LEHMAN BROTHERS SOUTH AFRICA GROWTH FUND INC, N-2/A, 1994-04-18

LEHMAN BROTHERS SOUTH AFRICA GROWTH FUND INC
N-2/A, 1994-04-18

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As filed with the Securities and Exchange Commission on April 18, 1994
Securities Act File No. 33-75498
Investment Company Act File No. 811-8366

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________

Form N-2
(Check appropriate box or boxes)

/X/ REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/X/ Pre-Effective Amendment No. 1
/ / Post-Effective Amendment No.
and/or
/X/ REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

/X/ Amendment No. 1

LEHMAN BROTHERS SOUTH AFRICA GROWTH FUND, INC.
(Exact Name of Registrant as Specified in Charter)

3 World Financial Center
New York, New York 10285
(Address of Principal Executive Offices (Number, Street, City, State, Zip
Code))

(212) 640-0600
(Registrant's Telephone Number, including Area Code)

Clinton Kendrick
Lehman Brothers South Africa Growth Fund, Inc.
3 World Financial Center, New York, New York 10285
Name and address (Number, Street, City, State, Zip Code) of Agent for Service

with copies to:
G. Hartwell Hylton, Esq. Burton M. Leibert, Esq.
Gary S. Schpero, Esq. Willkie Farr & Gallagher
Simpson Thacher & Bartlett 153 East 53rd Street
425 Lexington Avenue New York, New York 10022
New York, New York 10017-3909 (212) 821-8000
(212) 455-2000
_________________________

Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis in reliance on Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with a dividend
reinvestment plan, check the following box. / /
_________________________
<PAGE>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>

Proposed Maximum Proposed Maximum Amount of
Title of Securities Amount Being Offering Price Aggregate Registration
Being Registered Registered<F1> Per Share<F2> Offering Price<F2> Fee<F3><F4>
--------------------------- ------------------------ ----------------------- -------------------------- ------------

<S> <C> <C> <C> <C>
Common Stock,
par value $.001 4,600,000 $15.00 $69,000,000 $24,794

____________________
<FN>
<F1> Includes 600,000 shares of Common Stock issuable upon exercise of the
over-allotment options granted to the U.S. Underwriters and the
International Managers.
<F2> Estimated solely for purpose of calculating the registration fee.
<F3> Includes $1,000 registration fee under the Investment Company Act of
1940.

<F4> Previously paid.
</TABLE>

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
LEHMAN BROTHERS SOUTH AFRICA GROWTH FUND, INC.

CROSS-REFERENCE SHEET
Parts A and B of Prospectus<F1>

Items in Parts A and B of Form N-2 Location in Prospectus

Item 1. Outside Front Cover Cover of Prospectus

Item 2. Inside Front and Outside
Back Cover Page Inside Front and Outside Back Cover
of Prospectus

Item 3. Fee Table and Synopsis Prospectus Summary; Summary of
Expenses; Management of the Fund

Item 4. Financial Highlights Not Applicable

Item 5. Plan of Distribution Cover of Prospectus; Management of
the Fund; Underwriting

Item 6. Selling Shareholders Not Applicable

Item 7. Use of Proceeds Use of Proceeds; Investment Objective
and Policies; Additional Investment
Practices

Item 8. General Description of the
Registrant Cover of Prospectus; Prospectus
Summary; The Fund; Investment
Objective and Policies; Additional
Investment Practices; Investment
Restrictions; Risk Factors and
Special Considerations

Item 9. Management Management of the Fund; Custodian,
Transfer Agent, Dividend Paying Agent
and Registrar; Common Stock

Item 10. Capital Stock, Long-Term
Debt, and Other Securities Common Stock; Dividends and
Distributions; Dividend Reinvestment
and Cash Purchase Plan; Taxation

Item 11. Defaults and Arrears on
Senior Securities Not Applicable

Item 12. Legal Proceedings Not Applicable

Item 13. Table of Contents of the
Statement of Additional
Information Not Applicable
<PAGE>
Item 14. Cover Page Not Applicable

Item 15. Table of Contents Not Applicable

Item 16. General Information and
History Not Applicable

Item 17. Investment Objective and
Policies Investment Objective and Policies;
Additional Investment Practices;
Investment Restrictions; Portfolio
Transactions

Item 18. Management Management of the Fund; Custodian,
Transfer Agent, Dividend Paying Agent
and Registrar

Item 19. Control Persons and
Principal Holders of
Securities Common Stock

Item 20. Investment Advisory and
Other Services Management of the Fund

Item 21. Brokerage Allocation and
Other Practices Portfolio Transactions

Item 22. Tax Status Dividends and Distributions; Dividend
Reinvestment and Cash Purchase Plan;
Taxation

Item 23. Financial Statements Experts; Report of Independent
Auditors; Statement of Assets and
Liabilities

<F1> Pursuant to General Instruction H of Form N-2, all information required
to be set forth in Part B: Statement of Additional Information has been
included in Part A: The Prospectus. All Items required to be set forth
in Part C are set forth in Part C.
<PAGE>
EXPLANATORY NOTE

This Registration Statement contains two forms of Prospectus to be used
in connection with the offering of shares in the United States (the "U.S.
Offering") and the offering of shares outside of the United States (the
"International Offering"). The Prospectus to be used in connection with the
U.S. Offering (the "U.S. Prospectus") is set forth in full following this
explanatory note. The Prospectus to be used in connection with the
International Offering is identical to the U.S. Prospectus except that the
front and back covers are replaced with the alternate versions included herein
following the U.S. Prospectus.
<PAGE>
- ------------------------------------------------------------------------------

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

- ------------------------------------------------------------------------------
Subject to Completion, dated __________ __, 1994

PROSPECTUS
4,000,000 Shares

LEHMAN BROTHERS SOUTH AFRICA GROWTH FUND, INC.

Common Stock
_________________________

Lehman Brothers South Africa Growth Fund, Inc. (the "Fund") is a newly
organized, non-diversified, closed-end management investment company that seeks
long-term capital appreciation through investing, under normal market
conditions, at least 65% of its assets in the equity securities of South
African issuers (as defined in this Prospectus). The Fund's investment adviser
anticipates that, under current market conditions, 80% or more of the Fund's
total assets will be so invested. There can be no assurance that the Fund's
investment objective will be achieved. The Fund may also invest up to 35% of
its assets in (i) debt securities issued or guaranteed by South African issuers
and (ii) equity securities of issuers which do not meet the definition of South
African issuers but which are likely, in the opinion of the Investment Adviser,
to be affected by developments in the South African economy or in South
Africa's international economic relations.

The Fund's investments in securities of South African issuers involve
certain special risks and considerations not typically associated with
investing in securities of U.S. companies or the U.S. government, including
risks associated with political, social and economic uncertainty in connection
with the political transformation in South Africa from a system of apartheid to
a multi-party democracy, commodity price fluctuations, higher and more volatile
fluctuations in the rates of inflation, higher unemployment rates and a
relatively less well-educated work force, currency fluctuations and the
existence of a two-tiered currency system, price volatility in and relative
illiquidity of securities markets, greater concentration of economic wealth and
a greater role of the state in the economy and certain other risks pertaining
to investment in the securities of foreign issuers generally. The Fund may
invest in debt obligations rated below investment grade or in comparable
unrated debt obligations, which are considered to be speculative with respect
to the payment of interest and the repayment of principal. In addition,
although the Fund has no present intention to do so, the Fund may borrow for
certain purposes. There are special risks and considerations associated with
borrowing and with investing in such debt obligations. Investment in the Fund
should be considered speculative. See "Investment Objective and Policies" and
"Risk Factors and Special Considerations."

<PAGE>
Of the 4,000,000 shares of Common Stock offered hereby, _______ shares are
initially being offered in the United States by the U.S. Underwriters (the
"U.S. Offering") and _______ shares are initially being offered in a concurrent
international offering outside the United States by the International Managers
(the "International Offering"). Such offerings are collectively referred to as
the "Offerings." The offering price and sales load per share for the U.S.
Offering and the International Offering will be identical. See "Underwriting."

Lehman Brothers Global Asset Management Limited will act as investment
adviser to the Fund. The Board of Executors Limited will serve as the South
African sub-adviser to the Fund.

An application will be made to list the Common Stock on the New York Stock
Exchange under the symbol ["RSA."] Prior to the Offerings there has been no
public market for the Fund's Common Stock. Shares of closed-end investment
companies have in the past frequently traded at discounts from their net asset
values and initial offering prices. The risk of loss associated with this
characteristic of closed-end investment companies may be greater for investors
purchasing shares in the initial public offering and expecting to sell the
shares soon after the completion thereof. There is no restriction on the
number of shares that may be purchased subject to the transfer restriction
described in the footnotes to the table below, except that the Fund will
comply, with respect to non-restricted shares, with the distribution
requirements of the New York Stock Exchange. See "Underwriting." To the
extent investors who are subject to the transfer restriction sell their shares
once the transfer restriction is no longer applicable, the market price of the
Common Stock could be adversely affected. In addition, the transfer
restriction will reduce the number of shares available for sale in the
secondary market during the 90 day restriction period.

The address of the Fund is 3 World Financial Center, New York, New York
10285, and its telephone number is (212) 640-0600. Investors are advised to
read this Prospectus, which sets forth information about the Fund that
investors should know before investing, and to retain it for future reference.
_________________________

Price to Proceeds to
Public<F1> Sales Load<F1><F2> the Fund<F2>
----------------------- ----------------------- -----------------------

Per Share $15.00 $ $
Total<F3> $60,000,000 $ $

____________________

<FN>

<F1> The "Price to Public" and "Sales Load" per share will be reduced to $__
and $__, respectively, for purchases in single transactions (as defined
in this Prospectus under "Underwriting") of between ______ and ______
shares, inclusive, and to $__ for purchases in single transactions of
______ or more shares of Common Stock, subject to the following
sentence. Purchasers who agree to purchase shares of Common Stock at
the reduced price will be restricted from transferring such shares for a
period of 90 days after the closing of the Offerings.

<F2> Before deduction of organizational and offering expenses payable by the
Fund (including $____________ to be paid to the U.S. Underwriters and
the International Managers as reimbursement of certain of their expenses
in connection with the Offerings) estimated at $____________.
<F3> The Fund has granted to the U.S. Underwriters an option, exercisable in
one or more installments within 45 days from the date of this
Prospectus, to purchase up to ____________ additional shares of Common
Stock to cover over-allotments, if any. The International Managers have
been granted a similar option to purchase up to ____________ additional
shares to cover over-allotments, if any. If such options are exercised
in full, the total Price to Public, Sales Load and Proceeds to Fund will
be increased by $9,000,000, $____________ and $____________,
respectively. See "Underwriting."
</TABLE>

_________________________

The shares of Common Stock offered by this Prospectus are offered by the
U.S. Underwriters subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
U.S. Underwriters and to certain further conditions. It is expected that
delivery of certificates for the shares of Common Stock will be made at the
offices of Lehman Brothers Inc., New York, New York, on or about
_____________ ___, 1994.

_________________________

Lehman Brothers

_____________ __, 1994
<PAGE>
IN CONNECTION WITH THE OFFERINGS, THE U.S. UNDERWRITERS AND THE
INTERNATIONAL MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE
OR MAINTAIN THE MARKET PRICE OF THE FUND'S COMMON STOCK AT A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE
EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.

_________________________

In this Prospectus, the Republic of South Africa is referred to as "South
Africa." Unless otherwise specified, all references in this Prospectus to
"dollars," "US $" or "$" are to United States dollars, all references to "R,"
"Rand" or "Commercial Rand" are to the South African Commercial Rand and all
references to "Financial Rand" are to the South African Financial Rand. On
__________, the noon buying rate in New York City for cable transfers payable
in Financial Rand was _______ per dollar, and in Commercial Rand was
____________ per dollar, as certified for customs purposes by the Federal
Reserve Bank of New York. Certain numbers in this Prospectus have been
rounded.

_________________________
<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus.

The Fund . . . . . . . . The Fund is a newly organized, non-diversified,
closed-end management investment company
designed for investors desiring to participate
in the securities markets of South Africa.

Investment in South
Africa . . . . . . . . South Africa has the most developed and
sophisticated economy in the African continent.
Its gross domestic product ("GDP") in 1992 of
Rands 327.1 billion (approximately $114.8
billion at an average exchange rate of 2.85
Rands per U.S. dollar) represented approximately
27% of the continent's aggregate GDP. South
Africa has a land area of approximately 471,000
square miles, roughly three times the size of
the state of California. As of the end of 1992,
it had a population estimated at approximately
40 million, accounting for 6% of the population
of the African continent. South Africa's stock
market, the Johannesburg Stock Exchange, was
established in 1887 and at December 31, 1993 had
a total market capitalization of approximately
$217 billion with 647 listed companies, ranking
it among the 15 largest stock markets in the
world. South Africa has a well developed legal
system, a modern financial services industry and
a well developed manufacturing sector in
addition to its world-renowned mining industry.
Lehman Brothers Global Asset Management Limited,
the Fund's investment adviser (the "Investment
Adviser"), believes that the accelerating pace
of political and economic change in South Africa
creates the potential for many South African
companies to experience rapid growth and the
potential for capital appreciation as improved
financial conditions become reflected in the
prices of their securities.

South Africa is undergoing a political
transformation from a system of apartheid, which
disenfranchised a majority of the population, to
a multi-party democracy with universal suffrage.
General elections have been scheduled for April
26-28, 1994 and Nelson Mandela, head of the
African National Congress ("ANC"), is widely
expected to be the next State President. South
Africa established a Transitional Executive
Council to oversee the transition process and
adopted a new interim constitution, passed by
the South Africa Parliament on December 23,
1993. As a result of these developments, as
well as a September 1993 speech before the
<PAGE>
United Nations in which Nelson Mandela called
for the lifting of all remaining economic
sanctions against South Africa, the United
States, on November 23, 1993, repealed the
Comprehensive Anti-Apartheid Act of 1986. Other
countries have followed suit. The Investment
Adviser believes that the adoption by South
Africa of free market policies, the
enfranchisement of new groups of consumers, the
strength of the country's industrial sector, its
developed physical and financial infrastructure
and its significant mineral wealth present
excellent long-term investment opportunities for
investors. Information concerning the South
African economy and South African securities
markets is included in this Prospectus as
"Appendix C: Republic of South Africa" and
"Appendix D: The South African Securities
Markets," respectively.

Investment Objective and
Policies . . . . . . . The Fund's investment objective is long-term
capital appreciation. Although current income
from dividends and interest may be a
consideration in selecting the Fund's portfolio
securities, it is not an objective of the Fund.
There can be no assurance that the Fund's
investment objective will be achieved. See
"Investment Objective and Policies."

The Fund will, under normal market conditions,
invest at least 65% of its assets in the equity
securities of South African issuers (as defined
in this Prospectus), and, under current market
conditions, the Investment Adviser anticipates
that 80% or more of the Fund's total assets will
be so invested. Equity securities in which the
Fund will invest include common and preferred
stock (including convertible preferred stock),
American, Global or other types of Depositary
Receipts, bonds, notes and debentures
convertible into common or preferred stock,
equity interests in trusts, partnerships or
joint ventures and common stock purchase
warrants and rights. Most of the equity
securities purchased by the Fund are expected to
be traded on non-U.S. stock exchanges or in non-
U.S. over-the-counter markets. However, the
Fund may invest up to 25% of its total assets in
securities which are neither listed on a
securities exchange nor traded in an over-the-
counter market. The Fund may, for cash
management or temporary defensive purposes,
pending investment in accordance with the Fund's
investment objective and policies and to meet
operating expenses, invest without limitation in
Temporary Investments (as defined in this
Prospectus). See "Investment Objective and
Policies."

<PAGE>

For the purposes of this Prospectus "South
African issuers" are (i) companies organized
under the laws of South Africa; (ii) companies
whose securities are principally traded in South
Africa; (iii) subsidiaries of companies
described in clauses (i) or (ii) above that
issue debt securities guaranteed by, or
securities payable with (or convertible into)
the stock of, companies described in clauses (i)
or (ii); (iv) companies that finance operations
in South Africa by means of securities
denominated in South African currency; (v)
companies that derive at least 50% of their
revenues primarily from either goods or services
produced in South Africa or sales made in South
Africa; (vi) issuers of depositary shares for
South African equity securities; (vii) the
government of South Africa and its agencies and
instrumentalities; and (viii) public sector
entities in South Africa, including any entity
fully or partly owned by the entities described
in the foregoing clause (vii).

The Offerings . . . . . . 4,000,000 shares of Common Stock are being
offered in concurrent offerings as follows:
_________ shares in the United States by a group
of underwriters (the "U.S. Underwriters")
represented by Lehman Brothers Inc. and
_________ (the "Representatives") and _________
shares outside of the United States by
a group of managers (the "International
Managers") represented by Lehman Brothers
International and ________ (the "Lead
International Managers"). The initial public
offering price of the shares of Common Stock is
$15.00 per share, which will be reduced to
$______ for purchases in single transactions (as
defined below in "Underwriting") of between
________ and _________ shares, inclusive, and to
$______ for purchases in single transactions of
________ or more shares of Common Stock, subject
to the following sentence. Purchasers who agree
<PAGE>

to purchase shares of Common Stock at the
reduced price will be restricted from
transferring those shares for a period of 90
days after the closing of the Offerings. There
is no restriction on the number of shares that
may be purchased subject to the transfer
restriction, except that the Fund will comply,
with respect to non-restricted shares, with the
distribution requirements of the New York Stock
Exchange. The minimum investment is $1,500 (100
shares). In addition, the U.S. Underwriters and
the International Managers have been granted
options, exercisable in one or more
installments, to purchase up to __________ and
________ additional shares, respectively, to
cover over-allotments. See "Underwriting."

Listing . . . . . . . . . An application will be made to list the Common
Stock on the New York Stock Exchange.

Symbol . . . . . . . . . [RSA]

Investment Adviser
and Administrator . . . Lehman Brothers Global Asset Management Limited
acts as the Fund's investment adviser. The
Investment Adviser is an indirect, wholly owned
subsidiary of Lehman Brothers Inc., a leading
full service investment firm serving U.S. and
foreign securities and commodities markets. The
Investment Adviser, together with other Lehman
Brothers Inc. investment advisory affiliates,
had in excess of $__ billion in assets under
management as of _________ __, 1994. The
Investment Adviser serves as investment adviser
or sub-investment adviser to several U.S.-
registered and offshore investment funds.

The Fund will pay the Investment Adviser a fee
for its advisory services at an annual rate of
_____% of the value of the Fund's average
monthly net assets. The Boston Company
Advisors, Inc. serves as the Fund's
administrator, for which it is paid a fee by the
Fund at an annual rate of _____% of the value of
the Fund's average monthly net assets. These
fees, in the aggregate, are higher than those
paid by many investment companies, although they
are comparable to fees paid by other closed-end
investment companies that invest primarily in
the securities of issuers located in a single
foreign country. See "Management of the Fund"
and "Summary of Expenses."

South African
Sub-Adviser . . . . . . The Board of Executors Limited will act as sub-
adviser (the "South African Sub-Adviser") and
will advise the Investment Adviser on a regular

<PAGE>
basis with respect to South African markets,
industries and issuers. The South African Sub-
Adviser will make investment recommendations to
the Investment Adviser but will not make
investment decisions for the Fund. The
Investment Adviser will pay the South African
Sub-Adviser a fee for its sub-advisory services
at an annual rate of _____% of the value of the
Fund's average monthly net assets.

Dividends and
Distributions . . . . . The Fund intends to distribute annually to
holders of Common Stock substantially all of its
net investment income, and to distribute any net
realized capital gains at least annually. See
"Dividends and Distributions; Dividend
Reinvestment and Cash Purchase Plan."

Under the Fund's Dividend Reinvestment and Cash
Purchase Plan (the "Plan"), all dividends and
distributions will be automatically reinvested
in additional shares of Common Stock of the Fund
unless a shareholder elects to receive cash.
Participants also have the option of making
additional cash payments, annually, to be used
to acquire additional shares of Common Stock of
the Fund in the open market. Shareholders whose
shares are held in the name of a broker or
nominee should contact such broker or nominee to
confirm that they may participate in the Plan.
See "Dividends and Distributions; Dividend
Reinvestment and Cash Purchase Plan."

Custodian and
Subcustodians . . . . . Boston Safe Deposit and Trust Company will serve
as the Fund's custodian and may employ
subcustodians outside the United States approved
by the Fund's Board of Directors in accordance
with the Investment Company Act of 1940, as
amended (the "1940 Act"). See "Custodian,
Transfer Agent, Dividend Paying Agent and
Registrar."

Transfer and Dividend
Paying Agent . . . . . . The Shareholder Services Group, Inc. will serve
as the Fund's transfer agent and dividend paying
agent. See "Custodian, Transfer Agent, Dividend
Paying Agent and Registrar."

Antidiscount
Measures . . . . . . . If, at any time after the second year following
the Offerings, shares of the Fund's Common Stock
publicly trade for a substantial period of time
at a substantial discount from net asset value,
the Fund's Board of Directors will consider, at
its next regularly scheduled meeting,
authorizing various actions designed to

<PAGE>
eliminate the discount. These actions may
include periodic repurchases of shares, tender
offers or recommending to shareholders
conversion to an open-end investment company.
No assurance can be given that the Board of
Directors will undertake any such actions or
that if repurchases or tender offers are
undertaken, the Fund's shares will trade at a
price that is close or equal to net asset value.
Under certain circumstances, a shareholder vote
may be required to authorize periodic
repurchases or tender offers of the Fund's
shares of Common Stock. Conversion to an open-
end investment company would require a
shareholder vote. See "Common Stock -- Future
Actions Relating to a Discount in the Price of
the Fund's Shares of Common Stock."

Risk Factors and Special
Considerations . . . . . The Fund's investments in securities of South
African issuers involve specific risks and
considerations relating to South Africa's
ongoing process of transition from the apartheid
regime to a non-racial democracy, including (a)
political, social and economic uncertainty
arising from the abolition of the apartheid
regime in South Africa and the transfer of
political power to a Black majority which is
almost six times larger in number than the White
minority, (b) uncertainties relating to the
policies to be pursued by the new government
following transition to a non-racial democratic
government, including the impossibility of
predicting whether such new government will
pursue nationalization, expropriation or other
means to redistribute wealth, (c) the economic
and financial pressures associated with
attempting to improve the living standards of a
Black population which is growing at almost
three times the rate of the White population,
particularly at a time when the economy is
attempting to recover from its longest recession
in this century and one of its most severe
droughts in this century, (d) the possibility of
civil war in the event a peaceful transition
cannot be arranged from a White-minority
dominated, racially exclusive society and
government to a non-racial, multi-party,
democratic republic, and (e) uncertainties
relating to the effort to restore diplomatic,
economic and trading relations with other
countries and international organizations after
almost two decades of isolation within the
international community. Political violence,
particularly between the ANC and the Inkatha
Freedom Party, is estimated to have claimed the
lives of 18,000 people in the past decade and
has escalated in the weeks preceding the April
1994 elections. Concerns about the uncertainty
<PAGE>
of the transition process, including economic
policies that may be followed by the new
government regarding redistribution of wealth,
have resulted in an increase by a sizeable
amount in the outflow of capital from South
Africa. In the event South Africa is unable to
make the transition to a non-racial democracy,
or is unable to do so without prolonged unrest,
the value of South African securities as well as
the value of the Fund's shares are likely to
suffer material declines and the Fund could
suffer substantial losses.

In addition, the value of the Fund's investments
in securities of South African issuers may be
affected by (a) the impact on the South African
economy of fluctuations in international
commodity prices, particularly the price of
gold, (b) substantially higher unemployment
rates and a relatively less well-educated work
force than in the United States and Western
Europe, (c) significantly higher and more
volatile fluctuations in the rates of inflation
than in the United States and Western Europe,
(d) the existence of a two-tiered currency
system in which a separate currency, which
typically trades at a significant discount to
the official currency, is used to fund foreign
investment and (e) greater concentration of
economic wealth and a greater role of the state
in the economy than in the United States. See
"Risk Factors and Special Considerations."

The economies of individual countries in which
the Fund may invest may differ favorably or
unfavorably and significantly from the U.S.
economy in such respects as the rate of growth
of GDP or gross national product, rate of
inflation, capital reinvestment, resource self-
sufficiency, structural unemployment and balance
of payments position.

The Fund's investments in securities of South
African issuers and other foreign issuers
generally involve certain special risks and
considerations not typically associated with
investing in securities of U.S. companies or the
U.S. government, including risks relating to (i)
foreign exchange matters, including fluctuations
in the rate of exchange between the dollar and
<PAGE>
the applicable foreign currency, exchange
control regulations and costs associated with
conversion of investment principal and income
from one currency to another; (ii) restrictions
on foreign investment and repatriation of
capital; (iii) differences between the U.S. and
foreign securities markets, including potential
price volatility in and relative illiquidity of
the securities markets, concentration of market
capitalization in a relatively small number of
companies, delays and related administrative
uncertainties in connection with clearance and
settlement of securities transactions, the lack
of sufficient capital to expand market
operations, the possibility of permanent or
temporary termination of trading, greater
spreads between bid and ask prices for
securities, the absence of uniform accounting,
auditing and financial reporting standards,
practices and disclosure requirements, such that
certain material disclosures may not be made and
less information may be available to investors
investing in foreign securities than to
investors investing in U.S. securities, and less
government supervision and regulations; and (iv)
certain risks related to economic, political and
social factors.

Certain countries in which investments may be
made by the Fund may be subject to a
substantially greater degree of social,
political and economic instability than is the
case in the United States and Western European
countries. Such instability may result from,
among other things, the following: (i)
authoritarian governments or military
involvement in political and economic decision-
making, and changes in government through extra-
constitutional means; (ii) popular unrest
associated with demands for improved political,
economic and social conditions; (iii) internal
insurgencies; (iv) hostile relations with
neighboring countries; and (v) ethnic, religious
and racial disaffection. Such social, political
and economic instability could disrupt the
principal financial markets in which the Fund
invests and adversely affect the value of the
Fund's assets. In addition, there may be the
possibility of nationalization, asset
expropriations or future confiscatory levels of
taxation affecting the Fund. Certain of such
risks, and certain of the risks identified in
the preceding paragraph, may be more pronounced
in countries which are less developed than South
Africa. In the event of nationalization,
expropriation or other confiscation, the Fund
may not be fairly compensated for its loss and
could lose its entire investment in the country
<PAGE>
involved. See "Risk Factors and Special
Considerations."

The Fund may invest up to 25% of its total
assets in securities which are neither listed on
a securities exchange nor traded in an over-the-
counter market. The Fund may encounter
substantial delays and could incur losses in
attempting to sell such securities. See
"Additional Investment Practices."

The Fund may use various other investment
practices that involve special considerations,
including purchasing and selling options on
securities, financial futures, fixed income
indices and other financial instruments,
entering into financial and precious metals
futures contracts, interest rate transactions,
currency transactions, precious metals
transactions, equity swaps and related
transactions, equity or debt securities
transactions on a when-issued or delayed
delivery basis, and repurchase and reverse
repurchase agreements, selling securities short
and lending portfolio securities. See
"Additional Investment Practices."

Although the Fund has no present intention to do
so, the Fund may, in certain circumstances,
borrow in an amount up to one third of the
Fund's total assets. Borrowing by the Fund
creates special risks. For example, borrowing
may exaggerate changes in the net asset value of
the Fund's shares and in the return on the
Fund's portfolio. Although the principal of any
borrowing will be fixed, the Fund's assets may
change in value during the time the borrowing is
outstanding. Borrowing will create expenses for
the Fund which can exceed the income from the
assets acquired with the proceeds of the
borrowing. Furthermore, if the Fund were to
engage in borrowing, an increase in interest
rates could reduce the value of the Fund's
Common Stock by increasing the Fund's interest
expense.

The Fund has not established any rating criteria
for the debt securities in which it may invest.
Securities rated in medium to low rating
categories of nationally recognized statistical
rating organizations and unrated securities of
comparable credit quality ("high yield/high
risk" securities) are speculative with respect
to the capacity to pay interest and repay
<PAGE>
principal in accordance with the terms of the
security and generally involve a greater
volatility of price than securities in higher
rated categories. Ratings criteria established
by nationally recognized statistical ratings
organizations are included as Appendix A to this
Prospectus. The Investment Adviser may take
advantage of the entire range of maturities
offered for the debt securities in which the
Fund may invest. The Fund's investments in
securities with longer terms to maturity are
subject to greater volatility than the Fund's
investments in shorter term debt securities.
Additionally, the value of debt securities of
South African issuers held by the Fund may be
expected to vary inversely in relation to
fluctuations in South African interest rates.
See "Risk Factors and Special Considerations."

Investment in debt obligations issued or
guaranteed by a government, its agencies or
instrumentalities ("Sovereign Debt") involves a
high degree of risk. The governmental entity
that controls the repayment of Sovereign Debt
may not be willing or able to repay the
principal and/or interest when due in accordance
with the terms of such debt. A governmental
entity's ability or willingness to repay
principal and interest due in a timely manner
may be affected by, among other factors, its
cash flow situation, the availability of
sufficient foreign exchange on the date a
payment is due, the governmental entity's policy
towards the International Monetary Fund, the
extent of its foreign reserves, the relative
size of the debt service burden to the economy
as a whole and the political constraints to
which a governmental entity may be subject.
Consequently, governmental entities may default
on their Sovereign Debt. Holders of Sovereign
Debt, including the Fund, may be requested to
participate in the rescheduling of such debt and
to extend further loans to governmental
entities. Furthermore, a foreign sovereign
itself would not be subject to traditional
bankruptcy proceedings and certain sovereign
entities may not be subject to such proceedings.
See "Risk Factors and Special Considerations."

Income and capital gains on securities held by
the Fund may be subject to withholding or other
taxes imposed by South Africa or other foreign
countries, which would reduce the return to the
Fund on those securities. The imposition of
such taxes and the rates imposed are subject to
change. The Fund may elect, when eligible, to
"pass-through" to the Fund's shareholders, as a
<PAGE>
deduction or credit, the amount of foreign taxes
paid by the Fund. The taxes passed through to
shareholders would be included in each
shareholder's income. Certain shareholders,
including some non-U.S. shareholders, would not
be entitled to the benefit of a deduction or
credit with respect to foreign taxes paid by the
Fund. If a shareholder is eligible and elects
to credit foreign taxes, such credit is subject
to limitations. Other foreign taxes, such as
transfer taxes, may be imposed on the Fund, but
would not give rise to a credit, or be eligible
to be passed through to shareholders. See
"Taxation -- Foreign Taxes."

The Fund is newly organized, and, accordingly,
does not have an operating history. Prior to
the Offerings, there has been no market for the
Fund's shares of Common Stock. Shares of
closed-end investment companies frequently trade
at a discount from net asset value, but in some
cases have traded at or above net asset value.
This characteristic of shares of a closed-end
fund is a risk separate and distinct from the
risk that the Fund's net asset value will
decrease. The Fund cannot predict whether its
shares will trade at, below or above net asset
value. The risk of purchasing shares of closed-
end funds that might later trade at a discount
is more pronounced for investors who wish to
sell their shares in a relatively short period
of time following completion of the offering.
The Fund is intended primarily for long-term
investors and should not be considered a vehicle
for short-term purposes. See "Risk Factors and
Special Considerations."

The Fund is classified as a "non-diversified"
investment company under the 1940 Act, which
means that the Fund is not limited by the 1940
Act in the proportion of its assets that may be
invested in the securities of a single issuer.
However, the Fund intends to comply with the
diversification requirements imposed by the
Internal Revenue Code of 1986, as amended (the
"Code"), for qualification as a regulated
investment company, which generally means that
with respect to 50% of the Fund's portfolio, no
more than 5% of the Fund's assets will be
invested in any one issuer and with respect to
the other 50% of the Fund's portfolio, not more
than 25% of the Fund's assets will be invested
in any one issuer. See "Taxation" for a more
complete description of the diversification
requirements imposed by the Code. As a non-
diversified investment company, the Fund may
<PAGE>
invest a greater proportion of its assets in the
securities of a smaller number of issuers and,
as a result, will be subject to greater risk of
loss with respect to its portfolio securities.
See "Risk Factors and Special Considerations."

The Fund's Articles of Incorporation contain
certain anti-takeover provisions that may have
the effect of inhibiting the Fund's possible
conversion to open-end status and limiting the
ability of other persons to acquire control of
the Fund. In certain circumstances, these
provisions might also inhibit the ability of
holders of Common Stock to sell their shares at
a premium over prevailing market prices. The
Fund's Board of Directors has determined that
these provisions are in the best interests of
shareholders generally. See "Risk Factors and
Special Considerations" and "Common Stock."

Investors who purchase shares of Common Stock at
a reduced price will be restricted from
transferring such shares for a period of 90 days
after the closing of the Offerings. There is no
restriction on the number of shares that may be
purchased subject to the transfer restriction
described above, except that the Fund will
comply, with respect to non-restricted shares,
with the distribution requirements of the New
York Stock Exchange. See "Underwriting." To
the extent these investors sell their shares
once the transfer restriction is no longer
applicable, the market price of the Common Stock
could be adversely affected. In addition, the
transfer restriction will reduce the number of
shares available for sale in the secondary
market during the 90 day restriction period.

Investors should carefully consider their
ability to assume the foregoing risks before
making an investment in the Fund. An investment
in shares of Common Stock of the Fund may not be
appropriate for all investors, should not be
considered as a complete investment program, and
should be considered speculative. See "Risk
Factors and Special Considerations."
<PAGE>
SUMMARY OF EXPENSES

Shareholder Transaction Expenses

Sales Load (as a percentage of offering price) %<F1>

Annual Expenses (as a percentage of net assets attributable to common shares)

Management Fees %
Other Expenses (estimated) %
Total Annual Expenses (estimated) %
________
<F1> The sales load is reduced for certain transactions. See "Underwriting."

The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly.

As of the date of this Prospectus, the Fund had not commenced investment
operations. The amount set forth in "Other Expenses" is, therefore, based on
estimated amounts for the current fiscal year, assuming no exercise of the
over-allotment options granted to the U.S. Underwriters and the International
Managers. "Other Expenses" will include custodial and transfer agency fees,
administration fees, legal and accounting fees, printing costs and listing
fees. For additional information with respect to the expenses identified in
the table above, see "Management of the Fund."

Example

The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical investment in the Fund. These amounts are based upon payment by
an investor of a ____% sales load and payment by the Fund of operating expenses
at the levels set forth in the table above.

An investor would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) reinvestment of all dividends and
distributions at net asset value:

1 Year 3 Years 5 Years 10 Years

$ $ $ $

This example as well as the information set forth in the table above
should not be considered a representation of the future expenses of the Fund,
and actual expenses may be greater or less than those shown. Moreover, while
the example assumes a 5% annual return, the Fund's performance will vary and
may result in a return greater or less than 5%. In addition, while the example
assumes reinvestment of all dividends and distributions at net asset value,
this may not be the case for participants in the Fund's Dividend Reinvestment
and Cash Purchase Plan (the "Plan"). See "Dividends and Distributions;
Dividend Reinvestment and Cash Purchase Plan."
<PAGE>
THE FUND

Lehman Brothers South Africa Growth Fund, Inc. (the "Fund") is a newly
organized, non-diversified, closed-end management investment company designed
for investors desiring to participate in the securities markets of South
Africa. The Fund, which was incorporated under the laws of the State of
Maryland on February 16, 1994, is registered under the Investment Company Act
of 1940, as amended (the "1940 Act") and has its principal office at 3 World
Financial Center, New York, New York 10285.

INVESTMENT IN SOUTH AFRICA

South Africa has the most developed and sophisticated economy in the
African continent. Its 1992 gross domestic product ("GDP") of Rands 327.1
billion (approximately $114.8 billion at an average exchange rate of 2.85 Rands
per U.S. dollar) represented approximately 27% of the continent's aggregate
GDP. South Africa has a land area of approximately 471,000 square miles,
roughly three times the size of the state of California. As of the end of
1992, it had a population estimated at approximately 40 million, accounting for
6% of the population of the African continent. South Africa's stock market,
the Johannesburg Stock Exchange, was established in 1887 and, at December 31,
1993, had a total market capitalization of approximately $217 billion with 647
listed companies, ranking it among the 15 largest stock markets in the world.
South Africa has a well developed legal system, a modern financial services
industry and a well developed manufacturing sector in addition to its world-
renowned mining industry. Lehman Brothers Global Asset Management Limited, the
Fund's investment adviser (the "Investment Adviser"), believes that the
accelerating pace of political and economic change in South Africa creates the
potential for many South African companies to experience rapid growth and the
potential for capital appreciation as improved financial conditions become
reflected in the prices of their securities.

South Africa is undergoing a political transformation from a system of
apartheid, which disenfranchised a majority of the population, to a multi-party
democracy with universal suffrage. General elections have been scheduled for
April 26-28, 1994 and Nelson Mandela, head of the African National Congress
("ANC"), is widely expected to be the next State President. South Africa
established a Transitional Executive Council to oversee the transition process
and adopted a new interim constitution, passed by the South Africa Parliament
on December 23, 1993. As a result of these developments, as well as a
September 1993 speech before the United Nations in which Nelson Mandela called
for the lifting of all remaining economic sanctions against South Africa, the
United States, on November 23, 1993, repealed the Comprehensive Anti-Apartheid
Act of 1986. Other countries have followed suit. The Investment Adviser
believes that the adoption by South Africa of free market policies, the
enfranchisement of new groups of consumers, the strength of the country's
industrial sector, its developed physical and financial infrastructure and its
significant mineral wealth present excellent long-term investment opportunities
for investors. Information concerning the South African economy and South
African securities markets is included in this Prospectus as "Appendix C:
Republic of South Africa" and "Appendix D: The South African Securities
Markets," respectively.

<PAGE>
USE OF PROCEEDS

The net proceeds of the Offerings, estimated to be $__________ (assuming
no exercise of the over-allotment options granted to the U.S. Underwriters and
the International Managers) after deducting the sales load and offering and
organizational expenses, will be invested in accordance with the policies set
forth under "Investment Objective and Policies." The Fund anticipates that,
under current market conditions, the net proceeds of the Offerings will be
fully invested in accordance with the Fund's investment objective and policies
within six months from the date of this Prospectus, however, it may take up to
one year for the Fund to be fully invested, depending upon market conditions
and the availability of appropriate securities, to avoid adversely influencing
the prices paid by the Fund for its portfolio securities. Pending such
investment, the proceeds will be invested in Temporary Investments as described
under "Investment Objective and Policies -- Temporary Investments." Offering
expenses estimated at $________ will be paid from the proceeds of the Offerings
and will be charged to capital. Organizational expenses of the Fund estimated
at $________ will be amortized on a straight-line basis for a five-year period
beginning at the commencement of operations of the Fund.

INVESTMENT OBJECTIVE AND POLICIES

General

The Fund's investment objective is to seek long-term capital appreciation.
This objective and the Fund's policy to invest, under normal market conditions,
at least 65% of its assets in the equity securities of South African issuers
(as defined below) are fundamental policies of the Fund which cannot be changed
without the approval of the holders of a majority (as described below under
"Investment Restrictions") of the Fund's outstanding voting securities. No
assurance can be given that the Fund will realize its investment objective.

Under current market conditions, the Investment Adviser anticipates that
80% or more of the Fund's total assets will be invested in the equity
securities of South African issuers. Equity securities in which the Fund will
invest include common and preferred stock (including convertible preferred
stock), American, Global or other types of Depositary Receipts, bonds, notes
and debentures convertible into common or preferred stock, equity interests in
trusts, partnerships or joint ventures and common stock purchase warrants and
rights. Most of the equity securities purchased by the Fund are expected to be
traded on non-U.S. stock exchanges or in non-U.S. over-the-counter markets.
However, the Fund may invest up to 25% of its total assets in securities which
are neither listed on a securities exchange nor traded in an over-the-counter
market, as described below under "Other Investments -- Securities Which are
Neither Listed on a Securities Exchange nor Traded in an Over-the-Counter
Market." In addition, certain securities in which the Fund may invest may be
considered illiquid due to the existence of a thin trading market, and there is
no limitation on the Fund's ability to invest in such securities.

For the purposes of this Prospectus, "South African issuers" are (i)
companies organized under the laws of South Africa; (ii) companies whose
<PAGE>
securities are principally traded in South Africa; (iii) subsidiaries of
companies described in clauses (i) or (ii) above that issue debt securities
guaranteed by, or securities payable with (or convertible into) the stock of,
companies described in clauses (i) or (ii); (iv) companies that finance
operations in South Africa by means of securities denominated in South African
currency; (v) companies that derive at least 50% of their revenues primarily
from either goods or services produced in South Africa or sales made in South
Africa; (vi) issuers of depositary shares for South African equity securities;
(vii) the government of South Africa and its agencies and instrumentalities;
and (viii) public sector entities in South Africa, including any entity fully
or partly owned by the entities described in the foregoing clause (vii).

The Fund may also invest up to 35% of its assets in (i) debt securities
issued or guaranteed by South African issuers and (ii) equity securities of
issuers which do not meet the definition of South African issuers but which are
likely, in the opinion of the Investment Adviser, to be affected by
developments in the South African economy or in South Africa's international
economic relations (which may be issuers which are organized in, whose
securities are principally traded in, or which are principally based in, other
African countries). The Investment Adviser may take advantage of the entire
range of maturities offered for the debt securities in which the Fund may
invest. The Fund's investments in securities with longer terms to maturity are
subject to greater volatility than the Fund's investments in shorter term debt
securities. Additionally, the value of debt securities of South African
issuers held by the Fund can be expected to vary inversely in relation to
fluctuations in South African interest rates. Certain of the debt securities
in which the Fund may invest may be rated below investment grade or unrated.
See "Risk Factors and Special Considerations -- The Fund's Investments and
Operations" and "Appendix A: Ratings."

The Fund intends to invest in a broad spectrum of South African
industries. In selecting industries and companies for investment by the Fund,
the Investment Adviser will consider factors such as overall growth prospects,
competitive position in domestic and export markets, technology, research and
development, productivity, labor costs, raw material costs and sources, profit
margins, return on investment, capital resources, government regulation and
management.

The Fund is classified as a non-diversified investment company under the
1940 Act, which means that the Fund is not limited by the 1940 Act in the
proportion of its assets that it may invest in the securities of a single
issuer. However, the Fund intends to comply with the diversification
requirements of the Internal Revenue Code of 1986, as amended (the "Code") and
otherwise to conduct its operations so as to qualify as a "regulated investment
company" for purposes of the Code which generally will relieve the Fund of any
liability for U.S. federal income tax to the extent that its earnings are
distributed to shareholders. See "Taxation."

Temporary Investments

The Fund may, for cash management or temporary defensive purposes, pending
investment in accordance with the Fund's investment objective and policies and
<PAGE>
to meet operating expenses, invest without limitation in certain short-term
instruments ("Temporary Investments"). The Temporary Investments in which the
Fund may invest include obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities ("U.S. Government Securities");
obligations issued or guaranteed by other governments, including South Africa
and the United Kingdom, or one of their agencies or instrumentalities;
obligations issued or guaranteed by international organizations designed or
supported by multiple foreign government entities to promote economic
reconstruction or development; bank obligations, such as certificates of
deposit, time deposits and bankers' acceptances; corporate debt obligations,
including commercial paper; and repurchase agreements (as described below). To
be eligible for investment under the circumstances described above, such
instruments (other than U.S. Government Securities) must be issued by an issuer
having a short-term debt rating of A-1 or better by Standard & Poor's
Corporation, a rating of Prime-1 by Moody's Investors Service, Inc., a
comparable rating from another nationally recognized rating service or, if
unrated, deemed to be of equivalent quality by the Investment Adviser. See
"Appendix A: Ratings."

Other Investments

Repurchase Agreements. The Fund may purchase instruments from South
African and non-South African financial institutions, such as banks and broker-
dealers, subject to the seller's agreement to repurchase them at an agreed upon
time and price ("repurchase agreements"). The seller under a repurchase
agreement will be required to maintain the value of the securities subject to
the repurchase agreement at not less than the repurchase price. Default by the
seller would, however, expose the Fund to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations. The Investment Adviser will monitor and mark to market the value
of such securities daily to assure that the value equals or exceeds the
repurchase price. The Investment Adviser also monitors the creditworthiness of
parties to repurchase agreements under the Board of Directors' general
supervision.

Securities Which are Neither Listed on a Securities Exchange nor Traded in
an Over-the-Counter Market. The Fund may invest up to 25% of its total assets
in securities which are neither listed on a securities exchange nor traded in
an over-the-counter market. The Fund may encounter substantial delays and
could incur losses in attempting to sell such securities. In addition, issuers
of such securities may not be subject to the disclosure and other investor
protection requirements that might be applicable if their securities were
listed on an exchange or traded in an over-the-counter market. If any
privately placed securities held by the Fund are required to be registered
under the securities laws of one or more jurisdictions before being resold, the
Fund may be required to bear the expenses of registration. See "Risk Factors
and Special Considerations -- The Fund's Investments and Operations."

Rule 144A Securities. The Fund may purchase without limitation certain
restricted securities ("Rule 144A securities") for which there is a secondary
market of qualified institutional buyers, as contemplated by Rule 144A under
the Securities Act of 1933, as amended (the "Securities Act"). Rule 144A
<PAGE>
provides an exemption from the registration requirements of the Securities Act
for the resale of certain restricted securities to qualified institutional
buyers.

Convertible Securities. The Fund may invest in convertible securities,
including such securities that may be unrated or rated below investment grade.
See "Risk Factors and Special Considerations -- The Fund's Investments and
Operations" and "Appendix A: Ratings." A convertible security is a bond,
debenture, note, or preferred stock that may be converted into or exchanged for
a prescribed amount of common or preferred stock of the same or a different
issuer within a particular period of time at a specified price or formula. A
convertible security entitles the holder to receive interest generally paid or
accrued on debt or the dividend paid on preferred stock until the convertible
security matures or is redeemed, converted or exchanged. Convertible
securities have general characteristics similar to both fixed-income and equity
securities. Although to a lesser extent than with fixed-income securities
generally, the market value of convertible securities tends to decline as
interest rates increase and, conversely, tends to increase as interest rates
decline. In addition, because of the conversion feature, the market value of
convertible securities tends to vary with fluctuations in the market value of
the underlying common stocks and therefore also will react to variations in the
general market for equity securities. A unique feature of convertible
securities is that as the market price of the underlying common stock declines,
convertible securities tend to trade increasingly on a yield basis, and so may
not experience market value declines to the same extent as the underlying
common stock. When the market price of the underlying common stock increases,
the prices of the convertible securities tend to rise as a reflection of the
value of the underlying common stock. While no securities investments are
without risk, investment in convertible securities generally entail less risk
than investments in common stock of the same issuer.

A convertible security might be subject to redemption at the option of the
issuer at a price established in the convertible security's governing
instrument. If a convertible security held by the Fund is called for
redemption, the Fund may be required to permit the issuer to redeem the
security, convert it into the underlying common stock or sell it to a third
party.

Warrants. The Fund may invest in warrants, which are securities
permitting, but not obligating, their holder to subscribe for other securities.
Warrants do not carry with them the right to dividends or voting rights with
respect to the securities that they entitle their holder to purchase, and they
do not represent any rights in the assets of the issuer. As a result, an
investment in warrants may be considered more speculative than certain other
types of investments. In addition, the value of a warrant does not necessarily
change with the value of the underlying securities and a warrant ceases to have
value if it is not exercised prior to its expiration date.

Precious Metals. The Fund may also invest up to 10% of its assets in gold
bullion and gold coins which, unlike investments in many securities, earn no
investment income and offer only the potential for capital appreciation or
depreciation. The Fund may purchase gold bullion and gold coins on the spot or
<PAGE>
forward markets either as an investment or in an effort to hedge its
investments in securities of South African issuers. To the extent that the
Fund purchases gold bullion and coins as an investment, it may use precious
metals forward and futures contracts and commodity swaps to hedge those
investments. See "Additional Investment Practices -- Hedging" below. The Fund
will only purchase and sell gold bullion and coins from and to U.S. and foreign
banks, U.S. and foreign commodities exchanges, exchanges affiliated with a
regulated U.S. or foreign stock exchange, and dealers who are members of, or
affiliated with members of, a U.S. or foreign commodities exchange, in
accordance with applicable investment laws. Gold bullion will not be purchased
in any form that is not readily marketable. Coins will not be purchased for
their numismatic value and will not be considered for purchase if they cannot
be bought or sold in an active market. Any bullion or coins purchased by the
Fund will be delivered to and stored with a qualified custodian bank.

ADDITIONAL INVESTMENT PRACTICES

Hedging

The Fund is authorized, without limitation (except as described below with
respect to entering into futures contracts or options thereon for purposes
other than bona fide hedging), to use various hedging and investment strategies
described below to hedge various market risks (such as interest rates, broad or
specific market movements, currency exchange rates and precious metals prices),
to manage the effective maturity or duration of debt instruments held by the
Fund, or to seek to increase the Fund's income or gain. Techniques and
instruments may change, however, over time as new instruments and strategies
are developed or regulatory changes occur.

Subject to the constraints described above, the Fund may purchase and sell
interest rate, currency, stock index or precious metals futures contracts and
enter into currency forward contracts, swaps and related transactions, it may
purchase and sell (or write) exchange listed and over-the-counter put and call
options on debt and equity securities, currencies, futures contracts, fixed
income and stock indices and other financial instruments, it may enter into
precious metals swaps, forward contracts and related transactions, and it may
enter into interest rate swaps and related transactions, equity swaps and
related transactions and other similar transactions which may be developed to
the extent the Investment Adviser determines that they are consistent with the
Fund's investment objective and policies and applicable regulatory requirements
(collectively, these transactions are referred to in this Prospectus as
"Hedging"). These techniques and strategies are often referred to as
"derivatives transactions." The Fund may enter into futures contracts or
options thereon for purposes other than bona fide hedging if, immediately
thereafter, the sum of the amount of its initial margin and premiums on open
contracts and options would not exceed 5% of the liquidation value of the
Fund's portfolio; provided, that in the case of an option that is in-the-money
at the time of the purchase, the in-the-money amount may be excluded in
calculating the 5% limitation.

<PAGE>
Hedging may be used by the Fund to attempt to protect against possible
changes in the market value of securities or precious metals held in or to be
purchased for the Fund's portfolio resulting from securities markets, currency
exchange rate or precious metals price fluctuations, to protect the Fund's
unrealized gains in the value of its portfolio securities, to facilitate the
sale of those securities for investment purposes, to manage the effective
maturity or duration of the Fund's portfolio, to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular debt or equity securities or precious metals or to seek to enhance
the Fund's income or gain. The ability of the Fund to utilize Hedging
successfully will depend on the Investment Adviser's ability to predict
pertinent market movements, which cannot be assured. These skills are
different from those needed to select portfolio securities. The use of Hedging
in certain circumstances will require that the Fund segregate cash, liquid high
grade debt obligations or other assets to the extent the Fund's obligations are
not otherwise "covered" through ownership of the underlying security, financial
instrument or currency.

A detailed discussion of Hedging, including applicable requirements of the
Commodity Futures Trading Commission, the requirement to segregate assets with
respect to these transactions and special risks associated with such
strategies, appears as Appendix B to this Prospectus. See also "Risk Factors
and Special Considerations -- The Fund's Investments and Operations."

The degree of the Fund's use of Hedging may be limited by certain
provisions of the Code. See "Taxation."

When-Issued and Delayed Delivery Securities

The Fund may purchase equity or debt securities on a when-issued or
delayed delivery basis. Securities purchased on a when-issued or delayed
delivery basis are purchased for delivery beyond the normal settlement date at
a stated price. No income accrues to the purchaser of a security on a
when-issued or delayed delivery basis prior to delivery. Such securities are
recorded as an asset and are subject to changes in value based upon changes in
the general level of interest rates. Purchasing a security on a when-issued or
delayed delivery basis can involve a risk that the market price at the time of
delivery may be lower than the agreed-upon purchase price, in which case there
could be an unrealized loss at the time of delivery. The Fund will only make
commitments to purchase securities on a when-issued or delayed delivery basis
with the intention of actually acquiring the securities but may sell them
before the settlement date if it is deemed advisable. The Fund will establish
a segregated account in which it will maintain liquid assets in an amount at
least equal in value to the Fund's commitments to purchase securities on a
when-issued or delayed delivery basis. If the value of these assets declines,
the Fund will place additional liquid assets in the account on a daily basis so
that the value of the assets in the account is equal to the amount of such
commitments. See "Investment Restrictions."

<PAGE>
Loans of Portfolio Securities

The Fund may lend its portfolio securities consistent with its investment
policies. By doing so, the Fund attempts to increase its income. In the event
of the bankruptcy of the other party to a securities loan, the Fund could
experience delays in recovering the securities it lent. To the extent that, in
the meantime, the value of the securities the Fund lent has increased, the Fund
could experience a loss. However, loans will be made only to borrowers deemed
by the Investment Adviser to be of good standing and only when, in the judgment
of the Investment Adviser, the income to be earned from the loans justifies the
attendant risks.

The Fund may lend securities from its portfolio if liquid assets in an
amount at least equal to the current market value of the securities loaned
(including accrued interest thereon) plus the interest payable to the Fund with
respect to the loan is maintained by the Fund in a segregated account. Any
securities that the Fund may receive as collateral will not become a part of
its portfolio at the time of the loan and, in the event of a default by the
borrower, the Fund will, if permitted by law, dispose of such collateral except
for such part thereof that is a security in which the Fund is permitted to
invest. During the time securities are on loan, the borrower will pay the Fund
any accrued income on those securities, and the Fund may receive an agreed-upon
fee from a borrower. The value of securities loaned will be marked to market
daily. Loans of securities by the Fund will be subject to termination at the
Fund's or the borrower's option. The Fund may pay reasonable negotiated fees
in connection with loaned securities, so long as such fees are set forth in a
written contract and approved by the Fund's Board of Directors.

Investment Funds

The Fund may, to the extent permitted by the 1940 Act, invest in
investment funds, pooled accounts or other investment vehicles (collectively,
"investment funds") other than those for which the Investment Adviser serves as
investment adviser or sponsor and which invest a substantial portion of their
assets in securities in which the Fund is authorized to invest. The Fund may
invest in such investment funds as a means of investing in other securities in
which the Fund is authorized to invest when the Investment Adviser believes
that such investments may be more advantageous to the Fund than a direct market
purchase of such securities. From time to time, such investment funds may be
the most effective available means or the only permitted method by which the
Fund may invest in equity securities of certain foreign issuers. See "Risk
Factors and Special Considerations -- Investment and Repatriation
Restrictions." Under the 1940 Act, the Fund may invest a maximum of 10% of its
total assets in the securities of other investment companies. In addition,
under the 1940 Act, not more than 5% of the Fund's total assets may be invested
in the securities of any one investment company, and the Fund may not acquire
more than 3% of the outstanding voting stock of any one investment company. By
investing in another investment fund, the Fund bears a ratable share of the
investment fund's expenses, as well as continuing to bear the Fund's advisory
and administrative fees with respect to the amount of the investment. The
Fund's investment in certain investment funds will result in special
U.S. federal income tax consequences described below under "Taxation."

<PAGE>
Short Sales

The Fund may from time to time sell securities short without limitation,
although initially the Fund does not intend to sell securities short to any
significant extent. A short sale is a transaction in which the Fund would sell
securities it does not own (but has borrowed) in anticipation of a decline in
the market price of the securities. When the Fund makes a short sale, the
proceeds it receives from the sale will be held on behalf of a broker until the
Fund replaces the borrowed securities. To deliver the securities to the buyer,
the Fund will need to arrange through a broker to borrow the securities and, in
so doing, the Fund will become obligated to replace the securities borrowed at
their market price at the time of replacement, whatever that price may be. The
Fund may have to pay a premium to borrow the securities and must pay any
dividends or interest payable on the securities until they are replaced.

The Fund's obligation to replace the securities borrowed in connection
with a short sale will be secured by collateral deposited with the broker that
consists of cash, U.S. government securities or other liquid high grade debt
obligations. In addition, the Fund will place in a segregated account with its
custodian, or designated sub-custodian, an amount of cash, U.S. government
securities or other liquid high grade debt obligations equal to the difference,
if any, between (1) the market value of the securities sold at the time they
were sold short and (2) any cash, U.S. government securities or other liquid
high grade debt obligations deposited as collateral with the broker in
connection with the short sale (not including the proceeds of the short sale).
Until it replaces the borrowed securities, the Fund will maintain the
segregated account daily at a level so that (1) the amount deposited in the
account plus the amount deposited with the broker (not including the proceeds
from the short sale) will equal the current market value of the securities sold
short and (2) the amount deposited in the account plus the amount deposited
with the broker (not including the proceeds from the short sale) will not be
less than the market value of the securities at the time they were sold short.

Short sales by the Fund involve certain risks and special considerations.
Possible losses from short sales differ from losses that could be incurred from
a purchase of a security, because losses from short sales may be unlimited,
whereas losses from purchases can equal only the total amount invested.
Moreover, to the extent the Fund sells securities short, the holding period of
certain Fund investments may be terminated or suspended for purposes of
satisfying the 30% limitation for qualification as a "regulated investment
company" under the Code. See "Taxation - The Fund."

Borrowing

The fund may borrow from a bank or other entity in a privately arranged
transaction to the maximum extent permitted under the 1940 Act, but only in
order to finance the repurchase and/or tenders of its shares or to pay
distributions for purposes of complying with the Code. See "Risk Factors and
Special Considerations -- The Fund's Investments and Operations," "Common Stock
- -- Future Actions Relating to a Discount in the Price of the Fund's Shares of
Common Stock" and "Taxation -- The Fund." The 1940 Act requires the Fund to
maintain "asset coverage" of not less than 300% of its "senior securities
<PAGE>
representing indebtedness," as those terms are defined and used in the 1940
Act. In addition, the Fund may not pay any cash dividends or make any cash
distributions to shareholders if, after the distribution, there would be less
than 300% asset coverage of a senior security representing indebtedness for
borrowings (excluding for this purpose certain evidences of indebtedness made
by a bank or other entity and privately arranged, and not intended to be
publicly distributed). If, as a result of the foregoing restriction or
otherwise, the Fund were unable to distribute at least 90% of its investment
company taxable income in any year, it would lose its status as a regulated
investment company for such year and become liable at the corporate level for
federal income taxes on its income for such year. See "Taxation -- The Fund."

The Fund may also borrow for temporary purposes in an amount not exceeding
5% of the value of the total assets of the Fund. Such borrowings are not
subject to the asset coverage restrictions set forth in the preceding
paragraph. See "Investment Restrictions."

The Fund may also enter into reverse repurchase agreements, pursuant to
which it would sell portfolio securities to financial institutions and agree to
repurchase them at an agreed upon date and price. At the time the Fund enters
into a reverse repurchase agreement, it may establish and maintain a segregated
account, with its custodian or a designated subcustodian, containing cash,
securities issued or guaranteed by the U.S. Government or its agencies and
instrumentalities or other liquid, high-grade debt obligations, having a value
not less than the repurchase price (including accrued interest). Reverse
repurchase agreements involve the risk that the market value of the portfolio
securities sold by the Fund may decline below the price of the securities at
which the Fund is obligated to repurchase. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy or becomes
insolvent, the buyer or its trustee or receiver may receive an extension of
time to determine whether to enforce the Fund's obligations to repurchase the
securities, and the Fund's use of proceeds of the reverse repurchase agreement
may effectively be restricted pending the decision. Reverse repurchase
agreements will be treated as borrowings for purposes of calculating the Fund's
borrowing limitation to the extent the Fund does not establish and maintain a
segregated account (as described above). The Investment Adviser monitors the
creditworthiness of parties to reverse repurchase agreements under the Board of
Directors' general supervision.

INVESTMENT RESTRICTIONS

The Fund's investment objective, its policy to invest, under normal market
conditions, at least 65% of its assets in equity securities of South African
issuers and the following investment restrictions are the Fund's only
fundamental policies that may not be changed without the prior approval of the
holders of a majority of the Fund's outstanding voting securities. A "majority
of the Fund's outstanding voting securities" for this purpose means the lesser
of (a) 67% or more of the shares of the Fund's Common Stock present at a
meeting of shareholders, if the holders of 50% of the outstanding shares are
present or represented by proxy at the meeting, or (b) more than 50% of the
outstanding shares. Fund policies which are not fundamental may be modified by
<PAGE>
the Board of Directors if, in the reasonable exercise of the Board's business
judgment, modification is determined to be necessary, desirable or appropriate
to carry out the Fund's objective. All percentage limitations contained in the
restrictions listed below or described elsewhere in this Prospectus apply
immediately after a purchase or initial investment, and any subsequent change
in any applicable percentage resulting from market fluctuations does not
require elimination of any security from the Fund's portfolio. Under its
fundamental restrictions, the Fund may not:

(1) purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be
invested in securities of one or more issuers conducting their principal
business activities in the same industry, provided that there is no
limitation with respect to investment in obligations issued or guaranteed
by the U.S. government, its agencies or instrumentalities;

(2) issue senior securities or borrow money, except that the Fund
may (a) borrow up to 5% of its total assets (including the amount
borrowed) for temporary or emergency purposes (including for clearance of
transactions, repurchases of its shares or payment of dividends), without
regard to the amount of borrowing outstanding under clause (b) below, and
(b) borrow from a bank or other entity in a privately arranged transaction
or enter into reverse repurchase agreements up to 33-1/3% of its total
assets (including the amount borrowed) in connection with the repurchase
of shares or tender offers or to pay dividends for the purposes of
complying with the Code, provided, however, that the Fund's obligations
under when-issued and delayed delivery transactions and similar
transactions and reverse repurchase agreements are not treated as senior
securities if covering assets are appropriately segregated, and the use of
Hedging shall not be deemed to involve the issuance of a "senior security"
or a "borrowing" if covering assets are appropriately segregated; for
purposes of clauses (a) and (b) above, the term "total assets" shall be
calculated after giving effect to the net proceeds of senior securities
issued by the Fund reduced by any liabilities and indebtedness not
constituting senior securities except for such liabilities and
indebtedness as are excluded from treatment as senior securities under
this item (2);

(3) make loans, except that (a) the Fund may (i) purchase and hold
debt instruments (including bonds, debentures or other obligations and
certificates of deposit, bankers' acceptances and fixed time deposits) in
accordance with its investment objective and policies, (ii) enter into
repurchase agreements with respect to portfolio securities, and (iii) make
loans of portfolio securities, as described under "Additional Investment
Practices -- Loans of Portfolio Securities" in this Prospectus; and (b)
delays in the settlement of securities transactions will not be considered
loans.

(4) underwrite the securities of other issuers, except to the extent
that, in connection with the disposition of portfolio securities, it may
be deemed to be an underwriter;
<PAGE>
(5) purchase real estate, real estate mortgage loans or real estate
limited partnership interests (other than securities secured by real
estate or interests therein or securities issued by companies that invest
in real estate or interests therein);

(6) purchase securities on margin (except as provided in (2) above
and except for delayed delivery or when-issued transactions, such
short-term credits as are necessary for the clearance of transactions, and
margin deposits in connection with transactions in futures contracts,
options on futures contracts, options on securities, securities indices
and currencies);

(7) purchase or sell commodities or commodity contracts, including
futures contracts and options thereon, except that the Fund may (a) invest
in gold bullion or gold coins as set forth under "Investment Objectives
and Policies -- Other Investments -- Precious Metals" and (b) engage in
Hedging; or

(8) invest for the purpose of exercising control over management of
any company.

RISK FACTORS AND SPECIAL CONSIDERATIONS

The Fund's assets will be invested primarily in securities of foreign
issuers. Investors should recognize that investing in securities of foreign
issuers involves certain risks and special considerations, including those set
forth below, which are not typically associated with investing in securities of
U.S. issuers. Further, certain investments that the Fund may purchase, and
investment techniques in which the Fund may engage, involve risks, including
those set forth below.

Social, Political and Economic Factors

South Africa is in the midst of an historic transition from the apartheid
regime to a non-racial democracy. National elections in which, for the first
time in the history of South Africa, eligibility for participation will not be
determined on the basis of race are scheduled for April 26-28, 1994. A number
of political organizations have registered for these elections, and a few
political organizations have stated their opposition to the elections.

As of February 12, 1994, the original deadline for political parties to
register for inclusion on the ballot in the April 1994 elections, nineteen
political parties had registered, including the National Party, the ANC,
the Pan-Africanist Congress and the Democratic Party. Two parties, the
Inkatha Freedom Party and the Afrikaner Volksfront, which includes
the Conservative Party, and the government of the nominally independent
homeland of Bophuthatswana announced that they would boycott the elections. It
was also reported that King Goodwill Zwelithini, the King of the Zulus,
demanded that the South African government grant him an independent monarchy in
the province of Natal. Certain of these announcements were accompanied by
statements encouraging civil resistance to the elections. Both the Inkatha
<PAGE>
Freedom Party and the Afrikaner Volksfront desire greater regional autonomy
than what is provided for in the interim Constitution adopted by the South
African Parliament in December 1993, including the creation of separate ethnic
states for Afrikaners and Zulus. They have also called for a delay in the
elections, a demand that has been opposed adamantly by Nelson Mandela and
current State President de Klerk. In an effort to encourage full participation
in the elections, the ANC recently agreed to certain demands of the boycotting
groups for, among other things, a strengthening of the powers of the provincial
governments and a split ballot system. In early March 1994, a faction of the
Afrikaner Volksfront (under the name, Freedom Front) registered for the
elections before the expiration of an extended registration deadline. The
Inkatha Freedom Party also registered "provisionally" for the elections before
the expiration of the deadline but conditioned its participation in the
elections on an agreement by the ANC to submit disagreements over the new
constitution to international mediation. The Inkatha Freedom Party
subsequently failed to present a list of candidates for inclusion on the
ballot, and has renewed its intention to boycott the elections. In addition,
after the outbreak of violence and widespread strikes in Bophuthatswana in
March 1994, the South African government and the Transitional Executive Council
removed the leader of the homeland from power and have assured its residents
freedom to participate in the elections. Similar action was taken in the
homeland of Ciskei in March 1994, even though Ciskei's government had already
agreed to participate in the elections, after hundreds of policemen went on
strike demanding refunds of their pensions. Political violence persists,
particularly in the province of Natal and more recently in Johannesburg,
leading to the declaration by State President de Klerk of a state of emergency
in Natal, and there can be no assurance that the elections will not be
disrupted by violence.

It is intended that the legislature chosen in the upcoming elections will
adopt a new Constitution for South Africa. In December 1993, the existing
South African Parliament adopted an interim Constitution under which South
Africa will be governed prior to the adoption of the new Constitution. In
addition, in December 1993, the Transitional Executive Council, a multi-party
quasi-governmental body, was established to consult and assist in governmental
affairs pending the April elections. Neither the outcome of the scheduled
elections nor the prospects of the proposed constitutional reform can be
predicted, although it is widely believed that the ANC will win a majority of
the seats in the new Parliament and that Nelson Mandela will be elected the
next State President of South Africa. Likewise, it is not possible to predict
all of the policies that will be pursued by the South African government after
such elections and whether such government will be able to establish itself as
the legitimate representative of all the people of South Africa.

Spokesmen for the ANC, the party led by Nelson Mandela, have stated that
reducing the concentration of economic power is a goal to be pursued by the new
government and that nationalization is one means to achieve this goal.
Spokesmen for the ANC have also stated, however, that a strong private sector
will be important and that anti-trust legislation, rather than nationalization,
may be a means to redress the concentration of economic power in conglomerates.
It is not possible to predict whether the policies of the new government will
include nationalization, expropriation or other means of redistributing wealth.

<PAGE>

South Africa is a multi-racial society. Approximately 75% of the total
population of South Africa is Black, and approximately 13% of the total
population is White. The remainder is composed of persons of Asian or mixed
racial ancestry. The average annual growth rate of the Black population is
estimated to be almost three times that of the White population. Under the
apartheid regime, Blacks were excluded from the political process, prohibited
from owning land, physically segregated in the "homelands" and in townships
created on the outskirts of urban areas, denied access to skilled jobs and
subjected to a segregated educational system whereby curriculum was closely
controlled by the government. Although the South African government abolished
the last of the legal foundations of its apartheid policy in 1991, and since
that time a number of steps have been taken to permit the Black population to
participate in the political process and to improve the access of the Black
population to better-quality education, a large segment of the Black population
continues to be relatively undereducated and unskilled and racial tensions
persist in South African society. As a result, it is not possible to predict
whether or when a stable South African society will emerge from the
transitional arrangements currently underway or how the problems associated
with dismantling the social and cultural manifestations of apartheid will be
resolved. South Africa has experienced significant outbreaks of political
violence in the recent past, including during the weeks preceding the April
1994 elections. It is estimated that political violence, particularly between
the ANC and the Inkatha Freedom Party, has claimed the lives of 18,000 people
in the past decade. It is not possible to predict whether the transition to a
multi-racial democratic society can be achieved in a peaceful manner and
without adverse consequences to the economy. Concerns about the uncertainty of
the transition process, including economic policies that may be followed by the
new government regarding redistribution of wealth, have resulted in an increase
by a sizeable amount in the outflow of capital from South Africa. In the event
South Africa is unable to make the transition to a non-racial democracy, or is
unable to do so without prolonged unrest, the value of South African securities
as well as the value of the Fund's shares are likely to suffer material
declines and the Fund could suffer substantial losses.

South Africa's rainfall is typically unreliable and unpredictable, and the
country is periodically afflicted by drastic and prolonged droughts which often
end in severe floods. Agriculture in South Africa was adversely affected by a
particularly severe drought during the 1991 and 1992 growing seasons. There
can be no assurance that similar climatic conditions in the future will not
have an adverse impact on agriculture or on the South African economy in
general.

The economy of South Africa experienced its longest recession this century
commencing in 1989. The Reserve Bank of South Africa has stated its belief,
however, that the recession bottomed out and the economy recovered somewhat in
1993. The Reserve Bank has stated further that the recovery in domestic output
during the first nine months of 1993 was mainly due to relatively favorable
weather conditions and a substantial increase in agricultural production
following the drought.

<PAGE>
South Africa has been the subject of economic, trade and other types of
sanctions imposed by numerous countries and international organizations in
opposition to its former apartheid policies. Many of these restrictions either
have been lifted or are expected to be lifted upon the installation of a
democratically-elected government in connection with the elections scheduled
for April 1994. It is not possible to predict the impact of these developments
on the economy of South Africa.

South Africa is the world's leading producer of gold and has the world's
largest proven gold reserves. In 1992, net gold exports as a ratio to GDP were
5.6%, and gold production accounted for 46% of South Africa's total value of
mineral production, 59% of its total mineral exports and 22.8% of its total
exports. South Africa also mines and exports a significant portion of the
world's supply of other metals and minerals. Fluctuations in the international
price of commodities, particularly gold, may have a significant effect on the
economy.

The total domestic debt of the central government of South Africa was
approximately R143.4 billion (approximately $45.1 billion at a monthly average
exchange rate of 3.18 Rands per U.S. dollar) at March 31, 1993, equal to
approximately 43% of GDP for fiscal year 1992/93. Central government spending
constituted 36.3% of GDP for fiscal year 1992/93, and interest payments on
the central government's domestic debt absorbed just over 14% of the national
budget in that year. High and increasing levels of public debt could result
in rising interest rates, which could limit the growth of the economy and
restrict the ability of the government to make expenditures. It is not
possible to predict the extent to which the South African government will
be able to restrain the growth of the public debt in the face of likely
increasing demands for public expenditure following transition to a
democratic government.

Certain countries in which the Fund may make investments may be subject to
a substantially greater degree of social, political and economic instability
than is the case in the United States and Western European countries. Such
instability may result from, among other things, the following: (i)
authoritarian governments or military involvement in political and economic
decision-making, and changes in government through extra-constitutional means;
(ii) popular unrest associated with demands for improved political, economic
and social conditions; (iii) internal insurgencies; (iv) hostile relations with
neighboring countries; and (v) ethnic, religious and racial disaffection. Such
social, political and economic instability could significantly disrupt the
principal financial markets in which the Fund invests and adversely affect the
value of the Fund's assets. In addition, there may be the possibility of
nationalization, asset expropriations or future confiscatory levels of taxation
affecting the Fund. In the event of nationalization, expropriation or other
confiscation, the Fund may not be fairly compensated for its loss and could
lose its entire investment in the country involved.

The economies of individual countries in which the Fund may invest may
differ favorably or unfavorably and significantly from the U.S. economy in such
respects as the rate of growth of GDP or gross national product, rate of
inflation, currency depreciation, capital reinvestment, resource self-
sufficiency, structural unemployment and balance of payments position.

<PAGE>
Most of the foreign countries in which the Fund may make investments do
not have Western-style or fully democratic governments. Some governments in
these countries are authoritarian in nature and influenced by security forces.
Disparities of wealth and racial tensions, among other factors, have also led
to social unrest in some of these countries accompanied, in certain cases, by
violence and labor unrest. Ethnic, religious and racial disaffection, as
evidenced in South Africa, have created social, economic and political
problems.

Several of the foreign countries in which the Fund may make investments
have or in the past have had hostile relationships with neighboring nations or
have experienced internal insurgency. The economies of most of these countries
are heavily dependent upon international trade and are accordingly affected by
protective trade barriers and the economic conditions of their trading
partners. The enactment by the United States or other principal trading
partners of protectionist trade legislation, reduction of foreign investment in
the local economies and general declines in the international securities
markets could have a significant adverse effect upon the securities markets of
these countries. In addition, the economies of some of these countries are
vulnerable to weakness in world prices for their commodity exports, including
precious metals.

Governments in certain foreign countries in which the Fund may make
investments participate to a significant degree, through ownership interests or
regulation, in their respective economies. Action by these governments could
have a significant adverse effect on market prices of securities and payment of
dividends.

Currency Fluctuations

The Fund's assets will be invested primarily in securities of South
African issuers and other foreign securities and substantially all income will
be received by the Fund in South African or other foreign currencies. However,
the Fund will compute and distribute its income in dollars, and the computation
of income will be made on the date of its receipt by the Fund at the applicable
foreign exchange rate in effect on that date. Therefore, if the value of the
foreign currencies in which the Fund receives its income falls relative to the
dollar between receipt of the income and the making of Fund distributions, the
Fund will be required to liquidate securities in order to make distributions in
the event that the Fund has insufficient cash in dollars to meet distribution
requirements.

The value of the assets of the Fund as measured in dollars also may be
affected favorably or unfavorably by fluctuations in currency rates and
exchange control regulations. Some of the currencies of countries in which the
Fund may make investments have experienced devaluations relative to the dollar,
and major adjustments have been made periodically in certain of such
currencies. Also, certain of these countries face serious exchange
constraints. Further, the Fund may incur costs in connection with conversions
between various currencies. Foreign exchange dealers realize a profit based on
the difference between the prices at which they are buying and selling various
currencies. Thus, a dealer normally will offer to sell a foreign currency to
<PAGE>
the Fund at one rate, while offering a lesser rate of exchange should the Fund
desire immediately to resell that currency to the dealer. The Fund will
conduct its foreign currency exchange transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through entering into forward, futures or options contracts to
purchase or sell foreign currencies or through entering into currency swap
transactions. The Fund expects that a substantial amount of its income will be
received in South African currency.

If the foreign currency hedging engaged in by the Fund does not protect
the Fund against adverse changes in exchange rates, the Fund's net assets
(including accrued income and realized capital gains) and distributions would
be affected by fluctuations in the value of the South African or other
applicable foreign currency relative to the dollar.

South Africa Two-Tiered Currency System

South Africa maintains a two-tiered currency system composed of the
Financial Rand and the Commercial Rand. Foreign capital investments, including
the purchase of financial instruments, are generally transacted in Financial
Rands; dividends and interest may be paid to foreigners in Commercial Rands
subject to prior approval by the Reserve Bank of South Africa (which approval
is generally granted in the ordinary course). Proceeds realized by foreigners
from the sale of financial instruments within South Africa must be paid in
Financial Rands and do not require any prior exchange control approval. The
conversions of South African currency into dollars and vice versa in connection
with such transactions must be effected through banks that are specifically
designated by the Reserve Bank of South Africa as authorized currency dealers.
The Fund could be adversely affected by delays in, or a refusal to grant, any
required exchange control approval, and obtaining such approvals may involve
additional costs to the Fund.

The Financial Rand system was created to control the outflow of funds from
South Africa and serve as an incentive to bring foreign capital into the
country. Through this system, non-residents purchase Financial Rands with
foreign currency for use in making investments in South Africa and sell
Financial Rands for foreign currency in order to remove capital from South
Africa. The exchange rate for Financial Rands has historically represented a
discount to the exchange rate for Commercial Rands. The discount reached 52.9%
at the end of 1986, decreased to 13.5% at the end of 1991, increased to 37.2%
at the end of 1992, and decreased to 20.9% at the end of 1993. The amount of
the discount depends largely on the relative demand for the purchase of foreign
currency for removal from South Africa versus the demand for purchase of
Financial Rands for investment in South Africa. Accordingly, the value of an
investment made by the Fund will fluctuate with the discount reflected in the
Financial Rand exchange rate. It is not possible to predict whether the South
African government will retain the existing two-tier currency system or, if it
does retain such system, how much the Financial Rand discount will fluctuate.
The following table sets forth historical exchange rates per dollar for the
Financial Rand and the Commercial Rand and the amount of the discount between
the two currencies:

<PAGE>
Currency Exchange Rates
(per U.S. Dollar)
End of Period

___.
__,

Currency 1988 1989 1990 1991 1992 1993 1994
_______________________ ___________ ___________ ___________ ___________ ___________ ___________ ___________
<S> <C> <C> <C> <C> <C> <C> <C>

Financial Rand 3.8292 3.5842 3.3841 3.1721 4.8603 4.2955

Commercial Rand 2.3787 2.5484 2.5634 2.7435 3.0544 3.3990

Discount 37.9% 28.9% 24.3% 13.5% 37.2% 20.9%

Source: Reserve Bank of South Africa
</TABLE>

Investment and Repatriation Restrictions

South Africa generally does not prohibit foreign investment. However,
under current exchange control regulations applicable in South Africa, certain
Financial Rand investments by foreigners, including investments in unlisted
South African securities, require the prior written approval of the Reserve
Bank of South Africa. No such approval is required for foreigners to make
investments with the Financial Rand in listed securities on the Johannesburg
Stock Exchange (the "JSE") or in bank deposits. To obtain approval to make
a Financial Rand investment in an unlisted South African security, a written
application must be submitted on behalf of a foreign investor by an authorized
currency dealer to the Reserve Bank of South Africa describing the
transaction, which application is subject to the obtaining of exchange
control approval. The feasibility and desirability of acquiring unlisted
securities in such circumstances is not assured since the Reserve Bank may
grant or refuse an application. The Fund cannot predict how long it will
take to obtain exchange control approval or guarantee whether a particular
application will be approved. In considering an application, the Reserve
Bank is guided by policy directives of the South African government.
In addition, South African law limits the ability of any South African company
that is more than 25% owned or controlled by foreigners to borrow money from
South African lenders. The Investment Adviser believes that these restrictions
will not materially affect the Fund's investment strategies.

Investment by the Fund in the securities markets of certain countries in
which the Fund may wish to invest may be restricted or controlled to varying
degrees. These restrictions may limit investment in certain of these countries
and may increase expenses of the Fund. For example, certain countries may
require governmental approval prior to investments by foreign persons in a
particular company or industry sector or limit investment by foreign persons to
only a specific class of securities of a company which may have less
<PAGE>
advantageous terms (including price) than securities of the company available
for purchase by nationals. Certain countries may also restrict or prohibit
investment opportunities in issuers or industries deemed important to national
interests. In addition, the repatriation of both investment income and capital
from some of these countries may be subject to restrictions such as the need
for certain government consents. Even where there is no outright restriction
on repatriation of capital, the mechanics of repatriation may affect certain
aspects of the operation of the Fund.

If, because of restrictions on repatriation or conversion, the Fund were
unable to distribute substantially all of its net investment income and long-
term capital gains within applicable time periods, the Fund could be subject to
U.S. Federal income and excise taxes which would not otherwise be incurred and
may cease to qualify for the favorable tax treatment afforded to regulated
investment companies under the Code, in which case it would become subject to
U.S. Federal income tax on all of its income and gains. See "Taxation -- U.S.
Shareholders."

From time to time, investment funds may be the only or most effective
available means by which the Fund may invest in equity securities of certain
foreign issuers. Investment in such investment funds may involve the payment of
management expenses and, in connection with some purchases, sales loads, and
payment of substantial premiums above the value of such companies' portfolio
securities. The Fund does not intend to invest in such investment funds
unless, in the judgment of the Investment Adviser, the potential benefits of
such investment outweigh the payment of any applicable premium, sales load and
expenses. In addition, the Fund's investments in such investment funds are
subject to limitations under the 1940 Act and market availability, and may
result in special U.S. Federal income tax consequences. See "Additional
Investment Practices -- Investment Funds" and "Taxation -- U.S. Shareholders."

Market Characteristics

Differences in Securities Markets. The securities markets in which the
Fund expects that it may make investments generally have substantially less
volume than the New York Stock Exchange, and equity securities of most
companies listed on such markets may be less liquid and more volatile than
equity securities of U.S. companies of comparable size. Although the JSE in
South Africa is a well-established stock exchange, some of the stock exchanges
in other foreign countries in which the Fund may make investments, to the
extent that established securities markets even exist, are in the earliest
stages of their development. Many companies traded on securities markets in
such countries are smaller, newer and less seasoned than companies whose
securities are traded on securities markets in the United States. Investments
in smaller companies involve greater risk than is customarily associated with
investing in larger companies. Smaller companies may have limited product
lines, markets or financial or managerial resources and may be more susceptible
to losses and risks of bankruptcy. Additionally, market making and arbitrage
activities are generally less extensive in such markets, which may contribute
to increased volatility and reduced liquidity of such markets. Accordingly,
each of these markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
<PAGE>
blocks of securities, than is usual in the United States. To the extent that
any of these countries experiences rapid increases in its money supply and
investment in equity securities for speculative purposes, the equity securities
traded in any such country may trade at price-earning multiples higher than
those of comparable companies trading on securities markets in the United
States, which may not be sustainable. In addition, risks due to the lack of
modern technology, the lack of a sufficient capital base to expand business
operations, the possibility of permanent or temporary termination of trading,
and greater spreads between bid and ask prices may exist in such markets.

The JSE is the only authorized stock exchange in South Africa. Based on
its market capitalization for domestic listed issuers as of December 31, 1993,
the JSE is the 12th largest securities exchange in the world.

The JSE is relatively small and highly concentrated compared to the
securities markets of the United States and Japan. It also lacks certain
of the technology of other modern exchanges. The aggregate market
capitalization of companies listed on the JSE was approximately $217 billion
as at December 31, 1993, which represents nearly 5% of the approximately
$4.5 trillion in equity market capitalization of companies listed on
the New York Stock Exchange as at such date. Market capitalization and
trading volume of the JSE are concentrated in a small number of companies.
On December 31, 1993, of the 647 companies listed on the JSE, the 25 largest
companies by market capitalization represented almost 50% of the total market
capitalization of JSE listed equity securities, the 10 largest companies by
market capitalization represented approximately 30% of the total market
capitalization and the 5 largest companies represented nearly 21% of the total
market capitalization. It is estimated that as of July 1993, the four largest
conglomerates in South Africa controlled 76.4% of the total market
capitalization on the JSE. It is also estimated that nearly 10% of the
companies listed on the JSE exist merely to hold controlling shares of other
companies.

Estimated annual trading volume in listed equity securities on the JSE for
the year ended December 31, 1993 was R44.1 billion (approximately $12.97
billion), representing less than 1% of the approximately $2.3 trillion in
trading volume of all equity securities for the same period on the New York
Stock Exchange. The South African securities markets are presently more
volatile and illiquid than the United States securities markets.

Trading practices in South Africa are also significantly different from
those in the United States. Although public offerings of securities in South
Africa are regulated by the Registrar of Companies and the JSE, the sale and
resale of securities are generally less regulated in South Africa than in the
United States. Commercial, corporation and securities laws govern the sale and
resale of securities in South Africa, and contractual and corporate
restrictions may also apply. See "Appendix D: The South African Securities
Markets."

Brokerage commissions and other transaction costs on the JSE and the
securities exchanges in other countries in which the Fund may make investments
are generally higher than in the United States. In addition, securities
<PAGE>
settlements and clearance may in some instances be subject to delays and
related administrative uncertainties. Delays in settlement could result in
temporary periods when assets of the Fund are uninvested and no return is
earned thereon. The inability of the Fund to make intended security purchases
due to settlement problems could cause the Fund to miss attractive investment
opportunities. The inability to dispose of a portfolio security due to
settlement problems could result either in losses to the Fund due to subsequent
declines in the value of such portfolio security or, if the Fund has entered
into a contract to sell the security, could result in possible liability to the
purchaser.

Foreign Subcustodians. Rules adopted under the 1940 Act permit the Fund
to maintain its foreign securities and cash in the custody of certain eligible
non-U.S. banks and securities depositories. Banks in foreign countries in
which the Fund may make investments may not be eligible subcustodians for the
Fund, in which event the Fund may be precluded from purchasing securities in
which it would otherwise invest, and other banks that are eligible foreign
subcustodians may be recently organized or otherwise lack extensive operating
experience. At present, custody arrangements complying with the requirements
of the Securities and Exchange Commission (the "Commission") are available in
South Africa. In certain countries in which the Fund may make investments,
there may be legal restrictions or limitations on the ability of the Fund to
recover assets held in custody by foreign subcustodians in the event of the
bankruptcy of the subcustodian.

Government Supervision of Foreign Securities Markets; Legal Systems.
There may be less government supervision and regulation of securities
exchanges, listed companies and brokers in South Africa and other countries in
which the Fund may make investments than exists in the United States. Less
information may, therefore, be available to the Fund than in respect of
investments in the United States. Further, in certain of these countries, less
information may be available to the Fund than to local market participants.
Brokers in such countries may not be as well capitalized as those in the United
States, so that they are more susceptible to financial failure in times of
market, political, or economic stress. In addition, existing laws and
regulations are often inconsistently applied. Foreign investors may be
adversely affected by new laws and regulations, changes to existing laws and
regulations and preemption of local laws and regulations by national laws. In
circumstances where adequate laws exist, it may not be possible to obtain swift
and equitable enforcement of the law.

Financial Information and Standards. South African issuers and issuers in
the other foreign countries in which the Fund may make investments may be
subject to accounting, auditing and financial standards and requirements that
differ, in some cases significantly, from those applicable to U.S. issuers. In
particular, the assets and profits appearing on the financial statements of a
foreign issuer may not reflect its financial position or results of operations
in the way they would be reflected had the financial statements been prepared
in accordance with U.S. generally accepted accounting principles. In addition,
for an issuer that keeps accounting records in local currency, inflation
accounting rules may require, for both tax and accounting purposes, that
certain assets and liabilities be restated on the issuer's balance sheet in
<PAGE>
order to express items in terms of currency of constant purchasing power.
Inflation accounting may indirectly generate losses or profits. Consequently,
financial data may be materially affected by restatements for inflation and may
not accurately reflect the real condition of those issuers and securities
markets. Moreover, substantially less information may be publicly available
about issuers in foreign countries than is available about U.S. issuers.

The Fund's Investments and Operations

Illiquid Securities. The Fund may invest up to 25% of its total assets in
securities which are neither listed on a securities exchange nor traded in an
over-the-counter market. In addition, certain securities in which the Fund may
invest may be considered illiquid due to the existence of a thin trading
market, and there is no limitation on the Fund's ability to invest in such
securities. The Fund may encounter substantial delays and could incur losses
in attempting to sell such securities. Companies whose securities are neither
listed on an exchange nor traded in an over-the-counter market may not be
subject to the same disclosure and other legal requirements that are applicable
to companies whose securities are either listed on an exchange or traded in an
over-the-counter market, and, therefore, there may be less public information
available with respect to such issuers.

Hedging. Risks and special considerations of certain of the investment
practices in which the Fund may engage are described above under "Additional
Investment Practices." Hedging involves special risks, including possible
default by the other party to the transaction, illiquidity and, to the extent
the Investment Adviser's view as to certain market movements is incorrect, the
risk that the use of Hedging could result in losses greater than if they had
not been used. Use of put and call options could result in losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or for
prices higher than (in the case of put options) or lower than (in the case of
call options) current market values, or cause the Fund to hold a security it
might otherwise sell. The use of currency transactions could result in the
Fund's incurring losses as a result of the imposition of exchange controls,
suspension of settlements, or the inability to deliver or receive a specified
currency. The use of options and futures transactions entails certain special
risks. In particular, the variable degree of correlation between price
movements of futures contracts and price movements in the related portfolio
position of the Fund could create the possibility that losses on the hedging
instrument will be greater than gains in the value of the Fund's position.
Price changes in precious metals futures contracts will not necessarily
correlate with price changes in precious metals or price changes in South
African securities markets. Precious metals futures contracts will therefore
be an imperfect hedge against or proxy for movements in precious metals or
movements in South African securities markets. In addition, futures and
options markets could be illiquid in some circumstances and certain over-the-
counter options could have no markets. As a result, in certain markets, the
Fund might not be able to close out a position without incurring substantial
losses. Although the Fund's use of futures and options transactions for
hedging should tend to minimize the risk of loss due to a decline in the value
of the hedged position, at the same time it will tend to limit any potential
gain to the Fund that might result from an increase in value of the position.
<PAGE>
Finally, the daily variation margin requirements for futures contracts create a
greater ongoing potential financial risk than would purchases of options, in
which case the exposure is limited to the cost of the initial premium and
transaction costs. Losses resulting from the use of hedging will reduce the
Fund's net asset value, and possibly income, and the losses can be greater than
if Hedging had not been used. Additional information regarding the risks and
special consideration associated with Hedging appears in Appendix B to this
Prospectus.

Borrowing. The Fund may borrow from a bank or other entity in a privately
arranged transaction to the maximum extent permitted by the 1940 Act, but only
to finance the repurchase and/or tenders for its shares or to pay distributions
for purposes of complying with the Code. See "Common Stock -- Future Actions
Relating to a Discount in the Price of the Fund's Shares of Common Stock." In
addition, the Fund may borrow up to 5% of its total assets for temporary or
emergency purposes. Borrowing creates an opportunity for the Fund to finance
the limited activities described above without the requirement that portfolio
securities be liquidated at a time when it would be disadvantageous to do so,
but, at the same time, creates special risks. For example, borrowing may
exaggerate changes in the net asset value of the Fund's shares and in the
return on the Fund's portfolio. Although the principal of any borrowing will
be fixed, the Fund's assets may change in value during the time the borrowing
is outstanding. Borrowing will create expenses for the Fund which can exceed
the income from the assets acquired with the proceeds of the borrowing.
Furthermore, if the Fund were to engage in borrowing, an increase in interest
rates could reduce or eliminate the benefits of borrowing and could reduce the
value of the Fund's shares by increasing the Fund's interest expense.

Taxes. Income and capital gains on securities held by the Fund may be
subject to withholding or other taxes imposed by South Africa or other foreign
countries, which would reduce the return to the Fund on those securities. The
imposition of such taxes and the rates imposed are subject to change. The Fund
may elect, when eligible, to "pass-through" to the Fund's shareholders, as a
deduction or credit, the amount of foreign taxes paid by the Fund. The taxes
passed through to shareholders would be included in each shareholders's income.
Certain shareholders, including some non-U.S. shareholders, would not be
entitled to the benefit of a deduction or credit with respect to foreign taxes
paid by the Fund. If a shareholder is eligible and elects to credit foreign
taxes, such credit is subject to limitations. Other foreign taxes, such as
transfer taxes, may be imposed on the Fund, but would not give rise to a
credit, or be eligible to be passed through to shareholders. See "Taxation --
Foreign Taxes."

High Yield/High Risk and Unrated Debt. The Fund may invest in convertible
securities which are unrated or rated below investment grade. In addition, the
Fund has not established any rating criteria for the debt securities in which
it may invest and such securities may not be rated at all for creditworthiness.
Securities rated in medium to low rating categories of nationally recognized
statistical rating organizations and unrated securities of comparable quality
(such securities are referred to herein as "high yield/high risk securities")
are speculative with respect to the capacity to pay interest and repay
principal in accordance with the terms of the security and generally involve a
<PAGE>
greater volatility of price than securities in higher rated categories. In
purchasing such securities, the Fund will rely on the Investment Adviser's
analysis, judgment and experience in evaluating the creditworthiness of an
issuer of such securities. The Investment Adviser will take into
consideration, among other things, the issuer's financial resources, its
operating history, its sensitivity to economic conditions and trends, the
quality of the issuer's management and regulatory matters. Ratings criteria
established by nationally recognized statistical ratings organizations are
included as Appendix A to this Prospectus.

The market values of high yield/high risk securities tend to reflect
individual issuer developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Issuers of high yield/high risk securities may be highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of
such issuers generally is greater than is the case with higher rated
securities. For example, during a sustained period of rising interest rates or
an economic downturn, issuers of high yield/high risk securities may be more
likely to experience financial stress, especially if such issuers are highly
leveraged. During such periods, service of debt obligations also may be
adversely affected by the issuer's inability to meet specific projected
business forecasts, specific issuer developments or the unavailability of
additional financing. The risk of loss due to default by the issuer is
significantly greater for the holders of high yield/high risk securities
because such securities may be unsecured and may be subordinated to other
creditors of the issuer.

High yield/high risk securities may have redemption or call features which
would permit an issuer to repurchase the securities from the Fund. If a call
were exercised by the issuer during a period of declining interest rates, the
Fund in all likelihood would have to replace the called securities with lower
yielding securities, thus decreasing the net investment income to the Fund and
dividends to shareholders.

The Fund may have difficulty disposing of certain high yield/high risk
securities, as there may be a thin trading market for such securities. To the
extent that a secondary trading market for high yield/high risk securities does
exist, it is generally not as liquid as the secondary market for higher rated
securities. Reduced secondary market liquidity may have an adverse impact on
market price and the Fund's ability to dispose of particular issues when
necessary to meet the Fund's liquidity needs or in response to a specific
economic event, such as a deterioration in the creditworthiness of the issuer.
Reduced secondary market liquidity for certain high yield/high risk securities
may also make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing the Fund's portfolio. Market quotations are
generally available on many high yield/high risk securities only from a limited
number of dealers and may not necessarily represent firm bids of such dealers
of prices for actual sales. The Fund's Directors or the Investment Adviser
will carefully consider the factors affecting the market for high yield/high
risk securities in determining whether any particular security is liquid or
illiquid and whether current market quotations are readily available. Adverse
<PAGE>
publicity and investor perceptions, which may not be based on fundamental
analysis, also may decrease the value and liquidity of high yield/high risk
securities, particularly in a thinly traded market. Factors adversely
affecting the market value of high yield/high risk securities are likely to
adversely affect the Fund's net asset value. In addition, the Fund may incur
additional expenses to the extent it is required to seek recovery upon a
default on a portfolio holding or participate in the restructuring of the
obligations.

Sovereign Debt. Investment in debt obligations of a government, its
agencies or instrumentalities ("Sovereign Debt") involves a high degree of
risk. The governmental entity that controls the repayment of Sovereign Debt
may not be willing or able to repay the principal and/or interest when due in
accordance with the terms of such debt. A governmental entity's ability or
willingness to repay principal and interest due in a timely manner may be
affected by, among other factors, its cash flow situation, the availability of
sufficient foreign exchange on the date a payment is due, the governmental
entity's policy towards the International Monetary Fund, the extent of its
foreign reserves, the relative size of the debt service burden to the economy
as a whole and the political constraints to which a governmental entity may be
subject.

Governmental entities may also be dependent on expected disbursements from
multilateral agencies, foreign governments and others abroad to reduce
principal and interest arrearages. The commitment on the part of these
agencies, governments and others to make such disbursements may be conditioned
on a governmental entity's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may result in the cancellation of such third
parties' commitments to lend funds to the governmental entity, which may
further impair such debtor's ability or willingness to timely service its
debts. Consequently, governmental entities may default on their Sovereign
Debt.

Holders of Sovereign Debt, including the Fund, may be requested to
participate in the rescheduling of such debt and to extend further loans to
governmental entities. A foreign sovereign itself would not be subject to
traditional bankruptcy proceedings by which Sovereign Debt on which it has
defaulted may be collected in whole or in part, and certain sovereign entities
may not be subject to such proceedings.

The Sovereign Debt instruments in which the Fund may invest involve great
risk and are deemed to be the equivalent in terms of quality to high yield/high
risk securities discussed above and are therefore subject to many of the same
risks as such securities. Similarly, the Fund may have difficulty disposing of
certain Sovereign Debt obligations, as there may be a thin trading market for
such securities.

Concentration. A significant portion of the Fund's assets may be invested
in securities of issuers involved in various natural resources industries,
including the gold, diamond, copper and silver mining and oil production
<PAGE>
industries, although the Fund will not invest in excess of 25% of its total
assets in any one of these industries. These natural resources industries may
be affected by general levels of inflation in, and the strength of the
economies of, developed countries, and by other factors which would generally
affect natural resources prices.

Precious Metals. Investments related to gold and other precious metals
and minerals are considered speculative and are affected by a host of world-
wide economic, financial and political factors. Prices of gold and other
precious metals may fluctuate sharply over short periods of time due to changes
in inflation or expectations regarding inflation in various countries, the
availability of supplies of these precious metals, changes in industrial and
commercial demand, metal sales by governments, central banks or international
agencies, investment speculation, monetary and other economic policies of
various governments and governmental restrictions on the private ownership of
certain precious metals and minerals.

At the present time, there are five major producers of gold bullion. In
order of magnitude they are South Africa, the former Union of Soviet Socialist
Republics, Canada, the United States and Australia. Political and economic
conditions in these countries may have a direct effect on the mining,
distribution and price of gold and sales of central bank gold holdings.

Net Asset Value Discount. The Fund is a newly organized closed-end
company with no previous operating history. Shares of closed-end investment
companies frequently trade at a discount from net asset value, but in certain
instances have traded at or above net asset value. This characteristic of
shares of a closed-end fund is a risk separate and distinct from the risk that
the Fund's net asset value will decrease. The Fund cannot predict whether its
Common Stock will trade at, above or below net asset value. The risk of
purchasing shares of a closed-end fund that might later trade at a discount is
more pronounced for investors who wish to sell their shares in a relatively
short period of time following completion of the offering.

Non-Diversification. The Fund is classified as a non-diversified
investment company under the 1940 Act, which means that the Fund is not limited
by that law in the proportion of its assets that may be invested in the
obligations of a single issuer. However, the Fund intends to comply with the
diversification requirements imposed by the Code, which generally means that
with respect to 50% of the Fund's portfolio, no more than 5% of the Fund's
assets will be invested in any one issuer and with respect to the other 50% of
the Fund's portfolio, not more than 25% of the Fund's assets will be invested
in any one issuer. See "Taxation" for a more complete description of the
diversification requirements imposed by the Code. As a non-diversified
investment company, the Fund may invest a greater proportion of its assets in
the securities of a smaller number of issuers and, as a result, will be subject
to greater risk of loss with respect to its portfolio securities.

Anti-Takeover Provisions. The Fund's Articles of Incorporation contain
certain anti-takeover provisions that may have the effect of inhibiting the
Fund's possible conversion to open-end status and limiting the ability of other
persons to acquire control of the Fund. In certain circumstances, these
provisions might also inhibit the ability of holders of Common Stock to sell
their shares at a premium over prevailing market prices. The Fund's Board of
<PAGE>
Directors has determined that these provisions are in the best interests of
shareholders generally.

Operating Expenses. The Fund's estimated operating expenses are higher
than those of many other investment companies which invest exclusively in U.S.
securities. These expenses reflect the specialized nature of the Fund's
investment polices and strategies and the Investment Adviser believes that they
are comparable to fees paid by other closed-end investment companies registered
under the 1940 Act that invest primarily in the securities of issuers located
in a single foreign country.

Transfer Restrictions. Investors who purchase shares of Common Stock at a
reduced price will be restricted from transferring such shares for a period of
90 days after the closing of the Offerings. See "Underwriting." There is no
restriction on the number of shares that may be purchased subject to the
transfer restriction described above, except that the Fund will comply, with
respect to non-restricted shares, with the distribution requirements of the New
York Stock Exchange. See "Underwriting." To the extent these investors sell
their shares once the transfer restriction is no longer applicable, the market
price of the Common Stock could be adversely affected. In addition, the
transfer restriction will reduce the number of shares available for sale in the
secondary market during the 90 day restriction period.

Investors should carefully consider their ability to assume the foregoing
risks before making an investment in the Fund. An investment in shares of
Common Stock of the Fund may not be appropriate for all investors, should not
be considered as a complete investment program and should be considered
speculative.

MANAGEMENT OF THE FUND

Directors and Officers

The names of the directors and principal officers of the Fund are set
forth below, together with their positions and their principal occupations
during the past five years and in the case of the directors, their positions
with certain other international organizations and publicly held companies.
<PAGE>
<TABLE>
<CAPTION>
Principal Occupations
Names and Addresses Position with Fund and Other Affiliations
- ------------------- ------------------ ----------------------

<S> <C> <C>
Steven Spiegel<F1> Chairman of the Board and Managing Director, Lehman
Lehman Brothers President Brothers Inc.; President, Global
World Financial Center Asset Management Inc.; formerly
New York, New York 10285 Chairman, Lehman Brothers
International (Europe).

Clinton Kendrick<F1> Director, Treasurer and Secretary Chief Operating Officer, Lehman
World Financial Center Brothers Global Asset Management
New York, New York 10285 Inc.; formerly President and
Chief Executive Officer, Hyperion
Capital Management; formerly
President and Director, Alliance
Capital Management.
____________________
<FN>
<F1> Director who is an "interested person" within the meaning of the
Investment Company Act of 1940.
</TABLE>

The Fund intends to pay each of its directors who is not a director,
officer or employee of the Investment Adviser (as defined below) or any
affiliate thereof an annual fee of $_________, plus $______ for each Board of
Directors meeting attended. In addition, the Fund will reimburse these
directors for travel and out-of-pocket expenses incurred in connection with
Board of Directors meetings.

The Fund's Board of Directors has an Executive Committee, which may
exercise the powers of the Board to conduct and supervise the current and
ordinary business of the Fund while the Board is not in session. The current
members of the Executive Committee are _______. The Fund also has an Audit
Committee composed currently of ________.

The Articles of Incorporation and Bylaws of the Fund provide that the Fund
will indemnify directors and officers and may indemnify employees or agents of
the Fund against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices with the Fund
to the fullest extent permitted by law. In addition, the Fund's Articles of
Incorporation provide that the Fund's directors and officers will not be liable
to shareholders for money damages, except in limited instances. However,
nothing in the Articles of Incorporation or the Bylaws of the Fund protects or
indemnifies a director, officer, employee or agent against any liability to
which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.

Commencing with the first annual meeting of shareholders, the Board of
Directors will be divided into three classes, having terms of one, two and
<PAGE>
three years, respectively. At the annual meeting of shareholders in each year
thereafter, the term of one class will expire and directors will be elected to
serve in that class for terms of three years. See "Common Stock -- Special
Voting Provisions."

Investment Adviser

Lehman Brothers Global Asset Management Limited serves as investment
adviser to the Fund. Subject to the supervision and direction of the Fund's
Board of Directors, the Investment Adviser manages the portfolio of the Fund in
accordance with the Fund's stated investment objective and policies, makes
investment decisions for the Fund and places orders to purchase and sell
securities. As compensation for the services of the Investment Adviser as
investment adviser to the Fund, the Investment Adviser is paid a monthly fee by
the Fund at the annual rate of __% of the value of the Fund's average daily net
assets pursuant to an Advisory Agreement between the Investment Adviser and the
Fund.

The Investment Adviser, together with other Lehman Brothers Inc.
investment advisory affiliates, had in excess of $__ billion in assets under
management as of _________ __, 1994. In addition to the Fund, the Investment
Adviser serves as investment adviser or sub-investment adviser to several U.S.-
registered and offshore investment funds.

Mr. Robert Pennells, Managing Director - Equities of the Investment
Adviser, and Ms. Aisling O'Duffy, Investment Manager - Equities of the
Investment Adviser, have primary responsibility for the day-to-day management
of the Fund's investment portfolio. Mr. Pennells, who began his investment
career in 1970, is the Head of Global Equities for the Investment Adviser and
has primary responsibility for all of the Investment Adviser's equity
portfolios and the formulation of the Investment Adviser's global strategy.
Prior to joining the Investment Adviser in 1992, Mr. Pennells was Head of
International Equities at Hill Samuel Investment Management, where he was also
a member of the Board of Director's Management Committee. Mr. Pennells joined
Hill Samuel Asset Management in 1983. Ms. O'Duffy concentrates on analysis of
equity investments in the precious metals and natural resources sectors, and
also is involved in the development and implementation of investment strategy
in the equity markets in the far east. Prior to joining the Investment Adviser
in 1987, Ms. O'Duffy was Administration and Financing Manager of Impact
Systems, a computer software company.

The Investment Adviser is an affiliate of Lehman Brothers Inc., a leading
full service investment firm serving U.S. and foreign securities and
commodities markets. The Investment Adviser operates principally from the
United Kingdom, is a member of the United Kingdom Investment Management
Regulatory Organization and is registered with the Commission as an investment
adviser under the U.S. Investment Advisers Act of 1940, as amended (the
"Advisers Act"). The Investment Adviser is an indirect wholly owned subsidiary
of Lehman Brothers Holdings, Inc. ("Holdings"), all of the issued and
outstanding common stock (representing approximately 88% of the voting
stock on a fully diluted basis) of which is held by American Express
Company ("American Express"), with the balance of the voting stock of
Holdings being held by Nippon Life Insurance Company ("Nippon Life"). The
Investment Adviser is located at Two Broadgate, London EC2M 7HA, England.
<PAGE>
On January 21, 1994, American Express announced plans to issue a special
dividend to its common shareholders consisting of the common stock of Holdings
which it owns immediately preceding such dividend. Prior to that dividend the
equity capital of Holdings would be increased by approximately $1.25 billion.
After the special dividend, American Express and Nippon Life would retain
ownership of approximately 2.2% and 11.2%, respectively, of the outstanding
voting stock of Holdings on a fully diluted basis. The proposed transaction
is expected to be completed during the second quarter of 1994 and would result
in Holdings emerging as an independent publicly-owned corporation.

Sub-adviser

The Board of Executors Limited will act as sub-adviser (the "South African
Sub-Adviser") and will advise the Investment Adviser on a regular basis with
respect to South African markets, industries and issuers. The South African
Sub-Adviser will make investment recommendations to the Investment Adviser but
will not make investment decisions for the Fund. The Investment Adviser will
pay the South African Sub-Adviser a fee for its sub-advisory services at an
annual rate of __% of the value of the Fund's average monthly net assets
pursuant to a Sub-Advisory Agreement between the South African Sub-Adviser and
the Investment Adviser.

The South African Sub-Adviser was incorporated under the laws of South
Africa in 1987 and is an independent financial services, banking and investment
group which was established in 1838 and has operated continuously since that
date. The South African Sub-Adviser provides financial services to both
corporate and private clients through three major divisions, Private Client
Services, BOE Fund Management and BOE Merchant Bank. The South African Sub-
Adviser has filed an application to register as an investment adviser under the
Advisers Act, and has not previously served as an investment adviser to an
investment company registered under the 1940 Act. The South African Sub-
Adviser's securities have been listed on the JSE since 1987. 36.3% of the
issued and outstanding voting securities of the South African Sub-Adviser are
held by AVF Group Limited, 59% of the voting securities of which are in turn
held by Anglovaal Limited, 50.661% of the voting securities of which are held
in turn by Anglovaal Holdings Limited. 51% of the voting securities of
Anglovaal Holdings Limited are held by the Hersov and Menell families and 26.9%
are held by Gencor Ltd. The South African Sub-Adviser is located at 4 Wale
Street, Capetown 8001, South Africa.

Administrator

The Boston Company Advisors, Inc. serves as the Fund's administrator (the
"Administrator") pursuant to an agreement with the Fund (the "Administration
Agreement"). The Administrator is located at Exchange Place, Boston,
Massachusetts 02108. As compensation for its services, the Fund pays the
Administrator a fee that is computed ____________ and paid ________________ at
an annual rate of __% of the value of the Fund's average monthly net assets.

The Administrator will provide office facilities and personnel adequate to
perform certain services for the Fund including oversight of the determination
and publication of the Fund's net asset value in accordance with policies
adopted from time to time by the Board of Directors; maintenance of the books
<PAGE>
and records of the Fund required under the 1940 Act; preparation of the Fund's
U.S. federal, state and local income tax returns; preparation of financial
information for the Fund's proxy statements and semiannual and annual reports
to shareholders; and preparation of the Fund's reports to the Securities and
Exchange Commission.

Duration and Termination; Non-Exclusive Services

Unless earlier terminated as described below, the Advisory Agreement and
the Sub-Advisory Agreement are each effective on the date the Fund's
registration statement is declared effective by the Securities and Exchange
Commission and will remain in effect for two years and from year to year
thereafter if approved annually (1) by the Board of Directors of the Fund or by
the holders of a majority of the Fund's outstanding voting securities and (2)
by a majority of the Directors who are not parties to the Advisory Agreement or
"interested persons" (as defined in the 1940 Act) of any such party. The
Advisory Agreement and the Sub-Advisory Agreement will each terminate on their
assignment by any party. The Advisory Agreement is terminable without penalty
on 60 days' written notice by the Fund or by vote of the shareholders of the
Fund or on 60 days' written notice by the Investment Adviser. The Sub-Advisory
Agreement is terminable without penalty on 60 days' written notice by the Fund
or by vote of the shareholders of the Fund or on 60 days' written notice by the
South African Sub-Adviser or the Investment Adviser.

The services of the Investment Adviser, the South African Sub-Adviser and
the Administrator are not deemed to be exclusive, and nothing in the relevant
service agreements will prevent any of them or their affiliates from providing
similar services to other investment companies and other clients (whether or
not their investment objectives and policies are similar to those of the Fund)
or from engaging in other activities.

Estimated Expenses

The Investment Adviser, the South African Sub-Adviser and the
Administrator are each obligated to pay expenses associated with providing the
services contemplated by the agreements with the Fund to which they are
parties, including compensation of and office space for their respective
officers and employees connected with investment and economic research, trading
and investment management and administration of the Fund, as well as the fees
of all directors of the Fund who are affiliated with those companies or any of
their affiliates. The Fund pays all other expenses incurred in the operation
of the Fund including, among other things, organizational and offering expenses
(which will include out-of-pocket expenses, but not overhead or employee costs
of the Investment Adviser); expenses for legal, accounting and auditing
services; taxes and governmental fees; dues and expenses incurred in connection
with membership in investment company organizations; fees and expenses incurred
in connection with listing the Fund's shares on any stock exchange; expenses of
leverage; costs of printing and distributing shareholder reports, proxy
materials, prospectuses, stock certificates and distributions of dividends;
charges of the Fund's custodians, subcustodians, administrators, registrars,
transfer agents, dividend disbursing agents and dividend reinvestment plan
agents; payment for portfolio pricing services to a pricing agent, if any;
<PAGE>
registration and filing fees of the Commission; expenses of registering or
qualifying securities of the Fund for sale in the various states; freight and
other charges in connection with the shipment of the Fund's portfolio
securities; fees and expenses of non-interested directors; travel expenses or
an appropriate portion thereof of directors and officers of the Fund who are
directors; officers or employees of the Investment Adviser to the extent such
expenses relate to attendance at meetings of the Board of Directors or any
committee thereof; salaries of shareholder relations personnel; costs of
shareholders meetings; insurance; interest; brokerage costs; and litigation and
other extraordinary or non-recurring expenses.

PORTFOLIO TRANSACTIONS

Subject to the general control of the Fund's Board of Directors, the
Investment Adviser is responsible for, makes decisions with respect to, and
places orders for all purchases and sales of portfolio securities for the Fund.
Transactions on United States and some foreign stock exchanges involve the
payment of negotiated brokerage commissions, which may vary among different
brokers and dealers. The cost of securities purchased from underwriters
includes an underwriter's commission or concession, and the prices at which
securities are purchased from and sold to dealers in the U.S. and some foreign
over-the-counter markets include an undisclosed dealer spread. While the
Investment Adviser generally seeks the best price in placing its orders, the
Fund may not necessarily be paying the lowest price available. Securities
firms which provide supplemental research to the Investment Adviser may receive
orders for transactions by the Fund. In these circumstances, as contemplated
by Section 28(e) of the Securities Exchange Act of 1934, the commissions paid
may be higher than those which the Fund might otherwise have paid to another
broker if those services had not been provided. Information so received will
be in addition to and not in lieu of the services required to be performed by
the Investment Adviser under the Advisory Agreement, and the expenses of the
Investment Adviser will not necessarily be reduced as a result of the receipt
of such supplemental information. Research services furnished to the
Investment Adviser by brokers who effect securities transactions for the Fund
may be used by the Investment Adviser in servicing other investment companies
and accounts which it manages. Similarly, research services furnished to the
Investment Adviser by brokers who effect securities transactions for other
investment companies and accounts which the Adviser manages may be used by the
Investment Adviser in servicing the Fund. Not all of these research services
are used by the Investment Adviser in managing any particular account,
including the Fund.

With respect to over-the-counter transactions, the Fund, where possible,
will deal directly with the dealers who make a market in the securities
involved except in those circumstances where better prices and execution are
available elsewhere.

Investment decisions for the Fund are made independently from those for
the other investment company portfolios or accounts advised by the Investment
Adviser. Such other portfolios may also invest in the same securities as the
Fund. When purchases or sales of the same security are made at substantially
<PAGE>
the same time on behalf of such other portfolios, transactions are averaged as
to price, and available investments allocated as to amount, in a manner which
the Investment Adviser believes to be equitable to each portfolio, including
the Fund. In some instances, this investment procedure may adversely affect
the price paid or received by the Fund or the size of the position obtainable
for the Fund. To the extent permitted by law, the Investment Adviser may
aggregate the securities to be sold or purchased for the Fund with those to be
sold or purchased for such other portfolios in order to obtain best execution.

Lehman Brothers Inc., the South African Sub-Adviser and other affiliated
persons (as defined in the 1940 Act) of the Fund, or affiliated persons of such
persons, may from time to time be selected to perform brokerage services for
the Fund, subject to the considerations discussed above and the applicable
provisions of the 1940 Act, but are prohibited by the 1940 Act from dealing
with the Fund as principal in the purchase or sale of securities. However,
pursuant to an exemption granted by the Commission, the Fund may engage in
transactions involving certain money market instruments with Lehman Brothers
Inc. and certain of its affiliates acting as principal. The Fund will not
purchase securities during the existence of any underwriting or selling group
relating thereto of which Lehman Brothers Inc., the South African Sub-Adviser
or any affiliate thereof is a member, except to the extent permitted by the
Commission. Under certain circumstances, the Fund may be at a disadvantage
because of these limitations in comparison with other investment company
portfolios which have a similar investment objective but are not subject to
such limitations.

It is anticipated that the Fund's annual portfolio turnover rate generally
will not exceed 75%. This rate is calculated by dividing the lesser of sales
or purchases of portfolio securities for any given year by the average monthly
value of the Fund's portfolio securities for that year. For purposes of this
calculation, no regard is given to securities having a maturity or expiration
date at the time of acquisition of one year or less. Portfolio turnover
directly affects the amount of transaction costs that are borne by the Fund.
In addition, the sale of securities held by the Fund for not more than one year
will give rise to short-term capital gain or loss for U.S. federal income tax
purposes. The U.S. federal income tax requirement that the Fund derive less
than 30% of its gross income from the sale or other disposition of stock or
securities held less than three months may limit the Fund's ability to dispose
of its securities.

DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT
AND CASH PURCHASE PLAN

The Fund intends to distribute annually to shareholders substantially all
of its net investment income, and to distribute any net realized capital gains
at least annually. Net investment income for this purpose is income other than
net realized long and short-term capital gains net of expenses.

Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
shareholders whose shares of Common Stock are registered in their own names
will be deemed to have elected to have all distributions automatically
<PAGE>
reinvested by The Shareholder Services Group, Inc. (the "Plan Agent") in Fund
shares pursuant to the Plan, unless such shareholders elect to receive
distributions in cash. Shareholders who elect to receive distributions in cash
will receive all distributions in cash paid by check in dollars mailed directly
to the shareholder by The Shareholder Services Group, Inc., as dividend paying
agent. In the case of shareholders, such as banks, brokers or nominees, that
hold shares for others who are beneficial owners, the Plan Agent will
administer the Plan on the basis of the number of shares certified from time to
time by the shareholders as representing the total amount registered in such
shareholders' names and held for the account of beneficial owners that have not
elected to receive distributions in cash. Investors that own shares registered
in the name of a bank, broker or other nominee should consult with such nominee
as to participation in the Plan through such nominee, and may be required to
have their shares registered in their own names in order to participate in the
Plan.

The Plan Agent serves as agent for the shareholders in administering the
Plan. If the directors of the Fund declare an income dividend or a capital
gains distribution payable either in the Fund's Common Stock or in cash,
nonparticipants in the Plan will receive cash and participants in the Plan will
receive Common Stock, to be issued by the Fund or purchased by the Plan Agent
in the open market, as provided below. If the market price per share on the
valuation date equals or exceeds net asset value per share on that date, the
Fund will issue new shares to participants at net asset value; provided,
however, if the net asset value is less than 95% of the market price on the
valuation date, then such shares will be issued at 95% of the market price.
The valuation date will be the dividend or distribution payment date or, if
that date is not a New York Stock Exchange trading day, the next preceding
trading day. If net asset value exceeds the market price of Fund shares at
such time, or if the Fund should declare an income dividend or capital gains
distribution payable only in cash, the Plan Agent will, as agent for the
participants, buy Fund shares in the open market, on the New York Stock
Exchange or elsewhere, for the participants' accounts on, or shortly after, the
payment date. If, before the Plan Agent has completed its purchases, the
market price exceeds the net asset value of a Fund share, the average per share
purchase price paid by the Plan Agent may exceed the net asset value of the
Fund's shares, resulting in the acquisition of fewer shares than if the
distribution had been paid in shares issued by the Fund on the dividend payment
date. Because of the foregoing difficulty with respect to open-market
purchases, the Plan provides that if the Plan Agent is unable to invest the
full dividend amount in open-market purchases during the purchase period or if
the market discount shifts to a market premium during the purchase period, the
Plan Agent will cease making open-market purchases and will receive the
uninvested portion of the dividend amount in newly issued shares at the close
of business on the last purchase date.

Participants have the option of making additional cash payments to the
Plan Agent, annually, in any amount from $______ to $______, for investment in
the Fund's Common Stock. The Plan Agent will use all such funds received from
participants to purchase Fund shares in the open market on or about _________.
Any voluntary cash payment received more than 30 days prior to this date will
be returned by the Plan Agent, and interest will not be paid on any uninvested
<PAGE>
cash payment. To avoid unnecessary cash accumulations, and also to allow ample
time for receipt and processing by the Plan Agent, it is suggested that
participants send in voluntary cash payments to be received by the Plan Agent
approximately ten days before an applicable purchase date specified above. 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 such payment
is to be invested.

The Plan Agent maintains all shareholder accounts in the Plan and
furnishes written confirmations of all transactions in an account, including
information needed by shareholders for personal and tax records. Shares in the
account of each Plan participant will be held by the Plan Agent in the name of
the participant, and each shareholder's proxy will include those shares
purchased pursuant to the Plan.

There is no charge to participants for reinvesting dividends or capital
gains distributions or voluntary cash payments. The Plan Agent's fees for the
reinvestment of dividends and capital gains distributions and voluntary cash
payments will be paid by the Fund. There will be no brokerage charges with
respect to shares issued directly by the Fund as a result of dividends or
capital gains distributions payable either in stock or in cash. However, each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases in connection with the
reinvestment of dividends and capital gains distributions and voluntary cash
payments made by the participant. Brokerage charges for purchasing small
amounts of stock for individual accounts through the Plan are expected to be
less than the usual brokerage charges for such transactions, because the Plan
Agent will be purchasing stock for all participants in blocks and prorating the
lower commission thus attainable.

The receipt of dividends and distributions under the Plan will not relieve
participants of any income tax which may be payable on such dividends or
distributions. See "Taxation -- Shareholders."

Experience under the Plan may indicate that changes in the Plan are
desirable. Accordingly, the Fund and the Plan Agent reserve the right to
terminate the Plan as applied to any voluntary cash payments made and any
dividend or distribution paid subsequent to notice of the termination sent to
members of the Plan at least 30 days before the record date for such dividend
or distribution. The Plan also may be amended by the Fund or the Plan Agent,
but (except when necessary or appropriate to comply with applicable law, rules
or policies of a regulatory authority) only by at least 30 days' written notice
to participants in the Plan. All correspondence concerning the Plan should be
directed to the Plan Agent at P.O Box 1376, Boston, Massachusetts 02104.

TAXATION

The following is a general summary of certain United States federal income
tax considerations affecting the Fund and U.S. shareholders. No attempt is
made to present a detailed explanation of all federal, state, local and foreign
income tax considerations, and this discussion is not intended as a substitute
<PAGE>
for careful tax planning. Accordingly, potential investors are urged to
consult their own tax advisors regarding an investment in the Fund.

The Fund

The Fund intends to qualify and elect to be treated as a "regulated
investment company" for federal income tax purposes under Subchapter M of the
Code. In order to so qualify, the Fund must, among other things, (a) derive in
each taxable year at least 90% of its gross income from dividends, interest,
payments with respect to loans of securities, gains from the sale or other
disposition of stock or securities, or foreign currencies, or other income
derived with respect to its business of investing in such stock, securities or
currencies (including, but not limited to, gains from options, futures or
forward contracts); (b) derive in each taxable year less than 30% of its gross
income from the sale or other disposition of any of the following that are held
for less than three months (the "30% limitation"): (i) stock or securities,
(ii) options, futures or forward contracts, or (iii) foreign currencies (or
foreign currency options, futures or forward contracts) that are not directly
related to its principal business of investing in stock or securities (or
options and futures with respect to stocks or securities); and (c) diversify
its holdings so that, at the end of each quarter of each taxable year, (i) at
least 50% of the value of the Fund's assets is represented by cash, cash items,
U.S. Government securities, securities of other regulated investment companies,
and other securities which, with respect to any one issuer, do not represent
more than 5% of the value of the Fund's assets nor more than 10% of the voting
securities of such issuer, and (ii) not more than 25% of the value of the
Fund's assets is invested in the securities of any issuer (other than
U.S. Government securities or the securities of other regulated investment
companies).

If the Fund qualifies as a regulated investment company and distributes to
its shareholders at least 90% of its investment company taxable income
(including any short-term capital gain but not net capital gain, which is the
excess of net long-term capital gains over net short-term capital losses), then
the Fund will not be subject to federal income tax on the income so
distributed. However, the Fund would be subject to corporate income tax at a
rate of 35% on any undistributed income. If in any year the Fund should fail
to qualify as a regulated investment company, the Fund would be subject to
federal income tax in the same manner as an ordinary corporation, and
distributions to shareholders would be taxable to such holders as ordinary
dividend income to the extent of the current or accumulated earnings and
profits of the Fund; distributions in excess of earnings and profits would be
treated as a tax-free return of capital to the extent of a holder's basis in
its shares, and any excess as a long-or short-term capital gain. In addition,
the Fund will be subject to a nondeductible 4% excise tax on the amount by
which the aggregate income it distributes in any calendar year is less than the
sum of: (a) 98% of the Fund's ordinary income for such calendar year; (b) 98%
of the excess of capital gains over capital losses for the one-year period
ending on October 31 of each year; and (c) 100% of the undistributed ordinary
income and gains from prior years.
<PAGE>
The Fund intends to distribute sufficient income so as to avoid both
corporate income tax and the excise tax.

The Fund may engage in hedging involving foreign currencies, forward
contracts, options and futures contracts (including options and futures
contracts of foreign currencies). See "Additional Investment Practices --
Hedging." Such transactions will be subject to special provisions of the Code
that, among other things, may affect the character of gains and losses realized
by the Fund (that is, may affect whether gains or losses are ordinary or
capital), accelerate recognition of income to the Fund and defer recognition of
certain of the Fund's losses. These rules could therefore affect the
character, amount and timing of distributions to shareholders. In addition,
these provisions (1) will require the Fund to "mark-to-market" certain types of
positions in its portfolio (that is, treat them as if they were closed out) and
(2) may cause the Fund to recognize income without receiving cash with which to
pay dividends or make distributions in amounts necessary to satisfy the
distribution requirements for avoiding income and excise taxes. The extent to
which the Fund may be able to use such hedging techniques and continue to
qualify as a regulated investment company may be limited by the 30% limitation
discussed above. The Fund intends to monitor its transactions, will make the
appropriate tax elections and will make the appropriate entries in its books
and records when it acquires any foreign currency, forward contracts, option,
futures contract, or hedged investment in order to mitigate the effect of these
rules and prevent disqualification of the Fund as a regulated investment
company.

The Fund will maintain accounts and calculate income by reference to the
dollar for U.S. federal income tax purposes. Investments generally will be
maintained and income therefrom calculated by reference to the Rand and such
calculations will not necessarily correspond to the Fund's distributable income
and capital gains for U.S. federal income tax purposes as a result of
fluctuations in currency exchange rates.

Furthermore, exchange control regulations may restrict the ability of the
Fund to repatriate investment income or the proceeds of sales of securities.
These restrictions and limitations may limit the Fund's ability to make
sufficient distributions to satisfy the 90% distribution requirement and avoid
the 4% excise tax.

The tax treatment of certain investments of the Fund is not free from
doubt and it is possible that an Internal Revenue Service (the "IRS")
examination of the issuers of such securities or of the Fund could result in
adjustments to the income of the Fund. An upward adjustment by the IRS to the
income of the Fund may result in the failure of the Fund to satisfy the 90%
distribution requirement described in the Prospectus necessary for the Fund to
maintain its status as a regulated investment company under the Code. In such
event, the Fund may be able to make a "deficiency dividend" distribution to its
shareholders with respect to the year under examination to satisfy this
requirement. Such distribution will be taxable as a dividend to the
shareholders receiving the distribution (whether or not the Fund has sufficient
current or accumulated earnings and profits for the year in which such
distribution is made) in the taxable year in which such dividends are received.
<PAGE>
A downward adjustment by the IRS to the income of the Fund may cause a portion
of the previously made distribution with respect to the year under examination
not to be treated as a dividend. In such event, the portion of distributions
to each shareholder not treated as a dividend would be recharacterized as a
return of capital and reduce the shareholder's basis in the shares held at the
time of the previously made distributions. Accordingly, this reduction in
basis could cause a shareholder to recognize additional gain upon the sale of
such shareholder's shares.

If the Fund purchases shares in certain foreign investment entities,
called "passive foreign investment companies" ("PFICs"), the Fund may be
subject to U.S. federal income tax on a portion of any "excess distribution" or
gain from the disposition of the shares even if the income is distributed as a
taxable dividend by the Fund to its shareholders. Additional charges in the
nature of interest may be imposed on the Fund with respect to deferred taxes
arising from the distributions or gains. If the Fund were to invest in a PFIC
and the PFIC made the necessary information available, and the Fund were to
elect to treat the PFIC as a "qualified electing fund" under the Code, in lieu
of being taxed in the manner described above the Fund would be required to
include in income each year a portion of the ordinary earnings and net capital
gains of the PFIC, even if not distributed to the Fund, and the amounts would
be subject to the 90% and calendar year distribution requirements described
above.

Proposed regulations have been issued which may allow the Fund to make an
election to mark to market its shares of PFIC stock in lieu of being subject to
U.S. federal income tax. At the end of each taxable year to which the election
applies, the Fund would report as ordinary income the amount by which the fair
market value of the PFIC's stock exceeds the Fund's adjusted basis in these
shares. No mark-to-market losses may be recognized. The effect of the
election would be to treat excess distributions and gain on dispositions as
ordinary income which is not subject to a fund level tax when distributed to
shareholders as a dividend.

Legislation currently pending before the U.S. Congress could require a
mark-to-market regime similar to the proposed regulations. It is impossible to
predict if or when the legislation will become law and, if so enacted, what
form it will ultimately take.

U.S. Shareholders

Distributions. Distributions to shareholders of net investment income
will be taxable as ordinary income whether paid in cash or reinvested in
additional shares. It is not anticipated that a significant portion of such
dividends, if any, will qualify for the dividends-received deduction generally
available for corporate shareholders under the Code. Shareholders receiving
distributions from the Fund in the form of additional shares pursuant to the
dividend reinvestment plan will be treated for federal income tax purposes as
receiving a distribution in an amount equal to the fair market value of the
additional shares on the date of such a distribution. Consequently, if the
number of Shares distributed reflects a market premium, the amount distributed
<PAGE>
to shareholders participating in the plan would exceed the amount of the cash
distributed to nonparticipating shareholders.

Distributions to shareholders of net capital gain that are designated by
the Fund as "capital gain dividends" will be taxable as long-term capital
gains, whether paid in cash or additional shares, regardless of how long the
shares have been held by such shareholders. Capital gain dividends will not be
eligible for the dividends-received deduction. The current maximum federal
income tax rate imposed on individuals with respect to long-term capital gains
is limited to 28%, whereas the current maximum federal income tax rate imposed
on individuals with respect to ordinary income (and short-term capital gains,
which are taxed at the same rates as ordinary income) is 39.6%. With respect
to corporate taxpayers, long-term capital gains are currently taxed at the same
federal income tax rates as ordinary income and short-term capital gains.

Dividends and distributions by the Fund are generally taxable to the
shareholders at the time the dividend or distribution is made (even if paid or
reinvested in additional shares). Distributions in excess of the Fund's
current and accumulated earnings and profits will, as to each of the Fund's
shareholders, be treated as a tax-free return of capital, to the extent of the
shareholder's basis in his shares, and as a capital gain thereafter. The
Fund's dividends and distributions generally will not be taxable to U.S. tax-
exempt entities (unless the entities are subject to the U.S. federal tax on
unrelated business income and incur indebtedness allocable to the purchase of
Fund shares) and will not be a specified preference item for purposes of the
U.S. federal alternative minimum tax imposed on individuals and corporations.
Any dividend declared by the Fund in October, November or December of any
calendar year, however, which is payable to shareholders of record on a
specified date in such a month and which is not paid on or before December 31
of such year will be treated as received by the Shareholders as of December 31
of such year, provided that the dividend is paid during January of the
following year.

A notice detailing the tax status of dividends and distributions paid by
the Fund will be mailed annually to the shareholders of the Fund.

Dispositions and Repurchases. Gain or loss, if any, recognized on the
sale or other disposition of shares of the Fund will be taxed as capital gain
or loss if the shares are capital assets in the shareholder's hands.
Generally, a shareholder's gain or loss will be a long-term gain or loss if the
shares have been held for more than one year. If a shareholder sells or
otherwise disposes of a share of the Fund before holding it for more than six
months, any loss on the sale or other disposition of such share shall be
treated as a long-term capital loss to the extent of any capital gain dividends
received by the shareholder with respect to such share. A loss realized on a
sale or exchange of shares may be disallowed if other shares of the Fund are
acquired (whether under the Plan or otherwise) within a 61-day period beginning
30 days before and ending 30 days after the date that the shares are disposed
of.

A repurchase by the Fund of shares generally will be treated as a sale of
the shares by a shareholder provided that after the repurchase the shareholder
<PAGE>
does not own, either directly or by attribution under Section 318 of the Code,
any shares. If after a repurchase a shareholder continues to own, directly or
by attribution, any shares, it is possible that any amounts received in the
repurchase by such shareholder will be taxable as a dividend to such
shareholder, and there is a risk that shareholders who do not have any of their
shares repurchased would be treated as having received a dividend distribution
as a result of their proportionate increase in the ownership of the Fund.

Foreign Taxes. The Fund may be subject to certain taxes imposed by
foreign countries with respect to dividends, interest, capital gains and other
income. See "South African Taxes." If the Fund qualifies as a regulated
investment company, if certain distribution requirements are satisfied and if
more than 50% in value of the Fund's total assets at the close of any taxable
year consists of stocks or securities of foreign corporations, which for this
purpose should include obligations issued by foreign governmental issuers, the
Fund may elect to treat any foreign income taxes paid by it (if such taxes are
treated as income taxes under U.S. income tax principles) as paid by its
shareholders. The Fund expects to qualify for and may make this election. For
any year that the Fund makes such an election, an amount equal to the foreign
income taxes paid by the Fund that can be treated as income taxes under
U.S. income tax principles will be included in the income of its shareholders
and each shareholder will be entitled (subject to certain limitations) to
credit the amount included in his income against his U.S. tax liabilities, if
any, or to deduct such amount from his U.S. taxable income, if any. Shortly
after any year for which it makes such an election, the Fund will report to its
shareholders, in writing, the amount per share of such foreign income taxes
that must be included in each shareholder's gross income and the amount that
will be available for deductions or credit. In general, a shareholder may
elect each year whether to claim deductions or credits for foreign taxes. No
deductions for foreign taxes may be claimed, however, by non-corporate
shareholders (including certain foreign shareholders as described below) who do
not itemize deductions. If a shareholder elects to credit foreign taxes, the
amount of credit that may be claimed in any year may not exceed the same
proportion of the U.S. tax against which such credit is taken that the
shareholder's taxable income from foreign sources (but not in excess of the
shareholder's entire taxable income) bears to his entire taxable income. For
this purpose, the Fund expects that the capital gains it distributes to its
shareholders, whether dividends or capital gains distributions, will not be
treated as foreign source taxable income. If the Fund makes this election, a
shareholder will be treated as receiving foreign source income in an amount
equal to the sum of his proportionate share of foreign income taxes paid by the
Fund and the portion of dividends paid by the Fund representing income earned
from foreign sources. This limitation must be applied separately to certain
categories of income and the related foreign taxes.

Backup Withholding. The Fund may be required to withhold federal income
tax at a rate of 31% ("backup withholding") from dividends and redemption
proceeds paid to non-corporate shareholders. This tax may be withheld from
dividends if (i) the shareholder fails to furnish the Fund with the
shareholder's correct taxpayer identification number, (ii) the IRS notifies the
Fund that the shareholder has failed to report properly certain interest and
dividend income to the IRS and to respond to notices to that effect, or
<PAGE>
(iii) when required to do so, the shareholder fails to certify that he or she
is not subject to backup withholding. Redemption proceeds may be subject to
withholding under the circumstances described in (i) above. Backup withholding
is not an additional tax. Any amounts withheld under the backup withholding
rules from payments made to a shareholder may be credited against such
shareholder's federal income tax liability.

Foreign Shareholders

U.S. taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation, or a foreign partnership ("foreign shareholder"), depends on
whether the income from the Fund is "effectively connected" with a U.S. trade
or business carried on by such shareholder. Ordinarily, income from the Fund
will not be treated as so "effectively connected."

Income not Effectively Connected. If the income from the Fund is not
"effectively connected" with a U.S. trade or business carried on by the foreign
shareholder, distributions of investment company taxable income will be subject
to a U.S. tax of 30% (or lower treaty rate), which tax is generally withheld
from such distributions. Furthermore, foreign shareholders may be subject to
U.S. tax at the rate of 30% (or lower treaty rate) of the income resulting from
the Fund's election to treat any foreign taxes paid by it as paid by its
shareholders, but will not be able to claim a credit or deduction for the
foreign taxes as having been paid by them.

Distributions of capital gain dividends to a non-resident alien who is
present in the United States for fewer than one hundred eighty-three days
during the taxable year will not be subject to the 30% U.S. withholding tax.
An alien individual who is physically present in the United States for more
than one hundred eighty-two days during the taxable year generally is treated
as a resident for U.S. federal income tax purposes, in which case he or she
will be subject to U.S. federal income tax on his or her worldwide income
including ordinary income and capital gain dividends at the graduated rates
applicable to U.S. citizens, rather than the 30% U.S. withholding tax. In the
case of a foreign shareholder who is a non-resident alien individual, the Fund
may be required to withhold U.S. federal income tax at a rate of 31% of
distributions of capital gain dividends under the backup withholding system
unless the foreign shareholder makes required certifications to the Fund on a
properly completed U.S. Internal Revenue Service Form W-8. The amount so
withheld could be applied as a credit against any U.S. tax due from the
shareholder or, if no tax is due, refunded pursuant to a claim therefor
properly filed on an income tax return.

Income Effectively Connected. If the income from the Fund is "effectively
connected" with a U.S. trade or business carried on by a foreign shareholder,
then distributions of investment company taxable income and net capital gains,
and any gains realized upon the sale of Shares or the Fund, will be subject to
U.S. federal income tax at the graduated rates applicable to U.S. citizens,
residents and domestic corporations. Such shareholders may also be subject to
the 30% branch profits tax.
<PAGE>
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are advised to consult their own tax advisers
with respect to the particular tax consequences to them of an investment in the
Fund.

South African Taxes

The Fund will be subject to tax in South Africa as follows:

(i) dividends paid to the Fund in respect of securities of South African
issuers will be subject to a withholding tax of 15%;

(ii) interest paid to the Fund in respect of securities of South African
issuers will be exempt from tax; and

(iii) under principles of South African income tax law, gains realized by
the Fund from the sale or exchange of securities of South African issuers
should be exempt from tax. Application has been made by the Fund to the
South African Department of Finance for gains realized by the Fund on its
shares in South African companies to be specifically exempted from South
African income tax under Section 10(1)(s) of the Income Tax Act of 1962.
The Commissioner of Inland Revenue has recommended approval of the Fund's
application.

A transfer tax of approximately 1% will be payable upon any acquisition of
equity securities. The tax is not imposed on the acquisition of options or
futures contracts.

Notices

Shareholders will be notified annually by the Fund of the dividends,
distributions and deemed distributions made by the Fund to its shareholders.
Furthermore, shareholders will be sent, if appropriate, various written notices
after the close of the Fund's taxable year regarding certain dividends,
distributions and deemed distributions that were paid (or that were treated as
having been paid) by the Fund to its shareholders during the preceding taxable
year.

NET ASSET VALUE

Net asset value will be determined no less frequently than on the last
business day of each week and at such other times as the Board of Directors may
determine, by dividing the value of the net assets of the Fund (the value of
its assets less its liabilities including borrowings, exclusive of capital
stock and surplus) by the total number of shares of Common Stock outstanding.
In valuing the Fund's assets, all securities for which market quotations are
readily available are valued (i) at the last sale price prior to the time of
determination if there was a sale on the date of determination, (ii) at the
mean between the last current bid and asked prices if there was no sales price
on such date and bid and asked quotations are available, and (iii) at the bid
<PAGE>
price if there was no sales price on such date and only bid quotations are
available. Publicly traded government debt securities are typically traded
internationally on the over-the-counter market, and will be valued at the mean
between the last current bid and asked price as at the close of business of
that market. In instances where a price determined above is deemed not to
represent fair market value, the price is determined in such manner as the
Board of Directors may prescribe. Securities may be valued by independent
pricing services which use prices provided by market-makers or estimates of
market values obtained from yield data relating to instruments or securities
with similar characteristics. Short-term investments having a maturity of
60 days or less are valued at amortized cost, unless the Board of Directors
determines that such valuation does not constitute fair value. In valuing
assets, prices denominated in foreign currencies are converted to dollar
equivalents at the current exchange rate. Securities for which reliable
quotations or pricing services are not readily available and all other
securities and assets are valued at fair value as determined in good faith by,
or under procedures established by, the Board of Directors.

COMMON STOCK

The authorized capital stock of the Fund is 100,000,000 shares of Common
Stock ($.001 par value). The Common Stock, when issued, will be fully paid and
nonassessable. All shares of Common Stock are equal as to dividends,
distributions and voting privileges. There are no conversion, preemptive or
other subscription rights. In the event of liquidation, each share of Common
Stock is entitled to its proportion of the Fund's assets after debts and
expenses. There are no cumulative voting rights for the election of directors.
Prior to the Offerings, The Investment Adviser will own 100% of the outstanding
shares of Common Stock of the Fund and, consequently, will be a controlling
person of the Fund until the shares offered hereby are issued and sold.

The Fund has no present intention of offering additional shares of its
Common Stock. Other offerings of its Common Stock, if made, will require
approval of the Fund's Board of Directors. Any additional offerings will be
subject to the requirements of the 1940 Act that shares of Common Stock may not
be sold at a price below the then current net asset value (exclusive of the
sales load) except in connection with an offering to existing shareholders or
with the consent of a majority of the Fund's outstanding Common Stock. The
Board of Directors has authorized the officers of the Fund in their discretion,
subject to compliance with the 1940 Act and other applicable law, to purchase
in the open market up to 5% of the outstanding Common Stock in the event that
the Common Stock trades at a discount to net asset value. There is no
assurance that any such open market purchases will be made and such
authorization may be terminated at any time.

Future Actions Relating to a Discount in the Price of the Fund's Shares of
Common Stock

Shares of closed-end investment companies frequently trade at discounts
from net asset value, especially shortly after the completion of the initial
public offering. The Fund cannot predict whether its shares of Common Stock
<PAGE>
will trade above, at or below net asset value. The market price of the Fund's
shares of Common Stock will be determined by, among other things, the supply
and demand for the Fund's shares, the Fund's investment performance and
investor perception of the Fund's overall attractiveness as an investment as
compared with alternative investments. If, at any time after the second year
following the Offerings, shares of the Fund's Common Stock publicly trade for a
substantial period of time at a substantial discount from the Fund's then
current net asset value per share, the Fund's Board of Directors will consider,
at its next regularly scheduled meeting, authorizing various actions designed
to eliminate the discount. The actions considered by the Board of Directors
may include periodic repurchases of shares, tender offers to purchase shares
from all stockholders at net asset value or recommending to shareholders
amendments to the Fund's Articles of Incorporation to convert the Fund to an
open-end investment company. The Board of Directors would consider all
relevant factors in determining whether to take any such actions, including the
effect of such actions on the Fund's status as a regulated investment company
under the Code and the availability of cash to finance repurchases or tender
offers in view of the restrictions on the Fund's ability to borrow.
Shareholders of an open-end investment company may require the company to
redeem their shares at any time (except in certain circumstances as authorized
by or under the 1940 Act) at their net asset value, less such redemption
charge, if any, as might be in effect at the time of redemption. No assurance
can be given that the Fund will convert to an open-end investment company or
that share repurchases or tender offers will be made or that, if made, they
will reduce or eliminate market discount. Should any repurchases be made in
the future, it is expected that they would be made at prices at or below the
current net asset value per share. Any repurchases or tender offers would
cause the Fund's net assets to decrease, which may have the effect of
increasing the Fund's expense ratio.

In considering whether to recommend to shareholders the conversion of the
Fund to an open-end investment company, the Fund's Board of Directors would
consider a number of factors, including whether the Fund's ability to operate
in accordance with its investment policies, such as its authority to invest in
securities which may be illiquid, may be impaired as a result. In light of the
position of the Commission that illiquid securities may not exceed 15% of the
total assets of a registered open-end investment company, an attempt to convert
the Fund to such a company would have to take into account the percentage of
such securities in the Fund's portfolio at the time and other factors. The
Fund cannot predict whether on this basis it would be able to effect any such
conversion or whether relief from the Commission's position, if sought, could
be obtained. Under certain circumstances, a shareholder vote may be required
to authorize periodic repurchases or tender offers of the Fund's shares of
Common Stock. In considering whether to recommend to shareholders such
authorization, the Board of Directors similarly would consider a number of
factors including limitations that may be placed on the Fund's investment
policies as a consequence of such repurchase or tender offer policy.

Any amendment to the Fund's Articles of Incorporation that would convert
the Fund to an open-end investment company would require the approval of the
holders of the outstanding Common Stock. See "Special Voting Provisions" below
for a discussion of voting requirements applicable to conversion of the Fund to
<PAGE>
an open-end investment company. If the Fund converted to an open-end
investment company, it could be required to liquidate its portfolio investments
to meet requests for redemption, and the Common Stock would no longer be listed
on the New York Stock Exchange. Shareholders of an open-end investment company
may require the company to redeem their shares at any time (except in certain
circumstances as authorized by or under the 1940 Act) at the net asset value,
less such redemption charge, if any, as might be in effect at the time of
redemption.

Special Voting Provisions

The Fund presently has provisions in its Articles of Incorporation and
By-Laws (commonly referred to as "anti-takeover" provisions) which may have the
effect of limiting the ability of other entities or persons to acquire control
of the Fund, to cause it to engage in certain transactions or to modify its
structure.

First, a director may be removed from office only for cause by vote of at
least 75% of the Shares entitled to be voted on the matter. Second, the
affirmative vote of 75% of the entire Board of Directors is required to
authorize the conversion of the Fund from a closed-end to an open-end
investment company. The conversion also requires the affirmative vote of
holders of at least 75% of the Common Stock unless it is approved by a vote of
75% of the Continuing Directors (as defined below), in which event such
conversion requires the approval of the holders of a majority of the Common
Stock. A "Continuing Director" is any member of the board of directors of the
Fund who (i) is not a person or affiliate of a person who enters or proposed to
enter into a Business Combination (as defined below) with the Fund (an
"Interested Party") and (ii) who has been a member of the board of directors
for a period of at least 12 months, or has been a member of the board of
directors since April 15, 1994, or is a successor of a Continuing Director who
is unaffiliated with an Interested Party and is recommended to succeed a
Continuing Director by a majority of the Continuing Directors then on the Board
of Directors of the Fund.

Third, at the Fund's first annual stockholders meeting, the Board of
Directors will be classified into three classes, each with a term of three
years with only one class of directors standing for election in any year. Such
classification may prevent replacement of a majority of the directors for up to
a two year period. The affirmative vote of at least 75% of the Shares will be
required to amend the Charter or By-Laws to change any of the provisions in the
preceding two paragraphs.

Additionally, the affirmative vote of 75% of the entire Board of Directors
and the holders of at least (i) 80% of the Common Stock and (ii) in the case of
a Business Combination (as defined below), 66% of the Common Stock other than
Common Stock held by an Interested Party who is (or whose affiliate is) a party
to a Business Combination (as defined below) or an affiliate or associate of
the Interested Party, are required to authorize any of the following
transactions:
<PAGE>
(i) merger, consolidation or statutory share exchange of the Fund
with or into any other person;

(ii) issuance or transfer by the Fund (in one or a series of
transactions in any 12 month period) of any securities of the Fund to any
person or entity for cash, securities or other property (or combination
thereof) having an aggregate fair market value of $1,000,000 or more,
excluding issuances or transfers of debt securities of the Fund, sales of
securities of the Fund in connection with a public offering, issuances of
securities of the Fund pursuant to a dividend reinvestment plan adopted by
the Fund and issuances of securities of the Fund upon the exercise of any
stock subscription rights distributed by the Fund and portfolio
transactions effected by the Fund in the ordinary course of its business;

(iii) sale, lease, exchange, mortgage, pledge, transfer or other
disposition by the Fund (in one or a series of transactions in any
12 month period) to or with any person or entity of any assets of the Fund
having an aggregate fair market value of $1,000,000 or more except for
portfolio transactions (including pledges of portfolio securities in
connection with borrowings) effected by the Fund in the ordinary course of
its business (transactions within clauses (i), (ii) and (iii) above being
known individually as a "Business Combination");

(iv) the voluntary liquidation or dissolution of the Fund, or an
amendment to the Fund's Charter to terminate the Fund's existence; or

(v) unless the 1940 Act or federal law requires a lesser vote, any
stockholder proposal as to specific investment decisions made or to be
made with respect to the Fund's assets as to which stockholder approval is
required under federal or Maryland law.

However, the stockholder vote described above will not be required with
respect to the foregoing transactions (other than those set forth in (v) above)
if they are approved by a vote of 75% of the Continuing Directors. In that
case, if Maryland law requires, the affirmative vote of a majority of the votes
entitled to be cast thereon shall be required. The Fund's By-Laws contain
provisions the effect of which is to prevent matters, including nominations of
directors, from being considered at a stockholders' meeting where the Fund has
not received notice of the matters at least 60 days prior to the meeting (or
10 days following the date notice of such meeting is given by the Fund if less
than 70 days' notice of such meeting is given by the Fund).

Reference is made to the Articles of Incorporation and By-Laws of the
Fund, on file with the Commission, for the full text of these provisions. See
"Further Information." The percentage of votes required under these
provisions, which are greater than the minimum requirements under Maryland law
absent the elections described above or in the 1940 Act, will make more
difficult a change in the Fund's business or management and may have the effect
of depriving stockholders of an opportunity to sell shares at a premium over
prevailing market prices by discouraging a third party from seeking to obtain
control of the Fund in a tender offer or similar transaction. The Fund's Board
<PAGE>
of Directors, however, has considered these anti-takeover provisions and
believes they are in the best interests of stockholders.

In addition, in the opinion of the Investment Adviser, these provisions
offer several advantages. They may require persons seeking control of the Fund
to negotiate with its management regarding the price to be paid for the shares
required to obtain such control, they promote continuity and stability and they
enhance the Fund's ability to pursue long-term strategies that are consistent
with its investment objective.

CUSTODIAN, TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR

Boston Safe Deposit and Trust Company, 1 Boston Place, Boston,
Massachusetts 02108, will act as custodian for the Fund's assets. The
custodian may employ subcustodians outside the United States who are approved
by the Board of Directors in accordance with the provisions of the 1940 Act.
The Shareholder Services Group, Inc., 53 State Street, Boston, Massachusetts
02109-2873, will act as the transfer agent, dividend paying agent and registrar
for the Fund's Common Stock.

UNDERWRITING

The underwriters of the United States Offering named below (the "U.S.
Underwriters"), for whom Lehman Brothers Inc. and ______________ are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions of the U.S. Underwriting Agreement (the form of which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part), to purchase, and the Fund has agreed to sell to them, severally, the
number of shares of Common Stock set forth opposite their names below:

Number
U.S. Underwriters of Shares

Lehman Brothers Inc. . . . . . . . . . . . . . . . . . . . . . . .

__________
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . ==========

The Managers of the International Offering named below (the "International
Managers"), for whom Lehman Brothers International (Europe) and ______________
are acting as Lead Managers (the "Lead International Managers"), have severally
agreed, subject to the terms and conditions of the International Underwriting
Agreement (the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part), to purchase, and the Fund has
agreed to sell to them, severally, the number of shares of Common Stock set
forth opposite their names below:
<PAGE>
Number
International Managers of Shares

Lehman Brothers International (Europe). . . . . . . . . . . . . . .

__________
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . ==========

The U.S. Underwriting Agreement and the International Underwriting
Agreement (collectively, the "Underwriting Agreements") provide that if
any of the foregoing shares are purchased by the U.S. Underwriters pursuant
to the U.S. Underwriting Agreement or by the International Managers pursuant
to the International Underwriting Agreement, all the shares of Common Stock
agreed to be purchased by the U.S. Underwriters or the International Managers,
as the case may be, pursuant to their respective Underwriting Agreements must
be so purchased, and that the obligations of the U.S. Underwriters and the
International Managers thereunder are subject to approval of certain legal
matters by counsel and to various other conditions. The offering price,
underwriting discounts and commissions for the U.S. Offering and the
International Offering are identical. The closing of each Offering is a
condition to the closing of the other Offering.

The Fund has granted to each of the U.S. Underwriters and the
International Managers an option, exercisable in one or more installments
within 45 days from the date of this Prospectus, to purchase up to an
additional ________ and _______ shares, respectively, of Common Stock, at the
public offering price less the sales load, to cover over-allotments, if any.
To the extent that the U.S. Underwriters and the International Managers
exercise such option, each of the U.S. Underwriters and the International
Managers, as the case may be, will be committed, subject to certain conditions,
to purchase a number of shares proportionate to such U.S. Underwriter's or
<PAGE>
International Manager's initial commitment as indicated in the preceding
tables.

The Fund has been advised by the Representatives and the Lead
International Managers that the U.S. Underwriters and the International
Managers propose to offer the shares of Common Stock offered by this
Prospectus to the public initially at the price to public set forth
on the cover page of this Prospectus, except that, through a reduction
in the sales load, the price will be reduced to $________ for purchases
in single transactions (as defined below) of between _________ and
_______ shares, inclusive, and to $_______ for purchases in single transactions
of ______________ or more shares of Common Stock, subject to the following.
Purchasers who agree to purchase shares of Common Stock at the reduced price
will be restricted from selling, assigning or otherwise transferring or
contracting to sell, assign or otherwise transfer those shares for a period of
90 days after the closing of the Offerings. There is no restriction on the
number of shares that may be purchased subject to the transfer restriction,
except that the Fund will comply, with respect to non-restricted shares, with
the distribution requirements of the New York Stock Exchange. The certificates
evidencing shares of Common Stock purchased at the reduced price will contain a
legend stating the transfer restriction. Investors must pay for any shares of
Common Stock purchased in the initial public offering on or before __________
__, 1994. The sales loads of $__ and $__ are equal to __% and __%,
respectively, of the initial public offering price.

The Representatives and the Lead International Managers have also
advised the Fund that they propose to offer the Common Stock to certain
selected dealers (which may include the U.S. Underwriters and the
International Managers) at the initial offering price per share set forth
on the cover page of this Prospectus less a concession not in excess of
$.___ per share ($.___ per share for purchases in single transactions
of between __________ and ___________ shares, inclusive, and $.____ per
share for purchases in single transactions of ______________ or more shares
of Common Stock). The U.S. Underwriters and the International Managers
may allow, and such dealers may reallow, a discount not in excess of $.____
per share on sales to other dealers. After the initial public offering,
the price to public, concession and reallowance to dealers may be changed
by the Representatives and the Lead International Managers.

The term "single transaction," as used in this Prospectus, refers to a
single purchase by an individual or to concurrent purchases, which in the
aggregate are at least equal to the prescribed amounts, by an individual, his
parents, spouse, siblings and children purchasing shares for his or their own
account and to single transactions by a trustee, money manager, or other
fiduciary purchasing shares for one or more trust estates, one or more
fiduciary accounts and/or his own account. The term "single transaction" also
includes purchases by any "company," as that term is defined in the 1940 Act,
its directors, senior executive officers and controlling shareholders;
provided, however, that it does not include purchases by any such company which
has not been in existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other registered
<PAGE>
investment companies at a discount; and provided further, that it does not
include purchases by any group of individuals whose sole organizational nexus
is that the participants therein are credit cardholders of a company,
policyholders of an insurance company or noninvestment advisory customers of a
bank.

The U.S. Underwriters and the International Managers have entered
into an Agreement Between U.S. Underwriters and International Managers.
Pursuant to this Agreement, each U.S. Underwriter has agreed that, as
part of the distribution of the _______ shares (plus any of the _______
shares to cover over-allotments) of Common Stock offered in the U.S.
Offering, (a) it is not purchasing any of such shares for the account
of anyone other than a U.S. Person and (b) it has not offered or sold,
and will not offer, sell resell or deliver, directly or indirectly, any
of such shares or distribute any prospectus relating to the U.S. Offering to
any person other than a U.S. Person; each International Manager has agreed
that, as part of the distribution of the _________ shares (plus any of the
_______ shares to cover over-allotments) of Common Stock offered in the
International Offering, (a) it is not purchasing any of such shares for the
account of any U.S. Person and (b) it has not offered or sold, and will
not offer, sell, resell or deliver, directly or indirectly, any of such
shares or distribute any prospectus relating to the International
Offering to any U.S. Person. The foregoing limitations do not apply to
stabilization transactions or to certain other transactions specified in
the Underwriting Agreements and the Agreement Between U.S. Underwriters and
International Managers, including (i) certain purchases and sales between
the U.S. Underwriters and the International Managers, (ii) certain offers,
sales, resales, deliveries or distributions to or through investment advisors
or other persons exercising investment direction, (iii) purchases, offers or
sales by a U.S. Underwriter who is also acting as an International Manager,
or by an International Manager who is also acting as a U.S. Underwriter
and (iv) other transactions specifically approved by the U.S. Underwriters
and the International Managers. As used herein, "U.S. Person" means any
resident or citizen of the United States, any corporation or other entity
created or organized in or under the laws of the United States or any estate
or trust the income of which is subject to United States federal income
taxation regardless of the source of its income. The term "United States"
means the United States of America (including the District of Columbia) and
its territories, its possessions and other areas subject to its jurisdiction.
<PAGE>
Pursuant to the Agreement Between U.S. Underwriters and International
Managers, sales may be made between the U.S. Underwriters and the
International Managers of such number of shares of Common Stock as may
be mutually agreed. The price of any shares so sold shall be the public
offering price as then in effect for Common Stock being sold by the
U.S. Underwriters and the International Managers, less an amount not
greater than the selling concession allocable to such Common Stock.
To the extent that there are sales between the U.S. Underwriters and the
International Managers pursuant to the Agreement Between U.S. Underwriters
and International Managers, the number of shares initially available for
sale by the U.S. Underwriters or by the International Managers may be more
or less than the amount specified on the cover page of this Prospectus.

Each U.S. Underwriter and International Manager has represented and
agreed that (i) it has not offered or sold, and will not offer or sell,
in the United Kingdom, by means of any document, any shares of Common
Stock other than to persons whose ordinary business it is to buy or sell shares
or debentures, whether as principal or agent (except under circumstances which
do not constitute an offer to the public within the meaning of the Companies
Act 1985 of Great Britain); (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Common Stock in, from or otherwise
involving the United Kingdom, and (iii) it has only issued or passed on, and
will only issue or pass on to any person in the United Kingdom, any document
received by it in connection with the issue of the Common Stock if that person
is of a kind described in Article 9(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1988.

Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the offering price set forth on the cover page hereof.

Prior to the Offerings, there has been no market for the shares of Common
Stock. An application will be made to list the Common Stock on the New York
Stock Exchange under the symbol ["RSA."] In order to meet the requirements for
listing of the Common Stock on the New York Stock Exchange, the U.S.
Underwriters have undertaken to sell lots of 100 or more shares to a minimum of
2,000 beneficial holders in the United States.

To the extent permitted under the 1940 Act and the rules and regulations
promulgated thereunder, the Fund anticipates that the Representatives and
certain other U.S. Underwriters may from time to time act as brokers or dealers
in connection with the execution of its portfolio transactions after they have
ceased to be U.S Underwriters and, subject to certain restrictions under the
1940 Act, may act as brokers while they are U.S. Underwriters.

The U.S. Underwriters and the International Managers
have taken certain actions to discourage short term trading of shares
<PAGE>
of Common Stock during a period of time following the initial offering date.
Included in these actions is the requirement of physical delivery of
certificates representing shares of Common Stock to transfer their ownership
for a certain period and the withholding of the concession to dealers with
shares of Common Stock which were sold by such dealers and which are
repurchased for the account of the Underwriters during such period.

The Investment Adviser, an affiliate of Lehman Brothers Inc. (a
Representative) and Lehman Brothers International (a Lead International
Manager), will act as the Fund's Investment Adviser and will receive
compensation from the Fund in connection therewith. See "Management of the
Fund -- Investment Adviser." Clinton Kendrick, a director and officer of the
Fund, and Steven Spiegel, a director and officer of the Fund, are each
affiliated with Lehman Brothers Inc.

In the Underwriting Agreements, the Fund and to a certain extent the
Investment Adviser, on the one hand, and the U.S. Underwriters and the
International Managers, as the case may be, on the other hand, have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act, and to contribute to payments
that they may be required to make in respect thereof.

The Fund has agreed to pay the U.S. Underwriters and the International
Managers an aggregate of up to $_______ as partial reimbursement of their
expenses incurred in connection with the Offerings of the shares of Common
Stock.

EXPERTS

The financial statement of the Fund included in the Prospectus has been so
included in reliance on the report of Ernst & Young, independent auditors,
given on the authority of said firm as experts in auditing and accounting.

LEGAL MATTERS

The validity of the shares offered hereby will be passed on for the Fund
by Simpson Thacher & Bartlett (a partnership which includes professional
corporations), New York, New York, and certain legal matters will be passed
upon for the U.S. Underwriters and the International Managers by
Willkie Farr & Gallagher, New York, New York. Counsel for the Fund,
the U.S. Underwriters and the International Managers will rely,
as to matters of Maryland law, on Piper & Marbury, Baltimore, Maryland.
Certain legal matters concerning South African law will be passed upon
by __________, South Africa.

<PAGE>
FURTHER INFORMATION

Further information concerning these securities and their issuer may be
found in the Registration Statement of which this Prospectus constitutes a part
on file with the Securities and Exchange Commission.
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholder
Lehman Brothers South Africa Growth Fund, Inc.

We have audited the accompanying statement of assets and liabilities of Lehman
Brothers South Africa Growth Fund, Inc. (the "Fund") as of _________ __, 1994.
This financial statement is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of assets and
liabilities is free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the statement
of assets and liabilities. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of Lehman
Brothers South Africa Growth Fund, Inc. at __________ __, 1994, in conformity
with generally accepted accounting principles.

ERNST & YOUNG

Boston, Massachusetts
___________ __, 1994

<PAGE>
LEHMAN BROTHERS SOUTH AFRICA GROWTH FUND, INC. (Note 1)

STATEMENT OF ASSETS AND LIABILITIES

Assets:
Cash
Deferred organization expenses (Note 2)
Total Assets

Liabilities:
Accrued organization expenses (Note 2)
Commitments (Notes 2 and 3) __________

Net Assets (shares of $.___ par value shares
of common stock issued and outstanding;
___________ shares authorized) $
=========

Net asset value per share $
=========

Notes to Financial Statement

NOTE 1

Lehman Brothers South Africa Growth Fund, Inc. (the "Fund") was
incorporated as a Maryland corporation on February 16, 1994 and has had no
operations to date other than matters relating to its organization and
registration as a non-diversified, closed-end management investment company
under the Investment Company Act of 1940, as amended, and the sale and issuance
to Lehman Brothers Global Asset Management Limited of ____________ shares of
its common stock for an aggregate purchase price of $________. The books and
records of the Fund will be maintained in U.S. dollars.

NOTE 2

Organization expenses relating to the Fund incurred and to be incurred by
the Investment Adviser will be reimbursed by the Fund. Such expenses,
estimated at $______, will be deferred and amortized on a straight-line basis
for a five year period beginning at the commencement of operations of the Fund.
Offering costs, estimated at $______, will be paid from the proceeds of the
Offerings and charged to capital at the time of the issuance of such shares.

NOTE 3

The Fund will enter into a management agreement with Lehman Brothers
Global Asset Management Limited ("the Investment Adviser") pursuant to which
the Investment Adviser will provide investment advisory services to the Fund
and will be responsible for the management of the Fund's portfolio in
accordance with the Fund's investment policies and for making decisions to buy,
sell, or hold particular securities. The Boston Company Advisors, Inc. will
<PAGE>
serve as the Fund's Administrator (the "Administrator") pursuant to an
administration agreement entered into between the Fund and the Administrator.

The Fund will pay the Investment Adviser a monthly fee for its advisory
services at an annual rate of ____% of the Fund's average monthly net assets.
The Fund will pay the Administrator a monthly fee for its administration
services at an annual rate of ____% of the Fund's average weekly net assets.

Lehman Brothers Inc. and ___________________ are acting as the
Representatives of the U.S. Underwriters participating in the U.S. Offering of
the common stock of the Fund.

Lehman Brothers International and ___________________ are acting as the
Lead International Managers of the International Managers participating in the
International Offering of the common stock of the Fund.

Certain officers and/or directors of the Fund are officers and/or
directors of the Investment Adviser.
<PAGE>
APPENDIX A

RATINGS

The following is a description of certain ratings of Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P") that are
applicable to certain obligations in which the Fund may invest.

Moody's Corporate Bond Ratings

Aaa -- Bonds which are rated Aaa are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected
by a large or by an exceptionally stable margin, and principal is secure.
While the various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong position of
such issues.

Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.

A -- Bonds which are rated A possess many favorable investment qualities
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.

Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.

Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterize bonds in this class.

B -- Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance and
other terms of the contract over any long period of time may be small.

Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.

<PAGE>
Ca -- Bonds which are rated Ca represent obligations which are speculative
in high degree. Such issues are often in default or have other marked
shortcomings.

C -- Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Moody's applies numerical modifiers "1", "2" and "3" to certain of its
rating classifications. The modifier "1" indicates that the security ranks in
the higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the issue ranks in the
lower end of its generic rating category.

S&P Corporate Bond Ratings

AAA -- This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.

AA -- Bonds rated AA also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.

A -- Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.

BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.

BB-B-CCC-CC -- Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

D -- Bonds rated D are in default. The D category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired. The D rating is also used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

The ratings set forth above may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
<PAGE>
Moody's Commercial Paper Ratings

Prime-1 -- Issuers (or related supporting institutions) rated Prime-1 have
a superior capacity for repayment of short-term promissory obligations. Prime-
1 repayment capacity will normally be evidenced by leading market positions in
well-established industries, high rates or return on funds employed,
conservative capitalization structures with moderate reliance on debt and ample
asset protection, broad margins in earnings coverage of fixed financial charges
and high internal cash generation, and well-established access to a range of
financial markets and assured sources of alternate liquidity.

Prime-2 -- Issuers (or related supporting institutions) rated Prime-2 have
a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternative liquidity is
maintained.

Prime-3 -- Issuers (or related supporting institutions) rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.

Not Prime -- Issuers rated Not Prime do not fall within any of the Prime
rating categories.

S&P Commercial Paper Ratings

An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into four categories, ranging from "A" for the highest
quality obligations to "D" for the lowest. The four categories are as follows:

A -- Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2 and 3 to indicate the relative degree of safety.

A-1 -- This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined
to possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.

A-2 -- Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated "A-1".

A-3 -- Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
<PAGE>
effects of changes in circumstances than obligations carrying the higher
designations.

B -- Issues rated "B" are regarded as having only an adequate capacity for
timely payment. However, such capacity may be damaged by changing conditions
or short-term adversities.

C -- This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.

D -- Debt rated "D" is in payment default. The "D" rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period.
_________________________

Like higher rated bonds, bonds rated in the Baa or BBB categories are
considered to have adequate capacity to pay principal and interest. However,
such bonds may have speculative characteristics, and changes in economic
conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade bonds.

After purchase by the Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Fund. Neither
event will require a sale of such security by the Fund. However, the
Investment Adviser will consider such event in its determination of whether the
Fund should continue to hold the security. To the extent that the ratings
given by Moody's or S&P may change as a result of changes in such organizations
or their rating systems, the Fund will attempt to use comparable ratings as
standards for investments in accordance with the investment policies contained
in this Prospectus.
<PAGE>
APPENDIX B

GENERAL CHARACTERISTICS AND RISKS OF HEDGING

A detailed discussion of the Hedging (as defined below) that may be done
by the Investment Adviser on behalf of the Fund follows below. The Fund will
not be obligated, however, to do any Hedging and makes no representation as to
the availability of these techniques at this time or at any time in the future.
"Hedging," as used in this Appendix A, refers to the purchase and sale (or
writing) of exchange-listed and over-the-counter ("OTC") put and call options
on currencies and debt and equity securities and indices, entering into
interest rate, currency, stock index or precious metals futures contracts and
options on interest rate, currency or stock index futures contracts, entering
into interest rate swaps, caps, floors and collars, currency forward contracts
and currency swaps, caps, floors and collars, precious metals forward contracts
and swaps, caps, floors and collars and equity swaps, caps, floors and collars
or trading in other types of derivative instruments.

The Fund's ability to pursue certain of these strategies may be limited by
the U.S. Commodity Exchange Act, as amended, applicable regulations of the
Commodity Futures Trading Commission ("CFTC") thereunder and the federal income
tax requirements applicable to regulated investment companies which are not
operated as commodity pools.

Put and Call Options on Securities and Indices

The Fund may purchase and sell put and call options on debt and equity
securities and indices based upon the prices of debt or equity securities. A
put option on a security gives the purchaser of the option the right to sell
and the writer the obligation to buy the underlying security at the exercise
price during the option period. The Fund may also purchase and sell options on
indices based upon the prices of debt or equity securities ("index options").
Index options are similar to options on securities except that, rather than
taking or making delivery of securities underlying the option at a specified
price upon exercise, an index option gives the holder the right to receive cash
upon exercise of the option if the level of the index upon which the option is
based is greater, in the case of a call, or less in the case of a put, than the
exercise price of the option. The purchase of a put option on a security would
be designed to protect against a substantial decline in the market value of a
security held by the Fund. A call option on a security gives the purchaser of
the option the right to buy and the writer the obligation to sell the
underlying security at the exercise price during the option period. The
purchase of a call option on a security would be intended to protect the Fund
against an increase in the price of a security that it intended to purchase in
the future. In the case of either put or call options that it has purchased,
if the option expires without being sold or exercised, the Fund will experience
a loss in the amount of the option premium plus any related commissions. When
the Fund sells put and call options, it receives a premium as the seller of the
option. The premium that the Fund receives for writing the option will serve
as a partial hedge, in the amount of the option premium, against changes in the
value of the securities in its portfolio. During the term of the option,
however, a covered call seller has, in return for the premium on the option,
<PAGE>
given up the opportunity for capital appreciation above the exercise price of
the option if the value of the underlying security increases, but has retained
the risk of loss should the price of the underlying security decline.
Conversely, a secured put seller retains the risk of loss should the market
value of the underlying security decline below the exercise price of the
option, less the premium received on the sale of the option. The Fund is
authorized to purchase and sell exchange listed options and over-the-counter
options ("OTC Options") which are privately negotiated with the counterparty to
such contract. Listed options are issued by the Options Clearing Corporation
("OCC"), which guarantees the performance of the obligations of the parties to
such options.

All such call options sold (written) by the Fund will be "covered" as long
as the call is outstanding (i.e., the Fund will own the instrument subject to
the call or other securities or assets acceptable under applicable segregation
and coverage rules). All such put options sold (written) by the Fund will be
secured by segregated assets consisting of cash or liquid high grade debt
securities having a value not less than the exercise price.

The Fund's ability to close out its position as a purchaser or seller of
an exchange listed put or call option is dependent upon the existence of a
liquid secondary market. Among the possible reasons for the absence of a
liquid secondary market on an exchange are: (i) insufficient trading interest
in certain options; (ii) restrictions on transactions imposed by an exchange;
(iii) trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities;
(iv) interruption of the normal operations on an exchange; (v) inadequacy of
the facilities of an exchange or the OCC to handle current trading volume; or
(vi) a decision by one or more exchanges to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that exchange (or in that class or series of options) would cease to
exist, although outstanding options on that exchange that had been listed by
the OCC as a result of trades on that exchange would generally continue to be
exercisable in accordance with their terms. OTC Options are purchased from or
sold to dealers, financial institutions or other counterparties which have
entered into direct agreements with the Fund. With OTC Options, such variables
as expiration date, exercise price and premium will be agreed upon between the
Fund and the counterparty, without the intermediation of a third party such as
the OCC. If the counterparty fails to make or take delivery of the securities
underlying an option it has written, or otherwise settle the transaction in
accordance with the terms of that option as written, the Fund would lose the
premium paid for the option as well as any anticipated benefit of the
transaction. As the Fund must rely on the credit quality of the counterparty
rather than the guarantee of the OCC, it will only enter into OTC options with
counterparties with the highest long-term credit ratings, and with primary
United States government securities dealers recognized by the Federal Reserve
Bank of New York.

The hours of trading for options on securities may not conform to the
hours during which the underlying securities are traded. To the extent that
the option markets close before the markets for the underlying securities,
<PAGE>
significant price and rate movements can take place in the underlying markets
that cannot be reflected in the option markets.

Futures Contracts and Options on Futures Contracts

Characteristics. The Fund may purchase and sell futures contracts on
currencies, interest rates and indices of debt and equity securities and
purchase and sell (write) put and call options on such futures contracts traded
on recognized domestic (or, if applicable regulations permit, foreign)
exchanges as a hedge against anticipated interest rate changes or movements in
equity markets. The Fund may also purchase or sell futures contracts on gold
bullion, platinum and silver traded on recognized domestic (or, if applicable
regulations permit, foreign) exchanges as a hedge against anticipated changes
in precious metals prices or as a temporary substitute for investing in South
African debt and equity securities. The sale of a futures contract creates an
obligation by the Fund, as seller, to deliver the specific type of financial
instrument or commodity called for in the contract at a specified future time
for a specified price. Options on futures contracts are similar to options on
securities except that an option on a futures contract gives the purchaser the
right in return for the premium paid to assume a position in a futures contract
(a long position if the option is a call and a short position if the option is
a put).

Margin Requirements. At the time a futures contract is purchased or sold,
the Fund must allocate cash or securities as a deposit payment ("initial
margin"). It is expected that the initial margin that the Fund will pay may
range from approximately 1% to approximately 5% of the value of the instruments
underlying the contract. In certain circumstances, however, such as during
periods of high volatility, the Fund may be required by an exchange to increase
the level of its initial margin payment. Additionally, initial margin
requirements may be increased in the future pursuant to regulatory action. An
outstanding futures contract is valued daily and the payment in cash of
"variation margin" may be required, a process known as "marking to the market."
Transactions in listed options and futures are usually settled by entering into
an offsetting transaction, and are subject to the risk that the position may
not be able to be closed if no offsetting transaction can be arranged.

Limitations on Use of Futures Contracts and Options on Futures Contracts.
The Fund's use of futures contracts and options on futures contracts will in
all cases be consistent with applicable regulatory requirements and in
particular, the rules and regulations of the CFTC. In addition, the Fund may
not sell futures contracts if the value of such futures contracts exceeds the
total market value of the Fund's portfolio securities.

The Fund will not engage in transactions in futures contracts or options
thereon for speculative purposes but only as a hedge against changes resulting
from market conditions in the values of securities in its portfolio; provided,
however, that the Fund may enter into futures contracts or options thereon for
purposes other than bona fide hedging if, immediately thereafter, the sum of
the amount of its initial margin and premiums on open contracts and options
would not exceed 5% of the liquidation value of the Fund's portfolio; provided,
further, that in the case of an option that is in-the-money at the time of the
<PAGE>
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. In addition, the value of the futures contracts on gold bullion,
platinum and silver purchased and sold by the Fund will not at any time exceed
10% of the net assets of the Fund. Also, when required, a segregated account
of cash or cash equivalents will be maintained and marked to market in an
amount equal to the market value of the contract. The Investment Adviser
reserves the right to comply with such different standards as may be
established from time to time by CFTC rules and regulations with respect to the
purchase and sale of futures contracts and options thereon.

Interest Rate Transactions

The Fund may engage in interest rate transactions with counterparties to
hedge against changes in the value of portfolio securities which the Fund
anticipates purchasing. Interest rate transactions include options on debt
securities and indices of debt securities, futures contracts on interest rates
and options on such futures contracts and interest rate swaps, caps, floors and
collars.

The Fund may enter into interest rate swaps and may purchase or sell
interest rate caps, floors and collars. Interest rate swaps involve the
exchange by the Fund with another party of their respective commitments to pay
or receive interest. The purchase of an interest rate cap entitles the
purchaser to receive payments on a notional principal amount from the party
selling the cap to the extent that a specified index exceeds a predetermined
interest rate. The purchase of an interest rate floor entitles the purchaser
to receive payments of interest on a notional principal amount from the party
selling the interest rate floor to the extent that a specified index falls
below a predetermined interest rate. A collar is a combination of a cap and a
floor that preserves a certain return with a predetermined range of interest
rates or values. The Fund would enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio, to manage the duration of its portfolio or to protect against any
increase in the price of the securities the Fund anticipates purchasing at a
later date. The Fund will not sell interest rate caps, floors or collars that
it does not own.

The Fund may enter into interest rate swaps, caps, floors or collars on
either an asset-based or liability-based basis, depending on whether it is
hedging its assets or liabilities, and will usually enter into interest rate
swaps on a net basis (i.e., the two payment streams are netted out), with the
Fund receiving or paying, as the case may be, only the net amount of the two
payments on the payment date. The Fund will not enter into any interest rate
swap, cap, floor or collar transaction unless the unsecured senior debt or the
claims-paying ability of the other party thereto is rated in the highest rating
category of at least one nationally recognized rating organization at the time
of entering into such transaction. If there is a default by the other party to
such a transaction, the Fund will have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms
acting both as principals and as agents utilizing standardized swap
documentation. Caps, floors and collars are more recent innovations for which
<PAGE>
standardized documentation has not yet been developed and, accordingly, they
are less liquid than swaps.

Currency Transactions

The Fund may engage in currency transactions with counterparties to hedge
the value of portfolio securities denominated in particular currencies against
fluctuations in relative value. Currency transactions include currency forward
contracts, exchange listed currency futures contracts, exchange listed and OTC
options on currencies and currency swaps, caps, floors and collars. A forward
currency contract involves a privately negotiated obligation to purchase or
sell (with delivery generally required) a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. A currency swap is
an agreement to exchange cash flows based on the notional difference among two
or more currencies and operates similarly to an interest rate swap, which is
described above. Currency caps, floors and collars operate similarly to
interest rate caps, floors and collars, which are also described above. The
Fund may enter into currency transactions with counterparties that have
received (or the guarantors of the obligations of that have received) a credit
rating of P-1 or A-1 by Moody's or S&P, respectively, or that have an
equivalent rating from an NRSRO or (except for OTC currency options) are
determined to be of equivalent credit quality by the Investment Adviser.

The Fund's dealings in forward currency contracts and other currency
transactions such as futures contracts, options, options on futures contracts
and swaps will be limited to hedging involving either specific transactions or
portfolio positions. Transaction hedging is entering into a currency
transaction with respect to specific assets or liabilities of the Fund, which
will generally arise in connection with the purchase or sale of the Fund's
portfolio securities or the receipt of income from them. Position hedging is
entering into a currency transaction with respect to portfolio security
positions denominated or generally quoted in that currency. The Fund will not
enter into a transaction to hedge currency exposure to an extent greater, after
netting all transactions intended wholly or partially to offset other
transactions, than the aggregate market value (at the time of entering into the
transaction) of the securities held in the Fund's portfolio that are
denominated or generally quoted in or currently convertible into the currency,
other than with respect to proxy hedging as described below.

The Fund may cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure. To reduce the effect of currency fluctuations on
the value of existing or anticipated holdings of portfolio securities, the Fund
may also engage in proxy hedging. Proxy hedging is often used when the
currency to which the Fund's portfolio is exposed is difficult to hedge or to
hedge against the dollar. Proxy hedging entails entering into a forward
contract to sell a currency, the changes in the value of which are generally
considered to be linked to a currency or currencies in which some or all of the
Fund's portfolio securities are or are expected to be denominated, and to buy
dollars. The amount of the contract would not exceed the value of the Fund's
<PAGE>
securities denominated in linked currencies. Currency hedging involves some of
the same risks and considerations as other transactions with similar
instruments, Currency transactions can result in losses to the Fund if the
currency being hedged fluctuates in value to a degree or in a direction that is
not anticipated. Further, the risk exists that the perceived linkage between
various currencies may not be present or may not be present during the
particular time that the Fund is engaging in proxy hedging. If the Fund enters
into a currency hedging transaction, the Fund will comply with the asset
segregation requirements described below.

Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be adversely affected by
government exchange controls, limitations or restrictions on repatriation of
currency, and manipulations or exchange restrictions imposed by governments.
These forms of governmental actions can result in losses to the Fund if it is
unable to deliver or receive currency or monies in settlement of obligations
and could also cause hedges it has entered into to be rendered useless,
resulting in full currency exposure as well as incurring transaction costs.
Buyers and sellers of currency futures are subject to the same risks that apply
to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on these options is subject to the
maintenance of a liquid market that may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.

Precious Metals Transactions

The Fund may engage in precious metals transactions with counterparties to
hedge against changes in the value of portfolio securities or precious metals
which the Fund anticipates purchasing. Precious metals transactions include
futures contracts and forward contracts on precious metals and commodity swaps,
caps, floors and collars which are based upon precious metals. A forward
precious metals contract involves a privately negotiated obligation to
purchase or sell (with delivery generally required) a specific precious metal
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the
contract.

The Fund may enter into commodity swaps and may purchase or sell commodity
caps, floors and collars. A commodity swap is an agreement to exchange cash
flows based on the price of one or more commodities and operates similarly to
an interest rate swap, which is described above. Commodity caps, floors and
collars operate similarly to interest rate caps, floors and collars, which are
also described above. The Fund would enter into these transactions primarily
to protect against any increase in the price of the securities or precious
metals the Fund anticipates purchasing at a later date. The Fund will not sell
commodity caps, floors or collars that it does not own.
<PAGE>
The Fund may enter into commodity swaps, caps, floors and collars on
either an asset-based or liability-based basis, depending on whether it is
hedging its assets or liabilities, and will usually enter commodity swaps on a
net basis (i.e., the two payment streams are netted out), with the Fund
receiving or paying, as the case may be, only the net amount of the two
payments on the payment date. The Fund will not enter into any commodity swap,
cap, floor or collar transaction unless the unsecured senior debt or the
claims-paying ability of the other party thereto is rated in the highest rating
category of at least one nationally recognized rating organization at the time
of entering into such transaction. If there is a default by the other party to
such a transaction, the Fund will have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms
acting both as principals and as agents utilizing standardized swap
documentation. Caps, floors and collars are more recent innovations for which
standardized documentation has not yet been developed and, accordingly, they
are less liquid than swaps.

Equity Swaps and Related Transactions

The Fund may enter into equity swaps and may purchase or sell equity caps,
floors and collars. An equity swap is an agreement to exchange cash flows
based on the price of an equity index and operates similarly to an interest
rate swap, which is described above. Equity caps, floors and collars operate
similarly to interest rate caps, floors and collars, which are also described
above. The Fund would enter into these transactions primarily to preserve a
return or spread on a particular investment or portion of its portfolio, or to
protect against any increase in the price of the securities the Fund
anticipates purchasing at a later date. The Fund will not sell equity caps,
floors or collars that it does not own.

The Fund may enter into equity swaps, caps, floors and collars on either
an asset-based or liability-based basis, depending on whether it is hedging its
assets or liabilities, and will usually enter into equity swaps on a net basis,
i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments on the
payment date. The Fund will not enter into any equity swap, cap, floor or
collar transaction unless the unsecured senior debt or the claims-paying
ability of the other party thereto is rated in the highest rating category of
at least one nationally recognized rating organization at the time of entering
into such transaction. If there is a default by the other party to such a
transaction, the Fund will have contractual remedies pursuant to the agreements
related to the transaction. The swap market has grown substantially in recent
years with a large number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap documentation. Caps,
floors and collars are more recent innovations for which standardized
documentation has not yet been developed and, accordingly, they are less liquid
than swaps.
<PAGE>
Risks of Hedging

Hedging involves special risks, including possible default by the other
party to the transaction, illiquidity and, to the extent the Investment
Adviser's view as to certain market movements is incorrect, the risk that the
use of Hedging could result in losses greater than if such investment
strategies had not been used. Use of put and call options could result in
losses to the Fund, force the sale or purchase of portfolio securities at an
inopportune time or for prices higher than (in the case of put options) or
lower than (in the case of call options) current market values, or cause the
Fund to hold a security it might otherwise sell. The use of currency
transactions could result in the Fund's incurring losses as a result of the
imposition of exchange controls, suspension of settlements, or the inability to
deliver or receive a specified currency. The use of options and futures
transactions entails certain special risks. In particular, the variable degree
of correlation between price movements of futures contracts and price movements
in the related portfolio position of the Fund could create the possibility that
losses on the hedging instrument are greater than gains in the value of the
Fund's position. Price changes in precious metals futures contracts will not
necessarily correlate with price changes in precious metals or price changes in
South African securities markets. Precious metals futures contracts will
therefore be an imperfect hedge against or proxy for movements in precious
metals or movements in South African securities markets. In addition, futures
and options markets could be illiquid in some circumstances and certain
over-the-counter options could have no markets. As a result, in certain
markets, the Fund might not be able to close out a position without incurring
substantial losses. Although the Fund's use of futures and options
transactions for hedging purposes should tend to minimize the risk of loss due
to a decline in the value of the hedged position at the same time it will tend
to limit any potential gain to the Fund that might result from an increase in
value of the position. Finally, the daily variation margin requirements for
futures contracts create a greater ongoing potential financial risk than would
purchases of options, in which case the exposure is united to the cost of the
initial premium and transaction costs. Losses resulting from Hedging will
reduce the Fund's net asset value, and possibly income, and the losses can be
greater than if the Hedging had not been used.

When conducted outside the United States, Hedging may not be regulated as
rigorously as in the United States, may not involve a clearing mechanism and
related guarantees, and will be subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities, currencies and
other instruments. The value of positions taken as part of non-U.S. Hedging
also could be adversely affected by: (1) other complex foreign political, legal
and economic factors; (2) lesser availability of data on which to make trading
decisions than in the United States; (3) delays in the Fund's ability to act
upon economic events occurring in foreign markets during non-business hours in
the United States; (4) the imposition of different exercise and settlement
terms and procedures and margin requirements than in the United States; and (5)
lower trading volume and liquidity.
<PAGE>
Segregation and Cover Requirements

Much of the Hedging which may be entered into by the Fund is subject to
segregation and coverage requirements established by either the CFTC or the
Commission, with the result that, if the Fund does not hold the instrument
underlying the futures contract or option, the Fund will be required to
segregate on an ongoing basis with its custodian, cash, U.S. government
securities, or other liquid high grade debt obligations in an amount at least
equal to the Fund's obligations with respect to such instruments. Such amounts
will fluctuate as the market value of the obligations increases or decreases.
The segregation requirement can result in the Fund maintaining positions it
would otherwise liquidate and consequently segregating assets with respect
thereto at a time when it might be disadvantageous to do so. In addition, with
respect to futures contracts purchased by the Fund, the Fund will also be
subject to the segregation requirements with respect to the value of the
instruments underlying the futures contract.

Other Limitations

The degree of the Fund's use of Hedging may be limited by certain
provisions of the Code. See "Taxation" in the Prospectus.
<PAGE>

APPENDIX C

REPUBLIC OF SOUTH AFRICA

The information set forth in this Appendix C has been extracted from
various government and private publications. The Fund and its Board of
Directors make no representation as to the accuracy of the information, nor has
the Fund or its Board of Directors attempted to verify the statistical
information presented in this Appendix C. Furthermore, no representation is
made that any correlation exists between the Republic of South Africa or its
economy in general and the performance of the Fund.

GEOGRAPHY AND POPULATION

The Republic of South Africa is located at the southern tip of the African
continent and is bounded in the north by the Republics of Namibia, Botswana and
Zimbabwe, in the northeast by the Republic of Mozambique and the Kingdom of
Swaziland, in the east by the Indian Ocean and in the west by the South
Atlantic Ocean. The independent Kingdom of Lesotho is an enclave situated
within the southeastern part of South Africa. The total land area of South
Africa is approximately 471,000 square miles, roughly three times the size of
the State of California.

In 1947, South Africa took into its possession Prince Edward Island and
Marion Island, which are located in the South Indian Ocean approximately 1200
miles southeast of Capetown. On March 1, 1994, South Africa transferred to
Namibia the territory of Walvis Bay and several nearby offshore islands which
South Africa previously ruled as its territory. See "Government and Political
Conditions -- International Relations."

South Africa is divided into four provinces -- the Cape Province, the
Orange Free State, Natal and the Transvaal, and has three capitals -- Pretoria
(administrative), Cape Town (legislative) and Bloemfontein (judicial). After
the April 1994 elections, there will be nine provinces.

Intended to segregate the population on the basis of race, the 1913 Native
Land Act, which was repealed in the early 1990s, laid the foundation for the
creation of ten areas of South Africa as "bantustans" or "homelands" for
Blacks. The homelands have exercised varying degrees of self-governance. Four
of the homelands -- Transkei, Bophuthatswana, Venda and Ciskei (collectively,
the "TBVC states") -- have been recognized by South Africa as nominally
independent, sovereign states but are not recognized by any other country in
the world. Although all of these "homelands" are to be reincorporated into
South Africa following the installation of a democratically-elected government,
the issue of reincorporation has been one of the contentious points in
negotiations concerning the transition to the new government.

The population of South Africa generally is comprised of four racial
groups: Whites, Asians (comprised principally of descendants of Indian workers
<PAGE>
brought to South Africa in the mid-19th century), individuals of mixed racial
lineage (referred to in South Africa as "Coloureds") and Blacks (the two
largest groups of which are the Zulu and the Xhosa). A substantial majority of
the population is Black, with Whites comprising approximately 13% of the total
population.

In mid-1993, the total population of South Africa, including the TBVC
states, was approximately 39 million, the total population was growing at 2.4%
per annum, and the average life expectancy of the total population was
approximately 63 years.

The following tables set forth information regarding the composition and
increase in size of the total population in terms of its principal racial
groups:

Total Population of South Africa

<TABLE>
<CAPTION>
Percentage
share
according Average
to the mid- annual growth
year estimate rate
1993<F1> 1980-1993
(%) (%)
-------------- --------------
<S> <C> <C>
Black . . . . . . . . . . . . . . . . 75.7 2.86
White . . . . . . . . . . . . . . . . 13.1 .99
Coloured . . . . . . . . . . . . . . . 8.6 1.81
Asian . . . . . . . . . . . . . . . . 2.6 1.70

____________________
<FN>
<F1> Includes TBVC states.

Source: Department of Finance of South Africa, The South African
Economy in Brief, September 1993; Central Statistical
Service of South Africa.
</TABLE>
<PAGE>
<TABLE>
Projected Increase in Total Population 1990-2010<F1>
(millions)

<CAPTION>
1990 1995 2000 2005 2010
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Black . . . . . . . . . . . . . . . . . . 22.1 25.6 30.5 36.9 42.9
White . . . . . . . . . . . . . . . . . . 5.0 5.2 5.3 5.4 5.5
Coloured . . . . . . . . . . . . . . . . . 3.2 3.5 3.8 4.0 4.3
Asian . . . . . . . . . . . . . . . . . . 1.0 1.0 1.1 1.1 1.2
---- ---- ---- ---- ----
Total . . . . . . . . . . . . . . . . 31.3 35.3 40.7 47.4 53.9
==== ==== ==== ==== ====
____________________

<FN>
<F1> Excludes TBVC states.

Source: Central Statistical Service of South Africa, Statistics in Brief, 1992.
</TABLE>

Population statistics are generally believed to be inaccurate as a result
of significant undercounting of the Black population.

There is considerable economic disparity between the Whites and the other
principal racial groups in South Africa. The per capita income of Blacks,
Coloureds and Asians is dramatically lower than that of Whites. The
unemployment rate for Blacks has been severe and was estimated in 1992 to be
more than 40%. The following table sets forth the average monthly salaries
and wages in the non-primary sectors for the principal racial groups:
<PAGE>
<TABLE>
Average Monthly Salaries and Wages in Non-Primary Sectors<F1>
(Rand)
<CAPTION>
Whites Coloureds Asians Blacks
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
1991 . . . . . . . . . . . . . . . . . . . . . 3,420 1,405 1,998 1,172
1992 . . . . . . . . . . . . . . . . . . . . . 4,144 1,789 2,432 1,447

____________________

<F1> Includes manufacturing, electricity, gas and water, construction,
wholesale and retail trade and catering and accommodation services,
transport, storage and communication, financing, insurance, real estate
and business services and community, social and personal services.

Source: Central Statistical Service of South Africa, Bulletin of Statistics,
September 1993.
</TABLE>

It has also been estimated that the literacy rates of the adult Black,
Coloured and Asian populations are significantly lower than that of the
adult White population, particularly in rural areas.

These disparities are one factor that has contributed to political unrest
and will present a significant challenge for South Africa's political system
and economy in the future.
<PAGE>
It is estimated that in 1991 approximately 57% of the total population
lived in urban areas, and approximately 80% of the metropolitan population was
found in areas surrounding the cities of Pretoria, Johannesburg, Capetown,
Durban and Port Elizabeth. These metropolitan areas in the aggregate
constitute the country's major areas of economic activity and major consumer
markets.

The official languages of South Africa are English and Afrikaans, a
language which originated with the Dutch settlers of the seventeenth century.
Both languages are spoken by most White, Coloured and Asian people as a home
language, and it is believed that most urban Blacks have at least a rudimentary
knowledge of either English or Afrikaans. There are also twelve African
languages, the principal of which are Xhosa, Zulu and Sesotho. After the April
1994 elections, there will be 11 official languages (English, Afrikaans and
nine African languages).

GOVERNMENT AND POLITICAL CONDITIONS

Until recently, South Africa was organized as a racially segregated state
and society in which the basic rights and obligations of the individual were
prescribed according to race. Political and economic power was held by the
White minority, which exercised its control over the state and the economy to
maintain its domination over the disenfranchised Black majority. The last of
the legal foundations of this "apartheid" regime was abolished in 1991, and
non-racial, multi-party elections for a new government of national unity have
been scheduled for April 26-28, 1994. It is estimated that the results of the
elections will be announced within 48 hours after the polls close on April 28,
1994, and that approximately 23 million people are eligible to vote.

The Apartheid Regime

The term "apartheid" literally means "apartness" and well describes the
system of political, social, economic and cultural exclusion imposed on the
Black population during the period 1948-1991. Under the apartheid regime,
Blacks were excluded from the political process, prohibited from owning land,
physically segregated in the "homelands" and in townships created on the
outskirts of urban areas, and denied access to skilled jobs. The systematic
exclusion of the Black population from civil society was reinforced by an
internal passport system which significantly impeded the mobility of the Black
population and by the establishment of a segregated educational system whose
curriculum was closely controlled by the government.

Enforcement of the apartheid regime was effected through concentration of
control of the media and the police powers of the state in the hands of the
White minority. Practices undertaken during the apartheid era to preserve
domination over the African population included the forcible resettlement of
individuals to the homelands and townships, the prohibition of organized
political activity and public gatherings, and the right to arrest and detain
persons without trial and imprison them in solitary confinement.
<PAGE>
Transition to a New Form of Government

Faced with increasingly violent resistance from the Black population, and
largely isolated within the international community, the South African
government imposed a nationwide state of emergency in 1986. At the same time,
demographic pressures and the growing dependence of the economy on Africans as
consumers and workers led the government to review its apartheid policies. In
the latter half of the 1980s, the government initiated measures to dismantle
certain elements of the apartheid regime in an effort to defuse what had become
a socially explosive and politically unstable situation. This process
accelerated after the current State President, Frederik W. de Klerk, assumed
office in 1989. A bellwether of this change in policy was the legalization in
February 1990 of the African National Congress (the "ANC"), a longstanding
opponent of the apartheid regime which had been banned in 1960, and the release
of its leader, Nelson Mandela, after 26 years imprisonment. The state of
emergency was lifted later in 1990.

Apartheid in public places was abolished in October 1990 through repeal of
the Separate Amenities Act. Parliament abolished the remaining statutory bases
of apartheid in June 1991 through repeal of a number of other laws, including
the Land Acts of 1913 and 1936, the Group Areas Act, the Black Communities Act
and the Population Registration Act.

Non-racial, multi-party, democratic elections for a new government of
national unity are scheduled for April 26-28, 1994. It is intended that the
legislature chosen in such elections will adopt a new Constitution for South
Africa. The existing Parliament adopted an Interim Constitution in December
1993 under which South Africa will be governed pending adoption of the new
Constitution. In addition, in December 1993, the Transitional Executive
Council, a multi-party, quasi-governmental body, was established to assist and
consult in governmental functions until the new government is established
following the April 26-28, 1994 elections. See "Political Structure" in this
Appendix C.

In December, 1993 State President Frederik W. de Klerk and ANC President
Nelson Mandela were jointly awarded the 1993 Nobel Peace Prize in recognition
of their contributions to the eradication of apartheid and the transition to
democracy in South Africa.

A national economic forum, consisting of representatives from the
government, the private sector and the predominately Black trade unions, has
been meeting since late 1992 to achieve consensus on national economic goals,
including economic growth and social development and to address socio-economic
imbalances. Among the significant issues that have been discussed by the
national economic forum are the agreements with respect to foreign debt which
the government reached with its foreign creditors in late 1993, the agreement
reached with the International Monetary Fund (the "IMF") in December, 1993 for
an $849 million compensatory and contingency financing facility and the
government's submission to the General Agreement on Tariffs and Trade ("GATT").
See "Government and Political Conditions -- International Relations", "The
South African Economy -- Foreign Trade" and "The South African Economy --
Balance of Payments" in this Appendix C.
<PAGE>
Political violence nevertheless persists. This violence is a product of
not only continuing tensions between the Whites and Blacks, but also emerging
tensions within the Black population. In many instances, violence within the
Black population has been attributable to tensions between the ANC and the
Inkatha Freedom Party and the Pan-Africanist Congress, although in early 1994,
to enable it to participate in the April 1994 elections, the Pan-Africanist
Congress announced that it would suspend its armed struggle. Violence has also
been promoted by the existence of para-military organizations such as the
Azanian People's Liberation Army which is associated with the Pan-Africanist
Congress, and the emergence of extremist, white-supremacist groups such as the
neo-Nazi Afrikaner Resistance Movement. The South African Institute of Race
Relations estimates that political violence has resulted in the death of nearly
18,000 people since 1984.

International Relations

South Africa is a member of a number of international organizations and is
a signatory to GATT. South Africa maintains diplomatic relations with several
countries, including the United States and most of the other member countries
of the Organization for Economic Cooperation and Development. With the end of
apartheid and the prospect of non-racial democratic elections, a number of
countries are engaged in discussions with South Africa regarding the
establishment and, in some cases the restoration, of diplomatic relations.

South Africa was a founding member of the United Nations in 1945. In
protest against South Africa's racial policies, the General Assembly in 1974
suspended South Africa's right to participate in its activities. The General
Assembly has lifted its economic sanctions, including its oil embargo as a
result of the establishment of the Transitional Executive Council.

South Africa is also a member of the International Bank for Reconstruction
and Development (the "World Bank") and the IMF. On December 22, 1993, the IMF
approved an $849 million compensatory and contingency financing facility to
help relieve the negative effects of South Africa's recent drought and declines
in earnings from exports of gold, platinum and other minerals. This is the
first IMF financing for South Africa in more than a decade. South Africa has
also been engaged in discussions with the World Bank regarding the availability
of assistance from that institution.

The international community imposed a variety of economic and trade
sanctions against South Africa during the apartheid era. Among those invoking
sanctions were the United Nations, the European Community, the British
Commonwealth, the Organization of Petroleum Exporting States and the United
States. These economic sanctions in substantial part have been lifted within
the past two years, and there currently is no U.S. federal law prohibiting
investment in South Africa by U.S. persons. On November 23, 1993, President
Clinton signed into law the South African Democratic Transition Support Act of
1993 (the "Transition Act"), which, among other things, repeals the
Comprehensive Anti-Apartheid Act of 1986 and legislation requiring the U.S.
Executive Director of the IMF to oppose any IMF facility for any country which
practices apartheid and provides the authorization for the President to provide
assistance to South Africa under the Foreign Assistance Act of 1961. Other
<PAGE>
significant provisions of the Transition Act include negotiation of a tax
treaty with South Africa to facilitate United States investment in South Africa
and the encouragement of the Secretary of the Treasury to instruct the U.S.
executive directors of each of the relevant international financial
institutions to urge those institutions to initiate or expand their lending and
other financial assistance activities to South Africa. Many states and
municipalities in the United States have also lifted sanctions previously in
effect. The Clinton Administration has stated that it will oppose any attempts
by state and local governments in the United States to replace sanctions with
other impediments to trade and investment, such as voluntary guidelines on
workers' rights and other issues.

In late 1993, U.S. Secretary of Commerce Ronald Brown and South African
Finance Minister Derek Keys signed an agreement calling for relations between
South Africa and the U.S. Overseas Private Investment Corporation ("OPIC").
OPIC is a U.S. government agency which promotes U.S. private investment in
developing countries by financing projects through direct loans and loan
guarantees and insuring against losses due to specific political risks.

The South African government and Nelson Mandela have been seeking closer
ties with the European Community, and Nelson Mandela has proposed linking South
Africa to the European Community through the Lome Convention.

South Africa remains subject to the arms embargo declared by the United
Nations Security Council in 1977, as well as the Security Council resolutions
urging states to refrain from nuclear cooperation that would contribute to the
manufacture and development by South Africa of nuclear weapons or nuclear
devices. In March 1993 State President de Klerk admitted in Parliament that
South Africa had manufactured six Hiroshima-sized atomic bombs during the
period 1974-1990. He insisted, however, that no nuclear weapon had been
tested, a matter disputed by the United States, and that all weapons were
dismantled in 1990. Inspectors of the International Atomic Energy Agency have
been invited to inspect the facilities and records of the South African weapons
program. South Africa became a signatory to the Nuclear Non-Proliferation
Treaty in July 1991. Legislation has been introduced in the South African
Parliament to ban the manufacture of nuclear and biological weapons.

In the aftermath of border conflicts and armed engagements with its
neighbors during the 1970s and 1980s, South Africa's relations with its
neighboring countries generally have been stable, although Angola recently has
made accusations that South Africa is providing covert support, including
weaponry, to the insurrectionist National Union for the Total Independence of
Angola ("UNITA"). South Africa transferred to Namibia's control on March 1,
1994 the territory of Walvis Bay and several nearby offshore islands. Walvis
Bay is the only deep-water port along the Namibian coastline and was the
location of a South African air force base.

South Africa is a member of the Southern Africa Customs Union, together
with Botswana, Lesotho, Swaziland and Namibia. Free movement of goods is
permitted among those countries, a common external tariff is imposed, and
customs revenue is shared among them based on a periodically adjusted formula.
South Africa is also a member of the Common Monetary Area, together with
<PAGE>
Lesotho, Swaziland and Namibia, under which they apply uniform exchange control
regulations to ensure monetary order in the region. Funds are freely
transferable among the four countries and the other countries have free access
to South African capital markets.

Political Structure

South Africa has been governed under the Constitution approved on
September 22, 1984 by a Whites-only vote. The Constitution vests legislative
power jointly with the State President and a tricameral Parliament, which
provides political representation in the central government to Whites, Asians
and Coloureds, but not Blacks. South Africa has been ruled by the National
Party without interruption since 1948.

On December 22, 1993, Parliament adopted the Interim Constitution under
which South Africa will be governed until the new legislature to be elected in
the April 1994 elections adopts a permanent Constitution. A mechanism exists
for amendment of the Interim Constitution.

The Interim Constitution provides for a federal structure in which the
national government shares power with newly created regional governments, for
an independent judiciary and for the independence of the Reserve Bank provided
there is regular consultation between its governor and the minister of finance.
In addition, the "homelands" will be abolished and the TBVC states will be
permitted to reunite with South Africa. The manner in which power will be
shared continues to be the subject of considerable dispute. There will be nine
provinces and eleven official languages. The Interim Constitution also
incorporates a bill of rights, including property rights.

The elections scheduled for April 26-28, 1994 are intended to elect a 400
member legislative body (the "National Assembly") that will appoint a
government of national unity consisting of representatives of each political
organization receiving at least 5% of the vote. A senate (the "Senate") will
also be formed, composed of ten members from each province who will be elected
by the provincial legislatures. The government will be led by a president, who
will be selected by majority vote of the National Assembly from among its
members. In addition, there will be at least two executive deputy presidents,
one each selected by any party with 20% or more of the seats in the National
Assembly (and in any event by the two largest parties) from among its
representatives. The executive deputy presidents will become members of the
cabinet ex officio, and the president will be required to consult them
regarding matters of governmental policy and cabinet affairs. The cabinet will
consist of not more than 27 ministers, each of whom will be required to be
members of the National Assembly. The president will allocate the portfolios
of the cabinet after consultation with the executive deputy presidents. Each
party with at least 5% of the seats in the National Assembly will be
represented in the Cabinet in proportion to its representation in the National
Assembly. It is generally expected that Nelson Mandela will be the next state
president and that Frederik W. de Klerk, the current state president, will be
one of the executive deputy presidents.
<PAGE>
The National Assembly and the Senate, sitting in joint session (the
"Constitutional Assembly"), will be responsible for devising a permanent
Constitution, which is intended to be enacted within two years following the
first session of the Constitutional Assembly. The Constitutional Assembly will
be bound by certain constitutional principles, including the creation of a
federal republic and the creation of a bill of rights. Approval of the new
constitution requires a two-thirds vote of the Constitutional Assembly and
certification by an independent constitutional tribunal that the new
constitution enshrines the constitutional principles. If only a majority
approves the constitution, it must then be approved by a majority of 60% of the
voters in a national referendum. The independent constitutional tribunal will
also have the power to decide any disputes regarding the powers of the
Constitutional Assembly.

The elections scheduled for April 26-28, 1994 will be overseen by an
Independent Electoral Commission (the "IEC") appointed by the State President
on the advice of the Transitional Executive Council. The IEC will be
responsible for administering, organizing, conducting and supervising the
elections to the National Assembly.

The cornerstone of the legislative actions taken by the Parliament to
prepare the transition to a new constitutional and political order was the
creation of the Transitional Executive Council (the "TEC"), which was
constituted in December, 1993. The TEC is a multi-racial, quasi-governmental
body formed for the purpose of facilitating and promoting, in conjunction with
all legislative and executive structures at all levels of government in South
Africa, the preparation for and transition to a democratic order in South
Africa.

The TEC is comprised of representatives of the Government and 23 political
organizations which, as a condition of such membership, undertook to abide by
and implement the directives of the TEC and renounce violence as a means of
achieving political objectives. A number of political organizations, including
the Conservative Party and three of the Black participants in the Negotiating
Council -- the Inkatha Freedom Party, and representatives of the KwaZulu and
Bophuthatswana homelands -- have refused to participate in the TEC. More
recently, however, the Inkatha Freedom Party registered "provisionally" for the
elections (but subsequently permitted its registration to lapse) and, following
civil strife, violence and the removal of the leader of Bophuthatswana, the
residents of Bophuthatswana will be able to participate in the elections. See
"Government and Political Conditions -- Recent Developments" in this
Appendix C.

The TEC will remain in existence until installation of the first cabinet
as contemplated by the Interim Constitution, at which time it will dissolve by
operation of law. In the event elections to the National Assembly for any
reason are delayed, it is expected that the TEC's mandate will be extended
accordingly.

The TEC is empowered to, among other things: request and obtain
information and documents from the government; summon any Minister to appear
before the TEC; direct the government not to proceed with any legislation which
<PAGE>
the TEC determines would adversely affect its ability to attain its objectives;
establish a National Inspectorate to investigate and monitor the internal
security agencies; upon the decision of at least 80% of its members, require
the State President to withdraw any state of emergency declared by the State
President; issue regulations governing the deployment of any military force,
including any para-military force, in connection with a crime-prevention or
peacekeeping operation and exercise veto authority over the decision to make
any such deployment; establish and maintain a National Peacekeeping Force whose
functions shall relate to the maintenance of peace and public order in South
Africa; participate in preparation of the budget for fiscal year 1994-95 and be
consulted, and exercise veto power, with respect to any new international
financial agreement between the government and any foreign country or
international agency; and monitor the activities of the intelligence agencies.

Decisions of the TEC are to be made by consensus to the extent possible.
If a consensus cannot be reached with respect to a decision, then, subject to
certain exceptions which require an 80% vote, action may be taken only if
supported by at least 75% of the members. Disagreements regarding actions
taken by the TEC will be adjudicated by a Special Electoral Court, whose
findings shall be final and binding and not subject to further appeal.

Recent Developments

Although it appears that South Africa is proceeding toward installation of
a democratically-elected government, the process is increasingly marked by
violence and turmoil, with a few groups refusing to participate in the process
and contesting the legitimacy of the outcome. Such violence continues and may
continue during and after the April 1994 elections. It cannot be assured that
the elections will not be disrupted or prevented by violence or that the
government chosen in such elections will be able to govern effectively.

As of February 12, 1994, the original deadline for political parties to
register for inclusion on the ballot in the April 1994 elections, nineteen
political parties had registered, including the National Party, the ANC,
the Pan-Africanist Congress and the Democratic Party. Two parties, the
Inkatha Freedom Party and the Afrikaner Volksfront, which includes the
Conservative Party, and the government of the nominally independent homeland
of Bophuthatswana announced that they would boycott the elections. It
was also reported that King Goodwill Zwelithini, the King of the Zulus,
demanded that the South African government grant him an independent monarchy in
the province of Natal. Certain of these announcements were accompanied by
statements encouraging civil resistance to the elections. Both the Inkatha
Freedom Party and the Afrikaner Volksfront desire greater regional autonomy
than what is provided for in the Interim Constitution, including the creation
of separate ethnic states for Afrikaners and Zulus. They have also called for
a delay in the elections, a demand that has been opposed adamantly by Nelson
Mandela and State President de Klerk. In an effort to encourage
full participation in the elections, the ANC recently agreed to certain
demands of the boycotting groups for, among other things, a strengthening
of the powers of the provincial governments and a split ballot system.
In early March 1994, a faction of the Afrikaner Volksfront (under the name,
Freedom Front) registered for the elections before the expiration of an
<PAGE>
extended registration deadline. The Inkatha Freedom Party also registered
"provisionally" for the elections before the expiration of the deadline
but conditioned its participation in the elections on an agreement by
the ANC to submit disagreements over the new constitution to international
mediation. The Inkatha Freedom Party subsequently failed to present a
list of candidates for inclusion on the ballot and has renewed its
intention to boycott the elections. In addition, after the outbreak
of violence and widespread strikes in Bophuthatswana in March 1994, the
South African government and the TEC removed the leader of the homeland
from power and have assured its residents freedom to participate in the
elections. Similar action was taken in the homeland of Ciskei in March 1994,
even though Ciskei's government had already agreed to participate in the
elections, after hundreds of policemen went on strike demanding refunds of
their pensions. Political violence persists, particularly in the province of
Natal and more recently in Johannesburg, leading to the declaration by State
President de Klerk of a state of emergency in Natal, and there can be no
assurance that the elections will not be disrupted by violence.

On January 14, 1994, the ANC (the party led by Nelson Mandela) released a
draft Reconstruction and Development Programme (the "Program") outlining
proposals for policies to be implemented by the South African government
following the April 1994 elections. The Program is divided into five major
areas: meeting basic needs, developing human resources, building the economy,
democratizing the state and society and implementing the Program. With respect
to meeting basic needs, the Program sets out such policies as redistributing a
substantial amount of land to landless people, building over one million low-
income houses in the next five years, providing clean water and sanitation to
all, electrifying 2.5 million new homes by the year 2000 and providing access
for all to affordable health care and telecommunications. With respect to
development of human resources, the Program focuses on improving the education
and training system, artistic and cultural expression and sport and recreation.
On the economy, the Program aims to achieve a dynamic balance between
government intervention, the private sector and the participation of society.
In particular, the Program recommends that the government consider expanding
its role in strategic areas of the economy through nationalization, purchasing
equity interests in companies, or establishing public corporations or joint
ventures with the private sector. The Program also endorses policies which
create a climate conducive to foreign investment and national treatment of
foreign investors. With respect to mining, the Program advocates the return of
mineral rights to the government who would then lease them, the introduction of
antitrust legislation to democratize the mining sector and government
intervention in output and pricing decisions. On democratization of the state
and society, the Program stresses the need for the enfranchisement of all South
Africans and government accountability. To finance the implementation of the
Program, the document discusses restructuring the national budget, mobilizing
new funds (including through the use of "reconstruction levies" -- levies on
capital transfers, land and luxury goods), and attracting support from the
private sector. It is not possible to predict whether or to what extent the
policies set forth in the Program will be implemented or whether such policies,
if implemented, will have a positive or negative effect on the value of assets
held by the Fund. Concerns about the uncertainty of the transition process,
including economic policies that may be followed by the new government
regarding redistribution of wealth, have resulted in an increase by a sizeable
<PAGE>
amount in the outflow of capital from South Africa. See "The South African
Economy -- Balance of Payments" in this Appendix C.

All of the policies to be pursued by the government to be established
after the April 1994 elections cannot be predicted. The policies to be adopted
by the new government following the election may contribute to a climate that
is favorable or unfavorable to improving economic conditions and may have a
positive or negative effect on the value of assets held by the Fund.

THE SOUTH AFRICAN ECONOMY

Overview

South Africa has a diversified, market-oriented economy whose make-up
ranges from modern, highly-developed sectors, in particular the services
sector, through the informal sector that is typical of most developing
economies, to primitive agricultural subsistence that ranks with conditions in
many of the less developed countries. South Africa has a wealth of natural
resources, advanced mining and manufacturing sectors, a sophisticated financial
services industry and a long established entrepreneurial business culture.

South Africa's rainfall is typically unreliable and unpredictable, and the
country is periodically afflicted by drastic and prolonged droughts which often
end in severe floods. Agriculture was adversely affected by a particularly
severe drought during the 1991 and 1992 growing seasons. There can be no
assurance that similar climatic conditions in the future will not have an
adverse impact on agriculture or on the South African economy in general.

The South African economy experienced its longest recession of this
century commencing in March 1989. The recession deepened considerably in 1992,
intensified by the severe drought that year. Although the decrease in real
gross domestic product ("GDP") was relatively small over this cyclical downward
phase, the recession nevertheless affected the inhabitants of the country
seriously because it followed a long period of low average economic growth. In
addition, uncertainties arising from the process of constitutional
negotiations, intermittent civil unrest and violence, a generally weak
international economy and the widespread drought in 1991 and 1992 prolonged the
downturn in economic activity and increased its severity. Many people
therefore became unemployed, and insufficient new job opportunities were
created.

The Reserve Bank of South Africa has stated that the prolonged recession
of more than four years bottomed out and the economy recovered somewhat during
1993. The mainstay of this improved economic performance has been the
substantial increase in agricultural production to more normal levels after
having been adversely affected in 1992 by one of the most severe droughts in
the country's history. In the third quarter of 1993 the level of agricultural
output had returned to more or less the average output level of 1991 - i.e. to
the levels that prevailed before the drought of 1992. Real agricultural output
increased by 17.5% in 1993 and maize production in particular increased from 3
million tons in 1992 to about 9 million tons in 1993. This higher agricultural
output made a large direct contribution to an increase in total domestic
<PAGE>
product, but was also in an indirect manner (through linkages with other
production sectors) partly responsible for more widespread growth in the
economy. A substantial increase in the volume of merchandise exports and net
gold exports also contributed to the revival in economic activity, with the
quantity of goods exported increasing by 6% in 1993.

The impact of the economic recession is also evident in a decline in gross
national product ("GNP"). Real GNP per capita (a measure of average material
well-being) in the second quarter of 1993 was some 13.5% lower than its upper
turning-point in the second quarter of 1988. The average annualized income of
R3,200 per capita (at 1985 prices) in the first half of 1993 was approximately
equal to average annualized per capita income in 1971. For 1993, GNP per
capita (at 1985 prices) was R3,146, as compared with an average of
approximately R3,645 (at 1985 prices) for the 1980s and an average of R3,294
(at 1985 prices) for the first three years of the 1990s.

After having declined for three consecutive calendar years, real GDP began
to rise in early 1993, increasing by approximately 1% in 1993, and the Reserve
Bank has estimated that the growth rate could reach 3% in 1994. This was the
first time since 1988 that the country experienced three consecutive quarters
of positive economic growth and the first year of positive growth in the 1990s.

<PAGE>
The following table sets forth South Africa's national income and
production accounts and other information with respect to South Africa's GDP
and GNP for the years 1985 through 1993:

<TABLE>
<CAPTION>
National Income and Production Accounts<F1><F2>

1985 1986 1987 1988 1989 1990 1991 1992 1993
-------- -------- -------- -------- -------- -------- -------- -------- --------
(Rand millions)<F3>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Private Consumption
Expenditure . . . . . . . . 66,167 77,965 93,353 111,324 131,940 154,873 179,283 203,407 225,867
Consumption Expenditure by
General Government . . . . . 21,297 25,672 30,599 35,276 43,946 51,421 61,988 69,727 79,976
Gross Domestic Fixed
Investment . . . . . . . . . 28,715 28,707 31,497 39,381 48,575 52,957 53,668 52,060 52,829
Change in Inventories . . . . . (3,734) (1,702) 355 3,230 961 (2,549) (5,622) (2,797) 2,182
Residual Item . . . . . . . . . (471) (1,776) (4,720) (2,011) (4,566) (9,167) (6,916) (8,114) (8,311)
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross Domestic Expenditures . . 111,974 128,866 151,804 187,200 220,856 247,535 282,401 314,283 349,543
Exports of Goods and Non-
Factor Services . . . . . . 39,698 45,508 48,627 57,890 66,021 70,714 74,220 78,070 90,001
Less Imports of Goods and
Non-Factor Services . . . . (28,546) (32,239) (35,187) (47,027) (53,449) (54,046) (58,726) (65,285) (74,296)
------- ------- ------- ------- ------- ------- ------- ------- -------
Expenditure on GDP (at Market
Prices) . . . . . . . . . . 123,126 142,135 164,524 198,063 233,428 264,203 297,895 327,068 365,248
Less Net Factor Payments to
the Rest of the World . . . (5,986) (7,010) (6,693) (7,572) (9,310) (11,529) (9,509) (9,145) (10,130)
------- ------- ------- ------- ------- ------- ------- ------- -------
GNP (at Market Prices) . . . . 117,140 135,125 157,831 190,491 224,118 252,674 288,386 317,923 355,118
Net Current Transfers
Received from Rest of the
World . . . . . . . . . . . 42 69 (39) 92 205 185 202 300 358
Less Residual Item . . . . . . (-471) (-1,776) (-4,720) (-2,011) (-4,566) (-9,167) (-6,916) (-8,114) (-8,311)
------- ------- ------- ------- ------- ------- ------- ------- -------
National Disposable Income at
Market Prices . . . . . . . 117,653 136,970 162,512 192,594 228,889 262,026 295,504 326,337 363,787
======= ======= ======= ======= ======= ======= ======= ======= =======
Real GNP (at Constant 1985
Prices) . . . . . . . . . . 117,140 118,034 122,326 127,296 128,163 125,766 126,169 123,326 124,959
Percentage Change of Real GNP
over Previous Year . . . . . (0.8) 0.8 3.6 4.1 0.7 (1.9) 0.3 (2.3) 1.3
Expenditure on GDP (at
Constant 1985 Prices) . . . 123,126 123,148 125,735 131,016 134,025 133,409 132,890 130,126 131,567
Percentage Change of Real GDP
over Previous Year . . . . . (1.2) 0.0 2.1 4.2 2.3 (0.5) (0.4) (2.1) 1.1
GDP Per Capita (at 1985
Prices) . . . . . . . . . . 3,730 3,641 3,631 3,696 3,694 3,592 3,498 3,349 3,312
____________________
<FN>
<F1> At current prices except where noted.
<F2> Data for the last four years are preliminary and subject to revision.
<PAGE>
<F3> Except for GDP per capita (at 1985 Prices) which is presented in Rands
and not Rand millions.

Source: Reserve Bank of South Africa, Quarterly Bulletin, December 1993;
Reserve Bank of South Africa, Quarterly Bulletin, March 1994.
</TABLE>

The revival of economic activity in 1993 was restricted by a continued
large net outflow of capital not related to reserves. Due largely to political
uncertainty, the ongoing internal unrest, pressure on the exchange rate of the
Rand, a relatively strong U.S. dollar internationally and the relatively high
cost of foreign borrowing on the international capital markets, net outflow of
capital reached R16.3 billion in 1993 (as compared with R3.7 billion in 1992),
over 90% of which was in the form of capital with an original maturity of one
year or less. This brought the cumulative amount of net capital outflow since
1985 to R49 billion. These large capital outflows caused the net gold and
other foreign reserves of South Africa to decrease by R10.3 billion in 1993.
In order to support the level of the foreign reserves and the exchange rate of
the Rand, drawings of R7.1 billion were made on foreign credit facilities
(including an IMF loan) in 1993. See "The South African Economy -- Balance of
Payments" in this Appendix C.

Sectoral Pattern of Economic Activity

Manufacturing is the largest single income-generating sector of the South
African economy, followed by finance, mining and commerce.

<PAGE>
GDP by industry sector (at current prices) from 1985 to 1993 was as
follows:

<TABLE>
<CAPTION>
Gross Domestic Product by Industry Sector at Current Prices

1985 1986 1987 1988 1989 1990 1991 1992 1993
-------- -------- -------- -------- -------- -------- -------- -------- --------
(Rand millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Primary Sector
Agriculture, Forestry and
Fishing . . . . . . . . . 6,526 7,242 9,430 11,560 12,649 12,272 13,039 11,605 14,062
Mining and Quarrying . . . . 16,671 20,214 19,379 21,903 23,582 25,079 27,005 28,410 31,736
Secondary Sector
Manufacturing . . . . . . . 25,928 30,277 35,752 44,105 52,859 59,945 66,567 73,722 80,456
Electricity, Gas and Water . 4,836 5,632 6,827 8,231 9,225 10,710 11,710 12,676 13,749
Construction (Contractors) . 4,144 4,507 4,915 5,822 6,571 7,446 8,201 8,817 9,375
Tertiary Sector
Wholesale and Retail Trade,
Catering and
Accommodation . . . . . . 13,254 15,228 18,995 22,521 27,029 31,620 36,173 40,500 44,010
Transport, Storage and
Communication . . . . . . 9,935 11,448 13,217 15,535 16,825 19,376 22,687 24,441 26,370
Finance, Insurance, Real
Estate and Business
Services . . . . . . . . . 15,754 16,686 19,769 23,768 28,825 34,192 39,683 46,010 52,825
Community, Social and
Personal Services . . . . 1,897 2,222 2,604 2,994 3,446 4,020 4,645 5,357 6,014
Less Imputed Financial Services
Charges . . . . . . . . . . (3,200) (3,709) (4,380) (4,990) (5,883) (6,975) (8,188) (9,734) (11,250)
General Government . . . . . 13,901 16,465 19,636 22,495 28,006 33,690 40,012 46,553 51,565
Other Producers . . . . . . . 2,802 3,275 3,787 4,286 4,876 5,633 6,416 7,257 7,959
------- ------- ------- ------- ------- ------- ------- ------- -------
GDP at Factor Cost . . . . . 112,448 129,487 149,931 178,230 208,010 237,008 267,950 295,614 326,871
======= ======= ======= ======= ======= ======= ======= ======= =======
____________________
<FN>
Source: Reserve Bank of South Africa, Quarterly Bulletin, December 1993;
Reserve Bank of South Africa, Quarterly Bulletin, March 1994;
Central Statistical Service of South Africa.
</TABLE>

<PAGE>
The percentage shares of GDP at factor cost (measured in 1985 prices) by
type of economic activity from 1988 to 1993 were as follows:

<TABLE>
SECTORAL ALLOCATION OF ECONOMIC ACTIVITY<F1>
(% of GDP at factor cost)

<CAPTION>
1988 1989 1990 1991 1992 1993
--------------- ------------ ------------ ------------ ------------ -----------
%
<S> <C> <C> <C> <C> <C> <C>
Agriculture, forestry and fishing . 6.2 6.9 6.4 6.5 5.0 5.8
Mining and quarrying . . . . . . . 13.2 12.8 12.7 12.6 13.0 13.0
Manufacturing . . . . . . . . . . . 23.7 23.3 23.2 22.7 22.6 22.3
Electricity, gas and water . . . . 4.6 4.6 4.7 4.8 4.9 5.0
Construction (contractors) . . . . 3.1 3.3 3.3 3.2 3.0 2.8
Wholesale and retail trade,
catering and accommodation . . 11.5 11.3 11.5 11.5 11.5 11.4
Transport, storage and
communication . . . . . . . . 8.7 8.8 8.9 8.8 9.1 9.1
Finance, insurance, real estate
and business services . . . . 14.4 14.4 14.5 14.8 15.2 15.1
Community, social and personal
services . . . . . . . . . . . 1.7 1.7 1.7 1.8 1.9 1.9
Other (including general
government) . . . . . . . . . 15.7 15.7 15.9 16.2 16.8 16.6
Less imputed financial services
charges . . . . . . . . . . . (2.8) (2.8) (2.8) (2.9) (3.0) (3.0)
----- ----- ----- ----- ----- -----
100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- -----
____________________
<FN>
<F1> Measured at constant 1985 prices.

Source: Department of Finance of South Africa, The South African Economy
in Brief, September 1993; Reserve Bank of South Africa, Quarterly
Bulletin, March 1994; Central Statistical Service of South
Africa.
</TABLE>

Gross Domestic Expenditure

Despite the severity of the recent recession, real gross domestic
expenditure decreased only moderately owing to the relative firmness of private
consumption expenditure. The firmness of private consumption expenditure,
however, was neutralized by sharp decreases in real fixed capital formation and
in inventory investment. Real consumption expenditure of the general
government continued to rise in the economic downturn, and as a ratio of GDP it
reached an all-time high of 21.5% in 1992. This level may be compared with an
average of 10.5% in the 1960s, 13.5% in the 1970s and 16.5% in the 1980s.
However, real consumption expenditure of the general government rose by less
than 0.5% in 1993, as compared with 2.5% in 1990, 5% in 1991 and an average
annual rate of 4% in the 1980s.
<PAGE>
The annual rates of change in real gross domestic expenditure and its main
components (at 1985 prices) from 1986 to 1993 are depicted below:

<TABLE>
ANNUAL RATES OF CHANGE IN REAL GROSS DOMESTIC EXPENDITURE

<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993
--------- --------- -------- --------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Private consumption
expenditure (%) . . . . 0.2 3.9 5.3 2.8 2.1 0.3 (2.3) 0.4
Consumption expenditure by
general government (%) . 2.3 3.7 1.7 3.7 2.6 5.2 0.3 0.3
Gross domestic fixed
investment (%) . . . . . (18.2) (2.4) 8.9 5.1 (2.0) (8.4) (9.9) (3.9)
Change in inventories
(R millions) . . . . . . (1,638) 291 2,112 519 (3,052) (2,596) (1,279) (1,161)
Gross domestic
expenditure (%) . . . . 0.7 3.8 6.8 0.9 (2.7) 0.0 (1.1) 0.7
____________________
<FN>
Source: Reserve Bank of South Africa, Quarterly Bulletin, March 1994.
</TABLE>

Aggregate real gross domestic expenditure, which had fluctuated
considerably in the recession of 1989 to 1993, increased sharply at an
annualized rate of 12.5% in the third quarter of 1993 and at an estimated rate
of 11.5% in the fourth quarter of 1993. For 1993, aggregate real gross
domestic expenditure increased by 0.5%, as compared with a decline of about 1%
for 1992. The moderate increase in gross domestic expenditure reflected an
increase in real consumption expenditure combined with a moderate build up of
inventories and a rise in real gross domestic fixed investment in the second
half of 1993.

Gross Domestic Fixed Investment

A general lack of confidence owing to political uncertainty, the high
percentage of unutilized production capacity in the manufacturing sector,
relatively low economic growth in the rest of the world, the high rates of
taxation, and weakness in the price of gold led to a decrease of approximately
23.5% in real gross domestic fixed investment from the third quarter of 1989 to
the second quarter of 1993. However, total real gross domestic fixed
investment levelled out in the second quarter of 1993 and, after fourteen
consecutive quarters of contraction, increased at an annualized rate of 1.5% in
the third quarter of 1993 and approximately 3.5% in the fourth quarter of 1993.
This acceleration in the growth of fixed investment can be attributed mainly to
increases in real capital formation by the private sector and public
authorities, which offset a moderate decrease in real capital expenditure by
public corporations.
<PAGE>
The following table sets forth the ratio of gross domestic fixed
investment to GDP (at current prices) for each year during the period 1983-
1993:

<TABLE>
<CAPTION>
Ratio of Gross Domestic Fixed Investment to GDP
(%)

<S> <C>
1983 26.8
1984 24.4
1985 23.3
1986 20.2
1987 19.1
1988 19.9
1989 20.8
1990 20.0
1991 18.0
1992 15.9
1993 14.5
____________________
<FN>
Source: Reserve Bank of South Africa, Quarterly Bulletin, March 1994.
</TABLE>

<PAGE>
Gross domestic fixed investment (at current prices) by type of
economic activity for each year during the period 1986 through 1933 is depicted
below:

<TABLE>
GROSS DOMESTIC FIXED INVESTMENT
(R millions)
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993
---------- ---------- ---------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
By Type of Economic
Activity
Agriculture, forestry and
fishing . . . . . . . . . 974 1,027 1,423 1,841 1,768 1,863 1,963 2,206
Mining and quarrying . . . 4,198 4,853 6,080 6,971 7,088 6,623 6,473 6,081
Manufacturing . . . . . . . 4,246 4,806 6,550 10,207 14,025 13,649 12,972 13,053
Electricity, gas and water 4,116 3,957 3,650 4,243 4,204 3,695 2,707 3,142
Construction (contractors) 427 435 534 667 770 778 727 741
Wholesale and retail
trade, catering and
accommodation . . . . 1,678 1,761 2,612 3,020 3,184 3,557 3,962 4,105
Transport, storage and
communication . . . . 3,026 2,956 3,297 3,493 3,849 4,688 4,139 4,054
Finance, insurance, real
estate and business
services<F1> . . . . . 6,174 7,478 10,261 12,441 12,555 13,065 13,249 13,285
Community, social and
personal services . . 3,868 4,224 4,974 5,692 5,514 5,750 5,868 6,162
------ ------ ------ ------ ------ ------ ------ ------
Gross domestic fixed
investment . . . . . . . 28,707 31,497 39,381 48,575 52,957 53,668 52,060 52,829
Change in inventories . . . (1,702) 355 3,230 961 (2,549) (5,622) (2,797) 2,182
------ ------ ------ ------ ------ ------ ------ ------
Gross domestic investment . 27,005 31,852 42,611 49,536 50,408 48,046 49,263 55,011
------ ------ ------ ------ ------ ------ ------ ------
____________________
<FN>
<F1> Including transfer costs.

Source: Reserve Bank of South Africa, Quarterly Bulletin, March 1994.
</TABLE>

Inflation

Although inflation in South Africa remains higher than that of its
major trading partners, consumer price inflation slowed in the second half of
1992 to its lowest level since the middle of 1978. The decline in the
inflation rate has been attributed to a combination of factors, including
continued tight monetary policy, the length of the recession, the slowdown in
nominal wage increases, and the improvement in agricultural conditions.
Increases in the consumer price index in the middle of 1993 were due to sharp
increases in education fees and an increase in the value-added tax rate, other
indirect taxes and the price of petrol. However, the inflation in the consumer
price index was 9.7% in 1993, the first year since 1973 for a single-digit rate
of inflation in the consumer price index, and has been attributed largely to a
strict anti-inflationary monetary policy, reductions in the costs of home
<PAGE>
ownership and lower rates of increase in the prices of food and non-alcoholic
beverages. The inflation in the producer price index was 6.6% in 1993, its
lowest level since 1971.

The following table sets forth the percentage change in the consumer
price index and the producer price index during the period 1988 through 1993:

Inflation: 1988-1993<F1>

<TABLE>
<CAPTION>
Consumer Producer
Price Index Price Index
----------------- ----------------
<S> <C> <C>
1988 . . . . . . . . . . . . . . . . . 12.7 13.1
1989 . . . . . . . . . . . . . . . . . 14.7 15.2
1990 . . . . . . . . . . . . . . . . . 14.4 12.0
1991 . . . . . . . . . . . . . . . . . 15.3 11.4
1992 . . . . . . . . . . . . . . . . . 13.9 8.3
1993 . . . . . . . . . . . . . . . . . 9.7 6.6
____________________
<FN>
<F1> Average % increase over prior year.

Source: Department of Finance of South Africa, The South African Economy
in Brief, September 1993; Reserve Bank of South Africa, Quarterly
Bulletin, December 1993; Reserve Bank of South Africa, Quarterly
Bulletin, March 1994.
</TABLE>

Wages and Employment

One of the main characteristics of the recent recession was the
substantial decrease in employment. Total employment in the formal non-
agricultural sectors of the economy declined by 5.9% (or by nearly 350,000
jobs) from the beginning of the recession in early 1989 to the first quarter of
1993. The total number of workers employed in the formal non-agricultural
sectors of the economy at the end of the first quarter of 1993 was
approximately equal to the number of such workers employed at the end of the
first quarter of 1983 -- i.e., no additional employment opportunities were
provided in the formal non-agricultural sectors of the economy over the past
ten years. The following table sets forth the sectoral distribution of non-
agricultural job losses during the period of February 1989 to December 1992,
and illustrates that such losses were attributable entirely to a contraction of
employment in the private sector:
<PAGE>
<TABLE>
<CAPTION>
Percentage Change in Non-Agricultural Employment
(%)

February 1989 to
Sector December 1992
- ------ ----------------
<S> <C>

Manufacturing . . . . . . . . . . . . . . . . . . -4.6
Construction . . . . . . . . . . . . . . . . . . -13.6
Electricity generation . . . . . . . . . . . . . -18.5
Mining . . . . . . . . . . . . . . . . . . . . . -18.0
Trade . . . . . . . . . . . . . . . . . . . . . . -2.9
Hotels and laundry services . . . . . . . . . . . -10.1
Private road transportation . . . . . . . . . . . -16.3
Insurance industry . . . . . . . . . . . . . . . 15.4
Banking institutions . . . . . . . . . . . . . . 3.7
------

Private sector . . . . . . . . . . . . . . . . . -7.8
Public authorities . . . . . . . . . . . . . . . 2.7
------

Total non-agricultural sectors . . . . . . . . . -4.8

____________________
<FN>
Source: Reserve Bank of South Africa, Annual Economic Report, 1993.
</TABLE>

High rates of decrease in private sector employment were recorded in almost
every calendar quarter since the start of the recession in 1989. Approximately
1.5 million new job-seekers have been unable to find employment in the formal
non-agricultural sectors of the economy since the beginning of the recession.
The severe effect of the cyclical downswing in the labor market is also
confirmed by a sharp increase in the number of registered unemployed workers,
averaging 12.5% higher in the first ten months of 1993 as compared with the
corresponding period of 1992. In October 1993, the total number of registered
employed (seasonally adjusted) amounted to 319,000 persons. There are
no official government statistics regarding unemployment. The only
available government figures are the number of unemployed registered
at the South African Department of Manpower. The number of registered
unemployed may not be indicative of the actual number of unemployed, since
not all unemployed persons register and the statistics cover only the non-
agricultural sectors of the economy.

Employment by public authorities rose, on balance, by 2.5% from the
first quarter of 1989 to the fourth quarter of 1992. During the first two
quarters of 1993, however, efforts by the central government and parastatals to
curtail increases in current expenditure caused the total employment by public
authorities to decline at seasonally adjusted and annualized rates of 5.1% and
8.2%, respectively. The level of total employment by public authorities in the
second quarter of 1993 was 0.7% lower than in the first quarter of 1989.
<PAGE>
Employment in the agricultural sector decreased by an estimated 3%
between February 1989 and December 1992, leading to an increase in the ratio of
people unemployed or involved in the informal sector of the economy to the
total economically active population of South Africa from approximately 39% in
1988 to approximately 46% in 1992.

The recent downward trend in employment in the formal sectors of the
economy is not only a cyclical phenomenon. The Reserve Bank has reported that
South Africa is facing problems of structural unemployment. Before 1982, the
rate of growth in total employment in the formal sectors of the economy roughly
matched the rate of increase in the economically active population. Between
1970 and 1982, employment in the formal non-agricultural sectors increased at
an average annual rate of 2.7%, compared with a growth of 2.9% per annum in the
economically active population. Subsequently, average annual employment growth
in the formal non-agricultural sectors slowed to 0.5% during the years 1983 to
1989 and to a negative rate of 1.5% from 1989 to 1992.

The structural unemployment problem is also related to the fact that
labor productivity increased at an average annual rate of only 0.6% in the
period from 1972 to 1992. This low rate of increase may be attributed largely
to the low level of skills of the South African workforce. In 1991 only
approximately 30% of the economically active non-White population was
considered to be skilled or potentially skilled workers.

Labor productivity in the non-agricultural sectors of the economy rose
at an average annual rate of 0.9% from 1988 to 1992. Contrary to its cyclical
pattern in the previous two recessions (when productivity declined sharply),
non-agricultural labor productivity in the recent recession showed a pronounced
upward trend. In 1991 and 1992, the real output per worker in the formal non-
agricultural sectors increased at an average annual rate of 1.3%. This
relatively higher growth in productivity was achieved by the laying-off of
workers at a rate faster than the contraction in output volumes. In this
manner, real output levels in the non-agricultural sectors of the economy in
1992 were back at the level that prevailed in 1988, but 200,000 fewer workers
were required to produce this output.

Despite the substantial increase in unemployment and the relatively
low productivity growth, the real remuneration per worker rose at an average
rate of 2.0% per annum from 1988 to 1992, and by as much as 2.7% in the
calendar year 1992. This increase was mainly due to the fact that the average
nominal remuneration per worker in the non-agricultural sector rose by 16.5%
per year from 1988 to 1992, or at a rate well above the rate of inflation. In
1992, the rise in nominal salaries and wages per worker employed in the formal
non-agricultural sectors of the economy decelerated somewhat to 15.2% from
15.8% in 1991 and a peak of 18% in 1989.

<PAGE>
The following table sets forth the total number of registered
unemployed, indices of labor productivity, worker remuneration and unit labor
costs for the non-agricultural sectors of the economy for each of the years
1988 through 1992:

<TABLE>
Unemployment and Labor Costs in the
Non-Agricultural Sectors
<CAPTION>
Remuneration per worker (1985=100)
--------------------------------------------------------------------
Unit labor
costs
At current prices At constant prices<F1> (1985=100)
-------------------------------- -------------------------------- ---------------------
Labor
Total no. pro-
of ductivity Public Public At At
registered Index authorities Private authorities Private current constant
unemployed (1985=100) <F2> sector Total <F2> sector Total prices prices<F1>
--------- --------- ----------- -------- -------- ----------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 . . . 122,063 100.7 146.7 153.3 151.3 99.3 102.1 101.2 150.9 100.7
1989 . . . 116,460 101.6 178.8 179.0 179.0 104.8 103.2 103.8 176.8 102.2
1990 . . . 173,703 102.2 210.1 209.5 209.9 107.0 105.0 105.7 206.2 103.5
1991 . . . 247,783 103.6 246.4 241.6 243.7 109.9 105.9 107.4 236.1 103.7
1992 . . . 287,805 105.1 281.1 279.2 280.7 111.7 109.1 110.2 268.1 104.9
____________________
<FN>
<F1> Deflated by the non-agricultural gross domestic product deflator.
<F2> Excluding contributions to employer's funds.
Source: Reserve Bank of South Africa, Quarterly Bulletin, March 1994;
Department of Manpower of South Africa and Central Statistical
Service of South Africa.
</TABLE>

Total trade union membership in 1992 represented approximately 29.5%
of the economically active population. In response to the economic pressures
of recent years, labor relations have been marked by tensions between
management and the trade unions. It is estimated that total person-days lost
to strikes and work stoppages in the non-agricultural sectors (excluding the
central government) rose to 1.73 million in 1992, up from 1.34 million in 1991,
but down from 5.83 million in 1987. For the first nine months of 1993, the
total person-days lost to strikes and work stoppages is estimated to be
663,705.

Public and Private Ownership; Concentration of Economic Power

While South Africa is largely a free enterprise economy, state-owned
firms ("parastatals") have monopolies or near monopolies in telecommunications,
<PAGE>
postal services, water supply, television, air, rail, and ports. Government-
owned industries include substantial portions of the energy sector,
transportation, armaments, electric power, communications, and oil exploration.
It was estimated in 1992 that the government and parastatals owned 33% of the
country's fixed assets. In 1988 the government embarked upon a program to
privatize and deregulate public enterprises.

Enterprises in the manufacturing, mining, agriculture, commerce, and
finance sectors are almost entirely privately held. Conglomerates dominate the
private sector, resulting in highly concentrated economic ownership. It is
estimated that, as of July 1993, six conglomerates controlled, directly or
indirectly, approximately 86% of the total market capitalization of listed
companies on the Johannesburg Stock Exchange (the "JSE"). The six
conglomerates are Anglo American Corporation, Rembrandt Group, Ltd.,
Liberty Group, Ltd., Algovaal Holdings, S.A. Mutual Life Assurance Society
and Sanlam. Certain of the conglomerates have announced plans to "unbundle"
or spin off some of their holdings to other investors.

Mining

The mining industry has played a key role in South Africa's economic
development, accounting for approximately 9.7% of GDP at factor cost in 1993.
The country is richly endowed with a variety of minerals and metals; it is
estimated that South Africa at August 31, 1992 possessed 82% of the world's
manganese reserve base, 66% of its platinum group metals, 54% of its chromium
ore, 40% of its gold, 33% of its vanadium, 26% of its zirconium, and 11% of its
titanium minerals. South Africa also contains significant reserves of several
other metals and minerals, including uranium (12% of the world's total
reserves), phosphate rock, iron ore and zinc. South Africa is one of the three
leading producers of ferroalloys in the world. In addition, as of 1991, South
Africa was the world's fifth largest producer of natural diamonds, a high
percentage of which were of gem and near-gem quality and as of August 31, 1992,
South Africa had the world's fourth largest diamond reserve base.

Gold has dominated South Africa's mining sector and has been a
significant factor in its economy for over a century. South Africa remains the
world's largest gold producer; it is estimated that South Africa has accounted
for approximately 47% of the world's total gold production over the last
century. However, gold's role in the economy declined steadily through the
1980s. By 1990, net gold exports as a ratio to GDP were 6.9%, compared with
16.8% in 1980. In 1992, net gold exports as a ratio to GDP were 5.6%, and gold
production accounted for 46% of South Africa's total value of mineral
production, 59% of its total mineral exports and 22.8% of its total exports.
While gold production in 1992 increased by approximately 11 tons from 1991, the
value of gold production in 1992 fell by 3%. The value of net gold exports,
seasonally adjusted and annualized, increased from R18.2 billion in the fourth
quarter of 1992 to R24.5 billion in the third quarter of 1993, reflecting a
rise in the U.S. dollar price of gold and a depreciation of the Rand against
the U.S. dollar, and then decreased to R21.2 billion in the fourth quarter of
1993. The increase in value of net gold exports may be attributed to an
increase in the volume of gold exports which increased by 8% in the third
quarter of 1993. This increase is also related to a decrease in inventories
<PAGE>
stockpiled over preceding quarters. In 1993, the average fixing price of gold
increased from approximately $329 per fine ounce for the month of January to
approximately $392 per fine ounce for the month of July, the highest monthly
average since August 1990, and then decreased to approximately $383 per fine
ounce for the month of December.

The following table shows total gold production in South Africa and
the approximate average London daily fixing price of gold per fine ounce for
the periods indicated:

<TABLE>
Gold Production and Prices
<CAPTION>

1987 1988 1989 1990 1991 1992 1993
---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Fine Kilograms . . . . . . . . . . . 604,949 619,044 606,256 602,699 597,941 608,485 619,489
Average London Daily Fixing Price
Per Fine Ounce . . . . . . . . . . $ 447 $ 437 $ 382 $ 384 $ 362 $ 344 $ 360
____________________
<FN>
Source: Chamber of Mines of South Africa; Reserve Bank of South Africa,
Quarterly Bulletin, March 1994.
</TABLE>

South Africa's mining industry consists of six major mining houses and
a number of independent mines. The six major mining companies, which control
almost all mineral production in South Africa, are Anglo American Corporation,
Gencor, Rand Mines, Anglovaal, Gold Fields of South Africa and Johannesburg
Consolidated Investment Company. Most of these companies also maintain
significant holdings in other sectors of the economy.

There was little or no growth in the mining industry during 1991-1992.
This stagnation was attributed to slack world demand, lower prices paid for
gold and other minerals on the world market, and increased production costs.
Several of the major mines responded to these pressures by scaling down
operations, reducing production, and closing unprofitable shafts. There has
also been a shift to mining higher-grade ore to maintain reasonable profit
levels.

In 1993, the real production of the mining industry increased by 1.5%
as compared with 1% in 1992. Only the real output of diamond mining contracted
in 1993 due mainly to deliberate cutbacks in production in some of the less
cost-effective and older diamond mines.

<PAGE>
The following table shows the relative contribution of mineral
products to total mineral production for the years 1991 and 1992:****

<TABLE>
Mining Production Index
<CAPTION>

1990 Index
Weight<F1> 1991 1992
-------------- -------------- --------------
<S> <C> <C> <C>

Gold . . . . . . . . . . . . . 49.9 99.0 101.8
Iron Core . . . . . . . . . . 2.8 94.9 94.7
Copper . . . . . . . . . . . . 2.8 104.9 95.3
Manganese Ore . . . . . . . . . 2.2 69.2 60.0
Other Metallic Minerals . . . . 10.6 96.7 99.0
Diamonds . . . . . . . . . . . 4.6 96.1 112.6
Coal . . . . . . . . . . . . . 21.5 99.5 97.7
Building Materials . . . . . . 3.1 91.1 82.1
Asbestos . . . . . . . . . . . 0.4 105.4 65.3
Other Non-metallic Materials . 2.1 90.6 88.2
All Categories . . . . . . . . 100.0 97.7 98.8
Percentage change of all
categories over previous
year . . . . . . . . . . . . (2.3) 1.1
____________________
<FN>
<F1> Index weights are based on the gross values of production of the
individual minerals during the period January to December 1990 and have
been used since January 1, 1990.

Source: Central Statistical Service of South Africa, Bulletin of Statistics,
September 1993.
</TABLE>

Manufacturing

Manufacturing is the largest sector of South Africa's economy,
accounting for approximately 25% of GDP at factor cost in 1993. South Africa
is a world leader in several specialized areas of technology, including railway
rolling stock, armaments, mining, drilling, and exploring machinery.

The most significant manufacturing subsectors are the chemical
industry, the food and beverages industry, the motor vehicle, parts and
accessories industry, the metal and metal products industry and the iron
and steel industry. South Africa is the largest producer of steel on
the African continent and is considered to be one of the lowest cost steel
producers in the world.

Between the 1970s and 1990, manufacturing growth weakened in South
Africa, falling from an average annual growth rate of 8.6% in the 1960s to a
rate of 5.3% in the 1970s and 0.1% in the 1980s. These low growth rates have
been attributed to the combination of international sanctions, disinvestment,
political problems, inflation, high interest rates, and an inward economic and
<PAGE>
industrial policy which over the past ten years focussed on import substitution
and protection.

Real manufacturing output increased at an annualized rate of 1.5% in
the first quarter of 1993, decreased by approximately 0.5% in the second
quarter of 1993, and increased by nearly 5% and less than 0.5% in the third and
fourth quarters of 1993, respectively. The improvement in manufacturing
production has been attributed to the increase in the volume of manufacturing
exports in the first nine months of 1993, the higher agricultural output, which
had positive linkages with some manufacturing enterprises, and fewer
disruptions of production because of strikes and other work stoppages.

<PAGE>
The following table shows the index of physical volume of the
manufacturing production of major groups for the years 1991 and 1992 and for
1993 through June 30:

<TABLE>
Index of Physical Volume of Manufacturing
Production of Major Groups
(1985=100)
<CAPTION>
1985
Index Weight<F1> 1991 1992 1993<F2>
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Food . . . . . . . . . . . . . . . . . . . . . . . . . 11.5 109.5 107.9 106.7
Beverages . . . . . . . . . . . . . . . . . . . . . . . 2.7 127.8 124.5 103.1
Tobacco Products . . . . . . . . . . . . . . . . . . . 0.6 102.2 97.2 104.6
Textiles . . . . . . . . . . . . . . . . . . . . . . . 3.7 87.8 79.1 88.5
Weaving Apparel (excluding footwear) . . . . . . . . . 2.9 101.8 95.3 94.7
Leather and Leather Products (excluding footwear) . . . 0.4 98.1 100.8 84.4
Footwear . . . . . . . . . . . . . . . . . . . . . . . 1.0 108.7 93.5 92.7
Wood and Wood Cork Products (excluding furniture) . . . 1.9 96.7 92.2 96.5
Furniture (wood) . . . . . . . . . . . . . . . . . . . 1.4 96.7 96.0 92.8
Paper and Paper Products . . . . . . . . . . . . . . . 4.1 117.3 117.4 108.6
Printing, Publishing and Allied Industries . . . . . . 3.8 93.7 90.4 99.0
Industrial Chemicals . . . . . . . . . . . . . . . . . 4.2 99.3 94.0 94.4
Other Chemical Products . . . . . . . . . . . . . . . . 15.5 111.8 117.0 133.4
Rubber Products . . . . . . . . . . . . . . . . . . . . 1.4 116.2 113.5 126.4
Other Plastic Products . . . . . . . . . . . . . . . . 2.1 122.9 127.5 128.3
Pottery, China and Earthenware . . . . . . . . . . . . 0.2 80.1 77.5 77.2
Glass and Glass Products . . . . . . . . . . . . . . . 0.9 108.0 98.5 94.0
Other Non-Metallic Mineral Products . . . . . . . . . . 4.1 91.6 85.7 90.7
Iron and Steel . . . . . . . . . . . . . . . . . . . . 7.7 99.1 92.7 98.6
Non-Ferrous Metal . . . . . . . . . . . . . . . . . . . 3.0 131.9 133.5 136.3
Fabricated Metal Products (excluding machinery) . . . . 7.7 90.0 86.7 92.5
Machinery and Equipment . . . . . . . . . . . . . . . . 6.3 88.4 80.8 75.5
Electrical Machinery, etc. . . . . . . . . . . . . . . 4.9 107.9 95.5 94.7
Motor Vehicles, Parts and Accessories . . . . . . . . . 5.0 103.8 97.0 100.2
Transport Equipment (excluding Motor Vehicles, Parts
and Accessories) . . . . . . . . . . . . . . . . . . 1.4 78.4 71.5 64.9
Professional, Scientific, Measuring and Controlling
Equipment and Photographic and Optical Goods . . . . 0.5 111.5 123.5 129.8
Other Manufacturing . . . . . . . . . . . . . . . . . . 1.1 124.1 116.4 140.5
----- ----- ----- -----
Total . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 104.1 101.0 104.5
____________________
<FN>
<F1> Indices were calculated on the basis of monthly production data obtained
from a sample survey of manufacturing establishments in the private and
the public sector. The indices were recalculated on the basis of
1985=100. The weighting factors for aggregating major groups to total
manufacturing were calculated on the basis of the net output derived
from the 1985 census.
<F2> As of June 30, 1993.

Source: Central Statistical Service of South Africa, Bulletin of
Statistics, September 1993.
</TABLE>
<PAGE>
Utilization of production capacity ranged between 78.5% and 84.5%
during the period 1985 to 1992 and, as of September 1993, was 78.9% on a
seasonally adjusted basis.

Agriculture

Agriculture, forestry and fishing together accounted for approximately
4.3% of South Africa's GDP at factor cost in 1993. South Africa historically
has been largely self-sufficient in most important agricultural products. The
principal agricultural export items are maize, wool, sugar and fruit. In 1991
and 1992, however, South Africa's agriculture suffered from what is considered
to be its worst drought of the century, which in 1992 resulted in a decrease of
more than 25% in total agricultural output. The drought had a particularly
adverse effect on the maize crop. The maize crop harvested during the 1991/92
season was 3 million tons compared with about 9 million tons estimated for the
1992/93 season. As a consequence, agricultural imports during the period 1989-
1992 increased by approximately 96%.

More favorable weather conditions in 1993 led to a significant
increase in agricultural output in 1993, bringing agricultural output up to
more normal levels.

South Africa's agricultural sector consists of larger commercial farms
operated by White farmers, and small subsistence level and low technology farms
tended by Black farmers, who have been long denied access to choice
agricultural land. White commercial agriculture is characterized by high
technology, sophisticated inputs, and highly organized single-channel marketing
systems with generally adequate storage and transportation systems.

<PAGE>
The following table sets forth the gross value of major agricultural
products for the seasons indicated:

<TABLE>
Major Agricultural Products
Gross Value of Output
(R Millions)

<CAPTION>
Product 1988/89 1989/90 1990/91 1991/92 1992/93
- ------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>

Maize . . . . . . . . . . . . . 3,418 2,856 3,264 1,518 4,196
Wheat . . . . . . . . . . . . . 1,218 931 880 1,321 922
Hay . . . . . . . . . . . . . . 780 866 898 1,032 1,352
Sugar Cane . . . . . . . . . . 817 943 1,002 1,140 1,227
Viticulture . . . . . . . . . . 445 594 653 708 740
Deciduous and Other Fruit . . . 842 1,163 1,291 1,504 1,569
Vegetables . . . . . . . . . . 699 865 985 1,059 1,107
Wool . . . . . . . . . . . . . 875 746 591 428 323
Eggs . . . . . . . . . . . . . 593 700 806 981 1,096
Poultry . . . . . . . . . . . . 2,291 2,286 2,738 3,131 3,222
Cattle Slaughtered . . . . . . 2,129 2,302 2,402 2,860 2,889
Sheep and Goats Slaughtered . . 808 857 833 889 904
Fresh Milk . . . . . . . . . . 762 920 1,000 995 1,193
____________________
<FN>
Source: Department of Customs and Excise of South Africa, Abstract of
Agricultural Statistics, 1994.
</TABLE>

Commercial forests cover approximately 1% of the total land area of
South Africa and yield a range of pine and other timbers. The country meets
nearly 90% of its timber needs from domestic timber production. South Africa
is a leading producer of wattle board and wattle extract, and major exporter of
wood pulp and wood chips.

Energy

Most of South Africa's domestic energy requirements are met by coal,
which provides 87% of the country's primary energy needs, and, to a lesser
extent, by uranium. It is estimated that South Africa produces more than half
of all electricity generated in Africa. However, the state-controlled power
utility, Eskom, estimates that only 30%, or roughly 12 million, of all South
Africans have electricity in their homes.

The country lacks sufficient domestic petroleum or natural gas
resources and has undertaken a substantial effort to develop a synthetic fuels
industry. Sasol is a world leader in oil-from-coal technology (coal
gasification).
<PAGE>
Infrastructure

South Africa has a well-developed transportation and communications
infrastructure. As of early 1994, the railroad network consisted of
approximately 36,000 km of track, of which 16,455 km were electrified. As at
the end of 1993, the provincial and national road network consisted of 57,600
km of surfaced and 148,900 km of unsurfaced roads. South Africa ranks among
the world's top 12 sea-trading nations and has a number of well-equipped ports.

South Africa's telecommunications system is considered to be the best
developed and most modern in Africa. The system consists of carrier-equipped
open-wire lines, coaxial cables, radio relay links, fiber optic cable and radio
communications stations.

Fiscal Policy

The recession, combined with the drought in 1992, had a significant
effect on the government's finances in the fiscal year 1992/1993. After having
decreased to a low of R4.8 billion in fiscal year 1989/90 (mainly as a result
of privatization proceeds), the public sector borrowing requirement (the
deficit before borrowing and debt repayment of the consolidated central
government, provincial administrations, local authorities and non-financial
public enterprises) increased to R17 billion in fiscal year 1991/1992 and to
R32.2 billion in fiscal year 1992/1993. For the first half of fiscal year
1993/1994, the public sector borrowing requirement was R13.3 billion as
compared with R16.7 billion for the corresponding period in the previous fiscal
year. As a ratio of GDP, the public sector borrowing requirement amounted to
approximately 9.5% in fiscal year 1992/1993, compared with 2% in fiscal year
1989/1990 and an average of 5.5% in the previous five fiscal years. For the
first nine months of fiscal year 1993/1994, the public sector borrowing
requirement amounted to approximately 6.2% of GDP, as compared to 8.1% for the
corresponding period of the previous fiscal year.

The borrowing requirement of the general government as a ratio of GDP
increased from less than 1% in fiscal year 1989/1990 to approximately 9.5% in
fiscal year 1992/1993. The ratio of total general government expenditure and
net lending to GDP increased from 34% in fiscal year 1989/1990 to 40% in fiscal
year 1992/1993, reflecting the increased demands on general government
emanating from the prolonged recession, the political transition, socio-
economic backlogs and the severe drought. More particularly, the rise in
general government expenditure was related to an increase in interest payments,
subsidies to exporters and farmers, transfers, and high salary and wage
increases of the employees of the general government.

In the first nine months of fiscal year 1993/1994, the borrowing
requirement of the general government decreased to R18.9 billion from R21.4
billion for the corresponding period in fiscal year 1992/1993.

The following table sets forth the borrowing requirements for the
consolidated general government, non-financial public enterprises and the
<PAGE>
public sector and the borrowing requirements set forth in the main budget for
the periods indicated:

<TABLE>
BORROWING REQUIREMENTS<F1>
<CAPTION>

Year ended 31st March,
----------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994<F2>
---------- ---------- ---------- ---------- ---------- ----------
(Rand Millions)
<S> <C> <C> <C> <C> <C> <C>
Consolidated general government . . . . . . . . . . 7,251 2,182 12,108 15,379 32,221 18,945
Non-financial public enterprises . . . . . . . . . (446) 2,075 1,376 (185) (1,188) (1,254)
Public sector . . . . . . . . . . . . . . . . . . . 7,519 4,647 14,138 15,672 30,919 17,504
Main budget . . . . . . . . . . . . . . . . . . . . 6,659 1,555 13,111 14,323 31,372 19,581
Ratio of borrowing requirement of consolidated
general government to GDP . . . . . . . . . . . -- 0.9% 4.5% 5.2% 9.5% --
____________________
<FN>
<F1> Data for the last two years are preliminary and subject to revision.
<F2> For the period April 1, 1993 through December 31, 1993.

Source: Reserve Bank of South Africa, Annual Report, 1993; Reserve Bank
of South Africa, Quarterly Bulletin, March 1994.
</TABLE>

<PAGE>
The following table sets forth consolidated general government revenue
and expenditures and the ratio of total expenditure to GDP for each of the
periods indicated:

<TABLE>
<CAPTION>
Consolidated General Government Revenue and Expenditures<F1>

1991/1992<F2> 1992/1993<F2> 1993/1994<F3>
------------------- ------------------- --------------------
(Rand millions)
<S> <C> <C> <C>
Revenue
Tax revenue . . . . . . . . . . . . 81,791 86,927 73,418
Non-tax revenue . . . . . . . . . . 13,850 16,090 13,298
------- ------- -------
Total current revenue . . . . . . . 95,641 103,017 86,716
Capital revenue . . . . . . . . . . 296 574 302
------- ------- -------
Total revenue . . . . . . . . . . . . . 95,937 103,591 87,018
Grants . . . . . . . . . . . . . . . -- -- --
------- ------- -------
Total revenue and grants . . . . . 95,937 103,591 87,018
======= ======= =======
Expenditure
Goods and Services . . . . . . . . . 70,579 78,816 64,616
Interest . . . . . . . . . . . . . . 15,141 19,322 15,200
Subsidies and other current transfers
14,327 19,921 15,736
------- ------- -------
Total current expenditure . . . . . . . 100,047 118,059 95,552
Capital expenditure . . . . . . . . . . 10,238 17,485 9,481
------- ------- -------
Total expenditure . . . . . . . . 110,285 135,544 105,033
======= ======= =======
Net lending to other public entities . 1,031 268 930
Borrowing requirement . . . . . . . . . 15,379 32,221 18,945
Ratio of total expenditure to GDP . . . 36.2% 40.2% -
____________________
<FN>
<F1> Data for the last two years are preliminary and subject to revision.
<F2> For the year ended March 31.
<F3> For the period April 1, 1993 through December 31, 1993.

Sources: Reserve Bank of South Africa, Annual Report, 1993; Reserve Bank
of South Africa, Quarterly Bulletin, March 1994.
</TABLE>

<PAGE>
The current political events in South Africa have had clear
implications for public finance. The South African budget now places
increasing emphasis on social spending. The level of such spending, involving
outlays on both physical and social infrastructure related particularly to the
less-developed part of the community, has been rising significantly. This
trend emerges clearly from the following functional classification of
expenditure:

<TABLE>
CLASSIFICATION OF GOVERNMENTAL EXPENDITURE 1991-1994
(% of total expenditure)

<CAPTION>
Year ended 31st March,
------------------------------------------------------------------------
1991<F1> 1992<F1> 1993<F1> 1994<F2>
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
General government services . . . . . . . . . . . . . . 8.4 8.9 7.7 7.3
Protection services . . . . . . . . . . . . . . . . . . 21.8 19.9 17.9 17.9
Defence . . . . . . . . . . . . . . . . . . . . . 13.7 10.8 9.1 8.4
Police . . . . . . . . . . . . . . . . . . . . . . 5.6 6.4 6.2 6.7
Prisons and Law Courts . . . . . . . . . . . . . . 2.6 2.6 2.5 2.7
Social services . . . . . . . . . . . . . . . . . . . . 41.3 43.2 43.8 44.0
Education . . . . . . . . . . . . . . . . . . . . 20.9 20.6 20.7 21.4
Health . . . . . . . . . . . . . . . . . . . . . . 10.1 11.0 10.8 10.2
Social security and welfare . . . . . . . . . . . 6.9 7.7 8.5 8.3
Housing and related services . . . . . . . . . . . 1.5 1.6 1.1 1.3
Other<F3> . . . . . . . . . . . . . . . . . . . . 1.9 2.4 2.8 2.8
Economic services . . . . . . . . . . . . . . . . . . . 13.6 12.9 15.6 13.3
Agriculture, forestry and fishing . . . . . . . . 2.3 2.5 5.1 2.4
Transport and communication . . . . . . . . . . . 4.9 4.5 4.8 5.0
Export trade promotion . . . . . . . . . . . . . . 1.1 1.7 2.3 2.0
Other<F4> . . . . . . . . . . . . . . . . . . . . 5.3 4.2 3.4 3.9
Interest on public debt . . . . . . . . . . . . . . . . 14.8 14.9 14.8 17.4
Government enterprises . . . . . . . . . . . . . . . . 0.1 0.2 0.2 0.1
____________________
<FN>
<F1> Main Budget, including Additional Budget.
<F2> Main Budget.
<F3> Recreation and culture, sewerage and sanitation, and community
development.
<F4> Includes, among others, fuel and energy, mining, manufacturing, and
regional development.

Source: Department of Finance of South Africa, The South African Economy
in Brief, September 1993.
</TABLE>

The new emphasis in budgetary priorities presents profound challenges
to fiscal discipline. The South African government will be under pressure to
expand social expenditure in line with the fast-growing demands in the socio-
economic and development spheres arising out of historical backlogs coupled
with a high rate of population growth and a mounting level of expectations.
These demands have to be reconciled, however, with a commitment to contain
public sector expenditure vis-a-vis that of the total economy as part of the
program of economic restructuring.
<PAGE>
Monetary Policy

The primary objective of monetary policy in South Africa is to attain
overall financial stability and protect the internal and external value of
South Africa's currency.

The Reserve Bank's relatively strict monetary policies of the past few
years are succeeding in reducing the growth in the money supply to levels more
or less comparable to those in South Africa's main trading partner countries.
As a result of the restrictive monetary policy stance, the decline in real
economic activity and the lower rate of inflation in South Africa, the growth
in money supply has slowed significantly since 1989. The twelve-month rate of
increase in the broadly defined money supply (M3) fell from a peak of 27.5% in
August 1988 to 10.2% in January 1991. Owing to the conversion of certain off-
balance-sheet items into conventional deposits and advances, it then rose to
15.9% in February 1991, fluctuated around this higher level throughout the rest
of 1991 and amounted to 14.2% in January 1992. The rate of increase over
twelve months in M3 subsequently contracted again to 10.4% in February 1992 and
receded more gradually to 8.0% in December 1992.

The slower growth of M3 during 1992 brought it well within the money
supply guidelines of 7-10% for that year. The growth in the quarterly average
value of M3 from the fourth quarter of 1991 to the fourth quarter of 1992
amounted to 8.8%. From the beginning of 1993 the growth rate in M3 moved below
the lower boundary of the new guideline of 6-9%, and M3 showed virtually no
growth from the fourth quarter of 1992 to the second quarter of 1993. The
growth rate in M3 then started to rise moderately to 4.3% in September 1993,
and then to 7% in December 1993. Despite the low growth in money supply, the
Reserve Bank continued to pursue a fairly restrictive monetary policy and did
not take active steps to force the growth in money supply back into the
guideline range for the year.

<PAGE>
The following table shows the volume of the money supply on
December 31 for the years 1988 through 1993:

<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
----------- ----------- ----------- ----------- ----------- ------------
(Rand millions)
<S> <C> <C> <C> <C> <C> <C>
Money Supply (M1)<F1> . . . . . . . . . . 41,537 45,761 53,048 60,910 71,571 76,398
Non-demand Deposits<F2> . . . . . . . . . 76,394 98,852 109,233 121,705 125,585 134,580
------- ------- ------- ------- ------- -------
Money Supply (M3)<F3> . . . . . . . . . . 117,931 144,613 162,281 182,615 197,156 210,978
======= ======= ======= ======= ======= =======
Percentage increase of M3 over previous
year . . . . . . . . . . . . . . . . 27.2 22.6 12.2 12.5 8.0 7.0
____________________
<FN>
<F1> Comprised of coins and notes in circulation, checks and other demand
deposits.
<F2> Comprised of short-term deposits (other than demand deposits), medium-
term deposits (including all savings deposits) and long-term deposits.
<F3> Broadly-defined money supply.

Source: Reserve Bank of South Africa, Quarterly Bulletin, December 1993;
Reserve Bank of South Africa, Quarterly Bulletin, March 1994.
</TABLE>

<PAGE>
The following table shows the major interest rates at the end of the
respective periods:

<TABLE>
INTEREST RATES 1987-1993
(%)
<CAPTION>
1987 1988 1989 1990 1991 1992 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Reserve Bank discount rate (bank
rate)<F1> . . . . . . . . . . . . 9.5 14.5 18.0 18.0 17.0 14.0 12.0
Commercial banks prime overdraft
rate on current accounts . . . . . 13.0 22.5 22.0 21.5 23.5 20.5 17.0
Long-term government stock rate (10
years and over)<F2> . . . . . . . 15.5 16.7 15.9 16.0 16.7 14.9 12.2
Long-term corporate loan rate
(company loan securities)<F2> . . 17.0 17.1 18.0 17.8 21.2 18.1 18.4
Eskom stock rate<F2> . . . . . . . . 15.5 16.5 15.7 15.8 16.3 14.9 12.2
____________________
<FN>
<F1> Up to April 30, 1993, the rediscount rate on Treasury bills. Thereafter
the accommodation rate for overnight loans against collateral of
Treasury bills, short-term government stock, Landbank bills or Reserve
Bank bills with an outstanding maturity of less than 92 days.
<F2> Monthly average yield of loan stock traded on the Johannesburg Stock
Exchange.

Money market conditions remained relatively tight during the first
nine months of 1993, due to a decrease in the net gold and other foreign
reserves of the Reserve Bank and a substantial increase in government deposits
with the Reserve Bank. Aimed at easing the money market conditions, in the
first nine months of 1993, the Reserve Bank reduced the minimum cash reserve
requirements of banks, allowed the banks to reduce their liabilities for
purposes of calculating their cash reserve requirements by subtracting
interbank deposits and certain repurchase agreements, and transferred funds
from government accounts at the Reserve Bank to banks as an interim measure in
anticipation of the proposed introduction of a system of "tax and loan
accounts" (through which Exchequer receipts and payments will be channelled).
At the end of December 1993, the government funds placed with banks amounted to
R5.2 billion, decreasing to R2 billion at the end of February 1994.

Banking and Finance

The financial sector comprises a national reserve bank, a banking
system, non-banking financial institutions and the financial markets. The
Reserve Bank is established independently from the government and functions as
the country's central bank. It is also the country's sole marketing agent for
gold. The Reserve Bank, among other things, maintains government accounts,
holds the commercial banks' reserve accounts, manages South Africa's gold and
foreign reserves, issues bank notes and administers South Africa's foreign
exchange control regulations.
<PAGE>
In 1992, South Africa had 47 private sector banks with over 2,000
branches. Distinctions between commercial, general, and merchant banks were
rooted in legal definitions which limited a bank's activities according to
types of transactions and clientele. These legal distinctions have eased in
recent years, and the bank holding companies in South Africa typically own
several banks geared to various clienteles.

Banks in South Africa are regulated under the Banks Act of 1990, are
supervised by the Reserve Bank and are subject to the risk-based capital
adequacy requirements prescribed under the guidelines of the Bank of
International Settlements.

Other types of financial institutions include insurance companies,
pension and provident funds, money-broking firms, unit trusts and stokvels
(rotating credit associations used by urban blacks whose members pool their
resources to provide financing without interest or rigid payment schedules).

More specialized financial institutions include the Development Bank
of Southern Africa (a multilateral institution established in 1983 to support
economic development in Southern Africa through loans, technical assistance and
training to both governmental and non-governmental developmental agencies), the
Land and Agricultural Bank of South Africa (an institution established to
mobilize and lend funds for assistance to the farming community, agricultural
cooperations and agricultural boards of control) and the Local Authorities
Loans Fund Board (an institution administered by the Department of Finance to
make long term loans available to local authorities who are unable to borrow
directly from the capital market).

Foreign Trade

South Africa has maintained a positive trade balance since 1983, led
by exports of gold and other metals and minerals. Machinery has been and
remains the main category of imports followed by transport equipment and
chemicals. South Africa's leading trading partners are Germany, the United
States, the United Kingdom and Japan.

<PAGE>
The following table sets forth the value of South Africa's imports and
exports by type of product for the years 1988 to 1992:

<TABLE>
FOREIGN TRADE BY PRODUCTS 1988-1992
(R millions)

<CAPTION>
Imports Exports<F1>
----------------------------------------------- ------------------------------------------------
1988 1989 1990 1991 1992 1988 1989 1990 1991 1992
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Live animals, animal
products . . . . . . . . 491.7 263.8 224.7 270.3 440.0 254.5 404.7 493.4 692.0 734.7
Vegetable products . . . . 604.1 711.2 924.9 1,142.7 2,553.1 911.6 2,484.9 2,044.6 1,909.4 2,208.6
Animal/vegetable fats,
oils, waxes . . . . . . 293.3 373.6 324.5 268.5 463.6 102.7 142.8 122.6 153.3 152.8
Prepared food, tobacco . . 726.0 1,008.8 926.6 1,018.1 1,122.4 1,240.5 1,578.7 1,714.1 2,040.7 1,891.1
Mineral products . . . . . 455.3 490.5 570.3 573.5 541.0 5,009.4 6,616.8 7,257.1 7,281.2 7,558.8
Chemical and allied
industries . . . . . . . 4,194.9 4,754.5 4,777.6 5,397.0 5,766.3 1,585.6 1,974.7 1,896.4 2,300.7 3,286.6
Resins, plastic, other
rubber . . . . . . . . . 1,882.7 1,938.8 1,893.1 2,150.2 2,226.6 257.0 363.7 405.5 581.6 747.5
Leather, furskins . . . . . 214.2 263.4 269.7 250.1 260.5 333.1 408.0 407.4 349.4 421.0
Wood, cork, plaiting . . . 270.3 323.8 337.1 381.4 388.8 184.5 255.7 319.6 342.5 378.7
Paper, paperboard . . . . . 1,035.4 1,331.5 1,249.7 1,352.1 1,512.9 844.5 1,616.7 1,590.6 1,622.1 1,653.6
Textiles . . . . . . . . . 1,675.1 1,914.3 2,008.6 2,493.7 2,475.0 1,314.2 1,556.1 1,621.1 1,823.7 1,734.6
Footgear, headgear . . . . 176.3 173.1 199.2 305.5 306.1 19.3 24.1 25.3 32.8 52.9
Stone, plaster, cement,
asbestos, ceramic,
glass . . . . . . . . . 422.0 516.6 615.9 641.7 686.5 148.7 206.6 253.6 306.5 364.8
Precious, semi-precious
stones . . . . . . . . . 409.8 499.7 469.4 349.8 343.7 3,989.4 5,436.3 5,760.9 6,780.4 7,570.8
Basic metals . . . . . . . 1,923.1 2,422.2 2,223.3 2,231.0 2,462.8 6,716.4 9,093.5 9,054.9 9,534.0 9,399.0
Machinery, appliances . . . 12,386.1 13,274.8 13,212.5 13,982.5 14,965.9 868.6 1,059.6 1,362.7 1,678.3 2,133.8
Vehicles, transport
equipment . . . . . . . 5,608.3 6,877.2 5,692.6 6,766.9 6,505.7 447.0 674.2 1,148.9 1,531.2 2,367.3
Professional, scientific
equipment . . . . . . . 1,581.3 1,702.3 1,819.2 2,157.6 2,226.1 85.8 102.6 137.7 148.4 178.5
Miscellaneous
manufactured articles . 436.8 430.1 486.2 601.4 627.0 110.7 143.3 170.6 246.0 295.2
Art . . . . . . . . . . . . 34.0 43.9 31.3 19.0 27.9 16.5 27.0 23.6 19.5 18.5
Unclassified, balance of
payment adjustment<F2> . 4,707.0 5,427.7 5,868.6 5,855.4 6,015.3 24,360.7 24,558.4 25,117.9 24,981.2 24,308.0
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total . . . . . . . . . . . 39,527.7 44,741.8 44,125.0 48,209.1 51,917.2 48,800.7 58,728.4 60,928.5 64,354.9 67,456.8
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
____________________
<FN>
<F1> Exports include gold and platinum.
<F2> A further breakdown is not possible because of sanctions imposed on
South Africa during the respective periods.

Source: Department of Finance of South Africa, The South African Economy
in Brief, September 1993.

</TABLE>
<PAGE>
In contrast to previous recessions, when a decline in economic
activity was usually accompanied by a decrease in the volume of imports, the
physical quantity of imports in the recent recession remained at a relatively
high level. The volume of merchandise imports rose by nearly 5.5% from the
first quarter of 1989 to the second quarter of 1993; it decreased by almost 40%
and 25% in the recessions of 1981-83 and 1984-86. As a ratio of real gross
domestic expenditure, merchandise imports (at constant prices) also rose from
21.8% in 1990 to 24% in 1992 and further to 24.7% by the end of 1993.

Import prices were affected favorably during the period 1989-1993 by
the continued relatively low inflation rates in South Africa's main trading
partner countries, a relatively small rise in international oil prices, and
only a moderate depreciation in the nominal effective exchange rate of the
Rand. During the period from 1989 to 1992, import prices increased at an
average annual rate of only 4.5%. The rise in import prices then started to
accelerate to 6% with the sharper depreciation of the Rand in the first half of
1993.

In 1993, the value of merchandise imports (seasonally adjusted and
annualized) increased to R56.4 billion in the first quarter, decreased to
R55.8 billion in the second quarter and then increased to R59.3 billion
in the third quarter and to R64 billion in the fourth quarter, representing
an overall increase of 13.5% for 1993.

<PAGE>
The following table sets forth the value of South Africa's merchandise
imports by geographic region during the period 1990-1992:

<TABLE>
DIRECTION OF MERCHANDISE IMPORTS 1990-1992<F1>
(at current prices)

<CAPTION>
1990 1991 1992
--------------------- --------------------- ---------------------
R millions % R millions % R millions %
<S> <C> <C> <C> <C> <C> <C>
World Zones
Africa . . . . . . . . . . . . . 789.8 1.8 863.4 1.8 1,184.4 2.3
Europe . . . . . . . . . . . . . 21,632.4 49.0 21,834.6 45.3 23,161.2 44.6
America . . . . . . . . . . . . . 6,422.5 14.5 8,010.8 16.6 8,971.2 17.3
Asia . . . . . . . . . . . . . . 8,989.8 20.4 11,043.6 22.9 11,714.4 22.6
Oceania . . . . . . . . . . . . . 430.6 0.98 563.8 1.2 685.6 1.3
Other unclassified goods and
balance of payments
adjustments<F2> . . . . . . . 5,859.9 13.3 5,892.9 12.2 6,200.4 11.9
-------- ----- -------- ----- -------- -----
Total . . . . . . . . . . . . . . 44,125.0 100.0 48,209.1 100.0 51,917.2 100.0
======== ===== ======== ===== ======== =====
____________________
<FN>
<F1> Not adjusted for balance of payment purposes.
<F2> A further breakdown of areas is not possible because of sanctions
imposed on South Africa during the respective periods.

Source: Department of Finance of South Africa, The South African Economy
in Brief, September 1993.
</TABLE>

The value of merchandise (excluding gold) exports increased from
R32.1 billion in 1988 to R49.0 billion in 1992, or at an average rate of
11% per year. This may be compared with an average annual rate of increase
of 26% in the period from 1983 to 1988. On a quarterly basis, the value of
merchandise exports (excluding gold) levelled off during 1992 and decreased
from a seasonally adjusted and annualized value of R49.4 billion in the
fourth quarter of 1992 to R48.6 billion in the first quarter of 1993.
Merchandise exports (excluding gold) then recovered substantially to a
seasonally adjusted and annualized value of R56.2 billion in the second quarter
of 1993, declined to R54.8 billion in the third quarter of 1993 and increased
again to R63.6 billion in the fourth quarter of 1993. For 1993, the total
value of merchandise exports (excluding gold) increased by 14.5% as compared
with 9.5% in 1992. The sharp rise in 1993 to a large extent was related to
higher export prices, which rose by 8% because of depreciation of the Rand.

After having increased at an average annual rate of 7% in the period
1983 to 1988, the growth in the volume of merchandise exports slowed down to
slightly less than 4% per year from 1988 to 1992, but for the first nine months
of 1993 was 2% above its level in the corresponding period of 1992, and for
1993, rose by 6%.
<PAGE>
The rate of increase in the prices of exported goods also slowed down
substantially from an average annualized level of 17.5% from 1983 to 1988 to an
average of 7% per year from 1988 to 1992. In the first half of 1993 export
prices continued to rise at a fairly moderate rate, and for 1993, rose by 8%.
This increase in export prices occurred despite a decline of slightly more than
38% in international commodity prices from June 1988 to June 1993. The export
prices of goods not dependent on international commodity prices therefore rose;
a further depreciation in the exchange rate of the Rand (especially against the
U.S. dollar, in which the major part of export prices are denominated) also
contributed to this increase.

The following table sets forth the value of South Africa's merchandise
exports by geographic region during the period 1990-1992:

<TABLE>
DIRECTION OF MERCHANDISE EXPORTS 1990-1992<F1>
(at current prices)
<CAPTION>
1990 1991 1992
--------------------- --------------------- ---------------------
R millions % R millions % R millions %
<S> <C> <C> <C> <C> <C> <C>
World Zones
Africa . . . . . . . . . . . . . 4,008 6.6 5,064.5 7.9 6,130.3 9.1
Europe . . . . . . . . . . . . . 22,921.4 37.6 23,322.9 36.2 22,860.9 33.9
America . . . . . . . . . . . . . 3,341.5 5.5 4,938.4 7.7 6,214.5 9.2
Asia . . . . . . . . . . . . . . 10,899.8 17.9 11,764.7 18.3 12,271.5 18.2
Oceania . . . . . . . . . . . . . 349.4 0.6 318.2 0.5 372.3 0.5
Other unclassified goods and
balance of payments
adjustments<F2><F3> . . . . . 19,275.9 31.6 18,458.0 28.7 18,887.7 28.0
Ships/aircraft stores . . . . . . 132.5 0.2 488.2 0.7 719.6 1.1
-------- ----- -------- ----- -------- -----
Total . . . . . . . . . . . . . . 60,928.5 100.0 64,354.9 100.0 67,456.8 100.0
-------- ----- -------- ----- -------- -----
____________________
<FN>
<F1> Not adjusted for balance of payment purposes.
<F2> Includes exports of gold and platinum.
<F3> A further breakdown of areas is not possible because of sanctions
imposed on South Africa during the respective periods.

Source: Department of Finance of South Africa, The South African Economy
in Brief, September 1993.
</TABLE>

Under the terms of the Import and Export Control Act of 1963, South
Africa's Minister of Trade and Industry may act in the national interest to
prohibit, ration, or otherwise regulate imports. Current regulations require
import permits for a wide variety of goods. In addition to applicable tariff
rates, which in 1992 generally ranged from 15% to 60%, with luxury goods as
<PAGE>
high as 60% and automobiles at 100%, surcharges, which may be as high as 40%
are imposed on certain categories of imported goods.

The South African government has stated its intention to liberalize
its import policies by reducing tariffs. It has been reported that the
government made progress in phasing out the surcharges during fiscal years
1990/1991 and 1991/1992, and remains committed to their complete removal if the
balance of payments situation improves. Its actions in this area are part of
its broader policy to emphasize export-oriented production.

Balance of Payments

South Africa's balance of payments situation weakened in 1992,
primarily as the result of R4.7 billion in short-term capital outflows for the
year. The surplus on the current account of the balance of payments declined
from a record annual high of R6.19 billion in 1991 to R3.94 billion in 1992.
The marginally lower value of net gold exports and the impact of the drought on
agricultural imports and exports contributed to this decline. However, the
cumulative surplus on the current account of the balance of payments in 1993
amounted to R5.9 billion, a combined result of a substantial rise in the value
of merchandise exports and net gold exports. As a ratio of GDP, the surplus on
the current account increased from 1.2% in 1992 to 1.6% in 1993. The improved
performance of the current account balance during a period in which the
domestic economy recovered somewhat was a reflection of the low level from
which the economy started to grow and the effect of a substantial increase in
agricultural output.

<PAGE>
The following table sets forth South Africa's balance of payments for
the years 1986 through 1993:

<TABLE>
Balance of Payments<F1>
(R millions)
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993
--------- -------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Merchandise exports fob<F2> 23,922 25,607 32,125 38,384 42,735 44,709 49,010 56,059
Net gold exports<F3> . . . 16,719 17,823 19,701 19,140 18,177 19,587 18,356 22,229
Service receipts . . . . . 7,582 7,955 8,884 11,543 11,346 12,386 13,310 14,277
Less merchandise imports,
fob<F2> . . . . . . . . 25,826 28,606 39,408 44,266 43,408 47,385 51,883 58,812
Less payments for services 16,138 16,032 18,011 21,539 23,711 23,312 25,153 28,178
Transfers (net receipts+) . 69 (39) 92 205 185 202 300 358
------ ------ ------ ------ ------ ------ ------ ------
Balance on current account 6,328 6,708 3,383 3,467 5,324 6,187 3,940 5,933
------ ------ ------ ------ ------ ------ ------ ------

Long term capital movements (3,162) (1,701) (1,173) (606) (102) (1,730) (1,511) (1,500)
Public authorities . . . (305) (532) (440) (177) 903 782 2,092 (2,073)
Public corporations . . (75) 817 (636) (292) (392) 269 1,050 (1,674)
Monetary sector . . . . (103) 90 63 (122) 37 (124) (689) (57)
Non-monetary private
sector . . . . . . . . (2,679) (2,076) (160) (15) (650) (2,657) (3,964) 2,304
------ ------ ------ ------ ------ ------ ------ ------
Basic balance . . . . . . . 3,166 5,007 2,210 2,861 5,222 4,457 2,429 4,433
------ ------ ------ ------ ------ ------ ------ ------

Short term capital
movements not related
to reserves<F4> . . . . (2,046) (2,236) (5,253) (2,830) 1,670 (424) (2,162) (14,773)
Public authorities . . . (71) 8 (59) (409) 32 (327) (4) (25)
Public corporations . . (224) (40) 35 (211) 11 (89) (35) 96
Monetary sector<F7> . . 78 (373) 437 1,268 638 2,621 3,306 (2,809)
Non-monetary private
sector<F6> . . . . . . (1,829) (1,831) (5,666) (3,478) (2,351) (2,629) (5,429) (12,035)
Change in net gold and
other foreign reserves
owing to balance of
payments transactions . 1,120 2,771 (3,043) 31 3,552 4,033 267 (10,340)
Change in liabilities
related to
reserves<F5> . . . . . . (2,273) (886) 1,363 1,358 (2,673) (1,024) 808 7,399
SDR allocations and
valuation . . . . . . . 989 330 445 (1,190) (520) (468) 326 2,786
Change in gross gold and
other foreign reserves . (164) 2,215 (1,235) 199 359 2,541 1,401 (155)
____________________
<FN>
<F1> Data for the last four years are preliminary and subject to revision.
<F2> Published customs figures adjusted for balance of payments purposes.
<PAGE>
<F3> Net foreign sales of gold plus changes in gold holdings of the Reserve
Bank and other banking institutions.
<F4> Excluding short-term liabilities related to gold and other foreign
reserves as described in footnote <F4>.
<F5> Liabilities related to gold and other foreign reserves consist of all
foreign short-term liabilities of the Reserve Bank and
short-term foreign loans to the Central Government by foreign banks and
authorities.
<F6> Including unrecorded transactions on the current and capital accounts.
<F7> Includes all short-term foreign liabilities of the other banking
institutions (excluding the Reserve Bank).

Source: Reserve Bank of South Africa, Quarterly Bulletin, December 1993;
Reserve Bank of South Africa, Quarterly Bulletin, March 1994.
</TABLE>

The following table sets forth the quarterly terms of trade for 1988
through 1993:

<TABLE>
Terms of Trade 1988-1993<F1>
(1985=100)
<CAPTION>
1988 1989 1990 1991 1992 1993
--------------- --------------- --------------- ---------------- ------------------ -----------------
Excl. Excl. Excl. Excl. Excl. Excl.
Quarter Total gold Total gold Total gold Total gold Total gold Total gold
- ------- ------ ----- ------ ------ ------ ------ ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
I 106.1 105.2 102.3 105.2 100.2 104.7 93.8 99.7 99.2 106.6 94.8 100.9
II 107.3 106.5 101.9 105.9 97.6 104.0 96.6 103.0 97.2 106.2 97.3 103.2
III 103.9 105.1 100.4 104.7 100.1 107.5 97.4 103.7 92.5 101.2 96.2 102.8
IV 103.1 103.3 97.7 98.8 96.3 103.8 99.6 105.5 94.4 101.2 97.3 102.6
____________________
<FN>
<F1> Seasonally adjusted. Export price index divided by the import price
index.

Source: Reserve Bank of South Africa, Quarterly Bulletin, March 1994.
</TABLE>

Maintenance of the current account surplus has been an integral part
of South Africa's response to the imposition by its foreign creditors in 1985
of a suspension of credit and a demand for repayment of short-term debt. This
action, together with subsequent action by foreign governments, resulted in a
declaration by South Africa of a moratorium on the repayment of its short-term
obligations to foreign creditors. At the time the moratorium was imposed in
1985, South Africa's foreign debt was approximately $24 billion, of which
approximately $14 billion was short-term.

Under the terms of a rescheduling agreement concluded in March 1987,
South Africa agreed to repay $1.42 billion of its outstanding short-term debt
over the next three years. It also agreed to continue making both interest and
principal payments on its long-term debt, which was excluded from the
moratorium. Also included in this agreement was an "exit clause" which allowed
<PAGE>
foreign creditors the option of converting their short-term debt into long-term
debt repayable over 10 years. By May 1989 the term structure of South Africa's
debt had shifted as a result of these arrangements, with outstanding long-term
debt of about $12 billion and short-term debt of approximately $9 billion.

Another rescheduling agreement was reached in October 1989. This
agreement included a 3-1/2 year rescheduling plan for repayment of the foreign
debt affected by the moratorium. Under the pact, South Africa was to repay
$1.5 billion, or approximately 19% of its $8 billion short-term debt
outstanding as of October 1989 and then scheduled to mature in June 1990, in
eight installments.

On September 29, 1993, the South African government announced a new
agreement with creditors, the 1994 Debt Arrangement (the "Debt Arrangement").
Under the Debt Arrangement, 40% of the short-term debt under the moratorium
would be paid off within the first five years and the remainder over the last
three years of the agreement, which ends on August 15, 2001. At the time of
the Debt Arrangement, approximately $5 billion remained of the debt originally
subject to the moratorium. It has been reported that the Debt Arrangement has
been endorsed by South Africa's main political organizations, including the
ANC, the Pan-Africanist Congress and the Inkatha Freedom Party.

<PAGE>
The following table sets forth changes in South Africa's total foreign
debt during the period 1987-1992:

<TABLE>
TOTAL FOREIGN DEBT 1987-1992<F1>
<CAPTION>
31st December 1987 1988 1989 1990 1991 1992 1987 1988 1989 1990 1991 1992
- ------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(R millions)<F2> (US $ millions)<F2>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Affected debt . . . . 22,075 21,576 18,669 16,978 16,403 16,720 11,453 9,073 7,326 6,623 5,979 5,474
Public sector . . 7,168 6,694 6,664 5,109 5,171 5,312 3,719 2,815 2,615 1,993 1,885 1,739
Monetary sector<F3> 10,154 11,769 8,863 7,865 6,820 6,518 5,268 4,949 3,478 3,068 2,486 2,134
Non-monetary
private sector . . 4,753 3,113 3,142 4,004 4,412 4,890 2,466 1,309 1,233 1,562 1,608 1,601
Non-affected debt . . 21,522 28,804 33,820 32,710 33,333 36,124 11,165 12,112 13,271 12,760 12,150 11,827
Public sector . . 12,140 13,317 13,440 12,220 13,391 14,514 6,298 5,600 5,274 4,767 4,881 4,752
Monetary sector<F3> 906 1,229 3,468 1,182 107 883 470 517 1,361 461 39 289
Non-monetary
private sector . . 4,293 5,992 5,696 7,101 6,639 6,118 2,227 2,519 2,235 2,770 2,420 2,003
Medium-and long-
term loans . . . . 4,183 8,266 11,216 12,207 13,196 14,609 2,170 3,476 4,401 4,762 4,810 4,783
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total foreign debt . 43,597 50,380 52,489 49,688 49,736 52,844 22,618 21,185 20,597 19,383 18,129 17,301
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
____________________
<FN>
<F1> Excluding blocked rand accounts, ordinary and non-redeemable preference
shares, quoted domestic debentures and quoted domestic loan stock.
<F2> Valued at middle-market exchange rates as at end of period.
<F3> Including on lending to other sectors.

Source: Reserve Bank of South Africa, Quarterly Bulletin, March 1994.
</TABLE>

<PAGE>
The following table sets forth certain ratios (expressed as
percentages) relating to South Africa's total foreign debt position during the
period 1986-1992:

<TABLE>
TOTAL FOREIGN DEBT 1986-1992
Ratios of Selected Data<F1>
(% as at December 31)
<CAPTION>
1986 1987 1988 1989 1990 1991 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total foreign debt to:
- GDP . . . . . . . 36.3 28.0 24.3 23.1 19.0 16.8 15.1
- Total export
earnings . . . . 107.0 89.6 79.3 78.2 69.4 65.3 61.1
Interest payments to
total export
earnings . . . . . . 10.3 8.0 8.0 8.5 8.8 7.5 6.7
Interest and divided
payments to total
export earnings . . 15.6 13.3 12.3 12.9 13.4 11.6 10.7
____________________
<FN>
<F1> Ratios calculated in terms of US dollar for international comparison
purposes.

Source: Reserve Bank of South Africa, Quarterly Bulletin, March 1994.
</TABLE>

Smaller surpluses on the current account of the balance of payments
were accompanied by a large outflow of capital from about June 1992, which
caused the gross gold and other foreign reserves of the country to contract.
At first this capital outflow reflected mainly renewed uncertainty arising from
potential developments and civil unrest. Later it was exacerbated by the
strength of the dollar on international foreign exchange markets, leads and
lags in foreign payments and receipts and the ready availability of domestic
funds. At the end of September 1993, the level of the gross gold and other
foreign reserves was equivalent to the value of only five weeks' imports of
goods and services. For 1993, the average level of the gross gold and other
foreign reserves was equivalent to the value of approximately six weeks'
imports of goods and services. The target of the Reserve Bank is that reserves
should cover at least three months' imports, a level last achieved in 1981.

<PAGE>
South Africa's gold and foreign exchange reserves positions at the end
of the indicated periods were as follows:

<TABLE>
Gold and Other Foreign Reserves<F1>
(As at December 31)
(R millions)
<CAPTION>
1994
1986 1987 1988 1989 1990 1991 1992 1993 <F2>
--------- --------- --------- --------- ---------- --------- --------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gold Reserves . . . . . . 3,708 4,904 3,079 2,883 3,625 5,689 6,083 5,634 5,486
Foreign exchange
reserves . . . . . . . 807 1,235 1,853 2,433 2,580 2,463 3,021 3,458 3,314
----- ----- ----- ----- ----- ----- ----- ----- -----
Total (Reserve Bank) . . 4,515 6,139 4,932 5,316 6,205 8,152 9,104 9,092 8,800
Rest of monetary
sector . . . . . . . . 1,207 1,799 1,772 1,587 1,056 1,649 2,095 1,951 --
Central Government . . . 3 2 1 1 2 3 6 7 --
----- ----- ----- ----- ----- ----- ----- ----- -----
Gross gold and other
foreign reserves . . . 5,725 7,940 6,705 6,904 7,263 9,804 11,205 11,050 --
Change in net gold and
other foreign
reserves during
period . . . . . . . . 1,042 2,771 (3,043) 31 3,552 4,033 267 (10,340) --
____________________
<FN>
<F1> Gold reserves are valued at 90% of the last 10 London fixing prices
during the month. Other foreign reserves are valued at the middle
market exchange rate applicable on a specific date.
<F2> As of end of February 1994.

Source: Reserve Bank of South Africa, Quarterly Bulletin, March 1994;
Reserve Bank of South Africa, Quarterly Bulletin, December 1993.
</TABLE>

Foreign Investment and Foreign Exchange

Exchange controls have been a feature of the South African economy
since 1961, and tight controls on capital movements by South African residents
remain in effect. Controls on capital movements by non-residents were removed
in 1983 but then reinstituted in 1985 in response to the foreign debt crisis
that year. Exchange controls are administered by the Reserve Bank and by banks
which are designated by the Reserve Bank as authorized dealers.

South Africa generally does not prohibit foreign investment. However,
under current exchange control regulations applicable in South Africa, certain
Financial Rand investments by foreigners, including investments in unlisted
South African securities, require the prior written approval of the Reserve
Bank. No such approval is required for foreigners to make investments with the
Financial Rand in listed securities on the JSE or in bank deposits. To obtain
approval to make investments with the Financial Rand in an unlisted South
African security, a written application must be submitted on behalf of a
<PAGE>
foreign investor by an authorized currency dealer to the Reserve Bank
describing the transaction, and attaching the latest audited financial
statements and pro forma balance sheets showing the financial position of the
company immediately before and after the making of the investment. The
feasibility and desirability of acquiring unlisted securities in such
circumstances is not assured since the Reserve Bank may grant or refuse an
application. In considering an application, the Reserve Bank is guided by
policy directives of the South African government.

Direct foreign investment in South Africa may be made through
establishment of a branch, partnership or new company incorporated in South
Africa, as well as through the acquisition of an existing South African
company. South Africa generally applies a policy of national treatment to
foreign investors.

Information published by the Reserve Bank on foreign liabilities of
South Africa by kind of economic activity as of December 31, 1992 indicated
that of the R113.3 billion in total direct and indirect foreign investment, the
largest sectors for foreign investment were finance, insurance, real estate and
business services (accounting for 28% in the aggregate), electricity, gas and
water (accounting for 15.7% in the aggregate), community, social and personal
services (accounting for 15.1% in the aggregate) and manufacturing (accounting
for 15%).

South African law limits the ability of South African companies that,
directly or indirectly, are 25% or more owned or controlled by non-residents
(such companies are referred to as "affected companies") to borrow funds from
South African lenders. The amount which affected companies may borrow from
South African lenders is calculated on a sliding-scale formula based on the
affected company's total effective capital (broadly, equity capital, retained
earnings, funds borrowed from shareholders and deferred taxes) and the
percentage of foreign-owned equity.

The monetary unit of South Africa is the Rand (R), which is divided
into 100 rand cents (c). South Africa maintains two types of currency, the
Commercial Rand, which is the official currency, and the Financial Rand, which
is the non-resident investment or disinvestment currency. The Commercial Rand
is used for current transactions involving the normal commercial flow of goods
and services to and from South Africa, foreign loans, and remittances of
dividends and interest payments.

The Financial Rand was re-introduced in 1985 to control the outflow of
funds from South Africa and serve as an incentive to bring foreign or
nonresident capital into the country. The Financial Rand consists of a pool of
rands generated by the local sale and redemption of proceeds of non-residents'
investments in South Africa. When a non-resident sells an investment to a
resident, the non-resident is paid in Commercial Rand which is deposited into
the non-resident's account with an authorized dealer and then designated as
Financial Rand. Financial Rand owned by a non-resident may only be sold to
another non-resident against payment in foreign currency outside South Africa.
<PAGE>
As such, no currency leaves the country in connection with transactions
denominated in Financial Rands. Disinvestment by non-residents is
automatically met by new investments. Financial Rands can be obtained only
through banks designated by the Reserve Bank as authorized dealers.

Financial Rands may be used by non-resident investors to purchase
certain South African financial instruments, including listed securities on the
JSE, new issues of quoted shares and securities issued by the South African
government ("gilts") and to pay brokerage charges and bank charges in respect
of transactions effected in Financial Rands. While as a legal matter non-
resident investors may fund their purchases of South African financial
instruments through Commercial Rands, as a practical matter only Financial
Rands are generally used to effect such transactions.

Different rates of exchange are quoted for Commercial Rands and
Financial Rands. The Financial Rand trades independently from the Commercial
Rand and, historically, has traded at a discount to the Commercial Rand. The
amount of this discount has been subject to significant fluctuations, depending
on the relative attractiveness of investments in South Africa to international
investors.

As South Africa experienced growing internal political unrest and
increasing isolation from the international community during the 1980s, short-
term movements in the value of the Commercial Rand increased in magnitude;
during the period 1984-1989, the Commercial Rand depreciated sharply against
all the major western currencies. The value of the Commercial Rand against the
U.S. dollar was relatively more stable during the period of late 1989-1992.
From the end of December 1992 to November 18, 1993, the Commercial Rand
depreciated against all the currencies of its major trading partners (except
Italy), reaching a record low of R3.46 per U.S. dollar on October 6, 1993
before stabilizing at a level between R3.34 and R3.38 per U.S. dollar until
November 18, 1993. In the first two months of 1994, the Commercial Rand
continued to depreciate against the major currencies.

The continuing demand for South African securities, the progress made
with the political negotiation process and the lifting of many of the remaining
sanctions against South Africa by various countries and organizations resulted
in an appreciation of the Financial Rand of nearly 15% in the first ten months
of 1993. On October 15, 1993, the Financial Rand reached a high of R4.0950 per
U.S. dollar before depreciating again to R4.2653 per U.S. dollar on November
18, 1993. The Financial Rand discount decreased from 37.2% at the end of
December 1992 to 16.5% on October 8, 1993 and then increased to 21.1% on
November 18, 1993. Concern regarding problems experienced with the
constitutional negotiating process caused the exchange rate of the Financial
Rand to depreciate to R4.726 per U.S. dollar on February 28, 1994, and the
discount of the Financial Rand as against the Commercial Rand increased to
26.5%.

<PAGE>
Movements of the exchange rate of the Financial Rand and the
Commercial Rand at the end of the designated calendar period are set out in the
table below:

<TABLE>
EXCHANGE RATES 1988-1993<F1>

<CAPTION>
Period Commercial Rand Financial Rand Discount<F2>
- ------ ------------------- ------------------- --------------------
<S> <C> <C> <C>
1988 0.4204 0.2611 37.9
1989 0.3924 0.2790 28.9
1990 0.3901 0.2955 24.3
1991 0.3645 0.3152 13.5
1992 0.3274 0.2057 37.2
1993 0.2942 0.2328 20.9
____________________
<FN>
<F1> Expressed in U.S. dollar per rand at the end of the period.
<F2> The difference between the prices of the Commercial Rand and the
Financial Rand as a percentage of the Commercial Rand.

Source: Department of Finance of South Africa, The South African Economy
in Brief, September 1993; Reserve Bank of South Africa, Quarterly
Bulletin, March 1994.
</TABLE>

The Reserve Bank announced for the first time in March 1992 that it
would intervene in the Financial Rand market with a view to stabilize the
currency. The most recent evidence of intervention was in February 1994. The
Reserve Bank has indicated its preference that the Financial Rand eventually be
abolished in connection with the normalization of South Africa's relationships
with the international financial community. Statements have also been made
recently by the ANC advocating abolition of the two-tier foreign exchange
system.

<PAGE>

APPENDIX D

THE SOUTH AFRICAN SECURITIES MARKETS

The information set forth in this Appendix D has been extracted from
various government and private publications, including publications issued by
the Johannesburg Stock Exchange. The Fund and its Board of Directors make no
representation as to the accuracy of the information, nor has the Fund or its
Board of Directors attempted to verify the statistical information presented in
this Appendix D.

REGULATORY OVERSIGHT OF SECURITIES MARKETS

The South African securities markets are regulated primarily by the
Stock Exchanges Control Act of 1985 (the "Stock Exchanges Act"), the Financial
Markets Control Act of 1989 (the "Financial Markets Act"), the Financial
Services Board Act of 1990, the Companies Act of 1973 (the "Companies Act") and
the Safe Deposit of Securities Act of 1992. The Financial Services Board
oversees the activities of the securities markets. The chief executive officer
of the Financial Services Board is appointed by the Minister of Finance and
acts as both the Registrar of Stock Exchanges and the Registrar of Financial
Markets.

The legislation noted above envisions that equity trading be conducted
on special equity exchanges and gilts or bonds, options and futures be traded
in separate financial markets. However, apart from the Johannesburg Stock
Exchange ("JSE"), which operates the only equity market, a traded options
market and a floor and clearing house for the trading of gilts and bonds, and
the South African Futures Exchange ("SAFEX"), which operates a market in
futures contracts and options on futures contracts, no other formal financial
market has been established. A Bond Market Exchange was created pursuant to
the Financial Markets Control Act of 1989 as a market for trading in bonds and
gilts, intending to assume this responsibility from the gilt floor of the JSE
and a parallel institutional screen-based market, but a trading license is not
expected to be granted until later in 1994. See "The Bond Market -- Secondary
Market" in this Appendix D.

THE JOHANNESBURG STOCK EXCHANGE

The JSE, a member of the International Federation of Stock Exchanges
("FIBV"), serves as the exclusive stock exchange for South Africa and is the
largest stock exchange in Africa. The JSE was founded in 1887 as a
marketplace for trading the shares of the mining and financial companies
established in South Africa subsequent to the discovery of substantial
deposits of gold.

Based on statistics generated by FIBV for 42 member stock
exchanges, as of December 31, 1993, the JSE was the 12th largest formal
equity market in the world based upon aggregate market capitalization
of listed domestic issuers. However, the JSE is relatively small and
<PAGE>
illiquid compared to the securities markets of the United States and Japan.
The total market capitalization of JSE-listed equity securities as of
December 31, 1993 was approximately R737.6 billion (approximately
U.S.$217 billion) as compared with approximately $4.5 trillion for the
New York Stock Exchange and $2.9 trillion for the Tokyo Stock Exchange.
Based on FIBV's statistics, the JSE ranked 31st in terms of market turnover
for 1993 and 35th in terms of liquidity as at December 31, 1993. It also
lacks certain of the technology of the other modern stock exchanges.

Governance

Until 1947, the JSE was exclusively a self-regulatory entity. With
the passage of the Stock Exchanges Control Act (the "1947 Act") in 1947,
however, government controls were erected to aid in insuring the proper
enforcement of the JSE's rules and regulations, as well as to serve as a
legislative basis for additional supervisory and investor protection measures.

In 1985, various laws relating to the regulation and control of stock
exchanges and the business of stockbrokers and certain lenders of money against
the security of securities, including the 1947 Act, were consolidated in the
Stock Exchanges Act. The Stock Exchanges Act is administered by the Registrar
of Stock Exchanges, an officer appointed by the Minister of Finance. The JSE
is licensed annually under, and operates within the legal framework of, the
Stock Exchanges Act, which provides that only licensed stock exchanges may
carry on the business of a stock exchange. The Stock Exchanges Act requires
the governing committee of the JSE to promulgate rules which are substantially
prescribed by such Act, which rules are subject to the approval of the
Registrar of Stock Exchanges. The Stock Exchanges Act prescribes, among other
requirements, the capital and other requirements for membership, the type of
books that are required to be kept by stockbrokers, provisions in respect of
minimum cover, the time allowed for the payment of share purchases and for the
delivery of scrip and the conditions under which short sales may be executed.
Brokerage firms are also required to submit annual audited balance sheets to
the Registrar of Financial Institutions.

Internally, the JSE is governed by an honorary 15-person committee
(the "JSE Committee"), all of whom may be broking members. The elected broking
members (who may not number fewer than 10 and who are elected annually) may
appoint an executive president and two non-members to the committee. Under
changes to the constitution of the JSE, effective February 15, 1994, the number
of JSE Committee members was increased to a maximum of 17, 4 of whom may be
non-members and a maximum of 13 (or, in certain circumstances, 12) of whom must
be broking members. Policy decisions are made by the JSE Committee and are
carried out by a full-time executive headed by the executive president. The
JSE prescribes its own rules and regulations, which are primarily concerned
with the manner in which trading has to be conducted, the obligations of
members to one another and to their clients, the operations of the JSE's
clearing house and the disciplinary procedures to be applied to defaulting
members.
<PAGE>
Listing and Reporting Requirements

The JSE is comprised of three market segments for trading in equity
securities: the Main Board, the Development Capital Market (established in
1984) and the Venture Capital Market (established in 1989). A variety of
securities may be listed and traded on the three segments, including stocks,
shares, debentures, notes, units of stocks issued in place of shares and
options and rights on and to the foregoing. Excluded, however, are shares of a
private company and options on or rights to such shares. The JSE listing
requirements are currently undergoing revision, which are expected to be
finalized at the end of 1994. Companies must pay a fee and apply to the JSE
Committee for listing on the JSE. The JSE Committee also has the power to
terminate or suspend the listing of any security, investigate dealings in a
listed security and prescribe minimum listing requirements, both prior to
granting a listing and as a condition to continued listing.

For a company to list on the Main Board, the following requirements
must be met: (A) subscribed capital, excluding revaluations of assets, of at
least R2,000,000 in the form of not less than 1,000,000 shares in issue; (B) a
satisfactory profits listing for the preceding three years, with a current
audited profit level of at least R1,000,000 before taxation; (C) 30% of the
first million shares publicly held, and an agreed percentage of the balance;
(D) a minimum of 300 public shareholders; and (E) a minimum initial issue price
of 100 cents per share. Notwithstanding the foregoing, the JSE Committee may
in its discretion grant a listing to a company which does not meet the above
requirements.

The Development Capital Market was formed to encourage the growth of
small businesses and large companies which are not able to list on the Main
Board. However, with continued expansion, a company listed in the Development
Capital Market may meet the listing requirements of the Main Board and be
"promoted". A listing in the Development Capital Market requires: (A)
subscribed capital, excluding revaluations of assets, of at least R1,000,000 in
the form of not less than 1,000,000 shares in issue; (C) a satisfactory trading
record for two years (or, in exceptional circumstances, a lesser period), with
a current audited profit level of at least R500,000, before taxation (mining
companies are exempt from this requirement); (C) a minimum of 10% of the shares
in issue publicly held; (D) a minimum of 75 public shareholders; and (E) a
minimum initial issue price of 50 cents per share.

The Venture Capital Market was formed to assist developing businesses
specializing in venture capital projects, or single venture companies. These
companies are commercial speculations with a high degree of risk. For a
listing in the Venture Capital Market, the following requirements must be met:
(A) subscribed capital, excluding revaluations of assets, of at least
R2,000,000 in the form of not less than 1,000,000 shares in issue; (B) while
the company need not have a profit history, it should indicate in its analysis
of future earnings credible returns on capital which, on a time-weighted basis,
are above average; (C) a minimum of 5% of the shares in issue publicly held;
(D) a minimum of 75 public shareholders; (E) a minimum initial issue price of
50 cents per share; (F) the company should have directors and management, the
majority of which have had successful careers; (G) the company must furnish the
<PAGE>
JSE with an undertaking that any disposition of assets to any party associated
with the control of the company will require the consent of the company in a
general meeting (excluding the controlling shareholders); and (H) the company
must have, in bold block letters at the beginning of its prospectus or pre-
listing statement, a warning about the speculative nature of investment in such
a company. Notwithstanding the foregoing, the JSE has stated that it is not
possible to provide definitive listing requirements in the Venture Capital
Market, and the JSE reserves the right in its sole discretion to change the
requirements if it believes that such change would be in the interest of
potential investors.

Pyramid holding companies are permitted to be listed on the JSE but
companies are required to consult the JSE before entering into any commitment,
arrangement or agreement which could result in a pyramid operation relating to
a listed company. The JSE classifies companies as pyramid companies if they
hold 50% or more of the equity share capital of a listed company and/or derive
more than 75% of their income from such listed company. However, the JSE
reserves the right to classify as a pyramid company a company which has,
acquires or proposes to acquire a shareholding in a listed company which gives
it de facto control of the listed company and/or represents more than 50% of
its total assets or produces more than 50% of its total net income. Partly as
a result of the existence of pyramid holding companies, the actual market value
of shares available for public trading is significantly less than the aggregate
market capitalization of the JSE. See "Market Capitalization" in this
Appendix D.

Listed companies are required, among other things, to submit to the
JSE annual financial statements and interim reports and all notices and
circulars issued to shareholders or debenture holders. The JSE must be
advised, among other things, of an increase or decrease of authorized share or
loan capital, an increase in issued capital and issue of new shares, a
declaration of dividends or rights and dates of closing of transfer registers,
and the rate of non-resident shareholders tax, if applicable or non-declaration
of preference or ordinary dividends.

Market Capitalization

At the end of 1993, there were 647 companies with equity-listed
securities on the JSE, down from 671 at the end of 1992, reportedly as a result
of takeovers and the spinning off of companies by some of the conglomerates.
The market capitalization of all JSE listed equity securities on December 31,
1993 was approximately R737.6 billion (approximately U.S.$217 billion), an
increase of 47.1% from the market capitalization on December 31, 1992. Total
equity trading volume for 1993 was R44.1 billion, an increase of R22 billion
over 1992. Part of the reason for the increase in trading volume for 1993 was
a change in the rules for recording trades. Effective as of November 2, 1992,
all trades executed by brokers in listed equities and Kruggerands resulting in
a change of ownership (including foreign legs of arbitrage transactions and all
deals initially booked to allocation/suspense accounts) had to be reported to
the JSE's Equity Clearing House for inclusion in the trading statistics. If
foreign arbitrage transactions are excluded, the total equity trading volume
for 1993 would be R34.1 billion.
<PAGE>
At the end of 1993, companies with equity-listed securities that were
listed on the Development Capital Market had a total market capitalization of
R851 million. At the end of 1993, companies with equity-listed securities
that were listed on the Venture Capital Market had a total market
capitalization of R39 million.

The following table sets forth the number of listed companies, the
aggregate market capitalization of all JSE-listed equity securities and the
annual trading volumes for each year ended December 31 during the period 1991
through 1993:

<TABLE>
<CAPTION>
Number of
Listed Market Equity Trading
Year Companies Capitalization Volume on the JSE
- ---- ------------------- ------------------- -------------------
(Rand billions) (Rand billions)
<S> <C> <C> <C>
1991 . . . . . . . . . . . . . 728 508.3 22.2
1992 . . . . . . . . . . . . . 671 501.3 22.1
1993 . . . . . . . . . . . . . 647 737.6 44.1
____________________
<FN>
Source: Johannesburg Stock Exchange.
</TABLE>

Market capitalization is concentrated in a limited number of
companies. On December 31, 1993, the 25 largest companies by market
capitalization represented almost 50% of the total market capitalization of JSE
listed equity securities, the 10 largest companies by market capitalization
represented approximately 30% of the total market capitalization and the 5
largest companies represented nearly 21% of the total market capitalization.
It is estimated that as of July 1993, the four largest conglomerates controlled
76.4% of the total market capitalization on the JSE. These conglomerates are:
(1) Anglo American Corporation (38.2%), (ii) Rembrandt Group (15.5%), (iii)
Sanlam (12%) and (iv) S.A. Mutual (10.7%). It is also estimated that nearly
10% of the companies listed on the JSE exist merely to hold controlling shares
of other companies. As a result of the concentration of ownership, the
existence of pyramid companies and cross-holdings between listed companies, the
actual market value of shares available for public trading is significantly
smaller than the aggregate market capitalization.
<PAGE>
Trading volume of JSE-listed equity securities as a percentage of
total market capitalization of all JSE-listed equity securities was
approximately 4.76% in 1992, increasing to approximately 7.14% in 1993.

The following tables list the 25 largest companies on the JSE by
market capitalization on December 31, 1993 and show the sectoral distribution
of listed companies on December 31, 1993:

<TABLE>
<CAPTION>
Market Capitalization
Company at December 31, 1993
- ------- ----------------------------------
(Rand millions) (US$ millions)

<S> <C> <C>
Anglo American Corporation of South Africa Ltd. . . . 51,025.6 15,011.9
De Beers Consolidated Mines Ltd. . . . . . . . . . . . 39,351.3 11,577.3
The South African Breweries Ltd. . . . . . . . . . . . 25,975.5 7,642.1
Richemont Securities AG . . . . . . . . . . . . . . . . 20,958.0 6,166.0
Liberty Life Association of Africa Ltd. . . . . . . . 17,489.9 5,145.6
Rembrandt Group Ltd. . . . . . . . . . . . . . . . . . 16,573.5 4,876.0
Minorco Societe Anonyme . . . . . . . . . . . . . . . . 15,498.5 4,559.7
Standard Bank Investment Corp. Ltd. . . . . . . . . . 12,869.4 3,786.2
Johannesburg Consolidated Investment Co. Ltd. . . . . . 12,004.4 3,531.7
Gencor Ltd. . . . . . . . . . . . . . . . . . . . . . . 11,903.5 3,502.1
Driefontein Consolidated Ltd. . . . . . . . . . . . . 11,526.0 3,391.0
Anglo American Investment Trust . . . . . . . . . . . . 10,800.0 3,177.4
Barlow Rand Ltd. . . . . . . . . . . . . . . . . . . . 10,772.9 3,169.4
Sasol Ltd. . . . . . . . . . . . . . . . . . . . . . . 10,621.9 3,125.0
Gold Fields of South Africa Ltd. . . . . . . . . . . . 10,327.7 3,038.5
Rustenburg Platinum Holdings Ltd. . . . . . . . . . . 10,276.3 3,023.3
Liberty Holdings Ltd. . . . . . . . . . . . . . . . . 9,438.1 2,776.7
Anglo American Gold Investment Company Ltd. . . . . . 9,417.4 2,770.6
Free State Consolidated Gold Mines Ltd. . . . . . . . . 8,626.3 2,537.9
Beverage and Consumer Industry Holdings Ltd. . . . . . 8,517.6 2,505.9
Vaal Reefs Exploration and Mining Co. Ltd. . . . . . . 8,295.8 2,440.7
Rembrandt Controlling Investments Ltd. . . . . . . . . 7,920.0 2,330.1
Tiger Oats Ltd. . . . . . . . . . . . . . . . . . . . 7,813.4 2,298.7
Liblife Strategic Investments Ltd. . . . . . . . . . . 7,533.0 2,216.2
Kloof Gold Mining Company Ltd. . . . . . . . . . . . . 7,380.5 2,171.4
--------- ---------
Total<F1> . . . . . . . . . . . . . . . . . . . . . 362,916.8 106,771.6
========= =========
_____________________
<FN>
<F1> Figures may not add up due to rounding.
Source: Johannesburg Stock Exchange.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sectoral Distribution
Percentage of
Market Market
Industry Capitalization Capitalization
- -------- ----------------- -----------------
(Rand millions) (%)
<S> <C> <C>
Coal . . . . . . . . . . . . . . . . . . . 5,358 0.73
Diamonds . . . . . . . . . . . . . . . . . 51,139 6.93
All Gold . . . . . . . . . . . . . . . . . 76,960 10.43
Metals and Minerals . . . . . . . . . . . . 26,926 3.65
Mining Finance . . . . . . . . . . . . . . 132,029 17.90
Financial . . . . . . . . . . . . . . . . . 96,432 13.07
Industrial . . . . . . . . . . . . . . . . 347,897 47.16
Development Capital Market . . . . . . . . 851 0.12
Venture Capital Market . . . . . . . . . . 39 0.01
____________________
<FN>
Source: Johannesburg Stock Exchange.
</TABLE>

As at January 20, 1994, 90 South African registered companies listed
on the JSE were also listed on the London Stock Exchange, 23 were listed on the
Paris Stock Exchange, 38 in the aggregate were listed on four other European
stock exchanges and 4 were listed on the Namibia Stock Exchange.

Following an increase of 34.6% from November 1992 to July 1993, the
average monthly price level of all classes of shares declined by 6.7% up to
September 1993. The sharp decrease in the gold price on the world markets in
August, weaker international commodity prices in dollar terms related to the
sluggish international economic recovery, and uncertainty on the local equity
market attributable to worse than expected financial results, caused a sharp
decline in the prices of mining shares and industrial and commercial shares.
Partly as a result of the improvement in the political climate, the lifting of
sanctions against South Africa, and active trading on some of the world's
leading stock exchanges, the average monthly price level of all classes of
shares rose by 27.2% from September 1993 to January 1994.

The sharp increase in share prices noted above resulted in a reduction
of the average dividend yield from 3.51% in December 1992 to 2.97% in September
1993, and to 2.36% in January 1994.

At the end of December 1992, equity securities listed on the JSE were
selling on an average price/earnings ratio of 12.9 times earnings, a slight
increase over the ratio for 1991 year-end. By the end of December 1993, the
ratio had increased to 18.7. In January 1994, the price/earnings ratio for all
classes of shares other than gold was 18.2, but, if the discount on the
<PAGE>
Financial Rand is taken into consideration, the price/earnings ratio for non-
residents amounted to 13.8.

JSE-Actuaries Equity Indices

The JSE has three principal indices which measure movements on the
exchange: the All Share Index, the Industrial Index and the All Gold Index.
Companies are selected for inclusion on the indices by members of the JSE
Committee and the Actuarial Society. These companies tend to be of sound
financial standing and have widely traded or marketable share capital. A list
of companies for each index is developed according to certain guidelines which
include: all or a major portion of a company's activities should not be
located outside South Africa, the volume of shares traded should not be
exceedingly small over the past few years, companies should be selected so as
to ensure diversity within a particular sector, and companies do not need to be
paying dividends but an attempt is made to exclude unsound companies.
Companies selected for inclusion on a particular list are then ranked in order
of market capitalization, from largest to smallest. Companies are successively
selected until approximately 80% of the market capitalization of the eligible
companies in the relevant sector have been included in the index. The indices
are revised annually to take effect as closely as possible to the beginning of
each calendar year, but the JSE Committee may also change the list during the
year under certain circumstances such as the delisting or the suspension of
listing of an included company, the declaration of bankruptcy by an included
company, changes in control of an included company and the listing of a new
issue with a large market capitalization.

<PAGE>
The All Share Index, the Industrial Index and the All Gold Index
increased by approximately 50.1%, 27.7% and 170.9%, respectively, from the end
of 1992 to the end of 1993, placing the JSE at historically high levels which
may not continue. The following table shows the high, low and close values of
the three indices for the years 1987 through 1993:

<TABLE>
<CAPTION>
1987 1988 1989 1990 1991 1992 1993
------------ ------------ ------------ ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
All Share Index
High . . . . . . 2,804 2,037 3,126 3,399 3,584 4,896
Low . . . . . . 1,675 1,512 1,990 2,537 2,525 3,245
Close . . . . . 1,820 1,984 2,976 2,720 3,440 3,259 4,893

Industrial Index
High . . . . . . 2,268 1,942 2,840 3,319 4,378 5,573
Low . . . . . . 1,402 1,386 1,955 2,638 2,829 4,332
Close . . . . . 1,446 1,942 2,790 3,018 4,170 4,363 5,573

All Gold Index
High . . . . . . 2,499 1,791 2,260 2,252 1,486 2,212
Low . . . . . . 1,443 1,149 1,247 1,101 968 768
Close . . . . . 1,774 1,298 2,049 1,201 1,131 799 2,164
____________
<FN>
Source: Johannesburg Stock Exchange.
</TABLE>

Operations

Membership

The JSE affords two basic categories of membership: (i) individual
membership, consisting of broking members, non-broking members, and associate
members; and (ii) company membership, comprised of corporate members (i.e.,
incorporated companies whose shareholders are restricted to broking members of
the JSE). Membership is restricted to natural persons at least 21 years old
with South Africa citizenship. Among other qualifications, members must pass
the JSE examinations and meet minimum capital requirements. As of December,
1993, JSE membership was comprised of 48 brokerage firms with 335 broking
members and 118 non-broking members. Only broking members can trade on the
floor of the JSE. A new class of corporate member, with limited rights to
trade, is to be admitted to the JSE for the first time during 1994. The rights
of these members, to be known as derivative members, are being developed where
the primary aim is to permit creators of derivatives to hedge their positions
by having direct access to the cash market.

The Guarantee Fund

Among the mechanisms for investor protection at the JSE is a Guarantee
Fund out of which the JSE pays, after a stockbroker is declared insolvent the
liabilities of a stockbroker arising out of the buying and selling of
securities by him on behalf of other persons while a member of the JSE, up to
an amount specified in the rules of the JSE. As of July 31, 1992, the
Guarantee Fund had net assets in excess of R80,000,000 (excluding any
contingent liability arising out of defaults of broking firms), and as of
<PAGE>
December 31, 1993, net assets were in excess of R85,000,000. All broking
members of the JSE are jointly liable for any shortfall following the
exhaustion of the assets of the Guarantee Fund arising at any time. Protection
is restricted to losses in respect of transactions in securities other than
gilts to R5 million in the aggregate per broking firm and for gilts to R10
million in the aggregate per broking firm.

Trading Procedures

The JSE maintains standard trading hours, with only minor differences
between the equity and bond markets. The equity and traded options markets are
open for trading between 9:30 a.m. and 4:00 p.m., Monday through Friday, while
the bond market commences trading at 7:00 a.m. and ends at 5:00 p.m., in each
case excluding public holidays.

The JSE's equity market is a continuous two-way open outcry auction
market on a central trading floor. There is no specialist system and trading
on the equity floor is directly between JSE-member firms. Members may trade as
principals for their own account dealings, for arbitrage and with certain
overseas counterparties, but may only act as agent for trading with clients.
Trading in the bond markets may take place on the JSE gilt floor directly
between JSE-gilt members or over the telephone with non-JSE members based on
Reuters screen pricing. See "The Bond Market -- Secondary Market" in this
Appendix D. In the bond markets a broker can act as both agent and principal.
Trading in equities is normally in lots of 100 shares and trading in gilts is
normally in lots of R1,000,000 in nominal value, but trading in odd-lots may
take place. When a sale is concluded, the price is recorded on the relevant
board in the market whenever it is different from the price of the previous
sale.

After a transaction has been concluded, the buying and selling brokers
each report their part of the transaction to the Equity Clearing House (in the
case of equity transactions) and the Gilt Clearing House (in the case of gilt
transactions). Both sides of such transactions are matched by computer.

The market may be closed temporarily when developments at the macro
level warrant a closure or when systems are stressed due to trading volumes
exceeding the capacity of the administrative resources. The last time that
this occurred was in the 1970s and was due to trading volumes exceeding the
capacity of the network.

Settlement Procedures

The JSE has well-developed settlement procedures for settling and
clearing securities transactions. A computerized clearing system records the
entire week's trading on the equity floor, with no interim settlement taking
place. At the end of each week, the system calculates the net balance owed in
each security to or by each brokerage firm. The balances are prepared each
Friday night, and the difference between the contract values of trades and
their marked-to-market values are settled with the Equity Clearing House
("ECH") on each Monday before deliveries of scrip. The total number of shares
in any security owed by delivering brokers must match the total number due to
<PAGE>
receiving brokers. Each firm which has to deliver a net balance of shares in
any security is advised by the ECH as to the name of the firm or firms to which
the scrip must be addressed. The scrip is then delivered to the ECH in sealed
envelopes and sorted into the appropriate boxes for each firm.

Each year is divided into 52 weekly settlement periods numbered
consecutively beginning with the first week in January, with each period
beginning on a Tuesday and ending on a Friday. The current week's trading is
settled on balance the following week, except for transactions nominated for
settlement in later periods. The selling brokers stipulate the number of
settlement periods in which they expect to be in a position to deliver the
scrip to the ECH. The number of settlement periods appears on the broker's
note.

On Mondays the ECH sends each broking firm a settlement statement
showing its net balance of all transactions in the previous week or weeks in
every security due for delivery in the current week. Brokers deliver to the
ECH scrip balances as calculated by the ECH as soon as they are available and
on any day during the remainder of the week. At the same time they collect
scrip placed in their boxes by the ECH.

When an investor sells securities, the proceeds of the sale will not
be received by the selling investor until the Tuesday of the following week at
the earliest, and then only if the selling investor has delivered the scrip to
the broker. If an investor sells shares and then purchases shares with the
proceeds thereof within the same week, settlement with the broker will be on
the basis of the balance only. An investor who sells securities must deliver
such securities in negotiable form within seven business days after the date of
the sale to the selling investor's broker who must forthwith pay to the selling
investor (i) the amount in full payable for such securities or (ii) any
resulting credit balance in the account of such person with the broker,
provided that such payment is not made before any settlement period stipulated
in the transaction. If the selling client fails to present the certificates to
his broker within the prescribed time period, the broker may purchase the
shares on the market at the prevailing market price, with any profit or loss
from the forced purchase being for the account of the defaulting client.

The Stock Exchanges Act generally requires a client who is purchasing
securities to pay his broker within seven business days of the transaction,
whether or not the securities are available for delivery. Two exceptions to
this requirement are (i) in the event that the client instructs a bank to pay
for the securities when they are delivered and (ii) corporate entities with an
excess of assets over liabilities of not less than R1,000,000 may make payment
upon delivery. If the client does not pay his broker within the prescribed
period, the shares may be sold by his broker at the prevailing market price,
with any profit or loss from the forced sale being for the account of the
defaulting client. Share certificates registered in the name of the purchasing
investor normally are delivered to the purchasing investor within four to seven
weeks.
<PAGE>
Transaction Costs

Brokerage commissions for purchases or sales of securities,
excluding government and municipal securities, are fixed based on a sliding
scale starting with 1.2% for transactions of up to R5,000 and ending with
R7,127.50 plus .20% on the excess over R1,500,000 for transactions over
R1,500,000. The minimum charge for any transaction is R2.20. In addition,
there is a basic charge of up to R30 at the broker's discretion where the
total consideration is up to R200 and a flat charge of R20 otherwise.
There is also a surcharge of 2.4% on the brokerage fee.

For transactions in gilts where the broking firm acts as an agent,
brokerage commissions may not exceed (i) 0.05% for transactions of a nominal
value of less than R20,000, (ii) 0.03% for transactions of a nominal value of
R20,000 up to R99,999 and (iii) at the broker's discretion for transactions of
a nominal value in excess of R100,000. Broking firms may, at their discretion,
charge a minimum brokerage of R10, and in transactions of under R100,000 in
nominal value may pass on to the client the relevant Gilt Clearing House charge
(if any), which shall be separately shown on the broker's note. Typically, a
commission of .01% per R1 million of nominal value, the standard unit of trade,
is charged for long-dated stocks while short-dated stocks might have a higher
brokerage charge in percentage terms.

A clearing house charge of R7 per trade and R2 per contract is imposed
for traded options. Brokerage commissions on cash-settled traded options range
from 3% for option premiums up to R10,000 to R975 plus 1% on the excess over
R50,000 for option premiums in excess of R50,000, subject to a minimum charge
of R20 for any transaction. Scrip-settled options are subject to brokerage
applicable in the equities market when exercised and assigned.

Beyond these standard charges, there is a transfer tax on
acquisitions of equity securities (excluding options and futures contracts)
and there are special taxation provisions and regulations affecting foreign
investors. See "Taxation -- South African Taxes" in the Prospectus.

MARKETS

Equity Markets

Primary Market

Total equity capital raised on the JSE for the calendar year 1993
was approximately R13.6 billion, as compared with R12.6 billion for 1992 and
<PAGE>
R9.6 billion for 1991. For the year ended December 31, 1993, the industrial,
financial and mining (including mining finance) sectors comprised 71.5%, 9.4%
and 18.4%, respectively, of total equity capital raised on the JSE. The
following table shows the equity capital raised by sector for the years 1991
through 1993:

<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------
Sector 1991 1992 1993
- ------ -------------------- -------------------- --------------------
(Rand Millions)

<S> <C> <C> <C>
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . 6,576 6,601 9,692
Financial . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,140 4,741 1,276
Mining Producers . . . . . . . . . . . . . . . . . . . . . . . 791 1,178 1,985
Mining Finance . . . . . . . . . . . . . . . . . . . . . . . . 39 103 512
Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . 30 0 0
Development Capital . . . . . . . . . . . . . . . . . . . . . . 40 3 94
Venture Capital . . . . . . . . . . . . . . . . . . . . . . . . 4 0 0
----- ------ ------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,620 12,626 13,559
____________________
<FN>
Source: Johannesburg Stock Exchange, Monthly Bulletins, December 1993
and December 1992.
</TABLE>
<PAGE>
Secondary Market

Annual trading volume in equity securities on the JSE generally
increased from 1984 through 1993, decreasing only in 1988, 1991 and 1992.
Trading volume nearly doubled from R22.1 billion in 1992 to R44.1 billion in
1993. However, if foreign arbitrage transactions, which were excluded from the
turnover statistics until November 1992, are excluded from the 1992 and 1993
trading volume numbers, the increase in trading volume between the end of 1992
and 1993 would be only R12.4 billion. The following table lists the 25 most
actively traded equity securities on the JSE based on annual trading value and
their annual trading volumes for the year ended December 31, 1993:

<TABLE>

<CAPTION>
Annual
Trading Total Shares
Company Value Traded
- ------- -------------- --------------
(Rand millions) (Millions)

<S> <C> <C>
De Beers Consolidated Mines Ltd. . . . . . . . . . . . . . . . . . . . . 3,386.29 43.54
Vaal Reefs Exploration & Mining Company Ltd. . . . . . . . . . . . . . . 2,276.62 7.56
Anglo American Corporation of South Africa Ltd. . . . . . . . . . . . . . 1,827.80 12.80
Richemont Securities AG . . . . . . . . . . . . . . . . . . . . . . . . . 1,634.45 41.94
Anglo American Gold Investment Company Ltd. . . . . . . . . . . . . . . . 1,598.28 5.68
Driefontein Consolidated Ltd. . . . . . . . . . . . . . . . . . . . . . 1,557.63 32.40
Kloof Gold Mining Company Ltd. . . . . . . . . . . . . . . . . . . . . . 1,344.29 29.64
Free State Consolidated Gold Mines Ltd. . . . . . . . . . . . . . . . . . 1,223.58 23.44
Western Deep Levels Ltd. . . . . . . . . . . . . . . . . . . . . . . . . 1,071.19 9.15
Minorco Societe Anonyme . . . . . . . . . . . . . . . . . . . . . . . . . 933.86 12.52
Gencor Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 884.76 91.89
Barlow Rand Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 884.72 19.86
The South African Breweries Ltd. . . . . . . . . . . . . . . . . . . . . 865.94 13.28
The Randfontein Estates Gold Mining Co. Witwatersand . . . . . . . . . . 764.74 25.53
Rustenburg Platinum Holdings Ltd. . . . . . . . . . . . . . . . . . . . . 753.57 10.40
Sasol Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577.28 30.43
Hartebeestfontein Gold Mining Company Ltd. . . . . . . . . . . . . . . . 574.46 29.27
Southvaal Holdings Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . 560.47 6.08
Western Areas Gold Mining Co. Ltd. . . . . . . . . . . . . . . . . . . . 540.24 32.12
Liberty Life Association of Africa Ltd. . . . . . . . . . . . . . . . . . 535.04 8.32
Gold Fields of South Africa Ltd. . . . . . . . . . . . . . . . . . . . . 498.35 5.84
Rembrandt Group Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . 497.83 18.67
Iscor Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473.72 362.07
Orange Free State Investments Ltd. . . . . . . . . . . . . . . . . . . . 442.71 3.76
Sappi Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432.55 16.23
____________________
<FN>
Source: Johannesburg Stock Exchange, Monthly Bulletin, December 1993.
</TABLE>
<PAGE>
During 1993, non-residents were net purchasers of shares in the amount
of R2.8 billion and net purchasers of public sector stock in the amount of R1.5
billion, as compared with R313 million in 1992. In 1990 and 1991, non-
residents were net sellers of shares and public sector stock in the amounts
of R3 billion and R2.1 billion, respectively.

The following table sets forth foreign trading on the JSE equities
market for the years 1988 through 1993:

Year 1988 1989 1990 1991 1992 1993
- ---- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Purchases (Rand millions) . . . . . . . 3,076 5,116 6,227 2,544 4,865 11,664
Sales (Rand millions) . . . . . . . . . 3,128 8,472 10,471 6,496 5,345 8,855
Net (Sales)/ Purchases (Rand millions) (52) (3,356) (4,244) (3,952) (480) (2,809)
% of Total Turnover . . . . . . . . . . 27.6 32.8 34.9 20.3 23.1 23.3
____________________
<FN>
Source: Johannesburg Stock Exchange.
</TABLE>

The Bond Market

Primary Market

The primary market for gilts is created by public sector issuers and
buyers, with no major role being played by the JSE. The term "gilts" typically
refers to fixed interest securities issued by the central government whereas
the term "semi-gilts" typically refers to fixed-interest securities issued by
other governmental and government-related entities such as statutory
corporations, municipalities and local authorities. The major buyers in this
market are insurance companies, building societies, pension funds, trust
companies and public investment commissioners. Net new borrowing by the public
sector through issues of fixed-interest securities amounted to R24.9 billion in
1993, as compared with 9.8 billion in 1992 and 9.3 billion in 1991.

<PAGE>
The following table shows the net issues of marketable bonds in the
public sector for the years 1986 through 1993:

<TABLE>
Net Issues of Marketable Bonds in Public Sector<F1>

Public
Central Enterprises Local
Government<F2> <F3> Authorities Other<F4> Total
------------- ------------- ------------- ------------- -------------
(Rand millions)
<S> <C> <C> <C> <C> <C>
1986 . . . . . . . . . . . . . . . . . . . . . 5,336 3,417 452 683 9,888
1987 . . . . . . . . . . . . . . . . . . . . . 7,062 1,805 216 (209) 8,874
1988<F3> . . . . . . . . . . . . . . . . . . . 10,443 871 201 0 11,515
1989 . . . . . . . . . . . . . . . . . . . . . 9,205 3,510 100 (452) 12,363
1990 . . . . . . . . . . . . . . . . . . . . . 4,304 4,249 812 1,041 10,406
1991 . . . . . . . . . . . . . . . . . . . . . 16,599 3,933 244 1,173 21,949
1992 . . . . . . . . . . . . . . . . . . . . . 18,668 4,384 1,288 (59) 24,281
1993 . . . . . . . . . . . . . . . . . . . . . 33,948 (1,823) 781 (698) 32,208
____________________
<FN>
<F1> Cash receipts less cash repayments.
<F2> Ownership classification from 1982 based on registered transactions at
Treasury.
<F3> Non-financial public corporations and government enterprises (such as
Eskom). As from November, 1987, the net sales out of own internal
holdings into the secondary market by a certain public enterprise is
included.
<F4> Independent and self-governing National States, technikons, universities
and financial public enterprises such as National Housing Fund and
National Parks Board, Landbank and Development Bank of Southern Africa
are also included.

Source: Reserve Bank of South Africa, Quarterly Bulletin, March 1994.
</TABLE>

The corporate bond market is small and illiquid, with most corporate
debt being raised through bank lending.

Secondary Market

Secondary trading in gilts currently occurs on the floor of the JSE
and in a parallel screen-based institutional market. The Bond Market Exchange
(the "BME") was created pursuant to the Financial Markets Control Act of 1989
as a market for trading in bonds or gilts. The BME will be managed by the Bond
Market Association (the "BMA"). As a licensed exchange it will assume
responsibility for trading in bonds and gilts, taking this responsibility over
from the present formal market operated at the JSE and the informal market
operated outside the JSE. The delayed granting of a trading license to the BME
has necessitated the JSE continuing the operation of the formal gilts market in
terms of a dispensation granted by the Registrar under the Financial Markets
Control Act. The delay is reportedly as a result of the failure to reach
<PAGE>
agreement on a risk management system and a rule book and slow implementation
of an approved reporting and clearing system. Although a phased implementation
of the BME commenced in April 1993, it is anticipated that the JSE will
continue operating the gilt trading floor and clearing house until the BMA is
licensed, which is not expected until later in 1994. Members of the JSE may
also become members of the BMA.

Trading in the JSE gilt market can be done by JSE members on the
market floor by open outcry auction. Non-JSE members and JSE members may also
trade gilts based on the Reuters screen with trading concluded over the
telephone. Only gilt transactions on the JSE gilt floor are recorded with the
Gilt Clearing House (the "GCH"), which transactions must be recorded within 15
minutes of the trade. The GCH monitors the gilt trades through an exclusive
computer system, provides trade information and guarantees the deals cleared
through its system. Unlike the practice in international bond markets, bond
prices on the JSE gilt floor are quoted in terms of yield to maturity rather
than price. The prices quoted are calculated for a specific settlement date
which is usually the second Thursday following the trade date.

The JSE guarantees the performance of counterparties in the settlement
of all gilt transactions on the JSE gilt floor which are between JSE members
and users of the GCH. This is limited to those transactions in cleared stocks
which are due for settlement during the guarantee period. The duration of the
guarantee period is variable at the discretion of the JSE Committee but is
currently ten days. Thus all settlements on the day of default of a broker
plus the settlements due on the next nine days are guaranteed for performance
by the GCH.

The following table shows the total nominal value of gilts traded on
the JSE for the years 1991 through 1993:

<TABLE>
Total Nominal Value of Gilts Traded on the JSE
<CAPTION>

Year Nominal Value
- ---- ----------------------
(Rand billions)

Source: Johannesburg Stock Exchange
</TABLE>

<PAGE>
Yields on government long stock traded on the JSE with maturities of
at least 10 years averaged on a monthly basis 15.96% for 1990, 16.66% for 1991
and 14.90% for 1992, peaked in April 1993 at 15.03% and then declined to 12.2%
in December 1993. In January 1994, the monthly average yield was 12.1%, with
the decline being attributed to success in reducing inflation, a decline in
overseas interest rates and net foreign purchases of domestic loan stock.

There is also significant trading of gilts in the over-the-counter
market. Options on bonds are also traded in the over-the-counter market with
non-standardized paper.

Private investors account for only a small proportion of trading in
the bond market. Most of the securities are held by pension funds, insurance
companies, banks and building societies.

The Registrar of Financial Markets declared certain debentures as
financial instruments for purposes of the Financial Markets Control Act to
enable corporate bonds to be traded in the same way as the gilts which are
currently traded on the JSE gilt floor. Following the passage of this new
regulation, South African Breweries issued a R1 billion corporate bond late in
1992. This financial instrument is expected to be used by other companies and
to provide a mechanism for funding major development projects in the sub-
Saharan region. Enhanced disclosure requirements for corporate bond issues are
being finalized.

The Financial Futures Market

In South Africa, futures and options contracts are traded over SAFEX,
which was officially opened in August of 1990, "formalizing" the informal
futures market which had commenced operations in 1987 under the management of
the Rand Merchant Bank Limited. The initial members of SAFEX included the JSE,
the Reserve Bank, merchant banks, general banks, building societies, borrowers,
life insurance companies, discount houses, stockbrokers and independent
brokers. As of December 31, 1993, SAFEX had 72 members. The business of SAFEX
is managed by an executive committee, which is elected annually from its
members. SAFEX is regulated by the Financial Markets Control Act of 1989 as
<PAGE>
well as by its own internal rules and directives, which must be approved by the
Registrar of Financial Markets.

The futures market in South Africa is structured in three tiers,
consisting of Clearing Members (who guarantee trades), Non-Clearing Members
(including banks, brokers and institutions) and clients. Both Clearing Members
and Non-Clearing Members may be either broking or non-broking members. JSE
members may also become members of SAFEX. The Clearing Members jointly own
SAFCOM (Safex Clearing Company (Pty) Ltd), SAFEX's clearing house and market
administrator. SAFEX members may trade either as principal or as agent.
Trading is conducted principally between the hours of 8:00 a.m. and 4:30 p.m.
Trading is done over the Reuters screen with deals concluded on the telephone.
After negotiation on the telephone, the agreed upon price may differ from the
quoted price. SAFEX plans to eventually develop an automated trading system
which would link all traders on a computer network. All futures contracts are
settled in cash one day subsequent to their trade. Interest is payable on all
margin deposits; while nonresidents trading over SAFEX must execute their
transaction via the Financial Rand, margin interest is paid in Commercial Rand.

SAFCOM provides settlement and risk management services. Performance
risk is managed by initial margin requirements, variation margins and
performance guarantees from the Clearing Members of the exchange, which include
most of the major South African financial institutions.

Futures contracts are available on three JSE equity indices (the All
Share Index, the All Gold Index and the Industrial Index), U.S. Dollar gold
prices, a three month Bankers' Acceptance and a long dated Eskom bond. There
are no fixed commission charges for transactions executed on SAFEX. However,
SAFEX charges booking fees of R4.3 for each transaction and R1.3 for each
futures contract on the equity indices and U.S. Dollar gold prices, R5 for each
transaction and R1 per 10 contracts or part thereof for futures on a long dated
Eskom bond, R5.5 for each transaction and R1 for each contract for futures on
Bankers' Acceptances and R10 for each transaction and R0.5 for each options
contract.

The volume in futures contracts is growing rapidly -- 605,707 in 1991,
approximately 1.36 million in 1992 and approximately 3 million in 1993 -- and
in 1993 amounted to more than R103 billion in underlying value. Trade in the
share indices, representing the largest part of the value of futures contracts
(approximately 97.4% in 1993), was affected favorably in the first nine months
of 1993 by the volatile gold price, reduced trading fees on SAFEX and increased
uncertainty about the future direction of share prices. For the first two
months of 1994, the aggregate volume in futures contracts was 766,943 with an
underlying aggregate value of approximately R34.7 billion, as compared with
379,447 contracts with an underlying value of approximately R12.2 billion for
the same period in 1993.

The underlying value of transactions in futures contracts rose to a
quarterly average of approximately R22.2 billion in the first nine months of
1993, as compared with approximately R11.8 billion in the corresponding period
of 1992. In the third quarter of 1993, the average monthly value of
<PAGE>
transactions in futures contracts was approximately R8.3 billion, in the fourth
quarter of 1993, the average monthly value of transactions in futures contracts
was approximately R12.5 billion, and for the first two months of 1994, the
value of transactions in futures contracts was approximately R20.1 billion and
R14.6 billion, respectively.

Options on futures contracts were listed during 1992 and the number of
contracts traded during 1993 reached 70% of the number of contracts in the
underlying instruments. Only American style put and call options (exercisable
at any time prior to their expiry) are traded. In 1993, the volume in options
on futures contracts was approximately 2.2 million, and for the first two
months of 1994, the aggregate volume was 944,523 as compared with 95,170 for
the same period in 1993. The value of trade in options on futures contracts
increased from a monthly average of approximately R103 million and
approximately R305 million, respectively, in the first two quarters of 1993 to
approximately R343 million and approximately R723 million, respectively, in the
third and fourth quarters of 1993. For the first two months of 1994, the
aggregate value of trade in options on futures contracts was approximately R1.2
billion and R667 million, respectively.

The Traded Options Market

Trading in equity derivatives commenced on the JSE's Traded Options
Market (the "TOM") in 1992. Until early 1993, trading in equity derivatives on
the TOM was reserved exclusively for South African residents. However, during
the first quarter of 1993, it was announced that the TOM would be accessible to
foreign investors and other nonresidents. Both put and call options on
selected listed equities and the JSE-Actuaries Indices are traded on the TOM.
Only American style options are traded. As of February 28, 1994, TOM remained
open but activity ceased in March 1993, reportedly as a result of competition
with SAFEX and the higher commission charges for transactions on the TOM.

This new market has its own set of rules and directives, generally
utilizing existing equity rules when possible. Trading in options takes place
on the open outcry auction method on a centralized trading floor between the
hours of 9:30 a.m. and 4:00 p.m., Monday through Friday, excluding public
holidays. The Traded Options Clearing House ("TOCH") acts as agent for options
clearing and guarantees the performance of all option contracts executed by
members on the TOM trading floor and registered with TOCH. TOCH assumes
responsibility for risk management and margins and, if necessary, liquidating
positions that represent unacceptable risk. The TOM uses electronic funds
transfer for cash settlements between its members, direct participants and its
clearing house. All the share index options traded on the TOM are cash
settled. Options on the shares of individual companies are cash settled and,
in some instances, scrip settled.

THE UNIT TRUST INDUSTRY

A Unit Trust is a South African investment vehicle which pools the
funds of a number of individual investors, usually for investment in a
diversified portfolio of JSE-listed equity securities, corporate bonds and
gilts. Unit Trusts are regulated under the Unit Trust Control Act of 1981.
<PAGE>
According to JSE statistics, by June, 1993 there were 50 such Unit Trusts,
accounting for a total of 1,228,000 individual accounts. These trusts can, in
turn, be classified into 23 general equity trusts (aimed at investors seeking a
diversified portfolio), 18 specialist trusts (designed for those desiring
investments in a specific sector of the market) and 9 high income trusts
(catering to investors who wish to achieve high current income through
debentures, gilts and semi-gilts). In June, 1993, assets under the management
of the leading 20 South African management companies totalled R16.3 billion.
The equity portion represented approximately 1.75% of the JSE's market
capitalization.

Unit Trusts are either open-end or closed-end, with the income they
generate being distributed either quarterly or semi-annually. Distributions
can either be automatically reinvested in additional units or paid out in cash,
depending upon the individual investor's election. The selling and purchasing
price for each unit is calculated on a daily basis by the Unit Trust's
managers.

SECURITIES REGULATION

Public Offerings

Public offerings for the sale or subscription of securities are
regulated under Chapter VI of the Companies Act, which requires that all such
offerings (other than rights offerings involving securities listed, or agreed
by the JSE to be listed, on the JSE) be made pursuant to a prospectus
satisfying the prescribed requirements for form and content. Such requirements
relate generally to the issue or sale of shares and debentures and rights and
interests in a company or in or to any shares or debentures. As a general
matter, the disclosure requirements under the Companies Act are less extensive
than those under the federal securities laws of the United States. In
addition, companies intending to make a public offering of their securities
which also seek to be listed on the JSE must comply with the requirements of
the JSE.

A prospectus must contain certain general information about the issuer
such as its name, date of incorporation, the composition of its board of
directors, the identity of its auditor, attorney, banker, stockbroker, trustee,
underwriter and secretary, a description of its material contracts, and
management's evaluation of its general financial condition. It also must
contain, among other things, a description of underwriters' commissions and
preliminary expenses, the terms and conditions of the offering, and the
securities being offered, a copy of the issuer's audited consolidated financial
statements and the auditor's report thereon.

A fully executed copy of the prospectus, together with a copy of any
underwriting agreement entered into by the company with respect to the offering
and all material contracts entered into by the company, must be filed with the
Registrar of Companies within 14 days of the date of the prospectus. In
practice, the prospectus is filed with the Registrar of Companies in draft form
and, after it has been approved, it is prepared in final form, submitted to the
directors for signature and then filed for registration. The Registrar of the
<PAGE>
Companies does not assess the merits of an offer but is responsible for
ensuring that the formalities prescribed by the Companies Act are complied
with.

Directors, underwriters and any other person who authorized the use of
the prospectus may be held liable for any loss suffered by a person who
acquired the securities offered pursuant to the prospectus in reliance on the
information set forth in the prospectus. Civil liability attaches for
omissions calculated to mislead as well as for false or misleading statements
in a prospectus. Criminal liability attaches for common law fraud and attaches
under the Companies Act for untrue statements and omissions which are material.

Private Offerings

Companies may issue their securities in transactions not involving a
public offering without having to comply with the prospectus requirements of
the Companies Act. Such private offerings may be made by either the issuing
company itself or a merchant bank, stockbroker or other intermediary acting on
behalf of the issuer.

Public companies issuing shares in a private placement may also seek
to have those shares listed on the JSE. However, where a company desires to
privately place shares to be listed on the JSE, a minimum of 30% of the
issuance must be allocated to the sponsoring broker which, in turn, must allot
30% of its allowance to the brokerage houses at large. Notwithstanding these
requirements, the JSE Committee may, in its discretion, grant a listing to a
company which does not fulfil these requirements.

Shares issued in a private placement may be freely transferable,
subject to any restrictions on transferability contained in the company's
articles of incorporation and to the transfer being effectuated in a manner not
constituting a public offering.

Insider Trading

New legislation prohibiting insider trading came into force in
February, 1991. The new South African insider trading rules are predicated
upon similar U.S. legislation. Insider trading is defined, in part, as any
person who knowingly deals in a security on the basis of unpublished price
sensitive information (information not readily available to reasonable
investors which would reasonably be expected to affect materially the price of
a security if it were generally available). Persons found guilty of insider
trading are liable to a fine not exceeding R500,000 or imprisonment for a
period not exceeding 10 years, or both. The Securities Regulation Panel
monitors insider trading and the Inspectorate division of the JSE constantly
monitors brokers to help ensure investor protection in transactions in listed
securities.

Takeovers

The Companies Act provides for the establishment of a Securities
Regulation Panel which has published a Code of Rules with respect to takeovers
<PAGE>
based largely on the City Code on Takeovers and Mergers issued by the London
Panel on Takeovers and Mergers. The transactions covered by the Code of Rules
are transactions which have the effect of vesting control of a company in a
person or two or more persons acting in concert. Control for this purpose
generally means the right to vote at least 35% of the voting equity of a
company. Also covered by the Code are acquisitions by existing shareholders
owning between 35% and 50% of a company of additional securities of the company
of more than 5% in any 12-month period. The Code only applies to public
companies, whether listed or not, resident in South Africa, to private
companies with more than 10 beneficial shareholders where the interests of the
shareholders valued at the offer price and their loan capital exceed R5 million
and to statutory corporations. The Code requires the offeror to extend the
offer to all shareholders on the same or for comparable consideration.

Capital Structure: Equity and Debt Securities

Equity Securities

Under South African corporate law, there are generally three classes
of equity securities: preference shares, ordinary shares and deferred shares.

Preference shares are often characterized by a preferential right to a
fixed dividend, provided that the company has sufficient profits available for
distribution. A company's constituent documents may provide that preference
shares not be granted voting rights; however, in instances where a preferential
dividend or a redemption payment thereon remains in arrears and unpaid or a
resolution is proposed affecting the rights of preference shareholders,
including a resolution to wind up the company or reduce its capital, such
shares must be granted voting rights.

Unlike preference shares, ordinary shares carry full voting rights.
However, ordinary shares do not entitle their shareholders to a fixed dividend
rate; dividends payable on ordinary shares may be declared only when the
preference shares have been paid and then only if declared by the board of
directors of the issuing company.

Deferred shares are usually entitled to a dividend only after a
prescribed minimum dividend has been declared for ordinary shares. A deferred
share may also be so denominated because the right of a holder to participate
in a distribution of capital is deferred. Generally, deferred shares are
rendered as remuneration for promoters or as consideration for asset purchases.

Debt Securities

Under South African accounting principles, preference, ordinary and
deferred shares are denoted on a company's balance sheet as shareholders'
equity. Debentures and other money loans, on the other hand, are classified as
"external equity," which is further subclassified into long-term and short-term
liabilities.
<PAGE>
Companies issue debentures generally as a means of obtaining long-term
loan funds. Ordinarily, an issuance of debentures is supported by a trust deed
appointing a trustee for the debenture holders and granting the trustee the
necessary powers to protect their interests. Unlike shareholders, a debenture
holder receives interest at a predetermined rate, payable on a fixed date,
irrespective of whether profits have been generated. If so permitted by its
articles, a company may issue debentures which are convertible into any class
of shares.

Corporate Structure

Public and Private Companies

The Companies Act provides for the formation of two types of
companies: one with share capital and one without share capital but whose
constituent documents limit the liability of its members (i.e., a so-called
"company limited by guarantee"). A company formed with share capital may take
two forms: a "public company" or a "private company." The shares and
debentures of a public company are eligible for listing on the JSE, subject to
the JSE's internal listing requirements. See "The Johannesburg Stock Exchange
- -- Listing and Reporting Requirements" in this Appendix D. Public companies
with share capital are required to distribute annual audited and semi-annual
financial statements to shareholders and debentureholders and to file such
statements with the Registrar of Financial Institutions. A private company
may not publicly offer any of its shares or debentures, may have not more than
50 shareholders, excluding employees and former employees, and must restrict
the right to transfer its shares. Private companies are required to distribute
annual audited financial statements to shareholders and debentureholders but
are not required to file such financial statements with the Registrar of
Financial Institutions unless such companies are subsidiaries of public
companies with share capital.

Directors

Directors of JSE listed companies are elected by a majority of
shareholders at a general meeting of shareholders and may be removed by the
affirmative vote of a majority of shareholders at a general meeting of
shareholders. There is no requirement under South African corporate law that
any of the directors of public or listed companies be independent or outside
directors. Under both South African common law and the Companies Act, a
company's directors owe the company fiduciary duties of care and loyalty.
Directors are prohibited from self-dealing transactions that are not permitted
by the articles of incorporation or approved at a general meeting with full
disclosure of the particulars of the transaction.

<PAGE>
No dealer, salesperson or any other person has been authorized to give
any information or to make any representation in connection with this offering
other than those contained in this Prospectus, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Fund, the Fund's investment adviser or any U.S. Underwriter. Neither
the delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Fund since the date hereof or that the information contained
herein is correct as of any time subsequent to its date. However, if any
material change occurs while this Prospectus is required by law to be
delivered, this Prospectus will be supplemented or amended accordingly. This
Prospectus does not constitute an offer to sell or solicitation of an offer to
buy any of the securities offered hereby in any jurisdiction to any person to
whom it is unlawful to make such offer or solicitation in such jurisdiction.

TABLE OF CONTENTS
Page

Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary Of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment In South Africa . . . . . . . . . . . . . . . . . . . . . . .
Use Of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Objective And Policies . . . . . . . . . . . . . . . . . . . .
Additional Investment Practices . . . . . . . . . . . . . . . . . . . . .
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors And Special Considerations . . . . . . . . . . . . . . . .
Management Of The Fund . . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends And Distributions; Dividend
Reinvestment And Cash Purchase Plan . . . . . . . . . . . . . . . . . .
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Custodian, Transfer Agent, Dividend
Paying Agent And Registrar . . . . . . . . . . . . . . . . . . . . . .
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Further Information . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report Of Independent Accountants . . . . . . . . . . . . . . . . . . . .
Statement Of Assets And Liabilities . . . . . . . . . . . . . . . . . . .
Appendix A: Ratings . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix B: General Characteristics and
Risks of Hedging . . . . . . . . . . . . . . . . . . . . . .
Appendix C: Republic of South Africa . . . . . . . . . . . . . . . . . .
Appendix D: The South African
Securities Markets . . . . . . . . . . . . . . . . . . . . . . . . . .

Until ______ __, 1994 all dealers effecting transactions in the Common Stock,
whether or not participating in this distribution, may be required to deliver
a Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE>
4,000,000 Shares

LEHMAN BROTHERS
SOUTH AFRICA
GROWTH FUND, INC.

Common Stock

----------
PROSPECTUS
----------

Lehman Brothers

<PAGE>
- ------------------------------------------------------------------------------

- ------------------------------------------------------------------------------
[Alternate cover page for International Prospectus]

Subject to Completion, dated __________ __, 1994

PROSPECTUS
4,000,000 Shares

LEHMAN BROTHERS SOUTH AFRICA GROWTH FUND, INC.

Common Stock

_________________________

Of the 4,000,000 shares of Common Stock offered hereby, _______ shares
are initially being offered outside the United States by the International
<PAGE>
Managers (the "International Offering") and _________ shares are initially
being offered in a concurrent offering in the United States by the U.S.
Underwriters (the "U.S. Offering"). Such offerings are collectively
referred to as the "Offerings." The offering price and sales load per share
for the International Offering and the U.S. Offering will be identical. See
"Underwriting."

Lehman Brothers Global Asset Management Limited will act as investment
adviser to the Fund. The Board of Executors Limited will serve as the South
African sub-adviser to the Fund.

An application will be made to list the Common Stock on the New York
Stock Exchange under the symbol "[RSA]." Prior to the Offerings there has been
no public market for the Fund's Common Stock. Shares of closed-end investment
companies have in the past frequently traded at discounts from their net asset
values and initial offering prices. The risk of loss associated with this
characteristic of closed-end investment companies may be greater for investors
purchasing shares in the initial public offering and expecting to sell the
shares soon after the completion thereof. There is no restriction on the
number of shares that may be purchased subject to the transfer restriction
described in the footnotes to the table below, except that the Fund will
comply, with respect to non-restricted shares, with the distribution
requirements of the New York Stock Exchange. See "Underwriting." To the
extent investors who are subject to the transfer restriction sell their shares
once the transfer restriction is no longer applicable, the market price of the
Common Stock could be adversely affected. In addition, the transfer
restriction will reduce the number of shares available for sale in the
secondary market during the 90 day restriction period.

The address of the Fund is 3 World Financial Center, New York,
New York 10285, and its telephone number is (212) 640-0600. Investors are
advised to read this Prospectus, which sets forth information about the Fund
that investors should know before investing, and to retain it for future
reference.
_________________________

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
<TABLE>
<CAPTION>
Price to Proceeds to
Public<F1> Sales Load<F1><F2> Fund<F2>
------------------------ ------------------------ ------------------------

Per Share $15.00 $ $
Total<F3> $60,000,000 $ $

____________________
<FN>
<F1> The "Price to Public" and "Sales Load" per share will be reduced to
$__ and $__, respectively, for purchases in single transactions (as
defined in this Prospectus under "Underwriting") of between ______ and
______ shares, inclusive, and to $__ for purchases in single
transactions of ______ or more shares of Common Stock, subject to the
following sentence. Purchasers who agree to purchase shares of Common
Stock at the reduced price will be restricted from transferring such
shares for a period of 90 days after the closing of the Offerings.
<F2> Before deduction of organizational and offering expenses payable by
the Fund (including $____________ to be paid to the International
Managers and the U.S. Underwriters as reimbursement of certain of
their expenses in connection with the Offerings) estimated at
$____________.
<F3> The Fund has granted to the International Managers an option,
exercisable in one or more installments within 45 days from the date
of this Prospectus, to purchase up to ____________ additional shares
of Common Stock to cover over-allotments, if any. The U.S.
Underwriters have been granted a similar option to purchase up to
____________ additional shares to cover over-allotments, if any. If
such options are exercised in full, the total Price to Public, Sales
Load and Proceeds to Fund will be increased by $9,000,000,
$____________ and $____________, respectively. See "Underwriting."
</TABLE> _________________________

The shares of Common Stock offered by this Prospectus are offered by
the International Managers subject to prior sale, to withdrawal, cancellation
or modification of the offer without notice, to delivery to and acceptance by
the International Managers and to certain further conditions. It is expected
that delivery of certificates for the shares of Common Stock will be made at
the offices of Lehman Brothers Inc., New York, New York, on or about
_____________ ___, 1994.

_________________________

Lehman Brothers

_____________ __, 1994
<PAGE>
IN CONNECTION WITH THE OFFERINGS, THE INTERNATIONAL MANAGERS AND THE
U.S. UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR
MAINTAIN THE MARKET PRICE OF THE FUND'S COMMON STOCK AT A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE
EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

_________________________

In this Prospectus, the Republic of South Africa is referred to as
"South Africa." Unless otherwise specified, all references in this Prospectus
to "dollars," "US $" or "$" are to United States dollars, all references to
"Commercial Rand" are to the South African Commercial Rand, all references to
"Financial Rand" are to the South African Financial Rand, and all references to
"Rand" are to the Commercial Rand and the Financial Rand. On __________, the
noon buying rate in New York City for cable transfers payable in Financial Rand
was _______ per dollar, and in Commercial Rand was ____________ per dollar, as
certified for customs purposes by the Federal Reserve Bank of New York.
Certain numbers in this Prospectus have been rounded.

_________________________
<PAGE>
[Alternate back cover page for International Prospectus]
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation in connection with this offering
other than those contained in this Prospectus, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Fund, the Fund's investment adviser or any International Manager.
Neither the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no change
in the affairs of the Fund since the date hereof or that the information
contained herein is correct as of any time subsequent to its date. However, if
any material change occurs while this Prospectus is required by law to be
delivered, this Prospectus will be supplemented or amended accordingly. This
Prospectus does not constitute an offer to sell or solicitation of an offer to
buy any of the securities offered hereby in any jurisdiction to any person to
whom it is unlawful to make such offer or solicitation in such jurisdiction.

TABLE OF CONTENTS
Page

LEHMAN BROTHERS
SOUTH AFRICA
GROWTH FUND, INC.

Common Stock

----------
PROSPECTUS
----------

Lehman Brothers

Item 24. Financial Statements and Exhibits

(1) Financial Statements

Parts A & B The South Africa Growth Fund, Inc.

(i) Statement of Assets and Liabilities.

(ii) Report of Independent auditors.

Part C None.

(2) Exhibits

(a) Articles of Incorporation.<F2>

(b) By-Laws.<F2>

(d) Form of specimen certificate representing shares of Common Stock, par
value $.001 per share.<F1>

(e) Form of Dividend Reinvestment and Cash Purchase Plan.<F1>

(f) Not applicable.

(g)(A) Form of Advisory Agreement between the Fund and Lehman Brothers
Global Asset Management Limited.<F1>

(g)(B) Form of Administration Agreement between the Fund and The Boston
Company Advisors, Inc.<F1>

(g)(C) Form of Sub-Advisory Agreement between the Fund and The Board of
Executors Limited.<F1>

(h)(A) Form of U.S. Underwriting Agreement.<F1>

(h)(B) Form of International Underwriting Agreement.<F1>

(h)(C) Form of Agreement Between U.S. Underwriters and International
Managers.<F1>

(h)(D) Master Agreement Among U.S. Underwriters.<F1>

(h)(E) Master Selected Dealer Agreement.<F1>

(i) Not applicable.

(j) Form of Custodian Contract between the Fund and Boston Safe Deposit
and Trust Company.<F1>

(k)(A) Form of Registrar, Transfer Agency and Service Agreement between the
Fund and The Shareholder Services Group, Inc.<F1>

(l)(A) Opinion and consent of Simpson Thacher & Bartlett.<F1>
<PAGE>
(l)(B) Opinion and consent of Piper & Marbury.<F1>

(m) Not applicable.

(n) Consent of Ernst & Young, independent auditors.<F1>

(o) Not applicable.

(p) Form of Share Purchase Agreement between the Fund and Lehman Brothers
Global Asset Management Limited.<F1>

(q) Not applicable.

(r) Not applicable.

(s) Powers of attorney.<F1>

__________________
[FN]
<F1> To be filed by amendment.
<F2> Previously filed.

Item 25. Marketing Arrangements

See Section __ of the U.S. Underwriting Agreement to be filed as
Exhibit (h)(A) to this Registration Statement and Section __ of the
International Underwriting Agreement to be filed as Exhibit (h)(B) to this
Registration Statement.

Item 26. Other Expenses of Issuance and Distribution

The following table sets forth the estimated expenses expected to be
incurred in connection with the Offerings described in this Registration
Statement:

<TABLE>

<S> <C>
Registration fees $24,794
Blue Sky qualification fees (including fees of counsel) <F1>
Stock exchange listing fees <F1>
Printing (other than stock certificates) <F1>
Engraving and printing stock certificates <F1>
Accounting fees and expenses <F1>
Legal fees and expenses <F1>
Underwriters' expense allowance <F1>
NASD fees <F1>
Miscellaneous <F1>
------------
Total $ <F1>
============
______________
<FN>
<F1> To be completed by amendment.
</TABLE>

Item 27. Persons Controlled by or under Common Control with Registrant

None.
<PAGE>
Item 28. Number of Holders of Securities

As of the effective date of this Registration Statement:

(2)
Number of
(1) Record
Title of Class Holders
-------------- ---------

Common Stock, par value $.001 1

Item 29. Indemnification

Section 2-418 of the General Corporation Law of the State of Maryland,
the state in which The South Africa Growth Fund, Inc. (the "Fund") was
organized, empowers a corporation, subject to certain limitations, to indemnify
its directors, officers, employees and agents against expenses (including
attorneys' fees, judgments, penalties, fines and settlements) actually and
reasonably incurred by them in connection with any suit or proceeding to which
they are a party so long as they acted in good faith or without active and
deliberate dishonesty, or they received no actual improper personal benefit in
money, property or services, or, with respect to any criminal proceeding, so
long as they had no reasonable cause to believe their conduct to have been
unlawful.

Article VII of the Fund's Articles of Incorporation filed as
Exhibit (a) provides that the Fund shall indemnify its currently acting and
former directors and officers to the fullest extent permitted by the Maryland
General Corporation Law. The Fund's Board of Directors may make further
provision for indemnification of directors, officers, employees and agents to
the fullest extent permitted by Maryland law. The Articles of Incorporation
provide, however, that the Fund's directors and officers shall not be
indemnified against liability arising from willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
their office.

Article VI of the Fund's By-Laws filed as Exhibit (b) indemnifies
current or former directors and officers of the Fund to the full extent
permissible under the Maryland General Corporation Law, the Securities Act of
1933, as amended ("the 1933 Act") and the Investment Company Act of 1940, as
amended ("the 1940 Act"). Employees and agents who are not officers or
directors of the Fund may be indemnified in the same manner, and to such
further extent as may be provided by action of the Board of Directors or by
contract. In addition, the Fund may purchase insurance on behalf of any
director, officer, employee or agent of the Fund with respect to certain
liabilities.

Section __ of the Advisory Agreement filed as Exhibit g(A) provides
that the Fund shall indemnify Lehman Brothers Global Asset Management Limited
(the "Investment Adviser") from any and all losses, claims, damages,
liabilities or expenses not resulting from willful misfeasance, bad faith or
<PAGE>
gross negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under the Advisory Agreement.

Under Section __ of the U.S. Underwriting Agreement filed as
Exhibit h(A) and Section __ of the International Underwriting Agreement
filed as Exhibit h(B), the Fund will indemnify the U.S. Underwriters and
the International Managers, and the U.S. Underwriters and the International
Managers will indemnify the Fund, with such indemnities also extending to
the directors, certain of the officers, and controlling persons of the
aforementioned indemnified parties, against certain liabilities in
connection with the Offerings, including liabilities under the 1933 Act.

Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of the Fund,
pursuant to the foregoing provisions or otherwise, the Fund has been advised
that in the opinion of the Securities and Exchange Commission ("the
Commission") such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Fund of
expenses incurred or paid by a director, officer or controlling person of the
Fund in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Fund will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.

Item 30. Business and Other Connections of the Investment Adviser

Information as to the directors and officers of the Investment Adviser
and the South African Sub-Adviser are included in their Forms ADV filed with
the Commission (Commission File Nos. 801-21068 and 801-45943, respectively) and
are incorporated herein by reference thereto.

Item 31. Location of Accounts and Records

Certain accounts, books and other documents required to be maintained
by Section 31(a) of the 1940 Act and the Rules promulgated thereunder are
maintained by the Investment Adviser at Two Broadgate, London EC2M 7HA,
England. Records relating to the duties of the Registrant's custodian are
maintained by Boston Safe Deposit and Trust Company and records relating to the
duties of the Registrant's transfer agent are maintained by The Shareholder
Services Group, Inc.

Item 32. Management Services

Not applicable.
<PAGE>
Item 33. Undertakings

(1) Registrant undertakes to suspend the offering of the shares
covered hereby until it amends its prospectus contained herein if (1)
subsequent to the effective date of this Registration Statement, its net asset
value per share declines more than 10% from its net asset value per share as of
the effective date of this Registration Statement, or (2) its net asset value
increases to an amount greater than its net proceeds as stated in the
prospectus contained herein.

(2) Registrant hereby undertakes:

a. That, for purposes of determining any liability under the
Act, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant under
Rule 497(h) under the Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

b. That, for the purpose of determining any liability under
the Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York, on the 15th
day of April, 1994.

LEHMAN BROTHERS SOUTH AFRICA GROWTH FUND, INC.
(Registrant)

By: /s/ Steven Spiegel
-------------------------------------
Steven Spiegel
Chairman of the Board and President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:

/s/ Steven Spiegel Chairman of the Board April 15, 1994
- ------------------
Steven Spiegel and President (Principal
Executive Officer)

/s/ Clinton Kendrick Director, Treasurer and April 15, 1994
- --------------------
Clinton Kendrick Secretary (Principal
Financial and Accounting
Officer)

<PAGE>
Exhibit Index
- -------------

Exhibit
- -------

(a) Registrant's Articles of Incorporation

(b) Registrant's By-Laws

Exhibit (a)

ARTICLES OF INCORPORATION

LEHMAN BROTHERS SOUTH AFRICA GROWTH FUND, INC.

ARTICLE I

THE UNDERSIGNED, David Hartman, whose post office address is 425
Lexington Avenue, New York, NY 10017-3909, being at least eighteen years of
age, does hereby act as an incorporator and form a corporation under and by
virtue of the Maryland General Corporation Law.

ARTICLE II

NAME

The name of the corporation (which is hereinafter called the
"Corporation") is Lehman Brothers South Africa Growth Fund, Inc.

ARTICLE III

PURPOSE AND POWER

The purpose for which the Corporation is formed is to conduct and
carry on the business of a closed-end investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Corporation
shall have all of the powers granted to corporations by the Maryland General
Corporation Law now or hereafter in force.

ARTICLE IV

PRINCIPAL OFFICE AND RESIDENT AGENT

The post office address of the principal office of the Corporation in
the State of Maryland is c/o The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202. The name of the resident agent of the
Corporation in the State of Maryland is The Corporation Trust Incorporated, a
Maryland corporation. The post office address of the resident agent is 32
South Street, Baltimore, Maryland 21202.
<PAGE>
ARTICLE V

CAPITAL STOCK

(1) The total number of shares of capital stock that the Corporation
shall have authority to issue is one hundred million (100,000,000) shares, of
the par value of one mill ($.001) per share and of the aggregate par value of
one hundred thousand dollars ($100,000), all of which one hundred million
(100,000,000) shares are initially classified as "Common Stock".

(2) The Corporation may issue fractional shares. Any fractional
share shall carry proportionately the rights of a whole share including,
without limitation, the right to vote and the right to receive dividends. The
holder of a fractional share shall not, however, have the right to receive a
certificate evidencing it.

(3) All persons who shall acquire shares of capital stock in the
Corporation shall acquire the same subject to the provisions of these Articles
of Incorporation and the By-Laws of the Corporation.

(4) No holder of shares of capital stock of the Corporation by
virtue of being such a holder shall have any preemptive or other right to
purchase or subscribe for any shares of the Corporation's capital stock or any
other security that the Corporation may issue or sell other than a right that
the Board of Directors in its discretion may determine to grant.

(5) The Board of Directors shall have authority by resolution to
classify and reclassify any authorized but unissued shares of capital stock
from time to time by setting or changing in any one or more respects the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of
redemption of the capital stock.

(6) Notwithstanding any provision of law requiring any action to be
taken or authorized by the affirmative vote of the holders of a greater
proportion of the votes of all classes or of any class of stock of the
Corporation, such action shall be effective and valid if taken or authorized by
the affirmative vote of a majority of the total number of votes entitled to be
cast thereon, except as otherwise provided in these Articles of Incorporation.

ARTICLE VI

BOARD OF DIRECTORS

(1) The number of directors constituting the Board of Directors
shall initially be two (2). This number may be changed pursuant to the By-Laws
of the Corporation, but shall at no time be less than the minimum number
required under the Maryland General Corporation Law nor more than twelve (12).
The names of the initial directors are: Clinton Kendrick and Steven Spiegel.

(2) Beginning with the first annual meeting of stockholders of the
Corporation (the "first annual meeting") and if at such time, the number of
directors shall be three (3) or more, the Board of Directors of the Corporation
shall be divided into three classes: Class I, Class II and Class III. At the
first annual meeting, directors of Class I shall be elected to the Board of
<PAGE>
Directors for a term expiring at the next succeeding annual meeting of
stockholders, directors of Class II shall be elected to the Board of Directors
for a term expiring at the second succeeding annual meeting of stockholders and
directors of Class III shall be elected to the Board of Directors for a term
expiring at the third succeeding annual meeting of stockholders. At each
subsequent annual meeting of stockholders, the directors chosen to succeed
those whose terms are expiring shall be identified as being of the same class
as the directors whom they succeed and shall be elected for a term expiring at
the time of the third succeeding annual meeting of stockholders subsequent to
their election, or thereafter in each case when their respective successors are
elected and qualified. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes by resolution of the Board of
Directors so as to maintain the number of directors in each class as nearly
equal as possible, but in no case shall a decrease in the number of directors
shorten the term of any incumbent director.

(3) A director of the Corporation may be removed from office only
for cause and then only by vote of the holders of at least seventy-five percent
(75%) of the votes entitled to be cast for the election of directors.

(4) In furtherance, and not in limitation, of the powers conferred
by the laws of the State of Maryland, the Board of Directors is expressly
authorized:

(i) To make, alter or repeal the By-Laws of the Corporation,
except as otherwise required by the 1940 Act.

(ii) From time to time to determine whether and to what extent
and at what times and places and under what conditions and
regulations the books and accounts of the Corporation, or any of them
other than the stock ledger, shall be open to the inspection of the
stockholders. No stockholder shall have any right to inspect any
account or book or document of the Corporation, except as conferred
by law or authorized by resolution of the Board of Directors.

(iii) Without the assent or vote of the stockholders, to
authorize the issuance from time to time of shares of the capital
stock of any class of the Corporation, whether now or hereafter
authorized, and securities convertible into shares of capital stock
of the Corporation of any class or classes, whether now or hereafter
authorized, for such consideration as the Board of Directors may deem
advisable.

(iv) Without the assent or vote of the stockholders, to
authorize and issue obligations of the Corporation, secured or
unsecured, as the Board of Directors may determine, and to authorize
and cause to be executed mortgages and liens upon the real or
personal property of the Corporation.

(v) To establish the basis or method for determining the value
of the assets and the amount of the liabilities of the Corporation
and the net asset value of each share of the Corporation's capital
stock.

(vi) To determine what accounting periods shall be used by the
Corporation for any purpose; to set apart out of any funds of the
Corporation reserves for such purposes as it shall determine and to
<PAGE>
abolish the same; to declare and pay any dividends and distributions
in cash, securities or other property from any funds legally
available therefor, at such intervals as it shall determine; to
declare dividends or distributions by means of a formula or other
method of determination, at meetings held less frequently than the
frequency of the effectiveness of such declarations; and to establish
payment dates for dividends or any other distributions on any basis,
including dates occurring less frequently than the effectiveness of
declarations thereof.

(vii) In addition to the powers and authorities granted in these
Articles of Incorporation and by statute expressly conferred upon it,
the Board of Directors is authorized to exercise all powers and do
all acts that may be exercised or done by the Corporation pursuant to
the provisions of the laws of the State of Maryland, these Articles
of Incorporation and the By-Laws of the Corporation.

(5) Any determination made in good faith, and in accordance with
these Articles of Incorporation, if applicable, by or pursuant to the direction
of the Board of Directors, with respect to the amount of assets, obligations or
liabilities of the Corporation, as to the amount of net income of the
Corporation from dividends and interest for any period or amounts at any time
legally available for the payment of dividends, as to the amount of any
reserves or charges set up and the propriety thereof, as to the time of or
purpose for creating reserves or as to the use, alteration or cancellation of
any reserves or charges (whether or not any obligation or liability for which
the reserves or charges have been created has been paid or discharged or is
then or thereafter required to be paid or discharged), as to the value of any
security owned by the Corporation, as to the determination of the net asset
value of shares of any class of the Corporation's capital stock, or as to any
other matters relating to the issuance, sale or other acquisition or
disposition of securities or shares of capital stock of the Corporation, and
any reasonable determination made in good faith by the Board of Directors
whether any transaction constitutes a purchase of securities on "margin," a
sale of securities "short," or an underwriting or the sale of, or a
participation in any underwriting or selling group in connection with the
public distribution of, any securities, shall be final and conclusive, and
shall be binding upon the Corporation and all holders of shares of its capital
stock, past, present and future, and shares of the capital stock of the
Corporation are issued and sold on the condition and understanding, evidenced
by the purchase of shares of capital stock or acceptance of share certificates,
that any and all such determinations shall be binding as aforesaid. No
provision of these Articles of Incorporation shall be effective to require a
waiver of compliance with any provision of the Securities Act of 1933, as
amended, or the 1940 Act, or of any valid rule, regulation or order of the
Securities and Exchange Commission under those Acts.

ARTICLE VII

LIABILITY AND INDEMNIFICATION

(1) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law,
no director or officer of the Corporation shall have any personal liability to
the Corporation or its stockholders for monetary damages. This limitation on
liability applies to events occurring at the time a person serves as a director
<PAGE>
or officer of the Corporation whether or not such person is a director or
officer at the time of any proceeding in which liability is asserted.

(2) The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify and advance expenses to its officers to
the same extent as its directors and may do so to such further extent as is
consistent with law. The Board of Directors may by By-Law, resolution or
agreement make further provision for indemnification of directors, officers,
employees and agents to the fullest extent permitted by the Maryland General
Corporation Law. This indemnification applies to events occurring at the time
a person serves as a director or officer of the Corporation whether or not such
person is a director or officer at the time of any proceeding in which
liability is asserted.

(3) No provision of these Articles of Incorporation shall be
effective to protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its security holders to
which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.

(4) References to the Maryland General Corporation Law in this
Article VII are to that law as from time to time amended. No amendment to the
Corporation's Articles of Incorporation shall affect any right of any person
under this Article VII based on any event, omission or proceeding prior to such
amendment.

ARTICLE VIII

SHAREHOLDER VOTE

(1) Notwithstanding any other provision of these Articles of
Incorporation, the affirmative vote of the holders of (i) eighty percent (80%)
of the votes entitled to be cast thereon by shareholders of the Corporation and
(ii) in the case of a Business Combination (as defined below), 66-2/3% of the
votes entitled to be cast thereon by shareholders of the Corporation other than
votes entitled to be cast thereon by an Interested Party (as defined below) who
is (or whose Affiliate (as defined below) is) a party to a Business Combination
(as defined below) or an Affiliate or associate of the Interested Party, in
addition to the affirmative vote of seventy-five percent (75%) of the entire
Board of Directors, shall be required to advise, approve, adopt or authorize
any of the following:

(i) a merger, consolidation or statutory share exchange of the
Corporation with or into another person;

(ii) issuance or transfer by the Corporation (in one or a series of
transactions in any 12 month period) of any securities of the Corporation
to any person or entity for cash, securities or other property (or
combination thereof) having an aggregate fair market value of $1,000,000
or more, excluding issuances or transfers of debt securities of the
Corporation, sales of securities of the Corporation in connection with a
public offering, issuances of securities of the Corporation pursuant to a
<PAGE>
dividend reinvestment plan adopted by the Corporation, issuances of
securities of the Corporation upon the exercise of any stock subscription
rights distributed by the Corporation and portfolio transactions effected
by the Corporation in the ordinary course of business;

(iii) sale, lease, exchange, mortgage, pledge, transfer or other
disposition by the Corporation (in one or a series of transactions in any
12 month period) to or with any person or entity of any assets of the
Corporation having an aggregate fair market value of $1,000,000 or more
except for portfolio transactions (including pledges of portfolio
securities in connection with borrowings) effected by the Corporation in
the ordinary course of its business (transactions within clauses (i), (ii)
and (iii) above being known individually as a "Business Combination");

(iv) the voluntary liquidation or dissolution of the Corporation, or
an amendment to these Articles of Incorporation to terminate the
Corporation's existence; or

(v) unless the 1940 Act or federal law requires a lesser vote, any
shareholder proposal as to specific investment decisions made or to be
made with respect to the Corporation's assets as to which stockholder
approval is required under Federal or Maryland law.

However, a 75% shareholder vote will not be required with respect to
the foregoing transactions (other than those set forth in (v) above) if they
are approved by a vote of seventy-five percent (75%) of the Continuing
Directors (as defined below). In that case, if Maryland law requires
shareholder approval, the affirmative vote of a majority of the votes entitled
to be cast shall be required.

(i) "Continuing Director" means any member of the Board of Directors
of the Corporation who is not an Interested Party or an Affiliate of an
Interested Party and has been a member of the Board of Directors for a
period of at least 12 months, or has been a member of the Board of
Directors since April 15, 1994 or is a successor of a Continuing Director
who is unaffiliated with an Interested Party and is recommended to succeed
a Continuing Director by a majority of the Continuing Directors then on
the Board of Directors.

(ii) "Interested Party" shall mean any person, other than an
investment company advised by the Corporation's initial investment manager
or any of its Affiliates, which enters, or proposes to enter, into a
Business Combination with the Corporation.

(iii) "Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended.

(2) Notwithstanding any other provision of these Articles of
Incorporation, the affirmative vote of seventy-five percent (75%) of the entire
Board of Directors shall be required to advise, approve, adopt or authorize the
conversion of the Corporation from a closed-end company to an open-end company,
and any amendments necessary to effect the conversion. Such conversion or any
such amendment shall also require the approval of the holders of seventy-five
percent (75%) of the votes entitled to be cast thereon by stockholders of the
Corporation unless approved by a vote of seventy-five percent (75%) of the
Continuing Directors, in which event such conversion shall require the approval
<PAGE>
of the holders of a majority of the votes entitled to be cast thereon by
stockholders of the Corporation.

ARTICLE IX

AMENDMENTS

(1) The Corporation reserves the right from time to time to make any
amendment to these Articles of Incorporation, now or hereafter authorized by
law, including any amendment that alters the contract rights, as expressly set
forth in these Articles of Incorporation, of any outstanding capital stock of
the Corporation.

(2) In addition to the voting requirements imposed by law or by any
other provision of these Articles of Incorporation, the provisions set forth in
this Article IX, the provisions of Article III hereof, the provisions of
Sections (2) and (3) of Article VI hereof, the provisions of these Articles of
Incorporation setting the maximum number of Directors at twelve (12), the
provisions of Article VIII and the provisions of Article X (except as provided
in Section (1) of Article VIII) hereof, may not be amended, altered or repealed
in any respect, nor may any provision inconsistent with this Article IX, the
provisions of Sections (2) and (3) of Article VI hereof, the provision setting
the maximum number of Directors or the provisions of Article VIII hereof be
adopted, unless such action is advised by seventy-five percent (75%) of the
entire Board of Directors and approved by the affirmative vote of the holders
of at least seventy-five percent (75%) of the votes entitled to be cast by
stockholders of the Corporation.

ARTICLE X

PERPETUAL EXISTENCE

The duration of the Corporation shall be perpetual.

IN WITNESS WHEREOF, I have adopted and signed these Articles of
Incorporation and do hereby acknowledge that these Articles of Incorporation
are my act.

/s/ David Hartman
David Hartman
Incorporator

Witness: /s/ Regina Charles

Dated: February 16, 1994

Exhibit (b)

BY-LAWS

LEHMAN BROTHERS SOUTH AFRICA GROWTH FUND, INC.

A Maryland Corporation

ARTICLE I

OFFICES

SECTION 1. Principal Office in Maryland. Lehman Brothers
South Africa Growth Fund, Inc. (the "Corporation") shall have a principal
office in the City of Baltimore, State of Maryland.

SECTION 2. Other Offices. The Corporation may have offices
also at such other places within and without the State of Maryland as the Board
of Directors may from time to time determine or as the business of the
Corporation may require.

ARTICLE II

STOCKHOLDERS

SECTION 1. Annual Meetings. The annual meeting of the
stockholders of the Corporation shall be held on a date not less than ninety
(90) nor more than one hundred twenty (120) days following the end of the
Corporation's fiscal year fixed from time to time by the Board of Directors.
An annual meeting may be held at any place in or out of the State of Maryland
and at any time, each as may be determined by the Board of Directors and
designated in the notice of the meeting. Any business of the Corporation may
be transacted at an annual meeting without the purposes having been specified
in the notice unless otherwise provided by statute, the Corporation's Articles
of Incorporation, as amended from time to time (the "Charter"), or these By-
Laws.

SECTION 2. Special Meetings. Special meetings of the
stockholders for any purpose or purposes, unless otherwise prescribed by
statute or by the Corporation's Charter, may be held at any place within the
United States, and may be called at any time by the Board of Directors or by
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the Chairman or the President, and shall be called by the Secretary (or in his
absence, an Assistant Secretary) at the request in writing
of a majority of the Board of Directors or at the request
in writing of stockholders entitled to cast at least
twenty-five percent (25%) of the votes entitled to be cast at the meeting upon
payment by such stockholders to the Corporation of the reasonably estimated
cost of preparing and mailing a notice of the meeting (which estimated cost
shall be provided to such stockholders by the Secretary of the Corporation).
Notwithstanding the foregoing, unless requested by stockholders entitled to
cast a majority of the votes entitled to be cast at the meeting, a special
meeting of the stockholders need not be called at the request of stockholders
to consider any matter that is substantially the same as a matter voted on at
any special meeting of the stockholders held during the preceding twelve (12)
months. A written request shall state the purpose or purposes of the proposed
meeting.

SECTION 3. Notice of Meetings. Written or printed notice of
the purpose or purposes and of the time and place of every meeting of the
stockholders shall be given by the Secretary of the Corporation to each
stockholder of record entitled to vote at or to notice of the meeting, by
placing the notice in the mail at least ten (10) days, but not more than ninety
(90) days, prior to the date designated for the meeting addressed to each
stockholder at his address appearing on the books of the Corporation or
supplied by the stockholder to the Corporation for the purpose of notice.
Notice of any meeting of stockholders shall be deemed waived by any stockholder
who attends the meeting in person or by proxy, or who before or after the
meeting submits a signed waiver of notice that is filed with the records of the
meeting.

SECTION 4. Notice of Stockholder Business.

(a) At any annual or special meeting of the stockholders, only
such business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual or special meeting, the
business must be (i) (A) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (B) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors, or (C) otherwise properly brought before the meeting by a
stockholder and (ii) a proper subject under applicable law for stockholder
action.

(b) For business to be properly brought before an annual or
special meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, any such
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation not later than 60 days prior to the date of the
meeting; provided, however, that if less than 70 days notice or prior public
disclosure of the date of the meeting is given or made to stockholders, any
such notice by a stockholder to be timely must be so received not later than
the close of business on the tenth day following the day on which notice of the
date of the annual or special meeting was given or such public disclosure was
made.

(c) Any such notice by a stockholder shall set forth as to
each matter the stockholder proposes to bring before the annual or special
meeting (i) a brief description of the business desired to be brought before
the annual or special meeting and the reasons for conducting such business at
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the annual or special meeting, (ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (iii) the
class and number of shares of the capital stock of the Corporation which are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business.

(d) Notwithstanding anything in the By-Laws to the contrary,
no business shall be conducted at any annual or special meeting except in
accordance with the procedures set forth in this Section 4. The Chairman of
the annual or special meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the
meeting and in accordance with the provisions of this Section 4, and if he
should so determine, he shall so declare to the meeting that any such business
not properly brought before the meeting shall not be considered or transacted.

SECTION 5. Quorum; Voting. Except as otherwise provided by
statute or by the Corporation's Charter, the presence in person or by proxy of
stockholders of the Corporation entitled to cast at least a majority of the
votes entitled to be cast shall constitute a quorum at each meeting of the
stockholders. A majority of the votes cast at a meeting at which a quorum is
present is sufficient to approve any matter which properly comes before the
meeting. In the absence of a quorum, the stockholders present in person or by
proxy at the meeting, by majority vote and without notice other than by
announcement at the meeting, may adjourn the meeting from time to time as
provided in this Section 5 until a quorum shall attend. The stockholders
present at any duly organized meeting may continue to do business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave
less than a quorum.

SECTION 6. Adjournment. Any meeting of the stockholders may
be adjourned from time to time, without notice other than by announcement at
the meeting at which the adjournment is taken. At any adjourned meeting at
which a quorum shall be present any action may be taken that could have been
taken at the meeting originally called. A meeting of the stockholders may not
be adjourned to a date more than one hundred twenty (120) days after the
original record date.

SECTION 7. Organization. At every meeting of the
stockholders, the Chairman of the Board, or in his absence or inability to act,
the President, or in his absence or inability to act, a Vice President, or in
the absence or inability to act of all the Vice Presidents, a chairman chosen
by the stockholders, shall act as chairman of the meeting. The Secretary, or
in his or her absence or inability to act, a person appointed by the chairman
of the meeting, shall act as secretary of the meeting and keep the minutes of
the meeting.

SECTION 8. Order of Business. The order of business at all
meetings of the stockholders shall be as determined by the chairman of the
meeting.

SECTION 9. Proxies. A stockholder may vote the stock he owns
of record either in person or by written proxy signed by the stockholder or by
his duly authorized attorney-in-fact. No proxy shall be valid after the
expiration of eleven (11) months from the date thereof, unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure of the
stockholder executing it, except in those cases in which the proxy states that
it is irrevocable and in which an irrevocable proxy is permitted by law.
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SECTION 10. Fixing of Record Date for Determining
Stockholders Entitled to Vote at Meeting. The Board of
Directors may set a record date for the purpose of
determining stockholders entitled to vote at any meeting of
the stockholders. The record date for a particular meeting
shall be not more than ninety (90) nor fewer than ten (10)
days before the date of the meeting. All persons who were
holders of record of shares as of the record date of a
meeting, and no others, shall be entitled to notice of and to vote at such
meeting and any adjournment thereof.

SECTION 11. Inspectors. The Board of Directors may, in
advance of any meeting of stockholders, appoint one (1) or more inspectors to
act at the meeting or at any adjournment of the meeting. If the inspectors
shall not be so appointed or if any of them shall fail to appear or act, the
chairman of the meeting may appoint inspectors. Each inspector, before
entering upon the discharge of his duties, shall, if required by the chairman
of the meeting, take and sign an oath to execute faithfully the duties of
inspector at the meeting with strict impartiality and according to the best of
his ability. The inspectors, if appointed, shall determine the number of
shares outstanding and the voting power of each share, the number of shares
represented at the meeting, the existence of a quorum and the validity and
effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the result,
and do those acts as are proper to conduct the election or vote with fairness
to all stockholders. On request of the chairman of the meeting or any
stockholder entitled to vote at the meeting, the inspectors shall make a report
in writing of any challenge, request or matter determined by them and shall
execute a certificate of any fact found by them. No director or candidate for
the office of director shall act as inspector of an election of directors.
Inspectors need not be stockholders of the Corporation.

SECTION 12. Consent of Stockholders in Lieu of Meeting. Except
as otherwise provided by statute or the Corporation's Charter, any action
required or permitted to be taken at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if the following are filed with the records of stockholders' meetings:
(a) a unanimous written consent that sets forth the action and is signed by
each stockholder entitled to vote on the matter and (b) a written waiver of any
right to dissent signed by each stockholder entitled to notice of the meeting
but not entitled to vote at the meeting.

ARTICLE III

BOARD OF DIRECTORS

SECTION 1. General Powers. Except as otherwise provided in
the Corporation's Charter, the business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. All powers of the
Corporation may be exercised by or under authority of the Board of Directors
except as conferred on or reserved to the stockholders by law, by the
Corporation's Charter or by these By-Laws.

SECTION 2. Number, Election and Term of Directors. The number
of directors constituting the entire Board of Directors (which initially was
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fixed at two (2) in the Corporation's Charter) may be changed from time to time
by a majority of the entire Board of Directors; provided, however, that the
number of directors shall in no event be fewer than that required by law, nor
more than twelve (12). Beginning with the first annual meeting of stockholders
of the Corporation and if at such time, the number of directors shall be three
(3) or more, (the "First Annual Meeting"), the Board of Directors of the
Corporation shall be divided into three classes: Class I, Class II and Class
III. At the First Annual Meeting, directors of Class I shall be elected to the
Board of Directors for a term expiring at the next succeeding annual meeting of
stockholders, directors of Class II shall be elected to the Board of Directors
for a term expiring at the second succeeding annual meeting of stockholders and
directors of Class III shall be elected to the Board of Directors for a term
expiring at the third succeeding annual meeting of stockholders. At each
subsequent annual meeting of stockholders, the directors chosen to succeed
those whose terms are expiring shall be identified as being of the same class
as the directors whom they succeed and shall be elected for a term expiring at
the time of the third succeeding annual meeting of stockholders subsequent to
their election. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 5 of this Article III, and each
director elected shall hold office for the term provided above and until his
successor shall have been elected and shall have qualified, or until his death,
or until he shall have resigned or have been removed as provided in these By-
Laws, or as otherwise provided by statute or the Corporation's Charter. Any
vacancy created by an increase in directors may be filled in accordance with
Section 5 of this Article III. No reduction in the number of directors shall
have the effect of removing any director from office prior to the expiration of
his term unless the director is specifically removed pursuant to Section 4 of
this Article III at the time of the decrease.

SECTION 3. Resignation. A director of the Corporation may
resign at any time by giving written notice of his resignation to the Board of
Directors or the Chairman of the Board or to the Vice-Chairman of the Board or
the President or the Secretary of the Corporation. Any resignation shall take
effect at the time specified in it or, should the time when it is to become
effective not be specified in it, immediately upon its receipt. Acceptance of
a resignation shall not be necessary to make it effective unless the
resignation states otherwise.

SECTION 4. Removal of Directors. A director of the
Corporation may be removed from office only for cause and only by vote of the
holders of at least seventy-five percent (75%) of the votes entitled to be cast
for the election of directors.

SECTION 5. Vacancies. Subject to the provisions of the
Investment Company Act of 1940 (the "1940 Act"), any vacancies in the Board of
Directors, whether arising from death, resignation, removal or any other cause
except an increase in the number of directors, shall be filled by a vote of the
majority of the remaining Directors whether or not sufficient to constitute a
quorum. A majority of the entire Board may fill a vacancy that results from an
increase in the number of directors. Notwithstanding the foregoing, if the
stockholders of any class of the Corporation's capital stock are entitled
separately to elect one or more directors, a majority of the remaining
directors elected by that class or the sole remaining director elected by that
class may fill any vacancy among the number of directors elected by that class.
Any director appointed by the Board of Directors to fill a vacancy shall hold
office only until the next annual meeting of stockholders of the Corporation
and until a successor has been elected and qualifies. Any director elected by
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the stockholders to fill a vacancy shall hold office for the balance of the
term of the director he replaced.

SECTION 6. Place of Meetings. Meetings of the Board may be
held at any place that the Board of Directors may from time to time determine
or that is specified in the notice of the meeting.

SECTION 7. Regular Meetings. Regular meetings of the Board
of Directors may be held without notice at the time and place determined by
the Board of Directors.

SECTION 8. Special Meetings. Special meetings of the Board
of Directors may be called by two (2) or more directors of the Corporation or
by the Chairman of the Board or the President.

SECTION 9. Annual Meeting. The annual meeting of the newly
elected and other directors shall be held as soon as practicable after the
meeting of stockholders at which the newly elected directors were elected. No
notice of such annual meeting shall be necessary if such meeting is held
immediately after the adjournment, and at the site, of the meeting of
stockholders. If not so held, notice shall be given as hereinafter provided
for special meetings of the Board of Directors.

SECTION 10. Notice of Special Meetings. Notice of each
special meeting of the Board of Directors shall be given by the Secretary as
hereinafter provided. Each notice shall state the time and place of the
meeting and shall be delivered to each director, either personally or by
telephone or other standard form of telecommunication, at least twenty-four
(24) hours before the time at which the meeting is to be held, or by first-
class mail, postage prepaid, addressed to the director at his residence or
usual place of business, and mailed at least three (3) days before the day on
which the meeting is to be held.

SECTION 11. Waiver of Notice of Meetings. Notice of any
special meeting need not be given to any director who shall, either before or
after the meeting, sign a written waiver of notice that is filed with the
records of the meeting or who shall attend the meeting.

SECTION 12. Quorum and Voting. A majority of the entire
Board of Directors shall constitute a quorum for the transaction of business,
and except as otherwise expressly required by statute, the Corporation's
Charter or these By-Laws, the act of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board. In
the absence of a quorum at any meeting of the Board, a majority of the
directors present may adjourn the meeting to another time and place until a
quorum shall be present. Notice of the time and place of any adjourned
meeting shall be given to the directors who were not present at the time of
the adjournment and, unless the time and place were announced at the meeting
at which the adjournment was taken, to the other directors.

SECTION 13. Organization. The Chairman of the Board shall
preside at each meeting of the Board. In the absence or inability of the
Chairman of the Board to act, the President (if he is a director), or, in his
absence or inability to act, another director chosen by a majority of the
directors present, shall act as chairman of the meeting and preside at the
meeting. The Secretary (or, in his or her absence or inability to act, any
person appointed by the chairman) shall act as secretary of the meeting and
keep the minutes of the meeting.
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SECTION 14. Committees. The Board of Directors may designate
one (1) or more committees of the Board of Directors, including an executive
committee, each consisting of two (2) or more directors. To the extent
provided in the resolutions adopted by the Board of Directors, and permitted by
law, the committee or committees shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of the
Corporation. Any committee or committees shall have the name or names
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and provide those
minutes to the Board of Directors when required. The members of a committee
present at any meeting, whether or not they constitute a quorum, may appoint a
director to act in the place of an absent member.

SECTION 15. Written Consent of Directors in Lieu of a
Meeting. Subject to the provisions of the l940 Act, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee of the Board may be taken without a meeting if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of the proceedings of the
Board or committee.

SECTION 16. Telephone Conference. Members of the Board of
Directors or any committee of the Board may participate in any Board or
committee meeting by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other at the same time. Participation by such means shall constitute
presence in person at the meeting, provided, however, that such participation
shall not constitute presence in person with respect to matters which the 1940
Act, and the rules thereunder require the approval of directors by vote cast in
person at a meeting.

SECTION 17. Compensation. Each director shall be entitled to
receive compensation, if any, as may from time to time be fixed by the Board of
Directors, including a fee for each meeting of the Board or any committee
thereof, regular or special, he attends. Directors may also be reimbursed by
the Corporation for all reasonable expenses incurred in traveling to and from
the place of a Board or committee meeting.

ARTICLE IV

OFFICERS, AGENTS AND EMPLOYEES

SECTION 1. Number and Qualifications. The officers of the
Corporation shall be a Chairman, a President, a Secretary, a Treasurer, and an
Assistant Secretary, each of whom shall be elected by the Board of Directors.
The Board of Directors may elect or appoint a Chairman of the Board of
Directors, and one (1) or more Vice Presidents and may also appoint any other
officers, assistant officers, agents and employees it deems necessary or
proper. Any two (2) or more offices may be held by the same person, except the
offices of President and Vice President, but no officer shall execute,
acknowledge or verify in more than one (1) capacity any instrument required by
law to be executed, acknowledged or verified by more than one officer.
Officers shall be elected by the Board of Directors each year at its first
meeting held after the annual meeting of stockholders, each to hold office
until the meeting of the Board following the next annual meeting of the
stockholders and until his successor shall have been duly elected and shall
have qualified, or until his death, or until he shall have resigned or have
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been removed, as provided in these By-Laws. The Board of Directors may from
time to time elect such officers (including one or more Assistant Vice
Presidents, one or more Assistant Treasurers and one or more Assistant
Secretaries) and may appoint, or delegate to the President the power to
appoint, such agents as may be necessary or desirable for the business of the
Corporation. Such other officers and agents shall have such duties and shall
hold their offices for such terms as may be prescribed by the Board or by the
appointing authority.

SECTION 2. Resignations. Any officer of the Corporation may
resign at any time by giving written notice of his resignation to the Board of
Directors, the Chairman of the Board, the President or the Secretary. Any
resignation shall take effect at the time specified therein or, if the time
when it shall become effective is not specified therein, immediately upon its
receipt. The acceptance of a resignation shall not be necessary to make it
effective unless otherwise stated in the resignation.

SECTION 3. Removal of Officer, Agent or Employee. Any
officer, agent or employee of the Corporation may be removed by the Board of
Directors with or without cause at any time, and the Board may delegate the
power of removal as to agents and employees not elected or appointed by the
Board of Directors. Removal shall be without prejudice to the person's
contract rights, if any, but the appointment of any person as an officer, agent
or employee of the Corporation shall not of itself create contract rights.

SECTION 4. Vacancies. A vacancy in any office, whether
arising from death, resignation, removal or any other cause, may be filled for
the unexpired portion of the term of the office that shall be vacant, in the
manner prescribed in these By-Laws for the regular election or appointment to
the office.

SECTION 5. Compensation. The compensation of the officers of
the Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer with respect to other officers under his control.

SECTION 6. Bonds or Other Security. If required by the Board,
any officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in an amount and with any
surety or sureties as the Board may require.

SECTION 7. Chairman of the Board of Directors. The Chairman
of the Board of Directors shall be the chief executive officer of the
Corporation and shall have, subject to the control of the Board of Directors,
general and active management and supervision of the business, affairs, and
property of the Corporation and its several officers and may employ and
discharge employees and agents of the Corporation, except those elected or
appointed by the Board, and he may delegate these powers. The Chairman shall
preside at all meetings of the stockholders and of the Board of Directors. He
shall execute on behalf of the Corporation all instruments requiring such
execution except to the extent that signing and execution thereof shall be
required by the President of the Corporation or shall be expressly delegated by
the Board of Directors to some other officer or agent of the Corporation.

SECTION 8. Vice-Chairman of the Board of the Directors. The
Vice-Chairman of the Board of Directors shall, in the absence of the Chairman
of the Board, preside at all meetings of the stockholders and directors. He
shall have and exercise all the powers and authority of the Chairman of the
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Board in the event of the Chairman's absence or inability to act or during a
vacancy in the office of Chairman of the Board. He shall also have such other
duties and responsibilities as shall be assigned to him by the Chairman or the
Board of Directors.

SECTION 9. President. The President shall, in the absence of
the Chairman and Vice-Chairman of the Board of Directors, preside at all
meetings of the stockholders and directors. He shall have and exercise all the
powers and authority of the Chairman of the Board in the event of the
Chairman's and Vice-Chairman's absence or inability to act or during a vacancy
in the offices of Chairman and Vice-Chairman of the Board. He shall sign and
execute all instruments required to be signed and executed by the President of
the Corporation. He shall also have such other duties and responsibilities as
shall be assigned to him by the Chairman or the Board of Directors.

SECTION 10. Vice President. Each Vice President shall have
the powers and perform the duties that the Board of Directors or the Chairman
of the Board may from time to time prescribe.

SECTION 11. Treasurer. Subject to the provisions of any
contract that may be entered into with any custodian pursuant to authority
granted by the Board of Directors, the Treasurer shall have charge of all
receipts and disbursements of the Corporation and shall have or provide for the
custody of the Corporation's funds and securities; he shall have full authority
to receive and give receipts for all money due and payable to the Corporation,
and to endorse checks, drafts, and warrants, in its name and on its behalf and
to give full discharge for the same; he shall deposit all funds of the
Corporation, except those that may be required for current use, in such banks
or other places of deposit as the Board of Directors may from time to time
designate; and, in general, he shall perform all duties incident to the office
of Treasurer and such other duties as may from time to time be assigned to him
by the Board of Directors or the Chairman of the Board.

SECTION 12. Assistant Treasurers. The Assistant Treasurers in
the order of their seniority, unless otherwise determined by the Chairman of
the Board or the Board of Directors, shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer. They
shall perform such other duties and have such other powers as the Chairman or
the Board of Directors may from time to time prescribe.

SECTION 13. Secretary. The Secretary shall:

(a) keep or cause to be kept in one or more books provided for
the purpose, the minutes of all meetings of the Board of Directors,
the committees of the Board and the stockholders;

(b) see that all notices are duly given in accordance with
the provisions of these By-Laws and as required by law;

(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all stock certificates of
the Corporation (unless the seal of the Corporation on such
certificates shall be a facsimile, as hereinafter provided) and affix
and attest the seal to all other documents to be executed on behalf of
the Corporation under its seal;
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(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and filed are
properly kept and filed; and

(e) in general, perform all the duties incident to the office
of Secretary and such other duties as from time to time may be
assigned to him by the Board of Directors or the Chairman of the
Board.

SECTION 14. Assistant Secretaries. The Assistant Secretaries
in the order of their seniority, unless otherwise determined by the Chairman of
the Board or the Board of Directors, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary. They
shall perform such other duties and have such other powers as the President or
the Board of Directors may from time to time prescribe.

SECTION 15. Delegation of Duties. In case of the absence of
any officer of the Corporation, or for any other reason that the Board of
Directors may deem sufficient, the Board may confer for the time being the
powers or duties, or any of them, of such officer upon any other officer or
upon any director.

ARTICLE V

STOCK

SECTION 1. Stock Certificates. Unless otherwise provided by
the Board of Directors and permitted by law, each hold
Corporation shall be entitled upon specific written request to such person as
may be designated by the Corporation to have a certificate or certificates, in
a form approved by the Board, representing the number of shares of stock of the
Corporation owned by him; provided, however, that certificates for fractional
shares will not be delivered in any case. The certificates representing shares
of stock shall be signed by or in the name of the Corporation by the Chairman
of the Board, the Vice-Chairman of the Board, the President or a Vice President
and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer and may be sealed with the seal of the Corporation. Any or all of
the signatures or the seal on the certificate may be facsimiles. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before the certificate is issued, it may
be issued by the Corporation with the same effect as if the officer, transfer
agent or registrar was still in office at the date of issue.

SECTION 2. Stock Ledger. There shall be maintained a stock
ledger containing the name and address of each stockholder and the number of
shares of stock of each class the shareholder holds. The stock ledger may be
in written form or any other form which can be converted within a reasonable
time into written form for visual inspection. The original or a duplicate of
the stock ledger shall be kept at the principal office of the Corporation or at
any other office or agency specified by the Board of Directors.

SECTION 3. Transfers of Shares. Transfers of shares of stock
of the Corporation shall be made on the stock records of the Corporation only
by the registered holder of the shares, or by his attorney thereunto authorized
by power of attorney duly executed and filed with the Secretary or with a
transfer agent or transfer clerk, and on surrender of the certificate or
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certificates, if issued, for the shares properly endorsed or accompanied by a
duly executed stock transfer power and the payment of all taxes thereon.
Except as otherwise provided by law, the Corporation shall be entitled to
recognize the exclusive right of a person in whose name any share or shares
stand on the record of stockholders as the owner of the share or shares for all
purposes, including, without limitation, the rights to receive dividends or
other distributions and to vote as the owner, and the Corporation shall not be
bound to recognize any equitable or legal claim to or interest in any such
share or shares on the part of any other person.

SECTION 4. Regulations. The Board of Directors may authorize
the issuance of uncertificated securities if permitted by law. If stock
certificates are issued, the Board of Directors may make any additional rules
and regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. The Board may appoint, or authorize any officer or
officers to appoint, one or more transfer agents or one or more transfer clerks
and one or more registrars and may require all certificates for shares of stock
to bear the signature or signatures of any of them.

SECTION 5. Lost, Destroyed or Mutilated Certificates. The
holder of any certificate representing shares of stock of the Corporation shall
immediately notify the Corporation of its loss, destruction or mutilation and
the Corporation may issue a new certificate of stock in the place of any
certificate issued by it that has been alleged to have been lost or destroyed
or that shall have been mutilated. The Board may, in its discretion, require
the owner (or his legal representative) of a lost, destroyed or mutilated
certificate to give to the Corporation a bond in a sum, limited or unlimited,
and in a form and with any surety or sureties, as the Board in its absolute
discretion shall determine, to indemnify the Corporation against any claim that
may be made against it on account of the alleged loss or destruction of any
such certificate, or issuance of a new certificate. Anything herein to the
contrary notwithstanding, the Board of Directors, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.

SECTION 6. Fixing of Record Date for Dividends, Distributions,
etc. The Board may fix, in advance, a date not more than ninety (90) days
preceding the date fixed for the payment of any dividend or the making of any
distribution or the allotment of rights to subscribe for securities of the
Corporation, or for the delivery of evidences of rights or evidences of
interests arising out of any change, conversion or exchange of common stock or
other securities, as the record date for the determination of the stockholders
entitled to receive any such dividend, distribution, allotment, rights or
interests, and in such case only the stockholders of record at the time so
fixed shall be entitled to receive such dividend, distribution, allotment,
rights or interests.

SECTION 7. Information to Stockholders and Others. Any
stockholder of the Corporation or his agent may inspect and copy during the
Corporation's usual business hours these By-Laws, minutes of the proceedings of
its stockholders, annual statements of its affairs and voting trust agreements
on file at its principal office.
<PAGE>
ARTICLE VI

INDEMNIFICATION AND INSURANCE

SECTION 1. Indemnification of Directors and Officers. Any
person who was or is a party or is threatened to be made a party in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is a current or former director or officer of the Corporation, or is or
was serving while a director or officer of the Corporation at the request of
the Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, enterprise
or employee benefit plan, shall be indemnified by the Corporation against
judgments, penalties, fines, excise taxes, settlements and reasonable expenses
(including attorneys' fees) actually incurred by such person in connection with
such action, suit or proceeding to the full extent permissible under the
Maryland General Corporation Law, the Securities Act of 1933, as amended (the
"1933 Act"), and the 1940 Act, as those statutes are now or hereafter in force,
except that such indemnity shall not protect any such person against any
liability to the Corporation or any stockholder thereof to which such person
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office ("disabling conduct").

SECTION 2. Advances. Any current or former director or
officer of the Corporation claiming indemnification within the scope of this
Article VI shall be entitled to advances from the Corporation for payment of
the reasonable expenses incurred by him in connection with proceedings to which
he is a party in the manner and to the full extent permissible under the
Maryland General Corporation Law, the 1933 Act, and the 1940 Act, as those
statutes are now or hereafter in force; provided, however, that the person
seeking indemnification shall provide to the Corporation a written affirmation
of his good faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met and a written undertaking to
repay any such advance, if it should ultimately be determined that the standard
of conduct has not been met, and provided further that at least one of the
following additional conditions is met: (a) the person seeking indemnification
shall provide a security in form and amount acceptable to the Corporation for
his undertaking; (b) the Corporation is insured against losses arising by
reason of the advance; or (c) a majority of a quorum of directors of the
Corporation who are neither "interested persons" as defined in Section 2(a)(19)
of the 1940 Act, nor parties to the proceeding ("disinterested non-party
directors"), or independent legal counsel, in a written opinion, shall
determine, based on a review of facts readily available to the Corporation at
the time the advance is proposed to be made, that there is reason to believe
that the person seeking indemnification will ultimately be found to be entitled
to indemnification.

SECTION 3. Procedure. At the request of any current or former
director or officer, or any employee or agent whom the Corporation proposes to
indemnify, the Board of Directors shall determine, or cause to be determined,
in a manner consistent with the Maryland General Corporation Law, the 1933 Act,
and the 1940 Act, as those statutes are now or hereafter in force, whether the
standards required by this Article VI have been met; provided, however, that
indemnification shall be made only following: (a) a final decision on the
merits by a court or other body before whom the proceeding was brought, finding
that the person to be indemnified was not liable by reason of disabling conduct
<PAGE>
or (b) in the absence of such a decision, a reasonable determination, based
upon a review of the facts, that the person to be indemnified was not liable by
reason of disabling conduct, by (i) the vote of a majority of a quorum of
disinterested non-party directors or (ii) an independent legal counsel in a
written opinion.

SECTION 4. Indemnification of Employees and Agents. Employees
and agents who are not officers or directors of the Corporation may be
indemnified, and reasonable expenses may be advanced to such employees or
agents, in accordance with the procedures set forth in this Article VI to the
extent permissible under the Maryland General Corporation Law, the 1933 Act,
and the 1940 Act, as those statutes are now or hereafter in force, and to such
further extent, consistent with the foregoing, as may be provided by action of
the Board of Directors or by contract.

SECTION 5. Other Rights. The indemnification provided by this
Article VI shall not be deemed exclusive of any other right, with respect to
indemnification or otherwise, to which those seeking such indemnification may
be entitled under any insurance or other agreement, vote of stockholders or
disinterested directors or otherwise, both as to action by a director or
officer of the Corporation in his official capacity and as to action by such
person in another capacity while holding such office or position, and shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person.

SECTION 6. Insurance. The Corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or who, while a
director, officer, employee or agent of the Corporation, is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation, partnership, joint
venture, trust, enterprise or employee benefit plan, against any liability
asserted against and incurred by him in any such capacity, or arising out of
his status as such, provided that no insurance may be obtained by the
Corporation for liabilities against which it would not have the power to
indemnify him under this Article VI or applicable law.

ARTICLE VII

SEAL

The seal of the Corporation shall be circular in form and shall
bear the name of the Corporation, the year of its incorporation, the words
"Corporate Seal" and "Maryland" and any emblem or device approved by the Board
of Directors. The seal may be used by causing it or a facsimile to be
impressed or affixed or in any other manner reproduced. In lieu of affixing
the seal, it shall be sufficient to meet the requirements of any law, rule or
regulation relating to a corporate seal to place the word "(seal)" adjacent to
the signature of the person authorized to sign the document on behalf of the
Corporation.
<PAGE>
ARTICLE VIII

AMENDMENTS

These By-Laws may be amended by the Board of Directors, subject
to the requirements of the 1940 Act; provided, however, that no amendment of
these By-Laws shall affect any right of any person under Article VI hereof
based on any event, omission or proceeding prior to the amendment. These By-
Laws may not be amended by the stockholders of the Corporation.