GLOBAL ASSET MANAGEMENT(R)
GAM FUNDS, INC.
ANNUAL REPORT
FOR THE YEAR ENDED
31ST DECEMBER, 1998
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' objective, policies, management, records and other
information.
GAM FUNDS, INC.
INVESTMENT ADVISER;
GAM International Management Limited
GAM(R)
<PAGE>
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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$13.6 billion under management and employs a worldwide staff of
about 526 people.
For US investors, GAM offers GAM Funds, Inc. an open-end diversified
management investment company registered under the Investment Company Act of
1940, as amended. The Fund consists of seven open-end mutual funds - GAM
International, GAM Global, GAM Europe, GAM Pacific Basin, GAM Japan Capital, GAM
North America and GAMerica Capital Funds.
For additional information about any of the GAM Funds, please contact your
financial consultant or call GAM at 1-800-426-4685 (toll-free).
- --------------------------------------------------------------------------------
Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
GAM International ...................... 3
GAM Global ............................. 10
GAM Europe ............................. 17
GAM Pacific Basin ...................... 22
GAM Japan Capital ...................... 28
GAM North America ...................... 34
GAMerica Capital ....................... 39
Financial Statements ................... 44
Notes to Financial Statements .......... 51
</TABLE>
<PAGE>
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GAM International Fund
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Fund Management
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
JOHN R. HORSEMAN JOINED GAM IN 1987, INITIALLY AS
A MEMBER OF THE ASIAN TEAM BASED IN HONG KONG.
SINCE MOVING TO THE LONDON OFFICE IN 1990, HE HAS
BEEN RESPONSIBLE FOR A NUMBER OF GAM'S GLOBAL AND
INTERNATIONAL FUNDS. PRIOR TO JOINING GAM IN 1987,
HE WORKED FOR BA INVESTMENT MANAGEMENT
INTERNATIONAL LTD AND WAS RESPONSIBLE FOR SOME OF
THE BANK OF AMERICA'S GLOBAL EQUITY FUNDS. HE
COMMENCED MANAGEMENT OF GAM GLOBAL AND GAM
INTERNATIONAL FUNDS ON 1ST APRIL, 1990. MR
HORSEMAN ALSO MANAGES THE OFFSHORE FUND GAM
UNIVERSAL US$ 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
<TABLE>
<CAPTION>
GAM
International
Class A
(after Average
GAM maximum MSCI 1 Month
International sales load EAFE Deposit
Class A of 5%) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$30.06 US$31.64 1,405.04
- ------------------------------------------------------------------------------------------
% % % %
- ------------------------------------------------------------------------------------------
Quarter to Dec, 98 + 2.42 - 2.70 +20.75 + 1.35
- ------------------------------------------------------------------------------------------
Jan - Dec, 1998 + 7.22 + 1.85 +20.33 + 5.67
- ------------------------------------------------------------------------------------------
Average annual total return:
- ------------------------------------------------------------------------------------------
5 years to December, 1998 +11.96 +10.82 + 9.50 + 5.40
- ------------------------------------------------------------------------------------------
10 years to December, 1998 + 15.65 + 15.06 + 5.96 + 5.81
- ------------------------------------------------------------------------------------------
Since inception + 20.56 + 20.12 +15.72 + 6.33
- ------------------------------------------------------------------------------------------
</TABLE>
Performance is calculated on a total return basis. During the year, Class A paid
a distribution of US$0.51, and Class D paid a distribution of US$0.49. Class A
inception was on 2nd January, 1985, Class B on 26th May, 1998, Class C on 19th
May, 1998 and Class D on 18th September, 1995. Past performance is not
necessarily 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.
3
<PAGE>
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GAM International Fund - Report to Shareholders (CONTINUED)
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[GRAPHIC OMITTED]
NOTE: The graph compares the performance results of a hypothetical $10,000
investment in Class A and a comparable index. The performance of Class A is
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
Morgan Stanley Capital International.
The MSCI Europe, Australasia and Far East Index is a market value weighted,
unmanaged index of the weighted share prices of some 1,093 companies listed on
the stock exchanges of Australia, Austria, Belgium, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The
combined market capitalization 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.
AVERAGE ANNUAL TOTAL RETURN - CLASS A
[The following table represents a bar graph in the printed report.]
GAM
INTERNATIONAL
GAM CLASS A
INTERNATIONAL (AFTER MAXIMUM MSCI
CLASS A SALES LOAD OF 5%) EAFE INDEX
YEAR % % %
- -----------------------------------------------------------------
One 7.22 1.85 20.33
Five 11.96 10.82 9.50
Ten 15.65 15.06 5.96
Since Inception 20.56 20.12 15.72
ANNUAL PERFORMANCE - CLASS A
[The following table represents a bar graph in the printed report.]
GAM
INTERNATIONAL
GAM CLASS A
INTERNATIONAL (AFTER MAXIMUM MSCI
CLASS A SALES LOAD OF 5%) EAFE INDEX
YEAR % % %
- ------------------------------------------------------------
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
1998 7.22 1.85 20.33
4
<PAGE>
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GAM International Fund - Report to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
THE FACTS - CLASS B SHARES
<TABLE>
<CAPTION>
GAM
International Average
GAM Class B MSCI 1 Month
International (with deferred EAFE Deposit
Class B sales charge) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$30.41 1,405.04
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 98 + 2.22 - 2.89 +20.75 + 1.35
- --------------------------------------------------------------------------------
Since inception* - 8.92 -13.48 + 1.96 + 3.31
- --------------------------------------------------------------------------------
</TABLE>
THE FACTS - CLASS C SHARES
<TABLE>
<CAPTION>
GAM
International Average
GAM Class C MSCI 1 Month
International (with deferred EAFE Deposit
Class C sales charge) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$30.37 1,405.04
- ----------------------------------------------------------------------------------
% % % %
- ----------------------------------------------------------------------------------
Quarter to Dec, 98 + 2.19 + 1.17 +20.75 + 1.35
- ----------------------------------------------------------------------------------
Since inception* - 6.87 -10.54 + 4.51 + 3.42
- ----------------------------------------------------------------------------------
</TABLE>
THE FACTS - CLASS D SHARES
<TABLE>
<CAPTION>
GAM
International
Class D
(after Average
GAM maximum MSCI 1 Month
International sales load EAFE Deposit
Class D of 3.5%) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$29.92 US$31.01 1,405.04
- --------------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------------
Quarter to Dec, 98 + 2.40 - 1.19 +20.75 + 1.35
- --------------------------------------------------------------------------------------
Jan - Dec, 1998 + 7.13 + 3.38 +20.33 + 5.67
- --------------------------------------------------------------------------------------
Average annual total return:
- --------------------------------------------------------------------------------------
Since inception* +16.12 +14.87 +10.65 + 5.59
- --------------------------------------------------------------------------------------
</TABLE>
* Inception was on 26th May, 1998 for Class B shares, 19th May, 1998 for Class C
shares and 18th September, 1995 for Class D shares.
[GRAPHIC OMITTED]
NOTE: The graph compares the performance results of a hypothetical $10,000
investment in Class D and a comparable index. The performance of Class D is
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, The
Financial Times and Morgan Stanley Capital International.
The MSCI Europe, Australasia and Far East Index is a market value weighted,
unmanaged index of the weighted share prices of some 1,093 companies listed on
the stock exchanges of Australia, Austria, Belgium, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The
combined market capitalization 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.
5
<PAGE>
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GAM International Fund - Report to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
THE COMMENT
In retrospect, 1998 must be viewed as one of the more challenging years
which GAM International has had to face. A collapse in the emerging markets
precipitated by Russia's default of its foreign obligations and a continuation
of the Asian crisis were features of the second half of 1998. Only in the last
few months did these markets experience a measure of recovery.
Troubles were not confined to Asia or the emerging markets. Although the
Fund had little or no direct exposure to Asia, the Fund's holdings in banks and
financial institutions in Europe did not escape the downturn. Perceiving that
these banks may have problem loans in Asia or losses in emerging market debt,
investors sold shares heavily, whether or not they did in fact have such an
exposure or had sustained losses. The subsequent recovery has them trailing
still from their old highs. It is the view of the Manager that those European
banks and life insurance companies which are concentrating on core businesses
and maintaining adequate risk controls can continue their recovery. However,
their performance has been relatively disappointing this year and contributed to
the underperformance of GAM International during the second half of 1998.
On a brighter note, we look forward to 1999 and believe the investment
climate will remain favorable. In the fall of this year, we increased our
exposure to the Deutsche mark, but soon to be Euro, denominated bonds and feel
confident that `real' bond yields will continue their steady decline, provided
inflation and economic growth continue, at their low level across the `Euro'
zone. Similarly, we have been increasing our exposure to higher yielding
utilities, particularly in the United Kingdom where restructuring in a stable
pricing climate is improving profitability. Bid activity in the water and
electric power sectors has also been growing, as investors recognize the value
inherent in many of the companies in these industries.
Elsewhere our decision to sell our holdings in Japanese electrical and
automobile exporters was an important one. A strengthening of Japanese yen
combined with a deepening recession in their home market threatened to undermine
the profitability of these companies. The cash raised was usefully reinvested in
German bonds and select banking and life insurance stocks in Europe, which were
disproportionately affected by the crisis. Our exposure to Asian stocks is
extremely low and GAM International has no direct emerging market exposure.
6
<PAGE>
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GAM International Fund - Statement of Investments
- --------------------------------------------------------------------------------
AS AT 31ST DECEMBER, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- -------------- --------------------------------------- --------------
<S> <C> <C>
ADJUSTABLE RATE INDEX NOTES - 3.3%
UNITED KINGDOM - 3.3%
+ DLJ ARIN, Indexed to 3,000,000 shares
British Biotech 1999-01-15 7,552,783
+ DLJ ARIN, Indexed to 3,200,000 shares
British Biotech 1999-04-03 3,953,800
+ DLJ ARIN, Indexed to 10,000,000 shares
British Steel 1999-11-09 12,565,718
+ DLJ ARIN, Indexed to 26,745,352 shares
Basket 1999-10-18 66,363,675
+ DLJ ARIN, Indexed to 7,307,127 shares
TeleWest Communications 1999-12-07 7,171,617
----------
TOTAL ADJUSTABLE RATE INDEX NOTES
(COST $100,668,948) 97,607,593
----------
BONDS - 15.6%
GERMANY - 15.6%
219,750,000 Bundes Deutschland 6.25%
2024-01-04 161,965,866
398,500,000 Bundes Deutschland 6.50%
2027-07-04 304,136,347
-----------
TOTAL BONDS (COST $467,227,419) 466,102,213
-----------
BOND WARRANTS - 0.6%
GERMANY - 0.6%
*550,000,000 Bundes Deutschland 5.625%
1999-12-09 114.5 DEM Calls 9,533,663
*520,000,000 Bundes Deutschland 5.625%
1999-12-10 115.86 DEM Calls 8,514,620
-----------
TOTAL BOND WARRANTS (COST $24,054,228) 18,048,283
-----------
CURRENCY WARRANTS - 0.0%
UNITED STATES - 0.0%
*1,404,000 Goldman USD/HKD 7.75
Put Call Wts 1999-06-11 842,400
-----------
TOTAL CURRENCY WARRANTS (COST $5,866,400) 842,400
-----------
EQUITIES - 75.1%
DENMARK - 2.0%
442,377 Den Danske Bank 59,566,757
-----------
59,566,757
-----------
FINLAND - 1.8%
445,210 Nokia A 54,460,582
-----------
54,460,582
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- ------------ -------------------------------- --------------
<S> <C> <C>
FRANCE - 12.4%
715,785 AXA - UAP 103,699,848
56,760 Carrefour 42,831,415
*3,470,967 Credit Lyonnais 130,991,600
84,118 L'Oreal 60,782,815
235,575 Union des Assurances Federales 31,263,933
-----------
369,569,611
-----------
GERMANY - 2.2%
182,649 Allianz 66,935,696
-----------
66,935,696
-----------
JAPAN - 5.1%
1,240,000 Takeda Chemical 47,764,101
2,479,000 Terumo 58,391,393
1,456,000 Yamanouchi Pharmaceutical 46,930,311
-----------
153,085,805
-----------
NETHERLANDS - 13.0%
1,305,910 Fortis AMEV 108,164,300
931,387 ING 56,767,107
1,089,178 Koninklijke 51,889,920
1,441,593 Unilever 123,162,589
219,106 Wolters Kluwer 46,862,485
-----------
386,846,401
-----------
SWEDEN - 0.6%
1,447,643 OM Gruppen 18,255,128
-----------
18,255,128
-----------
SWITZERLAND - 14.8%
51,046 Nestle Registered 111,220,243
53,677 Novartis Registered 105,609,488
9,115 Roche Holdings Genussscheine 111,322,160
*154,388 Zurich Allied 114,415,650
-----------
442,567,541
-----------
UNITED KINGDOM - 23.2%
7,236,425 Bank of Scotland 86,617,402
3,807,911 Barclays 82,042,783
5,158,091 British Aerospace 43,990,101
4,546,010 Dairy Crest Group 28,038,378
2,046,128 Emap Publishing 39,118,233
5,000,000 Express Dairies 11,013,731
2,506,213 Hyder 31,456,726
44,120 Lloyds TSB Group 628,586
4,388,652 National Express Group 81,276,488
6,080,007 National Power 52,459,003
4,339,899 Newsquest 17,640,345
5,729,633 Scottish Power 57,913,389
3,268,678 Severn Trent 55,426,940
</TABLE>
7
<PAGE>
- --------------------------------------------------------------------------------
GAM International Fund - Statement of Investments (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- -------------------------------------------------------------------
<S> <C> <C>
2,368,824 Severn Trent Class B 1,220,796
11,347,590 Stagecoach Holdings 45,181,199
3,137,252 Thames Water 60,500,085
-------------
694,524,185
-------------
TOTAL EQUITIES (COST $1,656,925,839) 2,245,811,706
-------------
INDEX WARRANTS - 1.3%
JAPAN - 1.3%
*1,332,400 Nikkei 225 (OTC)
Put Wts 1999-12-03 37,906,780
-------------
TOTAL INDEX WARRANTS (COST $27,021,106) 37,906,780
-------------
OPTIONS - 1.6%
DENMARK - 0.2%
*90,000 Tele Danmark
1999-09-10 991 DKK Puts 5,631,554
-------------
5,631,554
-------------
FRANCE - 0.3%
*65,000 Bouygues
1999-10-14 1,456 FRF Puts 10,589,850
-------------
10,589,850
-------------
JAPAN - 0.1%
*83,478 Tostem
1999-09-14 2,822 JPY Puts 860,622
*243,794 Tostem
1999-09-17 2,594 JPY Puts 1,528,435
-------------
2,389,057
-------------
UNITED KINGDOM - 1.0%
*2,333,333 British Gas
1999-10-07 5 GBP Puts 16,912,656
*1,150,226 Rentokil
1999-11-05 5 GBP Puts 3,575,036
*1,000,000 Rentokil
1999-11-02 5 GBP Puts 2,743,043
*1,183,067 Rentokil
1999-12-17 6 GBP Puts 6,155,265
-------------
29,386,000
-------------
TOTAL OPTIONS (COST $65,377,819) 47,996,461
-------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- --------------------------------------------------------------------
<S> <C> <C>
PREFERRED SHARES - 2.1%
GERMANY - 2.1%
131,627 SAP Pfd 62,779,901
-------------
TOTAL PREFERRED SHARES (COST $60,503,618) 62,779,901
-------------
TIME DEPOSITS - 0.1%
UNITED STATES - 0.1%
3,710,594 Wachovia Bank
4.0% 1999-01-04 3,710,594
-------------
TOTAL TIME DEPOSITS (COST $3,710,594) 3,710,594
-------------
TOTAL INVESTMENTS (COST $2,411,355,971**) - 2,980,805,931
-------------
99.7%
FUTURES - 0.8%
JAPAN - 0.8%
US$
*312,200,093 NIKKEI 225 Index Futures (SMX)
1999-03-31 32,894,383
-------------
TOTAL FUTURES
32,894,383
MARGIN ON DEPOSIT AS COLLATERAL
(10,323,188)
-------------
DUE FROM BROKERS FOR FUTURES CONTRACTS
22,571,195
-------------
NET CURRENT LIABILITIES - (0.5)%
(15,175,887)
-------------
TOTAL NET ASSETS - 100.0%
2,988,201,239
=============
</TABLE>
* Non-income producing security.
** Cost for federal income tax purposes is $2,421,955,200 (Note 5).
+ Adjustable rate index notes are inversely indexed to the value of the
underlying security.
Glossary of Terms:
DEM - German Mark
DKK - Danish Krone
FRF - French Franc
GBP - British Pound
HKD - Hong Kong Dollar
JPY - Japanese Yen
OTC - Over the Counter
SMX - Singapore International Monetary Exchange
USD - United States Dollar
See notes to financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
GAM International Fund - Statement of Investments (CONTINUED)
- --------------------------------------------------------------------------------
GEOGRAPHIC ANALYSIS AS AT
31ST DECEMBER, 1998
[The following table represents a pie chart in the printed report.]
NET CURRENT LIABILITIES ................ (0.5)%
UNITED KINGDOM ......................... 27.5%
OTHER .................................. 4.7%
JAPAN .................................. 7.3%
FRANCE ................................. 12.7%
NETHERLANDS ............................ 13.0%
SWITZERLAND ............................ 14.8%
GERMANY ................................ 20.5%
INVESTMENT ANALYSIS AS AT
31ST DECEMBER, 1998 (UNAUDITED)
[The following table represents a pie chart in the printed report.]
NET CURRTENT LIABILITIES ............... (0.5)%
HEALTH & PERSONAL CARE ................. 14.8%
FIXED INTEREST ......................... 15.6%
OTHER .................................. 25.4%
BUSINESS & PUBLIC SERVICES ............. 7.5%
FOOD & HOUSEHOLD PRODUCTS .............. 11.0%
BANKING ................................ 12.0%
INSURANCE .............................. 14.2%
9
<PAGE>
- --------------------------------------------------------------------------------
GAM Global Fund
- --------------------------------------------------------------------------------
Fund Management
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
JOHN R. HORSEMEN JOINED GAM IN 1987, INITIALLY AS
A MEMBER OF THE ASIAN TEAM BASED IN HONG KONG.
SINCE MOVING TO THE LONDON OFFICE IN 1990, HE HAS
BEEN 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 SOME 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 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 substantially invest 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
<TABLE>
<CAPTION>
GAM
Global
Class A
(after Average
GAM maximum MSCI 1 Month
Global sales load World Deposit
Class A of 5%) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$19.04 US$20.04 1,149.95
- ------------------------------------------------------------------------------------
% % % %
-----------------------------------------------------------------------------------
Quarter to Dec, 98 - 0.83 - 5.79 +21.22 + 1.35
- ------------------------------------------------------------------------------------
Jan - Dec, 1998 + 2.57 - 2.56 +24.80 + 5.67
- ------------------------------------------------------------------------------------
Average annual total return:
- ------------------------------------------------------------------------------------
5 years to December, 1998 +12.26 +11.11 +16.19 + 5.40
- ------------------------------------------------------------------------------------
10 years to December, 1998 +13.77 +13.19 +11.26 + 5.81
- ------------------------------------------------------------------------------------
Since inception +12.96 +12.50 +13.24 + 6.11
- ------------------------------------------------------------------------------------
</TABLE>
Performance is calculated on a total return basis. During the year, Class A and
Class D paid a distribution of US$0.17. Class A inception was on 28th May, 1986,
Class B on 26th May, 1998, Class C on 19th May, 1998 and Class D on 6th October,
1995. Past performance is not necessarily 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.
10
<PAGE>
- --------------------------------------------------------------------------------
GAM Global Fund - Report to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NOTE: The graph compares the performance results of a hypothetical $10,000
investment in Class A and a comparable index. The performance of Class A is
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, The
Financial Times and Morgan Stanley Capital International.
The MSCI World Index is a market value weighted, unmanaged index of the
weighted share prices of companies listed on the stock exchanges of Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,
Sweden, Switzerland, United Kingdom and the United States. The combined market
capitalization of these companies represents approximately 60% of the aggregate
market value of the stock exchanges of the above 22 countries. The percentage
change in the value of the index includes dividends reinvested.
AVERAGE ANNUAL TOTAL RETURN - CLASS A
[The following table represents a bar graph in the printed report.]
GAM GLOBAL
GAM CLASS A MSCI
GLOBAL (AFTER MAXIMUM WORLD
CLASS A SALES LOAD OF 5%) INDEX
YEAR % % %
- ------------------------------------------------------------------
One 2.57 (2.56) 24.80
Five 12.26 11.11 16.19
Ten 13.77 13.19 11.26
Since Inception 12.96 12.50 13.24
ANNUAL PERFORMANCE - CLASS A
[The following table represents a bar graph in the printed report.]
GAM GLOBAL
GAM CLASS A MSCI
GLOBAL (AFTER MAXIMUM WORLD
CLASS A SALES LOAD OF 5%) INDEX
YEAR % % %
- ----------------------------------------------------
1994 (16.15) (20.35) 5.58
1995 36.25 29.44 21.33
1996 12.74 7.11 14.00
1997 34.95 28.20 16.23
1998 2.57 (2.56) 24.80
11
<PAGE>
- --------------------------------------------------------------------------------
GAM Global Fund - Report to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
THE FACTS - CLASS B SHARES
<TABLE>
<CAPTION>
GAM Global Average
GAM Class B MSCI 1 Month
Global (with deferred World Deposit
Class B sales charge) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$19.11 1,149.95
- ---------------------------------------------------------------------------------
% % % %
- ---------------------------------------------------------------------------------
Quarter to Dec, 98 - 1.04 - 5.98 +21.22 + 1.35
- ---------------------------------------------------------------------------------
Since inception* - 8.96 -13.51 + 7.99 + 3.31
- ---------------------------------------------------------------------------------
</TABLE>
THE FACTS - CLASS C SHARES
<TABLE>
<CAPTION>
GAM Global Average
GAM Class C MSCI 1 Month
Global (with deferred World Deposit
Class C sales charge) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$19.10 1,149.95
- --------------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------------
Quarter to Dec, 98 - 1.04 - 2.03 +21.22 + 1.35
- --------------------------------------------------------------------------------------
Since inception* - 9.31 -10.21 + 8.47 + 3.42
- --------------------------------------------------------------------------------------
</TABLE>
THE FACTS - CLASS D SHARES
<TABLE>
<CAPTION>
GAM Global
Class D
(after Average
GAM maximum MSCI 1 Month
Global sales load World Deposit
Class D of 3.5%) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$18.79 US$19.47 1,149.95
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 98 - 0.84 - 4.31 +21.22 + 1.35
- --------------------------------------------------------------------------------
Jan - Dec, 1998 + 2.38 - 1.20 +24.80 + 5.67
- --------------------------------------------------------------------------------
Average annual total return:
- --------------------------------------------------------------------------------
Since inception* +16.57 +15.29 +18.67 + 5.58
- --------------------------------------------------------------------------------
</TABLE>
* Inception was on 26th May, 1998 for Class B shares, 19th May, 1998 for Class
C shares and 6th October, 1995 for Class D shares.
[GRAPHIC OMITTED]
NOTE: The graph compares the performance results of a hypothetical $10,000
investment in Class D and a comparable index. The performance of Class D is
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, The
Financial Times and Morgan Stanley Capital International.
The MSCI World Index is a market value weighted, unmanaged index of the weighted
share prices of companies listed on the stock exchanges of Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy,
Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, United Kingdom and the United States. The combined market
capitalization of these companies represents approximately 60% of the aggregate
market value of the stock exchanges of the above 22 countries. The percentage
change in the value of the index includes dividends reinvested.
12
<PAGE>
- --------------------------------------------------------------------------------
GAM Global Fund - Report to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
THE COMMENT
1998 was a challenging year for GAM Global. The second half of 1998 saw
continued collapses in emerging markets, precipitated by a default in Russia's
foreign obligations and a continuation of the Asian crisis. Only in the last
quarter did these markets experience some recovery.
The Fund had little direct exposure to Asia and emerging markets. However,
the Fund was invested in US brokers and banks (such as Merrill Lynch and
Citigroup) which suffered from problem loans or trading losses related to these
markets.
At the beginning of October, in view of the sharply deteriorating worldwide
economies, cash was also raised. Monies were reinvested a few weeks later when
the US Federal Reserve gave a clear signal that it would act to avoid a
recession, by cutting rates sharply and unexpectedly.
The decision, with hindsight, was too defensive and efforts to protect the
fund by raising cash also contributed to the underperformance of GAM Global
during the second half of 1998.
On a brighter note, however, we look forward to 1999 and believe that the
investment climate will remain favorable. In the fall of this year, we increased
our exposure to leading US consumer non-durable goods companies, such as Colgate
and Procter & Gamble. These companies are prime beneficiaries of sharply lower
commodity costs. They also dominate their markets and enjoy stable demand for
their products.
New names, such as Pfizer and EMC Corp. were added to the exposure to the
pharmaceutical and technology sectors. These two sectors continue to have
attractive growth characteristics. We have also increased our exposure to the
Deutsche mark, but soon to be Euro, denominated bonds and feel confident that
with inflation and economic growth staying very low, right across the `Euro'
zone, `real' bond yields will continue their steady decline.
Elsewhere, our decision to sell our holdings in Japanese electrical and
automobile exporters was an important one. A strengthening of the yen combined
with a deepening recession in their home market threatens to undermine the
profitability of these companies. The cash raised was reinvested in German bonds
and in consumer goods, pharmaceutical and technology companies in the US, which
were disproportionately affected by the crisis and thus undervalued. GAM Global
has limited direct exposure to Asian stocks and to emerging markets.
13
<PAGE>
- --------------------------------------------------------------------------------
GAM Global Fund - Statement of Investments
- --------------------------------------------------------------------------------
AS AT 31ST DECEMBER, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- -------------- ------------------------------------- ------------
<S> <C> <C>
ADJUSTABLE RATE INDEX NOTES - 2.0%
UNITED KINGDOM - 1.7%
+ DLJ ARIN, Indexed to 115,000 shares
British Biotech 1999-05-07 141,981
+ DLJ ARIN, Indexed to 160,000 shares
Colt Telecom 1999-10-01 798,552
+ DLJ ARIN, Indexed to 220,000 shares
Orange 1999-09-03 1,358,720
+ DLJ ARIN, Indexed to 100,000 shares
TeleWest Communications 1999-04-02 178,257
+ DLJ ARIN, Indexed to 32,042 shares
TeleWest Communications 1999-09-07 12,116
+ DLJ ARIN, Indexed to 202,113 shares
TeleWest Communications 1999-06-10 234,131
+ DLJ ARIN, Indexed to 75,000 shares
with Wts. TeleWest
Communications 1999-03-24 169,484
---------
2,893,241
---------
UNITED STATES - 0.3%
+ DLJ ARIN, Indexed to 25,000 shares
MCI WorldCom 1999-10-21 601,649
---------
601,649
---------
TOTAL ADJUSTABLE RATE INDEX NOTES (COST $3,727,028) 3,494,890
---------
BONDS - 9.0%
GERMANY - 9.0%
20,000,000 Bundes Deutschland 6.50% 2027-07-04 15,264,058
----------
TOTAL BONDS (COST $15,021,497) 15,264,058
----------
BOND WARRANTS - 0.5%
GERMANY - 0.5%
*47,000,000 Bundes Deutschland 5.625%
1999-12-10 115.86 DEM Calls 769,591
----------
TOTAL BOND WARRANTS (COST $1,064,321) 769,591
----------
EQUITIES - 80.9%
FINLAND - 1.8%
24,226 Nokia A 2,963,460
----------
2,963,460
----------
FRANCE - 4.9%
3,121 Carrefour 2,355,124
*99,135 Credit Lyonnais 3,741,278
3,166 L'Oreal 2,287,720
----------
8,384,122
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- -------------- ----------------------------------- --------------
<S> <C> <C>
NETHERLANDS - 4.6%
59,306 Fortis AMEV 4,912,124
13,838 Wolters Kluwer 2,959,677
---------
7,871,801
---------
SWITZERLAND - 6.6%
2,022 Novartis Registered 3,978,285
191 Roche Holding Genussscheine 2,332,697
6,505 Zurich Allied 4,820,801
---------
11,131,783
----------
UNITED KINGDOM - 5.7%
144,336 Barclays 3,109,770
133,819 Hyder 1,679,629
257,767 National Power 2,224,043
139,940 Thames Water 2,698,662
----------
9,712,104
----------
UNITED STATES - 57.3%
76,597 Abbott Laboratories 3,753,253
37,761 American Express 3,861,062
38,474 American International Group 3,717,550
*31,004 Amerisource Health Corp 2,015,260
30,004 Automatic Data Processing 2,405,946
19,439 Bristol-Myers Squibb 2,601,181
29,398 Cintas 2,070,722
57,320 Colgate-Palmolive 5,323,595
83,184 Computer Associates International 3,545,718
41,121 Computer Sciences 2,649,734
*42,650 EMC 3,625,250
77,113 Freddie Mac 4,968,969
87,605 Galileo International 3,810,818
88,213 H.J. Heinz 4,995,061
51,111 IMS Health 3,855,686
38,023 Intel 4,508,102
50,569 Johnson & Johnson 4,241,475
37,280 Merck 5,505,790
*36,419 Microsoft 5,050,860
133,534 Nielsen Media Research 2,403,612
44,484 Pfizer 5,579,962
65,009 Procter & Gamble 5,936,134
65,776 Schering-Plough 3,634,124
*66,812 Tellabs 4,580,798
28,831 William Wrigley Jr. Company 2,582,176
----------
97,222,838
-----------
TOTAL EQUITIES (COST $113,534,410) 137,286,108
-----------
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
GAM Global Fund - Statement of Investments (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- --------------- ------------------------------- ---------------
<S> <C> <C>
OPTIONS - 2.6%
FRANCE - 0.4%
*4,333 Bouygues
1999-10-14 1456 FRF Puts 705,936
-------
705,936
-------
JAPAN - 1.0%
*4,522 Tostem
1999-09-14 2822 JPY Puts 46,620
*13,206 Tostem
1999-09-17 2594 JPY Puts 82,793
*112,500 Tostem
1999-11-12 3016 JPY Puts 1,546,270
---------
1,675,683
---------
UNITED KINGDOM - 0.8%
*113,333 British Gas
1999-10-07 5 GBP Puts 821,470
*65,729 Rentokil
1999-10-05 5 GBP Puts 204,293
*67,604 Rentokil
1999-12-17 6 GBP Puts 351,730
---------
1,377,493
---------
UNITED STATES - 0.4%
*12,500 MCI WorldCom
1999-12-23 104 USD Puts 736,000
---------
736,000
---------
TOTAL OPTIONS (COST $5,555,088) 4,495,112
---------
PREFERRED SHARES - 1.5%
GERMANY - 1.5%
5,342 SAP Pfd 2,547,883
---------
TOTAL PREFERRED SHARES (COST $2,429,133) 2,547,883
---------
TIME DEPOSITS - 1.5%
UNITED STATES - 1.5%
$ 2,550,799 Morgan Guaranty London
4.0% 1999-01-04 2,550,799
---------
TOTAL TIME DEPOSITS (COST $2,550,799) 2,550,799
-----------
TOTAL INVESTMENTS (COST $143,882,276**) - 98.0% 166,408,441
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- --------------- ------------------------------- ---------------
<S> <C> <C>
FUTURES - 0.5%
US$ JAPAN - 0.5%
*12,238,164 Nikkei-225 Index Futures (SMX)
1999-03-31 1,399,538
-----------
TOTAL FUTURES
1,399,538
MARGIN ON DEPOSIT AS COLLATERAL
(514,831)
-----------
DUE FROM BROKERS FOR FUTURE CONTRACTS
884,707
-----------
NET CURRENT ASSETS - 1.5%
2,479,058
-----------
TOTAL NET ASSETS - 100.0%
169,772,206
===========
</TABLE>
* Non-income producing security.
** Cost for federal income tax purposes is $145,580,039 (Note 5).
+ Adjustable rate index notes are inversely indexed to the value of the
underlying security.
Glossary of Terms:
DEM - German Mark
FRF - French Franc
GBP - British Pound
JPY - Japanese Yen
SMX - Singapore International Monetary Exchange
USD - United States Dollar
See notes to financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
GAM Global Fund - Statement of Investments (CONTINUED)
- --------------------------------------------------------------------------------
GEOGRAPHIC ANALYSIS AS AT
31ST DECEMBER, 1998
The following table represents a pie chart in the printed report.]
GERMANY ............................ 11.0%
UNITED KINGDOM ..................... 8.2%
SWITZERLAND ........................ 6.6%
RANCE .............................. 5.3%
NETHERLANDS ........................ 4.6%
OTHER .............................. 3.3%
NET CURRENT ASSETS ................. 1.55%
UNITED STATES 59.5%
INVESTMENT ANALYSIS AS AT
31ST DECEMBER, 1998 (UNAUDITED)
The following table represents a pie chart in the printed report.]
HEALTH & PERSONAL CARE ............. 21.2%
NET CURRENT ASSETS ................. 1.5%
OTHER .............................. 28.0%
FINANCIAL SERVICES ................. 5.2%
INSURANCE .......................... 7.9%
FIXED INTEREST ..................... 9.0%
FOOD & HOUSEHOLD PRODUCTS .......... 11.1%
BUSINESS & PUBLIC SERVICES ......... 16.1%
16
<PAGE>
- --------------------------------------------------------------------------------
GAM Europe Fund
- --------------------------------------------------------------------------------
Fund Management
- --------------------------------------------------------------------------------
[GRAPHIC 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 - CLASS A SHARES
GAM
Europe
Class A
(after Average
GAM maximum MSCI 1 Month
Europe sales load Europe Deposit
Class A of 5%) Index Rate
31st Dec, 1998 US$12.63 US$13.29 1,336.97
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 98 +12.22 + 6.61 +18.81 - 1.35
- --------------------------------------------------------------------------------
Jan - Dec, 1998 +10.70 + 5.17 +28.91 - 5.67
- --------------------------------------------------------------------------------
Average annual total return:
- --------------------------------------------------------------------------------
3 years to December, 1998 +19.65 +17.62 +24.85 + 5.57
- --------------------------------------------------------------------------------
5 years to December, 1998 +14.15 +12.98 +19.53 + 5.40
- --------------------------------------------------------------------------------
Since inception + 7.30 + 6.69 +14.38 + 5.40
- --------------------------------------------------------------------------------
Performance is calculated on a total return basis. During the year, Class A paid
distributions of US$1.25, and Class B and Class C paid distributions of US$0.99.
Class A inception was on 1st January 1990, Class B on 26th May, 1998 and Class C
on 20th May, 1998. Past performance is not necessarily 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.
17
<PAGE>
- --------------------------------------------------------------------------------
GAM Europe Fund - Report to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NOTE: The graph compares the performance results of a hypothetical $10,000
investment in Class A and a comparable index. The performance of Class A is
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, The
Financial Times and Morgan Stanley Capital International.
The MSCI Europe Index is a market value weighted, unmanaged index of the
weighted share prices of companies listed on the stock exchanges of Austria,
Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway,
Portugal, Spain, Sweden, Switzerland and the United Kingdom. The combined market
capitalization of these companies represents approximately 60% of the aggregate
market value of the stock exchanges of the above 15 countries. The percentage
change in the value of the index includes dividends reinvested.
AVERAGE ANNUAL TOTAL RETURN - CLASS A
[The following table represents a bar chart in the printed report.]
GAM
EUROPE
CLASS A
GAM (AFTER MAXIMUM MSCI
EUROPE SALES LOAD EUROPE
CLASS A OF 5%) INDEX
YEAR % % %
- --------------------------------------------------------------
One 10.70 5.17 28.91
Three 19.65 17.62 24.85
Five 14.15 12.98 19.53
Since Inception 7.30 6.69 14.38
ANNUAL PERFORMANCE - CLASS A
[The following table represents a bar chart in the printed report.]
GAM
EUROPE
CLASS A
GAM (AFTER MAXIMUM MSCI
EUROPE SALES LOAD EUROPE
CLASS A OF 5%) INDEX
YEAR % % %
- -------------------------------------------------
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
1998 10.70 5.17 28.91
18
<PAGE>
- --------------------------------------------------------------------------------
GAM Europe Fund - Report to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
THE FACTS - CLASS B SHARES
<TABLE>
<CAPTION>
GAM
Europe Average
GAM Class B MSCI 1 Month
Europe (with deferred Europe Deposit
Class B sales charge) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$12.82 1,336.97
- ---------------------------------------------------------------------------------------
% % % %
- ---------------------------------------------------------------------------------------
Quarter to Dec, 98 +11.76 + 6.17 +18.81 + 1.35
- ---------------------------------------------------------------------------------------
Since inception* - 9.82 -14.33 + 0.31 + 3.31
- ---------------------------------------------------------------------------------------
</TABLE>
THE FACTS - CLASS C SHARES
<TABLE>
<CAPTION>
GAM
Europe Average
GAM Class C MSCI 1 Month
Europe (with deferred Europe Deposit
Class C sales charge) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$12.70 1,336.97
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 98 +11.23 +10.12 +18.81 + 1.35
- --------------------------------------------------------------------------------
Since inception* - 9.32 -10.22 + 2.28 + 3.42
- --------------------------------------------------------------------------------
</TABLE>
* Inception was on 26th May, 1998 for Class B shares and 20th May, 1998 for
Class C shares.
THE COMMENT
The final quarter witnessed a powerful rebound in the western world's
equity markets. The strong downward momentum during the crisis of August and
September was reversed with quite remarkable vigor during the following two
months, wrong-footing those, including ourselves, who had built liquidity to
protect against further losses.
While the swift response by the US central bank has been viewed as pivotal,
we continue to believe that caution is necessary. The very action of the US Fed,
followed by the Europeans, may have helped rekindle the strong liquidity flows
responsible for the earlier bubble in financial markets. It is important to note
that in the current economic slowdown financial markets enjoy even less
competition in attracting such flows. The risk has to be of a re-inflation of
the bubble.
In structuring the fund for the year ahead, we draw on the experiences of
the individual businesses and industries we research. There is an ongoing
polarization between the winners: strong business franchises-and the losers:
those lacking pricing power. It is clear that the forces of deflation are
intensifying this polarization and we expect this to continue. Investors will
therefore continue to be faced with the choice between "paying up for growth"
and being attracted by the optical illusion of value represented by most
industrial stocks. We will avoid the latter, of course.
The number of companies commanding strong franchises and pricing power is
relatively small and where the fund is focused. Hence, pharmaceuticals, domestic
banks, insurance and media represent the key industrial choices we have made.
19
<PAGE>
- --------------------------------------------------------------------------------
GAM Europe Fund - Statement of Investments
- --------------------------------------------------------------------------------
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- ------------------------------------------------------------------------
ADJUSTABLE RATE INDEX NOTES - 1.9%
SWITZERLAND - 1.9%
+ DLJ ARIN, Indexed to 1,900 shares
Clariant 1999-10-15 1,017,402
---------
TOTAL ADJUSTABLE RATE INDEX NOTES (COST $983,356) 1,017,402
---------
EQUITIES - 98.8%
BELGIUM - 5.2%
*7,500 Fortis 2,715,321
---------
2,715,321
---------
DENMARK - 5.5%
2,413 Bang & Olufsen Holding Class B 147,446
11,670 Den Danske Bank 1,571,384
5,950 Jyske Bank Registered 578,375
14,000 Spar Nord Holding 584,278
---------
2,881,483
---------
FINLAND - 2.2%
6,510 Nokia A 796,339
*32,280 Tampere Telephone 336,911
---------
1,133,250
---------
FRANCE - 13.3%
5,000 AXA-UAP 724,378
385 Carrefour 290,523
10,000 CGIP 550,885
7,000 Credit Commercial de France 649,794
2,343 Essilor International 921,946
388 L'Oreal 280,365
3,230 Pinault-Printemps-Redoute 616,999
1,407 Suez Lyonnaise des Eaux 288,899
2,955 Synthelabo 625,249
14,130 Thomson CSF 606,546
3,757 Total Class B 380,337
8,820 Valeo 694,747
1,152 Vivendi 298,766
---------
6,929,434
---------
GERMANY - 12.4%
1,550 Allianz 568,031
1,040 BMW 806,550
14,000 BHF Bank 562,603
*6,700 DaimlerChrysler 661,059
4,630 HypoVereinsbank 362,402
9,200 Mannesmann 1,053,951
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- ------------------------------------------------------------------------
GERMANY - (CONTINUED)
4,500 M\)nchener R\)ckversicherungs-Gesellschaf 2,178,137
5,000 RWE 273,655
---------
6,466,388
---------
ITALY - 6.2%
19,903 Assicurazioni Generali 831,999
30,000 Banca Popolare di Bergamo Credit 728,821
140,655 Telecom Italia Mobile Spa 1,039,610
75,000 Telecom Italia Spa 640,672
---------
3,241,102
---------
NETHERLAND - 6.6%
25,535 Heijmans Group 527,386
35,000 Holdingmaatschappij De Telegraaf 940,850
9,167 ING 558,720
7,603 Laurus 191,834
14,167 Unilever 1,210,358
---------
3,429,148
---------
NORWAY - 1.0%
142,909 Den Norske Bank 497,092
---------
497,092
---------
PORTUGAL - 1.3%
12,000 Brisa-Auto Estradas de Portugal 705,670
++ *8,297 Sotancro -
---------
705,670
---------
SPAIN - 3.3%
44,670 Argentaria 1,157,434
22,350 Endesa 592,500
---------
1,749,934
---------
SWEDEN - 4.1%
28,560 LM Ericsson B 681,457
34,956 Svenska Handelsbank Class A 1,477,988
---------
2,159,445
---------
SWITZERLAND - 13.5%
680 Nestle Registered 1,481,600
1,330 Novartis Registered 2,616,775
180 Roche Holding Genussscheine 2,198,353
1,000 Zurich Allied 741,092
---------
7,037,820
---------
20
<PAGE>
- --------------------------------------------------------------------------------
GAM Europe Fund - Statement of Investments (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- ----------- ----------------------------------------- --------------
<S> <C> <C>
UNITED KINGDOM - 22.0%
74,000 Amvescap 572,049
100,000 Bank of Scotland 1,196,964
44,247 BG 284,671
35,128 BP Amoco 524,419
45,900 Daily Mail & General Trust Class A 2,135,818
30,677 EMAP 586,488
30,170 Glaxo Wellcome 1,040,739
*50,000 K S Biomedix Holdings 197,416
59,000 Lloyds TSB Group 840,584
5,330 Perpetual 271,364
37,000 Prudential 565,898
9,909 Railtrack Group 258,629
50,714 Scottish and Southern Energy 570,775
52,145 Scottish Power 527,066
220,000 Somerfield 1,470,271
28,025 Vodaphone Group 455,652
---------
11,498,803
----------
UNITED STATES - 2.2%
20,100 Pharmacia & Upjohn 1,128,172
----------
1,128,172
----------
TOTAL EQUITIES (COST $45,698,918) 51,573,062
----------
EQUITY RIGHTS - 0.0%
BELGIUM - 0.0%
*90 Generale de Banque Rts 3
----------
TOTAL EQUITY RIGHTS (COST $113) 3
----------
PREFERRED SHARES - 1.0%
GERMANY - 1.0%
954 Marshollek, Lautenschlaeger und Partner 543,590
----------
TOTAL PREFERRED SHARES (COST $563,736) 543,590
----------
TOTAL INVESTMENTS (COST $47,246,123**) - 101.7% 53,134,057
NET CURRENT LIABILITIES - (1.7)% (902,166)
----------
TOTAL NET ASSETS -100.0% 52,231,891
==========
</TABLE>
* Non-income producing security.
** Cost for federal income tax purposes is $47,507,091 (Note 5).
+ Adjustable rate index notes are inversely indexed to the value of the
underlying security.
++ Fair value determined by Board of Directors.
See notes to financial statements.
GEOGRAPHIC ANALYSIS AS AT
31ST DECEMBER, 1998
[GRAPHIC OMITTED]
[The following table represents a pie chart in the printed report.]
NET CURRENT LIABILITIES ................ (1.7)%
OTHER .................................. 24.8%
ITALY .................................. 6.2%
NETHERLANDS ............................ 6.6%
FRANCE ................................. 13.3%
GERMANY ................................ 13.4%
SWITZERLAND ............................ 15.4%
UNITED KINGDOM ......................... 22.0%
INVESTMENT ANALYSIS AS AT
31ST DECEMBER, 1998 (UNAUDITED)
[The following table represents a bar chart in the printed report.]
NET CURRENT LIABILITIES ................ (1.7)%
BANKING ................................ 19.5%
TELECOMMUNICATIONS ..................... 4.7%
OTHER .................................. 28.0%
INSURANCE .............................. 17.0%
BROADCASTING & PUBLISHING .............. 7.0%
FOOD & HOUSEHOLD PRODUCTS .............. 8.3%
HEALTH & PERSONAL CARE ................. 17.2%
21
<PAGE>
- --------------------------------------------------------------------------------
GAM Pacific Basin Fund
- --------------------------------------------------------------------------------
Fund Management
- --------------------------------------------------------------------------------
[GRAPHIC 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
their 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
<TABLE>
<CAPTION>
GAM
Pacific
Basin
Class A
GAM (after Average
Pacific maximum MSCI 1 Month
Basin sales load Pacific Deposit
Class A of 5%) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$8.23 US$8.66 1,594.53
- ----------------------------------------------------------------------------------
% % % %
- ----------------------------------------------------------------------------------
Quarter to Dec, 98 +34.05 +27.34 +26.1 + 1.35
- ----------------------------------------------------------------------------------
Jan - Dec, 1998 - 3.99 - 8.79 + 2.6 + 5.67
- ----------------------------------------------------------------------------------
Average annual total return:
- ----------------------------------------------------------------------------------
5 years to December, 1998 - 5.55 - 6.52 - 3.95 + 5.40
- ----------------------------------------------------------------------------------
10 years to December, 1998 + 5.71 + 5.17 - 3.72 + 5.81
- ----------------------------------------------------------------------------------
Since inception + 5.03 + 4.56 - 1.56 + 6.08
- ----------------------------------------------------------------------------------
</TABLE>
Performance is calculated on a total return basis. During the year, Class A paid
distributions of US$0.94, Class B distributions of US$0.16, Class C a
distribution of US$0.09 and Class D distributions of US$0.97. Class A inception
was on 6th May, 1987, Class B on 26th May, 1998, Class C on 1st June, 1998 and
Class D on 6th October, 1995. Past performance is not necessarily 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.
22
<PAGE>
- --------------------------------------------------------------------------------
GAM Pacific Basin Fund - Report to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NOTE: The graph compares the performance results of a hypothetical $10,000
investment in Class A and a comparable index. The performance of Class A is
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, The
Financial Times and 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 capitalization 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.
AVERAGE ANNUAL TOTAL RETURN - CLASS A
[The following table represents a bar chart in the printed report.]
GAM
PACIFIC BASIN
GAM CLASS A MSCI
PACIFIC BASIN (AFTER MAXIMUM PACIFIC
CLASS A SALES LOAD OF 5% INDEX
Year % % %
- -----------------------------------------------------------------
One (3.99) (8.79) 2.69
Five (5.55) (6.52) (3.95)
Ten 5.71 5.17 (3.72)
Since Inception 5.03 4.56 (1.56)
ANNUAL PERFORMANCE - CLASS A
[The following table represents a bar chart in the printed report.]
GAM
PACIFIC BASIN
GAM CLASS A MSCI
PACIFIC BASIN (AFTER MAXIMUM PACIFIC
CLASS A SALES LOAD OF 5% INDEX
Year % % %
- ----------------------------------------------------------
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)
1998 (3.99) (8.79) 2.69
23
<PAGE>
- --------------------------------------------------------------------------------
GAM Pacific Basin Fund - Report to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
THE FACTS - CLASS B SHARES
<TABLE>
<CAPTION>
GAM
GAM Pacific Basin Average
Pacific Class B MSCI 1 Month
Basin (with deferred Pacific Deposit
Class B sales charge) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$8.96 1,594.53
- ------------------------------------------------------------------------------------
% % % %
- ------------------------------------------------------------------------------------
Quarter to Dec, 98 +30.44 +23.92 +26.19 +1.35
- ------------------------------------------------------------------------------------
Since inception* - 0.35 - 5.33 + 6.58 +3.31
- ------------------------------------------------------------------------------------
</TABLE>
THE FACTS - CLASS C SHARES
<TABLE>
<CAPTION>
GAM
GAM Pacific Basin Average
Pacific Class C MSCI 1 Month
Basin (with deferred Pacific Deposit
Class C sales charge) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$8.12 1,594.53
- -------------------------------------------------------------------------------------
% % % %
- -------------------------------------------------------------------------------------
Quarter to Dec, 98 +25.52 +24.21 +26.19 + 1.35
- -------------------------------------------------------------------------------------
Since inception* - 3.87 - 4.83 +12.25 + 3.22
- -------------------------------------------------------------------------------------
</TABLE>
THE FACTS - CLASS D SHARES
<TABLE>
<CAPTION>
GAM
Pacific Basin
Class D
GAM (after Average
Pacific maximum MSCI 1 Month
Basin sales load Pacific Deposit
Class D of 3.5%) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$8.11 US$8.40 1,594.53
- ----------------------------------------------------------------------------------
% % % %
- ----------------------------------------------------------------------------------
Quarter to Dec, 98 +28.49 +24.00 +26.19 + 1.35
- ----------------------------------------------------------------------------------
Jan - Dec, 1998 - 4.64 - 7.98 + 2.69 + 5.67
- ----------------------------------------------------------------------------------
Average annual total return:
- ----------------------------------------------------------------------------------
Since inception* -11.65 -12.63 - 8.28 + 5.58
- ----------------------------------------------------------------------------------
</TABLE>
* Inception was on 26th May, 1998 for Class B shares, 1st June, 1998 for Class
C shares and 6th October, 1995 for Class D shares.
[GRAPHIC OMITTED]
NOTE: The graph compares the performance results of a hypothetical $10,000
investment in Class D and a comparable index. The performance of Class D is
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, The
Financial Times and 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 capitalization 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.
24
<PAGE>
- --------------------------------------------------------------------------------
GAM Pacific Basin Fund - Statement of Investments
- --------------------------------------------------------------------------------
THE COMMENT
During 1998 the depth of the Japanese recession had become more apparent
with industrial production continuing to fall and consumption remaining weak.
Government plans to improve the situation through a combination of restructuring
and injections of public funds are usually seen as inadequate or too protracted
in their implementation. Resolving the problems of the banking sector remains
central to seeing a sustainable recovery in the economy and after the failure of
LTCB and SCB we can expect further headline bankruptcies before balance sheets
start to improve. Forecast earnings from most exporters have been downgraded as
a result of the sharp upward move in the yen. A highly selective stock picking
approach remains essential for 1999.
Asian stock markets have experienced a turbulent year as economies
reverberated from the financial crisis which began in the second half of 1997.
Most countries saw their currency hit a low point in the first quarter followed
by a sustained recovery which enabled interest rates to be steadily reduced.
This in turn helped relieve the volatility within the region's financial system
albeit too late to save many of the weaker banking groups. Shorting by hedge
fund managers exacerbated the decline in share prices, which led to outstanding
buying opportunities for fundamental longer-term investors.
Most Asian stock markets experienced a very sharp recovery in the final
quarter of the year due to falling interest rates and government measures to
alleviate the regional recession. Singapore in particular introduced a package
to significantly reduce business operating costs by lowering employers' pension
contributions, cutting corporation tax and introducing lower wages. Hong Kong is
also starting to respond to interest rate cuts with new apartment sales reaching
a three year high in October. The speed with which share prices have rebounded
has caught most investors by surprise and a prolonged period of consolidation is
required to allow fundamentals to match valuations.
In Australia the economy has shown considerable resilience in the aftermath
of the Asian crisis and attractive investment opportunities are likely to arise
due to further corporate activity in the financial sector. One industry which
continues to suffer due to the weakness of commodity prices is mining where most
of the small and medium sized producers are likely to cease operating unless
there is a quick and sustained upturn.
AS AT 31ST DECEMBER, 1998
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- ------------- ------------------------------------ ------------
EQUITIES - 92.0%
AUSTRALIA - 10.3%
52,000 Australia & New Zealand Bank Group 340,325
42,000 Coles Myer 220,057
240,572 Colonial 825,566
199,000 Novus Petroleum 158,531
29,475 Rio Tinto 349,595
-------
1,894,074
---------
CHINA - 1.9%
64,000 China Resources Enterprise 99,541
*148,000 China Telecom Class H 255,976
---------
355,517
---------
HONG KONG - 21.5%
96,000 Cheung Kong Holdings 690,795
532,380 Hong Kong & China Gas 676,847
373,000 Hong Kong Land Holdings 440,140
15,600 HSBC Holdings (HKD) 388,611
311,000 Kerry Properties 254,898
50,000 Shanghai Industrial Holdings 100,999
91,000 Sun Hung Kai Properties 663,625
98,500 Swire Pacific Class A 441,162
215,352 Wharf Holdings 314,094
---------
3,971,171
---------
INDONESIA - 1.1%
2,036,024 Bank Bali (FR) 95,439
*402,800 Hero Supermarket 50,350
696,000 Mayorah Indah 36,975
*429,000 Modern Photo Film 26,813
---------
209,577
---------
JAPAN - 29.7%
8,700 Aiful 528,487
27,000 Anritsu 218,764
19,000 Canon 406,314
47,000 Hitachi 291,331
9,000 Japan Associated Finance 243,868
38,000 Mitsubishi Estate 340,866
19,000 Mori Seiko 215,355
49 Nippon Tel & Tel 378,358
86,000 Nissan Fire & Marine Insurance 258,921
16,000 Nomura Securities 139,555
28,000 Omron 383,813
13,900 ORIX 1,038,838
8,100 Sony 590,304
42,000 Sumitomo Marine & Fire Insurance 266,289
7,000 Tachihi Enterprise 172,009
---------
5,473,072
---------
25
<PAGE>
- --------------------------------------------------------------------------------
GAM Pacific Basin Fund - Statement of Investments (CONTINUED)
- --------------------------------------------------------------------------------
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- -------------- --------------------------------------- ------------
PHILIPPINES - 4.5%
1,079,200 Ayala Land B 305,172
213,120 Bank of The Philippine Islands 451,990
*3,951,000 Cebu Holdings Inc (PHP) 66,019
-------
823,181
-------
SINGAPORE - 17.7%
2,000 Avimo Group (SGD) 3,139
325,000 DBS Land 478,636
88,775 Development Bank of Singapore (FR) 801,665
462,000 Kim Eng Holdings 175,000
189,111 Overseas Chinese Banking (FR) 1,283,663
*72,000 Overseas Union Bank (FR) 314,182
20,000 Singapore Press Holdings 218,182
---------
3,274,467
---------
THAILAND - 5.3%
*199,000 Bangkok Bank (FR) 410,592
*91,750 Post Publishing (FR) 116,107
*255,610 Thai Farmers Bank (FR) 450,042
---------
976,741
---------
TOTAL EQUITIES (COST $21,528,702) 16,977,800
----------
EQUITY WARRANTS - 0.0%
HONG KONG - 0.0%
*24,790 Hong Kong & China Gas Wts 1999-09-30 1,632
*19,167 Wharf Holdings Wts 1999-12-31 1,583
----------
3,215
----------
INDONESIA - 0.0%
*7,447 Bank Bali Wts 2000-08-29 (FR) 93
----------
93
----------
THAILAND - 0.0%
*17,763 Thai Farmers Bank Wts 2002-09-15 (FR) 2,394
----------
2,394
----------
TOTAL EQUITY WARRANTS (COST $17,592)
5,702
----------
TIME DEPOSITS - 3.6%
UNITED STATES - 3.6%
$ 664,896 Morgan Guaranty London
4.0% 1999-01-04 664,896
----------
TOTAL TIME DEPOSITS (COST $664,896)
664,896
----------
TOTAL INVESTMENTS (COST $22,211,190**) - 95.6%
17,648,398
NET CURRENT ASSETS - 4.4%
809,314
----------
TOTAL NET ASSETS - 100.0%
18,457,712
==========
* Non-income producing security.
** Cost for federal income tax purposes is $23,730,225 (Note 5).
Glossary of terms:
FR - Foreign Registered
HKD - Hong Kong Dollar
PHP - Philippine Peso
SGD - Singapore Dollar
See notes to financial statements.
26
<PAGE>
- --------------------------------------------------------------------------------
GAM Pacific Basin Fund - Statement of Investments (CONTINUED)
- --------------------------------------------------------------------------------
GEOGRAPHIC ANALYSIS
AS AT 31ST DECEMBER, 1998
[The following table represents a pie chart in the printed report.]
THAILAND ......................... 5.3%
NET CURRENT ASSETS ............... 4.4%
OTHER ............................ 6.6%
AUSTRALIA ........................ 10.3%
HONG KONG ........................ 21.5%
JAPAN ............................ 29.7%
PHILIPPINES ...................... 4.5%
SINGAPORE ........................ 17.7%
INVESTMENT ANALYSIS
AS AT 31ST DECEMBER (UNAUDITED)
[The following table represents a bar chart in the printed report.]
REAL ESTATE ....................... 20.8%
NET CURRENT ASSETS ................ 4.4%
OTHER ............................. 22.2%
UTILITIES-ELECTRICAL & GAS ........ 3.7%
TELEC0MMUNICATIONS ................ 3.4%
ELECTRICAL & ELECTRONICS .......... 4.9%
FINANCIAL SERVICES ................ 16.0%
BANKING ........................... 24.6%
27
<PAGE>
- --------------------------------------------------------------------------------
GAM Japan Capital Fund
- --------------------------------------------------------------------------------
Fund Management
- --------------------------------------------------------------------------------
[GRAPHIC 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 - CLASS A SHARES
<TABLE>
<CAPTION>
GAM Japan
Capital
Class A
GAM (after Tokyo Average
Japan maximum Stock 1 Month
Capital sales load Exchange Deposit
Class A of 5%) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$7.65 US$8.05 1,086.99
- ---------------------------------------------------------------------------------
% % % %
- ---------------------------------------------------------------------------------
Quarter to Dec, 98 + 7.90 + 2.50 +26.1 + 1.35
- ---------------------------------------------------------------------------------
Jan - Dec, 1998 - 2.75 - 7.61 + 7.7 + 5.67
- ---------------------------------------------------------------------------------
Average annual total return:
- ---------------------------------------------------------------------------------
3 years to December 1998 - 1.73 - 3.40 -13.52 + 5.57
- ---------------------------------------------------------------------------------
Since inception - 0.63 - 1.75 -10.92 + 5.60
- ---------------------------------------------------------------------------------
</TABLE>
Performance is calculated on a total return basis. During the year, Class A paid
a distribution of US$0.57. Class A inception was on 1st July, 1994, Class B on
26th May, 1998 and Class C on 19th May, 1998. Past performance is not
necessarily 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.
28
<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 Class A and a comparable index. The performance of Class A is
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, The
Financial Times and Datastream.
The Tokyo Stock Exchange Index (TOPIX) is a capitalization-weighted composite
index of approximately 1,200 companies listed on the First Section of the Tokyo
Stock Exchange. The combined market capitalization 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.
AVERAGE ANNUAL TOTAL RETURN - CLASS A
[The following table represents a bar chart in the printed report.]
GAM
JAPAN CAPITAL
GAM CLASS A TOKYO STOCK
JAPAN CAPITAL (AFTER MAXIMUM EXCHANGE
CLASS A SALES LOAD OF 5%) INDEX
Year % % %
- -----------------------------------------------------------------------
One (2.75) (7.61) 7.77
Two (2.66) (5.12) 11.97
Three (1.73) (3.40) (13.52)
Since Inception (0.63) (1.75) (10.92)
ANNUAL PERFORMANCE - CLASS A
[The following table represents a bar chart in the printed report.]
GAM
JAPAN CAPITAL
GAM CLASS A TOKYO STOCK
JAPAN CAPITAL (AFTER MAXIMUM EXCHANGE
CLASS A 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)
1998 (2.75) (7.61) 7.77
29
<PAGE>
- --------------------------------------------------------------------------------
GAM Japan Capital Fund - Report to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
THE FACTS - CLASS B SHARES
<TABLE>
<CAPTION>
GAM
Japan
GAM Capital Tokyo Average
Japan Class B Stock 1 Month
Capital (with deferred Exchange Deposit
Class B sales charge) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$8.11 1,086.99
- ---------------------------------------------------------------------------------------
% % % %
- ---------------------------------------------------------------------------------------
Quarter to Dec, 98 + 6.85 + 1.51 +26.16 + 1.35
- ---------------------------------------------------------------------------------------
Since inception* - 4.48 - 9.25 + 8.62 + 3.31
- ---------------------------------------------------------------------------------------
</TABLE>
THE FACTS - CLASS C SHARES
<TABLE>
<CAPTION>
GAM
Japan
GAM Capital Tokyo Average
Japan Class C Stock 1 Month
Capital (with deferred Exchange Deposit
Class C sales charge) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$8.12 1,086.99
- ------------------------------------------------------------------------------------
% % % %
- ------------------------------------------------------------------------------------
Quarter to Dec, 98 + 7.12 + 6.05 +26.16 + 1.35
- ------------------------------------------------------------------------------------
Since inception* - 5.14 - 6.09 + 8.28 + 3.42
- ------------------------------------------------------------------------------------
</TABLE>
* Inception was on 26th May, 1998 for Class B shares, and on 19th May for Class
C shares.
THE COMMENT
During 1998, Japan's economy entered full blown recession with the economy
shrinking for a record four consecutive quarters. The stock market fell for the
first three quarters of the year and then stabilized in the fourth. Investors
were encouraged by the announcement of yet another record stimulatory public
works package as well as a -60 trillion package to bail out the banks.
Japanese economic policy showed signs of becoming stronger throughout the
year as the severity of the economic downturn became recognized. Unfortunately,
there was still an unwillingness to accept the painful consequences of
restructuring, the closure of excess capacity, which for the economy as a whole
stands at approximately 30%. Most policies aimed at forestalling the need for
such action rather than alleviating its consequences. Although further policy
action can be expected in 1999, the government is for the first time coming up
against a new and unfamiliar constraint. In the latter part of 1998, Moody's
downgraded Japan's sovereign debt rating in reaction to the countries rapidly
deteriorating fiscal position. With government debt now exceeding 100% of GDP,
the bond market has also signaled concern - government bond yields rose sharply
to 1.99% in the last six weeks of the year from a low of under 0.7%.
The Fund continues to invest by cautiously maintaining a high level of cash
and restricting investments to companies with strong balance sheets and well
defined business franchises. The main focus continues to be in non-bank
financials and multinational exporters. The latter group, companies such as
Sony, having done well over a number of years, corrected sharply in the final
quarter of the year as the yen rallied strongly, undermining the attractiveness
of overseas earnings. We continue to maintain most of our positions in these
companies as Japanese multinationals have ridden out such conditions before and
invariably have emerged stronger. New investments have had more of a domestic
flavor with additions to existing positions in companies such as Yamanouchi and
Secom and participation in newly listed companies such as Toppan Forms and
Fujitsu Support and Services. The manager is normally wary of new listings as
the prices are often too high and the prospects exaggerated. However, in
30
<PAGE>
- --------------------------------------------------------------------------------
GAM Japan Capital Fund - Statement of Investments
- --------------------------------------------------------------------------------
the current difficult environment, the only companies that are able to list are
usually high quality and sell for a reasonable price affording good
opportunities. 1999 could well be another difficult year, at least initially. If
the stock market experiences a correction, it is likely that this will finally
force the radical restructuring Japan so desperately needs. The opportunity to
invest at attractive valuations that the manager has awaited may possibly even
signal the end of the nine-year bear market.
Having successfully protected the value of the Fund against the weakness of
the yen in previous quarters, the relative performance suffered in the final
quarter of the year when the yen rose sharply. Although the yen may remain firm
in the early part of 1999, weakness is likely to return later as the impact of a
strong yen on Japan's manufacturing sector becomes better understood.
AS AT 31ST DECEMBER, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- -------------- --------------------------------------- ------------
<S> <C> <C>
CONVERTIBLES - 1.0%
BANKING - 1.0%
*36,000,000 Sanwa International Convertible Reg S 248,650
-------
TOTAL CONVERTIBLES (COST $281,580) 248,650
-------
EQUITIES - 79.7%
APPLIANCES & HOUSEHOLD DURABLES - 3.9%
15,000 Matsushita Electric 265,519
9,400 Sony 685,044
-------
950,563
-------
AUTOMOBILES - 2.5%
52,000 Suzuki Motor 617,019
-------
617,019
-------
BANKING - 1.2%
41,000 Bank of Kyoto 206,942
18,000 Tochigi Bank 95,635
-------
302,577
-------
BROADCASTING & PUBLISHING - 0.7%
4,000 Nippon Broadcasting System 160,099
-------
160,099
-------
BUILDING MATERIAL & COMPONENTS - 0.8%
28,000 Inax 180,997
2,000 Okabe 5,933
-------
186,930
-------
BUSINESS & PUBLIC SERVICES - 4.9%
6,400 Asatsu 153,015
10,500 Sanix 255,690
9,000 Secom 745,949
13,100 Wesco 35,380
-------
1,190,034
---------
CHEMICALS - 1.7%
17,000 Shin-Etsu Chemical 409,457
---------
409,457
---------
DATA PROCESSING & REPRODUCTION - 6.3%
10,000 Canon 213,849
5,000 Fujitsu Support and Services 360,843
2,700 Nidec 330,656
67,000 Ricoh 618,206
---------
1,523,554
---------
</TABLE>
31
<PAGE>
- --------------------------------------------------------------------------------
GAM Japan Capital Fund - Statement of Investments (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- ----------- --------------------------------------- ------------
<S> <C> <C>
ELECTRICAL & ELECTRONICS - 2.2%
19,000 Anritsu 153,945
61,000 Hitachi 378,110
-------
532,055
-------
ELECTRONIC COMP. & INSTRUMENTS - 4.8%
4,000 Fuji Soft ABC 203,666
9,000 Mimasu Semiconductor Industry 93,323
7,000 Rohm 637,829
25,000 Yamatake Honeywell 236,872
-------
1,171,690
---------
FINANCIAL SERVICES - 10.7%
20,700 Credit Saison 510,489
4,000 Japan Associated Finance 108,386
4,440 Nichiei 353,848
15,300 ORIX 1,143,469
1,460 Shohkoh Fund 470,592
---------
2,586,784
---------
FOOD & HOUSEHOLD PRODUCTS - 2.9%
18,100 Matsumotokiyoshi 700,407
---------
700,407
---------
FOREST PRODUCTS & PAPER - 2.6%
36,000 Toppan Forms 640,751
---------
640,751
---------
HEALTH & PERSONAL CARE - 6.1%
13,000 Chugai Pharmaceutical 130,081
10,000 Santen Pharmaceutical 192,155
*11,000 Sawai Pharmaceutical 76,950
14,000 Towa Pharmaceutical 105,375
12,600 Xebio 262,756
22,000 Yamanouchi Pharmaceutical 709,112
---------
1,476,429
---------
INDUSTRIAL COMPONENTS - 4.2%
77,000 Minebea 882,299
8,000 Sumitomo Special Metals 130,417
---------
1,012,716
---------
INSURANCE - 5.4%
26,000 Chiyoda Fire & Marine Insurance 87,258
34,000 Dowa Fire & Marine Insurance 126,450
67,000 Mitsui Marine & Fire Insurance 353,006
123,000 Nissan Fire & Marine Insurance 370,318
58,000 Sumitomo Marine & Fire Insurance 367,732
---------
1,304,764
---------
MACHINERY & ENGINEERING - 0.5%
4,000 Fuji Machine Manufacturing 126,450
---------
126,450
---------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- ----------- --------------------------------------- ------------
<S> <C> <C>
MERCHANDISING - 7.2%
2,400 Amway Japan 27,415
100 Bellsystem 24 22,315
9,510 Circle K Japan 418,531
26,700 DeoDeo Corp 256,763
9,000 Paris Miki 207,208
4,300 Ryohin Keikaku 573,054
12,000 Shimachu 239,086
---------
1,744,372
---------
REAL ESTATE - 1.7%
8,000 Sankei Building 26,211
2,000 Tachihi Enterprise 49,146
36,930 TOC 334,865
---------
410,222
---------
RECREATION & OTHER CONSUMER GOODS - 3.7%
32,000 Citizen Watch 192,686
19,000 Fuji Photo Film 706,632
---------
899,318
---------
TELECOMMUNICATIONS - 3.0%
17,000 Nippon Denwa Shisetsu 58,709
87 Nippon Tel and Tel 671,778
---------
730,487
---------
TEXTILES & APPAREL - 1.4%
27,000 Shiseido 347,153
---------
347,153
---------
UTILITIES - ELECTRIC & GAS - 1.1%
12,900 Kyushu Electric Power 245,595
1,000 Okinawa Electric Power 18,595
---------
264,190
---------
WHOLESALE & INTERNATIONAL TRADE - 0.2%
4,700 Yellow Hat 44,948
---------
44,948
---------
TOTAL EQUITIES (COST $19,747,483) 19,332,969
----------
</TABLE>
32
<PAGE>
- --------------------------------------------------------------------------------
GAM Japan Capital Fund - Statement of Investments (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- --------------------------------------------------------------------- --------------
<S> <C> <C>
OPTIONS - 0.2%
INDEX - 0.2%
*20 Nikkei 225 Index
13,000 JPY Puts 1999-03-31 49,588
------
TOTAL OPTIONS (COST $59,383) 49,588
------
TIME DEPOSITS - 20.5%
UNITED STATES - 20.5%
$4,987,069 First National Bank of
Chicago 4.06% 1999-01-04 4,987,069
---------
TOTAL TIME DEPOSITS (COST $4,987,069) 4,987,069
----------
TOTAL INVESTMENTS (COST $25,075,515**) - 101.4% 24,618,276
NET CURRENT ASSETS (1.4)% (345,425)
----------
TOTAL NET ASSETS - 100.0% 24,272,851
==========
</TABLE>
* Non-income producing security.
** Cost for federal income tax purposes is $25,838,191 (Note 5).
Glossary of Terms:
JPY - Japanese Yen
Reg S - Regulation S
See notes to financial statements.
33
<PAGE>
- --------------------------------------------------------------------------------
GAM North America Fund
- --------------------------------------------------------------------------------
Fund Management
- --------------------------------------------------------------------------------
[GRAPHIC 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 - CLASS A SHARES
<TABLE>
<CAPTION>
GAM North
America
Class A
GAM (after Average
North maximum S & P 1 Month
America sales load Comp Deposit
Class A of 5%) Index Rate
<S> <C> <C> <C> <C>
31st Dec., 1998 US$16.74 US$17.62 1,229.23
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 98 +18.07 +12.17 +21.46 + 1.35
- --------------------------------------------------------------------------------
Jan - Dec, 1998 +29.44 +22.96 +28.76 + 5.67
- --------------------------------------------------------------------------------
Average annual total return:
- --------------------------------------------------------------------------------
3 years to December, 1998 +27.62 +25.46 +28.28 + 5.57
- --------------------------------------------------------------------------------
5 years to December, 1998 +22.88 +21.63 +24.08 + 5.40
- --------------------------------------------------------------------------------
Since inception +15.83 +15.17 +17.92 + 5.40
- --------------------------------------------------------------------------------
</TABLE>
Performance is calculated on a total return basis. During the year, Class A paid
a distribution of US$5.27, and Class B and Class C paid distributions of
US$4.81. Class A inception was on 1st January, 1990, Class B on 26th May, 1998
and Class C on 7th July, 1998. Past performance is not necessarily 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 North America Fund - Report to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NOTE: The graph compares the performance results of a hypothetical $10,000
investment in Class A and a comparable index. The performance of Class A is
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, The
Financial Times and Datastream.
The Standard and 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.
AVERAGE ANNUAL TOTAL RETURN - CLASS A
[The following table represents a bar chart in the printed report.]
GAM NORTH
AMERICA STANDARD &
GAM CLASS A POOR'S
NORTH AMERICA (AFTER MAXIMUM COMPOSITE
CLASS A SALES LOAD OF 5%) INDEX
YEAR % % %
- -----------------------------------------------------------------------
One 29.44 22.96 28.76
Three 27.62 25.46 28.28
Five 22.88 21.63 24.08
Since inception 15.83 15.17 17.92
ANNUAL PERFORMANCE - CLASS A
[GRAPHIC OMITTED]
GAM NORTH
AMERICA STANDARD &
GAM CLASS A POOR'S
NORTH AMERICA (AFTER MAXIMUM COMPOSITE
CLASS A SALES LOAD OF 5%) INDEX
YEAR % % %
- -------------------------------------------------------------
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
1998 29.44 22.96 28.76
35
<PAGE>
- --------------------------------------------------------------------------------
GAM North America Fund - Report to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
THE FACTS - CLASS B SHARES
<TABLE>
<CAPTION>
GAM
North America Average
GAM Class B S & P 1 Month
North America (with deferred Comp Deposit
Class B sales charge) Index Rate
<S> <C> <C> <C> <C>
31st Dec., 1998 US$16.87 1,229.23
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 98 +16.96 +11.11 +21.46 + 1.35
- --------------------------------------------------------------------------------
Since inception* + 9.68 + 4.19 +13.49 + 3.31
- --------------------------------------------------------------------------------
</TABLE>
THE FACTS - CLASS C SHARES
<TABLE>
<CAPTION>
GAM
North America Average
GAM Class C S & P 1 Month
North America (with deferred Comp Deposit
Class C sales charge) Index Rate
<S> <C> <C> <C> <C>
31st Dec., 1998 US$16.58 1,229.23
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 98 +16.64 +15.47 +21.46 + 1.35
- --------------------------------------------------------------------------------
Since inception* + 0.69 - 0.31 + 7.35 + 2.66
- --------------------------------------------------------------------------------
</TABLE>
* Inception was on 26th May, 1998 for Class B shares and 7th July, 1998 for
Class C shares.
THE COMMENT
The US economy is approaching the longest peacetime expansion, in the
current business cycle, since the Civil War. There is little evidence of
pressures or excesses, which historically have flagged the demise of an
expansion, such as rising prices, a general trend in wage inflation and
increasing long-term interest rates with a steepening yield curve. In fact, we
expect to see another decline in the annual rate of inflation, from 1.5%
projected for 1998, to 1.3% in 1999, while fundamentals support a continued
decline in interest rates, to 4.50% on the 30-year bond. Thus, we see a
continuation of minimum pricing flexibility, in the general economy and no
measurable pickup in commodity prices. In spite of numerous exogenous events,
leading to a global financial crisis in 1998, US GDP growth exceeded our own, as
well as, consensus expectations. We expect the rate of growth to weaken from an
average annual rate near 3.8% in 1998, to an average annual rate near 2.5% in
1999. Stable growth will continue to be driven by consumption. However, we
expect demand to weaken somewhat and continue to be focused on the housing
sector and related purchases of goods and services. Automobile sales should also
remain at high levels. We expect to see some improvement in the savings rate,
reflecting the weaker pace of consumption, a high level of employment and stable
real income growth. The decline in manufacturing may have plateaued. Although we
expect the recovery period to extend over several years, we should see some
pick-up in demand from Asia as the year unfolds. Relatedly, exports will
continue to be a net negative, due, in particular, to weakness in Brazil and
Mexico. Capital spending, which boosted 1998 growth above our forecast, weakened
sharply in the third quarter and we expect continued weakness in 1999. However,
against a backdrop of global liquidity, declining interest rates and a weaker
dollar, we expect above consensus corporate profit growth, near 8.0%. Thus, also
taking into consideration expenses related to Y2K, capital spending could be
stronger than forecast. The Fund's performance in excess of the benchmark for
the year-to-date, is attributable to our long-term investment strategy and focus
on the large, globally dominant, highest quality companies. Sector concentration
in the large, US-domiciled pharmaceutical companies had the most positive impact
on
36
<PAGE>
- --------------------------------------------------------------------------------
GAM North America Fund - Statement of Investments
- --------------------------------------------------------------------------------
performance-led by, Pfizer, Merck and Johnson & Johnson. Increased exposure to
the technology sector also supported the Fund's outperformance, led by Intel,
Microsoft and Cisco Systems. Strength in individual positions in Berkshire
Hathaway, Chase Manhattan Bank, General Electric and Walgreen, was also
noteworthy.
AS AT 31ST DECEMBER, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- ---------- -------------------------------------- ----------
<S> <C> <C>
EQUITIES - 92.8%
AUTOMOBILES - 4.1%
*3,618 DaimlerChrysler 347,554
7,718 Ford Motor 452,950
-------
800,504
-------
BANKING - 4.4%
6,500 Chase Manhattan 442,406
5,500 SunTrust Banks 420,750
-------
863,156
-------
BEVERAGES & TOBACCO - 11.0%
13,500 Coca-Cola 902,813
8,000 PepsiCo 327,500
17,000 Philip Morris 909,500
-------
2,139,813
---------
BROADCASTING & PUBLISHING - 1.0%
2,000 McGraw-Hill 203,750
---------
203,750
---------
BUSINESS & PUBLIC SERVICES - 2.7%
*3,800 Microsoft 527,013
---------
527,013
---------
CHEMICALS - 0.4%
1,500 DuPont de Nemours 79,594
---------
79,594
---------
DATA PROCESSING & REPRODUCTION - 2.6%
4,900 Compaq Computer 205,494
4,500 Hewlett Packard 307,406
---------
512,900
---------
ELECTRICAL & ELECTRONICS - 1.1%
3,500 Emerson Electric 211,750
---------
211,750
---------
ELECTRONIC COMP. & INSTRUMENTS - 5.8%
*3,850 Cisco Systems 357,328
6,500 Intel 770,656
---------
1,127,984
---------
ENERGY SOURCES - 6.1%
3,500 BP Amoco 332,500
3,200 Chevron 265,400
4,200 Exxon 307,125
3,200 Mobil 278,800
---------
1,183,825
---------
</TABLE>
37
<PAGE>
- --------------------------------------------------------------------------------
GAM North America Fund - Statement of Investments (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- ------------- ------------------------------------ ------------
<S> <C> <C>
FINANCIAL SERVICES - 6.7%
9,098 Associates First Capital A 385,528
8,000 Citigroup 396,000
7,000 Fannie Mae 518,000
-------
1,299,528
---------
FOOD & HOUSEHOLD PRODUCTS - 2.1%
4,500 Proctor & Gamble 410,906
---------
410,906
---------
HEALTH & PERSONAL CARE - 21.7%
7,600 Abbott Laboratories 372,400
8,000 American Home Products 450,500
4,000 Bristol-Myers Squibb 535,250
600 Estee Lauder Class A 51,300
10,000 Gillette 483,125
6,500 Johnson & Johnson 545,188
4,500 Merck 664,594
9,000 Pfizer 1,128,937
---------
4,231,294
---------
INDUSTRIAL COMPONENTS - 1.5%
6,000 Rockwell International 291,375
---------
291,375
---------
INSURANCE - 5.6%
1,200 American General 93,600
*10 Berkshire Hathaway 700,000
5,000 Marsh & McLennan Companies 292,187
---------
1,085,787
---------
LEISURE & TOURISM - 1.6%
2,500 McDonald's 191,562
*2,350 Tricon Global Restaurants 117,794
---------
309,356
---------
MERCHANDISING - 2.4%
1,200 Wal-Mart Stores 97,725
6,400 Walgreen 374,800
---------
472,525
---------
MULTI-INDUSTRY - 4.2%
4,000 Allied Signal 177,250
6200 General Electric 632,788
---------
810,038
---------
RECREATION & OTHER
CONSUMER GOODS - 0.5%
*4,800 Polo Ralph Lauren Class A 92,100
---------
92,100
---------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- ------------- ------------------------------------ ------------
<S> <C> <C>
TELECOMMUNICATIONS - 6.0%
4,600 Bell Atlantic 243,800
7,600 Bellsouth 379,050
10,064 SBC Communications 539,682
---------
1,162,532
---------
TRANSPORTATION - ROAD & RAIL - 1.3%
8,000 Norfolk Southern 253,500
---------
253,500
---------
TOTAL EQUITIES (COST $14,073,629) 18,069,230
----------
PREFERRED SHARES - 0.2%
BROADCASTING & PUBLISHING - 0.2%
1,800 News Corp ADR (Pfd) 44,437
----------
TOTAL PREFERRED SHARES (COST $36,335) 44,437
----------
TIME DEPOSITS - 4.5%
UNITED STATES - 4.5%
$ 874,800 Republic National Bank
4.06% 1999-01-04 874,800
----------
TOTAL TIME DEPOSITS (COST $874,800) 874,800
----------
TOTAL INVESTMENTS (COST $14,984,764**) - 97.5% 18,988,467
NET CURRENT ASSETS - 2.5% 489,811
----------
TOTAL NET ASSETS - 100.0% 19,478,278
==========
</TABLE>
* Non-income producing security.
** Cost for federal income tax purposes is $14,989,281 (Note 5).
Glossary of terms:
ADR -American Depositary Receipt
See notes to financial statements.
38
<PAGE>
- --------------------------------------------------------------------------------
GAMerica Capital Fund
- --------------------------------------------------------------------------------
Fund Management
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
GORDON GRENDER, DIRECTOR, HAS BEEN ASSOCIATED WITH
GAM SINCE 1983 . HE HAS BEEN ACTIVELY INVOLVED IN
FUND MANAGEMENT IN NORTH AMERICAN STOCK MARKETS
SINCE 1974. HE COMMENCED MANAGEMENT OF GAMERICA
CAPITAL FUND ON 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 - CLASS A SHARES
<TABLE>
<CAPTION>
GAMerica
Capital
Class A
(after Average
GAMerica maximum S & P 1 Month
Capital sales load Comp Deposit
Class A of 5%) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$17.08 US$17.98 1,229.23
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 98 +19.81 +13.82 +21.46 + 1.35
- --------------------------------------------------------------------------------
Jan - Dec, 1998 +30.59 +24.06 +28.76 + 5.67
- --------------------------------------------------------------------------------
Average annual total return:
- --------------------------------------------------------------------------------
3 years to December 1998 +28.48 +26.31 +28.28 + 5.57
- --------------------------------------------------------------------------------
Since inception +23.42 +21.69 +28.82 + 5.63
- --------------------------------------------------------------------------------
</TABLE>
Performance is calculated on a total return basis. During the year, Class A paid
a distribution of US$0.42, and Class B and Class C paid distributions of
US$0.15. Class A inception was on 12th May 1995, Class B and Class C on 26th
May, 1998. Past performance is not necessarily 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.
39
<PAGE>
- --------------------------------------------------------------------------------
GAMerica Capital Fund - Report to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NOTE: The graph compares the performance results of a hypothetical $10,000
investment in Class A and a comparable index. The performance of Class A is
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, The
Financial Times and Datastream.
The Standard and 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.
AVERAGE ANNUAL TOTAL RETURN - CLASS A
[The following table represents a bar chart in the printed report.]
GAMERICA
CAPITAL
GAMERICA CLASS A S & P
CAPITAL (AFTER MAXIMUM COMPOSITE
CLASS A SALES LOAD OF 5%) INDEX
YEAR % % %
- ----------------------------------------------------------------
One 30.59 24.06 28.76
Two 33.89 30.50 31.03
Three 28.48 26.31 28.28
Since inception 23.42 21.69 28.82
ANNUAL PERFORMANCE - CLASS A
[The following table represents a bar chart in the printed report.]
GAMERICA
CAPITAL
GAMERICA CLASS A S & P
CAPITAL (AFTER MAXIMUM COMPOSITE
CLASS A SALES LOAD OF 5%) INDEX
YEAR % % %
- ------------------------------------------------------
1995 1.38 (3.70) 19.03
1996 18.31 12.40 22.95
1997 37.28 30.41 33.35
1998 30.59 24.06 28.76
40
<PAGE>
- --------------------------------------------------------------------------------
GAMerica Capital Fund - Report to Shareholders (CONTINUED)
- --------------------------------------------------------------------------------
THE FACTS - CLASS B SHARES
<TABLE>
<CAPTION>
GAMerica
Capital Average
GAMerica Class B S & P 1 Month
Capital (with deferred Comp Deposit
Class B sales charge) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$17.26 1,229.23
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 98 +19.40 +13.43 +21.46 + 1.35
- --------------------------------------------------------------------------------
Since inception* + 5.13 - 0.13 +13.49 + 3.31
- --------------------------------------------------------------------------------
</TABLE>
THE FACTS - CLASS C SHARES
<TABLE>
<CAPTION>
GAMerica
Capital Average
GAMerica Class C S & P 1 Month
Capital (with deferred Comp Deposit
Class C sales charge) Index Rate
<S> <C> <C> <C> <C>
31st Dec, 1998 US$17.13 1,229.23
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 98 +18.75 +17.56 +21.46 + 1.35
- --------------------------------------------------------------------------------
Since inception* + 4.34 + 3.30 +13.49 + 3.31
- --------------------------------------------------------------------------------
</TABLE>
* Inception was on 26th May, 1998 for Class B and Class C shares.
THE COMMENT
In many ways 1998 was another exceptional year for US equity markets with a
rise of 28% in the Standard & Poor's Composite Index but a fall of 2% for the
Russell 2000 Index of smaller companies.
Much of the gain in the market was the result of exceptionally strong
performances of some of the largest technology companies, which as a group rose
80%.
After falling 20% between July and October on fears of the effect of the
Asian crisis on the US economy the market recovery was spectacular. Seven weeks
after the October low the market reached a new high in November.
Interest rates continued to fall through the year and this together with
rapid money growth helped fuel the rise in the market.
At the time of our review last year the Standard & Poor's Industrial Index
was selling at 25 times earnings and analysts were expecting 13% growth for 1998
although we were not convinced this would be achieved. Growth in 1998 is
actually estimated to have been less than 1% and the market is now selling at 31
times historic earnings with analysts expecting growth of 10.7% for 1999.
At present the outlook for interest rates remains benign and some of the
Asian economies, with the notable exception of Japan, are showing signs of
improvement. On the other hand there is excessive speculation in internet stocks
and valuation levels of many of the major companies seem high.
We continue to be enthusiastic for the prospects for the US in the longer
term and as we have written before we will do our best to try to identify
undervalued stocks.
41
<PAGE>
- --------------------------------------------------------------------------------
GAMerica Capital Fund - Statement of Investments
- --------------------------------------------------------------------------------
AS AT 31ST DECEMBER, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- -------------- --------------------------------------------------
<S> <C> <C>
EQUITIES - 70.7%
AUTOMOBILE PARTS & EQUIPMENT - 4.5%
*23,000 Keystone Automotive Industries 481,563
*15,000 United Auto Group 137,812
-------
619,375
-------
BANKING - 0.1%
*3,000 Friedman, Billings, Ramsey Group A 19,500
-------
19,500
-------
BEVERAGE & TOBACCO - 0.4%
2,000 Gallaher Group ADR 54,375
-------
54,375
-------
BUSINESS & PUBLIC SERVICES - 1.6%
*27,000 Professional Staff ADR 212,625
-------
212,625
-------
CONSTRUCTION & HOUSING - 1.8%
*9,765 Palm Harbor Homes 245,956
-------
245,956
-------
DATA PROCESSING & REPRODUCTION - 2.3%
*15,000 Beyond.com 311,250
-------
311,250
-------
ELECTRICAL & ELECTRONICS - 0.3%
2,500 AVX 42,344
-------
42,344
-------
ELECTRONIC COMP. & INSTRUMENTS - 6.6%
*60,000 Power One 420,000
15,000 Raychem Corp 484,687
-------
904,687
-------
ENERGY SOURCES - 0.6%
3,000 Unocal 87,562
-------
87,562
-------
FINANCIAL SERVICES - 1.1%
*26,400 Titan 145,200
-------
145,200
-------
FOOD & HOUSEHOLD PRODUCTS - 4.5%
3,472 Archer-Daniels-Midland 59,675
15,000 Delta & Pine Land 555,000
-------
614,675
-------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- -------------- -------------------------------------- ------
<S> <C> <C>
HEALTH & PERSONAL CARE - 3.6%
*4,500 ClinTrials Research 17,719
8,000 Intimate Brands Class A 239,000
*100,000 Unilab 237,500
-------
494,219
-------
LEISURE & TOURISM - 0.5%
*5,000 N2K 65,313
-------
65,313
-------
INSURANCE - 8.0%
3,500 EXEL Limited 262,500
20,000 Intercargo 227,500
15,000 Orion Capital Corp 597,188
-------
1,087,188
---------
MACHINERY & ENGINEERING - 3.5%
20,000 Gerber Scientific 476,250
---------
476,250
---------
MERCHANDISING - 4.9%
6,250 Fred's Class A 93,750
++ *12,500 Jumbosports -
*7,500 Party City 108,281
30,000 Pep Boys 470,625
---------
672,656
---------
MISC. MATERIALS & COMMODITIES - 8.4%
*12,000 Best Buy 736,500
33,000 Foamex International 408,375
---------
1,144,875
---------
REAL ESTATE - 6.1%
20,000 Bradley Real Estate 410,000
*38,000 Fairfield Communities 420,375
---------
830,375
---------
RECREATION, OTHER CONSUMER
GOODS - 1.9%
2,000 Fortune Brands 63,250
*7,500 Select Comfort 198,281
---------
261,531
---------
TELECOMMUNICATIONS - 3.2%
*6,000 MCI WorldCom 430,500
---------
430,500
---------
</TABLE>
42
<PAGE>
- --------------------------------------------------------------------------------
GAMerica Capital Fund - Statement of Investments (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE
HOLDINGS DESCRIPTION US$
- ------------------------------------------------ ---------------------------
<S> <C> <C>
WHOLESALE & INTERNATIONAL TRADE - 6.8%
*50,000 CyberShop International 568,750
*50,000 Point of Sale 356,250
----------
925,000
----------
TOTAL EQUITIES (COST $8,215,872) 9,645,456
----------
TIME DEPOSITS - 43.2%
UNITED STATES - 43.2%
$ 5,893,086 Brown Brothers Harriman & Co.
4.06% 1999-01-04 5,893,086
----------
TOTAL TIME DEPOSITS (COST $5,893,086) 5,893,086
----------
TOTAL INVESTMENTS (COST $14,108,958**) - 113.9% 15,538,542
NET CURRENT ASSETS - (13.9)% (1,893,698)
----------
TOTAL NET ASSETS - 100.0% 13,644,844
==========
</TABLE>
* Non-income producing security
** Cost for federal income tax purposes is identical.
++ Fair value determined by Board of Directors
Glossary of terms:
ADR - American Depositary Receipt
See notes to financial statements.
43
<PAGE>
- --------------------------------------------------------------------------------
GAM Funds, Inc. - Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
AT 31ST DECEMBER, 1998
<TABLE>
<CAPTION>
GAM
International
-----------------
<S> <C>
ASSETS (IN US$)
Investments in securities at value $2,980,805,931
Cash - Foreign currencies 10,391,348
Receivables:
Securities sold 47,088,102
Capital shares sold 24,667,396
Dividends, interest and other 21,839,895
Due from broker for futures contracts (Note 6) 22,571,195
Deferred organizational expenses and other assets 44,748
--------------
TOTAL ASSETS 3,107,408,615
--------------
LIABILITIES
Due to Custodian 401,558
Payables:
Securities purchased 12,633,642
Capital shares redeemed 13,978,794
Net equity in foreign currency exchange contracts (Note 6) 81,444,046
Accrued management fee 7,045,452
Accrued distribution fee 2,254,328
Accrued expenses and other 1,449,556
--------------
TOTAL LIABILITIES 119,207,376
--------------
NET ASSETS $2,988,201,239
==============
SOURCE OF NET ASSETS
Net capital paid in on shares of capital stock (Note 4) $2,542,204,538
Accumulated net investment income/(loss) 48,844,853
Accumulated net realized gains/(losses) (114,049,288)
Net unrealized appreciation/(depreciation) 511,201,136
--------------
NET ASSETS $2,988,201,239
==============
CLASS A SHARES OUTSTANDING 89,339,098
CLASS A NET ASSETS $2,685,713,285
Net asset value and redemption value per share (Note 4) $ 30.06
Offering price per share (100/95 x net asset value per share reduced
on sales of $100,000 or more) $ 31.64
CLASS B SHARES OUTSTANDING 2,145,228
CLASS B NET ASSETS $ 65,238,335
Net asset value and offering price per share (Note 4) $ 30.41
CLASS C SHARES OUTSTANDING 2,583,074
CLASS C NET ASSETS $ 78,452,148
Net asset value and offering price per share (Note 4) $ 30.37
CLASS D SHARES OUTSTANDING 5,308,001
CLASS D NET ASSETS $ 158,797,471
Net asset value and redemption value per share (Note 4) $ 29.92
Offering price per share (100/96.5 x net asset value per share reduced
on sales of $100,000 or more) $ 31.01
Identified cost of investments $2,411,355,971
<CAPTION>
GAM
GAM GAM Pacific
Global Europe Basin
--------------- -------------- ----------------
<S> <C> <C> <C>
ASSETS (IN US$)
Investments in securities at value $ 166,408,441 $53,134,057 $ 17,648,398
Cash - Foreign currencies 4,475,101 457,522 568,477
Receivables:
Securities sold 1,368,280 894,576 295,686
Capital shares sold 704,829 129,021 180,727
Dividends, interest and other 505,941 147,594 5,127
Due from broker for futures contracts (Note 6) 884,707 - -
Deferred organizational expenses and other assets 81,525 25,752 66,532
------------- ----------- --------------
TOTAL ASSETS 174,428,824 54,788,522 18,764,947
------------- ----------- --------------
LIABILITIES
Due to Custodian 31,665 2,127,099 -
Payables:
Securities purchased 1,298,373 47,104 -
Capital shares redeemed 719,101 143,993 31,120
Net equity in foreign currency exchange contracts (Note 6) 1,982,619 - 165,573
Accrued management fee 385,477 129,573 43,209
Accrued distribution fee 127,401 43,258 8,686
Accrued expenses and other 111,982 65,604 58,647
------------- ----------- --------------
TOTAL LIABILITIES 4,656,618 2,556,631 307,235
------------- ----------- --------------
NET ASSETS $ 169,772,206 $52,231,891 $ 18,457,712
============= =========== ==============
SOURCE OF NET ASSETS
Net capital paid in on shares of capital stock (Note 4) $ 163,925,186 $46,078,620 $ 43,042,597
Accumulated net investment income/(loss) 231,030 (580,951) (1,521,567)
Accumulated net realized gains/(losses) (15,903,022) 842,614 (18,334,451)
Net unrealized appreciation/(depreciation) 21,519,012 5,891,608 (4,728,867)
------------- ----------- --------------
NET ASSETS $ 169,772,206 $52,231,891 $ 18,457,712
============= =========== ==============
CLASS A SHARES OUTSTANDING 7,366,611 3,928,719 2,060,852
CLASS A NET ASSETS $ 140,273,905 $49,630,906 $ 16,970,880
Net asset value and redemption value per share (Note 4) $ 19.04 $ 12.63 $ 8.23
Offering price per share (100/95 x net asset value per share reduced
on sales of $100,000 or more) $ 20.04 $ 13.29 $ 8.66
CLASS B SHARES OUTSTANDING 544,380 139,436 30,477
CLASS B NET ASSETS $ 10,401,771 $ 1,787,478 $ 273,101
Net asset value and offering price per share (Note 4) $ 19.11 $ 12.82 $ 8.96
CLASS C SHARES OUTSTANDING 471,924 64,078 20,090
CLASS C NET ASSETS $ 9,014,307 $ 813,507 $ 163,155
Net asset value and offering price per share (Note 4) $ 19.10 $ 12.70 $ 8.12
CLASS D SHARES OUTSTANDING 536,674 129,496
CLASS D NET ASSETS $ 10,082,223 $ 1,050,576
Net asset value and redemption value per share (Note 4) $ 18.79 $ 8.11
Offering price per share (100/96.5 x net asset value per share reduced
on sales of $100,000 or more) $ 19.47 $ 8.40
Identified cost of investments $ 143,882,276 $47,246,123 $ 22,211,190
</TABLE>
See notes to financial statements.
44
<PAGE>
- --------------------------------------------------------------------------------
GAM Funds, Inc. - Statements of Assets and Liabilities (CONTINUED)
- --------------------------------------------------------------------------------
AT 31ST DECEMBER, 1998
<TABLE>
<CAPTION>
GAM GAM
Japan North GAMerica
Capital America Capital
---------------- -------------- ----------------
<S> <C> <C> <C>
ASSETS (IN US$)
Investments in securities at value $ 24,618,276 $18,988,467 $ 15,538,542
Cash - Foreign currencies 74,731 - -
Receivables:
Securities sold - - 15,562
Capital shares sold 84,609 538,226 172,946
Dividends, interest and other 2,541 15,775 -
Due from broker for futures contracts (Note 6) - - -
Deferred organizational expenses and other assets 34,898 25,004 30,462
------------- ----------- ------------
TOTAL ASSETS 24,815,055 19,567,472 15,757,512
------------- ----------- ------------
LIABILITIES
Due to Custodian - - -
Payables:
Securities purchased - - -
Capital shares redeemed 205,320 14 2,046,562
Net equity in foreign currency exchange contracts (Note 6) 198,943 - -
Accrued management fee 58,589 40,743 29,688
Accrued distribution fee 18,974 14,698 9,299
Accrued expenses and other 60,378 33,739 27,119
------------- ----------- ------------
TOTAL LIABILITIES 542,204 89,194 2,112,668
------------- ----------- ------------
NET ASSETS $ 24,272,851 $19,478,278 $ 13,644,844
============= =========== ============
SOURCE OF NET ASSETS
Net capital paid in on shares of capital stock (Note 4) $ 35,524,373 $15,479,094 $ 11,462,481
Accumulated net investment income/(loss) (564,454) - -
Accumulated net realized gains/(losses) (10,032,285) (4,519) 752,779
Net unrealized appreciation/(depreciation) (654,783) 4,003,703 1,429,584
------------- ----------- ------------
NET ASSETS $ 24,272,851 $19,478,278 $ 13,644,844
============= =========== ============
CLASS A SHARES OUTSTANDING 2,963,123 1,037,790 671,457
CLASS A NET ASSETS $ 22,653,597 $17,367,461 $ 11,469,117
Net asset value and redemption value per share (Note 4) $ 7.65 $ 16.74 $ 17.08
Offering price per share (100/95 x net asset value per share reduced
on sales of $100,000 or more) $ 8.05 $ 17.62 $ 17.98
CLASS B SHARES OUTSTANDING 82,029 57,457 57,651
CLASS B NET ASSETS $ 665,292 $ 969,038 $ 995,172
Net asset value and offering price per share (Note 4) $ 8.11 $ 16.87 $ 17.26
CLASS C SHARES OUTSTANDING 117,546 68,860 68,908
CLASS C NET ASSETS $ 953,962 $ 1,141,779 $ 1,180,555
Net asset value and offering price per share (Note 4) $ 8.12 $ 16.58 $ 17.13
Identified cost of investments $ 25,075,515 $14,984,764 $ 14,108,958
</TABLE>
See notes to financial statements.
45
<PAGE>
- --------------------------------------------------------------------------------
GAM Funds, Inc. - Statements of Operations
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED 31ST DECEMBER, 1998
<TABLE>
<CAPTION>
GAM
International
-----------------
<S> <C>
INVESTMENT INCOME (in US$)
Dividends (Note 5) $ 35,103,529
Interest (Note 5) 15,212,644
---------------
50,316,173
---------------
EXPENSES
Investment advisory fee (Note 2) 26,355,350
Custodian fees and expenses 2,843,048
Transfer agent fees and expenses 1,227,047
Shareholder servicing fees 2,080,090
Distribution Fee - Class A (Note 2) 7,294,583
Distribution Fee - Class B (Note 2) 215,555
Distribution Fee - Class C (Note 2) 253,723
Distribution Fee - Class D (Note 2) 720,663
Professional fees 85,946
Administrative expenses 1,906,922
Printing 460,035
Amortization of organization costs -
Filing fees 217,824
Other 98,091
---------------
Total operating expenses 43,758,877
Interest expense 408,179
---------------
Total expenses 44,167,056
---------------
Net investment income/(loss) 6,149,117
---------------
REALIZED AND UNREALIZED
GAIN/(LOSS) FROM INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain/(loss) from:
Securities and futures (49,319,071)
Foreign currency transactions 56,795,637
---------------
7,476,566
---------------
Unrealized appreciation/(depreciation) for the period:
Securities and futures 207,718,407
Foreign currency translation of forwards and other assets and
liabilities (120,222,584)
---------------
87,495,823
---------------
Net gain/(loss) on investments and foreign currencies 94,972,389
---------------
NET INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS $ 101,121,506
===============
<CAPTION>
GAM
GAM GAM Pacific
Global Europe Basin
---------------- --------------- ----------------
<S> <C> <C> <C>
INVESTMENT INCOME (in US$)
Dividends (Note 5) $ 1,118,213 $ 1,046,544 $ 430,319
Interest (Note 5) 780,790 138,635 54,477
------------- ------------- -------------
1,899,003 1,185,179 484,796
------------- ------------- -------------
EXPENSES
Investment advisory fee (Note 2) 1,287,387 513,908 207,532
Custodian fees and expenses 126,003 119,247 82,262
Transfer agent fees and expenses 74,259 21,877 17,142
Shareholder servicing fees 66,412 60,281 19,992
Distribution Fee - Class A (Note 2) 344,319 148,759 58,540
Distribution Fee - Class B (Note 2) 40,342 6,062 732
Distribution Fee - Class C (Note 2) 29,946 3,242 259
Distribution Fee - Class D (Note 2) 39,766 - 6,551
Professional fees 40,211 37,512 38,588
Administrative expenses 120,835 63,612 27,172
Printing 29,566 5,640 12,222
Amortization of organization costs - - -
Filing fees 45,618 30,302 26,084
Other 26,963 13,563 18,965
------------- ------------- -------------
Total operating expenses 2,271,627 1,024,005 516,041
Interest expense 36,126 63,667 2,398
------------- ------------- -------------
Total expenses 2,307,753 1,087,672 518,439
------------- ------------- -------------
Net investment income/(loss) (408,750) 97,507 (33,643)
------------- ------------- -------------
REALIZED AND UNREALIZED
GAIN/(LOSS) FROM INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain/(loss) from:
Securities and futures (15,837,149) 5,052,875 (12,325,961)
Foreign currency transactions 586,996 (2,113,769) 624,826
------------- ------------- -------------
(15,250,153) 2,939,106 (11,701,135)
------------- ------------- -------------
Unrealized appreciation/(depreciation) for the period:
Securities and futures 13,748,950 653,303 11,133,105
Foreign currency translation of forwards and other assets and
liabilities (2,616,617) (790,259) (1,205,753)
------------- ------------- -------------
11,132,333 (136,956) 9,927,352
------------- ------------- -------------
Net gain/(loss) on investments and foreign currencies (4,117,820) 2,802,150 (1,773,783)
------------- ------------- -------------
NET INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS $ (4,526,570) $ 2,899,657 $ (1,807,426)
============= ============= =============
</TABLE>
See notes to financial statements.
46
<PAGE>
- --------------------------------------------------------------------------------
GAM Funds, Inc. - Statements of Operations (CONTINUED)
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED 31ST DECEMBER, 1998
<TABLE>
<CAPTION>
GAM GAM
Japan North GAMerica
Capital America Capital
--------------- ------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME (in US$)
Dividends (Note 5) $ 146,489 $ 235,555 $ 37,455
Interest (Note 5) 240,742 49,355 170,275
------------ ---------- ----------
387,231 284,910 207,730
------------ ---------- ----------
EXPENSES
Investment advisory fee (Note 2) 280,165 160,274 84,838
Custodian fees and expenses 101,517 24,767 11,571
Transfer agent fees and expenses 13,802 8,371 4,009
Shareholder servicing fees 29,878 14,237 4,523
Distribution Fee - Class A (Note 2) 82,943 47,573 24,192
Distribution Fee - Class B (Note 2) 2,002 1,562 3,220
Distribution Fee - Class C (Note 2) 3,994 1,454 1,676
Distribution Fee - Class D (Note 2) - - -
Professional fees 26,426 24,169 20,520
Administrative expenses 34,683 23,568 19,732
Printing 7,711 3,412 464
Amortization of organization costs 6,377 - 5,191
Filing fees 17,203 23,617 33,771
Other 15,958 12,568 13,604
------------ ---------- ----------
Total operating expenses 622,659 345,572 227,311
Interest expense - 11,357 -
------------ ---------- ----------
Total expenses 622,659 356,929 227,311
------------ ---------- ----------
Net investment income/(loss) (235,428) (72,019) (19,581)
------------ ---------- ----------
REALIZED AND UNREALIZED
GAIN/(LOSS) FROM INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain/(loss) from:
Securities and futures (5,485,709) 4,184,527 880,209
Foreign currency transactions 725,195 - -
------------ ---------- ----------
(4,760,514) 4,184,527 880,209
------------ ---------- ----------
Unrealized appreciation/(depreciation) for the period:
Securities and futures 5,618,621 570,859 902,365
Foreign currency translation of forwards and other assets and
liabilities (1,513,661) - -
------------ ---------- ----------
4,104,960 570,859 902,365
------------ ---------- ----------
Net gain/(loss) on investments and foreign currencies (655,554) 4,755,386 1,782,574
------------ ---------- ----------
NET INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS $ (890,982) $4,683,367 $1,762,993
============ ========== ==========
</TABLE>
See notes to financial statements.
47
<PAGE>
- --------------------------------------------------------------------------------
GAM Funds, Inc. - Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GAM International
-------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED ENDED
31ST DEC, 31ST DEC,
1998 1997
------------------ ------------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET
ASSETS FROM:
Operations
Net investment income/(loss) $ 6,149,117 $ 3,992,788
Net realized gain/(loss) 7,476,566 41,910,352
Unrealized appreciation/
(depreciation) for the period 87,495,823 297,012,713
-------------- --------------
Net increase/(decrease) in net
assets from operations 101,121,506 342,915,853
Dividends paid to shareholders from:
Net investment income
Class A (3,801,544) (9,853,914)
Class B - -
Class C - -
Class D (162,472) (446,919)
Net realized gain on investments
Class A (37,602,228) (69,883,955)
Class B - -
Class C - -
Class D (2,310,145) (3,900,288)
Capital share transactions (Note 4) 1,038,008,110 585,581,903
-------------- --------------
Total increase/(decrease) in net assets 1,095,253,227 844,412,680
NET ASSETS
Beginning of year 1,892,948,012 1,048,535,332
-------------- --------------
End of year $2,988,201,239 $1,892,948,012
============== ==============
<CAPTION>
GAM Global GAM Europe
------------------------------- ------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED
31ST DEC, 31ST DEC, 31ST DEC, 31ST DEC,
1998 1997 1998 1997
---------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET
ASSETS FROM:
Operations
Net investment income/(loss) $ (408,750) $ (99,246) $ 97,507 $ 56,137
Net realized gain/(loss) (15,250,153) 2,745,392 2,939,106 6,720,669
Unrealized appreciation/
(depreciation) for the period 11,132,333 6,526,805 (136,956) 1,955,004
------------- ------------ ------------ ------------
Net increase/(decrease) in net
assets from operations (4,526,570) 9,172,951 2,899,657 8,731,810
Dividends paid to shareholders from:
Net investment income
Class A - (41,404) (57,979) (157,450)
Class B - - - -
Class C - - - -
Class D - (3,430) - -
Net realized gain on investments
Class A (1,094,319) (1,964,612) (4,571,876) (6,689,436)
Class B - - (114,513) -
Class C - - (59,514) -
Class D (78,435) (113,298) - -
Capital share transactions (Note 4) 105,964,032 42,059,028 15,035,528 12,088,259
------------- ------------ ------------ ------------
Total increase/(decrease) in net assets 100,264,708 49,109,235 13,131,303 13,973,183
NET ASSETS
Beginning of year 69,507,498 20,398,263 39,100,588 25,127,405
------------- ------------ ------------ ------------
End of year $ 169,772,206 $ 69,507,498 $ 52,231,891 $ 39,100,588
============= ============ ============ ============
</TABLE>
See notes to financial statements.
48
<PAGE>
- --------------------------------------------------------------------------------
GAM Funds, Inc. - Statements of Changes in Net Assets (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GAM Pacific Basin GAM Japan 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,
1998 1997 1998 1997
---------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET
ASSETS FROM:
Operations
Net investment income/(loss) $ (33,643) $ 8,059 $ (235,428) $ (309,689)
Net realized gain/(loss) (11,701,135) (2,999,804) (4,760,514) (526,629)
Unrealized appreciation/
(depreciation) for the period 9,927,352 (11,915,960) 4,104,960 (1,717,822)
------------- ------------- ------------ ------------
Net increase/(decrease) in net
assets from operations (1,807,426) (14,907,705) (890,982) (2,554,140)
Dividends paid to shareholders from:
Net investment income
Class A (431,742) - - -
Class B (936) - - -
Class C - - - -
Class D (28,893) - - -
Net realized gain on investments
Class A (1,566,094) (3,364,522) (1,796,842) (2,411,374)
Class B (2,587) - - -
Class C (1,405) - - -
Class D (72,474) (168,365) - -
Capital share transactions (Note 4) (2,259,071) (8,616,881) (3,911,099) (679,565)
------------- ------------- ------------ ------------
Total increase/(decrease) in net assets (6,170,628) (27,057,473) (6,598,923) (5,645,079)
NET ASSETS
Beginning of year 24,628,340 51,685,813 30,871,774 36,516,853
------------- ------------- ------------ ------------
End of year $ 18,457,712 $ 24,628,340 $ 24,272,851 $ 30,871,774
============= ============= ============ ============
</TABLE>
See notes to financial statements.
49
<PAGE>
- --------------------------------------------------------------------------------
GAM Funds, Inc. - Statements of Changes in Net Assets (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GAM North America 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,
1998 1997 1998 1997
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET
ASSETS FROM:
Operations
Net investment income/(loss) $ (72,019) $ 54 $ (19,581) $ (45,849)
Net realized gain/(loss) 4,184,527 390,977 880,209 400,765
Unrealized appreciation/(depreciation)
for the period 570,859 1,513,490 902,365 351,466
------------ ----------- ----------- ----------
Net increase/(decrease) in net assets
from operations 4,683,367 1,904,521 1,762,993 706,382
Dividends paid to shareholders from:
Net investment income
Class A - (576) - -
Class B - - - -
Class C - - - -
Class D - - - -
Net realized gain on investments
Class A (4,058,087) (130,244) (253,783) (228,865)
Class B (169,676) - (8,302) -
Class C (196,849) - (7,626) -
Class D - - - -
Capital share transactions (Note 4) 8,253,350 3,339,649 8,352,505 1,397,530
------------ ----------- ----------- ----------
Total increase/(decrease) in net assets 8,512,105 5,113,350 9,845,787 1,875,047
NET ASSETS
Beginning of year 10,966,173 5,852,823 3,799,057 1,924,010
------------ ----------- ----------- ----------
End of year $ 19,478,278 $10,966,173 $13,644,844 $3,799,057
============ =========== =========== ==========
</TABLE>
See notes to financial statements.
50
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
AT 31ST DECEMBER, 1998
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 seven
portfolios: GAM International Fund, GAM Global Fund, GAM Europe Fund, GAM
Pacific Basin Fund, GAM Japan Capital Fund, GAM North America 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. GAMerica Capital Fund invests
primarily in securities of companies in the United States.
The Funds offer Class A, Class B, Class C and Class D shares. Class A, Class B
and Class C shares currently are available for all funds and 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%.
There is no front-end sales charge on Class B or Class C shares. Class B shares
are currently sold with a contingent deferred sales charge which declines from
5.0% to zero depending on the period of time the shares are held. Class B shares
will automatically convert to Class A shares eight years after the end of the
calendar month of purchase. Class C shares redeemed within one year of purchase
will be subject to a contingent deferred sales charge of 1.0%. The four 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.
51
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
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. 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 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). These deposits are made by the
Funds as a partial guarantee of their performance under the contract. 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.
52
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
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.
DEFERRED ORGANIZATION EXPENSES
Organization costs for GAM Japan 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 trade date. 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.
Interest expense primarily relates to custodian bank overdraft charges incurred
during the year.
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 1.00% 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.
53
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
GAM Services, Inc. acts as principal underwriter of the Fund. For the year ended
31st December, 1998, GAM Services, Inc. retained front-end sales load charges of
$4,221,836 and contingent deferred sales charges of $43,470 from the sale of
Fund shares. Front end sales charges are waived for Class A and Class D
purchases of $1 million or more, but are subject to contingent deferred sales
charges of 1% for shares sold within 18 months of purchase.
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. Effective 29th April, 1998, the Funds adopted a
Class B and Class C Distribution Plan pursuant to this rule which provides for
payments by the Funds to GAM Services at the annual rate of up to 1.00% of each
applicable Fund's average net assets attributable to Class B and Class C 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 was compensated by each Fund as
follows, during 1998:
<TABLE>
<CAPTION>
GAM GAM GAM
GAM GAM GAM Pacific Japan North GAMerica
International Global Europe Basin Capital America Capital
=============== ======== ======== ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C> <C>
Annual Retainer $ 3,125 $3,125 $3,125 $3,125 $3,125 $3,125 $3,125
Meeting Fee 125 125 125 125 125 125 125
</TABLE>
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, 1998, GAM Funds, Inc. had 1,510,000,000 shares of common
stock, $0.001 par value authorized. For each of the seven active funds shares
were allocated as follows: 260,000,000, 160,000,000, 75,000,000 and 50,000,000
shares, respectively, were allocated to each of Class A, Class B, Class C and
Class D of GAM International; 85,000,000, 75,000,000, 20,000,000 and 25,000,000
shares, respectively, were allocated to Class A, Class B, Class C and Class D of
GAM Global; 60,000,000, 50,000,000, 20,000,000 and 25,000,000 shares,
respectively, were allocated to Class A, Class B, Class C and Class D of GAM
Europe and GAM Pacific Basin; 55,000,000, 50,000,000, 20,000,000 and 12,500,000
shares, respectively, were allocated to Class A, Class B, Class C and Class D of
GAM Japan Capital; 55,000,000, 50,000,000, 15,000,000 and 25,000,000 shares,
respectively, were allocated to Class A, Class B, Class C and Class D of GAM
North America; while 30,000,000, 25,000,000, 15,000,000 and 25,000,000 shares,
respectively, were allocated to Class A, Class B, Class C and Class D of
GAMerica Capital. Changes in each Fund's capital stock are summarized as
follows:
54
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GAM International Fund
For the Periods
---------------------------------------------------------------------------
01-Jan-98 to 31-Dec-98 01-Jan-97 to 31-Dec-97
Shares US$ Shares US$
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 45,400,274 1,410,892,506 29,334,376 797,964,527
Shares issued on reinvestment of distributions 1,087,592 36,118,910 2,500,837 69,462,995
Shares redeemed (20,171,368) (616,480,333) (12,437,416) (332,541,512)
----------- ------------- ----------- ------------
Net increase 26,316,498 830,531,083 19,397,797 534,886,010
=========== ============= =========== ============
CLASS B*
Shares sold 2,207,863 69,950,241 - -
Shares issued on reinvestment of distributions - - - -
Shares redeemed (62,635) (1,862,050) - -
----------- ------------- ----------- ------------
Net increase 2,145,228 68,088,191 - -
=========== ============= =========== ============
CLASS C*
Shares sold 2,701,915 85,010,147 - -
Shares issued on reinvestment of distributions - - - -
Shares redeemed (118,841) (3,552,764) - -
----------- ------------- ----------- ------------
Net increase 2,583,074 81,457,383 - -
=========== ============= =========== ============
CLASS D
Shares sold 2,569,061 81,219,579 2,142,282 59,042,169
Shares issued on reinvestment of distributions 61,660 2,038,502 134,583 3,717,035
Shares redeemed (825,441) (25,326,628) (452,108) (12,063,311)
----------- ------------- ----------- ------------
Net increase 1,805,280 57,931,453 1,824,757 50,695,893
=========== ============= =========== ============
</TABLE>
* Inception was on 26th May, 1998 for Class B shares and 19th May, 1998 for
Class C shares.
55
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GAM Global Fund
For the Periods
---------------------------------------------------------------------
01-Jan-98 to 31-Dec-98 01-Jan-97 to 31-Dec-97
<S> <C> <C> <C> <C>
Shares US$ Shares US$
------ ----- ------- -----
CLASS A
Shares sold 5,703,377 114,235,277 3,043,487 53,815,753
Shares issued on reinvestment of distributions 42,648 913,190 95,084 1,743,330
Shares redeemed (1,892,961) (36,700,992) (989,599) (16,207,961)
---------- ----------- --------- -----------
Net increase 3,853,064 78,447,475 2,148,972 39,351,122
========== =========== ========= ===========
CLASS B*
Shares sold 573,771 11,824,991 - -
Shares issued on reinvestment of distributions - - - -
Shares redeemed (29,391) (547,356) - -
---------- ----------- --------- -----------
Net increase 544,380 11,277,635 - -
========== =========== ========= ===========
CLASS C*
Shares sold 497,048 10,044,918 - -
Shares issued on reinvestment of distributions - - - -
Shares redeemed (25,124) (469,047) - -
---------- ----------- --------- -----------
Net increase 471,924 9,575,871 - -
========== =========== ========= ===========
CLASS D
Shares sold 443,861 8,783,427 164,316 3,018,076
Shares issued on reinvestment of distributions 2,800 59,198 5,659 102,511
Shares redeemed (113,686) (2,179,574) (23,624) (412,681)
---------- ----------- --------- -----------
Net increase 332,975 6,663,051 146,351 2,707,906
========== =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
GAM Europe Fund
For the Periods
-----------------------------------------------------------------------
01-Jan-98 to 31-Dec-98 01-Jan-97 to 31-Dec-97
<S> <C> <C> <C> <C>
Shares US$ Shares US$
------ ----- ------ -----
CLASS A
Shares sold 2,751,899 39,135,869 2,155,335 28,650,194
Shares issued on reinvestment of distributions 289,531 3,590,914 382,881 4,693,020
Shares redeemed (2,222,956) (30,614,504) (1,547,698) (21,254,955)
---------- ----------- ---------- -----------
Net increase 818,474 12,112,279 990,518 12,088,259
========== =========== ========== ===========
CLASS B**
Shares sold 132,088 1,912,188 - -
Shares issued on reinvestment of distributions 7,455 89,985 - -
Shares redeemed (107) (1,427) - -
---------- ----------- ---------- -----------
Net increase 139,436 2,000,746 - -
========== =========== ========== ===========
CLASS C**
Shares sold 68,931 988,167 - -
Shares issued on reinvestment of distributions 3,477 41,622 - -
Shares redeemed (8,330) (107,286) - -
---------- ----------- ---------- -----------
Net increase 64,078 922,503 - -
========== =========== ========== ===========
</TABLE>
* Inception was on 26th May, 1998 for Class B shares, and 19th May, 1998 for
Class C shares.
** Inception was on 26th May, 1998 for Class B shares, and 20th May, 1998 for
Class C shares.
56
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GAM Pacific Basin Fund
For the Periods
-----------------------------------------------------------------------
01-Jan-98 to 31-Dec-98 01-Jan-97 to 31-Dec-97
<S> <C> <C> <C> <C>
Shares US$ Shares US$
------ ----- ------ -----
CLASS A
Shares sold 1,630,440 14,115,594 1,941,999 28,048,990
Shares issued on reinvestment of distributions 254,764 1,876,104 236,407 2,658,787
Shares redeemed (2,203,361) (18,453,528) (3,062,559) (39,899,633)
---------- ----------- ---------- -----------
Net decrease (318,157) (2,461,830) (884,153) (9,191,856)
========== =========== ========== ===========
CLASS B*
Shares sold 35,743 313,454 - -
Shares issued on reinvestment of distributions 346 3,105 - -
Shares redeemed (5,612) (47,195) - -
---------- ----------- ---------- -----------
Net increase 30,477 269,364 - -
========== =========== ========== ===========
CLASS C*
Shares sold 24,845 201,259 - -
Shares issued on reinvestment of distributions 165 1,346 - -
Shares redeemed (4,920) (41,279) - -
---------- ----------- ---------- -----------
Net increase 20,090 161,326 - -
========== =========== ========== ===========
CLASS D
Shares sold 86,774 789,743 51,066 746,179
Shares issued on reinvestment of distributions 10,952 82,721 14,840 163,481
Shares redeemed (132,815) (1,100,395) (24,922) (334,685)
---------- ----------- ---------- -----------
Net increase/(decrease) (35,089) (227,931) 40,984 574,975
========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
GAM Japan Capital Fund
For the Periods
-----------------------------------------------------------------------
01-Jan-98 to 31-Dec-98 01-Jan-97 to 31-Dec-97
<S> <C> <C> <C> <C>
Shares US$ Shares US$
------ ----- ------ -----
CLASS A
Shares sold 2,689,003 22,104,590 3,911,543 38,716,276
Shares issued on reinvestment of distributions 189,127 1,469,516 219,840 1,969,882
Shares redeemed (3,571,289) (29,092,373) (4,362,649) (41,365,723)
---------- ----------- ---------- -----------
Net decrease (693,159) (5,518,267) (231,266) (679,565)
========== =========== ========== ===========
CLASS B**
Shares sold 84,512 686,362 - -
Shares issued on reinvestment of distributions - - - -
Shares redeemed (2,483) (19,815) - -
---------- ----------- ---------- -----------
Net increase 82,029 666,547 - -
========== =========== ========== ===========
CLASS C**
Shares sold 207,654 1,680,813 - -
Shares issued on reinvestment of distributions - - - -
Shares redeemed (90,108) (740,192) - -
---------- ----------- ---------- -----------
Net increase 117,546 940,621 - -
========== =========== ========== ===========
</TABLE>
* Inception was on 26th May, 1998 for Class B shares, and 1st June, 1998 for
Class C shares.
** Inception was on 26th May, 1998 for Class B shares, and 19th May, 1998 for
Class C shares.
57
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GAM North America Fund
For the Periods
------------------------------------------------------------------
01-Jan-98 to 31-Dec-98 01-Jan-97 to 31-Dec-97
<S> <C> <C> <C> <C>
Shares US$ Shares US$
------ ----- ----- ----
CLASS A
Shares sold 1,110,616 20,630,033 392,721 6,494,878
Shares issued on reinvestment of distributions 180,046 2,853,737 5,909 101,515
Shares redeemed (885,969) (17,552,935) (197,145) (3,256,744)
--------- ----------- -------- ----------
Net increase 404,693 5,930,835 201,485 3,339,649
========= =========== ======== ==========
CLASS B*
Shares sold 50,419 953,797 - -
Shares issued on reinvestment of distributions 7,641 120,349 - -
Shares redeemed (603) (9,536) - -
--------- ----------- -------- ----------
Net increase 57,457 1,064,610 - -
========= =========== ======== ==========
CLASS C*
Shares sold 59,835 1,126,114 - -
Shares issued on reinvestment of distributions 10,461 162,047 - -
Shares redeemed (1,436) (30,256) - -
--------- ----------- -------- ----------
Net increase 68,860 1,257,905 - -
========= =========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
GAMerica Capital
For the Periods
--------------------------------------------------------------
01-Jan-98 to 31-Dec-98 01-Jan-97 to 31-Dec-97
<S> <C> <C> <C> <C>
Shares US$ Shares US$
----- ---- ---- -----
CLASS A
Shares sold 510,150 8,088,698 168,956 2,197,313
Shares issued on reinvestment of distributions 10,128 160,863 9,395 124,173
Shares redeemed (131,637) (1,925,319) (73,313) (923,956)
-------- ---------- ------- ---------
Net increase 388,641 6,324,242 105,038 1,397,530
======== ========== ======= =========
CLASS B**
Shares sold 67,936 1,076,014 - -
Shares issued on reinvestment of distributions 513 8,214 - -
Shares redeemed (10,798) (175,102) - -
-------- ---------- ------- ---------
Net increase 57,651 909,126 - -
======== ========== ======= =========
CLASS C**
Shares sold 69,325 1,125,809 - -
Shares issued on reinvestment of distributions 312 4,950 - -
Shares redeemed (729) (11,622) - -
-------- ---------- ------- ---------
Net increase 68,908 1,119,137 - -
======== ========== ======= =========
</TABLE>
* Inception was on 26th May, 1998 for Class B shares, and 7th July, 1998 for
Class C shares.
** Inception was on 26th May, 1998 for Class B and Class C shares.
58
<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, 1998 excluding short-term securities, were as follows:
<TABLE>
<CAPTION>
GAM GAM GAM
GAM GAM GAM Pacific Japan North GAMerica
International Global Europe Basin Capital America Capital
=============== ============= ============ ============ ============ ============ ==========
<S> <C> <C> <C> <C> <C> <C> <C>
In US$
Purchases 2,879,942,869 253,529,026 91,171,356 10,595,644 13,470,858 14,045,736 7,123,849
Sales 1,958,537,385 155,062,836 81,590,523 17,175,664 16,291,342 11,061,702 1,519,033
</TABLE>
Realized gains and losses are reported on an identified cost basis. At 31st
December, 1998, the aggregate gross unrealized appreciation and depreciation of
securities, based on cost for federal income tax purposes, were as follows:
<TABLE>
<CAPTION>
GAM GAM GAM
GAM GAM GAM Pacific Japan North GAMerica
International Global Europe Basin Capital America Capital
=============== =============== ============= =============== =============== ============= =============
<S> <C> <C> <C> <C> <C> <C> <C>
In US$
Appreciation 616,081,687 23,912,644 6,507,989 230,742 2,197,304 4,070,284 2,069,044
Depreciation (57,230,956) (3,084,242) (881,023) (6,312,569) (3,417,219) (71,098) (639,460)
----------- ---------- --------- ---------- ---------- --------- ---------
Net 558,850,731 20,828,402 5,626,966 (6,081,827) (1,219,915) 3,999,186 1,429,584
=========== ========== ========= ========== ========== ========= =========
</TABLE>
At 31st December, 1998, 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 Pacific Japan North GAMerica
International Global Europe Basin Capital America Capital
=============== ============ ======== ============= =================== ========= =========
<S> <C> <C> <C> <C> <C> <C> <C>
In US$ 84,471,948 10,210,753 - 760,353 507,841 - -
14,482,801 2,474,673
6,403,283
Carryforward 31st Dec, 31st Dec, - 31st Dec, 31st Dec, - -
Expiration dates 2006 2006 - 2005 & 2006 2003, 2005 & 2006 - -
</TABLE>
Foreign taxes withheld from dividends for the year ended 31st December, 1998,
were as follows:
<TABLE>
<CAPTION>
GAM GAM GAM
GAM GAM GAM Pacific Japan North GAMerica
International Global Europe Basin Capital America Capital
=============== ======== ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C> <C>
In US$
Dividends 4,772,011 69,830 126,897 35,570 25,336 971 404
</TABLE>
59
<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, 1998, 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
<TABLE>
<CAPTION>
Net
unrealized
appreciation/
(depreciation)
---------------
<S> <C>
US$
4,059,920,000 Japanese yen sold vs. 29,732,113 US$
6th January, 1999 (6,239,585)
*3,817,240,000 Japanese yen sold vs. 27,954,888 US$
6th January, 1999 (45,112)
*1,669,560,000 Japanese yen sold vs. 12,226,730 US$
6th January, 1999 226,730
*1,404,600,000 Japanese yen sold vs. 10,286,342 US$
6th January, 1999 286,342
*11,384,900,000 Japanese yen sold vs. 83,375,320 US$
6th January, 1999 (1,624,680)
*7,987,800,000 Japanese yen sold vs. 58,497,254 US$
6th January, 1999 (1,502,746)
*6,534,500,000 Japanese yen sold vs. 47,854,266 US$
6th January, 1999 (2,145,734)
*5,056,800,000 Japanese yen sold vs. 37,032,589 US$
6th January, 1999 (5,967,411)
*13,523,980,000 Japanese yen sold vs. 99,040,498 US$
6th January, 1999 (18,959,502)
*The Fund has entered into offsetting forward foreign currency contracts.
</TABLE>
60
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net
unrealized
appreciation/
(depreciation)
---------------
<S> <C>
*72,012,000 German marks sold vs. 40,000,000 US$
8th January, 1999 (1,813,959)
7,549,000 German marks sold vs. 4,169,106 US$
8th January, 1999 (360,145)
*82,986,000 German marks sold vs. 45,830,894,US$
8th January, 1999 (2,355,147)
*438,815,000 Dutch guilders sold vs. 215,000,000 US$
15th January, 1999 (12,766,532)
25,940,000 Dutch guilders sold vs. 13,010,332 US$
15th January, 1999 (807,204)
*13,936,000 Dutch guilders sold vs. 6,989,668 US$
15th January, 1999 (243,800)
121,603,000 French francs sold vs. 20,085,394 US$
15th January, 1999 (1,681,679)
*353,070,000 French francs sold vs. 58,317,229 US$
15th January, 1999 (1,682,771)
*145,502,500 French francs sold vs. 24,032,919 US$
15th January, 1999 (967,081)
*1,862,087,500 French francs sold vs. 307,564,458 US$
15th January, 1999 (17,435,542)
1,319,400 Swedish krona bought vs. 167,305 US$
29th January, 1999 (4,125)
*140,632,200 Swedish krona sold vs. 18,000,000 US$
29th January, 1999 167,305
1,209,000 German marks sold vs. 696,268 US$
1st March, 1999 (31,002)
*111,657,000 German marks sold vs. 64,303,732 US$
1st March, 1999 (696,268)
60,081,711 UK Pound sold vs. 100,000,000 US$
8th March, 1999 291,276
387,234,043 UK Pound sold vs. 637,000,000 US$
5th May, 1999 (5,085,674)
-----------
Net equity in foreign currency exchange contracts (81,444,046)
===========
*The Fund has entered into offsetting forward foreign currency contracts.
</TABLE>
61
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net
unrealized
appreciation/
(depreciation)
---------------
<S> <C>
GAM GLOBAL FUND
US$
157,709,000 Japanese yen sold vs. 1,154,954 US$
6th January, 1999 (242,379)
*599,085,000 Japanese yen sold vs. 4,387,294 US$
6th January, 1999 (112,706)
*529,200,000 Japanese yen sold vs. 3,875,503 US$
6th January, 1999 (624,497)
*297,986,000 Japanese yen sold vs. 2,182,248 US$
6th January, 1999 (417,752)
750,850 Dutch guilders sold vs. 367,901 US$
15th January, 1999 (32,056)
*12,719,090 Dutch guilders sold vs. 6,232,099 US$
15th January, 1999 (351,622)
*997,400 Dutch guilders sold vs. 500,000 US$
15th January, 1999 (16,279)
102,560 German marks sold vs. 56,663 US$
15th January, 1999 (4,894)
*1,345,440 German marks sold vs. 743,337 US$
15th January, 1999 (56,663)
2,469,288 UK Pound sold vs. 4,000,000 US$
10th February, 1999 (100,885)
2,426,154 UK Pound sold vs. 4,000,000 US$
5th May, 1999 (22,886)
--------
Net equity in foreign currency exchange contracts (1,982,619)
==========
GAM PACIFIC BASIN FUND
US$
454,740,000 Japanese yen sold vs. 3,900,000 US$
29th January, 1999 (141,993)
23,448,000 Hong Kong Dollar sold vs. 3,000,000 US$
15th April, 1999 (23,580)
----------
Net equity in foreign currency exchange contracts (165,573)
==========
*The Fund has entered into offsetting forward foreign currency contracts.
</TABLE>
62
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net
unrealized
appreciation/
(depreciation)
---------------
<S> <C>
GAM JAPAN CAPITAL FUND
US$
691,740,000 Japanese yen sold vs. 6,000,000 US$
31st March, 1999 (198,943)
------------
Net equity in foreign currency exchange contracts (198,943)
============
</TABLE>
At 31st December, 1998 the Funds had sufficient cash and/or securities to cover
any commitments under these contracts. Futures: A futures contract obligates one
party to sell and the other party to purchase a specific instrument for an
agreed price on an agreed future date. At 31st December, 1998 GAM International
Fund and GAM Global Fund had outstanding futures contracts as set out in their
respective Statement of Investments.
NOTE 7. RISKS ASSOCIATED WITH FOREIGN INVESTMENTS
Investing in securities issued by companies whose principal business activities
are outside the United States may involve significant risks not present in
domestic investments. For example, there is generally less publicly available
information about foreign companies, particularly those not subject to the
disclosure and reporting requirements of the U.S. securities laws. Foreign
issuers are generally not bound by uniform accounting, auditing, and financial
reporting requirements and standards of practice comparable to those applicable
to domestic issuers. Investments in foreign securities also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of funds or
other assets of the Portfolio, political or financial instability or diplomatic
and other developments which could affect such investments. Foreign stock
markets, while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and more
volatile than securities of comparable U.S. companies. In general, there is less
overall governmental supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the United States.
63
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 8. FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Per share operating performance (for a share outstanding
throughout the period)
----------------------------------------------------------------
Income from investment operations
---------------------------------------------
Net realized
Net asset value, Net and unrealized Total from
beginning investment gain/(loss) on investment
of period income/(loss) investments operations
------------------ --------------- ---------------- ------------
<S> <C> <C> <C> <C>
01-JAN-98 TO
31-DEC-98
US$
GAM International
Class A US$ 28.46 0.08+ 2.03 2.11
Class B++ US$ 33.39 (0.20)+ (2.78) (2.98)
Class C++ US$ 32.61 (0.20)+ (2.04) (2.24)
Class D US$ 28.34 0.04+ 2.03 2.07
GAM Global
Class A US$ 18.71 (0.05)+ 0.55 0.50
Class B++ US$ 20.99 (0.13)+ (1.75) (1.88)
Class C++ US$ 21.06 (0.14)+ (1.82) (1.96)
Class D US$ 18.50 (0.08)+ 0.54 0.46
GAM Europe
Class A US$ 12.57 0.03+ 1.28 1.31
Class B++ US$ 15.38 (0.20)+ (1.37) (1.57)
Class C++ US$ 15.16 (0.28)+ (1.19) (1.47)
GAM Pacific Basin
Class A US$ 9.69 (0.01)+ (0.51) (0.52)
Class B++ US$ 9.15 (0.35)+ 0.32 (0.03)
Class C++ US$ 8.54 (0.70)+ 0.37 (0.33)
Class D US$ 9.62 (0.01)+ (0.53) (0.54)
GAM Japan Capital
Class A US$ 8.44 (0.06)+ (0.16) (0.22)
Class B++ US$ 8.49 (0.19)+ (0.19) (0.38)
Class C++ US$ 8.56 (0.15)+ (0.29) (0.44)
GAM North America
Class A US$ 17.32 (0.07)+ 4.76 4.69
Class B++ US$ 20.08 (0.57)+ 2.17 1.60
Class C++ US$ 21.58 (0.44)+ 0.25 (0.19)
GAMerica Capital
Class A US$ 13.43 (0.01)+ 4.08 4.07
Class B++ US$ 16.57 (0.26)+ 1.10 0.84
Class C++ US$ 16.57 (0.37)+ 1.08 0.71
<CAPTION>
Per share operating performance (for a share outstanding
throughout the period)
---------------------------------------------------------
Less distributions
-------------------------------------------
Dividends Distributions
from net from net Net asset
investment realized Total value, end
income gains Distributions of period
------------ -------------- --------------- ------------
<S> <C> <C> <C> <C>
01-JAN-98 TO
31-DEC-98
US$
GAM International
Class A (0.05) (0.46) (0.51) US$ 30.06
Class B++ - - - US$ 30.41
Class C++ - - - US$ 30.37
Class D (0.03) (0.46) (0.49) US$ 29.92
GAM Global
Class A - (0.17) (0.17) US$ 19.04
Class B++ - - - US$ 19.11
Class C++ - - - US$ 19.10
Class D - (0.17) (0.17) US$ 18.79
GAM Europe
Class A (0.02) (1.23) (1.25) US$ 12.63
Class B++ - (0.99) (0.99) US$ 12.82
Class C++ - (0.99) (0.99) US$ 12.70
GAM Pacific Basin
Class A (0.22) (0.72) (0.94) US$ 8.23
Class B++ (0.04) (0.12) (0.16) US$ 8.96
Class C++ - (0.09) (0.09) US$ 8.12
Class D (0.25) (0.72) (0.97) US$ 8.11
GAM Japan Capital
Class A - (0.57) (0.57) US$ 7.65
Class B++ - - - US$ 8.11
Class C++ - - - US$ 8.12
GAM North America
Class A - (5.27) (5.27) US$ 16.74
Class B++ - (4.81) (4.81) US$ 16.87
Class C++ - (4.81) (4.81) US$ 16.58
GAMerica Capital
Class A - (0.42) (0.42) US$ 17.08
Class B++ - (0.15) (0.15) US$ 17.26
Class C++ - (0.15) (0.15) US$ 17.13
</TABLE>
64
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Per share operating performance (for a share outstanding
throughout the period)
----------------------------------------------------------------
Income from investment operations
---------------------------------------------
Net realized
Net asset value, Net and unrealized Total from
beginning investment gain/(loss) on investment
of period income/(loss) investments operations
------------------ --------------- ---------------- ------------
<S> <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
Class D US$ 23.07 0.01+ 6.59 6.60
GAM Global
Class A US$ 14.35 (0.04)+ 5.04 5.00
Class D US$ 14.22 (0.09)+ 5.02 4.93
GAM Europe
Class A US$ 11.85 0.02+ 3.15 3.17
GAM Pacific Basin
Class A US$ 15.26 0.00+ (4.45) (4.45)
Class D US$ 15.20 0.01+ (4.47) (4.46)
GAM Japan Capital
Class A US$ 9.39 (0.10)+ (0.11) (0.21)
GAM North America
Class A US$ 13.56 0.00+ 3.99 3.99
GAMerica Capital
Class A US$ 10.82 (0.24)+ 4.23 3.99
01-JAN-96 TO
31-DEC-96
US$
GAM International
Class A US$ 21.37 0.57+ 1.34 1.91
Class D US$ 21.35 0.45+ 1.32 1.77
GAM Global
Class A US$ 13.51 0.16+ 1.55 1.71
Class D US$ 13.48 0.07+ 1.47 1.54
GAM Europe
Class A US$ 10.04 0.07+ 2.06 2.13
GAM Pacific Basin
Class A US$ 16.97 0.04+ (0.11) (0.07)
Class D US$ 16.96 (0.10)+ (0.11) (0.21)
GAM Japan Capital
Class A US$ 10.16 (0.05)+ 0.07 0.02
GAM North America
Class A US$ 11.93 (0.05)+ 2.93 2.88
GAMerica Capital
Class A US$ 10.03 (0.42)+ 2.22 1.80
<CAPTION>
Per share operating performance (for a share outstanding
throughout the period)
-------------------------------------------------------------
Less distributions
-----------------------------------------------
Dividends Distributions
from net from net Net asset
investment realized Total value, end
income gains Distributions of period
------------ -------------- ------------------- ------------
<S> <C> <C> <C> <C>
01-JAN-97 TO
31-DEC-97
US$
GAM International
Class A (0.18) (1.17) (1.35) US$ 28.46
Class D (0.16) (1.17) (1.33) US$ 28.34
GAM Global
Class A (0.02) (0.62) (0.64) US$ 18.71
Class D (0.03) (0.62) (0.65) US$ 18.50
GAM Europe
Class A (0.06) (2.39) (2.45) US$ 12.57
GAM Pacific Basin
Class A - (1.12) (1.12) US$ 9.69
Class D - (1.12) (1.12) US$ 9.62
GAM Japan Capital
Class A - (0.74) (0.74) US$ 8.44
GAM North America
Class A - (0.23) (0.23) US$ 17.32
GAMerica Capital
Class A - (1.38) (1.38) US$ 13.43
01-JAN-96 TO
31-DEC-96
US$
GAM International
Class A (0.09) (0.04) (0.13) US$ 23.15
Class D (0.01) (0.04) (0.05) US$ 23.07
GAM Global
Class A (0.08) (0.79) (0.87) US$ 14.35
Class D (0.01) (0.79) (0.80) US$ 14.22
GAM Europe
Class A (0.01) (0.31) (0.32) US$ 11.85
GAM Pacific Basin
Class A (0.74) (0.90) (1.64) US$ 15.26
Class D (0.65) (0.90) (1.55) US$ 15.20
GAM Japan Capital
Class A (0.70) (0.09) (0.79) US$ 9.39
GAM North America
Class A - (1.25) (1.25) US$ 13.56
GAMerica Capital
Class A - (1.01) (1.01) US$ 10.82
</TABLE>
65
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Per share operating performance (for a share outstanding
throughout the period)
----------------------------------------------------------------
Income from investment operations
---------------------------------------------
Net realized
Net asset value, Net and unrealized Total from
beginning investment gain/(loss) on investment
of period income/(loss) investments operations
------------------ --------------- ---------------- ------------
<S> <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
Class D US$ 20.46 0.10 1.78 1.88
GAM Global
Class A US$ 10.60 0.35 3.48 3.83
Class D US$ 13.46 - 0.92 0.92
GAM Europe
Class A US$ 8.66 0.07 1.38 1.45
GAM Pacific Basin
Class A US$ 17.62 - 0.61 0.61
Class D US$ 17.36 (0.02) 0.26 0.24
GAM Japan Capital
Class A US$ 9.62 (0.07) 0.69 0.62
GAM North America
Class A US$ 9.14 - 2.83 2.83
GAMerica Capital**
Class A US$ 10.00 0.07 0.07 0.14
01-JAN-94 TO
31-DEC-94
US$
GAM International US$ 23.90 0.34 (2.58) (2.24)
GAM Global US$ 17.92 0.19 (2.94) (2.75)
GAM Europe US$ 8.93 - (0.27) (0.27)
GAM Pacific Basin US$ 19.20 (0.05) 1.36 1.31
GAM Japan Capital* US$ 10.00 0.02 (0.40) (0.38)
GAM North America US$ 12.80 0.04 0.23 0.27
<CAPTION>
Per share operating performance (for a share outstanding
throughout the
period)
---------------------------------------------------------
Less distributions
-------------------------------------------
Dividends Distributions
from net from net Net asset
investment realized Total value, end
income gains Distributions of period
------------ -------------- --------------- ------------
<S> <C> <C> <C> <C>
01-JAN-95 TO
31-DEC-95
US$
GAM International
Class A (0.47) (0.53) (1.00) US$ 21.37
Class D (0.46) (0.53) (0.99) US$ 21.35
GAM Global
Class A (0.30) (0.62) (0.92) US$ 13.51
Class D (0.28) (0.62) (0.90) US$ 13.48
GAM Europe
Class A (0.06) (0.01) (0.07) US$ 10.04
GAM Pacific Basin
Class A - (1.26) (1.26) US$ 16.97
Class D - (0.64) (0.64) US$ 16.96
GAM Japan Capital
Class A (0.05) (0.03) (0.08) US$ 10.16
GAM North America
Class A - (0.04) (0.04) US$ 11.93
GAMerica Capital**
Class A (0.07) (0.04) (0.11) US$ 10.03
01-JAN-94 TO
31-DEC-94
US$
GAM International (0.66) (3.79) (4.45) US$ 17.21
GAM Global (0.49) (4.08) (4.57) US$ 10.60
GAM Europe - - - US$ 8.66
GAM Pacific Basin - (2.89) (2.89) US$ 17.62
GAM Japan Capital* - - - US$ 9.62
GAM North America (0.23) (3.70) (3.93) US$ 9.14
</TABLE>
+ For the years ended 31st December 1996, 1997 and 1998, net investment income
per share has been determined based on the weighted average shares
outstanding method.
++ The inception dates for Classes B and C were as follows: International Class
B on 26th May 1998, Class C on 19th May 1998, Global Class B on 26th May,
1998, Class C on 19th May, 1998, Europe Class B on 26th May, 1998, Class C on
20th May, 1998, Pacific Basin Class B on 26th May, 1998, Class C on 1st June,
1998, Japan Capital Class B on 26th May, 1998, Class C on 19th May, 1998,
North America Class B on 26th May, 1998, Class C on 7th July, 1998 and
GAMerica Capital Class B and Class C on 26th May, 1998.
* Period from 1st July, 1994 (Inception) to 31st December, 1994.
** Period from 12th May, 1995 (Inception) to 31st December, 1995.
66
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratios/supplemental data
---------------------------------------------------------------------------------
Ratios to average net assets
---------------------------------------------
Total return
(without Net assets Net Portfolio
deduction of end of period investment turnover
sales load)++ (000 omitted) Expenses income/(loss) rate
--------------- --------------- ------------ ----------------- ----------
<S> <C> <C> <C> <C> <C>
01-JAN-98 TO
31-DEC-98
US$
GAM International
Class A 7.22% US$ 2,685,713 1.66% 0.27% 73%
Class B** (8.92)% US$ 65,238 2.54%* (1.10)%* 73%
Class C** (6.87)% US$ 78,452 2.52%* (1.14)%* 73%
Class D 7.13% US$ 158,797 1.80% 0.14% 73%
GAM Global
Class A 2.57% US$ 140,274 1.71% (0.25)% 123%
Class B** (8.96)% US$ 10,402 2.70%* (1.14)%* 123%
Class C** (9.31)% US$ 9,014 2.83%* (1.27)%* 123%
Class D 2.38% US$ 10,082 1.87% (0.41)% 123%
GAM Europe
Class A 10.70% US$ 49,631 2.06% 0.24% 168%
Class B** (9.82)% US$ 1,787 3.93%* (2.58)%* 168%
Class C** (9.32)% US$ 814 4.93%* (3.46)%* 168%
GAM Pacific Basin
Class A (3.99)% US$ 16,971 2.42% (0.11)% 55%
Class B** (0.35)% US$ 273 9.39%* (7.52)%* 55%
Class C** (3.87)% US$ 163 20.34%* (19.15)%* 55%
Class D (4.64)% US$ 1,051 2.53% (0.17)% 55%
GAM Japan Capital
Class A (2.75)% US$ 22,654 2.16% (0.78)% 59%
Class B** (4.48)% US$ 665 5.31%* (4.22)%* 59%
Class C** (5.14)% US$ 954 3.99%* (3.00)%* 59%
GAM North America
Class A 29.44% US$ 17,367 2.10% (0.34)% 70%
Class B** (9.68)% US$ 969 7.56%* (5.81)%* 70%
Class C** 0.69% US$ 1,142 8.16%* (6.50)%* 70%
GAMerica Capital
Class A 30.59% US$ 11,469 2.46% (0.03)% 29%
Class B** 5.13% US$ 995 5.19%* (2.74)%* 29%
Class C** 4.34% US$ 1,181 7.15%* (4.77)%* 29%
</TABLE>
67
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratios/supplemental data
-----------------------------------------------------------------------------
Ratios to average net assets
-----------------------------------------
Total Return
(without Net assets Net Portfolio
deduction of end of period investment turnover
sales load)++ (000 omitted) expenses income/(loss) rate
--------------- --------------- ---------- --------------- ----------
<S> <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%
Class D 28.78% US$ 99,283 1.82% 0.05% 48%
GAM Global
Class A 34.95% US$ 65,739 1.83% (0.25)% 48%
Class D 34.80% US$ 3,768 2.01% (0.53)% 48%
GAM Europe
Class A 27.55% US$ 39,101 1.81% 0.15% 80%
GAM Pacific Basin
Class A (30.00)% US$ 23,046 1.98% 0.02% 42%
Class D (30.18)% US$ 1,583 2.08% (0.09)% 42%
GAM Japan Capital
Class A (2.58)% US$ 30,872 2.15% (1.06)% 76%
GAM North America
Class A 29.41% US$ 10,966 1.94% 0.00% 15%
GAMerica Capital
Class A 37.28% US$ 3,799 3.45% (2.04)% 22%
01-JAN-96 TO
31-DEC-96
US$
GAM International+
Class A 8.98% US$ 1,009,819 1.56% 2.70% 82%
Class D 8.33% US$ 38,716 2.06% 2.13% 82%
GAM Global+
Class A 12.74% US$ 19,583 2.26% 1.17% 107%
Class D 11.54% US$ 815 2.88% 0.52% 107%
GAM Europe+
Class A 21.32% US$ 25,127 1.89% 0.59% 76%
GAM Pacific Basin+
Class A (0.39)% US$ 49,808 1.76% 0.22% 46%
Class D (1.19)% US$ 1,878 2.28% (0.57)% 46%
GAM Japan Capital+
Class A 0.15% US$ 36,504 1.84% (0.50)% 23%
GAM North America+
Class A 24.10% US$ 5,853 2.61% (0.39)% 9%
GAMerica Capital***+
Class A 18.31% US$ 1,927 5.16% (3.79)% 27%
</TABLE>
68
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratios/supplemental data
---------------------------------------------------------------------------------
Ratios to average net assets
---------------------------------------------
Total return
(without Net assets Net Portfolio
deduction of end of period investment turnover
sales load)++ (000 omitted) Expenses income/(loss) rate
--------------- --------------- ------------ ----------------- ----------
<S> <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$ 3,600 3.61% (2.35)% 122%
GAM North America***
Class A 30.90% US$ 5,981 2.98% 0.01% 9%
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%
</TABLE>
+ Period from 1st July, 1994 (Inception) to 31st December, 1994.
++ Period from 12th May, 1995 (Inception) to 31st December, 1995. * Annualized.
** The inception dates for Classes B and C were as follows: International Class
B on 26th May 1998, Class C on 19th May 1998, Global Class B on 26th May,
1998, Class C on 19th May, 1998, Europe Class B on 26th May, 1998, Class C on
20th May, 1998, Pacific Basin Class B on 26th May, 1998, Class C on 1st June,
1998, Japan Capital Class B on 26th May, 1998, Class C on 19th May, 1998,
North America Class B on 26th May, 1998, Class C on 7th July, 1998 and
GAMerica Capital Class B and Class C on 26th May, 1998.
***In the absence of expense reimbursement, expenses on an annualized basis
would have represented 6.16% for GAMerica Capital of average net assets 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 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.
69
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Bank loans
-----------------------------------------------------------------------------
Average
Average amount number of shares Average
Amount of bank loans outstanding amount of
outstanding outstanding during the period debt per share
end of period during the period (monthly average) during the
(000 omitted) (000 omitted) (000 omitted) period
--------------- ------------------- ------------------- ---------------
<S> <C> <C> <C> <C>
01-JAN-98 TO
31-DEC-98
US$
GAM International
Class A
Class B*
Class C*
Class D
GAM Global
Class A
Class B*
Class C*
Class D
GAM Europe ++++
Class A - US$ 44 3,658 US$ .012
Class B* - US$ 2 78 US$ .019
Class C* - US$ 1 40 US$ .017
GAM Pacific Basin
Class A
Class B*
Class C*
Class D
GAM Japan Capital
Class A
Class B*
Class C*
GAM North America ++++
Class A - US$ 68 797 US$.085
Class B* - - - -
Class C* - - - -
GAMerica Capital
Class A
Class B*
Class C*
</TABLE>
70
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Bank loans
-----------------------------------------------------------------------------
Average
Average amount number of shares Average
Amount of bank loans outstanding amount of
outstanding outstanding during the period debt per share
end of period during the period (monthly average) during the
(000 omitted) (000 omitted) (000 omitted) period
--------------- ------------------- ------------------- ---------------
<S> <C> <C> <C> <C>
01-JAN-97 TO
31-DEC-97
US$
GAM International
Class A
Class D
GAM Global
Class A
Class D
GAM Europe +++
Class A US$ 884 US$ 2.4 2,688 US$ 0.001
GAM Pacific Basin +++
Class A US$ 2,102 US$ 5.8 3,265 US$ 0.002
Class D US$ 144 US$ 0.4 140 US$ 0.003
GAM Japan Capital +++
Class A - US$ 145.5 3,074 US$ 0.047
GAM North America
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
GAMerica Capital
Class A
</TABLE>
71
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Bank loans
-----------------------------------------------------------------------------
Average
Average amount number of shares Average
Amount of bank loans outstanding amount of
outstanding outstanding during the period debt per share
end of period during the period (monthly average) during the
(000 omitted) (000 omitted) (000 omitted) 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
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
</TABLE>
*The inception dates for Classes B and C were as follows: International Class
B on 26th May 1998, Class C on 19th May 1998, Global Class B on 26th May,
1998, Class C on 19th May, 1998, Europe Class B on 26th May, 1998, Class C
on 20th May, 1998, Pacific Basin Class B on 26th May, 1998, Class C on 1st
June, 1998, Japan Capital Class B on 26th May, 1998, Class C on 19th May,
1998, North America Class B on 26th May, 1998, Class C on 7th July, 1998 and
GAMerica Capital Class B and Class C on 26th May, 1998.
+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.
++++The average daily interest rate during the period was 8.65% for GAM Europe
and 8.63% for GAM North America, respectively.
72
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Accounts
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders
of GAM Funds, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the statements of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position 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 and GAMerica
Capital Fund) at December 31, 1998, the results of their operations for the year
then ended, the changes in their net assets for each of the two years in the
period then ended, and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above. The financial highlights for each of the two years
in the period ended December 31, 1995, were audited by other auditors whose
report, dated February 2, 1996, expressed an unqualified opinion thereon.
[GRAPHIC OMITTED]
/s/ PricewaterhouseCoopers LLP
-------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 22, 1999
73
<PAGE>
- --------------------------------------------------------------------------------
Additional Federal Tax Information (unaudited)
- --------------------------------------------------------------------------------
The percentage of ordinary income dividends paid by the Funds during the year
ended 31st December 1998, which qualify for the Dividends Received Deduction
available to corporate shareholders was:
<TABLE>
<CAPTION>
GAM GAM GAM
GAM GAM GAM Pacific Japan North GAMerica
International Global Europe Basin Capital America Capital
=============== ======== ======== ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C> <C>
Percentages 0% 0% 0% 0% 0% 100% 2.43%
</TABLE>
The Funds hereby designate the following approximate amounts as capital gain
distributions for the purpose of the Dividends Paid Deduction:
<TABLE>
<CAPTION>
GAM GAM GAM
GAM GAM GAM Pacific Japan North GAMerica
International Global Europe Basin Capital America Capital
=============== ========= =========== ========= ========= =========== =========
<S> <C> <C> <C> <C> <C> <C> <C>
In US$
Distribution - 676,058 4,456,208 - - 4,342,973 229,017
</TABLE>
In January 1999, the Funds reported on Form 1099 the tax status of all
distributions made during calendar year 1998.
74
<PAGE>
- --------------------------------------------------------------------------------
Supplemental Proxy Information (unaudited)
- --------------------------------------------------------------------------------
The "Company" had a special meeting of shareholders on April 9, 1998. The
following is a description of the matters presented to shareholders for approval
and the results of the voting.
1. The following Directors (constituting the entire Board of Directors) were
elected by shareholders:
<TABLE>
<CAPTION>
IN FAVOR ABSTAIN
------------ --------
<S> <C> <C>
Gilbert de Botton .......... 47,222,916 495,043
George W. Landau ........... 47,197,581 520,379
Robert J. McGuire .......... 47,217,735 500,225
Roland Weiser .............. 47,212,879 505,081
</TABLE>
2. Shareholders approved the proposal to eliminate the Funds' fundamental
investment restrictions with respect to (a) investments in issuers with an
operating history of less than three years (For: 25,674,938, Against: 2,677,160,
Abstain: 1,077,036); (b) investments in issuers in which officers and directors
of the "Company" or its investment adviser own more than certain specified
percentages of the securities of such issuer (For: 25,010,148, Against:
3,225,003, Abstain: 1,193,981); and (c) investments in interests in oil, gas or
other mineral exploration or development programs (For: 25,359,546, Against:
3,049,356, Abstain: 1,020,235).
3. Shareholders approved the change from fundamental to non-fundamental the
Funds' investment restrictions with respect to (a) short sales of securities and
(b) investments in illiquid securities (For: 24,644,025, Against: 3,314,456,
Abstain: 1,470,653).
4. Shareholders ratified the selection of PricewaterhouseCoopers LLP as
independent accountants for the "Company" for its fiscal year ended December 31,
1998 (For: 46,747,500, Against: 328,956, Abstain: 641,494).
75
<PAGE>
BOARD OF DIRECTORS
<TABLE>
<S> <C>
Gilbert de Botton - President CHAIRMAN, Global Asset Management Limited, London
George W. Landau SENIOR ADVISER, Latin America Group, The Coca-Cola
Company, New York
Roland Weiser PRESIDENT, Intervista, Summit, New Jersey
Robert J. McGuire, Esq. ATTORNEY/CONSULTANT, Morvillo, Abramowitz, Grand, Iason
& Silberberg, P.C., New York, New York
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) 557-8635
</TABLE>
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: 44-171-493 9990 Fax: 44-171-493 0715 Tlx: 296099 GAMUK G
On Internet;
Information on GAM's SEC-registered funds -www.gam.com
Email enquiries on GAM - [email protected]
