Monthly Report
Deutsche Equity Income Trust PLC
11 March 2003
Deutsche Equity Income Trust
REPORT FOR THE MONTH OF FEBRUARY 2003
MARKET BACKGROUND
The UK equity market as measured by the FTSE All-Share index rose by 2.1% in
capital terms over the month. Our net asset value per share rose by 1.3% but the
share price rose by just 0.6% over the same period as the discount to net asset
value increased from 0.2% to 0.9%.
In contrast to the previous month large companies outperformed, with the FTSE
100 Index rising by 2.5% in capital terms. The FTSE Mid 250 Index rose by a more
modest 0.5% and the FTSE Small Cap Index fell by 1.0%. The FTSE Higher Yield
Index also outperformed the Lower Yield Index by 3.4% over the month despite a
poor performance from Life Assurance stocks and some of the mortgage-related
Banks.
The best performing sectors over the month were Forestry & Paper, Mining and
Household Goods & Textiles (helped by the bid for Coats), although it should be
noted that Tobacco, Banks and Construction & Building Materials also
outperformed. The worst performing sectors were Steel & Other Metals (concerns
about a delay to the sale of Corus's aluminium subsidiary) and Electronic &
Electrical Equipment (another profits warning at Invensys).
Major purchases during the period included closing the underweight position in
Lloyds TSB and establishing a new holding in United Utilities. Holdings were
sold in Next, Centrica and BSkyB corporate bonds.
OUTLOOK
A quick resolution to the unstable geopolitical situation still looks unlikely,
but we continue to believe that the UK equity market looks attractive at current
levels with the dividend yield in excess of base rates for the first time since
December 1974. In addition, despite the pressure on several financial companies
to reassess their dividend payouts, there are some encouraging signs of
improving cash generation and a more pro-active stance towards returning cash to
shareholders via dividends.
Our investment philosophy remains unchanged: we use cash flow return on
investment (CFROI) rather than earnings per share as the principal tool to
analyse and value companies, and construct the portfolio using the most
attractive stocks in each sector. Combined with our commitment to achieve a
respectable level of income, we are confident that this philosophy will continue
to reward shareholders over the longer term.
28/02/03 31/01/03
NET ASSET VALUE 182.1p 179.8p
MID-MARKET SHARE PRICE 28/02/03 31/01/03
Ordinary Shares 180.5p 179.5p
Dividend Yield (%) 4.2 4.2
LARGEST HOLDINGS (market value £49.9 million equal to 68.3% of total portfolio)
£'000's % of portfolio
GlaxoSmithKline 5,253 7.2
BP 5,179 7.1
HSBC Holdings 4,918 6.7
Royal Bank of Scotland 3,877 5.3
AstraZeneca 3,146 4.3
Shell Transport & Trading 2,470 3.3
Vodafone Group 2,255 3.1
Imperial Tobacco 2,133 2.9
Scottish & Southern Energy 1,972 2.7
BT Group 1,604 2.2
Tate & Lyle 1,459 2.0
HBOS 1,372 1.9
Lloyds TSB 1,361 1.9
Barclays 1,269 1.7
Viridian Group 1,252 1.7
SIG 1,221 1.7
Legal & General 1,158 1.6
BPB 1,123 1.5
Canary Wharf Group 1,111 1.5
Debenhams 1,094 1.5
MMO2 7.625% 25/1/2012 1,017 1.4
GUS 930 1.3
Prudential 929 1.3
Senior 919 1.3
3i Group 877 1.2
FINANCIAL CALENDAR
Company Half-year end 31 March 2003
For further information, contact Graham Ashby at Deutsche Asset Management on
020-7545-6000.
For additional copies, changes of address or details of our Private Investors'
Plan, low cost ISA and Dividend Reinvestment Plan (a plan through which
shareholders, who hold their shares on the Company's main register, can use
their dividends to purchase further shares) contact Mark Pope on 020-7545-0520,
e-mail address: mark.pope@db.com. Further details of Deutsche Equity Income
Trust including the latest annual, interim and monthly reports can be found on
the Deutsche Investment Trust Managers website located at
www.deutsche-its.co.uk.
Issued by Deutsche Equity Income Trust PLC and approved by Deutsche Investment
Trust Managers Limited, regulated by the Financial Services Authority and
manager of Deutsche Equity Income Trust PLC. Investors should be aware that past
performance is not necessarily a guide to future returns, the price of shares
and the income from them may fall as well as rise and investors may not get back
the amount they invested.
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