<PAGE>
LETTER TO SHAREHOLDERS The Southern Africa Fund
================================================================================
July 28, 1999
Dear Shareholder:
This report contains investment results and market commentary for The Southern
Africa Fund (the "Fund") for the semi-annual reporting period ended May 31,
1999.
INVESTMENT RESULTS
The following table provides investment results for the Fund and its benchmark,
the Johannesburg Stock Exchange (JSE) All-Share Index, for the three-, six- and
12-month periods ended May 31, 1999. The Fund's outperformance relative to its
benchmark index over the three- and six-month periods under review was a result
of the Fund's underweighting in gold and gold-related stocks, which performed
poorly during these periods. Additionally, the Fund's outperformance was due to
a weak bullion price and our focus on individual growth stocks where we added
significant value on a security selection basis.
- --------------------------------------------------------------------------------
INVESTMENT RESULTS*
Periods Ended May 31, 1999
Total Returns
3 Months 6 Months 12 Months
-------- -------- ---------
The Southern
Africa Fund 12.11% 11.20% -27.72%
Johannesburg Stock
Exchange (JSE)
All-Share Index 9.74% 6.87% -27.63%
* The Fund's investment results are total returns for the periods and are
based on the net asset value of the Fund's shares as of May 31, 1999. All
fees and expenses related to the operation of the Fund have been deducted.
Past performance is no guarantee of future results.
The Johannesburg Stock Exchange (JSE) All-Share Index is a
capitalization-weighted index of all domestic stocks traded on the
Johannesburg Stock Exchange. The index is unmanaged and reflects no fees
or expenses. An investor cannot invest directly in an index.
- --------------------------------------------------------------------------------
MARKET COMMENTARY
Market sentiment in South Africa has improved markedly over the past few months.
The relatively untroubled re-election of the African National Congress (ANC)
under Thabo Mbeki, as well as an improved global pricing environment for
commodities (with the exception of gold), has led to some upward revisions in
gross domestic product (GDP) estimates for 1999 and 2000. Overall GDP growth is
now expected to be mildly positive in 1999 with a stronger recovery taking hold
next year when we expect GDP growth to be in the region of 3.0%.
In our view, the new ANC administration is unlikely to pursue any significant
policy changes relative to the outgoing government. However, we expect that the
relatively poor showing of the more left-wing candidates should allow Mr. Mbeki
to steer a more pragmatic course with regards to relations with South Africa's
trade unions as well as the issue of black empowerment.
In the face of this perceived political stability, the South African currency
has risen marginally against the U.S. dollar, thereby reviving expectations of
further cuts in interest rates. This anticipation has been further enhanced by a
significant decline in the growth of money supply, which has been the central
bank's primary target indicator. Although short-term inflation numbers have
fallen less than most expectations, we would expect to see some further
significant rate cuts over the second half of this year.
This should provide a particularly positive background for the stock market. A
combination of rising growth estimates and falling interest rates should serve
to push money into the stock market which, at this point in time, is not
discounting any significant improvement in corporate earnings either this year
or next. At the same time, however, we remain disappointed with the speed of the
dismantling
1
<PAGE>
The Southern Africa Fund
================================================================================
of exchange controls. Were the authorities to move quickly now to eliminate
these impediments to the free flow of capital, we could anticipate a potentially
substantial rally in South African stock prices. As it stands, many major South
African corporations continue to move their primary listings from the
Johannesburg Stock Exchange to the London Stock Exchange. The outflow of
management talent that results from these moves can only be stemmed by removing
the prime motivation for primary offshore listings -- exchange controls.
Despite the slow removal of these controls, we do continue to anticipate a
further upward move in South African share prices even without the controls'
immediate elimination. Valuations remain low and most foreign investors are
significantly underweighted in the region. Further, good macro-economic news is
likely to lead to a meaningful increase in the capital flows into the country.
PORTFOLIO STRATEGY AND MARKET OUTLOOK
As a result of our positive outlook, the Fund remains broadly and fully
invested. We have increased the economic sensitivity of the Fund's portfolio in
recent months as our global growth estimates have been revised upwards. However,
the main focus of the Fund remains on companies with strong relative growth
prospects and focused businesses. These groups have served us well in the past.
We believe they will continue to do so in the future, particularly due to the
fact that we anticipate some multiple expansion as interest rates decline.
Thank you for your continued interest and participation in The Southern Africa
Fund. We look forward to reporting to you again on developments in the Southern
African markets and your Fund's investment results in coming periods.
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 HOLDINGS
May 31, 1999 (unaudited) The Southern Africa Fund
================================================================================
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
COMPANY U.S.$ VALUE PERCENT OF NET ASSETS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Rembrandt Group, Ltd. $ 4,765,275 6.1%
M-Cell, Ltd. 4,354,869 5.5
Standard Bank Investment Corp., Ltd. 4,134,984 5.3
Nedcor, Ltd. 3,737,943 4.7
Billiton Plc. 3,431,662 4.4
South African Breweries, Ltd. 3,348,950 4.3
Firstrand Limited 2,949,541 3.8
Econet Wireless Holding 2,940,551 3.8
Liberty Life Association of Africa, Ltd. 2,923,402 3.7
Anglo-American Corp. of South Africa, Ltd. 2,834,856 3.6
Total $35,422,033 45.2%
- --------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
PORTFOLIO OF INVESTMENTS
May 31, 1999 (unaudited) The Southern Africa Fund
================================================================================
Company Shares U.S.$ Value
- --------------------------------------------------------------------------------
COMMON STOCKS
& OTHER INVESTMENTS--98.1%
BOTSWANA--1.6%
CONSUMER
MANUFACTURING--0.4%
MISCELLANEOUS--0.4%
Sefalana Holdings Co. ................... 350,000 $ 313,863
----------
CONSUMER STAPLES--0.6%
BEVERAGES--0.6 %
Kgolo Ya Sechaba, Ltd. .................. 100,000 11,605
Sechaba Breweries, Ltd. ................. 398,000 432,487
----------
444,092
----------
FINANCIAL SERVICES--0.6%
INSURANCE--0.6%
Botswana Insurance
Holdings, Ltd. ......................... 219,979 464,156
----------
Total Botswanan Securities
(cost $1,062,305) ....................... 1,222,111
----------
KENYA--0.6%
CONSUMER STAPLES--0.6%
BEVERAGES--0.6%
East African Breweries, Ltd
(cost $421,655) ....................... 452,623 507,915
----------
MALAWI--1.5%
CONSUMER SERVICES--1.5%
PRINTING & PUBLISHING--1.5%
Press Corporation(a)(b)
(cost $2,002,637) ..................... 188,750 1,157,038
----------
MAURITIUS--1.6%
CONSUMER SERVICES--0.6%
RESTAURANTS & LODGING--0.6%
New Mauritius Hotels, Ltd. .............. 167,358 292,910
Rogers and Company, Ltd. ................ 83,679 203,040
----------
495,950
----------
CONSUMER SERVICES--0.5%
BEVERAGES--0.5%
Mauritius Breweries, Ltd. ............... 102,122 373,716
----------
FINANCIAL SERVICES--0.5%
BANKING--0.5%
Mauritius Commercial
Banking ................................ 100,000 377,884
----------
Total Mauritian Securities
(cost $1,154,737) ....................... 1,247,550
----------
NAMIBIA--1.2%
BASIC INDUSTRY--0.5%
MINING & METALS--0.5%
Namibian Minerals Corp.(a) .............. 130,000 414,375
----------
CONSUMER STAPLES--0.7%
BEVERAGES--0.7%
Namibian Breweries, Ltd. ................ 1,000,000 543,131
----------
Total Namibian Securities
(cost $1,071,883) ....................... 957,506
----------
SOUTH AFRICA--84.9%
BASIC INDUSTRIES--12.6%
GOLD--1.8%
Anglogold, Ltd. ......................... 38,200 1,437,757
----------
MINING & METALS--7.5%
Anglo American Platinum ................. 80,100 1,475,204
Billiton Plc ............................ 1,106,400 3,431,662
South African Iron &
Steel Industry Corp. ................... 3,993,586 962,696
----------
5,869,562
----------
MISCELLANEOUS--3.3%
Johnnies Industrial Co. ................. 451,000 2,598,369
----------
9,905,688
----------
4
<PAGE>
The Southern Africa Fund
================================================================================
Company Shares U.S.$ Value
- --------------------------------------------------------------------------------
CONSUMER SERVICES--12.7%
BROADCASTING & CABLE--3.3%
Electronic Media /Supersports
International Hldgs .................... 1,700,000 $ 1,051,828
M-Web Holdings, Ltd.(a) ............... 495,992 1,498,538
-----------
2,550,366
-----------
PRINTING & PUBLISHING--3.3%
Nasionale Pers Beperk,
N shares ............................... 569,570 2,585,834
-----------
RETAIL--GENERAL
MERCHANDISE--6.1%
New Clicks Holdings, Ltd. .............. 1,736,227 2,511,216
Pick `N Pay Stores, Ltd. ............... 1,836,500 2,302,081
-----------
4,813,297
-----------
9,949,497
-----------
CONSUMER STAPLES--12.8%
BEVERAGES--6.7%
Amalgamated Beverage
Industries, Ltd. ....................... 286,100 1,885,110
South African
Breweries, Ltd. ........................ 415,945 3,348,950
-----------
5,234,060
-----------
TOBACCO--6.1%
Rembrandt Group, Ltd. ................... 670,100 4,765,275
-----------
9,999,335
-----------
ENERGY--2.6%
DOMESTIC INTEGRATED--2.6%
Energy Africa, Ltd.(a) .................. 1,193,550 2,052,388
-----------
FINANCIAL SERVICES--22.5%
BANKING--16.3%
ABSA Group, Ltd. ........................ 420,000 1,930,414
Firstrand Limited ....................... 3,132,000 2,949,541
Nedcor, Ltd. ............................ 186,373 3,737,943
Standard Bank
Investment Corp., Ltd. ................. 1,343,600 4,134,984
-----------
12,752,882
-----------
INSURANCE--2.5%
Forbes Group, Ltd. ...................... 774,000 1,977,758
-----------
MISCELLANEOUS FINANCE--3.7%
Liberty Life Association. of Africa, Ltd. 216,558 2,923,402
-----------
17,654,042
-----------
HEALTH CARE--1.3%
MISCELLANEOUS
HEALTH CARE--1.3%
Macmed Health
Care, Ltd.(a) ......................... 3,394,248 981,864
Macmed Health
Care, Ltd. Rights(a) .................. 818,390 1,315
-----------
983,179
-----------
MULTI-INDUSTRY
COMPANIES--6.8%
Anglo-American Corp. of
South Africa, Ltd. .................... 62,420 2,834,856
Financiere Richemont-
Dep Rec ............................... 156,300 2,516,876
-----------
5,351,732
-----------
TECHNOLOGY--8.1%
CHEMICALS--2.5%
AECI, Ltd. .............................. 909,000 1,928,292
-----------
COMPUTER SOFTWARE--5.6%
Dimension Data
Holdings, Ltd.(a) ...................... 639,841 2,570,675
Usko, Ltd. .............................. 6,822,754 1,863,991
-----------
4,434,666
-----------
6,362,958
-----------
UTILITY--5.5%
TELEPHONE UTILITY--5.5%
M-Cell, Ltd. ............................ 2,958,316 4,354,869
-----------
Total South African Securities
(cost $69,695,078) ...................... 66,613,688
-----------
5
<PAGE>
PORTFOLIO OF INVESTMENTS (continued) The Southern Africa Fund
================================================================================
Company Shares U.S.$ Value
- --------------------------------------------------------------------------------
ZAMBIA--1.1%
CONSUMER STAPLES--0.2%
BEVERAGES--0.2%
National Breweries Plc.(a) .............. 2,000,000 $ 154,890
-----------
FOOD--0.2%
Zambia Sugar Co. ........................ 30,720,000 159,425
-----------
TOBACCO--0.7%
Rothmans of Pall Mall
(Zambia) Berhad ........................ 16,079,032 544,954
-----------
Total Zambian Securities
(cost $1,162,450) ....................... 859,269
-----------
ZIMBABWE--5.6%
CONSUMER STAPLES--1.3%
BEVERAGES--1.3%
Delta Corp. ............................. 3,844,282 1,014,043
-----------
FINANCIAL SERVICES--0.5%
BANKING--0.5%
NMBZ Holdings, Ltd. ..................... 1,025,000 410,269
-----------
Shares or
Principal
Amount
Company (000) U.S.$ Value
- --------------------------------------------------------------------------------
CONSUMER SERVICES--3.8%
BROADCASTING & CABLE--3.8%
Econet Wireless
Holding(a) ............................. 29,100,000 $ 2,940,551
-----------
Total Zimbabwean Securities
(cost $3,346,223) ..................... 4,364,863
-----------
Total Common Stocks and
Other Investments
(cost $79,916,968) .................... 76,929,940
-----------
TIME DEPOSIT--0.4%
Brown Brothers Harriman & Co. ............
4.625%, 6/01/99
(cost $300,000) ......................... $300 $ 300,000
-----------
TOTAL INVESTMENTS--98.5%
(cost $80,216,968) ...................... 77,229,940
Other assets less liabilities--1.5% ...... 1,174,449
-----------
NET ASSETS--100% ........................... $78,404,389
===========
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) U.S. Dollar denominated security.
See notes to financial statements.
6
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999 (unaudited) The Southern Africa Fund
================================================================================
ASSETS
Investments in securities, at value (cost $80,216,968) ........ $77,229,940
Cash, at value (cost $1,724,391) .............................. 1,694,901
Receivable for investment securities sold ..................... 951,579
Dividends and interest receivable ............................. 135,932
-----------
Total assets .................................................. 80,012,352
-----------
LIABILITIES
Payable for investment securities purchased ................... 910,769
Tender fees payable ........................................... 169,737
Advisory fee payable .......................................... 157,248
Sub-advisory fee payable ...................................... 52,416
Administrative fee payable .................................... 12,432
Accrued expenses and other liabilities ........................ 305,361
-----------
Total liabilities ............................................. 1,607,963
-----------
NET ASSETS ...................................................... $78,404,389
===========
COMPOSITION OF NET ASSETS:
Common stock, at par .......................................... $ 60,071
Additional paid-in capital .................................... 82,684,676
Undistributed net investment income ........................... 297,013
Accumulated net realized losses on investment transactions .... (1,620,539)
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities .................. (3,016,832)
-----------
$78,404,389
===========
NET ASSET VALUE PER SHARE
(based on 6,007,100 shares outstanding) ....................... $13.05
===========
- --------------------------------------------------------------------------------
See notes to financial statements.
7
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended May 31, 1999 (unaudited) The Southern Africa Fund
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $32,096) ........ $1,231,564
Interest .................................................... 49,849 $1,281,413
----------
EXPENSES
Management fee .............................................. 296,999
Audit & legal ............................................... 134,292
Sub-advisory fee ............................................ 99,000
Directors' fees and expenses ................................ 92,806
Administrative fee .......................................... 76,200
Custodian ................................................... 63,783
Reports and notices to shareholders ......................... 29,802
Transfer agency ............................................. 4,348
Amortization of organization expenses ....................... 3,152
Registration ................................................ 1,550
Miscellaneous ............................................... 7,619
----------
Total expenses .............................................. 809,551
----------
Net investment income ....................................... 471,862
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investment transactions ................ (853,842)
Net realized loss on foreign currency transactions .......... (137,914)
Net change in unrealized depreciation of:
Investments ................................................ 8,143,296
Foreign currency denominated assets and liabilities ........ (26,043)
----------
Net gain on investments and foreign currency transactions ... 7,125,497
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS .................... $7,597,359
==========
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
8
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
The Southern Africa Fund
================================================================================
<TABLE>
<CAPTION>
Six Months Ended Year Ended
May 31, 1999 November 30,
(unaudited) 1998
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income ....................................................... $ 471,862 $ 892,421
Net realized gain (loss) on investments and foreign currency transactions ... (991,756) 400,146
Net change in unrealized appreciation (depreciation) of investments
and foreign currency denominated assets and liabilities .................... 8,117,253 (24,121,657)
------------ ------------
Net increase (decrease) in net assets from operations ....................... 7,597,359 (22,829,090)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ....................................................... -0- (892,421)
Distributions in excess of net investment income ............................ -0- (1,624,554)
Net realized gains .......................................................... (2,300,720) (15,558,389)
COMMON STOCK TRANSACTIONS
Tender offer costs .......................................................... (169,737) -0-
------------ ------------
Total increase (decrease) ................................................... 5,126,902 (40,904,454)
NET ASSETS:
Beginning of year ........................................................... 73,277,487 114,181,941
------------ ------------
End of period (including undistributed net investment income
of $297,013 as of May 31, 1999) ............................................ $ 78,404,389 $ 73,277,487
============ ============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
May 31, 1999 (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 financial
statements have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and assumptions
that affect the reported amounts of asset and liabilities in the financial
statements and amounts of income and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies of the Fund.
1. Security Valuation
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are generally
valued at the last reported sales price or if no sale occurred, at the mean of
the closing bid and asked prices on that day. Readily marketable securities
traded in over-the-counter market, securities listed on a foreign securities
exchange whose operations are similar to the U.S. over-the-counter market, and
securities listed on a national securities exchange whose primary market is
believed to be over-the-counter, are valued at the mean of the current bid and
asked prices. U.S. government and fixed income securities which mature in 60
days or less are valued at amortized cost, unless this method does not represent
fair value. Securities for which current market quotations are not readily
available are valued at their fair value as determined in good faith by, or in
accordance with procedures adopted by, the Fund's Board of Directors. Fixed
income securities may be valued on the basis of prices obtained from a pricing
service when such prices are believed to reflect the fair market value of such
securities.
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 accrued.
Net realized gains or losses on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed-income
investments and closed forward exchange currency contracts, holdings of foreign
currencies, currency 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. 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 any, 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.
4. 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. The
Fund accretes discounts on short-term securities as adjustments to interest
income.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) The Southern Africa Fund
================================================================================
5. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences are
permanent, such amounts are reclassified within the capital accounts based on
their federal tax basis treatment; temporary differences do not require such
reclassification.
- --------------------------------------------------------------------------------
NOTE B: Management, Sub-advisory and Administrative fees
Under the terms of the Investment Management Agreement, amended as of May 1,
1998, the Fund pays Alliance Capital Management L.P. (the "Investment Manager")
a fee calculated and paid quarterly, based on either (i) .81% of the Fund's
average weekly net assets if 90% or less of the Fund's average weekly net assets
are invested in securities of South African issuers, or (ii) the sum of (a) .80%
of the Fund's average weekly net assets and (b) .10% of the Fund's average
weekly net assets not invested in securities of South African issuers if greater
than 90% of the Fund's average weekly net assets are invested in securities of
South African issuers.
Under the new terms of the Sub-Advisory Agreement, effective May 31, 1998, the
Fund pays Gensec Asset Management (PTY) a fee calculated and paid quarterly
equal to an annualized rate of .30 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.
There were no reimbursements from the Fund to AFS during the six months ended
May 31, 1999 relating to shareholder servicing costs.
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 $16,927,721 and $17,450,048,
respectively, for the six months ended May 31, 1999. There were no purchases or
sales of U.S. government or government agency obligations for the six months
ended May 31, 1999.
At May 31, 1999, 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 $7,863,156 and gross unrealized depreciation of
investments was $10,850,182 resulting in net unrealized depreciation of
$2,987,026 (excluding foreign currency transactions).
Forward Exchange Currency Contracts
The Fund enters into forward exchange currency contracts to hedge its exposure
to changes in foreign currency exchange rates on its foreign portfolio holdings,
to hedge certain firm purchase and sales commitments denominated in foreign
currencies and for investment purposes. 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 contracts and the closing of such contracts is included in net
realized gains or losses 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.
11
<PAGE>
The Southern Africa Fund
================================================================================
The Fund's custodian will place and maintain cash not available for investment
or other 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.
At May 31, 1999, the Fund had no outstanding forward exchange currency
contracts.
- --------------------------------------------------------------------------------
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, 1999, the
Investment Manager owned 7,100 shares.
- --------------------------------------------------------------------------------
NOTE E: Concentration of Risk
Investment in securities of foreign companies involves special risks which
include the possibility of future political and economic developments which
could adversely affect the value of such securities. Moreover, securities of
many foreign companies and their markets may be less liquid and their prices
more volatile than those of comparable U.S. companies and the United States
Government.
- --------------------------------------------------------------------------------
NOTE F: Year 2000
Many computer systems and applications in use today process transactions using
two-digit date fields for the year of the transaction, rather than the full four
digits. If these systems are not modified or replaced, transactions occurring
after 1999 could be processed as year "1900," which could result in processing
inaccuracies and computer system failures at or after the Year 2000. This is
commonly known as the Year 2000 problem. The Fund and its major service
providers, including Alliance, utilize a number of computer systems and
applications that have been either developed internally or licensed from third
party suppliers. In addition, the Fund and its major service providers,
including Alliance, are dependent on third party suppliers for certain systems
applications and for electronic receipt of information. Should any of the
computer systems employed by the Fund or its major service providers, including
Alliance, fail to process year 2000 related information properly, that could
have a significant negative impact on the Fund's operations and the services
that are provided to the Fund's stockholders. To the extent that the operations
of issuers of securities held by the Fund are impaired by the Year 2000 problem,
or prices of securities held by the Fund decline as a result of real or
perceived problems relating to the Year 2000, the value of the Fund's shares may
be materially affected. In addition, for the Fund's investments in foreign
markets, it is possible that foreign companies and markets will not be as
prepared for Year 2000 as domestic companies and markets.
The Year 2000 issue is a high priority for the Fund and Alliance. The Fund has
been advised that, during 1997, Alliance began a formal Year 2000 initiative
which established a structured and coordinated process to deal with the Year
2000 issue. As part of its initiative, Alliance established a Year 2000 project
office to manage the Year 2000 initiative, focusing on both information
technology and non-information technology systems. Alliance has also retained
the services of a number of consulting firms which have expertise in advising
and assisting with regard to Year 2000 issues. Alliance reports that by June 30,
1998 it had completed its inventory and assessment of its domestic and
international computer systems and applications, identified mission critical
systems and non-mission critical systems and determined which of these systems
are not Year 2000 compliant. All third party suppliers of mission critical
computer systems and applications have been contacted to verify whether their
systems and applications will be Year 2000 compliant and their responses are
being evaluated. Substantially all of those contacted have
12
<PAGE>
The Southern Africa Fund
================================================================================
responded and approximately 90% have informed Alliance that their systems and
applications are or will be Year 2000 compliant. Alliance will seek alternative
solutions or third party suppliers for all suppliers who do not furnish a
satisfactory response by July 31, 1999. The same process is being performed for
non-mission critical systems with estimated completion by July 31, 1999.
Alliance had remediated, replaced or retired all of its non-compliant mission
critical systems and applications which can impact the Fund. After each system
has been remediated, it is tested with 19XX dates to determine if it still
performs its intended business function correctly. Next, each system undergoes a
simulation test using dates occurring after December 31, 1999. Inclusive of the
replacement and retirement of some of its systems, Alliance has completed these
testing phases for approximately 89% of nonmission critical systems. Integrated
systems tests will then be conducted to verify that the systems will continue to
work together. Full integration testing of all mission critical and nonmission
critical systems is estimated to be completed by July 31, 1999. Testing of
interfaces with third-party suppliers has begun and will continue throughout
1999. Alliance reports that it has completed an inventory of its facilities and
related technology applications and has begun to evaluate and test these
systems. Alliance reports that it anticipates that these systems will be fully
operable in the year 2000. Alliance, with the assistance of a consulting firm,
is developing Year 2000 specific contingency plans with emphasis on mission
critical functions. These plans seek to provide alternative methods of
processing in the event of a failure that is outside Alliance's control. The
estimated date for the completion of these plans is July 31, 1999.
There are many risks associated with Year 2000 issues, including the risks that
the computer systems and applications used by the Fund and its major service
providers will not operate as intended and that the systems and applications of
third party providers to the Fund and its service providers will not be Year
2000 compliant. Likewise there can be no assurance the compliance schedules
outlined above will be met or that the actual cost incurred will not exceed
current cost estimates. Should the significant computer systems and applications
used by the Fund and its major service providers or the systems of its important
third party suppliers be unable to process date sensitive information accurately
after 1999, the Fund and its service providers may be unable to conduct its
normal business operations and to provide shareholders with the required
services. In addition, the Fund and its service providers may incur
unanticipated expenses, regulatory actions and legal liabilities. The Fund and
Alliance cannot determine which risks, if any, are most reasonably likely to
occur or the effects of any particular failure to be Year 2000 compliant.
Certain statements provided by Alliance in this section entitled "Year 2000," as
such statements relate to Alliance, are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. To the fullest
extent permitted by law, the foregoing Year 2000 discussion is a "Year 2000
Readiness Disclosure" within the meaning of the Year 2000 Information and
Readiness Disclosure Act, 15 U.S.C. Sec. 1 (1998).
- --------------------------------------------------------------------------------
NOTE G: Subsequent Event
On June 24, 1999, the Fund purchased and retired 1,201,420 shares of its
outstanding common stock for $14.30 per share pursuant to a tender offer. The
Fund incurred tender offer costs of $169,737 which were charged to additional
paid-in capital.
13
<PAGE>
FINANCIAL HIGHLIGHTS The Southern Africa Fund
================================================================================
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Six Months Ended Year Ended November 30,
May 31, 1999 -----------------------------------------------
(unaudited) 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........................ $12.20 $19.01 $20.08 $21.49 $18.34
-------- -------- -------- -------- --------
Income From Investment Operations
- ---------------------------------
Net investment income ....................................... .08 .16 .41 .39 .17
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions .............................................. 1.15 (3.96) 1.10 (.30) 4.27
-------- -------- -------- -------- --------
Net increase (decrease) in net asset valuefrom operations ... 1.23 (3.80) 1.51 .09 4.44
-------- -------- -------- -------- --------
Less: Dividends and Distributions
- ---------------------------------
Dividends from net investment income ........................ -0- (.15) (.34) (.59) (.52)
Distributions in excess of net investment income ............ -0- (.27) -0- -0- -0-
Distribution from net realized gains on
investments and foreign currency transactions ............. (0.38) (2.59) (2.24) (.91) (.77)
-------- -------- -------- -------- --------
Total dividends and distributions ........................... (0.38) (3.01) (2.58) (1.50) (1.29)
-------- -------- -------- -------- --------
Net asset value, end of period .............................. $13.05 $12.20 $19.01 $20.08 $21.49
======== ======== ======== ======== ========
Market value, end of period ................................. $11.125 $10.0625 $15.375 $16.50 $16.75
======== ======== ======== ======== ========
Total Return
- ------------
Total investment return based on: (c)
Market value .............................................. 14.93% (18.11)% 9.28% 6.12% 22.90%
Net asset value ........................................... 11.20% (19.70)% 11.03% .66% 27.89%
Ratios/Supplemental Data
- ------------------------
Net assets, end of period (000's omitted) ................... $78,404 $73,277 $114,182 $120,612 $129,112
Ratio of expenses to average net assets ..................... 2.18%(d) 2.10% 2.05% 2.04% 2.05%
Ratio of net investment income toaverage net assets ......... 1.27%(d) 0.95% 2.00% 1.87% .94%
Portfolio turnover rate ..................................... 23% 86% 46% 62% 41%
<CAPTION>
March 7, 1994 (a)
to
November 30, 1994
-----------------
<S> <C>
Net asset value, beginning of period ........................ $13.87(b)
--------
Income From Investment Operations
- ---------------------------------
Net investment income ....................................... .42
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions .............................................. 4.05
--------
Net increase (decrease) in net asset valuefrom operations ... 4.47
--------
Less: Dividends and Distributions
- ---------------------------------
Dividends from net investment income ........................ -0-
Distributions in excess of net investment income ............ -0-
Distribution from net realized gains on
investments and foreigncurrency transactions .............. -0-
--------
Total dividends and distributions ........................... -0-
--------
Net asset value, end of period .............................. $18.34
========
Market value, end of period ................................. $14.875
========
Total Return
- ------------
Total investment return based on: (c)
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%(d)
Ratio of net investment income toaverage net assets ......... 3.65%(d)
Portfolio turnover rate ..................................... 15%
</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.
14
<PAGE>
ADDITIONAL INFORMATION The Southern Africa Fund
================================================================================
Supplemental Proxy Information
The Annual Meeting of the Shareholders of The Southern Africa Fund was held on
April 27, 1999. The description of each proposal and number of shares are as
follows:
Shares
Voted For
- --------------------------------------------------------------------------------
1. To elect Directors: Class One Directors
(term expires 2002)
David H. Williams 2,447,481
Prof. Dennis Davis 2,436,772
Wendy N. Luhabe 2,440,648
Sam N. Montsi 2,446,198
Ronald G. Olin 637,004
Ralph W. Bradshaw 637,004
Gary A. Bentz 637,004
William A. Clark 637,004
Class Two Directors
(term expires 2001)
Johannes C. van Reenen 2,440,673
<TABLE>
<CAPTION>
Shares Voted Shares Voted Shares Voted
for Against Abstain
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify the selection of Ernst & Young LLP
as the Fund's independent auditors for the Fund's
fiscal year ending November 30, 1999: 2,740,283 19,945 391,722
- ----------------------------------------------------------------------------------------------------------
3. Stockholder proposal to recommend that the
Board of Directors take steps necessary to
provide all stockholders the option of receiving
net asset value for their shares within two months
of the annual meeting: 784,516 2,250,900 116,530
- ----------------------------------------------------------------------------------------------------------
4. Stockholder proposal recommending that all
directors not standing for election who oppose the
proposal to resign their positions as Directors of
the Fund: 722,551 2,262,331 167,064
- ----------------------------------------------------------------------------------------------------------
5. Stockholder proposal that the advisory contract
between the Fund and Alliance Capital
Management LP be terminated within sixty days: 559,802 2,280,882 170,427
- ----------------------------------------------------------------------------------------------------------
6. Stockholder proposal recommending that the
Board of Directors authorize and direct the officers
of the Fund to reimburse the Soliciting Stockholder
for reasonable fees and expenses associated with
initial proxy communication: 671,503 2,312,768 167,673
- ----------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
The Southern Africa Fund
================================================================================
BOARD OF DIRECTORS
Dave H. Williams, Chairman and President Wendy N. Luhabe
T.N. Chapman(1) Ronnie Masson
Prof. Dennis Davis(1) Sam N. Montsi
David D.T. Hatendi(1) Johannes C. van Reenen
Dr. Willem de Klerk(1) Frank Savage
Moss L. Leoka Dr. Reba W. Williams
Peter G.A. Wrighton(1)
OFFICERS
Norman S. Bergel, Senior Vice President Edmund P. Bergan, Jr., Secretary
Mark H. Breedon, Senior Vice President Mark D. Gersten, Treasurer &
Russell Brody, Vice President Chief Financial Officer
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,
TRANSFER AGENT AND REGISTRAR
Brown Brothers Harriman & Co.
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.
16
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<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".
Dividend Reinvestment Plan
A Dividend Reinvestment Plan provides automatic reinvestment of dividends and
capital gains distributions in additional Fund shares.
For questions concerning shareholder account information, or if you would like a
brochure describing the Dividend Reinvestment Plan, please call The Bank of New
York at 1-800-432-8224.
The Southern Africa Fund
1345 Avenue of the Americas
New York, New York 10105
AllianceCapital[LOGO]
(R)These registered service marks used under license from the owner, Alliance
Capital Management L.P.
SAFSR 599
THE
---------------
SOUTHERN AFRICA
---------------
FUND
---------------
[GRAPHIC]
Semi-Annual Report
May 31, 1999
Alliance(R)
