ASA LIMITED
ANNUAL [Graphic Omitted]
REPORT
2002
ASA LIMITED
Incorporated in the
Republic of South Africa
(Registration No. 1958/01920/06)
ANNUAL REPORT AND
FINANCIAL STATEMENTS
November 30, 2002
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)
CONTENTS
Directors' report 2
Chairman's report 2
Portfolio changes (unaudited) 4
Certain investment policies and restrictions 5
Report of independent public accountants 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
Notes to financial statements 10
Financial highlights 12
Supplementary information 12
Certain tax information for United States shareholders 13
Dividend reinvestment plan 15
Change in auditors 15
Board of directors 16
OFFICERS
Robert J.A. Irwin, CHAIRMAN OF THE BOARD AND TREASURER
Ronald L. McCarthy, MANAGING DIRECTOR AND SOUTH AFRICAN SECRETARY
Chester A. Crocker, UNITED STATES SECRETARY
Paul K. Wustrack, Jr., ASSISTANT UNITED STATES SECRETARY
Dorothy Faith Kenny, ASSISTANT SOUTH AFRICAN SECRETARY
AUDITORS
Ernst & Young LLP, New York, NY, U.S.A.
Ernst & Young, Johannesburg, South Africa
COUNSEL
Werksmans, Johannesburg, South Africa
Kirkpatrick & Lockhart LLP, Washington, DC, U.S.A.
CUSTODIAN
J.P. Morgan Chase Brooklyn, NY, U.S.A.
SUBCUSTODIAN
Standard Bank of South Africa Limited
Johannesburg, South Africa
FUND ACCOUNTANTS
Kaufman Rossin & Co., PA
Miami, FL, U.S.A.
SHAREHOLDER SERVICES
LGN Associates
Florham Park, NJ, U.S.A.
(973) 377-3535
REGISTERED OFFICE
36 Wierda Road West, Sandton 2196,
South Africa
Website-HTTP://WWW.ASALTD.COM
TRANSFER AGENT
EquiServe Trust Company, N.A.
525 Washington Boulevard, Jersey City, NJ 07310, U.S.A.
COPIES OF THE SEMI-ANNUAL 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) 27-11 784-0500/1/2, 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 TRUST COMPANY, N.A. OF ANY CHANGE
OF ADDRESS.
1
DIRECTORS' REPORT (UNAUDITED)
The Directors submit herewith their report together with audited financial
statements for the fiscal years ended November 30, 2002 and 2001.
In addition to the financial statements there are statements setting forth:
(1) certain investment policies and restrictions, (2) portfolio changes during
the year, (3) financial highlights for the fiscal years ended 1998 through 2002,
(4) supplementary information, (5) certain tax information for United States
shareholders, (6) information regarding the Company's dividend reinvestment plan
and (7) change in auditors.
ASA Limited is incorporated in the Republic of South Africa. The accompanying
financial statements are reported in United States dollars. (See Notes (l)B and
(3) to the financial statements for additional information.)
At November 30, 2002 the Company's net assets were equivalent to $33.48 per
share. The closing price of our Company's stock was $30.06 per share at November
30, 2002, which represented a 10.2% discount to the net asset value. This
compares with $21.97 per share at November 30, 2001 at which time the closing
price was $19.83, a discount of 9.7% to the net asset value. For the fiscal year
ended November 30, 2002 the net assets of the Company per share in United States
dollar terms increased by 52%.
Net investment income for the fiscal year ended November 30, 2002 was
equivalent to $.85 per share, as compared to $1.00 per share for the fiscal year
ended November 30, 2001. Net realized gains from investments were $.51 per share
for the fiscal year ended November 30, 2002 as compared to $3.05 per share for
the fiscal year ended November 30, 2001. Net realized (loss) from foreign
currency transactions was ($1.13) per share for the fiscal year ended November
30, 2002 as compared to ($.24) per share for the fiscal year ended November 30,
2001.
The Company paid dividends totaling $.80 per share in U.S. currency during
the fiscal year ended November 30, 2002. For the fiscal year ended November 30,
2001, the dividend payments totaled $.80 per share. (See Certain tax information
for United States shareholders (pages 13 and 14) for further comments.)
At our annual meeting convened on February 1, 2002 shareholders were asked to
approve two proposals set forth in the proxy statement. Proposal 1 (election of
directors) and proposal 2 (ratification of the selection of accountants) passed.
At least 7,911,981 shares (approximately 82 percent of the outstanding shares)
were voted for the following directors: Robert J.A. Irwin, Henry R. Breck, Harry
M. Conger, Chester A. Crocker, Joseph C. Farrell, James G. Inglis, Malcolm W.
MacNaught, Ronald L. McCarthy, Robert A. Pilkington and A. Michael Rosholt. The
selection of Arthur Andersen LLP to serve as auditors for the year 2002 was
approved by a vote of 7,435,041 shares for, 475,931 shares against and 43,861
abstained.
THE GOLD BULLION MARKET
At the end of the Company's 2001 fiscal year, the gold price was hovering
around the US$270/oz mark. This price was short-lived, however, and by the end
of the first quarter 2002 had moved sustainably above the US$300/oz level. The
price peaked for the fiscal year at the beginning of June when it rose,
intraday, above US$330/oz.
The bullish fundamentals for the metal began to emerge at the end of 2001 and
continued into 2002, and producer hedging was discouraged by the small spread
between spot and forward pricing. An unfavorable outlook for the US economy, the
ongoing transparency and discipline with respect to central bank sales,
continuing industry consolidation and the downtrend in mine supply were all
major factors leading to a revival of interest in gold. Higher oil prices and
the threat of war in the Middle East also lent important support to the price.
Despite not being able to breach the US$330/oz level in the closing months of
fiscal 2002, the downside seems well supported at US$310/oz. By January of 2003
the price had risen above US$350/oz and it continued to react positively to
dollar weakness, declining global equity markets and the threat of war in the
Middle East.
THE GOLD SHARE MARKET
For almost two years, gold shares have had an exceptionally good run. At the
end of our fiscal 2001 the Philadelphia Stock Exchange gold and silver index
(XAU) closed at 52.57. At the close of our fiscal 2002 in November, it had risen
to 63.38, some 21% higher. The Company's net assets rose during the same period
from $21.97 per share to $33.48 per share, an increase of 52.39%. By January 6,
2003 the XAU had risen to 76.52 for a total increase since November 2001 of
45.56%. The Company's net assets for the same period had increased to $41.61 per
share for a gain of 89.39%.
THE GOLD MINING INDUSTRY
While 2001 was a year for rationalizing and restructuring, 2002 has been
mostly a year of bedding down all the mergers and acquisitions that took place
during the past few years. There have, of course, been additional deals, in
particular the successful bid by Newmont/Franco-Nevada for Normandy, the offer
for Aurion Gold by Placer Dome and the three-way merger of TVX, Kinross Gold and
Echo Bay. The gold industry continues to become more global and more
concentrated.
The South African gold mining sector is currently in good shape.
Nevertheless, it is beginning to feel the pinch of the rising cost of labor
associated with the recent appreciation of the Rand. The challenge that now
faces the south African gold mining industry is how and where it intends to
grow. Initial forays have been made into the rest of Africa, Australia and South
America with varying degrees of success. More recently Harmony has made an
2
investment in Russia. Gold Fields Limited and Harmony both listed on the NYSE in
2002, and are looking to become more visible in the U.S. where their largest
shareholder base now resides.
THE PLATINUM INDUSTRY
By the late 2002, platinum was expected to remain firm in the US$450 to
US$550/oz range for some time to come, underpinned largely by the rapid growth
in demand from autocatalysis. The cap for platinum demand at the moment is in
other-use categories, like jewelery, which are more price sensitive. These
sources of demand appear to weaken considerably when the price moves above
US$500/oz. However, in january 2003 the price has moved well above US$600/oz. At
these price levels the producers will continue to generate strong cash flows,
despite a weak palladium price outlook. A stronger rand in the short term will,
however, impact negatively and we have already seen earnings fall from the high
base set in 2002. Overall, however, this is a robust industry with solid
fundamentals.
PORTFOLIO RESTRUCTURING
During fiscal 2002 the Company continued to structure the investment
portfolio with a more global perspective. To this end disposals were made in
Gold Fields Limited, based in South Africa, and further acquisitions were made
in Barrick Gold Corporation and Placer Dome Incorporated in Canada, Compania de
Minas Buenaventura in Peru and Newcrest Mining in Australia. As part of the
Newmont/ Franco-Nevada merger, our holdings in Franco-Nevada Mining Corporation
Limited were converted into Newmont Mining Corporation in the U.S.
ECONOMIC ENVIRONMENT
The Department of Mineral and Energy Affairs released the Socio-Economic
Empowerment Charter in the third quarter of the year. The provisions of the
Charter as finally approved were broadly in line with expectations, with the
most significant one being the attainment of a 26% black empowerment target
within ten years and an undertaking by the mining sector to provide and/or
underwrite R100bn of empowerment capital. The finalization of the Charter brings
to an end a period of extreme uncertainty. The only outstanding issue remains
the finalization of the Money Bill relating to royalty payments by the mining
industry.
Exports have been an important contributor to Gross Domestic Product (GDP)
growth in South Africa over the past few years. While the rand's decline in
recent years has been an important factor in promoting export expansion, current
trends of slower global growth will probably start to undermine the export
growth path, especially given that rising domestic inflation is partly
offsetting the competitive benefits of a weaker rand. Overall, the Producer
Price Index increased over 15% during 2002. It is unlikely that South Africa
will be able to deliver on its inflation target rate of 3-6%, as measured by the
Consumer Price Index (CPI), until late in 2003. Indeed, the CPI is expected to
have peaked above 11% in 2002 and average 7.4% in 2003. These inflation
prospects have, of course, been driving the Government's aggressive stance on
interest rates.
Despite the 400 basis point interest rate increase this year, there is enough
evidence to indicate that overall growth will be higher this year than in 2001.
The export sector (in view of the net exports contribution to GDP and its
positive effects on domestic production and investment) combined with resilient
household demand and higher government spending will provide a widespread
support base for GDP growth in 2002. Growth is expected to be around 2.5%
relative to 2.2% in 2001.
THE COMPANY'S TAX STATUS
Shareholders' attention is once again directed to Note 2 to the Financial
Statements concerning the Company's tax status. During the year, a number of
meetings have been held with our tax advisors and officials of the South African
Revenue Service ("SARS") and the Treasury Department to clarify the Company's
tax position with regard to the scope of its income tax exemption and the effect
of the latest amendments to the South African Income Tax Act. At this time no
definitive conclusion is in sight. However, the Company has provided for the tax
liability that could arise in the event of an unfavorable decision by the SARS.
* * *
THE ANNUAL MEETING OF SHAREHOLDERS WILL BE HELD ON THURSDAY, FEBRUARY 27,
2003 AT 10:00 A.M. AT THE OFFICES OF UBS PAINE WEBBER, 1285 AVENUE OF THE
AMERICAS, 14TH FLOOR, NEW YORK, NEW YORK USA. WE LOOK FORWARD TO HAVING YOU IN
ATTENDANCE.
ROBERT J.A. IRWIN, CHAIRMAN OF THE BOARD
AND TREASURER
3
[Data below represents line graphs in the printed piece]
PHILADELPHIA GOLD & SILVER INDEX (XAU): Monthly average price (unaudited)
"1999" 69
66
"2000" 64
65
59
56
59
59
54
52
52
45
44
51
"2001" 49
48
51
52
59
57
54
56
57
55
53
54
"2002" 58
66
65
71
81
78
69
65
73
63
66
LONDON FREE MARKET GOLD PRICE: Monthly average $ per ounce (audited)
"1999" 291.35
290.25
283.3
293.65
276.75
275.05
272.25
"2000" 288.15
276.75
277
273.65
264.5
269.1
258
266
262
263
260
272
"2001" 270
267
272
283
283
276
276
282
296
294
303
314
"2002" 321
313
310
319
317
319
-----
================================================================================
PORTFOLIO CHANGES (UNAUDITED) NUMBER OF SHARES/PRINCIPAL AMOUNT
---------------------------------
NET CHANGES DURING THE YEAR ENDED NOVEMBER 30, 2002 INCREASE DECREASE
-------- --------
ORDINARY SHARES OF GOLD MINING COMPANIES
Newcrest Mining Limited--ADRs 3 000 000
Newmont Mining Corporation 320 368(1)
Gold Fields Limited 450 000
Barrick Gold Corporation 348 000
Placer Dome Incorporated 50 000
Compania de Minas Buenaventura--ADRs 200 000
Franco-Nevada Mining Corporation Limited 283 000
FIXED INCOME INVESTMENTS
Republic of South Africa S150 12% due 2/28/05 39 000 000(2)
(1) Received in exchange for 400,460 shares of Franco-Nevada Mining Corporation
Limited as part of merger.
(2) South African Rand
4
CERTAIN INVESTMENT POLICIES AND RESTRICTIONS (UNAUDITED)
The following is a summary of certain of the Company's investment policies and
restrictions and is subject to the more complete 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% of the value of its total assets in the common shares or
securities convertible into common shares of companies conducting, as the major
portion of their business, gold mining and related activites in the Republic of
South Africa. It is expected that most of such companies will have reached the
production stage. The balance of the Company's total assets, other than minor
amounts which may be held in cash, may (i) be invested in common shares or
securities convertible into common shares of companies engaged in other business
of varied types in the Republic of South Africa, (ii) be held in the form of
gold bullion or certificates of deposit therefor to be purchased, directly or
indirectly, with South African rand (provided that the Company's holdings in the
form of gold bullion or certificates of deposit therefor may not exceed 25% of
the value of the Company's total assets) and/or (iii)
be invested in common shares or securities convertible into common 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 the
Company's investment in such companies may not exceed 20% of the value of the
Company's total assets). If investment considerations warrant, the Company may
deviate from the foregoing to the extent it temporarily holds its assets in
cash, cash equivalents or securities issued or guaranteed by the Government of
South Africa (South African Government Securities).
2. Not to invest in securities, except South African government securities, of
any issuer if as a result over 20 per cent in value of the Company's total
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 companies, each of which exceeds 10 per cent of such value.
3. 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.
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and the Board of
Directors of ASA Limited:
We have audited the accompanying statement of assets and liabilities of ASA
Limited (incorporated in the Republic of South Africa), including the schedule
of investments, as of November 30, 2002 and the related statements of
operations, surplus and changes in net assets, financial highlights and
supplementary information for the year then ended. These financial statements,
financial highlights and supplementary information are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements, financial highlights and supplementary information based
on our audit. The financial statements, financial highlights and supplementary
information for years presented prior to November 30, 2002 were audited by other
auditors who have ceased operations and whose report dated December 18, 2001
expressed an unqualified opinion on those statements, financial highlights and
supplementary information.
We conducted our audit in accordance with auditing standards 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, evidence supporting
the amounts and disclosures in the financial statements, financial highlights
and supplementary information. Our procedures included the confirmation of
securities owned as of November 30, 2002, by correspondence with the custodians.
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 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, 2002, the
results of its operations, the surplus and changes in its net assets, financial
highlights and supplementary information for the year then ended, in conformity
with accounting principles generally accepted in the United States.
Ernst & Young LLP
New York, N.Y., U.S.A.
Ernst & Young
Johannesburg, SA
January 10, 2003
5
SCHEDULE OF INVESTMENTS
(NOTE 1)
November 30, 2002
--------------------------------------------------------------------------------------------------------------
Number of Percent of
Name of Company Shares Market Value Net Assets
--------------------------------------------------------------------------------------------------------------
ORDINARY SHARES OF GOLD MINING COMPANIES
AUSTRALIAN GOLD MINES
Newcrest Mining Limited - ADRs 3 000 000 $ 9 450 000 2.9%
--------------------------------------------------------------------------------------------------------------
9 450 000 2.9
--------------------------------------------------------------------------------------------------------------
UNITED STATES GOLD MINES
Newmont Mining Corporation 520 368 12 181 815 3.8
--------------------------------------------------------------------------------------------------------------
12 181 815 3.8
--------------------------------------------------------------------------------------------------------------
SOUTH AFRICAN GOLD MINES
Anglogold Limited 1 194 947 62 843 666 19.6
Gold Fields Limited 10 344 977 111 156 830 34.6
Harmony Gold Mining Company Limited 1 336 17 023 --
Harmony Gold Mining Company Limited - ADRs 2 166 400 27 816 576 8.6
--------------------------------------------------------------------------------------------------------------
201 834 095 62.8
--------------------------------------------------------------------------------------------------------------
CANADIAN GOLD MINES
Barrick Gold Corporation 730 000 10 709 100 3.3
Placer Dome Incorporated 965 312 9 247 689 2.9
--------------------------------------------------------------------------------------------------------------
19 956 789 6.2
--------------------------------------------------------------------------------------------------------------
SOUTH AMERICAN GOLD MINES
Compania de Minas Buenaventura - ADRs 450 000 10 111 500 3.1
--------------------------------------------------------------------------------------------------------------
253 534 199 78.8
--------------------------------------------------------------------------------------------------------------
ORDINARY SHARES OF OTHER COMPANIES
SOUTH AFRICAN MINING
Anglo American PLC 1 280 000 17 900 422 5.6
Anglo American Platinum Corporation Limited 820 500 29 505 730 9.2
Impala Platinum Holdings Limited 262 700 16 056 838 5.0
--------------------------------------------------------------------------------------------------------------
63 462 990 19.8
--------------------------------------------------------------------------------------------------------------
Total investments 316 997 189 98.6
CASH AND OTHER ASSETS LESS LIABILITIES 4 426 038 1.4
--------------------------------------------------------------------------------------------------------------
Net assets $321 423 227 100.0%
--------------------------------------------------------------------------------------------------------------
There is no assurance that the valuations at which the Company's
investments are carried could be realized upon sale. The notes to the
financial statements form an integral part of these statements.
6
STATEMENTS OF ASSETS AND LIABILITIES
----------------------------------------------------------------------------------------------------------------------
November 30, November 30,
ASSETS 2002 2001
----------------------------------------------------------------------------------------------------------------------
Investments, at market value (Note 1)
Gold mining companies -
Cost $120 148 921 in 2002
$114 303 334 in 2001 $253 534 199 $135 808 528
Other companies -
Cost $26 678 003 in 2002 and 2001 63 462 990 59 088 427
Fixed income investments -
Cost $4 934 397 in 2001 -- 4 046 940
----------------------------------------------------------------------------------------------------------------------
316 997 189 198 943 895
----------------------------------------------------------------------------------------------------------------------
Cash 8 225 357 6 157 670
Bank time deposits -- 6 500 000
Dividends and interest receivable 138 999 236 208
Other assets 31 885 68 905
----------------------------------------------------------------------------------------------------------------------
Total assets 325 393 430 211 906 678
----------------------------------------------------------------------------------------------------------------------
LIABILITIES
---------------------------------------------------------------------------------------------------------------------
Accounts payable and accrued liabilities 509 028 962 155
Deferred South African tax liability 3 461 175 --
----------------------------------------------------------------------------------------------------------------------
Total liabilities 3 970 203 962 155
----------------------------------------------------------------------------------------------------------------------
NET ASSETS (SHAREHOLDERS' INVESTMENT) 321 423 227 210 944 523
----------------------------------------------------------------------------------------------------------------------
Ordinary (common) shares R 0.25 nominal (par) value
Authorized: 24 000 000 shares
Issued and Outstanding: 9 600 000 shares 3 360 000 3 360 000
Share premium (capital surplus) 27 489 156 27 489 156
Undistributed net investment income 58 663 135 58 225 358
Undistributed net realized (loss) from foreign currency transactions (51 220 869) (40 378 157)
Undistributed net realized gain on investments 115 112 525 110 174 594
Net unrealized appreciation on investments 166 709 091 53 028 160
Net unrealized appreciation (depreciation) on translation of assets
and liabilities in foreign currency 1 310 189 (954 588)
----------------------------------------------------------------------------------------------------------------------
Net assets $321 423 227 $210 944 523
----------------------------------------------------------------------------------------------------------------------
Net assets per share $33.48 $21.97
----------------------------------------------------------------------------------------------------------------------
The closing price of the Company's shares on the New York Stock Exchange was
$30.06 and $19.83 on November 30, 2002 and 2001, respectively.
The notes to the financial statements form an integral part of these
statements.
7
STATEMENTS OF OPERATIONS
Years ended November 30, 2002 and 2001
-------------------------------------------------------------------------------------------------------------------------
2002 2001
-------------------------------------------------------------------------------------------------------------------------
Investment income
Dividend income $ 10 423 088 $ 10 839 535
Interest income 499 036 1 062 114
-------------------------------------------------------------------------------------------------------------------------
Total investment income 10 922 124 11 901 649
-------------------------------------------------------------------------------------------------------------------------
Expenses
Shareholders' report and proxy expenses 103 129 229 981
Directors' fees and expenses 538 420 440 456
Salaries and benefits 297 796 234 638
Other administrative expenses 373 250 362 515
Transfer agent, registrar and custodian 107 433 121 028
Professional fees and expenses 511 274 425 726
Insurance 104 595 88 165
Contributions 80 793 48 655
Other 311 444 324 101
-------------------------------------------------------------------------------------------------------------------------
Total expenses 2 428 134 2 275 265
-------------------------------------------------------------------------------------------------------------------------
Net investment income before South African tax 8 493 990 9 626 384
South African tax (376 213) (20 000)
-------------------------------------------------------------------------------------------------------------------------
Net investment income 8 117 777 9 606 384
-------------------------------------------------------------------------------------------------------------------------
Net realized gain from investments
Proceeds from sales 13 409 630 29 385 423
Cost of securities sold (8 399 743) (60 724)
South African tax (71 956) --
-------------------------------------------------------------------------------------------------------------------------
Net realized gain from investments 4 937 931 29 324 699
-------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from foreign currency transactions
Investments (9 832 299) (602 612)
Foreign currency 505 300 (1 584 831)
South African tax (1 515 713) (125 000)
-------------------------------------------------------------------------------------------------------------------------
Net realized (loss) from foreign currency transactions (10 842 712) (2 312 443)
-------------------------------------------------------------------------------------------------------------------------
Net increase in unrealized appreciation on investments
Balance, beginning of year 53 028 160 39 591 628
Balance, end of year 170 170 266 53 028 160
-------------------------------------------------------------------------------------------------------------------------
Increase 117 142 106 13 436 532
Deferred South African tax (3 461 175) --
-------------------------------------------------------------------------------------------------------------------------
Net increase in unrealized appreciation on investments 113 680 931 13 436 532
-------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in unrealized appreciation on translation of
assets and liabilities in foreign currency 743 200 793 587
South African tax benefit (tax) 1 521 577 (950 000)
-------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in unrealized appreciation (depreciation) on
translation of assets and liabilities in foreign currency 2 264 777 (156 413)
-------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain from investments and foreign currency
transactions 110 040 927 40 292 375
-------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $118 158 704 $49 898 759
-------------------------------------------------------------------------------------------------------------------------
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, 2002 and 2001
--------------------------------------------------------------------------------------------------------------------
November 30, November 30,
STATEMENTS OF SURPLUS 2002 2001
--------------------------------------------------------------------------------------------------------------------
Share premium (capital surplus)
Balance, beginning and end of year $ 27 489 156 $ 27 489 156
--------------------------------------------------------------------------------------------------------------------
Undistributed net investment income
Balance, beginning of year $ 58 225 358 $ 56 298 974
Net investment income for the year 8 117 777 9 606 384
Dividends paid (7 680 000) (7 680 000)
--------------------------------------------------------------------------------------------------------------------
Balance, end of period $ 58 663 135 $ 58 225 358
--------------------------------------------------------------------------------------------------------------------
Undistributed net realized (loss) from
foreign currency transactions
Balance, beginning of year $(40 378 157) $(38 065 714)
Net realized (loss) for the year (10 842 712) (2 312 443)
--------------------------------------------------------------------------------------------------------------------
Balance, end of year $(51 220 869) $(40 378 157)
--------------------------------------------------------------------------------------------------------------------
Undistributed net realized gain from investments
(Computed on identified cost basis)
Balance, beginning of year $110 174 594 $80 849 895
Net realized gain for the year 4 937 931 29 324 699
--------------------------------------------------------------------------------------------------------------------
Balance, end of year $115 112 525 $110 174 594
--------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments
Balance, beginning of year $ 53 028 160 $ 39 591 628
Net increase for the year 113 680 931 13 436 532
--------------------------------------------------------------------------------------------------------------------
Balance, end of year $166 709 091 $ 53 028 160
--------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on
translation of assets and liabilities in foreign currency
Balance, beginning of year $ (954 588) $ (798 175)
Net unrealized appreciation (depreciation)
for the year 2 264 777 (156 413)
--------------------------------------------------------------------------------------------------------------------
Balance, end of year $ 1 310 189 $ (954 588)
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS 2002 2001
-------------------------------------------------------------------------------------------------------------------
Net investment income $ 8 117 777 $ 9 606 384
Net realized gain from investments 4 937 931 29 324 699
Net realized (loss) from foreign currency
transactions (10 842 712) (2 312 443)
Net increase in unrealized appreciation on investments 113 680 931 13 436 532
Net unrealized appreciation (depreciation) on translation
of assets and liabilities in foreign currency 2 264 777 (156 413)
-------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 118 158 704 49 898 759
Dividends paid (7 680 000) (7 680 000)
-------------------------------------------------------------------------------------------------------------------
Net increase in net assets 110 478 704 42 218 759
Net assets, beginning of year 210 944 523 168 725 764
-------------------------------------------------------------------------------------------------------------------
Net assets, end of year $321 423 227 $210 944 523
-------------------------------------------------------------------------------------------------------------------
The notes to the financial statements form an integral part of these
statements.
9
NOTES TO FINANCIAL STATEMENTS
Years ended November 30, 2002 and 2001
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 statements at quoted market
value. The difference between cost and current market value is reflected
separately as net increase in unrealized appreciation on investments. The net
realized gain or loss from the sale of securities is determined on the
identified cost basis.
Quoted market value of those shares traded 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 ask 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. 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 appreciation (depreciation) on
translation of assets and liabilities in foreign currency.
C. SECURITY TRANSACTIONS AND INVESTMENT INCOME
During the year ended November 30, 2002 sales of securities amounted to
$13,409,630 and purchases of securities amounted to $19,129,051. During the year
ended November 30, 2001 sales of securities amounted to $29,385,423 and
purchases of securities amounted to $21,474,429. 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 recognized on
the accrual basis.
D. DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders are recorded on the ex-dividend date.
E. 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 affect 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.
10
2 TAX STATUS OF THE COMPANY Pursuant to the South African Income Tax Act, as
amended, the Company is subject to tax on dividends received from sources other
than South Africa as well as foreign exchange gains. In addition, in terms of
the residence based system of taxation, beginning with the fiscal year ended
November 30, 2002, the Company is subject to tax on interest earned on cash
deposits. A provision for South African taxes of $370,349 and $1,095,000 for
these items has been included in the accompanying financial statements for the
fiscal years ended November 30, 2002 and November 30, 2001, respectively.
Effective October 1, 2001, the Company became subject to a tax on capital
gains realized on the disposal of South African and foreign securities. The tax
on capital gains will only be levied on the appreciation in value of securities
since October 1, 2001 or a taxable gain determined based on a time apportionment
method. Under the apportionment method, only that portion of the total
appreciation (gain) allocated to the period after October 1, 2001 will be
taxable. A tax provision of $71,956 has been included in the accompanying
financial statements for realized capital gains during the fiscal year ended
November 30, 2002. A deferred tax liability of $3,461,175 has been recorded for
the fiscal year ended November 30, 2002 for the tax on the unrealized capital
gains on securities.
Management continues to seek exemptions from the taxes on capital gains and
foreign exchange gains under the South African Income Tax Act. However, it is
uncertain whether the Company will be granted such exemptions. A resolution of
this matter is expected in 2003.
The reporting for financial statement purposes of distributions made during
the fiscal year from net investment income or net realized gains may differ from
their ultimate reporting for U.S. federal income tax purposes. The differences
are caused primarily by the separate line item reporting for financial statement
purposes of foreign exchange gains or losses. See pages 13 and 14 for additional
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 years ended November
30, 2002 and 2001 there were no covered employees under the plan and,
consequently, no retirement expense was incurred.
In 1993, the Company purchased an annuity policy as a retirement benefit for
the Chairman at an annual cost of $25,000 per year for five years. Since
December 1, 1998 the Company has accrued the retirement benefit for the Chairman
on an annual basis. During the years ended November 30, 2002 and November 30,
2001 the annual cost to the Company was $31,250 and $28,125 per year,
respectively. At November 30, 2002, the Company has recorded a liability of
$114,075 related to this benefit.
5 COMMITMENTS The Company's lease for office space in Johannesburg expired in
February 2002. The Company has renewed the lease for a period of twelve months
at an annual cost of approximately $35,000.
11
FINANCIAL HIGHLIGHTS
Year Ended November 30
-------------------------------------------------------------------------------------------------------------------------------
2002 2001 2000 1999 1998
-------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $ 21.97 $ 17.58 $ 22.51 $ 19.01 $ 20.45
-------------------------------------------------------------------------------------------------------------------------------
Net investment income .85 1.00 .61 .58 .66
Net realized gain from investments .51 3.05 1.00 .62 .32
Net realized (loss) from foreign currency transactions (1.13) (.24) (1.02) (.95) (.11)
Net increase (decrease) in unrealized appreciation
on investments 11.84 1.40 (4.88) 3.84 (1.49)
Net unrealized appreciation (depreciation) on
translation of assets and liabilities in foreign
currency .24 (.02) (.04) .01 (.02)
-------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 12.31 5.19 (4.33) 4.10 (.64)
Less dividends (.80) (.80) (.60) (.60) (.80)
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 33.48 $ 21.97 $ 17.58 $ 22.51 $ 19.01
===============================================================================================================================
Market value per share, end of year $30.06 $19.83 $ 14.56 $ 19.125 $ 19.125
TOTAL INVESTMENT RETURN(1)
Based on market value per share 55.72% 41.76% (21.06%) 3.44% (3.30%)
RATIOS TO AVERAGE NET ASSETS(1)
Expenses .91% 1.10% 1.15% 1.13% 1.15%
Net investment income 2.63% 4.61% 3.06% 3.02% 3.34%
SUPPLEMENTAL DATA
Net assets, end of year (000 omitted) $321 423 $210 944 $168 726 $216 051 $182 530
Portfolio turnover rate 4.41% 11.18% 7.43% 6.66% 1.06%
Per share calculations are based on the 9,600,000 shares outstanding.
(1) Determined in U.S. dollar terms.
SUPPLEMENTARY INFORMATION
Years ended November 30, 2002 and 2001
------------------------------------------------------------------------------------------------------------------------------
CERTAIN FEES INCURRED BY THE COMPANY 2002 2001
------------------------------------------------------------------------------------------------------------------------------
Directors' fees $ 220 000 $ 231 000
Officers' salaries 285 018 225 536
Auditors 50 000 66 777
------------------------------------------------------------------------------------------------------------------------------
The notes to the financial statements form an integral part of these
statements.
12
CERTAIN TAX INFORMATION FOR
UNITED STATES SHAREHOLDERS (UNAUDITED)
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. Under that section, a
United States shareholder who has held his shares in the Company for more than
one year is subject 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 for the period during which he held those
shares between December 1, 1963 and November 30, 1987. If such shareholder's
profit on the sale of his shares exceeds such ratable share and he held his
shares for more than one year, then, subject 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, 2001.
Year ended November 30 Per year Per day
--------------------------------------------------------------------------------
1964 $ .042 $.00012
--------------------------------------------------------------------------------
1965 .067 .00019
--------------------------------------------------------------------------------
1966 .105 .00029
--------------------------------------------------------------------------------
1967 .277 .00076
--------------------------------------------------------------------------------
1968 .241 .00066
--------------------------------------------------------------------------------
1969 .461 .00126
--------------------------------------------------------------------------------
1970 .218 .00060
--------------------------------------------------------------------------------
1971 .203 .00056
--------------------------------------------------------------------------------
1972 .445 .00122
--------------------------------------------------------------------------------
1973 .497 .00136
--------------------------------------------------------------------------------
1974 1.151 .00316
--------------------------------------------------------------------------------
1975 .851 .00233
--------------------------------------------------------------------------------
1976 .370 .00101
--------------------------------------------------------------------------------
1977 .083 .00023
--------------------------------------------------------------------------------
1978 .357 .00098
--------------------------------------------------------------------------------
1979 .219 .00060
--------------------------------------------------------------------------------
1980 1.962 .00538
--------------------------------------------------------------------------------
1981 .954 .00261
--------------------------------------------------------------------------------
1982 .102 .00028
--------------------------------------------------------------------------------
1983 -0- -0-
--------------------------------------------------------------------------------
1984 -0- -0-
--------------------------------------------------------------------------------
1985 (.151) (.00041)
--------------------------------------------------------------------------------
1986 -0- -0-
--------------------------------------------------------------------------------
1987 -0- -0-
--------------------------------------------------------------------------------
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
his Company shares 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. Furthermore, shares held by such shareholder
may be denied the benefit of any otherwise applicable increase in tax basis at
death. Under proposed regulations, a "disposition" would include a U.S.
taxpayer's becoming a nonresident alien.
As noted, the general tax consequences described in the preceding paragraph
apply to an "excess distribution" on Company shares, which is defined as a
distribution by the Company for a taxable year that is more than 125% of the
average amount it distributed for the three preceding taxable years.* If the
Company makes an excess distribution in a taxable year, a United States
shareholder who has not made a QEF or mark-to-market election would be required
to allocate the excess amount ratably over the ENTIRE holding period for his
shares. That allocation would result in tax being payable at the highest
applicable rate in the prior years to which the distribution is allocated and
interest charges being imposed on the resulting "underpayment" of taxes made in
those years. In contrast, a distribution that is not an excess distribution
would be taxable to a United States shareholder as a normal dividend (see
above), with no interest charge.
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 paragraphs
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 capital gain (his "QEF" inclusion) regardless of
whether such income or gain was actually distributed. A United States
shareholder who makes a valid QEF election
------------
* For example, the Company made annual distributions of $.80, $.60 and $.60 per
share during the taxable years ended November 30, 2001, 2000 and 1999,
respectively, an average per year of $.667 per share. Accordingly, any
distribution in excess of $.833 per share (125% of $.667) would be treated as an
excess distribution for the taxable year ended November 30, 2002. (All amounts
in U.S. currency.)
13
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 for the period during which he held those shares 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 subsequently 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 distributions out of accumulated earnings and profits in
excess thereof would be treated as taxable dividends. Such a 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 preceding sentence. Special rules apply to United States
shareholders 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 individually 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 Company shares after November 30, 2001 and who files his tax return on
the basis of a calendar year may make a QEF election on his 2002 tax return. A
shareholder of the Company who first held his Company shares on or before
November 30, 2001 may also make the QEF election on his 2002 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 extensions, 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.
In early 2003 the Company will send to United States shareholders the PFIC
Annual Information Statement for the Company's 2002 taxable year. Such annual
information statement may be used for purposes of completing Form 8621. A
shareholder who either is subject 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.
Special rules apply to United States persons who hold Company shares 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 alternate 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 in such shares to the fair market value on the date of death (or
alternate valuation date). In that case, in general, the transferee of such
shares will take a basis in the shares equal to the shareholder's basis therein
immediately before his death. If a United States shareholder dies owning Company
shares for which a valid QEF election 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 for the period during which he held those shares 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.
14
DIVIDEND REINVESTMENT PLAN
EquiServe Trust Company, N.A. ("EquiServe") has been engaged 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
EquiServe as agent to apply to the purchase of common shares of the Company in
the open market (i) all cash dividends (after deduction of the service charge
described below) which become payable to such participant on the Company's
shares (including shares registered 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, EquiServe will commingle each
participant's funds with those of all other participants 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 available from a
cash dividend and any voluntary cash payments being concurrently invested. Any
stock dividends or split shares distributed on shares held in the Plan will be
credited to the participant's account.
For each participant, a service charge of 5% of the combined amount of the
participant's dividend and any voluntary payment being concurrently invested, up
to a maximum charge of $2.50 per participant, will be deducted (and paid to
EquiServe) prior to each purchase of shares. Shareholder sales of shares held by
EquiServe 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 EquiServe 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 three years.
Participation in the Plan may be terminated by a participant at any time by
written instructions to EquiServe. Upon termination, 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.
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 EquiServe
Dividend Reinvestment Plan, 150 Royall St., Canton, MA 02021. Information may
also be obtained by calling EquiServe's Telephone Response Center at
800-446-2617 between 8:30 a.m. and 5 p.m., Eastern time, Monday through Friday.
--------------------------------------------------------------------------------
CHANGE IN AUDITORS
In November 2001, the Board of Directors of the Company selected Arthur
Andersen LLP ("Andersen") as its independent public accountant for the fiscal
year ended November 30, 2002. At a Board meeting held on July 25, 2002, the
Board of Directors of the Company, including a majority of the Directors who are
not "interested persons" (as defined in the Investment Company Act of 1940) of
the Company, elected to terminate the appointment of Andersen in light of recent
events involving that firm and selected Ernst & Young LLP as the Company's
independent public accountant for the 2002 fiscal year. The decision to change
accountants was approved by the Company's Audit Committee.
Andersen's reports on the Company's financial statements for the Company's
two most recent fiscal years prior to the fiscal year ended November 30, 2002
contained no adverse opinion or disclaimer of opinion, and neither report was
qualified or modified as to uncertainty, audit scope, or accounting principles.
During those fiscal years and the subsequent period preceding Andersen's
dismissal, there were no disagreements with Andersen on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures, which disagreements, if not resolved to the satisfaction of
andersen, would have caused it to make reference to the subject matter of the
disagreements in connection with its reports on the financial statements of such
years.
15
THE BOARD OF DIRECTORS OF ASA LIMITED
Each of the individuals listed below serves as a director for ASA Limited.
INTERESTED DIRECTORS
ROBERT J.A. IRWIN (75)
c/o LGN Associates, P.O. Box 269 Florham Park, NJ 07932
Position held with the Company: Chairman & Treasurer
Director since: 1987
Principal Occupations During Past 5 Years: Chairman of ASA Limited
Other Directorships held by Director: Former director of Niagara Share
Corporation
CHESTER A. CROCKER (61)
c/o LGN Associates, P.O. Box 269 Florham Park, NJ 07932
Position held with the Company: Director and U.S. Secretary since 1999
Director since: 1996
Principal Occupations During Past 5 Years: James R. Schlesinger Professor of
Strategic Studies, School of Foreign Service, Georgetown University;
President of Crocker Group (consultants)
Other Directorships held by Director: Chairman and Director of United States
Institute of Peace, Director of Ashanti Goldfields, Ltd. Director of Africa
Holdings Ltd., Director of Modern Africa Growth & Income Fund
RONALD L. MCCARTHY (69)
c/o LGN Associates, P.O. Box 269 Florham Park, NJ 07932
Position held with the Company: Director and Managing Director since 1988
Director since: 1988
Principal Occupations During Past 5 Years: Managing Director of ASA Limited
Other Directorships held by Director: None
--------------------------------------------------------------------------------
INDEPENDENT DIRECTORS
HENRY R. BRECK (65)
c/o LGN Associates, P.O. Box 269 Florham Park, NJ 07932
Position held with the Company: Director
Director since: 1996
Principal Occupations During Past 5 Years: Chairman and a director of Ark
Asset Management Co., (registered investment adviser)
Other Directorships held by Director: Director of Butler Capital Corp.
HARRY M. CONGER (72)
c/o LGN Associates, P.O. Box 269 Florham Park, NJ 07932
Position held with the Company: Director
Director since: 1984
Principal Occupations During Past 5 Years: Chairman and CEO Emeritus of
Homestake Mining Company
Other Directorships held by Director: Director of Apex Silver Mines, Trustee of
the California Institute of Technology
JOSEPH C. FARRELL (67)
c/o LGN Associates, P.O. Box 269 Florham Park, NJ 07932
Position held with the Company: Director
Director since: 1999
Principal Occupations During Past 5 Years: Chairman, President and CEO of
The Pittston Company
Other Directorships held by Director: Director of Universal Corporation
JAMES G. INGLIS (58)
c/o LGN Associates, P.O. Box 269 Florham Park, NJ 07932
Position held with the Company: Director
Director since: 1998
Principal Occupations During Past 5 Years: Chairman of Melville Douglas
Investment Management (Pty) Ltd.
Other Directorships held by Director: None
MALCOLM W. MACNAUGHT (65)
c/o LGN Associates, P.O. Box 269 Florham Park, NJ 07932
Position held with the Company: Director
Director since: 1998
Principal Occupations During Past 5 Years: Former Vice President
and Portfolio Manager at Fidelity Investments
Other Directorships held by Director: Director of Meridian Gold
Corporation
ROBERT A. PILKINGTON (57)
c/o LGN Associates, P.O. Box 269 Florham Park, NJ 07932
Position held with the Company: Director
Director since: 1979
Principal Occupations During Past 5 Years: Investment banker and
Managing Director of UBS Warburg LLC or predecessor
companies since 1985
Other Directorships held by Director: Director of Avocet Mining PLC
A. MICHAEL ROSHOLT (82)
c/o LGN Associates, P.O. Box 269 Florham Park, NJ 07932
Position held with the Company: Director
Director since: 1982
Principal Occupations During Past 5 Years: Chairman of the
National Business Initiative (South Africa), a non-profit organization
Other Directorships held by Director: Former Chairman of Barlow
Rand Limited
16