<PAGE>
LETTER TO SHAREHOLDERS The Southern Africa Fund
================================================================================
January 27, 1997
Dear Shareholder:
The markets of South Africa enjoyed mixed fortunes over the final quarter of
1996. Zimbabwe and Mauritius continued to move ahead, but South Africa, Botswana
and Namibia experienced more subdued growth.
For South Africa, the region's largest stock market, 1996 was a year of
consolidation following outstanding returns during 1994 and 1995. Rising
interest rates and a sustained attack on the South African rand motivated both
foreign and domestic investors to take profits and move to the sidelines during
the course of the year. At the same time, the South African Reserve Bank's
determination to reduce inflationary expectations has led the economy to fight
some of the highest real rates of interest in the world. Consequently,
expectations for both growth and corporate profits were steadily reduced over
the year.
Despite this, your Fund's returns for the fiscal year ended November 30, 1996
are relatively favorable compared to the performance of its benchmark, the
Johannesburg Stock Exchange (JSE) All Share Index.
INVESTMENT RESULTS
Total Returns for the Periods Ended November 30, 1996 were:
6 Months 12 Months
-------- ---------
The Southern Africa
Fund 0.80% 0.66%
JSE All-Share Index -6.74% -10.63%
The JSE All-Share Index is unmanaged.
MARKET REVIEW
In addition to currency concerns, the South African market has also been
affected by an increase in inflation, fueled primarily by rising food prices.
The dismantling of many agricultural boards, which had kept prices of many
staple grains well below world market levels, resulted in a significant upward
shift in agricultural prices as producers were able to sell directly onto world
markets for the first time. The effect of these price increases was the
principal reason for inflation's rise toward 10% during 1996.
At the same time, observers were concerned about the rapid rate of credit
expansion, which, at around 18% a year, seemed to suggest overheating of the
economy with all the inflationary implications of runaway consumption. We
believe the Reserve Bank's response to this environment, raising interest rates
another 1% in November, will prove to be the final stage of this period of
monetary tightening.
Domestic credit expansion has flattened at around the 17% level and we expect
this figure to contract quite sharply during 1997. Short-term interest rates, at
approximately 16%, are well ahead of our expected inflationary peak of 10%. In
addition, growth estimates are falling to below 2% for 1997. The government
budget appears well under control and, we believe, will meet its deficit target.
Elsewhere in the region, we welcome Zambia's moves towards privatization and
liberalization over the course of 1996 and look forward to new opportunities in
markets such as Malawi. We also welcome the long overdue appointment of a
Finance Minister in Mauritius and continue to favor this stock market as one of
the region's most attractive.
We believe the Zimbabwean economy, however, is at risk of overheating. Although
economic growth will be strong, the failure of the country's central bank to
tighten monetary policy in the face of burgeoning growth has led to rapid
liquidity expansion and an explosion in asset valuations, both in the property
and equity markets. We believe interest rates need to move higher if an
inflationary upsurge is to be avoided.
INVESTMENT STRATEGY
We have continued to focus your Fund on growth stocks and companies offering a
more stable earnings
1
<PAGE>
The Southern Africa Fund
================================================================================
profile, particularly in South Africa. Among South African equities, portfolio
holdings are concentrated in publishing, technology and financial services
issues. We have also maintained a substantial position in the South African
fixed income market through long-term government bonds.
Portfolio holdings in Zimbabwe have been reduced along with the significant rise
in values in that market. Proceeds from these sales have been redeployed into
Mauritian and Zambian securities.
PORTFOLIO DIVERSIFICATION
Based on total market value as of 11/30/96
South Africa - 89.8%
Zimbabwe - 6.7%
Mauritius - 1.4%
Botswana - 0.7%
Namibia - 0.5%
Zambia - 0.5%
Short-Term Notes - 0.4%
YEAR-END CAPITAL GAIN DISTRIBUTION
It is the Fund's policy to distribute substantially all of its net investment
income and net realized capital gains to Fund shareholders at least annually.
The distribution for 1996 was unusually large: $2.575 per share, of which $2.12
represented net long-term capital gains. The distribution was payable on January
10, 1997 to shareholders of record at the close of business on December 31,
1996.
TENDER OFFER MEASUREMENT REQUIREMENT
As disclosed in the prospectus for the Fund's initial public offering in 1994,
it is the Fund's current policy to conduct a tender offer during the second
quarter of 1997 (and each subsequent year) unless, during an appropriate
"measurement period" of 12 calendar weeks prior to April 1 in the relevant year,
the Fund's average market price equals at least $15.00 per share, or the average
market discount from net asset value of the Fund's common stock is less than 5%.
During the measurement period selected by the Board of Directors for this
purpose, the 12 weeks ended Friday, December 27, 1996, the Fund's market price
averaged $16.25 per share. Accordingly, the Fund will not be obliged to make a
tender offer during the second quarter of 1997.
OUTLOOK
We anticipate that 1997 will be a better year for the South African market.
Although there may be a few more negative earnings surprises to come, the
prospects for lower interest rates in South Africa should allow some expansion
in price/earnings ratios, especially for growth stocks. We also view the current
economic climate as favorable for bonds and expect rising prices (and lower
yields) as inflation becomes less of a concern.
Overall, we continue to feel that Southern Africa offers some of the more
exciting investment opportunities in the world today, and look forward to 1997
as a year of opportunity for the entire Southern African region. As always, we
appreciate your continued confidence in The Southern Africa Fund.
Sincerely,
/s/ Dave H. Williams
Dave H. Williams
Chairman and President
/s/ Mark H. Breedon
Mark H. Breedon
Senior Vice President
2
<PAGE>
TEN LARGEST EQUITY HOLDINGS
November 30, 1996 The Southern Africa Fund
================================================================================
<TABLE>
<CAPTION>
===========================================================================================================================
COMPANY U.S.$ VALUE PERCENT OF NET ASSETS
===========================================================================================================================
<S> <C> <C>
Dimension Data Holdings, Ltd. $ 4,920,213 4.1%
- ---------------------------------------------------------------------------------------------------------------------------
De Beers Centenary AG 4,583,695 3.8
- ---------------------------------------------------------------------------------------------------------------------------
Rembrandt Group, Ltd. 4,483,283 3.7
- ---------------------------------------------------------------------------------------------------------------------------
Anglo-American Corp. of South Africa, Ltd. 4,274,316 3.5
- ---------------------------------------------------------------------------------------------------------------------------
Energy Africa, Ltd. 3,648,366 3.1
- ---------------------------------------------------------------------------------------------------------------------------
Nampak, Ltd. 3,622,264 3.1
- ---------------------------------------------------------------------------------------------------------------------------
M-Cell, Ltd. 3,479,061 2.9
- ---------------------------------------------------------------------------------------------------------------------------
Amalgamated Banks of South Africa 3,430,504 2.8
- ---------------------------------------------------------------------------------------------------------------------------
Metropolitan Life, Ltd. 3,418,085 2.8
- ---------------------------------------------------------------------------------------------------------------------------
South African Breweries, Ltd. 3,296,341 2.7
- ---------------------------------------------------------------------------------------------------------------------------
Total $39,156,128 32.5%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
PORTFOLIO OF INVESTMENTS
November 30, 1996 The Southern Africa Fund
================================================================================
<TABLE>
<CAPTION>
Company Shares U.S.$ Value
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--78.7%
BOTSWANA--0.7%
CONSUMER
MANUFACTURING--0.4%
Sefalana Holdings Co.(a) ................. 350,000 $ 407,190
------------
CONSUMER STAPLES--0.0%
Kgolo Ya Sechaba, Ltd.(a) ................ 100,000 38,780
------------
FINANCIAL SERVICES--0.3%
Botswana Insurance
Holdings, Ltd.(a) ....................... 198,550 118,246
Sechaba Investment Trust(a) .............. 398,000 281,127
------------
399,373
------------
Total Botswanan Securities
(cost $1,101,882) ....................... 845,343
------------
MAURITIUS--1.3%
CONSUMER SERVICES--0.3%
Sun Resorts, Ltd.(a) ..................... 223,231 387,986
------------
CONSUMER STAPLES--0.4%
Happy World Foods, Ltd.(a) ............... 197,261 155,215
Mauritius Breweries, Ltd.(a) ............. 51,061 312,774
------------
467,989
------------
FINANCIAL SERVICES--0.6%
Mauritius Commercial
Bank(a) ................................. 110,000 399,900
State Bank of Mauritius,
Ltd.(a) ................................. 766,000 339,512
------------
739,412
------------
Total Mauritian Securities
(cost $1,598,163) ....................... 1,595,387
------------
NAMIBIA--0.5%
MULTI-INDUSTRY
COMPANY--0.5%
Namibian Breweries, Ltd.
(cost $574,506) ......................... 1,000,000 550,880
------------
SOUTH AFRICA--69.2%
CONSUMER
MANUFACTURING--3.0%
Nampak, Ltd.(b) .......................... 914,200 3,622,264
------------
CONSUMER SERVICES--15.7%
Electronic Media
Network, Ltd. ........................... 1,700,000 $ 1,623,969
Housewares Group, Ltd. ................... 456,975 481,183
Independent Newspapers
Holdings, Ltd. .......................... 40,000 172,818
Multichoice Holdings, Ltd.(a) ............ 508,700 2,098,415
Nasionale Pers Beperk(a) ................. 303,000 2,614,904
Omni Media Corp., Ltd. ................... 190,000 2,805,037
Publico, Ltd. ............................ 1,021,090 753,736
Richemont Securities(b) .................. 200,000 2,985,237
Servgro International, Ltd.(b) ........... 500,000 2,583,587
Teljoy Holdings, Ltd. .................... 3,318,580 1,902,095
Times Media, Ltd. ........................ 127,800 943,378
------------
18,964,359
------------
CONSUMER STAPLES--9.5%
Metro Cash & Carry, Ltd. ................. 675,000 2,051,672
The Premier Group, Ltd. .................. 1,122,089 1,573,751
Rembrandt Group, Ltd.(b) ................. 500,000 4,483,283
South African Breweries,
Ltd.(b) ................................. 130,606 3,296,341
------------
11,405,047
------------
ENERGY--4.8%
Energy Africa, Ltd.(a) ................... 1,043,750 3,648,366
Sasol, Ltd. .............................. 175,000 2,165,654
------------
5,814,020
------------
FINANCIAL SERVICES--12.2%
Amalgamated Banks of
South Africa ............................ 632,036 3,430,504
Fedsure Holdings, Ltd. ................... 355,096 2,278,134
Forbes Group, Ltd. ....................... 207,000 305,601
Metropolitan Life, Ltd. .................. 205,800 3,418,085
Mutual & Federal Insurance
Co., Ltd. ............................... 500,000 2,453,322
Standard Bank Investment
Corp., Ltd ............................. 75,000 2,808,836
------------
14,694,482
------------
MINING & METALS--12.2%
De Beers Centenary AG(b) ................. 150,000 4,583,695
Driefontein Consolidated, Ltd. 250,000 2,849,544
Gencor, Ltd. ............................. 800,000 2,848,459
HJ Joel Gold Mining
Co., Ltd.(a) ............................ 400,000 404,690
Ingwe Coal Corp., Ltd. ................... 275,100 2,233,769
Western Areas Gold
Mining Co., Ltd. ........................ 128,160 1,794,685
------------
14,714,842
------------
</TABLE>
4
<PAGE>
The Southern Africa Fund
================================================================================
<TABLE>
<CAPTION>
Company Shares U.S.$ Value
- --------------------------------------------------------------------------------
<S> <C> <C>
MULTI-INDUSTRY
COMPANY--3.5%
Anglo-American Corp. of
South Africa, Ltd.(b) ................... 75,000 $ 4,274,316
------------
TECHNOLOGY--5.4%
Dimension Data Holdings, Ltd. .............. 1,750,000 4,920,213
Plessey Corp., Ltd. ...................... 748,211 1,543,206
------------
6,463,419
------------
UTILITIES--2.9%
M-Cell, Ltd.(a) .......................... 3,770,484 3,479,061
------------
Total South African Securities
(cost $61,694,540) ...................... 83,431,810
------------
ZAMBIA--0.5%
CONSUMER STAPLES--0.5%
Rothmans of Pall Mall (Zambia)
Berhad .................................. 13,731,902 355,414
Zambia Sugar Co. ......................... 30,720,000 265,035
------------
Total Zambian Securities
(cost $813,385) ......................... 620,449
------------
ZIMBABWE--6.5%
CONSUMER SERVICES--2.7%
Meikles Africa, Ltd. (d) ................. 1,512,900 2,193,705
Zimbabwe Newspapers ...................... 134,600 312,951
Zimbabwe Sun
International(a) ........................ 2,000,001 744,013
------------
3,250,669
------------
CONSUMER STAPLES--1.6%
Delta Corp. .............................. 500,001 1,557,780
Eastern Highland Plantation .............. 3,383,000 409,012
------------
1,966,792
------------
<CAPTION>
Shares or
Principal
Amount
Company (000) U.S.$ Value
- --------------------------------------------------------------------------------
<S> <C> <C>
MINING & METALS--0.8%
Reunion Mining Plc(a)(c) ................. 420,000 $ 564,749
Zimbabwe Alloys, Ltd. .................... 452,000 336,294
------------
901,043
------------
MULTI-INDUSTRY
COMPANIES--1.4%
TA Holdings, Ltd. ........................ 8,024,800 1,231,427
Trans Zambezi, Ind. (d) .................. 200,000 480,000
------------
1,711,427
------------
Total Zimbabwean Securities
(cost $5,765,851) ....................... 7,829,931
------------
Total Common Stocks
(COST $71,548,327) ....................... 94,873,800
------------
FOREIGN GOVERNMENT
OBLIGATIONS--17.5%
SOUTH AFRICA--17.5%
Republic of South Africa,
12.00%, 2/28/05 ......................... ZAR 37,100 6,686,216
13.00%, 8/31/10 ......................... 79,500 14,410,454
------------
Total Foreign Government
Obligations
(cost $22,181,882) ...................... 21,096,670
------------
TIME DEPOSIT--0.3%
Sumitomo Bank
5.50%, 12/2/96
(cost $400,000) ......................... US$ 400 400,000
------------
TOTAL INVESTMENTS--96.5%
(cost $94,130,209) ...................... 116,370,470
Other assets less liabilities--3.5% ........ 4,241,489
------------
NET ASSETS--100% ........................... $120,611,959
============
</TABLE>
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Security, or portion thereof, has been segregated to collateralize forward
exchange currency contracts. Total value of securities amounted to
$20,117,891 at November 30, 1996.
(c) Denominated in U.S. Dollars. Issued with 20,000 warrants. Each warrant
gives the holder the right to subscribe for one ordinary share at U.S.
$7.50 twice a year through April, 1997.
(d) Denominated in U.S. Dollars.
Glossary:
ZAR - South African Financial Rand.
See notes to financial statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1996 The Southern Africa Fund
================================================================================
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $94,130,209) ................................................ $116,370,470
Cash, at value (cost $3,387,981) ...................................................................... 3,364,269
Interest and dividends receivable ..................................................................... 909,738
Receivable for investment securities sold ............................................................. 687,409
Net unrealized appreciation on forward exchange currency contracts .................................... 35,366
Deferred organization expenses and other assets ....................................................... 28,490
------------
Total assets .......................................................................................... 121,395,742
------------
LIABILITIES
Advisory fee payable .................................................................................. 273,382
Payable for investment securities purchased ........................................................... 209,045
Sub-advisory fees payable ............................................................................. 109,353
Administrative fee payable ............................................................................ 19,847
Accrued expenses and other liabilities ................................................................ 172,156
------------
Total liabilities ..................................................................................... 783,783
------------
NET ASSETS .............................................................................................. $120,611,959
============
COMPOSITION OF NET ASSETS:
Common stock, at par .................................................................................. $ 60,071
Additional paid-in capital ............................................................................ 83,255,566
Undistributed net investment income ................................................................... 1,641,343
Accumulated net realized gain on investments .......................................................... 13,414,998
Net unrealized appreciation of investments and foreign currency
denominated assets and liabilities ................................................................... 22,239,981
------------
$120,611,959
============
NET ASSET VALUE PER SHARE (based on 6,007,100 shares outstanding) ....................................... $20.08
======
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
6
<PAGE>
STATEMENT OF OPERATIONS
Year Ended November 30, 1996 The Southern Africa Fund
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest ........................................................................................ $ 2,641,708
Dividends (net of foreign taxes withheld of $17,020) ............................................ 2,269,785 $ 4,911,493
------------
EXPENSES
Advisory fee .................................................................................... 1,131,706
Sub-advisory fees ............................................................................... 457,494
Administrative fee .............................................................................. 251,833
Custodian ....................................................................................... 250,061
Directors' fees and expenses .................................................................... 195,563
Audit & legal ................................................................................... 147,610
Transfer agency ................................................................................. 45,743
Reports and notices to shareholders ............................................................. 39,604
Registration .................................................................................... 16,170
Amortization of organization expenses ........................................................... 12,027
Miscellaneous ................................................................................... 13,758
------------
Total expenses .................................................................................. 2,561,569
------------
Net investment income ........................................................................... 2,349,924
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investments ................................................................ 13,659,180
Net realized loss on foreign currency transactions .............................................. (706,323)
Net change in unrealized appreciation of investments ............................................ (14,809,200)
Net change in unrealized depreciation of foreign currency denominated assets and liabilities .... 16,582
------------
Net loss on investments and foreign currency transactions ....................................... (1,839,761)
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ........................................................ $ 510,163
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
November 30, November 30,
1996 1995
------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income ................................................................ $ 2,349,924 $ 1,032,249
Net realized gain on investments and foreign currency transactions ................... 12,952,857 8,024,150
Net change in unrealized appreciation (depreciation) of investments and
foreign currency denominated assets and liabilities ................................. (14,792,618) 17,594,596
------------- -------------
Net increase in net assets from operations ........................................... 510,163 26,650,995
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................................................ (3,544,189) (3,139,662)
Net realized gains ................................................................... (5,466,461) (4,579,449)
------------- -------------
Total increase (decrease) ............................................................ (8,500,487) 18,931,884
NET ASSETS
Beginning of year .................................................................... 129,112,446 110,180,562
------------- -------------
End of year (including undistributed net investment income of $1,641,343
and $3,300,119, respectively) ....................................................... $ 120,611,959 $ 129,112,446
============= =============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
November 30, 1996 The Southern Africa Fund
================================================================================
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. 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. 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 loss on foreign currency transactions represents net foreign
exchange gains and losses from sales and maturities of foreign securities and
forward exchange currency contracts, holding of 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 year end exchange rates are reflected as a
component of net unrealized appreciation of investments and foreign currency
denominated assets and liabilities.
3. ORGANIZATION EXPENSES
Organization expenses of approximately $60,000 have been deferred and are being
amortized on a straight-line basis through March 1999.
4. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute substantially 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.
5. INVESTMENT INCOME AND INVESTMENT 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. Investment
transactions are accounted for on the date the securities are purchased or sold.
Investment gains and losses are determined on the identified cost basis.
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend date
and are determined in accordance with income tax regulations.
7. RECLASSIFICATION OF COMPONENTS OF NET ASSETS
As of November 30, 1996 the Fund reclassified certain components of net assets.
The reclassifications
8
<PAGE>
The Southern Africa Fund
================================================================================
resulted in a net increase to accumulated net realized gain on investments of
$464,511 and a net decrease in undistributed net investment income of $464,511.
This reclassification was the result of permanent book to tax differences. Net
assets were not affected by the change.
- --------------------------------------------------------------------------------
NOTE B: ADVISORY, SUB-ADVISORY AND ADMINISTRATIVE FEES
Under the terms of a Management Agreement, the Fund pays Alliance Capital
Management L.P. (the "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 a Sub-Advisory Agreement, the Fund pays 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.
On December 7, 1996 the Fund's Board of Directors accepted the resignation of
Investec Asset Management (International) Limited, which has also been a
Sub-Advisor to the Fund under a similar Sub-Advisory Agreement.
The Fund entered into a Shareholder Inquiry Agency Agreement with Alliance Fund
Services, Inc. ("AFS"), an affiliate of the Investment Manager, whereby the Fund
reimburses AFS for costs relating to servicing phone inquiries for the Fund. The
Fund reimbursed AFS $2,427 during the year ended November 30, 1996 relating to
shareholder servicing costs.
Under the terms of an Administration Agreement, the Fund pays Princeton
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 certain
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
and U.S. Government Securities) aggregated $74,858,497 and $82,192,571,
respectively, for the year ended November 30, 1996.
At November 30, 1996, the cost of securities for Federal income tax purposes was
$94,136,492. Accordingly, gross unrealized appreciation of investments was
$25,743,740 and gross unrealized depreciation of investments was $3,509,762
resulting in net unrealized appreciation of $22,233,978 (excluding foreign
currency transactions).
FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward exchange currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings and to hedge certain firm purchase and sale commitments denominated in
foreign currencies. A forward exchange currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The gain or loss arising from the differences between the original
contract and the closing of such contract is included in net realized gain or
loss on foreign currency transactions.
Fluctuations in the value of forward exchange currency contracts are recorded
for financial reporting purposes as unrealized gains or losses by the Fund.
The Fund's custodian will place and maintain cash or investments in a separate
account of the Fund having a value equal to the aggregate amount of the Fund's
commitments under forward exchange currency contracts entered into with respect
to position hedges.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) The Southern Africa Fund
================================================================================
Risk may arise from the potential inability of a counterparty to meet the terms
of a contract and from unanticipated movements in the value of foreign
currencies relative to the U.S. dollar.
The face or contract amount, in U.S. dollars, as reflected in the following
table, reflects the total exposure the Fund has in that particular currency
contract. At November 30, 1996, the Fund had outstanding forward exchange
currency contracts, as follows:
<TABLE>
<CAPTION>
Contract Value on U.S. $ Unrealized
Amount Origination Current Appreciation
Foreign Currency Buy Contract (000) Date Value (Depreciation)
- ----------------------------- -------- ----------- ------- --------------
<S> <C> <C> <C> <C>
South African Rand
expiring 12/23/96 .......... 16,084 $3,500,000 $3,466,209 $ (33,791)
Foreign Currency Sale Contract
- ------------------------------
Zimbabwe Dollars
expiring 12/23/96 .......... 37,765 3,500,000 3,430,843 69,157
----------
$ 35,366
==========
</TABLE>
- --------------------------------------------------------------------------------
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, 1996, the
Investment Manager owned 7,100 shares.
- --------------------------------------------------------------------------------
NOTE E: CONCENTRATION OF RISK
Investing in equity securities of Southern African issuers involves special
consideration 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.
10
<PAGE>
FINANCIAL HIGHLIGHTS The Southern Africa Fund
================================================================================
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Year Ended
November 30, March 7, 1994(a)
---------------------------------- to
1996 1995 November 30, 1994
------------- ------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period ............................. $ 21.49 $ 18.34 $ 13.87(b)
-------- -------- --------
Income From Investment Operations
Net investment income ............................................ .39 .17 .42
Net realized and unrealized gain (loss) on investments
and foreign currency transactions .............................. (.30) 4.27 4.05
-------- -------- --------
Net increase in net asset value from operations .................. .09 4.44 4.47
-------- -------- --------
Less: Dividends and Distributions
Dividends from net investment income ............................. (.59) (.52) -0-
Distributions from net realized gains on
investments and foreign currency transactions .................. (.91) (.77) -0-
-------- -------- --------
Total dividends and distributions ................................ (1.50) (1.29) -0-
-------- -------- --------
Net asset value, end of period ................................... $ 20.08 $ 21.49 $ 18.34
======== ======== ========
Market value, end of period ...................................... $ 16.50 $ 16.750 $ 14.875
======== ======== ========
Total Return
Total investment return based on: (c)
Market value ................................................... 6.12% 22.90% 5.50%
Net asset value ................................................ .66% 27.89% 30.07%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) ........................ $120,612 $129,112 $110,181
Ratio of expenses to average net assets .......................... 2.04% 2.05% 2.30%(d)
Ratio of net investment income to average net assets ............. 1.87% .94% 3.65%(d)
Portfolio turnover rate .......................................... 62% 41% 15%
Average commission rate (e) ...................................... $ .0046 -- --
</TABLE>
- --------------------------------------------------------------------------------
(a) Commencement of operations.
(b) Net of offering costs of $.23.
(c) 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.
(d) Annualized.
(e) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged. This amount includes commissions paid in
foreign currencies, which have been converted into US dollars using the
prevailing exchange rate on the date of the transaction. Such conversions
may materially affect the rate shown.
11
<PAGE>
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS The Southern Africa Fund
================================================================================
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., including the portfolio of investments, as of
November 30, 1996, and the related statement of operations 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 periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Southern Africa Fund, Inc. at November 30, 1996, the results of its operations
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 indicated
periods, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG
New York, New York
January 9, 1997
12
<PAGE>
ADDITIONAL INFORMATION The Southern Africa Fund
================================================================================
Shareholders whose shares are registered in their own names may elect to be
participants in the Dividend Reinvestment Plan (the "Plan"), pursuant to which
dividends and capital gain distributions to shareholders will be reinvested in
additional shares of the Fund. The Bank of New York (the "Agent") will act 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.
If the Board declares an income distribution or determines to make a capital
gain distribution payable either in shares or in cash, as holders of the Common
Stock may have elected, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in shares of Common Stock
of the Fund valued as follows:
(i) If the shares of Common Stock are trading at net asset value or at a
premium above net asset value at the time of valuation, the Fund will issue
new shares at the greater of net asset value or 95% of the then current
market price.
(ii) If the shares of Common Stock are trading at a discount from net asset
value at the time of valuation, the Agent will receive the dividend or
distribution in cash and apply it to the purchase of the Fund's shares of
Common Stock in the open market on the New York Stock Exchange or
elsewhere, for the participants' accounts. Such purchases will be made on
or shortly after the payment date for such dividend or distribution and in
no event more than 30 days after such date except where temporary
curtailment or suspension of purchase is necessary to comply with Federal
securities laws. If, before the Agent has completed its purchases, the
market price exceeds the net asset value of a share of Common Stock, the
average purchase price per share paid by the Agent may exceed the net asset
value of the Fund's shares of Common Stock, resulting in the acquisition of
fewer shares than if the dividend or distribution had been paid in shares
issued by the Fund.
The Agent will maintain all shareholders' accounts in the Plan and furnish
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Agent in non-certificate form in the name of the
participant, and each shareholder's proxy will include those shares purchased or
received pursuant to the Plan.
There will be no charges with respect to shares issued directly by the Fund to
satisfy the dividend reinvestment requirements. However, each participant will
pay a pro rata share of brokerage commissions incurred with respect to the
Agent's open market purchases of shares. In each case, the cost per share of
shares purchased for each shareholder's account will be the average cost,
including brokerage commissions, of any shares purchased in the open market plus
the cost of any shares issued by the Fund.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
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
voluntary cash payments made and 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. 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, a Senior Vice President of the Fund.
13
<PAGE>
The Southern Africa Fund
================================================================================
BOARD OF DIRECTORS
Dave H. Williams, Chairman and President Dr. Enos Mabuza(1)
T.N. Chapman(1) Ronnie Masson(1)
Prof. Dennis Davis(1) Frank Savage
David D.T. Hatendi(1) Desmond Smith
Dr. Willem de Klerk(1) Reba W. Williams
Stephen Koseff Peter G.A. Wrighton(1)
Moss L. Leoka(1)
OFFICERS
Norman S. Bergel, Senior Vice President Mark D. Gersten, Treasurer
Mark H. Breedon, Senior Vice President & Chief Financial Officer
Edmund P. Bergan Jr., Secretary Joseph J. Mantineo, Controller
ADMINISTRATOR INDEPENDENT AUDITORS
Princeton Administrators, L.P. Ernst & Young LLP
P.O. Box 9095 787 Seventh Avenue
Princeton, NJ 08543-9095 New York, NY 10019
CUSTODIAN DIVIDEND PAYING AGENT,
Brown Brothers Harriman & Co. TRANSFER AGENT AND REGISTRAR
40 Water Street The Bank of New York
Boston, MA 02109 101 Barclay Street
New York, NY 10286
LEGAL COUNSEL
Seward & Kissel
One Battery Park Plaza
New York, NY 10004
- --------------------------------------------------------------------------------
(1) Member of the Audit Committee.
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 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.
14
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
THE SOUTHERN AFRICA FUND
Summary of General Information
INVESTMENT POLICIES AND OBJECTIVES
The investment objective of the Fund is to seek long-term capital appreciation
through investment in equity and fixed income securities of Southern African
issuers.
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 Sunday 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
1345 Avenue of the Americas
New York, New York 10105
ALLIANCE CAPITAL [LOGO]
Investing without the Mystery./(SM)/
/(R)/These registered service marks used under license from the owner, Alliance
Capital Management L.P.
SAFAR
THE
- ---------------
SOUTHERN AFRICA
- ---------------
FUND
- ---------------
[GRAPHIC OF AFRICA]
ANNUAL REPORT
NOVEMBER 30, 1996
ALLIANCE/(R)/
Investing without the Mystery./(SM)/
