Atlantic Sapphire
Annual Report 2000

Plain-text annual report

ASA Limited Annual Report 2000 ASA Limited Incorporated in the Republic of South Africa (Registration No. 1958/01920/06) Annual Report and Financial Statements Year ended November 30, 2000 Directors Robert J.A. Irwin (U.S.A.) Henry R. Breck (U.S.A.) Harry M. Conger (U.S.A.) Chester A. Crocker (U.S.A.) Joseph C. Farrell (U.S.A.) James G. Inglis (South Africa) Malcolm W. MacNaught (U.S.A.) Ronald L. McCarthy (South Africa) Robert A. Pilkington (U.S.A.) A. Michael Rosholt (South Africa) Wesley A. Stanger, Jr. (Director Emeritus) Contents Directors’ report 2 Chairman’s report 2 Certain investment policies and restrictions 4 Report of independent public accountants 4 Portfolio changes (unaudited) 5 Schedule of investments 6 Statements of assets and liabilities 7 Statements of operations 8 Statements of surplus 9 Statements of changes in net assets 9 Statements of cash flows 10 Supplementary information 10 Notes to financial statements 11 Financial highlights 13 Certain tax information for United States shareholders 14 Dividend reinvestment plan 15 Officers Robert J.A. Irwin, Chairman of the Board and Treasurer Ronald L. McCarthy, Managing Director Chester A. Crocker, United States Secretary Dana L. Platt, Esq. Vice President and Assistant Secretary Ranquin Associates, South African Secretary Auditors Arthur Andersen & Co., Johannesburg, South Africa Arthur Andersen LLP, New York, N.Y., U.S.A. Counsel Werksmans, Johannesburg, South Africa Kirkpatrick & Lockhart LLP, New York, N.Y., U.S.A. Custodian The Chase Manhattan Bank, N.A. Chase Metrotech Center, Brooklyn, N.Y. 11245, U.S.A. Shareholder Services LGN Associates Florham Park, NJ, USA (973) 377-3535 Subcustodian Standard Bank of South Africa Limited Johannesburg, South Africa Registered Office 36 Wierda Road West, Sandton 2196, South Africa Website-http://www.asaltd.com Transfer Agent EquiServe-First Chicago Trust Division P.O. Box 2500, Jersey City, NJ 07303-2500, U.S.A. South African Secretary Ranquin Associates Sandton 2196, South Africa Copies of the Quarterly and Annual Reports of the Company and the latest valuation of net assets per share may be requested from the Company, at its Registered Office (011) 784-0500/1/2, or from LGN Associates, Lawrence G. Nardolillo, C.P.A., P.O. Box 269, Florham Park, New Jersey 07932 (973) 377-3535. Shareholders are reminded to notify EquiServe-First Chicago Trust Division of any change of address. 1 Directors’ report The Directors submit herewith their report together with audited financial statements for the fiscal years ended November 30, 2000 and 1999. The U.S. dollar amounts, which are shown solely for the convenience of United States share- holders, are based on the rates of exchange that were in effect during the periods covered, as more fully explained in Note 1 of the notes to financial statements on page 11. In addition to the financial statements are statements setting forth: (1) certain investment policies and restrictions, (2) port- folio changes during the year, (3) financial highlights for the fiscal years ended 1996 through 2000, (4) certain tax informa- tion for United States shareholders and (5) information regard- ing the Company’s dividend reinvestment plan. ASA Limited is incorporated in the Republic of South Africa and consequently values its investments at Johannesburg Stock Exchange share prices translated into U.S. dollars at the rand exchange rate. (See Notes (l)B and (3) to the financial state- ments for additional information.) At November 30, 2000 the Company’s net assets, including investments valued at Johannesburg Stock Exchange quota- tions, were equivalent to R135.49 ($17.58) per share. The clos- ing price of our Company’s stock was $14.56 per share at November 30, 2000, which represented a 17.2% discount to the net asset value. This compares with R138.62 ($22.51) per share, at November 30, 1999 at which time the closing price was $19.125, a discount of 15% to the net asset value. Net investment income for the fiscal year ended November 30, 2000 was equivalent to R4.08 ($.61) per share, as compared to R3.56 ($.58) per share for the year ended November 30, 1999. Net realized gains from investments were R7.01 ($1.00) per share for the fiscal year ended November 30, 2000 as com- pared to R3.76 ($0.62) per share for the fiscal year ended November 30, 1999. Net realized gain (loss) from foreign cur- rency transactions was R.29 (($1.02)) per share for the year ended November 30, 2000 as compared to R.14 (($.95)) per share for the fiscal year ended November 30, 1999. The Company paid dividends in U.S. currency during the fis- cal year ended November 30, 2000 in the aggregate amount of R4.20 ($.60) per share. For the fiscal year ended November 30, 1999, the dividend payments totaled R3.69 ($.60) per share. (See Certain tax information for United States shareholders (pages 14 and 15) for further comments.) Chairman’s report The Gold Bullion Market The year started with much promise, with the price rallying to a high of $316.60 per ounce in February 2000. This excite- ment was precipitated by announcements from the major pro- ducers with respect to their hedge books (predominantly relating to hedge buy back programmes), bringing hopes of a fundamental change in hedging policies and the reduction of forward sales. At the same time, ongoing speculation on what action would be required to rescue Ashanti Gold Fields also permeated the market. While the miners tried their best to keep interest in the metal, robust announcements from a number of Central Banks again assailed the market. The Bank of England announced that it 2 would again sell another 150 tonnes of gold in the same man- ner it did before (bi-monthly auctions). Sales were also made by Switzerland, the Netherlands, Canada, Uruguay and Chile. While the European sales all fell within the “quota” allowed by the Washington Agreement, these sales remained negative in terms of sentiment. The effect remains more psychological than real as the market could probably easily absorb the volumes being sold. At a recent conference on “The Euro, the Dollar and Gold” organized by the World Gold Council, the Governor of the Bank of Italy had an interesting comment on gold’s role as a reserve asset. “It is up to economists to analyze whether and to what extent in an international monetary system that has surely not yet become fully consistent in many of its parts — gold, which performed a monetary function for thousands of years, can still contribute to preserving that fundamental condition for orderly economic activity: price stability.” It looks like the economists may have given us their answer for now, with gold having remained subdued in an environment of high oil prices, a strong dollar relative to the Euro and Asian currencies and a volatile stock market. The softening dollar could however provide some relief, as is being witnessed right now with the year drawing to a close and gold clawing its way back into the $270 per ounce range. The Gold Share Market The gold share market has not reacted well to the generally poor performance of the gold price. In fact gold shares are trad- ing at valuation multiples not seen for an extended period of time. This situation is probably not sustainable and a re-rating could well occur as the gold price improves and restructuring becomes a reality. At the end of fiscal 1999 the Philadelphia Stock Exchange gold and silver index (XAU) was trading at a level of 67.04. At the close of fiscal 2000, it declined to a level of 47.08, some 30% lower. The Johannesburg stock exchange All Gold Index declined approximately 46% when expressed in United States dollars. The net assets of ASA per share in United States dollar terms significantly bettered both indexes with a decline of 22%. The discount on the market value of our shares moved from 15% at the start of the fiscal year to a little over 17% on November 30, 2000. Despite the weakness in the Rand which has seen the Rand gold price rise to near record levels of R2 080 per ounce, the shares continue to be driven by moves in the dollar gold price. The Gold Mining Industry Response The lackluster gold price has continued to focus the minds of gold company executives and the industry has continued to rationalize and restructure. A number of deals and proposed deals both country specific and cross border have been announced. These include the Newmont Mining Corporation purchase of Battle Mountain Gold, the merger of Franco Nevada and Euro Nevada to form Franco Nevada and subsequently the proposal to merge Franco Nevada with Gold Fields Limited to form Gold Fields International. The Gold Fields Limited and Franco Nevada deal was, however, not consummated due to the inabil- ity to obtain approval from the Ministry of Finance and South African Reserve Bank for the listing of Gold Fields International. The cautionary announcements, however, have not been retracted and we believe it is possible that other alter- natives are being pursued to complete the deal. Anglogold has continued its growth drive and during the year acquired 40% of the Morila project in Mali and 50% of the Geita project in Tanzania. Harmony acquired the Randfontein Estates Gold Mine at the beginning of this year. This will see them becoming a 2.3 mil- lion ounce annual producer. In a recent cautionary move it has also been announced that Harmony has bid for Anglogold’s Elandsrand/Deelkraal operation. If successful in their bid, Harmony’s production will grow to around 3 million ounces per annum. The Elandsrand/Deelkraal sale is just the start of what could be the last great restructuring of the South African gold mining industry. This is being driven not so much by the gold price, as the Rand gold price is near all time highs, but more by the need to better utilize existing infrastructure to optimally extract the maturing ore resource base in the country. While this restruc- turing should result in a more sensible and logical extraction of the resources, the opportunity is also being used to pursue Black Economic Empowerment (BEE). This will be done through a process of joint ventures and partnerships. There is still a long way to go in the consolidation of the global gold industry. Perhaps with a more centralized and better financed gold mining industry, there may be less reason or inclination for the industry to depress the price of their prod- uct, by selling forward into a dull market to hedge against a decline in price or finance future production which should probably not be brought on line if it can not deliver a return at these prices. Portfolio Restructuring The Company has made minor changes to the overall invest- ment portfolio during the year. The small holding in Western Areas Gold Mine has been sold and certain lesser disposals took place in De Beers Consolidated Mines and Anglo American Platinum Corporation Ltd. The Company continues to hold a significant part of its total assets in both these latter investments, and the proceeds of the disposals were used to increase the investment in Harmony Gold Mining Company Limited – ADR. The platinum producers have again had an outstanding year. This has been a direct result of the ongoing positive funda- mentals in both the platinum and palladium market. The weaker rand has also contributed to strong earnings growth. Right now the outlook on the supply/demand side remains pos- itive, with the expansion programmes only expected to push the market into surplus in two to three years time. While Russian deliveries remain uncertain, as the size of the market increases their overall impact is starting to be diluted. This is particularly applicable to the platinum market. De Beers has also had an outstanding year in terms of both share price performance and earnings, with sales being as robust as expected in the Millennium. Much has also been said about a restructuring of the company and the unwinding of the Anglo American PLC cross holding. With the US economy slowing, however, it is expected that diamond sales will decrease. Economic Environment The South African economy is showing increasing evidence of a broad-based recovery with a growth of 31/2% which should be easily attainable in 2001. The main driver on the supply-side will continue to be the tertiary sector, where the largest sectors (excluding government) — finance and real estate, transport and communication, and wholesale and retail trade — are cur- rently showing annual growth rates of between 5% and 6%. There should be considerable added support to overall growth from the manufacturing sector. Private consumption and, especially, investment are expected to lead demand-side growth. Although some increase in parastatal investment is expected, the private sector is antic- ipated to contribute the greatest portion to the increase in investment. Improving confidence as previous fears of interest rate hikes recede should help this process, and momentum in private-sector investment has already picked up strongly. The Rand currency has suffered an unprecedented depreciation against the US Dollar from last year, moving from six to almost eight Rand to the dollar. This is not from any inherent weakness in the economy, but as with the majority of world currencies has more to do with the ongoing strength of the Dollar. South Africa’s current account deficit is expected to remain below 1% of GDP in 2001, so financing should not prove to be a problem. However, in this context it should be noted that port- folio inflows remain the dominant source of capital flows into South Africa and, although the country occupies a respectably high position on the table of developing nations of the world, remains vulnerable to shifts in global risk appetite with respect to its ability to finance the current account deficit. General Comments At the Annual Meeting of Shareholders to be held on February 15, 2001, your Board of Directors is asking you to vote on revisions to ASA’s investment policies and conforming changes to ASA’s corporate documents, its Articles of Association and By-Laws. These revisions are designed to respond to consolidation taking place in the gold mining industry. Your participation in the voting process is impor- tant no matter how many shares you hold. The Board has appointed Ms. Dana Platt to the office of Vice President. Ms. Platt brings to this position a wealth of experi- ence and expertise, having formerly held a senior position with our independent legal counsel. * * * The Annual Meeting of Shareholders will be held on Thursday, February 15, 2001 at 10:00 A.M. at The Park Lane Hotel, 36 Central Park South, New York, New York USA. We look forward to having you in attendance. ROBERT J.A. IRWIN, Chairman of the Board and Treasurer 3 Certain investment policies and restrictions The following is a summary of certain of the Company’s invest- ment policies and restrictions and is subject to the more com- plete statements contained in the Company’s Memorandum of Association (Charter), Articles of Association (By-Laws) and Registration Statement under the United States Investment Company Act of 1940, each as amended: 1. To invest over 50 per cent in value of its assets in common shares (or securities convertible into common shares) of gold mining companies in South Africa; 2. To invest substantially the remainder of its assets, subject to the following notes, in common shares (or securities convert- ible into common shares) of other companies in South Africa; except, in the case of both 1 and 2, for temporary holdings of cash, cash equivalents or securities of, or guaranteed by, the Government of South Africa or an instrumentality thereof; 3. Not to invest in securities of any issuer if as a result over 20 per cent in value of the Company’s assets would at the time be invested in securities of such issuer provided that no more than 40 per cent of the Company’s assets would at the time be invested in securities of issuers, each of which exceeds 10 per cent of such value; 4. Not to invest in securities of any issuer which has a record of less than three years’ continuous operation if as a result over Report of independent public accountants To the Shareholders and the Board of Directors of ASA Limited: We have audited the accompanying statements of assets and liabilities of ASA Limited (incorporated in the Republic of South Africa) as of November 30, 2000 and 1999, including the schedule of investments as of November 30, 2000, the related statements of operations, surplus, changes in net assets and cash flows and supplementary information for each of the two years in the period ended November 30, 2000, and the financial highlights for each of the five years in the period then ended. These financial statements, financial highlights and supple- mentary information are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements, financial highlights and supplemen- tary information based on our audits. We conducted our audits in accordance with auditing stan- dards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements, financial highlights and supplementary information are free of material misstatement. An audit includes examining, on a test basis, evi- dence supporting the amounts and disclosures in the financial statements, financial highlights and supplementary informa- tion. Our procedures included the physical examination or con- firmation of securities owned as of November 30, 2000 and 1999, by correspondence with the custodians and brokers. An audit also includes assessing the accounting principles used and 4 10 per cent in value of the Company’s assets would at the time be invested in securities of all such issuers; 5. Not to invest in securities of any class of any issuer (except securities of or guaranteed by the Government of South Africa or an instrumentality thereof) if as a result the Company would at the time own over 10 per cent of such securities outstanding; 6. Not to invest in securities of any issuer if officers and direc- tors of the Company, owning in each case over one-half of 1 per cent of the securities of such issuer, together own over 5 per cent of the securities of such issuer; and 7. Not to purchase any securities on margin or to sell any secu- rities short. Note A. In April 1969, the shareholders approved an amend- ment of the Company’s Registration Statement to permit the Company to invest up to 20 per cent of the value of its total assets in common shares (or securities convertible into com- mon shares) of companies primarily engaged outside of South Africa in extractive or related industries or in the holding or development of real estate, provided that such amendment should not change the policy set forth in 1 above. The imple- mentation of this amendment required the approval of the South African Exchange Control Authorities. Note B. The Company is also permitted by its Registration Statement to hold up to 25 per cent in value of its assets in gold or gold certificates. significant estimates made by management, as well as evaluat- ing the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements, financial highlights and supplementary information referred to above present fairly, in all material respects, the financial position of ASA Limited as of November 30, 2000 and 1999, the results of its operations, its cash flows, the changes in its net assets and supplementary information for each of the two years in the period ended November 30, 2000 and its financial highlights for each of the five years in the period then ended, in conformity with account- ing principles generally accepted in the United States. Arthur Andersen & Co. Johannesburg, South Africa December 22, 2000 Arthur Andersen LLP New York, N.Y., U.S.A. JSE All gold share index: Monthly average prices (rand) 1997 1998 1999 2000 London free market gold price: Monthly average $ per ounce 1500 1300 1100 900 700 500 350 340 330 320 310 300 290 280 270 260 250 240 230 220 1997 1998 1999 2000 Portfolio changes (unaudited) Net changes during the year ended November 30, 2000 Ordinary shares of gold mining companies Harmony Gold Mining Company Limited ADR Harmony Gold Mining Company Limited Western Areas Gold Mining Company Limited Ordinary shares of other companies Anglo American Platinum Corporation Limited De Beers Consolidated Mines Limited/Centenary AG Options Randfontein Estates Number of Shares Increase Decrease 2 166 400 150 664 600 300 194 300 300 000 16 700 Government bonds Republic of South Africa S150 12% due 2/28/05 Principal Amount (Rand) 39 000 000 The notes to the financial statements form an integral part of this information. 5 Schedule of investments (Note 1) November 30, 2000 Name of Company Ordinary Shares of gold mining companies South African Gold Mines Anglogold Limited Gold Fields Limited Harmony Gold Mining Company Limited Harmony Gold Mining Company Limited - ADR Canadian Gold Mines Barrick Gold Corporation Franco Nevada Mining Corporation Limited Placer Dome Incorporated Ordinary shares of other companies Anglo American Platinum Corporation Limited Anglo American Corporation PLC De Beers Consolidated Mines Limited/Centenary AG Impala Platinum Holdings Limited Number of Shares/ Principal Amount South African Rand United States Dollars Percent of Net assets 1 194 947 10 794 979 1 336 2 166 400 R 225 844 983 235 330 542 38 343 63 648 832 524 862 700 $ 68 075 577 282 000 306 460 365 312 32 613 300 23 091 761 25 363 612 81 068 673 10 514 744 605 931 373 78 590 321 820 500 320 000 701 300 262 700 255 996 000 127 232 000 146 571 700 95 885 500 625 685 200 81 152 425 1 231 616 573 159 742 746 17.4% 18.1 — 4.9 40.4 2.5 1.8 1.9 6.2 46.6 19.7 9.8 11.3 7.4 48.2 94.8 3.0 3.0 97.8 2.2 Government bonds Republic of South Africa S150 12% due 2/28/05 R 39 000 000 38 192 236 Total Investments, at Market Value Cash and other assets less payables 38 192 236 4 953 597 1 269 808 809 30 851 372 164 696 343 4 029 421 Total Net Assets R 1 300 660 181 $ 168 725 764 100.0% The notes to the financial statements form an integral part of this schedule. The Company’s accounts are maintained in rand, the currency of the Republic of South Africa. U.S. dollar amounts are shown solely for the convenience of United States share- holders. There is no assurance that the valuations at which the Company’s investments are carried could be realized upon sale. 6 Statements of assets and liabilities November 30, 2000 and 1999 Assets Investments, at market value (Note 1) Gold mining companies— Cost R 235 254 940 ($92 828 943) in 2000 R 198 285 731 ($92 323 036) in 1999 Other companies— Cost R 62 594 863 ($27 341 307) in 2000 R 80 132 354 ($34 342 056) in 1999 Government bonds— Cost R 38 192 236 ($4 953 597) in 2000 Cash in banks Bank time deposits Receivable for securities sold Dividends and interest receivable Other assets Total assets Liabilities Accounts payable and accrued liabilities Payable for securities purchased Total liabilities Net assets (shareholders’ investment) Ordinary (common) shares R 0.25 nominal (par) value Authorized: 24 000 000 shares Issued and Outstanding: 9 600 000 shares Share premium (capital surplus) Undistributed net investment income Undistributed net realized gain (loss) from foreign currency transactions Undistributed net realized gain on investments Net unrealized appreciation on investments Net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies Net assets Net assets per share The closing price of the Company’s shares on the New York Stock Exchange was $14.56 per share on November 30, 2000 and $19.125 per share on November 30, 1999. The notes to the financial statements form an integral part of these statements. ROBERT J.A. IRWIN, Chairman of the Board & Treasurer RONALD L. MCCARTHY, Managing Director 2000 1999 South African Rand United States Dollars South African Rand United States Dollars R 605 931 373 $ 78 590 321 R783 098 052 $127 126 307 625 685 200 81 152 425 529 966 600 86 033 539 38 192 236 4 953 597 — — 1 269 808 809 82 573 813 — — 1 949 453 266 157 164 696 343 10 706 444 — — 252 847 62 467 1 313 064 652 6 424 960 9 240 000 6 511 139 2 519 689 363 705 213 159 846 1 043 013 1 500 000 1 057 003 409 041 75 013 1 354 598 232 175 718 101 1 338 124 145 217 243 916 1 658 783 52 279 268 215 147 6 777 190 756 448 6 589 154 122 800 1 069 668 53 938 051 6 992 337 7 345 602 1 192 468 2 400 000 19 636 586 18 126 615 8 383 498 310 822 353 933 807 038 3 360 000 27 489 156 56 298 974 (38 065 714) 80 849 895 39 591 628 2 400 000 19 636 586 19 424 305 5 605 568 243 499 635 1 034 686 836 3 360 000 27 489 156 56 205 253 (28 247 288) 71 253 751 86 494 686 7 484 091 (798 175) 5 525 613 (504 110) R 1 300 660 181 $168 725 764 R 1 330 778 543 $216 051 448 R 135.49 $ 17.58 R138.62 $22.51 7 Statements of operations Years ended November 30, 2000 and 1999 Investment income Dividends Interest Expenses Shareholders’ report and proxy expenses Directors’ fees and expenses Salaries Other administrative expenses Transfer agent, registrar and custodian Professional fees and expenses Insurance Contributions South African tax on foreign dividends (Note 2) Other 2000 1999 South African Rand United States Dollars South African Rand United States Dollars R 51 966 163 2 197 308 $ 7 734 885 310 503 R 44 682 352 2 108 300 $ 7 287 594 344 556 54 163 471 8 045 388 46 790 652 7 632 150 921 491 3 425 213 2 302 599 2 342 037 848 862 1 655 208 588 437 426 643 206 086 2 395 785 137 396 489 072 338 231 347 619 120 925 237 427 87 557 55 515 26 730 351 195 706 872 2 786 996 2 090 196 2 101 423 650 306 1 113 856 531 393 424 610 –– 2 189 557 117 300 456 603 344 388 347 333 106 036 182 484 87 505 69 281 –– 359 665 15 112 361 2 191 667 12 595 209 2 070 595 Net investment income 39 051 110 5 853 721 34 195 443 5 561 555 Net realized and unrealized gain (loss) from investments and foreign currency transactions Net realized gain from investments Proceeds from sales Cost of securities sold 115 504 638 48 181 920 15 851 707 6 255 563 75 502 788 39 374 912 12 461 594 6 479 334 Net realized gain from investments 67 322 718 9 596 144 36 127 876 5 982 260 Net realized gain (loss) from foreign currency transactions Investments Foreign currency transactions –– 2 777 930 (9 137 335) (681 091) — 1 377 363 (9 000 638) (150 089) Net realized gain (loss) from foreign currency transactions 2 777 930 (9 818 426) 1 377 363 (9 150 727) Net increase (decrease) in unrealized appreciation on investments Balance, beginning of year Balance, end of year Increase (Decrease) 1 034 686 836 933 807 038 86 494 686 39 591 628 778 778 375 1 034 686 836 49 646 548 86 494 686 (100 879 798) (46 903 058) 255 908 461 36 848 138 Net increase (decrease) in unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currency 1 958 478 (294 065) 86 809 40 685 Net realized and unrealized gain (loss) from investments and foreign currency transactions (28 820 672) (47 419 405) 293 500 509 33 720 356 Net increase (decrease) in net assets resulting from operations R 10 230 438 $(41 565 684) R 327 695 952 $39 281 911 The notes to the financial statements form an integral part of these statements. 8 Statements of surplus and statements of changes in net assets Years ended November 30, 2000 and 1999 Statements of surplus Share premium (capital surplus) Balance, beginning and end of year Undistributed net investment income Balance, beginning of year Net investment income for the year Dividends paid Balance, end of year Undistributed net realized gain (loss) from foreign currency transactions Balance, beginning of year Net realized gain (loss) for the year Balance, end of year Undistributed net realized gain on investments (Computed on identified cost basis) Balance, beginning of year Net realized gain for the year 2000 1999 South African Rand United States Dollars South African Rand United States Dollars R 19 636 586 $ 27 489 156 R 19 636 586 $ 27 489 156 R 19 424 305 39 051 110 $ 56 205 253 5 853 721 R 20 681 662 34 195 443 $ 56 403 698 5 561 555 58 475 415 (40 348 800) 62 058 974 (5 760 000) 54 877 105 (35 452 800) 61 965 253 (5 760 000) R 18 126 615 $ 56 298 974 R 19 424 305 $ 56 205 253 R R 5 605 568 2 777 930 $(28 247 288) R (9 818 426) 4 228 205 1 377 363 $(19 096 561) (9 150 727) 8 383 498 $(38 065 714) R 5 605 568 $(28 247 288) R 243 499 635 67 322 718 $ 71 253 751 9 596 144 R 207 371 759 36 127 876 $ 65 271 491 5 982 260 Balance, end of year R 310 822 353 $ 80 849 895 R 243 499 635 $ 71 253 751 Net unrealized appreciation on investments Balance, beginning of year Increase (decrease) for the year R 1 034 686 836 (100 879 798) $ 86 494 686 (46 903 058) R 778 778 375 255 908 461 $ 49 646 548 36 848 138 Balance, end of year R 933 807 038 $ 39 591 628 R 1 034 686 836 $ 86 494 686 Net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currency Balance, beginning of year Net unrealized appreciation (depreciation) for the year Balance, end of year R R 5 525 613 1 958 478 $ (504 110) R (294 065) 5 438 804 86 809 $ (544 795) 40 685 7 484 091 $ (798 175) R 5 525 613 $ (504 110) Statements of changes in net assets Net investment income Net realized gain from investments Net realized gain (loss) from foreign currency transactions Net increase (decrease) in unrealized appreciation on investments Net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currency Dividends paid Total increase (decrease) Net assets, beginning of year Net assets, end of year The notes to the financial statements form an integral part of these statements. 2000 1999 South African Rand United States Dollars South African Rand United States Dollars R 39 051 110 67 322 718 2 777 930 (100 879 798) $ 5 853 721 9 596 144 (9 818 426) (46 903 058) R 34 195 443 36 127 876 1 377 363 255 908 461 $ 5 561 555 5 982 260 (9 150 727) 36 848 138 1 958 478 (294 065) 86 809 40 685 10 230 438 (40 348 800) (41 565 684) (5 760 000) 327 695 952 (35 452 800) 39 281 911 (5 760 000) (30 118 362) 1 330 778 543 (47 325 684) 216 051 448 292 243 152 1 038 535 391 33 521 911 182 529 537 R 1 300 660 181 $168 725 764 R 1 330 778 543 $216 051 448 9 Statements of cash flows Years ended November 30, 2000 and 1999 2000 1999 South African Rand United States Dollars South African Rand United States Dollars Operating Activities Interest and dividends Operating expenses Unrealized exchange gains (losses) Realized exchange gains (losses) (Increase) decrease in receivable for securities sold (Increase) decrease in dividends and interest receivable Decrease in other assets Increase in accounts payable, accrued liabilities and payable for securities purchased R 54 163 471 (15 112 361) 1 958 478 2 777 930 6 511 139 570 236 97 548 46 592 449 $ 8 045 388 (2 191 667) (294 065) (9 818 426) 1 057 003 156 194 12 546 5 799 869 R 46 790 652 (12 595 209) 86 809 1 377 363 (6 213 891) (2 312 074) 108 919 6 567 210 $ 7 632 150 (2 070 595) 40 685 (9 150 727) (1 004 763) (372 554) 18 188 1 055 668 Net cash provided by (used in) operating activities 97 558 890 2 766 842 33 809 779 (3 851 948) Investing Activities Investments acquired Proceeds from disposal of investments Adjustments to cost for realized foreign exchange differences (105 805 875) 115 504 638 — (13 832 453) 15 851 707 9 137 335 (73 818 091) 75 502 788 — (12 053 014) 12 461 594 9 000 638 Net cash provided by investing activities 9 698 763 11 156 589 1 684 697 9 409 218 Financing Activity Dividends paid Increase (decrease) in cash in banks Increase (decrease) in bank time deposits (40 348 800) (5 760 000) (35 452 800) (5 760 000) 76 148 853 (9 240 000) 9 663 431 (1 500 000) (9 198 324) 9 240 000 (1 702 730) 1 500 000 Increase (Decrease) in available cash R 66 908 853 $ 8 163 431 R 41 676 $ (202 730) Supplementary information Years ended November 30, 2000 and 1999 Certain fees incurred by the Company Directors’ fees Officers’ salaries Arthur Andersen (Auditors) The notes to the financial statements form an integral part of these statements. 2000 1999 South African Rand United States Dollars South African Rand United States Dollars R 1 663 788 2 135 271 416 717 $ 236 000 313 491 62 508 R 1 356 952 1 928 093 352 004 $ 222 750 317 697 58 223 10 Notes to financial statements Years ended November 30, 2000 and 1999 1 Summary of significant accounting policies The following is a summary of the Company’s significant accounting policies: A Investments Security transactions are recorded on the respective trade dates. Securities owned are reflected in the accompanying financial state- ments at quoted market value. The difference between cost and current market value is reflected separately as unrealized apprecia- tion (depreciation) on investments. The net realized gain or loss from the sale of securities is determined for accounting purposes on the basis of the cost of specific certificates. Substantially all shares in the Company’s portfolio are traded on the Johannesburg Stock Exchange. Quoted market value of those shares traded on the Johannesburg Stock Exchange or other stock exchanges, as applicable, represents the last recorded sales price on the financial statement date, or the mean between the closing bid and asked prices of those securities not traded on that date. In the event that a mean price cannot be computed due to the absence of either a bid or an asked price, then the bid price plus 1% or the asked price less 1%, as applicable, is used. There is no assurance that the valuation at which the Company’s investments are carried could be realized upon sale. B Translation of South African Rand into United States Dollars The Company’s accounts are maintained in rand, the currency of the Republic of South Africa. United States dollar amounts are shown solely for the convenience of United States shareholders. The Company translates rand into U.S. dollars at the current rand exchange rate in computing its net asset values. At November 30, 2000, the rand exchange rate was approximately R7.71 to the dol- lar ($.13 to the rand). United States dollar equivalents have been determined at appropriate rates of exchange as follows: (i) Purchases, sales, receipts and expenditures are translated at the approximate current rates of exchange in effect at the respec- tive dates of such transactions. (ii) Assets, including investment securities, at quoted market value (Note 1(A)), and liabilities at each reporting date are trans- lated at the current exchange rate in effect at such date. (iii) Ordinary shares outstanding and share premium (capital surplus) accounts are translated at historical rates, averaging $1.40 to the rand. C Exchange Gains and Losses The Company records exchange gains and losses in accordance with the provisions of the American Institute of Certified Public Accountants Statement of Position 93-4, Foreign Currency Accounting and Financial Statement Presentation for Investment Companies (“SOP”). The SOP requires separate disclosure in the accompanying financial statements of net realized gain (loss) from foreign currency transactions, and inclusion of unrealized gain (loss) on the translation of currency as part of net unrealized appre- ciation (depreciation) on translation of assets and liabilities in foreign currency. D Security Transactions and Investment Income During the year ended November 30, 2000, sales of securities amounted to R 115,504,638 ($15,851,707) and purchases of securi- ties amounted to R 105,805,875 ($13,832,453). During the year ended November 30, 1999, sales of securities amounted to R75,502,788 ($12,461,594) and purchases of securities amounted to R73,818,091 ($12,053,014). Security transactions are accounted for on the date the securities are purchased or sold. Dividend income is recorded on the ex- dividend date (the date on which the securities would be sold ex-dividend) net of withholding taxes, if any. Interest income is rec- ognized on the accrual basis. 11 E Distributions to Shareholders Dividends to shareholders are recorded on the ex-dividend date. F Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the period. Actual results could differ from those estimates. 2 Tax status of the Company Pursuant to the South African Taxation Laws Amendment Act, the Company is subject to tax on foreign dividends received, effective February 23, 2000. Beginning with the fiscal year ending November 30, 2002, the Company will also be subject to tax on foreign interest earned. A provision for tax on foreign dividends of R 206 086 ($26,730) has been included in the accompanying financial statements for the year ending November 30, 2000. The South African Revenue Service has recently announced proposed amendments to levy a tax on capital gains resulting from the disposal of capital assets. If enacted into law, certain of the Company’s capital gains might be subject to taxation. However, due to the uncertainty surrounding these proposed changes and their applicability to the Company, management has not assessed the ulti- mate impact of the capital gains tax amendment on the Company’s financial position. The reporting for financial statement purposes of distributions made during the fiscal year from net investment income or net real- ized gains may differ from their ultimate reporting for U.S. federal income tax purposes. These differences primarily are caused by the separate line item reporting for financial statement purposes of foreign exchange gains or losses. See pages 14 and 15 for addi- tional tax information for United States Shareholders. 3 Currency exchange There are exchange control regulations restricting the transfer of funds from South Africa. In 1958 the South African Reserve Bank, in the exercise of its powers under such regulations, advised the Company that the exchange control authorities would permit the Company to transfer to the United States in dollars both the Company’s capital and its gross income, whether received as dividends or as profits on the sale of investments, at the current official exchange rate prevailing from time to time. Future implementation of exchange control policies could be influenced by national monetary considerations that may prevail at any given time. 4 Retirement Plan Effective April 1, 1989, the Company established a defined contribution plan (the “Plan’’) to replace its previous pension plan. The Plan covers all full-time employees. The Company will contribute 15% of each covered employee’s salary to the Plan. The Plan provides for immediate vesting by the employee without regard to length of service. During the year ended November 30, 2000, there was no retirement plan expense, and in the year ended November 30, 1999, retirement plan expense aggre- gated R3,995 ($740). In addition, the Company purchased an annuity policy owned by the Company, for the benefit of the Chairman, at an annual cost of $25,000 per year. Effective May 1, 1999, the annual cost to the Company was increased to $28,125. 5 Commitments The Company’s lease for office space in Johannesburg will expire in February 2001. Rent expense under this lease for the year ending November 30, 2000 was R288,174 ($43,250). The Company has an option to extend this lease for a period up to twelve months. 6 Subsequent Events Effective December 1, 2000, the internal accounting function and various administrative duties per- formed by Ranquin Associates in South Africa will be transferred to the United States. Kaufman Rossin & Co., PA will succeed Ranquin Associates and perform the accounting function for the Company. 12 Financial highlights Per Share Operating Performance Net asset value, beginning of year Net investment income Net realized gain from investments Net realized gain (loss) from foreign currency transactions Net increase (decrease) in unrealized appreciation on investments Net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currency Total from investment operations Less dividends and distributions Net asset value, end of year Year Ended November 30 2000 1999 1998 1997 1996 South African Rand R 138.62 R 108.18 R 99.38 R 161.77 R 127.19 4.08 7.01 .29 (10.51) .20 1.07 (4.20) 3.56 3.76 .14 26.66 .01 34.13 (3.69) 3.59 1.91 .19 7.61 (.09) 13.21 (4.41) 4.43 — .11 (61.40) .02 (56.84) (5.55) 4.52 1.50 (.12) 34.03 .62 40.55 (5.97) R 135.49 R 138.62 R 108.18 R 99.38 R 161.77 United States Dollars Net asset value, beginning of year $ 22.51 $ 19.01 $ 20.45 $ 35.09 $ 34.66 Net investment income Net realized gain from investments Net realized gain (loss) from foreign currency transactions Net increase (decrease) in unrealized appreciation on investments Net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currency Total from investment operations Less dividends and distributions Net asset value, end of year .61 1.00 (1.02) (4.88) (.04) (4.33) (.60) .58 .62 (.95) 3.84 .01 4.10 (.60) .66 .32 (.11) (1.49) (.02) (.64) (.80) .97 — — (14.41) — (13.44) (1.20) 1.10 .39 (.71) 1.05 — 1.83 (1.40) $ 17.58 $ 22.51 $ 19.01 $ 20.45 $ 35.09 Market value per share, end of year $ 14.56 $ 19.125 $ 19.125 $ 20.625 $ 37.625 Total Investment Return(1) Based on market value per share Ratios to Average Net Assets(1) Expenses Net investment income Supplemental Data Net assets, end of year (000 omitted) Portfolio turnover rate Per share calculations are based on the 9,600,000 shares outstanding. (1) Determined in dollar terms. (21.06%) 3.44% (3.30%) (42.86%) (.28%) 1.15% 3.06% 1.13% 3.02% 1.15% 3.34% .71% 3.25% .49% 2.72% $168 726 $216 051 $182 530 7.43% 6.66% 1.06% $196 301 — $336 882 1.79% 13 Certain tax information for United States shareholders From December 1, 1963 through November 30, 1987, the Company was treated as a “foreign investment company’’ for United States federal income tax purposes pursuant to Section 1246 of the Internal Revenue Code (the “Code’’). Under Section 1246 of the Code, a United States shareholder who has held his shares of the Company for more than one year is sub- ject to tax at ordinary income tax rates on his profit (if any) on a sale of his shares to the extent of his “ratable share’’ of the Company’s earnings and profits accumulated between December 1, 1963 and November 30, 1987. If such share- holder’s profit on the sale of his shares exceeds such ratable share and he held his shares for more than one year, then, sub- ject to the discussion below regarding the United States federal income tax rules applicable to taxable years of the Company beginning after November 30, 1987, he is subject to tax at long- term capital gain rates on the excess. The Company’s per share earnings and profits accumulated (undistributed) in each of the taxable years from 1964 through 1987 is given below in United States currency. All the per share amounts give effect to the two-for-one stock splits that became effective on May 10, 1966, May 10, 1973 and May 9, 1975. All the per share amounts reflect distributions through November 30, 1999. Year ended November 30 Per year Per day $ .042 .067 .105 .277 .241 .461 .218 .203 .445 .497 1.151 .851 .370 .083 .357 .219 1.962 .954 .102 -0- -0- (.151) -0- -0- $.00012 .00019 .00029 .00076 .00066 .00126 .00060 .00056 .00122 .00136 .00316 .00233 .00101 .00023 .00098 .00060 .00538 .00261 .00028 -0- -0- (.00041) -0- -0- 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 14 Under rules enacted by the Tax Reform Act of 1986, the Company became a “passive foreign investment company’’ (a “PFIC’’) on December 1, 1987. The manner in which these rules apply depends on whether a United States shareholder (1) elects to treat the Company as a qualified electing fund (“QEF’’) with respect to his Company shares, or (2) for taxable years of such United States shareholder beginning after December 31, 1997, elects to “mark-to-market’’ his Company shares as of the close of each taxable year, or (3) makes neither election. In general, if a United States shareholder of the Company does not make either such election, any gain realized on the direct or indirect disposition of Company shares by such share- holder will be treated as ordinary income. In addition, such shareholder will be subject to an “interest charge’’ on part of his tax liability with respect to such gain, as well as with respect to certain “excess distributions’’ made by the Company. Under proposed regulations, a “disposition’’ would include a U.S. tax- payer becoming a nonresident alien. If a United States shareholder elects to treat the Company as a QEF with respect to his shares therein for the first year he holds his shares during which the Company is a PFIC (or who later makes the QEF election and also elects to treat his shares generally as if they were sold for their fair market value on the first day of the first taxable year of the Company for which the QEF election is effective), the rules described in the preceding paragraph generally will not apply. Instead, the electing United States shareholder will include annually in his gross income his pro rata share of the Company’s ordinary earnings and net cap- ital gain (his “QEF’’ inclusion) regardless of whether such income or gain was actually distributed. A United States share- holder who makes a valid QEF election will recognize capital gain on any profit from the actual sale of his shares if those shares were held as capital assets, except to the extent of the shareholder’s ratable share of the earnings and profits of the Company accumulated between December 1, 1963 and November 30, 1987, as described above. Alternatively, if a United States shareholder makes the mark- to-market election with respect to Company shares for taxable years beginning on or after January 1, 1998, such shareholder will be required annually to report any unrealized gain with respect to his shares as ordinary income, and any unrealized loss would be permitted as an ordinary loss, but only to the extent of previous inclusions of ordinary income. Any gain sub- sequently realized by the electing United States shareholder on a sale or other disposition of his Company shares also would be treated as ordinary income, but such shareholder would not be subject to an interest charge on his resulting tax liability. Special rules apply to a United States shareholder that held his PFIC stock prior to the first taxable year for which the mark-to- market election was effective. A United States shareholder with a valid QEF election in effect would not be taxed on any distributions paid by the Company to the extent of any QEF inclusions, but any distri- butions out of accumulated earnings and profits in excess thereof would be treated as taxable dividends. Such shareholder would increase the tax basis in his Company shares by the amount of any QEF inclusions and reduce such tax basis by any distributions to him that are not taxable as described in the pre- ceding sentence. Special rules apply to United States share- holders who make the QEF election and wish to defer the payment of tax on their annual QEF inclusions. Each shareholder who desires QEF treatment must individu- ally elect such treatment. The QEF election must be made for the taxable year of the shareholder in which or with which the taxable year of the Company ends. A QEF election is effective for the shareholder’s taxable year for which it is made and all subsequent taxable years of the shareholder and may not be revoked without the consent of the Internal Revenue Service. A shareholder of the Company who first held his shares in the Company after November 30, 1999 and who files his tax return on the basis of a calendar year may make a QEF election on his 2000 tax return. A shareholder of the Company who first held his shares in the Company on or before November 30, 1999 may also make the QEF election on his 2000 tax return, but should consult his tax advisor concerning the tax consequences and special rules that apply where a QEF election could have been made with respect to such shares for an earlier taxable year. The QEF election must be made by the due date, with exten- sions, of the federal income tax return for the taxable year for which the election is to apply. Under Treasury regulations, the QEF election is made on Internal Revenue Service Form 8621, which must be completed and attached to a timely filed income tax return in which the shareholder reports his QEF inclusion for the year to which the election applies. In order to allow United States shareholders to make the QEF elections and to comply with the applicable annual reporting requirements, the Company annually will provide to them a “PFIC Annual Information Statement’’ containing certain information required by Treasury regulations (the annual information state- ment). A completed copy of the Form 8621 also must be filed with the Internal Revenue Service Center, P.O. Box 21086, Philadelphia, Pennsylvania 19114 at the time the election state- ment is filed with the return. In early 2001 the Company will send to United States share- holders the PFIC Annual Information Statement for the Company’s 2000 taxable fiscal year. Such annual information statement may be used for purposes of completing Internal Revenue Service Form 8621. A shareholder who either is sub- ject to a prior QEF election or is making a QEF election for the first time must attach a completed Form 8621 to his income tax return each year. Other United States shareholders also must attach completed Forms 8621 to their tax returns each year, but shareholders not electing QEF treatment will not need to report QEF inclusions thereon. Copies of all Forms 8621 also must be sent to the Philadelphia Internal Revenue Service Center iden- tified above by the due date, with extensions, of the returns to which the Forms 8621 are attached. Special rules apply to United States persons who hold shares in the Company through intermediate entities or persons and to United States shareholders who directly or indirectly pledge their shares, including those in a margin account. Ordinarily, the tax basis that is obtained by a transferee of property on the death of the owner of that property is adjusted to the property’s fair market value on the date of death (or alter- nate valuation date). If a United States shareholder dies owning shares with respect to which he did not elect QEF treatment (or elected such treatment after the first year in which he owned shares in which the Company was a PFIC and did not elect to recognize gain as described above), the transferee of those shares will not be entitled to adjust the tax basis of such shares to the fair market value on the date of death (or alternate valu- ation date). In this case, in general, the transferee of such shares will take a basis in the shares equal to the shareholder’s basis immediately before his death. If a United States shareholder dies owning shares in the Company for which a valid QEF elec- tion was in effect for all taxable years in such shareholder’s holding period during which the Company was a PFIC (or the shareholder elected to treat the shares as if sold on the first day of the first taxable year of the Company for which the QEF election was effective), then the basis increase generally will be available unless the holding period for his shares began on or prior to November 30, 1987. In the latter case, in general, any otherwise applicable basis increase will be reduced to the extent of the shareholder’s ratable share of the earnings and profits of the Company accumulated between December 1, 1963 and November 30, 1987. DUE TO THE COMPLEXITY OF THE APPLICABLE TAX RULES, UNITED STATES SHAREHOLDERS OF THE COMPANY ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE IMPACT OF THESE RULES ON THEIR INVESTMENT IN THE COMPANY AND ON THEIR INDIVIDUAL SITUATIONS. Dividend Reinvestment Plan The Company’s Board of Directors has authorized EquiServe-First Chicago Trust Division (“First Chicago’’) to offer a dividend reinvestment plan (the “Plan’’) to shareholders. Shareholders must elect to participate in the Plan by signing an authorization. The authorization appoints First Chicago as agent to apply to the purchase of common shares of the Company in the open market (i) all cash dividends (after deduc- tion of the applicable South African withholding tax and the service charge described below) which become payable to such participant on the Company’s shares (including shares regis- tered in his or her name and shares accumulated under the Plan) and (ii) any voluntary cash payments ($50 minimum, $3,000 maximum per dividend period) received from such participant within 30 days prior to such dividend payment date. For the purpose of making purchases, First Chicago will commingle each participant’s funds with those of all other par- ticipants in the Plan. The price per share of shares purchased for each participant’s account shall be the average price (including brokerage commissions and any other costs of purchase) of all shares purchased in the open market with the net funds avail- able from a cash dividend and any voluntary cash payments 15 being concurrently invested. Any stock dividends or split shares distributed on shares held in the Plan will be credited to the par- ticipant’s account. For each participant, a service charge of 5% of the combined amount of the participant’s dividend and any voluntary pay- ment being concurrently invested, up to a maximum charge of $2.50 per participant, will be deducted (and paid to First Chicago) prior to each purchase of shares. Shareholder sales of shares held by First Chicago in the Plan are subject to a fee of $10.00 plus applicable brokerage commissions deducted from the proceeds of the sale. Additional nominal fees are charged by First Chicago for specific shareholder requests such as requests for information regarding share cost basis detail in excess of two prior years and for replacement 1099 reports older than one year. Participation in the Plan may be terminated by a participant at any time by written instructions to First Chicago. Upon ter- mination, a participant will receive a certificate for the full number of shares credited to his or her account, unless he or she requests the sale of all or part of such shares. Dividends reinvested by a shareholder under the Plan will generally be treated for U.S. federal income tax purposes in the same manner as dividends paid to such shareholder in cash. See “Certain tax information for United States shareholders’’ for more information regarding tax consequences to U.S. investors of an investment in shares of the Company, including the effect of the Company’s status as a PFIC. The amount of the service charge is deductible for U.S. federal income tax purposes, subject to limitations. In addition, shareholders who are U.S. citizens or residents may use the amount of South African tax withheld, if any, either as a deduction from income or, subject to certain limitations, as a credit against their U.S. federal income taxes. An investor participating in the Plan may not hold his or her shares in a “street name’’ brokerage account. Additional information regarding the Plan may be obtained from First Chicago Dividend Reinvestment Plan, P.O. Box 2598, Jersey City, New Jersey 07303-2598. Information may also be obtained by calling First Chicago’s Telephone Response Center at (201) 324-0498 between 8:30 a.m. and 7 p.m., Eastern time, Monday through Friday. 16 

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