<PAGE>
LETTER TO SHAREHOLDERS The Southern Africa Fund
================================================================================
July 11, 1997
Dear Shareholder:
The South African stock market has been stagnant during the quarter under review
following the substantial gains of early 1997. Investors have adopted a
wait-and-see attitude towards the future course of inflation and growth as the
debate about the direction of interest rates has heated up.
Shown below are The Southern Africa Fund's total returns for 6- and 12-month
periods ended May 31, 1997. For comparison, we have also shown results for the
Johannesburg Stock Exchange (JSE) All-Share Index. Your Fund's substantial
outperformance compared to the JSE All-Share Index is primarily due to superior
stock selection and emphasis on growth companies.
INVESTMENT RESULTS*
Total returns for the periods ended May 31, 1997
<TABLE>
<CAPTION>
6 Months 12 Months
------------------------
<S> <C> <C>
The Southern Africa
Fund 19.61% 20.58%
JSE All-Share Index 9.17 2.87
</TABLE>
* Total returns are based on net asset value. The JSE All-Share Index is
unmanaged.
MARKET REVIEW AND OUTLOOK
Our macroeconomic view continues to maintain that growth in South Africa will
remain subdued this year with the gross domestic product (GDP) advancing
approximately 2.5% during 1997, a level we consider below the long-term growth
potential of the country. This slower growth rate is due to the restrictive
monetary policy currently being pursued by the South African Central Bank. High
real interest rates are beginning to curtail domestic credit expansion and, we
believe, should result in a significant downward shift in the rate of price
increases. Consequently, we expect the Central Bank to have plenty of room to
lower rates later in 1997, leading to economic recovery in 1998.
Much of this will depend upon the relative stability of the exchange rate. The
recent upheavals in the foreign exchange markets of several emerging market
countries could potentially extend to the South African rand. The Central Bank's
lack of significant reserve cover is often cited as a basis of currency
instability. However, we consider any significant currency turmoil as being
unlikely. South Africa's overall financial condition, in terms of total debt
outstanding to GDP and the magnitude of foreign currency borrowing, is
significantly superior to that of the average emerging market economy as well as
a substantial number of developed nations.
With the prospect of economic recovery delayed until 1998, it is probable that
equity investors will be subject to more negative earnings surprises over the
course of 1997. These disappointments will probably occur in the more
economically sensitive sectors of the stock market, such as commodities, retail,
and basic industry. Despite these disappointments, we fully expect the stock
market to perform relatively well as a result of declining interest rates.
The recent decline in the price of gold has unnerved some investors. Gold
provides a significant revenue stream for South Africa and, as a result, both
income and employment are likely to be affected by a sustained fall in the gold
price.
South Africa's gold mining sector is in need of significant restructuring. It is
our hope that the recent price decline will act as a catalyst towards promoting
the difficult changes that must be made for the industry to be revitalized.
INVESTMENT STRATEGY
We continue to favor the outlook for long-term bonds despite their recent
outperformance. Although yields
1
<PAGE>
The Southern Africa Fund
================================================================================
have fallen towards 14%, we believe that prices will improve further as
inflation declines. Consequently, 15% of your portfolio is invested in this
asset class.
We have also maintained our focus on growth stocks in South Africa in industries
such as technology, publishing, media, and cellular communications which we feel
offer long-term growth at reasonable valuation levels. Our aversion to cyclical
stocks remains as we continue to fear more negative earnings surprises in this
area. One exception, is Sappi, the pulp and paper producer. We have rebuilt our
position in this company in expectation of a global improvement in paper prices.
We look forward to further news on the unbundling of more of South Africa's
holding companies, which should unlock considerable value for shareholders. The
process of dismantling many of the country's old pyramid structures now appears
to be irreversible and we anticipate more value-enhancing moves.
GEOGRAPHIC DIVERSIFICATION
Based on Total Market Value as of May 31, 1997.
[PIE CHART]
<TABLE>
<S> <C>
Zambia 0.9%
Namibia 0.6%
Short-Term Notes 0.5%
South Africa 90.6%
Zimbabwe 4.4%
Mauritius 2.1%
Botswana 0.9%
</TABLE>
Elsewhere in the region, we have continued to scale back our positions in
Zimbabwe due to a major deterioration in relative competitiveness over the past
year which we believe has put the currency at risk. Additionally, we find it
hard to discover further value in the Zimbabwean stockmarket after the sharp
run-up in equity prices.
However, we do feel that Namibia, Botswana, Zambia, and Mauritius offer great
opportunities and continue to look for investment opportunities in these
countries. Overall, we feel that the Southern African region offers some of the
most exciting investment opportunities available today. A combination of
declining interest rates and inflation should result in a significant upsurge in
investor interest in the region.
As always, we appreciate your continued interest and investment in The Southern
Africa Fund and look forward to continuing to serve your investment needs.
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
May 31, 1997 (unaudited) The Southern Africa Fund
================================================================================
<TABLE>
<CAPTION>
================================================================================
COMPANY U.S.$ VALUE PERCENT OF NET ASSETS
================================================================================
<S> <C> <C>
Teljoy Holdings, Ltd. $ 4,608,290 3.7%
- --------------------------------------------------------------------------------
Standard Bank Investment Corp., Ltd. 4,477,278 3.6
- --------------------------------------------------------------------------------
Nampak, Ltd. 4,137,005 3.4
- --------------------------------------------------------------------------------
Energy Africa, Ltd. 4,023,254 3.3
- --------------------------------------------------------------------------------
Metropolitan Life, Ltd. 3,962,122 3.2
- --------------------------------------------------------------------------------
Amalgamated Banks of South Africa 3,950,859 3.2
- --------------------------------------------------------------------------------
M-Cell, Ltd. 3,948,959 3.2
- --------------------------------------------------------------------------------
Rembrandt Group, Ltd. 3,728,341 3.0
- --------------------------------------------------------------------------------
South African Breweries, Ltd. 3,669,365 3.0
- --------------------------------------------------------------------------------
Nasionale Pers Beperk 3,651,575 3.0
- --------------------------------------------------------------------------------
Total $40,157,048 32.6%
- --------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
PORTFOLIO OF INVESTMENTS
May 31, 1997 (unaudited) The Southern Africa Fund
================================================================================
<TABLE>
<CAPTION>
Company Shares U.S.$ Value
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--82.1%
BOTSWANA--0.9%
CONSUMER
MANUFACTURING--0.4%
Sefalana Holdings Co. .................... 350,000 $ 480,200
------------
CONSUMER STAPLES--0.0%
Kgolo Ya Sechaba, Ltd. ................... 100,000 47,600
------------
FINANCIAL SERVICES--0.5%
Botswana Insurance
Holdings, Ltd. .......................... 203,116 147,868
Sechaba Investment Trust ................. 398,000 440,188
------------
588,056
------------
Total Botswanan Securities
(cost $1,104,552) 1,115,856
------------
MAURITIUS--2.1%
CONSUMER SERVICES--0.6%
Sun Resorts, Ltd. ........................ 280,000 670,132
------------
CONSUMER STAPLES--0.7%
Happy World Foods, Ltd. .................. 687,837 506,011
Mauritius Breweries, Ltd.(a) ............. 51,061 363,112
------------
869,123
------------
FINANCIAL SERVICES--0.8%
Mauritius Commercial Bank ................ 110,000 477,440
State Bank of Mauritius, Ltd. ............ 960,000 541,442
------------
1,018,882
------------
Total Mauritian Securities
(cost $2,211,863) ....................... 2,558,137
------------
NAMIBIA--0.6%
MULTI INDUSTRY
COMPANY--0.6%
Namibian Breweries, Ltd.
(cost $574,506) ......................... 1,000,000 726,907
------------
SOUTH AFRICA--73.3%
BASIC INDUSTRY--1.6%
Sappi, Ltd. .............................. 215,700 1,979,785
------------
CONSUMER
MANUFACTURING--3.4%
Nampak, Ltd.(b) .......................... 1,050,000 4,137,005
------------
CONSUMER SERVICES--16.1%
Electronic Media
Network, Ltd. ........................... 1,700,000 1,997,985
Independent Newspapers
Holdings, Ltd. .......................... 40,000 206,850
Multichoice Holdings, Ltd.(a) ............ 508,700 1,856,237
Nasionale Pers Beperk .................... 363,287 3,651,575
New Clicks Holdings, Ltd. ................ 1,000,000 1,119,319
Omni Media Corp., Ltd. ................... 190,000 2,828,520
Perskorgroep, Ltd. ....................... 21,500 770,092
Publico, Ltd. ............................ 1,021,090 765,760
Servgro International, Ltd.(b) ........... 350,000 650,325
Teljoy Holdings, Ltd.(a) ................. 3,812,080 4,608,290
Times Media, Ltd. ........................ 127,800 1,058,563
Tourism Investment
Corp., Ltd.(a) .......................... 950,000 323,260
------------
19,836,776
------------
CONSUMER STAPLES--11.1%
Illovo Sugar, Ltd. ....................... 750,000 1,511,081
Metro Cash & Carry, Ltd. ................. 3,413,010 2,941,591
The Premier Group, Ltd. .................. 1,131,769 1,773,535
Rembrandt Group, Ltd.(b) ................. 370,100 3,728,341
South African
Breweries, Ltd.(b) ...................... 130,606 3,669,365
------------
13,623,913
------------
ENERGY--5.0%
Energy Africa, Ltd.(a) ................... 843,750 4,023,254
Sasol, Ltd. .............................. 175,000 2,144,896
------------
6,168,150
------------
FINANCIAL SERVICES--16.9%
Amalgamated Banks of
South Africa ............................ 639,438 3,950,859
Fedsure Holdings, Ltd. ................... 237,196 2,309,833
Investec Bank, Ltd. ...................... 50,000 1,830,087
Metropolitan Life, Ltd. .................. 2,058,000 3,962,122
Mutual & Federal
Insurance Co., Ltd. ..................... 500,000 2,350,571
Nedcor, Ltd. ............................. 100,000 1,947,616
Standard Bank
Investment Corp., Ltd. .................. 100,000 4,477,278
------------
20,828,366
------------
MINING & METALS--9.4%
De Beers Centenary AG(b) ................. 78,900 2,764,238
Driefontein
Consolidated, Ltd. ...................... 187,500 1,582,438
Gencor, Ltd. ............................. 800,000 3,510,186
HJ Joel Gold
Mining Co., Ltd.(a) ..................... 400,000 331,319
Ingwe Coal Corp., Ltd. ................... 275,100 1,862,945
</TABLE>
4
<PAGE>
PORTFOLIO OF INVESTMENTS
May 31, 1997 (unaudited) The Southern Africa Fund
================================================================================
<TABLE>
<CAPTION>
Company Shares U.S.$ Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Vaal Reefs Exploration &
Mining Co., Ltd. ........................ 10,000 $ 599,955
Western Areas Gold
Mining Co., Ltd. ........................ 129,120 924,970
------------
11,576,051
------------
MULTI INDUSTRY
COMPANY--2.8%
Anglo-American Corp. of
South Africa, Ltd.(b) ................... 60,000 3,512,425
------------
TECHNOLOGY--3.8%
Dimension Data
Holdings, Ltd.(a) ....................... 1,000,000 3,346,765
Plessey Corp., Ltd. ...................... 748,211 1,296,430
------------
4,643,195
------------
UTILITIES--3.2%
M-Cell, Ltd.(a) .......................... 3,000,000 3,948,959
------------
Total South African Securities
(cost $62,842,873) ...................... 90,254,625
------------
ZAMBIA--0.9%
CONSUMER STAPLES--0.9%
Rothmans of Pall Mall
(Zambia) Berhad ......................... 13,731,902 476,802
Zambia Sugar Co.(a) ...................... 30,720,000 592,593
------------
Total Zambian Securities
(cost $813,385) ......................... 1,069,395
------------
ZIMBABWE--4.3%
CONSUMER SERVICES--1.0%
Meikles Africa, Ltd.(a)(c) .............. 400,000 890,000
Zimbabwe Newspapers ...................... 3,307,200 351,830
------------
1,241,830
------------
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal
Amount
Company (000) U.S.$ Value
- --------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES--1.0%
Delta Corp. .............................. 809,234 $ 1,219,590
------------
FINANCIAL SERVICES--0.4%
NMBZ Holdings, Ltd.(a) ................... 200,000 549,645
------------
MINING & METALS--0.8%
Reunion Mining Plc(a)(c) ................. 520,000 944,068
------------
MULTI-INDUSTRY
COMPANY--1.1%
TA Holdings, Ltd. ........................ 8,024,800 1,351,695
------------
Total Zimbabwean Securities
(cost $2,940,851) ....................... 5,306,828
------------
Total Common Stocks
(cost $70,488,030) ...................... 101,031,748
------------
FOREIGN GOVERNMENT
OBLIGATIONS--15.2%
SOUTH AFRICA--15.2%
Republic of South Africa
12.00%, 2/28/05 ......................... ZAR 28,900 5,627,614
13.00%, 8/31/10 ......................... 66,000 13,078,195
------------
Total Foreign Government
Obligations
(cost $18,130,180) ...................... 18,705,809
------------
TIME DEPOSIT--0.5%
Sumitomo Bank
5.65625%, 6/02/97
(cost $600,000).......................... US$ 600 600,000
------------
TOTAL INVESTMENTS--97.8%
(cost $89,218,210) ...................... 120,337,557
Other assets less liabilities--2.2% ........ 2,683,362
------------
NET ASSETS--100% ........................... $123,020,919
============
</TABLE>
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Security, or portion thereof, with an aggregate market value of
$12,978,709, have been segregated to collateralize forward exchange
currency contracts.
(c) U.S. Dollar denominated security.
Glossary:
ZAR - South African Rand.
See notes to financial statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1997 (unaudited) The Southern Africa Fund
================================================================================
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $89,218,210) ........... $120,337,557
Cash, at value (cost $2,141,955) ................................. 2,137,944
Receivable for investment securities sold ........................ 3,014,815
Interest and dividends receivable ................................ 829,172
Deferred organization expenses and other assets .................. 33,960
------------
Total assets ..................................................... 126,353,448
------------
LIABILITIES
Payable for investment securities purchased ...................... 2,760,998
Advisory fee payable ............................................. 273,738
Net unrealized depreciation on forward exchange currency contracts 77,297
Sub-advisory fee payable ......................................... 54,748
Administrative fee payable ....................................... 20,491
Accrued expenses and other liabilities ........................... 145,257
------------
Total liabilities ................................................ 3,332,529
------------
NET ASSETS ......................................................... $123,020,919
============
COMPOSITION OF NET ASSETS:
Common stock, at par ............................................. $ 60,071
Additional paid-in capital ....................................... 83,255,566
Undistributed net investment income .............................. 1,008,015
Accumulated net realized gain on investment transactions ......... 7,660,012
Net unrealized appreciation of investments and foreign currency
denominated assets and liabilities ............................. 31,037,255
------------
$123,020,919
============
NET ASSET VALUE PER SHARE (based on 6,007,100 shares outstanding) .. $ 20.48
============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
6
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended May 31, 1997 (unaudited) The Southern Africa Fund
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.......................................................................... $1,618,332
Dividends (net of foreign taxes withheld of $8,445)............................... 833,695 $ 2,452,027
----------
EXPENSES
Advisory fee...................................................................... 526,037
Custodian ........................................................................ 117,262
Administrative fee................................................................ 117,082
Sub-advisory fee.................................................................. 110,289
Directors' fees and expense....................................................... 94,800
Audit & legal..................................................................... 52,807
Reports and notices to shareholders............................................... 19,580
Transfer agency .................................................................. 19,143
Registration...................................................................... 8,063
Amortization of organization expenses............................................. 5,948
Miscellaneous..................................................................... 1,966
----------
Total expenses.................................................................... 1,072,977
-----------
Net investment income............................................................. 1,379,050
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions...................................... 7,794,867
Net realized loss on foreign currency transactions................................ (93,949)
Net change in unrealized appreciation of investments.............................. 8,879,086
Net change in unrealized depreciation of foreign
currency denominated assets and liabilities...................................... (81,812)
-----------
Net gain on investments and foreign currency transactions......................... 16,498,192
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.......................................... $17,877,242
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Six Months Ended Year Ended
May 31, 1997 November 30,
(unaudited) 1996
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income ................................................... $ 1,379,050 $ 2,349,924
Net realized gain on investments and foreign currency transactions ...... 7,700,918 12,952,857
Net change in unrealized appreciation (depreciation) of investments
and foreign currency denominated assets and liabilities ................ 8,797,274 (14,792,618)
------------- -------------
Net increase in net assets from operations .............................. 17,877,242 510,163
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................................... (2,012,378) (3,544,189)
Net realized gains ...................................................... (13,455,904) (5,466,461)
------------- -------------
Total increase (decrease) ............................................... 2,408,960 (8,500,487)
NET ASSETS
Beginning of year ....................................................... 120,611,959 129,112,446
------------- -------------
End of period (including undistributed net investment income of
$1,008,015 and $1,641,343, respectively) ............................... $ 123,020,919 $ 120,611,959
============= =============
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
May 31, 1997 (unaudited) 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 rate of exchange
prevailing when earned or accrued.
Net realized loss on foreign currency transactions represents foreign exchange
gains and losses from sales and maturities of foreign investments and closed
forward exchange currency contracts, holdings of foreign currencies, exchange
gains and losses realized between the trade and settlement dates on foreign
investment transactions and the difference between the 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 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. 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 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.
For federal income tax purposes, the Fund's distributions of income and capital
gains are subject to recharacterization, which may include a tax return of
capital, at the end of the year to reflect the final investment results for that
year.
8
<PAGE>
The Southern Africa Fund
================================================================================
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.
Under the terms of a Shareholder Inquiry Agency Agreement with Alliance Fund
Services, Inc. ("AFS"), an affiliate of the Investment Manager, the Fund
reimburses AFS for costs relating to servicing phone inquires for the Fund. The
Fund reimbursed AFS $1,230 during the six months ended May 31,1997.
Under the terms of an Administrative 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 for the fund and provides clerical and other
services.
- --------------------------------------------------------------------------------
NOTE C: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $16,034,002 and $28,959,006,
respectively, for the six months ended May 31, 1997. There were no purchases or
sales of U.S. government or government agency obligations for the six months
ended May 31, 1997.
At May 31, 1997, the cost of investments for federal income tax purposes was the
same as the cost for financial reporting purposes. Accordingly, gross unrealized
appreciation of investments was $33,100,064 and gross unrealized depreciation of
investments was $1,980,717 resulting in net unrealized appreciation of
$31,119,347 (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 difference 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 liquid assets in a separate account
of the Fund having a value at least equal to the aggregate amount of the Fund's
commitments under forward exchange currency contracts entered into with respect
to position hedges.
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 May 31, 1997, the Fund had outstanding forward exchange currency contracts,
as follows:
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) The Southern Africa Fund
================================================================================
<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 7/25/1997........................... 14,487 $3,181,533 $3,195,216 $ 13,683
Foreign Currency Sale Contract
- ------------------------------
Zimbabwe Dollars
expiring 7/25/1997........................... 37,765 3,181,550 3,272,530 (90,980)
-------
$(77,297)
========
</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 May 31, 1997, the
Investment Manager owned 7,100 shares.
- --------------------------------------------------------------------------------
NOTE E: Concentration of Risk
Investment 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
Six Months Ended November 30, March 7, 1994 (a)
May 31, 1997 -------------------------------- to
(unaudited) 1996 1995 November 30, 1994
------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................. $ 20.08 $ 21.49 $ 18.34 $ 13.87(b)
------------- ------------- ------------- -------------
Income From Investment Operations
Net investment income ................................ .22 .39 .17 .42
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions ....................................... 2.76 (.30) 4.27 4.05
------------- ------------- ------------- -------------
Net increase in net asset value from operations ...... 2.98 .09 4.44 4.47
------------- ------------- ------------- -------------
Less: Dividends and Distributions
Dividends from net investment income ................. (.34) (.59) (.52) -0-
Distribution from net realized gains on
investments and foreign currency transactions ...... (2.24) (.91) (.77) -0-
------------- ------------- ------------- -------------
Total dividends and distributions .................... (2.58) (1.50) (1.29) -0-
------------- ------------- ------------- -------------
Net asset value, end of period ....................... $ 20.48 $ 20.08 $ 21.49 $ 18.34
============= ============= ============= =============
Market value, end of period .......................... $ 16.875 $ 16.50 $ 16.75 $ 14.875
============= ============= ============= =============
Total Return
Total investment return based on: (c)
Market value ....................................... 19.94% 6.12% 22.90% 5.50%
Net asset value .................................... 19.61% .66% 27.89% 30.07%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) ............ $ 123,021 $ 120,612 $ 129,112 $ 110,181
Ratio of expenses to average net assets .............. 1.84%(d) 2.04% 2.05% 2.30%(d)
Ratio of net investment income to average
net assets ......................................... 2.36%(d) 1.87% .94% 3.65%(d)
Portfolio turnover rate .............................. 14% 62% 41% 15%
Average commission rate (e) .......................... $ .0012 $ .0046 -- --
</TABLE>
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(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 each 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 to
foreign brokers which may materially affect the rate shown. Amounts paid in
foreign currencies have been converted into U.S. dollars using the
prevailing exchange rate on the date of the transaction.
11
<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 Vincent S. Noto, 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.
12
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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
AllianceCapital [LOGO](R)
(R)These registered service marks used under license from the owner, Alliance
Capital Management L.P.
SAFAR
---------------------
THE
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SOUTHERN AFRICA
---------------------
FUND
---------------------
[GRAPHIC]
Semi-Annual Report
May 31, 1997
Alliance(R)
