<PAGE>
THE NEW SOUTH AFRICA
FUND INC.
SEMI-ANNUAL REPORT
AUGUST 31, 1995
(UNAUDITED)
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
OBJECTIVE
The New South Africa Fund Inc. (the "Fund") seeks to achieve long-term capital
appreciation through investments principally in securities of issuers in the
Republic of South Africa ("South Africa"), as well as, to a lesser extent, in
other countries in the Southern African region. Under normal circumstances, the
Fund will invest at least 80% of its assets in securities of South African
issuers, including at least 65% of its assets in equity securities of South
African issuers. The Fund may also invest up to 35% of its assets in fixed
income securities.
MANAGEMENT
- -------------------------------------------------------------------
Fleming International Asset Management Limited is the investment management
company appointed to advise on and manage the Fund's portfolio. The Investment
Adviser is an affiliate of Robert Fleming Holdings Limited, which manages over
$78 billion in assets worldwide. Carmen Maynard, a vice president of the Fund,
has principal responsibility for recommending the purchase and sale of the
investment securities by the Fund. Ms. Maynard has been an investment manager in
South Africa for the past 16 years and has been involved in the day-to-day
management of the Fund's portfolio since its inception.
MARKET INFORMATION
- -------------------------------------------------------------------
The Fund is listed on the New York Stock Exchange (symbol "NSA"). THE SHARE
PRICE IS PUBLISHED IN: THE NEW YORK TIMES (daily) under the designation "NwSAfr"
and THE WALL STREET JOURNAL (daily), and BARRON'S (each Monday) under the
designation "NewSoAfrFd".
THE NET ASSET VALUE PER SHARE IS PUBLISHED UNDER "CLOSED END FUNDS" EACH MONDAY
IN: THE NEW YORK TIMES, THE WALL STREET JOURNAL and BARRON'S.
1
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
DIRECTORS AND ADMINISTRATION
<TABLE>
<S> <C>
OFFICERS AND DIRECTORS Iain O.S. Saunders - President,
Treasurer and Chairman of the
Board of Directors
Anton Dirk Botha - Director
Arthur Levy - Director
Dr. Nthato H. Motlana - Director
Arnold Witkin - Director
John P. Balfe - Vice President
Carmen Maynard - Vice President
Ann Cranmer - Vice President
Patricia Smith - Secretary
INVESTMENT ADVISER Fleming International Asset
Management Limited
25 Copthall Avenue
London EC2R 7DR England
ADMINISTRATOR Bear Stearns Funds Management Inc.
245 Park Avenue
New York, NY 10167
U.S.A.
CUSTODIAN Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540
U.S.A.
INDEPENDENT ACCOUNTANTS Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
U.S.A.
LEGAL COUNSEL Baker & McKenzie
805 Third Avenue
New York, NY 10022
U.S.A.
REGISTRAR, TRANSFER AGENT PNC Bank, N.A.
& Bellevue Corporate Center
DIVIDEND PAYING AGENT 400 Bellevue Parkway
Mail Stop 400 0202
Wilmington, DE 19809
U.S.A.
</TABLE>
2
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
HIGHLIGHTS OF THE PERIOD
AT AUGUST 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
US $
---------------
<S> <C>
Net Assets 86,731,394
Net Asset Value ("NAV") per Share 18.23
Market Price on New York Stock Exchange 14.13
Discount to NAV 22.52%
PERFORMANCE FROM MARCH 11, 1994* TO AUGUST 31, 1995
Total Return based on Market Price 7.19%+
Total Return based on NAV 40.25%+
Johannesburg Stock Exchange ("JSE") All Share
Index 34.47%++
</TABLE>
- ------------------------
* Commencement of operations.
+ Assumes reinvestment of dividends in accordance with the Fund's dividend
reinvestment and cash purchase plan.
++ The JSE All Share Index excludes reinvestment of dividends on the underlying
securities.
NAV & MARKET PRICE VS. JSE ALL SHARE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE NEW SOUTH AFRICA FUND INC.
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE & MARKET VALUE
MARCH 11, 1994 - FEBRUARY 28, 1995
Initial Offering Price to
Public $15.00
Underwriting Spread 1.05
DATE NAV MKT VALUE DISCOUNT
03/11/94 $13.76 13.950 1.38%
03/18/94 13.74 12.875 -6.30%
03/25/94 13.75 13.125 -4.55%
03/31/94 13.60 11.875 -12.68%
04/08/94 13.30 11.875 -10.71%
04/15/94 12.72 11.250 -11.56%
04/22/94 13.69 12.500 -8.69%
04/29/94 14.91 13.625 -8.62%
05/06/94 14.53 12.375 -14.83%
05/13/94 14.41 12.750 -11.52%
05/20/94 14.12 12.000 -15.01%
05/27/94 14.31 12.250 -14.40%
05/31/94 14.44 12.500 -13.43%
06/03/94 14.56 12.500 -14.15%
06/10/94 14.70 12.875 -12.41%
06/17/94 15.08 13.625 -9.65%
06/24/94 15.10 13.000 -13.91%
06/30/94 14.36 12.625 -12.08%
07/01/94 14.34 12.750 -11.09%
07/08/94 14.35 12.375 -13.76%
07/15/94 15.41 12.750 -17.26%
07/22/94 15.07 13.125 -12.91%
07/29/94 15.01 12.875 -14.22%
08/05/94 15.49 12.500 -19.30%
08/12/94 15.66 12.875 -17.78%
08/19/94 15.88 13.000 -18.14%
08/26/94 15.66 13.250 -15.39%
08/31/94 15.80 12.875 -18.51%
09/02/94 15.84 12.750 -19.51%
09/09/94 16.06 12.875 -19.83%
09/16/94 16.17 13.000 -19.60%
09/23/94 16.24 13.125 -19.18%
09/30/94 16.28 13.125 -19.38%
10/07/94 16.44 13.125 -20.16%
10/14/94 16.82 13.750 -18.25%
10/21/94 17.71 14.375 -18.83%
10/28/94 17.50 14.375 -17.86%
10/31/94 17.50 14.125 -19.29%
11/04/94 17.60 14.250 -19.03%
11/11/94 17.60 14.375 -18.32%
11/18/94 17.77 14.125 -20.51%
11/25/94 17.39 13.625 -21.65%
11/30/94 17.51 14.000 -20.05%
12/02/94 17.42 14.000 -19.63%
div 0.77 12/09/94 17.16 14.000 -18.41%
reinv px. 13.13 12/16/94 17.60 14.500 -17.61%
Factor 1.058644 12/23/94 18.04 14.821 -17.84%
12/30/94 18.08 14.953 -17.30%
1/06/95 17.91 14.953 -16.52%
1/13/95 17.10 14.556 -14.86%
1/20/95 16.68 13.365 -19.89%
1/27/95 16.36 13.101 -19.90%
1/31/95 15.94 12.968 -18.66%
2/03/95 16.87 13.895 -17.66%
2/10/95 16.95 13.895 -18.02%
2/17/95 16.93 13.498 -20.26%
2/24/95 17.01 14.159 -16.77%
2/28/95 16.82 14.159 -15.83%
3/03/95 17.26 14.292 -17.18%
3/10/95 18.25 14.953 -18.07%
3/17/95 18.74 14.953 -20.20%
3/24/95 18.42 15.218 -17.39%
3/31/95 18.75 15.086 -19.54%
4/7/95 19.13 14.953 -21.83%
4/13/95 18.80 15.086 -19.76%
4/21/95 18.96 15.615 -17.64%
4/28/95 19.09 15.350 -19.58%
4/30/95 19.09 15.350 -19.58%
5/5/95 19.35 15.747 -18.63%
5/12/95 19.21 15.483 -19.42%
5/19/95 18.84 15.086 -19.94%
5/26/95 18.98 15.086 -20.52%
5/31/95 20.07 15.350 -23.52%
6/02/95 19.08 14.953 -21.61%
6/09/95 18.84 14.953 -20.65%
6/16/95 18.84 14.953 -20.65%
6/23/95 19.21 14.953 -22.18%
6/30/95 19.00 15.218 -19.92%
07/07/95 19.03 15.086 -20.75%
07/14/95 19.03 15.086 -20.75%
07/21/95 18.94 15.086 -20.35%
07/28/95 18.95 15.086 -20.39%
07/31/95 19.02 14.953 -21.40%
08/04/95 19.33 15.218 -21.28%
08/11/95 19.34 15.086 -22.00%
08/18/95 19.33 14.953 -22.65%
08/25/95 19.24 14.953 -22.26%
08/31/95 19.30 14.953 -22.52%
<CAPTION>
THE NEW SOUTH AFRICA FUND INC.
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE & MARKET VALUE
MARCH 11, 1994 - FEBRUARY 28, 1995
% CHANGE % CHANGE % CHANGE
JSE INDEX DATE NAV MKT INDEX
1127.3 03/11/94 100.00% 100.00% 100.00%
1144.7 03/18/94 99.85% 92.29% 101.54%
1098.8 03/25/94 99.93% 94.09% 97.47%
1003.3 03/31/94 98.84% 85.13% 89.00%
984.7 04/08/94 96.66% 85.13% 87.35%
921.1 04/15/94 92.44% 80.65% 81.71%
1041.3 04/22/94 99.49% 89.61% 92.37%
1158.6 04/29/94 108.36% 97.67% 102.78%
1134.5 05/06/94 105.60% 88.71% 100.64%
1131.7 05/13/94 104.72% 91.40% 100.39%
1110.3 05/20/94 102.62% 86.02% 98.49%
1131.9 05/27/94 104.00% 87.81% 100.41%
1134.8 05/31/94 104.94% 89.61% 100.67%
1151.8 06/03/94 105.81% 89.61% 102.17%
1179.3 06/10/94 106.83% 92.29% 104.61%
1216.6 06/17/94 109.59% 97.67% 107.92%
1182.2 06/24/94 109.74% 93.19% 104.87%
1136.5 06/30/94 104.36% 90.50% 100.82%
1135.9 07/01/94 104.22% 91.40% 100.76%
1136.7 07/08/94 104.29% 88.71% 100.83%
1250.4 07/15/94 111.99% 91.40% 110.92%
1211.1 07/22/94 109.52% 94.09% 107.43%
1216.9 07/29/94 109.08% 92.29% 107.95%
1255.0 08/05/94 112.57% 89.61% 111.33%
1280.4 08/12/94 113.81% 92.29% 113.58%
1297.3 08/19/94 115.41% 93.19% 115.08%
1284.9 08/26/94 113.81% 94.98% 113.98%
1297.9 08/31/94 114.83% 92.29% 115.13%
1308 09/02/94 115.12% 91.40% 116.03%
1321 09/09/94 116.72% 92.29% 117.18%
1322 09/16/94 117.51% 93.19% 117.27%
1339 09/23/94 118.02% 94.09% 118.78%
1329 09/30/94 118.31% 94.09% 117.89%
1342.4 10/07/94 119.48% 94.09% 119.08%
1374.1 10/14/94 122.24% 98.57% 121.89%
1447.2 10/21/94 128.71% 103.05% 128.38%
1436.9 10/28/94 127.18% 103.05% 127.46%
1420.1 10/31/94 127.18% 101.25% 125.97%
1430.9 11/04/94 127.91% 102.15% 126.93%
1430.6 11/11/94 127.91% 103.05% 126.90%
1433.7 11/18/94 129.14% 101.25% 127.18%
1392.1 11/25/94 126.38% 97.67% 123.49%
1398.7 11/30/94 127.25% 100.36% 124.08%
1379.1 12/02/94 126.60% 100.36% 122.34%
div 1372 12/09/94 124.71% 100.36% 121.71%
reinv px. 1377 12/16/94 127.91% 103.94% 122.15%
Factor 1417 12/23/94 131.10% 106.24% 125.70%
1440.9 12/30/94 131.41% 107.19% 127.82%
1418.9 1/06/95 130.18% 107.19% 125.87%
1347.8 1/13/95 124.25% 104.35% 119.56%
1309.8 1/20/95 121.25% 95.81% 116.19%
1274.7 1/27/95 118.87% 93.91% 113.08%
1232.7 1/31/95 115.87% 92.96% 109.35%
1314 2/03/95 122.64% 99.60% 116.56%
1310 2/10/95 123.18% 99.60% 116.21%
1317 2/17/95 123.02% 96.76% 116.83%
1334 2/24/95 123.64% 101.50% 118.34%
1317 2/28/95 122.25% 101.50% 116.83%
1,349.99 3/03/95 125.41% 102.45% 119.75%
1,393.07 3/10/95 132.64% 107.19% 123.58%
1,472.65 3/17/95 136.18% 107.19% 130.64%
1,450.21 3/24/95 133.87% 109.09% 128.64%
1,471.20 3/31/95 136.25% 108.14% 130.51%
1,516.66 4/7/95 139.02% 107.19% 134.54%
1,484.88 4/13/95 136.64% 108.14% 131.72%
1,499.06 4/21/95 137.79% 111.94% 132.98%
1,515.03 4/28/95 138.72% 110.04% 134.39%
1,515.03 4/30/95 138.72% 110.04% 134.39%
1,544.52 5/5/95 140.64% 112.88% 137.01%
1,522.30 5/12/95 139.64% 110.99% 135.04%
1,486.39 5/19/95 136.95% 108.14% 131.85%
1,501.35 5/26/95 137.95% 108.14% 133.18%
1,486.51 5/31/95 145.87% 110.04% 131.86%
1,505.04 6/02/95 138.64% 107.19% 133.51%
1,481.57 6/09/95 136.95% 107.19% 131.43%
1,479.77 6/16/95 136.95% 107.19% 131.27%
1,507.01 6/23/95 139.64% 107.19% 133.68%
1,490.76 6/30/95 138.10% 109.09% 132.24%
1,493.14 07/07/95 138.33% 108.14% 132.45%
1,494.00 07/14/95 138.33% 108.14% 132.53%
1,493.27 07/21/95 137.64% 108.14% 132.46%
1,492.61 07/28/95 137.72% 108.14% 132.41%
1,502.43 07/31/95 138.25% 107.19% 133.28%
1,528.98 08/04/95 140.49% 109.09% 135.63%
1,531.42 08/11/95 140.56% 108.14% 135.85%
1,527.32 08/18/95 140.49% 107.19% 135.48%
1,520.61 08/25/95 139.79% 107.19% 134.89%
1,516.04 08/31/95 140.25% 107.19% 134.48%
</TABLE>
3
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
MAJOR EQUITY HOLDINGS
AT AUGUST 31, 1995
<TABLE>
<CAPTION>
Percentage of Net
Assets
-----------------
<S> <C>
ANGLO AMERICAN CORPORATION OF SOUTH AFRICA LTD. 4.9
The largest mining house in the Republic of South Africa
("SA") and the world's largest gold producer, with 1994
output of 260 tons. Besides gold, the greater group, which
includes De Beers Consolidated Mines Ltd. ("De Beers") and
Amplats TS, is the world's largest producer of platinum and
diamonds. Other operations include coal, manganese and
ferroalloys, steel/ vanadium, financials and industrials.
DE BEERS 4.4
Comprises two companies: De Beers, which owns diamond mines
in SA and an investment portfolio including a 38% stake in
Anglo, and Centenary, which houses the companies through
which the group regulates the flow of rough diamonds to the
world market.
GENCOR LTD. 4.3
A mining house concentrated in resource businesses
including aluminum, coal, platinum, gold, manganese and
other metals. Following unbundling of its non-mining
interests to its shareholders in 1993, the group has no
industrial interests.
ISCOR LTD. 3.7
An integrated steel producer with a largely self-sufficient
South African raw materials base. The group supplies over
75% of domestic requirements. Roughly half its output is
exported.
THE TONGAAT-HULETT GROUP LTD. 3.2
One of SA's two largest sugar producers, with approximately
40% of industry output. Its subsidiary Toncoro has the
dominant share of the country's brick business. Other
operations include food, aluminum products and textiles.
</TABLE>
4
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
MAJOR EQUITY HOLDINGS (CONTINUED)
<TABLE>
<CAPTION>
Percentage of Net
Assets
-----------------
<S> <C>
C.G. SMITH LTD. 2.8
A diversified consumer products group with interests in
food processing, packaging and textiles. Its biggest
investments are Nampak (SA's largest packaging group) and
Tiger, one of the country's largest food and pharmaceutical
groups.
REUNERT LTD. 2.8
The holding company for a number of high-tech businesses
active in telecommunications, power generation, cables,
consumer electronics, office equipment and military
systems.
REMBRANDT GROUP LTD. 2.6
Has a dominant share of the domestic cigarette market and
has used its strong cashflow from this source to diversify
into mining, food and financial services. Tobacco accounted
for less than 50% of 1994 earnings.
SASOL LTD. 2.6
Converts coal into fuel and chemicals and also owns 64% of
a crude oil refinery. Its plants produce 46% of SA's fuel
requirements and most of its petrochemical feedstocks.
SENTRACHEM LTD. 2.6
Manufactures chemicals and plastics for the SA and export
markets.
</TABLE>
5
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT
OCTOBER 12, 1995
DEAR SHAREHOLDERS,
The New South Africa Fund Inc. ("NSA" or the "Fund") is now in its second year
of existence, having been listed on the New York Stock Exchange in March 1994.
The net asset value of the Fund (assuming reinvestment of all distributions) has
risen by 40.25% since inception. However, because of the emergence of a discount
the share price has not performed as well. Over the six months under review, the
net asset value has appreciated by 14.7% but the share price has only advanced
5.6%. This issue is addressed later in this review.
MARKET ENVIRONMENT
The following table summarizes market moves between the Fund's last fiscal year
ended February 28, 1995 and August 31, 1995.
<TABLE>
<CAPTION>
August 31, February 28,
1995 1995 % Change
--------------- ----------------- -----------
<S> <C> <C> <C>
Net Asset Value
("NAV")(US$) 18.23 15.89 14.73
Market price (US$) 14.13 13.38 5.61
Discount to NAV (%) 22.52 15.83 42.26
SOUTH AFRICA
Financial rand vs. US$ -- 3.91 --
Commercial rand vs.
US$ 3.66 3.60 1.67
Johannesburg Stock
Exchange ("JSE") All
Share Index (US$) 1,516 1,316 15.20
Three month bankers'
acceptance rate (%) 14.0 13.3 5.26
Yield on benchmark
long bond (%) 15.8 16.6 (4.82)
ZIMBABWE
Zimbabwe Industrial
Index (US$) 426 362 17.68
BOTSWANA
Botswana Share Index
(US$) 109 117 (6.84)
</TABLE>
6
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT (CONTINUED)
The Johannesburg Stock Exchange was in a gradually recovering phase over the
review period, after having fallen sharply in January and February of 1995. An
ongoing feature of the market was the gradual accumulation of South African
equities by foreign investors. During the first eight months of 1995, foreigners
bought nearly R4 billion of SA shares directly on the JSE and also participated
in various offshore placings by South African corporates. Against this, South
African institutional investors have been downweighting equities gradually, in
anticipation of some relaxation of exchange controls.
South African corporate profit growth remains healthy and this has resulted in
the earnings multiple on the All Share Index declining from 20 times during the
second half of 1994 to just below 16 times at present. With earnings growth of
approximately 25% in prospect for the next twelve months, the forward multiple
declines to below 13 times. Although driven by different factors, earnings
growth for mining and non-mining shares should be similar over the 12 month
period.
ECONOMY
The cyclical upswing in the South African economy, which began in May 1993,
remains intact. However, there was some slowdown early in 1995 as a result of
lower gold production and the impact of adverse weather conditions on
agriculture. Real GDP grew by 3% per annum on average over the two years to June
1995, a considerable improvement on the negative growth of the 1989-1993
recession. In recent quarters spending has been growing at a healthy 6% per
annum, nearly double the rate of GDP growth. This has, of course, impacted
adversely on the current account of the balance of payments, although the
deficit is still running below 2% of GDP. Fortunately, the country's low level
of foreign debt enables foreign borrowing to be used to finance import growth
which, encouragingly has been concentrated in capital goods rather than
consumption.
A number of favorable factors pertain to the economy at present:
- Export markets remain relatively buoyant;
- Relative political stability is leading to growing consumer and business
confidence;
- Strong capital spending growth is expanding the export capacity of the
economy;
7
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT (CONTINUED)
- Despite ongoing trade union turbulence, labor productivity continues to
improve;
- The substantial capital outflows which prevailed in the apartheid years
have been transformed into capital inflows. Approximately R18.6 billion
(4% of GDP) flowed into the economy in the year to June 1995.
Of some concern, however, is the lack of progress in certain key areas which
need to be resolved if economic growth is to prove sustainable:
- Reconstruction and development program spending has been slow to
materialize and evidence is growing that government should move from its
present consensus building approach towards taking a leadership role in
implementing growth oriented economic policies.
- A more pro-active approach to privatization is needed, rather than the
gradualist policy currently in play.
- Crime levels remain unacceptably high and undermine the underlying
positives for the economy.
THE PORTFOLIO
At the end of the period under review the Fund held 78% of assets in equities,
almost entirely in South African issuers. Investment in neighboring territories
Zimbabwe and Botswana accounted for less than 2% of assets. Shares quoted under
mining categories accounted for 25% of assets, although this tends to overstate
the case because mining houses have substantial financial and industrial
interests. Mining accounted for 34% of the JSE's All Share Index market
capitalization at the end of August. Financials made up 4% of assets,
concentrated in selected banks, industrials 49% and deposits, the balance. With
better value now available in the share market, the Fund is implementing a
buying program for selected shares and the cash component of the portfolio is
likely to decline in consequence. The best value is still concentrated in
selected parts of the industrial market, and buying is likely to be concentrated
here.
Of the 22% of the Fund's net assets held on deposit, 9% was invested in U.S.
dollar deposits and 13% in South African rand.
8
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT (CONTINUED)
DISCOUNT TO NET ASSET VALUE
Over the six months under review the discount of the share price to the net
asset value has widened from 15.9% to 22.5%. The fact that the net asset value
appreciation has not translated into share price performance is a matter of
concern for the Board, which regularly considers means to reduce the discount at
each of its quarterly meetings.
It is relevant to note that this is a problem common to all three of the
Southern African regional funds listed on the New York Stock Exchange. This led
the Board to conclude that the problem is more that Southern Africa is currently
out of favour with investors rather than anything specific to do with the Fund
itself. Furthermore, it indicated to the Board that such measures as tender
offers or open market share repurchases do not have a lasting effect on the
level of the discount as the other two funds have made use of these to some
extent. The Board also noted that, as the smallest of the three funds, any
reduction in the number of outstanding shares (which necessarily would result
from any share repurchases) would have a disproportionately large impact on the
Fund's expense ratio as well as adversely affecting the liquidity of the shares.
The Board also considered more radical approaches such as recommending to
shareholders that the Fund convert to open-end status (which would result in the
delisting of the Fund from the New York Stock Exchange but which would enable
shareholders to cause the Fund to redeem their shares at net asset value) or
liquidating the Fund. The Board believes that both these alternatives would be
quite inappropriate at this stage in the life of the Fund and not in
shareholders' long-term interests. The Fund was launched less than two years
ago. Since that time the South African economy has performed well and this has
been reflected in the securities markets. The Board believes that significant
potential for further growth remains as economic and regulatory reforms continue
and the positive impact of the opening up of the South African economy to
international capital is increasingly felt. Also, the existing closed-end
structure allows the Fund to take significant positions in relatively illiquid
shares which would not be possible in an open-end structure. This is an
important element of the Fund's investment strategy.
In conclusion, therefore, while the Board finds the Fund's market discount
situation to be frustrating, it believes that shareholders' interests are best
served at this time by not making open market share repurchases, or
9
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT (CONTINUED)
conducting a tender offer, or converting the Fund to an open-end structure or by
liquidation. The Board continues to believe that the present closed-end
structure is best suited for attaining the Fund's objective of long-term capital
appreciation and also believes that at such time as South Africa and the South
African securities market return to favor with investors, that the market
discount may narrow substantially and that under such circumstances, even a
market price premium per share to net asset value is possible.
Consistent with the Board's policy as stated in the Fund's initial public
offering prospectus, however, the Board will reconsider these matters at each of
its quarterly meetings notwithstanding its present condition.
DIVIDEND
A dividend of 12 cents per share was declared on September 6, payable October
13, and a further dividend is likely to be paid to satisfy U.S. Federal tax
requirements.
We appreciate your interest and continued support of the Fund.
Respectfully submitted,
[SIGNATURE]
Iain O.S. Saunders
President, Treasurer and
Chairman of the Board of Directors
10
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT PORTFOLIO (UNAUDITED)
AT AUGUST 31, 1995
<TABLE>
<CAPTION>
MARKET
VALUE
DESCRIPTION SHARES US $
- -------------------------------------- ---------- -----------
<S> <C> <C>
COMMON STOCKS--78.21%
BOTSWANA--0.03%
BEVERAGES & HOTELS--0.01%
Sechaba Investment Trust Co. Ltd. 10,800 7,133
-----------
COMMERCIAL BANKS--0.02%
Barclays Bank of Botswana Ltd. 5,000 6,783
Standard Chartered Bank Botswana
Ltd. 10,000 14,458
-----------
21,241
-----------
TOTAL BOTSWANA (cost $33,443) 28,374
-----------
SOUTH AFRICA--76.94%
BASE METALS--6.89%
Anglovaal Ltd. "N" ordinary 60,000 2,215,839
Gencor Ltd. 1,000,000 3,761,455
-----------
5,977,294
-----------
BEVERAGES & HOTELS--4.37%
Interleisure Ltd. 556,200 547,755
Sun International (Bophuthatswana)
Ltd. 170,000 1,069,621
The South African Breweries Ltd. 71,609 2,174,422
-----------
3,791,798
-----------
BUILDING AND CONSTRUCTION--7.07%
Barlows Ltd. 150,000 1,631,104
LTA Ltd. 250,000 1,248,119
Murray & Roberts Holdings Ltd. 322,500 2,051,190
Pretoria Portland Cement Co. Ltd. 50,000 1,203,666
-----------
6,134,079
-----------
</TABLE>
11
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT PORTFOLIO (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
MARKET
VALUE
DESCRIPTION SHARES US $
- -------------------------------------- ---------- -----------
SOUTH AFRICA (CONTINUED)
<S> <C> <C>
CHEMICALS & OIL--5.21%
Polifin Ltd. (a) 38,992 79,466
Sasol Ltd. 259,950 2,222,251
Sentrachem Ltd. 600,000 2,215,840
-----------
4,517,557
-----------
COAL MINING--1.23%
Rand Mines Ltd. 100,000 1,066,886
-----------
COMMERCIAL BANKS--3.97%
NBS Holdings Ltd. 149,300 1,756,230
Standard Bank Investment Corp. Ltd. 50,000 1,682,396
-----------
3,438,626
-----------
DIAMOND MINING--5.64%
De Beers Consolidated Mines Ltd. 150,000 3,846,943
Industrial & Commercial Holdings
Group Ltd. 170,000 1,046,369
-----------
4,893,312
-----------
ELECTRONICS--2.76%
Reunert Ltd. 480,000 2,396,389
-----------
FOOD--4.56%
Tiger Oats Ltd. 80,000 1,173,574
The Tongaat-Hulett Group Ltd. 220,882 2,779,530
-----------
3,953,104
-----------
FURNITURE & HOUSEHOLD--1.53%
JD Group Ltd. 350,000 1,328,478
-----------
</TABLE>
12
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT PORTFOLIO (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
MARKET
VALUE
DESCRIPTION SHARES US $
- -------------------------------------- ---------- -----------
SOUTH AFRICA (CONTINUED)
<S> <C> <C>
GOLD MINING--8.17%
Anglo Amercian Corporation of South
Africa Ltd. 80,000 4,278,485
Free State Consolidated Gold Mines
Ltd. 60,800 712,701
Johannesburg Consolidated Inv. Co.
Ltd. 21,900 173,738
Kloof Gold Mining Co. Ltd. 100,000 1,135,276
Western Areas Gold Mining Ltd. 50,000 783,067
-----------
7,083,267
-----------
INSURANCE--1.51%
Liberty Life Association of Africa
Ltd. 50,000 1,306,251
-----------
PAPER & PACKAGING--5.85%
C.G. Smith Ltd. 400,000 2,407,332
Nampak Ltd. 170,000 753,385
Sappi Ltd. 100,000 1,914,923
-----------
5,075,640
-----------
PLATINUM--2.84%
Potgietersrust Platinums Ltd. 186,400 1,198,304
Rustenburg Platinum Holdings Ltd. 55,600 1,262,426
-----------
2,460,730
-----------
</TABLE>
<TABLE>
<S> <C> <C>
STEEL & ALLOYS--4.35%
Highveld Steel & Vanadium Corp. Ltd. 79,999 590,883
Iscor Ltd. 2,769,844 3,182,422
-----------
3,773,305
-----------
</TABLE>
13
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT PORTFOLIO (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
MARKET
VALUE
DESCRIPTION SHARES US $
- -------------------------------------- ---------- -----------
SOUTH AFRICA (CONTINUED)
<S> <C> <C>
STORES--6.40%
CNA Gallo Ltd. 600,000 738,613
Pepkor Ltd. 214,000 1,302,558
Pick 'n Pay Stores Ltd. 501,000 1,507,591
Specialty Stores Ltd. 504,300 620,804
Specialty Stores Ltd. "N" (a) 1,174,300 1,381,340
-----------
5,550,906
-----------
TOBACCO--2.60%
Rembrandt Group Ltd. 282,000 2,256,463
-----------
TRANSPORTATION--1.99%
Safmarine & Rennies Holdings Ltd. 600,000 1,723,430
-----------
TOTAL SOUTH AFRICA
(cost $48,231,577) 66,727,515
-----------
ZIMBABWE--1.24%
BEVERAGES & HOTELS--0.45%
Delta Corp. Ltd. 250,000 390,061
-----------
BUILDING & CONSTRUCTION--0.26%
Portland Holdings Ltd. 225,000 227,535
-----------
COMMERCIAL BANKS--0.34%
Barclays Bank of Zimbabwe Ltd. 350,000 293,268
-----------
TOBACCO--0.19%
British American Tobacco Zimbabwe
Ltd. 35,000 52,586
T.S.L. Ltd. 430,000 113,060
-----------
165,646
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL ZIMBABWE (cost $1,217,283) 1,076,510
-----------
TOTAL COMMON STOCK
(cost $49,482,303) 67,832,399
-----------
</TABLE>
14
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT PORTFOLIO (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
MARKET
PAR VALUE
DESCRIPTION (000) US $
- -------------------------------------- ---------- -----------
<S> <C> <C>
SHORT-TERM INVESTMENT--8.64%
REPURCHASE AGREEMENT--8.64%
Repurchase Agreement dated 08/31/95
with Bear, Stearns Securities Corp.,
5.75%, due 09/01/95, collateralized
by $46,070,000 U.S. Treasury Bonds
(Interest-Only), 8.00%, 11/15/21;
value: $7,644,856; proceeds:
$7,495,991 (cost $7,494,794) US$ 7,495 7,494,794
-----------
TOTAL INVESTMENTS--86.85%
(cost $56,977,097)(b) 75,327,193
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES--13.15% 11,404,201
-----------
NET ASSETS--100% 86,731,394
-----------
-----------
</TABLE>
- ------------------------
(a) Non-income producing security.
(b) Aggregate cost for US federal income tax purposes is $57,145,356.
The aggregate unrealized appreciation (depreciation) for all securities is
as follows:
US $
-----------
Excess of market value over
tax cost 18,896,338
Excess of tax cost over market
value (714,501)
-----------
Net unrealized appreciation 18,181,837
-----------
-----------
See accompanying notes to financial statements.
15
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
AT AUGUST 31, 1995
<TABLE>
<CAPTION>
US $
-----------
<S> <C>
ASSETS
Investments, at value (cost $56,977,097) (Note 2) 75,327,193
Cash (representing foreign currency holdings with
a cost of $11,497,879 in an interest-bearing
account) 11,445,446
Interest and dividends receivable 160,466
Deferred organizational costs (Note 1) 77,280
Prepaid insurance 19,395
-----------
TOTAL ASSETS 87,029,780
-----------
LIABILITIES
Due to Investment Adviser (Note 6) 91,704
Due to Administrator (Note 6) 21,850
Accrued expenses payable 184,832
-----------
TOTAL LIABILITIES 298,386
-----------
NET ASSETS 86,731,394
-----------
-----------
NET ASSETS CONSIST OF:
Common stock, $0.001 par value (200,000,000 shares
authorized; 4,757,169 shares issued and
outstanding) (Note 1) 4,757
Additional paid-in capital 65,435,661
Undistributed net investment income (Note 2) 1,176,311
Accumulated net realized gain on investments and
foreign currency transactions 1,817,108
Net unrealized appreciation on investments,
foreign currency holdings and other assets and
liabilities denominated in foreign currencies 18,297,557
-----------
NET ASSETS 86,731,394
-----------
-----------
NET ASSET VALUE PER SHARE
($86,731,394 DIVIDED BY 4,757,169) 18.23
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED AUGUST 31, 1995
<TABLE>
<CAPTION>
US $
----------
<S> <C>
INVESTMENT INCOME
Interest (Note 2) 974,242
Dividends (net of foreign withholding taxes of
$103,823) (Note 2) 670,694
----------
TOTAL INVESTMENT INCOME 1,644,936
----------
EXPENSES
Investment advisory fees (Note 6) 533,290
Administration fees (Note 6) 63,995
Custodian fees 44,158
Accounting fees 37,205
Reports and notices to shareholders 32,054
Audit fees 31,188
Legal fees 30,158
Directors' fees and expenses 23,304
Transfer agent fees and expenses 19,630
Insurance 16,883
Amortization of organizational costs (Note 1) 10,988
NYSE listing fees 8,390
Miscellaneous 5,134
----------
TOTAL EXPENSES 856,377
----------
NET INVESTMENT INCOME 788,559
----------
NET REALIZED AND UNREALIZED GAINS/(LOSSES) ON
INVESTMENTS, FOREIGN CURRENCY HOLDINGS AND OTHER
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN
CURRENCIES
NET REALIZED GAIN ON (Note 2):
Investments 1,004,630
Foreign currency transactions 1,331,380
----------
2,336,010
NET UNREALIZED APPRECIATION/(DEPRECIATION) ON (Note
2):
Investments 8,752,269
Foreign currency holdings and other assets and
liabilities denominated in foreign currencies (750,198)
----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS,
FOREIGN CURRENCY HOLDINGS AND OTHER ASSETS AND
LIABILITIES DENOMINATED IN FOREIGN CURRENCIES 10,338,081
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 11,126,640
----------
----------
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the Period
Months ended March 11, 1994*
August 31, 1995 through
(unaudited) February 28, 1995
INCREASE IN NET ASSETS US $ US $
------------------- ---------------------
<S> <C> <C>
OPERATIONS
Net investment income 788,559 1,871,735
Net realized gain on investments
and foreign currency
transactions 2,336,010 1,660,135
Net unrealized appreciation on
investments, foreign currency
holdings and other assets and
liabilities denominated in
foreign currencies 8,002,071 10,295,486
------------------- -----------
Net increase in net assets
resulting from operations 11,126,640 13,827,356
------------------- -----------
Dividends and distributions to
shareholders from:
Net investment income -- (1,871,735)
In excess of net investment
income -- (1,505,855)
Net realized gains on
investments and foreign
currency transactions -- (285,430)
------------------- -----------
-- (3,663,020)
------------------- -----------
CAPITAL SHARE TRANSACTIONS
Common stock issued (Note 1, 9) -- 66,262,500
Offering costs (Note 1, 9) -- (922,090)
------------------- -----------
-- 65,340,410
------------------- -----------
NET INCREASE IN NET ASSETS 11,126,640 75,504,746
Net Assets:
Beginning of period 75,604,754 100,008
------------------- -----------
End of period (including
undistributed net investment
income of $1,176,311 and
$387,752, respectively) 86,731,394 75,604,754
------------------- -----------
------------------- -----------
</TABLE>
- ------------------------
* Commencement of operations.
See accompanying notes to financial statements.
18
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
FINANCIAL HIGHLIGHTS
CONTAINED BELOW IS PER SHARE OPERATING PERFORMANCE DATA FOR A SHARE OF COMMON
STOCK OUTSTANDING, TOTAL INVESTMENT RETURN, RATIOS TO AVERAGE NET ASSETS AND
OTHER SUPPLEMENTAL DATA FOR EACH PERIOD INDICATED. THIS INFORMATION HAS BEEN
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS AND MARKET PRICE
DATA FOR THE FUND'S SHARES.
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months For the Period
ended March 11, 1994*
August 31, 1995 through
(unaudited) February 28, 1995
US $ US $
--------------------- ---------------------
<S> <C> <C>
Net asset value, beginning of period 15.89 13.95**
Offering costs charged to additional
paid-in capital -- (0.19)
----- -----
15.89 13.76
----- -----
Net investment income 0.17 0.39
Net realized and unrealized gains on
investments, foreign currency
holdings and other assets and
liabilities denominated in foreign
currencies 2.17 2.51
----- -----
Total from investment operations 2.34 2.90
----- -----
Distributions to shareholders from:
Net investment income -- (0.39)
In excess of net investment income -- (0.32)
Net realized gains on investments
and foreign currency transactions -- (0.06)
----- -----
Total distributions to shareholders -- (0.77)
----- -----
NET ASSET VALUE, END OF PERIOD 18.23 15.89
----- -----
----- -----
MARKET VALUE, END OF PERIOD 14.13 13.38
----- -----
----- -----
TOTAL INVESTMENT RETURN BASED ON: (a)(b)
Market value 5.61% 1.50%
Net asset value 14.73% 22.25%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD 86,731,394 75,604,754
RATIO OF EXPENSES TO AVERAGE NET
ASSETS+ 2.01 % 2.10 %
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS+ 1.85 % 2.61 %
PORTFOLIO TURNOVER RATE 6.92 % 10.88 %
AVERAGE COMMISSION RATE $ 0.02 --
</TABLE>
- ----------------------------------
* Commencement of operations.
** Initial public offering price of $15.00 per share less underwriting discount
of $1.05 per share.
+ Annualized.
(a) 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. Total investment return does not reflect
sales charges or brokerage commissions.
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 the 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.
(b) Total investment return for periods of less than one year are not
annualized.
See accompanying notes to financial statements.
19
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
AT AUGUST 31, 1995
1. ORGANIZATION
The New South Africa Fund Inc. (the "Fund") was incorporated in the State of
Maryland on January 11, 1994 as a registered, non-diversified, closed-end
management investment company under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). Organizational costs of $109,346
have been deferred and are being amortized on a straight-line basis over a
60-month period from the date the Fund commenced operations. The Fund
incurred $922,090 of offering costs which were charged to additional paid-in
capital upon the receipt of proceeds from the initial public offering of the
Fund's shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies, which are
generally accepted in the United States of America, followed by the Fund.
I) SECURITY VALUATION
All securities for which the primary market is on an exchange are
valued at the last sale price on such exchange on the day of valuation
or, if there was no sale on such day, the last bid price quoted on such
day. Portfolio securities that are actively traded on the
over-the-counter market, including listed securities for which the
primary market is believed to be over-the-counter, are valued at the
mean between the most recently quoted bid and asked prices provided by
the principal market makers. Securities and assets for which market
quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of
Directors. US government securities and other debt instruments having 60
days or less remaining until maturity are stated at amortized cost if
their
original maturity was 60 days or less, or by amortizing their fair value
as of the 61st day prior to maturity if their original term to maturity
exceeded 60 days (unless in either case the Board of Directors
determines that this method does not represent fair value).
II) REPURCHASE AGREEMENTS
The Fund may invest temporarily, without limitation, in repurchase
agreements, which are agreements pursuant to
20
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
which securities are acquired by the Fund from a third party with the
understanding that they will be repurchased by the seller at a fixed
price on an agreed date. These agreements may be made with respect to
any of the portfolio securities in which the Fund is authorized to
invest. Repurchase agreements may be characterized as loans secured by
the underlying securities. The Investment Adviser monitors the continued
creditworthiness of counterparties, subject to the supervision of the
Fund's Board of Directors. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the
coupon rate or date of maturity of the purchased security. The
collateral is marked to market daily. In the event of default or
bankruptcy of the counterparty, the Fund's realization of the value of
the collateral may be delayed or limited.
III) TAXES
It is the intention of the Fund to qualify as a regulated investment
company and to distribute, at least annually, substantially all of its
net investment income and any net long-term capital gains in excess of
net short-term capital losses. Accordingly, no provision for US federal
income taxes is required. In addition, by distributing during each
calendar year substantially all of its net investment income, capital
gains and certain other amounts, if any, the Fund intends not to be
subject to a US federal excise tax.
For US federal income tax purposes, realized capital losses incurred
after October 31, 1994, within the fiscal year are deemed to arise on
the first day of the following fiscal year. For the period March 11,
1994 (commencement of operations) through February 28, 1995, the Fund
incurred and elected to defer such losses of $524,382.
Through September 30, 1995, the Republic of South Africa ("South
Africa") imposed a 15% withholding tax on dividends paid by South
African companies to the Fund. Effective October 1, 1995, the South
African government eliminated such tax. In addition, other income
received by the Fund from sources within South Africa or Southern
African regions may be subject to additional withholding and other taxes
imposed by such countries.
21
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
IV) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Realized
gains and losses on the sale of investment securities are determined on
the identified cost basis. Interest income is recorded on the accrual
basis. Dividend income and other distributions are recorded on the
ex-dividend date or as the Fund becomes aware of such dividends. The
collectibility of income receivable from foreign securities is evaluated
periodically and resulting allowance for uncollectible amounts, if any,
are reflected currently in the determination of net investment income.
At August 31, 1995, no such allowance was established.
V) DISTRIBUTION OF INCOME AND GAINS
The Fund intends to distribute to shareholders at least annually,
substantially all of its net investment income and net realized capital
gains. Dividends and distributions to shareholders are recorded by the
Fund on the ex-dividend date.
The amount of dividends and distributions from net investment income and
net realized capital gains are determined in accordance with US federal
income tax regulations, which may differ from generally accepted
accounting principles. These "book/tax" differences are either
considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified
within capital accounts based on their US federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes
are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent
distributions exceed current and accumulated earnings and profits for US
federal income tax purposes, they are reported as distributions of
paid-in capital.
VI) FOREIGN CURRENCY TRANSLATION
The books and records of the Fund are maintained in US dollars.
22
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
Foreign currency amounts are translated into US dollars at the 12 p.m.
mid-market price of such currencies against US dollars as quoted by
major New York banks as follows:
- investments, other assets and liabilities: at the prevailing rates of
exchange on the valuation date (see Note 4);
- investment transactions and investment income and expenses: at the
prevailing rates of exchange on the dates of such transactions (see
Note 4).
Although the net assets of the Fund are presented at the foreign
exchange rates and market values at the close of the period, the Fund
does not isolate that portion of the results of operations arising as a
result of changes in the foreign exchange rates from the fluctuations
arising from changes in the market prices of the securities held at
period end. Similarly, the Fund does not isolate the effect of changes
in foreign exchange rates from the fluctuations arising from changes in
the market prices of equity-related securities sold during the period.
Accordingly, realized and unrealized foreign currency gains and losses
with respect to such securities are included in the reported net
realized and unrealized gains and losses on investment transactions
balances. However, the Fund does isolate the effect of fluctuations in
foreign exchange rates when determining the gain or loss upon the sale
or maturity of foreign currency denominated debt obligations pursuant to
US federal income tax regulations. Such amount is categorized as foreign
exchange gain or loss for both financial reporting and income tax
reporting purposes.
Net currency gains from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of
net unrealized appreciation/depreciation on investments, foreign
currency holdings, and other assets and liabilities denominated in
foreign currencies.
Net realized foreign exchange gains of $1,331,380 represent foreign
exchange gains and losses from sales and maturities of debt securities,
holdings of foreign currencies, transactions in forward foreign currency
contracts, exchange gains or losses realized between the trade dates and
settlement dates on
23
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
security transactions, and the difference between the amounts of
interest and dividends recorded on the Fund's books and the US dollar
equivalent of the amounts actually received.
3. FORWARD CURRENCY CONTRACTS
The Fund conducts any currency exchange transactions on a spot, i.e. cash,
basis at the rate prevailing in the currency exchange market. A forward
currency contract typically involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at
the time of the contract. When the Fund enters into a forward contract or
other currency obligation, the Fund's custodian or a sub-custodian will
place cash or high grade debt securities in a segregated account of the Fund
in an amount equal to the value of the Fund's total assets committed to the
consummation of the obligation. If the value of the securities placed in the
segregated account declines, additional cash or securities will be placed in
the account so that the value of the account will be equal to the amount of
the Fund's commitment with respect to the contract.
4. FOREIGN EXCHANGE RATES
The South African Government maintained a dual currency system of commercial
rand and financial rand as part of its exchange control policy through March
12, 1995. The financial rand was the investment or repatriation currency for
non-residents such as the Fund. Effectively, there was a finite pool of
financial rand which was generated by the purchase and sale of investments
in South Africa by non-residents. The Fund had translated its South African
investments, related capital gains and cash arising from such activities
into US dollars at the mid-market price of financial rand against the US
dollar. The commercial rand was the official rate of exchange and was used
for transactions of a current nature and for income flowing from
investments, such as dividends, interest and royalties. The Fund has
translated its other assets, liabilities, net investment income and cash
resulting from such activities at the mid-market price of commercial rand
against the US dollar. The financial rand historically traded at a discount
to the commercial rand.
Effective March 13, 1995, the South African Finance Ministry abolished the
dual-currency system which had been in place since 1985. The measure
eliminated the financial rand. The commercial rand prevails
24
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
and is now known as the rand. Accordingly, beginning March 13, 1995, the
Fund translates all of its assets, liabilities and transactions using the
rand.
5. INVESTMENT TRANSACTIONS
For the period ended August 31, 1995, total purchases and sales of portfolio
investments excluding short-term securities, were $4,686,185 and
$13,722,166, respectively.
6. INVESTMENT ADVISER AND ADMINISTRATOR
I) Fleming International Asset Management Limited provides investment
advisory services to the Fund under the terms of an Investment Advisory
Agreement. Under the Investment Advisory Agreement, the Investment
Adviser is paid a monthly advisory fee at an annual rate of 1.25% of the
Fund's average weekly net assets.
II) Bear Stearns Funds Management Inc. (the "Administrator"), an affiliate
of Bear, Stearns & Co. Inc. ("Bear Stearns"), provides administrative
services to the Fund under an Administration Agreement. The
Administrator receives a fee that is computed monthly and paid quarterly
at an annual rate of 0.15% of the Fund's average weekly net assets.
7. TRANSACTIONS WITH AFFILIATES
Robert Fleming Inc. and Robert Fleming & Co. Limited affiliates of the
Investment Adviser, participated in the underwriting group as managers of
the US and international offerings, respectively, of the Fund's common
stock. Robert Fleming Inc. and Robert Fleming & Co. Limited received
$134,218, in underwriting and management fees and $518,133 in selling
concessions for the sale of 1,189,914 shares.
Bear Stearns and Bear, Stearns International Limited ("BSIL"), participated
in the Fund's underwriting group as managers of the U.S. and international
offerings, respectively. Bear Stearns and BSIL received $406,594 in
underwriting and management fees and $1,232,470 in selling concessions for
the sale of 2,904,808 shares.
For the six months ended August 31, 1995, the Fund paid approximately $60 in
brokerage commissions to Stockbrokers Botswana Ltd., an affiliate of the
Investment Adviser. In March 1995, Robert Fleming & Co Limited, an affiliate
of the Investment Adviser,
25
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
announced an agreement in principle to acquire a 50% interest in Martin &
Co. Martin & Co. was not an affiliate of the Investment Adviser during the
six months ended August 31, 1995 during which time the Fund paid Martin &
Co. brokerage commissions totalling $19,473.
8. CONCENTRATION OF RISK
The South African and the Southern African regions securities markets are
substantially smaller, less liquid and more volatile than the major
securities markets in the United States. A high proportion of the securities
of many companies in South Africa or Southern African regions may be held by
a limited number of persons, which may limit the number of securities
available for investment by the Fund. The limited liquidity of South Africa
and the Southern African region securities markets may also affect the
Fund's ability to acquire or dispose of securities at the price and time it
wishes to do so.
The Fund, subject to local investment limitations, may invest up to 10% of
its assets in non-publicly traded equity securities which may involve a high
degree of business and financial risk and may result in substantial losses.
Because of the current absence of any liquid trading market for these
investments, the Fund may take longer to liquidate these positions than
would be the case for publicly traded securities. Although these securities
may be resold in privately negotiated transactions, the prices realized on
such sales could be less than those originally paid by the Fund. Further,
companies whose securities are not publicly traded may not be subject to the
disclosure and other investor protection requirements applicable to
companies whose securities are publicly traded. At August 31, 1995, the Fund
held no such securities. The Fund is permitted to engage in the trading of
sovereign debt of South Africa or Southern African regions which involves a
substantial degree of risk. The issuer of the debt or the governmental
authorities that control the repayment of the debt may be unable or
unwilling to repay principal and/or interest when due in accordance with the
terms of such debt. Sovereign debt in which the Fund invests is widely
considered to have credit quality below investment grade as determined by US
rating agencies. As a result, sovereign debt may be regarded as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligations
and involves major risk exposure to adverse conditions.
26
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
9. CAPITAL STOCK
The authorized capital stock of the Fund is 200,000,000 shares of common
stock, $0.001 par value. Of the 4,757,169 shares outstanding at August 31,
1995, Robert Fleming Inc., an affiliate of the Investment Adviser, owned
7,169 shares. In addition to the issuance of common stock to Robert Fleming
Inc., a public offering of the Fund's shares by a group of underwriters
resulted in the issuance of 4,750,000 shares of the Fund's common stock.
- --------------------------------------------------------------
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET REALIZED
AND UNREALIZED
GAINS (LOSSES) ON
INVESTMENTS,
FOREIGN CURRENCY
NET INCREASE/
NET HOLDINGS AND MARKET
INVESTMENT INVESTMENT FOREIGN CURRENCY (DECREASE) IN NET PRICE
INCOME INCOME TRANSACTIONS ASSETS FROM OPERATIONS ON NYSE
---------------------- ---------------------- ---------------------- ---------------------- ---------
TOTAL TOTAL TOTAL TOTAL
QUARTER ENDED (000) PER SHARE (000) PER SHARE (000) PER SHARE (000) PER SHARE HIGH
- --------------------- --------- ----------- --------- ----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
May 31, 1995......... $ 857 $ 0.18 $ 431 $ 0.09 $ 9,161 $ 1.93 $ 9,592 $ 2.02 $ 15.000
August 31, 1995...... 788 0.17 358 0.08 1,177 0.24 1,535 0.32 14.625
--------- ----- --------- ----- --------- ----- --------- -----
Totals........... $ 1,645 $ 0.35 $ 789 $ 0.17 $ 10,338 $ 2.17 $ 11,127 $ 2.34
--------- ----- --------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- ----- --------- -----
May 31, 1994+........ $ 375 $ 0.08 $ 48 $ 0.01 $ 3,261 $ 0.69 $ 3,309 $ 0.70 $ 15.000
August 31, 1994...... 1,265 0.26 865 0.18 5,610 1.18 6,475 1.36 13.875
November 30, 1994.... 942 0.20 516 0.11 7,599 1.60 8,115 1.71 15.000
February 28, 1995.... 795 0.17 442 0.09 (4,514) (0.96) (4,072) (0.87) 15.125
--------- ----- --------- ----- --------- ----- --------- -----
Totals........... $ 3,377 $ 0.71 $ 1,871 $ 0.39 $ 11,956 $ 2.51 $ 13,827 $ 2.90
--------- ----- --------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- ----- --------- -----
<CAPTION>
QUARTER ENDED LOW
- --------------------- ---------
<S> <C>
May 31, 1995......... $ 13.125
August 31, 1995...... 13.875
Totals...........
May 31, 1994+........ $ 11.125
August 31, 1994...... 12.125
November 30, 1994.... 12.750
February 28, 1995.... 12.125
Totals...........
</TABLE>
- ------------------------------
+For the period March 11, 1994 (commencement of operations) through May 31,
1994.
27
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS
On May 24, 1995, the Fund's Annual Meeting of Shareholders was held and the
following matters were voted upon:
(1) To elect a director to the Board of Directors of the Fund.
<TABLE>
<CAPTION>
NAME OF DIRECTOR VOTES FOR VOTES AGAINST VOTES WITHHELD NON-VOTES
- ----------------- ----------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Arnold Witkin 3,698,768 -- 6,923 1,051,478
</TABLE>
In addition to the director elected at the meeting, Iain O. S. Saunders, Anton
Dirk Botha, Arthur Levy, and Dr. Nthato H. Motlana continue to serve as
directors of the Fund.
(2) To ratify the selection of Price Waterhouse LLP as independent accountants
for the year ending February 29, 1996.
<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST VOTES WITHHELD NON-VOTES
----------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
3,692,278 11,511 1,902 1,051,478
</TABLE>
(3) To ratify the Fund's investment advisory agreement with Fleming
International Asset Management Limited.
<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST VOTES WITHHELD NON-VOTES
----------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
3,676,464 13,956 15,271 1,051,478
</TABLE>
28
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
- --------------------------------------------------------
1. Pursuant to The New South Africa Fund Inc. (the "Fund") Dividend
Reinvestment and Cash Purchase Plan (the "Plan") each shareholder
("Shareholder") holding shares of common stock in the Fund will
automatically be a participant in the Plan, unless PNC Bank, National
Association, the Plan agent (the "Plan Agent"), is otherwise instructed
by the Shareholder, in writing, to have all distributions, net of any
applicable US withholding tax, paid in cash. Shareholders who do not
wish to participate in the Plan will receive all distributions in cash
paid by check mailed directly to the Shareholder by the Plan Agent. The
Plan Agent will act as agent for individual Shareholders and will open
an account for each Shareholder under the Plan in the same name as her
or his present shares of common stock are registered.
2. Whenever the directors of the Fund declare a capital gains distribution
or an income dividend payable in shares of common stock or cash,
participating Shareholders will take such distribution or dividend
entirely in shares of common stock and the Plan Agent shall
automatically receive such shares of common stock, including fractions,
for the Shareholder's account, except in the circumstances described in
paragraph 3 below.
3. Whenever the market price per share of common stock equals or exceeds
net asset value per share on the date the event described in paragraph 2
above occurs, participants will be issued shares of common stock at net
asset value or, if the net asset value is less than 95% of the market
price on the date the shares of common stock are valued, then
participants will be issued shares valued at 95% of the market price. If
net asset value per share of the common stock at such time exceeds the
market price of common stock on the date such shares are valued, the
Plan Agent, as agent for the participants, will buy shares of common
stock on the open market, on the New York Stock Exchange (the
"Exchange") or elsewhere, for the participants' accounts. If, before the
Plan Agent has completed its purchases, the market price exceeds the net
asset value of shares, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of shares, resulting in the
acquisition of fewer shares than if the dividend or distribution had
been paid in shares issued by the Fund at net asset value. Additionally,
if the market price exceeds the net asset value of shares before the
Plan Agent has
29
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (CONTINUED)
- ---------------------------------------------------------------------
completed its purchases, the Plan Agent is permitted to cease purchasing
shares and the Fund may issue the remaining shares at a price equal to
the greater of (a) net asset value or (b) 95% of the then current market
price. In a case where the Plan Agent has terminated open market
purchases and the Fund has issued the remaining shares, the number of
shares received by the participant in respect of the cash dividend or
distribution will be based on the weighted average of prices paid for
shares purchased in the open market and the price at which the Fund
issues remaining shares. If the Fund should declare an income dividend
or capital gains distribution payable only in cash, the Plan Agent will,
as purchasing agent for the participants, buy shares of common stock in
the open market, on the Exchange or elsewhere, for the participants'
accounts on, or shortly after, the payment date. To the extent the Plan
Agent is unable to do so and, before the Plan Agent has completed its
purchases, the market price exceeds the net asset value of the common
stock, the average per share purchase price paid by the Plan Agent may
exceed the net asset value of the common stock, resulting in the
acquisition of fewer shares of common stock than if the dividend or
capital gains distribution had been paid in common stock issued by the
Fund. The Plan Agent will apply all cash received as a dividend or
capital gains distribution to purchase shares of common stock on the
open market as soon as practicable after the payment date of such
dividend or capital gains distribution, but in no event later than 30
days after such date, except where necessary to comply with applicable
provisions of the federal securities laws.
4. Participants in the Plan may make additional cash payments to the Plan
Agent, semi-annually, in any amount from $100 to $3,000, for investment
in shares of common stock. The Plan Agent will use all funds received
from participants to purchase shares in the open market on or about
February 15 and August 15 of each year. Any voluntary cash payments
received more than 30 days prior to these dates will be returned by the
Plan Agent, and interest will not be paid on any uninvested cash
payments. Voluntary cash payments should be received by the Plan Agent
approximately ten days before February 15 or August 15, as the case may
30
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (CONTINUED)
- ---------------------------------------------------------------------
be. A participant may withdraw a voluntary cash payment by written
notice, if the notice is received by the Plan Agent not less than 48
hours before the payment is to be invested.
5. For all purposes of the Plan: (a) the market price of Fund shares of
common stock on a particular date shall be the last sales price on the
Exchange on the close of the previous trading day or, if there is no
sale on the Exchange on that date, then the mean between the closing bid
and asked quotations for such stock on the Exchange on such date, (b)
the date shares of common stock are valued is the dividend or
distribution payment date or, if that date is not an Exchange trading
day, the next preceding trading day and (c) net asset value per share of
common stock or a particular date shall be as determined by or on behalf
of the Fund.
6. The open-market purchases provided for above may be made on any
securities exchange where the shares of common stock of the Fund are
traded, in the over-the-counter market or in negotiated transactions,
and may be on such terms as to price, delivery and otherwise as the Plan
Agent shall determine. Funds held by the Plan Agent uninvested will not
bear interest, and it is understood that, in any event, the Plan Agent
shall have no liability in connection with any inability to purchase
shares of common stock within 30 days after the initial date of such
purchase as herein provided, or with the timing of any purchases
effected. The Plan Agent shall have no responsibility as to the value of
the shares of common stock of the Fund acquired for Shareholders'
accounts.
7. The Plan Agent will hold shares of common stock acquired pursuant to the
Plan in noncertificated form in the participant's name. The Plan Agent
will forward to the Shareholders any proxy solicitation material and
will vote any shares of common stock so held for each of the
Shareholders only in accordance with the proxy returned by her or him to
the Fund. In the case of Shareholders, such as banks, brokers or
nominees, that hold shares for others who are the beneficial owners of
such shares, the Plan Agent will administer the Plan on the basis of the
number of shares certified from time to time by such Shareholders as
representing the total amount registered in the name of such
Shareholders and held for the account of beneficial owners who
31
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (CONTINUED)
- ---------------------------------------------------------------------
participate in the Plan. Upon a Shareholder's written request, the Plan
Agent will deliver to her or him, without charge, a certificate or
certificates for the full shares of common stock.
8. The Plan Agent will confirm in writing each acquisition made for the
account of a Shareholder as soon as practicable, but not later than 60
days after the date thereof. Although a Shareholder may from time to
time have an undivided fractional interest (computed to three decimal
places) in a share of common stock of the Fund, no certificates for a
fractional share will be issued. However, dividends and distributions on
fractional shares of common stock will be credited to such Shareholder's
account. In the event of termination of a Shareholder's account under
the Plan, the Plan Agent will adjust for any such undivided fractional
interest in cash at the market value of the shares of common stock at
the time of termination.
9. Any stock dividends or split shares distributed by the Fund on shares of
common stock held by the Plan Agent for a Shareholder will be credited
to such Shareholder's account. In the event that the Fund makes
available to Shareholders rights to purchase additional shares of common
stock or other securities, the Plan Agent will sell such rights and
apply the proceeds of the sale to the purchase of additional shares of
common stock of the Fund for the account of such Shareholders.
10. The Shareholders each will be charged a pro rata share of brokerage
commissions on all open market purchases.
11. Each Shareholder may terminate her or his account under the Plan by
notifying the Plan Agent in writing. Such termination will be effective
immediately if notice is received by the Plan Agent not less than 10
days prior to any dividend or distribution record date; otherwise such
termination will be effective, with respect to any subsequent dividend
or distributions, on the first trading day after the dividend or
distribution paid for such record date shall have been credited to the
Shareholder's account. The Plan may be terminated by the Plan Agent or
the Fund as applied to any voluntary cash payments made and any dividend
or distributions paid subsequent to notice of the terminations in
writing mailed to the Shareholders at least 30 days prior to the
relevant
32
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (CONTINUED)
- ---------------------------------------------------------------------
semi-annual voluntary payment date or to any record date for the payment
of any dividend or distribution by the Fund. Upon any termination the
Plan Agent will cause a certificate or certificates for the full shares
held for each Shareholder under the Plan and cash adjustment for any
fraction to be delivered to her or him.
12. These terms and conditions may be amended or supplemented by the Plan
Agent or the Fund at any time or times but, except when necessary or
appropriate to comply with applicable law or the rules or policies of
the Securities and Exchange Commission or any other regulatory
authority, only by mailing to the Shareholders appropriate written
notice at least 30 days prior to the effective date thereof. The
amendment or supplement shall be deemed to be accepted by a Shareholder
unless, prior to the effective date thereof, the Plan Agent receives
written notice of the termination of such Shareholder's account under
the Plan. Any such amendment may include an appointment by the Plan
Agent in its place and stead of a successor Plan Agent under these terms
and conditions, with full power and authority to perform all or any of
the acts to be performed by the Plan Agent under these terms and
conditions. Upon any such appointment of a Plan Agent for the purpose of
receiving dividends and distributions, the Fund will be authorized to
pay to such successor Plan Agent, for Shareholders' accounts, all
dividends and distributions payable on the share of common stock held in
the Shareholders' name or under the Plan for retention or application by
such successor Plan Agent as provided in these terms and conditions.
13. The Plan Agent shall at all times act in good faith and agree to use its
best efforts within reasonable limits to ensure the accuracy of all
services performed under its Plan and to comply with applicable law, but
assumes no responsibility and shall not be liable for loss or damage due
errors unless such error is caused by its negligence, bad faith or
willful misconduct or that of its employees.
14. All correspondence concerning the Plan should be directed to the Plan
Agent, c/o PFPC Inc., 400 Bellevue Parkway, Wilimington, Delaware 19809
or by telephone at 1-800-852-4750.
33
<PAGE>
THIS REPORT, INCLUDING THE FINANCIAL STATEMENTS HEREIN, IS TRANSMITTED TO THE
SHAREHOLDERS OF THE NEW SOUTH AFRICA FUND INC. FOR THEIR INFORMATION. THE
FINANCIAL INFORMATION INCLUDED HEREIN IS TAKEN FROM THE RECORDS OF THE FUND
WITHOUT AUDIT BY THE FUND'S INDEPENDENT ACCOUNTANTS WHO DO NOT EXPRESS AN
OPINION THEREON. THIS IS NOT A PROSPECTUS, CIRCULAR OR REPRESENTATION INTENDED
FOR USE IN THE PURCHASE OF SHARES OF THE FUND OR ANY SECURITIES MENTIONED IN
THIS REPORT.
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.
COMPARISONS BETWEEN CHANGES IN THE FUND'S NET ASSET VALUE PER SHARE AND CHANGES
IN THE JOHANNESBURG STOCK EXCHANGE ALL-SHARE INDEX SHOULD BE CONSIDERED IN LIGHT
OF THE FUND'S INVESTMENT POLICY AND OBJECTIVES, THE CHARACTERISTICS AND QUALITY
OF THE FUND'S INVESTMENTS, THE SIZE OF THE FUND AND VARIATIONS IN THE US
DOLLAR/RAND EXCHANGE RATE.
<PAGE>
BEAR STEARNS FUNDS MANAGEMENT INC.
Administrator for The New South Africa Fund Inc.
245 Park Avenue
New York, NY 10167
Telephone (212) 272-9027
