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 811-08050
THE 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: 212-667-4939
Date of fiscal year end: OCTOBER 31, 2005
Date of reporting period: OCTOBER 31, 2005
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, 100 F Street, NE,
Washington, DC 20549. 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 Report to Shareholders is attached herewith.
The Asia Tigers Fund, Inc.
November 30, 2005
DEAR FUND SHAREHOLDER,
We are pleased to provide you with the audited financial statements of The Asia
Tigers Fund, Inc. (NYSE: GRR) (the "Fund") for the fiscal year ended October 31,
2005.
The Fund's net asset value ("NAV") closed at $13.44 on October 31, 2005,
representing an increase of 22.4% for the Fund's fiscal year. The Fund
outperformed its benchmark, the MSCI AC Asia Free ex-Japan*, which rose 17.4%
during the same period.
Overall, Asian equity markets posted a solid advance for the twelve months
ending October 31, 2005, marking the fourth straight year (as measured by the
Fund's October fiscal year-end) the region has seen positive gains. Most
impressively, the strong performance came despite challenging headwinds,
including: 1) the U.S. Federal Reserve continuously raising interest rates, 2)
oil prices surging over 50%, before dropping back to a more than 30% increase
for the period, and 3) intensifying concern over the spread of avian flu.
Despite these concerns, Asian markets continued to see rising portfolio inflows,
as global fund managers increasingly recognized that the region's higher growth
rates, improving corporate governance, and more efficient capital management
could add up to a reduced risk premium for Asian shares. Structurally, Asian
governments are also showing progressive change, with 2005's biggest highlight
being the Chinese government finally taking the first step to liberalize its
currency regime by de-pegging the yuan and allowing it to appreciate (albeit
very slightly) against the U.S. dollar.
Finally, despite the solid performance of the Fund's benchmark over the past
several years, investors should be encouraged by the fact that share valuations
overall still remain at the lower end of Asia's historical valuation range. The
bright outlook for Asia indeed remains intact.
On behalf of the Board of Directors, we thank you for your participation and
continued support of the Fund.
Sincerely,
/s/ Bryan McKigney
Bryan McKigney
Chairman, President and Director
*Please note that the benchmark is an unmanaged index. Investors cannot directly
invest in the index. The index does not reflect transaction costs or manager
fees.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. There is no guarantee that
the Fund's or any other investment technique will be effective under all market
conditions.
1
THE ASIA TIGERS FUND, INC.
- --------------------------------------------------------------------------------
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 Note D to the Financial Statements.)
- --------------------------------------------------------------------------------
2
THE ASIA TIGERS FUND, INC.
OCTOBER 31, 2005
Schedule of Investments
COMMON STOCKS (97.90% of net assets)
NUMBER PERCENT OF
OF SHARES SECURITY NET ASSETS COST VALUE
- ------------------------------------------------------------------------------------------------------------------------------
CHINA 4.43%
AIRPORT DEVELOPMENT & MAINTENANCE 0.73%
1,384,000 Beijing Capital International Airport Co., Ltd. ....... $ 503,268 $ 557,895
------------ -----------
COAL 0.37%
443,200 Yanzhou Coal Mining Company Ltd. ...................... 146,938 284,420
------------ -----------
MACHINERY - MATERIAL HANDLING 0.58%
550,800 Shanghai Zhenhua Port Machinery Co., Class B .......... 360,563 442,843
------------ -----------
METAL PROCESSORS & FABRICATION 0.57%
922,280 Jiangxi Copper Co., Ltd. .............................. 520,822 437,207
------------ -----------
OIL COMPANIES - INTEGRATED 1.31%
25,149 China Petroleum and Chemical Corp. ADR ................ 699,348 1,012,247
------------ -----------
REAL ESTATE - OPERATIONS & DEVELOPMENT 0.87%
1,375,903 China Vanke Co., Ltd. Class B ......................... 329,363 667,333
------------ -----------
TOTAL CHINA ........................................... 2,560,302 3,401,945
------------ -----------
HONG KONG 21.79%
APPAREL & SHOES MANUFACTURING 0.62%
3,460,000 Symphony Holdings Ltd. ................................ 559,162 473,095
------------ -----------
CELLULAR TELECOMMUNICATIONS 2.06%
355,100 China Mobile (Hong Kong) Ltd. ......................... 1,006,060 1,580,289
------------ -----------
COMMERCIAL BANKS - NON-US 1.98%
109,202 Dah Sing Financial Holdings, Ltd. ..................... 601,759 663,465
30,500 HSBC Holdings PLC ..................................... 347,585 477,230
56,000 Wing Hang Bank Ltd. ................................... 405,097 382,490
------------ -----------
1,354,441 1,523,185
------------ -----------
DISTRIBUTION & WHOLESALE 1.72%
187,000 Esprit Holdings Ltd. .................................. 256,915 1,318,252
------------ -----------
DIVERSIFIED OPERATIONS 2.17%
175,810 Hutchison Whampoa Ltd. ................................ 782,938 1,664,586
------------ -----------
ELECTRIC - GENERATION 0.85%
1,090,000 China Resources Power Holdings Co. .................... 602,433 653,802
------------ -----------
3
THE ASIA TIGERS FUND, INC.
OCTOBER 31, 2005
Schedule of Investments (continued)
COMMON STOCKS (continued)
NUMBER PERCENT OF
OF SHARES SECURITY NET ASSETS COST VALUE
- ------------------------------------------------------------------------------------------------------------------------------
HONG KONG (CONTINUED)
FINANCE - OTHER SERVICES 0.98%
226,000 Hong Kong Exchanges & Clearing Ltd. ................... $ 420,335 $ 755,048
------------ -----------
HOTELS & MOTELS 0.37%
4,190,000 Regal Hotels International Holdings Ltd. .............. 269,494 281,050
------------ -----------
MACHINERY - GENERAL INDUSTRY 0.53%
596,000 Fongs' Industries Co., Ltd. ........................... 498,763 403,620
------------ -----------
OIL COMPANIES - EXPLORATION & PRODUCTION 1.07%
12,450 CNOOC Ltd. ADR ........................................ 614,875 817,965
------------ -----------
REAL ESTATE - OPERATIONS & DEVELOPMENT 5.90%
142,700 Cheung Kong Holdings Ltd. ............................. 1,015,150 1,484,551
2,080,000 Emperor Entertainment Hotel Ltd.+ ..................... 446,079 525,879
1,385,000 Far East Consortium ................................... 400,040 419,840
212,000 Hopewell Holdings Ltd. ................................ 148,468 516,850
283,826 Kerry Properties Ltd. ................................. 485,122 710,265
93,300 Sun Hung Kai Properties Ltd. .......................... 667,036 882,170
------------ -----------
3,161,895 4,539,555
------------ -----------
RETAIL - RESTAURANTS 0.33%
226,000 Cafe De Coral Holdings Ltd. ........................... 172,922 255,084
------------ -----------
SEMICONDUCTOR COMPONENTS - INTEGRATED CIRCUITS 0.66%
1,368,000 Solomon Systech International Ltd. .................... 504,638 502,918
------------ -----------
TELECOMMUNICATIONS EQUIPMENT 0.86%
620,000 Foxconn International Holdings, Ltd.+ ................. 353,710 663,799
------------ -----------
TELECOMMUNICATIONS SERVICES 1.18%
2,780,000 China Telecom Corp., Ltd. ............................. 903,150 905,467
------------ -----------
TEXTILE - PRODUCTS 0.51%
1,548,000 Victory City International Holdings Ltd. .............. 497,612 389,379
------------ -----------
TOTAL HONG KONG ....................................... 11,959,343 16,727,094
------------ -----------
INDIA 9.69%
APPLICATIONS SOFTWARE 2.21%
30,326 Infosys Technologies Ltd. ............................. 591,189 1,696,925
------------ -----------
4
THE ASIA TIGERS FUND, INC.
OCTOBER 31, 2005
Schedule of Investments (continued)
COMMON STOCKS (continued)
NUMBER PERCENT OF
OF SHARES SECURITY NET ASSETS COST VALUE
- --------------------------------------------------------------------------------------------------------------------------------
INDIA (CONTINUED)
COMMERCIAL BANKS - NON-US 2.26%
25,600 Punjab National Bank Ltd. ............................. $ 228,991 $ 229,835
80,930 State Bank of India ................................... 328,936 1,504,037
--------------- --------------
557,927 1,733,872
--------------- --------------
ELECTRONIC COMPONENTS - MISCELLANEOUS 0.52%
24,500 Bharat Electronics Ltd. ............................... 344,211 395,542
--------------- --------------
OIL COMPANIES - EXPLORATION & PRODUCTION 0.55%
20,500 Oil and Natural Gas Corp. Ltd. ........................ 470,392 422,112
--------------- --------------
PETROCHEMICALS 1.52%
69,238 Reliance Industries Ltd. .............................. 438,478 1,170,545
--------------- --------------
POWER CONVERSION & SUPPLY EQUIPMENT 0.97%
29,120 Bharat Heavy Electricals Ltd. ......................... 279,666 742,413
--------------- --------------
TELECOMMUNICATIONS SERVICES 1.29%
138,680 Bharti Tele-Ventures Ltd.+ ............................ 429,607 992,021
--------------- --------------
TEXTILE - PRODUCTS 0.37%
48,150 Mahavir Spinning Mills Ltd. ........................... 179,973 286,786
--------------- --------------
TOTAL INDIA ........................................... 3,291,443 7,440,216
--------------- --------------
INDONESIA 1.26%
COMMERCIAL BANKS - NON-US 0.52%
1,258,830 PT Bank Central Asia Tbk .............................. 333,342 401,357
--------------- --------------
TELECOMMUNICATIONS SERVICES 0.74%
1,149,500 PT Telekomunikasi Indonesia+ .......................... 552,962 568,216
--------------- --------------
TOTAL INDONESIA ....................................... 886,304 969,573
--------------- --------------
MALAYSIA 4.80%
AGRICULTURAL OPERATIONS 1.09%
241,400 IOI Corp. BHD ......................................... 371,052 837,706
--------------- --------------
CELLULAR TELECOMMUNICATIONS 0.43%
139,650 Maxis Communications BHD .............................. 257,038 332,940
--------------- --------------
COMMERCIAL BANKS - NON-US 0.69%
365,400 Commerce Asset-Holding BHD ............................ 457,077 532,371
--------------- --------------
5
THE ASIA TIGERS FUND, INC.
OCTOBER 31, 2005
Schedule of Investments (continued)
COMMON STOCKS (continued)
NUMBER PERCENT OF
OF SHARES SECURITY NET ASSETS COST VALUE
- --------------------------------------------------------------------------------------------------------------------------------
MALAYSIA (CONTINUED)
LOTTERY SERVICES 0.56%
389,700 Berjaya Sports Toto BHD ............................... $ 348,676 $ 433,574
--------------- --------------
RESORTS & THEME PARKS 0.71%
196,500 Resorts World BHD ..................................... 453,803 546,556
--------------- --------------
TRANSPORTATION - MARINE 1.32%
399,000 Malaysia International Shipping Corp. BHD ............. 455,085 1,004,106
--------------- --------------
TOTAL MALAYSIA ........................................ 2,342,731 3,687,253
--------------- --------------
SINGAPORE 11.45%
COMMERCIAL BANKS - NON-US 1.58%
134,100 DBS Group Holdings Ltd. ............................... 872,975 1,210,067
--------------- --------------
COMMERCIAL SERVICES 0.56%
341,000 Singapore Airport Terminal Services Ltd. .............. 463,043 432,396
--------------- --------------
DIVERSIFIED OPERATIONS 0.80%
90,000 Keppel Corp. Ltd. ..................................... 649,687 615,729
--------------- --------------
ELECTRONIC COMPONENTS - MISCELLANEOUS 0.48%
1,199,000 Huan Hsin Holdings Ltd. ............................... 491,824 371,251
--------------- --------------
ENGINEERING/RESEARCH AND DEVELOPMENT SERVICES 1.07%
520,000 SembCorp Industries Ltd. .............................. 818,628 824,983
--------------- --------------
FOOD - MEAT PRODUCTS 0.70%
1,058,500 People's Food Holdings Ltd. ........................... 569,072 536,882
--------------- --------------
REAL ESTATE - OPERATIONS & DEVELOPMENT 1.00%
341,500 Keppel Land Ltd. ...................................... 255,243 769,385
--------------- --------------
TELECOMMUNICATIONS SERVICES 1.37%
758,720 Singapore Telecommunications Ltd. ..................... 978,584 1,042,622
--------------- --------------
TRANSPORTATION - MARINE 1.87%
503,000 Cosco Corp. (Singapore) Ltd. .......................... 603,229 652,650
970,200 Ezra Holdings Ltd. .................................... 599,454 783,919
--------------- --------------
1,202,683 1,436,569
--------------- --------------
6
THE ASIA TIGERS FUND, INC.
OCTOBER 31, 2005
Schedule of Investments (continued)
COMMON STOCKS (continued)
NUMBER PERCENT OF
OF SHARES SECURITY NET ASSETS COST VALUE
- --------------------------------------------------------------------------------------------------------------------------------
SINGAPORE (CONTINUED)
WATER TREATMENT SYSTEMS 2.02%
880,250 Hyflux Limited ........................................ $ 766,421 $ 1,552,268
---------------- --------------
TOTAL SINGAPORE ....................................... 7,068,160 8,792,152
---------------- --------------
SOUTH KOREA 26.26%
AIRLINES 0.00%
5 Korean Air Lines Co., Ltd. ............................ 48 94
---------------- --------------
AUTO - CARS & LIGHT TRUCKS 1.31%
13,700 Hyundai Motor Co. ..................................... 564,529 1,008,864
---------------- --------------
AUTOMOTIVE PARTS - EQUIPMENT 0.68%
6,570 Hyundai Mobis ......................................... 554,032 524,236
---------------- --------------
BUILDING & CONSTRUCTION - MISCELLANEOUS 1.18%
21,010 GS Engineering & Construction Corp. ................... 454,396 903,862
---------------- --------------
CELLULAR TELECOMMUNICATIONS 1.15%
4,890 SK Telecom Co., Ltd. .................................. 842,053 881,441
---------------- --------------
CIRCUITS 0.81%
17,450 Core Logic, Inc. ...................................... 614,669 613,149
---------------- --------------
COMMERCIAL BANKS - NON-US 1.69%
23,541 Kookmin Bank .......................................... 527,907 1,296,769
---------------- --------------
COMPUTERS 0.50%
3,850 Samsung SDI Co., Ltd. ................................. 394,476 379,374
---------------- --------------
DIVERSIFIED FINANCIAL SERVICES 2.32%
53,320 Shinhan Financial Group Co., Ltd. ..................... 744,906 1,783,826
---------------- --------------
DIVERSIFIED OPERATIONS 0.71%
23,710 GS Holdings Corp. ..................................... 523,493 544,769
---------------- --------------
ELECTRIC - INTEGRATED 0.90%
21,240 Korea Electric Power Corp. ............................ 532,147 693,230
---------------- --------------
ELECTRIC PRODUCTS - MISCELLANEOUS 9.03%
13,068 Samsung Electronics Co., Ltd. ......................... 3,361,659 6,934,759
---------------- --------------
NON-FERROUS METALS 0.65%
14,520 Korea Zinc Co., Ltd. .................................. 336,286 496,935
---------------- --------------
7
THE ASIA TIGERS FUND, INC.
OCTOBER 31, 2005
Schedule of Investments (continued)
COMMON STOCKS (continued)
NUMBER PERCENT OF
OF SHARES SECURITY NET ASSETS COST VALUE
- --------------------------------------------------------------------------------------------------------------------------------
SOUTH KOREA (CONTINUED)
PETROCHEMICALS 0.56%
16,330 LG Petrochemical Co., Ltd. ............................ $ 386,976 $ 431,720
---------------- --------------
PROPERTY & CASUALTY INSURANCE 0.94%
58,250 LG Insurance Co., Ltd. ................................ 228,300 722,385
---------------- --------------
RETAIL - DISCOUNT 0.93%
1,990 Shinsegae Co., Ltd. ................................... 558,276 715,497
---------------- --------------
SHIPBUILDING 0.77%
46,090 Samsung Heavy Industries .............................. 602,185 587,092
---------------- --------------
STEEL - PRODUCERS 2.13%
25,770 Dongkuk Steel Mill Co., Ltd. .......................... 425,029 465,753
4,640 POSCO ................................................. 509,744 943,434
4,350 POSCO ADR ............................................. 123,672 223,111
---------------- --------------
1,058,445 1,632,298
---------------- --------------
TOTAL SOUTH KOREA ..................................... 12,284,783 20,150,300
---------------- --------------
TAIWAN 14.65%
BUILDING PRODUCTS - CEMENT & AGGREGATION 0.95%
1,183,350 Taiwan Cement Corp. ................................... 647,707 726,555
---------------- --------------
COMMERCIAL BANKS - NON-US 1.08%
1,623,227 Taishin Financial Holdings Co., Ltd. .................. 707,896 829,720
---------------- --------------
COMPUTERS 1.75%
290,440 Acer, Inc. ............................................ 549,678 587,779
342,669 Advantech Co., Ltd. ................................... 436,321 753,736
1 Compal Electronics, Inc. .............................. 1 1
---------------- --------------
986,000 1,341,516
---------------- --------------
DIVERSIFIED FINANCIAL SERVICES 1.55%
1,535,827 Chinatrust Financial Holding Co. ...................... 1,003,275 1,192,444
---------------- --------------
ELECTRONIC COMPONENTS - MISCELLANEOUS 2.00%
480 AU Optronics Corp. .................................... 616 607
355,562 HON HAI Precision Industry ............................ 1,030,503 1,536,637
---------------- --------------
1,031,119 1,537,244
---------------- --------------
8
THE ASIA TIGERS FUND, INC.
OCTOBER 31, 2005
Schedule of Investments (continued)
COMMON STOCKS (continued)
NUMBER PERCENT OF
OF SHARES SECURITY NET ASSETS COST VALUE
- --------------------------------------------------------------------------------------------------------------------------------
TAIWAN (CONTINUED)
OIL REFINING & MARKETING 0.84%
353,000 Formosa Petrochemical Corp. ......................... $ 654,926 $ 645,998
--------------- --------------
RETAIL - AUTOMOBILE 0.62%
191,000 Hotai Motor Co., Ltd ................................ 429,959 472,497
--------------- --------------
SEMICONDUCTOR COMPONENTS - INTEGRATED CIRCUITS 5.56%
700,583 Advanced Semiconductor Engineering, Inc. ............ 474,485 427,013
90,584 Novatek Microelectronics Corp., Ltd. ................ 376,600 395,528
914,000 Powerchip Semiconductor Corp. ....................... 590,590 433,143
1,348,485 Taiwan Semiconductor Manufacturing Co., Ltd. ........ 2,070,788 2,089,958
1,738,791 United Microelectronics Corp. ....................... 1,103,553 922,476
--------------- --------------
4,616,016 4,268,118
--------------- --------------
TRANSPORTATION - MARINE 0.30%
273,000 Sincere Navigation Corp. ............................ 293,533 222,947
--------------- --------------
TOTAL TAIWAN ........................................ 10,370,431 11,237,039
--------------- --------------
THAILAND 3.57%
BUILDING PRODUCTS - CEMENT & AGGREGATION 1.09%
148,020 Siam Cement PCL ..................................... 468,003 834,529
--------------- --------------
CELLULAR TELECOMMUNICATIONS 0.67%
208,800 Advanced Info Service PCL ........................... 336,149 511,827
--------------- --------------
COMMERCIAL BANKS - NON-US 0.17%
114,000 Siam Commercial Bank PCL ............................ 154,472 132,038
--------------- --------------
OIL COMPANIES - EXPLORATION & PRODUCTION 0.93%
69,700 PTT Exploration & Production PCL .................... 512,898 717,588
--------------- --------------
REAL ESTATE 0.71%
2,050,000 Cpn Retail Growth Property Fund+ .................... 560,035 547,739
--------------- --------------
TOTAL THAILAND ...................................... 2,031,557 2,743,721
--------------- --------------
TOTAL COMMON STOCKS ................................. 52,795,054 75,149,293
--------------- --------------
9
THE ASIA TIGERS FUND, INC.
OCTOBER 31, 2005
Schedule of Investments (concluded)
PREFERRED STOCK (0.66% of holdings)
NUMBER PERCENT OF
OF SHARES SECURITY NET ASSETS COST VALUE
- --------------------------------------------------------------------------------------------------------------------------------
THAILAND 0.66%
COMMERCIAL BANKS - NON-US 0.66%
444,205 Siam Commercial Bank PCL - 5.25% Preferred ............ $ 151,803 $ 509,047
--------------- --------------
TOTAL THAILAND ........................................ 151,803 509,047
--------------- --------------
TOTAL PREFERRED STOCK ................................. 151,803 509,047
--------------- --------------
TOTAL STOCK INVESTMENTS ............................... 98.56% $ 52,946,857 $ 75,658,340
--------------- --------------
REPURCHASE AGREEMENT (0.03% of net assets)
PRINCIPAL PERCENT OF
AMOUNT SECURITY NET ASSETS COST VALUE
- --------------------------------------------------------------------------------------------------------------------------------
UNITED STATES 0.03%
COMMERCIAL BANKS 0.03%
$ 21,854 State Street Bank, 1.20%, dated 10/31/05, $ 21,854 $ 21,854
due 11/01/05, proceeds at maturity $21,855
(Collateralized by $25,000 FNMA, 6%,
due 5/15/2008, Market Value $26,481)
TOTAL UNITED STATES ................................... 21,854 21,854
--------------- --------------
TOTAL REPURCHASE AGREEMENT ............................ 21,854 21,854
--------------- --------------
TOTAL INVESTMENTS++ ................................... 98.59% $ 52,968,711 75,680,194
=============== ==============
OTHER ASSETS LESS LIABILITIES ......................... 1.41% 1,080,838
--------------
NET ASSETS ............................................ 100.00% $ 76,761,032
==============
This Schedule of Investments reflects each company's country of domicile. The
companies may also be subject to the risks of other countries.
FOOTNOTES AND ABBREVIATIONS
ADR - American Depository Receipts
+ Non-income producing security.
++ As of October 31, 2005 aggregate cost for federal
income tax purposes was $53,213,113.
The aggregate gross unrealized appreciation
(depreciation) for all securities was as follows:
Excess of value over tax cost $ 23,691,871
Excess of tax cost over value (1,224,790)
------------
$ 22,467,081
============
See accompanying notes to financial statements.
10
THE ASIA TIGERS FUND, INC.
OCTOBER 31, 2005
Statement of Assets and Liabilities
ASSETS
Investments, at value (Cost $52,968,711) ............................................... $ 75,680,194
Cash (including $1,078,011 of foreign currency holdings with a cost of $1,074,415) ..... 1,093,662
Receivables:
Securities sold ..................................................................... 843,238
Dividends ........................................................................... 21,698
Prepaid expenses ....................................................................... 4,062
--------------
TOTAL ASSETS ......................................................... 77,642,854
--------------
LIABILITIES
Due to Investment Manager .............................................................. 70,840
Due to Administrator ................................................................... 14,168
Due to Directors ....................................................................... 3,200
Accrued expenses ....................................................................... 212,609
Deferred foreign withholding taxes payable ............................................. 581,005
--------------
TOTAL LIABILITIES .................................................... 881,822
--------------
NET ASSETS ........................................................... $ 76,761,032
==============
NET ASSET VALUE PER SHARE
($76,761,032/5,712,491 SHARES ISSUED AND OUTSTANDING) ................ $ 13.44
==============
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 ........................................................................ 277,305,256
Cost of 14,802,493 shares repurchased .................................................. (134,766,468)
Accumulated net realized loss on investments ........................................... (87,941,013)
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 $581,005) ............................. 22,142,742
--------------
$ 76,761,032
==============
See accompanying notes to financial statements.
11
THE ASIA TIGERS FUND, INC.
FOR THE YEAR ENDED
Statement of Operations OCTOBER 31, 2005
INVESTMENT INCOME
Dividends (net of taxes withheld of $272,763) .......................................... $ 2,134,101
Interest ............................................................................... 16,130
--------------
TOTAL INVESTMENT INCOME .............................................. 2,150,231
--------------
EXPENSES
Management fees ............................................. $ 837,359
Legal fees .................................................. 307,643
Administration fees ......................................... 167,036
Custodian fees .............................................. 138,586
Audit and tax fees .......................................... 90,149
Printing .................................................... 67,927
Insurance ................................................... 32,183
Directors' fees ............................................. 29,762
Transfer agent fees ......................................... 23,290
NYSE fees ................................................... 20,382
ICI fees .................................................... 3,161
Interest expense ............................................ 749
Miscellaneous ............................................... 25,187
-----------
TOTAL EXPENSES ....................................................... 1,743,414
--------------
NET INVESTMENT INCOME ................................................ 406,817
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY
HOLDINGS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN
FOREIGN CURRENCIES:
Net realized gain (loss) from:
Security transactions (net of capital gains tax of $222,990) ........................ 10,509,132
Foreign currency related transactions ............................................... (243,814)
--------------
10,265,318
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 $191,204) ........ 5,804,706
--------------
Net realized and unrealized gain on investments, foreign currency holdings and
translation of other assets and liabilities denominated in foreign currencies ....... 16,070,024
--------------
Net increase in net assets resulting from operations ................................... $ 16,476,841
==============
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, 2005 OCTOBER 31, 2004
- -------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ............................................................. $ 406,817 $ 567,795
Net realized gain on investments and foreign currency related transactions ........ 10,265,318 9,440,094
Net change in unrealized appreciation (depreciation) in value of investments,
foreign currency holdings and translation of other assets and liabilities
denominated in foreign currencies .............................................. 5,804,706 (5,999,582)
---------------- ----------------
Net increase in net assets resulting from operations .............................. 16,476,841 4,008,307
---------------- ----------------
DISTRIBUTION TO SHAREHOLDERS
Net investment income ($0.00 and $0.07 per share, respectively) ................... -- (602,747)
---------------- ----------------
Decrease in net assets resulting from distributions ............................... -- (602,747)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS
Shares repurchased under Repurchase Offers (1,300,950 and 1,597,225 shares,
respectively) (net of repurchase fees of $336,904 and $358,879, respectively)
(including expenses of $236,680 and $271,043, respectively) .................... (16,744,957) (17,856,056)
---------------- ----------------
Net decrease in net assets resulting from capital share transactions .............. (16,744,957) (17,856,056)
---------------- ----------------
Total decrease in net assets ...................................................... (268,116) (14,450,496)
NET ASSETS
Beginning of year ................................................................. 77,029,148 91,479,644
---------------- ----------------
End of year (including undistributed net investment income of $0 and $8,244,
respectively) .................................................................. $ 76,761,032 $ 77,029,148
================ ================
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,
2005 2004 2003 2002 2001
- ----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period ...... $ 10.98 $ 10.62 $ 7.65 $ 6.89 $ 9.55
------------ ------------ ------------ ------------ ------------
Net investment income ..................... 0.06 1 0.07 1 0.05 1 0.01 1 0.03
Net realized and unrealized gains
(losses) on investments, foreign
currency holdings, and translation
of other assets and liabilities
denominated in foreign
currencies 2 ........................... 2.38 0.35 2.87 0.60 (2.42)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) from
investment operations .................. 2.44 0.42 2.92 0.61 (2.39)
------------ ------------ ------------ ------------ ------------
Less dividends and distributions:
Dividends from net investment
income ................................. -- (0.07) -- -- (0.29)
------------ ------------ ------------ ------------ ------------
Total dividends and distributions ......... -- (0.07) -- -- (0.29)
------------ ------------ ------------ ------------ ------------
Capital share transactions
Anti-dilutive effect of Tender Offer ... -- -- -- 0.14 --
Anti-dilutive effect of Repurchase
Offer ............................... 0.02 0.01 0.05 0.01 --
Anti-dilutive effect of Share Repurchase
Program ............................. -- -- -- -- 4 0.02
------------ ------------ ------------ ------------ ------------
Total capital share transactions .......... 0.02 0.01 0.05 0.15 0.02
------------ ------------ ------------ ------------ ------------
Net asset value, end of period ............ $ 13.44 $ 10.98 $ 10.62 $ 7.65 $ 6.89
============ ============ ============ ============ ============
Per share market value, end of period ..... $ 12.91 $ 10.02 $ 10.30 $ 6.77 $ 5.79
TOTAL INVESTMENT RETURN BASED
ON MARKET VALUE 3 ...................... 28.84% (2.13)% 52.14% 16.93% (15.62)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ....... $ 76,761 $ 77,029 $ 91,480 $ 100,438 $ 134,112
Ratios of expenses to average net assets .. 2.08% 1.99% 1.95% 1.78% 1.58%
Ratios of net investment income
to average net assets .................. 0.49% 0.65% 0.60% 0.06% 0.31%
Portfolio turnover ........................ 40.79% 39.79% 33.10% 41.32% 28.98%
See page 15 for footnotes.
14
THE ASIA TIGERS FUND, INC.
Financial Highlights (concluded)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
1 Based on average shares outstanding throughout the period.
2 Net of deferred foreign withholding taxes of $0.03, less than $0.01, $0.03,
less than $0.01 and $0.06 per share for the years ended October 31, 2005,
October 31, 2004, October 31, 2003, October 31, 2002 and October 31, 2001,
respectively.
3 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. Past performance is not a guarantee of future results.
4 Less than $0.01 per share.
See accompanying notes to financial statements.
15
THE ASIA TIGERS FUND, INC.
OCTOBER 31, 2005
Notes to Financial Statements
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 (the "1940
Act"), as a closed-end, non-diversified management investment company. The
Fund's investment objective is long-term capital appreciation, which it seeks to
achieve by investing primarily in equity securities of Asian companies.
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America ("GAAP") 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 that are traded over-the-counter are valued, if bid and asked
quotations are available, at the mean between the current bid and asked prices.
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.
REPURCHASE AGREEMENTS. The Fund enters into repurchase agreements, whereby
securities are purchased from a counterparty under an agreement to resell them
at a future date at the same price plus accrued interest. The Fund is exposed to
credit risk on repurchase agreements to the extent that the counterparty
defaults on its obligation to repurchase the securities, and the market value of
such securities held by the Fund, including any accrued interest or dividends on
such securities, is less than the face amount of the repurchase agreement plus
accrued interest.
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
16
THE ASIA TIGERS FUND, INC.
OCTOBER 31, 2005
Notes to Financial Statements (continued)
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 GAAP.
At October 31, 2005, the components of net assets (excluding paid in capital) on
a tax basis were as follows:
Book and tax ordinary income ................................ $ 0
----------------
Tax basis capital loss carryover ............................ $ (87,696,612)
Plus/less: cumulative timing differences - wash sales ....... (244,401)
--------------
Book basis accumulated capital loss ......................... (87,941,013)
----------------
Book unrealized foreign exchange loss ....................... 4,291
----------------
Book unrealized appreciation on foreign currencies .......... 3,596
----------------
Tax basis unrealized appreciation ........................... 22,471,459
Plus/less: cumulative timing differences - wash sales ....... 244,401
--------------
Book basis unrealized appreciation .......................... 22,715,860
Deferred foreign withholding tax ............................ (581,005)
----------------
Net assets (excluding paid in capital) ...................... $ (65,798,271)
================
The differences between book and tax basis unrealized appreciation is primarily
attributable to wash sales and deferred foreign withholding tax.
Net asset value ............................................................... $ 76,761,032
Paid in capital ............................................................... (142,559,303)
----------------
Net assets (excluding paid in capital) ........................................ $ (65,798,271)
================
At October 31, 2005, the Fund had a net capital loss carryover of $87,696,612,
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, $72,482,023 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, 2005, the Fund utilized
capital loss carryforwards amounting to $10,459,549.
17
THE ASIA TIGERS FUND, INC.
OCTOBER 31, 2005
Notes to Financial Statements (continued)
The tax character of dividends and distributions declared during the years ended
October 31, 2005 and October 31, 2004 were as follows:
2005 2004
--------- ---------
Ordinary Income $ 0 $ 602,747
--------- ---------
Total $ 0 $ 602,747
========= =========
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. The above
taxes may be reduced or eliminated under the terms of applicable U.S. income tax
treaties with some of these countries. 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.
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 GAAP. 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.
18
THE ASIA TIGERS FUND, INC.
OCTOBER 31, 2005
Notes to Financial Statements (continued)
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, 2005, the Fund reclassified $406,817 from
accumulated net realized loss on investments to accumulated net investment
income as a result of permanent book and tax differences relating primarily to
realized foreign currency losses. The Fund also reclassified $8,244 from
accumulated net investment income to paid-in capital as a result of permanent
tax differences relating to the net operating income for the year ended October
31, 2004. Net assets were not affected by the reclassification.
NOTE B: MANAGEMENT, INVESTMENT ADVISORY, ADMINISTRATIVE SERVICES AND DIRECTORS
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"). 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, 2005, these fees amounted to $837,359.
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. 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, 2005, these fees amounted to $167,036.
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
$33,127,663 and $50,444,687, respectively, for the year ended October 31, 2005.
19
THE ASIA TIGERS FUND, INC.
OCTOBER 31, 2005
Notes to Financial Statements (continued)
During the year ended October 31, 2005, the results of the four quarterly
repurchase offers were as follows:
REPURCHASE REPURCHASE REPURCHASE REPURCHASE
OFFER #9 OFFER #10 OFFER #11 OFFER #12
- ------------------------------------------------------------------------------------------------------------------
Commencement Date December 23, 2004 March 30, 2005 June 24, 2005 September 23, 2005
- ------------------------------------------------------------------------------------------------------------------
Expiration Date January 14, 2005 April 15, 2005 July 15, 2005 October 14, 2005
- ------------------------------------------------------------------------------------------------------------------
Repurchase Offer Date January 21, 2005 April 29, 2005 July 22, 2005 October 21, 2005
- ------------------------------------------------------------------------------------------------------------------
% of Issued and Outstanding Shares
of Common Stock 5% 5% 5% 5%
- ------------------------------------------------------------------------------------------------------------------
Shares Validly Tendered 2,067,018.2378 2,015,544.2378 1,414,680.2378 1,220,554.2378
- ------------------------------------------------------------------------------------------------------------------
Final Pro-ration Odd Lot Shares 14,617.0000 16,780.0000 20,371.0000 6,343.0000
- ------------------------------------------------------------------------------------------------------------------
Final Pro-ration Non-Odd Lot Shares 2,052,401.2378 1,998,764.2378 1,394,309.2378 1,214,211.2378
- ------------------------------------------------------------------------------------------------------------------
% of Non-Odd Lot Shares Accepted 16.37382% 15.96170% 21.23700% 24.23892%
- ------------------------------------------------------------------------------------------------------------------
Shares Accepted for Tender 350,672 333,138 316,482 300,657
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value as of Repurchase
Offer Date ($) 12.23 12.42 13.71 13.57
- ------------------------------------------------------------------------------------------------------------------
Repurchase Fee per Share ($) 0.2446 0.2484 0.2742 0.2714
- ------------------------------------------------------------------------------------------------------------------
Repurchase Offer Price ($) 11.9854 12.1716 13.4358 13.2986
- ------------------------------------------------------------------------------------------------------------------
Repurchase Fee ($) 85,775 82,752 86,779 81,598
- ------------------------------------------------------------------------------------------------------------------
Expenses ($) 82,282 50,825 66,751 36,822
- ------------------------------------------------------------------------------------------------------------------
Total Cost ($) 4,285,226 4,105,647 4,318,940 4,035,138
- ------------------------------------------------------------------------------------------------------------------
20
THE ASIA TIGERS FUND, INC.
OCTOBER 31, 2005
Notes to Financial Statements (continued)
During the year ended October 31, 2004, the results of the four quarterly
repurchase offers were as follows:
REPURCHASE REPURCHASE REPURCHASE REPURCHASE
OFFER #5 OFFER #6 OFFER #7 OFFER #8
- ------------------------------------------------------------------------------------------------------------------
Commencement Date December 26, 2003 March 26, 2004 June 25, 2004 September 24, 2004
- ------------------------------------------------------------------------------------------------------------------
Expiration Date January 16, 2004 April 16, 2004 July 16, 2004 October 15, 2004
- ------------------------------------------------------------------------------------------------------------------
Repurchase Offer Date January 23, 2004 April 23, 2004 July 23, 2004 October 22, 2004
- ------------------------------------------------------------------------------------------------------------------
% of Issued and Outstanding Shares
of Common Stock 5% 5% 5% 5%
- ------------------------------------------------------------------------------------------------------------------
Shares Validly Tendered 1,459,130.6002 2,609,905.2003 2,552,812.2062 2,478,511.6639
- ------------------------------------------------------------------------------------------------------------------
Final Pro-ration Odd Lot Shares 10,744.1907 47,448.4154 140,434.0191 31,206.4261
- ------------------------------------------------------------------------------------------------------------------
Final Pro-ration Non-Odd Lot Shares 419,789.0000 361,558.2056 248,122.2819 337,922.0000
- ------------------------------------------------------------------------------------------------------------------
% of Non-Odd Lot Shares Accepted 28.96825% 13.93511% 10.28540% 13.80784%
- ------------------------------------------------------------------------------------------------------------------
Shares Accepted for Tender 430,533 409,007 388,556 369,128
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value as of Repurchase
Offer Date ($) 11.86 12.03 10.05 10.87
- ------------------------------------------------------------------------------------------------------------------
Repurchase Fee per Share ($) 0.2372 0.2406 0.2010 0.2174
- ------------------------------------------------------------------------------------------------------------------
Repurchase Offer Price ($) 11.6228 11.7894 9.8490 10.6526
- ------------------------------------------------------------------------------------------------------------------
Repurchase Fee ($) 102,123 98,407 78,100 80,249
- ------------------------------------------------------------------------------------------------------------------
Expenses ($) 93,229 106,490 59,045 12,279
- ------------------------------------------------------------------------------------------------------------------
Total Cost ($) 5,097,231 4,928,432 3,885,936 3,944,456
- ------------------------------------------------------------------------------------------------------------------
21
THE ASIA TIGERS FUND, INC.
OCTOBER 31, 2005
Notes to Financial Statements (concluded)
NOTE D: 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.
NOTE E: OTHER
At October 31, 2005, 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.
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 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.
In the normal course of business, the Fund may enter into contracts that contain
a variety of representations and warranties and which may provide for general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience, management expects the
risk of loss to be remote.
NOTE F: SUBSEQUENT EVENTS
On November 8, 2005, the Fund's Board of Directors appointed Blackstone Asia
Advisors L.L.C. ("Blackstone Advisors") to serve as the Fund's interim
investment manager upon the expiration of the Fund's existing arrangements with
Advantage on December 4, 2005. The Board of Directors also approved a new
investment management agreement between the Fund and Blackstone Advisors which
will be submitted to stockholders for approval. The interim agreement will
remain in effect until the earlier of (i) stockholder approval of the new
agreement and (ii) May 3, 2006. There will be no increase in management fees
under the new agreements with Blackstone Advisors. The Board of Directors also
appointed Blackstone Administrative Services Partnership L.P. to serve as the
Fund's administrator pursuant to an administration agreement effective December
4, 2005.
22
THE ASIA TIGERS FUND, INC.
Report of Independent Registered Public Accounting Firm
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, 2005, 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards 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, 2005 by correspondence with the custodian, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
300 Madison Avenue
New York, New York
November 30, 2005
23
THE ASIA TIGERS FUND, INC.
The following sections of this Annual Report are not a part of the audited
financial statements.
Continuation of the Management Agreement
The Investment Company Act of 1940, as amended, requires that the Fund's Board
of Directors, including a majority of its Directors who are not affiliated with
the Fund's investment adviser (the "Independent Directors") voting separately,
approve the Fund's advisory agreement and the related fees for its initial term
and on an annual basis thereafter at a meeting called for the purpose of voting
on the agreement's approval or continuation. At a meeting held in person on May
17, 2005, the Board discussed the Fund's Management Agreement (the "Agreement"),
dated June 3, 2003, between the Fund and Advantage Advisers, Inc. ("Advantage").
At the meeting, the Board, including the Independent Directors, unanimously
agreed to renew the Agreement for a six-month term, or through December 4, 2005.
In making this decision, the Independent Directors were represented by
independent counsel who assisted them in their deliberations prior to and during
the Board meeting and in the meeting's executive session.
In considering whether to continue the Fund's Agreement, the Independent
Directors had undertaken certain actions in order to gather information,
including the formation of a joint committee of the Boards of various
Oppenheimer funds and participation in joint meetings of various Oppenheimer
funds to identify issues and discuss developments and to provide Oppenheimer
with an opportunity to respond to the Boards' inquiries. In addition, the joint
committee and the Independent Directors conducted interviews of certain key
personnel of Oppenheimer and the Fund's service providers, including the Fund's
portfolio manager, during which the Independent Directors discussed, among other
things, the portfolio manager's employment arrangements with Oppenheimer. The
Independent Directors also previously raised a number of issues with the
Chairman of Oppenheimer Holdings Inc., the ultimate parent of Advantage,
including certain matters relating to the Fund and Oppenheimer's business
strategy with respect to the Fund, all matters to which the Chairman of
Oppenheimer responded.
In addition, the Board reviewed materials provided by Advantage, which included,
among other things, Oppenheimer's business, personnel and operations, services,
compensation by the Fund and compliance activities, as well as information
regarding the Fund's investment performance and expenses compared to other funds
with investment objectives and policies similar to those of the Fund, as well as
compared to the benchmark index and an analysis of the profitability of the
investment advisory relationship to Advantage. Fund counsel also provided a
memorandum outlining the legal duties of the Board, and information regarding
compliance matters relating to Advantage were also provided to the Board by
Advantage.
The Board considered factors relating to both the selection of Advantage and the
approval of the fees when reviewing the Agreement. In particular, the Board
considered the following:
(i) THE QUALIFICATIONS OF ADVANTAGE, INCLUDING THE NATURE, EXTENT AND QUALITY OF
SERVICES TO BE PROVIDED AND THE INVESTMENT PERFORMANCE OF THE FUND AND
ADVANTAGE: First, the Directors reviewed the services that Advantage provides to
the Fund, including, but not limited to, making the day-to-day decisions for
investing the Fund's assets in accordance with the Fund's objectives and
policies and investment
24
THE ASIA TIGERS FUND, INC.
Continuation of the Management Agreement (continued)
restrictions, subject to the supervision and direction of the Board. The
Directors also listened to a report by the portfolio manager detailing (i)
information regarding Advantage's management of the Fund's portfolio; (ii) the
Fund's performance; and (iii) an analysis of the advisory fees paid by the Fund.
The Chairman of the Fund and the portfolio manager discussed the Fund's
performance (on an absolute and relative basis), the expenses borne by the Fund,
the nature and quality of the advisory and administrative services rendered to
the Fund by Advantage and certain expenses borne by Advantage in its management
of the Fund and compared the advisory fees paid by the Fund to those paid by the
Fund's peer group. The Board also considered the fact that Advantage also makes
available research and statistical data to the Fund, as well as monitors the
performance of the Fund's outside service providers, including the Fund's
administrator, transfer agent and custodian.
In addition, the Directors considered the education, background and experience
of the personnel and management teams at Advantage, and in particular, the track
record of the portfolio manager. Among other things, they took into
consideration the favorable history of the portfolio manager for the Fund,
finding that this has had, and would likely continue to have, a favorable impact
on the success of the Fund. The Directors also considered Advantage's employee
turnover, compensation and budget structure and its ability to attract and
retain quality and experienced personnel. They considered the quality of the
support provided by Oppenheimer and its affiliates to the Fund. The Directors
also considered Advantage's investment philosophy with respect to the Fund and
the investment outlook for the Fund. The Directors concluded that they were
satisfied with the services that had been provided to the Fund by Advantage.
(ii) THE REASONABLENESS OF THE ADVISORY FEES: The Directors reviewed the past
investment performance of the Fund and Advantage, as well as the past investment
performance of the Fund's peers. In particular, the Directors focused on the
analysis of the Fund's performance in the materials provided by Advantage,
noting that the Fund's performance was comparable with that of its peer group,
and that the Fund outperformed its benchmark over the last three years, the last
five years and since inception for both annualized and cumulative returns.
Further, the Fund's performance was strong over the last three years in absolute
terms. The Directors recognized that past performance is not an indicator of
future performance, but concluded that Advantage had the necessary expertise to
continue to manage the Fund in accordance with its investment objectives and
strategies.
The Directors next considered the costs of the services provided by Advantage.
As part of their analysis, the Directors gave substantial consideration to the
comparisons of fees and expense ratios of the Fund as described in the materials
provided by Advantage. Under the Agreement, the Fund pays to Advantage a monthly
fee computed at the annual rate of 1.00% of the Fund's average weekly net
assets.
In reviewing the investment advisory fees, the Directors noted that the Fund's
fee was slightly above average when compared to those of its peer group. The
Directors noted that the Fund's expense ratio was comparable with those of its
peer group. The Directors also considered the other benefits to
25
THE ASIA TIGERS FUND, INC.
Continuation of the Management Agreement (continued)
Advantage and its affiliates from the relationship with the Fund, including,
among others, the administration fees paid to Oppenheimer. Further, the
Directors considered the extent to which economies of scale would be realized as
the Fund grows and whether the fee levels reflect economies of scale for the
benefit of the Fund's shareholders. The Board determined that the current amount
and structure of the fee is appropriate and noted that the Fund's assets had
recently been declining as a result of its interval fund structure.
(iii) THE OPERATING EXPENSES OF THE FUND: The Directors reviewed the operating
expenses of the Fund, on an absolute basis and as compared to those of its
principal peer group. The Directors noted that, as described in the materials
provided by Advantage, the annualized expense ratio had slightly increased in
2004 as compared to 2003 due, in part, to the decreased assets of the Fund. The
Directors also reviewed payments made by the Fund to its affiliates, including
Oppenheimer, for various services. The Directors concluded that the expenses of
the Fund were reasonable.
(iv) PORTFOLIO TRANSACTIONS: The Directors considered the policies and practices
of the Fund and Advantage in effecting portfolio transactions. The Directors
considered the Fund's general policies with respect to brokerages, including
payment levels, allocation policies among clients and use of soft dollars, as
described in the materials provided by Advantage, and discussed whether the
transactions were carried out competently and within the scope of applicable
governmental and Fund policy limitations. The Directors also considered the
Fund's transactions with affiliates, portfolio turnover rates, the recapture of
brokerage commissions and the consideration of research services in placing
portfolio transactions. The Directors took into consideration other benefits to
be derived by Advantage in connection with the Agreement, noting particularly
the research and related services, within the meaning of Section 28(e) of the
Securities Exchange Act of 1934, as amended, that Advantage would be eligible to
receive by allocating the Fund's brokerage transactions.
(v) ADVANTAGE'S MANAGEMENT OF OTHER FUNDS AND OTHER INVESTMENTS AND FEES PAID:
The Directors also considered Advantage's management of other funds and other
investment products and the fees paid in those instances, noting that Advantage
managed one other registered fund which invested in Asia. The Directors compared
both the services rendered and the fees paid under the agreement to the other
fund, and the Directors determined that the services and fees were comparable to
those being offered under the other contract by Advantage.
(vi) THE PROFITABILITY OF ADVANTAGE AND ITS AFFILIATES WITH RESPECT TO THEIR
RELATIONSHIP TO THE FUND: The Directors reviewed information regarding the
profitability to Advantage of its relationship with the Fund. The Board
considered the level of Advantage's profits and whether the profits were
reasonable for Advantage. The profitability analysis took into consideration
fall out benefits from Advantage's relationship with the Fund, including fees
paid to Advantage under the Agreement and under the Administration Agreement.
The Directors found that the profits realized by Advantage from its relationship
with the Fund were reasonable and consistent with fiduciary duties.
26
THE ASIA TIGERS FUND, INC.
Continuation of the Management Agreement (concluded)
The Board also considered possible alternatives to the management arrangement
from the standpoint of the Fund and its shareholders. The Directors considered
the relative advantages and disadvantages of retaining another investment
adviser (or advisers) or hiring internal management to perform all or a part of
the advisory, administrative or operational tasks that Advantage and Oppenheimer
provide. In connection with their examination of these alternatives, the
Directors considered all of the factors described above. The Directors further
considered whether the Fund would have the ability on its own to attract, retain
and supervise highly qualified personnel and obtain services at least equivalent
to those provided by Advantage under the Agreement.
In considering whether to approve the continuation of the Agreement, the Board
did not identify nor was any single factor determinative to the decision of the
Board. The Board also separately considered the operational, administrative and
other services provided to the Fund by Oppenheimer under the Administration
Agreement between the Fund and Oppenheimer. The Independent Directors were
satisfied with the services provided by Advantage to the Fund and with the
investment performance and reasonable expense levels (including advisory fees)
of the Fund as well as the general responsiveness of Oppenheimer to the issues
raised. On that basis, the Independent Directors believed that the continuation
of the Agreement was in the best interests of the Fund and its shareholders. As
the Independent Directors' primary interest is the long-term stability of the
Fund and in light of the fact that there is no employment contract in place with
the Fund's portfolio manager, the Directors determined that it would be
appropriate to continue the Agreement for a six month period during which time
Oppenheimer would endeavor to reach satisfactory employment or other
arrangements for the long-term stable portfolio management of the Fund. The
Independent Directors also determined to establish a subcommittee to explore
alternatives for the management of the Fund in the event that Oppenheimer was
not able to satisfy the Board as to its long term business plan.
SUBSEQUENT DEVELOPMENTS
In August 2005, at a meeting held in person, the Independent Directors
considered proposals from four firms, including Oppenheimer, for the management
of the Fund. Following that meeting, the Independent Directors indicated their
intention to consider an investment advisory arrangement with an affiliate of
The Blackstone Group L.P. ("Blackstone") at a subsequent meeting and invited
Blackstone to make an additional, more formal presentation. At an in-person
meeting on November 8, 2005, the Fund's Board of Directors appointed Blackstone
Asia Advisors L.L.C. ("Blackstone Advisors") to serve as the Fund's interim
investment manager upon the expiration of the Fund's existing arrangements with
Advantage on December 4, 2005. The Board of Directors also approved a new
investment management agreement between the Fund and Blackstone Advisors which
will be submitted to stockholders for approval. The Fund's portfolio manager for
the last six years will continue to be the Fund's portfolio manager under new
employment arrangements with Blackstone.
27
THE ASIA TIGERS FUND, INC.
Results of Annual Meeting of Stockholders (unaudited)
ANNUAL MEETING
The Fund held its Annual Meeting of Stockholders on February 28, 2005. At the
meeting, stockholders elected the nominee proposed for election to the Fund's
Board of Directors. The following table provides information concerning the
matters voted on at the meeting:
I. ELECTION OF DIRECTORS
NON-VOTING TOTAL VOTING AND
NOMINEE VOTES FOR VOTES WITHHELD SHARES NON-VOTING SHARES
-------------- --------- -------------- ---------- -----------------
Leslie H. Gelb 4,766,303 99,405 0 4,865,708
Luis F. Rubio 4,767,583 98,125 0 4,865,708
At October 31, 2005, in addition to Leslie H. Gelb and Luis F. Rubio, the other
directors of the Fund were as follows:
Lawrence K. Becker
Bryan McKigney
Jeswald W. Salacuse
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge
upon request by calling the Fund's toll free number at 1-800-421-4777 and at the
Securities and Exchange Commission website at http://www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio
securities during the most recent twelve month period ended June 30, 2005 is
available, without charge, upon request, by calling the Fund's toll free number
at 1-800-421-4777 and at the Securities and Exchange Commission website at
http://www.sec.gov.
The Fund's CEO has submitted to the NYSE the required annual certification and
the Fund also has included the certifications of the Fund's CEO and CFO required
by Section 302 of the Sarbanes-Oxley Act in the Fund's Form N-CSR filed with the
SEC, for the period of this report.
28
THE ASIA TIGERS FUND, INC.
INFORMATION ABOUT DIRECTORS AND OFFICERS (UNAUDITED)
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 Estate 11 None
Member of the Investment Management (July
8039 Harbor View Terrace Audit and 2003-Present); Vice President
Brooklyn, NY 11209 Nominating - Controller/Treasurer,
Committees, National Financial Partners
Age: 50 Class III (2000- 2003); Managing
Director -
Controller/Treasurer,
Oppenheimer Capital - PIMCO
(1981-2000).
- -----------------------------------------------------------------------------------------------------------------------------------
Leslie H. Gelb Director and Since 1994 President Emeritus, The 2 Britannica.com;
Member of Council on Foreign Relations Director of 34
The Council on Foreign the Audit and (2003-Present); President, The registered
Relations Nominating Council on Foreign Relations investment
58 East 68th Street Committees, (1993-2003); Columnist companies advised
New York, NY 10021 Class I (1991-1993), Deputy Editorial by Salomon
Page Editor (1985-1990) and Brothers Asset
Age: 68 Editor, Op-Ed Page Management
(1988-1990), THE NEW YORK ("SBAM").
TIMES.
- -----------------------------------------------------------------------------------------------------------------------------------
Luis F. Rubio Director and Since 1999 President, Centro de 11 None
Member of Investigacion para el
Jaime Balmes No. 11, D-2 the Audit and Desarrollo, A.C. (Center of
Los Morales Polanco Nominating Research for Development)
Mexico, D.F. 11510 Committees, (2002-Present); Director
Class I General, Centro de
Age: 50 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 of 2 Director of 34
Member of Commercial Law, The Fletcher registered
The Fletcher School of Audit School of Law & Diplomacy investment
Law & Diplomacy Committee (1986-Present); Dean, The companies advised
at Tufts University, and Chairman Fletcher School of Law & by SBAM.
Medford, MA 02155 of Nominating Diplomacy, Tufts University
Committee, (1986-1994).
Age: 68 Class II
- -----------------------------------------------------------------------------------------------------------------------------------
29
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, Oppenheimer 2 None
Director and Asset Management(June 2003-
90 Broad Street Chairman of Present); Managing Director
New York, NY 10004 the Board (2000-June 2003) and Executive
Director (1993- 2000), CIBC
Age: 47 World Markets Corp.; Managing
Director, CIBC Oppenheimer
Advisers, L.L.C. and
Advantage; President of The
India 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 Management
90 Broad Street since June 2003 and Executive
New York, NY 10004 Director (1995- June 2003),
CIBC World Markets Corp.;
Age: 54 formerly, Vice President,
Oppenheimer & Co., Inc.
(1986-1994).
- -----------------------------------------------------------------------------------------------------------------------------------
Deborah Kaback Secretary Since 2003 Senior Vice President and None None
Senior Counsel, Oppenheimer
200 Park Avenue Asset Management Inc. since
24th Floor June 2003; Executive Director,
New York, NY 10166 CIBC World Markets Corp.
(August 2001-June 2003); Vice
Age: 54 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>
We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The Fund will pass through foreign source income of $435,766 and foreign taxes
paid of $435,766.
For taxable non-corporate shareholders, 100% of the Fund's income represents
qualified dividend income subject to the 15% rate category.
30
THE ASIA TIGERS FUND, INC.
Dividends and Distributions (unaudited)
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 dividend amount in open-market purchases
during the purchase period or if the market discount shifts
31
THE ASIA TIGERS FUND, INC.
Dividends and Distributions (unaudited) (continued)
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.
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
32
THE ASIA TIGERS FUND, INC.
Dividends and Distributions (unaudited) (concluded)
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, Westborough, Massachusetts, 01581.
33
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.
34
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
35
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. The Asia Tigers Fund, Inc.
CUSTODIAN:
State Street Corporation
The Fund's Statement of Additional Annual Report
Information includes additional October 31, 2005
information about the Fund and is
available without charge, upon request by
calling (800) 421-4777.
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 or by visiting the
Securities and Exchange Commission's
website at www.sec.gov.
The Fund files its complete schedule of
portfolio holdings wih the Securities and
Exchange Commission for the first and
third quarters of its fiscal year on Form
N-Q. You may obtain a copy of these
filings by visiting the Securities and
Exchange Commission's website at
www.sec.gov or its Public Reference Room
in Washington, D.C. Information on the
operation of the Public Reference Room may ADVANTAGE ADVISERS, INC.
be obtained by calling (800) SEC-0330.
This report is sent to shareholders of the
Fund for their information. It is not a
Prospectus, circular or representation
intended for use in the purchase or sale
of shares of the Fund or of any securities
mentioned in this report.
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report,
has 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.
(c) There have been no amendments, during the period covered by this
report, to a provision of the 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, and
that relates to any element of the code of ethics description.
(d) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the 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, that
relates to one or more of the items set forth in paragraph (b) of
this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
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.
AUDIT FEES
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services
that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal
years are $71,500 for 2005 and $68,500 for 2004.
AUDIT-RELATED FEES
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the
registrant's financial statements and are not reported under
paragraph (a) of this Item are $0 for 2005 and $0 for 2004.
TAX FEES
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $45,100 for 2005 and
$34,645 for 2004.
ALL OTHER FEES
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other
than the services reported in paragraphs (a) through (c) of this
Item are $0 for 2005 and $0 for 2004.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
THE ASIA TIGERS FUND, INC.
THE INDIA FUND, INC.
AUDIT COMMITTEE PRE-APPROVAL POLICIES
As adopted on October 26, 2004
The Audit Committee (the "Committee") of each of The Asia Tigers Fund,
Inc. and The India Fund, Inc. (each, a "Fund") must pre-approve any independent
accounting firm's engagement to render audit and/or permissible non-audit
(including audit-related) services, as required by law. In evaluating a proposed
engagement by the Fund's independent accountants, the Committee will evaluate
the effect that the engagement might reasonably be expected to have on the
accountant's independence. That evaluation will be based on several factors,
including:
o a review of the nature of the professional services expected
to be provided;
o the fees to be charged in connection with the services
expected to be provided;
o a review of the safeguards put into place by the accounting
firm to safeguard indepenndence; and
o periodic meetings with the accounting firm.
I. POLICY FOR AUDIT AND NON-AUDIT SERVICES TO BE PROVIDED TO THE FUND
On an annual basis, the Fund's Committee will review and pre-approve the
scope of the audits of the Fund and proposed audit fees and permitted non-audit
services that may be performed by the Fund's independent accountants. At least
annually, the Committee will receive a report of all audit and non-audit
services that were rendered in the previous calendar year pursuant to this
policy. The term of any pre-approval is twelve months from the date of
pre-approval, unless the Committee specifically provides otherwise. The
Committee may modify any pre-approval at its discretion. Fee levels for all
services pre-approved under this policy will be established annually by the
Committee.
In addition to the Committee's pre-approval of services pursuant to this
policy, the engagement of the independent accounting firm for any permitted
non-audit service provided to the Fund will also require the separate written
pre-approval of the President of the Fund, who will independently confirm that
the accounting firm's engagement will not adversely affect the firm's
independence. All non-audit services performed by the independent accounting
firm will be disclosed, as required, in filings with the Securities and Exchange
Commission (the "SEC").
A. AUDIT SERVICES
The categories of audit services and related fees to be reviewed and
pre-approved annually by the Committee are:
2
o annual Fund financial statement audits (including applicable
internal control reports);
o seed audits (related to new product filings, as required);
o semiannual financial statement reviews (if applicable); and
o SEC and regulatory filings and consents issued in connection with
any of the above;
B. AUDIT-RELATED SERVICES
The following categories of audit-related services are considered to be
consistent with the role of the Fund's independent accountants, and services
falling under one of these categories will be pre-approved by the Committee on
an annual basis if the Committee deems the services to be consistent with the
accounting firm's independence:
o accounting consultations;
o Fund merger support services;
o agreed-upon procedure reports;
o attestation reports;
o SEC and regulatory filings and consents issued in connection with
filings previously authorized by the Board of Directors;
o comfort letters; and
o internal control reports (other than issued pursuant to annual Fund
financial statement audits).
Individual audit-related services that fall within one of these categories
and are not presented to the Committee as part of the annual pre-approval
process may be pre-approved, if deemed consistent with the accounting firm's
independence, by the Committee Chairman (or any other Committee member who is a
disinterested director under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), to whom this responsibility has been delegated) so
long as the estimated fee for the services does not exceed $75,000. Any such
pre-approval shall be reported to the full Committee at its next regularly
scheduled meeting.
C. TAX SERVICES
The following categories of tax and tax compliance services are considered
to be consistent with the role of the Fund's independent accountants, and
services falling under one of these categories will be pre-approved by the
Committee on an annual basis if the Committee deems the services to be
consistent with the accounting firm's independence:
3
o federal, state and local income tax compliance as well as sales and
use tax compliance;
o timely "regulated investment company" qualification reviews;
o tax distribution analysis and planning;
o tax authority examination services;
o tax appeals support services;
o accounting methods studies;
o Fund merger support services; and
o other tax consulting services and related projects.
Individual tax services that fall within one of these categories and are
not presented to the Committee as part of the annual pre-approval process may be
pre-approved, if deemed consistent with the accounting firm's independence, by
the Committee Chairman (or any other Committee member who is a disinterested
director under the Investment Company Act to whom this responsibility has been
delegated) so long as the estimated fee for the services does not exceed
$75,000. Any such pre-approval shall be reported to the full Committee at its
next regularly scheduled meeting.
C. PROSCRIBED SERVICES
The Fund's independent accountants will not render services in the
following categories of non-audit services:
o bookkeeping or other services related to the accounting records or
financial statements of the Fund;
o financial information systems design and implementation;
o appraisal or valuation services, fairness opinions or
contribution-in-kind reports;
o actuarial services;
o internal audit outsourcing services;
o management functions or human resources;
o broker/dealer, investment adviser or investment banking services;
o legal and other expert services unrelated to the audit; and
4
o any other service that the Public Company Accounting Oversight Board
determines, by regulation, is impermissible.
II. PRE-APPROVAL OF NON-AUDIT SERVICES PROVIDED TO OTHER ENTITIES WITHIN THE
INVESTMENT COMPANY COMPLEX
The Committee will pre-approve annually any permitted non-audit services
to be provided to Advantage Advisers, Inc. or any other investment manager to
the Fund (but not including any sub-adviser whose role is primarily portfolio
management and is sub-contracted by the investment manager) (the " Investment
Manager") and any entity controlling, controlled by or under common control with
the Investment Manager that provides ongoing services to the Fund (including
affiliated sub-advisers to the Funds), provided that, in each case, the
engagement relates directly to the operations and financial reporting of the
Fund (such entities, including the Investment Manager, shall be referred to
herein as the "Service Affiliates"). Individual projects that are not presented
to the Committee as part of the annual pre-approval process may be pre-approved,
if deemed consistent with the accounting firm's independence, by the Committee
Chairman (or any other Committee member who is a disinterested director under
the Investment Company Act to whom this responsibility has been delegated) so
long as the estimated fee for the services does not exceed $100,000. Any such
pre-approval shall be reported to the full Committee at its next regularly
scheduled meeting.
The Committee will also receive an annual report from the Fund's
independent accounting firm showing the aggregate fees for all services provided
to the Service Affiliates.
III. DE MINIMUS EXCEPTION TO REQUIREMENT OF PRE-APPROVAL OF NON-AUDIT SERVICES
With respect to the provision of permitted non-audit services to a Fund or
Service Affiliates, the pre-approval requirement is waived if each of the
following requirements is met:
(1) The aggregate amount of all non-approved permitted non-audit
services provided constitutes no more than (i) with respect to such
services provided to the Fund, five percent (5%) of the total amount
of revenues paid by the Fund to its independent accountant during
the fiscal year in which such services are provided and (ii) with
respect to such services provided to Service Affiliates, five
percent (5%) of the total amount of revenues paid to the Fund's
independent accountant by the Fund and the Service Affiliates during
the fiscal year in which such services are provided;
(2) Such services were not recognized by the Fund at the time of the
engagement for such services to be non-audit services; and
(3) Such services are promptly brought to the attention of the Committee
and approved prior to the completion of the audit by the Committee
or by the Committee Chairman (or any other Committee member who is a
disinterested director under the Investment Company Act to whom this
responsibility has been delegated). Any approval by the Committee
Chairman or other delegate shall be reported to the full Committee
at its next regularly scheduled meeting.
(e)(2) The percentage of services described in each of paragraphs (b)
through (d) of this Item that were approved by the audit committee
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X
are as follows:
(b) N/A
(c) 100%
(d) N/A
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the
most recent fiscal year that were attributed to work performed by
persons other than the principal accountant's full-time, permanent
employees was less than fifty percent.
(g) The aggregate non-audit fees billed by the registrant's accountant
for services rendered to the registrant, and rendered to the
registrant's investment adviser (not including any sub-adviser whose
role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling,
controlled by, or under common control with the adviser that
provides ongoing services to the registrant for each of the last two
fiscal years of the registrant was $40,000 for 2005 and $50,000 for
2004.
(h) The registrant's audit committee of the board of directors has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and
any entity controlling, controlled by, or under common control with
the investment adviser that provides ongoing services to the
registrant that were not
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal
accountant's independence.
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. SCHEDULE OF INVESTMENTS.
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Proxy Voting Policies are attached herewith.
ADVANTAGE ADVISERS, INC.
PROXY VOTING MANUAL
TABLE OF CONTENTS
PAGE
----
INTRODUCTION...................................................................1
CHAPTER 1 BOARD OF DIRECTORS..................................................2
Voting on Director Nominees In Uncontested Elections..................3
Chairman and CEO are the same person..................................4
Independence of Directors.............................................5
Stock Ownership Requirements..........................................6
Charitable Contributions..............................................7
Director and Officer Indemnification And Liability Protection.........8
Size of the Board....................................................10
Voting on Director Nominees in Contested Elections...................11
Term Of Office.......................................................12
Compensation Disclosure..............................................13
CHAPTER 2 AUDITORS...........................................................14
Ratifying Auditors...................................................15
CHAPTER 3 TENDER OFFER DEFENSES..............................................16
Poison Pills.........................................................17
Greenmail............................................................18
Supermajority Vote...................................................19
CHAPTER 4 MERGERS AND CORPORATE RESTRUCTURING................................20
Changing Corporate Name..............................................21
Reincorporation......................................................22
CHAPTER 5 PROXY CONTEST DEFENSES.............................................23
Board Structure: Staggered vs. Annual Elections.....................24
Cumulative Voting....................................................25
Shareholders' Ability to Call Special Meeting........................26
Shareholders' Ability to Alter Size of the Board.....................27
CHAPTER 6 MISCELLANEOUS CORPORATE GOVERNANCE PROVISIONS......................28
Confidential Voting..................................................29
Shareholder Advisory Committees......................................30
Foreign Corporate Matters............................................31
-i-
Government Service List..............................................32
CHAPTER 7 SOCIAL AND ENVIRONMENTAL ISSUES....................................33
Energy and Environmental Issues (CERES Principles)...................34
Northern Ireland (MacBride Principles)...............................35
Maquiladora Standards and International Operations and Policies......36
Equal Employment Opportunity And Discrimination......................37
Animal Rights........................................................38
CHAPTER 8 CAPITAL STRUCTURE..................................................39
Common Stock Authorization...........................................40
Blank Check Preferred Stock..........................................41
Preemptive Rights....................................................42
Stock Distributions: Splits and Dividends...........................43
Stock Splits.........................................................43
Reverse Stock Splits.................................................44
Adjustments to Par Value of Common Stock.............................45
Debt Restructurings..................................................46
CHAPTER 9 EXECUTIVE AND DIRECTOR COMPENSATION................................47
Director Compensation................................................48
Shareholder Proposal to Limit Executive and Director Pay.............49
Employee Stock Ownership Plans (ESOPs)...............................50
Options Expensing....................................................51
Golden Parachutes....................................................52
Proposal to Ban Golden Parachutes....................................53
Outside Directors' Retirement Compensation...........................54
CHAPTER 10 STATE OF INCORPORATION............................................55
Control Share Acquisition Statutes...................................56
Opt-Out of State Takeover Statutes...................................57
Corporate Restructuring, Spin-Offs Asset Sales, Liquidations.........58
CHAPTER 11 CONFLICTS OF INTEREST.............................................59
Conflicts............................................................60
CHAPTER 12 GOVERNANCE COMMITTEE AND PROXY MANAGERS...........................62
Governance Committee.................................................63
Proxy Managers.......................................................64
CHAPTER 13 SPECIAL ISSUES WITH VOTING FOREIGN PROXIES........................65
Special Issues with Voting Foreign Proxies...........................66
-ii-
CHAPTER 14 RECORD KEEPING....................................................67
Record Keeping.......................................................68
-iii-
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.
CHAPTER 1
BOARD OF DIRECTORS
2
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.
3
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.
4
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.
5
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.
6
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.
7
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.
8
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 them in their individual
capacities arising out of the discharge of their duties.
2. Attracting and retaining the most qualified directors enhances
shareholder value.
9
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.
10
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
11
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.
12
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.
13
CHAPTER 2
AUDITORS
14
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.
15
CHAPTER 3
TENDER OFFER DEFENSES
16
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.
17
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.
18
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.
19
CHAPTER 4
MERGERS
AND
CORPORATE
RESTRUCTURING
20
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.
21
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.
22
CHAPTER 5
PROXY
CONTEST
DEFENSES
23
BOARD STRUCTURE: STAGGERED VS. ANNUAL ELECTIONS
A company that has a 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.
24
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.
25
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.
26
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.
27
CHAPTER 6
MISCELLANEOUS
CORPORATE
GOVERNANCE
PROVISIONS
28
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.
29
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.
30
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.
31
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 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.
32
CHAPTER 7
SOCIAL
AND
ENVIRONMENTAL
ISSUES
33
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.
34
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.
35
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.
36
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.
37
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.
38
CHAPTER 8
CAPITAL
STRUCTURE
39
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 to 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?
40
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.
41
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.
42
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.
43
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.
44
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.
45
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?
46
CHAPTER 9
EXECUTIVE
AND
DIRECTOR
COMPENSATION
47
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.
48
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.
49
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.
50
OPTIONS EXPENSING
Shareholder proposal to expense options.
VOTE RECOMMENDATION
It is our policy to vote FOR proposals to
expense options.
51
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.
52
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.
53
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.
54
CHAPTER 10
STATE
OF
INCORPORATION
55
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.
56
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.
57
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.
58
CHAPTER 11
CONFLICTS
OF
INTEREST
59
CONFLICTS
From time to time, proxy voting proposals may raise conflicts between the
interests of the Advisers clients and the interests of the Adviser, its
affiliates and its 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.
60
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.
61
CHAPTER 12
GOVERNANCE COMMITTEE
AND
PROXY MANAGERS
62
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.
63
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.
64
CHAPTER 13
SPECIAL ISSUES WITH VOTING
FOREIGN PROXIES
65
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.
66
CHAPTER 14
RECORD KEEPING
67
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.
68
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
REGISTRANT PURCHASES OF EQUITY SECURITIES
- ------------------------------------------------------------------------------------------------------------------------------
(C) TOTAL NUMBER OF SHARES (OR (D) MAXIMUM NUMBER (OR APPROXIMATE
(A) TOTAL NUMBER OF (B) AVERAGE UNITS) PURCHASED AS PART OF DOLLAR VALUE) OF SHARES (OR UNITS)
SHARES (OR UNITS) PRICE PAID PER PUBLICLY ANNOUNCED PLANS OR THAT MAY YET BE PURCHASED UNDER THE
PERIOD PURCHASED SHARE (OR UNIT) PROGRAMS PLANS OR PROGRAMS
- ------------------------------------------------------------------------------------------------------------------------------
05/01/05 None None None None
to
05/31/05
- ------------------------------------------------------------------------------------------------------------------------------
06/01/05 None None None None
to
06/30/05
- ------------------------------------------------------------------------------------------------------------------------------
07/01/05 316,482.0000 $13.4358 316,482.0000 (1) None
to
07/31/05
- ------------------------------------------------------------------------------------------------------------------------------
08/01/05 None None None None
to
08/31/05
- ------------------------------------------------------------------------------------------------------------------------------
09/01/05 None None None None
to
09/30/05
- ------------------------------------------------------------------------------------------------------------------------------
10/01/05 300,657.0000 $13.2386 300,657.0000 (2) None
to
10/31/05
- ------------------------------------------------------------------------------------------------------------------------------
Total 617,137.0000 617,137.0000
- ------------------------------------------------------------------------------------------------------------------------------
(1) These shares were repurchased in connection with the Fund's regular,
quarterly repurchase offer announced on June 24, 2005 that expired on July 15,
2005. In connection with this repurchase offer, the Fund offered to repurchase
up to 316,482.0000 shares of its common stock, an amount equal to 5% of its
outstanding shares of common stock, for cash at a price approximately equal to
the Fund's net asset value as of July 22, 2005.
(2) These shares were repurchased in connection with the Fund's regular,
quarterly repurchase offer announced on September 23, 2005 that expired on
October 14, 2005. In connection with this repurchase offer, the Fund offered to
repurchase up to 300,657.0000 shares of its common stock, an amount equal to 5%
of its outstanding shares of common stock, for cash at a price approximately
equal to the Fund's net asset value as of October 21, 2005.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR
240.14a-101), or this Item.
ITEM 11. 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 Securities Exchange Act of 1934, as amended (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 second
fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 12. 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 Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
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) THE ASIA TIGERS FUND, INC.
--------------------------------------------------------------------
By (Signature and Title)* /s/ Bryan McKigney
-------------------------------------------------------
Bryan McKigney, Director, President and Chairman
(principal executive officer)
Date DECEMBER 2, 2005
----------------------------------------------------------------------------
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
-------------------------------------------------------
Bryan McKigney, Director, President and Chairman
(principal executive officer)
Date DECEMBER 2, 2005
----------------------------------------------------------------------------
By (Signature and Title)* /s/ Alan Kaye
-------------------------------------------------------
Alan Kaye, Treasurer
(principal financial officer)
Date DECEMBER 2, 2005
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.