Schroder
Asian Growth Fund, Inc.
[PHOTO] [PHOTO]
[PHOTO]
Third Quarter
[PHOTO] Report
July 31, 1996
[PHOTO]
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SCHRODER ASIAN GROWTH FUND, INC.
THIRD QUARTER 1996
Dear Shareholder,
The Fund's net asset value per share was $13.51 on July 31, 1996, a fall of
7.0% over the quarter, and the closing price of the Fund's shares on the New
York Stock Exchange was $12.125, a fall of 7.6% over the quarter. On that date,
the discount between net asset value and market price was 10.25%. Over the
period, Asian markets were weak. The emerging markets of Korea, Thailand and
Indonesia were the worst performers, down 24.8%, 17.9% and 16.2% (in U.S.
currency terms) respectively. The only exception was the Philippines, which rose
4.6% (in U.S. currency terms).
The Fund continues its investment strategy of maintaining a core portfolio
of equity securities in Asian companies that the Investment Adviser believes are
well managed, fast growing, of high quality and likely to benefit from long-term
growth trends in each country and in the region as a whole.
After a strong performance in the six months ending April 30, 1996, Asian
markets fell this quarter as fears of rising U.S. interest rates acted as a
catalyst for profit taking across the board. Country weightings changed little
throughout the quarter, with the Fund still maintaining it's high positions in
Japan, 19.4%, and Hong Kong/China, 20.2%.
Economic news from China continues to improve as exhibited by slower second
quarter GDP growth (9.4%) and inflation figures (8.5%). The corporate earnings
of Chinese companies are expected to accelerate into 1997 and the Fund continues
to seek its exposure to China mainly through Hong Kong listed stocks such as
Citic Pacific, a diversified Chinese conglomerate, and China Resources, a
property company with exposure to the Beijing market.
Over the quarter, Japan was dominated by concerns that the pace of economic
recovery could prompt a rise in interest rates after a strong first calendar
quarter GDP growth figure (5.5%). This, combined with the expected public
offerings from the banking sector in an effort to recapitalize after a record
level of loan write-offs in 1995, could dampen the market's recovery. The Yen
continued to weaken against the U.S. dollar during the last quarter, falling a
further 1.7%. The Yen/Dollar rate on July 31 was (Y)106.85. The Yen hedge of
10.4% was closed on June 7 at a rate of (Y)108.535, yielding a profit.
The Fund continues its commitment to the emerging markets. Of the 35% the
Fund has invested in these markets, 10% is in India. Indian corporate earnings
are robust and the tight liquidity situation has been easing. The Fund's largest
Indian holding, Mahanger Telephone, the local telephone operator for the Bombay
and Delhi areas, recently reported 1996 full-year net profit of +26%. In
Thailand however, profits growth has been weaker than expected as the corporate
sector has felt the squeeze from high interest rates. This has pushed the
earnings recovery into 1997 and had a negative effect on the stock market. The
political background in Indonesia has deteriorated with the ill-health of
President Suharto raising questions over succession. The market reflected this
recent turmoil and is likely to remain volatile until the elections next year.
The Philippines has been relatively resilient over the quarter as company
profits growth is robust, reflecting the underlying strength of the economy.
Corporate earnings growth for the first six months of 1996 was 33% for the
market.
The Fund management team, consisting of Laura E. Luckyn-Malone who directs
the Fund's investments in New York, assisted by Heather F. Crighton in London,
works closely with the Schroder Investment Management Group analysts based in
ten offices throughout Asia. The focus of the Fund remains on bottom-up stock
picking which drives country allocation.
We thank you for your continued interest in the Fund. Please do not
hesitate to call us at (800) 730-2932 or (212) 641-3884 if you have any
questions.
/s/ Laura E. Luckyn-Malone
President
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PERFORMANCE
NET ASSET VALUE VS. SHARE PRICE FROM
INCEPTION TO JULY 26, 1996
GRAPH
COUNTRY RETURNS
IN U.S. DOLLARS (1)
Quarter(2)
JAPAN -8.9%
SINGAPORE -15.3
INDIA -9.1
KOREA -24.8
PHILIPPINES 4.6
THAILAND -17.9
MALAYSIA -9.5
INDONESIA -16.2
HONG KONG -4.0
(1) Morgan Stanley Capital International Country Indicies
(2) May 1, 1996 to July 31, 1996
TEN LARGEST HOLDINGS
As of July 31, 1996 % Net Assets
1. CITIC PACIFIC - Hong Kong 3.5%
conglomerate
2. AYALA LAND, INC. - Philippine real estate 2.9%
and land developement company
3. SUN HUNG KAI PROPERTIES LTD.- 2.9%
Hong Kong property developer
4. GLORY LTD. - Japanese change 2.7%
handling machine manufacturer
5. HUANENG POWER INTERNATIONAL, LTD. - 2.5%
Chinese power plant operator
6. HUTCHISON WHAMPOA - Hong Kong port 2.4%
operator and conglomerate
7. MABUCHI MOTORS CO., LTD. - Japanese 2.4%
micro motor manufacturer
8. MAHANGER TELEPHONE NIGAM LTD. - Indian 2.3%
telecommunications company
9. KOREA MOBILE TELECOMMUNICATIONS CORP. - 2.2%
Korean telecommunications services
10. ISLAND & PENINSULAR BERHAD - Malaysian 2.2%
property developer
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DIVERSIFICATION
SECTOR BREAKDOWN
TOP 5 AS OF JULY 31, 1996
INDUSTRY % OF PORTFOLIO
Services 20.6%
Real Estate 18.4%
Finance 15.2%
Capital Equipment 12.6%
Consumer Goods 12.3%
GEOGRAPHICAL BREAKDOWN
AS OF JULY 31, 1996
HONG KONG/CHINA 20.2%
JAPAN 19.4%
MALAYSIA 12.3%
INDIA 10.2%
SINGAPORE 8.9%
PHILIPPINES 7.2%
THAILAND 7.0%
KOREA 6.1%
INDONESIA 4.9%
CASH 3.8%
NYSE Symbol: SHF
The financial information included herein regarding the Fund is taken from the
records of the Fund without examination by independent accountants who do not
express an opinion thereon. Other information is from public sources or Schroder
estimates.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its common stock in the open market.
This report is sent to the shareholders of the Fund for their information. It is
not a prospectus, circular or representation intended for use in the purchase or
sale of shares of the Fund or of any securities mentioned in the report.
