Portfolio Update
13 November 2010 - 12:53AM
UK Regulatory
TIDMEST TIDMESTS
THE EASTERN EUROPEAN TRUST PLC
All information is at 31 OCTOBER 2010 and unaudited.
Performance at month end with net income reinvested
One Three One Three *Since
Month Months Year Years 30.04.09
Sterling:
Share price** 8.3% 13.4% 43.4% -17.4% 109.1%
Net asset value** 4.5% 10.2% 38.0% -20.9% 98.3%
MSCI EM Europe 10/40(TR) 3.4% 9.6% 27.2% -4.5% 78.5%
US Dollars:
Net asset value 6.0% 12.5% 33.9% -39.1% 113.9%
MSCI EM Europe 10/40(TR) 4.9% 11.8% 23.4% -26.5% 92.6%
Sources: BlackRock and Standard & Poor's Micropal
* BlackRock took over the investment management of the Company with effect from
1 May 2009.
** Net asset value and share price performance includes the subscription share
reinvestment, assuming the subscription share entitlement was sold and the
proceeds reinvested on the first day of trading.
At month end
Net asset value - capital only: 326.19p
Net asset value*** - cum income: 327.96p
Share price: 307.00p
Subscription share price: 18.75p
Total assets^: GBP165.4m
Discount (share price to capital only NAV): 5.9%
Gearing: 1.6%
Net yield: n/a
Ordinary shares in issue^^: 49,626,886
Subscription shares: 9,201,084
***Includes year to date net revenue equal to 1.77p per share.
^Total assets include current year revenue.
^^Excluding 4,664,367 shares held in treasury.
During the month 603,513 subscription shares were exercised at 299p per share.
Benchmark
Sector Analysis Total Assets (%) Index (%) Country Analysis Total Assets (%)
Financials 34.3 33.7 Russia 53.9
Energy 23.6 31.0 Turkey 17.1
Materials 14.1 11.2 Poland 12.5
Telecommunications 9.6 8.7 Czech Republic 5.4
Consumer Staples 7.2 4.4 Hungary 4.2
Utilities 5.2 6.7 Austria 1.9
Consumer Discretionary 4.6 0.9 Kazakhstan 1.4
Industrials 1.4 2.1 Germany 1.4
Health Care 1.1 1.0 Sweden 1.0
Technology - 0.3 Denmark 1.0
Ukraine 1.0
Finland 0.3
Net current liabilities (1.1) 0.0 Net current liabilities (1.1)
----- ----- -----
100.0 100.0 100.0
===== ===== =====
Ten Largest Equity Investments(in alphabetical order)
Company Country of Risk
Bank Pekao Poland
CEZ Czech Republic
Gazprom Russia
Lukoil Russia
MMC Norilsk Nickel Russia
Novatek Russia
Rosneft Russia
Sberbank Russia
Turkiye Garanti Turkey
Vimpel Communications Russia
Commenting on the markets, Sam Vecht, representing the investment
Manager noted;
Markets
The MSCI Emerging Europe 10/40 Index returned 3.4% in October. Equity markets
benefited from expectations of an announcement of a second round of
quantitative easing by the Fed early in November. In particular, investors were
attracted by yields in Turkey which was the strongest market over the month,
and which also benefited from robust industrial production figures. The Czech
Republic was the weakest market during October. Financials and consumer staples
were the strongest sectors while energy and utilities were relative
underperformers.
Performance
The Eastern European Trust PLC NAV rose by 4.5%, outperforming the index by
1.1%. The main contributions came from stock selection. Positive contributors
to performance included Austrian bank, Raiffeisen Bank, which is benefiting
from a reduction in bad debt levels in Eastern Europe and from increasing loan
growth and Russian bank, Sberbank, where expectations for profits were
increased. The portfolio also gained from an underweight position in Russian
oil producer, Lukoil, whose shares underperformed in October. Shares in Kazakh
oil exploration and production company, Zhaikmunai, rose by over 25% following
the completion of a gas treatment unit which will lead to increased production.
The main detractors from performance in the month included Hungarian telecoms
company, Magyar Telekom, which fell following the announcement of a new
telecoms tax. Shares in Swedish cosmetics company, Oriflame, also slipped in
response to disappointing results due to margin pressure.
Activity
During October, we increased exposure to the materials sector, buying a new
holding in Russian steel manufacturer, Mechel, and added to the holding in
Russian miner, Norilsk Nickel; we bought into Mechel following underperformance
resulting in a low valuation, while Norilsk shares have not kept pace with
rising commodity prices and are undervalued compared to its global peers. We
also added to Russian fertiliser producer, Uralkali; we expect the company to
benefit from rising potash prices, benefiting from the oligopolistic nature of
the potash market and supported by increasing crop prices. We bought shares in
Danish brewer, Carlsberg, which generates a significant proportion of its sales
from Russia and other emerging markets where beer consumption is increasing. We
reduced holdings in the energy sector, specifically Russian oil company,
Rosneft, and Hungarian energy company, MOL. Lastly, we took profits on the
holding in Kazakh oil company, Zhaikmunai, mentioned above, and also sold the
holding in Polish software vendor, Asseco Poland.
Outlook
Emerging European equities remain very attractive on low valuations compared to
other markets. Corporate earnings growth is strong and there have been further
upgrades to forecasts for both 2010 and 2011.
We have adjusted positions in October so that the positions in energy have been
reduced and this is now the largest underweight, while the portfolio is
overweight the materials sector. The increase in materials reflects our
positive view of the economic outlook which is further supported by additional
US quantitative easing; we believe that companies in the materials sector are
well placed to take advantage of the weaker dollar and rising commodity prices.
Stock specific factors lead us to be more cautious on energy companies. In
Hungary, we are concerned about additional taxation and stock overhang while in
Russia high marginal rates of tax continue to limit any upside. In terms of
countries we have increased the weighting in Russia while the portfolio remains
underweight Poland where we are concerned about the impact of the funding
requirements of government privatisations on the market.
Latest information is available by typing www.blackrock.co.uk/its on the
internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV
terminal).
12 November 2010
END
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