<PAGE>
February 14, 1997
Dear Shareholder,
I am pleased to present the interim report of the OMEGA South Africa Fund,
covering the period July 1, 1996 to December 31, 1996.
As I have brought to the attention of shareholders in my previous reports,
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 Africa equity market in a cost effective way. The key
features of this unique structure are summarized overleaf.
During the six month period under review the performance of the South African
equity market was disappointing with the JSE Actuaries All Share Index, the
benchmark for the Fund, falling by over three percent during a period when
most world equity markets were showing very robust performances. This three
percent decline is in rand terms; in U.S. dollar terms the decline was a much
more substantial ten percent.
During this very difficult period the total return in U.S. dollars from the
OMEGA Fund was a negative 8.3% which compares with a U.S. dollar decline of
9.4% in the total return for the JSE Actuaries All Share Index. Total
dividends from the Fund amounted to U.S.$ 4.54 per share.
The continued weakness of the rand against the U.S. dollar throughout
calendar 1996 which saw a total decline of 22%, from R3.65 to R4.68 to the
dollar, significantly undermined the returns to international investors and
was clearly the major feature of the South African investment markets during
1996. However, as I noted in my previous report to shareholders, while a
sharp depreciation of the rand is clearly uncomfortable in the short term, in
the longer term dollar adjusted returns need not be adversely affected if
share prices are sufficiently stimulated by the depreciation of the rand - as
has been the case historically. It should be noted that the opening six weeks
of 1997 has been a marked improvement in confidence, reflected in both a
firmer trend in the All Share Index and the rand.
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 U.S.$900 MILLION AT DECEMBER
31, 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.
The Fund seeks 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 is accorded to short term and cyclical factors.
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.
The Master Trust was established with a fully invested portfolio of South
African equities in November, 1995. 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 U.S. 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 U.S.$42 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 U.S.$900 million at December 31,
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
the cost of realizing the underlying South African securities to fund
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 December 31, 1996 there were 68 shareholdings in the portfolio of which
the top 10 comprised 48.4% by value. The historical price earnings ratio was
16.7 and the dividend yield was 2.3%; this compares with 14.7 and 2.5% for
the benchmark JSE All Share Index.
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 December 31, 1996:
WEIGHT IN WEIGHT IN
OMEGA ALL SHARE
FUND INDEX
Sasol 6.2% 3.4%
Nedcor 5.6% 1.4%
De Beers 5.6% 5.2%
Anglo American 5.5% 6.1%
Standard Bank 5.4% 2.2%
Rembrandt 4.8% 2.2%
SA Breweries 4.1% 3.8%
Barlow 3.9% 0.9%
Safren 3.7% 0.6%
Anglovaal 3.6% 0.9%
TOTAL 48.4% 26.7%
2
<PAGE>
THE SOUTH AFRICAN
ECONOMY
The South African economy entered the fourth year of its economic upswing and
is on target to produce another year of 3% growth in GDP in 1996.
RB6006DGDP - TOTAL AT FACTOR COST (EXCL AGRICULTURE)
(CONST. 85 PRICES) (SAAR)
1990 0 -0.3437
-0.5 -0.994
-0.7 0.3768
0 -0.0969
1991 -0.9 -1.2982
-1 -1.0852
-1 -1.4763
-1.2 -1.8589
1992 -1.1 -0.9244
-1.5 -0.9925
-2.7 -1.0303
-3.4 -0.7281
1993 -2.1 -0.2652
-0.3 0.0978
2.7 1.023
5 1.5897
1994 3.5 1.3712
2.8 1.7748
2.2 2.0427
2.5 2.818
1995 3.8 3.62
3.8 4.3701
3.4 4.287
2.5 3.4829
1996 2.8 2.5618
3.1 1.7903
3.2 1.115
However, while the level of growth has been acceptable, its composition has
become much less so. Since 1995 growth has been increasingly driven by
spending rather than production. This has had the inevitable consequence of
putting pressure on the country's balance of payments, which in turn has
contributed to the decline in the rand and the need for South Africa to
maintain high short term interest rates.
These current difficulties arise out of the international re-integration and
domestic deregulation of the economy which are necessary steps if South
Africa is to build a platform to support a higher long term growth potential.
However, cheaper and more accessible imports and real income growth have
contributed to a buoyant spending environment which is only now beginning to
slow in response to the impact of very high real interest rates and the fall
in the rand.
rb6007c Private consumption expenditure: Total (R millions)(Const)
"Quarterly, year-on-year"
1990 1.3
3.2
3.9
3
1991 2.7
-0.1
-2.2
-2.1
1992 -2.1
-2
-1.4
-0.2
1993 -0.9
-1.1
1.1
2.1
1994 1.1
4.4
2.4
4.1
1995 4.7
4.9
5.7
3.8
1996 4.2
3.8
3.6
Production on the other hand is under pressure. Third quarter GDP rose 3.2%
year on year, but much of this gain was due to enormous growth in the small
agricultural sector (under 5% of GDP). Non agricultural GDP grew 1.1%.
Manufacturing GDP, which is a quarter of total production, contracted by 0.8%.
Looking forward into 1997 we expect some of these trends to reverse as the
economy slows to a forecast GDP growth of around 2.0%. Spending is expected
to be more restrained on the back of slower private consumption as consumers'
real incomes are squeezed and high real interest rates continue to bite. The
next government budget, due in March, 1997, is likely to be tough with few,
if any, benefits for individuals. Additionally, 1997 is unlikely to see a
repeat of the excellent 1996 agricultural season.
Production will unavoidably feel the impact of slowing domestic demand in
some sectors.
But other sectors will be underpinned by export demand, as the 1996
depreciation of the rand works through to higher export volumes and improved
rand earnings. Strong G7 economies in 1997 would also support both the
demand for and the prices of South Africa's commodity exports.
3
<PAGE>
One of the economic successes of recent years has been the reduction of
inflation from an annual rate of over 16% in 1991 to below 6% by early 1996.
CPI100 - INFLATION - CPI - ALL ITEMSCPI100 - INFLATION - CPI - ALL ITEMS
198601 1986 21%
198602 18%
198603 19%
198604 19%
198605 17%
198606 17%
198607 18%
198608 19%
198609 20%
198610 19%
198611 19%
198612 18%
198701 1987 16%
198702 16%
198703 17%
198704 16%
198705 17%
198706 17%
198707 16%
198708 16%
198709 16%
198710 16%
198711 15%
198712 15%
198801 1988 14%
198802 14%
198803 13%
198804 13%
198805 13%
198806 13%
198807 12%
198808 12%
198809 12%
198810 12%
198811 12%
198812 13%
198901 1989 13%
198902 14%
198903 14%
198904 14%
198905 15%
198906 16%
198907 16%
198908 16%
198909 15%
198910 15%
198911 15%
198912 15%
199001 1990 15%
199002 15%
199003 15%
199004 15%
199005 14%
199006 14%
199007 13%
199008 14%
199009 14%
199010 14%
199011 15%
199012 15%
199101 1991 14%
199102 15%
199103 14%
199104 15%
199105 15%
199106 15%
199107 16%
199108 16%
199109 15%
199110 17%
199111 16%
199112 16%
199201 1992 16%
199202 16%
199203 16%
199204 16%
199205 15%
199206 15%
199207 15%
199208 14%
199209 14%
199210 12%
199211 11%
199212 10%
199301 1993 10%
199302 9%
199303 10%
199304 11%
199305 11%
199306 10%
199307 10%
199308 9%
199309 9%
199310 9%
199311 9%
199312 10%
199401 1994 10%
199402 10%
199403 9%
199404 7%
199405 7%
199406 8%
199407 8%
199408 9%
199409 10%
199410 10%
199411 10%
199412 10%
199501 1995 10%
199502 10%
199503 10%
199504 11%
199505 11%
199506 10%
199507 9%
199508 8%
199509 6%
199510 6%
199511 6%
199512 7%
199601 1996 7%
199602 7%
199603 6%
199604 6%
199605 6%
199606 7%
199607 7%
199608 8%
199609 8%
199610 9%
199611 9%
199612
In recent months inflation has again begun to rise reflecting pressure from
food prices and the fall in the rand. We expect inflation to remain at this
higher level through 1997, averaging around 9% for the year compared with an
expected 7.4% for 1996. However, we believe that the monetary authorities
remain committed to containing inflation. With this and the key discipline
of low world inflation in a competitive environment, South Africa's inflation
could again be trending down by the end of 1997.
wlk215 EXCHANGE RATES USA/SA (RAND PER DOLLAR)
199001 1990 2.551
199002 2.558
199003 2.577
199004 2.571
199005 2.564
199006 2.545
199007 2.564
199008 2.551
199009 2.591
199010 2.597
199011 2.611
199012 2.639
199013 2.66
199014 2.667
199015 2.653
199016 2.66
199017 2.667
199018 2.667
199019 2.639
199020 2.646
199021 2.667
199022 2.674
199023 2.674
199024 2.667
199025 2.674
199026 2.667
199027 2.653
199028 2.639
199029 2.632
199030 2.625
199031 2.604
199032 2.604
199033 2.577
199034 2.558
199035 2.571
199036 2.571
199037 2.577
199038 2.584
199039 2.577
199040 2.571
199041 2.532
199042 2.532
199043 2.551
199044 2.551
199045 2.545
199046 2.538
199047 2.519
199048 2.525
199049 2.519
199050 2.519
199051 2.584
199052 2.577
199053 2.564
199101 1991 2.551
199102 2.591
199103 2.577
199104 2.558
199105 2.551
199106 2.532
199107 2.545
199108 2.551
199109 2.584
199110 2.611
199111 2.646
199112 2.695
199113 2.747
199114 2.71
199115 2.725
199116 2.77
199117 2.801
199118 2.801
199119 2.801
199120 2.801
199121 2.809
199122 2.817
199123 2.857
199124 2.89
199125 2.899
199126 2.899
199127 2.924
199128 2.915
199129 2.865
199130 2.882
199131 2.89
199132 2.865
199133 2.899
199134 2.89
199135 2.89
199136 2.874
199137 2.849
199138 2.841
199139 2.841
199140 2.817
199141 2.841
199142 2.849
199143 2.857
199144 2.841
199145 2.817
199146 2.801
199147 2.793
199148 2.817
199149 2.793
199150 2.786
199151 2.778
199152 2.747
199153 2.755
199201 1992 2.762
199202 2.786
199203 2.825
199204 2.817
199205 2.825
199206 2.793
199207 2.825
199208 2.857
199209 2.874
199210 2.89
199211 2.907
199212 2.907
199213 2.907
199214 2.89
199215 2.882
199216 2.899
199217 2.89
199218 2.89
199219 2.874
199220 2.857
199221 2.849
199222 2.841
199223 2.841
199224 2.83
199225 2.817
199226 2.801
199227 2.762
199228 2.786
199229 2.755
199230 2.77
199231 2.77
199232 2.786
199233 2.778
199234 2.778
199235 2.755
199236 2.745
199237 2.795
199238 2.842
199239 2.85
199240 2.832
199241 2.872
199242 2.872
199243 2.922
199244 2.965
199245 2.992
199246 2.985
199247 2.99
199248 3.028
199249 3.004
199250 3.02
199251 3.006
199252 3.017
199253 3.055
199301 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
199401 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 3.571
199451 3.567
199452 3.545
199453 3.55
199501 1995 3.555
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 3.613
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 3.62
199546 3.63
199547 3.64
199548 3.65
199549 3.67
199550 3.65
199551 3.65
199552 3.65
199553 3.63
199601 1996 3.61
199602 3.62
199603 3.65
199604 3.65
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
199628 4.363
199629 4.388
199630 4.458
199631 4.503
199632 4.525
199633 4.558
199634 4.553
199635 4.518
199636 4.518
199637 4.513
199638 4.498
199639 4.543
199640 4.535
199641 4.555
199642 4.558
199643 4.588
199644 4.683
199645 4.703
199646 4.683
199647 4.608
199648 4.595
199649 4.673
199650 4.753
199651 4.693
199652 4.695
199653 4.701
199701 1997 4.708
199702 4.673
The profound weakness of the rand through 1996 was the consequence of many
different factors, but key among them were a more negative sentiment towards
South Africa by foreign investors and continued strong demand for imports as
domestic spending remained robust.
RB5380K Ratio of balance on current account to gross domestic product at
current prices (percentage) (Pe
199001 1990 3%
199002 1%
199003 1%
199004 3%
199101 1991 1%
199102 1%
199103 2%
199104 4%
199201 1992 3%
199202 2%
199203 1%
199204 1%
199301 1993 1%
199302 3%
199303 2%
199304 1%
199401 1994 1%
199402 1%
199403 -1%
199404 -1%
199501 1995 -3%
199502 -3%
199503 -1%
199504 -2%
199601 1996 -2%
199602 -3%
199603 -2%
199604
1997
We expect slower spending growth and the weaker rand to be a brake on import
demand in 1997. This, combined with better exports, could dramatically
improve the current account deficit from its present level of around 2% of
GDP.
A smaller current account deficit would ease the pressure on South Africa's
weak foreign exchange reserves position. Together with further real progress
in establishing fiscal discipline, a tough monetary policy, and progress on
privatization, this should create an environment more attractive to foreign
capital which will add further support to the reserves and consequently to
the rand.
4
<PAGE>
THE SOUTH AFRICAN INVESTMENT MARKET
The unexpectedly sharp depreciation of the rand in the first half of 1996
resulted in a sharp rise in yields of all interest bearing securities along
the yield curve. Interest rates on long term government bonds rose from a
low of 13.5% in February, before the currency collapse, to a high of 16.5% by
May and thereafter stabilized for the balance of year in the 15.7% to 16.2%
range. For calendar 1996 the All Bond Index returned 6.6% in rand terms and
a negative 17.7% in U.S. dollar terms. Looking forward, the expected
economic slowdown should provide room for interest rates to decline during
1997 and with real yields currently in excess of 6.0% we believe the bond
market starts the year well placed to enjoy good returns in 1997.
The JSE's strong finish to 1995 continued into January 1996 but thereafter
the weakness of the rand undermined both local and international investor
sentiment. For the year, the JSE All Share Index provided a total return of
9.4% in rand terms but a loss of 14.8% in U.S. dollar terms. This compared
poorly with most emerging and developed markets.
The sectoral spread of JSE returns was fairly diverse with the Mining
Producers Index the best performer on the back of a strong gold board during
the first half of the year, even though gold shares retraced most of their
gains before year end.
IFC Investable
Country Return
Venezuela 52.00% 125.40
Hungary 52.00% 102.70
Zimbabwe 52.00% 78.50
Turkey 49.00% 49.00
Taiwan 37.30% 37.30
Brazil 34.30% 34.30
Portugal 30.50% 30.50
Malaysia 25.80% 25.80
Argentina 22.20% 22.20
Mexico 18.50% 18.50
Indonesia 18.10% 18.10
Philippines 14.30% 14.30
Colombia 9.20% 9.20
Greece 6.50% 6.50
Jordan 3.20% 3.20
India -0.70% -0.70
Sri Lanka -7.40% -7.40
Chile -14.30% -14.30
South Africa -17.10% -17.10
Pakistan -17.50% -17.50
Korea -37.60% -37.60
Thailand -39.80% -39.80
The Mining Producers and the Mining Finance indices returned 22% and 20%
respectively to local investors, but showed losses in dollar terms of 5% and
7% respectively. Industrial shares suffered the most in 1996, returning just
1% in rand terms and losing 21% in dollar terms, although within the sector
there were large differences in performance.
During 1996 the South African share market was under pressure from high and
rising short term interest rates, a weak currency, and a decline in political
confidence. Perhaps unsurprisingly, the de-rating of the All Share Index
which commenced in 1994 (when the historic price earnings ratio peaked above
19) continued, closing 1996 at a p/e of 14.7 compared with the p/e of 16.7 at
the start of the year.
5
<PAGE>
ALSI EPS PE
GROWTH RATIO
Jan-86 22.6% 10.5
23.4% 10.4
24.1% 10.2
24.6% 19.1% 9.4
24.6% 19.1% 9.7
24.3% 19.1% 10.0
23.7% 19.1% 10.6
22.8% 19.1% 11.8
21.8% 19.1% 12.0
20.9% 19.1% 11.8
20.0% 12.0
19.1% 11.9
Jan-87 18.0% 12.8
16.7% 12.3
15.4% 12.7
14.2% 12.1% 13.5
13.3% 12.1% 13.3
12.7% 12.1% 13.0
12.3% 12.1% 14.5
11.9% 12.1% 14.7
11.6% 12.1% 14.5
11.4% 12.1% 11.2
11.5% 10.3
12.1% 9.6
Jan-88 13.1% 8.4
14.3% 8.0
15.6% 8.8
17.0% 29.6% 8.4
18.5% 29.6% 8.5
20.2% 29.6% 8.7
22.0% 29.6% 9.0
23.8% 29.6% 8.1
25.7% 29.6% 8.7
27.4% 29.6% 9.1
28.7% 8.9
29.6% 8.8
Jan-89 30.2% 9.5
30.3% 9.8
30.3% 10.4
30.0% 17.0% 10.5
29.4% 17.0% 9.5
28.6% 17.0% 10.1
27.5% 17.0% 10.2
26.3% 17.0% 10.0
24.7% 17.0% 9.9
22.6% 17.0% 9.8
20.0% 9.9
17.0% 10.3
Jan-90 13.8% 11.0
10.6% 10.4
7.7% 10.9
5.3% -10.3% 10.0
3.2% -10.3% 10.5
1.1% -10.3% 10.0
-1.2% -10.3% 10.4
-3.7% -10.3% 10.0
-6.2% -10.3% 9.2
-8.3% -10.3% 9.0
-9.7% 8.9
-10.3% 9.3
Jan-91 -10.3% 8.8
-9.7% 9.7
-9.0% 10.3
-8.2% -1.6% 11.1
-7.4% -1.6% 11.4
-6.5% -1.6% 12.0
-5.6% -1.6% 12.8
-4.5% -1.6% 12.3
-3.3% -1.6% 12.0
-2.3% -1.6% 13.2
-1.7% 13.0
-1.6% 12.5
Jan-92 -1.9% 13.2
-2.7% 13.2
-3.6% 13.2
-4.5% -4.7% 12.8
-5.2% -4.7% 13.9
-5.8% -4.7% 13.5
-6.0% -4.7% 12.7
-6.2% -4.7% 12.0
-6.3% -4.7% 12.3
-6.2% -4.7% 11.6
-5.7% 12.3
-4.7% 12.7
Jan-93 -3.2% 13.3
-1.2% 13.3
0.7% 14.1
2.4% 11.8%1 4.7
3.7% 11.8% 15.6
4.6% 11.8% 15.9
5.5% 11.8% 16.4
6.7% 11.8% 15.4
8.1% 11.8% 14.3
9.6% 11.8% 14.5
11.0% 15.4
11.8% 18.2
Jan-94 12.2% 17.9
12.5% 17.5
12.8% 18.2
13.3% 16.0% 19.2
13.9% 16.0% 19.2
14.5% 16.0% 18.9
15.1% 16.0% 19.6
15.4% 16.0% 19.6
15.5% 16.0% 19.2
15.5% 16.0% 19.2
15.6% 18.5
16.0% 18.9
Jan-95 16.5% 16.4
17.1% 16.1
17.7% 16.7
18.3% 22.4% 17.2
19.2% 22.4% 16.7
20.3% 22.4% 16.4
21.2% 22.4% 16.4
22.0% 22.4% 15.9
22.6% 22.4% 15.9
22.7% 22.4% 16.4
22.5% 16.4
22.4% 16.7
Jan-96 22.6% 18.5
23.0% 17.5
23.6% 16.9
23.9% 24.2% 17.9
23.8% 24.2% 17.2
23.1% 24.2% 16.9
22.8% 24.2% 16.1
22.7% 24.2% 15.6
22.7% 24.2% 15.9
23.4% 24.2% 15.9
24.0% 14.7
24.2% 14.7
This de-rating occurred despite robust earnings per share growth of 22% for
1996. Old Mutual is expecting earnings growth of more than 30% for the
period to June 30, 1998, which is in line with consensus earnings forecasts.
COMPARATIVE EARNINGS FORECASTS
18M" Forward earnings growth for 18 months to June 30, 1998"
DEVELOPED GRTH
SWITZERLAND 50%
FRANCE 42%
CANADA 37%
SOUTH AFRICA 31%
GERMANY 27%
UNITED STATES 26%
ITALY 26%
SWEDEN 24%
BELGIUM 22%
SPAIN 22%
JAPAN 22%
HONG KONG 21%
AUSTRALIA 21%
SINGAPORE 19%
NETHERLANDS 17%
UNITED KINGDOM 15%
18M
EMERGING GRTH
TURKEY 151%
BRAZIL 58%
KOREA 51%
PHILIPPINES 46%
PORTUGAL 38%
ARGENTINA 35%
POLAND 34%
INDONESIA 33%
SOUTH AFRICA 31%
GREECE 30%
MALAYSIA 27%
THAILAND 26%
CHINA 22%
MEXICO 17%
CHILE 16%
TAIWAN 16%
This Earnings Forecast chart would place the Index on a forward multiple to
June, 1998 of approximately 10.4, which compares favorably with consensus
forward ratings for other markets, both developed and emerging.
COMPARATIVE MARKET RATINGS
18M" Forward PE Multiple (18 months forward to June 30, 1998)"
DEVELOPED PE
JAPAN 28
SINGAPORE 18
GERMANY 16
FRANCE 16
UNITED STATES 15
NETHERLANDS 14
SWITZERLAND 14
ITALY 14
AUSTRALIA 13
CANADA 13
SWEDEN 13
UNITED KINGDOM 13
SPAIN 12
BELGIUM 12
HONG KONG 12
SOUTH AFRICA 10
18M
EMERGING PE
TAIWAN 20
MALAYSIA 17
INDONESIA 14
PHILIPPINES 13
PORTUGAL 13
ARGENTINA 12
THAILAND 11
CHILE 11
CHINA 11
SOUTH AFRICA 10
GREECE 9
BRAZIL 8
MEXICO 8
KOREA 7
POLAND 7
TURKEY 2
Source: IBES
Looking to 1998 and beyond we are expecting that a pick up in economic
growth will continue to the end of the decade, and if this develops, it
should support earnings growth in double figures throughout this period.
The major uncertainty on the longer term horizon remains how exchange control
relaxation will continue to unfold and what impact this will have on the
level of the rand and on the investment allocations of local South African
investors. While the initial assessment is likely to be that these events
will be negative, it may be that the rand is already appropriately discounted
and that the investment inflow from foreign investors who are currently
underweight South Africa will match the outflow from local investors.
Hopefully this is an uncertainty which the South African government will take
steps to resolve sooner rather than later.
OLD MUTUAL ASSET MANAGERS (BERMUDA) LTD.
FEBRUARY 14, 1997
6
<PAGE>
OMEGA SOUTH AFRICA FUND
INVESTMENT SUMMARY AS AT DECEMBER 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
Historical Information** Total Return (%)
-----------------------------------------------------
Net Asset Value(1) Index(2)(3)
-------------------------- ----------------------
Average Average
Cumulative Annual Cumulative Annual
-------------------------- ----------------------
<S> <C> <C> <C> <C>
Fiscal Year to Date (8.32)% N/A (9.36)% N/A
One Year (15.69)% (15.69)% (14.80)% (14.80)%
Since Inception* (12.10)% (10.59)% (11.86)% (10.38)%
</TABLE>
Comparative Returns(2)(4)
- -------------------------------------------------------------------------------
OMEGA JSE ALSI
11/10/95 100.00 100.00
11/30/95 99.18 98.54
12/31/95 104.26 103.46
1/31/96 113.03 114.19
2/29/96 103.61 105.55
3/31/96 101.68 103.20
4/30/96 95.74 98.51
5/31/96 93.90 95.46
6/30/96 95.88 97.25
7/31/96 88.00 89.95
8/31/96 89.33 91.65
9/30/96 91.86 93.40
10/31/96 90.38 91.50
11/30/96 90.92 90.20
12/31/96 87.90 88.14
<TABLE>
Six Months Ended December 31, 1996** Period Ended June 30, 1996*
<S> <C> <C>
Net Asset Value Per Share $83.09 $95.61
Income Dividends 3.24 0.29
Capital Gains Distributions 1.30 -
Fund Total Return(1) (8.32)% (4.12)%
Index Total Return(2)(3)** (9.36)% (2.75)%
</TABLE>
- -------------
(1) 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 at the net asset value on the ex-dividend date. Periods
less than one year are not annualized.
(2) Assumes dividends and capital gain distributions, if any, were reinvested.
(3) The benchmark for investment performance is the JSE All Share Index.
(4) OMEGA South Africa Fund net asset value and JSE All Share Index rebased
to November 10, 1995 = 100, the launch date of the Fund.
* The Fund commenced operations on November 10, 1995.
**Unaudited.
7
<PAGE>
OMEGA SOUTH AFRICA FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
- -------------------------------------------------------------------------------
ASSETS
Investment in Trust, at value (Note B) $ 4,955,779
Receivable from investment adviser (Note C) 9,640
-------------
TOTAL ASSETS 4,965,419
LIABILITIES
Payable for Fund expenses 13,421
Dividends payable 157,084
-------------
TOTAL LIABILITIES 170,505
-------------
NET ASSETS $ 4,794,914
-------------
-------------
NET ASSETS consist of:
Paid in capital $ 7,830,338
Distributions in excess of net investment income (79,422)
Accumulated net realized gain on investment 64,745
Net unrealized depreciation of investment (3,020,747)
-------------
NET ASSETS $ 4,794,914
-------------
-------------
SHARES OUTSTANDING 57,706
---------
---------
NET ASSET VALUE PER SHARE $ 83.09
---------
---------
MAXIMUM OFFERING PRICE PER SHARE $ 83.38
---------
---------
See Notes to Financial Statements.
8
<PAGE>
OMEGA SOUTH AFRICA FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Investment income allocated from Trust $ 131,273
Expenses allocated from Trust (38,205)
-------------
Net investment income from Trust 93,068
-------------
EXPENSES
Administrative fee (Note C) 20,165
Trustees' fees and expenses (Note C) 12,602
Auditing fees 10,838
Shareholder servicing agent fee 10,057
Printing expense 6,302
12b-1 fees (Note C) 2,470
Miscellaneous expenses 378
-------------
Total expenses 62,812
Deduct: Expenses reimbursed by investment adviser (Note C) (51,617)
-------------
NET EXPENSES 11,195
-------------
NET INVESTMENT INCOME 81,873
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) allocated from Trust on:
Investments 77,613
Foreign currency transactions (12,802)
-------------
Net realized gain allocated from Trust 64,811
Net change in unrealized depreciation of investments
allocated from Trust (1,153,495)
-------------
NET REALIZED AND UNREALIZED LOSS ALLOCATED FROM TRUST (1,088,684)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (1,006,811)
-------------
-------------
See Notes to Financial Statements.
9
<PAGE>
OMEGA SOUTH AFRICA FUND
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
PERIOD FROM
SIX MONTHS ENDED NOVEMBER 10, 1995
DECEMBER 31, 1996 (COMMENCEMENT OF OPERATIONS)
(UNAUDITED) TO JUNE 30, 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 81,873 $ 86,561
Net realized gain allocated from Trust 64,811 63,467
Net change in unrealized depreciation
of investments allocated from Trust (1,153,495) (1,867,252)
------------ ------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS (1,006,811) (1,717,224)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (225,561) (12,000)
Realized capital gains (73,828) -
------------ ------------
TOTAL DISTRIBUTIONS (299,389) (12,000)
------------ ------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Proceeds from shares sold
(net of placement fee of $0 and $250,
respectively) - 14,002,451
Payments for shares redeemed (6,249,747) -
Distributions reinvested 77,634 -
------------ ------------
NET INCREASE (DECREASE) FROM FUND
SHARE TRANSACTIONS (6,172,113) 14,002,451
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS (7,478,313) 12,273,227
NET ASSETS
Beginning of period 12,273,227 -
------------ ------------
End of period $ 4,794,914 $ 12,273,227
------------ ------------
------------ ------------
NUMBER OF SHARES OF BENEFICIAL INTEREST
Sold - 128,373
Redeemed (71,602) -
Distributions reinvested 935 -
------- -------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (70,667) 128,373
------- -------
------- -------
</TABLE>
See Notes to Financial Statements.
10
<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.
<TABLE>
SIX MONTHS ENDED
DECEMBER 31, 1996 PERIOD ENDED
(UNAUDITED) JUNE 30, 1996(1)
------------ ------------
<S> <C> <C>
PER SHARE DATA:
Net Asset Value, Beginning of Period $ 95.61 $ 100.00
Income From Investment Operations
Net Investment Income 1.36 0.88
Net Realized and Unrealized Gains and
Losses on Investment and Foreign Currency (9.34) (4.98)
------------ ------------
Total From Investment Operations (7.98) (4.10)
------------ ------------
Less Distributions From:
Net Investment Income (3.24) (0.29)
Realized Capital Gains (1.30) -
------------ ------------
Total From Distributions (4.54) (0.29)
------------ ------------
Net Asset Value, End of Period $ 83.09 $ 95.61
------------ ------------
------------ ------------
TOTAL RETURN (8.32)%(4) (4.12)%(4)
------------ ------------
------------ ------------
RATIOS/SUPPLEMENTAL DATA:
Ratio of Expenses to Average Net Assets 1.00%(2)(3) 1.00%(2)(3)
------------ ------------
------------ ------------
Ratio of Net Investment Income to
Average Net Assets 1.65%(2)(3) 1.46%(2)(3)
------------ ------------
------------ ------------
Net Assets, End of Period (in thousands) $ 4,795 $ 12,273
------------ ------------
------------ ------------
</TABLE>
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 as follows: for the six
months ended December 31, 1996, 2.05% and 0.61%, respectively; and for
the period from November 10, 1995 (Commencement of Operations) to June
30, 1996, 2.42% and 0.03%, respectively.
(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.
11
<PAGE>
OMEGA SOUTH AFRICA FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (UNAUDITED)
NOTE A -- ORGANIZATION
Old Mutual Equity Growth Assets South Africa Equity 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 (0.55% at December 31, 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 other investors in the Trust on a daily
basis.
12
<PAGE>
OMEGA SOUTH AFRICA FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (UNAUDITED)
-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 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.
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 July 1, 1996 to December 31, 1996
amounted to $55,186 and $6,417,621, respectively.
13
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
("THE TRUST")
FINANCIAL STATEMENTS
DECEMBER 31, 1996 (UNAUDITED)
14
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996 (UNAUDITED)
- -------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS--96.6%
BANKS & FINANCIAL SERVICES--14.6%
731,182 Amalgamated Banks of SA Ltd $ 3,750,052
1,005,000 Coronation Holdings * 11,758,468
240,000 First National Bank Holdings Ltd 1,174,484
1,236,025 Genbel Securities Ltd 12,229,503
300,000 Investec Holdings Ltd 6,475,051
3,577,544 Nedcor Ltd 48,928,906
1,200,000 Standard Bank Investment Corp. Ltd 47,184,528
-----------
131,500,992
-----------
BEVERAGES, HOTELS & LEISURE--5.5%
124,700 Amalgamated Beverage Industries Ltd 479,667
1,221,211 Johnnies Industrial Corporation Ltd 13,309,490
1,422,496 The South African Breweries Ltd 36,022,177
-----------
49,811,334
-----------
BUILDING, CONSTRUCTION, ALLIED--4.3%
180,000 Anglo Alpha Ltd 2,942,622
3,800,000 Barlow Ltd 33,781,387
1,200,000 Group Five Holdings 1,641,201
-----------
38,365,210
-----------
CHEMICALS, OILS & PLASTICS--8.0%
880,000 AECI Ltd 4,889,411
1,452,300 Engen Ltd 7,789,877
4,580,038 Sasol Ltd 54,320,357
3,044,394 Sentrachem Ltd 5,438,858
-----------
72,438,503
-----------
COAL--2.5%
173,321 Anglo American Coal Corp Ltd 13,148,617
1,312,000 Ingwe Coal Corporation Ltd 9,392,457
-----------
22,541,074
-----------
DIAMONDS--5.4%
1,700,000 De Beers Consolidated Mines Ltd 48,680,415
-----------
ELECTRONICS & ELECTRICAL--2.5%
2,320,000 Allied Electronics Corporation Ltd $ 2,553,264
2,500,000 Grintek Ltd 2,457,528
4,173,746 Reunert Ltd 13,824,781
598,500 Siltek Ltd 3,868,923
-----------
22,704,496
-----------
ENGINEERING--1.8%
3,466,260 African Oxygen Ltd 11,851,728
1,000,000 Hudaco Industries Ltd 4,006,838
-----------
15,858,566
-----------
FOOD--1.4%
360,000 CG Smith Foods Ltd 5,846,778
4,852,100 Irvin & Johnson Ltd 4,251,226
171,800 Tiger Oats Ltd 2,368,009
-----------
12,466,013
-----------
FURNITURE & HOUSEHOLD--0.8%
1,512,142 JD Group Ltd 7,109,119
-----------
GOLD--1.5%
720,000 Driefontein Consolidated Ltd 7,577,733
111,000 Southvaal Holdings Ltd 3,237,846
44,000 Vaal Reefs Exploration and Mining Co Ltd 2,820,814
-----------
13,636,393
-----------
INDUSTRIAL HOLDING--16.9%
4,835,000 Anglovaal Industries Ltd 21,852,815
265,925 Anglovaal Industries Ltd (Rights
Expiration 1/17/1997) 20,458
1,650,000 Bidvest Group Ltd 8,391,922
6,000,000 CG Smith Ltd 29,298,002
1,100,000 Imperial Holdings Ltd 10,460,519
567,280 Malbak Ltd 2,491,207
2,582,600 Murray & Roberts Holdings Ltd 5,794,914
4,700,000 Rembrandt Group Ltd 41,932,899
14,200,000 Safmarine & Rennies Holdings Ltd 31,862,379
-----------
152,105,115
-----------
See Notes to Financial Statements.
15
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996 (UNAUDITED)
-CONTINUED-
- -------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS--Continued
INSURANCE--1.6%
286,295 Liberty Life Association of Africa Ltd $ 7,173,435
1,500,000 Mutual & Federal Insurance Co Ltd 7,372,582
-----------
14,546,017
-----------
MANGANESE--0.6%
490,000 Samancor Ltd 5,759,162
-----------
MINING HOLDING--0.9%
44,000 Associated Ore & Metal Corp Ltd 2,820,814
1,300,000 Avmin Limited 4,861,631
-----------
7,682,445
-----------
MINING HOUSES--16.0%
1,676,520 Angelo American Platinum Corporation Ltd 9,941,966
870,000 Anglo American Corporation of SA Ltd 47,873,705
1,057,200 Anglovaal Ltd 31,177,177
8,400,000 Gencor Ltd 30,516,081
880,000 Gold Fields of SA Ltd 24,259,002
1,600,000 Rand Mines Ltd 229,084
-----------
143,997,015
-----------
PAPER & PACKAGING--1.4%
870,000 Nampak Ltd 3,458,062
1,046,386 Sappi Ltd 9,391,647
-----------
12,849,709
-----------
PLATINUM--2.3%
330,000 Impala Platinum Holdings Ltd 3,296,826
883,706 Potgietersrust Platinums Ltd 4,343,464
970,932 Rustenburg Platinum Holdings Ltd 13,279,121
-----------
20,919,411
-----------
PRINTING & PUBLISHING--1.4%
497,000 Independent Newspapers Holdings Ltd $ 2,124,159
500,000 Nasionale Pers Bpk 4,621,220
400,000 Omni Media Corp Ltd 5,449,300
-----------
12,194,679
-----------
STEEL & ALLIED--1.5%
18,708,103 Iscor Ltd 13,352,936
-----------
STORES--3.8%
2,250,385 Foschini Ltd * 7,502,085
1,350,000 Metro Cash & Carry Ltd 4,471,631
3,701,034 Speciality Stores 'N' Ltd 2,689,073
335,252 Speciality Stores Ltd 254,331
5,114,328 Wooltru Ltd 19,563,302
-----------
34,480,422
-----------
TRANSPORTATION--1.9%
3,370,421 Trencor Ltd 16,925,931
-----------
Total Common Stocks
(Cost $1,008,335,890) 869,924,957
-----------
- -------------------------------------------------------------------------------
MATURITY AMORTIZED
AMOUNT VALUE
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT--2.1%
$ 19,139,661 State Street Bank and Trust Company
4.75%, dated 12/31/96, due 01/07/97
(collateralized by a U.S. Treasury Bond,
5.625%, 11/30/98) (Cost $19,122,000) 19,122,000
-----------
Total Investments--98.7%
(Cost $1,027,457,890) $ 889,046,957
Net Other Assets--1.3% 11,396,400
-----------
Total Net Assets--100% $ 900,443,357
-----------
-----------
NOTES TO SCHEDULE OF INVESTMENTS
* Non-income producing security.
See Notes to Financial Statements.
16
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (Note B)
(Cost of investments - $1,027,457,890) $ 889,046,957
Cash (including foreign currency, at value) 9,061,120
Deferred organization costs (Note B) 1,131,035
Dividends and interest receivable 3,448,005
Other assets 59,273
-----------
Total Assets 902,746,390
-----------
LIABILITIES
Payable for investments purchased 1,714,331
Payable to adviser (Note C) 452,927
Accrued expenses 135,775
-----------
Total Liabilities 2,303,033
-----------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS $ 900,443,357
-----------
-----------
See Notes to Financial Statements.
17
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
STATEMENT OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Dividend income $ 11,652,604
Interest income 1,178,854
Investment lending income 1,923
-----------
TOTAL INCOME 12,833,381
-----------
EXPENSES
Investment advisory fee (Note C) 2,805,777
Administration fee (Note C) 184,962
Amortization of deferred organization expenses (Note B) 159,168
Custodian fees 142,517
Legal fees 126,029
Trustees fees and expenses (Note C) 80,659
Auditing fees 25,710
Miscellaneous expenses 50,799
-----------
TOTAL EXPENSES 3,575,621
-----------
NET INVESTMENT INCOME 9,257,760
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 6,131,154
Foreign currency transactions (1,056,669)
-----------
Net realized gain 5,074,485
-----------
Net change in unrealized depreciation of:
Investments (98,616,049)
Foreign currency translations (86,556)
-----------
Net change in unrealized depreciation (98,702,605)
-----------
NET REALIZED AND UNREALIZED LOSS (93,628,120)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (84,370,360)
-----------
-----------
See Notes to Financial Statements.
18
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
DECEMBER 31, 1996 PERIOD ENDED
(UNAUDITED) JUNE 30, 1996 (1)
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 9,257,760 $ 9,277,319
Net realized gain on investments and
foreign currency transactions 5,074,485 6,446,468
Net change in unrealized depreciation
of investments and foreign currency
translations (98,702,605) (39,777,485)
------------- --------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS (84,370,360) (24,053,698)
------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Contributions 12,973,012 1,122,724,906
Withdrawals (17,011,638) (109,818,865)
------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM TRANSACTIONS
IN INVESTORS' BENEFICIAL INTERESTS (4,038,626) 1,012,906,041
------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS (88,408,986) 988,852,343
NET ASSETS
Beginning of period 988,852,343 -
------------- --------------
End of period $ 900,443,357 $ 988,852,343
------------- --------------
------------- --------------
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED
DECEMBER 31, 1996 PERIOD ENDED
(UNAUDITED) JUNE 30, 1996 (1)
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.76%(2) 0.82%(2)
-------- ---------
-------- ---------
Net investment income 1.98%(2) 1.34%(2)
-------- ---------
-------- ---------
Portfolio turnover rate 5.21%(3) 4.43%(3)
-------- ---------
-------- ---------
Average commission rate per share $ 0.01 $ 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
DECEMBER 31, 1996 (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 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 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 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 91.21% of
the beneficial interest in the Trust as of December 31, 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 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
DECEMBER 31, 1996 (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, 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 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 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.
21
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (UNAUDITED)
-CONTINUED-
LOANS OF INVESTMENT SECURITIES: The Trust may lend its investment securities
while it continues to earn dividends on such investments loaned. In
connection with the lending of investment securities, the Trust receives U.S.
Treasury Securities as collateral in an amount at least equal to 105 percent
of the market value of the investments loaned. Additional collateral is
requested from the borrower if the value falls below 105 percent. For the
period ended December 31, 1996, the market value of investments loaned and
the amount of collateral received with respect to such transactions was
$5,355,769 and $5,623,156, respectively.
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. The Adviser receives for its services monthly
compensation at the rate of 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 accounting 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.
22
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (UNAUDITED)
-CONTINUED-
NOTE D -- INVESTMENT TRANSACTIONS
For the period ended December 31, 1996, there were purchase and sale
transactions (excluding short-term securities) of $51,835,149 and
$57,824,657, respectively. The aggregate cost of Trust investments was
substantially the same for book and Federal income tax purposes at December
31, 1996. Gross unrealized appreciation of investments was $39,806,106 and
gross unrealized depreciation of investments was $178,217,039, resulting in
net unrealized depreciation of investments of $138,410,933.
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
