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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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ 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)
- --------------------------------------------------------------------------------
(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):
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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:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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SCHRODER ASIAN GROWTH FUND, INC.
787 SEVENTH AVENUE
NEW YORK, NEW YORK 10019
July 29, 1997
Dear Fellow Stockholder:
The enclosed proxy statement contains two proposals. Proposal No. 1 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, 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 a price 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 strategy.
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-SM- fund-of-funds structure by
investing its assets in two investment companies which together have the
same investment policies as the Fund. The proxy statement describes this
structure in detail.
- The Conversion will not result in an 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, transaction
processing and shareholder servicing.
- 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 holders 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 IN ORDER TO CONTINUE GATHERING
VOTES. See the proxy statement for complete instructions on how to vote.
In view of the possibility that the Conversion may not be approved, YOUR
DIRECTORS STRONGLY 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 1997 tender offer
was approximately $338,000 in additional Fund expenses, and the Fund's discount
returned to historical levels following the expiration of the tender offer. The
Board recommends Proposal No. 2 because it believes
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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.
Finally, with deep regret, I report to you that Madelon DeVoe Talley, one of
your Directors, died in an automobile accident on July 18, 1997. On behalf of
all of the Fund's Directors, officers, and stockholders, I would like here to
acknowledge her capable stewardship and her collegiality, both of which will be
greatly missed.
Thank you for your continued interest in the Fund.
/s/ I. PETER SEDGWICK
I. Peter Sedgwick
Chairman
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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 Proposal No. 1, a proposal to convert the Fund from a
closed-end investment company to an open-end investment company (the
"Conversion"). Approval of this proposal 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-SM- 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; and
(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) To approve Proposal No. 2, a proposal to eliminate the undertaking, made
in the Fund's prospectus dated December 22, 1993 (the "Prospectus"), that
the Fund will conduct annual tender offers for its shares under the terms
and conditions set forth in the Prospectus.
THE BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT YOU VOTE IN FAVOR
OF PROPOSAL NO. 2.
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(3) To transact such other business as may properly come before the Special
Meeting and any adjournments thereof.
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 Fund's proxy solicitation agent (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
/s/ MARGARET H. DOUGLAS-HAMILTON
Margaret H. Douglas-Hamilton
Secretary
New York, New York
Dated: July 29, 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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2
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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.
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 29, 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 Shareholder Communications
Corporation, the Fund's proxy solicitation agent (the "Proxy Solicitation
Agent") reminding you to vote. If you have any questions, please call them,
TOLL-FREE AT 1-800-733-8481 EXTENSION 484.
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PROPOSAL NO. 1
CONVERSION OF THE FUND
TO AN OPEN-END INVESTMENT COMPANY
SUMMARY
GENERAL DESCRIPTION OF THE CONVERSION
Proposal No. 1 seeks the approval of the Fund's stockholders for the
conversion of the Fund into an open-end Core and Gateway-SM- Fund Structure (the
"Conversion"), eliminating the Fund's market price discount and permitting the
Fund to invest its assets in other investment companies managed by the Fund's
investment adviser. The Fund would operate through a fund-of-funds structure in
which the Fund will be a "gateway fund" investing in two "core" funds. To effect
the Conversion, the Fund will contribute assets invested in Asian countries
other than Japan to a "core" fund, the Asia ex-Japan Core Portfolio (the "Asia
Core"), and will contribute assets invested in Japan to a second "core" fund,
the Japan Core Portfolio (the "Japan Core"). Thereafter, the Fund will replicate
its current investment objective by investing in these two core portfolios (the
"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 Schroder Capital Management International
Inc. ("SCMI"), the Fund's investment adviser, 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. It is currently expected that the
Conversion will be completed during the first calendar quarter of 1998.
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 from the Fund at net asset value ("NAV") (subject to any
applicable redemption fees), so that there will not be any market price discount
from NAV. In view 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.
As part of the Conversion, the Fund will reorganize as a Delaware business
trust. Other open-end mutual funds (the "Schroder family of funds") distributed
by Schroder Fund Advisors Inc. ("SFA"), an affiliate of SCMI, are also organized
as Delaware business trusts. 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. The maximum sales charge will
2
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be 5.25% of the amount 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 during the first six months after the
Conversion, the Fund's 2.00% redemption fee will apply to such exchanges.
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. In accordance with terms of the
Prospectus, the Fund conducted a tender offer for its shares during the first
calendar quarter of 1997. Nonetheless, since the completion of the tender offer,
the Fund's shares have continued to trade at a discount that is 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. The Board of Directors concluded that such other methods
would not address the Fund's discount as effectively as the Conversion would.
The Conversion 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 discount. The Board of Directors also considered the potential
benefits of the Conversion and its potential impact on the Fund's investment
program and expenses, including assurances provided by SCMI that SCMI does not
expect that the Conversion would result in any material change in (i) the manner
in which the Fund's investment strategy is implemented or (ii) the investment
opportunities that are made 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? 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. Some of the Fund's investment policies require
modification so that it may seek to realize its objective within the Core and
Gateway Fund Structure by allocating its investments between the Japan Core and
the Asia Core.
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,
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many of which will be nonrecurring, including costs associated with requesting a
ruling from the Internal Revenue Service (the "IRS") as well as 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 $410,000, 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, transfer agency costs associated with 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 8. The Fund's
expenses could be substantially higher if there are substantial redemptions
following the Conversion.
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 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 OF THE CONVERSION? The Conversion will not
occur unless the Fund receives both an opinion from its tax counsel to the
effect that no gain or loss will be recognized by the stockholders of the Fund
or the Fund for federal income tax purposes as a result of the Fund's
reorganization as a Delaware business trust, and an IRS ruling, or an opinion
from the Fund's tax counsel, to the effect that no gain or loss will be
recognized by the Fund for federal income tax purposes as a result of the Fund's
contribution of assets to the Core Portfolios. For additional information, see
the discussion appearing under the captions "WHAT ARE THE TAX CONSEQUENCES OF
CONVERSION TO THE CORE AND GATEWAY FUND STRUCTURE?" at page 10, and "WHAT ARE
THE TAX CONSEQUENCES OF THE REORGANIZATION AS A DELAWARE BUSINESS TRUST?" at
page 27. 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, in the same way that a stockholder selling shares
would have recognized gain (or loss) prior to the Conversion.
HOW ARE OPEN-END FUND SHARES PURCHASED AND REDEEMED? Shares can be purchased
through broker-dealers or other financial intermediaries on any business day,
subject to applicable sales charges. Holders of shares of open-end funds
generally have the right to redeem their shares at NAV (less any applicable
redemption fees). 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 trading on the
NYSE is restricted or that exchange is closed, (b) 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
4
<PAGE>
fairly to determine the value of its net assets, or (c) during any other period
when the Securities and Exchange Commission ("SEC"), by order, so permits.
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 from a closed-end company to an open-end
company and the reorganization of the Fund into a Delaware business trust. This
vote also authorizes the new advisory agreements with SCMI and amending the
Fund's fundamental policies 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 through a fund-of-funds structure in the Japan Core
and the Asia Core and to conform the Fund's fundamental policies to the
requirements 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 AMENDMENTS TO THE
FUND'S FUNDAMENTAL POLICIES.
SUMMARY OF THE CORE AND GATEWAY FUND STRUCTURE
"Core and Gateway"-SM- is a registered service mark of Forum Financial
Services, Inc. The following illustration compares a traditional open-end fund
structure to the Core and Gateway Fund Structure proposed for the Fund.
[Graphic]
Comparison of Traditional, Master-Feeder and Fund-of-Funds Structures.
*The Fund proposes to utilize the fund-of-funds structure.
5
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The Fund would operate in a fund-of-funds structure as a "gateway fund"
investing in two Core Portfolios. Other gateway entities (including registered
investment companies and other institutional investors) could invest in either
or both of the Core Portfolios, potentially leading to economies of scale and
greater asset growth at the core level. As shown in the chart above, a "gateway
fund" or another investor that invests in a single Core Portfolio would be
investing through a "master-feeder" structure. Fixed operating costs borne in
whole or in part directly by a Core Portfolio in which the Fund invests 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 are presently no
investors in the Core Portfolios. There can be no assurance that there will be
additional investors (other than SCMI and Forum Administrative Services, LLC
("Forum"), which will make the initial investment in each Core Portfolio
required for federal income tax purposes) or that the presence of additional
investors will result in economies of scale or net asset growth of the Core
Portfolios.
FACTORS CONSIDERED BY THE BOARD OF DIRECTORS
In approving the proposal authorizing the investment of the assets of the
Fund in the Core Portfolios, the Board of Directors considered, among other
things, (i) the fact that the Schroder family of funds employs a Core and
Gateway structure offering the potential to achieve certain efficiencies, and
(ii) the possibility that the Fund would benefit from economies of scale in the
Core Portfolios through the potential growth of assets in other gateway funds,
which may target different classes of investors or offer different investment
products than the Fund. The Board of Directors also took into account the
expected increase in the Fund's expense ratio under the Core and Gateway Fund
Structure that would result from, among other things, decreases in the Fund's
assets due to redemptions and higher transfer agency costs (and any
corresponding decrease in costs, such as the absence of NYSE listing fees).
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
Stockholders may have questions about how the 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
Core and will contribute assets invested in Japan to the Japan Core. In exchange
for these contributions, the Fund will receive interests representing its
ownership interest in these Core Portfolios. Both the Japan Core and the Asia
Core 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 Core 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
investments by SCMI and Forum 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
will calculate 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.
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<PAGE>
The Fund will allocate its investments between the Japan Core and the Asia
Core in accordance with the same investment objective and policies 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 Core and
the Japan Core is to seek long-term capital appreciation. The Asia Core 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 Core 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?
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 13. SCMI will
also serve as investment adviser to the Core Portfolios.
DISTRIBUTOR. As an open-end fund following the Conversion, the Fund will
need to retain a 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 SFA, as
distributor. SFA is 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. SFA will not receive any
fees from the Fund for serving as distributor, but may be entitled to retain a
portion of the front-end sales charge, where applicable.
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.
The Fund's administrative arrangements would be integrated into the existing
administrative arrangements for the Schroder family of funds. This integration
is intended to 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 also act as administrator for the Fund and as
such will be responsible for,
7
<PAGE>
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. The Fund will also 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 the Core Portfolios. In
addition, the Fund is expected to retain 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 will also bear its pro rata portion of the fee paid to
Forum by the Core Portfolios at a rate of 0.05% per annum of the average daily
net assets of the Core Portfolios. Pursuant to the subadministration agreement,
Forum will assist SFA with certain of its responsibilities, including
shareholder reporting and regulatory compliance.
The Fund is authorized to pay a servicing fee to broker-dealers and other
financial intermediaries in exchange for providing shareholder support and
administrative services to the Fund and its stockholders. Such payments may not
exceed 0.25% per annum of the average daily net assets of the Fund, and would be
made through SFA pursuant to the Shareholder Service Plan described below at
page 20.
CUSTODIAN. The Chase Manhattan Bank ("Chase") presently serves as custodian
both to the Fund and to the portfolio funds which are series of SCF, including
the Core Portfolios. 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.
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 following table compares the
actual expenses for the Fund for the semi-annual period ended April 30, 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 for such semi-annual period. 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
8
<PAGE>
Fund's expenses could be substantially higher if there are substantial
redemptions following the Conversion. For additional information regarding the
proposed new advisory and administration arrangements for the Fund, see the
discussion beginning at page 13.
<TABLE>
<CAPTION>
COMPARATIVE EXPENSES IN CORE AND GATEWAY FUND
STRUCTURE
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
ACTUAL
SCHRODER
ASIAN TOTAL
GROWTH SCHRODER GATEWAY AND
FUND,INC. ASIAN GROWTH JAPAN CORE
EXPENSES* FUND GATEWAY CORE ASIA CORE PORTFOLIOS
------------- ------------- --------- --------- ------------
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 None None 2.00% for 6
months months
Exchange fee................................... None None N/A N/A None
(redemption (redemption
fee applies fee applies
for 6 months) 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%+ 0.83%(2)
Administration............................... 0.25%(3) 0.05% 0.05%+ 0.05%+ 0.10%
Distribution fees (12b-1)...................... None None None None None
Other Expenses................................. 0.34% 0.50%(4) 0.85%
Shareholder servicing........................ N/A 0.25%
Subadministration............................ N/A 0.05% 0.05%+ 0.05%+
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Fund Operating Expenses.................. 1.59% 1.78%
</TABLE>
- ------------------------------
* During the semi-annual period ended April 30, 1997, there was a significant
reduction in the net assets of the Fund as a result of the Fund's tender
offer which expired on March 20, 1997. Such reduction had the effect of
increasing the Fund's expense ratio. For the Fund's fiscal year ended
October 31, 1996, the Fund's Other Expenses were 0.32%. The Investment
Advisory fee and the Administration fee did not change.
** 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. The Fund's assets have never exceeded
$300 million.
(2) Total advisory fee assuming the Fund invests 90% of its net assets in the
Asia Core and 10% of its net assets in the Japan Core. The maximum advisory
fee, if all of the Fund's assets are invested in the Asia Core, would be
0.90%.
9
<PAGE>
(3) 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.
(4) The "Other Expenses" category is estimated and includes the Fund's pro rata
portion of the operating expenses of the Core Portfolios.
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 Core and 10% of its net assets in the Japan Core.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Existing Fund Structure (closed-end)......................................... $ 16 $ 50 $ 87 $ 189
Fund Structure after the Conversion (no sales load).......................... $ 18 $ 56 $ 97 $ 210
Fund Structure after the Conversion
(assuming 5.25% sales load)................................................ $ 70 $ 106 $ 144 $ 251
</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,
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 semi-annual period
ended April 30, 1997, the Fund's annualized total expense ratio was 1.59%. An
increase in the Fund's expense ratio may adversely affect the Fund's returns. 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 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. 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.
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
10
<PAGE>
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 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.
WHAT CHANGES TO THE FUND'S FUNDAMENTAL POLICIES ARE 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, as defined under
the 1940 Act. (See page 14 of this Proxy Statement.)
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 that 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.
In order to permit the Fund to operate in the Core and Gateway Fund
Structure, the Fund's policies described above will need to be supplemented by
the addition of the following fundamental investment policy:
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.
11
<PAGE>
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 current 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 shares or tender offers; provided, however, that the Fund's
obligations under when-issued and delayed delivery transactions and similar
transactions are not treated as senior securities if covering assets are
appropriately segregated, and the use of hedging (as such term is defined in the
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, this policy with respect to borrowings needs to be modified
to comply with the requirements of the 1940 Act, as follows:
THE FUND WILL NOT BORROW MONEY EXCEPT THAT THE FUND MAY BORROW FROM BANKS
UP TO 33 1/3% OF ITS TOTAL ASSETS (INCLUDING THE AMOUNT BORROWED) FOR
TEMPORARY OR EMERGENCY PURPOSES OR TO MEET REDEMPTION REQUESTS. THE FUND
MAY NOT ISSUE ANY CLASS OF SECURITIES WHICH IS SENIOR TO THE FUND'S
SHARES OF BENEFICIAL INTEREST; PROVIDED, HOWEVER, THAT NONE OF THE
FOLLOWING SHALL BE DEEMED TO CREATE SENIOR SECURITIES: (A) ANY BORROWING
PERMITTED BY THIS RESTRICTION OR ANY PLEDGE OR ENCUMBRANCE TO SECURE SUCH
BORROWING; (B) ANY COLLATERAL ARRANGEMENTS WITH RESPECT TO OPTIONS,
FUTURES CONTRACTS, OPTIONS ON FUTURES CONTRACTS OR OTHER FINANCIAL
INSTRUMENTS; OR (C) ANY PURCHASE, SALE OR OTHER PERMITTED TRANSACTION IN
OPTIONS, FORWARD CONTRACTS, FUTURES CONTRACTS, OPTIONS ON FUTURES
CONTRACTS OR OTHER FINANCIAL INSTRUMENTS.
Certain fundamental investment restrictions of the Fund might be construed
as restricting the Fund's ability to carry out the reorganization from a
Maryland corporation into a Delaware business trust. By approving the
Reorganization Plan included in Proposal No. 1 (as described below at page 22),
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. A VOTE FOR PROPOSAL NO. 1 WILL INCLUDE
A VOTE TO APPROVE ALL THE MODIFICATIONS TO THE FUND'S FUNDAMENTAL POLICIES
DESCRIBED ABOVE.
12
<PAGE>
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, and by separate vote 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 Core and the Asia
Core.
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 investment selection and other services to
be provided by SCMI at the Core Portfolio level, and SCMI's experience managing
open-end funds. In considering whether to approve the Asset Allocation Agreement
and the Standby Advisory Agreement, the Directors took into account a variety of
factors. In particular, they considered the terms of the Asset Allocation
Agreement and the Standby Advisory Agreement, the quality of the services
provided by SCMI to the Fund to date and the Fund's performance to date, and fee
data and related information, including comparisons of advisory and
administrative fees charged to other funds. 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.
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. 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 Incorporated, and $10,957.95, or 1.08% of total
commissions, 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
13
<PAGE>
the Fund's stated investment objective, policies, and restrictions. 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 Fund's assets have never exceeded $300 million to
date. 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 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 either by majority vote of the Board of Directors
or by vote of a majority of the Fund's outstanding voting securities, defined in
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. The Fund Agreement may be terminated at any time, without payment
of any penalty, 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% per annum of the Fund's average daily net assets. Under this
agreement, SCMI will determine the appropriate allocation of the Fund's
investment assets among the Japan Core and the Asia Core, consistent with the
Fund's investment objective.
14
<PAGE>
Pursuant to a separate advisory agreement (the "Core Agreement") between
SCMI and SCF, SCMI will also act as investment adviser to the series of SCF,
including the Japan Core and the Asia Core. The Core Agreement will provide for
advisory fees of 0.70% per annum of the average daily net assets invested in the
Asia Core and 0.55% per annum of the average daily net assets invested in the
Japan Core. SFA, a wholly-owned subsidiary of SCMI, will serve as administrator
both to the Fund and to the Japan Core and the Asia Core. 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 the Core Portfolios.
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, or both, the total "management fee,"
that is, the investment advisory fee and 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. Also, while the Fund Agreement is governed by Maryland law, the
new advisory agreements are governed by Delaware law.
PRO FORMA FEE CALCULATION
For the fiscal year ended October 31, 1996, the Fund paid advisory fees
totaling $2,479,442 to SCMI, based on the applicable contractual fee rate of
1.00% per annum of the average weekly net assets of the Fund. During that
period, the Fund also paid administrative fees totaling $670,455 to Princeton
Administrators, L.P., based on a contractual fee rate of 0.25% per annum of the
average weekly net assets of the Fund.
If the Conversion had been in effect for the same period, the maximum
advisory fee that would have been payable to SCMI would have been at an annual
rate of 0.90% of the average daily net assets of the Fund (assuming all assets
invested in the Asia Core). In addition, administration fees at an annual rate
of 0.10% of the average daily net assets of the Fund would have been payable to
SFA, a wholly-owned subsidiary of SCMI. Accordingly, the maximum combined fees
paid to SCMI and its affiliates for advisory and administrative services would
have been 1.00% per annum of the average daily net assets of the Fund, the same
rate as actually paid to SCMI. (As a closed-end fund, the Fund's fees are
currently based on weekly net assets, while fees charged to open-end funds are
calculated based on daily net assets.)
15
<PAGE>
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
ADMINISTRATION FEE ANNUAL SCMI SUB-
RATE INVESTMENT ADVISORY
AS A PERCENTAGE OF FEE RATE AS A
NAME OF NET ASSETS AS OF AVERAGE DAILY NET PERCENTAGE OF AVERAGE
FUND 4/30/97 ASSETS DAILY NET ASSETS
- ---------------------------------------- --------------------- ---------------------- ----------------------------
<S> <C> <C> <C>
PaineWebber Managed $ 62,905,567.85 1.20%* 0.65% up to $100 million
Investments Trust-- and
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.
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 Core. Mr. Farquharson will be
primarily responsible for the management of the Japan Core.
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 24.
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
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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"). The Schroder Group 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.
SCMI has extensive research resources within the Asian region, consisting of
offices in Tokyo, Hong Kong S.A.R., Singapore, Seoul, Taipei, Jakarta, Kuala
Lumpur and Bangkok. Each year, the Schroder Group generally researches and
screens for investment potential more than 2,850 Asian companies. Of those
companies, the Schroder Group's 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. ("SCM").
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 and Chairman of SCM
Jane P. Lucas (2). Senior Vice President; Director of SFA; Director of SCM.
Abdallah H. Nauphal (2). Group Vice President; Director of SCM.
Gavin D. Ralston (1). Senior Vice President, Director and Managing Director.
David M. Salisbury* (1). Director and Chairman; Director of Schroders
Incorporated and SCM; 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 and Director; Director of SCM.
- ------------------------
* Principal executive officer.
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(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.
The following officers of the Fund are also officers 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 (doing business in
New York State as Schroders Holdings) 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. 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. 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.
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 distributor, at NAV, subject to any
front-end sales charge. 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 (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
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redeem shares at NAV makes a secondary market unnecessary. Accordingly, the
Fund's shares would be delisted from the NYSE upon the Conversion.
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 the caption "CHANGES FROM THE
ARTICLES AND BYLAWS OF THE FUND" at page 22.
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 will 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 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, which 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. 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. An open-end investment company may not have more than 15%
of its net assets invested in securities that are illiquid. The Board of
Directors has amended the Fund's policy on illiquid securities, effective upon
the Conversion, to permit the Fund to invest up to 15% of its net assets in such
securities. The Fund has no present plans to significantly increase its
investment in illiquid securities. The Fund currently has less than 10% of its
net
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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.
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). 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" 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 beginning at page 11, 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 for temporary or
emergency purposes or to assist in meeting redemptions in a manner consistent
with the requirements of the 1940 Act.
SHAREHOLDER SERVICES. If the Conversion is approved by the stockholders, as
noted above, the Fund will become part of the Schroder family of funds. Services
provided by such funds 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 the class
of shares available to retail investors in other funds 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.
Pursuant to the Shareholder Service Plan, SFA is authorized to pay a servicing
fee to broker-dealers and other financial intermediaries. 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. The
maximum amount payable under the Shareholder Service Plan is 0.25% of the
average daily net assets of the Class A shares.
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 the Fund's transfer agent. Instead,
shares issued pursuant to the dividend reinvestment plan will be allocated and
delivered directly to stockholders' accounts.
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<PAGE>
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 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.
During the six-month period when the Fund's 2.00% redemption fee is in effect,
this automatic redemption policy will be suspended. Beginning after the end of
such six-month period, 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.
STOCK CERTIFICATES. If the Conversion is approved, shares of Common Stock
of the Fund will be canceled. In general, interests in the successor Fund will
be maintained by book entry. New certificates for the successor Fund's shares
will be issued only upon written stockholder request.
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 for 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,
would eliminate this requirement, effective for the taxable year beginning after
the date of enactment. 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 recently acquired portfolio securities
must be sold because of unexpectedly large net redemptions or large influxes of
cash are followed within a short time by significant redemptions of Fund shares.
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, in order to bring its
operations more closely in line with those of other funds in the Schroder family
of funds, which are organized as Delaware business trusts, potentially reducing
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.
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<PAGE>
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.
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. In general, interests in the
successor Fund will be represented by book entry. New certificates for the
successor Fund's shares will be issued only upon written shareholder request,
and any certificate representing shares of the successor Fund to be issued in
replacement of a certificate representing shares of common stock of the Fund
will be issued only upon the surrender of the latter certificate.
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 amended at any time by
action of the Directors of the Fund or the Trustees of the successor Fund,
notwithstanding approval thereof by the stockholders of the Fund, provided that
no amendment shall have a material adverse effect on the interests of such
stockholders. The Reorganization Plan may be terminated at any time prior to the
closing date under such plan, without liability on the part of either party
thereto or its respective Directors, Trustees, officers or stockholders, by any
party on notice to the other party. The Fund and the successor Fund shall be
responsible for all of their expenses in connection with the reorganization.
CHANGES FROM THE ARTICLES AND BYLAWS OF THE FUND
The terms of the Trust Instrument and Bylaws of the successor Fund, as
reorganized under Delaware law, will differ from 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 successor 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 from the present provisions reflect the different nature of
an open-end--as opposed to a closed-end--fund. For example, the Trust Instrument
will authorize the
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<PAGE>
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 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 provide for a single class of Trustees for the successor Fund. 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.
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<PAGE>
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 of the successor
Fund effective upon the Conversion: Louise Croset, Peter E. Guernsey, John I.
Howell, William L. Means, David M. Salisbury, and I. Peter Sedgwick. 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 the Fund's Directors is not available for
election due to unforeseen circumstances, it is anticipated that such other
persons as the Directors of the Fund may recommend will be elected. Messrs.
Guernsey, Howell and Means, 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 SCF are as follows:
Margaret H. Douglas-Hamilton--Vice President; Secretary of the Fund; Senior
Vice President, Secretary and General Counsel of Schroders Incorporated;
Director, SCM.
Robert Jackowitz--Treasurer; Treasurer of the Fund; First Vice President and
Comptroller of SCMI; Assistant Treasurer of Schroders Incorporated; First
Vice President and Treasurer of SCM; Treasurer of SFA.
Catherine A. Mazza--Vice President; Vice President and Assistant Secretary
of the Fund; First Vice President of SCMI and SCM; President of SFA.
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<PAGE>
Alexandra Poe--Vice President and Secretary; Assistant Secretary of the
Fund; Senior Vice President, Secretary and Fund Counsel of SFA; Vice
President of SCMI.
John A. Troiano--Vice President; Chief Executive and Director of SCMI;
Director of SCM.
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.
(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.
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<PAGE>
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 obligations or duties involved in
the conduct of the office of Trustee.
(c) VOTING RIGHTS WITH RESPECT TO THE 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.
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" of the Core Portfolio as such
term is defined at page 14 of this Proxy Statement. The Board of Trustees of SCF
may change nonfundamental policies without prior interestholder approval. Other
matters that will normally require approval of interestholders of the Core
Portfolio 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.
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<PAGE>
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.
Although the Fund does not believe that the Conversion will result in any
material tax costs to the Fund 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.
PROPOSAL NO. 2
ELIMINATION OF ANNUAL
TENDER OFFER UNDERTAKING
If Proposal No. 1 is not approved, the Fund will continue to operate as a
closed-end fund. In view of such possibility, the Board of Directors is
recommending that the stockholders vote to approve Proposal No. 2, eliminating
the undertaking made in the Prospectus that the Fund conduct annual tender
offers for its shares under the terms and conditions set forth in the
Prospectus, because the tender offer process entailed substantial expense for
the Fund and the Fund's discount returned to historical levels following
expiration of the tender offer conducted in the first calendar quarter of 1997.
THE BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
APPROVAL OF PROPOSAL NO. 2 BECAUSE OF THE POSSIBILITY THAT THE CONVERSION MAY
NOT BE APPROVED. IF THE CONVERSION IS APPROVED, PROPOSAL NO. 2 NEED NOT BE
IMPLEMENTED.
THE FUND'S PRESENT ANNUAL 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, and that annual
tender offers for shares may help reduce any market discount that may develop.
To that end, in the Prospectus the
27
<PAGE>
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.
THE FUND'S EXPERIENCE UNDER THE TENDER OFFER PROVISION
In accordance with the Prospectus, the Fund conducted a tender offer for its
shares during the first calendar quarter of 1997 pursuant to the Offer to
Purchase dated February 19, 1997 (the "Tender"). 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 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
$338,000.
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 weekly closing share price of $12.115, with
an average discount of 10.96%. During the Tender, the Fund's average weekly
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
weekly closing share price was $11.93 and the average discount was 11.33%.
FACTORS CONSIDERED BY THE BOARD OF DIRECTORS
The Board of Directors has concluded that the Fund's present annual tender
offer policy is unlikely to provide an effective means of reducing or
eliminating the Fund's discount over any substantial period of time, 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. Although the Fund is not aware of any evidence
suggesting that its tender offer undertaking has caused shares of the Fund to
trade at a discount significantly less than would have existed in the absence of
such undertaking, there is a possibility that the Fund's discount may widen if
Proposal No. 2 is approved and the Fund continues to operate as a closed-end
fund.
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 $338,000,
(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
28
<PAGE>
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 objective. 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.
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 14 of this Proxy Statement.)
Abstentions and broker non-votes have the effect of votes against eliminating
the policy.
29
<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
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.
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<PAGE>
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 by telephone authorize another person to act as his or her proxy
and provide instructions on the voting of his or her shares. 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 within 72 hours. A special toll-free number,
1-800-733-8481 extension 484, is available in case the information contained in
the confirmation is incorrect, or if a stockholder wants to change his or her
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 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 10004.
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
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<PAGE>
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).
By order of the Board of Directors
/s/ MARGARET H. DOUGLAS-HAMILTON
Margaret H. Douglas-Hamilton
Secretary
New York, New York
Dated: July 29, 1997
32
<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 [#][May 15, 1996][/#] [*] [/*],
between Schroder Asian Growth Fund, [#][Inc., a Maryland corporation][/#] [*]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 [#][closed][/#] [*]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 [#][has previously retained][/#] [*]desires to retain[/*]
the Investment Adviser to render investment advisory services to or on behalf of
the Fund [#][pursuant to an Investment Advisory Agreement dated and effective as
of December 21, 1993 (the "Agreement")][/#] [*]in the manner and on the terms
hereinafter set forth[/*]; and
WHEREAS, the [#][Fund and the][/#] Investment Adviser [#][desire to amend
the Agreement in order to revise the provisions relating to the compensation of
the Investment Adviser][/#] [*]is willing to render such investment advisory
services to the Fund[/*];
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 [#][Directors][/#] [*]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 [#][Articles
of Incorporation][/#] [*]Trust Instrument[/*], its Bylaws and its registration
statement filed on Form N-[#][2][/#] [*]1A[/*] with the SEC, as such
A-1
<PAGE>
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 [#][Directors][/#] [*]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 [#][Directors][/#] [*]Trustees[/*] or the Fund's
administrator may reasonably request;
(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 [#][Directors][/#] [*]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
[#][Directors][/#] [*]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.
A-2
<PAGE>
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 [#][directors][/#]
[*]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
[#][directors][/#] [*]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 [#][Directors][/#] [*]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 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 [#][directors'][/#] [*]Trustees'[/*] and officers'
insurance and fidelity bonds; (ix) compensation and expenses of the
[#][directors][/#] [*]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 [#][Directors][/#]
[*]Trustees[/*], or any committees thereof, or meetings of shareholders
including out-of-pocket travel expenses of [#][directors][/#] [*]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 [#][within the limitations set forth in the Prospectus of the Fund
contained in the Fund's Registration Statement][/#].
4. COMPENSATION OF THE INVESTMENT ADVISER.
A-3
<PAGE>
(a) [*]FOR ASSET ALLOCATION AGREEMENT ONLY: In consideration of the
foregoing, the Fund shall pay the Adviser a fee at an annual rate of 0.20% of
the average daily net assets of the Fund. 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 Fund shall pay the Adviser a fee at an annual rate of 0.90% of the average
daily net assets of that portion of the assets of the Fund that are not invested
in another 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 applicable order of the Securities and Exchange
Commission, granting an exemption from the prohibitions of Rule 12(d)(1) of that
Act. No fee shall be payable hereunder during any period in which the Fund
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.[/*]
(a) [#]For the services rendered, the equipment and facilities furnished and
expenses assumed by the Investment Adviser, commencing on the date of
effectiveness hereof, the Fund shall pay in arrears to the Investment Adviser as
of the end of each calendar month a fee in U.S. dollars 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. For purposes of this calculation, average weekly net
assets is determined at the end of each month on the basis of the average daily
net assets of the Fund for each week during the month. 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. If this Agreement becomes effective
subsequent to the first day of a month or shall terminate before the last day of
a month, compensation for that part of the month that this Agreement is in
effect shall be subject to a pro rata adjustment based on the number of days
elapsed in the relevant month as a percentage of the total number of days in
such month in order to permit the fee to be calculated in a manner consistent
with the calculation of the fee as set forth above. During any period when the
determination of net asset value is suspended by the Board of Directors of the
Fund, the average net asset value of a share for the last week prior to such
suspension shall be deemed to be the average net asset value at the close of
each succeeding week until it is again determined.[/#]
(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
A-4
<PAGE>
the last business day of the month, that 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 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
Fund and the shareholders of the Fund shall not be liable for any obligations of
the Fund 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
A-5
<PAGE>
Fund to which the Adviser's rights or claims relate in settlement of such rights
or claims, and not to the Trustees of the Fund or the shareholders of the
Fund.[/*]
[*]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 [#][directors][/#] [*]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 [#][directors][/#]
[*]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
[#][Directors][/#] [*]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 [#][Directors][/#] [*]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 8, the definitions contained in Section 2(a) of the
Investment Company Act (particularly the definitions of "assignment,"
"interested person" and "voting security") shall be applied.
[#][8][/#] [*]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 [#][Directors][/#] [*]Trustees
of the Fund[/*], including a majority of the [#][directors][/#] [*]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
[#][directors][/#] [*]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.
[#][9][/#] [*]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:
[#][Laura E. Luckyn Malone][/#] [*]Louise Croset[/*] and (b) to the Investment
Adviser at the same address.
[#][10][/#] [*]11[/*]. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of [#][New York][/#] [*]Delaware[/*] and
the applicable provisions of the Investment Company Act. To the extent
[#][the][/#] applicable laws of the State of [#][New York][/#] [*]Delaware[/*],
or any of the provisions herein, conflict with the applicable provisions of the
Investment Company Act, the latter shall control.
[#][11][/#] [*]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 [#][Investment][/#] Adviser confirms that the Fund is a
[#]["business][/#][*]Non-private[/*] Customer[#]["][/#] as defined [#][by][/#]
[*]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 [#][Employment][/#]
[*]Employee[/*] Retirement Income Security Act of 1974, as amended.
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<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
[#][, INC.][/#]
[*]By: [/*]
SCHRODER CAPITAL MANAGEMENT
INTERNATIONAL INC.
[*]By: [/*]
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<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 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
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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 except upon written request.
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.
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.
B-2
<PAGE>
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. For purposes of this Agreement, a "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 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
B-3
<PAGE>
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 Fund has filed all federal income tax returns of the Fund
required to be filed by it, 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.
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, bylaw, 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.
B-4
<PAGE>
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.
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, 1997, 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
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<PAGE>
this Agreement, upon the proxy statement which will be distributed to Fund
Stockholders 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.
7.4. 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.
8.4. TAX OPINION. The Fund and the Trust shall have received the opinion
referred to in paragraph 7.3 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.
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<PAGE>
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.
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-7
<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.
<TABLE>
<S> <C>
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
(Please specify below)
</TABLE>
<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-SM- 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-01-1996
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 187002931
<INVESTMENTS-AT-VALUE> 202751227
<RECEIVABLES> 778263
<ASSETS-OTHER> 4399514
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<TOTAL-ASSETS> 207929004
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1044928
<TOTAL-LIABILITIES> 1781707
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<PAID-IN-CAPITAL-COMMON> 225936839
<SHARES-COMMON-STOCK> 16107100
<SHARES-COMMON-PRIOR> 19607100
<ACCUMULATED-NII-CURRENT> 0
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<OTHER-INCOME> 0
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<REALIZED-GAINS-CURRENT> (2221037)
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1826573)
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<NUMBER-OF-SHARES-REDEEMED> 3500000
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (51697415)
<ACCUMULATED-NII-PRIOR> 1826585
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<PER-SHARE-GAIN-APPREC> (.19)
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<PER-SHARE-NAV-END> 12.80
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
