Interim Management Statement
07 Novembro 2011 - 2:04PM
UK Regulatory
TIDMSR.
SR Europe Investment Trust plc
Interim Management Statement
for the three months ended 30 September 2011 (unaudited)
This interim management statement has been produced to provide information to
shareholders in accordance with the relevant requirements of the UK Listing
Authority's Disclosure and Transparency Rules. It should not be relied upon by
any other party or parties for any other purposes. The views, information and
data in this publication should not be deemed a financial promotion or
recommendation.
Investment Objective
SR Europe Investment Trust plc invests in an actively managed portfolio of
quoted companies and debt instruments in the United Kingdom and continental
Europe, including developing Europe, Russia and Turkey, with the objective of
generating capital growth without neglecting income.
Summary
30 September 2011 30 June 2011
Net assets (including current period GBP54,092 GBP68,440
revenue) GBP'000
Net asset value per share
- basic and fully diluted 187.57p 236.20p
Investment Manager's Review
3 months to P6 months to
30 September 2011 30 June 2011
SR NAV (20.2)% 1.9%
MSCI Europe (including UK) Total (20.5)% 6.4%
Return Index
Markets declined substantially during the third quarter, with the broad Stoxx
600 index falling 25.9% to the low point on 23rd September before recovering
slightly to close the quarter down 21.1% (in sterling terms). Four main issues
fuelled investors concerns: 1) evidence of a faltering economic recovery in the
US, exacerbated by a sovereign debt downgrade and political stalemate, 2) an
escalation of the crisis in the eurozone, with political leaders' inability to
deliver a comprehensive solution leading to evidence of Italian contagion, 3)
persistent inflation in China leading to increasing concerns about the outlook
for growth, 4) a problematic Q2 earnings season, littered with profit warnings.
As fears began to mount that the Western world might tip back into recession
and in the process provoke another banking crisis, equity markets sold off
aggressively.
During the period the Trust's NAV declined by 20.2%, essentially matching the
disappointing performance of European equity markets. These losses came from
our long equity portfolio, with very small gains recorded in equity put options
and index derivatives. The Trust reduced its net balance sheet exposure
significantly over the period and altered the composition, cutting cyclical
long exposure and adding both defensive growth stocks and index hedges.
However, spiking volatility and market panic significantly impacted our ability
to hedge the portfolio, where option protection became very expensive and in
some cases simply not available. The introduction of shorting bans in
financials in countries such as France, Italy and Spain made index hedges
difficult to use. This had a significant impact particularly given financials
form a material part of the market and were the epicentre of the crisis (the
Stoxx 600 Banks index declined 31.4% in the quarter).
The outlook for equity markets for the remainder of the year is particularly
difficult to predict. On the positive side, the turmoil of August and September
seems to have finally persuaded European policymakers of the urgency for a
comprehensive solution to the eurozone crisis. We may potentially see final
measures at the G20 summit in Cannes in early November. If this solution proves
convincing, there is scope for European equity markets to rally substantially.
If however the measures are inadequate, we could see an escalation of the
crisis and bank failures in the Eurozone which would be very negative for
markets. Meanwhile a growth slowdown, continued deleveraging causing
deflationary pressures and a lack of competitiveness in many peripheral
Eurozone economies, remain dominant themes.
We will need to remain flexible and pragmatic in our balance sheet management
and in our investments and respond to events as they occur.
Top 10 Holdings (excluding cash and bonds)
as at 30 September 2011
Company % of Net Country Sector
Assets
L'Oreal 5.6 France Consumer Staples
ENI 5.6 Italy Energy
Virgin Media 5.0 United Kingdom Telecommunications
Edenred 4.9 France Industrials
SAP 4.7 Germany Information Technology
Adidas 4.5 Germany Consumer Discretionary
Alcatel-Lucent 4.4 France Telecommunications
Novo-Nordisk 4.4 Denmark Healthcare
Nestle 4.4 Switzerland Food Products
International Power 4.1 United Kingdom Utilities
Asset Allocation (equity gross long only)
as at 30 September 2011
As at As at
30 September 2011 30 June 2011
Country % of Net Assets % of Net Assets
Denmark 4.4 4.7
France 18.0 14.1
Germany 9.2 23.8
Italy 9.5 9.7
Spain - 3.4
Switzerland 8.2 7.1
United Kingdom 9.0 13.5
As at 30 September 2011 As at 30 June 2011
GBP % GBP %
Equities 31,548,757 58.3 52,242,053 76.3
Derivative -33.1 - 9.8
Overlay
Net Exposure 25.2 86.1
Government 11,155,733 -
Bonds
Net cash and 11,387,335 16,197,860
other assets
Net Assets 54,091,825 68,439,913
Note: At the time of writing the Company has built up long equity exposure to
80% of NAV, offset by 40% index hedges to give a net equity exposure of 40%.
George Papandreou's plans for a Greek referendum raise the stakes in the
Eurozone crisis, re-opening the possibility of a disorderly default, an outcome
markets had thought could be discounted post the Eurozone agreement earlier in
October. However, if Papandreou were to win a clear mandate from the people
for reforms necessary to preserve membership of the Eurozone, we would be in a
much stronger position than previously envisaged. This could lay the
foundation for a durable solution to the crisis.
Contact Details:
Capita Sinclair Henderson Limited
+ 44 1392 412122
www.sreit.co.uk
07 November 2011
END
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