<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
THE NEW SOUTH AFRICA FUND INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
THE NEW SOUTH AFRICA FUND INC.
101 CARNEGIE CENTER
PRINCETON, N.J. 08540
---------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
---------------------
To our Stockholders:
Notice is hereby given that a Special Meeting of Stockholders of The New
South Africa Fund Inc. (the "Fund") will be held at 11:00 a.m. on Wednesday,
April 28, 1999 at the offices of Bear Stearns Funds Management Inc., 245 Park
Avenue, New York, New York 10167, U.S.A., for the following purposes:
(1) To approve or disapprove a plan of complete liquidation and
dissolution of the Fund (the "Plan"), providing for, among other things,
the sale of all of the assets of the Fund, the payment of one or more
liquidating dividends to stockholders of the Fund, and the dissolution of
the Fund pursuant to Maryland law, in accordance with the Plan in complete
liquidation of stockholders' interests in the Fund ("Proposal 1"); and
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on February 22, 1999 will
be entitled to vote at the meeting.
By order of the Board of Directors,
LINDA E. FIELD
Secretary
February 24, 1999
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED FORM OF PROXY AND MAIL IT IN THE ENCLOSED RETURN ENVELOPE.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
<PAGE> 3
[ Intentionally Left Blank ]
<PAGE> 4
THE NEW SOUTH AFRICA FUND INC.
101 CARNEGIE CENTER
PRINCETON, N.J. 08540
---------------------
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
---------------------
This Proxy Statement is furnished to the stockholders of THE NEW SOUTH
AFRICA FUND INC. (the "Fund") in connection with the solicitation by the Board
of Directors of the Fund (the "Board" or "Board of Directors") of proxies to be
used at a Special Meeting of Stockholders (the "Meeting") of the Fund to be held
at the offices of the Fund's administrator, Bear Stearns Funds Management Inc.,
245 Park Avenue, New York, New York 10167, U.S.A., on Wednesday, April 28, 1999
at 11:00 a.m. for the purposes set forth in the accompanying Notice of Special
Meeting of Stockholders (the "Notice"). This Proxy Statement and accompanying
form of proxy are first being sent to stockholders on or about February 24,
1999.
Stockholders of record at the close of business on February 22, 1999 (the
"Record Date"), will be entitled to vote at the Meeting. On the Record Date, the
Fund had outstanding and entitled to vote at the Meeting 4,030,869 shares, each
entitled to one vote. The presence, in person or by proxy (except as described
below), of stockholders entitled to cast at least a majority of the votes which
all stockholders are entitled to cast will constitute a quorum. Holders of
shares covered by a properly executed and returned proxy will be considered
present at the Meeting for purposes of determining the existence of a quorum for
the transaction of business even if such proxy contains instructions to abstain
from voting, or does not include voting instructions (and authority to vote has
not been withheld).
If the enclosed proxy is duly executed and returned in time to be voted at
the Meeting, and not subsequently revoked, all shares represented by such proxy
will be voted in accordance with the instructions marked thereon, and in the
best judgment of the persons named as proxies with respect to any other business
as may properly come before the Meeting or any adjournment thereof. However
(except in the case of broker "non-votes" as described below), if no
instructions are specified with respect to any one or more of the proposals set
forth in the Notice, all shares represented by such proxy will be voted "FOR"
Proposal 1, and in the best judgment of the persons named as proxies with
respect to any other business as may properly come before the Meeting or any
adjournment thereof. If a proxy that is properly executed and returned
accompanied by instructions to withhold authority to vote represents a broker
"non-vote" (that is, a proxy from a broker or nominee indicating that such
person has not received instructions from the beneficial owner or other person
entitled to vote shares on a particular matter with respect to which the broker
or nominee does not have discretionary power), in the opinion of the Fund's
special Maryland counsel, the shares represented thereby will not be considered
to be present at the Meeting for purposes of determining the existence of a
quorum for the transaction of business, and be deemed not cast with respect to
such proposal.
Assuming a quorum is present at the Meeting, under the Fund's by-laws, the
affirmative vote of stockholders representing a majority of the Fund's
outstanding shares of common stock will be required for the
<PAGE> 5
approval of Proposal 1. Accordingly, abstentions and broker "non-votes", which
will not be considered to have been cast, will also have the effect of a vote
"against" such proposal.
In the event that a quorum is not present or represented, the holders of a
majority of the shares present in person or proxy may adjourn the Meeting,
without notice other than announcement at the Meeting, until the requisite
number of shares entitled to vote at the Meeting shall be present.
If a quorum is present, but sufficient votes to approve Proposal 1 are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitations of proxies of stockholders of the
Fund. Any such adjournment will require the affirmative vote of a majority of
those shares present at the Meeting or represented by proxy. When voting on a
proposed adjournment, the persons named as proxies will vote for the proposed
adjournment all proxies that they are entitled to vote with respect to Proposal
1, unless directed to vote against Proposal 1, in which case such proxies will
be voted against the proposed adjournment.
Any stockholder giving a proxy will have the power to revoke it by notice
in writing received by the Secretary of the Fund, c/o The New South Africa Fund
Inc., 101 Carnegie Center, Princeton, N.J. 08540, U.S.A., prior to the exercise
of such proxy at the Meeting. Also, any stockholder attending the Meeting may
vote in person whether or not he or she has previously filed an executed proxy.
Other than as set forth in the table below and notes thereto, no person, to
the knowledge of the Fund, owned 5% or more of the outstanding shares of the
Fund. Each share or fractional share outstanding on the Record Date will be
entitled to one vote or fractional vote at the Meeting.
As of the Record Date, the following persons were known to the Fund to be
beneficial owners of more than 5% of the outstanding shares of the Fund.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
OF BENEFICIAL OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS(1)
- ------------------------------------ ------------------------------------ ----------------- --------
<S> <C> <C> <C>
Common stock, par value City of London Investment
$0.001 per share Group PLC(2)
10 Eastcheap
London EC3M ILX
England 207,603(2) 5.15(2)
Deep Discount Advisors, Inc.(3)
One West Pack Square
Suite 777 Asheville
NC 28801 314,576(3) 7.80(3)
</TABLE>
- ---------------
(1) Based upon 4,030,869 shares of common stock of the Fund outstanding as of
the Record Date.
(2) The Fund has been advised that beneficial ownership of shares reported by
City of London Investment Group PLC ("CLIG") (formerly Olliff & Partners
PLC) includes beneficial ownership of shares held by entities that are
directly or indirectly controlled by CLIG. These entities include two
investment managers, City of London Investment Management Company Ltd.
("CLIM") and City of London Unit Trust Managers Ltd. ("CLUTM"), and two
collective investment vehicles, Emerging Markets Country Fund ("EMCF") and
Emerging Market Country Trust ("EMCT"). The Fund has been advised that CLIM
and CLUTM acts as investment manager of EMCF and EMCT, respectively.
Information regarding beneficial
2
<PAGE> 6
ownership of shares of common stock of the Fund for CLIG is based solely
upon information in its report on Schedule 13G understood to have been filed
with the SEC on January 20, 1999.
(3) Information regarding beneficial ownership of shares by Deep Discount
Advisors, Inc. ("DDA") is based solely upon information in DDA's report on
Schedule 13G understood to have been filed with the SEC on February 10,
1999.
As of the Record Date, the directors and officers of the Fund as a group
owned less than 1% of the outstanding stock of the Fund.
All costs of solicitation of proxies will be borne by the Fund. Proxy
solicitations will be made by the use of the mails, but solicitations may also
be made by telephone, telegraph and/or personal interview by officers or
employees of the Fund, and by officers or employees of Fleming International
Asset Management Limited, the investment adviser to the Fund, and its
affiliates, without special compensation. The Fund has also retained the
services of MacKenzie Partners Inc. for the solicitation of proxies. The Fund
anticipates that it will pay such firm a fee of approximately $7,500 and will
reimburse such firm for its reasonable expenses. Proxies should be returned in
the enclosed envelope.
The Fund's investment adviser is Fleming International Asset Management
Limited ("FIAM" or the "Investment Adviser"), 25 Copthall Avenue, London EC2R
7DR, United Kingdom.
COPIES OF THE FUND'S MOST RECENT ANNUAL REPORT AND/OR SEMI-ANNUAL REPORT
MAY BE OBTAINED WITHOUT CHARGE BY CALLING 1-800-852-4750, OR BY WRITING TO THE
FUND'S TRANSFER AGENT, C/O PFPC INC., 400 BELLEVUE PARKWAY, WILMINGTON, DELAWARE
19809.
3
<PAGE> 7
PROPOSAL 1
TO APPROVE OR DISAPPROVE A PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION OF
THE FUND, PROVIDING FOR, AMONG OTHER THINGS, THE SALE OF ALL OF THE ASSETS OF
THE FUND, THE PAYMENT OF ONE OR MORE LIQUIDATING DIVIDENDS TO STOCKHOLDERS OF
THE FUND, AND THE DISSOLUTION OF THE FUND PURSUANT TO MARYLAND LAW, IN
ACCORDANCE WITH THE PLAN IN COMPLETE LIQUIDATION OF STOCKHOLDERS' INTERESTS IN
THE FUND.
BACKGROUND AND REASONS FOR THE LIQUIDATION
The Fund is a Maryland corporation and is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a non-diversified
closed-end management investment company. Shares of the Fund are traded on The
New York Stock Exchange, Inc. (the "NYSE"). The Fund's investment objective is
to seek long-term capital appreciation through investing primarily in equity
securities of issuers in the Republic of South Africa as well as, to a lesser
extent, in other countries in the Southern Africa region. Currently, however,
the Fund is invested principally in short-term U.S. Treasury securities and
other short-term debt securities.
At its meeting on December 10, 1998, the Board of Directors determined that
under present facts and circumstances, liquidating the Fund would be in
stockholders' best interests and so voted to adopt the Plan of Liquidation and
Dissolution attached hereto as Exhibit A (the "Plan"). There are a number of
reasons why the Board has concluded that liquidating the Fund is appropriate at
this juncture.
The Fund was originally conceived in 1994 to be an investment vehicle by
which investors, principally in the United States, but elsewhere as well, could
obtain exposure on an economically and practically efficient basis, to the
securities markets in South Africa and neighboring countries. It was believed by
the Fund's investment adviser and the Board that these markets presented
opportunities to achieve long-term capital appreciation. Among other factors
which led to this view were that South Africa had recently and successfully
dismantled its apartheid policies and had held democratic elections in which
Nelson Mandela had been elected president. It was then expected that the new
government would implement economic and other policies to foster growth and
development. In addition, it was expected that foreign investors, which for
years had been withdrawing from South Africa, would return. An objective mark of
renewed international investor interest in South Africa at this time was the
announcement that The Johannesburg Stock Exchange (the "JSE") and some of its
listed companies would for the first time be included in certain international
emerging markets indices. Thus, it was expected that international investor
funds using these indices as their benchmarks would begin investing in
JSE-listed securities. For these reasons, among others, the Board believed that
a closed-end fund seeking long-term capital appreciation would have a reasonable
prospect of achieving that objective by investing in equity securities of South
African and neighboring countries. Moreover, depending upon the level of funds
raised through an initial public offering, such a fund could represent an
efficient means of making investments in such markets due to economies of scale,
elimination of custodial and settlement problems usually confronted by foreign
investors, professional management and the ability to be fully invested.
The Fund completed its initial public offering in March 1994 with net
proceeds of $66.26 million and began investment operations shortly thereafter.
Over the years, the Fund's investment performance often exceeded that of the JSE
All Share Index in absolute terms. To the disappointment of the Board as well as
many stockholders, however, this performance was tempered by the discount to net
asset value ("NAV") at which the Fund's shares frequently traded on the NYSE.
This discount developed shortly after the Fund's initial public offering and has
persisted, with some interruptions, since then at levels at times exceeding 20%.
4
<PAGE> 8
At substantially all of its meetings, the Board discussed the problem of the
discount to NAV and studied and considered various means of trying to close the
discount. In that regard, the Board consulted with its outside advisers and
observed actions taken by other funds with similar discounts. Although many
closed-end specialist funds, such as the Fund, experience discount problems
similar to that of the Fund, there is no clear-cut or definitive solution to the
problem. Nevertheless, under the Board's direction, the Fund initiated share
repurchase programs intended to narrow the discount (which produced only
short-term effects) and publicity measures intended to raise the profile of the
Fund among brokers and thereby to attract the interest of new investors to
invest in the Fund in the hopes that a resulting increase in demand for the
Fund's shares would narrow the discount. The Fund also conducted a self-tender
offer pursuant to which the Fund repurchased 10% of its outstanding shares at
NAV.
Notwithstanding the Board's actions, however, the discount to NAV has
persisted. In response to the requests of several large stockholders of the
Fund, the Board agreed to convene a special meeting of stockholders of the Fund
and invited stockholders to submit proposals addressing their concerns with
respect to the discount, the Fund's future and other matters.
In the meantime, during the beginning of the third quarter of calendar year
1998, market values of South African securities, including many of those in the
Fund's portfolio, dropped sharply, consistent with similar declines in the
market values of securities in emerging markets in Asia and Latin America which
occurred at about the same time. The effect of this (together with the effect of
the self-tender offer) on the Fund's net assets was substantial. As at June 30,
1998, the Fund's net assets were $66,298,674 and NAV per share was $14.74 per
share. As at September 30, 1998, the Fund's net assets were $40,630,856 and NAV
per share was $10.04 per share. The substantial reduction in the Fund's net
assets resulting from the drop in the market values of its portfolio securities
meant that the Fund's expense ratio (that is, its expenses per share) was
becoming higher; the Fund had quite suddenly become much more expensive (on a
cost per share as a percentage of NAV per share basis) to operate. Nevertheless,
the Fund's investment objective is long-term capital appreciation and the
decline in values in the markets in which the Fund invests might have
represented a good buying opportunity if the decline were only a temporary one,
as, for example, the later drop which occurred in the securities markets in the
United States proved to be. Accordingly, the Board, in consultation with its
outside advisers, decided that at that time, it was in the interests of
stockholders of the Fund for the Fund to stay invested -- at least so long as
there appeared to be the possibility that the decline was temporary and that
there were still reasonable prospects for the Fund to achieve its investment
objective. Nevertheless, given the extraordinary drop in net assets and the
sharp increase in the expense ratio which resulted, the Board determined to
monitor the situation in the South African markets closely. To that end, the
Board instructed FIAM to consider whether the drop in values in the Fund's
portfolio securities and the contemporaneous volatility and decline of the Rand
as against the U.S. dollar might be temporary and might therefore represent a
buying opportunity, or whether, on the other hand, the markets in which the Fund
was investing had changed so substantially that it might no longer be likely for
the Fund to achieve its investment objective of achieving long-term capital
appreciation.
On December 8, 1998, the special meeting of stockholders of the Fund
referred to above took place. Two proposals were submitted by stockholders and
both were approved by an overwhelming percentage of holders of shares present at
the meeting (although holders of shares representing barely the majority
necessary to constitute a quorum were present). One proposal was to recommend
that the Board consider approving and submitting to stockholders, as soon as
possible, a plan whereby the Fund would be liquidated in an orderly manner. Such
proposal was precatory in nature (i.e., it could only "recommend" that the Board
take action) because, under Maryland law, only the Board can initiate the
process of dissolution of a Maryland corporation.
5
<PAGE> 9
The other proposal which stockholders adopted terminated the Fund's investment
advisory agreement with FIAM and recommended that the Board approve a new
investment advisory agreement with FIAM which would provide for the investment
advisory fee to be varied in accordance with a formula which links the amount of
the fee to the degree to which the market price for the Fund's shares is at a
discount to their NAV.
Two days after the special stockholder meeting, the Board convened its
regularly scheduled quarterly meeting. At that meeting, the Board considered the
results of the special meeting of stockholders and the history of the Fund as
outlined above, including the inability to halt either the persistence or the
size of the discount to NAV at which the Fund's shares have frequently traded on
the NYSE and the recent negative developments in the securities markets in which
the Fund invests. FIAM reported to the Board that it was of the view that the
drop in values and the volatility presently persisting in the South African
currency and securities markets were such that the Fund's ability to achieve its
investment objective of long-term capital appreciation by investing in such
markets was diminished. Moreover, the Board concluded that previously
anticipated economic growth in general had not met and was not expected to meet
expectations. In the light of the foregoing advice and conclusions, as well as
the current small asset base of the Fund and the resulting increase in expense
ratio, and taking into account the stockholder vote as well, the Board
determined that liquidation was in the best interests of stockholders and
adopted the Plan.
Given its view that investing in the securities markets of South Africa and
other countries in the region was no longer consistent with the Fund's
investment objective of seeking long-term capital appreciation, and given the
volatility of those markets, the Board also determined that the Fund should
unwind its positions in South African and other regional equities and invest the
proceeds in short-term U.S. Treasury securities and other short-term instruments
pending the Meeting. Given the relative illiquidity of the securities markets in
which the Fund invests and the potential for creating "fire sale" conditions
when the Fund liquidates its equity holdings in such markets, however, the Board
instructed FIAM to liquidate the Fund's positions in an orderly manner, without
any deadline, so as to maximize value. The strategy of investing in short-term
U.S. Treasury securities and other short-term instruments pending the Meeting
has two objectives. The first is to preserve assets through investing in
low-risk securities pending expected approval by stockholders of liquidation. In
addition, because the South African and other regional securities markets are
relatively illiquid, it can take time to unwind long positions in such markets.
If the process of moving into short-term, low-risk securities takes place before
the Meeting, the Fund will be able to liquidate and make a liquidating
distribution to stockholders much faster following a stockholder vote to
liquidate than it would if it were invested in securities of South African and
other regional issuers.
PLAN OF LIQUIDATION AND DISSOLUTION
The Plan provides for the complete liquidation of the assets of the Fund,
the payment and discharge of, or other provision for, all liabilities and
obligations of the Fund, the payment of one or more liquidating dividends to
stockholders of the Fund, the dissolution of the Fund pursuant to Maryland law,
and the distribution of the remaining proceeds of the Fund to stockholders. All
references to the Plan contained in this proxy statement should be treated as
summary in nature and are qualified in their entirety by reference to the
provisions of the Plan.
The Plan will be effective on the day on which it is approved by the
requisite vote of stockholders (the "Effective Date"). On the Effective Date,
the Fund shall cease to conduct business except as is required to carry out the
terms of the Plan. As soon as practicable after the Effective Date, the Fund
will send notice to all its known creditors and employees, if any, that the Plan
has been approved by the Board of Directors and the stockholders and that the
Fund will be liquidating and dissolving. Additionally, as soon as reasonably
6
<PAGE> 10
practicable after Effective Date, all portfolio securities of the Fund not
already converted to cash or cash equivalents will be converted to cash or cash
equivalents in a due and orderly fashion in consultation with the Fund's
investment adviser.
As soon as practicable after the Effective Date, the Board of Directors
will declare and pay one or more liquidating dividends (the "Liquidating
Dividend"), of the maximum amount that the Board determines it is permitted to
declare and pay under Maryland law, to stockholders of record on the date that
the Liquidating Dividend is declared, ratably among the issued and outstanding
shares of common stock of the Fund. An amount which the Fund estimates is
necessary to discharge any unpaid liabilities, including contingent and
potential contingent liabilities, will be reserved.
As soon as practicable after (i) the 20 day period required under Maryland
law for notice to be provided to creditors and employees of the Fund that the
Plan has been approved by the Board of Directors and the stockholders and that
the Fund will be liquidating and dissolving, (ii) the payment of the Liquidating
Dividend, and (iii) the receipt of any required tax clearance certificates, the
Fund will file Articles of Dissolution with the State Department of Assessments
and Taxation of the State of Maryland ("SDAT") and make such filings as are
necessary to cause its common stock to cease to be listed on the NYSE and to de-
register as an investment company under the 1940 Act. Upon the acceptance of the
Articles of Dissolution for filing by the SDAT, the stock transfer books of the
Fund will be permanently closed and the Fund will be legally dissolved (the
"Dissolution Date"). Thereafter, the Fund will continue to exist for the purpose
of paying, satisfying, and discharging any existing debts or obligations,
collecting and distributing its assets, and doing all other acts required to
liquidate and wind up its business and affairs, but not for the purpose of
continuing the business for which the Fund was organized.
Following the Dissolution Date, the Fund will send a notice (the
"Liquidation Notice") to stockholders of record to prove their interests in the
Fund. Thereafter, the assets of the Fund remaining following the payment of the
Liquidating Dividend will be distributed ratably among the issued and
outstanding shares of common stock of the Fund immediately before the
Dissolution Date, in one or more cash payments, to stockholders of record who
prove their interests, reserving the relative share of assets of those who have
not proved their interests and any amount which the Fund estimates is necessary
to discharge any unpaid liabilities. It is expected that substantially all of
the assets of the Fund remaining after the Liquidating Dividend will be
distributed to stockholders in the first distribution, less any reserved
amounts. Subsequent distributions, if any, are anticipated to be made as soon as
possible after the first distribution. All surplus assets, including all surplus
assets attributable to stockholders who have not proved their interests, may be
finally distributed to stockholders of record who have proved their interests no
earlier than three years from the date of the Liquidation Notice.
All of the expenses incurred by the Fund in carrying out the Plan will be
borne by the Fund. Stockholders should expect that the amounts to be distributed
to stockholders upon liquidation will be less than the NAV of the Fund as at the
date of the Meeting as such amounts will be reduced by the expenses incurred by
the Fund in connection with the liquidation and portfolio transaction costs in
addition to any reduction in NAV which may occur as a result of and declines in
the market value of the Fund's portfolio securities.
The Plan authorizes the Board to modify or amend the Plan without
stockholder approval at any time if it determines that such action would be
advisable and in the best interests of the Fund and its stockholders. However,
any amendment or modification which, in the determination of the Board, would
materially and adversely affect the interests of stockholders must be submitted
to the stockholders for approval.
7
<PAGE> 11
In the event that Proposal 1 is not approved by the requisite stockholder
vote, the Board will consider alternatives available at that time, including
other courses of action previously considered by the Board before adopting the
Plan.
WHY IT IS VERY IMPORTANT FOR STOCKHOLDERS TO PARTICIPATE IN THIS MEETING
At the December 8, 1998 special meeting of stockholders of the Fund,
stockholders adopted a resolution to terminate the Fund's then existing
investment advisory agreement with FIAM and recommended that the Board of
Directors approve a new investment advisory agreement with FIAM which would
provide for the investment advisory fee to be varied in accordance with a
formula which would link the level of the fee to the degree to which the market
price for the Fund's shares is at a discount to their NAV. As a general matter,
under such recommended formula, the greater the discount, the lower the advisory
fee. The Board of Directors terminated the Fund's then existing investment
advisory agreement and approved a new investment advisory agreement with FIAM
which became effective on February 7, 1999 (the "new investment advisory
agreement"). The new investment advisory agreement reflects the current policy
of the Board to liquidate the Fund's equity holdings in an orderly manner and to
reinvest the Fund's assets in short-term U.S. Treasury securities and other
money-market instruments. Commensurate with such policy, the investment advisory
fee in the new investment advisory agreement is less than it was under the old
agreement. The fee in the new investment advisory agreement is a fixed amount of
$12,500 per month. The investment advisory fee in the old agreement was computed
and payable monthly in an amount equal to 1.25% of the Fund's average weekly NAV
on an annualized basis.
Assuming that Proposal 1 is approved by stockholders, the Fund anticipates
that it will be able to pay the Liquidating Dividend, file Articles of
Dissolution, de-list its shares from the NYSE and de-register as an investment
company under the 1940 Act within approximately four to five weeks following the
Effective Date. Stockholders should note, however, that the 1940 Act will
require stockholders of the Fund to vote on the new investment advisory
agreement with FIAM not later than 120 days following the termination of the old
investment advisory agreement with FIAM. Such date is June 6, 1999. If
stockholders of the Fund vote to liquidate the Fund, and the Fund de-registers
as an investment company under the 1940 Act and terminates the new investment
advisory agreement prior to such date, no stockholder approval of the new
investment advisory agreement should be required. This should be possible
according to the timetable presently contemplated, although there can be no
assurance to this effect.
In the event that it appears that the Fund will be unable to de-register as
an investment company under the 1940 Act and terminate the new investment
advisory agreement on or prior to June 6, 1999, the Fund will be required to
convene another special meeting of stockholders to vote upon such new investment
advisory agreement. Alternatively, the Fund could seek to obtain exemptive
relief from such requirement from the SEC, although there can be no assurance
that such relief, if sought, would be granted.
The costs of a special meeting of stockholders to approve the new
investment advisory agreement, and the costs of seeking exemptive relief from
the SEC, if either or both are required, would be borne by the Fund and would
reduce NAV per share. Accordingly, in order to avoid the foregoing expenses, it
will be very important for stockholders of the Fund to participate in the
Meeting either by sending in their proxies enclosed herewith or by attending the
Meeting in person.
8
<PAGE> 12
FEDERAL INCOME TAX CONSEQUENCES
The following summary provides general information with regard to the U.S.
federal income tax consequences to certain U.S. stockholders on receipt of the
liquidation distribution(s)(which for purposes of this section includes the
Liquidating Dividend) from the Fund pursuant to the provisions of the Plan. This
summary also discusses the effect of U.S. federal income tax provisions on the
Fund resulting from its liquidation and dissolution; however, the Fund has not
sought a ruling from the Internal Revenue Service (the "Service") with respect
to the liquidation and dissolution of the Fund. The statements below are,
therefore, not binding upon the Service, and there can be no assurance that the
Service will concur with this summary or that the tax consequences to any
stockholder upon receipt of the liquidation distribution(s) will be as set forth
below.
This summary is based on the tax laws and regulations in effect on the date
of this Proxy Statement, all of which are subject to change by legislative or
administrative action, possibly with retroactive effect.
The information below is only a summary of some of the U.S. federal tax
consequences generally affecting the Fund and its individual U.S. stockholders
resulting from the liquidation of the Fund. This summary does not address the
particular U.S. federal income tax consequences applicable to stockholders other
than U.S. individuals nor does it address state or local tax consequences. The
tax consequences discussed herein may affect stockholders differently depending
on their particular tax situations unrelated to the liquidation distribution(s),
and accordingly, this summary is not a substitute for careful tax planning on an
individual basis. Stockholders are encouraged to consult their personal tax
advisers to determine the U.S. federal, state or other income tax consequences
of receiving the liquidation distribution(s).
As discussed above, pursuant to the Plan, the Fund will sell its assets,
pay or make provisions for the payment of all liabilities, distribute the
remaining proceeds to its stockholders and dissolve. The Fund currently
qualifies, and intends to continue to qualify as a regulated investment company
under the Internal Revenue Code of 1986 (the "Code"), so that it will be
relieved of U.S. federal income tax on any of its net income realized from the
sale of its assets and otherwise by reason of the special dividends paid
deduction made available to it by reason of such status. As a result, the Fund
will not be subject to U.S. federal income tax on any of its income or capital
gains realized from the sale of its assets pursuant to the liquidation.
For U.S. federal income tax purposes, a stockholder's receipt of the
liquidation distribution(s) will be a taxable event and will be treated as a
sale of the stockholder's shares of the Fund in exchange for the liquidation
distribution(s). Each stockholder will recognize a gain or loss in an amount
equal to the difference between the adjusted tax basis in his or her shares and
the liquidation distribution(s) he or she receives from the Fund. If the shares
are held as a capital asset, the gain or loss will generally be characterized as
a capital gain or loss. If the shares have been held for more than one year, any
gain will constitute a long-term capital gain taxable to individual stockholders
at a maximum rate of 20%, and any loss will constitute a long-term capital loss.
If the stockholder has held the shares for not more than one year, any gain or
loss will be a short-term capital gain or loss.
Under the Code, some stockholders may be subject to a 31% withholding tax
on any ordinary or capital gains dividends as well as the liquidation
distribution(s) ("backup withholding"). Generally, stockholders subject to
backup withholding will be those for whom a correct taxpayer identification
number is not on file with the Fund or who the Service has identified as having
furnished an incorrect number or having failed to report interest or dividend
income on their tax returns. An individual's taxpayer identification number is
his or her social security number. Certain stockholders specified in the Code
may be exempt from backup
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withholding. The backup withholding tax is not an additional tax and may be
credited against a taxpayer's U.S. federal income tax liability.
Stockholders will be notified of their respective shares of ordinary and
capital gains dividends for the Fund's final fiscal year in normal tax-reporting
fashion.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT YOU VOTE FOR PROPOSAL 1.
ADDITIONAL INFORMATION
APPRAISAL RIGHTS
Stockholders will not be entitled to appraisal rights under the Maryland
General Corporation Law in connection with the Plan.
AUDITORS
Representatives of PricewaterhouseCoopers LLP, the Fund's independent
accountants, are expected to be present at the Meeting and will have the
opportunity to make a statement if they desire to do so. They are expected to be
available to respond to appropriate questions relating to matters coming before
the Meeting.
STOCKHOLDER PROPOSALS
The deadline for stockholders to submit a proposal to be included in the
Fund's proxy statement for the 1999 Annual Meeting of Stockholders was January
8, 1999.
If stockholders of the Fund vote to liquidate and dissolve the Fund at the
Meeting on the date on which it has been called, the Fund does not expect to
hold an annual meeting in 1999.
OTHER MATTERS
Management does not know of any matters to be presented at the Meeting
other than those stated above. If any other business should come before the
Meeting, the persons named in the proxies intend to vote thereon in accordance
with the views of the Fund's management.
By order of the Board of Directors,
LINDA E. FIELD
Secretary
February 24, 1999
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EXHIBIT A
PLAN OF LIQUIDATION AND DISSOLUTION
THIS PLAN OF LIQUIDATION AND DISSOLUTION (the "Plan") is adopted by THE NEW
SOUTH AFRICA FUND INC., a Maryland corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company is a closed-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, this Plan is intended to be and is adopted as a plan of
liquidation of the Company, on the terms and conditions set forth below; and
WHEREAS, the board of directors of the Company, including a majority of the
directors who are not interested persons (as defined by the 1940 Act), has
determined that this Plan is in the best interests of the stockholders of the
Company.
NOW THEREFORE, the board of directors of the Company hereby adopts the Plan
as follows:
I. DEFINED TERMS. Capitalized terms used, but not otherwise defined herein
shall have the meanings set forth below:
"Commission" means the U.S. Securities and Exchange Commission.
"Dissolution Date" means the date on which the Articles of Dissolution
of the Company have been accepted for filing by the SDAT.
"Effective Date" means the date on which the stockholders approve the
Plan.
"Liquidating Dividend" means the maximum distribution or distributions
to stockholders that the board of directors of the Company determines it is
permitted to declare and pay under the MGCL, provided always that an amount
is reserved to pay liabilities of the Company as contemplated in Article
VII of this Plan.
"Liquidation Notice" means the notice sent by the Company to
stockholders of record stating, among other things, that they must prove
their interests in the Company within a specified time at least 60 days
after the date of the Liquidation Notice.
"Liquidation Period" means the period between the Effective Date and
the Dissolution Date.
"MGCL" means the Maryland General Corporation Law.
"NYSE" means the New York Stock Exchange, Inc.
"SDAT" means the State Department of Assessments and Taxation of the
State of Maryland.
II. CONDITIONS PRECEDENT. This Plan is approved subject to the following
conditions:
A. Proxy Statement. A Proxy Statement describing the Plan and the
proposed liquidation and dissolution shall be prepared and submitted to the
Commission and thereafter shall be delivered to each stockholder of record
of the Company for the purposes of soliciting proxies for the approval of
the Plan.
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B. Stockholder Approval. This Plan shall be approved by the
affirmative vote required by the MGCL and the 1940 Act of holders of shares
of the Company's common stock voted at a special meeting of the
stockholders called for the purpose of approving the Plan, assuming a
quorum is present.
C. Approvals and Authorizations. All necessary approvals and
authorizations from any regulatory authority having jurisdiction over the
transactions contemplated by the Plan shall be obtained.
III. TERMINATION OF BUSINESS OPERATIONS. On the Effective Date, the
Company shall cease to conduct business except as is required to carry out the
terms of the Plan.
IV. NOTICE OF LIQUIDATION AND DISSOLUTION TO CREDITORS. As soon as
practicable after the Effective Date, the Company shall mail notice in
accordance with the MGCL to all its creditors and employees that the Plan has
been approved by the board of directors and the stockholders and that the
Company will be liquidating its assets and dissolving.
V. LIQUIDATION OF ASSETS. As soon as reasonably practicable after the
Effective Date, all portfolio securities of the Company not already converted to
cash or cash equivalents shall be converted to cash or cash equivalents in a due
and orderly fashion in consultation with the Company's investment adviser.
VI. LIQUIDATING DIVIDEND. As soon as reasonably practicable after the
Effective Date; however, in no event on or after the Dissolution Date, the board
of directors of the Company shall declare and pay the Liquidating Dividend to
stockholders of record of the Company on the date that the Liquidating Dividend
is declared. The Liquidating Dividend shall be distributed ratably among the
issued and outstanding shares of common stock of the Company.
VII. LIABILITIES. During the Liquidation Period, the Company shall pay,
discharge, or otherwise provide for the payment or discharge of any and all
liabilities and obligations including, without limitation, contingent
liabilities of the Company. If the Company is unable to pay, discharge or
otherwise provide for any of its liabilities during the Liquidation Period, the
Company may retain cash or cash equivalents in an amount which it estimates is
necessary to discharge any unpaid liabilities of the Company on the Company's
books as of the Dissolution Date. Unpaid liabilities include, without
limitation, income dividends and capital gains distributions, if any, payable
for the period prior to the Dissolution Date, contingent and potential
contingent liabilities, and any amounts owing or which may come due with respect
to contractual counter parties, trade creditors, professionals and others.
VIII. NOTICE AND DISTRIBUTION TO STOCKHOLDERS. As soon as reasonably
practicable after the Dissolution Date, the Company shall distribute the
Liquidation Notice. The Liquidation Notice shall be mailed to each stockholder
at its address as it appears on the records of the Company. A notice of the
liquidation and dissolution of the Company shall also be published at least once
a week for three successive weeks in a newspaper of general circulation
published in the county in which the principal office of the Company is located.
Thereafter, the assets of the Company remaining following the payment of the
Liquidating Dividend will be distributed ratably among the issued and
outstanding shares of common stock of the Company immediately prior to the
Dissolution Date, in one or more cash payments, to stockholders of record who
prove their interests in the Company (as contemplated by Article IX of this
Plan), reserving the relative share of assets of those who have not proved their
interests. The first distribution of the Company's assets among the issued and
outstanding shares of common stock of the Company immediately prior to the
Dissolution Date (the "First Distribution") is expected to consist of cash
representing substantially all the assets of the Company remaining after the
Liquidating Dividend, less the amount reserved to pay liabilities of the Company
as contemplated in Article VII of this Plan. Subsequent distributions, if any,
are anticipated to
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be made as soon as reasonably practicable after the First Distribution and may
consist of one or more of the following: (i) any cash remaining from assets
reserved for stockholders who have not proved their interests, (ii) any cash
from any assets remaining after the payment of liabilities of the Company as
contemplated in Article VII of this Plan, (iii) the proceeds of any sale of
assets of the Company under the Plan not sold prior to the First Distribution
and (iv) any other miscellaneous income to the Company.
IX. PROOF OF INTEREST IN THE COMPANY. In order to prove its interest in
the Company, each stockholder of record will be required to surrender his or her
share certificates, if any, by mail to: PNC Bank, N.A., Bellevue Corporate
Center, 400 Bellevue Parkway, Mail Stop W3-F400-02-4, Wilmington, Delaware
19809, U.S.A., prior to receiving his or her share of the First Distribution and
any subsequent distribution. In the event that a stockholder cannot surrender a
share certificate because it has been lost, destroyed or wrongfully taken, the
stockholder must contact PNC Bank, N.A., Bellevue Corporate Center, 400 Bellevue
Parkway, Mail Stop W3-F400-02-4, Wilmington, Delaware 19809, U.S.A., to make
alternative arrangements. Upon evidence satisfactory to the board of directors
of the Company that a certificate representing shares of the Company's common
stock has been lost, destroyed or wrongfully taken, and upon receiving indemnity
satisfactory to the board of directors against loss to the Company, the board of
directors may authorize distributions to such stockholder.
X. FINAL DISTRIBUTION. No earlier than three years from the date of the
Liquidation Notice, the directors of the Company may distribute all surplus
assets, including all surplus assets attributable to stockholders who have not
proved their interest in the manner contemplated by Article IX, remaining under
the directors' control to those stockholders of record who have proved their
interests in the proportion that each such stockholder's interest is to the
interests of all the stockholders who have previously proved their interests.
Subsequent to such distribution, the interest of any stockholder who has not
proved his interest is forever barred and foreclosed therefrom.
XI. AMENDMENT OR TERMINATION. This Plan and the transactions contemplated
by this Plan may be terminated and abandoned by the Company at any time prior to
the date that the Articles of Dissolution of the Company are accepted for record
by the SDAT, upon (i) the adoption of a resolution by the board of directors of
the Company to terminate and abandon this Plan, and (ii) the approval of such
resolution by the stockholders of the Company by the affirmative vote required
under the MGCL and the 1940 Act of the Company's common stock voted at a special
meeting of stockholders called for the purpose of terminating and abandoning the
Plan. The board of directors may modify or amend this Plan at any time without
stockholder approval if it determines that such action would be advisable and in
the best interests of the Company and the stockholders. However, if the board of
directors determines that any such amendment or modification will materially and
adversely affect the interests of the stockholders, such an amendment or
modification will not be adopted unless approved by the affirmative vote
required under the MGCL and the 1940 Act of the Company's common stock voted at
a special meeting of the stockholders called for the purpose of amending or
modifying the Plan.
XII. FILINGS. Notwithstanding any provision of this Plan to the contrary,
as soon as practicable after (i) the conclusion of any period required for
notice to creditors and employees of the Company under the MGCL, (ii) the
payment of the Liquidating Dividend, and (iii) receipt of any required tax
clearance certificates from any taxing authorities or in lieu thereof, the
payment of any taxes to any taxing authorities, the Company shall file Articles
of Dissolution with the SDAT and make such filings as are necessary to de-
register as an investment company under the 1940 Act, to cause its common stock
to cease to be listed on the NYSE, to de-register its class of common stock
under the Securities Exchange Act of 1934, as amended, and file any other
documents as are necessary to effect the dissolution and de-registration of the
Company in
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accordance with the requirements of the Articles of Incorporation of the
Company, the MGCL, the Internal Revenue Code of 1986, as amended, any applicable
securities laws, and any rules and regulations of the Commission or any state
securities commission, including, without limitation, withdrawing any
qualification to conduct business in any state in which the Company is so
qualified, as well as the preparation and filing of any tax returns.
XIII. POWERS OF BOARD AND OFFICERS. The board of directors, and subject to
the direction of the board of directors, the officers of the Company, shall have
authority to do or authorize any or all acts as provided for in the Plan and any
and all such further acts as they may consider necessary or desirable to carry
out the purposes of the Plan, including, without limitation, the execution and
filing of all certificates, documents, tax returns, forms and other papers which
may be necessary or appropriate to implement the Plan or which may be required
by the provisions of the MGCL, the 1940 Act, NYSE requirements or any other
applicable laws. The death, resignation or other disability of any director or
any officer of the Company shall not impair the authority of the surviving or
remaining directors or officers to exercise any of the powers provided for in
the Plan.
XIV. EXPENSES. The expenses of carrying out the terms of this Plan shall
be borne by the Company, whether or not the liquidation and dissolution
contemplated by the Plan is effected.
XV. FURTHER ASSURANCES. The Company shall take such further action, prior
to, at, and after the Dissolution Date, as may be necessary to consummate the
transactions contemplated by this Plan.
XVI. GOVERNING LAW. This Plan shall be governed and construed in
accordance with the laws of the State of Maryland.
IN WITNESS WHEREOF, the board of directors of the Company has caused this
Plan to be executed by its duly authorized representative as of this
day of , 1999.
THE NEW SOUTH AFRICA FUND INC.
By:
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APPENDIX
PROXY THE NEW SOUTH AFRICA FUND INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS of The New South Africa Fund Inc.
for use at the Special Meeting of Stockholders to be held at 11:00 a.m. on April
28, 1999 at the offices of Bear Stearns Funds Management Inc., 245 Park Avenue,
New York, New York 10167, U.S.A. The undersigned hereby appoints Arnold Witkin
and Linda E. Field with full power of substitution, as proxies of the
undersigned to vote at the above-stated Meeting and at all adjournments thereof,
all shares of the Fund held of record by the undersigned on the record date for
the Meeting upon the following matters, and upon any other matter which may
properly come before the Meeting or any adjournment thereof, in their
discretion.
EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN THE MANNER SPECIFIED HEREIN,
AND IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE "FOR" PROPOSAL 1.
1. To approve or disapprove a plan of complete liquidation and dissolution of
the Fund, providing for, among other things, the sale of all of the assets
of the Fund, the payment of one or more liquidating dividends to
stockholders of the Fund, and the dissolution of the Fund pursuant to
Maryland law, in accordance with the Plan in complete liquidation of
stockholders' interests in the Fund.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on the reverse side)
(Continued from other side)
2. In his discretion, the proxy is authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
Receipt of Notice of Meeting and Proxy Statement is hereby acknowledged.
Dated: , 1999
--------------------
----------------------------
(Signature)
----------------------------
(Signature)
Please sign exactly as name appears. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
PLEASE SIGN, DATE AND RETURN PROMPTLY
