UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-8050
---------------------
Asia Tigers Fund, Inc.
------------------------------------------------------
(Exact name of registrant as specified in charter)
200 Park Avenue
New York, NY 10166
------------------------------------------------------
(Address of principal executive offices) (Zip code)
Simpson Thacher Bartlett LLP
425 Lexington Avenue
New York, NY 10017
------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-667-4711
-------------------
Date of fiscal year end: October 31, 2003
------------------------
Date of reporting period: October 31, 2003
-----------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Asia Tigers Fund, Inc.
December 11, 2003
DEAR FUND SHAREHOLDER,
We are pleased to provide you with the audited financial statements of The Asia
Tigers Fund, Inc. (the "Fund") for the fiscal year ended October 31, 2003.
The Fund's net asset value ("NAV") closed at $10.62 on October 31, 2003,
representing an increase of 38.8% for the Fund's fiscal year. The Fund
outperformed its benchmark, the MSCI AC Asia Free ex-Japan*, which increased
34.8% during the same 12-month period.
Asian equity markets had a difficult start to 2003, weighed down by both
geopolitical uncertainty and the frightening outbreak of SARs (i.e., severe
acute respiratory syndrome). However, remarkably, both the U.S. military victory
in Iraq and the containment of the SARs virus were achieved far more quickly
than even optimists forecast. As a result, Asian markets rebounded strongly from
first quarter losses and, in fact, have continued to push higher throughout the
year. The Federal Reserve's aggressive reflationary efforts, increased fiscal
spending and a weak dollar have all helped fuel a strong U.S. economic recovery,
all of which, in our opinion, have had a significant positive impact on the
Asian region.
On behalf of the Board of Directors, we thank you for your participation and
continued support of the Fund. If you have any questions, please do not hesitate
to call our toll-free number, 800-421-4777.
Sincerely,
/s/ BRYAN MCKIGNEY
Bryan McKigney
Chairman, President and Director
* The benchmark is an unmanaged index. Investors cannot invest directly in the
benchmark.
1
THE ASIA TIGERS FUND, INC.
- --------------------------------------------------------------------------------
CHANGE IN INVESTMENT POLICY
On April 30, 2002, the Board of Directors of the Fund approved a change to the
Fund's investment policies in connection with Rule 35d-1 under the Investment
Company Act of 1940. Under normal conditions, the Fund will invest at least 80%
of the value of its assets in equity securities of Asian Companies (as defined
in the Fund's prospectus). Previously, the Fund's investment policies stated
that the Fund would invest at least 65% of the value of its assets in such
securities. The Board also adopted a policy to provide the stockholders of the
Fund with 60 days' notice of any change to the investment policy adopted if such
notice is required by Rule 35d-1.
FUNDAMENTAL PERIODIC REPURCHASE POLICY
The Fund has adopted the following fundamental policy regarding periodic
repurchases:
a) The Fund will make offers to repurchase its shares at quarterly
intervals pursuant to Rule 23c-3 under the Investment Company Act of
1940, as amended from time to time ("Offers"). The Board of Directors
may place such conditions and limitations on Offers as may be permitted
under Rule 23c-3.
b) 14 days prior to the last Friday of each of the Fund's fiscal quarters,
or the next business day if such Friday is not a business day, will be
the deadline (the "Repurchase Request Deadline") by which the Fund must
receive repurchase requests submitted by stockholders in response to the
most recent Offer.
c) The date on which the repurchase price for shares is to be determined
(the "Repurchase Pricing Date") shall occur no later than the last
Friday of each of the Fund's fiscal quarters, or the next business day
if such day is not a business day.
d) Offers may be suspended or postponed under certain circumstances, as
provided for in Rule 23c-3.
(For further details, see Notes D and E to the Financial Statements.)
- --------------------------------------------------------------------------------
2
THE ASIA TIGERS FUND, INC.
SCHEDULE OF INVESTMENTS OCTOBER 31, 2003
COMMON STOCKS (99.49% of holdings)
NUMBER PERCENT OF
OF SHARES SECURITY HOLDINGS COST VALUE
- --------------------------------------------------------------------------------------------------------
CHINA 3.85%
COAL 1.53%
1,894,000 Yanzhou Coal Mining Company Limited ............ $ 677,421 $ 1,390,192
------------- -------------
ENERGY SOURCES 2.32%
25,999 China Petroleum and Chemical Corporation ADR .. 488,257 852,507
34,156 PetroChina Company Limited ADR ................ 700,680 1,243,279
------------- -------------
1,188,937 2,095,786
------------- -------------
TOTAL CHINA .................................... 1,866,358 3,485,978
------------- -------------
HONG KONG 21.57%
APPAREL/SHOES MANUFACTURING 0.49%
156,600 Yue Yuen Industrial Holdings Limited ........... 168,825 443,644
------------- -------------
AUTOMOBILES 0.93%
1,019,000 Denway Motors Limited .......................... 407,869 839,797
------------- -------------
BANKING 2.60%
82,400 Dah Sing Financial Group ....................... 386,373 575,635
79,600 Hang Seng Bank Limited ......................... 794,009 994,271
51,700 HSBC Holdings PLC .............................. 589,185 778,926
------------- -------------
1,769,567 2,348,832
------------- -------------
COMPUTERS 0.79%
2,088,000 Digital China Holdings Limited ................. 664,116 719,241
------------- -------------
CONSUMER GOODS & SERVICES 0.75%
402,000 Li & Fung Limited .............................. 355,668 675,548
------------- -------------
FINANCIAL SERVICES 1.38%
572,000 Hong Kong Exchanges & Clearing Limited ......... 879,093 1,244,809
------------- -------------
INFRASTRUCTURE 0.01%
59,200 Hopewell Highway Infrastructure
Warrants - expiration date 08/05/06+ ......... 6,072 12,197
------------- -------------
MULTI - INDUSTRY 3.50%
407,800 Hutchison Whampoa Limited ...................... 2,025,472 3,163,911
------------- -------------
3
THE ASIA TIGERS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 2003
COMMON STOCKS (continued)
NUMBER PERCENT OF
OF SHARES SECURITY HOLDINGS COST VALUE
- --------------------------------------------------------------------------------------------------------
HONG KONG (CONTINUED)
REAL ESTATE 6.30%
227,700 Cheung Kong Holdings Limited ................... $ 1,812,063 $ 1,898,553
1,112,090 China Vanke Company Limited .................... 604,555 680,226
592,000 Hopewell Holdings Limited ...................... 427,067 983,403
252,300 Sun Hung Kai Properties Limited ................ 1,738,268 2,136,156
------------- -------------
4,581,953 5,698,338
------------- -------------
RETAIL FOOD CHAINS 0.63%
634,000 Cafe De Coral Holdings Limited ................. 492,163 571,488
------------- -------------
RETAILING 0.96%
277,000 Esprit Holdings Limited ........................ 364,442 870,341
------------- -------------
TELECOMMUNICATIONS 2.46%
783,000 China Mobile (Hong Kong) Limited ............... 2,626,386 2,223,260
------------- -------------
TRANSPORTATION 0.77%
738,000 Travelsky Technology Limited ................... 492,210 693,744
------------- -------------
TOTAL HONG KONG ................................ 14,833,836 19,505,150
------------- -------------
INDIA 8.49%
BANKING 3.37%
88,800 Canara Bank Limited ............................ 181,678 263,441
160,500 Corporation Bank ............................... 599,234 812,948
77,500 Jammu and Kashmir Bank Limited ................. 421,784 476,766
139,680 State Bank of India ............................ 568,229 1,492,345
------------- -------------
1,770,925 3,045,500
------------- -------------
COMMERCIAL VEHICLES 0.75%
135,000 Ashok Leyland Limited .......................... 354,575 680,362
------------- -------------
ENERGY SOURCES 1.77%
74,700 Hindustan Petroleum Corporation Limited ........ 174,549 542,613
98,883 Reliance Industries Limited .................... 293,665 1,061,051
------------- -------------
468,214 1,603,664
------------- -------------
PHARMACEUTICALS 0.77%
32,089 Ranbaxy Laboratories Limited ................... 238,477 696,123
------------- -------------
4
THE ASIA TIGERS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 2003
COMMON STOCKS (CONTINUED)
NUMBER PERCENT OF
OF SHARES SECURITY HOLDINGS COST VALUE
- --------------------------------------------------------------------------------------------------------
INDIA (CONTINUED)
TECHNOLOGY 1.23%
10,594 Infosys Technologies Limited ................... $ 1,011,575 $ 1,108,362
------------- -------------
UTILITIES - ELECTRIC & GAS 0.60%
51,100 Bharat Heavy Electricals Limited ............... 263,367 542,910
------------- -------------
TOTAL INDIA .................................... 4,107,133 7,676,921
------------- -------------
INDONESIA 1.02%
BANKING 0.59%
16,218,000 PT Bank Pan Indonesia .......................... 431,934 534,460
------------- -------------
BEVERAGES & TOBACCO 0.43%
763,000 PT Hanjaya Mandala Sampoerna ................... 357,991 390,637
------------- -------------
TOTAL INDONESIA ................................ 789,925 925,097
------------- -------------
KOREA 26.82%
APPLIANCE & HOUSEHOLD DURABLES 10.73%
24,440 Samsung Electronics Company Limited ............ 4,930,458 9,705,787
------------- -------------
AUTOMOBILES 0.72%
19,620 Hyundai Motor Company Limited .................. 460,472 654,000
------------- -------------
BANKING 3.61%
68,781 Kookmin Bank ................................... 1,405,234 2,510,637
52,430 Shinhan Financial Group Company Limited ........ 555,042 753,114
------------- -------------
1,960,276 3,263,751
------------- -------------
BEVERAGES & TOBACCO 0.56%
27,142 Kook Soon Dang Brewery Company Limited ......... 383,218 504,541
------------- -------------
CHEMICALS 0.69%
15,572 LG Chem Limited ................................ 527,478 624,985
------------- -------------
COMPUTERS 0.77%
6,767 Samsung SDI Company Limited .................... 443,779 697,570
------------- -------------
CONSTRUCTION & HOUSING 0.54%
30,400 LG Engineering & Construction Corporation ...... 308,842 486,759
------------- -------------
5
THE ASIA TIGERS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 2003
COMMON STOCKS (CONTINUED)
NUMBER PERCENT OF
OF SHARES SECURITY HOLDINGS COST VALUE
- --------------------------------------------------------------------------------------------------------
KOREA (CONTINUED)
FOOD & HOUSEHOLD PRODUCTS 0.64%
11,620 CJ Corporation ................................. $ 434,307 $ 580,264
------------- -------------
GAMBLING 0.68%
48,800 Kangwon Land Incorporated ...................... 670,261 616,443
------------- -------------
INSURANCE 0.65%
62,580 LG Insurance Company Limited ................... 301,197 296,111
5,020 Samsung Fire & Marine Insurance
Company Limited .............................. 298,052 286,736
------------- -------------
599,249 582,847
------------- -------------
METALS - STEEL 2.42%
9,070 POSCO .......................................... 1,048,340 1,057,592
39,050 POSCO ADR ...................................... 1,195,125 1,131,669
------------- -------------
2,243,465 2,189,261
------------- -------------
TELECOMMUNICATIONS 3.24%
20,120 KT Corporation ................................. 904,084 800,720
12,040 SK Telecom Company Limited ..................... 1,947,061 2,126,202
------------- -------------
2,851,145 2,926,922
------------- -------------
TRANSPORTATION - AIR 0.00%
5 Korean Air Company Limited ..................... 48 67
------------- -------------
UTILITIES - ELECTRIC & GAS 1.57%
73,580 Korea Electric Power Corporation ............... 1,881,744 1,420,619
------------- -------------
TOTAL KOREA .................................... 17,694,742 24,253,816
------------- -------------
MALAYSIA 5.18%
AGRICULTURE 0.87%
392,900 IOI Corporation ................................ 517,418 785,802
------------- -------------
BANKING 0.77%
487,000 Hong Leong Bank ................................ 707,875 698,462
------------- -------------
LEISURE & TOURISM 1.26%
394,700 Resorts World .................................. 839,421 1,142,556
------------- -------------
6
THE ASIA TIGERS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 2003
COMMON STOCKS (CONTINUED)
NUMBER PERCENT OF
OF SHARES SECURITY HOLDINGS COST VALUE
- --------------------------------------------------------------------------------------------------------
MALAYSIA (CONTINUED)
MULTI - INDUSTRY 0.66%
518,000 Berjaya Sports Toto ............................ $ 802,880 $ 594,339
------------- -------------
OIL EQUIPMENT & SERVICES 0.23%
154,000 Dialog Group ................................... 216,587 210,737
------------- -------------
SHIPPING & TRANSPORT 0.71%
199,500 Malaysia International Shipping Corporation .... 455,085 640,502
------------- -------------
TELECOMMUNICATIONS 0.68%
307,000 Maxis Communications ........................... 416,271 609,962
------------- -------------
TOTAL MALAYSIA ................................. 3,955,537 4,682,360
------------- -------------
SINGAPORE 9.95%
BANKING 3.77%
236,100 DBS Group Holdings Limited ..................... 1,507,960 1,939,314
188,456 United Overseas Bank Limited ................... 1,088,564 1,472,194
------------- -------------
2,596,524 3,411,508
------------- -------------
ELECTRONIC COMPONENTS & INSTRUMENTS 0.94%
78,600 Venture Corporation Limited .................... 545,788 853,298
------------- -------------
FOOD & HOUSEHOLD PRODUCTS 1.21%
943,000 People's Food Holdings Limited ................. 426,730 601,244
581,000 Want Want Holdings Limited ..................... 373,102 490,945
------------- -------------
799,832 1,092,189
------------- -------------
MACHINERY & ENGINEERING 0.65%
528,000 Singapore Technologies Engineering Limited ..... 554,392 585,339
------------- -------------
MULTI - INDUSTRY 0.44%
524,000 SembCorp Industries Limited .................... 406,347 397,303
------------- -------------
REAL ESTATE 0.67%
615,500 Keppel Land Limited ............................ 497,364 601,026
------------- -------------
TELECOMMUNICATIONS 0.82%
753,000 Singapore Telecommunications Limited ........... 785,863 743,943
------------- -------------
7
THE ASIA TIGERS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 2003
COMMON STOCKS (CONTINUED)
NUMBER PERCENT OF
OF SHARES SECURITY HOLDINGS COST VALUE
- --------------------------------------------------------------------------------------------------------
SINGAPORE (CONTINUED)
TRANSPORTATION - AIR 0.62%
81,000 Singapore Airlines Limited ..................... $ 514,277 $ 562,972
------------- -------------
WATER TREATMENT 0.83%
710,000 Hyflux Limited ................................. 539,962 750,399
------------- -------------
TOTAL SINGAPORE ................................ 7,240,349 8,997,977
------------- -------------
TAIWAN 17.09%
BANKING 4.08%
1,423,170 Chinatrust Financial Holding Company Limited ... 1,110,588 1,478,672
2,231,569 SinoPac Holdings ............................... 894,299 1,208,561
1,416,045 Taishin Financial Holdings Company Limited ..... 500,206 1,004,464
------------- -------------
2,505,093 3,691,697
------------- -------------
CONSUMER GOODS & SERVICES 0.31%
562,541 Test-Rite International Company Limited ........ 282,516 276,510
------------- -------------
DATA PROCESSING & REPRODUCTION 1.17%
700,787 Compal Electronics Incorporated ................ 522,227 1,062,267
------------- -------------
ELECTRICAL & ELECTRONICS 7.27%
612,500 Delta Electronics Incorporated ................. 760,383 782,413
365,957 Hon Hai Precision Industry Company Limited ..... 1,384,142 1,637,247
2,106,798 Taiwan Semiconductor Manufacturing
Company Limited+ ............................. 4,838,326 4,154,685
------------- -------------
6,982,851 6,574,345
------------- -------------
ELECTRONIC COMPONENTS & INSTRUMENTS 2.79%
550,376 Advantech Company Limited ...................... 762,714 826,171
169,527 Ambit Microsystems Corporation ................. 506,804 464,047
1,152,618 Elan Microelectronics Corporation .............. 1,134,111 1,044,905
213,000 Taiwan Cellular Corporation .................... 198,600 191,214
------------- -------------
2,602,229 2,526,337
------------- -------------
INTERNET 0.38%
464,000 Gamania Digital Entertainment
Company Limited .............................. 350,944 345,524
------------- -------------
8
THE ASIA TIGERS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 2003
COMMON STOCKS (CONTINUED)
NUMBER PERCENT OF
OF SHARES SECURITY HOLDINGS COST VALUE
- --------------------------------------------------------------------------------------------------------
TAIWAN (CONTINUED)
PHOTO-OPTICS 0.32%
27,000 Largan Precision Company Limited ............... $ 316,159 $ 288,477
------------- -------------
TRANSPORTATION - AIR 0.77%
1,638,249 EVA Airways Corporation ........................ 566,388 694,357
------------- -------------
TOTAL TAIWAN ................................... 14,128,407 15,459,514
------------- -------------
THAILAND 5.52%
BUILDING MATERIALS & COMPONENTS 1.03%
163,720 Siam Cement PLC - Foreign ...................... 331,719 927,453
------------- -------------
CHEMICALS 0.86%
359,500 National Petrochemical PLC ..................... 378,069 779,465
------------- -------------
FINANCIAL SERVICES 0.58%
514,000 Kiatnakin Finance PLC .......................... 518,261 521,795
------------- -------------
FOOD & HOUSEHOLD PRODUCTS 0.02%
124,940 Charoen Pokphand Foods PLC
Warrants - expiration date 07/21/05+ ......... 0 17,851
------------- -------------
MEDIA 1.25%
55,700 BEC World PLC .................................. 278,131 337,872
31,000 BEC World PLC - Foreign ........................ 143,784 188,044
1,284,700 United Broadcasting Corporation PLC+ ........... 411,164 598,958
------------- -------------
833,079 1,124,874
------------- -------------
REAL ESTATE 1.41%
2,658,000 Lalin Property PLC ............................. 461,369 799,499
1,415,000 Land and Houses PLC - Foreign .................. 270,435 478,820
------------- -------------
731,804 1,278,319
------------- -------------
TELECOMMUNICATIONS 0.37%
217,500 Advanced Information Service PLC ............... 198,070 338,012
------------- -------------
TOTAL THAILAND ................................. 2,991,002 4,987,769
------------- -------------
TOTAL COMMON STOCKS ............................ $ 67,607,289 $ 89,974,582
------------- -------------
9
THE ASIA TIGERS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 2003
PREFERRED STOCK (0.51% of holdings)
NUMBER PERCENT OF
OF SHARES SECURITY HOLDINGS COST VALUE
- --------------------------------------------------------------------------------------------------------
THAILAND 0.51%
BANKING 0.51%
444,205 Siam Commercial Bank PLC - 5.25% Preferred+ .... $ 151,803 $ 464,859
------------- -------------
TOTAL THAILAND ................................. 151,803 464,859
------------- -------------
TOTAL PREFERRED STOCK .......................... $ 151,803 $ 464,859
------------- -------------
TOTAL INVESTMENTS++ ....................100.0%++ $ 67,759,092 $ 90,439,441
============= =============
<FN>
FOOTNOTES AND ABBREVIATIONS
ADR - American Depository Receipts
+ Non-Income producing security.
++ Aggregate cost for Federal Income Tax purposes is $68,416,707.
The aggregate gross unrealized appreciation (depreciation) for all securities is
as follows:
Excess of value over tax cost $24,413,305
Excess of tax cost over value (2,390,571)
-----------
$22,022,734
===========
</FN>
See accompanying notes to financial statements.
10
THE ASIA TIGERS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 2003
ASSETS
Investments, at value (Cost $67,759,092) ................................ $ 90,439,441
Cash (including $1,260,349 of foreign currency holdings with a cost
of $1,253,533) ....................................................... 1,639,102
Receivables:
Securities sold ...................................................... 222,490
Dividends ............................................................ 13,933
Interest ............................................................. 1,348
Prepaid expenses ........................................................ 11,249
-------------
TOTAL ASSETS .......................................... 92,327,563
-------------
LIABILITIES
Payable for securities purchased ........................................ 204,626
Due to Investment Manager ............................................... 83,961
Due to Administrator .................................................... 16,794
Accrued expenses ........................................................ 191,176
Deferred foreign withholding taxes payable .............................. 351,362
-------------
TOTAL LIABILITIES ..................................... 847,919
-------------
NET ASSETS ............................................ $ 91,479,644
=============
NET ASSET VALUE PER SHARE
($91,479,644/8,610,666 ISSUED AND OUTSTANDING) ........ $ 10.62
=============
NET ASSETS CONSIST OF:
Capital stock, $0.001 par value; 20,514,984 shares issued
(100,000,000 shares authorized) ...................................... $ 20,515
Paid-in capital ......................................................... 277,336,210
Cost of 11,904,318 shares repurchased ................................... (100,165,455)
Undistributed net investment income ..................................... 602,661
Accumulated net realized loss on investments ............................ (108,651,905)
Net unrealized appreciation in value of investments and on translation of
other assets and liabilities denominated in foreign currencies
(net of deferred foreign withholding taxes of $349,318) .............. 22,337,618
-------------
$ 91,479,644
=============
See accompanying notes to financial statements.
11
THE ASIA TIGERS FUND, INC.
FOR THE YEAR ENDED
STATEMENT OF OPERATIONS OCTOBER 31, 2003
INVESTMENT INCOME
Dividends (Net of taxes withheld of $225,650) ................................ $ 2,361,621
Interest (Net of taxes withheld of $2,542) ................................... 8,929
-----------
TOTAL INVESTMENT INCOME .................................... 2,370,550
-----------
EXPENSES
Management fees ................................................ $929,301
Administration fees ............................................ 185,860
Legal fees ..................................................... 168,365
Audit and tax fees ............................................. 159,531
Custodian fees ................................................. 146,544
Insurance ...................................................... 58,513
Printing ....................................................... 40,210
NYSE fees ...................................................... 31,790
Transfer agent fees ............................................ 29,596
Directors' fees ................................................ 29,499
ICI fees ....................................................... 4,934
Interest expense ............................................... 1,357
Miscellaneous .................................................. 30,933
--------
TOTAL EXPENSES ............................................. 1,816,433
-----------
NET INVESTMENT INCOME ...................................... 554,117
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FOREIGN CURRENCY HOLDINGS AND TRANSLATION OF OTHER ASSETS
AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES:
Net realized loss from:
Security transactions (less refund of capital gains tax of $157,622) ...... (3,358,262)
Foreign currency related transactions ..................................... (109,082)
-----------
(3,467,344)
Net change in unrealized appreciation in value of investments, foreign
currency holdings and translation of other assets and liabilities
denominated in foreign currencies (net of change in deferred foreign
withholding taxes of $303,263) ............................................ 31,162,463
-----------
Net realized and unrealized gain on investments, foreign currency holdings and
translation of other assets and liabilities denominated in foreign
currencies ................................................................ 27,695,119
-----------
Net increase in net assets resulting from operations ......................... $28,249,236
===========
See accompanying notes to financial statements.
12
THE ASIA TIGERS FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002
- ----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ................................................. $ 554,117 $ 88,201
Net realized loss on investments and foreign currency
related transactions ............................................... (3,467,344) (1,352,717)
Net change in unrealized appreciation in value of investments,
foreign currency holdings and translation of other assets and
liabilities denominated in foreign currencies ...................... 31,162,463 21,336,172
------------ ------------
Net increase in net assets resulting from operations .................. 28,249,236 20,071,656
------------ ------------
CAPITAL SHARE TRANSACTIONS
Shares repurchased under Tender Offer (4,860,746 shares in October
2002) including expenses of $8,108 and $159,344, respectively ...... (8,108) (42,447,837)
Shares repurchased under Repurchase Offer (4,513,348 shares and
1,458,224 shares, respectively) (net of repurchase fees of $755,383
and $222,817, respectively) (including expenses of $303,720 and
$137,114, respectively) ............................................ (37,199,391) (11,055,126)
Shares repurchased under Share Repurchase Plan (32,800 shares in
October 2002) ...................................................... -- (243,041)
------------ ------------
Net decrease in net assets resulting from capital share transactions .. (37,207,499) (53,746,004)
------------ ------------
Total decrease in net assets .......................................... (8,958,263) (33,674,348)
NET ASSETS
Beginning of year ..................................................... 100,437,907 134,112,255
------------ ------------
End of year (including undistributed net investment income
of $554,117 at October 31, 2003) $ 91,479,644 $100,437,907
============ ============
See accompanying notes to financial statements.
13
THE ASIA TIGERS FUND, INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period ............ $ 7.65 $6.89 $9.55 $11.02 $ 7.55
------ ----- ----- ------ ------
Net investment income ........................... 0.05 3 0.01 3 0.03 0.32 0.04
Net realized and unrealized gains
(losses) on investments, foreign currency
holdings, and translation of other assets
and liabilities denominated in foreign
currencies .................................. 2.87 2 0.60 2 (2.42) 2 (1.86) 2 3.44 2
------ ----- ----- ------ ------
Net increase (decrease) from
investment operations ........................ 2.92 0.61 (2.39) (1.54) 3.48
------ ----- ----- ------ ------
Less Distributions:
Dividends from net investment
income ..................................... -- -- (0.29) (0.07) (0.01)
------ ----- ----- ------ ------
Total dividends and distributions ............... -- -- (0.29) (0.07) (0.01)
------ ----- ----- ------ ------
Capital share transactions
Anti-dilutive effect of Tender Offer ......... -- 0.14 -- -- --
Anti-dilutive effect of Repurchase Offer ..... 0.05 0.01 -- -- --
Anti-dilutive effect of
Share Repurchase Program ................... -- -- 4 0.02 0.14 --
------ ----- ----- ------ ------
Total capital share transactions ................ 0.05 0.15 0.02 0.14 --
------ ----- ----- ------ ------
Net asset value, end of period .................. $10.62 $7.65 $6.89 $ 9.55 $11.02
====== ===== ===== ====== ======
Per share market value, end of period ........... $10.30 $6.77 $5.79 $ 7.13 $ 8.63
TOTAL INVESTMENT RETURN BASED
ON MARKET VALUE 1 ............................ 52.14% 16.93% (15.62)% (16.82)% 41.03%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ............. $91,480 $100,438 $134,112 $188,204 $226,077
Ratios of expenses to average net assets ........ 1.95% 1.78% 1.58% 1.69% 1.70%
Ratios of net investment income to
average net assets ........................... 0.60% 0.06% 0.31% 2.50% 0.43%
Portfolio turnover .............................. 33.10% 41.32% 28.98% 31.42% 92.44%
See page 15 for footnotes.
14
THE ASIA TIGERS FUND, INC.
FINANCIAL HIGHLIGHTS (CONCLUDED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
1 Total investment return is calculated assuming a purchase of common stock at
the current market price on the first day and a sale at the current market
price on the last day of each period reported. Dividends and distributions,
if any, are assumed, for purposes of this calculation, to be reinvested at
prices obtained under the Fund's dividend reinvestment plan. Total investment
return does not reflect brokerage commissions or sales charges.
2 Net of deferred foreign withholding taxes of $0.03, less than $0.01, $0.06,
$0.03 and $0.06 per share for the years ended October 31, 2003, October 31,
2002, October 31, 2001, October 31, 2000 and October 31, 1999, respectively.
3 Based on average shares outstanding throughout the period.
4 Less than $0.01 per share.
See accompanying notes to financial statements.
15
THE ASIA TIGERS FUND, INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 2003
NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Asia Tigers Fund, Inc. (the "Fund") was incorporated in Maryland on
September 23, 1993 and commenced operations on November 29, 1993. The Fund is
registered under the Investment Company Act of 1940, as amended, as a
closed-end, non-diversified management investment company.
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
SIGNIFICANT ACCOUNTING POLICIES ARE AS FOLLOWS:
PORTFOLIO VALUATION. Investments are stated at value in the accompanying
financial statements. In valuing the Fund's assets, all securities for which
market quotations are readily available are generally valued:
(i) at the last sale price prior to the time of determination if there
was a sale on the date of determination,
(ii) at the mean between the last current bid and asked prices if there
was no sales price on such date and bid and asked quotations are
available, and
(iii) at the bid price if there was no sales price on such date and only
bid quotations are available.
Securities for which sales prices and bid and asked quotations are not available
on the date of determination may be valued at the most recently available prices
or quotations under policies adopted by the Board of Directors. Investments in
short-term debt securities having a maturity of 60 days or less are valued at
amortized cost which approximates market value. All other securities and assets
are carried at fair value as determined in good faith by, or under the direction
of, the Board of Directors.
The net asset value per share of the Fund is calculated weekly and at the end of
each month.
OPTIONS. The Fund may purchase or write put or call options on securities for
the purpose of enhancing returns or hedging against changes in the market value
of the underlying securities or foreign currencies. The Fund receives or pays a
premium and the option is subsequently marked to market to reflect the current
value of the option. The Fund will realize a gain or loss upon the expiration or
closing of the option transaction. The options for which market quotations are
readily available are generally valued:
(i) at the closing price,
(ii) at the mean between the last current bid and asked prices if there
was no closing price on such date and bid and asked quotations are
available, and
(iii) at the asked price if there was no closing price on such date and
only asked quotations are available for written options or at the
bid price for purchased options.
16
THE ASIA TIGERS FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) OCTOBER 31, 2003
Gains and losses on written options are reported separately in the Statement of
Operations. Written options are reported as a liability on the Statement of
Assets and Liabilities. Purchased options are included in the Fund's Schedule of
Investments.
The risk associated with purchasing put and call options is limited to the
premium paid. The risk associated with written options is that the change in
value of the option contract may not correspond to the change in value of the
hedged instrument. Such risks may exceed amounts reflected on the Statement of
Assets and Liabilities.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME. Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex-dividend date or when known. The collectibility of
income receivable from foreign securities is evaluated periodically, and any
resulting allowances for uncollectible amounts are reflected currently in the
determination of investment income.
TAX STATUS. No provision is made for U.S. Federal income or excise taxes as it
is the Fund's intention to continue to qualify as a regulated investment company
and to make the requisite distributions to its shareholders which will be
sufficient to relieve it from all or substantially all Federal income and excise
taxes.
Income and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles ("GAAP").
At October 31, 2003, the components of net assets (excluding paid in capital) on
a tax basis were as follows:
Book and Tax Ordinary Income ............................................................ $ 602,661
------------
Tax basis capital loss carryover ....................................... $(107,994,290)
Plus/Less: Cumulative Timing Differences - Wash Sales .................. (657,615)
-------------
Book Basis Accumulated capital loss ..................................................... (108,651,905)
------------
Book unrealized foreign exchange loss ................................................... (229)
------------
Book unrealized appreciation on foreign currencies ...................................... 6,816
------------
Tax basis unrealized appreciation ...................................... 22,022,734
Plus/Less: Cumulative Timing Differences - Wash Sales .................. 657,615
-------------
Book Basis unrealized appreciation ...................................................... 22,680,349
Deferred foreign withholding tax ........................................................ (349,318)
------------
Net assets (excluding paid in capital) .................................................. $(85,711,626)
============
17
THE ASIA TIGERS FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) OCTOBER 31, 2003
The differences between book and tax basis unrealized appreciation is primarily
attributable to wash sales and deferred foreign withholding tax.
Net Asset Value ............................................... $ 91,479,644
Paid in Capital ............................................... (177,191,270)
-------------
Net assets (excluding paid in capital) ........................ $ (85,711,626)
=============
At October 31, 2003, the Fund had a net capital loss carryover of $107,994,290,
which is available to offset future net realized gains on securities
transactions to the extent provided for in the Internal Revenue Code. Of the
aggregate capital losses, $1,846,888 will expire in the year 2004, $90,932,813
will expire in the year 2006, $8,437,899 will expire in the year 2009,
$3,353,570 will expire in 2010 and $3,423,120 will expire in 2011. To the extent
that capital gains are so offset, such gains will not be distributed. During the
year ended October 31, 2003, $7,999,610 of capital loss carryovers from the 1995
tax year expired.
Dividend and interest income from non-U.S. sources received by the Fund are
generally subject to non-U.S. withholding taxes. In addition, the Fund may be
subject to capital gains tax in certain countries in which it invests and
records the capital gains tax when it is paid to the applicable governmental
authority. Such withholding taxes may be reduced or eliminated under the terms
of applicable U.S. income tax treaties with some of these countries. For
dividend and income withholding taxes, the Fund accrues such taxes when the
related income is earned.
FOREIGN CURRENCY TRANSLATION. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) value of investment securities, assets and liabilities at the current
rates of exchange on the valuation date; and
(ii) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
The Fund does not generally isolate the effect of fluctuations in foreign
currency rates from the effect of fluctuations in the market prices of equity
securities. The Fund reports certain realized gains and losses on foreign
currency related transactions as components of realized gains and losses for
financial reporting purposes, whereas such gains and losses are included in or
are a reduction of ordinary income for Federal income tax purposes.
Securities denominated in currencies other than U.S. dollars are subject to
changes in value due to fluctuations in foreign exchange. Foreign security and
currency transactions involve certain considerations and risks not typically
associated with those of domestic origin as a result of, among other factors,
the
18
THE ASIA TIGERS FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) OCTOBER 31, 2003
level of governmental supervision and regulation of foreign securities markets
and the possibilities of political or economic instability, the fact that
foreign securities markets may be smaller and less developed, and the fact that
securities, tax and corporate laws may have only recently developed or are in
developing stages, and laws may not exist to cover all contingencies or to
protect investors adequately.
DISTRIBUTION OF INCOME AND GAINS. The Fund intends to distribute annually to
shareholders substantially all of its net investment income, including foreign
currency gains, and to distribute annually any net realized capital gains in
excess of net realized capital losses (including any capital loss carryovers).
An additional distribution may be made to the extent necessary to avoid payment
of a 4% federal excise tax.
Distributions to shareholders are recorded on the ex-dividend date. The amount
of dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax regulations,
which may differ from accounting principles generally accepted in the United
States of America. These book/tax differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes, are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains. To the extent they exceed net investment
income and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
During the year ended October 31, 2003, the Fund reclassified $48,540 from
accumulated net realized loss on investments to undistributed net investment
income as a result of permanent book and tax differences primarily relating to
net realized foreign currency losses and a refund of capital gains tax and
reclassed $7,999,610 from accumulated net realized loss to paid in capital as a
result of the expiration of capital loss carryovers. Net investment income and
net assets were not affected by the reclassification.
NOTE B: MANAGEMENT, INVESTMENT ADVISORY, AND ADMINISTRATIVE SERVICES
Advantage Advisers, Inc. ("Advantage"), a subsidiary of Oppenheimer Asset
Management Inc. ("OAM") and an affiliate of Oppenheimer & Co. Inc.
("Oppenheimer"), serves as the Fund's Investment Manager under the terms of a
management agreement dated June 5, 2003 (the "Management Agreement"). Prior to
September 2003, Oppenheimer was called Fahnestock & Co. Inc. Pursuant to the
Management Agreement, the Investment Manager manages the Fund's investment
portfolio. For its services, the Investment Manager receives monthly fees at an
annual rate of 1.00% of the Fund's average weekly net assets. For the year ended
October 31, 2003, these fees amounted to $929,301.
19
THE ASIA TIGERS FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) OCTOBER 31, 2003
Oppenheimer, a registered investment advisor and an indirect wholly-owned
subsidiary of Oppenheimer Holdings Inc., serves as the Fund's administrator (the
"Administrator") pursuant to an administration agreement dated June 5, 2003.
Prior to September 2003, Oppenheimer Holdings Inc. was called Fahnestock Viner
Holdings Inc. The Administrator provides certain administrative services to the
Fund. For its services, the Administrator receives a monthly fee at an annual
rate of 0.20% of the value of the Fund's average weekly net assets. For the year
ended October 31, 2003, these fees amounted to $185,860 (Prior to June 5, 2003,
the Fund's administrator was CIBC World Markets Corp.)
On December 10, 2002, Canadian Imperial Bank of Commerce, CIBC World Markets
Corp. ("CIBC WM"), Fahnestock & Co. Inc. ("Fahnestock") and Fahnestock Viner
Holdings Inc. ("FVH") announced that Fahnestock and FVH had agreed to acquire
the U.S. brokerage and asset management businesses of CIBC WM, including
Advantage. The acquisition of the U.S. brokerage business closed on January 3,
2003. As required under the Investment Company Act of 1940, as amended (the
"1940 Act"), the Fund's then existing Management Agreement provided for its
automatic termination in the event of "assignment" as defined in the 1940 Act.
Consummation of the acquisition by Fahnestock and FVH of the asset management
business of CIBC WM constituted an assignment of the Fund's then existing
Management Agreement. The acquisition by Fahnestock and FVH of CIBC WM's U.S.
asset management business was completed on June 4, 2003. In connection with the
June 4, 2003 acquisition, a new investment management agreement dated June 5,
2003 was executed, having been previously approved by the Board of Directors of
the Fund, including a majority of the independent Directors at a special meeting
held on January 17, 2003 and by the stockholders of the Fund at the Fund's
February 28, 2003 annual meeting of stockholders, as required by the 1940 Act.
In September 2003, Fahnestock & Co. Inc. changed its name to Oppenheimer & Co.
Inc. and Fahnestock Viner Holdings Inc. changed its name to Oppenheimer Holdings
Inc.
The Fund pays each of its directors who is not a director, officer or employee
of the Investment Manager, the Administrator or any affiliate thereof an annual
fee of $5,000 plus up to $700 for each Board of Directors meeting attended. In
addition, the Fund reimburses the independent directors for travel and
out-of-pocket expenses incurred in connection with Board of Directors meetings.
NOTE C: PORTFOLIO ACTIVITY
Purchases and sales of securities other than short-term obligations aggregated
$29,635,773 and $65,835,901, respectively, for the year ended October 31, 2003.
20
THE ASIA TIGERS FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) OCTOBER 31, 2003
NOTE D: CAPITAL STOCK
During the year ended October 31, 2002, the Fund purchased 32,800 shares of
capital stock on the open market at a total cost of $243,041. The weighted
average discount of these purchases, comparing the purchase price to the net
asset value at the time of purchase, was 12.01%. These shares were purchased
pursuant to the Fund's Stock Repurchase Plan previously approved by the Fund's
Board of Directors authorizing the Fund to purchase up to 2,000,000 shares of
its capital stock.
At a meeting of the Board of Directors held on November 7, 2001, the Board of
Directors approved a tender offer. Pursuant to the tender offer, the Fund
offered to purchase up to 25% of the Fund's outstanding shares of common stock
for cash at a price equal to 95% of the Fund's net asset value per share as of
the closing date. The tender offer commenced on February 15, 2002 and expired on
March 15, 2002. In connection with the tender offer, the Fund purchased
4,860,746 shares of capital stock at a total cost of $42,447,837, including
expenses of $167,452.
NOTE E: QUARTERLY REPURCHASE OFFERS
In January 2002, the Board of Directors approved, subject to stockholder
approval, a fundamental policy whereby the Fund would adopt an "interval fund"
structure pursuant to Rule 23c-3 under the 1940 Act. Stockholders of the Fund
subsequently approved the policy at the Special Meeting of Stockholders held on
April 26, 2002. As an interval fund, the Fund will make quarterly repurchase
offers at net asset value (less a 2% repurchase fee) to all Fund stockholders.
The percentage of outstanding shares that the Fund can repurchase in each offer
will be established by the Fund's Board of Directors shortly before the
commencement of each quarterly offer, and will be between 5% and 25% of the
Fund's then outstanding shares.
During the year ended October 31, 2002, the Fund completed one quarterly
repurchase offer. On September 20, 2002, the Fund offered to repurchase up to
10% of its issued and outstanding shares of common stock. The repurchase offer
expired on October 11, 2002, and the shares were repurchased at the Net Asset
Value ("NAV") at the close of regular trading on the New York Stock Exchange on
October 25, 2002, less a repurchase fee of 2% of the NAV per share.
10,091,392.3292 shares were validly tendered and not withdrawn prior to the
expiration of the Fund's repurchase offer. The final pro-ration calculations
resulted in 19,567.5847 odd lot shares and 1,438,656 non-odd lot shares validly
tendered. Under final pro-ration, 14.28393% of the non-odd lot shares tendered
were accepted for payment. The shares accepted for tender (1,458,224 shares
representing 10%) received cash at a repurchase offer price of $7.4872, which
was equal to the Fund's net asset value of $7.64 as of October 25, 2002, less a
repurchase fee of $0.1528 per share, for a total cost to the Fund of
$11,055,126, net of the repurchase fee of $222,817, and including expenses of
$137,114.
21
THE ASIA TIGERS FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) OCTOBER 31, 2003
During the year ended October 31, 2003, the Fund completed four quarterly
repurchase offers. On December 20, 2002, the Fund offered to repurchase up to
10% of its issued and outstanding shares of common stock. This first repurchase
offer expired on January 17, 2003, and the shares were repurchased at the NAV at
the close of regular trading on the New York Stock Exchange on January 31, 2003,
less a repurchase fee of 2% of the NAV per share. Prior to the expiration of the
Fund's repurchase offer, 8,616,672.8056 shares were validly tendered and not
withdrawn. The final pro-ration calculations resulted in 82,446.8942 odd lot
shares and 1,229,954.5408 non-odd lot shares validly tendered. Under final
pro-ration, 14.41204% of the non-odd lot shares tendered were accepted for
payment. The shares accepted for tender (1,312,402 shares representing 10%)
received cash at a repurchase offer price of $7.497, which is equal to the
Fund's net asset value per share of $7.65 as of January 31, 2003, less a
repurchase fee of $0.153 per share, for a total cost to the Fund of $9,914,921,
net of the repurchase fee of $200,797, and including expenses of $75,843.
During the second repurchase offer which commenced on March 14, 2003, the Fund
offered to repurchase up to 10% of its issued and outstanding shares of common
stock. The repurchase offer expired on April 11, 2003, and the shares were
repurchased at the NAV at the close of regular trading on the New York Stock
Exchange on April 25, 2003, less a repurchase fee of 2% of the NAV per share.
Prior to the expiration of the Fund's repurchase offer, 7,549,181.0853 shares
were validly tendered and not withdrawn. The final pro-ration calculations
resulted in 70,758.5097 odd lot shares and 7,478,423 non-odd lot shares validly
tendered. Under final pro-ration, 14.8481% of the non-odd lot shares tendered
were accepted for payment. The shares accepted for tender (1,181,161 shares
representing 10%) received cash at a repurchase offer price of $6.76, which was
equal to the Fund's net asset value of $6.90 as of April 25, 2003, less a
repurchase fee of $0.14 per share, for a total cost to the Fund of $8,124,713
net of the repurchase fee of $165,363, and including expenses of $140,062.
During the third repurchase offer which commenced on June 20, 2003, the Fund
offered to repurchase up to 10% of its issued and outstanding shares of common
stock. The repurchase offer expired on July 11, 2003, and the shares were
repurchased at the NAV at the close of regular trading on the New York Stock
Exchange on July 25, 2003, less a repurchase fee of 2% of the NAV per share.
Prior to the expiration of the Fund's repurchase offer, 6,050,576.649 shares
were validly tendered and not withdrawn. The final pro-ration calculations
resulted in 46,426.328 odd lot shares and 6,070,023.321 non-odd lot shares
validly tendered. Under final pro-ration, 16.7482% of the non-odd lot shares
tendered were accepted for payment. The shares accepted for tender (1,063,045
shares representing 10%) received cash at a repurchase offer price of $8.8298,
which was equal to the Fund's net asset value of $9.01 as of July 25, 2003, less
a repurchase fee of $0.1802 per share, for a total cost to the Fund of
$9,437,913, net of repurchase fee of $191,561, and including expenses of
$51,438.
22
THE ASIA TIGERS FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED) OCTOBER 31, 2003
During the fourth repurchase offer which commenced on September 26, 2003, the
Fund offered to repurchase up to 10% of its issued and outstanding shares of
common stock. The repurchase offer expired on October 17, 2003, and the shares
were repurchased at the NAV at the close of regular trading on the New York
Stock Exchange on October 24, 2003, less a repurchase fee of 2% of the NAV per
share. Prior to the expiration of the Fund's repurchase offer, 4,434,410.9331
shares were validly tendered and not withdrawn. The final pro-ration
calculations resulted in 73,149 odd lot shares and 4,360,552.9331 non-odd lot
shares validly tendered. Under final pro-ration, 20.26329% of the non-odd lot
shares tendered were accepted for payment. The shares accepted for tender
(956,740 shares representing 10%) received cash at a repurchase offer price of
$10.1234, which was equal to the Fund's net asset value of $10.33 as of October
24, 2003, less a repurchase fee of $0.2066 per share, for a total cost to the
Fund of $9,721,844, net of repurchase fee of $197,662, and including expenses of
$36,377.
NOTE F: OTHER
At October 31, 2003, substantially all of the Fund's assets were invested in
Asian securities. The Asian securities markets are substantially smaller, less
developed, less liquid, and more volatile than the major securities markets in
the United States. Consequently, acquisitions and dispositions of Asian
securities involve special risks and considerations not present with respect to
U.S. securities.
NOTE G: SUBSEQUENT EVENTS
On October 29, 2003, the Board of Directors elected Lawrence K. Becker to serve
as a non-interested Director and as a member of the Fund's Audit Committee and
to function as the Audit Committee's financial expert for purposes of the U.S.
securities laws, including the Sarbanes-Oxley Act of 2002.
- --------------------------------------------------------------------------------
U.S. FEDERAL TAXATION NOTICE (UNAUDITED)
The Fund paid foreign taxes of $70,570 during the fiscal year ended October 31,
2003, which it intends to pass through pursuant to Section 853 of the Internal
Revenue Code, to its shareholders, which is deemed to be foreign source income
for tax information reporting purposes.
- --------------------------------------------------------------------------------
23
THE ASIA TIGERS FUND, INC.
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF THE ASIA TIGERS FUND, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Asia Tigers Fund, Inc. (the
"Fund") at October 31, 2003, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
1177 Avenue of the Americas
New York, New York
December 18, 2003
24
THE ASIA TIGERS FUND, INC.
INFORMATION ABOUT DIRECTORS AND OFFICERS
The business and affairs of The Asia Tigers Fund, Inc. (the "Fund") are managed
under the direction of the Board of Directors. Information pertaining to the
Directors and executive officers of the Fund is set forth below.
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX
TERM OF OVERSEEN BY OTHER
POSITION OFFICE AND DIRECTOR TRUSTEESHIPS/
WITH LENGTH OF PRINCIPAL OCCUPATION(S) (INCLUDING DIRECTORSHIPS
NAME, ADDRESS AND AGE FUND 1 TIME SERVED 1 DURING PAST 5 YEARS THE FUND) HELD BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence K. Becker Director, Since 2003 Private Investor, Real 11 None
Member of the Estate Investment
8039 Harbor View Terrace Audit and Management (July
Brooklyn, NY 11209 Nominating 2003-Present); Vice
Committees, President -
Age: 48 Class III Controller/Treasurer,
National Financial
Partners (2000-2003);
Managing Director -
Controller/ Treasurer,
Oppenheimer Capital -
PIMCO (1981-2000).
- ------------------------------------------------------------------------------------------------------------------------------------
Leslie H. Gelb Director and Since 1994 President Emeritus, The 2 Britannica.com; Director of 31
Member of Council on Foreign registered investment companies
The Council on Foreign the Audit and Relations (2003-Present); advised by Salomon Brothers
Relations Nominating President, The Council on Asset Management ("SBAM").
58 East 68th Street Committees, Foreign Relations
New York, NY 10021 Class I (1993-2003); Columnist
(1991-1993), Deputy
Age: 66 Editorial Page Editor
(1985-1990) and Editor,
Op-Ed Page (1988-1990),
THE NEW YORK TIMES.
- ------------------------------------------------------------------------------------------------------------------------------------
Luis F. Rubio Director and Since 1999 President, Centro de 11 None
Member of the Investigacion para el
Jaime Balmes No. 11, D-2 Audit and Desarrollo, A.C. (Center
Los Morales Polanco Nominating of Research for
Mexico, D.F. 11510 Committees, Development)
Class I (2002-Present); Director
Age: 48 General, Centro de
Investigacion para el
Desarrollo, A.C. (Center
of Research for
Development) (1984-2002);
frequent contributor of
op-ed pieces to THE LOS
ANGELES TIMES and THE
WALL STREET JOURNAL.
- ------------------------------------------------------------------------------------------------------------------------------------
Jeswald W. Salacuse Director, Since 1993 Henry J. Braker Professor 2 Director of 31 registered
Member of of Commercial Law, The investment companies advised by
The Fletcher School of Audit Fletcher School of Law & SBAM.
Law & Diplomacy Committee Diplomacy (1986-Present);
Packard Avenue at Tufts and Chairman Dean, The Fletcher School
University, of Nominating of Law & Diplomacy, Tufts
Medford, MA 02155 Committee, University (1986-1994).
Class II
Age: 66
- ------------------------------------------------------------------------------------------------------------------------------------
25
THE ASIA TIGERS FUND, INC.
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX
TERM OF OVERSEEN BY OTHER
POSITION OFFICE AND DIRECTOR TRUSTEESHIPS/
WITH LENGTH OF PRINCIPAL OCCUPATION(S) (INCLUDING DIRECTORSHIPS
NAME, ADDRESS AND AGE FUND 1 TIME SERVED 1 DURING PAST 5 YEARS THE FUND) HELD BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS
- ------------------------------------------------------------------------------------------------------------------------------------
Bryan McKigney President, Since 1999 Managing Director, 2 None
Director and Oppenheimer Asset
90 Broad Street Chairman of Management (June
New York, NY 10004 the Board 2003-Present); Managing
Director (2000-June 2003)
Age: 45 and Executive Director
(1993-2000), CIBC World
Markets Corp.; Managing
Director, CIBC
Oppenheimer Advisers,
L.L.C. and Advantage;
President of the Asia
Tigers Fund, Inc.; and
formerly, Vice President
and Division Executive,
Head of Derivative
Operations (1986-1993).
- ------------------------------------------------------------------------------------------------------------------------------------
EXECUTIVE OFFICER(S) WHO ARE NOT DIRECTORS
- ------------------------------------------------------------------------------------------------------------------------------------
Alan E. Kaye Treasurer Since 1999 Senior Vice President, None None
Oppenheimer Asset
90 Broad Street Management since June
New York, NY 10004 2003 and Executive
Director (1995-June
Age: 52 2003), CIBC World Markets
Corp.; formerly, Vice
President, Oppenheimer &
Co., Inc. (1986-1994).
- ------------------------------------------------------------------------------------------------------------------------------------
Deborah Kaback Secretary Since 2003 Senior Vice President and None None
Senior Counsel,
200 Park Avenue Oppenheimer Asset
24th Floor Management Inc. since
New York, NY 10166 June 2003; Executive
Director, CIBC World
Age: 52 Markets Corp. (August
2001-June 2003); Vice
President and Senior
Counsel, Oppenheimer
Funds Inc. (November
1999-August 2001); Senior
Vice President,
Oppenheimer Capital
(April 1989-November
1999).
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
1 The Fund's Board of Directors is divided into three classes: Class I, Class II, and Class III. The terms of office of the Class
I, Class II, and Class III Directors expire at the Annual Meeting of Stockholders in the year 2005, year 2006, and year 2007,
respectively, or thereafter in each case when their respective successors are duly elected and qualified. The Fund's executive
officers are chosen each year at the first meeting of the Fund's Board of Directors following the Annual Meeting of Stockholders,
to hold office until the meeting of the Board following the next Annual Meeting of Stockholders and until their successors are
duly elected and qualified.
</FN>
26
THE ASIA TIGERS FUND, INC.
DIVIDENDS AND DISTRIBUTIONS
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The Fund intends to distribute annually to shareholders substantially all of its
net investment income, and to distribute any net realized capital gains at least
annually. Net investment income for this purpose is income other than net
realized long- and short-term capital gains net of expenses.
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
shareholders whose shares of Common Stock are registered in their own names will
be deemed to have elected to have all distributions automatically reinvested by
the Plan Agent in the Fund shares pursuant to the Plan, unless such shareholders
elect to receive distributions in cash. Shareholders who elect to receive
distributions in cash will receive all distributions in cash paid by check in
dollars mailed directly to the shareholder by PNC Bank, National Association, as
dividend paying agent. In the case of shareholders such as banks, brokers or
nominees that hold shares for others who are beneficial owners, the Plan Agent
will administer the Plan on the basis of the number of shares certified from
time to time by the shareholders as representing the total amount registered in
such shareholders' names and held for the account of beneficial owners that have
not elected to receive distributions in cash. Investors that own shares
registered in the name of a bank, broker or other nominee should consult with
such nominee as to participation in the Plan through such nominee, and may be
required to have their shares registered in their own names in order to
participate in the Plan.
The Plan Agent serves as agent for the shareholders in administering the Plan.
If the directors of the Fund declare an income dividend or a capital gains
distribution payable either in the Fund's Common Stock or in cash,
nonparticipants in the Plan will receive cash and participants in the Plan will
receive Common Stock, to be issued by the Fund or purchased by the Plan Agent in
the open market, as provided below. If the market price per share on the
valuation date equals or exceeds net asset value per share on that date, the
Fund will issue new shares to participants at net asset value; provided,
however, that if the net asset value is less than 95% of the market price on the
valuation date, then such shares will be issued at 95% of the market price. The
valuation date will be the dividend or distribution payment date or, if that
date is not a New York Stock Exchange trading day, the next preceding trading
day. If net asset value exceeds the market price of Fund shares at such time, or
if the Fund should declare an income dividend or capital gains distribution
payable only in cash, the Plan Agent will, as agent for the participants, buy
Fund shares in the open market, on the New York Stock Exchange or elsewhere, for
the participants' accounts on, or shortly after, the payment date. If, before
the Plan Agent has completed its purchases, the market price exceeds the net
asset value of a Fund share, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of the Fund's shares, resulting in the
acquisition of fewer shares than if the distribution had been paid in shares
issued by the Fund on the dividend payment date. Because of the foregoing
difficulty with respect to open-market purchases, the Plan provides that if the
Plan Agent is unable to invest the full
27
THE ASIA TIGERS FUND, INC.
DIVIDENDS AND DISTRIBUTIONS (CONTINUED)
dividend amount in open-market purchases during the purchase period or if the
market discount shifts to a market premium during the purchase period, the Plan
Agent will cease making open-market purchases and will receive the uninvested
portion of the dividend amount in newly issued shares at the close of business
on the last purchase date.
Participants have the option of making additional cash payments to the Plan
Agent, annually, in any amount from $100 to $3,000, for investment in the Fund's
Common Stock. The Plan Agent will use all such funds received from participants
to purchase Fund shares in the open market on or about February 15.
Any voluntary cash payment received more than 30 days prior to this date will be
returned by the Plan Agent, and interest will not be paid on any uninvested cash
payment. To avoid unnecessary cash accumulations, and also to allow ample time
for receipt and processing by the Plan Agent, it is suggested that participants
send in voluntary cash payments to be received by the Plan Agent approximately
ten days before an applicable purchase date specified above. A participant may
withdraw a voluntary cash payment by written notice, if the notice is received
by the Plan Agent not less than 48 hours before such payment is to be invested.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in an account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in the name of the
participant, and each shareholder's proxy will include those shares purchased
pursuant to the Plan.
There is no charge to participants for reinvesting dividends or capital gains
distributions or voluntary cash payments. The Plan Agent's fees for the
reinvestment of dividends and capital gains distributions and voluntary cash
payments will be paid by the Fund. There will be no brokerage charges with
respect to shares issued directly by the Fund as a result of dividends or
capital gains distributions payable either in stock or in cash. However, each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases in connection with the
reinvestment of dividends and capital gains distributions and voluntary cash
payments made by the participant. Brokerage charges for purchasing small amounts
of stock for individual accounts through the Plan are expected to be less than
the usual brokerage charges for such transactions, because the Plan Agent will
be purchasing stock for all participants in blocks and prorating the lower
commission thus attainable.
The receipt of dividends and distributions under the Plan will not relieve
participants of any income tax that may be payable on such dividends or
distributions.
28
THE ASIA TIGERS FUND, INC.
DIVIDENDS AND DISTRIBUTIONS (CONCLUDED)
Experience under the Plan may indicate that changes in the Plan are desirable.
Accordingly, the Fund and the Plan Agent reserve the right to terminate the Plan
as applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to notice of the termination sent to members of the Plan at
least 30 days before the record date for such dividend or distribution. The Plan
also may be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by at least 30 days' written notice to participants in the Plan.
All correspondence concerning the Plan should be directed to the Plan Agent at
P.O. Box 43027, Providence, Rhode Island, 02940-3027.
29
PRIVACY POLICY OF
ADVANTAGE ADVISERS, INC.
THE ASIA TIGERS FUND, INC.
THE INDIA FUND, INC.
- --------------------------------------------------------------------------------
YOUR PRIVACY IS PROTECTED
An important part of our commitment to you is our respect for your right to
privacy. Protecting all the information we are either required to gather or
which accumulates in the course of doing business with you is a cornerstone of
our relationship with you. While the range of products and services we offer
continues to expand, and the technology we use continues to change, our
commitment to maintaining standards and procedures with respect to security
remains constant.
COLLECTION OF INFORMATION
The primary reason that we collect and maintain information is to more
effectively administer our customer relationship with you. It allows us to
identify, improve and develop products and services that we believe could be of
benefit. It also permits us to provide efficient, accurate and responsive
service, to help protect you from unauthorized use of your information and to
comply with regulatory and other legal requirements. These include those related
to institutional risk control and the resolution of disputes or inquiries.
Various sources are used to collect information about you, including (i)
information you provide to us at the time you establish a relationship, (ii)
information provided in applications, forms or instruction letters completed by
you, (iii) information about your transactions with us or our affiliated
companies, and/or (iv) information we receive through an outside source, such as
a bank or credit bureau. In order to maintain the integrity of client
information, we have procedures in place to update such information, as well as
to delete it when appropriate. We encourage you to communicate such changes
whenever necessary.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic, personal information (such as your name,
address or tax identification number) about our clients or former clients to
anyone, except as permitted or required by law. We maintain physical, electronic
and procedural safeguards to protect such information, and limit access to such
information to those employees who require it in order to provide products or
services to you.
The law permits us to share client information with companies that are
affiliated with us which provide financial, credit, insurance, trust, legal,
accounting and administrative services to us or our clients. This allows us to
enhance our relationship with you by providing a broader range of products to
better meet your needs and to protect the assets you may hold with us by
preserving the safety and soundness of our firm.
30
PRIVACY POLICY OF
ADVANTAGE ADVISERS, INC.
THE ASIA TIGERS FUND, INC.
THE INDIA FUND, INC.
- --------------------------------------------------------------------------------
Finally, we are also permitted to disclose nonpublic, personal information to
unaffiliated outside parties who assist us with processing, marketing or
servicing a financial product, transaction or service requested by you,
administering benefits or claims relating to such a transaction, product or
service, and/or providing confirmations, statements, valuations or other records
or information produced on our behalf.
It may be necessary, under anti-money laundering or other laws, to disclose
information about you in order to accept your subscription. Information about
you may also be released if you so direct, or if we or an affiliate are
compelled to do so by law, or in connection with any government or
self-regulatory organization request or investigation.
We are committed to upholding this Privacy Policy. We will notify you on an
annual basis of our policies and practices in this regard and at any time that
there is a material change that would require your consent.
May 2003
31
THE ASIA TIGERS FUND, INC.
INVESTMENT MANAGER:
Advantage Advisers, Inc., a subsidiary of
Oppenheimer Asset Management Inc.
ADMINISTRATOR:
Oppenheimer & Co. Inc.
SUB-ADMINISTRATOR:
PFPC Inc.
TRANSFER AGENT:
PFPC Inc.
CUSTODIAN:
Deutsche Bank
Trust Company Americas
The Fund has adopted the Investment Manager's proxy voting policies and
procedures to govern the voting of proxies relating to its voting securities.
You may obtain a copy of these proxy voting procedures, without charge, by
calling (800) 421-4777.
The Asia Tigers Fund,Inc.
Annual Report
October 31, 2003
ADVANTAGE ADVISERS, INC.
ITEM 2. CODE OF ETHICS.
(a) The registrant, on July 29, 2003, adopted a Code of Ethics that applies
to the registrant's principal executive officer, principal financial
officer, principal accounting officer or controller, or persons
performing similar functions, regardless of whether these individuals
are employed by the registrant or a third party. (the "Code of
Ethics").
(b) There have been no amendments, during the period covered by this
report, to any provisions of the Code of Ethics.
(c) The registrant has not granted any waivers, during the period covered
by this report, including an implicit waiver, from any provisions of
the code of Ethics.
(d) Not Applicable.
(e) Not Applicable.
(f) A copy of the registrant's Code of Ethics is filed as an exhibit
hereto. The registrant undertakes to provide a copy of the Code of
Ethics to any person, without charge upon request to the registrant at
its address at 200 Park Avenue, New York, NY 10166.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a) The registrant's board of directors has determined that the registrant
has at least one audit committee financial expert serving on its audit
committee, Mr. Lawrence Becker, and that Mr. Becker is "independent." Mr.
Becker was elected as non-interested Director of the Audit Committee at a
meeting of the board of directors held on October 23, 2003.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated audit committee consisting of all the
independent directors of the registrant. The members of the audit committee are
Lawrence K. Becker, Leslie H. Gelb, Luis F. Rubio, and Jeswald W. Salacuse.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
ADVANTAGE ADVISERS, INC.
PROXY VOTING MANUAL
1
INTRODUCTION 4
- --------------------------------------------------------------------------------
CHAPTER 1 BOARD OF DIRECTORS
VOTING ON DIRECTOR NOMINEES IN UNCONTESTED ELECTIONS 6
- --------------------------------------------------------------------------------
CHAIRMAN & CEO ARE THE SAME PERSON 7
- --------------------------------------------------------------------------------
INDEPENDENCE OF DIRECTORS 8
- --------------------------------------------------------------------------------
STOCK OWENERSHIP REQUEST 9
- --------------------------------------------------------------------------------
CHARITABLE CONTRIBUTIONS 10
- --------------------------------------------------------------------------------
DIRECTOR AND OFFICER INDEMNIFICATION AND LIABILITY PROTECTION 11
- --------------------------------------------------------------------------------
VOTE RECOMMENDATION 12
- --------------------------------------------------------------------------------
SIZE OF THE BOARD 13
- --------------------------------------------------------------------------------
VOTING ON DIRECTOR NOMINEES IN CONTESTED ELECTIONS 14
- --------------------------------------------------------------------------------
TERM OF OFFICE 15
- --------------------------------------------------------------------------------
COMPENSATION DISCLOSURE 16
- --------------------------------------------------------------------------------
CHAPTER 2 AUDITORS
------------------
17
- --------------------------------------------------------------------------------
RATIFYING AUDITORS 18
- --------------------------------------------------------------------------------
CHAPTER 3 TENDER OFFER DEFENSES
-------------------------------
19
- --------------------------------------------------------------------------------
POISON PILLS 20
- --------------------------------------------------------------------------------
GREENMAIL 21
- --------------------------------------------------------------------------------
SUPERMAJORITY VOTE 22
- --------------------------------------------------------------------------------
CHAPTER 4 MERGERS AND CORPORATE RESTRUCTURING
---------------------------------------------
23
- --------------------------------------------------------------------------------
CHANGING CORPORATE NAME 24
- --------------------------------------------------------------------------------
REINCORPORATION 25
- --------------------------------------------------------------------------------
CHAPTER 5 PROXY CONTEST DEFENSES
--------------------------------
26
- --------------------------------------------------------------------------------
BOARD STRUCTURE: STAGGERED VS. ANNUAL ELECTIONS 27
- --------------------------------------------------------------------------------
CUMULATIVE VOTING 28
- --------------------------------------------------------------------------------
SHAREHOLDERS' ABILITY TO CALL SPECIAL MEETING 29
- --------------------------------------------------------------------------------
SHAREHOLDERS' ABILITY TO ALTER SIZE OF THE BOARD 30
- --------------------------------------------------------------------------------
CHAPTER 6 MISCELLANEOUS CORPORATE
---------------------------------
GOVERNANCE PROVISIONS 31
- --------------------------------------------------------------------------------
CONFIDENTIAL VOTING 32
- --------------------------------------------------------------------------------
SHAREHOLDER ADVISORY COMMITTEES 33
- --------------------------------------------------------------------------------
FOREIGN CORPORATE MATTERS 34
- --------------------------------------------------------------------------------
GOVERNMENT SERVICE LIST
-----------------------
35
- --------------------------------------------------------------------------------
CHAPTER 7 SOCIAL AND ENVIRONMENTAL ISSUES 36
- --------------------------------------------------------------------------------
ENERGY AND ENVIRONMENTAL ISSUES (CERES PRINCIPLES) 37
- --------------------------------------------------------------------------------
2
NORTHERN IRELAND (MACBRIDE PRINCIPLES)
--------------------------------------
38
- --------------------------------------------------------------------------------
MAQUILADORA STANDARDS & INTERNATIONAL OPERATIONS AND POLICIES 39
- --------------------------------------------------------------------------------
EQUAL EMPLOYMENT OPPORTUNITY & DISCRIMINATION 40
- --------------------------------------------------------------------------------
ANIMAL RIGHTS 41
- --------------------------------------------------------------------------------
CHAPTER 8 CAPITAL STRUCTURE
---------------------------
42
- --------------------------------------------------------------------------------
COMMON STOCK AUTHORIZATION
--------------------------
43
--
BLANK CHECK PREFERRED STOCK
---------------------------
44
- --------------------------------------------------------------------------------
PREEMPTIVE RIGHTS 45
- --------------------------------------------------------------------------------
STOCK DISTRIBUTION: SPLITS AND DIVIDENDS 46
- --------------------------------------------------------------------------------
REVERSE STOCK SPLITS
--------------------
47
- --------------------------------------------------------------------------------
ADJUSTMENTS TO PAR VALUE OF COMMON STOCK 48
- --------------------------------------------------------------------------------
DEBT RESTRUCTURING 49
- --------------------------------------------------------------------------------
CHAPTER 9 EXECUTIVE AND DIRECTOR COMPENSATION
---------------------------------------------
50
- --------------------------------------------------------------------------------
DIRECTOR COMPENSATION 51
- --------------------------------------------------------------------------------
SHAREHOLDER PROPOSAL TO LIMIT EXECUTIVE AND DIRECTOR PAY 52
- --------------------------------------------------------------------------------
EMPLOYEE STOCK OWNERSHIP PLANS (ESOPS)
53
- --------------------------------------------------------------------------------
OPTIONS EXPENSING 54
- --------------------------------------------------------------------------------
GOLDEN PARACHUTES 55
- --------------------------------------------------------------------------------
PROPOSAL TO BAN GOLDEN PARACHUTES 56
- --------------------------------------------------------------------------------
OUTSIDE DIRECTORS' RETIREMENT COMPENSATION 57
- --------------------------------------------------------------------------------
CHAPTER 10 STATE OF INCORPORATION
---------------------------------
58
- --------------------------------------------------------------------------------
CONTROL SHARE ACQUISITION STATUTES 59
- --------------------------------------------------------------------------------
OPT-OUT OF STATE TAKEOVER STATUTES
60
- --------------------------------------------------------------------------------
CORPORATE RESTRUCTURING, SPIN-OFFS, ASSET SALES, LIQUIDATIONS
61
- --------------------------------------------------------------------------------
CHAPTER 11 CONFLICT OF INTEREST
-------------------------------
62
- --------------------------------------------------------------------------------
CONFLICTS 63
- --------------------------------------------------------------------------------
CONFLICTS CONT'D 64
- --------------------------------------------------------------------------------
CHAPTER 12 CORPORATE GOVERNANCE COMMITTEE
& PROXY MANAGERS 65
- --------------------------------------------------------------------------------
3
CORPORATE GOVERNANCE COMMITTEE 66
- --------------------------------------------------------------------------------
PROXY MANAGERS 67
- --------------------------------------------------------------------------------
CHAPTER 13 SPECIAL ISSUES WITH
------------------------------
VOTING FOREIGN PROXIES 68
- --------------------------------------------------------------------------------
SPECIAL ISSUES 69
- --------------------------------------------------------------------------------
CHAPTER 14 RECORD KEEPING 70
- --------------------------------------------------------------------------------
RECORD KEEPING 71
- --------------------------------------------------------------------------------
4
INTRODUCTION
------------
Rule 206(4)-6 (the "Rule") adopted under the Investment Advisers Act of 1940, as
amended (the "Advisers Act") requires all registered investment advisers that
exercise voting discretion over securities held in client portfolios to adopt
proxy voting policies and procedures.
Advantage Advisers, Inc., (the "Adviser") is a registered investment adviser
under the Advisers Act and is therefore required to adopt proxy voting policies
and procedures pursuant to the Rule.
When the Adviser has investment discretion over a client's investment portfolio,
then the Adviser votes proxies for the Account pursuant to the policies and
procedures set forth herein.
5
VOTING ON DIRECTOR NOMINEES
---------------------------
IN UNCONTESTED ELECTIONS
------------------------
These proposals seek shareholder votes for persons who have been nominated by a
corporation's board of directors to stand for election to serve as members of
that board. No candidates are opposing these board nominees.
In each analysis of an uncontested election of directors you should review:
a) Company performance
b) Composition of the board and key board committees
c) Attendance at board meetings
d) Corporate governance provisions and takeover activity
We may also consider:
a) Board decisions concerning executive compensation
b) Number of other board seats held by the nominee
c) Interlocking directorships
VOTE RECOMMENDATION
It is our policy to vote IN FAVOR of
the candidates proposed by the board.
We will look carefully at each candidate's background contained in the proxy
statement. In the absence of unusual circumstances suggesting a nominee is
clearly not qualified to serve as a member of the board, we will vote with
management.
6
CHAIRMAN AND CEO ARE THE SAME PERSON
- ------------------------------------
Shareholders may propose that different persons hold the positions of the
chairman and the CEO.
We would evaluate these proposals on a case by case basis depending on the
size of the company and performance of management.
7
INDEPENDENCE OF DIRECTORS
- -------------------------
Shareholders may request that the board be comprised of a majority of
independent directors and that audit, compensation and nominating
committees of the Board consists exclusively of independent directors. We
believe that independent directors are important to corporate governance.
VOTE RECOMMENDATION
It is our policy to vote FOR proposals
requesting that a majority of the Board be
independent and that the audit, compensation
and nominating committees of the board
include only independent directors.
8
STOCK OWNERSHIP REQUIREMENTS
- ----------------------------
Shareholders may propose that directors be required to own a minimum amount
of company stock or that directors should be paid in company stock, not cash.
This proposal is based on the view that directors will align themselves with the
interest of shareholders if they are shareholders themselves. We believe that
directors are required to exercise their fiduciary duty to the company and its
shareholders whether or not they own shares in the company and should be allowed
to invest in company stock based on their own personal considerations.
VOTE RECOMMENDATION
Vote AGAINST proposals that require director
stock ownership
9
CHARITABLE CONTRIBUTIONS
------------------------
Charitable contributions by companies are generally useful for assisting
worthwhile causes and for creating goodwill between the company and its
community. Moreover, there may be certain long-term financial benefits to
companies from certain charitable contributions generated from, for
example, movies spent helping educational efforts in the firm's primary
employment areas. Shareholders should not decide what the most worthwhile
charities are.
VOTE RECOMMENDATION
(Shareholders Proposals)
Vote AGAINST proposals regarding charitable
contribution.
Shareholders have differing and equally sincere views as to which charities
the company should contribute to, and the amount it should contribute. In
the absence of bad faith, self-dealing, or gross negligence, management
should determine which contributions are in the best interest of the
company.
10
DIRECTOR AND OFFICER INDEMNIFICATION
------------------------------------
AND LIABILITY PROTECTION
------------------------
These proposals typically provide for protection (or additional protection)
which is to be afforded to the directors of a corporation in the form of
indemnification by the corporation, insurance coverage or limitations upon
their liability in connection with their responsibilities as directors.
When a corporation indemnifies its directors and officers, it means the
corporation promises to reimburse them for certain legal expenses, damages,
and judgements incurred as a result of lawsuits relating to their corporate
actions. The corporation becomes the insurer for its officers and
directors.
11
VOTE RECOMMENDATION
Vote AGAINST proposals that eliminate
entirely director and officers' liability for
monetary damages for violating the duty of
care.
Vote AGAINST indemnification proposals that
would expand coverage beyond just legal
expenses to acts, such as negligence, that
are more serious violations of fiduciary
obligations than mere carelessness.
Vote FOR only those proposals providing such
expanded coverage in cases when a director's
or officer's legal defense was unsuccessful
if: a) the director was found to have acted
in good faith, and b) only if the director's
legal expenses would be covered.
The following factors should be considered:
1. The present environment in which directors operate provides substantial
risk of claims or suits against against them in their individual
capacities arising out of the discharge of their duties.
2. Attracting and retaining the most qualified directors enhances
shareholder value.
12
SIZE OF THE BOARD
-----------------
Typically there are three reasons for changing the size of the board. The
first reason may be to permit inclusion into the board of additional
individuals who, by virtue of their ability and experience, would benefit
the corporation. The second reason may be to reduce the size of the board
due to expiration of terms, resignation of sitting directors or, thirdly,
to accommodate the corporation's changing needs.
VOTE RECOMMENDATION
Vote FOR the board's recommendation to
increase or decrease the size of the board.
The following factors should be considered:
1. These proposals may aim at reducing or increasing the influence of
certain groups of individuals.
2. This is an issue with which the board of directors is uniquely
qualified to deal, since they have the most experience in sitting on a
board and are up-to-date on the specific needs of the corporation.
13
VOTING ON DIRECTOR NOMINEES IN CONTESTED ELECTIONS
- --------------------------------------------------
Votes in contested elections of directors are evaluated on a CASE-BY-CASE basis.
The following factors are considered:
1. management's track record
2. background to the proxy contest
3. qualifications of director nominees
14
TERM OF OFFICE
--------------
This is a shareholder's proposal to limit the tenure of outside directors. This
requirement may not be an appropriate one. It is an artificial imposition on the
board, and may have the result of removing knowledgeable directors from the
board.
VOTE RECOMMENDATION
Vote AGAINST shareholder proposals to limit
the tenure of outside directors.
The following factors should be considered:
1. An experienced director should not be disqualified because he or she
has served a certain number of years.
2. The nominating committee is in the best position to judge the
directors' terms in office due to their understanding of a
corporation's needs and a director's abilities and experience.
3. If shareholders are not satisfied with the job a director is doing,
they can vote him/her off the board when the term is up.
15
COMPENSATION DISCLOSURE
-----------------------
These proposals seek shareholder approval of a request that the board of
directors disclose the amount of compensation paid to officers and employees, in
addition to the disclosure of such information in the proxy statement as
required by the SEC regulations.
VOTE RECOMMENDATION
(shareholders policy)
Vote AGAINST these proposals that require
disclosure, unless we have reason to believe
that mandated disclosures are insufficient to
give an accurate and meaningful account of
senior management compensation.
The following factors should be considered:
1. Federal securities laws require disclosure in corporate proxy
statements of the compensation paid to corporate directors and
officers.
2. Employees other than executive officers and directors are typically not
in policy-making roles where they have the ability to determine, in a
significant way, the amount of their own compensation.
3. The disclosure of compensation of lower-level officers and employees
infringes upon their privacy and might create morale problems.
16
CHAPTER 2
AUDITORS
17
RATIFYING AUDITORS
Shareholders must make certain that auditors are responsibly examining the
financial statements of a company, that their reports adequately express any
legitimate financial concerns, and that the auditor is independent of the
company it is serving.
VOTE RECOMMENDATION
Vote FOR proposal to ratify auditors.
The following factors should be considered:
1. Although lawsuits are sometimes filed against accounting firms,
including those nationally recognized, these firms typically complete
their assignments in a lawful and professional manner.
2. Sometimes it may be appropriate for a corporation to change accounting
firms, but the board of directors is in the best position to judge the
advantages of any such change and any disagreements with former
auditors must be fully disclosed to shareholders.
3. If there is a reason to believe the independent auditor has rendered an
opinion which is neither accurate nor indicative of the company's
financial position, then in this case vote AGAINST ratification.
18
CHAPTER 3
TENDER OFFER DEFENSES
19
POISON PILLS
------------
Poison pills are corporate-sponsored financial devices that, when triggered by
potential acquirers, do one or more of the following: a) dilute the acquirer's
equity in the target company, b) dilute the acquirer's voting interests in the
target company, or c) dilute the acquirer's equity holdings in the post-merger
company. Generally, poison pills accomplish these tasks by issuing rights or
warrants to shareholders that are essentially worthless unless triggered by a
hostile acquisition attempt.
A poison pill should contain a redemption clause that would allow the board to
redeem it even after a potential acquirer has surpassed the ownership threshold.
Poison pills may be adopted by the board without shareholder approval. But
shareholders must have the opportunity to ratify or reject them at least every
two years.
VOTE RECOMMENDATION
Vote FOR shareholder proposals asking that a
company submit its poison pill for
shareholder ratification.
Vote on a CASE-BY-CASE basis regarding
shareholder proposals to redeem a company's
poison pill.
Vote on a CASE-BY-CASE basis regarding
management proposals to ratify a poison pill.
20
GREENMAIL
---------
Greenmail payments are targeted share repurchases by management of company stock
from individuals or groups seeking control of the company. Since only the
hostile party receives payment, usually at a substantial premium over the
market, the practice discriminates against all other shareholders.
Greenmail payments usually expose the company to negative press and may result
in lawsuits by shareholders. When a company's name is associated with such a
practice, company customers may think twice about future purchases made at the
expense of the shareholders.
VOTE RECOMMENDATION
Vote FOR proposals to adopt anti Greenmail or
bylaw amendments or otherwise restrict a
company's ability to make Greenmail payments
Vote on a CASE-BY-CASE basis regarding
anti-Greenmail proposals when they are
bundled with other charter or bylaw
amendments.
The following factors should be considered:
1. While studies by the SEC and others show that Greenmail devalues the
company's stock price, an argument can be made that a payment can
enable the company to pursue plans that may provide long-term gains to
the shareholders.
21
SUPERMAJORITY VOTE
------------------
Supermajority provisions violate the principle that a simple majority of voting
shares should be all that is necessary to effect change regarding a company and
its corporate governance provisions. These proposals seek shareholder approval
to exceed the normal level of shareholder participation and approval from a
simple majority of the outstanding shares to a much higher percentage.
VOTE RECOMMENDATIONS
Vote AGAINST management proposals to require
a Supermajority shareholder vote to approve
mergers and other significant business
combinations.
Vote FOR shareholder proposals to lower
Supermajority vote requirements for mergers
and other significant business combinations.
The following factors should be considered:
1. Supermajority requirements ensure broad agreement on issues that may
have a significant impact on the future of the company.
2. Supermajority vote may make action all but impossible.
3. Supermajority requirements are counter to the principle of majority
rule.
22
CHAPTER 4
MERGERS
AND
CORPORATE
RESTRUCTURING
23
CHANGING CORPORATE NAME
-----------------------
This proposal seeks shareholder approval to change the corporation's name. It is
probably better to vote for the proposed name change before management goes back
to the drawing board and spends another small fortune attempting again to change
the name.
VOTE RECOMMENDATION
Vote FOR changing the corporate name.
The following factors should be considered:
1. A name of a corporation symbolizes its substance.
2. There are many reasons a corporation may have for changing its name,
including an intention to change the direction of the business or to
have a contemporary corporate image.
3. The board of directors is well-positioned to determine the best name
for the corporation because, among other reasons, it usually seeks
professional advice on such matters.
24
REINCORPORATION
---------------
These proposals seek shareholder approval to change the state in which a company
is incorporated. Sometimes this is done to accommodate the company's most active
operations or headquarters. More often, however, the companies want to
reincorporate in a state with more stringent anti-takeover provisions.
Delaware's state laws, for instance, including liability and anti-takeover
provisions, are more favorable to corporations.
VOTE RECOMMENDATION
Vote on a CASE-BY-CASE basis, carefully
reviewing the new state's laws and any
significant changes the company makes in its
charter and by-laws.
The following factors should be considered:
1. The board is in the best position to determine the company's need to
incorporate.
2. Reincorporation may have considerable implications for shareholders,
affecting a company's takeover defenses, its corporate structure or
governance features.
3. Reincorporation in a state with stronger anti-takeover laws may harm
shareholder value.
25
CHAPTER 5
PROXY
CONTEST
DEFENSES
26
BOARD STRUCTURE: STAGGERED VS. ANNUAL ELECTIONS
-----------------------------------------------
A company that has classified, or staggered, board is one in which directors are
typically divided into three classes, with each class serving three-year terms;
each class's reelection occurs in different years. In contrast, all directors of
an annually elected board serve one-year and the entire board stands for
election each year.
Classifying the board makes it more difficult to change control of a company
through a proxy contest involving election of directors. Because only a minority
of the directors are elected each year, it will be more difficult to win control
of the board in a single election.
VOTE RECOMMENDATIONS
Vote AGAINST proposals to classify the board.
Vote FOR proposals to repeal classified
boards and to elect all directors annually.
The following factors should be considered:
1. The annual election of directors provides an extra check on
management's performance. A director who is doing a good job should not
fear an annual review of his/her directorship.
27
CUMULATIVE VOTING
-----------------
Most companies provide that shareholders are entitled to cast one vote for each
share owned, the so-called "one share, one vote" standard. This proposal seeks
to allow each shareholder to cast votes in the election of directors
proportionate to the number of directors times the number of shares owned by
each shareholder for one nominee.
VOTE RECOMMENDATION
Vote AGAINST proposals that permit cumulative
voting.
The following factors should be considered:
1. Cumulative voting would allow a minority owner to create an impact
disproportionate to his/her holdings.
2. Cumulative voting can be used to elect a director who would represent
special interests and not those of the corporation and its
shareholders.
3. Cumulative voting can allow a minority to have representation.
4. Cumulative Voting can lead to a conflict within the board which could
interfere with its ability to serve the shareholders' best interests.
28
SHAREHOLDERS' ABILITY TO CALL SPECIAL MEETING
---------------------------------------------
Most state corporation statutes allow shareholders to call a special meeting
when they want to take action on certain matters that arise between regularly
scheduled annual meetings.
VOTE RECOMMENDATION
Vote AGAINST proposals to restrict or
prohibit shareholder ability to call special
meetings.
Vote FOR proposals that remove restrictions
on the right of shareholders to act
independently of management.
29
SHAREHOLDERS' ABILITY TO ALTER SIZE OF THE BOARD
------------------------------------------------
Proposals which would allow management to increase or decrease the size of the
board at its own discretion are often used by companies as a takeover defense.
Shareholders should support management proposals to fix the size of the board at
a specific number of directors, preventing management from increasing the size
of the board without shareholder approval. By increasing the size of the board,
management can make it more difficult for dissidents to gain control of the
board.
VOTE RECOMMENDATIONS
Vote FOR proposal which seek to fix the size
of the board.
Vote AGAINST proposals which give management
the ability to alter the size of the board
without shareholder approval.
30
CHAPTER 6
MISCELLANEOUS
CORPORATE
GOVERNANCE
PROVISIONS
31
CONFIDENTIAL VOTING
-------------------
Confidential voting, also known as voting by secret ballot, is one of the key
structural issues in the proxy system. All proxies, ballots, and voting
tabulations that identify individual shareholders are kept confidential.
VOTE RECOMMENDATIONS
Vote FOR shareholder proposals requesting
that corporations adopt confidential voting.
Vote FOR management proposals to adopt
confidential voting.
The following factors should be considered:
1. Some shareholders elect to have the board not know how they voted on
certain issues.
2. Should the board be aware of how a shareholder voted, the board could
attempt to influence the shareholder to change his/her vote, giving
itself an advantage over those that do not have access to this
information.
3. Confidential voting is an important element of corporate democracy
which should be available to the shareholder.
32
SHAREHOLDER ADVISORY COMMITTEES
-------------------------------
These proposals request that the corporation establish a shareholder advisory
committee to review the board's performance. In some instances, it would have a
budget funded by the corporation and would be composed of salaried committee
members with authority to hire outside experts and to include reports in the
annual proxy statement.
VOTE RECOMMENDATION
Vote AGAINST proposals to establish a
shareholder advisory committee.
The following factors should be considered:
1. Directors already have fiduciary responsibility to represent
shareholders and are accountable to them by law, thus rendering
shareholder advisory committees unnecessary.
2. Adding another layer to the current corporate governance system would
be expensive and unproductive.
33
FOREIGN CORPORATE MATTERS
-------------------------
These proposals are usually submitted by companies incorporated outside of the
United States seeking shareholder approval for actions which are considered
ordinary business and do not require shareholder approval in the United States
(i.e., declaration of dividends, approval of financial statements, etc.).
VOTE RECOMMENDATION
Vote FOR proposals that concern foreign
companies incorporated outside of the United
States.
The following factors should be considered:
1. The laws and regulations of various countries differ widely as to those
issues on which shareholder approval is needed, usually requiring
consent for actions which are considered routine in the United States.
2. The board of directors is well-positioned to determine whether or not
these types of actions are in the best interest of the corporation's
shareholders.
34
GOVERNMENT SERVICE LIST
-----------------------
This proposal requests that the board of directors prepare a list of employees
or consultants to the company who have been employed by the government within a
specified period of time and the substance of their involvement.
Solicitation of customers and negotiation of contractual or other business
relationships is traditionally the responsibility of management. Compilation of
such a list does not seem to serve a useful purpose, primarily because existing
laws and regulations serve as a checklist on conflicts of interest.
VOTE RECOMMENDATION
Vote AGAINST these proposals which a request
a list of employees having been employed by
the government.
The following factors should be considered:
1. For certain companies, employing individuals familiar with the
regulatory agencies and procedures is essential and, therefore, is in
the best interests of the shareholders.
2. Existing laws and regulations require enough disclosure and serve as a
check on conflicts of interest.
3. Additional disclosure would be an unreasonable invasion of such
individual's privacy.
35
CHAPTER 7
SOCIAL
AND
ENVIRONMENTAL
ISSUES
36
ENERGY AND ENVIRONMENTAL ISSUES
-------------------------------
(CERES PRINCIPLES)
------------------
CERES proposals ask management to sign or report on process toward compliance
with ten principles committing the company to environmental stewardship.
Principle 10 directs companies to fill out the CERES report. This report
requires companies to disclose information about environmental policies, toxic
emissions, hazardous waste management, workplace safety, energy use, and
environmental audits.
VOTE RECOMMENDATION
Vote AGAINST proposals requesting that
companies sign the CERES Principles.
The following factors should be considered:
1. We do not believe a concrete business case is made for this proposal.
In our opinion, the company will be best served by continuing to carry
on its business as it did before the proposal was made.
37
NORTHERN IRELAND
----------------
(MACBRIDE PRINCIPLES)
---------------------
It is well documented that Northern Ireland's Catholic community faces much
higher unemployment figures then the Protestant community. Most proposals ask
companies to endorse or report on progress with respect to the MacBride
Principles.
In evaluating a proposal to adopt the MacBride Principles, you must decide if
the principles will cause the company to divest, and worsen unemployment
problems.
VOTE RECOMMENDATION
REFRAIN from voting on proposals that request
companies to adopt the MacBride Principles.
The following factors should be considered:
1. We believe that human and political rights are of the utmost importance
for their own sake as well as for the enhancement of economic potential
of a nation.
2. We do not believe a concrete business case has been made for this
proposal. We will refrain from making social or political statements by
voting for these proposals. We will only vote on proposals that
maximize the value of the issuers' status without regard to (i.e., we
will not pass judgement upon) the non-economic considerations.
38
MAQUILADORA STANDARDS AND
-------------------------
INTERNATIONAL OPERATIONS AND POLICIES
-------------------------------------
Proposals in this area generally request companies to report on or to adopt
certain principles regarding their operations in foreign countries.
The Maquiladora Standards are a set of guidelines that outline how U.S.
companies should conduct operations in Maquiladora facilities just across the
U.S.-Mexican border. These standards cover such topics as community development,
environmental policies, health and safety policies, and fair employment
practices.
VOTE RECOMMENDATION
ABSTAIN from providing a vote recommendation
on proposals regarding the Maquiladora
Standards and international operating
policies.
The following factors should be considered:
1. We believe that human rights are of the utmost importance for their own
sake as well as for the enhancement of economic potential of a nation.
2. We do not believe that a concrete business case has been made for these
proposals. We will refrain from making social statements by voting for
these proposals. We will not only vote on proposals that maximize the
value of the issuers' securities without regard to (i.e., we will not
pass judgement upon) the non-economic considerations.
39
EQUAL EMPLOYMENT OPPORTUNITY
----------------------------
AND DISCRIMINATION
------------------
In regards to equal employment and discrimination, companies without
comprehensive EEO programs will find it hard to recruit qualified employees and
find them at a long-term competitive disadvantage. Companies who are not
carefully watching their human resource practices could also face lawsuits.
VOTE RECOMMENDATION
REFRAIN from voting on any proposals
regarding equal employment opportunities and
discrimination.
The following factors should be considered:
1. We feel that the hiring and promotion of employees should be free from
prohibited discriminatory practices. We also feel that many of these
issues are already subject to significant state and federal
regulations.
40
ANIMAL RIGHTS
-------------
A Corporation is requested to issue a report on its progress towards reducing
reliance on animal tests for consumer product safety.
VOTE RECOMMENDATION
REFRAIN from making vote recommendations on
proposals regarding animal rights.
The following factors should be considered:
1. Needless cruelty to animals should never be tolerated. However, the
testing of products on animals may be very important to the health and
safety of consumers.
2. We also feel that this issue is already subject to significant state
and federal regulation.
41
CHAPTER 8
CAPITAL
STRUCTURE
42
COMMON STOCK AUTHORIZATION
--------------------------
The ability to increase the number of authorized shares could accommodate the
sale of equity, stock splits, dividends, compensation-based plans, etc. The
board can usually be trusted to use additional shares for capital-raising and
other transactions that are in the corporation's best interests.
However, excessive escalation in the number of authorized shares may allow the
board to radically change the corporation's direction without shareholder
approval. Be careful to view that the increased number of shares will not enable
the company to activate a poison pill.
VOTE RECOMMENDATION
Vote CASE-BY-CASE on proposals increase the
number of shares of common stock authorized
for issue.
Vote AGAINST proposed common share
authorization that increase existing
authorization by more then 100 percent unless
a clear need for the excess shares is
presented by the company.
The following factors should be considered:
1. Is this company going to make frequent business acquisitions over a
period of time?
2. Is the company expanding its operations?
3. Within the company, are there any debt structuring or prepackaged
bankruptcy plans?
43
BLANK CHECK PREFERRED STOCK
---------------------------
The terms of blank check preferred stock give the board of directors the power
to issue shares of preferred stock at their discretion, with voting, conversion,
distribution and other rights to be determined by the board at the time of the
issue.
Blank check preferred stock can provide corporations with the flexibility to
meet changing financial conditions. However, once the blank check preferred
stock has been authorized, the shareholders have no further power over how or
when it will be allocated.
VOTE RECOMMENDATION
Vote AGAINST proposals authorizing the
creation of new classes of preferred stock
with unspecified voting, conversion, dividend
distribution, and other rights.
The following factors should be considered:
1. Blank check preferred stock can be used as the vehicle for a poison
pill defense against hostile suitors, or it may be placed in friendly
hands to help block a takeover bid.
44
PREEMPTIVE RIGHTS
-----------------
These proposals request that the corporation provide existing shareholders with
an opportunity to acquire additional shares in proportion to their existing
holdings whenever new shares are issued. In companies with a large shareholder
base and ease in which shareholders could preserve their relative interest
through purchases of shares on the open market, the cost of implementing
preemptive rights does not seem justifiable in relation to the benefits.
VOTE RECOMMENDATION
Vote AGAINST proposals seeking preemptive
rights.
The following factors should be considered:
1. The existence of preemptive rights can considerably slow down the
process of issuing new shares due to the logistics involved in
protecting such rights.
2. Preemptive rights are not necessary for the shareholder in today's
corporations, whose stock is held by a wide range of owners and is, in
most cases, highly liquid.
45
STOCK DISTRIBUTIONS: SPLITS AND DIVIDENDS
- -------------------- --------------------
STOCK SPLITS
- ------------
The corporation requests authorization for a stock split.
VOTE RECOMMENDATION
Vote FOR management proposal to authorize
stock splits unless the split will result in
an increase of authorized but unissued shares
of more than 100% after giving effect to the
shares needed for the split.
46
REVERSE STOCK SPLITS
- --------------------
VOTE RECOMMENDATION
Vote FOR management proposal to authorize
reverse stock split unless the reverse stock
split results in an increase of authorized
but unissued shares of more than 100% after
giving effect to the shares needed for the
reverse split.
47
ADJUSTMENTS TO PAR VALUE OF COMMON STOCK
----------------------------------------
The purpose of par value stock is to establish the maximum responsibility of
stockholder in the event that a corporation becomes insolvent. It represents the
maximum amount that a shareholder must pay the corporation if the stock is to be
fully paid when issued.
The corporation requests permission to reduce the par value of its stock. In
most cases, adjusting par value is a routine financing decision and should be
supported.
VOTE RECOMMENDATION
Vote FOR management proposals to reduce the
par value of common stock.
The following factors should be considered:
1. State laws sometimes prohibit issuance of new stock priced below that
of the outstanding shares.
2. A corporation may be unable to raise capital if the par value is
overstated.
48
DEBT RESTRUCTURINGS
- -------------------
The corporation may propose to increase common and/or preferred shares and to
issue shares as part of a debt restructuring plan.
VOTE RECOMMENDATION
It is our policy to vote CASE-BY-CASE on debt
restructuring
The following factors should be considered:
1. Dilution - How much will ownership interest of existing shareholders be
reduced and how extreme will dilution to future earnings be?
2. Change in Control - Will the transaction result in a change of control
of the company?
3. Bankruptcy - Is the threat of bankruptcy, which would result in severe
losses in shareholder value, the main factor driving the debt
restructuring?
49
CHAPTER 9
EXECUTIVE
AND
DIRECTOR
COMPENSATION
50
DIRECTOR COMPENSATION
---------------------
Directors represent shareholders and are responsible for protecting shareholder
interests. Companies state in the proxy material that they pay directors well in
order to attract the most qualified candidates. All compensation packages for
any executive, director or employee should include a pay-for-performance
component.
VOTE RECOMMENDATION
Vote on a CASE-BY-CASE basis for director
compensation.
The following factors should be considered:
1. As directors take an increasingly active role in corporate
decision-making and governance, their compensation is becoming more
performance-based.
51
SHAREHOLDER PROPOSAL TO LIMIT EXECUTIVE AND DIRECTOR PAY
--------------------------------------------------------
Shareholder compensation proposals that set limits or reduce executive
compensation should be closely scrutinized. Many of these proposals may be
flawed in their emphasis on an absolute dollar figure in compensation.
VOTE RECOMMENDATION
Vote on a CASE-BY-CASE basis
The following factors should be considered:
1. Executive compensation is established by a committee that consists of
independent directors who have fiduciary responsibility to act in the
best interest of the shareholders and who are best placed to make
compensation decisions.
52
EMPLOYEE STOCK OWNERSHIP PLANS (ESOPS)
--------------------------------------
These proposals ask for stockholder endorsement of compensation plans for key
employees which involve the issuance of company shares by granting of stock
options, SARs, restricted stock, etc. These plans help attract and retain
best-qualified corporate personnel and tie their interests more closely to those
of the shareholders.
VOTE RECOMMENDATION
Vote FOR proposals to adopt share-based
compensation plans when the following items
are involved:
1. The exercise price for stock options is less than 85% of fair market
value on the date of the grant.
2. It is an omnibus stock plan which gives directors broad discretion in
deciding how much and what kind of stock to award, when and to whom.
3. The shares for issue exceed 8% of the company's outstanding shares; or,
in the case of the evergreen plans, the amount of increase exceeds 1.5%
of the total number of shares outstanding.
Vote AGAINST proposals adopting share based
compensation plans when the following items
are involved:
1. Re-load options (new options issued for any exercised).
2. The plan would allow for management to pyramid their holdings by using
stock to purchase more stock, without having to lay out cash. Vote YES
if this is for directors.
53
OPTIONS EXPENSING
-----------------
Shareholder proposal to expense options.
VOTE RECOMMENDATION
It is our policy to vote FOR proposals to
expense options
54
GOLDEN PARACHUTES
-----------------
Golden parachutes are designed to protect the employees of a corporation in the
event of a change in control. The change in control agreement will specify the
exact payments to be made under the golden parachutes. The calculation for
payout is usually based on some multiple of an employee's annual or monthly
compensation. Golden parachutes are generally given to employees whose annual
compensation exceeds $112,000.
Recent experience has shown a willingness of many managements to treat severance
agreements as equal to equity investments and to reward themselves as if
substantial amounts of equity were at risk.
VOTE RECOMMENDATION
Vote FOR proposals which seek to limit
additional compensation payments.
Vote FOR shareholder proposals to have golden
parachutes submitted for shareholder
ratification.
The following factors should be considered:
1. The stability of management may be affected by an attempted acquisition
of the corporation.
2. There is a tendency on the part of an entrenched management to
overstate the value of their continuing control of and influence on the
day-to-day functions of a corporation.
55
PROPOSAL TO BAN GOLDEN PARACHUTES
---------------------------------
Based on the foregoing information:
VOTE RECOMMENDATION
We are FOR this proposal, which essentially
bans golden parachutes, because we feel
management's compensation should be solely
based on real-time contributions to the
corporation while they are serving it.
Deferred current compensation is viewed
differently than future, contingent
compensation for current services.
56
OUTSIDE DIRECTORS' RETIREMENT COMPENSATION
------------------------------------------
We believe that directors should only be compensated while serving the company.
VOTE RECOMMENDATIONS
Vote AGAINST proposals establishing outside
directors' retirement compensation.
Vote FOR proposals that revoke outside
directors' retirement compensation.
57
CHAPTER 10
STATE
OF
INCORPORATION
58
CONTROL SHARE ACQUISITION STATUTES
----------------------------------
These proposals suggest that the board of directors solicit shareholder approval
before committing acquisitions or divestiture of a business exceeding stipulated
threshold levels. Such statutes function by denying shares their voting rights
when they contribute to ownership in excess of certain thresholds.
VOTE RECOMMENDATION
Vote AGAINST proposals which request the
board to seek shareholder approval before
committing to an acquisition.
The following factors should be considered:
1. These proposals deprive the board of directors of its ability to act
quickly in propitious circumstances.
2. Conforming to these requirements can be expensive.
3. The board of directors is uniquely qualified and positioned to be able
to make these decisions without prior shareholder approval.
4. The threshold levels usually imposed by these proposals are much more
stringent than required by law.
59
OPT-OUT OF STATE TAKEOVER STATUTES
----------------------------------
These proposals seek shareholder approval to opt-out (not be governed by)
certain provisions of the anti-takeover laws of various states. Delaware law,
for instance, dictates that a bidder has to acquire at least 85% of a company's
stock before exercising control, unless he or she has board approval. This means
that a company may thwart an otherwise successful bidder by securing 15% of its
stock in friendly hands.
VOTE RECOMMENDATION
Vote on a CASE-BY-CASE basis for these
proposals.
The following factors should be considered:
1. It is the directors' responsibility to act on behalf of the
shareholders in opposing coercive takeover attempts.
2. Creating deterrents to corporate takeovers may allow for entrenchment
of inefficient management.
3. These statutes strengthen the board's ability to deal with potential
buyers on fair and reasonable terms.
4. Shareholders should have the final say on whether the company should be
merged or acquired.
60
CORPORATE RESTRUCTURING, SPIN-OFFS ASSET SALES, LIQUIDATIONS
------------------------------------------------------------
Votes on corporate restructuring, spin-offs, asset sales and liquidations are
evaluated on a CASE BY CASE basis.
61
CHAPTER 11
CONFLICTS
OF
INTEREST
62
CONFLICTS
- ---------
From time to time, proxy voting proposals may raise conflicts between the
interests of the Advisers clients and the interests of the Adviser, it's
affiliates and it's employees. Conflicts of interest may arise when:
1. Proxy votes regarding non-routine matters are solicited by an issuer
that may have a separate account relationship with an affiliate of the
Adviser or an investment banking relationship with Fahnestock & Co.
Inc.
2. A proponent of a proxy proposal has a business relationship with the
Adviser or one of its affiliates or the Adviser or one of its
affiliates has a business relationship with participants in proxy
contests, corporate directors or director candidates.
3. An employee of the Adviser has a personal interest in the outcome of a
particular matter before shareholders.
If the Adviser receives a proxy that to the knowledge of the Proxy Manager
raises a conflict of interest, the Proxy Manager shall advise the Governance
Committee which shall determine whether the conflict is "material" to any
specific proposal involved in the proxy. The Governance Committee will determine
whether the proposal is material as follows:
1. Routine proxy proposals are presumed not to involve a material conflict
of interest.
2. Non-routine proxy proposals-Proxy proposals that are "non- routine"
will be presumed to involve a material conflict of interest unless the
Governance Committee determines that the conflict is unrelated to the
proposal. Non-routine proposals would include a merger, compensation
matters for management and contested elections of directors.
63
CONFLICTS CONT'D
3. The Governance Committee may determine on a case by case basis that
particular non-routine proposals do not involve a material conflict of
interest because the proposal is not directly related to the Adviser's
conflict vis-a-vis the issue. The Governance Committee will record the
basis for any such determination. With respect to any proposal that the
Governance Committee determines presents a material conflict of
interest, the Adviser may vote regarding that proposal in any of the
following ways:
a) Obtain instructions from the client on how to vote.
b) Use existing proxy guidelines if the policy with respect to the
proposal is specifically addressed and does not involve a case by case
analysis.
c) Vote the proposal that involves the conflict according to the
recommendations of an independent third party such as Institutional
Share Services Inc. or Investor Responsibility Research Center.
64
CHAPTER 12
GOVERNANCE COMMITTEE
AND
PROXY MANAGERS
65
GOVERNANCE COMMITTEE
- --------------------
The Governance Committee is responsible for the maintenance of the Proxy Voting
Policies and Procedures and will determine whether any conflict between the
interest of clients and the Advisers in voting proxies is material. The
Governance Committee includes the following: (1) Bryan McKigney, (2) Barbara
Pires, and (3) Punita Kumar-Sinha.
66
PROXY MANAGERS
- --------------
The Proxy Manager for the Adviser is Punita Kumar-Sinha, Portfolio Manager. The
Proxy Manager will determine how votes will be cast on proposals that are
evaluated on a case-by case basis.
67
CHAPTER 13
SPECIAL ISSUES WITH VOTING
FOREIGN PROXIES
68
SPECIAL ISSUES WITH VOTING FOREIGN PROXIES
- ------------------------------------------
Voting proxies with respect to shares of foreign stock may involve
significantly greater effort and corresponding cost than voting proxies in the
U.S domestic market. Issues in voting foreign proxies include the following:
1. Each country has its own rules and practices regarding shareholder
notification, voting restrictions, registration conditions and share
blocking.
2. In some foreign countries shares may be "blocked" by custodian or
depository or bearer shares deposited with specific financial
institutions for a certain number of days before or after the
shareholders meeting. When blocked, shares typically may not be traded
until the day after the blocking period. Advantage may refrain from
voting shares of foreign stocks subject to blocking restrictions where
in the Adviser's judgment; the benefit from voting the shares is
outweighed by the interest in maintaining client liquidity in the
shares. This decision is made on a case by case basis based on a
relevant factors including the length of the blocking period, the
significance of the holding and whether the stock is considered by a
long-term holding.
3. Time frames between shareholder notification, distribution of proxy
materials, book closures and the actual meeting date may be too short
to allow timely action.
4. In certain countries, applicable regulations require that votes must be
made in person at the shareholder meeting. The Adviser will weigh the
costs and benefits of voting on proxy proposals in countries that
require in person voting on a case by case basis and make decisions on
whether voting on a given proxy proposal is prudent. Generally, the
Adviser will not vote shares in countries that require in person voting
on routine matters such as uncontested elections of directors,
ratification of auditors.
69
CHAPTER 14
RECORD KEEPING
70
RECORD KEEPING
- --------------
Advantage will maintain the following records:
1. Copies of these policies
2. A copy of each proxy statement that the Adviser receives regarding
client securities. The Adviser may satisfy this requirement by relying
on a third party to keep copies of proxy statements provided that the
Adviser has an undertaking from the third party to provide a copy of
the proxy statement promptly upon request.
3. A record of each vote cast on behalf of a client. A third party may
keep these voting records provided that the Adviser has an undertaking
from the third party to provide a copy of the record promptly upon
request.
4. A copy of any document created by the Adviser that was material to
making a decision on how to vote proxies or that memorializes the basis
for that decision.
5. A copy of each written client request for information on how an Adviser
voted proxies on behalf of the client and a copy of written response by
the Adviser to any client request for information on how the Adviser
voted proxies on behalf of the client.
The above records shall be maintained for five years from the end of the fiscal
year during which the last entry was made on such record, the first two years in
an appropriate office of the Adviser.
71
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act
(17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 10. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 are attached hereto.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Asia Tigers Fund, Inc.
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By (Signature and Title)* /s/Bryan McKigney
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Bryan McKigney, President and Chairman
(principal executive officer)
Date December 17, 2003
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/Bryan McKigney
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Bryan McKigney, President and Chairman
(principal executive officer)
Date December 17, 2003
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By (Signature and Title)* /s/Alan Kaye
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Alan Kaye, Treasurer
(principal financial officer)
Date December 17, 2003
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* Print the name and title of each signing officer under his or her signature.