RNS Number:0155O
Dresdner RCM Emerging Mkts Tst PLC
30 November 2001
For immediate release 30th November 2001
DRESDNER RCM EMERGING MARKETS TRUST PLC
ANNOUNCEMENT OF UNAUDITED INTERIM RESULTS
For the six months ended 30th September 2001
Highlights
* Net asset value per share decreased 18.3% against comparable index (MSCI
Emerging Markets) which fell 22.3%
* Asian economies suffering from sharp downturn in the technology and
communications sector
* Economic conditions in the US and threat of Argentinian default
adversely affected Latin American markets
* Portfolio has been repositioned defensively. Prevailing uncertainty and
volatility now offering opportunities to buy into some emerging markets at
attractive prices
* Arrangements for Continuation Vote of the Trust to be held in January
2002.
Interim Results
A summary of the results for the six months ended 30th September 2001 is set
out below. The net asset value attributable to each ordinary share undiluted
was 77.6p, compared to 95.0p at the end of the previous financial year, a
decrease of 18.3% over the half year. Over the same period the MSCI Emerging
Markets Index decreased by 22.3%. The Trust's net asset value performance over
the twelve months to 30th September 2001, as calculated by the Association of
Investment Trust Companies Monthly Information Service, was slightly better
than the average of all the trusts in the global emerging markets sector.
During that period the Trust's net asset value fell by 33.8%.
Investment Review
It has been another disappointing six months for the emerging markets asset
class. The same concerns came to the fore as in the previous report - growing
fears of a global slowdown and falls in the telecom, media and technology
sector. This together with the more specific emerging market issues of Turkey
and Argentina has meant the emerging market countries have been out of favour
with investors. All this has been compounded by the terrorist events in the
United States on September 11th which has led to investors becoming still more
risk averse.
The downturn in Asian economies has surpassed what were considered bearish
forecasts only six months ago. With the US economy struggling with a downturn
in manufacturing and industrial activity, it had been hoped that consumers
would continue to buoy growth. However, through the summer, evidence was
beginning to challenge this view. Even before the tragic events of September
11th, Asian highly open economies were suffering from the sharp slowdown in
technology and telecommunications. Already Malaysia and Taiwan are considered
to be in recession and may well be joined by Korea, Thailand and the
Philippines. Authorities have responded with a combination of fiscal and
monetary stimuli. While consumption has picked up in a number of Asian
countries, overall credit growth is still weak. Many of the banks in the
region remain structurally impaired to provide credit where it is needed.
China has been more resilient with her somewhat closed economy, foreign direct
investment is on the rise and structural reforms are proceeding. Yet unlike
the rest of Asia, China's A and B share market do not present attractive
valuations. India has been more resilient and is experiencing some
acceleration in liquidity growth combined with reasonable output growth. The
government is also allowing much needed deregulation which will prove
beneficial over time.
Latin America finished the period under review down 21.2%. The main issue
during the period has continued to be uncertainty regarding Argentina's
ability to avoid a devaluation and to stave off a default on its debt in light
of lack of growth and domestic money moving offshore. The market which has
been hurt most by this concern has been Brazil where we have seen the currency
weaken by over 20%. Matters in Brazil have not been helped by power shortages
due to a drought. This has led to short time working and downward revisions in
economic forecasts. Mexico has seen a much better performance with a stronger
than expected currency helping returns. Performance has also benefited from
Mexico's perceived status as a safe haven in these times of turmoil. However,
even here we are seeing a big slowdown and concerns have been rising about the
impact of a recession in the United States and the lack of fiscal reform
within Mexico.
Slow economic activity in Western Europe together with a weak euro has
continued to be a problem for emerging Europe. The global weakness in telecoms
and technology has not helped as the most liquid stocks in the region are in
these sectors. The best performance has been from Russia. High global oil
prices have been the driving force behind this good performance. Structural
reforms going through the Duma and good economic data have made investors more
confident about the market.
Concerns about Turkey's continuing economic problems have made it one of the
worst performing markets during the period. However, with the current
instability in the Middle East, as a NATO member there is some belief that
Turkey is too strategically important to allow the problems to continue and
further financial aid will be forthcoming. Political turmoil has hurt the
Israeli domestic market and the falls in the technology sector there have also
hurt the other sectors of investment. The resource stocks in South Africa
started the review period well but as fears about global recession grew the
platinum stocks suffered. The acts of terrorism in the U.S.A on September 11th
have led investors to look once again at gold as a safe haven. This and
consolidation within the sector has helped the country's gold companies.
Outlook
The World Trade Center catastrophe has increased the risk premium for emerging
markets and we have placed the portfolio defensively to take into account the
uncertainties. The outlook for the east European markets depends on the global
economic growth. The expected interest rate cuts in "Euroland" could ease the
situation in the region. Hungary is the market which should benefit most from
any positive news out of Western Europe. Uncertainty about prospects for the
oil price are likely to hurt Russia in the short term but we remain positive
on the fundamental economic outlook. Similarly concerns about the fall in
demand for commodities could impact the South African index.
Asia's markets are for the most part revealing attractive valuations on a
variety of measures. However, the area of greatest importance, growth, and the
price you pay for that growth, still indicate a great deal of uncertainty. The
trough in the interest rate cycle seems close as does the profit cycle, but it
seemed close six months ago too. As yet, we see no improvement in the earnings
cycle in Asia as earnings per share estimates continue to fall for
significantly more stocks than they rise. Even Korea, which we look to for a
geared indicator on the global economy has yet to consistently perform well
this year. Our approach therefore will continue to concentrate at the stock
level and invest in those companies with a more resilient earnings pattern.
Within Latin America, Argentina is likely to remain a concern. Standard &
Poors have just downgraded the country to "SD" (selective default) and it is
difficult to see how the economy can be revived. As we write there is talk of
dollarisation but this will not solve the underlying economic problems. Events
in Argentina are likely to continue negatively impacting Brazil. Mexico is
likely to remain the safe haven in the region. Due to its close relations with
the United States it will obviously suffer economically if its neighbour goes
into a deep recession but the quality of its main companies remain good and
are defensive plays in the current environment. Concerns about the ability of
the government to pass the fiscal reforms are likely to weigh on the market
but defensiveness of stocks is likely to be the main consideration in the
short term.
The Future of the Company
In the Chairman's statement in the 2001 Report and Accounts he stated that the
Board would give shareholders the opportunity to vote on the continuation of
the Trust at an Extraordinary General Meeting in January 2002, in advance of
the planned date of 2004. Accordingly, a notice convening an Extraordinary
General Meeting will be sent to shareholders shortly. As detailed above, the
prevailing uncertainty in the global and emerging economies and subsequent
market volatility offers the Managers the opportunity to buy, selectively,
into emerging market companies at attractive prices. Market volatility
continues to favour closed ended funds, like the Trust, for investing in the
illiquid emerging market asset class.
If a majority of shareholders wishes to maintain the Trust's present structure
and investment policy, by voting for the continuation resolution at the EGM,
the Board will continue the management and operation of the Trust as at
present and shareholders would have another opportunity to consider the future
of the Trust in 2006. Or, if a majority of votes cast at the EGM is against
continuation, the Board will then put forward reconstruction proposals to
shareholders. These proposals would involve a scheme of reconstruction under
which shareholders who wished to realise their investment in the Trust would
have the opportunity to do so for cash, reflecting the underlying net asset
value after deducting the costs of liquidation. Those who wished to continue
their investment in emerging or global markets in a tax-efficient manner would
be able to elect for shares in a fund (or funds) to be proposed, such as the
Dresdner Emerging Markets Fund, a sub-fund of the Dresdner Global Distributor
Fund which is an open-ended Luxembourg investment fund recognised by the
Financial Services Authority.
10 Fenchurch Street By Order of the Board
London, EC3M 3LB
Gerry Absalom
30th November 2001 Company Secretary
SUMMARY OF UNAUDITED RESULTS
STATEMENT OF TOTAL RETURN
for the six months ended 30th September 2001
2001
(#'000) (#'000) (#'000)
Revenue Capital Total
(Note 2)
Net losses on investments - (4,074) (4,074)
Income from investments 270 - 270
Other income 29 - 29
Investment management fee (184) - (184)
Other expenses (72) - (72)
Net return before finance costs and taxation 43 (4,074) (4,031)
Finance costs of borrowings - - -
Return on ordinary activities before taxation 43 (4,074) (4,031)
Overseas tax (26) - (26)
Return on ordinary activities 17 (4,074) (4,057)
after taxation
Return per Ordinary Share (Note 3) 0.07p (17.48)p (17.41)p
NET ASSET STATEMENT
as at 30th September 2001
2001 2001
(#'000) (#'000)
Fixed asset investments 17,159
Current assets 1,411
Current liabilities (492)
Net current assets 919
Total Net Assets 18,078
Called up Share Capital 2,331
Share Premium Account 11,470
Warrant Reserve 3,143
Capital Redemption Reserve 500
Capital Reserves: Realised 1,007
Unrealised (5,141)
(4,134)
Special Reserve 5,510
Revenue Reserve (742)
Shareholders' Funds 18,078
Undiluted net asset value per Ordinary Share + 77.6p
Diluted net asset value per Ordinary Share ** 81.8p
+ The undiluted net asset value is based on 23,305,479 Ordinary
Shares in issue at the period end.
** The calculation of the diluted net asset value assumes all
outstanding warrants have been exercised, and is therefore based on
28,724,659 Ordinary Shares in issue.
STATEMENT OF TOTAL RETURN
for the six months ended 30th September 2000
2000
(#'000) (#'000) (#'000)
Revenue Capital Total
(Note 2)
Net losses on investments - (8,310) (8,310)
Income from investments 303 - 303
Other income 20 - 20
Investment management fee (274) - (274)
Other expenses (112) - (112)
Net return before finance costs and taxation (63) (8,310) (8,373)
Finance costs of borrowings - - -
Return on ordinary activities before taxation (63) (8,310) (8,373)
Overseas tax (26) - (26)
Return on ordinary activities (89) (8,310) (8,399)
after taxation
Return per Ordinary Share (Note 3) (0.36)p (33.47)p (33.83)p
NET ASSET STATEMENT
as at 30th September 2000
2000 2000
(#'000) (#'000)
Fixed asset investments 27,461
Current assets 1,909
Current liabilities (405)
Net current assets 1,504
Total Net Assets 28,965
Called up Share Capital 2,469
Share Premium Account 11,468
Warrant Reserve 3,145
Capital Redemption Reserve 361
Capital Reserves: Realised 5,400
Unrealised 190
5,590
Special Reserve 6,566
Revenue Reserve (634)
Shareholders' Funds 28,965
Undiluted net asset value per Ordinary Share + 117.3p
Diluted net asset value per Ordinary Share ** 114.2p
+ The undiluted net asset value is based on 24,695,734 Ordinary
Shares in issue at the period end. During the period, 510,000 Ordinary
Shares were repurchased by the Company and cancelled and 1,200
Ordinary Shares were issued on the exercise of warrants.
** The calculation of the diluted net asset value assumes all
outstanding warrants have been exercised, and is therefore based on
30,114,914 Ordinary Shares in issue.
STATEMENT OF TOTAL RETURN
for the year ended 31st March 2001
2001
(#'000) (#'000) (#'000)
Revenue Capital Total
(Note 2)
Net losses on investments - (13,957) (13,957)
Income from investments 428 - 428
Other income 51 - 51
Investment management fee (480) - (480)
Other expenses (181) - (181)
Net return before finance costs and taxation (182) (13,957) (14,139)
Finance costs of borrowings - - -
Return on ordinary activities before taxation (182) (13,957) (14,139)
Overseas tax (33) - (33)
Return on ordinary activities (215) (13,957) (14,172)
after taxation
Return per Ordinary Share (Note 3) (0.87)p (56.56)p (57.43)p
NET ASSET STATEMENT
as at 31st March 2001
2001 2001
(#'000) (#'000)
Fixed asset investments 21,420
Current assets 872
Current liabilities (157)
Net current assets 715
Total Net Assets 22,135
Called up Share Capital 2,331
Share Premium Account 11,470
Warrant Reserve 3,143
Capital Redemption Reserve 500
Capital Reserves: Realised 2,221
Unrealised (2,280)
(59)
Special Reserve 5,510
Revenue Reserve (760)
Shareholders' Funds 22,135
Undiluted net asset value per Ordinary Share + 95.0p
Diluted net asset value per Ordinary Share ** 95.9p
+ The undiluted net asset value is based on 23,305,479 Ordinary
Shares in issue at the year end. During the year, 1,900,255 Ordinary
Shares were repurchased by the Company and cancelled and 1,200
Ordinary Shares were issued on the exercise of warrants.
** The calculation of the diluted net asset value assumes all
outstanding warrants have been exercised, and is therefore based on
28,724,659 Ordinary Shares in issue.
CASH FLOW STATEMENTS
Six months Six months Year
to to to
30th 30th 31st
September September March
2001 2000 2001
(#'000) (#'000) #'000)
Net cash inflow (outflow) from operating 61 (71) (412)
activities
Servicing of Finance
Interest paid - - -
Taxation
UK income tax repaid 24 74 74
Investing activities
Purchase of investments (11,626) (15,698) (34,592)
Proceeds from sales of investments 12,235 17,287 36,297
Net cash inflow from investing 609 1,589 1,705
activities
Net cash inflow before financing 694 1,592 1,367
Financing
Issue of share capital on exercise of - 1 1
warrants
Purchase of Ordinary Shares for - (557) (1,607)
cancellation
Expenses associated with share re-purchases - (3) (8)
Net cash outflow from financing - (559) (1,614)
Increase (decrease) in cash 694 1,033 (247)
Note 1
The interim statement has been prepared using the same accounting policies as
those adopted in the annual accounts for the year ended 31st March 2001. It
has been neither audited nor reviewed by the Company's auditors.
The Statement of Total Return and the Net Asset Statement for the year ended
31st March 2001 has been extracted from the published accounts of the Company
at that date which have been delivered to the Registrar of Companies. The
Auditors' opinion on those accounts was unqualified and did not contain a
statement under Section 237(2) or (3) of the Companies Act 1985.
Note 2
The revenue column of this statement is the profit and loss account of the
Company.
Note 3
The returns per Ordinary Share are based on revenue and capital returns to
Ordinary Shareholders, as appropriate, and on the weighted average number of
Ordinary Shares in issue throughout each period, being 23,305,479 for the six
months ended 30th September 2001, 24,824,232 for the six months ended 30th
September 2000 and 24,677,913 for the year ended 31st March 2001.
For further information, please contact:-
Dresdner RCM Global Investors (UK) Limited
Tessa Murray, Head of Corporate Communications
Tel:- 020 7475 8861
or
Dresdner RCM Global Investors (UK) Limited
Simon White or Carolyn Dakers
Tel:- 020 7475 2700
FIFTEEN LARGEST EQUITY HOLDINGS
AS AT 30TH SEPTEMBER 2001
Country Valuation % of Total
#'000 Assets
Telefonos De Mexico ADR Mexico 482 2.67
Teva Pharma Ind ADR Israel 469 2.59
China Mobile (HK) China 428 2.37
Ranbaxy Labs GDR India 408 2.26
Anglo Amercian South Africa 371 2.05
Taiwan Semiconductor ADS Taiwan 361 2.00
Gamuds Berhad Malaysia 354 1.96
Lukoil Holdings ADR Russia 352 1.95
** Samsung Electronics GDR Korea 337 1.86
H & CB ADR Korea 324 1.79
BHP Billiton South Africa 311 1.72
** Asustek Computer GDR Taiwan 302 1.67
OTP Bank Hungary 302 1.67
Surgutneftegaz ADR Russia 302 1.67
ITC GDR India 301 1.67
5,404 29.90
** Listed on the London Stock Exchange
GEOGRAPHICAL DISTRIBUTION AT 30th SEPTEMBER 2001
as a percentage of Total Invested Funds
%
Korea 9.7
India 8.0
China 7.2
Malaysia 6.6
Taiwan 6.4
Thailand 3.3
Philippines 2.0
Indonesia 1.6
ASIA 44.8
Mexico 8.3
Brazil 6.1
Chile 5.6
Argentina 0.4
LATIN AMERICA 20.4
South Africa 12.1
Russia 6.9
Israel 6.3
Hungary 2.7
Turkey 2.6
Poland 2.0
Croatia 0.9
Czech Republic 0.6
Egypt 0.5
Portugal 0.2
EUROPE/AFRICA 34.8
TOTAL 100.0
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