THE ASIA TIGERS
FUND, INC.
Annual Report
October 31, 1998
ADVANTAGE ADVISERS, INC.
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The Asia Tigers Fund, Inc.
November 23, 1998
Dear Shareholder,
We are pleased to present you with the audited financial statements of The Asia
Tigers Fund, Inc. (the "Fund") for the fiscal year ended October 31, 1998. The
most recent period has been a volatile one for the Asian region, with most
markets experiencing negative returns. In the following pages, the Investment
Adviser provides a detailed look at the Fund's portfolio, as well as a
discussion of the economic and market conditions of the region.
The Fund's net asset value ("NAV") closed at $7.55 per share on October 31,
1998, dropping 22.0% for the year, outperforming, by reference, the MSCI AC Asia
Free Ex-Japan Index, which was down 25.0% over the same period. The Fund
continues to provide its share-holders with broad-based exposure to the emerging
equity markets of the Asian Pacific Basin and the Indian subcontinent. As of
October 31, 1998, the Fund was invested in 12 countries. Four of these countries
account for approximately 70% of the Fund's investments: Hong Kong, Taiwan,
India and Singapore.
As a result of changing market conditions, the Fund has shifted the geographic
allocation of its investments. In response to government interventions in both
Hong Kong and Malaysia, the Investment Adviser decided to reduce the Fund's
exposure to those markets. In addition, the Investment Adviser has taken other
steps to maintain a defensive posture.
In the near-term, the Investment Adviser remains cautious. However, over the
long term, the Investment Adviser believes that Asia continues to offer growth
opportunities. The Investment Adviser intends to maintain the Fund's defensive
position until real improvements in economic fundamentals and a more positive
perspective for the region are evident.
On behalf of the Board of Directors, thank you for your participation in the
Fund.
Sincerely,
/s/ Alan Rappaport
Alan Rappaport
Chairman
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THE ASIA TIGERS FUND, INC.
Report of the Investment Adviser
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PERFORMANCE
The 12-month period ended October 31, 1998 resulted in continued disappointment
and frustration for the Asia Ex-Japan equity investor. The regional benchmark
which The Asia Tigers Fund, Inc. (the "Fund") uses for comparison purposes, the
MSCI AC Asia Free Ex-Japan Index, dropped 25.0%. During the same period, the
Fund's net asset value ("NAV") fell 22.0%.
Seven of the 12 markets in which the Fund invests lost more than 25% of their
value in US dollar terms during the year. Indonesia was the worst performing
equity market in the region, losing nearly 77% of its value in the 12 months
ended October 31, 1998. Malaysia, China and Pakistan were standout poor
performers, as each market fell more than 50%. Sri Lanka lost more than 40%,
while India and Korea each dropped in excess of 25%. The best performing markets
were Hong Kong and the Philippines, which fell 0.9% and 9.5%, respectively. None
of the 12 markets in which the Fund is invested registered a gain for the
period.
Currencies played a large role in the region's performance during the past year.
The Indonesian Rupiah lost more than 53% of its value against the US dollar. The
Korean Won and Pakistan Rupee both lost a minimum of 20% against the US dollar.
In fact, the only currency exposure that did not hurt the Fund's performance
during the period was the Hong Kong Dollar, which held its value despite strong
attacks by currency speculators.
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The Fund's net asset value is calculated weekly and published in The Wall Street
Journal every Monday under the heading, "Closed End Funds." The Fund's NAV is
also published in The New York Times on Mondays and in Barron's on Saturdays.
The Fund is listed on the New York Stock Exchange under ticker symbol GRR.
If you have any questions or would like an update on the Fund, please call our
toll-free phone number (800) 421-4777. This number provides a recorded monthly
review as well as specific details about the Fund, its portfolio and
performance.
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THE ASIA TIGERS FUND, INC.
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COUNTRY ALLOCATION
During the 12-month period ended October 31, 1998, the Fund shifted its
geographic allocation. Allocations are made between countries in the region
based upon the changing underlying economic conditions and relative equity
valuations. Since the end of October 1997, larger changes in the Fund's country
weights include investment increases in Korea, India and Thailand, as well as
decreases in Malaysia, Indonesia and Hong Kong. During the period, the Fund's
cash level rose from 9.1% to 10.0%. The charts below indicate the Fund's
breakdown at the end of the Fund's most recent two fiscal years.
COUNTRY HOLDINGS
October 31, 1998
[The following table was depicted as a pie chart in the printed material]
Hong Kong 29.3%
Taiwan 16.9
India 14.4
Singapore 11.6
Korea 7.2
Thailand 4.8
Philippines 1.9
Malaysia 1.8
China 1.0
Pakistan 0.6
Sri Lanka 0.2
Indonesia 0.3
USA (Cash) 10.0
[The following table was depicted as a pie chart in the printed material]
October 31,1997
Hong Kong 32.0%
Taiwan 14.5
India 11.0
Singapore 10.9
Korea 4.0
Thailand 2.0
Philippines 1.5
Malaysia 6.9
China 1.3
Pakistan 1.3
Sri Lanka 0.2
Indonesia 5.3
Bangladesh 0.0
USA (Cash) 9.1
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ASIA IN A GLOBAL CONTEXT
What began as a domestic problem for Thailand in July 1997 rapidly spread,
within Asia first, and then in 1998 to Latin America and Russia, and finally to
the developed countries of Europe and the United States. The currency crisis in
Thailand exposed weaknesses in the domestic banking systems of Thailand,
Indonesia, Korea and Malaysia. Also exposed were weaknesses in the risk
assessments made by the Japanese and the Western bankers providing loans to the
region. Initially, Asia's emerging market problems were viewed as positive by
the developed Western financial markets, as the crisis put deflationary pressure
on the commodities and manufactured goods that Asia produces.
However, when there was a liquidity crisis and subsequent US Federal Reserve led
recapitalization of the well-known hedge fund, Long Term Capital Management, the
risk of excessive leverage in the entire world's banking system surfaced. This
chain of events led to a surprise cut in interest rates by the US Federal
Reserve bank and a surge in the value of the Japanese Yen against the US dollar.
The Japanese Yen rallied as the "Yen Carry Trade" was reversed. The term "Yen
Carry Trade" is derived from a practice when one borrows in Yen at a very low
interest rate (less than 1%) and invests in higher yielding stocks and bonds in
the US and Europe. The short covering in the Yen was dramatic, and when combined
with a substantial (US$500 billion) rescue package for Japan's banking system,
begins to build a better long-term investment case for Japan as well as the
smaller economies in Asia. Indeed, after an extended period of underperformance,
Asia's stock market outperformed the US and Europe in the third quarter of 1998.
The surprise cut in interest rates by the United States led to a rally in Asian
equity markets and around the world. Historically, lower interest rates have
been a powerful and positive force for most financial assets, such as stocks and
bonds. But we should be cautious about the US Federal Reserve's mid-October cut
in interest rates. The Federal Reserve cut rates, we would argue, not to
stimulate the US economy, but because the world's financial system is under a
good deal of stress. In our opinion, the world needs lower interest rates while
it assesses the health of the world banking system and financial architecture.
In addition to the financial challenges mentioned above, we believe that the
world is confronted with deflationary forces provoked by an over-investment
crisis. Unlike previous economic slowdowns following high inflation and
over-heated demand, the present excess in supply and over-capacity is triggering
price drops. With producer and commodity prices falling in most countries, we
have entered an environment where it will be difficult for companies to raise
the prices of the goods they sell.
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REGIONAL OUTLOOK
Last year at this time, the Asian economies were suffering from a financial
crisis, in response to which the International Monetary Fund ("IMF") dispensed
billions of dollars in emergency rescue packages (tied to austerity plans) in
Thailand, Indonesia and Korea. Stock markets fell, currencies
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THE ASIA TIGERS FUND, INC.
were devalued, interest rates soared and a crisis of confidence affected
investors in Asia. In February 1998, Asian stock markets rebounded as there was
hope and faith that stern IMF measures would lead Asia back to economic health.
In April 1998, new evidence emerged that Japan, the largest economy in Asia, had
more serious financial problems than previously thought. As a result, the
region's stock markets, as well as currencies, renewed their downward trend.
From early-April to mid-June 1998, the Yen lost about 12% of its value against
the US dollar, leading to another round of speculative attacks on Asia's other
currencies. Interest rates remained very high, forcing recessions upon Thailand,
Indonesia, Korea, Hong Kong, Singapore and Malaysia.
High-profile government interventions in stock and currency markets have caused
international investors to reconsider their stance in the region. In Hong Kong,
the Hong Kong Monetary Authority has spent over US$12.5 billion propping up the
equity market. In Malaysia, Prime Minister Mahathir made the decision to impose
capital controls on the Malaysian Ringgit. In both cases, the interventions
resulted in a temporary rally on the stock markets, making valuations stretched
in the absence of real improvements in underlying fundamentals. We reduced the
Fund's weightings for both Hong Kong and Malaysia to reflect our cautious view
toward such intervention.
The recent cut in US interest rates and dramatic strengthening of the Japanese
Yen against the US dollar is a welcome relief for most Asian economies and stock
markets. Lower US interest rates and a weaker US dollar should have the effect
of lowering Asian interest rates and removing devaluation pressure from Asian
currencies. New risk aversion by major hedge funds may also help dampen
speculative attacks on Asia.
In the near-term, we expect that lower global interest rates will lead to a
much-needed downtrend in Asian interest rates. However, despite the possibility
of better near-term sentiment, we still believe it will take a long time before
real improvements in economic fundamentals become apparent. For the rest of the
year, economic momentum for most Asian countries is likely to continue downward
and corporate earnings are expected to remain disappointing. Therefore, we plan
to maintain our cautious portfolio strategy during the remainder of 1998.
Looking forward to 1999, relative to the regional benchmark, we will likely
maintain the Fund's overweight positions in India, Sri Lanka and Thailand.
Assuming that low domestic interest rates can be maintained, we also would
expect to add to the Fund's investments in both Singapore and Hong Kong. We will
likely remain neutral to Taiwan, Korea, China and Pakistan. We will remain
somewhat cautious and underweight the other three markets where the Fund
invests: Malaysia, the Philippines and Indonesia. Of course, we will closely
monitor future developments, and change our investment view accordingly. The
Investment Adviser believes that Asia remains arguably the best region in the
world for long-term growth of equity capital, but the near-term outlook for
economies in which the Fund invests will remain challenging and difficult.
The following comments provide investors with a brief summary of the Investment
Adviser's view on the Fund's target markets and on some of the investments that
make up the portfolio.
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THE ASIA TIGERS FUND, INC.
CHINA
US$1.5 million, 1.0% of the Fund's total investments, as of October 31, 1998.
China's economy, second only to Japan in Asia, is critically important to the
region in which the Fund invests. Despite the dramatic economic contraction in
most Asian countries this year, China's economy grew by about 7.6% during the
first nine months of 1998. Meanwhile, China has made great strides in
controlling inflation. In October 1994, inflation in China was running at an
annual rate in excess of 27%, presenting a threat to the economy. Currently,
inflation is running at less than 2%. We expect the overall economy to grow
between 7% and 8% in 1998.
Most of the Fund's greater China exposure is in the Hong Kong-based firms that
have significant operations in China. The Fund holds one "H-share," a Chinese
mainland state-owned enterprise that has listed a minority stake on the Hong
Kong stock exchange. Beijing Datang Power Generation Company develops,
constructs, owns and operates coal-fired electric power plants in northern
China. We believe that this company is in a key position to benefit from the
rapid development occurring in the metropolitan area surrounding China's capital
city. In 1997, Beijing Datang Power reported sales of 5.1 billion Yuan and net
income of 1.1 billion Yuan. These figures represent year-over-year gains of
12.9% and 24.3%, respectively, over the comparable figures for 1996.
HONG KONG
US$43.9 million, 29.3% of the Fund's total investments, as of October 31, 1998.
Hong Kong has had a volatile and difficult year. During the July 1997 hand-over
to China, the city was a proud city in the world spotlight. But during the last
few months of 1997, the currency was under attack, interest rates were rising
and jobs were being lost. In August 1998, the Hong Kong Monetary Authority spent
about 10% of its currency reserves to buy stocks. Although the intervention has
helped to provide some stability to the stock market, it cost Hong Kong some of
its well-earned reputation as one of the most laissez faire economies in the
world. Today, the economy is in a recession (Hong Kong's second quarter GDP
growth rate was negative 5.2%), unemployment is at a 15-year high (5.3%) and the
near-term outlook is rather gloomy. However, the bright spot on Hong Kong's
investment horizon is lower interest rates. In mid-October 1998, Hong Kong's
prime rate was lowered to 9.75% from 10% following the surprise rate cut by the
US Federal Reserve. Hong Kong's inflation for the year ended September 1998 was
just 2.5%, the lowest in 18 years.
Hutchison Whampoa is the Fund's largest single holding in Hong Kong. With a
stock market valuation of greater than US$25 billion, Hutchison Whampoa has
operations in property investment and development, container terminals,
telecommunications, infrastructure, retail and manufacturing. For the year of
1997, Hutchison reported sales of HK$44.6 billion and profit of HK$12.3 billion.
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THE ASIA TIGERS FUND, INC.
INDIA
US$21.6 million, 14.4% of the Fund's total investments, as of October 31, 1998.
First India and then Pakistan alarmed the world by testing nuclear devices in
1998. Most developed countries condemned the tests and imposed economic
sanctions on both countries. Meanwhile, India's fiscal deficit stood at 6.1% of
total economic output as of March 1998. Although the government has been making
progress in collecting taxes, the fiscal deficit is likely to stay stubbornly
high for at least the next few years. India has been insulated from much of
Southeast Asia's economic turmoil. We would expect corporate earnings per share
to grow in double digits for at least the fiscal years ending March of 1999 and
2000. Indian software companies have been reporting exciting net profit growth
of 50% for the past few years, and the prospects for the industry are
particularly bright.
The Fund's largest position in India is Hindustan Lever. This company is India's
largest manufacturer of branded and packaged consumer products. Hindustan Lever
produces and sells soaps, detergents, personal care products and processed
foods. The company has a brand portfolio of approximately 144 products
including: "Lux" and "Pears" soaps, "Surf" detergent, "Sunsilk" shampoo and
"Paras" fertilizers. In 1997, the company reported sales of 78.2 billion Indian
Rupees worth of products and net profits of 5.6 billion Indian Rupees.
INDONESIA
US$0.4 million, 0.3% of the Fund's total investments, as of October 31, 1998.
The past 12 months in Indonesia have been the most politically and economically
volatile in at least 30 years. President Suharto, who had been in absolute power
for 32 years, stepped down in May 1998. The IMF's rescue plan has been accepted
and is running its course. Political uncertainty remains high, although the new
President, Dr. Habibie, has declared he will be in power until the next
elections in the year 2000. We believe that the banking system needs to be
nationalized and recapitalized. We believe that the economy is likely to shrink
by approximately 18% in 1998 and continue to shrink, although at a slower pace,
in 1999. Unemployment is near 20% and inflation is running at about 80% for the
year ended October 31, 1998, by far Asia's highest.
Gulf Indonesia Resources is an independent oil and natural gas company. The Fund
owns Gulf Indonesia's New York Stock Exchange-listed American Depository Receipt
(ADR) shares. In 1997, Gulf Indonesia reported profits of US$8.3 million on
sales of US$119.6 million.
KOREA
US$10.8 million, 7.2% of the Fund's total investments, as of October 31, 1998.
At some US$58 billion, Korea's emergency aid package has the distinction of
being the highest last year. In late 1997, Korea had a cash flow crisis as
foreign exchange reserves fell to US$7.3 billion. The government has been able
to successfully reschedule and extend a significant portion of its debt. As
imports fell in 1998, the current account surplus has increased and Korea is now
in the fortunate
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THE ASIA TIGERS FUND, INC.
position of having a trade surplus that will likely exceed US$30 billion in
1998. This compares favorably with 1997's deficit of US$9 billion. Foreign
exchange reserves were US$47.7 billion as of October 15, 1998. Meanwhile, Korea
has been rapidly deregulating and opening its stock, bond and deposit markets to
foreign investment.
On the other hand, Korea has some large and difficult tasks ahead of it. The
banking system desperately needs recapitalization, and estimates of the cost are
as high as 40% of GDP. In addition, Korean companies need to pay down debts. The
top 64 business groups in Korea had an average debt/equity ratio of 483% at the
end of 1997. The Korean government is suggesting that this ratio be brought
below 200% by the end of 1999. It is difficult to see how this goal can be
accomplished.
The Fund's largest investment in Korea, Pohang Iron & Steel, is one of the
world's largest and most efficient producers of steel. The Korean government has
a majority stake in the company, which enjoys a near-monopoly position in its
domestic market. In addition, as the domestic price of steel in Korea remains
below the international price, it is expected that a liberalization of prices
will help, rather than hurt, the company's bottom line. In 1997, the company
reported profits of 729 billion Korean Won on sales of 1.1 trillion Korean Won.
MALAYSIA
US$2.6 million, 1.8% of the Fund's total investments, as of October 31, 1998.
Once again, Malaysia stands apart from the rest of the region as having the
worst government response to the region's crisis. On September 1, 1998, Malaysia
imposed capital controls. Effectively, this means that foreigners may not
convert their local currency holdings of Malaysian Ringgit into another currency
until September 1, 1999. Malaysia's monetary policy has been viewed as
isolationist. By shutting its economy off from the rest of the world, the
government hopes to aggressively stimulate the economy by lowering interest
rates and growing out of its problems. Time will tell if Malaysia's
controversial policy makes any sense. Prime Minister Mahathir fired his Finance
Minister, Anwar Ibrahim, and later had him imprisoned under the country's
internal security law. The controversial sacking of Anwar and large public
demonstrations for "reformasi" have raised the risk of political instability in
the near-term for Dr. Mahathir. Since capital controls were imposed, domestic
interest rates have been cut aggressively and the banks have been instructed to
increase their loans outstanding by 8%.
The Fund's largest Malaysian investment is Petronas Gas. Petronas Gas is
responsible for the processing and transmission of natural gas owned and
extracted by its parent company, Petronas. The company has stable earnings
growth forecast for the foreseeable future as virtually all of its revenue is
derived from pre-determined reservation and flow rate charges. For the year
ended March 1998, Petronas reported net profits of 942 million Malaysian
Ringgit, representing a 13% rise over the previous year's figure.
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THE ASIA TIGERS FUND, INC.
PAKISTAN
US$1.0 million, 0.6% of the Fund's total investments, as of October 31, 1998.
Pakistan is currently experiencing a cash flow crisis. The economic sanctions
imposed in response to nuclear testing by Pakistan have made its weak financial
position even worse. The IMF and other international bodies are working to help
Pakistan through its near-term troubles, but progress will likely be slow and
problematic. On the bright side is the corporate earnings outlook. We believe
that consensus earnings per share growth for the country should be near 20% for
the next two years.
The Fund's largest holding in Pakistan is the Republic of Pakistan convertible
bonds. These bonds may be converted into the shares of Pakistan Telecom, the
country's dominant telephone service provider. In 1997, Pakistan Telecom
reported revenues of 40.6 billion Pakistan Rupees and profits of 12.2 billion
Pakistan Rupees.
PHILIPPINES
US$2.8 million, 1.9% of the Fund's total investments, as of October 31, 1998.
In 1998, the Philippine President Ramos completed a very successful six-year
term and, by constitutional law, was not permitted to run again. Retired actor
Joseph Estrada was then elected to the presidency. There has been disappointment
with the new president's appointments, and greater political risk has been
attached to the stock market as a result. The government's fiscal balance sheet
remains burdened by debt and low economic growth, which are expected to keep
government revenue disappointing. On the other hand, Philippine corporations do
not have the same US dollar-denominated debt found in much of the rest of
Southeast Asia. In addition, the banking system is believed to be relatively
sound, with the average bank's capital adequacy ratio at 14%.
In the Philippines, the Fund's largest holding is SM Prime. SM Prime is the
country's largest shopping mall operator with six such properties. The company
also operates cinemas, bowling lanes, department stores and supermarkets. In
1997, the company reported profits of 2.3 billion Philippine Pesos on sales of
4.1 billion Philippine Pesos.
SINGAPORE
US$17.5 million, 11.6% of the Fund's total investments, as of October 31, 1998.
Singapore is considered to have the most stable political environment in all of
Asia. The government's balance sheet is exceptionally strong and the banking
system is well capitalized. The major problem for Singapore is that,
geographically, it is located between Indonesia and Malaysia, two countries that
are having severe economic problems. Similar to Hong Kong, Singapore has
inflated property prices, but unlike Hong Kong, Singapore has substantial
pension reserves (called the "Central Provident Fund") which are likely to make
asset deflation less severe. The recent declines in domestic interest rates are
viewed as particularly helpful to Singapore's economy and stock market.
The Fund's largest position in Singapore is Fullerton Global Corp. convertible
bonds. These bonds
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THE ASIA TIGERS FUND, INC.
may be converted into the shares of Singapore Telecommunications. Singapore
Telecommunications is the dominant provider of telecommunications services to
Singapore's population of three million. In the fiscal year ended March 1998,
the company reported net profits of 1.8 billion Singapore dollars, about 9%
higher than the comparable figure for the year ended March 1997.
SRI LANKA
US$0.3 million, 0.2% of the Fund's total investments, as of October 31, 1998.
A civil war has been ongoing in the north of Sri Lanka since 1983. Although
there is little hope of the conflict ending soon, the country has managed to
carry on and grow successfully. Like elsewhere in the Indian sub-continent,
corporate earnings growth is expected to be in the double-digits for 1999 and
2000.
The Fund owns one stock in Sri Lanka. John Keells Holdings is a broadly
diversified conglomerate with a focus on operating tourist facilities and
services. We believe that the company has strong management and that its
businesses in food and beverage, as well as tea plantations, should show
particularly healthy growth rates. In 1997, John Keells reported sales of 5.7
billion Sri Lankan Rupees and profits of 421 million Sri Lankan Rupees.
TAIWAN
US$25.3 million, 16.9% of the Fund's total investments, as of October 31, 1998.
Taiwan is somewhat insulated from the typical Asian economic woes due to its
sound banking system as well as a stable property market. Taiwan has a focused,
globally competitive electronics industry. The country's electronics companies
supply components such as printed circuit boards, motherboards, switching power
supplies, resistors and connectors to virtually all the top US computer makers.
One of the Fund's largest holdings in Taiwan is President Chain Store
Corporation. The company is the sole operator of 7-Eleven stores in Taiwan. With
1,883 stores as of September 1998, President Chain Store claims a dominant 38%
share of the convenience store market, three times more than its closest
competitor. As in the US, each store carries more than 3,000 items, but in
Taiwan 7-Eleven stores also offer services ranging from selling bus passes to
collection of telephone bill payments.
THAILAND
US$7.2 million, 4.8% of the Fund's total investments, as of October 31, 1998.
In recent months, we have added to the Fund's exposure to Thailand. Although
Thailand is still facing the formidable challenge of recapitalizing its
financial system and its overall economic growth is expected to shrink further
for the next 12 months, the country has probably made the biggest strides of all
countries in the region in dealing with Asia's economic crisis. In addition, the
International Monetary Fund continues to lend significant support to Thailand
and Thailand's foreign exchange reserves have returned to a healthier level (in
excess of US$27 billion). In addition, domestic interest rates have been falling
sharply while the Thai Baht has remained stable and even
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THE ASIA TIGERS FUND, INC.
appreciated against the US dollar. We believe that the recent reduction in US
interest rates, the subsequent weakness in the US dollar and the strength of the
Japanese Yen should make the economic environment even more favorable for
Thailand.
In Thailand, the Fund's largest holding is Advanced Information. Advanced
Information has a license from the Telephone Organization of Thailand to provide
cellular phone services until the year 2010. The company operates both analog
and digital cellular systems for mobile telephone communications. For the year
ended December 1997, the company reported sales of 15.2 billion Thai Baht and
profits of 1.4 billion Thai Baht.
C. Bruce Nisker, CFA
AXA Asset Management Partenaires
Hong Kong
November 17, 1998
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AXA Asset Management Partenaires ("AAMP") has served as the Investment Adviser
to the Fund since June 8, 1998 pursuant to an investment advisory agreement
among Advantage Advisers, Inc., AAMP and the Fund (the "New Advisory
Agreement"). The New Advisory Agreement was approved by the Fund's Board of
Directors in connection with an agreement entered into between AXA Investment
Managers SA ("AXA") and Barclays Bank providing for AXA to acquire (the
"Transaction") Barclays Global Investors International Hong Kong Limited
("BGIHK"). The Transaction closed on June 8, 1998.
While the Transaction did not directly involve Barclays Global Investors
International Inc. ("BGI"), which had served as the Fund's investment adviser
since the Fund's inception, BGI provided investment advice to the Fund through
the services of BGIHK's investment advisory personnel. Upon consummation of the
Transaction, all of BGIHK's investment advisory personnel involved in the
management of the Fund became associated with AXA and AAMP. The New Advisory
Agreement was approved at a Special Meeting of the Fund which was held on August
7, 1998.
During May 1998, the Board of Directors of the Fund reviewed and approved
various amendments to the Fund's bylaws. For example, the provisions relating to
timely notice for proposals to be brought before an annual meeting of
stockholders (other than a proposal under Rule 14a-8 of the Securities Exchange
Act of 1934 to be included in the Fund's proxy statement) have been amended. As
amended, a stockholder's notice generally must be delivered to the Fund not less
than 60 days nor more than 90 days prior to the first anniversary of the
preceding year's annual meeting. The Board believes that the amended timely
notice provisions will provide greater certainty to stockholders because
previously, timely notice keyed off the date of the current year's meeting or
the date the public disclosure of the current year's meeting is made. In
addition, the provisions provide that any business to be brought before a
special meeting of stockholders must be specified in the notice of meeting or
otherwise properly brought before the meeting by or at the direction of the
Board of Directors. Finally, upon recommendation of the Fund's Maryland counsel,
other changes to certain bylaw provisions were made to conform to the bylaw
provisions of more recently incorporated Maryland corporations.
Year 2000 Processing Issues
Many computer programs employed throughout the world use two digits rather than
four to identify the year. These programs, if not adapted, may not correctly
handle the change from "99" to "00" on January 1, 2000, and many not be able to
perform necessary functions. The Year 2000 issue affects virtually all companies
and organizations.
Both the Investment Manager and the Investment Adviser have advised the Fund
that they are implementing steps intended to ensure that their computer systems
are capable of Year 2000 processing. In addition, the Fund is inquiring with
third parties to assess the adequacy of their Year 2000 compliance efforts. The
Fund intends to develop contingency plans intended to ensure that third-party
non-compliance will not materially affect the Fund's operations. The Fund does
not currently anticipate that the Year 2000 issue will have an adverse effect on
the Investment Manager's or the Investment Adviser's ability to continue to
provide the services currently provided to the Fund.
Companies in which the Fund invests could be adversely affected by the Year 2000
issue, but the Fund cannot predict the consequential effect on its investment
return. To the extent the impact on a portfolio holding is negative, the Fund's
investment return could be adversely affected.
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THE ASIA TIGERS FUND, INC.
Schedule of Investments October 31, 1998
COMMON STOCKS (82.81% of holdings)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
China 1.03%
Utilities - Electric & Gas 1.03%
5,000,000 Beijing Datang Power Generation Company ........... $ 2,081,735 $ 1,549,387
------------ ------------
Total China ....................................... 2,081,735 1,549,387
------------ ------------
Hong Kong 29.05%
Banking 1.85%
320,000 Hang Seng Bank .................................... 3,318,448 2,768,238
------------ ------------
Multi-Industry 7.70%
1,450,000 Hutchison Whampoa ................................. 9,592,654 10,390,575
500,000 Shanghai Industrial Holdings ...................... 1,995,120 1,155,584
------------ ------------
11,587,774 11,546,159
------------ ------------
Real Estate 7.18%
810,000 Cheung Kong Holdings .............................. 5,687,904 5,542,931
750,000 Sun Hung Kai Properties ........................... 5,659,568 5,229,180
------------ ------------
11,347,472 10,772,111
------------ ------------
Telecommunications 6.79%
1,050,000 China Telecommunication ........................... 1,937,446 1,972,563
4,100,090 Hong Kong Telecommunication ....................... 7,713,077 8,205,474
------------ ------------
9,650,523 10,178,037
------------ ------------
Utilities - Electric & Gas 5.53%
950,000 CLP Holdings ...................................... 5,000,143 5,335,700
920,000 Hong Kong & China Gas ............................. 972,370 1,306,649
450,000 Hong Kong Electric ................................ 1,412,250 1,650,097
------------ ------------
7,384,763 8,292,446
------------ ------------
Total Hong Kong ................................... 43,288,980 43,556,991
------------ ------------
India 14.38%
Automobiles 1.34%
70,300 Bajaj Auto ........................................ 1,079,765 918,995
54,500 Punjab Tractors ................................... 1,091,411 1,007,079
5,000 Tata Engineering & Locomotive ..................... 41,953 13,326
</TABLE>
12
<PAGE>
THE ASIA TIGERS FUND, INC.
Schedule of Investments (continued) October 31, 1998
COMMON STOCKS (continued)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
India (continued)
Automobiles (continued)
5,000 TVS Suzuki ....................................... $ 64,729 $ 70,792
------------ ------------
2,277,858 2,010,192
------------ ------------
Banking 0.76%
288,300 Bank of Baroda ................................... 963,437 360,715
300 Oriental Bank of Commerce ........................ 738 276
210,000 State Bank of India .............................. 1,217,234 771,388
------------ ------------
2,181,409 1,132,379
------------ ------------
Beverages & Tobacco 1.50%
136,300 ITC .............................................. 2,082,790 2,251,556
------------ ------------
Business/Public Service 2.36%
20,000 Infosys Technology ............................... 1,070,596 1,144,004
80,000 NIIT ............................................. 579,105 2,398,017
------------ ------------
1,649,701 3,542,021
------------ ------------
Chemicals 1.24%
53,184 Castrol India .................................... 949,885 778,425
418,700 Reliance Industries .............................. 1,856,676 1,084,310
------------ ------------
2,806,561 1,862,735
------------ ------------
Construction & Housing 0.17%
74,900 Larsen & Toubro .................................. 430,396 255,679
------------ ------------
Energy Sources 1.86%
140,000 Bharat Petroleum Corp. ........................... 1,201,225 843,107
310,000 Hindustan Petroleum .............................. 2,939,985 1,948,111
------------ ------------
4,141,210 2,791,218
------------ ------------
Health/Personal Care 3.99%
30,300 Dr Reddy's Laboratories .......................... 330,778 317,950
69,945 Glaxo India ...................................... 691,393 791,340
110,000 Hindustan Lever .................................. 3,479,928 4,162,653
60,000 Ranbaxy Labs ..................................... 1,063,381 707,153
------------ ------------
5,565,480 5,979,096
------------ ------------
Metals - Non-Ferrous 0.00%
600 Indian Aluminum .................................. 3,056 1,035
------------ ------------
</TABLE>
13
<PAGE>
THE ASIA TIGERS FUND, INC.
Schedule of Investments (continued) October 31, 1998
COMMON STOCKS (continued)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
India (continued)
Telecommunications 1.16%
400,000 Mahanagar Telephone Nigam ........................ $ 2,673,954 $ 1,728,045
------------ ------------
Textiles & Apparel 0.00%
4,590 Arvind Mills ..................................... 15,311 3,326
------------ ------------
Total India ...................................... 23,827,726 21,557,282
------------ ------------
Indonesia 0.26%
Energy Sources 0.13%
20,000 Gulf Indonesia Resources ADR+ .................... 459,485 197,500
------------ ------------
Food & Household Products 0.08%
260,000 Daya Guna Samudera ............................... 382,348 110,329
------------ ------------
Forest Products & Paper 0.05%
400,000 Astra Argo Lestari ............................... 95,188 80,263
------------ ------------
Total Indonesia .................................. 937,021 388,092
------------ ------------
Korea 7.23%
Appliance & Household Durables 1.51%
55,160 Samsung Electronics .............................. 1,956,347 2,257,400
------------ ------------
Metals - Steel 2.63%
70,000 Pohang Iron & Steel .............................. 3,394,625 3,938,488
------------ ------------
Telecommunications 2.08%
4,500 SK Telecom ....................................... 2,243,010 3,123,263
------------ ------------
Utilities - Electric & Gas 1.01%
85,000 Korea Electric Power ............................. 1,054,763 1,513,831
------------ ------------
Total Korea ...................................... 8,648,745 10,832,982
------------ ------------
Malaysia 1.46%
Beverages & Tobacco 0.32%
200,000 Rothmans of Pall Mall* ........................... 1,578,034 476,316
------------ ------------
Construction & Housing 0.16%
734,000 YTL Power International*+ ........................ 445,411 243,379
------------ ------------
</TABLE>
14
<PAGE>
THE ASIA TIGERS FUND, INC.
Schedule of Investments (continued) October 31, 1998
COMMON STOCKS (continued)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Malaysia (continued)
Transportation - Shipping 0.26%
700,000 Malaysia International Shipping* ................. $ 1,218,484 $ 383,158
------------ ------------
Utilities - Electric & Gas 0.72%
1,200,000 Petronas Gas* .................................... 3,109,541 1,081,579
------------ ------------
Total Malaysia ................................... 6,351,470 2,184,432
------------ ------------
Pakistan 0.13%
Energy Sources 0.13%
200,000 Pakistan State Oil ............................... 899,530 197,216
------------ ------------
Total Pakistan ................................... 899,530 197,216
------------ ------------
Philippines 1.86%
Beverages & Tobacco 0.25%
250,000 San Miguel-B ..................................... 511,002 368,649
------------ ------------
Real Estate 0.89%
2,000,000 Ayala Land ....................................... 775,028 607,187
4,350,000 SM Prime ......................................... 830,836 733,086
------------ ------------
1,605,864 1,340,273
------------ ------------
Telecommunications 0.33%
20,000 Philippine Long Distance Telephone ADR ........... 490,119 487,500
------------ ------------
Utilities - Electric & Gas 0.39%
200,000 Manila Electric Company .......................... 530,989 589,839
------------ ------------
Total Philippines ................................ 3,137,974 2,786,261
------------ ------------
Singapore 8.53%
Banking 2.16%
300,000 Development Bank of Singapore .................... 1,332,783 1,880,184
309,224 Overseas Chinese Bank Corporation ................ 1,346,925 1,348,996
------------ ------------
2,679,708 3,229,180
------------ ------------
Broadcasting/Publishing 0.96%
166,248 Singapore Press Holdings ......................... 2,059,510 1,440,305
------------ ------------
</TABLE>
15
<PAGE>
THE ASIA TIGERS FUND, INC.
Schedule of Investments (continued) October 31, 1998
COMMON STOCKS (continued)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Singapore (continued)
Electronic Components & Instruments 1.32%
400,000 Natsteel Electronics .............................. $ 698,198 $ 820,891
350,000 Venture Manufacturing ............................. 902,644 1,161,290
------------ ------------
1,600,842 1,982,181
------------ ------------
Machinery & Engineering 1.25%
1,900,000 Singapore Technologies Engineering ................ 1,494,143 1,867,896
------------ ------------
Real Estate 1.57%
650,000 City Developments ................................. 2,482,999 2,356,375
------------ ------------
Transportation - Air 1.27%
310,000 Singapore Airlines ................................ 2,724,906 1,904,762
------------ ------------
Total Singapore ................................... 13,042,108 12,780,699
------------ ------------
Sri Lanka 0.19%
Multi-Industry 0.19%
100,000 John Keells Holdings .............................. 341,238 283,265
------------ ------------
Total Sri Lanka ................................... 341,238 283,265
------------ ------------
Taiwan 13.91%
Banking 0.15%
328,368 China Trust Commercial Bank+ ...................... 266,722 228,870
------------ ------------
Building Materials & Components 0.87%
1,450,000 Asia Cement ....................................... 1,279,814 1,310,254
------------ ------------
Construction & Housing 1.72%
1,537,500 CTCI Corporation+ ................................. 2,286,507 2,584,233
------------ ------------
Electrical & Electronics 2.69%
555,800 Hon Hai Precision Industry+ ....................... 2,387,398 2,674,011
850,000 Siliconware Precision Industries Company+ ......... 1,265,811 1,363,146
------------ ------------
3,653,209 4,037,157
------------ ------------
Electronic Components & Instruments 1.87%
440,000 Compeq Manufacturing Company Ltd.+ ................ 2,681,377 2,795,374
------------ ------------
</TABLE>
16
<PAGE>
THE ASIA TIGERS FUND, INC.
Schedule of Investments (continued) October 31, 1998
COMMON STOCKS (continued)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Taiwan (continued)
Insurance 2.59%
1,100,000 Cathay Life Insurance ............................ $ 4,221,592 $ 3,884,348
------------ ------------
Metals - Steel 0.59%
1,300,000 China Steel ...................................... 768,658 882,035
------------ ------------
Retail - Merchandising 2.59%
1,215,200 President Chain Store Corporation ................ 3,160,123 3,878,896
------------ ------------
Textiles & Apparel 0.84%
1,800,000 Far Eastern Textile .............................. 1,218,422 1,254,588
------------ ------------
Total Taiwan ..................................... 19,536,424 20,855,755
------------ ------------
Thailand 4.78%
Building Materials & Components 0.75%
90,000 Siam Cement ...................................... 1,993,745 1,126,684
------------ ------------
Construction & Housing 0.52%
1,000,000 Bangkok Expressway+ .............................. 880,101 789,223
------------ ------------
Electronic Components & Instruments 0.42%
110,000 Delta Electronics ................................ 723,046 628,657
------------ ------------
Energy Sources 1.03%
160,000 PTT Exploration & Production ..................... 1,703,673 1,541,434
------------ ------------
Telecommunications 1.18%
240,000 Advanced Information ............................. 1,262,353 1,763,505
------------ ------------
Utilities - Electric & Gas 0.88%
500,000 Electricity Generating ........................... 841,256 1,319,908
------------ ------------
Total Thailand ................................... 7,404,174 7,169,411
------------ ------------
TOTAL COMMON STOCKS .............................. $129,497,125 $124,141,773
------------ ------------
</TABLE>
17
<PAGE>
THE ASIA TIGERS FUND, INC.
Schedule of Investments (continued) October 31, 1998
CONVERTIBLE (6.83% of holdings)
<TABLE>
<CAPTION>
Par Value Percent of
($000) Security Holdings Cost Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hong Kong 0.21%
Financial 0.21%
400 Shanghai Industrial 1.00%, 02/24/03 .............. $259,301 $ 308,680
------------ ------------
Total Hong Kong .................................. 259,301 308,680
------------ ------------
Pakistan 0.52%
Telecommunications 0.52%
1,750 Republic of Pakistan 6.00%, 02/26/02 ............. 1,452,835 784,000
------------ ------------
Total Pakistan ................................... 1,452,835 784,000
------------ ------------
Singapore 3.13%
Telecommunications 3.13%
5,000 Fullerton Global Corp Zero Coupon
Bond, 04/02/03 ................................. 4,621,713 4,692,000
------------ ------------
Total Singapore .................................. 4,621,713 4,692,000
------------ ------------
Taiwan 2.97%
Chemicals 2.03%
2,750 Nan Ya Plastics 1.75%, 07/19/01 .................. 3,004,043 3,041,775
------------ ------------
Electrical & Electronics 0.94%
1,250 Taiwan Semiconductor Zero Coupon
Bond, 07/03/02 ................................. 1,371,187 1,410,500
------------ ------------
Total Taiwan ..................................... 4,375,230 4,452,275
------------ ------------
TOTAL CONVERTIBLE BONDS .......................... $ 10,709,079 $ 10,236,955
------------ ------------
</TABLE>
18
<PAGE>
THE ASIA TIGERS FUND, INC.
Schedule of Investments (concluded) October 31, 1998
SHORT-TERM OBLIGATIONS (10.36% of holdings)
<TABLE>
<CAPTION>
Par Value Percent of
($000) Security Holdings Cost Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Time Deposits 5.10%
Malaysia 0.30%
MYR 3,395 Malaysia Time Deposit 5.00%, 01/14/99* ............. $ 446,749 $ 446,749
------------ ------------
Total Malaysia ..................................... 446,749 446,749
------------ ------------
United States 4.80%
$7,200 Chase Manhattan Bank London Time
Deposit 5.7625%, 11/2/98 ......................... 7,200,000 7,200,000
------------ ------------
Total United States ................................ 7,200,000 7,200,000
------------ ------------
TOTAL TIME DEPOSITS ................................ 7,646,749 7,646,749
------------ ------------
United States Treasury Bills 5.26%
6,000 U.S. Treasury Bill, 02/04/99 ....................... 5,924,000 5,930,402
2,000 U.S. Treasury Bill, 04/29/99 ....................... 1,954,500 1,957,717
------------ ------------
7,878,500 7,888,119
------------ ------------
Total United States Treasury Bills ................. 7,878,500 7,888,119
------------ ------------
TOTAL SHORT-TERM OBLIGATIONS ....................... 15,525,249 15,534,868
------------ ------------
TOTAL INVESTMENTS++ 100.00% $155,731,453 $149,913,596
============ ============
</TABLE>
<TABLE>
<CAPTION>
Footnotes and Abbreviations
ADR - American Depository Receipts
MYR - Malaysian Ringgit
* Deemed to be an illiquid security and has been fair valued as
determined by or under the direction of the Board of Directors.
+ Non-income producing security
++ Aggregate cost for Federal income tax purposes is $157,378,634.
The aggregate gross unrealized appreciation (depreciation) for
all securities is as follows:
<S> <C>
Excess of value over tax cost $ 10,537,650
Excess of tax cost over value $(18,002,688)
------------
$ (7,465,038)
============
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
THE ASIA TIGERS FUND, INC.
Statement of Assets and Liabilities October 31, 1998
ASSETS
Investments, at value (Cost $155,731,453) ..................... $ 149,913,596
Cash (including $3,545,597 of foreign currency
holdings with a cost of $3,545,143) ...................... 4,438,668
Receivables:
Dividends ................................................ 219,360
Interest ................................................. 44,712
Securities sold .......................................... 640,420
Unamortized organization costs ................................ 1,933
Prepaid expenses .............................................. 93,829
-------------
Total Assets .............................. 155,352,518
-------------
LIABILITIES
Payable for securities purchased .............................. 25,274
Due to Investment Manager ..................................... 122,262
Due to Administrator .......................................... 24,453
Accrued expenses .............................................. 234,816
-------------
Total Liabilities ......................... 406,805
-------------
Net Assets ................................ $ 154,945,713
=============
NET ASSET VALUE PER SHARE
($154,945,713/20,514,984) ............... $ 7.55
=============
NET ASSETS CONSIST OF:
Capital stock, $0.001 par value; 20,514,984 shares issued
and outstanding (100,000,000 shares authorized) .......... $ 20,515
Paid-in capital ............................................... 285,743,977
Undistributed net investment income ........................... 102,684
Accumulated net realized loss on investments .................. (125,099,413)
Net unrealized depreciation in value of investments and on
translation of other assets and liabilities denominated
in foreign currencies .................................... (5,822,050)
-------------
$ 154,945,713
=============
See accompanying notes to financial statements.
20
<PAGE>
THE ASIA TIGERS FUND, INC.
Statement of Operations For the Year Ended
October 31, 1998
Investment Income
Dividends (Net of taxes withheld of $97,827) . $ 3,333,030
Interest 1,211,926
------------
Total Investment Income .. 4,544,956
------------
Expenses
Management fees .............................. $1,659,429
Custodian fees ............................... 378,302
Administration fees .......................... 331,886
Legal fees ................................... 168,999
Insurance .................................... 101,195
Transfer agent fees .......................... 69,372
Audit fees ................................... 63,680
NYSE fees .................................... 32,339
Directors' fees .............................. 25,800
Amortization of organizational costs ......... 24,330
Interest Expense ............................. 15,580
Printing ..................................... 15,000
Miscellaneous ................................ 8,101
----------
Total Expenses ........... 2,894,013
------------
Net Investment Income .... 1,650,943
------------
Net Realized and Unrealized Gain (Loss) On Investments,
Foreign Currency Holdings and Translation of Other Assets
and Liabilities Denominated In Foreign Currencies:
Net realized loss from:
Security transactions .................... (92,278,515)
Foreign currency related transactions .... (1,548,259)
------------
(93,826,774)
Net change in unrealized appreciation in value of investments,
foreign currency holdings and translation of other assets
and liabilities denominated in foreign currencies ........ 48,532,628
------------
Net realized and unrealized loss on investments, foreign
currency holdings and translation of other assets and
liabilities denominated in foreign currencies ............ (45,294,146)
------------
Net decrease in net assets resulting from operations ......... $(43,643,203)
============
See accompanying notes to financial statements.
21
<PAGE>
THE ASIA TIGERS FUND, INC.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year For the Year
Ended Ended
October 31, 1998 October 31, 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income .................................................. $ 1,650,943 $ 678,838
Net realized gain (loss) on investments and foreign currency
related transactions ............................................. (93,826,774) 3,256,686
Net change in unrealized appreciation (depreciation) in value of
investments, foreign currency holdings and translation of other
assets and liabilities denominated in foreign currencies ......... 48,532,628 (60,720,179)
------------ ------------
Net decrease in net assets resulting from operations ................... (43,643,203) (56,784,655)
------------ ------------
Distributions to shareholders from
Net investment income ($0.00 per share) ................................ -- (53,053)
In excess of net investment income ($0.04 per share) ................... -- (767,547)
------------ ------------
Net decrease in net assets from distributions .......................... -- (820,600)
------------ ------------
Total decrease in net assets (43,643,203) (57,605,255)
------------ ------------
NET ASSETS
Beginning of year 198,588,916 256,194,171
------------ ------------
End of year (including undistributed net investment income of
$102,684 as of October 31, 1998) $154,945,713 $198,588,916
============ ============
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
THE ASIA TIGERS FUND, INC.
Financial Highlights
For a Share Outstanding throughout Each Period
<TABLE>
<CAPTION>
For the Period
November 29, 1993
(Commencement
For the Year For the Year For the Year For the Year of Operations)
Ended Ended Ended Ended Through
October 31,1998 October 31,1997 October 31, 1996 October 31, 1995 October 31, 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period ... $ 9.68 $ 12.49 $ 12.08 $ 13.89 $ 13.97*
-------- -------- -------- -------- --------
Net investment income .................. 0.08 0.03 0.05 0.09 0.05
Net realized and unrealized gains
(losses) on investments, foreign
currency holdings, and translation
of other assets and liabilities
denominated in foreign currencies .... (2.21) (2.80) 0.44 (1.67) (0.11)
-------- -------- -------- -------- --------
Net increase (decrease) from
investment operations ................ (2.13) (2.77) 0.49 (1.58) (0.06)
-------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment income . -- (0.00)+ (0.08) (0.06) (0.02)
In excess of net investment income ... -- (0.04) -- -- --
Distributions from net realized gains -- -- -- (0.17) --
-------- -------- -------- -------- --------
Total dividends and distributions ...... 0.00 (0.04) (0.08) (0.23) (0.02)
-------- -------- -------- -------- --------
Net asset value, end of period ......... $ 7.55 $ 9.68 $ 12.49 $ 12.08 $ 13.89
======== ======== ======== ======== ========
Per share market value, end of period .. $ 6.13 $ 7.94 $ 10.38 $ 10.38 $ 12.38
Total Investment Return Based
on Market Value** .................... (22.83)% (23.23)% 0.59% (14.17)% (11.65)%
Ratios/Supplemental Data
Net assets, end of period (in 000s) .... $154,946 $198,589 $256,194 $247,761 $284,910
Ratios of expenses to average net assets 1.74% 1.60% 1.60% 1.65% 1.60%***
Ratios of net investment income to
average net assets ................... 0.99% 0.25% 0.41% 0.71% 0.38%***
Portfolio turnover ..................... 93.47% 95.38% 91.57% 77.88% 45.51%
</TABLE>
See page 24 for footnotes.
23
<PAGE>
THE ASIA TIGERS FUND, INC.
Financial Highlights (concluded)
For a Share Outstanding throughout Each Period
* Initial public offering price $15.00 per share less underwriting discount
of $0.98 per share and offering costs of $0.05 per share.
** 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, except that for the
period ended October 31, 1994, total investment return is based on a
beginning of period price of $14.02 (initial offering price of $15.00 less
underwriting discount of $0.98). 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 and is not
annualized.
*** Annualized
+ Less than $0.01 per share.
See accompanying notes to financial statements.
24
<PAGE>
THE ASIA TIGERS FUND, INC.
Notes to Financial Statements October 31, 1998
NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Asia Tigers Fund, Inc. (the "Fund") was incorporated in Maryland on
September 23, 1993 and commenced operations on November 29, 1993. The Fund is
registered under the Investment Company Act of 1940, as amended, as a
closed-end, non-diversified management investment company. Prior to commencing
its operations on November 29, 1993, the Fund had no activities other than the
sale of 3,567 shares of common stock to CIBC Oppenheimer Corp. ("CIBC
Oppenheimer"), formerly known as Oppenheimer & Co., Inc., and 3,567 shares of
capital stock to Barclays Global Investors International, Inc. ("BGI"), the
Fund's former Investment Adviser. At October 31, 1998, CIBC Oppenheimer owned
3,567 shares of the Fund's common stock.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
Significant accounting policies are as follows:
Portfolio Valuation. Investments are stated at value in the accompanying
financial statements. In valuing the Fund's assets, all securities for which
market quotations are readily available are generally valued:
(i) at the last sale price prior to the time of determination if there
was a sale on the date of determination,
(ii) at the mean between the last current bid and asked prices if there
was no sales price on such date and bid and asked quotations are
available, and
(iii) at the bid price if there was no sales price on such date and only
bid quotations are available.
Securities for which sales prices and bid and asked quotations are not available
on the date of determination may be valued at the most recently available prices
or quotations under policies adopted by the Board of Directors. Investments in
short-term debt securities having a maturity of 60 days or less are valued at
amortized cost which approximates market value. All other securities and assets
are carried at fair value as determined in good faith by, or under the direction
of, the Board of Directors.
On September 1, 1998, the Central Bank of Malaysia announced measures that
significantly restrict the rights of non-residents with respect to transactions
in Malaysian securities with the intention to insulate Malaysia from the
problems confronting the international financial markets. Beginning September 1,
1998 the Malaysian government fixed the exchange rate of its currency, the
Ringgit, at 3.80 Ringgit equal to US$1.00 and adopted stringent controls over
currency and stock trading
25
<PAGE>
THE ASIA TIGERS FUND, INC.
Notes to Financial Statements (continued) October 31, 1998
which had the effect of forcing all offshore holdings of Malaysian currency and
securities back into the country. In addition, the government suspended foreign
investors' ability to convert proceeds from the sale of Malaysian securities
into foreign currency for one year from the date of initial purchase, with
repatriation of the proceeds from the sale of all securities held at September
1, 1998 prohibited for one year. As a result of the imposition of the above
restrictions over currency and stock trading, the Fund's Board of Directors have
deemed all holdings of the Fund in Malaysian securities and currency as illiquid
and have fair valued holdings in such investments using an exchange rate of 7.60
Ringgit equal to US$1.00. At October 31, 1998, investments in Malaysia
aggregating $2,631,181 (1.7% of net assets) have been fair valued in good faith
by, or under the direction of, the Fund's Board of Directors.
The net asset value per share of the Fund is calculated weekly and at the end of
each month.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex-dividend date or when known. The collectibility of
income receivable from foreign securities is evaluated periodically, and any
resulting allowances for uncollectible amounts are reflected currently in the
determination of investment income.
Tax Status. No provision is made for U.S. Federal income or excise taxes as it
is the Fund's intention to continue to qualify as a regulated investment company
and to make the requisite distributions to its shareholders which will be
sufficient to relieve it from all or substantially all Federal income and excise
taxes.
At October 31, 1998, the Fund had a net capital loss carryover of $123,452,232,
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, $30,672,532 will expire in the year 2003, $1,846,888
will expire in the year 2004 and $90,932,812 will expire in the year 2006.
Dividend and interest income from non-U.S. sources received by the Fund are
generally subject to non-U.S. withholding taxes. Such withholding taxes may be
reduced or eliminated under the terms of applicable U.S. income tax treaties.
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) market value of investment securities, assets and liabilities at the
current rates of exchange on the valuation date; and
26
<PAGE>
THE ASIA TIGERS FUND, INC.
Notes to Financial Statements (continued) October 31, 1998
(ii) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
The Fund does not generally isolate the effect of fluctuations in foreign
currency rates from the effect of fluctuations in the market prices of equity
securities. The Fund reports certain realized gains and losses on foreign
currency related transactions as components of realized gains and losses for
financial reporting purposes, whereas such gains and losses are included in or
are a reduction of ordinary income for Federal income tax purposes.
Securities denominated in currencies other than U.S. dollars are subject to
changes in value due to fluctuations in foreign exchange. Foreign security and
currency transactions involve certain considerations and risks not typically
associated with those of domestic origin as a result of, among other factors,
the level of governmental supervision and regulation of foreign securities
markets and the possibilities of political or economic instability, the fact
that foreign securities markets may be smaller and less developed, and the fact
that securities, tax and corporate laws may have only recently developed or are
in developing stages, and laws may not exist to cover all contingencies or to
protect investors adequately.
Distribution of Income and Gains. The Fund intends to distribute annually to
shareholders substantially all of its net investment income, including foreign
currency gains, and to distribute annually any net realized capital gains in
excess of net realized capital losses (including any capital loss carryovers).
An additional distribution may be made to the extent necessary to avoid payment
of a 4% federal excise tax.
Distributions to shareholders are recorded on the ex-dividend date. The amount
of dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax regulations,
which may differ from generally accepted accounting principles. These book/tax
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
During the year ended October 31, 1998, the Fund reclassified $1,548,259 from
accumulated net realized loss on investments to undistributed net investment
income as a result of permanent book and tax differences primarily relating to
foreign currency losses. Net investment income and net assets were not affected
by the change.
27
<PAGE>
THE ASIA TIGERS FUND, INC.
Notes to Financial Statements (continued) October 31, 1998
Other. Costs incurred by the Fund in connection with its organization are being
amortized on a straight line basis over a five-year period beginning with the
commencement of operations of the Fund.
NOTE B: MANAGEMENT, INVESTMENT ADVISORY, AND ADMINISTRATIVE SERVICES
On November 3, 1997, CIBC Wood Gundy Securities Corp., the broker-dealer
subsidiary of Canadian Imperial Bank of Commerce, acquired all of the stock of
Oppenheimer Holdings, the indirect parent of Advantage Advisers, Inc., the
Fund's Investment Manager. In connection with the acquisition, CIBC Wood Gundy
Securities Corp. was merged into Oppenheimer & Co., Inc., whose name was changed
to CIBC Oppenheimer Corp.
Advantage Advisers, Inc., a subsidiary of CIBC Oppenheimer, serves as the Fund's
Investment Manager under the terms of a management agreement (the "Management
Agreement"). Pursuant to the Management Agreement, the Investment Manager
supervises the Fund's investment program, including advising and consulting with
the Fund's Investment Adviser. AXA Asset Management Partenaires ("AAMP") has
served as the Investment Adviser to the Fund since June 8, 1998 pursuant to an
investment advisory agreement among Advantage, AAMP and the Fund (the "New
Advisory Agreement"). The New Advisory Agreement was approved by the Fund's
Board of Directors in connection with an agreement entered into between AXA
Investment Managers SA ("AXA") and Barclays Bank plc, providing for AXA to
acquire (the "Transaction") Barclays Global Investors International Hong Kong
Limited ("BGIHK"). The Transaction closed on June 8, 1998.
While the Transaction did not directly involve Barclays Global Investors
International Inc. ("BGI"), which had served as the Fund's Investment Adviser
since the Fund's inception, BGI provided investment advice to the Fund through
the services of BGIHK's investment advisory personnel. Upon consummation of the
Transaction, all of BGIHK's investment advisory personnel involved in the
management of the Fund became associated with AXA and AAMP. The New Advisory
Agreement was approved at a Special Meeting of the Fund which was held on August
7, 1998. Pursuant to the New Advisory Agreement, AAMP is responsible for (and
BGI was previously responsible for) investing the Fund's portfolio in accordance
with its investment objective and policies.
For its services, the Investment Manager receives monthly fees at an annual rate
of 1.00% of the Fund's average weekly net assets and the Investment Adviser is
entitled to receive from the Investment Manager monthly fees at an annual rate
of 0.50% of the Fund's average weekly net assets. For the year ended October 31,
1998, fees paid to the Investment Manager amounted to $1,659,429, of which the
Investment Manager informed the Fund it paid $829,714 to the Investment Adviser.
CIBC Oppenheimer serves as the Fund's administrator (the "Administrator"). The
Administrator provides certain administrative services to the Fund. For its
services, the Administrator receives a
28
<PAGE>
THE ASIA TIGERS FUND, INC.
Notes to Financial Statements (concluded) October 31, 1998
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, 1998, these fees amounted to
$331,886.
The Fund pays each of its directors who is not a director, officer or employee
of the Investment Manager, the Investment Adviser, 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 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
$135,582,487 and $138,170,229, respectively, for the year ended October 31,
1998.
NOTE D: OTHER
At October 31, 1998, 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.
Additionally, the Fund owned securities of certain companies in India valued at
approximately $1,613,284 which were in the process of being registered in the
name of the Fund. Significant delays are common in registering the transfer of
securities in this country, and such transfers can take a year or longer.
Securities regulations in India normally preclude the Fund from selling such
securities until the completion of the registration process.
- --------------------------------------------------------------------------------
US Federal Taxation Notice (unaudited)
The Fund paid foreign taxes of $97,827 during the fiscal year ended October 31,
1998, which it intends to pass through pursuant to Section 853 of the Internal
Revenue Code, to its shareholders, which is deemed to be foreign source income
for tax information reporting purposes.
- --------------------------------------------------------------------------------
29
<PAGE>
THE ASIA TIGERS FUND, INC.
Report of Independent Accountants
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, 1998, 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 four years in the period
then ended and for the period November 29, 1993 (commencement of operations)
through October 31, 1994, in conformity with generally accepted accounting
principles. 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 generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
December 8, 1998
30
<PAGE>
THE ASIA TIGERS FUND, INC.
Results of Special Meeting
The Fund held a Special Meeting of Stockholders on August 7, 1998, at which a
new Investment Advisory Agreement among Advantage Advisers, Inc., AXA Asset
Management Partenaires and the Fund was approved. Certain amendments to the
existing Management Agreement between Advantage Advisers, Inc. and the Fund were
also approved. The following table provides information concerning the matters
voted on at the meeting:
I. Approval of a new Investment Advisory Agreement
Votes For Votes Against Votes Abstained
11,133,990 843,705 251,295
II. Approval of amendments to the Management Agreement
Votes For Votes Against Votes Abstained
9,136,091 794,399 2,298,500
31
<PAGE>
THE ASIA TIGERS FUND, INC.
Dividends and Distributions
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The Fund intends to distribute annually to shareholders substantially all of its
net investment income, and to distribute any net realized capital gains at least
annually. Net investment income for this purpose is income other than net
realized long- and short-term capital gains net of expenses.
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
shareholders whose shares of Common Stock are registered in their own names will
be deemed to have elected to have all distributions automatically reinvested by
the Plan Agent in 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
32
<PAGE>
THE ASIA TIGERS FUND, INC.
Dividends and Distributions (continued)
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 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.
33
<PAGE>
THE ASIA TIGERS FUND, INC.
Dividends and Distributions (concluded)
Experience under the Plan may indicate that changes in the Plan are desirable.
Accordingly, the Fund and the Plan Agent reserve the right to terminate the Plan
as applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to notice of the termination sent to members of the Plan at
least 30 days before the record date for such dividend or distribution. The Plan
also may be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by at least 30 days' written notice to participants in the Plan.
All correspondence concerning the Plan should be directed to the Plan Agent at
400 Bellevue Parkway, Wilmington, Delaware, 19809.
34
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<PAGE>
THE ASIA TIGERS FUND, INC.
Investment Manager:
Advantage Advisers, Inc., a wholly owned
subsidiary of CIBC Oppenheimer Corp.
Investment Adviser:
AXA Asset Management Partenaires
(formerly Barclays Global Investors
International Inc.)
Administrator:
CIBC Oppenheimer Corp.
Sub-Administrator:
PFPC Inc.
Transfer Agent:
PNC Bank, National Association
Custodian:
The Chase Manhattan Bank
