<PAGE>
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SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
787 Seventh Avenue, New York, NY 10019
(800) 730-2932
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation through investments primarily
in equity securities of Asian companies.
INVESTMENT ADVISER
Schroder Capital Management International Inc. (the "Investment Adviser") is
a wholly owned indirect subsidiary of Schroders plc, the London Stock Exchange
listed holding company parent of an investment banking and investment management
group of companies (the "Schroder Group") that dates its origins to 1804. The
investment operations of the Schroder Group are located in 20 countries
worldwide including 10 offices in Asia. The Schroder Group has been managing
international investment portfolios since the early years of this century. At
the end of the last calendar quarter, September 30, 1997, the Schroder Group had
over $175 billion in assets under management. At that same date, the Investment
Adviser, together with its U.K. affiliate, Schroder Capital Managment
International Ltd., had over $28 billion under management, of which
approximately $10.9 billion was invested in the Asian region.
December 15, 1997
Dear Stockholder:
We are pleased to present to you the 1997 Annual Report for the Schroder
Asian Growth Fund, Inc., (the "Fund"). On October 31, 1997 the Fund's net asset
value was $9.34 per share and the closing price on the New York Stock Exchange
was $8.50.
It has been a volatile year in the Asian markets but management is standing
firm with its long-term investment strategy for the Fund. The Fund will continue
to emphasize companies with long-term growth prospects that are well-managed and
of good quality. Management continues to believe that in the longer term the
impact of recent currency devaluations will be very positive for the region's
economies. As export competitiveness is restored, net exports will likely
improve. The positive impact this will have on current account balances will
allow currencies to stabilize. As currencies stabilize, interest rates should
fall and the environment for steady growth will return. The external sector will
lead the recovery with strong growth anticipated in 1999. Domestic investment
will follow as lower interest rates will allow liquidity to improve. With the
increasing involvement of the International Monetary Fund (IMF), there is now
some assurance that the external debt obligations will be met, removing a key
worry from the region's stock markets.
We thank you for your support and interest in the Fund.
Sincerely,
[SIGNATURE] [SIGNATURE]
I. Peter Sedgwick Louise Croset
Chairman President
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1
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SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS (AS OF OCTOBER 31, 1997)
At the end of the fiscal year, October 31, 1997, the Fund was approximately
85% invested in equity securities and 15% in cash and other assets.
During the first half of the fiscal year, the prospects for Asian markets
were generally favorable. In response, the Fund increased its weighting in Hong
Kong; as the outlook for China's economy improved, the conditions for a recovery
in regional exports were in place as the cyclical electronics industry
stabilized.
The following six months were a period of significant volatility across the
region's stock markets, resulting in negative market returns for the six and
twelve month periods. Market volatility was triggered by the region's currency
turmoil. Although originally restricted to Thailand and its close neighbors (the
Philippines, Indonesia and Malaysia), the turmoil spread through the region,
finally reaching the North Asian markets of Korea, Taiwan and Hong Kong in the
closing weeks of October 1997.
The currency turmoil has, with the exception of the Hong Kong dollar, led to
an abandonment of fixed exchange rates among Asian economies and subsequent
currency devaluations. Interest rates in most economies are now higher than
previously expected and the prior positive environment for corporate earnings
growth has largely diminished. In response, the industry focus of the Fund's
holdings has shifted away from interest rate sensitive sectors such as real
estate and banking, and towards more defensive sectors such as utilities,
telecommunications and consumer durables.
Over the year, the Fund maintained a high weighting to HONG KONG. Mainland
Chinese liquidity flows and the positive momentum associated with the colony's
hand over provided support to the stock market. Corporate earnings for Hong Kong
companies were also buoyed by China's favorable economic prospects, particularly
export growth. Unfortunately, the recent decision by the Taiwanese to devalue
their currency led to speculative pressure on the Hong Kong dollar peg. Both the
Hong Kong Monetary Authority and China have pledged to defend the peg, but in
response, local interest rates have moved up sharply, leading to significant
downward pressure on real estate prices. In the short term, although the current
higher interest rates will have a negative impact on corporate earnings,
management believes that the reform process currently at work in China should
have an overriding positive impact on the outlook for Hong Kong. Well-managed
corporations that have increased their activities in CHINA, particularly
infrastructure and service related industries, should benefit.
The Fund's exposure to SINGAPORE has been maintained over the past twelve
months. The government allowed the local currency to depreciate during the
recent crisis, which should help to ensure competitiveness of exports.
Singapore's reputation as a safe haven remains intact, with the local banks
remaining highly capitalized. In contrast, the fall in MALAYSIA'S market over
the year reflected increasing investor concern over the lack of a transparent
government policy in dealing with economic conditions. Political considerations
are taking priority and with the prospect of much slower economic growth, as the
Malaysian economy contracts next year, the Fund has reduced its weighting.
Exposure to the Asian Emerging Markets of Thailand, Indonesia and the
Philippines was reduced over the year. Higher interest rates as a result of the
currency devaluations impacted the outlook for economic growth and corporate
earnings. Southern Asia's overcapacity in manufacturing plants and commercial
and retail real estate will require a period of adjustment, with vacancy levels
expected to remain high. The banking sector will face deteriorating operating
environments as non-performing loans rise, and although eventual
recapitalization of balance sheets will occur, most country's banking sectors
face rationalization. Disappointingly, policy response has generally been slow
to address individual country problems, but the recent acceptance of IMF help in
Thailand and Indonesia is positive. The similar acceptance of IMF help in South
Korea recently should also be constructive, not just for South Korea but for the
region as a whole.
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2
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SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
In JAPAN, strong economic growth in the first half of the Fund's fiscal year
contrasted with a sharp slowdown in the second half. The Japanese market fell by
17% in yen terms and 22% in U.S. dollar terms over the period in reaction to the
government's measures to stem the budget deficit. The strong relative
performance of mainly export-oriented sectors, such as transport equipment and
electric machinery, contrasted with the comparatively poor performance of banks,
basic industries, and smaller companies.
The Fund's portfolio emphasized larger manufacturing companies, which have
the best prospects for earnings improvement. Such stocks include BRIDGESTONE
CORP., the tire manufacturer, and TAKEDA CHEMICAL INDUSTRIES, the pharmaceutical
maker. The Fund also maintained large positions in some smaller stocks where
management expects outstanding long-term value including GLORY LTD., a
money-handling machine maker, and HANSHIN ELECTRIC RAILWAY CO., a railway
operator.
Other significant events during the fiscal year just ended include the
election of Louise Croset as a Director and President of the Fund, replacing
departing portfolio manager Laura Luckyn-Malone, on January 16, 1997. From that
date, Ms. Croset and Heather Crighton, a manager of the Fund since its
inception, have headed the Fund's investment management team. Ms. Croset joined
SCMI in 1993 and is a First Vice President and Director of the firm. From 1987
to 1993, Ms. Croset served as a Vice President at Wellington Management Co. Ms.
Crighton is a First Vice President of SCMI and has been with the firm since
1992.
On March 20, 1997, the Fund completed a tender offer for 3,500,000 of the
Fund's shares. In 1998, the fund will convert to an open-end structure, as
described in Note 7 to the financial statements that follow.
DIVIDEND REINVESTMENT PLAN
The Fund offers you a plan for the reinvestment of your dividends and
capital gains distribution in shares of the Fund. If you wish to participate,
please contact the plan agent, State Street Bank and Trust Company, at (800)
426-5523.
OTHER INFORMATION
The Fund's net asset value is published every Monday in THE WALL STREET
JOURNAL under the heading "Closed End Funds." The Fund's net asset value is also
published in THE NEW YORK TIMES and BARRON'S.
In addition, the Fund publishes a newsletter in the middle of each month,
containing country weightings and a market update. You can request a copy by
calling (800) 730-2932.
During the fiscal year ended October 31, 1997, there have been (i) no
material changes in the Fund's investment objectives or policies that have not
been approved by shareholders; (ii) no changes in the Fund's Articles of
Incorporation; (iii) no changes in the principal risk factors associated with
investment in the Fund.
THE VIEWS EXPRESSED IN THIS REPORT WERE THOSE OF THE FUND'S PORTFOLIO
MANAGERS AS OF OCTOBER 31, 1997, AND MAY NOT REFLECT THE VIEWS OF THE PORTFOLIO
MANAGERS ON THE DATE THIS REPORT IS FIRST PUBLISHED OR ANY TIME THEREAFTER.
THESE VIEWS ARE INTENDED TO ASSIST SHAREHOLDERS OF THE FUND IN UNDERSTANDING
THEIR INVESTMENT IN THE FUND AND DO NOT CONSTITUTE INVESTMENT ADVICE; INVESTORS
SHOULD CONSULT THEIR OWN INVESTMENT PROFESSIONALS AS TO THEIR INDIVIDUAL
INVESTMENT PROGRAMS.
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3
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SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
PORTFOLIO CHARACTERISTICS AS OF OCTOBER 31, 1997
COUNTRY WEIGHTINGS
<TABLE>
<CAPTION>
COUNTRY % OF NET ASSETS
<S> <C>
- ------------------------------------------------------------------------------
Hong Kong 27.3%
Japan 18.7%
Singapore 9.7%
Malaysia 8.0%
India 7.4%
Korea 3.8%
Philippines 3.5%
Indonesia 3.0%
China 1.8%
Thailand 1.6%
Cash 15.2%
- ------------------------------------------------------------------------------
Total 100.0%
</TABLE>
INVESTMENT BY INDUSTRY
<TABLE>
<CAPTION>
INDUSTRY % OF NET ASSETS
<S> <C>
- ------------------------------------------------------------------------------
Real Estate 20.3%
Capital Equipment 17.6%
Services 14.9%
Energy 8.5%
Finance 7.2%
Multi-Industry 6.8%
Materials 4.7%
Consumer Goods 3.2%
Insurance 1.6%
Cash 15.2%
- ------------------------------------------------------------------------------
Total 100.0%
</TABLE>
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
SECURITY % OF NET ASSETS
<S> <C>
- ----------------------------------------------------------------------------------------------
Citic Pacific Ltd. (HK) 4.4%
Hutchison Whampoa (HK) 3.7%
Cheung Kong Holdings Ltd. (HK) 2.8%
Sun Hung Kai Properties Ltd. (HK) 2.5%
Swire Pacific Ltd. 'A' (HK) 2.4%
China Resources Enterprise Ltd. (HK) 2.4%
Singapore Press Holdings Ltd. (SGD) 2.3%
Cheung Kong Infrastucture Holdings (HK) 2.3%
New World Infrastucture Ltd. (HK) 2.0%
Hong Kong & China Gas Company Ltd. (HK) 1.9%
- ----------------------------------------------------------------------------------------------
Total 26.7%
</TABLE>
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4
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SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
COMMON STOCKS - 84.8%
CHINA - 1.8%
SHARES VALUE US$
- --------- ------------
121,000 UTILITIES ELECTRICAL & GAS - 1.8%
Huaneng Power International,
Ltd. (a)*
(Cost $2,050,520)
HONG KONG - 27.3%
2,662,000
------------
1,331,000 BUILDING & CONSTRUCTION - 2.3%
Cheung Kong Infrastructure
Holdings
3,443,726
------------
3,160,000 CHEMICALS - 0.8%
Chen Hsong Holdings Ltd.
1,226,391
------------
1,376,000 COMMERCE/INDUSTRIAL - 6.8%
672,000 Citic Pacific Ltd.
Swire Pacific Ltd. 'A'
6,586,287
3,590,375
------------
10,176,662
------------
1,486,000 ELECTRICITY & GAS - 1.8%
Hong Kong and China Gas
Company Ltd.
2,806,675
------------
767,250 FOODS - 0.1%
Guangdong Brewery Holdings
Ltd.*
140,944
------------
616,000 REAL ESTATE - 14.7%
1,290,000 Cheung Kong Holdings Ltd.
811,000 China Resources Enterprise
77,000 Ltd.
1,501,000 Hutchison Whampoa
509,000 New World Development Company
825,000 Ltd.
New World Infrastructure Ltd.*
Sun Hung Kai Properties Ltd.
Wharf (Holdings) Ltd.
4,283,312
3,537,904
5,613,001
270,944
3,019,476
3,753,299
1,686,287
------------
22,164,223
------------
1,214,000 SERVICES - 0.5%
Guangdong Investments
773,474
------------
430,000 WHOLESALE - 0.3%
Guangnan Holdings
TOTAL HONG KONG
(COST $43,034,303)
INDIA - 7.4%
394,955
------------
41,127,050
------------
BANKING - 0.8%
State Bank of India
COMMON STOCKS
1,191,460
165,000 ------------
SHARES VALUE US$
- --------- ------------
<C> <S> <C>
INDIA (CONCLUDED)
HOUSEHOLD GOODS - 1.6%
69,000 Hindustan Lever Ltd. 2,435,032
------------
LEISURE AND TOURISM - 0.0%
125 Indian Hotels Co., Ltd. 2,019
------------
MACHINERY & ENGINEERING - 1.2%
72,000 Bajaj Auto Ltd. 1,142,327
36,000 Bajaj Auto Ltd. Bonus Shares 571,140
227 Tata Engineering & Locomotive
Company Ltd. 1,992
------------
1,715,459
------------
OIL, INTEGRATED - 1.0%
127,000 Bharat Petroleum Corporation
Ltd. 1,523,720
------------
PHARMACEUTICALS - 0.0%
1,779 Ranbaxy Laboratories Ltd. 34,701
------------
TELECOMMUNICATIONS - 2.8%
393,000 Mahanagar Telephone Nigam Ltd. 2,742,024
63,000 Videsh Sanchar Nigam Ltd. 1,473,583
------------
4,215,607
------------
TOTAL INDIA
(COST $9,361,192) 11,117,998
------------
INDONESIA - 3.0%
COMMUNICATIONS - 1.0%
46,000 P.T. Indosat 104,109
1,430,000 P.T. Telekomunikasi Indonesia 1,334,401
------------
1,438,510
------------
FOODS - 0.5%
774,680 P.T. Indofood Sukses Makmur 776,838
------------
MISC. MANUFACTURING - 0.8%
435,000 P.T. Gudang Garam 1,235,933
------------
RETAIL SALES - 0.4%
82,500 P.T. Unilever Indonesia 643,454
------------
TRANSPORTATION EQUIPMENT - 0.3%
551,000 P.T. Astra International 410,564
------------
TOTAL INDONESIA
(COST $6,075,219) 4,505,299
------------
</TABLE>
See accompanying notes to financial statements.
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5
<PAGE>
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SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
<TABLE>
<CAPTION>
COMMON STOCKS
SHARES VALUE US$
- --------- ------------
JAPAN - 18.7%
<C> <S> <C>
CHEMICALS - 0.1%
38,000 Sakata Inx Corp. 175,127
------------
CONSTRUCTION - 1.4%
54,000 Daiwa House Industry Co., Ltd. 521,088
73,000 Higashi Nihon House Co. 546,544
48,000 Kinden Corporation 590,966
42,000 Sanki Engineering Co. 349,389
8,000 Tostem Corporation 111,139
------------
2,119,126
------------
ELECTRICAL APPLIANCES - 3.9%
27,000 Fuji Photo Film Co. 979,286
142,000 Hitachi Ltd. 1,092,671
6,000 Kyocera Corporation 343,898
77,000 Matsushita Electrical
Industrial Company, Ltd. 1,293,902
88,000 Mitsubishi Electric
Corporation 293,553
16,000 Murata Manufacturing Co., Ltd. 644,206
30,000 Omron Corporation 514,100
7,700 SMC Corporation 666,168
------------
5,827,784
------------
INSURANCE - 1.6%
181,000 Koa Fire & Marine Insurance
Co., Ltd. 941,061
90,000 Sumitomo Marine & Fire
Insurance 600,449
162,000 Yasuda Fire & Marine Insurance 898,877
------------
2,440,387
------------
IRON & STEEL - 0.6%
411,000 Sumitomo Metal Industries 823,983
------------
LAND TRANSPORTATION - 1.1%
123 East Japan Railway Company 598,577
317,000 Hanshin Electric Railway Co. 1,073,280
------------
1,671,857
------------
MACHINERY - 1.5%
63,000 Amada Metrics Co. Ltd. 463,813
106,000 Glory Ltd. 1,737,127
------------
2,200,940
------------
MINING - 0.1%
31,000 Nittetsu Mining Co. 173,813
------------
MISC. FINANCIAL - 0.7%
40,700 Credit Saison Co., Ltd. 1,093,595
------------
MISC. MANUFACTURING - 0.6%
72,000 Toppan Printing Company Ltd. 904,417
------------
<CAPTION>
COMMON STOCKS
SHARES VALUE US$
- --------- ------------
<C> <S> <C>
JAPAN (CONCLUDED)
OIL - 0.3%
72,000 Showa Shell Sekiyu 504,916
------------
PAPER & PULP - 0.2%
66,000 Oji Paper Co., Ltd. 334,914
------------
PHARMECEUTICALS - 0.9%
51,000 Takeda Chemical Industries 1,391,565
------------
REAL ESTATE - 0.4%
133,100 Airport Facilities Co., Ltd. 476,108
17,000 T.O.C Co. 171,117
------------
647,225
------------
RETAIL SALES - 0.4%
12,000 Ito-Yokado Co., Ltd. 596,955
------------
RUBBER GOODS - 1.0%
66,000 Bridgestone Corp. 1,427,502
------------
SECURITIES - 0.4%
51,000 Nomura Securities Company Ltd. 593,961
------------
SERVICES - 0.1%
9,000 Chubu-Nippon Broadcasting Co.,
Ltd. 157,225
------------
TEXTILES - 0.4%
67,000 Kuraray Company Limited 601,947
------------
TRANSPORTATION EQUIPMENT - 0.8%
40,000 Toyota Motor Corporation 1,114,716
------------
WHOLESALE - 2.2%
100,000 Inaba Denkisangyo Co. 1,123,035
15,000 Meiko Shokai Co. 461,692
81,000 Mitsubishi Corporation 694,035
143,000 Mitsui & Company 1,086,091
------------
3,364,853
------------
TOTAL JAPAN
(COST $35,979,550) 28,166,808
------------
KOREA - 3.8%
BANKING - 0.5%
86,979 Shinhan Bank 670,463
------------
COMMUNICATIONS - 0.4%
1,833 SK Telecom Co. Ltd.(1) 623,755
------------
ELECTRICAL APPLIANCES - 0.9%
35,000 LG Electronics 473,958
22,784 Samsung Electronics Co.(1) 901,748
------------
1,375,706
------------
</TABLE>
See accompanying notes to financial statements.
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6
<PAGE>
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SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
<TABLE>
<CAPTION>
COMMON STOCKS
SHARES VALUE US$
- --------- ------------
KOREA (CONCLUDED)
<C> <S> <C>
ELECTRICITY & GAS - 0.5%
49,000 Korea Electric & Power Corp. 699,271
------------
IRON-STEEL - 0.6%
21,000 Pohang Iron & Steel Co., Ltd.
(1) 927,631
------------
OILS - 0.4%
46,020 Yukong Ltd. 623,188
------------
SECURITIES - 0.5%
64,000 Daewoo Securities Co.* 793,333
------------
TOTAL KOREA
(COST $12,929,984) 5,713,347
------------
MALAYSIA - 8.0%
BANKING - 1.2%
354,000 Malayan Banking Berhad 1,365,202
465,000 RHB Capital Berhad 389,238
83,400 RHB Sakura Merchant Bankers
Berhad* 52,359
------------
1,806,799
------------
CONSTRUCTION - 1.6%
665,000 Gamuda Berhad 1,013,901
615,000 United Engineers (Malaysia)
Ltd. 1,452,466
------------
2,466,367
------------
ELECTRICITY & GAS - 1.4%
65,000 Petronas Gas Berhad 174,888
888,000 Tenaga Nasional Berhad 1,911,390
------------
2,086,278
------------
GLASS & CERAMICS - 0.2%
100,000 Fraser & Neave Ltd. 224,963
------------
MISC. MANUFACTURING - 0.8%
820,000 R.J. Reynolds Berhad 1,262,481
------------
REAL ESTATE - 1.7%
2,779,000 Island & Peninsular Berhad 2,575,456
------------
SERVICES - 1.1%
561,500 Genting Berhad 1,577,907
------------
TOTAL MALAYSIA
(COST $26,018,189) 12,000,251
------------
PHILIPPINES - 3.5%
COMMUNICATION - 1.6%
96,340 Philippine Long Distance
Telephone 2,401,638
------------
<CAPTION>
COMMON STOCKS
SHARES VALUE US$
- --------- ------------
<C> <S> <C>
PHILIPPINES (CONCLUDED)
ELECTRICITY & GAS - 0.7%
315,315 Manila Electric Co. 'B' 970,200
------------
MINING - 0.3%
5,496,000 Belle Corporation* 501,060
1,099,200 Belle Corporation Wts. (2)* 203
------------
501,263
------------
REAL ESTATE - 0.9%
3,323,768 Ayala Land, Inc. 'B' 1,302,046
------------
TOTAL PHILIPPINES
(COST $7,831,441) 5,175,147
------------
SINGAPORE - 9.7%
BANKING - 3.1%
576,000 Overseas Union Bank Ltd. 1,923,664
500,880 United Overseas Bank Ltd. 2,772,046
------------
4,695,710
------------
GLASS & CERAMICS - 0.4%
110,000 Fraser & Neave Ltd. 552,799
------------
MACHINERY & ENGINEERING - 1.6%
760,000 Keppel Corp., Ltd. 2,407,634
------------
REAL ESTATE - 2.3%
522,000 City Developments Ltd. 2,191,603
748,000 DBS Land Ltd. 1,275,216
------------
3,466,819
------------
SERVICES - 2.3%
253,200 Singapore Press Holdings Ltd. 3,495,191
------------
TOTAL SINGAPORE
(COST $22,240,842) 14,618,153
------------
THAILAND - 1.6%
COMMUNICATIONS - 0.4%
630,000 TelecomAsia Corp.* 277,262
183,000 Total Access Communication
Co., Ltd. 349,530
------------
626,792
------------
ELECTRICITY & GAS - 0.6%
582,200 Electricity Generating Public
Co., Ltd. 953,726
------------
MINING - 0.3%
49,000 PTT Exploration and Production
Public Company Limited 491,198
------------
</TABLE>
See accompanying notes to financial statements.
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7
<PAGE>
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SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
OCTOBER 31, 1997
<TABLE>
<CAPTION>
COMMON STOCKS
SHARES VALUE US$
- ----------- ------------
REAL ESTATE - 0.3%
Land & House Corp. Limited
TOTAL THAILAND 364,694
(COST $7,720,378) ------------
TOTAL COMMON STOCKS
(COST $173,241,618) 2,436,410
COMMON STOCKS ------------
426,171 127,522,463
PRINCIPAL ------------
AMOUNT VALUE US$
- ----------- ------------
<C> <S> <C>
(000)
SHORT-TERM INVESTMENTS - 12.6%
REPURCHASE AGREEMENT - 12.6%
U.S.$19,000 With Chase Securities
Incorporated dated 10/31/97
5.55%, due 11/03/97
(repurchase proceeds
$19,008,788); collateralized
by: $17,885,000 U.S.
Treasury Note, 6.875%, due
5/15/06 (value $19,947,546)
(COST $19,000,000) 19,000,000
------------
TOTAL INVESTMENTS
(COST $192,241,618) - 97.4% 146,522,463
Other assets less
liabilities - 2.6% 3,883,112
------------
Net Assets - 100% $150,405,575
------------
------------
</TABLE>
* Non-income producing security.
(a) American Depositary Receipt.
(1) Priced at fair value as determined by the Investment Adviser and approved by
the Board of Directors.
(2) The warrants enable the holder to subscribe to one share for every warrant
held at PHP 8.50 per share. The warrants can be exercised from 10/06/98 thru
12/31/00.
Percentages are based on net assets.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
8
<PAGE>
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SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $173,241,618) $ 127,522,463
Repurchase agreement 19,000,000
Cash 3,514,982
Foreign currency, at value (cost $14,556) 14,556
Receivable for securities sold 1,755,433
Receivable for dividends 225,566
Receivable for interest 19,383
Unrealized appreciation on forward foreign currency
contracts 1,260
Deferred organization expenses 39,567
Prepaid expenses 9,924
-------------
Total Assets 152,103,134
-------------
LIABILITIES:
Payable for securities purchased 991,206
Estimated tax liability on Indian investments (Note 5) 209,820
Investment advisory fee payable 142,321
Administration fee payable 35,580
Unrealized depreciation on forward foreign currency
contracts 205
Accrued expenses payable and other liabilities 318,427
-------------
Total Liabilities 1,697,559
-------------
Net Assets $ 150,405,575
-------------
-------------
NET ASSETS WERE COMPOSED OF:
Capital Stock, par value ($.01 per share, applicable to
19,607,100 shares issued: authorized 100,000,000
shares) $ 196,071
Paid-in-capital in excess of par 270,878,538
Treasury Stock at cost (3,500,000 shares--Note 6) (45,640,000)
Accumulated net investment loss (245,643)
Accumulated net realized losses from investments (28,855,504)
Net unrealized depreciation of investments (net of
estimated tax liability on Indian investments of
$209,820 - Note 5) (45,928,975)
Net unrealized appreciation on translation of assets and
liabilities in foreign currencies and forward foreign
currency contracts 1,088
-------------
Net Assets $ 150,405,575
-------------
-------------
Net asset value per share ($150,405,575
divided by 16,107,100 shares outstanding) $ 9.34
-------------
-------------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
9
<PAGE>
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SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $133,393) $ 2,597,793
Interest and discount earned 784,509
------------
Total Investment Income 3,382,302
------------
EXPENSES:
Investment advisory fee 2,301,847
Administration fee 575,461
Legal fees and expenses 385,107
Custodian's fees and expenses 282,580
Transfer agent's fees and expenses 183,596
Reports to shareholders 138,858
Directors' fees and expenses 72,116
Insurance expense 53,295
Independent accountants' fees and expenses 35,791
Amortization of deferred organization expenses 33,981
Registration fees 24,260
Miscellaneous expenses 12,235
------------
Total Expenses 4,099,127
------------
NET INVESTMENT LOSS (716,825)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments (net of taxes paid on Indian Investments of
$212,364) 3,269,878
Foreign currency transactions and forward foreign currency
contracts (160,676)
Net change in unrealized appreciation (depreciation) on:
Investments (net of change in estimated tax liability on
Indian investments of $56,530 - Note 5) (62,130,824)
Translation of assets and liabilities in foreign
currencies and forward foreign currency contracts 3,541
------------
NET REALIZED AND UNREALIZED LOSS FROM INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS (59,018,081)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(59,734,906)
------------
------------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
<S> <C> <C>
- --------------------------------------------------------------------------------
INCREASE(DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss $ (716,825) $ (508,543)
Net realized gain from investment
transactions 3,269,878 21,946
Net realized gain (loss) from
foreign currency transactions and
forward foreign currency contracts (160,676) 2,568,860
Net change in unrealized
appreciation (depreciation) on
investments (net of estimated tax
liability on Indian investments of
$209,820 and $266,350,
respectively - Note 5) (62,130,824) 8,574,019
Net change in unrealized
appreciation (depreciation) on
translation of assets and
liabilities in foreign currencies
and forward foreign currency
contracts 3,541 (245,390)
----------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (59,734,906) 10,410,892
----------------- -----------------
DIVIDENDS TO SHAREHOLDERS:
Investment income-net (1,826,573) -
----------------- -----------------
CAPITAL STOCK TRANSACTIONS (NOTE 6):
Cost of shares redeemed pursuant to
tender offer (45,640,000) -
Tender offer costs charged to paid
in capital in excess of par (237,658) (53,304)
----------------- -----------------
TOTAL CAPITAL STOCK TRANSACTIONS (45,877,658) (53,304)
----------------- -----------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (107,439,137) 10,357,588
----------------- -----------------
NET ASSETS:
Beginning of year 257,844,712 247,487,124
----------------- -----------------
End of year (including undistributed
(accumulated) net investment
income (loss) of $(245,643) and
$1,826,585 for the years ended
1997 and 1996, respectively) $ 150,405,575 $ 257,844,712
----------------- -----------------
----------------- -----------------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios:
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
YEAR YEAR YEAR DECEMBER 30,
ENDED ENDED ENDED 1993* TO
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1995 1994
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.15 $ 12.62 $ 13.84 $ 14.01**
Investment Operations:
Net investment income (loss) (0.05) (0.03) 0.02 (0.01)
Net realized and unrealized gain (loss) on
investments (net of estimated tax
liability on Indian investments) and
foreign currency transactions and foreign
currency contracts (3.66) 0.56 (1.24) (0.16)
----------- ----------- ----------- -------
Total from investment operations (3.71) 0.53 (1.22) (0.17)
----------- ----------- ----------- -------
Less dividends from investment income-net (0.09) - - -
----------- ----------- ----------- -------
Tender offer costs charged to
paid-in-capital in excess of par (0.01) -+ - -
----------- ----------- ----------- -------
Net asset value, end of period $ 9.34 $ 13.15 $ 12.62 $ 13.84
----------- ----------- ----------- -------
----------- ----------- ----------- -------
Market value, end of period $ 8.50 $ 12.00 $ 11.125 $ 12.00
----------- ----------- ----------- -------
----------- ----------- ----------- -------
Total investment return based on (1):
Market value (28.62 )% 7.87% (7.29 )% (20.00 )%
----------- ----------- ----------- -------
----------- ----------- ----------- -------
Net asset value (28.43 )% 4.20% (8.82 )% (1.21 )%
----------- ----------- ----------- -------
----------- ----------- ----------- -------
Ratio/Supplementary Data:
Net assets, end of period (Millions) $ 150.41 $ 257.84 $ 247.49 $ 271.42
Ratio of expenses to average net assets 1.78 % 1.57 % 1.65 % 1.59 %***
Ratio of expenses to average net assets
excluding conversion costs (Note 7) 1.59 % - - -
Ratio of net investment income (loss) to
average net assets (0.31 )% (0.19 )% 0.12 % (0.10 )%***
Portfolio turnover rate 39.14 % 34.71 % 66.79 % 19.76 %
Average commission rate per share**** $ 0.0142 $ 0.0224 N/A N/A
</TABLE>
* Commencement of investment operations.
** Net of $.09 offering expenses.
*** Annualized.
**** For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for trades on
which a commission is charged.
+ Less than $0.01 per share.
(1) Total investment return is calculated assuming a purchase of common
stock on the opening of the first day and a sale on the closing of the last
day of each period reported. Dividends and distributions, if any, are
assumed for the purposes of this calculation, to be reinvested at prices
obtained under the Fund's dividend reinvestment plan. Total investment
return does not reflect brokerage commissions paid to purchase shares of the
Fund. Generally, total investment return based on net asset value will be
higher than total investment return based on market value in periods where
there is an increase in the discount or a decrease in the premium of the
market value to the net asset value from the beginning to the end of such
periods. Conversely, total investment return based on net asset value will
be lower than total investment return based on market value in periods where
there is a decrease in the discount or an increase in the premium of the
market value to the net asset value from the beginning to the end of such
periods. Total investment returns for periods of less than one full year are
not annualized.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES:
Schroder Asian Growth Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 (the "Act"), as amended, as a
non-diversified, closed-end management investment company. The Fund was
incorporated in Maryland on November 5, 1993 and investment operations
commenced on December 30, 1993. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of
its financial statements.
SECURITY VALUATION
Portfolio securities listed or traded on a recognized stock exchange or
NASDAQ National Market System are valued at the last reported sales price on
the exchange on which the securities are principally traded. Other
securities for which market quotations are readily available are valued at
the last sales price prior to the time of determination. If there is no
sales price on such date, and if bid and asked quotations are available,
such securities are valued at the mean between the last current bid and
asked prices. The value of a foreign security is determined in its national
currency as of 9:00 a.m., New York time, and that value is then converted
into its U.S. dollar equivalent on the day of valuation as of 11:30 a.m.,
New York time. Securities for which market quotations are not readily
available, and securities for which, in the judgment of the Investment
Adviser, the prices or values available do not represent the fair value of
the instrument, are valued at fair value, pursuant to the Fund's pricing
procedures as determined by the Adviser and approved in good faith by the
Board of Directors. In determining the fair value of such securities, the
Adviser and the Board consider all relevant information, including but not
limited to types of securities, current financial and market information and
restrictions on dispositions. The values assigned to the securities holdings
do not necessarily represent amounts which might ultimately be realized upon
their sale or other disposition, since such amounts depend on future
circumstances and cannot reasonably be determined until the actual
disposition occurs. However, because of the inherent uncertainty of such
valuations, those estimated values may differ significantly from the values
that would have been used had a ready market for the investments existed,
and the differences could be material. At October 31, 1997, the portfolio
contained three securities for which market quotations were not readily
available and which were fair valued pursuant to the Fund's procedures.
These securities had a total value of $2,453,134 representing 1.6% of the
Fund's net assets.
The Fund may enter into repurchase agreements whereby the Fund, through
its custodian, receives delivery of the underlying securities. The
underlying collateral is valued daily on a marked-to-market basis to assure
that the value, including accrued interest, is at least equal to the
repurchase price. In the event of a default of the obligation to repurchase,
the Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. If the seller defaults and the value of the
collateral declines, realization of the collateral by the Fund may be
delayed or limited.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are recorded on trade date. Dividend income is
recorded on the ex-dividend date except for certain dividends from foreign
securities which are recorded as soon as the Fund is informed of the
ex-dividend date. Interest income (including accretion of discount) is
recorded on the accrual basis. Realized gains and losses from security
transactions are determined on the identified cost basis.
FOREIGN CURRENCY TRANSLATION
Foreign currency amounts denominated in or expected to settle in foreign
currencies ("FC") are translated into U.S. dollars on the following basis:
market value of investment securities and other assets and liabilities at
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
the rate of exchange at the end of the respective period, purchases and
sales of investment securities and income and expenses at the rate of
exchange prevailing on the respective dates of such transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from the investment.
Reported net realized foreign exchange gains or losses arise from sales
of portfolio securities, sales and maturities of short-term securities,
sales of FCs, currency gains or losses realized between the trade and
settlement dates on securities transactions, the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books, and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses include
changes in the value of assets and liabilities, other than investments in
securities at fiscal year end, arising as a result of changes in the
exchange rate.
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions payable by the Fund, if any, are accrued on
the ex-dividend date. Dividends from net investment income and capital gain
distributions are determined in accordance with U.S. Federal income tax
regulations, which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign
currency transactions, passive foreign investment companies and net
investment losses. As a result of these differences, at October 31, 1997,
the Fund decreased paid-in-capital by $549,102, decreased accumulated net
investment loss by $471,170, decreased accumulated net realized losses from
investments by $20,769 and decreased accumulated net realized losses from
foreign currency transactions and forward foreign currency contracts by
$57,163. Net assets were not affected by the reclassification.
FORWARD FOREIGN CURRENCY CONTRACTS
The Fund may enter into forward contracts to purchase or sell FCs to
protect against the effect of possible adverse movements in foreign exchange
rates on the U.S. dollar value of the underlying portfolio. Risks associated
with such contracts include the movement in value of the FC relative to the
U.S. dollar and the ability of the counterparty to perform. Forward foreign
currency contracts are valued at the forward rate and are marked-to-market
weekly. Fluctuations in the value of such contracts are recorded as
unrealized gains or losses; realized gains or losses include net gains or
losses on contracts which have terminated by settlement.
ORGANIZATIONAL COSTS
Costs incurred by the Fund in connection with its organization and
initial registration are being amortized on a straight line basis over a
five-year period from the commencement of investment operations.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
2. PURCHASES AND SALES OF SECURITIES:
The aggregate cost of securities purchased and the proceeds from sales
of securities, excluding short-term investments, for the year ended October
31, 1997 were $83,156,326 and $149,297,647, respectively.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FORWARD FOREIGN CURRENCY CONTRACTS AS OF OCTOBER 31, 1997:
<TABLE>
<CAPTION>
CONTRACTS TO UNREALIZED
DELIVER/ SETTLEMENT IN EXCHANGE APPRECIATION/
RECEIVE DATE FOR VALUE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
CONTRACTS TO BUY:
Hong Kong Dollar USD 331,191 11/03/97 HKD 2,560,505 $ 331,242 $ 51
Hong Kong Dollar USD 273,378 11/03/97 HKD 2,113,543 273,420 42
Japanese Yen USD 48,201 11/04/97 JPY 5,815,412 48,377 176
Japanese Yen USD 13,864 11/06/97 JPY 1,664,057 13,843 (21)
Malaysian Ringit USD 177,931 11/06/97 MYR 596,995 178,474 543
Malaysian Ringit USD 145,401 11/07/97 MYR 487,865 145,849 448
------
Total $ 1,239
------
------
CONTRACTS TO SELL:
Hong Kong Dollar HKD 2,403,436 11/03/97 USD (310,875) (310,923) (48)
Malaysian Ringit MYR 149,715 11/06/97 USD (44,622) (44,758) (136)
------
Total $ (184 )
------
------
</TABLE>
4. INVESTMENT ADVISORY AND ADMINISTRATIVE AGREEMENTS AND OTHER TRANSACTIONS
WITH AFFILIATES:
The Fund retains Schroder Capital Management International, Inc. as
Investment Adviser (the "Adviser"). The Investment Advisory Agreement, as
amended on May 16, 1996, provides for a monthly fee at the annual rate of
(1) 1.00% of the Fund's average weekly net assets up to and including $300
million, and (2) 0.85% of the Fund's average weekly net assets in excess of
$300 million. The Fund paid or accrued fees to the Adviser of $2,301,847 for
the year ended October 31, 1997.
The Fund retains Princeton Administrators, L.P. as the Administrator.
Pursuant to the administration agreement, as amended on May 16, 1996, the
Administrator receives a monthly fee equal to the greater of (a) $150,000
per annum or (b) an annual rate of (1) 0.25% of the Fund's average weekly
net assets up to and including $300 million, and (2) 0.22% of the Fund's
average weekly net assets in excess of $300 million.The Fund paid or accrued
fees to the Administrator of $575,461 for the year ended October 31, 1997.
Several individuals who are directors and/or officers of the Fund are
also directors or officers of the Investment Advisor or its affiliates.
5. FEDERAL INCOME TAXES:
Since it is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its stockholders, no
Federal income tax provision is required.
For Federal income tax purposes, the tax basis of investment securities
owned is $192,677,609. At October 31, 1997, net unrealized depreciation on
investments was $(46,155,146). This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market value
over tax cost was $11,066,950 and aggregate gross unrealized depreciation
for all securities in which there was an excess of tax cost over market
value was $57,222,096.
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
For Federal income tax purposes, the Fund had a capital loss carry
forward as of October 31, 1997 of $28,664,146 ($2,615,657 expiring in 2002
and $26,048,489 expiring in 2003) which is available to offset future
capital gains, subject to limitations imposed under the Internal Revenue
Code.
Under the applicable foreign tax law, a withholding tax may be imposed
on interest, dividends, and capital gains at various rates. Indian tax
regulations require that taxes be paid on capital gains realized by the
Fund. At October 31, 1997, the Fund decreased net unrealized appreciation by
the estimated tax liability attributable to Indian investments of $209,820.
6. CAPITAL STOCK:
There are 100,000,000 shares of $.01 par value common stock authorized.
There are 16,107,100 shares issued and outstanding as of October 31, 1997.
On February 18, 1997, the Fund's Board of Directors approved a tender
offer (the "Tender Offer") to purchase up to 3.5 million shares of
outstanding common stock. The offer commenced on February 19, 1997 and
expired on March 20, 1997. The Fund received tenders representing 13,268,062
shares of common stock. Pursuant to the terms of the Tender Offer, the Fund
determined to accept 3.5 million common shares. As a result of the Tender
Offer, the Fund purchased 3.5 million shares for a total of $45,640,000.
As of October 31,1997 and October 31, 1996, costs incurred in connection
with the tender offer in the amount of $237,658 and $53,304, respectively,
have been charged to paid-in-capital in excess of par.
7. SUBSEQUENT EVENT:
On October 24, 1997, the shareholders of the Fund approved management's
proposal to convert the Fund from a closed-end to an open-end investment
company (the "Conversion"). Approval of this proposal included approval of
(1) amendments to the fundamental policies of the Fund to enable the Fund to
participate in an open-end Core and Gateway fund structure, (2) new
investment advisory agreements with the Investment Adviser to take effect
upon the Conversion, (3) changing the Fund's subclassification under the
Investment Company Act from a closed-end to an open-end company, and (4)
adopting an Agreement and Plan of Reorganization pursuant to which the Fund
would reorganize from a Maryland corporation into a Delaware business trust.
Following the Conversion, shares of the Fund will be subject to an
asset-based shareholder servicing fee of 0.25% per annum, and, for shares
purchased after the Conversion through brokers or other financial
intermediaries, a front-end sales charge based on the size of the purchase.
In addition, during the first six months after the conversion, open-end
shares received by stockholders of the Fund in the Conversion will be
subject to a redemption fee of 2.00%. Following the Conversion, stockholders
will be able to buy and sell at a price based on net asset value, subject
for the first six months to a redemption fee of 2.00%. In the course of
converting to an open-end fund, the Fund will also (a) convert from a
Maryland corporation to a Delaware business trust; and (b) commence
operating in a Core-and-Gateway fund-of-funds structure. There will be no
change in the Fund's investment objective and strategy. Schroder Capital
Management International, Inc. will continue to serve as investment adviser
for the Fund's investments.
As of October 31, 1997, costs incurred in connection with the Conversion
amounted to $431,366, the majority of which related to legal and transfer
agent fees.
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
PROXY RESULTS
During the year ended October 31, 1997, Schroder Asian Growth Fund, Inc.
shareholders voted on the following proposals. The proposals were approved at
the annual meeting of shareholders held on June 3, 1997. The description of the
proposals and number of shares voted are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
SHARES
VOTED FOR ABSTENTIONS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. To elect certain Directors: John I. Howell(1) 12,144,007 639,784
12,148,287 635,504
David M.
Salisbury(1)
12,146,872 636,919
Louise Croset(2)
(1) Nominee for Class II director to serve until 2000 annual meeting of stockholders
(2) Nominee for Class III director to serve until 1998 annual meeting of stockholders
- -------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES
SHARES VOTED
VOTED FOR AGAINST ABSTENTIONS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
2. To ratify the selection of Coopers & Lybrand L.L.P.
as the Fund's independent accountants. 12,366,765 268,458 148,568
- -------------------------------------------------------------------------------------------------------
</TABLE>
The following proposals were voted on at the Special Meeting of
Stockholders, October 24, 1997. The proposal to approve the Conversion of the
Fund to an open-end Core and Gateway Fund Structure, which required the
affirmative vote of holders of two-thirds of the outstanding shares of the Fund,
was approved. The proposal to eliminate the tender offer undertaking set forth
in the Fund's prospectus dated December 22, 1993, which required the affirmative
vote of a majority of the outstanding voting securities of the Fund, as defined
by the Investment Company Act of 1940, was not approved.
<TABLE>
<CAPTION>
SHARES SHARES
VOTED VOTED
FOR AGAINST ABSTAIN
----------- ----------- ---------
<S> <C> <C> <C> <C>
1. TO APPROVE THE CONVERSION OF THE FUND TO AN OPEN-END CORE AND 10,834,272 312,118 134,720
GATEWAY FUND STRUCTURE
2. TO ELIMINATE THE TENDER OFFER UNDERTAKING SET FORTH IN THE 7,121,328 437,017 253,171
FUND'S PROSPECTUS
</TABLE>
DIVIDEND REINVESTMENT PLAN
Shareholders whose shares are registered in their own names may elect to be
participants in the Dividend Reinvestment Plan (the "Plan"), pursuant to which
dividends and capital gain distributions to shareholders will be paid in or
reinvested in additional shares of the Fund (the "Dividend Shares"). State
Street Bank and Trust Company (the "Plan Agent") will act as agent for
participants under the Plan. Shareholders whose shares are held in the name of a
brokerage firm, bank, or other nominee should contact such nominee to see if it
will participate in the Plan on the shareholders' behalf. If the nominee is
unable to do so, the shareholder may wish to request that their shares be
reregistered in the shareholder's own name.
A shareholder may elect to withdraw from the Plan without penalty at any
time upon written notice to the Plan Agent. When a participant withdraws from
the Plan, or upon termination of the Plan, certificates for whole Dividend
Shares credited to the shareholder's account under the Plan will be issued and
cash payment will be made for any fractional Dividend Shares credited to such
account. An election to withdraw from the Plan will, until such election is
changed, be deemed to be an election by a shareholder to take all subsequent
dividends and distributions in cash. Elections will be effective immediately if
notice is received by the Plan Agent not less than ten days prior to any
dividend or distribution record date; otherwise, such termination will be
effective after the investment of the then current dividend or distribution. If
a withdrawing shareholder requests the Plan Agent to sell the
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
shareholder's Dividend Shares upon withdrawal from participation in the Plan,
the withdrawing shareholder will be required to pay a $2.50 fee plus brokerage
commission.
Whenever the Fund declares a distribution from capital gains or an income
dividend either in cash or in shares of the Fund, participants in the Plan will
receive shares of the Fund. Whenever the market price per share is equal to or
exceeds the net asset value of the valuation date, participants will be issued
shares of the Fund at a price per share equal to the greater of (a) the net
asset value per share on the date or (b) 95% of the market price of the Fund's
shares on the date. The valuation date will be the dividend or distribution
payment date or, if that date is not a trading day on the New York Stock
Exchange, the immediately preceding trading day. The Fund will not issue
Dividend Shares under the Plan at a price below net asset value. If net asset
value exceeds the market price of Fund shares as of the valuation date, or if
the Fund should declare a dividend or capital gains distribution payable only in
cash, the Plan Agent will, as agent for the participants, buy Fund shares in the
open market, on the New York Stock Exchange or elsewhere, for the participants'
accounts on or shortly after the payment date. If, before the Plan Agent has
completed its purchase, the market price exceeds the net asset value of a Fund
share, the average per share purchase price paid by the Plan Agent may exceed
the net asset value of the Fund's shares, resulting in the acquisition of fewer
Dividend Shares than if the dividend or capital gains distribution had been paid
in shares issued by the Fund.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmation of all transactions in the accounts, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in noncertificated form in
the name of the participant, and each shareholder's proxy will include those
Dividend Shares purchased pursuant to the Plan.
There is no charge to participants for reinvesting dividends or capital
gains distributions. The Plan Agent's fee for the handling of reinvestment of
dividends and distributions will be paid by the Fund. There will be no brokerage
charges with respect to Dividend Shares issued directly by the Fund as a result
of dividends or capital gains distributions payable either in shares or in cash.
However, each participant will pay a pro rata share of brokerage commissions
incurred with respect to the Plan Agent's open market purchases in connection
with the reinvestment of dividends or capital gains distributions.
The automatic reinvestment of dividends and distributions will not relieve
participants of any U.S. Federal income tax that may be payable on such
dividends or distributions. To the extent dividends and distributions are
reinvested in additional Shares issued by the Fund, participants should be
treated for U.S. Federal income tax purposes as receiving a distribution in an
amount equal the fair market value, determined as of the valuation date, of the
shares received (regardless of the net asset value of the shares on the
valuation date), and should have a cost basis in such shares equal to such fair
market value.
Experience under the plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to notice of the change
sent to participants in the plan at least 90 days before the record date for
such dividend or distribution. The Plan may also be amended or terminated by the
Plan Agent at least 90 days prior written notice to participants in the Plan.
All correspondence concerning the Plan should be directed to the Plan Agent at
State Street Bank and Trust Company, P.O. Box 8200, Boston, Massachusetts
02266-8200, at 1-800-426-5523.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER ASIAN GROWTH FUND, INC.
- ------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Schroder Asian Growth Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Schroder Asian Growth Fund, Inc., including the schedule of investments, as of
October 31, 1997, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for the three years in the
period then ended, and for the period December 30, 1993 (commencement of
operations) to October 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Schroder Asian Growth Fund, Inc. as of October 31, 1997, the results of its
operations for the year then ended, and the changes in its net assets for each
of the two years in the period then ended, and financial highlights for the
three years in the period then ended and for the period December 30, 1993
(commencement of operations) to October 31, 1994, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
December 4, 1997
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19
<PAGE>
DIRECTORS
Louise Croset, President
Peter E. Guernsey
John I. Howell
William L. Means
David Salisbury
I. Peter Sedgwick, Chairman
OFFICERS
Louise Croset
President
Heather F. Crighton
Vice President
Catherine A. Mazza
Vice President
Mark J. Smith
Vice President
Margaret H. Douglas-Hamilton
Secretary
Fergal Cassidy
Treasurer
Alexandra Poe
Assistant Secretary
INVESTMENT ADVISOR
Schroder Capital Management International Inc.
787 Seventh Avenue, 34th Floor
New York, NY 10019
INDEPENDENT ACCOUNTANTS
Cooper & Lybrand L.L.P.
1301 Avenue of the Americas Annual Report
New York, NY 10019 October 31, 1997
NYSE Symbol: SHF
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its common stock in the open market.
This report is sent to the shareholders of the Fund for their information. It is
not a prospectus, circular or representation intended for use in the purchase or
sale of shares of the Fund or of any securities.
