SEC Company Response from GAM FUNDS INC (CIK 0000749155) — Apr 22, 2005
GAM FUNDS INC (CIK 0000749155)
Date: April 22, 2005 · CIK: 0000749155 · Accession: 0001137439-05-000119
AI Filing Summary & Sentiment
File numbers found in text: 811-4062
Letter
April 22, 2005 VIA Edgar and Email Christian T. Sandoe, Esq. Division of Investment Management U.S. Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549
Re: GAM Funds, Inc. (File Nos. 2-92136 and 811-4062) - Response to SEC Comments on Post-Effective Amendment No. 42
Dear Mr. Sandoe:
We are responding to your comments, provided, on your behalf by Chad Eskildsen, via telephone on April 11, 2005 to Post-Effective Amendment No. 42 to the Registration Statement of GAM Funds, Inc. (the "Registrant") filed on February 25, 2005. Set forth below, we have briefly summarized each of your comments and our response follows immediately thereafter.
In connection with our responses to your comments, we acknowledge, on behalf of the Registrant, that:
o The Registrant is responsible for the adequacy and accuracy of the disclosure in the filing;
o Staff comments or changes to disclosure in response to staff comments in the filing reviewed by the staff do not foreclose the Commission from taking any action with respect to the filing; and
o The Registrant may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
General Comment
1. Pursuant to SEC Press Release 2004-89 (June 24, 2004), all EDGAR correspondence should include a "Tandy letter" that includes certain acknowledgements.
Response: The acknowledgements required in a Tandy letter are included as the second paragraph of this response letter.
Prospectus Comments
2. GAM International Equity indicates that it will invest in stocks issued in at least three different countries. Please address how this complies with footnote 42 of the Names Rule Release.
Response: Footnote 42 of the Names Rule Release notes that the SEC staff expects that a fund that uses the term "International" in its name would invest its assets in investments that are tied economically to a number of countries throughout the world. However, the footnote does not provide insight into what constitutes "a number of different countries" nor does there appear to be any other interpretations on this issue other than a Staff issued Generic Comment Letter (pub. avail. Jan. 3, 1991). In that Generic Comment Letter, the Staff indicated that "an international fund should have a policy requiring investment in at least three different countries outside the United States." GAM International Equity's principal investment strategy was drafted in reliance on that Generic Comment Letter. Furthermore, footnote 43 to the Names Rule Release notes with respect to funds that are not subject to the Names Rule (Rule 35d-1 under the Investment Company Act of 1940) that "an investment company may use any reasonable definition of the terms used in its name and should define the terms used in its name in discussing its investment objectives and strategies in the prospectus." We believe that we have accomplished this by explicitly indicating that GAM International Equity will invest in at least three countries other than the United States. Finally, as a practical matter, it is important to note that the Fund is generally invested in at least ten countries at any given time.
3. Since Small/Mid-Cap Risk is listed as a principal risk for each of GAM European Equity, GAM Asia-Pacific Equity and GAM International Equity, disclosure regarding small and mid-cap investing should be added to the "Principal Investment Strategy" section.
Response: The risk disclosure related to Small/Mid-Cap Risk has been moved to the Non-Principal Risks section because small/mid-cap investing is not a principal strategy for any of these Funds.
4. Since "Focus Investing" is listed as a principal risk for each of GAM European Equity, GAM Asia-Pacific Equity and GAM International Equity, disclosure regarding investing in a limited number of issuers should be added to the "Principal Investment Strategy" section.
Response: In response to your comments, we have added the following sentences to the principal investment strategy for each of the affected funds:
For GAM International Equity: "Typically, the Fund will invest in 60 to 100 securities, which are mainly equities."
For GAM Asia-Pacific Equity: "Typically, the Fund will invest in 50 to 70 securities, which are mainly equities."
For "GAM European Equity: "Typically, the Fund will invest in 80 to 120 securities, which are mainly equities."
Please note that the Focus Investing Risk description for GAM European Equity has been revised slightly to indicate that the Fund typically invests in less than 120 securities instead of 100.
5. For all fee tables, you have requested that the lines entitled "Maximum Front-End Sales Charge" and "Maximum Deferred Sales Charge" be indented under the line entitled "Maximum Sales Charge."
Response: The typeset version of the prospectus will include the change referenced above in all fee tables.
6. The fee waiver line in the fee table for GAM Asia-Pacific Equity should be eliminated if the prior contractual waiver will not be in effect for the upcoming fiscal year.
Response: There is no longer a contractual fee waiver for this fund. As a result, the fee waiver line has been eliminated from the fee table. In addition, we have replaced the prior footnote to the fee table with the following new language:
"The Investment Adviser has voluntarily agreed to waive a portion of its advisory fee in the amount of 0.10% per annum during fiscal year 2005. As a result of this voluntary fee waiver, the total fund operating expenses paid by Class A, Class B and Class C Shares are expected to be 2.87%, 3.72% and 4.83%, respectively."
7. Since "Derivative Instruments" risk is listed as a principal risk for GAM Gabelli Long/Short, disclosure regarding investing in derivative instruments should be added to the "Principal Investment Strategy" section.
Response: The risk disclosure related to Derivative Instruments Risk has been moved to the Non-Principal Risks section because investing in derivative instruments is not a principal strategy for the fund.
8. Please add dates of employment for the various portfolio manager biographies in a manner that is sufficient to indicate at least five year's experience.
Response: We have revised each portfolio manager's biography to respond to the comment above.
9. In the fifth paragraph under the section entitled "Frequent/Short-Term Trading or Market Timing", please indicate whether the use of the word "may" in the first sentence indicates that market timing may be permitted for transactions placed through a financial intermediary.
Response: The use of the word "may" is not meant to indicate that market timing would be permitted in such circumstances. Rather, the use of "may" is intended to address the fact that a Fund cannot always identify or reasonably detect excessive trading for transactions placed through omnibus accounts. However, in response to your comment, we have revised this entire paragraph to clarify the Fund's ability to detect excessive trading for transactions placed through intermediaries. The revised paragraph appears below.
"Investors who place transactions through the same financial intermediary on an omnibus account basis may be deemed part of a group for the purpose of this policy and may be rejected in whole or in part by a Fund. The Funds, however, cannot always identify or reasonably detect excessive trading that may be facilitated by financial intermediaries or made difficult to identify through the use of omnibus accounts by those intermediaries that transmit purchase, exchange and redemption orders to Funds, and thus the Funds may have difficulty curtailing such activity. Transactions accepted by your financial intermediary and determined by a Fund's principal underwriter to constitute market timing are not deemed accepted by a Fund and may be cancelled or revoked by the Fund within one business day of the Fund's determination that the transaction violates this policy. Some investors own their shares in the Funds through omnibus accounts at a financial institution. In such cases, the Funds may not know the identity of individual beneficial owners of the Funds' shares, and may not be able to charge a redemption fee to the individuals actually redeeming Fund shares. However, the Company reviews all trading activity on behalf of omnibus accounts. If any abuses are detected, the Company will contact the intermediary to determine whether the policy of the Funds has been violated and to what degree. The Company may permanently or for a specific period of time bar any such accounts from further purchases of Fund shares. The Funds' ability to impose restrictions and deter abuses with respect to accounts traded through particular intermediaries may vary depending on the systems capabilities, applicable contractual and legal restrictions and cooperation of those intermediaries."
10. In the fifth paragraph under the section entitled "Frequent/Short-Term Trading or Market Timing", the second sentence indicates transactions accepted by a financial intermediary that are determined by the Fund's principal underwriter to constitute market timing may be cancelled by the Fund. In what timeframe would the transaction be cancelled?
Response: The transaction would be cancelled within one business day of the Fund's determination that the transaction violates the market timing policy. See the revised disclosure for this paragraph included in the response to Question 9 above.
11. You indicate that the second paragraph under the section entitled "Redemption Fees" is confusing and should be clarified.
Response: The paragraph has been revised and now reads as follows:
"Redemption fees are not charged for transactions in the Funds if the Funds are held in an account being managed by GAM on a discretionary basis. Market timing activities with respect to these accounts are prohibited unless the activity is part of a mandated asset allocation that is executed across applicable discretionary managed accounts."
12. Explain supplementally why a 1% redemption fee is charged only on Class A Shares and not all classes of shares.
Response: A redemption fee is not assessed on the other classes of shares because those classes currently charge a contingent deferred sales charge.
SAI Comments
13. In the section entitled "Disclosure of Portfolio Holdings," you indicated that the disclosure should address the following: (a) whether any compensation is received by the Fund for release of portfolio holdings information; (b) the Board's oversight role in ensuring that the policy is being followed; (c) the procedures used to ensure that the disclosure of portfolio holdings information is in the best interests of the Fund; (d) who is authorized to release portfolio holdings information; (e) list current ongoing relationships to release portfolio holdings information: and (f) explain who in "Compliance" has authority to make decisions under the policy.
Response: The entire section has been revised to address all of your comments above. The revised section appears below.
"The Board of Directors has adopted policies and procedures regarding the disclosure of portfolio holdings information to protect the interests of Fund shareholders and to address potential conflicts of interest that could arise between the interests of Fund shareholders and the interests of the Investment Advisers, principal underwriter or affiliated persons of the Investment Advisers or principal underwriter. The Funds' overall policy with respect to the release of portfolio holdings is to release such information consistent with applicable legal requirements and the fiduciary duties owed to shareholders. Subject to the limited exceptions described below, the Funds will not make available to anyone non-public information with respect to their portfolio holdings, until such time as the information is made available to all shareholders or the general public.
These policies and procedures also are applicable to the Funds' respective Investment Advisers and their agents. Pursuant to the policy, the Funds, their Investment Advisers and their agents are obligated to:
o Act in the best interests of Fund shareholders by protecting non-public and potentially material portfolio holdings information;
o Ensure that portfolio holdings information is not provided to a favored group of clients or potential clients; and
o Adopt such safeguards and controls around the release of client information so that no client or group of clients is unfairly disadvantaged as a result of such release.
Pursuant to this policy, only the Funds' top 10 holdings are disclosed in marketing and other material. For certain Funds, the disclosure is limited to fewer than 10 holdings. Any requests for departures from this policy from clients, or from other third parties, must be authorized by either the Chief Compliance Officer or General Counsel. In certain jurisdictions it is prohibited by law to make available to some shareholders the Funds' underlying portfolio positions unless all shareholders receive the same information. Providing such information to selected recipients could assist a person or entity in late trading of the Funds' shares or allow them to engage in other detrimental trading techniques such as front running or short selling of the portfolio securities in the Funds.
There are general, and other limited exceptions to this prohibition. Third parties that provide services to the Funds, such as trade execution measurement and reporting systems, personal securities transaction monitoring, proxy voting, the Funds' custodians, administrator, accountants/auditors and executing brokers may also receive or have access to nonpublic Fund portfolio holdings information. These p
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CORRESP
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filename1.htm
SEC Correspondence for GAM Funds as filed April 22, 2005
[SRSY LOGO] Stradley Ronon Stevens & Young, LLP
1220 19th Street, NW
Suite 600
Washington, DC 20036
Telephone (202) 822-9611
Fax (202) 822-0140
April 22, 2005
VIA Edgar and Email
Christian T. Sandoe, Esq.
Division of Investment Management
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: GAM Funds, Inc. (File Nos. 2-92136 and 811-4062) -
Response to SEC Comments on Post-Effective Amendment No. 42
Dear Mr. Sandoe:
We are responding to your comments, provided, on your behalf by Chad Eskildsen,
via telephone on April 11, 2005 to Post-Effective Amendment No. 42 to the
Registration Statement of GAM Funds, Inc. (the "Registrant") filed on February
25, 2005. Set forth below, we have briefly summarized each of your comments and
our response follows immediately thereafter.
In connection with our responses to your comments, we acknowledge, on behalf of
the Registrant, that:
o The Registrant is responsible for the adequacy and accuracy of the
disclosure in the filing;
o Staff comments or changes to disclosure in response to staff comments in
the filing reviewed by the staff do not foreclose the Commission from
taking any action with respect to the filing; and
o The Registrant may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities laws
of the United States.
General Comment
1. Pursuant to SEC Press Release 2004-89 (June 24, 2004), all EDGAR
correspondence should include a "Tandy letter" that includes certain
acknowledgements.
Response: The acknowledgements required in a Tandy letter are included as
the second paragraph of this response letter.
Prospectus Comments
2. GAM International Equity indicates that it will invest in stocks issued in
at least three different countries. Please address how this complies with
footnote 42 of the Names Rule Release.
Response: Footnote 42 of the Names Rule Release notes that the SEC staff
expects that a fund that uses the term "International" in its name would
invest its assets in investments that are tied economically to a number of
countries throughout the world. However, the footnote does not provide
insight into what constitutes "a number of different countries" nor does
there appear to be any other interpretations on this issue other than a
Staff issued Generic Comment Letter (pub. avail. Jan. 3, 1991). In that
Generic Comment Letter, the Staff indicated that "an international fund
should have a policy requiring investment in at least three different
countries outside the United States." GAM International Equity's principal
investment strategy was drafted in reliance on that Generic Comment Letter.
Furthermore, footnote 43 to the Names Rule Release notes with respect to
funds that are not subject to the Names Rule (Rule 35d-1 under the
Investment Company Act of 1940) that "an investment company may use any
reasonable definition of the terms used in its name and should define the
terms used in its name in discussing its investment objectives and
strategies in the prospectus." We believe that we have accomplished this by
explicitly indicating that GAM International Equity will invest in at least
three countries other than the United States. Finally, as a practical
matter, it is important to note that the Fund is generally invested in at
least ten countries at any given time.
3. Since Small/Mid-Cap Risk is listed as a principal risk for each of GAM
European Equity, GAM Asia-Pacific Equity and GAM International Equity,
disclosure regarding small and mid-cap investing should be added to the
"Principal Investment Strategy" section.
Response: The risk disclosure related to Small/Mid-Cap Risk has been moved
to the Non-Principal Risks section because small/mid-cap investing is not a
principal strategy for any of these Funds.
4. Since "Focus Investing" is listed as a principal risk for each of GAM
European Equity, GAM Asia-Pacific Equity and GAM International Equity,
disclosure regarding investing in a limited number of issuers should be
added to the "Principal Investment Strategy" section.
Response: In response to your comments, we have added the following
sentences to the principal investment strategy for each of the affected
funds:
For GAM International Equity: "Typically, the Fund will invest in 60 to 100
securities, which are mainly equities."
For GAM Asia-Pacific Equity: "Typically, the Fund will invest in 50 to 70
securities, which are mainly equities."
For "GAM European Equity: "Typically, the Fund will invest in 80 to 120
securities, which are mainly equities."
Please note that the Focus Investing Risk description for GAM European
Equity has been revised slightly to indicate that the Fund typically
invests in less than 120 securities instead of 100.
5. For all fee tables, you have requested that the lines entitled "Maximum
Front-End Sales Charge" and "Maximum Deferred Sales Charge" be indented
under the line entitled "Maximum Sales Charge."
Response: The typeset version of the prospectus will include the change
referenced above in all fee tables.
6. The fee waiver line in the fee table for GAM Asia-Pacific Equity should be
eliminated if the prior contractual waiver will not be in effect for the
upcoming fiscal year.
Response: There is no longer a contractual fee waiver for this fund. As a
result, the fee waiver line has been eliminated from the fee table. In
addition, we have replaced the prior footnote to the fee table with the
following new language:
"The Investment Adviser has voluntarily agreed to waive a portion of its
advisory fee in the amount of 0.10% per annum during fiscal year 2005. As a
result of this voluntary fee waiver, the total fund operating expenses paid
by Class A, Class B and Class C Shares are expected to be 2.87%, 3.72% and
4.83%, respectively."
7. Since "Derivative Instruments" risk is listed as a principal risk for GAM
Gabelli Long/Short, disclosure regarding investing in derivative
instruments should be added to the "Principal Investment Strategy" section.
Response: The risk disclosure related to Derivative Instruments Risk has
been moved to the Non-Principal Risks section because investing in
derivative instruments is not a principal strategy for the fund.
8. Please add dates of employment for the various portfolio manager
biographies in a manner that is sufficient to indicate at least five year's
experience.
Response: We have revised each portfolio manager's biography to respond to
the comment above.
9. In the fifth paragraph under the section entitled "Frequent/Short-Term
Trading or Market Timing", please indicate whether the use of the word
"may" in the first sentence indicates that market timing may be permitted
for transactions placed through a financial intermediary.
Response: The use of the word "may" is not meant to indicate that market
timing would be permitted in such circumstances. Rather, the use of "may"
is intended to address the fact that a Fund cannot always identify or
reasonably detect excessive trading for transactions placed through omnibus
accounts. However, in response to your comment, we have revised this entire
paragraph to clarify the Fund's ability to detect excessive trading for
transactions placed through intermediaries. The revised paragraph appears
below.
"Investors who place transactions through the same financial intermediary
on an omnibus account basis may be deemed part of a group for the purpose
of this policy and may be rejected in whole or in part by a Fund. The
Funds, however, cannot always identify or reasonably detect excessive
trading that may be facilitated by financial intermediaries or made
difficult to identify through the use of omnibus accounts by those
intermediaries that transmit purchase, exchange and redemption orders to
Funds, and thus the Funds may have difficulty curtailing such activity.
Transactions accepted by your financial intermediary and determined by a
Fund's principal underwriter to constitute market timing are not deemed
accepted by a Fund and may be cancelled or revoked by the Fund within one
business day of the Fund's determination that the transaction violates this
policy. Some investors own their shares in the Funds through omnibus
accounts at a financial institution. In such cases, the Funds may not know
the identity of individual beneficial owners of the Funds' shares, and may
not be able to charge a redemption fee to the individuals actually
redeeming Fund shares. However, the Company reviews all trading activity on
behalf of omnibus accounts. If any abuses are detected, the Company will
contact the intermediary to determine whether the policy of the Funds has
been violated and to what degree. The Company may permanently or for a
specific period of time bar any such accounts from further purchases of
Fund shares. The Funds' ability to impose restrictions and deter abuses
with respect to accounts traded through particular intermediaries may vary
depending on the systems capabilities, applicable contractual and legal
restrictions and cooperation of those intermediaries."
10. In the fifth paragraph under the section entitled "Frequent/Short-Term
Trading or Market Timing", the second sentence indicates transactions
accepted by a financial intermediary that are determined by the Fund's
principal underwriter to constitute market timing may be cancelled by the
Fund. In what timeframe would the transaction be cancelled?
Response: The transaction would be cancelled within one business day of the
Fund's determination that the transaction violates the market timing
policy. See the revised disclosure for this paragraph included in the
response to Question 9 above.
11. You indicate that the second paragraph under the section entitled
"Redemption Fees" is confusing and should be clarified.
Response: The paragraph has been revised and now reads as follows:
"Redemption fees are not charged for transactions in the Funds if the Funds
are held in an account being managed by GAM on a discretionary basis.
Market timing activities with respect to these accounts are prohibited
unless the activity is part of a mandated asset allocation that is executed
across applicable discretionary managed accounts."
12. Explain supplementally why a 1% redemption fee is charged only on Class A
Shares and not all classes of shares.
Response: A redemption fee is not assessed on the other classes of shares
because those classes currently charge a contingent deferred sales charge.
SAI Comments
13. In the section entitled "Disclosure of Portfolio Holdings," you indicated
that the disclosure should address the following: (a) whether any
compensation is received by the Fund for release of portfolio holdings
information; (b) the Board's oversight role in ensuring that the policy is
being followed; (c) the procedures used to ensure that the disclosure of
portfolio holdings information is in the best interests of the Fund; (d)
who is authorized to release portfolio holdings information; (e) list
current ongoing relationships to release portfolio holdings information:
and (f) explain who in "Compliance" has authority to make decisions under
the policy.
Response: The entire section has been revised to address all of your
comments above. The revised section appears below.
"The Board of Directors has adopted policies and procedures regarding the
disclosure of portfolio holdings information to protect the interests of
Fund shareholders and to address potential conflicts of interest that could
arise between the interests of Fund shareholders and the interests of the
Investment Advisers, principal underwriter or affiliated persons of the
Investment Advisers or principal underwriter. The Funds' overall policy
with respect to the release of portfolio holdings is to release such
information consistent with applicable legal requirements and the fiduciary
duties owed to shareholders. Subject to the limited exceptions described
below, the Funds will not make available to anyone non-public information
with respect to their portfolio holdings, until such time as the
information is made available to all shareholders or the general public.
These policies and procedures also are applicable to the Funds' respective
Investment Advisers and their agents. Pursuant to the policy, the Funds,
their Investment Advisers and their agents are obligated to:
o Act in the best interests of Fund shareholders by protecting non-public and
potentially material portfolio holdings information;
o Ensure that portfolio holdings information is not provided to a favored
group of clients or potential clients; and
o Adopt such safeguards and controls around the release of client information
so that no client or group of clients is unfairly disadvantaged as a result
of such release.
Pursuant to this policy, only the Funds' top 10 holdings are disclosed in
marketing and other material. For certain Funds, the disclosure is limited
to fewer than 10 holdings. Any requests for departures from this policy
from clients, or from other third parties, must be authorized by either the
Chief Compliance Officer or General Counsel. In certain jurisdictions it is
prohibited by law to make available to some shareholders the Funds'
underlying portfolio positions unless all shareholders receive the same
information. Providing such information to selected recipients could assist
a person or entity in late trading of the Funds' shares or allow them to
engage in other detrimental trading techniques such as front running or
short selling of the portfolio securities in the Funds.
There are general, and other limited exceptions to this prohibition. Third
parties that provide services to the Funds, such as trade execution
measurement and reporting systems, personal securities transaction
monitoring, proxy voting, the Funds' custodians, administrator,
accountants/auditors and executing brokers may also receive or have access
to nonpublic Fund portfolio holdings information. These p