ANNUAL REPORT OLD MUTUAL UNIT TRUST FUNDS. Abridged Report to Unit Holders for the Year ended 31 December 2017 PLANNING FOR POSITIVE FUTURES

Transcription

1 2017 ANNUAL REPORT OLD MUTUAL UNIT TRUST FUNDS Abridged Report to Unit Holders for the Year ended 31 December 2017 PLANNING FOR POSITIVE FUTURES

2 2 OLD MUTUAL UNIT TRUST FUNDS ANNUAL REPORT

3 TABLE OF CONTENTS CORPORATE INFORMATION 4 STATEMENT OF TRUSTEE S RESPONSIBILITIES 7 CHAIRPERSON S STATEMENT TO UNIT HOLDERS 8-11 REPORT OF THE CUSTODIAN 15 FINANCIAL STATEMENTS OLD MUTUAL EQUITY FUND FINANCIAL STATEMENTS: Statement of Comprehensive Income 16 Statement of Financial Position 17 OLD MUTUAL MONEY MARKET FUND FINANCIAL STATEMENTS: Statement of Comprehensive Income 18 Statement of Financial Position 19 OLD MUTUAL BALANCED FUND FINANCIAL STATEMENTS: Statement of Comprehensive Income 20 Statement of Financial Position 21 OLD MUTUAL BOND FUND FINANCIAL STATEMENTS: Statement of Comprehensive Income 22 Statement of Financial Position 23 OLD MUTUAL EAST AFRICAN FUND FINANCIAL STATEMENTS: Statement of Comprehensive Income 24 Statement of Financial Position 25 ANNUAL REPORT OLD MUTUAL UNIT TRUST FUNDS

4 CORPORATE INFORMATION Fund Manager: Chairperson: Ag Managing Director: Trustee: Investment Manager: Custodian: Auditor: Address: Old Mutual Investment Services (Kenya) Limited (OMIS) Ms. Rose N. Ogega. Peter David Anderson KCB Bank Kenya Limited, KCB Tower, 7th Floor, Junction of Hospital and Kenya Road, Upper Hill, P.O. Box Nairobi, Kenya Old Mutual Investment Group Limited, UAP Old Mutual Tower, Upper Hill Road, P.O. Box 11589, 00400, Nairobi, Kenya. KCB Bank Kenya Limited, KCB Tower, 8th Floor, Junction of Hospital and Kenya Road, Upper Hill, P.O. Box Nairobi, Kenya PricewaterhouseCoopers, PwC Tower, Waiyaki way, Westlands, P.O. Box 43963, Nairobi, Kenya. UAP Old Mutual Tower, Upper Hill Road, P.O. Box 30059, Nairobi, Kenya. Telephone: (020) Facsmile: (020) Internet: 4 OLD MUTUAL UNIT TRUST FUNDS ANNUAL REPORT

5 HOW DO WE PLAN YOUR FUTURE? We constantly work to ensure that we enable the planning of your future through: OUR VALUES OUR VISION OUR MISSION Integrity Respect Accountability Pushing beyond boundaries To become our customers most trusted savings and wealth management partner in East Africa. Through understanding and meeting our customers needs, we will profitably expand our market for wealth accumulation and protection in East Africa. ANNUAL REPORT OLD MUTUAL UNIT TRUST FUNDS 5

6 WHERE IS YOUR MONEY? In 2017, Old Mutual Equity Fund investors made returns of up to 21%. What s more, you pay Zero % initial fees. Invest Via Paybill No For more information, contact: or clientservices@oldmutualkenya.com *Past performance is not necessarily a guide to future investment performance. 6

7 STATEMENT OF TRUSTEE S RESPONSIBILITIES The Capital Markets Act requires the trustee to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the fund as at the end of the year and of the results of its operations. It also requires the trustee to ensure that the fund manager keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the fund. The trustee is also responsible for safeguarding the assets of the fund. The trustee accepts responsibility for the annual financial statements, which have been prepared using appropriate accounting policies in conformity with International Financial Reporting Standards and the requirements of the Capital Markets Act. The trustee is of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the fund and of its operating results. DECLARATION STATEMENT The Old Mutual Unit Trust Fund is an approved unit trust within the meaning of the Capital Markets Act; Old Mutual Unit Trust Fund is an umbrella fund comprising of five sub-funds. The unit-holders are not liable for the debts of the unit trust fund; The Old Mutual Equity Fund is a securities fund investing in the Nairobi Stock Exchange in Kenya. The Old Mutual Money Market Fund is a securities fund investing in a range of debt securities, fixed deposit instruments or near cash & cash holding in the Kenyan market. The Old Mutual Balanced Fund is a securities fund investing in equity and interest bearing assets. The Old Mutual Bond Fund is a securities fund investing in a range of debt securities instruments or near cash & cash holding in the Kenyan market. The Old Mutual East African Fund is a securities fund investing in equity and interest bearing assets In future there may be other sub funds in the umbrella collective investment scheme. A sub fund is not a legal entity, if the assets attributable to any sub fund were insufficient to meet the liabilities attributable to it the shortfall may have to be met out of the assets attributable to one or more other sub funds of the umbrella scheme. Nothing has come to the attention of the trustee to indicate that the fund will not remain a going concern for at least twelve months from the date of this statement. By order of the trustee Kenya Commercial Bank Limited 21 st March 2018 ANNUAL REPORT OLD MUTUAL UNIT TRUST FUNDS 7

8 CHAIRPERSON S STATEMENT TO UNIT HOLDERS About Us Old Mutual Plc is an international investment, savings, insurance and banking group founded in Cape Town, South Africa in 1845 as the country s first mutual life insurance company. The Group provides life assurance, asset management, banking and general insurance in Europe, the Americas, Africa and Asia to over 16 million customers. The Kenya entities are part of Old Mutual Emerging Markets business and is a fully owned subsidiary of Old Mutual Plc that has its primary listing on London Stock Exchange and secondary listings on, Johannesburg, Zimbabwe, Namibia and Malawi stock exchanges....we have improved our processes to allow clients to receive their funds via MPESA for amounts below 70,000, reducing the transaction costs associated with EFT payments and improving our turnaround times to our clients... Ms. Rose Ogega CHAIRPERSON 2017 Economic Review The Kenyan economy is estimated to have grown by 4.9% in 2017, mainly supported by improvements in the growth rate of the real estate and public administration sectors and an improvement in the second half in agriculture. Deceleration in growth in key sectors such as financial intermediation, manufacturing, transport and storage have weighed down the overall economic growth rate. Inflation reduced in the year from 6.3% in December 2016 to 4.5% in December Inflation in the first half of the year picked up significantly due to the poor harvest experienced in late This in particular resulted in a rapid rise in maize prices which subsequently the Government moved to contain through a subsidy that effectively fixed the price of maize flour at KES 90 per two kilogram packet. 8 OLD MUTUAL UNIT TRUST FUNDS ANNUAL REPORT

9 CHAIRPERSON S STATEMENT TO UNIT HOLDERS (Continued) This subsidy, the impact of improving rainfall on other crop prices and helped inflation move lower during the second half of In the year, the Monetary Policy Committee held the Central Bank Rate at 10% with the economy exhibiting sluggish demand in part due to the prolonged election period and slow private credit growth as banks adjusted to the interest rate cap rule. The Committee has cited though that growth is expected to pick up in 2018, inflation outlook is favourable and the currency is expected to be stable. The NSE 20 and NASI indices recovered in 2017 seeing a growth of 16.5% and 28.4% respectively as market participants bid up share prices from low levels driven by increasing optimism over the likelihood of accelerating corporate earnings growth in 2018 and the approaching end of electioneering. Our Ambition Since inception of the Old Mutual Unit Trusts Funds in 2003 we have strived to make the Unit Trust Funds accessible to all through significantly lowering the minimum amount of funds that need to be invested in any fund; enabling access via your mobile phone and expanding our network of branches and service centres. As we further seek to improve the services to our existing 26,745 unit holders we have improved our processes to allow clients to receive their funds via MPESA for amounts below 70,000, reducing the transaction costs associated with EFT payments and improving our turnaround times to our clients. We have further improved our communication to clients by alerting them via SMS of any transactions done on their accounts to secure their account and reduce the possibility of fraud incidents. We continue to encourage clients to update their information and a majority of our clients are now receiving regular communication via as opposed to via the post-office. Unit Holders Funds in Old Mutual Unit Trust Funds AUM change Fund (%) Old Mutual Equity Fund 1,539,215,792 1,392,410,690 11% Old Mutual Money Market 5,514,187,283 6,212,952,753-11% Fund Old Mutual Balanced Fund 397,720, ,751,011-1% Old Mutual Bond Fund 52,702,757 59,776,412-12% Old Mutual East African Fund 23,370,072 23,816,788-2% Total 7,527,196,709 8,136,189,490-7% ANNUAL REPORT OLD MUTUAL UNIT TRUST FUNDS 9

10 CHAIRPERSON S STATEMENT TO UNIT HOLDERS (Continued) Investor Returns on Old Mutual Unit Trust Funds 5 Year Fund Cumulative return Old Mutual Equity Fund 45.33% 21.04% -5.60% % 12.80% 25.57% Old Mutual Balanced 45.17% 15.27% 2.67% -4.41% 10.11% 16.54% Fund Old Mutual East Africa 31.36% 12.52% -1.13% -7.54% 8.57% 17.62% Fund Old Mutual Money 41.25% 6.04% 7.75% 8.19% 7.08% 6.71% Market Fund Old Mutual Bond Fund 28.18% 6.29% 6.06% 4.51% 4.49% 4.13% Our Funds that hold equities as part of their investment mandate performed well as we ensured that there was sufficient equity exposure throughout the year considering the fast moving market, economic and political environment. With considerable exposure to strong performers such as KCB and Safaricom the equity portion in the funds performed to expectations. Long term investors in funds with equity investments will appreciate that performance varies considerably from year to year. Though over the long term the stock market will rise reflecting the performance of the economy and of the leading companies in the economy that are often listed at the Securities Exchange. It is therefore our continued expectation that the equity market will be rewarding where investments are held in companies that seek to maximise shareholder wealth over the long term. Investors are encouraged to pursue a similar long term investment horizon and note the inherent price volatility of the Old Mutual Equity Fund is part and parcel of investing in equities. If this volatility does not sit well with any unit holders the option exists to invest in Old Mutual Balanced Fund or East African Fund that have a less aggressive risk profile. The even more conservative funds such as the Money Market Fund and Bond Fund produced modest returns in line with their cautious investment risk profile. Our largest fund, the Money Market Fund seeks to provide a return comparable to other money market investments whilst simultaneously providing Unit Holders access to their funds within a matter of a couple of days. The Fund Manager continues to prudently invest client monies with the appropriate portfolio diversification combined with careful and thoughtful fundamental analysis. Portfolio construction and risk management continues to be at the heart of our investment process. 10 OLD MUTUAL UNIT TRUST FUNDS ANNUAL REPORT

11 CHAIRPERSON S STATEMENT TO UNIT HOLDERS (Continued) 2018 Outlook In 2017 politics dominated the news as expected and had a significant influence on the overall economic performance. Investors however looked passed that and positioned for continued economic expansion within the country in one of the fastest growing regions in the world. With politics receding or at least the temperature around it and the government looking to continue with its development agenda, more attention at the stock market at least will be paid to the success and failure of companies as they look to grow and expand. Kenya economic growth is forecast by the World Bank to be in the region of 5.5% in 2018 in large part due to absence of the election and an improvement in rainfall and with the possibility that access to credit will improve for small and medium sized enterprises. Inflation is not expected to be a significant issue through the year though a lot depends once again depends on rainfall and the oil price and their impact on food and fuel prices. Barring any adverse shocks, the Kenya Shilling is expected to remain broadly stable though with a bias to depreciate modestly and is supported by high foreign exchange reserves and the intermittent activity by the Central Bank of Kenya to stem excessive volatility. Financial Planning All investors, whether with a short, medium or long term investment time frame, should each year undergo a reassessment of their financial plan and goals to ascertain whether they are on track to achieve them. In this regard Old Mutual has invested extensively in the numbers and capability of our client service officers and financial advisors that are always available to offer advice suitable to your unique individual circumstances and I encourage you to meet with them. Make a point of establishing a continuing relationship with your financial adviser and ensure that you have at least one meeting a year. We thank you for investing in the Old Mutual Unit Trusts and making us your partner. Gratitude I would like to convey my appreciation to the management and staff for their efforts during the year. My appreciation goes to the Board of Directors for their input, oversight and giving strategic direction to the company. I also extend my gratitude to our clients and business affiliates for your continued support over the years. We look forward to continuing to work with you in the future. Lastly, I thank the Government of Kenya and the regulatory authorities namely: Capital Markets Authority, Insurance Regulatory Authority, Retirement Benefits Authority, and Kenya Revenue Authority who continue to provide an enabling business environment. Thank you. Rose N. Ogega. Chairperson ANNUAL REPORT OLD MUTUAL UNIT TRUST FUNDS 11

12 GROWTH TOMORROW BEGINS WITH A PLANNED TODAY 12 OLD MUTUAL UNIT TRUST FUNDS ANNUAL REPORT

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14 HOW HAVE YOU INVESTED YOUR MONEY? With our Funds, and Zero% upfront fees, let your money work for you Equity Fund Balanced Fund East Africa Fund Bond Fund For more information, contact: or *Past performance is not necessarily a guide to future investment performance.

15 REPORT OF THE CUSTODIAN a) In accordance with the Capital Markets (Collective Investments Schemes) Regulations, 2001 (the regulations) and the Custody Agreement between Kenya Commercial Bank Limited as the custodian and Old Mutual Investment Services (Kenya) Limited as the fund manager, we confirm that we have discharged the duties prescribed for a Custodian under Regulation 35 of the regulations, to Old Mutual Unit Trusts Funds. For the year 1st January 2017 to 31st December 2017, we have held the assets for the Old Mutual Unit Trust Funds, including title deeds, securities and income that accrue thereof, to the order of the fund manager and facilitated the transfer, exchange or delivery in accordance with the instructions received from the fund manager. b) We confirm having affected the sale, redemption and cancellation of units in accordance with the creation/liquidation instructions received from the fund manager. By order of the custodian Kenya Commercial Bank Limited 21 st March 2018 ANNUAL REPORT OLD MUTUAL UNIT TRUST FUNDS 15

16 FINANCIAL STATEMENTS EQUITY FUND STATEMENT OF COMPREHENSIVE INCOME INCOME Interest and dividend income 109,706, ,493,143 Fair value gain/(loss) on investments at fair value through profit or loss 209,548,843 (131,606,053) Total gain/(loss) from investing activities 319,254,981 (6,112,910) EXPENSES Service fees and other expenses (62,063,361) (68,869,303) Profit/(loss) before tax 257,191,620 (74,982,213) Income tax expense - - Profit/(loss) for the year 257,191,620 (74,982,213) Other comprehensive income, net of tax - - Total comprehensive income/(loss) for the year 257,191,620 (74,982,213) The full set of financial position can be obtained from Old Mutual Kenya website: 16 OLD MUTUAL UNIT TRUST FUNDS ANNUAL REPORT

17 FINANCIAL STATEMENTS EQUITY FUND STATEMENT OF FINANCIAL POSITION ASSETS Investment balances 1,558,034,076 1,416,799,110 Receivables 25, ,665 Bank and cash balances 11,608,847 14,902,574 TOTAL ASSETS 1,569,668,610 1,432,299,349 EQUITY Unit holder balances 1,539,215,792 1,392,410,690 LIABILITIES Current liabilities 30,452,818 39,888,659 TOTAL EQUITY AND LIABILITIES 1,569,668,610 1,432,299,349 The financial information is extracted from the Fund s financial statements which were approved for issue by the Trustee on 21 st March 2018 and signed on its behalf by: Trustee The full set of financial position can be obtained from Old Mutual Kenya website: ANNUAL REPORT OLD MUTUAL UNIT TRUST FUNDS 17

18 FINANCIAL STATEMENTS MONEY MARKET FUND STATEMENT OF COMPREHENSIVE INCOME INCOME Interest income 602,194, ,050,907 Fair value gain on investments at fair value through profit or loss 3,577,515 2,448,030 Bank deposits write off through the yield (34,824,885) (8,777,779) Impairment of bank deposits (12,291,125) (43,481,836) Total income from investing activities 558,656, ,239,322 EXPENSES Service fees and other expenses (219,741,148) (214,631,924) Profit before tax 338,915, ,607,398 Income tax expense - - Profit for the year 338,915, ,607,398 Other comprehensive income, net of tax - - Total comprehensive income for the year 338,915, ,607,398 The full set of financial position can be obtained from Old Mutual Kenya website: 18 OLD MUTUAL UNIT TRUST FUNDS ANNUAL REPORT

19 FINANCIAL STATEMENTS MONEY MARKET FUND STATEMENT OF FINANCIAL POSITION ASSETS Investment balances 5,536,807,218 6,249,156,237 Receivables 5,802,811 2,233,578 Bank and cash balances 25,614,631 23,319,971 TOTAL ASSETS 5,568,224,660 6,274,709,786 EQUITY Unit holder balances 5,514,187,283 6,212,952,753 LIABILITIES Current liabilities 54,037,377 61,757,033 TOTAL EQUITY AND LIABILITIES 5,568,224,660 6,274,709,786 The financial information is extracted from the Fund s financial statements which were approved for issue by the Trustee on 21 st March 2018 and signed on its behalf by: Trustee The full set of financial position can be obtained from Old Mutual Kenya website: ANNUAL REPORT OLD MUTUAL UNIT TRUST FUNDS 19

20 FINANCIAL STATEMENTS BALANCED FUND STATEMENT OF COMPREHENSIVE INCOME INCOME Interest and dividend income 36,046,590 41,155,612 Fair value gain/(loss) on investments at fair value through profit or loss 38,021,313 (10,527,415) Total income from investing activities 74,067,903 30,628,197 EXPENSES Service fees and other expenses (17,349,040) (19,330,008) Profit before tax 56,718,863 11,298,188 Income tax expense - - Profit for the year 56,718,863 11,298,188 Other comprehensive income, net of tax - - Total comprehensive income for the year 56,718,863 11,298,188 The full set of financial position can be obtained from Old Mutual Kenya website: 20 OLD MUTUAL UNIT TRUST FUNDS ANNUAL REPORT

21 FINANCIAL STATEMENTS BALANCED FUND STATEMENT OF FINANCIAL POSITION ASSETS Investment balances 394,624, ,003,588 Receivables 501,288 - Bank and cash balances 7,777,561 4,495,063 TOTAL ASSETS 402,903, ,498,651 EQUITY Unit holder balances 397,720, ,751,011 LIABILITIES Current liabilities 5,182,699 4,747,640 TOTAL EQUITY AND LIABILITIES 402,903, ,498,651 The financial information is extracted from the Fund s financial statements which were approved for issue by the Trustee on 21 st March 2018 and signed on its behalf by: Trustee The full set of financial position can be obtained from Old Mutual Kenya website: ANNUAL REPORT OLD MUTUAL UNIT TRUST FUNDS 21

22 FINANCIAL STATEMENTS BOND FUND STATEMENT OF COMPREHENSIVE INCOME INCOME Interest income 6,435,856 7,236,025 Fair value gain on investments at fair value through profit or loss 533,713 85,945 Total income from investing activities 6,969,569 7,321,970 EXPENSES Service fees and other expenses (2,438,256) (2,745,737) Profit before tax 4,531,313 4,576,233 Income tax expense (1,199,596) (1,085,404) Profit for the year 3,331,717 3,490,829 Other comprehensive income, net of tax - - Total comprehensive income for the year 3,331,717 3,490,829 The full set of financial position can be obtained from Old Mutual Kenya website: 22 OLD MUTUAL UNIT TRUST FUNDS ANNUAL REPORT

23 FINANCIAL STATEMENTS BOND FUND STATEMENT OF FINANCIAL POSITION ASSETS Investment balances 52,482,866 60,820,301 Bank and cash balances 1,761, ,333 TOTAL ASSETS 54,244,228 61,565,634 EQUITY Unit holder balances 52,702,757 59,776,412 LIABILITIES Current liabilities 1,541,471 1,789,222 TOTAL EQUITY AND LIABILITIES 54,244,228 61,565,634 The financial information is extracted from the Fund s financial statements which were approved for issue by the Trustee on 21 st March 2018 and signed on its behalf by: Trustee The full set of financial position can be obtained from Old Mutual Kenya website: ANNUAL REPORT OLD MUTUAL UNIT TRUST FUNDS 23

24 FINANCIAL STATEMENTS EAST AFRICAN FUND STATEMENT OF COMPREHENSIVE INCOME INCOME Interest and dividend income 2,041,846 2,259,737 Fair value gain/(loss) on investments at fair value through profit or loss 2,474,389 (933,501) Total income from investing activities 4,516,235 1,326,236 EXPENSES Service fees and other expenses (1,350,844) (1,358,907) Profit/(loss) before tax 3,165,391 (32,671) Income tax expense (255,808) (274,148) Profit/(loss) for the year 2,909,583 (306,819) Other comprehensive income, net of tax - - Total comprehensive income/(loss) for the year 2,909,583 (306,819) The full set of financial position can be obtained from Old Mutual Kenya website: 24 OLD MUTUAL UNIT TRUST FUNDS ANNUAL REPORT

25 FINANCIAL STATEMENTS EAST AFRICAN FUND STATEMENT OF FINANCIAL POSITION ASSETS Investments balances 23,188,671 23,792,133 Receivables Bank and cash balances 426, ,985 TOTAL ASSETS 23,615,008 24,280,283 EQUITY Unit holder balances 23,370,072 23,816,788 LIABILITIES Current liabilities 244, ,495 TOTAL EQUITY AND LIABILITIES 23,615,008 24,280,283 The financial information is extracted from the Fund s financial statements which were approved for issue by the Trustee on 21 st March 2018 and signed on its behalf by: Trustee The full set of financial position can be obtained from Old Mutual Kenya website: ANNUAL REPORT OLD MUTUAL UNIT TRUST FUNDS 25

26 NOTES 26 OLD MUTUAL UNIT TRUST FUNDS ANNUAL REPORT

27 OUR OFFICES NAIROBI OM Head Office, UAP Old Mutual Tower Old Mutual Building 1st Floor, Kimathi Street MACHAKOS Kinyali House, 1st floor, Mbolu Malu Road - Old Mutual Office THIKA Twin Oak Plaza, 1st Flr, Kwame Nkurumah Rd - Old Mutual Office NYERI Sohan Plaza, Kimathi Way - UAP Old Mutual Office MERU Twin Plaza, 1st Fl, Ghana Rd - Old Mutual Office NAKURU Ereto Plaza, 1st Floor, Mburu Gichua Rd - Old Mutual Office ELDORET Imperial Court, Uganda Road - Old Mutual Office MOMBASA Biashara Bank Building, Grd Flr, Nyerere Rd - UAP Old Mutual Office KISUMU Tivoli Center, Grd Flr, Oginga Odinga street - UAP Old Mutual Office KISII Ouro Complex, Grd Flr - UAP Old Mutual Office BUNGOMA Cooperative hse 3rd fl, Moi Avenue - Old Mutual Office ANNUAL REPORT OLD MUTUAL UNIT TRUST FUNDS 27

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