-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BYAcFYGjUNJfpgs4KL6QLPlvNUAWEohE3jduSluMRpMeuXpkmwtKT55p8iiD7JUc IYLiYZT97q1mOd4uI1ViRw== 0000930413-97-000137.txt : 19970304 0000930413-97-000137.hdr.sgml : 19970304 ACCESSION NUMBER: 0000930413-97-000137 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 22 FILED AS OF DATE: 19970303 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GAM FUNDS INC CENTRAL INDEX KEY: 0000749155 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133237280 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-92136 FILM NUMBER: 97549263 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04062 FILM NUMBER: 97549256 BUSINESS ADDRESS: STREET 1: 135 E 57TH ST STREET 2: 25TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2128884200 MAIL ADDRESS: STREET 1: 135 E 57TH ST STREET 2: 25TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: GAM INTERNATIONAL INC DATE OF NAME CHANGE: 19860304 485APOS 1 POST-EFFECTIVE AMENDMENT As filed with the Securities and Exchange Commission on February 28, 1997 Registration No. 2-92136 File No. 811-4062 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X / --- Pre-Effective Amendment No. / / ------ --- Post-Effective Amendment No. 28 / X / --- and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X / --- Amendment No. 31 GAM FUNDS, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) 135 East 57th Street, New York, New York 10022 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) Registrant's Telephone Number, including Area Code: (212) 407-4600 GAM FUNDS, INC. Copy to: 135 East 57th Street, James B. Sitrick, Esq. New York, New York 10022 Coudert Brothers (Name and Address of Agent for Service) 1114 Avenue of the Americas New York, New York 10036 Approximate Date of Proposed Public Offering: Effective date of this Post-Effective Amendment. It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [ ] on (date) pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(i) [ X ] on April 30, 1997 pursuant to paragraph (a)(i) [ ] 75 days after filing pursuant to paragraph (a)(ii) [ ] on (date) pursuant to paragraph (a)(ii) of rule 485. If appropriate, check the following box: [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment. DECLARATION PURSUANT TO RULE 24f-2 Pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended, the Registrant has registered an indefinite number or amount of securities under the Securities Act of 1933. The Rule 24f-2 Notice for the Registrant's fiscal year ended December 31, 1996 was filed on February 21, 1997. Page 1 of pages --- INDEX TO EXHIBITS APPEARS ON PAGE ---- GAM FUNDS, INC. Contents This Registration Statement on Form N-1A consists of the following: 1. Facing Sheet 2. Cross-Reference Sheet 3. Part A - Prospectus 4. Part B - Statement of Additional Information 5. Part C - Other Information 6. Signature Sheet GAM FUNDS, INC. Cross-Reference Sheet pursuant to Rule 495(a) Form N-1A Item No. Part A Heading in Prospectus - -------------------------------------------------------------------------------- 1. Cover Page Cover Page 2. Synopsis Expenses; Summary 3. Condensed Financial Information Financial Highlights 4. General Description of Investment Objective and Registrant Policies and Risk Considerations 5. Management of the Fund Management of the Funds 6. Capital Stock and Other Description of Shares; Shareholder Securities Transactions and Services; Additional Information 7. Purchase of Securities Shareholder Transactions and Services; Being Offered Management of the Funds 8. Redemption or Repurchase Redemption of Shares 9. Pending Legal Proceedings N.A. GLOBAL ASSET MANAGEMENT GAM FUNDS, INC. 135 East 57th Street, New York,, NY 10022 Tel: (800) 426-4685 Fax: (212) 407-4684 Internet: info@gam.com PROSPECTUS APRIL 30, 1997 GAM GLOBAL FUND GAM INTERNATIONAL FUND GAM PACIFIC BASIN FUND GAM JAPAN CAPITAL FUND GAM ASIAN CAPITAL FUND GAM EUROPE FUND GAM NORTH AMERICA FUND GAMERICA CAPITAL FUND GAM Funds, Inc. (the "Company") is a diversified open-end management investment company which offers investors the opportunity to invest in eight different portfolios (the "Funds") investing primarily in equity securities. This Prospectus sets forth concisely information a prospective investor should know about each GAM Fund before investing. Investors are advised to read and retain this Prospectus for future reference. The Company has filed a Statement of Additional Information, dated April 30, 1997, with the Securities and Exchange Commission. Such Statement is incorporated by reference in this Prospectus, and is available without charge upon request at the address and telephone number indicated above. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION ("SEC") OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Table of Contents Summary.............................................................. Investor Expenses.................................................... Financial Highlights................................................. Investment Objectives and Policies and Risk Considerations........... Shareholder Transactions and Services Purchase of Shares.......................................... Redemption of Shares........................................ Exchanges................................................... Other Account Services Tax Matters................................................. Management of the Funds.............................................. Description of Shares................................................ Additional Information............................................... Purchase Application................................................. Back Cover SUMMARY INVESTMENT OBJECTIVE AND POLICIES. The investment objective of each Fund is to seek long-term capital appreciation by investing primarily in equity securities. Each Fund seeks to achieve this objective by investing in the particular geographic region established pursuant to its own investment policy. Each Fund employs its own strategy and has its own risk/reward profile. The Funds are not guaranteed to achieve their objective. PRINCIPAL RISKS. GAM International, Europe, Pacific Basin, Asian Capital and Japan Capital Funds will invest primarily in securities of foreign issuers, and GAM Global and North America Funds and, to a lesser extent, GAMerica Capital Fund, may invest in securities of foreign issuers. Generally, investments in securities of foreign issuers involve greater risks than investments in United States issuers. Certain investment techniques that may be utilized by the Funds, such as hedging and leveraging techniques, also involve risk. Because investors could lose money by investing in the Funds, investors should be sure to read and understand these and all risk factors associated with an investment in the Funds. INVESTMENT ADVISERS AND UNDERWRITER. The Funds are managed by GAM International Management Limited, a London-based affiliate of the Global Asset Management (GAM) Group of companies, an international investment advisory organization with approximately $9 billion under management and offices or affiliates in Bermuda, New York, London, Zurich, Hong Kong, Singapore, Edinburgh, Dublin and the Isle of Man. Fayez Sarofim & Co., which serves as co-investment adviser for GAM North America Fund, is based in Houston, Texas and manages aggregate assets of approximately $38 billion. GAM Services, Inc., an affiliate of GAM, serves as principal underwriter for the Funds' shares. Shares are continuously offered to the public through securities dealers and other financial services firms that have entered into an agreement with GAM Services to sell shares of the Funds. MINIMUM INVESTMENT. The minimum initial investment is $5,000 ($2,000 for IRA accounts); shareholders may make subsequent purchases for as little as $500. Purchases of shares may be subject to a maximum sales charge of 5% of the purchase price in the case of Class A shares, and 3.5% in the case of Class D shares. DIVIDENDS AND DISTRIBUTIONS. Each Fund distributes annually all of its net investment income and net realized capital gains. Dividends and distributions may be reinvested automatically without a sales load. ADDITIONAL FUND FEATURES. The Funds offer Exchanges at Net Asset Value, Reduced Sales Charges through a Statement of Intention and Rights of Accumulation; Telephone Exchanges and Redemptions; Automatic Investment and Systematic Withdrawal Plans; and money market investment privileges through the GAM Money Market Account. INVESTOR EXPENSES Fund investors pay various expenses either directly or indirectly. The figures below show the expenses for the past year, adjusted to reflect any changes. Future expenses may be greater or less.
International Global Pacific Basin Class A Class D* Class A Class D* Class A Class D* SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed On 5% 3.5% 5% 3.5% 5% 3.5% Purchases (as a percentage of offering price)(1) Maximum Deferred Sales Charge None(2) None None(2) None None(2) None ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) Management Fees (after expense reimbursement) 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 12b-1 Fees(4) 0.30% 0.50% 0.30% 0.50% 0.30% 0.50% Other Expenses(5) 0.49 0.41 1.19 1.23 0.69 0.63 Total Fund Operating Expenses(4) 1.79% 1.91% 2.49% 2.73% 1.99% 2.13% ===== ===== ===== ===== ===== =====
*Class D shares are currently offered only by GAM International Fund, GAM Global Fund and GAM Pacific Basin Fund.
North Japan GAMerica Asian Europe America Capital Capital Capital Class A Class A Class A Class A Class A SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed On 5% 5% 5% 5% 5% Purchases (as a percentage of offering price)(1) Maximum Deferred Sales Charge None(2) None(2) None(2) None(2) None(2) ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) Management Fees (after expense reimbursement) 1.00% 1.00% 1.00% 0%(3) 0.40%(3) 12b-1 Fees(4) 0.30% 0.30% 0.30% 0.30% 0.30% Other Expenses(5) 0.82% 1.54% 0.77% 5.09% 2.51% Total Fund Operating Expenses(4) 2.12% 2.84% 2.07% 5.39% 3.21%
NOTES TO TABLE (1) The sales charge is reduced for investments of $100,000 or more, declining to zero for large order purchases of $1 million or more. The sales charge may be waived for certain investors, as described below under "Shareholder Transactions and Services - Purchasing Shares. (2) Except for investments of $1 million or more. See "Shareholder Transactions and Services -- Purchasing Shares". (3) In the absence of an expense reimbursement, the management fee for each of GAMerica Capital Fund and GAM Asian Capital Fund would have been 1.0%, resulting in total expenses of 6.39% and 3.81%, respectively. (4) 12b-1 Fees, Total Fund Operating Expenses and the following Example for Class A shares have been restated to reflect adoption by the Funds, effective October 9, 1996, of a 12b-1 Plan of Distribution for Class A shares providing for payments of 0.30% annually of the average daily net assets represented by Class A shares of each Fund. 12b-1 fees for Class D shares were introduced in 1995. Class D shares may pay up to 0.50% of average daily net assets annually pursuant to the 12b-1 Plan. Because of the 12b-1 fee, long term shareholders of Class D shares may indirectly pay more than the equivalent of the maximum permitted front-end sales charge. (5) Other expenses include custodian, transfer agent, administrative, legal and accounting fees and expenses. The Funds' expense ratios may be higher than those of most registered investment companies since the cost of maintaining custody of foreign securities is higher than those for most domestic funds and the rate of the advisory fee paid by each Fund exceeds that of most registered investment companies. EXAMPLE The table below shows what an investor would pay if he or she invested $1,000 over the various time frames indicated. The example assumes reinvestment of all dividends, an average annual return of 5%, and that "Total Fund Operating Expenses" remain the same each year. International Global Pacific Basin Class A Class D Class A Class D Class A Class D 1 Year $ 67 $ 54 $ 74 $ 62 $ 69 $ 56 3 Year 104 93 124 117 109 99 5 Year 142 135 176 174 152 145 10 Year 250 250 318 330 270 273 North Japan GAMerica Asian Europe America Capital Capital Capital Class A Class A Class A Class A Class A 1 Year $ 70 $ 77 $ 70 $ 101 $ 81 3 Year 113 134 112 203 144 5 Year 158 192 156 304 209 10 Year 283 351 278 552 384 This example is for comparison purposes only and is not a representation of actual expenses and returns, either past or future. FINANCIAL HIGHLIGHTS Unless otherwise noted, the selected financial information below is for the fiscal periods ending December 31 of each year. The accounting firm of Coopers & Lybrand L.L.P. audited the Funds' financial statements for the year ended December 31, 1996. Their report is included in the Funds' Annual Report, which contains further information about the performance of the Funds. A copy of the Annual Report is incorporated by reference into the Statement of Additional Information and available at no charge upon request to the Funds. The Funds' financial statements for periods prior to 1996 were audited by other independent accountants. Expense and income ratios and portfolio turnover rates have been annualized for periods less than one year. Total returns for periods of less than one year are not annualized. GAM INTERNATIONAL FUND
05-Sept-95+ to 1996 1996 1995 31-Dec-95 1994 1993 1992 1991 Class A Class D Class A Class D Class A Class A Class A Class A Per share operating performance (for a share outstanding throughout the period)* Net asset value Beginning of period $21.37 $21.35 $17.21 $20.46 $23.90 $14.56 $14.86 $12.87 ------ ------ ------- ------- ------- ------- ------- ------ Income from investment operations Net investment income 0.57 0.45 0.52 0.1 0.34 0.25 0.71 0.36 Net realized and unrealized gain/(loss) on investments 1.34 1.32 4.64 1.78 (2.58) 10.38 0.28 1.64 ---- ---- ---- ---- ------ ----- ---- ---- Total from investment operations 1.91 1.77 5.16 1.88 (2.24) 10.63 0.43 2.00 ---- ---- ---- ---- ------ ----- ---- ---- Less distributions Dividends from net investment income (0.09) (0.01) (0.47) (0.46) (0.66) (0.34) (0.43) (0.01) Distributions from net realized gains (0.04) (0.04) (0.53) (0.53) (3.79) (0.95) (0.30) 0.00 ------ ------ ------ ------ ------ ------ ------ ------ Total distributions (0.13) (0.05) (1.00) (0.99) (4.45) (1.29) (0.73) (0.01) ------ ------ ------ ------ ------ ------ ------ ------ Net asset value End of period $23.15 $23.07 $21.37 $21.35 $17.21 $23.90 $14.56 $14.86 ======= ======= ======= ======= ======= ======= ======= ====== Total return (without deduction of sales load) 8.98% 8.33% 30.09% 9.26% (10.23%) 79.96% 3.08% 15.56% Net assets, end of period (000 omitted) $1,009,819 $38,716 $560,234 $8,714 $158,336 $80,776 $41,032 $40,355 Ratios to average net assets Expenses 1.56% 2.06% 1.57% 2.22% 1.60% 1.99% 2.03% 2.11% Net investment income 2.70% 2.13% 3.89% 1.90% 2.74% 2.28% 4.85% 3.25% Portfolio turnover rate 82% 82% 34.97% 34.97% 110.48% 98.45% 109.16% 160.67% Average Commission Rate 0.0202 0.0202 Paid Bank Loans Amount outstanding at end of period (000 omitted) -- -- -- -- -- $9,557 $2,743 -- Average amount of bank loans outstanding during the period (000 omitted) -- -- -- -- -- $2,042 $901 -- Average number of shares outstanding during the period (monthly average) (000 omitted) -- -- -- -- -- -- 2,700 2,790 Average amount of debt per share during the period -- -- -- -- -- $0.76 $0.32 --
FOR THE PERIODS 1990 1989 1988 1987 Class A Class A Class A Class A Per share operating performance (for a share outstanding throughout the period)* Net asset value Beginning of period $17.02 $14.81 $13.29 $21.91 ------- ------- ------- ------ Income from investment operations Net investment income 0.17 0.03 0.04 0.11 Net realized and unrealized gain/(loss) on investments (1.41) 3.21 2.72 2.38 ------ ---- ---- ---- Total from investment operations (1.24) 3.24 2.76 2.49 ------ ---- ---- ---- Less distributions Dividends from net investment income -- -- (0.06) (0.23) Distributions from net realized gains (2.91) (1.03) (1.18) (10.88) ------ ------ ------ ------- Total distributions (2.91) (1.03) (1.24) (11.11) ------ ------ ------ ------- Net asset value End of period $21.87 $17.02 $14.81 $13.29 ======= ======= ======= ====== Total return (without deduction of sales load) (7.30%) 22.46% 21.51% 12.05% Net assets, end of period (000 omitted) $23,450 $20,537 $19,638 $21,167 Ratios to average net assets Expenses 2.30% 2.74% 2.76% 2.23% Net investment income 1.32% 0.19% 0.27% 0.38% Portfolio turnover rate 253.89% 32.52% 22.86% 79.58% Bank Loans Amount outstanding at end of period (000 omitted) -- -- -- -- Average amount of bank loans outstanding during the period (000 omitted) -- -- -- -- Average number of shares outstanding during the period (monthly average) (000 omitted) -- -- -- -- Average amount of debt per share during the period -- -- -- -- - ----------------------------------------------------- * Per share amounts for years ended prior to December 31, 1995 have been restated to reflect a 10-for-1 stock split effective December 19, 1995. + Commencement of offering of Class D shares. GAM GLOBAL FUND
05-Sep-95+ to 1996 1996 1995 31-Dec-95 1994 1993 1992 1991 Class A Class D Class A Class D Class A Class A Class A Class A Per share operating performance (for a share outstanding throughout the period)* Net asset value Beginning of period $13.51 $13.48 $10.60 $13.46 $17.92 $10.33 $11.37 $10.28 Income from investment operations Net investment income 0.16 0.07 0.35 -- 0.19 0.24 0.64 0.28 Net realized and unrealized gain/(loss) on investments 1.55 1.47 3.48 0.92 ($ 2.94) $ 7.46 ($ 1.15) $ 0.81 ---- ---- ---- ---- ------- ------- ------- ------ Total from investment operations 1.71 1.55 3.83 0.92 (2.75) 7.70 (0.51) 1.09 ---- ---- ---- ---- ------ ---- ------ ---- Dividends from net investment income (0.08) (0.18) (0.30) (0.28) (0.49) (0.11) (0.28) -- Distributions from net realized gains (0.79) (0.63) (0.62) (0.62) (4.08) -- (0.25) -- ------ ------ ------ ------ ------ ------ ------ ------ Total distributions (0.87) (0.81) 0.92 (0.90) (4.57) (0.11) (0.53) -- ------ ------ ----- ------ ------ ------ ------ -- Net asset value End of period $14.35 *$14.22 $13.51 $13.48 $10.60 $17.92 $10.33 $11.37 ====== ======= ======= ======= ======= ======= ======= ====== Total return (without deduction of sales load) 12.74% 11.54% 36.25% 6.97% (16.15%) 75.30% (4.65%) 10.61% Ratios/supplemental data: Net assets, end of period (000 omitted) $19,583 $815 $26,161 $295 $19,940 $33,416 $19,763 $23,990 Ratios to average net assets Expenses 2.26% 2.88% 2.16% 2.81% 2.29% 2.68% 2.37% 2.33% Net investment income/(loss) 1.17% 0.52% 2.96% (0.09%) 0.91% 1.88% 5.25% 2.20% Portfolio turnover rate 107% 107% 60.18% 60.18% 123.33% 106.73% 118.41% 180.52% Average Commission Rate Paid 0.0255 0.0255 Bank Loans Amount outstanding at end of period -- -- -- -- -- $2,165 $9,010 -- (000 omitted) Average amount of bank loans outstanding during the period (000 omitted) -- -- -- -- -- $2,600 $1,401 -- Average number of shares outstanding during the period (monthly average) (000 omitted) -- -- -- -- -- -- 1,780 2,130 Average amount of debt per share during the period -- -- -- -- -- $ 1.48 $0.66 --
FOR THE PERIODS 1990 1989 1988 1987 Class A Class A Class A Class A Per share operating performance (for a share outstanding throughout the period)* Net asset value Beginning of period $13.14 $11.08 $9.26 $10.47 ------- ------- ------ ------ Income from investment operations Net investment income 0.06 0.04 (0.01) 0.12 Net realized and unrealized gain/(loss) on investments (1.54) 2.56 2.25 (0.38) ------ ----- ---- ------ Total from investment operations (1.48) 2.60 2.24 (0.26) ------ ----- ---- ------ Dividends from net investment income -- (0.03) -- (0.12) Distributions from net realized gains (1.38) (0.51) (0.42) (0.83) ------ ------ ------ ------ Total distributions (1.38) (0.54) (0.42) (0.95) ------ ------ ------ ------ Net asset value End of period $10.28 $13.14 $11.08 $9.26 ======= ======= ======= ====== Total return (11.26%) 24.20% 25.04% (2.47%) (without deduction of sales load) Ratios/supplemental data: Net assets, end of period (000 omitted) $23,577 $22,794 $17,805 $18,229 Ratios to average net assets Expenses 2.45% 2.68% 2.94% 2.09% Net investment income/(loss) 0.58% 0.36% (0.05%) 0.90% Portfolio turnover rate 250.46% 31.28% 34.09% 67.35% Bank Loans Amount outstanding at end of period (000 omitted) -- -- -- $1,900 Average amount of bank loans outstanding during the period (000 omitted) -- -- -- $158 Average number of shares outstanding during the period (monthly average) (000 omitted) -- -- -- 220 Average amount of debt per share during the period -- -- -- $0.72 - -------------------------------------------------------------------------------- + Commencement of offering of Class D shares. * Per share amounts for periods ended prior to December 31, 1995 have been restated to reflect a 10-for-1 stock split effective December 19, 1995. GAM PACIFIC BASIN FUND
05-Sep-95+ to 1996 1996 1995 31-Dec-95 1994 1993 1992 Class A Class D Class A Class D Class A Class A Class A Per share operating performance (for a share outstanding throughout the period)* Net asset value Beginning of period $16.97 $16.96 $17.62 $17.36 $19.20 $13.14 $13.77 ------ ------ ------- ------- ------- ------- ------ Income from investment operations Net investment income/(loss) 0.04 (0.10) -- (0.02) (0.05) (0.03) 0.01 Net realized and unrealized gain/(loss) on investments (0.11) (0.11) 0.61 0.26 1.36 6.57 (0.06) ------ ------ ---- ---- ---- ---- ------ Total from investment operations (0.07) (0.21) 0.61 0.24 1.31 6.54 (0.05) ------ ------ ---- ---- ---- ---- ------ Less distributions Dividends from net investment income (0.74) (0.65) -- -- -- (0.04) (0.09) Distributions from net realized gains (0.90) (0.90) (1.26) (0.64) (2.89) (0.44) (0.49) ------ ------ ------ ------ ------ Total distributions (1.64) (1.55) (1.26) (0.64) (2.89) (0.48) (0.58) ------ ------ ------ ------ ------ Net asset value End of period $15.26 $15.20 $16.97 $16.96 $17.62 $19.20 $13.14 ====== ====== ======= ======= ======= ======= ====== Total return (without deduction of sales load) (0.39%) (1.19%) 4.50% 2.35% 7.41% 51.52% (0.37%) Net assets, end of period (000 omitted) $49,808 $1,878 $53,944 $1,547 $48,527 $40,719 $28,206 Ratios to average net assets Expenses 1.76% 2.28% 1.98% 2.63% 1.78% 1.93% 2.03% Net investment income 0.22% (0.57%) (0.07%) (1.49%) (0.35%) (0.29%) 0.09% Portfolio turnover rate 46% 46% 64.01% 64.01% 29.11% 91.07% 74.78% Average Commission Rate Paid 0.0251 0.0251
For the Periods
++06-May-87 to 1991 1990 1989 1988 31-Dec-87 Class A Class A Class A Class A Class A Per share operating performance (for a share outstanding throughout the period)* Net asset value Beginning of period $11.93 $14.21 $10.16 $8.25 $10.00 ------- ------- ------- ------ ------ Income from investment operations Net investment income 0.17 (0.04) (0.22) (0.41) (0.19) Net realized and unrealized gain/(loss) on investments 1.81 (1.11) (4.61) (2.32) (1.56) ----- ------ ------ ------ ------ Total from investment operations (1.98) (1.15) 4.39 1.91 (1.75) ------ ------ ----- ----- ------ Dividends from net investment income -- -- -- -- -- Distributions from net realized gains (0.14) (0.13) (0.34) -- -- ------ ------ ------ -- -- Total distributions (0.14) (0.13) (0.34) -- -- ------ ------ ------ -- -- Net asset value End of period $13.77 $11.93 $14.21 $10.16 $8.25 ======= ======= ======= ======= ====== Total return 16.71% (8.21%) 43.34% 23.21% (17.55%) (without deduction of sales load) Ratios/supplemental data: Net assets, end of period (000 omitted) $35,849 $20,811 $7,490 $4,341 $3,689 Ratios to average net assets Expenses 2.29% 3.74% 5.93% 5.92% 6.80% Net investment income/(loss) 0.78% (0.31%) (3.39%) (3.29%) (4.47%) Portfolio turnover rate 78.80% 103.05% 152.89% 147.87% 85.53%
- -------------------------------------- * Per share amounts for periods ended prior to December 31, 1995 have been restated to reflect a 10-for-1 stock split effective December 19, 1995. + Commencement of offering of Class D shares. ++Commencement of operations GAM EUROPE FUND
+01-Jan-90 to 1996 1995 1994 1993 1992 1991 31-Dec-90 Class A Class A Class A Class A Class A Class A Class A Per share operating performance (for a share outstanding throughout the period)* Net asset value Beginning of period $10.04 $8.66 $8.93 $7.34 $8.33 $8.39 $10.00 Income from investment operations Net investment income 0.07 0.07 -- 0.24 0.40 0.22 (0.02) Net realized and unrealized gain/(loss) on investments 2.06 1.38 (0.27) 1.41 (0.78) (0.28) 1.59 ---- ---- ------ ---- ------ ------ ---- Total from investment operations 2.13 1.45 (0.27) 1.65 (0.38) (0.06) 1.61 ---- ---- ------ ----- ------ ------ ---- Less distributions Dividends from net investment income (0.01) (0.06) -- (0.06) (0.22) -- -- Distributions from net realized gains (0.31) (0.01) -- -- (0.39) -- -- ------ ------ -- -- ------ -- -- Total distributions (0.32) (0.07) -- (0.06) (0.61) -- -- ------ ------ -- ------- ------- -- -- Net asset value End of period $11.85 $10.04 $8.66 $8.93 $7.34 $8.33 $8.39 ====== ======= ====== ====== ====== ====== ===== Total return (without deduction of sales load) 21.32% 16.77% (3.11%) 22.68% (4.91%) (0.70%) (16.07%) Ratios/supplemental data: Net assets, end of period (000 omitted) $25,127 $22,961 $32,233 $14,398 $17,264 $13,558 $9,186 Ratios to average net assets Expenses 1.89% 2.12% 2.35% 2.64% 2.47% 2.76% 3.57% Net investment income/(loss) 0.59% 0.75% 0.06% 1.05% 5.06% 2.17% (0.22%) Portfolio turnover rate 76% 145.16% 74.96% 181.51% 72.20% 232.55% 325.62% Average Commission Rate Paid 0.0168 Bank Loans Amount outstanding at end of period -- -- -- $1,860 $1,177 -- -- (000 omitted) Average amount of bank loans outstanding during the period (000 omitted) -- $123 -- $521 $347 -- -- Average number of shares outstanding during the period (monthly average) (000 omitted) -- 390 -- 1,680 2,400 -- -- Average amount of debt per share during the period -- $0.32 -- $0.31 $0.14 -- --
- --------------------------------- * Per share amounts for periods ended prior to December 31, 1995 have been restated to reflect a 10-for-1 stock split effective December 19, 1995. + Commencement of operations GAM NORTH AMERICA FUND
1996 1995 1994 1993 1992 1991 +1990 Class A Class A Class A Class A Class A Class A Class A Per share operating performance (for a share outstanding throughout the period)* Net asset value Beginning of period $11.93 $9.14 $12.80 $13.63 $13.35 $10.21 $10.00 ------ ------ ------- ------- ------- ------- ------ Income from investment operations Net investment income (loss) (0.05) -- 0.04 0.19 0.07 0.06 (0.22) Net realized and unrealized gain/(loss) on investments 2.93 2.83 0.23 (0.46) 0.25 3.08 0.43 ---- ---- ---- ------ ---- ---- ---- Total from investment operations 2.88 2.83 0.27 (0.27) 0.32 3.14 0.21 ---- ---- ---- ------ ---- ---- ---- Less distributions Dividends from net investment income -- -- (0.23) (0.07) (0.03) -- -- Distributions from net realized gains (1.25) (0.04) (3.70) (0.49) (0.01) -- -- ------ ------ ------ ------ ------ -- -- Total distributions (1.25) (0.04) (3.93) (0.56) (0.04) -- -- ------ ------ ------ ------ ------ -- -- Net asset value End of period $13.56 $11.93 $9.14 $12.80 $13.63 $13.35 $10.21 ====== ======= ====== ======= ======= ======= ====== Total return (without deduction of sales load) 24.10% 30.90% 2.97% (2.09%) 2.42% 30.69% 2.14% Ratios/supplemental data: Net assets, end of period (000 omitted) $5,853 $5,981 $1,887 $3,289 $11,781 $12,290 $1,862 Ratios to average net assets Expenses, net of reimbursement 2.61% **2.98% **2.54% 2.10% 2.43% 2.96% **11.52% Net investment income (0.39%) 0.01% 0.37% 0.69% 0.47% 0.45% (5.49%) Portfolio turnover rate 9% 8.57% 3.00% 3.42% 20.38% 3.44% 0.00% Average Commission Rate Paid 0.06
- -------------------------------------- * Per share amounts for years ended prior to December 31, 1995 have been restated to reflect a 10-for-1 stock split effective December 19, 1995. **In the absence of the expense reimbursement, expenses on an annualized basis would have represented 3.27%, 5.81% and 14.31% of the average net assets, respectively, for the years ended December 31, 1995, 1994 and 1990. + Commenced operations January 1, 1990. Fayez Sarofim & Co. was appointed co-investment adviser of the Fund effective June 20, 1990. GAM JAPAN CAPITAL FUND
+01-Jul-94 to 1996 1995 31-Dec-94 Class A Class A Class A Per share operating performance (for a share outstanding throughout the period)* Net asset value Beginning of period $10.16 $9.62 $10.00 ------ ------ ------ Income from investment operations Net investment income (0.05) (0.07) 0.02 Net realized and unrealized gain/(loss) on investments 0.07 0.69 (0.40) ---- ---- ------ Total from investment operations 0.02 0.62 (0.38) ---- ---- ------ Less distributions Dividends from net investment income (0.70) (0.05) -- Distributions from net realized gains (0.09) (0.03) -- ------ -- Total distributions (0.79) (0.08) -- ------ ------ -- Net asset value End of period $9.39 $10.16 $9.62 ====== ======= ===== Total return (without deduction of sales load) 0.15% 6.45% (3.77%) Ratios/supplemental data: Net assets, end of period (000 omitted) $36,504 $13,600 $9,406 Ratios to average net assets Expenses, net of reimbursement 1.84 **3.61% 2.19% Net investment income/(loss) (0.50%) (2.35%) 0.70% Portfolio turnover rate 23% 122.38% 7.02% Average Commission Rate Paid 0.0697
- ------------------------------------- * Per share amounts for periods ended prior to December 31, 1995 have been restated to reflect a 10-for-1 stock split effective December 19, 1995. + Commencement of operations **In the absence of the expense reimbursement, for the period ended December 31, 1995, expenses on an annualized basis would have represented 4.61% of the average net assets. GAMERICA CAPITAL FUND
+12-May-95 to 1996 31-Dec-95 Class A Class A Per share operating performance (for a share outstanding throughout the period) Net asset value Beginning of period $10.03 $10.00 ------ ------ Income from investment operations Net investment income (loss) (0.42) 0.07 Net realized and unrealized gain/(loss) on investments 2.22 0.07 ---- ---- Total from investment operations 1.80 0.14 ---- ---- Less distributions Dividends from net investment income -- (0.07) Distributions from net realized gains (1.01) (0.04) Total distributions (1.01) (0.11) ------ ------ Net asset value End of period $10.82 $10.03 ======= ====== Total return (without deduction of sales load) 18.31% 1.38% Ratios/supplemental data: Net assets, end of period (000 omitted) $ 1,924 $ 3,029 Ratios to average net assets Expenses, net of reimbursement* 5.16% 3.73% Net investment income/(loss) (3.79%) 1.36% Portfolio turnover rate 27% 10.90% Average Commission Rate Paid 0.0533
- ---------------------------------------- + Commencement of operations * In the absence of the expense reimbursement, for the period ended December 31, 1995 and the year ended December 31, 1996, expenses on an annualized basis would have represented 4.73% and 6.16%, respectively of the average net assets. GAM ASIAN CAPITAL FUND
+12-May-95 to 1996 31-Dec-95 Class A Class A Per share operating performance (for a share outstanding throughout the period) Net asset value Beginning of period $9.53 $10.00 ----- ------ Income from investment operations Net investment income (loss) (0.07) (0.01) Net realized and unrealized gain/(loss) on investments 0.38 (0.42) ---- ------ Total from investment operations 0.31 (0.43) ---- ------ Less distributions Dividends from net investment income -- -- Distributions from net realized gains (0.01) (0.04) -- ------ Total distributions (0.01) (0.04) -- ------ Net asset value End of period $9.83 $9.53 ====== ====== Total return (without deduction of sales load) 3.28% (4.25%) Ratios/supplemental data: Net assets, end of period (000 omitted) $5,629 $5,560 Ratios to average net assets Expenses, net of reimbursement* 2.98% 3.11% Net investment income/(loss) (0.75%) (0.17%) Portfolio turnover rate 86% 17.01% Average Commission Rate Paid 0.0124
- ------------------------------------------------------------------------------- + Commencement of operations * In the absence of the expense reimbursement, for the period ended December 31, 1995 and the year ended December 31, 1996, expenses on an annualized basis would have represented 3.95% and 3.58%, respectively, of the average net assets. PERFORMANCE INFORMATION. The Funds may advertise performance information representing each Fund's total return for the periods indicated. Total return includes changes in the net asset value of each Fund's shares and assumes reinvestment of all dividends and capital gains distributions. Total return therefore reflects the expenses of each Fund, but does not reflect any taxes due on dividends or distributions paid to shareholders. The Funds may advertise total return both before and after deduction of the sales load. Past results may not be indicative of future performance. The investment return and principal value of shares of each Fund will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. INVESTMENT OBJECTIVES AND POLICIES AND RISK CONSIDERATIONS Each Fund's investment objective is to seek long-term capital appreciation. To pursue this goal, each Fund has adopted an investment policy relating to a particular geographic region in which it intends to invest a substantial portion of its assets. The policy of each Fund is described below. Although the Funds generally intend to purchase securities for long-term investment, each Fund may also engage in short-term trading based upon changes affecting a particular company, industry, country or region or changes in general market, economic or political conditions. Generally, each Fund expects to achieve its objective by investing in equity securities (which include but are not limited to common and preferred stocks and warrants). However, if it is determined that the long-term capital appreciation of debt securities may equal or exceed the return on equity securities, then a Fund may be substantially invested in debt securities of companies or governments and their agencies and instrumentalities. Each Fund is not required to maintain any particular proportion of equity or debt securities in its portfolio. Any dividend or interest income realized by a Fund on its investments will be incidental to its goal of long-term capital appreciation. The investment objective of each Fund and the investment policies set forth below may be changed by the Board of Directors upon written notice to the shareholders of the affected Fund(s). If there is a change in objective, shareholders should consider whether the Fund remains an appropriate investment. In light of each Fund's investment objective and anticipated portfolio, each Fund should be considered as a vehicle for diversification and not as a balanced investment program. There is no assurance that each Fund will achieve its investment objective. Each Fund has adopted the following investment policy relating to the geographic areas in which it may invest. In the case of the GAM Pacific Basin, Japan Capital, Asian Capital, Europe, North America and GAMerica Capital Funds, each Fund intends to invest substantially all of its assets in the region dictated by its investment policy and, under normal market circumstances, will invest at least 65% of its assets in securities of companies or governments in the relevant geographic area. GAM GLOBAL FUND may invest in securities issued by companies in any country of the world, including the United States, and will normally invest in securities issued by companies in the United States, Canada, the United Kingdom, Continental Europe and the Pacific Basin. Under normal market conditions, GAM Global Fund will invest in securities of companies in at least three different countries. GAM INTERNATIONAL FUND may invest in securities issued by companies in any country other than the United States and will normally invest in securities issued by companies in Canada, the United Kingdom, Continental Europe and the Pacific Basin. Under normal market conditions, GAM International Fund will invest in securities of companies in at least three foreign countries. For temporary defensive purposes, GAM International Fund may invest in debt securities of United States companies and the United States government and its agencies and instrumentalities. GAM PACIFIC BASIN FUND may invest primarily in securities of companies in the Pacific Basin, including Japan, Hong Kong, Singapore, Malaysia, Thailand, Vietnam, Indonesia, the Philippines, Korea, China, Taiwan, India, Australia and New Zealand. GAM JAPAN CAPITAL FUND may invest primarily in securities of companies in Japan. GAM ASIAN CAPITAL FUND may invest primarily in securities issued by companies in Asia other than Japan. Countries in Asia include Hong Kong, Singapore, Malaysia, Thailand, Vietnam, Indonesia, the Philippines, Korea, China, Taiwan, India, Myanmar, Pakistan, Bangladesh and Sri Lanka. GAM EUROPE FUND may invest primarily in securities issued by companies in Europe, including the United Kingdom, Ireland, France, Germany, Denmark, Norway, Sweden, Finland, Iceland, Switzerland, Austria, Belgium, Spain, Portugal, Italy, Greece, Hungary, Poland, the Czech Republic and Slovakia. GAM NORTH AMERICA FUND may invest primarily in securities issued by companies in the United States and Canada. GAMERICA CAPITAL FUND. This Fund may invest primarily in securities of companies in the United States. A company will be considered to be in or from a particular country for purposes of the preceding paragraphs if (a) at least 50% of the company's assets are located in the country or at least 50% of its total revenues are derived from goods or services produced in the country or sales made in the country; (b) the principal trading market for the company's securities is in the country; or (c) the company is incorporated under the laws of the country. Each Fund will seek investment opportunities in all types of companies, including smaller companies in the earlier stages of development. In making investment decisions, each Fund will rely on the advice of its Investment Adviser(s) and its own judgment rather than on any specific objective criteria. The debt securities in which each Fund may invest are not required to have any rating and may include securities of companies in default of interest or principal payment obligations. None of the Funds may invest more than 5% of its assets in debt securities which are rated lower than "investment grade" by a rating service. Debt securities rated in the lowest "investment grade" by a rating service (e.g., bonds rated BBB by S&P) or lower have speculative characteristics, and changes in economic or other circumstances are more likely to lead to a weakened capacity of the issuers of such securities to make principal or interest payments than issuers of higher grade securities. A decrease in the rating of debt securities held by a Fund may cause the Fund to have more than 5% of its assets invested in debt securities which are not "investment grade". In such a case, the Fund will not be required to sell such debt securities. Each Fund may, for temporary defensive purposes, invest in short-term debt securities of foreign and United States companies, foreign governments and the United States government, its agencies and instrumentalities, as well as in money market instruments denominated in United States dollars or a foreign currency. These money market instruments include negotiable or short-term deposits with domestic or foreign banks with total assets of at least $50 million; high quality commercial paper; and repurchase agreements maturing within seven days with domestic or foreign dealers, banks and other financial institutions deemed to be creditworthy under guidelines approved by the Board of Directors. In order to have funds available for redemption and investment opportunities, each Fund may hold a portion of its portfolio in cash or United States and foreign money market instruments. At no point in time will more than 35% of each Fund's portfolio be so invested (except when the Fund is in a temporary defensive posture) and/or held in cash. The Funds' portfolio securities are generally purchased on stock exchanges and in over-the-counter markets in the countries in which the principal offices of the issuers of such securities are located. The Funds may also invest in American Depositary Receipts ("ADRs") or European Depositary Receipts ("EDRs") representing securities of foreign companies, including both sponsored and unsponsored ADRs. These securities may not necessarily be denominated in the same currency as the securities which they represent. OTHER INVESTMENT POLICIES AND TECHNIQUES The Funds will also utilize certain sophisticated investment techniques described below, some of which involve substantial risks. Additional information about some of the investment techniques described below and the related risks is contained in the Statement of Additional Information. OPTIONS AND WARRANTS. Each Fund may invest up to 5% of its net assets in options on equity or debt securities or securities indices and up to 10% of its net assets in warrants, including options and warrants traded in over-the-counter markets. An option on a security gives the owner the right to acquire ("call option") or dispose of ("put option") the underlying security at a fixed price (the "strike price") on or before a specified date in the future. A warrant is equivalent to a call option written by the issuer of the underlying security. Each Fund may write covered call options on securities in an amount equal to not more than 100% of its net assets and secured put options in an amount equal to not more than 50% of its net assets. A call option written by a Fund is "covered" if the Fund owns the underlying securities subject to the option or if the Fund holds a call at the same exercise price, for the same period and on the same securities as the call written. A put option will be considered "secured" if a Fund segregates liquid assets having a value equal to or greater than the exercise price of the option, or if the Fund holds a put at the same exercise price, for the same period and on the same securities as the put written. FUTURES CONTRACTS. Each Fund may invest up to 5% of its net assets in initial margin or premiums for futures contracts and options on futures contracts, including stock index futures and financial futures. A commodity futures contract obligates one party to deliver and the other party to purchase a specific quantity of a commodity at a fixed price at a specified future date, time and place. In the case of a financial future, the underlying commodity is a financial instrument, such as a U.S. Treasury Bond, Treasury Note or Treasury Bill. No consideration will be paid or received by a Fund upon the purchase or sale of a futures contract. Initially, a Fund will be required to deposit with a broker an amount of cash or cash equivalents equal to approximately 5% of the contract amount. Subsequent payments to and from the broker will be made daily as the price of the index or securities underlying the futures contract fluctuates. An option on a commodity futures contract gives the purchaser the right, in exchange for the payment of a premium, to assume a position as a purchaser or a seller in a futures contract at a specified exercise price at any time prior to the expiration date of the option. The Funds will trade in commodity futures and options thereon for bona fide hedging purposes and otherwise in accordance with rules of the Commodity Futures Trading Commission. FORWARD FOREIGN EXCHANGE CONTRACTS. Since the Funds may invest in securities denominated in currencies other than the United States dollar, changes in foreign currency exchange rates may affect the values of portfolio securities. The rate of exchange between the United States dollar and other currencies is determined by forces of supply and demand in the foreign exchange markets. These forces are affected by the international balance of payments and other economic and financial conditions, government intervention, speculation and other factors. The Funds may enter into forward foreign exchange contracts for the purchase or sale of foreign currency to "lock in" the United States dollar price of the securities denominated in a foreign currency or the United States dollar equivalent of interest and dividends to be paid on such securities, or to hedge against the possibility that the currency of a foreign country in which a Fund has investments may suffer a decline against the United States dollar, or for speculative purposes. A forward foreign currency exchange contract obligates one party to purchase and the other party to sell an agreed amount of a foreign currency on an agreed date and at an agreed price. The Funds may purchase put and call options on foreign currencies. Put options convey the right to sell the underlying currency at a price which is anticipated to be higher than the spot prices of the currency at the time the option expires. Call options convey the right to buy the underlying currency at the time the option expires. Each Fund may also write covered call options in an amount not to exceed the value of the Fund's portfolio securities or other assets denominated in the relevant currency and secured put options in an amount equal to 50% of its net assets. ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets in illiquid securities, including restricted securities or private placements. An illiquid security is a security that cannot be sold quickly in the ordinary course of business. The absence of a trading market may adversely affect the ability of the Funds to sell such illiquid securities promptly and at an acceptable price, and may also make it more difficult to ascertain a market value for such securities. Certain securities cannot be sold to the U.S. public because of their terms or because of SEC regulation. The Investment Advisers may determine that securities that cannot be sold to the U.S. public but that can be sold to institutional investors (Rule 144A Securities) or on foreign markets are liquid. The Investment Adviser will follow guidelines established by the Board of Directors of the Company in making liquidity determinations for Rule 144A and other securities. BORROWING AND LENDING. Each Fund may borrow money from banks for temporary emergency purposes in an amount not to exceed one-third of its total assets. Borrowing by a Fund will cause it to incur interest and other expenses. Borrowing by a Fund, also known as leverage, will also tend to exaggerate the effect on the net asset value of the Fund's shares of any increase or decrease in the market value of the Fund's assets. Each Fund may lend its portfolio securities to institutions deemed creditworthy pursuant to procedures established by the Board of Directors. No such loan will be made which would cause the aggregate market value of all securities lent by a Fund to exceed 15% of the value of the Fund's total assets. ADJUSTABLE RATE INDEX NOTES. Each Fund may invest in adjustable rate index notes (ARINs) or similar instruments. An ARIN is a form of promissory note issued by a brokerage firm or other counterparty which provides that the amount of principal or interest paid will vary inversely in proportion to changes in the value of a specified security. Under such an instrument, the Fund will make a profit if the value of the specified security decreases and will suffer a loss if the value of the specified security increases. The effect of such an instrument is equivalent to a short sale of the specified security, except that the potential loss to the Fund is limited to the amount invested in the ARIN, whereas in the case of a short sale the short seller is potentially subject to unlimited risk of loss. The Funds could suffer losses in the event of a default or insolvency of the brokerage firm or other counterparty issuing the ARIN. OTHER INVESTMENT ACTIVITIES. It is likely that new investment products will continue to develop which will combine elements of options, futures contracts or debt securities with other types of derivative financial products, such as swaps, caps and floors, or which will otherwise tie payments to be made or received to the value of specific securities or to existing or new indices. Swaps involve the exchange by two parties of their respective obligations to pay or receive a stream of payments. For example, a Fund might exchange floating interest payments for fixed interest payments, or a series of payments in one currency for a series of payments in another currency. The purchase of a cap or floor entitles the purchaser to receive payment on an agreed principal amount from the seller if a specified index exceeds (in the case of a cap) or falls below (in the case of a floor) a predetermined interest or exchange rate. The Funds may invest and trade in derivative financial products to the extent permitted by applicable regulations. Derivative products are frequently traded on over-the-counter markets and will usually be subject to the restriction that not more than 15% of the net assets of each Fund may be invested in illiquid securities. The Funds will purchase or sell derivative products for hedging purposes only, unless otherwise permitted by applicable regulations. A Fund will not enter into swaps, caps or floors if on a net basis the aggregate notional principal amount of such agreements exceeds the net assets of the Fund. DIVERSIFICATION; INVESTMENT RESTRICTIONS The Investment Company Act of 1940 classifies investment companies as either diversified or non-diversified. The Company qualifies as a diversified Company. Accordingly, each Fund's investments will be diversified to the extent that, with respect to 75% of its total assets, no more than 5% of its total assets will be invested in any one issuer, and a Fund will not acquire more than 10% of the outstanding voting securities of any one issuer. Each Fund's investments will be selected among different industries, such that not more than 25% of its total assets will be invested in any one industry. The preceding limitations will not apply to securities of the United States government, its agencies or instrumentalities. Each Fund is subject to certain fundamental investment restrictions and limitations which are set forth in full in the Statement of Additional Information. These fundamental policies cannot be changed without approval of a majority of each Fund's outstanding voting securities. All restrictions, except the restriction relating to borrowing, shall apply only at the time an investment is made, and a subsequent change in the value of an investment or of a Fund's assets shall not result in a violation. RISK CONSIDERATIONS INVESTING IN FOREIGN SECURITIES. GAM International, Europe, Pacific Basin, Asian Capital and Japan Capital Funds will invest primarily in securities of foreign issuers, and GAM Global, North America, and GAMerica Capital Funds may invest a portion of their assets in securities of foreign issuers. Investors should carefully consider the risks involved in investments in securities of non-U.S. companies and governments. Such risks include fluctuations in foreign exchange rates, political or economic instability in the country of issue, and the possible imposition of exchange controls or other laws or restrictions. Securities prices in non-U.S. markets are generally subject to different economic, financial, political and social factors than are the prices of securities in U.S. markets. These factors may result in either a larger gain or a larger loss than an investment in comparable U.S. securities. The Funds may enter into forward foreign exchange contracts in an attempt to hedge against adverse fluctuations in the relative rates of exchange between different currencies. However, attempting to hedge the value of a Fund's portfolio securities against a decline in the value of a currency will not eliminate fluctuations in the underlying prices of the securities. There can be no assurance that such hedging attempts will be successful. There is likely to be less publicly available information concerning non-U.S. issuers of securities held by the Funds than is available concerning U.S. companies. Foreign companies are not subject to the same accounting, auditing and financial reporting standards as are applicable to U.S. companies. There may be less government supervision and regulation of foreign broker-dealers, financial institutions and listed companies than exists in the United States. Non-US securities exchanges generally have less volume than the New York Stock Exchange and may be subject to less government supervision and regulation than those in the United States. Securities of non-U.S. companies may be less liquid and more volatile than securities of comparable U.S. companies. Non-U.S. brokerage commissions and custodial fees are generally higher than those in the United States, and the settlement period for securities transactions may be longer, in some countries up to 30 days. Dividend and interest income from non-U.S. securities may be subject to withholding taxes. GAM Pacific Basin and Asian Capital Funds and, to a lesser extent, GAM Europe, International and Global Funds may invest a portion of their assets in securities of issuers in developing countries or emerging markets, which generally involve greater potential for gain or loss. In comparison to the United States and other developed countries, developing countries may have relatively unstable governments, economies based on only a few industries and securities markets that trade a smaller number of securities. GAM Europe, Pacific Basin, Japan Capital, Asian Capital, North America and GAMerica Capital Funds will invest primarily in specific geographic areas. An investment in one of these Funds will tend to be affected by political, economic, fiscal, regulatory or other developments in the relevant geographic area to a greater extent than investments in the other Funds. For example, securities markets in Europe may be affected by the efforts of certain European countries to adopt a single currency, coordinate monetary and fiscal policies and form a single market and trading block. Investments in the securities of issuers in Eastern Europe typically would involve greater potential for gain or loss than investments in securities of issuers in Western European countries. The extent of economic development, political stability and market depth of different countries in the Pacific Basin varies widely. Certain countries in the Pacific Basin are either comparatively underdeveloped or are in the process of becoming developed, and investments in the securities of issuers in such countries typically would involve greater potential for gain or loss than investments in securities of issuers in developed countries. A large part of the Japanese economy is dependent on international trade, so that modifications in international trade barriers and fluctuations in trade flows may indirectly affect the value of the Fund's shares. Japan is currently in a recession and its stock market has declined in the past several years. In recent years, Japanese securities markets have also experienced relatively high levels of volatility. INVESTING IN SMALLER COMPANIES. Each Fund may invest in all types of companies, including companies in the earlier stages of development. Investing in smaller, newer companies generally involves greater risk and potentially greater reward than investing in larger, more established companies. Smaller, newer companies often have limited product lines, markets or financial resources, and they may be dependent upon one or a few key persons for management. The securities of such companies may be subject to more abrupt or erratic market movements than securities of larger, more established companies. FIXED INCOME SECURITIES. The Funds will invest in fixed income securities which involve interest rate risk. As interest rates rise, bond values generally fall, and as interest rates fall, bond values generally rise. The Funds may also purchase debt securities issued by smaller or financially distressed companies, including securities of companies which may have defaulted on interest or principal payment obligations. Such debt securities may have very low ratings or no ratings, may be considered speculative investments, and involve greater risk of loss of interest and principal. OPTIONS, FUTURES AND OTHER DERIVATIVES. Trading in options, futures and other forms of derivatives involves substantial risks. The low margin and premiums normally required in such trading provide a large amount of leverage. A relatively small change in the price of a security or index underlying a derivative can produce a disproportionately larger profit or loss, and a Fund may gain or lose more than its initial investment. There is no assurance that a liquid secondary market will exist for options, futures or derivatives purchased or sold, and a Fund may be required to maintain a position until exercise or expiration, which could result in losses. There can be no assurance that the Funds' hedging transactions will be successful. If the Investment Advisers predict incorrectly, the effect on the value of a Fund's investments may be less favorable than if the Fund had not engaged in such options and futures trading. Foreign currency forward contracts, repurchase agreements, ARINS, and certain other types of futures, options and derivatives are entered into directly between the Funds and banks, brokerage firms and other investors in over-the-counter markets rather than through the facilities of any exchange. A Fund may experience losses or delays in the event of a default or bankruptcy of a bank, broker-dealer or other investor with which the Fund entered into such an agreement. Some derivatives may constitute illiquid securities which cannot readily be resold. ------------- For more complete information regarding risks which investors should consider before making an investment in a Fund, see "Investment Objective and Policies--Risk Considerations" in the Statement of Additional Information. SHAREHOLDER TRANSACTIONS AND SERVICES Following is information relevant to purchasing, selling and exchanging shares of the Funds, as well as a description of the shareholder services and programs available. All transactions will be processed through the Funds' transfer agent, Chase Global Funds Services Company (the "Transfer Agent") at the address and telephone number set forth below under "Shareholder Inquiries". The price or net asset value ("NAV") per share for each Fund and class other than GAM Japan Capital Fund, is determined at the close of regular trading (normally 4 p.m. New York time) on each day the New York Stock Exchange is open for business (normally Monday through Friday). GAM Japan Capital Fund's NAV is calculated at the close of trading on the Tokyo Stock Exchange. NAV per share is determined by dividing the value of a Fund's securities, cash and other assets (including accrued interest), less all liabilities (including accrued expenses), by the number of the Fund's shares outstanding. Purchase, sale and exchange transactions in shares of the Funds will be processed based at the NAV per share on the date the transaction request is received and accepted. Securities traded on foreign exchanges will ordinarily be valued at the last quoted sale price available before the close of the New York Stock Exchange (except as described above with respect to securities held by GAM Japan Capital Fund). If a security is traded on more than one United States or foreign exchange, the last quoted sales price on the exchange which represents the primary market for the security will be used. Because some of the Funds' portfolio securities may be traded on certain weekend days and on days that are holidays in the United States but not in other countries where trading occurs, the net asset value of a Fund's portfolio may be significantly affected at times when a shareholder has no ability to purchase or redeem shares of the Fund. PURCHASING SHARES Shares of each Fund are offered on a continuous basis. Orders received in good form prior to 4:00 p.m. New York time (or placed with a financial service firm before such time and transmitted by the financial service firm before the Fund processes that day's share transactions) will be processed based on that day's closing price or NAV, plus any applicable initial sales charge. Purchase orders must be accompanied by a completed and signed application, and are subject to acceptance and collection of payment at full face value in US Dollars. Each Fund and GAM Services, Inc., the Funds' distributor ("GAM Services"), reserve the right to reject any purchase order. The minimum initial investment in each Fund is $5,000 and subsequent investments must be at least $500, except that for IRAs the minimum initial investment is $2,000 and the minimum subsequent investment is $500. You can initiate any purchase, exchange or sale of shares through your financial services firm. Shares may also be purchased by mail directly from the Transfer Agent, by forwarding the Purchase Application form attached to this Prospectus. Complete the appropriate parts of the Purchase Application following the instructions set forth on the form and mail it with your check payable to "GAM Funds, Inc.". Payment for shares may also be made by wire transfer after you have mailed in your Purchase Application. In addition to the Funds, Investors may also purchase directly or by exchange, without charge, shares of The Reserve Funds - Primary Fund, an open-end management investment company commonly known as a money market fund (the "GAM Money Market Account"). The GAM Money Market Account is offered through GAM Services, but is not a series of the Company. Each Fund offers Class A shares, and GAM International, GAM Global and GAM Pacific Basin Funds offer Class D shares. Each class has its own cost structure, allowing investors to choose the one that best meets their requirements. Investors should consult their financial services firm to assist them with this decision. Share purchases and other transactions are electronically recorded (book-entry shares). The Funds do not generally issue certificates for shares purchased. CLASS A SHARES. Class A shares are offered at net asset value plus an initial sales charge, unless the purchase qualifies for a complete waiver of the charge. Large order purchases may be made without a sales charge; however, such purchases will be subject to a contingent deferred sales charge as described below. Class A shares are also subject to an ongoing fee of 0.30% annually of the average daily net assets of each Fund represented by Class A shares pursuant to the Class A Share Plan of Distribution adopted by the Funds. (See "Management of the Funds - The Distributor"). Purchase Amount Sales Load Sales Load Amount (as % of (as % of Net Reallowed Offering Price) Amount Invested) to Dealers (as % of Offering Price) Up to $100,000 5.00% 5.26% 4.0% $100,000- $299,999 4.0% 4.17% 3.0% $300,000-$599,999 3.0% 3.09% 2.0% $600,000-$999,999 2.0% 2.04% 1.0% $1,000,000 and over 0% See Below INVESTMENTS OF $1,000,000 OR MORE. Large order purchases of Class A shares are available with no front-end sales charge. GAM Services intends to pay financial services firms a commission from its own resources in connection with these purchases of up to 1% of the amount invested for amounts from $1 million to $3 million, 0.70% on amounts of $3 million to $5 million, 0.50% on amounts of $5 million to $50 million, and 0.25% on amounts of $50 million and above. Those purchases for which GAM Services pays a commission (and the payment of which has not been waived by the financial services firm) are subject to a 1% contingent deferred sales charge ("CDSC") on any shares sold within one year of purchase, declining to 0.50% for redemptions occurring in the second year and declining thereafter to zero. Waivers of the CDSC are available under the circumstances described below. The CDSC is based on the lesser of the original purchase cost or the current market value of the shares being sold, and is not charged on shares acquired by reinvesting your dividends. To keep the CDSC as low as possible, each time an investor places a request to sell shares, the Fund will first sell any shares in your account that are not subject to a CDSC. CLASS D SHARES. Class D shares are offered at net asset value plus an initial sales charge which is lower than the sales charge imposed on Class A shares. However, Class D shares are also subject to an ongoing fee of 0.50% annually of the average daily net assets of each Fund represented by Class D shares pursuant to the Class D Share Plan of Distribution adopted by the Funds. (See "Management of the Funds - The Distributor"). Purchase Amount Sales Load Sales Load Amount (As % of (As % of Net Reallowed Offering Price) Amount Invested) to Dealers (As % of Offering Price) Up to $100,000 3.50% 3.63% 2.5% $100,000- $299,999 2.5% 2.56% 1.5% $300,000-$599,999 2.0% 2.04% 1.0% $600,000-$999,999 1.5% 1.52% 1.0% $1,000,000 and over* 0% *Purchases of $1 million or more should be for Class A shares. Please consult your financial services firm. SALES CHARGE REDUCTIONS AND WAIVERS REDUCTIONS. Certain purchases of Class A and Class D shares may qualify for reduced or eliminated sales charges. Investors qualifying for a waiver of the sales charge should purchase Class A shares. Please refer to the Purchase Application or consult your financial services firm to take advantage of these purchase options. RIGHTS OF ACCUMULATION - You may add the value of any shares of the same class already owned to the amount of your next investment in that class for purposes of calculating the sales charge. STATEMENT OF INTENTION - You may purchase shares of a Class over a 13-month period and receive the same sales charge as if all shares had been purchased at once. COMBINATION PRIVILEGE - You may combine shares of the same class of more than one Fund, and individuals may include shares purchased for themselves, their spouse and children under the age of 21 for purposes of calculating the sales charge. WAIVERS OF FRONT-END SALES CHARGES. Shares may be offered without the front-end sales charge to active and retired Fund directors and other persons affiliated with the Fund or GAM Services or its affiliates, broker-dealers having sales agreements with GAM Services, and spouses and minor children of the foregoing persons or trusts or employee benefit plans for the benefit of such persons; persons investing the proceeds of a redemption of shares of any other investment company managed or sponsored by an affiliate of GAM Services; accounts managed by an affiliate of GAM Services; financial representatives utilizing Fund shares in fee-based investment products under agreements with GAM Services or the Funds; organizations described in Section 501(c)(3) of the Internal Revenue Code of 1986; financial institution trust departments investing an aggregate of $1 million or more in the Funds; certain tax qualified plans of administrators who have entered into a services agreement with GAM Services or the Funds; and employee benefit plans of companies with more than 100 employees. WAIVERS OF CDSC. The CDSC imposed on Class A shares may be waived on shares sold to make payments through a systematic withdrawal plan; in connection with certain distributions from an IRA; due to the death or disability of a shareholder; or in connection with exchanges for Class A shares of another Fund. SELLING SHARES Shares may be sold on any day the New York Stock Exchange is open, either through your financial services firm or directly to the Funds' Transfer Agent. Financial services firms must receive requests before 4:00 p.m., New York time, and are responsible for furnishing all necessary documentation to the Transfer Agent. You will receive the NAV (price) per share on the date your request is received in proper order for processing, less any applicable CDSC on Class A shares. Requests made directly to the Transfer Agent must be made in writing unless you have elected telephone redemption privileges. (See "Telephone Transactions" below.) The written request, signed by the registered account holder(s), must be addressed and mailed to the Transfer Agent, indicating the number of shares or dollar amount to be sold. Your signature(s) must be guaranteed by a bank, member firm of a national stock exchange or another eligible guarantor institution. A notary public is not acceptable. If you hold certificates representing your shares, the certificate, endorsed for transfer, must accompany your request. Additional documentation is required for sales by corporations, agents, fiduciaries, surviving joint owners and individual retirement account holders. Please contact the Transfer Agent. When you place a request to sell shares for which the purchase money has not yet been collected, the request will be executed in a timely fashion, but the Fund will not release the proceeds to you until your purchase payment clears, which may take up to ten days after the purchase. In unusual circumstances, a Fund may temporarily suspend the processing of sell requests, or may postpone payment of proceeds for up to three business days or longer, as permitted by law. The value of your shares at the time of sale may be more or less than you paid for them. The sale of shares may be a taxable event to you. (See "Tax Matters".) INVOLUNTARY REDEMPTIONS. Except in the case of retirement accounts and accounts maintained by administrators for retirement plans, if your account value falls below $1,000 due to withdrawals other than by use of the systematic withdrawal program described below, you may be asked to purchase more shares within 30 days. If your account is not brought back to the minimum account size, the Fund may close the account and mail the proceeds to the registered address for the account. Your account will not be closed if the value has decreased due to Fund performance or the payment of sales charges. No CDSC will be imposed on accounts closed involuntarily. REINSTATEMENT PRIVILEGE. If you sell shares of a Fund, you may reinvest in your existing account (or a new account reopened under the same registration) some or all of the proceeds in the same class of shares of any Fund within 60 days without a sales charge. If you paid a CDSC at the time of sale, you will be credited with the portion of the CDSC paid in respect of the reinvested proceeds. EXCHANGES Shares of one Fund may be exchanged for shares of the same class of another Fund, or for shares of the GAM Money Market Account, generally without paying any sales charge. Upon an exchange from the GAM Money Market Account into a Fund, investors who purchased the GAM Money Market Account directly must pay the initial sales charge imposed by the Fund into which they exchange. Shares subject to a CDSC will be subject to the same CDSC after the exchange, which will continue to age from the original purchase date. A Fund may refuse any exchange order, and may change or cancel the exchange privilege at any time upon 60 days' notice to shareholders. Unless an investor has elected the telephone or facsimile exchange privilege, investors must request in writing a sale of all or a portion of their current investment and a simultaneous purchase into a separate Fund(s), which the investor must indicate on a new application form. An executed request to sell and a Purchase Application must be mailed to the Transfer Agent for processing. An exchange out of a Fund is treated as a sale and may result in a gain or loss for tax purposes. (See "Tax Matters".) OTHER ACCOUNT SERVICES DIVIDEND REINVESTMENT. Investors may opt to have their dividends reinvested in additional shares of the same Fund and class. Unless you direct otherwise, your distributions will be automatically reinvested. You can choose on the Purchase Application to have a check for your dividends mailed to your registered address. However, if your dividend checks are returned to the Fund because they are not deliverable after two attempts, your dividends will automatically be reinvested thereafter in additional shares of the same Fund and class. SYSTEMATIC WITHDRAWAL PLAN. This program allows investors to sell their shares at regular periodic intervals and direct payment of the proceeds to themselves or to a third party. To initiate this option, you must have at least $10,000 worth of shares in your account. You may elect this option by providing the information required in the appropriate section of the Purchase Application. Withdrawals concurrent with the purchase of shares of the Funds will be disadvantageous because of the payment of duplicative sales loads, if applicable. For this reason, additional purchases of Fund shares are discouraged when participating in this program. AUTOMATIC INVESTMENT PLAN. You may make additional purchases in incremental amounts of $500 or more through an automatic investment program. Monthly or quarterly investments will be debited automatically, at your instruction, from your account at a financial institution. To enroll in this program, please complete the appropriate sections of the Purchase Application or contact the Transfer Agent. You may terminate the program at any time by written notice to the Transfer Agent. Termination will become effective within 30 days after receipt of your request. The Fund may immediately terminate your participation in the event that any item is unpaid by your financial institution. TELEPHONE AND FACSIMILE PRIVILEGES. Telephone and facsimile redemption and exchange privileges are available and can be initiated by properly completing the appropriate sections of the Purchase Application or contacting the Transfer Agent. For your protection, telephone requests may be recorded in order to verify their accuracy. In addition, the Transfer Agent has procedures in place to verify the identity of the caller. If these procedures are not followed, the Transfer Agent is responsible for any losses that may occur to any account due to an unauthorized telephone call. Proceeds of telephone and facsimile redemptions will only be mailed to your registered address or sent by wire transfer to an account designated in advance. SHAREHOLDER INQUIRIES. Please contact your financial representative for further instructions and assistance with your investment, or contact the Transfer Agent at the following address or telephone numbers: Chase Global Funds Services Company 73 Tremont Street Boston, MA 02108 (800) 426-4685 (617) 557-8000 ext. 6610 Facsimile: (617) 557-8635 TAX MATTERS SHAREHOLDER TRANSACTIONS. Normally, any sale or exchange of shares of a Fund will be a taxable event. Depending on the purchase price and the sale price of the shares you sell or exchange, you may have a gain or a loss on the transaction. DIVIDENDS. So long as each Fund meets the requirements for being a tax-qualified regulated investment company it pays no federal income tax on the earnings it distributes to shareholders. Each Fund intends annually to pay a dividend representing its entire net investment income and to distribute all its realized net capital gains. In so doing, the Fund will avoid the imposition of any excise taxes. Dividends, whether reinvested or taken as cash, are generally taxable. Dividends from long-term capital gains are taxable as capital gains; dividends from other sources are generally taxable as ordinary income. After a Fund makes a distribution to shareholders, the value of each outstanding share of the Fund will decrease by the amount of the distribution. If a shareholder purchases shares immediately before the record date of the distribution, the shareholder will pay the full price for the shares and then receive some portion of the price back as a taxable dividend or capital gain distribution (also known as "buying a dividend"). The Form 1099 and Tax Notice that is mailed to you every January details your dividends and their federal tax category. You should verify your tax liability with your tax professional. Please consult the Statement of Additional Information for a description of certain other tax consequences to shareholders. MANAGEMENT OF THE FUNDS DIRECTORS AND OFFICERS. The business of the Funds is supervised by the Board of Directors, who may exercise all powers not required by statute, the Articles of Incorporation or the By-Laws to be exercised by the shareholders. When appropriate, the Board of Directors will consider separately matters relating to each Fund or to any class of shares of a Fund. The Board elects the officers of the Company and retains various companies to carry out the Fund's operations, including the investment advisers, custodian, administrator and transfer agent. INVESTMENT ADVISERS. Each Fund is advised by GAM International Management Limited ("GAM"), a corporation organized in 1984 under the laws of the United Kingdom, with its principal offices located at 12 St. James Place, London SW1A 1NX England. Fayez Sarofim & Co. ("Sarofim"), a Texas corporation organized in 1958 with offices at Two Houston Center, Houston, TX 77010, serves as co-investment adviser to GAM North America Fund. The individuals primarily responsible for the day-to-day management of each Fund's portfolio are set forth below. GAM GLOBAL AND GAM INTERNATIONAL FUNDS. John R Horseman, Investment Director, joined GAM initially as a member of the Asian team based in Hong Kong. He commenced management of GAM International and GAM Global Funds on April 20, 1990 after moving to the London office. He is now responsible for a number of GAM's other global and international funds, including the offshore fund, GAM Universal US$ Inc. GAM PACIFIC BASIN FUND. Michael S Bunker, Investment Director, has overall responsibility for Asian investment policy. He has over 20 years' investment experience, primarily in Asian markets. He commenced management of GAM Pacific Basin Fund on May 6, 1987. Mr Bunker also manages the offshore fund GAM Pacific Inc. Mr Bunker is now based in London after having lived in Hong Kong for three years. GAM JAPAN CAPITAL FUND. Paul S Kirkby, Investment Director, is responsible for investment in the Japanese market. Prior to joining GAM in 1985, as a Senior Fund Manager in Hong Kong, he was an investment analyst with New Japan Securities Co. Ltd in Tokyo. He commenced management of GAM Japan Capital Fund on July 1, 1994. Mr Kirkby also manages the offshore fund GAM Japan Inc. Mr Kirkby is now based in London having lived in Hong Kong for seven years. GAM ASIAN CAPITAL FUND. Adrian L Cantwell, Investment Director, is responsible for Asia ex Japan portfolios. Prior to joining GAM in 1990, he was a Director of Gartmore Limited, Hong Kong, responsible for South East Asian investment. He commenced management of GAM Asian Capital Fund on May 12, 1995. Mr Cantwell also manages the offshore funds GAM Asian Inc. and GAM Singapore/Malaysia Inc. Mr Cantwell has lived in Hong Kong since 1985. GAM EUROPE FUND. John Bennett, Investment Director, is responsible for European markets. Prior to joining GAM in 1993, he was a Senior Fund Manager at Ivory & Sime, responsible for Continental European equity portfolios. He commenced management of GAM Europe Fund on January 1, 1993. Mr Bennett also manages the offshore fund GAM Pan European Inc. Mr Bennett is based in Edinburgh. GAM NORTH AMERICA FUND. Fayez Sarofim founded Fayez Sarofim & Co in 1958 and is the majority shareholder, President and Chairman of the Board. The firm currently manages aggregate assets of approximately $38 billion under the supervision of Mr. Sarofim. Mr. Sarofim is also a director of Allegheny Teledyne, Inc., Argonaut Group, Unitrin, Inc., Imperial Holly Corp. and EXOR Group. He commenced management of GAM North America Fund on June 29, 1990. Mr Sarofim also manages the offshore fund GAM US Inc. GAMERICA CAPITAL FUND. Gordon Grender, Director, has been associated with the GAM group since 1983. He has been actively involved in fund management in North American stock markets since 1974. He commenced management of GAMerica Capital Fund on May 12, 1995. Mr Grender also manages GAMerica Inc., an offshore fund with similar investment objectives. GAM is an indirect subsidiary of Global Asset Management Ltd., which itself is ultimately controlled, as to approximately 70%, by Lorelock, S.A., which itself is controlled by a discretionary trust of which Mr. de Botton, President and Director of the Company, may be a potential beneficiary and, as to approximately 30%, by St. James's Place Capital plc (a financial services company organized under the laws of and based in the United Kingdom). Global Asset Management Ltd., directly or indirectly through its subsidiaries, manages domestic and foreign mutual funds and managed accounts with aggregate assets of approximately $9 billion. Subject to the direction and general supervision of the Board of Directors, GAM furnishes the Funds with investment research and advice and makes recommendations with respect to the Funds' purchases and sales of portfolio securities and brokerage allocation, and both GAM and Sarofim provide such services with respect to GAM North America Fund. As compensation for such services, each Fund except GAM North America Fund pays GAM the equivalent to 1.0% per annum of the Fund's average daily net assets. GAM North America Fund pays a fee equal to 0.50% of its average daily net assets to each of GAM and Sarofim, representing an aggregate fee equal to 1.0% of its average daily net assets. The Funds' expense ratios may be higher than those of most registered investment companies since the cost of maintaining custody of foreign securities is higher than those for most domestic funds and the rate of the advisory fee paid by each Fund exceeds that of most registered investment companies. The Funds pay for all expenses of their operations. DISTRIBUTOR AND SALES AND SERVICE COMPENSATION. GAM Services Inc., an affiliate of GAM with its principal offices located at 135 East 57th Street, New York, New York 10022, serves as distributor and principal underwriter of the Funds' shares. As such, GAM Services compensates financial services firms which sell shares of the Funds pursuant to agreements with GAM Services. Compensation payments originate from sales charges paid by shareholders at the time of purchase and from 12b-1 fees paid out of Fund assets. Sales charges are deducted from payment for shares at the time of investment and reallowed to financial services firms as set forth in the table under "Purchase of Shares." These firms typically pass on a portion of this selling compensation to their financial representatives who sell shares of the Funds and provide personal account services to Fund shareholders. 12b-1 fees vary according to the 12b-1 Plan adopted by each Fund for each class of shares. The Funds pay 12b-1 fees equal to 0.30% annually of the average daily net assets represented by Class A shares. Of this amount, GAM Services retains 0.05% annually and a service fee of 0.25% is reallowed to financial services firms. Funds offering Class D shares pay 12b-1 fees equal to 0.50% annually of those Funds' net assets represented by Class D shares. GAM Services reallows the entire Class D share 12b-1 fee to financial services firms. In the case of Class A and Class D share accounts which are not assigned to a financial services firm, GAM Services retains the entire fee. Distribution fees may be used to pay sales and service compensation to financial services firms and to defray other distribution related expenses enumerated in the 12b-1 Plans. Should the fees collected under the Plans exceed the expenses of GAM Services in any year, GAM Services would realize a profit. GAM Services, as distributor for the GAM Money Market Account, collects a fee paid in part by the GAM Money Market Account pursuant to distribution and shareholder service arrangements offered by The Reserve Funds and their principal underwriter. GAM Services or the Funds may also contract with banks, trust companies, broker-dealers or other financial organizations to act as shareholder servicing agents to provide administrative services for the Funds, such as processing purchase and redemption transactions, transmitting and receiving funds for the purchase and sale of shares in the Funds, answering routine inquiries regarding the Funds, furnishing monthly and year-end statements and confirmations of purchases and sales of shares, transmitting periodic reports, updated prospectuses, proxy statements and other communications to shareholders, and providing other services as agreed from time to time. For these services, each Fund pays fees to shareholder servicing agents which may vary depending upon the services provided, but do not exceed an annual rate of 0.25% of the daily net asset value of the shares of a Fund owned by shareholders with whom the shareholder servicing agent has a servicing relationship. CUSTODIAN AND ADMINISTRATOR. Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts 02109, serves as custodian of the Funds' securities and cash and as their administrator. Brown Brothers employs subcustodians for the purpose of providing custodial services for the Funds' foreign assets held outside the United States. TRANSFER AGENT; SHAREHOLDER SERVICING AGENTS. Chase Global Fund Services Company, P.O. Box 2798, Boston, Massachusetts 02208 (the "Transfer Agent") serves as shareholder service agent, dividend-disbursing agent, transfer agent and registrar for the Funds. Pursuant to an agreement with GAM Services, the Transfer Agent also provides services to representatives of financial services companies on behalf of their customers who are shareholders in the Funds. The Funds and GAM Services also engage and compensate other entities for serving as shareholder servicing and subaccounting agents for the benefit of discrete groups of Fund shareholders. DESCRIPTION OF SHARES GAM Funds, Inc., a Maryland corporation, was organized on May 7, 1984. The Company has eight series of common stock outstanding, each of which may be divided into two classes of shares, Class A shares and Class D shares. The two classes of shares of a series represent interests in the same portfolio of investments, have the same rights, and are generally identical in all respects, except that each class bears its separate distribution and certain class expenses and has exclusive voting rights with respect to any matter on which a separate vote of any class is required by the Act or Maryland law. The net income attributable to each class and dividends payable on the shares of each class will be reduced by the amount of distribution fees and other expenses of each class. Class D shares bear higher distribution fees, which will cause the Class D shares to pay lower dividends than the Class A shares. The Directors, in the exercise of their fiduciary duties under the Act and Maryland law, will seek to ensure that no conflicts arise between the Class A and Class D shares of a Fund. Each share outstanding is entitled to share equally in dividends and other distributions and in the net assets of the respective series Fund on liquidation. Shares are fully paid and nonassessable when issued, freely transferable, have no pre-emptive, subscription or conversion rights and are redeemable and subject to redemption under certain conditions described above. Each share outstanding entitles the holder to one vote. If a Fund is separately affected by a matter requiring a vote, the shareholders of each such Fund shall vote separately. The Company is not required to hold annual meetings of shareholders, although special meetings will be held for purposes such as electing or removing directors, changing fundamental policies, or approving an investment advisory agreement. Shareholders will be assisted in communicating with other shareholders in connection with removing a director as if Section 16 (c) of the Act were applicable. ADDITIONAL INFORMATION This Prospectus does not contain all the information included in the Registration Statement filed with the SEC with respect to the securities offered hereby. The Registration Statement, including the exhibits filed therewith, may be examined at the office of the SEC in Washington, D.C. Statements contained in this Prospectus as to the contents of any contract or other document referred to are not necessarily complete and, in each instance, reference should be made to the copy of such contract or other document filed as an exhibit to the Registration Statement of which this Prospectus forms a part, each such statement being qualified in all respects by such reference. GLOBAL ASSET MANAGEMENT(R) GAM FUNDS, INC. PROSPECTUS and APPLICATION April 30, 1997 No dealer, salesman, or any other person has been authorized to give any information or to make any representations, other than those contained in this Prospectus, in connection with the offer contained in this Prospectus, and, if given or made, such other information or representations must not be relied upon as having been authorized by the Company. This Prospectus does not constitute an offer by the Company to sell or a solicitation of any offer to buy any of the securities offered hereby in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. GAM LOGO Part B Heading in Statement of - ------- Additional Information ------------------------ 10. Cover Page Cover Page 11. Table of Contents Table of Contents 12. General Information and Cover Page History 13. Investment Objectives and Investment Objective and Policies Policies 14. Management of the Fund Management of the Company 15. Control Persons and Principal Management of the Company, Holders of Securities Investment Advisory and Other Services 16. Investment Advisory and Investment Advisory and Other Services Other Services 17. Brokerage Allocation Brokerage Allocation 18. Capital Stock and Other Investment Objective and Securities Policies 19. Purchase, Redemption and Net Asset Value, Pricing of Securities Dividends and Taxes; Being Offered Investment Advisor and Other Services 20. Tax Status Net Asset Value, Dividends and Taxes 21. Underwriters Investment Advisory and Other Services 22. Calculation of Performance Performance Information Data 23. Financial Statements Financial Statements Part C Information required to be included in Part C is set forth under the appropriate item, so numbered, in Part C to this Registration Statement on Form N-1A. GAM FUNDS, INC. 135 East 57th Street New York, NY 10022 Tel: (212) 407-4600/Fax: (212) 407-4684 STATEMENT OF ADDITIONAL INFORMATION April 30, 1997 This Statement of Additional Information pertains to the funds listed below, each of which is a separate series of common stock GAM Funds, Inc. (the "Company"), a diversified open-end management investment company. Each series of the Company represents a separate portfolio of securities (each a "Fund" and collectively the "Funds"). The investment objective of each Fund is to seek long term capital appreciation through investment primarily in equity securities. Each Fund seeks to achieve its objective by investing primarily within a particular geographic region in accordance with its own investment policy. There is no assurance that the Funds will achieve their objective. The Funds are managed by GAM International Management Limited ("GAM"). Fayez Sarofim & Co. ("Sarofim") serves as co-investment adviser to the GAM North America Fund. (GAM and Sarofim are collectively referred to as the "Investment Advisers".) GAM Services, Inc., an affiliate of GAM ("GAM Services") serves as the principal underwriter for the Funds' securities. GAM GLOBAL FUND invests primarily in the United States, Europe, the Pacific Basin, and Canada. GAM INTERNATIONAL FUND invests primarily in Europe, the Pacific Basin and Canada. GAM PACIFIC BASIN FUND invests primarily in the Pacific Basin, including Japan, Hong Kong, Korea, Taiwan, Singapore, Malaysia, Thailand, Indonesia and Australia. GAM JAPAN CAPITAL FUND invests primarily in Japan. GAM ASIAN CAPITAL FUND invests primarily in Asia excluding Japan. GAM EUROPE FUND invests primarily in Europe. GAM NORTH AMERICA FUND invests primarily in the United States and Canada. GAMERICA CAPITAL FUND investing primarily in the United States. This Statement of Additional Information, which should be kept for future reference, is not a prospectus. It should be read in conjunction with the Prospectus of the Funds, dated April 30, 1997, which can be obtained without cost upon request at the address indicated above. TABLE OF CONTENTS Page INVESTMENT OBJECTIVE AND POLICIES Rating of Securities United States Government Obligations Repurchase Agreements Options Stock Index Futures and Options Interest Rate Futures and Options Foreign Currency Transactions Lending Portfolio Securities Warrants Borrowing Restricted Securities Future Developments Investment Restrictions Risk Considerations Portfolio Turnover PERFORMANCE INFORMATION NET ASSET VALUE, DIVIDENDS AND TAXES Net Asset Value Suspension of the Determination of Net Asset Value Tax Status MANAGEMENT OF THE COMPANY Compensation of Directors and Executive Officers Principal Holders of Securities INVESTMENT ADVISORY AND OTHER SERVICES Investment Advisory Contracts Advisory Fees Investment Advisers Distributor and Plans of Distribution Custodian and Administrator Transfer Agent Legal Counsel Independent Accountants Reports to Shareholders BROKERAGE ALLOCATION FINANCIAL STATEMENTS -i- INVESTMENT OBJECTIVE AND POLICIES The investment objective and policies of each Fund are described in the Prospectus under the heading "Investment Objective and Policies and Risk Considerations." Set forth below is additional information with respect to the investment objective and policies of each Fund. RATING OF SECURITIES. Each Fund may invest a substantial portion of its assets in debt securities issued by companies or governments and their agencies and instrumentalities if it determines that the long-term capital appreciation of such debt securities may equal or exceed the return on equity securities. The debt securities (bonds and notes) in which the Funds may invest will be rated C or better by Moody's Investors Services, Inc. ("Moody's") or D or better by Standard & Poor's Corporation ("S&P"), which are the lowest ratings, or, if unrated, be comparable in quality as determined pursuant to guidelines established by the Company's Board of Directors, since debt securities of foreign companies and foreign governments are not generally rated by Moody's or S&P. Each Fund may, for temporary defensive purposes, invest in debt securities (with remaining maturities of five years or less) issued by companies and governments and their agencies and instrumentalities and in money market instruments denominated in currency of the United States or foreign nations. The money market instruments include commercial paper which, when purchased, is rated Prime-1 or better by Moody's or A-1 or better by S&P or, if not rated, is issued by a company which at the date of investment has an outstanding debt issue rated Aa or better by Moody's or AA or better by S&P or is of equivalent investment quality as determined by the Company pursuant to guidelines established and maintained in good faith by the Board of Directors. None of the Funds will commit more than 5% of its assets, determined at the time of investment, to investments in debt securities which are rated lower than "investment grade" by a rating service. Debt securities rated lower than "investment grade," also known as "junk bonds," are those debt securities not rated in one of the four highest categories by a rating service (e.g., bonds rated lower than BBB by S&P or lower than Baa by Moody's). Junk bonds, and debt securities rated in the lowest "investment grade," have speculative characteristics, and changes in economic circumstances or other circumstances are more likely to lead to a weakened capacity on the part of issuers of such lower rated debt securities to make principal and interest payments than issuers of higher rated investment grade bonds. Developments such as higher interest rates may lead to a higher incidence of junk bond defaults, and the market in junk bonds may be more volatile and illiquid than that in investment grade bonds. UNITED STATES GOVERNMENT OBLIGATIONS. The Funds may invest in securities of the United States government, its agencies and instrumentalities. United States government securities include United States Treasury obligations, which include United States Treasury bills, United States Treasury notes and United States Treasury bonds; and obligations issued or guaranteed by United States government agencies and instrumentalities. Agencies and instrumentalities include the Federal Land Banks, Farmers Home Administration, Central Bank for Cooperatives, Federal Intermediate Credit Banks, Federal Home Loan Bank, Student Loan Marketing Association, Federal National Mortgage Association and Government National Mortgage Association. REPURCHASE AGREEMENTS. Each Fund may, for temporary defensive purposes, invest in repurchase agreements. In such a transaction, at the same time a Fund purchases a security, it agrees to resell it to the seller and is obligated to redeliver the security to the seller at a fixed price and time. This establishes a yield during the Fund's holding period, since the resale price is in excess of the purchase price and reflects an agreed-upon market rate. Such transactions afford an opportunity for a Fund to invest temporarily available cash. Repurchase agreements may be considered loans to the seller collateralized by the underlying securities. The risk to a Fund is limited to the ability of the seller to pay the agreed-upon sum on the delivery date; in the event of a default the repurchase agreement provides that the Fund is entitled to sell the underlying collateral. If the value of the collateral declines after the agreement is entered into, however, and if the seller defaults when the value of the underlying collateral is less than the repurchase price, a Fund could incur a loss of both principal and interest. The collateral is marked-to-market daily and the Investment Advisers monitor the value of the collateral in an effort to determine that the value of the collateral always equals or exceeds the agreed-upon sum to be paid to a Fund. If the seller were to be subject to a United States bankruptcy proceeding, the ability of a Fund to liquidate the collateral could be delayed or impaired because of certain provisions in the bankruptcy law. Each Fund may only enter into repurchase agreements with domestic or foreign securities dealers, banks and other financial institutions deemed to be creditworthy under guidelines approved by the Board of Directors. OPTIONS. The principal reason for writing covered call options is to realize, through the receipt of premiums, a greater return than would be realized on a Fund's portfolio securities alone. In return for a premium, the writer of a covered call option forfeits the right to any appreciation in the value of the underlying security above the strike price for the life of the option (or until a closing purchase transaction can be effected). Nevertheless, the call writer retains the risk of a decline in the price of the underlying security. Similarly, the principal reason for writing secured put options is to realize income in the form of premiums. The writer of a secured put option accepts the risk of a decline in the price of the underlying security. Although each Fund generally will purchase or write only those options for which it believes there is an active secondary market so as to facilitate closing transactions, there is no assurance that sufficient trading interest to create a liquid secondary market on a securities exchange will exist for any particular option or at any particular time, and for some options no such secondary market may exist. A liquid secondary market in an option may cease to exist for a variety of reasons. In such event, it might not be possible to effect closing transactions in particular options. If, as a covered call option writer, a Fund is unable to effect a closing purchase transaction in a secondary market, it will not be able to sell the underlying security until the option expires or it delivers the underlying security upon exercise. The success of each Fund's options trading activities will depend on the ability of the Investment Advisers to predict correctly future changes in the prices of securities. Purchase or sale of options to hedge each Fund's existing securities positions is also subject to the risk that the value of the option purchased or sold may not move in perfect correlation with the price of the underlying security. It is a condition to the favorable tax treatment afforded to a regulated investment company, such as the Funds, that each Fund derive less than 30% of its gross income from the sale or disposition of securities (including certain options and futures contracts) held for less than three months. This requirement may limit the extent to which each Fund may engage in trading in options and futures (discussed below), and options and futures trading may increase the risk that a Fund may not satisfy this requirement and that it may therefore become liable for taxes on its income and gains. The greater leverage in options and futures trading may also tend to increase the daily fluctuations in the value of a Fund's shares. STOCK INDEX FUTURES AND OPTIONS. Each Fund may purchase and sell stock index futures contracts, and purchase, sell and write put and call options on stock index futures contracts, for the purpose of hedging its portfolio. A stock index fluctuates with changes in the market value of the stocks included in the index. An option on a securities index gives the holder the right to receive, upon exercise of the option, an amount of cash if the closing level of the securities index upon which the option is based is greater than, in the case of a call option, or less than, in the case of a put option, the strike price of the option. Some stock index options are based on a broad market index, such as the NYSE Composite Index, or a narrower market index, such as the Standard & Poor's 100. In the case of a stock index future, the seller of the futures contract is obligated to deliver, and the purchaser obligated to take, an amount of cash equal to a specific dollar amount multiplied by the difference between the value of a specific stock index at the close of the last trading day of the contract and the price at which the agreement is made. No physical delivery of the underlying stocks in the index is made. If the assets of a Fund are substantially invested in equity securities, the Fund might sell a futures contract based on a stock index which is expected to reflect changes in prices of stocks in the Fund's portfolio in order to hedge against a possible general decline in market prices. A Fund may similarly purchase a stock index futures contract to hedge against a possible increase in the price of stocks before the Fund is able to invest cash or cash equivalents in stock in an orderly fashion. The effectiveness of trading in stock index futures and options as a hedging technique will depend upon the extent to which price movements in a Fund's portfolio correlate with price movements of the stock index selected. Because the value of an index future or option depends upon movements in the level of the index rather than the price of a particular stock, whether a Fund will realize a gain or loss from the purchase, sale or writing of a stock index future or option depends upon movements in the level of stock prices in the stock market generally, or in the case of certain indexes, in an industry or market segment, rather than movements in the price of a particular stock. In addition to the possibility that there may be an imperfect correlation, or no correlation at all, between movements in a stock index and the portion of the portfolio being hedged, the price of stock index futures may not correlate perfectly with the movement in the stock index due to certain market distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions which would distort the normal relationship between the index and futures markets. Secondly, from the point of view of speculators, the deposit requirements in the futures market are less onerous than margin requirements in the securities market. Therefore, increased participation by speculators in the futures market also may cause temporary price distortions. Due to the possibility of price distortions in the futures market and because of the imperfect correlation between movements in the stock index and movements in the price of stock index futures, a correct forecast of general market trends by the Investment Advisers still may not result in a successful hedging transaction. Successful use of stock index futures by the Funds also is subject to the ability of the Investment Adviser to predict correctly movements in the direction of the market. For example, if a Fund has hedged against the possibility of a decline in the market adversely affecting stocks held in its portfolio and stock prices increase instead, the Fund will lose part or all of the benefit of the increased value of its stocks which it has hedged because it will have offsetting losses in its futures positions. Each Fund may purchase and sell commodity futures contracts, and purchase, sell or write options on futures contracts, for bona fide hedging purposes or otherwise in accordance with applicable rules of the Commodity Futures Trading Commission (the "CFTC"). CFTC rules permit an entity such as a Fund to acquire commodity futures and options as part of its portfolio management strategy, provided that the sum of the amount of initial margin deposits and premiums paid for unexpired commodity futures contracts and options would not exceed 5% of the fair market value of the assets of the Fund, after taking into account unrealized profits and unrealized losses on such contracts it has entered into. In the case of an option that is in-the-money at the time of purchase, the in-the-money amount may be excluded in calculating the 5%. When a Fund enters into a futures contract or writes an option on a futures contract, it will instruct its custodian to segregate cash or liquid securities having a market value which, when added to the margin deposited with the broker or futures commission merchant, will at all times equal the purchase price of a long position in a futures contract, the strike price of a put option written by the Fund, or the market value (marked-to-market daily) of the commodity underlying a short position in a futures contract or a call option written by the Fund, or the Fund will otherwise cover the transaction. INTEREST RATE FUTURES AND OPTIONS. Each Fund may hedge against the possibility of an increase or decrease in interest rates adversely affecting the value of securities held in its portfolio by purchasing or selling a futures contract on a specific debt security whose price is expected to reflect changes in interest rates. However, if a Fund anticipates an increase in interest rates and rates decrease instead, the Fund will lose part or all of the benefit of the increased value of the securities which it has hedged because it will have offsetting losses in its futures position. A Fund may purchase call options on interest rate futures contracts to hedge against a decline in interest rates and may purchase put options on interest rate futures contracts to hedge its portfolio securities against the risk of rising interest rates. A Fund will sell options on interest rate futures contracts as part of closing purchase transactions to terminate its options positions. No assurance can be given that such closing transactions can be effected or that there will be a correlation between price movements in the options on interest rate futures and price movements in the portfolio securities of the Fund which are the subject of the hedge. In addition, a Fund's purchase of such options will be based upon predictions as to anticipated interest rate trends, which could prove to be inaccurate. The potential loss related to the purchase of an option on an interest rate futures contracts is limited to the premium paid for the option. Although each Fund intends to purchase or sell commodity futures contracts only if there is an active market for each such contract, no assurance can be given that a liquid market will exist for the contracts at any particular time. Many futures exchanges and boards of trade limit the amount of fluctuation permitted in futures contract prices during a single trading day. Once the daily limit has been reached in a particular contract, no trades may be made that day at a price beyond that limit. Futures contract prices could move to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions and subjecting some futures traders to substantial losses. In such event and in the event of adverse price movements, a Fund would be required to make daily cash payments of variation margin. In such circumstances, an increase in the value of the portion of the portfolio being hedged, if any, may offset partially or completely losses on the futures contract. However, no assurance can be given that the price of the securities being hedged will correlate with the price movements in a futures contract and thus provide an offset to losses on the futures contract. FOREIGN CURRENCY TRANSACTIONS. Since investments in foreign securities will usually involve currencies of foreign countries, and since each Fund may temporarily hold funds in foreign or domestic bank deposits in foreign currencies during the completion of investment programs, the value of the assets of each Fund as measured in United States dollars may be affected favorably or unfavorably by changes in foreign currency exchange rates and exchange control regulations, and the Funds may incur costs in connection with conversions between various currencies. The Funds may enter into foreign currency exchange transactions either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market, or through entering into forward contracts to purchase or sell foreign currencies. A forward foreign exchange contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement and is consummated without payment of any commission. Each Fund may enter into forward foreign exchange contracts for speculative purposes and under the following circumstances: When a Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency, or when a Fund anticipates the receipt in a foreign currency of dividends or interest payments on such a security which it purchases or already holds, it may desire to "lock-in" the United States dollar price of the security or the United States dollar equivalent of such dividend or interest payment, as the case may be. By entering into a forward contract for the purchase or sale, for a fixed amount of dollars, of the amount of foreign currency involved in the underlying security transactions, the Fund will be able to protect itself against a possible loss resulting from an adverse change in the relationship between the United States dollar and the subject foreign currency during the period between the date the security is purchased or sold, or on which the dividend or interest payment is declared, and the date on which payment is made or received. If it is believed that the currency of a particular foreign country may suffer a substantial decline against the United States dollar or another currency, a Fund may enter into a forward contract to sell, for a fixed amount of dollars, the amount of foreign currency approximating the value of some or all of the Fund's portfolio securities denominated in such foreign currency. The precise matching of the forward contract amounts and the value of the securities involved will not generally be possible since the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date the forward contract is entered into and the date it matures. The projection of short-term currency market movements is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain. Each Fund will place cash or liquid securities in a separate custody account of the Fund with the Company's custodian in an amount equal to the value of the Fund's total assets committed to the consummation of the hedge contracts or otherwise cover such transactions. The securities placed in the separate account will be marked-to-market daily. If the value of the securities placed in the separate account declines, additional cash or liquid securities will be placed in the account on a daily basis so that the value of the account will equal the amount of the Fund's uncovered commitments with respect to such contracts. The Funds generally will not enter into a forward contract with a term of greater than one year. At the maturity of a forward contract, a Fund may either sell the portfolio security and make delivery of the foreign currency, or it may retain the security and terminate its contractual obligation to deliver the foreign currency by purchasing an "offsetting" contract with the same currency trader obligating it to purchase, on the same maturity date, the same amount of the foreign currency. A Fund may also purchase an "offsetting" contract prior to the maturity of the underlying contract. There is no assurance that such an "offsetting" contract will always be available to a Fund. It is impossible to forecast with absolute precision what the market value of portfolio securities will be at the expiration of a related forward contract. Accordingly, it may be necessary for a Fund to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of a security being sold is less than the amount of foreign currency the Fund is obligated to deliver. Conversely, a Fund may sell on the spot market some of the foreign currency received upon the sale of the portfolio security if its market value exceeds the amount of foreign currency the Fund is obligated to deliver. If a Fund retains the portfolio security and engages in an offsetting transaction, the Fund will incur a gain or a loss to the extent that there has been movement in forward contract prices. If a Fund engages in an offsetting transaction, it may subsequently enter into a new forward contract to sell the foreign currency. Should forward prices decline during the period between a Fund's entering into a forward contract for the sale of a foreign currency and the date it enters into an offsetting contract for the purchase of the foreign currency, the Fund will realize a gain to the extent the price of the currency it has agreed to purchase is less than the price of the currency it has agreed to sell. Should forward prices increase, the Fund will suffer a loss to the extent the price of the currency it has agreed to purchase exceeds the price of the currency it has agreed to sell. A Fund is not required to enter into hedging transactions with regard to its foreign currency-denominated securities and will not do so unless deemed appropriate by the Investment Advisers. Hedging the value of a Fund's portfolio securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. Although such contracts tend to minimize the risk of loss due to a decline in the value of the hedged currency, at the same time, they tend to limit any potential gain which might result should the value of such currency increase. The Funds may purchase or sell options to buy or sell foreign currencies and options on foreign currency futures, or write such options, as a substitute for entering into forward foreign exchange contracts in the circumstances described above. For example, in order to hedge against the decline in value of portfolio securities denominated in a specific foreign currency, a Fund may purchase an option to sell, for a specified amount of dollars, the amount of foreign currency represented by such portfolio securities. In such case, the Fund will pay a "premium" to acquire the option, as well as the agreed exercise price if it exercises the option. Although each Fund values its assets daily in terms of United States dollars, the Funds do not intend to convert their foreign currency holdings into United States dollars on any regular basis. A Fund may so convert from time to time, and thereby incur certain currency conversion charges. Although foreign exchange dealers do not generally charge a fee for conversion, they do realize a profit based on the difference (the "spread") between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one rate, while offering a lesser rate of exchange should the Fund desire to resell that currency to the dealer. LENDING PORTFOLIO SECURITIES. Each Fund may lend its portfolio securities to brokers, dealers and financial institutions considered creditworthy when secured by collateral maintained on a daily marked-to-market basis in an amount equal to at least 100% of the market value, determined daily, of the loaned securities. A Fund may at any time call the loan and obtain the return of the securities loaned. No such loan will be made which would cause the aggregate market value of all securities lent by a Fund to exceed 15% of the value of the Fund's total assets. The Fund will continue to receive the income on loaned securities and will, at the same time, earn interest on the loan collateral. Any cash collateral received under these loans will be invested in short-term money market instruments. WARRANTS. Each Fund may purchase warrants. The holder of a warrant has the right to purchase a given number of shares of a particular issuer at a specified price until expiration of the warrant. Such investments can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Each Fund may invest up to 10% of its net assets, valued at the lower of cost or market value, in warrants (other than those that have been acquired in units or attached to other securities), including warrants not listed on American or foreign stock exchanges. Prices of warrants do not move in tandem with the prices of the underlying securities, and are speculative investments. They pay no dividends and confer no rights other than a purchase option. If a warrant is not exercised by the date of its expiration, a Fund will lose its entire investment in such warrant. BORROWING. Each Fund may borrow from banks for temporary emergency purposes. Each Fund will maintain continuous asset coverage (that is, total assets including borrowings, less liabilities exclusive of borrowings) of 300% of the amount borrowed. If the 300% asset coverage should decline as a result of market fluctuations or other reasons, a Fund may be required to sell some of its portfolio holdings within three days to reduce the debt and restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell portfolio holdings at the time. Borrowing money, also known as leveraging, will cause a Fund to incur interest charges, and may increase the effect of fluctuations in the value of the investments of the Fund on the net asset value of its shares. A Fund will not purchase additional securities for investment while there are bank borrowings outstanding representing more than 5% of the total assets of the Fund. RESTRICTED SECURITIES. The Funds may purchase securities that are not registered for sale to the general public in the United States, but which can be resold to institutional investors in the United States, including securities offered pursuant to Rule 144A adopted by the United States Securities and Exchange Commission ("SEC"). Provided that a dealer or institutional trading market in such securities exists, either within or outside the United States, these restricted securities will not be treated as illiquid securities for purposes of the Funds' investment restrictions. The Board of Directors will establish standards for determining whether or not 144A securities are liquid based on the level of trading activity, availability of reliable price information and other relevant considerations. The Funds may also purchase privately placed restricted securities for which no institutional market exists. The absence of a trading market may adversely affect the ability of the Funds to sell such illiquid securities promptly and at an acceptable price, and may also make it more difficult to ascertain a market value for illiquid securities held by the Funds. FUTURE DEVELOPMENTS. The Funds may take advantage of opportunities in the area of options and futures contracts and other derivative financial instruments which are developed in the future, to the extent such opportunities are both consistent with each Fund's investment objective and permitted by applicable regulations. The Funds' Prospectus and Statement of Additional Information will be amended or supplemented, if appropriate in connection with any such practices. INVESTMENT RESTRICTIONS. Each Fund has adopted certain investment restrictions which cannot be changed without approval by holders of a majority of its outstanding voting shares. As defined in the Investment Company Act of 1940, as amended (the "Act"), this means the lesser of (a) 67% or more of the shares of the Fund at a meeting where more than 50% of the outstanding shares are present in person or by proxy or (b) more than 50% of the outstanding shares of the Fund. In accordance with these restrictions, each Fund may not: 1. With respect to 75% of its total assets, invest more than 5% of its total assets in any one issuer (other than the United States government, its agencies and instrumentalities) or purchase more than 10% of the voting securities, or more than 10% of any class of securities, of any one issuer. (For this purpose all outstanding debt securities of an issuer are considered as one class, and all preferred stocks of an issuer are considered as one class.) 2. Invest for the purpose of exercising control or management of another company. 3. Make short sales of securities or purchase any securities on margin, except for such short-term credits as are necessary for the clearance of transactions. 4. Invest in real estate (including real estate limited partnerships),although a Fund may invest in marketable securities which are secured by real estate and securities of companies which invest or deal in real estate. 5. Invest more than 10% of the value of its total assets in securities of companies which, with their predecessors, have a record of less than three years' continuous operation. 6. Purchase or retain the securities of any issuer if any of the officers or directors of the Company or its investment adviser owns individually more than 1/2 of 1% of the securities of such issuer and together such officers and directors owning more than 1/2 of 1% own more than 5% of the securities of such issuer. 7. Concentrate more than 25% of the value of its total assets in any one industry (including securities of non-United States governments). 8. Make loans, except that this restriction shall not prohibit (1) the purchase of publicly distributed debt securities in accordance with a Fund's investment objectives and policies, (2) the lending of portfolio securities, and (3) entering into repurchase agreements. 9. Borrow money, except from banks for temporary emergency purposes and, in no event, in excess of 33 1/3% of its total assets at value or cost, whichever is less; or pledge or mortgage its assets or transfer or assign or otherwise encumber them in an amount exceeding the amount of the borrowing secured thereby. 10. Underwrite securities issued by others except to the extent the Company may be deemed to be an underwriter, under the Federal securities laws, in connection with the disposition of its portfolio securities. 11. Purchase securities of other investment companies, except (a) in connection with a merger, consolidation, reorganization or acquisition of assets or (b) a Fund may purchase securities of closed-end investment companies up to (i) 3% of the outstanding voting stock of any one investment company (including for this purpose investments by any other series of the Company), (ii) 5% of the total assets of the Fund with respect to any one investment company and (iii) 10% of the total assets of the Fund in the aggregate. 12. Invest in interests in oil, gas or other mineral exploration or development programs (including leases), although it may invest in the securities of companies which invest in or sponsor such programs. 13. Invest more than 15% of the Fund's net assets in securities which cannot be readily resold to the public because of legal or contractual restrictions or because there are no market quotations readily available or in other "illiquid" securities (including non-negotiable deposits with banks and repurchase agreements of a duration of more than seven days). 14. Participate on a joint or a joint and several basis in any trading account in securities. 15. Issue senior securities (as defined in the Act), other than as set forth in paragraph 9 above and except to the extent that foreign currency forward contracts may be deemed to constitute a senior security. 16. Invest in commodities or commodity futures contracts, except that each Fund may enter into forward foreign exchange contracts and may invest up to 5% of its net assets in initial margin or premiums for futures contracts or options on futures contracts. If a percentage restriction (other than the restriction on borrowing in paragraph 9) is adhered to at the time of investment, a subsequent increase or decrease in the percentage beyond the specified limit resulting from a change in value or net assets will not be considered a violation. Whenever any investment policy or investment restriction states a maximum percentage of a Fund's assets which may be invested in any security or other property, it is intended that such maximum percentage limitation be determined immediately after and as a result of the acquisition of such security or property. RISK CONSIDERATIONS. Investors should carefully consider the risks involved in investments in securities of companies and governments of foreign nations, which add to the usual risks inherent in domestic investments. Such special risks include the lower level of government supervision and regulation of stock exchanges, broker-dealers and listed companies, fluctuations in foreign exchange rates, future political and economic developments, and the possible imposition of exchange controls or other foreign governmental laws or restrictions. In addition, securities prices in foreign countries are generally subject to different economic, financial, political and social factors than prices of securities of United States issuers. The Company anticipates that the portfolio securities of foreign issuers held by each Fund generally will not be registered with the SEC nor will the issuers thereof be subject to the reporting requirements of such agency. In addition, the governments under which these companies are organized may impose less government supervision than is required in the United States. Accordingly, there may be less publicly available information concerning certain of the issuers of securities held by the Funds than is available concerning United States companies. In addition, foreign companies are not generally subject to uniform accounting, auditing and financial reporting standards or to practices and requirements comparable to those applicable to United States companies. It is contemplated that the Funds' foreign portfolio securities generally will be purchased on stock exchanges or in over-the-counter markets located in the countries in which the principal offices of the issuers of the various securities are located, if that is the best available market. Foreign stock exchanges generally have substantially less volume than the New York Stock Exchange and may be subject to less government supervision and regulation than those in the United States. Accordingly, securities of foreign companies may be less liquid and more volatile than securities of comparable United States companies. Similarly, volume and liquidity in most foreign bond markets is less than in the United States and, at times, price volatility can be greater than in the United States. The Funds may also invest in American Depositary Receipts ("ADRs") or European Depositary Receipts ("EDRs") representing securities of foreign companies, including both sponsored and unsponsored ADRs. Unsponsored ADRs may be created without the participation of the foreign issuer. Holders of these ADRs generally bear all the cost of the ADR facility, whereas foreign issuers typically bear certain costs in a sponsored ADR. The bank or trust company depository of an unsponsored ADR may be under no obligation to distribute shareholder communications received from the foreign issuer or to pass through voting rights. The markets for ADRs and EDRs, especially unsponsored ADRs, may be substantially more limited and less liquid than the markets for the underlying securities. Foreign broker-dealers also may be subject to less government supervision than those in the United States. Although the Funds endeavor to achieve the most favorable net results on their portfolio transactions, fixed commissions for transactions on certain foreign stock exchanges may be higher than negotiated commissions available on United States exchanges. With respect to certain foreign countries, there is the possibility of adverse changes in investment or exchange control regulations, expropriation or confiscatory taxation, and limitations on the transfer or exchange of funds or other assets of the Funds. The Funds' ability and decisions to purchase or sell portfolio securities may be affected by laws or regulations relating to the convertibility and repatriation of assets. There is also the risk in certain foreign countries of political or social instability, or diplomatic developments which could affect United States investments as well as the prices of securities in those countries. Moreover, individual foreign economies may differ favorably or unfavorably from the United States economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position. Because the shares of the Funds are redeemable on a daily basis in United States dollars, each Fund intends to manage its portfolio so as to give reasonable assurance that it will be able to obtain United States dollars to the extent necessary to meet anticipated redemptions. The Funds do not believe that this consideration will have any significant effects on their portfolio strategies under present conditions. PORTFOLIO TURNOVER. Portfolio turnover rate is calculated by dividing the lesser of a Fund's sales or purchases of portfolio securities for the fiscal year (exclusive of purchases or sales of all securities whose maturities or expiration dates at the time of acquisition were one year or less) by the monthly average value of the securities in a Fund's portfolio during the fiscal year. A portfolio turnover rate in excess of 100% is considered to be high. A high portfolio turnover rate may result in higher short-term capital gains to shareholders for tax purposes and increased brokerage commissions and other transaction costs borne by the Fund. PERFORMANCE INFORMATION The average annual total return of each Fund for the periods ended December 31, 1996 is set forth in the table below. Average annual total return is computed by finding the average annual compounded rates of return over the periods indicated that would equate the initial amount invested in a Fund to the redemption value at the end of the period. All dividends and distributions are assumed to be reinvested. The results are shown both with and without deduction of the sales load, since the sales load can be waived for certain investors. Average Annual Return --------------------------------------- After Deduction of Without Deduction Maximum Sales Load of Sales Load ------------------ ----------------- GAM International Fund (Class A) 1 year 3.53% 8.98% 5 years 17.54% 18.75% 10 years 14.89% 15.48% From inception (1/2/85) 20.55% 21.07% GAM International Fund (Class D) 1 year 4.54% 8.33% From inception (9/5/95) 10.94% 14.06% GAM Global Fund (Class A) 1 year 7.11% 12.74% 5 years 15.38% 16.57% 10 years 11.76% 12.34% From inception (5/28/86) 11.55% 12.09% GAM Global Fund (Class D) 1 year 7.63% 11.53% From inception (9/5/95) 11.82% 15.09% GAM Pacific Basin Fund (Class A) 1 year (5.37)% (0.39)% 5 years 9.91% 11.04% From inception (5/6/87) 9.97% 10.55% GAM Pacific Basin Fund (Class D) 1 year (4.65)% (1.19)% From inception (9/5/95) (2.11)% 0.83% GAM Europe Fund 1 year 15.25% 21.32% 5 years 8.75% 9.87% From inception (1/1/90) 3.45% 4.21% GAM North America Fund 1 year 17.89% 24.10% 5 years 9.77% 10.90% From inception (1/1/90) 11.39% 12.21% GAM Japan Capital Fund 1 year (4.86)% 0.15% From inception (7/1/94) (1.02)% 1.03% GAM Asian Capital Fund 1 year (1.89)% 3.28% From inception (5/12/95) (3.74)% (0.68)% GAMerica Capital Fund 1 year 12.40% 18.31% From inception (5/12/95) 8.28% 11.73% Prospective investors should note that past results may not be indicative of future performance. The investment return and principal value of shares of a Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Comparative performance information may be used from time to time in advertising each Fund's shares. The performance of GAM Global Fund may be compared to the Morgan Stanley Capital International (MSCI) World Index. The performance of GAM International Fund may be compared to the MSCI Europe, Australia, Far East (EAFE) Index. The performance of GAM Pacific Basin Fund may be compared to the MSCI Pacific Index. The performance of GAM Asian Capital Fund may be compared to the MSCI Combined Far East Index ex Japan. The performance of GAM Japan Capital Fund may be compared to the Tokyo Stock Exchange Index. The performance of GAM North America Fund and GAMerica Capital Fund may be compared to the Standard & Poor's 500 Composite Stock Price Index and the Dow Jones Industrial Average. The performance of GAM Europe Fund may be compared to the MSCI Europe and Financial Times Actuaries World Indices--Europe. Each stock index is an unmanaged index of common stock prices, converted into U.S. dollars where appropriate. Any index selected by a Fund may not compute total return in the same manner as the Funds and may exclude, for example, dividends paid on stocks included in the index and brokerage or other fees. NET ASSET VALUE, DIVIDENDS AND TAXES NET ASSET VALUE. Each Fund determines its net asset value each day the New York Stock Exchange is open for trading. The New York Stock Exchange is closed on the following holidays, in addition to Saturdays and Sundays: New Year's Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Portfolio securities, including ADR's, EDR's and options, which are traded on stock exchanges or a national securities market will be valued at the last sale price as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Securities traded in the over-the-counter market will be valued at the last available bid price in the over-the-counter market prior to the time of valuation. Money market securities will be valued at market value, except that instruments maturing within 60 days of the valuation are valued at amortized cost. The other securities and assets of each Fund for which market quotations may not be readily available (including restricted securities which are subject to limitations as to their sale) will be valued at fair value as determined in good faith by or under the direction of the Board of Directors. Securities quoted in foreign currencies will be converted to United States dollar equivalents using prevailing market exchange rates. SUSPENSION OF THE DETERMINATION OF NET ASSET VALUE. The Board of Directors may suspend the determination of net asset value and, accordingly, redemptions for a Fund for the whole or any part of any period during which (1) the New York Stock Exchange is closed (other than for customary weekend and holiday closings), (2) trading on the New York Stock Exchange is restricted, (3) an emergency exists as a result of which disposal of securities owned by the Fund is not reasonably practicable or it is not reasonably practicable for the Fund fairly to determine the value of its net assets, or (4) the Securities and Exchange Commission may by order permit for the protection of the holders of the Fund's shares. TAX STATUS. Although each Fund is a series of the Company, it is treated as a separate corporation for purposes of the Internal Revenue Code of 1986, as amended (the "Code"). Each Fund expects to meet certain diversification- of-assets and other requirements in order to qualify under the Code as a regulated investment company. If it qualifies, a Fund will not be subject to United States Federal income tax on net ordinary income and net capital gains which are distributed to its shareholders within certain time periods specified in the Code. Each Fund intends to distribute annually all of its net ordinary income and net capital gains. If a Fund were to fail to distribute timely substantially all such income and gains, it would be subject to Federal corporate income tax and, in certain circumstances, a 4% excise tax on its undistributed income and gains. Distributions from net ordinary income and net short-term capital gains are taxable to shareholders as ordinary income. The 70% deduction available to corporations for dividends received from a Fund will apply to ordinary income distributions only to the extent that they are attributable to a Fund's dividend income from United States corporations. Distributions from net long-term capital gains are taxable to a shareholder as long-term capital gains regardless of the length of time the shares in respect of which such distributions are received have been held by the shareholder. Dividends declared in December will be treated as received in December as long as they are actually paid before February 1 of the following year. Income from foreign securities purchased by a Fund may be reduced by a withholding tax at the source. If as of the fiscal year-end of a Fund more than 50% of the Fund's assets are invested in securities of foreign corporations, then the Fund may make an election which will result in the shareholders having the option to elect either to deduct their pro rata share of the foreign taxes paid by the Fund or to use their pro rata share of the foreign taxes paid by the Fund in calculating the foreign tax credit to which they are entitled. Distributions by a Fund will be treated as United States source income for purposes other than computing the foreign tax credit limitation. Distributions of net ordinary income or net short-term capital gains received by a non-resident alien individual or foreign corporation which is not engaged in a trade or business in the United States generally will be subject to Federal withholding tax at the rate of 30%, unless such rate is reduced by an applicable income tax treaty to which the United States is a party. However, gains from the sale by such shareholders of shares of the Funds and distributions to such shareholders from long-term capital gains generally will not be subject to the Federal withholding tax. Ordinarily, distributions and redemption proceeds earned by a United States shareholder of a Fund are not subject to withholding of Federal income tax. However, distributions or redemption proceeds paid by a Fund to a shareholder may be subject to 31% backup withholding if the shareholder fails to supply the Fund or its agent with such shareholder's taxpayer identification number or an applicable exemption certificate. In addition to the Federal income tax consequences described above relating to an investment in a Fund, there may be other Federal, state or local tax considerations that depend upon the circumstances of each particular investor. Prospective shareholders are therefore urged to consult their tax advisors with respect to the effect of this investment on their own specific situations. MANAGEMENT OF THE COMPANY The name, address, principal occupation during the past five years and other information with respect to each of the Directors and Executive Officers of the Company are as follows:
Name and Address: Position(s) Held Principal Occupation(s) With the Company During Past Five Years ----------------- ----------------------- Gilbert de Botton Chairman, Global Asset Management Limited, investment adviser, Director/President and Global Asset Management (U.K.) Ltd., holding company, 1983 12 St. James's Place to present; Vice President, Global Asset Management Limited London SW1A 1NX (Bermuda), investment adviser, 1989 to present. England George W. Landau Chairman, Latin American Advisory Board of Coca-Cola Director International, 1988 to present. Director, Emigrant Savings 2601 South Bayshore Drive Bank, Brazil Equity Fund, Chile Fund, Latin American Suite 1109 Investment Fund, South America Fund, Latin American Equity Coconut Grove, FL 33133 Fund, Emerging Markets Telecommunications Fund, Emerging Markets Infrastructure Fund, Global Asset Management Funds, and Fundacion Chile. Former President, Americas Society and the Council of the Americas, 1985-1993. Therese Meier* Managing Director, Global Asset Management GAM (Schweiz) A.G., Director Zurich, 1983 to present. Muhlebachstrasse 173 8008 Zurich Switzerland Madelon DeVoe Talley Author and Investment Consultant; Commissioner, Port Authority Director of New York and New Jersey; Governor of National Association 876 Park Avenue of Securities Dealers, Inc. (1993-1995), currently a member of New York, NY 10021 the NASD Selection Committee; Director or Trustee: Alliance Capital Management, L.P.; Corporate Property Association Series 1-10, Smith Barney Special Equity and Fixed Income Series and Trak Series; New York State Industrial Development Board, Schroders Asian Growth Fund. Member of Investment Committee - New York State Retirement Fund. Former Trustee, New York State Teachers Retirement System, 1988 to 1993. Roland Weiser President, Intervista, business consulting, 1984 to present. Director Director, GAM Diversity Fund and Unimed Pharmaceuticals, Inc. 86 Beekman Road Former Senior Vice President, Schering Plough Corporation Summit, New Jersey 07901 (International).
Kevin Blanchfield Chief Operating Officer, Treasurer and Assistant Secretary, Vice President/Treasurer Global Asset Management (USA) Inc., GAM Investments, Inc. and 135 East 57th Street GAM Services Inc., 1995 to present; Vice President and New York, NY 10022 Treasurer, Global Asset Management (USA) Inc., GAM Investments, Inc. and GAM Services Inc., 1993 to 1995; Senior Vice President - Finance and Administration, Lazard Freres & Co., 1991 to 1993. Lisa M. Hurley General Counsel and Secretary, Global Asset Management (USA) Secretary Inc. and Secretary of GAM Investments, Inc. and GAM Services, 135 East 57th Street Inc., 1996 to present. From October 1993 to May 1996, Senior New York, NY 10022 Vice President and Secretary of Northstar Investment Management Corporation and Vice President and Secretary, Northstar Advantage Funds. Prior to October 1993, Vice President and General Counsel of National Securities and Research Corporation and Secretary of the National Funds.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS. Each independent Director of the Company receives annual compensation from the Company of $5,000 per year plus $500 for each meeting of the Board of Directors attended. Each Director is reimbursed by the Company for travel expenses incurred in connection with attendance at Board of Directors meetings. The officers and interested Directors of the Company do not receive any compensation from the Company. The name, position(s) and information related to the compensation of each of the Directors in the most recent fiscal year are as follows.
Aggregate Pension or Estimated Total Compensation Compensation Retirement Benefits Annual Benefits From the Company and Name and Position(s) Held From the Accrued as Part of Upon Fund Complex With the Company Company Company Expenses Retirement Paid to Directors ------------------------- ------------ ------------------- --------------- -------------------- Gilbert de Botton $0 $0 Director and President George W. Landau $7,000 $7,000 Director Therese Meier $0 $0 Director Madelon DeVoe Talley $7,000 $7,000 Director Roland Weiser $7,000 $7,000 Director
PRINCIPAL HOLDERS OF SECURITIES. As of January 31, 1997, all Directors and Officers of the Funds as a group owned beneficially or of record less than 1% of the outstanding securities of any Fund except GAMerica Capital Fund, of which the group held 2.5%. To the knowledge of the Funds, as of December 31, 1996, no Shareholders owned beneficially or of record more than 5% of a Fund's outstanding shares, except as set forth below. Mr. Gilbert de Botton, President and Director of the Company, may be deemed to have shared voting or investment power over shares owned by clients or held by custodians or nominees for clients of Global Asset Management (USA) Inc. or other affiliates of GAM, or by employee benefit plans for the benefit of employees of GAM its affiliates, as a result of the indirect ownership of interests in GAM and its affiliates by a trust of which Mr. de Botton is a potential beneficiary. Mr. de Botton disclaims beneficial ownership of such shares.
INTERNATIONAL GLOBAL PACIFIC BASIN Class A Class D Class A Class D Class A Class D Enele Co 6.54% 1211 Southwest Ave Portland, OR 97204 Charles Schwab 22.05% 13.28% 32.29 101 Montgomery St. San Francisco, CA 94104 Julius Baer Securities 6.08% 330 Madison Ave New York, NY 10017 Resources Trust Co., Trustee 12.04% fbo R.C. Erfft, IRA P.O. Box 5900 Denver, CO 80217 Fox & Co. 8.90% P.O. Box 976 New York, NY 10268 S. & T. Hardilek 7.4% P.O. Box 536 Lake City, CO 81235 Resources Trust 5.62% FBO H.L. Kenna IRA Denver, CO 80217 Royal Life Insurance Int'l Ltd. 27.91% Royal Court, Castletown Isle of Man, BI Key Trust Co. of Ohio 81.44% UOA Pension Plan Cleveland, OH 44114
EUROPE NORTH AMERICA JAPAN CAPITAL ASIAN CAPITAL GAMERICA Blush & Co 5.23% 5.13% P.O. Box 976 New York, NY 10268 Peter Blum 6.17% Case Postal 1211 Geneve Switz 999 Fayez Serofim 37.1% 2 Houston Center Houston, TX 77010 Fox & Co. 17.l3% 12.03% 12.6% 11.5% 23.34% P.O. Box 976 New York, NY 10268 Northern Trust fbo Gordon Trust 5.64% 5.94% P.O. Box 92956 Chicago, IL 60675 Edmond Harmsworth 7.82% 6.78% 10.42% 359 Beacon Street Boston, MA 02110 Infid & Co. 12.11% P.O. Box 9005 Church Street Station New York, NY 10008 Long Island University 6.1% Brookville, NY 11548 S. Klein Trust 5.59% 5.87% c/o Rothschild Bank 8034 Zurich, Switzerland NAV LLC 18.28% 650 Madison Ave. New York, NY 10022 Post & Co. 5.87% 5.39% Wall Street Station New York, NY 10268 Rozenkranz Fndn 19.67% 650 Madison Ave. New York, NY 10022 Charles Schwab 17.97% 9.92% 30.35% 19.43% 12.57% 101 Montgomery Street San Francisco, CA 94104 J. & M. Schrem 6.52% 5.36% 7.09% 13.4% c/o Rothschild Bank Zolikerstr. 181 CH-8034 Zurich Switz.
INVESTMENT ADVISORY AND OTHER SERVICES INVESTMENT ADVISORY CONTRACTS. The Amended and Restated Investment Advisory Contract dated April 14, 1994 (the "GAM Contract") between the Company and GAM, as amended, was last approved by the Board of Directors (including a majority of the Directors who were not parties to the GAM Contract or interested persons of any such party) on behalf of each Fund on October 24, 1996 and by the shareholders of each Fund (other than GAM Japan Capital Fund, GAMerica Capital Fund and GAM Asian Capital Fund) on April 14, 1994. The investment advisory agreement dated June 29, 1990 between the Company and Sarofim (the "Sarofim Contract") was last approved by the Board of Directors, including a majority of the Directors who are not parties to the Sarofim Contract or interested persons of any such party, on October 24, 1996 and by the shareholders of GAM North America Fund on April 14, 1994. The GAM Contract and the Sarofim Contract will each continue in effect from year to year thereafter if approved annually by the Board of Directors or by the vote of a majority of the outstanding shares of each Fund (as defined in the Act) and, in either event, by the approval of a majority of those Directors who are not parties to the GAM Contract or the Sarofim Contract or interested persons of any such party. The GAM Contract requires GAM to conduct and maintain a continuous review of each Fund's portfolio and to make all investment decisions regarding purchases and sales of portfolio securities and brokerage allocation for each Fund other than GAM North America Fund. GAM will render its services to each fund from outside the United States. The Sarofim Contract requires Sarofim to provide the same services to GAM North America Fund subject to the supervision and oversight of GAM. Sarofim commenced providing investment advisory services to GAM North America Fund on June 29, 1990. The GAM Contract and the Sarofim Contract (the "Contracts") each provides that the Investment Advisers will select brokers and dealers for execution of each Fund's portfolio transactions consistent with the Company's brokerage policy (see "Brokerage Allocation"). Although the services provided by broker-dealers in accordance with the brokerage policy incidentally may help reduce the expenses of or otherwise benefit the other investment advisory clients of the Investment Advisers or their affiliates, as well as the Funds, the value of such services is indeterminable and the Investment Advisers' fees are not reduced by any offset arrangement by reason thereof. Each of the Contracts provides that the Investment Advisers shall have no liability to the Company or to any shareholder of a Fund for any error of judgment, mistake of law, or any loss arising out of any investment or other act or omission in the performance by an Investment Adviser of its duties under such Contracts or for any loss or damage resulting from the imposition by any government of exchange control restrictions which might affect the liquidity of a Fund's assets maintained with custodians or securities depositories in foreign countries or from any political acts of any foreign governments to which such assets might be exposed, except for liability resulting from willful misfeasance, bad faith or gross negligence on the Investment Adviser's part or reckless disregard of its duties under the Contract. Each Contract will terminate automatically in the event of its assignment, as such term is defined under the Act, and may be terminated by each Fund at any time without payment of any penalty on 60 days' written notice, with the approval of a majority of the Directors of the Company or by vote of a majority of the outstanding shares of a Fund (as defined in the Act). The Company acknowledges that it has obtained its corporate name by consent of GAM and agrees that if (i) GAM should cease to be the Company's investment adviser or (ii) Global Asset Management Ltd. should cease to own a majority equity interest in GAM, the Company, upon request of GAM, shall submit to its shareholders for their vote a proposal to delete the initials "GAM" from its name and cease to use the name "GAM Funds, Inc." or any other name using or derived from "GAM" or "Global Asset Management," any component thereof or any name deceptively similar thereto, and indicate on all letterheads and other promotional material that GAM is no longer the Company's investment adviser. If GAM makes such request because Global Asset Management Ltd. no longer owns a majority equity interest in GAM, the question of continuing the GAM Contract must be submitted to a vote of the Company's shareholders. The Company has agreed that GAM or any of its successors or assigns may use or permit the use of the names "Global Asset Management" and "GAM" or any component or combination thereof in connection with any entity or business, whether or not the same directly or indirectly competes or conflicts with the Company and its business in any manner. ADVISORY FEES. For its services to the Funds, GAM receives a quarterly fee of 0.25% of the average daily net assets of each of GAM International Fund, GAM Global Fund, GAM Pacific Basin Fund, GAM Japan Capital Fund, GAM Asian Capital Fund, GAMerica Capital Fund and GAM Europe Fund during the quarter preceding each payment; and GAM and Sarofim each receives a quarterly fee equal to 0.125% of the average daily net assets of GAM North America Fund. In each case the aggregate advisory fees are equivalent to an annual fee of 1.0% of the average daily net assets of each Fund during the year. The level of advisory fees paid by each Fund is higher than the rate of advisory fee paid by most registered investment companies. The actual advisory fee paid by each Fund during the fiscal years ended December 31, 1996, 1995 and 1994 are set forth below:
Inter- Pacific North Japan GAMerica Asian national Global Basin Europe America Capital Capital Capital -------- ------ ------- ------ ------- ------- ------- ------- 1996 $8,746,443 $206,365 $710,064 $270,703 $57,701 $350,646 $23,247 $66,992 1995 $3,085,111 $208,022 $414,221 $203,030 $38,934 $57,489 $16,082 $28,041 1994 $1,239,629 $241,333 $461,985 $237,793 $20,883 $31,606 NA NA
Expenses incurred in connection with each Fund's organization, initial registration and initial offering under Federal and state securities laws, including printing, legal and registration fees, and the period over which such expenses are amortized, are set forth below (except for the expenses of GAM International Fund, GAM Global Fund, GAM Pacific Basin Fund, GAM Europe Fund and GAM North American Fund, which have been fully amortized): Japan GAMerica Asian Capital Capital Capital ------- -------- ------- Organizational Expenses $34,166 $30,036 $30,036 Amortized over 5 years beginning 7/1/94 5/12/95 5/12/95 The expense ratio of each Fund may be higher than that of most registered investment companies since the cost of maintaining the custody of foreign securities is higher than that for most domestic funds and the rate of advisory fees paid by the Funds exceeds that of most registered investment companies. In addition, each Fund bears its own operating expenses. INVESTMENT ADVISERS. All of the Investment Advisers are registered under the United States Investment Advisers Act of 1940, as amended. GAM is controlled by and under common control with other investment advisers (as described below) which have substantial experience managing foreign mutual funds and which have aggregate assets under management of approximately $9 billion. Sarofim has aggregate assets under management of approximately $38 billion. The Directors of GAM and their principal occupations are as follows: Name and Position Held with Investment Adviser Principal Occupation - -------------------------------------------------------------------------------- Gilbert de Botton, Director. See "Management of the Company" above. Count Ulric von Rosen, Director. President, Bonnier Medical Division of Bonnier Medical Group, Sweden. Paul S. Kirkby, Director. Investment Director, Global Asset Management (H.K.) Ltd. David J. Miller, Director. Finance Director, Global Asset Management (U.K.) Ltd. Alan McFarlane, Director. Managing Director (Institutional), Global Asset Management Ltd., investment adviser. Denis G. Raeburn, Director. Managing Director, Global Asset Management Ltd. and Global Asset Management (U.K.) Ltd., holding company. Gordon Grender, Director. Investment manager. GAM is a wholly-owned subsidiary of Global Asset Management (U.K.) Limited, a holding company. Global Asset Management Ltd., an investment adviser organized under the laws of Bermuda, controls the Investment Adviser through its wholly-owned subsidiaries, Greenpark Management N.V. and GAMAdmin B.V. (the latter of which is the direct parent of Global Asset Management (U.K.) Limited). Lorelock, S.A., which is controlled directly by Metrolis Anstalt, a Lichtenstein company, and indirectly by a discretionary trust of which Protec Trust Management Establishment is trustee and Mr. de Botton, a Director and President of the Fund, may be deemed to be a beneficiary, owns approximately 70% of the voting securities of Global Asset Management Ltd. St. James's Place Capital plc, an international, diversified financial services company, owns approximately 30% through its wholly-owned subsidiary J. Rothschild Investment Management Ltd. St. James's Place Capital plc controls, individually and collectively and directly and indirectly, a number of subsidiaries, which provide financial services and investment management services for various investment companies, among others, and which are involved internationally in various financial service businesses. The Directors and principal executive officers of Sarofim and their principal occupations are as follows: Fayez S. Sarofim Chairman, Director and President, Sarofim Raye G. White Executive Vice President, Secretary -Treasurer and Director, Sarofim Ralph B. Thomas Senior Vice President, Sarofim William K. McGee, Jr. Senior Vice President, Sarofim Russell M. Frankel Senior Vice President, Sarofim Charles E. Sheedy Senior Vice President, Sarofim Russell B. Hawkins Senior Vice President, Sarofim A majority of the outstanding stock of Sarofim is owned by Fayez S. Sarofim. In addition, Mr. Sarofim is a director of Allegheny Teledyne, Inc., Unitrin, Inc., Argonaut Group, Imperial Holly Corp. and EXOR Group, each of which is a publicly traded corporation with principal offices in the United States. Mr. Sarofim is a past director of Teledyne, Inc., MESA, Inc., Alley Theatre, Houston Ballet Foundation and the Museum of Fine Arts Houston. PRINCIPAL UNDERWRITER AND PLANS OF DISTRIBUTION. The Company has entered into distribution agreements (the "Distribution Agreements") with GAM Services under which GAM Services has agreed to act as principal underwriter and to use reasonable efforts to distribute each Fund's Class A and Class D shares. GAM Services is an indirect wholly-owned subsidiary of Global Asset Management Ltd., which also controls GAM. Pursuant to the Distribution Agreements, GAM Services receives the sales load on sales of each Class of the Funds' shares and reallows a portion of the sales load to dealers/brokers. GAM Services also receives the distribution fees payable pursuant to the Funds' Plans of Distribution for Class A and Class D Shares described below (the "Plans"). The Distribution Agreements may be terminated at any time upon 60 days' written notice, without payment of a penalty, by GAM Services, by vote of a majority of the outstanding class of voting securities of the affected Fund, or by vote of a majority of the Directors of the Fund who are not "interested Persons" of the Fund and who have no direct or indirect financial interest in the operation of the Distribution Agreements. The Distribution Agreements will terminate automatically in the event of their assignment. In addition to the amount paid to dealers pursuant to the sales charge table in the Prospectus, GAM Services from time to time may offer assistance to dealers and their registered representatives in the form of business and educational or training seminars. Dealers may not use sales of any of the Funds' shares to qualify for or participate in such programs to the extent such may be prohibited by a dealer's internal procedures or by the laws of any state or any self-regulatory agency, such as the National Association of Securities Dealers, Inc. Costs associated with incentive or training programs are borne by GAM Services and paid from its own resources or from fees collected under the Plans. GAM Services from time to time may reallow all or a portion of the sales charge on Class A and Class D shares to individual selling dealers. Such additional reallowance generally will be made only when the selling dealer commits to substantial marketing support such as internal wholesaling through dedicated personnel, internal communications and mass mailings. Each Fund has adopted separate distribution plans under Rule 12b-1 of the 1940 Act for each class of its shares. The Plans permit each Fund to compensate GAM Services in connection with activities intended to promote the sale of each class of shares of each Fund. Pursuant to the Plan for Class A shares, each Fund may pay GAM Services up to 0.30% of average daily net assets of the Fund's Class A shares. Under the Plan for Class D shares, each Fund may pay GAM Services up to 0.50% of the average daily net assets attributable to Class D shares of the Fund. Expenditures by GAM Services under the Plans may consist of: (i) commissions to sales personnel for selling shares of the Funds; (ii) compensation, sales incentives and payments to sales, marketing and service personnel; (iii) payments to broker-dealers and other financial institutions that have entered into agreements with GAM Services in the form of a Dealer Agreement for GAM Funds, Inc. for services rendered in connection with the sale and distribution of shares of the Funds; (iv) payment of expenses incurred in sales and promotional activities, including advertising expenditures related to the Funds; (v) the costs of preparing and distributing promotional materials; (vi) the cost of printing the Funds' Prospectus and SAI for distribution to potential investors; and (vii) other activities that are reasonably calculated to result in the sale of shares of the Funds. A portion of the fees paid to GAM Services pursuant to the Plans not exceeding 0.25% annually of the average daily net assets of each Fund's shares may be paid as compensation for providing services to each Fund's shareholders, including assistance in connection with inquiries related to shareholder accounts (the "Service Fees"). In order to receive Service Fees under the Plans, participants must meet such qualifications as are established in the sole discretion of GAM Services, such as services to each Fund's shareholders; services providing each Fund with more efficient methods of offering shares to coherent groups of clients, members or prospects of a participant; services permitting more efficient methods of purchasing and selling shares, or transmission of orders for the purchase or sale if shares by computerized tape or other electronic equipment; or other processing. The Directors have concluded that there is a reasonable likelihood that the Plans will benefit each Fund and its shareholders and that the Plans should result in greater sales and/or fewer redemptions of Fund shares. On a quarterly basis, the Directors will review a report on expenditures under the Plans and the purposes for which expenditures were made. The Directors will conduct an additional, more extensive review annually in determining whether the Plans shall be continued. Continuation of the Plans from year to year is contingent on annual approval by a majority of the Directors acting separately on behalf of each Fund and class and by a majority of the Directors who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of the Plans or any related agreements (the "Plan Directors"). The Plans provide that they may not be amended to increase materially the costs that a Fund may bear pursuant to the applicable Plan without approval of the shareholders of the affected class of shares of each Fund and that other material amendments to the Plans must be approved by a majority of the Plan Directors acting separately on behalf of each Fund, by vote cast in person at a meeting called for the purpose of considering such amendments. The Plans further provide that while each Plan is in effect, the selection and nomination of Directors who are not "interested persons" shall be committed to the discretion of the Directors who are not "interested persons." A Plan may be terminated at any time by vote of a majority of the Plan Directors or a majority of the outstanding Class of shares of the affected Fund to which the Plan relates. The total dollar amount (000's omitted) and manner in which amounts paid by each class of shares of the Funds under the Plans during the last fiscal year were spent is set forth below: International Fund Class A Class D ------- ------- Advertising $ 10.8 $ 0.3 Printing/Mailing Prospectus/ SAI to Potential Investors 111.5 1.8 Compensation to Dealers 215.3 100.8 Compensation to Sales Personnel 130.6 4.1 Other* 187.1 33.0 ----- ---- Total Disbursements $655.3 $111 Global Fund Class A Class D ------- ------- Advertising $0.2 $ - Printing/Mailing Prospectus/ SAI to Potential Investors 2.4 0.2 Compensation to Dealers 3.8 1.7 Compensation to Sales Personnel 2.8 0.4 Other* 3.9 0.4 ----- ---- Total Disbursements $13.1 $2.7 Pacific Basin Fund Class A Class D ------- ------- Advertising $0.8 $ - Printing/Mailing Prospectus/ SAI to Potential Investors 8.4 - Compensation to Dealers 7.2 7.8 Compensation to Sales Personnel 9.9 0.1 Other* 14.1 0.1 ----- ---- Total Disbursements $40.4 8.0 Japan Capital Fund Class A - ------- Advertising $0.6 Printing/Mailing Prospectus/ SAI to Potential Investors 6.3 Compensation to Dealers 2.8 Compensation to Sales Personnel 7.4 Other* 10.6 ----- Total Disbursements $27.8 Asian Capital Fund Class A - ------- Advertising $0.1 Printing/Mailing Prospectus/ SAI to Potential Investors 0.8 Compensation to Dealers 0.9 Compensation to Sales Personnel 0.9 Other* 1.4 ----- Total Disbursements $4.1 Europe Fund Class A - ------- Advertising $0.4 Printing/Mailing Prospectus/ 3.9 SAI to Potential Investors Compensation to Dealers 2.7 Compensation to Sales Personnel 4.5 Other* 6.5 ----- Total Disbursements $18.0 North America Fund Class A - ------- Advertising $0.1 Printing/Mailing Prospectus/ SAI to Potential Investors 1.0 Compensation to Dealers 0.3 Compensation to Sales Personnel 1.1 Other* 1.6 ----- Total Disbursements $4.1 GAMerica Capital Fund Class A - ------- Advertising $ - Printing/Mailing Prospectus/ 0.3 SAI to Potential Investors Compensation to Dealers 0.1 Compensation to Sales Personnel 0.4 Other* 0.6 ----- Total Disbursements $1.4 - ----------------------- * Includes travel and entertainment costs of internal sales personnel, communications costs, establishment costs for regional sales personnel and fulfillment expenses. ------------------------ The aggregate dollar amount of underwriting commissions and the amount retained by the Distributor for each of the last 2 fiscal years is a follows:
1996 (000's omitted) Class A Class D ------- ------- Aggregate After Reallowance Aggregate After Reallowance International Fund $9,386 $3,591 $584 $199 Global Fund 217 65 23 7 Pacific Basin Fund 215 91 15 6 Japan Capital Fund 122 59 NA Asian Capital Fund 6 3 N/A Europe Fund 17 11 N/A North America Fund 9 2 N/A GAMerica Fund -- -- N/A 1995 (000's omitted) Class A Class D* Aggregate After Reallowance Aggregate After Reallowance International Fund $2,523 $1,656 $ -- $ -- Global Fund 101 64 -- -- Pacific Basin Fund 110 80 -- -- Japan Capital Fund 8 7 Asian Capital Fund 9 8 Europe Fund 16 15 North America Fund 25 22 GAMerica Fund 2 2 *Class D Shares were first offered on September 5, 1995.
CUSTODIAN AND ADMINISTRATOR. Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts 02109 ("Brown Brothers"), serves as custodian of the Company's securities and cash and as its fund accounting agent and administrator. As such, Brown Brothers maintains certain records for the Company required by the Act and applicable Federal and state tax laws, keeps books of account, renders reports and statements, including financial statements, and disburses funds in payment of the Company's bills and obligations. Brown Brothers is reimbursed by the Company for its disbursements, expenses and charges (including counsel fees but excluding salaries and usual overhead expenses) incurred in connection with the foregoing services and receives a fee from the Company based on a fee schedule in effect from time to time (which is based on the net asset value of each Fund). The agreement provides for termination by either party on 60 days' written notice. TRANSFER AGENT. Chase Global Funds Service Company, P.O. Box 2798, Boston, Massachusetts 02208, serves as shareholder service agent, dividend-disbursing agent, transfer agent and registrar for the Funds. The Funds also engage other entities to act as shareholder servicing agents and to perform subaccounting services for the benefit of discrete groups of Fund shareholders. LEGAL COUNSEL. Coudert Brothers, 1114 Avenue of the Americas, New York, New York 10036, acts as legal counsel for the Funds and GAM. INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109, are the independent accountants for the Company for the fiscal year ending December 31, 1997. In addition to reporting annually on the financial statements of each Fund, the Company's accountants will review certain filings of the Company with the SEC and will prepare the Company's Federal and state corporation tax returns. REPORTS TO SHAREHOLDERS. The fiscal year of the Company ends on December 31. Shareholders of each Fund will be provided at least semi-annually with reports showing the portfolio of the Fund and other information, including an annual report with financial statements audited by independent accountants. BROKERAGE ALLOCATION The Contracts provide that the Investment Advisers shall be responsible for the selection of brokers and dealers for the execution of the portfolio transactions of each Fund and, when applicable, the negotiation of commissions in connection therewith. Purchase and sale orders will usually be placed with brokers who are selected based on their ability to achieve "best execution" of such orders. "Best execution" means prompt and reliable execution at the most favorable security price, taking into account the other provisions hereinafter set forth. The determination of what may constitute best execution and price in the execution of a securities transaction by a broker involves a number of considerations, including the overall direct net economic result to the Fund (involving both price paid or received and any commissions and other costs paid), the efficiency with which the transaction is effected, the ability to effect the transaction at all where a large block is involved, the availability of the broker to stand ready to execute possibly difficult transactions in the future, and the financial strength and stability of the broker. Such considerations are weighed by the Investment Advisers in determining the overall reasonableness of brokerage commissions. Each Investment Adviser is authorized to allocate brokerage and principal business to brokers who have provided brokerage and research services, as such services are defined in Section 28(e) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), for the Company and/or other accounts for which the Investment Adviser exercises investment discretion (as defined in Section 3(a)(35) of the 1934 Act) and, as to transactions for which fixed minimum commission rates are not applicable, to cause a Fund to pay a commission for effecting a securities transaction in excess of the amount another broker would have charged for effecting that transaction, if the Investment Adviser determines in good faith that such amount of commission is reasonable in relation to the value of the brokerage and research services provided by such broker, viewed in terms of either that particular transaction or the Investment Adviser's overall responsibilities with respect to the Fund and the other accounts as to which it exercises investment discretion. In reaching such determination, the Investment Advisers will not be required to place or to attempt to place a specific dollar value on the research or execution services of a broker or on the portion of any commission reflecting either of said services. Research services provided by brokers to the Investment Advisers includes that which brokerage houses customarily provide to institutional investors and statistical and economic data and research reports on particular companies and industries. Research furnished by brokers may be used by each Investment Adviser for any of its accounts, and not all such research may be used by the Investment Advisers for the Funds. The amount of brokerage commissions paid by each Fund during the three fiscal years ended December 31, 1996 are set forth below:
Inter- Pacific North Japan GAMerica Asian national Global Basin Europe America Capital Capital Capital -------- ------ ------- ------ ------- ------- -------- ------- 1996 $3,778,350 $109,863 $362,709 $ 93,545 $2,512 $139,479 $3,385 $47,627 1995 706,834 51,949 268,565 149,546 3,906 96,322 6,336 30,158 1994 614,271 209,240 165,154 120,013 2,304 41,233 NA NA
FINANCIAL STATEMENTS The audited financial statements of each Fund for the fiscal year ended December 31, 1996 and the report of the Funds' independent auditors in connection therewith are included in the 1996 Annual Report to Shareholders and are incorporated by reference in this Statement of Additional Information. GAM Funds, Inc. Post-Effective Amendment No. 28 PART C OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS: The following financial statements for the year ended December 31, 1996 are incorporated by reference to the Annual Report to shareholders of the following funds: GAM International, Global, Pacific Basin, Europe, Japan Capital, North America, Asian Capital and GAMerica Capital Funds: Statements of Investments Statements of Assets and Liabilities Statements of Operations Statements of Changes in Net Assets Notes to Financial Statements (b) EXHIBITS: (1)(a) Articles of Incorporation of Registrant, as amended or supplemented from time to time, are incorporated by reference to the Registrant's Registration Statement on Form N-1A which has been previously filed with the Commission ("Form N-1A"). (1)(b) Certificate of Correction to the Registrant's Articles of Incorporation is incorporated by reference to the Registrant's Form N-SAR filed for the period ended December 31, 1995. (1)(c) Articles Supplementary to the Registrant's Articles of Incorporation increasing number of authorized shares and classifying shares of each of the Funds as Class A Shares or Class D Shares are incorporated by reference to the Registrant's Form N-SAR filed for the period ended December 31, 1995. (1)(d) Articles of Amendment to the Registrant's Articles of Incorporation redesignating the shares of each of the Funds as Class A Shares are incorporated by reference to PEA No. 27 to Registrant's Registration Statement ("PEA 27"). (1)(e) Articles Supplementary adding GAM Mid-Cap U.S. Fund are incorporated by reference to PEA 27. (2) Bylaws of Registrant are incorporated herein by reference to the Registrant's Post-Effective Amendment No. 4 to the Registration Statement on Form N-1A, filed on December 31, 1985 ("PEA No. 4"). (3) Not applicable. (4) Specimen stock certificates of the Registrant are incorporated herein by reference to PEA No. 4. (5)(a) Amended and Restated Investment Advisory Agreement with GAM International Management Limited, dated April 14, 1994, is incorporated by reference to PEA No. 27. (5)(b) Amendment No. 1 to Amended and Restated Investment Advisory Agreement with GAM International Management Limited, dated March 10, 1995, is incorporated by reference to PEA 27 . (5)(c) Amendment No. 2 to Amended and Restated Investment Advisory Agreement with GAM International Management Limited, dated August 17, 1995, is incorporated by reference to PEA 27. (5)(d) Investment Advisory Agreement with Fayez Sarofim & Co., dated June 29, 1990, is incorporated herein by reference to the Registrant's Post-Effective Amendment No. 15 to the Registration Statement on Form N-1A, filed on August 29, 1990. (5)(e) Investment Advisory Agreement with Forstmann-Leff Associates Inc., dated August 17, 1995, is incorporated by reference to PEA 27. (6)(a) Second Amended and Restated Distribution Agreement For Class A Shares with GAM Services, Inc. dated November 1, 1996 is filed herewith. (6)(b) First Amended Distribution Agreement For Class D Shares with GAM Services, Inc., dated November 1, 1996, is filed herewith. (6)(c) Amended Form of Dealer Agreement between GAM Services, Inc. and designated dealers is filed herewith. (7) Not Applicable. (8) Custodian Agreement with Brown Brothers Harriman & Co., dated April 26, 1995, is incorporated by reference to PEA No. 26. (9) Transfer Agency Agreement with Chase Global Funds Service Company (as successor to AIM Financial Services, Inc.), as amended, is incorporated herein by reference to the Registrant's Post-Effective Amendment No. 2 to the Registration Statement on Form N-1A, filed on June 26, 1985, the Registrant's Post-Effective Amendment No. 6 to the Registration Statement on Form N-1A, filed on October 31, 1986, and the Registrant's Post-Effective Amendment No. 11 to the Registration Statement on Form N-1A, filed on April 27, 1989. (9)(b) Administration Agreement with Brown Brothers Harriman & Co. dated October 1, 1995 is filed herewith. (10) Opinion of Counsel is incorporated herein by reference to the Registrant's Rule 24f-2 Notice for the Registrant's fiscal year ended December 31, 1995, filed on February 21, 1997. (11) Consent of Coopers & Lybrand L.L.P. is filed herewith. (12) Not Applicable. (13)(a) Subscription Agreement with Global Asset Management (USA) Inc. for shares of GAM Mid-Cap U.S. Fund, dated September 5, 1995, is incorporated by reference to PEA 27. (14) Not Applicable. (15)(a) Class D Distribution Plan adopted by the Registrant pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, (the "1940 Act") is incorporated by reference to PEA 27. (15)(b) Class A Distribution Plan adopted by the Registrant pursuant to Rule 12b-1 under the 1940 Act is filed herewith. (16) Schedule of computation of performance quotations provided in the Statement of Additional Information is filed herewith. (17) Financial Data Schedules are filed herewith. (18) Amended Multiple Class Plan For Class A and D Shares adopted by the Registrant pursuant to Rule 18f-3 under the 1940 Act is filed herewith. (19) Powers of Attorney for Mr. Weiser, Mrs. Meier, Mrs. Talley, Mr. Landau and Mr. de Botton are filed herewith. ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT. N/A ITEM 26. NUMBER OF HOLDERS OF SECURITIES. Number of Record Holders Title of Series as of January 31, 1997 --------------- ------------------------- GAM International Fund Class A Common Stock 20,951 Class D Common Stock 1,309 GAM Global Fund Class A Common Stock 594 Class D Common Stock 32 GAM Pacific Basin Fund Class A Common Stock 846 Class D Common Stock 35 GAM Europe Fund Class A Common Stock 215 GAM North America Fund Class A Common Stock 67 GAM Japan Capital Fund Class A Common Stock 222 GAMerica Capital Fund Class A Common Stock 35 GAM Asian Capital Fund Class A Common Stock 111 ITEM 27. INDEMNIFICATION. All officers, directors, employees and agents of the Registrant are to be indemnified to the fullest extent permitted by law for any liabilities of any nature whatsoever incurred in connection with the affairs of the Registrant, except in cases where willful misfeasance, bad faith, gross negligence or reckless disregard of duties to the Registrant are established. See Article NINTH of the Articles of Incorporation of the Registrant, as amended, for a more complete description of matters related to indemnification. GAM Services Inc. ("GAM Services"), the Registrant's principal underwriter, will be indemnified against all claims, demands, liabilities and expenses which may be incurred by it arising out of any untrue statement, or alleged untrue statement, of a material fact contained in the Registrant's registration statement or material omission, or alleged material omission, therein. ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS. PAUL S. KIRKBY Global Asset Management (H.K.) Ltd., 1801 Two Exchange Square, Central, Hong Kong, investment adviser, director, 1985 to present. GAM (Asia) Retirement Scheme, 1801 Two Exchange Square, Central, Hong Kong, trustee, 1986 to present. Hanningfield Investments Ltd., 1801 Two Exchange Square, Central, Hong Kong, investment adviser, director, 1987 to present. GAM Japan Inc. and GAM Pacific Inc., Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, British Virgin Islands, director. Exeter Investments Ltd., 11/F Alexandra House, Central, Hong Kong, investment company, director, 1987 to present. NICHOLAS J. EELEY Global Asset Management Limited, 12 St. James's Place, London SWlA 1NX, England, investment adviser, director, 1984 to present. GAM Pacific Inc. and GAM Arbitrage Inc., Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, British Virgin Islands, director. DAVID J. MILLER Global Asset Management (U.K.) Ltd., 12 St. James's Place, London SW1A 1NX, England, investment adviser, chief financial officer, 1987 to present. GAM Fund Management Ltd., Dublin. GAM Administration Limited, 11 Athol Street, Douglas, Isle of Man, director. ALAN MCFARLANE Global Asset Management Ltd., 12 St. James's Place, London SW1A 1NX, England, managing director (institutional), 1993 to present. DENIS G. RAEBURN Global Asset Management Ltd. and Global Asset Management (U.K.) Ltd., 12 St. James's Place, London SW1A 1NX, England, managing director, 1987 to present. Cellcom Limited, Denmark House, Staples Corner, London NW9 7BW, England, director, 1983 to present. Global Asset Management (USA) Inc., 135 East 57th Street, New York, NY 10022, director, 1990 to present. Mr. Raeburn is also a director of various other companies controlled by GAM and of various investment funds organized outside the United States in the GAM group of funds. GORDON GRENDER Global Asset Management (U.K.) Ltd., 12 St. James's Place, London SW1A 1NX, England, independent contractor and fund manager, 1994 to present. Stephens Inc., 111 Center Street, Little Rock, AK. Consultant, 1995 to present. Neilson Management Ltd., 65 London Wall, London, England, January 1997 to present. Cognito Ltd., 12 Swinegate, Leeds, England. Alternate Director, January 1997 to present. Foreign & Colonial US Smaller Companies plc, Exchange House, Primrose Street, London EC2A 2NY, England, director, 1993 to present. Investco Overseas Holdings Limited, 81 Carter Lane, London EC4 5EP, England, director, 1987 to present. Flexbale Limited, 2 Chapel Court, London SE1 1HR, England, director, 1983 to present. Adrian Berkeley & Associates Limited, The Estate Office, Normanby, Scunthorpe, South Humberside DN15 9HS, England, director, 1969 to present. Mr. Grender also acts as portfolio manager for GAM North American Unit Trust and GAMerica, Inc. The directors and officers of Sarofim and their only activities of a substantial nature during the past two years are set forth in the Statement of Additional Information under "Investment Advisers." ITEM 29. PRINCIPAL UNDERWRITERS.
(a) None. (b) Name and Positions and Positions and Principal Offices with Offices with Business Address Underwriter Registrant --------------------------------------------------------------------------------------- Kevin Blanchfield Chief Operating Officer, Vice President 135 East 57th Street Treasurer and Treasurer New York, NY 10022 and Director Lisa M. Hurley Secretary Secretary 135 East 57th Street New York, NY 10022 (c) N/A
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS. The accounts, books and other documents required to be maintained by Registrant pursuant to Rule 31a-1(a) of the Act are maintained as follows: Accounts and Records Pursuant to Rule Location -------------------- -------- 31a - 1(b)(1) Brown Brothers Harriman & Co. 31a - 1(b)(2)(i) 40 Water Street 31a - 1(b)(2)(ii) Boston, Massachusetts 02109 31a - 1(b)(2)(iii) 31a - 1(b)(3) 31a - 1(b)(5)-(8) 31a - 1(b)(10) 31a - 1(b)(1) Chase Global Funds Service Company 31a - 1(b)(2)(iv) P.O. Box 2798 Boston, Massachusetts 02208 31a - 1(b)(9)-(11) GAM International Management Limited 12 St. James's Place London SWIA 1NX, England Fayez Sarofim & Co. Suite 2907 Two Houston Center Houston, Texas 77010 31a - 1(b)(4) Coudert Brothers 1114 Avenue of the Americas New York, New York 10036 ITEM 31. N/A ITEM 32. UNDERTAKINGS (a) N/A (b) N/A (c) Registrant hereby undertakes to furnish each person to whom a prospectus is delivered with a copy of the Registrant's latest annual report to shareholders for each series upon request and without charge. SIGNATURES. Registrant has duly caused this Post-Effective Amendment to the Registration Statement on Form N-1A of GAM Funds, Inc. to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York and State of New York, on the 28th day of February, 1997. GAM FUNDS, INC. Registrant By /s/ Kevin J. Blanchfield ---------------------------- Kevin J. Blanchfield Vice President and Treasurer Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature: Title: Date: - ---------- ------ ----- /s/ Gilbert de Botton* President and February 28, 1997 - --------------------------------------------- Director Gilbert de Botton (Principal Executive Officer) /s/ Kevin J. Blanchfield Vice President/ February 28, 1997 - --------------------------------------------- Treasurer Kevin J. Blanchfield (Principal Financial and Accounting Officer) /s/ Therese Meier* Director February 28, 1997 - --------------------------------------------- Therese Meier /s/ Madelon DeVoe Talley* Director February 28, 1997 - --------------------------------------------- Madelon DeVoe Talley /s/ Roland Weiser* Director February 28, 1997 - --------------------------------------------- Roland Weiser /s/ George W. Landau* Director February 28, 1997 - --------------------------------------------- George W. Landau
*By: /s/ Lisa M. Hurley ------------------ Executed by Lisa M. Hurley on behalf of those indicated pursuant to Powers of Attorney filed herewith. INDEX TO EXHIBITS Exhibit No. Description of Index - ----------- -------------------- 6(a) Second Amended and Restated Distribution Agreement for Class A Shares with GAM Services, Inc. dated November 1, 1996 6(b) First Amended Distribution Agreement for Class D Shares with GAM Services, Inc. dated November 1, 1996. 6(c) Amended Form of Dealer Agreement between GAM Services, Inc. and designated dealers. 9(b) Administration Agreement with Brown Brothers Harriman & Co. dated October 1, 1995. 11 Consent of Coopers & Lybrand L.L.P., independent auditors of Registrant. 12 Annual Report to Shareholders of GAM Funds, Inc. 15(b) Class A Distribution Plan adopted by Registrant. 16 Performance Calculations 17 Financial Data Schedules. 18 Amended Multiple Class Plan for Class A and D Shares adopted by Registrant. 19 Powers of Attorney EX-6.A 2 DISTRIBUTION AGREEMENT - CLASS A Exhibit 6(a) SECOND AMENDED AND RESTATED DISTRIBUTION AGREEMENT FOR CLASS A SHARES THIS AGREEMENT made as of the 1st day of November, 1996, by and between GAM FUNDS, INC. a Maryland corporation (the "Fund"), and GAM SERVICES INC., a Delaware corporation ("GAM Services"). WHEREAS, the Fund is registered as an open-end, diversified, management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); WHEREAS, on December 11, 1989, the Fund and GAM Services entered into an agreement to provide distribution services for the Fund (the "Original Distribution Agreement"); WHEREAS, on August 17, 1995 the Fund and GAM Services entered into the First Amended and Restated Distribution Agreement for Class A Shares, and simultaneously entered into a separate Distribution Agreement regarding the Fund's Class D Shares; and WHEREAS, the Fund and GAM Services now desire to amend the Original Distribution Agreement to provide that GAM Services shall provide distribution services for the Fund's Class A Shares on the terms and conditions hereinafter set forth; NOW THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt whereof is hereby acknowledged, the parties hereto agree as follows: 1. APPOINTMENT. The Fund hereby appoints GAM Services as distributor of the Class A Shares of the Fund for the period and on the terms set forth in this Agreement. GAM Services accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. 2. DELIVERY OF DOCUMENTS. The Fund has furnished GAM Services Services with true and correct copies of each of the following: (a) the Fund's Certificate of Incorporation and all amendments thereto (such Certificate of Incorporation, as presently in effect and as it shall from time to time be amended, is herein called the "Certificate"); (b) the Fund's By-Laws and all amendments thereto (such By-Laws, as presently in effect and as they shall from time to time be amended, are herein called the "By-Laws"); (c) the Fund's Registration Statement on Form N-1A under the Securities Act of 1933, as amended (the "1933 Act"), and under the 1940 Act as filed with the Securities and Exchange Commission (the "SEC") relating to the shares of the Fund and all amendments thereto; (d) the Fund's most recent prospectus and statement of additional information (such prospectus and statement of additional information, as presently in effect and all amendments and supplements thereto, are herein called the "Prospectus" and "SAI", respectively); and (e) the Fund's Plan of Distribution for Class A Shares. The Fund will furnish GAM Services from time to time with copies of all amendments or supplements to the foregoing, if any. 3. DUTIES AS DISTRIBUTOR. GAM Services shall give the Fund the benefit of its best judgment, efforts and facilities in rendering its services as distributor of the Fund's Class A Shares. In carrying out its obligations hereunder, GAM Services shall: (a) receive orders for the purchase of the Fund's Class A Shares, accept or reject such orders on behalf of the Fund in accordance with the Fund's currently effective Prospectus and SAI and transmit such orders as are so accepted to the Fund's transfer agent as promptly as possible; (b) receive requests for redemption from holders of the Fund's Class A Shares and transmit such redemption requests to the Fund's transfer agent as promptly as possible; and (c) respond to inquiries from the Fund's Class A shareholders concerning the status of their accounts with the Fund. 4. DISTRIBUTION OF CLASS A SHARES. GAM Services shall be exclusive distributor of the Fund's Class A Shares. It is mutually understood and agreed that GAM Services does not undertake to sell all or any specific portion of the Class A Shares of the Fund. The Fund shall not sell any of its Class A Shares through any securities dealer other than GAM Services. Notwithstanding the provisions of the foregoing sentence: (a) the Fund may issue its Class A Shares to any other investment company or personal holding company, or to the shareholders thereof, in exchange for all or a majority of the shares or assets of any such company; (b) the Fund may issue its Class A Shares at their net asset value to any shareholder of the Fund purchasing such shares with dividends or other cash distributions received from the Fund pursuant to an offer made to all shareholders; (c) GAM Services may enter into shareholder processing and servicing agreements in accordance with Section 7 hereof; (d) GAM Services may, and when requested by the Fund shall, suspend its efforts to effectuate sales of the Class A Shares of the Fund at any time when in the opinion of GAM Services or of the Fund no sales should be made because of market or other economic considerations or abnormal circumstances of any kind; (e) the Fund may withdraw the offering of its Class A Shares (i) at any time with the consent of GAM Services, or (ii) without such consent when so required by the provisions of any statute or of any order, rule or regulation of any governmental body having jurisdiction; and (f) the price at which the Class A Shares may be sold (the "offering price") shall be the net asset value per Class A Share plus any applicable sales load as determined in the manner established from time to time by the Fund's Board of Directors and as set forth in the Fund's then current Prospectus and SAI. 5. CONTROL BY BOARD OF DIRECTORS. Any distribution activities undertaken by GAM Services pursuant to this Agreement, as well as any other activities undertaken by GAM Services on behalf of the Fund pursuant thereto, shall at all times be subject to any applicable directives of the Board of Directors of the Fund. 6. COMPLIANCE WITH APPLICABLE REQUIREMENTS. In carrying out its obligations under this Agreement, GAM Services shall at all times conform to: (a) all applicable provisions of the 1940 Act and any rules and regulations adopted thereunder; (b) the provisions of the Registration Statement of the Fund under the 1933 Act and the 1940 Act; (c) the provisions of the Certificate of the Fund; (d) the provisions of the By-Laws of the Fund; (e) the rules and regulations of the National Association of Securities Dealers, Inc. ("NASD") and all other self-regulatory organizations applicable to the sale of investment company shares; and (f) any other applicable provision of state and Federal law. 7. DEALER AND SHAREHOLDER SERVICE AGREEMENTS. GAM Services may enter into dealer and shareholder service agreements (the "Dealer Agreements") with any securities dealer ("Securities Dealer") who is registered under the Securities Exchange Act of 1934 (the "1934 Act") and a member in good standing of the NASD (or who is not required to be so registered or a member of the NASD because such Securities Dealer does not have any customers in the United States), who may wish to establish accounts or sub-accounts on behalf of such Securities Dealer's customers. GAM Services may enter into shareholder processing and service agreements ("Shareholder Service Agreements") with persons other than Securities Dealers ("Shareholder Service Agents") who are not required to be registered under the 1934 Act or members in good standing of the NASD, who are exempt from registration as a broker or a dealer under the 1934 Act or who may otherwise lawfully furnish services to Fund shareholders without registration under the 1934 Act. GAM Services will supervise the Fund's relations with Securities Dealers and Shareholder Service Agents. Securities Dealers and Shareholder Service Agents shall be paid such amounts as GAM Services may determine from time to time in its discretion. 8. EXPENSES. The expenses connected with the Fund shall be allocable between the Fund and GAM Services as follows: (a) GAM Services shall furnish, at its expense and without cost to the Fund, the services of personnel to the extent that such services are required to carry out its obligations under this Agreement. (b) GAM Services shall bear the fees payable to Securities Dealers and Shareholder Service Agents as set forth in Section 7 above, except that the Fund may pay fees to Securities Dealers and Shareholders Service Agents in an amount not to exceed an annual rate of 0.25% of the daily net asset value of the Class A Shares of the Fund owned by shareholders with whom such Securities Dealer or Shareholder Service Agent has a servicing relationship in exchange for administrative services provided to such shareholders as described in the Prospectus and SAI. (c) The expenses of printing and distributing Prospectuses and SAI (other than those Prospectuses and SAI distributed to shareholders of the Fund) and any other promotional or sales literature used by GAM Services or furnished by GAM Services to investors, Securities Dealers or Shareholder Service Agents in connection with the public offering of the Fund's Class A Shares, and other advertising or promotional expenses incurred in connection with such public offering, shall be paid by GAM Services. (d) The Fund assumes and shall pay or cause to be paid all other expenses of the Fund (other than those expressly assumed by the Fund's investment advisors), including, without limitation: the fees of the Fund's investment advisors; the charges and expenses of any registrar, any custodian or depository appointed by the Fund for the safekeeping of its cash, portfolio securities and other property, and any transfer, dividend or accounting agent or agents appointed by the Fund; brokers' commissions chargeable to the Fund in connection with portfolio securities transactions to which the Fund is a party; all taxes, including securities issuance and transfer taxes, and fees payable by the Fund to Federal, state or other governmental agencies; the costs and expenses of engraving or printing of certificates representing shares of the Fund; all costs and expenses in connection with the registration and maintenance of registration of the Fund and its shares with the SEC and various states and other jurisdictions (including filing fees, legal fees and disbursements of counsel); the costs and expenses of printing, including typesetting, and distributing the Prospectuses and SAI of the Fund and supplements thereto to the Fund's shareholders; all expenses of shareholders' and directors' meetings and of preparing, printing and mailing of proxy statements and reports to shareholders; fees and travel expenses of directors or members of any advisory board or committee; all expenses incident to the payment of any dividend, distribution, withdrawal or redemption, whether in shares or in cash; charges and expenses of any outside service used for pricing of the Fund's shares; fees and expenses of legal counsel and of independent accountants, in connection with any matter relating to the Fund; membership dues of industry associations; interest payable on Fund borrowings; postage; insurance premiums on property or personnel (including officers and directors) of the Fund; extraordinary expenses (including, but not limited to, legal claims and liabilities and litigation costs and any indemnification related thereto); and all other charges and costs of the Fund's operation unless otherwise explicitly provided herein. 9. COMPENSATION. The Fund shall pay or cause to be paid to GAM Services: (i) any sales load received by the Fund with respect to the sale of its Class A Shares in accordance with the Prospectus and SAI, and (ii) compensation at the annual rate of 0.30% of the average daily net assets of each series of the Fund attributable to the Class A Shares, which shall be calculated and accrued daily and paid monthly or at such other intervals as the Board of Directors and GAM Services shall mutually agree. 10. NON-EXCLUSIVITY. The services of GAM Services to the Fund are not to be deemed to be exclusive, and GAM Services and its officers and directors shall be free to render distribution or other services to others (including other investment companies) and to engage in other activities. 11. TERM. This Agreement shall become effective on the date hereof and shall continue in force and effect, subject to Section 13 hereof, until the first anniversary of the date hereof. 12. RENEWAL. Following the expiration of its initial one-year term, this Agreement shall continue in force and effect from year to year, subject to Section 13 hereof, provided that such continuance is specifically approved at least annually: (a) by the Fund's Board of Directors; and (b) by the affirmative vote of a majority of the Directors who are not parties to this Agreement or "interested persons" (as defined by the 1940 Act) of any such party and have no direct or indirect financial interest in the operation of this Agreement or any agreement related to this Agreement, by votes cast in person at a meeting specifically called for the purpose of voting on such approval. 13. TERMINATION. This Agreement may be terminated at any time, without the payment of any penalty, (i) by vote of the Fund's Board of Directors, (ii) by vote of a majority of the members of the Board of Directors of the Fund who are not "interested persons" of the Fund and have no direct or indirect financial interest in the operation of this Agreement or in any agreement related to this Agreement, (iii) with respect to any Series of the Fund, by vote of a majority of the outstanding Class A Shares of such Series (as defined in Section 2(a)(42) of the 1940 Act), or (iv) by GAM Services, on sixty (60) days' written notice to the other party. The notice provided for herein may be waived by either party. This Agreement shall automatically terminate in the event of its "assignment" as defined in Section 2(a)(4) of the 1940 Act. 14. AMENDMENTS. (a) This Agreement may be amended by the parties hereto only if such amendment is specifically approved (i) by the Board of Directors of the Fund and (ii) by a majority of those Directors who are not parties to this Agreement or "interested persons" of any such party, which vote must be cast in person at a meeting called for the purpose of voting on such approval. (b) In the event that this Agreement is proposed to be amended to increase materially the amount to be spent by the Fund for distribution, such amendment will not be effected with respect to any Series without the approval of the holders of the Class A Shares of such Series. 15. LIABILITY OF THE DISTRIBUTOR. In the performance of its duties hereunder, GAM Services shall be obligated to exercise care and diligence and to act in good faith and to use its best efforts within reasonable limits to ensure the accuracy of all services performed under this Agreement, but GAM Services shall not be liable for any act or omission which does not constitute willful misfeasance, bad faith or gross negligence on the part of GAM Services or reckless disregard by GAM Services of its duties under this Agreement. 16. INDEMNIFICATION. (a) The Fund agrees to indemnify, defend and hold GAM Services, its officers and directors and any person who controls GAM Services within the meaning of Section 15 of the 1933 Act, free and harmless from and against any and all claims, demands, liabilities and expenses (including the cost of investigating or defending such claims, demands or liabilities and any counsel fees incurred in connection therewith) which GAM Services, its officers, directors or any such controlling person may incur arising out of or based upon any untrue statement of a material fact contained in the Registration Statement, Prospectus or SAI or arising out of or based upon any alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such claims, demands, liabilities or expenses arise out of or are based upon any such untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information furnished in writing by GAM Services to the Fund for use in the Registration Statement, Prospectus or SAI; provided, however, that this indemnity agreement, to the extent that it might require indemnity of any person who is also an officer or director of the Fund or who controls the Fund within the meaning of Section 15 of the 1933 Act, shall not inure to the benefit of such officer, director or controlling person unless a court of competent jurisdiction shall determine, or it shall have been determined by controlling precedent, that such result would not be against public policy as expressed in the 1933 Act; and further provided, that in no event shall anything contained herein be so construed as to protect GAM Services against any liability to the Fund or to its security holders to which GAM Services would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of its reckless disregard of its obligations under this Agreement. In the event that GAM Services becomes a party to any action or proceeding in respect of which indemnification may be sought hereunder, GAM Services shall promptly notify the Fund thereof. Following such notice, the Fund shall be entitled to participate therein, and to the extent that it may wish, to assume the defense thereof with counsel reasonably satisfactory to GAM Services. After notice from the Fund to GAM Services of an election so to assume the defense thereof, the Fund shall not be liable to GAM Services hereunder for any legal or other expenses subsequently incurred by GAM Services in connection with the defense thereof other than reasonable costs of investigation. (b) GAM Services agrees to indemnify, defend and hold the Fund, its officers and directors and any person who controls the Fund, if any, within the meaning of Section 15 of the 1933 Act, free and harmless from and against any and all claims, demands, liabilities and expenses (including the costs of investigating or defending against such claims, demands or liabilities and any counsel fees incurred in connection therewith) which the Fund, its directors or officers or any such controlling person may incur, but only to the extent that such liability or expense incurred by the Fund, its directors or officers or such controlling person resulting from such claims or demands shall arise out of or be based upon any alleged untrue statement of a material fact contained in information furnished in writing by GAM Services to the Fund for use in the Registration Statement, Prospectus or SAI or shall arise out of or be based upon any alleged omission to state a material fact in connection with such information required to be stated in the Registration Statement, Prospectus or SAI or necessary to make such information not misleading. (c) Neither party to this Agreement shall be liable under this Section 16 for any settlement of any action or claim effected without its prior written consent. 17. REPORTS. GAM Services shall provide to the Board of Directors of the Fund, and the Board of Directors shall review, at least quarterly, a written report of the amounts expended pursuant to this Agreement and the purposes for which such expenditures were made, including, without limitation, commissions, advertising, printing, interest, carrying charges and allocated overhead expenses. GAM Services shall also provide the Board of Directors of the Fund with such other information regarding the implementation of this Agreement as the Board of Directors may reasonably request from time to time. 18. NOTICES. Any notices under this Agreement shall be in writing, addressed and delivered or mailed postage paid to the other party at such address as such other party may designate for the receipt of such notice. Until further notice to the other party, it is agreed that the address of each party for this purpose shall be 135 East 57th Street, New York, New York 10022. 19. INTERPRETATION. This Agreement shall be implemented and construed in a manner consistent with the provisions of the 1940 Act. Any question of interpretation of any term or provision of this Agreement having a counterpart in or otherwise derived from a term or provision of the 1940 Act shall be resolved by reference to such term or provision of the 1940 Act and to interpretations thereof, if any, by the United States courts or, in the absence of any controlling decision of any such court, by rules, regulations or orders of the SEC issued pursuant to the 1940 Act. In addition, where the effect of a requirement of the 1940 Act reflected in any provision of this Agreement is revised by rule, regulation or order of the SEC, such provision shall be deemed to incorporate the effect of such rule, regulation or order. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers on the day and year first above written. GAM FUNDS, INC. By:_________________________ Name: Kevin J. Blanchfield Title: Treasurer GAM SERVICES, INC. By:__________________________ Name: David A. Anderson Title: Managing Director - Mutual Funds EX-6.B 3 DISTRIBUTION AGREEMENT - CLASS D Exhibit 6(b) FIRST AMENDED AND RESTATED DISTRIBUTION AGREEMENT FOR CLASS D SHARES THIS AGREEMENT, made as of the 1st day of November, 1996 by and between GAM FUNDS, INC. a Maryland corporation (the "Fund"), and GAM SERVICES INC., a Delaware corporation ("GAM Services"). WHEREAS, the Fund is registered as an open-end, diversified, management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, on August 17, 1995, the Fund and GAM Services entered into an agreement to provide distribution services for the Class D Shares of the Fund (the "Original Distribution Agreement"); and WHEREAS, the Fund and GAM Services now desire to amend the Original Distribution Agreement to provide that GAM Services shall provide distribution services for the Fund's Class D Shares on the terms and conditions hereinafter set forth; NOW THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt whereof is hereby acknowledged, the parties hereto agree as follows: 1. APPOINTMENT. The Fund hereby appoints GAM Services as distributor of the Class D Shares of the Fund for the period and on the terms set forth in this Agreement. GAM Services accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. 2. DELIVERY OF DOCUMENTS. The Fund has furnished GAM Services with true and correct copies of each of the following: (a) the Fund's Certificate of Incorporation and all amendments thereto (such Certificate of Incorporation, as presently in effect and as it shall from time to time be amended, is herein called the "Certificate"); (b) the Fund's By-Laws and all amendments thereto (such By-Laws, as presently in effect and as they shall from time to time be amended, are herein called the "By-Laws"); (c) the Fund's Registration Statement on Form N-1A under the Securities Act of 1933, as amended (the "1933 Act"), and under the 1940 Act as filed with the Securities and Exchange Commission (the "SEC") relating to the shares of the Fund and all amendments thereto; (d) the Fund's most recent prospectus and statement of additional information (such prospectus and statement of additional information, as presently in effect and all amendments and supplements thereto, are herein called the "Prospectus" and "SAI", respectively); and (e) the Fund's Plan of Distribution for Class D Shares. The Fund will furnish GAM Services from time to time with copies of all amendments or supplements to the foregoing, if any. 3. DUTIES AS DISTRIBUTOR. GAM Services shall give the Fund the benefit of its best judgment, efforts and facilities in rendering its services as distributor of the Fund's Class D Shares. In carrying out its obligations hereunder, GAM Services shall: (a) receive orders for the purchase of the Fund's Class D Shares, accept or reject such orders on behalf of the Fund in accordance with the Fund's currently effective Prospectus and SAI and transmit such orders as are so accepted to the Fund's transfer agent as promptly as possible; (b) receive requests for redemption from holders of the Fund's Class D Shares and transmit such redemption requests to the Fund's transfer agent as promptly as possible; and (c) respond to inquiries from the Fund's Class D shareholders concerning the status of their accounts with the Fund. 4. DISTRIBUTION OF CLASS D SHARES. GAM Services shall be exclusive distributor of the Fund's Class D Shares. It is mutually understood and agreed that GAM Services does not undertake to sell all or any specific portion of the Class D Shares of the Fund. The Fund shall not sell any of its Class D Shares through any securities dealer other than GAM Services. Notwithstanding the provisions of the foregoing sentence: (a) the Fund may issue its Class D Shares to any other investment company or personal holding company, or to the shareholders thereof, in exchange for all or a majority of the shares or assets of any such company; (b) the Fund may issue its Class D Shares at their net asset value to any shareholder of the Fund purchasing such shares with dividends or other cash distributions received from the Fund pursuant to an offer made to all shareholders; (c) GAM Services may enter into shareholder processing and servicing agreements in accordance with Section 7 hereof; (d) GAM Services may, and when requested by the Fund shall, suspend its efforts to effectuate sales of the Class D Shares of the Fund at any time when in the opinion of GAM Services or of the Fund no sales should be made because of market or other economic considerations or abnormal circumstances of any kind; (e) the Fund may withdraw the offering of its Class D Shares (i) at any time with the consent of GAM Services, or (ii) without such consent when so required by the provisions of any statute or of any order, rule or regulation of any governmental body having jurisdiction; and (f) the price at which the Class D Shares may be sold (the "offering price") shall be the net asset value per Class D Share plus any applicable sales load as determined in the manner established from time to time by the Fund's Board of Directors and as set forth in the Fund's then current Prospectus and SAI. 5. CONTROL BY BOARD OF DIRECTORS. Any distribution activities undertaken by GAM Services pursuant to this Agreement, as well as any other activities undertaken by GAM Services on behalf of the Fund pursuant thereto, shall at all times be subject to any applicable directives of the Board of Directors of the Fund. 6. COMPLIANCE WITH APPLICABLE REQUIREMENTS. In carrying out its obligations under this Agreement, GAM Services shall at all times conform to: (a) all applicable provisions of the 1940 Act and any rules and regulations adopted thereunder; (b) the provisions of the Registration Statement of the Fund under the 1933 Act and the 1940 Act; (c) the provisions of the Certificate of the Fund; (d) the provisions of the By-Laws of the Fund; (e) the rules and regulations of the National Association of Securities Dealers, Inc. ("NASD") and all other self-regulatory organizations applicable to the sale of investment company shares; and (f) any other applicable provision of state and Federal law. 7. DEALER AND SHAREHOLDER SERVICE AGREEMENTS. GAM Services may enter into dealer and shareholder service agreements (the "Dealer Agreements") with any securities dealer ("Securities Dealer") who is registered under the Securities Exchange Act of 1934 (the "1934 Act") and a member in good standing of the NASD (or who is not required to be so registered or a member of the NASD because such Securities Dealer does not have any customers in the United States), who may wish to establish accounts or sub-accounts on behalf of such Securities Dealer's customers. GAM Services may enter into shareholder processing and service agreements ("Shareholder Service Agreements") with persons other than Securities Dealers ("Shareholder Service Agents") who are not required to be registered under the 1934 Act or members in good standing of the NASD, who are exempt from registration as a broker or a dealer under the 1934 Act or who may otherwise lawfully furnish services to Fund shareholders without registration under the 1934 Act. GAM Services will supervise the Fund's relations with Securities Dealers and Shareholder Service Agents. GAM Services will make payments to Securities Dealers and Shareholder Service Agents in such amounts as GAM Services may determine from time to time in its discretion. 8. EXPENSES. The expenses connected with the Fund shall be allocable between the Fund and GAM Services as follows: (a) GAM Services shall furnish, at its expense and without cost to the Fund, the services of personnel to the extent that such services are required to carry out its obligations under this Agreement. (b) GAM Services shall bear the fees payable to Securities Dealers and Shareholder Service Agents as set forth in Section 7 above, except that the Fund may pay fees to Securities Dealers and Shareholders Service Agents in an amount not to exceed an annual rate of 0.25% of the daily net asset value of the Class D Shares of the Fund owned by shareholders with whom such Securities Dealer or Shareholder Service Agent has a servicing relationship in exchange for administrative services provided to such shareholders as described in the Prospectus and SAI. (c) The expenses of printing and distributing Prospectuses and SAI (other than those Prospectuses and SAI distributed to shareholders of the Fund) and any other promotional or sales literature used by GAM Services or furnished by GAM Services to investors, Securities Dealers or Shareholder Service Agents in connection with the public offering of the Fund's Class D Shares, and other advertising or promotional expenses incurred in connection with such public offering, shall be paid by GAM Services. (d) The Fund assumes and shall pay or cause to be paid all other expenses of the Fund (other than those expressly assumed by the Fund's investment advisors), including, without limitation: the fees of the Fund's investment advisors; the charges and expenses of any registrar, any custodian or depository appointed by the Fund for the safekeeping of its cash, portfolio securities and other property, and any transfer, dividend or accounting agent or agents appointed by the Fund; brokers' commissions chargeable to the Fund in connection with portfolio securities transactions to which the Fund is a party; all taxes, including securities issuance and transfer taxes, and fees payable by the Fund to Federal, state or other governmental agencies; the costs and expenses of engraving or printing of certificates representing shares of the Fund; all costs and expenses in connection with the registration and maintenance of registration of the Fund and its shares with the SEC and various states and other jurisdictions (including filing fees, legal fees and disbursements of counsel); the costs and expenses of printing, including typesetting, and distributing the Prospectuses and SAI of the Fund and supplements thereto to the Fund's shareholders; all expenses of shareholders' and directors' meetings and of preparing, printing and mailing of proxy statements and reports to shareholders; fees and travel expenses of directors or members of any advisory board or committee; all expenses incident to the payment of any dividend, distribution, withdrawal or redemption, whether in shares or in cash; charges and expenses of any outside service used for pricing of the Fund's shares; fees and expenses of legal counsel and of independent accountants, in connection with any matter relating to the Fund; membership dues of industry associations; interest payable on Fund borrowings; postage; insurance premiums on property or personnel (including officers and directors) of the Fund; extraordinary expenses (including, but not limited to, legal claims and liabilities and litigation costs and any indemnification related thereto); and all other charges and costs of the Fund's operation unless otherwise explicitly provided herein. 9. COMPENSATION. The Fund shall pay or cause to be paid to GAM Services: (i) any sales load received by the Fund with respect to the sale of its Class D Shares in accordance with the Prospectus and SAI, and (ii) compensation at the annual rate of 0.50% of the average daily net assets of each series of the Fund attributable to the Class D Shares, which shall be calculated and accrued daily and paid monthly or at such other intervals as the Board of Directors and GAM Services shall mutually agree. 10. NON-EXCLUSIVITY. The services of GAM Services to the Fund are not to be deemed to be exclusive, and GAM Services and its officers and directors shall be free to render distribution or other services to others (including other investment companies) and to engage in other activities. 11. TERM. This Agreement shall become effective on the date hereof and shall continue in force and effect, subject to Section 13 hereof, until the first anniversary of the date hereof. 12. RENEWAL. Following the expiration of its initial one-year term, this Agreement shall continue in force and effect, subject to Section 13 hereof, provided that such continuance is specifically approved at least annually: (a) by the Fund's Board of Directors; and (b) by the affirmative vote of a majority of the Directors who are not parties to this Agreement or "interested persons" (as defined by the 1940 Act) of any such party and have no direct or indirect financial interest in the operation of this Agreement or any agreement related to this Agreement, by votes cast in person at a meeting specifically called for the purpose of voting on such approval. 13. TERMINATION. This Agreement may be terminated at any time, without the payment of any penalty, (i) by vote of the Fund's Board of Directors, (ii) by vote of a majority of the members of the Board of Directors of the Fund who are not "interested persons" of the Fund and have no direct or indirect financial interest in the operation of this Agreement or in any agreement related to this Agreement, (iii) with respect to any Series of the Fund, by vote of a majority of the outstanding Class D Shares of such Series (as defined in Section 2(a)(42) of the 1940 Act), or (iv) by GAM Services, on sixty (60) days' written notice to the other party. The notice provided for herein may be waived by either party. This Agreement shall automatically terminate in the event of its "assignment" as defined in Section 2(a)(4) of the 1940 Act. 14. AMENDMENTS. (a) This Agreement may be amended by the parties hereto only if such amendment is specifically approved (i) by the Board of Directors of the Fund and (ii) by a majority of those Directors who are not parties to this Agreement or "interested persons" of any such party, which vote must be cast in person at a meeting called for the purpose of voting on such approval. (b) In the event that this Agreement is proposed to be amended to increase materially the amount to be spent by the Fund for distribution, such amendment will not be effected with respect to any Series without the approval of the holders of Class D Shares of such Series. 15. LIABILITY OF THE DISTRIBUTOR. In the performance of its duties hereunder, GAM Services shall be obligated to exercise care and diligence and to act in good faith and to use its best efforts within reasonable limits to ensure the accuracy of all services performed under this Agreement, but GAM Services shall not be liable for any act or omission which does not constitute willful misfeasance, bad faith or gross negligence on the part of GAM Services or reckless disregard by GAM Services of its duties under this Agreement. 16. INDEMNIFICATION. (a) The Fund agrees to indemnify, defend and hold GAM Services, its officers and directors and any person who controls GAM Services within the meaning of Section 15 of the 1933 Act, free and harmless from and against any and all claims, demands, liabilities and expenses (including the cost of investigating or defending such claims, demands or liabilities and any counsel fees incurred in connection therewith) which GAM Services, its officers, directors or any such controlling person may incur arising out of or based upon any untrue statement of a material fact contained in the Registration Statement, Prospectus or SAI or arising out of or based upon any alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such claims, demands, liabilities or expenses arise out of or are based upon any such untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information furnished in writing by GAM Services to the Fund for use in the Registration Statement, Prospectus or SAI; provided, however, that this indemnity agreement, to the extent that it might require indemnity of any person who is also an officer or director of the Fund or who controls the Fund within the meaning of Section 15 of the 1933 Act, shall not inure to the benefit of such officer, director or controlling person unless a court of competent jurisdiction shall determine, or it shall have been determined by controlling precedent, that such result would not be against public policy as expressed in the 1933 Act; and further provided, that in no event shall anything contained herein be so construed as to protect GAM Services against any liability to the Fund or to its security holders to which GAM Services would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of its reckless disregard of its obligations under this Agreement. In the event that GAM Services becomes a party to any action or proceeding in respect of which indemnification may be sought hereunder, GAM Services shall promptly notify the Fund thereof. Following such notice, the Fund shall be entitled to participate therein, and to the extent that it may wish, to assume the defense thereof with counsel reasonably satisfactory to GAM Services. After notice from the Fund to GAM Services of an election so to assume the defense thereof, the Fund shall not be liable to GAM Services hereunder for any legal or other expenses subsequently incurred by GAM Services in connection with the defense thereof other than reasonable costs of investigation. (b) GAM Services agrees to indemnify, defend and hold the Fund, its officers and directors and any person who controls the Fund, if any, within the meaning of Section 15 of the 1933 Act, free and harmless from and against any and all claims, demands, liabilities and expenses (including the costs of investigating or defending against such claims, demands or liabilities and any counsel fees incurred in connection therewith) which the Fund, its directors or officers or any such controlling person may incur, but only to the extent that such liability or expense incurred by the Fund, its directors or officers or such controlling person resulting from such claims or demands shall arise out of or be based upon any alleged untrue statement of a material fact contained in information furnished in writing by GAM Services to the Fund for use in the Registration Statement, Prospectus or SAI or shall arise out of or be based upon any alleged omission to state a material fact in connection with such information required to be stated in the Registration Statement, Prospectus or SAI or necessary to make such information not misleading. (c) Neither party to this Agreement shall be liable under this Section 16 for any settlement of any action or claim effected without its prior written consent. 17. REPORTS. GAM Services shall provide to the Board of Directors of the Fund, and the Board of Directors shall review, at least quarterly, a written report of the amounts expended pursuant to this Agreement and the purposes for which such expenditures were made, including, without limitation, commissions, advertising, printing, interest, carrying charges and allocated overhead expenses. GAM Services shall also provide the Board of Directors of the Fund with such other information regarding the implementation of this Agreement as the Board of Directors may reasonably request from time to time. 18. NOTICES. Any notices under this Agreement shall be in writing, addressed and delivered or mailed postage paid to the other party at such address as such other party may designate for the receipt of such notice. Until further notice to the other party, it is agreed that the address of each party for this purpose shall be 135 East 57th Street, New York, New York 10022. 19. INTERPRETATION. This Agreement shall be implemented and construed in a manner consistent with the provisions of the 1940 Act. Any question of interpretation of any term or provision of this Agreement having a counterpart in or otherwise derived from a term or provision of the 1940 Act shall be resolved by reference to such term or provision of the 1940 Act and to interpretations thereof, if any, by the United States courts or, in the absence of any controlling decision of any such court, by rules, regulations or orders of the SEC issued pursuant to the 1940 Act. In addition, where the effect of a requirement of the 1940 Act reflected in any provision of this Agreement is revised by rule, regulation or order of the SEC, such provision shall be deemed to incorporate the effect of such rule, regulation or order. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers on the day and year first above written. GAM FUNDS, INC. By:___________________________ Name: Kevin J. Blanchfield Title: Treasurer GAM SERVICES, INC. By:____________________________ Name: David A. Anderson Title: Manageing Director - Mutual Funds EX-6.C 4 SALES AGREEMENT Exhibit 6(c) GAM FUNDS, INC. SALES AGREEMENT GAM Services Inc., a Delaware corporation, serves as Distributor (the "Distributor") of GAM Funds, Inc., an open-end investment company registered under the Investment Company Act of 1940 (the "Investment Company Act"). GAM Funds, Inc. has established separate series which are designated as GAM Europe Fund, GAM Global Fund, GAM International Fund, GAM North America Fund, GAM Pacific Basin Fund, GAM Japan Capital Fund, GAM Asian Capital Fund, and GAMerica Capital Fund and may establish additional separate series in the future from time to time in its discretion, all of which shall be referred to herein as the "Funds." The Funds currently offer Class A and Class D shares of common stock ("Shares") to the public in accordance with the terms and conditions contained in the Prospectus of the Funds, and may offer additional classes of shares of the Funds in the future, which for purposes of this Agreement shall also be deemed Shares. (The term "Prospectus" as used herein refers to the prospectus on file with the Securities and Exchange Commission which is part of the registration statement on file at any given time under the Securities Act of 1933 (the "Securities Act")). The Funds are offering their Shares primarily to private individual investors who seek capital appreciation. In connection with the foregoing, you may serve as a participating dealer (and, therefore, accept orders for the purchase or redemption of Shares, respond to shareholder inquiries and perform other related functions) on the following terms and conditions: 1. PARTICIPATING DEALER. You are hereby designated a Participating Dealer and as such are authorized to (i) accept orders for the original purchase of Shares or purchase by exchange, and transmit to the Funds such orders and the payment made therefore, (ii) accept orders for the redemption of Shares, and transmit to the Funds such orders and all additional material, including any Share certificates, as may be required to complete the redemption, and (iii) assist your customers ("Customers") with the foregoing purchases, redemptions and exchanges, as well as all other matters relating to their investments in the Funds, in each case subject to the terms and conditions set forth in the Prospectus. You are to review each Share purchase or redemption order submitted through you or with your assistance for completeness and accuracy. You further agree to undertake from time to time certain shareholder servicing and account maintenance activities on behalf of your Customers who have purchased Shares and who use your facilities, including handling all inquiries related to the status of their investment and positions or transactions in Shares reflected in their account; communicating with the Funds; effecting redemptions, purchases and exchanges of Shares; and distributing confirmations and account statements and otherwise preparing and maintaining accurate and complete Customer account records with respect to Customer assets invested in Shares of the Fund. 2. LIMITATION OF AUTHORITY. No person is authorized to make any representation concerning the Funds or the Shares except those contained in the Prospectus and in such printed information as the Distributor may subsequently prepare. No person is authorized to distribute sales material relating to the Funds without the prior written approval of the Distributor. 3. SELLING COMPENSATION. The Distributor will pay you selling commissions no less often than monthly according to the reallowance schedule contained in the Prospectus as compensation for selling Shares of the Funds. Upon the sale of any Shares you will look solely to the Distributor for sales compensation from payments received for such Shares, and you acknowledge that the Funds shall have no direct responsibility therefor. 4. DISTRIBUTION AND SERVICE FEES. Each of the Funds has adopted a plan of distribution pursuant to Rule 12b-1 of the Investment Company Act for its Class A Shares and, where offered by particular Funds, for its Class D Shares (collectively the "Plans"). Pursuant to the Plans, the Distributor may pay Participating Dealers distribution and/or service fees based upon total Fund assets maintained in accounts held in the name or for the benefit of your Customers. Such fees shall be paid in consideration of your efforts in providing information and services necessary or appropriate (i) to provide personal services to your Customer-shareholders of the Funds, (ii) to assist the Distributor in any distribution efforts, including, without limitation, making use of the Participating Dealer's name, client lists and publications for the solicitation of sales of Shares to Customers, and (iii) such other assistance as the Distributor may reasonably request, to the extent permitted by applicable statute, rule or regulation. With respect to the Class A Share accounts maintained for the benefit of your Customers, the Distributor shall pay to you a service fee (as defined in the National Association of Securities Dealers, Inc. Rules of Fair Practice) equal to 0.25 of 1% per annum of the average daily net assets of all such Class A Share accounts. With respect to Class D Share accounts maintained for the benefit of your Customers, the Distributor shall pay a total fee equal to 0.50 of 1% (representing a service fee of 0.25 of 1% and a distribution fee of 0.25 of 1%) per annum of the average daily net assets of all such Class D Share accounts. Such payments shall be payable no less often than quarterly and may be subject to such minimums as the Distributor shall establish from time to time. The Distributor has no obligation to make any such payments and you agree to waive payment of any fee until the Distributor is in receipt of the corresponding fee from each Fund. The payment of fees has been authorized pursuant to the Plans adopted by the Directors and shareholders of the Funds pursuant to the requirements of the Investment Company Act and such authorizations may be withdrawn at any time. 5. PROSPECTUS AND REPORTS. You agree to comply with the provisions contained in the Securities Act governing the distribution of Prospectuses to persons to whom you offer Shares. You further agree to deliver, upon our request, copies of any amended Prospectus to Customers whose Shares you are holding as record owner and to deliver to such persons copies of the annual and interim reports and any proxy solicitation materials of the Funds. We agree to furnish to you as many copies of the Prospectus, annual and interim reports and proxy solicitation materials as you may reasonably request. 6. QUALIFICATION TO ACT. You represent that you are a member in good standing of the National Association of Securities Dealers, Inc. You agree that you will not offer Shares to persons in any jurisdiction in which you may not lawfully make such offer due to the fact that you are not registered under, or are not exempt from, the applicable registration or licensing requirements of such jurisdiction. 7. BLUE SKY. The Funds have registered an indefinite number of Shares under the Securities Act. Upon application to us, we will inform you as to the states or other jurisdictions in which we believe the Shares have been qualified for sale under, or are exempt from the requirements of, the respective securities laws of such states, but we assume no responsibility or obligation as to your right to sell Shares in any jurisdiction. 8. AUTHORITY OF FUNDS. The Funds shall have full authority to take such action as each deems advisable in respect of all matters pertaining to the offering of Shares, including the right not to accept any order for the purchase of Shares. 9. RECORD KEEPING. You will (i) maintain all records required by law to be kept by you relating to transactions in Shares of the Funds by or on behalf of your Customers and compensation received by you in respect thereto, (ii) upon request by the Funds, promptly make such of these records available to the Funds as the Funds may reasonably request in connection with their operations, and (iii) promptly notify the Funds if you experience any difficulty in maintaining the records described in the foregoing clause in an accurate and complete manner. 10. LIABILITY. The Distributor shall be under no liability to you except for lack of good faith and for obligations expressly assumed by it hereunder. In carrying out your obligations, you agree to act in good faith and without negligence. Nothing contained in this agreement is intended to operate as a waiver by the Distributor or you of compliance with any provision of the Investment Company Act, the Securities Act, the Securities Exchange Act of 1934, as amended, or the rules and regulations promulgated by the Securities and Exchange Commission thereunder. 11. TERM AND TERMINATION. Except with respect to the provisions of paragraph 4 hereof, the continuation of which shall be subject to the proviso set forth therein, this Agreement shall remain in effect until terminated as set forth herein. This agreement may be terminated by either party, without penalty, upon ten days' notice to the other party and shall automatically terminate in the event of its assignment, as defined in the Investment Company Act. This agreement may also be terminated at any time without penalty by the vote of a majority of the members of the Board of Directors of the Funds who are not "interested persons" (as such phrase is defined in the Investment Company Act), and have no direct or indirect financial interest in the operation of the Distribution Agreement between the Funds and the Distributor, or by the vote of a majority of the outstanding voting securities of each Fund. 12. COMMUNICATIONS. All communications to us should be sent to the Distributor at GAM Services Inc., 135 East 57th Street, New York, NY 10021, Attention: Managing Director - Mutual Funds. Any notice to you shall be duly given if mailed or telegraphed to you at the address specified by you below. 13. MISCELLANEOUS. This agreement constitutes the entire agreement between us relating to the subject matter hereof and may only be amended by a written agreement executed on behalf of each of us. If the foregoing is in accordance with your understanding of our agreement, please sign and return to us one copy of this agreement. Firm Name: CONFIRMED AND ACCEPTED BY: ____________________________________ GAM SERVICES, INC. By: ________________________________ By: ______________________________ ____________________________________ David A. Anderson Managing Director - Mutual Funds __________________________________ GAM Services, Inc. (Please Type Name and Title) Address: ___________________________ ____________________________________ ____________________________________ NSCC Dealer #_______________________ NSCC Dealer Alpha Code______________ NSCC Clearing #_____________________ Phone Number: _____________________ Fax Number:_________________________ Date: ______________________________ Mutual Fund Coordinator/Primary Contact: ____________________________________ EX-9.B. 5 EXHIBIT 9.B ADMINISTRATION AGREEMENT THIS ADMINISTRATION AGREEMENT is made as of October 1, 1995 by and between Brown Brothers Harriman & Co., a limited partnership organized under the laws of the State of New York (the "Administrator"), and GAM Funds Inc. on behalf of each of the portfolios listed on Schedule A attached hereto, as the same may be amended from time to time (each a "Fund" and, collectively, the "Fund" or "Funds"). WHEREAS, the Funds are registered as management investment companies under the Investment Company Act of 1940, as amended (the " 1940 Act"); and WHEREAS, the Funds desire to retain the Administrator to render certain administrative services to the Funds, and the Administrator is willing to render such services. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows: 1. EMPLOYMENT OF ADMINISTRATOR. Each of the Funds hereby employs and appoints the Administrator to act as its administrator on the terms set forth in this Agreement, and the Administrator accepts such appointment. 2. DELIVERY OF DOCUMENTS. Each Fund will (i) furnish the Administrator with properly certified or authenticated copies of resolutions of the Fund's Board of Directors or Trustees authorizing the appointment of the Administrator to provide certain administrative services to the Fund and approving this Agreement; (ii) provide the Administrator with any other documents or resolutions (including but not limited to directions or resolutions of the Fund's Board of Directors or Trustees) which relate to or affect the Administrator's performance of its duties hereunder or which the Administrator may reasonably request; and (iii) notify the Administrator promptly of any matter affecting the performance by the Administrator of its services under this Agreement. 3. DUTIES AS ADMINISTRATOR. Subject to the supervision and direction of the Board of Directors or Trustees of a Fund, the Administrator will perform the following services: (1) Accumulate information for and, subject to approval by the Fund's Treasurer, prepare reports to the Fund's shareholders of record as set forth in Rule 30d-1 of the 1940 Act or as agreed upon in writing from time to time between the parties hereto; (2) Prepare and file the Securities and Exchange Commission's Form N-SAR and Rule 24f-2 Notice; (3) Consult with the Fund's Treasurer on financial matters relating to the Fund including without limitation dividend distributions, expense proformas, expense accruals and other matters, including payment of expenses, as shall from time to time be agreed upon by the parties; (4) Assist the investment adviser for the Fund (the "Adviser"), at the Adviser's request, in monitoring and developing compliance procedures for the Fund which will include, among other matters, procedures to assist the Adviser in monitoring compliance with the Fund's investment objectives, policies and restrictions, tax matters and applicable laws and regulations and performing certain monthly compliance tests, to the extent relevant information is available to the Administrator in the performance of its functions as the Fund's net asset value calculation agent; (5) Assist the Fund's Treasurer in the preparation of quarterly reporting to the Fund's Board of Directors or Trustees including brokerage allocation reporting and reporting required under Rules 17a-7 and 17e-1 of the 1940 Act; (6) Assist the Fund's Treasurer, officers and Adviser in such other matters as the Fund and the Administrator shall from time to time agree; (7) Report monthly to the Fund's Treasurer on compliance of the Fund's fidelity bond coverage with Rule 17g-1 of the 1940 Act; and (8) Report monthly to Treasurer on comparison of the Fund's actual shares outstanding with its authorized shares. In performing its duties and obligations hereunder, the Administrator will act in accordance with each Fund's Articles of lncorporation or Declaration of Trust, By-Laws and Prospectus and with the Proper Instructions of its Board of Directors or Trustees, Treasurer and any other authorized person as from time to time delivered to the Administrator by the Fund. It is -2- agreed and understood, however, that the Administrator shall not be responsible for compliance of a Fund's investments with any applicable documents, laws or regulations, or for losses, costs or expenses arising out of a Fund's failure to comply with said documents, laws or regulations or a Fund's failure or inability to correct any non-compliance therewith. 4. EXPENSES AND COMPENSATION. For the services to be rendered and the facilities to be furnished by the Administrator as provided for in this Agreement, each Fund shall pay the Administrator for its services rendered pursuant to this Agreement an administration fee based on such fee schedule as may from time to time be agreed upon in writing by the Funds and the Administrator. In addition to such fee, the Administrator shall bill each Fund separately for any out-of-pocket disbursements of the Administrator. Out-of-pocket disbursements shall include, but shall not be limited to, postage, including courier services; telephone; telecommunications; printing, duplicating and photocopying charges; forms and supplies; filing fees; legal expenses; and travel expenses. The foregoing fees and disbursements shall be billed to each Fund by the Administrator and shall be paid promptly by wire transfer or other appropriate means to the Administrator. 5. LIMITATION OF LIABILITY. (a) The Administrator shall incur no liability with respect to any telecommunications, equipment or power failures, or any failures to perform or delays in performance by postal or courier services or third-party information providers. The Administrator shall also incur no liability under this Agreement if the Administrator or any agent or entity utilized by the Administrator shall be prevented, forbidden or delayed from performing, or omits to perform, any act or thing which this Agreement provides shall be performed or omitted to be performed, by reason of causes or events beyond its control, including but not limited to (x) any Sovereign Risk, or (y) any provision of any present or future law, regulation or order of the United States or any state thereof, or of any foreign country or political subdivision thereof, or of any securities depository or clearing agency, or (z) any provision of any order or judgment of any court of competent jurisdiction. A "Sovereign Risk" shall mean any nationalization; expropriation; devaluation; revaluation; confiscation; seizure; cancellation; destruction; strike; -3- act of war, terrorism, insurrection or revolution; or any other act or event beyond the Administrator's control. (b) Notwithstanding any other provision of this Agreement, the Administrator shall not be held accountable or liable for any losses, damages or expenses a Fund or any shareholder or former shareholder of a Fund or any other person may suffer or incur arising from acts, omissions, errors or delays of the Administrator in the performance of its obligations and duties hereunder, including without limitation any error of judgment or mistake of law, except a damage, loss or expense resulting from the Administrator's willful malfeasance, bad faith or gross negligence in the performance of such obligations and duties. The Administrator shall in no event be required to take any action which is in contravention of any applicable law, rule or regulation or any order or judgment of any court of competent jurisdiction. Each Fund hereby agrees to indemnify the Administrator against and hold it harmless from any and all losses, claims, damages, liabilities or expenses (including reasonable counsel fees and expenses) resulting from any act, omission, error or delay or any claim, demand, action or suit, in connection with or arising out of performance of its obligations and duties under this Agreement, not resulting from the willful malfeasance, bad faith or gross negligence of the Administrator in the performance of such obligations and duties. The Administrator shall in no event be liable or responsible to a Fund, any present or former shareholder of a Fund or any other person for any error or delay which continued or was undetected after the date of an audit performed by the certified public accountants employed by the Fund if, in the exercise of reasonable care in accordance with generally accepted accounting standards, such accountants should have become aware of such error or delay in the course of performing such audit. It is also agreed that, in the event of an act, omission, error or delay which leads to losses, costs or expenses for which the Administrator may be liable, the Fund and the Administrator will consult and make good faith efforts to reach agreement on what actions should be taken in order to mitigate any loss suffered by the Fund or its present or former shareholders, in order that the Administrator's exposure to liability shall be reduced to the extent possible after taking into account all relevant factors and alternatives. It is understood that in attempting to reach agreement on the actions to be taken or the amount of the loss which should appropriately be borne by the Administrator, the Fund and the Administrator will consider such relevant factors -4- as the amount of the loss involved, the Fund's desire to avoid loss of shareholder good will, the fact that other persons or entities could have been reasonably expected to have detected the error sooner than the time it was actually discovered, the appropriateness of limiting or eliminating the benefit which shareholders or former shareholders might have obtained by reason of the error, and the possibility that other parties providing services to the Fund might be induced to absorb a portion of the loss incurred. (c) Notwithstanding anything else in this Agreement to the contrary, the Administrator's entire liability to any one Fund for any loss or damage arising or resulting from its performance hereunder or for any other cause whatsoever, and regardless of the form of action, shall be limited to that Fund's actual and direct out-of-pocket expenses and losses which are reasonably incurred by the Fund. In no event and under no circumstances shall the Administrator or a Fund be held liable to the other party for consequential or indirect damages, loss of profits, damage to reputation or business or any other special damages arising under or by reason of any provision of this Agreement or for any act or omission hereunder. 6. RELIANCE BY THE ADMINISTRATOR ON PROPER INSTRUCTIONS AND OPINIONS OF COUNSEL AND OPINIONS OF CERTIFIED PUBLIC ACCOUNTANTS. (a) The Administrator shall not be liable for, and shall be indemnified by the Fund against any and all losses, costs, damages or expenses arising from or as a result of, any action taken or omitted in reliance upon Proper Instructions believed by it to be genuine or upon any other written notice, request, direction, instruction, certificate or other instrument believed by it to be genuine and signed by the proper party or parties. Proper Instructions shall include a written request, direction, instruction or certification signed or initialed on behalf of the Fund by one or more persons as the Board of Trustees or Directors of the Fund shall have from time to time authorized. Those persons authorized to give Proper Instructions may be identified by the Board of Trustees or Directors by name, title or position and will include at least one officer empowered by the Board to name other individuals who are authorized to give Proper Instructions on behalf of the Fund. Telephonic or other oral instructions or instructions given by telefax transmission may be given by any one of the above persons and will also be considered Proper Instructions if the Administrator believes them to have -5- been given by a person authorized to give such instructions with respect to the transaction involved. With respect to telefax transmissions, the Fund hereby acknowledges that (i) receipt of legible instructions cannot be assured, (ii) the Administrator cannot verify that authorized signatures on telefax instructions are original, and (iii) the Administrator shall not be responsible for losses or expenses incurred through actions taken in reliance on such telefax instructions. Each Fund agrees that such telefax instructions shall be conclusive evidence of the Fund's Proper Instruction to the Administrator to act or to omit to act. Proper Instructions given orally will be confirmed by written instructions in the manner set forth above, including by telefax, but the lack of such confirmation shall in no way affect any action taken by the Administrator in reliance upon such oral instructions. The Fund authorizes the Administrator to tape record any and all telephonic or other oral instructions given to the Administrator by or on behalf of the Fund (including any of its officers, Directors, Trustees, employees or agents or any investment manager or adviser or person or entity with similar responsibilities which is authorized to give Proper Instructions on behalf of the Fund to the Administrator.) (b) The Administrator may consult with its counsel or the Fund's counsel in any case where so doing appears to the Administrator to be necessary or desirable. The Administrator shall not be considered to have engaged in any misconduct or to have acted negligently and shall be without liability in acting upon the advice of its counsel or of a Fund's counsel. (c) The Administrator may consult with a certified public accountant or a Fund's Treasurer in any case where so doing appears to the Administrator to be necessary or desirable. The Administrator shall not be considered to have engaged in any misconduct or to have acted negligently and shall be without liability in acting upon the advice of such certified public accountant or of a Fund's Treasurer. 7. TERMINATION OF AGREEMENT. (a) This Agreement shall continue in full force and effect until terminated by the Administrator or a Fund by an instrument in writing delivered or mailed, postage prepaid, to the other party, such termination to take effect not sooner than ninety -6- (90) days after the date of such delivery or mailing. In the event a termination notice is given by a party hereto, all expenses associated with the movement of records and materials and the conversion thereof shall be paid by the Fund for which services shall cease to be performed hereunder. The Administrator shall be responsible for completing all actions in progress when such termination notice is given unless otherwise agreed. Notwithstanding anything in the foregoing provisions of this clause, if it appears impracticable in the circumstances to effect an orderly delivery of the necessary and appropriate records of the Administrator to a successor within the time specified in the notice of termination as aforesaid, the Administrator and the relevant Fund agree that this Agreement shall remain in full force and effect for such reasonable period as may be required to complete necessary arrangements with a successor. (b) If a party hereto shall fail to perform its duties and obligations hereunder (a "Defaulting Party") resulting in material loss to another party ("the "Non-Defaulting Party"), the Non-Defaulting Party may give written notice thereof to the Defaulting Party, and if such material breach shall not have been remedied within thirty (30) days after such written notice is given, then the Non-Defaulting Party may terminate this Agreement by giving thirty (30) days' written notice of such termination to the Defaulting Party. If the Administrator is the Non-Defaulting Party, its termination of this Agreement shall not constitute a waiver of any other rights or remedies of the Administrator with respect to payment for services performed prior to such termination or fights of the Administrator to be reimbursed for out-of-pocket expenses. In all cases, termination by the Non-Defaulting Party shall not constitute a waiver by the Non-Defaulting Party of any other rights it might have under this Agreement or otherwise against the Defaulting Party. (c) This Section 7 shall survive any termination of this Agreement, whether for cause or not for cause. 8. AMENDMENT OF THIS AGREEMENT. This Agreement constitutes the entire understanding and agreement of the parties hereto with respect to the subject matter hereof. No provision of this Agreement may be amended or terminated except by a statement in writing signed by the party against which enforcement of the amendment or termination is sought. -7- In connection with the operation of this Agreement, the Funds and the Administrator may agree in writing from time to time on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement. In the event any provision of this Agreement is determined to be void or unenforceable, such determination shall not affect the remainder of this Agreement, which shall continue to be in force. The section headings and the use of defined terms in the singular or plural tenses in this Agreement are for the convenience of the parties and in no way alter, amend, limit or restrict the contractual obligations of the parties set forth in this Agreement. 9. GOVERNING LAW. This Agreement shall be governed by and construed according to the laws of the Commonwealth of Massachusetts without giving effect to conflicts of laws principles. 10. NOTICES. Notices and other writings delivered or mailed postage prepaid to a Fund addressed to such Fund c/o Global Asset Management (USA) Inc., 135 East 57th Street, New York, New York 10022, Attention: Treasurer or to such other address as the Fund may have designated to the Administrator in writing, or to the Administrator at 40 Water Street, Boston, MA 02109, Attention: Manager, Fund Administration Department, or to such other address as the Administrator may have designated to the Funds in writing, shall be deemed to have been properly delivered or given hereunder to the respective addressee. 11. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of each Fund and the Administrator and their respective successors and assigns, provided that no party hereto may assign this Agreement or any of its rights or obligations hereunder without the written consent of the other party. 12. COUNTERPARTS. This Agreement may be executed in any number of counterparts -8- each of which shall be deemed to be an original and which collectively shall be deemed to constitute only one instrument. This Agreement shall become effective when one or more counterparts have been signed and delivered by each of the parties. 13. EXCLUSIVITY. The services furnished by the Administrator hereunder are not to be deemed exclusive, and the Administrator shall be free to furnish similar services to others. 14. AUTHORIZATION. Each Fund hereby represents and warrants that the execution and delivery of this Agreement have been authorized by such Fund's Board of Directors or Trustees and that this Agreement has been signed by an authorized officer of such Fund. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date first written above. BROWN BROTHERS HARRIMAN & CO. GAM FUNDS INC. ON BEHALF OF EACH OF THE PORTFOLIOS LISTED ON SCHEDULE A ATTACHED HERETO By: By: ------------------------------- --------------------------------- Name: Stokley P. Towles Name: Title: Partner Title: -9- SCHEDULE A TO ADMINISTRATION AGREEMENT BETWEEN BROWN BROTHERS HARRIMAN & CO. AND GAM FUNDS INC. ON BEHALF OF EACH OF THE FOLLOWING PORTFOLIOS DATED AS OF OCTOBER 1, 1995 The following is a list of Portfolios for which the Administrator shall serve under an Administration Agreement dated as of October 1, 1995. FUND ---- GAM International Fund GAM Global Fund GAM Pacific Basin Fund GAM North America Fund GAM Japan Capital Fund GAM Europe Fund GAM Asian Capital Fund GAMerica Capital Fund GAM Mid-Cap U.S. Fund Dated as of ------------------- By: --------------------------- Name: Title: Date: EX-11 6 CONSENT OF COOPERS & LYBRAND Exhibit 11 CONSENT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Gam Funds, Inc., We consent to the incorporation by reference in the Prospectus and Statement of Additional Information constituting parts of Post-Effective Amendment No. 28 to the Registration Statement of Gam Funds, Inc. (comprising, respectively, GAM International Fund, GAM Global Fund, GAM Europe Fund, GAM Pacific Basin Fund, GAM Japan Fund, GAM North America fund, GAM Asian Capital Fund, GAMerica Capital Fund) on the Form N-1A (File No. 2-92136) of our report dated February 14, 1997, on our audit of the financial statements and financial highlights of the Funds, which report is included in the Annual Report to shareholders for the year ended December 31, 1996, which is incorporated by reference in the Post-Effective Amendment to the Registration Statement. We also consent to the reference to our firm under the heading "Financial Highlights" in such Prospectus. Coopers & Lybrand L.L.P. Boston, MA February 27, 1997 EX-12 7 1996 ANNUAL REPORT - -------------------------------------------------------------------------------- BOARD OF DIRECTORS - -------------------------------------------------------------------------------- Gilbert de Botton--President CHAIRMAN, Global Asset Management Limited, London. George W. Landau SENIOR ADVISER AND CHAIRMAN, Latin America Advisory Board, Coca-Cola International, New York. Therese Meier MANAGING DIRECTOR, Global Asset Management GAM (Schweiz) AG, Zurich. Madelon DeVoe Talley TRUSTEE, The New York State Teachers Retirement System, New York. Roland Weiser PRESIDENT, Intervista, Summit, New Jersey. Address of the Company: 135 East 57th Street New York, New York 10022. Tel: (212) 407--4600 1-800-426-4685 (toll free) Fax: (212) 407-4684 Registrar and Transfer Agent: Chase Global Funds Services Company P.O. Box 2798 Boston, Massachusetts 02208. Tel: (617) 557-8000 ext 6610 1-800-356-5740 (toll free) Fax: (617) 557-8698 - -------------------------------------------------------------------------------- Copies of this report may be obtained from the Fund, from the Transfer Agent or from: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- IN THE ISLE OF MAN; GAM Administration Limited, 11 Athol Street, Douglas, Isle of Man IM99 1HH, British Isles Tel: 44-1624 632632 Fax: 44-1624 625956 IN THE UNITED KINGDOM (FOR AUTHORIZED PERSONS ONLY); Global Asset Management Limited, regulated by IMRO, 12 St. James's Place, London, SW1A 1NX, UK Tel: 44-171-493 9990 Fax: 44-171-493 0715 Tlx: 296099 GAMUK G ON INTERNET; Information on GAM's SEC-registered funds - http://www.usinfo.gam.com Email enquiries on GAM - info@gam.com - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- GLOBAL ASSET MANAGEMENT (R) GAM FUNDS, INC GAM (R) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE GAM GROUP - -------------------------------------------------------------------------------- The GAM group was founded in April 1983 by Gilbert de Botton. GAM's corporate policy is to attempt to harness the top investment talent in the world, not only in-house but also outside the GAM organization, in order to provide above average, long term growth. The GAM group currently has approximately US$9.0 billion under management and employs a worldwide staff of about 390 people. For US investors, GAM offers GAM Funds, Inc. an open-end diversified management investment company registered under the Investment Company Act of 1940, as amended. The Fund consists of eight open-end mutual funds -- GAM International, GAM Global, GAM Europe, GAM Pacific Basin, GAM Japan Capital, GAM North America, GAM Asian Capital and GAMerica Capital Funds. For additional information about any of the GAM Funds, please contact your financial consultant or call GAM at 1--800--426--4685 (toll free). - -------------------------------------------------------------------------------- CONTENTS - -------------------------------------------------------------------------------- GAM International ...................................................... 2 GAM Global ............................................................. 7 GAM Europe ............................................................. 12 GAM Pacific Basin ...................................................... 17 GAM Japan Capital ...................................................... 22 GAM North America ...................................................... 26 GAMAsian Capital ....................................................... 30 GAMerica Capital ....................................................... 34 Portfolio Analysis ..................................................... 37 Financial Statements ................................................... 39 Notes to Financial Statements .......................................... 46 Independent Auditor's Report ........................................... 62 - -------------------------------------------------------------------------------- GAM INTERNATIONAL FUND - -------------------------------------------------------------------------------- FUND MANAGEMENT - -------------------------------------------------------------------------------- - ------------- [Photo] - ------------- JOHN R. HORSEMAN, INVESTMENT DIRECTOR, JOINED GAM INITIALLY AS A MEMBER OF THE ASIAN TEAM BASED IN HONG KONG. AFTER MOVING TO THE LONDON OFFICE IN 1990 HE IS NOW RESPONSIBLE FOR A NUMBER OF GAM'S GLOBAL AND INTERNATIONAL FUNDS. PRIOR TO JOINING GAM IN 1987, HE WORKED FOR BA INVESTMENT MANAGEMENT INTERNATIONAL LTD, RESPONSIBLE FOR CERTAIN OF THE BANK OF AMERICA'S GLOBAL EQUITY FUNDS. HE COMMENCED MANAGEMENT OF GAM GLOBAL AND GAM INTERNATIONAL FUNDS ON APRIL 1, 1990. MR. HORSEMAN ALSO MANAGES THE OFFSHORE FUND GAM UNIVERSAL US$ INC. The Fund's investment objective is long-term capital appreciation, generally through investment in equity securities issued by companies with principal offices in countries other than the United States, including Canada, the United Kingdom, Continental Europe, and the Pacific Basin. However, if the Fund determines that the long-term capital appreciation of debt securities may equal or exceed the return on equity securities, it may be substantially invested in debt securities of companies and governments, their agencies and instrumentalities. Any income realized by the Fund on its investments will be incidental to its goal of long-term capital appreciation. Report to Shareholders - -------------------------------------------------------------------------------- THE FACTS -- CLASS A SHARES
GAM International Class A (after Average GAM maximum MSCI 1 Month International sales load EAFE Deposit Class A of 5%) Index Rate 31st Dec, 96 US$23.15 1,185.57 - --------------------------------------------------------------------------------------------- % % % % - --------------------------------------------------------------------------------------------- Quarter to Dec, 96 +10.26 +4.74 +1.67 +1.31 - --------------------------------------------------------------------------------------------- Jan -- Dec, 1996 +8.98 +3.53 +6.36 +5.37 - --------------------------------------------------------------------------------------------- Average annual total return:- - --------------------------------------------------------------------------------------------- 1 year to Dec, 1996 +8.98 +3.53 +6.36 +5.37 - --------------------------------------------------------------------------------------------- 5 years to Dec, 1996 +18.74 +17.53 +8.48 +4.52 - --------------------------------------------------------------------------------------------- 10 years to Dec, 1996 +15.48 +14.88 +8.84 +6.18 - --------------------------------------------------------------------------------------------- Since inception +21.07 +20.55 +16.55 +6.44 - ---------------------------------------------------------------------------------------------
Performances are calculated on a total return basis. During the year Class A shares paid a dividend of US$0.13 and Class D US$0.05. Class A inception was on 2nd January, 1985 and Class D on 18th September, 1995. Indications of past performance are not necessarily indicative of future performance. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. 2 - -------------------------------------------------------------------------------- GAM INTERNATIONAL FUND -- REPORT TO SHAREHOLDERS (CONTINUED) - -------------------------------------------------------------------------------- [Chart] NOTE:The graphs compare the performance results of a hypothetical $10,000 investment in either Class and a comparable index. The performances of Class A and Class D are also shown after adjustment to reflect the maximum sales load, which is waived for certain investors. The performance of the index does not reflect brokerage commissions and other expenses that would be incurred to acquire a comparable portfolio of securities. - ---------- Sources used are the net asset value of the Fund computed daily and Morgan Stanley Capital International. The MSCI Europe, Australian and Far East Index is a market-value weighted, unmanaged index on the weighted share prices of some 1,000 companies listed on the stock exchanges of Australia, Austria, Belgium, Denmark, France, Germany, Hong Kong, Italy, Japan, the Netherlands, Norway, Singapore/Malaysia, Spain, Sweden, Switzerland and the United Kingdom. The combined market capitalisation of these companies represents approximately 60% of the aggregate market value of the stock exchanges of the above 16 countries. The percentage change in the value of the index includes dividends reinvested. THE FACTS -- CLASS D SHARES
GAM International Class D (after Average GAM maximum MSCI 1 Month International sales load EAFE Deposit Class D of 3.5%) Index Rate 31st Dec, 96 US$23.07 1,185.57 - --------------------------------------------------------------------------------------------- % % % % - --------------------------------------------------------------------------------------------- Quarter to Dec, 96 +10.13 +6.27 +1.67 +1.31 - --------------------------------------------------------------------------------------------- Jan -- Dec, 1996 +8.33 +4.54 +6.36 +5.37 - --------------------------------------------------------------------------------------------- Average annual total return:- - --------------------------------------------------------------------------------------------- 1 year to Dec, 1996 +8.33 +4.54 +6.36 +5.37 - --------------------------------------------------------------------------------------------- Since inception +14.09 +10.98 +10.39 +5.47 - ---------------------------------------------------------------------------------------------
[Chart] 3 - -------------------------------------------------------------------------------- GAM INTERNATIONAL FUND -- REPORT TO SHAREHOLDERS (CONTINUED) - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN -- CLASS A [Chart] ANNUAL PERFORMANCE -- CLASS A [Chart] GAM International Class A (after GAM maximum MSCI International sales load EAFE Class A of 5%) Index Year % % % - ------------------------------------------------------- 1992 3.08 (2.07) (11.85) 1993 79.96 70.97 32.94 1994 (10.23) (14.71) 8.06 1995 30.09 23.59 1.55 1996 8.98 3.53 6.36 THE COMMENT 1996 has continued to be a year of progress for investors in GAM International, although at a rather more modest pace than in some previous years. In general, good appreciation in the Fund's equity positions was partly offset by an appreciating dollar and sluggish bond markets in Europe. European markets formed the mainstay of the Fund during the year and currently represent around 70% of the Fund's total assets. Growth stocks, particularly in the pharmaceutical sector, performed strongly and are well represented in GAM International. The merger between Ciba and Sandoz in Switzerland figured prominently. Elsewhere the Fund's exposure to financials and utilities in Europe performed well as short-term interest rates and inflation both remained low. In anticipation of further gains in these sectors some new names were added during the year, among them OM Gruppen in Sweden and Den Danske Bank in Denmark. Bond markets generally lagged behind their equity counterparts although they all managed positive returns in their respective local currencies. At present bond holdings represent 12% of GAM International and were reduced during the year. Asian markets by comparison overall had an indifferent year although Hong Kong was a bright spot. Low valuations, good earnings growth and positive developments in China suggest this might continue. In the summer the Fund began to rebuild its holdings in Hong Kong after a two-and-a-half-year absence. The Fund's holdings in Japanese electrical stocks were retained throughout 1996. - ---------- A Plan of Distribution (12b-1 plan), as proposed by your Fund's directors, was approved by the Class A shareholders of each Series of the Fund in 1996. The 12b-1 plan calls for your Fund to pay the Fund's distributor up to 0.30% of its average net assets to finance distribution and servicing related activities engaged in by the distributor and third party financial intermediaries for the benefit of the Fund and its shareholders. 4 - -------------------------------------------------------------------------------- GAM INTERNATIONAL FUND -- STATEMENT OF INVESTMENTS - -------------------------------------------------------------------------------- AS AT 31ST DECEMBER, 1996 MARKET % VALUE OF HOLDINGS DESCRIPTION US$ NET ASSETS - -------------------------------------------------------------------------------- ADJUSTABLE RATE INDEX NOTES UNITED KINGDOM + DLJ ARIN, Indexed to 320,000 shares British Biotech 1997-04-3 12,887,490 1.23 + DLJ ARIN, Indexed to 1,100,000 shares General Cable 1997--05--05 1,034,662 0.10 + DLJ ARIN, Indexed to 1,100,000 shares General Cable 1997--06--10 1,199,305 0.11 + DLJ ARIN, Indexed to 3,250,000 shares TeleWest Communications 1997--04--03 5,926,867 0.57 + DLJ ARIN, Indexed to 1,200,000 shares TeleWest Communications 1997--04--25 1,792,855 0.17 + DLJ ARIN, Indexed to 1,200,000 shares TeleWest Communications 1997--09--16 940,348 0.09 ----------- ----- TOTAL ADJUSTABLE RATE INDEX NOTES (COST $13,863,965) 23,781,527 2.27 ----------- ----- BONDS FRANCE 53.552m OAT 6% 2025--10--25 9,211,749 0.88 ----------- ----- 9,211,749 0.88 ----------- ----- GERMANY 17.515m Austria 6.50% 2024--01--10 11,032,242 1.05 117.750m Bundes Deutschland 6.25% 2024--01--04 72,664,024 6.93 ----------- ----- 83,696,266 7.98 ----------- ----- TOTAL BONDS (COST $95,244,229) 92,908,015 8.86 ----------- ----- BOND WARRANTS FRANCE *6,066,000 French Government Bond 85.25 Wts May 1997 4,770,026 0.46 ----------- ----- 4,770,026 0.46 ----------- ----- GERMANY *4,174,000 Bundes Deutschland 6.25% Wts May 1997 15,868,144 1.51 ----------- ----- 15,868,144 1.51 ----------- ----- NETHERLANDS *1,607,000 Nederland 7.5% 2023--01--15 105.1 Wts July 1997 7,037,280 0.67 ----------- ----- 7,037,280 0.67 ----------- ----- TOTAL BOND WARRANTS (COST $14,471,123) 27,675,450 2.64 ----------- ----- EQUITIES BELGIUM 55,000 Kredietbank 18,043,260 1.72 ----------- ----- 18,043,260 1.72 ----------- ----- DENMARK 250,000 Danske Bank 20,171,345 1.92 ----------- ----- 20,171,345 1.92 ----------- ----- FRANCE 24,703 Carrefour 16,073,495 1.53 41,925 L'Oreal 15,789,043 1.51 380,000 Lagardere Groupe Registered 10,429,218 0.99 134,000 Union des Assurances Federales 16,528,862 1.58 ----------- ----- 58,820,618 5.61 ----------- ----- GERMANY 360,000 BASF 13,868,469 1.32 340,000 Veba 19,664,674 1.88 ----------- ----- 33,533,143 3.20 ----------- ----- HONG KONG 3,825,000 Cheung Kong (Holdings) 33,999,451 3.24 3,900,000 Henderson Land 39,330,273 3.75 9,508,000 Hong Kong & China Gas 18,255,065 1.74 2,109,739 HSBC Holdings (HKD) 45,143,423 4.31 6,754,000 JCG Holdings 6,592,889 0.63 ----------- ----- 143,321,101 13.67 ----------- ----- JAPAN 300,000 Amway Japan 9,636,474 0.92 1,435,000 Canon 31,720,922 3.03 3,750 East Japan Railway Co. 16,870,305 1.61 470,000 Hoya 18,465,590 1.76 270,000 Rohm 17,718,677 1.69 330,000 Sony 21,627,666 2.06 780,000 Takeda Chemical 16,366,462 1.56 325,000 TDK Corp 21,187,721 2.02 ----------- ----- 153,593,817 14.65 ----------- ----- MALAYSIA 2,700,000 UMW Holdings 12,615,324 1.20 ----------- ----- 12,615,324 1.20 ----------- ----- 5 - -------------------------------------------------------------------------------- GAM INTERNATIONAL FUND -- STATEMENT OF INVESTMENTS (CONTINUED) - -------------------------------------------------------------------------------- MARKET % VALUE OF HOLDINGS DESCRIPTION US$ NET ASSETS - -------------------------------------------------------------------------------- NETHERLANDS 448,753 ABN-AMRO Holdings 29,178,754 2.79 1,030,891 Fortis AMEV 36,079,557 3.44 615,323 ING 22,140,458 2.11 117,917 Wolters Kluwer CVA 15,654,968 1.50 ------------- ------ 103,053,737 9.84 ------------- ------ SINGAPORE 1,283,000 City Developments 11,552,776 1.10 282,500 Singapore Bus Service (FR) 1,463,678 0.14 3,363,000 Want Want Holdings 8,844,690 0.84 ------------- ------ 21,861,144 2.08 ------------- ------ SPAIN 400,000 Banco Argentaria 17,914,332 1.71 73,200 Banco Popular Registered 14,388,508 1.37 ------------- ------ 32,302,840 3.08 ------------- ------ SWEDEN 625,270 OM Gruppen 18,796,999 1.79 ------------- ------ 18,796,999 1.79 ------------- ------ SWITZERLAND *27,620 Novartis Registered 31,633,515 3.02 4,150 Roche Holding Genussscheine 32,291,558 3.08 *87,560 Swiss Bank Corp Registered 16,648,502 1.59 ------------- ------ 80,573,575 7.69 ------------- ------ UNITED KINGDOM 3,489,130 B.A.T. Industries 28,929,786 2.76 6,712,798 Bank of Scotland 35,419,058 3.38 2,200,000 Barclays 37,763,576 3.60 76,747 Barclays (Restricted) 1,317,382 0.13 1,000,000 Carpetright 9,901,718 0.94 1,340,000 Hyder 17,124,833 1.63 2,000,000 Prudential 16,856,904 1.61 25,892 Prudential (Restricted) 218,230 0.02 1,840,000 RJB Mining 13,396,442 1.28 1,767,112 Severn Trent 20,252,233 1.93 2,528 Smithkline Beecham 34,992 0.00 1,703,516 Thames Water 17,830,772 1.70 823,962 United Utilities 8,737,366 0.83 145,015 United Utilities (Restricted) 1,537,752 0.15 ------------- ------ 209,321,044 19.96 ------------- ------ TOTAL EQUITIES (COST $802,114,527) 906,007,947 86.41 ------------- ------ EQUITY WARRANTS SWITZERLAND *3,000 Roche Holding Wts 1998--05--05 97,497 0.01 *7,800 Swiss Bank Corp Bearer Wts 2000 21,561 0.00 ------------- ------ TOTAL EQUITY WARRANTS (COST $85,829) 119,058 0.01 ------------- ------ TOTAL INVESTMENTS (COST $925,779,673**) 1,050,491,997 100.19 ------------- ------ NET CURRENT LIABILITIES (1,956,665) (0.19) ------------- ------ TOTAL NET ASSETS 1,048,535,332 100.00 ============= ====== * Non-income producing security. ** Cost for federal income tax purposes is $925,989,477. (Note 5) + Adjustable rate index notes are inversely indexed to the value of the underlying security. Glossary of terms: FR -- Foreign Registered See notes to financial statements. GEOGRAPHIC ANALYSIS AS AT 31ST DECEMBER, 1996 [The following table represents a chart in the printed piece.] NET CURRENT LIABILITIES (.019)% UNITED KINGDOM ........ 22.23% DENMARK ............... 1.92% HONG KONG ............. 13.57% SINGAPORE ............. 2.08% FRANCE ................ 6.95% BELGIUM ............... 1.72% SWITZERLAND ........... 7.70% SPAIN ................. 3.08% JAPAN ................. 14.65% SWEDEN ................ 1.79% NETHERLANDS ........... 10.51% MALAYSIA .............. 1.20% GERMANY ............... 12.69% 6 - -------------------------------------------------------------------------------- GAM GLOBAL FUND - -------------------------------------------------------------------------------- FUND MANAGEMENT - -------------------------------------------------------------------------------- - -------------- [Photo] - -------------- JOHN R. HORSEMAN, INVESTMENT DIRECTOR, JOINED GAM INITIALLY AS A MEMBER OF THE ASIAN TEAM BASED IN HONG KONG. AFTER MOVING TO THE LONDON OFFICE IN 1990 HE IS NOW RESPONSIBLE FOR A NUMBER OF GAM'S GLOBAL AND INTERNATIONAL FUNDS. PRIOR TO JOINING GAM IN 1987, HE WORKED FOR BA INVESTMENT MANAGEMENT INTERNATIONAL LTD, RESPONSIBLE FOR CERTAIN OF THE BANK OF AMERICA'S GLOBAL EQUITY FUNDS. HE COMMENCED MANAGEMENT OF GAM GLOBAL AND GAM INTERNATIONAL FUNDS ON APRIL 1, 1990. MR. HORSEMAN ALSO MANAGES THE OFFSHORE FUND GAM UNIVERSAL US$ INC. The Fund's investment objective is long-term capital appreciation, generally through investment in equity securities issued by companies with principal offices in countries including the United States, Canada, the United Kingdom, Continental Europe, and the Pacific Basin. However, if the Fund determines that the long-term capital appreciation of debt securities may equal or exceed the return on equity securities, it may be substantially invested in debt securities of companies and governments, their agencies and instrumentalities. Any income realized by the Fund on its investments will be incidental to its goal of long-term capital appreciation. REPORT TO SHAREHOLDERS - -------------------------------------------------------------------------------- THE FACTS -- CLASS A SHARES
GAM Global Class A (after Average GAM maximum MSCI 1 Month Global sales load EAFE Deposit Class A of 5%) Index Rate 31st Dec, 96 US$14.35 820.36 - --------------------------------------------------------------------------------------------- % % % % - --------------------------------------------------------------------------------------------- Quarter to Dec, 96 +10.01 +4.51 +4.69 +1.31 - --------------------------------------------------------------------------------------------- Jan -- Dec, 1996 +12.74 +7.11 +14.00 +5.37 - --------------------------------------------------------------------------------------------- Average annual total return:- - --------------------------------------------------------------------------------------------- 1 year to Dec, 1996 +12.74 +7.11 +14.00 +5.37 - --------------------------------------------------------------------------------------------- 5 years to Dec, 1996 +16.57 +15.38 +11.37 +4.52 - --------------------------------------------------------------------------------------------- 10 years to Dec, 1996 +12.34 +11.76 +11.27 +6.18 - --------------------------------------------------------------------------------------------- Since inception +12.09 +11.55 +11.93 +6.20 - ---------------------------------------------------------------------------------------------
Performances are calculated on a total return basis. During the year Class A shares paid a dividend of US$0.87 and Class D US$0.80. Class A inception was on 28th May, 1986 and Class D inception was on 6th October, 1995. Indications of past performance are not necessarily indicative of future performance. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. 7 - -------------------------------------------------------------------------------- GAM GLOBAL FUND -- REPORT TO SHAREHOLDERS (CONTINUED) - -------------------------------------------------------------------------------- [Chart] NOTE: The graphs compare the performance results of a hypothetical $10,000 investment in either Class and a comparable index. The performances of Class A and Class D are also shown after adjustment to reflect the maximum sales load, which is waived for certain investors. The performance of the index does not reflect brokerage commissions and other expenses that would be incurred to acquire a comparable portfolio of securities. - ---------- Sources used are the net asset value of the Fund computed daily and Morgan Stanley Capital International. The MSCI World Index is an arithmetical average weighted by market value of the performance of some 1,400 securities listed on the stock exchanges of Australia, Austria, Belgium, Canada, Denmark, France, Finland, Germany, Hong Kong, Italy, Japan, the Netherlands, New Zealand, Norway, Singapore, Malaysia, Spain, Sweden, Switzerland, the United Kingdom and the United States of America. The combined market capitalisation of these companies represents approximately 60% of the aggregate market value of the stock exchanges of the above 21 countries. The percentage change in the value of the index includes dividends reinvested. THE FACTS -- CLASS D SHARES
GAM Global Class D (after Average GAM maximum MSCI 1 Month Global sales load EAFE Deposit Class D of 3.5%) Index Rate 31st Dec, 96 US$14.22 820.36 - --------------------------------------------------------------------------------------------- % % % % - --------------------------------------------------------------------------------------------- Quarter to Dec, 96 +10.18 +6.32 +4.69 +1.31 - --------------------------------------------------------------------------------------------- Jan -- Dec, 1996 +11.54 +7.63 +14.00 +5.37 - --------------------------------------------------------------------------------------------- Average annual total return:- - --------------------------------------------------------------------------------------------- 1 year to Dec, 1996 +11.54 +7.63 +14.00 +5.37 - --------------------------------------------------------------------------------------------- Since inception +15.15 +11.88 +15.85 +5.45 - ---------------------------------------------------------------------------------------------
[Chart] 8 - -------------------------------------------------------------------------------- GAM GLOBAL FUND -- REPORT TO SHAREHOLDERS (CONTINUED) - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN -- CLASS A [Chart] ANNUAL PERFORMANCE -- CLASS A [Chart] GAM Global Class A (after GAM maximum MSCI Global sales load EAFE Class A of 5%) Index Year % % % - ------------------------------------------------------- 1992 (4.65) (9.42) (4.66) 1993 75.30 66.53 23.13 1994 (16.15) (20.35) 5.58 1995 36.25 29.44 21.32 1996 12.74 7.11 14.00 THE COMMENT 1996 has continued to be a year of progress for investors in GAM Global. Good appreciation in the Fund's equity positions was partly offset by an appreciating dollar and sluggish bond markets in Europe where the Fund had an exposure. Equities in the United States formed the mainstay of the Fund during the year and currently represent 46% of the Fund's total assets. Holdings in the bank sector performed paricularly well as investors continued to take account of bank merger activity and the possibilities this presents for cost savings and improved profitability. Otherwise the Fund's positions in selected companies undergoing some form of restructuring or merger, such as Burlington Northern or Kimberly Clark, performed well. In Europe, although these markets have not performed as well as in the United States, good returns have been possible. Utilities, financials and selected pharmaceutical stocks have all performed well. However, European companies have yet to undertake restructuring to improve profitability and returns to the shareholder in the manner evident in the United States. If this were to occur, investment returns could surprise even the more optimistic forecasts. Holdings in European equities were increased in the latter part of the year, at the same time reducing the Fund's European bond holdings. Asian markets by comparison overall had an indifferent year, although Hong Kong was a bright spot. Low valuations, good earnings growth and positive developments in China suggest this might continue. In the summer, the Fund began to rebuild its holdings in Hong Kong after a two-and-a-half-year absence. The Fund's holdings in Japenese electrical stocks were retained throughout 1996. - ---------- A Plan of Distribution (12b-1 plan), as proposed by your Fund's directors, was approved by the Class A shareholders of each Series of the Fund in 1996. The 12b-1 plan calls for your Fund to pay the Fund's distributor up to 0.30% of its average net assets to finance distribution and servicing related activities engaged in by the distributor and third party financial intermediaries for the benefit of the Fund and its shareholders. 9 - -------------------------------------------------------------------------------- GAM GLOBAL FUND -- STATEMENT OF INVESTMENTS - -------------------------------------------------------------------------------- AS AT 31ST DECEMBER, 1996 MARKET % VALUE OF HOLDINGS DESCRIPTION US$ NET ASSETS - -------------------------------------------------------------------------------- ADJUSTABLE RATE INDEX NOTES UNITED KINGDOM + DLJ ARIN Indexed to 11,500 shares British Biotech 1997--05--0 502,873 2.47 + DLJ ARIN Indexed to 110,000 shares General Cable 1997--06--10 119,930 0.59 + DLJ ARIN Indexed to 100,000 shares TeleWest Communications 1997--04--03 182,365 0.89 + DLJ ARIN Indexed to 75,000 shares TeleWest Communications 1997--03--25 125,085 0.61 --------- ---- TOTAL ADJUSTABLE RATE INDEX NOTES (COST $551,354) 930,253 4.56 --------- ---- BONDS GERMANY 1,713,000 Bundes Deutschland 6.25% 2024--01--04 1,057,100 5.18 --------- ---- 1,057,100 5.18 --------- ---- TOTAL BONDS (COST $1,112,681) 1,057,100 5.18 --------- ---- BOND WARRANTS FRANCE *122,000 OAT 6% 1997--05--16 84.36 Calls January 1996 95,935 0.47 --------- ---- 95,935 0.47 --------- ---- GERMANY *54,000 Bundes Deutschland 6.25% Wts May 1997 205,290 1.01 --------- ---- 205,290 1.01 --------- ---- NETHERLANDS *78,300 Nederland 7.5% 2023--01--15 101 Calls July 1996 342,887 1.68 --------- ---- 342,887 1.68 --------- ---- TOTAL BOND WARRANTS (COST $300,888) 644,112 3.16 --------- ---- EQUITIES FRANCE 1,980 Union des Assurances Federales 244,232 1.20 --------- ---- 244,232 1.20 --------- ---- HONG KONG 40,000 Cheung Kong (Holdings) 355,550 1.74 69,000 Henderson Land 695,843 3.41 132,300 Hong Kong & China Gas 254,012 1.25 32,041 HSBC Holdings (HKD) 685,602 3.36 214,800 JCG Holdings 209,676 1.03 --------- ---- 2,200,683 10.79 --------- ---- JAPAN 18,000 Canon 397,893 1.95 4,000 Rohm 262,499 1.28 4,600 Sony 301,477 1.48 5,000 TDK Corp 325,965 1.60 --------- ---- 1,287,834 6.31 --------- ---- NETHERLANDS 6,773 ABN-AMRO Holding 440,393 2.16 18,554 Fortis AMEV 649,360 3.18 --------- ---- 1,089,753 5.34 --------- ---- SINGAPORE 35,000 City Developments 315,158 1.55 --------- ---- 315,158 1.55 --------- ---- SWEDEN 9,961 OM Gruppen 299,450 1.47 --------- ---- 299,450 1.47 --------- ---- SWITZERLAND *499 Novartis Registered 571,511 2.80 64 Roche Holding Genussscheine 497,990 2.44 *1,492 Swiss Bank Corp Registered 283,686 1.39 --------- ---- 1,353,187 6.63 --------- ---- UNITED KINGDOM 33,900 Barclays 581,902 2.85 1,012 Barclays (Restricted) 17,371 0.08 26,800 Hyder 342,497 1.68 28,000 RJB Mining 203,859 1.00 26,633 Thames Water 278,769 1.37 --------- ---- 1,424,398 6.98 --------- ---- UNITED STATES 3,300 American International Group 357,225 1.75 7,000 American Stores 286,125 1.40 *5,000 Amgen 271,875 1.33 3,640 BankAmerica 363,090 1.78 3,600 Burlington Northern/Santa Fe 310,950 1.52 *11,400 Champion Enterprises 222,300 1.09 6,668 Chase Manhattan 595,119 2.92 5,610 Columbia/HCA Healthcare 228,608 1.12 3,185 Federal Home Loan Mortgage 350,748 1.72 4,368 First Union 323,232 1.58 10 - -------------------------------------------------------------------------------- GAM GLOBAL FUND -- STATEMENT OF INVESTMENTS (CONTINUED) - -------------------------------------------------------------------------------- MARKET % VALUE OF HOLDINGS DESCRIPTION US$ NET ASSETS - -------------------------------------------------------------------------------- UNITED STATES (CONTINUED) 4,150 Gillette 322,663 1.58 3,500 Intel 458,281 2.25 13,000 Intermet 209,625 1.03 8,236 Johnson & Johnson 409,741 2.01 3,640 Kimberly-Clark 346,710 1.70 *9,100 Kroger 423,150 2.07 8,700 MBNA 361,050 1.77 5,505 Medtronic 374,340 1.84 8,560 Merrill Lynch 697,640 3.42 9,739 NationsBank 951,987 4.67 4,095 Philip Morris 461,199 2.26 16,000 Republic Group 250,000 1.23 6,043 Schering-Plough 391,284 1.92 1,365 Wells Fargo 368,209 1.81 ---------- ------ 9,335,151 45.77 ---------- ------ TOTAL EQUITIES (COST $14,488,715) 17,549,846 86.04 ---------- ------ EQUITY WARRANTS SWITZERLAND *54 Roche Holdings Wts 1998--05--05 1,755 0.01 *195 Swiss Bank Corp Bearer Wts 2000 539 0.00 ---------- ------ TOTAL EQUITY WARRANTS (COST $1,545) 2,294 0.01 ---------- ------ TOTAL INVESTMENTS (COST $16,455,183**) 20,183,605 98.95 NET CURRENT ASSETS 214,658 1.05 ---------- ------ TOTAL NET ASSETS 20,398,263 100.00 ========== ====== * Non-income producing security. ** Cost for federal income tax purposes is $16,457,846.(Note 5) + Adjustable rate index notes are inversely indexed to the value of the underlying security. See notes to financial statements. GEOGRAPHIC ANALYSIS AS AT 31ST DECEMBER, 1996 NET CURRENT ASSESTS 1.05% SWEDEN 1.47% SINGAPORE 1.55% FRANCE 1.67% JAPAN 6.31% SWITZERLAND 6.64% NETHERLANDS 7.02% HONG KONG 10.79% GERMANY 5.19% UNITED KINGDOM 11.54% UNITED STATES 45.77% 11 - -------------------------------------------------------------------------------- GAM EUROPE FUND - -------------------------------------------------------------------------------- FUND MANAGEMENT - -------------------------------------------------------------------------------- - ----------- [Photo] - ----------- JOHN BENNETT, INVESTMENT DIRECTOR, IS RESPONSIBLE FOR EUROPEAN MARKETS. PRIOR TO JOINING GAM IN 1993, HE WAS A SENIOR FUND MANAGER AT IVORY & SIME, RESPONSIBLE FOR CONTINENTAL EUROPEAN EQUITY PORTFOLIOS. HE COMMENCED MANAGEMENT OF GAM EUROPE FUND ON JANUARY 1, 1993. MR. BENNETT ALSO MANAGES THE OFFSHORE FUND GAM PAN EUROPEAN INC. MR. BENNETT IS BASED IN EDINBURGH. The Fund's investment objective is long-term capital appreciation, generally through investment in equity securities issued by companies with principal offices in Europe. However, if the Fund determines that the long-term capital appreciation of debt securities may equal or exceed the return on equity securities, it may be substantially invested in debt securities of companies and governments, their agencies and instrumentalities. Any income realized by the Fund on its investments will be incidental to its goal of long-term capital appreciation. REPORT TO SHAREHOLDERS - -------------------------------------------------------------------------------- THE FACTS
GAM Europe (after Average GAM maximum MSCI 1 Month Europe sales load Europe Deposit Class A of 5%) Index Rate 31st Dec, 96 US$11.85 869.13 - --------------------------------------------------------------------------------------------- % % % % - --------------------------------------------------------------------------------------------- Quarter to Dec, 96 +7.60 +2.22 +9.69 +1.31 - --------------------------------------------------------------------------------------------- Jan -- Dec, 1996 +21.32 +15.25 +21.57 +5.37 - --------------------------------------------------------------------------------------------- Average annual total return:- - --------------------------------------------------------------------------------------------- 1 year to Dec, 1996 +21.32 +15.25 +21.57 +5.37 - --------------------------------------------------------------------------------------------- 5 years to Dec, 1996 +9.87 +8.75 +13.62 +4.52 - --------------------------------------------------------------------------------------------- Since inception +4.21 +3.45 +11.13 +5.32 - ---------------------------------------------------------------------------------------------
Performances are calculated on a total return basis. During the year, a dividend was paid of US$0.32. The Fund's inception was on 1st January, 1990. Indications of past performance are not necessarily indicative of future performance. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. 12 - -------------------------------------------------------------------------------- GAM EUROPE FUND -- REPORT TO SHAREHOLDERS (CONTINUED) - -------------------------------------------------------------------------------- [Chart] NOTE: The graph compares the performance results of a hypothetical $10,000 investment in the Fund and a comparable index. The performance of the Fund is also shown after adjustment to reflect the maximum sales load, which is waived for certain investors. The performance of the index does not reflect brokerage commissions and other expenses that would be incurred to acquire a comparable portfolio of securities. - ------------ Sources used are the net asset value of the Fund computed daily and Morgan Stanley Capital International. The MSCI Europe Index is an arithmetical average weighted by market value of the performance of some 600 securities listed on the stock exchanges of Austria, Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden, Switzerland and the United Kingdom. The combined market capitalisation of these companies represents approximately 60% of the aggregate market value of the stock exchanges of the above 13 countries. The percentage change in the value of the index includes dividends reinvested. AVERAGE ANNUAL TOTAL RETURN [Chart] ANNUAL PERFORMANCE [Chart] GAM Europe MSCI GAM (after maximum Europe Europe sales load of 5%) Index Year % % % - ------------------------------------------------------- 1992 (4.91) (9.66) (4.25) 1993 22.68 16.55 29.79 1994 (3.11) (7.95) 2.66 1995 16.77 10.93 22.13 1996 21.32 15.25 21.57 13 - -------------------------------------------------------------------------------- GAM EUROPE FUND -- REPORT TO SHAREHOLDERS (CONTINUED) - -------------------------------------------------------------------------------- THE COMMENT Expectations of falling interest rates and rising asset prices have been well fulfilled in 1996. That this applies to financial assets to the near exclusion of real assets is testament to the powerful deflationary forces sweeping through Europe. As we have indicated in earlier reports our regular meetings with companies have proven invaluable in highlighting these trends and their effects on corporate pricing power. Such forces are all too evident in the growing wave of mergers now being witnessed and the fundamental restructuring of the way Europe does business. We have sought to benefit from these trends via our investment strategy throughout the past two years and the Fund's performance is the result of our commitment to bottom up stock selection. The following stocks are worthy of mention for their strong contribution to performance in the year just ended: The French market was again a major contributor to the Fund's results, more so due to good stock selection than to the performance of the local index. Comptoirs Modernes and Guilbert ended the year as the Fund's two largest investments having been exceptional performers in 1996. The former is one of France's leading food retailers, now replicating its domestic strategy elsewhere in Europe. Guilbert too is an example of a franchise capable of exploitation beyond domestic borders. The company has grown from being France's leading office materials wholesaler to a major force in Europe. Technip was also a strong performer as investors assessed the company's earnings prospects and attractive valuation. This company, based in France, is an international leader in turnkey process plant construction. In Germany, two stocks were held continuously throughout 1996, both rewarded the fund well. Buderus is an engineering concern whose main business is the production of heating systems. The company enjoys an excellent product franchise as well as strong management and finances. Veba the diversified holding company, benefited from continued business rationalisation and cost reduction.The biggest gain in the Fund's Dutch portfolio was produced by ABN Amro, the banking group. This company's management continues to prove adept at building from a strong domestic business. The Swiss portfolio benefited from the holding in Ciba Geigy which announced early in the year a merger with neighbouring pharmaceutical group, Sandoz. The Fund retains a holding in the merged entity, known as Novartis. Whilst the UK market's performance was more subdued, the returns to the Fund were boosted by sterling's strength, particularly in the closing months of 1996. Stock selection was mixed, resulting in significant changes to the British portfolio in anticipation of the year ahead. The strongest performance came from Burford whose share price rose by 40% as the group continued to grow from its roots in provincial property development and investment. Scandinavia was a notable contributor to performance, partly as a result of the stellar performance of local markets as well as individual stock picks. The Fund invested in "Emerging Europe" during the year and the holding in Gedeon Richter, the Hungarian pharmaceutical business proved rewarding. ASSET ALLOCATION Our investment philosophy and process means that the fund's geographic split is the result of stock picking. We see less opportunity in choosing countries or "markets" than we do in evaluating companies. The geographic result of the year's efforts was most visible in the Swedish market whose representation in the fund rose to 8.4% by the end of the year from 1.8% a year earlier. In neighboring Norway, the Fund's exposure rose from 2.4% to 4.7%. OUTLOOK The best part of the interest rate impetus is probably behind us and the year ahead will demand an even sharper focus on companies' earnings. The Fund has been well served by its major holdings and we don't anticipate the need to make significant changes. Where we do expect further opportunity is among the growing number of European restructuring cases. Just as Europe's deflation should not be underestimated, neither should the gathering momentum towards leaner, fitter and more profitable businesses. - ------------- A Plan of Distribution (12b-1 plan), as proposed by your Fund's directors, was approved by the Class A shareholders of each Series of the Fund in 1996. The 12b-1 plan calls for your Fund to pay the Fund's distributor up to 0.30% of its average net assets to finance distribution and servicing related activities engaged in by the distributor and third party financial intermediaries for the benefit of the Fund and its shareholders. 14 - -------------------------------------------------------------------------------- GAM EUROPE FUND -- STATEMENT OF INVESTMENTS - -------------------------------------------------------------------------------- AS AT 31ST DECEMBER, 1996 MARKET % VALUE OF HOLDINGS DESCRIPTION US$ NET ASSETS - -------------------------------------------------------------------------------- EQUITIES BELGIUM 990 Generale de Banque 355,227 1.41 90 Generale de Banque Rts 51 0.00 ---------- ------ 355,278 1.41 ---------- ------ FINLAND 15,140 Kesko 213,738 0.85 ---------- ------ 213,738 0.85 ---------- ------ FRANCE 2,101 Air Liquide 327,996 1.31 15,015 AXA 954,987 3.80 2,080 Comptoirs Modernes 1,122,482 4.47 7,500 Credit Commercial de France 346,921 1.38 5,412 Guilbert 1,058,722 4.21 2,762 IMETAL 407,766 1.62 550 Rexel 166,956 0.66 11,677 SEITA 488,370 1.94 5,565 Technip 522,339 2.08 10,960 Total B 891,418 3.55 7,750 Valeo 477,980 1.90 ---------- ------ 6,765,937 26.92 ---------- ------ GERMANY 11,850 BASF AG 456,504 1.82 970 Buderus 479,075 1.91 15,550 Veba 899,370 3.58 ---------- ------ 1,834,949 7.31 ---------- ------ HUNGARY 4,460 Gedeon Richter 260,649 1.04 ---------- ------ 260,649 1.04 ---------- ------ ITALY 305,345 TIM 771,982 3.07 ---------- ------ 771,982 3.07 ---------- ------ NETHERLANDS 9,679 ABN-AMRO Holding 629,347 2.50 36,300 Elsevier 613,172 2.44 4,663 Eriks Holdings 403,273 1.60 16,625 Heijmans Group 254,859 1.01 4,790 Royal Dutch Petroleum Bearer 839,320 3.34 39,560 Telegraaf Holding 833,011 3.32 ---------- ------ 3,572,982 14.21 ---------- ------ NORWAY 12,855 Kverneland Gruppen 355,331 1.41 7,095 Orkla A 498,090 1.98 10,800 Sparebanken 338,388 1.35 ---------- ------ 1,191,809 4.74 ---------- ------ PORTUGAL *+8,297 Sotancro -- 0.00 ---------- ------ -- 0.00 ---------- ------ SPAIN 4,200 Banco Popular Registered 825,570 3.29 ---------- ------ 825,570 3.29 ---------- ------ SWEDEN 24,900 Atlas Copco 602,491 2.40 17,125 Kalmar Industries 285,032 1.13 28,175 Sandvik A 760,237 3.03 16,300 Svenska Handlesbank 468,501 1.86 ---------- ------ 2,116,261 8.42 ---------- ------ SWITZERLAND 800 Affichage Genussscheine 342,473 1.36 *672 Novartis AG Registered 769,650 3.06 110 Roche Holding Genussscheine 855,921 3.41 ---------- ------ 1,968,044 7.83 ---------- ------ UNITED KINGDOM 26,710 BTR 130,407 0.52 27,550 Daily Mail & General Trust A 621,570 2.47 21,000 Glaxo Wellcome 341,763 1.36 52,580 Hozelock Group 408,940 1.63 241,750 Metalrax Group 426,566 1.70 183,751 Burford Holdings 459,584 1.83 165,320 NFC 523,938 2.09 *139,250 Somerfield 393,606 1.57 300,000 United Industries 241,547 0.96 20,235 Wolseley 160,844 0.64 91,735 Wyevale Garden Centres 361,448 1.44 28,720 Zeneca 809,344 3.22 ---------- ------ 4,879,557 19.43 ---------- ------ TOTAL EQUITIES (COST $20,653,072) 24,756,756 98.52 ---------- ------ Equity Warrants SWITZERLAND *130 Roche Holding Wts 1998--05--05 4,225 0.02 ---------- ------ TOTAL EQUITY WARRANTS (COST $2,181) 4,225 0.02 ---------- ------ 15 - -------------------------------------------------------------------------------- GAM EUROPE FUND -- STATEMENT OF INVESTMENTS (CONTINUED) - -------------------------------------------------------------------------------- MARKET % VALUE OF HOLDINGS DESCRIPTION US$ NET ASSETS - -------------------------------------------------------------------------------- PREFERRED SHARES GERMANY 5,500 Henkel Pfd 276,287 1.10 765 STO Pfd Bearer 360,427 1.43 ---------- ------ TOTAL PREFERRED SHARES (COST $628,967) 636,714 2.53 ---------- ------ TOTAL INVESTMENTS (COST $21,284,220**) 25,397,695 101.07 NET CURRENT LIABILITIES (270,290) (1.07) ---------- ------ TOTAL NET ASSETS 25,127,405 100.00 ========== ====== * Non-income producing security. ** Cost for federal income tax purposes is $21,288,756. (Note 5) + Fair value determined by the Board of Directors. See notes to financial statements. GEOGRAPHIC ANALYSIS AS AT 31ST DECEMBER, 1996 [The following table represents a chart in the printed piece.] NET CURRENT LIABILITIES (1.07%) FRANCE 26.92% OTHER AREAS 3.30% NORWAY 4.74% SWEDEN 8.42% SPAIN 3.29% NETHERLANDS 14.21% ITALY 3.07% SWITZERLAND 7.85% GERMANY 9.84% UNITED KINGDOM 19.43% 16 - -------------------------------------------------------------------------------- GAM PACIFIC BASIN FUND - -------------------------------------------------------------------------------- FUND MANAGEMENT - -------------------------------------------------------------------------------- - ---------- [Photo] - ---------- MICHAEL S. BUNKER, INVESTMENT DIRECTOR, HAS OVERALL RESPONSIBILITY FOR ASIAN INVESTMENT POLICY. PRIOR TO JOINING GAM IN 1985, HE WORKED FOR J. ROTHSCHILD CHARTERHOUSE MANAGEMENT LTD. IN HONG KONG. HE HAS OVER 20 YEARS' INVESTMENT EXPERIENCE, PRIMARILY IN ASIAN MARKETS. HE COMMENCED MANAGEMENT OF GAM PACIFIC BASIN FUND ON MAY 6, 1987. MR. BUNKER ALSO MANAGES THE OFFSHORE FUND GAM PACIFIC INC. MR. BUNKER IS NOW BASED IN LONDON, HAVING LIVED IN HONG KONG FOR 3 YEARS. The Fund's investment objective is long-term capital appreciation, generally through investment in equity securities issued by companies with principal offices in the Pacific Basin, including Japan, Hong Kong, Singapore, Malaysia, Indonesia, the Philippines, Korea, Taiwan, India, Australia and New Zealand. However, if the Fund determines that the long-term capital appreciation of debt securities may equal or exceed the return on equity securities, it may be invested substantially in debt securities of Pacific Basin companies and the governments of the Pacific Basin, their agencies and instrumentalities. Any income realized by the Fund on its investments will be incidental to its goal of long-term capital appreciation. REPORT TO SHAREHOLDERS - -------------------------------------------------------------------------------- THE FACTS -- CLASS A SHARES
GAM Pacific Basin Class A (after Average GAM maximum MSCI 1 Month Pacific Basin sales load Pacific Deposit Class A of 5%) Index Rate 31st Dec, 96 US$15.26 2,138.88 - --------------------------------------------------------------------------------------------- % % % % - --------------------------------------------------------------------------------------------- Quarter to Dec, 96 -1.56 -6.48 -7.10 +1.31 - --------------------------------------------------------------------------------------------- Jan -- Dec, 1996 -0.39 -5.31 -8.40 +5.37 - --------------------------------------------------------------------------------------------- Average annual total return:- - --------------------------------------------------------------------------------------------- 1 year to Dec, 1996 -0.39 -5.31 -8.40 +5.37 - --------------------------------------------------------------------------------------------- 5 years to Dec, 1996 +11.05 +9.92 +3.47 +4.52 - --------------------------------------------------------------------------------------------- Since inception +10.56 +9.98 +0.86 +6.17 - ---------------------------------------------------------------------------------------------
Performances are calculated on a total return basis. During the year, Class A shares paid a dividend of US$1.64 and Class D US$1.55. Class A inception was on 6th May, 1987 and Class D on 18th October, 1995. Indications of past performance are not necessarily indicative of future performance. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. 17 - -------------------------------------------------------------------------------- GAM PACIFIC BASIN FUND -- REPORT TO SHAREHOLDERS (CONTINUED) - -------------------------------------------------------------------------------- [Chart] NOTE: The graphs compare the performance results of a hypothetical $10,000 investment in either Class and a comparable index. The performance of Class A and Class D are also shown after adjustment to reflect the maximum sales load, which is waived for certain investors. The performance of the index does not reflect brokerage commissions and other expenses that would be incurred to acquire a comparable portfolio of securities. - ---------- Sources used are the net asset value of the Fund computed daily and Morgan Stanley Capital International. The MSCI Pacific Index is an arithmetical average weighted by market value of the performance of some 410 securities listed on the stock exchanges of Australia, Hong Kong, New Zealand, Singapore/Malaysia and Japan. The combined market capitalisation of these companies represents approximately 60% of the aggregate market value of the stock exchanges of the above five countries. The percentage change in the value of the index includes dividends reinvested. THE FACTS -- CLASS D SHARES
GAM Pacific Basin Class D (after Average GAM maximum MSCI 1 Month Pacific Basin sales load Pacific Deposit Class D of 3.5%) Index Rate 31st Dec, 96 US$15.20 2,138.88 - --------------------------------------------------------------------------------------------- % % % % - --------------------------------------------------------------------------------------------- Quarter to Dec, 96 -1.90 -5.34 -7.10 +1.31 - --------------------------------------------------------------------------------------------- Jan -- Dec, 1996 -1.19 -4.65 -8.40 +5.37 - --------------------------------------------------------------------------------------------- Average annual total return:- - --------------------------------------------------------------------------------------------- Since inception +0.83 -2.11 -0.93 +5.44 - ---------------------------------------------------------------------------------------------
[Chart] 18 - -------------------------------------------------------------------------------- GAM PACIFIC BASIN FUND -- REPORT TO SHAREHOLDERS (CONTINUED) - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN - CLASS A [Chart] ANNUAL PERFORMANCE - CLASS A [Chart] GAM Pacific Basin Class A (after GAM maximum MSCI Pacific Basin sales load Pacific Class A of 5%) Index Year % % % - ------------------------------------------------------- 1992 (0.37) (5.35) (18.20) 1993 51.51 43.93 35.97 1994 7.41 2.04 13.03 1995 4.56 (0.72) 2.99 1996 (0.39) (5.31) (8.40) THE COMMENT In the first quarter of 1996, investors were confident that Japanese equities would continue their strong upward trend against the background of a sustainable recovery in the domestic economy. A combination of supplemental budgets, very low interest rates and a steadily weakening currency should have provided sufficient stimulus to improve both business and consumer confidence and underpin the upturn in economic prospects. This has not been the case, indicating that the structural problems to be addressed in sectors such as banking and heavy industry are more deeply rooted than originally anticipated. The Japanese stock market has increasingly focused on a narrow range of companies such as motors and electricals and until a broader recovery in earnings becomes evident, this trend is likely to continue. The yen is also expected to drift downwards against the US dollar while interest rates are held at an historically low level. Shares in other Asian countries experienced sharply contrasting fortunes in 1996, with Korea and Thailand falling due to deteriorating domestic economic conditions and weakness in their trade accounts. Hong Kong investors have at times been nervous about the prospect of higher US interest rates, but the overall trend has seen equities rising to record levels on the Hang Seng index. This improvement is a direct result of growing confidence and anticipation that the hand-over of the colony to China in six months time will be a smooth transition which will enhance, rather than damage, local prosperity. - --------- A Plan of Distribution (12b-1 plan), as proposed by your Fund's directors, was approved by the Class A shareholders of each Series of the Fund in 1996. The 12b-1 plan calls for your Fund to pay the Fund's distributor up to 0.30% of its average net assets to finance distribution and servicing related activities engaged in by the distributor and third party financial intermediaries for the benefit of the Fund and its shareholders. 19 - -------------------------------------------------------------------------------- GAM PACIFIC BASIN FUND -- STATEMENT OF INVESTMENTS - -------------------------------------------------------------------------------- AS AT 31ST DECEMBER, 1996 MARKET % VALUE OF HOLDINGS DESCRIPTION US$ NET ASSETS - -------------------------------------------------------------------------------- EQUITIES AUSTRALIA 81,500 Broken Hill Proprietary 1,160,863 2.24 93,475 CRA 1,467,397 2.84 583,000 MIM Holdings 815,522 1.58 358,000 Novus Petroleum 819,522 1.59 110,875 WMC 698,863 1.35 ---------- ------ 4,962,225 9.60 ---------- ------ HONG KONG 669,000 Amoy Properties 964,426 1.87 152,000 Cheung Kong (Holdings) 1,351,089 2.61 832,000 Hong Kong & China Gas 1,597,414 3.09 870,200 Hong Kong Telecommunications 1,395,110 2.70 68,400 HSBC Holdings (HKD) 1,463,598 2.83 *446000 Kerry Properties 1,222,471 2.36 156,000 Sun Hung Kai Properties 1,911,048 3.70 211,000 Swire Pacific A 2,018,747 3.91 357,352 Wharf (Holdings) 1,783,410 3.45 ---------- ------ 13,707,313 26.52 ---------- ------ INDONESIA 566,400 Bank Bali (FR) 1,414,801 2.74 854,000 Hero Supermarket (FR) 632,727 1.22 770,000 Mayorah Indah (FR) 358,594 0.69 232,000 Modern Photo Film (FR) 736,664 1.43 314,000 Mustika Ratu (FR) 425,402 0.82 ---------- ------ 3,568,188 6.90 ---------- ------ JAPAN 73,000 Canon 1,613,678 3.12 18,700 Canon Sales 416,596 0.81 164 DDI 1,084,742 2.10 11,000 Japan Associated Finance 869,096 1.68 64,000 Joshin Denki 663,155 1.28 41,000 Matsushita Electric Industrial 669,113 1.29 82,000 Mitsubishi Estate 842,587 1.63 16,000 Murata Manufacturing 531,906 1.03 116,000 Nagoya Railroad 445,730 0.86 40,200 ORIX 1,673,120 3.24 20,000 Secom 1,210,604 2.34 75,000 Sekisui Chemical 757,707 1.47 16,300 Sony 1,068,276 2.07 100,000 Sumitomo Marine & Fire Insurance 621,708 1.20 68,000 Suzuki Motor 622,399 1.20 8,000 Tachihi Enterprise 241,775 0.47 25,000 Tokyo Electron 766,341 1.48 19,900 Xebio 592,824 1.15 ---------- ------ 14,691,357 28.42 ---------- ------ 14,691,357 28.42 ---------- ------ KOREA 58,000 Hyundai Motor GDR 432,100 0.84 14,524 LG Electronics 183,913 0.36 320 Samsung Electronics GDS (Voting) New 10,440 0.02 11,245 Samsung Electronics GDS (Non Voting) New 174,298 0.34 46,315 Samsung Electronics GDS (Non Voting) 856,828 1.66 1,068 Samsung Electronics Representing (Voting) New 43,388 0.08 46,508 Shinhan Bank 740,550 1.43 ---------- ------ 2,441,517 4.73 ---------- ------ MALAYSIA 140,500 Genting 968,006 1.87 103,000 Hume Industries (Malaysia) 648,466 1.26 ---------- ------ 1,616,472 3.13 ---------- ------ NEW ZEALAND 316,098 Carter Holt Harvey 717,324 1.39 ---------- ------ 717,324 1.39 ---------- ------ PHILIPPINES 546,000 Ayala Land B 622,814 1.20 185,400 Bank of Philippine Islands 1,120,859 2.17 16,800 Philippine Long Distance Telephone 923,042 1.79 ---------- ------ 2,666,715 5.16 ---------- ------ SINGAPORE 106,750 Development Bank of Singapore Singapore (FR) 1,441,846 2.79 777,000 Kim Eng Holdings 710,755 1.37 147,432 Overseas Chinese Banking Corp (FR) 1,833,286 3.55 20,000 Wing Tai Holdings 57,171 0.11 ---------- ------ 4,043,058 7.82 ---------- ------ THAILAND 400,000 Krung Thai Bank (FR) 772,050 1.49 181,750 Post Publishing (FR) 389,778 0.75 91,000 Siam Commerical Bank (FR) 659,986 1.28 116,610 Thai Farmers Bank (FR) 727,505 1.41 220,700 Thai Glass Industries (FR) 757,295 1.47 247,400 Thai Military Bank (FR) 487,160 0.94 3,793,774 7.34 ---------- ------ TOTAL EQUITIES (COST $55,152,964) 52,207,943 101.01 ---------- ------ 20 - -------------------------------------------------------------------------------- GAM PACIFIC BASIN FUND -- STATEMENT OF INVESTMENTS (CONTINUED) - -------------------------------------------------------------------------------- MARKET % VALUE OF HOLDINGS DESCRIPTION US$ NET ASSETS - -------------------------------------------------------------------------------- EQUITY WARRANTS INDONESIA *2,800 Bank Bali (FR) Wts 200 1,423 0.00 ---------- ------ 1,423 0.00 ---------- ------ JAPAN *710 Canon Sales Wts 1999-11-22 96,011 0.19 *210 Kyocera Wts 1998 144,375 0.28 *190 Seino Transportation Wts 4,750 0.01 *490 Tobu Railway Wts 1998 18,375 0.04 ---------- ------ 263,511 0.52 ---------- ------ SINGAPORE 80,000 Keppel Wts 1997 275,566 0.53 ---------- ------ 275,566 0.53 ---------- ------ THAILAND *17,763 Thai Farmers Bank Wts 2002 (FR) 16,796 0.03 ---------- ------ 16,796 0.03 ---------- ------ TOTAL EQUITY WARRANTS (COST $1,123,852) 557,296 1.08 ---------- ------ TOTAL INVESTMENTS (COST $56,276,816**) 52,765,239 102.09 NET CURRENT LIABILITIES (1,079,426) (2.09) ---------- ------ TOTAL NET ASSETS 51,685,813 100.00 ========== ====== * Non-income producing security. ** Cost for federal income tax purposes is $56,465,787. (Note 5) Glossary of Terms: GDR - Global Depository Receipt GDS - Global Depository Shares FR - Foreign REgistered See notes to financial statements. GEOGRAPHICAL ANALYSIS AS AT 31ST DECEMBER, 1996 NET CURRENT LIABILITIES (2.09)% JAPAN 28.94% PHILIPPINES 5.16% MALAYSIA 3.13% NEW ZEALAND 1.39% KOREA 4.73% INDONESIA 6.90% SINGAPORE 8.35% THAILAND 7.37% AUSTRALIA 9.60% HONG KONG 26.52% 21 - -------------------------------------------------------------------------------- GAM JAPAN CAPITAL FUND - -------------------------------------------------------------------------------- FUND MANAGEMENT - -------------------------------------------------------------------------------- - -------- [Photo] - -------- PAUL S. KIRKBY, INVESTMENT DIRECTOR, IS RESPONSIBLE FOR INVESTMENT IN THE JAPANESE MARKET. PRIOR TO JOINING GAM IN 1985, AS A SENIOR FUND MANAGER IN HONG KONG, HE WAS AN INVESTMENT ANALYST WITH NEW JAPAN SECURITIES CO. LTD IN TOKYO. HE COMMENCED MANAGEMENT OF GAM JAPAN CAPITAL FUND ON JULY 1, 1994. MR KIRKBY ALSO MANAGES THE OFFSHORE FUND GAM JAPAN INC. MR. KIRKBY IS NOW BASED IN LONDON, HAVING LIVED IN HONG KONG FOR SEVEN YEARS. The Fund's investment objective is long-term capital appreciation, generally through investment in equity securities issued by companies with principal offices in Japan. However, if the Fund determines that the long-term capital appreciation of debt securities may equal or exceed the return on equity securities, it may be substantially invested in debt securities of companies and governments, their agencies and instrumentalities. Any income realized by the Fund on its investments will be incidental to its goal of long-term capital appreciation. REPORT TO SHAREHOLDERS - -------------------------------------------------------------------------------- THE FACTS
GAM Japan Capital (after Average maximum Tokyo 1 Month GAM Japan sales load S.E. Deposit Capital of 5%) Index Rate 31st Dec, 96 US$9.39 1,470.94 - --------------------------------------------------------------------------------------------- % % % % - --------------------------------------------------------------------------------------------- Quarter to Dec, 96 -4.35 -9.13 -13.11 +1.31 - --------------------------------------------------------------------------------------------- Jan -- Dec, 1996 +0.15 -4.85 -16.55 +5.37 - --------------------------------------------------------------------------------------------- Average annual total return:- - --------------------------------------------------------------------------------------------- 1 year to Dec, 1996 +0.15 -4.85 -16.55 +5.37 - --------------------------------------------------------------------------------------------- Since inception +0.98 -1.06 -10.06 +5.55 - ---------------------------------------------------------------------------------------------
Performances are calculated on a total return basis. During the year, a dividend was paid of US$0.79. The Fund's inception was on 1st July, 1994. Indications of past performance are not necessarily indicative of the future performance. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. 22 - -------------------------------------------------------------------------------- GAM JAPAN CAPITAL FUND -- REPORT TO SHAREHOLDERS (CONTINUED) - -------------------------------------------------------------------------------- [Chart] NOTE: The graph compares the performance results of a hypothetical $10,000 investment in the Fund and a comparable index. The performance of the Fund is also shown after adjustment to reflect the maximum sales load, which is waived for certain investors. The performance of the index does not reflect brokerage commissions and other expenses that would be incurred to acquire a comparable portfolio of securities. - ---------- Sources used are net asset value of the Fund computed daily and Datastream. The Tokyo Stock Exchange Index (TOPIX) is a capitalisation-weighted composite index of approximately 1,200 companies listed on the First Section of the Tokyo Stock Exchange. The combined market capitalisation of these companies represents approximately 95% of the aggregate market value of the First and Second Section. The percentage change in the value of the index is calculated on a total return basis with dividends reinvested. THE COMMENT During 1996 the economy continued its modest recovery helped by record low interest rates, the weakness of the yen and deficit spending by the government. Company profits put in their third year of recovery. Despite all this good news, however, the stock market failed to make significant progress. Reasons given for the dull market response include concerns about the sustainability of the economic recovery and increased stock supply. Though these are valid concerns the uncompelling level of valuations remains the primary restraining factor preventing sharp advances by the indices. Although the outcome for the stock market this year has not come as a complete surprise, some of the Fund's stock picks have nevertheless been somewhat disappointing. Excellent performances from holdings in technology exporters and selected retailers have been offset by weakness in small stocks and insurance companies. Looking forward to next year, conditions will remain subdued, however the broadening of the economic recovery should provide a wider range of opportunities for investment. Excessive pessimism at this late stage is unwarranted. We expect continued performance from the technology area together with a recovery from smaller stocks and financial issues. The yen is likely to remain under pressure, although weakness from here is unlikely to match that seen over the last 18 months. Expecting some pause in the yen's descent, the proportion of the Fund's exposure to dollars has been reduced, a position which may be subject to further review. - ---------- A Plan of Distribution (12b-1 plan), as proposed by your Fund's directors, was approved by the Class A shareholders of each Series of the Fund in 1996. The 12b-1 plan calls for your Fund to pay the Fund's distributor up to 0.30% of its average net assets to finance distribution and servicing related activities engaged in by the distributor and third party financial intermediaries for the benefit of the Fund and its shareholders. 23 - -------------------------------------------------------------------------------- GAM JAPAN CAPITAL FUND -- STATEMENT OF INVESTMENTS - -------------------------------------------------------------------------------- MARKET % VALUE OF HOLDINGS DESCRIPTION US$ NET ASSETS - -------------------------------------------------------------------------------- EQUITIES APPLIANCES & HOUSEHOLD DURABLES 19,500 Rinnai 392,324 1.07 25,000 Sony 1,638,460 4.49 ---------- ------ 2,030,784 5.56 ---------- ------ AUTOMOBILES *138,000 Mazda Motor 493,325 1.35 31,000 Suzuki Motor 283,741 0.78 ---------- ------ 777,066 2.13 ---------- ------ BANKING 38,000 Bank of Kyoto 180,796 0.49 55,000 Long Term Credit Bank of Japan 297,772 0.81 20,000 Tochigi Bank 184,785 0.51 ---------- ------ 663,353 1.81 ---------- ------ BROADCASTING & PUBLISHING 9,000 Broadcasting System Niigata 116,570 0.32 ---------- ------ 116,570 0.32 ---------- ------ BUILDING MATERIALS & COMPONENTS 20,300 Almetax Manufacturing 164,770 0.45 ---------- ------ 164,770 0.45 ---------- ------ BUSINESS & PUBLIC SERVICES 400 NIC 5,595 0.02 40 Nihon Jumbo 1,395 0.00 20,000 Secom 1,210,604 3.32 21,060 Wesco 263,682 0.72 ---------- ------ 1,481,276 4.06 ---------- ------ CHEMICALS 61,000 Shin-Etsu Chemical 1,111,389 3.04 ---------- ------ 1,111,389 3.04 ---------- ------ CONSTRUCTION & HOUSING 19,000 Ataka Construction & Engineering 120,585 0.33 14,600 Daito Trust Construction Co. 162,628 0.44 ---------- ------ 283,213 0.77 ---------- ------ DATA PROCESSING &REPRODUCTION 80,000 Canon 1,768,414 4.85 ---------- ------ 1,768,414 4.85 ---------- ------ ELECTRICAL & ELECTRONICS 5,500 IO Data Device 149,599 0.41 16,000 NEC 193,420 0.53 6,600 NIDEC 225,110 0.62 44,600 Nippon Denwa Shisetsu 412,072 1.13 10,800 Satori Electric 372,092 1.02 7,200 Shinko Electric Industries 234,384 0.64 ---------- ------ 1,586,677 4.35 ---------- ------ ELECTRONIC COMP. & INSTRUMENTS 19,000 Mitsumi Electric 357,655 0.98 16,000 Murata Manufacturing 531,906 1.46 33,000 Omron Corp. 621,190 1.70 11,000 Rohm 721,872 1.98 25,000 Tokyo Electron 766,341 2.10 ---------- ------ 2,998,964 8.22 ---------- ------ FINANCIAL SERVICES 14,000 Japan Associated Finance 1,106,122 3.03 12,100 Nichiei (8577) 893,317 2.45 45,100 ORIX 1,877,057 5.14 5,100 Shohkoh Fund 1,109,749 3.04 ---------- ------ 4,986,245 13.66 ---------- ------ HEALTH & PERSONAL CARE 11,000 Banyu Pharmaceutical 153,873 0.42 53,750 Eisai 1,058,199 2.90 220 Santen Pharmaceutical 4,559 0.01 11,000 Sawai Pharmaceutical 131,077 0.36 10,000 Taisho Pharmaceutical 235,731 0.64 14,700 Towa Pharmaceutical 203,091 0.56 ---------- ------ 1,786,530 4.89 ---------- ------ INDUSTRIAL COMPONENTS 11,000 Okamura 72,757 0.20 ---------- ------ 72,757 0.20 ---------- ------ INSURANCE 120,000 Dai-Tokyo Fire & Marine Insurance 637,251 1.75 168,000 Sumitomo Marine & Fire Insurance 1,044,469 2.86 ---------- ------ 1,681,720 4.61 ---------- ------ LEISURE & TOURISM 17,000 Royal 388,999 1.07 27,000 Shochiku 233,140 0.64 ---------- ------ 622,139 1.71 ---------- ------ MACHINERY & ENGINEERING 18,000 Amada Metrecs 164,753 0.45 1,100 Japan Engineering Consultants 11,303 0.03 121,000 Mitsubishi Heavy Industries 961,230 2.63 10,000 Sansei Yusoki 110,526 0.30 21,000 Takuma 230,291 0.63 4,000 Tsubaki Nakashima 33,710 0.10 ---------- ------ 1,511,813 4.14 ---------- ------ 24 - -------------------------------------------------------------------------------- GAM JAPAN CAPITAL FUND -- STATEMENT OF INVESTMENTS (CONTINUED) - -------------------------------------------------------------------------------- MARKET % VALUE OF HOLDINGS DESCRIPTION US$ NET ASSETS - -------------------------------------------------------------------------------- MERCHANDISING 27,300 Amway Japan 876,919 2.40 15,200 Aoyama Trading 404,248 1.11 27,600 Circle K Japan 1,191,607 3.26 9,000 Daimon 144,547 0.39 400 Ishiguro Homa 7,253 0.02 27,000 Joshin Denki 279,769 0.77 40,000 Juel Verite Ohkubo 270,098 0.74 18,000 Jusco 610,828 1.67 21,000 Marui 378,983 1.04 19,900 Matsumotokiyoshi 652,966 1.79 7,100 Paris Miki 256,265 0.70 16,000 Shimachu 410,327 1.12 15,900 Xebio 473,664 1.30 4,600 York-Benimaru 128,296 0.35 ---------- ------ 6,085,770 16.66 ---------- ------ REAL ESTATE 15,000 Daiwa Kosho Lease 115,275 0.32 2,000 Tachihi Enterprises 60,444 0.17 32,000 TOC 284,604 0.78 ---------- ------ 460,323 1.27 ---------- ------ RECREATION, OTHER CONSUMER GOODS 35,000 Fuji Photo Film 1,154,477 3.16 ---------- ------ 1,154,477 3.16 ---------- ------ TELECOMMUNICATIONS 138 DDI Corp. 912,771 2.50 ---------- ------ 912,771 2.50 ---------- ------ TRANSPORTATION-- ROAD & RAIL 190 West Japan Railway Co. 615,232 1.69 ---------- ------ 615,232 1.69 ---------- ------ UTILITIES -- ELECTRIC & GAS 5,330 Okinawa Electric Power 135,770 0.37 ---------- ------ 135,770 0.37 ---------- ------ WHOLESALE & INTERNATIONAL TRADE 19,200 Nakayamafuku 157,499 0.43 ---------- ------ 157,499 0.43 ---------- ------ TOTAL EQUITIES (COST $36,613,447) 33,165,522 90.85 ---------- ------ EQUITY WARRANTS ELECTRONIC COMP. & INSTRUMENTS *200 Kyocera Wts 1998 137,500 0.38 *40 Yamatake Honeywell Wts 1997 90,500 0.25 ---------- ------ 228,000 0.63 ---------- ------ MACHINERY & ENGINEERING *35 Toyo Engineering Wts 1997 875 0.00 ---------- ------ 875 0.00 ---------- ------ RECREATION, OTHER CONSUMER GOODS *150 Canon Sales Wts 1997--11--11 14,456 0.04 *190 Canon Sales Wts 1999--11--22 25,693 0.07 ---------- ------ 40,149 0.11 ---------- ------ TRANSPORTATION -- ROAD & RAIL *30 Seino Transporation Wts 1997 750 0.00 *170 Tobu Railway Wts 1998 6,375 0.02 ---------- ------ 7,125 0.02 ---------- ------ TOTAL EQUITY WARRANTS (COST $513,800) 276,149 0.76 ---------- ------ PREFERRED SHARES FINANCIAL SERVICES 30,000,000 Y Sakura Finance Bermuda 0.75% CV Pfd 2001 266,169 0.73 ---------- ------ 266,169 0.73 ---------- ------ BANKING 240,000 Fuji International Finance Pfd Registered 2002--02--01 210,863 0.58 ---------- ------ 210,863 0.58 ---------- ------ TOTAL PREFERRED SHARES (COST $484,681) 477,032 1.31 ---------- ------ TOTAL INVESTMENTS (COST $37,611,928**) 33,918,703 92.92 NET CURRENT ASSETS 2,598,150 7.08 ---------- ------ TOTAL NET ASSETS 36,516,853 100.00 ========== ====== * Non-income producing security. ** Cost for federal income tax purposes is $37,994,209. (Note 5) See notes to the financial statements. 25 - -------------------------------------------------------------------------------- GAM NORTH AMERICA FUND - -------------------------------------------------------------------------------- FUND MANAGEMENT - -------------------------------------------------------------------------------- - --------- [Photo] - --------- FAYEZ SAROFIM FOUNDED FAYEZ SAROFIM & CO IN 1958 AND IS THE PRESIDENT AND CHAIRMAN OF THE BOARD. HE IS ALSO A DIRECTOR OF TELEDYNE INC., ARGONAUT GROUP, UNITRIN, INC., MESA INS., IMPERIAL HOLLY CORP. AND EXOR GROUP. FROM 1951 TO 1958 MR. SAROFIM WORKED FOR ANDERSON CLAYTON & CO., WHERE HIS LAST ASSIGNMENT WAS AS ASSISTANT TO THE PRESIDENT. HE COMMENCED MANAGEMENT OF GAM NORTH AMERICA FUND ON JUNE 29, 1990. MR. SAROFIM ALSO MANAGES THE OFFSHORE FUND GAM US INC. The Fund's investment objective is long-term capital appreciation, generally through investment in equity securities issued by companies with principal offices in the United States and Canada. However, if the Fund determines that the long-term capital appreciation of debt securities may equal or exceed the return on equity securities, it may be substantially invested in debt securities of companies and governments, their agencies and instrumentalities. Any income realized by the Fund on its investments will be incidental to its goal of long-term capital appreciation. REPORT TO SHAREHOLDERS - -------------------------------------------------------------------------------- THE FACTS
GAM North America (after Average maximum S&P 1 Month GAM sales load Comp Deposit North America of 5%) Index Rate 31st Dec, 96 US$13.56 740.74 - --------------------------------------------------------------------------------------------- % % % % - --------------------------------------------------------------------------------------------- Quarter to Dec, 96 +7.75 +2.36 +8.34 +1.31 - --------------------------------------------------------------------------------------------- Jan -- Dec, 1996 +24.10 +17.89 +22.95 +5.37 - --------------------------------------------------------------------------------------------- Average annual total return:- - --------------------------------------------------------------------------------------------- 1 year to Dec, 1996 +24.10 +17.89 +22.95 +5.37 - --------------------------------------------------------------------------------------------- 5 years to Dec, 1996 +10.86 +9.73 +15.20 +4.52 - --------------------------------------------------------------------------------------------- Since inception +12.18 +11.37 +14.41 +5.32 - ---------------------------------------------------------------------------------------------
Performances are calculated on a total return basis. During the year, a dividend was paid of US$1.25. The Fund's inception was on 1st January, 1990. Indications of past performance are not necessarily indicative of future performance. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. 26 - -------------------------------------------------------------------------------- GAM NORTH AMERICA FUND -- REPORT TO SHAREHOLDERS (CONTINUED) - -------------------------------------------------------------------------------- [CHART] NOTE: The graph compares the performance results of a hypothetical $10,000 investment in the Fund and a comparable index. The performance of the Fund is also shown after adjustment to reflect the maximum sales load, which is waived for certain investors. The performance of the index does not reflect brokerage commissions and other expenses that would be incurred to acquire a comparable portfolio of securities. - ---------- Sources used are the net asset value of the Fund which is computed daily and Datastream. The Standard & Poor's Composite Index is an unmanaged weighted index of the stock performance of 500 industrial, transportation, utility and financial companies. The percentage change in the value of the index includes dividends reinvested. AVERAGE ANNUAL TOTAL RETURN [Chart] ANNUAL PERFORMANCE [CHART] GAM STANDARD & NORTH AMERICA POOR'S GAM (AFTER MAXIMUM COMPOSITE NORTH AMERICA SALES LOAD OF 5%) INDEX YEAR % % % - ------------------------------------------------------- 1992 2.42 (2.70) 7.63 1993 (2.09) (6.98) 10.08 1994 2.97 (2.18) 1.27 1995 30.90 24.35 37.60 1996 24.10 17.89 22.95 27 - -------------------------------------------------------------------------------- GAM NORTH AMERICA FUND -- STATEMENT OF INVESTMENTS - -------------------------------------------------------------------------------- THE COMMENT The US economy has expanded over a period of 69 months in the current economic cycle. We believe the expansion has become more balanced than was the case in the first half of 1996 when GDP growth exceeded a sustainable, non-inflationary pattern. Overall, we expect the economy to remain relatively healthy, with average annual GDP of about 1.5--2.0% in the first half of 1997 and a somewhat stronger rate of growth later in the year, as lower interest rates contribute to a pick-up in demand and inventories are rebuilt. We believe the yield curve will continue to flatten, with short-term rates declining slightly from current levels and the rate on the 30-year bond breaking below 6.0% early in 1997. We believe annual inflation, as measured by the GDP price deflator, will increase at an annual rate of 2.2% in 1997. Export growth should pick up from current levels as our trading partners' economies improve. The consumer sector, which has been fueling growth, is reliquifying balance sheets from historically high debt levels and bank lending has become more selective. A sharp credit contraction reflects this trend, which is weakening demand. Relatedly, demographic trends support a continued rise in the US savings rate. Involuntary inventory accumulation also suggests weaker production and declining employment growth in the first half of 1997. Corporate profits will continue, but with some deceleration. In our view, earnings growth will be increasingly selective. We continue to focus investment strategy on large capitalisation, high quality multinationals with projected above-average earnings growth. Individual stock selection and strategic emphasis has positively impacted our firm's performance in 1996. As corporate profits become more selective and consistent earnings growth is at a premium, we expect that equity markets will reflect this selectivity, and investors will increasingly understand that they should look at a market of stocks, rather than the stock market in general. We expect the two-tier profile of the market will persist, and that lower quality, smaller capitalization and the more illiquid issues will underperform the higher quality, more visible companies. Equities should continue to outperform fixed income securities, cash and cash equivalents, and the holdings in our universe are expected to provide a total return in the range of 12--13%. - ---------- A Plan of Distribution (12b-1 plan), as proposed by your Fund's directors, was approved by the Class A shareholders of each Series of the Fund in 1996. The 12b-1 plan calls for your Fund to pay the Fund's distributor up to 0.30% of its average net assets to finance distribution and servicing related activities engaged in by the distributor and third party financial intermediaries for the benefit of the Fund and its shareholders. AS AT 31ST DECEMBER, 1996 MARKET % VALUE OF HOLDINGS DESCRIPTION US$ NET ASSETS - -------------------------------------------------------------------------------- EQUITIES AEROSPACE/MILITARY TECHNOLOGY 54 Boeing 5,744 0.10 --------- ------ 5,744 0.10 --------- ------ AUTOMOBILES 2,300 Chrysler 75,900 1.30 3,218 Ford Motor 102,574 1.75 --------- ------ 178,474 3.05 --------- ------ BANKING 2,200 Chase Manhattan 196,350 3.35 2,200 Citicorp 226,600 3.87 --------- ------ 422,950 7.22 --------- ------ BEVERAGES & TOBACCO 8,400 Coca-Cola 442,050 7.55 5,800 PepsiCo 169,650 2.90 2,800 Philip Morris 315,350 5.39 --------- ------ 927,050 15.84 --------- ------ BROADCASTING & PUBLISHING 1,500 McGraw-Hill 69,187 1.18 --------- ------ 69,187 1.18 --------- ------ CHEMICALS 800 Dow Chemical 62,700 1.07 1,400 DuPont de Nemours 132,125 2.26 1,700 International Flavors & Fragrances 76,500 1.31 --------- ------ 271,325 4.64 --------- ------ DATA PROCESSING & REPRODUCTION *1,200 Compaq Computer 89,100 1.52 --------- ------ 89,100 1.52 --------- ------ ELECTRICAL & ELECTRONICS 600 Emerson Electric 58,050 0.99 2,800 General Electric (USA) 276,850 4.73 --------- ------ 334,900 5.72 --------- ------ ELECTRONIC COMP. & INSTRUMENTS *1,950 Intel 255,328 4.36 900 Motorola 55,238 0.94 --------- ------ 310,566 5.30 --------- ------ ENERGY SOURCES 2,200 Chevron 143,000 2.44 1,500 Exxon 147,000 2.51 1,000 Mobil 122,250 2.09 --------- ------ 412,250 7.04 --------- ------ 28 - -------------------------------------------------------------------------------- GAM NORTH AMERICA FUND -- STATEMENT OF INVESTMENTS (CONTINUED) - -------------------------------------------------------------------------------- MARKET % VALUE OF HOLDINGS DESCRIPTION US$ NET ASSETS - -------------------------------------------------------------------------------- FINANCIAL SERVICES 2,800 Federal National Mortgage 104,300 1.78 --------- ------ 104,300 1.78 --------- ------ FOOD & HOUSEHOLD PRODUCTS 1,100 Kellogg 72,187 1.23 1,900 Procter & Gamble 204,250 3.49 --------- ------ 276,437 4.72 --------- ------ HEALTH & PERSONAL CARE 2,500 Abbott Laboratories 126,875 2.17 2,200 American Home Products 128,975 2.20 900 Estee Lauder A 45,787 0.78 2,900 Gillette 225,475 3.85 4,200 Johnson & Johnson 208,950 3.57 3,300 Merck 261,525 4.47 2,400 Pfizer 198,900 3.40 --------- ------ 1,196,487 20.44 --------- ------ INDUSTRIAL COMPONENTS 1,300 Rockwell International 79,138 1.35 --------- ------ 79,138 1.35 --------- ------ INSURANCE 2,300 American General 94,012 1.61 --------- ------ 94,012 1.61 --------- ------ LEISURE & TOURISM 1,700 McDonald's 76,925 1.31 1,000 Walt Disney 69,625 1.19 --------- ------ 146,550 2.50 --------- ------ MACHINERY & ENGINEERING 1,000 Caterpillar Inc. 75,250 1.29 --------- ------ 75,250 1.29 --------- ------ MERCHANDISING 2,500 Wal-Mart Stores 57,188 0.98 2,500 Walgreen 100,000 1.71 --------- ------ 157,188 2.69 --------- ------ MULTI-INDUSTRY 1,500 AlliedSignal 100,500 1.72 *6 Berkshire Hathaway 204,600 3.50 1,300 Minnesota Mining & Manufacturing 107,738 1.84 --------- ------ 412,838 7.06 --------- ------ RECREATION, OTHER CONSUMER GOODS 1,000 Eastman Kodak 80,250 1.37 --------- ------ 80,250 1.37 --------- ------ TELECOMMUNICATIONS 2,300 Pacific Telesis Group 84,525 1.45 --------- ------ 84,525 1.45 --------- ------ TRANSPORTATION-- ROAD & RAIL 1,000 Norfolk Southern 87,500 1.50 700 Union Pacific 42,088 0.72 --------- ------ 129,588 2.22 --------- ------ TOTAL EQUITIES (COST $3,931,074) 5,858,109 100.09 --------- ------ PREFERRED SHARES BROADCASTING & PUBLISHING 3,000 News Corp ADR (Pfd) 52,875 0.90 --------- ------ TOTAL PREFERRED SHARES (COST $60,555) 52,875 0.90 --------- ------ TOTAL INVESTMENTS (COST $3,991,629**) 5,910,984 100.99 NET CURRENT LIABILITIES (58,161) (0.99) --------- ------ TOTAL NET ASSETS 5,852,823 100.00 ========= ====== * Non-income producing security. ** Cost for federal income tax purposes is identical. Glossary of Terms: ADR - American Depository Receipt See notes to financial statements. 29 - -------------------------------------------------------------------------------- GAM ASIAN CAPITAL FUND - -------------------------------------------------------------------------------- FUND MANAGEMENT - -------------------------------------------------------------------------------- - -------------- [Photo] - -------------- ADRIAN L. CANTWELL, INVESTMENT DIRECTOR, IS RESPONSIBLE FOR ASIA EX JAPAN PORTFOLIOS. PRIOR TO JOINING GAM IN 1990, HE WAS A DIRECTOR OF GARTMORE LIMITED, HONG KONG, RESPONSIBLE FOR SOUTH EAST ASIAN INVESTMENT. HE COMMENCED MANAGEMENT OF GAM ASIAN CAPITAL FUND ON MAY 12, 1995. MR. CANTWELL ALSO MANAGES THE OFFSHORE FUNDS GAM ASIAN INC. AND GAM SINGAPORE/MALAYSIA INC. MR. CANTWELL HAS LIVED IN HONG KONG SINCE 1985. The Fund's investment objective is long-term capital appreciation, generally through investment in equity securities issued by companies with principal offices in Asia other than Japan. Countries in Asia include Hong Kong, Singapore, Malaysia, Thailand, Vietnam, Indonesia, the Philippines, Korea, China, Taiwan, India, Myanmar, Pakistan, Bangladesh and Sri Lanka. However if the Fund determines that the long-term capital appreciation of debt securities may equal or exceed the return on equity securities, it may be substantially invested in debt securities of companies and governments, their agencies and instrumentalities. Any income realized by the Fund on its investments will be incidental to its goal of long-term capital appreciation. REPORT TO SHAREHOLDERS - -------------------------------------------------------------------------------- THE FACTS
GAM Asian Capital (after MSCI AC Average GAM maximum Far East 1 Month Asian sales load (ex Japan) Deposit Capital of 5%) Index Rate 31st Dec, 96 US$9.83 326.88 - --------------------------------------------------------------------------------------------- % % % % - --------------------------------------------------------------------------------------------- Quarter to Dec, 96 +2.93 -2.21 +1.73 +1.31 - --------------------------------------------------------------------------------------------- Jan Dec, 1996 +3.28 -1.89 +9.97 +5.37 - --------------------------------------------------------------------------------------------- Average annual total return:- - --------------------------------------------------------------------------------------------- 1 year to Dec, 1996 +3.28 -1.89 +9.97 +5.37 - --------------------------------------------------------------------------------------------- Since inception +0.68 -3.74 +4.99 +5.59 - ---------------------------------------------------------------------------------------------
Performances are calculated on a total return basis. During the year, a dividend was paid of US$0.01. The Fund's inception was on 12th May, 1995. Indications of past performance are not necessarily indicative of future performance. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. 30 - -------------------------------------------------------------------------------- GAM ASIAN CAPITAL FUND -- REPORT TO SHAREHOLDERS (CONTINUED) - -------------------------------------------------------------------------------- [CHART] NOTE: The graph compares the performance results of a hypothetical $10,000 investment in the Fund and a comparable index. The performance of the Fund is also shown after adjustment to reflect the maximum sales load, which is waived for certain investors. The performance of the index does not reflect brokerage commissions and other expenses that would be incurred to acquire a comparable portfolio of securities. The performance of the index is no indication of the future performance of either the index or the Fund. - ----------- Sources used are net asset value of the Fund which is computed daily and Datastream. The MSCI Combined Far East Index (ex Japan) is an arithmetical average weighted by market value of the performance of some 400 securities listed on the stock exchanges of Hong Kong, Indonesia, Korea, Malaysia, Philipines, Singapore, Tawian and Thailand. The combined market capitalisation of these companies represents approximately 60% of the aggregated market value of the stock exchanges of the above 8 countries. The percentage change in the value of the index includes dividends reinvested. THE COMMENT The switch into Hong Kong commenced in the second quarter and continued throughout the second half of the year, with that market now accounting for over half of the Fund's assets by the end of 1996. Purchases have been concentrated in a limited number of blue chips in the property, banking, conglomerate and utilities sectors. Hong Kong's broad economic outlook continues to improve with inflation, trade statistics and consumer confidence all heading in the right direction. The residential property market is now firmly on the recovery path and political relations with China are enjoying a sustained period of calm. The re-rating of the market is expected to continue, although a period of consolidation is only realistic at some juncture after the, approximately, 30% rise this year. The main negative influence on the performance of the Fund in 1996 has been the low weighing in Hong Kong at the beginning of the year and the exposure to the banking sector in Thailand. After a six year period of share price outperformance, the fundamental asset quality of the Thai banking sector has come into question as a result of a significant slowdown in the economy, which is likely to record growth in the 6-7% range for 1996/7, after several years of above 8% growth. Looking forward, the manager attaches a low probability to a sustained rebound in Thai share prices in 1997 and the exposure has been reduced in favour of Hong Kong. Other country weightings have changed only marginally. The markets in S. Korea, the Philippines and India (about 3% of the fund) all fell whilst Indonesia, Malaysia, New Zealand, Singapore and Taiwan (about 30% of the fund) all rose. - ---------- A Plan of Distribution (12b-1 plan), as proposed by your Fund's directors, was approved by the Class A shareholders of each Series of the Fund in 1996. The 12b-1 plan calls for your Fund to pay the Fund's distributor up to 0.30% of its average net assets to finance distribution and servicing related activities engaged in by the distributor and third party financial intermediaries for the benefit of the Fund and its shareholders. 31 - -------------------------------------------------------------------------------- GAM ASIAN CAPITAL FUND -- STATEMENT OF INVESTMENTS - -------------------------------------------------------------------------------- AS AT 31ST DECEMBER, 1996 MARKET % VALUE OF HOLDINGS DESCRIPTION US$ NET ASSETS - -------------------------------------------------------------------------------- EQUITIES HONG KONG 22,000 Bank of East Asia 97,847 1.74 210,000 CDL Hotels 120,144 2.13 24,000 Cheung Kong Holdings 213,330 3.80 267,000 China Hong Kong Photo 89,754 1.59 48,400 Dah Sing Financial Services 196,491 3.49 180,000 First Pacific Company 233,887 4.15 157,100 HKR International 265,066 4.71 119,000 Hong Kong & China Gas 228,476 4.06 46,000 Hong Kong & Shanghai Hotel 86,832 1.54 103,200 Hong Kong Telecommunications 165,451 2.94 13,200 HSBC Holdings (HKD) 282,449 5.02 288,000 JCG Holdings 281,130 5.00 *27,000 Kerry Properties 74,006 1.31 208,000 Li & Fung 184,213 3.27 108,000 National Mutual Asia 102,631 1.82 15,000 New World Development 100,847 1.79 22,000 Sun Hung Kai Properties 269,507 4.79 21,000 Swire Pacific A 200,918 3.57 43,000 Wharf (Holdings) 214,597 3.81 74,000 Wheelock 210,964 3.75 --------- ------ 3,618,540 64.28 --------- ------ INDONESIA 127,000 Aneka Kimia Raya (FR) 75,275 1.34 25,850 Bank Bali (FR) 64,570 1.15 72,000 Citra Marga Nusaphala Persa (FR) 56,393 1.00 189,000 Sorini (FR) 88,019 1.56 14,800 Tri Polyta Indonesia ADR 92,500 1.64 --------- ------ 376,757 6.69 --------- ------ KOREA 6,000 Hyundai Motor GDR 44,700 0.79 4,000 Samsung Electronic GDS (Non-Voting) 74,000 1.31 --------- ------ 118,700 2.10 --------- ------ MALAYSIA 24,000 Resorts World 109,285 1.94 25,000 Tenaga Nasional 119,778 2.13 --------- ------ 229,063 4.07 --------- ------ NEW ZEALAND 44,000 Fernz 150,863 2.68 58,000 Helicopter Line 110,708 1.97 --------- ------ 261,571 4.65 --------- ------ SINGAPORE 34,000 DBS Land 125,134 2.22 5,000 Development Bank of Singapore (FR) 67,534 1.20 93,000 Osprey Maritime 141,564 2.52 43,000 Wing Tai Holdings 122,918 2.18 --------- ------ 457,150 8.12 --------- ------ TAIWAN *6,640 Advanced Semiconductor Engineering GDR 64,242 1.14 *5,753 GVC GDR 44,442 0.80 *5,300 Siliconware Precision Industries GDR 58,830 1.05 *9,000 Yageo GDR 90,450 1.61 --------- ------ 257,964 4.60 --------- ------ THAILAND 5,500 Bangkok Bank (FR) 53,186 0.94 *88,000 Bangkok Expressway (FR) 98,651 1.75 2,000 Thai Farmers Bank (FR) 12,477 0.22 35,000 Thai Glass Industries (FR) 120,097 2.13 7,100 Thai Military Bank (FR) 13,981 0.25 --------- ------ 298,392 5.29 --------- ------ TOTAL EQUITIES (COST $5,588,825) 5,618,137 99.80 --------- ------ EQUITY FUNDS TAIWAN 3,750 Taiwan Fund 83,438 1.48 --------- ------ TOTAL EQUITY FUNDS (COST $78,471) 83,438 1.48 --------- ------ TOTAL INVESTMENTS (COST $5,667,296**) 5,701,575 101.28 NET CURRENT LIABILITIES (72,316) (1.28) --------- ------ TOTAL NET ASSETS 5,629,259 100.00 ========= ====== * Non-income producing security. ** Cost for federal income tax purposes is $5,706,509. Glossary of Terms: ADR - American Depository Receipt GDR - Global Depository Receipt GDS - Global Depository Shares FR - Foreign Registered See notes to financial statements. 32 - -------------------------------------------------------------------------------- GAM ASIAN CAPITAL FUND - STATEMENT OF INVESTMENTS (CONTINUED) - -------------------------------------------------------------------------------- GEOGRAPHIC ANALYSIS AS AT 31ST DECEMBER, 1996 [The following table represents a chart in the printed piece.] NET CURRENT LIABILITIES (1.28)% INDONESIA 6.69% THAILAND 5.29% TAIWAN 6.08% NEW ZEALAND 4.65% MALAYSIA 4.07% JAPAN 2.10% SINGAPORE 8.12% HONG KONG 64.28% 33 - -------------------------------------------------------------------------------- GAMERICA CAPITAL FUND - -------------------------------------------------------------------------------- FUND MANAGEMENT - -------------------------------------------------------------------------------- - --------------- [Photo] - --------------- GORDON GRENDER, DIRECTOR, HAS BEEN ASSOCIATED WITH THE GAM GROUP SINCE 1983. HE HAS BEEN ACTIVELY INVOLVED IN FUND MANAGEMENT IN NORTH AMERICAN STOCK MARKETS SINCE 1974. HE COMMENCED MANAGEMENT OF GAMERICA CAPITAL FUND ON MAY 12, 1995. MR. GRENDER ALSO MANAGES GAMERICA INC., AN OFFSHORE FUND WITH SIMILAR INVESTMENT OBJECTIVES. The Fund's investment objective is long-term capital appreciation, generally through investment in equity securities issued by companies with principal offices in the United States. However, if the Fund determines that the long-term capital appreciation of debt securities may equal or exceed the return on equity securities, it may be substantially invested in debt securities of companies and governments, their agencies and instrumentalities. Any income realized by the Fund on its investments will be incidental to its goal of long-term capital appreciation. REPORT TO SHAREHOLDERS - -------------------------------------------------------------------------------- THE FACTS
GAMerica Capital (after Average maximum S&P 1 Month GAMerica sales load Comp Deposit Capital of 5%) Index Rate 31st Dec, 96 US$10.82 740.74 - --------------------------------------------------------------------------------------------- % % % % - --------------------------------------------------------------------------------------------- Quarter to Dec, 96 -5.97 -10.67 +8.34 +1.31 - --------------------------------------------------------------------------------------------- Jan -- Dec, 1996 +18.31 +12.40 +22.95 +5.37 - --------------------------------------------------------------------------------------------- Average annual total return:- - --------------------------------------------------------------------------------------------- 1 year to Dec, 1996 +18.31 +12.40 +22.95 +5.37 - --------------------------------------------------------------------------------------------- Since inception +11.73 +8.28 +26.14 +5.59 - ---------------------------------------------------------------------------------------------
Performances are calculated on a total return basis. During the year, a dividend was paid of US$1.01. The Fund's inception was on 12th May, 1995. Indications of past performance are not necessarily indicative of future performance. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. 34 - -------------------------------------------------------------------------------- GAMERICA CAPITAL FUND -- REPORT TO SHAREHOLDERS (CONTINUED) - -------------------------------------------------------------------------------- [CHART] NOTE: The graph compares the performance results of a hypothetical $10,000 investment in the Fund and a comparable index. The performance of the Fund is also shown after adjustment to reflect the maximum sales load, which is waived for certain investors. The performance of the index does not reflect brokerage commissions and other expenses that would be incurred to acquire a comparable portfolio of securities. - ---------- Sources used are the net asset value of the Fund which is computed daily and Datastream. THE COMMENT The US Stock Market experienced another exceptional year with continued large gains in corporate profits and sustained lower interest rates. After a sharp correction in the market in July, the S&P 500 posted gains of 23% by year end, including reinvested dividends. Large capitalization stocks accounted for a significant part of this gain, with the energy, financial and technology sectors leading the market. The Fund, which commenced operations in mid-1995, started the year with assets of approximately $2 million and a 25% cash position. By year end, the portfolio was fully invested through strategic selection of several positions in small to large capitalization issues. Existing holdings were largely unchanged. Individual issues in the portfolio performed on average in line with the market. Both the Fund's small asset base as well as its weightings in small and mid-cap issues contributed to the Fund's underperformance of the index. - ---------- A Plan of Distribution (12b-1 plan), as proposed by your Fund's directors, was approved by the Class A shareholders of each Series of the Fund in 1996. The 12b-1 plan calls for your Fund to pay the Fund's distributor up to 0.30% of its average net assets to finance distribution and servicing related activities engaged in by the distributor and third party financial intermediaries for the benefit of the Fund and its shareholders. 35 - -------------------------------------------------------------------------------- GAMERICA CAPITAL FUND -- STATEMENT OF INVESTMENTS - -------------------------------------------------------------------------------- AS AT 31ST DECEMBER, 1996 MARKET % VALUE OF HOLDINGS DESCRIPTION US$ NET ASSETS - -------------------------------------------------------------------------------- EQUITIES BEVERAGES & TOBACCO 2,000 American Brands 99,251 5.16 --------- ------ 99,251 5.16 --------- ------ BUSINESS & PUBLIC SERVICES * 13,000 Professional Staff ADR 113,750 5.91 * 26,400 Titan Corp. 89,100 4.63 --------- ------ 202,850 10.54 --------- ------ CONSTRUCTION & HOUSING * 6,250 Palm Harbor Homes 175,001 9.10 --------- ------ 175,001 9.10 --------- ------ ELECTRICAL & ELECTRONICS 2,500 AVX 53,750 2.79 --------- ------ 53,750 2.79 --------- ------ ENERGY SOURCES 3,000 Unocal 121,875 6.33 --------- ------ 121,875 6.33 --------- ------ FOOD & HOUSEHOLD PRODUCTS 3,150 Archer-Daniels-Midland 69,301 3.60 --------- ------ 69,301 3.60 --------- ------ HEALTH & PERSONAL CARE * 4,500 ClinTrials Research 102,375 5.32 8,000 Intimate Brands A 136,000 7.07 * 5,000 Regency Health Services 48,125 2.50 * 30,000 Unilab 13,125 0.68 --------- ------ 299,625 15.57 --------- ------ INDUSTRIAL COMPONENTS * 12,000 Foamex International 198,000 10.29 --------- ------ 198,000 10.29 --------- ------ INSURANCE 3,000 USLIFE 99,751 5.19 --------- ------ 99,751 5.19 --------- ------ MERCHANDISING * 6,000 Best Buy 63,750 3.31 10,000 Fred's A 86,250 4.48 2,000 Mercantile Stores 98,750 5.13 * 5,000 Party City 85,000 4.42 * 12,500 Sports & Recreation 96,875 5.04 --------- ------ 430,625 22.38 --------- ------ TELECOMMUNICATIONS * 6,000 WorldCom 156,375 8.13 --------- ------ 156,375 8.13 --------- ------ TOTAL EQUITIES (COST $1,730,650) 1,906,404 99.08 --------- ------ TOTAL INVESTMENTS (COST $1,730,650 **) 1,906,404 99.08 NET CURRENT ASSETS 17,606 0.92 --------- ------ TOTAL NET ASSETS 1,924,010 100.00 ========= ====== * Non-income producing security. ** Cost for federal income tax purposes is identical. Glossary of Terms: ADR - American Depository Receipt See notes to financial statements. 36 - -------------------------------------------------------------------------------- GAM FUNDS, INC. -- PORTFOLIO ANALYSIS - -------------------------------------------------------------------------------- AS AT 31ST DECEMBER, 1996 (UNAUDITED)
-------------------------------------------------------------------------------------- GAM GAM GAM GAM GAM GAM GAM Pacific Japan North Asian GAMerica International Global Europe Basin Capital America Capital Capital % % % % % % % % -------------------------------------------------------------------------------------- ANALYSIS, BY GEOGRAPHICAL AREA: Australia -- -- -- 9.60 -- -- -- -- Belgium 1.72 -- 1.41 China -- -- -- -- -- -- -- -- Denmark 1.92 Finland -- -- 0.85 France 6.95 1.67 26.92 -- -- -- -- -- Germany 12.69 6.19 9.84 -- -- -- -- -- Hong Kong 13.67 10.79 -- 26.52 -- -- 64.28 -- Hungary -- -- 1.04 Indonesia -- -- -- 6.90 -- -- 6.69 -- Italy -- -- 3.07 -- -- -- -- -- Japan 14.65 6.31 -- 28.94 92.92 -- -- -- Korea -- -- -- 4.73 -- -- 2.10 -- Malaysia 1.20 -- -- 3.13 -- -- 4.07 -- Netherlands 10.51 7.02 14.21 -- -- -- -- -- New Zealand -- -- -- 1.39 -- -- 4.65 -- Norway -- -- 4.74 -- -- -- -- -- Philippines -- -- -- 5.16 -- -- -- -- Singapore 2.08 1.55 -- 8.35 -- -- 8.12 -- Spain 3.08 -- 3.29 -- -- -- -- -- Sweden 1.79 1.47 8.42 -- -- -- -- -- Switzerland 7.70 6.64 7.85 -- -- -- -- -- Taiwan -- -- -- -- -- -- 6.08 -- Thailand -- -- -- 7.37 -- -- 5.29 -- United Kingdom 22.23 11.54 19.43 -- -- -- -- -- United States -- 45.77 -- -- -- 100.09 -- 93.17 Other Areas -- -- -- -- -- 0.90 -- 5.91 ------ ------ ------ ------ ------ ------ ------ ------ Total Investments 100.19 98.95 101.07 102.09 92.92 100.99 101.28 99.08 Other/Net current assets/(liabilities) (0.19) 1.05 (1.07) (2.09) 7.08 (0.99) (1.28) 0.92 ------ ------ ------ ------ ------ ------ ------ ------ Total Net Assets 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 ====== ====== ====== ====== ====== ====== ====== ====== ANALYSIS, BY SECTOR: Aerospace & Military Technology -- -- -- -- -- 0.10 -- -- Appliances & Household Durables 3.00 1.48 -- 5.82 5.56 -- 1.31 -- Automobiles -- -- -- 2.04 2.13 3.05 0.79 -- Banking 22.50 19.67 11.79 20.66 2.39 7.22 14.01 -- Beverages/Tobacco -- 2.26 1.94 -- -- 15.84 -- 5.16 Broadcasting & Publishing 1.50 -- 8.23 0.75 0.32 2.08 -- -- Building Materials & Components -- 1.23 2.07 2.73 0.45 -- -- -- Business & Public Services 6.24 4.17 5.57 3.34 4.06 -- 1.00 10.54 Chemicals 1.32 -- 3.13 -- 3.04 4.64 7.22 -- Construction & Housing -- 1.09 1.91 -- 0.77 -- 1.75 9.10 Data Processing & Reproduction 3.03 1.95 -- 3.12 4.85 1.52 -- -- Electrical & Electronics -- -- -- 1.03 4.35 5.72 3.46 2.79 Electronic Comp & Instruments 3.71 5.13 -- 1.76 8.85 5.30 1.14 --
37 - -------------------------------------------------------------------------------- GAM FUNDS, INC. -- PORTFOLIO ANALYSIS (CONTINUED) - -------------------------------------------------------------------------------- AS AT 31ST DECEMBER, 1996 (UNAUDITED)
-------------------------------------------------------------------------------------- GAM GAM GAM GAM GAM GAM GAM Pacific Japan North Asian GAMerica International Global Europe Basin Capital America Capital Capital % % % % % % % % ----------------------------------------------------------------------------------- ANALYSIS BY SECTOR, (CONTINUED): Energy Sources -- -- 6.89 3.83 -- 7.04 -- 6.33 Financial Services 4.53 14.08 0.66 6.29 14.39 1.78 5.00 -- Fixed Interest 8.86 5.18 -- -- -- -- -- -- Fixed Interest Options -- -- -- -- -- -- -- -- Fixed Interest Warrants 2.64 3.16 -- -- -- -- -- -- Food & Household Products 0.84 -- 4.29 0.69 -- 4.72 -- 3.60 Forest Products & Paper -- -- 1.41 1.39 -- -- -- -- Gold Mines -- -- -- -- -- -- -- -- Health & Personal Care 12.18 18.10 12.11 -- 4.89 21.84 -- 15.57 Index Futures 0.21 0.59 -- -- -- -- -- -- Industrial Components -- -- 1.90 -- 0.20 1.35 -- 10.29 Insurance 6.65 6.13 3.80 1.20 4.61 1.61 1.82 5.19 Investment Funds -- -- -- -- -- -- 1.48 -- Leisure & Tourism -- -- -- 1.87 1.71 2.50 7.58 -- Machinery & Engineering 1.20 -- 9.87 -- 4.14 1.29 -- -- Merchandising 2.46 3.47 4.47 3.65 16.66 1.29 -- 22.38 Metals-- Non-Ferrous 1.28 1.00 1.62 5.77 -- -- -- -- Metals-- Steel -- 1.03 3.03 -- -- -- -- -- Misc. Materials & Commodities -- -- -- 1.47 -- -- 2.13 -- Multi-Industry 3.75 -- 3.51 4.44 -- 7.06 11.47 -- Real Estate 8.09 4.96 1.84 17.40 1.27 -- 24.61 -- Recreation, Other Consumer Goods -- -- 1.44 2.25 3.27 1.37 -- -- Telecommunications 0.83 1.50 3.07 6.59 2.50 1.45 2.94 8.13 Transportation-- Airlines -- -- -- -- -- -- -- -- Transportation-- Road & Rail 1.75 1.52 2.09 0.91 1.71 2.22 -- -- Transportation-- Shipping -- -- -- -- -- -- 2.52 -- Utilities-- Electrical & Gas 3.62 1.25 3.58 3.09 0.37 -- 6.19 -- Wholesale & International Trade -- -- 0.85 -- 0.43 -- 4.86 -- Other Industries -- -- -- -- -- -- -- -- ------ ------ ------ ------ ------ ------ ------ ------ Total Investments 100.19 98.95 101.07 102.09 92.92 100.99 101.28 99.08 Other/Net current assets/(liabilities) (0.19) (1.05) (1.07) (2.09) 7.08 (0.99) (1.28) 0.92 ------ ------ ------ ------ ------ ------ ------ ------ Total Net Assets 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 ====== ====== ====== ====== ====== ====== ====== ====== ANALYSIS, BY INVESTMENT: Equities 86.41 86.04 98.52 101.01 90.85 100.09 99.80 99.08 Bonds 8.86 5.18 -- -- -- -- -- -- Convertibles -- -- -- -- -- -- -- -- Futures -- -- -- -- -- -- -- -- Equity Warrants 0.01 0.01 0.02 1.08 0.76 -- -- -- Options -- -- -- -- -- -- -- -- Bond Warrants 2.64 3.16 -- -- -- -- -- -- Adjustable Rate Index Notes 2.27 4.56 -- -- -- -- -- -- Equity Funds -- -- -- -- -- -- 1.48 -- Preferred Shares -- -- 2.53 -- 1.31 0.90 -- -- ------ ------ ------ ------ ------ ------ ------ ------ Total Investments 100.19 98.95 101.07 102.09 92.92 100.99 101.28 99.08 Other/Net current assets/(liabilities) (0.19) 1.05 (1.07) (2.09) 7.08 (0.99) (1.28) 0.92 ------ ------ ------ ------ ------ ------ ------ ------ Total Net Assets 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 ====== ====== ====== ====== ====== ====== ====== ======
38 - -------------------------------------------------------------------------------- GAM FUNDS, INC. -- STATEMENTS OF ASSETS AND LIABILITIES - -------------------------------------------------------------------------------- AT 31ST DECEMBER, 1996
GAM GAM GAM GAM Pacific International Global Europe Basin -------------------------------------------------------------------- ASSETS (in US$) Investments in securities at value $1,050,491,997 $20,183,605 $25,397,695 $52,765,239 Cash 243,439 307,621 -- -- Cash-- Foreign currencies 24,679,179 -- 81,923 3,187,489 Receivables: Securities sold 22,973,389 586,331 77,573 4,007,154 Capital shares sold 4,012,689 4,028 7,017 231,641 Dividends, interest and other 7,611,059 114,993 105,254 110,026 Net equity in foreign currency exchange contracts (Note 6) 2,364,336 134,158 -- 783,429 Deferred organizational expenses and other assets 1,347 -- -- -- -------------- ----------- ----------- ----------- TOTAL ASSETS 1,112,377,435 21,330,736 25,669,462 61,084,978 -------------- ----------- ----------- ----------- LIABILITIES Due to Custodian -- -- 223,834 5,502,314 Payables: Securities purchased 58,330,988 719,959 81,815 3,221,724 Capital shares redeemed 1,894,289 110,371 80,005 377,739 Net equity in foreign currency exchange contracts (Note 6) -- -- 43,277 -- Accrued management fee 2,491,152 50,079 65,276 154,012 Accrued distribution fee 468,868 10,720 12,845 32,422 Accrued expenses and other 656,806 41,344 35,005 110,954 -------------- ----------- ----------- ----------- TOTAL LIABILITIES 63,842,103 932,473 542,057 9,399,165 -------------- ----------- ----------- ----------- NET ASSETS $1,048,535,332 $20,398,263 $25,127,405 $51,685,813 ============== =========== =========== =========== SOURCE OF NET ASSETS Net capital paid in on shares of capital stock $ 918,545,454 $16,609,034 $20,432,750 $53,917,920 Accumulated net investment income/(loss) 7,848,354 (90,362) 208,492 (264,594) Accumulated net realized gains/(losses) on investments and foreign currency transactions (4,551,076) 19,717 412,603 772,747 Net unrealized appreciation/(depreciation) 126,692,600 3,859,874 4,073,560 (2,740,260) -------------- ----------- ----------- ----------- NET ASSETS $1,048,535,332 $20,398,263 $25,127,405 $51,685,813 ============== =========== =========== =========== CLASS A SHARES OUTSTANDING 43,624,803 1,364,575 2,119,727 3,263,162 CLASS A NET ASSETS $1,009,819,290 $19,582,798 $25,127,405 $49,807,635 Net asset value and redemption value per share (Note 4) $23.15 $14.35 $11.85 $15.26 Offering price per share (100/95 x net asset value per share reduced on sales of $100,000 or more) $24.37 $15.11 $12.47 $16.06 CLASS D SHARES OUTSTANDING 1,677,964 57,348 123,601 CLASS D NET ASSETS $ 38,716,042 $ 815,465 $ 1,878,178 Net asset value and redemption value per share (Note 4) $23.07 $14.22 $15.20 Offering price per share (100/96.5 x net asset value per share reduced on sales of $100,000 or more) $23.91 $14.74 $15.75 Identified cost of investments $ 925,779,673 $16,455,183 $21,284,220 $56,276,816
See notes to financial statements. 39 - -------------------------------------------------------------------------------- GAM FUNDS, INC. -- STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) - -------------------------------------------------------------------------------- AT 31ST DECEMBER, 1996
GAM GAM GAM Japan North Asian GAMerica Capital America Capital Capital -------------------------------------------------------------------- ASSETS (in US$) Investments in securities at value $ 33,918,703 $ 5,910,984 $ 5,701,575 $ 1,906,404 Cash 1,993,865 -- -- -- Cash-- Foreign currencies 113,562 -- 30,353 -- Receivables: Securities sold 216,418 -- 49,696 108,441 Capital shares sold 43,183 43 -- -- Dividends, interest and other 4,421 10,786 11,190 870 Net equity in foreign currency exchange contracts (Note 6) 652,235 -- -- -- Deferred organizational expenses and other assets 17,295 52 18,748 18,765 ------------ ----------- ----------- ----------- TOTAL ASSETS 36,959,682 5,921,865 5,811,562 2,034,480 ------------ ----------- ----------- ----------- LIABILITIES Due to Custodian -- 21,956 101,896 96,799 Payables: Securities purchased 75,193 -- 47,405 -- Capital shares redeemed 223,405 -- 4,138 -- Accrued management fee 101,199 29,322 -- -- Accrued distribution fee 20,655 3,039 2,918 1,084 Accrued expenses and other 22,377 14,725 25,946 12,587 ------------ ----------- ----------- ----------- TOTAL LIABILITIES 442,829 69,042 182,303 110,470 ------------ ----------- ----------- ----------- NET ASSETS $ 36,516,853 $ 5,852,823 $ 5,629,259 $ 1,924,010 ============ =========== =========== =========== SOURCE OF NET ASSETS Net capital paid in on shares of capital stock $ 40,622,921 $ 3,899,139 $ 5,748,274 $ 1,712,447 Accumulated net investment income/(loss) (464,007) -- (129,251) -- Accumulated net realized gains/(losses) on investments and foreign currency transactions (600,140) 34,330 (23,991) 35,810 Net unrealized appreciation/(depreciation) (3,041,921) 1,919,354 34,227 175,753 ------------ ----------- ----------- ----------- NET ASSETS $ 36,516,853 $ 5,852,823 $ 5,629,259 $ 1,924,010 ============ =========== =========== =========== CLASS A SHARES OUTSTANDING 3,887,548 431,612 572,668 177,778 CLASS A NET ASSETS $36,516,853 $5,852,823 $5,629,259 $1,924,010 Net asset value and redemption value per share (Note 4) $9.39 $13.56 $9.83 $10.82 Offering price per share (100/95 x net asset value per share reduced on sales of $100,000 or more) $9.88 $14.27 $10.35 $11.39 Identified cost of investments $37,611,928 $3,991,629 $5,667,296 $1,730,650
See notes to financial statements. 40 - -------------------------------------------------------------------------------- GAM FUNDS, INC. -- STATEMENTS OF OPERATIONS - -------------------------------------------------------------------------------- FOR THE YEAR ENDED 31ST DECEMBER, 1996
GAM GAM GAM GAM Pacific International Global Europe Basin -------------------------------------------------------------------- INVESTMENT INCOME (in US$) Dividends (Note 5) $ 18,133,591 $ 397,950 $ 558,265 $ 1,062,409 Interest (Note 5) 18,641,259 302,123 21,966 130,565 -------------- ----------- ----------- ----------- 36,774,850 700,073 580,231 1,192,974 -------------- ----------- ----------- ----------- EXPENSES Investment advisory fee (Note 2) 8,746,443 206,365 270,703 710,064 Custodian fees and expenses 1,136,363 49,653 67,649 132,957 Transfer agent fees and expenses 531,258 13,201 13,123 37,004 Shareholder servicing fees 675,217 9,339 14,494 79,251 Distribution fee-- Class A (Note 2) 657,993 13,021 17,820 40,003 Distribution fee-- Class D (Note 2) 107,613 2,821 -- 8,526 Professional fees 61,339 37,917 31,430 35,764 Administrative expenses 1,154,069 42,967 38,230 109,712 Printing 107,501 8,434 1,984 3,227 Filing fees 195,637 54,696 32,063 54,608 Other 188,155 2,230 20,738 24,794 -------------- ----------- ----------- ----------- Total operating expenses 13,561,588 440,644 508,234 1,235,910 Interest expense 170,110 27,240 1,903 16,161 -------------- ----------- ----------- ----------- Total expenses 13,731,698 467,884 510,137 1,252,071 Fees paid indirectly (Note 2) (308,909) (4,157) (87,794) (195,850) -------------- ----------- ----------- ----------- Net expenses 13,422,789 463,727 422,343 1,056,221 -------------- ----------- ----------- ----------- Net investment income 23,352,061 236,346 157,888 136,753 -------------- ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS AND FOREIGN CURRENCY Net realized gain/(loss) from: Securities and futures 2,511,037 1,567,263 1,934,635 3,791,861 Foreign currency transactions (6,435,969) (24,542) 10,533 3,699,043 -------------- ----------- ----------- ----------- (3,924,932) 1,542,721 1,945,168 7,490,904 -------------- ----------- ----------- ----------- Unrealized appreciation/(depreciation) for the period: Securities and futures 78,655,406 286,126 2,492,941 (7,959,592) Foreign currency translation of assets and liabilities other than investments (2,856,714) 6,081 49,347 (1,040,868) -------------- ----------- ----------- ----------- 75,798,692 292,207 2,542,288 (9,000,460) -------------- ----------- ----------- ----------- Net gain/(loss) on investments and foreign currencies 71,873,760 1,834,928 4,487,456 (1,509,556) -------------- ----------- ----------- ----------- NET INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS $ 95,225,821 $ 2,071,274 $ 4,645,344 ($1,372,803) ============== =========== =========== ===========
See notes to financial statements. 41 - -------------------------------------------------------------------------------- GAM FUNDS, INC. - STATEMENTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- FOR THE YEAR ENDED 31ST DECEMBER, 1996
GAM GAM GAM Japan North Asian GAMerica Capital America Capital Capital -------------------------------------------------------------------- INVESTMENT INCOME (in US$) Dividends (Note 5) $ 135,904 $ 119,746 $ 124,254 $ 23,063 Interest (Note 5) 196,086 2,472 5,149 5,416 --------- ---------- -------- -------- 331,990 122,218 129,403 28,479 --------- ---------- -------- -------- EXPENSES Investment advisory fee (Note 2) 350,646 57,701 66,992 23,247 Custodian fees and expenses 94,288 6,228 48,220 13,735 Transfer agent fees and expenses 18,327 3,227 3,560 1,544 Shareholder servicing fees 22,510 1,666 3,003 932 Distribution fee-- Class A (Note 2) 27,979 4,139 4,039 1,501 Professional fees 25,749 19,683 23,013 18,598 Administrative expenses 47,544 6,126 10,692 1,767 Printing 7,534 3,782 2,925 4,106 Amortization of organization costs 6,599 -- 7,521 7,521 Filing fees 30,978 29,591 54,765 55,158 Other 11,375 14,104 12,368 11,618 Total operating expenses 643,529 146,247 237,098 139,727 Expenses reimbursed (Note 2) -- -- (40,389) (23,247) Interest expense -- 1,167 1,798 3,153 --------- ---------- -------- -------- Total expenses 643,529 147,414 198,507 119,633 --------- ---------- -------- -------- Fees paid indirectly (Note 2) (138,489) (3,349) (19,009) (3,208) --------- ---------- -------- -------- Net expenses 505,040 144,065 179,498 116,425 --------- ---------- -------- -------- Net investment loss (173,050) (21,847) (50,095) (87,946) --------- ---------- -------- -------- REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS AND FOREIGN CURRENCY Net realized gain/(loss) from: Securities 262,410 562,745 (88,209) 292,631 Foreign currency transactions 3,149,416 -- 3,656 -- --------- ---------- -------- -------- 3,411,826 562,745 (84,553) 292,631 --------- ---------- -------- -------- Unrealized appreciation/(depreciation) for the period: Securities (4,203,364) 710,420 235,542 175,800 Foreign currency translation of assets and liabilities other than investments 122,424 -- (161) -- --------- ---------- -------- -------- (4,080,940) 710,420 235,381 175,800 --------- ---------- -------- -------- Net gain/(loss) on investments and foreign currencies (669,114) 1,273,165 150,828 468,431 --------- ---------- -------- -------- NET INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS ($842,164) $1,251,318 $100,733 $380,485 ========= ========== ======== ========
See notes to financial statements. 42 - -------------------------------------------------------------------------------- GAM FUNDS, INC. -- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
GAM International GAM Global GAM Europe ------------------------------ -------------------------- -------------------------- For the year For the year For the year For the year For the year For the year ended ended ended ended ended ended 31st Dec., 31st Dec., 31st Dec., 31st Dec., 31st Dec., 31st Dec., 1996 1995 1996 1995 1996 1995 ------------------------------------------------------------------------------------------ INCREASE/(DECREASE) IN NET ASSETS FROM: Operations Net investment income $23,352,061 $12,014,169 $236,346 $615,585 $157,888 $151,856 Net realized gain/(loss) (3,924,932) 3,986,558 1,542,721 1,001,264 1,945,168 1,155,176 Unrealized appreciation for the year 75,798,692 55,707,766 292,207 4,216,239 2,542,288 1,365,769 -------------- ------------ ----------- ----------- ----------- ----------- Net increase in net assets from operations 95,225,821 71,708,493 2,071,274 5,833,088 4,645,344 2,672,801 Dividends paid to shareholders from: Net investment income Class A (3,931,303) (11,449,364) (104,667) (524,618) (12,643) (137,849) Class D (20,209) (164,760) (765) (6,086) -- (14,596) Net realized gain on investments Class A (1,784,396) (12,880,231) (1,034,220) (1,107,972) (709,600) -- Class D (63,253) (189,648) (43,139) (13,417) -- -- Capital share transactions (Note 4) 390,160,627 363,587,999 (6,945,972) 2,334,999 (1,757,129) (11,791,785) -------------- ------------ ----------- ----------- ----------- ----------- Total increase/(decrease) in net assets 479,587,287 410,612,489 (6,057,489) 6,515,994 2,165,972 (9,271,429) NET ASSETS Beginning of year 568,948,045 158,335,556 26,455,752 19,939,758 22,961,433 32,232,862 -------------- ------------ ----------- ----------- ----------- ----------- End of year $1,048,535,332 $568,948,045 $20,398,263 $26,455,752 $25,127,405 $22,961,433 ============== ============ =========== =========== =========== ===========
See notes to financial statements. 43 - -------------------------------------------------------------------------------- GAM FUNDS, INC. -- STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) - --------------------------------------------------------------------------------
GAM Pacific Basin GAM Japan CapitalGAM North America ------------------------------ -------------------------- -------------------------- For the year For the year For the year For the year For the year For the year ended ended ended ended ended ended 31st Dec., 31st Dec., 31st Dec., 31st Dec., 31st Dec., 31st Dec., 1996 1995 1996 1995 1996 1995 ------------------------------------------------------------------------------------------ INCREASE/(DECREASE) IN NET ASSETS FROM: Operations Net investment income/(loss) $136,753 ($30,461) ($173,050) ($135,428) ($21,847) $345 Net realized gain/(loss) 7,490,904 3,325,760 3,411,826 (961,998) 562,745 18,699 Unrealized appreciation/ (depreciation) for the year (9,000,460) (2,637,550) (4,080,940) 1,266,324 710,420 1,023,284 ----------- ----------- ----------- ----------- ---------- ---------- Net increase/(decrease) in net assets from operations (1,372,803) 657,749 (842,164) 168,898 1,251,318 1,042,328 Dividends paid to shareholders from: Net investment income Class A (2,363,071) -- (2,786,341) (22,428) -- (22) Class D (73,778) -- -- -- -- -- Net realized gain on investments Class A (3,041,344) (4,120,556) (326,642) (12,278) (506,891) (18,699) Class D (101,996) (69,502) -- -- -- -- Capital share transactions (Note 4) 3,147,400 10,496,400 26,871,997 4,059,662 (872,358) 3,070,513 ----------- ----------- ----------- ----------- ---------- ---------- Total increase/(decrease) in net assets (3,805,592) 6,964,091 22,916,850 4,193,854 (127,931) 4,094,120 NET ASSETS Beginning of year 55,491,405 48,527,314 13,600,003 9,406,149 5,980,754 1,886,634 ----------- ----------- ----------- ----------- ---------- ---------- End of year $51,685,813 $55,491,405 $36,516,853 $13,600,003 $5,852,823 $5,980,754 =========== =========== =========== =========== ========== ==========
See notes to financial statements. 44 - -------------------------------------------------------------------------------- GAM FUNDS, INC. -- STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) - --------------------------------------------------------------------------------
GAM Asian Capital GAMerica Capital ------------------------------ ------------------------------ For the year For the period For the year For the period ended ended ended ended 31st Dec., 31st Dec., 31st Dec., 31st Dec., 1996 1995+ 1996 1995+ ---------------------------------------------------------------------- INCREASE/(DECREASE) IN NET ASSETS FROM: Operations Net investment income/(loss) ($50,095) ($4,819) ($87,946) $22,039 Net realized gain/(loss) (84,553) 19,945 292,631 12,000 Unrealized appreciation/ (depreciation) for the period 235,381 (201,154) 175,800 (47) ---------- ---------- ---------- ---------- Net increase/(decrease)in net assets from operations 100,733 (186,028) 380,485 33,992 Dividends paid to shareholders from: Net investment income Class A -- -- -- (21,207) Net realized gain on investments Class A (8,786) (25,963) (169,707) (12,000) Capital share transactions (Note 4) (23,103) 5,772,406 (1,316,024) 3,028,471 ---------- ---------- ---------- ---------- Total increase/(decrease) in net assets 68,844 5,560,415 (1,105,246) 3,029,256 NET ASSETS Beginning of period 5,560,415 -- 3,029,256 -- ---------- ---------- ---------- ---------- End of period $5,629,259 $5,560,415 $1,924,010 $3,029,256 ========== ========== ========== ==========
+ Period from 12th May, 1995 (Commencement of Operations) to 31st December,1995. See notes to financial statements. 45 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1. SIGNIFICANT ACCOUNTING POLICIES GAM Funds, Inc. (the "Company"), is an open-end diversified investment company registered under the Investment Company Act of 1940 comprised of eight portfolios: GAM International Fund, GAM Global Fund, GAM Europe Fund, GAM Pacific Basin Fund, GAM Japan Capital Fund, GAM North America Fund, GAM Asian Capital Fund, and GAMerica Capital Fund (the "Funds"). Each Fund seeks long-term capital appreciation by investing primarily in equity securities. GAM International Fund invests primarily in securities of companies in Europe, the Pacific Basin and Canada. GAM Global Fund invests primarily in securities of companies in the United States, Europe, the Pacific Basin and Canada. GAM Europe Fund invests primarily in securities of companies in Europe. GAM Pacific Basin Fund invests primarily in securities of companies in the Pacific Basin. GAM Japan Capital Fund invests primarily in securities of companies in Japan. GAM North America Fund invests primarily in securities of companies in the United States and Canada. GAM Asian Capital Fund invests primarily in securities of companies in Asia excluding Japan. GAMerica Capital Fund invests primarily in securities of companies in the United States. The Funds offer Class A and Class D shares; however, Class D shares currently are available only for GAM International Fund, GAM Global Fund and GAM Pacific Basin Fund. Class A shares are sold with a front-end sales charge of up to 5% and Class D shares are sold with a front-end sales charge of up to 3.5%. The two classes of shares have identical voting, dividend, liquidation and other rights, except that each class bears its separate distribution and certain class expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required by federal or state law. The following is a summary of significant accounting policies followed in the preparation of the Company's financial statements. VALUATION OF SECURITIES Investment securities are stated at value based on the last sale price on the exchange on which the securities are traded, or, lacking any sales, at the last available bid price. Securities traded in the over-the-counter market are valued at the last available bid price. Short-term securities maturing in 60 days or less are valued on an amortized cost basis which approximates market value. Other securities for which market quotations are not readily available are valued at fair value as determined by or under the direction of the Board of Directors. FOREIGN CURRENCY Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into US dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into US dollar amounts on the respective dates of such transactions. The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Funds' books, and the US dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal period end, resulting from changes in the exchange rate. 46 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- FOREIGN CURRENCY CONTRACTS Each Fund may enter into forward foreign currency exchange contracts primarily in order to hedge against foreign currency exchange rate risks on the non-US dollar denominated investment securities. These contracts are valued daily and the Funds' equity therein, representing unrealized gain or loss on the contracts, is included in the Statement of Assets and Liabilities. Realized and unrealized gains and losses are included in the Statement of Operations. FUTURES CONTRACTS Initial margin deposits made with respect to futures contracts traded on domestic exchanges are maintained by the Funds' custodian in segregated asset accounts. Initial margin deposits made upon entering into futures contracts traded on foreign exchanges are recognized as assets due from the broker (the Funds' agent in acquiring the futures positions). Subsequent changes in the daily valuation of open contracts are recognized as unrealized gains or losses. Variation margin payments are made or received on domestically traded futures as appreciation or depreciation in the value of these contracts occurs. Realized gains or losses are recorded when a contract is closed. FEDERAL INCOME TAXES It is each Fund's policy to satisfy the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to shareholders. Therefore, no provision for Federal income taxes is required. DISTRIBUTIONS TO SHAREHOLDERS Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for futures transactions, foreign currency transactions, passive foreign investment companies (PFIC), capital loss carryforwards and losses deferred due to wash sales and excise tax regulations. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital and may affect the per share distribution between net investment income and realized and unrealized gain/(loss). The calculation of Net Investment Income per share in the Selected Financial Information excludes these adjustments. Undistributed net investment income/(loss) and accumulated undistributed net realized gain/(loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. DEFERRED ORGANIZATION EXPENSES Organization costs for GAM Japan Capital Fund, GAM Asian Capital Fund and GAMerica Capital Fund have been deferred and are being amortized on a straight-line basis over a five-year period from each Fund's commencement of operations. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates. OTHER Securities transactions are recorded on the trade date basis. Interest is accrued on a daily basis and market discount is accreted on a straight-line basis. Dividend income is recorded on the ex-dividend date, except that certain dividends on foreign securities are recorded as soon as information is available to the Fund. 47 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- NOTE 2. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES The Investment Adviser, GAM International Management Limited, receives a fee under its agreement with the Company equivalent to 1% per annum of each Fund's average daily net assets, except for GAM North America Fund. With respect to GAM North America Fund, GAM International Management Limited and Fayez Sarofim & Co. serve as co-investment advisers to the Fund. Each co-adviser receives a fee under its agreement equivalent to 0.50% per annum of the Fund's average daily net assets. For the year ended 31st December, 1996, waivers of management fees by the Investment Adviser amounted to $40,389 and $23,247 for the GAM Asian Capital Fund and GAMerica Capital Fund, respectively. For the year ended 31st December, 1996, fund expenses were reduced as follows under an expense offset arrangement with the Fund's custodian. Custodian fees and expenses reported in the Statement of Operations exclude these credits. The Funds could have invested a portion of the assets utilized in connection with the offset arrangements in an income-producing asset if they had not entered into such an arrangement.
GAM GAM GAM GAM GAM GAM GAM GAMERICA INTERNATIONAL GLOBAL EUROPE PACIFIC BASIN JAPAN CAPITAL NORTH AMERICA ASIAN CAPITAL CAPITAL ------------------------------------------------------------------------------------------------------------------- $308,909 $4,157 $87,794 $195,850 $138,489 $3,349 $19,009 $3,208
GAM Services, Inc. acts as principal underwriter of the Fund. For the year ended 31st December, 1996, GAM Services, Inc. received front-end sales load charges of $2,062,895 from the sale of the Funds' shares. Effective 5th September, 1995, the Funds adopted a Class D Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 which provides for payments by the Funds to GAM Services at the annual rate of up to 0.50% of each applicable Fund's average net assets attributable to Class D shares. Effective 9th October, 1996, the Funds adopted a Class A Distribution Plan pursuant to this rule which provides for payments by the Funds to GAM Services at the annual rate of up to .30% of each applicable Fund's average net assets attributable to Class A shares. NOTE 3. DIRECTORS FEES The Funds do not pay any compensation to their officers or to any directors, officers or employees of GAM International Management Limited, GAM Services Inc. or their affiliates, other than registered investment companies. Each disinterested director is compensated by each Fund as follows:
GAM GAM GAM GAM GAM GAM GAM GAMERICA INTERNATIONAL GLOBAL EUROPE PACIFIC BASIN JAPAN CAPITAL NORTH AMERICA ASIAN CAPITAL CAPITAL ------------------------------------------------------------------------------------------------------------------------------ Annual Retainer $625 $625 $625 $625 $625 $625 $625 $625 Meeting Fee 63 63 63 63 63 63 63 63
NOTE 4. CAPITAL STOCK The Company declared a 10-for-1 stock split to shareholders of record as of 19th December, 1995. All per share data have been restated to reflect the stock split. At 31st December, 1996, GAM Funds, Inc. had 700,000,000 shares of common stock, $0.001 par value authorized which were allocated to each Fund as follows: 150,000,000 and 50,000,000 shares respectively, were allocated to each of Class A and Class D of GAM International, 50,000,000 and 25,000,000 shares respectively, were allocated to Class A and Class D of GAM Global, GAM Europe, GAM Pacific Basin and GAM North America, 25,000,000 shares were allocated to each of Class A and Class D of GAMerica Capital Funds, while 45,000,000 and 12,500,000 shares respectively were allocated to each of Class A and Class D of GAM Japan Capital and GAM Asian Capital Funds. Changes in each Fund's capital stock are summarized as follows: 48 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - --------------------------------------------------------------------------------
GAM INTERNATIONAL FUND For the Periods ---------------------------------------------------------- 01--Jan--96 to 31--Dec--96 01--Jan--95 to 31--Dec--95 Shares US$ Shares US$ ---------- ----------- ---------- ----------- CLASS A Shares sold 33,365,859 692,156,317 3,534,378 442,230,411 Shares issued on reinvestment of dividends 219,386 4,843,204 1,043,909 22,078,675 Shares issued on 10-for-1 split -- -- 21,450,499 -- Shares redeemed (16,170,479) (333,081,923) (739,009) (109,514,578) ---------- ----------- ---------- ----------- Net increase 17,414,766 363,917,598 25,289,777 354,794,508 ========== =========== ========== =========== CLASS D* Shares sold 1,461,453 30,255,446 112,790 8,456,005 Shares issued on reinvestment of dividends 3,688 78,975 16,239 342,978 Shares issued on 10-for-1 split -- -- 279,205 -- Shares redeemed (195,341) (4,091,392) (70) (5,492) ---------- ----------- ---------- ----------- Net increase 1,269,800 26,243,029 408,164 8,793,491 ========== =========== ========== ===========
- ---------- *Class D shares were offered for sale on 5th September, 1995.
GAM GLOBAL FUND For the Periods ---------------------------------------------------------- 01--Jan--96 to 31--Dec--96 01--Jan--95 to 31--Dec--95 Shares US$ Shares US$ ---------- ----------- ---------- ----------- CLASS A Shares sold 899,878 11,907,144 176,192 14,991,450 Shares issued on reinvestment of dividends 64,567 915,513 107,361 1,440,975 Shares issued on 10-for-1 split -- -- 1,595,905 -- Shares redeemed (1,535,935) (20,228,744) (131,581) (14,398,980) ---------- ----------- -------- ----------- Net increase/(decrease) (571,490) (7,406,087) 1,747,877 2,033,445 ========== =========== ========= =========== CLASS D* Shares sold 54,061 697,624 2,161 297,998 Shares issued on reinvestment of dividends 2,735 38,450 267 3,556 Shares issued on 10-for-1 split -- -- 19,452 -- Shares redeemed (21,328) (275,959) -- -- ---------- ----------- -------- ----------- Net increase 35,468 460,115 21,880 301,554 ========== =========== ========= =========== - ---------- *Class D shares were offered for sale on 5th September, 1995.
49 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - --------------------------------------------------------------------------------
GAM EUROPE FUND For the Periods ---------------------------------------------------------- 01--Jan--96 to 31--Dec--96 01--Jan--95 to 31--Dec--95 Shares US$ Shares US$ ---------- ----------- ---------- ----------- CLASS A Shares sold 1,072,701 12,022,756 233,600 21,831,710 Shares issued on reinvestment of dividends 47,646 542,923 11,967 118,597 Shares issued on 10-for-1 split -- -- 2,085,855 -- Shares redeemed (1,287,490) (14,322,808) (416,953) (33,742,092) ---------- ----------- -------- ----------- Net increase/(decrease) (167,143) (1,757,129) 1,914,469 (11,791,785) ========== =========== ======== ===========
GAM PACIFIC BASIN FUND For the Periods ---------------------------------------------------------- 01--Jan--96 to 31--Dec--96 01--Jan--95 to 31--Dec--95 Shares US$ Shares US$ ---------- ----------- ---------- ----------- CLASS A Shares sold 2,466,475 43,289,379 498,192 40,004,218 Shares issued on reinvestment of dividends 265,013 4,074,012 131,648 3,512,026 Shares issued on 10-for-1 split -- -- 2,569,309 -- Shares redeemed (2,646,254) (44,771,351) (296,598) (34,613,472) ---------- ----------- -------- ----------- Net increase 85,234 2,592,040 2,902,551 8,902,772 ========== =========== ======== =========== CLASS D* Shares sold 53,648 907,532 8,706 1,524,125 Shares issued on reinvestment of dividends 1,072 17,934 4,120 69,503 Shares issued on 10-for-1 split -- -- 78,357 -- Shares redeemed (22,302) (370,106) -- -- ---------- ----------- -------- ----------- Net increase 32,418 555,360 91,183 1,593,628 ========== =========== ======== ===========
- ---------- * Class D shares were offered for sale on 5th September, 1995. 50 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - --------------------------------------------------------------------------------
GAM JAPAN CAPITAL FUND For the Periods ---------------------------------------------------------- 01--Jan--96 to 31--Dec--96 01--Jan--95 to 31--Dec--95 Shares US$ Shares US$ ---------- ----------- ---------- ----------- CLASS A Shares sold 4,134,008 43,069,239 161,092 12,534,772 Shares issued on reinvestment of dividends 232,747 2,201,623 262 24,645 Shares issued on 10-for-1 split -- -- 1,190,830 -- Shares redeemed (1,817,450) (18,398,865) (111,683) (8,499,755) ---------- ----------- -------- ---------- Net increase 2,549,305 26,871,997 1,240,501 4,059,662 ========== =========== ======== ==========
GAM NORTH AMERICA FUND For the Periods ---------------------------------------------------------- 01--Jan--96 to 31--Dec--96 01--Jan--95 to 31--Dec--95 Shares US$ Shares US$ ---------- ----------- ---------- ----------- CLASS A Shares sold 69,484 911,748 37,084 3,775,544 Shares issued on reinvestment of dividends 26,418 360,609 1,246 14,805 Shares issued on 10-for-1 split -- -- 463,269 -- Shares redeemed (165,717) (2,144,715) (20,808) (719,836) -------- ---------- ------- -------- Net increase/(decrease) (69,815) (872,358) 480,791 3,070,513 ======== ========== ======= ========
51 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - --------------------------------------------------------------------------------
GAM ASIAN CAPITAL For the Periods ---------------------------------------------------------- 01--Jan--96 to 31--Dec--96 12--MAY--95+ to 31--Dec--95 Shares US$ Shares US$ ---------- ----------- ---------- ----------- CLASS A Shares sold 414,332 4,143,499 70,020 6,737,939 Shares issued on reinvestment of dividends 146 1,512 2,417 22,746 Shares issued on 10-for-1 split -- -- 529,049 -- Shares redeemed (425,435) (4,168,114) (17,861) (988,279) ------------ ------------ ------------ ------------ Net increase/(decrease) (10,957) (23,103) 583,625 5,772,406 ============ ============ ============ ============
GAMERICA CAPITAL For the Periods ---------------------------------------------------------- 01--Jan--96 to 31--Dec--96 12--MAY--95+ to 31--Dec--95 Shares US$ Shares US$ ---------- ----------- ---------- ----------- CLASS A Shares sold 21,800 269,201 32,077 3,216,219 Shares issued on reinvestment of dividends 9,804 102,358 2,464 24,562 Shares issued on 10--for-1 split -- -- 279,569 -- Shares redeemed (155,887) (1,687,583) (12,049) (212,310) -------- ---------- ------- --------- Net increase/(decrease) (124,283) (1,316,024) 302,061 3,028,471 ======== ========== ======= =========
- ---------- + Commencement of operations. 52 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- NOTE 5. INVESTMENT TRANSACTIONS The cost of purchases and proceeds of sales of investment securities for the year ended 31st December, 1996 excluding short-term securities, were as follows:
GAM GAM GAM GAM GAM GAM GAM GAMERICA INTERNATIONAL GLOBAL EUROPE PACIFIC BASIN JAPAN CAPITAL NORTH AMERICA ASIAN CAPITAL CAPITAL ----------------------------------------------------------------------------------------------------------------------- In US$ Purchases $1,102,375,937 $20,449,369 $18,545,348 $42,902,863 $32,431,699 $486,573 $5,632,936 $597,500 Sales 664,117,735 27,832,649 18,180,676 31,070,692 6,206,720 1,856,842 5,107,635 1,415,502
Realized gains and losses are reported on an identified cost basis. At 31st December, 1996, the aggregate gross unrealized appreciation and depreciation of securities, based on cost for federal income taxes purposes, were as follows:
GAM GAM GAM GAM GAM GAM GAM GAMERICA INTERNATIONAL GLOBAL EUROPE PACIFIC BASIN JAPAN CAPITAL NORTH AMERICA ASIAN CAPITAL CAPITAL ----------------------------------------------------------------------------------------------------------------------- In US$ Appreciation $138,235,382 $3,885,773 $4,577,921 $4,639,756 $935,383 $1,943,088 $687,145 $396,446 Depreciation 13,732,862 160,014 468,982 8,340,304 5,010,889 23,733 692,079 220,692 Net $124,502,520 $3,725,759 $4,108,939 $(3,700,548) $(4,075,506) $1,919,355 $(4,934) $175,754
At 31st December, 1996, the Funds had tax basis net capital losses as follows. These losses may be carried over to offset future capital gains through the expiration dates shown:
GAM GAM GAM GAM GAM GAM GAM GAMERICA INTERNATIONAL GLOBAL EUROPE PACIFIC BASIN JAPAN CAPITAL NORTH AMERICA ASIAN CAPITAL CAPITAL ----------------------------------------------------------------------------------------------------------------------- In US$ $4,340,589 -- -- -- $507,841 -- -- -- Carryforward 31st Dec, -- -- -- 31st Dec, -- -- -- Expiration dates 2003--2004 -- -- -- 2003 -- -- --
Foreign taxes withheld from dividends and interest for the year ended 31st December 1996, were as follows:
GAM GAM GAM GAM GAM GAM GAM GAMERICA INTERNATIONAL GLOBAL EUROPE PACIFIC BASIN JAPAN CAPITAL NORTH AMERICA ASIAN CAPITAL CAPITAL ----------------------------------------------------------------------------------------------------------------------- In US$ Dividends $2,842,486 $43,916 $62,629 $112,254 $23,988 $53 $15,230 -- Interest 48,263 13,168 4,560 -- -- -- -- --
53 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- NOTE 6. FINANCIAL INSTRUMENTS During the period, several of the Funds have been party to financial instruments with off-balance sheet risks, including forward foreign currency contracts and futures contracts, primarily in an attempt to minimize the risk to the Fund, in respect of its portfolio transactions. These instruments involve market and/or credit risk in excess of the amount recognized in the Statement of Assets and Liabilities. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from movement in currency and securities values and interest rates. The contract amount indicates the extent of the Funds' involvement in such contracts. Forwards: When entering a forward currency contract, the Fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed upon price on an agreed upon future date. At 31st December, 1996 the Fund had outstanding forward contracts for the purchase and sale of currencies as set out below. The contracts are reported in the financial statements at the Fund's net equity, as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, or the date an offsetting position, if any, has been entered into. GAM INTERNATIONAL FUND
UNREALIZED APPRECIATION/ (DEPRECIATION) ---------- US$ 14,126,320,000 Japanese yen sold vs. 132,000,000 US$, 21st January, 1997 9,646,575 41,103,210 UK Pound sterling sold vs. 100,000,000 German Deutsche marks, 21st January, 1997 (5,182,611) 1,220,292,000 Spanish peseta sold vs. 14,143,394 German Deutsche marks, 27th January, 1997 (203,444) 45,233,983 UK Pound sterling sold vs. 110,000,000 German Deutsche marks, 27th January, 1997 (5,519,665) 27,600,000 Malaysian ringgit sold vs. 10,985,512 US$, 27th February, 1997 78,576 51,000,000 Swedish krona sold vs. 11,312,719 German Deutsche marks, 6th March, 1997 (269,585) 438,290,160 French francs sold vs. 129,000,000 German Deutsche marks, 26th March, 1997 (656,165) 103,940,500 Swiss francs sold vs. 83,000,000 US$, 17th April, 1997 4,470,655 ---------- Net equity in foreign currency exchange contracts $2,364,336 ==========
54 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- GAM GLOBAL FUND US$ 96,234,000 Japanese yen sold vs. 900,000 US$, 21st January, 1997 66,481 1,500,000 Swedish krona sold vs. 332,727 German Deutsche marks, 6th March, 1997 (7,929) 2,037,558 French francs sold vs. 600,000 German Deutsche marks, 26th March, 1997 (2,858) 1,616,810 Swiss francs sold vs. 1,300,000 US$, 17th April, 1997 78,464 -------- Net equity in foreign currency exchange contracts $134,158 ======== GAM EUROPE FUND US$ 35,000,000 French francs sold vs. 6,714,843 US$, 24th January, 1997 (41,462) 3,775,000 German Deutsche marks sold vs. 2,444,918 US$, 24th January, 1997 (12,571) 6,250,000 Netherland guilders sold vs. 3,611,151 US$, 24th January, 1997 (14,002) 2,625,000 Swiss francs sold vs. 1,991,063 US$, 24th January, 1997 24,758 -------- Net equity in foreign currency exchange contracts ($43,277) ======== GAM PACIFIC BASIN FUND US$ 1,987,740,000 Japanese yen sold vs. 18,000,000 US$, 21st January, 1997 783,429 -------- Net equity in foreign currency exchange contracts $783,429 ======== GAM JAPAN CAPITAL FUND US$ 336,171,000 Japanese yen sold vs. 3,050,000 US$, 7th January, 1997 155,717 772,940,000 Japanese yen sold vs. 7,000,000 US$, 17th January, 1997 309,234 956,505,000 Japanese yen sold vs. 8,500,000 US$, 3rd February, 1997 199,509 349,835,000 Japanese yen sold vs. 3,050,000 US$, 7th April, 1997 (12,704) 18,086,500 Japanese yen bought vs. 155,717 US$, 7th January, 1997 479 -------- Net equity in foreign currency exchange contracts $652,235 ======== At 31st December, 1996 the Funds had sufficient cash and/or securities to cover any commitments under these Contracts. 55 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- NOTE 7. SELECTED FINANCIAL INFORMATION
PER SHARE OPERATING PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS -------------------------------------- ----------------------------------- NET REALIZED DIVIDENDS DISTRIBUTIONS NET ASSET VALUE, NET AND UNREALIZED TOTAL FROM FROM NET FROM NET NET ASSET BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT REALIZED TOTAL VALUE, END OF PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD --------------------------------------------------------------------------------------------------------- 01--JAN--96 TO 31--DEC--96 US$ GAM International Class A US$ 21.37 0.57+ 1.34 1.91 (0.09) (0.04) (0.13) US$ 23.15 Class D US$ 21.35 0.45+ 1.32 1.77 (0.01) (0.04) (0.05) US$ 23.07 GAM Global Class A US$ 13.51 0.16+ 1.55 1.71 (0.08) (0.79) (0.87) US$ 14.35 Class D US$ 13.48 0.07+ 1.47 1.54 (0.01) (0.79) (0.80) US$ 14.22 GAM Europe Class A US$ 10.04 0.07+ 2.06 2.13 (0.01) (0.31) (0.32) US$ 11.85 GAM Pacific Basin Class A US$ 16.97 0.04+ (0.11) (0.07) (0.74) (0.90) (1.64) US$ 15.26 Class D US$ 16.96 (0.10)+ (0.11) (0.21) (0.65) (0.90) (1.55) US$ 15.20 GAM Japan Capital Class A US$ 10.16 (0.05)+ 0.07 0.02 (0.70) (0.09) (0.79) US$ 9.39 GAM North America Class A US$ 11.93 (0.05)+ 2.93 2.88 -- (1.25) (1.25) US$ 13.56 GAM Asian Capital Class A US$ 9.53 (0.07)+ 0.38 0.31 -- (0.01) (0.01) US$ 9.83 GAMerica Capital Class A US$ 10.03 (0.42)+ 2.22 1.80 -- (1.01) (1.01) US$ 10.82 01--JAN--95 TO 31--DEC--95 US$ GAM International Class A US$ 17.21 0.52 4.64 5.16 (0.47) (0.53) (1.00) US$ 21.37 Class D US$ 20.46 0.10 1.78 1.88 (0.46) (0.53) (0.99) US$ 21.35 GAM Global Class A US$ 10.60 0.35 3.48 3.83 (0.30) (0.62) (0.92) US$ 13.51 Class D US$ 13.46 -- 0.92 0.92 (0.28) (0.62) (0.90) US$ 13.48 GAM Europe Class A US$ 8.66 0.07 1.38 1.45 (0.06) (0.01) (0.07) US$ 10.04 GAM Pacific Basin Class A US$ 17.62 -- 0.61 0.61 -- (1.26) (1.26) US$ 16.97 Class D US$ 17.36 (0.02) 0.26 0.24 -- (0.64) (0.64) US$ 16.96 GAM Japan Capital Class A US$ 9.62 (0.07) 0.69 0.62 (0.05) (0.03) (0.08) US$ 10.16 GAM North America Class A US$ 9.14 -- 2.83 2.83 -- (0.04) (0.04) US$ 11.93 GAM Asian Capital** Class A US$ 10.00 (0.01) (0.42) (0.43) -- (0.04) (0.04) US$ 9.53 GAMerica Capital** Class A US$ 10.00 0.07 0.07 0.14 (0.07) (0.04) (0.11) US$ 10.03 01--JAN--94 TO 31--DEC--94 US$ GAM International US$ 23.90 0.34 (2.58) (2.24) (0.66) (3.79) (4.45) US$ 17.21 GAM Global US$ 17.92 0.19 (2.94) (2.75) (0.49) (4.08) (4.57) US$ 10.60 GAM Europe US$ 8.93 -- (0.27) (0.27) -- -- -- US$ 8.66 GAM Pacific Basin US$ 19.20 (0.05) 1.36 1.31 -- (2.89) (2.89) US$ 17.62 GAM Japan Capital* US$ 10.00 0.02 (0.40) (0.38) -- -- -- US$ 9.62 GAM North America US$ 12.80 0.04 0.23 0.27 (0.23) (3.70) (3.93) US$ 9.14
56 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS -------------------------------------- ----------------------------------- NET REALIZED DIVIDENDS DISTRIBUTIONS NET ASSET VALUE, NET AND UNREALIZED TOTAL FROM FROM NET FROM NET NET ASSET BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT REALIZED TOTAL VALUE, END OF PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD --------------------------------------------------------------------------------------------------------- 01--JAN--93 TO 31--DEC--93 US$ GAM International US$ 14.56 0.25 10.38 10.63 (0.34) (0.95) (1.29) US$ 23.90 GAM Global US$ 10.33 0.24 7.46 7.70 (0.11) -- (0.11) US$ 17.92 GAM Europe US$ 7.34 0.24 1.41 1.65 (0.06) -- (0.06) US$ 8.93 GAM Pacific Basin US$ 13.14 (0.03) 6.57 6.54 (0.04) (0.44) (0.48) US$ 19.20 GAM North America US$ 13.63 0.19 (0.46) (0.27) (0.07) (0.49) (0.56) US$ 12.80 01--JAN--92 TO 31--DEC--92 US$ GAM International US$ 14.86 0.71 (0.28) 0.43 (0.43) (0.30) (0.73) US$ 14.56 GAM Global US$ 11.37 0.64 (1.15) (0.51) (0.28) (0.25) (0.53) US$ 10.33 GAM Europe US$ 8.33 0.40 (0.78) (0.38) (0.22) (0.39) (0.61) US$ 7.34 GAM Pacific Basin US$ 13.77 0.01 (0.06) (0.05) (0.09) (0.49) (0.58) US$ 13.14 GAM North America US$ 13.35 0.07 0.25 0.32 (0.03) (0.01) (0.04) US$ 13.63
+ For the year ended 31st December, 1996, net investment income per share has been determined based on the weighted average shares outstanding method. * Period from 1st July, 1994 (Inception) to 31st December, 1994. ** Period from 12th May, 1995 (Inception) to 31st December, 1995. 57 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA --------------------------------------------------------------------------------------------------- Ratios to average net assets -------------------------------- TOTAL RETURN (WITHOUT NET ASSETS NET PORTFOLIO AVERAGE DEDUCTION OF END OF PERIOD INVESTMENT TURNOVER COMMISSION SALES LOAD) (000 OMITTED) EXPENSES INCOME/(LOSS) RATE RATE PAID++++ --------------------------------------------------------------------------------------------------- 01--JAN--96 TO 31--DEC--96 US$ GAM International++ Class A 8.98% US$ 1,009,819 1.56% 2.70% 82% 0.0202 Class D 8.33% US$ 38,716 2.06% 2.13% 82% 0.0202 GAM Global++ Class A 12.74% US$ 19,583 2.26% 1.17% 107% 0.0255 Class D 11.54% US$ 815 2.88% 0.52% 107% 0.0255 GAM Europe++ Class A 21.32% US$ 25,127 1.89% 0.59% 76% 0.0168 GAM Pacific Basin++ Class A (0.39)% US$ 49,808 1.76% 0.22% 46% 0.0251 Class D (1.19)% US$ 1,878 2.28% (0.57)% 46% 0.0251 GAM Japan Capital++ Class A 0.15% US$ 36,504 1.84% (0.50)% 23% 0.0697 GAM North America+ Class A 24.10% US$ 5,853 2.61% (0.39)% 9% 0.0600 GAM Asian Capital**++ Class A 3.28% US$ 5,629 2.98% (0.75)% 86% 0.0124 GAMerica Capital**++ Class A 18.31% US$ 1,924 5.16% (3.79)% 27% 0.0533 01--JAN--95 TO 31--DEC--95 US$ GAM International Class A 30.09% US$ 560,234 1.57% 3.89% 34.97% -- Class D 9.26% US$ 8,714 2.22%* 1.90%* 34.97% -- GAM Global Class A 36.25% US$ 26,161 2.16% 2.96% 60.18% -- Class D 6.97% US$ 295 2.81%* (0.09)%* 60.18% -- GAM Europe Class A 16.77% US$ 22,961 2.12% 0.75% 145.16% -- GAM Pacific Basin Class A 4.50% US$ 53,944 1.98% (0.07)% 64.01% -- Class D 2.35% US$ 1,547 2.63%* (1.49)%* 64.01% -- GAM Japan Capital** Class A 6.45% US$ 13,600 3.61% (2.35)% 122.38% -- GAM North America** Class A 30.90% US$ 5,981 2.98% 0.01% 8.57% -- GAM Asian Capital++** Class A (4.25)% US$ 5,560 3.11%* (0.17)%* 17.01% -- GAMerica Capital++** Class A 1.38% US$ 3,029 3.73%* 1.36%* 10.90% -- 01--JAN-94 TO 31--DEC--94 US$ GAM International (10.23)% US$ 158,336 1.60% 2.74% 110.48% -- GAM Global (16.15)% US$ 19,940 2.29% 0.91% 123.33% -- GAM Europe (3.11)% US$ 32,233 2.35% 0.06% 74.96% -- GAM Pacific Basin 7.41% US$ 48,527 1.78% (0.35)% 29.11% -- GAM Japan Capital+ (3.77)% US$ 9,406 2.19%* 0.70%* 7.02% -- GAM North America** 2.97% US$ 1,887 2.54% 0.37% 3.00% --
58 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA --------------------------------------------------------------------------------------------------- Ratios to average net assets -------------------------------- TOTAL RETURN (WITHOUT NET ASSETS NET PORTFOLIO AVERAGE DEDUCTION OF END OF PERIOD INVESTMENT TURNOVER COMMISSION SALES LOAD) (000 OMITTED) EXPENSES INCOME/(LOSS) RATE RATE PAID++++ --------------------------------------------------------------------------------------------------- 01--JAN--93 TO 31--DEC--93 US$ GAM International++ 01--JAN--93 TO 31--DEC--93 US$ GAM International 79.96% US$ 80,776 1.99% 2.28% 98.45% -- GAM Global 75.30% US$ 33,416 2.68% 1.88% 106.73% -- GAM Europe 22.68% US$ 14,398 2.64% 1.05% 181.51% -- GAM Pacific Basin 51.52% US$ 40,719 1.93% (0.29)% 91.07% -- GAM North America (2.09)% US$ 3,289 2.10% 0.69% 3.42% -- 01--JAN--92 TO 31--DEC--92 US$ GAM International 3.08% US$ 41,032 2.03% 4.85% 109.16% -- GAM Global (4.65)% US$ 19,763 2.37% 5.25% 118.41% -- GAM Europe (4.91)% US$ 17,264 2.47% 5.06% 72.20% -- GAM Pacific Basin (0.37)% US$ 28,206 2.03% 0.09% 74.78% -- GAM North America 2.42% US$ 11,781 2.43% 0.47% 20.38% --
+ Period from 1st July, 1994 (Inception) to 31st December, 1994. ++ Period from 12th May, 1995 (Inception) to 31st December, 1995. * Annualized. ** In the absence of expense reimbursement, expenses on an annualized basis would have represented 3.59% for GAM Asian Capital and 6.16% for GAMerica Capital of average net assets respectively, for the year ended 31st December, 1996. Expenses on an annualized basis would have represented 4.61% for GAM Japan Capital, 3.27% for GAM North America, 3.95% for GAM Asian Capital and 4.73% for GAMerica Capital of average net assets, respectively, for the period ended 31st December, 1995 and 5.81% of average net assets for GAM North America Fund for the year ended 31st December 1994. ++ The ratios of expenses to average net assets for the year ended 31st December, 1996 include amounts paid through expense offset arrangements. Prior period ratios excluded these amounts (see Note 2). ++++ For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share for trades on which a commission is charged. 59
- -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- BANK LOANS ---------------------------------------------------------------------------------------- AVERAGE AVERAGE AMOUNT NUMBER OF SHARES AVERAGE AMOUNTS OF BANK LOANS OUSTANDING AMOUNT OF OUTSTANDING OUTSTANDING DURING THE PERIOD DEBT PER SHARE END OF PERIOD DURING THE PERIOD (MONTHLY AVERAGE) DURING (000 OMITTED) (000 OMITTED) (000 OMITTED) THE PERIOD ---------------------------------------------------------------------------------------- 01--JAN--96 TO 31--DEC--96 US$ GAM International Class A Class D GAM Global Class A Class D GAM Europe Class A GAM Pacific Basin Class A Class D GAM Japan Capital Class A GAM North America Class A GAM Asian Capital Class A GAMerica Capital Class A 01--JAN--95 TO 31--DEC--95 US$ GAM International Class A Class D GAM Global Class A Class D GAM Europe Class A -- US$ 123 390 US$ 0.32 GAM Pacific Basin Class A Class D GAM Japan Capital Class A GAM North America Class A GAM Asian Capital++ Class A GAMerica Capital++ Class A
60 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - --------------------------------------------------------------------------------
BANK LOANS ---------------------------------------------------------------------------------------- AVERAGE AVERAGE AMOUNT NUMBER OF SHARES AVERAGE AMOUNTS OF BANK LOANS OUSTANDING AMOUNT OF OUTSTANDING OUTSTANDING DURING THE PERIOD DEBT PER SHARE END OF PERIOD DURING THE PERIOD (MONTHLY AVERAGE) DURING (000 OMITTED) (000 OMITTED) (000 OMITTED) THE PERIOD ---------------------------------------------------------------------------------------- 01--JAN--94 TO 31--DEC--94 US$ GAM International GAM Global GAM Europe GAM Pacific Basin GAM Japan Capital+ GAM North America 01--JAN--93 TO 31--DEC--93 US$ GAM International US$ 9,557 US$ 2,042 2,700 US$ 0.76 GAM Global US$ 2,165 US$ 2,600 1,780 US$ 1.48 GAM Europe US$ 1,860 US$ 521 1,680 US$ 0.31 GAM Pacific Basin US$ -- US$ -- -- US$ -- GAM North America US$ -- US$ -- -- US$ -- 01--JAN--92 TO 31--DEC--92 US$ GAM International US$ 2,743 US$ 901 2,790 US$ 0.32 GAM Global US$ 9,010 US$ 1,401 2,130 US$ 0.66 GAM Europe US$ 1,177 US$ 347 2,400 US$ 0.14 GAM Pacific Basin US$ -- US$ -- -- US$ -- GAM North America US$ -- US$ -- -- US$ --
+ Period from 1st July, 1994 (Inception) to 31st December, 1994. ++ Period from 12th May, 1995 (Inception) to 31st December, 1995. 61 - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- To the Board of Directors and Shareholders of GAM Funds, Inc. We have audited the accompanying statements of assets and liabilities, including the statements of investments, of GAM Funds, Inc. (comprising, respectively, GAM International Fund, GAM Global Fund, GAM Europe Fund, GAM Pacific Basin Fund, GAM Japan Fund, GAM North America Fund, GAM Asian Capital Fund, and GAMerica Capital Fund) as of December 31, 1996, and the related statements of operations, the statements of changes in net assets, and the selected financial information for the year then ended. These financial statements and selected financial information are the responsibility of the Companyis management. Our responsibility is to express an opinion on these financial statements and selected financial information based on our audit. The statement of changes in net assets for the year ended December 31, 1995 and the selected financial information for each of the years in the period ended December 31, 1995, were audited by other auditors whose report, dated February 2, 1996, expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and selected financial information are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1996, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and selected financial information referred to above present fairly, in all material respects, the financial position of each of the respective portfolios constituting GAM Funds, Inc. as of December 31, 1996, and the results of their operations, the changes in their net assets and the selected financial information for the year then ended, in conformity with generally accepted accounting principles. Boston, Massachusetts February 14, 1997 Coopers & Lybrand L.L.P. 62 This Page Intentionally Left Blank EX-15.B 8 PLAN OF DISTRIBUTION - CLASS A SHARES Exhibit 15(b) GAM FUNDS, INC. PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1 CLASS A SHARES WHEREAS, GAM Funds, Inc. (the "Fund") is an open-end management investment company and is registered as such under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Fund desires to adopt a Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act with respect to shares of its Class A common stock, par value $.0001 per share (the "Class A Shares"), of each series of the Fund (the "Series"), and the Board of Directors has determined that there is a reasonable likelihood that adoption of the Plan will benefit each Series and its stockholders; and WHEREAS, pursuant to a Distribution Agreement, the Fund employs GAM Services Inc. (the "Distributor") as distributor for the continuous offering of Class A Shares. NOW, THEREFORE, the Fund hereby adopts a Plan of Distribution on the terms set forth below (the "Plan"). 1. The Fund and each Series shall pay to the Distributor, as distributor of the Class A Shares, or any successor of the Distributor authorised to act as distributor for the Fund, compensation for distribution of the Class A Shares at the annual rate of .30% of the average daily value of the net assets of each Series attributable to the Class A Shares. The amount of such compensation shall be calculated and accrued daily and paid monthly or at such other intervals as the Board of Directors and the Distributor shall mutually agree. 2. The amount set forth in Paragraph 1 of this Plan shall be paid for the Distributor's services as distributor of the Class A Shares. Such amount may be spent by the Distributor on any activities or to pay any expenses primarily intended to result in the sale of Class A Shares, including, but not limited to, compensation to and expenses of employees of the Distributor who engage in or support distribution of the Class A Shares; including overhead and telephone expenses of such employees, printing of prospectuses and reports for other than existing stockholders; preparation, printing and distribution of sales literature and advertising materials; compensation to broker/dealers who sell Class A Shares, and such other similar services that the Directors determine are reasonably calculated to result in sales of Class A Shares of the Fund; provided however, that any portion of such amount paid to the Distributor, which portion shall be equal to or less than .25% annually of the average daily net assets of the Fund's Class A Shares, may represent compensation for personal service to shareholders and/or maintenance of shareholder accounts (the "Service Fee"). The Distributor may negotiate with selling broker/dealers for distribution and personal services to be provided by the broker/dealer to investors and stockholders in connection with the sale and holding of Class A Shares, and all or any portion of the compensation paid to the Distributor under Paragraph 1 of this Plan may be reallocated by the Distributor to broker/dealers who sell Class A Shares in the form of distribution fees or a combination of Service Fees and distribution fees. 3. This Plan shall not take effect with respect to any Series until it has been approved by a vote of at least a majority (as defined in the 1940 Act) of the outstanding Class A Shares of such Series. 4. In addition to the approval required by paragraph 3 above, the Plan shall not take effect with respect to each Series until it has been approved, together with any related agreements, by votes of a majority of both (a) the Board of Directors of the Fund and (b) those Directors of the Fund who are not "interested persons" of the Fund (as defined in the 1940 Act) and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it (the "Rule 12b-1 Directors") cast in person at a meeting (or meetings) called for the purpose of voting on this Plan and such related agreements. 5. This Plan shall continue in effect for one year from the date of its adoption, and thereafter the Plan shall continue in effect for so long as such continuance is specifically approved at least annually in the manner provided for approval of this Plan in Paragraph 4. 6. At least quarterly in each year that this Plan remains in effect, the Fund's Principal Accounting Officer or Treasurer, or such other person authorised to direct the disposition of monies paid or payable by each Fund, shall, with the assistance of the Distributor, prepare and furnish to the Board of Directors of the Fund, for their review, a written report of the amounts expended pursuant to this Plan and the purposes for which such expenditures were made, including payment of commissions, advertising, printing, and interest expense, carrying charges and allocated overhead expenses. 7. All amounts expended under this Plan for the benefit of the Class A Shares of a specific Series as to which this Plan is effective will be charged to the Class A Shares of the Series, and any expenses pursuant to this Plan which are deemed by the Board of Directors of the Fund to benefit all such Series equally will be charged to the Class A Shares of each such Series on the basis of the net asset value of the Class A Shares of such Series in relation to the net asset value of all of the outstanding Class A Shares of the Fund. 8. This Plan may be terminated with respect to the Class A Shares of any Series at any time by vote of a majority of the Rule 12b-1 Directors, or by a vote of a majority of the outstanding Class A shareholders of such Series 9. This Plan may be amended at any time by the Board of Directors of the Fund, provided that any amendment to increase materially the amount to be expended by any Series of the Fund for distribution shall be effective only upon approval by shareholders of such Series of such amendment in the manner provided for initial approval in Paragraph 3 hereof, and any material amendments to the Plan shall be effective only upon approval by the Directors in the manner provided for approval on annual renewal in Paragraphs 4 and 5 hereof. 10. While this Plan is in effect, the selection and nomination of Directors who are not interested persons (as defined in the 1940 Act) of the Fund shall be committed to the discretion of the then current Directors who are not interested persons (as defined in the 1940 Act) of the Fund. 11. Any agreement related to this Plan shall provide (i) that such agreement may be terminated with respect to the Class A Shares of any Series at any time, without payment of any penalty, by vote of a majority of the outstanding voting securities of such Series, on not more than sixty (60) days' written notice to any other party to the agreement; and (ii) that such agreement shall terminate automatically in the event of its assignment. 12. In the event of an exchange between Series of the Fund, the Series into which the assets are transferred may adjust its remaining account balance of 12b-1 carryforwards in a manner consistent with adjustments for new sales; provided however, that the Series from which such balance is "transferred" has a sufficient remaining balance and such arrangement is otherwise conducted in accordance with Section 26(d)(2)(D) of the NASD's Rules of Fair Practice and the carryforward arrangement is implemented in accordance with this Plan. 13. The Fund shall preserve copies of this Plan and any related agreements and all reports made pursuant to Paragraph 6 hereof for a period of not less than six (6) years from the date of the Plan, such agreements or such reports, as the case may be, the first two (2) years in an easily accessible place. GAM FUNDS, INC. Dated:__________________________ By:______________________________ Title:____________________________ . EX-16 9 PERFORMANCE BACK-UP Exhibit 16 GAM ASIAN CAPITAL FUND PRICE DATA Date Div. Amount Price Factor Acc. Factor Adj. Price 5/12/95 100.00 1.0000 100.00 12/18/95 83.8800 9.32 10.0000 10.0000 12/26/95 0.0443 9.41 1.0047 10.0471 12/31/95 9.53 10.0471 95.75 8/12/96 0.0120 9.58 1.0013 10.0597 12/31/96 9.83 10.0597 98.89 AVERAGE ANNUAL RETURNS With 0.5% sales load 1 Year 3.28% -1.89% Since incept. -0.68% -3.74% GAMERICA CAPITAL FUND PRICE DATA Date Div. amount Price Factor Acc. factor Adj. price 5/12/95 100.00 1.0000 100.00 12/18/95 89.9100 9.99 10.0000 10.0000 12/26/95 0.1070 9.97 1.0107 10.1073 12/31/95 10.03 10.1073 101.38 12/23/96 1.0100 10.44 1.0967 11.0851 12/31/96 10.82 11.0851 119.94 AVERAGE ANNUAL RETURNS With 0.5% sales load 1 Year 18.31% 12.40% Since incept. 11.73% 8.28% GAM EUROPE FUND PRICE DATA Date Div. amount Price Factor Acc. factor Adj. price 1/1/90 100.00 1.0000 100.00 12/31/91 83.34 1.0000 83.34 1/2/92 6.0000 76.99 1.0779 1.0779 3/16/92 0.1600 72.44 1.0022 1.0803 1/4/93 0.5400 72.28 1.0075 1.0884 12/18/95 88.2000 9.80 10.0000 10.8838 12/26/95 0.0658 9.91 1.0066 10.9561 12/31/95 10.04 10.9561 110.00 8/12/96 0.1180 11.08 1.0106 11.0728 12/23/96 0.1990 11.69 1.0170 11.2613 12/31/96 11.85 11.2613 133.45 AVERAGE ANNUAL RETURNS With 0.5% sales load 1 Year 21.32% 15.25% 5 Year 9.87% 8.75% Since incept. 4.21% 3.45% GAM GLOBAL FUND (CLD) PRICE DATA Date Div. amount Price Factor Acc. factor Adj. price 10/6/95 134.92 1.0000 134.92 12/18/95 127.1700 14.13 10.0000 10.0000 12/26/95 0.9024 13.31 1.0678 10.6780 12/31/95 13.48 10.6780 143.94 8/12/96 0.0350 13.35 1.0026 10.7060 12/23/96 0.7680 14.08 1.0545 11.2899 12/31/96 14.22 11.2899 160.54 AVERAGE ANNUAL RETURNS With 0.35% sales load 1 Year 11.53% 7.63% Since incept. 15.09% 11.82% GAM GLOBAL FUND (CLA) PRICE DATA Date Div. amount Price Factor Acc. factor Adj. price 5/28/86 100.00 1.0000 100.00 12/31/86 104.69 1.0000 104.69 12/21/87 9.5600 92.72 1.1031 1.1031 3/18/88 4.2500 94.46 1.0450 1.1527 5/19/89 2.8100 108.45 1.0259 1.1826 12/20/89 2.6100 126.83 1.0206 1.2069 2/27/90 0.5100 125.67 1.0041 1.2118 12/28/90 13.2600 102.49 1.1294 1.3686 12/31/91 113.73 1.3686 155.65 1/2/92 4.3700 108.99 1.0401 1.4235 3/16/92 0.9700 100.87 1.0096 1.4372 1/4/93 1.0500 103.94 1.0101 1.4517 1/3/94 6.0500 174.34 1.0347 1.5021 7/1/94 13.3500 136.91 1.0975 1.6486 12/20/94 26.3500 105.92 1.2488 2.0587 8/22/95 0.0510 129.38 1.0004 2.0595 12/18/95 127.6200 14.18 10.0000 20.5948 12/26/95 0.9111 13.36 1.0682 21.9993 12/31/95 13.51 21.9993 297.21 8/12/96 0.0350 13.54 1.0026 22.0562 12/23/96 0.8340 14.21 1.0587 23.3507 12/31/96 14.35 23.3507 335.08 AVERAGE ANNUAL RETURNS With 0.5% sales load 1 Year 12.74% 7.11% 5 Year 16.57% 15.38% 10 Year 12.34% 11.76% Since incept. 12.09% 11.55% GAM PACIFIC BASIN FUND (CLA) PRICE DATA Date Div. amount Price Factor Acc. factor Adj. price 5/6/87 100.00 1.0000 100.00 12/20/89 3.4500 137.36 1.0251 1.0251 2/27/90 7.7000 123.98 1.0621 1.0888 12/28/90 3.5800 119.42 1.0300 1.1214 3/12/91 1.4100 131.13 1.0108 1.1335 12/31/91 137.72 1.1335 156.11 1/2/92 4.6200 133.49 1.0346 1.1727 3/16/92 1.2100 125.04 1.0097 1.1841 1/4/93 3.9400 126.72 1.0311 1.2209 4/13/93 0.8000 150.80 1.0053 1.2274 1/3/94 9.6500 182.54 1.0529 1.2922 7/1/94 8.8500 185.81 1.0476 1.3538 12/20/94 10.4300 170.53 1.0612 1.4366 8/22/95 6.1620 171.32 1.0360 1.4883 12/18/95 156.5100 17.39 10.0000 14.8825 12/26/95 0.8015 16.89 1.0475 15.5888 12/31/95 16.97 15.5888 264.54 8/12/96 0.1610 16.83 1.0096 15.7379 12/23/96 1.4720 15.14 1.0972 17.2680 12/31/96 15.26 17.2680 263.51 AVERAGE ANNUAL RETURNS With 0.5% sales load 1 Year -0.39% -5.37% 5 Year 11.04% 9.91% Since incept. 10.55% 9.97% GAM INTERNATIONAL FUND (CLD) PRICE DATA Date Div. amount Price Factor Acc. factor Adj. price 9/18/95 204.46 1.0000 204.46 12/18/95 199.1700 22.13 10.0000 10.0000 12/26/95 0.9925 21.12 1.0470 10.4699 12/31/95 21.35 10.4699 223.53 8/12/96 0.0424 20.78 1.0020 10.4913 12/23/96 0.0120 22.53 1.0005 10.4969 12/31/96 23.07 10.4969 242.16 AVERAGE ANNUAL RETURNS With 0.35% sales load 1 Year 8.33% 4.54% 5 Year 14.06% 10.94% Since incept. GAM INTERNATIONAL FUND (CLA) PRICE DATA Date Div. amount Price Factor Acc. factor Adj. price 1/2/85 100.00 1.0000 100.00 3/7/86 12.4000 171.98 1.0721 1.0721 12/31/86 219.12 1.0721 234.92 2/17/87 64.7700 175.43 1.3692 1.4679 12/28/87 46.3500 132.75 1.3492 1.9805 4/8/88 5.3900 132.27 1.0407 2.0612 12/22/88 7.0000 146.15 1.0479 2.1599 5/19/89 1.5400 141.04 1.0109 2.1835 12/20/89 8.7000 161.83 1.0538 2.3009 2/27/90 0.9400 162.72 1.0058 2.3141 12/28/90 28.1200 128.60 1.2187 2.8202 3/12/91 0.1300 135.42 1.0010 2.8229 12/31/91 148.63 2.8229 419.57 1/2/92 7.3300 141.05 1.0520 2.9696 1/4/93 12.8700 133.34 1.0965 3.2562 1/3/94 18.9000 222.66 1.0849 3.5326 7/1/94 7.0900 191.12 1.0371 3.6636 12/20/94 18.5400 170.93 1.1085 4.0610 12/18/95 199.5300 22.17 10.0000 40.6101 12/26/95 1.0032 21.15 1.0474 42.5363 12/31/95 21.37 42.5363 909.00 8/12/96 0.0426 20.89 1.0020 42.6231 12/23/96 0.0900 22.59 1.0040 42.7929 12/31/96 23.15 42.7929 990.66 AVERAGE ANNUAL RETURNS With 0.5% sales load 1 Year 8.98% 3.53% 5 Year 18.75% 17.54% 10 Year 15.48% 14.89% Since incept. 21.07% 20.55% GAM JAPAN CAPITAL FUND PRICE DATA Date Div. amount Price Factor Acc. factor Adj. price 7/1/94 100.00 1.0000 100.00 8/22/95 0.7680 93.99 1.0082 1.0082 12/18/95 88.5600 9.84 10.0000 10.0817 12/31/95 10.16 10.0817 102.43 8/12/96 0.0870 10.41 1.0084 10.1660 12/23/96 0.6950 9.31 1.0747 10.9249 12/31/96 9.39 10.9249 102.58 AVERAGE ANNUAL RETURNS With 0.5% sales load 1 Year 0.15% -4.86% 5 Year 1.03% -1.02% Since incept. GAM NORTH AMERICA FUND PRICE DATA Date Div. amount Price Factor Acc. factor Adj. price 1/1/90 100.00 1.0000 100.00 12/31/91 133.49 1.0000 133.49 1/2/92 0.4100 133.12 1.0031 1.0031 1/4/93 5.6100 130.64 1.0429 1.0462 1/3/94 37.3500 90.68 1.4119 1.4771 12/20/94 1.9000 91.42 1.0208 1.5078 12/18/95 107.1000 11.90 10.0000 15.0775 12/26/95 0.0363 11.88 1.0031 15.1236 12/31/95 11.93 15.1236 180.42 12/23/96 1.2530 13.65 1.0918 16.5118 12/31/96 13.56 16.5118 223.90 AVERAGE ANNUAL RETURNS With 0.5% sales load 1 Year 24.10% 17.89% 5 Year 10.90% 9.77% Since incept. 12.21% 11.39% GAM PACIFIC BASIN FUND (CLD) PRICE DATA Date Div. amount Price Factor Acc. factor Adj. price 10/18/95 173.77 1.0000 173.77 12/18/95 156.4200 17.38 10.0000 10.0000 12/26/95 0.7983 16.87 1.0473 10.4732 12/31/95 16.96 10.4732 177.63 8/12/96 0.1610 16.74 1.0096 10.5739 12/23/96 1.3870 15.08 1.0920 11.5465 12/31/96 15.20 11.5465 175.51 AVERAGE ANNUAL RETURNS With 0.35% sales load 1 Year -1.19% -4.65% Since incept. 0.83% -2.11% EX-27 10 FDS
6 011 GAM Asian Capital Year Dec-31-1996 Jan-01-1996 Dec-31-1996 5,667,296 5,701,575 60,886 49,101 0 5,811,562 47,405 0 134,898 182,303 0 5,748,274 572,668 583,625 0 (129,251) 0 (23,991) 34,227 5,629,259 124,254 5,149 0 179,498 (50,095) (84,553) 235,381 100,733 0 0 8,786 0 4,143,499 4,168,114 1,512 (23,103) 0 0 (4,819) (6,018) 66,992 1,798 179,498 6,662,597 9.53 (.07) .38 0 (.01) 0 9.83 2.98 0 0
EX-27 11 FDS
6 021 GAMerica Capital Year Dec-31-1996 Jan-01-1996 Dec-31-1996 1,730,650 1,906,404 109,311 18,765 0 2,034,480 0 0 110,470 110,470 0 1,712,447 177,778 302,061 0 0 35,810 0 175,753 1,924,010 23,063 5,416 0 116,425 (87,946) 292,631 175,800 380,485 0 0 (169,707) 0 269,201 1,687,583 102,358 (1,316,024) 832 0 0 0 23,247 3,153 116,425 2,318,118 10.03 (.42) 2.22 0 (1.01) 0 10.82 5.16 0 0
EX-27 12 FDS
6 031 GAM Europe Year Dec-31-1996 Jan-01-1996 Dec-31-1996 21,284,220 25,397,695 189,844 81,923 0 25,669,462 81,815 0 460,242 542,057 0 20,432,750 2,119,727 2,286,870 208,492 0 412,603 0 4,073,560 25,127,405 558,265 21,966 0 422,343 157,888 1,945,168 2,542,288 4,645,344 0 (12,643) (709,600) 0 12,022,756 14,322,808 542,923 (1,757,129) 11,543 0 0 (772,747) 270,703 1,903 422,343 26,922,209 10.04 .07 2.06 (.01) (.31) 0 11.85 1.89 0 0
EX-27 13 FDS
6 041 GAM Global Class A 1 Year Dec-31-1996 Jan-01-1996 Dec-31-1996 16,455,183 20,183,605 839,510 307,621 0 21,330,736 719,959 0 212,514 932,473 0 16,609,034 1,364,575 1,936,065 0 (90,362) 19,717 0 3,859,874 20,398,263 397,950 302,123 0 463,727 236,346 1,542,721 292,207 2,071,274 0 (104,667) (1,034,220) 0 11,907,144 20,228,744 915,513 (6,945,972) 0 0 (4,787) (665,695) 206,365 27,240 463,727 20,514,200 13.51 .16 1.55 (.08) (.79) 0 14.35 2.26 0 0
EX-27 14 FDS
6 044 GAM Global D 1 Year Dec-31-1996 Jan-01-1996 Dec-31-1996 16,455,183 20,183,605 839,510 307,621 0 21,330,736 719,959 0 212,514 932,473 0 16,609,034 57,348 21,880 0 (90,362) 19,717 0 3,859,874 20,398,263 397,950 302,123 0 463,727 236,346 1,542,721 292,207 2,071,274 0 (765) (43,139) 0 697,624 275,959 38,450 (6,945,972) 0 0 (4,787) (665,695) 206,365 27,240 463,727 20,514,200 13.48 .07 1.47 (.01) (.79) 0 14.22 2.88 0 0
EX-27 15 FDS
6 051 GAM International Class A 1 Year Dec-31-1996 Jan-01-1996 Dec-31-1996 925,779,673 1,050,491,997 36,961,473 24,923,965 0 1,112,377,435 58,330,988 0 5,511,115 63,842,103 0 918,545,454 43,624,803 26,210,037 7,848,354 0 0 (4,551,076) 126,692,600 1,048,535,332 18,133,591 18,641,259 0 13,422,789 23,352,061 (3,924,932) 75,798,692 95,225,821 0 (3,931,303) (1,784,396) 0 692,156,317 333,081,923 4,843,204 390,160,627 0 0 (43,392) (10,356,368) 8,746,443 170,110 13,422,789 869,911,674 21.37 .57 1.34 (.09) (.04) 0 23.15 1.56 0 0
EX-27 16 FDS
6 054 GAM International Class D 1 Year Dec-31-1996 Jan-01-1996 Dec-31-1996 925,779,673 1,050,491,997 36,961,473 24,923,965 0 1,112,377,435 58,330,988 0 5,511,115 63,842,103 0 918,545,454 1,677,964 408,164 7,848,354 0 0 (4,551,076) 126,692,600 1,048,535,332 18,133,591 18,641,259 0 13,422,789 23,352,061 (3,924,932) 75,798,692 95,225,821 0 (20,209) (63,253) 0 30,255,446 4,091,392 78,975 390,160,627 0 0 (43,392) (10,356,368) 8,746,443 170,110 13,422,789 869,911,674 21.35 .45 1.32 (.01) (.04) 0 23.07 2.06 0 0
EX-27 17 FDS
6 1 061 GAM Japan Capital Year Dec-31-1996 Jan-01-1996 Dec-31-1996 37,611,928 33,918,703 916,257 2,124,722 0 36,959,682 75,193 0 367,636 442,829 0 40,622,921 3,887,548 1,338,243 0 (464,007) 0 (600,140) (3,041,921) 36,516,853 135,904 196,086 0 505,040 (173,050) 3,411,826 (4,080,940) (842,164) 0 (2,786,341) (326,642) 0 43,069,239 18,398,865 2,201,623 26,871,997 0 0 (135,627) (1,054,318) 350,646 0 505,040 34,913,659 10.16 (.05) .07 (.70) (.09) 0 9.39 1.84 0 0
EX-27 18 FDS
6 1 071 GAM North America Year Dec-31-1996 Jan-01-1996 Dec-31-1996 3,991,629 5,910,984 10,829 52 0 5,921,865 0 0 69,042 69,042 0 3,899,139 431,612 501,427 0 0 34,330 0 1,919,354 5,852,823 119,746 2,472 0 144,065 (21,847) 562,745 710,420 1,251,318 0 0 (506,891) 0 911,748 2,144,715 360,609 (872,358) 323 0 0 0 57,701 1,167 144,065 5,639,712 11.93 (.05) 2.93 0 (1.25) 0 13.56 2.61 0 0
EX-27 19 FDS
6 081 GAM Pacific Basin Class A 1 Year Dec-31-1996 Jan-01-1996 Dec-31-1996 56,276,816 52,765,239 5,132,250 3,187,489 0 61,084,978 3,221,724 0 6,177,441 9,399,165 0 53,917,920 3,263,162 3,177,928 0 (264,594) 772,747 0 (2,740,260) 51,685,813 1,062,409 130,565 0 1,056,221 136,753 7,490,904 (9,000,460) (1,372,803) 0 (2,363,071) (3,041,344) 0 43,289,379 44,771,351 4,074,012 3,147,400 0 0 (30,461) (1,547,026) 710,064 16,161 1,056,221 70,618,413 16.97 .04 (.11) (.74) (.90) 0 15.26 1.76 0 0
EX-27 20 FDS
6 084 GAM Pacific Basin Class D 1 Year Dec-31-1996 Jan-01-1996 Dec-31-1996 56,276,816 52,765,239 5,132,250 3,187,489 0 61,084,978 3,221,724 0 6,177,441 9,399,165 0 53,917,920 123,601 91,183 0 (264,594) 772,747 0 (2,740,260) 51,685,813 1,062,409 130,565 0 1,056,221 136,753 7,490,904 (9,000,460) (1,372,803) 0 (73,778) (101,996) 0 907,532 370,106 17,934 3,147,400 0 0 (30,461) (1,547,026) 710,064 16,161 1,056,221 70,618,413 16.96 (.10) (.11) (.65) (.90) 0 15.20 2.28 0 0
EX-18 21 RULE 18F-3 MULTIPLE CLASS PLAN Exhibit 18 GAM FUNDS, INC. RULE 18f-3 MULTIPLE CLASS PLAN FOR CLASS A AND CLASS D SHARES I. INTRODUCTION A. AUTHORITY. This Rule 18f-3 Multiple Class Plan, as amended (the "Plan") is adopted by the Board of Directors (the "Board") of GAM Funds, Inc. (the "Fund"), including a majority of the Directors of the Fund who are not "interested persons" of the Fund as defined in the Investment Company Act of 1940, as amended (the "1940 Act") (the "Independent Directors"), pursuant to Rule 18f-3 under the 1940 Act. B. PLAN REQUIREMENTS. The Fund currently has two classes of shares, Class A Shares and Class D Shares, authorized for each series of Common Stock (the "Series"). Pursuant to Rule 18f-3, the Fund is required to adopt a written plan specifying all of the differences between the Fund's Class A and Class D Shares, including shareholder services, distribution arrangements, expense allocations, and any related conversion features or exchange options. Before the first issuance of Class D Shares of any Series, and before any material amendment of the Plan, a majority of the Board, and a majority of the independent Directors, must find that the Plan, as proposed to be adopted or amended, including the expense allocations, is in the best interests of each class individually and the Fund as a whole. In making its findings, the Board should consider the relationship between the classes and examine potential conflicts of interest between the classes regarding the allocation of fees, services, waivers and reimbursements of expenses, and voting rights. The Board should evaluate the level of services provided to each class and the cost of those services to ensure that the services are appropriate and that the allocation of expenses is reasonable. II. ATTRIBUTES OF SHARE CLASSES The shares of each class of a particular Series represent an equal pro rata interest in the Series and have identical voting, dividend, liquidation and other rights, preferences, powers, restrictions, limitations, qualifications, designations and terms and conditions, except that: (i) each class of shares has a different class designation (i.e., Class A or Class D Shares); (ii) each class of shares separately bears any distribution expenses in connection with any plan adopted pursuant to Rule 12b-1 under the 1940 Act (a "Rule 12b-1 Plan") for such class (and any other costs relating to obtaining shareholder approval of the Rule 12b-1 Plan for such class, or an amendment of such plan); (iii) only the holders of the shares of the class involved are entitled to vote on matters pertaining to the Rule 12b-1 Plan relating to such class (e.g., the adoption, amendment or termination of a Rule 12b-1 Plan); (iv) each class of shares separately bears shareholder servicing expenses for such class; (v) each class of shares bears all other expenses of the operations of a particular Series that are directly attributable to such class ("Class Expenses")1; (vi) each class of shares has exchange privileges unique to such class; and (vii) the expenses of a specific class of shares may be waived or reimbursed by GAM Services Inc., the Fund's distributor (the "Distributor"), or by the Fund's investment advisers or other providers of services. A. CLASS A SHARES Each Series has a class of shares designated as its "Class A Shares" which are offered subject to the following terms and conditions: (1) SALES LOADS. Class A Shares are offered with a maximum front-end sales charge of 5.0% of the offering price of the shares. The Distributor receives the sales charges and usually reallows all or a substantial part of such charges to authorized dealers that have effected sales of Class A Shares. Currently the Distributor may make payments to authorized dealers in amounts up to 4%. The sales charge is reduced at four break points, and purchases of $1 million or more are offered at net asset value, subject to a contingent deferred sales charge of 1% on redemptions made within one year of the date of purchase and 0.50% on redemptions made during the second year of investment (declinding to 0 thereafter). The CDSC is imposed to reimburse the Distributor for amounts paid to selling dealers at the time of sale, the maximum level of which is 1%, declining to 0.25% for purchase amounts of $50 million and above. Shares purchased through the reinvestment of dividends and other distributions paid in respect of Class A Shares will also be Class A Shares, although such shares will not be subject to the front-end sales charge. However, such shares will be subject to the 0.30% annual 12b-1 fee and the 0.25% annual administrative services fee, each of which is described below. (2) 12B-1 FEES. Class A Shares are subject to an annual distribution fee of 0.30% of the average daily net assets attributable to the Class A Shares of the relevant Series pursuant to a Rule 12b-1 Plan currently in effect for Class A Shares for such Series. Pursuant to the Plan, distribution fees may be utilized to compensate the Distributor for services provided and expenses incurred by it as principal underwriter of the Fund's Class A Shares. All or any part of such fee may be reallowed to authorized dealers that effected sales of Class A Shares, part of which may be classified as a shareholder servicing fee, as contemplated in the NASD's maximum sales charge rule, subject to the limitation of 0.25% of assets annually set forth in such rule. (3) ADMINISTRATIVE SERVICES FEES ("ASF"). Class A Shares owned by shareholders that have a servicing relationship with banks, trust companies, or financial service organizations ("shareholder servicing agents") that have contracted with the Fund to provide administrative services for the Fund may be subject to an annual servicing fee of up to 0.25% of the average daily net assets attributable to such Class A Shares. The administrative services fee is used to compensate the shareholder servicing agents for providing administrative services with respect to the holders of Class A Shares, such as processing purchase and redemption transactions, transmitting and receiving funds for the purchase and sale of Class A Shares, answering routine inquiries regarding the Fund, furnishing monthly and year-end statements and confirmations of purchases and sales of shares, transmitting periodic reports, updated prospectuses, proxy statements and other communications to shareholders, and providing other services as agreed from time to time. (4) EXCHANGE PRIVILEGES AND CONVERSION FEATURE. Class A Shares of each Series are exchangeable only for Class A Shares of any other Series, and for shares of the Short Term Investment Co. - Liquid Assets Portfolio - Private Class, a separate investment company distributed by the Fund's Distributor. Class A Shares have no conversion feature. B. CLASS D SHARES Each Series may offer a class of shares designated as its "Class D Shares" subject to the following terms and conditions: (1) SALES LOADS. Class D Shares are offered with a maximum front-end sales charge of 3.5% of the offering price of the shares. The sales charge is reduced at four break points, and purchases of $1,000,000 or more are not subject to the front-end sales charge. The Distributor receives the sales charges and reallows all or a substantial part of such charges to authorized dealers that have effected sales of Class D Shares. Currently the Distributor may make payments to authorized dealers in amounts up to 2.5% of the offering price. Shares purchased through the reinvestment of dividends and other distributions paid in respect of Class D Shares will also be Class D Shares, although such shares will not be subject to the front-end sales charge. However, such shares will be subject to the 0.50% annual distribution fee and the 0.25% annual administrative services fee, each of which is described below. (2) 12B-1 FEES. Class D Shares are subject to an annual distribution fee of 0.50% of the average daily net assets attributable to the Class D Shares of the relevant Series pursuant to the Rule 12b-1 Plan currently in effect for Class D Shares for such Series. Pursuant to the Plan, distribution fees may be utilized to compensate the Distributor for services provided and expenses incurred by it as principal underwriter of the Fund's Class D Shares. All or any part of such fee may be reallowed to authorized dealers that effected sales of Class D Shares, part of which may be classified as a shareholder servicing fee, as contemplated in the NASD's maximum sales charge rule, subject to the limitation of 0.25% of assets annually set forth in such rule.. (3) ADMINISTRATIVE SERVICES FEES ("ASF") Class D Shares owned by shareholders that have a servicing relationship with banks, trust companies, or financial services organizations ("shareholder servicing agents") that have contracted with the Fund to provide administrative services for the Fund may be subject to an annual servicing fee of up to 0.25% of the average daily net assets attributable to such Class D Shares. The administrative services fee is used to compensate the shareholder servicing agents for providing administrative services with respect to the holders of Class D Shares, such as processing purchase and redemption transactions, transmitting and receiving funds for the purchase and sale of Class D Shares, answering routine inquiries regarding the Fund, furnishing monthly and year-end statements and confirmations of purchases and sales of shares, transmitting periodic reports, updated prospectuses, proxy statements and other communications to shareholders, and providing other services as agreed from time to time. (4) EXCHANGE PRIVILEGES AND CONVERSION FEATURE. Class D Shares of each Series are exchangeable only for Class D Shares of any other Series, and for shares of the Short Term Investment Co. - Liquid Assets Portfolio - Private Class, a separate investment company distributed by the Fund's Distributor. Class D Shares have no conversion feature. III. CALCULATION OF DIVIDENDS. Dividends paid by a Series with respect to each class of its shares, to the extent any dividends are paid, must be calculated in the same manner, at the same time, on the same day and in the same amount, except that: (i) distribution and shareholder servicing payments associated with any Rule 12b-1 Plan or adminstrative services agreement relating to each respective class of shares (including any costs relating to implementing such plans or any amendment thereto) will be borne exclusively by that particular class; (ii) any incremental transfer agency fee relating to a particular class will be borne exclusively by that class; and (iii) Class Expenses relating to a particular class will be borne exclusively by that class. IV. EXPENSE ALLOCATIONS. All amounts expended for the benefit of a particular class of shares will be charged to that class of shares and any expenses which are deemed by the Board of Directors of the Fund to benefit both classes of shares equally will be charged to each class of shares on the basis of the net asset value of such class of shares in relation to the net asset value of all of the outstanding shares of the Fund. The methodology and procedures for calculating the net asset value and dividends and distributions with respect to each class of shares of the Fund and the proper allocation of income and expenses between the classes of shares of the Fund are required to be reviewed pursuant to the American Institute of Certified Public Accountants' Statement on Auditing Standards No. 55, which requires a review of the Fund's internal control structure. - -------- 1 Class Expenses may include: (i) transfer agent fees identified as being attributable to a specific class of shares; (ii) stationery, printing, postage, and delivery expenses related to preparing and distributing materials such as shareholder reports, prospectuses, and proxy statements to current shareholders of a specific class; (iii) Blue Sky registration fees incurred by a class of shares; (iv) SEC registration fees incurred by a class of shares; (v) expenses of administrative personnel and services as required to support the shareholders of a specific class; (vi) directors' fees or expenses incurred as a result of issues relating solely to a class of shares; (vii) accounting expenses relating solely to a class of shares; (viii) auditors' fees, litigation expenses, and legal fees and expenses relating solely to a class of shares; and (ix) expenses incurred in connection with shareholders meetings as a result of issues relating solely to a class of shares. 2 Class Expenses may include: (i) transfer agent fees identified as being attributable to a specific class of shares; (ii) stationery, printing, postage, and delivery expenses related to preparing and distributing materials such as shareholder reports, prospectuses, and proxy statements to current shareholders of a specific class; (iii) Blue Sky registration fees incurred by a class of shares; (iv) SEC registration fees incurred by a class of shares; (v) expenses of administrative personnel and services as required to support the shareholders of a specific class; (vi) directors' fees or expenses incurred as a result of issues relating solely to a class of shares; (vii) accounting expenses relating solely to a class of shares; (viii) auditors' fees, litigation expenses, and legal fees and expenses relating solely to a class of shares; and (ix) expenses incurred in connection with shareholders meetings as a result of issues relating solely to a class of shares. EX-19 22 POWERS OF ATTORNEY FOR GAM FUNDS, INC. Exhibit 19 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of GAM Funds, Inc., a Maryland corporation (the "Fund"), does hereby constitute and appoint Kevin J. Blanchfield, Lisa M. Hurley, Christopher M. Wells and Jeffrey L. Steele, or any of them, the true and lawful attorneys and agents of the undersigned, with full powers of substitution, to do any and all acts and things and execute any and all instruments that said attorneys or agents, or any of them, may deem necessary or advisable or which may be required to enable the Fund to comply with the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and the securities laws of the jurisdictions in which securities of the Fund may be offered and sold, and any rules, regulations or requirements of the Securities and Exchange Commission ("SEC"), or of the securities commission or other agency of any such jurisdiction in respect thereof, in connection with the registration and qualification of the Fund and its share of common stock for sale under the securities law of any such jurisdiction, including specifically, but without limiting the generality of the foregoing, the power and authority to sign in the name and on behalf of the undersigned (individually and as a director of the Fund), the Fund's Registration Statement on Form N-1A, any other registration statement or form adopted by the SEC or any such jurisdiction, any amendment or post-effective amendments to any of the foregoing, and any other instruments or documents filed as part of or in connection with any such registration statements; and the undersigned does hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents as of this 29th day of January, 1997. /s/Geoge W. Landau -------------------------- George W. Landau POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of GAM Funds, Inc., a Maryland corporation (the "Fund"), does hereby constitute and appoint Kevin J. Blanchfield, Lisa M. Hurley, Christopher M. Wells and Jeffrey L. Steele, or any of them, the true and lawful attorneys and agents of the undersigned, with full powers of substitution, to do any and all acts and things and execute any and all instruments that said attorneys or agents, or any of them, may deem necessary or advisable or which may be required to enable the Fund to comply with the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and the securities laws of the jurisdictions in which securities of the Fund may be offered and sold, and any rules, regulations or requirements of the Securities and Exchange Commission ("SEC"), or of the securities commission or other agency of any such jurisdiction in respect thereof, in connection with the registration and qualification of the Fund and its share of common stock for sale under the securities law of any such jurisdiction, including specifically, but without limiting the generality of the foregoing, the power and authority to sign in the name and on behalf of the undersigned (individually and as a director of the Fund), the Fund's Registration Statement on Form N-1A, any other registration statement or form adopted by the SEC or any such jurisdiction, any amendment or post-effective amendments to any of the foregoing, and any other instruments or documents filed as part of or in connection with any such registration statements; and the undersigned does hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents as of this 29th day of January, 1997. /s/ Madelon DeVoe Talley --------------------------- Madelon DeVoe Talley POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of GAM Funds, Inc., a Maryland corporation (the "Fund"), does hereby constitute and appoint Kevin J. Blanchfield, Lisa M. Hurley, Christopher M. Wells and Jeffrey L. Steele, or any of them, the true and lawful attorneys and agents of the undersigned, with full powers of substitution, to do any and all acts and things and execute any and all instruments that said attorneys or agents, or any of them, may deem necessary or advisable or which may be required to enable the Fund to comply with the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and the securities laws of the jurisdictions in which securities of the Fund may be offered and sold, and any rules, regulations or requirements of the Securities and Exchange Commission ("SEC"), or of the securities commission or other agency of any such jurisdiction in respect thereof, in connection with the registration and qualification of the Fund and its share of common stock for sale under the securities law of any such jurisdiction, including specifically, but without limiting the generality of the foregoing, the power and authority to sign in the name and on behalf of the undersigned (individually and as a director of the Fund), the Fund's Registration Statement on Form N-1A, any other registration statement or form adopted by the SEC or any such jurisdiction, any amendment or post-effective amendments to any of the foregoing, and any other instruments or documents filed as part of or in connection with any such registration statements; and the undersigned does hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents as of this 29th day of January, 1997. /s/ Roland Weiser --------------------------- Roland Weiser POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of GAM Funds, Inc., a Maryland corporation (the "Fund"), does hereby constitute and appoint Kevin J. Blanchfield, Lisa M. Hurley and Christopher M. Wells, or any of them, the true and lawful attorneys and agents of the undersigned, with full powers of substitution, to do any and all acts and things and execute any and all instruments that said attorneys or agents, or any of them, may deem necessary or advisable or which may be required to enable the Fund to comply with the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and the securities laws of the jurisdictions in which securities of the Fund may be offered and sold, and any rules, regulations or requirements of the Securities and Exchange Commission ("SEC"), or of the securities commission or other agency of any such jurisdiction in respect thereof, in connection with the registration and qualification of the Fund and its shares of common stock for sale under the securities law of any such jurisdiction, including specifically, but without limiting the generality of the foregoing, the power and authority to sign in the name and on behalf of the undersigned (individually and as a director of the Fund), the Fund's Registration Statement on Form N-1A, any other registration statement or form adopted by the SEC or any such jurisdiction, any amendment or post-effective amendments to any of the foregoing, and any other instruments or documents filed as part of or in connection with any such registration statements; and the undersigned does hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents as of this 29th day of January, 1997. /s/ Gilbert de Botton --------------------------- Gilbert de Botton POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of GAM Funds, Inc., a Maryland corporation (the "Fund"), does hereby constitute and appoint Kevin J. Blanchfield, Lisa M. Hurley and Christopher M. Wells, or any of them, the true and lawful attorneys and agents of the undersigned, with full powers of substitution, to do any and all acts and things and execute any and all instruments that said attorneys or agents, or any of them, may deem necessary or advisable or which may be required to enable the Fund to comply with the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and the securities laws of the jurisdictions in which securities of the Fund may be offered and sold, and any rules, regulations or requirements of the Securities and Exchange Commission ("SEC"), or of the securities commission or other agency of any such jurisdiction in respect thereof, in connection with the registration and qualification of the Fund and its shares of common stock for sale under the securities law of any such jurisdiction, including specifically, but without limiting the generality of the foregoing, the power and authority to sign in the name and on behalf of the undersigned (individually and as a director of the Fund), the Fund's Registration Statement on Form N-1A, any other registration statement or form adopted by the SEC or any such jurisdiction, any amendment or post-effective amendments to any of the foregoing, and any other instruments or documents filed as part of or in connection with any such registration statements; and the undersigned does hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents as of this 29th day of January, 1997. /s/ Therese Meier ------------------ Therese Meier -----END PRIVACY-ENHANCED MESSAGE-----