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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 31 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 34
(Check appropriate box or boxes.)
GAM Funds, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
135 East 57 Street New York, NY 10022
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code 212-407-4600
- --------------------------------------------------------------------------------
GAM Funds, Inc. (Same)
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering -----------------------------------
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[X] on 4/30/99 pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Omit from the facing sheet reference to the other Act if the Registration
Statement or amendment is filed under only one of the Acts. Include the
"Approximate Date of Proposed Public Offering" and "Title of Securities Being
Registered" only where securities are being registered under the Securities Act
of 1933.
Form N-1A is to be used by open-end management investment companies, except
insurance company separate accounts and small business investment companies
licensed under the United States Small Business Administration, to register
under the Investment Company Act of 1940 and to offer their shares under the
Securities Act of 1933. The Commission has designed Form N-1A to provide
investors with information that will assist them in making a decision about
investing in an investment company eligible to use the Form. The Commission also
may use the information provided on Form N-1A in its regulatory, disclosure
review, inspection, and policy making roles.
A Registrant is required to disclose the information specified by Form
N-1A, and the Commission will make this information public. A Registrant is not
required to respond to the collection of information contained in Form N-1A
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 5th Street, N.W.,
Washington, D.C. 20549-6009. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Sec. 3507.
POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION
OF INFORMATION CONTAINED IN THIS FORM ARE NOT REQUIRED TO
RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB
CONTROL NUMBER.
SEC 2052 (5-98)
<PAGE>
----------------------
GAM GLOBAL FUND
GAM INTERNATIONAL FUND
GAM PACIFIC BASIN FUND
GAM JAPAN CAPITAL FUND
GAM EUROPE FUND
GAM NORTH AMERICA FUND
GAMERICA CAPITAL
FUND
----------------------
GLOBAL ASSET MANAGEMENT
================================================================================
GAM Funds, Inc.
PROSPECTUS o APRIL 30, 1999
GAM Funds, Inc. (the "Company") is a diversified, open-end investment company.
The Company offers investors the opportunity to invest in seven different
portfolios (the "Funds") which invest primarily in equity securities. Shares of
one portfolio may be exchanged for shares of the same class of another portfolio
or for shares of the Reserve Funds--Primary Fund, an open-end investment
management company (the "GAM Money Market Account.")
The Funds described in this Prospectus are managed by GAM International
Management Limited ("GAM"). Fayez Sarofim & Co. ("Sarofim") serves as
co-investment adviser to the GAM North America Fund. GAM and Sarofim are
collectively referred to as the "Investment Advisers." GAM Services Inc. ("GAM
Services"), an affiliate of GAM, serves as the principal underwriter for the
Funds' securities.
Neither the Securities and Exchange Commission ("SEC") nor any state securities
commission has approved any fund's shares as an investment. Neither the SEC nor
any state security commission has determined if this prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
<PAGE>
Table of Contents
================================================================================
RISK AND RETURN SUMMARY 1
I. THE FUNDS
The Funds' Past Performance and Expenses 2
Investment Objectives and Strategies 16
Risk Considerations 21
Management of the Funds 22
II. SHAREHOLDER INFORMATION
Choosing the appropriate share class 24
How to buy shares 28
How to sell shares 29
How to exchange shares 30
Account services 31
Dividends and tax matters 31
III. FINANCIAL HIGHLIGHTS 32
<PAGE>
RISK & RETURN SUMMARY
================================================================================
INVESTMENT OBJECTIVE AND POLICIES
Each Fund seeks long-term capital appreciation by investing in a specific
geographic region. Each Fund employs its own investment strategy. Each Fund
carries its own particular potential for risk and reward.
PRINCIPAL RISKS
Generally, each Fund will invest in stocks. Stock prices fluctuate, so you
could lose money. Investing in foreign securities generally involves
greater risks than investing in U.S. securities. These risks may include
fluctuations of exchange rates and the possibility of political or economic
instability. In addition, certain of the Funds' investing techniques, like
hedging and leveraging, may involve additional risk, which may affect the
value of your investment.
GAM International, GAM Pacific Basin, GAM Japan Capital and GAM Europe
Funds invest primarily in foreign securities. GAM Global, GAM North America
and GAMerica Capital Funds invest to some extent in foreign securities.
WHO MAY WANT TO INVEST
The Funds may best suit those investors who want long-term capital
appreciation, and who can tolerate the risks involved with stock and
foreign investing.
CLASSES OF SHARES
The Company offers A, B, C, and D class shares. Each share class involves a
sales charge. For complete information on sales charges and classes of
shares, see "Shareholder Information."
1
================================================
GAM FUNDS INC PROSPECTUS / RISK & RETURN SUMMARY
<PAGE>
================================================================================
I. The Funds
GAM GLOBAL FUND
- --------------------------------- --------------------------------
PAST PERFORMANCE AND EXPENSES
A bar displays the annual return of the Fund for each year. Fund performance
shown does not reflect Class A sales charges, but includes the reinvestment of
dividends and capital gains. Performance would be lower if sales charges were
included. Past performance does not guarantee or predict future results.
================================================================================
GAM Global Fund
Class A Share Annual Total Returns
As of December 31
30%
---------------------------------------------------------------------------
20%
---------------------------------------------------------------------------
10%
---------------------------------------------------------------------------
0%
===========================================================================
- -10%
---------------------------------------------------------------------------
98 97 96 95 94 93 92 91 90 89
================================================================================
Highest and Lowest Returns
Highest Performing Quarter xx% in xnd quarter of 19xx
Lowest Performing Quarter -x% in xnd quarter of 19xx
Fund performance shown does not reflect sales charges. The MSCI World Index is a
broad market index used for comparative purposes. Past performance does not
guarantee or predict future results.
================================================================================
GAM Global Fund
1-, 5-, and 10-Year (or Life-of-Class) Annual Total Return for all Relevant
Share Classes Plus a Comparison to the MSCI World Index
As of December 31
1 Year 5 Year 10 Year
(or Life-of-Class)
Class A Shares X% X% X%
Class B Shares X% X% X%
Class C Shares X% X% X%
Class D Shares X% X% X%
MSCI World Index X% X% X%
* The MSCI World Index is an unmanaged, broad-based index of foreign and
domestic securities and includes reinvestment of dividends. Investors may
not purchase indices directly.
2
=============================================
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
Fund investors pay various expenses either directly or indirectly. This table
shows the expenses for the past year, adjusted to reflect any charges. Actual or
future expenses may be different.
================================================================================
GAM Global Fund Investor Expenses
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
<S> <C> <C> <C> <C>
Sales charges (paid directly from your investment)
- ----------------------------------------------------------------------------------------
Maximum Sales Charge 0.00% 0.00% 0.00% 0.00%
Maximum Deferred Sales Charge 0.00% 0.00% 0.00% 0.00%
<CAPTION>
Annual fund operating expenses (% of net assets)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees
(after expense reimbursal) 0.00% 0.00% 0.00% 0.00%
12b-1 Fees 0.00% 0.00% 0.00% 0.00%
Other Expenses 0.00% 0.00% 0.00% 0.00%
Total Fund Operating Expenses 0.00% 0.00% 0.00% 0.00%
</TABLE>
These examples can help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds. The examples assume a 5% return each
year, with operating expenses staying the same. Your actual returns and expenses
may be different.
Example #1 assumes you invest $10,000 in the Fund for the periods shown, then
redeem all your shares at the end of those periods.
Example #2 assumes you invest $10,000 in the Fund for the periods shown, but you
do not redeem your shares at the end of those periods.
================================================================================
Expenses of Hypothetical $10,000 Investment
in GAM Global Fund
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
<S> <C> <C> <C> <C>
EXAMPLE #1
- ----------------------------------------------------------------------------------------
For one year
For three years
For five years
For ten years
EXAMPLE #2
- ----------------------------------------------------------------------------------------
For one year
For three years
For five years
For ten years
</TABLE>
3
==========================================
GAM FUNDS INC PROSPECTUS / GAM GLOBAL FUND
<PAGE>
================================================================================
I. The Funds continued
GAM INTERNATIONAL FUND
- ----------------------------- -----------------------------
PAST PERFORMANCE AND EXPENSES
A bar displays the annual return of the Fund for each year. Fund performance
shown does not reflect Class A sales charges, but includes the reinvestment of
dividends and capital gains. Performance would be lower if sales charges were
included. Past performance does not guarantee or predict future results.
================================================================================
GAM International Fund
Class A Shares Annual Total Returns
As of December 31
30%
---------------------------------------------------------------------------
20%
---------------------------------------------------------------------------
10%
---------------------------------------------------------------------------
0%
===========================================================================
- -10%
---------------------------------------------------------------------------
98 97 96 95 94 93 92 91 90 89
================================================================================
Highest and Lowest Returns
Highest Performing Quarter xx% in xnd quarter of 19xx
Lowest Performing Quarter -x% in xnd quarter of 19xx
Fund performance shown does not reflect sales charges. The MSCI EAFE Index is a
broad market index used for comparative purposes. Past performance does not
guarantee or predict future results.
================================================================================
GAM International Fund
1-, 5-, and 10-Year (or Life-of-Class) Annual Total Return for all Relevant
Share Classes Plus a Comparison to the MSCI EAFE Index
As of December 31
1 Year 5 Year 10 Year
(or Life-of-Class)
Class A Shares X% X% X%
Class B Shares X% X% X%
Class C Shares X% X% X%
Class D Shares X% X% X%
MSCI World Index X% X% X%
* The MSCI EAFE (Europe, Australia, Far East) Index is an unmanaged index of
foreign stocks in Austria, Australia, Belgium, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand,
Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK and
includes reinvestment of dividends. Investors may not purchase indices
directly.
4
=============================================
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
Fund investors pay various expenses either directly or indirectly. This table
shows the expenses for the past year, adjusted to reflect any charges. Actual or
future expenses may be different.
================================================================================
GAM International Fund Investor Expenses
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
<S> <C> <C> <C> <C>
Sales charges (paid directly from your investment)
- ----------------------------------------------------------------------------------------
Maximum Sales Charge 0.00% 0.00% 0.00% 0.00%
Maximum Deferred Sales Charge 0.00% 0.00% 0.00% 0.00%
<CAPTION>
Annual fund operating expenses (% of net assets)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees
(after expense reimbursal) 0.00% 0.00% 0.00% 0.00%
12b-1 Fees 0.00% 0.00% 0.00% 0.00%
Other Expenses 0.00% 0.00% 0.00% 0.00%
Total Fund Operating Expenses 0.00% 0.00% 0.00% 0.00%
</TABLE>
These examples can help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds. The examples assume a 5% return each
year, with operating expenses staying the same. Your actual returns and expenses
may be different.
Example #1 assumes you invest $10,000 in the Fund for the periods shown, then
redeem all your shares at the end of those periods.
Example #2 assumes you invest $10,000 in the Fund for the periods shown, but you
do not redeem your shares at the end of those periods.
================================================================================
Expenses of Hypothetical $10,000 Investment
in GAM International Fund
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
<S> <C> <C> <C> <C>
EXAMPLE #1
- ----------------------------------------------------------------------------------------
For one year
For three years
For five years
For ten years
EXAMPLE #2
- ----------------------------------------------------------------------------------------
For one year
For three years
For five years
For ten years
</TABLE>
5
=================================================
GAM FUNDS INC PROSPECTUS / GAM INTERNATIONAL FUND
<PAGE>
================================================================================
I. The Funds continued
GAM PACIFIC BASIN FUND
- ----------------------------- -----------------------------
PAST PERFORMANCE AND EXPENSES
A bar displays the annual return of the Fund for each year. Fund performance
shown does not reflect Class A sales charges, but includes the reinvestment of
dividends and capital gains. Performance would be lower if sales charges were
included. Past performance does not guarantee or predict future results.
================================================================================
GAM Pacific Basin Fund
Class A Share Annual Total Returns
As of December 31
30%
---------------------------------------------------------------------------
20%
---------------------------------------------------------------------------
10%
---------------------------------------------------------------------------
0%
===========================================================================
- -10%
---------------------------------------------------------------------------
98 97 96 95 94 93 92 91 90 89
================================================================================
Highest and Lowest Returns
Highest Performing Quarter xx% in xnd quarter of 19xx
Lowest Performing Quarter -x% in xnd quarter of 19xx
Fund performance shown does not reflect sales charges. The MSCI Pacific Index is
a broad market index used for comparative purposes. Past performance does not
guarantee or predict future results.
================================================================================
GAM Pacific Basin Fund
1-, 5-, and 10-Year (or Life-of-Class) Annual Total Return for all Relevant
Share Classes Plus a Comparison to the MSCI Pacific Index
As of December 31
1 Year 5 Year 10 Year
(or Life-of-Class)
Class A Shares X% X% X%
Class B Shares X% X% X%
Class C Shares X% X% X%
Class D Shares X% X% X%
MSCI World Index X% X% X%
* The MSCI Pacific Index is an unmanaged index of securities listed on the
stock exchanges of Australia, Hong Kong, Japan, New Zealand and
Singapore/Malaysia and includes reinvestment of dividends. Investors may
not purchase indices directly.
6
=============================================
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
Fund investors pay various expenses either directly or indirectly. This table
shows the expenses for the past year, adjusted to reflect any charges. Actual or
future expenses may be different.
================================================================================
GAM Pacific Basin Fund Investor Expenses
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
<S> <C> <C> <C> <C>
Sales charges (paid directly from your investment)
- ----------------------------------------------------------------------------------------
Maximum Sales Charge 0.00% 0.00% 0.00% 0.00%
Maximum Deferred Sales Charge 0.00% 0.00% 0.00% 0.00%
<CAPTION>
Annual fund operating expenses (% of net assets)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees
(after expense reimbursal) 0.00% 0.00% 0.00% 0.00%
12b-1 Fees 0.00% 0.00% 0.00% 0.00%
Other Expenses 0.00% 0.00% 0.00% 0.00%
Total Fund Operating Expenses 0.00% 0.00% 0.00% 0.00%
</TABLE>
These examples can help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds. The examples assume a 5% return each
year, with operating expenses staying the same. Your actual returns and expenses
may be different.
Example #1 assumes you invest $10,000 in the Fund for the periods shown, then
redeem all your shares at the end of those periods.
Example #2 assumes you invest $10,000 in the Fund for the periods shown, but you
do not redeem your shares at the end of those periods.
================================================================================
Expenses of Hypothetical $10,000 Investment
in GAM Pacific Basin Fund
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
<S> <C> <C> <C> <C>
EXAMPLE #1
- ----------------------------------------------------------------------------------------
For one year
For three years
For five years
For ten years
EXAMPLE #2
- ----------------------------------------------------------------------------------------
For one year
For three years
For five years
For ten years
</TABLE>
7
=================================================
GAM FUNDS INC PROSPECTUS / GAM PACIFIC BASIN FUND
<PAGE>
================================================================================
I. The Funds continued
GAM JAPAN CAPITAL FUND
- ----------------------------- -----------------------------
PAST PERFORMANCE AND EXPENSES
A bar displays the annual return of the Fund for each year. Fund performance
shown does not reflect Class A sales charges, but includes the reinvestment of
dividends and capital gains. Performance would be lower if sales charges were
included. Past performance does not guarantee or predict future results.
================================================================================
GAM Japan Capital Fund
Class A Share Annual Total Returns
As of December 31
30%
---------------------------------------------------------------------------
20%
---------------------------------------------------------------------------
10%
---------------------------------------------------------------------------
0%
===========================================================================
- -10%
---------------------------------------------------------------------------
98 97 96 95 94
================================================================================
Highest and Lowest Returns
Highest Performing Quarter xx% in xnd quarter of 19xx
Lowest Performing Quarter -x% in xnd quarter of 19xx
Fund performance shown does not reflect sales charges. The Tokyo Stock Exchange
Index is a market index used for comparative purposes. Past performance does not
guarantee or predict future results.
================================================================================
GAM Japan Capital Fund
1- and 3-Year (or Life-of-Class) Annual Total Return for all Relevant Share
Classes Plus a Comparison to the Tokyo Stock Exchange
As of December 31
1 Year 3 Year Life-of-Class
Class A Shares X% X% X%
Class B Shares X% X% X%
Class C Shares X% X% X%
Tokyo Stock Exchange Index X% X% X%
* The Tokyo Stock Exchange Index (TOPIX) is an unmanaged composite index of
companies listed on the First Section of the Tokyo Stock Exchange and
includes reinvestment of dividends. Investors may not purchase indices
directly.
8
=============================================
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
Fund investors pay various expenses either directly or indirectly. This table
shows the expenses for the past year, adjusted to reflect any charges. Actual or
future expenses may be different.
================================================================================
GAM Japan Capital Fund Investor Expenses
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
Sales charges (paid directly from your investment)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge 0.00% 0.00% 0.00%
Maximum Deferred Sales Charge 0.00% 0.00% 0.00%
<CAPTION>
Annual fund operating expenses (% of net assets)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees
(after expense reimbursal) 0.00% 0.00% 0.00%
12b-1 Fees 0.00% 0.00% 0.00%
Other Expenses 0.00% 0.00% 0.00%
Total Fund Operating Expenses 0.00% 0.00% 0.00%
</TABLE>
These examples can help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds. The examples assume a 5% return each
year, with operating expenses staying the same. Your actual returns and expenses
may be different.
Example #1 assumes you invest $10,000 in the Fund for the periods shown, then
redeem all your shares at the end of those periods.
Example #2 assumes you invest $10,000 in the Fund for the periods shown, but you
do not redeem your shares at the end of those periods.
================================================================================
Expenses of Hypothetical $10,000 Investment
in GAM Japan Capital Fund
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
EXAMPLE #1
- ----------------------------------------------------------------------------------------
For one year
For three years
For five years
For ten years
EXAMPLE #2
- ----------------------------------------------------------------------------------------
For one year
For three years
For five years
For ten years
</TABLE>
9
=================================================
GAM FUNDS INC PROSPECTUS / GAM JAPAN CAPITAL FUND
<PAGE>
================================================================================
I. The Funds continued
GAM EUROPE FUND
- --------------------------------- --------------------------------
PAST PERFORMANCE AND EXPENSES
A bar displays the annual return of the Fund for each year. Fund performance
shown does not reflect Class A sales charges, but includes the reinvestment of
dividends and capital gains. Performance would be lower if sales charges were
included. Past performance does not guarantee or predict future results.
================================================================================
GAM Europe Fund
Class A Share Annual Total Returns
As of December 31
30%
---------------------------------------------------------------------------
20%
---------------------------------------------------------------------------
10%
---------------------------------------------------------------------------
0%
===========================================================================
- -10%
---------------------------------------------------------------------------
98 97 96 95 94 93 92 91 90
================================================================================
Highest and Lowest Returns
Highest Performing Quarter xx% in xnd quarter of 19xx
Lowest Performing Quarter -x% in xnd quarter of 19xx
Fund performance shown does not reflect sales charges. The MSCI Europe Index is
a broad market index used for comparative purposes. Past performance does not
guarantee or predict future results.
================================================================================
GAM Europe Fund
1- and 5-Year (or Life-of-Class) Annual Total Return for all Relevant Share
Classes Plus a Comparison to the MSCI Europe Index
As of December 31
1 Year 5 Year Life-of-Class
Class A Shares X% X% X%
Class B Shares X% X% X%
Class C Shares X% X% X%
MSCI Europe Index X% X% X%
* The MSCI Europe Index is an unmanaged index of securities listed on the
stock exchanges of 15 European countries and includes reinvestment of
dividends. Investors may not purchase indices directly.
10
=============================================
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
Fund investors pay various expenses either directly or indirectly. This table
shows the expenses for the past year, adjusted to reflect any charges. Actual or
future expenses may be different.
================================================================================
GAM Europe Fund Investor Expenses
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
Sales charges (paid directly from your investment)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge 0.00% 0.00% 0.00%
Maximum Deferred Sales Charge 0.00% 0.00% 0.00%
<CAPTION>
Annual fund operating expenses (% of net assets)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees
(after expense reimbursal) 0.00% 0.00% 0.00%
12b-1 Fees 0.00% 0.00% 0.00%
Other Expenses 0.00% 0.00% 0.00%
Total Fund Operating Expenses 0.00% 0.00% 0.00%
</TABLE>
These examples can help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds. The examples assume a 5% return each
year, with operating expenses staying the same. Your actual returns and expenses
may be different.
Example #1 assumes you invest $10,000 in the Fund for the periods shown, then
redeem all your shares at the end of those periods.
Example #2 assumes you invest $10,000 in the Fund for the periods shown, but you
do not redeem your shares at the end of those periods.
================================================================================
Expenses of Hypothetical $10,000 Investment
in GAM Europe Fund
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
EXAMPLE #1
- ----------------------------------------------------------------------------------------
For one year
For three years
For five years
For ten years
EXAMPLE #2
- ----------------------------------------------------------------------------------------
For one year
For three years
For five years
For ten years
</TABLE>
11
==========================================
GAM FUNDS INC PROSPECTUS / GAM EUROPE FUND
<PAGE>
================================================================================
I. The Funds continued
GAM NORTH AMERICA FUND
- ----------------------------- -----------------------------
PAST PERFORMANCE AND EXPENSES
A bar displays the annual return of the Fund for each year. Fund performance
shown does not reflect Class A sales charges, but includes the reinvestment of
dividends and capital gains. Performance would be lower if sales charges were
included. Past performance does not guarantee or predict future results.
================================================================================
GAM North America Fund
Class A Share Annual Total Returns
As of December 31
30%
---------------------------------------------------------------------------
20%
---------------------------------------------------------------------------
10%
---------------------------------------------------------------------------
0%
===========================================================================
- -10%
---------------------------------------------------------------------------
98 97 96 95 94 93 92 91 90
================================================================================
Highest and Lowest Returns
Highest Performing Quarter xx% in xnd quarter of 19xx
Lowest Performing Quarter -x% in xnd quarter of 19xx
Fund performance shown does not reflect sales charges. The S&P 500 Composite
Index is a broad market index used for comparative purposes. Past performance
does not guarantee or predict future results.
================================================================================
GAM North America Fund
1- and 5-Year (or Life-of-Class) Annual Total Return for all Relevant Share
Classes Plus a Comparison to the S&P 500 Composite index
As of December 31
1 Year 5 Year Life-of-Class
Class A Shares X% X% X%
Class B Shares X% X% X%
Class C Shares X% X% X%
S&P 500 Composite Index X% X% X%
* The S&P Composite Index is an unmanaged index of the stock performance of
500 industrial, transportation, utility and financial companies and
includes reinvestment of dividends. Investors may not purchase indices
directly.
12
=============================================
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
Fund investors pay various expenses either directly or indirectly. This table
shows the expenses for the past year, adjusted to reflect any charges. Actual or
future expenses may be different.
================================================================================
GAM North America Fund Investor Expenses
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Sales charges (paid directly from your investment)
- ----------------------------------------------------------------------------------------
Maximum Sales Charge 0.00% 0.00% 0.00%
Maximum Deferred Sales Charge 0.00% 0.00% 0.00%
<CAPTION>
Annual fund operating expenses (% of net assets)
- ----------------------------------------------------------------------------------------
Management Fees
(after expense reimbursal) 0.00% 0.00% 0.00%
12b-1 Fees 0.00% 0.00% 0.00%
Other Expenses 0.00% 0.00% 0.00%
Total Fund Operating Expenses 0.00% 0.00% 0.00%
</TABLE>
These examples can help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds. The examples assume a 5% return each
year, with operating expenses staying the same. Your actual returns and expenses
may be different.
Example #1 assumes you invest $10,000 in the Fund for the periods shown, then
redeem all your shares at the end of those periods.
Example #2 assumes you invest $10,000 in the Fund for the periods shown, but you
do not redeem your shares at the end of those periods.
================================================================================
Expenses of Hypothetical $10,000 Investment
in GAM North America Fund
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
EXAMPLE #1
- ----------------------------------------------------------------------------------------
For one year
For three years
For five years
For ten years
EXAMPLE #2
- ----------------------------------------------------------------------------------------
For one year
For three years
For five years
For ten years
</TABLE>
13
=================================================
GAM FUNDS INC PROSPECTUS / GAM NORTH AMERICA FUND
<PAGE>
================================================================================
I. The Funds continued
GAMERICA CAPITAL FUND
- ----------------------------- ------------------------------
PAST PERFORMANCE AND EXPENSES
A bar displays the annual return of the Fund for each year. Fund performance
shown does not reflect Class A sales charges, but includes the reinvestment of
dividends and capital gains. Performance would be lower if sales charges were
included. Past performance does not guarantee or predict future results.
================================================================================
GAMerica Capital Fund
Class A Share Annual Total Returns
As of December 31
30%
---------------------------------------------------------------------------
20%
---------------------------------------------------------------------------
10%
---------------------------------------------------------------------------
0%
===========================================================================
- -10%
---------------------------------------------------------------------------
98 97 96 95 94 93 92 91 90
================================================================================
Highest and Lowest Returns
Highest Performing Quarter xx% in xnd quarter of 19xx
Lowest Performing Quarter -x% in xnd quarter of 19xx
Fund performance shown does not reflect sales charges. The S&P 500 Composite
Index is a broad market index used for comparative purposes. Past performance
does not guarantee or predict future results.
================================================================================
GAMerica Capital Fund
1- and 3-Year (or Life-of-Class) Annual Total Return for all Relevant Share
Classes Plus a Comparison to the S&P 500 Composite Index
As of December 31
1 Year 3 Year Life-of-Class
Class A Shares X% X% X%
Class B Shares X% X% X%
Class C Shares X% X% X%
S&P 500 Composite Index X% X% X%
* The S&P Composite Index is an unmanaged index of the stock performance of
500 industrial, transportation, utility and financial companies and
includes reinvestment of dividends. Investors may not purchase indices
directly.
14
=============================================
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
Fund investors pay various expenses either directly or indirectly. This table
shows the expenses for the past year, adjusted to reflect any charges. Actual or
future expenses may be different.
================================================================================
GAMerica Capital Fund Investor Expenses
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
Sales charges (paid directly from your investment)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge 0.00% 0.00% 0.00%
Maximum Deferred Sales Charge 0.00% 0.00% 0.00%
<CAPTION>
Annual fund operating expenses (% of net assets)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees
(after expense reimbursal) 0.00% 0.00% 0.00%
12b-1 Fees 0.00% 0.00% 0.00%
Other Expenses 0.00% 0.00% 0.00%
Total Fund Operating Expenses 0.00% 0.00% 0.00%
</TABLE>
These examples can help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds. The examples assume a 5% return each
year, with operating expenses staying the same. Your actual returns and expenses
may be different.
Example #1 assumes you invest $10,000 in the Fund for the periods shown, then
redeem all your shares at the end of those periods.
Example #2 assumes you invest $10,000 in the Fund for the periods shown, but you
do not redeem your shares at the end of those periods.
================================================================================
Expenses of Hypothetical $10,000 Investment
in GAMerica Capital Fund
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
EXAMPLE #1
- ----------------------------------------------------------------------------------------
For one year
For three years
For five years
For ten years
EXAMPLE #2
- ----------------------------------------------------------------------------------------
For one year
For three years
For five years
For ten years
</TABLE>
15
================================================
GAM FUNDS INC PROSPECTUS / GAMERICA CAPITAL FUND
<PAGE>
Investment Objectives and Strategies
================================================================================
THE FUNDS' OVERALL INVESTMENT OBJECTIVES AND POLICIES
Each Fund's investment objective is long-term capital appreciation. The Funds
will pursue their objectives by investing primarily in stocks, including smaller
companies in the earlier stages of development. Under certain market conditions,
the Funds may engage in short-term trading. In addition, when the Funds'
investment advisers determine that the long-term capital appreciation of bonds
may equal or exceed the return on stocks, then the Funds may invest
substantially in bonds issued either by corporations or governments or
government agencies. None of the Funds may invest more than 5% of assets in
bonds rated lower than investment grade.
With respect to 75% of each Fund's total assets, no more than 5% of its assets
will be invested in any one issuer. A Fund will not acquire more than 10% of the
outstanding voting securities of any one issuer. No more than 25% of each Fund's
total assets will be invested in any one industry.
A company will be considered to be in or from a particular country if at least
50% of its assets are located in the country, if at least 50% of its revenues
are derived from goods or services produced in the country or sales made in the
country, its principal trading market is the country, or if it is incorporated
under the laws of the country.
The Funds' securities are generally bought and sold via stock exchanges and in
over-the-counter markets in the countries where the issuers are located. The
Funds may also invest via sponsored or unsponsored American Depository Receipts
(ADRs) or European Depository Receipts (EDRs), which represent the securities of
foreign companies on other exchanges. The Investment Adviser of each Fund may
buy or sell the same security at the same time on behalf of the Funds and one or
more other accounts managed by the Investment Adviser. The Investment Adviser
allocates available investments by such means as, in its judgment, will result
in fair treatment.
Each Fund, for temporary defensive purposes, may invest in
16
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FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
short-term bonds of foreign and United States companies, foreign governments,
the U.S. government and its agencies and instrumentalities, as well as money
market instruments denominated in U.S. dollars or a foreign currency. At no
point will more than 35% of each Fund's portfolio be held in cash or cash
equivalents, except when the Fund is taking temporary defensive measures.
The Funds may from time to time utilize certain sophisticated investment
techniques, including derivatives. Derivatives are financial instruments which
derive their value from the performance of an underlying asset--another
security, a commodity, or an index. Examples of these include:
FORWARD FOREIGN EXCHANGE CONTRACTS
When a Fund buys a foreign security, it generally does so in a foreign
currency. That currency has a price, and that price fluctuates. In order to
reduce the risk of currency price swings or for other purposes, the Funds may
buy forward foreign exchange contracts on foreign currencies. These contracts
"lock in" a price for the currency at a certain future date. The Funds may also
use put and call options on foreign currencies.
ADJUSTABLE RATE INDEX NOTES (ARINS)
ARINs are a form of promissory note issued by brokerage firms or other
counterparties which pay more principal or interest if the value of another
security falls, and less principal or interest if the value of another security
rises. Losses are limited to the value of the specified other security.
OPTIONS AND WARRANTS
An option is a contract giving the owner the right to buy ("call option") or
sell ("put option") a security at a designated price ("strike price") on a
certain date. A warrant is the equivalent of a call option written by the issuer
of the underlying security.
FUTURES CONTRACTS
Futures contracts obligate one party to deliver and the other party to purchase
a specific quantity of a commodity or a financial instrument at a designated
future date, time and place. Stock index futures contracts call for a cash
payment based on the increase or decrease in the value of an index.
=====================
THE "EURO" CONVERSION
=====================
As of January 1, 1999, 11 member states of the European Union converted their
national currencies to a common currency, the "euro." This conversion could
affect your investment in the GAM Funds in the following ways:
o It could have a material impact on a Fund's revenues, expenses or income.
o It could create increased competition among security issuers throughout
European Union markets because of new-found market-wide "price
transparency." This could affect issuers' plans for pricing their own
products and services in euro.
o It could affect an issuer's ability to make information technology updates
on a timely basis.
17
================================================
GAM FUNDS INC PROSPECTUS / INVESTMENT OBJECTIVES
<PAGE>
================================================================================
OTHER INVESTMENT STRATEGIES
ILLIQUID SECURITIES
Some securities, called "illiquid securities," cannot be readily traded. They
may be restricted, or they may be private placements. They may not be traded on
a readily available market. Certain securities cannot be sold to the U.S. public
because of their terms or because of SEC regulations. The Funds may invest up to
15% of assets in illiquid securities. At times, it may be difficult to ascertain
a price for these securities, or to buy or sell them at a desired price.
According to guidelines established by the Board of Directors, the Investment
Adviser may sometimes determine that Rule 144A Securities (those designated for
sale to institutional investors) or foreign securities are liquid in terms of
the policies of the Funds.
BORROWING AND LENDING
Each Fund may borrow money from banks for temporary emergency
purposes. Borrowings shall not exceed 1/3 of a Fund's total assets. In pursuit
of its investment objectives, each Fund may lend its portfolio securities to
creditworthy institutions. Lent securities shall not exceed 15% of the value of
a Fund's total assets. Borrowing, also known as "leverage," incurs interest
costs, which can adversely affect a Fund's investment return.
HOW THE FUNDS INVEST:
GLOBAL & INTERNATIONAL MARKETS
o GAM Global Fund may invest in securities of companies in any country in the
world, including the United States, Canada, Europe and the Pacific Basin.
Under normal conditions, the Fund invests in securities issued in at least
three different countries.
o GAM International Fund may invest in securities of companies in any country
other than the United States--normally, Canada, Europe and the Pacific
Basin. Under normal conditions, the Fund invests in securities issued in at
least three different countries.
To evaluate possible investments, the Investment Adviser uses a three-step
process:
1. Form macroeconomic views: The Investment Adviser monitors macro- economic and
market specific factors to highlight high-risk areas and to identify industries
with good fundamentals.
2. Country and sector allocation: The Investment Adviser avoids markets or
sectors perceived as overvalued and builds the portfolio around those industries
or themes with good fundamental prospects.
3. Security selection: The Investment Adviser chooses stocks or bonds within the
industries or themes it has identified which fit quality criteria.
18
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FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
HOW THE FUNDS INVEST: ASIAN MARKETS
o GAM Pacific Basin Fund may invest in securities of companies primarily in
Pacific Basin countries, including Japan, Hong Kong, Singapore, Malaysia,
Thailand, Vietnam, Indonesia, the Philippines, Korea, China, Taiwan, India,
Australia and New Zealand.
o GAM Japan Capital Fund may invest primarily in securities of companies in
Japan.
To evaluate possible investments, the Investment Adviser uses a three-step
process:
1. Macroeconomic analysis: The Investment Adviser evaluates prospects by country
and sector, supported by frequent company visits.
2. Country and/or sector allocation: The Investment Adviser compares typical
earnings growth rates to valuations, country by country or sector by sector,
then identifies those countries or sectors that display strong fundamental
growth. At the same time, the Investment Adviser identifies countries or sectors
that seem overvalued.
3. Stock selection: The Investment Adviser screens individual stocks for value,
then buys those that display the best combination of earnings potential and
price.
HOW THE FUNDS INVEST: EUROPEAN MARKETS
o GAM Europe Fund may invest primarily in securities issued by companies in
Europe, including the United Kingdom, Ireland, France, Germany, the
Netherlands, Denmark, Norway, Sweden, Finland,Iceland, Switzerland,
Austria, Belgium, Spain, Portugal, Italy, Greece, Hungary, Poland, the
Czech Republic and Slovakia.
To evaluate possible investments, the Investment Adviser uses a three-step
process:
1. Screen the stock universe: The Investment Adviser uses a number of screens to
help avoid inferior businesses and to identify potential stocks for the
portfolio.
2. Intensive research: The Investment Adviser combines a rigorous financial
analysis with frequent company visits to rank stocks.
3. Stock selection: The Investment Adviser assesses stocks for value relative to
price.
==================
Year 2000 Planning
==================
GAM is taking the Year 2000 date change very seriously. We are taking steps to
identify areas requiring change and to confirm that our technology environment
will remain stable into the next millennium. We have created a project team
dedicated to the Year 2000 issue.
The Year 2000 team is currently reviewing all aspects of the Year 2000 issue at
GAM including programs developed in-house, third-party applications and
utilities, hardware and operating systems. The team plans to test each
application. We have also sent letters to vendors requiring written confirmation
of Year 2000 compliance.
As part of the plan, we will simulate a 01-01-2000 date change and perform a
test of applications, operating systems, databases and hardware.
19
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GAM FUNDS INC PROSPECTUS / INVESTMENT OBJECTIVES
<PAGE>
Investment Objectives and Strategies continued
================================================================================
HOW THE FUNDS INVEST: U.S. MARKETS
o GAM North America Fund may invest primarily in securities issued by
companies in the United States and Canada.
The Investment Adviser selects stocks based on three factors:
1. A balance of revenue and growth from foreign and domestic sources
2. Successful franchises
3. Efficient production capacity
o GAMerica Capital Fund may invest primarily in securities of companies in
the United States. The Investment Adviser invests according to a low
turnover,value strategy, with the top 20 positions generally representing
80% of the portfolio's assets. The Adviser makes frequent visits to
companies, and prefers businesses with strong balance sheets and sound
management.
Except for GAM International Fund and GAM Global Fund, each Fund, in normal
circumstances, will invest at least 65% of assets in its designated geographic
area.
The investment objective and policies of each Fund may be changed by the Board
of Directors upon written notice to the shareholders. If you receive notice that
a Fund has changed its objective or policies, you should consider whether the
Fund still suits your investment needs and risk tolerance.
Each Fund is subject to certain fundamental investment restrictions and
limitations (see the Statement of Additional Information, the "SAI"). These
fundamental policies can be changed only with approval of a majority of each
Fund's outstanding voting securities. All restrictions, except the restriction
on borrowing, apply only at the time an investment is made. Subsequent changes
in the value of an investment or of a Fund's assets shall not result in a
violation.
There is no assurance that a Fund will achieve its investment objective.
20
=============================================
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
Risk Considerations
================================================================================
FOREIGN INVESTING
Foreign investing includes risks such as fluctuations in foreign exchange rates,
political or economic instability, and the possible imposition of exchange
controls or other laws or restrictions. Foreign securities prices may vary more
widely than those of U.S. securities because of economic, financial, political
or social factors.
Hedging
The Funds may employ forward foreign exchange contracts and futures in an
attempt to hedge against adverse fluctuations in rates of foreign exchange,
general market movements or for other purposes. Hedging cannot eliminate
fluctuations in the prices of foreign securities, and there is no assurance that
such hedging attempts will be successful.
Information
There is likely to be less available information about foreign securities than
is available about U.S. companies. Foreign companies may not be subject to the
same accounting standards as U.S. companies. Foreign issuers may be subject to
less stringent government supervision or regulation of financial markets and
business practices than U.S. issuers.
Liquidity
Non-U.S. securities may trade on small exchanges, less well regulated than U.S.
exchanges, and may be less liquid and more volatile than U.S. securities.
Commissions and fees
Brokerage fees and commissions are generally higher abroad than in the U.S.
Emerging markets
Countries in emerging markets may have relatively unstable governments,
economies based on only a few industries, and securities markets that trade a
small number of issues.
Geographic considerations
The investments of Funds that concentrate on designated geographic areas may be
affected by regional events. For example, Western European investments may be
affected by the Euro currency conversion (see "The Euro" sidebar on pg. 17).
Investments in Eastern Europe may be more volatile than those in Western Europe.
Certain Pacific Basin countries are under-developed. Japan and other countries
in Asia are currently in a recession.
BONDS
Bonds are subject to interest rate risk. When interest rates rise, the value of
existing bonds falls, and vice versa. The Funds may also invest in bonds of
distressed companies, or otherwise in unrated or low-rated bonds. These bonds,
sometimes called "junk bonds," carry a higher than normal risk of loss of
interest or principal.
STOCKS
Stock prices can change rapidly in response to developments affecting the issues
as well as in response to broader market developments.
SMALLER COMPANIES
Investing in smaller companies generally involves greater risk and potentially
greater reward. Small companies are often new and less well established. They
may have limited products lines, markets or financial resources, and they may
depend on one or a few key persons for management.
OPTIONS, FUTURES, AND OTHER DERIVATIVES
These instruments involve substantial risk, because a relatively small change in
the security or index underlying a derivative can produce a disproportionately
large profit or loss. A Fund may gain or lose more than its initial investment.
If a Fund has a derivative investment which begins to deteriorate, there may be
no way to sell it and avoid further losses, because no buyer may be available.
In addition, the securities underlying some derivatives may be illiquid. A Fund
may be forced to hold a position until exercise or expiration, which could
result in losses. Hedging, by its nature, involves predicting the probable
direction of price movements; if a Fund predicts incorrectly, it could lose
money--more than if it had not hedged at all.
The Funds may enter into foreign currency forward contracts, repurchase
agreements, ARINs, and certain other types of futures, options and derivatives
with banks, brokerage firms and other investors in over-the-counter markets, not
through any exchange. A Fund may experience losses or delays if a counterparty
to any such contract defaults or goes into bankruptcy.
Please see the SAI for a further discussion of investment risk.
21
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GAM FUNDS INC PROSPECTUS / INVESTMENT OBJECTIVES
<PAGE>
Management of the Funds
================================================================================
INVESTMENT ADVISERS
GAM International Management Limited ("GAM"), a corporation organized in 1984
under the laws of the United Kingdom, 12 St. James Place, London SW1A 1NX
England, serves as Investment Adviser for each Fund. GAM manages the assets of
all of the funds except GAM North America Fund.
Fayez Sarofim & Co. ("Sarofim"), a Texas corporation organized in 1958, Two
Houston Center, Houston, TX 77010, serves as Co-Investment Adviser for GAM North
America Fund and manages its assets.
As compensation for its services, each Fund, except GAM North America Fund, pays
GAM the equivalent of 1.0% per annum of the Fund's average daily net assets. GAM
North America Fund pays a fee equal to 0.5% of its average daily net assets to
GAM and 0.5% of its average daily net assets to Sarofim.
The Funds' expense ratios may be higher than those of most registered investment
companies. This reflects the higher costs of foreign investing. The advisory fee
paid by each Fund is higher than that of most registered investment companies.
The Funds pay for all expenses of their operations.
INDIVIDUALS PRIMARILY RESPONSIBLE FOR DAY-TO-DAY MANAGEMENT OF THE FUNDS:
GAM GLOBAL AND GAM INTERNATIONAL FUNDS
John R. Horseman Investment Director, joined GAM as a member of the Asian team
based in Hong Kong. He started as manager of GAM International and GAM Global
Funds on April 20, 1990, in London. He is now responsible for a number of GAM's
other global and international funds, including GAM Universal US$ Inc.
GAM PACIFIC BASIN FUND
Michael S. Bunker Investment Director, has overall responsibility for Asian
investment policy. Mr. Bunker has more than 20 years' investment experience,
primarily in Asian markets. He started managing GAM Pacific Basin Fund on May 6,
1987, and also manages the offshore fund, GAM Pacific Inc. Mr. Bunker is based
in London.
GAM JAPAN CAPITAL FUND
Paul S. Kirkby Investment Director, is responsible for investments in the
Japanese market. He joined GAM in 1985 as a Senior Fund Manager in Hong Kong;
before that, he was an analyst with New Japan Securities Co. Ltd., Tokyo. Mr.
Kirkby started managing GAM Japan Capital Fund on July 1, 1994, and also manages
the offshore fund GAM Japan Inc. Mr. Kirkby is based in London.
GAM EUROPE FUND
John Bennett Investment Director, is responsible for European markets. He joined
GAM in 1993; before that, he was Senior Fund Manager, Ivory & Sime, responsible
for Continental European equity portfolios. Mr. Bennett started managing GAM
Europe Fund on January 1, 1993, and also manages the offshore fund GAM Pan
European Inc. Mr. Bennett is based in London.
GAM NORTH AMERICA FUND
Fayez Sarofim Founder (1958), President and Chairman of the Board and managing
shareholder of Fayez Sarofim & Co., which serves as co-investment adviser of GAM
North America. He started managing GAM North America Fund on June 29, 1990, and
also manages the offshore fund GAM US Inc. Fayez Sarofim & Co. currently manages
aggregate assets of approximately $52 billion under the supervision of Mr.
Sarofim.
GAMERICA CAPITAL FUND
Gordon Grender Director, has been associated with GAM since 1983. He has managed
North American stock funds since 1974. Mr. Grender started managing GAMerica
Capital Fund on May 12, 1995, and also manages GAMerica Inc., an offshore fund
with similar investment objectives. Mr. Grender is based in London.
22
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FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
DISTRIBUTOR
GAM Services Inc., 135 East 57th Street, New York, NY 10022, an affiliate of
GAM, serves as distributor and principal underwriter of the Funds' shares.
Each Fund has adopted a Distribution Plan (the "Plans") under Rule 12b-1 to pay
for distribution and sale of its shares. Under the Plans, 12b-1 fees vary
according to class of shares. Please see "Sales Charge Schedules" on page 27 for
details. Since these fees are paid out of the Funds' assets on an on-going
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges.
GAM Services compensates financial services firms which sell shares and firms
which provide services to shareholders pursuant to agreements with GAM Services.
Compensation payments originate from sales charges paid by shareholders at the
time of purchase, from 12b-1 fees paid out of Fund assets, and from service fees
paid pursuant to the Plans.
In the event Class shares are not assigned to a financial services firm, GAM
Services will retain the entire fee. Should the fees collected under the Plans
exceed the expenses of GAM Services in any year, GAM Services would realize a
profit.
GAM Services, or the Funds, may also contract with banks, trust companies,
broker-dealers, or other financial organizations to act as shareholder servicing
agents to provide administrative services for the funds such as:
o Processing purchase and redemption transactions.
o Transmitting and receiving monies for the purchase and sale of shares
in the Funds.
o Answering routine inquires about the Funds.
o Furnishing monthly and year-end statements and confirmations of
purchases and sales of shares.
o Transmitting periodic reports, updated prospectuses, proxy statements
and other shareholder communications.
For these services, each Fund pays fees which may vary depending on the services
provided. Fees will not exceed an annual rate of 0.25% of the net daily asset
value of the shares of a Fund under the service contract.
23
==================================================
GAM FUNDS INC PROSPECTUS / MANAGEMENT OF THE FUNDS
<PAGE>
II. Shareholder Information
================================================================================
CHOOSING THE APPROPRIATE SHARE CLASS
When you buy, sell, or exchange shares of a Fund, you do so at the Fund's net
asset value (NAV), plus any applicable sales charge or Contingent Deferred Sales
Charge (CDSC). NAV is determined by dividing the value of a Fund's securities,
cash, and other assets (including accrued interest), minus all liabilities
(including accrued expenses), by the number of the Fund's shares outstanding.
The Funds (except GAM Japan Capital Fund) calculate their NAVs at the close of
regular trading each day (normally 4:00 p.m. Eastern Time) the New York Stock
Exchange is open. GAM Japan Capital's NAV is calculated at the close of trading
on the Tokyo Stock Exchange.
Fund shares are offered on a continuous basis. When you issue an order to buy,
sell, or exchange shares by 4:00 p.m. Eastern Time on a regular trading day,
your order will be processed at that day's NAV plus any applicable sales
charges.
The Funds invest in securities traded on foreign exchanges. Many of these
securities may be traded on days when the New York or Tokyo exchanges are not
open, or not traded on days when the New York or Tokyo exchanges are open. The
Funds will normally value securities traded on foreign exchanges at the last
quoted sale price available before the close of the New York Stock Exchange, or,
in the case of GAM Japan Capital Fund, before the close of the Tokyo Stock
Exchange.
The Company offers A, B, C, and D class shares. Each class involves different
sales charges, features and expenses.
24
=============================================
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
A, B, C, and D Share Comparison
<TABLE>
<CAPTION>
====================================================================================================================================
Class A Class B Class C Class D
<S> <C> <C> <C> <C>
Terms Offered at NAV plus Offered at NAV with Offered at NAV with Offered at NAV plus
a front-end sales no front-end sales no front-end sales a front-end sales
charge charge, but with a charge, but with a charge which is
Contingent Deferred Contingent Deferred lower than the sales
Sales Charge (CDSC) Sales Charge (CDSC) charge on A Shares
when shares are sold of 1.00% if shares
are sold within one
year after purchase
====================================================================================================================================
Availability All Funds All Funds All Funds GAM International,
GAM Global, and
GAM Pacific Basin Funds
====================================================================================================================================
Ongoing Lower than Class B, Higher than A or D Higher than A or D Higher than A
expenses C, or D Shares, but lower
than B or C
====================================================================================================================================
Appropriate o Who prefer a single o Who want to invest o Who want to invest o Who want a lower
for investors: front-end sales all money all money front-end sales
charge. immediately, with no immediately, with no charge
front-end charge front-end charge
o With a longer o Who may have a
investment horizon o With a shorter o With a shorter shorter investment
investment horizon. investment horizon horizon
o Who qualify for
reduced sales o Who may benefit from
charges on larger a lower CDSC if
investments shares are sold
within one year
====================================================================================================================================
Maximum Unlimited $300,000 $1,000,000 Unlimited, though
investment purchases for more
than $1,000,000
should be for Class
A Shares
</TABLE>
25
==================================================
GAM FUNDS INC PROSPECTUS / SHAREHOLDER INFORMATION
<PAGE>
II. Shareholder Information continued
================================================================================
INFORMATION ABOUT THE REDUCTION OR WAIVER OF FRONT-END SALES CHARGES:
Front-end sales charges may be reduced by:
o Rights of Accumulation. This means that you may add the value of any shares
you already own of the same class to the amount of your next investment in
that class for purposes of calculating the sales charge.
o Statement of Intention. This means you can declare your intention to
purchase shares of the same class over a 13-month period and receive the
same sales charge as if you had bought all the shares at once.
o Combination Privilege. This means you may combine shares of more than one
GAM Fund of the same class for purposes of calculating the sales charge.
Also, you may combine shares purchased in your own account with shares of
the same class purchased for your spouse or children under the age of 21.
Please refer to the Purchase Application or consult with your financial services
firm to take advantage of these purchase options.
Front-end sales charges may be waived...
o For GAM employees or others connected in designated ways to the firm, to
its affiliates, or to its registered representatives. Please see the SAI
for details.
o For large orders and purchases by eligible plans. Please see the SAI for
details, including a description of the commissions GAM may advance to
dealers for these purchases.
INFORMATION ABOUT CONTINGENT DEFERRED SALES CHARGE (CDSCS)
Class A Shares are subject to a front-end sales load at the time of purchase.
However, for certain purchases, the initial sales load may be waived. Those
purchases may be subject to a contingent deferred sales charge of 1% on shares
sold within 18 months of purchase if GAM has paid a commission (not waived by
the dealer) on the original purchase of shares.
Class B Shares are subject to a CDSC on any sale of shares which drops the
aggregate value of your Class B Share account below the aggregate amount you
have invested during the six years preceding your redemption. Class B shares may
be converted into Class A shares after eight years.
Class C Shares are subject to a CDSC on any sale of shares which drops the
aggregate value of your Class C Share account below the aggregate amount you
have invested during the one year preceding your redemption.
CDSCs will be waived...
o When you sell off the profit from shares that have increased in value over
certain periods (18 months for Class A, 6 years for Class B, 1 year for
Class C).
o When you sell shares you have bought by reinvesting dividends or
distributions, or that you have bought by exchanging shares of other GAM
Funds.
Note: When the Funds determine whether or not you owe a CDSC at the time you
sell shares, the Funds assume that the amounts described in the two points above
are sold first.
26
=============================================
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
Sales Charge Schedules
================================================================================
Front-end Sales Charges on A and D Shares
Class A Sales Charges
<TABLE>
<CAPTION>
====================================================================================================================================
Sales load Sales Load Amount Reallowed
(as % of (as % of Net to Dealers (as %
Purchase amount Offering Price) Amount Invested) of Offering Price)
<S> <C> <C> <C>
up to $100,000 5.00% 5.26% 4.00%
$100,000-$299,999 4.00% 4.71% 3.00%
$300,000-$599,999 3.00% 3.09% 2.00%
$600,000-$999,999 2.00% 2.04% 1.00%
$1,000,000# and over 0.00% See larger order purchase below*
Class A shares pay a 0.30% 12b-1 fee (of which 0.25% is reallowed to dealers).
* Purchases of $1 million or more should be for Class A shares. Please consult
your financial services firm.
<CAPTION>
Class D# Sales Charges
====================================================================================================================================
Sales load Sales Load Amount Reallowed
(as % of (as % of Net to Dealers (as %
Purchase amount Offering Price) Amount Invested) of Offering Price)
<S> <C> <C> <C>
up to $100,000 3.50% 3.63% 2.50%
$100,000-$299,999 2.50% 2.56% 1.50%
$300,000-$599,999 2.00% 2.04% 1.00%
$600,000-$999,999 1.50% 1.52% 1.00%
$1,000,000# and over* 0.00%
</TABLE>
Class D shares pay a 0.50% 12b-1 fee (all of which is reallowed to dealers).
*Purchases of $1 million or more should be for Class A shares. Please consult
your financial services firm.
Contingent Deferred Sales Charges (CDSCs) on Class B and C Shares
Class B Shares
<TABLE>
<CAPTION>
====================================================================================================================================
The year you sell shares 1st 2nd 3rd 4th 5th 6th 7th & after
<S> <C> <C> <C> <C> <C> <C> <C>
B Shares 5% 4% 3% 3% 2% 1% 0%
</TABLE>
Dealer commission: 4%
Class B shares pay a 1% 12b-1/service fee (of which 0.25% is reallowed to
dealers beginning in year 2).
Class C Shares
================================================================================
The year you sell shares 1st 2nd & after
C Shares 1% 0%
Dealer commission: 1% (Investment must be held at least 12 months.)
Class C shares pay a 1% 12b-1/service fee (all of which is reallowed to dealers
beginning in year 2).
27
==================================================
GAM FUNDS INC PROSPECTUS / SHAREHOLDER INFORMATION
<PAGE>
II. Shareholder Information continued
================================================================================
CDSC WAIVERS (continued from pg. 26)
o For shares sold from the registered accounts of persons who have died or
become disabled.
o For redemptions in connection with tax-qualified retirement plan
distributions, including lump-sum or required distributions or tax-free
return of excess contributions to an IRA.
o For sales of shares from Qualified Retirement Plans that offer funds
managed by GAM. This waiver applies under two conditions: a) the plan must
continue to offer Funds managed by GAMafter the redemption; or b) the Plan
is being fully "cashed out," with all assets distributed to its
participants.
o For share sales under the Systematic Withdrawal Plan. No more than 10% per
year of the account balance may be sold by Systematic Withdrawal, and the
account must maintain a minimum $10,000 balance.
o For exchanges between same share classes of other GAM Funds.
For detailed rules applicable to CDSC waivers, please read the SAI.
HOW TO BUY SHARES
You may buy shares through your financial services firm, or you may buy shares
directly by mail from the Transfer Agent, Boston Financial Data Services.
To buy shares directly by mail, complete the appropriate parts of the Purchase
Application (included with this Prospectus). Make your check out in the
appropriate amount to the order of "GAM Funds, Inc." Send the application and
check (U.S. dollars) to:
GAM Funds, Inc.
c/o Boston Financial Data Services
P.O. Box 9137
Boston, Massachusetts 02205
You may pay for shares by wire transfer after you have mailed in your Purchase
Application. See the wire instructions on the Purchase Application.
Minimum investment amounts
Initial investment $ 5,000
Subsequent investment 100
Initial IRA account investment 2,000
Subsequent IRA account investment 100
At their discretion, the Funds may waive minimum investment requirements for
custodial accounts, employee benefit plans or accounts opened under provisions
of the Uniform Gifts to Minors Act (UGMA).
Each Fund reserves the right to refuse any order for the purchase of shares.
Shareholders will be notified of any such action as required by law.
28
=============================================
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
HOW TO SELL SHARES
You may sell shares on any day the New York Stock Exchange is open, either
through your financial services firm or directly, through the Transfer Agent,
Boston Financial Data Services. Financial services firms must receive your sell
order before 4:00 p.m. Eastern Time, and are responsible for furnishing all
necessary documentation to the Transfer Agent.
TO SELL SHARES BY MAIL VIA THE TRANSFER AGENT
o Send a written request, indicating the Fund name, class of shares, number
of shares or dollar amount to be sold, and signed by the person(s) whose
name(s) appear on the account records, to:
GAM Funds, Inc.
c/o Boston Financial Data Services
P.O. Box 9137
Boston, Massachusetts 02205
o You will need a signature guarantee (a) if you sell shares worth $50,000 or
more; (b) if you want the money from your sale to be paid to someone other
than the registered accountholder (usually, this means to someone other
than yourself) or (c) if you want the money mailed to an address other than
the address of record (usually some other address than your own). You can
get a signature guarantee from most banks, from a member firm of a national
stock exchange, or from another guarantor institution. A notary public is
not acceptable.
o If you hold share certificates for the shares you want to sell, you must
send them along with your sell order. Please call the Transfer Agent at
800-426-4685 before you send share certificates.
o If you sell shares as a corporation, agent, fiduciary, surviving joint
owner, or individual retirement accountholder, you will need extra
documentation. Contact the Transfer Agent to make sure you include all
required documents with your order.
TO SELL SHARES BY PHONE OR FAX VIA THE TRANSFER AGENT
To sell shares by telephone or fax order, you must have first selected the
telephone redemption privilege, either on your initial Purchase Application, or
later, before placing your sell order.
INVOLUNTARY REDEMPTIONS
Your account may be closed by a Fund if, because of withdrawals, its value falls
below $1,000. These rules apply:
o You will be asked by the Fund to buy more shares within 30 days to raise
your account value above $1,000. If you do not do this, the Fund may redeem
our account and send you the proceeds. You will not owe any CDSC on the
proceeds of an involuntarily redeemed account.
o If you draw your account below $1,000 via the Systematic Withdrawal Plan
(see "Account Services," below), your account will not be subject to
involuntary redemption.
o Involuntary redemption does not apply to retirement accounts or accounts
maintained by administrators in retirement plans.
o No account will be closed if its value drops below $1,000 because of Fund
performance, or because of the payment of sales charges.
REINSTATEMENT PRIVILEGE
If you sell shares of a Fund, you may reinvest some or all of the proceeds
within 60 days without a sales charge. These rules apply:
o You must reinvest in the same account or a new account, in the same class
of shares.
o If you paid a CDSC at the time of sale, you will be credited with the
portion of the CDSC paid from of the reinvested proceeds.
29
==================================================
GAM FUNDS INC PROSPECTUS / SHAREHOLDER INFORMATION
<PAGE>
II. Shareholder Information continued
================================================================================
HOW TO EXCHANGE SHARES
You may exchange shares of any class of any Fund for shares of the same class of
another Fund, including the GAM Money Market Account, generally without paying
any sales charge. This may be done by phone or fax, or by mail.
TO EXCHANGE SHARES BY PHONE OR FAX VIA THE TRANSFER AGENT
Before you try to exchange shares by telephone or fax, make sure you have this
privilege. You must have selected it on your initial Purchase Application. If
you don't have this privilege now, you can still get it by calling the Transfer
Agent at 800-426-4685.
TO EXCHANGE SHARES BY MAIL VIA THE TRANSFER AGENT
o Send a written request, indicating the Fund name, class of shares, number
of shares or dollar amount to be exchanged, and signed by the person(s)
whose name(s) appear on the account records, to:
GAM Funds, Inc.
c/o Boston Financial Data Services
P.O. Box 9137
Boston, Massachusetts 02205
o Send a new Purchase Application, showing the simultaneous purchase of new
Fund shares. You can get a new Purchase Application by calling the Transfer
Agent at 800-426-4685.
EXCHANGES TO OR FROM THE GAM MONEY MARKET ACCOUNT
o Shares of one GAM Fund may be exchanged for shares of the same class of
another GAMFund or for shares of the Reserve Funds-Primary Fund (the "GAM
Money Market Account").
o The GAM Money Market Account does not offer D shares. You may exchange a
Fund's Class D shares for Class A shares of the GAM Money Market Account.
o Fund shares subject to a CDSC (i.e., Class B and Class C Shares) will be
subject to the same CDSC after exchanging them for shares of the GAM Money
Market Account. They will "age" from the original Fund purchase date.
Limits on exchanges
The exchange vehicle is not intended for short-term trading. Excessive exchange
activity may interfere with portfolio management and have an adverse effect on
shareholders. Each Fund reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges, or reject any exchange.
Shareholders will be notified of any such action to as required by law.
30
=============================================
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
ACCOUNT SERVICES
You may select the following account services on your Purchase Application, or
at any time thereafter, in writing.
o Dividend reinvestment Automatic, unless you direct that your dividends be
mailed to you.
o Systematic withdrawal plan You may order a specific dollar amount sale of
shares at regular intervals (monthly or quarterly). $10,000 account
minimum.
o Automatic investment plan You may order a specific dollar amount purchase
of shares at regular intervals (monthly or quarterly), with payments made
electronically from an account you designate at a financial services
institution. $100 minimum per automatic investment.
Telephone and facsimile privileges. Telephone requests may be recorded. The
Transfer Agent has procedures in place to verify caller identity. Proceeds from
telephone or facsimile sales will be mailed only to your registered account
address or transferred by wire to an account you designate when you establish
this privilege. As long as the Fund and the Transfer Agent follow instructions
communicated by telephone that were reasonably believed to be genuine at the
time of their receipt, neither they nor any of their affiliates will be liable
for any loss to the accountholder caused by an unauthorized transaction.
Please contact you financial representative for further help with your account,
or contact the Transfer Agent:
Boston Financial Data Services
Two Heritage Drive
Quincy, MA 02171
(800) 426-4685
(617) 328-5000
Fax: (617) 483-2405
DIVIDENDS AND TAX MATTERS
So long as each Fund meets the requirements of a tax-qualified registered
investment company, it pays no federal income tax on the earnings it distributes
to shareholders. Each Fund intends to pay a semi-annual dividend representing
its entire net investment income and to distribute all its realized net capital
gains. In so doing, the Fund will avoid the imposition of any excise taxes.
Dividends, whether reinvested or taken as cash, are generally taxable. Dividends
from capital gains are taxable at the rate applicable to the length of time the
investments have been held. Dividends from other sources are generally taxable
as ordinary income.
After a Fund makes its semi-annual distribution, the value of each outstanding
share will decrease by the amount of the distribution. If you buy shares
immediately before the record date of the distribution, you will pay the full
price for the shares, then receive some portion of the price back as a taxable
dividend or capital gain distribution.
Form 1099 DIV and Tax Notice, mailed to you every January, details your
distributions and their federal tax category.
Normally, any sale or exchange of shares is a taxable event. Depending on your
purchase price and sale price, you may have a gain or loss on the transaction.
Please verify your tax liability with your tax professional. Consult the SAI for
certain other tax consequences to shareholders.
31
==================================================
GAM FUNDS INC PROSPECTUS / SHAREHOLDER INFORMATION
<PAGE>
III. Financial Highlights
================================================================================
GAM GLOBAL FUND
Net asset value,
beginning of period
Net asset value,
end of period (000 eliminated)
Total return for the period
(without deduction of sales load)
Income from investment operations
Net investment income
Net realized and unrealized gain/(loss)
on investments
Total from investment operations
LESS DISTRIBUTIONS
Dividends from net investment income
Distributions from net realized gains
Total distributions
RATIOS TO AVERAGE NET ASSETS
Expenses
Net investment income
Portfolio turnover rate Average commission rate paid
Bank Loans
Amount outstanding
at end of period (000 omitted)
Average amount of bank loans outstanding
during the period (000 omitted)
Average number of shares outstanding
during the period (000 omitted)
Average amount of debt per share
during the period (000 omitted)
[Footnotes]
Class A Shares
- --------------------------------------------------------
98 97 96 95 94
- -------------------------------------------------------
Note:
Line 1 is the same as last year's Financial Highlights.
Lines 2+3 have been reordered.
- -------------------------------------------------------
32
================================================
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
Class B Shares Class C Shares Class D Shares
- -------------- -------------- ----------------------------------
98 98 98 97 96 95 94
33
===============================================
GAM FUNDS INC PROSPECTUS / FINANCIAL HIGHLIGHTS
<PAGE>
III. Financial Highlights continued
================================================================================
GAM INTERNATIONAL FUND
Net asset value,
beginning of period
Net asset value,
end of period (000 eliminated)
Total return for the period
(without deduction of sales load)
INCOME FROM INVESTMENT OPERATIONS
Net investment income
Net realized and unrealized gain/(loss)
on investments
Total from investment operations
LESS DISTRIBUTIONS
Dividends from net investment income
Distributions from net realized gains
Total distributions
RATIOS TO AVERAGE NET ASSETS
Expenses
Net investment income
Portfolio turnover rate
Average commission rate paid
BANK LOANS
Amount outstanding
at end of period (000 omitted)
Average amount of bank loans outstanding
during the period (000 omitted)
Average number of shares outstanding
during the period (000 omitted)
Average amount of debt per share
during the period (000 omitted)
[Footnotes]
Class A Shares
- ------------------------------------------------
98 97 96 95 94
34
=============================================
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
Class B Shares Class C Shares Class D Shares
98 98 98 97 96 95 94
35
===============================================
GAM FUNDS INC PROSPECTUS / FINANCIAL HIGHLIGHTS
<PAGE>
III. Financial Highlights continued
================================================================================
GAM PACIFIC BASIN FUND
Net asset value,
beginning of period
Net asset value,
end of period (000 eliminated)
Total return for the period
(without deduction of sales load)
INCOME FROM INVESTMENT OPERATIONS
Net investment income
Net realized and unrealized gain/(loss)
on investments
Total from investment operations
LESS DISTRIBUTIONS
Dividends from net investment income
Distributions from net realized gains
Total distributions
RATIOS TO AVERAGE NET ASSETS
Expenses
Net investment income
Portfolio turnover rate
Average commission rate paid
BANK LOANS
Amount outstanding
at end of period (000 omitted)
Average amount of bank loans outstanding
during the period (000 omitted)
Average number of shares outstanding
during the period (000 omitted)
Average amount of debt per share
during the period (000 omitted)
[Footnotes]
Class A Shares
- ------------------------------------------------
98 97 96 95 94
36
=============================================
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
Class B Shares Class C Shares Class D Shares
- -------------- -------------- --------------
98 98 98 97 96 95 94
37
===============================================
GAM FUNDS INC PROSPECTUS / FINANCIAL HIGHLIGHTS
<PAGE>
III. Financial Highlights continued
================================================================================
GAM JAPAN CAPITAL FUND
Net asset value,
beginning of period
Net asset value,
end of period (000 eliminated)
Total return for the period
(without deduction of sales load)
INCOME FROM INVESTMENT OPERATIONS
Net investment income
Net realized and unrealized gain/(loss)
on investments
Total from investment operations
LESS DISTRIBUTIONS
Dividends from net investment income
Distributions from net realized gains
Total distributions
RATIOS TO AVERAGE NET ASSETS
Expenses
Net investment income
Portfolio turnover rate
Average commission rate paid
BANK LOANS
Amount outstanding
at end of period (000 omitted)
Average amount of bank loans outstanding
during the period (000 omitted)
Average number of shares outstanding
during the period (000 omitted)
Average amount of debt per share
during the period (000 omitted)
[Footnotes]
Class A Shares
Class B Shares Class C Shares
- ---------------------------------- -------------- --------------
98 97 96 95 94 98 98
38
=============================================
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
GAM EUROPE FUND
Net asset value,
beginning of period
Net asset value,
end of period (000 eliminated)
Total return for the period
(without deduction of sales load)
INCOME FROM INVESTMENT OPERATIONS
Net investment income
Net realized and unrealized gain/(loss)
on investments
Total from investment operations
LESS DISTRIBUTIONS
Dividends from net investment income
Distributions from net realized gains
Total distributions
RATIOS TO AVERAGE NET ASSETS
Expenses Net investment income Portfolio turnover
rate Average commission rate paid
BANK LOANS
Amount outstanding
at end of period (000 omitted)
Average amount of bank loans outstanding
during the period (000 omitted)
Average number of shares outstanding
during the period (000 omitted)
Average amount of debt per share
during the period (000 omitted)
[Footnotes]
Class A Shares Class B Shares Class C Shares
- ---------------------------------- -------------- --------------
98 97 96 95 94 98 98
39
===============================================
GAM FUNDS INC PROSPECTUS / FINANCIAL HIGHLIGHTS
<PAGE>
III. Financial Highlights continued
================================================================================
GAM NORTH AMERICA FUND
Net asset value,
beginning of period
Net asset value,
end of period (000 eliminated)
Total return for the period
(without deduction of sales load)
INCOME FROM INVESTMENT OPERATIONS
Net investment income
Net realized and unrealized gain/(loss)
on investments
Total from investment operations
LESS DISTRIBUTIONS
Dividends from net investment income Distributions from net
realized gains Total distributions
RATIOS TO AVERAGE NET ASSETS
Expenses Net investment income Portfolio turnover
rate Average commission rate paid
BANK LOANS
Amount outstanding
at end of period (000 omitted)
Average amount of bank loans outstanding
during the period (000 omitted)
Average number of shares outstanding
during the period (000 omitted)
Average amount of debt per share
during the period (000 omitted)
[Footnotes]
Class A Shares Class B Shares Class C Shares
- -------------------------- -------------- --------------
98 97 96 95 94 98 98
40
=============================================
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
GAMERICA FUND
Net asset value,
beginning of period
Net asset value,
end of period (000 eliminated)
Total return for the period
(without deduction of sales load)
INCOME FROM INVESTMENT OPERATIONS
Net investment income
Net realized and unrealized gain/(loss)
on investments
Total from investment operations
LESS DISTRIBUTIONS
Dividends from net investment income
Distributions from net realized gains
Total distributions
RATIOS TO AVERAGE NET ASSETS
Expenses
Net investment income
Portfolio turnover rate
Average commission rate paid
BANK LOANS
Amount outstanding
at end of period (000 omitted)
Average amount of bank loans outstanding
during the period (000 omitted)
Average number of shares outstanding
during the period (000 omitted)
Average amount of debt per share
during the period (000 omitted)
[Footnotes]
Class A Shares Class B Shares Class C Shares
- -------------------------- -------------- --------------
98 97 96 95 94 98 98
41
===============================================
GAM FUNDS INC PROSPECTUS / FINANCIAL HIGHLIGHTS
<PAGE>
GAM FUNDS, INC. - PURCHASE APPLICATION
Mail to: GAM Funds, Inc., c/o Boston Financial Data Services, P.O. Box 9137,
Boston, MA 02205 (66 Brooks Drive, Brairkee, MA 02184-3839 for express mail
services) with your check or money order payable to "GAM Funds, Inc." To make
payment by wire, please notify Boston Financial Data Services at (800) 356-5740
or (617) -------- of the incoming wire and to receive a wire reference number.
Instruct your bank to wire the funds with the assigned reference number to:
State Street Bank and Trust Company, ABA # 011000028 for account of GAM [ ] Fund
Subscription DDA #9905-414-0
================================================================================
ACCOUNT REGISTRATION
================================================================================
o JOINT TENANT REGISTRATION will be as "joint tenants with the right of
survivorship" and not as "tenants in common" unless specified, and both
registrants should sign this application.
o TRUST REGISTRATIONS should specify the name of the trust, trustee(s),
beneficiary(ies), date of trust instrument, and the trustee, or other
fiduciary, should sign this application.
o UNIFORM GIFTS/TRANSFERS TO MINORS REGISTRATION should be in the name of one
custodian and one minor and include the state under which the custodianship
is created (using the minor's Social Security Number and the custodian
should sign this application.)
o INSTITUTIONAL REGISTRATIONS should be in the name of the institution, and an
officer should sign, indicating corporate or partnership office or title,
this application.
o For an INDIVIDUAL RETIREMENT ACCOUNT (IRA), a different application is
required. Please call (800) 426-4685 ext. 1 or your investment
representative to obtain an IRA application.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Registration Type: (Choose One) o Individual o Gift/Transfer to Minor o Other--------------
o Joint Tenants o Trust
Investor(s) Information Owner Joint Owner
Name ---------------------------------------------- ----------------------------------------
Address ---------------------------------------------- ----------------------------------------
---------------------------------------------- ----------------------------------------
City/State/Zip ---------------------------------------------- ----------------------------------------
Taxpayer ID/Social
Security Number ---------------------------------------------- ----------------------------------------
Date of Birth ---------------------------------------------- ----------------------------------------
Daytime Phone (---)----------------------------------------- ----------------------------------------
</TABLE>
================================================================================
INVESTMENT SELECTION
================================================================================
The minimum initial investment is $5,000 per fund and subsequent investments are
$100 per fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Class Class Class Class Investment Class Class Class
Amount A B C D Amount A B C
GAM International Fund: $____________ / / / / / / / / GAM North America Fund: $____________ / / / / / /
GAM Global Fund: $____________ / / / / / / / / GAMerica Capital Fund: $____________ / / / / / /
GAM Pacific Basin Fund: $____________ / / / / / / / / GAM Europe Fund: $____________ / / / / / /
GAM Japan Capital Fund: $____________ / / / / / /
GAM Money Market Account: $____________ / / / / / /
</TABLE>
CAPITAL GAIN AND DIVIDEND DISTRIBUTIONS
All dividends and capital gains distributions will be reinvested in additional
shares of the same class of the same Fund unless the appropriate boxes below are
checked:
/ / Pay dividends in cash / / Pay capital gains distributions in cash
================================================================================
INVESTMENT ADVISOR/BROKER (IF APPLICABLE)
================================================================================
Representative's Name --------------------------- Branch Address-------------
Representative's Number ------------------------- ---------------------------
Representative's Phone Number (---)-------------- ---------------------------
Firm Name --------------------------------------- Branch Number--------------
================================================================================
ADDITIONAL FEATURES AVAILABLE
================================================================================
<PAGE>
TELEPHONE PRIVILEGES
By checking any box, you authorize the Funds or their agents to honor telephone
or facsimile requests from you after you have reasonably identified yourself.
/ / Telephone Exchange -- Exchange shares of any Fund for shares of any
other Fund in the same class.
/ / Telephone Redemption -- Redemption of shares by telephone.
WIRE TRANSFER
Please complete wiring instructions below if you wish to be able to instruct the
Funds to wire redemption proceeds. A nominal fee will be deducted from the
redemption proceeds.
Bank Name -------------------------- ABA #*--------------------------
Name on Account---------------------- Account #-----------------------
Bank Address------------------------- --------------------------------
* The ABA # is the nine-digit number that precedes your account number along
the bottom of your check.
** Savings and loan associations or credit unions may not be able to receive
wire redemptions.
AUTOMATIC INVESTMENT PLAN (OPTIONAL)
By completing the section below you authorize the Fund's Agent to initiate
Automated Clearing House ("ACH") debits on the 25th day of each month or the
next business day. Please attach a voided check.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund Investment Amount Monthly or Quarterly
- ------------------------------------- $----------------------------------- / / / /
- ------------------------------------- $----------------------------------- / / / /
Bank Name ------------------------------------------------------- ABA #*--------------------------------
Name on Account ------------------------------------------------------- Account # ----------------------------
Bank Address (City, State Only) -------------------------------------------------------------------------------------------
</TABLE>
* The ABA # is the nine-digit number that precedes your account number along
the bottom of your check.
OVER, PLEASE
<PAGE>
CONTINUED
SYSTEMATIC WITHDRAWAL PLAN* (OPTIONAL)
By completing the section below you authorize the Fund's Agent to redeem the
necessary number of shares from your account in order to make periodic payments.
The minimum is $100 per Fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Choose One
Fund Withdrawal Amount Monthly Quarterly Semi-annually Annually
- ----------------------------- $------------------------------ / / / / / / / /
- ----------------------------- $------------------------------ / / / / / / / /
</TABLE>
/ / Credit to bank account as designated under Wire Transfer or
/ / Send check to name and address of account registration
* This request for Systematic Withdrawal Plan must be received by the 18th day
of the month in which you wish withdrawals to begin. Redemption of shares
will occur on the 25th day of the month prior to payment or the next
business day.
STATEMENT OF INTENTION (OPTIONAL)
/ / I/we agree to the Statement of Intention and Escrow Agreement set forth
below. Although I/we am/are not obligated to do so, I/we intend to invest
in the Funds over a 13-month period at least:
/ / $100,000 / / $300,000 / / $600,000 / / $1,000,000
RIGHT OF ACCUMULATION (OPTIONAL)
/ / I/we qualify for the Right of Accumulation described in the Prospectus.
(Please identify in whose name shares are registered, in which Fund(s), the
shareholder's account number, and the shareholder's relationship to you):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET ASSET VALUE ELIGIBILITY
/ / Check here if eligible for waiver of sales load. (Reason must be stated or
sales load will be incurred. See page 22)
Specify Reason -----------------------------------------------------------------
AGREEMENT AND SIGNATURE(S)
1. I/we have received, read and carefully reviewed a copy of the Funds'
prospectus.
2. All share purchases are subject to acceptance and are governed by New York
law.
3. I/we authorize you to honor redemption requests by telephone or facsimile, if
so elected above.
4. I/we authorize you to accept telephone or facsimile exchange instructions, if
so elected above.
5. I/we authorize you to wire proceeds of redemptions, if so elected above.
6. I/we hereby agree that neither the Company nor Boston Financial Data Services
will be liable for any loss, liability or expense as a result of any action
taken upon instructions believed by it to be genuine and which were in
accordance with the procedures set forth in the prospectus.
- --------------------------------------------------------------------------------
______ U.S. CITIZEN/TAXPAYER: UNDER PENALTY OF PERJURY, I/WE CERTIFY THAT (1)
THE NUMBER SHOWN ON THIS FORM IS MY/OUR CORRECT TAXPAYER IDENTIFICATION NUMBER
AND (2) I/WE AM/ARE NOT SUBJECT TO BACKUP WITHHOLDING EITHER BECAUSE I/WE HAVE
NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE THAT I/WE AM/ARE SUBJECT TO
BACKUP WITHHOLDING AS A RESULT OF FAILURE TO REPORT ALL INTEREST AND
DIVIDENDS, OR THE INTERNAL REVENUE SERVICE HAS NOTIFIED ME/US THAT I/WE AM/ARE
NO LONGER SUBJECT TO BACKUP WITHHOLDING. (IF YOU HAVE BEEN NOTIFIED BY THE
INTERNAL REVENUE SERVICE THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING,
STRIKE OUT PHRASE (2) ABOVE.) THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE
YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE PRECEDING
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
______ NON-U.S. CITIZENS/TAXPAYER: INDICATED COUNTRY OF RESIDENCE FOR TAX
PURPOSES______________________________________________________________________
UNDER PENALTIES OF PERJURY, I/WE CERTIFY THAT WE ARE NOT U.S. CITIZENS OR
RESIDENTS AND I/WE ARE EXEMPT FOREIGN PERSONS AS DEFINED BY INTERNAL REVENUE
SERVICE.
- --------------------------------------------------------------------------------
X----------------------------------- X---------------------------------
X----------------------------------- X---------------------------------
SIGNATURE(S) OF ALL APPLICANTS REGISTERED ABOVE - Sign exactly as name(s) of
registered owner(s) appear(s) above (including legal title if signing for
corporation, trust, custodial account, etc.).
Date -------------- 199--
STATEMENT OF INTENTION
If you anticipate investing $100,000 or more in shares of the Funds within a
13-month period, you may obtain a reduced sales load as though the total
quantity were invested in one lump sum by filing a Statement of Intention within
90 days of the start of the purchases. To ensure that the reduced price will be
received on future purchases, you must inform Boston Financial Data Services
that this Statement is in effect each time shares are purchased.
Subject to the conditions mentioned below, each purchase will be made at the
public offering price applicable to a single transaction of the dollar amount
specified on the application, as described in the prospectus. You are not
committed to purchase additional shares, but if your purchases within 13 months
plus the value of shares credited toward completion do not total the sum
specified, you will pay the increased amount of the sales load prescribed in the
Escrow Agreement. Neither dividends nor capital gain distributions invested in
additional shares will apply toward the competition of this Statement. If the
total purchases under this Statement are large enough to qualify for an even
lower sales load than that applicable to the amount specified in the Statement,
then you must notify the Transfer Agent and all transactions will then be
recomputed at the expiration date of this Statement to give effect to the lower
load. Any difference in sales load as a result of these additional purchases
will be applied to the purchase of additional shares at the lower load if
specified by you or refunded to you in cash if you so specify.
This Statement is not effective until accepted by the Company.
ESCROW AGREEMENT
Out of the initial purchase (or subsequent purchases if necessary) 5% of the
dollar amount specified on the application shall be held in escrow by Boston
Financial Data Services in the form of shares registered in your name. All
dividends and capital gain distributions on escrowed shares will be paid to you
or to your order. When the minimum investment so specified is completed, the
escrowed shares will be released. If the investment is not completed, the
Company will redeem an appropriate number of the escrowed shares in order to
realize any difference between the sales load on the amount specified and on the
amount actually attained. Shares remaining after any such redemption will be
released from escrow.
In signing the application, you irrevocably constitute and appoint Boston
Financial Data Services your attorney to surrender for redemption any or all
escrowed shares with full power of substitution in the premises.
<PAGE>
More Information About the Funds
================================================================================
The Funds' Statement of Additional Information (SAI) gives more detailed
information about the Funds, and is incorporated by reference into this
prospectus.
Annual and semi-annual reports published for each of these Funds describe in
detail the Funds' performance and the market conditions and investment
strategies that contributed to that performance.
For copies of SAIs or annual reports free of charge, call the Funds at the
telephone number below, or...
o Go to the Public Reference Room of the Securities and Exchange Commission.
o Call the SEC at (800) SEC-0330, or write to them at the Public Reference
Room, Washington, D.C. 20549-6009, and ask them to send you a copy. There
is a fee for this service.
o Download documents from the SEC's Internet website at http://www.sec.gov
GAM has authorized the use of information in this Prospectus, and only the
information in this prospectus, as an accurate representation of the Funds
offered in this Prospectus. This Prospectus may not be used or regarded as an
offer of the Funds in any jurisdiction where (or to any person for whom) such an
offer would be unlawful.
GAM FUNDS, INC.
135 East 57th Street
New York, NY 10022
Tel: (800) 426-4685 Fax: (212) 407-4684
Internet: http://www.gam.com
================================================
SEC Registration Number: 002-92136
<PAGE>
GLOBAL ASSET MANAGEMENT(R)
GAM FUNDS, INC.
135 EAST 57TH STREET
NEW YORK, NY 10022
TEL: (212) 407-4600/FAX: (212) 407-4684
STATEMENT OF ADDITIONAL INFORMATION
APRIL 30, 1999
This Statement of Additional Information pertains to the funds listed
below, each of which is a separate series of common stock of GAM Funds, Inc.
(the "Company"), a diversified open-end management investment company. Each
series of the Company represents a separate portfolio of securities (each a
"Fund" and collectively the "Funds"). The investment objective of each Fund is
to seek long term capital appreciation through investment primarily in equity
securities. Each Fund seeks to achieve its objective by investing primarily
within a particular geographic region in accordance with its own investment
policy. There is no assurance that the Funds will achieve their objective.
The Funds are managed by GAM International Management Limited ("GAM").
Fayez Sarofim & Co. ("Sarofim") serves as co-investment adviser to the GAM North
America Fund. (GAM and Sarofim are collectively referred to as the "Investment
Advisers".) GAM Services, Inc. ("GAM Services"), an affiliate of GAM, serves as
the principal underwriter for the Funds' securities.
GAM GLOBAL FUND invests primarily in the United States,
Europe, the Pacific Basin, and Canada.
GAM INTERNATIONAL FUND invests primarily in Europe, the
Pacific Basin and Canada.
GAM PACIFIC BASIN FUND invests primarily in the Pacific Basin,
including Japan, Hong Kong, Korea, Taiwan, Singapore,
Malaysia, Thailand, Indonesia and Australia.
GAM JAPAN CAPITAL FUND invests primarily in Japan.
GAM EUROPE FUND invests primarily in Europe.
GAM NORTH AMERICA FUND invests primarily in the United States
and Canada.
GAMERICA CAPITAL FUND invests primarily in the United States.
This Statement of Additional Information, which should be kept for
future reference, is not a prospectus. It should be read in conjunction with the
Prospectus of the Funds, dated April 30, 1999 which can be obtained without cost
upon request at the address indicated above.
The Funds' 1998 Annual Report to Shareholders is incorporated by
reference in this Statement of Additional Information.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
[TO BE RENUMBERED]
INVESTMENT OBJECTIVE AND STRATEGIES............................... 3
Rating of Securities.............................................. 3
United States Government Obligations.............................. 3
Repurchase Agreements............................................. 3
Options........................................................... 4
Stock Index Futures and Options................................... 4
Interest Rate Futures and Options................................. 5
Foreign Currency Transactions..................................... 6
Lending Portfolio Securities...................................... 8
Warrants.......................................................... 8
Borrowing......................................................... 8
Restricted Securities ............................................ 8
Future Developments............................................... 9
Fundamental Investment Restrictions............................... 9
Risk Considerations............................................... 10
Portfolio Turnover ............................................... 11
MANAGEMENT OF THE COMPANY......................................... 12
Compensation of Directors and Executive Officers.................. 13
Principal Holders of Securities................................... 13
INVESTMENT ADVISORY AND OTHER SERVICES............................ 17
Investment Advisers............................................... 17
Investment Advisory Contracts..................................... 18
Advisory Fees..................................................... 19
Principal Underwriter and Plans of Distribution................... 20
Custodian and Administrator....................................... 22
Transfer Agent.................................................... 23
Legal Counsel..................................................... 23
Independent Accountants........................................... 23
Reports to Shareholders........................................... 23
BROKERAGE ALLOCATION.............................................. 23
SHAREHOLDER INFORMATION........................................... [ ]
Sales Charge Reductions and Waivers............................... [ ]
Waivers of Front-End Sales Charges................................ [ ]
Contingent Deferred Sales Charge Waivers.......................... [ ]
Conversion Feature................................................ [ ]
NET ASSET VALUE, DIVIDENDS AND TAXES ............................. 24
Net Asset Value................................................... 24
Suspension of the Determination of Net Asset Value................ 24
Tax Status........................................................ 25
PERFORMANCE INFORMATION........................................... 26
DESCRIPTION OF SHARES............................................. [ ]
FINANCIAL STATEMENTS.............................................. 27
2
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INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The investment objective and strategies of each Fund are described in
the Prospectus under the heading "Investment Objective and Strategies and Risk
Considerations." Set forth below is additional information with respect to the
investment objective and strategies of each Fund.
RATING OF SECURITIES. Each Fund may invest a substantial portion of its
assets in debt securities issued by companies or governments and their agencies
and instrumentalities if it determines that the long-term capital appreciation
of such debt securities may equal or exceed the return on equity securities.
Each Fund is not required to maintain any particular proportion of equity or
debt securities in its portfolio. Any dividend or interest income realized by a
Fund on its investments will be incidental to its goal of long-term capital
appreciation. The debt securities (bonds and notes) in which the Funds may
invest are not required to have any rating. Each Fund may, for temporary
defensive purposes, invest in debt securities (with remaining maturities of five
years or less) issued by companies and governments and their agencies and
instrumentalities and in money market instruments denominated in currency of the
United States or foreign nations.
None of the Funds will commit more than 5% of its assets, determined at
the time of investment, to investments in debt securities which are rated lower
than "investment grade" by a rating service. Debt securities rated lower than
"investment grade," also known as "junk bonds," are those debt securities not
rated in one of the four highest categories by a rating service (e.g., bonds
rated lower than BBB by Standard & Poor's Corporation ("S&P") or lower than Baa
by Moody's Investors Services, Inc. ("Moody's"). Junk bonds, and debt securities
rated in the lowest "investment grade," have speculative characteristics, and
changes in economic circumstances or other circumstances are more likely to lead
to a weakened capacity on the part of issuers of such lower rated debt
securities to make principal and interest payments than issuers of higher rated
investment grade bonds. Developments such as higher interest rates may lead to a
higher incidence of junk bond defaults, and the market in junk bonds may be more
volatile and illiquid than that in investment grade bonds. A decrease in the
ratings of debt securities held by a Fund may cause the Fund to have more than
5% of its assets invested in debt securities which are not "investment grade".
In such a case, the Fund will not be required to sell such securities.
UNITED STATES GOVERNMENT OBLIGATIONS. The Funds may invest in
securities of the United States government, its agencies and instrumentalities.
United States government securities include United States Treasury obligations,
which include United States Treasury bills, United States Treasury notes and
United States Treasury bonds; and obligations issued or guaranteed by United
States government agencies and instrumentalities. Agencies and instrumentalities
include the Federal Land Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home Loan Bank, Student
Loan Marketing Association, Federal National Mortgage Association and Government
National Mortgage Association.
REPURCHASE AGREEMENTS. Each Fund may, for temporary defensive purposes,
invest in repurchase agreements. In such a transaction, at the same time a Fund
purchases a security, it agrees to resell it to the seller and is obligated to
redeliver the security to the seller at a fixed price and time. This establishes
a yield during the Fund's holding period, since the resale price is in excess of
the purchase price and reflects an agreed-upon market rate. Such transactions
afford an opportunity for a Fund to invest temporarily available cash.
Repurchase agreements may be considered loans to the seller collateralized by
the underlying securities. The risk to a Fund is limited to the ability of the
seller to pay the agreed-upon sum on the delivery date; in the event of a
default the repurchase agreement provides that the Fund is entitled to sell the
underlying collateral. If the value of the collateral declines after the
agreement is entered into, however, and if the seller defaults when the value of
the underlying collateral is less than the repurchase price, a Fund could incur
a loss of both principal and interest. The collateral is marked-to-market daily
and the Investment Advisers monitor the value of the collateral in an effort to
determine that the value of the collateral always equals or exceeds the
agreed-upon sum to be paid to a Fund. If the seller were to be subject to a
United States bankruptcy proceeding, the ability of a Fund to liquidate the
collateral could be delayed or impaired because of certain provisions in the
bankruptcy law. Each Fund may only enter into repurchase agreements with
domestic or foreign securities dealers, banks and other financial institutions
deemed to be creditworthy under guidelines approved by the Board of Directors.
3
<PAGE>
OPTIONS. Each Fund may invest up to 5% of its net assets in options on
equity or debt securities or securities indices and up to 10% of its net assets
in warrants, including options and warrants traded in over-the-counter markets.
An option on a security gives the owner the right to acquire ("call option") or
dispose of ("put option") the underlying security at a fixed price (the "strike
price") on or before a specified date in the future. A warrant is equivalent to
a call option written by the issuer of the underlying security.
Each Fund may write covered call options on securities in an amount
equal to not more than 100% of its net assets and secured put options in an
amount equal to not more than 50% of its net assets. A call option written by a
Fund is "covered" if the Fund owns the underlying securities subject to the
option or it the Fund holds a call at the same exercise price, for the same
period and on the same securities as the call written. A put option will be
considered "secured" if a Fund segregates liquid assets having a value equal to
or greater than the exercise price of the option, or if the Fund holds a put at
the same exercise price, for the same period and on the same securities as the
put written.
The principal reason for writing covered call options is to realize,
through the receipt of premiums, a greater return than would be realized on a
Fund's portfolio securities alone. In return for a premium, the writer of a
covered call option forfeits the right to any appreciation in the value of the
underlying security above the strike price for the life of the option (or until
a closing purchase transaction can be effected). Nevertheless, the call writer
retains the risk of a decline in the price of the underlying security.
Similarly, the principal reason for writing secured put options is to realize
income in the form of premiums. The writer of a secured put option accepts the
risk of a decline in the price of the underlying security. A Fund may invest up
to 5% of its net assets in options on securities or indicies including options
traded in over-the-counter markets.
Although each Fund generally will purchase or write only those options
for which it believes there is an active secondary market so as to facilitate
closing transactions, there is no assurance that sufficient trading interest to
create a liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may cease to
exist for a variety of reasons. In such event, it might not be possible to
effect closing transactions in particular options. If, as a covered call option
writer, a Fund is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise.
The success of each Fund's options trading activities will depend on
the ability of the Investment Advisers to predict correctly future changes in
the prices of securities. Purchase or sale of options to hedge each Fund's
existing securities positions is also subject to the risk that the value of the
option purchased or sold may not move in perfect correlation with the price of
the underlying security. The greater leverage in options and futures trading may
also tend to increase the daily fluctuations in the value of a Fund's shares.
STOCK INDEX FUTURES AND OPTIONS. Each Fund may purchase and sell stock
index futures contracts, and purchase, sell and write put and call options on
stock index futures contracts, for the purpose of hedging its portfolio. A stock
index fluctuates with changes in the market value of the stocks included in the
index. An option on a securities index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call option, or less than, in the case of a put option, the strike price of
the option. Some stock index options are based on a broad market index, such as
the NYSE Composite Index, or a narrower market index, such as the Standard &
Poor's 100. In the case of a stock index future, the seller of the futures
contract is obligated to deliver, and the purchaser obligated to take, an amount
of cash equal to a specific dollar amount multiplied by the difference between
the value of a specific stock index at the close of the last trading day of the
contract and the price at which the agreement is made. No physical delivery of
the underlying stocks in the index is made. If the assets of a Fund are
substantially invested in equity securities, the Fund might sell a futures
contract based on a stock index which is expected to reflect changes in prices
of stocks in the Fund's portfolio in order to hedge against a possible general
decline in market prices. A Fund may similarly purchase a stock index futures
contract to hedge against a possible increase in the price of stocks before the
Fund is able to invest cash or cash equivalents in stock in an orderly fashion.
4
<PAGE>
The effectiveness of trading in stock index futures and options as a
hedging technique will depend upon the extent to which price movements in a
Fund's portfolio correlate with price movements of the stock index selected.
Because the value of an index future or option depends upon movements in the
level of the index rather than the price of a particular stock, whether a Fund
will realize a gain or loss from the purchase, sale or writing of a stock index
future or option depends upon movements in the level of stock prices in the
stock market generally, or in the case of certain indexes, in an industry or
market segment, rather than movements in the price of a particular stock.
Successful use of stock index futures by the Funds also is subject to
the ability of the Investment Adviser to predict correctly movements in the
direction of the market. For example, if a Fund has hedged against the
possibility of a decline in the market adversely affecting stocks held in its
portfolio and stock prices increase instead, the Fund will lose part or all of
the benefit of the increased value of its stocks which it has hedged because it
will have offsetting losses in its futures positions.
Each Fund may purchase and sell commodity futures contracts, and
purchase, sell or write options on futures contracts, for bona fide hedging
purposes or otherwise in accordance with applicable rules of the Commodity
Futures Trading Commission (the "CFTC"). CFTC rules permit an entity such as a
Fund to acquire commodity futures and options as part of its portfolio
management strategy, provided that the sum of the amount of initial margin
deposits and premiums paid for unexpired commodity futures contracts and options
would not exceed 5% of the fair market value of the assets of the Fund, after
taking into account unrealized profits and unrealized losses on such contracts
it has entered into. In the case of an option that is in-the-money at the time
of purchase, the in-the-money amount may be excluded in calculating the 5%.
When a Fund enters into a futures contract or writes an option on a
futures contract, it will instruct its custodian to segregate cash or liquid
securities having a market value which, when added to the margin deposited with
the broker or futures commission merchant, will at all times equal the purchase
price of a long position in a futures contract, the strike price of a put option
written by the Fund, or the market value (marked-to-market daily) of the
commodity underlying a short position in a futures contract or a call option
written by the Fund, or the Fund will otherwise cover the transaction.
INTEREST RATE FUTURES AND OPTIONS. Each Fund may hedge against the
possibility of an increase or decrease in interest rates adversely affecting the
value of securities held in its portfolio by purchasing or selling a futures
contract on a specific debt security whose price is expected to reflect changes
in interest rates. However, if a Fund anticipates an increase in interest rates
and rates decrease instead, the Fund will lose part or all of the benefit of the
increased value of the securities which it has hedged because it will have
offsetting losses in its futures position.
A Fund may purchase call options on interest rate futures contracts to
hedge against a decline in interest rates and may purchase put options on
interest rate futures contracts to hedge its portfolio securities against the
risk of rising interest rates. A Fund will sell options on interest rate futures
contracts as part of closing purchase transactions to terminate its options
positions. No assurance can be given that such closing transactions can be
effected or that there will be a correlation between price movements in the
options on interest rate futures and price movements in the portfolio securities
of the Fund which are the subject of the hedge. In addition, a Fund's purchase
of such options will be based upon predictions as to anticipated interest rate
trends, which could prove to be inaccurate. The potential loss related to the
purchase of an option on an interest rate futures contracts is limited to the
premium paid for the option.
Although each Fund intends to purchase or sell commodity futures
contracts only if there is an active market for each such contract, no assurance
can be given that a liquid market will exist for the contracts at any particular
time. Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit. Futures contract prices could move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses. In such event and in the event of adverse price
movements, a Fund would be required to make daily cash payments of variation
margin. In such circumstances, an increase in the value of the portion of the
portfolio being hedged, if any, may offset partially or completely losses on the
futures contract. However, no assurance can be given
5
<PAGE>
that the price of the securities being hedged will correlate with the price
movements in a futures contract and thus provide an offset to losses on the
futures contract.
FOREIGN CURRENCY TRANSACTIONS. Since investments in foreign securities
will usually involve currencies of foreign countries, and since each Fund may
temporarily hold funds in foreign or domestic bank deposits in foreign
currencies during the completion of investment programs, the value of the assets
of each Fund as measured in United States dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations, and the Funds may incur costs in connection with conversions
between various currencies. The Funds may enter into foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or through entering into forward contracts
to purchase or sell foreign currencies. A forward foreign exchange contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These contracts are
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement and is consummated without payment of any
commission.
Each Fund may enter into forward foreign exchange contracts for
speculative purposes and under the following circumstances: When a Fund enters
into a contract for the purchase or sale of a security denominated in a foreign
currency, or when a Fund anticipates the receipt in a foreign currency of
dividends or interest payments on such a security which it purchases or already
holds, it may desire to "lock-in" the United States dollar price of the security
or the United States dollar equivalent of such dividend or interest payment, as
the case may be. By entering into a forward contract for the purchase or sale,
for a fixed amount of dollars, of the amount of foreign currency involved in the
underlying security transactions, the Fund will be able to protect itself
against a possible loss resulting from an adverse change in the relationship
between the United States dollar and the subject foreign currency during the
period between the date the security is purchased or sold, or on which the
dividend or interest payment is declared, and the date on which payment is made
or received.
If it is believed that the currency of a particular foreign country may
suffer a substantial decline against the United States dollar or another
currency, a Fund may enter into a forward contract to sell, for a fixed amount
of dollars, the amount of foreign currency approximating the value of some or
all of the Fund's portfolio securities denominated in such foreign currency. The
precise matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures.
The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Each Fund will place cash or liquid securities in a separate
custody account of the Fund with the Company's custodian in an amount equal to
the value of the Fund's total assets committed to the consummation of the hedge
contracts or otherwise cover such transactions. The securities placed in the
separate account will be marked-to-market daily. If the value of the securities
placed in the separate account declines, additional cash or liquid securities
will be placed in the account on a daily basis so that the value of the account
will equal the amount of the Fund's uncovered commitments with respect to such
contracts.
At the maturity of a forward contract, a Fund may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. A Fund may also purchase an "offsetting" contract prior to the
maturity of the underlying contract. There is no assurance that such an
"offsetting" contract will always be available to a Fund.
It is impossible to forecast with absolute precision what the market
value of portfolio securities will be at the expiration of a related forward
contract. Accordingly, it may be necessary for a Fund to purchase additional
foreign currency on the spot market (and bear the expense of such purchase) if
the market value of a security being sold is less than the amount of foreign
currency the Fund is obligated to deliver. Conversely, a Fund may sell on the
spot market some of the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver.
6
<PAGE>
A Fund is not required to enter into hedging transactions with regard
to its foreign currency-denominated securities and will not do so unless deemed
appropriate by the Investment Advisers. Hedging the value of a Fund's portfolio
securities against a decline in the value of a currency does not eliminate
fluctuations in the underlying prices of the securities. Although such contracts
tend to minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time, they tend to limit any potential gain which might
result should the value of such currency increase.
The Funds may purchase or sell options to buy or sell foreign
currencies and options on foreign currency futures, or write such options, as a
substitute for entering into forward foreign exchange contracts in the
circumstances described above. For example, in order to hedge against the
decline in value of portfolio securities denominated in a specific foreign
currency, a Fund may purchase an option to sell, for a specified amount of
dollars, the amount of foreign currency represented by such portfolio
securities. In such case, the Fund will pay a "premium" to acquire the option,
as well as the agreed exercise price if it exercises the option.
Although each Fund values its assets daily in terms of United States
dollars, the Funds do not intend to convert their foreign currency holdings into
United States dollars on any regular basis. A Fund may so convert from time to
time, and thereby incur certain currency conversion charges. Although foreign
exchange dealers do not generally charge a fee for conversion, they do realize a
profit based on the difference (the "spread") between the prices at which they
are buying and selling various currencies. Thus, a dealer may offer to sell a
foreign currency to a Fund at one rate, while offering a lesser rate of exchange
should the Fund desire to resell that currency to the dealer.
LENDING PORTFOLIO SECURITIES. Each Fund may lend its portfolio
securities to brokers, dealers and financial institutions considered
creditworthy when secured by collateral maintained on a daily marked-to-market
basis in an amount equal to at least 100% of the market value, determined daily,
of the loaned securities. A Fund may at any time call the loan and obtain the
return of the securities loaned. No such loan will be made which would cause the
aggregate market value of all securities lent by a Fund to exceed 15% of the
value of the Fund's total assets. The Fund will continue to receive the income
on loaned securities and will, at the same time, earn interest on the loan
collateral. Any cash collateral received under these loans will be invested in
short-term money market instruments.
WARRANTS. Each Fund may purchase warrants. The holder of a warrant has
the right to purchase a given number of shares of a particular issuer at a
specified price until expiration of the warrant. Such investments can provide a
greater potential for profit or loss than an equivalent investment in the
underlying security. Each Fund may invest up to 10% of its net assets, valued at
the lower of cost or market value, in warrants (other than those that have been
acquired in units or attached to other securities), including warrants not
listed on American or foreign stock exchanges. Prices of warrants do not move in
tandem with the prices of the underlying securities, and are speculative
investments. They pay no dividends and confer no rights other than a purchase
option. If a warrant is not exercised by the date of its expiration, a Fund will
lose its entire investment in such warrant.
BORROWING. Each Fund may borrow from banks for temporary emergency
purposes. Each Fund will maintain continuous asset coverage (that is, total
assets including borrowings, less liabilities exclusive of borrowings) of 300%
of the amount borrowed. If the 300% asset coverage should decline as a result of
market fluctuations or other reasons, a Fund may be required to sell some of its
portfolio holdings within three days to reduce the debt and restore the 300%
asset coverage, even though it may be disadvantageous from an investment
standpoint to sell portfolio holdings at the time.
Borrowing money, also known as leveraging, will cause a Fund to incur
interest charges, and may increase the effect of fluctuations in the value of
the investments of the Fund on the net asset value of its shares. A Fund will
not purchase additional securities for investment while there are bank
borrowings outstanding representing more than 5% of the total assets of the
Fund.
RESTRICTED SECURITIES. The Funds may purchase securities that are not
registered for sale to the general public in the United States, but which can be
resold to institutional investors in the United States, including securities
offered pursuant to Rule 144A adopted by the United States Securities and
Exchange Commission ("SEC"). If a dealer or institutional trading market in such
securities exists, either within or outside the United States, these restricted
securities will not be treated as illiquid securities for purposes of the Funds'
investment restrictions. The Board of Directors will establish standards for
determining whether or not 144A securities are liquid based on the level of
7
<PAGE>
trading activity, availability of reliable price information and other relevant
considerations. The Funds may also purchase privately placed restricted
securities for which no institutional market exists. The absence of a trading
market may adversely affect the ability of the Funds to sell such illiquid
securities promptly and at an acceptable price, and may also make it more
difficult to ascertain a market value for illiquid securities held by the Funds.
FUTURE DEVELOPMENTS. The Funds may take advantage of opportunities in
the area of options and futures contracts and other derivative financial
instruments which are developed in the future, to the extent such opportunities
are both consistent with each Fund's investment objective and permitted by
applicable regulations. The Funds' Prospectus and Statement of Additional
Information will be amended or supplemented, if appropriate in connection with
any such practices.
FUNDAMENTAL INVESTMENT RESTRICTIONS. Each Fund has adopted certain
investment restrictions which cannot be changed without approval by holders of a
majority of its outstanding voting shares. As defined in the Investment Company
Act of 1940, as amended (the "Act"), this means the lesser of (a) 67% or more of
the shares of the Fund at a meeting where more than 50% of the outstanding
shares are present in person or by proxy or (b) more than 50% of the outstanding
shares of the Fund.
In accordance with these restrictions, each Fund may not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets in any one issuer (other than the United States government, its
agencies and instrumentalities) or purchase more than 10% of the voting
securities, or more than 10% of any class of securities, of any one issuer. (For
this purpose all outstanding debt securities of an issuer are considered as one
class, and all preferred stocks of an issuer are considered as one class.)
(2) Invest for the purpose of exercising control or management of
another company.
(3) Invest in real estate (including real estate limited partnerships),
although a Fund may invest in marketable securities which are secured by real
estate and securities of companies which invest or deal in real estate.
(4) Concentrate more than 25% of the value of its total assets in any
one industry (including securities of non-United States governments).
(5) Make loans, except that this restriction shall not prohibit (1) the
purchase of publicly distributed debt securities in accordance with a Fund's
investment objectives and policies, (2) the lending of portfolio securities, and
(3) entering into repurchase agreements.
(6) Borrow money, except from banks for temporary emergency purposes
and, in no event, in excess of 33 1/3% of its total assets at value or cost,
whichever is less; or pledge or mortgage its assets or transfer or assign or
otherwise encumber them in an amount exceeding the amount of the borrowing
secured thereby.
(7) Underwrite securities issued by others except to the extent the
Company may be deemed to be an underwriter, under the Federal securities laws,
in connection with the disposition of its portfolio securities.
(8) Purchase securities of other investment companies, except (a) in
connection with a merger, consolidation, reorganization or acquisition of assets
or (b) a Fund may purchase securities of closed-end investment companies up to
(i) 3% of the outstanding voting stock of any one investment company (including
for this purpose investments by any other series of the Company), (ii) 5% of the
total assets of the Fund with respect to any one investment company and (iii)
10% of the total assets of the Fund in the aggregate.
(9) Participate on a joint or a joint and several basis in any trading
account in securities.
(10) Issue senior securities (as defined in the Act), other than as set
forth in paragraph 6.
(11) Invest in commodities or commodity futures contracts, except that
each Fund may enter into forward foreign exchange contracts and may invest up to
5% of its net assets in initial margin or premiums for futures contracts or
options on futures contracts.
8
<PAGE>
Non-Fundamental Investment Restrictions. Each Fund has also adopted
certain investment restrictions which are deemed non-fundamental which cannot be
changed without a vote of the majority of the Fund Directors.
In addition to non-fundamental restrictions stated elsewhere, each Fund may not:
(1) Make short sales of securities on margin, except for such
short-term credits as are necessary for the clearance of transactions.
(Management may recommend to the Board removal of this restriction.)
(2) Invest more than 15% of the Fund's net assets in securities which
cannot be readily resold to the public because there are no market quotations
readily available because of legal or contractual restrictions or because there
are no market quotations readily available or in other "illiquid securities"
(including non-negotiable deposits with banks and repurchase agreements of a
duration of more than seven days).
If a percentage restriction (other than the restriction on borrowing in
paragraph 6) is adhered to at the time of investment, a subsequent increase or
decrease in the percentage beyond the specified limit resulting from a change in
value or net assets will not be considered a violation. Whenever any investment
policy or investment restriction states a maximum percentage of a Fund's assets
which may be invested in any security or other property, it is intended that
such maximum percentage limitation be determined immediately after and as a
result of the acquisition of such security or property.
RISK CONSIDERATIONS. Investors should carefully consider the risks
involved in investments in securities of companies and governments of foreign
nations, which add to the usual risks inherent in domestic investments. Such
special risks include the lower level of government supervision and regulation
of stock exchanges, broker-dealers and listed companies, fluctuations in foreign
exchange rates, future political and economic developments, and the possible
imposition of exchange controls or other foreign governmental laws or
restrictions. In addition, securities prices in foreign countries are generally
subject to different economic, financial, political and social factors than
prices of securities of United States issuers.
The Company anticipates that the portfolio securities of foreign
issuers held by each Fund generally will not be registered with the SEC nor will
the issuers thereof be subject to the reporting requirements of such agency. In
addition, the governments under which these companies are organized may impose
less government supervision than is required in the United States. Accordingly,
there may be less publicly available information concerning certain of the
issuers of securities held by the Funds than is available concerning United
States companies. In addition, foreign companies are not generally subject to
uniform accounting, auditing and financial reporting standards or to practices
and requirements comparable to those applicable to United States companies.
It is contemplated that the Funds' foreign portfolio securities
generally will be purchased on stock exchanges or in over-the-counter markets
located in the countries in which the principal offices of the issuers of the
various securities are located, if that is the best available market. Foreign
stock exchanges generally have substantially less volume than the New York Stock
Exchange and may be subject to less government supervision and regulation than
those in the United States. Accordingly, securities of foreign companies may be
less liquid and more volatile than securities of comparable United States
companies. Similarly, volume and liquidity in most foreign bond markets is less
than in the United States and, at times, price volatility can be greater than in
the United States.
The Funds may also invest in American Depositary Receipts ("ADRs") or
European Depositary Receipts ("EDRs") representing securities of foreign
companies, including both sponsored and unsponsored ADRs. Unsponsored ADRs may
be created without the participation of the foreign issuer. Holders of these
ADRs generally bear all the cost of the ADR facility, whereas foreign issuers
typically bear certain costs in a sponsored ADR. The bank or trust company
depository of an unsponsored ADR may be under no obligation to distribute
shareholder communications received from the foreign issuer or to pass through
voting rights. The markets for ADRs and EDRs, especially unsponsored ADRs, may
be substantially more limited and less liquid than the markets for the
underlying securities.
Foreign broker-dealers also may be subject to less government
supervision than those in the United States. Although the Funds endeavor to
achieve the most favorable net results on their portfolio transactions, fixed
9
<PAGE>
commissions for transactions on certain foreign stock exchanges may be higher
than negotiated commissions available on United States exchanges.
With respect to certain foreign countries, there is the possibility of
adverse changes in investment or exchange control regulations, expropriation or
confiscatory taxation, and limitations on the transfer or exchange of funds or
other assets of the Funds. The Funds' ability and decisions to purchase or sell
portfolio securities may be affected by laws or regulations relating to the
convertibility and repatriation of assets. There is also the risk in certain
foreign countries of political or social instability, or diplomatic developments
which could affect United States investments as well as the prices of securities
in those countries. Moreover, individual foreign economies may differ favorably
or unfavorably from the United States economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
Because the shares of the Funds are redeemable on a daily basis in
United States dollars, each Fund intends to manage its portfolio so as to give
reasonable assurance that it will be able to obtain United States dollars to the
extent necessary to meet anticipated redemptions. The Funds do not believe that
this consideration will have any significant effects on their portfolio
strategies under present conditions.
PORTFOLIO TURNOVER. Portfolio turnover rate is calculated by dividing
the lesser of a Fund's sales or purchases of portfolio securities for the fiscal
year (exclusive of purchases or sales of all securities whose maturities or
expiration dates at the time of acquisition were one year or less) by the
monthly average value of the securities in a Fund's portfolio during the fiscal
year. A portfolio turnover rate in excess of 100% is considered to be high. A
high portfolio turnover rate may result in higher short-term capital gains to
shareholders for tax purposes and increased brokerage commissions and other
transaction costs borne by the Fund.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE COMPANY
- --------------------------------------------------------------------------------
The business of the Funds is supervised by the Board of Directors, who
may exercise all powers not required by statute, the Articles of Incorporation,
or the By-laws to be exercised by the shareholders. When appropriate, the Board
of Directors will consider seperarately matters relating to each Fund or to any
class or shares of a Fund. The Board elects the officers of the Company and
retains various companies to carry out the Fund's operations, including the
investment advisers, custodian, administrator and transfer agent.
The name, address, principal occupation during the past five years and
other information with respect to each of the Directors and Executive Officers
of the Company are as follows:
NAME AND ADDRESS:
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
WITH THE COMPANY DURING PAST FIVE YEARS
Gilbert de Botton* (64) Chairman, Global Asset Management Limited,
Director/President investment adviser, and Global Asset
12 St. James's Place Management (U.K.) Ltd., holding company,
London SWlA 1NX 1983 to present; Vice President, Global
England Asset Management Limited (Bermuda),
investment adviser, 1989 to present.
George W. Landau (78) Chairman, Latin American Advisory Board of
Director Coca-Cola International, 1988 to present.
2601 South Bayshore Drive Director, Emigrant Savings Bank, Brazil
Suite 1109 Equity Fund, Chile Fund, Latin American
Coconut Grove, FL 33133 Investment Fund, South America Fund, Latin
American Equity Fund, Emerging Markets
Telecommunications Fund, Emerging Markets
Infrastructure Fund, and Fundacion Chile.
10
<PAGE>
Former President, Americas Society and the
Council of the Americas, 1985-1993.
Robert J. McGuire (63) Attorney/Consultant, Morvillo, Abramowitz,
Director Grand, Iason & Silberberg, P.C., 1998 to
1085 Park Avenue present; President/Chief
New York, NY 10128 Operating Officer, New York, NY 10128
Kroll Associates 1989-1997.
Roland Weiser (67) President, Intervista, business consulting,
Director 1984 to present. Director, GAM Diversity
86 Beekman Road Fund and Unimed Pharmaceuticals, Inc.
Summit, New Jersey 07901 Former Senior Vice President, Schering
Plough Corporation (International).
Kevin Blanchfield Chief Operating Officer, Treasurer and
Vice President/Treasurer/ Assistant Secretary, Global Asset Management
Secretary (USA) Inc., GAM Investments, Inc. and
135 East 57th Street GAM Services Inc., 1993 to present;
New York, NY 10022 Senior Vice President -
Finance and Administration,
Lazard Freres & Co., 1991 to 1993.
* Mr. de Botton is a director who is an "interested person" of the Company
within the definitions set forth in the Act.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS. Each independent
Director of the Company receives annual compensation from the Company of $25,000
per year plus $1,000 for each meeting of the Board of Directors attended. Each
Director is reimbursed by the Company for travel expenses incurred in connection
with attendance at Board of Directors meetings. The officers and interested
Directors of the Company do not receive any compensation from the Company.
The name, position(s) and information related to the compensation of
each of the Directors in the most recent fiscal year are as follows.
<TABLE>
<CAPTION>
Pension or
Retirement Total
Aggregate Benefits Accrued Estimated Compensation
Name and Position(s) Compensation as Annual Benefits From the Company
Held With From the Part of Company Upon and Fund Complex
The Company Company Expenses Retirement Paid to Directors
- ----------- ------- -------- ---------- -----------------
<S> <C> <C>
Gilbert de Botton $0 $0
Director and
President
George W. Landau $23,500 $23,500
Director
Robert J. McGuire $21,750 $21,750
Director
Roland Weiser $23,500 $23,500
Director
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES. As of January 31, 1999, all Directors
and Officers of the Funds as a group owned beneficially or of record less than
1% of the outstanding securities of any Fund except GAMerica Capital Fund, of
which the group held 2.5%. To the knowledge of the Funds, as of January 31,
1999, no Shareholders owned beneficially (b) or of record (r) more than 5% of a
Fund's outstanding shares, except as set forth below. Mr. Gilbert de Botton,
President and Director of the Company, may be deemed to have shared voting or
investment power over shares
11
<PAGE>
owned by clients or held by custodians or nominees for clients of Global Asset
Management (USA) Inc. or other affiliates of GAM, or by employee benefit plans
for the benefit of employees of GAM and its affiliates, as a result of the
indirect ownership of interests in GAM and its affiliates by a trust of which
Mr. de Botton is a potential beneficiary. Mr. de Botton disclaims beneficial
ownership of such shares.
[TABLE TO BE INSERTED]
12
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER SERVICES
- --------------------------------------------------------------------------------
INVESTMENT ADVISERS. All of the Investment Advisers are registered
under the United States Investment Advisers Act of 1940, as amended. GAM is
controlled by and under common control with other investment advisers (as
described below) which have substantial experience managing foreign mutual funds
and which have aggregate assets under management of approximately $13.3 billion
as of January 31, 1999. As of that date, Sarofim had aggregate assets under
management of approximately $59 billion.
The Directors of GAM and their principal occupations are as follows:
<TABLE>
<CAPTION>
NAME AND POSITION HELD
WITH INVESTMENT ADVISER PRINCIPAL OCCUPATION
- ----------------------- --------------------
<S> <C>
Gilbert de Botton, Director. See "Management of the Company" above.
Count Ulric von Rosen, Director. President, Bonnier Medical Division of
Bonnier Medical Group, Sweden.
Paul S. Kirkby, Director. Investment Director, Global Asset Management (H.K.) Ltd.
David J. Miller, Director. Finance Director, Global Asset Management (U.K.) Ltd.
Alan McFarlane, Director. Managing Director (Institutional), Global
Asset Management Ltd., investment adviser.
Denis G. Raeburn, Director. Managing Director, Global Asset Management Ltd.
and Global Asset Management (U.K.) Ltd., holding company.
Gordon Grender, Director. Investment manager.
</TABLE>
GAM is a wholly-owned subsidiary of Global Asset Management (U.K.)
Limited, a holding company. Global Asset Management Ltd., an investment adviser
organized under the laws of Bermuda, controls the Investment Adviser through its
wholly-owned subsidiaries, Greenpark Management N.V. and GAMAdmin B.V. (the
latter of which is the direct parent of Global Asset Management (U.K.) Limited).
Lorelock, SA., which is controlled directly by Metrolis Anstalt, a Lichtenstein
company, and indirectly by a discretionary trust of which Mr. de Botton, a
Director and President of the Company, may be deemed to be a beneficiary, owns
approximately 70% of the voting securities of Global Asset Management Ltd. St.
James's Place Capital plc, an international, diversified financial services
company, owns approximately 30%. St. James's Place Capital plc controls,
individually and collectively and directly and indirectly, a number of
subsidiaries, which provide financial services and investment management
services for various investment companies, among others, and which are involved
internationally in various financial service businesses.
The Directors and principal executive officers of Sarofim and their
principal occupations are as follows:
Fayez S. Sarofim Chairman, Director and President, Sarofim
Raye G. White Executive Vice President, Secretary-Treasurer
and Director, Sarofim
Ralph B. Thomas Senior Vice President, Sarofim
William K. McGee, Jr. Senior Vice President, Sarofim
13
<PAGE>
Russell M. Frankel Senior Vice President, Sarofim
Charles E. Sheedy Senior Vice President, Sarofim
Russell B. Hawkins Senior Vice President, Sarofim
A majority of the outstanding stock of Sarofim is owned by Fayez S.
Sarofim. In addition, Mr. Sarofim is a director of Unitrin, Inc., Argonaut
Group, Imperial Holly Corp. and EXOR Group, each of which is a publicly traded
corporation with principal offices in the United States. Mr. Sarofim is a past
director of Teledyne, Inc., Allegheny Teledyne, Inc., MESA, Inc., Alley Theatre,
Houston Ballet Foundation and the Museum of Fine Arts Houston.
INVESTMENT ADVISORY CONTRACTS. The Amended and Restated Investment
Advisory Contract dated April 14, 1994 (the "GAM Contract") between the Company
and GAM, as amended, was last approved by the Board of Directors (including a
majority of the Directors who were not parties to the GAM Contract or interested
persons of any such party) on behalf of each Fund on October 28, 1998 and by the
shareholders of each Fund (other than GAM Japan Capital Fund and GAMerica
Capital Fund on April 14, 1994. The investment advisory agreement dated June 29,
1990 between the Company and Sarofim (the "Sarofim Contract") was last approved
by the Board of Directors, including a majority of the Directors who are not
parties to the Sarofim Contract or interested persons of any such party, on
October 28, 1998 and by the shareholders of GAM North America Fund on April 14,
1994. The GAM Contract and the Sarofim Contract will each continue in effect
from year to year thereafter if approved annually by the Board of Directors or
by the vote of a majority of the outstanding shares of each Fund (as defined in
the Act) and, in either event, by the approval of a majority of those Directors
who are not parties to the GAM Contract or the Sarofim Contract or interested
persons of any such party.
The GAM Contract requires GAM to conduct and maintain a continuous
review of each Fund's portfolio and to make all investment decisions regarding
purchases and sales of portfolio securities and brokerage allocation for each
Fund other than GAM North America Fund. GAM will render its services to each
fund from outside the United States. The Sarofim Contract requires Sarofim to
provide the same services to GAM North America Fund subject to the supervision
and oversight of GAM. Sarofim commenced providing investment advisory services
to GAM North America Fund on June 29, 1990.
The GAM Contract and the Sarofim Contract (the "Contracts") each
provides that the Investment Advisers will select brokers and dealers for
execution of each Fund's portfolio transactions consistent with the Company's
brokerage policy (see "Brokerage Allocation"). Although the services provided by
broker-dealers in accordance with the brokerage policy incidentally may help
reduce the expenses of or otherwise benefit the other investment advisory
clients of the Investment Advisers or their affiliates, as well as the Funds,
the value of such services is indeterminable and the Investment Advisers' fees
are not reduced by any offset arrangement by reason thereof.
Each of the Contracts provides that the Investment Advisers shall have
no liability to the Company or to any shareholder of a Fund for any error of
judgment, mistake of law, or any loss arising out of any investment or other act
or omission in the performance by an Investment Adviser of its duties under such
Contracts or for any loss or damage resulting from the imposition by any
government of exchange control restrictions which might affect the liquidity of
a Fund's assets maintained with custodians or securities depositories in foreign
countries or from any political acts of any foreign governments to which such
assets might be exposed, except for liability resulting from willful
misfeasance, bad faith or gross negligence on the Investment Adviser's part or
reckless disregard of its duties under the Contract.
Each Contract will terminate automatically in the event of its
assignment, as such term is defined under the Act, and may be terminated by each
Fund at any time without payment of any penalty on 60 days' written notice, with
the approval of a majority of the Directors of the Company or by vote of a
majority of the outstanding shares of a Fund (as defined in the Act).
The Company acknowledges that it has obtained its corporate name by
consent of GAM and agrees that if (i) GAM should cease to be the Company's
investment adviser or (ii) Global Asset Management Ltd. should cease to own a
majority equity interest in GAM, the Company, upon request of GAM, shall submit
to its shareholders for their vote a proposal to delete the initials "GAM" from
its name and cease to use the name "GAM Funds, Inc." or any other name
14
<PAGE>
using or derived from "GAM" or "Global Asset Management, any component thereof
or any name deceptively similar thereto, and indicate on all letterheads and
other promotional material that GAM is no longer the Company's investment
adviser. If GAM makes such request because Global Asset Management Ltd. no
longer owns a majority equity interest in GAM, the question of continuing the
GAM Contract must be submitted to a vote of the Company's shareholders. The
Company has agreed that GAM or any of its successors or assigns may use or
permit the use of the names "Global Asset Management" and "GAM" or any component
or combination thereof in connection with any entity or business, whether or not
the same directly or indirectly competes or conflicts with the Company and its
business in any manner.
ADVISORY FEES. For its services to the Funds, GAM receives a quarterly
fee of 0.25% of the average daily net assets of each of GAM International Fund,
GAM Global Fund, GAM Pacific Basin Fund, GAM Japan Capital Fund, GAMerica
Capital Fund and GAM Europe Fund during the quarter preceding each payment; and
GAM and Sarofim each receives a quarterly fee equal to 0.1 % of the average
daily net assets of GAM North America Fund. In each case the aggregate advisory
fees are equivalent to an annual fee of 1.0% of the average daily net assets of
each Fund during the year. The level of advisory fees paid by each Fund is
higher than the rate of advisory fee paid by most registered investment
companies. The actual advisory fee paid by each Fund during the fiscal years
ended December 31, 1998, 1997 and 1996 are set forth below:
<TABLE>
<CAPTION>
PACIFIC JAPAN NORTH GAMERICA
GLOBAL INTERNATIONAL BASIN CAPITAL EUROPE AMERICA CAPITAL
------ ------------- ------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $1,287,387 $26,355,350 $207,532 $280,165 $513,908 $160,274 $84,838
1997 $379,486 $14,631,974 $502,073 $293,314 $366,938 $85,196 $22,409
1996 $206,365 $8,746,443 $710,064 $350,646 $270,703 $57,701 $23,247
</TABLE>
Expenses incurred in connection with each Fund's organization, initial
registration and initial offering under Federal and state securities laws,
including printing, legal and registration fees, and the period over which such
expenses are amortized, are set forth below (except for the expenses of GAM
International Fund, GAM Global Fund, GAM Pacific Basin Fund, GAM Europe Fund and
GAM North American Fund, which have been fully amortized):
Japan GAMerica
CAPITAL CAPITAL
------- --------
Organizational Expenses $34,166 $30,036
Amortized over 5 years beginning 7/1/94 5/12/95
The expense ratio of each Fund may be higher than that of most
registered investment companies since the cost of maintaining the custody of
foreign securities is higher than that for most domestic funds and the rate of
advisory fees paid by the Funds exceeds that of most registered investment
companies. In addition, each Fund bears its own operating expenses.
PRINCIPAL UNDERWRITER AND PLANS OF DISTRIBUTION. The Company has
entered into distribution agreements (the "Distribution Agreements") with GAM
Services under which GAM Services has agreed to act as principal underwriter and
to use reasonable efforts to distribute each Fund's Class A, Class B, Class C
and Class D shares. GAM Services is an indirect wholly-owned subsidiary of
Global Asset Management Ltd., which also controls GAM.
Pursuant to the Distribution Agreements, GAM Services receives the
sales load on sales of each Class of the Funds' shares and reallows a portion of
the sales load to dealers/brokers. GAM Services also receives the distribution
fees payable pursuant to the Funds' Plans of Distribution for Class A, Class B,
Class C and Class D Shares described below (the "Plans"). The Distribution
Agreements may be terminated at any time upon 60 days' written notice, without
payment of a penalty, by GAM Services, by vote of a majority of the outstanding
class of voting securities of the affected Fund, or by vote of a majority of the
Directors of the Fund who are not "interested Persons" of the Fund and who have
no direct or indirect financial interest in the operation of the Distribution
Agreements. The Distribution Agreements will terminate automatically in the
event of their assignment.
15
<PAGE>
In addition to the amount paid to dealers pursuant to the sales charge
table in the Prospectus, GAM Services from time to time may offer assistance to
dealers and their registered representatives in the form of business and
educational or training seminars. Dealers may not use sales of any of the Funds'
shares to qualify for or participate in such programs to the extent such may be
prohibited by a dealer's internal procedures or by the laws of any state or any
self-regulatory agency, such as the National Association of Securities Dealers,
Inc. Costs associated with incentive or training programs are borne by GAM
Services and paid from its own resources or from fees collected under the Plans.
GAM Services from time to time may reallow all or a portion of the sales charge
on Class A and Class D shares to individual selling dealers.
The aggregate dollar amount of underwriting commissions and the amount
retained by the Distributor for each of the last three fiscal years is as
follows:
<TABLE>
<CAPTION>
1998
(000's omitted)
Class A Class B Class C Class D
------------------------ ----------------------- ------------------------ ----------------------
After After After After
Aggregate Reallowance Aggregate Reallowance Aggregate Reallowance Aggregate Reallowance
--------- ------------ --------- ----------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GAM International Fund $11,229 $2,895 $ $12 $ $3 $2,096 $653
GAM Global Fund 1,623 406 1 3 238 77
GAM Pacific Basin Fund 74 19 21 6
GAM North America Fund 44 14 .050
GAM Europe Fund 239 62
GAM Japan Capital Fund 160 40 .200 .067
GAMerica Capital Fund 113 31
</TABLE>
For the fiscal year ended 12/31/98, GAM Services received front-end sales loads
of $15,859,919.55 from the sale of Fund shares
<TABLE>
<CAPTION>
1997
(000's omitted)
Class A Class D
------------------------------ ---------------------------------
After After
Aggregate Reallowance Aggregate Reallowance
----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
GAM International Fund $ 9,147 $ 2,345 $ 1,321 $463
GAM Global Fund 639 173 228 28
GAM Pacific Basin Fund 85 25 25 6
GAM North America Fund 38 11 N/A N/A
GAM Europe Fund 35 13 N/A N/A
GAM Japan Capital Fund 267 76 N/A N/A
GAMerica Capital Fund 5 4 N/A N/A
</TABLE>
For the fiscal year ended 12/31/97, GAM Services received front-end sales loads
of $3,156,062 from the sale of Fund shares.
<TABLE>
<CAPTION>
1996
(000's omitted)
Class A Class D
------------------------------- ---------------------------------
After After
Aggregate Reallowance Aggregate Reallowance
----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
International Fund $ 9,386 $ 3,591 $584 $199
Global Fund 217 65 23 7
Pacific Basin Fund 215 91 15 6
Japan Capital Fund 122 59 N/A N/A
Europe Fund 17 11 N/A N/A
North America Fund 9 2 N/A N/A
GAMerica Fund --- --- N/A N/A
</TABLE>
16
<PAGE>
For the fiscal year ended 12/31/96, GAM Services received front-end sales loads
of $2,062,895 from the sales of Fund shares.
Each Fund has adopted separate distribution plans under Rule 12b-1 of
the 1940 Act for each class of its shares The Plans permit each Fund to
compensate GAM Services in connection with activities intended to promote the
sale of each class of shares of each Fund. Pursuant to the Plan for Class A
shares, each Fund may pay GAM Services up to 0.30% of average daily net assets
of the Fund's Class A shares. Under the Plan for Class B shares, each Fund may
pay GAM Services up to 1.00% of daily net assets of the Fund's Class B shares.
The Class C shares under the Plan for Class C shares may pay GAM Services up to
1.00% of daily net assets of the Fund's Class C shares. Under the Plan for Class
D shares, each Fund may pay GAM Services up to 0.50% of the average daily net
assets attributable to Class D shares of the Fund. Expenditures by GAM Services
under the Plans may consist of: (i) commissions to sales personnel for selling
shares of the Funds; including travel & entertainment expenses (ii)
compensation, sales incentives and payments to sales, marketing and service
personnel; (iii) payments to broker-dealers and other financial institutions
that have entered into agreements with GAM Services in the form of a Dealer
Agreement for GAM Funds, Inc. for services rendered in connection with the sale
and distribution of shares of the Funds; (iv) payment of expenses incurred in
sales and promotional activities, including advertising expenditures related to
the Funds; (v) the costs of preparing and distributing promotional materials;
(vi) the cost of printing the Funds' Prospectus and SAI for distribution to
potential investors; and (vii) other activities that are reasonably calculated
to result in the sale of shares of the Funds.
A portion of the fees paid to GAM Services pursuant to the Plans not
exceeding 0.25% annually of the average daily net assets of each Fund's shares
may be paid as compensation for providing services to each Fund's shareholders,
including assistance in connection with inquiries related to shareholder
accounts (the `Service Fees'). In order to receive Service Fees under the Plans,
participants must meet such qualifications as are established in the sole
discretion of GAM Services, such as services to each Fund's shareholders;
services providing each Fund with more efficient methods of offering shares to
coherent groups of clients, members or prospects of a participant; services
permitting more efficient methods of purchasing and selling shares, or
transmission of orders for the purchase or sale of shares by computerized tape
or other electronic equipment; or other processing.
The Directors have concluded that there is a reasonable likelihood that
the Plans will benefit each Fund and its shareholders and that the Plans should
result in greater sales and/or fewer redemptions of Fund shares. On a quarterly
basis, the Directors will review a report on expenditures under the Plans and
the purposes for which expenditures were made. The Directors will conduct an
additional, more extensive review annually in determining whether the Plans
shall be continued. Continuation of the Plans from year to year is contingent on
annual approval by a majority of the Directors acting separately on behalf of
each Fund and class and by a majority of the Directors who are not `interested
persons" (as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operation of the Plans or any related agreements (the
"Plan Directors"). The Plans provide that they may not be amended to increase
materially the costs that a Fund may bear pursuant to the applicable Plan
without approval of the shareholders of the affected class of shares of each
Fund and that other material amendments to the Plans must be approved by a
majority of the Plan Directors acting separately on behalf of each Fund, by vote
cast in person at a meeting called for the purpose of considering such
amendments. The Plans further provide that while each Plan is in effect, the
selection and nomination of Directors who are not "interested persons" shall be
committed to the discretion of the Directors who are not "interested persons." A
Plan may be terminated at any time by vote of a majority of the Fund Directors
or a majority of the outstanding shares of the Class of shares of the affected
Fund to which the Plan relates.
Total dollar amounts paid by each of the Funds pursuant to the Plans
for the fiscal year ended December 31, 1998 are as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
----------- -------- --------- ---------
<S> <C> <C> <C> <C>
GAM International Fund $7,294,583 $215,555 $253,723 $720,663
GAM Global Fund $344,319 $40,342 $29,946 $39,766
GAM Pacific Basin Fund $58,540 $732 $259 $6,551
GAM Japan Capital Fund $82,943 $2,002 $3,994 N/A
GAM Europe Fund $148,759 $6,062 $3,242 N/A
GAM North America Fund $47,573 $1,562 $1,454 N/A
GAMerica Capital Fund $24,192 $3,220 $1,676 N/A
</TABLE>
17
<PAGE>
CUSTODIAN AND ADMINISTRATOR. Brown Brothers Harriman & Co., 40 Water
Street, Boston, Massachusetts 02109 ("Brown Brothers"), serves as custodian of
the Company's securities and cash and as its fund accounting agent and
administrator. As such, Brown Brothers maintains certain records for the Company
required by the Act and applicable Federal and state tax laws, keeps books of
account, renders reports and statements, including financial statements, and
disburses funds in payment of the Company's bills and obligations.
Brown Brothers is reimbursed by the Company for its disbursements,
expenses and charges (including counsel fees but excluding salaries and usual
overhead expenses) incurred in connection with the foregoing services and
receives a fee from the Company based on a fee schedule in effect from time to
time (which is based on the net asset value of each Fund). The agreement
provides for termination by either party on 60 days' written notice.
TRANSFER AGENT. Boston Financial Data Services, Two Heritage Drive,
Quincy, Massachusetts 02171, serves as shareholder service agent,
dividend-disbursing agent, transfer agent and registrar for the Funds. The Funds
also engage other entities to act as shareholder servicing agents and to perform
subaccounting and administrative services for the benefit of discrete groups of
Fund shareholders.
LEGAL COUNSEL. Coudert Brothers, 1114 Avenue of the Americas, New York,
New York 10036, acts as legal counsel for the Funds and GAM.
INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers L.L.P., 1301 Avenue of
the Americas, New York, New York 10019-6013, are the independent accountants for
the Company for the fiscal year ending December 31, 1998. In addition to
reporting annually on the financial statements of each Fund, the Company's
accountants will review certain filings of the Company with the SEC and will
prepare the Company's Federal and state corporation tax returns.
REPORTS TO SHAREHOLDERS. The fiscal year of the Company ends on
December 31. Shareholders of each Fund will be provided at least semi-annually
with reports showing the portfolio of the Fund and other information, including
an annual report with financial statements audited by independent accountants.
- --------------------------------------------------------------------------------
BROKERAGE ALLOCATION
- --------------------------------------------------------------------------------
The Contracts provide that the Investment Advisers shall be responsible
for the selection of brokers and dealers for the execution of the portfolio
transactions of each Fund and, when applicable, the negotiation of commissions
in connection therewith.
Purchase and sale orders will usually be placed with brokers who are
selected based on their ability to achieve "best execution" of such orders.
"Best execution" means prompt and reliable execution at the most favorable
security price, taking into account the other provisions hereinafter set forth.
The determination of what may constitute best execution and price in the
execution of a securities transaction by a broker involves a number of
considerations, including the overall direct net economic result to the Fund
(involving both price paid or received and any commissions and other costs
paid), the efficiency with which the transaction is effected, the ability to
effect the transaction at all where a large block is involved, the availability
of the broker to stand ready to execute possibly difficult transactions in the
future, and the financial strength and stability of the broker. Such
considerations are weighed by the Investment Advisers in determining the overall
reasonableness of brokerage commissions.
Each Investment Adviser is authorized to allocate brokerage and
principal business to brokers who have provided brokerage and research services,
as such services are defined in Section 28(e) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), for the Company and/or other accounts for
which the Investment Adviser exercises investment discretion (as defined in
Section 3(a)(35) of the 1934 Act) and, as to transactions for which fixed
minimum commission rates are not applicable, to cause a Fund to pay a commission
for effecting a securities transaction in excess of the amount another broker
would have charged for effecting that transaction, if the Investment Adviser
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage
18
<PAGE>
and research services provided by such broker, viewed in terms of either that
particular transaction or the Investment Adviser's overall responsibilities with
respect to the Fund and the other accounts as to which it exercises investment
discretion. In reaching such determination, the Investment Advisers will not be
required to place or to attempt to place a specific dollar value on the research
or execution services of a broker or on the portion of any commission reflecting
either of said services.
Research services provided by brokers to the Investment Advisers
includes that which brokerage houses customarily provide to institutional
investors and statistical and economic data and research reports on particular
companies and industries. Research furnished by brokers may be used by each
Investment Adviser for any of its accounts, and not all such research may be
used by the Investment Advisers for the Funds.
The amount of brokerage commissions paid by each Fund during the three
fiscal years ended December 31, 1998, 1997 and 1996 are set forth below:
<TABLE>
<CAPTION>
PACIFIC NORTH JAPAN GAMERICA
INTERNATIONAL GLOBAL BASIN EUROPE AMERICA CAPITAL CAPITAL
------------- ------ ------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $6,155,942 $385,674 $109,176 $407,460 $20,784 $53,902 $11,605
1997 4,380,158 151,482 238,964 137,778 4,728 159,168 346
1996 3,778,350 109,863 362,709 93,545 2,512 139,479 3,385
</TABLE>
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
The Company offers A,B,C, and D Class Shares. Each Class involves different
sales charges, features and expenses as described more fully in the Prospectus.
SALES CHARGE REDUCTIONS AND WAIVERS
WAIVERS OF FRONT-END SALES CHARGES. Shares may be offered without the
front-end sales charge to active and retired Fund directors and other persons
affiliated with the Fund or GAM Services or its affiliates, registered
representatives of broker-dealers having sales agreements with GAM Services, and
spouses and minor children of the foregoing persons or trusts; companies
exchanging shares with or selling assets to a Fund pursuant to a merger,
acquisition or exchange offer; persons investing the proceeds of a redemption of
shares of any other investment company managed or sponsored by an affiliate of
GAM Services; accounts managed by an affiliate of GAM Services; registered
investment advisors and accounts over which they have discretionary authority;
organizations providing administrative services with respect to persons in the
preceding category; registered investment advisors and other financial services
firms that purchase shares for the benefit of their clients participating in a
"wrap account" or similar program under which clients pay a fee to the
investment advisor or other firm; organizations described in Section 501(c)(3)
of the Internal Revenue Code of 1986; trust companies, bank trust departments;
retirement, deferred compensation plans and trusts used to fund those plans;
charitable remainder trusts; certain tax qualified plans of administrators who
have entered into a service agreement with GAM Services or the Fund; and other
categories of investors, at the discretion of the Board, as disclosed in the
then current Prospectus of the Funds.
LARGE ORDERS PURCHASES AND PURCHASES BY ELIGIBLE PLANS. Purchase orders
of $1 million or more and all purchase orders by employee retirement plans with
more than 100 participants will not be subject to the front-end sales charge.
GAM Services may advance to dealers a commission from its own resources in
connection with these purchases based upon cumulative sales in each year or
portion thereof except when such orders are received from other registered
investment companies or investment funds. GAM Services will pay 1% of sales up
to $2 million; 0.80% on sales of $2 million up to $3 million, 0.50% on sales of
$3 million up to $5 million, and 0.25% on sales of $5 million and above. Those
purchases for which GAM Services pays a commission (and the payment of which has
not been
19
<PAGE>
waived by the dealer) are subject to a 1% contingent deferred sales charge
("CDSC") on any shares sold within 18 months of purchase. In the case of
eligible retirement plans, the CDSC will apply to redemptions at the plan level
only. 12b-1 fees earned on assets representing large order purchases or
purchases by eligible plans will be retained by GAM Services for one year after
the purchase is effected in order to reimburse it for a portion of the dealer
payment.
CONTINGENT DEFERRED SALES CHARGE WAIVERS. A contingent deferred sales
charge ("CDSC") will not be imposed on (i) any amount which represents an
increase in value of shares purchased within the applicable period (18 months
for Class A, 6 years for Class B, one year for Class C) preceding the
redemption; (ii) the current net asset value of shares purchased prior to the
applicable period; or (iii) the current net asset value of shares purchased
through reinvestment of dividends or distributions and/or shares acquired in
exchange for shares of other GAM Funds. Moreover, in determining whether a CDSC
is applicable it will be assumed that amounts described in (i), (ii) and (iii)
above (in that order) are redeemed first.
In addition, the CDSC, if otherwise applicable, will be waived in the
case of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (a) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (b) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination of
disability;
(2) redemptions in connection with the following retirement plan
distributions: (a) lump-sum or other distributions from a qualified corporate or
self-employed retirement plan following retirement or attainment of age 591/2;
(b) required distributions from an IRA or 403(b) Custodial Account following
attainment of age 591/2; or (c) a tax-free return of an excess contribution to
an IRA;
(3) all redemptions of shares held for the benefit of a participant in a
Qualified Retirement Plan which offers investment companies managed by an
affiliate of GAM Services ("Eligible Plan"), provided that either: (a) the plan
continues to be an Eligible Plan after the redemption; or (b) the redemption is
in connection with the complete termination of the plan involving the
distribution of all plan assets to participants;
(4) redemptions under the Systematic Withdrawal Plan, subject to a
maximum of 10% per year of the account balance, and further subject to a minimum
balance of $10,000;
(5) in connection with exchanges for shares of the same class of another
GAM Fund.
With reference to (1) above, for the purpose of determining disability,
the Distributor utilizes the definition of disability contained in Section
72(m)(7) of the Internal Revenue Code, which relates to the inability to engage
in gainful employment. With reference to (2) above, the term "distribution" does
not encompass direct transfer of IRA, 403(b) Custodial Accounts or retirement
plan assets to a successor custodian or trustee. All waivers will be granted
only following receipt by the Distributor of confirmation of the shareholder's
entitlement.
CONVERSION FEATURE. Class B Shares are sold at net asset value without
and initial sales charge so that the full amount of an investor's purchase
payment may be immediately invested in the Fund. A CDSC, however, will be
imposed on most Class B shares redeemed within six years after purchase as more
fully described in the Prospectus. Class B shares will convert automatically
into Class A shares, based on the relative net asset values of the shares of the
two Classes on the conversion date, which will be approximately eight (8) years
after the date of the original purchase. In the case of Class B shares
previously exchanged (see "How to Exchange Shares" in the Prospectus), the
period of time the shares were held in the GAM Money Market Account is included
in the holding period for conversion.
Effectiveness of the conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel that (i) the conversion of shares does not constitute a taxable event
under the Internal Revenue Code, (ii) Class A shares received on conversion will
have a basis equal to the shareholder's basis in the converted Class B shares
immediately prior to the conversion, and (iii) Class A shares received on
conversion will have a holding period that includes the holding period of the
converted Class B shares. The conversion feature may be suspended if the ruling
or opinion is no longer available. In such event, Class B shares would continue
to be subject to Class B 12b-1 fees.
20
<PAGE>
- --------------------------------------------------------------------------------
NET ASSET VALUE, DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
NET ASSET VALUE. Each Fund (except the GAM Japan Capital Fund)
determines its net asset value each day the New York Stock Exchange is open for
trading. The New York Stock Exchange is closed on the following holidays, in
addition to Saturdays and Sundays: New Year's Day, President's Day, Martin
Luther King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. GAM Japan Capital Fund determines its net
asset value each day the Tokyo Stock Exchange is open for trading.
Portfolio securities, including ADR's, EDR's and options, which are
traded on stock exchanges or a national securities market will be valued at the
last sale price as of the close of business on the day the securities are being
valued or, lacking any sales, at the last available bid price. Securities traded
in the over-the-counter market will be valued at the last available bid price in
the over-the-counter market prior to the time of valuation. Money market
securities will be valued at market value, except that instruments maturing
within 60 days of the valuation are valued at amortized cost. The other
securities and assets of each Fund for which market quotations may not be
readily available (including restricted securities which are subject to
limitations as to their sale) will be valued at fair value as determined in good
faith by or under the direction of the Board of Directors. Securities quoted in
foreign currencies will be converted to United States dollar equivalents using
prevailing market exchange rates.
SUSPENSION OF THE DETERMINATION OF NET ASSET VALUE. The Board of
Directors may suspend the determination of net asset value and, accordingly,
redemptions for a Fund for the whole or any part of any period during which (1)
the New York Stock Exchange is closed (other than for customary weekend and
holiday closings), (2) trading on the New York Stock Exchange is restricted, (3)
an emergency exists as a result of which disposal of securities owned by the
Fund is not reasonably practicable or it is not reasonably practicable for the
Fund fairly to determine the value of its net assets, or (4) the Securities and
Exchange Commission may by order permit for the protection of the holders of the
Fund's shares.
TAX STATUS. Although each Fund is a series of the Company, it is
treated as a separate corporation for purposes of the Internal Revenue Code of
1986, as amended (the "Code"). Each Fund expects to meet certain
diversification-of-assets and other requirements in order to qualify under the
Code as a regulated investment company. If it qualifies, a Fund will not be
subject to United States Federal income tax on net ordinary income and net
capital gains which are distributed to its shareholders within certain time
periods specified in the Code. Each Fund intends to distribute annually all of
its net ordinary income and net capital gains. If a Fund were to fail to
distribute timely substantially all such income and gains, it would be subject
to Federal corporate income tax and, in certain circumstances, a 4% excise tax
on its undistributed income and gains.
Distributions from net ordinary income and net short-term capital gains
are taxable to shareholders as ordinary income. The 70% deduction available to
corporations for dividends received from a Fund will apply to ordinary income
distributions only to the extent that they are attributable to a Fund's dividend
income from United States corporations. Distributions from net long-term capital
gains are taxable to a shareholder as long-term capital gains regardless of the
length of time the shares in respect of which such distributions are received
have been held by the shareholder. Dividends declared in December will be
treated as received in December as long as they are actually paid before
February 1 of the following year.
Income from foreign securities purchased by a Fund may be reduced by a
withholding tax at the source. If as of the fiscal year-end of a Fund more than
50% of the Fund's assets are invested in securities of foreign corporations,
then the Fund may make an election which will result in the shareholders having
the option to elect either to deduct their pro rata share of the foreign taxes
paid by the Fund or to use their pro rata share of the foreign taxes paid by the
Fund in calculating the foreign tax credit to which they are entitled.
Distributions by a Fund will be treated as United States source income for
purposes other than computing the foreign tax credit limitation.
Distributions of net ordinary income or net short-term capital gains
received by a non-resident alien individual or foreign corporation which is not
engaged in a trade or business in the United States generally will be subject to
Federal withholding tax at the rate of 30%, unless such rate is reduced by an
applicable income tax treaty to which the
21
<PAGE>
United States is a party. However, gains from the sale by such shareholders of
shares of the Funds and distributions to such shareholders from long-term
capital gains generally will not be subject to the Federal withholding tax.
Ordinarily, distributions and redemption proceeds earned by a United
States shareholder of a Fund are not subject to withholding of Federal income
tax. However, distributions or redemption proceeds paid by a Fund to a
shareholder may be subject to 20% backup withholding if the shareholder fails to
supply the Fund or its agent with such shareholder's taxpayer identification
number or an applicable exemption certificate.
In addition to the Federal income tax consequences described above
relating to an investment in a Fund, there may be other Federal, state or local
tax considerations that depend upon the circumstances of each particular
investor. Prospective shareholders are therefore urged to consult their tax
advisors with respect to the effect of this investment on their own specific
situations.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The average annual total return of each Fund for the periods ended
December 31, 1998 are set forth in the table below. Average annual total return
is computed by finding the average annual compounded rates of return over the
periods indicated that would equate the initial amount invested in a Fund to the
redemption value at the end of the period. All dividends and distributions are
assumed to be reinvested. The results are shown both with and without deduction
of the sales load, since the sales load can be waived for certain investors. [TO
BE UPDATED]
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURN
-----------------------------------------------------
AFTER DEDUCTION OF WITH DEDUCTION OF
MAXIMUM SALES LOAD SALES LOAD
-------------------------- -----------------------
<S> <C> <C>
GAM International Fund (Class A)
1 year
5 years
10 years
From inception (1/2/85)
GAM International Fund (Class B)
From inception (5/26/98)
GAM International Fund (Class C)
From inception (5/20/98)
GAM International Fund (Class D)
1 year
From inception (9/5/95)
GAM Global Fund (Class A)
1 year
5 year
10 year
From inception (5/28/86)
GAM Global Fund (Class B)
From inception (5/26/98)
GAM Global Fund (Class C)
From inception (5/20/98)
GAM Global Fund (Class D)
1 year
From inception (9/5/95)
</TABLE>
22
<PAGE>
GAM Pacific Basin Fund (Class A)
1 year
5 years
10 years
From inception(5/6/87)
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURN
-----------------------------------------------------
AFTER DEDUCTION OF WITH DEDUCTION OF
MAXIMUM SALES LOAD SALES LOAD
------------------------- -----------------------
<S> <C> <C>
GAM Pacific Basin Fund (Class B)
From inception (5/26/98 )
GAM Pacific Basin Fund (Class C)
From inception (5/20/98)
GAM Pacific Basin Fund (Class D)
1 year
From inception (9/5/95)
GAM Europe Fund (Class A)
1 year
5 years
From inception (1/1/90)
GAM Europe Fund (Class B)
From inception (5/27/98)
GAM Europe Fund (Class C)
From inception (5/21/98)
GAM North America Fund (Class A)
1 year
5 years
From inception (1/1/90)
GAM North America Fund (Class B)
From inception (5/27/98)
GAM North America Fund (Class C)
From inception (7/8/98)
GAM Japan Capital Fund (Class A)
1 year
From inception (7/1/94)
GAM Japan Capital Fund (Class B)
From inception (5/28/98)
GAM Japan Capital Fund (Class C)
From inception (5/20/98)
</TABLE>
23
<PAGE>
GAMerica Capital Fund (Class A)
1 year
From inception (5/12/95)
GAMerica Capital Fund (Class B)
From inception (5/27/98)
GAMerica Capital Fund (Class C)
From inception ( 5/27/98)
Prospective investors should note that past results may not be
indicative of future performance. The investment return and principal value of
shares of a Fund will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Comparative performance information may be used from time to time in
advertising each Fund's shares. The performance of GAM Global Fund may be
compared to the Morgan Stanley Capital International (MSCI) World Index. The
performance of GAM International Fund may be compared to the MSCI Europe,
Australia, Far East (EAFE) Index. The performance of GAM Pacific Basin Fund may
be compared to the MSCI Pacific Index. The performance of GAM Asian Capital Fund
may be compared to the MSCI Combined Far East Index ex Japan. The performance of
GAM Japan Capital Fund may be compared to the Tokyo Stock Exchange Index. The
performance of GAM North America Fund and GAMerica Capital Fund may be compared
to the Standard & Poor's 500 Composite Stock Price Index and the Dow Jones
Industrial Average. The performance of GAM Europe Fund may be compared to the
MSCI Europe and Financial Times Actuaries World Indices--Europe. Each stock
index is an unmanaged index of common stock prices, converted into U.S. dollars
where appropriate. Any index selected by a Fund may not compute total return in
the same manner as the Funds and may exclude, for example, dividends paid on
stocks included in the index and brokerage or other fees.
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES
- --------------------------------------------------------------------------------
GAM Funds, Inc., a Maryland corporation, was organized on May 7, 1984.
The Company has seven series of common stock outstanding, each of which may be
divided into four classes of shares, Class A, Class B, Class C and Class D
shares. The four classes of shares of a series represent interests in the same
portfolio of investments, have the same rights, and are generally identical in
all respects, except that each class bears its separate distribution and certain
class expenses and has exclusive voting rights with respect to any matter on
which a separate vote of any class is required by the Act or Maryland law. The
net income attributable to each class and dividends payable on the shares of
each class will be reduced by the amount of distribution fees and other expenses
of each class. Class D shares bear higher 12b-1 fees than Class A shares, which
will cause the Class D shares to pay lower dividends than the Class A shares.
Class B and Class C shares pay higher 12b-1 fees than Class A and Class D
shares, which will cause the Class B and Class C shares to pay lower dividends
than the Class A and Class D shares. The Directors, in the exercise of their
fiduciary duties under the Act and Maryland law, will seek to ensure that no
conflicts arise among the classes of shares of a Fund.
Each share outstanding is entitled to share equally in dividends and
other distributions and in the net assets of the respective series Fund on
liquidation. Shares are fully paid and nonassessable when issued, freely
transferable, have no pre-emptive, subscription or [conversion rights] and are
redeemable and subject to redemption under certain conditions described above.
The Funds do not generally issue certificates for shares purchased.
Each share outstanding entitles the holder to one vote. If a Fund is
separately affected by a matter requiring a vote, the shareholders of each such
Fund shall vote separately. The Company is not required to hold annual meetings
of shareholders, although special meetings will be held for purposes such as
electing or removing directors, changing fundamental policies, or approving an
investment advisory agreement. Shareholders will be assisted in communicating
with other shareholders in connection with removing a director as if Section 16
(c) of the Act were applicable.
24
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of each Fund for the fiscal year ended
December 31, 1998 and the report of the Funds' independent auditors in
connection therewith are included in the 1998 Annual Report to Shareholders and
are incorporated by reference in this Statement of Additional Information.
25
