BALTI KASVUFOND

ANNOUNCEMENT

31.03.99

 

1998 FUND MANAGER REPORT

 

The year 1998 brought along crises in the economies of the Baltic 

countries, therefore also on the securities markets. Although the sharp 

fall of securities markets, following the financial crisis in 

Southeast-Asia, started already in 1997, then 1998 was the first year 

when the securities markets fell in annual summary. Most of the share 

indices fell even below their values in the beginning of the year. 

TALSE in Estonia –66.1%, LITIN-A in Lithuania –41.9%, RICI in Latvia -

74.9%, and composite index of the Baltic countries BAL30 –61.5%.

 

The main reason behind such decline were the impacts of the Russian 

financial crisis to the Baltic companies. Several companies selling 

their production to Russia had direct losses in the form of unpaid 

debts. However, loss of market due to devaluation of ruble brought 

along even more significant consequences. Most of the companies spent 

the second half of the year to count their losses and work out new 

strategic plans. The economic crisis also helped to indicate the 

shortcomings in the management of several companies and economic short-

sightedness of managers. 

 

The economic crisis was also reflected in the companies’ liquidity 

problems, which resulted in rapid increase of interest rates during the 

second half year. Although the increase of interest rates included 

increase of the issuers’ credit risk, and several companies defaulted 

on redeeming their bonds on time, the interest rate raise offered also 

interesting investment opportunities.

 

The financial crisis had a direct influence also on the Estonian fund 

market. The liquidity crisis and price fall caused a significant 

decrease in the fund volumes, which in turn caused the net asset value 

of several investment funds to fall below the legally required level of 

5 million EEK, thus these funds were liquidated.

 

As of the end of 1998, the net asset value of Balti Kasvufond was 

15 275 868 EEK; unit net value amounted to 112.15 EEK. Thus, the fund’s 

NAV decreased annually 7 times, from the level of 107 775 172 EEK at 

the end of 1997. In great extent, decline of the fund NAV occurred due 

to decrease in the number of units by 3.35 times. The annual net value 

of the fund unit was –52.5%, i.e. the NAV decreased annually by 

approximately half (236.14 EEK at the end of 1997). 

 

Compared with the above figures describing the general investment 

climate, the annual yield of –52.5% can be considered satisfactory, 

since the result exceeded most of the region’s share indices (the only 

exception was LITIN-A). The yield figure of Balti Kasvufond was also 

positively influenced by allocation of the investment portfolio between 

shares and bonds.  

 

 

Mihkel Õim

Manager of the fund