<PAGE>
THE NEW SOUTH AFRICA
FUND INC.
ANNUAL REPORT
FEBRUARY 29, 1996
<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
$86 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 17 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
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.
DIVIDEND PAYING AGENT Bellevue Corporate Center
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 FEBRUARY 29, 1996
<TABLE>
<CAPTION>
US $
---------------
<S> <C>
Net Assets 92,196,248
Net Asset Value ("NAV") per Share 19.38
Market Price on New York Stock Exchange 15.375
Discount to NAV 20.67%
PERFORMANCE FROM MARCH 11, 1994* TO FEBRUARY 29, 1996
Total Return based on Market Price 22.18%+
Total Return based on NAV 56.14%+
Johannesburg Stock Exchange ("JSE") All Share
Index 54.05%++
</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>
NET ASSET VALUE MARKET PRICE JSE ALL SHARE INDEX
<S> <C> <C> <C>
3/11/94 100.00% 100.00% 100.00%
3/18 99.85% 92.29% 101.54%
3/25 99.93% 94.09% 97.47%
3/31 98.84% 85.13% 89.00%
4/8 96.66% 85.13% 87.35%
4/15 92.44% 80.65% 81.71%
4/22 99.49% 89.61% 92.37%
4/29 108.36% 97.67% 102.78%
5/6 105.60% 88.71% 100.64%
5/13 104.72% 91.40% 100.39%
5/20 102.62% 86.02% 98.49%
5/27 104.00% 87.81% 100.41%
5/31 104.94% 89.61% 100.67%
6/3 105.81% 89.61% 102.17%
6/10 106.83% 92.29% 104.61%
6/17 109.59% 97.67% 107.92%
6/24 109.74% 93.19% 104.87%
6/30 104.36% 90.50% 100.82%
7/1 104.22% 91.40% 100.76%
7/8 104.29% 88.71% 100.83%
7/15 111.99% 91.40% 110.92%
7/22 109.52% 94.09% 107.43%
7/29 109.08% 92.29% 107.95%
8/5 112.57% 89.61% 111.33%
8/12 113.81% 92.29% 113.58%
8/19 115.41% 93.19% 115.08%
8/26 113.81% 94.98% 113.98%
8/31 114.83% 92.29% 115.13%
9/2 115.12% 91.40% 116.03%
9/9 116.72% 92.29% 117.18%
9/16 117.51% 93.19% 117.27%
9/23 118.02% 94.09% 118.78%
9/30 118.31% 94.09% 117.89%
10/7 119.48% 94.09% 119.08%
10/14 122.24% 98.57% 121.89%
10/21 128.71% 103.05% 128.38%
10/28 127.18% 103.05% 127.46%
10/31 127.18% 101.25% 125.97%
11/4 127.91% 102.15% 126.93%
11/11 127.91% 103.05% 126.90%
11/18 129.14% 101.25% 127.18%
11/25 126.38% 97.67% 123.49%
11/30 127.25% 100.36% 124.08%
12/2 126.60% 100.36% 122.34%
12/9 124.71% 100.36% 121.71%
12/16 127.91% 103.94% 122.15%
12/23 131.10% 106.24% 125.70%
12/30 131.41% 107.19% 127.82%
1/6 130.18% 107.19% 125.87%
1/13 124.25% 104.35% 119.56%
1/20 121.25% 95.81% 116.19%
1/27 118.87% 93.91% 113.08%
1/31 115.87% 92.96% 109.35%
2/3 122.64% 99.60% 116.56%
2/10 123.18% 99.60% 116.21%
2/17 123.02% 96.76% 116.83%
2/24 123.64% 101.50% 118.34%
2/28 122.25% 101.50% 116.74%
3/3 125.41% 102.45% 119.75%
3/10 132.64% 107.19% 123.58%
3/17 136.18% 107.19% 130.64%
3/24 133.87% 109.09% 128.64%
3/31 136.25% 108.14% 130.51%
4/7 139.02% 107.19% 134.54%
4/13 136.64% 108.14% 131.72%
4/21 137.79% 111.94% 132.98%
4/28 138.72% 110.04% 134.39%
4/30 138.72% 110.04% 134.39%
5/5 140.64% 112.88% 137.01%
5/12 139.64% 110.99% 135.04%
5/19 136.95% 108.14% 131.85%
5/26 137.95% 108.14% 133.18%
5/31 137.79% 110.04% 131.86%
6/2 138.64% 107.19% 133.51%
6/9 136.95% 107.19% 131.43%
6/16 136.95% 107.19% 131.27%
6/23 139.64% 107.19% 133.68%
6/30 138.10% 109.09% 132.24%
7/7 138.33% 108.14% 132.45%
7/14 138.33% 108.14% 132.53%
7/21 137.64% 108.14% 132.46%
7/28 137.72% 108.14% 132.41%
7/31 138.25% 107.19% 133.28%
8/4 140.49% 109.09% 135.63%
8/11 140.56% 108.14% 135.85%
8/18 140.49% 107.19% 135.48%
8/25 139.79% 107.19% 134.89%
8/31 140.25% 107.19% 134.48%
9/8 141.33% 107.19% 135.37%
9/15 142.64% 109.09% 136.91%
9/22 143.33% 109.09% 137.41%
9/30 143.66% 109.99% 137.50%
10/6 144.59% 109.99% 138.92%
10/13 146.22% 110.95% 140.61%
10/20 147.93% 114.77% 141.89%
10/27 147.54% 111.90% 140.69%
10/31 147.77% 111.90% 140.81%
11/3 148.78% 113.82% 142.20%
11/10 152.19% 116.69% 146.94%
11/17 152.19% 116.69% 146.42%
11/24 150.95% 115.73% 145.34%
11/30 150.41% 117.64% 144.62%
12/8 155.22% 119.55% 150.20%
12/15 156.77% 117.64% 150.30%
12/22 158.17% 120.51% 151.48%
12/31 159.04% 119.20% 151.54%
1/5 166.93% 125.16% 159.51%
1/12 171.12% 130.13% 164.08%
1/19 171.44% 139.07% 165.82%
1/26 173.13% 141.06% 168.94%
1/31 170.96% 137.08% 166.95%
2/2 171.85% 143.04% 169.91%
2/9 169.91% 138.08% 167.20%
2/16 162.82% 133.11% 160.79%
2/23 159.36% 124.17% 155.42%
2/29/96 156.14% 122.18% 154.05%
Past performance is not predictive of future performance.
</TABLE>
3
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
MAJOR EQUITY HOLDINGS
AT FEBRUARY 29, 1996
<TABLE>
<CAPTION>
Percentage of Net
Assets
-----------------
<S> <C>
ANGLO AMERICAN CORPORATION OF SOUTH AFRICA LTD. 5.7
The largest mining house in the Republic of South Africa
("SA") and the world's largest gold producer, with 1995
output of 223 tons. Besides gold, the greater group, which
includes De Beers Consolidated Mines Ltd. ("De Beers") and
Amplats, is the world's largest producer of platinum and
diamonds. Other operations include coal, manganese and
ferroalloys, steel/ vanadium, financials and industrials.
DE BEERS 5.2
Comprised of two companies: De Beers, which owns diamond
mines in SA and an investment portfolio including a 38%
stake in Anglo American Corporation of South Africa Ltd.,
and Centenary, which houses the companies through which the
group regulates the flow of rough diamonds to the world
market.
GENCOR LTD. 4.0
The second largest mining house in SA, Gencor Ltd. is
concentrated in resource businesses including aluminum,
coal, platinum, gold, manganese and other metals. Over the
past two years, the group has created a major international
platform in aluminum and nickel through the $1.4 billion
purchase of Billiton.
THE TONGAAT-HULETT GROUP LTD. 3.9
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>
BARLOW LTD. 3.2
Comprised of a selection of businesses linked to capital
spending in the economy. Its subsidiaries include Pretoria
Portland Cement Co. Ltd., the country's largest cement
producer; Plascon, SA's largest paint company; and Robor,
which has a major share of the country's steel tube and
pipe industry.
REMBRANDT GROUP LTD. 3.2
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 1995 earnings.
SASOL LTD. 3.1
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.
REUNERT LTD. 3.0
The holding company for a number of high-tech businesses
active in telecommunications, power generation, cables,
consumer electronics, office equipment and military
systems.
C.G. SMITH LTD. 3.0
A diversified consumer products group with interests in
food processing, packaging and textiles. Its biggest
investments are Nampak Ltd. (SA's largest packaging group)
and Tiger Oats Ltd., one of the country's largest food and
pharmaceutical groups.
BIDVEST GROUP LTD. 2.8
Involved in the distribution of food and allied products to
the catering industry and in the manufacture of packaging,
staples, fasteners, adhesive tapes and industrial cleaning
materials.
</TABLE>
5
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT
APRIL 15, 1996
DEAR SHAREHOLDERS,
The New South Africa Fund Inc. ("NSA" or the "Fund") has been in existence for
over two years, having been listed on the New York Stock Exchange in March 1994.
The net asset value ("NAV") of the Fund (assuming reinvestment of all
distributions) has risen by 56.14% since inception through February 29, 1996
versus an increase of 54.05% in the Johannesburg Stock Exchange ("JSE") All
Share Index for the same period. For the fiscal year ended February 29, 1996,
the Fund's NAV rose 27.72% (assuming the reinvestment of distributions) versus
an increase of 31.92% in the JSE All Share Index for the same period.
Unfortunately, the discount of market price to NAV has remained substantial,
standing at 20.67% at the end of the fiscal year. This issue is addressed later
in this review.
MARKET ENVIRONMENT
The following table summarizes market moves between the Fund's fiscal years
ended February 28, 1995 and February 29, 1996.
<TABLE>
<CAPTION>
February 29, February 28,
1996 1995 % Change
------------- ----------------- -----------
<S> <C> <C> <C>
SOUTH AFRICA
Commercial rand vs. US$ 3.86 3.60 7.22
JSE All Share Index (US$) 1,737 1,316 31.99
Three month bankers'
acceptance rate (%) 14.1 13.3 6.02
Yield on benchmark long
bond (%) 14.8 16.6 (10.84)
ZIMBABWE
Zimbabwe Industrial Index
(US$) 516 362 42.54
BOTSWANA
Botswana Share Index (US$) 113 117 (3.42)
</TABLE>
After starting the year on a subdued note in the aftermath of the emerging
markets selloff, share prices on the Johannesburg Stock Exchange came to life
towards the end of 1995 as value re-emerged and it became clear that good
economic growth was translating into strong corporate profit performance. After
a dismal record during the first ten months of the fiscal year, gold shares
rebounded strongly in January as the gold price breached
6
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT (CONTINUED)
$400/oz. Bullion failed to sustain its recovery, however, and gold shares (7% of
the JSE All Share Index) and mining shares underperformed financial and
industrial shares over the review period.
ECONOMY
Two years after the country's first democratic elections, the South African
economy is well into an economic upswing, led by strong private sector capital
spending. Underlying economic growth is approximately 3% per annum but should
move towards 4% in 1996 as the agricultural sector bounces back after strong
summer rains. Although there are patches of softness beginning to emerge in the
manufacturing sector, this is unlikely to result in a widespread slowdown. In
the emerging market context, 3-4% per annum growth may seem minimal but the
Government of National Unity (GNU) is very cognizant of the need for an enduring
business cycle, rather than a boom/bust scenario. There is encouraging evidence
that significant progress has been made in ameliorating the structural economic
problems inherited by the present regime. Inflation has been halved from the 15%
which became entrenched in the 1970's and 1980's. Despite its recent weakness,
the rand is generally a more stable currency than was the case in the 1980's.
Furthermore, the budget deficit before borrowing as a percentage of GDP is
coming down steadily and should be close to 5% this fiscal year.
The Reconstruction and Development Program (RDP) -- the blueprint for social
upliftment in the economy -- remains mired in problems of delivery.
Approximately R7.5 billion was set aside in the 1996/7 budget for the RDP, but
only half of the R7.5 billion allocated over the previous two years has been
spent. Although the population has been remarkably patient in waiting for the
system to deliver, and progress has been made in key areas such as health and
education, it is to be hoped that the delivery of housing will improve soon in
order to avoid general disenchantment. A key issue which remains unresolved is
the standoff between labor and business. Businessmen correctly claim that the
country needs to raise productivity if it is to become internationally
competitive, while labor continues to demand that the perceived wrongs of the
past be corrected and remuneration packages improved. In the recent budget,
labor demonstrated its significant influence when the government bowed to
pressure not to increase value added tax. Increased competition is likely to be
a growing factor of the South African economic scene as import protection wanes
and international business interests expand. From a fund management
7
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT (CONTINUED)
point of view, an understanding of corporate readiness for and vulnerability to
increased competition will be a major factor influencing successful share
selection over the next few years.
While the recent decline in the rand from R3.65 to the dollar towards R4.00 has
reminded investors that the unitary currency is likely to be more volatile now
that the protective influence of the financial rand has been removed, the GNU
remains committed to its policy of gradual relaxation of exchange controls.
Already, local investment institutions can hold between 2.5% (pension funds) and
10% (unit trusts) of assets offshore under the system of asset swaps. Further
concessions are likely to be announced soon, probably allowing institutional
investors to invest a small proportion of annual cashflows offshore. The
determining factor for the speed with which exchange controls will be abolished
will be the size and perceived dependability of capital inflows from abroad. So
far, the evidence is encouraging and approximately R22.0 billion of short and
long-term capital (nearly 5% of GDP) flowed into the country last year.
THE PORTFOLIO
At the end of the fiscal year the Fund held almost 90% of assets in equities,
almost entirely in South African securities. Investment in neighboring
territories Zimbabwe and Botswana accounted for less than 2% of assets, mainly
because of the limited size of these markets. Shares quoted under mining
categories accounted for 26% of assets, although this tends to overstate the
case because mining houses have substantial financial and industrial interests.
Mining accounted for 32% of the JSE's market capitalization at the end of
February 1996. Financials made up 8% of assets, concentrated in selected banks
and long-term insurers while industrial securities comprised 56% of assets
against 50% of the JSE All Share Index. The balance of 10% was invested almost
equally between rand bonds, rand deposits and dollar deposits.
The JSE All Share Index trades on 17.2 times trailing earnings, which declines
to 14.3 times estimated earnings as a result of strong corporate profit growth.
Although earnings growth should be in the 20% region for the market as a whole,
certain sectors, such as platinum, are likely to experience earnings declines.
Present strategy is to underweight mining stocks in the portfolio, but that
strategy will be reviewed as and when there is evidence that the present loss of
momentum in world growth is
8
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT (CONTINUED)
nearing an end. Already there is encouraging evidence that stock ratios in key
commodities are at healthier levels, which will provide a sound basis for the
next upswing in the commodity cycle.
Since the semi-annual report in August 1995, share selection has focused on
areas likely to benefit from capital spending (Barlow Ltd. and Murray & Roberts
Holdings Ltd.), long-term insurance (Liberty Life Association of Africa Ltd. and
Norwich Holdings S.A. Ltd.) and selected retailers (CNA Gallo Ltd., Pepkor Ltd.
and Specialty Stores Ltd.).
DISCOUNT TO NET ASSET VALUE AND SHARE REPURCHASE PROGRAM
Over the last six months, the discount of the market price to net asset value
has remained at a relatively high level. This situation is common to all three
of the South African regional funds listed on the New York Stock Exchange. The
fact that the appreciation in net asset value has not translated into share
price performance remains a matter of concern to the Board of Directors (the
"Board").
In my last report, I covered in some detail the Board's views regarding the
discount. We have continued to regularly consider means to reduce the discount,
such as a tender offer. However, the Board does not believe that this would have
a lasting effect on the discount given that the Fund's discount is at a level
comparable with that of the other South African Funds.
The Board has 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 would not be in
shareholders' long-term interests. The Fund was launched a little over 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 South African economy to
international capital is increasingly felt. Also, the existing closed-end
structure
9
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT (CONTINUED)
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.
The persistence of the discount has led the Board to look more favorably on a
modest share repurchase. While having an adverse impact on the Fund's expense
ratio as well as the liquidity of the shares it does enhance net asset value for
ongoing investors. As a result, on February 29, 1996, the Board announced that
it had given the Fund's investment adviser discretion to cause the Fund to
repurchase up to 5% of the outstanding shares when the discount to net asset
value exceeds 20%. As of April 15, 1996, the Fund has repurchased 85,000 shares.
All share repurchases have been effected on the New York Stock Exchange in
compliance with applicable regulations of the US Securities and Exchange
Commission and the New York Stock Exchange.
In line with the policy stated in the Fund's initial public offering prospectus,
the Board will continue to reconsider these matters at each of its quarterly
meetings.
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
AT FEBRUARY 29, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
DESCRIPTION SHARES US $
- ------------------------------------- ----------- -----------
<S> <C> <C>
COMMON STOCKS--89.70%
BOTSWANA--0.03%
BEVERAGES & HOTELS--0.01%
Sechaba Investment Trust Co. Ltd. 10,800 8,250
-----------
COMMERCIAL BANKS--0.02%
Barclays Bank of Botswana Ltd. 5,000 6,450
Standard Chartered Bank Botswana
Ltd. 10,000 13,580
-----------
20,030
-----------
TOTAL BOTSWANA (cost $33,443) 28,280
-----------
SOUTH AFRICA--88.18%
BASE METALS--6.68%
Anglovaal Ltd. "N" ordinary 60,000 2,434,109
Gencor Ltd. 1,000,000 3,720,930
-----------
6,155,039
-----------
BEVERAGES & HOTELS--4.86%
Interleisure Ltd. 556,200 625,186
Sun International (South Africa)
Ltd. 1,000,000 1,343,669
The South African Breweries Ltd. 71,980 2,510,930
-----------
4,479,785
-----------
BUILDING & CONSTRUCTION--8.60%
Barlow Ltd. 220,000 2,927,649
LTA Ltd. 250,000 1,663,437
Murray & Roberts Holdings Ltd. 350,031 2,148,123
Pretoria Portland Cement Co. Ltd. 50,000 1,188,630
-----------
7,927,839
-----------
CHEMICALS & OIL--5.83%
Sasol Ltd. 334,889 2,898,910
Sentrachem Ltd. 600,000 2,480,620
-----------
5,379,530
-----------
</TABLE>
11
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
MARKET
VALUE
DESCRIPTION SHARES US $
- ------------------------------------- ----------- -----------
<S> <C> <C>
SOUTH AFRICA (CONTINUED)
COAL MINING--1.19%
Ingwe Coal Corporation Ltd. 135,700 920,446
Rand Mines Ltd. 100,000 174,418
-----------
1,094,864
-----------
COMMERCIAL BANKS--5.23%
NBS Holdings Ltd. 149,300 2,406,353
Standard Bank Investment Corp. Ltd. 54,900 2,411,628
-----------
4,817,981
-----------
DIAMOND MINING--6.93%
De Beers Consolidated Mines Ltd. 150,000 4,767,442
Industrial & Commercial Holdings
Group Ltd. 170,000 1,625,323
-----------
6,392,765
-----------
ELECTRONICS--2.99%
Reunert Ltd. 485,581 2,760,409
-----------
FOOD--8.22%
The Bidvest Group Ltd. 350,000 2,554,910
The Tongaat-Hulett Group Ltd. 222,761 3,626,342
Tiger Oats Ltd. 80,000 1,395,349
-----------
7,576,601
-----------
FURNITURE & HOUSEHOLD--2.37%
JD Group Ltd. 353,033 2,189,352
-----------
GOLD MINING--8.44%
Anglo American Corporation of South
Africa Ltd. 80,000 5,229,974
JCI Company Ltd. 21,900 186,744
Kloof Gold Mining Co. Ltd. 100,000 1,343,669
Western Areas Gold Mining Co. Ltd. 60,404 1,022,342
-----------
7,782,729
-----------
</TABLE>
12
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
MARKET
VALUE
DESCRIPTION SHARES US $
- ------------------------------------- ----------- -----------
<S> <C> <C>
SOUTH AFRICA (CONTINUED)
INSURANCE--2.56%
Liberty Life Association of Africa
Ltd. 60,625 1,864,180
Norwich Holdings S.A. Ltd. (a) 250,000 497,416
-----------
2,361,596
-----------
PAPER & PACKAGING--5.30%
C.G. Smith Ltd. 400,000 2,739,018
Nampak Ltd. 170,000 922,481
Sappi Ltd. 100,000 1,227,390
-----------
4,888,889
-----------
PLATINUM--2.41%
Potgietersrust Platinums Ltd. 186,400 1,180,052
Rustenburg Platinum Holdings Ltd. 55,600 1,038,010
-----------
2,218,062
-----------
STEEL & ALLOYS--2.55%
Iscor Ltd. 2,769,844 2,347,568
-----------
STORES--7.93%
CNA Gallo Ltd. 700,000 994,832
Pepkor Ltd. 300,000 1,870,155
Pick 'n Pay Stores Ltd. 501,000 1,715,310
Specialty Stores Ltd. 506,367 785,065
Specialty Stores Ltd. "N" 1,279,114 1,950,070
-----------
7,315,432
-----------
TOBACCO--3.17%
Rembrandt Group Ltd. 300,000 2,926,356
-----------
TRANSPORTATION--2.92%
Safmarine & Rennies Holdings Ltd. 800,000 2,687,339
-----------
TOTAL SOUTH AFRICA
(cost $53,798,205) 81,302,136
-----------
</TABLE>
13
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
MARKET
VALUE
DESCRIPTION SHARES US $
- ------------------------------------- ----------- -----------
<S> <C> <C>
ZIMBABWE--1.49%
BEVERAGES & HOTELS--0.60%
Delta Corp. Ltd. 250,000 554,602
-----------
BUILDING & CONSTRUCTION--0.25%
Portland Holdings Ltd. 225,000 225,802
-----------
COMMERCIAL BANKS--0.46%
Barclays Bank of Zimbabwe Ltd. 350,000 425,195
-----------
TOBACCO--0.18%
British American Tobacco Zimbabwe
Ltd. 35,000 42,150
Tobacco Sales Ltd. 430,000 124,917
-----------
167,067
-----------
TOTAL ZIMBABWE (cost $1,217,283) 1,372,666
-----------
TOTAL COMMON STOCK
(cost $55,048,931) 82,703,082
-----------
<CAPTION>
PAR
(000)
-----------
<S> <C> <C>
BOND--3.67%
Republic of South Africa Bond
12.00%, 02/28/05 (cost $3,627,643) R 15,000 3,378,876
-----------
</TABLE>
14
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
MARKET
PAR VALUE
DESCRIPTION (000) US $
- ------------------------------------- ----------- -----------
<S> <C> <C>
SHORT-TERM INVESTMENT--2.61%
REPURCHASE AGREEMENT--2.61%
Repurchase Agreement dated 02/29/96
with Bear, Stearns Securities Corp.,
5.30%, due 03/01/96, collateralized
by $8,240,000 US Treasury Strips
(Interest-Only), 5.25%, 02/15/14;
value: $2,459,146; proceeds:
$2,411,132 (cost $2,410,777) US $ 2,411 2,410,777
-----------
TOTAL INVESTMENTS--95.98%
(cost $61,087,351)(b) 88,492,735
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES--4.02% 3,703,513
-----------
NET ASSETS--100.00% 92,196,248
-----------
-----------
</TABLE>
- ----------
R Republic of South Africa rand (see Note 4).
US $ United States dollars.
(a) Non-income producing security.
(b) Aggregate cost for US federal income tax purposes is $61,713,642.
The aggregate unrealized apprecation (depreciation) for all securities is
as follows:
<TABLE>
<CAPTION>
US $
----------
<S> <C>
Excess of market value over tax cost 27,360,110
Excess of tax cost over market value (581,017)
----------
Net unrealized appreciation 26,779,093
----------
----------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
STATEMENT OF ASSETS AND LIABILITIES
AT FEBRUARY 29, 1996
<TABLE>
<CAPTION>
US $
-----------
<S> <C>
ASSETS
Investments, at value (cost $61,087,351) (Note 2) 88,492,735
Cash (representing foreign currency holdings with
a cost of $4,051,306 in an interest-bearing
account) 3,919,960
Interest and dividends receivable 125,656
Deferred organizational costs (Note 1) 66,411
Prepaid insurance 2,735
-----------
TOTAL ASSETS 92,607,497
-----------
LIABILITIES
Payables:
Investment advisory fee (Note 6) 202,810
Administration fee (Note 6) 24,337
Directors' fees 32,806
Other accrued expenses 151,296
-----------
TOTAL LIABILITIES 411,249
-----------
NET ASSETS 92,196,248
-----------
-----------
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
Distributions in excess of net investment income (290,591)
Accumulated net realized loss on investments and
foreign currency transactions (225,455)
Net unrealized appreciation on investments,
foreign currency holdings and other assets and
liabilities denominated in foreign currencies 27,271,876
-----------
NET ASSETS 92,196,248
-----------
-----------
NET ASSET VALUE PER SHARE
($92,196,248 DIVIDED BY 4,757,169) 19.38
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 29, 1996
<TABLE>
<CAPTION>
US $
----------
<S> <C>
INVESTMENT INCOME
Interest 1,826,888
Dividends (net of foreign withholding taxes of
$133,770) (Note 2) 1,522,468
----------
TOTAL INVESTMENT INCOME 3,349,356
----------
EXPENSES
Investment advisory fees (Note 6) 1,115,950
Administration fees (Note 6) 133,914
Custodian fees 90,284
Accounting fees 74,056
Legal fees 63,287
Audit fees 62,037
Reports and notices to shareholders 61,253
Directors' fees and expenses 46,354
Transfer agent fees and expenses 41,350
Insurance 33,542
Amortization of organizational costs (Note 1) 21,857
NYSE listing fees 16,690
Miscellaneous 10,211
----------
TOTAL EXPENSES 1,770,785
----------
NET INVESTMENT INCOME 1,578,571
----------
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 720,061
Foreign currency transactions 1,122,207
----------
1,842,268
----------
NET CHANGE IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON (Note 2):
Investments 17,858,270
Foreign currency holdings and other assets and
liabilities denominated in foreign currencies (881,880)
----------
16,976,390
----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS,
FOREIGN CURRENCY HOLDINGS AND OTHER ASSETS AND
LIABILITIES DENOMINATED IN FOREIGN CURRENCIES 18,818,658
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 20,397,229
----------
----------
</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 Period
For the March 11, 1994*
Year ended through
February 29, 1996 February 28, 1995
US $ US $
----------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net investment income 1,578,571 1,871,735
Net realized gain on investments and
foreign currency transactions 1,842,268 1,660,135
Net change in unrealized appreciation on
investments, foreign currency holdings
and other assets and liabilities
denominated in foreign currencies 16,976,390 10,295,486
----------------- -----------------
Net increase in net assets
resulting from operations 20,397,229 13,827,356
----------------- -----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM
Net investment income (1,578,571) (1,871,735)
In excess of net investment income (2,004,621) (1,505,855)
Net realized gains on investments (222,543) (285,430)
----------------- -----------------
(3,805,735) (3,663,020)
----------------- -----------------
CAPITAL SHARE TRANSACTIONS
Common stock issued (Notes 1, 9) -- 66,262,500
Offering costs (Notes 1, 9) -- (922,090)
----------------- -----------------
-- 65,340,410
----------------- -----------------
NET INCREASE IN NET ASSETS 16,591,494 75,504,746
Net Assets:
Beginning of period 75,604,754 100,008
----------------- -----------------
End of period (including distributions in
excess of net investment income of
$290,591 and undistributed net investment
income of $387,752, respectively) 92,196,248 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 Period
March 11,
For the Year 1994*
ended through
February 29, February 28,
1996 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 0.33 0.39
Net realized and unrealized gains on
investments, foreign currency holdings
and other assets and liabilities
denominated in foreign currencies 3.96 2.51
----- -----
Total from investment operations 4.29 2.90
----- -----
Distributions to shareholders from:
Net investment income (0.33) (0.39)
In excess of net investment income (0.42) (0.32)
Net realized gains on investments (0.05) (0.06)
----- -----
Total distributions to shareholders (0.80) (0.77)
----- -----
NET ASSET VALUE, END OF PERIOD 19.38 15.89
----- -----
----- -----
MARKET VALUE, END OF PERIOD 15.38 13.38
----- -----
----- -----
TOTAL INVESTMENT RETURN BASED ON: (a)(b)
Market value 20.38% 1.50%
Net asset value 27.72% 22.25%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD 92,196,248 75,604,754
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.98% 2.10%+
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 1.77% 2.61%+
PORTFOLIO TURNOVER RATE 18.91% 10.88%++
</TABLE>
- ----------------------------------
* Commencement of operations.
** Initial public offering price of $15.00 per share less underwriting discount
of $1.05 per share.
+ Annualized.
++ Not 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
AT FEBRUARY 29, 1996
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 market 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 (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 continue 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 and foreign
exchange losses incurred after October 31, but within the fiscal year
are deemed to arise on the first day of the following fiscal year. For
the fiscal year ended February 29, 1996, the Fund incurred and elected
to defer such losses of $22,272 and $203,183, respectively.
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 (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 February 29, 1996, 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. At February 29, 1996, the Fund reclassified within the
composition of net assets permanent book/tax differences relating to
realized gains on passive foreign investment company holdings of $888
22
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
and realized gains on foreign currency denominated transactions of
$1,325,390 from accumulated realized gains to undistributed net
investment income.
VI) FOREIGN CURRENCY TRANSLATION
The books and records of the Fund are maintained in US dollars. 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.
23
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Net realized foreign exchange gains of $1,122,207 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 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. During the fiscal year
ended February 29, 1996, the Fund held no such contracts.
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
24
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 and is now known
as the rand. Accordingly, beginning March 13, 1995, the Fund translated all
of its assets, liabilities and transactions using the rand.
5. INVESTMENT TRANSACTIONS
For the year ended February 29, 1996, total purchases and sales of portfolio
investments excluding short-term securities, were $14,569,694 and
$13,930,589, 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 US
25
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 year ended February 29, 1996, the Fund paid approximately $20,321,
$9,640 and $60 to Martin & Co., Fleming Martin Ltd. and Stockbrokers
Botswana Ltd., respectively, affiliates of the Investment Adviser.
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 February 29, 1996, 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
26
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
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 February 29,
1996, 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.
27
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
The New South Africa Fund Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The New South Africa Fund Inc. (the
"Fund") at February 29, 1996, the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights for the
year then ended and for the period March 11, 1994 (commencement of operations)
through February 28, 1995, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at February 29, 1996 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
April 15, 1996
28
<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 WITHHELD NON-VOTES
- ----------------- ----------- --------------- -----------
<S> <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>
29
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
US TAX INFORMATION
The Fund is required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise its shareholders within 60 days of the Fund's fiscal year end
(February 29, 1996) as to the US federal tax status of distributions received by
the Fund's shareholders in respect of such fiscal year. The $0.80 per share
dividend and distribution paid in respect of such fiscal year was derived from
ordinary income. Domestic shareholders, whether receiving these dividends in
cash or reinvesting it under the Dividend Reinvestment and Cash Purchase Plan,
must report dividend income as follows:
SOURCES OF DIVIDENDS AND DISTRIBUTIONS
<TABLE>
<CAPTION>
FOREIGN
SOURCE
FOREIGN TAXES INCOME
COUNTRY PAID PER SHARE PER SHARE
- ------------------------- --------------- -----------
<S> <C> <C>
South Africa $ 0.026 $ 0.315
Zimbabwe 0.002 $ 0.006
------- -----------
$ 0.028 $ 0.321
------- -----------
------- -----------
</TABLE>
The Fund has made an election under Internal Revenue Code 853 to pass
through foreign taxes paid by the Fund to its shareholders. The total amount of
foreign taxes that will be passed through to the shareholders for the fiscal
year ended February 29, 1996 is $133,333. The foreign source income for
information reporting purposes is $1,527,832.
Shareholders are required to include such $0.028 per share as dividend
income in addition to the per share dividends received. It is generally more
advantageous to claim credit rather than to take a deduction. The amount
allowable as a credit is subject to the general limitations on tax credits
imposed by Sections 904 of the U.S. Internal Revenue Code. The Fund did not earn
any dividend income that qualifies for the dividends received deduction that is
available to corporate shareholders.
Because the Fund's fiscal year is not the calendar year, another
notification will be sent in respect to calendar year 1996. The second
notification, which will reflect the amount to be used by calendar year
taxpayers on their US federal income tax returns, will be made in conjunction
with Form 1099-DIV and will be mailed in January 1997.
30
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
US TAX INFORMATION (CONTINUED)
Foreign shareholders will generally be subject to US withholding tax on the
amount of the actual dividends paid by the Fund. They will generally not be
entitled to a US foreign tax credit or deduction for the withholding of taxes
paid by the Fund.
Generally, dividends received by tax-exempt recipients (e.g. IRA's and
Keoghs) need not be reported as taxable income for US federal income tax
purposes. However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7)
plans) may need this information for their annual information reporting.
All shareholders are advised to consult their own tax advisers with respect
to the tax consequences of their investment in the Fund.
31
<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
32
<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
33
<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
34
<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 semi-annual voluntary payment date or to any record date for
the
35
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (CONTINUED)
- ---------------------------------------------------------------------
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.
36
<PAGE>
THIS REPORT, INCLUDING THE FINANCIAL STATEMENTS HEREIN, IS TRANSMITTED TO THE
SHAREHOLDERS OF THE NEW SOUTH AFRICA FUND INC. FOR THEIR INFORMATION. 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
