ABRIDGED ANNUAL FINANCIAL REPORT 2019
ABRIDGED ANNUAL FINANCIALREPORT 2019OLD MUTUAL UNIT TRUST MANAGERS (RF) (PTY) LTD
PageChairman’s message to unitholders3 to 4Abridged financial statements as at 31 December 20195 to 7Portfolio composition as at 31 December 20198Investment performance as at 31 December 20199Income distribution per unit (cents) as at 31 December 201910Price, total expense ratio and performance fee as at 31 December 201911Trustees’ report, important notice, statutory information12Old Mutual Unit Trust Managers (RF) (Pty) Ltd (Registration no. 1965/008471/07)Physical address:Mutualpark, Jan Smuts Drive, Pinelands 7405Postal address:PO Box 207, Cape Town 8000Telephone:(021) 503 1770 – Client SupportService centre:0860 234 234Facsimile:(021) 509 7100 – Client .oldmutualinvest.comPlease note: This Abridged Annual Report contains limited information on Old Mutual Unit Trusts’ funds. For more detailed information on these funds please go towww.oldmtualinvest.com or call 0860 234 234. Copies of the audited financial statements and the report of the Shari’ah Supervisory Board may be obtained, free of charge, and on request,from the management company.Printed on paper that is made with concern for the environment. To show that you care for the environment, opt to receive your correspondence electronically in future by contacting ourservice centre.2
ECONOMIC OVERVIEW2019 ended on a high note with equity markets surging in December,prevention measures to stem the growth of infections. As at16 March 2020, SA had 62 confirmed cases of COVID-19.as it turned out to be a good year for investors, with almost all globalasset classes posting positive returns. The US Federal Reserve (Fed) cutrates three times in the second half of the year, having gone into 2019expecting to hike three times. The Fed has signaled that rates will remainat current levels for the remainder of the year, while it will continue to addreserves to the banking system to ensure the smooth functioning of the USmoney market. Other major central banks have cut or are cutting, andthe “lower for longer” view of global interest rates is firmly in place.The US and China agreed to a ‘phase one’ trade deal that was officiallysigned at a White House ceremony early in January 2020. The USTreasury also removed China from its list of currency manipulators. BorisJohnson’s decisive victory in the December election (by number of seatswon, not total votes) meant that Britain left the European Union by theend of January in an orderly fashion with a withdrawal agreement inplace (though the hard work of negotiating a new trade regime liesahead).2020 OUTLOOK – IN A TECHNICAL RECESSIONSouth Africa’s Q4 2019 GDP growth was much weaker than expected,coming in at -1.4% on an annualized basis, following the -0.8% of thethird quarter. The two consecutive quarters of negative GDP growthmeans that the SA Economy is now back in a technical recession. Moreimportantly, the annual average growth in the SA economy over the lastfive years was less than 1%, 0.8% to be exact. This weakness was verybroad-based and seems to be more than the load-shedding that occurredin December of the 4th quarter of 2019. 2020 will likely also see growthof less than 1%.The 2020 outlook for South Africa is a concern as we confront a by-nowfamiliar list of problems: consumers under pressure, load-shedding, lowgrowth, rising government debt and COVID-19.The likelihood of a Moody’s downgrade to junk status (the other ratingsagencies already rate South Africa as junk) has increased.SURPRISESPredictably, there were a few surprises in the first days of January 2020.However, as investors we need to remember that with such bad newsThe first shock was the killing of a top Iranian general in a US dronecome opportunities to buy investments at discounted prices. Meanwhilestrike, setting off fears that the longstanding conflict between the twothe global backdrop remains supportive of decent returns from investmentscountries could escalate into all-out war. However, neither countriesnot directly linked to South Africa, including the many global companiesseemed to want war and ironically, the tragic accidental downing of alisted on the JSE whose share prices are unaffected by local gloom.passenger jet by Iranian anti-aircraft missiles also served to defuse thesituation by removing any claim Iran might have had to the moral high2020 BUDGET SPEECH OUTCOMESground. After the initial knee-jerk sell-off, the market reaction was muted.The positives outweighed the negatives in the 2020/21 Budget Speech,Due to sanctions, Iran is currently a much smaller participant in global oilmarkets and unlike in 1979, it was never going to be able to engineera doubling of oil prices.The second, much more pleasant surprise was the 0.25% repo rate cutannounced by the Monetary Policy Committee of the SA Reserve Bankin January. It was about time. Inflation declined through the course of2019, hitting a seven-year low of 3.6% in November, while theeconomy is struggling. Meanwhile, the economic growth outlook hasbeen cut sharply as load-shedding seems likely to persist through thecourse of the year. The SARB expects 2019 growth will be reported as0.4%, while the 2020 growth forecast has been downgraded to 1.2%.COVID-19 (CORONAVIRUS)tabled by the Minister of Finance on 26 February. It showed that theNational Treasury is willing to make hard choices during difficult times byfocusing on expenditure cuts rather than tax hikes. Whilst the absence ofnet tax hikes is good news for consumers, risks remain around theambitious plans to cut expenditure on the wage bill, as this still needs tobe negotiated with unions. Mboweni also announced baseline spendingreductions of R261 billion with adjustments on the wage bill penned in atabout R160 billion over the medium term. Government’s intention torestructure the corporate income tax system over the medium term bybroadening the base and reducing the rate was welcome. South Africa’scorporate income tax rate has remained unchanged at 28% for more thana decade. However, the large deficit, debt ratio and primary deficit,combined with still weak economic growth and the risks around the wagebill savings, could still lead to a Moody’s downgrade in March. AsThe Virus originated in a wet market in Wuhan around 12 Decemberexpected, Moody’s highlighted these risks in their post-budget2019. Similar to SARS, the virus resides in animals such as bats and cancommentary.migrate to and among humans through close contact. Chinese healthauthorities alerted outside bodies including the World HealthOrganisation (WHO) on 31 December 2019. At time of going to press,the World Health Organisation had declared COVID-19 a pandemic,as there were almost 190 000 cases recorded, with 7.5% havingsuccumbed in 56 countries. On 16 March, President C Ramaphosadeclared a national state of disaster in South Africa, focusing on3OLD MUTUAL ALBARAKA BALANCED FUNDWINSOld Mutual Investment Group was adjudged the winner of the GlobalIslamic Finance Awards (GIFA) 2019, for the Old Mutual AlbarakaBalanced Fund. The success of the fund is a result of a strong and equalpartnership between Old Mutual and Al Baraka Bank. This fund is a
Regulation 28 accredited ethical investment solution that delivers steady, Old Mutual Financial Services Fundlong-term capital growth. It is part of the suite of Shari’ah funds that Old Old Mutual Growth FundMutual offers, the others being the existing Old Mutual Albaraka Equity Old Mutual Industrial FundFund and the Old Mutual Albaraka Income Fund, which will launch this Old Mutual Top 20 Fundyear. The established funds have outperformed their peers in the General Old Mutual Top Companies FundEquity category on a 5-year rolling average and median basis from Old Mutual Mining and Resources FundNovember 1992 to November 2019. In addition, these funds have asignificant social impact, a dimension that is not captured in the purereturn on investment. Over the past seven years, the board has donatedR52 million to healthcare, education and maternity care projects. Thedonations are not only to Muslim communities, but benefit South Africansof different faiths and social backgrounds across the country.DRIVINGINNOVATIONTHROUGHONLINE BUY FORM LAUNCHEDOld Mutual Unit Trusts went live with an online buying form, My Shopper,to make it easier for clients to invest digitally and upload documentsonline, without the need to print, sign and scan. These digitaldevelopments are designed to create a more streamlined experience forESGSOLUTIONScustomers, to save time and make investing with Old Mutual Unit Trustsas easy as possible.Old Mutual Investment Group’s focused research since 2010 hasALWAYS REMEMBER THE INVESTMENTenabled innovation and the establishing of ESG fund ranges to thePRINCIPLESmarket in 2016. These passive, low-cost products are designed to offerinvestors the opportunity to achieve benchmark-like returns, by holding abasket of companies that is measurably better for the planet. With ESGproducts ranging across institutional, retail and direct, Old MutualInvestment Group became a leading SA investment manager in theprovision of ESG investment solutions.On the first trading day of 2010, the 4th of January, the FTSE/JSE AllShare Index was at 17 960 points. Ten years later, on 31st December2019, it had more than doubled to 41 218 points, (and touched over60 140 points in January 2018.) If we look over the long term, aninvestment of R1 in the FTSE/JSE All-Share and Cash Indices 90 yearsago, would give one a total of R563 and R2.11 in Equities and CashOLD MUTUAL ESG INDEX UNIT TRUSTSrespectively at 31 December 2019.In November 2018, Old Mutual Unit Trusts launched South Africa’s firstThe above statistics point to an unequivocal theme of long-term investmentESG Index unit trusts, the Old Mutual MSCI World ESG Index Feederprinciples that investors should always remember. Some of them are:Fund and Old Mutual MSCI Emerging Markets ESG Index Feeder Fund.These funds aim to achieve long-term capital growth by primarily gaining While there is minimal risk of losing money, it takes a lifetime toexposure to the MSCI Emerging Markets ESG Leaders Index, a free float-double the real value of money, as opposed to 10 years in equities;adjusted market capitalisation weighted index. These unit trusts can beaccessed directly, online or from financial planners.Stay invested – A risk to future financial freedom is investing in cash. Inflation is an investor’s worst enemy – To counter the effects ofinflation and low-return investments, investors need the higher growthpotential of equities. SA equities were the top performing asset classLAUNCH OF THE INVESTMENT SERIESwhen compared to SA cash, SA bonds, Global equity ZAR, GlobalAligned with the vision of making investing easy, and as an investmentBonds (ZAR), Gold (ZAR) for 42 of the last 90 years to Decembermanager with an extensive unit trusts offering, in 2019 Old Mutual UnitTrusts launched The Investment Series. This range is packaged in a simpleway that seeks to address customer goals. The goals are then matchedwith a relevant fund based on targeted returns and customers’ investmentperiod, evidence that there is a unit trust for every need, for every investor,at every stage of life. The Investment Series offers a core range of tenhand-picked funds. The five needs buckets are: Home and security;Freedom andadventure; Educationandambition; Retirementindependence, and A big goal.SIMPLIFICATION OF PRODUCT OFFERINGThe fundamental equity product suite was simplified to focus on oneproduct proposition for clients – General Equity. As a result, the following2019; Diversification is key – While equities are often the winning assetclass, it still pays to diversify. There is benefit in blending differentasset classes;Probably the best investment advice is for investors to seek out professionalhelp in developing and sticking to a plan, to achieve financial freedom.Financial Planners have the qualifications, are legislated to take lifelongfinancial education, have access to the latest market data and have toolsto help investors. Sticking to a plan is key as it relates to another importantinvestment principle, that which states that “it’s time in the market, nottiming the market, that counts”.sector funds were merged into the Old Mutual Equity Fund over the past2 years:PJ DempseyChairman: Old Mutual Unit Trusts4
CLASSIC INVESTMENT COLLECTION FUNDSR’000Old MutualBalanced FundOld MutualEquity FundOld MutualFlexible FundOld MutualGlobal EquityFundOld MutualInvestors’FundSTATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 20191 498 491159 246447 9142 739 759918 288Total finance costs616 72070 885179 36987 471577 742Distributions614 62069 895179 31240 710576 8262 1009905746 761916881 77188 361268 5452 652 288340 54617 916 4883 816 6115 354 54516 236 40912 959 157343 20165 059119 18652 541379 47717 573 2873 751 5525 235 35916 183 86812 579 680Old MutualReal IncomeFundOld MutualStable GrowthFundNet income from operations before finance costsWithholding tax on foreign dividendsChange in net assets attributable to unitholdersSTATEMENT OF FINANCIAL POSITIONAT 31 DECEMBER 2019Total assetsTotal liabilities, excluding net assets attributable to unitholdersNet assets attributable to unitholdersR’000Old MutualMaximumOld MutualReturn Fund ofModerateOld MutualFundsBalanced Fund Money MarketSTATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2019Net income from operations before finance costs91 34044 4221 083 343371 467Total finance costs17 77829 1821 083 388355 717310 374Distributions17 64829 1821 083 388355 717310 374130----73 56215 24015 750116 311840 029741 06315 678 9335 656 9356 418 85418 60216 76098 658115 848162 178821 427724 30315 580 2755 541 0876 256 676Old MutualAlbarakaEquity FundOld MutualBond FundOld MutualCapital BuilderFundOld MutualCapped SWIXIndex FundWithholding tax on foreign dividendsChange in net assets attributable to unitholders(45)426 685STATEMENT OF FINANCIAL POSITIONAT 31 DECEMBER 2019Total assetsTotal liabilities, excluding net assets attributable to unitholdersNet assets attributable to unitholdersR’000Old MutualAlbarakaBalanced FundSTATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2019222 114176 79275 07149 923Total finance costs94 50331 13469 99157 48211 451Distributions94 37730 90969 99157 38311 407Net income from operations before finance costsWithholding tax on foreign dividendsChange in net assets attributable to unitholders9916 417126225-127 611145 6585 0802 853 0122 139 700942 722629 299335 17347 83916 31841 02721 2387 3362 805 1732 123 382901 695608 061327 837(7 559)444 966STATEMENT OF FINANCIAL POSITIONAT 31 DECEMBER 2019Total assetsTotal liabilities, excluding net assets attributable to unitholdersNet assets attributable to unitholders5
R’000Old MutualCore BalancedFundOld MutualCoreConservativeFundOld MutualOld MutualCore Moderate Dynamic FloorFundFundOld MutualGlobalCurrencyFeeder FundSTATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2019Net income/(loss) from operations before finance costs27 05913 1169 996186 178Total finance costs12 9157 9035 472107 353732Distributions12 8827 8965 462105 750732337101 603-14 1445 2134 52478 825459 865192 884149 8242 521 236Withholding tax on foreign dividendsChange in net assets attributable to unitholders(12 009)(12 741)STATEMENT OF FINANCIAL POSITIONAT 31 DECEMBER 2019Total assetsTotal liabilities, excluding net assets attributable to unitholdersNet assets attributable to unitholders455 8688 5344 7523 27756 142688451 331188 132146 5472 465 094455 180Old MutualGlobal FTSERAFI AllWorld IndexFeeder FundOld MutualGold FundOld MutualIncome FundOld MutualInterest PlusFund94 398254 879208 980201 439Total finance costs40254198 685201 54455 293Distributions402198 685201 54454 914R’000Old MutualManagedAlpha EquityFundSTATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2019Net income from operations before finance costsWithholding tax on foreign dividendsChange in net assets attributable to unitholders-106 012-252-94 358254 62510 295632 719579 8963 174 8122 487 1461 888 3641 9211 55871 60421 63929 213630 798578 3383 103 2082 465 5071 859 151Old MutualMSCIEmergingMarkets ESGIndex FeederFundOld MutualMSCI WorldESG IndexFeeder FundOld MutualRAFI 40Index Fund71 61875 672(105)37950 719STATEMENT OF FINANCIAL POSITIONAT 31 DECEMBER 2019Total assetsTotal liabilities, excluding net assets attributable to unitholdersNet assets attributable to unitholdersR’000Old MutualMid & SmallCap FundOld MutualMining andResourcesFundSTATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2019Net income from operations before finance costs29 027312 90921 162Total finance costs22 78440 82121425139 468Distributions22 78440 8162425138 991Withholding tax on foreign dividendsChange in net assets attributable to unitholders-5190-4776 243272 08820 94871 36736 204717 1151 287 669629 003556 5611 030 40512 90119 9571962 09417 832704 2141 267 712628 807554 4671 012 573STATEMENT OF FINANCIAL POSITIONAT 31 DECEMBER 2019Total assetsTotal liabilities, excluding net assets attributable to unitholdersNet assets attributable to unitholders6
MULTI-MANAGER FUNDSR’000Old Mutual SAQuotedProperty FundOld MutualTop 40 FundOld MutualMultiOld MutualManagersMultiAggressiveManagersBalanced Fund Balanced Fundof Fundsof FundsOld MutualMultiManagersCautious Fundof FundsSTATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2019Net income from operations before finance costs103 20471 18258 5141 415 31946 812Total finance costs346 75527 07615 198382 54721 090Distributions342 98526 64915 099380 37221 0623 770427992 17528(243 551)44 10643 3161 032 77225 7224 391 729763 086613 08513 047 216478 082Withholding tax on foreign dividendsChange in net assets attributable to unitholdersSTATEMENT OF FINANCIAL POSITIONAT 31 DECEMBER 2019Total assetsTotal liabilities, excluding net assets attributable to unitholdersNet assets attributable to unitholders152 4932 7993 70520 4403 9954 239 236760 287609 38013 026 776474 087MULTI-MANAGER FUNDSR’000Old MutualMultiManagersDefensiveFund of FundsOld MutualMultiManagersEnhancedIncome Fundof FundsOld MutualMultiManagersEquity Fund ofFundsOld MutualMultiManagersMaximumReturn Fundof FundsSTATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2019Net income from operations before finance costs580 59246 49010 14818 909Total finance costs182 48740 5656 0381 320Distributions182 03240 5535 9891 305455124915398 1055 9254 11017 5895 260 786672 777198 990118 46123 06312 6536 3041765 237 723660 124192 686118 285Withholding tax on foreign dividendsChange in net assets attributable to unitholdersSTATEMENT OF FINANCIAL POSITIONAT 31 DECEMBER 2019Total assetsTotal liabilities, excluding net assets attributable to unitholdersNet assets attributable to unitholders7
Cash andMoneyDerivativescashmarketat fairequivalents* gnOld Mutual Balanced Fund3.862.15-0.0621.660.8026.1945.40-Old Mutual Equity Fund0.19---8.6417.1674.01-Old Mutual Flexible Fund10.03-0.1513.87-18.8356.510.61Old Mutual Global Equity Fund3.71------96.29Old Mutual Investors’ Fund3.31---2.61-94.08-Old Mutual Maximum Return Fund of Funds3.72---57.4338.85--Old Mutual Moderate Balanced Fund5.23--0.0243.96-14.6736.16-17.5582.45------Old Mutual Real Income Fund3.0111.89-72.42-0.4112.27-Old Mutual Stable Growth Fund6.28--0.0251.31-14.6827.75-Old Mutual Albaraka Balanced Fund2.6434.83-2.10-21.0939.34-Old Mutual Albaraka Equity Fund1.13----22.5570.335.99Old Mutual Bond Fund3.26--96.74----11.3614.41-34.54--39.69-Old Mutual Money Market FundOld Mutual Capital Builder FundOld Mutual Capped SWIX Index Fund2.23-----97.77-Old Mutual Core Balanced Fund0.85--13.0345.43-40.69-Old Mutual Core Conservative Fund3.25--27.7553.10-15.89-Old Mutual Core Moderate Fund0.88--23.9145.36-29.85-Old
Chairman’s message to unitholders 3 to 4 Abridged financial statements as at 31 December 2019 5 to 7 Portfolio composition as at 31 December 2019 8 Investment pe rformance as at 31 December 2019 9 Income distribution per uni t (cents) as at 31 December 2019 10 Price, total expense ratio and p erformance fee as at 31 December 2019 11 Trustees’ report, important notice, statutory information .
Abridged Consolidated Financial Statements The following abridged consolidated financial statements and notes have been prepared as described in Note 1. While prepared based on the principles of PRC GAAP, they do not contain all of the information which either PRC GAAP or IFRS would require fo
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