ESTS Blackrock Sub

 
TIDMEST TIDMESTS 
 
THE EASTERN EUROPEAN TRUST PLC 
 
All information is at 30 SEPTEMBER 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**            7.1%       12.9%    31.1%      -19.2%        93.1% 
Net asset value**        7.2%       14.6%    30.5%      -19.4%        89.7% 
MSCI EM Europe 10/40(TR) 7.7%       15.0%    23.0%       -0.7%        72.7% 
 
US Dollars: 
Net asset value          9.9%       20.8%    28.6%      -37.7%       101.8% 
MSCI EM Europe 10/40(TR)10.4%       21.1%    21.2%      -23.2%        83.7% 
 
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:            311.70p 
Net asset value*** - cum income:           313.84p 
Share price:                               283.50p 
Subscription share price:                   13.50p 
Total assets^:                             GBP164.6m 
Discount (share price to capital only NAV):   9.0% 
Gearing:                                      6.5% 
Net yield:                                     n/a 
Ordinary shares in issue^^:             49,023,373 
Subscription shares:                     9,804,597 
 
***Includes year to date net revenue equal to 2.14p per share. 
^Total assets include current year revenue. 
^^Excluding 4,664,367 shares held in treasury. 
 
Benchmark 
Sector Analysis       Total Assets (%)      Index (%)      Country Analysis      Total Assets (%) 
Financials                       31.1           32.4       Russia                           50.1 
Energy                           27.2           31.5       Turkey                           17.5 
Telecommunications               11.4            9.0       Poland                           13.4 
Materials                         8.9           11.3       Czech Republic                    6.4 
Utilities                         6.9            7.2       Hungary                           5.7 
Consumer Staples                  6.4            4.2       Kazakhstan                        2.5 
Industrials                       3.4            2.2       Austria                           1.4 
Consumer Discretionary            3.1            0.9       Sweden                            1.1 
Information Technology            1.8            0.3       Germany                           1.1 
Health Care                       1.0            1.0       Finland                           1.0 
Net current liabilities          (1.2)           0.0       Ukraine                           1.0 
                                                           Net current liabilities          (1.2) 
                                -----          -----                                       ----- 
                                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 
Haci Omer Sabanci       Turkey 
Lukoil                  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 7.7% in September. Poland and 
Turkey were the strongest performers over the month. Poland's performance was 
driven by continued confidence in the country's economic recovery, benefitting 
from the strong rebound in German industrial production. In Turkey, the economy 
continued its robust recovery in a relatively benign inflationary environment. 
A convincing referendum victory for the ruling AK Party also encouraged 
investors. Russia was the weakest relative performer over the month, with the 
Rouble depreciating slightly and the market failing to benefit fully from 
capital inflows into the emerging market asset class. Cyclical sectors such as 
industrials and consumer discretionary performed strongly over the month while 
utilities and energy underperformed the index. 
 
Performance 
 
The Eastern European Trust Plc returned 7.2%, underperforming the index by 
0.5%. Positive contributors to performance included commercial airline, Turkish 
Airlines, which benefitted from increasing passenger volumes as well as news of 
expansion and acquisition plans which were received well by the market. In the 
materials sector, the underweight position in Russian nickel producer, Norlisk 
Nickel, significantly added to performance after the stock underperformed 
against the index. Despite the continued strength of base metal prices, 
investors remain concerned over shareholder disputes regarding corporate 
governance issues. 
 
The main detractors to performance in the month included Russian telecoms 
company, Vimpelcom, which continued to lag following confirmation of 
discussions in respect of merger and acquisition opportunities outside of its 
existing markets and Russian pharmaceutical distributor, Protek, which 
surprised the market with a profit warning after experiencing operational 
difficulties linked to the new pharmaceutical pricing regime in Russia. 
 
Activity 
 
During September we added to the existing holding in Polish bank, Pekao, which 
we expect to use its strong capital position to support loan growth and in Bre 
Bank, believing that the ability of the company to increase earnings following 
a recent capital-raising is underestimated. We also increased our exposure to 
Russian financial, Sberbank, which we believe to be an undervalued beneficiary 
of the Russian economic recovery. 
 
Other new investments included the German domiciled retailer, Metro, which 
derives most of its profitability from Eastern Europe and is an attractively 
valued exposure to consumer demand. 
 
Some profits were taken in Turkish bank, Haci Omer Sabanci, into share price 
strength and Polish Bank, BZW, after a 70% stake was sold to Spanish financial 
giant, Santander. 
 
Outlook 
 
Emerging European equities remain attractive compared to other markets. The 
region's companies benefit from lower corporate tax rates with a lower cost of 
manufacturing than developed Europe and lower transport costs to core markets 
for finished goods than Asia. These factors support strong earnings growth and 
attractive returns which are not reflected in valuations. 
 
Poland, Hungary and the Czech Republic are all important beneficiaries of 
German manufacturing strength. As of August, German factory orders were up 20% 
year on year, which has translated into strong industrial and trade data in 
these peripheral countries. Eastern Europe is broadly under appreciated, 
inflows have been weak and we view this as an opportunity as activity returns 
strongly in the region. We currently hold an overweight position in Czech, and 
an equal weight position in Hungary. Despite a positive long-term outlook for 
Poland, we are underweight the Polish market ahead of capital raising amongst 
large cap stocks which leads us to be more cautious in the nearer term. 
 
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). 
 
14 October 2010 
 
 
 
END 
 

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