<PAGE>
[LOGO] THE NEW SOUTH AFRICA
FUND INC.
[ART]
SEMI-ANNUAL REPORT
AUGUST 31, 1996
(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
$94 billion in assets worldwide. Carmen Maynard, a vice president of the Fund,
has principal responsibility for recommending the purchase and sale of
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 Sunday
in THE NEW YORK TIMES and each Monday in 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 (UNAUDITED)
AT AUGUST 31, 1996
<TABLE>
<CAPTION>
US $
---------------
<S> <C>
Net Assets 72,281,149
Net Asset Value ("NAV") per Share 15.99
Market Price on New York Stock Exchange 12.625
Discount to NAV 21.04%
PERFORMANCE FROM MARCH 11, 1994* TO AUGUST 31, 1996
Total Return based on Market Price 0.33%+
Total Return based on NAV 28.82%+
Johannesburg Stock Exchange ("JSE") All Share
Index 32.28%++
</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%
3/18/94 99.85% 92.29% 101.54%
3/25/94 99.93% 94.09% 97.47%
3/31/94 98.84% 85.13% 89.00%
4/8/94 96.66% 85.13% 87.35%
4/15/94 92.44% 80.65% 81.71%
4/22/94 99.49% 89.61% 92.37%
4/29/94 108.36% 97.67% 102.78%
5/6/94 105.60% 88.71% 100.64%
5/13/94 104.72% 91.40% 100.39%
5/20/94 102.62% 86.02% 98.49%
5/27/94 104.00% 87.81% 100.41%
5/31/94 104.94% 89.61% 100.67%
6/3/94 105.81% 89.61% 102.17%
6/10/94 106.83% 92.29% 104.61%
6/17/94 109.59% 97.67% 107.92%
6/24/94 109.74% 93.19% 104.87%
6/30/94 104.36% 90.50% 100.82%
7/1/94 104.22% 91.40% 100.76%
7/8/94 104.29% 88.71% 100.83%
7/15/94 111.99% 91.40% 110.92%
7/22/94 109.52% 94.09% 107.43%
7/29/94 109.08% 92.29% 107.95%
8/5/94 112.57% 89.61% 111.33%
8/12/94 113.81% 92.29% 113.58%
8/19/94 115.41% 93.19% 115.08%
8/26/94 113.81% 94.98% 113.98%
8/31/94 114.83% 92.29% 115.13%
9/2/94 115.12% 91.40% 116.03%
9/9/94 116.72% 92.29% 117.18%
9/16/94 117.51% 93.19% 117.27%
9/23/94 118.02% 94.09% 118.78%
9/30/94 118.31% 94.09% 117.89%
10/7/94 119.48% 94.09% 119.08%
10/14/94 122.24% 98.57% 121.89%
10/21/94 128.71% 103.05% 128.38%
10/28/94 127.18% 103.05% 127.46%
10/31/94 127.18% 101.25% 125.97%
11/4/94 127.91% 102.15% 126.93%
11/11/94 127.91% 103.05% 126.90%
11/18/94 129.14% 101.25% 127.18%
11/25/94 126.38% 97.67% 123.49%
11/30/94 127.25% 100.36% 124.08%
12/2/94 126.60% 100.36% 122.34%
12/9/94 124.71% 100.36% 121.71%
12/16/94 127.91% 103.94% 122.15%
12/23/94 131.10% 106.24% 125.70%
12/30/94 131.41% 107.19% 127.82%
1/6/95 130.18% 107.19% 125.87%
1/13/95 124.25% 104.35% 119.56%
1/20/95 121.25% 95.81% 116.19%
1/27/95 118.87% 93.91% 113.08%
1/31/95 115.87% 92.96% 109.35%
2/3/95 122.64% 99.60% 116.56%
2/10/95 123.18% 99.60% 116.21%
2/17/95 123.02% 96.76% 116.83%
2/24/95 123.64% 101.50% 118.34%
2/28/95 122.25% 101.50% 116.74%
3/3/95 125.41% 102.45% 119.75%
3/10/95 132.64% 107.19% 123.58%
3/17/95 136.18% 107.19% 130.64%
3/24/95 133.87% 109.09% 128.64%
3/31/95 136.25% 108.14% 130.51%
4/7/95 139.02% 107.19% 134.54%
4/13/95 136.64% 108.14% 131.72%
4/21/95 137.79% 111.94% 132.98%
4/28/95 138.72% 110.04% 134.39%
4/30/95 138.72% 110.04% 134.39%
5/5/95 140.64% 112.88% 137.01%
5/12/95 139.64% 110.99% 135.04%
5/19/95 136.95% 108.14% 131.85%
5/26/95 137.95% 108.14% 133.18%
5/31/95 137.79% 110.04% 131.86%
6/2/95 138.64% 107.19% 133.51%
6/9/95 136.95% 107.19% 131.43%
6/16/95 136.95% 107.19% 131.27%
6/23/95 139.64% 107.19% 133.68%
6/30/95 138.10% 109.09% 132.24%
7/7/95 138.33% 108.14% 132.45%
7/14/95 138.33% 108.14% 132.53%
7/21/95 137.64% 108.14% 132.46%
7/28/95 137.72% 108.14% 132.41%
7/31/95 138.25% 107.19% 133.28%
8/4/95 140.49% 109.09% 135.63%
8/11/95 140.56% 108.14% 135.85%
8/18/95 140.49% 107.19% 135.48%
8/25/95 139.79% 107.19% 134.89%
8/31/95 140.25% 107.19% 134.48%
9/8/95 141.33% 107.19% 135.37%
9/15/95 142.64% 109.09% 136.91%
9/22/95 143.33% 109.09% 137.41%
9/30/95 143.66% 109.99% 137.50%
10/6/95 144.59% 109.99% 138.92%
10/13/95 146.22% 110.95% 140.61%
10/20/95 147.93% 114.77% 141.89%
10/27/95 147.54% 111.90% 140.69%
10/31/95 147.77% 111.90% 140.81%
11/3/95 148.78% 113.82% 142.20%
11/10/95 152.19% 116.69% 146.94%
11/17/95 152.19% 116.69% 146.42%
11/24/95 150.95% 115.73% 145.34%
11/30/95 150.41% 117.64% 144.62%
12/8/95 155.22% 119.55% 150.20%
12/15/95 156.77% 117.64% 150.30%
12/22/95 158.17% 120.51% 151.48%
12/31/95 159.04% 119.20% 151.54%
1/5/96 166.93% 125.16% 159.51%
1/12/96 171.12% 130.13% 164.08%
1/19/96 171.44% 139.07% 165.82%
1/26/96 173.13% 141.06% 168.94%
1/31/96 170.96% 137.08% 166.95%
2/2/96 171.85% 143.04% 169.91%
2/9/96 169.91% 138.08% 167.20%
2/16/96 162.82% 133.11% 160.79%
2/23/96 159.36% 124.17% 155.42%
2/29/96 156.14% 122.18% 154.05%
3/1/96 155.41% 123.18% 152.93%
3/8/96 154.93% 118.21% 151.76%
3/15/96 153.88% 120.20% 150.95%
3/22/96 153.72% 123.18% 151.42%
3/29/96 152.03% 121.19% 150.34%
4/4/96 145.90% 117.22% 144.62%
4/12/96 143.89% 113.24% 142.05%
4/19/96 145.98% 113.24% 145.02%
4/26/96 141.71% 114.24% 140.16%
4/30/96 143.89% 113.24% 143.25%
5/3/96 140.51% 113.24% 139.98%
5/10/96 135.35% 109.27% 135.84%
5/17/96 137.61% 111.26% 137.95%
5/24/96 135.59% 109.27% 136.16%
5/31/96 138.41% 107.28% 138.57%
6/7/96 137.69% 107.28% 138.65%
6/14/96 139.30% 106.29% 138.83%
6/21/96 139.38% 108.28% 139.46%
6/28/96 141.55% 109.27% 140.91%
7/5/96 141.15% 110.26% 141.19%
7/12/96 135.91% 111.26% 136.68%
7/19/96 136.80% 107.28% 137.20%
7/26/96 131.40% 104.30% 132.09%
7/31/96 128.50% 103.31% 130.08%
8/2/96 131.24% 103.31% 132.57%
8/9/96 128.90% 103.31% 131.26%
8/16/96 123.83% 103.31% 127.22%
8/23/96 124.88% 99.33% 128.19%
8/31/96 128.82% 100.33% 132.28%
</TABLE>
3
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
MAJOR EQUITY HOLDINGS
AT AUGUST 31, 1996
<TABLE>
<CAPTION>
Percentage of Net
Assets
-----------------
<S> <C>
ANGLO AMERICAN CORPORATION OF SOUTH AFRICA LTD. 6.7
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
JCI Company Ltd., is the world's largest producer of
platinum and diamonds. Other operations include coal,
manganese and ferroalloys, steel/vanadium, financials and
industrials.
DE BEERS 6.5
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 Central Selling
Organization through which 80% of the world's gem diamonds
are sold.
SASOL LTD. 5.2
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.
GENCOR LTD. 4.9
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. 3.7
One of SA's two largest sugar producers, with approximately
40% of industry output. Its subsidiary CoroBrik 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>
REMBRANDT GROUP LTD. 3.5
Has a one third stake in Rothmans International and a
dominant share of the domestic cigarette market. Rembrandt
Group Ltd. 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.
STANDARD BANK INVESTMENT CORP. LTD. 2.9
The second largest banking group in South Africa in terms
of assets but it is by far the biggest in market
capitalization. The group is represented in London, the Far
East, and the US, and has a strong presence in sub-Saharan
Africa following the acquisition of ANZ Grindlays' African
operations. It holds an effective joint controlling
interest in Liberty Life Association of Africa Ltd.
("Liberty Life"), the largest proprietary life insurer in
SA.
LIBERTY LIFE 2.9
The third largest life insurance company in SA and the
largest proprietary insurance company. Strategic
investments include; major holdings in Standard Bank
Investment Corp. Ltd., The South African Breweries Ltd.
(SA's leading consumer group) and Premier (a diversified
food and pharmaceutical operation). They have effective
control of Liberty International Holdings plc, a London
listed holding company with interests in UK property
investment--particularly, regional shopping centers.
BARLOW LTD. 2.8
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.
C.G. SMITH LTD. 2.7
A diversified consumer products group with interests in
food processing, packaging and textiles.
</TABLE>
5
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT
OCTOBER 11, 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.
Since inception, the net asset value of the Fund (assuming the dividend
reinvestment option was selected by shareholders) has risen by 28.8% against
32.3% for the Johannesburg Stock Exchange ("JSE") All Share Index.
Unfortunately, the discount to net asset value has remained substantial,
standing at 21.0% at August 31, 1996, though at the time of writing, the
discount has fallen to 20.6%.
MARKET ENVIRONMENT
The following table summarizes market moves between the Fund's last fiscal year
ended February 29, 1996 and August 31, 1996.
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 29,
1996 1996 % CHANGE
----------- --------------- -----------
<S> <C> <C> <C>
SOUTH AFRICA
Rand vs. US$............................ 4.49 3.86 (14.0)*
JSE All Share Index
(local)............................. 6,689 6,705 (0.2)
(US $).............................. 1,490 1,737 (14.2)
Three month bankers'
acceptance rate (%)................... 15.5 14.1 9.9
Yield on benchmark long bond (%)........ 15.2 14.8 2.7
Zimbabwe Industrial Index (local)....... 5,808 4,848 19.8
Botswana Share Index (local)............ 351 334 5.1
</TABLE>
- ------------------------
* The rand declined in relation to the US dollar.
Although the JSE All Share Index was barely changed over the period under
review, its performance in dollar terms was a disappointing decline of 14.2% as
a result of the depreciation of the rand against the dollar. The South African
currency had performed exceptionally well in 1995 after the abolition of the
dual currency system but a number of factors combined to put pressure on the
rand into 1996. As is usually the case in these matters, it is difficult to
pinpoint the key factor which precipitated the slide, but speculative short
selling of the currency by international players no doubt had something to do
with it. The resignation of the Minister of Finance, a selloff in the bond
market and the perception that the rand needed to decline to a more
"appropriate" level to accommodate the relaxation of
6
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT (CONTINUED)
exchange controls were also contributing factors. The rand appears to be
stabilizing around the R4.50 level against the dollar, a view supported by
International Monetary Fund which views the currency as having "...fallen too
far, although some correction was necessary."
ECONOMY
After averaging approximately 3% per annum growth since the first democratic
elections in April 1994, the South African economy is showing clear signs of
having reached the top of the business cycle for the meantime. Significantly, no
recession is forecast, merely a period of slower growth. While GDP growth
remained fairly healthy at 3.5% in the first half of 1996, this was flattered by
a recovery in agriculture. The most significant development in recent quarters
has been the deterioration in the balance of payments, with the current account
deficit ballooning to R6.9 billion in the first half of 1996, compared with a
capital inflow of just R2.7 billion. The Reserve Bank has resisted the
traditional response of hiking interest rates to redress the situation, citing
unusually high import stockpiling in the second quarter as a distorting factor
which should be allowed to work out of the system before an accurate assessment
can be made.
The development of balance of payments difficulties in the mature phase of the
business cycle is not a new phenomenon. It does, however, require a period of
economic adjustment through sustained high interest rates to cool domestic
demand--the South African prime borrowing rate is currently a very high 12% in
real terms and clearly, the central bank would risk overkill in terms of
economic growth if it were to hike rates again. Consumer price inflation, which
reached a low of 5.5% in April, has begun to rise as a result of the weakness of
the currency but is widely forecast to remain in single digits over the next few
years. This is a significant achievement against the backdrop of the double
digit inflation which prevailed during the 1970's and 1980's.
The question of South Africa's true growth potential remains unanswered,
although the government's recently published macroeconomic model gives a clear
indication that Pretoria views the next few years as a period of moderate growth
and moderate inflation. Clearly, the authorities have aspirations to raise the
growth profile over time. Near term prospects might disappoint some emerging
market fund managers who find even 3-4% per annum growth somewhat pedestrian in
the emerging market context, but recent balance of payments difficulties have
clearly demonstrated that higher growth rates are not sustainable in the absence
of
7
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT (CONTINUED)
strong foreign capital inflows to the country. In view of the government's
gradualist approach to both privatization and the relaxation of foreign exchange
controls, and given the high profile trade union activity which many potential
foreign investors find offputting, capital flows from abroad are likely to
remain somewhat erratic. It is encouraging, though, that the International
Monetary Fund has endorsed the gradualist approach to dismantling exchange
controls.
THE PORTFOLIO
At August 31, 1996, the Fund held 88% of assets in equities, almost entirely in
South African securities. Investment in neighboring territories Zimbabwe and
Botswana accounted for less than 2.5% 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 35% of the
JSE's market capitalization at the end of August. Financials made up 11% of
assets, concentrated in selected banks and long-term insurers while industrial
securities comprised 51% of assets against 48% of the JSE All Share Index. The
balance of 12% was invested almost equally between rand deposits and dollar
deposits.
The Fund's policy of underweighting mining in favor of industrials and cash
hampered performance in the six months under review. The mining producers' index
rose by 9% over the period while industrials fell by 5.6%. Over the longer-term,
industrials are expected to reassert their outperformance trend and there can be
little question that the quality of industrial earnings is superior to that of
the volatile and unpredictable mining sector.
Since the Fund's fiscal year end in February, there has been selective trimming
of capital spending related shares such as LTA Ltd., Reunert Ltd. and Murray &
Roberts Holdings Ltd., while a new position was established in rapidly growing
furniture retailer Protea Furnishers Ltd.
PROSPECTS
Corporate profit growth peaked early in 1996 at around 25% for the market as a
whole and 40% for industrials. Clearly, with interest rates high and the economy
tailing off, the prognosis is for a slowdown in profit growth. Nevertheless,
consensus forecasts of 15-20% growth for both the mining
8
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT (CONTINUED)
and non-mining parts of the market remain very healthy in real terms and put the
JSE All Share Index on a forward price earnings multiple of around 13.5 times,
which is not demanding in the "new South Africa" era.
In view of the above comments, the prognosis is for a better performance from
both the rand and the JSE All Share Index during the second half of the Fund's
fiscal year.
DISCOUNT TO NET ASSET VALUE AND SHARE REPURCHASE PROGRAM
Disappointingly, the Fund's discount to NAV continues to languish at a
relatively high level along with the other two South African regional funds
listed on the New York Stock Exchange. The Fund completed a 5% share repurchase
program on May 10, 1996, which had the effect of increasing the net asset value
of the Fund's shares still outstanding. Share repurchases, however, also have
the effect of reducing the total asset size of the Fund, as has the recent
decline in the rand. Reduction in the size of the Fund tends to increase the
Fund's expense ratio. Accordingly, while the Board of Directors will consider
future share repurchases as well as other measures to reduce the discount at
each of its quarterly meetings; it will do so giving consideration to the impact
any such repurchases or other measures may have on the Fund's expense ratio,
particularly in light of any other external factors which could also effect the
ratio.
Respectfully submitted,
[SIGNATURE]
Iain O.S. Saunders
President, Treasurer and
Chairman of the Board of Directors
9
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT PORTFOLIO (UNAUDITED)
AT AUGUST 31, 1996
<TABLE>
<CAPTION>
MARKET
VALUE
DESCRIPTION SHARES US $
- ------------------------------------- ----------- -----------
<S> <C> <C>
COMMON STOCKS--87.86%
BOTSWANA--0.03%
BEVERAGES & HOTELS--0.01%
Sechaba Investment Trust Co. Ltd. 10,800 7,974
-----------
COMMERCIAL BANKS--0.02%
Barclays Bank of Botswana Ltd. 5,000 5,592
Standard Chartered Bank Botswana
Ltd. 10,000 10,610
-----------
16,202
-----------
TOTAL BOTSWANA (cost $33,443) 24,176
-----------
SOUTH AFRICA--85.44%
BASE METALS--7.48%
Anglovaal Ltd. "N" ordinary 60,000 1,885,867
Gencor Ltd. 1,000,000 3,522,069
-----------
5,407,936
-----------
BEVERAGES & HOTELS--3.93%
Interleisure Ltd. 556,200 533,139
Sun International (South Africa)
Ltd. 381,400 365,586
The South African Breweries Ltd. 73,136 1,940,077
-----------
2,838,802
-----------
BUILDING & CONSTRUCTION--6.51%
Barlow Ltd. 220,000 2,025,412
LTA Ltd. 200,000 1,069,996
Murray & Roberts Holdings Ltd. 250,031 863,906
Pretoria Portland Cement Co. Ltd. 50,000 743,981
-----------
4,703,295
-----------
CHEMICALS & OIL--7.51%
Sasol Ltd. 334,889 3,732,601
Sentrachem Ltd. 600,000 1,698,618
-----------
5,431,219
-----------
</TABLE>
10
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT PORTFOLIO (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
MARKET
VALUE
DESCRIPTION SHARES US $
- ------------------------------------- ----------- -----------
<S> <C> <C>
SOUTH AFRICA (CONTINUED)
COAL MINING--1.53%
Ingwe Coal Corporation Ltd. 135,700 1,107,138
-----------
COMMERCIAL BANKS--6.48%
NBS Holdings Ltd. 149,300 1,897,035
Nedcor Ltd. 50,000 677,107
Standard Bank Investment Corp. Ltd. 54,900 2,111,068
-----------
4,685,210
-----------
DIAMOND MINING--6.46%
De Beers Consolidated Mines Ltd. 150,000 4,672,871
-----------
ELECTRONICS--1.71%
Reunert Ltd. 368,633 1,236,720
-----------
FOOD--7.61%
The Bidvest Group Ltd. 352,240 1,829,512
The Tongaat-Hulett Group Ltd. 222,761 2,669,060
Tiger Oats Ltd. 80,000 998,663
-----------
5,497,235
-----------
FURNITURE & HOUSEHOLD--2.29%
JD Group Ltd. 353,033 1,652,629
-----------
GOLD MINING--9.41%
Anglo American Corporation of South
Africa Ltd. 80,000 4,859,563
JCI Company Ltd. 100,000 869,371
Western Areas Gold Mining Co. Ltd. 80,000 1,069,996
-----------
6,798,930
-----------
INSURANCE--3.54%
Liberty Life Association of Africa
Ltd. 70,625 2,070,260
Norwich Holdings S.A. Ltd. (a) 300,000 488,185
-----------
2,558,445
-----------
</TABLE>
11
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT PORTFOLIO (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
MARKET
VALUE
DESCRIPTION SHARES US $
- ------------------------------------- ----------- -----------
<S> <C> <C>
SOUTH AFRICA (CONTINUED)
PAPER & PACKAGING--3.71%
C.G. Smith Ltd. 400,000 1,952,742
Nampak Ltd. 170,000 729,492
-----------
2,682,234
-----------
PLATINUM--0.68%
Potgietersrust Platinums Ltd. 100,000 490,415
-----------
STEEL & ALLOYS--2.30%
Iscor Ltd. 2,769,844 1,660,918
-----------
STORES--8.13%
CNA Gallo Ltd. 719,097 601,118
Pepkor Ltd. 300,000 1,203,745
Pick 'n Pay Stores Ltd. 501,000 469,059
Pick 'n Pay Stores Ltd. "N" 1,002,000 915,782
Protea Furnishers Ltd. 4,000,000 838,163
Specialty Stores Ltd. 509,988 528,632
Specialty Stores Ltd. "N" 1,288,713 1,321,462
-----------
5,877,961
-----------
TOBACCO--3.49%
Rembrandt Group Ltd. 300,000 2,524,521
-----------
TRANSPORTATION--2.67%
Safmarine & Rennies Holdings Ltd. 800,000 1,925,992
-----------
TOTAL SOUTH AFRICA
(cost $50,913,322) 61,752,471
-----------
ZIMBABWE--2.39%
BEVERAGES & HOTELS--0.93%
Delta Corp. Ltd. 255,330 669,962
-----------
BUILDING & CONSTRUCTION--0.33%
Portland Holdings Ltd. 225,000 240,525
-----------
COMMERCIAL BANKS--0.87%
Barclays Bank of Zimbabwe Ltd. 350,000 629,252
-----------
</TABLE>
12
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT PORTFOLIO (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
MARKET
VALUE
DESCRIPTION SHARES US $
- ------------------------------------- ----------- -----------
<S> <C> <C>
TOBACCO--0.26%
BAT (Zimbabwe) Ltd. 35,000 37,415
T.S.L. Ltd. 430,000 150,437
-----------
187,852
-----------
TOTAL ZIMBABWE (cost $1,227,873) 1,727,591
-----------
TOTAL COMMON STOCK
(cost $52,174,638) 63,504,238
-----------
<CAPTION>
PAR
(000)
-----------
<S> <C> <C>
SHORT-TERM INVESTMENT--5.93%
REPURCHASE AGREEMENT--5.93%
Repurchase Agreement dated 08/30/96
with Bear, Stearns Securities Corp.,
5.15%, due 09/03/96, collateralized
by $4,375,000 US Treasury Strips
(Interest-Only), 02/15/10 and
$10,460,000 US Treasury Strips
(Interest-Only), 02/15/15; total
value: $4,375,024; proceeds:
$4,290,441 (cost $4,287,988) US $ 4,288 4,287,988
-----------
</TABLE>
13
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT PORTFOLIO (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
MARKET
VALUE
DESCRIPTION US $
- ------------------------------------- -----------
<S> <C> <C>
TOTAL INVESTMENTS--93.79%
(cost $56,462,626)(b) 67,792,226
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES--6.21% 4,488,923
-----------
NET ASSETS--100.00% 72,281,149
-----------
-----------
</TABLE>
- ----------
US $ United States dollars.
(a) Non-income producing security.
(b) Aggregate cost for US federal income tax purposes is $56,462,626.
The aggregate unrealized appreciation (depreciation) for all securities is
as follows:
<TABLE>
<CAPTION>
US $
----------
<S> <C>
Excess of market value over tax cost 13,637,678
Excess of tax cost over market value (2,308,078)
----------
Net unrealized appreciation 11,329,600
----------
----------
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
AT AUGUST 31, 1996
<TABLE>
<CAPTION>
US $
-----------
<S> <C>
ASSETS
Investments, at value (cost $56,462,626) (Note 2) 67,792,226
Cash (representing foreign currency holdings with
a cost of $4,296,549 in an interest-bearing
account) 4,324,743
Receivable for securities sold 203,372
Interest and dividends receivable 102,545
Deferred organizational costs (Note 1) 55,422
Prepaid expenses 27,862
-----------
TOTAL ASSETS 72,506,170
-----------
LIABILITIES
Payables:
Investment advisory fee (Note 5) 75,972
Administration fee (Note 5) 18,940
Directors' fees 16,870
Other accrued expenses 113,239
-----------
TOTAL LIABILITIES 225,021
-----------
NET ASSETS 72,281,149
-----------
-----------
NET ASSETS CONSIST OF:
Common stock, $0.001 par value (200,000,000 shares
authorized 4,519,311 shares issued and
outstanding) (Note 8) 4,519
Additional paid-in capital 62,056,499
Distributions in excess of net investment income (2,851)
Accumulated net realized loss on investments and
foreign currency transactions (1,134,048)
Net unrealized appreciation on investments,
foreign currency holdings and other assets and
liabilities denominated in foreign currencies 11,357,030
-----------
NET ASSETS 72,281,149
-----------
-----------
NET ASSET VALUE PER SHARE
($72,281,149 DIVIDED BY 4,519,311) 15.99
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
US $
-----------
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding taxes
of $5,004) (Note 2) 828,860
Interest 470,754
-----------
TOTAL INVESTMENT INCOME 1,299,614
-----------
EXPENSES
Investment advisory fees (Note 5) 505,101
Legal fees 200,156
Administration fees (Note 5) 60,612
Custodian fees 47,608
Directors' fees and expenses 37,804
Accounting fees 37,205
Audit fees 31,188
Reports and notices to shareholders 30,176
Transfer agent fees and expenses 20,630
Insurance 16,842
Amortization of organizational costs (Note 1) 10,988
NYSE listing fees 8,032
Miscellaneous 5,532
-----------
TOTAL EXPENSES 1,011,874
-----------
NET INVESTMENT INCOME 287,740
-----------
NET REALIZED AND UNREALIZED GAINS/(LOSSES) ON
INVESTMENTS, FOREIGN CURRENCY HOLDINGS AND OTHER
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN
CURRENCIES
NET REALIZED GAIN/(LOSS) ON (Note 2):
Investments 385,979
Foreign currency transactions (1,294,572)
-----------
(908,593)
-----------
NET CHANGE IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON (Note 2):
Investments (16,075,784)
Foreign currency holdings and other assets and
liabilities denominated in foreign currencies 160,938
-----------
(15,914,846)
-----------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS,
FOREIGN CURRENCY HOLDINGS AND OTHER ASSETS AND
LIABILITIES DENOMINATED IN FOREIGN CURRENCIES (16,823,439)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS (16,535,699)
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six
Months ended For the Year
August 31, 1996 ended February
(unaudited) 29, 1996
US $ US $
--------------- -----------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
OPERATIONS
Net investment income 287,740 1,578,571
Net realized gain/(loss) on investments and
foreign currency transactions (908,593) 1,842,268
Net change in unrealized appreciation on
investments, foreign currency holdings and
other assets and liabilities denominated
in foreign currencies (15,914,846) 16,976,390
--------------- -----------------
Net increase/(decrease) in net assets
resulting from operations (16,535,699) 20,397,229
--------------- -----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM
Net investment income -- (1,578,571)
In excess of net investment income -- (2,004,621)
Net realized gains on investments -- (222,543)
--------------- -----------------
-- (3,805,735)
--------------- -----------------
CAPITAL STOCK TRANSACTIONS
Cost of shares repurchased (3,379,400) --
--------------- -----------------
NET INCREASE/(DECREASE) IN NET ASSETS (19,915,099) 16,591,494
Net Assets:
Beginning of period 92,196,248 75,604,754
--------------- -----------------
End of period 72,281,149 92,196,248
--------------- -----------------
--------------- -----------------
</TABLE>
See accompanying notes to financial statements.
17
<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
For the Six March 11,
Months ended For the Year 1994*
August 31, ended through
1996 February 29, February 28,
(unaudited) 1996 1995
US $ US $ US $
------------ ------------ --------------
<S> <C> <C> <C>
Net asset value, beginning of period 19.38 15.89 13.95**
Offering costs charged to additional
paid-in capital -- -- (0.19)
------ ----- -----
19.38 15.89 13.76
------ ----- -----
Net investment income 0.06+ 0.33 0.39
Net realized and unrealized gains/
(losses) on investments, foreign
currency holdings and other assets and
liabilities denominated in foreign
currencies (3.65)+ 3.96 2.51
------ ----- -----
Total from investment operations (3.59)+ 4.29 2.90
------ ----- -----
Dividends and 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 dividends and distributions to
shareholders -- (0.80) (0.77)
------ ----- -----
Antidilutive impact due to shares of
beneficial interest repurchased 0.20 -- --
------ ----- -----
NET ASSET VALUE, END OF PERIOD 15.99 19.38 15.89
------ ----- -----
------ ----- -----
MARKET VALUE, END OF PERIOD 12.63 15.38 13.38
------ ----- -----
------ ----- -----
TOTAL INVESTMENT RETURN BASED ON: (a)(b)
Market value (17.89)% 20.38% 1.50%
Net asset value (17.49)% 27.72% 22.25%
RATIOS/ SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD 72,281,149 92,196,248 75,604,754
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.50%++ 1.98% 2.10%++
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 0.71%++ 1.77% 2.61%++
PORTFOLIO TURNOVER 4.90%+++ 18.91% 10.88%+++
AVERAGE COMMISSION RATE PER SHARE (c) $0.0090 -- --
</TABLE>
- ----------------------------------
* Commencement of operations.
** Initial public offering price of $15.00 per share less underwriting discount
of $1.05 per share.
+ Based on average shares outstanding.
++ 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.
(c) Disclosure is required for fiscal years beginning on or after September 1,
1995.
See accompanying notes to financial statements.
18
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
AT AUGUST 31, 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.
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 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
19
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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.
The Republic of South Africa ("South Africa") does not impose a
withholding tax on dividends paid by South African companies to the
Fund. However, other income received by the Fund from sources within
South Africa or Southern African regions may be subject to withholding
and other taxes imposed by such countries.
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
20
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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, 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
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.
21
<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;
- investment transactions and investment income and expenses: at the
prevailing rates of exchange on the dates of such transactions.
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 losses of $1,294,572 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
22
<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. During the six months
ended August 31, 1996, the Fund held no such contracts.
4. INVESTMENT TRANSACTIONS
For the six months ended August 31, 1996, total purchases and sales of
portfolio investments excluding short-term securities, were $3,723,597 and
$9,993,658, respectively.
5. 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 weekly and paid quarterly
at an annual rate of 0.15% of the Fund's average weekly net assets.
23
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
6. TRANSACTIONS WITH AFFILIATES
For the six months ended August 31, 1996, the Fund paid approximately $6,967
in brokerage commissions to Fleming Martin Ltd., an affiliate of the
Investment Adviser.
7. 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, 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 determined by US rating agencies. As a
result, sovereign debt may be regarded as predominantly speculative with
respect to the issuer's
24
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
capacity to pay interest and repay principal in accordance with the terms of
the obligations and involves major risk exposure to adverse conditions.
8. CAPITAL STOCK
The authorized capital stock of the Fund is 200,000,000 shares of common
stock, $0.001 par value. Of the 4,519,311 shares outstanding at August 31,
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.
On February 29, 1996, the Board of Directors 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%. During the quarter ended May 31, 1996, the Fund repurchased 5% or
237,858 of its outstanding shares.
25
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS
On May 20, 1996, the annual meeting of shareholders of The New South Africa Fund
Inc. (the "Fund") was held and the following matters were voted upon:
(1) To re-elect two directors to the Board of Directors of the Fund.
<TABLE>
<CAPTION>
NAME OF DIRECTOR FOR WITHHELD NON-VOTES
- ----------------------------- ------------- ----------- -------------
<S> <C> <C> <C>
Anton Dirk Botha 3,480,870 1,619 1,189,680
Dr. Nthato H. Motlana 3,480,759 1,730 1,189,680
</TABLE>
In addition to the directors re-elected at the meeting, Iain O. S. Saunders,
Arthur Levy, and Arnold Witkin 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 28, 1997.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
------------- --------- ----------- -------------
<S> <C> <C> <C> <C>
3,465,378 0 17,111 1,189,680
</TABLE>
26
<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
27
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THE NEW SOUTH AFRICA FUND INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (CONTINUED)
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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
28
<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
29
<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
30
<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.
31
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<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>
[LOGO]
BEAR STEARNS FUNDS MANAGEMENT INC.
Administrator for The New South Africa Fund Inc.
245 Park Avenue
New York, NY 10167
Telephone (212) 272-2479
