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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-21650
ASA (BERMUDA) LIMITED
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(Exact name of registrant as specified in charter)
11 SUMMER STREET, 4TH FLOOR, BUFFALO, NEW YORK 14209
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(Address of principal executive offices) (Zip code)
JPMORGAN CHASE BANK
3 CHASE METROTECH CENTER
BROOKLYN, NY 11245
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(Name and address of agent for service)
Registrant's telephone number, including area code: (716) 883-2428
Date of fiscal year end: NOVEMBER 30, 2005
Date of reporting period: NOVEMBER 30, 2005
FORM N-CSR IS TO BE USED BY MANAGEMENT INVESTMENT COMPANIES TO FILE REPORTS WITH
THE COMMISSION NOT LATER THAN 10 DAYS AFTER THE TRANSMISSION TO STOCKHOLDERS OF
ANY REPORT THAT IS REQUIRED TO BE TRANSMITTED TO STOCKHOLDERS UNDER RULE 30e-1
UNDER THE INVESTMENT COMPANY ACT OF 1940 (17 CFR 270.30e-1). THE COMMISSION MAY
USE THE INFORMATION PROVIDED ON FORM N-CSR IN ITS REGULATORY, DISCLOSURE REVIEW,
INSPECTION, AND POLICYMAKING ROLES.
A REGISTRANT IS REQUIRED TO DISCLOSE THE INFORMATION SPECIFIED BY FORM N-CSR,
AND THE COMMISSION WILL MAKE THIS INFORMATION PUBLIC. A REGISTRANT IS NOT
REQUIRED TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN FORM N-CSR
UNLESS THE FORM DISPLAYS A CURRENTLY VALID OFFICE OF MANAGEMENT AND BUDGET
("OMB") CONTROL NUMBER. PLEASE DIRECT COMMENTS CONCERNING THE ACCURACY OF THE
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WASHINGTON, DC 20549-0609. THE OMB HAS REVIEWED THIS COLLECTION OF INFORMATION
UNDER THE CLEARANCE REQUIREMENTS OF 44 U.S.C. SS. 3507.
Item 1. Reports to Stockholders.
ASA (BERMUDA) LIMITED
ANNUAL
REPORT [Graphic Omitted]
2005
ASA (BERMUDA) LIMITED
ANNUAL REPORT AND
FINANCIAL STATEMENTS
November 30, 2005
DIRECTORS
Robert J.A. Irwin (U.S.A.)
Henry R. Breck (U.S.A.)
Harry M. Conger (U.S.A.)
Chester A. Crocker (U.S.A.)
Joseph C. Farrell (U.S.A.)
James G. Inglis (South Africa)
Malcolm W. MacNaught (U.S.A.)
Ronald L. McCarthy (South Africa)
Robert A. Pilkington (U.S.A.)
A. Michael Rosholt (South Africa)
CONTENTS
Chairman's report 2
Portfolio changes 4
Certain investment policies and restrictions 5
Report of independent registered public accounting firm 5
Schedule of investments 6
Statement of assets and liabilities 7
Statement of operations 8
Statements of changes in net assets 9
Notes to financial statements 10
Financial highlights 12
Supplementary information 12
Certain tax information for United States shareholders 13
Dividend reinvestment and stock purchase plan 15
Privacy notice 15
Proxy voting 16
Form N-Q 16
Annual CEO certification 16
Voting results 16
Forward-looking statements 16
Board of directors and officers 17
OFFICERS
Robert J.A. Irwin, CHAIRMAN, PRESIDENT AND TREASURER
Paul K. Wustrack, Jr., SECRETARY AND CHIEF COMPLIANCE OFFICER
EXECUTIVE OFFICES
11 Summer Street
Buffalo, New York
REGISTERED OFFICE
Canon's Court
22 Victoria Street
Hamilton HM 12, Bermuda
AUDITORS
Ernst & Young LLP, New York, NY, U.S.A.
COUNSEL
Appleby Spurling Hunter, Hamilton, Bermuda
Kirkpatrick & Lockhart Nicholson Graham LLP, Washington, DC, U.S.A.
CUSTODIAN
JPMorgan Chase Bank
Brooklyn, NY, U.S.A.
SUBCUSTODIAN
Standard Bank of South Africa Limited
Johannesburg, South Africa
FUND ACCOUNTANTS
Kaufman Rossin & Co., PA
Miami, FL, U.S.A.
SHAREHOLDER SERVICES
LGN Group, LLC
Florham Park, NJ, U.S.A.
(973) 377-3535
TRANSFER AGENT
Computershare Trust Company, N.A.
525 Washington Boulevard, Jersey City, NJ 07310, U.S.A.
website-http://www.asaltd.com
THE SEMI-ANNUAL AND ANNUAL REPORTS OF THE COMPANY AND THE LATEST VALUATION OF
NET ASSETS PER SHARE MAY BE VIEWED ON THE COMPANY'S WEBSITE OR MAY BE REQUESTED
FROM LGN GROUP, LLC, LAWRENCE G. NARDOLILLO, C.P.A., P.O. BOX 269, FLORHAM PARK,
NEW JERSEY 07932 (973) 377-3535. SHAREHOLDERS ARE REMINDED TO NOTIFY
COMPUTERSHARE OF ANY CHANGE OF ADDRESS.
1
CHAIRMAN'S REPORT (UNAUDITED)
At November 30, 2005 the Company's net asset value was $55.93 per share. The
closing price of the Company's stock on the New York Stock Exchange was $49.65
per share at November 30, 2005, which represented a 11.2% discount to the net
asset value. This compares with the net asset value of $49.95 per share at
November 30, 2004 at which time the closing price was $44.82, a discount of
10.3% to the net asset value.
Net investment income for the fiscal year ended November 30, 2005 was $.10
per share, as compared to $.22 per share for the fiscal year ended November 30,
2004. Realized gains from investments net of net realized loss from foreign
currency transactions for the fiscal year ended November 30, 2005 were $1.25 per
share, as compared to $.05 per share for the fiscal year ended November 30,
2004.
Dividends totaling $.90 per share were paid or declared during the fiscal
year ended November 30, 2005. For the fiscal year ended November 30, 2004, the
total dividend payments were $.55 per share. (See Note 1.E. Distributions to
Shareholders (page 10) and Certain tax information for United States
shareholders (pages 13 and 14) for further comments.)
In July shareholders approved changes in the Company's investment policies
and restrictions designed to provide the Company with greater investment
flexibility. Among the changes were the following:
1. The Company's subclassification under the Investment Company Act of 1940
was changed from a diversified to a non-diversified company.
2. The Company is now allowed to increase its investments outside of South
Africa.
3. The Company is now allowed to invest directly in a broader array of
precious minerals and bullion.
4. The Company is now allowed to invest its cash in a wider variety of
short-term instruments.
The Company had been confined to a large extent to investment in precious
mineral (primarily gold) producers in South Africa. Most of our investments were
acquired many years ago at much lower prices and there are substantial
unrealized capital gains. The tax implications of these unrealized capital gains
will be considered as the new broadened investment policies are implemented in
the coming years.
At our fiscal year end, the portfolio was still about 75% invested in the
stocks of South African gold and other precious metals mining companies, as well
as companies with a substantial portion of their assets invested in South
Africa.
THE GOLD BULLION MARKET
The dollar price of gold enjoyed a tremendous surge in calendar year 2005,
trading over $500/oz in the final weeks of the year for the first time since
1983. The average for the year will be very close to $445/oz, almost 10% higher
than the average achieved in 2004. Opinion is divided about the reason for the
increase in the price of the metal and in particular for the sharp rise in
recent weeks. The more doom-laden commentators suggest that we are at last
witnessing a flight from the fiat paper currencies of the world. More
conventional explanations that gold is often a refuge in times of inflation are
difficult to sustain in the face of only limited signs of that particular
economic disease. Certainly there is news of considerable accumulation of the
metal in the new, wealthy communities of China and India.
Of course, it is the rand price of gold that the South African mines need to
keep in mind. At about R 3500 per ounce the gold price, while improving, is
still below the brief peak value of R 3700 achieved during the rand collapse in
late 2001. The Johannesburg gold certificate exchange traded fund (New Gold) has
been growing slowly in popularity since its listing in November 2004. Turnover
has only very recently exceeded 500,000 units (equivalent to 5,000 oz) per week.
The signs are, however, that interest in gold ETFs in Johannesburg and elsewhere
is picking up quite dramatically as the gold price catches investors' attention.
THE GOLD SHARE MARKET
The FTSE/JSE Gold Sector Price Index is currently around 2350, its highest
level since March 2004, but quite a way below the 3500 record set in 2002
following the collapse of the rand. Since January 2005 the AngloGold Ashanti
share price is up almost 45%, Harmony is up 63% and Gold Fields is up almost
50%. These shares, however, sagged in the first quarter of the year. Since
reaching their lows in May 2005 the returns have been even greater. Harmony and
Gold Fields have recovered from the ending of a potentially very hostile
corporate action. Operationally, the South African gold producers are putting
strategies in place to cope with the stronger rand environment. Both Harmony and
Gold Fields have announced projects to expand their offshore production bases,
which should further reduce country specific risk.
THE GOLD MINING INDUSTRY
Mine production has been slipping, primarily as a result of lower production
from South African sources and could reach its second lowest level since 1997,
according to Gold Fields Mineral Services. In addition, producers have been
de-hedging, which has removed a source of supply and created additional demand.
Although official sector sales have risen, there has been a sharp fall-off in
scrap sales. Investment demand tends to track the dollar and this has been a
source of support. Thus, demand rises as the dollar weakens. Furthermore, high
oil prices have led to inflation fears, which has stimulated investment demand
for gold. Jewelry fabrication demand appears strong although other offtake is
less robust. On the whole, the supply and demand fundamentals appear positive
for gold.
THE PLATINUM INDUSTRY AND MARKET
The platinum price has recently shot above the $1,000/oz mark, with the
annual average price approaching $900/oz after 2004's $846/oz and 2003's
$700/oz. The palladium price has also recently been showing some enthusiasm and
rose above $250/oz for the first time in more than a year. It will of course be
a long time until this metal again trades as high as the heights of $1,000/oz
experienced briefly in 2001. Both the Anglo Platinum and the Impala share prices
look set to close the year near their highs. For Impala this is very near to R
900 per share, about 85% up on the year, while at its November peak of R 485 per
share, Anglo Platinum has more than doubled since the end of last year.
The platinum market is expected to remain in shortfall according to market
statistics published by Johnson Matthey. Although platinum output should grow 2%
to 6.59 million ounces, output from South Africa is likely to be lower than
2
previously expected as a result of production problems. Johnson Matthey
forecasts platinum demand of 6.71 million ounces for the full year. Auto
catalyst demand is expected to grow strongly, by up to 8% to 3.86 million
ounces, the sixth successive year of growth in this sector. Furthermore, the
growth of diesel catalysis should lend longer-term support to platinum demand.
Jewelry demand is, however, expected to fall due to higher prices. Nevertheless,
an overall shortage of the metal should support the platinum price.
THE SOUTH AFRICAN ECONOMIC ENVIRONMENT
The overarching economic variable, from a South African mineral producer's
perspective, is the rand/dollar exchange rate. 2005 delivered two of the most
unlikely scenarios. The rand continued to be a strong currency against most
currencies -- probably because of the continuing strength of almost all
commodity prices -- and the dollar beat the common forecasts and managed
convincingly to outperform its rivals in the form of the euro and the yen. Thus
the rand strengthened versus just about every currency except the dollar in
2005. As the end of the year approaches, the debate is about whether the rand
could even return to levels stronger than 6 per dollar. It is currently at
around 6.4 per dollar. It seems unwise to make predictions about currency
exchange rates but it seems likely that as long as the prices of all metals both
precious and base continue to boom, then the rand will remain a strong currency
worldwide. This obviously puts considerable strains on exporting industries like
the mines.
The South African economy grew in the third quarter at 4.2% (quarter on
quarter annualized) down from 5.4% in the second quarter. Repeated
pronouncements from government and the Reserve Bank confirm that the target
growth rate is 6% per annum. This is not an impossible figure to reach but its
impact on the mining industry may be quite limited. Major contributors to such
growth will likely come from long overdue government spending on infrastructure
as well as continued consumer spending, as the benefits of the Black Economic
Empowerment ("BEE") programs and charters deliver a new aspirant and affluent
middle class. The SA Reserve Bank limited their intervention to just one
interest rate cut of a modest one half percentage point that took effect in
April 2005. The precious metals mining industry will continue to look for a
steady rise in the price of their product to allow them to keep their heads
above water.
SOUTH AFRICAN REGULATORY MATTERS
From a regulatory perspective, the feature of the year remained uncertainty
over the conversion of old order mineral rights to new order rights in terms of
legislation governing the mining and minerals industry. There have been
administrative delays in approving the changeover to new order rights, with only
AngloGold reporting this year that they have successfully converted their
rights. A portion of Harmony's rights were converted in 2004, while Gold Fields,
Impala and Anglo Platinum have lodged their requests for rights conversion. The
platinum producers are continuing to expand, both in South Africa and Zimbabwe
despite the uncertainties relating to the rights conversion. BEE, which is
required in terms of compliance with the minerals legislation, is continuing. In
December, Anglo Platinum announced a BEE transaction while Impala issued a
cautionary relating to an undisclosed BEE deal. This suggests that the South
African precious metal producers are undertaking steps to mitigate regulatory
risk.
PORTFOLIO CHANGES
During the year we added to our holdings outside of South Africa with
purchases of Meridian Gold Inc., Goldcorp Inc. and Lonmin PLC.
Meridian Gold, headquartered in Reno, Nevada, holds 100% interest in El Penon
Mine in Northern Chile. It also owns 100% interest Esquel Gold Deposit in
Argentina and an interest in the Rossi Project in the Carlin Trend in Nevada.
The company is believed to have proven and probable reserves of approximately
4.4 million ounces. It produced 315,000 ounces of gold in 2004.
Goldcorp is a Canadian based gold producer. Its assets include a mine in the
Red Lake District of Ontario and other interests in Argentina, Mexico, Australia
and the U.S. The company also owns a 65% interest in Silver Wheaton Corp, a
publicly traded company engaged in the purchase and sale of silver from Mexico
and Sweden. Goldcorp produced approximately 628,000 ounces of gold in 2004 and
reports reserves of 5.22 million ounces of gold.
Lonmin is the third largest primary producer of platinum in the world. It
produces over 900,000 ounces of platinum annually as well as the other platinum
group metals such as palladium and rhodium. Its operations are located in the
northwest province of South Africa.
During the year we reduced our holdings of Gold Fields, AngloGold, Impala and
Anglo Platinum.
Consolidation within the gold mining industry continues. Barrick Gold has
offered $10.4 billion in cash and stock for Placer Dome. Following the planned
sale of certain assets to Goldcorp, Barrick Gold will be the world's largest
gold producer with its annual production of 8.3 million ounces, exceeding number
two, Newmont Mining, with its 6.26 million ounces. The offer expires on January
16, 2006. If Barrick succeeds, Goldcorp intends to pay Barrick for their
Canadian operations and a 40% interest in Pueblo Viejo, in the Dominican
Republic. Goldcorp with its new assets will become the 9th largest producer with
production at a rate of 2 million ounces per annum. It is difficult to speculate
on what may then happen to Placer Dome's 50% interest in the South Deep mine in
South Africa.
On December 22, 2005 Placer Dome's board announced that they unanimously
backed the Barrick offer.
* * *
THE ANNUAL GENERAL MEETING OF SHAREHOLDERS WILL BE HELD ON WEDNESDAY, MARCH
8, 2006 AT 10:00 A.M. AT THE OFFICES OF UBS, 1285 AVENUE OF THE AMERICAS, 13TH
FLOOR, NEW YORK, NEW YORK, USA. WE LOOK FORWARD TO HAVING YOU IN ATTENDANCE.
ROBERT J.A. IRWIN, CHAIRMAN, PRESIDENT
AND TREASURER
3
[Data below represents line chart in the printed piece]
PHILADELPHIA GOLD & SILVER INDEX (XAU): Monthly average price (unaudited)
2003 2004 2005
---- ---- ----
78 102.69 93
73 99.63 94
66 100.13 98
66 93.82 89
72 84.03 83
78 85.83 90
79 87.53 92
87 89.88 95
93 94.95 106
94 101.71 108
101 106.83 112
107.5 100
[Data below represents line chart in the printed piece]
LONDON FREE MARKET GOLD PRICE: Monthly average $ per ounce (unaudited)
2003 2004 2005
---- ---- ----
357 413.99 424
359 405.33 423
341 406.67 434
328 403.02 429
356 383.45 422
357 391.99 431
351 398.09 424
360 400.48 438
379 405.27 456
379 420.46 470
390 439.39 477
407.59 442
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PORTFOLIO CHANGES DURING THE YEAR ENDED NUMBER OF SHARES
NOVEMBER 30, 2005 (UNAUDITED) ----------------
INCREASE DECREASE
-------- --------
AngloGold Ashanti Limited 144,000
Anglo Platinum Limited 300,400
Goldcorp Inc. 600,000
Gold Fields Limited 1,345,000
Impala Platinum Holdings Limited 47,400
Lonmin PLC - ADRs 450,000
Meridian Gold Inc. 600,000
4
CERTAIN INVESTMENT POLICIES AND RESTRICTIONS (UNAUDITED)
The following is a summary of certain of the Company's investment policies and
restrictions and is subject to the more complete statements contained in
documents filed with the Securities and Exchange Commission.
THE CONCENTRATION OF INVESTMENTS IN A PARTICULAR INDUSTRY OR GROUP OF
INDUSTRIES. It is a fundamental policy (i.e., a policy that may be changed only
by shareholder vote) of the Company that at least 80% of its total assets be (i)
invested in common shares or securities convertible into common shares of
companies engaged, directly or indirectly, in the exploration, mining or
processing of gold, silver, platinum, diamonds or other precious minerals, (ii)
held as bullion or other direct forms of gold, silver, platinum or other
precious minerals, (iii) invested in instruments representing interests in gold,
silver, platinum or other precious minerals such as certificates of deposit
therefor, and/or (iv) invested in securities of investment companies, including
exchange traded funds, or other securities that seek to replicate the price
movement of gold, silver or platinum bullion. Compliance with the percentage
limitation relating to the concentration of the Company's investments will be
measured at the time of investment.
If investment opportunities deemed by the Company to be attractive are not
available in the types of securities referred to in the preceding paragraph, the
Company may deviate from the investment policy outlined in the preceding
paragraph and make temporary investments of unlimited amounts in securities
issued by the U.S. Government, its agencies or instrumentalities or other high
quality money market instruments.
THE PERCENTAGE OF VOTING SECURITIES OF ANY ONE ISSUER THAT THE COMPANY MAY
ACQUIRE. It is the non-fundamental policy (i.e., a policy that may be changed by
the Board of Directors) of the Company that the Company shall not purchase a
security if, at the time of purchase, more than 20% of the value of its total
assets would be invested in securities of the issuer of such security.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of ASA (Bermuda) Limited:
We have audited the accompanying statement of assets and liabilities of ASA
(Bermuda) Limited (the "Company"), including the schedule of investments, as of
November 30, 2005, and the related statement of operations and supplementary
information for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the four years in the period then ended. These financial statements,
supplementary information and financial highlights are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements, supplementary information and financial highlights based
on our audits. The financial highlights for the year ended November 30, 2001
were audited by other auditors 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
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements, supplementary information and financial highlights are
free of material misstatement. We were not engaged to perform an audit of the
Company's internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, supplementary
information and financial highlights, assesing the accounting principles used
and significant estimates made by management and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of November 30, 2005 by correspondence with the custodian.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements, supplementary information and
financial highlights referred to above present fairly, in all material respects,
the financial position of ASA (Bermuda) Limited at November 30, 2005, the
results of its operations and supplementary information for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the four years in the period
then ended, in conformity with U.S. generally accepted accounting principles.
Ernst & Young LLP
New York, New York
December 28, 2005
5
SCHEDULE OF INVESTMENTS
November 30, 2005
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Number of Percent of
Name of Company Shares Market Value Net Assets
----------------------------------------------------------------------------------------------------------------------------------
ORDINARY SHARES OF GOLD MINING COMPANIES
AUSTRALIA
Newcrest Mining Limited - ADRs 3,000,000 $ 47,158,200 8.8%
----------------------------------------------------------------------------------------------------------------------------------
UNITED STATES
Newmont Mining Corporation 520,368 23,999,372 4.5
----------------------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA
AngloGold Ashanti Limited 2,245,894 94,575,282 17.6
Gold Fields Limited 8,359,977 124,982,562 23.2
Harmony Gold Mining Company Limited 292,459 3,530,006 .7
Harmony Gold Mining Company Limited - ADRs 2,166,400 26,148,448 4.9
----------------------------------------------------------------------------------------------------------------------------------
249,236,298 46.4
----------------------------------------------------------------------------------------------------------------------------------
CANADA
Barrick Gold Corporation 730,000 19,425,300 3.6
Goldcorp Inc. 600,000 12,192,000 2.3
Meridian Gold Inc. (1) 600,000 11,544,000 2.1
Placer Dome Incorporated 1,065,312 23,372,945 4.4
----------------------------------------------------------------------------------------------------------------------------------
66,534,245 12.4
----------------------------------------------------------------------------------------------------------------------------------
PERU
Compania de Minas Buenaventura S.A. - ADRs 900,000 25,218,000 4.7
----------------------------------------------------------------------------------------------------------------------------------
Total ordinary shares of gold mining companies (cost - $123,269,208) 412,146,115 76.8
----------------------------------------------------------------------------------------------------------------------------------
ORDINARY SHARES OF OTHER MINING COMPANIES
SOUTH AFRICA
Anglo Platinum Limited 520,100 34,447,972 6.4
Impala Platinum Holdings Limited 215,300 28,184,932 5.2
Mvelaphanda Resources Limited (1) 1,950,000 6,366,777 1.2
----------------------------------------------------------------------------------------------------------------------------------
68,999,681 12.8
----------------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM
Anglo American plc 1,280,000 40,195,199 7.5
Lonmin PLC - ADRs 450,000 12,629,212 2.3
----------------------------------------------------------------------------------------------------------------------------------
52,824,411 9.8
----------------------------------------------------------------------------------------------------------------------------------
Total ordinary shares of other mining companies (cost - $32,813,711) 121,824,092 22.6
----------------------------------------------------------------------------------------------------------------------------------
Total investments (Cost - $156,082,919) (2) 533,970,207 99.4
----------------------------------------------------------------------------------------------------------------------------------
CASH, CASH EQUIVALENTS, RECEIVABLES AND OTHER ASSETS LESS LIABILITIES 2,959,119 .6
----------------------------------------------------------------------------------------------------------------------------------
Net assets $536,929,326 100.0%
----------------------------------------------------------------------------------------------------------------------------------
(1) Non-income producing security.
(2) Cost of investments shown approximates cost for U.S. federal income
tax purposes, determined in accordance with U.S. income tax principles.
Gross unrealized appreciation of investments and gross unrealized
depreciation of investments at November 30, 2005 were $379,438,023 and
$1,550,735, respectively, resulting in net unrealized appreciation on
investments of $377,887,288.
ADR - American Depository Receipt
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.
PORTFOLIO STATISTICS
November 30, 2005
--------------------------------------------------------------------------------
COUNTRY BREAKDOWN*
South Africa 59.2%
Canada 12.4%
United Kingdom 9.8%
Australia 8.8%
Peru 4.7%
United States 4.5%
* Country breakdowns are expressed as a percentage of total net assets.
The entire portfolio consists of investments in ordinary shares of
companies engaged, directly or indirectly, in the exploration, mining or
processing of gold and other precious minerals.
6
STATEMENT OF ASSETS AND LIABILITIES
November 30, 2005
--------------------------------------------------------------------------------
ASSETS
----------------------------------------------------------------------------------------------------------------------------------
Investments, at market value
Gold mining companies - (cost - $123,269,208) $412,146,115
Other mining companies - (cost - $32,813,711) 121,824,092
----------------------------------------------------------------------------------------------------------------------------------
533,970,207
----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 10,936,169
Dividends and interest receivable 326,744
Other assets 190,000
----------------------------------------------------------------------------------------------------------------------------------
Total assets 545,423,120
----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
----------------------------------------------------------------------------------------------------------------------------------
Accounts payable and accrued liabilities 1,034,363
Liability for retirement benefits due to current and future retired directors 739,431
Dividend payable 6,720,000
----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 8,493,794
----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (SHAREHOLDERS' INVESTMENT) $536,929,326
----------------------------------------------------------------------------------------------------------------------------------
Common shares $1 par value
Authorized: 30,000,000 shares
Issued & Outstanding: 9,600,000 shares $ 9,600,000
Share premium (capital surplus) 21,249,156
Undistributed net investment income 54,890,187
Undistributed net realized (loss) from foreign currency transactions (75,676,877)
Undistributed net realized gain on investments 148,435,529
Net unrealized appreciation on investments 377,887,288
Net unrealized gain on translation of assets
and liabilities in foreign currency 544,043
----------------------------------------------------------------------------------------------------------------------------------
Net assets $536,929,326
----------------------------------------------------------------------------------------------------------------------------------
Net assets per share $55.93
---------------------------------------------------------------------------------------------------------------------------------
The closing price of the Company's shares on the New York Stock Exchange
on November 30, 2005 was $49.65.
The notes to the financial statements form an integral part of these
statements.
7
STATEMENT OF OPERATIONS
Year ended November 30, 2005
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Investment income
Dividend income (net of foreign withholding taxes of $183,668) $ 5,971,286
Interest income 127,565
------------------------------------------------------------------------------------------------------------------------------------
Total investment income 6,098,851
------------------------------------------------------------------------------------------------------------------------------------
Expenses
Shareholder reports and proxy expenses 467,174
Directors' fees and expenses 593,872
Provision for retirement benefits due to current and future retired directors 739,431
Salaries and benefits 633,264
Other administrative expenses 546,150
Fund accounting 126,214
Transfer agent, registrar and custodian 327,333
Professional fees and expenses 925,247
Insurance 280,930
Wind-up expenses - ASA Limited 225,790
Other 297,828
------------------------------------------------------------------------------------------------------------------------------------
Total expenses 5,163,233
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 935,618
------------------------------------------------------------------------------------------------------------------------------------
Net realized gain from investments
Proceeds from sales 39,471,259
Cost of securities sold 6,447,697
------------------------------------------------------------------------------------------------------------------------------------
Net realized gain from investments 33,023,562
------------------------------------------------------------------------------------------------------------------------------------
Net realized (loss) from foreign currency transactions
Investments (20,977,260)
Foreign currency (32,227)
------------------------------------------------------------------------------------------------------------------------------------
Net realized (loss) from foreign currency transactions (21,009,487)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in unrealized appreciation on investments
Balance, beginning of year 324,361,555
Balance, end of year 377,887,288
------------------------------------------------------------------------------------------------------------------------------------
Net increase in unrealized appreciation on investments 53,525,733
------------------------------------------------------------------------------------------------------------------------------------
Net unrealized (loss) on translation of assets and liabilities in foreign currency (439,268)
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain from investments and foreign currency transactions 65,100,540
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 66,036,158
------------------------------------------------------------------------------------------------------------------------------------
The notes to the financial statements form an integral part of these
statements.
8
STATEMENTS OF CHANGES IN NET ASSETS
Years ended November 30, 2005 and 2004
-----------------------------------------------------------------------------------------------------------------------------------
2005 2004
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 935,618 $ 2,071,268
Net realized gain from investments 33,023,562 7,019,442
Net realized (loss) from foreign currency transactions (21,009,487) (6,485,411)
Net increase (decrease) in unrealized appreciation on investments 53,525,733 (12,843,461)
Net unrealized gain (loss) on translation of assets
and liabilities in foreign currency (439,268) 267,241
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 66,036,158 (9,970,921)
Dividends (8,640,000) (5,280,000)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 57,396,158 (15,250,921)
Net assets, beginning of year 479,533,168 494,784,089
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year $536,929,326 $479,533,168
-----------------------------------------------------------------------------------------------------------------------------------
The notes to the financial statements form an integral part of these
statements.
9
NOTES TO FINANCIAL STATEMENTS
Year ended November 30, 2005
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ASA (Bermuda) Limited is a
closed-end management investment company registered under the United States
Investment Company Act of 1940, and was organized as an exempted limited
liability company under the laws of Bermuda.
A. INVESTMENTS
Portfolio securities listed on U.S. and foreign stock exchanges 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
asked price less 1%, as applicable, is used. Securities listed on foreign stock
exchanges may be fair valued based on significant events that have occurred
subsequent to the close of the foreign markets.
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. If a security is valued
at a "fair value", that value is likely to be different from the last quoted
price for the security. Various factors may be reveiwed in order to make a good
faith determination of a security's fair value. These factors include, but are
not limited to, the nature of the security; relevant financial or business
developments of the issuer; actively traded similar or related securities;
conversion rights on the security; and changes in overall market conditions.
Where the Company holds securities listed on foreign stock exchanges and ADRs
representing these securities are actively traded on the New York Stock
Exchange, the securities are fair valued based on the last reported sales price
of the ADRs.
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 accounting 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. CASH EQUIVALENTS
The Company considers all money market and all highly liquid temporary cash
investments purchased with an original maturity of less than three months to be
cash equivalents.
C. FOREIGN CURRENCY TRANSLATION
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollar amounts at the closing rate of
exchange on the date of valuation. Purchases and sales of investment securities
and income and expense items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions. The
resulting net foreign currency gain or loss is included in the statement of
operations.
D. SECURITY TRANSACTIONS AND INVESTMENT INCOME
During the year ended November 30, 2005, sales of securities amounted to
$39,471,259 and purchases of securities amounted to $32,348,576.
Dividend income is recorded on the ex-dividend date, net of withholding taxes,
if any. Interest income is recognized on the accrual basis.
E. DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders are recorded on the ex-dividend date.
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 United States federal income tax purposes. The
differences are caused primarily by the separate line item reporting for
financial statement purposes of foreign exchange gains or losses. See pages 13
and 14 for additional tax information for United States shareholders.
F. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
G. BASIS OF PRESENTATION
The financial statements are presented in United States dollars.
10
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended November 30, 2005
2. RETIREMENT PLANS 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; $45,000 in March
2003, $55,000 in February 2004 and $60,000 in March 2005. As a result, the
Company has recorded an expense of $58,333 for the year ended November 30, 2005.
The Company has recorded an asset in the amount of $170,000 related to the
retirement obligation liability of $463,967 as of November 30, 2005. The
$463,967 represents the total liability payable under the agreement at November
30, 2005. Upon retirement from the Company, the liability under the agreement is
payable in ten consecutive equal annual payments to the Chairman.
The Company recorded a provision of $739,431 during the fiscal year ended
November 30, 2005 for an actuarially determined unfunded liability for
retirement benefits due to current and future retired directors. Directors of
the Company qualify to receive retirement benefits if they have served the
Company (and its predecessor, ASA Limited) for at least twelve years prior to
retirement.
3. ASA LIMITED In connection with the winding up of the Company's predecessor,
ASA Limited, in South Africa, the Company incurred expenses of $225,790 for the
fiscal year ended November 30, 2005.
4. CONCENTRATION RISK It is a fundamental policy of the Company that at least
80% of its total assets be invested in securities of companies engaged, directly
or indirectly, in the exploration, mining or processing of gold or other
precious minerals and/or in other gold and precious mineral investments.
A substantial portion of the Company's assets currently is invested in South
African companies and other companies having significant assets or operations in
South Africa. The Company is, therefore, subject to gold and precious mineral
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 currently 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 minerals 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.
5. INDEMNIFICATIONS In the ordinary course of business, the Company enters into
contracts that contain a variety of indemnifications. The Company's maximum
exposure under these arrangements is unknown. However, the Company has not had
prior claims or losses pursuant to these indemnification provisions and expects
the risk of loss thereunder to be remote.
11
FINANCIAL HIGHLIGHTS
Year Ended November 30
------------------------------------------------------------------------------------------------------------------------------------
2005 2004 2003 2002 2001
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $ 49.95 $ 51.54 $ 33.48 $ 21.97 $ 17.58
------------------------------------------------------------------------------------------------------------------------------------
Net investment income .10 .22 .84 .85 1.00
Net realized gain from investments 3.44 .73 - .51 3.05
Net realized gain (loss) from foreign currency transactions (2.19) (.68) .32 (1.13) (.24)
Net increase (decrease) in unrealized appreciation
on investments 5.58 (1.34) 17.76 11.84 1.40
Net unrealized gain (loss) on translation of
assets and liabilities in foreign currency (.05) .03 (.06) .24 (.02)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 6.88 (1.04) 18.86 12.31 5.19
Less dividends (.90) (.55) (.80) (.80) (.80)
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 55.93 $ 49.95 $ 51.54 $ 33.48 $ 21.97
====================================================================================================================================
Market value per share, end of year $ 49.65 $ 44.82 $ 47.16 $ 30.06 $ 19.83
TOTAL INVESTMENT RETURN(1)
Based on market value per share 11.40% (3.67%) 59.91% 55.72% 41.76%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.15% 1.03% .84% .91% 1.10%
Net investment income .21% .46% 2.09% 2.63% 4.61%
SUPPLEMENTAL DATA
Net assets, end of year (000 omitted) $536,929 $479,533 $494,784 $321,423 $210,944
Portfolio turnover rate 7.31% 1.63% -- 4.41% 11.18%
Per share calculations are based on the 9,600,000 shares outstanding.
(1) Total investment return is calculated assuming a purchase of common
shares at the current market price on the first day and a sale at the
current market price on the last day of each year reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to
be reinvested at prices obtained under the Company's dividend reinvestment
plan.
SUPPLEMENTARY INFORMATION
Year ended November 30, 2005
-------------------------------------------------------------------------------------------------------------------------------
CERTAIN FEES INCURRED BY THE COMPANY
-------------------------------------------------------------------------------------------------------------------------------
Directors' fees $323,000
Officers' remuneration 553,750
Ronald L. McCarthy (compensation related to ASA Limited) 61,250
UBS Securities LLC (shareholder meeting room charges paid to company
of which a director is an affiliated person) 2,699
-------------------------------------------------------------------------------------------------------------------------------
The notes to the financial statements form an integral part of these
statements.
12
CERTAIN TAX INFORMATION FOR
UNITED STATES SHAREHOLDERS (UNAUDITED)
From December 1, 1963 through November 30, 1987, the Company was treated as a
"foreign investment company" for United States federal income tax purposes
pursuant to Section 1246 of the Internal Revenue Code. Under that section, a
United States shareholder who has held his shares in the Company for more than
one year is subject to tax at ordinary income tax rates on his profit (if any)
on a sale of his shares to the extent of his "ratable share" of the Company's
earnings and profits accumulated for the period during which he held those
shares between December 1, 1963 and November 30, 1987. If such shareholder's
profit on the sale of his shares exceeds such ratable share and he held his
shares for more than one year, then, subject to the discussion below regarding
the United States federal income tax rules applicable to taxable years of the
Company beginning after November 30, 1987, he is subject to tax at long-term
capital gain rates on the excess.
The Company's per share earnings and profits accumulated (undistributed) in
each of the taxable years from 1964 through 1987 is available upon request from
LGN Group, LLC, P.O. Box 269, Florham Park, NJ 07932.
Under rules enacted by the Tax Reform Act of 1986, the Company became a
"passive foreign investment company" (a "PFIC") on December 1, 1987. The manner
in which these rules apply depends on whether a United States shareholder (1)
elects to treat the Company as a qualified electing fund ("QEF") with respect to
his Company shares, (2) for taxable years of a United States shareholder
beginning after December 31, 1997, elects to "mark-to-market" his Company shares
as of the close of each taxable year, or (3) makes neither election.
In general, if a United States shareholder of the Company does NOT make
either such election, any gain realized on the disposition of his Company shares
will be treated as ordinary income. In addition, such a shareholder will be
subject to an "interest charge" on part of his tax liability with respect to
such gain, as well as with respect to an "excess distribution" made by the
Company (as explained in the following paragraph). Furthermore, shares held by
such a shareholder 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.
As noted, the general tax consequences described in the preceding paragraph
apply to an "excess distribution" on Company shares, which is defined as
distributions by the Company a shareholder receives during a taxable year that
are more than 125% of the average amount it distributed for the three preceding
taxable years.* If the Company makes an excess distribution in a year, a United
States 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 shares. That allocation would result in tax being payable at the highest
applicable rate in the prior taxable 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 United States shareholder as a normal
dividend,** with no interest charge.
If a United States shareholder elects to treat the Company as a QEF with
respect to his shares therein for his first taxable year he holds his shares
during which the Company is a PFIC (or later makes the QEF election and also
elects to treat his shares generally as if they were sold for their fair market
value on the first day of the first taxable year of the Company for which the
QEF election is effective, in which event the gain from such "deemed sale" would
be treated as an excess distribution), the rules described in the preceding
paragraphs generally would not apply. Instead, the electing United States
shareholder would include annually in his gross income his PRO RATA share of the
Company's ordinary earnings and net capital gain (his "QEF" inclusion)
regardless of whether such income or gain was actually distributed. A United
States shareholder who makes a valid QEF election will recognize capital gain on
any profit from the actual sale of his shares if those shares were held as
capital assets, except to the extent of the shareholder's ratable share of the
earnings and profits of the Company accumulated for the period during which he
held those shares between December 1, 1963 and November 30, 1987, as described
above.
Alternatively, if a United States shareholder makes the mark-to-market
election with respect to Company shares for taxable years beginning on or after
January 1, 1998, such shareholder would be required annually to report any
unrealized gain with respect to his 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 subsequently realized by an
electing United States shareholder on a sale or other disposition of his Company
shares also would be treated as ordinary income, but such shareholder would not
be subject to an interest charge on his resulting tax liability. Special rules
apply to a United States shareholder that held his PFIC stock prior to his first
taxable year for which the mark-to-market election was effective.
A United States shareholder with a valid QEF election in effect would not be
taxed on any distributions paid by the Company to the extent of any QEF
inclusions, but any distributions out of accumulated earnings and profits in
excess thereof would be treated as taxable dividends. Such a shareholder would
increase the tax basis in his Company shares by the amount of any QEF inclusions
and reduce such tax basis
-----------------------
* For example, the Company made annual distributions of $.55, $.80 and $.80 per
share during 2004, 2003 and 2002, respectively, an average per year of $.71667
per share. Accordingly, any distribution in excess of $.90 per share (125% of
$.71667) would be treated as an excess distribution for 2005. (All amounts in
U.S. currency.)
** Because the Company is a PFIC, dividends it pays will not qualify for the 15%
maximum U.S. federal income tax rate on dividends that individuals receive.
13
by any distributions to him that are not taxable as described in the preceding
sentence. Special rules apply to United States shareholders who make the QEF
election and wish to defer the payment of tax on their annual QEF inclusions.
Each shareholder who desires QEF treatment must individually elect such
treatment. The QEF election must be made for the taxable year of the shareholder
in which or with which the taxable year of the Company ends. A QEF election is
effective for the shareholder's taxable year for which it is made and all
subsequent taxable years of the shareholder and may not be revoked without the
consent of the Internal Revenue Service. A shareholder of the Company who first
held his Company shares after November 30, 2004 and who files his tax return on
the basis of a calendar year may make a QEF election on his 2005 tax return. A
shareholder of the Company who first held his Company shares on or before
November 30, 2004 may also make the QEF election on his 2005 tax return but
should consult his tax advisor concerning the tax consequences and special rules
that apply when a QEF election could have been made with respect to such shares
for an earlier taxable year.
The QEF election must be made by the due date, with extensions, of the
federal income tax return for the taxable year for which the election is to
apply. Under Treasury regulations, the 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 QEF inclusion for the taxable
year to which the election applies. In order to allow United States shareholders
to make the QEF elections and to comply with the applicable annual reporting
requirements, the Company annually will provide to them a "PFIC Annual
Information Statement" containing certain information required by Treasury
regulations.
In early 2006, the Company will send to United States shareholders the PFIC
Annual Information Statement for the Company's 2005 taxable year. Such annual
information statement may be used for purposes of completing Form 8621. A
shareholder who either is subject to a prior QEF election or is making a QEF
election for the first time must attach a completed Form 8621 to his income tax
return each year. Other United States shareholders also must attach completed
Forms 8621 to their tax returns each year, but shareholders not electing QEF
treatment will not need to report QEF inclusions thereon.
Special rules apply to United States persons who hold Company shares through
intermediate entities or persons and to United States shareholders who directly
or indirectly pledge their shares, including those in a margin account.
Ordinarily, the tax basis that is obtained by a transferee of property on the
death of the owner of that property is adjusted to the property's fair market
value on the date of death (or alternate valuation date). If a United States
shareholder dies owning shares with respect to which he did not elect QEF
treatment (or elected such treatment after the first taxable year in which he
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 in such shares to the fair market value on the date of
death (or alternate valuation date). In that case, in general, the transferee of
such shares will take a basis in the shares equal to the shareholder's basis
therein immediately before his death. If a United States shareholder dies owning
Company shares for which a valid QEF election was in effect for all taxable
years in such shareholder's holding period during which the Company was a PFIC
(or the shareholder made a "deemed sale" election), then the basis increase
generally will be available unless the holding period for his shares began on or
prior to November 30, 1987. In the latter case, in general, any otherwise
applicable basis increase will be reduced to the extent of the shareholder's
ratable share of the earnings and profits of the Company accumulated for the
period during which he held those shares between December 1, 1963 and November
30, 1987.
DUE TO THE COMPLEXITY OF THE APPLICABLE TAX RULES, UNITED STATES SHAREHOLDERS
OF THE COMPANY ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING
THE IMPACT OF THESE RULES ON THEIR INVESTMENT IN THE COMPANY AND ON THEIR
INDIVIDUAL SITUATIONS.
14
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN (UNAUDITED)
Computershare Trust Company, N.A. ("Computershare") has been engaged to offer
a dividend reinvestment and stock purchase plan (the "Plan") to shareholders.
Shareholders may elect to participate in the Plan by signing an authorization.
The authorization appoints Computershare as agent to apply to the purchase of
common shares of the Company in the open market (i) all cash dividends (after
deduction of the service charge described below) that become payable to such
participant on the Company's shares (including shares registered in his name and
shares accumulated under the Plan) and (ii) any optional cash investments ($50
minimum, subject to an annual maximum of $60,000) received from such
participant.
For the purpose of making purchases, Computershare will commingle each
participant's funds with those of all other participants in the 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 net funds available from a
cash dividend and any voluntary cash payments being concurrently invested. Any
stock dividends or split shares distributed on shares held in the 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 payment being concurrently invested, up
to a maximum charge of $2.50 per participant plus $.03 per share, will be
deducted (and paid to Computershare) prior to each purchase of shares.
Shareholder sales of shares held by Computershare in the Plan are subject to a
fee of $10.00 plus $.12 per share deducted from the proceeds of the sale.
Additional nominal fees are charged by Computershare for specific shareholder
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.
Participation in the Plan may be terminated by a participant at any time by
written instructions to Computershare. Upon termination, a participant will
receive a certificate for the full number of shares credited to his account,
unless he requests the sale of all or part of such shares.
Dividends reinvested by a shareholder under the Plan will generally be
treated for U.S. federal income tax purposes in the same manner as dividends
paid to such shareholder in cash. See "Certain tax information for United States
shareholders" for more information regarding tax consequences to U.S. investors
of an investment in shares of the Company, including the effect of the Company's
status as a PFIC. The amount of the service charge is deductible for U.S.
federal income tax purposes, subject to limitations.
To participate in the Plan an investor may not hold his shares in a "street
name" brokerage account.
Additional information regarding the Plan may be obtained from Computershare,
P.O. Box 43081, Providence, RI 02940-3081. Information may also be obtained on
the internet at www.computershare.com/equiserve or by calling Computershare's
Telephone Response Center at 1-781-575-2723 between 9:00 a.m. and 5:00 p.m.,
Eastern time, Monday through Friday.
--------------------------------------------------------------------------------
PRIVACY NOTICE (UNAUDITED)
The Company is committed to protecting the financial privacy of its
shareholders.
We do not share any nonpublic, personal information that we may collect about
shareholders with anyone, including our affiliates, except to service and
administer shareholders' share accounts, to process transactions, to comply with
shareholders' requests or legal requirements or for other limited purposes
permitted by law. For example, the Company may disclose a shareholder's name,
address, social security number and the number of shares owned to its
administrator, transfer agent or other service providers in order to provide the
shareholder with proxy statements, tax reporting forms, annual reports or other
information about the Company. This policy applies to all of the Company's
shareholders and former shareholders.
We keep nonpublic personal information in a secure environment. We restrict
access to nonpublic personal information to Company officers, agents and service
providers who have a need to know the information based on their role in
servicing or administering shareholders' accounts. The Company also maintains
physical, electronic and procedural safeguards that comply with federal
regulations and established security standards to protect the confidentiality of
nonpublic personal information.
15
OTHER INFORMATION (UNAUDITED)
PROXY VOTING
The policies and procedures used by the Company to determine how to vote
proxies relating to portfolio securities and information regarding how the
Company voted proxies relating to portfolio securities during the twelve month
period ended June 30, 2005 is available on the Company's website at
http://www.asaltd.com and on the Securities and Exchange Commission's website at
http://www.sec.gov. A written copy of the Company's policies and procedures is
available without charge, upon request, by calling collect (973) 377-3535.
FORM N-Q
The Company files its schedule of portfolio holdings with the Securities and
Exchange Commission (the "Commission") for the first and third quarters of each
fiscal year on Form N-Q. The Company's Forms N-Q are available on the
Commission's website at http://www.sec.gov. The Company's Forms N-Q also may be
reviewed and copied at the Commission's Public Reference Room in Washington,
D.C.; information on the operation of the Public Reference Room may be obtained
by calling 1-800-SEC-0330. The schedule of portfolio holdings also is included
in the Company's financial statements for the first and third quarters of each
fiscal year which are available on the Company's website at
http://www.asaltd.com.
ANNUAL CEO CERTIFICATION
The Company has submitted to the New York Stock Exchange the required annual
certification of the Company's Chief Executive Officer. The Company also will
include the certification of the Company's Chief Executive Officer and Chief
Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 as
an exhibit to the Company's Form N-CSR for the year ended November 30, 2005 to
be filed with the Securities and Exchange Commission.
VOTING RESULTS
The following votes were cast at a Special General Meeting of Shareholders of
ASA (Bermuda) Limited held on July 21, 2005:
PROPOSAL TO CHANGE THE COMPANY'S SUBCLASSIFICATION UNDER THE INVESTMENT
COMPANY ACT FROM A DIVERSIFIED TO A NON-DIVERSIFIED COMPANY AND TO ELIMINATE
RELATED FUNDAMENTAL INVESTMENT RESTRICTIONS. SEE THE FOLLOWING SUB-PROPOSALS FOR
VOTING RESULTS.
SUB-PROPOSAL CHANGING THE COMPANY'S SUBCLASSIFICATION UNDER THE INVESTMENT
COMPANY ACT FROM A DIVERSIFIED TO A NON-DIVERSIFIED COMPANY.
For Against Abstain
---- ------- -------
3,786,305 783,486 249,986
SUB-PROPOSAL ELIMINATING THE FUNDAMENTAL RESTRICTION CONCERNING THE
PERCENTAGE OF ASSETS WHICH THE COMPANY MAY INVEST IN THE SECURITIES OF ANY
SINGLE ISSUER.
For Against Abstain
---- ------- -------
3,743,083 839,515 237,179
SUB-PROPOSAL ELIMINATING THE FUNDAMENTAL INVESTMENT RESTRICTION CONCERNING
THE PERCENTAGE OF OUTSTANDING SECURITIES OF ANY SINGLE ISSUER WHICH THE COMPANY
MAY ACQUIRE.
For Against Abstain
---- ------- -------
3,755,218 824,831 239,728
PROPOSAL TO REPLACE THE COMPANY'S CURRENT FUNDAMENTAL INVEVSTMENT POLICIES
CONCERNING THE CONCENTRATION OF ITS INVESTMENTS INSIDE AND OUTSIDE OF SOUTH
AFRICA WITH A NEW FUNDAMENTAL INVESTMENT POLICY.
For Against Abstain
---- ------- -------
3,813,209 771,368 235,200
PROPOSAL TO AMEND THE COMPANY'S FUNDAMENTAL INVESTMENT RESTRICTION RELATING
TO THE PURCHASE OR SALE OF COMMODITIES.
For Against Abstain
---- ------- -------
3,728,821 841,625 249,331
PROPOSAL TO AMEND THE COMPANY'S FUNDAMENTAL INVESTMENT RESTRICTION RELATING
TO INVESTMENTS OF CASH.
For Against Abstain
---- ------- -------
3,809,693 758,716 251,368
FORWARD-LOOKING STATEMENTS
This report contains "forward-looking statements" within the meaning of the
Securities Act of 1933 and the Securities Exchange Act of 1934. By their nature
all forward-looking statements involve risks, uncertainties and other factors
which may cause actual results, performance or achievements of management's
plans to be materially different from those contemplated by the forward-looking
statements. Such factors include, but are not limited to, the performance of the
companies whose securities comprise the Company's portfolio, the conditions in
the U.S., South Africa and other international securities and foreign exchange
markets, the price of gold, platinum and other precious minerals and changes in
tax law.
16
BOARD OF DIRECTORS AND OFFICERS
OF ASA (BERMUDA) LIMITED
Directors are elected at each annual general meeting of shareholders to serve
until the next annual general meeting. Officers are elected to serve one-year
terms. The address of each director and officer is c/o LGN Group, LLC, P.O. Box
269, Florham Park, NJ 07932.
INTERESTED DIRECTORS
ROBERT J.A. IRWIN (78)
Position held with the Company: Chairman and Treasurer since 2003;
President since 2004; Director since 2003 (ASA Limited from 1987 to 2005)
Other Principal Occupations During Past 5 Years: Chairman and Treasurer of
ASA Limited until 2005
Other Directorships held by Director: Former President, Chief Executive
Officer and Director of Niagara Share Corporation
RONALD L. MCCARTHY (72)
Position held with the Company: Director since 2004
(ASA Limited from 1988 to 2005)
Principal Occupations During Past 5 Years: Managing Director and,
from 2001, Secretary of ASA Limited until 2005
Other Directorships held by Director: None
--------------------------------------------------------------------------------
INDEPENDENT DIRECTORS
HENRY R. BRECK (68)
Position held with the Company: Director since 2004
(ASA Limited from 1996 to 2004)
Principal Occupations During Past 5 Years: Chairman and a director of Ark
Asset Management Co., (registered investment adviser)
Other Directorships held by Director: Director of Butler Capital Corp.
HARRY M. CONGER (75)
Position held with the Company: Deputy Chairman (non-executive) since 2004
Director since 2004 (ASA Limited from 1984 to 2004)
Principal Occupations During Past 5 Years: Chairman and CEO Emeritus of
Homestake Mining Company
Other Directorships held by Director: Director of Apex Silver Mines Limited
CHESTER A. CROCKER (64)
Position held with the Company: Director since 2004
(ASA Limited from 1996 to 2004)
Principal Occupations During Past 5 Years: James R. Schlesinger Professor of
Strategic Studies, School of Foreign Service, Georgetown University;
President of Crocker Group (consultants)
Other Directorships held by Director: Director of Universal Corporation,
United States Institute of Peace, First Africa Holdings Ltd. and
G3 Good Governance Group, Ltd.
JOSEPH C. FARRELL (70)
Position held with the Company: Director since 2004
(ASA Limited from 1999 to 2004)
Principal Occupations During Past 5 Years: Retired Chairman, President and
CEO of The Pittston Company
Other Directorships held by Director: Director of Universal Corporation and
Maxjet Airways, Inc.
JAMES G. INGLIS (61)
Position held with the Company: Director since 2004
(ASA Limited from 1998 to 2004)
Principal Occupations During Past 5 Years: Chairman of Melville Douglas
Investment Management (Pty) Ltd. since 2002; Executive Director prior thereto.
Other Directorships held by Director: Director of Coupon Holdings (Pty) Ltd.
MALCOLM W. MACNAUGHT (68)
Position held with the Company: Director since 2004
(ASA Limited from 1998 to 2005)
Principal Occupations During Past 5 Years: Retired and formerly
Vice President and Portfolio Manager at Fidelity Investments
Other Directorships held by Director: Director of Meridian Gold, Inc.
ROBERT A. PILKINGTON (60)
Position held with the Company: Director since 2004 (ASA Limited from 1979 to
2005) Principal Occupations During Past 5 Years: Investment banker and
Managing Director of UBS Securities LLC or predecessor companies
Other Directorships held by Director: Director of Avocet Mining PLC
A. MICHAEL ROSHOLT (85)
Position held with the Company: Director since 2004
(ASA Limited from 1982 to 2005)
Principal Occupations During Past 5 Years: Chairman of the
National Business Initiative (South Africa), a non-profit
organization; retired Chairman of Barlow Rand Limited
Other Directorships held by Director: None
--------------------------------------------------------------------------------
OTHER OFFICERS
PAUL K. WUSTRACK, JR. (62)
Position held with the Company: Secretary and Chief Compliance Officer since
2004
Other Principal Occupations During Past 5 Years: Assistant U.S. Secretary of
ASA Limited from 2002 to 2005, Chief Compliance Officer from 2004 to 2005;
prior thereto, Special Counsel, Phillips, Lytle, Hitchcock, Blaine & Huber LLP
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Item 2. Code of Ethics.
(a) The registrant has adopted a code of ethics that applies
to its principal executive officer and principal
financial officer.
(b) Not applicable.
(c) During the period covered by this report, there were no
amendments to the code of ethics referred to in 2(a)
above.
(d) During the period covered by this report, there were no
waivers to the provisions of the code of ethics referred
to in 2(a) above.
(e) Not applicable.
(f) A copy of the registrant's code of ethics is filed
herewith.
Item 3. Audit Committee Financial Expert.
The registrant's board of directors has determined that Malcolm
W. MacNaught is an "audit committee financial expert" as defined in Item 3 to
Form N-CSR. Mr. MacNaught has 35 years of experience evaluating and analyzing
investments and was Vice President and portfolio manager at Fidelity Investments
from 1968 until his retirement in 1996. He has served on registrant's and its
predecessor's, ASA Limited ("ASA"), Audit Committee for seven years and is
Chairman thereof. He also served as chairman of the audit committee of another
public company. Mr. MacNaught is an "independent" director pursuant to Item 3 of
Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees. The aggregate fees billed for professional
services rendered by the independent auditors for the
audit of the registrant's and ASA's annual financial
statements and audit or review of the semi-annual
financial statements and services rendered in connection
with statutory or regulatory filings for 2005 and 2004
were $98,400 and $100,000, respectively.
(b) Audit-Related-Fees - The aggregate fees billed for
assurance and related services rendered by the
independent auditors that were reasonably related to the
performance of the audit or review of the
registrant's and ASA's financial statements for 2005 and
2004 were $12,000 and $47,250. The figure for 2005
includes fees billed in connection with the review of
registrant's procedures related to compliance with its
SEC Order. The figure for 2004 includes fees billed in
connection with the review of documents filed with the
SEC related to the reorganization of the registrant and
ASA and the review of registrant's procedures related to
compliance with its SEC Order.
(c) Tax Fees - The aggregate fees billed for professional
services rendered by the independent auditors in
connection with tax compliance, tax advice and tax
planning, such as review of ASA's tax calculations,
ASA's South African tax returns and updates on South
African tax law changes for 2005 and 2004 were $0 and
$18,000, respectively.
(d) All Other Fees - There were no non-audit fees not
disclosed above that were billed for products and
services provided by the independent auditors for 2005
and 2004.
(e)(1) Audit Committee's Pre-Approval Policies and Procedures.
The Audit Committee of the registrant has the sole
authority to pre-approve all audit and non-audit
services to be provided by the independent auditors,
subject to the de minimis exceptions for non-audit
services described in Section 10A(i)(1)B of the
Securities Exchange Act of 1934 ("Exchange Act") which
are approved by the Committee prior to the completion of
the audit. The Audit Committee may delegate its
pre-approval authority to a subcommittee. If the
Committee has delegated its pre-approval authority to a
subcommittee, any decision of the subcommittee shall be
presented to the full Committee at its next scheduled
meeting. Pre-approval of audit and non-audit services
shall not be required if the engagement to render the
services is entered into pursuant to pre-approved
policies and procedures established by the Committee,
provided the Committee is informed of each such service.
The Committee has not yet established such policies and
procedures.
(e)(2) None of the services described in paragraphs (b) - (d)
above were approved by the Audit Committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) The aggregate fees billed by the independent auditors
for non-audit services rendered to the registrant and
its predecessor, ASA, for 2005 and 2004 were $12,000 and
$65,250, respectively.
(h) Not applicable.
Item 5. Audit Committee of Listed Registrants.
(a) The registrant has a standing audit committee
established in accordance with Section 3(a)(58)(A) of
the Exchange Act. The members of the audit committee
are: Messrs. Malcolm W. MacNaught (Chairman), Henry R.
Breck and Joseph C. Farrell.
(b) Not applicable.
Item 6. Schedule of Investments.
Included as part of the report to shareholders filed under
Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies.
ASA (BERMUDA) LIMITED
PROXY VOTING POLICIES AND PROCEDURES
The following is a statement of the proxy voting policies and procedures
of ASA (Bermuda) Limited ("Company").
PROXY ADMINISTRATION
The Company understands its proxy voting responsibilities and that proxy
voting decisions may affect the long-term interests of its shareholders. The
Company 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 the Company may not or cannot vote a proxy. For example, the
Company 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 the
Company's portfolio securities has been delegated to the President and, in his
absence or inability to act, the Secretary. In evaluating proxy proposals, the
President (or Secretary, when appropriate) 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 President (or
Secretary, when appropriate), who is accountable to the Board of Directors of
the Company.
GENERAL PRINCIPLES
In voting proxies, the Company will act solely in the best economic
interests of its shareholders with the goal of maximizing the value of the
Company'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.
The Company 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 the Company and its
shareholders.
SPECIFIC POLICIES
A. ROUTINE MATTERS
1. ELECTION OF DIRECTORS. In general, the Company will vote
in favor of management's director nominees if they are
running unopposed. The Company believes that management
is in the best position to evaluate the qualifications
of directors and the needs of a particular board.
Nevertheless, the Company 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, the Company 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, the
Company will rely on the judgment of management in
selecting the independent auditors, Nevertheless, the
Company 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.
3. STOCK OPTION AND OTHER EQUITY BASED COMPENSATION PLAN
PROPOSALS. The Company 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, the Company does not have a general
policy in regard to voting on those transactions. The Company
will vote on a case-by-case basis on each transaction.
C. CHANGES IN CAPITAL STRUCTURE
The Company 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 the Company's vote will be
made in a manner consistent with the objective of maximizing
long-term shareholder value.
D. ANTI-TAKEOVER PROPOSALS
In general, the Company will vote against any proposal which the
Company believes would materially contribute to preventing a
potential acquisition or takeover, including proposals to:
o Stagger the board of directors;
o Introduce cumulative voting;
o Introduce unequal voting rights;
o Create supermajority voting;
o Establish preemptive rights.
In general, the Company will vote in favor of any proposals to
reverse the above.
E. SHAREHOLDER PROPOSALS INVOLVING SOCIAL, MORAL OR ETHICAL MATTERS
In general, the Company 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 the Company believes a proposal
has substantial economic implications.
F. CONFLICT OF INTEREST
In view of the fact that the Company is internally managed and
does not have an investment advisor, it is unlikely that
conflicts of interest will
arise in voting the proxies of the Company's portfolio
companies. The Company maintains a record of the affiliated
persons of each director and officer of the Company including
the President and Secretary. The Compliance Officer reviews
proxy statement proposals to determine the existence of a
potential conflict of interest. In the event that the President
(or Secretary, when appropriate) 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 the Company's vote was made solely in the
interests of the Company and without regard to any other
consideration.
Date: November 10, 2005
Item 8. Portfolio Managers of Closed-End Management Investment
Companies.
Not applicable for reports covering periods ending before
December 31, 2005.
Item 9. Purchases of Equity Securities by Closed-end Management
Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which
shareholders may recommend nominees to the registrant's board of directors since
the registrant provided disclosure in response to Item 7(d)(2)(ii)(G) of
Schedule 14A in its proxy statement dated January 11, 2006.
Item 11. Controls and Procedures
(a) The Chairman of the Board, President and Treasurer, in
his capacities as principal executive officer and
principal financial officer of the registrant, has
concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940 (the "1940 Act")) are
effective, based on his evaluation of these controls and
procedures as of a date within 90 days prior to the
filing date of this report.
(b) There were no changes in the registrant's internal
control over financial reporting (as defined in Rule
30a-3(d) under the 1940 Act) that occurred during the
second fiscal quarter of the period covered by this
report that have materially affected, or are
reasonably likely to materially affect, the registrant's
internal control over financial reporting.
Item 12. Exhibits.
(a)(1) The code of ethics that is the subject of disclosure
under Item 2 above is attached hereto.
(2) The certification required by Rule 30a-2(a) under the
1940 Act is attached hereto.
(3) Not applicable.
(b) The certification required by Rule 30a-2(b) under the
1940 Act, Rule 13a-14(b) under the Exchange Act and
Section 1350 of Chapter 63 of Title 18 of the United
States Code is attached hereto. This certification is
not deemed "filed" for purposes of Section 18 of the
Exchange Act, or otherwise subject to the liability of
that section. Such certification will not be deemed to
be incorporated by reference into any filing under the
Securities Act of 1933 or the Exchange Act, except to
the extent that the registrant specifically incorporates
it by reference.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
ASA (Bermuda) Limited
Date: January 18, 2006 By: /s/ Robert J.A. Irwin
-------------------------------------------
Robert J.A. Irwin
Chairman of the Board, President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following person on behalf of the registrant and in the capacities and on the
date indicated.
Date: January 18, 2006 By: /s/ Robert J.A. Irwin
-------------------------------------------
Robert J.A. Irwin
Chairman of the Board, President and Treasurer
(Principal Executive Officer and
Principal Financial Officer)