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OMEGA
SOUTH AFRICA 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 ("JSE") Actuaries All Share Index from investment in equity securities
of South African issuers.
FUND ORGANIZATION
Rather than directly acquire and manage its 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.
INVESTMENT PORTFOLIO
Under normal circumstances at least 95% of the Master Trust's total assets will
be invested in listed South African equities.
At December 31, 1995 there were 61 shares in the portfolio of which the top 15
comprised 65% by value. The historical price earnings ratio was 19.0 and the
dividend yield was 1.9%.
THE OMEGA FUND HAS A UNIQUE FUND STRUCTURE OFFERING INSTITUTIONAL INVESTORS
INSTANT ACCESS TO THE SOUTH AFRICAN SHARE MARKET. WITH AN UNDERLYING PORTFOLIO
IN EXCESS OF US$ 1 BILLION, THE FUND COMBINES THE LIQUIDITY OF AN OPEN-END FUND
WITH THE PORTFOLIO STABILITY AND REDUCED TRADING COSTS ASSOCIATED WITH A
CLOSED-END FUND.
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$ 45 billion of assets
under management.
The Adviser receives a management fee of 0.60% per annum, reduced to 0.50% for
investors who invest US$ 50 million or more.
SUBSCRIPTION
Shares are priced daily and are offered on a continuous basis at net asset
value, plus brokerage commission.
REDEMPTION
Investors may request redemption of shares on any business day. Shares will be
redeemed at net asset value less a redemption fee of 1.65%.
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February 12, 1996
Dear Shareholder
The OMEGA Fund was launched on November 10, 1995 at a net asset value ("nav")
of US$ 100.00. The South African equity market has performed strongly since the
launch of the Fund with the result that the nav had increased to US$ 103.967 in
the seven weeks to December 31, 1995, including the payment of a dividend of
US$ 0.29453, an increase of 4.26%.
I am pleased to report that the performance of the Fund has continued to be
satisfactory and as at the date of this report, the nav had risen to $112.673,
an increase of 12.97% since launch.
The OMEGA Fund has a unique fund structure which was designed to create an
efficient vehicle for institutional investors to gain instant exposure to the
South African equity market in a cost effective way. I should like to remind
you of the key features.
Full details are contained in the OMEGA Fund Private Placement Memorandum so I
will confine my comments to what I believe are the unique benefits of this
structure.
- - The OMEGA Fund achieves its exposure to South Africa via its
investment in Old Mutual South Africa Equity Trust (the "Master Trust").
The Master Trust was established with a fully invested portfolio of over
US$ 1 billion. Consequently subscribers to the OMEGA Fund gain their
exposure to the Master Trust at nav, avoiding the bid ask spread, South
African stamp duty of 1.0%, and potential market impact costs on the
underlying South African securities.
- - The size of the Master Trust, currently in excess of US$ 1
billion and the ability of investors in the OMEGA Fund to acquire
virtually unlimited holdings at the next day's nav, enables investors in
the OMEGA Fund to gain exposure to the South African equity market
speedily and in volume - as well as cost effectively.
- - Redemptions from the OMEGA Fund may be requested in any size at
the next day's nav 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 Master Trust securities enhances the liquidity of the
OMEGA Fund and protects the investor from bearing the realization costs
of the underlying South African securities. We believe that this charge
is substantially less than the costs which would be incurred dealing
directly in South African securities.
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Our investment objective is long term total return in excess of that of the JSE
Actuaries All Share Index ("All Share Index"), and we will seek to realize this
objective through a policy of investing in those securities which the Adviser
believes will show above average growth in the longer term. Less weight will
be accorded to short term and cyclical factors.
The portfolio currently consists of some sixty securities but is weighted
towards the larger holdings, with the top fifteen accounting for 65% of the
portfolio by value. This stock specific weighting is also illustrated by a
comparison with the weightings these holdings have in the All Share Index.
OMEGA SOUTH AFRICA FUND
Top Fifteen Holdings as at December 31, 1995
<TABLE>
<CAPTION>
Weight in
Weight All Share
in OMEGA Index
<S> <C> <C>
STANDARD BANK 5.8% 2.4%
NEDCOR 5.6% 1.5%
CG SMITH 5.4% 1.5%
DE BEERS 5.1% 4.7%
SA BREWERIES 5.1% 4.4%
BARLOWS 5.0% 1.2%
ANGLO AMERICAN 4.9% 5.8%
SAFREN 4.8% 0.8%
SASOL 4.2% 2.0%
REMBRANDT 4.2% 2.1%
ANGLOVAAL N 4.1% 1.1%
WOOLTRU 3.1% 0.8%
ANGLOVAAL IND 2.7% 1.0%
GENCOR 2.7% 2.0%
REUNERT 2.6% 0.5%
</TABLE>
No report on the OMEGA Fund would be complete without some commentary on the
outlook for the South African economy and, more particularly, the South African
equity market. The review which follows has been produced by the Adviser and
such a review will form a regular part of our reports to shareholders.
Thank you for the confidence you have shown us by your investment in the OMEGA
South Africa Fund.
M. J. LEVETT
PRESIDENT
3
<PAGE> 5
THE SOUTH AFRICAN ECONOMY
1995 may prove to be a landmark year in South Africa's economic development in
the same way that 1994 marked a turning point in its political development. Key
economic features of the year were:
- - Abolition of the financial rand
- - First steps in the relaxation of exchange
control
- - Ongoing deregulation of the domestic
economy
- - Maintenance of fiscal and monetary
discipline
- - A structural reduction in the level of inflation.
[GRAPH]
[CPI INFLATION]
While a number of fundamental problems remain, in particular the very high
levels of unemployment, the progress made in opening up the economy combined
with the fiscal restraint of government and the monetary discipline of the
independent Reserve Bank has facilitated faster economic growth while reducing
inflation to its lowest level for many years.
The economic successes have induced a new level of optimism among both domestic
and international investors.
[GRAPH]
[SACOB BUSINESS CONFIDENCE INDEX]
Domestic investor confidence has been translated into a revival of growth in
private sector fixed investment which grew by an estimated 16% in real terms
during 1995. The confidence of international investors was most clearly
displayed by the strong inflows of foreign capital (which increased to more
than US$ 5 billion in 1995 compared to US$ 1.5 billion in 1994).
[GRAPH]
[CAPITAL INFLOWS (Sm)]
4
<PAGE> 6
GDP growth in 1995 is now estimated at 31/2%, an improvement on the widely
forecast 3%. Looking forward in 1996 we expect the continuation of the
favorable economic fundamentals to combine with positive cyclical factors (such
as the good rains experienced in 1995/96) and are forecasting more than 4% GDP
growth for 1996, with the strong momentum flowing over into 1997.
Good as these growth numbers are, the picture is still more encouraging when
one excludes government and the depressed agricultural and mining sectors.
[GRAPH]
[GDP GROWTH EXCL. GOV & PRIMARY SECTORS]
This illustrates that growth in the non-primary private sector, the engine for
growth in the economy, is currently running at over 6%.
With GDFI already on the upturn and with the impact of public sector spending
through the Reconstructuion and Development Program still to be felt, capital
spending is expected to provide a strong stimulus over the coming years.
Looking longer term the major issue which needs to be addressed is the
generally low level of labour productivity and the associated high levels of
unemployment. The risk is that short term solutions will be sought for what is
a long term structural problem; the opportunity is that the existing longer
term policy measures will be maintained, which could lead to South Africa
achieving rates of growth in the future which would have been considered
fanciful only one or two years ago.
THE SOUTH AFRICAN EQUITY MARKET
The equity market started 1995 on a weak note as many international investors
retreated from emerging markets in the wake of the Mexico crisis. However the
accelerating growth of the domestic economy and the increasing levels of
confidence brought back both the domestic and the international investor and
the All Share Index closed the year with a US dollar return of 15%, making
South Africa one of the best performing emerging markets in 1995 in US dollar
terms.
1996 has opened equally impressively with new highs being established regularly
during the first six weeks of the year. The key question, obviously, is can
this performance continue, or is the market close to running out of steam?
5
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The driving forces behind any equity market are the growth of corporate
earnings and the availability of liquidity for investment. Corporate earnings
growth has been rising strongly since 1994 when it averaged some 10%, to a
level of 30% in 1995. Our forecast for 1996 is for a slowdown in the rate of
growth but we are still expecting an increase in excess of 20% for the year.
This is broadly in line with the IBES* forecast for the next 18 months.
A comparison with the IBES consensus earnings growth estimates for a range of
countries for the next 18 months shows South Africa compares favourably with
many emerging and developed markets.
[GRAPH]
[EMERGING MARKETS 18 MONTHS FORWARD EARNING GROWTH]
Liquidity, the other major factor in the equation, is also plentiful; local
institutions remain strong buyers of South African equities and the demand from
international investors continues to grow.
[GRAPH]
[EMERGING MARKETS 18 MONTHS FORWARD PE RATIOS]
On balance therefore we believe the market seems likely to push higher and an
18 month forward price earnings ratio of 12.9 for the All Share Index is not
demanding and is below the historical average 15.0 of the last five years.
OLD MUTUAL ASSET
MANAGERS (BERMUDA)
FEBRUARY 12, 1996
6
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STATEMENT OF ASSETS AND LIABILITIES
OMEGA SOUTH AFRICA FUND
December 31, 1995 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in Trust, at value (Note B) $ 4,261,917
Receivable from investment adviser (Note C) 22,080
------------
Total assets 4,283,997
------------
LIABILITIES
Payable for Fund expenses 36,221
Dividends Payable 12,000
------------
Total Liabilities 48,221
------------
NET ASSETS $ 4,235,776
============
NET ASSETS consist of:
Paid in capital $ 4,089,750
Distribution in excess of net investment income (715)
Accumulated net realized gains on investment 221
Net unrealized appreciation on investment 146,520
------------
NET ASSETS $ 4,235,776
============
SHARES OUTSTANDING ($.001 PAR VALUE) 40,742
============
NET ASSET VALUE PER SHARE $ 103.96
============
</TABLE>
<PAGE> 9
STATEMENT OF OPERATIONS
OMEGA SOUTH AFRICA FUND
Period from November 10, 1995 (Commencement of Operations) to December 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Investment income allocated from Trust $ 15,643
Expenses allocated from Trust (3,702)
------------
NET INVESTMENT INCOME FROM TRUST 11,941
------------
EXPENSES:
Auditing fees 10,515
Trustees' fees and expense (Note c) 10,515
Administration fee (Note c) 8,412
Shareholder servicing agent fees 4,196
Printing expense 2,103
12b-1 fees (Note c) 218
Miscellaneous expenses 262
------------
Total expenses 36,221
Deduct: Expenses reimbursed by investment adviser (note c) (35,565)
------------
NET EXPENSES 656
------------
NET INVESTMENT INCOME 11,285
------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) allocated from Trust on:
Investment 233
Foreign currency transactions (12)
------------
Net realized gain 221
Net unrealized appreciation of investment allocated from Trust 146,520
------------
NET REALIZED AND UNREALIZED GAIN ALLOCATED FROM TRUST 146,741
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 158,026
============
</TABLE>
See Notes to Financial Statements.
<PAGE> 10
STATEMENT OF CHANGES IN NET ASSETS
OMEGA SOUTH AFRICA FUND
Period from November 10, 1995 (Commencement of Operations) to December 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 11,285
Net realized gain allocated from Trust 221
Net unrealized appreciation of investment allocated from Trust 146,520
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 158,026
------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (12,000)
------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Proceeds from shares sold (net of $250 placement fee) 4,089,750
------------
NET INCREASE IN NET ASSETS 4,235,776
NET ASSETS:
Beginning of period -
------------
End of period (including distribution in excess of
net investment income of $715) $ 4,235,776
============
NUMBER OF SHARES OF BENEFICIAL INTEREST:
SOLD 40,742
REDEEMED
-
NET INCREASE IN SHARES OUTSTANDING 40,742
============
</TABLE>
See Notes to Financial Statements.
<PAGE> 11
FINANCIAL HIGHLIGHTS
OMEGA SOUTH AFRICA FUND
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.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
1995(1)
-------
PER SHARE DATA:
<S> <C>
Net Asset Value, Beginning of Period $ 100.00
Income From Investment Operations
Net Investment Income 0.28
Net Realized and Unrealized Gains and
Losses on Investment and Foreign Currency 3.98
---------
Total From Investment Operations 4.26
---------
Less Distributions
Dividends from Net Investment Income (0.29)
Less Placement Fee (0.01)
---------
Net Asset Value, End of Period $ 103.96
========
TOTAL RETURN 4.26%(4)
========
RATIOS/SUPPLEMENTAL DATA:
Ratio of Expenses to Average Net Assets 1.00%(2)(3)
========
Ratio of Net Investment Income to Average Net Assets 2.59%(2)(3)
========
Net Assets, End of Period (in thousands) $ 4,236
========
</TABLE>
NOTES:
(1) For the period november 10, 1995 (commencement of operations) to
December 31, 1995.
(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 9.16% and (5.57)%,
respectively, for the period ended December 31, 1995.
(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. Had the Adviser not absorbed
a portion of expenses, total return would have been lower. Results
represent past performance and do not guarantee future results.
Investment returns and principal may fluctuate and shares when
redeemed may be worth more or less than original cost. Periods less
than one year are not annualized.
See Notes to Financial Statements.
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
OMEGA SOUTH AFRICA FUND
DECEMBER 31, 1995 (UNAUDITED)
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
investable assets in Old Mutual South Africa Equity Trust (the "Trust"), a
non-diversified open-end management investment company having the same
investment objective 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 charge 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 (0.40% at December 31, 1995).
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, the Fund distributes substantially all of its
taxable income, including realized capital gains, for the fiscal year. In
addition, by distributing during each calendar year substantially all of
its 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 other investors in the Trust on a daily basis.
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
OMEGA SOUTH AFRICA FUND
DECEMBER 31, 1995 (UNAUDITED)
-CONTINUED-
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: OMEGA South Africa Fund declares
and distributes dividends from net investment income, if any, semi-annually in
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 and differences in
the timing of 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.
NOTE C -- ADMINISTRATION AND PLACEMENT EXPENSES 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 daily net assets. This limitation does
not apply to extraordinary expenses, the sales charge on shares, brokerage
expenses or the redemption fee.
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 Administrative Services Agreement dated
as of October 23, 1995. Under the Administrative Services Agreement, OMEGA
South Africa Fund pays compensation to State Street at the annual rate of
$40,000.
OMEGA South Africa Fund has adopted a Placement Plan (the "Plan") pursuant to
Rule 12b-1 under the act. OMEGA South Africa Fund will reimburse the Adviser
for placement costs at an annual rate not to exceed 0.05% of the daily net
assets of OMEGA South Africa Fund.
Trustees receive an annual fee of $5,000. OMEGA South Africa Fund pays no
compensation to its Trustees who are directors or employees of Old Mutual or
any wholly-owned subsidiaries of Old Mutual.
NOTE D -- INVESTMENT TRANSACTIONS
OMEGA South Africa Fund's contributions and withdrawals in respect of its
investment in the Trust for the period from commencement of operations on
November 10, 1995 to December 31, 1995 amounted to $4,103,485 and $250,
respectively.
<PAGE> 14
SCHEDULE OF INVESTMENTS
OLD MUTUAL EQUITY TRUST
("THE TRUST")
DECEMBER 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
----------------------------------------------------- ------------------------------------------------------
NUMBER MARKET NUMBER MARKET
OF SHARES VALUE OF SHARES VALUE
----------------------------------------------------- ------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS - 99.7%
BANKS & FINANCIAL SERVICES - 12.5% ENGINEERING - 1.2%
710,000 Amalgamated Banks of SA Ltd $3,992,593 310,000 African Oxygen Ltd $ 12,755,452
240,000 First National Bank Holdings ------------
Ltd 2,205,459
300,000 Investec Holdings Ltd 5,760,527 FOOD - 1.2%
3,500,000 Nedcor Ltd 60,485,530 360,000 CG Smith Foods Ltd 7,505,143
1,300,000 Standard Bank Investment
Corp Ltd 62,405,706 310,000 Tiger Oats Ltd 5,357,290
---------- ------------
134,849,815
----------- 12,862,433
------------
BEVERAGES, HOTELS & LEISURE - 5.1% FURNITURE & HOUSEHOLD - 0.9%
1,500,000 The South African Breweries 1,500,000 JD Group Ltd 9,875,189
Ltd 54,930,737 ------------
---------- GOLD - 1.4%
720,000 Driefontein Consolidated Ltd 9,134,550
BUILDING, CONSTRUCTION & ALLIED - 1.2% 111,000 Southvaal Holdings Ltd 3,075,298
180,000 Anglo Alpha Ltd 7,060,760 44,000 Vaal Reefs Exploration and
Mining Co Ltd 2,848,443
2,400,000 Everite Holdings Ltd 5,925,113 ------------
--------- 15,058,291
12,985,873 ------------
----------
INDUSTRIAL HOLDING - 25.6% (1)
CHEMICALS, OILS & PLASTICS - 5.8% 3,900,000 Anglovaal Industries Ltd 29,419,833
880,000 Aeci Ltd 5,310,657 3,800,000 Barlow Ltd 54,099,575
1,200,000 Engen Ltd 9,216,843 1,100,000 Bidvest Group Ltd 7,090,934
5,500,000 Sasol Ltd 45,034,975 7,542,600 CG Smith Ltd 57,932,465
976,320 Sentrachem Ltd 3,481,596 1,300,000 Forward Corporation Ltd 1,069,812
--------- 340,000 Imperial Holdings Ltd 3,893,842
63,044,071 1,200,000 Johnnies Industrial Corporation
---------- Ltd 18,104,512
567,280 Malbak Ltd 3,929,178
COAL - 2.7% 750,000 Murray & Roberts Holdings Ltd 5,297,627
239,000 Anglo American Coal Corp 4,700,000 Rembrandt Group Ltd 45,124,126
Ltd 15,078,864 14,200,000 Safmarine and Rennies
2,080,000 Ingwe Coal Corporation Holdings Ltd 51,611,576
Ltd 13,693,595 ------------
---------- 277,573,480
28,772,459
----------
INSURANCE - 1.9%
DIAMONDS - 5.0% 280,000 Liberty Life Association of
1,800,000 De Beers Consolidated Mines Africa Ltd 8,679,194
Ltd 54,560,417 290,000 Metropolitan Life Ltd 4,534,357
---------- 300,000 Mutual & Federal Insurance Co
Ltd 7,077,218
ELECTRONICS & ELECTRICAL - 3.8% -----------
2,320,000 Allied Electronics Corporation 20,290,769
Ltd 6,300,370 ------------
2,500,000 Grintek Ltd 3,188,863
1,100,000 IBM South Africa Group Ltd 3,771,774
4,100,000 Reunert Ltd 28,116,856
----------
41,377,863
----------
</TABLE>
See Notes to Financial Statements
13
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SCHEDULE OF INVESTMENTS
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
("THE TRUST")
DECEMBER 31, 1995 (UNAUDITED)
-CONTINUED-
<TABLE>
<CAPTION>
- ------------------------------------------------------ ------------------------------------------------------
NUMBER MARKET NUMBER MARKET
OF SHARES VALUE OF SHARES VALUE
- ------------------------------------------------------ ------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS - CONTINUED PRINTING & PUBLISHING - 0.7%
INVESTMENT TRUSTS - 0.8% 270,000 Independent Newspapers
2,900,000 Genbel Investments Ltd $ 8,869,840 Holdings Ltd $ 1,388,698
------------ 400,000 Omni Media Corporation Ltd 6,364,011
MANGANESE - 0.6% --------------
490,000 Samancor Ltd 6,182,965 7,752,709
------------ --------------
MINING HOLDING - 1.1% STEEL & ALLIED - 1.5%
44,000 Associated Ore & Metal Corp 17,700,000 Iscor Ltd 15,925,387
Ltd 3,138,115 --------------
2,300,000 middle Witwatersrand STORES - 4.8%
(Western Areas) Ltd 9,148,265 2,142,000 Foschini LTD 16,745,851
------------ 1,585,000 Speciality Stores Ltd 2,211,004
12,286,380 6,000,000 Wooltru Ltd 32,917,295
------------ --------------
51,874,150
MINING HOUSES - 16.1% --------------
1,600,000 Anglo American Platinum TRANSPORTATION - 1.6%
Corporation Ltd 9,107,118 3,300,000 Trencor Ltd 17,199,287
870,000 Anglo American Corporation --------------
of SA Ltd 52,503,086 TOTAL COMMON STOCKS
1,100,000 Anglovaal Ltd 44,657,797 (COST $1,012,263,688) 1,078,476,888
8,400,000 Gencor Ltd 29,263,476 --------------
880,000 Gold Fields of SA Ltd 26,311,891
1,200,000 JCI Ltd 9,463,723 ------------------------------------------------------
1,600,000 Rand Mines Ltd 2,567,549 REPURCHASE MARKET
------------ PRICE VALUE
173,874,640 ------------------------------------------------------
------------
REPURCHASE AGREEMENT - 0.0%
PAPER & PACKAGING - 1.9% $ 358,249 State Street Bank and Trust Company
870,000 Nampak Ltd 4,832,670 at 5.00%, Dated 12/29/95, Due
1,030,000 Sappi Ltd 15,822,247 01/03/96 (Collateralized by U.S.
------------ Treasury Bond 8.00% 08/15/99,
20,654,917 Market Value of $368,270)
------------ (Cost $358,000) $ 358,000
--------------
PLATINUM - 2.3% TOTAL INVESTMENTS - 99.7%
330,000 Impala Platinum Holdings Ltd 6,019,750 (COST $1,012,621,688) $1,078,834,888
1,300,000L Ydenburg Platinum Ltd 18,900,014 NET OTHER ASSETS - 0.3% 3,244,896
------------ --------------
24,919,764 TOTAL NET ASSETS - 100% $1,082,079,784
------------ ==============
</TABLE>
Note to Schedule of Investments
- -------------------------------
(1) Industrial Holdings is not an industry but a Johannesburg Stock Exchange
sector which includes companies whose business activities are sufficiently
diverse that it is inappropriate to allocate them to one specific industry.
See notes to Financial Statements.
14
<PAGE> 16
STATEMENT OF ASSETS AND LIABILITIES
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
December 31, 1995 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (Note B)
(Cost of investments - $ 1,012,621,688) $ 1,078,834,888
Cash (including foreign currency, at value) 292,265
Receivable for investments sold 434,565
Deferred organization costs (note b) 1,748,769
Dividends and interest receivable 4,091,636
Other assets 61,080
----------------
TOTAL ASSETS 1,085,463,203
----------------
LIABILITIES
Payable for investments purchased 1,940,863
Accrued organization costs (note b) 718,138
Payable to adviser (note c) 542,962
Accrued expenses 181,456
----------------
TOTAL LIABILITIES 3,383,419
----------------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS $ 1,082,079,784
================
</TABLE>
See Notes to Financial Statements.
15
<PAGE> 17
STATEMENT OF OPERATIONS
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
Period from November 3, 1995 (Commencement of Operations) to December 31, 1995
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest income $ 18,432
Dividend income 4,204,760
--------------
TOTAL INCOME 4,223,192
--------------
EXPENSES:
Investment advisory fee (Note c) 1,214,172
Administration fee (Note c) 66,292
Custodian fees 52,620
Amortization of deferred organization expense (Note b) 51,231
Trustees' fees and expenses (Note c) 24,549
Auditing fees 22,317
Legal fees 11,159
Insurance expense 10,115
Miscellaneous expenses 4,519
--------------
TOTAL EXPENSES 1,456,974
--------------
NET INVESTMENT INCOME 2,766,218
--------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 25,211
Foreign currency transactions (2,975)
--------------
Net realized gain 22,236
Net unrealized appreciation of investments and foreign currency translations 66,234,707
--------------
NET REALIZED AND UNREALIZED GAIN 66,256,943
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 69,023,161
==============
</TABLE>
See Notes to Financial Statements.
16
<PAGE> 18
STATEMENT OF CHANGES IN NET ASSETS
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
Period from November 3, 1995 (Commencement of Operations) to December 31, 1995
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 2,766,218
Net realized gain on investments and foreign currency transactions 22,236
Net unrealized appreciation of investments and foreign currency translations 66,234,707
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 69,023,161
----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Contributions 1,048,461,222
Withdrawals (35,404,599)
----------------
NET INCREASE IN NET ASSETS RESULTING FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTERESTS 1,013,056,623
----------------
NET INCREASE IN NET ASSETS 1,082,079,784
NET ASSETS:
Beginning of period
--
End of period $ 1,082,079,784
================
</TABLE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1995(1)
-------
<S> <C>
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.86%(2)
====
Net investment income 1.63%(2)
====
Portfolio turnover rate 0.14%(3)
====
</TABLE>
NOTES:
(1) FOR THE PERIOD NOVEMBER 3, 1995 (COMMENCEMENT OF OPERATIONS) TO
DECEMBER 31, 1995.
(2) ANNUALIZED
(3) NOT ANNUALIZED
See Notes to Financial Statements.
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
DECEMBER 31, 1995 (UNAUDITED)
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 interests in the Trust are held by 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
beneficial 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 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 96.84% of the
beneficial interest in the Trust as of December 31, 1995. 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.
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
DECEMBER 31, 1995 (UNAUDITED)
-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 at least 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, or proceeds 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 or 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 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 3, 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.
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
DECEMBER 31, 1995 (UNAUDITED)
-CONTINUED-
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 to November 30, 1995 the Adviser received for its
services monthly compensation at the rate of 0.85% of daily net assets of the
Trust. As of December 1, 1995, the Adviser reduced its annual fee to 0.60% of
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 daily net assets. This limitation does not apply to
extraordinary expenses, sales charges, brokerage expenses and redemption fees.
State Street Cayman Trust Company, Ltd., will either directly or through an
affiliated entity provide certain administrative and accounting services to the
Trust pursuant to an Administrative Services Agreement dated as of October 23,
1995. Under the Administrative Services Agreement, the Trust pays compensation
to State Street at the annual rate of 0.05% of the first $500 million of the
Trust's daily net assets, 0.025% of the next $500 million of the Trust's daily
net assets and 0.01% of the Trust's 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 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 December 31, 1995, there were purchase and sale
transactions (excluding short-term securities) of $1,013,192,803 and $954,326,
respectively. The aggregate cost of Trust investments was substantially the
same for book and Federal income tax purposes at December 31, 1995. Gross
unrealized appreciation of investments (excluding foreign currency
translations) was $98,742,341 and gross unrealized depreciation of investments
(excluding foreign currency translations) was $32,529,141, resulting in net
unrealized appreciation of investments (excluding foreign currency
translations) of $66,213,200.
20
<PAGE> 22
<TABLE>
<S> <C>
TRUSTEES AUDITORS
-------- --------
Michael John Levett FOR THE OMEGA SOUTH AFRICA FUND:
Chairman of the Board KPMG Peat Marwick LLP
William Francois de la Harpe Beck One Boston Place, Boston, MA 02108
Deptuy Chairman of the Board
William Langley FOR THE MASTER TRUST:
Treasurer KPMG Peat Marwick
William Lester Boyan Vallis Building, Hamilton HM11, Bermuda
Thomas Haskins Davis
Michel John Drew LEGAL COUNSEL
Kenneth Rigby Williams -------------
IN THE UNITED KINGDOM:
Norton Rose
INVESTMENT MANAGER Kempson House, Camomile Street, London EC3A 7AN
------------------
Old Mutual Asset Managers (Bermuda) Limited IN THE UNITED STATES:
61 Front Street, Hamilton HM11, Bermuda Bingham, Dana & Gould
150 Federal Street, Boston, MA 02110
ADMINISTRATOR
------------- IN BERMUDA:
FOR THE OMEGA SOUTH AFRICA FUND: Conyers Dill & Pearman
State Street Bank and Trust Company Clarendon House, Church Street, Hamilton, Bermuda
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
</TABLE>
