Interim Results
Baring Emerging Europe Trust PLC
5 December 2000
The Baring Emerging Europe Trust PLC
The Baring Emerging Europe Trust PLC ('BEET'), a London Stock Exchange listed
investment trust, announced today its preliminary results for the six months
ended 31 October 2000. Highlights include:
* Net assets of the fund fell 24 per cent to $310.3 million against a fall of
23 per cent in the BEMI Emerging Europe index.
* Net asset value per share (fully diluted) fell 22 per cent to 228.2c (30
April 2000: 293.10c).
* During the period the fund suffered from weak equity performance throughout
the region. As global stock markets declined investors' appetite for risk
fell, particularly in emerging markets.
* The Board remains of the view that the investment case for the region
generally remains attractive.
Further information:
Michael Nokes, Baring Asset Management 020 7762 8405
Richard Spiegelberg, Chancery Communications 020 7269 6940
The Baring Emerging Europe Trust PLC
Preliminary Unaudited Announcement in respect of
the Six months ended 31 October 2000
STATEMENT OF TOTAL RETURN (unaudited)
Half year to 31 October 2000
Revenue Capital Total
$000 $000 $000
Gains/(losses) on investments -- (96,441) (96,441)
Gains/(losses) on foreign exchange -- 795 795
Income 2,805 -- 2,805
Investment management fee (2,265) -- (2,265)
Other Expenses (996) -- (996)
Net return before interest (456) (95,646) (96,102)
payable and taxation
Interest payable (65) -- (65)
Return on ordinary activities before (521) (95,646) (96,167)
taxation
Taxation (394) -- (394)
Return attributable to ordinary (915) (95,646) (96,561)
shareholders
Transfers to reserves (915) (95,646) (96,561)
Revenue Capital Total
Return per ordinary share (0.75)c (78.31)c (79.06) c
The Baring Emerging Europe Trust PLC
Preliminary Unaudited Announcement (cont'd)
STATEMENT OF TOTAL RETURN (unaudited)
Half-year to 31 October 1999
Revenue Capital Total
$000 $000 $000
Gains/(losses) on investments -- (6,024) (6,024)
Gains/(losses) on foreign exchange -- 94 94
Income 3,088 -- 3,088
Investment management fee (2,012) -- (2,012)
Other Expenses (855) -- (855)
Net return before interest payable 221 (5,930) (5,709)
and taxation
Interest payable (31) -- (31)
Return on ordinary activities 190 (5,930) (5,740)
before taxation
Taxation (276) -- (276)
Return attributable to ordinary (86) (5,930) (6,016)
shareholders
Transfers to reserves (86) (5,930) (6,016)
Revenue Capital Total
Return per ordinary share (0.07)c (4.78)c (4.85)c
The Baring Emerging Europe Trust PLC
Preliminary Unaudited Announcement (cont'd)
STATEMENT OF TOTAL RETURN (unaudited)
Full-year to 30 April 2000
Revenue Capital Total
$000 $000 $000
Gains/(losses) on investments -- 143,252 143,252
Gains/(losses) on foreign exchange -- 12 12
Income 3,613 -- 3,613
Investment management fee (5,024) -- (5,024)
Other Expenses (2,048) -- (2,048)
Net return before interest payable
and taxation (3,459) 143,264 139,805
Interest payable (201) -- (201)
Return on ordinary activities before
taxation (3,660) 143,264 139,604
Taxation (293) -- (293)
Return attributable to ordinary
shareholders (3,953) 143,264 139,311
Transfers to reserves (3,953) 143,264 139,311
Revenue Capital Total
Return per ordinary share (3.19)c 115.73c 112.54c
The Baring Emerging Europe Trust PLC
Preliminary Unaudited Announcement (cont'd)
BALANCE SHEET
At 31.10.2000 At 31.10.1999 At 30.04.2000
(unaudited) (unaudited)
$000 $000 $000
Fixed assets
Investments 303,796 266,359 409,140
Current assets
Debtors 2,517 459 22,260
Cash at bank and in hand 17,243 20,186 89
19,760 20,645 22,349
Creditors: amounts falling due
within one year (13,187) (20,950) (21,037)
Net current assets/
(current liabilities) 6,573 (305) 1,312
Total assets less current
liabilities 310,369 266,054 410,452
Capital and reserves
Called-up share capital 12,233 12,433 12,399
Share premium account 94,358 94,293 94,293
Warrant premium account 13,239 13,263 13,263
Other reserves
Redemption reserve 170 -- 35
Capital reserve - realised 200,335 140,010 204,178
Capital reserve - unrealised (1,150) 20 10,088 94,185
Revenue reserve (8,816) (4,033) (7,901)
Total equity Shareholders' funds 310,369 266,054 410,452
Net asset value
per share: basic 254.10c 214.30c 331.54c
fully diluted 228.26c 195.38c 293.10c
The Baring Emerging Europe Trust PLC
Preliminary Unaudited Announcement (cont'd)
CASH FLOW STATEMENT
Half year Half year Year ended
ended ended 30.04.2000
31.10.2000 31.10.1999
(unaudited) (unaudited)
$000 $000 $000
Operating activities
Income received from investments,
net of
tax 2,028 2,590 3,215
Interest received 384 222 105
Investment management fees paid (2,376) (1,959) (4,806)
Other cash payments (1,145) (865) (1,923)
Net cash outflow from operating
activities (1,109) (12) (3,409)
Returns on investments and servicing
of finance
Interest Paid (65) (31) (201)
Financial investments
Purchases of investments (106,467) (171,460) (381,593)
Sales of investments 147,594 189,910 364,455
Net cash (outflow)/inflow from
financial
investments 41,127 18,450 (17,138)
Financing
Exercise of Warrants 45 23 23
Buyback of Ordinary Shares (3,570) -- (930)
Net cash (outflow)/inflow from
financing (3,525) 23 (907)
Increase/(decrease) in cash 36,428 18,430 (21,655)
The Baring Emerging Europe Trust PLC
Preliminary Unaudited Announcement (cont'd)
NOTES
1. The figures for the six months to 31 October 2000 and 31 October 1999 are
unaudited and do not constitute statutory accounts. The figures for the
year ended 30 April 2000 are an extract from the latest published accounts
and do not constitute statutory accounts. Full accounts for that year have
been delivered to the Registrar of Companies and included the Report of the
Auditors which was unqualified and did not contain a statement under Section
237 of the Companies Act 1985.
2. The interim report will be sent to shareholders on 18 December 2000. It
will not be advertised in newspapers, but copies will be available from that
date at the Company's Registered office at 155 Bishopsgate, London, EC2M
3XY.
The Baring Emerging Europe Trust PLC
Preliminary Unaudited Announcement (cont'd)
CHAIRMAN'S STATEMENT
At a time of general weakness in all the markets in the region the Company's net
asset value declined by 23.6% during the half year. This compares to a fall of
22.8% in the Company's benchmark. Full details of the investment performance
are contained in the report of the investment manager.
During the half year both Rory Landman and Martin Taylor resigned from Baring
Asset Management ('BAM'), your Company's investment manager. They had been
responsible for the management of the Company's portfolio since 1995. Mr Klaus
Bockstaller was subsequently appointed by BAM as a replacement for Mr Taylor and
he is supported in his role by BAM's emerging European investment team.
On 18 August 2000 your Board announced that it had agreed with BAM that the
Company could terminate its investment management agreement (which requires six
months notice of termination) at any time prior to 19 April 2001. The terms of
this arrangement will enable the Board to properly review the performance of the
investment manager without incurring any undue expense.
I also need to report that Preston Rabl, who had been a director since the
Company's inception, resigned from the Board on 30 November 2000. Your Board is
very grateful for the service that Mr Rabl has rendered the Company. I hope to
be able to announce the appointment of at least one additional director in the
near future.
Despite the disappointing fall in net asset value during the half year the Board
remains of the view that the investment case for the region generally remains
attractive.
I would like to remind shareholders that the Company's shares can be purchased
through The Baring Emerging Europe Trust savings scheme, full details of which
can be found on the Company's recently launched website - www.beetplc.com.
Sir William Ryrie
Chairman
4 December 2000
The Baring Emerging Europe Trust PLC
Preliminary Unaudited Announcement (cont'd)
MANAGER'S REPORT
During the period under review the undiluted net asset value per share ('NAV')
of the Company fell from 331.5c to 254.1c, a fall of 23.3%. This compares with
an average fall of 20.7% by a peer group of comparable East European regional
funds (source: S&P) and a fall of 22.8% in the benchmark.
Historically the individual performances of our markets have displayed limited
correlation to movements of developed markets. The extreme volatility of NASDAQ
this year has determined the global appetite for risk and hence has effected the
performance of our markets which are perceived as being high risk, in particular
Russia. This negative global sentiment combined with the traditional seasonal
factors of low liquidity and little 'new' news during the summer months have
resulted in declines in all our regional markets despite continued positive
fundamentals. The market returns are indicated in the table below:
% change in US$ terms
Central Europe
Czech Republic (PX50) -17.9%
Hungary (BUX) -16.1%
Poland (WIG) -23.6%
Russia (RTS) -16.7%
Eastern Mediterranean
Greece (ATG) -17.4%
Turkey (ISE 100) -34.5%
Source: Reuters
The Baring Emerging Europe Trust PLC
Preliminary Unaudited Announcement (cont'd)
MANAGER'S REPORT (cont'd)
Central Europe
The economic fundamentals in both Hungary and the Czech Republic have continued
to benefit from strong external demand (primarily from the EU) while domestic
consumption in each country has remained relatively benign. This has resulted in
positive current account trends and improved fiscal balances in both countries.
Inflation throughout the region has been higher than expected due to the oil
price and high food prices driven by the summer drought. However, because of the
supportive macro environment and the one-off character of the above events, the
Czech and Hungarian central banks have been able to maintain low real interest
rates.
In Poland, however, a lack of demand for their low quality exports coupled with
strong domestic consumption has resulted in a significant deterioration in their
current account which has resulted in high real interest rates. The coalition
government also collapsed leading to a slowdown in the reform process and the
likelihood of a loose 2001 budget. There is however, a high probability of early
elections in the first half of 2001 which could lead to a stronger government
while real rates are likely to fall from current levels.
The Company is overweight Hungary but marginally underweight in both the Czech
Republic and Poland.
Russia
Perceived as being the highest risk market in our region Russia has been
affected by the reduction in global risk appetite, despite the positive
political and economic developments witnessed during the reporting period.
President Putin has established a strong government that has made progressive
strides with regard to structural reform. In particular, the recentralisation of
power after years of dilution of federal influences and new tax legislation,
have proved particularly important to the future development of the economy.
Macro economic data has been surprisingly positive. Strong oil and resource
prices have led to significant improvements in overall economic growth, foreign
currency reserves, current account and budget revenues. With these positive
effects being felt in the wider economy, the public tolerance to accept further
reforms which are likely to be pushed through by Putin, is much higher than
before. With valuations remaining attractive we believe Russia offers
significant potential upside and the Company is overweight.
The Baring Emerging Europe Trust PLC
Preliminary Unaudited Announcement (cont'd)
MANAGER'S REPORT (cont'd)
The Eastern Mediterranean
In Turkey the initial euphoria of the IMF disinflation programme leading to huge
gains in the preceding reporting period has since been undermined and the market
has corrected accordingly. The economy remains disappointingly weak stifled by
an exchange rate regime established with an overvalued and appreciating
currency. Consequently, uncompetitive exports have contracted compared to the
same period last year while imports, stimulated by consumer demand, fuelled by
the sharp fall in interest rates, have risen extremely sharply. With lower than
expected privatisation revenues from abroad and a lack of Foreign Direct
Investment there has been a far worse deterioration in the capital account than
the market had expected. While inflation is falling the decline has not been as
rapid as expected and initial targets for 2000 will be missed by a substantial
margin. The coalition government which initially began with a successful round
of reforms has now begun to show internal divisions and its ability to carry on
with the further necessary wide ranging reforms has diminished. Given the lack
of earnings growth company valuations are not attractive and the Company is zero
weighted.
The unwinding of last years Greek equity bubble has continued despite the rubber
stamping of their EMU application and continued cuts in interest rates as they
converge with those of the European Central Bank. With valuations still
relatively unattractive even domestic investors have begun to cut their losses
and look for attractive alternatives elsewhere. The Company is also zero
weighted in this market.
Conclusion
The political and economic fundamentals in Russia remain strong and we see
enormous upside potential in this market. In Central Europe too the macro
environment remains positive and given the recent market declines we expect the
region to benefit from a stabilisation in global markets. In Greece and Turkey,
however, we see few immediate attractions for investors.
Baring Asset Management Limited
4 December 2000
The Baring Emerging Europe Trust PLC
Preliminary Unaudited Announcement (cont'd)
GEOGRAPHIC EXPOSURE
31 October 2000 Benchmark*
% %
Central Europe
Czech Republic 8.8 9.3
Croatia 1.9 3.6
Estonia 1.0 --
Hungary 24.7 17.1
Poland 18.5 19.0
Slovakia -- 0.4
Slovenia 0.4 1.0
55.3 50.4
Eastern Mediterranean
Greece -- 20.3
Turkey 0.1 11.9
0.1 32.2
Russia 38.6 17.4
Cash & Equivalents 6.0 --
100.0% 100.0%
*Bespoke BEMI Emerging Europe Index
The Baring Emerging Europe Trust PLC
Preliminary Unaudited Announcement (cont'd)
20 LARGEST EQUITY HOLDINGS
Valuation
31 October 2000 %
1. Lukoil (Russia) 9.59
2. Unified Energy (Russia) 9.00
3. Surgutneftegaz (Russia) 8.66
4. Matav (Hungary) 8.36
5. OTP Bank (Hungary) 6.68
6. Gedeon Richter (Hungary) 5.99
7. Cesky Telecom (Czech) 4.68
8. Telekomun Pol (Poland) 4.10
9. Mobile Telesys (Russia) 3.86
10. Polski Kon Naft (Poland) 3.81
11. Norilsk Nickel (Russia) 3.40
12. Elektrim (Poland) 2.67
13. Ceska Sporitelna (Czech) 2.23
14. Pliva (Croatia) 1.89
15. Vimpel Comms (Russia) 1.53
16. KGHM Polska (Poland) 1.71
17. Tatneft (Russia) 1.13
18. Komercni Banka (Czech) 1.06
19. Netia (Russia) (Poland) 1.05
20. Eesti Telekom (Estonia) 1.03
82.43%
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