As filed with the Securities and Exchange Commission on February 7, 2003.
File No. ______________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. _____ [ ]
INVESTEC FUNDS
(Formerly Guinness Flight Investment Funds)
(Exact name of Registrant as Specified in Trust Instrument)
1055 Washington Blvd., 3rd Floor
Stamford, Connecticut 06901
---------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
(800) 362-5365
(Area Code and Telephone Number)
Susan Penry-Williams, Esq.
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
------------------------------------
(Name and Address of Agent for Service)
Copy to
Royce N. Brennen
Investec Funds
1055 Washington Blvd., 3rd Floor
Stamford, Connecticut 06901
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement becomes effective.
Title of Securities Being Registered: Shares of Beneficial Interest.
No Filing Fee is due because of reliance on Section 24(f) of the Investment
Company Act of 1940, as amended.
INVESTEC FUNDS
Investec Mainland China Fund
[800-915-6565]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [___________], 2003
The Investec Funds (the "Trust") will host a special meeting of
shareholders of the Investec Mainland China Fund (the "China Fund") on _______ [
], 2003, at [ ] p.m. [ ] Time (the "Meeting"). The Meeting will be held at the [
]. At the Meeting, we will ask shareholders of the Fund to vote on the following
proposal:
To approve an Agreement and Plan of Reorganization
and Liquidation (the "Plan") which if approved would
result in the transfer of all or substantially all of
the assets of the China Fund to the Investec China &
Hong Kong Fund (the "China & Hong Kong Fund") in
exchange for shares of the China & Hong Kong Fund and
the assumption by the China & Hong Kong Fund of the
identified liabilities of the China Fund. The Plan
also provides for distribution of those shares to
shareholders of the China Fund in liquidation and
subsequent termination of the China Fund. A vote in
favor of the Plan is a vote in favor of the
liquidation and dissolution of the China Fund; and
To transact such other business as may properly come
before the Meeting or any adjournments or
postponements thereof.
The Board of Trustees of the Investec Funds has fixed the close of
business on [___________], 2003 as the record date for the determination of
shareholders entitled to notice of, and to vote at, the meeting or any
adjournment or postponement thereof.
Investors are advised to read and retain this Proxy Statement and
Prospectus for future reference.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE REORGANIZATION OF THE CHINA
FUND. WE URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY.
_______ [ ], 2003
By Order of the Board of Trustees,
Eric M. Banhazl
Secretary
Investec Funds
[1055 Washington Blvd., 3rd Floor
Stamford, Connecticut 06901]
Dear Shareholder,
Enclosed is a combined Proxy Statement and Prospectus seeking your
approval of a proposed merger of the Investec Mainland China Fund (the "China
Fund") into the Investec China & Hong Kong Fund ("China & Hong Kong Fund")
(collectively, the "Funds"). Your vote to merge into the China & Hong Kong Fund
carries with it post-merger approval of a new investment advisory agreement in
the context that shareholders of the China & Hong Kong Fund are being asked to
consider approval of a new investment adviser, Guinness Atkinson Asset
Management, LLC ("Guinness Atkinson"), to manage the Fund in place of Investec
Asset Management U.S., Limited ("Investec"), the current manager for both Funds.
The approval of the new investment advisory agreement arises from an
announcement by Investec Group, the parent company of Investec, of its intention
to discontinue its U.S.-based mutual funds operations.
We are recommending the merger of the Funds because the investment
objectives of the China Fund and the China & Hong Kong Fund are similar and the
Funds employ similar investment policies to achieve their investment objectives.
Additionally, as discussed in the accompanying document, the China Fund's asset
base is decreasing and the China & Hong Kong Fund's ratio of expenses to net
assets for the most recently completed fiscal year is lower than those of the
China Fund. The combined assets of the Funds should provide a more stable asset
base for management because daily purchases and redemptions of shares should
have a less significant impact on the size of the combined Funds. Mr. Edmund
Harriss will continue to manage the China & Hong Kong Fund, as a membr of
Guinness Atkinson, following consummation of the merger and approval of the new
investment advisory agreement with Guinness Atkinson; the other services
currently provided to each Fund will be provided in substantially the same
manner as at present. The accompanying document describes the proposed
transaction and compares the investment policies, operating expenses and
performance history of the China Fund and the China & Hong Kong Fund. You should
review the accompanying materials carefully.
If shareholders of the China Fund do not approve the proposed
Reorganization, the Board has indicated that it would evaluate alternative
courses of action, including possible liquidation of the Fund.
Remember your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN, DATE
AND RETURN YOUR PROXY CARD IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we
do not receive your signed proxy card after a reasonable amount of time, you may
receive a telephone call from our proxy solicitor, [ (" ")],
reminding you to vote your shares. Proxies may be voted by telephone by calling
[ at ] between the hours of 9:00 a.m. and 11:00 p.m. (EST) Monday-Friday or
Saturday between the hours of 12:00 p.m. and 6:00 p.m. (EST). If you prefer, you
can fax the proxy card to [ , Attn: Proxy Department, at ].
We encourage you to vote by telephone or through the Internet (please refer to
your proxy card for the appropriate website) in order to expedite the
process. Whichever voting method you choose, please read the full text of the
Proxy Statement before you vote.
If you have any questions regarding the shareholder meeting, please feel
free to call our proxy solicitors, [ , at ] who will be
pleased to assist you.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED PROMPTLY.
Sincerely,
Royce Brennan
President
Table of Contents
Page
----
PART 1 - AN OVERVIEW.........................................................1
PART 2 - PROPOSAL TO APPROVE AN AGREEMENT AND PLAN OF
REORGANIZATION AND LIQUIDATION ON BEHALF OF YOUR FUND...............1
Introduction........................................................1
How the Reorganization Works........................................2
How the Fees of the China Fund Compare to the Fees of
the China & Hong Kong Fund..........................................2
How the China Fund Compares to the China & Hong Kong Fund...........4
Comparison of Investment Objectives.................................4
Comparison of Principal Investment Risks............................6
Comparison of Potential Risks and Rewards/Performance...............7
Comparison of Operations............................................8
Background.................................................8
Current Adviser............................................8
Guinness Atkinson Asset Management, LLC (Proposed
Adviser to the China & Hong Kong Fund).....................8
Administration Agreement, Distribution Agreement
and Distribution Plan.....................................10
Transfer Agent and Custodian..............................11
Dividends and Other Distributions.........................11
Purchase, Redemption and Exchange Procedures..............11
Exchange and Redemption Rights............................12
Trustees..................................................12
Comparison of Shareholder Rights...................................12
Capitalization of the Funds........................................12
Information about the Reorganization...............................12
Why We Want to Reorganize the Funds................................15
Considerations by the Board of Trustees............................16
Required Vote......................................................16
Board Recommendation...............................................16
i
PART 3 - MORE ON PROXY VOTING AND MEETING OF SHAREHOLDERS...................17
Who Can Vote.......................................................17
PART 4 - FUND INFORMATION...................................................19
PART 5 - FORM OF AGREEMENT AND PLAN OF REORGANIZATION AND
LIQUIDATION........................................................19
ii
YOUR VOTE IS IMPORTANT!
------------------------------------------------------------------------------
YOU CAN VOTE EASILY AND QUICKLY BY MAIL, BY INTERNET, BY PHONE (Toll-Free),
OR BY FAX. JUST FOLLOW THE SIMPLE INSTRUCTIONS THAT APPEAR ON YOUR ENCLOSED
PROXY CARD.
------------------------------------------------------------------------------
INVESTEC FUNDS
Investec Mainland China Fund
SPECIAL MEETING OF SHAREHOLDERS
______ [ ], 2003
------------------------------------------------------------
INVESTEC FUNDS
[1055 Washington Blvd., 3rd Floor
Stamford, Connecticut 06901]
COMBINED PROXY STATEMENT AND PROSPECTUS
DATED ______ [ ], 2003
INTRODUCTION
------------
This Combined Proxy Statement and Prospectus is being provided for a
special meeting of shareholders of the Investec Mainland China Fund (the "China
Fund") to be held on [_____] [ ], 2003 (the "Meeting"). We have divided the
Combined Proxy Statement and Prospectus into five parts:
Part 1 -- An Overview
Part 2 -- Proposal to Approve an Agreement and Plan of the
Reorganization and Liquidation on behalf of your Fund
Part 3 -- More on Proxy Voting and Meeting of Shareholders
Part 4 -- Fund Information
Part 5 -- Form of Agreement and Plan of Reorganization and Liquidation
Please read the entire Proxy Statement and Prospectus before voting.
If you have any questions about the Meeting, please feel free to call
[ at ].
We intend to mail this Combined Proxy Statement and Prospectus to
shareholders the week of _____ [ ], 2003. It contains information about the
China Fund and the China & Hong Kong Fund that you should know. Please keep it
for future reference. A Combined Statement of Additional Information and a
Prospectus dated April 30, 2002, as supplemented, and an Annual
Report and Semi-Annual Report dated December 31, 2002 and June 30, 2002,
respectively, are incorporated by reference and can be obtained free of charge
by calling us at 800-915-6565.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR
DETERMINED THAT THIS COMBINED PROXY STATEMENT AND PROSPECTUS IS ACCURATE OR
COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
Investec Funds is subject to the requirements of the Securities and
Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as
amended, and in accordance therewith, file reports, proxy statements and other
information with the SEC. The SEC maintains a website that contains information
about the Investec Funds. Any such reports, proxy material and other information
can be inspected and copied at the public reference facilities of the SEC, 450
Fifth Street, N.W., Washington, D.C. 20549. Copies of such materials can be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, or by electronic request at the following e-mail address:
publicinfo@sec.gov, at prescribed rates. You may call the SEC at (202) 942-8090
for information on the operation of the Public Reference Room.
PART 1 - AN OVERVIEW
The Board of Trustees of Investec Funds (the "Trust") has sent you this
Combined Proxy Statement and Prospectus to ask for your vote on a proposal to
approve an Agreement and Plan of Reorganization and Liquidation on behalf of the
China Fund. If this proposal is approved by the shareholders of the China Fund,
the China Fund will be reorganized into the China & Hong Kong Fund. In this
Combined Proxy Statement and Prospectus, we refer to the Agreement and Plan of
Reorganization and Liquidation as the "Plan of Reorganization," and to the
transactions described in the Plan of Reorganization as the "reorganization."
PART 2 - PROPOSAL TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION AND
LIQUIDATION ON BEHALF OF YOUR FUND
Introduction
The Board of Trustees of the Trust, on behalf of the China Fund and the
China & Hong Kong Fund, both of which are series of the Trust, has approved an
Agreement and Plan of Reorganization and Liquidation under which the China Fund
would be reorganized into the China & Hong Kong Fund.
The primary purpose of the reorganization of the China Fund is to provide
economies of scale through a larger fund with similar strategies and provide a
more stable base for management of its investment portfolio because daily
purchases and redemptions of shares should have a less significant impact on the
size of the combined Funds. This may grant a wider range of choices among
permitted investments than are currently available to the China Fund. The
projected annual operating expenses of the China & Hong Kong Fund, expressed as
a percentage of Fund assets, are expected to be lower than those of the China
Fund due to the economies of scale resulting from a larger fund.
The reorganization is expected to qualify as a tax-free reorganization
under the Internal Revenue Code (the "Code"). If the reorganization qualifies as
such, you, as a shareholder of the China Fund, will not recognize gain or loss
solely as a result of the reorganization.
Shareholders of the China Fund will vote to determine whether the Fund
will be reorganized into the China & Hong Kong Fund. The vote of a majority of
the outstanding voting securities of the China Fund is needed to adopt the Plan
of Reorganization on behalf of the Fund. Under the Investment Company Act of
1940, as amended (the "1940 Act"), the vote of a majority of the outstanding
voting securities means the affirmative vote of the lesser of (a) 67% or more of
the shares of the Fund present in person at the Meeting or represented by proxy,
if holders of more than 50% of the outstanding shares on the Record Date are
present, in person or by proxy, or (b) more than 50% of the outstanding shares
on the Record Date, whichever is less. If the reorganization of the China Fund
is not consummated for any reason, including the failure to obtain the requisite
approval of the shareholders of the China Fund, the Board of Trustees would
determine what, if any, further action should be taken, including possible
liquidation of the Fund.
The next few pages of this Combined Proxy Statement and Prospectus discuss
some of the details of the proposed reorganization and how it will affect the
China Fund and you.
How the Reorganization Works
If you approve the proposal discussed in this Combined Proxy Statement and
Prospectus, the China Fund would reorganize into the China & Hong Kong Fund. The
reorganization would work as follows:
o If you approve the Plan of Reorganization, the China Fund would
transfer substantially all of its assets and liabilities to the
China & Hong Kong Fund, in exchange for shares of the China &
Hong Kong Fund.
o The China Fund would distribute to you the China & Hong Kong Fund
shares it receives. The dollar value of the China & Hong Kong
Fund shares would be the same as the dollar value of the China
Fund shares.
o You would become a shareholder of the China & Hong Kong Fund. The
China Fund would then cease operations.
How the Fees of the China Fund Compare to the Fees of the China & Hong
Kong Fund
Both the China Fund and the China & Hong Kong Fund, like all mutual funds,
incur certain expenses in their operations. These expenses include management
fees, as well as the costs of maintaining accounts, administration, providing
shareholder liaison and distribution services, and other activities. The
following table describes the fees and expenses you may pay if you invest in the
China Fund or the China & Hong Kong Fund. The table also shows the expected
expenses of the China & Hong Kong Fund after the reorganization. The Funds'
annual expenses may be more or less than the amounts shown below.
China & Hong Kong Combined Pro Forma
China Fund Fund (Both Funds)
---------- ----------------- ------------------
Shareholder Transaction
Expenses (paid directly
from your investment)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None None None
Sales Charge Imposed on Reinvested Dividends None None None
Deferred Sales Charge None None None
Redemption Fees/Exchange Fees 2.00%(1)/None 2.00%(1)/None 2.00%(1)/None
Maximum Account Fee 0.00% 0.00% None
2
China & Hong Kong Combined Pro Forma
China Fund Fund (Both Funds)
---------- ----------------- ------------------
Shareholder Transaction
Expenses (paid directly
from your investment)
Annual Fund Operating Expenses (as a
percentage of average daily net assets)
Management Fees 1.00% 1.00% 1.00%
Distribution (Rule 12b-1) Fees None None None
Other Expenses 3.24 1.04 1.04
Total Annual Fund Operating Expenses 4.24 2.04 2.04
Expenses Reimbursed to the Fund (2.26) 0.00 0.00
Net Annual Fund Operating Expenses (expenses
actually incurred by the Fund) 1.98(2) 2.04 2.04
(1) You will be charged a 2% fee if you redeem or exchange shares of this Fund
within 30 days of purchase. There is a $15 fee for redemptions by wire.
(2) Investec is contractually obligated to cap the Fund's Total Annual Fund
Operating Expenses at 1.98% through June 30, 2003. For the fiscal year
ended December 31, 2002, Investec waived all Management Fees from the Fund.
Guinness Atkinson will continue to adhere to such obligation through June
30, 2003.
Example. This Example is intended to help you compare the cost of
investing in the China Fund with the cost of investing in the China & Hong Kong
Fund if the proposal is approved by shareholders of the China Fund.
The Example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
- -------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
China Fund $201 $1081 $1975 $4269
- -------------------------------------------------------------------------------
China & Hong Kong Fund $207 $640 $1098 $2369
- -------------------------------------------------------------------------------
Combined Pro Forma (Both Funds)* $207 $640 $1098 $2368
- -------------------------------------------------------------------------------
* [Your costs of investing in the Fund for 1 year reflect the amount you
would pay after Investec reimburses the Fund for some or all of the
Other Expenses. Your costs of investing in the Fund for 3, 5 and 10
years reflect the amount you would pay if Investec did not reimburse
the Fund for some or all of the Other Expenses. If Investec continued
to cap the Fund's expenses for 3, 5 or 10 years as it did for the first
year, your actual costs for those periods would be lower than the
amounts shown. Investec is currently under no obligation to cap the
Fund's expenses for any period beyond June 30, 2003. Guinness Atkinson
will adhere to such obligation through June 30, 2003.]
3
How the China Fund Compares to the China & Hong Kong Fund
For complete information about the China Fund or the China & Hong Kong
Fund, please refer to your copy of the Investec Funds' combined prospectus dated
April 30, 2002. You also can call us at 800-915-6565 for a free copy of the
combined prospectus. The information contained in your Fund's prospectus is
incorporated by reference into this Combined Proxy Statement and Prospectus.
Comparison of Investment Objectives. The following table compares
the investment objective of the China Fund with the investment objective of the
China & Hong Kong Fund.
- --------------------------------------------------------------------------
China Fund China & Hong Kong Fund
- --------------------------------------------------------------------------
Long-term capital appreciation Long-term capital
primarily through investments in appreciation primarily
equity securities of companies, though investments in
organized in or with principal securities of China and
office or markets in China, Hong Kong.
Hong Kong or Taiwan, which derive
a significant portion of their
revenue from: goods or services
sold or produced in; have a
significant portion of their assets
in; or are linked to assets or
currencies in the above countries.
- --------------------------------------------------------------------------
Comparison of Investment Policies and Strategies. The China Fund
and the China & Hong Kong Fund employ essentially the same investment policies
and strategies to achieve their respective goals. The China Fund focuses on
"Chinese" companies (companies whose principal market for trading securities is
China, Hong Kong or Taiwan), that are listed on specific stock exchanges (the
Shanghai, Shenzhen, Hong Kong and New York Stock Exchanges), and shares of
non-Chinese companies that have a majority of their assets in China. The China &
Hong Kong Fund focuses on companies who primarily trade on the China or Hong
Kong exchanges and on non-Chinese companies that derive 50% of their revenue
from activities in China and/or Hong Kong.
The following table highlights in more detail the principal
investment policies and strategies of the China Fund and the China & Hong Kong
Fund.
- -------------------------------------------------- -------------------------------------------------
China Fund China & Hong Kong Fund
- -------------------------------------------------- -------------------------------------------------
The China Fund intends to invest at least 80% of The China & Hong Kong Fund intends to invest at
its total assets (plus any borrowings for least 80% of its net assets (plus any
investment purposes)
4
- -------------------------------------------------- -------------------------------------------------
China Fund China & Hong Kong Fund
- -------------------------------------------------- -------------------------------------------------
in the following types of equity securities: borrowings for investment purposes) in the
following types of equity securities:
o "B" shares--shares issued by Chinese o equity securities of companies that are
companies that are listed on the Shanghai primarily traded on the China or Hong
Stock Exchange or the Shenzhen Stock Kong exchanges; or
Exchange;
o equity securities of companies that
o "H" shares--shares issued by Chinese derive at least 50% of their revenues
companies that are listed on the Hong from business activities in China
Kong Stock Exchange; and/or Hong Kong, but which are listed
and traded elsewhere.
o "N" shares--shares issued by Chinese
companies that are listed on the New York Equity securities include common stocks,
Stock Exchange; preferred stocks, securities convertible into
common stocks, rights and warrants. The China &
o "Red Chips" --shares issued by Hong Kong Hong Kong Fund normally invests at least 65% of
companies that are owned and controlled its total assets in companies listed on the
by Chinese government bodies and listed Hang Seng Index, with the actual weightings of
on the Hong Kong Stock Exchange; and the Hang Seng Index companies held in the China
& Hong Kong Fund's portfolio are normally
higher than that. Those companies may be of any
size.
o "China Plays"--shares issued by
non-Chinese companies that have the When current market, economic, political or
majority of their assets in China or that other conditions are unsuitable for the China &
derive a majority of their revenues from Hong Kong Fund's investment objective, the
activities in Mainland China. China & Hong Kong Fund may temporarily invest
up to 100% of its assets in cash, cash
When current market, economic, political or other equivalents or high quality short-term money
conditions are unsuitable for the China Fund's market instruments. When the China & Hong Kong
investment objective, the China Fund may Fund takes a temporary defensive position, it
temporarily invest up to 100% of its assets in may not achieve its investment objective.
cash, cash equivalents or high quality short-term However, the China & Hong Kong Fund will not
money market instruments. When the China Fund engage in market timing. The philosophy of the
takes a temporary defensive position, the China China & Hong Kong Fund is to remain invested.
Fund may not achieve its investment objective.
However, the China Fund will not engage in market
timing. The philosophy of the China Fund is to
remain invested.
- --------------------------------------------------- -------------------------------------------------
5
Comparison of Principal Investment Risks. Both of the Funds are
subject to similar risks common to all mutual funds that invest in equity
securities in China and Hong Kong. However, each Fund's risks differ based on
the specific types of equity securities in which it invests. For example, the
China Fund and the China & Hong Kong Fund each may experience losses due to
their concentration in a specific country's companies. The following table
highlights in more detail the principal investment risks, which are
substantially similar, of investing in the China Fund and the China & Hong Kong
Fund.
China Fund China & Hong Kong Fund
- ------------------------------------------------------ ------------------------------------------------------------------------
The China Fund is subject to the risks common to all The China & Hong Kong Fund is subject to the risks common to all
mutual funds that invest in equity securities and mutual funds that invest in equity securities and foreign securities.
foreign securities. You may lose money by investing Investing in the China & Hong Kong Fund may be more risky than
in the China Fund if any of the following occur: investing in a Fund that invests in the U.S. due to increased
volatility of foreign markets. You may lose money by investing in this
o the China and/or Hong Kong stock markets Fund if any of the following occur:
decline in value;
o the Hong Kong and/or China stock markets decline in value;
o China and/or Hong Kong stocks fall out of
favor with investors; o China and/or Hong Kong stocks fall out of favor with investors;
o the Fund has difficulty selling Asian smaller o the Fund has difficulty selling Asian smaller capitalization or
capitalization or emerging market stocks emerging market stocks during a down market due to lower
during a down market due to lower liquidity; liquidity;
o a stock or stocks in the Fund's portfolio do o a stock or stocks in the Fund's portfolio do not perform well;
not perform well;
o the value of Chinese currencies declines relative to the U.S.
o the value of Chinese currencies declines dollar;
relative to the U.S. dollar;
o the Chinese government expropriates the Fund's assets;
o the Chinese government expropriates the
Fund's assets; o political, social or economic instability in China causes the
value of the Fund's investments to decline; or
o political, social or economic instability in
China causes the value of the Fund's o the Fund Manager's investment strategy does not achieve the
investments to decline; or Fund's objective or the manager does not implement the strategy
properly.
o the Fund Manager's investment strategy does
not achieve the Fund's objective or the In addition, investing in common stocks entails a number of risks. The
manager does not implement the strategy stock markets in which the Fund invests may experience periods of
properly. volatility and instability. A variety of factors can negatively impact
the value of common stocks. These factors include a number of economic
In addition, investing in common stocks entails a factors such as interest rates and inflation rates as well as
number of risks. The stock markets in which the Fund non-economic factors such as political events. Foreign securities
invests may experience periods of volatility and experience more volatility than their domestic counterparts, in part
instability. A variety of factors can negatively because of higher political and economic risks, lack of reliable
impact the value of common stocks. These factors information, fluctuations in currency exchange rates and the risks
include a number of economic factors such as that a foreign government may take over assets, restrict the ability
interest rates and inflation rates as well as to exchange currency or restrict the delivery of securities. The
non-economic factors such as political events. prices of foreign securities issued in emerging countries experience
Foreign securities experience more volatility than more volatility because the securities markets in these countries may
their domestic counterparts, in part because of not be well established.
higher political and economic risks, lack of
reliable information, fluctuations in currency
exchange rates and the risks that a foreign
government may take over assets, restrict the
ability to exchange currency or restrict the
delivery of securities. The prices of foreign
securities issued in emerging countries experience
more volatility because the securities markets in
these countries may not be well established.
- ------------------------------------------------------ ------------------------------------------------------------------------
6
Comparison of Potential Risks and Rewards/Performance. The China
Fund and the China & Hong Kong Fund have their own risks and potential rewards.
The charts and tables below compare the potential risks and rewards of investing
in each Fund.
The charts shown below provide an indication of the risks of investing in
each Fund by showing changes in each Fund's performance for various time periods
ending December 31. The figures shown in the charts and tables assume
reinvestment of dividends.
Keep in mind that past performance does not indicate future results.
China Fund
1998: -24.96%
1999: 32.20%
2000: -21.69%
2001: -16.16%
2002: -1.33%
During the period shown in the chart, the best performance for a quarter
was 53.66% (for the quarter ended 6/30/99). The worst performance was -30.10%
(for the quarter ended 9/30/01).
China & Hong Kong Fund
1995: 20.45%
1996: 34.38%
1997: -20.34%
1998: -15.27%
7
1999: 66.27%
2000: -6.97%
2001: -23.45%
2002: -12.85%
During the period shown in the chart, the best performance for a quarter
was 32.16% (for the quarter ended 12/31/99). The worst performance was -28.32%
(for the quarter ended 12/31/97).
The average annual total returns for the China Fund and the China & Hong
Kong Fund for the periods ended December 31, 2002 are as follows:
- -------------------------------------------------------------------------------
Past One Past Five Since
Average Annual Total Returns Year Years inception
- -------------------------------------------------------------------------------
China Fund (1.33%) -- (9.21%)*
- -------------------------------------------------------------------------------
China & Hong Kong Fund (12.85%) (2.65%) 0.46%**
- -------------------------------------------------------------------------------
* Average annual total return since inception, November 03, 1997.
** Average annual total return since inception, June 30, 1994.
Comparison of Operations.
Background
Investec Group, the parent company of Investec Asset Management U.S.
Limited ("Investec"), the current investment adviser for the China Fund and the
China & Hong Kong Fund, has announced its intention to discontinue its
U.S.-based mutual funds operations and no longer serve as Adviser to the Funds.
In connection with its proposal to assume management of the Investec Funds,
Guinness Atkinson proposed the combination of the China Fund and the China &
Hong Kong Fund. It is expected that Mr. Edmund Harriss, the current portfolio
manager of the China & Hong Kong Fund, will continue to manage the China & Hong
Kong Fund as a member of Guinness Atkinson following consummation of the merger
and approval by shareholders of the China & Hong Kong Fund of a new investment
advisory agreement with Guinness Atkinson. See "Guinness Atkinson Asset
Management, LLC" below.
Current Adviser
Investec, the current Adviser supervises all aspects of the Funds'
operations and advises the Funds, subject to oversight by the Funds' Board of
Trustees. For providing these services, each Fund pays the Adviser an annual
advisory fee of 1% of average daily net assets. The Adviser offices are located
in the U.K., South Africa, Guernsey, Hong Kong, and the U.S. [The U.S. office is
located at 1055 Washington Blvd., 3rd Floor Stamford, CT 06901.] The Advisers'
main office is located in London, England at 2 Gresham Street, London EC2V 7QP.
For additional information concerning Investec see the current Prospectus of
Investec Funds dated April 30, 2002 together with the related Statement of
Additional Information also dated April 30, 2002, on file with the SEC and
incorporated by reference herein.
8
Guinness Atkinson Asset Management, LLC
(Proposed Adviser to the China & Hong Kong Fund)
Guinness Atkinson is a newly formed Delaware limited liability corporation
with offices in the United States and London. The principal executive officers
of Guinness Atkinson, their business addresses, position(s) with Guinness
Atkinson and a description of their principal occupations are set forth below.
- --------------------------------------------------------------------------------------
Position with Guinness
Name and Address Atkinson Principal Occupation(s)
- --------------------------------------------------------------------------------------
Tim W. N. Guinness Chairman and Chief Non-Executive Chairman of
19 Lord North Street Investment Officer Investec Asset Management
Westminster, London Limited and portfolio
SW1P 3LD manager of the Investec
Global Energy Fund
- --------------------------------------------------------------------------------------
James J. Atkinson, Jr. Chief Executive Officer Principal of Orbis
2020 East Financial Way Marketing, a mutual fund
Suite 100 marketing consultancy firm
Glendora, CA 91741
- --------------------------------------------------------------------------------------
Edmund Harriss(*) Director and Portfolio Portfolio Manager of
19 Lord North Street Manager Investec China & Hong Kong
Westminster, London Fund
SW1P 3LD
- --------------------------------------------------------------------------------------
Timothy W.N. Guinness
Since 1998, Mr. Guinness has managed the Investec Global Energy Fund and
acted as the non-executive chairman of Investec Asset Management Limited. From
1981 to 1998, Mr. Guinness served in several capacities at an offshoot of
Guinness Mahon Merchant Bank which later became known as Guinness Flight Global
Asset Management ("Guinness Flight"). During his tenure at Guinness Flight, Mr.
Guinness was responsible for the Global Equity Fund and the UK Equity Fund as
well as becoming principally involved in the firm's leadership from 1982. In
1998, when the firm was acquired by Investec Group, Guinness Flight had grown
from an investment manager with approximately $100 million dollars under
management to a company with over $11 billion dollars under management.
If you approve the Reorganization, Mr. Guinness will retire as chairman of
Investec Asset Management Limited, but will continue to manage the Investec
Global Energy Fund, through Guinness Asset Management Limited, a newly formed,
solely owned investment advisory firm.
James J. Atkinson
Mr. Atkinson is currently a principal of Orbis Marketing, a mutual fund
marketing consultancy firm. Prior to that, he was president of MAXfunds.com, an
internet site for mutual
- --------------------
* It is expected that Mr. Harriss will resign from his position at Investec
and become employed by Guinness Atkinson concurrent with Guinness Atkinson's
assumption of the management of the Investec Funds upon approval of the
shareholders.
9
fund investors. From 1993 to 2000, Mr. Atkinson was the Managing Director of
Guinness Flight Global Asset Management, US (later Investec Asset Management)
which managed the Guinness Flight family of funds.
Prior to serving as Managing Director of the Guinness Flight funds, Mr.
Atkinson co-founded and served as senior vice president of Huntington Advisers,
a niche provider of non-US dollar money market funds.
Edmund Harriss(*)
Mr. Harriss joined Investec in July 1993 as a Marketing Executive and
transferred to the Far East Desk in 1994. He has assisted with the management of
the China & Hong Kong Fund since November 1994. He was named a co-manager in
early 1998. Previously, from 1991 to 1993, he was the Assistant to the Managing
Director at a computer software company, PP Systems Ltd. of Salisbury, England.
Mr. Harriss is an Associate Member of the Institute of Management & Research.
Comparison of Existing and New Investment Advisory Agreements
Investec currently provides investment advisory services for the Funds
pursuant to an Investment Advisory Agreement between the Trust and Investec. The
terms and conditions of the Investment Advisory Agreement with respect to each
Fund are identical in all respects.
The terms and conditions of the proposed New Investment Advisory Agreement
between the China & Hong Kong Fund and Guinness Atkinson are substantially
identical in all material respects to the existing Investment Advisory
Agreement, except for the identity of the Fund's Adviser (Guinness Atkinson),
the use of the name "Guinness Atkinson" or a variant thereof in place of the
name "Investec", and the dates of their execution, effectiveness and
termination.
Administration Agreement, Distribution Agreement and Distribution Plan
The Trust has entered into separate Administration and Distribution
Agreements with respect to the Funds with U.S. Bancorp Fund Services, L.L.C.
("Administrator") and Quasar Distributors, LLC ("Distributor"), respectively.
For its services to the Funds, the Administrator receives a monthly fee
equal to, on an annual basis, 0.25% of each Fund's average daily net assets,
subject to a $40,000 annual minimum for China & Hong Kong Fund and $20,000
minimum for the China Fund.
Under the Distribution Agreement, the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchases for the Funds'
shares and pays the expenses of printing and distributing any prospectuses,
reports and other literature used by the Distributor, advertising, and other
promotional activities in connection with the offering of shares of the Fund for
sale to the public.
The Funds will not make separate payments as a result of the Distribution
Plan to the Adviser, the Administrator, Distributor or any other party, it being
recognized that the Funds presently pay, and will continue to pay, an investment
advisory fee to the Adviser and an
10
administration fee to the Administrator. To the extent that any payments made by
the Funds to the Adviser or the Administrator, including payment of fees under
the Investment Advisory Agreement or the Administration Agreement, respectively,
should be deemed to be indirect financing of any activity primarily intended to
result in the sale of shares of the Funds within the context of Rule 12b-1 under
the 1940 Act, then such payments shall be deemed to be authorized by the Plan.
The Distribution Plan and related agreements were approved by the Board of
Trustees including all of the "Qualified Trustees" (Trustees who are not
"interested" persons of the Funds, as defined in the 1940 Act, and who have no
direct or indirect financial interest in the Plan or any related agreement).
Transfer Agent and Custodian
Transfer Agent. U.S. Bancorp Fund Services, LLC is the Transfer Agent
for the Funds. The Transfer Agent provides record keeping and shareholder
services. U.S. Bancorp is located at 615 East Michigan Street, 3rd Floor,
Milwaukee, WI 53202.
Custodian. Investors Bank and Trust Company is the custodian for the
Funds. The custodian holds the securities, cash and other assets of the Funds.
Investors Bank and Trust is located at 200 Clarendon Street, Boston, MA 02116.
Dividends and Other Distributions
The dividend and distribution arrangements for the China Fund and the
China & Hong Kong Fund are the same. Both the China Fund and the China & Hong
Kong Fund distribute all or most of their net investment income and net capital
gains to shareholders. Dividends (investment income) for the Funds are normally
declared and paid annually, in December. Net capital gains for the Funds are
normally distributed in December. When calculating the amount of capital gain
for a Fund, the Fund can offset any capital gain with net capital loss (which
may be carried forward from a previous year).
Your dividends and/or capital gains distributions will be automatically
reinvested on the ex-dividend date when there is a distribution, unless you
elect otherwise, so that you will be buying more of both full and fractional
shares of the Fund. You will be buying those new shares at the net asset value
("NAV") per share on the ex-dividend date. You may choose to have dividends and
capital gains distributions paid to you in cash. You may also choose to reinvest
dividends and capital gains distributions in shares of another Investec Fund.
You may authorize either of these options by calling the Transfer Agent at (800)
915-6566 and requesting an optional shareholder services form. Dividends and
distributions are treated in the same manner for federal income tax purposes
whether you receive them in the form of cash or additional shares.
Purchase, Redemption and Exchange Procedures
The purchase, redemption and exchange procedures for the Fund and the
China & Hong Kong Fund are the same. The Transfer Agent is open from 9 a.m. to 4
p.m. Eastern Time for purchase, redemption and exchange orders. Shares will be
purchased, exchanged and redeemed at NAV per share. For trades in the China &
Hong Kong Fund and China Fund, the transfer agent must receive your request by
9:30 a.m. Eastern Time meaning that all purchase,
11
redemption or exchange orders must be received by that time to be processed that
day. The phone number you should call for account transaction requests is (800)
915-6566.
Exchange and Redemption Rights
The exchange and redemption rights for the China Fund and the China & Hong
Kong Fund are the same. You may exchange or redeem shares by mail or telephone.
When you exchange shares, you sell shares of one Investec Fund and buy shares of
another Investec Fund. You may realize either a gain or loss on those shares and
will be responsible for paying the appropriate taxes. If you exchange or redeem
through a broker, the broker may charge you a transaction fee. If you purchased
your shares by check, you may not receive your redemption proceeds until the
check has cleared, which may take up to 15 calendar days.
Trustees
The Board of Trustees of the Trust is responsible for the management of
both Funds and will continue to serve in such capacity after the reorganization.
The Fund
Comparison of Shareholder Rights. As series of the Trust, both
Funds' shareholders have the same rights, including, but not limited to, par
value, preemptive rights, preference and appraisal rights.
Capitalization of the Funds. The table below show existing
capitalization as of December 31, 2002, as well as pro forma capitalization as
of the same date,] which reflects the impact of any corporate actions, including
accounting adjustments, required to facilitate the reorganization. For these
reasons, the total pro forma combined Total Net Assets may differ from the
combined net assets of the Funds prior to the reorganization.
------------------------------------------------------------------------------
Total Net Shares
Assets Outstanding
(000) (000) NAV
------------------------------------------------------------------------------
China Fund $6,330 865 7.32
------------------------------------------------------------------------------
China & Hong Kong Fund $56,893 5,594 10.17
------------------------------------------------------------------------------
Combined Pro Forma (Both Funds) $63,223 6,126 10.17
------------------------------------------------------------------------------
Information about the Reorganization
This section describes some information you should know about the
reorganization of your Fund.
Description of transaction. The Plan of Reorganization provides that the
China Fund will transfer substantially all of its assets to the China & Hong
Kong Fund in exchange for shares of the China & Hong Kong Fund in the same
proportion as the shares of the China Fund. The China & Hong Kong Fund will also
assume substantially all of the China Fund's liabilities. After this
transaction, the China & Hong Kong Fund will give you shares of the China & Hong
Kong Fund (the "Closing"). The dollar value of the shares you receive will be
equal to the dollar
12
value of the China Fund shares you owned at the end of business on the day of
the Closing. You will not pay a sales charge or any other fee as part of this
transaction.
Please see the Plan of Reorganization for a more detailed description of
the reorganization. You can find the Plan of Reorganization in Part 5 of this
Combined Proxy Statement and Prospectus.
Who will pay for the reorganization The cost of the reorganization and
proxy solicitation will be borne by Guinness Atkinson and the Funds and is
estimated to be [$ ].
Tax Consequences of the Reorganization. The following discussion addresses
certain material United States federal income tax consequences of the
reorganization. It is based on current tax law, which may be changed by
legislative, judicial, or administrative action, possibly with retroactive
effect. No attempt has been made to present a complete discussion of the federal
tax consequences to the Funds or their shareholders, and this discussion does
not address any state, local or foreign tax consequences. The discussion relates
to United States persons who hold shares of a Fund as capital assets (as defined
in section 1221 of the Code). Special tax considerations may apply to certain
types of investors subject to special treatment under the tax law. Accordingly,
you are urged to consult your tax adviser with specific reference to your own
tax circumstances.
As a condition to the closing of the reorganization, both the China Fund
and the China & Hong Kong Fund must receive an opinion of counsel, on the basis
of the representations set forth or referred to in such opinion, describing the
material federal income tax consequences of the reorganization (the "Tax
Opinion"). The China Fund anticipates that the Tax Opinion will provide that the
reorganization will constitute a "reorganization" as such term is defined in
Section 368(a)(1) of the Code (a "tax-free reorganization"). If the
reorganization qualifies as a tax-free reorganization, then:
o No gain or loss will be recognized by the China Fund on the transfer
to the China & Hong Kong Fund of its assets in exchange solely for
shares of the China & Hong Kong Fund and the China & Hong Kong
Fund's assumption of the China Fund's liabilities or on the
subsequent distribution of shares of the China & Hong Kong Fund to
you in liquidation of the China Fund;
o No gain or loss will be recognized by the China & Hong Kong Fund on
its receipt of the China Fund's assets in exchange solely for shares
of the China & Hong Kong Fund and the China & Hong Kong Fund's
assumption of the China Fund's liabilities;
o The China & Hong Kong Fund's adjusted tax basis in the assets
acquired from the China Fund will be equal to the basis thereof in
your Fund's hands immediately before the reorganization, and the
China & Hong Kong Fund's holding period for the assets acquired from
the China Fund will include the China Fund's holding period
therefor;
13
o You will recognize no gain or loss on the exchange of shares of the
China Fund solely for shares of the China & Hong Kong Fund pursuant
to the reorganization; and
o Your aggregate tax basis in shares of the China & Hong Kong Fund
received by you in the reorganization will equal your aggregate tax
basis in the shares of the China Fund surrendered in exchange
therefor, and your holding period for shares of the China & Hong
Kong Fund received in the reorganization will include your holding
period for the shares of the China Fund surrendered in exchange
therefor, provided that you hold such shares as capital assets at
the effective time of the reorganization.
However, it is possible that the Internal Revenue Service could
successfully challenge the qualification of the reorganization as a tax-free
reorganization. If the reorganization does not qualify as a tax-free
reorganization:
o The China Fund would be treated as if it had transferred all of its
assets to the China & Hong Kong Fund in a taxable transaction in
which all built-in gains and losses on the assets transferred would
be recognized;
o You would be deemed to have exchanged your shares of the China Fund
for shares of the China & Hong Kong Fund in a taxable transaction in
which you would recognize a capital gain or loss equal to the
difference between your adjusted tax basis in the shares surrendered
and the fair market value of the shares of the China & Hong Kong
Fund received; and
o Your aggregate tax basis in shares of the China & Hong Kong Fund
received by you in the reorganization would be equal to their fair
market value on the date of the reorganization, and your holding
period for shares of the China & Hong Kong Fund received by you in
the reorganization would begin on the day after the day you receive
such shares.
In the event that the reorganization fails to qualify as a tax-free
reorganization, the Adviser believes that your Fund's capital loss carryforwards
would be sufficient to offset any net gain that would be recognized by the China
Fund.
As of [ , 200 ], the Fund had capital loss carryforwards of
$[ ]. If the reorganization qualifies as a tax-free reorganization, the use
of your Fund's capital loss carryforwards after the reorganization will be
limited each year to an amount equal to the net asset value of your Fund
immediately prior to the reorganization multiplied by the long-term tax-exempt
rate in effect for the month in which the reorganization occurs (the rate for
February 2003 is 4.65%). If the reorganization does not qualify as a tax-free
reorganization, the capital loss carryforwards of the China Fund will not be
available to offset capital gains of the China & Hong Kong Fund after the
reorganization. Regardless of any limitation on the ability of the China & Hong
Kong Fund to utilize the losses of the China Fund, the China & Hong Kong Fund
had $[ ] of its own capital loss carryforwards as of [ ]
that are available to offset capital gains realized after the reorganization.
14
Assuming the reorganization qualifies as a tax-free reorganization, you
will be required to retain in your records and file with your federal income tax
return for the taxable year in which the reorganization takes place a statement
setting forth all relevant facts in respect of the nonrecognition of gain or
loss upon the exchange. The statement is required to include:
o your tax basis in the shares surrendered in the reorganization; and
o the fair market value of the shares of the China & Hong Kong Fund
received in the reorganization as of the effective time of the
reorganization.
The China Fund may pay a dividend or distribute a taxable gain prior to
the reorganization. You may be liable for taxes on those distributions.
Legislation has recently been proposed which would eliminate the tax on certain
distributions.
The foregoing discussion is intended only as a summary and does not
purport to be a complete analysis or listing of all potential tax effects
relevant to a decision whether to vote in favor of the reorganization.
Conditions of the reorganization. Before the reorganization can occur,
both the China Fund and the China & Hong Kong Fund must satisfy certain
conditions. For example:
o Each Fund must receive an opinion of counsel describing the material
federal income tax consequences of the reorganization;
o Each Fund must receive an opinion of counsel certifying to certain
matters concerning the legal existence of each Fund;
o For the China Fund, a majority of the shareholders voting at the
Meeting in person or by proxy must approve the reorganization on
behalf of that Fund.
Why We Want to Reorganize the Funds
The Adviser believes that the reorganization will benefit both the Funds.
Among other things, the Adviser believes the reorganization will:
o Result in economies of scale. That is, the increased assets of the
combined Funds could possibly reduce expenses over time by spreading
fixed costs over a larger asset base.
o Going forward, eliminate duplicative efforts that separate funds may
require, such as accounting services, resulting in more efficient
operations of the China & Hong Kong Fund.
o Provides a more stable base for management of your Fund because
daily purchases and redemptions of shares should have a less
significant impact on the size of the combined Funds.
15
o Provide greater investment opportunities. That is, the increased
assets of the combined Funds will provide the manager with a wider
range of choices among permitted investments than are currently
available to the Funds separately.
Considerations by the Board of Trustees
On February 3, 2003, the Board of Trustees of the Trust, on behalf of the
China Fund and the China & Hong Kong Fund, unanimously approved the proposed
Plan of Reorganization. The Trustees concluded that the reorganization:
o Was in the best interests of the shareholders of both the China Fund
and the China & Hong Kong Fund; and
o Would not result in any dilution of the value of your investment or
the investment of the shareholders of the China & Hong Kong Fund.
In approving the Plan of Reorganization, the Trustees, including a
majority of the Trustees who are not "interested persons" (as defined in the
Investment Company Act of 1940, as amended) (the "Independent Trustees"),
considered that, among other things:
o The similarity of the investment objective and principal investment
strategies of the two Funds.
o The anticipated continuity of investment management.
o The comparative expenses of the two Funds and the potential
reduction of expenses for the combined Fund.
o The tax-free nature of the reorganization for federal income tax
purposes.
o The undertaking by Guinness Atkinson to bear a portion of the
expenses of the reorganization.
o Alternatives to the proposed transaction, including liquidation,
other investment companies with which the China Fund could merge or
maintaining the status quo.
Required Vote
Approval of the Proposal requires approval of (a) the lesser of 67% or
more of the shares of the China Fund present at the Meeting or represented by
proxy if the holders of more than 50% of the outstanding shares are present at
the Meeting or represented by a proxy; or (b) a majority of the outstanding
voting securities of the China Fund. Should the Plan of Reorganization not be
approved with respect to the China Fund, the Board of Trustees would determine
what, if any, further action should be taken, including possible liquidation of
the Fund.
16
Board Recommendation
THE BOARD OF TRUSTEES RECOMMENDS THAT
SHAREHOLDERS OF THE FUND VOTE "FOR" THE PROPOSAL
PART 3 - MORE ON PROXY VOTING AND MEETING OF SHAREHOLDERS
Who Can Vote
Only shareholders of record of the China Fund at the close of business on
the Record Date, [ ], may vote for the proposals at the Meeting.
As of the Record Date, the Fund had [ ] shares of beneficial interest
issued and outstanding, each share being entitled to one vote.
Information Concerning Outstanding Shares
As of the Record Date, [ ], principal holders owning 5% or more
of the outstanding shares of the China Fund are set forth below:
- -------------------------------------------------------------------------------
Shareholder Name & Address % held as of Record Date
-------------------------- ------------------------
Charles Schwab & Co. Inc. [ ]%
Special Custody Account for the
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Monterey Street
San Francisco, CA 94104-4122
- -------------------------------------------------------------------------------
National Investor Services Corp. [ ]%
Special Custody Account for the
Exclusive Benefit of Customers
55 Water Street 32nd Floor
New York, New York 10041-0028
- -------------------------------------------------------------------------------
As of the Record Date, the Trustees and officers as a group owned
beneficially less than 1% of the outstanding shares of the China Fund.
Quorum Requirements
At the Meeting, the presence in person or by proxy of shareholders of
one-third of the outstanding shares entitled to vote at the Meeting shall be
necessary and sufficient to constitute a quorum for the transaction of business.
In the event that a quorum of shareholders is not present at the Meeting, the
persons named as proxies shall have the power to adjourn the Meeting. Such
meeting shall be reconvened without additional notice. In the event a quorum is
present but sufficient votes to approve the proposal are not received, the
persons named as proxies may propose one or more adjournments to permit further
solicitation of proxies. If this should occur, we will vote proxies for or
against a motion to adjourn in the same proportion to the votes received in
favor or against the proposal.
17
You may cast one vote for the proposal for each whole share that you own
of the Fund. We count your fractional shares as fractional votes. If we receive
your proxy before the Meeting date, we will vote your shares as you instruct the
proxies. If you sign and return your proxy, but do not specify instructions, we
will vote your shares in favor of the proposal. You may revoke your proxy at any
time before the Meeting if you notify us in writing, or if you attend the
Meeting in person and vote in person.
If a proxy represents a broker "non-vote" (that is, a proxy from a broker
or nominee indicating that such person has not received instructions from the
beneficial owner or other person entitled to vote shares on a particular matter
with respect to which the broker or nominee does not have discretionary power)
or is marked with an abstention, the shares represented thereby will be
considered to be present at the Meeting for purposes of determining the
existence of a quorum for the transaction of business but will not be voted. For
this reason, a broker "non-vote" and abstentions will have the affect of a "no"
vote for purposes of obtaining the requisite approval of the proposal.
The Proxy Solicitation Process
The Board of Trustees of the Trust is soliciting your proxy to vote on the
matters described in this Combined Prospectus and Proxy Statement. We expect to
solicit proxies primarily by mail, but representatives of the Fund, the Fund's
investment advisor, their affiliates or others may communicate with you by mail
or by telephone or other electronic means to discuss your vote. Such individuals
will receive no additional compensation from the Fund for soliciting your proxy
vote. The costs of preparing and mailing proxy materials will be borne by
Guinness Atkinson and the Funds and is estimated to be [$ _____]. Proxy
solicitations will be made primarily by mail, but may also be made by telephone,
facsimile or personal interview conducted by certain officers or employees of
the Funds or the Adviser. The Funds have also retained [ (" ")] to assist with
proxy solicitations, the cost of which [(estimated to be $ _____)] will also be
borne by Guinness Atkinson and the Funds. [ ] is responsible for soliciting
individual shareholders, brokers, custodians, nominees and fiduciaries,
tabulating the returned proxies and performing other proxy solicitation
services.
PLEASE TAKE A MOMENT NOW TO SIGN, DATE AND RETURN YOUR PROXY CARD IN THE
ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not receive your signed proxy
card after a reasonable amount of time, you may receive a telephone call from
our proxy solicitor, [ ,] reminding you to vote your
shares. Proxies may be voted by telephone by calling [ ] at
[ ] between the hours of 9:00 a.m. and 11:00 p.m. (EST) Monday-Friday or
Saturday between the hours of 12:00 p.m. and 6:00 p.m. (EST). If you prefer, you
can fax the proxy card to [ , Attn: Proxy Department, at
]. We encourage you to vote by telephone or through the Internet (please
refer to your proxy card for the appropriate website) in order to expedite the
process. Whichever voting method you choose, please read the full text of the
Proxy Statement before you vote.
If you have any questions regarding the shareholder meeting, please feel
free to call our proxy solicitors, [ , at ] who will be pleased to assist you.
18
Other business. The Board of Trustees knows of no other business to be
brought before the Meeting. If any other matters properly come before the
Meeting, and on all matters incidental to the conduct of the Meeting, the named
proxies will vote all proxies using their best judgment on such matters unless
instructed to the contrary.
Recommendation of the Board of Trustees. After carefully considering all
of the issues involved, the Board of Trustees of the Trust has unanimously
concluded that the proposal is in the best interests of shareholders. The Board
of Trustees recommends that you vote to approve the Proposal.
PART 4 - FUND INFORMATION
The Trust is a statutory trust established under Delaware law. The
operations of the Trust are governed by a Trust Instrument dated March 6, 1997,
as amended.
Each Fund is a separate series of the Trust and, as such, has similar
rights under the Trust Instrument of the Trust and applicable Delaware law. You
should be aware of the following features of the Funds:
o Shares of each Fund participate equally in dividends and other
distributions attributable to that Fund, including any distributions
in the event of a liquidation.
o Each share of the Funds is entitled to one vote for all purposes.
o Shares of all series of the Trust vote for the election of Trustees
and on any other matter that affects all series of the Trust in
substantially the same manner, except as otherwise required by law.
o As to matters that affect each Fund differently, such as approval of
an investment advisory agreement, shares of each series vote as a
separate series.
o Delaware law does not require the Trust or its series to hold annual
meetings of shareholders and it is anticipated that shareholder
meetings will be held only when specifically required by federal or
state law.
o Shareholders have available certain procedures for the removal of
Trustees.
o Trustees and officers of the Trust have broad indemnification
rights.
Financial Statements. Ernst & Young LLP, independent auditors of the
Trust, has audited the financial statements for the year ended December 31, 2001
included in the Trust's Annual Report to Shareholders [and incorporated by
reference into the Statement of Additional Information dated April 30, 2002.]
19
PART 5 - FORM OF AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
This AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION ("Agreement") is
made as of __________, 2003, between Investec Funds, a Delaware statutory trust
(the "Trust"), on behalf of Investec China & Hong Kong Fund, a series of the
Trust ("Acquiring Fund"), and the Trust, on behalf of Investec Mainland China
Fund, a series of the Trust ("Target"). (Acquiring Fund and Target are sometimes
referred to herein individually as a "Fund" and collectively as the "Funds," and
the Trust is sometimes referred to herein as the "Investment Company.")
All agreements, representations, and obligations described herein, made or
to be taken or undertaken by either Fund, are made or shall be taken or
undertaken by the Trust on the Fund's behalf.
In accordance with the terms and conditions set forth in this Agreement,
the parties desire that Target transfer substantially all its assets to
Acquiring Fund in exchange solely for voting shares of beneficial interest of
Acquiring Fund ("Acquiring Fund's Shares") and the assumption by Acquiring Fund
of substantially all of Target's liabilities, and that Target distribute
Acquiring Fund's Shares pro rata to the holders of shares of beneficial interest
in Target ("Target's Shares") in liquidation of Target. All such transactions
with respect to Target and Acquiring Fund are referred to herein collectively as
the "Reorganization."
It is intended by the parties hereto that the Reorganization constitute a
reorganization within the meaning of Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended (the "Code"). The parties hereto hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Treasury
Regulation Sections 1.368-2(g) and 1.368-3(a).
In consideration of the mutual promises herein, the parties covenant and
agree as follows:
1. PLAN OF REORGANIZATION AND LIQUIDATION OF TARGET
1.1. At the Effective Time (as defined in paragraph 3.1), Target agrees to
assign, sell, convey, transfer, and deliver all of its assets described
in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring Fund agrees in
exchange therefore:
(a) to issue and deliver to Target the number of full and fractional
Acquiring Fund's Shares determined by dividing the net value of
Target (computed as set forth in paragraph 2.1) by the "NAV"
(computed as set forth in paragraph 2.2) of Acquiring Fund's
Shares; and
(b) to assume Target's liabilities described in paragraph 1.3
("Liabilities").
1.2. Assets shall include, without limitation, all cash, cash equivalents,
securities, receivables (including interest and dividends receivable),
claims and rights of action, rights to register shares under applicable
securities laws, books and records, deferred and prepaid expenses shown
as assets on Target's books, and other property owned by Target at the
Effective Time as defined in paragraph 3.1.
1.3. Liabilities shall include (except as otherwise provided herein) all of
Target's known liabilities, debts and obligations arising in the
ordinary course of business reflected on
20
the books of Target at the Effective Time, and any contingent
liabilities, if any, as the Board of Trustees shall reasonably deem
exist against Target at the Effective Time, for which contingent and
other appropriate liability reserves shall be established on Target's
books. Notwithstanding the foregoing, Target agrees to use its best
efforts to discharge all of its known Liabilities prior to the
Effective Time.
1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders a dividend and/or other distribution in an
amount large enough so that it will have distributed substantially all
(and in any event not less than 90%) of its investment company taxable
income (computed without regard to any deduction for dividends paid)
and substantially all of its realized net capital gain, if any, for the
current taxable year through the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall distribute Acquiring Fund's Shares received
by it pursuant to paragraph 1.1 to Target's shareholders of record,
determined as of the Effective Time (collectively
21
"Shareholders" and individually a "Shareholder"), in exchange for
Target's Shares and in liquidation of Target. To accomplish this
distribution, Acquiring Fund's transfer agent ("Transfer Agent") shall
open accounts on Acquiring Fund's share transfer books in the
Shareholders' names and transfer Acquiring Fund's Shares thereto. Each
Shareholder's account shall be credited with the pro rata number of
full and fractional (rounded to the third decimal place) Acquiring
Fund's Shares due that Shareholder. All outstanding Target's Shares,
including any represented by certificates, shall simultaneously be
canceled on Target's share transfer books. Acquiring Fund shall not
issue certificates representing Acquiring Fund's Shares in connection
with the Reorganization. However, certificates representing Target's
Shares shall represent Acquiring Fund's Shares after the
Reorganization.
1.6. As soon as reasonably practicable after distribution of Acquiring
Fund's Shares pursuant to paragraph 1.5, Target shall be terminated and
any further actions shall be taken in connection therewith as required
by applicable law. Target shall file such instruments and shall take
all other steps necessary to effect a complete liquidation and
dissolution of Target.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which
it is terminated.
1.8. Any transfer taxes payable upon issuance of Acquiring Fund's Shares in
a name other than that of the registered holder on Target's books of
Target's Shares exchanged therefor shall be paid by the person to whom
Acquiring Fund's Shares are to be issued, as a condition of such
transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the
[relevant stock exchange/New York Stock Exchange] [("NYSE")] on the
date of the Closing
21
as defined in paragraph 3.1 ("Valuation Time"), using the valuation
procedures set forth in Target's then current prospectus and statement
of additional information less (b) the amount of the Liabilities as of
the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of Acquiring Fund's Shares
shall be computed as of the Valuation Time, using the valuation
procedures set forth in Acquiring Fund's then current prospectus and
statement of additional information.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by or
under the direction of [Investec Asset Management U.S. Limited in
accordance with the Funds current prospectus and Statement of
Additional Information and subject to review by the Board of Trustees
or Auditors of the Trust.]
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at the Funds' principal offices,
[located at 1055 Washington Blvd., Stamford, CT 06901 on ____________,
2003,] or at such other place and/or on such other date upon which the
parties may agree. All acts taking place at the Closing shall be deemed
to take place simultaneously as of the close of business on the date
thereof or at such other time upon which the parties may agree
("Effective Time"). If, immediately before the Valuation Time, (a) the
[NYSE] is closed to trading or trading thereon is restricted or (b)
trading or the reporting of trading on the [NYSE] or elsewhere is
disrupted, so that accurate appraisal of the net value of Target and
the NAV for Acquiring Fund is impracticable, the Effective Time shall
be postponed until the first business day after the day when such
trading shall have been fully resumed and such reporting shall have
been restored.
3.2. Target shall deliver to the Trust at the Closing a schedule of its
Assets as of the Effective Time, which shall set forth for all
portfolio securities included therein their adjusted tax bases and
holding periods by lot. Target's custodian shall deliver at the Closing
a certificate of an authorized officer stating that (a) the Assets held
by the custodian will be transferred to Acquiring Fund at the Effective
Time and (b) all necessary taxes in conjunction with the delivery of
the Assets, including all applicable federal and state stock transfer
stamps, if any, have been paid or provision for payment has been made.
3.3. The Transfer Agent shall deliver at the Closing a certificate as to the
opening on Acquiring Fund's share transfer books of accounts in the
names of Target's Shareholders. The Trust shall issue and deliver a
confirmation to Target evidencing Acquiring Fund's Shares to be
credited to Target at the Effective Time or provide evidence
satisfactory to Target that Acquiring Fund's Shares have been credited
to Target's account on Acquiring Fund's books. At the Closing, each
party shall deliver to the other such bills of sale, checks,
assignments, stock certificates, receipts, or other documents as the
other party or its counsel may reasonably request.
22
3.4. The Trust, on behalf of Target and Acquiring Fund, respectively, shall
deliver at the Closing a certificate executed in its name by its
President or a Vice President and dated as of the Effective Time, to
the effect that the representations and warranties it made in this
Agreement are true and correct in all material respects at the
Effective Time, with the same force and effect as if made at and as of
the Effective Time, except as they may be affected by the transactions
contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. Target represents and warrants as follows:
4.1.1. At the Closing, Target will have good and marketable title to its
Assets and full right, power, and authority to sell, assign,
transfer, and deliver its Assets free of any liens or other
encumbrances; and upon delivery and payment for the Assets,
Acquiring Fund will acquire good and marketable title thereto;
4.1.2. Acquiring Fund's Shares are not being acquired for the purpose of
making any distribution thereof, other than in accordance with the
terms hereof;
4.1.3. Target's current prospectus and statement of additional
information conform in all material respects to the applicable
requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the Investment Company Act of 1940, as amended (the
"1940 Act"), and the rules and regulations thereunder, and do not
include any untrue statement of a material fact or omit any
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading;
4.1.4. Target is not in violation of, and the execution and delivery of
this Agreement and consummation of the transactions contemplated
hereby will not (a) conflict with or violate Delaware law or any
provision of the Trust's Trust Instrument or By-laws or of any
agreement, instrument, lease, or other undertaking to which Target
is a party or by which it is bound or (b) result in the
acceleration of any obligation, or the imposition of any penalty,
under any agreement, judgment, or decree to which Target is a
party or by which it is bound, except as previously disclosed in
writing to and accepted by the Trust;
4.1.5. Except as otherwise disclosed in writing to and accepted by the
Trust, all material contracts and other commitments of or
applicable to Target (other than this Agreement and investment
contracts, including options and futures) will be terminated, or
provision for discharge of any liabilities of Target thereunder
will be made, at or prior to the Effective Time, without Target
incurring any liability or penalty with respect thereto and
without diminishing or releasing any rights Target may have had
with respect to actions taken or not taken by any other party
thereto prior to the Closing;
4.1.6. Except as otherwise disclosed in writing to and accepted by the
Trust on behalf of Acquiring Fund, no litigation, administrative
proceeding, or investigation of or before any court or
governmental body is presently pending or (to Target's
23
knowledge) threatened against Target or any of its properties or
assets that, if adversely determined, would materially and
adversely affect Target's financial condition or the conduct of
its business; Target knows of no facts that might form the basis
for the institution of any such litigation, proceeding, or
investigation and is not a party to or subject to the provisions
of any order, decree, or judgment of any court or governmental
body that materially or adversely affects its business or its
ability to consummate the transactions contemplated hereby;
4.1.7. The execution, delivery, and performance of this Agreement has
been duly authorized as of the date hereof by all necessary action
on the part of the Trust's Board of Trustees on behalf of Target,
which has made the determinations required by Rule 17a-8(a) under
the 1940 Act; and, subject to approval by Target's shareholders
and receipt of any necessary exemptive relief or no-action
assurances requested from the Securities and Exchange Commission
("SEC") or its staff with respect to Sections 17(a) and 17(d) of
the 1940 Act, this Agreement will constitute a valid and legally
binding obligation of Target, enforceable in accordance with its
terms, except as the same may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, and
similar laws relating to or affecting creditors' rights and by
general principles of equity;
4.1.8. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's
shareholders;
4.1.9. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the Securities Exchange Act of
1934, as amended ("1934 Act"), or the 1940 Act for the execution
or performance of this Agreement by Target, except for (a) a proxy
statement ("Proxy Statement"), the information for which is
included in a combined prospectus and proxy statement filed by
Acquiring Fund with the SEC on Form N-14, (b) receipt of the
exemptive relief or no-action assurances referenced in
subparagraph 4.1.7, and (c) such consents, approvals,
authorizations, and filings as have been made or received or as
may be required subsequent to the Effective Time;
4.1.10. On the effective date of the Registration Statement, at the time
of the shareholders' meeting referred to in paragraph 5.2, and at
the Effective Time, the Proxy Statement will (a) comply in all
material respects with the applicable provisions of the 1933 Act,
the 1934 Act, and the 1940 Act and the rules and regulations
thereunder and (b) not contain any untrue statement of a material
fact or omit any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which such statements were made, not
misleading. This provision shall not apply to statements in or
omissions from the Proxy Statement made in reliance on and in
conformity with information furnished by the Trust for use
therein.
4.2. Acquiring Fund represents and warrants as follows:
24
4.2.1. Acquiring Fund's Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized
and, when issued and delivered as provided herein, will be duly
and validly issued and outstanding shares of Acquiring Fund, fully
paid and nonassessable by the Trust (except as disclosed in the
Trust's then current prospectus and statement of additional
information). Except as contemplated by this Agreement, Acquiring
Fund does not have outstanding any options, warrants, or other
rights to subscribe for or purchase any of its shares, nor is
there outstanding any security convertible into any of its shares;
4.2.2. Acquiring Fund's current prospectus and statement of additional
information conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and
regulations thereunder and do not include any untrue statement of
a material fact or omit any material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
4.2.3. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby (a) will not conflict with or violate Delaware
law or any provision of the Trust's Trust Instrument or By-laws or
any provision of any agreement, instrument, lease, or other
undertaking to which Acquiring Fund is a party or by which it is
bound or (b) result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or
decree to which Acquiring Fund is a party or by which it is bound,
except as previously disclosed in writing to and accepted by the
Trust;
4.2.4. Except as otherwise disclosed in writing to and accepted by the
Trust on behalf of Target, no litigation, administrative
proceeding, or investigation of or before any court or
governmental body is presently pending or (to Acquiring Fund's
knowledge) threatened against the Trust with respect to Acquiring
Fund or any of its properties or assets that, if adversely
determined, would materially and adversely affect Acquiring Fund's
financial condition or the conduct of its business; Acquiring Fund
knows of no facts that might form the basis for the institution of
any such litigation, proceeding, or investigation and is not a
party to or subject to the provisions of any order, decree, or
judgment of any court or governmental body that materially or
adversely affects its business or its ability to consummate the
transactions contemplated hereby;
4.2.5. The execution, delivery, and performance of this Agreement has
been duly authorized as of the date hereof by all necessary action
on the part of the Trust's Board of Trustees on behalf of
Acquiring Fund, which has made the determinations required by Rule
17a-8(a) under the 1940 Act; and, subject to receipt of any
necessary exemptive relief or no-action assurances requested from
the SEC or its staff with respect to Sections 17(a) and 17(d) of
the 1940 Act, this Agreement will constitute a valid and legally
binding obligation of Acquiring Fund, enforceable in accordance
with its terms, except as the same may be limited
25
by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors'
rights and by general principles of equity;
4.2.6. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the 1934 Act, or the 1940 Act for
the execution or performance of this Agreement by the Trust,
except for (a) the filing with the SEC of the Registration
Statement and a post-effective amendment to the Trust's
registration statement on Form N-14, (b) receipt of the exemptive
relief or no-action assurances referenced in subparagraph 4.2.5,
and (c) such consents, approvals, authorizations, and filings as
have been made or received or as may be required subsequent to the
Effective Time;
4.3. The Trust, on behalf of each Fund, represents and warrants to the other
as follows:
4.3.1. The Trust is a business trust that is duly organized, validly
existing, and in good standing under the laws of the State of
Delaware; and a copy of its Certificate of Trust is on file with
the Secretary of the State of Delaware;
4.3.2. The Trust is duly registered as an open-end management investment
company under the 1940 Act, and such registration will be in full
force and effect at the Effective Time;
4.3.3. Each Fund is a duly established and designated series of the
Trust.
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the ordinary
course between the date hereof and the Closing, it being understood
that (a) such ordinary course will include declaring and paying
customary dividends and other distributions and such changes in
operations as are contemplated by each Fund's normal business
activities and (b) each Fund will retain exclusive control of the
composition of its portfolio until the Closing, provided that Target
shall not dispose of more than an insignificant portion of its historic
business assets during such period without Acquiring Fund's prior
consent.
5.2. Target covenants to call a special meeting of shareholders to consider
and act upon this Agreement and to take all other action necessary to
obtain approval of the transactions contemplated hereby.
5.3. Target covenants that Acquiring Fund's Shares to be delivered hereunder
are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. Target covenants that it will assist the Trust in obtaining such
information as the Trust reasonably requests concerning the beneficial
ownership of Target's Shares.
26
5.5. Target covenants that its books and records (including all books and
records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to the Trust at the
Closing.
5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal securities laws.
5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be
executed and delivered all such assignments and other instruments, and
will take or cause to be taken such further action, as the other Fund
may deem necessary or desirable in order to vest in, and confirm to (a)
Acquiring Fund, title to and possession of all Target's Assets, and (b)
Target, title to and possession of Acquiring Fund's Shares to be
delivered hereunder, and otherwise to carry out the intent and purpose
hereof.
5.8. Acquiring Fund covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act,
and such state securities laws as it may deem appropriate in order to
continue its operations after the Effective Time.
5.9. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the
transactions contemplated hereby.
6. CONDITIONS PRECEDENT
6.1. Each Fund's obligations hereunder shall be subject to (a) performance
by the other Fund of all the obligations to be performed hereunder at
or before the Effective Time, (b) all representations and warranties of
the other Fund contained herein being true and correct in all material
respects as of the date hereof and, except as they may be affected by
the transactions contemplated hereby, as of the Effective Time, with
the same force and effect as if made at and as of the Effective Time,
and (c) the following further conditions that, at or before the
Effective Time:
6.1.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by the Trust's Board of Trustees on
behalf of Target and Acquiring Fund and shall have been approved
by Target's shareholders in accordance with applicable law.
6.1.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been
received that any other or further action is required to permit
the parties to carry out the transactions contemplated hereby. The
Registration Statement shall have become effective under the 1933
Act, no stop orders suspending the effectiveness thereof shall
have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under Section 25(b) of
the 1940 Act nor instituted any proceedings seeking to enjoin
consummation of the transactions contemplated hereby under Section
25(c) of the 1940 Act. All consents, orders, and permits of
27
federal, state, and local regulatory authorities (including the
SEC and state securities authorities) deemed necessary by either
Fund to permit consummation, in all material respects, of the
transactions contemplated hereby shall have been obtained, except
where failure to obtain the same would not involve a risk of a
material adverse effect on the assets or properties of the Fund.
6.1.3. At the Effective Time, no action, suit, or other proceeding shall
be pending before any court or governmental agency in which it is
sought to restrain or prohibit, or to obtain damages or other
relief in connection with, the transactions contemplated hereby.
6.1.4. Target shall have received an opinion of Kramer Levin Naftalis &
Frankel LLP, counsel to the Trust ("Counsel"), substantially to
the effect that:
6.1.4.1. Acquiring Fund is a validly existing series of the Trust, a
statutory trust duly formed and validly existing and in good
standing under the laws of the State of Delaware with the
power under its Trust Instrument to carry on its business and
to own all of its properties and assets;
6.1.4.2. This Agreement (a) has been duly authorized and executed by
the Trust on behalf of Acquiring Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by
Target, is a legal, valid and binding obligation of Acquiring
Fund, enforceable against Acquiring Fund in accordance with
its terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, receivership,
fraudulent conveyance, moratorium or other laws of general
application relating to or affecting the enforcement of
creditors' rights and remedies, as from time to time in
effect, (ii) application of equitable principles (regardless
of whether such enforceability is considered in a proceeding
in equity or at law) and (iii) principles of course of dealing
or course of performance and standards of good faith, fair
dealing, materiality and reasonableness that may be applied by
a court to the exercise of rights and remedies;
6.1.4.3. Acquiring Fund's Shares to be issued and delivered to the
Shareholders under this Agreement, assuming their due delivery
as contemplated by this Agreement, will be duly authorized and
validly issued and fully paid and nonassessable (except as
disclosed in the Trust's then current prospectus and statement
of additional information);
6.1.4.4. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not
(a) materially violate the Trust's Trust Instrument or By-laws
or any provision of any agreement to which the Trust (with
respect to Acquiring Fund) is a party or by which it is bound
or (b) to the knowledge of Counsel, result in the acceleration
of any obligation, or the imposition of any penalty, under any
agreement, judgment, or decree known to Counsel to which the
Trust (with respect to
28
Acquiring Fund) is a party or by which it (with respect to
Acquiring Fund) is bound, except as set forth in such opinion
or as previously disclosed in writing to and accepted by the
Trust;
6.1.4.5. To the knowledge of Counsel, no consent, approval,
authorization or order of any Delaware or Federal Court or
governmental authority of the State of Delaware or the United
States of America is required for the consummation by the
Trust on behalf of Acquiring Fund, of the transactions
contemplated by the Agreement, except such as may be required
under the 1933 Act, the 1934 Act and the 1940 Act and under
securities laws of states other than the State of Delaware;
6.1.4.6. The Trust is registered with the SEC as an investment company,
and to the knowledge of Counsel no order has been issued or
proceeding instituted to suspend such registration; and
6.1.4.7. To the knowledge of Counsel, (a) no litigation, administrative
proceeding, or investigation of or before any court or
governmental body is pending or threatened as to the Trust
(with respect to Acquiring Fund) or any of its properties or
assets attributable or allocable to Acquiring Fund and (b) the
Trust (with respect to Acquiring Fund) is not a party to or
subject to the provisions of any order, decree, or judgment of
any court or governmental body that materially and adversely
affects Acquiring Fund's business, except as set forth in such
opinion or as otherwise disclosed in writing to and accepted
by the Trust.
In rendering such opinion, Counsel may (i) rely, as to matters
governed by the laws of the State of Delaware, on an opinion of
competent Delaware counsel, (ii) make assumptions regarding the
authenticity, genuineness, and/or conformity of documents and copies
thereof without independent verification thereof, and other customary
assumptions as the parties may agree, (iii) limit such opinion to
applicable federal and state law, (iv) define the word "knowledge"
and related terms to mean the knowledge of attorneys then with such
firm who have devoted substantive attention to matters directly
related to this Agreement and the Reorganization; and (v) rely on
certificates of officers or trustees of the Trust, in each case
reasonably acceptable to the Trust.
6.1.5. Acquiring Fund shall have received an opinion of Counsel,
substantially to the effect that:
6.1.5.1. Target is a validly existing series of the Trust, a statutory
trust duly formed and validly existing and in good standing
under the laws of the State of Delaware with power under its
Trust Instrument to own all of its properties and assets and,
to the knowledge of Counsel, to carry on its business as
presently conducted;
6.1.5.2. This Agreement (a) has been duly authorized and executed by
the Trust on behalf of Target and (b) assuming due
authorization, execution, and
29
delivery of this Agreement by the Trust on behalf of Acquiring
Fund, is a legal, valid and binding obligation of Target,
enforceable against Target in accordance with its terms,
except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, receivership,
fraudulent conveyance, moratorium or other laws of general
application relating to or affecting the enforcement of
creditors' rights and remedies, as from time to time in
effect, (ii) application of equitable principles (regardless
of whether such enforceability is considered in a proceeding
in equity or at law) and (iii) principles of course of dealing
or course of performance and standards of good faith, fair
dealing, materiality and reasonableness that may be applied by
a court to the exercise of rights and remedies;
6.1.5.3. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not,
(a) materially violate the Trust's Trust Instrument or By-laws
or any provision of any agreement known to Counsel, to which
the Trust (with respect to Target) is a party or by which it
is bound or (b) to the knowledge of such counsel, result in
the acceleration of any obligation, or the imposition of any
penalty, under any agreement, judgment, or decree known to
Counsel to which the Trust (with respect to Target) is a party
or by which it (with respect to Target) is bound, except as
set forth in such opinion or as previously disclosed in
writing to and accepted by the Trust;
6.1.5.4. To the knowledge of Counsel, no consent, approval,
authorization or order of any Delaware or Federal Court or
governmental authority of the State of Delaware or the United
States of America is required for the consummation by the
Trust on behalf of Target, of the transactions contemplated by
the Agreement, except such as may be required under the 1933
Act, the 1934 Act and the 1940 Act and under securities laws
of states other than the State of Delaware;
6.1.5.5. The Trust is registered with the SEC as an investment company,
and to the knowledge of Counsel no order has been issued or
proceeding instituted to suspend such registration; and
6.1.5.6. To the knowledge of Counsel, (a) no litigation, administrative
proceeding, or investigation of or before any court or
governmental body is pending or threatened as to the Trust
(with respect to Target) or any of its properties or assets
attributable or allocable to Target and (b) the Trust (with
respect to Target) is not a party to or subject to the
provisions of any order, decree, or judgment of any court or
governmental body that materially and adversely affects
Target's business, except as set forth in such opinion or as
otherwise disclosed in writing to and accepted by the Trust.
In rendering such opinion, Counsel may (i) rely, as to matters
governed by the laws of the State of Delaware, on an opinion of
competent Delaware counsel, (ii) make assumptions regarding the
authenticity, genuineness, and/or conformity of
30
documents and copies thereof without independent verification
thereof, and other customary assumptions as the parties may agree,
(iii) limit such opinion to applicable federal and state law, (iv)
define the word "knowledge" and related terms to mean the knowledge
of attorneys then with such firm who have devoted substantive
attention to matters directly related to this Agreement and the
Reorganization, and (v) rely on certificates of officers or trustees
of Target; in each case reasonably acceptable to the Trust.
6.1.6. The Trust, on behalf of Target and Acquiring Fund, shall have
received an opinion of Counsel addressed to and in form and
substance reasonably satisfactory to it, as to the federal
income tax consequences of the Reorganization ("Tax Opinion").
In rendering the Tax Opinion, Counsel may rely as to factual
matters, exclusively and without independent verification, on
the representations made in this Agreement (and/or in separate
letters addressed to Counsel) and each Fund's separate
covenants. Each Fund agrees to make reasonable covenants and
representations as to factual matters as of the Effective Time
in connection with the rendering of such opinion.
The Tax Opinion shall be substantially to the effect that, based on the
facts and assumptions stated therein and conditioned on consummation of
the Reorganization in accordance with this Agreement, for federal
income tax purposes:
6.1.6.1 The Reorganization will constitute a reorganization
within the meaning of section 368(a)(1) of the Code,
and each Fund will be "a party to a reorganization"
within the meaning of section 368(b) of the Code;
6.1.6.2 No gain or loss will be recognized by the Target on
the transfer to the Acquiring Fund of Assets in
exchange solely for the Acquiring Fund's Shares and
the Acquiring Fund's assumption of Liabilities or on
the subsequent distribution of those shares to the
Shareholders in liquidation of the Target;
6.1.6.3 No gain or loss will be recognized by the Acquiring
Fund on its receipt of Assets in exchange solely for
the Acquiring Fund's Shares and its assumption of
Liabilities;
6.1.6.4 The Acquiring Fund's adjusted tax basis in the Assets
acquired will be equal to the basis thereof in the
Target's hands immediately before the Reorganization,
and the Acquiring Fund's holding period for the
Assets will include the Target's
holding period therefor;
6.1.6.5 A Shareholder will recognize no gain or loss on the
exchange of the Target Shares solely for the
Acquiring Fund's Shares pursuant to the
Reorganization; and
31
6.1.6.6 A Shareholder's aggregate tax basis in the Acquiring
Fund's Shares received by it in the Reorganization
will equal its aggregate tax basis in its the Target
Shares surrendered in exchange therefor, and its
holding period for the Acquiring Fund Shares will
include its holding period for the Target Shares,
provided the Target Shares are held as capital assets
by the Shareholder at the Effective Time.
6.2. At any time before the Closing, either Fund may waive any of the
foregoing conditions if, in the judgment of the Trust's Board of
Trustees, such waiver will not have a material adverse effect on its
shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. The Trust, on behalf of each Fund, represents and warrants that there
are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
7.2. Guinness Atkinson Asset Management and the Funds will be responsible
for paying all expenses incurred in connection with the Reorganization.
8. ENTIRE AGREEMENT; SURVIVAL
8.1. Neither party has made any representation, warranty, or covenant not
set forth herein, and this Agreement constitutes the entire agreement
between the parties. The representations, warranties, and covenants
contained herein or in any document delivered pursuant hereto or in
connection herewith shall survive the Closing.
9. TERMINATION OF AGREEMENT
9.1. This Agreement may be terminated at any time at or prior to the
Effective Time, whether before or after approval by Target's
Shareholders:
9.1.1. By either Fund (a) in the event of a material breach of any
representation, warranty, or covenant contained herein to be
performed at or prior to the Effective Time, (b) if a condition to
its obligations has not been met and it reasonably appears that
such condition will not or cannot be met, or (c) if the Closing has
not occurred on or before _____________, 2003; or
9.1.2. By the parties' mutual agreement.
9.2. In the event of termination under paragraphs 9.1.1(a), (b) or (c) or
9.1.2, there shall be no liability for damages on the part of either
Fund affected by the termination, or the trustees or officers of the
Trust, to the other Fund.
32
10. AMENDMENT
10.1. This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's Shareholders, in such
manner as may be mutually agreed upon in writing by the parties;
provided that following such approval no such amendment shall have a
material adverse effect on such Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware; provided that, in the case
of any conflict between such laws and the federal securities laws, the
latter shall govern.
11.2. Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other
than the parties and their respective successors and assigns any rights
or remedies under or by reason of this Agreement.
11.3. The parties acknowledge that the Trust is a statutory trust. Notice is
hereby given that this instrument is executed on behalf of the Trust's
Trustees solely in their capacity as trustees, and not individually,
and that the Trust's obligations under this instrument on behalf of
each Fund are not binding on or enforceable against any of its
trustees, officers, or shareholders, but are only binding on and
enforceable against the respective Funds' assets and property. Each
Fund agrees that, in asserting any rights or claims under this
Agreement, it shall look only to the corresponding Fund's assets and
property in settlement of such rights or claims and not to such
Trustees or shareholders or to the assets of any other series of the
Trust.
11.4. The Trust agrees to indemnify and hold harmless each Trustee of the
Trust at the time of the execution of this Agreement against expenses,
including reasonable attorneys' fees, judgments, fines and amounts paid
in settlement, actually and reasonably incurred by such Trustee in
connection with any claim that is asserted against such trustee arising
out of such person's service as a Trustee of the Trust, provided that
such indemnification shall be limited to the full extent of the
indemnification that is available to the Trustees of the Trust pursuant
to the provisions of the Trust's Trust Instrument and applicable law.
11.5 The Trust, on behalf of each Fund, hereby waives any conflict arising
out of the representation of each Fund by Counsel.
33
IN WITNESS WHEREOF, each party has caused this Agreement to be executed by
its duly authorized officer.
ATTEST: INVESTEC FUNDS, on behalf of the
Investec Mainland China Fund
By: ______________________________ By: ________________________________
Eric M. Banhazl Royce N. Brennan
Secretary President
ATTEST: INVESTEC FUNDS, on behalf of the
Investec China & Hong Kong Fund
By: ______________________________ By: ________________________________
Eric M. Banhazl Royce N. Brennan
Secretary President
34
Part B
STATEMENT OF ADDITIONAL INFORMATION
[ , 2003]
Acquisition of the Assets of
INVESTEC FUNDS'
Mainland China Fund
by and in exchange for shares of
INVESTEC FUNDS'
China & Hong Kong Fund
This Statement of Additional Information dated [ , 2003],
is not a prospectus, but should be read in conjunction with the Combined Proxy
Statement and Prospectus dated [ , 2003]. This Statement of Additional
Information is incorporated by reference in its entirety into the Combined Proxy
Statement and Prospectus. Copies of the Combined Proxy Statement and Prospectus
may be obtained by writing Investec Funds at [1055 Washington Blvd., 3rd Floor,
Stamford, CT 06901 or by calling toll free 1-800-915-6565].
TABLE OF CONTENTS
Page
Statement of Additional Information of the Investec
Mainland China Fund and Investec China & Hong
Kong Fund, both of which are series of the Investec
Funds, dated April 30, 2002. 2
Financial Statements of Investec Mainland China Fund
and Investec China & Hong Kong Fund, dated [December 31, 2002]. 2
STATEMENT OF ADDITIONAL INFORMATION OF THE REGISTRANT AND OF
THE COMPANY BEING ACQUIRED
The Statement of Additional Information of the Investec China & Hong
Kong Fund (the "Registrant") and the Investec Mainland China Fund (the "Company
Being Acquired"), both of which are series of the Investec Funds, dated April
30, 2002, as filed with the Securities and Exchange Commission on April 30,
2002, pursuant to Rule 485(b) (File No. 33-75340) hereby is incorporated by
reference. You may obtain a copy at no cost by writing Investec Funds at [1055
Washington Blvd., 3rd Floor, Stamford, CT 06901 or by calling toll free
1-800-915-6565].
FINANCIAL STATEMENTS OF THE REGISTRANT AND OF THE COMPANY BEING
ACQUIRED
The audited Financial Statements of the Investec China & Hong Kong Fund
(the "Registrant") and the Investec Mainland China Fund (the "Company Being
Acquired"), both of which are series of the Investec Funds, are incorporated by
reference to the Annual Report and Semi-Annual Report of the Investec Funds
(File No. 33-75340) dated December 31, 2001 and June 30, 2002, respectively. You
may obtain copies at no cost by writing Investec Funds at [1055 Washington
Blvd., 3rd Floor, Stamford, CT 06901 or by calling toll free 1-800-915-6565].
The following unaudited pro forma financial information combines the
Schedules of Portfolio Investments, the Statements of Assets and Liabilities,
and the Statements of Operations, as of [September 30, 2002], of the Investec
China & Hong Kong Fund and the Investec Mainland China Fund to reflect the
reorganization of the Investec Mainland China Fund into the Investec China &
Hong Kong Fund. The pro forma financial information shows the expected effect of
the reorganization transaction on the Investec China & Hong Kong Fund.
INVESTEC FUNDS
PART C
ITEM 15. INDEMNIFICATION.
The response to this item is incorporated by reference to Item 25 of Part C
of Post-Effective Amendment No. 31 to the Registrant's Registration Statement
on Form N-1A as filed May 2, 2002, accession number 0000894188-02-000495.
Item 16. Exhibits:
(1)(a) Certificate of Trust. (1)
(1)(b) Amendment to Certificate of Trust dated September 8, 2000. (2)
(2) Bylaws. (1)
(3) Not Applicable.
(4) Form of Agreement and Plan of Reorganization and Liquidation.
(5)(a) Trust Instrument. (1)
(5)(b) Amendment to Trust Instrument. (2)
(5)(c) Schedule A to Trust Instrument as of June 28, 2000. (2)
(6) Investment Advisory Agreement between Registrant and Investec Asset
Management U.S., Limited (formerly Guinness Flight Investment
Management Limited). (3)
(7) Distribution Agreement between Registrant and Quasar Distributors,
LLC (4)
(8) Not Applicable.
(9) Amended Custodian Agreement between Registrant and Investors Bank &
Trust Company. (3)
(10)(a) Distribution and Service Plan. (3)
(10)(b) Form of Distribution Plan for a class of the Guinness Flight Wired(R)
Index Fund. (5)
- ---------------
(1) Filed as an Exhibit to Post-Effective Amendment No. 7 to Registrant's
Registration Statement on Form N-1A filed electronically on March 20, 1997,
accession number 0000922423-96-000220 and incorporated herein by reference.
(2) Filed as an Exhibit to Post-Effective Amendment No. 28 to Registrant's
Registration Statement on Form N-1A filed electronically on October 13,
2000, accession number 0000922423-96-500010 and incorporated herein by
reference.
(3) Filed as an Exhibit to Post-Effective Amendment No. 12 to Registrant's
Registration Statement on Form N-1A filed electronically on August 28,
1998, accession number 0000922423-98-000948 and incorporated herein by
reference.
(4) Filed as an Exhibit to Post-Effective Amendment No. 30 to Registrant's
Registration Statement on Form N-1A filed electronically on March 1, 2002,
accession number 0000950147-02-000381 and incorporated by reference.
C-1
(10)(c) Form of Rule 18f-3 Multi-Class Plan. (6)
(11)(a) Consent of Counsel.
(11)(b) Opinion of counsel (to be filed by amendment).
(11)(c) Opinion of Delaware counsel (to be filed by amendment).
(12) Tax Opinion (to be filed by amendment).
(13) Not Applicable.
(14) Consent of Ernst & Young LLP, Independent Auditors for the
Registrant (to be filed by amendment).
(15) Not Applicable.
(16) Powers of Attorney.(7)
(17) Form of Proxy Card.
ITEM 17. Undertakings
(1) The undersigned registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part
of this registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) under the Securities Act
of 1933, as amended (the "Securities Act"), the reoffering prospectus will
contain the information called for by the applicable registration form for
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act,
each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
- ---------------
(5) Filed as an Exhibit to Post-Effective Amendment No. 24 to Registrant's
Registration Statement on Form N-1A filed electronically on December 23,
1999, accession number 0000922423-99-001476 and incorporated herein by
reference.
(6) Filed as an Exhibit to Post-Effective Amendment No. 26 to Registrant's
Registration Statement on Form N-1A filed electronically on June 30, 2000,
accession number 0000922423-00-000903 and incorporated herein by reference.
(7) Filed as an Exhibit to Post-Effective Amendment No. 26 to Registrant's
Registration Statement on Form N-14 filed electronically on October 22,
2001, accession number 0000922423-01-500921 and incorporated herein by
reference.
C-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement on Form N-14 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 7th day of February, 2003.
INVESTEC FUNDS
By: /s/ Royce N. Brennan
-----------------------------------------
Royce N. Brennan
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities indicated on the 7th day of February, 2003.
Signature Title Date
/s/ Eric Banhazl Treasurer and Secretary February 7, 2003
- ------------------------
Eric Banhazl
/s/ Dr. Gunter Dufey Trustee February 7, 2003
- ------------------------
*Dr. Gunter Dufey
/s/ J. I. Fordwood Trustee February 7, 2003
- ------------------------
*J. I. Fordwood
/s/ Timothy Guinness Trustee February 7, 2003
- ------------------------
*Timothy Guinness
/s/ Bret A. Herscher Trustee February 7, 2003
- ------------------------
*Bret A. Herscher
/s/ J. Brooks Reece, Jr. Trustee February 7, 2003
- ------------------------
*J. Brooks Reece, Jr.
*By: /s/ Susan Penry-Williams
--------------------------
Susan Penry-Williams
Attorney-in-Fact
EXHIBIT INDEX
EX-99.4 Form of Agreement and Plan of Reorganization and Liquidation.
EX-99.11(a) Consent of Counsel.
EX-99.11(b) Opinion of counsel (to be filed by amendment).
EX-99.12 Opinion of Delaware counsel (to be filed by amendment).
EX-99.14 Consent of Ernst & Young LLP, Independent Auditors for the
Registrant (to be filed by amendment).
EX-99.17 Form of Proxy Card