Interim Management Statement

RNS Number : 7159Z

Foreign & Colonial Eurotrust PLC

23 July 2008

 



Date:          23 July 2008

Contact:    Peter Jarvis    

                    F&C Management Limited    

                    020 7628 8000    

Foreign & Colonial Eurotrust PLC

Interim Management Statement

for the quarter ended 30 June 2008

Objective

The objective of Foreign & Colonial Eurotrust PLC is to achieve long-term growth through a diversified portfolio of Continental European securities.

Summary of results

Attributable to equity shareholders	30 June 2008	31 March 2008	% Change
Net assets	£387.40m	£407.14m	-4.8
Net asset value per share	766.48p	800.62p	-4.3
Share price	669.50p	731.00p	-8.4

Manager's Review

Performance

Your Company's net asset value per share ('NAV') fell by 4.3% during the quarter ended 30 June 2008, compared with a fall of 5.2% in the FTSE World Europe Index, excluding the UK and adjusted to sterling (the 'Benchmark'). The Company's share price fell by 8.4% from 731.00p to 669.50p. The discount widened from 8.7% to 12.7%.  During the quarter the Company bought back and cancelled 311,000 shares at a cost of £2,396,000. For the nine months ended 30 June 2008 the NAV, on a total return basis, fell by 13.8% compared to a fall of 9.6% in the Benchmark.

Review of markets

A broad based slowdown in growth now appears to be taking hold and the pace of economic expansion is expected to remain sluggish going into 2009, as a result of rising commodity prices, a strong Euro and tighter financial conditions. Meanwhile already high Eurozone inflation has risen further, prompting the ECB to raise interest rates by 0.25% to 4.25% in a bid to anchor inflation expectations. After this move we expect the ECB to hold firm while it monitors forecasted slower activity and the risks of second round effects from global inflation developments.

We expect the economic slowdown to continue to erode corporate earnings and for market volatility to restrict gains for equities generally. Financials also remain vulnerable to fears of further large writedowns. However, current conditions also provide opportunities to add exposure to companies we like and initiate new positions, based on price weakness where we see value. We are adding to companies that can better stand the global headwinds, exhibit pricing power to offset rising input costs and generate cash earnings irrespective of the economic cycle.

Portfolio strategy

Within Financials we further reduced our exposure to Banks, selling out of Bank of Ireland, and instead added to our Insurance weighting, buying Zurich Financial and Allianz. We added to the German listed Hypo Real Estate, which finances large volume and complex real estate projects, advises on disposing of real estate portfolios and structures investments in real estate based instruments.

During the period we continued to increase exposure to the Oil and Gas sector initiating positions in Petrolia drilling and Galp. The latter is Portugal's leading integrated oil and natural gas group, with a growing presence in Spain & Brazil, and a developing power business. Petrolia owns and charters drilling vessels for offshore, deepwater oil and gas exploration.

Towards the end of the period we sold the Company's position in ABB post strong performance and a belief that the valuation is no longer compelling against the market pullback. We reinvested in New World Resources, an operation that supplies coal to both steel and energy producers. The increasing demand for steel, current underinvestment in fossil fuel extraction and less than ideal global geopolitical situation should all benefit NWR.

Elsewhere the holding in Zodiak Television was divested post a bid from an Italian investment company and our position in Seloger was sold given the rapidly deteriorating outlook for the French residential housing market.

Outlook

The difficult economic environment looks set to continue. Current high inflation levels mixed with the credit/property crisis suggests the possibility of stagflation and negative real rates globally. While we believe these are legitimate concerns at current levels the market has adjusted to significantly lower growth and offers sufficient valuation support, and we believe the industrialisation of Emerging Markets should cushion a developed economy slowdown.

Peter Jarvis

Manager

23 July 2008

Ten Largest Equity Holdings at 30 June 2008
30 June	31 March	Company	Sector (Country)	% of total
2008	2008			investments
1	-	Allianz	Non-life insurance (Germany)	3.4
2	2	Total	Oil & gas producers (France)	3.0
3	1	Nokia	Technology hardware & equipment (Finland)	2.7
4	25	F Secure	Software & computer services (Finland)	2.6
5	27	Revus Energy	Oil & gas producers (Norway)	2.5
6	37	Zurich Financial	Non-life insurance (Switzerland)	2.4
7	31	E.on	Gas, water & multi-utilities (Germany)	2.3
8	12	Hypo Real Estate	General financial (Germany)	2.1
9	43	Elan Corporation	Pharmaceuticals & biotechnology (Ireland)	2.1
10	-	Arcelormittal	Industrial metals (Netherlands)	2.1

  Industrial Classification of Investments

	30 June 2008 % of total investments	31 March 2008 % of total investments
Financials	17.4	20.7
Oil & gas	14.8	10.5
Industrials	13.2	7.2
Basic materials	10.7	8.4
Technology	10.7	10.3
Healthcare	9.1	10.1
Consumer goods	8.8	18.9
Utilities	6.9	5.8
Telecommunications	4.5	1.9
Consumer services	3.9	6.2

Further Information

Further information, including monthly factsheets and daily net asset values published since the end of the quarter, can be found on the www.foreignandcolonialeurotrust.com website.

The Board is not aware of any significant events or transactions that have occurred between 30 June 2008 and the date of publication of this statement which would have a material impact on the financial position of the Company.  

By order of the Board

F&C Management Limited, Secretary

Exchange House, Primrose Street, London EC2A 2NY

23 July 2008

 

END

 

 

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