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
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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, N.A.
3 Chase Metrotech Center
Brooklyn, New York 11245
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(Name and address of agent for service)
Registrant's telephone number, including area code: 716-883-2428
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Date of fiscal year end: November 30, 2006
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Date of reporting period: November 30, 2006
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Item 1. Reports to Stockholders.
ASA (BERMUDA) LIMITED
ANNUAL
REPORT
2006
ASA (BERMUDA) LIMITED
ANNUAL REPORT AND
FINANCIAL STATEMENTS
November 30, 2006
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
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, NY, U.S.A.
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 Bailhache, Hamilton, Bermuda
Kirkpatrick & Lockhart Preston Gates Ellis LLP, Washington, DC, U.S.A.
CUSTODIAN
JPMorgan Chase Bank, N.A.
Brooklyn, NY, U.S.A.
SUBCUSTODIAN
FirstRand Bank Limited
Johannesburg, South Africa
FUND ACCOUNTANTS
Kaufman Rossin Fund Services, LLC
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-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, 2006 the Company's net asset value was $74.19 per share. The
closing price of the Company's shares on the New York Stock Exchange was $64.21
at November 30, 2006, which represented a 13.5% discount to the net asset value.
This compares with the net asset value of $55.93 per share at November 30, 2005,
at which time the closing price was $49.65, a discount of 11.2% to the net asset
value.
Net investment income for the fiscal year ended November 30, 2006 was $.76
per share, as compared to $.10 per share for the fiscal year ended November 30,
2005. Realized gain from investments, including net realized gain on investments
from foreign currency transactions for the fiscal year ended November 30, 2006,
were $1.38 per share, as compared to $1.25 per share for the fiscal year ended
November 30, 2005.
Dividends totaling $.90 per share were paid or declared during each of the
fiscal years ended November 30, 2006 and November 30, 2005. (See Note 1.E.
Dividends to Shareholders (page 10) and Certain tax information for United
States shareholders (pages 13 and 14) for further comments.)
THE GOLD BULLION MARKET
In 2006 the dollar price of gold continued to improve and in May it reached
$732/oz. In 1980 the price spiked to $800/oz. Unlike that occasion, this time
the gold price appears to be much less inclined to collapse from recent highs
and it has spent a good deal of time above $600/oz. Indeed, the average for the
year should be around $603/oz, which is a very gratifying 35% higher than last
year's average price.
The rand/dollar exchange rate is, of course, critical to the well-being of
the South African mines and like most exporters they welcome a weak rand.
Although there has been some recent recovery as the dollar has itself weakened,
the rand was much softer in 2006 than in 2005 resulting in record high rand
prices for bullion. A peak in the South African gold price of almost R154,350/kg
was seen in July and the year's average price is almost R132,000/kg. The last
few months have seen the rand price staying quite close to the R145,000/kg
level.
AngloGold Ashanti has reported on an interesting development in the North
American market. The retail trade there appears resigned to the higher raw
material prices and, accordingly, has been increasing prices on finished
products rather than trying to keep prices constant by reducing the gold content
of jewelry pieces. U.S. consumers have been setting records in their spending on
these items.
Without any particularly noteworthy activity in the bullion market by the
world's central banks this year, analysts have been speculating about whether or
not Russia might not soon be a significant buyer in order to boost the gold
component of its reserves from currently quite low levels. China's intention to
diversify its own reserves away from dollar currency holdings has also at times
been a factor in the gold bullion market.
THE GOLD SHARE MARKET
The FTSE/JSE Gold Mining Index has just six constituent shares of which the
three owned by the Company make an overwhelming majority contribution. The index
echoed the rand gold price and peaked at 3333 points in July 2006 as well. The
range this year has been a comparatively modest 880 points (2005's range was
1720 points). Currently, the index level is at about 2900 points. One factor
holding back share price performance is that both AngloGold Ashanti and Harmony
have been unable to report headline profits for any of the quarterly reporting
periods so far this year. In both cases a key culprit is poorly positioned hedge
books.
Gold Fields is the largest holding in our portfolio. It is the second largest
gold producer in Africa. The company is approaching completion of the
acquisition of the South Deep Mine (formerly jointly owned by South Africa's
Western Areas and Canada's Barrick Gold) for $1.5 billion in shares and cash. In
2007, Gold Fields plans to complete a study into the viability of expanding the
mine's annual production to 1 million ounces from the 800,000 ounces currently
expected by 2011. South Deep Mine is one of the most important new sources of
gold reserves in the world and it will be an advantage to Gold Fields at a time
when all gold mining companies are seeking new reserves to replace the old
reserves currently being mined.
The performance of the North American producers, as measured by the
Philadelphia Gold & Silver Index, has been similar to the dollar gold price and
peaked at just over 160 in May. This represented a 100% gain over the low set
nearly one year earlier. The current level of 140 is nearly at the year's
average.
THE PLATINUM MARKET
Rumors about the possible launch of a platinum metal exchange-traded fund
(ETF) caused the price of this metal to spike to an all time high of $1,390/oz
in the middle of November 2006. However, it quickly retreated from these heights
and is currently in the lower end of the $1,100/oz to $l,250/oz range, where it
has been for much of the year. This still represents a substantial increase over
2005 prices. According to the Johnson Matthey Platinum review, industrial demand
for the metal should grow while jewelry demand - particularly in China - is
expected to decline. With overall supply growth more or less matching this
forecast demand, the expectation is for the platinum price to remain at current
levels within a $280/oz trading range.
Both Anglo American Platinum and Impala share prices have enjoyed a very
positive year and, as they did in 2005, will end the current year near their
all-time highs.
THE ECONOMIC ENVIRONMENT
The United States ceased its regular upward ratcheting of the federal funds
rate in mid-2006 and the world has been watching to see how the U.S. economy and
its currency will respond. There are well-defended and strongly argued positions
on either side of the soft landing versus hard landing scenarios as well as on
whether or not the U.S. dollar will weaken further. Increasingly, recent
evidence is growing that the housing market is slowing substantially, but any
signs of a knock-on effect for the all-important consumer are not yet obvious.
2
Globally, there seems only a scant threat of inflation soaring away on the
upside; nevertheless, many central banks have been continuing a program of rate
increases. In South Africa, the Reserve Bank has become particularly worried by
the surge in money supply and credit extension. In addition to enjoying its own
share of the world-wide increase in liquidity, South Africa has been subject to
a unique change in the population dynamics, as hitherto underemployed portions
of the community have been able to join in the consumer culture and are making
up for lost time. In June, after a long period of no change, the Bank began a
program of increasing the repurchase rates about every two months by 50 basis
points. It is currently now at 9% and the prime overdraft rate is at 12.5%. It
will take a while for even these comparatively high interest rates to slow
consumer momentum.
As noted earlier, the rand has not enjoyed a strong year. Against the U.S.
dollar its weakness was somewhat watered down by its own weakness against other
currencies and so at a current level of just over R7 per USD it is down about
10% since January 1, 2006. Against the British pound, however, it is down more
than 20% for the comparable period. Some impact of this weakening currency can
be seen in the annualized GDP growth figures of 5.5%, 5.0% and 4.9% for the
first three quarters of 2006, respectively. The recent substantial upward
revision to the first two of these figures shows that the country came close to
the government target of 6% but the trend is, unfortunately, not in the right
direction.
PORTFOLIO MATTERS
In July 2005, the Company's shareholders voted to change the fundamental
investment policies of the Company in order to allow it to broaden the
diversification of its portfolio outside of South Africa. The purpose of this
change was to allow the Company to take advantage of investment opportunities
arising in countries around the world.
South Africa's share of world production has dropped from approximately 80%
thirty years ago to less than 15% today. South Africa is still in possession of
immense gold reserves. However, most of these reserves can only be produced at a
cost too high to encourage production at the current gold price. It is essential
that gold mining companies seek out new mineable reserves throughout the world
to replace current production. To that end, South African gold miners have to
some extent expanded their exploration and production activities outside of the
country. However, if the Company intends to fully participate in the benefits
from this expansion in the gold mining industry, it should be diversifying its
portfolio out of the South African investments that have served it so well over
the years. This diversification should and will take a broad geographic form as
many, if not most, of the most rapidly developing mining endeavours are in
countries where political risk is an ongoing concern.
AS WE CONTINUE TO DIVERSIFY THE PORTFOLIO, IT IS LIKELY THAT MORE CAPITAL
GAINS WILL BE REALIZED THAN WAS TYPICAL IN PAST YEARS. AS THIS OCCURS,
SHAREHOLDERS AND THEIR ADVISORS ARE AGAIN ENCOURAGED TO REVIEW THE IMPACT OF THE
U.S. FEDERAL INCOME TAX RULES GENERALLY DESCRIBED ON PAGES 13 AND 14 OF THE 2006
ANNUAL REPORT, AND IN PREVIOUS ANNUAL AND SEMI-ANNUAL REPORTS, ON THEIR
INDIVIDUAL FINANCIAL AND TAX SITUATION.
* * *
Ronald L. McCarthy will not stand for re-election as a director at our 2007
Annual General Meeting of Shareholders. We appreciate and thank Mr. McCarthy for
the important role he has played in the affairs of the Company and of its
predecessor, ASA Limited, the latter of which he served as Managing Director for
many years.
THE ANNUAL GENERAL MEETING OF SHAREHOLDERS WILL BE HELD ON THURSDAY, FEBRUARY
8, 2007, AT 10:00 A.M. AT THE OFFICES OF UBS, 1285 AVENUE OF THE AMERICAS, 14TH
FLOOR, NEW YORK, NEW YORK, USA. WE LOOK FORWARD TO HAVING YOU IN ATTENDANCE.
ROBERT J.A. IRWIN,
CHAIRMAN, PRESIDENT AND TREASURER
December 29, 2006
3
(THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE)
PHILADELPHIA GOLD & SILVER INDEX (XAU): Monthly average (unaudited)
107.5 2005 93 2006 142
2004 102.69 94 141
99.63 98 133
100.13 89 150
93.82 83 151
84.03 90 132
85.83 92 142
87.53 95 145
89.88 106 133
94.95 108 128
101.71 112 139
106.83 122
100
(THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE)
LONDON FREE MARKET GOLD PRICE: Monthly average $ per ounce (unaudited)
407.59 2005 424 2006 550
2004 413.99 423 555
405.33 434 557
406.67 429 611
403.02 422 675
383.45 431 596
391.99 424 634
398.09 438 632
400.48 456 598
405.27 470 586
420.46 477 628
439.39 510
442
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PORTFOLIO CHANGES DURING THE YEAR ENDED NUMBER OF SHARES
NOVEMBER 30, 2006 (UNAUDITED) ----------------
INCREASE DECREASE
Barrick Gold Corporation -------- --------
Goldcorp Inc. 195,000
Impala Platinum Holdings Limited 300,000
Mvelaphanda Resources Limited 1,507,100(1)
Placer Dome Incorporated 1,950,000
Randgold Resources Limited - ADRs 1,065,312
900,000
(1) Received as 8 for 1 stock split, effective November 6, 2006.
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 that 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, 2006, 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 five 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.
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, assessing 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, 2006 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, 2006, 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 five years in the period
then ended, in conformity with U.S. generally accepted accounting principles.
Ernst & Young LLP
New York, New York
December 29, 2006
5
SCHEDULE OF INVESTMENTS
November 30, 2006
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Number of Percent of
Name of Company Shares Market Value Net Assets
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ORDINARY SHARES OF GOLD MINING COMPANIES
AUSTRALIA
Newcrest Mining Limited - ADRs 3,000,000 $ 61,273,863 8.6%
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CANADA
Barrick Gold Corporation 925,000 29,082,000 4.1
Goldcorp Inc. 900,000 28,053,000 3.9
Meridian Gold Inc. (1) 600,000 18,480,000 2.6
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75,615,000 10.6
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CHANNEL ISLANDS
Randgold Resources Limited - ADRs (1) 900,000 20,646,000 2.9
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PERU
Compania de Minas Buenaventura S.A. - ADRs 900,000 25,686,000 3.6
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SOUTH AFRICA
AngloGold Ashanti Limited 2,245,894 108,297,009 15.2
Gold Fields Limited 8,359,977 159,926,359 22.4
Harmony Gold Mining Company Limited (1) 292,459 4,960,105 .7
Harmony Gold Mining Company Limited - ADRs (1) 2,166,400 36,742,144 5.2
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309,925,617 43.5
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UNITED STATES
Newmont Mining Corporation 520,368 24,410,463 3.4
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Total ordinary shares of gold mining companies (cost - $140,482,378) 517,556,943 72.6
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ORDINARY SHARES OF OTHER MINING COMPANIES
SOUTH AFRICA
Anglo Platinum Limited 520,100 60,195,547 8.5
Impala Platinum Holdings Limited 1,722,400 43,582,509 6.1
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103,778,056 14.6
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UNITED KINGDOM
Anglo American plc 1,280,000 59,442,281 8.4
LONMIN PLC - ADRS 450,000 27,161,672 3.8
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86,603,953 12.2
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Total ordinary shares of other mining companies (cost - $25,909,431) 190,382,009 26.8
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Total investments (Cost - $166,391,809) (2) 707,938,952 99.4
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CASH, CASH EQUIVALENTS, RECEIVABLES AND OTHER ASSETS LESS LIABILITIES 4,328,299 .6
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Net assets $712,267,251 100.0%
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(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. federal income tax
principles. Gross unrealized appreciation of investments and gross
unrealized depreciation of investments at November 30, 2006 were
$541,547,143 and $0, respectively, resulting in net unrealized
appreciation on investments of $541,547,143.
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, 2006
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COUNTRY BREAKDOWN*
South Africa 58.1%
United Kingdom 12.2%
Canada 10.6%
Australia 8.6%
Peru 3.6%
United States 3.4%
Channel Islands 2.9%
* Country breakdowns, which are based on Company domiciles, are
expressed as a percentage of 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, 2006
----------------------------------------------------------------------------------------------------------------
ASSETS
----------------------------------------------------------------------------------------------------------------
Investments, at market value
Gold mining companies - (cost - $140,482,378) $517,556,943
Other mining companies - (cost - $25,909,431) 190,382,009
----------------------------------------------------------------------------------------------------------------
707,938,952
----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 12,051,714
Dividends and interest receivable 340,711
Deferred pension 170,000
Other assets 22,000
----------------------------------------------------------------------------------------------------------------
Total assets 720,523,377
----------------------------------------------------------------------------------------------------------------
LIABILITIES
----------------------------------------------------------------------------------------------------------------
Accounts payable and accrued liabilities 298,500
Nonqualified pension liability 544,967
Liability for retirement benefits due to current and future retired directors 692,659
Dividend payable 6,720,000
----------------------------------------------------------------------------------------------------------------
Total liabilities 8,256,126
----------------------------------------------------------------------------------------------------------------
NET ASSETS (SHAREHOLDERS' INVESTMENT) $712,267,251
----------------------------------------------------------------------------------------------------------------
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 (75,260,226)
Undistributed net realized gain on investments 159,696,948
Net unrealized appreciation on investments 541,547,143
Net unrealized gain on translation of assets
and liabilities in foreign currency 544,043
----------------------------------------------------------------------------------------------------------------
Net assets $712,267,251
----------------------------------------------------------------------------------------------------------------
Net assets per share $74.19
----------------------------------------------------------------------------------------------------------------
The closing price of the Company's shares on the New York Stock Exchange
on November 30, 2006 was $64.21.
The notes to the financial statements form an integral part of these
statements.
7
STATEMENT OF OPERATIONS
Year ended November 30, 2006
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Investment income
Dividend income (net of foreign withholding taxes of $180,954) $ 11,006,282
Interest income 510,255
-----------------------------------------------------------------------------------------------------------------------
Total investment income 11,516,537
-----------------------------------------------------------------------------------------------------------------------
Expenses
Shareholder reports and proxy expenses 345,066
Directors' fees and expenses 618,058
Salaries and benefits 764,254
Other administrative expenses 626,324
Fund accounting 97,500
Professional fees and expenses 785,037
Insurance 276,571
Severance expense 500,673
Wind-up expenses - ASA Limited 55,029
Other 135,352
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Total expenses 4,203,864
-----------------------------------------------------------------------------------------------------------------------
Net investment income 7,312,673
-----------------------------------------------------------------------------------------------------------------------
Net realized gain from investments
Proceeds from sales 33,773,417
Cost of securities sold 21,184,671
-----------------------------------------------------------------------------------------------------------------------
Net realized gain from investments 12,588,746
-----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from foreign currency transactions
Investments 665,981
Foreign currency (249,330)
-----------------------------------------------------------------------------------------------------------------------
Net realized gain from foreign currency transactions 416,651
-----------------------------------------------------------------------------------------------------------------------
Net increase in unrealized appreciation on investments
Balance, beginning of year 377,887,288
Balance, end of year 541,547,143
-----------------------------------------------------------------------------------------------------------------------
Net increase in unrealized appreciation on investments 163,659,855
-----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain from investments and foreign currency transactions 176,665,252
-----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 183,977,925
-----------------------------------------------------------------------------------------------------------------------
The notes to the financial statements form an integral part of these
statements.
8
STATEMENTS OF CHANGES IN NET ASSETS
Years ended November 30, 2006 and 2005
----------------------------------------------------------------------------------------------------------------------------
2006 2005
----------------------------------------------------------------------------------------------------------------------------
Net investment income $ 7,312,673 $ 935,618
Net realized gain from investments 12,588,746 33,023,562
Net realized gain (loss) from foreign currency transactions 416,651 (21,009,487)
Net increase in unrealized appreciation on investments 163,659,855 53,525,733
Net unrealized gain (loss) on translation of assets
and liabilities in foreign currency -- (439,268)
----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 183,977,925 66,036,158
Dividends payable/paid
From net investment income (7,312,673) (1,920,000)
From net realized gain from investments (1,327,327) (6,720,000)
----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 175,337,925 57,396,158
Net assets, beginning of year 536,929,326 479,533,168
----------------------------------------------------------------------------------------------------------------------------
Net assets, end of year $712,267,251 $536,929,326
----------------------------------------------------------------------------------------------------------------------------
The notes to the financial statements form an integral part of these
statements.
9
NOTES TO FINANCIAL STATEMENTS
Year ended November 30, 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESAS A (Bermuda) Limited ("Company")
is a closed-end management investment company registered under the United States
Investment Company Act of 1940 and is organized as an exempted limited liability
company under the laws of Bermuda. The following is a summary of the Company's
significant accounting policies:
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. If 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 reviewed 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 NewYork 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. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
During the year ended November 30, 2006, sales of securities amounted to
$33,773,417 and purchases of securities amounted to $30,827,580.
Dividend income is recorded on the ex-dividend date, net of withholding taxes,
if any. Interest income is recognized on the accrual basis.
E. DIVIDENDS TO SHAREHOLDERS
Dividends to shareholders are recorded on the ex-dividend date.
The reporting for financial statement purposes of dividends paid 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 certain 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.
Certain prior year amounts in the accompanying financial statements have been
reclassified to conform with current year presentation.
10
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended November 30, 2006
2. NEW ACCOUNTING PRONOUNCEMENTS In September 2006, the Financial Accounting
Standards Board (FASB) issued STATEMENT ON FINANCIAL ACCOUNTING STANDARDS NO.
157, "FAIR VALUE MEASUREMENTS" (FAS 157). This standard clarifies the definition
of fair value for financial reporting, establishes a framework for measuring
fair value and requires additional disclosures about the use of fair value
measurements. FAS 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007 and interim periods within those fiscal
years. As of November 30, 2006, the Company does not believe the adoption of FAS
157 will impact the amounts reported in the financial statements, however,
additional disclosures will be required about the inputs used to develop the
measurements of fair value and the effect of certain of the measurements
reported in the statement of operations for a fiscal period.
3. RETIREMENT PLANS The Company has an unfunded non-qualified pension agreement
with its Chairman, President and Treasurer, Robert J. A. Irwin, pursuant to
which the Company credits amounts to a pension benefit account as determined
from time to time by the Board of Directors. Through the period ended November
30, 2006, interest equivalents were credited on amounts credited to the pension
benefit account at an annual rate of 3.5%. Beginning December 1, 2006, interest
equivalents will be credited at an annual rate of 5%. The Company recorded an
expense of $65,500 for the total amount credited to the pension benefit account
during the year ended November 30, 2006.
An amount equal to the balance in the pension benefit account will be payable
in a lump sum upon termination of Mr. Irwin's service as an officer of the
Company. At November 30, 2006, the Company has recorded a liability for pension
benefits due under the agreement of $544,967. The Company has recorded a
deferred pension asset of $170,000 related to this retirement obligation.
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. During the
fiscal year ended November 30, 2006, the liability amount of $739,431 was
reduced by $46,772 due to the death of a retired director resulting in a
liability of $692,659 as of November 30, 2006. 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.
4. ASA LIMITED In connection with the winding up of ASA Limited, in South
Africa, the Company incurred expenses of $55,029 for the fiscal year ended
November 30, 2006. In addition, the Company made a severance payment of $500,673
to Ronald L. McCarthy, former Managing Director of ASA Limited. This amount is
reported as severance expense on the statement of operations.
5. 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.
Asubstantial portion of the Company's assets currently is invested in South
African companies and other companies having significant assets or operations in
SouthAfrica. 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.
6. 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
-----------------------------------------------------------------------------------------------------------------------------------
2006 2005 2004 2003 2002
-----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $ 55.93 $ 49.95 $ 51.54 $ 33.48 $ 21.97
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income .76 .10 .22 .84 .85
Net realized gain from investments 1.31 3.44 .73 -- .51
Net realized gain (loss) from foreign currency
transactions .04 (2.19) (.68) .32 (1.13)
Net increase (decrease) in unrealized appreciation
on investments 17.05 5.58 (1.34) 17.76 11.84
Net unrealized gain (loss) on translation of
assets and liabilities in foreign currency -- (.05) .03 (.06) .24
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 19.16 6.88 (1.04) 18.86 12.31
Dividends
From net investment income (.76) (.20) (.55) (.80) (.80)
From net realized gain from investments (.14) (.70) -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 74.19 $ 55.93 $ 49.95 $ 51.54 $ 33.48
====================================================================================================================================
Market value per share, end of year $ 64.21 $ 49.65 $ 44.82 $ 47.16 $ 30.06
TOTAL INVESTMENT RETURN(1)
Based on market value per share 31.54% 11.40% (3.67%) 59.91% 55.72%
RATIOS TO AVERAGE NET ASSETS
Expenses .63% 1.15% 1.03% .84% .91%
Net investment income 1.09% .21% .46% 2.09% 2.63%
SUPPLEMENTAL DATA
Net assets, end of year (000 omitted) $712,267 $536,929 $479,533 $494,784 $321,423
Portfolio turnover rate 4.66% 7.31% 1.63% -- 4.41%
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 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, 2006
--------------------------------------------------------------------------------
CERTAIN FEES INCURRED BY THE COMPANY
--------------------------------------------------------------------------------
Directors' fees $316,000
Officers' remuneration 741,417
Ronald L. McCarthy (compensation related to ASA Limited) 520,996
--------------------------------------------------------------------------------
The notes to the financial statements form an integral part of these
statements.
12
CERTAIN TAX INFORMATION FOR
UNITED STATES SHAREHOLDERS (UNAUDITED)
THE FOLLOWING IS OF A GENERAL NATURE ONLY AND IS NOT, AND SHOULD NOT BE
INTERPRETED AS, LEGAL OR TAX ADVICE TO ANY PARTICULAR UNITED STATES SHAREHOLDER
OF THE COMPANY. DUE TO THE COMPLEXITY AND POTENTIALLY ADVERSE EFFECT OF THE
APPLICABLE TAX RULES, UNITED STATES SHAREHOLDERS 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.
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 the
total 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 year he holds his shares during
which the Company is a PFIC, the rules described in the preceding paragraphs
generally would not apply; those rules also would not apply to a United States
shareholder who makes the QEF election after such first year 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. 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.
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 who 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 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 Company's taxable year ends. A QEF election is
effective for the shareholder's taxable year for which it is made and all of his
subsequent taxable years 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, 2005 and who files his tax return on the basis
of a calendar year may make a QEF election on his 2006 tax return. A shareholder
of the Company who first held his Company shares on or before November 30, 2005
may also make the QEF election on his 2006 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.
A 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, 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 QEF inclusion for the taxable year to which
the election applies. In
------------------
* For example, the Company paid annual dividends of $.90, $.55 and $.80 per
share during 2005, 2004 and 2003, respectively, an average per year of $.75 per
share. Accordingly, any dividends during 2006 in excess of $.9375 per share
(125% of $.75) would be treated as an excess distribution for that year. (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 and
instead will be taxed at rates up to 35%.
13
order to allow United States shareholders to make QEF elections and to comply
with the applicable annual reporting requirements, the Company annually provides
them a "PFIC Annual Information Statement" containing certain information
required by Treasury regulations.
In early 2007, the Company will send to United States shareholders the PFIC
Annual Information Statement for the Company's 2006 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
property owner's death 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 their 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.
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 or her
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 or her
account, unless he or she 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 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, shareholders may not hold their 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, 2006 are available on the Company's website at
WWW.ASALTD.COM and on the Securities and Exchange Commission's website at
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 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 reported on Form
N-Q 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 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, 2006 to
be filed with the Securities and Exchange Commission.
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 United States, 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 (79)
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 (73)
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 (69)
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. (business
financing)
HARRY M. CONGER (76)
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 (65)
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,
(tobacco, lumber and agri-products) United States Institute of Peace, First
Africa Holdings Ltd. and G3 Good Governance Group, Ltd.
JOSEPH C. FARRELL (71)
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 (coal and mining, transportation and security
services) (now The Brinks Company)
Other Directorships held by Director: Director of Universal Corporation
(tobacco, lumber and agri-products) and Maxjet Airways, Inc.
JAMES G. INGLIS (62)
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 (69)
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 (61)
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 (86)
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), (non-profit organization); retired Chairman of
Barlow Rand Limited (financial, industrial and mining corporation)
Other Directorships held by Director: None
--------------------------------------------------------------------------------
OTHER OFFICERS
PAUL K. WUSTRACK, JR. (63)
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
* By reason of being an officer of the Company or by reason of receipt of
compensation from the Company other than for services as a director of the
Company.
17
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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 Joseph C.
Farrell, Chairman of the registrant's Audit Committee, is an
"audit committee financial expert" as defined in the instructions
to Item 3 of Form N-CSR. Mr. Farrell is "independent" as defined
in Item 3 of Form N-SCR.
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 annual financial statements
and review of the semi-annual financial statements and
services rendered in connection with statutory or
regulatory filings for 2006 and 2005 were $85,000 and
$98,400, respectively. The amount shown for 2005
includes $18,400 for audit of the registrant's
predecessor, ASA Limited ("ASA").
(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 financial statements for 2006 and 2005
were $0 and
$12,000 respectively. The figure for 2005 includes fees
billed in connection with the review of registrant's
procedures related to compliance with its Exemptive
Order dated September 20, 2004.
(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 for 2006 and 2005 were $5,000 and $0,
respectively. The figure for 2006 includes fees billed
for non-U.S. tax advisory services
(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 2006
and 2005.
(e)(1) 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. Any individual project that does not
exceed $25,000 may be pre-approved by the chair of the
Audit Committee. Any such pre-approval by the chair of
the Audit Committee must be presented to the full
Committee at its next scheduled meeting. Any proposed
services exceeding that cost level requires specific
pre-approval by the Audit Committee. 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
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 for
fiscal years ended November 30, 2006 and November 30,
2005 were $5,000 and $12,000, 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. Joseph C. Farrell (Chairman), Malcolm W.
MacNaught and Henry R. Breck.
(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.
Unless otherwise indicated, the information set forth below is as
of November 30, 2006.
(a)(1) Mr. Robert J.A. Irwin is responsible for the day-to-day
management of the registrant's portfolio and previously
was responsible for the day-to-day management of ASA's
portfolio. He has served the registrant as Chairman and
Treasurer since 2003 and President since 2004. He
previously served ASA as Chairman of the Board from 1993
to 2005 and as Treasurer from 1999 to 2005. The foregoing
information is provided as of January 12, 2007.
(2) Mr. Irwin is not responsible for the day-to-day management
of the portfolio of any other registered investment
company or other pooled investment vehicle. In his
capacity as a trustee of a charitable foundation (the
"Foundation") he is responsible for the day-to-day
management of an account (the "Account") maintained by the
Foundation having total assets of $5,219,513. Mr. Irwin
receives no compensation for his service as a trustee of
the Foundation. The Account includes securities of two
companies that are also held by the registrant. Those
securities have been held by the Foundation since at least
1999 and have a total value of $1,386,982. Mr. Irwin's
simultaneous management of the portfolios of the
registrant and the Account could present potential
conflicts of interest with respect to effecting trades in
the same securities. However, registrant believes that
these potential conflicts of interest do not have an
adverse effect on the portfolio management of the
registrant.
(3) Mr. Irwin's compensation consists of a fixed salary,
discretionary bonus and non-qualified pension benefit,
each as determined annually by the registrant's Board of
Directors upon the recommendation of its Compensation
Committee. In determining Mr. Irwin's compensation, the
Board of Directors and Compensation Committee consider his
overall performance and his management responsibilities
with the registrant including those not related to the
registrant's portfolio.
(4) Mr. Irwin beneficially owns common shares of registrant
having a value of over $100,000.
(b) Not applicable
Item 9. Purchases of Equity Securities by Closed-end Management
Investment Company and Affiliated Purchasers.
During the period covered by this report, there were no purchases
made by or on behalf of the registrant or any "affiliated
purchaser", as defined in Rule 10b-18(a)(3) under the Exchange
Act, of any common shares of the registrant.
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 22(b)(15) of Schedule 14A in its proxy statement dated
January 3, 2007.
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 12, 2007 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 12, 2007 By: /s/ Robert J.A. Irwin
------------------------------------------
Robert J.A. Irwin
Chairman of the Board, President and Treasurer
(Principal Executive Officer and
Principal Financial Officer)