As filed with the Securities and Exchange Commission on January 22, 1999
Registration No. 33-____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No.___ [ ] Post-Effective Amendment No.___
INVESCO INTERNATIONAL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
7800 East Union Avenue
Denver, Colorado
(Address of Principal Executive Offices)
P.O. Box 173706, Denver, Colorado 80237
(Mailing Address)
(303) 930-6300
(Registrant's Area Code and Telephone Number)
Glen A. Payne, Esq.
7800 East Union Avenue
Denver, Colorado 80237
(Name and Address of Agent for Service)
Copies to:
Clifford J. Alexander, Esq.
Susan M. Casey, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
Telephone: (202) 778-9036
Approximate Date of Proposed Public Offering: as soon as practicable after
this Registration Statement becomes effective under the Securities Act of 1933.
Title of securities being registered: Common stock, par value $0.01 per
share.
<PAGE>
No filing fee is required because of reliance on Section 24(f) under the
Investment Company Act of 1940, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
<PAGE>
INVESCO INTERNATIONAL FUNDS, INC.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following papers and documents:
Cover Sheet
Contents of Registration Statement
Cross Reference Sheets
Letter to Shareholders
Notice of Special Meeting
Part A - Prospectus/Proxy Statement
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
<PAGE>
INVESCO INTERNATIONAL FUNDS, INC.
FORM N-14 CROSS REFERENCE SHEET
Part A Item No. Prospectus/Proxy
AND CAPTION STATEMENT CAPTION
- -------------- ------------------
1. Beginning of Registration Statement and Cover Page
Outside Front Cover Page of Prospectus
2. Beginning and Outside Back Cover Page Table of Contents
of Prospectus
3. Synopsis Information and Risk Factors Synopsis; Comparison of Principal
Risk Factors
4. Information About the Transaction Synopsis; The Proposed Transaction
5. Information About the Registrant Synopsis; Comparison of Principal
Risk Factors; Additional
Information About Pacific Basin
Fund; Miscellaneous; See also,
the Prospectus for INVESCO
Pacific Basin Fund, dated March
1, 1999, previously filed on
EDGAR, Accession Number
0000906334-98-000019
6. Information About the Company Being Synopsis; Comparison of Principal
Acquired Risk Factors; Miscellaneous; See
also, the Prospectus for INVESCO
Asian Growth Fund, dated December
1, 1998, previously filed on
EDGAR, Accession Number 0000923705-
98-000020
7. Voting Information Voting Information
8. Interest of Certain Persons and Experts Not Applicable
9. Additional Information Required for Not Applicable
Re-offering by Persons Deemed to be
Underwriters
<PAGE>
INVESCO INTERNATIONAL FUNDS, INC.
FORM N-14 CROSS REFERENCE SHEET
Part B Item No. Statement of Additional
and Caption Information Caption
- -------------- -----------------------
10. Cover Page Cover Page
11. Table of Contents Not Applicable
12. Additional Information About the Statement of Additional
Registrant Information of INVESCO Pacific
Basin Fund, dated March 1, 1999
and previously filed on EDGAR,
Accession Number
0000906334-98-000019
13. Additional Information About the Statement of Additional
Company Being Acquired Information of INVESCO Asian
Growth Fund, dated December 1,
1998, previously filed on EDGAR,
Accession Number 0000923705-98-
000020
14. Financial Statements Annual Report of INVESCO Pacific
Basin Fund for Fiscal Year Ended
October 31, 1998, previously
filed on EDGAR, Accession Number
0000906334-98-000018; Annual
Report of INVESCO Asian Growth
Fund for Fiscal Year Ended July 31,
1998, previously filed on EDGAR,
Accession Number 0000923705-98-
000013
<PAGE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
INVESCO INTERNATIONAL FUNDS, INC.
PART A
<PAGE>
INVESCO ASIAN GROWTH FUND
(A SERIES OF INVESCO SPECIALTY FUNDS, INC.)
March __, 1999
Dear INVESCO Asian Growth Fund Shareholder:
The attached proxy materials describe a proposal that INVESCO Asian Growth
Fund ("Asian Growth Fund") reorganize and become part of INVESCO Pacific Basin
Fund ("Pacific Basin Fund"). If the proposal is approved and implemented, each
shareholder of Asian Growth Fund will automatically become a shareholder of
Pacific Basin Fund.
The attached proxy materials also seek your approval (if the
reorganization is not approved or cannot be completed for some other reason) of
certain changes, in the fundamental investment restrictions of Asian Growth
Fund, to convert Asian Growth Fund to a portfolio of INVESCO International
Funds, Inc., to elect directors, and to ratify the appointment of
PricewaterhouseCoopers LLP as independent accountants of Asian Growth Fund.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL PROPOSALS. The board
believes that combining the two Funds will benefit Asian Growth Fund's
shareholders by providing them with a portfolio that has an investment objective
that is substantially similar to that of Asian Growth Fund, that has a similar
investment strategy and that, before taking into account voluntary fee waivers,
will have lower operating expenses as a percentage of net assets. If, however,
the reorganization is not approved or cannot be completed for some other reason,
you are also being asked to approve certain organizational and routine changes,
as well as changes to the fundamental investment restrictions of Asian Growth
Fund that will update and streamline the Fund's restrictions. The attached proxy
materials provide more information about the proposed reorganization and the two
Funds, as well as the proposed changes in fundamental investment restrictions
and the other matters you are being asked to vote upon.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. Voting your
shares early will permit Asian Growth Fund to avoid costly follow-up mail and
telephone solicitation. After reviewing the attached materials, please complete,
date and sign your proxy card and mail it in the enclosed return envelope today.
As an alternative to using the paper proxy card to vote, you may vote by mail,
by telephone, by facsimile, through the Internet or in person.
Very truly yours,
Mark H. Williamson
President
INVESCO Asian Growth Fund
<PAGE>
[HEADLINE] WHAT YOU SHOULD KNOW ABOUT
THIS PROPOSED FUND MERGER
March 23, 1999
INVESCO AND THE FUND'S BOARD OF DIRECTORS ENCOURAGE YOU TO READ THE ENCLOSED
PROXY STATEMENT CAREFULLY. THE FOLLOWING IS A BRIEF OVERVIEW OF THE KEY ISSUE.
WHY IS MY FUND HOLDING A SPECIAL SHAREHOLDERS MEETING?
The main reason for the meeting is so that shareholders of INVESCO Asian Growth
Fund can decide whether or not to reorganize their fund. If shareholders decide
in favor of the proposal, ASIAN GROWTH FUND will merge with another, similar
mutual fund managed by INVESCO, and you will become a shareholder of INVESCO
PACIFIC BASIN FUND. If shareholders decide they do not wish to merge the Funds,
there are other matters of business to be considered. So, even if you vote in
favor of the proposed merger, please do review all of the other proposals and
vote on them as well.
WHAT ARE THE ADVANTAGES OF MERGING THE FUNDS?
There are two key potential advantages:
o By combining the Funds, SHAREHOLDERS MAY ENJOY LOWER EXPENSE RATIOS over time.
Larger funds tend to enjoy economies of scale not available to funds with
smaller assets under management.
o These LOWER COSTS MAY LEAD TO STRONGER PERFORMANCE, since total return to a
fund's shareholders is net of fund expenses.
The potential benefits and possible disadvantages are explained in more detail
in the enclosed proxy statement.
<PAGE>
HOW ARE THESE TWO FUNDS ALIKE?
The investment goals of the Funds are the same: capital appreciation. Because
these funds invest primarily overseas, both are subject to the special risks of
international investing (such as currency fluctuations, and differences in
accounting and securities regulation). However, there are significant
differences in investment strategy:
o ASIAN GROWTH FUND invests in companies located throughout Asia and the Pacific
Rim -- but excludes Japan in favor of less developed markets.
o PACIFIC BASIN FUND invests throughout the Far East and Pacific Rim, including
Japan. This greater geographical area, which incorporates the dominant economy
of the region, offers additional opportunities for seeking the Fund's goal.
WHAT HAPPENS IF SHAREHOLDERS DECIDE IN FAVOR OF A MERGER?
A Closing Date will be set for the reorganization. Shareholders will receive
full and fractional shares of Pacific Basin Fund equal in value to the shares of
Asian Growth Fund that they owned on the Closing Date.
The net asset value per share of Pacific Basin Fund will not be affected by the
transaction. That means the reorganization will not result in a dilution of any
shareholder's interest.
IF THE FUNDS MERGE, WILL THERE BE TAX CONSEQUENCES FOR ME?
Unlike a transaction where you direct INVESCO to sell shares of one fund in
order to buy shares of another, the reorganization WILL NOT BE CONSIDERED A
TAXABLE EVENT. The Funds themselves will recognize no gains or losses on assets
as a result of a reorganization. So you will not have reportable capital gains
or losses due to the reorganization. However, you should consult your own tax
advisor regarding any possible effect a reorganization might have on you, given
your personal circumstances -particularly regarding state and local taxes.
<PAGE>
WHO WILL PAY FOR THIS REORGANIZATION?
The expenses of the reorganization, including legal expenses, printing,
packaging and postage, plus the costs of any supplementary solicitation, will be
borne partly by INVESCO and partly by the two Funds.
WHAT DOES THE FUND'S BOARD OF DIRECTORS RECOMMEND?
The Board believes you should vote in favor of the reorganization. More
important, though, the directors recommend that you study the issues involved,
call us with any questions, and vote promptly to ensure that a quorum of Asian
Growth Fund shares will be represented at the Fund's special shareholders
meeting.
WHERE DO I GET MORE INFORMATION ABOUT INVESCO PACIFIC BASIN FUND?
o Please visit our Web site at www.invesco.com
o Or call Investor Services toll-free at 1-800-646-8372
[BACK COVER] YOU SHOULD KNOW WHAT INVESCO KNOWS
At INVESCO, we've built a global reputation on professional investment
management. Some of the world's largest institutions and more than a million
individuals rely on our knowledgeable investment specialists for effective
management of their portfolios. INVESCO provides investors the perspective
gained from more than 65 years of helping clients seek their financial goals.
The heart of INVESCO's business is to provide strong core mutual fund portfolios
designed as solid foundations for our clients' investments. We draw on the
resources of affiliates worldwide, so we have seasoned experts in the investment
strategies you want to pursue -- both for your core investments as well as to
meet special needs. And we offer award-winning service to help you better take
advantage of our investment expertise. Call us to learn more about your choices
at INVESCO.
<PAGE>
INVESCO ASIAN GROWTH FUND
(A SERIES OF INVESCO SPECIALTY FUNDS, INC.)
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
MAY 20, 1999
To The Shareholders:
A special meeting of shareholders of the INVESCO Asian Growth Fund ("Asian
Growth Fund"), a series of INVESCO Specialty Funds, Inc., ("Specialty Funds"),
will be held on May 20, 1999, at 10:00 a.m., Mountain Time, at the Office of
INVESCO Funds Group, Inc., 7800 East Union Avenue, Denver, Colorado, for the
following purposes:
(1) To approve an Agreement and Plan of Reorganization and Termination
under which INVESCO Pacific Basin Fund ("Pacific Basin Fund"), a series of
INVESCO International Funds ("International Funds"), Inc., would acquire all of
the assets of Asian Growth Fund in exchange solely for shares of Pacific Basin
Fund and the assumption by Pacific Basin Fund of all of Asian Growth Fund's
liabilities, followed by the distribution of those shares to the shareholders of
Asian Growth Fund, all as described in the accompanying Prospectus/Proxy
Statement;
(2) To approve an Agreement and Plan of Conversion and Termination
providing for the conversion of Asian Growth Fund from a separate series of
Specialty Funds to a separate series of International Funds;
(3) To approve certain changes to the fundamental investment restrictions
of Asian Growth Fund;
(4) To elect a board of directors of Specialty Funds, Inc.;
(5) To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of Asian Growth Fund; and
(6) To transact such other business as may properly come before the
meeting or any adjournment thereof.
<PAGE>
You are entitled to vote at the meeting and any adjournment thereof if you
owned shares of Asian Growth Fund at the close of business on March 12, 1999. IF
YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON. IF YOU DO NOT EXPECT
TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
CARD IN THE ENCLOSED POSTAGE PAID envelope.
By order of the board of directors,
Glen A. Payne
Secretary
March __, 1999
Denver, Colorado
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
Please indicate your voting instructions on the enclosed proxy card, sign
and date the card, and return it in the envelope provided. IF YOU SIGN, DATE AND
RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED
"FOR" THE PROPOSALS DESCRIBED ABOVE. In order to avoid the additional expense of
further solicitation, we ask your cooperation in mailing your proxy card
promptly. As an alternative to using the paper proxy card to vote, you may vote
by mail, by telephone, through the Internet, by facsimile machine or in person.
To vote by telephone, please call the toll-free number listed on the enclosed
proxy card(s). Shares that are registered in your name, as well as shares held
in "street name" through a broker, may be voted via the Internet or by
telephone. To vote in this manner, you will need the 12-digit "control"
number(s) that appear on your proxy card(s). To vote via the Internet, please
access http://www.______.com on the World Wide Web. In addition, shares that are
registered in your name may be voted by faxing your completed proxy card(s) to
1-800-___-____. If we do not receive your completed proxy after several weeks,
you may be contacted by our proxy solicitor, [name of proxy solicitor company].
Our proxy solicitor will remind you to vote your shares or will record your vote
over the phone if you choose to vote in that manner.
Unless proxy cards submitted by corporations and partnerships are signed by
the appropriate persons as indicated in the voting instructions on the proxy
card, they will not be voted.
2
<PAGE>
INVESCO PACIFIC BASIN FUND
(A SERIES OF INVESCO INTERNATIONAL FUNDS, INC.)
INVESCO ASIAN GROWTH FUND
(A SERIES OF INVESCO SPECIALTY FUNDS, INC.)
7800 EAST UNION AVENUE
DENVER, COLORADO 80237
(TOLL FREE) 1-800-646-8372
PROSPECTUS/PROXY STATEMENT
MARCH __, 1999
This Prospectus/Proxy Statement ("Proxy Statement") is being furnished to
shareholders of the INVESCO Asian Growth Fund ("Asian Growth Fund"), a series of
INVESCO Specialty Funds, Inc. ("Specialty Funds"), in connection with the
solicitation of proxies by its board of directors for use at a special meeting
of its shareholders to be held on May 20, 1999, at 10:00 a.m., Mountain Time,
and at any adjournment of the meeting, if the meeting is adjourned for any
reason.
As more fully described in this Proxy Statement, one of the main purposes
of the meeting is to vote on a proposed reorganization. In the reorganization,
the INVESCO Pacific Basin Fund ("Pacific Basin Fund"), a series of INVESCO
International Funds, Inc. ("International Funds"), would acquire all of the
assets of Asian Growth Fund, in exchange solely for shares of Pacific Basin Fund
and the assumption by Pacific Basin Fund of all of the liabilities of Asian
Growth Fund. Those shares of Pacific Basin Fund would then be distributed to the
shareholders of Asian Growth Fund, so that each shareholder would receive a
number of full and fractional shares of Pacific Basin Fund having an aggregate
value that, on the effective date of the reorganization, is equal to the
aggregate net asset value of the shareholder's shares of Asian Growth Fund. As
soon as practicable following the distribution of shares, Asian Growth Fund will
be terminated.
Pacific Basin Fund is a diversified series of International Funds, which
is an open-end management investment company. The investment objective of both
Pacific Basin Fund and Asian Growth Fund is to seek capital appreciation.
This Proxy Statement, which should be retained for future reference, sets
forth concisely the information about the reorganization and Pacific Basin Fund
that a shareholder should know before voting on the reorganization. A Statement
of Additional Information, dated [March 1, 1999], relating to the reorganization
and including historical financial statements, has been filed with the
Securities and Exchange Commission ("SEC") and is incorporated herein by
reference (that is, the Statement of Additional Information is legally a part of
this Proxy Statement). A Prospectus and a Statement of Additional Information
for Pacific Basin Fund, each [March 1, 1999], and Annual Report to Shareholders
<PAGE>
for the fiscal year ended October 31, 1998 have been filed with the SEC and are
incorporated herein by this reference. Asian Growth Fund's Prospectus and
Statement of Additional Information, each dated December 1, 1998, have been
filed with the SEC and also are incorporated herein by this reference. Copies of
Pacific Basin Fund's Prospectus and Annual Report to Shareholders accompany this
Proxy Statement. Copies of the other referenced documents, as well as Asian
Growth Fund's Annual Report to Shareholders for the fiscal year ended July 31,
1998, may be obtained without charge, and further inquiries may be made, by
writing to INVESCO Distributors, Inc., P.O. Box 173706, Denver, Colorado
80217-3706, or by calling toll-free 1-800-646-8372.
The SEC maintains a website (http://www.sec.gov) that contains the
Statement of Additional Information and other material incorporated by
reference, together with other information regarding Pacific Basin Fund and
Asian Growth Fund.
THE SEC HAS NOT APPROVED OR DISAPPROVED THE SHARES OF THE INVESCO PACIFIC BASIN
FUND, OR DETERMINED WHETHER THIS PROXY STATEMENT IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
2
<PAGE>
TABLE OF CONTENTS
VOTING INFORMATION............................................................__
PART I: THE REORGANIZATION
PROPOSAL 1: To Approve an Agreement and Plan of Reorganization
and Termination under which Pacific Basin Fund would acquire
all the assets of Asian Growth Fund in exchange solely for
shares of Pacific Basin Fund and all of Asian Growth Fund's
liabilities, followed by the distribution of those shares to
the shareholders of Asian Growth Fund.
Synopsis.......................................................... __
Comparison of Principal Risk Factors ..............................__
The Proposed Transaction...........................................__
PART II: PROPOSED ORGANIZATIONAL MATTER
PROPOSAL 2: If Proposal 1 is not approved, to approve an
Agreement and Plan of Conversion and Termination providing for
the conversion of Asian Growth Fund to a separate series of
International Funds.
Reason for the Proposed Conversion.................................__
Summary of the Plan of Conversion and Termination..................__
Continuation of Fund Shareholder Accounts..........................__
Expenses...........................................................__
Temporary Waiver of Investment Restrictions........................__
Tax Consequences of the Conversion.................................__
Conclusion.........................................................__
PART III: PROPOSED MODIFICATIONS TO FUNDAMENTAL INVESTMENT RESTRICTIONS
AND ROUTINE CORPORATE GOVERNANCE MATTERS
PROPOSAL 3: If Proposal 1 is not Approved, to approve
amendments to the Fundamental Investment Policies of Asian
Growth Fund.
a. To Amend the Fund's Fundamental Investment Restriction on
Issuer Diversification............................................__
b. To Amend the Fund's Fundamental Investment Restriction on
Borrowing.........................................................__
c. To Amend the Fund's Fundamental Investment Restriction on
Issuing Senior Securities.........................................__
3
<PAGE>
d. To Amend the Fund's Fundamental Investment Restriction on
Real Estate Investments...........................................__
e. To Amend the Fund's Fundamental Investment Restriction on
Investing in Commodities..........................................__
f. To Amend the Fund's Fundamental Investment Restriction on
Loans.............................................................__
g. To Amend the Fund's Fundamental Investment Restriction on
Underwriting Securities...........................................__
h. To Amend the Fund's Fundamental Investment Restriction on
Industry Concentration............................................__
i. To Amend the Fund's Fundamental Investment Restriction on
Investing in Another Investment Company...........................__
PROPOSAL 4: To Elect a Board of Directors................................__
PROPOSAL 5: To Ratify or Reject the Selection of
PricewaterhouseCoopers LLP as Independent Accountants.....................__
OTHER BUSINESS................................................................__
INFORMATION CONCERNING ADVISER, SUB-ADVISER, DISTRIBUTOR,
AND AFFILIATED COMPANIES......................................................__
MISCELLANEOUS.................................................................__
Available Information.....................................................__
Legal Matters.............................................................__
Experts...................................................................__
APPENDIX A: AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION............A-1
APPENDIX B: PRINCIPAL SHAREHOLDERS...........................................B-1
APPENDIX C: AGREEMENT AND PLAN OF CONVERSION AND TERMINATION.................C-1
4
<PAGE>
INVESCO ASIAN GROWTH FUND
(a series of INVESCO Specialty Funds, Inc.)
-----------
PROSPECTUS/PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
MAY 20, 1999
-----------
VOTING INFORMATION
This Prospectus/Proxy Statement ("Proxy Statement") is being furnished to
shareholders of INVESCO Asian Growth Fund ("Asian Growth Fund"), a series of
INVESCO Specialty Funds, Inc. ("Specialty Funds"), in connection with the
solicitation of proxies from Asian Growth Fund shareholders by the board of
directors ("Board") of Specialty Funds for use at a special meeting of
shareholders to be held on May 20, 1999 ("Meeting"), and at any adjournment of
the Meeting. This Proxy Statement will first be mailed to shareholders on or
about March 23, 1999.
One-third of Asian Growth Fund's shares outstanding on March 12, 1999,
represented in person or by proxy, shall constitute a quorum and must be present
for the transaction of business at the Meeting. If a quorum is not present at
the Meeting or a quorum is present but sufficient votes to approve one or more
of the proposals are not received, the persons named as proxies may propose one
or more adjournments of the Meeting to permit further solicitation of proxies.
Any such adjournment will require the affirmative vote of a majority of those
shares represented at the Meeting in person or by proxy. The persons named as
proxies will vote those proxies that they are entitled to vote FOR any proposal
in favor of such an adjournment and will vote those proxies required to be voted
AGAINST a proposal against such adjournment. A shareholder vote may be taken on
one or more of the proposals in this Proxy Statement prior to any such
adjournment if sufficient votes have been received and it is otherwise
appropriate.
Broker non-votes are shares held in street name for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and for which the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be counted
as shares present for purposes of determining whether a quorum is present but
will not be voted for or against any adjournment or proposal. Accordingly,
abstentions and broker non-votes effectively will be a vote against adjournment
or against any proposal where the required vote is a percentage of the shares
present or outstanding. Abstentions and broker non-votes will not be counted,
however, as votes cast for purposes of determining whether sufficient votes have
been received to approve a proposal.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with your directions as indicated on the proxy card, if your proxy
card is received properly executed by you or by your duly appointed agent or
attorney-in-fact. If you sign, date and return the proxy card, but give no
voting instructions, your shares will be voted in favor of approval of each of
<PAGE>
the proposals and the duly appointed proxies may, in their discretion, vote upon
such other matters as may come before the Meeting. The proxy card may be revoked
by giving another proxy or by letter or telegram revoking the initial proxy. To
be effective, revocation must be received by Specialty Funds prior to the
Meeting and must indicate your name and account number. If you attend the
Meeting in person you may, if you wish, vote by ballot at the Meeting, thereby
canceling any proxy previously given.
In order to reduce costs, notices to a shareholder having more than one
account in Asian Growth Fund listed under the same Social Security number at a
single address have been combined. The proxy cards have been coded so that a
shareholder's votes will be counted for each such account.
As of March 12, 1999 ("Record Date"), Asian Growth Fund had _______ shares
of common stock outstanding. The solicitation of proxies, the cost of which will
be borne half by INVESCO Funds Group, Inc., the investment adviser and transfer
agent of Asian Growth Fund ("INVESCO "), and half by INVESCO Pacific Basin Fund
("Pacific Basin Fund"), a series of INVESCO International Funds, Inc.
("International Funds"), and Asian Growth Fund, will be made primarily by mail
but also may be made by telephone or oral communications by representatives of
INVESCO and INVESCO Distributors, Inc. ("IDI"), the distributor of the INVESCO
group of investment companies ("INVESCO Funds"), who will not receive any
compensation for these activities from either Asian Growth Fund or Pacific Basin
Fund, or by [name of proxy solicitor company], professional proxy solicitors,
who will be paid fees and expenses of up to approximately $_______ for
soliciting services. If votes are recorded by telephone, [name of proxy
solicitor company] will use procedures designed to authenticate shareholders'
identities, to allow shareholders to authorize the voting of their shares in
accordance with their instructions, and to confirm that a shareholder's
instructions have been properly recorded. You may also vote by mail, by
facsimile or through a secure Internet site. Proxies voted by telephone,
facsimile or Internet may be revoked at any time before they are voted in the
same manner that proxies voted by mail may be revoked.
[Except as set forth in Appendix B, INVESCO does not know of any person
who owns beneficially 5% or more of the shares of Asian Growth Fund or Pacific
Basin Fund (each a "Fund"). Directors and officers of Specialty Funds own in the
aggregate less than 1 % of the shares of Asian Growth Fund.]
VOTE REQUIRED. Approval of Proposal 1 and Proposal 2 requires the
affirmative vote of a majority of the outstanding voting securities of Asian
Growth Fund. Approval of Proposal 3 requires the affirmative vote of a "majority
of the outstanding voting securities" of the Asian Growth Fund, as defined in
the Investment Company Act of 1940, as amended ("1940 Act"). This means that
Proposal 3 must be approved by the lesser of: (1) 67% of Asian Growth Fund's
shares present at a meeting of shareholders if the owners of more than 50% of
Asian Growth Fund's shares then outstanding are present in person or by proxy;
or (2) more than 50% of Asian Growth Fund's outstanding shares. A plurality of
the votes cast at the Meeting, and at concurrent Meetings of the other series of
Specialty Funds, taken in the aggregate, is sufficient to approve Proposal 4.
Approval of Proposal 5 requires the affirmative vote of a majority of the shares
of Asian Growth Fund present at the Meeting, provided a quorum is present. Each
2
<PAGE>
outstanding full share of Asian Growth Fund is entitled to one vote, and each
outstanding fractional share thereof is entitled to a proportionate fractional
share of one vote. If any Proposal is not approved by the requisite vote of
shareholders, the persons named as proxies may propose one or more adjournments
of the Meeting to permit further solicitation of proxies.
PART I. THE REORGANIZATION
PROPOSAL 1. TO APPROVE AN AGREEMENT AND PLAN OF
REORGANIZATION AND TERMINATION ("REORGANIZATION PLAN") UNDER
WHICH PACIFIC BASIN FUND WOULD ACQUIRE ALL THE ASSETS OF
ASIAN GROWTH FUND IN EXCHANGE SOLELY FOR SHARES OF PACIFIC
BASIN FUND AND THE ASSUMPTION BY PACIFIC BASIN FUND OF ASIAN
GROWTH FUND'S LIABILITIES FOLLOWED BY THE DISTRIBUTION OF
THOSE SHARES TO THE SHARESHOLDERS OF ASIAN GROWTH FUND
("REORGANIZATION")
SYNOPSIS
The following is a summary of certain information contained elsewhere in
this Proxy Statement, the Prospectus and Statement of Additional Information of
Pacific Basin Fund (which are incorporated herein by reference), the Prospectus
and Statement of Additional Information of Asian Growth Fund (which are
incorporated herein by reference), and the Reorganization Plan (which is
attached as Appendix A to this Proxy Statement). As discussed more fully below,
Specialty Funds' Board believes that the Reorganization will benefit Asian
Growth Fund's shareholders. Pacific Basin Fund has an investment objective that
is substantially similar to the investment objective of Asian Growth Fund and
has similar investment strategies. It is anticipated that, following the
Reorganization, the total operating expenses for the combined Fund, before
taking into account voluntary fee waivers and expense reimbursements, will be
lower as a percentage of net assets than those of Asian Growth Fund.
THE PROPOSED REORGANIZATION
Specialty Funds' Board considered and unanimously approved the
Reorganization Plan at a meeting held on [February 3, 1999]. The Reorganization
Plan provides for the acquisition of all the assets of Asian Growth Fund by
Pacific Basin Fund, in exchange solely for shares of common stock of Pacific
Basin Fund and the assumption by Pacific Basin Fund of all the liabilities of
Asian Growth Fund. Asian Growth Fund then will distribute those shares of
Pacific Basin Fund to its shareholders, so that each Asian Growth Fund
shareholder will receive the number of full and fractional shares that is equal
in value to the shareholder's holdings in Asian Growth Fund as of the day the
Reorganization is completed. Asian Growth Fund then will be terminated as soon
as practicable thereafter.
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The Reorganization will occur as of the close of business on June 18,
1999, or at a later date when the conditions to the closing are satisfied
("Closing Date").
For the reasons set forth below under "The Proposed Transaction Reasons
for the Reorganization," Specialty Funds' Board, including its directors who are
not "interested persons," as that term is defined in the 1940 Act, of Specialty
Funds, International Funds, INVESCO, INVESCO Asset Management Limited ("IAML")
or INVESCO Asia Limited ("IAL") (collectively, the "Independent Directors"), has
determined that the Reorganization is in the best interests of Asian Growth
Fund, that the terms of the Reorganization are fair and reasonable and that the
interests of Asian Growth Fund's shareholders would not be diluted as a result
of the Reorganization. Accordingly, Specialty Funds' Board recommends approval
of the transaction. In addition, the Board of International Funds, including its
Independent Directors, has determined that the Reorganization is in the best
interests of Pacific Basin Fund, that the terms of the Reorganization are fair
and reasonable and that the interests of Pacific Basin Fund's shareholders would
not be diluted as a result of the Reorganization.
COMPARATIVE FEE TABLE
Certain fees and expenses that Asian Growth Fund's shareholders pay,
directly or indirectly, are slightly different from those incurred by Pacific
Basin Fund's shareholders, although neither Fund's shares are subject to any
shareholder transaction expenses, I.E., there are no sales charges on shares
purchased or deferred sales charges for shares redeemed. The following tables
show (1) fees currently incurred by shareholders of each Fund and fees that each
shareholder will incur after giving effect to the Reorganization, and (2) the
current fees and expenses incurred for the fiscal year ended October 31, 1998 by
Pacific Basin Fund and the fiscal year ended July 31, 1998 by Asian Growth Fund,
and PRO FORMA fees for Pacific Basin Fund after the Reorganization.
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SHAREHOLDER FEES (fees paid directly from your investment)
COMBINED FUND
PACIFIC BASIN FUND ASIAN GROWTH FUND (PRO FORMA)
------------------ ----------------- ------------
Sales charge (load) None None None
on purchases of shares
Sales charge (load) None None None
on reinvested dividends
Redemption fee or None* None None*
deferred sales charge
(load)
Exchange fee None None None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
PACIFIC BASIN FUND ASIAN GROWTH FUND COMBINED FUND
(PRO FORMA)
------------------ ----------------- -------------
Management Fees 0.75% 0.75% 0.75%
Distribution (12b-1)Fees(1) 0.25% 0.25% 0.25%
Other Expenses 1.56%(3) 1.92%(4) 1.49%
-------- -------- -----
Total Fund Operating 2.56%(3) 2.92%(4) 2.49%
Expenses(2)
* [Effective April __, 1999, Pacific Basin Fund will impose redemption and
exchange fees of 2.00% on shares held three months or less and 1.00% on
shares held more than three months but less than six months. The fee will be
retained by the Fund to offset transaction costs and other expenses
associated with short-term redemptions and exchanges. This redemption fee
will not apply to shares of Pacific Basin Fund issued in the Reorganization.]
(1)Because each Fund pays distribution fees, long-term shareholders could pay
more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc. Effective
December 1, 1997, Pacific Basin Fund was authorized to pay a distribution
(12b-1) fee of up to 0.25% of new assets (new sales of shares, exchanges into
the Fund, and reinvestments of dividends and other distributions made on or
after December 1, 1997). For the fiscal year ended October 31, 1998, actual
distribution (12b-1) fees were 0.20% of average net assets. Currently,
because of the increase in new assets, actual distribution (12b-1) fees are
0.25% if average new assets.
(2)Each Funds' actual Total Fund Operating expenses were lower than the figures
shown because their custodian fees were reduced under expense offset
arrangements. Because of an SEC requirement, the figures shown above DO NOT
reflect these reductions.
(3)Certain expenses of Pacific Basin Fund are being absorbed voluntarily by
INVESCO. Accordingly, the Other Expenses and Total Operating Expenses paid,
after absorption, by Pacific Basin Fund were 1.07% and 2.07%, respectively.
INVESCO will continue to absorb expenses of for a period of at least one year
so that Total Fund Operating Expenses will not exceed 2.00%.
(4)Certain expenses of Asian Growth Fund are being absorbed voluntarily by
INVESCO and IAL, the Fund's sub-advisor. Accordingly, the actual Other
Expenses and Total Fund Operating Expenses paid by Asian Growth Fund were
1.01% and 2.01%, respectively. INVESCO and IAL do not intend to continue
absorbing the expenses of Asian Growth Fund. Thus, if the Reorganization is
not approved, Asian Growth Fund's actual Other Expenses and Total Fund
Operating Expenses will likely increase.
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EXAMPLE OF EFFECT ON FUND EXPENSES
This Example is intended to help you compare the cost of investing in
Asian Growth Fund with the cost of investing in Pacific Basin Fund and the cost
of investing in Pacific Basin Fund assuming the Reorganization has been
completed.
This Example assumes that you invest $10,000 in the specified Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. This Example also assumes that your investment has a 5% return each
year, that all dividends and other distributions are reinvested 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:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
PACIFIC BASIN $262 $806 $1,376 $2,923
FUND
ASIAN GROWTH $296 $907 $1,543 $3,278
FUND
COMBINED FUND $255 $785 $1,340 $2,853
(PRO FORMA)
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND EACH FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
The actual expenses of each Fund will depend upon, among other things, the level
of its average net assets and the extent to which it incurs variable expenses,
such as transfer agency costs.
FORM OF ORGANIZATION
Pacific Basin Fund is a series of International Funds, an open-end,
diversified investment management company that was organized as a Maryland
corporation on April 2, 1993. Asian Growth Fund is a series of Specialty Funds,
an open-end, diversified investment management company that was organized as a
Maryland corporation on April 12, 1994. Neither International Funds nor
Specialty Funds is required to (nor does it) hold annual shareholder meetings.
Neither Fund issues share certificates.
INVESTMENT ADVISER
INVESCO is the investment adviser of both Funds. In this capacity, INVESCO
is primarily responsible for providing the Funds with various administrative
services and supervising their daily business affairs. IAML is the sub-adviser
of Pacific Basin Fund and IAL is sub-adviser of Asian Growth Fund. The
sub-adviser of each Fund is primarily responsible for selecting and managing
that Fund's investments.
INVESCO is currently paid: (1) by Pacific Basin Fund a monthly advisory
fee computed at the annual rate of 0.75% on the first $350 million of the Fund's
average net assets, 0.65% on the next $350 million of such assets, and 0.55% on
such assets over $700 million; and (2) by Asian Growth Fund a monthly advisory
fee computed at the annual rate of 0.75% on the first $500 million of the Fund's
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average net assets, 0.65% on the next $500 million of such assets, and 0.55% on
such assets over $1 billion.
Out of the advisory fee which it receives from Pacific Basin Fund, INVESCO
pays IAML, as sub-adviser of Pacific Basin Fund, a monthly fee based upon the
average net asset value of 0.30% on the first $350 million of such assets; 0.26%
on the next $350 million of such assets, and 0.22% on such assets over $700
million. Out of the advisory fee which it receives from the Asian Growth Fund,
INVESCO pays IAL, as sub-adviser of Asian Growth Fund, a monthly fee based upon
the average net asset value of 0.30% on the first $500 million of the Fund's
average net assets; 0.26% on the next $500 million of such assets; and 0.22% on
such assets over $1 billion.
Following the Reorganization, INVESCO, in its capacity as investment
adviser to Pacific Basin Fund, will be primarily responsible for providing the
combined Fund with various administrative services and supervising the combined
Fund's daily business affairs. Following the Reorganization, IAML, in its
capacity as investment sub-adviser to Pacific Basin Fund, will be primarily
responsible for managing the investments of the Funds' combined assets.
INVESTMENT OBJECTIVES AND POLICIES
Pacific Basin Fund has an investment objective generally similar to that
of Asian Growth Fund in that each Fund seeks capital appreciation through
investment in equity securities of issuers in a particular region of the world,
but the methodologies through which the Funds seek this objective differ.
Pacific Basin Fund focuses on issuers in both developed and emerging markets in
the Pacific Basin region, and under normal conditions, invests at least 80% of
its total assets in the equity securities of companies domiciled in Far Eastern
or Western Pacific countries. Asian Growth Fund focuses on issuers in Asian
markets and, under normal circumstances, invests at least 65% of its total
assets in equity securities of large and small companies domiciled or with
primary operations in Asia and the Pacific Rim, excluding Japan.
There are certain similarities between the investment policies of Pacific
Basin Fund and those of Asian Growth Fund: 1) each Fund invests primarily in
equity securities of non-U.S. issuers; 2) Pacific Basin Fund is permitted to
invest substantially in securities of emerging market issuers while Asian Growth
Fund invests primarily in such securities; 3) there is significant overlap
between the countries in which Pacific Basin Fund may invest and those in which
Asian Growth Fund may invest; and 4) Pacific Basin Fund and Asian Growth Fund
are each "diversified" portfolios under the 1940 Act, which means that each Fund
is limited with respect to the percentage of its assets that it may invest in
the securities of a limited number of issuers.
However, there also are significant differences between the investment
policies of Pacific Basin Fund and those of Asian Growth Fund: 1) Pacific Basin
Fund's investments focus on countries in the Pacific Basin, which is more
limited in scope than Asian Growth Fund, which may invest in a broader range of
Asian and Pacific Rim countries; 2) Pacific Basin Fund may invest substantially
in a number of developed countries, including Japan, as well as emerging markets
countries while Asian Growth Fund focuses more on emerging markets countries and
does not invest in Japan; and 3) Pacific Basin Fund normally is required to
invest a higher percentage of its assets (80%) in its permitted pool of
countries than Asian Growth Fund (65%).
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<PAGE>
OTHER INVESTMENT POLICIES AND PRACTICES - Pacific Basin Fund may only
invest in investment grade debt securities. Asian Growth Fund may invest up to
30% of its total assets in debt securities rated below investment grade,
commonly referred to as "junk bonds." As spelled out in greater detail in Asian
Growth Fund's Prospectus, investment in junk bonds involves a higher degree of
investment risk than investment in higher rated debt securities. However, junk
bonds also generally provide an opportunity to earn higher yields. Consequently,
Pacific Basin Fund may incur less investment risk in its debt security
investments but also may be more limited in the income it earns from such
investments.
Asian Growth Fund may engage in a variety of futures and options
transactions and may enter into swap contracts and purchase securities for
forward delivery for hedging purposes. These practices involve distinct risks
that are described in the Prospectus and Statement of Additional Information of
Asian Growth Fund. Pacific Basin Fund may not engage in such transactions and
hence does not incur these risks. However, Pacific Basin Fund may enter into
foreign currency forward contracts as a hedge against fluctuations in foreign
exchange rates.
Each Fund also may engage in: securities lending transactions and
purchasing illiquid and Rule 144A securities. These practices and the associated
risks are described in detail in the Prospectus and Statement of Additional
Information for each Fund. Each Fund's ability to employ these practices is
substantially similar.
There can be no assurance that either Fund will achieve its investment
objective.
OPERATION OF PACIFIC BASIN FUND FOLLOWING THE REORGANIZATION
As indicated above, the investment objectives and policies of the two
Funds are similar, although each Fund has authority to invest in certain
securities and instruments that the other Fund does not. Based on their review
of the investment portfolios of each Fund, INVESCO and IAML believe that most of
the assets held by Asian Growth Fund will be consistent with the investment
policies of Pacific Basin Fund and thus can be transferred to and held by
Pacific Basin Fund if the Reorganization Plan is approved. To the extent that
Asian Growth Fund is holding certain securities that may not be held by Pacific
Basin Fund, these securities will be sold prior to the Reorganization. The
proceeds of such sales will be held in temporary investments or reinvested in
assets that qualify to be held by Pacific Basin Fund. The possible need for
Asian Growth Fund to dispose of assets prior to the Reorganization could result
in selling securities at a disadvantageous time and could result in Asian Growth
Fund's realizing losses that would not otherwise have been realized.
Alternatively, these sales could result in Asian Growth Fund's realizing gains
that would not otherwise have been realized, the net proceeds of which would be
included a distribution to its shareholders prior to the Reorganization.
As discussed above, INVESCO serves as investment adviser to both Funds,
and IAML serves as sub-adviser to Pacific Basin Fund and IAL serve as
sub-adviser to Asian Growth Fund. After the Reorganization, INVESCO and IAML
will continue their respective roles. In its capacity as investment adviser to
Pacific Basin Fund, INVESCO will continue to be primarily responsible for
providing the combined Fund with various administrative services and supervising
the combined Fund's daily business affairs. IAML, as the sub-adviser to the
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<PAGE>
Pacific Basin Fund, will continue to be primarily responsible for selecting and
managing the combined Fund's investments. In addition, the directors and
officers of Pacific Basin Fund, its distributor, and other outside agents will
continue to serve the Fund in their current capacities.
PURCHASES, REDEMPTIONS, EXCHANGES, AND DIVIDEND AND TAX INFORMATION
PURCHASES. Shares of each Fund may be purchased by wire, telephone, mail
or direct payroll purchase. The shares of each Fund are sold on a continuous
basis at the net asset value ("NAV") per share next calculated after receipt of
a purchase order in good form. The NAV per share for each Fund is computed
separately and is determined once each day that the New York Stock Exchange is
open as of the close of regular trading on that exchange ("Business Day"), but
may also be computed at other times. For a more complete discussion of share
purchases, see "How to Buy Shares" in either Fund's Prospectus.
REDEMPTIONS. Shares of each Fund may be redeemed by telephone or by mail.
Redemptions are made at the NAV per share next determined after a request in
proper form is received at the Fund's office. Normally, payments for shares
redeemed will be mailed within seven days following receipt of the required
documents.
[Effective April 4, 1999, Pacific Basin Fund will impose redemption and
exchange fees of 2.00% on shares held three months or less and 1.00% on shares
held more than three months but less than six months. The fee will be retained
by the Fund to offset transaction costs and other expenses associated with
short-term redemptions and exchanges. This redemption fee will NOT apply to
shares of Pacific Basin Fund issued in the Reorganization.] For a more complete
discussion of share redemption procedures, see "How to Redeem Shares" in either
the Pacific Basin Fund Prospectus or the Asian Growth Fund Prospectus.
[Asian Growth Fund shares will no longer be available for purchase on the
Business Day following the date on which the Reorganization is approved and all
contingencies have been met (the "Closing Date"). Redemptions of Asian Growth
Fund's shares may be effected immediately prior to the Closing Date.]
EXCHANGES. Shares of each Fund may be exchanged for shares of another
INVESCO Fund on the basis of their respective NAVs per share at the time of the
exchange. After the Reorganization, shares of Pacific Basin Fund will continue
to be exchangeable for shares of another INVESCO Fund. For a more complete
discussion of the Funds' exchange policies, see "How to Buy Shares" in either
Fund's Prospectus.
DIVIDENDS AND OTHER DISTRIBUTIONS. Each Fund earns investment income in
the form of interest and dividends on investments. Dividends paid by each Fund
are based solely on its investment income. Each Fund's policy is to distribute
substantially all of its investment income, less expenses, to shareholders on an
annual or semiannual basis, at the discretion of the Board of Directors of that
Fund
Each Fund also realizes capital gains and losses when it sells securities
or derivatives for more or less than it paid. If total gains on these sales
exceed total losses (including losses carried forward from previous years), a
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<PAGE>
Fund has capital gain net income. Net realized capital gains, if any, together
with net gains realized on foreign currency transactions, if any, are
distributed to each Fund's shareholders at least annually, usually in December.
On or before the Closing Date, Asian Growth Fund will declare as a
distribution substantially all of its net investment income and realized net
capital gain, if any, and distribute that amount plus any previously declared
but unpaid dividends, in order to continue to maintain its tax status as a
regulated investment company.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
The Funds will receive an opinion of their counsel, Kirkpatrick & Lockhart
LLP, to the effect that the Reorganization will constitute a tax-free
reorganization within the meaning of section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended ("Code"). Accordingly, neither Fund nor any of
their respective shareholders will recognize any gain or loss as a result of the
Reorganization. See "The Proposed Transaction - Federal Income Tax
Considerations," page 18.
COMPARISON OF PRINCIPAL RISK FACTORS
Because Asian Growth Fund's investment objective and policies are
substantially similar to those of Pacific Basin Fund, an investment in Pacific
Basin Fund is subject to many of the same specific risks as an investment in
Asian Growth Fund. However, there are differences between the Funds. The
principal specific risks associated with investing in the Funds include:
FOREIGN SECURITIES RISK. Investment in Pacific Basin Fund and Asian Growth
Fund involves the risks associated with investing in foreign securities. Each
Fund differs, however, with respect to the particular geographical region or
type of foreign security in which it invests. Asian Growth Fund focuses its
investments in emerging markets issuers located in Asia (except Japan) and
Pacific Basin Fund in regions that are characterized by emerging markets. While
both Funds seek their objectives by investing in this part of the world, Asian
Growth Fund focuses more intensely on investment opportunities in emerging
markets while Pacific Basin Fund tends to emphasize investments in certain
developed countries in the Pacific Basin (including Japan), in addition to
investing in emerging countries in that region. For example, Pacific Basin Fund
will invest in countries such as Japan, which has a highly developed and
sophisticated capital market, while it will also invest in countries such as
Malaysia and India, which are considered emerging markets because they are
characterized by various features associated with emerging markets, such as
archaic legal systems or government imposed currency controls. Accordingly,
although Pacific Basin Fund is subject to the risks discussed below related to
investing in emerging markets, it will tend to have less exposure to emerging
markets than Asian Growth Fund because of its additional focus on securities of
issuers in developed markets such as Japan and Australia.
On the other hand, the Pacific Basin Fund presents greater investment
risks in certain respects than Asian Growth Fund. Pacific Basin Fund invests in
a more limited number of countries than Asian Growth Fund, although certain of
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<PAGE>
those countries have large, developed capital markets. Thus, it may be more
subject to adverse economic, political, regulatory and other changes in a single
or a limited number of countries than Asian Growth Fund.
Investments in securities of foreign companies and in foreign markets
involve certain additional risks not associated with investments in domestic
companies and markets. For U.S. investors, the returns on foreign securities are
influenced not only by the returns on the foreign investments themselves, but
also by currency fluctuations. That is, when the U.S. dollar rises against a
foreign currency, returns for U.S. investors on foreign securities denominated
in that foreign currency generally will decline. In contrast, when the U.S.
dollar declines against foreign currencies, returns on those foreign securities
generally will increase. Other aspects of international investing to consider
include:
o less publicly available information than is generally available about U.S.
issuers
o differences in accounting, auditing and financial reporting standards
generally higher commission rates and longer settlement periods on
foreign portfolio transactions
o smaller trading volumes and generally lower liquidity of foreign stock
markets, which may cause greater price volatility
o less government regulation of stock exchanges, brokers and listed
companies abroad than in the United States
o investments in certain countries may be subject to foreign withholding
taxes, which may reduce dividend income or capital gains payable to
shareholders
Additional risks attendant to investing in foreign securities include: the
possibility of expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations; political instability; potential
restrictions on the flow of international capital; and the possibility of the
Fund experiencing difficulties in pursuing legal remedies and collecting
judgments.
EMERGING MARKETS. To varying degrees, Pacific Basin Fund and Asian Growth
Fund may invest in the securities of issuers located in developing countries and
emerging markets. The emerging countries in which a Fund invests may be subject
to a substantially greater degree of social, political and economic instability
than is the case in the United States and other developed countries. Such
instability may result from, among other things, the following: (i)
authoritarian governments or military involvement in political and economic
decision-making, and changes in government through extra-constitutional means;
(ii) popular unrest associated with demands for improved political, economic and
social conditions; (iii) internal insurgencies and terrorist activities; (iv)
hostile relations with neighboring countries; and (v) drug trafficking. Social,
political and economic instability could significantly disrupt the principal
financial markets in which a Fund invests and adversely affect the value of the
Fund's assets.
The economies of individual emerging countries may differ favorably or
unfavorably and significantly from the U.S. economy in such respects as the rate
of growth of gross domestic product or gross national product, rate of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency, structural unemployment and balance of payments position.
Governments of many emerging countries have exercised and continue to exercise
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<PAGE>
substantial influence over many aspects of the private sector. In some cases,
the government owns or controls many companies, including some of the largest in
the country. Accordingly, government actions in the future could have a
significant effect on economic conditions in an emerging country, which could
affect private sector companies and a Fund, and on market conditions, prices and
yields of securities in the Fund's portfolio. There may be the possibility of
nationalization, asset expropriation or future confiscatory levels of taxation
affecting a Fund. In the event of nationalization, expropriation or other
confiscation, a Fund may not be fairly compensated for its loss and could lose
its entire investment in the country involved. The economies of most emerging
countries are heavily dependent upon international trade and accordingly are
affected by protective trade barriers and the economic conditions of their
trading partners. The enactment by the United States or other principal trading
partners of protectionist trade legislation, reduction of foreign investment in
the local economies and general declines in the international securities markets
could have a significant adverse effect upon the securities markets of these
countries. The economies of emerging countries generally are less diverse and
mature than the economies of the United States and other developed countries,
and are vulnerable to weaknesses in world prices for the emerging countries'
commodity exports and natural resources.
Securities exchanges and broker-dealers in most emerging countries are
subject to less regulatory scrutiny than in the United States, as are emerging
country issuers. The limited size of the markets for securities may enable
adverse publicity, investors' perceptions or traders' positions or strategies to
affect prices unduly, at times decreasing not only the value but also the
liquidity of a Fund's investments.
The market capitalizations of listed equity securities on exchanges in
emerging countries are significantly smaller than those of the United States and
other major economies. Only a few issuers may constitute a major portion of the
market capitalization and trading equity. A large segment of the ownership of
many emerging country issuers may be held by a limited number of persons and
families, which may limit the number of shares available for investment by a
Fund. As a consequence, individual emerging country securities markets are
vulnerable to the effect of large investors trading significant blocks of
securities or by large dispositions of securities, e.g., as a result of margin
calls. The resulting limitations on the liquidity of emerging country securities
will influence a Fund's ability to acquire and dispose of such securities at the
price and time it desires to do so.
In addition, in certain emerging countries, there may be limitations on
investment by foreigners in the securities of companies located in those
countries, and restrictions on foreign currency transactions or repatriation of
capital. The ability to invest may be restricted to the use of investment
vehicles authorized by the local government, investment in shares of other
investment companies, or investments in American Depository Receipts or American
Depository Shares, or other similar depository securities.
SMALLER CAPITALIZATION COMPANIES. Both Funds may invest in smaller
capitalization companies, including those traded on regional foreign stock
exchanges or in the foreign over-the-counter market. These are typically
companies with a market capitalization of less than $1 billion. Smaller
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<PAGE>
capitalization companies may have limited operating histories, product lines,
and financial and managerial resources. These companies also may be subject to
intense competition from larger companies, and their stock may be subject to
more abrupt or erratic market movements than the stock of larger, more
established companies. Due to these and other factors, smaller capitalization
companies may suffer significant losses, although they may realize substantial
growth.
FUTURES, OPTIONS, FORWARD CONTRACTS, AND OTHER DERIVATIVES. The Funds
differ in the types of futures, options, forward contracts, and other derivative
securities in which they may invest. The Pacific Basin Fund is limited to
investing only in forward contracts for the purchase or sale of foreign
currencies ("forward currency contracts"). It may not invest in any other types
of derivative securities. A forward currency contract is an agreement between
contracting parties to exchange an amount of currency at some future time at an
agreed-upon rate. The Pacific Basin Fund enters into forward foreign currency
contracts as a hedge against fluctuations in foreign exchange rates pending the
settlement of transactions in foreign securities or during the time the Fund
holds foreign securities, and not for purposes of speculation. Although the Fund
has not adopted any limitations on its ability to use forward currency
contracts, it does not attempt to hedge all of its foreign investment positions,
and will enter into forward currency contracts only to the extent, if any,
deemed appropriate by INVESCO or IAML. The Fund does not enter into forward
contracts for terms of more than one year and no predictions can be made with
respect to whether the total of such transactions will result in a better or
worse position than had the Fund not entered into any forward contracts. Forward
contracts may, from time to time, be considered illiquid, in which case they
would be subject to the Fund's limitation on investing in illiquid securities,
discussed below.
Asian Growth Fund may invest in futures, options, forward contracts,
swaps, and other derivative instruments. The Fund invests in these instruments
as a hedge against adverse movements in securities, foreign currency, and
interest rate markets, and not for purposes of speculation. Risks inherent in
the use of futures, options, forward contracts, and swaps include: (1) the risk
that interest rates, securities prices and currency markets will not move in the
directions anticipated, in which case the Fund could be left in a less favorable
position than if such strategies had not been used.; (2) imperfect correlation
between the price of futures, options and forward contracts and movements in the
prices of the securities or currencies being hedged; (3) the fact that the
skills needed to use these strategies are different from those needed to select
portfolio securities; (4) the possible absence of a liquid secondary market for
any particular instrument at any time; and (5) the possible need to defer
closing out certain hedged positions to avoid adverse tax consequences. The use
of futures, options, forward contracts, and swaps exposes Asian Growth Fund to
additional investment risks and transaction costs and, as a result, no more than
5% of Asian Growth Fund's total assets are committed to such investments.
ILLIQUID AND RULE 144A SECURITIES. The Funds differ slightly in their
respective approaches toward investing in illiquid and Rule 144A securities.
Securities are considered to be illiquid if they are have not been registered
under the Securities Act of 1933 and are thus subject to restrictions on their
resale ("restricted securities") or if, based upon their nature or the market
for such securities, they are not readily marketable. Any limitations on resale
and marketability may have the effect of preventing the Funds from disposing of
such securities at the time desired or at a reasonable price. In addition, in
order to resell restricted securities, the Funds might have to bear the expense
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<PAGE>
and incur the delays associated with registering such securities. The Pacific
Basin Fund may not invest more than 10% of its net assets in illiquid and
restricted securities. For both Funds, repurchase agreements maturing in more
than 7 days are considered as illiquid for purposes of this restriction. Rule
144A securities are not registered for sale to the general public and are thus
restricted. However, these securities can be resold to qualified institutional
investors, provided that a liquid institutional trading market develops. For
Pacific Basin Fund, Rule 144A securities are subject to the 10% limitation on
illiquid securities, even if a liquid institutional trading market develops. In
contrast, the Asian Growth Fund may purchase Rule 144A securities without regard
to its 15% limitation on illiquid securities if a liquid institutional trading
market exists. If a liquid institutional trading market does not develop for the
Funds' Rule 144A securities, the value of the Funds' investments in these
securities may be negatively affected.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. Pacific Basin Fund may invest
in companies domiciled in certain countries by purchasing common shares of
closed-end investment companies organized to invest in the securities markets of
particular countries (each a "country fund"). This is done only when it is not
possible for non-residents to make direct investments in securities of the
companies in those countries. Pacific Basin Fund's investments in country funds
are limited in that it may not purchase shares of a country fund if: (a) such a
purchase would cause the Fund to own more than 3% of the total outstanding
voting stock of a particular country fund; or (b) such purchase would cause the
Fund to have more than 5% of its total assets invested in a particular country
fund or more than 10% of its total assets invested in the securities of other
investment companies. Investments in certain country funds may involve the
payment of substantial premiums above the value of such country funds' portfolio
securities. In addition, to the extent that Pacific Basin Fund invests in
country funds, its investment return may be reduced by duplicative advisory fees
and operating expenses resulting from two separate management companies managing
the Fund's assets. Asian Growth Fund does not invest in other investment
companies.
LOWER-RATED DEBT SECURITIES. Pacific Basin Fund does not invest in
lower-rated debt securities. In contrast, Asian Growth Fund may invest up to 30%
of total fund assets in debt securities that are rated below BBB by Standard &
Poor's, a division of the McGraw-Hill Companies, Inc. ("S&P"), or Baa by Moody's
Investors Service, Inc. ("Moody's") or, if unrated, are determined by INVESCO or
IAL to be equivalent in quality to debt securities having such ratings (commonly
referred to as "junk bonds"). Asian Growth Fund does not invest in debt
securities rated below CCC by S&P or Caa by Moody's or, if unrated, determined
by INVESCO or IAL to be equivalent in quality to debt securities having such
ratings. (For a further discussion of bond ratings, see the Statement of
Additional Information dated December 1, 1998 of Asian Growth Fund.)
WHEN-ISSUED OR DELAYED DELIVERY SECURITIES. The Pacific Basin Fund does
not invest in when-issued securities, while the Asian Growth Fund may make
commitments to purchase or sell equity or debt securities in advance of their
issue in an amount up to 10% of its total assets, measured at the time the
commitment is made. The purchase of securities on a when-issued basis involves
the risk that the value of the securities purchased will decline prior to
settlement.
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TURNOVER RATE. Each Fund's investment portfolio is actively traded.
Because each Fund's strategy highlights many short-term factors - current
information about a company, investor interest, price movements of the company's
securities and general market and monetary conditions - securities may be bought
and sold relatively frequently. Each Fund's portfolio turnover rate may be
higher than that of many other mutual funds, sometimes exceeding 200%. This
turnover may result in greater brokerage commissions and acceleration of capital
gains, which are taxable when distributed to shareholders.
YEAR 2000. Many computer systems in use today may not recognize any date
after December 31, 1999. If these systems are not fixed by that date, it is
possible that they could generate erroneous information or fail altogether.
INVESCO has committed substantial resources to make sure that its own major
computer systems will continue to function on and after January 1, 2000. In
addition, the markets for, or value of, securities in which the Funds invest may
possibly be hurt by computer failures affecting portfolio investments or trading
of securities beginning January 1, 2000. For example, improperly functioning
systems could result in securities trade settlement problems and liquidity
issues, production issues for individual companies and overall economic
uncertainties. Individual issuers may incur increased costs in making their own
systems Year 2000 compliant. The combination of market uncertainty and increased
costs means that there is a possibility that Year 2000 computer issues may
adversely affect the Funds' investments.
See "Risk Factors" in the Prospectuses as of Pacific Basin Fund and Asian
Growth Fund for a more complete description of investment risks.
THE PROPOSED TRANSACTION
REORGANIZATION PLAN
The terms and conditions under which the proposed transaction will be
consummated are set forth in the Reorganization Plan. Significant provisions of
the Reorganization Plan are summarized below; however, this summary is qualified
in its entirety by reference to the Reorganization Plan, which is attached as
Appendix A to this Proxy Statement.
The Reorganization Plan provides for: (a) the acquisition by Pacific Basin
Fund on the Closing Date of all the assets of Asian Growth Fund in exchange
solely for Pacific Basin Fund shares and the assumption by Pacific Basin Fund of
all of Asian Growth Fund's liabilities; and (b) the distribution of those
Pacific Basin Fund shares to the shareholders of Asian Growth Fund.
The assets of Asian Growth Fund to be acquired by Pacific Basin Fund
include all cash, cash equivalents, securities, receivables, claims and rights
of action, rights to register shares under applicable securities laws, books and
records, deferred and prepaid expenses shown as assets on Asian Growth Fund's
books, and all other property owned by Asian Growth Fund. Pacific Basin Fund
will assume from Asian Growth Fund all liabilities, debts, obligations and
duties of Asian Growth Fund of whatever kind or nature; provided, however, that
Asian Growth Fund will use its best efforts to discharge all of its known
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liabilities before the Closing Date. Pacific Basin Fund will deliver its shares
to Asian Growth Fund, which will distribute the shares to Asian Growth Fund's
shareholders.
The value of Asian Growth Fund's assets to be acquired by Pacific Basin
Fund and the NAV per share of the shares of Pacific Basin Fund to be exchanged
for those assets will be determined as of the close of regular trading on the
New York Stock Exchange on the Closing Date ("Valuation Time"), using the
valuation procedures described in each Fund's then-current Prospectus and
Statement of Additional Information. Asian Growth Fund's net value shall be the
value of its assets to be acquired by Pacific Basin Fund, less the amount of
Asian Growth Fund's liabilities, as of the Valuation Time.
On, or as soon as practicable after, the Closing Date, Asian Growth Fund
will distribute the Pacific Basin Fund shares that it receives to its
shareholders of record as of the effective time of the Reorganization, PRO RATA,
so that each Asian Growth Fund shareholder will receive a number of full and
fractional shares of Pacific Basin Fund equal in aggregate value to the
shareholder's holdings in Asian Growth Fund; Asian Growth Fund will be
terminated as soon as practicable after the share distribution. The shares will
be distributed by opening accounts on the books of Pacific Basin Fund in the
names of Asian Growth Fund shareholders and by transferring to those accounts
the shares previously credited to the account of Asian Growth Fund on those
books. Fractional shares in Pacific Basin Fund will be rounded to the third
decimal place.
Accordingly, immediately after the Reorganization, each former shareholder
of Asian Growth Fund will own Pacific Basin Fund shares that will be equal in
aggregate value to that shareholder's Asian Growth Fund shares immediately prior
to the Reorganization. Moreover, because the Pacific Basin Fund shares will be
issued at net asset value in exchange for the net assets of Asian Growth Fund,
the aggregate value of Pacific Basin Fund shares issued to Asian Growth Fund
shareholders will equal the aggregate value of Asian Growth Fund shares. The NAV
per share of Pacific Basin Fund will be unchanged by the transaction. Thus, the
Reorganization will not result in a dilution of any shareholder's interest.
Any transfer taxes payable upon the issuance of Pacific Basin Fund shares
in a name other than that of the registered Asian Growth Fund shareholder will
be paid by the person to whom those shares are to be issued as a condition of
the transfer. Any reporting responsibility of Asian Growth Fund to a public
authority will continue to be its responsibility until it is dissolved.
Half of the cost of the Reorganization, including professional fees and
the cost of soliciting proxies for the Meeting, consisting principally of
printing and mailing expenses, together with the cost of any supplementary
solicitation, will be borne by INVESCO, the investment adviser to each Fund, and
half by the Funds. The Boards of International Funds and Specialty Funds each
considered the fact that INVESCO will pay half of these expenses in approving
the Reorganization and finding that the Reorganization is in the best interests
of their Fund.
The consummation of the Reorganization is subject to a number of
conditions set forth in the Reorganization Plan, some of which may be waived by
either Fund. In addition, the Reorganization Plan may be amended in any mutually
16
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agreeable manner, except that no amendment may be made subsequent to the Meeting
that has a material adverse effect on Asian Growth Fund shareholders' interests.
REASONS FOR THE REORGANIZATION
The Board of Specialty Funds, including a majority of its Independent
Directors, has determined that the Reorganization is in the best interests of
Asian Growth Fund, that the terms of the Reorganization are fair and reasonable
and that the interests of Asian Growth Fund's shareholders will not be diluted
as a result of the Reorganization. The Board of International Funds, including a
majority of its Independent Directors, has determined that the Reorganization is
in the best interests of Pacific Basin Fund, that the terms of the
Reorganization are fair and reasonable and that the interests of Pacific Basin
Fund's shareholders will not be diluted as a result of the Reorganization.
In approving the Reorganization, each Board, including a majority of its
independent Directors, considered a number of factors, including the following:
(1) the compatibility of the Funds' investment objectives, policies
and restrictions;
(2) the effect of the Reorganization on the Funds' expected
investment performance;
(3) the effect of the Reorganization on the expense ratio of each
Fund relative to its current expense ratio;
(4) the costs to be incurred by each Fund as a result of the
Reorganization;
(5) the tax consequences of the Reorganization;
(6) possible alternatives to the Reorganization, including whether
Asian Growth Fund could continue to operate on a stand-alone basis or
should be liquidated; and
(7) the potential benefits of the Reorganization to INVESCO and to
other persons.
The Reorganization was recommended to the Board of each Fund by INVESCO at
meetings of the Boards held on [February 3, 1999.] In recommending the
Reorganization, INVESCO advised the Boards that the investment advisory fee
schedule applicable to Pacific Basin Fund would is identical to the fee for
Asian Growth Fund, but the expenses of Pacific Basin Fund are lower then those
of Asian Growth Fund. INVESCO advised the Boards that, in the event the
reorganization is not approved, INVESCO most likely would cease to absorb
certain expenses of Asian Growth Fund, as it has in the past. The Boards also
considered the similarity in investment objective and portfolio composition
between the two Funds. Further, the Boards were advised by INVESCO that, because
Pacific Basin Fund has greater net assets than Asian Growth Fund, combining the
two Funds would reduce the expenses borne by the shareholders of Asian Growth
Fund as a percentage of net assets. The Boards were also advised that following
the Reorganization, the expense ratio for Pacific Basin Fund may decrease
because the investment advisory fee paid by that Fund decreases as its size
increases.
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DESCRIPTION OF SECURITIES TO BE ISSUED
International Funds is registered with the SEC as an open-end management
investment company. It has an authorized capitalization of 500 million shares of
common stock (par value $0.01 per share), of which 100 million are allocated to
Pacific Basin Fund. Shares of Pacific Basin Fund entitle their holders to one
vote per full share and fractional votes for fractional shares held.
Pacific Basin Fund does not hold annual meetings of shareholders. There
normally will be no meetings of shareholders for the purpose of electing
directors unless fewer than a majority of the directors holding office have been
elected by shareholders, at which time the directors then in office will call a
shareholders' meeting for the election of directors. The directors will call
annual or special meetings of shareholders for action by shareholder vote as may
be required by the 1940 Act or the Fund's Articles of Incorporation, or at their
discretion.
Both Funds are series of investment companies organized as Maryland
corporations. Thus, the rights of shareholders of each Fund with respect to
shareholder meetings, inspection of shareholder lists, and distributions on
liquidation of a Fund are identical.
TEMPORARY WAIVER OF THE INVESTMENT RESTRICTIONS
Certain fundamental investment restrictions of Asian Growth Fund, which
prohibit it from acquiring more than a stated percentage of another company,
might be construed as restricting its ability to carry out the Reorganization.
By approving the Reorganization Plan, Asian Growth Fund shareholders are
agreeing to waive, only for the purpose of the Reorganization, those fundamental
investment restrictions that could prohibit or otherwise impede the transaction.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Asian Growth Fund's assets for Pacific Basin Fund shares
and Pacific Basin Fund's assumption of Asian Growth Fund's liabilities is
intended to qualify for federal income tax purposes as a tax-free reorganization
under section 368(a)(1)(C) of the Code. The Funds will receive an opinion of
their counsel, Kirkpatrick & Lockhart LLP, substantially to the effect that--
(1) Pacific Basin Fund's acquisition of Asian Growth Fund's assets
in exchange solely for Pacific Basin Fund shares and Pacific Basin Fund's
assumption of Asian Growth Fund's liabilities, followed by Asian Growth
Fund's distribution of those shares PRO RATA to its shareholders
constructively in exchange for their Asian Growth Fund shares, will
constitute a "reorganization" within the meaning of section 368(a)(1)(C)
of the Code, and each Fund will be "a party to a reorganization" within
the meaning of section 368(b) of the Code;
(2) Asian Growth Fund will recognize no gain or loss on the transfer
to Pacific Basin Fund of its assets in exchange solely for Pacific Basin
Fund shares and Pacific Basin Fund's assumption of Asian Growth Fund's
liabilities or on the subsequent distribution of those shares to Asian
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Growth Fund's shareholders in constructive exchange for their Asian Growth
Fund shares:
(3) Pacific Basin Fund will recognize no gain or loss on its receipt
of the transferred assets in exchange solely for Pacific Basin Fund shares
and its assumption of Asian Growth Fund's liabilities;
(4) Pacific Basin Fund's basis for the transferred assets will be
the same as the basis thereof in Asian Growth Fund's hands immediately
before the Reorganization, and Pacific Basin Fund's holding period for
those assets will include Asian Growth Fund's holding period therefor;
(5) An Asian Growth Fund shareholder will recognize no gain or loss
on the constructive exchange of all its Asian Growth Fund shares solely
for Pacific Basin Fund shares pursuant to the Reorganization; and
(6) An Asian Growth Fund shareholder's aggregate basis for Pacific
Basin Fund shares to be received by it in the Reorganization will be the
same as the aggregate basis for its Asian Growth Fund shares to be
constructively surrendered in exchange for those Pacific Basin Fund
shares, and its holding period for those Pacific Basin Fund shares will
include its holding period for those Asian Growth Fund shares, provided
they are held as capital assets by the shareholder on the Closing Date.
The tax opinion may state that no opinion is expressed as to the effect of
the Reorganization on the Funds or any shareholder with respect to any asset as
to which any unrealized gain or loss is required to be recognized for federal
income tax purposes at the end of a taxable year (or on the termination or
transfer thereof) under a mark-to-market system of accounting.
Shareholders of Asian Growth Fund should consult their tax advisers
regarding the effect, if any, of the Reorganization in light of their individual
circumstances. Because the foregoing discussion only relates to federal income
tax consequences of the Reorganization, those shareholders also should consult
their tax advisers about state and local tax consequences, if any, of the
Reorganization.
CAPITALIZATION
The following table shows the capitalization of each Fund as of October
31, 1998, and on a PRO FORMA combined basis (unaudited) as of October 31, 1998,
giving effect to the Reorganization:
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PACIFIC BASIN ASIAN GROWTH COMBINED FUND
FUND FUND (PRO FORMA)
---- ---- -----------
(unaudited) (unaudited)
Net Assets.................. $45,068,440 $21,640,368 $66,708,808
Net Asset Value Per Share... $6.69 $3.72 $6.69
Shares Outstanding.......... 6,733,646 5,815,222 9,968,380
REQUIRED VOTE. Approval of the Reorganization Plan requires the
affirmative vote of a majority of the outstanding voting securities of Asian
Growth Fund.
THE BOARD UNAMIOUSLY RECOMMENDS THAT
THE SHAREHOLDERS VOTE "FOR" PROPOSAL 1
--------------------------------------------------------
PART II. PROPOSED ORGANIZATIONAL MATTER
PROPOSAL 1 SEEKS SHAREHOLDER APPROVAL TO REORGANIZE ASIAN GROWTH FUND INTO
PACIFIC BASIN FUND. IF PROPOSAL 1 IS APPROVED, SHAREHOLDERS WILL RECEIVE FULL
AND FRACTIONAL SHARES OF PACIFIC BASIN FUND EQUIVALENT IN AGGREGATE VALUE TO THE
SHARES OF THE ASIAN GROWTH FUND THAT THEY OWNED ON THE DAY OF THE CLOSING AND
PROPOSAL 2 WILL HAVE NO EFFECT. HOWEVER, WHETHER OR NOT SHAREHOLDERS VOTE TO
APPROVE THE REORGANIZATION AS SET FORTH IN PROPOSAL 1, THE BOARD RECOMMENDS THAT
SHAREHOLDERS APPROVE PROPOSAL 2, SET FORTH BELOW. THIS PROPOSAL IN INTENDED TO
RATIONALIZE THE OPERATIONS OF ASIAN GROWTH FUND BY RESTRUCTURING THAT FUND AS A
SERIES OF INTERNATIONAL FUNDS RATHER THAN SPECIALTY FUNDS.
PROPOSAL 2. TO APPROVE AN AGREEMENT AND PLAN OF
CONVERSION AND TERMINATION ("CONVERSION PLAN")
PROVIDING FOR THE CONVERSION OF ASIAN GROWTH FUND
FROM A SEPARATE SERIES OF SPECIALTY FUNDS TO A
SEPARATE SERIES OF INTERNATIONAL FUNDS
Asian Growth Fund is presently organized as one of seven series of
Specialty Funds. Specialty Fund's Board of Directors, including a majority of
its Independent Directors has approved Conversion Plan in the form attached to
this Prospectus/Proxy Statement as Appendix C. The Conversion Plan provides for
the conversion of Asian Growth Fund from a separate series of Specialty Funds, a
Maryland corporation, to a newly established separate series (the "New Series")
20
<PAGE>
of International Funds, also a Maryland corporation. THE PROPOSED CHANGE WILL
HAVE NO MATERIAL EFFECT ON SHAREHOLDERS, OFFICERS, OPERATIONS OR THE MANAGEMENT
OF ASIAN GROWTH FUND.
The New Series, which has not yet commenced business operations, and was
established for the purpose of effecting the conversion will carry on the
business of Asian Growth Fund following the conversion and will have investment
objectives, policies, and limitations identical to those of Asian Growth Fund.
The investment objective, policies, and limitations of Asian Growth Fund will
not change except as approved by shareholders and as described in Proposal 3 of
this Proxy Statement. Since both Specialty Funds and International Funds are
Maryland corporations organized under substantially similar Articles of
Incorporation, the rights of the security holders of Asian Growth Fund under
state law and its governing documents are expected to remain unchanged after the
conversion. Shareholder voting rights under both Specialty Funds and
International Funds are currently based on the number of shares owned. The same
individuals serve as Directors of both Specialty Funds and International Funds.
INVESCO, Asian Growth Fund's investment adviser, will be responsible for
providing the New Series with various administrative services and supervising
the New Series' daily business affairs, subject to the supervision of
International Funds' Board of Directors, under a management contract
substantially identical to the contract in effect between INVESCO and Asian
Growth Fund immediately prior to the Closing Date. IAL, Asian Growth Fund's
sub-adviser, will have primary responsibility for providing investment advice
and research services to Asian Growth Fund under a Sub-Advisory Agreement
substantially identical to the agreement in effect between IAL and INVESCO
immediately prior to the Closing Date. Asian Growth Fund's distribution agent,
IDI, will distribute shares of the New Series under a General Distribution
Agreement substantially identical to the contract in effect between IDI and
Asian Growth Fund immediately prior to the Closing Date.
REASON FOR THE PROPOSED CONVERSION
Specialty Funds' Board of Directors unanimously recommends conversion of
Asian Growth Fund to a separate series of the International Funds (i.e., the New
Series). Moving Asian Growth Fund from Specialty Funds to International Funds
will consolidate and streamline the production and mailing of certain financial
reports and legal documents, reducing expense to Asian Growth Fund. Ultimately,
it is expected that all INVESCO Funds that invest internationally will become
series of International Funds. THE PROPOSED CHANGE WILL HAVE NO MATERIAL EFFECT
ON THE SHAREHOLDERS, OFFICERS, OPERATIONS, OR MANAGEMENT OF ASIAN GROWTH FUND.
The proposal to present the Conversion Plan to shareholders was approved
by the Board of Directors of Specialty Funds, including all of its Independent
Directors on [February 3, 1999.] The Board of Directors recommends that Asian
Growth Fund shareholders vote FOR the approval of the Conversion Plan. Such a
vote encompasses approval of both (i) the conversion of Asian Growth Fund to a
separate series of the International Funds and (ii) a temporary waiver of
certain investment limitations of Asian Growth Fund to permit the conversion
(see "Temporary Waiver of Investment Restrictions," below). If shareholders of
Asian Growth Fund do not approve the Reorganization Plan set forth in Proposal
1, which provides for combining Asian Growth Fund with Pacific Basin Fund, and
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do not approve the alternative Conversion Plan set forth herein, Asian Growth
Fund will continue to operate as a series of Specialty Funds.
SUMMARY OF THE PLAN OF CONVERSION
The following discussion summarizes the important terms of the Conversion
Plan. This summary is qualified in its entirety by reference to the Conversion
Plan itself, which is attached as Appendix C to this Proxy Statement.
If this Proposal is approved by shareholders, then on June 18, 1999 or
such later date to which Specialty Funds and International Funds agree (the
"Closing Date"), Asian Growth Fund will transfer all of its assets to the New
Series in exchange solely shares of the New Series ("New Series Shares") equal
to the number of Asian Growth Fund shares outstanding on the Closing Date and
the assumption by the New Series of all of the liabilities of Asian Growth Fund.
Immediately thereafter, Asian Growth Fund will constructively distribute to each
Asian Growth Fund shareholder one New Series Share for each Asian Growth Fund
share ("Fund Share") held by the shareholder on the Closing Date in liquidation
of such Fund Shares. As soon as is practicable after this distribution of New
Series Shares, Asian Growth Fund will be terminated as a series of Specialty
Fund and will be liquidated. UPON COMPLETION OF THE CONVERSION, EACH ASIAN
GROWTH FUND SHAREHOLDER WILL OWN FULL AND FRACTIONAL NEW SERIES SHARES EQUAL IN
NUMBER, DENOMINATION, AND AGGREGATE NAV TO HIS OR HER FUND SHARES.
The Conversion Plan authorizes International Funds, on behalf of the New
Series, to approve (i) a Management Contract with INVESCO with respect to the
New Series (the "New Management Contract") (ii) a Sub-Advisory Agreement between
INVESCO and IAL with respect to the New Series (the "New Sub-Advisory
Agreement") and (iii) a Distribution and Service Plan under Rule 12b-1 (the "New
12b-1 Plan") with respect to the New Series (collectively, the "New
Agreements"). Approval of the Conversion Plan will authorize Specialty Funds
(which will be issued a single share of the New Series on a temporary basis) to
approve the New Agreements as the sole initial shareholder of the New Series.
Each New Agreement will be identical to the corresponding contract, agreement,
or plan in effect with respect to Asian Growth Fund immediately prior to the
Closing Date.
The New Agreements will take effect on the Closing Date, and each will
continue in effect until [June 18, 2000.] Thereafter, the New Management
Contract and New Sub-Advisory Agreement will continue in effect only if their
respective continuances are approved at least annually (i) by the vote of a
majority of the Independent Directors cast in person at a meeting called for the
purpose of voting on such approval and (ii) by the vote of a majority of the
directors or a majority of the outstanding voting shares of the New Series. The
New 12b-1 Plan will continue in effect only if approved annually by a vote of
the Independent Directors, cast in person at a meeting called for that purpose.
The New Management Contract and the New Sub-Advisory Agreement will be
terminable without penalty on sixty days' written notice either by International
Funds, INVESCO, or IAL, as the case may be, and either will terminate
automatically in the event of its assignment. The New 12b-1 Plan will be
terminable at any time without penalty by a vote of a majority of the
Independent Directors or a majority of the outstanding voting shares of the New
Series.
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The Board of Directors of the New Series will hold office without limit in
time except that (i) any Director may resign and (ii) a Director may be removed
at any Special Meeting of the shareholders at which a quorum is present by the
affirmative vote of a majority of the outstanding voting shares of International
Funds. In case a vacancy shall for any reason exist, a majority of the remaining
Directors, though less than a quorum, will vote to fill such vacancy by
appointing another Director, so long as, immediately after such appointment, at
least two-thirds of the Directors have been elected by shareholders. If, at any
time, less than a majority of the Directors holding office have been elected by
shareholders, the Directors then in office will promptly call a shareholders'
meeting for the purpose of electing a Board of Directors. Otherwise, there need
normally be no meetings of shareholders for the purpose of electing Directors.
Assuming the Conversion Plan is approved and the Reorganization set forth
in Proposal 1 is not approved, it is currently contemplated that the Conversion
will become effective on the Closing Date. However, the Conversion may become
effective at such other date as Specialty Funds and International Funds may
agree in writing.
The obligations of Specialty Funds and International Funds under the
Conversion Plan are subject to various conditions as stated therein.
Notwithstanding the approval of the Conversion Plan by Asian Growth Fund
shareholders, the Conversion Plan may be terminated or amended at any time prior
to the Conversion by action of the Directors to provide against unforeseen
events, if (i) there is a material breach by the other party of any
representation, warranty, or agreement contained in the Conversion Plan to be
performed at or prior to the Closing Date or (ii) it reasonably appears that a
party will not or cannot meet a condition of the Conversion Plan. Either
Specialty Funds or International Funds may at any time waive compliance with any
of the covenants and conditions contained in, or may amend, the Conversion Plan,
provided that the waiver or amendment does not materially adversely affect the
interests of Asian Growth Fund shareholders.
CONTINUATION OF FUND SHAREHOLDER ACCOUNTS
International Fund's transfer agent will establish an account for the New
Series shareholders containing the appropriate number and denominations of New
Series Shares to be received by each holder of Fund Shares under the Conversion
Plan. Such accounts will be identical in all material respects to the accounts
currently maintained by Asian Growth Fund's transfer agent for its shareholders.
EXPENSES
[The Fund and the New Series will each be responsible for all of their
respective expenses of the Conversion, estimated at approximately $_____________
in the aggregate.]
TEMPORARY WAIVER OF INVESTMENT RESTRICTIONS
Certain fundamental investment restrictions of Asian Growth Fund, which
prohibit it from acquiring more than a stated percentage of ownership of another
company, might be construed as restricting its ability to carry out the
Conversion. By approving the Conversion Plan, Asian Growth Fund shareholders
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<PAGE>
will be agreeing to waive, only for the purpose of the Conversion, those
fundamental investment restrictions that could prohibit or otherwise impede the
transaction.
TAX CONSEQUENCES OF THE REORGANIZATION
Both Specialty Funds and International Funds will receive an opinion from
their counsel, Kirkpatrick & Lockhart LLP, that the Conversion will constitute a
tax-free reorganization within the meaning of section 368(a)(1)(F) of the Code.
Accordingly, Asian Growth Fund, the New Series, and Asian Growth Fund's
shareholders will recognize no gain or loss for federal income tax purposes upon
(i) the transfer of Asian Growth Fund's assets in exchange solely for New Series
Shares and the assumption by the New Series of Asian Growth Fund's liabilities
or (ii) the distribution of the New Series Shares to Asian Growth Fund's
shareholders in liquidation of their Fund Shares. The opinion will further
provide, among other things, that (1) a Asian Growth Fund shareholder's
aggregate basis for federal income tax purposes of the New Series Shares to be
received by the shareholder in the Conversion will be the same as the aggregate
basis of his or her Fund Shares to be constructively surrendered in exchange for
those New Series shares and (2) an Asian Growth Fund shareholder's holding
period for his or her New Series Shares will include the shareholder's holding
period for his or her Fund Shares, provided that those Fund Shares were held as
capital assets at the time of the Conversion.
CONCLUSION
Specialty Fund's Board of Directors has concluded that the proposed
Conversion Plan is in the best interests of Asian Growth Fund's shareholders,
provided the Reorganization set forth in Proposal 1 is not approved. A vote in
favor of the Conversion Plan encompasses (i) approval of the conversion of Asian
Growth Fund to the New Series (ii) approval of the temporary waiver of certain
investment limitations of Asian Growth Fund to permit the Conversion (see
"Temporary Waiver of Investment Restrictions," above) and (iii) authorization of
Specialty Funds, as sole initial shareholder of the New Series, to approve (a) a
Management Contract with respect to the New Series between International Funds
and INVESCO (b) a Sub-Advisory Agreement with respect to the New Series between
INVESCO and IAML and (c) a Distribution and Service Plan under Rule 12b-1 with
respect to the New Series. Each of these New Agreements is identical to the
corresponding contract, agreement, or plan in effect with Asian Growth Fund
immediately prior to the Closing Date. If approved, the Conversion Plan will
take effect on the Closing Date. If neither the Conversion Plan nor the
Reorganization of Asian Growth Fund under Proposal 1 is approved, Asian Growth
Fund will continue to operate as a series of Specialty Funds; otherwise, Asian
Growth Fund will be reorganized consistent with shareholder approval.
REQUIRED VOTE. Approval of the Conversion Plan requires the
affirmative vote of a majority of the outstanding voting securities of Asian
Growth Fund.
THE BOARD UNAMIOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 2
-----------------------------------------------------------
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PART III. PROPOSED MODIFICATIONS TO FUNDAMENTAL INVESTMENT
RESTRICTIONS AND ROUTINE CORPORATE GOVERNANCE MATTERS
THESE PROPOSALS MAKE CERTAIN ROUTINE CHANGES TO MODERNIZE SOME OF ASIAN
GROWTH FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS AND SEEK SHAREHOLDER APPROVAL
OF CERTAIN ROUTINE CORPORATE GOVERNANCE MATTERS. IF THE REORGANIZATION DESCRIBED
IN PROPOSAL 1 IS APPROVED BY SHAREHOLDERS AT THE MEETING, THE PROPOSED
FUNDAMENTAL RESTRICTION CHANGES WILL NOT BE IMPLEMENTED, BECAUSE ASIAN GROWTH
FUND SHAREHOLDERS WILL BECOME SHAREHOLDERS OF PACIFIC BASIN FUND. WHETHER OR NOT
SHAREHOLDERS VOTE TO APPROVE THE REORGANIZATION DESCRIBED IN PROPOSAL 1, THE
BOARD RECOMMENDS THAT SHAREHOLDERS APPROVE THE PROPOSALS SET FORTH BELOW.
PROPOSAL 3. TO APPROVE AMENDMENTS TO THE FUNDAMENTAL
INVESTMENT RESTRICTIONS OF ASIAN PACIFIC FUND
As required by the 1940 Act, Asian Growth Fund has adopted certain
fundamental investment restrictions ("fundamental restrictions"), which are set
forth in the Fund's Statement of Additional Information. These fundamental
restrictions may be changed only with shareholder approval. Restrictions and
policies that the Fund has not specifically designated as fundamental are
considered to be "non-fundamental" and may be changed by the Board of Specialty
Funds without shareholder approval.
Some of Asian Growth Fund's fundamental restrictions reflect past
regulatory, business or industry conditions, practices or requirements that are
no longer in effect. Also, as other INVESCO Funds have been created over the
years, they have adopted fundamental restrictions that are substantially similar
but that often have been phrased in slightly different ways, resulting in minor
but unintended differences in effect or potentially giving rise to unintended
differences in interpretation. Accordingly, the Board of Specialty Funds has
approved revisions to Asian Growth Fund's fundamental restrictions in order to
simplify and modernize the Fund's fundamental restrictions and make them more
uniform with those of the other INVESCO Funds.
The Board believes that eliminating the disparities among the INVESCO
Funds' fundamental restrictions will enhance management's ability to manage the
Fund's assets efficiently and effectively in changing regulatory and investment
environments and permit the Board to review and monitor investment policies more
easily. In addition, standardizing the fundamental investment policies of the
INVESCO Funds will assist the INVESCO Funds in making required regulatory
filings in a more efficient and cost-effective way. Although the proposed
changes in fundamental restrictions will allow Asian Growth Fund greater
investment flexibility to respond to future investment opportunities, the Board
does not anticipate that the changes, individually or in the aggregate, will
result at this time in a material change in the level of investment risk
associated with an investment in the Fund.
The text and a summary description of each proposed amended fundamental
restriction of Asian Growth Fund are set forth below, together with the text of
the corresponding current fundamental restriction. The text below also describes
25
<PAGE>
any non-fundamental restrictions that would be adopted by the Board in
conjunction with the revision of certain fundamental restrictions. Any
non-fundamental restriction may be modified or eliminated by the Board at any
future date without further shareholder approval.
If approved by Asian Growth Fund shareholders at the Meeting, the proposed
changes in Asian Growth Fund's fundamental restrictions will be adopted by the
Fund only if the Reorganization is NOT approved by Asian Growth Fund
shareholders. In that event, Asian Growth Fund's Statement of Additional
Information will be revised to reflect those changes as soon as practicable
following the Meeting. If the Reorganization is approved, the proposed changes
in the Fund's fundamental restrictions will not be implemented. Instead, as
described in Proposal 1, Asian Growth Fund shareholders will become shareholders
of Pacific Basin Fund, whose shareholders are being asked to approve
substantially similar changes in Pacific Basin Fund's fundamental restrictions,
and Asian Growth Fund will be terminated.
a. MODIFICATION OF FUNDAMENTAL RESTRICTION ON ISSUER DIVERSIFICATION
Asian Growth Fund's current fundamental restriction on issuer
diversification is as follows:
The Fund may not, with respect to seventy-five percent (75%) of
its total assets, purchase the securities of any one issuer
(except cash items and "government securities" as defined under
the 1940 Act), if the purchase would cause the Fund to have more
than 5% of the value of its total assets invested in the
securities of such issuer or to own more than 10% of the
outstanding voting securities of such issuer.
The Board recommends that this restriction be replaced with the following
fundamental restriction:
The Fund may not, with respect to 75% of the Fund's total assets,
purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities, or securities of other investment
companies) if, as a result, (i) more than 5% of the Fund's total
assets would be invested in the securities of that issuer, or
(ii) the Fund would hold more than 10% of the outstanding voting
securities of that issuer.
The primary purpose of the modification is to revise the Fund's
fundamental restriction on issuer diversification to conform to a restriction
that is expected to become standard for all INVESCO Funds. The proposed change
would standardize the language of the Fund's fundamental restriction on issuer
diversification. In addition, the proposal would also provide the Fund's
managers with greater investment flexibility because it would allow Asian Growth
Fund to invest in other investment companies, to the extent permitted by the
1940 Act. The ability of mutual funds to invest in other investment companies is
currently generally restricted by rules under the 1940 Act, including a rule
26
<PAGE>
limiting all such investments to 10% of the mutual fund's total assets and
investment in any one investment company to an aggregate of 5% of the value of
the investing fund's total assets and 3% of the total outstanding voting stock
of the acquired investment company.
b. MODIFICATION OF FUNDAMENTAL RESTRICTION ON BORROWING AND ADOPTION OF
NON-FUNDAMENTAL RESTRICTION ON BORROWING
Asian Growth Fund's current fundamental restriction on borrowing is as
follows:
The Fund may not borrow money or issue senior securities (as defined in
the 1940 Act), except that the Fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) and may enter into
reverse repurchase agreements in an aggregate amount not exceeding 331/3%
of the value of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
331/3% of the value of the Fund's total assets by reason of a decline in
total assets will be reduced within three business days to the extent
necessary to comply with the 331/3% limitation. This restriction shall not
prohibit deposits of assets to margin or guarantee positions in futures,
options, swaps, or forward contracts, or the segregation of assets in
connection with such contracts.
In applying this restriction, if the Fund has borrowed money in an amount
exceeding 5% of the value of the Fund's net assets, the Fund will not
purchase additional securities while any such borrowing exists.
The Board recommends that shareholders vote to replace this restriction
with the following fundamental restriction:
The Fund may not borrow money, except that the Fund may borrow money in an
amount not exceeding 331/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings).
The primary purpose of the proposal is to eliminate differences between
the INVESCO Funds' current restrictions on borrowing and those imposed by the
1940 Act. Currently, the Fund's fundamental restriction is significantly more
limiting than the restrictions imposed by the 1940 Act in that it limits the
purposes for which Asian Growth Fund may borrow money. In addition, in applying
the current restriction, the Fund will not purchase additional securities if the
Fund has outstanding borrowings in excess of 5% of the value of its net assets.
The proposed revision would eliminate the restrictions on the purposes for which
the Fund may borrow money and the limitation on purchases of securities while
borrowings in excess of 5% of the Fund's net assets are outstanding. In
addition, the proposal would delete the explicit requirement, which tracks that
already contained in the 1940 Act, that any borrowings that come to exceed
331/3% of the Fund's total assets by reason of a decline in total assets be
reduced within three business days. The proposed revision would also separate
27
<PAGE>
the Fund's fundamental restriction on borrowing and issuing senior securities
into two fundamental restrictions, a revision that is expected to be standard
for all of the INVESCO Funds. (See "Modification of fundamental investment
restriction on issuing senior securities," below).
If the proposal is approved, the Board will adopt a non-fundamental policy
with respect to borrowing as follows:
The Fund may borrow only from a bank or from an open-end
management investment company managed by INVESCO Funds Group,
Inc. or an affiliate or a successor thereof for temporary or
emergency purposes (not for leveraging or investing) or by
engaging in reverse repurchase agreements with any party (reverse
repurchase agreements will be treated as borrowings for purposes
of fundamental limitation (2)).
The non-fundamental limitation reflects the Fund's current policy that
borrowing by the Fund may only be done for temporary or emergency purposes. In
addition to borrowing from banks, as permitted in the Fund's current policy, the
non-fundamental policy would permit the Fund to borrow from open-end funds
managed by INVESCO or an affiliate or successor thereof. The Fund would not be
able to do so, however, unless it obtains permission for such borrowings from
the SEC. The non-fundamental policy also clarifies that reverse repurchase
agreements will be treated as borrowings. The Board believes that this approach,
making the Fund's fundamental restriction on borrowing no more limiting than is
required under the 1940 Act, while incorporating more strict limits on borrowing
in a non-fundamental restriction, will maximize the Fund's flexibility for
future contingencies.
c. MODIFICATION ON FUNDAMENTAL RESTRICTION ON ISSUING SENIOR SECURITIES
The Fund's current restriction on issuing senior securities is as follows:
The Fund may not borrow money or issue senior securities (as
defined in the 1940 Act), except that the Fund may borrow money
for temporary or emergency purposes (not for leveraging or
investment) and may enter into reverse repurchase agreements in
an aggregate amount not exceeding 331/3% of the value of its
total assets (including the amount borrowed) less liabilities
(other than borrowings). Any borrowings that come to exceed
331/3% of the value of the Fund's total assets by reason of a
decline in total assets will be reduced within three business
days to the extent necessary to comply with the 331/3%
limitation. This restriction shall not prohibit deposits of
assets to margin or guarantee positions in futures, options,
swaps, or forward contracts, or the segregation of assets in
connection with such contracts.
The Board recommends that shareholders vote to replace this restriction
with the following fundamental restriction:
The Fund may not issue senior securities, except as permitted
under the Investment Company Act of 1940.
28
<PAGE>
The primary purpose of the proposal is to eliminate any unnecessary
limitations in the policy and conform it to 1940 Act requirements. The Board
believes that the adoption of the proposed fundamental restriction, which does
not specify the manner in which senior securities may be issued, and is no more
limiting than is required by the 1940 Act, will maximize the Fund's flexibility
for future contingencies and will conform to the fundamental restrictions of the
other INVESCO Funds on the issuance of senior securities.
d. MODIFICATION OF FUNDAMENTAL RESTRICTION ON REAL ESTATE INVESTMENTS
Asian Growth Fund's current fundamental restriction on real estate
investments is as follows:
The Fund may not invest directly in real estate or interests in
real estate; however, the Fund may own debt or equity securities
issued by companies engaged in those businesses.
The Board recommends that shareholders vote to replace this restriction
with the following fundamental restriction:
The Fund may not purchase or sell real estate unless acquired as
a result of ownership of securities or other instruments (but
this shall not prevent the Fund from investing in securities or
other instruments backed by real estate or securities of
companies engaged in the real estate business).
In addition to conforming Asian Growth Fund's fundamental restriction to
that of the other INVESCO Funds, the proposed amendment of the Fund's
fundamental restriction on investment in real estate more completely describes
the types of real estate-related securities investments that are permissible for
the Fund and would permit the Fund to purchase or sell real estate acquired as a
result of ownership of securities or other instruments (e.g., through
foreclosure on a mortgage in which the Fund directly or indirectly holds an
interest). The Board believes that this clarification will make it easier for
decisions to be made concerning the Fund's investments in real estate-related
securities without materially altering the general restriction on direct
investments in real estate or interests in real estate.
e. MODIFICATION OF FUNDAMENTAL RESTRICTION ON INVESTING IN COMMODITIES
Asian Growth Fund's current fundamental restriction on the purchase of
commodities is as follows:
The Fund may not purchase or sell physical commodities other than
foreign currencies unless acquired as a result of ownership of
securities (but this shall not prevent the Fund from purchasing
or selling options, futures, swaps and forward contracts or from
investing in securities or other instruments backed by physical
commodities.)
29
<PAGE>
The Board recommends that shareholders vote to replace this restriction
with the following fundamental restriction:
The Fund will not purchase or sell physical commodities; however,
this policy shall not prevent the Fund from purchasing and
selling foreign currency, futures contracts, options, forward
contracts, swaps, caps, floors, collars and other financial
instruments.
The proposed changes to this investment restriction are intended to
conform the restriction to those of the other INVESCO Funds and to ensure that
Asian Growth Fund will have the maximum flexibility to enter into hedging or
other transactions utilizing financial contracts and derivative products when
doing so is permitted by operating policies established for the Fund by the
Board. Due to the rapid and continuing development of derivative products and
the possibility of changes in the definition of "commodities," particularly in
the context of the jurisdiction of the Commodities Futures Trading Commission,
it is important for the Fund's policy to be flexible enough to allow it to enter
into hedging and other transactions using these products when doing so is deemed
appropriate by INVESCO and is within the investment parameters established by
the Board. To maximize that flexibility, the Board recommends that the Fund's
fundamental restriction on commodities investments be clear in permitting the
use of derivative products, even if the current non-fundamental restrictions of
the Fund would not permit investment in one or more of the permitted
transactions.
f. MODIFICATION OF FUNDAMENTAL RESTRICTION ON LOANS
Asian Growth Fund's current fundamental restriction on loans is as follows:
The Fund may not lend any security or make any other loan if, as
a result, more than 331/3% of its total assets would be lent to
other parties (but this limitation does not apply to purchases of
commercial paper, debt securities or to repurchase agreements.)
The Board recommends that shareholders vote to replace this restriction
with the following fundamental restriction:
The Fund may not lend any security or make any loan if, as a
result, more than 331/3 % of its total assets would be lent to
other parties, but this limitation does not apply to the purchase
of debt securities or to repurchase agreements.
The primary purpose of the proposal is to eliminate minor differences in
the wording of the INVESCO Funds' current restrictions on loans for greater
uniformity. The proposed changes to this fundamental restriction are relatively
minor and would have no substantive effect on Asian Growth Fund's lending
activities or other investments.
30
<PAGE>
g. MODIFICATION OF FUNDAMENTAL RESTRICTION ON UNDERWRITING SECURITIES
Asian Growth Fund's current fundamental restriction on underwriting
securities is as follows:
The Fund may not act as an underwriter of securities issued by
others, except to the extent that it may be deemed an underwriter
in connection with the disposition of portfolio securities of the
Fund.
The Board recommends that shareholders vote to replace this restriction
with the following fundamental restriction:
The Fund may not underwrite securities of other issuers, except
insofar as it may be deemed to be an underwriter under the
Securities Act of 1933, as amended, in connection with the
disposition of the Fund's portfolio securities.
The purpose of the proposal is to eliminate minor differences in the
wording of the Fund's current restrictions on underwriting for greater
uniformity with the fundamental restrictions of other INVESCO Funds and to avoid
unintended limitations.
h. MODIFICATION OF FUNDAMENTAL RESTRICTION ON INDUSTRY CONCENTRATION
Asian Growth Fund's current fundamental restriction on industry
concentration is as follows:
The Asian Growth Fund may not invest more than 25% of the value
of its total assets in any particular industry (other than
government securities).
The Board recommends that shareholders vote to replace this restriction
with the following fundamental restriction:
The Fund may not purchase the securities of any issuer (other
than securities issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities or municipal securities)
if, as a result, more than 25% of the Fund's total assets would
be invested in the securities of companies whose principal
business activities are in the same industry.
If the proposed revision is approved, the Board will also adopt the
following non- fundamental restriction:
With respect to fundamental limitation [(7)], domestic and
foreign banking will be considered to be different industries.
The primary purpose of the modification is to eliminate minor differences
in the wording of the INVESCO Funds' current restrictions on concentration for
greater uniformity and to avoid unintended limitations, without materially
altering the restriction. The proposed changes to Asian Growth Fund's
31
<PAGE>
fundamental concentration policy clarify that the concentration limitation does
not apply to securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities or to municipal securities. The exclusion from the
current concentration limitation refers simply to "government securities." A
failure to except all such securities from the concentration policy could hinder
the Fund's ability to purchase such securities in conjunction with taking
temporary defensive positions.
i. MODIFICATION OF FUNDAMENTAL POLICY ON INVESTING IN ANOTHER
INVESTMENT COMPANY
Asian Growth Fund's current fundamental policy regarding investment in
another investment company is as follows:
The Fund may, notwithstanding any other investment policy or
limitation (whether or not fundamental), invest all of its assets
in the securities of a single open-end management investment
company with substantially the same fundamental investment
objectives, policies and limitations as the Fund.
The Board recommends that shareholders vote to replace this policy with
the following fundamental policy:
The Fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities
of a single open-end management investment company managed by
INVESCO Funds Group, Inc. or an affiliate or a successor thereof,
with substantially the same fundamental investment objective,
policies and limitations as the Fund.
The proposed revision to Asian Growth Fund's current fundamental policy
would ensure that the INVESCO Funds have uniform policies permitting each Fund
to adopt a "master/feeder" structure whereby one or more Funds invest all of
their assets in another Fund. The master/feeder structure has the potential,
under certain circumstances, to minimize administration costs and maximize the
possibility of gaining a broader investor base. Currently, none of the INVESCO
Funds intend to establish a master/feeder structure; however, the Board
recommends that Asian Growth Fund shareholders adopt a policy that would permit
this structure in the event that the Board determines to recommend the adoption
of a master/feeder structure by the Fund. The proposed revision, unlike the
current policy, would require that any fund in which the Fund may invest under a
master/feeder structure be advised by INVESCO or an affiliate.
REQUIRED VOTE. Approval of Proposal 3 requires the affirmative vote of a
"majority of the outstanding voting securities" of Asian Growth Fund, which for
this purpose means the affirmative vote of the lesser of (1) 67% or more of the
shares of the Fund present at the Meeting or represented by proxy if more than
50% of the outstanding shares of the Fund are so present or represented, or (2)
more than 50% of the outstanding shares of the Fund. SHAREHOLDERS WHO VOTE "FOR"
PROPOSAL 3 WILL VOTE "FOR" EACH PROPOSED CHANGE DESCRIBED ABOVE. THOSE
SHAREHOLDERS WHO WISH TO VOTE AGAINST ANY OF THE SPECIFIC PROPOSED CHANGES
DESCRIBED ABOVE MAY DO SO ON THE PROXY PROVIDED.
32
<PAGE>
THE BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" PROPOSAL 3
-----------------------------------------------------------
PROPOSAL 4. TO ELECT THE DIRECTORS OF SPECIALTY FUNDS, INC.
The Board of Specialty Funds has unanimously nominated the individuals
identified below for election to the Board at the Meeting. Specialty Funds
currently has ten directors. Vacancies on the Board are generally filled by
appointment by the remaining directors. However, the 1940 Act provides that
vacancies may not be filled by directors unless thereafter at least two-thirds
of the directors shall have been elected by shareholders. To ensure continued
compliance with this rule without incurring the expense of calling additional
shareholder meetings, shareholders are being asked at this meeting to elect the
current ten directors to hold office until the next meeting of shareholders.
Consistent with the provisions of Specialty Funds' by-laws, and as permitted by
Maryland law, Specialty Funds does not anticipate holding annual shareholder
meetings. Thus, the directors will be elected for indefinite terms, subject to
termination or resignation. Each nominee has indicated a willingness to serve if
elected. If any of the nominees should not be available for election, the
persons named as proxies (or their substitutes) may vote for other persons in
their discretion. Management has no reason to believe that any nominee will be
unavailable for election.
All of the directors now being proposed for election were appointed by the
Independent Directors. Eight of the ten current directors are Independent
Directors.
The persons named as attorneys-in-fact in the enclosed proxy have advised
Specialty Funds that unless a proxy instructs them to withhold authority to vote
for all listed nominees or for any individual nominee, they will vote all
validly executed proxies for the election of the nominees named below.
The nominees for director, their ages, a description of their principal
occupations, the number of Asian Growth Fund shares owned by each, and their
respective memberships on Board committees are listed in the table below.
NAME, POSITION PRINCIPAL OCCUPATION AND DIRECTOR NUMBER OF MEMBER
WITH SPECIALTY BUSINESS EXPERIENCE OR ASIAN GROWTH OF
FUNDS, AND AGE (DURING THE PAST EXECUTIVE FUND SHARES COMMITTEE
- -------------- FIVE YEARS) OFFICER OF BENEFICIALLY ---------
--------------- SPECIALTY OWNED
FUNDS DIRECTLY OR
SINCE INDIRECTLY
-------- ON DEC. 31,
1998 (1)
----------
CHARLES W. Chief Executive Officer 1994 0 (3),(5),(6)
BRADY, CHAIRMAN and Director of AMVESCAP
OF THE BOARD, PLC, London, England,
AGE 63* and of various
subsidiaries thereof.
Chairman of the Board of
INVESCO Global Health
Sciences Fund
FRED A. Trustee of INVESCO 1994 26.2970 (2),(3),(5)
DEERING, VICE Global Health Sciences
CHAIRMAN OF THE Fund. Formerly,
BOARD, AGE 70 Chairman of the
Executive Committee and
Chairman of the Board of
Security Life of Denver
Insurance Company,
Denver, Colorado;
Director of ING America
Life Insurance Company
33
<PAGE>
MARK H. President, Chief 1998 0 (3),(5)
WILLIAMSON, Executive Officer, and
PRESIDENT, Director, INVESCO
CHIEF EXECUTIVE Distributors Inc.;
OFFICER, AND President, Chief
DIRECTOR, AGE Executive Officer, and
47* Director, INVESCO;
President, INVESCO
Global Health Sciences
Fund. Formerly,
Chairman of the Board
and Chief Executive
Officer, NationsBanc
Advisers, Inc.
(1995-1997); Chairman of
the Board, NationsBanc
Investments, Inc.
(1997-1998).
DR. VICTOR L. Professor Emeritus, 1994 26.2970 (4),(6),(8)
ANDREWS, Chairman Emeritus and
DIRECTOR, Chairman of the CFO
AGE 68 Roundtable of the
Department of Finance at
Georgia State
University, Atlanta,
Georgia; President,
Andrews Financial
Associates, Inc.
(consulting firm); since
October 1984, Director
of the Center for the
Study of Regulated
Industry at Georgia
State University;
formerly, member of the
faculties of the Harvard
Business School and the
Sloan School of
Management of MIT. Dr.
Andrews is also a
director of the
Southeastern Thrift and
Bank Fund, Inc. and the
Sheffield Funds, Inc.
BOB R. BAKER, President and Chief 1994 26.2970 (3),(4),(5)
DIRECTOR, Executive Officer of AMC
AGE 62 Cancer Research Center,
Denver, Colorado, since
January 1989; until
December 1988, Vice
Chairman of the Board,
First Columbia Financial
Corporation, Englewood,
Colorado. Formerly, Chairman
of the Board and Chief
Executive Officer of First
Columbia Financial Corporation.
LAWRENCE H. Trust Consultant; Prior 1993 26.2970 (2),(6),(7)
BUDNER, to June 1987, Senior
DIRECTOR, Vice President and
AGE 68 Senior Trust Officer,
InterFirst Bank, Dallas,
Texas.
1997 26.2970 (4),(8)
DR. WENDY LEE Self-employed (since
GRAMM, 1993). Professor of
DIRECTOR, Economics and Public
AGE 53 Administration,
University of Texas at
Arlington. Formerly,
Chairman, Commodities
Futures Trading Commission
(1988-1993); Administrator
for Information and
Regulatory Affairs, Office of
34
<PAGE>
Management and Budget
(1985-1988); Executive Director,
Presidential Task Force on
Regulatory Relief; Director,
Federal Trade Commission
Bureau of Economics. Director
of the Chicago Mercantile
Exchange; Enron Corporation;
IBP, Inc.; State Farm Insurance
Company; Independent Women's
Forum; International Republic
Institute; and the Republican
Women's Federal Forum.
KENNETH T. Presently retired. 1994 26.2970 (2),(3),(5),
KING, DIRECTOR, Formerly, Chairman of (6),(7),
AGE 73 the Board, The Capitol
Life Insurance Company,
Providence Washington
Insurance Company, and
Director of numerous
subsidiaries thereof in
the United States.
Formerly, Chairman of
the Board, The
Providence Capitol
Companies in the United
Kingdom and Guernsey.
Until 1987, Chairman of
the Board, Symbion
Corporation.
34a
<PAGE>
JOHN W. Presently retired. 1995 26.2970 (2),(3),(5),
MCINTYRE, Formerly, Vice Chairman (7)
DIRECTOR, of the Board, The
AGE 68 Citizens and Southern
Corporation; Chairman of
the Board and Chief
Executive Officer, The
Citizens and Southern
Georgia Corporation;
Chairman of the Board
and Chief Executive Officer,
Citizens and Southern
National Bank. Trustee of
INVESCO Global Health
Sciences Fund and Gables
Residential Trust.
DR. LARRY SOLL, Presently retired. 1997 26.2970 (4),(8)
DIRECTOR, Formerly, Chairman of
AGE 56 the Board (1987-1994),
Chief Executive Officer
(1982-1989 and
1993-1994) and President
(1982-1989) of Synergen
Corporation. Director
of Synergen Corporation
since incorporation in
1982. Director of ISI
Pharmaceuticals, Inc.
Trustee of INVESCO
Global Health Sciences
Fund.
*Because of his or her affiliation with INVESCO, with Asian Growth Fund's
investment adviser, or with companies affiliated with INVESCO, this individual
is deemed to be an "interested person" of Specialty Funds as that term is
defined in the 1940 Act.
(1) = As interpreted by the SEC, a security is beneficially owned by a person if
that person has or shares voting power or investment power with respect to
that security. The persons listed have partial or complete voting and investment
power with respect to their respective Fund shares.
(2) = Member of the Audit Committee
(3) = Member of the Executive Committee
(4) = Member of the Management Liaison Committee
(5) = Member of the Valuation Committee
(6) = Member of the Compensation Committee
(7) = Member of the Soft Dollar Brokerage Committee
(8) = Member of the Derivatives Committee
The Board has audit, management liaison, soft dollar brokerage, and
derivatives committees consisting of Independent Directors and compensation,
executive, and valuation committees consisting of both Independent Directors and
non-independent directors. The Board does not have a nominating committee. The
audit committee, consisting of four Independent Directors, meets quarterly with
Specialty Funds' independent accountants and executive officers of Specialty
Funds. This committee reviews the accounting principles being applied by
Specialty Funds in financial reporting, the scope and adequacy of internal
controls, the responsibilities and fees of the independent accountants, and
other matters. All of the recommendations of the audit committee are reported to
the full Board. During the intervals between the meetings of the Board, the
executive committee may exercise all powers and authority of the Board in the
management of Specialty Funds' business, except for certain powers which, under
applicable law and/or Specialty Funds' by-laws, may only be exercised by the
full Board. All decisions are subsequently submitted for ratification by the
Board. The management liaison committee meets quarterly with various management
personnel of INVESCO in order to facilitate better understanding of management
and operations of Specialty Funds, and to review legal and operational matters
that have been assigned to the committee by the Board, in furtherance of the
Board's overall duty of supervision. The soft dollar brokerage committee meets
periodically to review soft dollar transactions by Specialty Funds, and to
review policies and procedures of Specialty Funds' adviser with respect to soft
dollar brokerage transactions. The committee then reports on these matters to
the Board. The derivatives committee meets periodically to review derivatives
investments made by Specialty Funds. The committee monitors derivatives usage by
Specialty Funds and the procedures utilized by Specialty Funds' adviser to
ensure that the use of such instruments follows the policies on such instruments
adopted by the Board. The committee then reports on these matters to the Board.
35
<PAGE>
During the past fiscal year, the Board met four times, the audit committee
met three times, the compensation committee met once, the management liaison
committee met three times, the soft dollar brokerage committee met once, and the
derivatives committee met twice. The executive committee did not meet. During
Specialty Funds' last fiscal year, each Director nominee attended 75% or more of
the Board meetings and meeting of the committees of the Board on which he or she
served.
The Board nominates individuals to serve as Independent Directors, without
any specific nominating committee. The Board ordinarily will not consider
unsolicited director nominations recommended by Specialty Funds' shareholders.
The Board, including its Independent Directors, unanimously approved the
nomination of the foregoing persons to serve as directors and directed that the
election of these nominees be submitted to Specialty Fund's shareholders.
The following table sets forth information relating to the compensation
paid to directors during the last fiscal year:
COMPENSATION TABLE
AMOUNTS PAID DURING THE MOST RECENT
FISCAL YEAR BY SPECIALTY FUNDS TO DIRECTORS
PENSION OR TOTAL
RETIREMENT COMPENSATION
AGGREGATE BENEFITS FROM SPECIALTY
COMPENSATION ACCRUED AS ESTIMATED FUNDS AND
FROM PART OF ANNUAL INVESCO FUNDS
NAME OF PERSON, SPECIALTY SPECIALTY BENEFITS UPON PAID TO
POSITION FUNDS(1) FUNDS EXPENSES(2) RETIREMENT(3) DIRECTORS(1)
- --------------- --------- ----------------- ------------ --------------
DR. VICTOR L. $6,845 $815 $640 $80,350
ANDREWS, DIRECTOR
BOB R. BAKER, $6,920 $727 $858 $84,000
DIRECTOR
LAWRENCE H. $6,723 $815 $640 $79,350
BUDNER, DIRECTOR
DANIEL D. $6,852 $880 $478 $70,000
CHABRIS,(4) DIRECTOR
FRED A DEERING, $6,892 $862 $553 $103,700
VICE CHAIRMAN OF
THE BOARD AND
DIRECTOR
DR. WENDY L. $6,700 $0 $0 $79,000
GRAMM, DIRECTOR
KENNETH T. KING, $6,753 $895 $502 $77,050
DIRECTOR
JOHN W. MCINTYRE, $6,744 $0 $0 $98,500
DIRECTOR
DR. LARRY SOLL, $6,744 $0 $0 $96,000
DIRECTOR
-------------------------------------------------------------
TOTAL $61,243 $4,994 $3,671 $767,950
- -----
AS A PERCENTAGE .0131%5 .0011%5 0.0035%6
OF NET ASSETS
- ---------------
(1) The Vice Chairman of the board, the chairmen of the audit, management
liaison, derivatives, soft dollar brokerage and compensation committees, and the
members of the executive and valuation committees of each Fund receive
compensation for serving in such capacities in addition to the compensation paid
to all Independent Directors.
(2) Represents benefits accrued with respect to the Defined Benefit Deferred
Compensation Plan discussed below, and not compensation deferred at the election
of the directors.
(3) These figures represent Specialty Funds' share of the estimated annual
benefits payable by the INVESCO Complex (excluding INVESCO Global Health
Sciences Fund which does not participate in this retirement plan) upon the
directors' retirement, calculated using the current method of allocating
director compensation among the INVESCO Funds. These estimated benefits
assume retirement at age 72 and that the basic retainer payable to the directors
36
<PAGE>
will be adjusted periodically for inflation, for increases in the number of
funds in the INVESCO Complex, and for other reasons during the period in which
retirement benefits are accrued on behalf of the respective directors. This
results in lower estimated benefits for directors who are closer to retirement
and higher estimated benefits for directors who are farther from retirement.
With the exception of Mr. McIntyre and Drs. Soll and Gramm, each of these
directors has served as director of one or more of the INVESCO Funds for the
minimum five-year period required to be eligible to participate in the
Defined Benefit Deferred Compensation Plan.
(4) Mr. Chabris retired as a director effective September 30, 1998.
(5) Total as a percentage of Specialty Fund's net assets as of July 31, 1998.
(6) Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1998.
Specialty Funds pays its Independent Directors, Board vice chairman,
committee chairmen and committee members the fees described above. Specialty
Funds also reimburses its Independent Directors for travel expenses incurred in
attending meetings. Charles W. Brady, Chairman of the Board, and Mark H.
Williamson, President, Chief Executive Officer, and Director, as "interested
persons" of Specialty Funds and of other INVESCO Funds receive compensation and
are reimbursed for travel expenses incurred in attending meetings as officers or
employees of INVESCO or its affiliated companies, but do not receive any
director's fees or other compensation from Specialty Funds or other INVESCO
Funds for their services as directors.
The overall direction and supervision of Specialty Funds is the
responsibility of the Board, which has the primary duty of ensuring that each of
the Specialty Funds' general investment policies and programs are adhered to and
that Specialty Funds is properly administered. The officers of Specialty Funds,
all of whom are officers and employees of and paid by INVESCO, are responsible
for the day-to-day administration of Specialty Funds. INVESCO, as investment
adviser for Specialty Funds, is primarily responsible for providing the Funds
with various administrative services and supervising the Fund's daily business
affairs. IAL, as sub-adviser to the Asian Growth Fund, is primarily responsible
for making investment decisions on behalf of Asian Growth Fund. These investment
decisions are reviewed by the investment committee of INVESCO.
All of the officers and directors of Specialty Funds hold comparable
positions with the following INVESCO Funds: INVESCO Bond Funds, Inc.
(formerly, INVESCO Income Funds, Inc.), INVESCO Growth Funds, Inc. (formerly
INVESCO Growth Fund, Inc.), INVESCO Combination Stock & Bond Funds, Inc.
(formerly, INVESCO Flexible Funds, Inc. and INVESCO Multiple Asset Funds,
Inc.), INVESCO Diversified Funds, Inc., INVESCO Emerging Opportunity Funds,
Inc., INVESCO Industrial Income Fund, Inc., INVESCO International Funds,
Inc., INVESCO Money Market Funds, Inc., INVESCO Sector Funds, Inc. (formerly,
INVESCO Strategic Portfolios, Inc.), INVESCO Stock Funds, Inc. (formerly,
INVESCO Equity Funds, Inc. and INVESCO Capital Appreciation Funds, Inc.),
INVESCO Tax-Free Income Funds, Inc., and INVESCO Variable Investment Funds,
Inc. All of the directors of Specialty Funds also serve as trustees of
INVESCO Value Trust and INVESCO Treasurer's Series Trust.
The Boards of the Funds managed by INVESCO, INVESCO Treasurer's Series
Trust, and INVESCO Value Trust have adopted a Defined Benefit Deferred
Compensation Plan (the "Plan") for the non-interested directors and trustees of
the Funds. Under the Plan, each director or trustee who is not an interested
person of the Funds (as defined in Section 2(a)(47) of the 1940 Act) and who has
served for at least five years (a "Qualified Director") is entitled to receive,
upon termination of service as director (normally at retirement age 72 or the
retirement age of 73 or 74, if the retirement date is extended by the Boards for
one or two years, but less than three years) continuation of payment for one
year (the "First Year Retirement Benefit") of the annual basic retainer and
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annualized board meeting fees payable by the Funds to the Qualified Director at
the time of his or her retirement. Commencing with any such director's second
year of retirement, and commencing with the first year of retirement of any
director whose retirement has been extended by the Board for three years, a
Qualified Director shall receive quarterly payments at an annual rate equal to
50% of the basic retainer and annualized board meeting fees. These payments will
continue for the remainder of the Qualified Director's life or ten years,
whichever is longer . If a Qualified Director dies or becomes disabled after age
72 and before age 74 while still a director of the Funds, the First Year
Retirement Benefit and retirement payments will be made to him or her or to his
or her beneficiary or estate. If a Qualified Director becomes disabled or dies
either prior to age 72 or during his or her 74th year while still a director of
the Funds, the director will not be entitled to receive the First Year
Retirement Benefit; however, the retirement payments will be made to his or her
beneficiary or estate. The Plan is administered by a committee of three
directors who are also participants in the Plan and one director who is not a
Plan participant. The cost of the Plan will be allocated among the INVESCO,
Treasurer's Series Trust, and Value Trust Funds (the "INVESCO Funds") in a
manner determined to be fair and equitable by the committee. The Fund began
making payments to Mr. Chabris as of October 1, 1998 under the Plan. The Fund
has no stock options or other pension or retirement plans for management or
other personnel and pays no salary or compensation to any of its officers.
The Independent Directors have contributed to a deferred compensation
plan, pursuant to which they have deferred receipt of a portion of the
compensation which they would otherwise have been paid as directors of certain
of the INVESCO Funds. The deferred amounts, once the amount that has been
deferred totals at least $100, are invested in shares of all of the INVESCO
Funds. Each Independent Director is, therefore, an indirect owner of shares of
each INVESCO Fund, in addition to any Fund shares that may be owned directly.
REQUIRED VOTE. Election of each nominee as a director of Specialty Funds
requires, in the aggregate, the vote of a plurality of all the outstanding
shares of Asian Growth Fund present at the Meeting in person or by proxy, and of
the outstanding shares of the other series of Specialty Funds present at
concurrent meetings of the shareholders of those series.
THE BOARD, INCLUDING THE INDEPENDENT DIRECTORS,
UNAMIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
EACH OF THE NOMINEES IN PROPOSAL 4.
-----------------------------------------------------------
PROPOSAL 5. RATIFICATION OR REJECTION OF SELECTION
OF INDEPENDENT ACCOUNTANTS.
The Board of Specialty Funds, including all of its Independent Directors,
has unanimously selected PricewaterhouseCoopers LLP to continue to serve as
independent accountants of Asian Growth Fund, subject to ratification by Asian
Growth Fund's shareholders. PricewaterhouseCoopers LLP has no direct financial
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interest or material indirect financial interest in Asian Growth Fund.
Representatives of PricewaterhouseCoopers LLP are not expected to attend the
meeting, but have been given the opportunity to make a statement if they so
desire, and will be available should any matter arise requiring their presence.
The independent accountants examine annual financial statements for Asian
Growth Fund and provide other audit and tax-related services. In recommending
the selection of PricewaterhouseCoopers LLP, the directors reviewed the nature
and scope of the services to be provided (including non-audit services) and
whether the performance of such services would affect the accountants'
independence.
REQUIRED VOTE. Approval of Proposal 5 requires the affirmative vote of
a majority of the votes present at the Meeting, provided that a quorum is
present.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" PROPOSAL 5.
-----------------------------------------------------------
OTHER BUSINESS
The Board knows of no other business to be brought before the Meeting. If,
however, any other matters properly come before the Meeting, it is the intention
that proxies that do not contain specific instructions to the contrary will be
voted on such matters in accordance with the judgment of the persons designated
in the proxies.
INFORMATION CONCERNING ADVISER,
SUB-ADVISER, DISTRIBUTOR AND
AFFILIATED COMPANIES
INVESCO, a Delaware corporation, serves as Asian Growth Fund's investment
adviser, and provides other services to Asian Growth Fund and Specialty Funds.
IAL, a Hong Kong corporation, serves as Asian Growth Fund's sub-adviser. IDI, a
Delaware corporation, serves as Asian Growth Fund's distributor. INVESCO is a
wholly owned subsidiary of INVESCO North American Holdings, Inc. ("INAH"). INAH,
IAL, IAML and IDI are indirect wholly owned subsidiaries of AMVESCAP PLC.(1)
INVESCO's and IDI's offices are located at 7800 East Union Avenue, Denver,
Colorado 80237. IAL's offices are located at [11-12th Floor, Three Exchange
Place, 8 Connaught Place, Central, Hong Kong.] INAH's offices are located at
1315 Peachtree Street, N.E., Atlanta, Georgia 30309. The corporate headquarters
of AMVESCAP PLC are located at 11 Devonshire Square, London, EC2M 4YR, England.
- -----------------------
1 The intermediary companies between INAH and AMVESCAP PLC are as follows:
INVESCO, Inc., INVESCO Group Services, Inc. and INVESCO North American Group,
Ltd., each of which is wholly owned by its immediate parent.
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INVESCO currently serves as investment adviser of 14 open-end investment
companies having approximate aggregate net assets in excess of $21.1 billion as
of December 31, 1998.
The principal executive officers and directors of INVESCO and their
principal occupations are:
Mark H. Williamson, Chairman of the Board, President, Chief Executive
Officer and Director, also President and Chief Executive Officer of IDI.;
Charles Mayer, Director and Senior Vice President, also, Senior Vice President
and Director of IDI; Ronald L. Grooms, Senior Vice President and Treasurer, also
Senior Vice President and Treasurer of IDI; and Glen A. Payne, Senior Vice
President, Secretary, and General Counsel, also Senior Vice President, Secretary
and General Counsel of IDI. The address of each of the foregoing officers and
directors is 7800 East Union Avenue, Denver, Colorado 80237.
INVESCO, as adviser, has contracted with IAML for providing portfolio
investment advisory services to Pacific Basin Fund. IAML also acts as
sub-adviser to INVESCO Emerging Markets Fund, INVESCO European Fund, INVESCO
European Small Company Fund, INVESCO International Growth Fund, and INVESCO
Latin American Growth Fund.
The principal executive officers and directors of IAML are as follows:
Tristan Hillgarth, Chief Executive Officer; Dennis Elliot, Director;
Jeremy Lambourne, Director; Dallas McGillivray, Director; Anthony Myers,
Director; Graeme Proudfoot, Director; Riccardo Ricciardi, Director; Martin
Trowell, Director; Hugh Ward, Director; Roger Yeates, Director; Michael Perman,
Secretary; and Robert Cachett, Secretary. The address of each of the foregoing
officers and directors is 11 Devonshire Square, London, EC2M 4YR, England.
INVESCO, as investment adviser, has contracted with IAL to provide
portfolio investment advisory services to Asian Growth Fund. IAL is a wholly
owned subsidiary of INAH.
The principal executive officers and directors of IAL and their principal
occupations are:
The Hon. Michael Benson, Chairman; John Greenwood, Vice Chairman; Anna
Tong, Managing Director; Andrew Lo, Chief Executive Officer; William Barron,
Director; Rod Ellis, Secretary and Director; Nigel Hale, Director; Alfred Ho,
Director; Gracie Liu, Director; Sam Lau, Director; James Robertson, Director;
Janice Wong Yi, Director; Billy Chan Lee Wang, Director; Lum Chin Pong,
Director; Liang Hwa-Dong, Director; John Misselbrook, Director; Jeremy Simpson,
Director; Edith Ngan, Director; and Dean Chrisholm, Director. The address of the
foregoing officers and directors is 11-12th Floor, Three Exchange Place, 8
Connaught Place, Central, Hong Kong.
Pursuant to an Administrative Services Agreement between Specialty Funds
and INVESCO, INVESCO provides administrative services to Specialty Funds,
including sub-accounting and recordkeeping services and functions. For such
services, the Fund pays INVESCO a fee consisting of a base fee of $10,000 per
year, plus an additional incremental fee computed at the annual rate of 0.015%
per year of the average net assets of the Fund. INVESCO is also paid a fee by
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the Fund for providing transfer agent services, including acting as Specialty
Funds' registrar, transfer agent and dividend disbursing agent. During the
fiscal year ended July 31, 1998, Specialty Funds paid INVESCO total compensation
of $1,593,856 for such services.
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MISCELLANEOUS
AVAILABLE INFORMATION
Each Fund is subject to the information requirements of the Securities
Exchange Act of 1934 and the 1940 Act and in accordance with those requirements
files reports, proxy material and other information with the SEC. These reports,
proxy material and other information can be inspected and copied at the Public
Reference Room maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, the Midwest Regional office of the SEC, Northwest Atrium Center, 500 West
Madison Street, Suite 400, Chicago, Illinois 60611, and the Northeast Regional
Office of the SEC, Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can also be obtained from the Public Reference
Branch, Office of Consumer Affairs and Information Services, Securities and
Exchange Commission, Washington, D.C. 20459 at prescribed rates.
LEGAL MATTERS
Certain legal matters in connection with the issuance of Pacific Basin
Fund shares as part of the Reorganization will be passed upon by Pacific Basin
Fund's counsel, Kirkpatrick & Lockhart LLP.
EXPERTS
The audited financial statements of Pacific Basin Fund and Asian Growth
Fund, incorporated herein by reference and incorporated by reference or included
in their respective Statements of Additional Information, have been audited by
PricewaterhouseCoopers LLP, independent accountants for the Funds, whose reports
thereon are included in the Funds' Annual Reports to Shareholders for the fiscal
year ended October 31, 1998 with respect to Pacific Basin Fund and July 31, 1998
with respect to Asian Growth Fund. The financial statements audited by
PricewaterhouseCoopers LLP have been incorporated herein by reference in
reliance on their reports given on their authority as experts in auditing and
accounting matters.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
----------------------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement")
is made as of _______ __, 1999, between INVESCO Specialty Funds, Inc., a
Maryland corporation ("Corporation T"), on behalf of INVESCO Asian Growth Fund,
a segregated portfolio of assets ("series") thereof ("Target"), and INVESCO
International Funds, Inc., a Maryland corporation ("Corporation A"), on behalf
of its INVESCO Pacific Basin Fund series ("Acquiring Fund"). (Acquiring Fund and
Target are sometimes referred to herein individually as a "Fund" and
collectively as the "Funds," and Corporation A and Corporation T are sometimes
referred to herein individually as an "Investment Company" and collectively as
the "Investment Companies.") All agreements, representations, actions, and
obligations described herein made or to be taken or undertaken by either Fund
are made and shall be taken or undertaken by Corporation A on behalf of
Acquiring Fund and by Corporation T on behalf of Target.
This Agreement is intended to be, and is adopted as, a plan of a
reorganization described in section 368(a)(1)(C) of the Internal Revenue Code of
1986, as amended ("Code"). The reorganization will involve the transfer to
Acquiring Fund of Target's assets in exchange solely for voting shares of common
stock in Acquiring Fund, par value $0.01 per share ("Acquiring Fund Shares"),
and the assumption by Acquiring Fund of Target's liabilities, followed by the
constructive distribution of the Acquiring Fund Shares pro rata to the holders
of shares of common stock in Target ("Target Shares") in exchange therefor, all
on the terms and conditions set forth herein. The foregoing transactions are
referred to herein collectively as the "Reorganization."
Each Fund issues a single class of shares, which are substantially
similar to each other. Each Fund's shares (1) are offered at net asset value
("NAV"), (2) are subject to a management fee of up to 0.75% of its net assets,
and (3) are subject to a service fee at the annual rate of 0.25% of its net
assets imposed pursuant to a plan of distribution adopted in accordance with
Rule 12b-1 promulgated under the Investment Company Act of 1940, as amended
("1940 Act") (though Acquiring Fund Shares issued before December 1, 1997, are
not subject to any such fee).
In consideration of the mutual promises contained herein, the parties
agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION
--------------------------------------
1.1. 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 therefor --
(a) to issue and deliver to Target the number of full and
fractional (rounded to the third decimal place) Acquiring
Fund Shares, determined by dividing the net value of
Target (computed as set forth in paragraph 2.1) by the NAV
of an Acquiring Fund Share (computed as set forth in
paragraph 2.2), and
(b) to assume all of Target's liabilities described in
paragraph 1.3 ("Liabilities").
Such transactions shall take place at the Closing (as defined in
paragraph 3.1).
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1.2. The 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. The Liabilities shall include (except as otherwise provided
herein) all of Target's liabilities, debts, obligations, and duties of whatever
kind or nature, whether absolute, accrued, contingent, or otherwise, whether or
not arising in the ordinary course of business, whether or not determinable at
the Effective Time, and whether or not specifically referred to in this
Agreement. Notwithstanding the foregoing, Target agrees to use its best efforts
to discharge all its known Liabilities before 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 the Acquiring Fund Shares received by it
pursuant to paragraph 1.1 to Target's shareholders of record, determined as of
the Effective Time (each a "Shareholder" and collectively "Shareholders"), in
constructive exchange for their Target Shares. Such distribution shall be
accomplished by Corporation A's transfer agent's opening accounts on Acquiring
Fund's share transfer books in the Shareholders' names and transferring such
Acquiring Fund Shares thereto. Each Shareholder's account shall be credited with
the respective pro rata number of full and fractional (rounded to the third
decimal place) Acquiring Fund Shares due that Shareholder. All outstanding
Target Shares, including any represented by certificates, shall simultaneously
be canceled on Target's share transfer books. Acquiring Fund shall not issue
certificates representing the Acquiring Fund Shares issued in connection with
the Reorganization.
1.6. As soon as reasonably practicable after distribution of the
Acquiring Fund Shares pursuant to paragraph 1.5, but in all events within twelve
months after the Effective Time, Target shall be terminated as a series of
Corporation T and any further actions shall be taken in connection therewith as
required by applicable law.
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 Shares
in a name other than that of the registered holder on Target's books of the
Target Shares constructively exchanged therefor shall be paid by the person to
whom such Acquiring Fund 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 New
York Stock Exchange ("NYSE") on the date of the Closing ("Valuation Time"),
using the valuation procedures set forth in Target's then-current prospectus and
statement of additional information ("SAI") less (b) the amount of the
Liabilities as of the Valuation Time.
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2.2. For purposes of paragraph 1.1(a), the NAV of an Acquiring Fund
Share shall be computed as of the Valuation Time, using the valuation procedures
set forth in Acquiring Fund's then-current prospectus and SAI.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made
by or under the direction of INVESCO Funds Group, Inc. ("INVESCO").
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 office on
June 18, 1999, or at such other place and/or on such other date as to 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 as to 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 of an Acquiring Fund Share 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. Corporation T's fund accounting and pricing agent shall deliver at
the Closing a certificate of an authorized officer verifying that the
information (including adjusted basis and holding period, by lot) concerning the
Assets, including all portfolio securities, transferred by Target to Acquiring
Fund, as reflected on Acquiring Fund's books immediately following the Closing,
does or will conform to such information on Target's books immediately before
the Closing. Corporation T'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. Corporation T shall deliver to Corporation A at the Closing a list
of the names and addresses of the Shareholders and the number of outstanding
Target Shares owned by each Shareholder, all as of the Effective Time, certified
by the Secretary or Assistant Secretary of Corporation T. Corporation A's
transfer agent shall deliver at the Closing a certificate as to the opening on
Acquiring Fund's share transfer books of accounts in the Shareholders' names.
Corporation A shall issue and deliver a confirmation to Corporation T evidencing
the Acquiring Fund Shares to be credited to Target at the Effective Time or
provide evidence satisfactory to Corporation T that such Acquiring Fund 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.
3.4. Each Investment Company shall deliver to the other at the Closing
a certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
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4. REPRESENTATIONS AND WARRANTIES
------------------------------
4.1. Target represents and warrants as follows:
4.1.1. Corporation T is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Maryland;
and a copy of its Articles of Incorporation is on file with the
Secretary of the State of Maryland;
4.1.2. Corporation T 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;
4.1.3. Target is a duly established and designated series
of Corporation T;
4.1.4. At the Closing, Target will have good and marketable
title to the Assets and full right, power, and authority to sell,
assign, transfer, and deliver the 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;
4.1.5. Target's current prospectus and SAI conform in all
material respects to the applicable requirements of the Securities Act
of 1933, as amended ("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 to state 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;
4.1.6. Target is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby will not conflict with or violate, Maryland law or
any provision of Corporation T's Articles of Incorporation 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 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 Corporation A;
4.1.7. Except as otherwise disclosed in writing to and
accepted by Corporation A, all material contracts and other commitments
of or applicable to Target (other than this Agreement and investment
contracts, including options, futures, and forward contracts) will be
terminated, or provision for discharge of any liabilities of Target
thereunder will be made, at or prior to the Effective Time, without
either Fund's 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 omitted or to be taken by any other
party thereto prior to the Closing;
4.1.8. Except as otherwise disclosed in writing to and
accepted by Corporation A, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently
pending or (to Target's knowledge) threatened against Corporation T
with respect to 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
A-4
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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;
4.1.9. The execution, delivery, and performance of this
Agreement have been duly authorized as of the date hereof by all
necessary action on the part of Corporation T's board of directors,
which has made the determinations required by Rule 17a-8(a) under the
1940 Act; and, subject to approval by Target's shareholders, this
Agreement constitutes 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;
4.1.10. At the Effective Time, the performance of this
Agreement shall have been duly authorized by all necessary action by
Target's shareholders;
4.1.11. 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 Corporation T, except for (a) the
filing with the Securities and Exchange Commission ("SEC") of a
registration statement by Corporation A on Form N-14 relating to the
Acquiring Fund Shares issuable hereunder, and any supplement or
amendment thereto ("Registration Statement"), including therein a
prospectus/proxy statement ("Proxy Statement"), and (b) such consents,
approvals, authorizations, and filings as have been made or received or
as may be required subsequent to the Effective Time;
4.1.12. 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 regulations thereunder and (b) not
contain any untrue statement of a material fact or omit to state a
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; provided that the foregoing shall
not apply to statements in or omissions from the Proxy Statement made
in reliance on and in conformity with information furnished by
Corporation A for use therein;
4.1.13. The Liabilities were incurred by Target in the
ordinary course of its business; and there are no Liabilities other
than liabilities disclosed or provided for in Corporation T's financial
statements referred to in paragraph 4.1.9 and liabilities incurred by
Target in the ordinary course of its business subsequent to July 31,
1998, or otherwise previously disclosed to Corporation A, none of which
has been materially adverse to the business, assets, or results of
Target operations;
4.1.14. Target is a "fund" as defined in section 851(g)(2) of
the Code; it qualified for treatment as a regulated investment company
under Subchapter M of the Code ("RIC") for each past taxable year since
it commenced operations and will continue to meet all the requirements
for such qualification for its current taxable year; and it has no
earnings and profits accumulated in any taxable year in which the
provisions of Subchapter M did not apply to it. The Assets shall be
invested at all times through the Effective Time in a manner that
ensures compliance with the foregoing;
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4.1.15. Target is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case
within the meaning of section 368(a)(3)(A) of the Code;
4.1.16. Not more than 25% of the value of Target's total
assets (excluding cash, cash items, and U.S. government securities) is
invested in the stock and securities of any one issuer, and not more
than 50% of the value of such assets is invested in the stock and
securities of five or fewer issuers;
4.1.17. Target will be terminated as soon as reasonably
practicable after the Effective Time, but in all events within twelve
months thereafter;
4.1.18. Target's federal income tax returns, and all
applicable state and local tax returns, for all taxable years to and
including the taxable year ended July 31, 1997, have been timely filed
and all taxes payable pursuant to such returns have been timely paid;
and
4.1.19. The financial statements of Corporation T for the year
ended July 31, 1998, to be delivered to Corporation A, fairly represent
the financial position of Target as of that date and the results of its
operations and changes in its net assets for the year then ended.
4.2. Acquiring Fund represents and warrants as follows:
4.2.1. Corporation A is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Maryland;
and a copy of its Articles of Incorporation is on file with the
Secretary of the State of Maryland;
4.2.2. Corporation A 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;
4.2.3. Corporation A has 500,000,000 authorized shares of
common stock, par value $0.01 per share, ___,000,000 shares of which
were allocated to the Acquiring Fund, of which _,___,___ shares were
outstanding as of October 31, 1998. Because Corporation A is an
open-end investment company engaged in the continuous offering and
redemption of its shares, the number of outstanding Acquiring Fund
Shares may change prior to the Effective Time;
4.2.4. Acquiring Fund is a duly established and designated
series of Corporation A;
4.2.5. No consideration other than Acquiring Fund Shares (and
Acquiring Fund's assumption of the Liabilities) will be issued in
exchange for the Assets in the Reorganization;
4.2.6. The Acquiring Fund 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
non-assessable;
4.2.7. Acquiring Fund's current prospectus and SAI 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
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include any untrue statement of a material fact or omit to state 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;
4.2.8. Acquiring Fund is not in violation of, and the
execution and delivery of this Agreement and consummation of the
transactions contemplated hereby will not conflict with or violate,
Maryland law or any provision of Corporation A's Articles of
Incorporation or By-Laws or of any provision of any agreement,
instrument, lease, or other undertaking to which Acquiring Fund is a
party or by which it is bound or 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
Corporation T;
4.2.9. Except as otherwise disclosed in writing to and
accepted by Corporation T, 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
Corporation A 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;
4.2.10. The execution, delivery, and performance of this
Agreement have been duly authorized as of the date hereof by all
necessary action on the part of Corporation A's board of directors
(together with Corporation T's board of directors, the "Boards"), which
has made the determinations required by Rule 17a-8(a) under the 1940
Act; and this Agreement constitutes a valid and legally binding
obligation of Acquiring Fund, 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;
4.2.11. 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 Corporation
A, except for (a) the filing with the SEC of the Registration Statement
and a post-effective amendment to Corporation A's registration
statement on Form N1-A and (b) such consents, approvals,
authorizations, and filings as have been made or received or as may be
required subsequent to the Effective Time;
4.2.12. 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 regulations thereunder and (b) not
contain any untrue statement of a material fact or omit to state a
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; provided that the foregoing shall
not apply to statements in or omissions from the Proxy Statement made
in reliance on and in conformity with information furnished by
Corporation T for use therein;
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4.2.13. Acquiring Fund is a "fund" as defined in section
851(g)(2) of the Code; it qualified for treatment as a RIC for each
past taxable year since it commenced operations and will continue to
meet all the requirements for such qualification for its current
taxable year; Acquiring Fund intends to continue to meet all such
requirements for the next taxable year; and it has no earnings and
profits accumulated in any taxable year in which the provisions of
Subchapter M of the Code did not apply to it;
4.2.14. Acquiring Fund has no plan or intention to issue
additional Acquiring Fund Shares following the Reorganization except
for shares issued in the ordinary course of its business as a series of
an open-end investment company; nor does Acquiring Fund have any plan
or intention to redeem or otherwise reacquire any Acquiring Fund Shares
issued to the Shareholders pursuant to the Reorganization, except to
the extent it is required by the 1940 Act to redeem any of its shares
presented for redemption at net asset value in the ordinary course of
that business;
4.2.15. Following the Reorganization, Acquiring Fund (a) will
continue Target's "historic business" (within the meaning of section
1.368-1(d)(2) of the Income Tax Regulations under the Code), (b) use a
significant portion of Target's historic business assets (within the
meaning of section 1.368-1(d)(3) of the Income Tax Regulations under
the Code) in a business, (c) has no plan or intention to sell or
otherwise dispose of any of the Assets, except for dispositions made in
the ordinary course of that business and dispositions necessary to
maintain its status as a RIC, and (d) expects to retain substantially
all the Assets in the same form as it receives them in the
Reorganization, unless and until subsequent investment circumstances
suggest the desirability of change or it becomes necessary to make
dispositions thereof to maintain such status;
4.2.16. There is no plan or intention for Acquiring Fund to be
dissolved or merged into another corporation or a business trust or any
"fund" thereof (within the meaning of section 851(g)(2) of the Code)
following the Reorganization;
4.2.17. Immediately after the Reorganization, (a) not more
than 25% of the value of Acquiring Fund's total assets (excluding cash,
cash items, and U.S. government securities) will be invested in the
stock and securities of any one issuer and (b) not more than 50% of the
value of such assets will be invested in the stock and securities of
five or fewer issuers;
4.2.18. Acquiring Fund does not own, directly or indirectly,
nor at the Effective Time will it own, directly or indirectly, nor has
it owned, directly or indirectly, at any time during the past five
years, any shares of Target;
4.2.19. Acquiring Fund's federal income tax returns, and all
applicable state and local tax returns, for all taxable years to and
including the taxable year ended October 31, 1997, have been timely
filed and all taxes payable pursuant to such returns have been timely
paid;
4.2.20. The financial statements of Corporation A for the year
ended October 31, 1998, to be delivered to Corporation T, fairly
represent the financial position of Acquiring Fund as of that date and
the results of its operations and changes in its net assets for the
year then ended; and
4.2.21. If the Reorganization is consummated, Acquiring Fund
will treat each Shareholder that receives Acquiring Fund Shares in
connection with the Reorganization as having made a minimum initial
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purchase of Acquiring Fund Shares for the purpose of making additional
investments in Acquiring Fund Shares, regardless of the value of the
Acquiring Fund Shares so received.
4.3. Each Fund represents and warrants as follows:
4.3.1. The aggregate fair market value of the Acquiring Fund
Shares, when received by the Shareholders, will be approximately equal
to the aggregate fair market value of their Target Shares
constructively surrendered in exchange therefor;
4.3.2. Its management (a) is unaware of any plan or intention
of Shareholders to redeem, sell, or otherwise dispose of (i) any
portion of their Target Shares before the Reorganization to any person
related (within the meaning of section 1.368-1(e)(3) of the Income Tax
Regulations under the Code) to either Fund or (ii) any portion of the
Acquiring Fund Shares to be received by them in the Reorganization to
any person related (as so defined) to Acquiring Fund, (b) does not
anticipate dispositions of those Acquiring Fund Shares at the time of
or soon after the Reorganization to exceed the usual rate and frequency
of dispositions of shares of Target as a series of an open-end
investment company, (c) expects that the percentage of Shareholder
interests, if any, that will be disposed of as a result of or at the
time of the Reorganization will be de minimis, and (d) does not
anticipate that there will be extraordinary redemptions of Acquiring
Fund Shares immediately following the Reorganization;
4.3.3. The Shareholders will pay their own expenses, if any,
incurred in connection with the Reorganization;
4.3.4. Immediately following consummation of the
Reorganization, Acquiring Fund will hold substantially the same assets
and be subject to substantially the same liabilities that Target held
or was subject to immediately prior thereto (in addition to the assets
and liabilities Acquiring Fund then held or was subject to), plus any
liabilities and expenses of the parties incurred in connection with the
Reorganization;
4.3.5. The fair market value of the Assets on a going concern
basis will equal or exceed the Liabilities to be assumed by Acquiring
Fund and those to which the Assets are subject;
4.3.6. There is no intercompany indebtedness between the
Funds that was issued or acquired, or will be settled, at a discount;
4.3.7. Pursuant to the Reorganization, Target will transfer
to Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the
fair market value of the net assets, and at least 70% of the fair
market value of the gross assets, held by Target immediately before the
Reorganization. For the purposes of this representation, any amounts
used by Target to pay its Reorganization expenses and to make
redemptions and distributions immediately before the Reorganization
(except (a) redemptions not made as part of the Reorganization and (b)
distributions made to conform to its policy of distributing all or
substantially all of its income and gains to avoid the obligation to
pay federal income tax and/or the excise tax under section 4982 of the
Code) will be included as assets held thereby immediately before the
Reorganization;
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4.3.8. None of the compensation received by any Shareholder
who is an employee of or service provider to Target will be separate
consideration for, or allocable to, any of the Target Shares held by
such Shareholder; none of the Acquiring Fund Shares received by any
such Shareholder will be separate consideration for, or allocable to,
any employment agreement; investment advisory agreement, or other
service agreement; and the consideration paid to any such Shareholder
will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's-length for similar
services;
4.3.9. Immediately after the Reorganization, the Shareholders
will not own shares constituting "control" of Acquiring Fund within the
meaning of section 304(c) of the Code; and
4.3.10. Neither Fund will be reimbursed for any expenses
incurred by it or on its behalf in connection with the Reorganization
unless those expenses are solely and directly related to the
Reorganization (determined in accordance with the guidelines set forth
in Rev. Rul. 73-54, 1973-1 C.B.
187) ("Reorganization Expenses").
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 (1)
Target shall not dispose of more than an insignificant
portion of its historic business assets during such period
without Acquiring Fund's prior consent and (2) if Target's
shareholders' approve this Agreement (and the transactions
contemplated hereby), then between the date of such
approval and the Closing, the Investment Companies shall
coordinate the Funds' respective portfolios so that the
transfer of the Assets to Acquiring Fund will not cause it
to fail to be in compliance with all of its investment
policies and restrictions immediately after the Closing.
5.2. Target covenants to call a shareholders' meeting to consider and
act on this Agreement and to take all other action necessary to obtain approval
of the transactions contemplated hereby.
5.3. Target covenants that the Acquiring Fund 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 Corporation A in obtaining
such information as Corporation A reasonably requests concerning the beneficial
ownership of Target Shares.
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 Corporation A at the Closing.
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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 the Assets, and (b) Target, title to and possession of the Acquiring Fund
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 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
--------------------
Each Fund's obligations hereunder shall be subject to (a) performance
by the other Fund of all its 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. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by the Boards and shall have been approved by
Target's shareholders in accordance with applicable law.
6.2. 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 federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Investment Company to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain same would not involve a risk of a material
adverse effect on the assets or properties of either Fund, provided that either
Investment Company may for itself waive any of such conditions.
6.3. 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.
6.4. Corporation T shall have received an opinion of Kirkpatrick &
Lockhart LLP substantially to the effect that:
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6.4.1. Acquiring Fund is a duly established series of
Corporation A, a corporation duly organized, validly existing, and in
good standing under the laws of the State of Maryland with power under
its Articles of Incorporation to own all its properties and assets and,
to the knowledge of such counsel, to carry on its business as presently
conducted;
6.4.2. This Agreement (a) has been duly authorized, executed,
and delivered by Corporation A on behalf of Acquiring Fund and (b)
assuming due authorization, execution, and delivery of this Agreement
by Corporation T on behalf of Target, is a valid and legally binding
obligation of Corporation A with respect to Acquiring Fund, 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;
6.4.3. The Acquiring Fund Shares to be issued and distributed
to the Shareholders under this Agreement, assuming their due delivery
as contemplated by this Agreement, will be duly authorized and validly
issued and outstanding and fully paid and non-assessable;
6.4.4. The execution and delivery of this Agreement did not,
and the consummation of the transactions contemplated hereby will not,
materially violate Corporation A's Articles of Incorporation or By-Laws
or any provision of any agreement (known to such counsel, without any
independent inquiry or investigation) to which Corporation A (with
respect to Acquiring Fund) is a party or by which it is bound or (to
the knowledge of such counsel, without any independent inquiry or
investigation) result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to
which Corporation A (with respect to Acquiring Fund) is a party or by
which it is bound, except as set forth in such opinion or as previously
disclosed in writing to and accepted by Corporation T;
6.4.5. To the knowledge of such counsel (without any
independent inquiry or investigation), no consent, approval,
authorization, or order of any court or governmental authority is
required for the consummation by Corporation A on behalf of Acquiring
Fund of the transactions contemplated herein, except such as have been
obtained under the 1933 Act, the 1934 Act, and the 1940 Act and such as
may be required under state securities laws;
6.4.6. Corporation A is registered with the SEC as an
investment company, and to the knowledge of such counsel no order has
been issued or proceeding instituted to suspend such registration; and
6.4.7. To the knowledge of such counsel (without any
independent inquiry or investigation), (a) no litigation,
administrative proceeding, or investigation of or before any court or
governmental body is pending or threatened as to Corporation A (with
respect to Acquiring Fund) or any of its properties or assets
attributable or allocable to Acquiring Fund and (b) Corporation A (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 Corporation T.
In rendering such opinion, such counsel may (1) rely, as to matters governed by
the laws of the State of Maryland, on an opinion of competent Maryland counsel,
(2) make assumptions regarding the authenticity, genuineness, and/or conformity
of documents and copies thereof without independent verification thereof, (3)
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limit such opinion to applicable federal and state law, and (4) 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.
6.5. Corporation A shall have received an opinion of Kirkpatrick &
Lockhart LLP substantially to the effect that:
6.5.1. Target is a duly established series of Corporation T, a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Maryland with power under its Articles
of Incorporation to own all its properties and assets and, to the
knowledge of such counsel, to carry on its business as presently
conducted;
6.5.2. This Agreement (a) has been duly authorized, executed,
and delivered by Corporation T on behalf of Target and (b) assuming due
authorization, execution, and delivery of this Agreement by Corporation
A on behalf of Acquiring Fund, is a valid and legally binding
obligation of Corporation T with respect to 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;
6.5.3. The execution and delivery of this Agreement did not,
and the consummation of the transactions contemplated hereby will not,
materially violate Corporation T's Articles of Incorporation or By-Laws
or any provision of any agreement (known to such counsel, without any
independent inquiry or investigation) to which Corporation T (with
respect to Target) is a party or by which it is bound or (to the
knowledge of such counsel, without any independent inquiry or
investigation) result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to
which Corporation T (with respect to Target) is a party or by which it
is bound, except as set forth in such opinion or as previously
disclosed in writing to and accepted by Corporation A;
6.5.4. To the knowledge of such counsel (without any
independent inquiry or investigation), no consent, approval,
authorization, or order of any court or governmental authority is
required for the consummation by Corporation T on behalf of Target of
the transactions contemplated herein, except such as have been obtained
under the 1933 Act, the 1934 Act, and the 1940 Act and such as may be
required under state securities laws;
6.5.5. Corporation T is registered with the SEC as an
investment company, and to the knowledge of such counsel no order has
been issued or proceeding instituted to suspend such registration; and
6.5.6. To the knowledge of such counsel (without any
independent inquiry or investigation), (a) no litigation,
administrative proceeding, or investigation of or before any court or
governmental body is pending or threatened as to Corporation T (with
respect to Target) or any of its properties or assets attributable or
allocable to Target and (b) Corporation T (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
Corporation A.
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In rendering such opinion, such counsel may (1) rely, as to matters governed by
the laws of the State of Maryland, on an opinion of competent Maryland counsel,
(2) make assumptions regarding the authenticity, genuineness, and/or conformity
of documents and copies thereof without independent verification thereof, (3)
limit such opinion to applicable federal and state law, and (4) 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.
6.6. Each Investment Company shall have received an opinion of
Kirkpatrick & Lockhart LLP, addressed to and in form and substance satisfactory
to it, as to the federal income tax consequences mentioned below ("Tax
Opinion"). In rendering the Tax Opinion, such counsel may rely as to factual
matters, exclusively and without independent verification, on the
representations made in this Agreement (or in separate letters addressed to such
counsel) and the certificates delivered pursuant to paragraph 3.4. 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:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange
solely for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities, followed by Target's distribution of those shares pro rata
to the Shareholders constructively in exchange for the Shareholders'
Target Shares, will constitute a reorganization within the meaning of
section 368(a)(1)(C) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
6.6.2. Target will recognize no gain or loss on the transfer
to Acquiring Fund of the Assets in exchange solely for Acquiring Fund
Shares and Acquiring Fund's assumption of the Liabilities or on the
subsequent distribution of those shares to the Shareholders in
constructive exchange for their Target Shares;
6.6.3. Acquiring Fund will recognize no gain or loss on its
receipt of the Assets in exchange solely for Acquiring Fund Shares and
its assumption of the Liabilities;
6.6.4. Acquiring Fund's basis for the Assets will be the same
as the basis thereof in Target's hands immediately before the
Reorganization, and Acquiring Fund's holding period for the Assets will
include Target's holding period therefor;
6.6.5. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring
Fund Shares pursuant to the Reorganization; and
6.6.6. A Shareholder's aggregate basis for the Acquiring Fund
Shares to be received by it in the Reorganization will be the same as
the aggregate basis for its Target Shares to be constructively
surrendered in exchange for those Acquiring Fund Shares, and its
holding period for those Acquiring Fund Shares will include its holding
period for those Target Shares, provided they are held as capital
assets by the Shareholder at the Effective Time.
Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any asset as to which any unrealized gain or loss is
required to be recognized for federal income tax purposes at the end of a
taxable year (or on the termination or transfer thereof) under a mark-to-market
system of accounting.
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At any time before the Closing, either Investment Company may waive any of the
foregoing conditions (except that set forth in paragraph 6.1) if, in the
judgment of its Board, such waiver will not have a material adverse effect on
its Fund's shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
---------------------------
7.1. Each Investment Company represents and warrants to the other that
there are no brokers or finders entitled to receive any payments in connection
with the transactions provided for herein.
7.2. Except as otherwise provided herein, 50% of the total
Reorganization Expenses will be borne by INVESCO and the remaining 50% will be
borne partly by each Fund.
8. ENTIRE AGREEMENT; NO SURVIVAL
-----------------------------
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 not
survive the Closing.
9. TERMINATION OF AGREEMENT
------------------------
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. By either Fund (a) in the event of the other Fund's 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 August
31, 1999; or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or the directors or officers
of either Investment Company, to the other Fund.
10. AMENDMENT
---------
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 the
Shareholders' interests.
11. MISCELLANEOUS
-------------
11.1. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Maryland; provided that, in the case of
any conflict between such laws and the federal securities laws, the latter shall
govern.
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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. This Agreement may be executed in one or more counterparts, all
of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been executed by each Investment
Company and delivered to the other party hereto. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
and delivered by its duly authorized officers as of the day and year first
written above.
ATTEST: INVESCO SPECIALTY FUNDS, INC.,
on behalf of its series,
INVESCO Asian Growth Fund
_______________________ By:_______________________
Assistant Secretary Vice President
ATTEST: INVESCO INTERNATIONAL FUNDS, INC.,
on behalf of its series,
INVESCO Pacific Basin Fund
_______________________ By:_______________________
Assistant Secretary Vice President
A-16
<PAGE>
APPENDIX B
----------
PRINCIPAL SHAREHOLDERS
----------------------
As of March 12, 1999, the following entities held more than 5% of each
Fund's outstanding shares:
NATURE OF COMBINED
OWNERSHIP % OWNED FUND %
--------- ------- --------
PACIFIC BASIN FUND
- ------------------
Charles Schwab & Co. Inc.
Special Custody Acct. for the Record
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
ASIAN GROWTH FUND
- -----------------
Charles Schwab & Co. Inc.
Special Custody Acct. for the Record
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
B-1
<PAGE>
APPENDIX C
AGREEMENT AND PLAN OF CONVERSION AND TERMINATION
------------------------------------------------
This AGREEMENT AND PLAN OF CONVERSION AND TERMINATION ("Agreement") is
made as of _____ __, 1999, between INVESCO Specialty Funds, Inc., a Maryland
corporation ("Specialty Funds"), on behalf of INVESCO Asian Growth Fund, a
segregated portfolio of assets ("series") thereof ("Old Fund"), and INVESCO
International Funds, Inc., a Maryland corporation ("International Funds"), on
behalf of its INVESCO Asian Growth Fund series ("New Fund"). (Old Fund and New
Fund are sometimes referred to herein individually as a "Fund" and collectively
as the "Funds"; Specialty Funds and International Funds are sometimes referred
to herein individually as an "Investment Company" and collectively as the
"Investment Companies.") All agreements, representations, actions, and
obligations described herein made or to be taken or undertaken by either Fund
are made and shall be taken or undertaken by Specialty Funds on behalf of Old
Fund and by International Funds on behalf of New Fund.
Old Fund intends to change its identity -- by converting from a series
of Specialty Funds to a series of International Funds -- through a
reorganization within the meaning of section 368(a)(1)(F) of the Internal
Revenue Code of 1986, as amended ("Code"). Old Fund desires to accomplish such
conversion by transferring all its assets to New Fund (which is being
established solely for the purpose of acquiring such assets and continuing Old
Fund's business) in exchange solely for voting shares of common stock in New
Fund ("New Fund Shares") and New Fund's assumption of Old Fund's liabilities,
followed by the constructive distribution of the New Fund Shares pro rata to the
holders of shares of common stock in Old Fund ("Old Fund Shares") in exchange
therefor, all on the terms and conditions set forth in this Agreement (which is
intended to be, and is adopted as, a "plan of reorganization" for federal income
tax purposes). All such transactions are referred to herein as the
"Reorganization."
In consideration of the mutual promises herein contained, the parties
agree as follows:
1. PLAN OF CONVERSION AND TERMINATION
----------------------------------
1.1. Old Fund agrees to assign, sell, convey, transfer, and deliver all
of its assets described in paragraph 1.2 ("Assets") to New Fund. New Fund agrees
in exchange therefor --
(a) to issue and deliver to Old Fund the number of full and
fractional (rounded to the third decimal place) New Fund Shares equal
to the number of full and fractional Old Fund Shares then outstanding,
and
(b) to assume all of Old Fund's liabilities described in
paragraph 1.3 ("Liabilities").
Such transactions shall take place at the Closing (as defined in paragraph 2.1).
1.2. The 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 Old Fund's books, and other property owned by Old Fund at the
Effective Time (as defined in paragraph 2.1).
C-1
<PAGE>
1.3. The Liabilities shall include all of Old Fund's liabilities,
debts, obligations, and duties of whatever kind or nature, whether absolute,
accrued, contingent, or otherwise, whether or not arising in the ordinary course
of business, whether or not determinable at the Effective Time, and whether or
not specifically referred to in this Agreement.
1.4. At the Effective Time (or as soon thereafter as is reasonably
practicable), (a) the New Fund Share issued pursuant to paragraph 4.4 shall be
redeemed by New Fund for $1.00 and (b) Old Fund shall distribute the New Fund
Shares it received pursuant to paragraph 1.1 to its shareholders of record,
determined as of the Effective Time (each a "Shareholder" and collectively
"Shareholders"), in constructive exchange for their Old Fund Shares. Such
distribution shall be accomplished by International Funds' transfer agent's
opening accounts on New Fund's share transfer books in the Shareholders' names
and transferring such New Fund Shares thereto. Each Shareholder's account shall
be credited with the respective pro rata number of full and fractional (rounded
to the third decimal place) New Fund Shares due that Shareholder. All
outstanding Old Fund Shares, including those represented by certificates, shall
simultaneously be canceled on Old Fund's share transfer books. New Fund shall
not issue certificates representing the New Fund Shares in connection with the
Reorganization.
1.5. As soon as reasonably practicable after distribution of the New
Fund Shares pursuant to paragraph 1.4, but in all events within twelve months
after the Effective Time, Old Fund shall be terminated as a series of Specialty
Funds and any further actions shall be taken in connection therewith as required
by applicable law.
1.6. Any reporting responsibility of Old Fund to a public authority is
and shall remain its responsibility up to and including the date on which it is
terminated.
1.7. Any transfer taxes payable on issuance of New Fund Shares in a
name other than that of the registered holder on Old Fund's books of the Old
Fund Shares constructively exchanged therefor shall be paid by the person to
whom such New Fund Shares are to be issued, as a condition of such transfer.
2. CLOSING AND EFFECTIVE TIME
--------------------------
2.1. The Reorganization, together with related acts necessary to
consummate the same ("Closing"), shall occur at the Funds' principal office on
June 18, 1999, or at such other place and/or on such other date as to 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 as to which the parties may agree ("Effective Time").
2.2. Specialty Funds' fund accounting and pricing agent shall deliver
at the Closing a certificate of an authorized officer verifying that the
information (including adjusted basis and holding period, by lot) concerning the
Assets, including all portfolio securities, transferred by Old Fund to New Fund,
as reflected on New Fund's books immediately following the Closing, does or will
conform to such information on Old Fund's books immediately before the Closing.
Specialty Fund'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 New 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.
2.3. International Funds' transfer agent shall deliver at the Closing a
certificate as to the opening on New Fund's share transfer books of accounts in
the Shareholders' names. International Funds shall issue and deliver a
C-2
<PAGE>
confirmation to Specialty Funds evidencing the New Fund Shares to be credited to
Old Fund at the Effective Time or provide evidence satisfactory to Specialty
Funds that such New Fund Shares have been credited to Old Fund's account on such
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.
2.4. Each Investment Company shall deliver to the other at the Closing
a certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
3. REPRESENTATIONS AND WARRANTIES
------------------------------
3.1. Old Fund represents and warrants as follows:
3.1.1. Specialty Funds is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Maryland; and a copy of its Articles of Incorporation is on file with
the Secretary of State of Maryland;
3.1.2. Specialty Funds is duly registered as an open-end
management investment company under the Investment Company Act of 1940,
as amended ("1940 Act"), and such registration will be in full force
and effect at the Effective Time;
3.1.3. Old Fund is a duly established and designated series of
Specialty Funds;
3.1.4. At the Closing, Old Fund will have good and marketable
title to the Assets and full right, power, and authority to sell,
assign, transfer, and deliver the Assets free of any liens or other
encumbrances; and upon delivery and payment for the Assets, New Fund
will acquire good and marketable title thereto;
3.1.5. New Fund Shares are not being acquired for the purpose
of making any distribution thereof, other than in accordance with the
terms hereof;
3.1.6. Old Fund is a "fund" as defined in section 851(g)(2) of
the Code; it qualified for treatment as a regulated investment company
under Subchapter M of the Code ("RIC") for each past taxable year since
it commenced operations and will continue to meet all the requirements
for such qualification for its current taxable year; and it has no
earnings and profits accumulated in any taxable year in which the
provisions of Subchapter M did not apply to it. The Assets shall be
invested at all times through the Effective Time in a manner that
ensures compliance with the foregoing;
3.1.7. The Liabilities were incurred by Old Fund in the
ordinary course of its business and are associated with the Assets;
3.1.8. Old Fund is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case
within the meaning of section 368(a)(3)(A) of the Code;
3.1.9. Not more than 25% of the value of Old Fund's total
assets (excluding cash, cash items, and U.S. government securities) is
invested in the stock and securities of any one issuer, and not more
C-3
<PAGE>
than 50% of the value of such assets is invested in the stock and
securities of five or fewer issuers;
3.1.10. As of the Effective Time, Old Fund will not have
outstanding any warrants, options, convertible securities, or any other
type of rights pursuant to which any person could acquire Old Fund
Shares;
3.1.11. At the Effective Time, the performance of this
Agreement shall have been duly authorized by all necessary action by
Old Fund's shareholders; and
3.1.12. Old Fund will be terminated as soon as reasonably
practicable after the Effective Time, but in all events within twelve
months thereafter.
3.2. New Fund represents and warrants as follows:
3.2.1. International Funds is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Maryland; and a copy of its Articles of Incorporation is on file with
the Secretary of State of Maryland;
3.2.2. International Funds 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;
3.2.3. Before the Effective Time, New Fund will be a duly
established and designated series of International Funds;
3.2.4. New Fund has not commenced operations and will not do
so until after the Closing;
3.2.5. Prior to the Effective Time, there will be no issued
and outstanding shares in New Fund or any other securities issued by
New Fund, except as provided in paragraph 4.4;
3.2.6. No consideration other than New Fund Shares (and New
Fund's assumption of the Liabilities) will be issued in exchange for
the Assets in the Reorganization;
3.2.7. The New Fund Shares to be issued and delivered to Old
Fund 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 New Fund, fully paid and
non-assessable;
3.2.8. New Fund will be a "fund" as defined in section
851(g)(2) of the Code and will meet all the requirements to qualify for
treatment as a RIC for its taxable year in which the Reorganization
occurs;
3.2.9. New Fund has no plan or intention to issue additional
New Fund Shares following the Reorganization except for shares issued
in the ordinary course of its business as a series of an open-end
investment company; nor does New Fund have any plan or intention to
redeem or otherwise reacquire any New Fund Shares issued to the
Shareholders pursuant to the Reorganization, except to the extent it is
required by the 1940 Act to redeem any of its shares presented for
redemption at net asset value in the ordinary course of that business;
C-4
<PAGE>
3.2.10. Following the Reorganization, New Fund (a) will
continue Old Fund's "historic business" (within the meaning of section
1.368-1(d)(2) of the Income Tax Regulations under the Code), (b) use a
significant portion of Old Fund's historic business assets (within the
meaning of section 1.368-1(d)(3) of the Income Tax Regulations under
the Code) in a business, (c) has no plan or intention to sell or
otherwise dispose of any of the Assets, except for dispositions made in
the ordinary course of that business and dispositions necessary to
maintain its status as a RIC, and (d) expects to retain substantially
all the Assets in the same form as it receives them in the
Reorganization, unless and until subsequent investment circumstances
suggest the desirability of change or it becomes necessary to make
dispositions thereof to maintain such status;
3. 2.11. There is no plan or intention for New Fund to be
dissolved or merged into another corporation or a business trust or any
"fund" thereof (within the meaning of section 851(g)(2) of the Code)
following the Reorganization; and
3.2.12. Immediately after the Reorganization, (a) not more
than 25% of the value of New Fund's total assets (excluding cash, cash
items, and U.S. government securities) will be invested in the stock
and securities of any one issuer and (b) not more than 50% of the value
of such assets will be invested in the stock and securities of five or
fewer issuers.
3.3. Each Fund represents and warrants as follows:
3.3.1. The aggregate fair market value of the New Fund Shares,
when received by the Shareholders, will be approximately equal to the
aggregate fair market value of their Old Fund Shares constructively
surrendered in exchange therefor;
3.3.2. Its management (a) is unaware of any plan or intention
of Shareholders to redeem, sell, or otherwise dispose of (i) any
portion of their Old Fund Shares before the Reorganization to any
person related (within the meaning of section 1.368-1(e)(3) of the
Income Tax Regulations under the Code) to either Fund or (ii) any
portion of the New Fund Shares to be received by them in the
Reorganization to any person related (as so defined) to New Fund, (b)
does not anticipate dispositions of those New Fund Shares at the time
of or soon after the Reorganization to exceed the usual rate and
frequency of dispositions of shares of Old Fund as a series of an
open-end investment company, (c) expects that the percentage of
Shareholder interests, if any, that will be disposed of as a result of
or at the time of the Reorganization will be de minimis, and (d) does
not anticipate that there will be extraordinary redemptions of New Fund
Shares immediately following the Reorganization;
3.3.3. The Shareholders will pay their own expenses, if any,
incurred in connection with the Reorganization;
3.3.4. Immediately following consummation of the
Reorganization, the Shareholders will own all the New Fund Shares and
will own such shares solely by reason of their ownership of Old Fund
Shares immediately before the Reorganization;
3.3.5. Immediately following consummation of the
Reorganization, New Fund will hold the same assets -- except for assets
distributed to shareholders in the course of its business as a RIC and
assets used to pay expenses incurred in connection with the
Reorganization -- and be subject to the same liabilities that Old Fund
held or was subject to immediately prior to the Reorganization, plus
any liabilities for expenses of the parties incurred in connection with
the Reorganization. Such excepted assets, together with the amount of
all redemptions and distributions (other than regular, normal
C-5
<PAGE>
dividends) made by Old Fund immediately preceding the Reorganization,
will, in the aggregate, constitute less than 1% of its net assets;
3.3.6. There is no intercompany indebtedness between the Funds
that was issued or acquired, or will be settled, at a discount; and
3.3.7. Neither Fund will be reimbursed for any expenses
incurred by it or on its behalf in connection with the Reorganization
unless those expenses are solely and directly related to the
Reorganization (determined in accordance with the guidelines set forth
in Rev. Rul. 73-54, 1973-1 C.B.
187) ("Reorganization Expenses").
4. CONDITIONS PRECEDENT
--------------------
Each Fund's obligations hereunder shall be subject to (a) performance
by the other Fund of all its 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 on
and as of the Effective Time, and (c) the further conditions that, at or before
the Effective Time:
4.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by the each Investment Company's board of
directors and shall have been approved by Old Fund's shareholders in accordance
with applicable law;
4.2. All necessary filings shall have been made with the Securities and
Exchange Commission ("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. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Investment Company to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain same would not involve a risk of a material
adverse effect on the assets or properties of either Fund, provided that either
Investment Company may for itself waive any of such conditions;
4.3. Each Investment Company shall have received an opinion of
Kirkpatrick & Lockhart LLP, addressed to and in form and substance satisfactory
to it, as to the federal income tax consequences mentioned below ("Tax
Opinion"). In rendering the Tax Opinion, such counsel may rely as to factual
matters, exclusively and without independent verification, on the
representations made in this Agreement (or in separate letters addressed to such
counsel) and the certificates delivered pursuant to paragraph 2.4. 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:
4.3.1. New Fund's acquisition of the Assets in exchange solely
for New Fund Shares and New Fund's assumption of the Liabilities,
followed by Old Fund's distribution of those shares pro rata to the
Shareholders constructively in exchange for the Shareholders' Old Fund
Shares, will constitute a reorganization within the meaning of section
368(a)(1)(F) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
4.3.2. Old Fund will recognize no gain or loss on the transfer
to New Fund of the Assets in exchange solely for New Fund Shares and
New Fund's assumption of the Liabilities or on the subsequent
C-6
<PAGE>
distribution of those shares to the Shareholders in constructive
exchange for their Old Fund Shares;
4.3.3. New Fund will recognize no gain or loss on its receipt
of the Assets in exchange solely for New Fund Shares and its assumption
of the Liabilities;
4.3.4. New Fund's basis for the Assets will be the same as the
basis thereof in Old Fund's hands immediately before the
Reorganization, and New Fund's holding period for the Assets will
include Old Fund's holding period therefor;
4.3.5. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Old Fund Shares solely for New Fund
Shares pursuant to the Reorganization;
4.3.6. A Shareholder's aggregate basis for the New Fund Shares
to be received by it in the Reorganization will be the same as the
aggregate basis for its Old Fund Shares to be constructively
surrendered in exchange for those New Fund Shares, and its holding
period for those New Fund Shares will include its holding period for
those Old Fund Shares, provided they are held as capital assets by the
Shareholder at the Effective Time; and
4.3.7. For purposes of section 381 of the Code, New Fund will
be treated as if there had been no Reorganization. Accordingly, the
Reorganization will not result in the termination of Old Fund's taxable
year, Old Fund's tax attributes enumerated in section 381(c) of the
Code will be taken into account by New Fund as if there had been no
Reorganization, and the part of Old Fund's taxable year before the
Reorganization will be included in New Fund's taxable year after the
Reorganization;
4.4. Prior to the Closing, International Funds' directors shall have
authorized the issuance of, and New Fund shall have issued, one New Fund Share
to Specialty Funds in consideration of the payment of $1.00 to vote on the
matters referred to in paragraph 4.5; and
4.5. International Funds (on behalf of and with respect to New Fund)
shall have entered into a management contract, a sub-advisory agreement, a
distribution and service plan pursuant to Rule 12b-1 under the 1940 Act, and
such other agreements as are necessary for New Fund's operation as a series of
an open-end investment company. Each such contract, agreement, and plan shall
have been approved by International Funds' directors and, to the extent required
by law, by such of those directors who are not "interested persons" thereof (as
defined in the 1940 Act) and by Specialty Funds as the sole shareholder of New
Fund.
At any time before the Closing, either Investment Company may waive any of the
foregoing conditions (except that set forth in paragraph 4.1) if, in the
judgment of its board of directors, such waiver will not have a material adverse
effect on its Fund's shareholders' interests.
5. BROKERAGE FEES AND EXPENSES
---------------------------
5.1. Each Investment Company represents and warrants to the other that
there are no brokers or finders entitled to receive any payments in connection
with the transactions provided for herein.
5.2. Except as otherwise provided herein, 50% of the total
Reorganization Expenses will be borne by INVESCO and the remaining 50% will be
borne partly by each Fund.
C-7
<PAGE>
6. ENTIRE AGREEMENT; NO SURVIVAL
-----------------------------
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 not
survive the Closing.
7. TERMINATION
-----------
This Agreement may be terminated at any time at or prior to the
Effective Time, whether before or after approval by Old Fund's shareholders:
7.1. By either Fund (a) in the event of the other Fund's 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 August
31, 1999; or
7.2. By the parties' mutual agreement.
In the event of termination under paragraphs 7.1(c) or 7.2, there shall be no
liability for damages on the part of either Fund, or the directors or officers
of either Investment Company, to the other Fund.
8. AMENDMENT
---------
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Old Fund'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 the
Shareholders' interests.
9. MISCELLANEOUS
-------------
9.1. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Maryland; provided that, in the case of
any conflict between such laws and the federal securities laws, the latter shall
govern.
9.2. 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.
9.3. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been executed by each Investment Company and
delivered to the other party hereto. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
C-8
<PAGE>
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
and delivered by its duly authorized officers as of the day and year first
written above.
ATTEST: INVESCO SPECIALTY FUNDS, INC.,
on behalf of its series,
INVESCO Asian Growth Fund
____________________________ By:____________________________
Assistant Secretary Vice President
ATTEST: INVESCO INTERNATIONAL FUNDS, INC.,
on behalf of its series,
INVESCO Asian Growth Fund
____________________________ By:____________________________
Assistant Secretary Vice President
C-9
<PAGE>
INVESCO PACIFIC BASIN FUND
(A SERIES OF INVESCO INTERNATIONAL FUNDS, INC.)
INVESCO ASIAN GROWTH FUND
(A SERIES OF INVESCO SPECIALTY FUNDS, INC.)
7800 E. UNION AVENUE
DENVER, COLORADO 80237
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates specifically to the
proposed Reorganization whereby INVESCO Pacific Basin Fund ("Pacific Basin
Fund") would acquire the assets of INVESCO Asian Growth Fund ("Asian Growth
Fund") in exchange solely for shares of Pacific Basin Fund and the assumption by
Pacific Basin Fund of Asian Growth Fund's liabilities. This Statement of
Additional Information consists of this cover page and the following described
documents, each of which is incorporated by reference herein:
(1) [The Statement of Additional Information of Pacific Basin Fund,
dated March 1, 1998.]
(2) The Statement of Additional Information of Asian Growth Fund,
dated December 1, 1998.
(3) The Annual Report to Shareholders of Pacific Basin Fund for the
fiscal year ended October 31, 1998.
(4) The Annual Report to Shareholders of Asian Growth Fund for the
fiscal year ended July 31, 1998.
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Prospectus/Proxy Statement dated March __,
1999 relating to the above-referenced matter. A copy of the Prospectus/Proxy
Statement may be obtained by calling toll-free 1-800-646-8372. This Statement of
Additional Information is dated March __, 1999.
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
Twelve Months Ended October 31, 1998
UNAUDITED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Asian Growth Pacific Basin Pro Forma Pro Forma
Fund Fund Adjustments Combined
--------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 292,210 $ 910,732 $ 1,202,942
Interest 157,955 258,341 416,296
Foreign Taxes Withheld (18,568) (68,440) (87,008)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 431,597 1,100,633 1,532,230
- --------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees (Note 3) 112,775 368,580 $ (782)(a) 480,573
Distribution Expenses (Note 3) 37,592 100,442 22,157 (a) 160,191
Transfer Agent Fees 159,722 499,564 (39,931)(b) 619,355
Administrative Fees (Note 3) 12,282 17,399 (10,070)(a) 19,611
Custodian Fees and Expenses 24,999 74,353 99,352
Directors' Fees and Expenses 10,065 12,272 (8,000)(b) 14,337
Professional Fees and Expenses 24,403 26,856 (22,690)(b) 28,569
Registration Fees and Expenses 35,321 107,708 (28,321)(b) 114,708
Reports to Shareholders 15,309 39,446 (3,827 (b) 50,928
Other Expenses 5,740 6,796 (2,064)(b) 10,472
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 438,208 1,253,416 1,598,096
Fees and Expenses Absorbed by Investment Adviser (137,648) (236,517) 111,263 (c) (262,902)
Fees and Expenses Paid Indirectly (16,306) (37,359) (53,665)
- --------------------------------------------------------------------------------------------------------------------------------
NET EXPENSES 284,254 979,540 17,735 1,281,529
- --------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 147,343 121,093 (17,735) 250,701
- --------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Loss on:
Investment Securities (5,996,630) (12,976,634) (18,973,264)
Foreign Currency Transactions (2,677,855) (6,941,635) (9,619,490)
- --------------------------------------------------------------------------------------------------------------------------------
Total Net Realized Loss (8,674,485) (19,918,269) (28,592,754)
- --------------------------------------------------------------------------------------------------------------------------------
Change in Net Appreciation of:
Investment Securities 2,511,196 4,158,665 6,669,861
Foreign Currency Transactions 825,665 3,045,780 3,871,445
- --------------------------------------------------------------------------------------------------------------------------------
Total Net Appreciation 3,336,861 7,204,445 10,541,306
- --------------------------------------------------------------------------------------------------------------------------------
NET LOSS ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS (5,337,624) (12,713,824) (18,051,448)
- --------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $(5,190,281) $(12,592,731) $(17,735) $(17,800,747)
================================================================================================================================
(a) Reflects adjustments to Investment Advisory Fees, Distribution Expenses and Administrative Fees based on the surviving
Fund's contractual fee obligation.
(b) Reflects elimination of duplicate services or fees.
(c) Reflects adjustment to the level of the surviving Fund's voluntary expense reimbursement.
See Notes to Financial Statements
</TABLE>
<PAGE>
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
UNAUDITED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ASIAN GROWTH PACIFIC BASIN PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
-------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $25,349,676 $47,521,525 $72,871,201
===============================================================================================================================
At Value(a) $22,145,509 $44,035,416 $66,180,925
Cash 0 171,434 171,434
Foreign Currency ($110,549, $257 and $110,806, respectively) 110,489 840 111,329
Receivables:
Investment Securities Sold 20,299 4,790 25,089
Fund Shares Sold 172,684 3,154,509 3,327,193
Dividends and Interest 15,330 99,220 114,550
Prepaid Expenses and Other Assets 54,398 48,854 103,252
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 22,518,709 47,515,063 70,033,772
- -------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payables:
Custodian 12,664 0 12,664
Investment Securities Purchased 784,396 418,186 1,202,582
Fund Shares Repurchased 30,270 271,734 302,004
Depreciation on Forward Foreign Currency Contracts 24,525 1,718,619 1,743,144
Accrued Distribution Expenses 3,246 8,929 12,175
Accrued Expenses and Other Payables 23,240 29,155 52,395
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 878,341 2,446,623 3,324,964
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AT VALUE $21,640,368 $45,068,440 $66,708,808
===============================================================================================================================
NET ASSETS
Paid-in Capital $36,105,714 $70,490,092 $106,595,806
Accumulated Undistributed Net Investment Income 120,048 233,342 353,390
Accumulated Undistributed Net Realized Loss on Investment
Securities and Foreign Currency Transactions (11,359,512) (20,458,031) (31,817,543)
Net Depreciation of Investment Securities and Foreign
Currency Transactions (3,225,882) (5,196,963) (8,422,845)
===============================================================================================================================
NET ASSETS AT VALUE $21,640,368 $45,068,440 $66,708,808
===============================================================================================================================
Shares Outstanding 5,815,222 6,733,646 (2,580,488)(b) 9,968,380
NET ASSET VALUE, Offering and Redemption Price per Share $ 3.72 $ 6.69 $ 6.69
===============================================================================================================================
(a) Investment securities at cost and value at October 31, 1998 include repurchase agreements of $9,164,000 and $2,834,000 for
Asian Growth and Pacific Basin Funds, respectively.
(b) Adjustment to reflect the exchange of shares of common stock outstanding from Asian Growth Fund to Pacific Basin Fund.
See Notes to Financial Statements
</TABLE>
<PAGE>
PRO FORMA SUMMARY OF INVESTMENTS BY INDUSTRY
<TABLE>
<CAPTION>
% OF INVESTMENT SECURITIES VALUE
- -------------------------------------- ----------------------------------------------
ASIAN GROWTH PACIFIC BASIN PRO FORMA INDUSTRY ASIAN GROWTH PACIFIC BASIN PRO FORMA
FUND FUND COMBINED INDUSTRY CODE FUND FUND COMBINED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0.64 % 0.21 % Agricultural Products AG $ 140,921 $ 140,921
3.98 % 2.65 Auto Parts AP $ 1,752,338 1,752,338
2.73 1.82 Automobiles AM 1,201,407 1,201,407
8.37 13.80 11.98 Banks BK 1,854,461 6,073,311 7,927,772
1.83 1.22 Beverages BV 807,061 807,061
0.74 0.64 0.67 Broadcasting BR 164,168 281,902 446,070
0.74 0.49 Building Materials BD 325,602 325,602
0.28 2.28 1.61 Chemicals CH 61,283 1,005,964 1,067,247
0.64 0.22 Communications--Equipment
& Manufacturing CM 142,477 142,477
2.29 1.52 Computer Related CO 1,008,753 1,008,753
6.82 2.58 4.00 Conglomerates CG 1,509,816 1,137,688 2,647,504
0.97 0.64 Consumer Finance CF 425,641 425,641
0.99 1.21 1.14 Distribution DB 219,404 534,769 754,173
5.34 1.40 2.72 Electric Utilities EU 1,182,944 617,738 1,800,682
1.48 0.99 Electrical Equipment EE 652,193 652,193
5.89 3.92 Electronics EL 2,592,414 2,592,414
3.46 2.30 Electronics-- Semiconductor ES 1,524,243 1,524,243
2.49 1.33 1.72 Engineering & Construction EC 550,845 587,419 1,138,264
0.82 3.51 2.61 Financial FN 181,125 1,546,301 1,727,426
0.85 1.07 1.00 Foods FD 188,454 472,840 661,294
1.09 2.31 1.91 Gaming GM 241,825 1,019,142 1,260,967
1.89 1.98 1.95 Gold & Precious Metals Mining GP 418,055 871,960 1,290,015
0.48 4.23 2.98 Health Care Drugs--Pharmaceuticals HD 106,875 1,864,327 1,971,202
0.54 3.06 2.22 Insurance IN 118,442 1,347,874 1,466,316
0.26 0.17 Investment Bank/Broker Firm IV 113,276 113,276
0.52 0.17 Iron & Steel IS 114,725 114,725
1.04 0.75 0.85 Manufacturing MG 231,087 330,385 561,472
1.18 0.40 Metals Mining MM 261,513 261,513
1.60 0.53 Oil & Gas Related OG 353,570 353,570
3.12 2.08 Personal Care PL 1,374,067 1,374,067
1.10 1.68 1.48 Publishing PB 242,461 738,928 981,389
8.28 4.06 5.47 Real Estate Related RL 1,834,266 1,787,844 3,622,110
41.38 6.44 18.13 Repurchase Agreements RA 9,164,000 2,834,000 11,998,000
2.83 1.88 Retail RT 1,246,889 1,246,889
4.04 4.60 4.41 Services SV 893,864 2,024,840 2,918,704
2.22 1.47 Telecommunications--Cellular
& Wireless TC 975,457 975,457
6.94 3.76 4.82 Telecommunications--Long Distance TL 1,537,893 1,653,852 3,191,745
1.49 4.31 3.37 Telephone TN 330,804 1,896,770 2,227,574
1.92 1.28 Toys TY 846,134 846,134
0.45 0.15 Transportation TR 100,231 100,231
1.28 0.85 Truckers TK 562,087 562,087
===================================================================================================================================
100.00 % 100.00 % 100.00 % $22,145,509 $44,035,416 $66,180,925
====================================================================================================================================
See Notes to Financial Statements
</TABLE>
<PAGE>
FORWARD FOREIGN CURRENCY CONTRACTS
Open at October 31, 1998:
CURRENCY CURRENCY UNREALIZED
CURRENCY/VALUE DATE UNITS SOLD VALUE (US$) LOSS
- ----------------------------------------------------------------------------
ASIAN GROWTH FUND
Singapore Dollar 3/9/1999 515,000 $ 269,929 $ (24,525)
============================================================================
PACIFIC BASIN FUND
Japanese Yen 12/18/1998 1,581,600,000 $10,329,002 $(1,670,998)
Singapore Dollar 3/9/1999 1,000,000 524,134 (47,621)
- ----------------------------------------------------------------------------
$10,853,136 $(1,718,619)
============================================================================
See Notes to Financial Statements
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
PRO FORMA STATEMENT OF INVESTMENT SECURITIES
October 31, 1998
UNAUDITED
<TABLE>
<CAPTION>
SHARES, UNITS OR PRINCIPAL AMOUNT VALUE
- ------------------------------------- --------------------------------------------
Asian Growth Pacific Basin Pro Forma INDUSTRY Asian Growth Pacific Basin Pro Forma
Fund Fund Combined DESCRIPTION CODE Fund Fund Combined
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCKS & WARRANTS 80.84%
AUSTRALIA 18.58%
10,000 85,000 95,000 AMP Ltd(a)(b) IN $ 118,442 $ 1,006,760 $ 1,125,202
40,000 220,000 260,000 Australia & New Zealand Banking
Group Ltd(e) BK 227,762 1,252,690 1,480,452
65,000 65,000 Brambles Industries Ltd SV 1,419,373 1,419,373
75,000 75,000 Commonwealth Bank of Australia BK 928,316 928,316
330,000 330,000 Foster's Brewing Group Ltd BV 807,061 807,061
38,000 38,000 Lend Lease Ltd FN 834,682 834,682
100,000 100,000 National Australia Bank Ltd BK 1,319,276 1,319,276
864 864 News Corp Ltd PB 5,877 5,877
20,000 70,000 90,000 Rio Tinto Ltd GP 249,132 871,960 1,121,092
20,000 130,000 150,000 TABCORP Holdings Ltd GM 132,475 861,089 993,564
50,000 480,000 530,000 Telstra Corp Ltd Installment Receipts(a) TN 197,580 1,896,770 2,094,350
50,000 50,000 WMC Holdings Ltd GP 168,923 168,923
====================================================================================================================================
12,298,168
HONG KONG 13.61%
130,000 110,000 240,000 CLP Holdings Ltd EU 730,054 617,738 1,347,792
180,000 110,000 290,000 Cheung Kong Holdings Ltd RL 1,231,603 752,646 1,984,249
120,000 120,000 Cheung Kong Infrastructure Holdings Ltd EC 305,190 305,190
80,000 80,000 China Telecom Ltd(a) TL 150,271 150,271
436,000 510,000 946,000 COSCO Pacific Ltd SV 213,891 250,194 464,085
42,900 53,000 95,900 Hang Seng Bank Ltd BK 371,069 458,430 829,499
240,000 270,000 510,000 Hong Kong Telecommunications Ltd TL 480,248 540,279 1,020,527
200,000 110,000 310,000 Hutchison Whampoa Ltd CG 1,432,998 788,149 2,221,147
100,000 100,000 Shanghai Industrial Holdings Ltd MG 231,087 231,087
330,000 350,000 680,000 Tianjin Development Holdings Ltd DB 219,404 232,701 452,105
====================================================================================================================================
9,005,952
INDIA 1.07%
13,000 13,000 BSES Ltd Regulation S GDR
Representing 3 OEU Shrs(a)(g) EU 156,000 156,000
Mahanagar Telephone Nigam Ltd
Regulation S Sponsored GDR
25,000 25,000 Representing 2 Ord Shrs(a)(g) TL 265,000 265,000
7,500 7,500 Ranbaxy Laboratories Ltd GDR
Representing HDd Shrs 106,875 106,875
Videsh Sanchar Nigam Ltd Regulation S GDR
17,000 17,000 Representing 1/2 Ord Shr(a)(g) TL 177,650 177,650
====================================================================================================================================
705,525
INDONESIA 1.07%
20,000 20,000 Gulf Indonesia Resources Ltd (a) OG 197,500 197,500
1,500,000 1,500,000 PT Aneka Tambang TBK MM 261,513 261,513
22,652 22,652 PT Bank Internasional Indonesia
Warrants (Exp 2000)(a) BK 146 146
1,035,000 1,035,000 PT Dynaplast(a) CH 61,283 61,283
842,500 842,500 PT Indofood Sukses Makmur(a) FD 188,454 188,454
====================================================================================================================================
708,896
JAPAN 34.12%
50,000 50,000 Ajinomoto Co(c) FD 472,840 472,840
42,500 42,500 Bank of Tokyo-Mitsubishi Ltd (c) BK 394,255 394,255
50,000 50,000 Bridgestone Corp(c) AP 1,100,575 1,100,575
15,000 15,000 Credit Saison Ltd (c) FN 353,342 353,342
40,000 40,000 Dai Nippon Printing Ltd(c) PB 616,150 616,150
60,000 60,000 Fujitsu Ltd(c) CO 638,462 638,462
70,000 70,000 Hitachi Ltd(c) EL 356,217 356,217
20,000 20,000 Jafco Co Ltd(c) CF 425,641 425,641
15,000 15,000 JUSCO Co Ltd(c) RT 241,998 241,998
30,000 30,000 Kao Corp(c) PL 607,569 607,569
54,225 54,225 Kitagawa Industries Ltd(c) MG 330,385 330,385
12,000 12,000 Kyocera Corp(c) EL 530,336 530,336
10,000 10,000 Mabuchi Motor Ltd(c) EE 652,193 652,193
44,000 44,000 Matsushita Electric Industrial Ltd(c) EL 646,048 646,048
40,000 40,000 Mitsui Fudosan Ltd(c) RL 265,683 265,683
50,000 50,000 NEC Corp(c) CO 370,291 370,291
70,000 70,000 NKG Spark Plug Ltd(c) AP 651,763 651,763
27 27 NTT Mobile Communication Network TC 975,457 975,457
<PAGE>
SHARES, UNITS OR PRINCIPAL AMOUNT VALUE
- ------------------------------------- --------------------------------------------
Asian Growth Pacific Basin Pro Forma INDUSTRY Asian Growth Pacific Basin Pro Forma
Fund Fund Combined DESCRIPTION CODE Fund Fund Combined
- ------------------------------------------------------------------------------------------------------------------------------------
$ 10,000 $10,000 Nintendo Co Ltd(c) TY $ 846,134 $ 846,134
15,000 15,000 Nippon COMSYS(c) EC 194,371 194,371
100,000 100,000 Nippon Express Ltd(c) TK 562,087 562,087
100 100 Nippon Telegraph & Telephone(c) TL 782,631 782,631
15,000 15,000 Nomura Securities Ltd(c) IV 113,276 113,276
5,000 5,000 Orix Corp(c) FN 358,277 358,277
16,000 16,000 Rock Field Ltd(c) DB 302,068 302,068
18,000 18,000 Sanix Inc(c) SV 355,273 355,273
50,000 50,000 Sanwa Bank Ltd(c) BK 390,028 390,028
10,000 10,000 Secom Co Ltd(c) EL 742,298 742,298
75,000 75,000 Sekisui Chemical Ltd(c) CH 408,693 408,693
10,000 10,000 Seven-Eleven Japan Ltd(c) RT 760,319 760,319
30,000 30,000 Shin-Etsu Chemical Ltd (c) CH 597,271 597,271
70,000 70,000 Shiseido Co Ltd(c) PL 766,498 766,498
5,000 5,000 Sony Corp(c) EL 317,515 317,515
30,000 30,000 Taisho Pharmaceutical Ltd(c) HD 803,227 803,227
15,000 15,000 Takeda Chemical Industries Ltd(c) HD 487,857 487,857
30,000 30,000 Tokio Marine & Fire Insurance Ltd(c) IN 341,114 341,114
30,000 30,000 Tokyo Broadcasting System(c) BR 281,902 281,902
18,000 18,000 Tokyo Electron Ltd(c) ES 585,429 585,429
200,000 200,000 Toshiba Corp(c) ES 938,814 938,814
50,000 50,000 Toyota Motor(c) AM 1,201,407 1,201,407
15,000 15,000 Uny Co Ltd(c) RT 244,572 244,572
20,000 20,000 Yamanouchi Pharmaceutical Ltd(c) HD 573,243 573,243
====================================================================================================================================
22,583,509
LUXEMBOURG 0.27%
$ 315 315 Korea Asia Fund IDR Representing
500 Shrs(a) FN $181,125 181,125
====================================================================================================================================
MALAYSIA 1.56%
74,000 74,000 Berjaya Sports Toto Berhad(d) GM 44,692 44,692
120,000 120,000 Malakoff Berhad(d) AG 140,921 140,921
120,000 120,000 Malayan Banking Berhad(d) BK 108,947 108,947
320,000 320,000 Metroplex Berhad(d) RL 30,632 30,632
90,000 220,000 310,000 Tanjong PLC(d) GM 64,658 158,053 222,711
100,000 100,000 Telekom Malaysia Berhad(d) TN 133,224 133,224
550,000 550,000 YTL Corp Berhad(d) CG 349,539 349,539
====================================================================================================================================
1,030,666
NEW ZEALAND 0.60%
246,016 246,016 Fletcher Challenge Building BD 325,602 325,602
37,000 37,000 Telecom Corp of New Zealand
Ltd Installment Receipts TL 72,083 72,083
====================================================================================================================================
397,685
PHILIPPINES 0.78%
512,880 512,880 Ayala Land RL 155,707 155,707
1,522,800 1,522,800 Benpres Holdings(a) BR 164,168 164,168
147,600 147,600 First Philippine Holdings B Shrs CG 76,818 76,818
5,000 5,000 Philippine Long Distance Telephone TL 119,579 119,579
====================================================================================================================================
516,272
SINGAPORE 6.07%
65,000 150,000 215,000 City Developments Ltd(c) RL 235,522 543,512 779,034
160,000 200,000 360,000 DBS Land Ltd RL 180,802 226,003 406,805
49,000 117,000 166,000 Development Bank of Singapore Ltd
Foreign Shrs(c) BK 306,946 732,912 1,039,858
70,000 70,000 Overseas Union Bank Ltd Foreign Shrs BK 190,014 190,014
28,000 13,500 41,500 Singapore Press Holdings Ltd PB 242,461 116,901 359,362
250,000 400,000 650,000 Singapore Technologies Engineering Ltd EC 245,655 393,048 638,703
200,000 150,000 350,000 Singapore Telecommunications Ltd TL 345,145 258,859 604,004
====================================================================================================================================
4,017,780
SOUTH KOREA 0.66%
10,000 10,000 Korea Electric Power(a) EU 178,098 178,098
6,000 6,000 LG Information & Communication CM 137,779 137,779
2,610 2,610 Pohang Iron & Steel Ltd IS 114,725 114,725
230 230 Sungmi Telecom Electronics CM 4,698 4,698
====================================================================================================================================
435,300
THAILAND 0.94%
127,000 127,000 Bangkok Expressway PCL Foreign Shrs(a) TR 100,231 100,231
500,000 500,000 Bank of Asia PLC Foreign Shrs BK 244,931 244,931
45,000 45,000 Electricity Generating PLC Foreign Shrs(a) EU 118,792 118,792
16,200 16,200 PTT Exploration & Production PCL Foreign
Shrs(a) OG 156,070 156,070
1,875 1,875 Thai Farmers Bank PLC Warrants
(Exp 2002)(a) BK 296 296
====================================================================================================================================
620,320
<PAGE>
SHARES, UNITS OR PRINCIPAL AMOUNT VALUE
- ------------------------------------- --------------------------------------------
Asian Growth Pacific Basin Pro Forma INDUSTRY Asian Growth Pacific Basin Pro Forma
Fund Fund Combined DESCRIPTION CODE Fund Fund Combined
- ------------------------------------------------------------------------------------------------------------------------------------
620,320
UNITED KINGDOM 1.51%
22,400 21,316 43,716 HSBC Holdings PLC(e) BK $513,297 $ 488,457 $1,001,754
====================================================================================================================================
TOTAL COMMON STOCKS & WARRANTS
(Cost $15,675,137, $44,687,525 and
$60,362,662, respectively) 53,502,952
====================================================================================================================================
OTHER SECURITIES 1.03%
SOUTH KOREA 1.03%
Merrill Lynch International & Co DV
KOSPI 200 Index Low Exercise Price
Call Warrants (Expires 3/11/1999)(f)
(Cost $510,539, $0 and $510,539,
2,026 2,026 respectively) SV 679,973 679,973
====================================================================================================================================
SHORT-TERM INVESTMENTS -- REPURCHASE
AGREEMENTS 18.13% UNITED STATES 18.13%
Repurchase Agreement with State Street
dated 10/30/1998 due 11/2/1998 at
5.350%, repurchased at $9,168,086
(Collateralized by US Treasury Bonds,
due 5/15/2017 at 8.750%, value
$9,330,352) (Cost $9,164,000, $0 and
9,164,000 9,164,000 $9,164,000, respectively) RA 9,164,000 9,164,000
Repurchase Agreement with State Street
dated 10/30/1998 due 11/2/1998 at
5.350%, repurchased at $2,835,263
(Collateralized by US Treasury Bonds,
due 11/15/2015 at 9.875%, value
$2,890,600) (Cost $0, $2,834,000 and
2,834,000 2,834,000 $2,834,000, respectively) RA 2,834,000 2,834,000
====================================================================================================================================
11,998,000
TOTAL INVESTMENT SECURITIES AT VALUE
100.00% (Cost $25,349,676, $47,521,525
and $72,871,201, respectively) (Cost
for Income Tax Purposes $25,546,229,
$48,374,109 and $73,920,338,
respectively) $22,145,509 $44,035,416 $66,180,925
====================================================================================================================================
(a) Security is non-income producing.
(b) Security acquired pursuant to Rule 144A. The Fund deems such securities to be "liquid" since an institutional market exists.
(c) Security has been designated as collateral for forward foreign currency contracts.
(d) Security has been deemed illiquid.
(e) Security has been designated as collateral for installment receipts.
(f) Security is linked to a barometer index of the Korean stock market. The KOSPI 200 is an unmanaged index indicative of the
overall Korean stock market.
(g) Security is a restricted security at October 31, 1998.
See Notes to Financial Statements
</TABLE>
PRO FORMA NOTES TO FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 -- BASIS OF COMBINATION. Pacific Basin Fund (the "Fund") is a series of
INVESCO International Funds, Inc. which is incorporated in Maryland. The Fund is
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Pro Forma Statement of Assets and
Liabilities, including the Statement of Investments at October 31, 1998, and the
related Pro Forma Statements of Operations ("Pro Forma Statements") for the
twelve months ended October 31, 1998, reflect the combined operations of Asian
Growth Fund, a series of INVESCO Speciality Funds, Inc. and Pacific Basin Fund.
The Pro Forma Statements give effect to the proposed transfer of all assets and
liabilities of Asian Growth Fund in exchange for shares in Pacific Fund. Under
generally accepted accounting principles, the historical cost of investment
securities will be carried forward to the surviving entity and the results of
operations of the Asian Growth Fund for pre-combination periods will not be
restated. The Pro Forma Statements do not reflect the expenses of either Fund in
carrying out its obligations under the proposed Agreement and Plan of
Reorganization and Termination. The Pro Forma Statements should be read in
conjunction with the historical financial statements of each Fund included in
their respective Statements of Additional Information.
NOTE 2 -- SHARES OUTSTANDING. Shareholders of Asian Growth Fund would become
shareholders of Pacific Basin Fund upon receiving shares of Pacific Basin Fund
equal to the value of their holdings in Asian Growth Fund as of the date of the
reorganization.
NOTE 3 -- PRO FORMA OPERATIONS. The Pro Forma Statement of Operations assumes
that the combined gross investment income is equal to the sum of each Fund's
actual gross investment income for the twelve months ended October 31, 1998.
Operating expenses combine the actual expenses of each Fund with certain
expenses adjusted to reflect the changes in expenses resulting from the
combination. The Investment Advisory, Distribution Expenses and Administrative
Fees have been calculated for the combined Fund based on contractual rates
expected to be in effect for the Pacific Basin Fund at the time of
reorganization based upon the combined level of average net assets for the
twelve months ended October 31, 1998.
<PAGE>
INVESCO INTERNATIONAL FUNDS, INC.
PART C
OTHER INFORMATION
Item 15. Indemnification
---------------
Indemnification provisions for officers and directors of Registrant are
set forth in Article VII, Section 2 of the Articles of Incorporation, and are
hereby incorporated by reference. See Item 16(1) below. Under this Article,
officers and directors will be indemnified to the fullest extent permitted to
directors by the Maryland General Corporation Law, subject only to such
limitations as may be required by the Investment Company Act of 1940, as amended
("1940 Act"), and the rules thereunder. Under the 1940 Act, directors and
officers of Registrant cannot be protected against liability to Registrant or
its shareholders to which they would be subject because of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties of their office.
Registrant also maintains liability insurance policies covering its directors
and officers.
Item 16. Exhibits
--------
(1) Articles of Incorporation.(2)
(a) Articles Supplementary to the Fund's Articles of Incorporation
dated November 11, 1997.(4)
(b) Articles Supplementary to Articles of Incorporation dated
December 4, 1998.(6)
(2) By-Laws, as of July 21, 1993.(3)
(3) Voting trust agreement - none.
(4)(a) Agreement and Plan of Reorganization and Termination is attached
hereto as Appendix A to the Prospectus/Proxy Statement.
(b) Agreement and Plan of Conversion and Termination attached hereto
as Appendix C to the Prospectus/Proxy Statement.
(5) Provisions of instruments defining the rights of holders of
securities are contained in Articles III, IV, VI, VIII of the
Registrant's Articles of Incorporation as amended, and Articles I,
II, V, VI, VII, VIII, IX and X of the Registrant's Bylaws.
(6)(i) Investment Advisory Agreement dated February 28, 1997.(2)
(a) Amendment to Advisory Agreement dated January 30, 1998.(4)
(b) Amendment to Advisory Agreement dated September 18, 1998.(6)
(ii)(a) Sub-advisory Agreement dated February 28, 1998 between
INVESCO Funds Group, Inc. and INVESCO Asset Management
Limited with respect to European, Pacific Basin and
International Funds.(2)
(b) Sub-advisory Agreement dated January 30, 1998 between
INVESCO Funds Group, Inc. and INVESCO Asset Management
Limited with respect to Emerging Markets Fund.(4)
(c) Sub-advisory Agreement dated September 18, 1998 between
INVESCO Funds Group, Inc. and INVESCO Global Asset
<PAGE>
Management (N.A.) with respect to International Blue Chip
Fund.(6)
(7)(a) General Distribution Agreement dated February 28, 1997.(2)
(b) Distribution Agreement between Registrant and INVESCO
Distributors, Inc. dated September 30, 1997.(3)
(8) Defined Benefit Deferred Compensation Plan for Non-Interested
Directors and Trustees.(5)
(9) Custody Agreement between Registrant and State Street Bank and
Trust Company dated July 1, 1993.(3)
(a) Amendment to Custody Agreement dated October 25, 1995.(1)
(b) Data Access Service Addendum.(3)
(c) Additional Fund Letter dated November 13, 1994.(4)
(d) Additional Fund Letter dated July 23, 1998.(6)
(10) Plan and Agreement of Distribution dated November 1, 1997 adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940.(3)
(11) Opinion and consent of Kirkpatrick & Lockhart LLP regarding the
legality of securities being registered (filed herewith).
(12)(a) Opinion and consent of Kirkpatrick & Lockhart LLP regarding
certain tax matters in connection with INVESCO Pacific Basin
Fund (to be filed).
(b) Opinion and Consent of Kirkpatrick & Lockhart LLP regarding
certain tax matters in connection with INVESCO Asian Growth
Fund (to be filed).
(13)(a) Transfer Agency Agreement dated February 28, 1997.(2)
(b) Administrative Services Agreement between Registrant and
INVESCO Funds Group, Inc. dated February 28, 1997.(2)
(14) Consent of PricewaterhouseCoopers LLP (filed herewith).
(15) Financial statements omitted from part B - none.
(16) Copies of manually signed Powers of Attorney - incorporated by
reference to Powers of Attorney previously filed with the
Securities and Exchange Commission on June 29, 1993, February 24,
1994, February 17, 1995, December 22, 1995 and November 17, 1997.
(17) Additional Exhibits.
(a) Proxy Cards (filed herewith).
- ---------------
(1) Incorporated by reference from Post-Effective Amendment No. 3 to the
registration statement, filed December 22, 1995.
(2) Incorporated by reference from Post-Effective Amendment No. 4 to the
registration statement, filed February 25, 1997.
(3) Incorporated by reference from Post-Effective Amendment No. 5 to the
registration statement, filed November 17, 1997.
(4) Incorporated by reference from Post-Effective Amendment No. 6 to the
registration statement, filed February 26, 1998.
(5) Incorporated by reference from Post-Effective Amendment No. 7 to the
registration statement, filed July 10, 1998.
(6) Incorporated by reference from Post-Effective Amendment No. 8
to the registration statement, filed December 30, 1998.
<PAGE>
Item 17. Undertakings
------------
(1) The undersigned Registrant agrees that prior to any public
re-offering of the securities registered through the use of the 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) of the Securities Act of
1933, the re-offering prospectus will contain the information called for by the
applicable registration form for re-offering 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 of 1933, 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.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, as amended, this
Registration Statement has been signed on behalf of Registrant, in the City of
Denver and the State of Colorado, on this 22nd day of January 1999.
Attest: INVESCO International Funds, Inc.
/s/ Glen A. Payne By:/s/ Mark H. Williamson
- ----------------- ----------------------
Glen A. Payne Mark H. Williamson
Secretary President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Mark H. Williamson President, Director January 22, 1999
- ---------------------- and Chief Executive Officer
Mark H. Williamson
/s/ Ronald L. Grooms Treasurer and Chief Financial January 22, 1999
- ---------------------- and Accounting Officer
Ronald L. Grooms
Director January 22, 1999
- ---------------------
Victor L. Andrews*
Director January 22, 1999
- ----------------
Bob R. Baker*
Director January 22, 1999
- --------------------
Charles W. Brady*
Director January 22, 1999
- ------------------
Wendy L. Gramm*
Director January 22, 1999
- ----------------------
Lawrence H. Budner*
Director January 22, 1999
- ------------------
Fred A. Deering*
Director January 22, 1999
- --------------
Larry Soll*
<PAGE>
Director January 22, 1999
- -------------------
Kenneth T. King*
Director January 22, 1999
- --------------------
John W. McIntyre*
By *____________________ January 22, 1999
Edward F. O'Keefe
Attorney in Fact
By */s/ Glen A. Payne January 22, 1999
------------------
Glen A. Payne
Attorney in Fact
* Original Powers of Attorney authorizing Edward F. O'Keefe and Glen A. Payne,
and each of them, to execute this Registration Statement on Form N-14 of the
Registrant on behalf of the above-named directors and officers of the Registrant
have been filed with the Securities and Exchange Commission on June 29, 1993,
February 24, 1994, February 17, 1995, December 22, 1995, November 17, 1997,
respectively.
<PAGE>
EXHIBIT INDEX
(1) Articles of Incorporation.(2)
(a) Articles Supplementary to the Fund's Articles of Incorporation
dated November 11, 1997.(4)
(b) Articles Supplementary to Articles of Incorporation dated
December 4, 1998.(6)
(2) By-Laws, as of July 21, 1993.(3)
(3) Voting trust agreement - none.
(4) (a) Agreement and Plan of Reorganization and Termination is
attached hereto as Appendix A to the Prospectus/Proxy
Statement.
(b) Agreement and Plan of Conversion and Termination
attached hereto as Appendix C to the Prospectus/Proxy
Statement.
(5) Provisions of instruments defining the rights of holders of
securities are contained in Articles III, IV, VI, VIII of the
Registrant's Articles of Incorporation as amended, and Articles I,
II, V, VI, VII, VIII, IX and X of the Registrant's Bylaws.
(6)(i) Investment Advisory Agreement dated February 28, 1997.(2)
(a) Amendment to Advisory Agreement dated January 30, 1998.(4)
(b) Amendment to Advisory Agreement dated September 18, 1998.(6)
(ii)(a) Sub-advisory Agreement dated February 28, 1998 between
INVESCO Funds Group, Inc. and INVESCO Asset Management
Limited with respect to European, Pacific Basin and
International Funds.(2)
(b) Sub-advisory Agreement dated January 30, 1998 between
INVESCO Funds Group, Inc. and INVESCO Asset Management
Limited with respect to Emerging Markets Fund.(4)
(c) Sub-advisory Agreement dated September 18, 1998 between
INVESCO Funds Group, Inc. and INVESCO Global Asset
Management (N.A.) with respect to International Blue Chip
Fund.(6)
(7) (a) General Distribution Agreement dated February 28, 1997.(2)
(b) Distribution Agreement between Registrant and INVESCO
Distributors, Inc. dated September 30, 1997.(3)
(8) Defined Benefit Deferred Compensation Plan for Non-Interested
Directors and Trustees.(5)
(9) Custody Agreement between Registrant and State Street Bank and
Trust Company dated July 1, 1993.(3)
(a) Amendment to Custody Agreement dated October 25, 1995.(1)
(b) Data Access Service Addendum.(3)
(c) Additional Fund Letter dated November 13, 1994.(4)
(d) Additional Fund Letter dated July 23, 1998.(6)
(10) Plan and Agreement of Distribution dated November 1, 1997 adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940.(3)
(11) Opinion and consent of Kirkpatrick & Lockhart LLP regarding the
legality of securities being registered (filed herewith).
(12) (a) Opinion and consent of Kirkpatrick & Lockhart LLP regarding
certain tax matters in connection with INVESCO Pacific Basin
Fund (to be filed).
<PAGE>
(b) Opinion and Consent of Kirkpatrick & Lockhart LLP regarding
certain tax matters in connection with INVESCO Asian Growth
Fund (to be filed).
(13) (a) Transfer Agency Agreement dated February 28, 1997.(2)
(b) Administrative Services Agreement between Registrant and
INVESCO Funds Group, Inc. dated February 28, 1997.(2)
(14) Consent of PricewaterhouseCoopers LLP (filed herewith).
(15) Financial statements omitted from part B - none.
(16) Copies of manually signed Powers of Attorney - incorporated by
reference to Powers of Attorney previously filed with the
Securities and Exchange Commission on June 29, 1993, February 24,
1994, February 17, 1995, December 22, 1995 and November 17, 1997.
(17) Additional Exhibits.
(a) Proxy Cards (filed herewith).
- ---------------
(1) Incorporated by reference from Post-Effective Amendment No. 3 to
the registration statement, filed December 22, 1995.
(2) Incorporated by reference from Post-Effective Amendment No. 4 to
the registration statement, filed February 25, 1997.
(3) Incorporated by reference from Post-Effective Amendment No. 5 to
the registration statement, filed November 17, 1997.
(4) Incorporated by reference from Post-Effective Amendment No. 6 to
the registration statement, filed February 26, 1998.
(5) Incorporated by reference from Post-Effective Amendment No. 7 to the
registration statement, filed July 10, 1998.
(6) Incorporated by reference from Post-Effective Amendment No. 8 to
the registration statement, filed December 30, 1998.
KIRKPATRICK & LOCKHART LLP
1800 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20036-1800
TELEPHONE (202) 778-9000
FACSIMILE (202) 778-9100
www.kl.com
Exhibit 11
January 22, 1999
INVESCO International Funds, Inc.
7800 East Union Avenue
Denver, CO 80237
Ladies and Gentlemen:
You have requested our opinion as to certain matters regarding the
issuance by INVESCO International Funds, Inc. ("Company"), a corporation
organized under the laws of the State of Maryland, of shares of common stock
(the "Shares") of INVESCO Pacific Basin Fund ("Pacific Basin Fund"), a series of
the Company, pursuant to an Agreement and Plan of Reorganization and Termination
("Plan") between the Company, on behalf of Pacific Basin Fund and INVESCO
Specialty Funds, Inc., on behalf of its series INVESCO Asian Growth Fund ("Asian
Growth Fund"). Under the Plan, Pacific Basin Fund would acquire the assets of
Asian Growth Fund in exchange for the Shares and the assumption by Pacific Basin
Fund of Asian Growth Fund's liabilities. In connection with the Plan, the
Company is about to file a Registration Statement on Form N-14 (the "N-14") for
the purpose of registering the Shares under the Securities Act of 1933, as
amended ("1933 Act"), to be issued pursuant to the Plan.
We have examined originals or copies believed by us to be genuine of the
Company's Articles of Incorporation and By-Laws, minutes of meetings of the
Company's board of directors, the form of Plan, and such other documents
relating to the authorization and issuance of the Shares as we have deemed
relevant. Based upon that examination, we are of the opinion that the Shares
being registered by the N-14 may be issued in accordance with the Plan and the
Company's Articles of Incorporation and By-Laws, subject to compliance with the
1933 Act, as amended, the Investment Company Act of 1940, as amended, and
applicable state laws regulating the distribution of securities, and when so
issued, those Shares will be legally issued, fully paid and non-assessable.
We hereby consent to this opinion accompanying the Form N-14 that the
Company plans to file with the Securities and Exchange Commission and to the
reference to our firm under the caption "Miscellaneous -- Legal Matters" in the
Prospectus/Proxy Statement filed as part of the Form N-14.
Sincerely yours,
/s/ KIRKPATRICK & LOCKHART LLP
KIRKPATRICK & LOCKHART LLP
Exhibit 14
PRICEWATERHOUSECOPPERS
- --------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS LLP
950 SEVENTEENTH STREET
SUITE 2500
DENVER CO 80202
TELEPHONE (303) 893 8100
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this registration statement on Form
N-14 (the "Registration Statement") of our report dated September 9, 1998
relating to the financial statements and financial highlights appearing on July
31, 1998 Annual Report to Shareholders of INVESCO Asian Growth Fund (one of the
portfolios constituting INVESCO Specialty Funds, Inc.) and our report dated
December 9, 1998 relating to the financial statements and financial highlights
appearing in the October 31, 1998 Annual Report to Shareholders of INVESCO
Pacific Basin Fund (one of the portfolios constituting INVESCO International
Funds, Inc.,) which are also incorporated by reference into the Statement of
Additional Information.
We also consent to the reference to us under the heading "experts" in the
combined Prospectus/Proxy Statement, constituting part of this Registration
Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
January 22, 1999
Exhibit 17
[Name and Address of Proxy Solicitor]
INVESCO ASIAN GROWTH FUND
INVESCO SPECIALTY FUNDS, INC.
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
MAY 20, 1999
This proxy is being solicited on behalf of the Board of Directors of INVESCO
Specialty Funds, Inc. ("Specialty Funds") and relates to the proposals with
respect to the Company and to INVESCO Asian Growth Fund, a series of the Company
("Asian Growth Fund"). The undersigned hereby appoints as proxies [ ] and [ ],
and each of them (with power of substitution), to vote all shares of common
stock of the undersigned in the Fund at the Special Meeting of Shareholders to
be held at 10:00 a.m., Mountain Standard Time, on May 20, 1999, at the offices
of the Company, 7800 E. Union Avenue, Denver, Colorado 80237, and any
adjournment thereof ("Meeting"), with all the power the undersigned would have
if personally present.
The shares represented by this proxy will be voted as instructed. Unless
indicated to the contrary, this proxy shall be deemed to grant authority to vote
"FOR" all proposals relating to the Company and the Fund with discretionary
power to vote upon such other business as may properly come before the Meeting.
YOUR VOTE IS IMPORTANT. IF YOU ARE NOT VOTING BY PHONE, FACSIMILE OR
INTERNET, PLEASE DATE AND SIGN THIS PROXY BELOW AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE.
TO VOTE BY TOUCH-TONE PHONE OR THE INTERNET, PLEASE CALL 1-800-[ ]
TOLL FREE OR VISIT WWW.[ ].COM. TO VOTE BY FACSIMILE
TRANSMISSION, PLEASE FAX YOUR COMPLETED PROXY CARD TO 1-800 [ ]-[ ]
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
[INVXXX] KEEP THIS PORTION FOR YOUR RECORDS
<PAGE>
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
INVESCO ASIAN GROWTH FUND
INVESCO INTERNATIONAL FUNDS, INC.
VOTE ON DIRECTORS FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
4. Election of the Company's Board [ ] [ ] [ ] To withhold
of Directors; (1) Charles W. authority to
Brady; (2) Fred A. Deering; vote for any
(3) Mark H. Williamson; individual
(4) Dr. Victor L. Andrews; nominee(s),
(5) Bob R. Baker; (6) Lawrence mark "For All
H. Budner; (7) Dr. Wendy Lee Except" and
Gramm; (8) Kenneth T. King; write the
(9) John W. McIntyre; and nominee's
(10) Dr. Larry Soll number on the
line below.
-------------
VOTE ON PROPOSALS FOR AGAINST ABSTAIN
1. Approval of an agreement and plan of [ ] [ ] [ ]
reorganization and termination under
which INVESCO Pacific Basin Fund
("Pacific Basin Fund"), a series of
INVESCO International Funds, Inc.,
("International Funds") would acquire
all of the assets of Asian Growth Fund
in exchange solely for shares of
Pacific Basin Fund and the assumption
by Pacific Basin Fund of all of Asian
Growth Fund's liabilities, followed by
the distribution of those shares to
the shareholders of Asian Growth Fund,
all as described in the accompanying
Prospectus/Proxy Statement;
2. Approval of an Agreement and Plan of
Conversion and Termination providing
for the conversion of Asian Growth
Fund from a separate series of Specialty
Funds to a separate series of International
Funds;
3. Approval of changes to the fundamental [ ] [ ] [ ]
investment policies;
[ ] To vote against the proposed changes to
one or more of the specific fundamental
investment policies, but to approve others,
PLACE AN "X" IN THE BOX AT left and
indicate the number(s)(as set forth in the
proxy statement) of the investment policy
or policies you do not want to change on
the line below.
------------------------------------------
5. Ratification of the selection of [ ] [ ] [ ]
PricewaterhouseCoopers LLP as the
Company's Independent Public Accountants;
YOUR VOTE IS IMPORTANT. IF YOU ARE NOT VOTING BY PHONE, FACSIMILE OR INTERNET,
PLEASE SIGN AND DATE THIS PROXY BELOW AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
TO VOTE BY TOUCH-TONE PHONE OR THE INTERNET, PLEASE CALL 1-800-[ ]
TOLL FREE OR VISIT WWW.[ ].COM. TO VOTE BY FACSIMILE TRANSMISSION, PLEASE FAX
YOUR COMPLETED PROXY CARD TO 1-800-[ ]-[ ]
<PAGE>
Please sign exactly as name appears hereon. If stock is held in the name of
joint owners, each should sign. Attorneys-in-fact, executors, administrators,
etc. should so indicate. If shareholder is a corporation or partnership, please
sign in full corporate or partnership name by authorized person
- ------------------------------- -----------------------------
Signature Date
- ------------------------------- -----------------------------
Signature (Joint Owners) Date
