Report to 31 December 1999
Deutsche Equity Income Trust PLC
26 January 2000
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Deutsche Equity Income Trust
REPORT TO 31 DECEMBER 1999
MARKET BACKGROUND
The UK Equity market, as measured by the FT-SE All-Share Index rose, by 14.7%
in capital terms in the three months to the 31 December. The strength of the
market was largely attributable to the rise in growth stocks, and in
particular technology related issues. In contrast the share prices of many
more cyclical companies actually fell in value over the period. In many
sectors the impact of intense competition on prices led to lower revenues and
pressure on profits. The scarcity of growth accounted for investors' appetite
for technology companies.
This made a difficult background for income funds as many of the poor
performing shares were in the higher yielding sector of the market. The
Company's net asset value rose by 11% underperforming the market by 3.7%.
However this return compares favourably with other income funds in general.
Despite the weakness of higher yielding stocks over the period we were not
tempted to increase exposure to those companies. In many cases there is still
a danger that returns may fall, particularly in some of the consumer stocks,
and this would undermine valuations further.
Where we did purchase more cyclical economically sensitive stocks we added to
existing positions in Burmah, Rexam, Lonmin and Laporte, believing that these
are capable of delivering some growth. We took profits in some of our more
growth orientated companies, good examples being Energis, Marconi and
Bowthorpe.
OUTLOOK
Although we expect growth to strengthen, we do not believe that this will
alter the competitive nature of the economic environment. Low inflation will
continue to persist, making life difficult for companies, whilst interest
rates are likely to rise further to control the rate of growth, which should
subdue markets. The short term is therefore likely to be difficult, although
we are confident that the longer-term economic environment will prove helpful
to equities. Our strategy remains to be mainly invested in those companies
best able to withstand an environment of low growth and low inflation.
Fully diluted
NET ASSET VALUE 31/12/99 30/09/99 31/12/99 30/09/99
272.5p 244.6p 266.2p 239.3p
MID-MARKET SHARE PRICE 31/12/99 30/09/99
Ordinary Shares 248.5p 216.5p
Warrants 149.0p 121.5p
LARGEST HOLDINGS (market value £66.6 million equal to 64.7% of total
portfolio)
% of
31/12/99 £'000's portfolio
BP Amoco 8,436 8.2
British Telecom 5,357 5.2
Vodafone Airtouch 5,169 5.0
HSBC Holdings 4,995 4.9
Shell Transport & Trading 4,287 4.2
AstraZeneca 3,665 3.6
Glaxo Wellcome 3,428 3.3
United Utilities 3,109 3.0
Marconi 2,455 2.4
Carlton Communications 2,316 2.2
Cable & Wireless 2,184 2.1
SmithKline Beecham 1,945 1.9
British Aerospace 1,867 1.8
SIG 1,817 1.8
Corus Group 1,682 1.6
Burmah Castrol 1,644 1.6
Pearson 1,619 1.6
Cookson Group 1,424 1.4
Royal & Sun Alliance 1,415 1.4
Euromoney Institutional Investor 1,350 1.3
Gerrard Group 1,337 1.3
Unigate 1,317 1.3
Marshalls 1,266 1.2
Lonmin 1,263 1.2
Rolls-Royce 1,258 1.2
For further information, contact Adrian Frost at Deutsche Asset Management on
020-7545-6000.
For additional copies, changes of address or details of our Private Investors'
Plan and low cost ISA contact Mark Pope on 020-7545-0520, e-mail address:
mark.pope@db.com
Issued by Deutsche Equity Income Trust PLC and approved by Deutsche Investment
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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