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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Schroder Asian Growth Fund, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:___________________________________________
2) Form, Schedule or Registration Statement No.:_____________________
3) Filing Party:_____________________________________________________
4) Date Filed:_______________________________________________________
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July 25, 1997
Dear Fellow Stockholder:
The enclosed proxy statement requests your vote to convert the Fund from a
closed-end to an open-end investment company (the "Conversion"). YOUR BOARD
OF DIRECTORS STRONGLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE CONVERSION
PROPOSAL, I.E., PROPOSAL NO. 1. Converting to an open-end structure will
eliminate the discount between market price and net asset value of the Fund's
shares.
The key features of the Conversion are:
- Stockholders will be able to buy and sell their shares at cost based
on net asset value. Post-Conversion purchases may be subject to a
front-end sales charge when purchased through a broker. For the
benefit of remaining stockholders, redemptions during the first six
months after Conversion will be subject to a 2.00% redemption fee to
be retained by the Fund to help stabilize assets and to offset
portfolio transaction costs.
- There will be no change in the Fund's investment objective and
strategies. Schroder Capital Management International Inc. ("SCMI")
will continue to be the investment adviser for the Fund's investment
portfolio.
- To give the Fund the potential to benefit from economies of scale, the
Fund will operate in a Core-and-Gateway -Registered Trademark-
structure by investing all of its assets in two investment companies
which together have the same investment objective as the Fund. The
proxy statement describes this structure in detail.
- There will be no increase in the aggregate management fee rates
payable to SCMI. The total expenses are expected to be comparable to
those of other open-end funds similar to the Fund. The total expense
ratio will increase as a result of the higher costs of operating an
open-end fund, such as the costs of daily pricing, off-exchange
transaction processing and shareholder servicing.
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- Stockholders will have the opportunity to exchange among all funds in
the Schroder family of open-end funds. SCMI and its affiliate,
Schroder Capital Management Inc., currently manage eleven other
open-end funds, including a broad selection of U.S. and international
equity funds.
A favorable vote of two-thirds of the outstanding shares of the Fund is
required to approve the Conversion. A percentage this high can be difficult
to obtain. We encourage you to vote promptly. If you do not, you may receive
a phone call from Shareholder Communications Corporation, proxy solicitors
whom the Fund has engaged to gather stockholder votes. BY READING THE PROXY
STATEMENT AND VOTING NOW, YOU HELP THE FUND AVOID THE ADDED COSTS OF
PROLONGED SOLICITATION AND POSSIBLE ADJOURNMENT. See the proxy statement for
complete instructions on how to vote.
In the event the Conversion is not approved by the requisite percentage of
votes, your Directors recommend that you vote IN FAVOR of Proposal No. 2, a
proposal to eliminate the Fund's undertaking to attempt to reduce the
discount by means of annual tender offers. The cost to the Fund of the
Fund's 1997 tender offer was $337,800 in additional Fund expenses and did not
appear to have any enduring effect on the discount. The Board recommends
Proposal No. 2 because it believes that tender offers impose costs and
burdens that are not justified by their limited impact on the discount for
the duration of the tender.
SCMI believes that the economic growth outlook for Asia remains very positive
based on increasing industrialization in the region, which supports rising
disposable income, strong consumer demand and positive corporate
expectations. We believe that Schroder Asian Growth Fund can continue to play
an important part in your global investment portfolio.
Thank you for your continued interest in the Fund.
I. Peter Sedgwick
Chairman
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PRELIMINARY PROXY MATERIALS
SCHRODER ASIAN GROWTH FUND, INC.
787 Seventh Avenue
New York, New York 10019
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
SEPTEMBER 17, 1997
TO THE STOCKHOLDERS OF
SCHRODER ASIAN GROWTH FUND, INC.:
Notice is hereby given that a Special Meeting of Stockholders of Schroder
Asian Growth Fund, Inc. (the "Fund") will be held at the offices of the Fund,
787 Seventh Avenue, Third Floor Auditorium, New York, New York 10019 on
Wednesday, September 17, 1997, at 4:00 p.m. for the following purposes:
(1) To approve a proposal to convert the Fund from a closed-end
investment company to an open-end investment company (the
"Conversion"). Approval of this Proposal No. 1 includes approval of
each of the following:
(a) Amending the fundamental policies of the Fund to enable the Fund
to participate in an open-end "Core and Gateway-Registered
Trademark- Fund Structure" described in more detail in the
accompanying Proxy Statement.
(b) Approving new investment advisory agreements with Schroder
Capital Management International Inc., the Fund's investment
adviser, to take effect upon the Conversion.
(c) Changing the Fund's subclassification under the Investment
Company Act of 1940 from a closed-end company to an open-end
company in order to effect the Conversion.
(d) Adopting an Agreement and Plan of Reorganization pursuant to
which the Fund would reorganize from a Maryland corporation into
a Delaware business trust.
THE BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
PROPOSAL NO. 1.
(2) If Proposal No. 1 is not approved and the Fund continues to operate
in a closed-end structure, to approve a proposal to eliminate the
undertaking made in the
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Fund's prospectus dated December 22, 1993 (the "Prospectus") that the
Fund must conduct annual tender offers for its shares under the terms
and conditions set forth in the Prospectus.
(3) To transact such other business as may properly come before the
Special Meeting and any adjournments thereof.
THE BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
EACH PROPOSAL.
The Board of Directors has fixed the close of business on July 18, 1997
as the record date (the "Record Date") for the determination of stockholders
entitled to notice of and to vote at the Special Meeting or any adjournment
thereof.
You are cordially invited to attend the Special Meeting of Stockholders.
Whether or not you expect to attend the Special Meeting in person, you are
requested to cast your vote. If we have not received your vote after a
reasonable period of time, you may receive a call from a representative of
Shareholder Communications Corporation (the "Proxy Solicitation Agent")
asking you to cast your vote over the phone or by facsimile. If you have any
questions or require another ballot, please contact them at 1-800-733-8481
extension 484.
The enclosed proxy is being solicited on behalf of the Board of Directors
of the Fund.
BY ORDER OF THE BOARD OF DIRECTORS
Margaret H. Douglas-Hamilton
Secretary
New York, New York
Dated: July __, 1997
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YOUR VOTE IS IMPORTANT.
Please indicate your voting instructions on the enclosed proxy card, sign
and return it as soon as possible using the envelope provided. If you have
any questions, please contact the Proxy Solicitation Agent, toll-free at
1-800-733-8481 extension 484. Your prompt response benefits all stockholders.
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PRELIMINARY PROXY STATEMENT
SCHRODER ASIAN GROWTH FUND, INC.
787 Seventh Avenue
New York, New York 10019
SPECIAL MEETING OF STOCKHOLDERS
SEPTEMBER 17, 1997
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Schroder Asian Growth Fund,
Inc. (the "Fund"), a Maryland corporation, to be voted at the Special Meeting
of Stockholders of the Fund (the "Special Meeting") to be held at 787 Seventh
Avenue, Third Floor Auditorium, New York, New York 10019, on Wednesday,
September 17, 1997, at 4:00 p.m. If you have any questions, please call
Shareholder Communications Corporation, the Fund's proxy solicitation agent
(the "Proxy Solicitation Agent"), toll-free at 1-800-733-8481 extension 484.
Only stockholders of record at the close of business on July 18, 1997
(the "Record Date") are entitled to notice of, and to vote at, the Special
Meeting. The Notice of Special Meeting, this Proxy Statement and the proxy
were mailed on or about [July 28], 1997 to stockholders of record on the
Record Date.
Stockholders are entitled to one vote for each full share of Common
Stock, par value $0.01 per share ("Common Stock"), of the Fund held as of the
Record Date, on each matter submitted to a vote at the Special Meeting, with
no shares having cumulative voting rights. As of the Record Date, the Fund
had outstanding 16,107,100 shares of Common Stock. [To the knowledge of the
management of the Fund, no person beneficially owned more than 5% of the
Fund's outstanding shares of Common Stock at such date.]
You may vote in person at the Special Meeting or return your signed proxy
card in the envelope provided. If we have not received your proxy as the
meeting date approaches, you may receive a call from the Proxy Solicitation
Agent reminding you to vote. If you have any questions or require assistance,
please contact them, toll-free, at 1-800-733-8481 extension 484.
<PAGE>
PROPOSAL NO. 1
CONVERSION OF THE FUND
TO AN OPEN-END INVESTMENT COMPANY
SUMMARY
GENERAL DESCRIPTION OF THE CONVERSION
Proposal No. 1 describes the proposed conversion of the Fund into an
open-end structure (the "Conversion"), permitting the Fund to invest its
assets in other investment companies or "portfolios" and eliminating the
Fund's market price discount. Proposal No. 1 authorizes the Fund to operate
as an open-end fund in the "Core and Gateway-Registered Trademark- Fund
Structure" which is already utilized by a family of open-end mutual funds
(the "Schroder family of funds") advised by Schroder Capital Management
International Inc., the Fund's investment adviser ("SCMI"). The Fund will be
a gateway fund investing its assets in two "Core Portfolios": The Asia
ex-Japan Portfolio would have as its initial assets Fund investments in Asian
countries other than Japan contributed to that Portfolio as of the date of
the Conversion, and the Japan Portfolio would have as its initial assets Fund
investments in Japan contributed to that Portfolio as of the date of the
Conversion. Thereafter, the Fund will replicate its current investment
objective by investing in these two Core Portfolios in proportions consistent
with the Fund's investment objective. If Proposal No. 1 is approved, the
Fund's investment objective and strategy will remain the same, and SCMI will
continue to be the Fund's investment adviser. In connection with the
Conversion, the Fund will enter into new investment advisory agreements with
SCMI.
The Fund is presently organized as a closed-end fund with shares listed
for trading on the New York Stock Exchange (the "NYSE"). The Fund does not
continuously purchase or redeem its shares. If the Fund converts to an
open-end structure, stockholders will be able to realize the value of their
shares by redeeming them at net asset value ("NAV") (subject to any
applicable redemption fees). Therefore, the Fund's market price discount from
NAV will be eliminated. In light of this result, by voting to approve the
Conversion, stockholders will also authorize the Fund to suspend the Fund's
annual tender offer undertaking for a period of up to [nine] months pending
completion of the Conversion. The Conversion requires that the Fund change
its classification from a closed-end fund to an open-end fund.
The Board of Directors of the Fund, including all of the Directors (the
"Independent Directors") who are not "interested persons" of the Fund within
the meaning of the Investment Company Act of 1940, as amended (the "1940
Act"), have unanimously approved the Conversion and related matters. The
Board of Directors strongly recommends that stockholders vote FOR the
approval of Proposal No. 1.
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As part of the Conversion, the Fund will reorganize as a Delaware
business trust in order to be consistent with the Core and Gateway Fund
Structure presently utilized by SCMI. The Fund will have one class of shares
of beneficial interest ("Class A shares"), but will be authorized to issue
additional classes. Stockholders of the Fund will become shareholders of the
Delaware business trust and will receive Class A shares in the Conversion.
The Class A shares will be subject to (i) an asset-based shareholder
servicing fee of 0.25% per annum, and (ii) for Class A shares purchased after
the Conversion through brokers or other financial intermediaries, a front-end
sales charge based on the size of the purchase of Class A shares. The maximum
sales charge will be 5.25% of the NAV of the shares purchased, declining to
no charge for purchases of amounts over $1,000,000. During the first six
months after the Conversion, there will also be a redemption fee of 2.00% on
redemptions of Class A shares received by stockholders of the Fund in the
Conversion. The purpose of this redemption fee, which will be paid to the
Fund, is to stabilize the assets of the Fund during the first six months
after the Conversion and to offset the brokerage and other costs incurred by
the Fund in meeting possibly heavy redemption requests. This redemption fee
may be reduced or terminated at any time in the discretion of the Board of
Directors.
Class A shares will be exchangeable for the class of shares available to
retail investors in the no-load funds in the Schroder family of funds. If
Class A shares are exchanged for such shares, the Fund's 2.00% redemption fee
will apply to such exchanges during the first six months after the Conversion.
WHY THE BOARD OF DIRECTORS STRONGLY RECOMMENDS THE CONVERSION
The Fund was organized in December 1993 as a closed-end fund. Since the
commencement of the Fund's operations, the Fund's shares have usually traded
on the NYSE at a discount from NAV. The Board of Directors of the Fund
determined, as stated in the Fund's prospectus dated December 22, 1993 (the
"Prospectus"), that it would be in the best interests of stockholders to take
action to attempt to reduce or eliminate such a discount. The Fund conducted
a tender offer for its shares during the first calendar quarter of 1997.
Nonetheless, after completion of the tender offer, the Fund's shares
continued to trade at a discount to NAV which was not narrower than the
discount prior to the commencement of the tender offer.
The Board of Directors has considered various methods of seeking to
narrow the Fund's discount, including adoption of a discretionary or interval
repurchase policy, open market repurchases of shares, adoption of a
guaranteed or managed distribution program, merger with other funds, and
reorganization into two or more funds. However, the Board of Directors
concluded that such other methods would not address the Fund's discount as
effectively as the Conversion would. In light of the Fund's continuing market
price discount to NAV, the Board of Directors is now strongly recommending
that stockholders vote to convert the Fund into an open-end structure, which
will allow stockholders to purchase and redeem shares from the Fund at NAV on
any business day (subject to applicable redemption fees), thereby eliminating
any
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discount to NAV. The Board of Directors reached this conclusion after
considering the potential benefits of the Conversion and its potential impact
on the Fund's investment program and expenses. The Board of Directors
considered assurances provided by SCMI indicating that SCMI does not expect
that the Conversion would result in any material change in the manner in
which the Fund's investment strategy is implemented or how investment
opportunities are available to the Fund.
CERTAIN QUESTIONS STOCKHOLDERS MAY HAVE ABOUT THE CONVERSION
Stockholders may have certain questions about how the Conversion will
affect the Fund and its stockholders. A number of relevant questions and
answers to those questions are found below.
Will the Fund's investment objective or policies change? No. The Fund's
investment objective, which is to seek long-term capital appreciation through
investment principally in equity securities of Asian companies, will not
change as a result of the conversion of the Fund to an open-end investment
company. The Fund will seek to realize its objective within the Core and
Gateway Fund Structure by allocating its investments between the Japan
Portfolio and the Asia ex-Japan Portfolio in a manner consistent with the
Fund's investment objective.
What are the anticipated costs of the Conversion? The Fund will use all
reasonably practicable measures to keep expenses at a minimum. However, there
will be costs associated with the Conversion, many of which will be
nonrecurring, including costs associated with requesting a ruling from the
Internal Revenue Service (the "IRS") and other legal expenses, the
preparation, mailing and solicitation of this Proxy Statement, the cost of
retaining the Proxy Solicitation Agent, and the cost of converting to a new
transfer agent for operating the Fund as an open-end investment company. It
is anticipated that such costs will total approximately [$407,000], and that
substantially all of these costs will be incurred by the Fund prior to the
effective date of the Conversion.
Following the Conversion, the Fund will incur some operating costs that
it does not bear as a closed-end fund. For example, as an open-end fund, the
Fund will incur costs in connection with calculating the Fund's NAV daily
instead of weekly, daily trade processing and related shareholder servicing,
the preparation and distribution of an updated registration statement and
prospectus at least annually as required by federal securities laws
(including printing and mailing costs), and the payment of necessary annual
registration fees for the sale of shares under federal and state securities
laws. For additional information, see the table appearing under the caption
"How will the Fund's expenses be affected?" at page [__].
When is the Conversion expected to take place? If the stockholders
approve the Conversion, the Fund will seek to complete the Conversion as soon
as reasonably practicable following the Special Meeting. It is currently
expected that the Conversion will be completed during the first calendar
quarter of 1998. However, completion of the Conversion in this time
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frame is not assured. By voting to approve the Conversion, stockholders will
also authorize the Fund to suspend the Fund's annual tender offer undertaking
(a description of which can be found in Proposal No. 2) for a period of up to
[nine] months pending completion of the Conversion.
What are the tax consequences if I redeem shares after the Conversion? A
stockholder redeeming shares after the Conversion (including by way of any
exchange) will recognize gain (or loss) to the extent that the redemption
proceeds are greater (or less) than such stockholder's adjusted tax basis in
the shares that are redeemed.
How are open-end fund shares redeemed and purchased? Holders of shares of
open-end funds generally have the right to require the fund to redeem their
shares at NAV. Payment for redemptions of shares will normally be made within
seven days after receipt of a proper request for redemption (in accordance
with redemption procedures to be specified in the Fund's new prospectus,
which will be provided to stockholders if the Conversion is completed). Such
payment may be postponed or the right of redemption suspended at times (a)
when the NYSE is closed for other than customary weekends and holidays, (b)
when trading on the NYSE is restricted, (c) when an emergency exists as a
result of which disposal of securities owned by the Fund is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or (d) during any other period when
the Securities and Exchange Commission ("SEC"), by order, so permits. Shares
can be purchased through broker-dealers or other financial intermediaries on
any business day, subject to applicable sales charges.
What vote is required to approve the Conversion? A vote "FOR" Proposal
No. 1 will constitute a vote "FOR" each element of the Conversion. Approval
of the Conversion requires the affirmative vote of holders of two-thirds of
the outstanding shares of the Fund, the vote required under the Articles of
Amendment and Restatement of the Fund (the "Articles") and under the Maryland
General Corporation Law (the "MGCL") to approve the changing of the Fund's
classification under the 1940 Act, and the reorganization of the Fund into a
Delaware business trust. This vote also authorizes the new advisory
agreements with SCMI and amending the fundamental policies of the Fund to
authorize the open-end Core and Gateway Fund Structure. Abstentions and
broker non-votes will have the effect of votes against the Conversion.
ADDITIONAL INFORMATION ABOUT THE CONVERSION
A. PARTICIPATION IN THE CORE AND GATEWAY FUND STRUCTURE
In order for the Fund to participate in the proposed Core and Gateway
Fund Structure, the Fund's present fundamental policies must be amended to
permit the Fund to invest its assets in the Japan Portfolio and the Asia
ex-Japan Portfolio and to reflect a modification required under the 1940 Act
if the Fund operates in an open-end structure. A vote FOR Proposal No. 1 will
include a vote to approve the amendment to the Fund's fundamental policies.
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SUMMARY OF CORE AND GATEWAY FUND STRUCTURE
"Core and Gateway"-Registered Trademark- is a registered trademark of
Forum Financial Services, Inc., and the Core and Gateway Fund Structure which
is being recommended for the Fund in connection with its Conversion is
presently used by five other open-end registered investment companies which
are advised by SCMI. The following illustration compares a traditional
open-end fund structure to the Core and Gateway Fund Structure proposed for
the Fund.
[Graphic Material to be inserted here]
The Core and Gateway Fund Structure will enable other gateway entities
(including registered investment companies and other institutional investors)
to invest in either or both of the Core Portfolios, potentially leading to
greater asset growth and economies of scale at the Core level. Fixed
operating costs borne in whole or in part directly by a Core Portfolio would
be indirectly shared pro rata by the Fund and other investors in such Core
Portfolio. A larger asset base may also enable a Core Portfolio to purchase
investment securities in larger denominations, resulting in possible
reductions in certain transactional and custodial expenses. There can be no
assurance that there will be additional investors (other than SCMI and Forum,
which will make the initial investment in each Core Portfolio) or that the
presence of additional investors will result in net asset growth of the Core
Portfolios.
Factors Considered by the Board of Directors in Recommending
the Core and Gateway Fund Structure
In approving the proposal authorizing the investment of the assets of the
Fund in the corresponding Core Portfolios, the Board of Directors considered,
among other things, (i) the fact that the Schroder family of funds employs
the Core and Gateway Fund Structure and that this would offer the opportunity
to achieve certain efficiencies and (ii) the possibility that the Fund would
benefit from economies of scale in the Core Portfolios through the growth of
assets in other gateway funds, which may target different classes of
investors or offer different investment products than the Fund (and any
corresponding decrease in costs, such as the absence of NYSE listing fees).
The Board of Directors also took into account the expected increase in the
Fund's expense ratio under the Core and Gateway Fund Structure resulting from
higher transfer agency costs and the proposed administration fee structure.
If Proposal No. 1 is approved by stockholders, the Board of Directors
retains the right to delay or not to proceed with the Conversion if the Board
of Directors determines that it would no longer be in the best interests of
the Fund and its stockholders.
Certain Questions Stockholders May Have About the Core and Gateway Fund
Structure
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Stockholders may have questions about how the new Core and Gateway Fund
Structure will affect the Fund and its stockholders. A number of relevant
questions and answers to those questions are found below.
What is the structure of the Core Portfolios? At the Conversion, the Fund
will contribute assets invested in Asian countries other than Japan to the
Asia ex-Japan Portfolio, and will contribute assets invested in Japan to the
Japan Portfolio. In exchange for these contributions, the Fund will receive
interests representing its ownership interest in the Core Portfolios. Both
the Japan Portfolio and the Asia ex-Japan Portfolio are organized as series
of Schroder Capital Funds ("SCF"), a Delaware business trust registered as an
open-end investment company with the SEC. Cash or cash equivalents held by
the Fund will be contributed to the Portfolios in proportion to the
securities and other non-cash assets contributed or retained by the Fund as
determined by SCMI. Prior to the Conversion, the Core Portfolios will not
hold investments or assets other than the initial investment by SCMI made to
meet applicable federal tax requirements. Therefore, upon completion of the
Conversion, the Fund's investments will be substantially identical to its
investments before the Conversion by virtue of the interests the Fund will
hold in the two Core Portfolios. Each Core Portfolio calculates its NAV as of
4:00 p.m. (New York City time), Monday through Friday, each business day that
the NYSE is open for trading.
The Fund will allocate its investments between the Japan Portfolio and
the Asia ex-Japan Portfolio to achieve the same investment policy as the Fund
now has. The investment objective of the Fund is to seek long-term capital
appreciation. As a matter of fundamental policy, the Fund invests at least
65% of its total assets in equity securities of Asian companies, including
Japanese companies. The Fund has no predetermined policy on the allocation of
funds for investment among countries. The investment objective of both the
Asia ex-Japan Portfolio and the Japan Portfolio is to seek long-term capital
appreciation. The Asia ex-Japan Portfolio invests mainly in equity securities
of Asian companies other than Japan. For this purpose, "Asian companies"
includes companies (i) organized under the laws of China, Hong Kong S.A.R.,
India, Indonesia, Korea, Malaysia, Pakistan, the Philippines, Singapore, Sri
Lanka, Taiwan, or Thailand, or any other countries or territories in the
Asian region located south of the border of the former Soviet Union, east of
the borders of Afghanistan and Iran, north of the Australia subcontinent and
west of the International Date Line that permit foreign investors to
participate in their stock markets (the "Asian Countries"); or (ii) that,
regardless of where organized, (A) derive at least 75% of their revenues from
goods produced or sold, investments made or services performed in Asian
Countries, or (B) maintain at least 75% of their assets in Asian Countries.
The Japan Portfolio invests mainly in equity securities of Japanese
companies, that is, companies that (i) are organized under the laws of Japan,
(ii) derive at least 75% of their revenues from goods produced or sold,
investments made or services performed in Japan, or (iii) maintain at least
75% of their assets in Japan.
How will the Fund's service arrangements be affected
by the Core and Gateway Fund Structure?
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INVESTMENT ADVISER. SCMI will remain the investment adviser to the Fund
pursuant to new investment advisory agreements to take effect upon the
Conversion. See the discussion of these agreements and the associated fees
under Part B, "Approval of New Advisory Agreements," beginning at page __.
SCMI will also serve as investment adviser to the Core Portfolios.
DISTRIBUTOR. In order to integrate the Fund into the operations of the
Schroder family of funds following the Conversion, the Board of Directors,
and by separate vote the Independent Directors, approved a form of
Distributor's Contract to be entered into by the Fund and by Schroder Fund
Advisors Inc. ("SFA") as principal underwriter. SFA is an affiliate of SCMI,
registered as a broker-dealer with the SEC and under applicable state laws.
Pursuant to the Distributor's Contract, SFA may sell shares of the Fund as
agent for the Fund. At the present time, because the Fund is closed-end,
there is no distributor of Fund shares.
ADMINISTRATOR. Pursuant to an administrative services agreement with the
Fund, Princeton Administrators, L.P. currently provides administrative
services to the Fund. The fees paid under the administrative services
agreement are the greater of (a) $150,000 per annum ($12,500 per month) or
(b) an annual rate of (i) 0.25% of average weekly net assets up to and
including $300 million and (ii) 0.22% of average weekly net assets in excess
of $300 million.
As noted above, the Fund's administrative arrangements would be
integrated into the existing administrative arrangements for the Schroder
family of funds. SCMI believes that this integration would reduce duplication
of management efforts in terms of supervision, monitoring and reporting.
Accordingly, SFA, which is the administrator for the Schroder family of
funds, will act as administrator for the Fund and as such will be responsible
for, among other things, (i) preparation of stockholder reports and
communications, (ii) regulatory compliance, such as reports to and filings
with the SEC and state securities commissions, and (iii) general supervision
of the operations of the Fund, including coordination of the services
performed by the Fund's investment adviser, transfer agent, custodian,
independent accountants, legal counsel and others. SFA will also be
responsible for administration of shareholder services arrangements.
As administrator, SFA will be paid a fee of 0.05% per annum of the Fund's
average daily net assets. In addition, the Fund will bear its pro rata
portion of the administrative services fee paid by the Core Portfolios to SFA
at a rate of 0.05% per annum of the average daily net assets of each Core
Portfolio. In addition, the Fund is expected to retain Forum Administrative
Services, LLC ("Forum") as subadministrator. For this service, the Fund will
pay Forum a fee of 0.05% per annum of the Fund's average daily net assets and
0.05% per annum of the average daily net assets of each Core Portfolio.
Pursuant to the subadministration agreement, Forum will assist SFA with
certain of its responsibilities, including shareholder reporting and
regulatory compliance.
In addition, the Fund may pay SFA an annual shareholder service fee of up
to 0.25% per annum of the average daily net assets of the Fund in exchange
for providing
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shareholder support and administrative services to the Fund and its
stockholders in respect of Class A shares, and to pay others for shareholder
servicing activities.
CUSTODIAN. The Chase Manhattan Bank ("Chase") presently serves as
custodian both to the Fund and to the portfolio funds which are series of
SCF. These arrangements would remain the same following the Conversion.
TRANSFER AGENT. The Fund's transfer agent is currently Boston EquiServe,
an affiliate of State Street Bank and Trust Company ("State Street"). Boston
EquiServe does not provide services to open-end funds. Following the
Conversion, the Fund is expected to retain Boston Financial Data Services
("BFDS"), a separately organized affiliate of State Street that provides
transfer agency services to open-end funds. The Fund will bear a nonrecurring
conversion cost in retaining BFDS, and BFDS will be paid a higher fee for its
transfer agency services than is currently paid to Boston EquiServe. These
increased fees reflect the higher transaction volume, inquiry processing, and
other customer service enhancements required by open-end funds.
Alternatively, the Fund may engage Forum Financial Corp. as transfer
agent and allow Forum Financial Corp. to engage BFDS as sub-transfer agent.
The Fund will adopt this structure if it will produce services advantages for
the Fund, such as facilitating exchanges between the Fund and other funds in
the Schroder family of funds. The Fund will not be subject to any net
increase in fees if Forum is retained as transfer agent.
INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P. ("Coopers & Lybrand")
currently serves as the independent accountants for the Fund, and is expected
to remain in that capacity following the Conversion. Representatives of
Coopers & Lybrand are expected to be present at the Special Meeting and will
have the opportunity to make a statement if they desire to do so. Such
representatives will be able to respond to appropriate questions.
How will the Fund's expenses be affected? The table below describes the
impact of the Conversion on the fees and expenses of the Fund. For additional
information regarding the proposed new advisory and administration
arrangements for the Fund, see the discussion beginning at page .
The following table shows the actual expenses for the Fund for its most
recent fiscal year ended October 31, 1996 (after adjustment as of April
30, 1997 to reflect the results of the reduction in assets of the Fund as
a result of the tender offer which expired on March 20, 1997), and a pro
forma adjustment thereof assuming the Conversion had been approved by the
stockholders and all arrangements contemplated by the Conversion had been
implemented at the beginning of the current fiscal year. The table also
assumes that there were no investors in either Core Portfolio other than
the Fund and that the Fund's asset levels were not affected by the
Conversion. The costs and expenses that will be associated with the
Conversion are not reflected. The Fund's expenses could be substantially
higher if there are substantial redemptions following the Conversion.
9
<PAGE>
<TABLE>
<CAPTION>
ACTUAL
SCHRODER
ASIAN PRO FORMA EXPENSES IN CORE AND GATEWAY FUND STRUCTURE
GROWTH ----------------------------------------------------------------------
FUND, INC. SCHRODER ASIA EX- TOTAL
(FY 1996) ASIAN GROWTH JAPAN JAPAN GATEWAY AND
EXPENSES FUND GATEWAY PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------------------- ----------- ----------- ---------------------
<S> <C> <C> <C> <C> <C>
Stockholder Transaction Expenses
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price) None* 5.25%** None None 5.25%
Maximum Deferred Sales Load (as a
percentage) None None None None None
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage) None None None None None
Redemption fees (as a percentage of
amount redeemed) None 2.00% for 6 months None None 2.00% for 6 months
Exchange fee None None (redemption fee N/ A N/ A None (redemption fee
applies for 6 months) applies for 6 months)
Annual Fund Expenses (as a
percentage of average net assets)
Management Fees
Investment Advisory 1.00%1 0.20% 0.55%+ 0.70%+ 0.90%3
Administration 0.25%2 0.05% 0.05%+ 0.05%+ 0.10%
Distribution fees (12b-1) None None None None None
Other Expenses 0.34% 0.76%4
Shareholder servicing 0.25%
Subadministration 0.05% 0.05%+ 0.05%+
Total Fund Operating Expenses 1.59% 1.76%
</TABLE>
- ------------------------
* Shares of the Fund as a closed-end investment company are traded on the
NYSE, and share transactions are subject to customary brokerage commissions.
** Maximum sales charge, applicable to purchases of less than $25,000 worth of
shares.
+ Investment advisory fees, administration fees and subadministration fees
are calculated based on the amount of the Fund's assets invested in the
particular Core Portfolio.
(1) Based on investment advisory fee of 1.00% of net assets up to $300 million
and 0.85% of net assets thereafter.
(2) Based on administration fee payable to Princeton Administrators, L.P. of
0.25% of net assets up to $300 million and 0.22% of net assets thereafter.
(3) Maximum advisory fee, if all of the Fund's assets are invested in the Asia
ex-Japan Portfolio.
(4) The "Other Expenses" category includes (i) a shareholder servicing fee of
0.25% per annum of the average daily net assets of the Schroder Asian Growth
Fund Gateway, and (ii) a subadministration fee of 0.05% of the average daily
net assets of the Gateway Fund and each Core Portfolio.
10
<PAGE>
EXAMPLE. The following illustrates the expenses on a $1,000 investment
in the Fund under the existing and proposed fund structures and Total
Fund Operating Expenses stated above, assuming a 5% annual return
and reinvestment of all dividends and distributions and further assuming
that the Fund invests 90% of its net assets in the Asia ex-Japan
Portfolio and 10% of its net assets in the Japan Portfolio.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Existing Fund Structure (closed-end)
Fund Structure after the Conversion (no sales load)..................... $ 18 $ 55 $ 95 $ 207
Fund Structure after the Conversion (assuming 5.25% sales load)......... $ 69 $ 105 $ 143 $ 249
</TABLE>
The table and example above are intended to show the various expenses
that an investor in the Fund would bear directly or indirectly after
conversion by the Fund to the Core and Gateway Fund Structure in
comparison to those borne under the existing fund structure. The example
should not be considered a representation of past or future expenses or
return. Actual expenses and return may be greater or less than indicated.
Although it is not possible to know whether the Fund will experience net
redemptions or net subscriptions, or over what time period either would
occur, as discussed above, it is possible that a significant number of shares
may be redeemed upon the Conversion. The Fund will impose a redemption fee
for the first six months following the Conversion. If the Fund's assets
decline, the Fund's ratio of operating costs to average net assets would
increase. For the year ended October 31, 1996, the Fund's expense ratio was
1.57%. If the Fund's asset base were to decrease, producing an increase in
the Fund's expense ratio, the Fund may experience a lower return than is
currently being produced. In addition, the Fund might be required to sell
portfolio securities in order to meet redemptions, thereby resulting in
realization of gains (or losses) and in brokerage and other transactional
expenses.
In the event the Fund were to become too small to be considered
economically viable, the Board of Directors may consider alternatives to
continuing the Fund's operations, including merger of the Fund with another
investment company or liquidation of the Fund. The Fund has no plans to
pursue such alternatives at this time.
What are the tax consequences of conversion to the Core and Gateway Fund
Structure? The Fund will request a ruling from the IRS to the effect that the
Fund's contribution of its assets to the Core Portfolios in exchange for
beneficial interests therein will not result in the recognition of gain or
loss for federal income tax purposes to the Fund or its stockholders.
However, there can be no assurance that the IRS will act on such request
prior to the Conversion. As a result, the consummation of the Conversion is
conditioned on either the receipt of an IRS ruling or an opinion of the
Fund's tax counsel, Debevoise & Plimpton, that the Fund will not recognize
any gain or loss for U.S. federal income tax purposes as a result of the
contribution of its assets to the Core Portfolios in exchange for beneficial
interests therein; however, the Board of Directors may decide to proceed with
the Conversion in the absence of such opinions or ruling if it concludes that
doing so is in the best interests of the Fund and its stockholders. While the
IRS
11
<PAGE>
is not bound by an opinion of counsel, the Fund believes that an opinion of
counsel provides sufficient authority on the tax effects of the Fund's
contribution of assets to the Core Portfolios.
The Fund intends to continue to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), following the Conversion. In each taxable year that the Fund so
qualifies, the Fund (but not its stockholders) will be relieved of federal
income tax on that part of its investment company taxable income and net
capital gain that is distributed to its stockholders. Neither the Fund nor
the Core Portfolios are expected to be required to pay any federal income or
excise taxes. Distributions from the Fund, except for distributions
designated as long-term capital gain distributions, will continue to be
taxable to stockholders as ordinary income, whether received in cash or
reinvested in Fund shares. Although the Fund does not believe that the
Conversion will result in any material tax costs to the Fund or its
stockholders in any non-U.S. jurisdiction, there can be no assurance in this
regard in view of the possibility of legislative developments or adverse
interpretations of present tax laws or policies in such jurisdictions.
Why are the Directors recommending approval of the change to the Fund's
fundamental policies necessary to implement the Core and Gateway Fund
Structure? At present, the Fund's fundamental policies limit the ability of
the Fund to invest its assets in other investment companies, such as the Core
Portfolios. In addition, if the Conversion is approved, its investment
restrictions with respect to borrowings and the issuance of senior securities
will have to be modified in order to comply with the restrictions in the 1940
Act with respect to borrowings by open-end funds. The fundamental policies
described below cannot be changed without the approval of a majority of the
outstanding voting securities of the Fund, defined under the 1940 Act as the
lesser of (a) 67% or more of the shares of the Fund present at a meeting of
stockholders, if the holders of more than 50% of the shares are present in
person or by proxy, and (b) more than 50% of the outstanding shares of the
Fund. A vote FOR Proposal No. 1 includes a vote to approve the modifications
to the Fund's fundamental policies.
At present, the Fund's fundamental policies, as set forth in the
Prospectus, provide that the Fund may not:
purchase any securities which would cause 25% or more of the value of
its total assets, taken at market value at the time of such purchase, to
be invested in securities of one or more issuers conducting their
principal business activities in the same industry ....
In addition, the Fund's investment policies provide as follows:
Under the 1940 Act, the Fund may invest a maximum of 10% of its total
assets in the securities of other investment companies. In addition,
under the 1940 Act, not more than 5% of the Fund's total assets may be
invested in the securities of any one investment company.
It is proposed that these policies be modified by adding the following
fundamental investment policy:
12
<PAGE>
Notwithstanding any other investment policy or restriction to the
contrary, the Fund may seek to achieve its investment objective by
investing some or all of its assets in the securities of one or more
investment companies to the extent permitted by the 1940 Act or an
applicable exemptive order under such Act; provided that, except to the
extent the Fund invests in other investment companies pursuant to
Section 12(d)(1)(A) of the 1940 Act, the Fund treats the assets of the
investment companies in which it invests as its own.
The Fund would retain the right to withdraw the Fund's investments from a
Core Portfolio at any time. In that event, the Board of Trustees would consider
what action should be taken to manage the withdrawn assets, including management
of the assets in accordance with its investment objective and policies directly
by SCMI at the Fund "gateway" level or investment of the assets in another Core
Portfolio. In any event, SCMI will seek to minimize the impact of any such
withdrawal.
The Fund's fundamental policies also provide, with respect to borrowings and
senior securities, that the Fund will not:
issue senior securities or borrow money, except that the Fund may borrow
(a) up to 5% of its total assets (including the amount borrowed) for
temporary or emergency purposes (including for clearance of transactions
or payment of dividends) and (b) up to 33 1/3% of its total assets
(including the amount borrowed) in connection with the repurchase of [s]
hares or tender offers; PROVIDED, HOWEVER, that the Fund's obligations
under when-issued and delayed delivery transactions and similar
transactions and not treated as senior securities if covering assets
are appropriately segregated, and the use of Hedging
[as such term is defined in the Fund's Prospectus] shall not be deemed to
involve the issuance of a "senior security" or a "borrowing." The Fund's
obligations under interest rate, currency and equity swaps are not treated
as senior securities.
. . .
If the Conversion is approved and the Fund is converted into an open-end
investment company, it is proposed that this policy with respect to borrowings
be modified to comply with the requirements of the 1940 Act by adding the
following fundamental investment policy:
The Fund will not borrow money or issue senior securities, except
that the Fund may borrow from a bank (i) if immediately after such
borrowing there is asset coverage of at least 300% as defined in the
1940 Act and (ii) up to 5% of its total assets (including the amount
borrowed) for temporary or emergency purposes.
Certain fundamental investment restrictions of the Fund might be construed
as restricting the Fund's ability to carry out the reorganization. By approving
the Reorganization
13
<PAGE>
Plan (as described below), stockholders will be agreeing to waive, only for
the purpose of the reorganization, any fundamental investment restriction
which prohibits the Fund from investing (1) in another company beyond a
stated percentage of ownership; (2) for the purpose of exercising control
over or management of any company; (3) in issuers having a record of less
than three years of continuous operations; and (4) in issuers in a single
industry.
B. APPROVAL OF NEW ADVISORY AGREEMENTS
In order for the Fund to operate as contemplated by the Conversion, the Fund
will need to enter into new advisory agreements with SCMI, effective upon the
date of the Conversion. A vote FOR Proposal No. 1 will include a vote to approve
the new advisory agreements.
FACTORS CONSIDERED BY THE BOARD OF DIRECTORS
The Board of Directors of the Fund, including the Independent Directors,
has unanimously voted to approve two new investment advisory agreements
between the Fund and SCMI to take effect upon the Conversion, each of which
must be approved by the stockholders of the Fund. First, under an asset
allocation agreement between the Fund and SCMI (the "Asset Allocation
Agreement"), SCMI will serve as investment adviser to the Fund following the
Conversion. Pursuant to the Asset Allocation Agreement, SCMI will determine
the appropriate allocation of the Fund's assets between the Japan Portfolio
and the Asia ex-Japan Portfolio.
Second, the Board of Directors, and by separate vote the Independent
Directors, unanimously approved a standby investment advisory agreement (the
"Standby Advisory Agreement") between the Fund and SCMI. Although the Conversion
contemplates that the Fund will invest all its assets in the Core Portfolios,
the Fund will have the right to maintain assets at the Fund level or withdraw
the Fund's investments from either or both Core Portfolios at any time. In that
case, SCMI will manage such assets pursuant to the Standby Advisory Agreement.
Forms of the Asset Allocation Agreement and the Standby Advisory Agreement are
attached as Exhibit A.
The Board of Directors considered the nature of the asset allocation
services to be performed by SCMI, the services to be provided by SCMI at the
Core Portfolio level, and SCMI's general level of experience relating to
open-end funds. The Directors also considered SCMI's ability to monitor the Core
and Gateway Fund Structure and supervise various service providers to be engaged
for the Fund. At the same time, the Directors took into account that "fall-out"
benefits may result for SCMI, such as benefits to the existing funds in the Core
and Gateway Fund Structure, or intangible benefits to SCMI. In considering
whether to approve the Asset Allocation Agreement and the Standby Advisory
Agreement, the Directors took into account a variety of factors, including,
among others, the terms of the Asset Allocation Agreement and the Standby
Advisory Agreement and the services to be provided by SCMI, the quality of the
services provided by SCMI to the Fund to date and the Fund's performance to
date, and fee data and
14
<PAGE>
related information, including comparisons of advisory and administrative
fees charged to other funds.
The Fund has no understanding or arrangement to direct any specific portion
of its brokerage to brokerage firms affiliated with SCMI, and SCMI does not
direct brokerage to any of such firms in recognition of research services. For
the year ended October 31, 1996, the Fund paid total brokerage commissions of
$1,017,272.75. Of that amount, no commissions were paid to brokerage firms
affiliated with SCMI. A total of $49,601.30, or 4.87% of total commissions, was
paid to Merrill Lynch, Pierce, Fenner & Smith, Inc., and $10,957.95, or 1.08%,
was paid to Merrill Lynch London, each an affiliate of Merrill Lynch & Co.,
Inc., the parent of Princeton Administrators, L.P., the administrator to the
Fund.
TERMS OF THE FUND'S PRESENT ADVISORY AGREEMENT WITH SCMI
Under the advisory agreement currently in effect between SCMI and the Fund
(the "Fund Agreement"), SCMI is responsible for supervising and directing the
investments of the Fund in accordance with the Fund's investment objective,
policies, and restrictions as provided in the Prospectus and the Fund's
Statement of Additional Information. SCMI is also responsible for effecting all
securities transactions on behalf of the Fund, including the negotiation of
commissions and the allocation of principal business and portfolio brokerage. In
addition to these services, SCMI provides the Fund with a wide range of
corporate administrative services. The Fund Agreement provides that the Fund
will bear all expenses of its operations not specifically assumed by SCMI. The
Fund Agreement also provides that SCMI, its directors, officers, employees, and
certain other persons performing specific functions for the Fund shall not be
liable to the Fund for any error of judgment, mistake of law or for any loss
arising out of any investment or for any act or omission in the execution and
management of the Fund, except for losses resulting from willful misfeasance,
bad faith, gross negligence, or reckless disregard of duty.
Under the Fund Agreement, SCMI receives a fee at an annual rate of (i)
1.00% of the Fund's average weekly net assets (i.e., the average weekly value
of the total assets of the Fund minus the sum of liabilities of the Fund) up
to and including $300 million; and (ii) 0.85% of the Fund's average weekly
net assets in excess of $300 million. The net assets for each weekly period
are determined by averaging the net assets at the last business day of such
weekly period with the net assets at the last business day of the immediately
preceding weekly period. Payment is made in arrears to SCMI as of the end of
each calendar month. The advisory fee is higher than fees charged to most
other investment companies but not necessarily higher than those charged to
funds with investment objectives similar to the Fund's investment objective.
The Fund Agreement provides that it will remain in force until the second
anniversary of the effective date, and from year to year thereafter, but only so
long as such continuance is approved at least annually by vote of a majority of
the Independent Directors, and by majority vote either of the Board of Directors
or of holders of the Fund's outstanding voting securities. The Fund Agreement
may be terminated at any time, without payment of any penalty,
15
<PAGE>
by the Fund either by the vote of the Board of Directors or by the vote of a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to SCMI.
On November 30, 1995, the Board of Directors and, separately, the
Independent Directors voted to continue and approve the Fund Agreement. On March
15, 1996, the Board of Directors and, separately, the Independent Directors
voted to approve an amendment to the Fund Agreement to provide for the fee
schedule currently in place, and to recommend that the stockholders of the Fund
vote for the approval of the Fund Agreement, as so amended. The stockholders
voted such approval at the Annual Meeting of Stockholders held on May 15, 1996.
On November 26, 1996, the Board of Directors and, separately, the Independent
Directors voted to continue the Fund Agreement, as amended.
TERMS OF THE PROPOSED NEW ADVISORY AGREEMENTS
The terms of the Asset Allocation Agreement and the Standby Advisory
Agreement are essentially the same as the terms of the Fund Agreement, except as
noted below. Apart from their fee provisions and as specifically noted below,
the Asset Allocation Agreement and the Standby Advisory Agreement are identical
to one another.
Under the Asset Allocation Agreement, SCMI will receive an asset allocation
fee of 0.20% of the Fund's net assets. Under this agreement, SCMI will determine
the appropriate allocation of the Fund's investment assets among the Japan
Portfolio and the Asia ex-Japan Portfolio, consistent with the Fund's investment
objectives.
Pursuant to a separate advisory agreement (the "Core Agreement") between
SCMI and SCF, SCMI also acts as investment adviser to the series of SCF,
including the Japan Portfolio and the Asia ex-Japan Portfolio. The Core
Agreement provides for advisory fees of 0.70% per annum of the average daily net
assets invested in the Asia ex-Japan Portfolio and 0.55% per annum of the
average daily net assets invested in the Japan Portfolio. SFA, a wholly-owned
subsidiary of SCMI, will serve as administrator both to the Fund and to the
Japan Portfolio and the Asia ex-Japan Portfolio. SFA will receive an
administration fee at a rate of 0.05% per annum of the daily net assets of the
Fund and, separately, administration fees at a rate of 0.05% per annum of the
Fund's net assets invested in each such portfolio.
If the Fund withdraws from the Core and Gateway Fund Structure, the Asset
Allocation Agreement will become inoperative and SCMI will act as investment
adviser to the Fund pursuant to the Standby Advisory Agreement. Under that
agreement, SCMI would receive an advisory fee at a rate of 0.90% per annum of
the average daily net assets of the Fund.
Whether SCMI acts as investment adviser to the Fund pursuant to the Asset
Allocation Agreement (and also acts as adviser to the Core Portfolios) or
pursuant to the Standby Advisory Agreement, the total "management fee," that is,
the investment advisory fee and
16
<PAGE>
administration fee payable to SCMI and its affiliates, will not exceed 1.00%
per annum of the average daily net assets of the Fund.
The Asset Allocation Agreement and the Standby Advisory Agreement each
contain certain provisions not found in the Fund Agreement that accommodate (i)
the continuous offering of classes of shares of interest of the Fund and (ii)
the limitation of liability for the Trustees of the Fund in accordance with
Delaware law. While the Fund Agreement is governed by Maryland law, the new
advisory agreements are governed by Delaware law.
PRO FORMA FEE CALCULATION
For the year ended October 31, 1996, the Fund paid advisory fees totaling
$2,479,442.00 to SCMI pursuant to the Fund Agreement. If the Conversion had been
in effect and the Fund's assets were invested in the Core Portfolios in
accordance with the allocation of the Fund's investments in Asian Countries
other than Japan and in Japan only, as of December 31, 1996, the Fund would have
paid advisory fees to SCMI of $ under the Asset Allocation Agreement.
The Fund would also have paid to SCMI $ in respect of the assets
invested in the Asia ex-Japan Portfolio and $ in respect of the assets
invested in the Japan Portfolio. The fees that would have been paid to SCMI if
the Conversion had been in effect therefore total $ , or % of the
fees actually paid during the period under the Fund Agreement. If the Standby
Advisory Agreement were in effect for the same period, the Fund would have paid
advisory fees of $ , or % of the fees actually paid under the Fund
Agreement.
FEES PAYABLE TO SCMI FROM OTHER FUNDS WITH SIMILAR INVESTMENT OBJECTIVES
SCMI also acts as investment adviser to one other registered investment
company having similar investment objectives and policies to those of the Fund.
The following table sets forth the name of such investment company, the annual
rate of compensation as of April 30, 1997, and other material information:
<TABLE>
<CAPTION>
ANNUAL INVESTMENT
ADVISORY AND ANNUAL SCMI SUB-
ADMINISTRATION FEE RATE INVESTMENT ADVISORY
NET ASSETS AS OF AS A PERCENTAGE OF FEE RATE AS A
NAME OF 4/30/97 AVERAGE DAILY NET PERCENTAGE OF AVERAGE
FUND ($ MILLIONS) ASSETS DAILY NET ASSETS
- -------------------------------- --------------------- ------------------------- --------------------------------
<S> <C> <C> <C>
PaineWebber Managed 0.65% up to $100 million
Investments Trust-- $ 62,905,567.85 1.20%*
PaineWebber Asia 0.55% over $100 million
Pacific Growth Fund
</TABLE>
- ------------------------
* The total operating expense ratio for "A" shares of this fund as of 4/30/97
was 1.92%, which reflects advisory and administration fees as well as
shareholder servicing, transfer agency, custodial and other costs. SCMI
has not waived any part of its sub-advisory fee.
17
<PAGE>
CERTAIN QUESTIONS STOCKHOLDERS MAY HAVE ABOUT THE NEW ADVISORY ARRANGEMENTS
Stockholders may have certain questions about how the new advisory
arrangements will affect the Fund and its stockholders. A number of relevant
questions and answers to those questions are found below.
Will the same persons at SCMI manage the Fund's investments after the
Conversion? Yes. The Fund's current investment management team includes Louise
Croset, a Director and President of the Fund, and Heather F. Crighton, Vice
President of the Fund, who are primarily responsible for the day-to-day
management of the investment portfolio, in each case with the assistance of
SCMI's Asian and Japanese investment management teams. Donald H. M. Farquharson,
who is responsible for investment management in the Japanese market, assists Ms.
Croset and Ms. Crighton. Upon the Conversion, Ms. Croset and Ms. Crighton will
remain primarily responsible for the management of the Fund and will also be
responsible for the management of the Asia ex-Japan Portfolio. Mr. Farquharson
will be primarily responsible for the management of the Japan Portfolio.
Ms. Croset, who has managed the Fund's portfolio since January 1997, has
been a First Vice President and Director of SCMI since 1993. She served as a
Vice President at Wellington Management Co. from 1987 to 1993. Ms. Crighton
is a First Vice President of SCMI. Prior to joining SCMI, she was a portfolio
manager for Mercantile and General Reinsurance Co. from 1988 to 1992. Mr.
Farquharson is a First Vice President of SCMI. He originally joined SCMI as
an equity analyst in 1988, served as the head of SCMI's Japanese Equity
Research group in Tokyo from 1993 to 1995 and has thereafter served as a fund
manager.
The Conversion is not expected to result in any changes in the Directors
(who will become Trustees) and officers of the Fund. See the discussion
beginning under the caption "Will there be any change in the Directors and
officers of the Fund?" at page ___.
SCMI, an investment adviser registered under the Investment Advisers Act of
1940, as amended, was established in 1980 to provide global investment advice to
U.S. clients from its New York and London, England offices. Together with its
U.K. affiliate, Schroder Capital Management International Ltd., SCMI had over
$23 billion in assets under management at March 31, 1997, of which approximately
$10.1 billion was invested in the Asian region. SCMI is a wholly-owned indirect
subsidiary of Schroders Public Limited Company ("Schroders plc"), the London
Stock Exchange-listed holding company of an investment banking and investment
management group of companies that dates its origins to 1804. The Schroder group
of companies has investment management operations located in 18 countries around
the world, including 10 in Asia. As of March 31, 1997, these companies had over
$150 billion in assets under management for a wide range of investment companies
and institutional clients in many nations.
18
<PAGE>
SCMI has access to an extensive network of research offices, many long
established, in Tokyo, Hong Kong S.A.R., Singapore, Seoul, Taipei, Jakarta,
Kuala Lumpur and Bangkok. Each year, these offices research and screen for
investment potential 2,850 companies in Asia. Of those companies, the investment
professionals further develop extensive management contacts, including on-site
visits, with approximately 1,700 companies.
SCMI advises individuals, trusts, charitable organizations, banks,
corporations, funds and pension plans. SCMI offers investment counseling
services on both a discretionary and advisory basis. The directors and principal
executive officer of SCMI, together with their principal occupations, are set
forth below:
John S. Ager (1). Senior Vice President and Director.
Louise Croset (1). First Vice President and Director.
Robert G. Davy (1). Senior Vice President and Director.
Richard R. Foulkes (1). Deputy Chairman/Executive Vice President and
Director.
David Gibson (2). Senior Vice President and Director; Director of Schroder
Capital Management Inc.
Phillipa J. Gould (1). Senior Vice President and Director.
C. John Govett (1). Director; Group Managing Director of Schroder Investment
Management Ltd. ("SIM Ltd."); Director of Schroders plc.
Sharon L. Haugh (2). Executive Vice President and Director; Director and
Chairman of SFA; Director of Schroder Capital Management Inc.
Jane P. Lucas (2). Senior Vice President and Director; Director of SFA;
Director of Schroder Capital Management Inc.
Abdallah N. Nauphal (2). Group Vice President and Director; Director of
Schroder Capital Management Inc.
Gavin D.L. Ralston (1). Senior Vice President, Director and Managing
Director.
David M. Salisbury* (1). Director and Chairman; Director, Schroders
Incorporated; Chairman and Director of SIM Ltd.
Mark J. Smith (1). Senior Vice President and Director; Director of SFA;
Director of SIM Ltd.
John A. Troiano (1). Chief Executive Officer and Director; Director of
Schroder Capital Management Inc.
- ------------------------
* Principal executive officer.
(1) Address: Schroder Capital Management International Inc., 33 Gutter Lane,
London, England EC2V 8AS.
(2) Address: Schroder Capital Management International Inc., 787 Seventh Avenue,
New York, New York 10019.
19
<PAGE>
The following officers of the Fund are also officers or employees of
SCMI: Heather F. Crighton, Margaret H. Douglas-Hamilton, Robert Jackowitz,
Catherine A. Mazza and Alexandra Poe.
SCMI is a New York Corporation. Schroders Incorporated owns 100% of the
voting securities of SCMI. Schroder International Holdings Limited owns 100%
of the voting securities of Schroders Incorporated. Schroders plc owns 100%
of the voting securities of Schroder International Holdings Limited. The
voting securities of Schroders plc are publicly traded on the London Stock
Exchange. Certain of such voting securities are held by the following persons
(the "Schroder Trustees"): 20.5% by Vincitas Limited, 13.2% by Veritas
Limited, and 5.9% by One Forty-Five Limited. To the knowledge of the Fund, no
other person holds 5% or more of the voting securities of Schroders plc. The
Schroder Trustees hold interests as trustees of certain discretionary trusts
created by members of the Schroder family. None of the persons for whom such
voting securities are held in trust has an absolute interest in any of such
securities, since such securities are held in fully discretionary trusts. No
individual or organization beneficially owns a 5% or greater interest in any
of such trusts, nor does any person or entity other than the Schroder
Trustees themselves possess direct or indirect 5% control over any of the
Schroder Trustees.
The address of SCMI and Schroders Incorporated is 787 Seventh Avenue, 34th
Floor, New York, New York 10019. The address of Schroder International Holdings
Limited and Schroders plc is 120 Cheapside, London, England EC2V 6DS. The
address of Vincitas Limited, Veritas Limited and One Forty-Five Limited is 22
Church Street, Hamilton, Bermuda HM 11.
C. RECLASSIFYING THE FUND AS AN OPEN-END INVESTMENT COMPANY
To effect the Conversion, the stockholders of the Fund must approve a change
in the classification of the Fund under the 1940 Act from a closed-end to an
open-end investment company. A vote FOR Proposal No. 1 will include a vote to
approve the change in classification.
DIFFERENCES BETWEEN THE FUND AS AN OPEN-END INVESTMENT COMPANY
AND THE FUND AS A CLOSED-END INVESTMENT COMPANY
ACQUISITION AND DISPOSITION OF SHARES. Closed-end investment companies,
such as the Fund, neither continuously redeem their outstanding shares nor
engage in the continuous sale of new shares, and thus operate with a relatively
fixed amount of shares outstanding. The shares of closed-end investment
companies are normally bought and sold on national securities exchanges; the
Fund's shares are currently listed for trading on the NYSE.
Open-end funds issue redeemable shares. The holders of redeemable shares
have the right to require the open-end fund to repurchase their shares at NAV.
Many open-end funds
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(including the Fund, if the Conversion is effected) also continuously issue
new shares to investors based on the fund's NAV at the time of such issuance
(subject to applicable fees). The right to redeem shares at NAV makes a
secondary market unnecessary. Accordingly, the Fund's shares would be delisted
from the NYSE upon the Conversion. Following the Conversion, investors would
be able to purchase shares of the Fund from broker-dealers and other
financial intermediaries or directly through SFA, which will serve as the
Fund's principal underwriter, at NAV, subject to any front-end sales charge.
VOTING RIGHTS AND STOCKHOLDER MEETINGS. As described below, certain
"anti-takeover" provisions currently found in the Fund's Articles and provisions
requiring supermajority votes to approve significant corporate transactions,
which were relevant to the Fund as a closed-end investment company, will be
omitted from the governing documents for the Fund in an open-end structure. See
the discussion of the proposed reorganization of the Fund as a Delaware business
trust instead of a Maryland corporation under Part D, "Reorganization as a
Delaware Business Trust."
The Bylaws of the Fund, as amended by the Board of Directors on November
25, 1996, require that the Fund hold an annual meeting of stockholders at a
date and time set by the Board of Directors during the month of November in
each year. The Fund is presently required to hold annual stockholder meetings
to satisfy NYSE listing requirements, which will not apply if the Fund is
open-ended. If the Fund converts to an open-end structure, the Fund will not
hold stockholder meetings unless required to do so by the 1940 Act. Under the
1940 Act, the Fund would be required to hold a stockholder meeting if, among
other things, the number of Directors elected by stockholders were less than
a majority of the total number of Directors, if a change were sought in the
fundamental investment policies of the Fund, or if a material change were
sought in the Fund's investment management agreement or, in certain
circumstances, any distribution plans adopted under Rule 12b-1 under the 1940
Act. By not having to hold annual stockholder meetings, the Fund would save
the costs, which can be substantial, of preparing proxy materials and
soliciting stockholders' votes on the usually routine proposals contained
therein.
DETERMINATION OF NET ASSET VALUE. At present, the Fund calculates its NAV
on a weekly basis on the Fund's valuation day in each week. SEC regulations
under the 1940 Act generally require open-end funds to value their assets on
each business day in order to determine the current NAV at which redemptions and
purchases are effected. NAVs of most large, established open-end funds are
published daily by leading financial publications. The Fund's NAV and other
information would continue to be published in leading financial publications
after the Conversion.
PORTFOLIO MANAGEMENT. Unlike open-end funds, closed-end investment
companies are not subject to pressures to sell portfolio securities at what may
be disadvantageous times in order to meet net redemptions. Because closed-end
funds do not have to meet redemptions, their cash reserves may be substantial or
minimal, depending primarily on management's perception of market conditions and
on management's decisions to use fund assets to repurchase shares. By
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contrast, most open-end funds maintain adequate reserves of cash or cash
equivalents in order to meet net redemptions as they arise. These reserves
may reduce the Fund's investment flexibility and the scope of its investment
opportunities. The Fund may have to sell portfolio securities in order to
meet redemptions or replenish reserves at a time when SCMI, the investment
adviser to the Fund, would not otherwise have elected to dispose of such
investments. This may cause the Fund to realize gains or losses, and increase
transaction costs and portfolio turnover. However, SCMI does not expect
significant changes in the Fund's investment policies or strategies as a
result of open-ending.
ILLIQUID SECURITIES. An open-end investment company may not have more than
15% of its total assets invested in securities that are illiquid. Following the
Conversion, the Fund must limit its investments in illiquid securities to 15% of
its total assets. As stated in the Prospectus at the time of the Fund's initial
public offering, the Fund was originally subject to a 10% limitation on illiquid
securities. The Fund currently has less than 10% of its net assets invested in
illiquid securities. Accordingly, SCMI does not expect that the 15% limitation
will change the manner in which the Fund's portfolio is managed. In order to
conform the policies of the Fund to those permitted for an open-end fund, the
Board of Directors has amended the Fund's policy on illiquid securities to
permit the Fund to invest up to 15% of its total assets in such securities. The
Fund has no present plans to significantly increase its investment in illiquid
securities.
SENIOR SECURITIES AND BORROWINGS. Closed-end investment companies are
permitted to issue senior securities representing indebtedness to any lender,
subject to a 300% asset coverage requirement under Section 18(a) of the 1940
Act. In addition, closed-end investment companies may issue preferred stock
(subject to various limitations), whereas Section 18(f) of the 1940 Act provides
that open-end investment companies generally cannot. Closed-end investment
companies thus may have more flexibility than open-end funds in "leveraging"
their stockholders' investments. The Fund has not used this strategy in the
past.
The 1940 Act prohibits open-end funds from issuing "senior securities"
representing indebtedness (i.e., bonds, debentures, notes and other similar
securities), other than indebtedness to banks where there is an asset coverage
of at least 300% for all borrowings. The Fund has never issued senior securities
or preferred stock, and SCMI does not believe that the more restrictive policies
as to permitted types of borrowings which would govern the Fund as an open-end
fund would materially affect the Fund's ability to carry out its investment
program.
As described above at page ___, it is recommended that stockholders of
the Fund approve an amendment to the Fund's fundamental investment restrictions
which would provide that the Fund may not borrow except from banks and only if
immediately after such borrowing there is asset coverage of at least 300% for
all borrowings of the Fund. The Fund may borrow money to assist in meeting
redemptions in a manner consistent with the requirements of the 1940 Act.
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SHAREHOLDER SERVICES. If the Conversion is approved by the stockholders,
the Fund will become part of the Schroder family of funds and will have
available to it all of the various services made available to such funds.
These services include the ability to invest in the Fund through tax-deferred
retirement plans or IRAs, the opportunity for stockholders to effect various
transactions by telephone, and participation in an exchange privilege that
allows stockholders to exchange shares of the Fund for shares of any other
fund in the Schroder family of funds. The cost of such services will normally
be borne by the Fund through a service plan for the Fund, rather than by
individual stockholders. Brokers and other financial intermediaries may
impose transaction fees on the purchase or redemption of shares. Such
additional fees would be borne by individual stockholders rather than by the
Fund.
At a meeting held on June 3, 1997, the Board of Directors unanimously
approved a Shareholder Service Plan for the Fund following the Conversion. The
Shareholder Service Plan describes the circumstances under which SFA may,
directly or through intermediaries, provide shareholder support services to the
Fund and its stockholders in respect of the Class A shares. The services
contemplated by the Shareholder Service Plan include establishing and
maintaining shareholder accounts and records, answering shareholder inquiries
and otherwise assisting shareholders in the purchase, redemption or exchange of
Class A shares, and such other services as may reasonably be requested. Under
the Shareholder Service Plan, SFA will receive a service fee at an annual rate
determined by the Trustees of the Fund of up to 0.25% of the average daily net
assets of the Class A shares. The Shareholder Service Plan will continue in
effect for one year from the date of execution, and thereafter for successive
periods of one year if approved at least annually by the Trustees.
DIVIDEND REINVESTMENT PLAN. The Fund intends to continue to provide the
opportunity for stockholders to have income dividends and capital gains
distributions automatically reinvested in Fund shares, unless they elect to
receive such amounts in cash. Effective upon conversion to an open-end
investment company, such reinvestments in shares would be made at NAV, rather
than at the greater of NAV or 95% of market value as presently provided by the
Fund's current dividend reinvestment plan. In addition, stockholders will no
longer be required to maintain an account at State Street, the Fund's current
transfer agent. Instead, shares issued pursuant to the dividend reinvestment
plan will be allocated and delivered directly to stockholders' accounts.
MINIMUM INVESTMENT AND INVOLUNTARY REDEMPTIONS. Due to the relatively
high cost of maintaining smaller accounts after the Conversion, the Fund will
reserve the right to redeem shares in any account (other than an IRA
retirement account) if at any time the account does not have a value of at
least $2,000, unless the value of the account falls below that amount solely
as a result of market activity. Stockholders will be notified that the value
of the account is less than $2,000 and be allowed at least 30 days to make an
additional investment to increase the account balance to at least $2,000.
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QUALIFICATION AS A REGULATED INVESTMENT COMPANY. The Fund intends to
continue to qualify for treatment as a regulated investment company under the
Code after the Conversion so that it will remain exempt from federal income tax
on that part of its investment company taxable income and net capital gain that
is distributed to its stockholders. To qualify for this treatment, the Fund must
meet several requirements, one of which, under current law, is that less than
30% of the Fund's gross income each taxable year may be derived from the sale or
other disposition of stock, securities, options, futures or forward contracts
held for less than three months. Pending legislation, if enacted, may eliminate
this requirement, effective for the taxable year of the Conversion and
thereafter. SCMI anticipates that the Fund will continue to be able to meet this
requirement (if still in effect) after the Conversion. No assurance exists,
however, that the relevant Code requirements will be met under all possible
circumstances, particularly if the Fund is required to sell recently acquired
portfolio securities because of unexpectedly large net redemptions or large
influxes of cash followed within a short time by significant redemptions of Fund
shares.
STOCK CERTIFICATES. If the Conversion is approved, shares of Common Stock
of the Fund will be canceled. The Fund will not issue any stock certificates.
Instead, all interests in the successor Fund will be maintained by book entry.
D. REORGANIZATION AS A DELAWARE BUSINESS TRUST
The Board of Directors is recommending that the Fund be operated as a
Delaware business trust instead of a Maryland corporation. The Board of
Directors believes that reorganizing the Fund to operate in the same manner as
the Schroder family of funds, which are organized as Delaware business trusts,
should reduce duplication of efforts and legal expenses. The Fund is proposed to
be reorganized into a Delaware business trust pursuant to an Agreement and Plan
of Reorganization (the "Reorganization Plan"), substantially in the form
included as Exhibit B to this Proxy Statement. A vote FOR Proposal No. 1 will
include a vote to approve the terms of the Reorganization Plan.
FACTORS CONSIDERED BY THE BOARD OF DIRECTORS
The Board of Directors considered the fact that the funds in the Schroder
family of funds are operating as Delaware business trusts and evaluated the
benefits of operating the Fund in the same structure to facilitate
administration of the Fund and possibly reduce fund expenses. In addition, they
noted that Delaware business trust law will provide greater flexibility to the
Fund than Maryland corporation law in structuring the Fund's operations.
THE REORGANIZATION PLAN
The following discussion summarizes the important terms of the
Reorganization Plan. This summary is qualified in its entirety by reference to
the Reorganization Plan itself.
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In connection with the Conversion, a Delaware business trust (which will
become the successor Fund) will be organized under the name Schroder Asian
Growth Fund. On the closing date of the Conversion (the "Closing Date"), the
Fund will transfer all of its assets to the successor Fund in exchange for the
assumption by the successor Fund of all the liabilities of the Fund and the
issuance of shares of beneficial interest of the successor Fund (the Class A
shares) to the Fund. The Class A shares issued to the Fund will have an
aggregate NAV equal to the aggregate NAV of the Fund as of the close of business
on the business day immediately preceding the Closing Date. Immediately
thereafter, the Fund will distribute its Class A shares to its stockholders
pro rata, in proportion to each stockholder's respective interest in the Fund
(as represented by shares of Common Stock of the Fund), in liquidation of
that interest. As soon as practicable thereafter, the Fund will be liquidated
and terminated.
Upon completion of the Conversion, each stockholder will be the owner of
full and fractional Class A shares equal in number, denomination and aggregate
NAV to such stockholder's shares in the Fund. Certificates representing shares
of Common Stock of the Fund will be canceled. All interests in the successor
Fund will be represented by book entry.
The obligations of the Fund and the successor Fund under the Reorganization
Plan are subject to various conditions as stated therein. In order to protect
against unforeseen events, the Reorganization Plan may be terminated or amended
at any time prior to the reorganization by action of either the Fund or the
successor Fund without liability to the other. The Fund and the successor Fund
shall be responsible for all of their expenses in connection with the
reorganization.
CHANGES FROM THE CHARTER AND BYLAWS OF THE FUND
The terms of the Trust Instrument and Bylaws of the successor Fund, as
reorganized under Delaware law, will modify the terms of the Articles and Bylaws
of the Fund. As a Delaware business trust, the successor Fund's operations will
be governed by its Trust Instrument, Bylaws and applicable Delaware law rather
than by the Articles, Bylaws and the MGCL which presently govern the Fund's
operations. The operations of the Fund will continue to be subject to the
provisions of the 1940 Act and the rules and regulations of the SEC thereunder
and applicable state securities laws.
Because the operations of a Delaware business trust are governed by its own
Declaration of Trust and not state corporate statutes, the Delaware business
trust typically provides greater flexibility of management and operations. In
general, the changes reflect the different nature of an open-end--as opposed to
a closed-end --fund. For example, the Trust Instrument will authorize the
Trustees of the successor Fund to create additional series or portfolios of the
successor Fund or divide the shares of any series into two or more separate
classes, all without need for a stockholder vote.
In addition, certain "anti-takeover" provisions found in the Articles but
not necessary for the operation of an open-end fund will be omitted from the
Trust Instrument. The
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Articles of the Fund require an affirmative vote by two-thirds of the
outstanding shares in order to approve, among other things, a merger,
consolidation, or sale of substantially all of the Fund's assets, or the
dissolution of the Fund. Moreover, a business combination involving the Fund
and any "interested stockholder" (a holder of at least 10% of the voting
power of the outstanding shares), or any affiliate of such a stockholder,
must be approved by the affirmative vote of holders of at least (a) 80% of
the outstanding voting shares and (b) two-thirds of the votes entitled to be
cast by holders of voting stock other than voting stock held by the
interested stockholder or its affiliates or associates.
By contrast, the Trust Instrument of the successor Fund will provide that
the Trustees may, without stockholder approval, (a) cause the successor Fund to
merge or consolidate into other entities, so long as the surviving entity will
succeed to or assume the successor Fund's registration as an open-end investment
company under the 1940 Act, or (b) cause the successor Fund to incorporate under
the laws of Delaware. However, the vote of a majority of the voting securities
of the successor Fund (as defined under the 1940 Act) will be required to permit
the Trustees to terminate the successor Fund by (i) selling and conveying
substantially all of the assets of the successor Fund to another entity that is
registered as an open-end investment company under the 1940 Act; or (ii) selling
and converting into money all of the assets of the successor Fund.
The Board of Directors of the Fund is divided into three classes, each
serving a three-year term ending in successive years. The Articles provide
that Directors of the Fund may not be removed from office except for cause
and only by vote of at least 75% of the votes entitled to be cast. The Trust
Instrument will eliminate the classification of the Board of Trustees of the
successor Fund and there will be only one class. Trustees will serve for the
lifetime of the Trust, or until their earlier resignation, retirement or
removal.
SHAREHOLDER ACCOUNTS AND PLANS
In connection with the reorganization, the Fund's transfer agent will
establish an account for each stockholder of record containing the appropriate
number of Class A shares to be received by that stockholder pursuant to the
Reorganization Plan. Such account will be the same in all material respects to
the account currently maintained by the Fund's transfer agent with regard to
that stockholder. No further action will be necessary in order to continue any
retirement plan currently maintained by a stockholder of the Fund with respect
to shares of the successor Fund.
ANSWERS TO CERTAIN QUESTIONS STOCKHOLDERS MAY HAVE RELATING TO THE
REORGANIZATION PLAN
Stockholders may have certain questions about how the Reorganization Plan
will affect the Fund and its stockholders. A number of relevant questions and
answers to those questions are found below.
Will there be any change in the Directors and officers of the Fund? No. The
following individuals are expected to be elected as Trustees effective upon the
Conversion:
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Louise Croset, Peter E. Guernsey, John I. Howell, William L. Means, David M.
Salisbury, I. Peter Sedgwick, and Madelon DeVoe Talley. Each of these
individuals has previously been elected by the stockholders of the Fund and
currently serves as a Director of the Fund, and each has consented to serve
as a Trustee if elected. If any of those persons should not be available for
election due to circumstances unforeseen at present, it is anticipated that
such other persons as the Directors of the Fund may recommend will be
elected. Messrs. Guernsey, Howell and Means and Ms. Talley, the proposed
Trustees of the Fund who are not "interested persons" of the Fund within the
meaning of the 1940 Act (the "Independent Trustees"), will receive the same
compensation that the Fund's Independent Directors currently receive.
The Trustees will elect officers whom they deem appropriate. It is expected
that the current officers of the Fund will be elected to serve in the same
capacities effective upon the Conversion. Officers and Trustees who are
interested persons of SCF, the Delaware business trust of which the Core
Portfolios will be two series, will receive no salary, fees or compensation from
SCF or the Fund.
The Trustees of SCF are as follows:
Peter E. Guernsey--Insurance consultant since August 1986; Director of the
Fund.
John I. Howell--Private consultant since February 1987; Director of the
Fund; Honorary Director, American International Group, Inc.; Director,
American International Life Assurance Company of New York.
Clarence F. Michalis--Chairman of the Board of Directors, Josiah Macy, Jr.
Foundation (charitable foundation).
Hermann C. Schwab--Retired since March 1988.
Mark J. Smith--President and Trustee of SCF; Senior Vice President and
Director of SCMI and Schroder Capital Management International Ltd.;
Director of SIM Ltd. and SFA.
The executive officers of SCF who are not Trustees of the gateway Fund are
as follows:
Margaret H. Douglas-Hamilton--Secretary; Secretary of the Fund; First Vice
President and General Counsel of Schroders Incorporated; Director, Schroder
Capital Management Inc.
Robert Jackowitz--Treasurer; Treasurer of the Fund; Vice President and
Assistant Treasurer of SCMI; Treasurer of SFA.
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Catherine A. Mazza--Vice President; Vice President and Assistant Secretary
of the Fund; First Vice President of SCMI; President of SFA.
Alexandra Poe--Vice President, Senior Vice President and Fund Counsel, SFA.
John A. Troiano--Vice President; Chief Executive Officer and Director of
SCMI.
What are some of the other differences between a Maryland corporation and
a Delaware business trust?
(a) Stockholder Liability. Under Maryland corporation law,
stockholders of a Maryland corporation such as the Fund are not generally
held personally liable for the obligations of the corporation, except in
limited circumstances generally not applicable to investment companies.
Under Delaware law, the successor Fund's stockholders will not be
personally liable for the obligations of the successor Fund. The Delaware
Business Trust Act provides that, except to the extent provided in the
governing instrument of a business trust, a stockholder of a Delaware
business trust is entitled to the same limitation of liability extended to
stockholders of private corporations for profit. Accordingly, the Trust
Instrument of the successor Fund will provide that stockholders of the
successor Fund shall not be personally liable for the debts, liabilities,
obligations and expenses incurred by or otherwise existing with respect to
the successor Fund. Moreover, the Trustees shall have no power to bind
personally any stockholder of the successor Fund or to call upon any such
stockholder for any money or assessment, apart from what such stockholder may
personally agree to pay. The securities regulators of some states, however,
have indicated that they may decline to apply Delaware law regarding the
personal liability of the stockholders of the successor Fund and it is
conceivable that, notwithstanding current laws, courts in other states may
decline to apply Delaware law on this point. As a result, to the extent that
the successor Fund or a stockholder will be subject to the jurisdiction of
courts in those states, there is a risk that such courts might not apply
Delaware law and could thereby subject successor Fund stockholders to
liability.
The management of the Fund believes this risk to be remote. To guard
against this risk, the Trust Instrument will (1) contain an express
disclaimer of stockholder liability for acts or obligations of the successor
Fund; and (2) provide for indemnification out of successor Fund property of
any stockholder held personally liable for the obligations of the successor
Fund. Thus, the risk of a successor Fund stockholder incurring financial loss
beyond the stockholder's investment because of stockholder liability would be
limited to circumstances in which (i) a court refused to apply Delaware law
or otherwise failed to give full effect to the Trust Instrument of the
successor Fund or contractual provisions limiting stockholder liability (or
no contractual limitation of liability was in effect); and (ii) the successor
Fund itself was unable to meet its obligations and the successor Fund held
inadequate insurance to cover its obligations. In light of Delaware law, the
nature of the successor Fund's business, and the nature of its assets, the
Board of Directors of
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the Fund believes that the risk of personal liability to a successor Fund
stockholder is extremely remote.
(b) Trustee and Officer Liability. The Articles of the Fund provide
that to the maximum extent permitted by Maryland law, and subject to the
requirements of the 1940 Act, no Director or officer of the Fund shall be
liable to the Fund or its stockholders for money damages. Directors of a
Maryland corporation such as the Fund may not be held personally liable under
Maryland law if the director acts in good faith, in a manner reasonably
believed by the director to be in the best interests of the Fund, and with
the care that an ordinarily prudent person in a like position would use under
similar circumstances. Under the 1940 Act, neither Maryland law nor the
Fund's Articles or Bylaws would protect a Director against any liability to
which the Director would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
Director's obligations and duties thereunder.
The Trust Instrument will provide that a Trustee, when acting in such
capacity, shall not be personally liable to any person other than the
successor Fund or its stockholders for any act, omission or obligation of the
successor Fund or any Trustee. Further, a Trustee shall not be liable for any
act or omission or any conduct whatsoever in his capacity as Trustee,
provided that nothing in the Trust Instrument or the Delaware Business Trust
Act shall protect any Trustee against any liability to the successor Fund or
to stockholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee.
(c) Voting Rights with Respect to the Election and Removal of
Directors or Trustees. The Articles of the Fund provide that a Director may
be removed from office only for cause and only by vote of the holders of at
least 75% of the votes entitled to be cast for the election of Directors. The
Bylaws of the Fund provide that special meetings of stockholders will be
called at the request of holders of shares entitled to cast a majority of all
the votes entitled to be cast at the meeting. The Trust Instrument for the
successor Fund organized as a Delaware business trust will provide that a
special meeting of stockholders for the purpose of voting on the removal of
any Trustee may be called by the holders of 10% or more of the outstanding
shares of the successor Fund.
(d) Voting with Respect to the Core Portfolios. In general, the
rights of the successor Fund as an interestholder in the Core Portfolios are
parallel to the rights of a stockholder with respect to the Fund. If there
are other investors in a Core Portfolio, there can be no assurance that a
vote of all of the interestholders of the Core Portfolio would result in the
same outcome as a vote of stockholders of the successor Fund. If the outcome
of a Core Portfolio vote was not consistent with the vote of the stockholders
of the successor Fund, the Board of Trustees of the successor Fund would
consider whether it was still in the best interests of the successor Fund and
its stockholders to invest in such Core Portfolio.
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Investors in each Core Portfolio have no preemptive rights and no
conversion rights. Each Core Portfolio normally does not hold meetings of
investors except as required under the 1940 Act. As an investor in Core
Portfolios, the successor Fund will be entitled to vote in proportion to its
relative interest in each such Core Portfolio. The Fund may, as required by
applicable law, hold meetings of its stockholders in regard to questions
presented by the Core Portfolios to their shareholders. As to any issue on
which successor Fund stockholders vote, the successor Fund will normally vote
its interest in the Core Portfolio in proportion to the votes cast by its
stockholders.
Changing a fundamental policy of a Core Portfolio requires approval of a
"majority of the outstanding voting securities," as such term is defined at
page [12] of this Proxy Statement, of the Core Portfolio. The Board of
Trustees of SCF may change nonfundamental policies without prior
interestholder approval. Other matters that will normally require approval of
interestholders of SCF include, subject to applicable statutory and
regulatory requirements, the election of Trustees, approval of an investment
advisory contract, certain amendments to the Trust Instrument of SCF, or a
merger, consolidation or sale of substantially all of a Core Portfolio's assets.
(e) Rights of Inspection. Under the MGCL, any stockholder of the Fund may
inspect and copy, during usual business hours, the Bylaws of the Fund,
minutes of the proceedings of stockholders, annual statements of affairs, and
any voting trust agreements on file at the Fund's principal office. Any
stockholder is entitled to receive, upon written request, a statement showing
all stock and securities issued by the Fund during a specified period of not
more than 12 months before the date of the request. Moreover, one or more
persons who have been stockholders for at least six months and who together
hold at least five percent of the outstanding shares of the Fund may request
in writing a statement of the Fund's current assets and liabilities and may
inspect and copy the Fund's books of account and stock ledger. Under the
Bylaws of the successor Fund, the Trustees shall from time to time determine
whether, to what extent and under what other conditions the accounts and
books of the successor Fund or any of them shall be open to the inspection of
stockholders. No stockholder of the successor Fund will have any right to
inspect any account or book or document of the successor Fund, except as
conferred by law or otherwise by the Trustees or by resolution of the
stockholders.
What are the tax consequences of the reorganization as a Delaware
business trust? The Conversion will not be completed unless the Fund and the
successor Fund receive an opinion from their tax counsel, Debevoise &
Plimpton, to the effect that the federal income tax consequences of the
Fund's reorganization as a Delaware business trust will be as follows: (1) no
gain or loss will be recognized by the successor Fund or the Fund upon the
transfer of all of the assets of the Fund to the successor Fund in exchange
for shares of the successor Fund; and (2) no gain or loss will be recognized
by stockholders of the Fund on the exchange of shares of the Fund for shares
of the successor Fund, and the holding period and tax basis of such shares
received by each stockholder of the Fund will be the same as the holding
period and tax basis of the stockholder's Fund shares held immediately prior
to the exchange; however, the Board of
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Directors may decide to proceed with the Conversion in the absence of such
opinions or ruling if it concludes that doing so is in the best interests of
the Fund and its stockholders. While the IRS is not bound by an opinion of
counsel, the Board of Directors believes that an opinion of counsel provides
sufficient authority on the tax effects of the Fund's reorganization as a
Delaware business trust.
Although the Fund does not believe that the Conversion will result in
any material tax costs to the Fund or its stockholder in any non-U.S.
jurisdiction, there can be no assurance in this regard in view of the
possibility of legislative developments or adverse interpretations of
present tax laws or policies in such jurisdictions.
31
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PROPOSAL NO. 2
ELIMINATION OF ANNUAL MANDATORY
TENDER OFFER REQUIREMENT
If Proposal No. 1 is not approved, the Fund will continue to operate
as a closed-end fund. In such event, the Board of Directors is recommending
that the stockholders vote to approve eliminating the undertaking made in the
Prospectus that the Fund must conduct annual tender offers for its shares
under the terms and conditions set forth in the Prospectus, since the tender
offer process entailed substantial expense for the Fund without resulting in
any lasting impact on the Fund's discount.
THE BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE APPROVAL OF PROPOSAL NO. 2 BECAUSE OF THE POSSIBILITY THAT PROPOSAL
NO. 1 MAY NOT BE APPROVED.
PROPOSAL NO. 2 WILL ONLY BE EFFECTED IF PROPOSAL NO. 1 IS NOT
APPROVED, IN WHICH EVENT THE FUND WILL CONTINUE TO OPERATE AS A CLOSED-END
FUND. IF PROPOSAL NO. 1 IS APPROVED, PROPOSAL NO. 2 WILL BE SUPERSEDED BY THE
CONVERSION BECAUSE THE FUND WILL CONVERT TO OPEN-END STATUS PURSUANT TO
PROPOSAL NO. 1.
THE FUND'S PRESENT MANDATORY TENDER OFFER UNDERTAKING
As stated in the Prospectus, in connection with the initial public
offering of shares of the Fund, the Board of Directors determined at that time
that it would be in the best interests of the stockholders to take action to
attempt to reduce or eliminate the Fund's share price discount to NAV. To that
end, in the Prospectus the Fund undertook to conduct an annual tender offer for
its shares during the first calendar quarter of each year commencing in 1997
that the average of the closing prices on the NYSE for the Fund's weekly
valuation day in each week during a specified period (the "Measurement Period")
represents a discount of 3% or more from the average NAV of the Fund as
determined on the same days in the same period. The Measurement Period is
required to be a 12-week consecutive period beginning in the fourth calendar
quarter of a calendar year and ending in the immediately following first
calendar quarter. It is the announced policy of the Directors of the Fund,
which may be changed by the Directors, that the Fund cannot accept tenders or
effect repurchases under the circumstances specified in the Prospectus.
THE FUND'S EXPERIENCE UNDER THE TENDER OFFER PROVISION
In accordance with the present requirements in the Prospectus, the
Fund conducted a tender offer for its shares (the "Tender") during the first
calendar quarter of 1997 pursuant to the Offer to Purchase dated February 19,
1997. The Tender commenced on February 19 and expired on March 20, 1997. In
accordance with the terms and conditions of the Tender, the Fund purchased
3,500,000 shares pro rata in accordance with the number of shares tendered
32
<PAGE>
by each stockholder, or approximately 26% of the total shares tendered. The
shares were purchased at $13.04 per share, the NAV at March 21, 1997, for a
total price of $45,640,000. The total accrued cost to the Fund of conducting
the Tender was approximately $337,834.
The Tender had no lasting impact on the Fund's discount. For the
period beginning on November 11, 1996 and ending on January 31, 1997 (the
Measurement Period fixed to determine if the Tender would be required), the
Fund's shares traded at an average price of $12.115, with an average discount
of 10.96%. During the Tender, the Fund's average closing share price on the
NYSE was $12.61 and the average discount for the same period was 9.25%.
Following the expiration of the Tender, the discount returned to historical
levels. For the period from March 26 (the first valuation date following the
completion of the Tender) to July 24, 1997, the Fund's average closing share
price was $[___] and the average discount was [___]%.
FACTORS CONSIDERED BY THE BOARD OF DIRECTORS
The Board of Directors has concluded that the Fund's present
mandatory tender offer policy cannot be expected to provide an effective
means of reducing or eliminating the Fund's discount and does not produce
sufficient benefits to the Fund or its stockholders to outweigh the costs of
maintaining the policy.
As reflected above, the Tender did not at any time eliminate the
Fund's discount. While the discount was reduced from time to time during the
pendency of the Tender, the discount widened to pre-Tender levels shortly
after the Tender expired. As a result, while the Tender did enable
stockholders to recover part of their investment in the Fund at NAV, it
produced no lasting benefit to the remaining stockholders.
The Board of Directors reviewed the costs and other potential
burdens imposed on the Fund by the Tender, including (i) the legal,
administrative and other expenses arising from the Tender, amounting to
approximately $337,834, (ii) the impact of the Tender on the expense ratio of
the Fund, and (iii) the impact of the Tender on the Fund's portfolio
holdings, liquidity and investment operations. The Board of Directors also
considered the cumulative impact of successive annual tender offers,
particularly with regard to the effect of such tender offers on the Fund's
net assets and its ability to meet its investment objectives. In addition,
the Board of Directors considered that continuation of the requirement
mandating annual tender offers would simply result in liquidation of the Fund
over time.
The Board of Directors considered alternative means of addressing
the Fund's discount, including conversion to open-end structures, merger into
other existing funds, or conducting periodic distributions or repurchases of
shares. In that regard, the Directors reviewed the experiences of other
closed-end funds facing share price discounts, including those funds with
policies requiring action in response to such discounts. The Directors
considered the range of actions taken by other funds and the effectiveness of
such actions in reducing or eliminating share price discounts. Therefore,
for the reasons discussed above in connection with Proposal No. 1,
33
<PAGE>
the Board of Directors unanimously recommends that the stockholders vote to
convert the Fund into an open-end structure and vote IN FAVOR OF PROPOSAL NO. 1.
WHAT VOTE IS REQUIRED TO ELIMINATE THE TENDER OFFER UNDERTAKING?
Approval of the elimination of the annual tender offer undertaking
requires the affirmative vote, at a meeting of the stockholders duly called
and at which a quorum is present, of a "majority of the outstanding voting
securities" of the Fund, as defined by the 1940 Act. (See page [ ] of this
Proxy Statement). Abstentions and broker non-votes have the effect of votes
against the new policy.
34
<PAGE>
FURTHER INFORMATION ABOUT VOTING
AND THE STOCKHOLDER MEETING
WHAT IS THE REQUIRED QUORUM?
In order to hold the Special Meeting, holders of a majority of the
Fund's shares entitled to vote must be present, in person or by proxy, at the
meeting. In the event that a quorum is present but sufficient votes in favor of
one or more of the Proposals are not received by the time scheduled for the
meeting, the persons named as proxies may propose one or more adjournments of
the meeting to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote of a majority of the shares present in person
or by proxy at the meeting. The persons named as proxies will vote in favor of
such adjournment if they determine that such adjournment and additional
solicitation is reasonable and in the interests of the Fund's stockholders.
In the absence of a quorum, the holders of a majority of shares
entitled to vote at the Special Meeting and present in person or by proxy, or,
if no stockholder entitled to vote is present in person or by proxy, any officer
present entitled to preside or act as secretary of the meeting may adjourn the
Special Meeting sine die or from time to time without further notice to
stockholders to a date not more than 120 days after July 18, 1997. Any business
that might have been transacted at the Special Meeting may be transacted at any
such adjourned meeting at which a quorum is present.
HOW WILL VOTES BE COUNTED?
The individuals named as proxies (or their substitutes) in the
enclosed proxy card (or cards if you have multiple accounts) will vote in
accordance with your directions as indicated thereon if your proxy is properly
executed when received. You may direct the proxy holders to vote your shares on
a Proposal by checking the appropriate box "For" or "Against," or instruct them
not to vote those shares on a Proposal by checking the "Abstain" box. (As noted
earlier, an abstention as to either Proposal No. 1 or Proposal No. 2 will have
the effect of a vote against that Proposal.) Alternatively, you may simply
sign, date and return your proxy card(s) with no specific instructions as to the
Proposals. If you properly execute your proxy card and give no voting
instructions with respect to a Proposal, your shares will be voted FOR each
Proposal.
Abstentions and "broker non-votes" (as defined below) are counted for
purposes of determining whether a quorum is present for purposes of convening
the meeting. "Broker non-votes" are shares held by a broker or nominee for
which an executed proxy is received by the Fund but not voted as to one or more
Proposals because instructions have not been received from the beneficial owners
or persons entitled to vote, and the broker or nominee does not have
35
<PAGE>
discretionary voting power on that Proposal. If a Proposal must be approved by
a percentage of voting securities present at the meeting or a majority of the
Fund's outstanding shares, abstentions and broker non-votes will be considered
to be voting securities that are present and will have the effect of votes
against the Proposal.
CAN I CHANGE MY VOTE AFTER I DELIVER MY PROXY?
Any proxy may be revoked at any time before it is exercised by filing
a written notice of revocation with the Fund, by delivering a properly executed
proxy bearing a later date, or by attending the Special Meeting and voting in
person.
WILL ANY OTHER MATTERS BE ACTED UPON AT THE SPECIAL MEETING?
The Board of Directors knows of no business other than Proposals No. 1
and No. 2 which will be presented for consideration at the Special Meeting. If
any other matter is properly presented, it is the intention of the persons named
in the enclosed proxy to vote in their discretion.
VOTING BY TELEPHONE.
In addition to voting in person or by executing a written proxy, a
stockholder may orally authorize another person to act as his or her proxy by
electronic transmission of his or her instructions on the voting of his or her
shares, followed by confirmation that his or her instructions have been properly
received and recorded. The Fund has been advised by counsel that these
procedures are consistent with the requirements of Maryland law. If these
procedures were subject to a successful legal challenge, such votes would not be
counted at the Special Meeting. The Fund is unaware of any such challenge at
this time.
Under these procedures, stockholders would be called at the telephone
number SCMI has in its records for their accounts, and would be asked for their
social security number or other identifying information. The stockholders would
then be given an opportunity to authorize proxies to vote their shares at the
Special Meeting in accordance with their instructions. To ensure that the
stockholders' instructions have been recorded correctly, they will also receive
a confirmation of their instructions in the mail. A special toll-free number,
1-800-733-8481 extension 484, will be available in case the information
contained in the confirmation is incorrect, or if you wish to change your vote.
COST OF THE SPECIAL MEETING.
The cost of the Special Meeting, including the expense of preparing,
printing and mailing the enclosed form of proxy and accompanying Notice of
Special Meeting and Proxy Statement, will be borne by the Fund. The Fund will
reimburse banks, brokers and others for their reasonable expenses in forwarding
proxy solicitation materials to the beneficial owners of the shares of the Fund.
To ensure that sufficient shares of Common Stock are represented at the Special
Meeting to permit approval of the Proposals outlined in the Proxy Statement,
the Fund
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<PAGE>
has retained at its expense Shareholder Communications Corporation to perform
certain proxy solicitation services in respect of the Special Meeting, for a
fee of $15,000, together with reimbursement of such firm's expenses. The
address of Shareholder Communications Corporation is 17 State Street, New
York, New York.
STOCKHOLDER PROPOSALS.
If the Conversion is approved, the Fund will not conduct annual
meetings of stockholders other than to the extent required by the 1940 Act. If
the Conversion is not approved, proposals of stockholders intended to be
presented at the next annual meeting of stockholders of the Fund must be
received by the Fund for inclusion in its Proxy Statement and form of proxy by
December 18, 1997.
OTHER INFORMATION.
While the Fund is a Maryland corporation, certain of its Directors and
officers are non-residents of the United States and have all, or a substantial
part, of their assets located outside of the United States. As a result, it may
be difficult for U.S. investors to effect service of process upon such Directors
or officers within the United States or effectively to enforce judgments of
courts of the United States predicated upon civil liabilities of such Directors
or officers under the federal securities laws of the United States. In
addition, such civil remedies as are afforded by the federal securities laws of
the United States may not be enforceable in the United Kingdom, the residence of
the non-U.S. resident Directors and officers of the Fund.
The Chase Manhattan Bank is the Fund's custodian. Its address is
Global Custody Division, Chase MetroTech Center, Brooklyn, New York 11245.
Boston EquiServe serves as transfer agent, dividend-paying agent, and registrar
for the Fund. Its address is 225 Franklin Street, Boston, Massachusetts 02110.
The Fund sends annual and quarterly reports to stockholders. THE FUND
WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL REPORT AND
SEMI-ANNUAL REPORT SUCCEEDING SUCH ANNUAL REPORT, IF ANY, TO STOCKHOLDERS UPON
REQUEST TO THE FUND'S ADMINISTRATOR, PRINCETON ADMINISTRATORS, L.P., 800
SCUDDERS MILL ROAD, PLAINSBORO, NEW JERSEY 08536 (OR CALL 1-800-688-0928).
37
<PAGE>
Exhibit A
[Marked to show
changes from the
Fund Agreement]
Form of
INVESTMENT ADVISORY AGREEMENT
[Same form of agreement for Asset Allocation Agreement and for Standby
Advisory Agreement. Both agreements have identical terms, except for the fee
provisions set forth at Section 4.]
Agreement, dated and effective as of ___________, between
Schroder Asian Growth Fund, a DELAWARE BUSINESS TRUST (herein referred to
as the "Fund") and Schroder Capital Management International Inc., a New York
corporation (herein referred to as the "Investment Adviser").
W I T N E S S E T H:
WHEREAS, the Fund is a non-diversified OPEN-end management
company registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act");
WHEREAS, the Investment Adviser provides investment advice and is
registered with the Securities and Exchange Commission (the "SEC") as an
investment adviser under the Investment Advisers Act of 1940, as amended (the
"Advisers Act") and is registered with the United Kingdom Investment
Management Regulatory Organisation ("IMRO");
WHEREAS, the Fund DESIRES TO RETAIN the Investment Adviser to
render investment advisory services to or on behalf of the Fund IN THE
MANNER AND ON THE TERMS HEREINAFTER SET FORTH; and
WHEREAS, the Investment Adviser IS WILLING TO RENDER SUCH
INVESTMENT ADVISORY SERVICES TO THE FUND;
A-1
<PAGE>
NOW, THEREFORE, in consideration of the promises and covenants
hereinafter contained, the Fund and the Investment Adviser hereby agree as
follows:
1. Engagement of the Investment Adviser. The Fund hereby employs
the Investment Adviser to act as the investment adviser to the Fund and to
provide the investment advisory services described below, subject to the
supervision of the Board of TRUSTEES of the Fund, for the period and on
the terms and conditions set forth in this Agreement. The Investment Adviser
hereby accepts such employment and agrees during such period to render such
services and to assume the obligations herein set forth for the compensation
provided for herein. The Investment Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority hereunder to act for or represent
the Fund in any way or otherwise be deemed an agent of the Fund.
2. Investment Advisory Services. Subject always to the Fund's
TRUST INSTRUMENT, its Bylaws and its registration statement filed on Form
N-1A with the SEC, as such registration statement may be amended from time
to time (the "Registration Statement"), the Investment Adviser shall act as
investment adviser to the Fund and as such shall furnish continuously an
investment program for the Fund consistent with the Fund's investment
objective, policies and restrictions. In the performance of its duties
hereunder, the Investment Adviser shall:
(a) determine from time to time which securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall
be held in the various securities and assets in which the Fund invests or in
cash;
(b) make decisions for the Fund with respect to foreign currency
matters and foreign exchange contracts, having regard to foreign exchange
controls, if any;
(c) advise the Fund in connection with policy decisions to be made
by its Board of TRUSTEES or any committee thereof with respect to its
investments and, as requested, furnish the Fund with research, economic and
statistical data in connection with its investments and investment policies;
(d) submit such reports relating to the valuation of the Fund's
securities as the Fund's Board of TRUSTEES or the Fund's administrator
may reasonably request;
A-2
<PAGE>
(e) place orders for the purchase, sale or exchange of portfolio
assets for the Fund's accounts with brokers or dealers selected by the
Investment Adviser; provided, however, that in connection with the placing
of such orders and the selection of such brokers or dealers the Investment
Adviser shall seek to obtain execution and pricing within the policy
guidelines established by the Fund's Board of TRUSTEES and set forth in
the Registration Statement of the Fund as in effect from time to time;
(f) provide information in the possession of the Investment Adviser
to the Fund's administrator as the Fund's administrator may request to
maintain and preserve the records required by the Investment Company Act;
(g) obtain and evaluate such information relating to economies,
industries, businesses, securities markets and securities as the Investment
Adviser may deem necessary or useful in the discharge of its duties
hereunder; and
(h) from time to time, or at any time requested by the Fund's Board
of TRUSTEES, make reports to the Fund concerning its performance of the
foregoing services and furnish advice and recommendations with respect to
other aspects of the business and affairs of the Fund.
3. Allocation of Charges and Expenses.
(a) The Investment Adviser shall pay for maintaining its staff and
personnel necessary to perform its obligations under this Agreement and
shall, at its own expense, maintain the office space, facilities, equipment
and personnel that are reasonably necessary to carry out its obligations
hereunder. In addition, the Investment Adviser shall pay the reasonable
salaries, fees and expenses of such of the Fund's officers and employees
(including the Fund's share of payroll taxes) and any fees and expenses of
such of the Fund's TRUSTEES as are directors, officers or employees of the
Investment Adviser OR OF FORUM FINANCIAL GROUP LIMITED LIABILITY COMPANY
("FORUM") OR THEIR AFFILIATES; provided, however, that the Fund, and not the
Investment Adviser, shall bear out-of-pocket travel expenses of Trustees
and officers of the Fund OR OF FORUM who are directors, officers or employees
of the Investment Adviser OR FORUM to the extent that such expenses relate to
attendance at meetings of the Board of Trustees of the Fund or any
committees thereof.
(b) The Fund assumes and shall pay or cause to be paid fees to the
Investment Adviser and the Fund's administrator and all other expenses of the
Fund
A-3
<PAGE>
including, without limitation: (i) charges and expenses of any custodian,
subcustodian or depositary appointed by the Fund for the safekeeping of its
cash, securities or property and fees and expenses of any transfer agent,
dividend paying agent and registrar for the Fund; (ii) charges and expenses
of accounting and auditing; (iii) expenses and fees associated with
registering and qualifying securities issued by the Fund for sale with the
SEC and in various states and foreign jurisdictions and expenses of preparing
share certificates and other expenses in connection with the issuance,
offering or underwriting of securities issued by the Fund, including stock
exchange listing fees and freight insurance and other charges in connection
with the shipment of the Fund's portfolio securities; (iv) expenses of
stationery, preparing, printing and distributing reports, notices and
dividends and other documents to the Fund's shareholders, including, without
limitation, expenses of tender offers for and repurchases of securities
issued by the Fund, in each case, to the extent not borne by the Fund's
administrator; (v) interest on any indebtedness of the Fund; (vi)
governmental fees and taxes of the Fund, including any stock transfer tax
payable on a portfolio security of the Fund; (vii) brokerage commissions and
other expenses incurred in acquiring or disposing of the Fund's portfolio
securities; (viii) costs of TRUSTEES' and officers' insurance and
fidelity bonds; (ix) compensation and expenses of the Trustees who are
not interested persons of the Investment Adviser, including out-of-pocket
travel expenses; (x) costs and expenses incidental to holding meetings of the
Board of TRUSTEES, or any committees thereof, or meetings of shareholders
including out-of-pocket travel expenses of TRUSTEES and officers of the
Fund or Forum who are directors, officers or employees of the Investment
Adviser to the extent that such expenses relate to attendance at such
meetings; (xi) fees for legal, auditing and consulting services and
litigation expenses, including settlement or arbitration costs; (xii) dues
and expenses incurred in connection with membership in investment company
organizations and expenses relating to investor and public relations; and
(xiii) costs, expenses and fees incurred in connection with obtaining,
maintaining, refinancing or repaying indebtedness. It is understood that the
organizational, offering and marketing expenses, including accounting, legal
and printing expenses and registration fees incurred by the Investment
Adviser on behalf of the Fund in connection with the initial public offering
of the Fund's securities will be reimbursed to the Investment Adviser by the
Fund.
A-4
<PAGE>
4. Compensation of the Investment Adviser.
(a) FOR ASSET ALLOCATION AGREEMENT ONLY: In consideration of
the foregoing, the Trust shall pay the Adviser a fee at an annual rate of
.20% of the average daily net assets of the Trust, provided that the fee
paid hereunder shall be reduced pro rata by any fees payable to the Adviser
under the [Standby Advisory Agreement]. Such fees shall be accrued daily and
shall be payable monthly in arrears on the first day of each calendar month
for services performed hereunder during any prior calendar month.
FOR STANDBY ADVISORY AGREEMENT ONLY: In consideration of the
foregoing, the Trust shall pay the Adviser a fee at an annual rate of .90% of
the average daily net assets of that portion of the assets of the Trust that
are not otherwise invested in a registered open-end management investment
company, or separate series thereof, in accordance with Section 12(d)(1)(G)
of the Investment Company Act of 1940, the rules thereunder or an exemptive
order from the prohibitions of Rule 12(d)(1) of that Act. No fee shall be
payable hereunder during any period in when which the Trust invests all (or
substantially all) of its investment assets in a registered, open-end
management investment company, or a separate series thereof, in accordance
with Section 12(d)(1)(E) of the Investment Company Act.
(b) Expense Limitations. In the event the operating expenses of
the Fund, including amounts payable to the Investment Adviser pursuant to
subsection (a) hereof, for any fiscal year of the Fund ending on a date on
which this Agreement is in effect, exceed the expense limitations applicable
to the Fund imposed by applicable state securities laws or regulations
thereunder, as such limitations may be raised or lowered from time to time,
the Investment Adviser shall reduce its management fee by the extent of such
excess and, if required pursuant to any such laws or regulations, will
reimburse the Fund in the amount of such excess; provided, however, to the
extent permitted by law, there shall be excluded from such expenses the
amount of any interest, taxes, brokerage commissions and extraordinary
expenses (including but not limited to legal claims and liabilities and
litigation costs, including settlement or arbitration costs, and any
indemnification related thereto) paid or payable by the Fund. Whenever the
expenses of the Fund exceed a pro rata portion of the applicable annual
expense limitations, the estimated amount of reimbursement under such
limitations shall be applicable as an offset against the monthly payment of
the management fee due to the Investment Adviser. Should two or more such
expense limitations be applicable as at the end of the last business day of
the month, that
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<PAGE>
expense limitation which results in the largest reduction in the Investment
Adviser's fee shall be applicable.
5. Limitation of Liability of the Investment Adviser.
(a) The Investment Adviser shall not be liable for any error of
judgment or mistake of law or for any loss arising out of any investment or
for any act or omission in the execution and management of the Fund, except
for willful misfeasance, bad faith or gross negligence in the performance of
its duties, or by reason of reckless disregard of its obligations and duties
hereunder. As used in this Section 5, the term "Investment Adviser" shall
include any affiliates of the Investment Adviser performing services for the
Fund contemplated hereby and directors, officers and employees of the
Investment Adviser as well as that corporation itself.
(b) The Investment Adviser shall not be liable for any losses
caused by disturbances of its operations by virtue of force majeure, war,
riot, or damage caused by nature or due to other events for which it is not
responsible (e.g., strike, lock-out or losses caused by the imposition of
foreign exchange controls, expropriation of assets or other acts of domestic
or foreign authorities).
(c) The presence of exculpatory language in this Agreement shall
not be deemed by the Fund, the Investment Adviser or any other party
appointed pursuant to this Agreement, including, without limitation, any
custodian, as in any way limiting causes of action and remedies which may,
notwithstanding such language, be available to the Fund either under common
law or statutory law principles applicable to fiduciary relationships or
under the federal securities laws.
6. Other Activities of the Investment Adviser and its Affiliates.
(a) Nothing herein contained shall prevent the Investment Adviser
or any of its affiliates from engaging in any other business or from acting
as investment adviser or investment manager for any other person or entity,
whether or not having investment policies or portfolios similar to that of
the Fund; and it is specifically understood that officers, directors and
employees of the Investment Adviser and its affiliates may continue to engage
in providing portfolio management services and advice to other investment
companies, whether or not registered, and to other investment advisory
clients. When other clients of the Investment Adviser desire to purchase or
sell a security at the same time such security is purchased or sold for the
Fund, such purchases and sales will, to the extent feasible, be allocated
among the
A-6
<PAGE>
Fund and such clients in a manner believed by the Investment Adviser to be
equitable to the Fund and such clients.
(b) The Investment Adviser reserves the right to grant the use of
the name "SCHRODER," or any derivative thereof, to any other investment
company or business enterprise. The Investment Adviser reserves the right to
withdraw from the Fund the use of the name "SCHRODER" and the use of its
registered service mark; at such time of withdrawal of the right to use the
name "SCHRODER," the Investment Adviser agrees that the question of
continuing this Agreement may be submitted to a vote of the Fund's
shareholders. In the event of such withdrawal or the termination of this
Agreement, for any reason, the Fund will, on the written request of the
Investment Adviser, take such action as may be necessary to change its name
and eliminate all reference to the word "SCHRODER" in any form, and will no
longer use such registered service mark.
7. LIMITATION OF LIABILITY OF THE FUND TRUSTEES: THE TRUSTEES OF
THE TRUST AND THE SHAREHOLDERS OF THE TRUST SHALL NOT BE LIABLE FOR ANY
OBLIGATIONS OF THE TRUST UNDER THIS AGREEMENT, AND THE ADVISER AGREES THAT,
IN ASSERTING ANY RIGHTS OR CLAIMS UNDER THIS AGREEMENT, IT SHALL LOOK ONLY TO
THE ASSETS AND PROPERTY OF THE TRUST TO WHICH THE ADVISER'S RIGHTS OR CLAIMS
RELATE IN SETTLEMENT OF SUCH RIGHTS OR CLAIMS, AND NOT TO THE TRUSTEES OF THE
TRUST OR THE SHAREHOLDERS OF THE TRUST.
8. Duration and Termination of this Agreement. This Agreement
shall remain in force until the second anniversary of the effective date of
this Agreement first set forth above and from year to year thereafter, but
only so long as such continuance is approved at least annually by (a) the
vote of a majority of the TRUSTEES of the Fund who are not parties to the
Agreement or interested persons of the Investment Adviser or interested
persons of any such party (other than as TRUSTEES of the Fund), cast in
person at a meeting called for the purpose of voting on such approval, and
(b) the vote of either (i) the Board of TRUSTEES of the Fund or (ii) a
majority of the outstanding voting securities of the Fund. This Agreement
may be terminated at any time, without payment of any penalty, by the Fund
either by the vote of the Board of TRUSTEES of the Fund or by the vote of
a majority of the outstanding voting securities of the Fund on sixty (60)
days' written notice to the Investment Adviser, and by the Investment Adviser
on sixty (60) days' written notice to the Fund. This Agreement shall
automatically terminate in the event of its assignment by either party. In
interpreting the provisions of this Section 7, the definitions contained in
Section 2(a) of the Investment Company Act (particularly the
A-7
<PAGE>
definitions of "assignment," "interested person" and "voting security") shall
be applied.
9. Amendment of this Agreement. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, and no amendment, transfer,
assignment, sale, hypothecation or pledge of this Agreement shall be effective
until approved by the vote of: (a) the Board of TRUSTEES of the Fund,
including a majority of the TRUSTEES who are not parties to the ADVISORY
Agreement or interested persons of the Investment Adviser or interested persons
of any such party (other than as TRUSTEES of the Fund), cast in person at a
meeting called for the purpose of voting on such approval and (b) a majority of
the outstanding voting securities of the Fund.
10. Notice. Any notice or other communication required to be
given pursuant to this Agreement shall be in writing or by fax, with hard copy
to follow, and shall be effective upon receipt. Notices and communications
shall be given: (a) to the Fund at c/o Schroder Capital Management
International Inc., 787 Seventh Avenue, 34th Floor, New York, New York l00l9,
Attention: LOUISE CROSET and (b) to the Investment Adviser at the same
address.
11. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of DELAWARE and the applicable
provisions of the Investment Company Act. To the extent applicable laws of the
State of DELAWARE, or any of the provisions herein, conflict with the
applicable provisions of the Investment Company Act, the latter shall control.
12. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
The Adviser confirms that the TRUST is a "NON-PRIVATE
CUSTOMER" as defined in the rules of IMRO and is being treated with the
same standard of care as an employee benefit plan subject to regulation under
the Employee Retirement Income Security Act of 1974, as amended.
A-8
<PAGE>
The Fund confirms that it has been provided with independent legal
advice on this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
SCHRODER ASIAN GROWTH FUND
By:________________________________________
SCHRODER CAPITAL MANAGEMENT
INTERNATIONAL INC.
By:________________________________________
A-9
<PAGE>
Exhibit B
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of
_________ between SCHRODER ASIAN GROWTH FUND, INC. (the "Fund"), a corporation
formed under the laws of the State of Maryland, and SCHRODER ASIAN GROWTH FUND
(the "Trust"), a business trust formed under the laws of the State of Delaware,
all of the initial shares of beneficial interest of which are owned by the Fund.
WHEREAS, this Agreement is intended to effect the reorganization of
the Company into a Delaware business trust by the transfer of all of the assets
of the Fund to the Trust solely in exchange for assumption by the Trust of all
of the liabilities of the Fund and issuance to the Fund of shares of beneficial
interest of the Trust (the "Class A Shares"), followed by the distribution, on
the Closing Date, as hereinafter defined, of the Class A Shares of the Trust to
the holders of shares of the Fund (the "Stockholders") and by the liquidation
and termination of the Fund as provided herein, all upon the terms and
conditions hereinafter set forth; and
WHEREAS, the Reorganization, as hereinafter defined, is intended to
qualify as a tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code");
NOW THEREFORE, in consideration of the promises and the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. STOCKHOLDER APPROVAL.
A special meeting (the "Meeting") of the Fund shall be called and held
for the purpose of approving this Agreement and the transactions contemplated
herein.
2. REORGANIZATION.
The transactions described in this section are hereinafter referred to
as the "Reorganization." The Reorganization shall occur with respect to the
Fund and the Trust.
2.1. Subject to the terms and conditions set forth herein and on the
basis of the representations and warranties contained herein, the Fund agrees to
transfer substantially all of its assets as set forth in paragraph 2.2 to the
Trust. The Trust agrees in exchange therefor (1) that the Trust shall assume
all of the Fund's liabilities, whether contingent or otherwise, existing as of
the Closing Date, and further (2) that on the Closing Date the Trust shall
deliver to the Fund the number of full and fractional Class A
B-1
<PAGE>
Shares equal to the value and number of full and fractional shares of the
Fund outstanding on the Closing Date.
2.2. The assets of the Fund transferred to the Trust shall include,
without limitation, all cash, cash equivalents, securities, receivables
(including interest and dividend receivables), claims or rights of action or
rights to register shares under applicable securities laws, books and records of
the Fund, all other property owned by the Fund and all deferred or prepaid
expenses shown as assets on the books of the Fund on the Closing Date.
2.3. Immediately upon delivery of the Class A Shares to the Fund, the
Directors are authorized, on behalf of the Fund, (1) to elect as trustees of the
Trust ("Trustees") the persons who currently serve as directors of the Fund; and
(2) to approve (i) the investment advisory agreements between Schroder Capital
Management International Inc., the investment adviser of the Fund (the
"Adviser"), and the Trust (the "Advisory Agreements"), each of which shall have
been approved by the stockholders of the Fund, and (ii) the continuation for the
Trust's fiscal year ending October 31, 1997 of the engagement of the independent
accountants who currently serve in that capacity for the Fund.
2.4. Upon consummation of the transactions described in paragraph 2.1
of this Agreement, the Class A Shares acquired by the Fund pursuant to paragraph
8.1 hereof shall be redeemed by the Trust for $1.00 and the Fund will distribute
to each Fund Stockholder of record Class A Shares of the Trust pro rata in
proportion to the Fund Stockholder's interest in the Fund in liquidation and
redemption of the Fund Stockholder's Fund shares. Simultaneously with such
crediting of Class A Shares of the Trust to Fund Stockholders, their Fund shares
shall be canceled. The Trust will not issue certificates evidencing Class A
Shares in connection with such distribution.
2.5. As soon as practicable after the distribution pursuant to
paragraph 2.4 of Class A Shares, the Fund shall be liquidated and terminated.
2.6. Ownership of Class A Shares by the former Fund Stockholders will
be reflected on the books of the Trust's transfer agent.
2.7. Any reporting responsibility of the Fund is and shall remain its
responsibility up to and including the later of the Closing Date and any date on
which the Fund may be liquidated and terminated.
B-2
<PAGE>
3. CLOSING AND CLOSING DATE.
3.1. The closing shall occur at such time as the parties may mutually
agree. The transfer of substantially all of the Fund's assets in exchange for
the assumption by the Trust of the liabilities of the Fund and the issuance of
Class A Shares, as described above, together with all related acts necessary to
consummate such acts (the "Closing"), shall occur on __________ ("Closing Date")
at the offices of Forum Financial Services, Inc., sub-administrator of the
Company, at Two Portland Square, Portland, Maine, or at such other place or
later date as the parties may agree. All acts taking place in the Closing shall
be deemed to take place simultaneously as of the last determination of the
Fund's net asset value or at such other time and place as the parties may agree.
3.2. In the event that on the Closing Date (a) the New York Stock
Exchange is closed to trading, or trading thereon is restricted, or (b) trading
or reporting of trading on said exchange or in any market in which portfolio
securities of the Fund are traded is disrupted so that accurate appraisal of the
value of the total net assets of the Fund is impracticable, the Closing shall be
postponed until the first business day upon which trading shall have been fully
resumed and reporting shall have been restored.
3.3. The Fund shall deliver at the Closing a certificate of an
authorized officer of the Fund stating that it has notified the custodian of the
Fund of the transfer of the assets of the Fund to the Trust.
3.4. The transfer agent for the Fund shall deliver at the Closing a
certificate as to the transfer on its books and records of the Fund
Stockholder's account to an account of the Trust. The Trust shall issue and
deliver a confirmation to the Fund of the number of Class A Shares to be
credited to the Fund with respect to the Trust on the Closing Date or provide
evidence satisfactory to the Fund that such Class A Shares have been credited to
the Fund's account on the books of the Trust.
3.5. At the Closing, each party shall deliver to the other such bills
of sale, checks, assignments, stock certificates, receipts and other documents
as such other party may reasonably request.
4. VALUATION.
4.1. The value of the Fund's net assets to be acquired by the Trust
shall be the net asset value computed as of the close of business on the last
business day preceding the Closing Date, using the valuation procedures set
forth in the Fund's then current prospectus or statement of additional
information. For purposes of this Agreement, a
B-3
<PAGE>
"business day" shall mean each day that the New York Stock Exchange is open
for trading.
4.2. The number, value and denominations of full and fractional Class
A Shares to be issued in exchange for the Fund's net assets shall be equal to
the number, value and denominations of full and fractional Fund shares
outstanding as of the close of business on the last business day preceding the
Closing Date.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE FUND.
5.1. Organization, Existence, etc. The Fund is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland and has the power to carry on its business as it is now being
conducted. The Fund is not, and is not required to be, qualified to do business
as a foreign corporation under the laws of any jurisdiction. The Fund has all
necessary Federal, state and local authorizations to own all of its properties
and assets and to carry on its business as it is now being conducted.
5.2. Registration as an Investment Company. The Fund is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as a
closed-end management investment company; such registration has not been revoked
or rescinded and is in full force and effect.
5.3. Capitalization. The authorized stock of the Fund consists of
100,000,000 shares of Common Stock, each having a par value of $.01 per share,
and 16,107,100 shares are issued and outstanding.
5.4. Financial Statements. The audited financial statements of the
Fund for the fiscal year ended October 31, 1997 (the "Financial Statements")
fairly present the financial position of the Fund as of the date thereof and the
results of its operations and changes in its net assets for the periods
indicated.
5.5. Fund Shares. The outstanding shares of the Fund are duly and
validly issued and outstanding, fully paid and nonassessable.
5.6. Authority Relative to this Agreement. The Fund has the power to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Fund's Board
of Directors and no other corporate proceedings by the Fund, other than the
approval of this Agreement by the Fund Stockholders at the
B-4
<PAGE>
Special Meeting, are necessary to authorize the performance of this Agreement
and the transactions contemplated hereby.
5.7. Liabilities. There are no liabilities of the Fund, whether or
not determined or determinable, other than liabilities disclosed or provided for
in the Financial Statements and liabilities incurred in the ordinary course of
business subsequent to October 31, 1997, none of which has been materially
adverse to the business, assets or results of operations of the Fund. All
liabilities of the Fund to be assumed by the Trust were incurred by the Fund in
the ordinary course of business.
5.8. Litigation. There are no claims, actions, suits or proceedings
pending or, to the knowledge of the Fund, threatened which would adversely
affect the Fund's assets or business or which would prevent or hinder
consummation of the transactions contemplated hereby. The Fund is not under the
jurisdiction of a court in a proceeding under Title 11 of the United States Code
or similar case within the meaning of section 368(a)(3)(A) of the Code.
5.9. Contracts. Except for contracts and agreements disclosed in the
initial prospectus of the Fund or as otherwise described in the Fund's reports
required under the Securities Exchange Act of 1934, as amended, under which no
material default exists, the Fund is not a party to or subject to any material
contract, debt instrument, plan, lease, franchise, license or permit of any kind
or nature whatsoever with respect to the Fund.
5.10. Taxes. The federal income tax returns of the Fund have been
filed for all taxable years to and including the taxable year ended October 31,
1997, and all taxes payable pursuant to such returns have been paid. The Fund
has qualified as a regulated investment company ("RIC") under Subchapter M of
the Code for each taxable year since it commenced operations and will continue
to meet all the requirements for such qualification for its current taxable year
through the Closing Date.
5.11. Liquidation and Termination. The Fund will be liquidated
and terminated as soon as practicable after completion of the Reorganization.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE TRUST.
The Trust represents and warrants to the Fund as follows:
6.1. Organization, Existence, etc. The Trust is a Delaware business
trust duly organized, validly existing and in good standing under the laws of
the State of Delaware, and the Trust has filed its Trust Certificate with the
Secretary of State of Delaware.
B-5
<PAGE>
6.2. Registration as an Investment Company. On the Closing Date and
upon the adoption of the Registration Statement, the Trust will be registered
under the 1940 Act as an open-end management investment company.
6.3. Capitalization. Prior to the Closing Date, there shall be no
issued and outstanding Class A Shares. Class A Shares issued on the Closing
Date in connection with the transactions contemplated herein will be duly and
validly issued and outstanding, fully paid and non-assessable under Delaware
law.
6.4. Commencement of Operations. The Trust has not commenced
operations and will not commence operations until after the Closing.
6.5. Authority Relative to this Agreement. The Trust has the power to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Trustees, and
no other proceedings are necessary to authorize its officers to effectuate this
Agreement and the transactions contemplated hereby. The Trust is not a party to
or obligated under any charter, by-law, indenture or contract provision or any
other commitment or obligation, or subject to any order or decree, which would
be violated by its executing and carrying out this Agreement.
6.6. Liabilities. There are no liabilities of the Trust, whether or
not determined or determinable, other than liabilities otherwise previously
disclosed to the Fund, none of which has been materially adverse to the
business, assets or results of operations of the Trust.
6.7. Litigation. There are no claims, actions, suits or proceedings
pending or, to the knowledge of the Trust, threatened which would adversely
affect the Trust or its assets or business or which would prevent or hinder
consummation of the transactions contemplated hereby.
6.8. Contracts. Except for contracts and agreements disclosed to the
Fund, under which no default exists, the Trust is not a party to or subject to
any material contract, debt instrument, plan, lease, franchise, license or
permit of any kind or nature whatsoever.
6.9. Taxes. The Trust intends that it will meet all the requirements
to qualify as a RIC under Subchapter M of the Code for each of the taxable years
ending after the Reorganization.
B-6
<PAGE>
6.10. Continuation of the Fund's Business. The Trust has no plan
or intention to issue additional Class A Shares following the Reorganization
except for shares issued in the ordinary course of the Trust's business as an
open-end investment company; nor does the Trust have any plan or intention to
redeem or otherwise reacquire any Class A Shares issued to Fund Stockholders
pursuant to the Reorganization, other than through redemptions arising in the
ordinary course of that business. The Trust will actively continue the Fund's
business.
7. CONDITIONS TO OBLIGATIONS OF THE TRUST.
The obligations of the Trust hereunder with respect to the
consummation of the Reorganization are subject to the satisfaction of the
following conditions:
7.1. Approval by Stockholders. This Agreement and the transactions
contemplated hereby, including, as necessary, any temporary amendment of any
investment restrictions of the Fund that might otherwise preclude the
consummation of the Reorganization, shall have been approved by the affirmative
vote of a majority of the outstanding shares of the Fund entitled to vote on the
matter.
7.2. Covenants, Warranties and Representations. The Fund shall have
complied with each of its covenants contained herein, each of the
representations and warranties contained herein shall be true in all material
respects as of the Closing Date, there shall have been no material adverse
change in the financial condition, results of operations, business, properties
or assets of the Fund since October 31, 1996, and the Trust shall have received
a certificate of the President of the Fund satisfactory in form and substance to
the Trust so stating.
7.3. Tax Opinion. The Fund and the Trust shall have received an
opinion of their tax counsel, dated on or before the Closing Date, to the effect
that, on the basis of existing provisions of the Code, current Treasury
Regulations issued thereunder, administrative interpretations thereof and court
decisions, for Federal income tax purposes: (i) no gain or loss will be
recognized by the Trust or the Fund upon the transfer of the assets of the Fund
to the Trust in exchange for Class A Shares of the Trust; and (ii) no gain or
loss will be recognized by Fund Stockholders on the exchange of shares of the
Fund for Class A Shares of the Trust and the holding period and tax basis of the
Class A Shares of the Trust received by each Stockholder of the Fund will be the
same as the holding period and tax basis of the Stockholder's Fund shares held
immediately prior to the exchange. For purposes of rendering their opinion, tax
counsel may rely exclusively, and without independent verification as to factual
matters, upon the statements made in this Agreement, upon the proxy statement
which will be distributed to Fund Stockholders
B-7
<PAGE>
in connection with the Reorganization, and upon such other written
representations as the Trust and the Fund will have verified as of the
Closing Date.
7.5. Opinion of Counsel. The Fund and the Trust shall have received
the opinion of counsel, dated as of the Closing Date and addressed to each of
them, to the effect that: (i) the Fund is a corporation duly organized and
existing under the laws of the State of Maryland, and the Trust is a Delaware
business trust duly organized and validly existing under the laws of the State
of Delaware; (ii) the Fund is a closed-end management investment company
registered under the 1940 Act, and the Trust is an open-end management
investment company registered under the 1940 Act; (iii) this Agreement and the
Reorganization provided for herein and the execution of this Agreement have been
duly authorized and approved by all requisite action of the Fund and the Trust,
and this Agreement has been duly executed and delivered by the Fund and the
Trust, and is a valid and binding obligation of each of the Fund and the Trust,
subject to applicable bankruptcy, insolvency, fraudulent conveyance and similar
laws or court decisions regarding enforcement of creditors' rights generally and
to general principles of equity; (iv) the Trust's Registration Statement has
been declared effective under the Securities Act and, to the best of counsel's
knowledge after reasonable investigation, no stop order has been issued or
threatened suspending its effectiveness; and (v) the Class A Shares of the Trust
to be issued in the Reorganization have been duly authorized and upon issuance
thereof will be validly issued, fully paid and nonassessable.
8. CONDITIONS TO OBLIGATIONS OF THE FUND.
The obligations of the Fund hereunder with respect to the consummation
of the Reorganization as it relates to the Fund are subject to the satisfaction
of the following conditions:
8.1. Issuance of Initial Share. Prior to the Closing, the Trustees of
the Trust shall have authorized the issuance of, and the Trust shall have
issued, one share of the Trust to the Fund in consideration of the payment of
$1.00 for the purpose of enabling the Fund to vote on the matters referred to in
paragraph 2.3 of this Agreement.
8.2. Covenants, Warranties and Representations. The Trust shall have
complied with each of its covenants contained herein, and each of the
representations and warranties contained herein shall be true in all material
respects as of the Closing Date.
8.3. Regulatory Approval. All necessary orders of exemption under the
1940 Act with respect to the transactions contemplated hereby shall have been
granted by the Commission; and all approvals, registrations, and exemptions
under Federal and state laws considered to be necessary shall have been
obtained.
B-8
<PAGE>
8.4. Tax Opinion. The Fund and the Trust shall have received the
opinion referred to in paragraph 7.4 of this Agreement.
9. AMENDMENTS; WAIVERS; TERMINATION; NON-SURVIVAL OF COVENANTS,
WARRANTIES AND REPRESENTATIONS.
9.1. Amendments. This Agreement may be amended at any time by action
of the directors of either party hereto notwithstanding approval thereof by the
Fund Stockholders, provided that no amendment shall have a material adverse
effect on the interests of such stockholders.
9.2. Waivers. At any time prior to the Closing Date either of the
parties may waive compliance with any of the covenants or conditions made for
its benefit contained herein.
9.3. Termination by Either Party. This Agreement may be terminated at
any time prior to the Closing Date without liability on the part of either party
hereto or its respective Trustees, Directors, officers or stockholders by any
party on notice to the other party.
9.4. Survival. No representations, warranties or covenants made in or
pursuant to this Agreement (including certifications of officers) shall survive
the Reorganization.
10. EXPENSES/LIABILITIES.
The Fund and the Trust shall each be responsible for all of their
expenses in connection with the Reorganization.
11. GENERAL.
This Agreement supersedes all prior agreements between the parties
(written or oral), is intended as a complete and exclusive statement of the
terms of the Agreement between the parties and may not be changed or terminated
orally. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been executed by the Trust and the Fund and
delivered to each of the parties hereto. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Nothing in this Agreement, express
or implied, is intended to confer upon any other person any rights or remedies
under or by reason of this Agreement.
B-9
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
Attest: SCHRODER ASIAN GROWTH FUND, INC.
By_______________________ By____________________________
-------------------------- -----------------------------
Attest: SCHRODER ASIAN GROWTH FUND
By_______________________ By____________________________
-------------------------- -----------------------------
Copies of the Trust Instrument, as amended, establishing the Trust are on file
with the Secretary of the Trust, and notice is hereby given that this Agreement
and Plan of Reorganization is executed on behalf of the Trust by officers of the
Trust as officers and not individually and that the obligations of or arising
out of this Agreement are not binding upon any of the Trustees, officers,
shareholders, employees or agents of the Trust individually but are binding only
upon the assets and property of the Trust.
B-10
<PAGE>
[Form of Proxy Card]
SCHRODER ASIAN GROWTH FUND, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF STOCKHOLDERS - SEPTEMBER 17, 1997
The undersigned stockholder of Schroder Asian Growth Fund, Inc., a Maryland
corporation (the "Fund"), hereby appoints Mr. David M. Salisbury and Mr. I.
Peter Sedgwick, with full power of substitution in each of them, to attend the
Special Meeting of Stockholders of the Fund to be held at 787 Seventh Avenue,
New York, New York 10019, on Wednesday, September 17, 1997, at 4:00 p.m., New
York City time, and any adjournment thereof, and to cast on behalf of the
undersigned all votes that the undersigned is entitled to cast at such meeting
and otherwise to represent the undersigned at the meeting with all powers
possessed by the undersigned if personally present at the meeting. The
undersigned hereby acknowledges receipt of the Notice of Special Meeting and of
the accompanying Proxy Statement and revokes any proxy previously given with
respect to the meeting.
UNLESS OTHERWISE SPECIFIED IN THE BOXES PROVIDED, THE UNDERSIGNED'S VOTE WILL BE
CAST FOR EACH NUMBERED ITEM LISTED ON THE REVERSE SIDE.
PLEASE VOTE, DATE, AND SIGN ON REVERSE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
(Please specify below)
- ------------------------------------ -------------------------------
- ------------------------------------ -------------------------------
- ------------------------------------ -------------------------------
- ------------------------------------ -------------------------------
<PAGE>
/ X / PLEASE MARK VOTES AS IN
THIS EXAMPLE
1. Approval of the conversion of the Fund from a closed-end investment company
to an open-end investment company, as more fully described in the
accompanying Proxy Statement, by:
(a) Amending the fundamental policies of the Fund to enable the
Fund to participate in an open-end "Core and
Gateway-Registered Trademark- Fund Structure."
(b) Approving new investment advisory agreements with SCMI, to
take effect upon the conversion.
(c) Changing the Fund's subclassification under the Investment
Company Act of 1940 from a closed-end company to an open-end
company in order to effect the conversion.
(d) Adopting an Agreement and Plan of Reorganization pursuant to
which the Fund would reorganize from a Maryland corporation
into a Delaware business trust.
For / / Against / / Abstain / /
2. Elimination of mandatory tender offer undertaking, as more fully described
in the accompanying Proxy Statement.
For / / Against / / Abstain / /
3. The proxies are authorized to vote in their discretion on any other
business which may properly come before the meeting or any adjournment or
postponement thereof.
Mark box at right if comments or address change
have been noted on the reverse side of this card. / /
RECORD DATE SHARES: _____________________
Please be sure to sign and date this proxy. Date:______________
Stockholder sign here ___________________ Co-owner sign here _______________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000914764
<NAME> SCHRODER ASIAN GROWTH FUND, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 187002931
<INVESTMENTS-AT-VALUE> 202751227
<RECEIVABLES> 778263
<ASSETS-OTHER> 4399514
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 207929004
<PAYABLE-FOR-SECURITIES> 736779
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1044928
<TOTAL-LIABILITIES> 1781707
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 225936839
<SHARES-COMMON-STOCK> 16107100
<SHARES-COMMON-PRIOR> 19607100
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (741622)
<ACCUMULATED-NET-GAINS> (34263675)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15215755
<NET-ASSETS> 206147297
<DIVIDEND-INCOME> 897041
<INTEREST-INCOME> 414096
<OTHER-INCOME> 0
<EXPENSES-NET> (2052771)
<NET-INVESTMENT-INCOME> (741634)
<REALIZED-GAINS-CURRENT> (2221037)
<APPREC-INCREASE-CURRENT> (983641)
<NET-CHANGE-FROM-OPS> (3946312)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1826573)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 3500000
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (51697415)
<ACCUMULATED-NII-PRIOR> 1826585
<ACCUMULATED-GAINS-PRIOR> (32042638)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1274747
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2052771
<AVERAGE-NET-ASSETS> 254949547
<PER-SHARE-NAV-BEGIN> 13.15
<PER-SHARE-NII> (.05)
<PER-SHARE-GAIN-APPREC> (.19)
<PER-SHARE-DIVIDEND> (.09)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (.02)
<PER-SHARE-NAV-END> 12.80
<EXPENSE-RATIO> 1.62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
