<PAGE>
LETTER TO SHAREHOLDERS The Southern Africa Fund, Inc.
- --------------------------------------------------------------------------------
January 16, 1995
Dear Shareholder:
Prospects for the Southern African region continue to improve. Not only has
South Africa made a successful transition to multi-party democracy, but
prospects for peace in Angola and Mozambique have been significantly enhanced by
elections in the latter, and in the former, renewed talks that resulted in a
settlement. At no time in recent history has the outlook for the region looked
so promising.
South Africa, as the dominant economic force in the region, appears at the early
stages of what should prove a sustained and significant economic recovery led
upwards by investment spending. Business confidence is high and consumer
spending is increasing while the global rise in commodity prices has had a
significant impact on the profitability and expansion plans of South Africa's
large mining sector.
PROGRAM FOR RECONSTRUCTION AND DEVELOPMENT
This overall economic resurgence should enable black living standard
expectations to be more easily accommodated. This, coupled with the
Reconstruction and Development Program (RDP), leaves us optimistic as to the
prospect of a continued peaceful transition to a more balanced distribution of
wealth throughout the country.
One cloud on the near-term horizon is inflation. Currently the consumer price
index stands around 10% higher on a year-on-year basis; given that money growth
is well above the central bank's target range, it appears inevitable that
further short-term interest rate hikes will be necessary in 1995 in order to
dampen inflationary pressures. It is to be hoped that the central bank will act
quickly and decisively to prevent an inflationary spiral that has accompanied
the majority of South Africa's growth phases.
PROTECTION FROM DEVALUATION
Although South Africa's inflation rate is likely to remain higher than the
industrial world's average, it is important to remember that foreign investors
are afforded protection against devaluation by the financial rand mechanism.
Currently, the financial rand (the rate at which foreign investors buy
securities in South Africa) trades at around a 17% discount to the commercial
rand (the rate at which goods and services are priced for import and export).
Consequently, any potential downward movement in the commercial rate is not
necessarily reflected in the rate at which foreigners value their security
holdings in the country.
We anticipate that this dual exchange rate mechanism is likely to be abolished
at some point in 1995, leading to a potential currency gain for overseas
investors.
COMMITMENT TO PRIVATIZATION
We also welcome the government's new commitment to privatization. Not only do we
expect greater efficiencies to be achieved by privatized companies, but that
revenues garnered from the sale of government-controlled entities such as the
utility company Eskom, SA Airways, and the national telecom network, should also
help to relieve the financial burden of the RDP, which we estimate at around 45
billion rands over the next five years.
The outlook for the stock market appears very favorable. We expect corporate
earnings growth of more than 20% per annum over the next two years. Given that
the South African market trades on a forward price earnings multiple of around
14 to foreign investors, further gains in equity prices should be attainable.
Capital flows into securities should also gain from the inclusion of South
Africa in the most widely followed emerging market indices during the first half
of 1995.
1
<PAGE>
The Southern Africa Fund, Inc.
- --------------------------------------------------------------------------------
Foreign investors remain significantly under represented in South Africa, which
today ranks among the top-ten securities markets of the world by market
capitalization. As the country's re-integration into the global economy
continues, capital flows will undoubtedly be attracted to this high growth area.
Your portfolio remains broadly fully invested with cash reserves representing
less than 2% of total assets. Mining-related issues represent the largest part
of the portfolio, although it remains underweighted in this area against the
benchmark JSE All-Share Index.
LARGEST HOLDINGS
We continue to focus on issues that we believe will prove beneficiaries of the
revival of growth in the region and whose earnings are sensitive to an upturn in
the economic cycle. The Fund's largest holdings include Iscor, the dominant
steel producer in the region; Gencor, a broadly based mining company; and Sappi,
the paper and forest products group.
Looking forward to 1995 we expect to increase holdings in stable growth
companies. We will also continue to add to holdings in Zimbabwe and Botswana as
the privatization and liberalization programs progress in these countries.
PERFORMANCE
From inception on March 7, 1994, through November 30, 1994, The Southern Africa
Fund has achieved a total return of +30.07% based on the net asset value. We
appreciate your investment in the Fund and look forward to updating you on its
progress in the coming months.
Sincerely,
/s/ Dave H. Williams
Dave H. Williams
Chairman and President
/s/ Mark H. Breedon
Mark H. Breedon
Senior Vice President and Portfolio Manager
2
<PAGE>
TEN LARGEST EQUITY HOLDINGS
November 30, 1994 The Southern Africa Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPANY U.S.$ VALUE PERCENT OF NET ASSETS
<S> <C> <C>
South Africa Iron & Steel Industrial Corp., Ltd. $ 6,027,649 5.5%
Gencor, Ltd. 5,273,723 4.8
South African Breweries, Ltd. 4,421,217 4.0
Murray & Roberts Holdings, Ltd. 4,059,976 3.7
Sappi, Ltd. 3,381,995 3.1
Anglo-American Corp. of South Africa, Ltd. 3,359,854 3.0
Nampak, Ltd. 2,706,569 2.5
Safmarine & Rennies Holdings, Ltd. 2,372,263 2.2
Metropolitan Life, Ltd. 2,343,723 2.1
Engen, Ltd. 2,274,939 2.1
Total $36,221,908 33.0%
</TABLE>
Industry Diversification
November 30, 1994 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.$ VALUE PERCENT OF NET ASSETS
<S> <C> <C>
Auto & Related $ 248,499 0.2%
Beverages 5,309,212 4.8
Chemicals 1,322,749 1.2
Energy Domestic Integrated 2,274,939 2.1
Engineering & Construction 4,059,976 3.7
Entertainment & Leisure 531,933 0.5
Financial Services 3,756,413 3.4
Foods/Food Processing 1,474,453 1.3
Household Products 1,672,749 1.5
Insurance 3,818,190 3.5
Mining & Metals 19,889,369 18.0
Miscellaneous 9,244,452 8.4
Multi-Industry Companies 7,736,097 7.0
Paper & Forest Products 3,580,074 3.3
Printing & Publishing 2,504,379 2.3
Retail 4,999,971 4.5
Technology 1,085,776 1.0
Telephone Utility 1,532,847 1.4
Tobacco 1,831,770 1.7
Cash & receivables, net of liabilities 33,306,714 30.2
Net Assets $110,180,562 100.0%
</TABLE>
3
<PAGE>
PORTFOLIO OF INVESTMENTS
November 30, 1994 The Southern Africa Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares U.S. $ Value
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--69.8%
BOTSWANA--0.3%
FINANCIAL SERVICES--0.1%
Sechaba Investment Trust...................... 100,000 $ 135,975
-----------
INSURANCE--0.2%
Botswana Insurance Holding, Ltd. ............. 190,000 160,598
-----------
Total Botswana Securities
(cost $331,445)............................... 296,573
-----------
SOUTH AFRICA--66.3%
BEVERAGES--4.0%
South African Breweries, Ltd. ................ 187,332 4,421,217
-----------
CHEMICALS--1.2%
African Oxygen, Ltd. ......................... 40,000 1,119,221
Sentrachem, Ltd. ............................. 47,800 203,528
-----------
1,322,749
-----------
ENERGY DOMESTIC INTEGRATED--2.1%
Engen, Ltd. .................................. 275,000 2,274,939
-----------
ENGINEERING & CONSTRUCTION--4.7%
Murray & Roberts Holdings, Ltd. .............. 145,100 4,059,976
Power Technologies, Ltd. ..................... 518,900 1,085,776
-----------
5,145,752
-----------
FINANCIAL SERVICES--3.3%
Amalgamated Banks of South Africa............. 800,000 2,160,584
Standard Bank Investment Corp., Ltd. ......... 50,000 1,459,854
-----------
3,620,438
-----------
FOODS/FOOD PROCESSING--1.3%
Premier Group Holdings, Ltd. ................. 1,200,000 1,474,453
-----------
HOUSEHOLD PRODUCTS--1.5%
J.D. Group, Ltd. ............................. 500,000 1,672,749
-----------
INSURANCE--3.3%
Metropolitan Life, Ltd. ...................... 305,800 $ 2,343,723
Mutual & Federal Insurance Co., Ltd. ......... 100,000 1,313,869
-----------
3,657,592
-----------
MINING & METALS--17.2%
Anglo-American Corp. of South Africa, Ltd. ... 60,000 3,359,854
Gencor, Ltd. ................................. 1,500,000 5,273,723
HJ Joel Mining Co., Ltd.(a) .................. 400,000 535,280
Leslie Gold Mines, Ltd. ...................... 200,000 328,467
Randfontein Estates Gold
Mining Co., Witwatersrand, Ltd. ............. 80,000 752,311
Rustenburg Platinum Holdings, Ltd. ........... 50,000 1,322,993
South Africa Iron & Steel Industrial
Corp., Ltd. ................................. 5,293,512 6,027,649
Western Areas Gold Mining Co., Ltd. .......... 85,000 1,406,326
-----------
19,006,603
-----------
MULTI-INDUSTRY COMPANIES--6.4%
Anglo-American Industrial Corp., Ltd. ........ 30,000 1,496,350
Anglovaal, Ltd. .............................. 50,000 1,666,667
Plate Glass & Shatterprufe Industries, Ltd. .. 41,800 1,525,547
Safmarine & Rennies Holdings, Ltd. ........... 750,000 2,372,263
-----------
7,060,827
-----------
PACKAGING--2.5%
Nampak, Ltd. ................................. 741,600 2,706,569
-----------
PAPER & FOREST PRODUCTS--3.1%
Sappi, Ltd. .................................. 200,000 3,381,995
-----------
PRINTING & PUBLISHING--2.3%
Argus Newspaper, Ltd. ........................ 201,000 537,956
Nasional Pers Beperk.......................... 100,000 401,460
Omni Media Corp. ............................. 201,000 1,564,963
-----------
2,504,379
-----------
</TABLE>
4
<PAGE>
The Southern Africa Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares U.S.$ Value
- --------------------------------------------------------------------------------
RETAIL--4.4%
Edgars Stores, Ltd. ...................... 50,000 $ 1,703,163
Pepkor, Ltd. ............................. 150,000 894,161
Wooltru, Ltd.--Class A ................... 403,600 2,258,589
------------
4,855,913
------------
TELEPHONE UTILITY--1.4%
Electronic Media Network, Ltd. ........... 500,000 1,532,847
------------
TOBACCO--1.7%
Rembrandt Group, Ltd. .................... 271,300 1,831,770
------------
MISCELLANEOUS--5.9%
Bid Corp., Ltd. .......................... 500,000 1,125,304
Compagnie Financiere
Richemont AG............................. 200,000 1,909,976
De Beers Centenary AG..................... 80,000 1,746,959
Malbak, Ltd. ............................. 215,900 1,208,199
Tempora Investments, Ltd. ................ 120,000 547,445
------------
6,537,883
------------
Total South African Securities
(cost $54,959,352)...................... 73,008,675
------------
ZIMBABWE--3.2%
AUTO & RELATED--0.2%
Chloride CA, Ltd. ........................ 2,300,000 248,499
------------
BEVERAGES--0.8%
Delta Corp. .............................. 56,900 887,995
------------
ENTERTAINMENT & LEISURE--0.5%
Zimbabwe Sun.............................. 2,110,000 531,933
------------
MINING & METALS--0.8%
Bindura Nickel............................ 150,000 234,094
Reunion Mining PLC (b) 300,000 318,000
Zimbabwe Alloys ZM........................ 787,000 330,672
------------
882,766
------------
<CAPTION>
Shares or
Principal
Amount
(000) U.S.$ Value
- --------------------------------------------------------------------------------
<S> <C> <C>
MULTI-INDUSTRY
COMPANIES--0.6%
PG Industries............................. 405,000 $ 243,097
TA Holdings, Ltd. ........................ 4,000,000 432,173
------------
675,270
------------
PAPER & FOREST PRODUCTS--0.2%
Art Corp. ................................ 3,000,000 198,079
------------
RETAIL--0.1%
Caps Holdings............................. 100,000 144,058
------------
Total Zimbabwean Securities
(cost $3,820,572)....................... 3,568,600
------------
Total Common Stocks
(cost $59,111,369)...................... 76,873,848
------------
TIME DEPOSITS--25.8%
SOUTH AFRICA--24.7%
Standard Bank Investment
Corp., Ltd. 11.25%, 12/7/94
(cost $25,031,840) ................. ZAL 112,000 27,250,608
------------
UNITED STATES--1.1%
Banque Nationale de Paris
5.625%, 12/1/94
(cost $1,200,000).................... US$ 1,200 1,200,000
------------
Total Time Deposits
(cost $26,231,840)................... 28,450,608
------------
TOTAL INVESTMENTS--95.6%
(cost $85,343,209)..................... 105,324,456
Other assets less liabilities--4.4% 4,856,106
------------
NET ASSETS--100% $110,180,562
============
</TABLE>
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Denominated in U.S. Dollars. Issued with one warrant per every three
ordinary shares. Each warrant gives the holder the right to subscribe for
one ordinary share at U.S. $7.50 twice a year through April, 1997.
Glossary:
ZAL -- South African Financial Rand.
South African All Share Index (ALSI) Futures contracts outstanding as of
November 30, 1994 are as follows:
<TABLE>
<CAPTION>
Number of Expiration
Contracts Date Value
----------- ------------ ------------
<S> <C> <C>
2,280 March 1995 $ 32,397,080
============
Total ALSI Futures Contracts
(Futures Contract Price--$33,194,847)
</TABLE>
See notes to financial statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1994 The Southern Africa Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at value (cost $85,343,209)........ $105,324,456
Cash, at value (cost $4,500,292).............................. 4,519,136
Margin deposits, at value (cost $1,564,458)................... 1,804,073
Interest and dividends receivable............................. 189,095
Due from broker, variation margin............................. 84,820
Deferred organization expenses and other assets............... 30,068
------------
Total assets.................................................. 111,951,648
------------
LIABILITIES
Payable for investment securities purchased................... 1,094,475
Advisory fee payable.......................................... 240,758
Sub-advisory fees payable..................................... 102,822
Organization and offering costs payable....................... 68,960
Administrative fee payable.................................... 18,621
Accrued expenses and other liabilities........................ 245,450
------------
Total liabilities............................................. 1,771,086
------------
NET ASSETS (equivalent to $18.34 per share, based on
6,007,100 shares outstanding)................................ $110,180,562
============
COMPOSITION OF NET ASSETS
Common stock, at par.......................................... $ 60,071
Additional paid-in capital.................................... 83,255,566
Undistributed net investment income........................... 2,509,536
Accumulated net realized gain on investments and foreign
currency transactions....................................... 4,917,386
Net unrealized appreciation of investments, futures contracts,
and foreign currency denominated assets and liabilities..... 19,438,003
------------
$110,180,562
============
NET ASSET VALUE PER SHARE....................................... $18.34
======
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
6
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 7, 1994* TO THE SOUTHERN AFRICA FUND, INC.
NOVEMBER 30, 1994
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C> <C>
Interest.................................................... $ 3,223,992
Dividends (net of foreign taxes withheld of $138,260)....... 863,450 $
4,087,442
------------
EXPENSES
Advisory fee................................................ 617,672
Sub-advisory fees........................................... 260,598
Directors' fees & expenses.................................. 226,329
Custodian................................................... 145,691
Administrative fee.......................................... 137,532
Audit & legal............................................... 80,040
Transfer agency............................................. 35,828
Reports and notices to shareholders......................... 31,563
Amortization of organization expenses....................... 8,839
Miscellaneous............................................... 33,814
------------
Total expenses..............................................
1,577,906
- ------------
Net investment income.......................................
2,509,536
- ------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investments............................
4,579,449
Net realized gain on foreign currency transactions..........
337,937
Net unrealized appreciation of investments and
futures contracts.........................................
19,183,481
Net unrealized appreciation of foreign currency
denominated assets and liabilities........................
254,522
- ------------
Net gain on investments and foreign currency
transactions..............................................
24,355,389
- ------------
NET INCREASE IN NET ASSETS FROM OPERATIONS.................... $
26,864,925
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD MARCH 7, 1994* TO NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income....................................... $
2,509,536
Net realized gain on investments and foreign
currency transactions.....................................
4,917,386
Net unrealized appreciation of investments,
futures contracts and foreign currency denominated
assets and liabilities...................................
19,438,003
- ------------
Net increase in net assets from operations..................
26,864,925
COMMON STOCK TRANSACTIONS
Net proceeds from sale of shares of common stock............
84,600,000
Offering costs charged to additional paid-in
capital....................................................
(1,384,473)
- ------------
Total increase..............................................
110,080,452
- ------------
NET ASSETS
Beginning of period.........................................
100,110
- ------------
End of period (including undistributed net
investment income of $2,509,536)...........................
$110,180,562
============
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations.
See notes to financial statements.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
November 30, 1994 The Southern Africa Fund, Inc.
- -------------------------------------------------------------------------------
NOTE A: Significant Accounting Policies
The Southern Africa Fund, Inc. (the "Fund") was incorporated under the laws of
the State of Maryland on March 25, 1993 and is registered under the Investment
Company Act of 1940 as a non-diversified, closed-end management investment
company. On February 14, 1994, the Fund sold 7,100 shares of common stock for
$100,110 to Alliance Capital Management, L.P. (the "Investment Manager"). The
Fund commenced operations on March 7, 1994. The following is a summary of
significant accounting policies of the Fund.
1. Security Valuation
Portfolio securities traded on a securities exchange are valued at the closing
price on such exchange on the day of valuation or, if no such closing price is
available, the last bid price quoted on such day. Other securities for which
market quotations are readily available are valued in a like manner. Futures
contracts are valued using the closing settlement price, or in the absence of
such a price, the most recently quoted asked price. Securities for which market
quotations are not readily available are valued in good faith at fair value
using methods determined by the Board of Directors. Readily marketable portfolio
securities may be valued on the basis of prices provided by a pricing service
when such prices are believed by the Investment Manager to reflect the fair
market value of such securities. Securities which mature in 60 days or less are
valued at amortized cost, which approximates market value, unless this method
does not represent fair value.
2. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the mean
of the quoted bid and asked price of such currencies against the U.S. dollar.
Purchases and sales of portfolio securities are translated into U.S. dollars at
the rates of exchange prevailing when such securities were acquired or sold.
Income and expenses are translated into U.S. dollars at rates of exchange
prevailing when earned or accrued.
Net realized gains on foreign currency transactions of $337,937 represent
foreign exchange gains and losses from holding foreign currencies, currency
gains and losses realized between the trade and settlement dates on foreign
security transactions, and the difference between amounts of dividends, interest
and foreign withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid.
Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected as
a component of net unrealized appreciation of investments and foreign currency
denominated assets and liabilities.
3. Financial Futures Contracts
The Fund may buy or sell stock index futures for the purpose of hedging its
portfolio against adverse effects of anticipated movements in the market. Upon
entering into a contract, the Fund deposits and maintains as collateral such
initial margin as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in the value of the contract.
Such receipts or payments are known as variation margin and are recorded by the
Fund as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the time it was closed.
4. Organization Expenses
Organization expenses of approximately $60,000 have been deferred and are being
amortized on a straight-line basis through March 1999.
5. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required. Withholding taxes on foreign interest and dividends have been provided
for in accordance with the applicable tax requirements.
8
<PAGE>
The Southern Africa Fund, Inc.
- -------------------------------------------------------------------------------
6. Investment Income and Security Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is
informed of the dividend. Interest income is accrued daily. Security
transactions are accounted for on the date the securities are purchased or sold.
Security gains and losses are determined on the identified cost basis.
7. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles.
8. Concentration of Risk
Investing in equity securities of Southern African issuers involves special
considerations and risks not typically associated with investments in the United
States. Among others, the risks associated with political and economic
uncertainty, particularly with respect to South Africa, may adversely affect the
securities markets of Southern African countries.
- -------------------------------------------------------------------------------
NOTE B: Advisory, Sub-advisory and Administrative Fees
Under the terms of a Management Agreement, the Fund pays its Investment Manager
a fee, calculated and paid quarterly, equal to an annualized rate of .90 of 1%
of the Fund's average weekly net assets during the quarter.
Under the terms of Sub-Advisory Agreements, the Fund pays Investec Asset
Management (International) Limited and Sanlam Asset Management (Gibraltar)
Limited a fee, calculated and paid quarterly, equal to an annualized rate of .20
of 1% of the greater of (i) the Fund's average weekly net assets invested in
securities of South African issuers or (ii) 90% of the Fund's average weekly net
assets during the quarter.
Under the terms of an Administrative Agreement, the Fund pays its Administrator,
Middlesex Administrators L.P. (the "Administrator") a monthly fee equal to the
annualized rate of .20 of 1% of the Fund's average adjusted weekly net assets
subject to an annual minimum of $150,000. The Administrator prepares financial
and regulatory reports and provides other clerical and administrative services.
- -------------------------------------------------------------------------------
NOTE C: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
aggregated $64,857,796 and $7,758,560, respectively, for the period ended
November 30, 1994.
At November 30, 1994 the cost of securities for federal income tax purposes was
$85,343,209. Accordingly, gross unrealized appreciation of investments was
$21,043,453 and gross unrealized depreciation of investments was $1,062,206,
resulting in net unrealized appreciation of $19,981,247 (excluding foreign
currency transactions).
- -------------------------------------------------------------------------------
NOTE D: Capital Stock
There are 100,000,000 shares of $.01 par value capital stock authorized.
Of the 6,007,100 shares of Common Stock outstanding at November 30, 1994, the
Investment Manager owned 7,100 shares. In addition to the shares issued to the
Investment Manager, an initial public offering of the Fund's shares resulted in
the issuance of 6,000,000 shares of the Fund's common stock, for net proceeds of
$84,600,000 after deducting underwriting discounts and commissions.
Offering costs of $1,384,473 relating to the initial public offering have been
charged to additional paid-in capital.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) The Southern Africa Fund, Inc.
- --------------------------------------------------------------------------------
NOTE E: Futures Contracts
At November 30, 1994, the Fund had entered into exchange traded financial
futures contracts as described below. The Fund bears the market risk that arises
from changes in the value of these financial instruments.
<TABLE>
<CAPTION>
Unrealized
Depreciation
Number of Expiration Nov. 30,
Type Contracts Position Month 1994
<S> <C> <C> <C> <C>
All Share
Index........ 2,280 Long March, 1995 $(797,767)
</TABLE>
At the time the Fund enters into a futures contract, it is required to make a
margin deposit with its custodian of a specified amount of cash or eligible
securities. Subsequently, gain or loss is recognized and payments are made on a
daily basis between the Fund and the broker as the market price of the futures
contract fluctuates. The aggregate value of cash pledged to cover margin
requirements for open positions at November 30, 1994 was $1,804,073.
- -------------------------------------------------------------------------------
NOTE F: Quarterly Results of Operations (unaudited)
<TABLE>
<CAPTION>
Net Realized
and Unrealized
Gain on Net Increase
Investments and in Net Assets
Net Investment Foreign Currency Resulting from Market
Price
Income Transactions Operations on
NYSE
--------------- ----------------- ---------------
- -----------------
Total Per Total Per Total Per
Quarter Ended (000) Share (000) Share (000) Share High
Low
- ------------- ----- ----- ------- ----- ------ ----- --------
- -------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
November 30, 1994... $ 840 $.14 $ 9,873 $1.64 $10,713 $1.78 $15.25
$13.625
August 31, 1994..... 708 .12 12,652 2.11 13,360 2.23 $14.50
$11.125
May 31, 1994*....... 962 .16 1,830 .30 2,792 .46 $15.00
$10.750
------ ---- ------- ----- ------- ------
$2,510 $.42 $24,355 $4.05 $26,865 $4.47
====== ==== ======= ===== ======= ======
</TABLE>
- -------------------------------------------------------------------------------
*From March 7, 1994 (commencement of operations).
10
<PAGE>
FINANCIAL HIGHLIGHTS The Southern Africa Fund, Inc.
- -------------------------------------------------------------------------------
Selected Data For A Share Of Common Stock Outstanding Throughout The Period
<TABLE>
<CAPTION>
March 7, 1994*
to November 30, 1994
--------------------
<S> <C>
Net asset value, beginning of period $ 13.87 (a)
--------
Income From Investment Operations
- ---------------------------------
Net investment income .42
Net realized and unrealized gain on investments,
futures contracts and foreign currency transactions 4.05
--------
Net increase in net asset value from operations 4.47
--------
Net asset value, end of period $ 18.34
========
Market value, end of period $ 14.875
========
Total Return
- ------------
Total investment return based on: (b)
Market value 5.50%
========
Net asset value 30.07%
========
Ratios/Supplemental Data
- ------------------------
Net assets, end of period (000's omitted) $110,181
========
Ratio of expenses to average net assets 2.30%(c)
Ratio of net investment income to average net assets 3.65%(c)
Portfolio turnover rate 14.52%
</TABLE>
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* Commencement of operations.
(a) Net of offering costs of $.23.
(b) Total investment return is calculated assuming a purchase of common stock on
the opening of the first day and a sale on the closing of the last day of
the period reported. Dividends and distributions, if any, are assumed, for
purposes of this calculation, to be reinvested at prices obtained under the
Fund's dividend reinvestment plan. Generally, total investment return based
on net asset value will be higher than total investment return based on
market value in periods where there is an increase in the discount or a
decrease in the premium of the market value to the net asset value from the
beginning to the end of such periods. Conversely, total investment return
based on net asset value will be lower than total investment return based on
market value in periods where there is a decrease in the discount or an
increase in the premium of the market value to the net asset value from the
beginning to the end of such periods. Total investment return for a period
of less than one year is not annualized.
(c) Annualized.
11
<PAGE>
Report Of Ernst & Young LLP Independent Auditors The Southern Africa Fund, Inc.
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To the Shareholders and Board of Directors
The Southern Africa Fund, Inc.
We have audited the accompanying statement of assets and liabilities of The
Southern Africa Fund, Inc. (the "Fund"), including the portfolio of investments,
as of November 30, 1994 and the related statements of operations and changes in
net assets and financial highlights for the period from March 7, 1994
(commencement of operations) to November 30, 1994. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of November 30,
1994, by correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Southern Africa Fund, Inc. at November 30, 1994, and the results of its
operations, the changes in net assets and the financial highlights for the
period from March 7, 1994 to November 30, 1994, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
January 3, 1995
12
<PAGE>
Additional Information The Southern Africa Fund, Inc.
- -------------------------------------------------------------------------------
Shareholders whose shares are registered in their own names may elect to be
participants in the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
pursuant to which dividends and capital gain distributions to shareholders will
be paid in or reinvested in additional shares of the Fund (the "Dividend
Shares"). The Bank of New York (the "Agent") acts as agent for participants
under the Plan. Shareholders whose shares are held in the name of a broker or
nominee should contact such broker or nominee to determine whether or how they
may participate in the Plan.
A shareholder who has elected to participate in the Plan may withdraw from the
Plan at any time. There will be no penalty for withdrawal from the Plan and
shareholders who have previously withdrawn from the Plan may rejoin it at any
time. Changes in elections must be in writing and should include the
shareholder's name and address as they appear on the share certificate. An
election to withdraw from the Plan will, until such election is changed, be
deemed to be an election by a shareholder to take all subsequent distributions
in cash. An election will only be effective for a distribution declared and
having a record date of at least ten days after the date on which the election
is received.
Commencing not more than five business days before the dividend payment date,
purchases of the Fund's shares may be made by the Agent, on behalf of the
participants in the Plan, from time to time to satisfy dividend reinvestments
under the Plan. Such purchases by the Agent on or before the dividend payment
date may be made on the New York Stock Exchange (the "Exchange") or elsewhere at
any time when the price plus estimated commissions of the Fund's Common Stock on
the Exchange is lower than the Fund's most recently calculated net asset value
per share. If the Agent determines on the payment date that the shares purchased
as of such date are insufficient to satisfy the dividend reinvestment
requirements, the Agent, on behalf of the participants in the Plan, will obtain
the necessary additional shares as follows. To the extent that outstanding
shares are not available at a cost of less than the per share net asset value,
the Agent, on behalf of the participants in the Plan, will accept payment of the
dividend, or the remaining portion thereof, in authorized but unissued shares of
the Fund on the dividend payment date. Such shares will be issued at a per
share price equal to the higher of (1) the net asset value per share on the
payment date, or (2) 95% of the closing market price per share on the payment
date. If the closing sale or offer price, plus estimated commissions, of the
Common Stock on the Exchange on the payment date is less than the Fund's net
asset value per share on such day, then the Agent will purchase additional
outstanding shares on the Exchange or elsewhere. If before the Agent has
completed such purchases, the market price plus commissions exceeds the net
asset value of the Fund's shares, the average per share purchase price paid by
the Agent may exceed the net asset value of the Fund's shares, resulting in the
acquisition of fewer shares than if shares had been issued by the Fund.
The Agent maintains all shareholders' accounts in the Plan and furnishes written
confirmation of all transactions in the account, including information needed by
shareholders for tax records. Shares in the account of each Plan participant
are held by the Agent in non-certificate form in the name of the participant,
and each shareholder's proxy includes those shares purchased or received
pursuant to the Plan.
There are no brokerage charges with respect to shares issued directly by the
Fund to satisfy the dividend reinvestment requirements. However, each
participant pays a pro rata share of brokerage commissions incurred with respect
to the Agent's open market
13
<PAGE>
Additional Information (continued) The Southern Africa Fund, Inc.
- --------------------------------------------------------------------------------
purchases of shares. In each case, the cost per share of shares purchased for
each shareholder's account is the average cost, including brokerage
commissions, of any shares purchased in the open market plus the cost of any
shares issued by the Fund.
Shareholders participating in the Plan may receive benefits not available to
shareholders not participating in the Plan. If the market price plus
commissions of the Fund's shares is above the net asset value, participants in
the Plan will receive shares of the Fund at a discount of up to 5% from the
current market value. However, if the market price plus commissions is below
the net asset value, participants will receive distributions in shares with a
net asset value greater than the value of any cash distribution they would have
received on their shares. There may be insufficient shares available in the
market to make distributions in shares at prices below the net asset value.
Also, since the Fund does not redeem its shares, the price on resale may be more
or less than the net asset value.
The automatic reinvestment of dividends and distributions does not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
In the case of foreign participants whose dividends are subject to United States
income tax withholding and in the case of any participants subject to 31%
federal backup withholding, the Agent will reinvest dividends after deduction of
the amount required to be withheld.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
dividend or distribution paid subsequent to written notice of the change sent to
participants in the Plan at least 90 days before the record date for such
dividend or distribution. The Plan may also be amended or terminated by the
Agent on at least 90 days' written notice to participants in the Plan. There is
no service charge to participants in the Plan; however, the Fund reserves the
right to amend the Plan to include a service charge payable to the Agent by the
participants. All correspondence concerning the Plan should be directed to the
Agent at The Bank of New York, 101 Barclay Street, New York, New York 10286.
Since the filing of the most recent amendment to the Fund's registration
statement with the Securities and Exchange Commission, there have been (i) no
material changes in the Fund's investment objectives or policies, (ii) no
changes to the Fund's charter or by-laws that would delay or prevent a change of
control of the Fund, (iii) no material changes in the principal risk factors
associated with investment in the Fund, and (iv) no change in the person
primarily responsible for the day-to-day management of the Fund's portfolio, who
is Mark H. Breedon, Senior Vice President of the Fund.
14
<PAGE>
The Southern Africa Fund, Inc.
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
Dave H. Williams, Chairman and President
Thomas N. Chapman
Prof. Dennis Davis
David D.T. Hatendi
Douglas de Jager
Dr. Willem de Klerk
Stephen Kosseff
Moss Lebakeng Leoka
Dr. Enos Mabuza
Ronnie Masson
Frank Savage
Reba W. Williams
Peter G.A. Wrighton
OFFICERS
Norman S. Bergel, Senior Vice President
Mark H. Breedon, Senior Vice President
Nicholas Crossland, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Patrick J. Farrell, Controller
ADMINISTRATOR
Middlesex Administrators L.P.
P.O. Box 9011
Princeton, NJ 08543
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
LEGAL COUNSEL
Seward & Kissel
One Battery Park Plaza
New York, NY 10004
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
DIVIDEND PAYING AGENT,
TRANSFER AGENT AND REGISTRAR
The Bank of New York
101 Barclay Street
New York, NY 10286
Notice is hereby given in accordance with Section 23 (c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its common stock in the open market.
This report, including the financial statements herein, is transmitted to the
shareholders of The Southern Africa Fund, Inc. for their information. The
financial information included herein is taken from the records of the Fund.
This is not a prospectus, circular or representation intended for use in the
purchases of shares of the Fund or any securities mentioned in this report.
15
<PAGE>
The
Southern Africa
Fund
[ART APPEARS HERE]
Annual Report
November 30, 1994
Alliance/(R)/
Mutual funds without the Mystery./SM/
The Southern Africa Fund, Inc.
Summary of General Information
Shareholder Information
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transaction section of newspapers. The Fund's NYSE trading
symbol is "SOA". Weekly comparative net asset value (NAV) and market price
information about the Fund is published each Monday in The Wall Street Journal
and each Saturday in The New York Times and other newspapers in a table called
"Closed-End Funds".
Additional Information about the Fund is available by calling 1-800-221-5672.
Dividend Reinvestment Plan
A Dividend Reinvestment Plan provides automatic
reinvestment of dividends and capital gains distributions in additional Fund
shares. A brochure describing the Plan is available from the Plan Agent, The
Bank of New York, by calling 1-800-432-8224.
The Southern Africa Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Alliance Capital [LOGO APPEARS HERE]
(R)These registered service marks used under license from the owner, Alliance
Capital Management L.P.
SAFAR
