The New South Africa
Fund Inc.
Annual Report
February 28, 1997
<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
$99 billion in assets worldwide. Mrs. Maynard had principal responsibility for
recommending the purchase and sale of the investment securities by the Fund
during the fiscal year ended February 28, 1997. Following a reorganization
within Fleming Martin, and effective April 3, 1997, Raymond Goldblatt, assisted
by Kathy Cave, assumed these responsibilities. Mr. Goldblatt is Chief Executive
Officer and Mrs. Cave is a senior fund manager of Fleming Martin Asset
Management. They have 12 years and eight years of investment experience,
respectively.
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
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
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.
- 2 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Highlights of the Period
At February 28, 1997
US $
Net Assets 79,364,302
Net Asset Value ("NAV") per Share 17.56
Market Price on New York Stock Exchange 14.00
Discount to NAV 20.27%
Performance from March 11, 1994* to February 28, 1997
Total Return based on Market Price 11.88%#
Total Return based on NAV 42.26%#
Johannesburg Stock Exchange ("JSE") All Share 41.61%##
Index
* 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
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Major Equity Holdings
At February 28, 1997
Percentage of
Net Assets
De Beers Consolidated Mines Ltd. 6.6
Comprised of two companies: De Beers, which owns diamond mines in the
Republic of South Africa ("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.
AngloAmerican Corporation of South Africa Ltd. 6.4
The largest mining house in SA and the world's largest gold producer, with
1996 output of 216 tons. Besides gold, the greater group, which includes
De Beers Consolidated Mines Ltd. 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.
Gencor Ltd. 5.5
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 three years, the group has focused
offshore through the Billiton acquisition and expanding its Australian coal
interests.
Sasol Ltd. 4.6
Converts coal into fuel and chemicals and also owns 64% of a crude oil
refinery. Its plants produce 46% of SA's fuel requirements and most of
its petrochemical feedstocks.
The Tongaat-Hulett Group Ltd. 4.4
One of SA's two largest sugar producers, with approximately 40% of
industry output. It also produces semi-fabricated aluminum products and
starch and glucose for use in the food, beverage and packaging industries.
Its subsidiary CoroBrik has the dominant share of the country's brick
business. Other operations include food, textiles and property.
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Major Equity Holdings
At February 28, 1997
Percentage of
Net Assets
Rembrandt Group Ltd. 3.9
Has a one third stake in Rothmans International and an 85% 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 50% of 1996 earnings.
Liberty Life Association of Africa Ltd. 3.1
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.
C.G. Smith Ltd. 2.9
A diversified consumer products group with interests in food processing,
packaging and textiles.
NBS Holdings Ltd. 2.8
Started as a mortgage lender, NBS Holdings Ltd. has developed into a
focused niche bank and insurance company. In terms of assets, it is the
fifth largest banking group in SA following its recent merger with Boland
Bank. It also has a 24% stake in BOE Corporation, a successful merchant
banking group.
Standard Bank Investment Corp. Ltd. 2.8
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., the largest proprietary life insurer
in SA.
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Investment Management Report
April 14, 1997
Dear Shareholders,
The New South Africa Fund Inc. ("NSA" or the "Fund") has been in existence
for more than three years, having 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 42.3% since inception through February 28, 1997
versus an increase of 41.6% in the Johannesburg Stock Exchange ("JSE") All Share
Index for the same period. For the fiscal year ended February 28, 1997, the
Fund's NAV fell 8.9% (assuming reinvestment of all distributions) versus a
decline of 8.1% in the JSE All Share Index for the same period. Unfortunately,
the discount of the market price to NAV has remained substantial, standing at
20% at the end of the fiscal year. This issue is addressed later in the review.
On behalf of the Board of Directors, I wish to express my warmest
appreciation to Carmen Maynard who has served as Vice President of the Fund
since the Fund's inception. Mrs. Maynard had principal responsibility for
recommending the purchase and sale of investment securities by the Fund. The
Board welcomes Raymond Goldblatt who, assisted by Kathy Cave, assumed this role
effective April 3, 1997.
Market Environment
The following table summarizes market moves between the Fund's fiscal years
ended February 29, 1996 and February 28, 1997.
February 28, February 29, %
1997 1996 Change
South Africa
Rand vs US $....................... 4.48 3.86 (16.06)
JSE All Share Index
(local)............................ 7,145 6,705 6.56
(US $)............................. 1,596 1,737 (8.12)
Three months bankers'
acceptance rate (%)................ 16.0 14.1 13.48
Yield on benchmark long
bond (%)........................... 14.9 14.8 0.68
Zimbabwe
Zimbabwe Industrial Index (US $)... 958 516 85.66
Botswana
Botswana Share Index (US $)........ 105 113 (7.08)
- 6 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Investment Management Report (continued)
The 16% depreciation of the rand against the dollar over the period more than
offset the improvement of some 6.5% of the JSE All Share Index in local currency
terms. The rand reached its lowest level in December at approximately R4.76 to
the dollar and then strengthened to close the period at R4.48. A number of
factors contributed to the improvement including the shrinking of the current
account deficit, an expected reduction of pressure on the capital account based
on anticipated proceeds from privatization issues and an inflow into the bond
market by foreigners seeking high yielding investment opportunities. On a
purchasing power parity basis the rand is fairly valued at approximately R4
level against the dollar but will probably trade at a 15-20% discount to this
level over the remainder of the year, as long as exchange controls continue.
Being the major beneficiaries of a weak rand, mining shares outperformed
financial and industrial shares despite a lower gold price and a pedestrian
outlook for most commodity prices in the short term.
Economy
As anticipated, the South African economy slowed in the second half of 1996 and
the GDP growth for the year as a whole (excluding agriculture which boosted
figures by about 1% chiefly due to a bumper maize crop) was 1.9% compared with
3.9% in 1995. The down-turn is being managed and no recession is forecast. In
fact, modest growth of 2.5% is expected in 1997 and a further improvement in
1998. As part of this management process, during November the central bank
raised the bank rate by 1%. This tightening was motivated in part by the
excessive credit growth and precariously low gold and foreign exchange reserves.
There has been some slowdown in credit growth and consumer spending and the
country's reserve position will be boosted in April with the proceeds of
privatization, principally from the national telecommunication company, Telkom.
Thus it is widely expected that interest rates will ease in the third quarter.
Inflation seems to be under control and should remain in single digits after
peaking in April.
Exchange controls are being dismantled rapidly with further steps having been
announced in the national budget in March. The lifting of trade barriers will
make corporate South Africa more internationally competitive. Against these
positive factors the high level of crime and low labor productivity remain of
concern.
- 7 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Investment Management Report (continued)
The Portfolio
At the end of the fiscal year ended February 28, 1997, the Fund held 89% of its
net assets in equities of which 86% was in South African securities and 3% was
invested in neighboring territories Zimbabwe and Botswana. The comparatively
small size and low volume of trade in the markets of neighboring countries are
the main reasons for the modest investment in these markets. Based on the
classification of shares by the Johannesburg Stock Exchange, 26% was invested in
mining, 12% in financial and 47% in industrial shares listed on the JSE. The
investments in Zimbabwe and Botswana were principally in industrial companies.
The balance of 11% is split almost equally between rand and dollar deposits.
In local currency terms, the SA market has not matched the inflation rate,
despite good earnings growth from companies. Thus the trailing P/E has declined
from over 20 times in 1994 to 15.4. Financial and industrial shares are expected
to continue a strong earnings growth trend with gains of 20% over the next
twelve months. The mining sector is expected to improve profits by approximately
13% based on the current gold price and modest growth prospects in the major
world economies. The Fund will continue to underweight the mining sector until
there is evidence that demand is improving.
Since the August 1996 semi-annual report, the exposure to the financial sector
has been enhanced with purchases of Norwich Holdings S.A. Ltd. and Liberty Life
Association of Africa Ltd. shares. This brings the insurance holdings to 5% of
net assets. Persetel Holdings Ltd., a computer company, was added to the
portfolio as well as Anglo American Industrial Corp. Ltd., which is a well
diversified commodity play whose earnings will be driven by chemical, paper,
sugar and other products. Against this, the holdings in Iscor Ltd., Barlow Ltd.
and Pick 'n Pay Stores Ltd. were trimmed while the entire holding of Murray &
Roberts Holdings Ltd. was sold.
Prospects
There are increasing signs that the government is committed to meeting the
objectives it has set itself in its macroeconomic plan. In the recent national
budget the deficit as a percentage of GDP was reduced to 4% (from approximately
9% in 1994) and this was seen by the market as a further step towards fiscal
responsibility. The major corporations in South Africa have little or no
financial leverage and are well placed to take
- 8 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Investment Management Report (continued)
advantage of any growth
opportunities that may arise. The twelve month forward P/E on the market is 12.7
times which is modest by historical standards and thus the market can be
expected to perform better.
Discount to net asset value and share repurchase plan
Despite the 5% share repurchase plan last year, the Fund's discount to net asset
value has remained at approximately 20%. This is in line with the other South
African regional funds listed on the New York Stock Exchange.
As discussed in my previous reports, this is a matter of great concern to the
Board of Directors ("the Board"). After careful consideration, particularly of
the impact on the expense ratio of the Fund, the Board announced on February 20,
1997 that a further 5% of the shares will be bought back whenever the discount
exceeds 20%. The effect will be an increase in the net asset value of the Fund's
shares still outstanding.
We appreciate your interest and continued support of the Fund.
Respectfully submitted,
/S/ Iain O.S. Saunders
Iain O.S. Saunders
President, Treasurer and
Chairman of the Board of Directors
- 9 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Portfolio
At February 28, 1997
<S> <C> <C>
MARKET
VALUE
DESCRIPTION SHARES US $
- -------------------------------------------------------------------------------
COMMON STOCKS - 88.59%
BOTSWANA - 0.03% Beverages & Hotels - 0.01%
Sechaba Investment Trust Co. Ltd. 10,800 7,766
-----------
Commercial Banks - 0.02%
Barclays Bank of Botswana Ltd. 5,000 7,826
Standard Chartered Bank Botswana Ltd. 10,000 11,844
-----------
19,670
-----------
Total Botswana (cost $33,443) 27,436
-----------
SOUTH AFRICA - 85.42%
Base Metals - 7.79%
Anglovaal Ltd. "N" ordinary 60,000 1,848,421
Gencor Ltd. 1,000,000 4,330,840
-----------
6,179,261
-----------
Beverages & Hotels - 3.66%
Interleisure Ltd. 382,800 461,462
Sun International (South Africa) Ltd. 381,400 255,430
The South African Breweries Ltd. 73,136 2,187,794
-----------
2,904,686
-----------
Building & Construction - 5.11%
Barlow Ltd. 180,000 1,898,649
LTA Ltd. 200,000 1,294,787
Pretoria Portland Cement Co. Ltd. 50,000 862,261
-----------
4,055,697
-----------
Chemicals & Oil - 6.00%
Sasol Ltd. 334,889 3,625,877
Sentrachem Ltd. 600,000 1,133,162
-----------
4,759,039
-----------
Coal Mining - 1.07%
Ingwe Coal Corporation Ltd. 135,700 848,220
-----------
- 10 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Investment Portfolio (continued)
At February 28, 1997
MARKET
VALUE
DESCRIPTION SHARES US $
- -------------------------------------------------------------------------------
SOUTH AFRICA (continued)
Commercial Banks - 6.74%
NBS Holdings Ltd. 149,300 2,249,749
Nedcor Ltd. 50,932 864,121
Standard Bank Investment Corp. Ltd. 54,900 2,236,689
-----------
5,350,559
-----------
Computers - Integrated Systems - 1.60%
Persetel Holdings Ltd. 200,000 1,272,464
-----------
Diamond Mining - 6.56%
De Beers Consolidated Mines Ltd. 150,000 5,207,054
-----------
Diversified Operations - 0.98%
Anglo American Industrial Corp. Ltd. 20,000 779,105
-----------
Electronics - 1.24%
Reunert Ltd. 368,633 987,520
-----------
Food - 8.91%
The Bidvest Group Ltd. 352,240 2,201,746
The Tongaat-Hulett Group Ltd. 224,883 3,526,740
Tiger Oats Ltd. 80,000 1,343,900
-----------
7,072,386
-----------
Furniture & Households - 3.78%
JD Group Ltd. 355,890 1,946,491
Protea Furnishers Ltd. 4,000,000 1,053,689
-----------
3,000,180
-----------
Gold Mining - 9.55%
Anglo American Corporation of
South Africa Ltd. 80,000 5,045,206
JCI Company Ltd. 131,158 1,427,381
Western Areas Gold Mining Co. Ltd. 80,000 1,107,266
-----------
7,579,853
-----------
- 11 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Investment Portfolio (continued)
At February 28, 1997
MARKET
VALUE
DESCRIPTION SHARES US $
- -------------------------------------------------------------------------------
SOUTH AFRICA (continued)
Insurance - 4.99%
Liberty Life Association of Africa Ltd. 84,980 2,461,470
Norwich Holdings S.A. Ltd. 750,000 1,496,819
-----------
3,958,289
-----------
Paper & Packaging - 3.85%
C.G. Smith Ltd. 400,000 2,321,688
Nampak Ltd. 170,000 730,550
-----------
3,052,238
-----------
Platinum - 0.79%
Potgietersrust Platinums Ltd. 100,000 625,070
-----------
Steel & Alloys - 0.74%
Iscor Ltd. 769,844 584,322
-----------
Stores - 5.65%
CNA Gallo Ltd. 719,097 642,123
Pepkor Ltd. 305,001 1,327,719
Pick 'n Pay Stores Ltd. 311,000 383,239
Pick 'n Pay Stores Ltd. "N" 1,002,000 1,107,244
Specialty Stores Ltd. 512,759 299,906
Specialty Stores Ltd. "N" 1,295,793 723,180
-----------
4,483,411
-----------
Tobacco - 3.88%
Rembrandt Group Ltd. 300,000 3,080,701
-----------
Transportation - 2.53%
Safmarine & Rennies Holdings Ltd. 800,000 2,009,153
-----------
Total South Africa (cost $51,346,132) 67,789,208
-----------
- 12 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Investment Portfolio
At February 28, 1997
MARKET
VALUE
DESCRIPTION SHARES US $
- -------------------------------------------------------------------------------
ZIMBABWE - 3.14%
Beverages & Hotels - 1.52%
Delta Corp. Ltd. 770,703 1,206,647
-----------
Building & Construction - 0.48%
Portland Holdings Ltd. 225,000 382,465
-----------
Commercial Banks - 0.73%
Barclays Bank of Zimbabwe Ltd. 175,000 579,289
-----------
Tobacco - 0.41%
BAT (Zimbabwe) Ltd. 35,000 67,323
T.S.L. Ltd. 430,000 261,597
-----------
328,920
-----------
Total Zimbabwe (cost $1,090,698) 2,497,321
-----------
TOTAL COMMON STOCKS
(cost $52,470,273) 70,313,965
-----------
- 13 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Investment Portfolio
At February 28, 1997
MARKET
VALUE
DESCRIPTION SHARES US $
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT - 4.40%
REPURCHASE AGREEMENT - 4.40%
Repurchase Agreement dated 02/28/97 with Bear,
Stearns Securities Corp., 5.26%, due 03/03/97,
collateralized by $8,240,000 US Treasury Strips
(Principal-Only) 8.125%, 05/15/21; total value:
$3,560,570; proceeds: $3,491,469 (cost $3,489,939) US $ 3,490 3,489,939
-----------
TOTAL INVESTMENTS - 92.99%
(cost $55,960,212)(a) 73,803,904
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES - 7.01% 5,560,398
-----------
NET ASSETS - 100.00% 79,364,302
===========
<FN>
US $ United States dollars.
(a) Aggregate cost for US federal income tax purposes
is $55,960,212. The aggregate unrealized
appreciation (depreciation) for all securities
is as follows:
US $
-----------
Excess of market value over tax cost 20,037,312
Excess of tax cost over market value (2,193,620)
-----------
Net unrealized appreciation 17,843,692
===========
</FN>
</TABLE>
See accompanying notes to financial statements
- 14 -
<PAGE>
<TABLE>
<CAPTION>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities
At February 28, 1997
<S> <C>
US $
----------
ASSETS
Investments, at value (cost $55,960,212) (Note 2) 73,803,904
Cash (representing foreign currency holdings with a
cost of $5,315,704 in an interest-bearing account) 5,483,946
Interest and dividends receivable 228,522
Deferred organizational costs (Note 1) 44,613
Receivable for securities sold 16,676
Prepaid expenses 20,130
----------
TOTAL ASSETS 79,597,791
----------
LIABILITIES
Payables:
Investment advisory fee (Note 5) 74,889
Administration fee (Note 5) 18,222
Other accrued expenses 140,378
----------
TOTAL LIABILITIES 233,489
----------
NET ASSETS 79,364,302
----------
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 61,322,362
Accumulated net realized gain on investments and
foreign currency transactions 23,871
Net unrealized appreciation on investments, foreign
currency holdings and other assets and liabilities
denominated in foreign currencies 18,013,550
----------
NET ASSETS 79,364,302
==========
NET ASSET VALUE PER SHARE
($79,364,302 / 4,519,311) 17.56
==========
</TABLE>
See accompanying notes to financial statements
- 15 -
<PAGE>
<TABLE>
<CAPTION>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Statement of Operations
For the Year ended February 28, 1997
<S> <C>
US $
----------
INVESTMENT INCOME
Dividends (net of foreign withholding taxes
of $5,387) (Note 2) 1,686,571
Interest 885,675
----------
TOTAL INVESTMENT INCOME 2,572,246
----------
EXPENSES
Investment advisory fees (Note 5) 965,494
Legal fees 277,931
Administration fees (Note 5) 115,860
Custodian fees 84,473
Accounting fees 75,803
Directors' fees and expenses 66,727
Audit fees 55,776
Reports and notices to shareholders 49,076
Transfer agent fees and expenses 35,960
Insurance 33,408
Amortization of organizational costs (Note 1) 21,798
NYSE listing fees 15,371
Miscellaneous 2,583
----------
TOTAL EXPENSES 1,800,260
----------
NET INVESTMENT INCOME 771,986
----------
NET REALIZED AND UNREALIZED GAINS/(LOSSES)
ON INVESTMENTS, FOREIGN CURRENCY
HOLDINGS AND OTHER ASSETS AND LIABILITIES
DENOMINATED IN FOREIGN CURRENCIES (Note 2)
Net realized gain/(loss) on:
Investments 708,930
Foreign currency transactions (1,339,351)
----------
(630,421)
----------
Net change in unrealized appreciation/
(depreciation) on:
Investments (9,262,103)
Foreign currency holdings and other assets and
liabilities denominated in foreign currencies 3,777
----------
(9,258,326)
----------
Net realized and unrealized losses on investments,
foreign currency holdings and other assets and
liabilities denominated in foreign currencies (9,888,747)
----------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS (9,116,761)
==========
</TABLE>
See accompanying notes to financial statements
- 16 -
<PAGE>
<TABLE>
<CAPTION>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Statement of Changes in Net Assets
<S> <C> <C>
For the Year ended
February 28, 1997 February 29, 1996
US $ US $
-------------------------------------
INCREASE/(DECREASE) IN NET ASSETS
OPERATIONS
Net investment income 771,986 1,578,571
Net realized gain/(loss) on investments
and foreign currency transactions (630,421) 1,842,268
Net change in unrealized appreciation
on investments, foreign currency
holdings and other assets and liabilities
denominated in foreign currencies (9,258,326) 16,976,390
----------- -----------
Net increase/(decrease) in net assets
resulting from operations (9,116,761) 20,397,229
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income (335,785) (1,578,571)
In excess of net investment income -- (2,004,621)
Net realized gains on investments -- (222,543)
----------- -----------
(335,785) (3,805,735)
----------- -----------
CAPITAL STOCK TRANSACTIONS
Cost of shares repurchased (3,379,400) --
----------- -----------
NET INCREASE/(DECREASE)
IN NET ASSETS (12,831,946) 16,591,494
Net Assets:
Beginning of year 92,196,248 75,604,754
----------- -----------
End of year 79,364,302 92,196,248
=========== ===========
</TABLE>
See accompanying notes to financial statements
- 17 -
<PAGE>
<TABLE>
<CAPTION>
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.
<S> <C> <C> <C>
For the Period
March 11, 1994*
For the Year ended through
February 28, 1997 February 29, 1996 February 28, 1995
US $ US $ US $
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 0.17 # 0.33 0.39
Net realized and unrealized gains/(losses)
on investments, foreign currency
holdings and other assets and liabilities
denominated in foreign currencies (2.12) # 3.96 2.51
Total from investment operations (1.95) # 4.29 2.90
Dividends and distributions to
shareholders from:
Net investment income (0.07) (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 (0.07) (0.80) (0.77)
Antidilutive impact due to shares
of beneficial interest repurchased 0.20 -- --
Net asset value, end of period 17.56 19.38 15.89
Market value, end of period 14.00 15.38 13.38
Total investment return based on: (a)(b)
Market value (8.43)% 20.38% 1.50%
Net asset value (8.88)% 27.72% 22.25%
RATIOS/ SUPPLEMENTAL DATA
Net assets, end of period 79,364,302 92,196,248 75,604,754
Ratio of expenses to average net
assets 2.35% 1.98% 2.10% ##
Ratio of net investment income to
average net assets 1.01% 1.77% 2.61% ##
Portfolio turnover rate 9.92% 18.91% 10.88% ###
Average commission rate per share (c) $0.0084 -- --
<FN>
- --------------
* 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. Represents average commission rate per share charged
to the Fund on purchases and sales of investments subject to such
commissions during the period.
</FN>
</TABLE>
See accompanying notes to financial statements
- 18 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Notes and Financial Statements
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 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 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
- 19 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Notes and Financial Statements (continued)
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 realizaton 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 28, 1997, the Fund incurred and elected
to defer foreign exchange losses of $36,497.
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 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 28, 1997, no such allowance was
established.
- 20
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Notes and Financial Statements (continued)
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 28, 1997, the Fund reclassified within
the composition of net assets permanent book/tax differences
relating to realized gains on passive foreign investment company
holdings of $626,291 and realized losses on foreign currency
denominated transactions of $1,506,038 from accumulated realized gains
to undistributed net investment income. In addition, the Fund
reclassified a net operating loss of $734,137 to paid-in capital.
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;
- 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
- 21 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Notes and Financial Statements (continued)
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 (other than investments) 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 $1,339,351 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
- 22 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Notes and Financial Statements (continued)
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 year ended February 28, 1997,
the Fund held no such contracts.
4. Investment Transactions
For the year ended February 28, 1997, total purchases and sales of
portfolio investments excluding short-term securities, were $7,058,988 and
$13,356,002, 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.
6. Transactions With Affiliates
For the year ended February 28, 1997, the Fund paid $9,476 and $1,014 in
brokerage commissions to Fleming Martin Ltd. and Martin & Co.,
respectively, affiliates 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 limitation, may invest up to 10% of
its assets in non-publicly traded equity securities which may involve
- 23 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Notes and Financial Statements (continued)
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 28, 1997, the Fund held no such securities.
The Fund is permitted to engage in the trading of sovereign debt of
South Africa or Southern African regions which involves a substantial
degree of risk. The issuer of the debt or the governmental authorities
that control the repayment of the debt may be unable or unwilling to repay
principal and/or interest when due in accordance with the terms of such
debt. Sovereign debt in which the Fund invests is widely considered to have
credit quality below investment grade as determined by US rating agencies.
As a result, sovereign debt may be regarded as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal
in accordance with the terms of the obligations and involves major risk
exposure to adverse conditions.
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
February 28, 1997, 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.
In addition, on February 20, 1997, the Board of Directors announced a
second share repurchase program with identical terms to the initial
program. Since the date of the announcement through April 14, 1997, the
Fund has not made any such repurchases.
- 24 -
<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 28, 1997, the results of its operations for the year then
ended, the changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the periods presented, 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 28, 1997 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 14, 1997
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Results of Annual Meeting of Shareholders (unaudited)
On May 20, 1996, the annual meeting of the 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>
<S> <C> <C> <C>
Name of Director For Withheld Non-Votes
- ----------------------------------------------------------------
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.
For Against Abstain Non-Votes
-----------------------------------------------------------
3,465,378 0 17,111 1,189,680
- 26 -
<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 28, 1997) as to the US federal tax status of distributions received by
the Fund's shareholders in respect of such fiscal year. The $0.0743 per share
dividend 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
Foreign
Source
Foreign Taxes Income
Country Paid Per Share Per Share
------------------------------------------------------
Zimbabwe $0.001 $0.003
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 28, 1997 is $5,387. The foreign source income for information reporting
purposes is $732,216.
Shareholders are required to include such $0.001 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 1997. 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 1998.
- 28 -
<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.
- 28 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Dividend Reinvestment and Cash Purchase Plan
1. Pursuant to The New South Africa Fund Inc. (the "Fund") Dividend
Reinvestment and Cash Purchase Plan (the "Plan") each shareholder
("Shareholder") holding shares of common stock in the Fund will
automatically be a participant in the Plan, unless PNC Bank, National
Association, the Plan agent (the "Plan Agent"), is otherwise instructed by
the Shareholder, in writing, to have all distributions, net of any
applicable US withholding tax, paid in cash. Shareholders who do not wish
to participate in the Plan will receive all distributions in cash paid by
check mailed directly to the Shareholder by the Plan Agent. The Plan Agent
will act as agent for individual Shareholders and will open an account for
each Shareholder under the Plan in the same name as her or his present
shares of common stock are registered.
2. Whenever the directors of the Fund declare a capital gains distribution or
an income dividend payable in shares of common stock or cash, participating
Shareholders will take such distribution or dividend entirely in shares of
common stock and the Plan Agent shall automatically receive such shares of
common stock, including fractions, for the Shareholder's account, except in
the circumstances described in paragraph 3 below.
3. Whenever the market price per share of common stock equals or exceeds net
asset value per share on the date the event described in paragraph 2 above
occurs, participants will be issued shares of common stock at net asset
value or, if the net asset value is less than 95% of the market price on
the date the shares of common stock are valued, then participants will be
issued shares valued at 95% of the market price. If net asset value per
share of the common stock at such time exceeds the market price of common
stock on the date such shares are valued, the Plan Agent, as agent for the
participants, will buy shares of common stock on the open market, on the
New York Stock Exchange (the "Exchange") or elsewhere, for the
participants' accounts. If, before the Plan Agent has completed its
purchases, the market price exceeds the net asset value of shares, the
average per share purchase price paid by the Plan Agent may exceed the net
asset value of shares, resulting in the acquisition of fewer shares than if
the dividend or distribution had been paid in shares issued by the Fund at
net asset value. Additionally, if the market price exceeds the net asset
value of shares before the Plan Agent has 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
- 29 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Dividend Reinvestment and Cash Purchase Plan (continued)
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 participnts'
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 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
date 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
- 30 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Dividend Reinvestment and Cash Purchase Plan (continued)
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 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
- 31 -
<PAGE>
The New South Africa Fund Inc.
- -------------------------------------------------------------------------------
Dividend Reinvestment and Cash Purchase Plan (continued)
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
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 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 be
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, Wilmington, Delaware 19809 or
by telephone at 1-800-852-4750.
- 32 -
<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>
NSA
Listed
NYSE
New York Stock Exchange
Bear Stearns Funds Management Inc.
Administrator for The New South Africa Fund Inc.
245 Park Avenue
New York, NY 10167
Telephone (212) 272-2479
