THE UNITED KINGDOM FUND INC.
-----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 15, 1998
-----------------------
To the Stockholders of
The United Kingdom Fund Inc.:
The annual meeting of the stockholders of The United Kingdom Fund Inc. will
be held on Tuesday, September 15, 1998 at 11:00 a.m., New York City time, at the
Waldorf-Astoria Hotel, 301 Park Avenue, 4th Floor, New York, New York for the
following purposes:
1. To elect directors.
2. To ratify or reject the selection of Ernst & Young LLP as
independent accountants for the Fund for the fiscal year ending March 31,
1999.
3. To amend and restate the charter to convert the Fund from a
closed-end investment company to an open-end investment company.
4. To vote on a stockholder proposal that the Fund repurchase all of
its outstanding shares at net asset value.
5. To transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on June 26, 1998 will be
entitled to vote at the meeting.
By order of the Board of Directors,
RITA J. KLEINMAN
Secretary
New York, New York
August __, 1998
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YOUR VOTE IS IMPORTANT. IT IS REQUIRED THAT THE HOLDERS OF MORE THAN 50% OF THE
OUTSTANDING SHARES BE REPRESENTED IN PERSON OR BY PROXY AT THIS MEETING. IN
ADDITION, THE PROPOSALS TO OPEN-END THE FUND AND TO HAVE THE FUND REPURCHASE ITS
SHARES REQUIRE A FAVORABLE VOTE OF THE HOLDERS OF TWO-THIRDS OF THE FUND'S
OUTSTANDING SHARES. YOU ARE URGED TO SPECIFY YOUR CHOICE AND SIGN, DATE AND
RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU DO
ATTEND. NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES.
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THE UNITED KINGDOM FUND INC.
245 Park Avenue
Fifteenth Floor
New York, New York 10167
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PROXY STATEMENT
-----------------------
This proxy statement is furnished to stockholders of The United Kingdom
Fund Inc. (the "Fund") in connection with the solicitation of proxies for the
Annual Meeting of Stockholders of the Fund to be held at 11:00 a.m. on Tuesday,
September 15, 1998 at the Waldorf-Astoria Hotel, 301 Park Avenue, 4th Floor, New
York, New York in accordance with the attached notice of meeting. It is expected
that this proxy statement and the accompanying form of proxy will be mailed to
stockholders of the Fund on August __, 1998 or as soon as possible thereafter.
The solicitation of the accompanying form of proxy is made on behalf of the
Board of Directors of the Fund (the "Board" or the "Board of Directors").
Revocation of any proxy may be effected orally at the meeting prior to voting or
by notice in writing to the Secretary of the Fund provided the notice is
received by the Secretary prior to voting. Each valid proxy received in time
will be voted at the meeting in favor of Proposals 1 and 2 and against Proposals
3 and 4 or, if a contrary choice is specified on the proxy, will be voted in
accordance with the specification. It is required that holders of more than 50%
of the outstanding shares be represented in person or by proxy at this meeting.
Proposal 1 concerning the election of directors requires the favorable vote of
the holders of a majority of the shares present at a meeting at which a quorum
is present. Proposal 2 concerning the ratification of accountants requires the
favorable vote of the holders of a majority of the shares present and entitled
to vote at a meeting at which a quorum is present. Proposals 3 and 4 concerning
the possible open-ending of the Fund and the possible offer by the Fund to
repurchase all of its outstanding shares at net asset value ("NAV") require the
favorable vote of the holders of two-thirds of the Fund's outstanding shares.
The Fund intends to treat a broker "non-vote" (that is, a proxy from a broker or
nominee indicating that such person has not received instructions from the
beneficial owner or other person entitled to vote shares on a particular matter
with respect to which the broker or nominee does not have discretionary power)
as present for quorum purposes if the proxy represented by that non-vote votes
on at least one Proposal. Consequently, broker non-votes counting toward the
quorum and votes to abstain will have the effect of a vote against Proposals
1,2,3 and 4 (and therefore against 1) the proposal to elect the directors, 2)
the proposal to ratify the selection of Ernst & Young LLP as independent
accountants for the Fund 3) the proposal to amend and restate the charter to
convert the Fund from a closed-end investment company to an open-end investment
company and 4) the proposal to have the Fund repurchase all of its outstanding
shares at NAV).
There were 4,011,655 shares of common stock of the Fund outstanding on the
record date, June 26, 1998. Each of these shares will be entitled to one
noncumulative vote. If a stockholder participates in the Fund's Dividend
Reinvestment and Cash Purchase Plan (the "Plan"), any proxy given by the
stockholder will also govern the voting of all shares held for the stockholder's
account under the Plan, unless contrary instructions are received by The Bank of
New York, as agent under the Plan.
Stockholders may obtain upon request and without charge a copy of the
Fund's annual report (and its most recent quarterly report succeeding the annual
report, if available), by calling toll free 1-888-243-9154 or writing Bear
Stearns Funds Management Inc., c/o The United Kingdom Fund Inc., 245 Park
Avenue, Fifteenth Floor, New York, New York 10167.
PROPOSAL 1
Election of Directors
Eight directors are to be elected for the ensuing year and until their
successors have been elected and have qualified. The names of the persons
nominated for election as directors, their principal occupations and other
directorships and their previous principal occupations during the past five
years are set forth below.
Except where a stockholder has indicated that he does not wish his proxy to
be voted for all nominees or for any particular nominee or nominees, it is
intended that the proxies received in the accompanying form will be voted for
the election of all such nominees, all of whom are currently directors. Each of
the directors has indicated his willingness to serve for the ensuing term. If
for any reason any of the nominees shall become unavailable for election,
discretionary authority may be exercised by the persons named in the proxy to
vote for substitute nominees proposed by the Board of Directors.
<TABLE>
Number of Shares of
Common Stock Owned
Name, Principal Occupations and Beneficially as of Date of Election to
Other Directorships and Previous Occupations June 3, 1998** Board of Directors Age
----- ----- ----- -----
<S> <C> <C> <C>
Anthony M. Solomon, Chairman of the Board 1,000 June 1987 78
Chairman, The Europe Fund, Inc.; Director, Alexandria
Real Estate Inc.; Adviser, Blackstone Group; previously,
President, Federal Reserve Bank of New York; Director,
S.G. Warburg Group plc (investment banking), Boards
of Overseers: Teachers Insurance and Annuity
Association and College Retirement Equities Fund,
Syntex Corporation
George F. Bennett 25,475 June 1987 86
Director: Gefinor S.A., The Europe Fund, Inc.; previously,
Chairman, President and Chief Executive Officer, State
Street Research & Management Co., Chairman and/or
President of various State Street investment funds and
affiliated companies (investment management) and Trustee
of Met Life - State Street investment funds; Director,
Mercury Asset Management International Ltd; Chairman,
Capital Trust Ltd.
+Livio Borghese 5,000 June 1987 59
Private Investor; previously, Chairman, Curtis Industries
Incorporated (wholesale industrial distributor),
International Investment Banking, Prudential Securities;
Director: Revco D.S. Inc. OMI Corp. (ocean shipping
company), The Noel Group (operating and holding company);
*Sir Arthur Bryan 1,275 June 1987 75
Director: The Europe Fund, Inc., Dartington Crystal Ltd.;
previously, Lord Lieutenant of Staffordshire; Director,
Friends' Provident Life Office, Chairman and Managing
Director, Josiah Wedgwood & Sons Ltd. (manufacturers of
fine china and crystal), Director: JCB Inc. of America,
Director, The Rank Organization plc
++Peter Stormonth Darling 0 June 1994 65
Chairman: Mercury European Privatisation Trust plc,
Deltec International S.A.; Director: Scottish Equitable
plc, Scottish Hydro-Electric plc, The Europe Fund, Inc.,
Greenwich Associates, Mercury Keystone Investment Trust
plc, The National Association of Securities Dealers
International Advisory Board, Sagitta Asset Management
Ltd; previously, Chairman, Mercury Asset Management
International Ltd; Director, Mercury Asset Management
Group Ltd
Leon Levy 500 June 1987 72
General Partner, Odyssey Partners, L.P. (private
investors); Chairman: Avatar Holdings, Inc., Oppenheimer
Mutual Funds; Director: The Europe Fund, Inc. and various
Mercury and other investment funds; previously, Chairman,
Oppenheimer Management Corporation; Director: Mercury
Asset Management Group Ltd and Long Lake Energy
Corporation
*J. Murray Logan 1,000 April 1990 63
Investment Manager, Rockefeller & Co., Inc. (investment
management); Managing Partner, L-R Global Partners, L.P.;
Director: The Europe Fund, Inc., World Trust Fund
(SICAV); previously, Trustee and Chairman, Committee for
Investments, The Johns Hopkins University
*James S. Martin 0 June 1989 62
Director, The United Kingdom Fund Inc.; previously,
Executive Vice President, Chief Investment Officer and
Trustee, College Retirement Equities Fund
</TABLE>
- -------------------
+ As of June 3, 1998, Mr. Borghese owned 70,337 shares of The Bear Stearns
Companies Inc., the parent of the Fund's Administrator, Bear Stearns Funds
Management Inc.
++ On December 22, 1997, Mr. Darling disposed of 345,794 shares of Mercury
Asset Management Group Ltd. Mr. Darling currently holds 12,000 shares of
Merrill Lynch & Co., Inc. ("Merrill Lynch"), the ultimate parent of the
Fund's Investment Manager, Mercury Asset Management International Channel
Islands Ltd., and the Fund's Investment Adviser, Mercury Asset Management
International Ltd. (individually, the "Investment Manager" and the
"Investment Adviser", respectively, and together the "Advisers"). Mr.
Darling is not currently an "interested person" of the Fund, as defined by
the Investment Company Act of 1940, as amended, but was an "interested
person" of the Fund during the fiscal year ended March 31, 1998.
* A member of the Audit Committee of the Board of Directors.
** All shares listed in this table are owned with sole voting and investment
power.
During the fiscal year ended March 31, 1998, four meetings of the Board of
Directors were held. Except for Mr. Borghese, each director attended 75% or more
of the total number of meetings of the Board of Directors and the committees on
which he served.
The Audit Committee is responsible for (1) reviewing with the independent
accountants the scope and results of their examination of the financial
statements of the Fund, changes in accounting practices or auditing standards,
and any other matters the Committee may determine; (2) recommending to the Board
of Directors each year independent accountants to examine the financial
statements of the Fund; and (3) reporting to the Board of Directors with respect
to the foregoing. The Audit Committee held two meetings during the past fiscal
year. At the present time, the Board of Directors has no compensation or
nominating committees, or other committees performing similar functions.
No officer or director of the Fund received aggregate remuneration from the
Fund of over $60,000 during the fiscal year ended on March 31, 1998. The
officers received no remuneration from the Fund. Each director who was not an
"interested person" (as defined in the 1940 Act) of the Fund received from the
Fund an annual fee of $7,500 for the fiscal year ended on March 31, 1998, except
Mr. Solomon, who received a fee of $12,500 for serving not only as a director
but also as the Chairman of the Board. All directors were entitled to receive
any out-of-pocket travel expenses for attendance at meetings. During the past
fiscal year, all directors as a group received aggregate remuneration amounting
to $57,500.
1997 Compensation Table
<TABLE>
Pension or Total Compensation
Retirement Benefits From Fund and
Aggregate Compensation Accrued As Part Fund Complex*
Name and Position From Fund of Fund Expenses Paid to Directors
----------------- ---------------------- ---------------- -----------------
<S> <C> <C> <C>
Anthony M. Solomon
Chairman of the Board............ $12,500 None $29,500
George F. Bennett
Director......................... 7,500 None 19,000
Livio Borghese
Director......................... 7,500 None 7,500
Sir Arthur Bryan
Director......................... 7,500 None 19,500
Peter Stormonth Darling
Director......................... None None None
Leon Levy
Director......................... 7,500 None 19,500
J. Murray Logan
Director......................... 7,500 None 19,000
James S. Martin
Director......................... 7,500 None 19,500
</TABLE>
- -------------------
* The Fund Complex includes two funds: the Fund and The Europe Fund, Inc.
The executive officers of the Fund are:
<TABLE>
Principal Occupation
Name and Age Position with Fund During Past 5 Years
------------ ------------------ -------------------
<S> <C> <C>
J. Loughlin Callahan, 50 President and Treasurer Managing Director, Mercury Asset
Management Ltd;
Steven W. Golann, 54 Vice President and Assistant Treasurer Director, Mercury Asset Management
International Ltd; previously, Managing
Director, Wertheim Philippe International
Rita J. Kleinman, 41 Secretary Vice President, Mercury Asset
Management International Ltd;
previously, Director of Client Services,
SBC Portfolio Management International
</TABLE>
Mr. Golann is a director and Ms. Kleinman is an officer of the Fund's
Investment Adviser.
The executive officers of the Fund are elected by the Board of Directors.
While the Fund is a Maryland corporation, Sir Arthur Bryan, Mr. J. Loughlin
Callahan and Mr. Peter Stormonth Darling are not residents of the United States
and substantially all of their assets may be located outside of the United
States. As a result, it may be difficult for U.S. investors to effect service of
process upon them within the United States or to realize judgments against them
of courts of the United States predicated upon civil liabilities under the
Federal securities laws of the United States.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR ALL OF THE NOMINEES LISTED ABOVE
PROPOSAL 2
Ratification or Rejection of Selection of Independent Accountants
Pursuant to the 1940 Act, a majority of the directors of the Fund who are
not "interested persons" of the Fund have selected Ernst & Young LLP as
independent accountants for the Fund for the fiscal year ending March 31, 1999.
Ernst & Young LLP has advised the Fund that neither that firm nor any of its
partners have any direct or indirect material financial interest in the Fund. In
accordance with the By-Laws of the Fund and the 1940 Act, this selection is
being presented to stockholders for ratification or rejection. A representative
of Ernst & Young LLP will be present at the 1998 Annual Meeting and will have
the opportunity to make a statement if he so desires and will be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
RATIFICATION OF THE REAPPOINTMENT OF ERNST & YOUNG LLP
PROPOSAL 3
Amendment and Restatement of the Charter to Convert
the Fund from a Closed-End Investment Company
to an Open-End Investment Company
I. Background of the Proposal
The Fund's prospectus dated August 6, 1987 provides that, in the event the
Fund's shares trade at an average discount from net asset value exceeding 10% on
the last day of the first 12 weeks of a year, the Fund must submit to its
stockholders at the next annual meeting a proposal to amend the Fund's charter
to provide that, upon the adoption of an amendment by holders of two-thirds of
the Fund's outstanding shares, it will convert to an open-end investment
company. During the first 12 full weeks of this year, the Fund's shares traded
at an average discount from net asset value of 11.25%, thus exceeding the 10%
threshold described above and triggering the proposal to convert the Fund to an
open-end investment company. As of July 24, 1998, as reported in The Wall Street
Journal, the Fund's shares traded at a discount from net asset value of 13.32%.
Section 2-604(b) of the Maryland General Corporation Law requires that
for a board to propose an amendment to a corporation's charter, the board must
first adopt a resolution which sets forth the proposed amendment and must
declare that the charter amendment is advisable. On June 3, 1998, the Board
satisfied these requirements with respect to this Proposal when it approved an
amendment to the Fund's Articles of Incorporation that would convert the Fund to
an open-end investment company (if approved by two-thirds of the outstanding
shares entitled to vote on the matter) and declared the proposed amended and
restated Articles of Incorporation advisable.
On that same date, the Board considered whether or not to recommend to
stockholders that the Proposal to convert to an open-end fund be approved. The
Board took into account the likelihood that, if the Fund were open-ended,
stockholders would likely realize a short-term gain, but determined that it is
in the long-term best interest of stockholders for the Fund to remain a
closed-end fund. The Board consequently recommends that stockholders vote
against this Proposal. In reaching this determination, the Board took into
account advice from legal counsel concerning the advantages and disadvantages of
both closed-end and open-end investment companies; advice from the Investment
Adviser, who recommended that the Fund remain a closed-end investment company at
this time; and the fact that the Fund has outperformed the Financial Times Stock
Exchange ("FTSE") All-Share Index in four of the past six years.
Accordingly, the Board adopted a resolution to recommend to stockholders
that they vote against the charter amendment that would convert the Fund from a
closed-end investment company to an open-end investment company. The Board,
however, has determined that although it currently recommends against
open-ending, in order to be responsive to stockholder concerns, if holders of a
majority of outstanding shares vote for open-ending, the Board will reconvene
and implement a plan to either convert the Fund to an open-end fund, liquidate
the Fund or merge with an open-end fund as soon as practicable after the
stockholders vote.
As of July 24, 1998, the Fund's shares traded at a discount from net asset
value of 13.32%, which was 2.75 percentage points lower than the 16.07% average
discount for the other 15 European country funds.
The factors considered by the Board in making its recommendation are
discussed in more detail below and the Board encourages stockholders to review
these factors to make their own determination on the appropriateness of
converting the Fund to an open-end investment company. The Board believes that
there are significant arguments for and against conversion and recommends that
stockholders consider both their short-term and long-term investment goals when
deciding how to vote on this Proposal.
II. Comparison Between Closed-End and Open-End Investment Companies
The Fund is currently a closed-end fund. As such, it neither redeems its
outstanding shares of stock nor continuously offers new stock for sale; thus, it
operates with a relatively fixed capitalization. The Fund's shares of stock are
traded on the NYSE. Open-end funds (also known as "mutual funds") issue
redeemable shares entitling stockholders to tender for their proportionate share
of a fund's net asset value. Also, open-end funds generally issue new shares at
the fund's net asset value.
In addition to the definitional difference between closed-end and open-end
funds, several significant distinctions exist which tend to favor one type or
the other in terms of advantages or disadvantages to the stockholder, although
gray areas certainly exist. Grouped in this manner, some of the legal,
operational and practical differences between closed-end and open-end investment
companies are as follows:
Closed-End Fund Advantages and/or Open-End Fund Disadvantages
(1) Portfolio management. Whereas closed-end funds can be fully invested,
open-end funds generally maintain some buffer of highly liquid assets or cash to
meet net redemptions in order to avoid liquidating portfolio securities at an
inopportune time. Closed-end funds, therefore, may invest with greater emphasis
on longer-term appreciation. Further, although open-end funds generally maintain
that their ability to sell shares at any time (resulting from their being priced
at net asset value) produces efficiencies, others have suggested that large net
purchases often occur around market highs and net redemptions around market
lows, inopportune times to invest or liquidate portfolio positions,
respectively. In a falling market situation, for example, redemptions increase
and liquidations in the open-end fund portfolio must increase to meet those
redemptions. In the event temporary investments and borrowings are exhausted,
the result may be that the more liquid blue chip securities will be sold,
leaving the open-end fund with the less-liquid securities in the fund's
portfolio which are not as well suited to meeting future redemptions or changes
in investment strategy.
(2) New York Stock Exchange listing. The Fund is currently listed on the
NYSE. It is believed in some investment circles that a fund listing on a U.S.
stock exchange, and in particular the NYSE, is an asset, especially in terms of
attracting non-U.S. investors. In addition, certain investors, such as pension
funds, have internal restrictions on the amount of their portfolio which can be
invested in non-listed securities. Conversion to an open-end fund would require
immediate de-listing of the Fund from the NYSE.
(3) Blue sky restrictions and costs. Because the Fund is listed on the
NYSE, it is exempt from state securities regulation. Prior to the enactment of
the National Securities Market Improvement Act of 1996 ("NSMIA"), had the Fund
converted to an open-end fund, the Fund would have been required to observe
certain state limitations from which it is currently exempt. NSMIA, however,
pre-empted the state securities laws which imposed merit standards on investment
companies registered under the 1940 Act. Accordingly, if the Fund converted to
an open-end fund, the Fund would not be subject to state investment limitations
and other restrictions contained in the state securities laws. However, the Fund
would still be required to submit notice filings to the states and would be
required to pay substantial fees in connection with those filings.
(4) Underwriting costs. If the Fund converts to open-end status it will
need to sell new shares; otherwise redemptions will cause the Fund to become a
diminishing asset. A principal underwriter will be needed for selling the new
shares. The cost of the underwriting would be paid either by purchasers (in the
case of a front-end load) or by current stockholders (in the case of a Rule
12b-1 distribution plan, which would require separate stockholder approval).
Redemption fees may be payable upon redemption of both current and newly-issued
shares. In addition, contingent deferred sales charges may also be payable upon
redemption of newly-issued shares. In any case, a selling effort is likely to
result in increased costs to the Fund.
(5) Leverage; Raising capital. The ability to borrow is more restricted in
the case of open-end funds than it is in the case of closed-end funds.
Closed-end funds can also issue preferred stock, not permitted to open-end
funds. The Fund has not to date utilized this additional flexibility.
(6) Automatic Dividend Reinvestment and Cash Purchase Plan. As a closed-end
investment company, the Fund's current Plan permits stockholders to elect to
reinvest their distributions on a different basis than would be the case if the
Fund converted to an open-end investment company. Currently, if shares are
trading at a discount, the agent for the Plan will attempt to buy shares of the
Fund on the NYSE or elsewhere. This permits a reinvesting stockholder to benefit
from the agent's purchase of additional shares at a discount. However, if before
the agent for the Plan completes its purchases, the market price exceeds the net
asset value, then the average per share purchase price of the reinvested shares
may exceed the net asset value per share. In addition, if shares are trading at
a premium, reinvesting stockholders are issued shares at the higher of net asset
value or 95% of the market price. As an open-end investment company, all
distributions would have to be reinvested at net asset value.
Open-End Fund Advantages and/or Closed-End Fund Disadvantages
(1) Redeemability of shares. Open-end funds are required to redeem their
shares at the holder's option on seven days' notice. This enables holders to
realize promptly the full value of the underlying assets. Although an open-end
fund eliminates the possibility of realizing a premium, it eliminates the
possibility of suffering a discount on sale.
If the proposal to open-end the Fund is approved, the current discount on
the Fund's shares will most likely be reduced prior to the date the Fund
converts to an open-end fund because the market, in anticipation of the ability
to redeem shares at net asset value, will most likely cause the market price for
the Fund's shares to increase to net asset value.
(2) Raising capital. A closed-end fund trading at a discount may not be
able to raise capital through share sales (other than through a rights offering)
when it believes further investment would be advantageous, because the 1940 Act
restricts the ability of a closed-end fund to sell its shares at a price below
net asset value. Open-end funds, on the other hand, are priced at net asset
value and therefore can sell additional shares at any time. This ability to
raise new money can achieve greater economies of scale and improve investment
management although, as noted above in paragraph (1) of Closed-End Fund
Advantages and/or Open-End Fund Disadvantages, this may not occur at the most
opportune times.
(3) NYSE fee. As an open-end fund, the Fund will no longer be listed on the
NYSE. The Fund will thus save the annual NYSE fee of $16,170, but will as a
result of de-listing have to pay the state blue sky fees discussed above, which
could be significantly more than the NYSE fee, depending on the channel of
distribution of the Fund's shares.
(4) Annual stockholder meetings. If the Fund remains a closed-end fund, it
is subject to NYSE rules requiring annual meetings of stockholders. By not
having to hold annual stockholders meetings, except when required for certain
1940 Act votes, the Fund would save the costs of preparing proxy materials and
soliciting stockholders' votes on the usual proposals contained therein. Based
on the number of outstanding shares and stockholders as of the record date, such
costs aggregate approximately $15,000 to $20,000 per year; however, these
savings would not be expected to materially affect the Fund's expense ratio.
(5) Stockholder services. Open-end funds typically provide more services to
stockholders than closed-end funds. One service that is generally offered by
open-end funds is enabling stockholders to transfer their investment from one
fund into another fund which is part of a family of open-end funds at little or
no cost to the stockholders. This permits the exchange of shares at relative net
asset value when the holder's investment objectives change. Other services that
could be offered include use of the Fund for retirement plans and permitting
purchases and sales of shares in convenient amounts. There are, of course,
additional costs for these services which must be weighed against the
anticipated benefit of the particular service.
In addition to the relative inherent qualities of closed-end and open-end
investment companies, certain negative results will necessarily derive from the
act of conversion itself:
(1) Redemption expenses. Net redemptions are probable immediately after
open-ending the Fund, although the redemption fee mentioned below may reduce the
number of redemptions that would otherwise occur. Redemptions will result in
increased brokerage expense and increased recognition of taxable gains and
losses. These redemptions could reduce the Fund to a size smaller than is
economically viable, resulting in a decision to terminate and liquidate the
Fund. If the Fund decreased in size, the expense ratio may increase because the
cost of many services may remain the same although the size of the Fund will
have decreased. Of course, if the size of the Fund increases, the Fund's expense
ratio may be reduced.
(2) Capital gains. The treatment of capital gains required under U.S. tax
law can be very onerous to non-redeeming stockholders in the event of the Fund's
conversion to an open-end fund. To raise cash to satisfy redeeming stockholders,
the Fund may be required to sell portfolio securities to satisfy redemption
requests. If the Fund's basis in the portfolio securities sold is less than the
sale price obtained, net capital gain may be realized. U.S. tax law imposes both
an income tax and an excise tax on net capital gain realized by closed-end and
open-end funds unless the fund distributes net capital gain to all stockholders,
in which case the stockholders would be subject to tax on such gain. In the
event of the Fund's conversion to an open-end fund, two negative results may
occur: first, because the Fund may sell securities, non-redeeming stockholders
may recognize a greater amount of capital gain than would be the case if the
Fund held such securities; and, second, to make the capital gain distribution
necessary to avoid capital gain recognition by the Fund, the Fund may need to
sell additional portfolio securities, thereby reducing further the size of the
Fund and, possibly, creating additional capital gain.
(3) Conversion costs. Conversion would be expensive, requiring legal,
accounting and other expenses of establishing a new structure. Although the
Board has been advised that the cost of conversion would be at least $300,000 or
7.5 cents per share, it is unable to determine at this time the actual costs
that would be involved and it believes that the costs could be substantially
higher.
III. Measures to be Adopted in the Event the Fund Becomes an Open-End Fund
In the event that a sufficient number of stockholders vote for the proposal
to open-end the Fund, the Board will convene and consider the method and time
period for the conversion of the Fund into an open-end investment company. The
Board would currently project that a period of six to nine months would be
necessary to effect the conversion. The Board, however, has already determined
that in this event a redemption fee of 1% will be imposed for redemptions
(whether in cash or in-kind) occurring within the first six months of the change
in status of the Fund. This redemption fee is similar to that imposed by other
funds which have converted into open-end funds and is a method of reducing the
number of immediate redemptions and offsetting the cost of liquidations.
The conversion of the Fund to an open-end investment company would be
accomplished by: (i) the filing of an Open-End Certificate with the Maryland
State Department of Assessments and Taxation and (ii) changing the Fund's
subclassification under the 1940 Act from a closed-end investment company to an
open-end investment company. In addition, because shares of an open-end
investment company are offered to the public on a continuous basis, the Board
would need to approve a distribution contract for the distribution of the Fund's
shares to become effective upon the Fund's conversion to an open-end investment
company. The Open-Ending Certificate would not be filed until a registration
statement under the Securities Act of 1933, as amended, covering the offering of
the shares of the Fund and appropriate state securities law qualifications had
become effective, which is expected to occur within two to four months after
filing of the registration statement.
In addition, in order to reduce the problem of recognition of capital gains
discussed above, the Board has determined that aggregate redemptions by any
single investor or related group of investors in an amount greater than $250,000
may be made in securities held by the Fund. This payment-in-kind will shift the
brokerage cost of liquidating those securities to the redeeming stockholder and
will reduce the recognition of capital gain by the Fund and non-redeeming
stockholders. Any in-kind distributions will be done on an across-the-board
basis, to the extent practicable, to avoid partiality in the selection of
securities to be distributed.
In the event that the requisite stockholder vote to open-end the Fund is
received, the Articles of Incorporation will be amended and restated as set
forth in Schedule I, attached hereto. The Amendment and Restatement will be
filed in Maryland at the time the conversion is implemented. In addition, if
stockholders of the Fund vote to approve the conversion of the Fund to an
open-end investment company, it is anticipated that the Fund will require
additional flexibility to meet stockholders' demands for redemptions and will be
required to conform to certain investment restrictions applicable to open-end
investment companies under the 1940 Act and certain state regulations.
Accordingly, stockholders will need to approve certain changes in the Fund's
investment restrictions, some of which would constitute fundamental policies of
the Fund.
In the event that the requisite stockholder vote to open-end the Fund is
received, the Board will consider other methods of easing the transition into
becoming an open-end fund. These methods will be adopted if the Board finds that
they are in the best interest of stockholders.
IV. Further Considerations
The Board believes that the decision to convert to an open-end format will
eliminate the discount to net asset value but may reduce the potential long-term
investment return on the Fund's shares and could, in the event of significant
capital outflow, result in the liquidation of the Fund. Conversion to an
open-end fund has been done by other funds generally in extreme circumstances
(e.g., as a defense against a hostile bid) which are not present in this
instance. The Board believes that conversion to an open-end fund would require a
fundamental and undesirable change in the investment strategy of the Fund. There
are many opportunities in the United Kingdom to invest in smaller market
capitalization stocks which historically have outperformed larger companies.
Such holdings of "special situation" stocks, though, can only be acquired
gradually over a long period of time and would be particularly vulnerable to
high levels of redemptions. The Board believes that the decision to convert to
an open-end format may result in a fundamental change in the Fund's investment
strategy, which may preclude the Fund from realizing the long-term potential of
these special situation stocks. The Board believes that the Fund is successfully
implementing this strategy as the Fund has outperformed the FTSE All-Share Index
in four of the past six years. However, to be responsive to stockholder
concerns, if holders of a majority of outstanding shares vote for open-ending,
the Board will reconvene and implement a plan to either convert the Fund to an
open-end fund, liquidate the Fund or merge with an open-end fund as soon as
practicable after the stockholders vote.
If the Fund remains a closed-end investment company, the Board will
continue with the effort to improve communication with the investment community,
in particular, research analysts and brokers. Management will continue a program
of regular visits to analysts specializing in the closed-end fund sector and
hopes that these efforts will create greater demand for the Fund's shares and
help reduce the Fund's discount. If the Fund's shares continue to trade at a
discount and that discount is greater than 10% during next year's test period,
the Board and stockholders will again have an opportunity to consider converting
the Fund to an open-end investment company.
In light of the above, the Board believes that the closed-end format
continues to be more appropriate to the Fund's character and investment
objective than the open-end format.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST CONVERSION
OF THE FUND FROM A CLOSED-END INVESTMENT COMPANY
TO AN OPEN-END INVESTMENT COMPANY
PROPOSAL 4
Stockholder Proposal to Have the Fund Offer to Repurchase
All of Its Outstanding Shares at NAV
I. Stockholder Proposal and Supporting Statement
A stockholder has submitted the following proposal for inclusion in this
Proxy Statement:
"RESOLVED: The Fund shall offer to repurchase all of its outstanding shares
at net asset value ('NAV')."
The stockholder claims beneficial ownership of more than 1,000 shares of
common stock of the Fund. The Fund will provide the name and address of the
proposing stockholder to any requesting person. Requests may be made by
telephone to Frank Maresca at (212) 272-2093 or in writing to The United Kingdom
Fund Inc., c/o Bear Stearns Funds Management Inc., 245 Park Avenue, 15th Floor,
New York, New York 10167.
The proposing shareholder requested that the following statement be
included in the proxy statement in support of the proposal:
"November 19, 1997 was a great day for the stockholders of Mercury
Asset Management Group plc, the parent company of our Fund's former investment
advisor. On that day, Mercury's stock rose sharply after it announced that
Merrill Lynch would acquire it at a large premium to its market price.
The stockholders of our Fund, on the other hand, have had little to
cheer about. That is because its shares have been languishing at a double-digit
discount for a long time.
Since our Fund's former management recently took an opportunity to cash
out of its own stock at a premium price, we think that we too deserve an
opportunity to sell our shares at an above-market price. Therefore, we would
like the Fund to conduct an offer to repurchase all of its shares at NAV.
If you agree that what was good for Mercury is good for us, you should
vote FOR this proposal."
II. The Board of Directors' Response to the Stockholder's Proposal
The Board recommends that the stockholders vote against this proposal. The
repurchase, if implemented, would be detrimental to stockholders who wished to
continue their investment in the Fund. If the Fund offered to repurchase all of
its outstanding shares at net asset value, stockholders would be forced to
choose between terminating their investment by accepting the offer or remaining
in a fund of unknown size, with an unquantifiably higher expense ratio and an
unknowable reduction in liquidity.
It is highly unusual for a fund to conduct an offer to repurchase an
unlimited number of shares at net asset value. Normally, for the protection of
the fund and of stockholders who wish to continue their investment, repurchase
offers are limited to a specific dollar amount or percentage of fund assets. In
the case of the Fund, since its NAV is approximately $70 million, an unlimited
tender offer could lead to a substantial reduction in its size. That could
render the Fund not viable, and it is possible that the Fund would be forced to
liquidate. Even if the size of the Fund were not substantially reduced, the Fund
would have to liquidate sufficient assets to purchase the tendered shares. The
Fund's investment strategy focuses on long-term appreciation, and as a
closed-end fund it does not need to maintain a significant amount of liquid
assets. The Fund could face losses if it is forced to liquidate assets at
disadvantageous prices to pay for stockholder redemptions.
The treatment of capital gains under U.S. tax law may also adversely
affect non-tendering stockholders in the event of a repurchase. On liquidating
assets to purchase the tendered shares, if the Fund's basis in the portfolio
securities sold is less than the sale price obtained, the Fund may realize net
capital gain. U.S. tax law imposes both an income tax and an excise tax on net
capital gain realized by the Fund unless it distributes net capital gain to all
stockholders, including non-tendering stockholders, in which case the
stockholders would be subject to tax on such gain. Thus, in the event of a
repurchase, non-tendering stockholders may recognize a greater amount of taxable
capital gain than would otherwise be the case if the Fund continued to hold such
assets.
Stockholders should note that the Fund has been advised by its Maryland
counsel that the stockholder proposal cannot be implemented by stockholder vote
alone. It must also be approved by the Directors of the Fund. Although the
Directors do not approve of the proposal for the reasons described above, they
have nonetheless decided to include the proposal in this proxy statement.
Maryland counsel has advised the Fund that in the absence of two-thirds of
the Directors having previously approved the proposal, the vote requirement for
stockholders to approve the proposal is 2/3 of the outstanding shares. If the
proposal is approved by two-thirds of the outstanding stockholders, the
Directors will reconvene and take action to implement the proposal through
conversion to an open-end fund or otherwise.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST
THE STOCKHOLDER PROPOSAL TO HAVE THE FUND OFFER TO
REPURCHASE ALL OF ITS SHARES AT NAV.
NOTWITHSTANDING THE LONG-TERM ADVANTAGES OF CONTINUING YOUR
INVESTMENT IN THE FUND, IF YOU WISH TO REDEEM YOUR SHARES,
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN
FAVOR OF PROPOSAL 3 RATHER THAN PROPOSAL 4.
OTHER MATTERS
Stock Ownership of Certain Beneficial Owners
On June 26, 1998, the officers and directors of the Fund as a group owned
beneficially 33,975 shares, or less than 1.0% of the Fund's outstanding shares.
The following chart lists those stockholders owning 5% or more of the Fund's
outstanding shares.
<TABLE>
(1) (2) (3) (4)
Amount and Nature
of Beneficial
Title of Class Name and Address of Beneficial Owner Ownership Percent of Class
-------------- ------------------------------------ --------- ----------------
<S> <C> <C> <C>
Common Stock Lazard Freres & Co. LLC 656,300 shares of 16.4% of the
30 Rockefeller Plaza The UK Fund* outstanding shares
New York, New York 10020
Common Stock Stichting Philips Pension Funds, 284,100 shares of 7.1% of the
Tramstraat 62 The UK Fund** outstanding shares
5611 CR
Eindhoven, Netherlands
Common Stock President and Fellows of Harvard College
c/o Harvard Management Company, Inc.
600 Atlantic Avenue, 241,700 shares of The 6.0% of the
Boston, MA 02210 UK Fund*** outstanding shares
</TABLE>
- ----------
* This information was derived from a statement on Schedule 13G, which Lazard
Freres & Co. LLC filed with the Commission on December 10, 1997.
** This information was derived from a statement on Schedule 13G, which
Stichting Philips Pension Funds filed with the Commission on December 31, 1991.
*** This information was derived from a statement on Schedule 13G, which Harvard
College filed with the Commission on February 13, 1998.
The Investment Manager and the Investment Adviser
The Fund's Investment Manager is Mercury Asset Management International
Channel Islands Ltd. and its Investment Adviser is Mercury Asset Management
International Ltd. The Investment Manager is a wholly-owned subsidiary of the
Investment Adviser, which in turn is a wholly-owned subsidiary of Mercury Asset
Management Ltd, one of the largest investment managers in Europe, headquartered
in London, England, at 33 King William Street, EC4R 9AS and a wholly-owned
subsidiary of Mercury Asset Management Group Ltd ("MAM") of the same address
whose ultimate parent is Merrill Lynch, located at 250 Vesey Street, New York,
New York 10281, USA.
The Investment Manager is a corporation organized under the laws of Jersey
(Channel Islands), with its principal office at Forum House, Grenville Street,
St. Helier, Jersey JE4 8RL, Channel Islands. The Investment Manager was formed
in January 1983 for the purposes of providing investment advisory and management
services for international portfolios desiring to utilize the services of the
Investment Adviser and is registered as an investment adviser with the
Securities and Exchange Commission. The Investment Manager's other clients
include individuals, a charitable organization and a registered investment
company, The Europe Fund, Inc. The Investment Adviser is a corporation
incorporated in 1981 under the Companies Act of Great Britain with its
registered office and principal place of business at 33 King William Street,
London EC4R 9AS, England. The Investment Adviser is registered as an investment
adviser with the Securities and Exchange Commission and is regulated by the
United Kingdom's Investment Management Regulatory Organization Ltd. The
Investment Adviser's advisory clients include charitable organizations,
corporations, pension plans, private investment companies and a registered
investment company. The Investment Adviser has also entered into a sub-advisory
contract with the Investment Manager to provide advisory services to The Europe
Fund, Inc.
The Advisers now act as investment adviser or sub-investment adviser for
other persons and entities and may, under agreements with the Fund, act as
investment adviser or sub-investment adviser to other registered investment
companies.
Messrs. Peter J. Gibbs, John Gillespie, Frank P. Le Feuvre and Robin E.R.
Rumboll are the directors of the Investment Manager. The principal occupation of
each director is as follows: Mr. Gibbs is the principal executive officer of the
Investment Manager and a director of Mercury Asset Management Ltd; Mr. Gillespie
is secretary of the Investment Manager and a director of Mercury Asset
Management Channel Islands Ltd; Mr. Le Feuvre is a director of Mercury Asset
Management Channel Islands Ltd; and Mr. Rumboll is an independent financial
consultant. The address of Mr. Gibbs is 33 King William Street, London, EC4R
9AS, England. The address of Messrs. Gillespie and Le Feuvre is Forum House,
Grenville Street, St. Helier, Jersey JE4 8RL, Channel Islands. The address of
Mr. Rumboll is Windsor House, St. Lawrence, Jersey, Channel Islands.
Mrs. C. Consuelo Brooke and Messrs. David M.F. Scott, Peter J. Gibbs,
Steven W. Golann and J. Eric Nelson are the directors of the Investment Adviser.
The principal occupation of each director is as follows: Mrs. Brooke and Mr.
Scott are fund managers of the Investment Adviser; Mr. Gibbs is chairman of the
Investment Adviser and a director of Mercury Asset Management Ltd; and Messrs.
Golann and Nelson are directors of the Investment Adviser. The address of Mrs.
Brooke and Messrs. Gibbs and Scott is 33 King William Street, London, EC4R 9AS,
England. The address of Messrs. Golann and Nelson is 780 Third Avenue, 34th
Floor, New York, NY, 10017, USA.
The Investment Management Agreement and the Investment Advisory Agreement
Under the Investment Management Agreement dated as of December 11, 1997
between the Fund and the Investment Manager (the "Investment Management
Agreement"), the Investment Manager, on the basis of advice given by the
Investment Adviser, will structure the Fund's portfolio, manage the Fund's
investments and make investment decisions on behalf of the Fund in accordance
with the Fund's stated investment objective, policies and limitations and
subject to the supervision, review and direction of the Board of Directors.
Under the Investment Advisory Agreement dated as of December 11, 1997
between the Investment Manager and the Investment Adviser (together with the
Investment Management Agreement, the "Agreements"), the Investment Adviser will
advise the Investment Manager with respect to the investment and reinvestment of
the assets of the Fund in accordance with the Fund's stated investment
objective, policies and limitations and subject to the supervision, review and
direction of the Board of Directors.
Under the Agreements, the Investment Manager or the Investment Adviser,
with the consent of the Investment Manager, will select and place orders with
brokers and dealers to execute portfolio transactions on behalf of the Fund and
furnish to the Board of Directors periodic reports on the Fund's investment
performance.
The Investment Management Agreement provides that the Fund will pay the
Investment Manager a fee at the annual rate of 0.75% of the Fund's average
weekly net assets up to $150 million and 0.65% of such assets in excess of $150
million based upon net asset value at the end of each week and payable on the
last day of each calendar month. For the fiscal year ended March 31, 1998, the
Investment Manager earned from the Fund investment management fees totalling
$474,387. The fee paid by the Fund to the Investment Manager is higher than that
paid by most investment companies, although lower than the fee paid by most
other closed-end investment companies which invest primarily in the securities
of companies in foreign countries. Pursuant to the Investment Advisory
Agreement, the Investment Adviser is paid by the Investment Manager a fee at the
annual rate of 0.1875% of the net assets of the Fund.
The Agreements provide that neither the Investment Manager nor the
Investment Adviser will be liable for any error of judgment or for any loss
suffered by the Fund in connection with the matters to which the Investment
Management Agreement or the Investment Advisory Agreement, respectively, relate,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on its part in the performance, or from reckless disregard by it, of its
obligations and duties under the Agreements.
Each of the Agreements provides that each party will bear all expenses of
its employees and overhead incurred by it in connection with its duties under
the Agreements. Each party (other than the Fund) further agrees to pay all
salaries and fees of the Fund's directors and officers who are "interested
persons" of that party. The Fund will bear all of its own expenses, including
but not limited to: expenses of organizing the Fund; fees of the Fund's
directors who are not "interested persons" of any other party; out-of-pocket
travel expenses for all directors and officers in connection with their
attendance at, and other expenses incurred by the Fund relating to, directors'
or committee meetings; interest expense; taxes and governmental fees; brokerage
commissions and other expenses incurred in acquiring or disposing of the Fund's
portfolio securities; expenses of preparing stock certificates; expenses in
connection with the issuance, offering, distribution, sale or underwriting of
securities by the Fund; expenses of registering and qualifying the Fund's shares
for sale with the Securities and Exchange Commission and in various states and
foreign jurisdictions; auditing, accounting, insurance and legal costs;
custodian, dividend disbursing and transfer agent expenses; expenses of
obtaining and maintaining the listing of the Fund's shares on the New York Stock
Exchange; membership dues to professional organizations; expenses of
stockholders' meetings and preparing and distributing proxies and reports to
stockholders; and costs of information obtained from services other than the
Investment Manager or its affiliated persons relating to the valuation of
securities.
Both the Investment Management Agreement and the Investment Advisory
Agreement were approved by the stockholders of the Fund on February 25, 1998.
The prior Investment Management Agreement and the prior Investment Advisory
Agreement (collectively, the "Prior Agreements") had been approved by the
stockholders of the Fund on October 20, 1988. The Board of Directors at
subsequent annual meetings approved the continuation of the Agreements. At the
same meetings, the Agreements were approved unanimously by the directors who are
not "interested persons" of the Fund. On December 22, 1997, the Prior Agreements
terminated pursuant to the 1940 Act as a result of the acquisition by Merrill
Lynch of MAM (the "Acquisition"). The Investment Manager and the Investment
Adviser provided services under interim arrangements, in accordance with an
order granted by the Securities and Exchange Commission, between December 22,
1997 and January 12, 1998 (at no more than cost) and between January 12, 1998
and February 25, 1998 (at standard fee levels).
Each Agreement may be terminated at any time by the Fund on 60 days'
written notice, without the payment of any penalty, upon the vote of a majority
of the Fund's Board of Directors or a majority of the outstanding voting
securities of the Fund. Each Agreement will terminate automatically in the event
of its assignment, as defined in the 1940 Act. The Investment Adviser may
terminate the Investment Advisory Agreement without penalty on 90 days' written
notice to the Fund and the Investment Manager. In addition, the Investment
Manager may terminate the Investment Management Agreement on 90 days' written
notice to the Fund and the Investment Advisory Agreement on 90 days' written
notice to the Fund and the Investment Adviser.
Securities Transactions For and With the Fund
The Investment Manager is responsible for the selection of brokers to
execute the Fund's portfolio transactions. In placing such transactions, the
Investment Manager will seek to obtain best execution for the Fund, taking into
account factors such as price, commission, size of order, difficulty of
execution, research capabilities skill required of the broker and investment
market and statistical information provided by the broker. In seeking best
execution of its transactions, the Fund may employ several different brokers.
Orders may be placed with brokers and banks who supply research to the
Fund, the Investment Manager and the Investment Adviser. The research may be
used by the Investment Manager and the Investment Adviser in advising other
clients, and the Fund's commissions to brokers supplying research may not
represent the lowest obtainable commission rates. Although the Fund may receive
research from firms affiliated with the Investment Manager or the Investment
Adviser, the Fund will not pay any higher commission to these entities than
would have been paid if that affiliated entity had not provided any research.
The Fund cannot engage in principal transactions with the Investment
Manager, the Investment Adviser or their affiliates.
Administrator
The Fund's Administrator is Bear Stearns Funds Management Inc., which is
headquartered at 245 Park Avenue, 15th Floor, New York, New York, 10167.
General
The Management of the Fund does not intend to present to the meeting any
business other than the matters stated above. As of the date of this proxy
statement, the Management of the Fund was not aware of any other matters which
might be presented for action at the meeting. If any matter not referred to in
the enclosed proxy should properly come before the meeting, the persons named in
the enclosed proxy will have discretionary authority to vote all proxies in
accordance with their best judgment.
The cost of soliciting proxies for the annual meeting will be borne by the
Fund. The Fund has retained Corporate Investor Communications, Inc. ("CIC") for
a fee of approximately $67,000, together with the reimbursement of its expenses,
to assist in the solicitation of proxies. CIC will identify record and
beneficial owners of shares of the Fund and contact them by mail, telephone or
otherwise to solicit their proxies. It is expected that approximately 15
employees of CIC will be involved in this solicitation effort. In addition to
the solicitation by CIC, the Fund's officers may solicit proxies personally, for
which they will receive no special compensation. The Fund may reimburse brokers
or persons holding stock in their names or in the name of their nominees for
their expenses in sending proxy material to the beneficial owners.
In the event that sufficient votes in favor of any of the items set forth
in the notice of annual meeting of stockholders are not received by the time
scheduled for the annual meeting of the stockholders, the persons named as
proxies may propose one or more adjournments of such annual meeting to permit
further solicitation of proxies with respect to any such items. Any such
adjournment will require the affirmative vote of a majority of the shares
present in person or by proxy at the session of such annual meeting to be
adjourned. The persons named as proxies will vote in favor of such adjournment,
if proposed, those proxies which they are entitled to vote in favor of such
items and against such adjournment those proxies required to be voted against
such items.
In order for any stockholder proposal to be included in the Fund's proxy
statement and form of proxy for the Fund's 1999 annual meeting of stockholders,
the stockholder proposal must be received by the Fund on or before April 30,
1999 and must satisfy other applicable legal requirements.
By order of the Board of Directors,
ANTHONY M. SOLOMON
Chairman of the Board
New York, New York
August __, 1998
(This page has been left blank intentionally.)
SCHEDULE 1
THE UNITED KINGDOM FUND INC.
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
FIRST: I, [ ], whose post office address is 450 Lexington Avenue, New York,
New York 10017, being at least eighteen years of age, do under and by virtue of
the General Laws of the State of Maryland authorizing the formation of
corporations, associate myself as incorporator with the intention of forming a
corporation.
SECOND: The name of the corporation (which is hereinafter called the
"Corporation") is:
The United Kingdom Fund Inc.
THIRD: Corporate Purposes.
(a) The purposes for which and any of which the Corporation is formed and
the business and objects to be carried on and promoted by it are:
(1) To act as an open-end, management investment company under the
Investment Company Act of 1940, as amended.
(2) To hold, invest and reinvest its assets in securities and other
investments or to hold part or all of its assets in cash.
(3) To issue and sell shares of its capital stock in such amounts and
on such terms and conditions and for such purposes and for such amount or kind
of consideration as may now or hereafter be permitted by the General Laws of the
State of Maryland and by these Articles of Incorporation, as the Board of
Directors may determine; provided, however, that the value of the consideration
per share to be received by the Corporation upon the sale or other disposition
of any shares of its capital stock shall not be less than the net asset value
per share of such capital stock outstanding at the time of such event.
(4) To redeem, purchase or otherwise acquire, hold, dispose of,
resell, transfer, reissue or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its capital stock, in any manner and
to the extent now or hereafter permitted by the General Laws of the State of
Maryland and by these Articles of Incorporation.
(5) To engage in any one or more businesses or transactions, or to
acquire all or any portion of any entity engaged in any one or more businesses
or transactions which the Board of Directors may from time to time authorize or
approve, whether or not related to the business described elsewhere in this
Article or to any other business at the time or theretofore engaged in by the
Corporation.
(6) To do any and all additional acts and to exercise any and all
additional powers or rights as may be necessary, incidental, appropriate or
desirable for the accomplishment of all or any of the foregoing purposes.
(b) The foregoing enumerated purposes and objects shall be in no way
limited or restricted by reference to, or inference from, the terms of any other
clause of this or any other Article of the charter of the Corporation, and each
shall be regarded as independent; and they are intended to be and shall be
construed as powers as well as purposes and objects of the Corporation and shall
be in addition to and not in limitation of the general powers of corporations
under the General Laws of the State of Maryland.
FOURTH: Address and Resident Agent.
The post office address of the principal office of the Corporation in the
State of Maryland is The Prentice-Hall Corporation System, Maryland, 929 North
Howard Street, Baltimore, Maryland 21201. The name and address of the resident
agent of the Corporation in the State of Maryland is The Prentice-Hall
Corporation System, Maryland, whose post office address is 929 North Howard
Street, Baltimore, Maryland 21201.
FIFTH: Capital Stock.
(a) The total number of shares of stock which the Corporation shall have
authority to issue is fifteen million (15,000,000) shares, all of one class
called Common Stock of one cent ($.01) par value each, having an aggregate par
value of $150,000.
(b) At all meetings of stockholders, each stockholder of the Corporation
shall be entitled to one vote for each share of stock standing in his name on
the books of the Corporation on the date fixed in accordance with the By-Laws
for determination of stockholders entitled to vote at such meeting. Any
fractional share shall carry proportionately all the rights of a whole share,
including the right to vote and the right to receive dividends and
distributions.
(c) Notwithstanding any provision of law requiring any action to be taken
or authorized by the affirmative vote of the holders of a majority or other
designated proportion of the shares, or to be otherwise taken or authorized by a
vote of the stockholders, and subject to Articles Eighth and Ninth, such actions
shall be effective and valid if taken or authorized by the affirmative vote of
the holders of a majority or other designated proportion of the total number of
shares outstanding and entitled to vote thereon pursuant to the provisions of
the charter of the Corporation.
(d) No holder of stock of the Corporation shall, as such holder, have any
right to purchase or subscribe for any shares of the capital stock of the
Corporation of any class or any other security of the Corporation which it may
issue or sell (whether out of the number of shares authorized by the charter of
the Corporation, or out of any shares of the capital stock of the Corporation
acquired by it after the issue thereof, or otherwise).
(e) All persons who shall acquire stock in the Corporation shall acquire
the same subject to the provisions of the charter of the Corporation.
SIXTH: Board of Directors.
The number of Directors of the Corporation shall be fixed by the By-Laws
and shall be not less than three. The names of the current directors of the
Corporation are: Anthony M. Solomon, George F. Bennett, Livio Borghese, Sir
Arthur Bryan, Peter Stormonth Darling, Leon Levy, J. Murray Logan and James S.
Martin.
The By-Laws of the Corporation may (1) fix the number of Directors at a
number other than that fixed in the charter of the Corporation and (2) authorize
the Board of Directors, by the vote of a majority of the entire Board of
Directors, to increase or decrease the number of Directors fixed by the charter
of the Corporation or by the By-Laws within a limit specified in the By-Laws and
to fill the vacancies created by any such increase in the number of Directors.
Unless otherwise provided by the By-laws of the Corporation, the Directors of
the Corporation need not be stockholders thereof.
To the full extent permitted by applicable law, no Director of the
Corporation shall be personally liable to the Corporation or its stockholders
for money damages by reason of being or having been a director of the
Corporation or by reason of serving or having served the Corporation in any
other capacity. No amendment or repeal of this Article Sixth of the charter of
the Corporation shall have the effect of increasing the liability of any
Director of the Corporation for or in respect of any acts or omissions of such
Director occurring prior to such amendment or repeal.
SEVENTH: Management of the Affairs of the Corporation.
(a) All corporate powers and authority of the Corporation (except as at the
time otherwise provided by statute, by the charter of the Corporation or by the
By-Laws) shall be vested in and exercised by the Board of Directors.
(b) The Board of Directors shall have the power to make, alter or repeal
the By-Laws of the Corporation except to the extent that the By-Laws otherwise
provide. The By-Laws may provide that meetings of the stockholders may be held
at any place in the United States provided in, or fixed by the Board of
Directors pursuant to, the By-Laws. The By-Laws may also provide for the conduct
of meetings of the Board of Directors or committees thereof by means of a
telephone conference circuit.
(c) The Board of Directors shall have power from time to time to authorize
payment of compensation to the Directors for services to the Corporation, as
provided in the By-Laws, including fees for attendance at meetings of the Board
of Directors and of committees.
(d) The Board of Directors shall have power from time to time to determine
whether and to what extent, and at what times and places and under what
conditions and regulations, the accounts and books of the Corporation (other
than the stock ledger) or any of them shall be open to the inspection of
stockholders; and no stockholder shall have the right to inspect any account,
book or document of the Corporation except at such time as is conferred by
statute or the By-Laws.
(e) Both stockholders and Directors shall have power, if the By-Laws so
provide, to hold their meetings and to have one or more offices, within or
without the State of Maryland and to keep the books of the Corporation (except
as otherwise required by statute) outside the State of Maryland, at such places
as from time to time may be designated by the By-Laws or the Board of Directors.
EIGHTH: Special Vote Requirements.
Notwithstanding any other provisions of this Charter, a favorable vote of
the holders of at least two-thirds of the shares of the Corporation then
entitled to be voted on the matter shall be required to approve, adopt or
authorize (i) a merger or consolidation of the Corporation with any other
corporation or share exchange transaction in which the Corporation is not the
surviving corporation, (ii) a sale of all or substantially all of the assets of
the Corporation (other than in the regular course of its investment activities),
or (iii) a liquidation or dissolution of the Corporation, unless such action has
previously been approved, adopted or authorized by the affirmative vote of
two-thirds of the total number of Directors fixed in accordance with the
By-Laws.
NINTH: Reservation of Right to Amend.
From time to time any of the provisions of the charter of the Corporation,
with the exception of Articles Third, Eighth and this Article Ninth, may be
amended, altered or repealed (including any amendment which changes the terms of
any of the outstanding stock by classification, reclassification or otherwise)
upon the vote of the holders of a majority of the shares of capital stock of the
Corporation at the time outstanding and entitled to vote, and other provisions
which might under the statutes of the State of Maryland at the time in force be
lawfully contained in the charter of the Corporation may be added or inserted
upon the vote of the holders of a majority of the shares of Common Stock of the
Corporation at the time outstanding and entitled to vote; and all rights at any
time conferred upon the stockholders of the Corporation by the charter of the
Corporation are granted subject to the provisions of this Article Ninth. The
provisions of Article Third may be amended, altered or repealed only upon the
vote of the holders of a majority of the outstanding voting securities of the
Corporation, as defined in the Investment Company Act of 1940. The provisions of
Article Eighth and this Article Ninth may be amended, altered or repealed only
upon the vote of the holders of two-thirds of the outstanding shares of Common
Stock of the Corporation.
TENTH: Redemption.
Each holder of shares of capital stock of the Corporation shall be entitled
to require the Corporation to redeem all or any part of the shares of capital
stock of the Corporation standing in the name of such holder on the books of the
Corporation, and all shares of capital stock issued by the Corporation shall be
subject to redemption by the Corporation, at the redemption price of such shares
as in effect from time to time as may be determined by the Board of Directors of
the Corporation in accordance with the provisions hereof, subject to the right
of the Board of Directors of the Corporation to suspend the right of redemption
of shares of capital stock of the Corporation or postpone the date of payment of
such redemption price in accordance with provisions of applicable law. The
redemption price of shares of capital stock of the Corporation shall be the net
asset value thereof as determined by the Board of Directors of the Corporation
from time to time in accordance with the provisions of applicable law, less such
redemption fee or other charge, if any, as may be fixed by resolution of the
Board of Directors of the Corporation. Payment of the redemption price shall be
made in cash or in-kind by the Corporation at such time and in such manner as
may be determined from time to time by the Board of Directors of the
Corporation.
ELEVENTH: Duration.
The duration of the Corporation shall be perpetual.
Please mark boxes [ ] or [x] in blue or black ink. Unless otherwise specified in
the boxes below, the undersigned's vote will be cast FOR proposals 1 and 2 and
AGAINST proposals 3 and 4.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL NOMINEES LISTED BELOW.
<TABLE>
<S> <C> <C>
1--ELECTION OF DIRECTORS. [ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY
(except as marked to the (to vote for all nominees
contrary below) listed below)
</TABLE>
Anthony M. Solomon, George F. Bennett, Livio Borghese, Sir Arthur Bryan,
Peter Stormonth Darling, Leon Levy, J. Murray Logan and James S. Martin.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below. If authority is not
withheld with respect to any nominee, the undersigned's vote will be cast
for such nominee).
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR PROPOSAL 2.
2--RATIFICATION OF SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS FOR
THE FISCAL YEAR ENDING MARCH 31, 1999:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST PROPOSAL 3.
3--AMENDMENT AND RESTATEMENT OF THE CHARTER TO CONVERT THE FUND FROM A
CLOSED-END INVESTMENT COMPANY TO AN OPEN-END INVESTMENT COMPANY:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST PROPOSAL 4.
4--STOCKHOLDER PROPOSAL TO CAUSE THE FUND TO REPURCHASE ALL OF ITS OUTSTANDING
SHARES AT NET ASSET VALUE.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5--TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
Please mark, date and sign as your name appears and
return in the enclosed envelope. If acting as executor,
administrator, trustee, guardian, etc. you should so
indicate when signing. If the signer is a corporation,
please sign the full corporate name, by duly authorized
officer. If shares are held jointly, each stockholder
named should sign.
The undersigned hereby acknowledges receipt of a copy of
the accompanying notice of meeting and proxy statement
and hereby revokes any proxy or proxies heretofore
given.
_______________________________________________________
Signature
_______________________________________________________
Signature
Date_____________________________________________, 1998
PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE-NO POSTAGE IS REQUIRED
THE UNITED KINGDOM FUND INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS--SEPTEMBER 15, 1998
The undersigned, revoking previous proxies, hereby appoints Anthony M.
Solomon, J. Loughlin Callahan and Thaddea M. Feldman, and each of them, the
proxies of the undersigned, with power of substitution to each of them, to vote
all shares of common stock of The United Kingdom Fund Inc. which the undersigned
is entitled to vote at the Annual Meeting of Stockholders of The United Kingdom
Fund Inc. to be held at the Waldorf-Astoria Hotel, 301 Park Avenue, 4th Floor,
New York, New York, on September 15, 1998 at 11:00 A.M., New York City time, and
at any and all adjournments thereof.
(Continued on reverse side)
