N-30B-2 1 c21153-n30b2.txt INTERIM REPORT ASA LIMITED 36 WIERDA ROAD WEST (INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA) WIERDA VALLEY, SANDTON SOUTH AFRICA TO THE SHAREHOLDERS: At May 31, 2001 the Company's net assets were equivalent to $24.26 per share. This compares with $17.58 per share at November 30, 2000 the end of the Company's previous fiscal year. The most recent net asset value similarly calculated was $23.51 per share at June 21, 2001 at which date our shares sold at a market price of $18.71 per share, a discount of 20.4% to the net asset value. Net investment income for the six months ended May 31, 2001 was equivalent to $.65 per share vs. $.35 for the same period last year. The Board of Directors declared a second quarter dividend of $.15 per share on April 27, 2001 payable May 25, 2001 to shareholders of record on May 18, 2001. It is with profound sadness that we record the death of Wesley A. Stanger, Jr. who died on May 23rd at the age of 92. Mr. Stanger became a director of ASA in 1960, served as Chairman of the Board from 1978 to 1993 and as Treasurer from 1985 to 1999. He became Director Emeritus in 1999. His many interests outside of his distinguished Wall Street career ranged from golf and tennis to his 20 years of service as a trustee of the University of Pennsylvania, his Alma Mater. During World War II, Mr. Stanger served as a Lieutenant in the Navy. He leaves behind many friends in the United States and South Africa. We miss his wise business judgment but even more we miss his warm friendship and his dry sense of humor. The gold price surged in May reaching $291.25 in London on May 21st. The price appears to have been driven by the possibility of higher inflation in the major industrial economies following the latest U.S. interest rate cut. Since then the price has fallen back to the mid $260's. The environment for gold, however, appears to have improved. Central banks selling has declined. Less gold is available for lending as the banks adhere to the terms of the Washington accord of 1999 by which the banks put controls on their gold sale programs. The cost of borrowing gold has risen lessening the incentive for the gold producers to sell their production forward. It has also lessened the incentive for traders to borrow gold, sell it and then invest the proceeds in a no longer booming U.S. equity market. Possibly in anticipation of these positive developments stocks of gold mining companies have been doing quite well. Since the beginning of the fiscal year on December 1st, ASA's net asset value has risen by 38%, outpacing the Philadelphia Stock Exchange's Gold and Precious Metals Stock Index (XAU) which rose 23% during the same period. These favorable results are due not only to an increase in the price of our gold stocks but the realization of the DeBeers deal and price appreciation in the non-gold sector of the portfolio. On Friday May 18th, the DeBeers shareholders approved the acquisition of the company by DB Investments a consortium representing Anglo American PLC, Debswana and the Oppenheimer family interests. DeBeers was delisted on June 1st and shareholders are to receive for each of their shares .446 of an Anglo American share, U.S. $15.35 in cash, the final Anglo American dividend for the year ended December 31st, and the DeBeers combined final dividends for the year ended September 30th of $1 per share. On various dates prior to and after the confirmation of the deal, ASA sold its 701,300 shares at various prices which reflected the terms of the deal. The Company realized a gain of approximately $29 million from these sales. 1 I would like to call to your attention the availability of the Dividend Reinvestment Plan. Any inquiries in regard to the plan should be directed to EquiServe-First Chicago Trust Division ("FCTD"), Dividend Reinvestment Plan, P.O. Box 2598, Jersey City, NJ, 07303-2598, U.S.A. Also FCTDis now able to communicate with shareholders through the Internet. The only requirement for shareholder participation is use of a personal computer and access to an electronic mail package. The FCTD address is "FCTC@EM.FCNBD.COM" and access is available 24-hours a day. In addition, FCTD has established a Response Center to respond to shareholders' questions in a timely manner. The telephone number is 201-324-0498. The Response Center is available Monday through Friday between 8:30 a.m. and 7 p.m. (Eastern Standard Time). Robert J.A. Irwin June 25, 2001 CHAIRMAN OF THE BOARD 2 SCHEDULE OF INVESTMENTS (NOTE 1) May 31, 2001
------------------------------------------------------------------------------------------------------------------- Number of United States Percent of Name of Company Shares/Principal Dollars Net Assets ------------------------------------------------------------------------------------------------------------------- ORDINARY SHARES OF GOLD MINING COMPANIES SOUTH AFRICAN GOLD MINES Anglogold Limited 1 194 947 $ 44 213 076 19.0% Gold Fields Limited 10 794 979 45 069 175 19.4 Harmony Gold Mining Company Limited 1 336 6 839 -- Harmony Gold Mining Company Limited - ADRs 2 166 400 10 507 040 4.5 ------------------------------------------------------------------------------------------------------------------- 99 796 130 42.9 ------------------------------------------------------------------------------------------------------------------- CANADIAN GOLD MINES Barrick Gold Corporation 282 000 4 653 000 2.0 Franco-Nevada Mining Corporation Limited 306 460 3 784 976 1.6 Placer Dome Incorporated 365 312 3 886 920 1.7 ------------------------------------------------------------------------------------------------------------------- 12 324 896 5.3 ------------------------------------------------------------------------------------------------------------------- 112 121 026 48.2 ------------------------------------------------------------------------------------------------------------------- ORDINARY SHARES OF OTHER COMPANIES Anglo American Platinum Corporation Limited 820 500 43 076 250 18.5 Anglo American Corporation PLC 1 280 000 20 736 000 8.9 Impala Platinum Holdings Limited 262 700 15 532 138 6.7 ------------------------------------------------------------------------------------------------------------------- 79 344 388 34.1 ------------------------------------------------------------------------------------------------------------------- GOVERNMENT BONDS Republic of South Africa S150 12% due 02/28/05 39 000 000(1) 4 979 324 2.1 ------------------------------------------------------------------------------------------------------------------- Total Investments, at Market Value 196 444 738 84.4 CASH AND OTHER ASSETS LESS PAYABLES 36 450 146 15.6 ------------------------------------------------------------------------------------------------------------------- Total Net Assets $232 894 884 100.0% -------------------------------------------------------------------------------------------------------------------
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. (1) South African Rand. 3 STATEMENTS OF ASSETS AND LIABILITIES
------------------------------------------------------------------------------------------------------------------- May 31, 2001 May 31, 2000 United States United States ASSETS Dollars Dollars ------------------------------------------------------------------------------------------------------------------- Investments, at market value (Note 1) Gold mining companies-- Cost $92 828 904 in 2001 $91 377 489 in 2000 $112 121 026 $100 650 875 Other companies-- Cost $26 678 003 in 2001 $34 342 056 in 2000 79 344 388 72 551 371 Government bonds-- Cost $ 4 934 397 in 2001 4 979 324 -- ------------------------------------------------------------------------------------------------------------------- 196 444 738 173 202 246 Cash in banks 36 408 264 1 362 618 Bank time deposits -- 1 750 000 Dividends and interest receivable 214 893 613 462 Other assets 107 532 110 111 ------------------------------------------------------------------------------------------------------------------- Total assets 233 175 427 177 038 437 ------------------------------------------------------------------------------------------------------------------- LIABILITIES ------------------------------------------------------------------------------------------------------------------- Accounts payable and accrued liabilities 280 543 123 132 ------------------------------------------------------------------------------------------------------------------- Total liabilities 280 543 123 132 ------------------------------------------------------------------------------------------------------------------- NET ASSETS (SHAREHOLDERS' INVESTMENT) ------------------------------------------------------------------------------------------------------------------- Ordinary (common) shares R0.25 nominal (par) value Authorized: 24,000,000 shares Issued & 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 59 676 780 56 715 979 Undistributed net realized (loss) from foreign currency transactions (38 885 703) (28 660 969) Undistributed net realized gain on investments 110 174 594 71 253 751 Net unrealized appreciation on investments 72 003 365 47 482 633 Net unrealized (depreciation) on translation of assets and liabilities in foreign currency (923 308) (725 245) ------------------------------------------------------------------------------------------------------------------- Net assets $232 894 884 $176 915 305 ------------------------------------------------------------------------------------------------------------------- Net asset value per share $24.26 $18.43 -------------------------------------------------------------------------------------------------------------------
The notes to the financial statements form an integral part of these statements. The closing price of the Company's shares on the New York Stock Exchange was $19.71 per share on May 31, 2001 and $15.31 per share on May 31, 2000. 4 STATEMENTS OF OPERATIONS
Six months ended ------------------------------------------------------------------------------------------------------------------- May 31, 2001 May 31, 2000 United States United States Dollars Dollars ------------------------------------------------------------------------------------------------------------------- Investment income Dividends $ 7 079 186 $ 4 423 497 Interest 412 958 104 254 ------------------------------------------------------------------------------------------------------------------- 7 492 144 4 527 751 ------------------------------------------------------------------------------------------------------------------- Expenses Shareholders' report and proxy expenses 177 712 127 267 Directors' fees and expenses 239 749 246 683 Salaries 111 346 126 117 Other administrative expenses 167 562 172 627 Transfer agent, registrar and custodian 71 016 66 601 Professional fees and expenses 234 189 154 354 Insurance 36 696 40 191 Other 196 068 203 185 ------------------------------------------------------------------------------------------------------------------- 1 234 338 1 137 025 ------------------------------------------------------------------------------------------------------------------- Net investment income 6 257 806 3 390 726 ------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) from investments and foreign currency transactions Net realized gain from investments Proceeds from sales 29 385 423 -- Cost of securities sold 60 724 -- ------------------------------------------------------------------------------------------------------------------- Net realized gain from investments 29 324 699 -- Net realized (loss) from foreign currency transactions Investments (602 612) -- Foreign currency transactions (217 377) (413 681) ------------------------------------------------------------------------------------------------------------------- Net realized (loss) from foreign currency transactions (819 989) (413 681) ------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in unrealized appreciation on investments Balance, beginning of period 39 591 696 86 494 686 Balance, end of period 72 003 433 47 482 633 ------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in unrealized appreciation 32 411 737 (39 012 053) ------------------------------------------------------------------------------------------------------------------- Net unrealized (depreciation) on translation of assets and liabilities in foreign currency (125 133) (221 135) ------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) from investments and foreign currency 60 791 314 (39 646 869) ------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $67 049 120 $(36 256 143) -------------------------------------------------------------------------------------------------------------------
The notes to the financial statements form an integral part of these statements. 5 STATEMENTS OF SURPLUS AND STATEMENTS OF CHANGES IN NET ASSETS
Six months ended ------------------------------------------------------------------------------------------------------------------- May 31, 2001 May 31, 2000 United States United States STATEMENTS OF SURPLUS Dollars Dollars ------------------------------------------------------------------------------------------------------------------- Share premium (capital surplus) Balance, beginning and end of period $ 27 489 156 $27 489 156 ------------------------------------------------------------------------------------------------------------------- Undistributed net investment income Balance, beginning of period $ 56 298 974 $56 205 253 Net investment income for the period 6 257 806 3 390 726 ------------------------------------------------------------------------------------------------------------------- 62 556 780 59 595 979 Dividends paid (2 880 000) (2 880 000) ------------------------------------------------------------------------------------------------------------------- Balance, end of period $ 59 676 780 $56 715 979 ------------------------------------------------------------------------------------------------------------------- Undistributed net realized (loss) from foreign currency transactions Balance, beginning of period $(38 065 714) $(28 247 288) Net realized (loss) for the period (819 989) (413 681) ------------------------------------------------------------------------------------------------------------------- Balance, end of period $(38 885 703) $(28 660 969) ------------------------------------------------------------------------------------------------------------------- Undistributed net realized gain on investments (Computed on identified cost basis) Balance, beginning of period $ 80 849 895 $71 253 751 Net realized gain for the period 29 324 699 -- ------------------------------------------------------------------------------------------------------------------- Balance, end of period $110 174 594 $71 253 751 ------------------------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments Balance, beginning of period $ 39 591 628 $86 494 686 Increase (Decrease) for the period 32 411 737 (39 012 053) ------------------------------------------------------------------------------------------------------------------- Balance, end of period $ 72 003 365 $47 482 633 ------------------------------------------------------------------------------------------------------------------- Net unrealized (depreciation) on translation of assets and liabilities in foreign currency Balance, beginning of period $ (798 175) $ (504 110) Net unrealized (depreciation) for the period (125 133) (221 135) ------------------------------------------------------------------------------------------------------------------- Balance, end of period $ (923 308) $ (725 245) ------------------------------------------------------------------------------------------------------------------- Six months ended ------------------------------------------------------------------------------------------------------------------- May 31, 2001 May 31, 2000 United States United States STATEMENTS OF CHANGES IN NET ASSETS Dollars Dollars ------------------------------------------------------------------------------------------------------------------- Net investment income $ 6 257 806 $ 3 390 726 Net realized gain from investments 29 324 699 -- Net realized (loss) from foreign currency transactions (819 989) (413 681) Net increase (decrease) in unrealized appreciation on investments 32 411 737 (39 012 053) Net unrealized (depreciation) on translation of assets and liabilities in foreign currency (125 133) (221 135) ------------------------------------------------------------------------------------------------------------------- 67 049 120 (36 256 143) Dividends paid from net investment income (2 880 000) (2 880 000) ------------------------------------------------------------------------------------------------------------------- Total increase (decrease) 64 169 120 (39 136 143) Net assets, beginning of period 168 725 764 216 051 448 ------------------------------------------------------------------------------------------------------------------- Net assets, end of period $232 894 884 $176 915 305 -------------------------------------------------------------------------------------------------------------------
The notes to the financial statements form an integral part of these statements. 6 NOTES TO FINANCIAL STATEMENTS MAY 31, 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 unrealized appreciation (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. 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 six months ended May 31, 2001 sales of securities amounted to $29,385,423 and there were no purchases of securities. During the six months ended May 31, 2000 there were no purchases or sales of securities. 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 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. F. BASIS OF PRESENTATION Certain prior period amounts in the accompanying financial statements have been reclassified to conform with current period presentation. 7 (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 interest earned. The South African government has signed into law the Income Tax Act, effective October 1, 2001, which levies a tax on capital gains resulting from the disposal of capital assets from such date based on a valuation of the portfolio at October 1, 2001. Management intends to seek an exemption from the capital gains tax under the Income Tax Act. However, it is uncertain whether the Company will be granted such exemption. 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. These differences primarily are caused by the separate line item reporting for financial statement purposes of foreign exchange gains or losses. See pages 10 and 11 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 six months ended May 31, 2001 and May 31, 2000, there was no retirement plan expense. In addition, the Company has recorded a liability of $70,313 as a retirement benefit for the Chairman. (5) COMMITMENTS--The Company's lease for office space in Johannesburg expired in February 2001. The Company has renewed the lease for a period of twelve months at an annual cost of $45,200. 8 FINANCIAL HIGHLIGHTS
Six months ended Year ended November 30 ----------------------------------------------------------------------------------------------------------------------------- May 31 May 31 2001 2000 2000 1999 1998 1997 1996 ----------------------------------------------------------------------------------------------------------------------------- United States Dollars ----------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 17.58 $ 22.51 $ 22.51 $ 19.01 $ 20.45 $ 35.09 $ 34.66 ----------------------------------------------------------------------------------------------------------------------------- Net investment income .65 .35 .61 .58 .66 .97 1.10 Net realized gain from investments 3.05 -- 1.00 .62 .32 -- 0.39 Net realized (loss) from foreign currency transactions (.09) (.04) (1.02) (.95) (.11) -- (.71) Net increase (decrease) in unrealized appreciation on investments 3.38 (4.07) (4.88) 3.84 (1.49) (14.41) 1.05 Net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currency (.01) (.02) (.04) .01 (.02) -- -- ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations 6.98 (3.78) (4.33) 4.10 (.64) (13.44) 1.83 Less dividends and distributions (.30) (.30) (.60) (.60) (.80) (1.20) (1.40) ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 24.26 $ 18.43 $ 17.58 $ 22.51 $ 19.01 $ 20.45 $ 35.09 ----------------------------------------------------------------------------------------------------------------------------- Market value per share, end of period $ 19.71 $ 15.31 $ 14.56 $ 19.125 $ 19.125 $ 20.625 $ 37.625 TOTAL INVESTMENT RETURN Based on market value per share 37.36% (18.49%) (21.06%) 3.44% (3.30%) (42.86%) (.28%) RATIOS TO AVERAGE NET ASSETS Expenses .61% .58% 1.15% 1.13% 1.15% .71% .49% Net investment income 3.07% 1.72% 3.06% 3.02% 3.34% 3.25% 2.72% SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $232 895 $176 915 $168 726 $216 051 $182 530 $196 301 $336 882 Portfolio turnover rate -- -- 7.43% 6.66% 1.06% -- 1.79% Per share calculations are based on the 9,600,000 shares outstanding.
SUPPLEMENTARY INFORMATION Six months ended May 31, 2001 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Certain fees incurred by the Company Directors' fees $112 000 Officers' salaries 104 500 Arthur Andersen (Auditors) 46 963 Ranquin Associates (South African Secretary) 50 234 9 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 May 31, 2001 and 2000, including the schedule of investments as of May 31, 2001, the related statements of operations, surplus and changes in net assets for the six months ended May 31, 2001 and 2000, the financial highlights for the six month periods ended May 31, 2001 and 2000, and for each of the five years in the period ended November 30, 2000 and the accompanying supplementary information for the six months ended May 31, 2001. 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 audits. We conducted our audits 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 physical examination or confirmation of securities owned as of May 31, 2001 and 2000 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 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 ASALimited as of May 31, 2001 and 2000, the results of its operations and changes in its net assets for the six months ended May 31, 2001 and 2000, its financial highlights for the six month periods ended May 31, 2001 and 2000 and for each of the five years in the period ended November 30, 2000 and its supplementary information for the six months ended May 31, 2001 in conformity with accounting principles generally accepted in the United States. Arthur Andersen LLP New York, N.Y., U.S.A. June 15, 2001 -------------------------------------- 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 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, 2000. 10
YEAR ENDED NOVEMBER 30 PER YEAR PER DAY YEAR ENDED NOVEMBER 30 PER YEAR PER DAY ---------------------- -------- ------- ---------------------- -------- ------- 1964 $ .042 $.00012 1976 .370 .00101 1965 .067 .00019 1977 .083 .00023 1966 .105 .00029 1978 .357 .00098 1967 .277 .00076 1979 .219 .00060 1968 .241 .00066 1980 1.962 .00538 1969 .461 .00126 1981 .954 .00261 1970 .218 .00060 1982 .102 .00028 1971 .203 .00056 1983 -0- -0- 1972 .445 .00122 1984 -0- -0- 1973 .497 .00136 1985 (.151) (.00041) 1974 1.151 .00316 1986 -0- -0- 1975 .851 .00233 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 of these elections. 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 shareholder 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 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 it were sold 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 capital gain (his "QEF" inclusion) regardless of whether such income or gain was actually distributed (although the distribution thereof would not be taxed again). A United States shareholder 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 such shareholder's 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 would 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 more detailed discussion of the United States federal income tax rules applicable to PFICs, including information relating to the filing of QEF elections, may be found in the Company's 2000 Annual Report under the heading "Certain tax information for United States shareholders." 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. 11 ASA LIMITED Incorporated in the Republic of South Africa (Registration No. 58/01920/06) DIRECTORS HENRY R. BRECK ROBERT J.A. IRWIN (U.S.A.) (U.S.A.) HARRY M. CONGER MALCOLM W. MACNAUGHT (U.S.A.) (U.S.A.) CHESTER A. CROCKER RONALD L. MCCARTHY (U.S.A.) (SOUTH AFRICA) JOSEPH C. FARRELL ROBERT A. PILKINGTON (U.S.A.) (U.S.A.) JAMES G. INGLIS A. MICHAEL ROSHOLT (SOUTH AFRICA) (SOUTH AFRICA) 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, VICE PRESIDENT AND ASSISTANT SECRETARY AUDITORS 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 J.P. MORGAN CHASE, NEW YORK, N.Y., U.S.A. SHAREHOLDER SERVICES LGN ASSOCIATES, P.O. BOX 269, FLORHAM PARK, NJ, USA (973) 377-3535 WEBSITE--HTTP://WWW.ASALTD.COM TRANSFER AGENT EQUISERVE-FIRST CHICAGO TRUST DIVISION, JERSEY CITY, N.J., U.S.A. ASA LIMITED [Graphic] INTERIM REPORT For the Six months ended May 31, 2001