Buchanan Special - Interim Results

RNS No 8510d
BUCHANAN SPECIAL EMERGING MARKETS
(to be renamed THE METAGE SPECIAL EMERGING MARKETS FUND LIMITED)
26th October 1998


METAGE SPECIAL EMERGING MARKETS FUND LIMITED
formerly, The Buchanan Special Emerging Markets Fund Limited

Preliminary announcement of unaudited results for the six months ended
June 30, 1998 and 1997 and for the year ended December 31, 1997

Capital                                 June 30,   June 30,     December 31,
                                        1998        1997              1997
                                        US$000's   US$000's     US$000's

Investments at market value:
  Long positions                        28,611     46,386       34,492
  Short positions                         (169)      (550)      (1,422)
  Unrealised loss on forward contracts      -         (25)          -

Net Current (Liabilities)/Assets        (4,665)    (6,362)      (2,205)
Net Asset Value                         23,777     39,449       30,865
Number of shares outstanding         1,616,650  1,616,650    1,616,650
Net Asset Value per Share (US$)          14.71      24.40        19.09


Profit And Loss                         June 30,  June 30,   December 31,
                                        1998      1997          1997
                                        US$000's  US$000's   US$000's

Dividends (net of withholding tax)         384       414       816
Interest income                             74        48       114
Other income                                 5        40        28      
Investment, management and 
 administrative expenses                  (430)   (1,452)   (2,028)        
Interest expense                          (240)     (508)     (824)

Loss on ordinary activities
attributable to shareholders              (207)   (1,458)   (1,894)

Loss per share (US$)*                   (0.128)   (0.902)   (1.172)

* The loss per share has been based on the average number of shares in issue
  throughout the six months ended June 30, 1998 of 1,616,650 (six months 
  ended June 30, 1997 and year ended December 31, 1997 - 1,616,650)

The Net Asset Value of the Fund fell by 22.9% over the period, as compared
with 19.9% on the benchmark, the MSCI Emerging Market Free Index.

Quarter 1
After a sharp fall in the first week of 1998, emerging markets hit a low on the
12th of January, and remained on an uptrend for the rest of the quarter.  The 
recovery was led by Asian markets where the currencies, although not exactly
stable, appeared at least to have broken out of the cycle of competitive
devaluations that characterised the fourth quarter of 1997.  The biggest
winners, Korea and Thailand (up 58% and 43%), were amongst the worst performing
markets of the previous quarter.  Indonesia, the other very weak Asian market
in the fourth quarter, failed to regain territory, as the Rupiah continued to
depreciate.  Several European markets also put in a good performance (notably
Greece and Poland), but Russia fell sharply in January as bond yields shot-up
to nearly 40% amid fears of a flight of international capital out of the
country.
 
The Fund NAV rose by 6.5% over the quarter, to show a modest 0.79%
outperformance of the benchmark.  The single largest contributor to the superior
performance was Thailand, where discounts on local closed-end funds bounced back
from their extreme highs at year-end. The volatility in Indonesia and Taiwan
provided numerous market-timing trading opportunities, and we managed to return
a profit in Indonesia despite an overall fall of 11% in the dollar value of the
index.

We are still managing to find some convertible bond conversion opportunities,
and there have been some very good value new issues this quarter.  We have also
profited from buying shares at a discount in a number of open-ended funds.

Quarter 2
The second quarter saw a virtual collapse in global emerging markets, sending
the MSCI Free Index down 24%, and leading to rising concerns regarding the
stability of several emerging economies.  In what is becoming a familiar
scenario, Asia took the lead, driven once again by a round of currency
devaluations.  Beyond Asia, the Russian authorities have been fighting a
continuing erosion of confidence in the Rouble.  Whilst the central bank has
been successful at holding the Rouble within its band, the cost to the equity
market has been high with the index falling by more than a half.  Through June
the markets took to following the (mis)fortunes of the Yen, with weakness in the
Japanese currency seen as further destabilising other Asian economies.

The Fund underperformed its benchmark by 3.45% over the quarter.  In the light
of the general cheapening of offshore funds which has taken place we are not too
disappointed with this result.  The majority of our holdings are at or near
their widest ever discounts, and in many cases with wind-up or restructuring
dates in the next few years, for example Ruang Khao High is on a 55% discount
and open-ends in December 2000.

The major disappointment this quarter has been the quantitative stock selection
strategies.  In Brazil the restructuring of the telecom sector has not had the
anticipated effect on stock prices, and in June the regional telephone companies
we own severely under-performed the market.  We are currently re-positioning
this portion of the portfolio.  We have ceased direct stock investment in Mexico
for the present, due to the cheap closed end fund alternatives now available.
There have been some success stories this quarter.  Our positions in Taiwanese
convertibles have performed very well in the declining market as several have
hit bond floors and provided excellent downside protection.  Elsewhere, volatile
discounts on South African funds have enabled us to trade profitably.

We have reduced our country level deviations from the benchmark, and continue to
focus on adding value via security selection, principally through trading
closed-end funds.

The directors have not declared a dividend for the period ended June 30, 1998
(1997: nil)

The report and financial statements for the period ended June 30, 1998 will be
sent to shareholders by the end of October 1998 and will be available to members
from the offices of the Investment Manager at Credit Suisse First Boston
(Europe) Limited, One Cabot Square, London E14 4QR.

END

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