GLOBAL ASSET MANAGEMENT
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GAM GLOBAL FUND
GAM INTERNATIONAL FUND
GAM PACIFIC BASIN FUND
GAM JAPAN CAPITAL FUND
GAM EUROPE FUND
GAM NORTH AMERICA FUND
GAMERICA CAPITAL FUND
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GAM FUNDS, INC.
PROSPECTUS o APRIL 30, 2000
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.
The Funds described in this Prospectus are managed by GAM International
Management Limited ("GIML"). Fayez Sarofim & Co. ("Sarofim") serves as
co-investment advisor to the GAM North America Fund. GAM and Sarofim are
collectively referred to as the "Investment Advisors." GAM Services, Inc. ("GAM
Services"), an affiliate of GIML, serves as the principal underwriter for the
Funds' securities.
Neither the Securities and Exchange Commission ("SEC") nor any state securities
commission has approved the Funds' 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.
INVESTMENTS IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENTS IN THE FUNDS INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
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TABLE OF CONTENTS
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I. RISK AND RETURN SUMMARY
GAM Global Fund 3
GAM International Fund 10
GAM Pacific Basin Fund 16
GAM Japan Capital Fund 22
GAM Europe Fund 28
GAM North America Fund 34
GAMerica Capital Fund 39
II. MANAGEMENT OF THE FUNDS 45
III. SHAREHOLDER INFORMATION
Choosing the appropriate share class 47
How to buy shares 51
How to sell shares 52
How to exchange shares 53
Account services 54
Dividends and tax matters 54
IV. FINANCIAL HIGHLIGHTS 56
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I. RISK AND RETURN SUMMARY
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GAM Global Fund
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation. Upon written notice to
shareholders, the Fund's investment objective may be changed without a vote of
shareholders.
PRINCIPAL INVESTMENT STRATEGY
The Fund invests primarily in common stocks of companies in any country of the
world, including the United States, Canada, Europe and the Pacific Basin. Under
normal market conditions, the Fund will invest in stocks issued in at least
three different countries.
If the investment advisor determines that the long-term capital appreciation of
bonds may equal or exceed the return on stocks, then the Fund may invest
substantially in bonds issued either by governments or government agencies or
corporations. To determine the relative attractiveness of stocks versus bonds,
the investment advisor compares the stock's earnings yield to short- and
long-term interest rates. Debt securities in which the Fund may invest are not
required to have any rating. The Fund may not invest more than 5% of its assets
in bonds rated lower than investment grade.
In selecting either a stock or bond, the investment advisor uses a "top down"
three-step approach screening potential investments by country, sector and
security. Countries and sectors are avoided when the investment advisor regards
them as too risky based on an economic analysis that examines, among other
factors, interest rates, growth rates, the inflation outlook and the strength of
the currency. The investment advisor seeks growth stocks at reasonable prices.
Generally, the investment advisor prefers companies with:
o Good industry fundamentals (sound balance sheet; solid earnings record; strong
forecasted earnings growth)
o "Pricing power" (the ability to raise prices at or
above the rate of inflation)
o High market share
o Some degree of "organic" growth not tied to the overall state of the economy
(strength of the ongoing business itself absent growth tied to mergers and
acquisitions)
Sales are triggered by an assessment that the security is no longer a good value
or that fundamental prospects have deteriorated. A deterioration of fundamentals
occurs when news on the company indicates a change in the company's prospects.
For example, a loss of market share, or less-than-expected or negative earnings
growth would indicate a deterioration of fundamentals. Sales are also triggered
when a company reaches a high price per earnings ratio relative to earnings
growth and interest rates.
The investment advisor does not screen potential companies based on size of the
company. Rather, the investment advisor takes into account its ability to
purchase or sell the company with relative ease within a short time frame.
The Fund, for temporary defensive purposes, may invest in 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. Should the Fund take a
temporary defensive position, it may not achieve its investment objectives. At
no point will more than 35% of the Fund's portfolio be held in cash or cash
equivalents, except when the Fund is taking temporary defensive measures.
PRINCIPAL RISKS
You could lose all or a portion of your investment in the Fund. Stock and bond
prices fluctuate in response to many factors including interest rates, general
economic conditions, investor perceptions and market liquidity. Investing in
foreign securities generally involve greater risk than investing in U.S.
securities. Foreign securities prices may vary more widely than those of U.S.
securities because of economic, financial, political or social factors
including:
o POLITICAL CONDITIONS Government regulation or action may adversely affect
foreign markets through the imposition of capital controls, the
nationalization of companies or industries, excessive taxes, or similar
items.
o 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.
3
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GAM FUNDS INC PROSPECTUS / RISK AND RETURN SUMMARY GAM
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Foreign issuers may be subject to less stringent government supervision or
regulation of financial markets and business practices than U.S. issuers.
o LIQUIDITY Non-U.S. securities may trade on small exchanges less well
regulated than U.S. exchanges, may be more difficult to buy or sell on a
particular day and may be more volatile than U.S. securities.
o COMMISSIONS AND FEES Brokerage fees and commissions are generally higher
abroad than in the U.S.
o 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.
o CURRENCY Fluctuations in currencies, local withholding and other taxes may
adversely impact the price of the Fund's investment.
o CREDIT AND RATING RISK Credit risk relates to the ability of the issuer to
meet interest or principal payments or both as they become due. In general,
lower-grade, higher-yield bonds are subject to credit risk to a greater
extent than lower-yield, higher-quality bonds. The lower the rating of a debt
instrument the more speculative its characteristics and changes in economic
or other circumstances are more likely to lead to an inability of the issuer
to make principal and interest payments than issuers of higher grade
securities.
o INTEREST RATE RISK Interest rate risk refers to the fluctuations in value of
fixed-income securities resulting from the inverse relationship between price
and yield. For example, an increase in general interest rates will tend to
reduce the market value of already-issued fixed-income investments, and a
decline in general interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes
in interest rates than obligations with shorter maturities.
o COMPANY RISK Investing in the Fund involves the risk common to investing in
any security, that is that the value of the securities held by the Fund will
fluctuate in response to changes in economic conditions or public
expectations about those securities. The net asset value of the Fund's shares
will change accordingly.
o MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
WHO MAY WANT TO INVEST?
The Fund may best suit those investors who want long-term capital appreciation,
and who can tolerate the risks involved with stock and foreign investing.
4
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FOR MORE INFORMATION PLEASE CALL 800-426-4685
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GAM
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GAM GLOBAL FUND
PAST PERFORMANCE AND EXPENSES
A BAR DISPLAYS THE ANNUAL RETURN OF THE FUND FOR EACH YEAR. THIS ILLUSTRATES THE
VARIABILITY OF THE PERFORMANCE FROM YEAR TO YEAR AND PROVIDES SOME INDICATION OF
THE RISKS OF INVESTING IN THE FUND. 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
[Figures below represent chart in printed piece]
'90 -11.26%
'91 10.61%
'92 -4.65%
'93 75.30%
'94 -16.15%
'95 36.25%
'96 12.74%
'97 34.95%
'98 2.57%
'99 14.23%
HIGHEST AND LOWEST RETURNS
Highest Performing Quarter 27.26% in 4th quarter of 1993
Lowest Performing Quarter -12.63% in 1st quarter of 1994
THE MSCI WORLD INDEX IS A BROAD MARKET INDEX USED FOR COMPARATIVE PURPOSES. PAST
PERFORMANCE DOES NOT GUARANTEE OR PREDICT FUTURE RESULTS.
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GAM GLOBAL FUND
1-, 5-, AND 10-YEAR (OR LIFE-OF-CLASS) AVERAGE ANNUAL TOTAL RETURN FOR ALL
RELEVANT SHARE CLASSES PLUS A COMPARISON TO THE MSCI WORLD INDEX
AS OF DECEMBER 31, 1999
CLASS 1 YEAR 5 YEAR 10 YEAR
(INCEPTION DATE) (OR LIFE-OF-CLASS-
IF LESS THAN 10 YEARS)
<S> <C> <C> <C>
A SHARES (MAY 28, 1986)
(AFTER MAXIMUM SALES LOAD OF 5%) 8.52% 18.20% 12.24%
B SHARES (MAY 26, 1998)
(WITH DEFERRED SALES CHARGE) 8.34% N/A -0.51%*
C SHARES (MAY 19, 1998)
(WITH DEFERRED SALES CHARGE) 12.25% N/A 1.66%*
D SHARES (OCTOBER 6, 1995)
(AFTER MAXIMUM SALES LOAD OF 3.5%) 9.96% N/A 14.97%*
MSCI WORLD INDEX** 25.34% 20.25% 11.98%
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* Returns of MSCI World Index were for the Life-of-Class B: 20.84%; C: 20.90%
and D: 20.21%.
** 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.
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FOR MORE INFORMATION PLEASE CALL 800-426-4685
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FUND INVESTORS PAY VARIOUS EXPENSES EITHER DIRECTLY OR INDIRECTLY. THIS TABLE
SHOWS THE EXPENSES FOR THE PAST YEAR, ADJUSTED TO REFLECT ANY CHARGES THAT YOU
MAY PAY IF YOU BUY AND HOLD SHARES OF THE FUND. ACTUAL OR FUTURE EXPENSES MAY BE
DIFFERENT.
FEES AND EXPENSES OF THE FUND
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GAM GLOBAL FUND INVESTOR EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
CLASS A CLASS B CLASS C CLASS D
SALES CHARGES (paid directly from your investment)
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<S> <C> <C> <C> <C>
Maximum Sales Charge 5.00% 0.00% 0.00% 3.50%
Maximum Deferred Sales Charge 0.00%* 5.00% 1.00% 0.00%
ANNUAL FUND OPERATING EXPENSES (% OF NET ASSETS) (expenses that are deducted from Fund assets)
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Management Fees 1.00% 1.00% 1.00% 1.00%
Distribution (12b-1) Fees 0.30% 1.00% 1.00% 0.50%
Other Expenses 0.59% 0.76% 0.77% 0.66%
TOTAL FUND OPERATING EXPENSES 1.89% 2.76% 2.77% 2.16%
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* Except for investments of $1 million or more. See "Information about
contingent deferred sales charge."
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.
EXAMPLES
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EXPENSES OF HYPOTHETICAL $10,000 INVESTMENT
IN GAM GLOBAL FUND
CLASS A CLASS B* CLASS C CLASS D
EXAMPLE #1
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For one year 682 779 380 561
For three years 1,064 1,156 859 1,002
For five years 1,470 1,659 1,464 1,469
For ten years 2,601 2,881 3,099 2,756
EXAMPLE #2
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For one year 682 279 280 561
For three years 1,064 856 859 1,002
For five years 1,470 1,459 1,464 1,469
For ten years 2,601 2,881 3,099 2,756
* Class B converts to Class A at end of Year 8.
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GAM FUNDS INC PROSPECTUS / GAM GLOBAL FUND GAM
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ADDITIONAL INFORMATION ABOUT NON-PRINCIPAL STRATEGIES AND RISKS
STRATEGIES
In addition to the principal strategies stated above, the following are
non-principal strategies you should consider. The Fund will not acquire more
than 10% of the outstanding voting securities of any one issuer. No more than
25% of the Fund's total assets will be invested in any one industry.
The Fund may from time to time engage in short selling of securities. Short
selling is an investment technique wherein the Fund sells a security it does not
own anticipating a decline in the market value of the security. Losses from
short sales differ from losses that could be incurred from a purchase of a
security, because losses from short sales may be unlimited, whereas losses from
purchases can equal only the total amount invested.
The frequency of short sales will vary substantially under different market
conditions, and no specified portion of Fund assets as a matter of practice will
be committed to short sales. However, no securities will be sold short if, after
effect is given to any such short sale, the total market value of all securities
sold short would exceed 20% of the value of the Fund's net assets.
The Fund 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:
o FORWARD FOREIGN EXCHANGE CONTRACTS When the 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 Fund may buy forward foreign exchange contracts on
foreign currencies. These contracts "lock in" a price for the currency at a
certain future date. The Fund may also use put and call options on foreign
currencies.
o 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.
o 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.
o 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 Fund 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. The Fund may experience losses or delays if a counterparty
to any such contract defaults or goes into bankruptcy.
RISKS
In addition to the principal risks stated above, the following are non-principal
risks you should consider.
o DERIVATIVE INSTRUMENTS Derivatives involve substantial risk, because a
relatively small change in the security or index underlying a derivative can
produce a disproportionately large loss. The Fund may lose more than its
initial investment. If the 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. The 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 the Fund
predicts incorrectly, it could lose money--more than if it had not hedged at
all. Hedging cannot eliminate fluctuations in the prices of foreign
securities, and there is no assurance that such hedging attempts will be
successful.
o MANAGEMENT RISK The Fund is subject to management risk because it is an
actively managed investment portfolio. The investment advisor will apply its
investment
8
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FOR MORE INFORMATION PLEASE CALL 800-426-4685
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techniques and risk analyses in making investment decisions for the Fund, but
there is no guarantee that its decisions will produce the intended result.
o SMALL AND MID-CAP RISK Investing in companies with small and mid-cap market
capitalizations involves greater risk than investing in larger companies.
Their stock prices can rise very quickly and drop dramatically in a short
period of time. This volatility results from a number of factors, including
reliance by these companies on limited product lines, markets and financial
and management resources. These and other factors may make small and mid-cap
companies more susceptible to setbacks or downturns. These companies may
experience higher rates of bankruptcy or other failures than larger
companies. They may be more likely to be negatively affected by changes in
management. In addition, the stock of a small and mid-cap company may be
thinly traded.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate will fluctuate from year to year, and the
Fund may have a portfolio turnover rate of more than 100% annually. "Portfolio
turnover" describes the rate at which the Fund traded its portfolio securities
during its last fiscal year. For example, if the Fund sold all of its securities
during the year, its portfolio turnover rate would have been 100%. Increased
portfolio turnover creates higher brokerage and transaction costs for the Fund,
which may reduce its overall performance. Additionally, the realization of
capital gains from selling portfolio securities may result in distributions of
taxable capital gains to shareholders, since the Fund will normally distribute
all of its capital gains realized to shareholders each year to avoid excise
taxes under the Internal Revenue Code.
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GAM FUNDS INC PROSPECTUS / RISK AND RETURN SUMMARY GAM
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GAM International Fund
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation. Upon written notice to
shareholders, the Fund's investment objective may be changed without a vote of
shareholders.
PRINCIPAL INVESTMENT STRATEGY
The Fund invests primarily in common stocks of companies in any country of the
world, other than the United States--normally Canada, Europe and the Pacific
Basin. Under normal market conditions, the Fund will invest in stocks issued in
at least three different countries.
In addition, if the investment advisor determines that the long-term capital
appreciation of bonds may equal or exceed the return on stocks, then the Fund
may invest substantially in bonds issued either by governments or government
agencies or corporations. To determine the relative attractiveness of stocks
versus bonds, the investment advisor compares the stock's earnings yield to
short- and long-term interest rates. Debt securities in which the Fund may
invest are not required to have any rating. The Fund may not invest more than 5%
of assets in bonds rated lower than investment grade.
In selecting either a stock or bond, the investment advisor uses a "top down"
three-step approach screening potential investments by country, sector and
security. Countries and sectors are avoided when the investment advisor regards
them as too risky based on an economic analysis that examines, among other
factors, interest rates, growth rates, the inflation outlook and the strength of
the currency. The investment advisor seeks growth stocks at reasonable prices.
Generally, the investment advisor prefers companies with:
o Good industry fundamentals (sound balance sheet; solid earnings record; strong
forecasted earnings growth)
o "Pricing power" (the ability to raise prices at or above the rate of
inflation)
o High market share
o Some degree of "organic" growth not tied to the overall state of the economy
(strength of the ongoing business itself absent growth tied to mergers and
acquisitions)
Sales are triggered by an assessment that the security is no longer a good value
or that fundamental prospects have deteriorated. A deterioration of fundamentals
occurs when news on the company indicates a change in the company's prospects.
For example, a loss of market share or less-than-expected or negative earnings
growth would indicate a deterioration of fundamentals. Sales are also triggered
when a company reaches a high price per earnings ratio relative to earnings
growth and interest rates.
The investment advisor does not screen potential companies based on size of the
company. Rather, the investment advisor takes into account its ability to
purchase or sell the company with relative ease within a short time frame.
The Fund, for temporary defensive purposes, may invest in 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. Should the Fund take a
temporary defensive position, it may not achieve its investment objectives. At
no point will more than 35% of the Fund's portfolio be held in cash or cash
equivalents, except when the Fund is taking temporary defensive measures.
PRINCIPAL RISKS
You could lose all or a portion of your investment in the Fund. Stock and bond
prices fluctuate in response to many factors including interest rates, general
economic conditions, investor perceptions and market liquidity. Investing in
foreign securities generally involve greater risk than investing in U.S.
securities. Foreign securities prices may vary more widely than those of U.S.
securities because of economic, financial, political or social factors
including:
o POLITICAL CONDITIONS Government regulation or action may adversely affect
foreign markets through the imposition of capital controls, the
nationalization of companies or industries, excessive taxes, or similar
items.
o 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 gov-
10
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FOR MORE INFORMATION PLEASE CALL 800-426-4685
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ernment supervision or regulation of financial markets and business practices
than U.S. issuers.
o LIQUIDITY Non-U.S. securities may trade on small exchanges less well
regulated than U.S. exchanges, may be more difficult to buy or sell on a
particular day and may be more volatile than U.S. securities.
o COMMISSIONS AND FEES Brokerage fees and commissions are generally higher
abroad than in the U.S.
o 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.
o CURRENCY Fluctuations in currencies, local withholding and other taxes may
adversely impact the price of the Fund's investment.
o CREDIT AND RATING RISK Credit risk relates to the ability of the issuer to
meet interest or principal payments or both as they become due. In general,
lower-grade, higher-yield bonds are subject to credit risk to a greater
extent than lower-yield, higher-quality bonds. The lower the rating of a debt
instrument the more speculative its characteristics and changes in economic
or other circumstances are more likely to lead to an inability of the issuer
to make principal and interest payments than issuers of higher grade
securities.
o INTEREST RATE RISK Interest rate risk refers to the fluctuations in value of
fixed-income securities resulting from the inverse relationship between price
and yield. For example, an increase in general interest rates will tend to
reduce the market value of already-issued fixed-income investments, and a
decline in general interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes
in interest rates than obligations with shorter maturities.
o COMPANY RISK Investing in the Fund involves the risk common to investing in
any security, that is that the value of the securities held by the Fund will
fluctuate in response to changes in economic conditions or public
expectations about those securities. The net asset value of the Fund's shares
will change accordingly.
o MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
WHO MAY WANT TO INVEST?
The Fund may best suit those investors who want long-term capital appreciation,
and who can tolerate the risks involved with stock and foreign investing.
11
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GAM FUNDS INC PROSPECTUS / RISK AND RETURN SUMMARY GAM
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GAM INTERNATIONAL FUND
PAST PERFORMANCE AND EXPENSES
A BAR DISPLAYS THE ANNUAL RETURN OF THE FUND FOR EACH YEAR. THIS ILLUSTRATES THE
VARIABILITY OF THE PERFORMANCE FROM YEAR TO YEAR AND PROVIDES SOME INDICATION OF
THE RISKS OF INVESTING IN THE FUND. 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
[Figures below represent chart in printed piece]
'90 -7.30%
'91 15.56%
'92 3.08%
'93 79.96%
'94 -10.23%
'95 30.09%
'96 8.98%
'97 28.93%
'98 7.22%
'99 6.99%
HIGHEST AND LOWEST RETURNS
Highest Performing Quarter 31.00% in 4th quarter of 1999
Lowest Performing Quarter -10.77% in 3rd quarter of 1998
THE MSCI EAFE INDEX IS A BROAD MARKET INDEX USED FOR COMPARATIVE PURPOSES.
PAST PERFORMANCE DOES NOT GUARANTEE OR PREDICT FUTURE RESULTS.
<TABLE>
<CAPTION>
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GAM INTERNATIONAL FUND
1-, 5-, AND 10-YEAR (OR LIFE-OF-CLASS) AVERAGE ANNUAL TOTAL RETURN FOR ALL
RELEVANT SHARE CLASSES PLUS A COMPARISON TO THE MSCI EAFE INDEX
AS OF DECEMBER 31, 1999
CLASS 1 YEAR 5 YEAR 10 YEAR
(INCEPTION DATE) (OR LIFE-OF-CLASS-
IF LESS THAN 10 YEARS)
<S> <C> <C> <C>
A SHARES (JANUARY 2, 1985)
(AFTER MAXIMUM SALES LOAD OF 5%) 1.64% 14.78% 13.52%
B SHARES (MAY 26, 1998)
(WITH DEFERRED SALES CHARGE) 1.25% N/A -4.05%*
C SHARES (MAY 19, 1998)
(WITH DEFERRED SALES CHARGE) 5.32% N/A -0.61%*
D SHARES (SEPTEMBER 18, 1998
(AFTER MAXIMUM SALES LOAD OF 3.5%) 3.08% N/A 12.94%*
MSCI EAFE INDEX** 27.30% 13.15% 7.35%
</TABLE>
*Returns of MSCI EAFE Index were for the Life-of-Class B: 17.72%; C: 19.30% and
D: 14.34%.
**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.
12
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
FEES AND EXPENSES OF THE FUND
FUND INVESTORS PAY VARIOUS EXPENSES EITHER DIRECTLY OR INDIRECTLY. THIS TABLE
SHOWS THE EXPENSES FOR THE PAST YEAR, ADJUSTED TO REFLECT ANY CHARGES THAT YOU
MAY PAY IF YOU BUY AND HOLD SHARES OF THE FUND. ACTUAL OR FUTURE EXPENSES MAY BE
DIFFERENT.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
GAM INTERNATIONAL FUND INVESTOR EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
CLASS A CLASS B CLASS C CLASS D
<S> <C> <C> <C> <C>
SALES CHARGES (paid directly from your investment)
- --------------------------------------------------------------------------------------------------
Maximum Sales Charge 5.00% 0.00% 0.00% 3.50%
Maximum Deferred Sales Charge 0.00%* 5.00% 1.00% 0.00%
ANNUAL FUND OPERATING EXPENSES (% OF NET ASSETS) (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------------------------
Management Fees 1.00% 1.00% 1.00% 1.00%
Distribution (12b-1) Fees 0.30% 1.00% 1.00% 0.50%
Other Expenses 0.46% 0.48% 0.48% 0.44%
TOTAL FUND OPERATING EXPENSES 1.76% 2.48% 2.48% 1.94%
</TABLE>
* Except for investments of $1 million or more. See "Information about
contingent deferred sales charge."
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.
EXAMPLES
- --------------------------------------------------------------------------------
EXPENSES OF HYPOTHETICAL $10,000 INVESTMENT
IN GAM INTERNATIONAL FUND
CLASS A CLASS B* CLASS C CLASS D
EXAMPLE #1
- --------------------------------------------------------------------------------
For one year 670 751 351 540
For three years 1,026 1,073 773 938
For five years 1,406 1,521 1,321 1,360
For ten years 2,469 2,639 2,816 2,535
EXAMPLE #2
- --------------------------------------------------------------------------------
For one year 670 251 251 540
For three years 1,026 773 773 938
For five years 1,406 1,321 1,321 1,360
For ten years 2,469 2,639 2,816 2,535
* Class B converts to Class A at the end of Year 8.
13
====
GAM FUNDS INC PROSPECTUS / GAM INTERNATIONAL FUND GAM
<PAGE>
================================================================================
ADDITIONAL INFORMATION ABOUT NON-PRINCIPAL STRATEGIES AND RISKS
STRATEGIES
In addition to the principal strategies stated above, the following are
non-principal strategies you should consider.
The Fund will not acquire more than 10% of the outstanding voting securities of
any one issuer. No more than 25% of the Fund's total assets will be invested in
any one industry.
The Fund may from time to time engage in short selling of securities. Short
selling is an investment technique wherein the Fund sells a security it does not
own anticipating a decline in the market value of the security. Losses from
short sales differ from losses that could be incurred from a purchase of a
security, because losses from short sales may be unlimited, whereas losses from
purchases can equal only the total amount invested.
The frequency of short sales will vary substantially under different market
conditions, and no specified portion of Fund assets as a matter of practice will
be committed to short sales. However, no securities will be sold short if, after
effect is given to any such short sale, the total market value of all securities
sold short would exceed 20% of the value of the Fund's net assets.
The Fund 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:
o FORWARD FOREIGN EXCHANGE CONTRACTS When the 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 Fund may buy forward foreign exchange contracts on
foreign currencies. These contracts "lock in" a price for the currency at a
certain future date. The Fund may also use put and call options on foreign
currencies.
o 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.
o 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.
o 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 Fund 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. The Fund may experience losses or delays if a counterparty
to any such contract defaults or goes into bankruptcy.
RISKS
In addition to the principal risks stated above, the following are non-principal
risks you should consider.
o DERIVATIVE INSTRUMENTS Derivatives involve substantial risk, because a
relatively small change in the security or index underlying a derivative can
produce a disproportionately large loss. The Fund may lose more than its
initial investment. If the 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. The 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 the Fund
predicts incorrectly, it could lose money--more than if it had not hedged at
all. Hedging cannot eliminate fluctuations in the prices of foreign
securities, and there is no assurance that such hedging attempts will be
successful.
14
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
o MANAGEMENT RISK The Fund is subject to management risk because it is an
actively managed investment port folio. The investment advisor will apply its
investment techniques and risk analyses in making investment decisions for
the Fund, but there is no guarantee that its decisions will produce the
intended result.
o SMALL AND MID-CAP RISK Investing in companies with small and mid-cap market
capitalizations involves greater risk than investing in larger companies.
Their stock prices can rise very quickly and drop dramatically in a short
period of time. This volatility results from a number of factors, including
reliance by these companies on limited product lines, markets and financial
and management resources. These and other factors may make small and mid-cap
companies more susceptible to setbacks or downturns. These companies may
experience higher rates of bankruptcy or other failures than larger
companies. They may be more likely to be negatively affected by changes in
management. In addition, the stock of a small and mid-cap company may be
thinly traded.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate will fluctuate from year to year, and the
Fund may have a portfolio turnover rate of more than 100% annually. "Portfolio
turnover" describes the rate at which the Fund traded its portfolio securities
during its last fiscal year. For example, if the Fund sold all of its securities
during the year, its portfolio turnover rate would have been 100%. Increased
portfolio turnover creates higher brokerage and transaction costs for the Fund,
which may reduce its overall performance. Additionally, the realization of
capital gains from selling portfolio securities may result in distributions of
taxable capital gains to shareholders, since the Fund will normally distribute
all of its capital gains realized to shareholders each year to avoid excise
taxes under the Internal Revenue Code.
15
====
GAM FUNDS INC PROSPECTUS / RISK AND RETURN SUMMARY GAM
<PAGE>
================================================================================
GAM Pacific Basin Fund
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation. Upon written notice to
shareholders, the Fund's investment objective may be changed without a vote of
shareholders.
PRINCIPAL INVESTMENT STRATEGY
The Fund invests primarily in common stocks of companies in the Pacific Basin,
including Japan, Hong Kong, Singapore, Malaysia, Thailand, Vietnam, Indonesia,
the Philippines, Korea, China, Taiwan, India, Australia and New Zealand. Under
normal market conditions, the Fund will invest in stocks issued in at least
three different countries. The Fund has a fundamental policy of concentrating at
least 25% of its assets in the financial services sector. Thus, more than 25% of
the value of the total assets of the Fund will ordinarily be invested in the
financial services sector, which sector includes banking, financial services,
insurance and real estate.
In addition, if the investment advisor determines that the long-term capital
appreciation of bonds may equal or exceed the return on stocks, then the Fund
may invest substantially in bonds issued either by governments or government
agencies or corporations. Debt securities in which the Fund may invest are not
required to have any rating. The Fund may not invest more than 5% of assets in
bonds rated lower than investment grade.
In selecting investments for the Fund, the investment advisor looks first at the
economic environment and will attempt to exclude speculative and highly illiquid
countries. Sector and stocks are excluded when viewed as over-valued. Within
those markets identified for investment, the investment advisor employs a
fundamental investment process focusing on factors such as:
o Experience and shareholder focus of company management
o Financial health including the strength of the balance sheet, cash flow,
earnings quality and long-term growth
o Competitive position within the industry
o Price of the stock compared to forecasted growth rate
o Liquidity as measured by market capitalization, daily trading volume
o Capability of management
Stocks selected tend to have higher return on equity, higher growth in earnings
per share and higher growth in cash flow per share than the benchmark index
(MSCI Pacific Index). Companies selected tend to be large-caps with high
liquidity, although the Fund is not restricted in terms of the size of the
company it could buy. Sales are triggered by an assessment that the stock is no
longer a good value or that fundamental prospects have deteriorated. A
deterioration of fundamentals occurs when, for example, management leaves, the
industry goes into a decline, or the company becomes overvalued by the markets.
Sales are also triggered when the investment advisor determines that there may
be better opportunities elsewhere.
The Fund, for temporary defensive purposes, may invest in 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. Should the Fund take a
temporary defensive position, it may not achieve its investment objectives. At
no point will more than 35% of the Fund's portfolio be held in cash or cash
equivalents, except when the Fund is taking temporary defensive measures.
PRINCIPAL RISKS
You could lose all or a portion of your investment in the Fund. Stock and bond
prices fluctuate in response to many factors including interest rates, general
economic conditions, investor perceptions and market liquidity. Since the Fund
invests principally in the Pacific Basin, it will be impacted by regional events
there to a greater extent than a more broadly diversified fund. Investing in
foreign securities generally involve greater risk than investing in U.S.
securities. Foreign securities prices may vary more widely than those of U.S.
securities because of economic, financial, political or social factors
including:
o POLITICAL CONDITIONS Government regulation or action may adversely affect
foreign markets through the imposition of capital controls, the
nationalization of companies or industries, excessive taxes, or similar
items.
o 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
16
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
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.
o LIQUIDITY Non-U.S. securities may trade on small exchanges less well
regulated than U.S. exchanges, may be more difficult to buy or sell on a
particular day and may be more volatile than U.S. securities.
o COMMISSIONS AND FEES Brokerage fees and commissions are generally higher
abroad than in the U.S.
o 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.
o CURRENCY Fluctuations in currencies, local withholding and other taxes may
adversely impact the price of the Fund's investment.
o CREDIT AND RATING RISK Credit risk relates to the ability of the issuer to
meet interest or principal payments or both as they become due. In general,
lower-grade, higher-yield bonds are subject to credit risk to a greater
extent than lower-yield, higher-quality bonds. The lower the rating of a debt
instrument the more speculative its characteristics and changes in economic
or other circumstances are more likely to lead to an inability of the issuer
to make principal and interest payments than issuers of higher grade
securities.
o INTEREST RATE RISK Interest rate refers to the fluctuations in value of
fixed-income securities resulting from the inverse relationship between price
and yield. For example, an increase in general interest rates will tend to
reduce the market value of already-issued fixed-income investments, and a
decline in general interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes
in interest rates than obligations with shorter maturities.
o COMPANY RISK Investing in the Fund involves the risk common to investing in
any security, that is that the value of the securities held by the Fund will
fluctuate in response to changes in economic conditions or public
expectations about those securities. The net asset value of the Fund's shares
will change accordingly.
o MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risks may affect a single issuer, industry, sector of
the economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
Since the Fund will concentrate its investments in the financial services
sector, it may be subject to greater share price fluctuations than a
non-concentrated fund and there is the risk that the Fund will perform poorly
during a downturn in that sector. Also, changes in government policies and
regulation, interest rates, currency exchange rates, and other factors affecting
the financial markets may affect businesses in the finance sector more
significantly. In addition, as the Fund's investments are concentrated in
investments in the financial services sector in the Pacific Basin, the Fund may
be more volatile than a more diversified Pacific Basin sector fund.
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
WHO MAY WANT TO INVEST?
The Fund may best suit those investors who want long-term capital appreciation,
and who can tolerate the risks involved with stock and foreign investing. Also,
the Fund may only be appropriate if you can tolerate concentrated investments in
a single market sector within the Pacific Basin region. The Fund should be
considered a vehicle for diversification and should not be considered a balanced
investment program by itself.
17
====
GAM FUNDS INC PROSPECTUS / RISK AND RETURN SUMMARY GAM
<PAGE>
================================================================================
GAM PACIFIC BASIN FUND
PAST PERFORMANCE AND EXPENSES
A BAR DISPLAYS THE ANNUAL RETURN OF THE FUND FOR EACH YEAR. THIS ILLUSTRATES THE
VARIABILITY OF THE PERFORMANCE FROM YEAR TO YEAR AND PROVIDES SOME INDICATION OF
THE RISKS OF INVESTING IN THE FUND. 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
[Figures below represent chart in printed piece]
'90 -8.21%
'91 16.71%
'92 -.37%
'93 51.52%
'94 7.41%
'95 4.50%
'96 -.39%
'97 -30.00%
'98 -3.99%
'99 74.91%
HIGHEST AND LOWEST RETURNS
Highest Performing Quarter 36.64% in 4th quarter of 1999
Lowest Performing Quarter -26.11% in 4th quarter of 1997
THE TOKYO STOCK EXCHANGE INDEX IS A 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) AVERAGE ANNUAL TOTAL RETURN FOR ALL
RELEVANT SHARE CLASSES PLUS A COMPARISON TO THE MSCI PACIFIC INDEX
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
CLASS 1 YEAR 5 YEAR 10 YEAR
(INCEPTION DATE) (OR LIFE-OF-CLASS-
IF LESS THAN 10 YEARS)
<S> <C> <C> <C>
A SHARES (MAY 6, 1987)
(AFTER MAXIMUM SALES LOAD OF 5%) 66.16% 3.06% 7.26%
B SHARES (MAY 26, 1998)
(AFTER DEFERRED SALES CHARGE) 62.90% N/A 35.90%*
C SHARES (JUNE 1, 1998)
(WITH DEFERRED SALES CHARGE) 62.15% N/A 32.89%*
D SHARES (OCTOBER 18, 1995)
(AFTER MAXIMUM SALES LOAD OF 3.5%) 67.64% N/A 2.89%*
MSCI PACIFIC INDEX** 57.96% 2.70% 0.52%
</TABLE>
* Returns of MSCI Pacific Index were for the Life-of-Class B: 38.51%; C: 43.61%
and D: 4.38%.
** 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.
18
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
FEES AND EXPENSES OF THE FUND
FUND INVESTORS PAY VARIOUS EXPENSES EITHER DIRECTLY OR INDIRECTLY. THE TABLE
ABOVE SHOWS THE EXPENSES FOR THE PAST YEAR, ADJUSTED TO REFLECT ANY CHARGES THAT
YOU MAY PAY IF YOU BUY AND HOLD SHARES OF THE FUND. 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 5.00% 0.00% 0.00% 3.50%
Maximum Deferred Sales Charge 0.00%* 5.00% 1.00% 0.00%
ANNUAL FUND OPERATING EXPENSES (% OF NET ASSETS) (expenses that are deducted from Fund assets)
- ------------------------------------------------------------------------------------------------
Management Fees 1.00% 1.00% 1.00% 1.00%
Distribution (12b-1) Fees 0.30% 1.00% 1.00% 0.50%
Other Expenses 0.96% 1.48% 3.57% 1.39%
TOTAL FUND OPERATING EXPENSES 2.26% 3.48% 5.57% 2.89%
</TABLE>
* Except for investments of $1 million or more. See "Information about
contingent deferred sales charge."
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.
EXAMPLES
- --------------------------------------------------------------------------------
EXPENSES OF HYPOTHETICAL $10,000 INVESTMENT
IN GAM PACIFIC BASIN FUND
CLASS A CLASS B* CLASS C CLASS D
EXAMPLE #1
- -------------------------------------------------------------------------------
For one year 718 851 655 632
For three years 1,171 1,368 1,657 1,213
For five years 1,650 2,007 2,746 1,820
For ten years 2,965 3,483 5,414 3,451
EXAMPLE #2
- --------------------------------------------------------------------------------
For one year 718 351 555 632
For three years 1,171 1,068 1,657 1,213
For five years 1,650 1,807 2,746 1,820
For ten years 2,965 3,483 5,414 3,451
* Class B converts to Class A at end of Year 8.
19
====
GAM FUNDS INC PROSPECTUS / GAM PACIFIC BASIN FUND GAM
<PAGE>
================================================================================
ADDITIONAL INFORMATION ABOUT NON-PRINCIPAL STRATEGIES AND RISKS
STRATEGIES
In addition to the principal strategies stated above, the following are
non-principal strategies you should consider.
The Fund will not acquire more than 10% of the outstanding voting securities of
any one issuer.
The Fund 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:
o FORWARD FOREIGN EXCHANGE CONTRACTS When the 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 Fund may buy forward foreign exchange contracts on
foreign currencies. These contracts "lock in" a price for the currency at a
certain future date. The Fund may also use put and call options on foreign
currencies.
o 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.
o 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 Fund 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. The Fund may experience losses or delays if a counterparty
to any such contract defaults or goes into bankruptcy.
RISKS
In addition to the principal risks stated above, the following are non-principal
risks you should consider.
o DERIVATIVE INSTRUMENTS Derivatives involve substantial risk, because a
relatively small change in the security or index underlying a derivative can
produce a disproportionately large profit or loss. The Fund may lose more
than its initial investment. If the 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. The 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 the Fund predicts incorrectly, it could lose money--more than if it had
not hedged at all. Hedging cannot eliminate fluctuations in the prices of
foreign securities, and there is no assurance that such hedging attempts will
be successful.
o MANAGEMENT RISK The Fund is subject to management risk because it is an
actively managed investment portfolio. The investment advisor will apply its
investment techniques and risk analyses in making investment decisions for
the Fund, but there is no guarantee that its decisions will produce the
intended result.
o SMALL AND MID-CAP RISK Investing in companies with small and mid-cap market
capitalizations involves greater risk than investing in larger companies.
Their stock prices can rise very quickly and drop dramatically in a short
period of time. This volatility results from a number of factors, including
reliance by these companies on limited product lines, markets and financial
and management resources. These and other factors may make small and mid-cap
companies more susceptible to setbacks or downturns. These companies may
experience higher rates of bankruptcy or other failures than larger
companies. They may be more likely to be negatively affected by changes in
management. In addition, the stock of a small and mid-cap company may be
thinly traded.
20
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate will fluctuate from year to year, and the
Fund may have a portfolio turnover rate of more than 100% annually. "Portfolio
turnover" describes the rate at which the Fund traded its portfolio securities
during its last fiscal year. For example, if the Fund sold all of its securities
during the year, its portfolio turnover rate would have been 100%. Increased
portfolio turnover creates higher brokerage and transaction costs for the Fund,
which may reduce its overall performance. Additionally, the realization of
capital gains from selling portfolio securities may result in distributions of
taxable capital gains to shareholders, since the Fund will normally distribute
all of its capital gains realized to shareholders each year to avoid excise
taxes under the Internal Revenue Code.
21
====
GAM FUNDS INC PROSPECTUS / RISK AND RETURN SUMMARY GAM
<PAGE>
================================================================================
GAM Japan Capital Fund
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation. Upon written notice to
shareholders, the Fund's investment objective may be changed without a vote of
shareholders.
PRINCIPAL INVESTMENT STRATEGY
The Fund invests primarily in common stocks of companies in Japan.
In addition, if the investment advisor determines that the long-term capital
appreciation of bonds may equal or exceed the return on stocks, then the Fund
may invest substantially in bonds issued either by governments or government
agencies or corporations. Debt securities in which the Fund may invest are not
required to have any rating. The Fund may not invest more than 5% of assets in
bonds rated lower than investment grade.
In selecting investments for the Fund, the investment advisor looks first at the
economic environment and will attempt to exclude sectors and stocks viewed as
over-valued. Within those areas identified for investment, the investment
advisor employs a fundamental investment process focusing on factors such as:
o Experience and shareholder focus of company
management
o Financial health including the strength of the balance sheet, cash flow,
earnings quality and long-term growth
o Competitive position within the industry
o Price of the stock compared to forecasted growth rate
o Liquidity as measured by market capitalization, daily trading volume
Stocks selected tend to have higher return on equity, higher growth in earnings
per share and higher growth in book value per share than the benchmark index
(Tokyo Stock Exchange Index). Companies selected tend to have a market
capitalization of over $1 billion, although the Fund is not restricted in terms
of the size of the company it could buy. Sales are triggered by an assessment
that the stock is no longer a good value or that fundamental prospects have
deteriorated. For example, fundamental prospects are considered to have
deterioriated when the company has been discounted in value in terms of its
price per earnings ratio.
The Fund, for temporary defensive purposes, may invest in 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. Should the Fund take a
temporary defensive position, it may not achieve its investment objectives. At
no point will more than 35% of the Fund's portfolio be held in cash or cash
equivalents, except when the Fund is taking temporary defensive measures.
PRINCIPAL RISKS
You could lose all or a portion of your investment in the Fund. Stock and bond
prices fluctuate in response to many factors including interest rates, general
economic conditions, investor perceptions and market liquidity. Investing in
foreign securities generally involve greater risk than investing in U.S.
securities. Since the Fund invests principally in Japan, it will be impacted by
national events there to a greater extent than a more broadly diversified fund.
Foreign securities prices may vary more widely than those of U.S. securities
because of economic, financial, political or social factors including:
o POLITICAL CONDITIONS Government regulation or action may adversely affect
foreign markets through the imposition of capital controls, the
nationalization of companies or industries, excessive taxes or similar items.
o 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.
o LIQUIDITY Non-U.S. securities may trade on small exchanges less well
regulated than U.S. exchanges, may be more difficult to buy or sell on a
particular day and may be more volatile than U.S. securities.
22
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
o COMMISSIONS AND FEES Brokerage fees and commissions are generally higher
abroad than in the U.S.
o 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.
o CURRENCY Fluctuations in currencies, local withholding and other taxes may
adversely impact the price of the Fund's investment.
o CREDIT AND RATING RISK Credit risk relates to the ability of the issuer to
meet interest or principal payments or both as they become due. In general,
lower-grade, high-yield bonds are subject to credit risk to a greater extent
than lower-yield, higher-quality bonds. The lower the rating of a debt
instrument the more speculative its characteristics and changes in economic
or other circumstances are more likely to lead to an inability of the issuer
to make principal and interest payments than issuers of higher grade
securities.
o INTEREST RATE RISK Interest rate risk refers to the fluctuations in value of
fixed-income securities resulting from the inverse relationship between price
and yield. For example, an increase in general interest rates will tend to
reduce the market value of already-issued fixed-income investments, and a
decline in general interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes
in interest rates than obligations with shorter maturities.
o COMPANY RISK Investing in the Fund involves the risk common to investing in
any security, that is that the value of the securities held by the Fund will
fluctuate in response to changes in economic conditions or public
expectations about those securities. The net asset value of the Fund's shares
will change accordingly.
o MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
WHO MAY WANT TO INVEST?
The Fund may best suit those investors who want long-term capital appreciation,
and who can tolerate the risks involved with stock and foreign investing.
23
====
GAM FUNDS INC PROSPECTUS / RISK AND RETURN SUMMARY GAM
<PAGE>
================================================================================
GAM JAPAN CAPITAL FUND
PAST PERFORMANCE AND EXPENSES
A BAR DISPLAYS THE ANNUAL RETURN OF THE FUND FOR EACH YEAR. THIS ILLUSTRATES THE
VARIABILITY OF THE PERFORMANCE FROM YEAR TO YEAR AND PROVIDES SOME INDICATION OF
THE RISKS ON INVESTING IN THE FUND. 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
[Figures below represent chart in printed piece]
'94 -3.77%
'95 6.45%
'96 .15%
'97 -2.58%
'98 -2.75%
'99 87.05%
HIGHEST AND LOWEST RETURNS
Highest Performing Quarter 21.68% in 4th quarter of 1999
Lowest Performing Quarter -10.91% in 1st quarter of 1995
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 5-YEAR (OR LIFE-OF-CLASS) AVERAGE ANNUAL TOTAL RETURN FOR ALL RELEVANT
SHARE CLASSES PLUS A COMPARISON TO THE TOKYO STOCK EXCHANGE
AS OF DECEMBER 31, 1999
CLASS 1 YEAR 5 YEAR LIFE-OF-CLASS
(INCEPTION DATE)
A SHARES (JULY 1, 1994)
(AFTER MAXIMUM SALES LOAD OF 5%) 77.71% 12.41% 10.45%
B SHARES (MAY 26, 1998)
(AFTER DEFERRED SALES CHARGE) 77.18% N/A 39.37%*
C SHARES (MAY 19, 1998)
(AFTER DEFERRED SALES CHARGE) 82.31% N/A 40.76%*
TOKYO STOCK EXCHANGE INDEX** 75.89% 2.34% 0.81%
*Returns of Tokyo Stock Exchange Index (TOPIX) were for the Life-of-Class
B: 49.91% and C: 48.90%.
**The 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.
24
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
FEES AND EXPENSES OF THE FUND
FUND INVESTORS PAY VARIOUS EXPENSES EITHER DIRECTLY OR INDIRECTLY. THIS TABLE
SHOWS THE EXPENSES FOR THE PAST YEAR, ADJUSTED TO REFLECT ANY CHARGES THAT YOU
MAY PAY IF YOU BUY AND HOLD SHARES OF THE FUND. ACTUAL OR FUTURE EXPENSES MAY BE
DIFFERENT.
- --------------------------------------------------------------------------------
GAM JAPAN CAPITAL 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 5.00% 0.00% 0.00%
Maximum Deferred Sales Charge 0.00%* 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES (% OF NET ASSETS) (expenses that are deducted from Fund assets)
- ---------------------------------------------------------------------------------------------------
Management Fees 1.00% 1.00% 1.00%
Distribution (12b-1) Fees 0.30% 1.00% 1.00%
Other Expenses 0.76% 1.80% 1.94%
TOTAL FUND OPERATING EXPENSES 2.06% 3.80% 3.94%
</TABLE>
* Except for investments of $1 million or more. See "Information about
contingent deferred sales charge."
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
EXAMPLES
- --------------------------------------------------------------------------------
CLASS A CLASS B* CLASS C
EXAMPLE #1
- --------------------------------------------------------------------------------
For one year 699 882 496
For three years 1,113 1,461 1,201
For five years 1,553 2,158 2,023
For ten years 2,770 3,656 4,155
EXAMPLE #2
- --------------------------------------------------------------------------------
For one year 699 382 396
For three years 1,113 1,161 1,201
For five years 1,553 1,958 2,023
For ten years 2,770 3,656 4,155
* Class B converts to Class A at end of year 8.
25
====
GAM FUNDS INC PROSPECTUS / GAM JAPAN CAPITAL FUND GAM
<PAGE>
================================================================================
ADDITIONAL INFORMATION ABOUT NON-PRINCIPAL STRATEGIES AND RISKS
STRATEGIES
In addition to the principal strategies stated above, the following are
non-principal strategies you should consider.
The Fund will not acquire more than 10% of the outstanding voting securities of
any one issuer. No more than 25% of the Fund's total assets will be invested in
any one industry.
The Fund 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:
o FORWARD FOREIGN EXCHANGE CONTRACTS When the 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 Fund may buy forward foreign exchange contracts on
foreign currencies. These contracts "lock in" a price for the currency at a
certain future date. The Fund may also use put and call options on foreign
currencies.
o 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.
o 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 Fund 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. The Fund may experience losses or delays if a counterparty
to any such contract defaults or goes into bankruptcy.
RISKS
In addition to the principal risks stated above, the following are non-principal
risks you should consider.
o DERIVATIVE INSTRUMENTS Derivatives involve substantial risk, because a
relatively small change in the security or index underlying a derivative can
produce a disproportionately large loss. The Fund may lose more than its
initial investment. If the 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. The 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 the Fund
predicts incorrectly, it could lose money--more than if it had not hedged at
all. Hedging cannot eliminate fluctuations in the prices of foreign
securities, and there is no assurance that such hedging attempts will be
successful.
o MANAGEMENT RISK The Fund is subject to management risk because it is an
actively managed investment portfolio. The investment advisor will apply its
investment techniques and risk analyses in making investment decisions for
the Fund, but there is no guarantee that its decision will produce the
intended result.
o SMALL AND MID-CAP RISK Investing in companies with small and mid-cap market
capitalizations involves greater risk than investing in larger companies.
Their stock prices can rise very quickly and drop dramatically in a short
period of time. This volatility results from a number of factors, including
reliance by these companies on limited product lines, markets and financial
and management resources. These and other factors may make small and mid-cap
companies more susceptible to setbacks or downturns. These companies may
experience higher rates of bankruptcy or other failures than larger
companies. They may be more likely to be negatively affected by changes in
management. In addition, the stock of a small and mid-cap company may be
thinly traded.
26
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate will fluctuate from year to year, and the
Fund may have a portfolio turnover rate of more than 100% annually. "Portfolio
turnover" describes the rate at which the Fund traded its portfolio securities
during its last fiscal year. For example, if the Fund sold all of its securities
during the year, its portfolio turnover rate would have been 100%. Increased
portfolio turnover creates higher brokerage and transaction costs for the Fund,
which may reduce its overall performance. Additionally, the realization of
capital gains from selling portfolio securities may result in distributions of
taxable capital gains to shareholders, since the Fund will normally distribute
all of its capital gain realized to shareholders each year to avoid excise taxes
under the Internal Revenue Code.
27
====
GAM FUNDS INC PROSPECTUS / RISK AND RETURN SUMMARY GAM
<PAGE>
================================================================================
GAM Europe Fund
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation. Upon written notice to
shareholders, the Fund's investment objective may be changed without a vote of
shareholders.
PRINCIPAL INVESTMENT STRATEGY
The Fund invests primarily in common stocks of 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. Under normal market
conditions, the Fund will invest in stocks issued in at least three different
countries. In addition, if the investment advisor determines that the long-term
capital appreciation of bonds may equal or exceed the return on stocks, then the
Fund may invest substantially in bonds issued either by governments or
government agencies or corporations. Debt securities in which the Fund may
invest are not required to have any rating. The Fund may not invest more than 5%
of assets in bonds rated lower than investment grade.
The investment advisor combines top-down and bottom-up analysis. Country and
sector allocation are integrated into the process, but stock selection is the
primary factor influencing Fund composition. Country selection is a result of
stock and industry selection. Stocks are evaluated relative to its peer group,
its earnings history and its growth potential. Company visits are an important
part of the selection process. Stocks selected tend to have the following
characteristics:
o Strong business with a leadership position in their field
o Attractive valuations
o Good quality management
o Strong company franchise, strong operating environment and prospects
The investment advisor does not screen based on size of the company. Rather, it
takes into account, its ability to purchase or sell the company with relative
ease within a short period of time. Sales are triggered by an assessment that
the stock is no longer a good value or that fundamental prospects have
deteriorated. For example, prospects are considered to have deteriorated when
the company becomes overvalued. Sales are also triggered when the investment
advisor determines that there may be better opportunities elsewhere.
The Fund, for temporary defensive purposes, may invest in 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. Should the Fund take a
temporary defensive position, it may not achieve its investment objectives. At
no point will more than 35% of the Fund's portfolio be held in cash or cash
equivalents, except when the Fund is taking temporary defensive measures.
PRINCIPAL RISKS
You could lose all or a portion of your investment in the Fund. Stock and bond
prices fluctuate in response to many factors including interest rates, general
economic conditions, investor perceptions and market liquidity. Investing in
foreign securities generally involve greater risk than investing in U.S.
securities. Since the Fund invests principally in Europe, it will be impacted by
regional events there to a greater extent than a more broadly diversified fund.
Foreign securities prices may vary more widely than those of U.S. securities
because of economic, financial, political or social factors including:
o POLITICAL CONDITIONS Government regulation or action may adversely affect
foreign markets through the imposition of capital controls, the
nationalization of companies or industries, excessive taxes or similar items.
o 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.
o LIQUIDITY Non-U.S. securities may trade on small exchanges less well
regulated than U.S. exchanges, may
28
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
be more difficult to buy or sell on a particular day and may be more volatile
than U.S. securities.
o COMMISSIONS AND FEES Brokerage fees and commissions are generally higher
abroad than in the U.S.
o 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.
o CURRENCY Fluctuations in currencies, local withholding and other taxes may
adversely impact the price of the Fund's investment.
o CREDIT AND RATING RISK Credit risk relates to the ability of the issuer to
meet interest or principal payments or both as they become due. In general,
lower-grade, high-yield bonds are subject to credit risk to a greater extent
than lower-yield, higher-quality bonds. The lower the rating of a debt
instrument the more speculative its characteristics and changes in economic
or other circumstances are more likely to lead to an inability of the issuer
to make principal and interest payments than issuers of higher grade
securities.
o INTEREST RATE RISK Interest rate risk refers to the fluctuations in value of
fixed-income securities resulting from the inverse relationship between price
and yield. For example, an increase in general interest rates will tend to
reduce the market value of already-issued fixed-income investments, and a
decline in general interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes
in interest rates than obligations with shorter maturities.
o COMPANY RISK Investing in the Fund involves the risk common to investing in
any security, that is that the value of the securities held by the Fund will
fluctuate in response to changes in economic conditions or public
expectations about those securities. The net asset value of the Fund's shares
will change accordingly.
o MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
WHO MAY WANT TO INVEST?
The Fund may best suit those investors who want long-term capital appreciation,
and who can tolerate the risks involved with stock and foreign investing.
29
====
GAM FUNDS INC PROSPECTUS / RISK AND RETURN SUMMARY GAM
<PAGE>
================================================================================
GAM EUROPE FUND
PAST PERFORMANCE AND EXPENSES
A BAR DISPLAYS THE ANNUAL RETURN OF THE FUND FOR EACH YEAR. THIS ILLUSTRATES THE
VARIABILITY OF THE PERFORMANCE FROM YEAR TO YEAR AND PROVIDES SOME INDICATION OF
THE RISKS OF INVESTING IN THE FUND. 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
[Figures below represent chart in printed piece]
'90 -16.07%
'91 -7.00%
'92 -4.91%
'93 22.68%
'94 -3.11%
'95 16.77%
'96 21.32%
'97 27.55%
'98 10.70%
'99 16.21%
HIGHEST AND LOWEST RETURNS
Highest Performing Quarter 27.94% in 4th quarter of 1999
Lowest Performing Quarter -17.45% in 3rd quarter of 1998
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) AVERAGE ANNUAL TOTAL RETURN FOR ALL RELEVANT
SHARE CLASSES PLUS A COMPARISON TO THE MSCI EUROPE INDEX
AS OF DECEMBER 31, 1999
CLASS 1 YEAR 5 YEAR LIFE-OF-CLASS
(INCEPTION DATE)
A SHARES (JANUARY 1, 1990)
(AFTER MAXIMUM SALES LOAD OF 5%) 10.40% 17.17% 7.60%
B SHARES (MAY 26, 1998)
(AFTER DEFERRED SALES CHARGE) 9.49% N/A -0.10%*
C SHARES (MAY 20, 1998)
(AFTER DEFERRED SALES CHARGE) 12.11% N/A 1.58%*
MSCI EUROPE INDEX** 16.23% 22.54% 14.54%
*Returns of MSCI Europe Index were for the Life-of-Class B: 10.08% and
C: 11.30%.
**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.
30
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
FEES AND EXPENSES OF THE FUND
FUND INVESTORS PAY VARIOUS EXPENSES EITHER DIRECTLY OR INDIRECTLY. THIS TABLE
SHOWS THE EXPENSES FOR THE PAST YEAR, ADJUSTED TO REFLECT ANY CHARGES THAT YOU
MAY PAY IF YOU BUY AND HOLD SHARES OF THE FUND. ACTUAL OR FUTURE EXPENSES MAY BE
DIFFERENT.
GAM EUROPE 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 5.00% 0.00% 0.00%
Maximum Deferred Sales Charge 0.00%* 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES (% OF NET ASSETS) (expenses that are deducted from fund assets)
- --------------------------------------------------------------------------------------------------
Management Fees 1.00% 1.00% 1.00%
Distribution (12b-1) Fees 0.30% 1.00% 1.00%
Other Expenses 1.18% 2.17% 3.35%
Total Fund Operating Expenses 2.48% 4.17% 5.35%
</TABLE>
* Except for investments of $1 million or more. See "Information about
contingent deferred sales charge."
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.
EXAMPLES
- --------------------------------------------------------------------------
EXPENSES OF HYPOTHETICAL $10,000 INVESTMENT
IN GAM EUROPE FUND
CLASS A CLASS B* CLASS C
EXAMPLE #1
- --------------------------------------------------------------------------
For one year 739 919 634
For three years 1,234 1,567 1,597
For five years 1,755 2,329 2,652
For ten years 3,175 3,992 5,257
EXAMPLE #2
- --------------------------------------------------------------------------
For one year 739 419 534
For three years 1,234 1,267 1,597
For five years 1,755 2,129 2,652
For ten years 3,175 3,992 5,257
* Class B converts to Class A at the end of year 8.
31
====
GAM FUNDS INC PROSPECTUS / GAM EUROPE FUND GAM
<PAGE>
================================================================================
ADDITIONAL INFORMATION ABOUT NON-PRINCIPAL STRATEGIES AND RISKS
STRATEGIES
In addition to the principal strategies stated above, the following are
non-principal strategies you should consider.
The Fund will not acquire more than 10% of the outstanding voting securities of
any one issuer. No more than 25% of the Fund's total assets will be invested in
any one industry.
The Fund 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:
o FORWARD FOREIGN EXCHANGE CONTRACTS When the 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 Fund may buy forward foreign exchange contracts on
foreign currencies. These contracts "lock in" a price for the currency at a
certain future date. The Fund may also use put and call options on foreign
currencies.
o 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.
o 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 Fund 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. The Fund may experience losses or delays if a counterparty
to any such contract defaults or goes into bankruptcy.
RISKS
In addition to the principal risks stated above, the following are non-principal
risks you should consider.
o DERIVATIVE INSTRUMENTS Derivatives involve substantial risk, because a
relatively small change in the security or index underlying a derivative can
produce a disproportionately large loss. The Fund may lose more than its
initial investment. If the 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. The 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 the Fund
predicts incorrectly, it could lose money--more than if it had not hedged at
all. Hedging cannot eliminate fluctuations in the prices of foreign
securities, and there is no assurance that such hedging attempts will be
successful.
o MANAGEMENT RISK The Fund is subject to management risk because it is an
actively managed investment portfolio. The investment advisor will apply its
investment techniques and risk analyses in making investment decisions for
the Fund, but there is no guarantee that its decision will produce the
intended result.
o SMALL AND MID-CAP RISK Investing in companies with small and mid-cap market
capitalizations involves greater risk than investing in larger companies.
Their stock prices can rise very quickly and drop dramatically in a short
period of time. This volatility results from a number of factors, including
reliance by these companies on limited product lines, markets and financial
and management resources. These and other factors may make small and mid-cap
companies more susceptible to setbacks or downturns. These companies may
experience higher rates of bankruptcy or other failures than larger
companies. They may be more likely to be negatively affected by changes in
management. In addition, the stock of a small and mid-cap company may be
thinly traded.
32
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate will fluctuate from year to year, and the
Fund may have a portfolio turnover rate of more than 100% annually. "Portfolio
turnover" describes the rate at which the Fund traded its portfolio securities
during its last fiscal year. For example, if the Fund sold all of its securities
during the year, its portfolio turnover rate would have been 100%. Increased
portfolio turnover creates higher brokerage and transaction costs for the Fund,
which may reduce its overall performance. Additionally, the realization of
capital gains from selling portfolio securities may result in distributions of
taxable capital gains to shareholders, since the Fund will normally distribute
all of its capital gain realized to shareholders each year to avoid excise taxes
under the Internal Revenue Code.
33
====
GAM FUNDS INC PROSPECTUS / RISK AND RETURN SUMMARY GAM
<PAGE>
================================================================================
GAM North America Fund
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation. Upon written notice to
shareholders, the Fund's investment objective may be changed without a vote of
shareholders.
PRINCIPAL INVESTMENT STRATEGY
The Fund invests primarily in common stocks of companies in the United States
and Canada. The Fund aims to cap exposure too any one particular holding at no
more than 7% of the Fund's total assets.
In addition, if the investment advisor determines that the long-term capital
appreciation of bonds may equal or exceed the return on stocks, then the Fund
may invest substantially in bonds issued either by governments or government
agencies or corporations. Debt securities in which the Fund may invest are not
required to have any rating. The Fund may not invest more than 5% of assets in
bonds rated lower than investment grade.
The investment advisor has a fundamentally based "growth" approach to investment
management, with an emphasis on identifying long term industries and industry
trends which will produce a growing stream of dividends ahead of inflation.
Typically, the Fund is comprised of large capitalization ($5 billion or higher),
U.S. domiciled companies with, on average, approximately 40 per cent of earnings
from non-U.S. sources. The investment advisor attempts to identify companies
which are globally dominant in their industry sectors and have access to growing
market share and to capital on a worldwide basis. Stocks are evaluated on
factors such as:
o The financial condition of the company
o Estimated earnings growth rates
o Pattern of consistent dividend payments
o Anticipated dividend growth rates
o Industry leadership and management expertise
o Global prominence and predictable earnings growth
Sales are triggered by an assessment that the stock is no longer a good value or
that fundamental prospects have deteriorated. Fundamentals are considered to
have deteriorated when a company's long-term economic scenario has weakened.
Sales are also triggered when the investment advisor determines that there may
be better opportunities elsewhere.
The Fund, for temporary defensive purposes, may invest in 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. Should the Fund take a
temporary defensive position, it may not achieve its investment objectives. At
no point will more than 35% of the Fund's portfolio be held in cash or cash
equivalents, except when the Fund is taking temporary defensive measures.
PRINCIPAL RISKS
You could lose all or a portion of your investment in the Fund. Stock prices
fluctuate based on such things as the business performance of the company,
investors' perception about the company or general economic conditions. Other
factors influencing the price of securities include:
ECONOMIC CONDITIONS The broad investment environment in the U.S. or
international markets could impact stock prices based on interest rates,
politics, fiscal policy and other current events.
INFLATION Rising prices of goods and services could eliminate any gains realized
from your investment in the Fund.
"GROWTH" INVESTING Growth stocks may carry higher prices than other stocks and
experience greater price fluctuations as the market reacts to the company's
growth potential and overall economic activity.
CREDIT AND RATING RISK Credit risk relates to the ability of the issuer to meet
interest or principal payments or both as they become due. In general,
lower-grade, high-yield bonds are subject to credit risk to a greater extent
than lower-yield, higher-quality bonds. The lower the rating of a debt
instrument the more speculative its characteristics and changes in economic or
other circumstances are more likely to lead to an inability of the issuer to
make principal and interest payments than issuers of higher grade securities.
34
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
INTEREST RATE RISK Interest rate risk refers to the fluctuations in value of
fixed-income securities resulting from the inverse relationship between price
and yield. For example, an increase in general interest rates will tend to
reduce the market value of already-issued fixed-income investments, and a
decline in general interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes in
interest rates than obligations with shorter maturities.
COMPANY RISK Investing in the Fund involves the risk common to investing in any
security, that is that the value of the securities held by the Fund will
fluctuate in response to changes in economic conditions or public expectations
about those securities. The net asset value of the Fund's shares will change
accordingly.
MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
WHO MAY WANT TO INVEST?
The Fund may best suit those investors who want long-term capital appreciation,
and who can tolerate the risks involved with stock investing.
35
====
GAM FUNDS INC PROSPECTUS / RISK AND RETURN SUMMARY GAM
<PAGE>
================================================================================
GAM NORTH AMERICA FUND
PAST PERFORMANCE AND EXPENSES
A BAR DISPLAYS THE ANNUAL RETURN OF THE FUND FOR EACH YEAR. THIS ILLUSTRATES THE
VARIABILITY OF THE PERFORMANCE FROM YEAR TO YEAR AND PROVIDES SOME INDICATION OF
THE RISKS ON INVESTING IN THE FUND. 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
[Figures below represent chart in printed piece]
'90 2.14%
'91 30.69%
'92 2.42%
'93 -2.09%
'94 2.97%
'95 30.90%
'96 24.10%
'97 29.41%
'98 29.44%
'99 9.32%
HIGHEST AND LOWEST RETURNS
Highest Performing Quarter 18.07% in 4th quarter of 1998
Lowest Performing Quarter -10.1% in 3rd quarter of 1998
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) AVERAGE ANNUAL TOTAL RETURN FOR ALL RELEVANT
SHARE CLASSES PLUS A COMPARISON TO THE S&P 500 COMPOSITE INDEX
AS OF DECEMBER 31, 1999
CLASS 1 YEAR 5 YEAR LIFE-OF-CLASS
(INCEPTION DATE)
A SHARES (JANUARY 1, 1990)
(AFTER MAXIMUM SALES LOAD OF 5%) 3.85% 23.09% 14.57%
B SHARES (MAY 26, 1998)
(AFTER DEFERRED SALES CHARGE) 2.82% N/A 8.92%*
C SHARES (JULY 7, 1998)
(AFTER DEFERRED SALES CHARGE) 7.02% N/A 5.83%*
S&P 500 COMPOSITE INDEX** 21.04% 28.59% 18.23%
*Returns of S&P Composite Index were for Life-of Class B: 21.97% and C: 19.30%.
**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.
36
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
FEES AND EXPENSES OF THE FUND
FUND INVESTORS PAY VARIOUS EXPENSES EITHER DIRECTLY OR INDIRECTLY. THIS TABLE
SHOWS THE EXPENSES FOR THE PAST YEAR, ADJUSTED TO REFLECT ANY CHARGES THAT YOU
MAY PAY IF YOU BUY OR HOLD SHARES OF THE FUND. ACTUAL OR FUTURE EXPENSES MAY BE
DIFFERENT.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
GAM NORTH AMERICA FUND INVESTOR EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
SALES CHARGES (paid directly from your investment)
- ----------------------------------------------------------------------------------------------------
Maximum Sales Charge 5.00% 0.00% 0.00%
Maximum Deferred Sales Charge 0.00%* 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES (% OF NET ASSETS) (expenses that are deducted from Fund assets)
- ----------------------------------------------------------------------------------------------------
Management Fees 1.00% 1.00% 1.00%
Distribution (12b-1) Fees 0.30% 1.00% 1.00%
Other Expenses 0.60% 1.11% 0.90%
TOTAL FUND OPERATING EXPENSES 1.90% 3.11% 2.90%
</TABLE>
* Except for investments of $1 million or more. See "Information about
contingent deferred sales charge."
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.
EXAMPLES
- ------------------------------------------------------------------------
EXPENSES OF HYPOTHETICAL $10,000 INVESTMENT
IN GAM NORTH AMERICA FUND
CLASS A CLASS B* CLASS C
EXAMPLE #1
- ------------------------------------------------------------------------
For one year 683 814 393
For three years 1,067 1,260 898
For five years 1,475 1,830 1,528
For ten years 2,611 3,139 3,223
EXAMPLE #2
- ------------------------------------------------------------------------
For one year 683 314 293
For three years 1,067 960 898
For five years 1,475 1,630 1,528
For ten years 2,611 3,139 3,223
* Class B converts to Class A at end of year 8.
37
====
GAM FUNDS INC PROSPECTUS / GAM NORTH AMERICA FUND GAM
<PAGE>
================================================================================
ADDITIONAL INFORMATION ABOUT NON-PRINCIPAL STRATEGIES AND RISKS
STRATEGIES
In addition to the principal strategies stated above, the following are
non-principal strategies you should consider.
The Fund will not acquire more than 10% of the outstanding voting securities of
any one issuer. No more than 25% of the Fund's total assets will be invested in
any one industry.
RISKS
In addition to the principal risks stated above, the following are non-principal
risks you should consider.
o MANAGEMENT RISK The Fund is subject to management risk because it is an
actively managed investment portfolio. The investment advisor will apply its
investment techniques and risk analyses in making investment decisions for
the Fund, but there is no guarantee that its decision will produce the
intended result.
o SMALL AND MID-CAP RISK Investing in companies with small and mid-cap market
capitalizations involves greater risk than investing in larger companies.
Their stock prices can rise very quickly and drop dramatically in a short
period of time. This volatility results from a number of factors, including
reliance by these companies on limited product lines, markets and financial
and management resources. These and other factors may make small and mid-cap
companies more susceptible to setbacks or downturns. These companies may
experience higher rates of bankruptcy or other failures than larger
companies. They may be more likely to be negatively affected by changes in
management. In addition, the stock of a small and mid-cap company may be
thinly traded.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate will fluctuate from year to year, and the
Fund may have a portfolio turnover rate of more than 100% annually. "Portfolio
turnover" describes the rate at which the Fund traded its portfolio securities
during its last fiscal year. For example, if the Fund sold all of its securities
during the year, tits portfolio turnover rate would have been 100%. Increased
portfolio turnover creates higher brokerage and transaction costs for the Fund,
which may reduce its overall performance. Additionally, the realization of
capital gains from selling portfolio securities may result in distributions of
taxable capital gains to shareholders, since the Fund will normally distribute
all of its capital gain realized to shareholders each year to avoid excise taxes
under the Internal Revenue Code.
38
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
GAMerica Capital Fund
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation. Upon written notice to
shareholders, the Fund's investment objective may be changed without a vote of
shareholders.
PRINCIPAL INVESTMENT STRATEGY
The Fund invests primarily in common stocks of companies in the United States
and Canada.
In addition, if the investment advisor determines that the long-term capital
appreciation of bonds may equal or exceed the return on stocks, then the Fund
may invest substantially in bonds issued either by governments or government
agencies or corporations. Debt securities in which the Fund may invest are not
required to have any rating. The Fund may not invest more than 5% of assets in
bonds rated lower than investment grade.
The investment advisor uses a research-intensive blend of value and growth
investing approach. Growth stocks are characterized by the investment advisor as
securities with strong revenue growth. Value stocks are typically characterized
by the following when compared to the market as a whole:
o Lower price to earnings ratios
o Lower price to book ratios
o Lower price to cash flow ratios
o Higher dividend yields
o Catalyst for change (consolidation in an industry; wrong market perception
after a large fall; inside ownership by an elderly person)
Although not restricted to mid and small cap stocks, the investment advisor
tends to find the best value in smaller companies of under $1 billion in market
capitalization. However, the investment advisor does not have a strategy with
respect to size. The Fund is generally concentrated into a limited number of
stocks with top 20 positions representing 80% of the total Fund. Turnover tends
to be low as the investment advisor looks for companies with limited leverage,
strong balance sheets and above all, sound management. Sales are triggered by an
assessment that the stock is no longer a good value or that fundamental
prospects have deteriorated; an increase in market capitalization alone will not
cause the investment advisor to sell. A company's prospects are considered to
have deteriorated when, for example, a business area has become overly
competitive or when a business model has weakened. Sales are also triggered by
gross overvaluation. The investment advisor makes frequent visits to companies
to judge their investment merit.
The Fund, for temporary defensive purposes, may invest in 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. Should the Fund take a
temporary defensive position, it may not achieve its investment objectives. At
no point will more than 35% of the Fund's portfolio be held in cash or cash
equivalents, except when the Fund is taking temporary defensive measures.
PRINCIPAL RISKS
You could lose all or a portion of your investment in the Fund. Stock prices
fluctuate based on such things as the business performance of the company,
investors' perception about the company or general economic conditions. Small
companies are often new and less well established. They may have limited product
lines, markets or financial resources, and they may depend on one or a few key
persons for management. Other factors influencing the price of securities
include:
ECONOMIC CONDITIONS The broad investment environment in the U.S. or
international markets could impact stock prices based on interest rates,
politics, fiscal policy and other current events.
INFLATION Rising prices of goods and services could eliminate any gains realized
from your investment in the Fund.
"VALUE" INVESTING Value stocks may carry higher risk than other stocks as the
determination that a stock is undervalued is subjective and the stock price may
not rise to what the investment advisor considers full value.
CREDIT AND RATING RISK Credit risk relates to the ability of the issuer to meet
interest or principal payments or both as they become due. In general,
lower-grade, high-yield bonds are subject to credit risk to a greater extent
than lower-yield, higher-quality bonds. The lower the rating of a debt
instrument the more speculative its characteristics and changes in economic or
other circumstances are more likely to lead to an inability of the issuer to
make princi-
39
====
GAM FUNDS INC PROSPECTUS / RISK AND RETURN SUMMARY GAM
<PAGE>
================================================================================
pal and interest payments than issuers of higher grade securities.
INTEREST RATE RISK Interest rate risk refers to the fluctuations in value of
fixed-income securities resulting from the inverse relationship between price
and yield. For example, an increase in general interest rates will tend to
reduce the market value of already-issued fixed-income investments, and a
decline in general interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes in
interest rates than obligations with shorter maturities.
COMPANY RISK Investing in the Fund involves the risk common to investing in any
security, that is that the value of the securities held by the Fund will
fluctuate in response to changes in economic conditions or public expectations
about those securities. The net asset value of the Fund's shares will change
accordingly.
MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
WHO MAY WANT TO INVEST?
The Fund may best suit those investors who want long-term capital appreciation,
and who can tolerate risks involved with stock investing.
40
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
[This Page Intentionally Left Blank]
41
====
GAM
<PAGE>
================================================================================
GAMERICA CAPITAL FUND
PAST PERFORMANCE AND EXPENSES
A BAR DISPLAYS THE ANNUAL RETURN OF THE FUND FOR EACH YEAR. THIS ILLUSTRATES THE
VARIABILITY OF THE PERFORMANCE FROM YEAR TO YEAR AND PROVIDES SOME INDICATION OF
THE RISKS OF INVESTING IN THE FUND. 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
[Figures below represent chart in printed piece]
'95 1.38%
'96 18.31%
'97 37.28%
'98 30.59%
'99 28.97%
HIGHEST AND LOWEST RETURNS
Highest Performing Quarter 24.02% in 3rd quarter of 1997
Lowest Performing Quarter -13.28% in 3rd quarter of 1998
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 YEAR AND LIFE-OF-CLASS AVERAGE ANNUAL TOTAL RETURN FOR ALL RELEVANT SHARE
CLASSES PLUS A COMPARISON TO THE S&P 500 COMPOSITE INDEX AS OF DECEMBER 31, 1999
CLASS 1 YEAR LIFE-OF-CLASS
(INCEPTION DATE)
A SHARES (MAY 12, 1995)
(AFTER MAXIMUM SALES LOAD OF 5%) 22.52% 23.23%
B SHARES (MAY 26, 1998)
(AFTER DEFERRED SALES CHARGE) 22.68% 17.96%*
C SHARES (MAY 26, 1998)
(AFTER DEFERRED SALES CHARGE) 26.94% 19.80%*
S&P 500 COMPOSITE INDEX 21.04% 27.10%
* Returns of S&P Composite Index were for Life-of Class B and C: 21.97%.
** 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.
42
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
FEES AND EXPENSES OF THE FUND
FUND INVESTORS PAY VARIOUS EXPENSES EITHER DIRECTLY OR INDIRECTLY. THIS TABLE
SHOWS THE EXPENSES FOR THE PAST YEAR, ADJUSTED TO REFLECT ANY CHARGES THAT YOU
MAY PAY IF YOU BUY AND HOLD SHARES OF THE FUND. ACTUAL OR FUTURE EXPENSES MAY BE
DIFFERENT.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
GAMERICA CAPITAL FUND INVESTOR EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
SALES CHARGES (paid directly from your investment)
- --------------------------------------------------------------------------------------------------
Maximum Sales Charge 5.00% 0.00% 0.00%
Maximum Deferred Sales Charge 0.00%* 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES (% OF NET ASSETS) (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------------------------
Management Fees 1.00% 1.00% 1.00%
Distribution (12b-1) Fees 0.30% 1.00% 1.00%
Other Expenses 0.54% 0.88% 0.74%
TOTAL FUND OPERATING EXPENSES 1.84% 2.88% 2.74%
</TABLE>
* Except for investments of $1 million or more. See "Information about
contingent deferred sales charge."
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.
EXAMPLES
- -----------------------------------------------------------------------
EXPENSES OF HYPOTHETICAL $10,000 INVESTMENT
IN GAMERICA CAPITAL FUND
CLASS A CLASS B* CLASS C
EXAMPLE #1
- -----------------------------------------------------------------------
For one year 678 791 377
For three years 1,050 1,192 850
For five years 1,446 1,718 1,450
For ten years 2,551 2,958 3,070
EXAMPLE #2
- -----------------------------------------------------------------------
For one year 678 291 277
For three years 1,050 892 850
For five years 1,446 1,518 1,450
For ten years 2,551 2,958 3,070
* Class B converts to Class A at end of year 8.
43
====
GAM FUNDS INC PROSPECTUS / GAMERICA CAPITAL FUND GAM
<PAGE>
================================================================================
ADDITIONAL INFORMATION ABOUT NON-PRINCIPAL STRATEGIES AND RISKS
STRATEGIES
In addition to the principal strategies stated above, the following are
non-principal strategies you should consider.
The Fund will not acquire more than 10% of the outstanding voting securities of
any one issuer. No more than 25% of the Fund's total assets will be invested in
any one industry.
RISKS
In addition to the principal risks stated above, the following are non-principal
risks you should consider.
o MANAGEMENT RISK The Fund is subject to management risk because it is an
actively managed investment portfolio. The investment advisor will apply its
investment techniques and risk analyses in making investment decisions for
the Fund, but there is no guarantee that its decision will produce the
intended result.
o SMALL AND MID-CAP RISK Investing in companies with small and mid-cap market
capitalizations involves greater risk than investing in larger companies.
Their stock prices can rise very quickly and drop dramatically in a short
period of time. This volatility results from a number of factors, including
reliance by these companies on limited product lines, markets and financial
and management resources. These and other factors may make small and mid-cap
companies more susceptible to setbacks or downturns. These companies may
experience higher rates of bankruptcy or other failures than larger
companies. They may be more likely to be negatively affected by changes in
management. In addition, the stock of a small and mid-cap company may be
thinly traded.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate will fluctuate from year to year, and the
Fund may have a portfolio turnover rate of more than 100% annually. "Portfolio
turnover" describes the rate at which the Fund traded its portfolio securities
during its last fiscal year. For example, if the Fund sold all of its securities
during the year, its portfolio turnover rate would have been 100%. Increased
portfolio turnover creates higher brokerage and transaction costs for the Fund,
which may reduce its overall performance. Additionally, the realization of
capital gains from selling portfolio securities may result in distributions of
taxable capital gains to shareholders, since the Fund will normally distribute
all of its capital gain realized to shareholders each year to avoid excise taxes
under the Internal Revenue Code.
44
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
II. Management of the Funds
================================================================================
INVESTMENT ADVISORS
GAM International Management Limited ("GIML"), a corporation organized in 1984
under the laws of the United Kingdom, 12 St. James's Place, London SW1A 1NX
England, serves as Investment Advisor for each Fund. GIML manages the assets of
all of the Funds except GAM North America Fund.
Global Asset Management Limited ("GAML"), the ultimate shareholder of GIML, is
wholly owned by UBS AG ("UBS"), a Swiss banking corporation. UBS, with
headquarters in Switzerland, is an internationally diversified organization with
operations in many aspects of the financial services industry. UBS was formed by
the merger of Union Bank of Switzerland and Swiss Bank Corporation in June 1998.
Fayez Sarofim & Co. ("Sarofim"), a Texas corporation organized in 1958, Two
Houston Center, Houston, TX 77010, serves as Co-Investment Advisor for GAM North
America Fund and manages its assets.
As compensation for its services, each Fund, except GAM North America Fund, pays
GIML 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 GIML 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
JEAN-PHILIPPE CREMERS, Investment Director, joined Global Asset Management as an
analyst for the International Team in April, 1992. He has been an Investment
Director with the International Team since 1997 and is responsible for a number
of Global Asset Management's other global and international funds. Prior to
joining Global Asset Management, Mr. Cremers analyzed the Japanese and U.S.
stock markets at the Tokyo Investment Information Centre in Hong Kong. Mr.
Cremers is based in London.
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 Global Asset Management 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 Global Asset Management 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. Both Fayez Sarofim &
Co. and GIML serve as co-investment advisor's of GAM North America. Fayez
Sarofim & Co. 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 $47 billion under the supervision of Mr.
Sarofim.
GAMERICA CAPITAL FUND GORDON GRENDER, Investment Director, has been associated
with Global Asset Management 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.
45
====
GAM FUNDS INC PROSPECTUS / MANAGEMENT OF THE FUNDS GAM
<PAGE>
================================================================================
DISTRIBUTOR
GAM Services, Inc., 135 East 57th Street, New York, NY 10022, an affiliate of
GIML, serves as distributor and principal underwriter of the Funds' shares. GIML
is an indirect wholly owned subsidiary of GAML. GAML is wholly owned by UBS. GAM
Services compensates financial services firms which sell shares of the Funds
pursuant to agreements with GAM Services. Compensation payments come from sales
charges paid by shareholders at the time of purchase (for Class A and D shares),
from GAM Services resources (for Class B and C shares) and from 12b-1 fees paid
out of Fund assets.
Each Fund has adopted a Distribution Plan under Rule 12b-1 to pay for
distribution and sale of its shares. Under this Plan, Class A, Class B, Class C
and Class D shares pay 12b-1 fees. Please see "Sales Charge Schedules" on page
50 for details.
In the case of Class A, B, C and D share accounts which are not assigned to a
financial services firm, GAM Services retains 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.
46
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
III. 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 (approximately 2:00 a.m. Eastern Time).
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
NAV of the Fund's shares may change on days when you will not be able to
purchase or redeem Fund shares. 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.
47
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GAM FUNDS INC PROSPECTUS / SHAREHOLDER INFORMATION GAM
<PAGE>
III. Shareholder Information continued
================================================================================
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
A, B, C, AND D SHARE COMPARISON
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
<S> <C> <C> <C> <C>
TERMS Offered at NAV plus Offered at NAV with no Offered at NAV with no Offered at NAV plus
a front-end sales charge front-end sales charge, front-end sales charge, a front-end sales
but with a Contingent but with a Contingent charge which is lower
Deferred Sales Charge Deferred Sales Charge than the sales charge
(CDSC) when shares are (CDSC) of 1.00% if shares on A Shares
sold 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, C, Higher than A or D Higher than A or D Higher than A Shares,
EXPENSES or D but lower than B or C
- -----------------------------------------------------------------------------------------------------------------------------------
APPROPRIATE o Who prefer a single o Who want to invest all o Who want to invest all o Who want a lower
FOR INVESTORS front-end sales charge money immediately, with money immediately, with front-end sales
no front-end charge no front-end charge charge
o With a longer
investment horizon o With a shorter o With a shorter o Who may have a
investment horizon. investment horizon shorter investment
o Who qualify for horizon
reduced sales charges
on larger investments
- -----------------------------------------------------------------------------------------------------------------------------------
MAXIMUM Unlimited $300,000 $1,000,000 Unlimited, though
INVESTMENT Your purchase of Class B Your purchase of Class C purchases for more
Shares must be for less Shares must be for less than $1,000,000 should
than $300,000, because if than $1,000,000, because be for Class A Shares
you invest $300,000 or if you invest $1,000,000 as you would pay a
more, you will pay less or more, you will pay lower 12b-1 fee.
in fees and charges if less in fees and charges
you buy Class A Shares. if you buy Class A Shares.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
48
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
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 CHARGES (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.
49
====
GAM FUNDS INC PROSPECTUS / SHAREHOLDER INFORMATION GAM
<PAGE>
Sales Charge Schedules
================================================================================
FRONT-END SALES CHARGES ON A AND D SHARES
CLASS A 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)
up to $100,000 5.00% 5.26% 4.00%
$100,000-$299,999 4.00% 4.17% 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%
Class A shares pay a 0.30% 12b-1 fee (of which 0.25% is reallowed to dealers).
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)
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%
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
- --------------------------------------------------------------------------------
THE YEAR YOU SELL SHARES 1ST 2ND 3RD 4TH 5TH 6TH 7TH & AFTER
B SHARES 5% 4% 3% 3% 2% 1% 0%
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).
- --------------------------------------------------------------------------------
50
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
CDSC WAIVERS (CONTINUED FROM PG. 49)
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 GIML. This waiver applies under two conditions: a) the plan must continue
to offer Funds managed by GIML after 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.
INFORMATION ABOUT 12b-1 FEES:
o The 12b-1 Plans adopted by the Fund permit the Fund to pay distribution fees
for the sale and distribution of its shares.
o Because these fees are paid out of Fund 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.
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 8264
Boston, Massachusetts 02206-8264
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.
The Funds are not designed for professional market timing organizations,
individuals, or entities using programmed or frequent exchanges or trades.
Frequent exchanges or trades may be disruptive to the management of the Fund and
can raise its expenses. The Funds' principal underwriter reserves the right to
reject or restrict any specific purchase and exchange requests with respect to
market timers and reserves the right to determine, in its sole discretion, that
an individual or entity is or has acted as a market timer.
51
====
GAM FUNDS INC PROSPECTUS / SHAREHOLDER INFORMATION GAM
<PAGE>
III. Shareholder Information continued
================================================================================
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 8264
Boston, Massachusetts 02266-8264
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 account holder (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 are required to provide a signature guarantee and live outside the
United States, a foreign bank acceptable to the Transfer Agent may provide a
signature guarantee. If such signature guarantee is not acceptable to the
Transfer Agent, you may experience a delay in processing of the redemption.
You may get a signature guarantee from a foreign bank which, for example, is
an overseas branch of a United States bank, member firm of a stock exchange
or has a branch office in the United States.
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 account holder, 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 the 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 your
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.
52
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
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.
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. The GAM Money
Market Account is an open-ended investment management company not offered
through this Prospectus. For a free prospectus on the GAM Money Market Account,
contact your advisor or call 800-426-4685.
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 8264
Boston, Massachusetts 02266-8264
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 GAM Fund or for shares of 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 as required by law.
53
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GAM FUNDS INC PROSPECTUS / SHAREHOLDER INFORMATION GAM
<PAGE>
III. Shareholder Information continued
================================================================================
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.
TA2000/VOICE
Beginning June 2000, you may access GAM Fund information through our phone
inquiry system. You may select from a menu of choices that includes prices,
dividends and capital gains, account balances and ordering duplicate statements.
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 account holder 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) 483-5000
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 by the Fund. 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.
54
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FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
[This Page Intentionally Left Blank]
55
====
GAM
<PAGE>
IV. Financial Highlights
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). Unless
otherwise noted, the selected financial information below is for the fiscal
periods ending December 31 of each year. The accounting firm
PricewaterhouseCoopers LLP audited the Funds' financial statements for each of
the four years ended December 31. Their report is included in the Funds' Annual
Report, which contains
================================================================================
GAM GLOBAL FUND
<TABLE>
<CAPTION>
CLASS A SHARES
--------------------------------------------------------
99 98 97 96 95
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of period $19.04 $18.71 $14.35 $13.51 $10.60
------ ------ ------ ------ ------
NET ASSET VALUE,
end of period $21.75 $19.04 $18.71 $14.35 $13.51
====== ====== ====== ====== ======
TOTAL RETURN FOR THE PERIOD#
(without deduction of sales load) 14.23% 2.57% 34.95% 12.74% 36.25%
TOTAL NET ASSETS (000 omitted) $66,825 $140,274 $65,739 $19,583 $26,161
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.13)## (0.05)## (0.04)## 0.16## 0.35
Net realized and unrealized gain/(loss)
on investments 2.84 0.55 5.04 1.55 3.48
------ ------ ------ ------ ------
Total from investment operations 2.71 0.50 5.00 1.71 3.83
------ ------ ------ ------ ------
LESS DISTRIBUTIONS -- -- (0.02) (0.08) (0.30)
Dividends from net investment income -- (0.17) (0.62) (0.79) (0.62)
Distributions from net realized gains ------ ------ ------ ------ ------
-- (0.17) (0.64) (0.87) (0.92)
Total distributions ------ ------ ------ ------ ------
RATIOS TO AVERAGE NET ASSETS
Expenses* 1.89% 1.71% 1.83% 2.26% 2.16%
Net investment income (0.69)% (0.25)% (0.25)% 1.17% 2.96%
Portfolio turnover rate 107% 123% 48% 107% 60%
</TABLE>
# Total return calculated for a period less than one year is not annualized.
## For the years ended 31st December 1996, 1997, 1998 and 1999, net investment
income per share has been determined based on the weighted average shares
outstanding method.
### The inception dates for Class B and C were 26th May, 1998 and 19th May
1998, respectively.
* The ratio of expenses to average net assets for the year ended 31st
December 1996 includes amounts paid through expense offset arrangements.
Prior and subsequent period ratios exclude these amounts.
+ Period from 6th October, 1995 (inception) to 31st December, 1995.
++ Annualized.
56
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
further information about the performance of the Funds. A copy of the Annual
Report is incorporated by reference into the Statement of Additional Information
and available at no charge upon request to the Funds. The Funds' financial
statements for periods prior to 1996 were audited by other independent
accountants. Expense and income ratios and portfolio turnover rates have been
annualized for periods less than one year. Total returns for periods of less
than one year are not annualized.
<TABLE>
<CAPTION>
CLASS B SHARES### CLASS C SHARES### CLASS D SHARES
- ------------------------- ---------------------------- ------------------------------------------------------------------------
99 98 99 98 99 98 97 96 95+
- ------------------------- ---------------------------- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$19.11 $20.99 $19.10 $21.06 $18.79 $18.50 $14.22 $13.48 $13.46
------ ------ ------ ------ ------
$21.66 19.11 $21.63 19.10 $21.41 $18.79 $18.50 $14.22 $13.48
====== ====== ====== ====== ====== ====== ====== ====== ======
13.34% (8.96)% 13.25% (9.31)% 13.94% 2.38% 34.80% 11.54% 6.97%
$9,454 $10,402 $7,901 $9,014 $5,632 $10,082 $3,768 $815 $295
(0.30)## (0.13)## (0.30)## (0.14)## (0.18)## (0.08)## (0.09)## 0.07 --
2.85 (1.75) 2.83 (1.82) 2.80 0.54 5.02 1.47 0.92
- ------ ------ ------ ------ ------ ------ ------ ------ ------
2.55 (1.88) 2.53 (1.96) 2.62 0.46 4.93 1.54 0.92
- ------ ------ ------ ------ ------ ------ ------ ------ ------
-- -- -- -- -- -- (0.03) (0.01) (0.28)
-- -- -- -- -- (0.17) (0.62) (0.79) (0.62)
- ------ ------ ------ ------ ------ ------ ------ ------ ------
-- -- -- -- -- (0.17) (0.65) (0.80) (0.90)
- ------ ------ ------ ------ ------ ------ ------ ------ ------
2.76% 2.70%++ 2.77% 2.83%++ 2.16% 1.87% 2.01% 2.88% 2.81%++
(1.61)% (1.14)%++ (1.62)% (1.27)%++ (0.98)% (0.41)% (0.53)% 0.52% (0.09)%++
107% 123% 107% 123% 107% 123% 48% 107% 60%
</TABLE>
57
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GAM FUNDS INC PROSPECTUS / FINANCIAL HIGHLIGHTS GAM
<PAGE>
IV. Financial Highlights continued
================================================================================
GAM INTERNATIONAL FUND
<TABLE>
<CAPTION>
CLASS A SHARES
-------------------------------------------------------------------------------------
99 98 97 96 95
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of period $30.06 $28.46 $23.15 $21.37 $17.21
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE,
end of period $32.16 $30.06 $28.46 $23.15 $21.37
========== ========== ========== ========== ==========
TOTAL RETURN FOR THE PERIOD+
(without deduction of sales load) 6.99% 7.22% 28.93% 8.98% 30.09%
TOTAL NET ASSETS (000 omitted) $1,271,042 $2,685,713 $1,793,665 $1,009,819 $560,234
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) 0.17## 0.08## 0.08## 0.57## 0.52
Net realized and unrealized gain/(loss)
on investments 1.93 2.03 6.58 1.34 4.64
---------- ---------- ---------- ---------- ----------
Total from investment operations 2.10 2.11 6.66 1.91 5.16
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from net investment income -- (0.05) (0.18) (0.09) (0.47)
Distributions from net realized gains -- (0.46) (1.17) (0.04) (0.53)
---------- ---------- ---------- ---------- ----------
Total distributions -- (0.51) (1.35) (0.13) (1.00)
---------- ---------- ---------- ---------- ----------
RATIOS TO AVERAGE NET ASSETS
Expenses* 1.76% 1.66% 1.68% 1.56% 1.57%
Net investment income 0.62% 0.27% 0.28% 2.70% 3.89%
Portfolio turnover rate 117% 73% 48% 82% 35%
</TABLE>
# Total return calculated for a period less than one year is not annualized.
## For the years ended 31st December 1996, 1997, 1998 and 1999, net investment
income per share has been determined based on the weighted average shares
outstanding method.
### The inception dates for Class B and C were 26th May, 1998 and 19th May
1998, respectively.
* The ratio of expenses to average net assets for the year ended 31st
December 1996 includes amounts paid through expense offset arrangements.
Prior and subsequent period ratios exclude these amounts.
+ Period from 18th September, 1995 (inception) to 31st December, 1995.
++ Annualized.
58
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
<TABLE>
<CAPTION>
========================================================================================================================
CLASS B SHARES### CLASS C SHARES### CLASS D SHARES
- ------------------------------------------------------------------------------------------------------------------------
99 98 99 98 99 98 97 96 95+
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$30.41 $33.39 $30.37 $32.61 $29.92 $28.34 $23.07 $21.35 $20.46
------ ------ ------ ------ ------ ------ ------ ------ ------
$32.31 $30.41 $32.29 $30.37 $31.96 $29.92 $28.34 $23.07 $21.35
====== ====== ====== ====== ====== ====== ====== ====== ======
6.25% (8.92)% 6.32% (6.87)% 6.82% 7.13% 28.78% 8.33% 9.26%
$71,930 $65,238 $79,556 $78,452 $101,364 $158,797 $99,283 $38,716 $8,714
(0.07)## (0.20)## (0.05)## (0.20)## 0.09## 0.04## 0.01## 0.45## 0.10
1.97 (2.78) 1.97 (2.04) 1.95 2.03 6.59 1.32 1.78
------- ------- -------- -------- -------- ------- ------- ------- -------
1.90 (2.98) (1.92) (2.24) 2.04 2.07 6.60 1.77 1.88
------- ------- -------- -------- -------- ------- ------- ------- -------
-- -- -- -- -- (0.03) (0.16) (0.01) (0.46)
-- -- -- -- -- (0.46) (1.17) (0.04) (0.53)
------- ------- -------- -------- -------- ------- ------- ------- -------
-- -- -- -- -- (0.49) (1.33) (0.05) (0.99)
------- ------- -------- -------- -------- ------- ------- ------- -------
2.48% 2.54%++ 2.48% 2.52%++ 1.94% 1.80% 1.82% 2.06% 2.22%++
(0.24)% (1.10)%++ (0.19)% (1.14)%++ 0.34% 0.14% 0.05% 2.13% 1.90%++
117% 73% 117% 73% 117% 73% 48% 82% 35%
</TABLE>
59
====
GAM FUNDS INC PROSPECTUS / FINANCIAL HIGHLIGHTS GAM
<PAGE>
IV. Financial Highlights continued
================================================================================
GAM PACIFIC BASIN FUND
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------
99 98 97 96 95
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of period $8.23 $9.69 $15.26 $16.97 $17.62
------ ------ ------ ------ ------
NET ASSET VALUE,
end of period $14.17 $8.23 $9.69 $15.26 $16.97
====== ====== ====== ====== ======
TOTAL RETURN FOR THE PERIOD#
(without deduction of sales load) 74.91% (3.99)% (30.00)% (0.39)% 4.50%
TOTAL NET ASSETS (000 omitted) $46,504 $16,971 $23,046 $49,808 $53,944
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.04)## (0.01)## -- 0.04## --
Net realized and unrealized gain/(loss)
on investments 6.19 (0.51) (4.45) (0.11) 0.61
------ ------ ------ ------ ------
Total from investment operations 6.15 (0.52) (4.45) (0.07) 0.61
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income (0.01) (0.22) -- (0.74) --
Distributions in excess of net investment income (0.20) -- -- -- --
Distributions from net realized gains -- (0.72) (1.12) (0.90) (1.26)
------ ------ ------ ------ ------
Total distributions (0.21) (0.94) (1.12) (1.64) (1.26)
------ ------ ------ ------ ------
RATIOS TO AVERAGE NET ASSETS
Expenses* 2.26% 2.42% 1.98% 1.76% 1.98%
Net investment income (0.42)% (0.11)% 0.02% 0.22% (0.07)%
Portfolio turnover rate 63% 55% 42% 46% 64%
</TABLE>
# Total return calculated for a period less than one year is not annualized.
## For the years ended 31st December 1996, 1997, 1998 and 1999, net investment
income per share has been determined based on the weighted average shares
outstanding method.
### The inception dates for Class B and C were 26th May, 1998 and 1st June
1998, respectively.
* The ratio of expenses to average net assets for the year ended 31st
December 1996 includes amounts paid through expense offset arrangements.
Prior and subsequent period ratios exclude these amounts.
+ Period from 18th October, 1995 (inception) to 31st December, 1995.
++ Annualized.
+++ The average daily interest rate during the period and at 31st December,
1997 was 8.69%.
60
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
<TABLE>
<CAPTION>
CLASS B SHARES### CLASS C SHARES### CLASS D SHARES
- --------------------------------------------------------------------------------------------------------------------------------
99 98 99 98 99 98 97 96 95+
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$8.96 $9.15 $8.12 $8.54 $8.11 $9.62 $15.20 $16.96 $17.36
------ ------ ------ ------ ------ ------ ------ ------ ------
$13.95 $8.11 $9.62 $15.20 $16.96
$14.89 $8.96 $13.21 $8.12 ====== ====== ====== ====== ======
====== ====== ====== ======
67.89% (0.35)% 63.15% (3.87)% 73.71% (4.64)% (30.18)% (1.19)% 2.35%
$6,169 $273 $1,509 $163 $1,727 $1,051 $1,583 $1,878 $1,547
(0.19)## (0.35)## (0.39)## (0.70)## (0.16)## (0.01)## 0.01## (0.10)## (0.02)
6.26 0.32 5.51 0.37 6.13 (0.53) (4.47) (0.11) 0.26
------ ------ ------ ------ ------ ------ ------ ------ ------
6.07 (0.03) 5.12 (0.33 5.97 (0.54) (4.46) (0.21) 0.24
------ ------ ------ ------ ------ ------ ------ ------ ------
-- (0.04) -- -- -- (0.25) -- (0.65) --
(0.14) -- (0.03) -- (0.13) -- -- -- --
-- (0.12) -- (0.09) -- (0.72) (1.12) (0.90) (0.64)
------ ------ ------ ------ ------ ------ ------ ------ ------
(0.14) (0.16) (0.03) (0.09) (0.13) (0.97) (1.12) (1.55) (0.64)
------ ------ ------ ------ ------ ------ ------ ------ ------
3.48% 9.39%++ 5.57% 20.34%++ 2.89% 2.53% 2.08% 2.28% 2.63%++
(1.59)% (7.52)%++ (3.82)% (19.15)%++ (1.55)% (0.17)% (0.09)% (0.57)% (1.49)%++
63% 55% 63% 55% 63% 55% 42% 46% 64%
</TABLE>
61
====
GAM FUNDS INC PROSPECTUS / FINANCIAL HIGHLIGHTS GAM
<PAGE>
IV. Financial Highlights continued
================================================================================
GAM JAPAN CAPITAL FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES### CLASS C SHARES###
----------------------------------------------- --------------- ---------------
99 98 97 96 95 99 98 99 98
----------------------------------------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of period $7.65 $8.44 $9.39 $10.16 $9.62 $8.11 $8.49 $8.12 $8.56
------- ------- ------- ------- ------- ------ ------ ------ ------
NET ASSET VALUE,
end of period $13.85 $7.65 $8.44 $9.39 $10.16 $14.45 $8.11 $14.65 $8.12
======= ======= ======= ======= ======= ====== ====== ====== ======
TOTAL RETURN FOR THE PERIOD#
(without deduction of sales load) 87.05% (2.75)% (2.58)% 0.15% 6.45% 82.18% (4.48)% 83.30% (5.14)%
TOTAL NET ASSETS (000 omitted) $66,757 $22,654 $30,872 $36,504 $13,600 $3,100 $665 $2,156 $954
INCOME FROM INVESTMENT
OPERATIONS
Net investment income/(loss) (0.14)## (0.06)## (0.10)## (0.05)## (0.07) (0.34)## (0.19)## (0.34)## (0.15)##
Net realized and unrealized gain/(loss)
on investments 6.77 (0.16) (0.11) 0.07 0.69 6.98 (0.19) 7.09 (0.29)
------- ------- ------- ------- ------- ------ ------ ------ ------
Total from investment operations 6.63 (0.22) (0.21) (0.02) 0.62 6.64 (0.38) 6.75 (0.44)
------- ------- ------- ------- ------- ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income -- -- -- (0.70) (0.05) -- -- -- --
Distributions in excess of net
investment income (0.43) -- -- -- -- (0.30) -- (0.22) --
Distributions from net
realized gains -- (0.57) (0.74) (0.09) (0.03) -- -- -- --
------- ------- ------- ------- ------- ------ ------ ------ ------
Total distributions (0.43) (0.57) (0.74) (0.79) (0.08) (0.30) -- (0.22) --
------- ------- ------- ------- ------- ------ ------ ------ ------
RATIOS TO AVERAGE NET ASSETS
Expenses* 2.06% 2.16% 2.15% 1.84% 3.61%** 3.80% 5.31%++ 3.94% 3.99%++
Net investment income (1.38)% (0.78)% (1.06)% (0.50)% (2.35)% (3.16)% (4.22)%++ (3.21)% (3.00)%++
Portfolio turnover rate 77% 59% 76% 23% 122% 77% 59% 77% 59%
</TABLE>
# Total return calculated for a period less than one year is not annualized.
## For the years ended 31st December 1996, 1997, 1998 and 1999, net investment
income per share has been determined based on the weighted average shares
outstanding method.
### The inception dates for Class B and C were 26th May, 1998 and 19th May
1998, respectively.
* The ratio of expenses to average net assets for the year ended 31st
December 1996 includes amounts paid through expense offset arrangements.
Prior and subsequent period ratios exclude these amounts.
** In the absence of expense reimbursement, for the period ended 31st
December, 1995, expenses on an annualized basis would have represented
4.61% of the average net assets.
++ Annualized.
62
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
GAM EUROPE FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES### CLASS C SHARES###
------------------------------------------------ ---------------- ---------------
99 98 97 96 95 99 98 99 98
------------------------------------------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of period $12.63 $12.57 $11.85 $10.04 $8.66 $12.82 $15.38 $12.70 $15.16
------- ------- ------- ------- ------- ------ ------ ------ ------
NET ASSET VALUE,
end of period $13.08 $12.63 $12.57 $11.85 $10.04 $13.08 $12.82 $12.77 $12.70
======= ======= ======= ======= ======= ====== ====== ====== ======
TOTAL RETURN FOR THE PERIOD#
(without deduction of sales load) 16.21% 10.70% 27.55% 21.32% 16.77% 14.48% (9.82)% 13.11% (9.32)%
TOTAL NET ASSETS (000 omitted) $20,450 $49,631 $39,101 $25,127 $22,961 $1,568 $1,787 $743 $814
INCOME FROM INVESTMENT
OPERATIONS
Net investment income/(loss) (0.09)## 0.03## 0.02## 0.07## 0.07 (0.29)## (0.20)## (0.43)## (0.28)##
Net realized and unrealized
gain/(loss) on investments 1.96 1.28 3.15 2.06 1.38 1.97 (1.37) (1.92) (1.19)
------- ------- ------- ------- ------- ------ ------ ------ ------
Total from investment operations 1.87 1.31 3.17 2.13 1.45 1.68 (1.57) 1.49 (1.47)
------- ------- ------- ------- ------- ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income -- (0.02) (0.06) (0.01) (0.06) -- -- -- --
Distributions from
net realized gains (1.42) (1.23) (2.39) (0.31) (0.01) (1.42) (0.99) (1.42) (0.99)
------- ------- ------- ------- ------- ------ ------ ------ ------
Total distributions (1.42) (1.25) (2.45) (0.32) (0.07) (1.42) (0.99) (1.42) (0.99)
------- ------- ------- ------- ------- ------ ------ ------ ------
RATIOS TO AVERAGE NET ASSETS
Expenses* 2.48% 2.06% 1.81% 1.89% 2.12% 4.17% 3.93%++ 5.35`% 4.93%++
Net investment income (0.79)% 0.24% 0.15% 0.59% 0.75% (2.41)% (2.58)%++ (3.62)% (3.46)%++
Portfolio turnover rate 109% 168% 80% 76% 145% 109% 168% 109% 168%
</TABLE>
# Total return calculated for a period less than one year is not annualized.
## For the years ended 31st December 1996, 1997, 1998 and 1999, net investment
income per share has been determined based on the weighted average shares
outstanding method.
### The inception dates for Class B and C were 26th May, 1998 and 20th May
1998, respectively.
* The ratio of expenses to average net assets for the year ended 31st
December 1996 includes amounts paid through expense offset arrangements.
Prior and subsequent period ratios exclude these amounts.
++ Annualized.
63
====
GAM FUNDS INC PROSPECTUS / FINANCIAL HIGHLIGHTS GAM
<PAGE>
IV. Financial Highlights continued
================================================================================
GAM NORTH AMERICA FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES### CLASS C SHARES###
----------------------------------------------- ---------------- ----------------
99 98 97 96 95 99 98 99 98
----------------------------------------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of period $16.74 $17.32 $13.56 $11.93 $9.14 $16.87 $20.08 $16.58 $21.58
------- ------- ------- ------- ------- ------ ------ ------ ------
NET ASSET VALUE,
end of period $18.30 $16.74 $17.32 $13.56 $11.93 $18.19 $16.87 $17.91 $16.58
======= ======= ======= ======= ======= ====== ====== ====== ======
TOTAL RETURN FOR THE PERIOD#
(without deduction of sales load) 9.32% 29.44% 29.41% 24.10% 30.90% 7.82% 9.68% 8.02% 0.69%
TOTAL NET ASSETS (000 omitted) $28,872 $17,367 $10,966 $5,853 $5,981 $4,048 $969 $5,914 $1,142
INCOME FROM INVESTMENT
OPERATIONS
Net investment income/(loss) (0.07)## (0.07)## --## (0.05)## -- (0.29)## (0.57)## (0.25)## (0.44)##
Net realized and unrealized
gain/(loss) on investments 1.63 4.76 3.99 2.93 2.83 1.61 2.17 1.58 0.25
------- ------- ------- ------- ------- ------ ------ ------ ------
Total from investment operations 1.56 4.69 3.99 2.88 2.83 1.32 1.60 1.33 (0.19)
------- ------- ------- ------- ------- ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income -- -- -- -- -- -- -- -- --
Distributions from net
realized gains -- (5.27) (0.23) (1.25) (0.04) -- (4.81) -- (4.81)
------- ------- ------- ------- ------- ------ ------ ------ ------
Total distributions -- (5.27) (0.23) (1.25) (0.04) -- (4.81) -- (4.81)
------- ------- ------- ------- ------- ------ ------ ------ ------
RATIOS TO AVERAGE NET ASSETS
Expenses* 1.90% 2.10% 1.94% 2.61% 2.98%** 3.11% 7.56%++ 2.90% 8.16%++
Net investment income (0.42)% (0.34)% 0.00% (0.39)% 0.01% (1.66)% (5.81)%++ (1.45)% (6.50)%++
Portfolio turnover rate 13% 70% 15% 9% 9% 13% 70% 13% 70%
</TABLE>
# Total return calculated for a period less than one year is not annualized.
## For the years ended 31st December 1996, 1997, 1998 and 1999, net investment
income per share has been determined based on the weighted average shares
outstanding method.
### The inception dates for Class B and C were 26th May, 1998 and 7th July,
1998, respectively.
* The ratio of expenses to average net assets for the year ended 31st
December 1996 includes amounts paid through expense offset arrangements.
Prior and subsequent period ratios exclude these amounts.
** In the absence of expense reimbursement, expenses on an annualized basis
would have represented 3.27% and 5.81% of the average net assets,
respectively to the years ended 31st December 1995 and 1994.
++ Annualized.
64
====
FOR MORE INFORMATION PLEASE CALL 800-426-4685
<PAGE>
================================================================================
GAMERICA CAPITAL FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES### CLASS C SHARES###
----------------------------------------------- ---------------- ---------------
99 98 97 96 95+ 99 98 99 98
----------------------------------------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of period $17.08 $13.43 $10.82 $10.03 $10.00 $17.26 $16.57 $17.13 $16.57
------- ------- ------- ------- ------- ------ ------ ------ ------
NET ASSET VALUE,
end of period $21.45 $17.08 $13.43 $10.82 $10.03 $21.54 $17.26 $21.42 $17.13
======= ======= ======= ======= ======= ====== ====== ====== ======
TOTAL RETURN FOR THE PERIOD+
(without deduction of sales load) 28.97% 30.59% 37.28% 18.31% 1.38% 27.68% 5.13% 27.95% 4.34%
TOTAL NET ASSETS (000 omitted) $51,108 $11,469 $3,799 $1,924 $3,029 $9,243 $995 $9,693 $1,181
INCOME FROM INVESTMENT
OPERATIONS
Net investment income/(loss) 0.13## (0.01)## (0.24)## (0.42)## 0.07 (0.07)## (0.26)## (0.04)## (0.37)##
Net realized and unrealized
gain/(loss) on investments 4.78 4.08 4.23 2.22 0.07 4.82 1.10 4.80 1.08
------- ------- ------- ------- ------- ------ ------ ------ ------
Total from investment operations 4.91 4.07 3.99 1.80 0.14 4.75 0.84 4.76 0.71
------- ------- ------- ------- ------- ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income (0.07) -- -- -- (0.07) -- -- -- --
Distributions from net realized gains (0.47) (0.42) (1.38) (1.01) (0.04) (0.47) (0.15) (0.47) (0.15)
------- ------- ------- ------- ------- ------ ------ ------ ------
Total distributions (0.54) (0.42) (1.38) (1.01) (0.11) (0.47) (0.15) (0.47) (0.15)
------- ------- ------- ------- ------- ------ ------ ------ ------
RATIOS TO AVERAGE NET ASSETS
Expenses* 1.84% 2.46% 3.45% 5.16%** 3.73%++** 2.88% 5.19%++ 2.74% 7.15%++
Net investment income 0.66% (0.03)% (2.04)% (3.79)% 1.36%++ (0.34)% (2.74)%++ (0.23)% (4.77)%++
Portfolio turnover rate 20% 29% 22% 27% 11% 20% 29% 20% 29%
</TABLE>
# Total return calculated for a period less than one year is not annualized.
## For the years ended 31st December 1996, 1997, 1998 and 1999, net investment
income per share has been determined based on the weighted average shares
outstanding method.
### The inception dates for Class B and C were 26th May, 1998.
* The ratio of expenses to average net assets for the year ended 31st
December 1996 includes amounts paid through expense offset arrangements.
Prior and subsequent period ratios exclude these amounts.
** In the absence of expense reimbursement expenses on a annualized would have
represented 6.16% and 4.73% of the average net assets basis respectively,
for the years ended 31st December 1996 and 1995.
+ Period from 12th May, 1995 (inception) to 31st December, 1995.
++ Annualized.
65
====
GAM FUNDS INC PROSPECTUS / FINANCIAL HIGHLIGHTS GAM
<PAGE>
[This Page Intentionally Left Blank]
66
====
<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 significantly 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.
Please call the SEC at (202) 942-8090 for hours of operation.
o E-mail your request to the SEC at [email protected], or write to them at the
Public Reference Room, c/o Securities and Exchange Commission, Washington,
D.C. 20549-0102, 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>
GAM Funds, Inc. - Purchase Application
Please mail in the enclosed envelope to: GAM Funds, Inc., c/o Boston Financial
Data Services, P.O. Box 9137, Boston, MA 02205-9775 (66 Brooks Drive, Braintree,
MA 02184-3839 for express mail services) with your check or money order pay-able
to "GAM Funds, Inc." To make payment by wire, please notify Boston Financial
Data Services at (800) 426-4685 or (617) 483-5000 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 Name"] 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.
Registration Type: [_] Individual [_] Gift/Transfer to Minor
(Choose One) [_] Joint Tenants [_] Trust [_] Other________________
Investor(s) Information Owner Joint Owner
Name ____________________________ ___________________________
Address ____________________________ ___________________________
____________________________ ___________________________
City/State/Zip ____________________________ ___________________________
Taxpayer ID/Social
Security Number ____________________________ ___________________________
Date of Birth ____________________________ ___________________________
Daytime Phone (______)____________________ ___________________________
E-Mail Address ____________________________ ___________________________
- --------------------------------------------------------------------------------
INVESTMENT Selection
- --------------------------------------------------------------------------------
The minimum initial investment is $5,000 per fund and subsequent investments are
$100 per fund.
Investment Class Class Class Class
Amount A B C D
GAM Global Fund: $___________________ [_] [_] [_] [_]
GAM International Fund: $___________________ [_] [_] [_] [_]
GAM Pacific Basin Fund: $___________________ [_] [_] [_] [_]
GAM Japan Capital Fund: $___________________ [_] [_] [_]
GAM Europe Fund: $___________________ [_] [_] [_]
GAM North America Fund: $___________________ [_] [_] [_]
GAMerica Capital Fund: $___________________ [_] [_] [_]
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
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT ADVISOR/BROKER (IF APPLICABLE)
- --------------------------------------------------------------------------------
Representative's Name___________________________________________________________
Branch Address__________________________________________________________________
Representative's Number_________________________________________________________
________________________________________________________________________________
Representative's Phone Number (______) _________________________________________
________________________________________________________________________________
Firm Name ____________________________________________________________________
Branch Address__________________________________________________________________
- --------------------------------------------------------------------------------
ADDITIONAL FEATURES AVAILABLE
- --------------------------------------------------------------------------------
TELEPHONE PRIVILEGES
Unless you check the boxes below, you authorize the Funds or their agents to
honor telephone or facsimile requests from you after you have reasonably
identified yourself.
[_] I do not want Telephone Exchange -- Exchange shares of any Fund for shares
of any other Fund in the same class.
[_] I do not want 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.
Fund Investment Amount Monthly or Quarterly
_______________________ $_____________________________ [_] [_]
_______________________ $_____________________________ [_] [_]
Bank Name______________________________________________________________________
ABA #*_________________________________________________________________________
Name on Account________________________________________________________________
Account #______________________________________________________________________
Bank Address (City, State Only)________________________________________________
* The ABA # is the nine-digit number that precedes your account number along
the bottom of your check.
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.
Choose One
Semi-
Fund Withdrawal Amount Monthly Quarterly annually Annually
_________________ $_________________ [_] [_] [_] [_]
_________________ $_________________ [_] [_] [_] [_]
[_] Credit to bank account as designated under Wire Transfer or o Send check to
name and address of account registration
* This request for Systematic Withdrawal Plan must be received by the 18th day
of the month in which you wish withdrawals to begin. Redemption of shares
will occur on the 25th day of the month prior to payment or the next
business day.
STATEMENT OF INTENTION (OPTIONAL)
[_] 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
OVER, PLEASE
<PAGE>
CONTINUED
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.)
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__________________________________
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 completion 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>
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, 2000
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 ("GIML").
Fayez Sarofim & Co. ("Sarofim") serves as co-investment adviser to the GAM North
America Fund. (GIML and Sarofim are collectively referred to as the "Investment
Advisers"). GAM Services, Inc. ("GAM Services"), an affiliate of GIML, 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, 2000, which can be obtained without
cost upon request at the address indicated above.
The Funds' 1999 Annual Report to Shareholders is incorporated by
reference in this Statement of Additional Information.
INVESTMENTS IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENTS IN THE FUNDS INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
<PAGE>
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGIES........................................ 3
Rating of Securities....................................................... 3
United States Government Obligations....................................... 3
Repurchase Agreements...................................................... 4
Options.................................................................... 4
Stock Index Futures and Options............................................ 5
Interest Rate Futures and Options.......................................... 5
Foreign Currency Transactions.............................................. 7
Lending Portfolio Securities............................................... 4
Warrants................................................................... 7
Borrowing.................................................................. 7
Short-Selling.............................................................. 8
Restricted Securities...................................................... 8
Future Developments........................................................ 8
Fundamental Investment Restrictions........................................ 9
Non-Fundamental Investment Restrictions.................................... 9
Risk Considerations........................................................ 10
Policy of Concentration for GAM Pacific Basin Fund......................... 10
Portfolio Turnover......................................................... 11
MANAGEMENT OF THE COMPANY.................................................. 12
Compensation of Directors and Executive Officers .......................... 13
Principal Holders of Securities............................................ 18
INVESTMENT ADVISORY AND OTHER SERVICES .................................... 18
Investment Advisers ....................................................... 18
Investment Advisory Contracts ............................................. 19
Advisory Fees.............................................................. 21
Principal Underwriter and Plans of Distribution ........................... 21
Custodian and Administrator ............................................... 25
Transfer Agent............................................................. 25
Legal Counsel.............................................................. 25
Independent Accountants ................................................... 25
Reports to Shareholders.................................................... 25
BROKERAGE ALLOCATION ...................................................... 26
Affiliated Transactions.................................................... 26
SHAREHOLDER INFORMATION ................................................... 27
Sales Charge Reductions and Waivers ....................................... 27
Waivers of Front-End Sales Charges ........................................ 27
Contingent Deferred Sales Charge Waivers................................... 27
Conversion Feature......................................................... 28
NET ASSET VALUE, DIVIDENDS AND TAXES....................................... 28
Net Asset Value............................................................ 28
Suspension of the Determination of Net Asset Value......................... 28
Tax Status................................................................. 29
PERFORMANCE INFORMATION.................................................... 29
DESCRIPTION OF SHARES...................................................... 32
FINANCIAL STATEMENTS....................................................... 32
2
<PAGE>
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INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The investment objective and strategies of each Fund are described in
the Prospectus under the "Risk and Return Summary" heading. Set forth below is
additional information with respect to the investment objective and strategies
of each Fund.
STRATEGIES. Each Fund has adopted the following investment policy
relating to the geographic areas in which it may invest. In the case of the GAM
Pacific Basin, GAM Japan Capital, GAM Europe, GAM North America and GAMerica
Capital Funds, each Fund intends to invest substantially all of its assets in
the region dictated by its investment policy and under normal market
circumstances, will invest at least 65% of its total assets in securities of
companies or governments in the relevant geographic area.
GAM GLOBAL FUND may invest in securities issued by companies in any
country of the world, including the United States, and will normally invest in
securities issued by companies in the United States, Canada, the United Kingdom,
Continental Europe and the Pacific Basin. Under normal market conditions, GAM
Global Fund will invest in securities of companies in at least three different
countries.
GAM INTERNATIONAL FUND may invest in securities issued by companies in
any country other than the United States and will normally invest in securities
issued by companies in Canada, the United Kingdom, Continental Europe and the
Pacific Basin. Under normal market conditions, GAM International Fund will
invest in securities of companies in at least three foreign countries. For
temporary defensive purposes, GAM International Fund may invest in debt
securities of United States companies and the United States government and its
agencies and instrumentalities.
GAM PACIFIC BASIN FUND may invest primarily in securities of companies
in the Pacific Basin, including Japan, Hong Kong, Singapore, Malaysia, Thailand,
Vietnam, Indonesia, the Philippines, Korea, China, Taiwan, India, Australia and
New Zealand.
GAM JAPAN CAPITAL FUND may invest primarily in securities of companies
in Japan.
GAM EUROPE FUND may invest primarily in securities issued by companies
in Europe, including the United Kingdom, Ireland, France, Germany, Denmark,
Norway, Sweden, Finland, Iceland, Switzerland, Austria, Belgium, Spain,
Portugal, Italy, Greece, Hungary, Poland, the Czech Republic and Slovakia.
GAM NORTH AMERICA FUND may invest primarily in securities of companies
in the United States and Canada.
GAMerica CAPITAL FUND may invest primarily in securities of companies
in the United States and Canada.
A company will be considered to be in or from a particular country for
purposes of the preceding paragraphs if (a) at least 50% of the company's assets
are located in the country or at least 50% of its total revenues are derived
from goods or services produced in the country or sales made in the country; (b)
the principal trading market for the company's securities is in the country; or
(c) the company is incorporated under the laws of the country.
Each Fund will seek investment opportunities in all types of companies,
including smaller companies in the earlier stages of development. In making
investment decisions, each Fund will rely on the advice of its Investment
Advisor(s) and its own judgment rather than on any specific objective criteria.
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 if the Fund holds a call at the same exercise price, for the same
period and on the same securities as the call written. A put option will be
considered "secured" if a Fund segregates liquid assets having a value equal to
or greater than the exercise price of the option, or if the Fund holds a put at
the same exercise price, for the same period and on the same securities as the
put written.
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 indices 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.
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
4
<PAGE>
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 (option contract on a stock whose current market price is above the
striking price of a call option or below the striking price of a put option),
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 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
5
<PAGE>
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.
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
6
<PAGE>
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.
SHORT-SELLING. GAM International Fund and GAM Global Fund may from time
to time engage in short selling of securities. Short selling is an investment
technique wherein the Fund sells a security it does not own anticipating a
decline in the market value of the security. To complete the transaction, the
Fund must borrow the security to make delivery to the buyer. The Fund is
obligated to replace the security borrowed by purchasing it subsequently at the
market price at the time of replacement. The price at such time may be more or
less than the price at which the security was sold by the Fund, which would
result in a loss or gain. Until the security is replaced, the Fund is required
to pay to the lender amounts equal to any dividends or interest which accrue
during the period of the loan. To borrow the security, the Fund also may be
required to pay a premium, which would increase the cost of the security sold.
The proceeds of the short sale will be retained by the broker, to the extent
necessary to meet margin requirements, until the short position is closed out.
The Fund will incur a loss as a result of the short sale if the price of the
security increases between the date of the short sale and the date on which the
Fund replaces the borrowed security. The Fund will realize a gain if the
security declines in price between those dates. This result is the opposite of
what one would expect from a purchase of a long position in a security. The
amount of any gain will be decreased, and the amount of any loss increased, by
the amount of any premium or amounts in lieu of dividends or interest the Fund
may be required to pay in connection with a short sale.
Short sales by the Fund involve risk. If the Fund incorrectly predicts
that the price of the borrowed security will decline, the Fund will have to
replace the securities sold short with securities with a greater value than the
amount received from the sale. As a result, losses from short sales may be
unlimited, whereas losses from long positions can equal only the total amount
invested.
7
<PAGE>
GAM International Fund and GAM Global Fund may also make short sales
"against the box." A short sale "against the box" is a transaction in which the
Fund enters into a short sale of a security which the Fund owns. The proceeds of
the short sale are held by a broker until the settlement date at which time the
Fund delivers the security to close the short position. The Fund receives the
net proceeds from the short sale.
Until the Fund replaces a borrowed security in connection with a short
sale, the Fund will: (a) maintain daily a segregated account, containing cash,
U.S. government securities, or certain liquid assets, at such a level that (i)
the amount deposited in the account plus the amount deposited with the broker as
collateral will equal the current value of the security sold short and (ii) the
amount deposited in the segregated account plus the amount deposited with the
broker as collateral will not be less than the market value of the security at
the time it was sold short; or (b) otherwise cover its short position.
The Fund anticipates that the frequency of short sales will vary
substantially under different market conditions, and it does not intend that any
specified portion of its assets as a matter of practice will be in short sales.
As a matter of policy, the Board of Directors has determined that securities
will not be sold short if, after effect is given to any such short sale, the
total market value of all securities sold short would exceed 20% of the value of
the Fund's net assets.
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
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), except
that GAM Pacific Basin Fund will concentrate more than 25% of the value of its
total assets in the finance sector, as such sector is defined in the Morgan
Stanley Capital International ("MSCI") Indices. SEE "POLICY OF CONCENTRATION FOR
GAM PACIFIC BASIN FUND" BELOW. The finance sector is defined by the MSCI to
include the following industries: banking; financial services; insurance and
real estate.
8
<PAGE>
(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.
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 Board of 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. This
restriction does not apply to GAM International Fund and GAM Global Fund. SEE
"Short-Selling" above for a further discussion. (Management may recommend to the
Board of Directors removal of this restriction for the other Funds).
(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. Investments in the Funds are not deposits or
obligations of, or guaranteed or endorsed by, any bank, including UBS AG or any
of its affiliates and are not insured or guaranteed by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other government
agency. Investments in the Funds involve investment risks, including the
possible loss of principal.
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.
9
<PAGE>
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
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 payment 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.
POLICY OF CONCENTRATION FOR GAM PACIFIC BASIN FUND. Since GAM Pacific
Basin Fund has a fundamental policy to concentrate its investments in the
financial services sector, it may be subject to greater share price fluctuations
than a non-concentrated fund. There is a risk that the Fund's concentration in
the securities of financial services companies will expose the Fund to the price
movements of companies in one industry more than a more broadly diversified
mutual fund. Because GAM Pacific Basin Fund invests primarily in one sector,
there is the risk that the Fund will perform poorly during a downturn in that
sector. Also, businesses in the finance sector may be affected more
significantly by changes in government policies and regulation, interest rates,
currency exchange rates, and other factors affecting the financial markets. The
finance sector is defined by the MSCI to include the following industries:
banking; financial services; insurance and real estate.
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.
10
<PAGE>
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 separately 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 Fund operations, including the investment
advisers, custodian, administrator and transfer agent.
The name, age, 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* (65) 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 (80) Chairman, Latin American Advisory Board of
Director Coca-Cola International, 1988 to present.
2601 South Bayshore Drive Director, Emigrant Savings Bank, Director, BEA
Suite 1109 Associates, Brazilian Equity Fund, Chile Fund,
Coconut Grove, FL 33133 Latin American Investment Fund, South America
Fund, Latin American Equity Fund, Emerging
Markets Telecommunications Fund, Emerging
Markets Infrastructure Fund, and Fundacion
Chile, 1989 to present. Director, six Credit
Suisse Asset Management, LLC ("CSAM"), formerly
known as BEA Associates advised investment
companies. 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; Director, Emigrant Savings Bank,
New York, NY 10128 1999 to present; Director, BEA Associates,
Brazilian Equity Fund, 1998 to present.
President/Chief Operating Officer, 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).
* Mr. de Botton is a director who is an "interested person" of the Company
within the definitions set forth in the Act.
11
<PAGE>
Name and Address:
Position(s) Held Principal Occupation(s)
With the Company During Past Five Years
- ------------------------ -----------------------
Kevin J. Blanchfield (45) Chief Operating Officer, Treasurer and
Vice President/Treasurer Assistant Secretary, Global Asset Management
135 East 57th Street (USA) Inc., GAM Investments, Inc. and
New York, NY 10022 GAM Services Inc., 1993 to present; Senior Vice
President Finance and Administration, Lazard
Freres & Co., 1991 to 1993.
Joseph J. Allessie (34) General Counsel and Corporate Secretary ,
Corporate Secretary Global Asset Management (USA) Inc., GAM
135 East 57th Street Investments Inc. and
New York, NY 10022 GAM Services, Inc. 1999 to present;
Regulatory Officer to State of
New Jersey, Department of Law and Public
Safety, Bureau of Securities, 1993-1999.
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
Aggregate Benefits Accrued Estimated
Name and Position(s) Compensation as Annual Benefits
Held With From the Part of Company Upon
The Company Company Expenses Retirement
- -------------------- ------------ ---------------- ---------------
<S> <C> <C> <C>
Gilbert de Botton $ 0 N/A N/A
Director and
President
George W. Landau $31,000 N/A N/A
Director
Robert J. McGuire $31,000 N/A N/A
Director
Roland Weiser $31,000 N/A N/A
Director
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES. As of January 31, 2000, 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. To the knowledge of the Funds, as
of January 31, 2000, no Shareholders owned beneficially (b) or of record (r)
more than 5% of a Fund's outstanding shares, except as set forth below. Prior to
December 17, 1999, Mr. Gilbert de Botton, President and Director of the Company,
may be deemed to have had shared voting or investment power over shares owned by
clients or held by custodians or nominees for clients of Global Asset Management
(USA) Inc. or other affiliates of GIML, or by employee benefit plans for the
benefit of employees of GIML and its affiliates, as a result of the indirect
ownership of interests in GIML and its affiliates by a trust of which Mr. de
Botton was a potential beneficiary. Mr. de Botton disclaims beneficial ownership
of such shares.
12
<PAGE>
INTERNATIONAL
NAME AND ADDRESS Class A Class B Class C Class D
------- ------- ------- -------
Charles Schwab & Co., Inc 15.55%(r)
FBO Customers
101 Montgomery St.
San Francisco, CA
94104
Merrill Lynch 12.63%(r) 21.93%(r) 29.68%(r) 13.42%(r)
FBO Customers of MLPF&S
4800 Deer Lake Dr. East
Jacksonville, FL
32246
Enele Co 5.03%(r)
FBO Smith Barney Accts
c/o Copper Mountain Trust
601 SW 2nd Ave-Ste 1800
Portland, OR 97204-3154
GLOBAL
NAME AND ADDRESS Class A Class B Class C Class D
------- ------- ------- -------
Charles Schwab & Co., Inc 11.66%(r)
FBO Customers
101 Montgomery St.
San Francisco, CA
94104
Merrill Lynch 19.02%(r) 21.45%(r) 34.36%(r) 23.10%(r)
FBO Customers of MLPF & S
4800 Deer Lake Dr. East
Jacksonville, FL
32246
<TABLE>
<CAPTION>
PACIFIC BASIN NORTH AMERICA
NAME AND ADDRESS Class A Class B Class C Class D Class A Class B Class C
------- ------- ------- ------- ------- ------- -------
<S> <C> <C>
Charles Schwab & Co., Inc 22.42%(r) 27.34%(r)
FBO Customers
101 Montgomery St.
San Francisco, CA
94104
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
PACIFIC BASIN NORTH AMERICA
NAME AND ADDRESS Class A Class B Class C Class D Class A Class B Class C
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
FISERV Securities Inc. 10.37%(r)
FAO Customers
One Commerce Square
2005 Market Street
Suite 1200
Philadelphia, PA
19103
c/o Fiduciary Tr Company 10.64%(r)
Intl
Dengel & Co
P O Box 3199
Church Street Station
New York, NY 10008-3199
Merrill Lynch 58.44%(r) 26.63% 16.30%(r) 20.62%(r) 61.37%(r)
FBO Customers of
MLPF&S
4800 Deer Lake Dr. East
Jacksonville, FL
32246
Fayez Sarofim & Co. 13.83%(r)
PO Box 52830
Houston, TX
77052
Jan I. Shrem and 5.87%(b)
Mitsuko Shrem
C/O Rothschild Bank
Zollickstrasse 181
CH-8034 Zurich
SWITZERLAND
Donaldson Lufkin Jenrette 5.89%(r)
Securities Corporation
Inc.
PO Box 2052
Jersey City, NJ
07303
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
PACIFIC BASIN NORTH AMERICA
NAME AND ADDRESS Class A Class B Class C Class D Class A Class B Class C
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Salomon Smith Barney Inc
FBO Customer
333 W. 34th St. 5.53%(r)
3rd Fl
New York, NY 10001
JAPAN CAPITAL EUROPE
NAME AND ADDRESS Class A Class B Class C Class A Class B Class C
------- ------- ------- ------- ------- -------
Charles Schwab & Co., Inc 23.58%(r) 34.91%(r)
FBO Customers
101 Montgomery St.
San Francisco, CA
94104
Citibank Switzerland 11.10%(r)
Attn Rowena Wollard
Seestr 25
8021 Zurich Switzerland
Merrill Lynch 5.56%(r) 36.71%(r) 16.97%(r) 10.79%(r) 21.58%(r)
FBO Customer MLPF & S
4800 Deer Lake Dr. East
Jacksonville, FL
32246
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
JAPAN CAPITAL EUROPE
NAME AND ADDRESS CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
FISERV Securities Inc. 7.78%(r)
One Commerce Square
2005 Market Street Ste.
1200
Philadelphia, PA
19103
Marian Peschel 12.53%(b)
Katarina Peschel
6830 Willow Lane
Minneapolis, MN
55430
Legg Mason Wood Walker 6.13%(r)
Inc
FBO Customer
P.O. Box 1476
Baltimore, MD
21202
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
JAPAN CAPITAL EUROPE
NAME AND ADDRESS Class A Class B Class C Class A Class B Class C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NFSC 7.04%(r)
FBO Tien Li Chia
832 Hardwood Court
Gates Mills, OH
44040
Dain Rauscher Custodian 12.00%(r)
Barbara A. Lippke
2600 Fairview Avenue E7
Seattle, WA 98102
PaineWebber 7.37%(r)
FBO Robert Gery
The Tunix Club
Tolland, MA
01034
Smith Barney Inc. 5.14%(r) 10.52%(r)
FBO Customer
388 Greenwich St.
New York, NY 10013
Lehman Brothers 19.70%(r)
FBO 834 21861 14
PO Box 29198
Brooklyn, NY 11202
Donaldson Lufkin & 6.46%(r)
Jenrette Securities
Corporation Inc
PO Box 2052
Jersey City, NJ
07303-2052
Shahrzad Khayami 5.31%(r)
188 E. 70th St.-Apt 29B
New York, NY 10021-5170
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
JAPAN CAPITAL EUROPE
NAME AND ADDRESS Class A Class B Class C Class A Class B Class C
------- ------- ------- ------- ------- -------
<S> <C>
Jan I. Shrem and 5.85%(r)
Mitsuko Shrem
C/O Rothschild Bank
Zollickstrasse 181
CH-8034 Zurich
SWITZERLAND
Post Co AC 974792 5.34%(r)
c o The Bank of NY
Mutual Fund Reorg Dept
PO Box 1066
Wall Street Station
New York, NY 10268-1066
</TABLE>
GAMERICA
NAME AND ADDRESS CLASS A CLASS B CLASS C
------- ------- -------
Charles Schwab & Co., Inc 26.97%(r)
FBO Customers
101 Montgomery St.
San Francisco, CA
94104
Merrill Lynch 5.12%(r) 23.36%(r) 14.21%(r)
FBO Customers of MLPF&S
4800 Deer Lake Dr. East
Jacksonville, FL
32246
Smith Barney Inc. 5.54%(r)
FBO Customer
388 Greenwich St.
New York, NY 10013
- --------------------------------------------------------------------------------
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. GIML is
controlled by and under common control with other investment advisers (as
described below) which have substantial experience managing foreign mutual
funds.
18
<PAGE>
The Directors of GIML and their principal occupations are as follows:
Name and Position Held
With Investment Adviser Principal Occupation
- ----------------------- --------------------
Gilbert M. de Botton See "Management of the Company"
above.
Jean-Philippe Cremers, Director. Investment Director, GIML
Gordon D. Grender, Director. Investment Director, GIML
Paul S. Kirkby, Director. Investment Director, GIML
Alan McFarlane, Director. Managing Director (Institutional),
Global Asset Management Limited
(London)
David J. Miller, Director. Finance Director of Global Asset
Management (U.K.) Ltd.
Denis Graham Raeburn, Director. Director, GAML and Managing
Director, Global Asset Management
(U.K.) Ltd.
Count Ulric E. von Rosen, Director. President, Bonnier Medical Division
of Bonnier Medical Group, Sweden
GIML 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 GIML through its wholly owned
subsidiaries, Greenpark Management N.V., Global Asset Management GAM SARL and
GAMAdmin B.V. (the latter of which is the direct parent of Global Asset
Management (U.K.) Limited). Global Asset Management Ltd. is wholly owned by UBS
AG, a banking corporation organized under the laws of Switzerland. UBS AG, with
headquarters in Switzerland, is an internationally diversified organization with
operations in many aspects of the financial services industry. UBS AG operates
in over 50 countries, has more than 48,000 employees and was formed by the
merger of Union Bank of Switzerland and Swiss Bank Corporation in June 1998. UBS
AG also maintains direct and indirect subsidiaries in the United States,
including Warburg Dillon Read LLC, an investment bank and broker-dealer; UBS
Brinson Inc. and Brinson Partners Inc., investment advisers; and Warburg Futures
Inc., a futures commission merchant and broker-dealer. Among UBS AG's direct and
indirect affiliates and related persons are various foreign broker-dealers,
investment advisers and banking organizations.
The Directors and principal executive officers of Sarofim and their
principal occupations are as follows:
Fayez S. Sarofim Chairman, Director and President, Sarofim
Raye G. White Executive Vice President, Secretary-Treasurer
and Director, Sarofim
Ralph B. Thomas Senior Vice President, Sarofim
William K. McGee, Jr Senior Vice President, Sarofim
Russell M. Frankel Senior Vice President, Sarofim
Charles E. Sheedy Senior Vice President, Sarofim
Russell B. Hawkins Senior Vice President, Sarofim
A majority of the outstanding stock of Sarofim is owned by Fayez S.
Sarofim. In addition, Mr. Sarofim is a director of Unitrin, Inc., Argonaut
Group, and Kinder Morgan, Inc., 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., Imperial Holly Corp., EXOR
Group, Alley Theatre, Houston Ballet Foundation and the Museum of Fine Arts
Houston.
INVESTMENT ADVISORY CONTRACTS. On December 17, 1999, UBS AG acquired
all the outstanding shares of Global Asset Management Ltd. (the "Acquisition").
19
<PAGE>
Global Asset Management Ltd. indirectly wholly owns GIML, an Investment Adviser
to the Funds. The Acquisition resulted in a change of control of GIML. Thus,
pursuant to the Act, prior to the completion of the Acquisition, the Board of
Directors considered the continuance of the then current Amended and Restated
Investment Advisory Contract dated April 14, 1994 (the "GIML Contract") with
GIML as an Investment Adviser to the Funds. The Board of Directors on September
29, 1999 (including a majority of the Directors who were not parties to the GIML
Contract or interested persons of any such party) approved the continuance of
the GIML Contract on behalf of each Fund, which approval was further ratified by
the Board (including a majority of the Directors who were not parties to the
GIML Contract or interested persons of any such party) on behalf of each Fund on
October 27, 1999. The shareholders of each Fund approved the continuance of the
GIML Contract on October 26, 1999. As such, a new Amended and Restated
Investment Advisory Contract (hereinafter referred to as the "GIML Contract")
was executed upon completion of the Acquisition, December 17, 1999, with
identical terms and conditions as the original GIML Contract.
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 27, 1999
and by the shareholders of GAM North America Fund on April 14, 1994.
The GIML Contract and the Sarofim Contract will each continue in effect
from year to year 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 GIML Contract or the Sarofim Contract or interested persons
of any such party.
The GIML Contract requires GIML 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. GIML 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 GIML. Sarofim commenced providing investment advisory services
to GAM North America Fund on June 29, 1990.
The GIML 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
judgement, 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 GIML and agrees that if (i) GIML should cease to be the Company's
investment adviser or (ii) Global Asset Management Ltd. should cease to own a
majority equity interest in GIML, the Company, upon request of GIML, shall
submit to its Shareholders for their vote a proposal to delete the initials
"GAM" from its name and cease to use the name "GAM Funds, Inc." or any other
name using or derived from "GAM" or "Global Asset Management, any component
thereof or any name deceptively similar thereto, and indicate on all letterheads
and other promotional material that GIML is no longer the Company's investment
adviser. If GIML makes such request because Global Asset Management Ltd. no
longer owns a majority equity interest in GIML, the question of continuing the
GIML Contract must be submitted to a vote of the Company's shareholders. The
Company has agreed that GIML or any of its successors or assigns may use or
20
<PAGE>
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, GIML 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 0.125 % of the average
daily net assets of GAM North America Fund. In each case the aggregate advisory
fees are equivalent to an annual fee of 1.0% of the average daily net assets of
each Fund during the year. The level of advisory fees paid by each Fund is
higher than the rate of advisory fee paid by most registered investment
companies. The actual advisory fee paid by each Fund during the fiscal years
ended December 31, 1999, 1998 and 1997 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>
1999 $1,207,927 $21,736,189 $314,098 $419,808 $319,451 $353,149 $389,284
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
</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 GIML. Global Asset Management
Ltd. is wholly owned by UBS AG, a banking corporation organized under the laws
of Switzerland.
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.
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
Regulation, 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
21
<PAGE>
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:
22
<PAGE>
<TABLE>
<CAPTION>
1999
(000's omitted)
CLASS A CLASS D
------------------------------- -----------------------------
After After
Aggregate Reallowance Aggregate Reallowance
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
GAM International Fund $1,344 $462 $178 $66
GAM Global Fund 77 24 19 9
GAM Pacific Basin Fund 43 23 4 2
GAM Japan Capital Fund 40 19 N/A N/A
GAM Europe Fund 19 10 N/A N/A
GAM North America Fund 39 12 N/A N/A
GAMerica Capital Fund 106 58 N/A N/A
</TABLE>
For the fiscal year ended December 31, 1999, GAM Services retained front-end
sales loads of $696,108 from the sale of Fund shares.
<TABLE>
<CAPTION>
1998
(000's omitted)
CLASS A CLASS D
------------------------------- -----------------------------
After After
Aggregate Reallowance Aggregate Reallowance
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
GAM International Fund $ 11,229 $ 2,895 $ 2,096 $653
GAM Global Fund 1,623 406 238 77
GAM Pacific Basin Fund 74 19 21 6
GAM North America Fund 44 14 N/A N/A
GAM Europe Fund 239 62 N/A N/A
GAM Japan Capital Fund 160 40 N/A N/A
GAMerica Capital Fund 113 31 N/A N/A
For the fiscal year ended December 31, 1998, GAM Services retained front-end
sales loads of $4,221,836 from the sale of Fund shares.
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 December 31, 1997, GAM Services retained front-end
sales loads of $3,156,062 from the sale of Fund shares.
The aggregate dollar amount of contingent deferred sales charges paid
to and retained by the Distributor for the fiscal year ended December 31, 1999
is as follows:
23
<PAGE>
1999
Class A Class C Class D
-------- ------- -------
GAM International Fund $334,579 $203,978 $4,335
GAM Global Fund 4,895 15,900
GAM Pacific Basin Fund 100 449
GAM North America Fund 4 3,455
GAM Europe Fund 1,313 1,830
GAM Japan Capital Fund -- 9,002
GAMerica Capital Fund 4,272 5,984
For the fiscal year ended December 31, 1999, GAM Services received
contingent deferred sales loads of $590,096 from the redemption of Fund Shares.
Each Fund has adopted separate distribution Plans under Rule 12b-1 of
the 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 Fund
shares; 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 Board of 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 should 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 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, 1999 are as follows:
24
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class C Class D
------- ------- ------- -------
<S> <C> <C> <C> <C>
GAM International Fund $5,696,178 $679,368 $838,136 $591,404
GAM Global Fund $ 283,193 $ 98,428 $ 88,290 $ 38,331
GAM Pacific Basin Fund $ 82,314 $ 22,150 $ 5,879 $ 6,286
GAM Japan Capital Fund $ 117,877 $ 14,709 $ 13,323 N/A
GAM Europe Fund $ 88,644 $ 15,772 $ 7,314 N/A
GAM North America Fund $ 81,603 $ 29,165 $ 51,338 N/A
GAMerica Capital Fund $ 86,771 $ 42,753 $ 58,376 N/A
</TABLE>
CUSTODIAN AND ADMINISTRATOR. The Custodian, Administrator and Fund Accounting
Agent for the Company is Brown Brothers Harriman & Co., Private Bankers
("BBH&Co."), a New York Limited Partnership established in 1818. BBH&Co. has
offices worldwide and provides services to the Company from its offices located
at 40 Water Street, Boston, MA 02109. As Custodian, administrator and Fund
Accounting Agent, BBH&Co. is responsible for the custody of the Company's
portfolio securities and cash, maintaining the financial and accounting books
and records of the Company, computing the Company's net asset value per share
and providing the administration services required for the daily business
operations of the Company. For its services to the Company, BBH&Co. is paid a
fee based on the net asset value of each Fund and is reimbursed by the Company
for its disbursements, certain expenses and charges based on an out-of-pocket
schedule agreed upon by BBH&Co. and the Company from time to time.
For the fiscal years ended December 31, 1999, 1998 and 1997, BBH&Co. was paid
the following fees for its services as Administrator and Fund Accounting Agent:
1999 1998 1997
---------- ---------- ----------
GAM International Fund $1,571,000 $1,906,922 $1,463,486
GAM Global Fund 123,000 120,835 54,473
GAM Pacific Basin Fund 60,000 27,172 69,776
GAM North America Fund 55,208 23,568 9,841
GAM Japan Capital Fund 59,000 34,683 36,937
GAM Europe Fund 56,000 63,612 13,749
GAMerica Capital Fund 55,149 19,732 3,000
TRANSFER AGENT. Boston Financial Data Services, Inc. ("Boston
Financial"), 66 Brooks Drive, Braintree, Massachusetts 02184-3839, serves as
shareholder service agent, dividend-disbursing agent and transfer agent for the
Funds. Pursuant to an agreement between the Funds and State Street Bank and
Trust Company ("State Street"), State Street has delegated performance of its
services to Boston Financial. 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 the Funds' shareholders.
LEGAL COUNSEL. Coudert Brothers, 1114 Avenue of the Americas, New York,
New York 10036, acts as legal counsel for the Funds and GIML.
INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers L.L.P., 1177 Avenue of
the Americas, New York, New York 10019-6013, are the independent accountants for
the Company for the fiscal year ending December 31, 1999. 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.
CODE OF ETHICS. Pursuant to rule 17j-1 of the Act, the Investment
Advisers have each adopted a Code of Ethics which applies to the personal
trading activities of their employees. GIML's Code of Ethics applies to itself
and its affiliates, including the Company, and the Company's principal
underwriter. Sarofim adopted a Code which applies to itself and its affiliates.
Both Codes of Ethics establish standards for personal securities transactions by
employees covered under their respective Codes of Ethics. Under the Codes of
Ethics, employees have a duty at all times to place the interests of
shareholders above their own, and never to take inappropriate advantage of their
position. As such, employees are prohibited from engaging in, or recommending,
any securities transaction which involves any actual or potential conflict of
interest, or any abuse of an employee's position of trust and responsibility.
All employees of the Investment Advisers are prohibited from recommending
securities transactions by any Fund without disclosing his or her interest, and
are prohibited from disclosing current or anticipated portfolio transactions
with respect to any Fund to anyone unless it is properly within his or her
duties to do so. Employees who are also deemed investment personnel under the
GIML Code of Ethics or access persons under the Sarofim Code of Ethics, defined
as those persons who, in connection with his or her regular functions or duties,
makes, participates in, or obtains information regarding the purchase or sale of
a security by the Investment Adviser, or whose functions relate to the making of
any recommendations with respect to such purchases or sales, are also prohibited
from: participating in initial public offerings or private placements which
present conflicts of interest with the Funds; and engaging in any securities
transaction for their own benefit or the benefit of others, including the Funds,
while in possession of material, non-public information concerning such
securities. All portfolio managers and investment related staff of GIML are
required to notify their local compliance officer in advance of any personal
dealings in securities which they intend to carry out and are not permitted to
deal personally in securities within seven working days (either in advance or
retrospectively) of carrying out any transaction in the same security on behalf
of the Fund(s) they manage. All Sarofim employees are required to receive prior
approval of all personal securities transactions, which approval will be denied
where there appears a conflict of interest between the employee and a client
including the Fund, managed by Sarofim.
The Investment Advisers have established under their respective Codes of Ethics
compliance procedures to review the personal securities transactions of their
associated persons in an effort to ensure compliance with their respective Codes
of Ethics in accord with rule 17j-1 of the Act.
Copies of the Codes of Ethics are on file with and publicly available from the
SEC.
25
<PAGE>
- --------------------------------------------------------------------------------
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 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, 1999, 1998 and 1997 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>
1999 $9,826,623 $349,742 $171,526 $226,651 $23,995 $126,241 $54,371
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
</TABLE>
AFFILIATED TRANSACTIONS. With effect of the Acquisition, the Company is
an indirect wholly owned subsidiary of UBS AG. UBS AG, a banking organization,
with headquarters in Switzerland, is an internationally diversified organization
with operations in many aspects of the financial services industry. Among UBS
AG's direct and indirect affiliates and related persons are various
broker-dealers to include direct and indirect subsidiaries in the United States
including Warburg Dillon Read LLC, an investment bank and broker-dealer and UBS
Warburg Futures Inc., a futures commission merchant and broker-dealer. Among UBS
AG's direct and indirect affiliates and related persons are various foreign
broker-dealers to include UBS AG London, an affiliated broker-dealer. As such,
when buying or selling securities, the Fund may pay commissions to brokers who
are affiliated with the Investment Advisers in accordance with procedures
adopted by the Board of Directors. The Fund may purchase securities in certain
underwritten offerings for which an affiliate of the Fund or the Investment
Adviser may act as an underwriter. The Fund may effect future transactions
through, and pay commissions to, futures commission merchants who are affiliated
with the Investment Advisers or the Fund in accordance with procedures adopted
by the Board of Directors.
From the date of the "Acquisition" through the fiscal year ended
December 31, 1999, the Fund did not pay any brokerage commissions to any
affiliated broker-dealer.
26
<PAGE>
- --------------------------------------------------------------------------------
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 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;
27
<PAGE>
(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; and
(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
an 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.
- --------------------------------------------------------------------------------
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.
28
<PAGE>
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 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, 1999 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.
29
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%)
- ------------------------------------------------------------------------------------------
10 YRS (OR SINCE 5 YRS 1 YR TO
INCEPTION) TO DEC. TO DEC. 31, DEC. 31,
31, 1999 1999 1999
- ------------------------------------------------------------------------------------------
With Without With Without With Without
FUND sales sales sales sales sales sales
CLASS (INCEPTION DATE) load load load load load load
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
GAM INTERNATIONAL FUND
Class A 1/02/85 13.52 14.10 14.78 15.96 1.64 6.99
Class B 5/26/98 (4.50) (2.04) 1.25 6.25
Class C 5/19/98 (0.61) (0.61) 5.32 6.32
Class D 9/18/95 12.94 13.88 3.08 6.82
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (%)
- ------------------------------------------------------------------------------------------
10 YRS (OR SINCE 5 YRS 1 YR TO
INCEPTION) TO DEC. TO DEC. 31, DEC. 31,
31, 1999 1999 1999
- ------------------------------------------------------------------------------------------
With Without With Without With Without
FUND sales sales sales sales sales sales
CLASS (INCEPTION DATE) load load load load load load
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
GAM GLOBAL FUND
Class A 5/28/86 12.24 12.82 18.20 19.42 8.52 14.23
Class B 5/26/98 (0.51) 1.98 8.34 13.34
Class C 5/19/98 1.66 1.66 12.25 13.25
Class D 10/6/95 14.97 15.94 9.96 13.94
GAM EUROPE FUND
Class A 1/01/90 7.60 8.15 17.17 18.37 10.40 16.21
Class B 5/26/98 (0.10) 2.02 9.49 14.48
Class C 5/20/98 1.58 1.58 12.11 13.11
GAM PACIFIC BASIN FUND
Class A 5/06/87 7.26 7.81 3.06 4.12 66.16 74.91
Class B 5/26/98 35.90 37.98 62.90 67.89
Class C 6/01/98 32.89 32.89 62.15 63.15
Class D 10/18/95 2.89 3.77 67.64 73.71
GAM JAPAN CAPITAL
Class A 7/01/94 10.45 11.48 12.41 13.57 77.71 87.05
Class B 5/26/98 39.37 41.41 77.18 82.18
Class C 5/19/98 40.76 40.76 82.31 83.30
GAM NORTH AMERICA
Class A 1/01/90 14.57 15.16 23.09 24.36 3.85 9.32
Class B 5/26/98 8.92 11.06 2.82 7.82
Class C 7/07/98 5.83 5.83 7.02 8.02
GAMERICA CAPITAL FUND
Class A 5/12/95 23.23 24.60 22.52 28.97
Class B 5/26/98 17.96 20.22 22.68 27.68
Class C 5/26/98 19.80 19.80 26.94 27.95
</TABLE>
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 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.
31
<PAGE>
- --------------------------------------------------------------------------------
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 on
liquidation. Shares are fully paid and non-assessable when issued, freely
transferable, have no pre-emptive or subscription 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.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of each Fund for the fiscal year ended
December 31, 1999 and the report of the Funds' independent accountants in
connection therewith are included in the 1999 Annual Report to Shareholders and
are incorporated by reference in this Statement of Additional Information.
32
