<PAGE>
August 5, 1996
Dear Shareholder,
This is the first annual report of the OMEGA South Africa Fund, covering
the period from launch on November 10, 1995 to June 30, 1996.
The OMEGA South Africa Fund has a unique fund structure which is designed to
create an efficient vehicle for institutional investors to gain immediate
exposure to the South African equity market in a cost effective way. I
believe that this structure has worked admirably during our first eight
months of operation bringing substantial benefits to investors. An
understanding of the key features of this unique structure is fundamental to
an understanding of the Fund and they are therefore summarized overleaf.
The performance of the South African equity market over the eight months to
June 30 can be split into two distinct periods. In the three months from
launch to the end of January the JSE Actuaries All Share Index advanced 14%,
while in the following five months the Index remained unchanged to give a 14%
advance for the full eight months. This however was in rand terms. In US
dollar terms the Index declined 4% over the eight months, reflecting the 16%
fall in the rand against the US dollar during this period.
Historically, the rand has been both a volatile currency and a currency which
has depreciated against the US dollar and both these characteristics should
be expected to continue in the future. However, it should also be noted that
although there has been a long term decline in the currency, which has fallen
over 80% against the US dollar over the past 20 years, the return from the
JSE All Share Index in US dollar terms has comfortably exceeded that from the
S & P 500 Index over this period.
An awareness of this historical relationship between currency depreciation
and stock market return is important as it suggests that while currency
depreciation may be uncomfortable in the short term (especially if it occurs
suddenly), it need not negatively affect dollar adjusted returns in the
longer term.
Against this background of volatile markets, I believe the early performance
of the Fund has been satisfactory, recording a US dollar net asset value
decline of 4% in line with the decline of 4% in the All Share Index over the
period to June 30. Total dividends paid to date for the period amounted to US
87.535 cents per share.
Our investment objective is to seek a long term total return in excess of the
All Share Index, and I remain confident that this will be achieved. Thank you
for the confidence you have shown us by your investment in the OMEGA South
Africa Fund.
M.J. LEVETT
CHAIRMAN
<PAGE>
OMEGA
SOUTH AFRICA FUND
THE OMEGA SOUTH AFRICA FUND HAS A UNIQUE FUND STRUCTURE OFFERING
INSTITUTIONAL INVESTORS INSTANT ACCESS TO THE SOUTH AFRICAN SHARE MARKET.
WITH AN UNDERLYING PORTFOLIO OF APPROXIMATELY US$1.0 BILLION AT JUNE 30,
1996, THE FUND COMBINES THE LIQUIDITY OF AN OPEN-END FUND WITH THE PORTFOLIO
STABILITY AND REDUCED TRADING COSTS ASSOCIATED WITH A CLOSED-END FUND.
FUND OBJECTIVE
The OMEGA South Africa Fund (the "OMEGA Fund") is a Massachusetts business
trust that seeks long term total return in excess of the Johannesburg Stock
Exchange Actuaries All Share Index from investment in equity securities of
South African issuers.
We seek to realize this objective through a policy of investing in those
securities which in the Adviser believes will show above average growth in
the longer term. Less weight is accorded to short term and cyclical factors.
FUND ORGANIZATION
Rather than directly acquire and manage it own portfolio of securities, the
OMEGA Fund invests all of its investable assets in Old Mutual South Africa
Equity Trust (the "Master Trust"), a Massachusetts trust that has the same
investment objective as the OMEGA Fund.
The Master Trust was established with a fully invested portfolio of
approximately US$1.0 billion. Consequently, subscribers to the OMEGA Fund
gain their exposure to the Master Trust at net asset value, avoiding the bid
ask spread, South African stamp duty of 0.5%, and potential market impact
costs on the underlying South African securities. Additionally, while the
Fund does not hedge the rand exposure of the underlying portfolio, it does
offer the benefits of dealing in US dollars.
INVESTMENT ADVISER
Old Mutual Asset Managers (Bermuda) Limited (the "Adviser") is the investment
adviser to the Master Trust. The Adviser is a wholly owned subsidiary of Old
Mutual, the largest insurer in South Africa with over US$40 billion of assets
under management.
The Adviser receives a management fee of 0.60% per annum
1
<PAGE>
SUBSCRIPTION
Shares are priced daily and are offered on a continuous basis at net asset
value, plus brokerage commission of up to 0.35%.
The size of the Master Trust, approximately US$1.0 billion at June 30, 1996
combined with the ability of investors in the OMEGA Fund to acquire
substantial shareholdings at the next day's net asset value, enables
investors in the OMEGA Fund to gain exposure to the South African equity
market speedily and in volume - as well as cost effectively.
REDEMPTION
Redemptions from the OMEGA Fund may be requested on any business day in any
size at the next day's net asset value subject to a redemption fee of 1.65%.
The liquidity for redemptions is provided by a portfolio of marketable
international securities held by the Old Mutual Global Assets Fund (the
"Global Fund"). Using realizations from the Global Fund rather than
realizations of the Master Trust securities enables the Master Trust to avoid
realization costs of the underlying South African securities for the purpose
of redemptions.
INVESTMENT PORTFOLIO
Under normal circumstances at least 95% of the Master Trust's total assets
will be invested in listed South African equities.
At June 30, 1996 there were 67 shareholdings in the portfolio of which the
top 10 comprised 49% by value. The historical price earnings ratio was 18.8
and the dividend yield was 2.1%.
In order to illustrate the stock specific weighting of the OMEGA Fund
portfolio, the table below compares the weighting in the Fund and the JSE All
Share Index of the Fund's top ten holdings as at June 30, 1996:
WEIGHT IN WEIGHT IN
OMEGA JSE ALL
FUND SHARE INDEX
De Beers 6.2% 5.6%
Sasol 6.0% 2.8%
Anglo American 5.6% 6.4%
Nedcor 5.4% 1.4%
Stanbic 5.2% 2.0%
Rembrandt 4.5% 2.1%
Safren 4.2% 0.7%
S. A. Breweries 4.2% 3.8%
Barlow 4.0% 0.9%
Anglovaal 3.9% 1.0%
2
<PAGE>
THE SOUTH AFRICAN ECONOMY
The year started off on the optimistic note that characterized much of 1995.
However the continuing integration of South Africa into the world economy led
to some unpleasant side effects, including for example the volatility of the
rand and a high level of real interest rates in South Africa. This has
encouraged a more pragmatic and investor friendly approach to policy-making
by the South African government.
The key developments so far in 1996 have been:
- - Further exchange control relaxation.
- - Growing portfolio capital inflows.
- - Historically high real interest rates.
- - Annual inflation in 5-7% range.
- - A fall of over 20% in the rand against the US dollar within three months.
- - The South African government's announcement of a macroeconomic policy
framework with a growth target of 6% per annum by 2000 and an objective of
reducing the budget deficit to 3% of GDP by 1999.
Capital inflows, which had been gradually improving since the second half of
1994, remained strong at the start of this year with net foreign purchases of
South African bonds and equities reaching a record high in February 1996.
However foreign sentiment towards South Africa deteriorated in mid February.
As a result, the rand, which had been relatively stable for over a year, fell
sharply in February and again in April prompted by market concerns over its
perceived overvaluation, the resignation of the Minister of Finance, rumors
over the health of President Mandela and rising US interest rates which
reduced the relative attractiveness of South African assets. Though
foreigners continued to be net buyers of South African equities on a monthly
basis through to June, they were net sellers of bonds in March and April.
PORTFOLIO CAPITAL INFLOWS (US $M)
Jan-95 88.26 3127410.2822
Feb 54.63 1951150.28
Mar (10.35) -373790.277
Apr 95.72 3460620.2766
May 325.95 11956950.2726
Jun 247.75 9091870.2725
Jul 123.29 4566260.27
Aug 311.07 11521100.27
Sep 219.55 8131420.27
Oct 58.23 2156770.27
Nov 160.36 5727020.28
Dec 148.87 5513860.27
Jan-96 485.53 17340290.28
Feb 616.56 22835620.27
Mar 50.35 1986000.2535
Apr (451.52) -19116130.2362
May 362.16 15925990.2274
Jun 618.36 26896780.2299
By May, net foreign portfolio flows into South Africa were again positive
suggesting that foreign investors were, if cautiously, more positive on
South Africa.
Despite the rand's decline, inflation remains under control. The Adviser
believes that the weaker currency also augurs well for a sizable improvement
in the current account deficit - from last year's 2.8% of GDP. In June the
South African Reserve Bank's gold and foreign exchange holdings rose for the
first time since December 1995.
3
<PAGE>
RAND/DOLLAR RATE
Year Rand/dollar
1993 3.094
199302 3.082
199303 3.082
199304 3.072
199305 3.127
199306 3.126
199307 3.12
199308 3.142
199309 3.17
199310 3.192
199311 3.187
199312 3.195
199313 3.175
199314 3.202
199315 3.192
199316 3.168
199317 3.165
199318 3.16
199319 3.182
199320 3.186
199321 3.185
199322 3.195
199323 3.197
199324 3.237
199325 3.31
199326 3.34
199327 3.34
199328 3.367
199329 3.362
199330 3.382
199331 3.377
199332 3.38
199333 3.38
199334 3.367
199335 3.387
199336 3.41
199337 3.42
199338 3.438
199339 3.457
199340 3.462
199341 3.36
199342 3.372
199343 3.367
199344 3.372
199345 3.372
199346 3.377
199347 3.375
199348 3.377
199349 3.372
199350 3.385
199351 3.39
199352 3.407
199353 3.407
1994 3.407
199402 3.412
199403 3.417
199404 3.43
199405 3.43
199406 3.45
199407 3.46
199408 3.56
199409 3.477
199410 3.43
199411 3.455
199412 3.445
199413 3.485
199414 3.557
199415 3.62
199416 3.61
199417 3.508
199418 3.615
199419 3.65
199420 3.685
199421 3.67
199422 3.642
199423 3.625
199424 3.65
199425 3.61
199426 3.67
199427 3.682
199428 3.677
199429 3.696
199430 3.71
199431 3.64
199432 3.597
199433 3.58
199434 3.59
199435 3.595
199436 3.575
199437 3.565
199438 3.545
199439 3.583
199440 3.583
199441 3.583
199442 3.535
199443 3.515
199444 3.52
199445 3.535
199446 3.543
199447 3.547
199448 3.575
199449 3.57
199450 3.575
199451 3.5467
199452 3.543
199453 3.55
1995 3.535
199502 3.526
199503 3.534
199504 3.542
199505 3.558
199506 3.558
199507 3.548
199508 3.625
199509 3.595
199510 3.66
199511 3.58
199512 3.643
199513 3.605
199514 3.6
199515 3.613
199516 3.623
199517 3.625
199518 3.64
199519 3.658
199520 3.673
199521 3.685
199522 3.69
199523 3.69
199524 3.67
199525 3.65
199526 3.645
199527 3.643
199528 3.65
199529 3.65
199530 3.63
199531 3.63
199532 3.63
199533 3.66
199534 3.67
199535 3.67
199536 3.67
199537 3.68
199538 3.65
199539 3.65
199540 3.67
199541 3.66
199542 3.65
199543 3.64
199544 3.63
199545 3.63
199546 3.63
199547 3.64
199548 3.65
199549 3.67
199550 3.65
199551 3.65
199552 3.65
199553 3.63
1996 3.61
199602 3.62
199603 3.63
199604 3.63
199605 3.65
199606 3.65
199607 3.71
199608 3.91
199609 3.9
199610 3.94
199611 3.935
199612 3.925
199613 4.015
199614 4.095
199615 4.165
199616 4.24
199617 4.45
199618 4.37
199619 4.475
199620 4.375
199621 4.385
199622 4.385
199623 4.36
199624 4.335
199625 4.37
199626 4.335
199627 4.34
A vital new element is the South African government's growth framework, GEAR
(GROWTH, EMPLOYMENT AND REDISTRIBUTION: A MACROECONOMIC STRATEGY) which was
released by the Minister of Finance on June 14, 1996. It is a pragmatic
document recognizing the country's macroeconomic shortcomings and the need
for firm action. With job creation the key objective, GEAR opts for growth
through more market-friendly policies. What is more, the government regards
it as non-negotiable, reflecting a less conciliatory approach to labor than
has been shown to date. Importantly the document contains concrete objectives
and timeframes so that the government's achievements can be measured against
the stated objectives.
The framework of GEAR sets a target for the creation of 400,000 new jobs per
annum by the year 2000. And to achieve this the government has committed
itself to tighter fiscal policy, contained inflation, "regulated flexibility"
in the labor market, and more investor friendly policies.
FISCAL DEFICIT
% of GDP
80 -0.3
81 -2.6
82 -2.7
83 -3.6
84 -3.7
85 -3.1
86 -4.9
87 -5.9
88 -4.1
89 -1.9
90 -2.7
91 -4.5
92 -8.5
93 -6.8
94 -6.7
95 -6.2
96 -5.1
97 -4
98 -3.3
99 -3
00 -3
Importantly, the Adviser expects that a tighter fiscal policy will give scope
to ease monetary policy. In parallel with annual cuts in the budget deficit,
to 3% of GDP by 1999, GEAR projects a fall in real interest rates from their
current high levels to a real prime rate of under 10% by 2000.
REAL INTEREST RATES
Year Real Prime LT Corp
1993 5.1277 7.5777
199302 5.5367 8.2167
199303 5.2378 6.5878
199304 4.1737 5.2337
199305 4.7252 5.6264
199306 4.2457 6.2652
199307 4.6924 6.3557
199308 4.6924 6.9824
199309 4.2228 7.1928
199310 3.8365 5.8565
199311 3.3985 6.0385
199312 2.5137 5.7437
1994 2.7575 5.3375
199402 2.9063 5.3663
199403 4.3642 6.2242
199404 5.652 8.192
199405 6.6327 8.0127
199406 7.4556 7.7656
199407 7.0026 7.0026
199408 7.4093 5.8793
199409 6.887 6.107
199410 7.0561 6.4461
199411 6.884 6.3984
199412 7.1077 6.3577
1995 7.3646 6.6346
199502 6.8455 7.6455
199503 6.4903 7.2503
199504 5.9587 6.4687
199505 6.1778 6.7278
199506 6.7364 8.5064
199507 7.4776 9.5476
199508 8.3153 10.9953
199509 8.8041 12.1341
199510 8.5276 12.1576
199511 8.0618 12.1118
199512 7.4415 11.6415
1996 6.8034 11.6034
199602 8.2679 11.9979
199603 8.943 12.183
199604 10.6638 13.9738
199605 10.3318 14.6418
Medium term economic growth prospects thus, in the opinion of the Adviser,
look encouraging, though growth is likely to slow initially as the high real
interest rates have their
4
<PAGE>
effect. Following last year's GDP growth of 3.3%, the Adviser projects that
growth in 1996 should be around 3%, slowing to 2% in 1997 with the
government's longer term aim being growth of 6%.
Improved summer rains are expected to provide a good corn crop and a generally
healthier agricultural sector will benefit rural household incomes and
agriculturally related businesses. The Adviser also expects a moderate
take-off in public sector investment. An important element of GEAR is a
public sector infrastructure drive.
Manufacturing, which makes up a quarter of total production, is currently
under pressure from competitive imports as a result of the government's
reduction of import tariffs for large sectors of the economy, at a rate
faster than that required by the World Trade Organization. Although the
weaker rand now compensates for some of the trade liberalization, interest
rates remain punitive and the government has indicated that it will take
advantage of the decline in the rand to accelerate tariff reductions in order
to keep inflation down and lock in the competitiveness gained by the
depreciation.
However, the Adviser believes that interest rates are probably close to their
peak. Healthier foreign sentiment, inflation which is largely under control,
and more recent stability in the currency market all point towards monetary
policy easing, a policy which would be supported by government's stated
commitment to a fairly austere macroeconomic policy. Any consequent lowering
of interest rates should cushion the current slowdown in demand.
THE SOUTH AFRICAN INVESTMENT MARKET
The bond market fell sharply as a result of the fall in the currency, with
yields in the benchmark RSA 150 government bond rising from below 13.5% in
mid February 1996 to over 16.5% by early May 1996. Foreign investors became
large net sellers of South African bonds in April, selling over R2bn through
the JSE. However on a monthly basis they have since been consistent buyers.
The RSA 150 has strengthened since May to a yield of just over 15%, and with
an inflation figure for the year to May 1996 of 5.9%, currently provides a
real yield in excess of 9.0%.
RETURNS ON JSE EQUITY INDICES IN $US
All Share Mining Industrial
2-Nov-95 0.00% 0.00% 0.00%
3-Nov-95 0.57% -0.07% 0.40%
6-Nov-95 1.43% -0.19% 1.48%
7-Nov-95 2.24% 0.11% 2.26%
8-Nov-95 3.06% 2.37% 2.02%
9-Nov-95 3.42% 3.96% 1.84%
10-Nov-95 3.92% 7.13% 1.64%
13-Nov-95 4.03% 7.40% 1.59%
14-Nov-95 3.47% 4.72% 1.59%
15-Nov-95 3.10% 3.54% 1.45%
16-Nov-95 3.39% 3.42% 2.04%
17-Nov-95 3.56% 3.73% 2.00%
20-Nov-95 3.95% 3.76% 2.39%
21-Nov-95 4.00% 4.04% 2.11%
22-Nov-95 3.43% 2.69% 1.61%
23-Nov-95 2.53% 0.88% 0.85%
24-Nov-95 2.79% 0.59% 1.29%
27-Nov-95 2.18% 0.00% 0.57%
28-Nov-95 2.91% 1.63% 1.13%
29-Nov-95 2.49% 0.12% 0.79%
30-Nov-95 2.28% -1.09% 0.88%
1-Dec-95 2.18% -3.06% 1.02%
4-Dec-95 2.52% -2.38% 1.31%
5-Dec-95 3.50% -1.24% 2.16%
6-Dec-95 5.14% 0.77% 3.28%
7-Dec-95 6.78% 1.97% 4.98%
8-Dec-95 6.23% 2.25% 4.01%
11-Dec-95 6.79% 3.71% 4.17%
12-Dec-95 7.45% 3.94% 4.98%
13-Dec-95 7.08% 2.63% 4.88%
14-Dec-95 6.61% 0.99% 4.83%
15-Dec-95 6.30% 0.52% 4.75%
18-Dec-95 6.82% 1.60% 5.19%
19-Dec-95 6.06% 0.82% 4.53%
20-Dec-95 6.47% 1.27% 5.14%
21-Dec-95 7.16% 2.59% 5.58%
22-Dec-95 7.14% 2.19% 5.72%
27-Dec-95 7.30% 2.17% 5.94%
28-Dec-95 7.23% 1.84% 5.99%
29-Dec-95 7.17% 1.59% 6.20%
2-Jan-96 7.61% 1.83% 6.53%
3-Jan-96 10.61% 7.03% 9.32%
6-Jan-96 11.74% 9.38% 10.00%
7-Jan-96 12.82% 12.43% 10.20%
8-Jan-96 14.05% 15.29% 10.78%
9-Jan-96 14.62% 15.88% 11.06%
10-Jan-96 14.91% 15.73% 11.24%
11-Jan-96 15.18% 17.57% 11.09%
12-Jan-96 16.05% 16.67% 12.62%
15-Jan-96 15.81% 14.64% 13.07%
16-Jan-96 17.03% 16.45% 14.30%
17-Jan-96 17.73% 17.18% 14.54%
18-Jan-96 17.28% 15.50% 14.61%
19-Jan-96 17.27% 14.77% 14.72%
22-Jan-96 18.77% 18.36% 15.42%
23-Jan-96 19.31% 19.36% 15.77%
24-Jan-96 19.09% 18.77% 15.66%
25-Jan-96 19.53% 18.89% 16.14%
26-Jan-96 19.48% 21.21% 15.42%
29-Jan-96 19.07% 20.21% 15.28%
30-Jan-96 19.00% 20.86% 15.01%
31-Jan-96 18.08% 19.82% 14.18%
1-Feb-96 18.52% 21.37% 14.42%
2-Feb-96 20.17% 28.36% 14.25%
5-Feb-96 19.63% 27.48% 13.67%
6-Feb-96 19.21% 26.38% 13.63%
7-Feb-96 19.83% 28.04% 13.94%
8-Feb-96 18.41% 24.06% 12.93%
9-Feb-96 18.25% 22.67% 12.79%
12-Feb-96 16.95% 18.99% 12.23%
13-Feb-96 16.36% 17.78% 12.08%
14-Feb-96 16.63% 17.27% 12.94%
15-Feb-96 17.38% 18.68% 13.45%
16-Feb-96 13.72% 16.64% 9.52%
19-Feb-96 10.81% 13.63% 6.52%
20-Feb-96 9.70% 12.35% 5.68%
21-Feb-96 4.36% 5.69% 0.81%
22-Feb-96 7.95% 11.73% 3.59%
23-Feb-96 9.92% 14.20% 5.34%
26-Feb-96 11.18% 16.23% 6.27%
27-Feb-96 10.05% 14.51% 5.32%
28-Feb-96 10.32% 13.34% 6.08%
29-Feb-96 8.95% 13.57% 4.29%
1-Mar-96 8.16% 12.64% 3.63%
4-Mar-96 7.98% 11.84% 3.89%
5-Mar-96 7.69% 9.62% 4.24%
6-Mar-96 8.06% 11.25% 4.25%
7-Mar-96 7.46% 10.68% 3.53%
8-Mar-96 7.33% 11.32% 3.41%
11-Mar-96 4.44% 8.15% 0.74%
12-Mar-96 6.35% 11.37% 2.06%
13-Mar-96 7.03% 11.97% 2.75%
14-Mar-96 6.26% 11.10% 1.91%
15-Mar-96 6.76% 10.91% 1.80%
18-Mar-96 6.21% 9.96% 1.59%
19-Mar-96 6.08% 9.40% 1.60%
20-Mar-96 5.99% 9.06% 1.61%
22-Mar-96 7.09% 11.30% 2.40%
25-Mar-96 7.58% 13.10% 2.66%
26-Mar-96 7.25% 14.04% 1.92%
27-Mar-96 6.53% 12.94% 1.07%
28-Mar-96 5.50% 11.29% -0.07%
29-Mar-96 6.33% 11.61% 0.92%
1-Apr-96 5.17% 8.58% 0.35%
2-Apr-96 5.02% 8.44% 0.10%
3-Apr-96 1.04% 5.08% -4.33%
4-Apr-96 2.28% 6.48% -3.26%
9-Apr-96 1.31% 6.93% -4.72%
10-Apr-96 -0.12% 5.59% -6.23%
11-Apr-96 0.29% 6.96% -6.13%
12-Apr-96 0.47% 7.76% -6.18%
15-Apr-96 -0.28% 6.98% -6.58%
16-Apr-96 1.02% 8.68% -5.42%
17-Apr-96 1.86% 8.90% -4.44%
18-Apr-96 1.79% 8.70% -4.52%
19-Apr-96 2.57% 9.89% -3.66%
22-Apr-96 4.25% 11.63% -1.90%
23-Apr-96 3.89% 12.04% -2.51%
24-Apr-96 2.98% 11.07% -3.57%
25-Apr-96 -0.12% 9.22% -6.90%
26-Apr-96 -0.87% 11.15% -8.56%
29-Apr-96 -0.29% 12.73% -8.33%
30-Apr-96 1.31% 15.99% -6.97%
2-May-96 0.10% 16.05% -8.11%
3-May-96 -1.00% 15.50% -9.40%
6-May-96 -2.12% 13.88% -10.46%
7-May-96 -1.62% 15.10% -9.97%
8-May-96 -4.83% 13.99% -14.09%
9-May-96 -6.90% 13.17% -16.64%
10-May-96 -3.93% 16.02% -13.93%
13-May-96 -2.52% 16.59% -12.27%
14-May-96 -0.94% 17.52% -10.57%
15-May-96 -0.87% 17.93% -10.76%
16-May-96 -2.36% 16.57% -12.50%
17-May-96 -2.43% 16.89% -12.53%
20-May-96 -3.23% 15.60% -13.43%
21-May-96 -3.54% 13.98% -13.29%
22-May-96 -4.01% 13.02% -13.72%
23-May-96 -4.07% 13.44% -13.88%
24-May-96 -3.70% 13.77% -13.34%
27-May-96 -3.90% 13.25% -13.47%
28-May-96 -3.65% 13.75% -13.22%
29-May-96 -3.31% 14.04% -12.70%
30-May-96 -3.12% 14.34% -12.59%
31-May-96 -2.00% 14.84% -11.31%
3-Jun-96 -1.67% 15.25% -11.01%
4-Jun-96 -1.82% 14.16% -11.02%
5-Jun-96 -2.22% 12.56% -11.31%
6-Jun-96 -1.74% 11.60% -10.62%
7-Jun-96 -1.94% 10.82% -11.07%
10-Jun-96 -1.51% 10.67% -10.54%
11-Jun-96 -2.28% 8.03% -10.74%
12-Jun-96 -1.17% 8.66% -9.57%
13-Jun-96 -0.63% 9.43% -8.93%
14-Jun-96 -1.81% 7.65% -9.86%
18-Jun-96 -1.48% 7.33% -9.10%
19-Jun-96 -1.25% 9.12% -9.47%
20-Jun-96 -1.59% 8.82% -9.87%
21-Jun-96 -1.37% 9.04% -9.77%
24-Jun-96 -1.22% 9.49% -9.76%
25-Jun-96 -0.65% 10.39% -9.28%
26-Jun-96 -0.17% 10.48% -8.82%
27-Jun-96 0.02% 9.87% -8.49%
28-Jun-96 -0.34% 8.20% -8.31%
1-Jul-96 -0.90% 7.84% -8.96%
2-Jul-96 -0.21% 9.51% -8.37%
3-Jul-96 0.22% 11.09% -8.28%
4-Jul-96 0.06% 10.65% -8.37%
5-Jul-96 -0.15% 10.65% -8.51%
8-Jul-96 -0.70% 11.17% -9.22%
9-Jul-96 0.10% 12.26% -8.49%
10-Jul-96 0.48% 13.31% -8.41%
The South African equity market has been less volatile. The JSE All Share
Index rose strongly in January 1996 being up 10% in both rand and US dollar
terms. However the subsequent fall in the rand led to some weakness in the
equity market, which by early
5
<PAGE>
March had retreated 5% from its February peak. The Index has since moved to
close the half year up 10%. Foreign investors, however, are 7% down in US
dollar terms on the half year due to the decline in the rand.
These averages obviously hide a wide disparity in returns across sectors. The
currency depreciation had a negative impact on consumer stocks while
commodity and rand hedge stocks benefited, lifting the Mining Producers Index
27% over the half year while the Industrial Index rose only 3%. Following the
recent strength of the Mining sector the Adviser believes it looks fully
valued and that the Industrial sector offers greater value.
EARNINGS FORECASTS
FORWARD EARNINGS GROWTH FOR 18 MONTHS TO DECEMBER 31, 1997
DEVELOPED MARKETS
United Kingdom 14%
Netherlands 15%
Sweden 17%
Hong Kong 18%
Australia 20%
Singapore 22%
United States 22%
Spain 23%
Canada 24%
Switzerland 26%
South Africa 29%
Germany 32%
Italy 58%
France 53%
EMERGING MARKETS
Argentina 9%
Chile 10%
Korea 10%
Taiwan 14%
Portugal 15%
China 19%
Malaysia 25%
South Africa 29%
Indonesia 29%
Thailand 29%
Poland 31%
Phillipines 40%
Mexico 46%
Brazil 53%
Source: IBES
The JSE All Share Index is currently trading at a price earnings ratio of
16.9 times. In the Adviser's opinion lower interest rates and the weaker
currency bode well for future earnings growth prospects. Old Mutual is
expecting earnings growth of over 20% in 1996 and 1997 which is in line with
consensus earnings forecasts. This would place the Index on a forward
multiple to December 1997 of less than 13, which compares favorably with
consensus forward ratings for the other major emerging markets.
RATING OF THE SOUTH AFRICAN MARKET
FORWARD PE MULTIPLE (18 MONTHS FORWARD TO DECEMBER 31, 1997)
DEVELOPED MARKETS
Hong Kong 10.7
Spain 11.3
Sweden 11.4
Australia 11.9
South Africa 12.1
Canada 12.3
United Kingdom 13
Netherlands 13.4
Italy 14
United States 14.3
Switzerland 14.3
France 15.4
Germany 16.3
Singapore 19.3
EMERGING MARKETS
Poland 7.7
China 9.2
Mexico 9.9
Brazil 10.1
Argentina 12
South Africa 12.1
Korea 12.3
Indonesia 13.6
Portugal 13.7
Chile 14.1
Thailand 15.8
Philippines 16.3
Malaysia 17.6
Taiwan 19.8
Source: IBES
Furthermore, the Adviser believes GDP growth is likely to accelerate toward
the end of the decade making forward multiples for the late 90's relatively
more attractive.
Looking longer term, the continuing relaxation of foreign exchange controls
does mean that local institutions can be expected to switch some of their
South African equity exposure into international exposure. However the
Adviser expects that this will be balanced to some extent by the substantial
equity underweight position in South African equities of foreign investors
and of the South African state pension fund, which has a large equity
investment program currently underway.
OLD MUTUAL ASSET MANAGERS
(BERMUDA) LIMITED
AUGUST 5, 1996
6
<PAGE>
OMEGA SOUTH AFRICA FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
ASSETS
Investment in Trust, at value (Note B) $12,313,830
Receivable from investment adviser (Note C) 3,318
-----------
TOTAL ASSETS 12,317,148
-----------
LIABILITIES
Payable for Fund expenses 43,921
-----------
TOTAL LIABILITIES 43,921
-----------
NET ASSETS $12,273,227
-----------
-----------
NET ASSETS consist of:
Paid in capital $14,002,451
Undistributed net investment income 64,266
Accumulated net realized gain on investment 73,762
Net unrealized depreciation of investment (1,867,252)
-----------
NET ASSETS $12,273,227
-----------
-----------
SHARES OUTSTANDING 128,373
-----------
-----------
NET ASSET VALUE PER SHARE $ 95.61
-----------
-----------
MAXIMUM OFFERING PRICE PER SHARE $ 95.95
-----------
-----------
See Notes to Financial Statements.
7
<PAGE>
OMEGA SOUTH AFRICA FUND
STATEMENT OF OPERATIONS
PERIOD FROM NOVEMBER 10, 1995 (COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1996
INVESTMENT IN INCOME
Investment income allocated from Trust $ 145,957
Expenses allocated from Trust (48,096)
-----------
NET INVESTMENT INCOME FROM TRUST 97,861
-----------
EXPENSES
Administrative fee (Note C) 25,246
Auditing fees 23,000
Trustees' fees and expenses (Note C) 20,833
Shareholder servicing agent fee 12,592
Printing expense 10,000
12b-1 fees (Note C) 2,970
Miscellaneous expenses 1,250
-----------
Total expenses 95,891
Deduct: Expenses reimbursed by investment adviser (Note C) (84,591)
-----------
NET EXPENSES 11,300
-----------
NET INVESTMENT INCOME 86,561
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) allocated from Trust on:
Investments 73,762
Foreign currency transactions (10,295)
-----------
Net realized gain allocated from Trust 63,467
Net unrealized depreciation of investments allocated from Trust (1,867,252)
-----------
NET REALIZED AND UNREALIZED LOSS ALLOCATED FROM TRUST (1,803,785)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(1,717,224)
-----------
-----------
See Notes to Financial Statements.
8
<PAGE>
OMEGA SOUTH AFRICA FUND
STATEMENT OF CHANGES IN NET ASSETS
PERIOD FROM NOVEMBER 10, 1995 (C0MMENCEMENT OF OPERATIONS) TO JUNE 30, 1996
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 86,561
Net realized gain allocated from Trust 63,467
Net unrealized depreciation of investments allocated from Trust (1,867,252)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (1,717,224)
-----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (12,000)
-----------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Proceeds from shares sold (net of $250 placement fee) 14,002,451
-----------
NET INCREASE IN NET ASSETS 12,273,227
NET ASSETS
Beginning of period --
-----------
End of period $12,273,227
-----------
-----------
NUMBER OF SHARES OF BENEFICIAL INTEREST
Sold 128,373
Redeemed --
-----------
NET INCREASE IN SHARES OUTSTANDING 128,373
-----------
-----------
See Notes to Financial Statements.
9
<PAGE>
OMEGA SOUTH AFRICA FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements. The per share amounts and ratios which are shown reflect income
and expenses including OMEGA South Africa Fund's proportionate share of the
Trust's income and expenses. It should be read in conjunction with the
Trust's Financial Statements and Notes thereto.
JUNE 30,
1996(1)
--------
PER SHARE DATA:
Net Asset Value, Beginning of Period $100.00
Income From Investment Operations
Net Investment Income 0.88
Net Realized and Unrealized Gains and
Losses on Investment and Foreign Currency (4.98)
-------
Total From Investment Operations (4.10)
Less: Dividends from Net Investment Income (0.29)
-------
Net Asset Value, End of Period $ 95.61
-------
-------
TOTAL RETURN (4.12)%(4)
-------
-------
RATIOS/SUPPLEMENTAL DATA:
Ratio of Expenses to Average Net Assets 1.00%(2)(3)
-------
-------
Ratio of Net Investment Income to Average Net Assets 1.46%(2)(3)
-------
-------
Net Assets, End of Period (in thousands) $12,273
-------
-------
NOTES:
(1) For the period November 10, 1995 (commencement of operations) to June 30,
1996.
(2) Annualized
(3) After reduction of expenses by the Adviser as described in Note C of
Notes to Financial Statements. Had the Adviser not undertaken such
action, the annualized ratios of expenses and net investment income to
average daily net assets would have been 2.42% and 0.03%, respectively,
for the period ended June 30, 1996.
(4) Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of OMEGA South Africa Fund
during the period, and assumes dividends and capital gain distributions,
if any, were reinvested. Periods less than one year are not annualized.
See Notes to Financial Statements.
10
<PAGE>
OMEGA SOUTH AFRICA FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE A -- ORGANIZATION
Old Mutual Equity Growth Assets South Africa Fund ("OMEGA South Africa Fund")
is a trust organized under the laws of the Commonwealth of Massachusetts
pursuant to a Declaration of Trust dated as of September 1, 1995. The OMEGA
South Africa Fund is registered as a non-diversified open-end management
investment company under the Investment Company Act of 1940, as amended (the
"Act"). OMEGA South Africa Fund offers shares of beneficial interest to
United States investors. The OMEGA South Africa Fund seeks to achieve its
investment objective by investing all of its net investable assets in Old
Mutual South Africa Equity Trust (the "Trust"), a non-diversified open-end
management investment company having the same investment objective and
policies as the OMEGA South Africa Fund. The performance of the OMEGA South
Africa Fund is directly affected by the performance of the Trust. The
financial statements of the Trust, including the schedule of investments,
are included elsewhere in this report and should be read in conjunction with
the OMEGA South Africa Fund's financial statements.
The maximum sales load imposed on purchases of OMEGA South Africa Fund Shares
(as a percentage of offering price) is 0.35%. A maximum redemption fee of
1.65% on redemption proceeds is charged by OMEGA South Africa Fund.
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles. The following is a summary of
significant accounting policies followed by OMEGA South Africa Fund in the
preparation of its financial statements.
TRUST VALUATION: The value of OMEGA South Africa Fund's investment in the
Trust reflects OMEGA South Africa Fund's proportionate interest in the net
assets of the Trust (1.25% at June 30, 1996).
INVESTMENT VALUATION: Investments in the Trust are valued by the Trust as
indicated in Note B of the Trust's financial statements.
FEDERAL INCOME TAXES: OMEGA South Africa Fund intends to qualify each year
and elect to be taxed as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended. By so qualifying, OMEGA South
Africa Fund will not be subject to federal income taxes to the extent that,
among other things, they distribute substantially all of their taxable
income, including realized capital gains, for the fiscal year. In addition,
by distributing during each calendar year substantially all of their net
investment income, capital gains and certain other amounts, if any, OMEGA
South Africa Fund will not be subject to a federal excise tax.
ALLOCATIONS: All net investment income and realized and unrealized capital
gains and losses of the Trust are allocated pro rata among the OMEGA South
Africa Fund and any other investors in the Trust on a daily basis.
11
<PAGE>
OMEGA SOUTH AFRICA FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
-CONTINUED-
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: OMEGA South Africa Fund declares
and distributes dividends from net investment income, if any, semi-annually
on or about the last day of December and June. OMEGA South Africa Fund's
realized capital gains, if any, will be distributed at least annually. Income
and capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign
currency transactions, the "mark-to-market" of certain passive foreign
investment companies and differences in the timing for recognition of certain
capital losses for financial reporting and tax purposes. Income dividends and
capital gain distributions to shareholders are recorded on the ex-dividend
date.
USE OF ESTIMATES: The preparation of financial statements in conformity with
United States generally accepted accounting principles requires management to
make estimates and assumptions in determining the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual amounts
could differ from these estimates.
NOTE C -- ADMINISTRATION AND DISTRIBUTION FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
Old Mutual Asset Managers (Bermuda) Limited (the "Adviser"), a wholly-owned
subsidiary of South African Mutual Life Assurance Society ("Old Mutual") will
reduce or rebate a portion of its advisory fee charged to the Trust as
necessary so that ordinary operating expenses of OMEGA South Africa Fund,
including the advisory fee allocated from the Trust, will not exceed 1.00%,
per annum of OMEGA South Africa Fund's average daily net assets. This
limitation does not apply to extraordinary expenses.
State Street Bank and Trust Company will either directly or through an
affiliated entity provide certain administrative and accounting services to
OMEGA South Africa Fund pursuant to an Administration Agreement dated as of
October 23, 1995. Under the Administration Agreement, OMEGA South Africa Fund
pays compensation to State Street at the annual rate of $40,000.
OMEGA South Africa Fund has adopted a Shareholder Servicing and Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended. OMEGA South Africa Fund will reimburse the Adviser for
distribution costs at an annual rate not to exceed 0.05% of the average daily
net assets of OMEGA South Africa Fund.
Trustees receive an annual fee of $5,000. OMEGA South Africa Fund pays no
compensation to their Trustees who are directors or employees of Old Mutual
or any wholly-owned subsidiaries of Old Mutual.
NOTE D -- INVESTMENT TRANSACTIONS
Contributions and withdrawals in OMEGA South Africa Fund's investment in the
Trust for the period from November 10, 1995, commencement of operations, on
to June 30, 1996 amounted to $14,083,973 and $64,219, respectively.
12
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
Old Mutual Equity Growth Assets South Africa Fund
We have audited the accompanying statement of assets and liabilities of the
Old Mutual Equity Growth Assets South Africa Fund (the "OMEGA South Africa
Fund") as of June 30, 1996, and the related statements of operations and
changes in net assets and financial highlights for the period from November
10, 1995 (commencement of operations) to June 30, 1996. These financial
statements and financial highlights are the responsibility of the OMEGA South
Africa Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. 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 and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Old Mutual Equity Growth Assets South Africa Fund as of June 30, 1996, the
results of its operations, changes in net assets and financial highlights for
the period from November 10, 1995 to June 30, 1996, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
July 22, 1996
13
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
(THE "TRUST")
FINANCIAL STATEMENTS
JUNE 30, 1996
14
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
SHEDULE OF INVESTMENTS
(THE "TRUST")
JUNE 30, 1996
NUMBER MARKET
OF SHARES VALUE
- -----------------------------------------------------------
COMMON STOCKS--97.9%
BANKS & FINANCIAL SERVICES--12.7%
718,723 Amalgamated Banks of SA Ltd $ 3,984,144
240,000 First National Bank Holdings Ltd 1,732,302
1,225,000 Genbel Securities Ltd 9,054,163
300,000 Investec Holdings Ltd 5,612,657
3,551,875 Nedcor Ltd 53,735,492
1,300,000 Standard Bank Investment Corp. Ltd 51,045,155
------------
125,163,913
------------
BEVERAGES, HOTELS & LEISURE--5.7%
1,423,867 The South African Breweries Ltd 41,767,204
1,204,125 Johnnies Industrial Corporation Ltd 15,018,536
------------
56,785,740
------------
BUILDING, CONSTRUCTION, ALLIED--4.7%
180,000 Anglo Alpha Ltd 4,656,427
3,800,000 Barlow Ltd 39,715,903
2,400,000 Everite Holdings Ltd 2,300,496
------------
46,672,826
------------
CHEMICALS, OILS & PLASTICS--7.9%
880,000 AECI Ltd 4,776,533
1,500,000 Engen Ltd 10,220,580
5,480,038 Sasol Ltd 58,857,089
1,209,275 Sentrachem Ltd 4,189,658
------------
78,043,860
------------
COAL--3.3%
248,321 Anglo American Coal Corp Ltd 18,009,654
2,080,000 Ingwe Coal Corporation Ltd 14,172,537
------------
32,182,191
------------
DIAMONDS--6.2%
1,800,000 De Beers Consolidated Mines Ltd 61,115,603
------------
ELECTRONICS & ELECTRICAL -- 2.7%
2,320,000 Allied Electronics Corporation Ltd 3,911,768
2,500,000 Grintek Ltd 2,251,992
4,147,674 Reunert Ltd 18,297,857
453,400 Siltek Ltd 2,513,362
------------
26,974,979
------------
ENGINEERING--1.3%
3,438,750 African Oxygen Ltd $ 12,469,887
------------
FOOD--1.2%
360,000 CG Smith Foods Ltd 5,654,233
1,898,600 Irvin & Johnson Ltd 1,688,327
307,000 Tiger Oats Ltd 4,307,714
------------
11,650,274
------------
FURNITURE & HOUSEHOLD--0.8%
1,500,000 JD Group Ltd 8,141,818
------------
GOLD--1.7%
720,000 Driefontein Consolidated Ltd 9,645,456
111,000 Southvaal Holdings Ltd 3,973,900
44,000 Vaal Reefs Exploration and
Mining Co Ltd 3,587,481
------------
17,206,837
------------
INDUSTRIAL HOLDINGS--15.9%
3,900,000 Anglovaal Industries Ltd 19,096,893
1,100,000 Bidvest Group Ltd 6,351,773
6,026,900 CG Smith Ltd 31,321,226
1,248,400 Forward Corporation Ltd 865,042
396,100 Imperial Holdings Ltd 4,025,499
567,280 Malbak Ltd 2,817,074
1,700,000 Murray & Roberts Holdings Ltd 6,792,932
4,700,000 Rembrandt Group Ltd 44,182,931
14,200,000 Safmarine & Rennies Holdings Ltd 41,817,762
------------
157,271,132
------------
INSURANCE--1.7%
283,266 Liberty Life Association
of Africa Ltd 9,077,990
1,500,000 Mutual & Federal Insurance Co Ltd 7,691,419
------------
16,769,409
------------
MANGANESE--0.6%
490,000 Samancor Ltd 6,366,209
------------
See Notes to Financial Statements.
15
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
SHEDULE OF INVESTMENTS
(THE "TRUST")
JUNE 30, 1996
-CONTINUED-
NUMBER MARKET
OF SHARES VALUE
- -----------------------------------------------------------
COMMON STOCKS--CONTINUED
MINING EXPLORATION--0.1%
304,063 Benguela Concessions Ltd $ 161,530
229,238 Lydenburg Exploration Ltd 423,583
------------
585,113
------------
MINING HOLDING--1.3%
44,000 Associated Ore & Metal Corp Ltd 2,754,129
2,300,000 Middle Witwatersrand
(Western Areas) Ltd 10,306,040
------------
13,060,169
------------
MINING HOUSES--17.6%
1,640,136 Angelo American Platinum
Corporation Ltd 10,228,357
870,000 Anglo American Corporation of SA Ltd 55,159,949
1,057,200 Anglovaal Ltd 38,581,268
8,400,000 Gencor Ltd 31,042,846
880,000 Gold Fields of SA Ltd 26,626,631
1,007,651 JCI Ltd 9,891,481
1,600,000 Rand Mines Ltd 2,867,768
------------
174,398,300
------------
PAPER & PACKAGING--1.5%
870,000 Nampak Ltd 3,596,951
1,030,000 Sappi Ltd 11,395,542
------------
14,992,493
------------
PLATINUM--2.5%
330,000 Impala Platinum Holdings Ltd 4,744,774
769,887 Lebowa Platinum Mines Ltd 497,906
863,435 Potgietersrust Platinums Ltd 4,337,617
951,474 Rustenburg Platinum Holdings Ltd 14,834,160
------------
24,414,457
------------
PRINTING & PUBLISHING--1.4%
290,100 Independent Newspapers Holdings Ltd $ 1,521,023
500,000 Nasionale Pers Bpk 5,543,365
400,000 Omni Media Corp Ltd 6,559,649
------------
13,624,037
------------
STEEL & ALLIED--1.4%
17,924,790 Iscor Ltd 14,076,518
------------
STORES--3.9%
2,206,260 Foschini Ltd 11,924,352
1,350,000 Metro Cash & Carry Ltd 5,222,890
146,742 Speciality Stores Ltd 188,109
1,822,211 Speciality Stores 'N' Ltd 2,230,678
5,042,352 Wooltru Ltd 19,216,724
------------
38,782,753
------------
TRANSPORTATION--1.8%
3,322,184 Trencor Ltd 17,648,743
------------
Total Common Stocks
(Cost $1,008,192,145) 968,397,261
------------
- ---------------------------------------------------------------
MATURITY AMORTIZED
AMOUNT VALUE
- ---------------------------------------------------------------
REPURCHASE AGREEMENT--0.7%
6,361,517 State Street Bank and Trust Company,
4.75%, dated 06/28/96, due 07/01/96
(collateralized by a U.S. Treasury Bond,
8.125%, 08/15/19)(Cost $6,359,000) 6,359,000
------------
Total Investments--98.6%
(Cost $1,014,551,145) $974,756,261
Net Other Assets--1.4% 14,096,082
------------
Net Assets--100% $988,852,343
------------
------------
See Notes to Financial Statements.
16
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
ASSETS
Investments in securities, at value (Note B)
(Cost of investments - $1,014,551,145) $ 974,756,261
Cash (including foreign currency, at value) 11,581,240
Receivable for investments sold 22,663,539
Dividends and interest receivable 4,090,738
Deferred organization costs (Note B) 1,541,055
Other assets 25,677
--------------
TOTAL ASSETS 1,014,658,510
--------------
LIABILITIES
Payable for investments purchased 24,882,691
Accrued organization costs (Note B) 271,676
Payable to adviser (Note C) 450,613
Accrued expenses 201,187
--------------
TOTAL LIABILITIES 25,806,167
--------------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS $ 988,852,343
--------------
--------------
See Notes to Financial Statements.
17
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
STATEMENT OF OPERATIONS
PERIOD FROM NOVEMBER 3, 1995 (COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1996
INVESTMENT INCOME
Interest income $ 448,030
Dividend income (net of $29,632 dividend tax) 14,459,938
------------
TOTAL INCOME 14,907,968
------------
EXPENSES
Investment advisory fee (Note C) 4,337,443
Legal fees 350,000
Administration fee (Note C) 252,158
Amortization of deferred organization expenses (Note B) 228,945
Custodian fees 214,251
Trustees fees and expenses (Note C) 127,084
Auditing fees 50,000
Miscellaneous expenses 70,768
------------
TOTAL EXPENSES 5,630,649
------------
NET INVESTMENT INCOME 9,277,319
------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 7,332,123
Foreign currency transactions (885,655)
------------
Net realized gain 6,446,468
------------
Net unrealized appreciation (depreciation) of:
Investments (39,794,884)
Foreign currency translations 17,399
------------
Net unrealized depreciation (39,777,485)
------------
NET REALIZED AND UNREALIZED LOSS (33,331,017)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(24,053,698)
------------
------------
See Notes to Financial Statements.
18
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
STATEMENT OF CHANGES IN NET ASSETS
PERIOD FROM NOVEMBER 3, 1995 (COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1996
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 9,277,319
Net realized gain on investments and
foreign currency transactions 6,446,468
Net unrealized depreciation of investments and
foreign currency translations (39,777,485)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (24,053,698)
--------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Contributions 1,122,724,906
Withdrawals (109,818,865)
--------------
NET INCREASE IN NET ASSETS RESULTING FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTERESTS 1,012,906,041
--------------
NET INCREASE IN NET ASSETS 988,852,343
NET ASSETS
Beginning of period --
--------------
End of period $ 988,852,343
--------------
--------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
JUNE 30,
1996 (1)
--------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.82%(2)
-------
-------
Net investment income 1.34%(2)
-------
-------
Portfolio turnover rate 4.43%(3)
-------
-------
Average commission rate per share $ 0.02
-------
-------
NOTES:
(1) For the period November 3, 1995 (commencement of operations) to June 30,
1996.
(2) Annualized
(3) Not annualized
See Notes to Financial Statements.
19
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE A -- ORGANIZATION
Old Mutual South Africa Equity Trust (the "Trust") is a trust organized under
the laws of the Commonwealth of Massachusetts pursuant to a Declaration of
Trust dated as of September 1, 1995 and has its principal place of business
in Bermuda. The Trust is registered as a non-diversified open-end management
investment company under the United States Investment Company Act of 1940, as
amended (the "Act").
The investment objective of the Trust is to seek long-term total return in
excess of the Johannesburg Stock Exchange ("JSE") Actuaries All Share Index
from investment in equity securities of South African issuers.
Beneficial interest in the Trust is issued to Old Mutual Equity Growth Assets
South Africa Fund ("OMEGA South Africa Fund") and Old Mutual South Africa
Growth Assets Fund Limited ("Old Mutual SAGA Fund"). OMEGA South Africa Fund
is a Massachusetts business trust organized pursuant to a Declaration of
Trust dated as of September 1, 1995. OMEGA South Africa Fund offers shares of
benefical interest to United States investors. Old Mutual SAGA Fund was
incorporated as a company under the laws of Bermuda as of September 7, 1995.
Old Mutual SAGA Fund offers shares of beneficial interest to non-United
States investors. The shares are listed on the Official List of the Irish
Stock Exchange.
Old Mutual Fund Holdings (Bermuda) Limited, a wholly-owned subsidiary of
South African Mutual Life Assurance Society ("Old Mutual"), holds 90.02% of
the beneficial interest in the Trust as of June 30, 1996. It is expected that
all of the investable assets of OMEGA South Africa Fund and Old Mutual SAGA
Fund will be invested in the Trust. The Trust will apply amounts so invested
to redeem a portion of the beneficial interest of Old Mutual Fund Holdings
(Bermuda) Limited in the Trust.
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements are prepared in accordance with United
States generally accepted accounting principles. The following is a summary
of significant accounting policies followed by the Trust in the preparation
of its financial statements.
VALUATION: Securities are valued each day on which the New York Stock
Exchange is open for trading (a "Business Day") as of 10:00 a.m. United
States eastern standard time which is after the close of business for the
Johannesburg Stock Exchange ("JSE") for that day. JSE listed securities will
generally be valued based on the current JSE ruling price which is generally
the last sale price. If the securities did not trade on the JSE on the date
of valuation, they may be valued on a different basis believed by the
trustees of the Trust to reflect their fair value.
20
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
-CONTINUED-
REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, the Trust's custodian takes possession of the underlying
collateral securities, the value of which equals the principal amount,
including interest, of the repurchase transaction. To the extent that any
repurchase transaction exceeds one business day, the value of the collateral
is marked-to-market on a daily basis to ensure the adequacy of the
collateral. In the event of default of the obligation to repurchase, the
Trust has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings.
INVESTMENT TRANSACTIONS: Investment security transactions are recorded on
trade date. Dividend income on foreign securities is recorded on the
ex-dividend date of when the Trust becomes aware of its declaration. Interest
income is recorded on the accrual basis. Realized gains and losses from
security transactions are determined on the basis of identified cost.
FOREIGN CURRENCY TRANSLATIONS: Securities and other assets and liabilities
denominated in foreign currencies, mainly South African Rand, are translated
into U.S. dollars using the exchange rate prevailing as of the time of
valuation. Purchases and sales of securities and income and expenses are
translated into U.S. dollar amounts on the respective dates of such
transactions. Net realized gain (loss) on foreign currency transactions
includes net realized currency gains and losses recognized between accrual
and payment dates. The Trust does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments
from fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized gain or
loss from investments.
FEDERAL INCOME TAXES: The Trust intends to comply with the requirements of
the Internal Revenue Code of 1986, as amended. The Trust intends to conduct
its operations so that the OMEGA South Africa Fund can qualify as a regulated
investment company under Subchapter M of the United States Internal Revenue
Code of 1986, as amended. The Trust will be treated as a partnership for
federal income tax purposes and is therefore not subject to federal income
tax.
ORGANIZATION EXPENSES: Expenses incurred by the Trust in connection with its
organization are being amortized on a straight-line basis over a period of
five years. The trustees consider U.S. $100,000 of the $4,750,100 in cash
invested as of November 1, 1995 to be the minimum required capital under the
Act (the "Initial Investment"). The amount paid by the Trust on any
redemption of beneficial interests from the Initial Investment will be
reduced by the pro rata portion of any unamortized organizational expenses of
the Trust. Such pro rata portion is to be determined by multiplying the
unamortized expenses with the ratio of the amount redeemed divided by the
amount of the book capital account of the beneficial interest attributable to
the Initial Investment at the time of redemption.
21
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
-CONTINUED-
USE OF ESTIMATES: The preparation of financial statements in conformity with
United States generally accepted accounting principles requires management to
make estimates and assumptions in determining the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual amounts
could differ from these estimates.
NOTE C -- ADVISORY AND ADMINISTRATION FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
The Trust has entered into an investment advisory agreement dated as of
October 23, 1995 with Old Mutual Asset Managers (Bermuda) Limited (the
"Adviser"), a wholly-owned subsidiary of Old Mutual to provide investment
management services. For the period November 3, 1995 to November 30, 1995 the
Adviser received for its services monthly compensation at the rate of 0.85%
of average daily net assets of the Trust. As of December 1, 1995, the Adviser
reduced its annual fee to 0.60% of average daily net assets of the Trust.
The Adviser will reduce or rebate a portion of its advisory fee as necessary
so that ordinary operating expenses of each of the OMEGA South Africa Fund
and Old Mutual SAGA Fund, including the advisory fee, will not exceed 1.00%,
per annum of each Fund's average daily net assets. This limitation does not
apply to extraordinary expenses, placement fees and brokerage expenses.
State Street Cayman Trust Company, Ltd., will either directly or through an
affiliated entity provide certain administrative and accouting services to
the Trust pursuant to an Administration Agreement dated as of October 23,
1995. Under the Administration Agreement, the Trust pays compensation to
State Street at the annual rate of 0.05% of the first $500 million of the
Trust's average daily net assets, 0.025% of the next $500 million of the
Trust's average daily net assets and 0.01% of the Trust's average daily net
assets in excess of $1 billion.
Trustees not resident in Bermuda receive an annual fee of $20,000. Trustees
resident in Bermuda receive an annual fee of $10,000. The Audit Committee
chairman receives an additional annual fee of $5,000. The trust pays no
compensation to their Trustees who are directors or employees of Old Mutual
or any wholly-owned subsidiaries of Old Mutual.
NOTE D -- INVESTMENT TRANSACTIONS
For the period ended June 30, 1996, there were purchase and sale transactions
(excluding short-term securities) of $1,051,172,452 and $40,592,233,
respectively. The aggregate cost of Trust investments was substantially the
same for book and Federal income tax purposes at June 30, 1996. Gross
unrealized appreciation of investments was $56,974,694 and gross unrealized
depreciation of investments was $96,769,578, resulting in net unrealized
depreciation of investments of $39,794,884.
22
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and the Owners of Beneficial Interest of
Old Mutual South Africa Equity Trust
We have audited the accompanying statement of assets and liabilities of the
Old Mutual South Africa Equity Trust (the "Trust") as of June 30, 1996,
including the schedule of investments as of June 30, 1996, and the related
statements of operations and changes in net assets and the financial
highlights for the period from November 3, 1995 (commencement of operations)
to June 30, 1996. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of the
securities owned as of June 30, 1996, by correspondence with the custodian
and brokers. 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 and financial highlights referred to
above present fairly, in all material respects, the financial position of Old
Mutual South Africa Equity Trust as of June 30, 1996, the result of its
operations, the changes in net assets and the financial highlights for the
period from November 3, 1995 to June 30, 1996, in conformity with United
States generally accepted accounting principles.
KPMG PEAT MARWICK
Chartered Accountants
July 22, 1996
23
<PAGE>
TRUSTEES
Michael John Levett
CHAIRMAN OF THE BOARD
William Francois de la Harpe Beck
DEPUTY CHAIRMAN OF THE BOARD
William Langley
TREASURER
William Lester Boyan
Thomas Haskins Davis
Michel John Drew
Kenneth Rigby Williams
INVESTMENT MANAGER
Old Mutual Asset Managers (Bermuda) Limited
61 Front Street, Hamilton HM11, Bermuda
ADMINISTRATOR
FOR THE OMEGA SOUTH AFRICA FUND:
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
FOR THE MASTER TRUST:
State Street Cayman Trust Company, Ltd.
P.O. Box 2508
Elizabeth Square, George Town
Grand Cayman, British West Indies
TRANSFER AGENT
FOR THE OMEGA SOUTH AFRICA FUND:
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
FOR THE OMEGA SOUTH AFRICA FUND
KPMG Peat Marwick LLP
99 High Street, Boston, MA 02110
FOR THE MASTER TRUST:
KPMG Peat Marwick
Vallis Building, Hamilton HM11, Bermuda
LEGAL COUNSEL
IN THE UNITED KINGDOM:
Norton Rose
Kempson House, Camomile Street, London EC3A
7AN
IN THE UNITED STATES:
Bingham, Dana & Gould
150 Federal Street, Boston, MA 02110
IN BERMUDA:
Conyers Dill & Pearman
Clarendon House, Church Street, Hamilton,
Bermuda
24
<PAGE>
OMEGA
SOUTH AFRICA
OLD MUTUAL
EQUITY GROWTH
ASSETS SOUTH
AFRICA FUND
ANNUAL REPORT
JUNE 30, 1996
(LOGO)
