<PAGE>
August 17 , 1998
Dear Shareholder,
Following a period of weakness for the South African stock market during the
first six months under review, when the JSE Actuaries All Share Index, the
benchmark for the Fund, fell by 16.4%, the second six month period realized a
9.2% gain to record an 8.7% decline for the full period. However, this 8.7%
decline was in rand terms; in U.S. dollar terms the decline was 30.4%,
reflecting the 24.0% decline in the rand/dollar exchange rate over the period.
The OMEGA Fund realized a negative total return of 23.5% in U.S. terms for the
past financial year which compares with a negative U.S. dollar total return of
28.7% for the benchmark All Share Index.
It is not pleasing to have to report a negative total return on the OMEGA Fund
over the year. However I do draw encouragement from the fact that the Fund has
again outperformed its benchmark - for the current year by a significant 5.2
percentage points.
Once again it was the weakness in the South African rand which was the primary
cause of the poor performance of the South African stock market in U.S. dollar
terms. In my last annual report to shareholders I cautioned that currency
uncertainty was likely in the short term; however a decline of the magnitude
experienced was not envisaged. While over the long term depreciation of the rand
compared to the U.S. dollar must continue to be expected as South African
inflation rates remain above U.S. levels, at current levels the rand does appear
oversold.
In presenting the annual report of the OMEGA South Africa Fund for the financial
year ended June 30, 1998, I must unfortunately advise shareholders that the
trustees of the OMEGA Fund have taken a decision to terminate the Fund. This was
not a decision taken lightly but only after a very full consideration of the
circumstances of the Fund and in particular the lack of demand for the Fund from
U.S. investors. I will be writing to shareholders advising on the procedure for
terminating the Fund and the options available.
Again, I should like to thank you for the support and confidence you have shown
in the past by your investment in the OMEGA South Africa Fund.
M.J. LEVETT
PRESIDENT
<PAGE>
THE SOUTH AFRICAN ECONOMY
The economic upturn which commenced in mid 1993 has slowed markedly over the
past twelve months under the combined pressure of very high real interest rates,
continued fiscal restraint, and weak global commodity demand. This slowdown was
widely expected and was generally accepted as a necessary cooling of the economy
as the monetary authorities sought to maintain the downward pressure on
inflation, rebuild the country's weak foreign exchange reserves, and maintain
the value of the rand.
[GRAPH]
GDP GROWTH
YEAR-ON-YEAR
<TABLE>
<CAPTION>
Q1 Q2 Q3 Q4
<S> <C> <C> <C> <C>
1990 (0.0275) (0.5415) (0.7049) 0.0062
1991 (0.8687) (1.0107) (0.9658) (1.2279)
1992 (1.1092) (1.5205) (2.7083) (3.4387)
1993 (2.1378) (0.2672) 2.7284 4.9515
1994 3.5072 2.8466 2.1559 2.5120
1995 3.8021 3.7865 3.4256 2.4762
1996 2.8485 3.2794 3.3974 3.4367
1997 2.4548 2.1110 1.3800 0.7819
1998 1.0267
1999
</TABLE>
Unfortunately, however, South Africa has recently been drawn into the broader
economic turmoil which has been affecting most emerging markets, with the rand
coming under mounting pressure on foreign exchange markets. As the graph
illustrates, the rand has a history of depreciation against the U.S. dollar,
largely reflecting inflation rate differentials; however the recent sharp
weakness would appear to owe more to speculative pressures than to any change in
the economic fundamentals. If history provides us with any insight it would
suggest that the current period of weakness could be followed by a period of
relative strength.
[GRAPH]
RAND EXCHANGE RATE
<TABLE>
<CAPTION>
R/$ Exchange Rate
January February March April May June July August September October November December
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1984 0.8000 0.8100 0.8200 0.8000 0.7800 0.7700 0.6700 0.6400 0.5000 0.5700 0.5500 0.5500
1985* 0.4600 0.5100 0.5000 0.5200 0.5000 0.5100 0.5100 0.4300 0.4000 0.3900 0.3800 0.5700
1986 0.4300 0.4800 0.4900 0.4900 0.4000 0.4000 0.3900 0.3900 0.4900 0.4500 0.4400 0.4500
1987 0.4800 0.4800 0.4800 0.4950 0.4970 0.4930 0.4840 0.4800 0.4080 0.4550 0.5040 0.5100
1988 0.5050 0.4640 0.4670 0.4880 0.4510 0.4380 0.4150 0.4070 0.4060 0.4050 0.4190 0.4260
1989 0.4180 0.4060 0.3930 0.3820 0.3750 0.3600 0.3710 0.3640 0.3580 0.3710 0.3800 0.3880
1990 0.3800 0.3800 0.3820 0.3760 0.3760 0.3740 0.3780 0.3870 0.3880 0.2820 0.3840 0.3800
1991* 0.3800 0.3820 0.3760 0.3640 0.3568 0.3460 0.3450 0.3480 0.3510 0.3520 0.3550 0.3810
1992 0.3500 0.3500 0.3450 0.3480 0.3490 0.3550 0.3010 0.3600 0.3550 0.3450 0.3330 0.3320
1993 0.3240 0.3790 0.3140 0.3140 0.3140 0.3070 0.2970 0.2850 0.2920 0.2930 0.2980 0.2950
1994 0.2800 0.2070 0.2890 0.2780 0.2730 0.2780 0.2710 0.2778 0.2788 0.2814 0.2022 0.2813
1995 0.2822 0.2800 0.2770 0.2766 0.2726 0.2725 0.2700 0.2700 0.2700 0.2700 0.2800 0.2700
1996* 0.2800 0.2700 0.2635 0.2362 0.2274 0.2288 0.2287 0.2207 0.2214 0.2182 0.2148 0.2130
1997 .21500 0.2238 0.2251 0.2246 0.2236 0.2218 0.2180 0.2134 0.2128 0.2117 0.2063 0.2052
1998 0.2025 0.2023 0.2007 0.1980 0.1804 0.1862 0.1583
Purchasing Power Parity
January February March April May June July August September October November December
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1984 0.8238 0.9138 0.8163 0.8111 0.8031 0.7955 0.7855 0.7811 0.7689 0.7568 0.7487 0.7422
1985* 0.7283 0.7080 0.7017 0.0986 0.0869 0.8793 0.8724 0.8811 0.8494 0.8449 0.8207 0.6116
1986 0.5961 0.5798 0.5718 0.5818 0.5538 0.5517 0.5419 0.5305 0.5271 0.8184 0.5102 0.5061
1987 0.9069 0.5020 0.4972 0.4949 0.4981 0.4940 0.4837 0.4897 0.4839 0.4796 0.4779 0.4748
1988 0.4719 0.4837 0.4802 0.4588 0.4543 0.4537 0.4530 0.4482 0.4451 0.4404 0.4360 0.4938
1989 0.4341 0.4286 0.4240 0.4198 0.4164 0.4145 0.4100 0.4823 0.4017 0.3984 0.3948 0.3927
1990 0.3804 0.3905 0.3882 0.3822 0.5791 0.3770 0.3770 0.3795 0.3808 0.3819 0.3072 0.3828
1991* 0.3582 0.3513 0.3507 0.3482 0.3068 0.3450 0.3413 0.3388 0.3353 0.3312 0.3298 0.3272
1992 0.3258 0.3258 0.3249 0.3211 0.3207 0.3200 0.3160 0.3196 0.3120 0.3116 0.3108 0.3035
1993 0.3098 0.3071 0.3057 0.3053 0.3084 0.3047 0.3018 0.2988 0.2984 0.2984 0.2958 0.2938
1994 0.2026 0.2911 0.2919 0.2884 0.2846 0.2024 0.2782 0.2766 0.2747 0.2720 0.2740 0.2727
1995 0.2708 0.2676 0.2673 0.2643 0.2624 0.2611 0.2804 0.2809 0.2600 0.2560 0.2585 0.2580
1996* 0.2580 0.2570 0.2555 0.2674 0.2536 0.2528 0.2507 0.2489 0.2488 0.2454 0.2455 0.2438
1997 0.2421 0.2402 0.2398 0.2384 0.2348 0.2349 0.2341 0.2348 0.2342 0.2337 0.2328 0.2316
1998 0.2303 0.2307 0.2900 0.2289 0.2272 0.2266
</TABLE>
The major economic downside to the present currency weakness is the upward
pressure it is placing on interest rates and the impact this will have on the
economic growth cycle. Until recently we believed that, following a
30 month period of rising interest rates, rates had peaked and a period of
falling rates had commenced.
[GRAPH]
INTEREST RATES AND INFLATION
<TABLE>
<CAPTION>
BANK RATE INFLATION
<S> <C> <C>
19900131 18.0000 55.2160
19900228 18.0000 55.5686
19900331 18.0000 56.5064
19900430 18.0000 57.0340
19900531 18.0000 57.6202
19900630 18.0000 58.0305
19900731 18.0000 58.4408
19900831 18.0000 59.3787
19900930 18.0000 60.3165
19901031 18.0000 60.7268
19901130 18.0000 62.0164
19901231 18.0000 62.4267
19910131 18.0000 63.1301
19910228 18.0000 63.8921
19910331 17.0000 64.4783
19910430 17.0000 65.3576
19910531 17.0000 66.3540
19910630 17.0000 66.8230
19910731 17.0000 67.7022
19910831 17.0000 68.6401
19910930 17.0000 69.5780
19911031 17.0000 70.9261
19911130 17.0000 71.6295
19911231 17.0000 72.5674
19920131 17.0000 73.5284
19920229 17.0000 73.8742
19920331 16.0000 74.6190
19920430 16.0000 75.5568
19920531 16.0000 76.1430
19920630 15.0000 76.2050
19920731 15.0000 77.6084
19920831 15.0000 78.4281
19920930 15.0000 78.9566
19921031 15.0000 79.2497
19921130 14.0000 79.5428
19921231 14.0000 79.5428
19930131 14.0000 80.4220
19930228 13.0000 80.6565
19930331 13.0000 81.8288
19930430 13.0000 83.8804
19930531 13.0000 84.2321
19930630 13.0000 84.5838
19930731 13.0000 85.2872
19930831 13.0000 86.6975
19930930 13.0000 86.1079
19931031 12.0000 86.6840
19931130 12.0000 86.8600
19931231 12.0000 87.1045
19940131 12.0000 88.3939
19940228 12.0000 88.6284
19940331 12.0000 89.2148
19940430 12.0000 89.8007
19940531 12.0000 90.3283
19940630 12.0000 90.9144
19940731 12.0000 92.3212
19940831 12.0000 93.7280
19940930 13.0000 94.8417
19941031 13.0000 95.1934
19941130 13.0000 95.4279
19941231 13.0000 95.7210
19950131 13.0000 96.8933
19950228 14.0000 97.3823
19950331 14.0000 98.3587
19950430 14.0000 99.7089
19950531 14.0000 100.0566
19950630 15.0000 100.0000
19950731 15.0000 100.5862
19950831 15.0000 100.7620
19950930 15.0000 100.8703
19951031 15.0000 101.2310
19951130 15.0000 101.5240
19951231 15.0000 102.2660
19960131 15.0000 103.5750
19960229 15.0000 103.6928
19960331 15.0000 104.5727
19960430 16.0000 105.2109
19960531 16.0000 105.8203
19960630 16.0000 106.8581
19960731 16.0000 107.7374
19960831 16.0000 108.3296
19960930 16.0000 109.3787
19961031 16.0000 110.4338
19961130 17.0000 110.8441
19961231 17.0000 111.8002
19970131 17.0000 113.3000
19970228 17.0000 113.9000
19970331 17.0000 114.8000
19970430 17.0000 116.0000
19970531 17.0000 118.0000
19970630 17.0000 116.3000
19970731 17.0000 117.5000
19970831 17.0000 117.7000
19970930 17.0000 118.2000
19971031 16.0000 118.7000
19971130 16.0000 118.3000
19971231 16.0000 118.7000
19980131 16.0000 119.7000
19980228 16.0000 120.0000
19980331 15.0000 120.8000
19980430 121.4000
19980531 121.8000
19980630 122.3000
19980731 125.7000
19980831 126.0000
19980930 127.4000
19981031 126.1000
19981130 126.7000
19981231 127.2000
</TABLE>
<TABLE>
<CAPTION>
REPO RATE
<S> <C>
19980309 15.000
19980310 15.000
19980311 15.000
19980312 15.000
19980313 15.000
19980314 15.000
19980315 15.000
19980316 15.000
19980317 15.000
19980318 15.000
19980319 15.000
19980320 15.000
19980321 15.000
19980322 15.000
19980323 15.000
19980324 15.000
19980325 15.000
19980326 15.000
19980327 15.000
19980328 15.000
19980329 15.000
19980330 15.000
19980331 15.000
19980401 15.000
19980402 15.000
19980403 14.983
19980404 14.983
19980405 14.983
19980406 14.986
19980407 14.988
19980408 14.990
19980409 14.954
19980410 14.954
19980411 14.954
19980412 14.954
19980413 14.954
19980414 14.921
19980415 14.897
19980416 14.853
19980417 14.853
19980418 14.853
19980419 14.853
19980420 14.884
19980421 14.919
19980422 14.879
19980423 14.879
19980424 14.879
19980425 14.879
19980426 14.879
19980427 14.879
19980428 14.913
19980429 14.927
19980430 14.927
19980501 14.927
19980502 14.927
19980503 14.927
19980504 14.927
19980505 14.895
19980506 14.873
19980507 14.846
19980508 14.795
19980509 14.795
19980510 14.795
19980511 14.785
19980512 14.798
19980513 14.830
19980514 14.986
19980515 15.001
19980516 15.001
19980517 15.001
19980518 15.150
19980519 15.255
19980520 15.500
19980521 15.655
19980522 15.799
19980523 15.799
19980524 15.799
19980525 16.094
19980526 18.000
19980527 18.000
19980528 18.000
19980529 18.000
19980530 18.000
19980531 18.000
19980601 18.000
19980602 18.000
19980603 18.000
19980604 17.500
19980605 17.500
19980606 17.500
19980607 17.500
19980608 17.500
19980609 17.500
19980610 17.500
19980611 17.500
19980612 17.000
19980613 17.000
19980614 17.000
19980615 17.000
19980616 17.000
19980617 17.000
19980618 17.000
19980619 20.377
19980620 20.377
19980621 20.377
19980622 23.985
19980623 20.456
19980624 18.710
19980625 17.345
19980626 18.311
19980627 18.311
19980628 18.311
19980629 20.078
19980630 20.209
19980701 20.527
19980702 20.382
19980703 20.578
19980704 20.578
19980705 20.578
19980706 21.118
19980707 21.145
19980708 21.154
19980709 21.171
19980710 21.207
19980711 21.207
19980712 21.207
19980713 21.232
19980714 21.250
19980715 21.275
19980716 21.278
19980717 21.284
19980718 21.284
19980719 21.284
19980720 21.292
19980721 21.304
19980722 21.316
19980723 21.318
19980724 21.319
19980725 21.319
19980726 21.319
19980727 21.322
19980728 21.325
19980729 21.330
19980730 21.337
19980731 21.346
19980801 21.346
19980802 21.346
19980803 21.347
19980804 21.349
19980805 21.351
19980806 21.353
19980807 21.355
19980808 21.355
19980809 21.355
19980810 21.355
19980811 21.358
19980812 21.362
19980813 21.363
19980814 21.364
19980815 21.364
19980816 21.364
19980817 21.366
</TABLE>
Falling interest rates, together with the effect of two large demutualisations
and the rebuilding of depleted inventories, were seen as a primary driver of a
strengthening in GDP growth in 1999 and 2000. Some strengthening can still be
expected but at a somewhat lower level, at least for 1998. We are currently
forecasting growth of only 1.0% for calendar year 1998 but a more encouraging
level of 2.5% and 3.5% for 1999 and 2000 respectively.
1
<PAGE>
THE SOUTH AFRICAN
INVESTMENT MARKET
The weakness of the rand was once again the dominant feature of the investment
markets during the 12 months to June 1998, falling 24.0% against the U.S. dollar
during the period. The equity market also declined during this period in rand
terms with the JSE Actuaries All Share Index losing 8.7%, leading to an
effective decline of 30.4% for the Index in dollar terms.
[GRAPH]
JSE ACTUARIES ALL SHARE INDEX
INDEXED TO 100 FROM 1 JANUARY 1990
<TABLE>
<CAPTION>
US Dollars Rands
<S> <C> <C> <C>
19891231 100 19891231 100
19900131 112.3908 19900131 107.3253
19900228 100.5145 19900228 103.629
19900331 94.99262 19900331 109.4422
19900430 88.64709 19900430 101.8817
19900531 98.77636 19900531 107.1237
19900630 88.44531 19900630 103.3938
19900731 97.40793 19900731 105.914
19900831 93.95471 19900831 100.5712
19900930 84.58017 19900930 92.2043
19901031 85.29226 19901031 89.61694
19901130 89.41416 19901130 87.39919
19901231 96.27963 19901231 91.39785
19910131 91.83711 19910131 85.8871
19910228 103.8395 19910228 94.18683
19910331 104.9512 19910331 96.67339
19910430 107.6784 19910430 101.9153
19910531 113.9819 19910531 104.6707
19910630 118.7846 19910630 111.0887
19910731 128.5287 19910731 117.3051
19910831 123.6824 19910831 112.5336
19910930 125.252 19910930 110.7863
19911031 133.9517 19911031 118.4812
19911130 138.0774 19911130 119.0188
19911231 129.0407 19911231 115.5914
19920131 126.48 19920131 121.1358
19920229 112.0307 19920229 120.8669
19920331 121.6871 19920331 119.2876
19920430 119.7731 19920430 116.0618
19920531 128.6652 19920531 125.4032
19920630 115.0386 19920630 122.8159
19920731 106.03 19920731 115.289
19920831 99.20702 19920831 105.914
19920930 93.651 19920930 107.8965
19921031 81.79336 19921031 101.3777
19921130 78.67069 19921130 107.2581
19921231 79.99144 19921231 109.5094
19930131 87.87864 19930131 115.3562
19930228 89.94598 19930228 114.8522
19930331 93.59946 19930331 119.6227
19930430 97.49301 19930430 125.4364
19930531 103.0854 19930531 134.1562
19930630 103.4553 19930630 137.0273
19930731 111.0868 19930731 140.3449
19930831 101.3147 19930831 135.562
19930930 109.298 19930930 126.6933
19931031 110.8323 19931031 131.5938
19931130 111.6283 19931130 139.9285
19931231 136.0542 19931231 164.4149
19940131 128.6806 19940131 159.7633
19940228 122.4007 19940228 162.8274
19940331 119.9334 19940331 165.9642
19940430 138.2222 19940430 180.0782
19940531 135.3708 19940531 181.3206
19940630 135.5719 19940630 181.59
19940731 145.1454 19940731 189.9156
19940831 154.8154 19940831 196.0268
19940930 158.5691 19940930 190.7296
19941031 169.429 19941031 192.3377
19941130 166.8653 19941130 193.4228
19941231 171.8689 19941231 197.1409
19950131 147.0474 19950131 169.8294
19950228 157.029 19950228 172.9531
19950331 175.4948 19950331 177.4821
19950430 180.723 19950430 184.1083
19950531 177.3225 19950531 183.851
19950630 177.8281 19950630 182.146
19950731 179.22 19950731 182.7438
19950831 180.844 19950831 186.2694
19950930 184.9029 19950930 190.0958
19951031 189.3536 19951031 194.5275
19951130 194.469 19951130 200.6755
19951231 203.7777 19951231 209.2883
19960131 224.5083 19960131 230.8767
19960229 207.1576 19960229 225.3057
19960331 202.1658 19960331 226.7674
19960430 192.6353 19960430 234.4182
19960531 186.337 19960531 229.1158
19960630 189.4807 19960630 231.1398
19960731 174.9242 19960731 222.006
19960831 177.8774 19960831 224.7769
19960930 180.9184 19960930 231.1169
19961031 176.9029 19961031 234.3839
19961130 174.0495 19961130 225.6025
19961231 169.7287 19961231 223.7072
19970131 174.4516 19970131 224.33
19970228 190.4225 19970228 240.0932
19970331 191.3013 19970331 238.3991
19970430 191.3355 19970430 239.6005
19970531 187.4256 19970531 235.9451
19970630 195.3889 19970630 249.3273
19970731 193.8153 19970731 251.4958
19970831 185.8094 19970831 245.5301
19970930 182.2481 19970930 239.361
19971031 163.2061 19971031 221.4086
19971130 155.4526 19971130 212.576
19971231 152.0466 19971231 208.411
19980131 158.2261 19980131 220.1036
19980228 171.4284 19980228 238.4304
19980331 179.5564 19980331 254.6666
19980430 194.263 19980430 276.7291
19980531 176.4981 19980531 256.3697
19980630 136.4474 19980630 227.5405
19980731 136.5037 19980731 235.9014
19980831 19980831 211.3895
19980930 19980930
19981031 19981031
19981130 19981130
19981231 19981231
</TABLE>
The overall decline of 8.7% in the Index over the period masked a period of
pronounced weakness from October - January when the Index fell 24.6% as the
impact of the Asian crises spread to other emerging markets. This "collapse" was
followed by a rapid turnaround, with the Index gaining 49.4% as investors
reappraised the greater fundamental strengths of the South African market and
expectations rose that interest rates had peaked and a cycle of falling interest
rates was about to commence.
Throughout this period of great volatility it was encouraging to see that
international investors continued to be net buyers of South African equities,
indicating that selling pressures came from domestic investors and that
international investors still viewed South Africa with some confidence.
[GRAPH]
FOREIGN EQUITY INVESTOR CONFIDENCE IS STRONG
QUARTERLY NET FOREIGN EQUITY TRANSACTION ($bn)
<TABLE>
<CAPTION>
=================================
Date
- ---------------------------------
<S> <C>
900330 -1.06857272
900629 -0.30121841
900928 -0.10754783
901231 -0.18365114
910329 -0.32623023
910628 -0.33839014
910930 -0.38875811
911231 -0.41660587
920331 -0.23048844
920630 -0.15968539
920930 0.06783339
921231 0.14011799
930331 0.34308041
930630 0.26912556
930930 -0.04451626
931231 0.28720711
940331 0.61006899
940630 -0.31913583
940930 -0.07315705
941230 -0.15090796
950331 0.23203610
950630 0.56194241
950929 0.32180837
951229 0.20864262
960329 0.59022551
960628 0.45629789
960930 0.31987806
961231 -0.11178457
970331 0.78444575
970630 1.81855210
970930 1.69168365
971231 1.35738944
980331 2.54585958
980630 2.38667264
</TABLE>
This volatility in investor confidence is clearly reflected in the volatility of
the price earnings ratio. From a low of 12.2 in January the p/e ratio rose to
18.2 in the following 14 weeks. The subsequent fall in the ratio to 14.5 at the
end of June marked a reversal of sentiment as it became apparent that the
pressures on the rand could force a period of higher interest rates and low
corporate earnings growth.
[GRAPH]
HISTORICAL RATING OF THE SOUTH AFRICAN MARKET
ALL SHARE INDEX
<TABLE>
<CAPTION>
EPSG PE
DEC END IJR
100/AEY
<S> <C> <C> <C>
6.80
8.62
6.99
5.85
8.70
8.70
8.33
10.53
12.82
12.35
13% 12.66
13% 13.51
13% 13.33
13% 12.99
1987 13% 14.49
13% 14.71
13% 14.49
13% 11.24
10.31
9.62
8.40
8.00
20% 8.77
20% 8.40
20% 8.47
20% 8.70
1988 20% 9.01
20% 8.13
20% 8.70
20% 9.09
8.93
8.77
9.52
9.80
29% 10.42
29% 10.53
29% 9.52
29% 10.10
1989 29% 10.20
29% 10.00
29% 9.90
29% 9.80
9.90
10.31
10.99
10.42
1% 10.87
1% 10.00
1% 10.53
1% 10.00
1990 1% 10.42
1% 10.00
1% 9.17
1% 9.01
8.93
9.26
8.77
9.71
(7%) 10.31
(7%) 11.11
(7%) 11.36
(7%) 12.05
1991 (7%) 12.82
(7%) 12.35
(7%) 12.05
(7%) 13.16
12.99
12.50
13.16
13.16
(6%) 13.16
(6%) 12.82
(6%) 13.89
(6%) 13.51
1992 (6%) 12.66
(6%) 12.05
(6%) 12.35
(6%) 11.63
12.35
12.66
13.33
13.33
5% 14.08
5% 14.71
5% 15.63
5% 15.87
1993 5% 16.39
5% 15.38
5% 14.29
5% 14.49
15.38
18.18
17.86
17.54
15% 18.18
15% 19.23
15% 19.23
15% 18.87
1994 15% 19.61
15% 19.61
15% 19.23
15% 19.23
18.52
18.87
16.39
16.13
20% 16.67
20% 17.24
20% 16.67
20% 16.39
1995 20% 16.39
20% 15.87
20% 15.87
20% 16.39
16.39
16.67
18.52
17.54
23% 16.95
23% 17.86
23% 17.24
23% 16.95
1996 23% 16.13
23% 15.63
23% 15.87
23% 15.87
14.71
14.71
14.49
15.38
2% 15.15
2% 15.15
2% 14.71
2% 14.93
1997 2% 15.38
2% 14.71
2% 14.71
2% 13.51
13.70
13.51
14.29
15.38
10% 16.67
10% 18.18
10% 16.67 16.67
10% 16.43
1998 10% 16.18
10% 15.94
10% 15.70
10% 15.46
15.22
14.98
14.73
14.49
22% 14.25
22% 14.01
22% 13.77
22% 13.54
1999 22% 13.32
22% 13.09
22% 12.86
22% 12.64
12.41
12.19
11.96
11.74
25% 11.51
25% 11.28
25% 11.06
25% 10.88
2000 25% 10.70
25% 10.53
25% 10.35
25% 10.17
10.00
9.82
9.64
9.47
21% 9.29
21% 9.11
21% 8.94
21%
2001 21%
</TABLE>
The outlook for corporate profit growth is therefore less sanguine than earlier
in the year, when earnings per share growth for the All Share Index was widely
forecast to be 20% plus. Our current estimate is for earnings per share growth
in the region of 18% for the 12 months to June, 1999, but with good prospects
for faster growth over the following 12 months. With the Index currently at 6800
it is on a trailing p/e of 14.6x; and our 12 month forecast implies a 12 month
forward p/e of 12.4x.
OLD MUTUAL ASSET MANAGERS
(BERMUDA) LIMITED
2
<PAGE>
OMEGA SOUTH AFRICA FUND
INVESTMENT SUMMARY AS AT JUNE 30, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Historical Information TOTAL RETURN (%)
NET ASSET VALUE (1) INDEX (2)(3)
CUMULATIVE AVERAGE CUMULATIVE AVERAGE
ANNUAL ANNUAL
<S> <C> <C> <C> <C>
Six Months (3.25) - -9.3 -
One Year (23.50) (23.50) (28.7) (28.7)
Two Years (16.48) (8.61) (24.4) (13.0)
Since Inception (5) (19.92) (8.07) (26.5) (11.0)
- ----------------------------------------------------------------------------------------------------
Comparative Returns (2) (4)
</TABLE>
<TABLE>
<CAPTION>
OMEGA JSE ALSI
<S> <C> <C>
9/11/95 100.00 100.00
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 92.48
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
6/30/97 104.68 103.81
07/31/97 103.48 102.97
08/31/97 99.25 98.91
09/30/97 98.55 97.21
10/31/97 88.37 87.24
11/30/97 84.66 83.28
12/31/97 82.77 81.64
1/31/98 85.90 85.15
2/28/98 92.26 92.44
3/31/98 98.14 97.01
4/30/98 107.68 105.14
5/31/98 97.92 95.89
6/30/98 80.08 73.50
</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.
(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.
3
<PAGE>
OMEGA SOUTH AFRICA FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in Trust, at value (Note B) $ 15,178,220
Receivable from investment adviser (Note C) 6,895
-------------
TOTAL ASSETS 15,185,115
-------------
LIABILITIES
Payable for Fund expenses 58,679
-------------
TOTAL LIABILITIES 58,679
-------------
NET ASSETS $ 15,126,436
-------------
-------------
NET ASSETS CONSIST OF:
Paid in capital $ 20,206,498
Undistributed net investment income 195,410
Accumulated net realized loss on investment (1,176,989)
Net unrealized depreciation of investment (4,098,483)
-------------
NET ASSETS $ 15,126,436
-------------
-------------
SHARES OUTSTANDING 202,391
-------------
-------------
NET ASSET VALUE PER SHARE $ 74.74
--------
--------
MAXIMUM OFFERING PRICE PER SHARE $ 75.00
--------
--------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
OMEGA SOUTH AFRICA FUND
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Investment income allocated from Trust $ 365,642
Expenses allocated from Trust (108,308)
------------
NET INVESTMENT INCOME FROM TRUST 257,334
------------
EXPENSES
Administrative fee (Note C) 40,000
Trustees' fees and expenses (Note C) 20,000
Auditing fees 20,000
Shareholder servicing agent fee 20,000
Printing expense 20,000
12b-1 fees (Note C) 6,938
------------
Total expenses 126,938
Deduct: Expenses reimbursed by investment adviser (Note C) (92,500)
------------
NET EXPENSES 34,438
------------
NET INVESTMENT INCOME 222,896
------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss allocated from Trust on:
Investments (1,001,611)
Foreign currency transactions (28,026)
------------
Net realized loss allocated from Trust (1,029,637)
Net change in unrealized depreciation of investments
allocated from Trust (2,000,597)
------------
NET REALIZED AND UNREALIZED LOSS ALLOCATED FROM TRUST (3,030,234)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (2,807,338)
------------
------------
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
OMEGA SOUTH AFRICA FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 222,896 $ 120,535
Net realized gain (loss) allocated from Trust (1,029,637) 46,475
Net change in unrealized depreciation
of investments allocated from Trust (2,000,597) (230,634)
------------- -------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (2,807,338) (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 9,518,833 2,940,269
Payments for shares redeemed (104,520) (6,249,747)
Distributions reinvested 22,783 77,634
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS 9,437,096 (3,231,844)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS 6,448,066 (3,594,857)
NET ASSETS
Beginning of year 8,678,370 12,273,227
------------- -------------
End of year $ 15,126,436 $ 8,678,370
------------- -------------
------------- -------------
NUMBER OF SHARES OF BENEFICIAL INTEREST
Sold 115,439 30,000
Redeemed (1,052) (71,602)
Distributions reinvested 298 935
------------- -------------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 114,685 (40,667)
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements.
6
<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>
Year Ended Year Ended Period Ended
June 30, 1998 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 1.40 2.27 0.88
Net Realized and Unrealized Gains and
Losses Allocated from Trust (24.63) 5.61 (4.98)
---------- ---------- ----------
Total From Investment Operations (23.23) 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 $ 74.74 $ 98.95 $ 95.61
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN(4) (23.50)% 9.18% (4.12)%
---------- ---------- ----------
---------- ---------- ----------
RATIOS/SUPPLEMENTAL DATA:
Ratio of Operating Expenses to Average Net Assets (5) 1.00%(3) 1.00%(3) 1.00%(2)(3)
---------- ---------- ----------
---------- ---------- ----------
Ratio of Total Expenses to Average Net Assets 1.03% 1.00%(3) 1.00%(2)(3)
---------- ---------- ----------
---------- ---------- ----------
Ratio of Net Investment Income to Average Net Assets 1.60%(3) 1.58%(3) 1.46%(2)(3)
---------- ---------- ----------
---------- ---------- ----------
Net Assets, End of Period (in thousands) $ 15,126 $ 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 year ended June 30, 1998,
1.66% and 0.94%, 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.
(5) Excluding interest expense.
See Notes to Financial Statements.
7
<PAGE>
OMEGA SOUTH AFRICA FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
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 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 (1.86% at June 30, 1998).
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 loss 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.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: OMEGA South Africa Fund declares
and distributes dividends from net investment income, if any, annually on or
about the last day of December. OMEGA South Africa Fund's realized capital
gains, if any, will be distributed at least annually. Income and capital gain
distributions are
8
<PAGE>
OMEGA SOUTH AFRICA FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(CONTINUED)
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 year ended June 30, 1998 amounted to $9,624,285 and $381,224,
respectively.
NOTE E - SUBSEQUENT EVENT
On August 17, 1998, the Trustees voted to liquidate the OMEGA South Africa Fund
effective September 30, 1998. The liquidation is subject to, and will be
effected only after compliance with, applicable regulatory requirements.
9
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
Old Mutual Equity Growth Assets South Africa Fund
We have audited the accompanying statement of assets and liabilities of Old
Mutual Equity Growth Assets South Africa Fund ("OMEGA South Africa Fund") as of
June 30, 1998, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two year period
ended June 30, 1998, and the financial highlights for each of the years in the
two year period ended June 30, 1998, and for the period from November 10, 1995
(commencement of operations) to June 30, 1996. These financial statements and
financial highlights are the responsibility of OMEGA South Africa Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Old
Mutual Equity Growth Assets South Africa Fund as of June 30, 1998, the results
of its operations for the year then ended, the changes in its net assets for
each of the years in the two year period ended June 30, 1998, and the financial
highlights for each of the years in the two year period ended June 30, 1998 and
for the period from November 10, 1995 to June 30, 1996, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
July 24, 1998, except as to Note E, which is as of August 17, 1998
10
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
("THE TRUST")
FINANCIAL STATEMENTS
JUNE 30, 1998
11
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--100.2%
BANKS--19.3%
4,678,000 ABSA Group Ltd $ 29,411,385
585,000 Investec Group Ltd 22,863,211
300,000 Investec Holdings Ltd 11,775,701
3,265,809 Nedcor Ltd 70,477,102
5,500,000 Standard Bank Investment
Corp Ltd 23,644,860
-------------
158,172,259
-------------
BEVERAGES, HOTELS & LEISURE--4.8%
1,462,556 Johnnies Industrial Corp Ltd 12,624,952
1,425,724 Kersaf Investments Ltd 6,541,130
332,500 Tempora Investments Ltd 1,468,989
922,161 The South African Breweries Ltd 19,117,017
-------------
39,752,088
-------------
CHEMICALS, OILS & PLASTICS--2.2%
326,500 AECI Ltd 1,320,425
1,452,300 Engen Ltd 4,047,191
6,073,600 Enviroserv Holdings Ltd 1,186,855
1,925,538 Sasol Ltd 11,239,121
-------------
17,793,592
-------------
COAL--1.4%
231,546 Anglo American Coal Corp Ltd 10,812,038
312,200 Ingwe Coal Corp Ltd 901,852
-------------
11,713,890
-------------
DIAMONDS--3.1%
709,821 Anglo American Investment
Trust Ltd 11,880,607
750,000 De Beers Consolidated Mines Ltd 13,279,524
-------------
25,160,131
-------------
ELECTRONICS & ELECTRICAL--11.2%
2,926,300 Datatec Ltd 54,697,196
2,012,000 Dimension Data Holdings Ltd 10,940,357
2,839,088 Persetel Q Data Holdings Ltd 25,568,677
-------------
91,206,230
-------------
ENGINEERING--0.3%
88,084 African Oxygen Ltd 149,675
1,300,000 Hudaco Industries Ltd 2,142,736
-------------
2,292,411
-------------
FINANCIAL SERVICES--8.3%
1,362,150 Coronation Holdings 'N' Ltd $ 20,600,060
13,246,463 Firstrand Ltd 20,483,061
2,064,234 Genbel Securities Ltd 25,535,469
473,992 Real Africa Durolink
Holdings Ltd * 885,966
-------------
67,504,556
-------------
FOOD--0.6%
354,200 CG Smith Foods Ltd 3,460,748
4,925,700 Irvin & Johnson Ltd 1,464,736
-------------
4,925,484
-------------
FURNITURE & HOUSEHOLD--1.0%
1,259,292 JD Group Ltd 8,537,936
-------------
INDUSTRIAL HOLDING--11.7%
4,835,000 Anglovaal Industries 'N' Ltd 5,340,272
4,644,936 Bidvest Group Ltd 35,715,098
4,000,000 CG Smith Ltd 11,079,015
3,654,100 Murray & Roberts Holdings Ltd 3,787,597
270,216 Plate Glass & Shatterprufe
Industries Ltd 2,617,215
4,300,000 Rembrandt Group Ltd 27,034,834
13,274,900 Safmarine & Rennies Holdings Ltd 10,150,731
-------------
95,724,762
-------------
INSURANCE--9.3%
2,131,800 Fedsure Holdings Ltd 26,081,495
908,649 Liberty Life Association of
Africa Ltd 17,848,738
16,286,600 New Africa Investments Ltd 17,573,477
3,961,037 Real Africa Investments Ltd * 14,874,922
-------------
76,378,632
-------------
MANGANESE--0.2%
44,000 Associated Ore & Metal Corp Ltd 1,345,794
-------------
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
-CONTINUED-
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--CONTINUED
MEDIA--5.5%
524,500 Independent Newspapers
Holdings Ltd $ 1,724,567
3,791,800 M Web Holdings Ltd 13,659,500
952,000 Omni Media Corp Ltd 16,176,721
1,952,119 Primedia Ltd 13,600,149
-------------
45,160,937
-------------
MINING HOUSES--8.5%
1,358,200 Anglo American Corp of SA Ltd 46,158,029
557,200 Anglovaal Ltd 3,711,511
5,000,000 Billiton PLC 9,940,527
1,680,000 Gencor Ltd 2,612,064
585,200 Gold Fields of SA Ltd 6,761,869
-------------
69,184,000
-------------
PAPER & PACKAGING--0.5%
1,094,386 Sappi Ltd 4,137,653
-------------
PLATINUM--1.7%
1,276,154 Anglo American Platinum Corp Ltd 13,986,735
-------------
STEEL & ALLIED--0.5%
20,678,398 Iscor Ltd 3,935,396
-------------
STORES--4.1%
9,958,867 Metro Cash and Carry Ltd 6,379,767
7,303,487 Speciality Stores 'N' Ltd 5,870,092
3,795,297 Truworths International Ltd * 2,579,641
8,623,406 Wooltru 'N' Ltd 11,136,429
10,051,352 Woolworths Holdings Ltd 7,515,030
-------------
33,480,959
-------------
TRANSPORTATION--6.0%
1,698,142 Imperial Holdings Ltd $ 16,736,149
2,546,327 Mobile Industries 'N' Ltd 605,753
3,799,000 Super Group Ltd 11,167,833
1,405,385 Tiger Wheels Ltd 8,358,280
3,686,925 Trencor Ltd 12,216,659
-------------
49,084,674
-------------
Total Common Stocks
(Cost $995,784,447) 819,478,119
-------------
TIME DEPOSIT--0.1%
517,000 State Street Cayman Islands
5.375%, 07/07/98
(Cost $517,000) 517,000
-------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MATURITY AMORTIZED
AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT--5.9%
48,299,000 State Street Bank and
Trust Company 5.650%, dated
06/30/98, due 07/01/98
(collateralized by a U.S.
Treasury Bond, 7.250%,
05/15/16) (Cost $48,299,000) 48,299,000
-------------
Total Investments--106.2%
(Cost $1,044,600,447) $ 868,294,119
Net Other Assets--(6.2)% (50,945,015)
-------------
Total Net Assets--100% $ 817,349,104
-------------
-------------
</TABLE>
NOTE TO SCHEDULE OF INVESTMENTS
* Non-income producing security.
See Notes to Financial Statements.
13
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (Note B)
(Cost of investments - $1,044,600,447) $ 868,294,119
Cash (including foreign currency, at value) 4,185,597
Receivable for investments sold 1,469,920
Deferred organization expenses (Note B) 692,440
Dividends and interest receivable 3,832,882
Other assets 17,518
-------------
TOTAL ASSETS 878,492,476
-------------
LIABILITIES
Payable for investments purchased 2,286,987
Collateral payable for securities loaned 48,299,000
Payable to adviser (Note C) 469,156
Loans Payable (Note B) 9,900,000
Accrued expenses 188,229
-------------
TOTAL LIABILITIES 61,143,372
-------------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS $ 817,349,104
-------------
-------------
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividend income $ 21,834,105
Interest income 2,745,004
Investment lending income 510,583
-------------
TOTAL INCOME 25,089,692
-------------
EXPENSES
Investment advisory fee (Note C) 5,805,025
Administration Fee (Note C) 377,957
Custodian fees 300,253
Amortization of Deferred organization expenses (Note B) 293,200
Interest expense on loans (Note B) 221,753
Legal fees 200,000
Trustees Fees and expenses (Note C) 160,000
Auditing fees 52,000
Miscellaneous expenses 64,337
-------------
TOTAL EXPENSES 7,474,525
-------------
NET INVESTMENT INCOME 17,615,167
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on:
Investments (54,440,006)
Foreign currency transactions (2,342,808)
-------------
Net realized loss (56,782,814)
Net change in unrealized appreciation (depreciation) of:
Investments (209,719,719)
Foreign currency transactions (39,752)
-------------
Net change in unrealized appreciation (depreciation) (209,759,471)
-------------
NET REALIZED AND UNREALIZED LOSS (266,542,285)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(248,927,118)
-------------
-------------
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 17,615,167 $ 17,624,887
Net realized gain (loss) on investments and
foreign currency transactions (56,782,814) 1,648,338
Net change in unrealized appreciation (depreciation)
of investments and foreign currency transactions (209,759,471) 72,855,815
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS (248,927,118) 92,129,040
-------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Contributions 56,721,247 63,862,347
Withdrawals (67,151,107) (68,137,648)
-------------- --------------
NET DECREASE IN NET ASSETS RESULTING FROM
TRANSACTIONS IN INVESTORS` BENEFICIAL INTERESTS (10,429,860) (4,275,301)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS (259,356,978) 87,853,739
NET ASSETS
Beginning of year 1,076,706,082 988,852,343
-------------- --------------
End of year $ 817,349,104 $1,076,706,082
-------------- --------------
------------- --------------
</TABLE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996(1)
------------- ------------- ---------------
<S> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding interest expense 0.75% 0.77% 0.82%(2)
------ ------ ------
------ ------ ------
Net investment income 1.82% 1.82% 1.34%(2)
------ ------ ------
------ ------ ------
Portfolio turnover rate 40.24% 9.88% 4.43%(3)
------ ------ ------
------ ------ ------
</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.
16
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
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. Old Mutual SAGA Fund was incorporated as a company
under the laws of Bermuda as of September 7, 1995. The shares of Old Mutual SAGA
Fund 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 89.05% of the
beneficial interest in the Trust as of June 30, 1998. 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 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.
17
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
-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 TRANSACTIONS: 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.
18
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
-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 or cash as collateral in an amount at least equal to 105% of the
market value of the investments loaned. Additional collateral is requested from
the borrower if the value falls below 105%. For the year ended June 30, 1998,
the market value of investments loaned and the amount of U.S. Treasury
Securities received as collateral with respect to such transactions was
$55,472,877 and $64,360,778, respectively. The Trust also loaned securities
having a value of $45,241,848 and received $48,299,000 in cash as collateral for
the loans. Cash collateral received is invested in a State Street repurchase
agreement.
LINE OF CREDIT: The Trust participates in an uncommitted line of credit
provided by Robert Fleming & Company Ltd. under a line of credit agreement dated
March 20, 1998 ( the "Agreement"). Advances under the Agreement are taken
primarily to fund the mismatch in settlements resulting from the purchase and
sale of investments by the Master Trust. Under the Agreement, the Fund may
borrow up to the lesser of $50 million or 5% of its net assets. Interest on
borrowings is payable at the aggregate of LIBOR (or best South African
equivalent rate) and a margin of 0.3% on an annualized basis. During the year
ended June 30, 1998, the maximum amount and average amount of loans outstanding
were US$25,643,104 and US$8,796,680, respectively. The Trust incurred interest
expense in the amount of $221,753. The weighted average interest rate was 5.97%
on U.S. dollar loans and 20.63% on South Africa rand loans.
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 continuance of the agreement is
specifically approved annually by the Trustees. The agreement can be terminated
at any time by written notice of not more than 60 days nor less than 30 days.
19
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
-CONTINUED-
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 its Trustees who are directors or employees of Old Mutual or any
wholly-owned subsidiaries of Old Mutual.
During the year ended June 30, 1998, the Trust purchased 3,297,449 shares of
Datatec Ltd. for US$17,782,791 from Old Mutual Global Assets Fund Limited, which
is also managed by the Adviser. The transaction did not include commissions. On
the date of purchase the market value of the Datatec Ltd. shares was
US$71,830,388.
NOTE D -- INVESTMENT TRANSACTIONS
For the year ended June 30, 1998, there were purchase and sale transactions
(excluding short-term securities) of $407,482,253 and $379,917,766,
respectively. The aggregate cost of Trust investments was substantially the
same for book and Federal income tax purposes at June 30, 1998. Gross
unrealized appreciation of investments was $130,383,777 and gross unrealized
depreciation of investments was $306,690,105 resulting in net unrealized
depreciation of investments of $176,306,328.
20
<PAGE>
INDEPENDENT AUDITORS REPORT
To the Board of Trustees and the Owners of Beneficial Interest of
Old Mutual South Africa Equity Trust
We have audited the accompanying statement of assets and liabilities of the Old
Mutual South Africa Equity Trust ("the Trust") including the schedule of
investments as of June 30, 1998, and the related statement of operations for the
year then ended, the statements of changes in net assets for each of the years
in the two year period ended June 30, 1998, and the financial highlights for
each of the years in the two year period ended June 30, 1998 and the period from
commencement of operations on November 3, 1995 to June 30, 1996. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
the securities owned as of June 30, 1998, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Old
Mutual South Africa Equity Trust as of June 30, 1998, the results of its
operations for the year then ended and the changes in its net assets for each of
the years in the two year period ended June 30, 1998, and the financial
highlights for each of the years in the two year period ended June 30, 1998 and
for the period from November 3, 1995 to June 30, 1996, in conformity with United
States generally accepted accounting principles.
KPMG PEAT MARWICK
Hamilton, Bermuda
July 24, 1998
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
Washington Mall, Phase II, 4th Floor
22 Church 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 Cayman Trust Company, Ltd.
P.O. Box 2508
Elizabeth Square, George Town
Grand Cayman, British West Indies
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
<PAGE>
OMEGA
SOUTH AFRICA
OLD MUTUAL
EQUITY GROWTH
ASSETS SOUTH
AFRICA FUND
[LOGO] ANNUAL REPORT
JUNE 30, 1998
