<PAGE>
February 13, 1998
Dear Shareholder,
I am pleased to present the interim report of the OMEGA South Africa Fund,
covering the period July 1, 1997 to December 31, 1997.
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 African 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 16% in rand terms; in U.S. dollar terms the
decline was a more substantial 22%.
During this period the total return in U.S. dollars from the OMEGA Fund was a
negative 20.93% which compares with a U.S. dollar decline of 21.20% in the total
return for the JSE Actuaries All Share Index. Total dividends from the Fund
amounted to U.S.$0.98 per share.
The major event affecting the South African investment markets for the six
months under review was the crisis that has shaken the Asian economies. The
impact on South Africa is discussed in more detail in the attached report of the
Adviser.
Any consequent global deflationary pressures must work through to the South
African economy, in particular through weaker demand and lower prices for
commodities - from gold to chemicals. However, I should like to suggest that the
overall impact on South Africa should not be exaggerated.
The South Africa of today is a well diversified economy with only 8.3% of GDP
coming from the mining sector, compared to the 14.8% from financial services and
23.7% from manufacturing. More important, however, is the underlying soundness
of the economy. Monetary and fiscal discipline have been at the heart of South
Africa's economic transition process over the past few years, rather than the
pursuit of growth without due regard to structural soundness. I believe we will
see the benefits of this disciplined economic management emerging more clearly
in 1998 and 1999.
The investment objective of the Fund continues to be to seek a long-term total
return in excess of the All Share Index. I am pleased to report that we have
realized this objective in the 26 months since inception and I expect that we
will continue to do so. Thank you for the confidence you have shown us by your
investment in the OMEGA South Africa Fund.
M.J. LEVETT
PRESIDENT
<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.$840 MILLION AT DECEMBER 31, 1997, 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 (the "Index") from investment in equity securities of
South African issuers.
The OMEGA 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 in November, 1995 with a fully invested
portfolio of South African equities. 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 0.25%, and potential market impact costs on the
underlying South African securities. Additionally, while the OMEGA 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.$52 billion of assets
under management.
The Adviser receives a management fee of 0.60% per annum of daily net assets.
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.$840 million at December 31,
1997, combined with the ability of investors in the OMEGA Fund to acquire
substantial shareholdings at the next business 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
amount at the next business day's net asset value, subject to a redemption fee
of 0.65%.
The liquidity for redemptions is provided by a portfolio of marketable
international securities held by Old Mutual Global Assets Fund Limited (the
"Global Fund"). Using realizations from the Global Fund rather than from 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, 1997 there were 72 shareholdings in the portfolio of which the
top 10 comprised 42.3% by value. The historical price earnings ratio was 16.2
and the dividend yield was 2.8%; this compares with a price earnings ratio and
dividend yield of 13.5 and 2.7%, respectively, for the benchmark Index.
In order to illustrate the stock specific weighting of the OMEGA Fund portfolio,
the table below compares the weighting in the portfolio and the Index of the
portfolio's top ten holdings as at December 31, 1997:
WEIGHT IN WEIGHT IN
OMEGA ALL SHARE
FUND INDEX
Nedcor 8.8% 2.5%
Sasol 5.2% 3.1%
Standard Bank 5.1% 2.6%
Anglo American 4.5% 4.6%
Rembrandt Group 3.8% 1.8%
SA Breweries 3.4% 4.2%
CG Smith 3.0% 1.0%
Safren 3.0% 0.5%
Investec 2.9% 1.3%
Billiton 2.6% 2.7%
TOTAL 42.3% 24.3%
2
<PAGE>
THE SOUTH AFRICAN ECONOMY
GDP growth slowed in 1997. As forecast, weakening domestic demand and a poor
agricultural season saw growth fall to 2% per annum by year end. We believe
another year of 2% growth seems likely in 1998 rather than the 3% plus growth we
had been hoping for only six months ago.
[GRAPH]
<TABLE>
<CAPTION>
GDP GROWTH - DATA
Q1 Q2 Q3 Q4
<S> <C> <C> <C> <C>
1990 (0.027500) (0.541508) (0.704872) 0.006158
1991 (0.868675) (1.010668) (0.965837) (1.227909)
1992 (1.109233) (1.520502) (2.708313) (3.438716)
1993 (2.137754) (0.267177) 2.728391 4.951540
1994 3.507197 2.846593 2.155949 2.512032
1995 3.802064 3.786531 3.425625 2.476244
1996 2.848495 3.279427 3.397446 3.436707
1997 2.335316 1.898756 1.173840 1.0
1998 1.5 1.7 2.3 3.2
</TABLE>
The reduction in our growth forecast for 1998 is due to a number of factors,
both international and domestic. On the international front the Asian crisis
will have an inevitable knock-on effect to the South African economy. We believe
that most of the impact will come through the expected slowdown in the global
economy and depressed gold and other commodity prices. Domestically, continued
high credit growth was one of the major factors which kept interest rates high
during 1997. Although two interest rate cuts are likely in 1998, real interest
rates will stay high, which should slow both consumption and fixed investment
spending.
Prospects for 1999 look more encouraging and we are currently forecasting GDP
growth of 3% for the year.
On a more positive note, the fundamentals of the South African economy are sound
and they continue to improve - unlike for many of the Asian economies. The
increasingly tough monetary policy stance pursued by the South African Reserve
Bank is illustrated by the widening differential between the Bank rate and the
inflation rate.
[GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES AND INFLATION
BANK RATE
J F M A M J J
<S> <C> <C> <C> <C> <C> <C> <C>
1990 18.000000 18.000000 18.000000 18.000000 18.000000 18.000000 18.000000
1991 18.000000 18.000000 17.000000 17.000000 17.000000 17.000000 17.000000
1992 17.000000 17.000000 16.000000 16.000000 16.000000 15.000000 15.000000
1993 14.000000 13.000000 13.000000 13.000000 13.000000 13.000000 13.000000
1994 12.000000 12.000000 12.000000 12.000000 12.000000 12.000000 12.000000
1995 13.000000 14.000000 14.000000 14.000000 14.000000 15.000000 15.000000
1996 15.000000 15.000000 15.000000 16.000000 16.000000 16.000000 16.000000
1997 17.000000 17.000000 17.000000 17.000000 17.000000 17.000000 17.000000
1998 16.000000 16.000000 15.000000 15.000000 15.000000 15.000000 15.000000
INFLATION
J F M A M J J
1990 15.158924 14.909091 14.898689 14.605418 13.904983 13.532110 13.295455
1991 14.331210 14.978903 14.107884 14.594039 15.157681 15.151515 15.847543
1992 16.155989 15.779817 15.727273 15.605381 14.752650 15.087719 14.632035
1993 9.672262 9.033281 9.662215 11.016292 10.623557 9.984756 9.894260
1994 9.912536 9.883721 9.025788 7.058001 7.237300 7.484407 8.247423
1995 9.615385 9.854497 10.249671 11.031332 10.772226 9.993553 8.952381
1996 6.896552 6.502107 6.317044 5.526161 5.858231 6.858148 7.109557
1997 9.388681 9.843640 9.589462 9.868301 9.516325 8.835875 9.061480
1998 5.472198 5.531168 5.235602 5.103806 5.258621 5.417025 5.191489
</TABLE>
While this monetary discipline has not been matched fully by fiscal discipline,
the government has reduced the fiscal deficit from 6.1% of GDP in 1995/96 to
5.6% in 1996/97. It is committed to a further gradual reduction in the deficit,
which could reach 4.5% of GDP in 1997/98.
A major success of recent years has been the steady reduction in the rate of
inflation. We expect a further decline from an expected 8.7% average in 1997 to
some 6.0% in 1998.
While some deterioration of the balance of payments position is likely in 1998,
we believe the current account deficit as a percentage of GDP is unlikely to
exceed a modest 2% (compared to 1% for 1997). We expect this to be financed with
ease. The level of foreign indebtedness is also modest by international
standards, currently standing at some 25% of GDP.
A further weakening of the rand, especially against a strong dollar, is likely
in 1998. But given the Reserve Bank's policy of allowing the currency to find
its own level and the expected lower inflation, such weakness is expected to be
modest.
3
<PAGE>
THE SOUTH AFRICAN
INVESTMENT MARKET
The gains recorded by the JSE Actuaries All Share Index for the first half of
the year evaporated during the second half and the Index ended 1997 with a loss
for the year of 7% in rand terms and 10% in U.S. dollar terms.
[GRAPH]
<TABLE>
<CAPTION>
Date
<S> <C> <C>
880129 100 100
880229 97 92
880331 107 100
880429 102 95
880531 107 95
880630 112 96
880729 116 94
880831 110 89
880930 118 94
881031 126 100
881130 125 108
881230 127 106
890131 138 114
890228 146 117
890331 162 126
890428 165 128
890531 153 109
890630 168 120
890731 171 128
890831 178 128
890929 176 130
891031 172 130
891130 182 139
891229 190 148
900131 204 158
900228 197 153
900330 208 156
900430 193 145
900531 203 153
900629 196 147
900731 201 155
900831 191 148
900928 175 136
901031 170 133
901130 166 131
901231 173 135
910131 163 128
910228 179 139
910329 183 134
910430 193 138
910531 199 141
910628 211 145
910731 223 155
910830 214 148
910930 210 149
911031 225 158
911129 226 161
911231 219 159
920131 230 163
920228 229 161
920331 226 157
920430 220 153
920529 238 167
920630 233 167
920731 219 158
920831 201 146
920930 205 145
921030 192 129
921130 204 134
921231 208 136
930129 219 142
930226 218 138
930331 227 142
930430 238 150
930531 255 159
930630 260 156
930730 266 157
930831 257 152
930930 240 139
931029 250 148
931130 266 157
931231 312 183
940131 303 176
940228 309 177
940331 315 180
940429 342 193
940531 344 188
940630 345 188
940729 360 195
940831 372 206
940930 362 202
941031 365 207
941130 367 206
941230 374 210
950131 322 182
950228 328 182
950331 337 187
950428 349 192
950531 349 189
950630 346 189
950731 347 191
950831 354 192
950929 361 197
951031 369 202
951130 381 207
951229 397 217
960131 438 239
960229 428 220
960329 430 215
960430 445 205
960531 435 198
960628 439 202
960731 421 186
960830 427 189
960930 439 193
961031 445 188
961129 428 185
961231 425 181
970131 426 186
970228 456 203
970331 452 204
970430 455 204
970530 448 199
970630 473 208
970731 477 206
970829 466 198
970930 454 194
971031 420 174
971128 403 165
971231 396 162
980130 395 160
</TABLE>
The disappointing second half performance was largely a reaction to the havoc in
the Asian markets (during October the Index in rand dropped over 20% in a matter
of days), and the international re-evaluation of the outlook for commodity based
equities in a global deflationary environment. This latter point is well
illustrated by the relative performance of major components of the JSE All Share
Index.
[GRAPH]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Jan 100 100 100
2 100 101 99
3 100 101 98
4 101 101 97
5 101 101 96
6 101 102 96
7 101 101 96
8 100 101 97
9 101 101 97
10 101 101 96
11 101 102 95
12 101 102 95
13 101 102 95
14 102 101 95
15 103 102 94
16 103 101 94
17 103 101 95
18 103 101 95
19 103 101 96
20 104 101 96
21 104 101 96
1 Feb 104 101 96
2 105 101 96
3 105 101 96
4 107 101 95
5 107 100 95
6 108 100 94
7 108 100 94
8 108 100 94
9 108 100 95
10 107 100 95
11 107 100 95
12 106 99 96
13 106 99 97
14 106 99 97
15 105 99 97
16 105 99 98
17 105 99 99
18 106 98 99
19 106 98 100
20 106 97 101
21 106 97 100
1 Mar 106 97 101
2 107 98 99
3 107 98 97
4 107 98 97
5 107 98 98
6 107 99 97
7 107 99 98
8 107 98 98
9 108 98 98
10 108 98 97
11 108 99 97
12 109 99 96
13 109 99 96
14 109 99 96
15 109 99 95
16 109 99 95
17 109 99 95
18 109 99 95
19 109 99 95
20 109 99 96
21 109 99 95
1 Apr 109 99 96
2 110 99 96
3 110 99 96
4 110 99 96
5 110 99 96
6 110 98 96
7 109 99 96
8 109 99 96
9 109 99 95
10 110 99 94
11 110 100 93
12 110 100 93
13 110 100 93
14 110 100 92
15 111 100 92
16 111 100 92
17 111 100 91
18 112 100 90
19 112 101 90
20 112 100 90
21 113 100 90
1 May 113 100 90
2 113 100 91
3 113 100 91
4 113 99 92
5 114 99 92
6 114 99 92
7 115 99 92
8 115 99 91
9 115 99 91
10 115 99 92
11 115 99 91
12 115 99 91
13 116 99 91
14 116 99 91
15 115 99 91
16 116 99 91
17 116 99 91
18 116 99 91
19 116 99 91
20 117 99 90
21 117 99 90
1 Jun 117 99 90
2 118 98 90
3 118 98 90
4 119 99 89
5 119 98 89
6 119 98 90
7 120 98 90
8 120 99 90
9 120 98 89
10 121 98 88
11 122 99 86
12 122 99 86
13 122 99 86
14 122 99 85
15 122 99 85
16 122 99 85
17 122 100 85
18 122 100 84
19 122 100 84
20 122 100 84
21 122 101 84
1 Jul 122 101 83
2 123 101 83
3 124 101 82
4 123 101 83
5 123 101 83
6 123 101 84
7 123 101 83
8 124 101 83
9 125 101 82
10 125 101 83
11 124 102 83
12 124 102 82
13 124 102 82
14 125 102 81
15 125 102 82
16 125 103 82
17 125 103 82
18 125 103 82
19 124 103 82
20 124 103 82
21 123 103 83
1 Aug 123 103 82
2 123 103 82
3 123 103 83
4 123 103 83
5 122 103 84
6 123 103 82
7 123 103 81
8 123 103 81
9 123 103 81
10 123 103 81
11 123 103 81
12 123 104 81
13 123 103 81
14 123 104 80
15 123 104 80
16 123 104 81
17 123 104 81
18 122 104 81
19 122 103 81
20 121 104 81
21 121 104 81
1 Sep 122 104 81
2 122 104 80
3 123 103 80
4 124 103 80
5 124 103 80
6 124 103 79
7 125 103 79
8 124 103 79
9 125 103 78
10 125 103 78
11 126 103 78
12 126 103 77
13 127 103 77
14 125 103 78
15 125 103 78
16 125 103 78
17 124 103 79
18 124 103 79
19 124 103 80
20 123 102 82
21 123 102 82
1 Oct 123 102 81
2 123 102 81
3 123 103 80
4 123 102 81
5 123 102 83
6 123 102 82
7 123 102 82
8 124 102 81
9 125 102 81
10 125 102 82
11 124 102 82
12 125 102 81
13 127 102 80
14 128 103 79
15 128 103 79
16 129 103 78
17 129 104 79
18 127 104 82
19 128 104 79
20 128 105 78
21 129 104 76
1 Nov 131 104 76
2 131 104 75
3 132 103 75
4 133 104 74
5 134 103 75
6 134 104 74
7 135 103 74
8 135 104 74
9 136 104 74
10 136 104 73
11 136 104 73
12 136 104 72
13 137 104 73
14 137 104 72
15 138 104 72
16 138 104 73
17 139 103 73
18 141 103 71
19 142 103 71
20 142 103 71
21 141 103 70
1 Dec 142 103 70
2 142 103 70
3 143 103 70
4 144 102 69
5 144 102 69
6 144 102 69
7 145 101 69
8 146 101 70
9 145 101 70
10 145 101 70
11 144 102 71
12 144 101 71
13 144 101 72
14 144 101 72
15 144 101 72
16 144 101 72
17 145 100 72
18 145 101 71
19 146 101 70
20 145 101 70
21 146 101 69
</TABLE>
While, in rand terms, the Mining Producer Index declined 32%, the Gold Index
component declined an even more dramatic 44% following the collapse of the gold
price. On a more positive note, the rising pressures on the mining industry have
accelerated a process of rationalization within the industry and, while we do
not expect the benefits to be apparent in the short term, we believe that longer
term benefits will emerge.
By contrast, financial shares performed strongly, led by the banks which are
benefiting from a combination of cost reductions and the expectation of
improving margins in a falling interest rate environment. Prospects for this
sector continue to look good into 1998.
The apparent "average" performance of the Industrial Index masks very divergent
performances in the underlying sectors. Those companies more exposed to the
impacts of international competition and domestic deregulation have generally
suffered while those in more specialized sectors, such as technology, media, and
"black empowerment" have done well.
[GRAPH]
<TABLE>
<CAPTION>
EPSg PE
DEC END IJR
100/AEY
<S> <C> <C>
1987 12.82
12.35
12.7% 12.66
12.7% 13.51
12.7% 13.33
12.7% 12.99
12.7% 14.49
12.7% 14.71
12.7% 14.49
12.7% 11.24
10.31
9.62
1988 8.40
8.00
20.2% 8.77
20.2% 8.40
20.2% 8.47
20.2% 8.70
20.2% 9.01
20.2% 8.13
20.2% 8.70
20.2% 9.09
8.93
8.77
1989 9.52
9.80
28.6% 10.42
28.6% 10.53
28.6% 9.52
28.6% 10.10
28.6% 10.20
28.6% 10.00
28.6% 9.90
28.6% 9.80
9.90
10.31
1990 10.99
10.42
1.1% 10.87
1.1% 10.00
1.1% 10.53
1.1% 10.00
1.1% 10.42
1.1% 10.00
1.1% 9.17
1.1% 9.01
8.93
9.26
1991 8.77
9.71
(6.5%) 10.31
(6.5%) 11.11
(6.5%) 11.36
(6.5%) 12.05
(6.5%) 12.82
(6.5%) 12.35
(6.5%) 12.05
(6.5%) 13.16
12.99
12.50
1992 13.16
13.16
(5.8%) 13.16
(5.8%) 12.82
(5.8%) 13.89
(5.8%) 13.51
(5.8%) 12.66
(5.8%) 12.05
(5.8%) 12.35
(5.8%) 11.63
12.35
12.66
1993 13.33
13.33
4.6% 14.08
4.6% 14.71
4.6% 15.63
4.6% 15.87
4.6% 16.39
4.6% 15.38
4.6% 14.29
4.6% 14.49
15.38
18.18
1994 17.86
17.54
14.5% 18.18
14.5% 19.23
14.5% 19.23
14.5% 18.87
14.5% 19.61
14.5% 19.61
14.5% 19.23
14.5% 19.23
18.52
18.87
1995 16.39
16.13
20.3% 16.67
20.3% 17.24
20.3% 16.67
20.3% 16.39
20.3% 16.39
20.3% 15.87
20.3% 15.87
20.3% 16.39
16.39
16.67
1996 18.52
17.54
22.9% 16.95
22.9% 17.86
22.9% 17.24
22.9% 16.95
22.9% 16.13
22.9% 15.63
22.9% 15.87
22.9% 15.87
14.71
14.71
1997 14.49
15.38
2.4% 15.15
2.4% 15.15
2.4% 14.71
2.4% 14.93
2.4% 15.38
2.4% 14.71
2.4% 14.71
2.4% 13.51
13.70
13.51
</TABLE>
The decline of 1997 earnings for the Index primarily reflects the collapse of
earnings in the mining sectors. Looking to 1998 we are forecasting a recovery in
total earnings growth to 15-20%, but within that we expect financial shares to
again outperform and mining shares to underperform.
A striking feature of the JSE through 1997 has been the ongoing derating of the
market. Our earnings forecast for 1998 implies a 12-month forward price earnings
ratio of between 11x and 12x, which we believe to be good value given our
expectation of a stronger economy in 1999.
OLD MUTUAL ASSET MANAGERS
(BERMUDA) LIMITED
4
<PAGE>
OMEGA SOUTH AFRICA FUND
INVESTMENT SUMMARY AS AT DECEMBER 31 1997
- --------------------------------------------------------------------------------
Historical Information* TOTAL RETURN (%)
NET ASSET VALUE (1) INDEX (2)(3)
CUMULATIVE AVERAGE CUMULATIVE AVERAGE
ANNUAL ANNUAL
Fiscal Year to Date (20.93) N/A (21.20) N/A
One Year (5.84) (5.84) (8.16) (8.16)
Since Inception (5) (17.23) (8.44) (18.36) (9.02)
- --------------------------------------------------------------------------------
COMPARATIVE RETURNS (2)(4)
[GRAPH]
<TABLE>
<CAPTION>
INDEXED
OMEGA JSE ALSI
<S> <C> <C>
09/11/95 100.00 100.00
11/30/95 99.18 99.41
12/31/95 104.26 104.37
01/31/69 113.03 115.22
02/29/96 103.61 106.48
03/31/96 101.68 104.10
04/30/96 95.74 99.38
05/31/96 93.90 96.30
06/30/96 95.88 98.12
07/31/96 88.00 90.75
08/31/96 89.33 92.46
09/30/96 91.86 94.22
10/31/96 90.38 92.32
11/30/96 90.92 91.01
12/31/96 87.90 88.90
1/31/97 90.19 91.58
2/28/97 97.96 100.17
3/31/97 100.73 100.92
4/30/97 101.89 100.95
5/31/97 98.98 99.17
6/30/97 104.68 103.61
7/31/97 103.48 102.89
8/30/97 99.25 98.93
9/30/97 98.55 97.26
10/31/97 88.37 87.17
11/30/97 84.66 83.19
12/31/97 82.77 81.64
</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 Actuaries All Share
Index.
(4) OMEGA South Africa Fund net asset value and JSE Actuaries All Share Index
rebased to November 10, 1995 = 100, the launch date of the Fund.
(5) The Fund commenced operations on November 10, 1995.
*Unaudited.
5
<PAGE>
OMEGA SOUTH AFRICA FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
- -----------------------------------------------------------------------------
ASSETS
Investment in Trust, at value (Note B) $ 14,405,993
Receivable from investment adviser (Note C) 7,823
------------
TOTAL ASSETS 14,413,816
------------
LIABILITIES
Payable for Fund expenses 45,800
------------
TOTAL LIABILITIES 45,800
------------
NET ASSETS $ 14,368,016
------------
------------
NET ASSETS CONSIST OF:
Paid in capital $ 19,062,223
Distributions in excess of net investment income (123,094)
Accumulated net realized loss on investment (84,050)
Net unrealized depreciation of investment (4,487,063)
------------
NET ASSETS $ 14,368,016
------------
------------
SHARES OUTSTANDING 185,992
------------
------------
NET ASSET VALUE PER SHARE $ 77.25
---------
---------
MAXIMUM OFFERING PRICE PER SHARE $ 77.52
---------
---------
See Notes to Financial Statements.
6
<PAGE>
OMEGA SOUTH AFRICA FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
- -----------------------------------------------------------------------------
INVESTMENT INCOME
Investment income allocated from Trust $ 143,250
Expenses allocated from Trust (38,334)
-----------
NET INVESTMENT INCOME FROM TRUST 104,916
-----------
EXPENSES
Administration fee (Note C) 20,164
Printing expense 11,290
Trustees' fees and expenses (Note C) 10,485
Auditing fees 10,083
Shareholder servicing agent fee 10,079
12b-1 fees (Note C) 2,540
-----------
Total expenses 64,641
Deduct: Expenses reimbursed by investment adviser (Note C) (52,279)
-----------
NET EXPENSES 12,362
-----------
NET INVESTMENT INCOME 92,554
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss allocated from Trust on:
Investments (97,573)
Foreign currency transactions (26,082)
-----------
Net realized loss allocated from Trust (123,655)
Net change in unrealized depreciation of investments
allocated from Trust (2,389,177)
-----------
NET REALIZED AND UNREALIZED LOSS ALLOCATED FROM TRUST (2,512,832)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (2,420,278)
-----------
-----------
See Notes to Financial Statements.
7
<PAGE>
OMEGA SOUTH AFRICA FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1997 YEAR ENDED
(UNAUDITED) JUNE 30, 1997
- ---------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 92,554 $ 120,535
Net realized gain (loss) allocated from Trust (123,655) 46,475
Net change in unrealized depreciation
of investments allocated from Trust (2,389,177) (230,634)
-------------- -----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (2,420,278) (63,624)
-------------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (181,692) (225,561)
Realized capital gains -- (73,828)
-------------- -----------
TOTAL DISTRIBUTIONS (181,692) (299,389)
-------------- -----------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Proceeds from shares sold 8,268,833 2,940,269
Payments for shares redeemed -- (6,249,747)
Distributions reinvested 22,783 77,634
-------------- -----------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS 8,291,616 (3,231,844)
-------------- -----------
NET INCREASE (DECREASE) IN NET ASSETS 5,689,646 (3,594,857)
NET ASSETS
Beginning of period 8,678,370 12,273,227
-------------- -----------
End of period $ 14,368,016 $ 8,678,370
-------------- -----------
-------------- -----------
NUMBER OF SHARES OF BENEFICIAL INTEREST
Sold 97,988 30,000
Redeemed -- (71,602)
Distributions reinvested 298 935
-------------- -----------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 98,286 (40,667)
-------------- -----------
</TABLE>
See Notes to Financial Statements.
8
<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>
<CAPTION>
Six Months Ended
December 31, 1997 Year Ended Period Ended
(Unaudited) June 30,1997 June 30, 1996(1)
----------------- -------------- ----------------
<S> <C> <C> <C>
PER SHARE DATA:
Net Asset Value, Beginning of Period $ 98.95 $ 95.61 $ 100.00
Income From Investment Operations
Net Investment Income 0.70 2.27 0.88
Net Realized and Unrealized Gains and
Losses Allocated from Trust (21.42) 5.61 (4.98)
--------- --------- ----------
Total From Investment Operations (20.72) 7.88 (4.10)
--------- --------- ----------
Less Distributions From:
Net Investment Income (0.98) (3.24) (0.29)
Realized Capital Gains -- (1.30) --
--------- --------- ----------
Total From Distributions (0.98) (4.54) (0.29)
Net Asset Value, End of Period $ 77.25 $ 98.95 $ 95.61
--------- --------- ----------
--------- --------- ----------
TOTAL RETURN(4) (20.93)% 9.18% (4.12)%
--------- --------- ----------
--------- --------- ----------
RATIOS/SUPPLEMENTAL DATA:
Ratio of Expenses to Average Net Assets 1.00%(2)(3) 1.00%(3) 1.00%(2)(3)
--------- --------- ----------
--------- --------- ---------
Ratio of Net Investment Income to Average Net Assets 1.82%(2)(3) 1.58%(3) 1.46%(2)(3)
--------- --------- ----------
--------- --------- ---------
Net Assets, End of Period (in thousands) $ 14,368 $ 8,678 $ 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 period ended December 31,
1997, 2.02% and 0.79%, respectively; for the year ended June 30, 1997,
2.77% and (0.19)%, 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.
9
<PAGE>
OMEGA SOUTH AFRICA FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 (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 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 0.65%
on redemption proceeds is charged by OMEGA South Africa Fund.
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements are prepared in accordance with generally
accepted accounting principles. The following is a summary of significant
accounting policies followed by OMEGA South Africa Fund in the preparation of
its financial statements.
TRUST VALUATION: The value of OMEGA South Africa Fund's investment in the Trust
reflects OMEGA South Africa Fund's proportionate interest in the net assets of
the Trust (1.71% at December 31, 1997).
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.
10
<PAGE>
OMEGA SOUTH AFRICA FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 (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 ("State Street") 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 six months ended December 31, 1997 amounted to $8,333,135 and
$227,285, respectively.
11
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
("THE TRUST")
FINANCIAL STATEMENTS
DECEMBER 31, 1997 (UNAUDITED)
12
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS--97.7%
BANKS--20.1%
2,000,000 Amalgamated Banks of SA Ltd $ 11,517,894
623,800 Investec Group Ltd 24,017,968
300,000 Investec Holdings Ltd 11,353,352
3,265,809 Nedcor Ltd 72,543,680
946,300 Standard Bank Investment Corp Ltd 41,651,213
5,000,000 Theta Group Ltd 7,815,714
--------------
168,899,821
--------------
BEVERAGES, HOTELS & LEISURE--4.9%
1,251,256 Johnnies Industrial Corp Ltd 13,330,946
1,122,161 The South African Breweries Ltd 27,696,282
--------------
41,027,228
--------------
BUILDING, CONSTRUCTION, ALLIED--2.4%
180,000 Anglo Alpha Ltd 1,999,177
2,000,000 Barlow Ltd 16,988,894
1,200,000 Group Five Holdings Ltd 1,209,379
--------------
20,197,450
--------------
CHEMICALS, OILS & PLASTICS--6.2%
680,000 AECI Ltd 2,125,874
1,452,300 Engen Ltd 7,392,930
4,080,038 Sasol Ltd 42,713,685
--------------
52,232,489
--------------
COAL--1.5%
181,905 Anglo American Coal Corp Ltd 8,492,891
1,312,000 Ingwe Coal Corp Ltd 4,560,428
--------------
13,053,319
--------------
DIAMONDS--4.1%
709,821 Anglo American Investment Trust Ltd 14,453,369
1,000,000 De Beers Consolidated Mines Ltd 20,361,991
--------------
34,815,360
--------------
ELECTRONICS & ELECTRICAL--3.2%
1,235,900 Allied Electronics Corp Ltd 2,414,860
132,251 Datatec Ltd 1,101,638
ELECTRONICS & ELECTRICAL--CONTINUED
2,012,000 Dimension Data Holdings Ltd 8,690,251
2,500,000 Grintek Ltd 437,063
1,892,188 Persetel Q Data Holdings Ltd 10,391,078
2,040,000 Reunert Ltd 3,314,685
598,500 Siltek Ltd 738,585
--------------
27,088,160
--------------
ENGINEERING--1.8%
4,000,000 African Oxygen Ltd 10,777,458
1,300,000 Hudaco Industries Ltd 3,983,957
--------------
14,761,415
--------------
FINANCIAL SERVICES--4.3%
1,392,450 Coronation Holdings Ltd 20,305,369
2,800,000 Forbes Group Ltd 5,183,052
1,250,806 Genbel Securities Ltd 11,062,250
--------------
36,550,671
--------------
FOOD--1.0%
354,200 CG Smith Foods Ltd 5,099,548
6,000,000 Irvin & Johnson Ltd 2,961,744
--------------
8,061,292
--------------
FURNITURE & HOUSEHOLD--1.1%
1,542,437 JD Group Ltd 9,437,989
--------------
INDUSTRIAL HOLDING--14.1%
15,800 Anglo American Industrial
Corp Ltd 382,164
4,835,000 Anglovaal Industries Ltd 8,950,020
1,952,412 Bidvest Group Ltd 16,163,016
6,000,000 CG Smith Ltd 24,681,201
3,980,000 Murray & Roberts Holdings Ltd 6,016,660
333,216 Plate Glass & Shatterprufe Industries Ltd 6,476,535
4,300,000 Rembrandt Group Ltd 31,396,545
13,274,900 Safmarine & Rennies Holdings Ltd 24,300,002
--------------
118,366,143
--------------
See Notes to Financial Statements.
13
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997 (UNAUDITED)
-CONTINUED-
- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS--CONTINUED
INSURANCE--7.6%
1,500,000 Fedsure Holdings Ltd $ 18,480,049
600,000 Liberty Life Association of Africa Ltd 15,425,751
1,500,000 Mutual & Federal Insurance Co Ltd 7,712,875
8,218,700 New Africa Investments Ltd 7,860,336
6,406,800 Norwich Holdings SA Ltd 9,882,970
1,932,900 Real Africa Investments Ltd* 4,691,119
--------------
64,053,100
--------------
MANGANESE--0.5%
44,000 Associated Ore & Metal Corp Ltd 2,171,946
490,000 Samancor Ltd 2,242,390
--------------
4,414,336
--------------
MEDIA--3.1%
524,500 Independent Newspapers Holdings Ltd 2,427,242
3,700,000 MIH Holdings Ltd* 10,654,052
500,000 Nasionale Pers Bpk 4,113,533
713,400 Omni Media Corp Ltd 8,979,860
--------------
26,174,687
--------------
MINING HOUSES--10.9%
920,000 Anglo American Corp of SA Ltd 37,163,307
1,057,200 Anglovaal Ltd 11,698,346
1,300,000 Avmin Ltd 1,564,171
8,400,000 Billiton Plc* 21,596,051
1,680,000 Gencor Ltd 2,781,572
1,089,900 Gold Fields of SA Ltd 16,700,442
--------------
91,503,889
--------------
PAPER & PACKAGING--0.9%
729,700 Nampak Ltd 2,191,201
1,046,386 Sappi Ltd 5,272,821
--------------
7,464,022
--------------
PLATINUM--0.2%
126,454 Anglo American Platinum Corp Ltd 1,690,561
--------------
STEEL & ALLIED--0.7%
19,178,398 Iscor Ltd 5,680,151
--------------
STORES--5.1%
2,364,253 Foschini Ltd 7,294,076
6,898,278 Metro Cash and Carry Ltd 6,029,963
6,339,637 Speciality Stores 'N' Ltd 4,628,900
6,188,893 Wooltru 'N' Ltd 19,475,537
200,000 Wooltru Ltd 699,301
3,496,004 Woolworths Holdings Ltd* 4,875,135
--------------
43,002,912
--------------
TRANSPORTATION--4.0%
1,183,830 Imperial Holdings Ltd 13,756,971
3,000,000 Super Group Ltd 6,293,706
3,386,438 Trencor Ltd 13,930,226
--------------
33,980,903
--------------
Total Common Stocks
(Cost $1,015,812,668) 822,455,898
--------------
- --------------------------------------------------------------------------------
MATURITY AMORTIZED
AMOUNT VALUE
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT--0.1%
1,262,226 State Street Bank and Trust
Company,5.000%, dated
12/31/97, due 1/7/98
(collateralized by a U.S.
Treasury Bond, 8.125%,
8/15/19) (Cost $1,261,000) 1,261,000
--------------
Total Investments--97.8%
(Cost $1,017,073,668) $ 823,716,898
Net Other Assets--2.2% 18,362,992
--------------
Total Net Assets--100% $ 842,079,890
--------------
--------------
Note to Schedule of Investments
- -------------------------------
* Non-income producing security.
See Notes to Financial Statements.
14
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (Note B)
(Cost of investments - $1,017,073,668) $ 823,716,898
Cash (including foreign currency, at value) 23,768,786
Receivable for investments sold 5,176,313
Deferred organization costs (Note B) 837,834
Dividends and interest receivable 3,799,606
Other assets 28,900
--------------
TOTAL ASSETS 857,328,337
--------------
LIABILITIES
Payable for investments purchased 14,619,219
Payable to adviser (Note C) 425,018
Accrued expenses 204,210
--------------
TOTAL LIABILITIES 15,248,447
--------------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS $ 842,079,890
--------------
--------------
See Notes to Financial Statements.
15
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
STATEMENT OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividend income $ 11,631,897
Interest income 1,365,659
Investment lending income 140,010
--------------
TOTAL INCOME 13,137,566
--------------
EXPENSES
INVESTMENT ADVISORY FEE (NOTE C) 2,949,157
ADMINISTRATION FEE (NOTE C) 189,163
CUSTODIAN FEES 152,499
AMORTIZATION OF DEFERRED ORGANIZATION EXPENSES (NOTE B) 147,805
LEGAL FEES 104,850
TRUSTEES FEES AND EXPENSES (NOTE C) 81,865
AUDITING FEES 26,215
MISCELLANEOUS EXPENSES 44,721
--------------
TOTAL EXPENSES 3,696,275
--------------
NET INVESTMENT INCOME 9,441,291
--------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on:
Investments (5,032,223)
Foreign currency transactions (2,214,219)
--------------
Net realized loss (7,246,442)
--------------
Net change in unrealized appreciation (depreciation) of:
Investments (226,770,161)
Foreign currency translations 286,767
--------------
Net change in unrealized appreciation (depreciation) (226,483,394)
--------------
Net realized and unrealized loss (233,729,836)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(224,288,545)
--------------
--------------
See Notes to Financial Statements.
16
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1997 Year Ended
(Unaudited) June 30, 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 9,441,291 $ 17,624,887
Net realized gain (loss) on investments and
foreign currency transactions (7,246,442) 1,648,338
Net change in unrealized appreciation (depreciation)
of investments and foreign currency translations (226,483,394) 72,855,815
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS (224,288,545) 92,129,040
--------------- ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Contributions 22,613,583 63,862,347
Withdrawals (32,951,230) (68,137,648)
--------------- ---------------
NET DECREASE IN NET ASSETS RESULTING FROM
TRANSACTIONS IN INVESTORS` BENEFICIAL INTERESTS (10,337,647) (4,275,301)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS (234,626,192) 87,853,739
NET ASSETS
Beginning of period 1,076,706,082 988,852,343
--------------- ---------------
End of period $ 842,079,890 $ 1,076,706,082
--------------- ---------------
--------------- ---------------
</TABLE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1997 Year Ended Period Ended
(Unaudited) June 30, 1997 June 30, 1996(1)
----------------- ------------- ----------------
<S> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.75%(2) 0.77% 0.82%(2)
-------- -------- --------
-------- -------- --------
Net investment income 1.93%(2) 1.82% 1.34%(2)
-------- -------- --------
-------- -------- --------
Portfolio turnover rate 14.16%(3) 9.88% 4.43%(3)
-------- -------- --------
-------- -------- --------
Average commission rate per share $ 0.02 $ 0.01 $ 0.02
-------- -------- --------
-------- -------- --------
</TABLE>
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.
17
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 (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 90.92% of the
beneficial interest in the Trust as of December 31, 1997. 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. 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>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 (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.
19
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 (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 six months ended
December 31, 1997, the market value of investments loaned and the amount of
collateral received with respect to such transactions was $68,163,203 and
$72,915,175, 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. ("State Street"), 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.
20
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 (UNAUDITED)
-CONTINUED-
NOTE D -- INVESTMENT TRANSACTIONS
For the six months ended December 31, 1997, there were purchase and sale
transactions (excluding short-term securities) of $135,557,216 and $133,574,769,
respectively. The aggregate cost of Trust investments was substantially the
same for book and Federal income tax purposes at December 31, 1997. Gross
unrealized appreciation of investments was $88,191,220 and gross unrealized
depreciation of investments was $281,547,990, resulting in net unrealized
depreciation of investments of $193,356,770.
21
<PAGE>
TRUSTEES
- --------
Michael John Levett
PRESIDENT
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 LLP
150 Federal Street, Boston, MA 02110
IN BERMUDA:
Conyers Dill & Pearman
Clarendon House, Church Street, Hamilton, Bermuda
22
