NSA
THE NEW SOUTH AFRICA
FUND INC.
NSA
ANNUAL REPORT
FEBRUARY 28, 1998
<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 ("FIAM") 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. Effective April 3, 1997, Raymond
Goldblatt was designated to have principal responsibility for recommending the
purchase and sale of investment securities by the Fund to the Fund's investment
adviser, FIAM, which has sole investment discretion with respect to the Fund's
assets. Mr. Goldblatt is Chief Executive Officer of Fleming Martin Asset
Management, an affiliate of FIAM, and has 13 years of investment management
experience.
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
Raymond Goldblatt - Vice President
Linda E. Field - 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 W3-F400-02-4
Wilmington, DE 19809
U.S.A.
2
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
HIGHLIGHTS OF THE PERIOD
- --------------------------------------------------------------------------------
AT FEBRUARY 28, 1998
US $
-----------
Net Assets 78,977,312
Net Asset Value ("NAV") per Share 17.56
Market Price on New York Stock Exchange 13.9375
Discount to NAV 20.63%
PERFORMANCE FROM MARCH 11, 1994* TO FEBRUARY 28, 1998
Total Return based on Market Price 23.96%+
Total Return based on NAV 58.33%+
Johannesburg Stock Exchange ("JSE") All Share 25.75%++
Index
- -------------------
* Commencement of operations.
+ Assumes reinvestment of dividends and distributions 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. In addition,
the JSE All Share Index is unmanaged.
NAV & MARKET PRICE VS. JSE ALL SHARE INDEX
Comparison of 60% to 190% of NAV & MARKET PRICE VS. JSE ALL SHARE INDEX
from 3/11/94 to 2/28/98. Past performance is not predictive of future
performance.
03/11/94 $1,000.00 $1,000.00 $1,000.00
05/31/94 896.06 1,049.42 983.86
08/31/94 922.94 1,148.26 1,133.89
11/30/94 1,003.58 1,272.53 1,224.73
02/28/95 1,015.01 1,222.52 1,153.94
05/31/95 1,100.38 1,377.93 1,301.55
08/31/95 1,071.92 1,402.55 1,329.31
11/30/95 1,176.42 1,504.11 1,427.23
02/29/96 1,221.82 1,561.11 1,516.81
05/31/96 1,072.82 1,384.11 1,374.03
08/31/96 1,003.28 1,288.24 1,306.27
11/29/96 1,033.08 1,297.90 1,275.73
02/28/97 1,118.77 1,422.63 1,398.08
05/30/97 1,188.69 1,466.38 1,377.78
08/29/97 1,228.65 1,486.63 1,364.85
11/28/97 1,000.37 1,284.36 1,142.82
02/28/98 1,239.61 1,583.31 1,257.46
3
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
MAJOR EQUITY HOLDINGS
- --------------------------------------------------------------------------------
AT FEBRUARY 28, 1998
PERCENTAGE OF
NET ASSETS
--------------
ORION SELECTIONS LTD. 5.9
The controlling company of the financial services group,
The Board of Executors Ltd. and NBS Boland Group. In
addition, it also has interests in retailing and the
property company Monex.
RMB HOLDINGS LTD. 5.3
A financial services group with cross holdings in the
life insurance industry through Momentum Life. It offers
investment banking, private banking, structured finance
and asset management capabilities.
THE BIDVEST GROUP LTD. 4.6
Operates in the field of food, catering and related
products servicing the tourism industry in South Africa.
It also has freight, packaging and hygiene services
business.
PROTEA FURNISHERS LTD. 4.5
A furniture retailer operating in South Africa and
neighboring countries. Its target market is the lower
income urban shoppers.
JD GROUP LTD. 4.3
A furniture retailer operating throughout South Africa.
It has six chains, supplying both furniture and home
appliances.
4
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
MAJOR EQUITY HOLDINGS (CONTINUED)
- --------------------------------------------------------------------------------
PERCENTAGE OF
NET ASSETS
--------------
THETA GROUP LTD. 4.3
A financial services company controlling operations in
niche growth sectors of all South African economy. Its
subsidiaries also trade in the subsistence lending
market.
INVESTEC GROUP LTD. 3.9
Investec Holdings is the holding company for Investec
Group Ltd. Its subsidiaries offer a wide range of
investment banking, private banking, asset management
and property services. It also has interests in entities
operating in London, Israel, Holland, New York and
Mauritius.
PRIMEDIA LTD. 3.9
A diversified media company with interests in radio
stations, print media, cinemas and outdoor advertising.
PERSETEL Q DATA HOLDINGS LTD. 3.9
A technology company servicing the computer industry. It
markets and supports computer hardware, software and
relevant systems in many segments of the industry. It
also has investments in Germany.
FEDSURE HOLDINGS LTD. 3.5
A life insurance company with major shareholdings in
strategic financial services companies. It also has
interests in healthcare and short-term insurance.
5
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT
- --------------------------------------------------------------------------------
MARCH 20, 1998
DEAR SHAREHOLDERS,
The New South Africa Fund Inc. ("NSA" or the "Fund") has been in existence since
March 1994, when it was listed on the New York Stock Exchange. Since inception,
the net asset value ("NAV") of the Fund (assuming reinvestment of all dividends
and distributions) has risen by 58.33% against 25.75% for the Johannesburg Stock
Exchange ("JSE") All Share Index. For the fiscal year ended February 28, 1998,
the Fund's NAV increased by 11.29% (assuming reinvestment of all dividends and
distributions) versus a decline of 10.09% in the JSE All Share Index for the
same period.
MARKET ENVIRONMENT
The following table summarizes market moves between February 28, 1997 and the
fiscal year ending February 28, 1998.
FEBRUARY 28, FEBRUARY 28, %
1998 1997 CHANGE
---- ---- ------
SOUTH AFRICA
Rand vs US $ .............................. 4.95 4.48 (10.49)
JSE All Share Index*
(local) .................................. 7,096 7,145 (0.69)
(US $) ................................... 1,434 1,595 (10.09)
Three month bankers'
acceptance rate (%) ...................... 13.75 15.95 --
Yield on benchmark long bond (%) .......... 13.21 14.96 --
ZIMBABWE
Industrial Index (local) .................. 7,879 10,700 (26.36)
BOTSWANA
Share Index (local) ....................... 751 374 100.80
*price movement only
Although the JSE All Share Index was flat in rand terms, it declined in US
dollar terms as the South African ("SA") rand depreciated by 10.49% against the
US dollar over the year. This decline in the currency was relatively small when
compared with the currencies of other emerging markets, especially those in
Southeast Asia. The Rand has appeared to have stabilized at around R5 per US
dollar.
Although the performance of the whole market was pedestrian, this masks some
fundamental shifts in relative valuation of a number of subsectors of the SA
market.
6
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT (CONTINUED)
- --------------------------------------------------------------------------------
The Southeast Asian economic and currency crisis of the last quarter in 1997 had
a severely negative effect on all commodity and resource based shares on the JSE
as expectations were that the demand for commodities (steel, coal, paper, other
metals) would be much lower. SA exports to the East are approximately 30% of
total exports.
In addition, the price of gold came under pressure especially as a result of
central bank sales, which adversely affected gold mining producers and their
share prices. World inflation remained muted and this also contributed to weaker
commodity prices.
After the sell off of SA equities by both local and foreign sources in October
and November 1997, certain sectors have shown remarkable resilience in 1998 to
date.
These sectors, namely banks and financial services, technology, and furniture
shares, have rebounded strongly and reached new highs.
Their strength can be attributed to several factors:
-- The expectation of lower official interest rates in South Africa.
-- Merger and acquisition activity.
-- Strong growth in their underlying market niches.
-- Six million policyholders are to gain a windfall of approximately R 90
billion from the listing of Sanlam and Old Mutual. This money should
bolster consumer spending in late 1998 and early 1999. The process is
called the "demutualization effect."
The resources and commodity shares have continued to be laggards.
ECONOMY
High real interest rates continued to have a negative effect on the economy with
GDP growing by only 1.7% in calendar year 1997. The Reserve Bank Governor's
stated intention was to reduce inflation, protect the value of the currency and
keep a tight reign on the demand for credit. His policies were effective; the
rate of inflation declined and the decline in the currency was relatively small,
but at the price of restrained growth and relatively high unemployment. This
environment was positive for
7
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT (CONTINUED)
- --------------------------------------------------------------------------------
financial services shares, but was detrimental to consumer related companies
selling on credit.
The Southeast Asian crisis which was originally manifested by the financial
markets, is now being felt at the operational level by some companies. Order
books are being reduced and the demand for raw material exports from South
Africa is under pressure.
However, the investment sentiment in South Africa is positive for certain
sectors of the economy. The fiscal and monetary policies of the SA authorities
are firm and rational and El Nino has not been too disruptive to the
agricultural community. This bodes well for a controlled budget deficit in 1998
(of below 4%), and gives scope for interest rate reductions and a boost to GDP
growth in 1998 and 1999.
THE PORTFOLIO
At February 28, 1998, the Fund had 82.7% of its net assets in SA equities, 4.9%
in SA bonds, and 6% in neighboring country equities. With the financial turmoil
experienced in the market during the latter part of 1997 and the subsequent
paradigm shifts in views of a number of market factors, the Fund had a
significant turnover in large capitalization shares. All direct mining shares
were sold, and the portfolio moved underweight on mining producers.
Three central themes were pursued:
-- A "demographic reality" theme, whereby shares were bought in companies
that were exposed to the increasing number of consumers experiencing the
benefit of electrification for the first time.
-- Technology - which is a high growth business area in South Africa.
-- Banks and financial services which benefit from the factors outlined
above.
The top ten shares reflect these themes.
The Fund's policy of underweighting mining in favor of selected industrial
equities was beneficial, nonetheless over the next few months care needs to
8
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT MANAGEMENT REPORT (CONTINUED)
- --------------------------------------------------------------------------------
be exercised should there be a turnaround of the underlying fundamentals.
The holdings in Zimbabwe were reduced substantially as political and currency
risk came to the forefront in November 1997. The Fund is now investing in
Botswana which appears to be a more stable environment.
DISCOUNT TO NET ASSET VALUE AND SHARE REPURCHASE PLAN
The discount at which the Fund's shares are trading is a matter of concern to
the Board of Directors. The Board consults with shareholders and is mindful of
their views.
The discount moved in a 16-22% range over the year which was in line with the
other SA regional funds listed on the New York Stock Exchange. The share
repurchase plan mentioned in my report last year, namely that up to 5% of the
shares will be bought back whenever the discount exceeds 20%, remains in place.
The effect of such repurchases is to increase the net asset value of the Fund's
shares still outstanding. The Board reviews the share repurchase plan and other
measures to reduce the discount at each meeting.
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.
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
AT FEBRUARY 28, 1998
MARKET
VALUE
DESCRIPTION SHARES US $
- ----------- ------ ----
COMMON STOCKS - 88.74%
BOTSWANA - 5.74%
BEVERAGES & HOTELS - 2.87%
Sechaba Breweries* 2,110,800 2,267,162
----------
COMMERCIAL BANKS - 2.87%
Barclays Bank of Botswana Ltd. 51,000 215,438
Standard Chartered Bank Botswana Ltd. 520,900 2,046,903
----------
2,262,341
----------
TOTAL BOTSWANA (cost $4,545,249) 4,529,503
----------
SOUTH AFRICA - 82.74%
AUDIO & VIDEO PRODUCTS - 1.94%
Teljoy Holdings Ltd. 750,000 1,532,932
----------
BEVERAGES & HOTELS - 2.64%
The South African Breweries Ltd. 74,382 2,086,274
----------
BUILDING & CONSTRUCTION - 0.66%
LTA Ltd. 100,000 521,096
----------
CHEMICALS & OIL - 1.08%
Sasol Ltd. 99,889 853,042
----------
COMMERCIAL BANKS - 9.72%
NBS Holdings Ltd. 467,042 1,464,967
Nedcor Ltd. 51,949 1,513,840
Orion Selections Ltd. 1,506,590 4,695,222
----------
7,674,029
----------
COMMERCIAL SERVICES - 0.63%
Sasani Ltd. 3,037,500 497,899
----------
COMPUTERS - INTEGRATED SYSTEMS - 6.09%
Dimension Data Holdings Ltd. 289,988 1,725,312
Persetel Q Data Holdings Ltd. 381,791 3,082,754
----------
4,808,066
----------
10
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
MARKET
VALUE
DESCRIPTION SHARES US $
- ----------- ------ ----
SOUTH AFRICA (CONTINUED)
DIVERSIFIED OPERATIONS - 6.58%
Primedia Ltd. Class N 490,000 3,093,791
The Board of Executors Ltd. 49,000 2,102,191
----------
5,195,982
----------
ELECTRONIC & ELECTRICAL EQUIPMENT - 1.08%
Spescom Electronics Ltd. 511,200 853,464
----------
FINANCE & BANKING - 10.50%
Genbel Securities Ltd. 75,896 959,929
Investec Group Ltd. 62,900 3,113,490
RMB Holdings Ltd. 851,288 4,220,685
----------
8,294,104
----------
FOOD - 4.63%
The Bidvest Group Ltd. 363,631 3,657,278
----------
FURNITURE & HOUSEHOLDS - 8.83%
JD Group Ltd. 358,243 3,425,467
Protea Furnishers Ltd. 4,520,000 3,549,037
----------
6,974,504
----------
GOLD MINING - 2.12%
Anglo American Corporation of
South Africa Ltd. 40,000 1,675,601
----------
INSURANCE - 9.14%
Capital Alliance Holdings Ltd. 301,962 1,830,162
Fedsure Holdings Ltd. 185,000 2,770,408
Liberty Life Association of Africa Ltd. 86,278 2,618,977
----------
7,219,547
----------
INVESTMENT COMPANIES - 7.38%
Coronation Holdings Ltd. Class N 138,187 2,446,896
Theta Group Ltd. * 1,100,000 3,383,581
----------
5,830,477
----------
11
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
MARKET
VALUE
DESCRIPTION SHARES US $
- ----------- ------ ----
SOUTH AFRICA (continued)
RETAIL - CONVENIENCE STORES - 2.15%
Metro Cash & Carry Ltd. 1,580,164 1,694,800
----------
RETAIL - MISCELLANEOUS/DIVERSIFIED - 1.27%
Mathomo Group Ltd. 1,412,240 1,000,269
----------
STORES - 4.68%
Pepkor Ltd. 305,001 2,092,383
Specialty Stores Ltd. 520,832 484,837
Specialty Stores Ltd. Class N 1,316,531 1,118,976
----------
3,696,196
----------
TELECOMMUNICATIONS EQUIPMENT - 1.62%
Allied Technologies Ltd. 30,000 729,736
Plessey Corporation Ltd. 400,000 550,439
----------
1,280,175
----------
TOTAL SOUTH AFRICA (cost $45,143,434) 65,345,735
----------
ZIMBABWE - 0.26%
COMMERCIAL BANKS - 0.26%
NMBZ Holdings Ltd. (cost $786,953) 250,000 208,333
----------
TOTAL COMMON STOCKS
(cost $50,475,636) 70,083,571
----------
12
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
INVESTMENT PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
MARKET
PAR VALUE
DESCRIPTION (000) US $
- ----------- ------ ----
DEBT OBLIGATION - 4.87%
Republic of South Africa Bond,
13.50%, 09/15/15 (cost $3,761,697) R 19,000 3,846,267
----------
SHORT-TERM INVESTMENT - 6.32%
REPURCHASE AGREEMENT - 6.32%
Repurchase Agreement dated 02/27/98 with
Bear, Stearns & Co. Inc., 5.54%, due 03/02/98,
collateralized by $5,148,649 Federal
National Mortgage Association 7.00%,
due 04/25/24; total value: $5,058,548;
proceeds: $4,995,911 (cost $4,993,606) US $ 4,994 4,993,606
----------
TOTAL INVESTMENTS - 99.93%
(cost $59,230,939)(a) 78,923,444
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES - 0.07% 53,868
----------
NET ASSETS - 100.00% 78,977,312
==========
* Non income producing securities.
R Republic of South Africa rand.
US $ United States dollars.
(a) Aggregate cost for US federal income tax purposes is $59,230,939. The
aggregate unrealized appreciation/(depreciation) for all securities is
as follows:
US $
-----------
Excess of market value over tax cost 22,277,936
Excess of tax cost over market value (2,585,431)
-----------
Net unrealized appreciation 19,692,505
===========
See accompanying notes to financial statements.
13
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
AT FEBRUARY 28, 1998
US $
-----------
ASSETS
Investments, at value (cost $59,230,939) (Note 2) 78,923,444
Cash (representing foreign currency holdings with a
cost of $134,291 in an interest-bearing account) 135,288
Receivables:
Interest 268,117
Dividends 28,295
Deferred organizational costs and prepaid expenses (Note 1) 23,582
-----------
TOTAL ASSETS 79,378,726
-----------
LIABILITIES
Payables:
Investment advisory fees (Note 4) 134,519
Directors' fees 41,399
Administration fees (Note 4) 16,146
Other accrued expenses 209,350
-----------
TOTAL LIABILITIES 401,414
-----------
NET ASSETS 78,977,312
===========
NET ASSETS CONSIST OF:
Common stock, $0.001 par value (200,000,000 shares
authorized; 4,496,521 shares issued
and outstanding) (Note 7) 4,497
Additional paid-in capital 61,028,440
Undistributed net investment income 133,001
Accumulated net realized loss on investments and
foreign currency transactions (1,878,854)
Net unrealized appreciation on investments, foreign
currency holdings and other assets and liabilities
denominated in foreign currencies 19,690,228
-----------
NET ASSETS 78,977,312
===========
NET ASSET VALUE PER SHARE
($78,977,312 (divided by) 4,496,521) $ 17.56
===========
See accompany notes to financial statements.
14
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED FEBRUARY 28, 1998
US $
-----------
INVESTMENT INCOME
Dividends (net of foreign withholding taxes
of $5,054) (Note 2) 1,217,406
Interest 1,034,960
-----------
TOTAL INVESTMENT INCOME 2,252,366
-----------
EXPENSES
Investment advisory fees (Note 4) 973,141
Professional fees 164,198
Administration fees (Note 4) 117,110
Custodian fees 87,122
Accounting fees 75,359
Transfer agent fees and expenses 41,284
Insurance 41,085
Directors' fees and expenses 38,030
Reports and notices to shareholders 24,835
Amortization of organizational costs (Note 1) 21,798
NYSE listing fees 16,779
Miscellaneous 13,918
-----------
TOTAL EXPENSES 1,614,659
-----------
NET INVESTMENT INCOME 637,707
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS, FOREIGN CURRENCY
HOLDINGS AND OTHER ASSETS AND LIABILITIES
DENOMINATED IN FOREIGN CURRENCIES (Note 2)
Net realized gain/(loss) on:
Investments 3,973,595
Foreign currency transactions (490,128)
-----------
3,483,467
-----------
Net change in unrealized appreciation/
(depreciation) on:
Investments 1,848,813
Foreign currency holdings and other assets and
liabilities denominated in foreign currencies (172,135)
-----------
1,676,678
-----------
Net realized and unrealized gain on investments,
foreign currency holdings and other assets and
liabilities denominated in foreign currencies 5,160,145
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 5,797,852
===========
See accompanying notes to financial statements.
15
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year ended
----------------------------
February 28, February 28,
1998 1997
US $ US $
------------ -------------
INCREASE/(DECREASE) IN NET ASSETS
OPERATIONS
Net investment income 637,707 771,986
Net realized gain/(loss) on investments
and foreign currency transactions 3,483,467 (630,421)
Net change in unrealized appreciation
on investments, foreign currency
holdings and other assets and liabilities
denominated in foreign currencies 1,676,678 (9,258,326)
------------ -------------
Net increase/(decrease) in net assets
resulting from operations 5,797,852 (9,116,761)
------------ -------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income (515,660) (335,785)
Net realized gains on investments (3,496,384) --
In excess of net realized gains on investments (1,878,854) --
------------ -------------
(5,890,898) (335,785)
------------ -------------
CAPITAL STOCK TRANSACTIONS
Cost of shares repurchased (293,944) (3,379,400)
------------ -------------
NET DECREASE IN NET ASSETS (386,990) (12,831,946)
Net Assets:
Beginning of year 79,364,302 92,196,248
------------ -------------
End of year 78,977,312* 79,364,302
============ =============
- ---------------
* Includes undistributed net investment
income of $133,001
See accompanying notes to financial statements.
16
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CONTAINED BELOW IS PER SHARE OPERATING PERFORMANCE DATA FOR A SHARE OF COMMON
STOCK OUTSTANDING, TOTAL INVESTMENT RETURN, RATIOS TO AVERAGE NET ASSETS AND
OTHER SUPPLEMENTAL DATA FOR EACH PERIOD INDICATED. THIS INFORMATION HAS BEEN
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS AND MARKET PRICE
DATA FOR THE FUND'S SHARES.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
March 11, 1994*
For the Year ended through
------------------------------------------
February 28, February 28, February 29, February 28,
1998 1997 1996 1995
US $ US $ US $ US $
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period 17.56 19.38 15.89 13.95**
Offering costs charged to additional paid-in capital -- -- -- (0.19)
------ ------ ------ ------
17.56 19.38 15.89 13.76
------ ------ ------ ------
Net investment income 0.14+ 0.17+ 0.33 0.39
Net realized and unrealized gain/(loss) on investments,
foreign currency holdings and other assets and
liabilities denominated in foreign currencies 1.15+ (2.12)+ 3.96 2.51
------ ------ ------ ------
Total from investment operations 1.29+ (1.95)+ 4.29 2.90
------ ------ ------ ------
Dividends and distributions to shareholders from:
Net investment income (0.11) (0.07) (0.33) (0.39)
In excess of net investment income-- -- (0.42) (0.32)
Net realized gains on investments (0.78) -- (0.05) (0.06)
In excess of net realized gains on investments (0.42) -- -- --
------ ------ ------ ------
Total dividends and distributions to shareholders (1.31) (0.07) (0.80) (0.77)
------ ------ ------ ------
Antidilutive impact due to shares of
beneficial interest repurchased 0.02 0.20 -- --
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD 17.56 17.56 19.38 15.89
====== ====== ====== ======
MARKET VALUE, END OF PERIOD 13.94 14.00 15.38 13.38
====== ====== ====== ======
TOTAL INVESTMENT RETURN BASED ON: (a) (b)
Market value 10.80% (8.43)% 20.38 1.50%
Net asset value 11.29% (8.88)% 27.72 22.25%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) 78,977 79,364 92,196 75,605
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.07% 2.35% 1.98% 2.10%++
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 0.82% 1.01% 1.77% 2.61%++
PORTFOLIO TURNOVER RATE 90.53% 9.92% 18.91% 10.88%+++
AVERAGE COMMISSION RATE PER SHARE (c) $ 0.0119 $ 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) Computed by dividing the total amount of brokerage commissions paid by the
total shares of investment securities purchased and sold during the
respective periods for which commissions were charged, as required by the
SEC for fiscal years beginning on or after September 1, 1995.
</FN>
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
AT FEBRUARY 28, 1998
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 the
underlying securities. The Investment Adviser monitors the
18
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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 28, 1998, the Fund
incurred and elected to defer $1,341,276 of realized capital losses
and $537,578 of realized foreign exchange losses.
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 and amortization of premium and discount are recorded
on a straight-line 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, 1998, no such
allowance was established.
19
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO 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, 1998, the Fund reclassified within the
composition of net assets permanent book/tax differences relating to
realized gains on foreign currency denominated transactions of
$10,954 from accumulated realized losses to undistributed net
investment income.
vi) FOREIGN CURRENCY TRANSLATION
The books and records of the Fund are maintained in US dollars.
Foreign currency amounts are translated into US dollars at the 12
p.m. mid-market price of such currencies against US dollars as quoted
by major New York banks as follows:
-- investments, other assets and liabilities; at the prevailing rates
of exchange on the valuation date;
-- 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
20
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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 $490,128 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. INVESTMENT TRANSACTIONS
For the year ended February 28, 1998, total purchases and sales of
portfolio investments excluding short-term securities, were $64,462,776 and
$66,290,417, respectively.
4. 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.
21
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
ii) Bear Stearns Funds Management Inc. (the "Administrator"), a
wholly-owned subsidiary of The Bear Stearns Companies Inc., 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.
5. TRANSACTIONS WITH AFFILIATES
For the year ended February 28, 1998, the Fund paid $207,152 and $10,537 in
brokerage commissions to Fleming Martin Ltd. and Robert Fleming Inc.,
respectively, affiliates of the Investment Adviser.
6. 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 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, 1998, 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
22
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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. However, the Fund's investment in the
government bond held at February 28, 1998 has been rated by US rating
agencies as investment grade.
7. CAPITAL STOCK
The authorized capital stock of the Fund is 200,000,000 shares of common
stock, $0.001 par value. Of the 4,496,521 shares outstanding at February
28, 1998, 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. During the quarter ended November 30, 1997, the Fund repurchased
22,790 of its outstanding shares.
23
<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, 1998, 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, 1998 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 8, 1998
24
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
- --------------------------------------------------------------------------------
On May 29, 1997, 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.
Name of Director For Withheld Non-Votes
- ---------------- --- -------- ---------
Iain O.S. Saunders 3,323,637 18,077 1,177,597
Arthur Levy 3,330,765 10,949 1,177,597
In addition to the directors re-elected at the meeting, Anton Dirk Botha, Dr.
Nthato H. Motlana, 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, 1998.
For Against Abstain Non-Votes
--- ------- ------- ---------
3,336,162 1,983 3,569 1,177,597
25
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
US TAX INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
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, 1998) as to the US federal tax status of distributions received by
the Fund's shareholders in respect of such fiscal year. Of the $1.31 per share
dividend paid in respect of such fiscal year, ordinary income contributed $0.11,
long-term capital gains contributed $0.02 from 28 percent rate gains and $1.18
from 20 percent rate gains. Domestic shareholders, whether receiving these
dividends in cash or reinvesting it under the Dividend Reinvestment and Cash
Purchase Plan, must report this dividend income.
The Fund does not intend to make an election under Internal Revenue Code Section
853 to pass through foreign taxes paid by the Fund to its shareholders.
The Fund did not earn any dividend income that qualifies for the dividends
received deduction that is available to corporate shareholders.
Information with respect to the distributions received by US Fund shareholders
as indicated above have been reported to them on Form 1099-DIV, which were
mailed to such shareholders in January 1998.
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.
26
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
DIVIDEND REINSTATEMENT 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
27
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
DIVIDEND REINSTATEMENT 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 nts' 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 on 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
28
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
DIVIDEND REINSTATEMENT AND CASH PURCHASE PLAN (CONTINUED)
- --------------------------------------------------------------------------------
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
immediately if notice is received by the Plan Agent not less than 10 days
29
<PAGE>
THE NEW SOUTH AFRICA FUND INC.
DIVIDEND REINSTATEMENT AND CASH PURCHASE PLAN (CONTINUED)
- --------------------------------------------------------------------------------
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 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 PNC Bank, N.A., 400 Bellevue Parkway, Mail Stop W3-F400-02-4,
Wilmington, Delaware 19809 or by telephone at 1-800-852-4750.
30
<PAGE>
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<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<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.
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NSA
LISTED
NYSE
THE 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
