As filed with the Securities and Exchange Commission on October 7, 2004
1933 Act Registration No. 333-_____
1940 Act Registration No. 811-21650
--------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ASA (BERMUDA) LIMITED
(Exact Name of Company as Specified in Charter)
4th Floor
11 Summer Street
Buffalo, NY 14209
(Address of Principal Executive Offices)
Company's Telephone Number, including Area Code: (716) 883-2428
(Name and Address of Agent for Service)
JPMorgan Chase Bank
3 Chase MetroTech Center
Brooklyn, NY 11245
Copy to:
R. Darrell Mounts
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, DC 20036
Approximate Date of Proposed Public Offering:
As soon as possible following the effective date of this Registration Statement
Calculation of Registration Fee under the Securities Act of 1933:
-------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
common shares, 9,600,000 $42.80(1) $410,880,000(1) $52,058.50
$1.00 par value shares
("shares")
-------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
ASA LIMITED
PADDOCK VIEW
36 WIERDA ROAD WEST
SANDTON 2196, SOUTH AFRICA
October 7, 2004
URGENT - IMMEDIATE ACTION REQUIRED
Dear ASA Shareholder:
Your Board of Directors ("Board") is requesting your approval of a
proposal, at a general meeting of shareholders to be held on November 11,
2004, that would authorize ASA Limited ("ASA") to move its place of
incorporation from the Republic of South Africa to the Commonwealth of Bermuda
by reorganizing itself into ASA (Bermuda) Limited ("ASAB"), an exempted limited
liability company newly formed in Bermuda.
ASA seeks to effect this change primarily because of certain taxes it
recently became subject to, or will be subject to, in South Africa that will
adversely affect ASA and its shareholders. As a Bermuda exempted limited
liability company, ASAB would not be subject to such taxes. If the proposal is
approved and implemented, each ASA shareholder will automatically become a
shareholder of ASAB without any action required on the shareholder's part.
The management, investment policies and service providers of ASAB will
be the same as those of ASA. In addition, ASAB, like ASA, is registered as a
closed-end management investment company under the Investment Company Act of
1940, as amended ("1940 Act"). Application has been made so that the shares of
ASAB, like those of ASA, will be listed on the New York Stock Exchange.
Your Board believes that approval of the proposal described in detail in
the enclosed proxy statement is in the best interests of ASA and its
shareholders. I urge you to consider and vote on this very important matter.
Your Board unanimously recommends that you vote FOR the proposal.
Your participation in the voting process is important no matter how many
shares you hold.
If your shares are registered in your name, please indicate your vote on
the enclosed proxy card, and sign, date and return it in the enclosed
postage-paid envelope. Please return your proxy card regardless of whether or
not you plan to attend the meeting, in order to make sure that your vote is
represented. If you do attend the meeting, you may revoke your proxy at the
meeting and vote in person. If you hold shares in "street name" through a broker
or other nominee, only your broker or nominee can vote your shares, and only
upon receipt of your specific instructions.
If you have any questions about the documents mailed to you or need
assistance in voting your shares, please call our proxy solicitor, D.F. King &
Co., Inc., toll free at 1-800-347-4750.
Sincerely,
ROBERT J.A. IRWIN
Chairman of the Board
ASA LIMITED
PADDOCK VIEW
36 WIERDA ROAD WEST
SANDTON 2196, SOUTH AFRICA
----------
NOTICE OF GENERAL MEETING OF SHAREHOLDERS
November 11, 2004
----------
To the Shareholders:
A general meeting of shareholders of ASA Limited ("ASA") ("Meeting")
will be held on November 11, 2004, at 10 a.m. Eastern Time, at the offices of
UBS, 1285 Avenue of the Americas, 14th floor, New York, New York 10020 for the
following purposes:
(1) To adopt the special and ordinary resolutions set forth in
Appendix B of the attached Prospectus/Proxy Statement that reflect the approval
of (i) an Agreement and Plan of Reorganization attached as Appendix A, under
which ASA (Bermuda) Limited ("ASAB") will acquire all of the assets of ASA in
exchange solely for shares of ASAB and ASAB's assumption of all of ASA's
liabilities ("Reorganization"), (ii) the winding-up of ASA subsequent to the
Reorganization, and (iii) other matters that will facilitate the winding-up of
ASA.
(2) To transact such other business as may properly come before the
Meeting or any adjournment or postponment thereof.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE PROPOSAL.
If you own shares of ASA at the close of business on November 4, 2004,
and such shares are registered in your name, you are entitled to attend, speak
and vote at the Meeting and any adjournment thereof or to appoint a proxy to do
so. If you attend the Meeting, you may vote your shares in person. If you do not
expect to attend the Meeting and wish to appoint a proxy, please complete, sign,
date and return the enclosed proxy card in the enclosed postage-paid envelope.
If you hold shares in "street name" through a broker or other nominee,
and you wish to vote at the general meeting in person, then you must request
your nominee to provide you with the necessary authority to vote your shares at
the Meeting. If you do not expect to attend the Meeting, but wish to have your
shares represented at the Meeting, you must provide your nominee with your
voting instructions.
By order of the Board of Directors,
CHESTER A. CROCKER
United States Secretary
October 7, 2004
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
If your shares are registered in your name, please indicate your voting
instructions on the enclosed proxy card, sign and date the card, and return it
in the envelope provided. IF YOU SIGN, DATE, AND RETURN THE PROXY CARD BUT GIVE
NO VOTING INSTRUCTIONS, THE PROXY SHALL BE ENTITLED TO VOTE YOUR SHARES AS HE
THINKS FIT. In order to avoid the additional expense of further solicitation, we
ask your cooperation in mailing your proxy card promptly.
If we do not receive your completed proxy card after our original
mailing, you may be contacted by ASA or by our proxy solicitor, D.F. King & Co.,
Inc., ASA or our proxy solicitor will remind you to appoint a proxy.
If you hold shares in "street name" through a broker or other nominee,
you should contact your nominee with your instructions for attendance or voting
at the meeting.
Intentionally Left Blank
ASA LIMITED
PADDOCK VIEW
36 WIERDA ROAD WEST
SANDTON 2196, SOUTH AFRICA
----------
PROSPECTUS/PROXY STATEMENT
OCTOBER 7, 2004
----------
This Prospectus/Proxy Statement ("Proxy Statement") is being furnished
to shareholders of ASA Limited ("ASA") in connection with the solicitation of
proxies from ASA shareholders by the Board of Directors of ASA ("Board") for use
at a general meeting of shareholders ("Meeting"), to be held on November 11,
2004, commencing at 10 a.m. Eastern Time, and at any adjournment of the Meeting.
As more fully described in this Proxy Statement, the purpose of the
Meeting is to adopt special and ordinary resolutions, set forth in Appendix B,
approving a proposed reorganization and the winding-up of ASA. In the
reorganization, ASA (Bermuda) Limited ("ASAB") would acquire all of the assets
of ASA in exchange solely for shares of ASAB and the assumption by ASAB of all
of the liabilities of ASA. Those shares of ASAB would then be distributed to ASA
shareholders on a one-for-one basis. (All these transactions are collectively
referred to as the "Reorganization.") As soon as practicable following the
distribution of shares, ASA would be wound-up and dissolved.
This Proxy Statement sets forth concisely the information about the
proposed Reorganization, ASAB and the winding-up of ASA that a shareholder
should know before voting. Additional information is contained in the following:
. A Statement of Additional Information, dated October 7, 2004, relating
to the Reorganization ("Reorganization SAI"), which has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated
herein by this reference (that is, the Reorganization SAI is legally a
part of this Proxy Statement).
. ASA's Annual Report to Shareholders for the fiscal year ended November
30, 2003 ("Annual Report") and Semi-Annual Report to Shareholders for
the semi-annual period ended May 31, 2004 ("Semi-Annual Report"), which
have been filed with the SEC and are incorporated herein by this
reference.
Copies of the above documents may be obtained without charge, and
further inquiries may be made, by writing to LGN Associates, P.O. Box 269,
Florham Park, New Jersey 07932, or by calling toll free 1-800-432-3378. In
addition, the SEC maintains a Website (http://www.sec.gov) that contains the
Reorganization SAI, Annual Report and Semi-Annual Report together with other
information regarding ASA and ASAB.
Investors are advised to read and retain this Proxy Statement for future
reference. ASAB, an exempted limited liability company newly formed in Bermuda,
is registered under the Investment Company Act of 1940, as amended ("1940 Act"),
as a closed-end management investment company. The primary investment policy of
each of ASA and ASAB is to invest in equity securities of companies engaged in
gold mining and related activities in South Africa.
This Proxy Statement will first be mailed to shareholders on or about
October 8, 2004.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
i
TABLE OF CONTENTS
SYNOPSIS.......................................................................1
The Proposed Reorganization...........................................1
Comparative Fee Table.................................................2
Example of Effect on Fund Expenses....................................2
Comparison of Investment Policies.....................................2
Performance of the Funds..............................................2
Form of Organization..................................................2
Investment Adviser and Investment Advisory Fees.......................3
Operation of ASAB Following the Reorganization........................3
Purchases.............................................................3
Dividends.............................................................3
Tax Consequences of the Reorganization................................3
PRINCIPAL RISK FACTORS.........................................................4
THE PROPOSED TRANSACTION.......................................................7
The Reorganization....................................................7
Reasons for the Reorganization........................................7
Description of Securities to be Issued................................7
Federal Income Tax Considerations.....................................8
South African Tax Consequences........................................8
Shareholder Rights....................................................8
Capitalization.......................................................11
INFORMATION ABOUT THE FUNDS...................................................12
Financial Highlights.................................................12
General Description..................................................14
Investment Policies..................................................14
Share Price Data (unaudited).........................................16
MANAGEMENT....................................................................16
Board of Directors...................................................16
Portfolio Management.................................................17
Administration.......................................................17
Custodians...........................................................17
Transfer Agent.......................................................18
AUTHORIZED CAPITAL............................................................18
Capital Stock........................................................18
Dividend Reinvestment Plan...........................................18
TAXES.........................................................................19
U.S. Federal Income Tax Considerations...............................19
Bermuda Tax Considerations...........................................21
DEFAULTS AND ARREARS ON SENIOR SECURITIES.....................................21
LEGAL PROCEEDINGS.............................................................21
REPORTS AND OTHER INFORMATION.................................................21
LEGAL MATTERS.................................................................22
EXPERTS.......................................................................22
VOTING INFORMATION............................................................22
OTHER BUSINESS................................................................23
APPENDIX A: AGREEMENT AND PLAN OF REORGANIZATION............................A-1
APPENDIX B: PROPOSED RESOLUTIONS............................................B-1
ii
ASA LIMITED
PADDOCK VIEW
36 WIERDA ROAD WEST
SANDTON 2196, SOUTH AFRICA
----------
PROSPECTUS/PROXY STATEMENT
GENERAL MEETING OF SHAREHOLDERS
NOVEMBER 11, 2004
----------
PROPOSAL:
To adopt the special and ordinary resolutions set forth in
Appendix B of this Proxy Statement that reflect the approval of
(i) an Agreement and Plan of Reorganization ("Plan") under which
ASAB will acquire all of the assets of ASA, in exchange solely
for shares of ASAB and ASAB's assumption of all of ASA's
liabilities, (ii) the winding-up of ASA subsequent to the
Reorganization, and (iii) other matters that will facilitate the
winding-up of ASA.
SYNOPSIS
The following is a summary of certain information contained elsewhere in
this Proxy Statement, the Reorganization SAI (which is incorporated herein by
reference), the Annual Report and Semi-Annual Report (which are incorporated
herein by reference), and the Plan, the form of which is attached as Appendix A
to this Proxy Statement. As discussed more fully below, the Board believes that
the Reorganization will benefit ASA's shareholders. ASA and ASAB (each sometimes
referred to below as a "Fund") have the same directors and substantially the
same officers and have investment policies that are the same.
THE PROPOSED REORGANIZATION
The Board considered and approved the Plan at a meeting held on
September 29, 2004. As provided in the Plan, the Reorganization will be effected
by ASAB's acquisition of all of the assets of ASA in exchange solely for
ordinary shares of ASAB and the assumption by ASAB of all of the liabilities of
ASA. ASA will then distribute those ASAB shares to its shareholders on a
one-for-one basis. ASA will be wound-up and dissolved as soon as practicable
thereafter.
ASAB will bear the costs of the Reorganization. If shareholder approval
is obtained, the Reorganization will occur as of the close of business on
November 26, 2004, or such other date as the Funds may agree when the
Reorganization is approved and all contingencies have been met ("Closing Date").
Due to adverse tax consequences, if approval is not obtained and the
Reorganization cannot occur on or before November 30, 2004, the Reorganization
will not occur and ASA will continue its current operations.
For the reasons set forth below under "The Proposed Transaction -
Reasons for the Reorganization," the Board, including the directors who are not
"interested persons," as that term is defined in Section 2(a)(19) of the 1940
Act ("Independent Directors"), has determined that the Reorganization is in the
best interests of ASA and its shareholders, that the terms of the Reorganization
are fair and reasonable, and that the interest of ASA's shareholders will not be
diluted as a result of the Reorganization. Accordingly, the Board recommends
that ASA shareholders approve the Reorganization.
COMPARATIVE FEE TABLE
Like all closed-end funds, ASA incurs, and ASAB will incur, certain
expenses in its operations and, as a shareholder, you pay these expenses
indirectly. The table below compares annual operating expenses (as a percentage
of average net assets) for ASA for the fiscal year ended November 30, 2003, and
pro forma expenses for ASAB, based on ASA's annual operating expenses assuming
the Reorganization is approved and effected.
ASAB
ASA (Pro Forma)
---- -----------
Management Fees/1/ 0% 0%
Other Expenses/2/,/3/ .84%/3/ .73%
Total Operating Expenses .84% .73%
EXAMPLE OF EFFECT ON FUND EXPENSES
This Example is intended to help you compare the cost of investing in
shares of ASA with the cost of investing in ASAB, assuming the Reorganization
has been approved and effected.
The Example assumes that you invest $1,000 in ASA or ASAB for the time
periods indicated. The Example also assumes that your investment has a 5% return
each year, that all dividends are reinvested, and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions, your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
ASA $ 9 $ 27 $ 47 $ 104
ASAB (Pro Forma) $ 7 $ 23 $ 41 $ 95
COMPARISON OF INVESTMENT POLICIES
The investment policies of ASA and ASAB are the same and require each of
them to invest over 50% of the value of their total assets in equity securities
of companies conducting, as the major portion of their business, gold mining and
related activities in South Africa. The balance of their assets, other than
small amounts held in cash, may be (1) invested in equity securities of
companies engaged in other types of businesses in South Africa, (2) held in the
form of gold bullion or certificates of deposit for gold bullion (up to 25% of
the value of total assets), and/or (3) invested in equity securities of
companies primarily engaged outside of South Africa in extractive or related
industries or in the holding or development of real estate (up to 20% of total
assets).
PERFORMANCE OF THE FUNDS
The annual total return for ASA for the fiscal year ended November 30,
2003, is set forth in the Annual Report, and the total return for ASA as of the
semi-annual period ended May 31, 2004, is set forth in the Semi-Annual Report.
Past performance does not indicate how a fund will perform in the future. As a
newly formed company, ASAB has no operating history.
FORM OF ORGANIZATION
ASA was organized as a public limited liability company in South Africa
in June 1958. ASAB was organized as an exempted limited liability company in
Bermuda in April 2003. Pending the Reorganization, ASAB currently has only a
nominee shareholder (necessary for its formation under Bermuda law) and nominal
assets.
--------
/1/ Neither ASA nor ASAB has an outside investment adviser.
/2/ The figure provided under "Other Expenses" is based upon estimated amounts
for ASAB's initial fiscal year and includes expenses such as directors'
fees, administrative fees, legal fees, auditing fees and insurance
expenses.
/3/ "Other Expenses" for ASA includes all of the costs of the Reorganization
incurred during the relevant period. The pro forma "Other Expenses" for
ASAB do not reflect reorganization expenses as they are not expected to be
incurred prospectively.
2
INVESTMENT ADVISER AND INVESTMENT ADVISORY FEES
ASA is, and ASAB will be, internally managed. Accordingly, neither ASA
nor ASAB has, or will have, an outside investment adviser to which it pays, or
will pay, fees for portfolio management. Robert J. A. Irwin, Chairman, Chief
Executive Officer, Treasurer and a director of ASA, is primarily responsible for
the day-to-day management of ASA's portfolio. Upon the acquisition by ASAB of
the assets of ASA pursuant to the Reorganization, Mr. Irwin will be responsible
for the management of ASAB's portfolio.
OPERATION OF ASAB FOLLOWING THE REORGANIZATION
As indicated above, the investment policies of ASA and ASAB are the
same. Accordingly, the assets held by ASA will be consistent with the investment
policies of ASAB and thus can be transferred to and held by ASAB if the
Reorganization is approved.
PURCHASES
ASA has not made a public offering of its shares since its initial
public offering in 1958, which was limited to the United States, and has no
current intention of making another public offering. Shares of ASA currently
trade on the New York Stock Exchange ("NYSE") but will be delisted following the
Closing Date.
ASAB has taken the actions necessary for its shares to be listed and
traded on the NYSE. Shares of ASAB will be listed and commence trading as of the
first business day following the Closing Date.
DIVIDENDS
ASA earns investment income in the form of interest and dividends on
investments. ASA's practice is to make distributions from its investment income,
less expenses, to shareholders. Dividends from net investment income are
declared and paid quarterly at the discretion of the Board. Shareholders may
participate in a dividend reinvestment plan administered by ASA's transfer
agent. Under this plan, shareholders may invest cash dividends and voluntary
cash payments in additional ASA ordinary shares ("common shares").
ASA also realizes capital gains and losses when it sells securities for
more or less than it paid. If, for any taxable year, total gains on these sales
exceed total losses (including losses carried forward from previous taxable
years), ASA has net capital gain income for the year. Dividends from net
realized capital gains, if any, may be distributed to shareholders. Dividends
are paid to holders of shares on the record date of the dividend regardless of
how long the shareholder has held his or her shares.
The sources of ASAB's dividends will be the same as those of ASA, and
its dividend policies will be identical to those of ASA, including the
availability of a dividend reinvestment plan administered by ASAB's transfer
agent.
TAX CONSEQUENCES OF THE REORGANIZATION
Each Fund will receive an opinion of KPMG Services (Proprietary)
Limited, South Africa, addressed to and in form and substance reasonably
satisfactory to the Fund, to the effect that, except for any uncertificated
securities tax or a similar transfer duty that may be payable by ASAB on the
transfer of ASA's South African portfolio holdings ("Transfer Duty"), neither
Fund nor any shareholder or person who beneficially owns ASA shares held in a
shareholder's name will earn, receive, realize, or recognize any profit, income,
or gain or any other item that will be subject to any South African tax or other
governmental levy as a result of or in connection with the Reorganization, any
transaction included therein, or ASA's winding-up and dissolution.
3
PRINCIPAL RISK FACTORS
Because the Funds have investment policies that are the same, an
investment in ASAB will be subject to the same specific risks as an investment
in ASA, in addition to the general risks arising from investing in any
closed-end investment company. There is no guarantee that ASAB will achieve its
investment objective or that it will not lose principal value.
The principal specific risks associated with investing in the Funds
include:
Industry Concentration
Because of its concentration in the securities of companies involved in
gold mining and related activities, a Fund's portfolio may experience greater
volatility than that of a broader-based investment company. The profitability of
companies involved in gold mining and related activities is significantly
affected by changes in the market price of gold (for further details, see
"Fluctuations in the Price of Gold" below). Gold mining companies also face
risks related to their operations that may affect overall profitability. These
risks include the uncertainty and cost of mineral exploration and acquisitions
and the uncertainties and unexpected problems and delays in developing mines. In
addition, the business of gold mining is subject to numerous risks that could
adversely impact a gold mining company. These risks include environmental
hazards, industrial accidents, underground fires, labor disputes, unexpected
geological formations, availability of appropriately skilled persons,
unanticipated ground and water conditions, fall of ground accidents, legal and
regulatory restrictions, and seismic activity.
Diversification
The Funds are classified as diversified investment companies. However,
due to consolidation in the gold mining industry, the Funds may be invested in a
limited number of securities and hold large positions in certain securities. As
a result, a change in value in one or more of these securities could
significantly affect the Funds' net asset values.
Fluctuations in the Price of Gold
The price of gold has been subject to dramatic downward and upward price
movements over short periods of time and may be affected by unpredictable
international monetary and political policies, such as currency devaluations or
revaluations, economic conditions within an individual country, trade
imbalances, or trade or currency restrictions between countries, world inflation
rates or expectations regarding inflation rates, interest rates, and currency
exchange rates. The price of gold also is influenced by the actual or expected
purchases and sales of gold reserves by central banks or other large gold
bullion holders or dealers, the demand for gold for industrial uses and for use
in jewelry, gold sales by gold producers in forward transactions, and the cost
of gold production in major gold-producing nations such as South Africa. The
price of gold, in turn, is likely to affect the market prices of securities of
companies mining or processing gold, and accordingly, the value of ASA's and
ASAB's investments in such securities may also be affected.
Investments in Gold Bullion
Each Fund may hold up to 25% of the value of its total assets in the
form of gold bullion or certificates of deposit therefor. Unlike certain more
traditional investment vehicles such as savings deposits and stocks and bonds,
which may produce interest or divided income, gold bullion earns no income
return. Appreciation in the market price of gold is the sole manner in which a
Fund will be able to realize gains on its investment in gold bullion.
Furthermore, the Funds may encounter storage and transaction costs in connection
with their ownership of gold bullion that may be higher than those attendant to
the purchase, holding, and disposition of more traditional types of investments.
4
Currency Fluctuation
The U.S. dollar value of the Funds' non-U.S. investments may be
significantly affected by changes in the exchange rates between the dollar and
the currencies, particularly the South African rand, in which those investments
are traded. Under normal circumstances, over 50% of the value of the Funds'
total assets will be invested in common shares or securities convertible into
common shares of companies conducting, as a major portion of their business,
gold mining and related activities in South Africa. Generally, these
investments, and dividends paid in respect of these investments, will be
denominated in South African rand. Consequently, a change in the value of the
rand against the U.S. dollar may result in a significant change in the U.S.
dollar value of the Funds' assets and dividend income denominated in that
currency.
Furthermore, mineral commodities such as gold are sold throughout the
world, principally in U.S. dollars, but the South African mining companies in
which the Funds may be invested incur their operating costs principally in South
African rand. Therefore, any appreciation in the value of the South African rand
relative to the U.S. dollar will adversely affect the profits of these South
African mining companies and also, indirectly, the value of ASA and ASAB's
investments in them. The rand has experienced significant appreciation against
the U.S. dollar since reaching an all-time low against that currency late in
2001.
Risks relating to South Africa
Under normal circumstances, over 50% of ASA's and ASAB's total assets
will be invested in common shares or securities convertible into common shares
of companies conducting, as a major portion of their business, gold mining and
related activities in the Republic of South Africa. As a result, the Funds are
subject to risks relating to South Africa.
While highly developed, sophisticated business sectors and
infrastructure form the core of South Africa's economy, large parts of the
population do not have access to adequate education, health care, housing, and
other services, including water and electricity. South Africa also has high
levels of crime, poverty, and unemployment in comparison with developed
countries. These problems have been among the factors that have hampered
investment into South Africa, prompted emigration of skilled workers, and
affected South Africa's economic growth rate negatively.
The South African government has committed itself to creating a stable,
democratic free market economy. However, it is difficult to predict the future
political, social, and economic direction of South Africa or how the government
will try to address South Africa's challenges. It is also difficult to predict
the effect of these challenges on the Funds' investments.
Further, there has been political and economic instability in
neighboring countries north of South Africa. Any resulting political or economic
instability in South Africa could have a negative impact on the Funds' South
African investments.
South Africa's exchange control regulations restrict transactions
between residents of the Common Monetary Area (which consists of south Africa,
the Republic of Namibia and the Kingdoms of Lesotho and Swaziland) and
non-residents of the Common Monetary Area. These restrictions generally do not
permit the export of capital from South Africa by South African companies and
hinder the ability of South African companies, including companies in which the
Funds invest, to make foreign investments and procure foreign denominated
financing. While exchange controls have been relaxed in recent years, it is
difficult to predict whether or how the South African Government will further
relax the remaining exchange control regulations in the future.
A substantial portion of the South African gold mining industry is
unionized, and companies within the industry are at risk of having their
production halted for indefinite periods due to strikes and other labor
disputes. In addition, since 1995 various labor laws have been enacted in South
Africa that enhance the rights of employees and have imposed additional costs on
the gold mining industry.
Significant labor disputes and work stoppages in the gold mining
industry may adversely affect the price of gold, the rand/dollar exchange rate,
and the operations and financial condition of companies within the gold mining
industry. In addition, the cost of compliance with labor laws may reduce the net
profit of such companies. Accordingly, the Funds' investment in such companies
may be affected.
The incidence of HIV/AIDS in South Africa could pose a risk to companies
in which the Funds invest. The exact impact of HIV/AIDS on the cost of
conducting business in South Africa and the potential growth of the South
African economy is unclear at this time. However, the incidence of HIV/AIDS
infections and HIV/AIDS related diseases is expected to reduce productivity and
increase employee related costs in South Africa, which may adversely impact on
the operations of companies in which the Funds invest.
Foreign Regulatory Environment
Companies in South Africa are subject to accounting, auditing, and
financial standards and requirements that closely follow those prescribed by
United Kingdom authorities. Although these standards are rigorous, they differ
from those applicable to U.S. companies, and therefore the assets, liabilities,
and profits of South African companies, as reported in their financial
statements, may not be the same as would be reflected if the statements had been
prepared in accordance with U.S. generally accepted accounting principles.
5
It may be said that in South Africa there is less government supervision
and regulation of South African securities exchanges, underwriters, brokers,
dealers, and listed companies than exist in the United States. The JSE
Securities Exchange South Africa, on which most of the securities in ASA's and
ASAB's portfolios are and will be, respectively, listed, is governed by a
statute that regulates the operation not only of the exchange but also of its
members and individual stockbrokers. The regulatory powers contained in this
statute are enforceable in the South African courts.
There is less publicly available information about South African
registered companies than about U.S. companies. As a result, the successful
management of the Funds' portfolios may be more dependent upon the skills and
expertise of its portfolio manager than is the case for investment companies
that invest primarily in U.S. companies, because the comparative lack of
information requires greater diligence by the portfolio manager in original
research and careful evaluation of available information.
The mining legislation to which South African mining companies are
subject has been replaced by the South African Mineral and Petroleum Resources
Development Act No. 28 of 2002 ("MDA"), which came into effect on May 1, 2004.
The broad objectives of the MDA and the Mining Charter issued pursuant to the
MDA are to facilitate participation of historically disadvantaged South Africans
in the mining industry and to ensure that unexploited minerals are profitably
mined. To give effect to these objectives, the right to prospect and mine for
minerals, which was previously based on a system of private ownership, will now
vest in the South African government, which will grant prospecting and mining
rights to applicants who are able to comply with various stipulated criteria,
which include criteria relating to black economic empowerment and social and
economic improvement. The principles contained in the Mining Charter relate to
the transfer of 26% of South Africa's mining assets to historically
disadvantaged South Africans over a ten-year period.
The transitional provisions of the MDA facilitate the conversion of
current prospecting and mining rights to the new form of rights contemplated by
the MDA. Conversion applicants will also have to demonstrate how they intend
complying with the MDA's empowerment criteria within a maximum period of five
years from May 1, 2004. If the South African companies in which ASA has
invested, and ASAB will invest, fail to comply with the conversion criteria
stipulated in the MDA, then these companies will forfeit their right to mine in
South Africa.
The MDA also makes provision for prospecting fees and mining royalties
that will become payable to the South African government in return for the new
form of prospecting or mining right. The details of these royalty payments will
be set out in further legislation to be known as the Mineral and Petroleum
Royalty Act. A draft bill of this legislation was earlier released for public
comment and is in the process of being redrafted by the South African National
Treasury Department. The exact effect of this legislation is unknown at this
time.
The compliance costs incurred in acquiring or converting prospecting and
mining rights in South Africa and the additional costs that may be incurred in
paying the proposed mining royalties could adversely affect the profitability of
the Funds' South African investments.
South African Companies in which the Funds invest are subject to
extensive environmental regulation and may incur significant costs in complying
with current and new legislation, which could affect their profitability and
financial condition.
Enforcement of Liabilities
Due to differences in legal systems and difficulties in obtaining
jurisdiction over non-U.S. residents, an investor may have more difficulty
enforcing the civil liabilities provisions of the U.S. securities laws against
non-U.S. companies and their non-U.S. resident directors. However, these risks
of enforcement difficulties are significantly reduced in relation to the Funds,
which are foreign investment companies permitted to register under the 1940 Act
pursuant to SEC orders. As a condition to obtaining its respective order, each
Fund undertook certain measures to make it legally and practically feasible for
its shareholders to enforce liabilities against it and its non-U.S. directors
and officers. See "Management - Board of Directors" and "Management -
Custodians"
Closed-End Funds
The Funds are closed-end investment companies registered under the 1940
Act the shares of which are or will be listed on the NYSE. Shares of closed-end
investment companies frequently trade at a discount from net asset value. This
characteristic of shares of a closed-end investment company is a risk separate
and distinct from the risk that a Fund's net asset value will decrease.
6
THE PROPOSED TRANSACTION
THE REORGANIZATION
ASA proposes to move from South Africa to Bermuda by reorganizing itself
into ASAB, an exempted limited liability company newly formed in Bermuda. If the
Reorganization is approved by shareholders, ASA will, pursuant to the Plan,
transfer all of its assets to ASAB in exchange solely for shares of ASAB equal
to the number of ASA shares outstanding on the Closing Date and the assumption
by ASAB of all of ASA's liabilities. Immediately thereafter, ASA will distribute
to each of its shareholders one ASAB share for each ASA share the shareholder
holds on the Closing Date. As soon as is practicable after this distribution,
ASA will be wound-up and dissolved. Upon completion of the Reorganization, each
ASA shareholder will own ASAB shares equal in number and aggregate net asset
value to his or her ASA shares.
All expenses of the Reorganization will be assumed by ASAB, including
the expenses associated with the termination of ASA, which might not be
completed until several months after the Reorganization.
REASONS FOR THE REORGANIZATION
ASA seeks to change its country of incorporation from South Africa to
Bermuda because of certain taxes ASA recently became subject to, or will soon be
subject to, in South Africa. Currently, ASA is subject to South African tax on
its income from interest and foreign dividends. Interest received on funds held
on deposit in South Africa is taxed at a rate of 30%. Beginning with the fiscal
year ended November 30, 2002, interest received on funds invested outside of
South Africa also became subject to a 30% tax. In addition, certain dividends
received from investments outside of South Africa are subject to tax at the rate
of 30%.
In addition to the foregoing taxes, effective December 1, 2004, ASA will
become subject to certain other taxes in South Africa. Since 1958, ASA has
operated under an exemption from certain taxes pursuant to Section 10(1)(s) of
the South African Income Tax Act, No. 58 of 1962 ("Income Tax Act"). Due to
changes in South Africa's tax law, including the repeal of Section 10(1)(s),
that exemption will end on November 30, 2004. The additional taxes to which ASA
will become subject as a result of the repeal of Section 10(1)(s), and their
impact on ASA and its shareholders, will be substantial but cannot at this time
be determined with absolute accuracy. The potential tax liability will only
arise at such time as ASA consummates a transaction that falls within the
Capital Gains Tax ("CGT") and the Secondary Tax on Companies ("STC") provisions
of the Income Tax Act.
Because of these tax issues, the Board considered the feasibility of
moving ASA from South Africa to another country. Although initial consideration
was given to relocation in the United States, the Board concluded that such a
relocation would entail significant adverse tax consequences. The Board also
considered relocation to Canada, but it became apparent that such a move would
not be feasible due to a variety of structural and operational issues.
Accordingly, the Board determined that a move to Bermuda presented the most
satisfactory alternative, due to the absence of the types of taxes to which ASA
would be subject in South Africa, the nonrecognition of gain to shareholders,
and the sophistication of the Bermudian legal system. A Bermuda company pays no
corporate taxes other than annual government dues, which are assessed on the
basis of a company's capitalization. In addition, Bermuda is "fiscally neutral"
to investment companies in the sense of having no tax applicable to the
establishment and operation of investment companies.
DESCRIPTION OF SECURITIES TO BE ISSUED
ASAB is registered with the SEC as a diversified closed-end management
investment company. Its authorized capital consists solely of common shares. One
ASAB common share will be distributed to ASA shareholders for each ASA share
held as of the Closing Date. Each ASAB share will have an equal right to
participate in any dividend declared and, in the event of dissolution, in the
assets of ASAB after payment of its debts. All ASAB shares will be fully paid
and non-assessable and will have no preemptive rights or conversion privileges.
7
FEDERAL INCOME TAX CONSIDERATIONS
If ASA reincorporates in Bermuda, its shareholders should not suffer any
adverse federal tax consequences as a result thereof or on the exchange of their
ASA shares for ASAB shares, as discussed below.
A corporation's "mere change in identity, form, or place of
organization" (a so-called "shell" or "F" reorganization) generally results in
nonrecognition of gain or loss for both the corporation and its shareholders.
Although section 367(a)(1) of the Internal Revenue Code of 1986, as amended
("Code"), makes this nonrecognition rule inapplicable to a reorganization
involving a foreign corporation under certain circumstances, that section
generally does not apply to the transfer of stock of a foreign corporation that
is party to a reorganization (as ASA would be). Moreover, the income tax
regulations ("Regulations") under that section generally provide that if a U.S.
person exchanges stock of a foreign corporation in an F reorganization, the
exchange is not subject to section 367(a). In that case, therefore, the
nonrecognition rule normally applicable to an F reorganization would apply.
ASA is a passive foreign investment company ("PFIC") for U.S. federal
income tax purposes. (See "Taxes - U.S. Federal Income Tax Considerations" below
for a discussion of the consequences of that characterization.) Section 367 and
the Regulations thereunder, however, do not expressly address the PFIC rules.
Under those rules, gain on a direct or indirect disposition of PFIC stock that
otherwise would not be fully recognized (such as in an F reorganization)
nevertheless must be recognized, to the extent provided in Regulations. However,
not only do neither final nor proposed Regulations provide for such recognition,
but proposed Regulations carve out two specific exceptions to this override of
nonrecognition provisions, one of which applies specifically to F
reorganizations. Accordingly, ASA and ASAB believe that ASA and its shareholders
should not be denied nonrecognition of gain treatment on the reincorporation in
Bermuda, and ASA will receive an opinion from U.S. counsel substantially to that
effect.
SOUTH AFRICAN TAX CONSEQUENCES
As discussed above, if ASA reorganizes on or before November 30, 2004,
it should not be subject to the CGT or STC in respect of the Reorganization.
However, ASAB may be subject to Transfer Duty in South Africa. If payable, that
duty would be assessed at the rate of 0.25% of the value of ASA's South African
portfolio holdings, which had a value of $299,502,438 as of August 31, 2004. If
the Reorganization had occurred on that date and the transfer of ASA's assets
was subject to Transfer Duty, the liability therefor would have been
approximately $748,756.
SHAREHOLDER RIGHTS
The following is a summary of the major differences between the
governing documents and laws applicable to ASA and ASAB.
Description of Shares
ASA's authorized share capital is 6 million rand, divided into 24
million ordinary shares with a par value of 0.25 rand each. ASA's issued share
capital is 2.4 million rand, divided into 9,600,000 ordinary shares. Its share
premium is 19,636,586 rand. All of ASA's issued shares rank equally with each
other and are fully paid. ASA may not, except by a special resolution of its
shareholders, increase its capital by the creation of new shares, authorize or
issue any securities senior in preference to its ordinary shares, or reduce its
capital. Any new shares created by special resolution must be issued on such
terms and conditions as the special resolution directs or, if the special
resolution so directs, as the directors may determine.
ASAB's current authorized share capital is $30,000,000, divided into
30,000,000 ordinary shares with a par value of $1.00 each. The approval of
ASAB's shareholders is required for any increase in its authorized share
capital. Shares of ASAB may be issued with preferred, deferred, qualified, or
other special rights or restrictions in regard to dividend, voting, return of
capital, or otherwise, as ASAB's shareholders or Board of Directors ("ASAB
Board") may determine.
Shareholder Meetings
ASA is required to hold an annual general meeting at least once each
calendar year, not more than thirteen months after the last annual general
meeting and not more than nine months after the end of its fiscal year.
8
The Chairman of the Board, the Treasurer, or the directors may convene a
shareholder meeting whenever he or they think fit and must do so at the request
of at least 100 shareholders or the holders of at least 5% of the issued shares
of ASA. Each shareholder present at a meeting in person or by proxy is entitled
to one vote for each share held. All matters other than those requiring a
specified majority may be decided by a simple majority of votes of shareholders
present in person or by proxy. All meetings are held in the United States.
The ASAB Board is required to hold an annual general meeting and may
convene special general meetings when and as required. Unless otherwise required
by the 1940 Act, the Bermuda Companies Act of 1981 ("Bermuda Companies Act"), or
ASAB's Bye-Laws, decisions to be made by ASAB's shareholders will be made by a
simple majority of shareholders present and voting at a meeting. Other than the
removal of directors or auditors, any action that may be taken at a shareholder
meeting may be done by written resolution signed by all shareholders or their
proxies. All shareholder meetings will be held in the United States.
Quorums
ASA's Articles of Association provide that a quorum at general meetings
of shareholders is three shareholders entitled to vote, personally present or,
in the case of a corporation, represented. If a quorum is not present, the
meeting will be adjourned to the same day in the next week at the same time and
place or to any other day, time, and place as the directors by notice designate.
However, if the meeting has been called at the request of shareholders, the
meeting shall be dissolved if a quorum is not present within half an hour of the
designated time.
At least one shareholder present in person or by proxy and entitled to
vote shall constitute a quorum for any general meeting of ASAB's shareholders.
If a quorum is not present, the meeting will be adjourned to such other day,
time, and place as the chairman of the meeting may determine.
Notice of Meetings
For ASA, notice of at least 21 "clear days" (i.e., days that do not
include the day on which notice is given and the day on which the meeting is
held) is required for annual general meetings and for meetings at which a
special resolution is to be proposed. At least fourteen clear days' notice is
required for all other general meetings. Shorter notice may be given if agreed
by a majority in number of shareholders entitled to attend and vote at the
meeting who hold 95% of the total voting rights, and notice need not be given if
agreed to in writing by all shareholders.
For ASAB, written notice of not less than five clear days is required
for annual general meetings and special meetings. Shorter notice may be provided
in the case of an annual general meeting if all shareholders entitled to attend
and vote agree, or, in the case of any other meeting, if a majority of all
shareholders entitled to attend and vote at the meeting and holding in the
aggregate not less than 95% in nominal value of shares entitled to vote agree.
Number of Directors
ASA must have not less than five and not more than fifteen directors,
unless otherwise determined by a special resolution of shareholders. The total
number of directors to hold office at any time is fixed from time to time by the
Board. At least a majority of the directors of ASA must at all times be citizens
and residents of the United States.
ASAB must have not less than two and not more than fifteen directors (or
such greater number as the shareholders may determine by resolution). At least a
majority of the directors of ASAB must at all times be citizens and residents of
the United States.
Removal of Directors
ASA shareholders may, by ordinary resolution at a meeting called for the
purpose, remove a director before the expiration of his period of office.
Special notice must be given of any proposed resolution to remove a director,
and the director is entitled to make written representations with respect to his
removal, which must be sent to shareholders prior to the shareholder meeting,
and to be heard at the meeting.
ASAB shareholders may, in a meeting called for the purpose, remove a
director, provided notice of any such meeting is served upon the director
concerned not less than fourteen days before the meeting. The director is
entitled to be heard at the meeting.
9
Shareholders' Liability
Under the South African Companies Act No. 61 of 1973 ("SA Companies
Act"), ASA is a distinct legal entity, with an existence separate from that of
its shareholders. Accordingly, the liabilities of ASA are those of the company
and not those of its shareholders.
Shareholders who are not also directors, officers, agents, or employees
of ASAB are not liable for its liabilities.
Director Indemnification
ASA's Articles of Association provide for the indemnification of each
director by ASA for all liability incurred as a director in defending any civil
or criminal proceedings in which he is acquitted, subject to the requirements of
the 1940 Act or the SA Companies Act. ASA's articles also require it to
indemnify each director against any costs, expenses, and liabilities that may be
imposed on or reasonably incurred by him as a result of his being (or having
been) a director of ASA. However, this indemnification does not protect a
director against any liability to ASA or its shareholders arising from a
violation of the U.S. securities laws, including the 1940 Act and the rules and
regulations thereunder, from any liability relating to agreements or
undertakings entered into or at the direction of the SEC, or from the director's
willful misfeasance, bad faith, gross negligence, or reckless disregard of his
duties as a director. In addition, the SA Companies Act provides that any
provision in a company's articles of association that exempts a director from or
indemnifies him against any liability for any negligence, default, breach of
duty, or breach of trust of which he may be guilty shall be void, but this
provision does not apply to insurance obtained by a company with respect to such
actions.
The Bermuda Companies Act allows a company, through its bye-laws or a
contractual or other arrangement with a director, to exempt the director from,
or indemnify him against, any loss arising, or liability attaching to him, by
any rule of law with respect to any negligence, default, breach of duty, or
breach of trust of which the director may be guilty in relation to the company.
However, no contract or arrangement may indemnify a director if such liability
would attach as a result of any fraud or dishonesty on the part of the director.
The Bermuda Companies Act also allows a company to indemnify a director against
any liability incurred in defending any proceeding in which judgment is given in
his favor or in which he is acquitted or granted relief by the court or with
respect to any loss attaching to him as a result of any negligence, default,
breach of duty, or breach of trust.
The Bye-Laws of ASAB provide for the indemnification of its directors
for liabilities (including legal fees) arising from their activities in the
conduct of ASAB's business. However, this indemnification does not extend to
violations of the U.S. securities laws or to matters arising from the director's
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties of his office, nor does it extend to matters that are contrary to the
provisions of the Bermuda Companies Act or matters in which the indemnified
person is not successful on the merits.
Personal Liability of Directors and Officers
Under the SA Companies Act, a court may declare that a director or
officer who was knowingly a party to the carrying on of the business of ASA
recklessly or with an intent to defraud creditors of ASA or of any other person
or for any fraudulent purpose, shall be personally responsible, without any
limitation of liability, for some or all of ASA's debts or other liabilities. If
directors fail to appoint an auditor within the required time periods, they may
be jointly and severally liable for all debts incurred by ASA in the absence of
an auditor. In addition, if any director or officer signs or authorizes on
behalf of ASA any check that does not mention ASA's name, the director or
officer will be liable to the holder of the instrument unless it is paid by ASA.
ASA may proceed against its directors personally for acting beyond their
authority and in breach of their fiduciary duties. In exceptional circumstances,
ASA's shareholders may enforce these duties on behalf of ASA by means of a
derivative action. ASA's Articles of Association provide that, subject to the
requirements of the SA Companies Act or Section 17(h) of the 1940 Act, no
director shall be liable for the acts or defaults of any other director or
officer of ASA, for any loss resulting from any shortfall of any investment
security, for any loss arising from the bankruptcy or wrongdoings of those with
whom any money or securities have been deposited, for any loss caused by any
error of judgment or oversight on his part, or for any other loss occurring
through the performance of his duties, unless the loss resulted from his own
negligence or dishonesty.
If a claim against an officer or director of ASAB falls outside the
indemnification discussed above, the Bermuda Companies Act permits ASAB to
indemnify the officer or director only if he is acquitted. Accordingly, a
director who
10
is found guilty of any violation of the U.S. securities laws or ASAB's SEC
order, fraud, or dishonesty may be personally liable to ASAB or its
shareholders.
Winding-Up
ASA may be wound-up voluntarily or by order of court. A voluntary
winding-up would be initiated by the adoption of a special resolution by ASA's
shareholders. In winding-up ASA, its assets would be applied to payment of the
expenses incurred in the winding-up and the claims of creditors. Any surplus
assets would be distributed by the liquidator among ASA's shareholders in
proportion to the nominal value of their shares. When ASA's affairs had been
completely wound up, ASA would be dissolved and its existence as a legal entity
would be terminated.
If ASAB were to be wound up, the liquidator may, with shareholder
approval and any other approval required under the Bermuda Companies Act, divide
ASAB's assets among its shareholders in cash or in kind. In so doing, the
liquidator may determine the fair value of the property to be divided and may
decide how the property should be divided among the shareholders. No shareholder
is required to accept any asset subject to any liability.
Amendment to Governing Documents
ASA's governing documents can be amended only by shareholder approval by
way of special resolution together with registration of such special resolution.
If the amendment of ASA's governing documents involves a change in the nature of
its business from that of an investment company, a change from a closed-end
company to an open-end company or from a non-diversified company to a
diversified company, a deviation from its policy relating to the concentration
of its investments in any particular industry or group of industries, or a
deviation from any of its fundamental policies (each, a "Fundamental Change"),
the change will also require approval by the vote of the lesser of (1) more than
50% of the outstanding voting securities of ASA or (2) 67% or more of the
outstanding voting securities of ASA at a shareholder meeting, if the holders or
more than 50% of the outstanding voting securities are present in person or by
proxy (a "1940 Act Vote"). As long as ASA is registered as an investment
company, its governing documents may not be changed without the authorization of
the SEC in any manner inconsistent with the 1940 Act, the rules and regulations
thereunder, and the undertakings and arrangements entered into with the SEC.
ASAB's Bye-Laws may be amended by resolution of the ASAB Board, subject
to approval by its shareholders. To alter ASAB's Memorandum of Association, a
general meeting of shareholders must be held to approve the proposed changes and
pass a recommendation to accept the directors' recommendation to amend the
Memorandum of Association in the form presented to the shareholders. If the
amendment of ASAB's governing documents involves a Fundamental Change, the
change will also require approval by a 1940 Act Vote. Under the Bermuda
Companies Act, shareholders holding at least 20% of a company's issued share
capital can apply to a court for annulment of any alteration. Accordingly,
approval of an amendment by at least 80% of ASAB's issued share capital will
allow filing of the alteration. As long as ASAB is registered as an investment
company, its governing documents may not be changed without the authorization of
the SEC in any manner inconsistent with the 1940 Act, the rules and regulations
thereunder, and the undertakings and arrangements entered into with the SEC.
The foregoing is only a summary of certain rights of shareholders under
the Funds' governing documents and laws and is not a complete description of
provisions contained in those sources. Shareholders should refer to the
provisions of those documents and laws directly for a more thorough description.
CAPITALIZATION
The following table (which is unaudited) sets forth the capitalization
of ASA as of May 31, 2004, and ASAB on a pro forma combined basis as of that
date, giving effect to the proposed Reorganization. ASAB has not had any
investment operations of its own as of the date of this Proxy Statement.
Accordingly, ASAB's capitalization immediately after the Reorganization will be
equivalent to ASA's capitalization immediately before the Reorganization, as
reflected in the table below.
ASAB
ASA (Pro Forma)(1)
----------- --------------
Net Assets (000) $ 412,376 $ 417,890
Net Asset Value per share $ 42.96 $ 43.53
Shares Outstanding (000) 9,600 9,600
(1) If the reorganization is completed by November 30, 2004 the deferred tax
liability for South African CGT will be eliminated and the deferred tax
liability will be reversed, which will be result in increase to unrealized
appreciation on investments in the financial statements. As of May 31, 2004,
the financial statements reflected a CGT liability of $5,530,941. As of
August 31, 2004, the financial statements reflected a CGT liability of
$6,830,581.
11
INFORMATION ABOUT THE FUNDS
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the
financial performance of ASA. The financial information in the first table below
is for the annual period ended November 30, 2003 and the financial information
in the second table below is for the semi-annual period ended May 31, 2004. The
information has been derived from the financial statements of ASA, and it has
been audited by Ernst & Young LLP, New York, New York, independent registered
public accounting firm, and Ernst & Young, Johannesburg, South Africa,
independent accountants for ASA, whose reports thereon are included in the
Annual Report and the Semi-Annual Report. ASA's financial statements for the
same periods are included in the Reorganization SAI. Certain information
reflects financial results for a single ASA share. The total returns in the
tables represent the rate that a shareholder would have earned (or lost) on an
investment in ASA (assuming the reinvestment of dividends). The information
should be read in conjunction with the financial statements in the
Reorganization SAI.
FISCAL YEAR ENDED NOVEMBER 30, 2003
Year Ended November 30
-----------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999
-----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $ 33.48 $ 21.97 $ 17.58 $ 22.51 $ 19.01
-----------------------------------------------------------------------------------------------------------------------------
Net investment income .84 .85 1.00 .61 .58
Net realized gain from investments -- .51 3.05 1.00 .62
Net realized gain (loss) from foreign currency
transactions .32 (1.13) (.24) (1.02) (.95)
Net increase (decrease) in unrealized appreciation on
investments 17.76 11.84 1.40 (4.88) 3.84
Net unrealized appreciation (depreciation) on
translation of assets and liabilities in foreign currency (.06) .24 (.02) (.04) .01
-----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 18.86 12.31 5.19 (4.33) 4.10
Less dividends (.80) (.80) (.80) (.60) (.60)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 51.54 $ 33.48 $ 21.97 $ 17.58 $ 22.51
-----------------------------------------------------------------------------------------------------------------------------
Market value per share, end of year $ 47.16 $ 30.06 $ 19.83 $ 14.56 $ 19.125
TOTAL INVESTMENT RETURN (1)
Based on market value per share 59.91% 55.72% 41.76% (21.06%) 3.44%
RATIOS TO AVERAGE NET ASSETS(1)
Expenses .84% .91% 1.10% 1.15% 1.13%
Net investment income 2.09% 2.63% 4.61% 3.06% 3.02%
SUPPLEMENTAL DATA
Net assets, end of year (000 omitted) $ 494,784 $ 321,423 $ 210,944 $ 168,726 $ 216,051
Portfolio turnover rate -- 4.41% 11.18% 7.43% 6.66%
Per share calculations are based on the 9,600,000 shares outstanding.
(1) Determined in U.S. dollar terms.
SUPPLEMENTARY INFORMATION
Years ended November 30, 2003 and 2002
CERTAIN FEES INCURRED BY ASA 2003 2002
----------------------------------------------------------------
Directors' fees $ 288,500 $ 220,000
Officers' remuneration 500,220 285,018
Ranquin Associates (a company of which
an officer is an affiliated person) 37,800 35,000
Auditors 110,000 50,000
----------------------------------------------------------------
12
SIX MONTHS ENDED MAY 31, 2004
Six Months Ended May 31 Year Ended November 30
----------------------------------------------------------------------------------------------------------------------------------
2004 2003 2003 2002 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $ 51.54 $ 33.48 $ 33.48 $ 21.97 $ 17.58 $ 22.51 $ 19.01
----------------------------------------------------------------------------------------------------------------------------------
Net investment income .20 .52 .84 .85 1.00 .61 .58
Net realized gain from investments .73 -- -- .51 3.05 1.00 .62
Net realized gain (loss) from foreign
currency transactions (.71) .14 .32 (1.13) (.24) (1.02) (.95)
Net increase (decrease) in unrealized
appreciation on investments (8.49) 2.46 17.76 11.84 1.40 (4.88) 3.84
Net unrealized appreciation (depreciation)
on translation of assets and liabilities
in foreign currency (.01) (.08) (.06) .24 (.02) (.04) .01
----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (8.28) 3.04 18.86 12.31 5.19 (4.33) 4.10
Less dividends (.30) (.30) (.80) (.80) (.80) (.60) (.60)
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 42.96 $ 36.22 $ 51.54 $ 33.48 $ 21.97 $ 17.58 $ 22.51
----------------------------------------------------------------------------------------------------------------------------------
Market value per share, end of year $ 37.64 $ 35.90 $ 47.16 $ 30.06 $ 19.83 $ 14.56 $ 19.125
TOTAL INVESTMENT RETURN (1)
Based on market value per share (19.59%) 20.39% 59.91% 55.72% 41.76% (21.06%) 3.44%
RATIOS TO AVERAGE NET ASSETS(1)(2)
Expenses .71% .86% .84% .91% 1.10% 1.15% 1.13%
Net investment income .86% 2.82% 2.09% 2.63% 4.61% 3.06% 3.02%
SUPPLEMENTAL DATA
Net assets, end of year (000 omitted) $ 412,376 $ 347,755 $ 494,784 $ 321,423 $ 210,944 $ 168,726 $ 216,051
Portfolio turnover rate 1.60% -- -- 4.41% 11.18% 7.43% 6.66%
Per share calculations are based on the 9,600,000 shares outstanding.
(1) Determined in U.S. dollar terms.
(2) Annualized for the six months ended May 31, 2004 and May 31, 2003.
SUPPLEMENTARY INFORMATION
Six months ended May 31, 2004 and 2003
CERTAIN FEES INCURRED BY ASA 2004 2003
----------------------------------------------------------------
Directors' fees $ 148,000 $ 149,500
Officers' remuneration 266,790 249,125
Ranquin Associates (a company of which
an officer is an affiliated person) 20,400 18,800
Auditors 49,000 70,000
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13
GENERAL DESCRIPTION
ASA was organized as a public limited liability company in South Africa
in June 1958. ASA is a diversified closed-end management investment company
registered with the SEC pursuant to a 1958 order under Section 7(d) of the 1940
Act.
ASAB is an exempted limited liability company organized in Bermuda on
April 29, 2003. ASAB is a diversified closed-end management investment company
registered with the SEC pursuant to a 2004 order under Section 7(d) of the 1940
Act. ASAB was organized to facilitate the reincorporation of ASA in Bermuda.
INVESTMENT POLICIES
Fundamental Policies. The following investment policies of ASA are
fundamental and may not be changed without shareholder action. The investment
policies of ASAB are the same as those of ASA.
(a) General. It is the policy of ASA to invest over 50% of the value
of its total assets in the common shares or securities convertible into common
shares of companies conducting, as the major portion of their business, gold
mining and related activities in South Africa. It is expected that most of such
companies will have reached the production stage. The balance of ASA's total
assets, other than minor amounts that may be held in cash, may be (i) invested
in common shares or securities convertible into common shares of companies
engaged in other businesses of varied types in South Africa, (ii) held in the
form of gold bullion or certificates of deposit therefor to be purchased,
directly or indirectly, with South African rand (provided that ASA's holdings in
the form of gold bullion or certificates of deposit therefor may not exceed 25%
of the value of its total assets), and/or (iii) invested in common shares or
securities convertible into common shares of companies primarily engaged outside
of South Africa in extractive or related industries or in the holding or
development of real estate (provided that ASA's investment in such companies may
not exceed 20% of the value of its total assets).
If investment opportunities deemed by ASA to be attractive are not
available in the types of securities referred to in the preceding paragraph, ASA
may deviate from the investment objectives and techniques outlined in that
paragraph and make temporary investments of unlimited amounts in securities
issued or guaranteed by the Government of South Africa or any instrumentality
thereof, or it may liquidate its investments and temporarily retain the proceeds
in South African rand. Such proceeds may also be temporarily retained in U.S.
dollars subject to ASA's ability to obtain dollars under exchange control
regulations and the limitations contained in ASA's agreement with, and letter
from, the South African Reserve Bank dated July 18, 1958.
(b) Fundamental Policies. The following are fundamental investment
policies of ASA that may not be changed without shareholder approval:
(1) Issuance of Senior Securities. It is the policy of ASA not to
issue any class of senior securities (debt obligations or preferred stock),
except that ASA may issue senior securities representing indebtedness payable in
money of any currency, in any amount and on any terms that the Board may deem
advisable, provided that no such senior securities shall (a) result in ASA's
total indebtedness for borrowed money immediately after such issue having an
asset coverage of less than 300% (securities listed on the JSE Securities
Exchange South Africa to be valued for this purpose at their then current market
value on such exchange) or (b) be secured by the pledge, mortgage or
hypothecation of any of ASA's assets.
(2) Short Sales, Purchases on Margin and Put and Call Options. It is
the policy of ASA not to purchase any securities on margin or sell any
securities short.
(3) Borrowing Money. It is the policy of ASA to borrow money of any
currency, in any amount and on any terms that the Board may deem advisable,
provided that no such borrowing shall (a) result in ASA's total indebtedness for
borrowed money immediately after such borrowing having an asset coverage of less
than 300% (securities listed on the JSE Securities Exchange South Africa to be
valued for this purpose at their then current market value on such exchange) or
(b) be secured by the pledge, mortgage or hypothecation of any of ASA's assets.
14
(4) Underwriting Securities of Other Issuers. It is the policy of
ASA not to make any commitment in respect of any underwriting of securities, or
in any participation in any such underwriting, that could or would, through
joint obligations or by reason of defaults on the part of other participants,
involve the assets of ASA to an extent over and above prescribed and specific
amounts intended or permitted to be acquired as an addition to portfolio
holdings. Furthermore, ASA may not participate as an underwriter of securities
in any underwriting that could result in ASA holding securities or amounts of
securities not permitted by its investment restrictions.
(5) Concentration of Investments in a Particular Industry or Group
of Industries. It is the policy of ASA to invest over 50% of the value of its
total assets in the common shares or securities convertible to common shares of
companies conducting, as the major portion of their business, gold mining and
related activities in South Africa. It is expected that most of such companies
will have reached the production stage.
(6) Purchase or Sale of Real Estate and Real Estate Mortgage Loans.
It is the policy of ASA not to purchase or sell real estate except (a) to the
extent necessary to provide it with an office for the transaction of its
business and (b) that ASA may invest up to 20% of the value of its total assets
in common shares or securities convertible into common shares of companies
primarily engaged outside of South Africa in extractive or related industries or
in the holding or development of real estate. ASA may not pledge, mortgage or
hypothecate any of its assets.
(7) Purchase or Sale of Commodities or Commodity Contracts. It is
the policy of ASA not to purchase or sell commodities or commodity contracts,
except that ASA may hold up to 25% of the value of its total assets in the form
of gold bullion or certificates of deposit therefor. ASA does not intend to deal
in gold bullion.
(8) Loans. It is the policy of ASA not to lend its funds or other
assets to any person, other than through the purchase, in accordance with its
investment policies, of securities.
(9) Percentage of its Assets that ASA May Invest in the Securities
of any One Issuer. It is the policy of ASA not to purchase the securities of any
issuer if, immediately after and as a result of such purchase, the market value
of such securities and all other securities of the same issuer owned by ASA
exceed 20% of the value of ASA's total assets, determined in such manner as may
be approved by the Board and applied on a consistent basis (subject to the
limitations of Section 2(a)(41) of the 1940 Act), except securities issued or
guaranteed by the Government of the Republic of South Africa or any
instrumentality thereof; provided, however, that ASA may not purchase the
securities of any issuer if, immediately after and as a result of such purchase,
the market value of such securities and all other securities of the same issuer
owned by ASA exceed 10% of the value of ASA's total assets, so determined, if
either (a) such purchase will result in more than 40% of the value of those
assets consisting of investments in companies each of which investments exceeds
10% of the value of those assets or (b) such 40% limitation is already exceeded.
(10) Percentage of Voting Securities of any One Issuer that ASA May
Acquire. It is the policy of ASA not to purchase securities of any issuer if,
immediately after and as a result of such purchase, ASA owns more than 10% of
any class of outstanding securities of such issuer, except securities issued or
guaranteed by the Government of South Africa or any instrumentality thereof.
(11) Investment in Securities of Other Investment Companies. It is
the policy of ASA that it may purchase securities issued by another investment
company otherwise than in the open market, but only within the limitations
imposed by the 1940 Act.
(12) Investments of Cash. It is the policy of ASA to invest its cash
in certificates of deposit issued by U.S. banks. ASA may also invest its funds
in South African rand denominated accounts, which may be interest bearing, with
an Eligible Foreign Custodian or an overseas branch of a Qualified U.S. Bank (as
such terms are defined in the 1940 Act) located in South Africa, in an aggregate
amount not exceeding 5% of the value of ASA's total assets.
(13) Purchases of Securities of New Issuers. It is the policy of ASA
not to purchase the securities of any issuers that have a record of less than
three years' continuous operation (such period to include the period of
operation of any predecessor, if the issuer whose securities are proposed as an
investment has come into existence as a result of a merger, consolidation,
reorganization or the purchase of substantially all of the assets of such
predecessor) if such purchase at the time thereof would cause more than 10% of
the value of ASA's total assets to be invested in the securities of such
issuers.
15
(14) Purchase of Securities Issued by Brokers, Dealers, Underwriters,
Investment Advisers and Insurance Companies. It is the policy of ASA not to
purchase or otherwise acquire any securities issued by brokers, dealers,
underwriters or investment advisers or, except within the limitations imposed by
the 1940 Act, any securities issued by insurance companies.
(15) Purchase of Securities of Certain Related Entities. It is the
policy of ASA not to purchase or hold securities of any issuer any of whose
officers, directors, trustees or security holders are also officers or directors
of ASA if any one or more of such persons own beneficially more than 1/2 of 1%
of the securities of that issuer and the persons owning more than 1/2 of 1% of
such securities together own beneficially more than 5% of the securities of such
securities of such issuer.
(16) Pledge or Mortgage of Assets. It is the policy of ASA not to
pledge, mortgage or hypothecate any of its assets.
(17) Participation in Trading Account. It is the policy of ASA not to
participate on a joint, or a joint and several, basis in any trading account in
securities, except in connection with an underwriting in which ASA is a
participant.
SHARE PRICE DATA (unaudited)
The shares of ASAB have no history of public trading. However, shares of
ASA trade on the NYSE. For the fiscal year ended November 30, 2003, trading in
ASA's shares fluctuated between 5.4% above net asset value and 9.5% below net
asset value. On September 23, 2004, the net asset value per share was $46.69 and
the market price per share was $41.04. The following is a summary of public
trading of ASA's shares:
PER SHARE
-----------------------------------------------------
PREMIUM (DISCOUNT)
QUARTER ENDED NET ASSET VALUE MARKET PRICE TO NET ASSET VALUE
------------- --------------- -------------- ------------------
HIGH LOW HIGH LOW HIGH LOW
8/31/02 41.16 29.94 40.44 24.72 (15.0) (6.5)
11/30/02 38.28 31.58 35.01 27.50 (14.3) (9.3)
2/28/03 42.45 36.31 42.85 29.31 1.5 (9.5)
5/31/03 37.48 32.61 38.92 31.76 5.4 (6.1)
8/31/03 44.56 36.25 44.13 35.20 3.0 (3.6)
11/30/03 51.54 44.57 48.00 40.13 (11.6) (3.2)
2/29/04 52.15 46.34 47.85 41.00 (14.0) (8.7)
5/31/04 50.48 38.28 43.68 33.47 (14.2) (9.1)
8/31/04 45.22 38.94 39.38 33.15 (15.3) (9.9)
MANAGEMENT
BOARD OF DIRECTORS
The management of the business and control of ASA is vested in its
Board, which has the power to make all decisions and to exercise or delegate all
of the powers of ASA, pursuant to and in compliance with the SA Companies Act
and the Articles of Association and by-laws of ASA.
The management of the business and control of ASAB is vested in its
Board, which has the power to make all decisions and to exercise or delegate all
of the powers of ASAB, pursuant to and in compliance with the Bermuda Companies
Act and the Memorandum of Association and Bye-Laws of ASAB.
Ronald L. McCarthy, A. Michael Rosholt and James G. Inglis are all
directors of ASA resident in South Africa and with most of their assets located
in South Africa. ASA was permitted to register under the 1940 Act by an order of
the SEC. As a condition of the order, a majority of ASA's board of directors and
officers must be U.S. citizens and
16
residents, and each director must enter into an agreement that provides, among
other things, that the director agrees to consent to the jurisdiction of a U.S.
court to enable ASA's shareholders to maintain actions against its directors and
officers for violations of its Articles or by-laws, the 1940 Act and the rules
and regulations thereunder, and the agreements and undertakings contained in
ASA's SEC order.
In addition, each non-U.S. director must irrevocably designate ASA's
U.S. custodian as an agent in the United States to accept service of process.
(See "Management - Custodians.") ASA and its officers and directors have also
consented that full faith and credit be given by courts of South Africa to any
final judgment or decree of a U.S. court in proceedings to enforce such judgment
or decree.
Upon completion of the Reorganization, each of the directors and
substantially the same officers of ASA will be directors and/or officers of
ASAB. ASAB and its officers and directors will be subject to conditions and
undertakings that are the same in all material respects to those of ASA's
current SEC order.
PORTFOLIO MANAGEMENT
ASA does not employ an outside investment adviser. Robert J.A. Irwin,
Chairman, Treasurer and a director of ASA, is primarily responsible for the
day-to-day management of ASA's portfolio. Following the Reorganization, Mr.
Irwin will be primarily responsible for the day-to-day management of ASAB's
portfolio. Mr. Irwin has been Chairman of the Board of ASA since 1993, a
director of ASA since 1987, and Treasurer of ASA since 1999, and has been
Chairman of the Board, Treasurer and a director of ASAB since its inception.
ADMINISTRATION
Ronald L. McCarthy acts as the Managing Director and South African
Secretary of ASA. In these capacities, his duties include the daily maintenance
of ASA's accounting records, the drafting of the monthly financial data for
submission to ASA's management, the compilation of ASA's budgets and cash flow
projections, the submission of ASA's monthly and annual statutory returns to the
appropriate South African governmental authorities, and the maintenance of ASA's
computer systems. For these services, Mr. McCarthy received a salary in fiscal
year 2003 of approximately $80,000.
Kaufman, Rossin & Co. PA, 2699 South Bayshore Drive, Miami, Florida
provides accounting services for ASA. The duties of Kaufman Rossin include the
daily maintenance of ASA's accounting records, determination of ASA's weekly net
asset value, and the drafting of the monthly financial data for submission to
the management of ASA. For its services to ASA, Kaufman Rossin received a fee in
fiscal year 2003 of $95,000. Kaufman Rossin will serve in a similar capacity for
ASAB.
LGN Associates, P.O. Box 269, Florham Park, New Jersey 07932, provides
shareholder services for ASA. In this capacity, LGN Associates prepares and
distributes the interim and annual reports to shareholders, and provides weekly
net asset value information to various financial services. LGN Associates also
performs required administrative services and responds to inquiries from
shareholders and other parties regarding ASA. For its services to ASA, LGN
Associates received a fee in fiscal year 2003 of $442,500. LGN Associates will
serve in a similar capacity for ASAB.
Appleby Corporate Services (Bermuda) Ltd., ("Appleby") Canon's Court, 22
Victoria Street, Hamilton HM12, Bermuda, acts as the Registered Representative
of ASAB in Bermuda. The duties of Appleby include discharging the duties set out
in the Bermuda Companies Act, including acting as agent for the service of
process in Bermuda.
CUSTODIANS
ASA's custodian is JPMorgan Chase Bank, located at 3 Chase MetroTech
Center, Brooklyn, NY 11245. The Standard Bank of South Africa Limited, 5
Simmonds Street, Johannesburg, South Africa, serves as ASA's subcustodian in
South Africa. ASA also is authorized to utilize subcustodians in the United
Kingdom, Australia, Japan, Switzerland and Canada under certain circumstances.
To date, ASA has not approved subcustodians in these countries.
17
ASAB's custodian will be JPMorgan Chase Bank, located at 3 Chase
MetroTech Center, Brooklyn, NY 11245. After the Reorganization, ASAB's
subcustodial arrangements will be the same as those of ASA.
TRANSFER AGENT
EquiServe Trust Company, N.A. ("EquiServe") 525 Washington Boulevard,
Jersey City, NJ 07310, serves as transfer agent and dividend-paying agent for
ASA. Equiserve also will serve as transfer agent and dividend paying agent for
ASAB.
AUTHORIZED CAPITAL
CAPITAL STOCK
The capital stock of ASA consists solely of common shares. Each share
entitles the holder to one vote for the election of directors and on all other
matters. Each share has an equal right to participate in any dividend declared
and, in the event of dissolution, in ASA's assets after payment of its debts.
Shares are fully paid and non-assessable. Shareholders have no preemptive rights
or conversion privileges. The capital stock of ASAB also consists solely of
common shares and is the same in all material respects to that of ASA.
(1) (2) (3) (4)
AMOUNT
OUTSTANDING
EXCLUSIVE OF
AMOUNT HELD AMOUNT
TITLE OF AMOUNT BY FUND SHOWN
CLASS AUTHORIZED FOR ITS ACCOUNT UNDER (3)
----------------- ---------- --------------- ------------
ASA Ordinary Shares -
Par Value R0.25 24,000,000 0 9,600,000
ASAB Ordinary Shares -
Par Value US$1.00 30,000,000 0 12,000
DIVIDEND REINVESTMENT PLAN
EquiServe has been engaged to offer a dividend reinvestment plan to
ASA's registered shareholders ("Dividend Plan"). Shareholders must elect to
participate in the Dividend Plan by signing an authorization. The authorization
appoints EquiServe as agent to apply to the purchase of ASA's shares in the open
market (1) all cash dividends (after deduction of the service charge described
below) that become payable to such participant on ASA's shares (including shares
registered in his or her name and shares accumulated under the Dividend Plan)
and (2) any voluntary cash payments ($50 minimum, $3,000 maximum per dividend
period) received from such participant within 30 days prior to the then-current
dividend's payment date.
For the purpose of making purchases, EquiServe will commingle each
participant's funds with those of all other participants in the Dividend Plan.
The price per share of shares purchased for each participant's account shall be
the average price (including brokerage commissions and any other costs of
purchase) of all shares purchased in the open market with the funds available
from that dividend and any voluntary cash payments being concurrently invested.
Any stock dividends or split shares distributed on shares held in the Dividend
Plan will be credited to the participant's account.
For each participant, a service charge of 5% of the combined amount of
the participant's dividend and any voluntary cash payment being concurrently
invested, up to a maximum charge of $2.50 per participant, will be deducted (and
paid to EquiServe) prior to the purchase of shares. Participant sales of shares
held by EquiServe in the Dividend Plan are subject to a fee of $10.00 plus
applicable brokerage commissions deducted from the proceeds of the sale.
Additional nominal fees are charged by EquiServe for specific Dividend Plan
participant requests such as requests for information regarding share cost basis
detail in excess of two prior years and for replacement Forms 1099 older than
three years.
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A participant may terminate participation in the Dividend Plan at any
time by written instructions to EquiServe. Upon termination, a participant will
receive (1) a certificate for the full shares credited to his or her account,
unless he or she requests the sale of all or part of such shares, and (2) an
amount equal to the current market value for any fractional shares then credited
to the account.
Dividends a participant reinvests under the Dividend Plan will generally
be treated for U.S. federal income tax purposes in the same manner as dividends
paid to the participant in cash. The amount of the service charge is deductible
for U.S. federal income tax purposes, subject to limitations. See "Taxes - U.S.
Federal Income Tax Considerations" for more information regarding U.S. federal
income tax consequences to shareholders of an investment in ASA shares,
including the effect of its status as a PFIC.
A shareholder participating in the Dividend Plan may not hold his or her
shares in a "street name" brokerage account.
Additional information regarding the Dividend Plan may be obtained from
EquiServe Dividend Reinvestment Plan, 250 Royall Street, Canton, MA 02021.
Information may also be obtained by calling EquiServe's Shareholder Contact
Center at (781) 575-2723 between 8:30 a.m. and 7 p.m., Eastern Time, Monday
through Friday.
ASAB will offer its shareholders a dividend reinvestment plan identical
to the Dividend Plan described above.
TAXES
U.S. FEDERAL INCOME TAX CONSIDERATIONS
ASAB is organized as an exempted limited liability company under the
laws of Bermuda; it will be classified for U.S. federal tax purposes as a
corporation and will not elect to be classified otherwise. As a non-U.S.
corporation, ASAB cannot qualify as a regulated investment company under the
Code. Accordingly, any dividends ASAB pays will be taxable to its U.S.
shareholders as ordinary income and, for corporate shareholders, will not
qualify for the dividends-received deduction. In addition, because ASAB will be
a PFIC, any dividends it pays to individual shareholders will not qualify for
the 15% maximum federal income tax rate on "qualified dividend income" received
by individuals (enacted under the Jobs and Growth Tax Relief Reconciliation Act
of 2003).
For its taxable years December 1, 1963, through November 30, 1987, ASA
was a "foreign investment company" for U.S. federal income tax purposes./4/ As a
result, a shareholder who held ASA shares during any part of those years will be
subject to tax at ordinary income rates on any profit on a sale of the ASAB
shares the shareholder receives pursuant to the Reorganization in exchange for
those ASA shares, to the extent of the shareholder's "ratable share" of ASA's
earnings and profits accumulated for the period in those years during which the
shareholder held those ASA shares ("Share of E&P"). If such a shareholder's
profit on the sale of shares exceeds his or her Share of E&P, then, subject to
the discussion below regarding ASA's taxable years beginning after November 30,
1987, the shareholder will be subject to tax on the excess at long-term capital
gain rates (generally, 15% for individual shareholders for sales of shares
through taxable years beginning before 2009).
ASA became a PFIC on December 1, 1987. Shareholders of a PFIC are
subject to highly complex tax rules with respect to gains on the disposition of
PFIC stock, PFIC distributions and undistributed PFIC income. The manner in
which these rules apply to a PFIC's shareholder depends on whether the
shareholder (1) elects to treat the PFIC as a "qualified electing fund" (a
"QEF") with respect to his or her PFIC shares, (2) for the shareholder's taxable
years beginning after December 31, 1997, elects to "mark-to-market" his or her
PFIC shares as of the close of each taxable year, or (3) makes neither election.
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/4/ Pursuant to the Reorganization, ASAB will succeed to ASA's tax attributes
for U.S. federal income tax purposes. Accordingly, all references in this
section to ASA (such as with respect to periods pre-dating this Proxy
Statement) include ASAB where the context permits or requires.
19
In general, if a shareholder does not make either election, any gain
realized on the direct or indirect disposition of his or her PFIC shares would
be treated as ordinary income. In addition, the shareholder would be subject to
an "interest charge" on part of his or her tax liability with respect to that
gain, as well as with respect to certain "excess distributions" the PFIC makes.
Furthermore, a shareholder's shares may be denied the benefit of any otherwise
applicable increase in tax basis at death. Under proposed regulations, a
"disposition" would include a U.S. taxpayer's becoming a nonresident alien.
An "excess distribution" on a PFIC's shares is a distribution the PFIC
makes for a taxable year that is more than 125% of the average amount it
distributed for the three preceding taxable years./5/ If a PFIC makes an excess
distribution in a taxable year, a shareholder who has not made a QEF or
mark-to-market election would be required to allocate the excess amount ratably
over the entire holding period for his or her shares. That allocation would
result in tax being payable at the highest applicable rate in the prior years to
which the distribution is allocated and interest charges being imposed on the
resulting "underpayment" of taxes made in those years. In contrast, a
distribution that is not an excess distribution would be taxable to a
shareholder as a normal dividend (see above), with no interest charge.
If a shareholder elects to treat a PFIC as a QEF with respect to his or
her interest therein for the first year he holds his or her shares during which
the company is a PFIC (or who later makes a QEF election and also elects to
treat his or her shares generally as if they were sold for their fair market
value on the first day of the PFIC's first taxable year for which the QEF
election is effective), the rules described in the preceding paragraphs
generally would not apply. Instead, the electing shareholder would include
annually in his or her gross income his or her pro rata share of the PFIC's
ordinary earnings and net capital gain (the electing shareholder's "QEF"
inclusion), regardless of whether that income or gain was actually distributed.
A shareholder who makes a valid QEF election will recognize capital gain on any
profit from the actual sale of his or her PFIC shares held as capital assets,
except to the extent of his or her Share of E&P.
Alternatively, if a shareholder makes a mark-to-market election with
respect to PFIC shares for taxable years beginning on or after January 1, 1998,
the shareholder would be required annually to report any unrealized gain with
respect to those shares as ordinary income, and any unrealized loss would be
permitted as an ordinary loss, but only to the extent of previous inclusions of
ordinary income. Any gain the electing shareholder subsequently realizes on a
disposition of those shares also would be treated as ordinary income, but the
shareholder would not be subject to an interest charge on the resulting tax
liability. Special rules apply to a shareholder that held PFIC shares prior to
the first taxable year for which a mark-to-market election was effective.
A shareholder with a valid QEF election in effect will not be taxed on
any distributions the PFIC makes to the extent of any QEF inclusions, but any
distributions out of accumulated earnings and profits in excess thereof will be
treated as taxable dividends. A shareholder would increase the tax basis in the
PFIC shares by the amount of any QEF inclusions and reduce that basis by any
distributions to him or her that are not taxable as described in the preceding
sentence. Special rules apply to shareholders who make a QEF election and wish
to defer the payment of tax on their annual QEF inclusions.
Each shareholder who desires QEF treatment must individually elect that
treatment. A QEF election must be made for the shareholder's taxable year in
which or with which the PFIC's taxable year ends and must be made by the due
date, with extensions, of the shareholder's U.S. federal income tax return for
the taxable year for which the election is to apply. A QEF election is effective
for the shareholder's taxable year for which it is made and all subsequent
taxable years and may not be revoked without the consent of the Internal Revenue
Service. Under U.S. Treasury Department regulations, a QEF election is made on
Internal Revenue Service Form 8621, which must be completed and attached to a
timely filed income tax return in which the shareholder reports his or her QEF
inclusion for the year to which the election applies. To allow shareholders to
make QEF elections and to comply with the applicable annual reporting
requirements, ASAB annually will provide to them a "PFIC Annual Information
Statement" containing certain information required by those regulations.
Special rules apply to U.S. persons who hold ASAB shares through
intermediate entities or persons and to shareholders who directly or indirectly
pledge their shares, including those in a margin account.
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/5/ For example, ASA made distributions of $.80 per share during each of the
taxable years ended November 30, 2003, 2002, and 2001. Accordingly, any
distributions for the taxable year ending November 30, 2004, aggregating
more than $1.00 per share (125% of $.80) would be treated as an excess
distribution. (All amounts are in U.S. currency.)
20
Ordinarily, the tax basis a transferee of property obtains on the death
of the property's owner is adjusted to the property's fair market value on the
date of death (or alternate valuation date). If a shareholder dies owning PFIC
shares with respect to which he or she did not elect QEF treatment (or elected
such treatment after the first year in which he or she owned shares in which the
company was a PFIC and did not elect to recognize gain as described above), the
transferee of those shares will not be entitled to adjust the tax basis therein.
In that case, the transferee generally will take a basis in the shares equal to
the shareholder's basis therein immediately before his or her death. If a
shareholder dies owning PFIC shares for which a valid QEF election was in effect
for all taxable years in the shareholder's holding period during which the
company was a PFIC (or the shareholder elected to treat the shares as if sold on
the first day of the company's first taxable year for which the QEF election was
effective), then the basis increase generally will be available unless the
holding period for his or her shares began on or before November 30, 1987. In
the latter case, any otherwise applicable basis increase generally will be
reduced to the extent of the shareholder's Share of E&P.
DUE TO THE COMPLEXITY OF THE APPLICABLE TAX RULES, SHAREHOLDERS ARE
STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISERS CONCERNING THE IMPACT OF THESE
RULES ON THEIR INVESTMENT IN ASAB AND ON THEIR INDIVIDUAL SITUATIONS.
BERMUDA TAX CONSIDERATIONS
At the date of this disclosure, there is no Bermuda income, corporation
or profits tax, withholding tax, capital gains tax, capital transfer tax, estate
duty, or inheritance tax payable by ASAB or its shareholders, other than any
shareholders ordinarily resident in Bermuda. ASAB is not subject to stamp duty
on the issue, transfer, or redemption of its shares.
ASAB has applied for and received an undertaking from the Minister of
Finance of Bermuda dated May 5, 2003, under the Exempted Undertakings Tax
Protection Act, 1966, as amended, that if there is enacted in Bermuda any
legislation imposing any (1) tax computed on profits or income, (2) tax computed
on any capital assets, gain, or appreciation, or (3) tax in the nature of estate
duty or inheritance tax, such tax shall not until March 28, 2016, be applicable
to ASAB or to any of its operations, shares, debentures, or other obligations
except insofar as such tax applies to persons ordinarily resident in Bermuda and
holding such ASAB shares, debentures, or other obligations or any land leased or
let to ASAB.
As an exempted company, ASAB is liable to pay the Bermuda Government an
annual registration fee based on its authorized share capital, which is
currently US$1,780.
SHAREHOLDERS SHOULD CONSULT LEGAL ADVISERS IN THE COUNTRIES OF THEIR
CITIZENSHIP, RESIDENCE AND DOMICILE TO DETERMINE THE POSSIBLE TAX OR OTHER
CONSEQUENCES OF PURCHASING, HOLDING AND REDEEMING ASAB SHARES UNDER THE LAWS OF
THOSE COUNTRIES.
DEFAULTS AND ARREARS ON SENIOR SECURITIES
Neither ASA nor ASAB has any senior securities outstanding.
LEGAL PROCEEDINGS
Neither ASA nor ASAB is a party to any legal proceedings.
REPORTS AND OTHER INFORMATION
ASA's reports and other information filed by ASA can be inspected and
copied at the Public Reference Section of the SEC, Washington, D.C. 20549-0102.
Copies of this information can be obtained, after paying a duplicating fee, from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, Securities and Exchange Commission, Washington, DC 20549, at
prescribed rates.
Reports, proxy statements and other information concerning ASA also can
be inspected at the NYSE, the exchange on which ASA's shares are traded.
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LEGAL MATTERS
Certain legal matters in connection with the issuance of ASAB shares as
part of the Reorganization will be passed upon by Appleby Spurling Hunter.
EXPERTS
The audited financial statements of ASA, incorporated herein by
reference, have been audited by Ernst & Young LLP, New York, New York,
independent registered public accounting firm, and Ernst & Young, Johannesburg,
South Africa, independent accountants for ASA, whose reports thereon are
included in the Annual Report and the Semi-Annual Report. The financial
statements audited by Ernst & Young LLP, New York and Ernst & Young,
Johannesburg have been incorporated herein by reference in reliance on their
report given on their authority as experts in auditing and accounting matters.
The Board unanimously recommends that you vote FOR the proposal. If
shareholders approve the Plan, the Reorganization will become effective on the
Closing Date. The winding-up and dissolution of ASA may take several months.
VOTING INFORMATION
This Proxy Statement is being furnished to shareholders of ASA in
connection with the solicitation of proxies from ASA shareholders by the Board
for use at a Meeting to be held on November 11, 2004, commencing at 10 a.m.
Eastern Time, and at any adjournment of the Meeting. The costs of this
solicitation are being paid by ASA.
Only shareholders of record at the close of business on November 4, 2004
will be entitled to vote, except that a person who at least 48 hours before the
Meeting satisfies the Board that he or she has the right to transfer shares into
his or her name in consequence of the death or bankruptcy of any shareholder of
record shall be entitled to vote such shares. Proof of any such right should be
presented to the United States Secretary, c/o LGN Associates, P.O. Box 269, 140
Columbia Turnpike, Florham Park, NJ 07932. There are 9,600,000 shares of ASA
outstanding, each of which entitles the holder to one vote. Each valid proxy
received in time will be voted at the Meeting in accordance with the
instructions on the proxy card. If no instructions are indicated, the proxy may
vote as he thinks fit.
ASA has retained D.F. King and Co., Inc., to assist in the solicitation
of proxies at a fee estimated at $15,000, plus customary out of pocket expenses.
As of June 30, 2004, City of London Investment Management Company, Ltd.
held 576,790 shares or 6.01% of the outstanding voting shares of ASA. Management
is aware of no other shareholders that may own more than 5% of the outstanding
voting shares.
The SA Companies Act and ASA's organizational documents require that
three shareholders entitled to vote at the Meeting be present personally or, if
the shareholder is a body corporate, represented, to constitute a quorum. Thus,
the Meeting cannot take place on its scheduled date if at least three such
shareholders are not present personally or represented, as the case may be. If,
within half an hour from the time scheduled for the Meeting, a quorum of
shareholders is not present, the Meeting shall stand adjourned to the same day
the next week at the same time and place, or to such other day, time and place
as the Board may by notice to the shareholders appoint. The SA Companies Act
further requires that shareholders holding in aggregate not less than 25% of the
total votes of all shareholders entitled to vote at the Meeting be present in
person or by proxy in order to pass a special resolution. If less than 25% of
the total votes of all shareholders entitled to vote at the Meeting are present
or represented at the Meeting, the Meeting shall stand adjourned to a day not
earlier than seven days and not later than twenty-one days after the date of the
Meeting. If a quorum is present but sufficient votes in favor of the proposal
are not reflected in the proxy cards received, the Chairman of the Meeting or
any shareholder who is present or represented and entitled to vote at the
Meeting may propose one or more adjournments of the Meeting to permit further
solicitation of proxies from ASA's shareholders. Any such adjournment will
require the affirmative vote of the majority of shareholders present or
represented at the Meeting or the holders of a majority of the shares that are
represented (in person or by proxy) at the Meeting to be adjourned. If the
persons whose names appear on the enclosed proxy card are appointed as proxies,
such persons will vote in favor of any such adjournment if they determine that
such adjournment and additional solicitation are reasonable and in the interest
of the shareholders.
In tallying shareholder votes, "broker non-votes" (i.e., shares held by
brokers or nominees as to which (i) instructions have not been received from the
beneficial owners or persons entitled to vote and (ii) the broker or nominee
does not have discretionary voting power on a particular matter) will not be
counted for purposes of determining whether a quorum is present for purposes of
convening the Meeting, and will not be counted as
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"votes cast" for the proposal. Abstentions will be counted for purposes of
determining whether a quorum is present for purposes of convening the Meeting,
and will have the same effect as a vote against the proposal.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with your directions as indicated on the proxy card, if your proxy
card is received properly executed by you or by your duly appointed agent or
attorney-in-fact. If you sign, date and return the proxy card, but do not
specify a proxy of your own choice and give no voting instructions, the proxies
whose names appear on the enclosed proxy card will vote in favor of the
proposal. If no instructions are given and you specify a proxy of your own
choice, the proxy may vote as he thinks fit. The proxy card may be revoked by
giving another proxy or by letter, fax, or telegram revoking the initial proxy.
To be effective, revocation must be received by ASA prior to the Meeting and
must indicate your name and account number. If you attend the Meeting in person
you may, if you wish, vote at the Meeting, thereby canceling any proxy
previously given.
Vote Required. Approval of the proposal requires the affirmative vote of
not less than three-fourths of the total votes to which shareholders present in
person or by proxy at the Meeting are entitled.
OTHER BUSINESS
The Board knows of no other business to be brought before the Meeting.
If, however, any other matters properly come before the Meeting, it is the
intention that proxies that do not contain specific instructions to the contrary
will be voted on such matters in accordance with the judgment of the persons
designated on the proxies.
ASA LIMITED
ROBERT J.A. IRWIN
Chairman of the Board
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Intentionally Left Blank
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of
October 4, 2004, between ASA Limited, a South African public limited liability
company ("Old Fund"), and ASA (Bermuda) Limited, a Bermudian exempted limited
liability company ("New Fund") (each a "Fund").
The Funds wish to effect a reorganization pursuant to which Old Fund
will change its identity, form and place of organization by transferring all its
assets to New Fund (which has been established solely for the purpose of
acquiring such assets and continuing Old Fund's business) in exchange solely for
ordinary shares of New Fund ("New Fund Shares") and New Fund's assumption of Old
Fund's liabilities, followed by the distribution of those shares pro rata to the
holders of ordinary shares in the issued share capital of Old Fund ("Old Fund
Shares"), all on the terms and conditions set forth in this Agreement. (All such
transactions are referred to herein as the "Reorganization.")
In consideration of the mutual promises herein contained, the parties
agree as follows:
1. THE TRANSACTION
1.1. Old Fund agrees to cede, assign, sell, convey, transfer and
deliver all of its assets described in paragraph 1.2 ("Assets") to New Fund. New
Fund agrees in exchange therefor -
(a) to issue and deliver to Old Fund the number of New Fund Shares equal
to the number of Old Fund Shares then outstanding, and
(b) to assume, and discharge when due, all of Old Fund's liabilities
described in paragraph 1.3 ("Liabilities"), and to indemnify Old
Fund against the Liabilities and any loss, liability, damage or
expense of any nature whatsoever arising out of or in connection
with the Liabilities, the conclusion and/or implementation of this
Agreement, and the winding-up and dissolution of Old Fund.
Such transactions shall take place at the Closing (as defined in paragraph 2.1).
1.2. The Assets shall include all cash, cash equivalents, securities,
receivables (including interest and dividends receivable), claims and rights of
action, rights to register shares under applicable securities laws, contractual
rights, books and records, deferred and prepaid expenses shown as assets on Old
Fund's books, and all other property Old Fund owns and rights Old Fund has at
the Effective Time (as defined in paragraph 2.1).
1.3. The Liabilities shall include all of Old Fund's liabilities,
debts, obligations and duties of whatever kind or nature, whether absolute,
accrued, contingent, or otherwise, whether or not arising in the ordinary course
of business, whether or not determinable at the Effective Time, whether or not
arising before or after the Effective Time, and whether or not specifically
referred to in this Agreement.
1.4. At the Closing, New Fund shall redeem the New Fund Share(s)
issued pursuant to paragraph 4.3 for an amount equal to the aggregate price at
which they were issued. At the Effective Time (or as soon thereafter as is
reasonably practicable), Old Fund shall distribute the New Fund Shares it
receives pursuant to paragraph 1.1 to its shareholders of record, determined as
of the Effective Time (each a "Shareholder" and collectively "Shareholders"), in
accordance with the provisions of section 90 of the South African Companies Act
(No. 61 of 1973), as amended, and Old Fund's Articles of Association. Such
distribution shall be accomplished by New Fund's transfer agent's opening
accounts on New Fund's share transfer books in the Shareholders' names and
transferring such New Fund Shares thereto. Each Shareholder's account shall be
credited with the number of New Fund Shares equal to the number of Old Fund
Shares that Shareholder held as of the Effective Time. Although Old Fund Shares
shall remain outstanding after such distribution, they effectively will have no
further value. New Fund shall not issue certificates representing the New Fund
Shares in connection with the Reorganization unless requested to do so by a
Shareholder; in the latter event, New Fund shall issue a certificate for the
whole number of New Fund Shares credited to such Shareholder's account.
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1.5. As soon as reasonably practicable after distribution of the New
Fund Shares pursuant to paragraph 1.4, but in all events within twelve months
after the Effective Time, Old Fund shall be wound-up and dissolved and any
further actions shall be taken in connection therewith as required by applicable
law.
1.6. Any reporting responsibility of Old Fund to a public authority
is and shall remain its responsibility up to and including the date on which it
is wound-up and dissolved.
1.7 Except as agreed in writing between Old Fund and its employees
in South Africa, New Fund shall be automatically substituted in place of Old
Fund in respect of all contracts of employment between Old Fund and those
employees in existence immediately before the Effective Time, as contemplated in
section 197 of the South African Labour Relations Act (No. 66 of 1995), as
amended.
2. CLOSING AND EFFECTIVE TIME
2.1. The Reorganization, together with related acts necessary to
consummate the same ("Closing"), shall occur at the offices of Kirkpatrick &
Lockhart LLP, Washington, DC, on November 26, 2004, or at such other place
and/or on such other date as to which the Funds may agree. All acts taking place
at the Closing shall be deemed to take place simultaneously as of the close of
business on the date thereof or at such other time as to which the Funds may
agree ("Effective Time").
2.2. Old Fund's fund accountants, Kaufman Rossin & Co., PA, shall
deliver at the Closing a certificate of an authorized representative certifying
information (including adjusted basis and holding period, by lot), as of
immediately before the Closing, concerning the Assets, including all portfolio
securities. Old Fund's custodian shall deliver at the Closing a certificate of
an authorized officer stating that (a) the Assets the custodian holds will be
transferred to New Fund at the Effective Time and (b) all necessary taxes in
conjunction with the delivery of the Assets, if any, have been paid or provision
for payment has been made.
2.3. At the Closing, (a) Old Fund's transfer agent shall deliver to
New Fund a list of the names and addresses of the Shareholders and the number of
outstanding Old Fund Shares each Shareholder owns, all as of the Effective Time,
certified by an authorized officer of such transfer agent, (b) New Fund's
transfer agent shall deliver a certificate as to the opening on New Fund's share
transfer books of accounts in the Shareholders' names, (c) New Fund shall issue
and deliver a confirmation to Old Fund evidencing the New Fund Shares to be
credited to Old Fund at the Effective Time or provide evidence satisfactory to
Old Fund that such New Fund Shares have been credited to Old Fund's account on
such books, and (d) each Fund shall deliver to the other such bills of sale,
checks, assignments, stock certificates, receipts, or other documents as the
other Fund may reasonably request.
2.4. Each Fund shall deliver to the other at the Closing a
certificate executed in its name by an officer in form and substance
satisfactory to the recipient and dated the Effective Time, to the effect that
the representations and warranties it made in this Agreement are true and
correct at the Effective Time except as they may be affected by the transactions
contemplated by this Agreement.
3. REPRESENTATIONS AND WARRANTIES
3.1. Old Fund represents and warrants to New Fund as follows:
3.1.1. Old Fund is a public limited liability company duly organized,
validly existing, and in good standing under the laws of the Republic of South
Africa;
3.1.2. Old Fund is duly registered as a closed-end management
investment company under the U.S. Investment Company Act of 1940, as amended
("1940 Act"), and such registration is in full force and effect;
3.1.3. At the Closing, Old Fund will have good and marketable title to
the Assets and full right, power, and authority to sell, assign, transfer, and
deliver the Assets free of any liens or other encumbrances (except securities
that are subject to securities loans); and on delivery and payment for the
Assets, New Fund will acquire good and marketable title thereto;
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3.1.4. New Fund Shares are not being acquired for the purpose of making
any distribution thereof, other than in accordance with the terms hereof;
3.1.5. The Liabilities were incurred by Old Fund in the ordinary course
of its business and are associated with the Assets;
3.1.6. Old Fund is not under the jurisdiction of a court in a case
under title 11 of the United States Code or a receivership, foreclosure, or
similar proceeding;
3.1.7. As of the Effective Time, Old Fund will not have outstanding any
warrants, options, convertible securities, or any other type of rights pursuant
to which any person could acquire Old Fund Shares; and
3.1.8. There is no plan or intention by any Old Fund shareholder who
owns 5% or more of the Old Fund Shares -- and to the best of the knowledge of
Old Fund's management, there is no plan or intention of Old Fund's remaining
shareholders -- to sell, exchange, or otherwise dispose of any New Fund Shares
they receive in the Reorganization.
3.2. New Fund represents and warrants to Old Fund as follows:
3.2.1. New Fund is an exempted limited liability company that is duly
organized, validly existing, and in good standing under the laws of the
Commonwealth of Bermuda;
3.2.2. New Fund will be duly registered as a closed-end management
investment company under the 1940 Act as of the Closing;
3.2.3. New Fund has not commenced operations and will not do so until
after the Closing;
3.2.4. Prior to the Effective Time, there will be no issued and
outstanding shares in New Fund or any other securities issued by New Fund,
except as provided in paragraph 4.3;
3.2.5. No consideration other than New Fund Shares (and New Fund's
assumption of the Liabilities) will be issued in exchange for the Assets in the
Reorganization;
3.2.6. The New Fund Shares to be issued and delivered to Old Fund
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, will be duly and validly issued and
outstanding shares of New Fund, fully paid and non-assessable;
3.2.7. New Fund has no plan or intention to issue additional New Fund
Shares following the Reorganization; nor does New Fund, or any person "related"
(within the meaning of section 1.368-1(e)(3) of the regulations under the U.S.
Internal Revenue Code of 1986, as amended ("Regulations")) to it, have any plan
or intention to acquire -- during the five-year period beginning at the
Effective Time, either directly or through any transaction, agreement, or
arrangement with any other person -- any New Fund Shares issued to the
Shareholders pursuant to the Reorganization with consideration other than New
Fund Shares;
3.2.8. Following the Reorganization, New Fund (a) will continue Old
Fund's "historic business" (within the meaning of section 1.368-1(d)(2) of the
Regulations) and (b) will use a significant portion of Old Fund's "historic
business assets" (within the meaning of section 1.368-1(d)(3) of the
Regulations) in a business; and
3.2.9. There is no plan or intention for New Fund to be dissolved or
merged into another limited liability company or a corporation or a business or
statutory trust following the Reorganization.
3.3. Each Fund represents and warrants to the other Fund as follows:
3.3.1. The fair market value of the New Fund Shares each Shareholder
receives will be approximately equal to the fair market value of its Old Fund
Shares (after taking into account any costs incurred in the Reorganization and
winding-up of Old Fund);
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3.3.2. Its management (a) is unaware of any plan or intention of Old
Fund shareholders to sell or otherwise dispose of (i) any portion of their Old
Fund Shares before the Reorganization to any person "related" (within the
meaning of section 1.368-1(e)(3) of the Regulations) to either Fund or (ii) any
portion of the New Fund Shares they receive in the Reorganization to any person
"related" (within such meaning) to New Fund, (b) does not anticipate
dispositions of those New Fund Shares at the time of or soon after the
Reorganization to exceed the usual rate and frequency of dispositions of Old
Fund Shares, and (c) expects that the percentage of Shareholder interests, if
any, that will be disposed of as a result of or at the time of the
Reorganization will be de minimis;
3.3.3. The Shareholders will pay their own expenses, if any, incurred
in connection with the Reorganization;
3.3.4. Immediately following consummation of the Reorganization, the
Shareholders will own all the New Fund Shares and will own such shares solely by
reason of their ownership of Old Fund Shares immediately before the
Reorganization;
3.3.5. Immediately following consummation of the Reorganization, New
Fund will hold the same assets -- except for assets used to pay expenses
incurred in connection with the Reorganization -- and be subject to the same
liabilities that Old Fund held or was subject to immediately before the
Reorganization, plus any liabilities for the Funds' expenses incurred in
connection with the Reorganization and winding-up of Old Fund. Such excepted
assets, together with the amount of all redemptions and distributions (other
than regular, normal dividends) Old Fund makes immediately preceding the
Reorganization, will, in the aggregate, constitute less than 1% of its net
assets;
3.3.6. None of the compensation received by any Shareholder who is an
employee of or service provider to Old Fund will be separate consideration for,
or allocable to, any of the Old Fund Shares such Shareholder holds; none of the
New Fund Shares any such Shareholder receives will be separate consideration
for, or allocable to, any employment agreement, investment advisory agreement,
or other service agreement; and the compensation paid to any such Shareholder
will be for services actually rendered and will be commensurate with amounts
paid to third parties bargaining at arm's-length for similar services;
3.3.7 The fair market value of the Assets on a going concern basis
will equal or exceed the sum of the Liabilities to be assumed by New Fund and
those to which the Assets are subject; and
3.3.8 Neither Fund will be reimbursed for any expenses incurred by it
or on its behalf in connection with the Reorganization unless those expenses are
solely and directly related to the Reorganization (determined in accordance with
the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B. 187) ("Reorganization
Expenses").
4. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) the other
Fund's performance of all its obligations to be performed hereunder at or before
the Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made on
and as of the Effective Time, and (c) the further conditions that, at or before
the Effective Time:
4.1. This Agreement and the transactions contemplated hereby shall
have been duly adopted and approved by each Fund's board of directors and shall
have been approved by Old Fund's shareholders in accordance with Old Fund's
Articles of Association and By-Laws and applicable law;
4.2. All necessary filings shall have been made with the U.S.
Securities and Exchange Commission ("SEC") and other appropriate governmental
authorities, and no order or directive shall have been received that any other
or further action is required to permit the Funds to carry out the transactions
contemplated hereby. The registration statement on Form N-14 filed by New Fund
relating to the New Fund Shares issuable hereunder, and any supplement or
amendment thereto, shall have become effective under the U.S. Securities Act of
1933, as amended ("1933 Act"), no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under section 25(b) of the 1940 Act
nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. New Fund
Shares shall have been approved for listing on the New York Stock Exchange. All
consents, orders and permits of South African, Bermudian and U.S. federal,
A-4
state and local governmental authorities (including the South African Securities
Regulation Panel, the Exchange Control Department of the South African Reserve
Bank, and the SEC) that are necessary to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain same would not involve a risk of a material
adverse effect on the Assets;
4.3 Prior to the Closing, New Fund's initial board of directors
shall have authorized the issuance of, and New Fund shall have issued, one or
more New Fund Shares to Mr. Robert J.A. Irwin or his appointee to enable such
holder to elect New Fund's board of directors;
4.4 At the Effective Time, no action, suit, or other proceeding
shall be pending before any court or governmental agency in which it is sought
to restrain or prohibit, or to obtain damages or other relief in connection
with, the transactions contemplated hereby; and
4.5 Each Fund shall have received an opinion of KPMG Services
(Proprietary) Limited, South Africa, addressed to and in form and substance
reasonably satisfactory to the Fund, to the effect that, except for any
uncertificated securities tax or a similar transfer duty that may be payable by
New Fund on the transfer of Old Fund's South African portfolio holdings, neither
Old Fund nor New Fund nor any Shareholder nor any person who beneficially owns
Old Fund Shares held in a Shareholder's name will earn, receive, realize, or
recognize any profit, income, or gain or any other item that will be subject to
any South African tax or other governmental levy as a result of or in connection
with the Reorganization, any transaction included therein or Old Fund's winding
up and dissolution.
At any time before the Closing, either Fund may waive any of the
foregoing conditions (except that set forth in paragraph 4.1) if, in the
judgment of its board of directors, such waiver will not have a material adverse
effect on its Fund's shareholders' interests.
5. COVENANTS
5.1 Old Fund covenants to operate its business in the ordinary
course between the date hereof and the Closing, it being understood that --
(a) such ordinary course will include declaring and paying customary
dividends and changes in operations contemplated by Old Fund's normal
business activities and
(b) Old Fund will retain exclusive control of the composition of its
portfolio until the Closing; provided that Old Fund shall not dispose of
more than an insignificant portion of its historic business assets (as
defined above) during that period without New Fund's prior consent.
5.2 Old Fund covenants to call a meeting of its shareholders to
consider and act on this Agreement.
5.3 Old Fund covenants that it will assist New Fund in obtaining
information the latter reasonably requests concerning the beneficial ownership
of Old Fund Shares.
5.4 Old Fund covenants that its books and records (including all
books and records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to New Fund at the Closing.
5.5 Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed and
delivered all assignments and other instruments, and will take or cause to be
taken all further action, the other Fund deems necessary or desirable in order
to vest in, and confirm to, (a) New Fund, title to and possession of all the
Assets, and (b) Old Fund, title to and possession of the New Fund Shares to be
delivered hereunder, and otherwise to carry out the intent and purpose hereof.
5.6 New Fund covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and other
securities laws it deems appropriate to conduct operations after the Effective
Time.
A-5
5.7 Subject to this Agreement, each Fund covenants to take or cause
to be taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
6. BROKERAGE FEES AND EXPENSES
6.1 Each Fund represents and warrants to the other that there are no
brokers or finders entitled to receive any payments in connection with the
transactions provided for herein.
6.2 New Fund will bear all of the Reorganization Expenses remaining
unpaid at the Effective Time and all expenses incurred in Old Fund's winding-up
and dissolution.
7. ENTIRE AGREEMENT; NO SURVIVAL
Neither Fund has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
Funds. The representations, warranties, and covenants contained herein or in any
document delivered pursuant hereto or in connection herewith shall not survive
the Closing.
8. TERMINATION
This Agreement may be terminated at any time at or prior to the
Effective Time, whether before or after approval by Old Fund's shareholders:
8.1. By either Fund (a) in the event of the other Fund's material
breach of any representation, warranty, or covenant contained herein to be
performed at or prior to the Effective Time, (b) if a condition to its
obligations has not been met and it reasonably appears that such condition will
not or cannot be met by the date set forth in the next clause, or (c) if the
Closing has not occurred on or before November 30, 2004; or
8.2. By the Funds' mutual agreement.
In the event of termination under paragraphs 8.1(c) or 8.2, there shall
be no liability for damages on the part of either Fund, or its directors or
officers, to the other Fund.
9. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Old Fund's shareholders, in any manner
mutually agreed on in writing by the Funds; provided that following such
approval no such amendment, modification, or supplement shall have a material
adverse effect on the Shareholders' interests.
10. MISCELLANEOUS
10.1. This Agreement shall be governed by and construed in accordance
with the internal laws of South Africa; provided that, in the case of any
conflict between such laws and the U.S. federal securities laws, the latter
shall govern.
10.2. Nothing expressed or implied herein is intended or shall be
construed to confer upon or give any person, firm, trust, or corporation other
than the Funds and their respective successors and assigns any rights or
remedies under or by reason of this Agreement.
10.3 Each Fund agrees that, in asserting any rights or claims under
this Agreement, it shall look only to the other Fund's assets and property in
settlement of all rights and claims and not to the other Fund's directors,
officers, or shareholders.
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10.4. 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 each Fund and
delivered to the other Fund. 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.
IN WITNESS WHEREOF, each Fund has caused this Agreement to be executed
and delivered by its duly authorized officers as of the day and year first
written above.
ATTEST: ASA LIMITED
By: /s/ Robert J.A. Irwin
/s/ Paul K. Wustrack, Jr. ----------------------------
------------------------- Name: Robert J.A. Irwin
Name: Paul K. Wustrack, Jr. Title: Chairman and Treasurer
Title: Assistant Secretary
ATTEST: ASA (BERMUDA) LIMITED
By: /s/ Robert J.A. Irwin
/s/ Paul K. Wustrack, Jr. -------------------------
------------------------- Name: Robert J.A. Irwin
Name: Paul K. Wustrack, Jr. Title: Chairman, President and
Title: Secretary Treasurer
A-7
Intentionally Left Blank
APPENDIX B
PROPOSED RESOLUTIONS
(1) Special Resolution number 1, which resolution is required by law
to be stated in full, is as follows:
Resolved, as a Special Resolution, that a plan of reorganization be
approved under which ASA (Bermuda) Limited ("ASAB") will acquire all of
the assets of ASA Limited ("ASA") in exchange solely for 9,600,000
shares of ASAB ("ASAB shares") and the assumption by ASAB of all of
ASA's liabilities, followed by a distribution of the ASAB shares to the
shareholders of ASA, all on the terms and conditions of the Agreement
and Plan of Reorganization, dated October 4, 2004, between ASA and ASAB
and more fully described in the attached proxy materials, a copy of
which Agreement and Plan has been tabled at this meeting and initialed
for identification purposes.
The reasons for, and the effect of, Special Resolution number 1 are set
out in the attached proxy materials.
(2) Special Resolution number 2, which resolution is required by law
to be stated in full, is as follows:
Resolved, as a Special Resolution, that, subject to the passing and
registration of Special Resolution number 1:
1. ASA be wound-up by means of a members' voluntary
winding-up in terms of section 349 as read with section
350 of the South African Companies Act No 61 of 1973, as
amended ("Companies Act");
2. Mrs. A.F. Venter of KPMG or failing her for any reason,
any other director of KPMG Administrators (Proprietary)
Limited be nominated as liquidator of ASA and shall not
be required to furnish security for the proper
performance of their duties as liquidator;
3. The liquidator shall be paid R20,000, exclusive of
South African value-added tax, as her professional fee
in respect of the dissolution plus disbursements;
4. Pursuant to Section 353(2)(b) of the Companies Act, the
directors of ASA be and are hereby authorized to
exercise all the powers of ASA until the liquidator
informs ASA that a certificate of appointment has been
duly issued by the Master of the High Court of South
Africa; and
5. The liquidator be authorised to destroy all books and
records of the liquidator and ASA after the expiry of
six months from the date of completion of the voluntary
winding-up of ASA.
The reason for Special Resolution number 2 is to wind-up ASA, as it is
no longer required by its shareholders following the reorganization contemplated
in Special Resolution number 1. The effect of the passing of Special Resolution
number 2 will be to obtain the required shareholder approval to wind-up ASA as a
members' voluntary winding-up and matters ancillary thereto.
(3) Special Resolution number 3, which resolution is required by law
to be stated in full, is as follows:
Resolved, as a Special Resolution, that ASA's Articles of Association be
and are hereby amended by the insertion of a new article 73A as follows:
PAYMENTS TO MEMBERS
73A.
The Company shall, for the purpose of facilitating its
winding up or deregistration, or the reduction of its
capital, any share premium account or capital redemption
reserve fund, be entitled by special resolution to
delegate to any person identified in such special
resolution the liability to pay any dividend, or make
any
B-1
payment in reduction of capital, or any other
distribution in respect of a share ("distribution").
Such delegation shall be on such terms and conditions as
may be determined by the Directors, provided that
unclaimed distributions which are the subject of the
delegation and which remain unclaimed for a period of
three years from the date of delegation shall be
forfeited for the benefit of any person/persons or
entity/entities nominated by the Directors.
The effect of Special Resolution number 3 is to amend the Articles of
Association of ASA to include a provision permitting ASA to delegate its
obligations in respect of dividends and/or distributions to a third party. The
reason for Special Resolution number 3 is to facilitate the winding-up of ASA.
(4) Special Resolution number 4, which resolution is required by law
to be stated in full, is as follows:
Resolved, as a Special Resolution that, subject to the passing and
registration of Special Resolutions numbered 1, 2 and 3, the liability
of ASA for payment of any unclaimed dividends and other distributions to
shareholders ("distributions") be and is hereby delegated to LGN
Associates, or its nominee, on such terms and conditions as may be
determined by the directors of ASA, provided that unclaimed
distributions which are the subject of the delegation and which remained
unclaimed for a period of three years from the date of delegation shall
be forfeited for the benefit of any person/persons or entity/entities
nominated by the directors of ASA.
The effect of Special Resolution number 4 is to delegate the liability of ASA
for payment of unclaimed dividends and other distributions to shareholders of
ASA to LGN Associates or its nominee. The reason therefor is to facilitate the
winding-up of ASA.
(5) Ordinary resolution number 1, which resolution is required by
law to be stated in full, is as follows:
Resolved that the directors of ASA be and are hereby authorized to do
all such things and sign all such documents as may be necessary for or
incidental to give effect to these resolutions.
B-2
ASA (BERMUDA) LIMITED
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 7, 2004
This statement of additional information (SAI) is not a prospectus. This
SAI should be read in conjunction with the Prospectus/Proxy Statement, dated
October 7, 2004.
To obtain a copy of the Prospectus/Proxy Statement, please write to LGN
Associates at P.O. Box 269, Florham Park, New Jersey 07932, or call
1-800-432-3378 or 973-377-3535
TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY................................................2
INVESTMENT OBJECTIVES AND POLICIES.............................................2
MANAGEMENT.....................................................................2
PROXY VOTING POLICIES AND PROCEDURES...........................................7
CONTROL PERSONS AND PRINCIPAL SECURITIES HOLDERS...............................7
INVESTMENT ADVISORY AND OTHER SERVICES.........................................7
BROKERAGE ALLOCATION AND OTHER SERVICES........................................7
FINANCIAL STATEMENTS...........................................................8
APPENDIX A: PROXY VOTING POLICIES AND PROCEDURES............................A-1
ASA (BERMUDA) LIMITED
GENERAL INFORMATION AND HISTORY
ASA (Bermuda) Limited ("ASAB") was organized in Bermuda as a limited
liability company on April 29, 2003. It was formed to permit ASA Limited ("ASA")
to move its place of incorporation from South Africa to Bermuda.
INVESTMENT OBJECTIVES AND POLICIES
ASAB primarily invests in equity securities of companies conducting, as
the major portion of their business, gold mining and related activities in South
Africa. It is expected that most of such companies will have reached the
production stage. The balance of ASAB's total assets (other than minor amounts
held in cash) may be invested in other companies engaged in other businesses of
varied types in South Africa, in companies primarily engaged outside of South
Africa in extractive or related industries or in the holding or development of
real estate, or in gold bullion or certificates of deposit therefor and other
instruments. Please refer to the section in the Prospectus/Proxy Statement
entitled "Investment Objectives and Policies" for a full discussion of the
investment objectives and fundamental investment policies of ASAB.
In addition to the policies described in the Prospectus/Proxy Statement,
ASAB has adopted the following additional investment policies, which may be
changed by its board of directors ("Board") without shareholder approval in
compliance with applicable law, regulation or regulatory policy.
(1) Investing for Control of Management. ASAB will not invest in
companies for the purpose of exercising control of management.
(2) Portfolio Turnover Policy. ASAB will purchase and sell securities
from time to time as considered advisable by ASAB to be in the best interest of
its shareholders and not for trading purposes.
MANAGEMENT
The name, address, positions held with ASAB and principal occupations
during the past five years of each of ASAB's officers and directors are set
forth below. ASAB consists of a single portfolio, which is overseen by the
Board.
POSITION HELD, TERM OF OFFICE(2) PRINCIPAL OCCUPATION
NAME, ADDRESS(1) AND AGE AND LENGTH OF TIME SERVED DURING THE PAST FIVE YEARS OTHER DIRECTORSHIPS
------------------------ -------------------------------- -------------------------- -----------------------------
INTERESTED DIRECTORS*:
Robert J.A. Irwin, 77 Chairman of the Board, Chairman of the Board of Director of ASA Limited;
Treasurer and Director ASA Limited since 1993, Former director,
since 2003; President Treasurer since 1999; President and Chief
and Chief Executive Director since 1987 Executive Officer of
Officer since 2004 Niagara Share Corporation
Chester A. Crocker, 62 Director since 2004; James R. Schlesinger Director of: ASA Limited;
Assistant Secretary Professor of Strategic Universal Corporation, First
since 2004 Studies, School of Foreign Africa Holdings Ltd.
Service, Georgetown and Modern Africa
University, President Growth & Income Fund
of Crocker Group (private equity fund);
(consultants) Good Governance
Group, Ltd., Chairman and
Director of United States
Institute of Peace
2
POSITION HELD, TERM OF OFFICE/(2)/ PRINCIPAL OCCUPATION
NAME, ADDRESS/(1)/ AND AGE AND LENGTH OF TIME SERVED DURING THE PAST FIVE YEARS OTHER DIRECTORSHIPS
-------------------------- ---------------------------------- -------------------------- ----------------------------
INTERESTED DIRECTORS*:
Ronald L. McCarthy, 71 Director since 2004; Director and Managing Director of ASA Limited
Assistant Treasurer Director of ASA
since 2004 Limitedsince 1988;
South African Secretary
of ASA Limited
since 2001
INDEPENDENT DIRECTORS**:
Henry R. Breck, 67 Director since 2004 Chairman and director of Director of ASA Limited
Ark Asset Management and Butler Capital Corp.
Co., Inc. (registered
investment adviser)
Harry M. Conger, 73 Director since 2004 Chairman and CEO Director of ASA Limited
Emeritus of Homestake and Apex Silver Mines
Mining Company (silver mining company).
Joseph C. Farrell, 68 Director since 2004 Former Chairman, Director of ASA Limited,
President and CEO of Universal Corporation
The Pittston Company and Skyline Airways, Inc.
James G. Inglis, 59 Director since 2004 Chairman of Melville Director of ASA Limited
Douglas Investment and Harding
Management (pty) Ltd. International Investments
Malcolm W. MacNaught, 67 Director since 2004 Former Vice President Director of ASA Limited
and Portfolio Manager and Meridian Gold, Inc.
at Fidelity Investments
Robert A. Pilkington, 59 Director since 2004 Investment banker and Director of ASA Limited
Managing Director of UBS and Avocet Mining PLC
Securities, LLC or
predecessor companies
since 1985
A. Michael Rosholt, 83 Director since 2004 Chairman of the National Director of ASA Limited;
Business Initiative Former Chairman of
(South Africa), Barlow Rand Limited
a non-profit organization (financial, industrial and
mining corporation)
3
POSITION HELD, TERM OF OFFICE/(2)/ PRINCIPAL OCCUPATION
NAME, ADDRESS/(1)/ AND AGE AND LENGTH OF TIME SERVED DURING THE PAST FIVE YEARS OTHER DIRECTORSHIPS
-------------------------- ---------------------------------- -------------------------- -----------------------------
OTHER OFFICERS
Paul K. Wustrack, Jr., 61 Secretary and Chief Assistant U.S. Secretary
Compliance Officer of ASA Limited
since 2004 since 2002, Chief
Compliance Officer since
2004; prior thereto
Special Counsel,
Phillips, Lytle,
Hitchcock, Blaine &
Huber LLP
----------
(1) The address for each director is c/o LGN Associates, PO Box 269, Florham
Park, NJ 07932.
(2) Each director serves as a director of ASAB until the next annual meeting
of shareholders.
* An "interested person" of ASAB, as such term is defined in the
Investment Company Act of 1940, by reason of being an officer of ASAB.
** A director that is not an "interested person" of ASAB.
Messers. McCarthy, Inglis and Rosholt are residents of South Africa. As
required by the SEC, each of these non-U.S. resident directors has appointed
JPMorgan Chase Bank, 3 Chase MetroTech Center, Brooklyn, NY 11245 to accept
service of process.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information as of November 30,
2003 regarding the beneficial ownership of ASA's shares by each director, each
executive officer and all directors and all executive officers as a group,
including the dollar range of the value of equity securities of ASA beneficially
owned by each director. The executive officers of ASA are also directors of ASA.
AMOUNT AND NATURE OF DOLLAR RANGE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1)(2) SHARE OWNERSHIP
------------------------------------ --------------------------- ----------------
INTERESTED DIRECTORS:
Robert J.A. Irwin 3,000 Over $100,000
Ronald L. McCarthy* None None
Chester A. Crocker 400 $10,001-$50,000
INDEPENDENT DIRECTORS:
Henry R. Breck 1,000 $10,001-$50,000
Harry M. Conger 1,100 $50,001-$100,000
Joseph G. Farrell 1,000 $10,001-$50,000
James G. Inglis* None None
Malcolm W. MacNaught 1,000 $10,001-$50,000
Robert A. Pilkington 3,000 Over $100,000
A. Michael Rosholt* None None
All Directors and Executive Officers 10,500
as a group
----------
* As residents of South Africa, Messrs. McCarthy, Inglis and Rosholt are
prohibited by ASA organizational documents from owning any shares of
ASA.
(1) Each individual has sole voting and investment power over the shares
shown opposite his name, except that Mr. Irwin has shared voting and
investment power over 142 shares owned by his wife.
4
(2) The shares shown for each individual and for all directors and executive
officers as a group constituted less than 1% of ASA outstanding shares.
The Board has an Audit Committee, a Compensation Committee, an Ethics
Committee, and a Nominating Committee. The Audit Committee acts pursuant to a
written charter and is responsible for overseeing ASAB's accounting and
financial reporting policies, practices and internal controls. The Audit
Committee currently consists of Messrs. MacNaught (Chairman), Pilkington and
Rosholt. The responsibilities of the Audit Committee include overseeing (a)
ASAB's accounting and financial reporting policies and practices, (b) ASAB's
internal controls and procedures, and (c) the integrity, quality and objectivity
of ASAB's financial statements and the audit thereof. The Audit Committee is
directly responsible for the selection (subject to ratification by a majority of
the independent directors and by the shareholders), compensation, oversight and,
when appropriate, termination of ASAB's independent auditors.
The current members of the Compensation Committee are Messrs. Conger
(Chairman), Inglis and Pilkington. The function of the Compensation Committee is
to make recommendations regarding the compensation of officers and the fees of
directors of ASAB. The current members of the Ethics Committee are Messrs.
Farrell (Chairman), Breck and Crocker. The function of the Ethics Committee is
to ensure compliance by the directors, officers and other access persons with
ASAB's Code of Ethics and Rule 17j-l under the Investment Company Act of 1940
("1940 Act"). The current members of the Nominating Committee are Messrs.
Pilkington (Chairman), Conger and Rosholt. The Nominating Committee is
responsible for identifying qualified candidates for the Board.
5
COMPENSATION
Each non-South African director receives an annual fee of $20,000 for
his services as a director and a fee of $1,500 for each Board meeting that he
attends in person and $1,000 for each Board meeting he attends by telephone.
Each South African director receives the rand equivalent of $20,000 as an annual
fee for his services as a director and the rand equivalent of $2,000 for each
Board meeting that he attends. In addition, directors receive a fee of $1,000
for each committee meeting that they attend (whether in person or by telephone).
The Chairman of the Audit Committee receives $3,000 for each Audit Committee
meeting that he attends. ASAB pays to any retired director who served as a
director of ASAB or its predecessor, ASA, for at least twelve years a retirement
benefit equal to 75% of the annual directors' fee from time to time in effect.
Directors retiring after attaining the age of 70 are entitled to such retirement
benefit for life; directors retiring prior to attaining such age are entitled to
such retainer for the lesser of life or the number of years they served as a
director.
Because ASAB has not completed its initial fiscal year, all amounts
shown in the table below are estimated.
PENSION OR
RETIREMENT
BENEFITS ESTIMATED TOTAL
AGGREGATE ACCRUED AS ANNUAL COMPENSATION
COMPENSATION PART OF BENEFIT FROM ASAB
NAME OF PERSON FROM ASAB's UPON PAID TO
& POSITION ASAB EXPENSES( ) RETIREMENT (3) DIRECTORS
---------------------------------- ------------ ------------ -------------- ------------
INTERESTED DIRECTORS:
Robert J.A. Irwin, Chairman, $ 325,000 $ 55,000(1) $ 15,000(2) $ 25,000
Chief Executive Officer,
President, Treasurer and
Director
Chester A. Crocker, $ 28,000 -- $ 15,000 $ 28,000
Assistant Secretary and
Director
Ronald L. McCarthy, $ 100,000 -- $ 15,000 $ 28,000
Assistant Treasurer and
Director
INDEPENDENT DIRECTORS:
Henry R. Breck, $ 29,000 -- $ 15,000 $ 29,000
Director
Harry M. Conger, $ 25,000 -- $ 15,000 $ 25,000
Director
Joseph C. Farrell, $ 29,000 -- $ 15,000 $ 29,000
Director
James G. Inglis, $ 29,000 -- $ 15,000 $ 29,000
Director
Malcolm W. MacNaught $ 35,000 -- $ 15,000 $ 35,000
Director
Robert A. Pilkington $ 30,000 -- $ 15,000 $ 30,000
Director
A. Michael Rosholt $ 32,000 -- $ 15,000 $ 32,000
Director
OTHER OFFICER
Paul K. Wustrack,
Jr. Chief Compliance Officer $ 80,000(4) -- -- --
----------
(1) In 1994, ASA entered into a supplemental non-qualified pension agreement
with its Chairman. Under the terms of the agreement, ASA agreed to
credit $25,000 per year for five years, beginning December 1, 1993, to a
Supplemental Pension Account with interest credited at an annual rate of
3.5%. The Board of ASA approved increases in the amount of the annual
credit as follows: $28,125 in May 1999; $31,250 in February 2002;
$45,000 in March 2003 and $55,000 in February 2004. As a result, ASA
recorded an expense amount of $41,562 for the year ended November 30,
2003. ASA recorded an expense amount of $41,562 for the year ended
November 30, 2003. ASA has also recorded an asset in the amount of
$145,000 related to the retirement obligation liability of $315,900 at
November 30, 2003.
(2) The amount shown for Mr. Irwin includes the retirement benefits payable
to him as a director and the amounts payable to him under the
supplemental pension agreement for his benefit ASAB.
(3) All directors qualify to receive retirement benefits if they have served
ASAB or its predecessor, ASA, for at least twelve years prior to
retirement. The amount shown for each director is the total benefits,
which are, or would be payable to such person assuming such director had
served twelve years as of November 30, 2003.
(4) The amount shown for Mr. Wustrack's compensation does not include any
bonus compensation.
6
PROXY VOTING POLICIES AND PROCEDURES
The proxy voting policies and procedures for ASA are attached as
Appendix A. ASAB will be subject to identical proxy voting policies and
procedures.
CONTROL PERSONS AND PRINCIPAL SECURITIES HOLDERS
Until such time as ASAB issues shares of stock in connection with the
transfer of assets of ASA to ASAB, Robert J.A. Irwin, as the sole shareholder of
ASAB will be a control person of ASAB.
INVESTMENT ADVISORY AND OTHER SERVICES
Advisory Services. ASAB does not employ an outside investment adviser.
Robert J.A. Irwin, Chairman, President, Treasurer and a director of ASAB, will
be primarily responsible for the day-to-day management of ASAB's portfolio.
Custodian and Subcustodian. JPMorgan Chase Bank, 3 Chase MetroTech
Center, Brooklyn, NY 11245, will serve as ASAB's custodian. The Standard Bank of
South Africa Limited, 5 Simmonds Street, Johannesburg, South Africa will serve
as ASAB's South African subcustodian. JPMorgan Chase Bank and Standard Bank
perform custodial and fund accounting services. ASAB also is authorized to
utilize subcustodians in the United Kingdom, Australia, Japan, Switzerland and
Canada under certain circumstances. To date, ASAB has not approved subcustodians
in these countries.
Transfer Agent. EquiServe Trust Company, N.A., 525 Washington Boulevard,
Jersey City, New Jersey 07310 will serve as ASAB's transfer agent as well as
agent for the dividend reinvestment plan relating to its shares.
Independent Registered Public Accounting Firm. Ernst & Young LLP, New
York, New York will serve as ASAB's independent registered public accounting
firm. Ernst & Young provides audit and tax services, and assistance and
consultation in connection with the review of ASAB's filings with the SEC.
BROKERAGE ALLOCATION AND OTHER SERVICES
ASAB has not commenced operations and has not paid any brokerage
commissions.
In effecting securities transactions, ASAB will generally seek to obtain
the best price and execution of orders. Commission rates, being a component of
price, are considered along with other relevant factors. In selecting brokers,
ASAB will consider the quality and reliability of brokerage services, including
execution capability, performance and financial responsibility, and may consider
research and other investment information provided by those brokers.
7
FINANCIAL STATEMENTS
ASAB has no operating history and only nominal assets. ASAB intends to
acquire all of the assets and assume all the liabilities of ASA. The tables
below represent the audited financial statements of ASA for its fiscal year
ended November 30, 2003 and for the six-month period ended May 31, 2004.
FISCAL YEAR ENDED NOVEMBER 30, 2003
SCHEDULE OF INVESTMENTS
(Note 1)
November 30, 2003
Number of Percent of
Name of Company Shares Market Value Net Assets
-----------------------------------------------------------------------------------------------------
ORDINARY SHARES OF GOLD MINING COMPANIES
Australian Gold Mines
Newcrest Mining Limited -ADRs 3,000,000 $ 28,500,000 5.8%
-----------------------------------------------------------------------------------------------------
28,500,000 5.8
-----------------------------------------------------------------------------------------------------
United States Gold Mines
Newmont Mining Corporation 520,368 25,050,516 5.1
-----------------------------------------------------------------------------------------------------
25,050,516 5.1
-----------------------------------------------------------------------------------------------------
South African Gold Mines
Anglogold Limited 2,389,894 114,544,340 23.2
Avgold Limited 2,671,230 4,178,605 .8
Gold Fields Limited 10,344,977 142,407,297 28.8
Harmony Gold Mining Company Limited 1,336 21,150 --
Harmony Gold Mining Company Limited - ADRs 2,166,400 34,294,112 6.8
-----------------------------------------------------------------------------------------------------
295,445,504 59.6
-----------------------------------------------------------------------------------------------------
Canadian Gold Mines
Barrick Gold Corporation 730,000 16,308,200 3.3
Placer Dome Incorporated 1,065,312 19,335,413 3.9
-----------------------------------------------------------------------------------------------------
35,643,613 7.2
-----------------------------------------------------------------------------------------------------
South American Gold Mines
Compania de Minas Buenaventura - ADRs 900,000 26,199,000 5.3
-----------------------------------------------------------------------------------------------------
410,838,633 83.0
-----------------------------------------------------------------------------------------------------
ORDINARY SHARES OF OTHER COMPANIES
South African Mining
Anglo American PLC 1,280,000 27,281,392 5.5
Anglo American Platinum Corporation Limited 820,500 35,168,123 7.1
Impala Platinum Holdings Limited 262,700 24,656,497 5.0
-----------------------------------------------------------------------------------------------------
87,106,012 17.6
-----------------------------------------------------------------------------------------------------
Total investments 497,944,645 100.6
-----------------------------------------------------------------------------------------------------
Cash and other assets less liabilities (3,160,556) (.6)
-----------------------------------------------------------------------------------------------------
Net assets $ 494,784,089 100.0%
-----------------------------------------------------------------------------------------------------
There is no assurance that the valuations at which the Company's investments are
carried could be realized upon sale.
The notes to the financial statements form an integral part of these statements.
8
STATEMENTS OF ASSETS AND LIABILITIES
November 30, 2003 November 30, 2002
------------------------------------------------------------------------------------------------
ASSETS
------------------------------------------------------------------------------------------------
Investments, at market value (Note I)
Gold mining companies -
Cost $125,445,039 in 2003
$120,148,921 in 2002 $ 410,838,633 $ 253,534,199
Other companies -
Cost $26,678,003 in 2003 and 2002 87,106,012 63,462,990
------------------------------------------------------------------------------------------------
497,944,645 316,997,189
------------------------------------------------------------------------------------------------
Cash 6,864,615 8,225,357
Dividends and interest receivable 175,216 138,999
Other assets 177,852 31,885
------------------------------------------------------------------------------------------------
Total assets 505,162,328 325,393,430
------------------------------------------------------------------------------------------------
LIABILITIES
------------------------------------------------------------------------------------------------
Accounts payable and accrued liabilities 612,977 289,074
Payable for securities purchased 1,027,362 --
Current year South African tax liability 121,313 219,954
Deferred South African tax liability 8,616,587 3,461,175
------------------------------------------------------------------------------------------------
Total liabilities 10,378,239 3,970,203
------------------------------------------------------------------------------------------------
Net assets (shareholders' investment) 494,784,089 321,423,227
------------------------------------------------------------------------------------------------
Ordinary (common) shares R 0.25 nominal (par) value
Authorized: 24,000,000 shares
Issued and Outstanding: 9,600,000 shares 3,360,000 3,360,000
Share premium (capital surplus) 27,489,156 27,489,156
Undistributed net investment income 59,083,301 58,663,135
Undistributed net realized (loss) from foreign currency
transactions (48,181,979) (51,220,869)
Undistributed net realized gain from investments 115,112,525 115,112,525
Net unrealized appreciation on investments 337,205,016 166,709,091
Net unrealized appreciation on translation of assets
and liabilities in foreign currency 716,070 1,310,189
------------------------------------------------------------------------------------------------
Net assets $ 494,784,089 $ 321,423,227
------------------------------------------------------------------------------------------------
Net assets per share $ 51.54 $ 33.48
------------------------------------------------------------------------------------------------
The closing price of the Company's shares on the New York Stock Exchange was
$47.16 and $30.06 on November 30, 2003 and 2002, respectively.
The notes to the financial statements form an integral part of these statements.
9
STATEMENTS OF OPERATIONS
Years ended November 30, 2003 and 2002
2003 2002
------------------------------------------------------------------------------------------------------------------
Investment income
Dividend income $ 10,947,308 $ 10,423,088
Interest income 704,772 499,036
------------------------------------------------------------------------------------------------------------------
Total investment income 11,652,080 10,922,124
------------------------------------------------------------------------------------------------------------------
Expenses
Shareholders' report and proxy expenses 112,387 103,129
Directors' fees and expenses 462,872 538,420
Salaries and benefits 468,678 297,796
Other administrative expenses 442,500 373,250
Transfer agent, registrar and custodian 127,291 107,433
Professional fees and expenses 1,023,897 511,274
Insurance 144,417 104,595
Contributions 117,619 80,793
Other 347,267 311,444
------------------------------------------------------------------------------------------------------------------
Total expenses 3,256,928 2,428,134
------------------------------------------------------------------------------------------------------------------
Net investment income before South African tax 8,395,152 8,493,990
South African tax (294,986) (376,213)
------------------------------------------------------------------------------------------------------------------
Net investment income 8,100,166 8,117,777
------------------------------------------------------------------------------------------------------------------
Net realized gain from investments
Proceeds from sales -- 13,409,630
Cost of securities sold -- (8,399,743)
South African tax -- (71,956)
------------------------------------------------------------------------------------------------------------------
Net realized gain from investments -- 4,937,931
------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from foreign currency transactions
Investments -- (9,832,299)
Foreign currency 1,399,249 505,300
South African tax refund (tax) 1,639,641 (1,515,713)
------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from foreign currency transactions 3,038,890 (10,842,712)
------------------------------------------------------------------------------------------------------------------
Net increase in unrealized appreciation on investments
Balance, beginning of year 170,170,266 53,028,160
Balance, end of year 345,821,603 170,170,266
------------------------------------------------------------------------------------------------------------------
Increase 175,651,337 117,142,106
Deferred South African tax (5,155,412) (3,461,175)
------------------------------------------------------------------------------------------------------------------
Net increase in unrealized appreciation from investments 170,495,925 113,680,931
------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in unrealized appreciation on translation of
assets and liabilities in foreign currency (594,119) 743,200
South African tax benefit -- 1,521,577
------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in unrealized appreciation on translation of
assets and liabilities in foreign currency (594,119) 2,264,777
------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain from investments and foreign
currency transactions 172,940,696 110,040,927
------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 181,040,862 $ 118,158,704
------------------------------------------------------------------------------------------------------------------
The notes to the financial statements form an integral part of these statements.
10
STATEMENTS OF SURPLUS AND STATEMENTS OF CHANGES IN NET ASSETS
Years ended November 30. 2003 and 2002
STATEMENTS OF SURPLUS November 30, 2003 November 30, 2002
------------------------------------------------------------------------------------------------------------
Share premium (capital surplus)
Balance, beginning and end of year $ 27,489,156 $ 27,489,156
------------------------------------------------------------------------------------------------------------
Undistributed net investment income
Balance, beginning of year $ 58,663,135 $ 58,225,358
Net investment income for the year 8,100,166 8,117,777
Dividends paid (7,680,000) (7,680,000)
------------------------------------------------------------------------------------------------------------
Balance, end of year $ 59,083,301 $ 58,663,135
------------------------------------------------------------------------------------------------------------
Undistributed net realized (loss) from
foreign currency transactions
Balance, beginning of year $ (51,220,869) $ (40,378,157)
Net realized gain (loss) for the year 3,038,890 (10,842,712)
------------------------------------------------------------------------------------------------------------
Balance, end of year $ (48,181,979) $ (51,220,869)
------------------------------------------------------------------------------------------------------------
Undistributed net realized gain from investments
(Computed on identified cost basis)
Balance, beginning of year $ 115,112,525 $ 110,174,594
Net realized gain for the year -- 4,937,931
------------------------------------------------------------------------------------------------------------
Balance, end of year $ 115,112,525 $ 115,112,525
------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments
Balance, beginning of year $ 166,709,091 $ 53,028,160
Net increase for the year 170,495,925 113,680,931
------------------------------------------------------------------------------------------------------------
Balance, end of year $ 337,205,016 $ 166,709,091
------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on
translation of assets and liabilities in foreign currency
Balance, beginning of year $ 1,310,189 $ (954,588)
Net unrealized appreciation (depreciation)
for the year (594,119) 2,264,777
------------------------------------------------------------------------------------------------------------
Balance, end of year $ 716,070 $ 1,310,189
------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS 2003 2002
------------------------------------------------------------------------------------------------------------
Net investment income $ 8,100,166 $ 8,117,777
Net realized gain from investments -- 4,937,931
Net realized gain (loss) from foreign currency
transactions 3,038,890 (10,842,712)
Net increase in unrealized appreciation on investments 170,495,925 113,680,931
Net unrealized appreciation (depreciation) on translation of assets
and liabilities in foreign currency (594,119) 2,264,777
------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 181,040,862 118,158,704
Dividends paid (7,680,000) (7,680,000)
------------------------------------------------------------------------------------------------------------
Net increase in net assets 173,360,862 110,478,704
Net assets, beginning of year 321,423,227 210,944,523
------------------------------------------------------------------------------------------------------------
Net assets, end of year $ 494,784,089 $ 321,423,227
------------------------------------------------------------------------------------------------------------
The notes to the financial statements form an integral part of these statements.
11
NOTES TO FINANCIAL STATEMENTS
Years ended November 30, 2003 and 2002
1 Summary of significant accounting policies. The following is a summary
of the Company's significant accounting policies:
A. Investments
Security transactions are recorded on the respective trade dates. Securities
owned are reflected in the accompanying financial statements at quoted market
value. The difference between cost and current market value is reflected
separately as net unrealized appreciation from investments. The net realized
gain or loss from the sale of securities is determined on the identified cost
basis.
Quoted market value of those shares traded represents the last recorded
sales price on the financial statement date, or the mean between the closing bid
and asked prices of those securities not traded on that date. In the event than
a mean price cannot be computed due to the absence of either a bid or an asked
price, then the bid price plus 1% or the ask price less 1%, as applicable, is
used.
There is no assurance that the valuation at which the Company's
investments are carried could be realized upon sale.
B. Exchange Gains and Losses
The Company records exchange gains and losses in accordance with the provisions
of the American Institute of Certified Public Accountants Statement of Position
93-4, Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies ("SOP"). The SOP requires separate disclosure in the
accompanying financial statements of net realized gain (loss) from foreign
currency transactions, and inclusion of unrealized gain (loss) on the
translation of currency as pan of net unrealized appreciation (depreciation) on
translation of assets and liabilities in foreign currency.
C. Security Transactions and Investment Income
During the year ended November 30, 2003 there were no sales of securities and
purchases of securities amounted to $5,296,118. During the year ended November
30, 2002 sales of securities amounted to $ 13,409,639 and purchases of
securities amounted to $19,129,051. Dividend income is recorded on the
ex-dividend date (the date on which the securities would be sold ex-dividend)
net of withholding taxes, if any. Interest income is recognized on the accrual
basis.
D. Distributions to Shareholders
Dividends to shareholders are recorded on the ex-dividend date.
E. Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses for the period. Actual results could differ from those estimates.
2 Tax status of the Company. Pursuant to the South African Income Tax Act,
as amended, the Company is subject to tax on dividends received from sources
other than South Africa. In addition, in terms of the residence based system of
taxation, beginning with the fiscal year ended November 30, 2002, the Company is
subject to tax on interest earned on cash deposits. A provision for South
African taxes of $294,986 and $376,213 for these items has been included in the
accompanying financial statements for the fiscal years ended November 30, 2003
and November 30, 2002, respectively.
In addition, the Company had previously provided for and paid taxes on
foreign exchange gains. However, the Company was assessed by the South African
Revenue Service ("SARS") on the basis that it is exempt from tax on foreign
exchange gains and in November 2003, after the completion of a refund audit
performed by SARS, the Company received a refund in respect of the overpayment
of tax in the amount of $1,639,641, plus interest.
12
A tax provision of -0- and $71,956 has been included in the accompanying
financial statements for realized capital gains during the fiscal years ended
November 30, 2003 and November 30, 2002, respectively. Also, a deferred tax
liability of $8,616,587 and $3,461,175 has been included for the tax on
unrealized capital gains on securities for the fiscal years ended November 30,
2003 and November 30, 2002. respectively.
SARS has held that, effective October 1, 2001, the Company became
subject to a tax on capital gains realized since that date on the disposal of
South African and foreign securities. However, after numerous representations
with SARS as well as the Treasury Department, the Company has been successful in
negotiating relief from this tax. On December 17, 2003, the South African Income
Tax Act of 1962 was amended by the Revenue Laws Amendment Bill 71 of 2003 and
signed into law by the President of South Africa. This amendment provides the
Company with an exemption from the Capital Gains Tax until November 30, 2004.
The Company has commenced actions necessary to relocate its place of
business to Bermuda before the expiration of its exemption. (See Note 5.) While
it is management's intention to complete this relocation before the November 30,
2004 expiration date, no assurance can be given that all conditions will be
satisfied. Therefore, the Company will continue to provide deferred South
African tax on unrealized capital gains on securities subsequent to November 30,
2003.
The reporting for financial statement purposes of distributions made
during the fiscal year from net investment income or net realized gains may
differ from their ultimate reporting for U.S. federal income tax purposes. The
differences are caused primarily by the separate line items reporting for
financial statement purposes of foreign exchange gains or losses. See the annual
report additional tax information for United States shareholders.
3 Currency exchange. There are exchange control regulations restricting
the transfer of funds from South Africa. In 1958 the South African Reserve Bank,
in the exercise of its powers under such regulations, advised the Company that
the exchange control authorities would permit the Company to transfer to the
United States in dollars both the Company's capital and its gross income,
whether received as dividends or as profits on the sale of investments, at the
current official exchange rate prevailing from time to time. Future
implementation of exchange control policies could be influenced by national
monetary considerations that may prevail at any given time.
4 Retirement plans. Effective April 1, 1989, the Company established a
defined contribution plan (the "Plan") to replace its previous pension plan. The
Plan covers all full-time employees. The Company will contribute 15% of each
covered employee's salary to the Plan. The Plan provides for immediate vesting
by the employee without regard to length of service. During the years ended
November 30, 2003 and 2002 there were no covered employees under the plan and,
consequently, no retirement expense was incurred.
In 1994, the Company entered into a supplemental non-qualified pension
agreement with its Chairman, Under the terms of the agreement, the Company
agreed to credit $25,000 per year for five years, beginning December 1, 1993, to
a Supplemental Pension Account with interest credited at an annual rate of 3.5%.
The Board of Directors approved increases in the amount of the annual
credit as follows: $28,125 in May 1999; $31,250 in February 2002 and $45,000 in
March 2003. As a result, the Company has recorded expense amounts of $41,562 and
$29,688 for the years ended November 30, 2003 and November 30, 2002,
respectively.
The Company has an asset in the amount of $145,000 related to the
retirement obligation liability of $315,900 as of November 30, 2003.
5 Company Reorganization. The Company announced earlier this year that, in
view of its tax situation, it had filed an application for an exemptive order
with the Securities and Exchange Commission to permit the Company to move from
the Republic of South Africa to the Commonwealth of Bermuda by reorganizing
itself into a newly formed company incorporated in Bermuda. The move would not
involve any material change in the Company's investment policies. The relocation
to Bermuda is subject to a number of conditions, including (1) receiving the
requested relief from the Securities and Exchange Commission; (2) receiving
approval to list the shares of the new Bermuda company on the New York Stock
Exchange and (3) satisfying shareholder approval requirements. No assurance can
be given that these conditions will be satisfied.
In connection with the reorganization, the Company has incurred
approximately $575,000 in legal and other professional fees as of November 30,
2003.
6 Commitments. The Company's lease for office space in Johannesburg
expired in February 2003. The Company has renewed the lease for a two year
period at an annual cost of approximately $55,000.
13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and the Board of
Directors of ASA Limited:
We have audited the accompanying statements of assets and liabilities of
ASA Limited (incorporated in the Republic of South Africa) as of November 30,
2003 and 2002, including the schedule of investments as of November 30, 2003,
and the related statements of operations, surplus and changes in net assets,
financial highlights and supplementary information for each of the two years in
the period ended November 30, 2003. These financial statements, financial
highlights and supplementary information are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements, financial highlights and supplementary information based on our
audits. The financial highlights for years presented prior to November 30, 2002
were audited by other auditors who have ceased operations and whose report dated
December 18, 2001 expressed an unqualified opinion on those financial
highlights.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements, financial highlights and supplementary information are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, financial
highlights and supplementary information. Our procedures included the
confirmation of securities owned as of November 30, 2003 and 2002, by
correspondence with the custodians 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, financial highlights and
supplementary information referred to above present fairly, in all material
respects, the financial position of ASA Limited as of November 30, 2003 and
2002, the results of its operations, the surplus and changes in its net assets,
financial highlights and supplementary information for each of the two years in
the period then ended, in conformity with accounting principles generally
accepted in the United States.
Ernst & Young LLP
New York, N.Y., U.S.A.
Ernst & Young
Johannesburg, SA
December 23, 2003
14
SEMI-ANNUAL PERIOD ENDED MAY 31, 2004
SCHEDULE OF INVESTMENTS
(Note 1)
May 31, 2004
Number of Percent of
Name of Company Shares Market Value Net Assets
-------------------------------------------------------------------------------------------------------------
ORDINARY SHARES OF GOLD MINING COMPANIES
-------------------------------------------------------------------------------------------------------------
Australian Gold Mines
Newcrest Mining Limited -ADRs 3,000,000 $ 27,630,000 6.7%
-------------------------------------------------------------------------------------------------------------
United States Gold Mines
Newmont Mining Corporation 520,368 20,663,813 5.0
-------------------------------------------------------------------------------------------------------------
South African Gold Mines
Anglogold Limited 2,389,894 83,636,131 20.3
Gold Fields Limited 9,704,977 114,834,568 27.7
Harmony Gold Mining Company Limited 292 459 3,523,828 .9
Harmony Gold Mining Company Limited - ADRs 2,166,400 25,953,472 6.3
-------------------------------------------------------------------------------------------------------------
227,947,999 55.2
-------------------------------------------------------------------------------------------------------------
Canadian Cold Mines
Barrick Gold Corporation 730,000 15,089,100 3.7
Placer Dome Incorporated 1,065,312 16,608,214 4.0
-------------------------------------------------------------------------------------------------------------
31,697,314 7.7
-------------------------------------------------------------------------------------------------------------
South American Gold Mines
Compania de Minas Buenaventura - ADRs 900,000 21,087,000 5.1
-------------------------------------------------------------------------------------------------------------
329,026,126 79.7
-------------------------------------------------------------------------------------------------------------
ORDINARY SHARES OF OTHER COMPANIES
-------------------------------------------------------------------------------------------------------------
South African Mining
Anglo American PLC 1,280,000 27,110,509 6.6
Anglo American Platinum Corporation Limited 820,500 30,552,691 7.4
Impala Platinum Holdings Limited 262,700 19,354,072 4.7
Mvelaphanda Resources Limited 1,950,000 6,285,416 1.5
-------------------------------------------------------------------------------------------------------------
83,302,688 20.2
-------------------------------------------------------------------------------------------------------------
Total investments (Cost - $151,159,299) 412,328,814 99.9
-------------------------------------------------------------------------------------------------------------
CASH AND OTHER ASSETS LESS LIABILITIES 46,838 .1
-------------------------------------------------------------------------------------------------------------
Net assets $ 412,375,652 100.0%
There is no assurance that the valuations at which the Company's investments are
carried could be realized upon sale.
The notes to the financial statements form an integral part of these statements.
15
STATEMENTS OF ASSETS AND LIABILITIES
May 31, 2004 May 31, 2003
-------------------------------------------------------------------------------------------------------
ASSETS
-------------------------------------------------------------------------------------------------------
Investments, at market value (Note I)
Gold mining companies -
Cost $117,577,016 in 2004
$121,354,720 in 2003 $ 329,026,126 $ 278,511,105
Other companies -
Cost $33,582,283 in 2004
$26,678,003 in 2003 83,302,688 63,406,199
-------------------------------------------------------------------------------------------------------
412,328,814 341,917,304
-------------------------------------------------------------------------------------------------------
Cash (Includes foreign cash of $4,633,317 and $497,790) 5,653,497 9,537,910
Dividends and interest receivable 139,910 146,103
Other assets 260,760 86,588
-------------------------------------------------------------------------------------------------------
Total assets 418,382,981 351,687,905
-------------------------------------------------------------------------------------------------------
LIABILITIES
-------------------------------------------------------------------------------------------------------
Accounts payable and accrued liabilities 493,205 403,136
Current South African tax liability (benefit) (16,817) 76,576
Deferred South African tax liability 5,530,941 3,453,238
-------------------------------------------------------------------------------------------------------
Total liabilities 6,007,329 3,932,950
-------------------------------------------------------------------------------------------------------
Net assets (shareholders' investment) $ 412,375,652 $ 347,754,955
Ordinary (common) shares R0.25 nominal (par) value
Authorized: 24,000,000 shares
Issued and Outstanding: 9 600 000 shares $ 3,360,000 $ 3,360,000
Shore premium 1 (capital surplus) 27,489,156 27,489,156
Undistributed net investment income 58,153,100 60,737,729
Undistributed net realized (loss) from foreign currency transactions (55,009,385) (49,874,418)
Undistributed net realized gains from investments 122,131,967 115,112,525
Net unrealized appreciation on investments 255,638,574 190,431,343
Net unrealized appreciation on translation of assets
and liabilities in foreign currency 612,240 498,620
-------------------------------------------------------------------------------------------------------
Net assets $ 412,375,652 $ 347,754,955
-------------------------------------------------------------------------------------------------------
Net assets per share $ 42.96 $ 36.22
-------------------------------------------------------------------------------------------------------
The closing price of the Company's shares on the New York Stock Exchange was
$37.64 and $35.90 on May 31, 2004 and 2003, respectively.
The notes to the financial statements form an integral part of these statements.
16
STATEMENTS OF OPERATIONS
Six months ended
--------------------------------------------------------------------------------------------------------
May 31, 2004 May 31, 2003
--------------------------------------------------------------------------------------------------------
Investment income
Dividend income $ 3,369,822 $ 6,133,508
Interest income 97,578 337,327
--------------------------------------------------------------------------------------------------------
Total investment income 3,467,400 6,470,835
--------------------------------------------------------------------------------------------------------
Expenses
Shareholders' report and proxy expenses 87,540 111,199
Directors' fees and expenses 317,613 281,447
Salaries and benefits 300,850 246,871
Other administrative expenses 373,454 331,500
Transfer agent, registrar and custodian 58,335 75,118
Professional fees and expenses 216,796 205,679
Insurance 72,081 76,127
Other 171,564 188,300
--------------------------------------------------------------------------------------------------------
Total expenses 1,598,233 1,516,241
--------------------------------------------------------------------------------------------------------
Net investment income before South African tax benefit 1,869,167 4,954,594
South African tax benefit 80,632 --
--------------------------------------------------------------------------------------------------------
Net investment income 1,949,799 4,954,594
--------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) from investments
and foreign currency transactions
Net realized gain from investments
Proceeds from sales 8,403,634 --
Cost of securities sold 1,384,192 --
--------------------------------------------------------------------------------------------------------
Net realized gain from investments 7,019,442 --
--------------------------------------------------------------------------------------------------------
Net realized gain (loss) from foreign currency transactions
Investments (6,872,264) --
Foreign currency transactions 44,858 1,346,451
--------------------------------------------------------------------------------------------------------
Net realized gain (loss) from foreign currency transactions (6,827,406) 1,346,451
--------------------------------------------------------------------------------------------------------
Net increase (decrease) in unrealized appreciation on investments
Balance, beginning of year 345,821,603 170,170,266
Balance, end of year 261,169,515 193,884,581
--------------------------------------------------------------------------------------------------------
Increase (Decrease) (84,652,088) 23,714,315
Change in Deferred South African tax liability 3,085,646 7,937
--------------------------------------------------------------------------------------------------------
Net increase (decrease) in unrealized appreciation from
investments (81,566,442) 23,722,252
--------------------------------------------------------------------------------------------------------
Net (decrease) in unrealized appreciation
on translation of assets and liabilities in foreign currency (103,830) (811,569)
--------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) from investments and
foreign and foreign currency transactions (81,478,236) 24,257,134
--------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (79,528,437) $ 29,211,728
--------------------------------------------------------------------------------------------------------
The notes to the financial statements form an integral part of these statements.
17
STATEMENTS OF SURPLUS AND STATEMENTS OF CHANGES IN NET ASSETS
Six months ended
---------------------------------------------------------------------------------------------------------
STATEMENTS OF SURPLUS May 31, 2004 May 31, 2003
---------------------------------------------------------------------------------------------------------
Share premium (capital surplus)
Balance, beginning and end of year $ 27,489,156 $ 27,489,156
---------------------------------------------------------------------------------------------------------
Undistributed net investment income
Balance, beginning of year $ 59,083,301 $ 58,663,135
Net investment income for the year 1,949,799 4,954,594
Dividends paid (2,880,000) (2,880,000)
---------------------------------------------------------------------------------------------------------
Balance, end of year $ 55,153,100 $ 60,737,729
---------------------------------------------------------------------------------------------------------
Undistributed net realized (loss) from foreign currency transactions
Balance, beginning of year $ (48,181,979) $ (51,220,869)
Net realized gain (loss) for the year (6,827,406) 1,346,451
---------------------------------------------------------------------------------------------------------
Balance, end of year $ (58,009,385) $ (49,874,418)
---------------------------------------------------------------------------------------------------------
Undistributed net realized gain from investments
(Computed on identified cost basis)
Balance, beginning of year $ 115,112,525 $ 115,112,525
Net realized gain for the year 7,019,442 --
---------------------------------------------------------------------------------------------------------
Balance, end of year $ 122,131,967 $ 115,112,525
---------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments
Balance, beginning of year $ 337,205,016 $ 166,709,091
Net increase (decrease) for the year (81,566,442) 23,722,252
---------------------------------------------------------------------------------------------------------
Balance, end of year $ 255,638,574 $ 190,431,343
---------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on
translation of assets and liabilities in foreign currency
Balance, beginning of year $ 716,070 $ 1,310,189
Net unrealized (depreciation) for the period (103,830) (811,569)
---------------------------------------------------------------------------------------------------------
Balance, end of year $ 612,240 $ 498,620
---------------------------------------------------------------------------------------------------------
Six months ended
---------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS May 31, 2004 May 31, 2003
---------------------------------------------------------------------------------------------------------
Net investment income $ 1,949,799 $ 4,954,594
Net realized gain from investments 7,019,442 --
Net realized gain (loss) from foreign currency transactions (6,827,406) 1,346,451
Net increase (decrease) in unrealized appreciation on investments (81,566,442) 23,722,252
Net (decrease) in unrealized appreciation (depreciation) on
translation of assets and liabilities in foreign currency (103,830) (811,569)
---------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (79,528,437) 29,211,728
Dividends paid (2,880,000) (2,880,000)
---------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (82,408,437) 26,331,728
Net assets, beginning of year 494,784,089 321,423,227
---------------------------------------------------------------------------------------------------------
Net assets, end of year $ 412,375,652 $ 347,754,955
---------------------------------------------------------------------------------------------------------
The notes to the financial statements form an integral part of these statements.
18
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED MAY 31, 2004 AND 2003
1 Summary of significant accounting policies. The following is a summary
of the Company's significant accounting policies:
A. Investments
Portfolio securities are generally valued at the last reported sales price on
the last trading day of the period, or the mean between the closing bid and
asked prices of those securities not traded on that date. In the event that a
mean price cannot be computed due to the absence of either a bid or an asked
price, then the bid price plus 1% or the ask price less 1%, as applicable, is
used. Securities for which current market quotations are not readily available
are valued at their fair value as determined in good faith by, or in accordance
with procedures adopted by, the Company's Board of Directors.
The difference between cost and current value is reflected separately as
net unrealized appreciation (depreciation) on investments. The net realized gain
or loss from the sale of securities is determined for account purposes on the
identified cost basis.
There is no assurance that the valuation at which the Company's
investments are carried could be realized upon sale.
B. Exchange Gains and Losses
The Company records exchange gains and losses in accordance with the provisions
of the American Institute of Certified Public Accountants Statement of Position
93-4, Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies ("SOP"). The SOP requires separate disclosure in the
accompanying financial statements of net realized gain (loss) from foreign
currency transactions, and inclusion of unrealized gain (loss) on the
translation of currency as part of net unrealized appreciation (depreciation) on
translation of assets and liabilities in foreign currency.
C. Security Transactions and Investment Income
During the six months ended May 31, 2004 sales of securities amounted to
$8,403,634 and purchases of securities amounted to $7,292,714. During the six
months ended May 31, 2003 there were no sales of securities and purchases of
securities amounted to $1,205,799.
Dividend income is recorded on the ex-dividend date (the date on which the
securities would be sold ex-dividend) net of withholding taxes, if any. Interest
income is recognized on the accrual basis.
D. Distributions to Shareholders
Dividends to shareholders arc recorded on the ex-dividend date.
E. Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses for the period. Actual results could differ from those estimates.
F. Basis of Presentation
The financial statements are presented in United States dollars.
Certain prior year amounts in the accompanying financial statements have been
reclassified to conform with current year presentation.
19
2 Tax status of the Company. Pursuant to the South African Income Tax Act,
as amended, the Company is subject to tax on dividends received from sources
other than South Africa. In addition, beginning with the fiscal year ended
November 30, 2002, the Company is subject to tax on interest earned on cash
deposits. A tax benefit for South African taxes of $80,632 and a tax provision
of $-0- for these items have been included in the accompanying financial
statements for the six months ended May 31, 2004 and May 31, 2003, respectively.
The Company had previously provided for and paid taxes on foreign
exchange gains. However, the Company was assessed by the South African Revenue
Service ("SARS") on the basis that it is exempt from tax on foreign exchange
gains and in November 2003, after the completion of a refund audit performed by
SARS, the Company received a refund in respect of the overpayment of tax in the
amount of $1,639,641, plus interest.
In addition to the foregoing taxes, ASA currently is exempt from certain
other taxes in South Africa. Such exemption, however, expires on November 30,
2004. Following that date ASA will become subject to the Capital Gains Tax
"CGT") and the Secondary Tax on Companies ("STC") in South Africa.
The CGT is assessed at an effective rate of 15% on most gains realized
by a corporation on the sale of an investment. No provision for the CGT has been
included in the accompanying financial statements for realized capital gains
during the six months ended May 31, 2004 as a result of the Company's current
exemption. A deferred tax liability of $5,530,941 and $3,453,238 has been
included for the CGT on unrealized capital gains on securities for the six
months ended May 31, 2004 and May 31, 2003, respectively.
The STC is assessed at the rate of 12.5% on the amount of dividends
distributed to shareholders, after a deduction for dividends received or accrued
by a corporation from South African companies during the relevant dividend
period or cycle. Effective January 1, 2003, the STC applies to liquidation
distributions to shareholders of capital gains attributable to the period after
October 1, 2001, with an offset for the capital gains tax paid on these gains.
The Company currently is exempt from the STC on the types of dividends discussed
above.
The Company has commenced actions necessary to relocate to Bermuda
before the expiration of its exemption. See Note 5. While it is management's
intention to complete this relocation before the November 30, 2004 expiration
date, no assurance can be given that all conditions will be satisfied by
November 30, 2004. If the Company is unable to relocate to Bermuda prior to
November 30, 2004, the Company's Board of Directors will decide what action, if
any, the Company should take. The Company could decide to remain in South Africa
after November 30, 2004, in which case the above-described taxes would apply to
the Company in the normal course of conducting its business. Alternatively, the
Company could decide to relocate to Bermuda after November 30, 2004, in which
case the Company would incur a tax liability at the time of the relocation
estimated at approximately $25 million, based on the Company's financial
statements as of May 31, 2004.
The reporting for financial statement purposes of distributions made
during the fiscal year from net investment income or net realized gains may
differ from their ultimate reporting for U.S. federal income tax purposes. The
differences are caused primarily by the separate line items reporting for
financial statement purposes of foreign exchange gains or losses. See the
semi-annual report for additional tax information for United States
shareholders.
3 Currency exchange. There are exchange control regulations restricting
the transfer of funds from South Africa. In 1958 the South African Reserve Bank,
in the exercise of its powers under such regulations, advised the Company that
the exchange control authorities would permit the Company to transfer to the
United States in dollars both the Company's capital and its gross income,
whether received as dividends or as profits on the sale of investments, at the
current official exchange rate prevailing from time to time. Future
implementation of exchange control policies could be influenced by national
monetary considerations that may prevail at any given time.
4 Retirement plans. Effective April 1, 1989, the Company established a
defined contribution plan (the "Retirement Plan") to replace its previous
pension plan. The Retirement Plan covers all full-time employees. The Company
will contribute 15% of each covered employee's salary to the Retirement Plan.
The Retirement Plan provides for immediate vesting by the employee without
regard to length of service. During the six months ended May 31, 2004 and 2003,
there were no covered employees under the Retirement Plan and consequently, no
retirement expense was incurred.
20
In 1994, the Company entered into a supplemental non-qualified pension
agreement with its Chairman. Under the terms of the agreement, the Company
agreed to credit $25,000 per year for five years, beginning December 1, 1993, to
a Supplemental Pension Account with interest credited at an annual rate of 3.5%.
The Board of Directors approved increases in the amount of the annual
credit as follows: $28,125 in May 1999; $31,250 in February 2002 and $45,000 in
March 2003 and $55,000 in February 2004. As a result, the Company has recorded
expense amounts of $25,833 and $19,051 for the six months ended May 31, 2004 and
May 31, 2003, respectively.
The Company has an asset in the amount of $150,750 related to the
retirement obligation liability including interest of $349,635 as of May 31,
2004.
5 Company Reorganization. The Company announced in early 2003 that, in
view of its tax situation, it had filed an application for an exemptive order
with the U.S. Securities and Exchange Commission to permit the Company to move
from the Republic of South Africa to the Commonwealth of Bermuda by reorganizing
itself into a newly formed company incorporated in Bermuda. The move would not
involve any material change in the Company's investment policies. The relocation
to Bermuda is subject to a number of conditions, including (1) receiving the
requested relief from the Securities and Exchange Commission; (2) receiving
approval to list the shares of the new Bermuda company on the New York Stock
Exchange and (3) satisfying shareholder approval requirements. No assurance can
be given that these conditions will be satisfied.
In connection with the reorganization, the Company has incurred
approximately $750,000 in legal and other professional fees as of May 31, 2004.
6 Concentration risk. Under normal circumstances, over 50% of the
Company's assets will be invested in equity securities of companies conducting,
as a major portion of their business, gold mining and related activities in
South Africa. The Company also invests in securities of companies engaged in
other businesses in South Africa, including the mining of other precious metals.
In addition, the Company invests a portion of its assets in securities of
companies operating outside of South Africa in extractive and related
activities, including gold mining. The Company is, therefore, subject to gold
and precious metal related risks as well as risks related to investing in South
Africa including political, economic, regulatory, currency fluctuation and
foreign exchange risks. As a result of industry consolidation, the Company
current is invested in a limited number of securities and thus holds large
positions in certain securities. Because the Company's investments are
concentrated in a limited number of securities of companies involved in the
mining of gold and other precious metals and related activities, the net asset
value of the Company may be subject to greater volatility than that of a more
broadly diversified investment company.
7 Commitments. The Company's lease for office space in Johannesburg
expired in February 2003. The Company has renewed the lease for a two-year
period at an annual cost of approximately $55,000.
21
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of ASA Limited:
We have audited the accompanying statements of assets and liabilities of
ASA Limited (incorporated in the Republic of South Africa) as of May 31, 2004
and 2003, including the schedule of investments as of May 31, 2004, and the
related statements of operations, surplus and changes in net assets and
supplementary information for the six months ended May 31, 2004 and 2003 and the
financial highlights for the six months ended may 31, 2004 and May 31, 2003 and
the years ended November 30, 2003 and 2002. These financial statements,
financial highlights and supplementary information are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements, financial highlights and supplementary information based
on our audits. The financial highlights for years presented prior to November
30, 2002 were audited by other auditors who have ceased operations and whose
report dated December 18, 2001 expressed an unqualified opinion on those
financial highlights.
We conducted our audits in accordance with the standards of the Public
Accounting Oversight Board (United States). 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, financial highlights and supplementary
information. Our procedures included the confirmation of securities owned as of
May 31, 2004 and 2003, by correspondence with the custodian. 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, financial highlights and
supplementary information referred to above present fairly, in all material
respects, the financial position of ASA Limited as of May 31, 2004 and 2003, the
results of its operations, its surplus, the changes in its net assets, and
supplementary information for each of the six month periods then ended and the
financial highlights for the six months ended May 31, 2004 and 2003 and the
years ended November 30, 2003 and 2002 in conformity with U.S. generally
accepted accounting principles.
Ernst & Young LLP
New York, N.Y., U.S.A.
Ernst & Young
Johannesburg, SA
July 16, 2004
22
STATEMENT OF ADDITIONAL INFORMATION
APPENDIX A
ASA LIMITED
PROXY VOTING POLICIES AND PROCEDURES
The following is a statement of the proxy voting policies and procedures
of ASA Limited.
PROXY ADMINISTRATION
ASA understands its proxy voting responsibilities and that proxy voting
decisions may affect the long-term interests of its shareholders. ASA attempts
to process every proxy vote it receives. However, voting proxies for shares of
certain non-U.S. companies may involve significantly greater effort and cost
than for shares of U.S. companies. There may be situations where ASA may not or
cannot vote a proxy. For example, ASA may receive proxy material too late to act
upon or the cost of voting may outweigh the benefit of voting.
Authority and responsibility to vote proxies with respect to ASA's
portfolio securities has been delegated to the Chairman of the Board and, in the
event of his inability to act, to the Managing Director of ASA. In evaluating
proxy proposals, the Chairman (or Managing Director) may consider information
from various sources, including management of the company presenting a proposal
as well as independent sources. The ultimate decision rests with the Chairman
(or Managing Director), who is accountable to the Board of Directors of ASA.
GENERAL PRINCIPLES
In voting proxies, ASA will act solely in the best economic interests of
its shareholders with the goal of maximizing the value of ASA's portfolio. These
policies and procedures are designed to promote accountability of a portfolio
company's management and board of directors to its shareholders and to align
their interests with those of shareholders. These policies and procedures
recognize that a portfolio company's managers are entrusted with the day-to-day
operations of the company, as well as longer-term strategic planning, subject to
the company's board of directors.
ASA believes that the quality and depth of a portfolio company's
management, including its board of directors, is an important consideration in
determining the desirability of an investment. Accordingly, the recommendations
of management on many issues are given substantial weight in determining how to
vote a proxy. However, each issue is considered on its own merits, and the
position of the portfolio company's management will not be supported whenever it
is determined not to be in the best interests of ASA and its shareholders.
SPECIFIC POLICIES
A. ROUTINE MATTERS
1. Election of Directors. In general, ASA will vote in
favor of management's director nominees if they are
running unopposed. ASA believes that management is in
the best position to evaluate the qualifications of
directors and the needs of a particular board.
Nevertheless, ASA will vote against, or withhold its
vote for, any nominee whom it feels is not qualified.
When management's nominees are opposed in a proxy
contest, ASA will evaluate which nominee's
publicly-announced management policies and goals are
most likely to maximize shareholder value, as well as
the past performance of the incumbent.
2. Ratification of Selection of Auditors. In general, ASA
will rely on the judgment of management in selecting the
independent auditors, Nevertheless, ASA will examine the
recommendation of management in appropriate cases, e.g.,
where there has been a change in auditors based upon a
disagreement on accounting matters.
A-1
3. Stock Option and Other Equity Based Compensation Plan
Proposals. ASA will generally approve management's
recommendations with respect to the adoption or
amendment of stock option plans and other equity based
compensation plans, provided that the total number of
shares reserved under all of a company's plans is
reasonable and not excessively dilutive.
B. ACQUISITIONS, MERGERS, REINCORPORATIONS, REORGANIZATIONS AND
OTHER TRANSACTIONS
Because voting on transactions such as acquisitions, mergers,
reincorporations and reorganizations involve considerations
unique to each transaction, ASA does not have a general policy
in regard to voting on those transactions. ASA will vote on a
case-by-case basis on each transaction.
C. CHANGES IN CAPITAL STRUCTURE
ASA evaluates proposed capital actions on a case-by-case basis
and will generally defer to management's business analysis in
support of such actions. In cases where proposed capital actions
support proxy defenses or act to reduce or limit shareholder
rights, particular consideration will be given to all the
effects of the action and ASA's vote will be made in a manner
consistent with the objective of maximizing long-term
shareholder value.
D. ANTI-TAKEOVER PROPOSALS
In general, ASA will vote against any proposal which ASA
believes would materially contribute to preventing a potential
acquisition or takeover, including proposals to:
. Stagger the board of directors;
. Introduce cumulative voting;
. Introduce unequal voting rights;
. Create supermajority voting;
. Establish preemptive rights.
In general, ASA will vote in favor of any proposals to reverse
the above.
E. SHAREHOLDER PROPOSALS INVOLVING SOCIAL, MORAL OR ETHICAL MATTERS
In general, ASA will vote in accordance with management's
recommendation on issues that primarily involve social, moral or
ethical matters, although exceptions may be made in certain
instances where ASA believes a proposal has substantial economic
implications.
F. CONFLICT OF INTEREST
In view of the fact that ASA is internally managed and does not
have an investment advisor, it is unlikely that conflicts of
interest will arise in voting the proxies of ASA's portfolio
companies. ASA maintains a record of the affiliated persons of
each director and officer of ASA including the Chairman and the
Managing Director. The Compliance Officer reviews proxy
statement proposals to determine the existence of a potential
conflict of interest. In the event that the Chairman (or the
Managing Director) has a personal conflict of interest, he shall
remove himself from the voting process. In cases of a conflict
of interest, a record shall be maintained confirming that ASA's
vote was made solely in the interests of ASA and without regard
to any other consideration.
Date: November 6, 2003
A-2
PART C
OTHER INFORMATION
Indemnification
---------------
Reference is hereby made to Sections 103 to 107 and Section 151 of the
Registrant's Bye-Laws, incorporated by reference to the Registrant's
Registration Statement on Form N-2, SEC File No. 811-21650, as filed with the
Securities and Exchange Commission on October 5, 2004.
The Registrant's directors and officers will be insured under an errors and
omissions liability insurance policy. The Registrant will be insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
Exhibits
--------
(1) Memorandum of Association 1/
(2) Bye-Laws 1/
(3) Voting trust agreement -Not applicable.
(4) Form of Agreement and Plan of Reorganization -Included as Appendix A
to the Prospectus/Proxy Statement in this Registration Statement.
(5) Instruments Defining the Rights of the Securities Holders - See
Exhibit 2.
(6) Investment Advisory Contracts -Not applicable.
(7) Underwriting or Distribution Contracts -Not applicable.
(8) Pension Arrangements--To be filed by Amendment
(9) (a) Form of Custodian Contract between the Registrant and JPMorgan
Chase Bank 1/
(b) Subcustodian Contract 1/
(10) Plan pursuant to 12b-1 or 18f-3 - Not applicable.
(11) Opinion and consent of Counsel regarding the legality of securities
being registered -Filed herewith.
(12) (a) Opinion and consent of KPMG Services (Proprietary) Limited, South
Africa, regarding certain tax matters -Filed herewith.
(b) Opinion and consent of Kirkpatrick & Lockhart LLP, regarding
certain tax matters--To be filed by Amendment.
(13) (a) Shareholder Services Contract with LGN Associates 1/
(b) Accounting Services Agreement with Kaufman, Rossin & Co., P.A. 1/
(c) Administrative Services Agreement with Appleby Corporate Services
(Bermuda) Ltd. 1/
(14) (a) Consent of Ernst & Young LLP, New York, New York -Filed herewith.
(b) Consent of Ernst & Young, Johannesburg, South Africa - Filed
herewith.
(15) Financial statements omitted from prospectus - Not applicable.
(16) Power of Attorney - Filed herewith.
(17) Additional Exhibits
(a) Form of Proxy -Filed herewith.
------------------------------
1/ Incorporated by reference to the Registrant's Registration Statement
on Form N-2, SEC File No. 811-21650, as filed with the - Securities
and Exchange Commission on October 5, 2004
Undertakings
------------
(1) The undersigned Registrant agrees that prior to any public
re-offering of the securities registered through the use of the prospectus which
is a part of this Registration Statement by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c) of the Securities Act of
1933, the re-offering prospectus will contain the information called for by the
applicable registration form for re-offering by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant, ASA (Bermuda) Limited, has duly caused this Initial
Filing of the Registrant's Registration Statement on Form N-14 to be signed on
its behalf by the undersigned, thereto duly authorized, in the City of Buffalo
and State of New York, on the 5th day of October, 2004.
ASA (BERMUDA) LIMITED
By: /s/ Robert J.A. Irwin
-------------------------
Robert J.A. Irwin
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Initial Filing of the Registrant's Registration Statement on Form N-14 has been
signed below by the following persons in the capacities and on the dates
indicated:
Signature Title Date
--------
/s/ Robert J.A. Irwin October 5, 2004
---------------------
Robert J.A. Irwin Chairman of the Board, Director,
President, Chief Executive Officer
and Treasurer
Chester A. Crocker* Assistant Secretary and Director
Ronald L. McCarthy* Assistant Treasurer and Director
Henry R. Breck* Director
Harry M. Conger* Director
Joseph C. Farrell* Director
James G. Inglis* Director
Malcolm W. MacNaught* Director
Robert A. Pilkington* Director
A. Michael Rosholt* Director
*By /s/ Robert J.A. Irwin
---------------------
Robert J.A. Irwin
Attorney-in-Fact
Date: October 5, 2004
---------------
EXHIBIT INDEX
(11) Opinion and consent of Appleby Spurling Hunter regarding the legality
of securities being registered
(12) Opinion and consent of KPMG Services (Proprietary) Limited, South
Africa, regarding certain tax matters
(14) (a) Consent of Ernst & Young LLP, New York, NY
(b) Consent of Ernst & Young, Johannesburg, South Africa
(16) Power of Attorney
(17) (a) Form of Proxy