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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