Oasis Crescent Income Fund Report - 3rd Quarter 2020

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1. OASIS COLLECTIVE INVESTMENT SCHEME KEY INVESTOR INFORMATION OASIS CRESCENT INCOME FUND 3RD QUARTER 2020 Investment Manager Adam Ebrahim Min . Monthly Investment R 500 Launch Date 31 March 2010 Min. Lump - Sum Investment R 2,000 Risk Profile Low to Medium Fund Size R 2.8 billion Distribution Period Monthly Total Expense Ratio 0.68% Fund Classification South African Multi Asset-Flexible Class A Distribution 0.5769 cents per unit Investment Objective and Policy The Oasis Crescent Income Fund is a Shari’ah compliant fund. The Oasis Crescent Income Fund is a specialist income portfolio. The primary objective is to provide income from the underlying investments. To achieve this objective, the portfolio consists of a combination of south african and global short-term, medium-term and long-term income generating securities permitted by the Collective Investment Schemes Control Act under Notice 90 of 2014. The portfolio may also include participatory interests or other forms of participation in collective investment scheme portfolios where such collective investment scheme portfolios are generating periodic income flows. Where the aforementioned portfolios are operated in territories other than South Africa, participatory interests or other forms of participation in these portfolios will be included in the portfolio only where the regulatory environment and investor protection provided is of an international standard and is to the satisfaction of the manager and trustee. The Trustee ensures that the investment policy set out in the supplemental deed is carried out. This document constitutes the minimum disclosure document and quarterly general investor’s report 1
2. Cumulative Returns Return Since Inception Cumulative Performance MayDec 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Sept 2020 Cum Ann Oasis Crescent Income Fund 3 .5 7.0 6.6 8.3 7.0 9.8 4.5 5.8 8.4 7.1 7.2 106.6 7.2 Performance (% returns) in Rand, net of fees, gross of non permissible income of the Oasis Crescent Income Fund since inception to 30 September 2020 (Source: Oasis Research) Annual returns for every year since inception are reported in this table and the highest and lowest annual returns are disclosed. Annualised Returns Annualised Returns Oasis Crescent Income Fund % Growth 1 year % Growth 3 years % Growth 5 years % Growth 7 years Return Since Inception 7.9 7.8 7.2 7.5 7.2 Annualised Performance (% returns) in Rand, net of fees, gross of non permissible income of the Oasis Crescent Income Fund since inception to 30 September 2020 (Source: Oasis Research) Annualised return represents the compound growth rate of the fund over the respective period and calculated in accordance with Global Investment Performance Standards. Investment Manager Commentary Global economic activity rebounded strongly into 3Q 2020 following the worst contraction on record since the Great Depression in 2Q due to simultaneous COVID-19 related lockdowns over March and April. The composite global manufacturing and services PMI recovered over 3Q 2020 to an average level of 51.9 after just 36.8 in 2Q during which the historic low of 26.2 was recorded in April, at the height of the global lockdowns1. Global monetary policy continued to remain highly supportive, a combination of near zero policy rates and ongoing quantitative easing. Of note, the Federal Reserve moved to adopt an average inflation targeting framework at its September FOMC meeting, indicating that they would not raise interest rates until inflation had been higher than 2% “for some time”. At face value, it would seem that monetary policy tightening from the Federal Reserve is not likely over the next few years. Despite the explicit and committed support from monetary authorities, the sustainability of the global economic rebound is at risk from 2 sources: namely, signs of a rapidly developing 2nd wave of global COVID-19 infections, particularly in Europe, and the associated re-imposition of lockdown measures as well as premature withdrawal of fiscal stimulus. In the US, for example, the provisions of the CARES Act expired on 31st July against the backdrop of a still-historically weak labor market, placing millions of vulnerable families at risk. While Congress is debating a fresh fiscal stimulus package, and chances of a deal look good once the 3rd November Presidential election is out of the way, political jockeying ahead of the election has so far appeared to stymie the chances for a much needed near-term deal. The European Union meanwhile announced a fiscal stimulus package worth €750bn in late July to facilitate economic recovery in Europe where almost one-third of funds is allocated toward the ‘green’ economy2. From an investment, economic and social perspective, the outlook remains exceptionally challenging. Looking ahead, much will fundamentally depend on the evolution of the COVID-19 pandemic itself. Consecutive infection waves combined with re-imposition of lockdown measures will hamper a sustained economic recovery until a proven vaccine is available. Until such time, politicians and policymakers will continue to grapple with profound social and economic trade-offs between literally saving lives, on the one hand, while trying to protect economic livelihoods, on the other, especially of low- to middle-income workers in face-to-face services sectors such as retail and hospitality who have borne the brunt of job losses. South Africa’s real GDP growth suffered a historic setback in 2Q20, as the economy contracted a record -17.1% YoY after the country had been shut down for 6 weeks from 26 March due to the response to the COVID pandemic. The economic shock was clearly highlighted in the labour market data for 2Q 2020 which was only released in September and revealed that 2.2mn individual lost their jobs3. This took the employment ratio (employed ÷ working age population) to a record low of 36.3% from 42.1 in 1Q 2020. Due to complications with undertaking the Labour Force Survey during the lockdown, the unemployment rate was somewhat counter-intuitively recorded as falling by -6.8ppt to 23.3% in 2Q 2020, the lowest rate since 1Q 2009. A practical adjustment to the official size of the labour force (adding back some 5.0mn individuals who were recorded as having exited the labour force due to an inability to officially ‘seek work’ during lockdown), would instead have seen the unemployment rate rise to 39.6% and the extended measure of unemployment, which includes ‘discouraged’ workers, at 50.2%. On a more positive note, South Africa’s manufacturing PMI rose to a 21-year survey high of 58.3 in September indicating a sharper-than-expected snapback in activity in the short-term4. The COVID outbreak has exposed South Africa’s already existent vulnerabilities: slowing economic growth, significant fiscal pressure, a jobs crisis and intense social inequalities. Although the Reserve Bank left the repo rate unchanged at 3.50% in its September MPC meeting, monetary policy is likely to remain very accommodative for the foreseeable future. At this point, it is imperative that government, labour and business pick up the baton and build a genuine social compact to implement much-needed structural reform to reinvigorate the economy. The November Medium-Term Budget statement will be a critical staging post for the Ramaphosa government to communicate how it expects to tackle the unsustainable rise in sovereign debt and implement policies to boost economic growth. The global economy has shown it maintains the potential for a robust recovery, especially in the U.S., but also in the rest of the world. The tone was predominantly positive over the last quarter, underpinned by policy measures, the gradual reopening of economies and, to some extent, hopes of a Covid-19 vaccine. Global central banks are still offering maximum support to their economies, keeping interest rates at or near zero and in some cases with ongoing asset purchase programs. In the U.S., the Federal Reserve (Fed) has ensured the smooth functioning of financial and credit markets and in August 2020, announced an important change to its monetary policy regime, switching to a form of average inflation targeting5. In September, government bond yields were mixed. The US 10-year yield closed at 0.68%, three basis points (bps) higher, with the UK 10-year yield six points higher at 0.23%6. The local fixed income market had a tumultuous year so far as investors strive to navigate between emergency monetary policy support by the South African Reserve Bank (SARB) and worsening fiscal conditions, adversely impacting the back end of the yield curve. The SARB has acted swiftly to stabilise the market and cut the repo rate by 300bps to an all-time low of 3.5% in an effort to protect an already fragile economy from the negative effects of the Covid-197. Despite the interest rate cuts this year, South African bonds offer attractive returns compared to both developed markets and emerging market peers. At 6.3%, the real 10-year yield remains far above its long-term average of 3.5%8. However, as we enter Q4:20, the Medium-term budget policy statement (MTBPS), S&P/Moody’s SA Sovereign Ratings Update, developments around Covid-19 vaccine and the U.S. Presidential Elections are expected to play a significant role in shaping the path of local yields, the currency and the yield curve. 1. Bloomberg economic statistics, Oasis Research 2. IMF, Policy Responses to COVID-19. https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19 3. Statistics South Africa: Quarterly Labour Force Survey 2Q 2020; http://www.statssa.gov.za/?p=13652 4. Bloomberg economic statistics, Oasis Research 5. FOMC Statement, https://www.federalreserve.gov/faqs/economy_14400.htm, August 2020 6. Bloomberg, Oasis Research 2020 7. SARB MPC Statement, September 2020 8. Bloomberg, Oasis Research 2020 2
3. Distribution Distribution Oasis Crescent Income Fund Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sept-20 0 .6277 0.6075 0.7226 0.7579 0.5119 0.8604 0.6851 0.6644 0.5461 0.5873 0.5936 0.5769 Distribution (cents per unit), of the Oasis Crescent Income Fund over the past 12 months. (Source: Oasis) Risk and Reward Profile Lower risk Higher risk Typically lower rewards 1 2 3 Typically higher rewards 4 5 6 7 The risk and reward indicator: • The above risk number is based on the rate at which the value of the Fund has moved up and down in the past • The above indicator is based on historical data and may not be a reliable indication of the risk profile of the Fund • The risk and reward category shown is not guaranteed and may shift over time • The lowest category does not mean ‘risk free’. The Fund may also be exposed to risks which the risk number does not adequately capture. These may include: • The value of stock market investments, and the income from them, will fluctuate. This will cause the Fund price to fall as well as rise and you may not get back the original amount you invested • Any investment in international companies means that currency exchange rate fluctuations will have an impact on the Fund • The Fund invests in a variety of geographic regions and countries. It is therefore exposed to the market sentiment of that specific geographic region or country. This level of diversification is appropriate to deliver on our objective to generate real returns at a lower volatility for our clients over the long term. Fees and Charges* Fee Type Financial Advisor Administrator Initial No charge Ongoing The initial financial advisor fee is limited to 0.5%. No charge Investment Manager No charge 0% 0.5% * Excluding VAT. No performance fees. A fixed fee of 0.5% per annum will be charged and is calculated and accrued daily based on the daily market value of the investment portfolio and paid to the investment manager on a monthly basis. Total Expense Ratio Class A of the portfolio has a Total Expense Ratio (TER) of 0.68% for the period from 1 July 2017 to 30 June 2020. 0.68% of the average Net Asset Value of the portfolio was incurred as charges, levies and fees related to the management of the portfolio. A higher TER does not necessarily imply a poor return, nor does a low TER imply a good return. The current TER cannot be regarded as an indication of future TERs. The ratio does not include transaction costs. Transaction cost was 0.00%. Total Expense Ratio 0.68% Service Fees 0.50% Performance Fees 3 - Other Costs 0.10% VAT 0.08%
4. Disclaimer This document is the Minimum Disclosure Document in terms of BN92 of 2014 of the Collective Investment Schemes Control Act , 2002 and also serves as a fund fact sheet. Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of participatory interests (units) may go down as well as up and past performance is not necessarily a guide to the future. Different classes of units apply to some of the Oasis Funds, which are subject to different fees and charges. A schedule of fees and charges and maximum commissions is available from the management company on request. Commission and incentives may be paid and if so, would be included in the overall costs. CIS are traded at ruling prices and forward pricing is used. CIS can engage in borrowing and scrip lending. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down. No guarantee is provided with respect to capital or return. Portfolios are valued at 15h00 daily. All necessary documentation must be received before 10h00. CIS are calculated on a net asset value basis which is the total value of all assets in the portfolio including any income accruals and less any permissible deductions from the portfolio which may include brokerage, commissions, STT, auditor’s fees, bank charges, trustee and custodian fees. CIS prices are available daily on www.oasiscrescent.com. The manager may borrow up to 10% of the market value of the portfolio to bridge insufficient liquidity. Oasis is a member of the Association for Savings and Investment SA. The above portfolio performance is calculated on a NAV to NAV basis and does not take initial fees into account. Income is reinvested on the ex dividend date. Actual investment performance will differ based on the initial fees applicable, the actual investment date and the date of reinvestment of income. Figures quoted are from Micropal and I Net Bridge for the period ending 30 September 2020 for a lump sum investment using NAV-NAV prices with income distributions reinvested. All information and opinions provided are of a general nature and the document contains no express or implied recommendation, warranty, guidance, advice or proposal that the product is appropriate to the investment objectives, financial situation or needs of any individual or entity. Oasis Crescent Management Company Ltd. is registered and approved in terms of the Collective Investment Schemes Control Act, 2002. Investment performance is for illustrative purposes only and is calculated by taking the actual initial fees and all ongoing fees into account for the amount shown and the income is reinvested on the reinvestment date. The manager has a right to close the portfolio to new investors in order to manage it more efficiently in accordance with its mandate. This Minimum Disclosure Document is published quarterly. Additional investment information (including brochures, application forms, annual and half-yearly reports) can be obtained free of charge from Oasis. Oasis Crescent Capital (Pty) Ltd. is the investment management company of the manager and is authorized under the Financial Advisory and Intermediary Services Act. 2002 (Act No.37 of 2002). Data are sourced from Oasis Research (30 September 2020). Kindly note that this is not the full Terms and Conditions. To view the latest Terms and Conditions please visit www.oasiscrescent.com. GIPS compliant & verified PROTECTING AND GROWING YOUR WEALTH Product Provider: Oasis Crescent Management Company Ltd. Oasis House, 96 Upper Roodebloem Road University Estate, Cape Town 7925 South Africa Tel: +27 21 413 7860 Fax: +27 21 413 7900 Oasis Share Call Helpline: 0860 100 786 Email : info@oasiscrescent.com www.oasiscrescent.com Custodian: The Standard Bank of South Africa Limited Standard Bank Trustee Services Corporate and Investment Banking 20th Floor, Main Tower Standard Bank Centre Heerengracht Cape Town 8000 Investment Company: Oasis Crescent Capital (Pty) Ltd. Oasis House, 96 Upper Roodebloem Road University Estate, Cape Town 7925 South Africa Tel: +27 21 413 7860 Fax: +27 21 413 7900 Oasis Share Call Helpline: 0860 100 786 Email : info@oasiscrescent.com www.oasiscrescent.com 4 Complaints: Oasis Ombudsman Postal Address : PO Box 1217 Cape Town 8000 Telephone: 021 413 7860 Email : ombudsman@za.oasiscrescent.com The Financial Services Providers Ombudsman Postal Address : PO Box 74571 Lynnwood Ridge 0040 Toll Free : 0860 324 766 Email : info@faisombud.co.za