Report to 30 June 1999
MORGAN GRENFELL EQUITY INCOME TRUST PLC
9 July 1999
REPORT TO 30 JUNE 1999
MARKET BACKGROUND
The UK equity market, as measured by the FTSE All-Share Index, rose by
just 1.8% in capital terms in the three months to 30 June. This was
despite continued evidence of reasonable growth in the economy and two
further 0.25% reductions in interest rates. The constraint on the
market was the uncertainty over the direction of US interest rate
policy, together with some signs of a pick-up in commodity prices.
Small and medium sized companies outperformed the market by 9.5% and
5.8% respectively, driven by a recovery in the share prices of
companies more sensitive to the rate of economic growth. As a result,
industrial sectors such as Resources, Steel, Chemicals, Automobiles and
Packaging all performed well.
The portfolio benefited from this and our diluted net asset value rose
8.4% outperforming the FTSE All-Shares Index by 6.6%, thereby adding to
the outperformance achieved in the six months to 31 March.
Activity over the period contained a mixture of growth and income
ideas. We bought some situations where we felt that the downside was
limited and change will realise value, good examples being Unigate,
Rank and Tomkins. On the growth track we purchased AstraZeneca after a
period of sharp underperformance and established a holding in Euromoney
Institutional Investor, a little followed yet attractive media company.
On the sale side we began to reduce the holding in Lonmin (formerly
Lonrho) which has been a successful resource investment. We also took
advantage of the strong move in some of the cyclical shares to reduce
or sell out, good examples being Barratt Developments, Williams, Arjo
Wiggins and Premier Farnell.
Our overall strategy is unaltered from that described in the recent
interim report, namely we continue to see a low inflation environment
with only very modest growth and this leads us to be cautious of
pursuing companies that are reliant on a strong resurgence in inflation
and growth.
NET ASSET VALUE
Fully diluted
30/06/99 31/03/99 30/06/99 31/03/99
256.4p 236.7p 249.8p 230.9p
MID-MARKET SHARE PRICE 30/06/99 31/03/99
Ordinary Shares 211.0p 210.75p
Warrants 105.50p 99.50p
LARGEST HOLDINGS (market value £59.3 million equal to 60.5% of total
portfolio)
% of
30/06/99 £'000's portfolio
BP Amoco 6,159 6.3
HSBC Holdings 4,334 4.4
British Telecom 4,034 4.1
Glaxo Wellcome 3,453 3.5
AstraZeneca 3,024 3.1
Cookson Group 2,800 2.9
Shell Transport & Trading 2,664 2.7
Royal & Sun Alliance 2,429 2.5
Vodafone Airtouch 2,314 2.4
Cable & Wireless 2,271 2.3
General Electric 2,199 2.2
British American Tobacco 2,092 2.1
SmithKline Beecham 2,030 2.1
Barclays 1,913 2.0
BPB 1,880 1.9
Billiton 1,840 1.9
United Utilities 1,725 1.8
National Westminster 1,679 1.7
Carlton Communications 1,673 1.7
Diageo 1,562 1.6
Unigate 1,501 1.5
Bass 1,457 1.5
Express Dairies 1,440 1.5
British Aerospace 1,412 1.4
Countrywide Assured 1,404 1.4
For further information, contact Adrian Frost at Morgan Grenfell on
0171-545-6000.
For additional copies, changes of address or details of our Private
Investors' Plan contact Mark Pope on 0171-545-0520, e-mail address:
mark.pope@db.com
Issued by Morgan Grenfell Equity Income Trust PLC and approved by
Morgan Grenfell Trust Managers Limited, regulated by the Investment
Management Regulatory Organisation and manager of Morgan Grenfell
Equity Income Trust PLC. Investors should be aware that past
performance is not necessarily a guide to future returns, values can
fall as well as rise and investors may not get back the amount they
invested.
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