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THE EASTERN EUROPEAN TRUST PLC - Correction : Annual Financial Report

Monday, March 25, 2013 12:17 PM


 Amendment re. Company's interests in excess of 3% of any company's
share capital.


                        The Eastern European Trust PLC
                         Annual Report 31 January 2013
Performance Record
Financial Highlights
Attributable to ordinary shareholders                                31    
          31           Change
                                                                January          January                %
                                                                   2013             2012
Assets
Net assets* (US$'000)                                           197,954         205,520             -3.7 
Net asset value per ordinary share (undiluted)                  504.17c         445.03c            +13.3
Net asset value per ordinary share** (undiluted)                318.01p         282.02p            +12.8
Net asset value per ordinary share (diluted)#                   491.43c         445.03c            +10.4
Net asset value per ordinary share** (diluted)#                 309.97p         282.02p             +9.9
MSCI EM Europe 10-40 Index (US$)                                 598.18          518.92            +15.3
MSCI EM Europe 10-40 Index (£)                                   377.29          328.82            +14.7
                                                               --------        --------         --------
Ordinary share price (mid-market)**                             439.16c         403.57c             +8.8
Ordinary share price (mid-market)                               277.00p         255.75p             +8.3
                                                               --------        --------         --------
2011 Subscription share price (mid-market)                            -           0.75p                -
                                                               --------        --------         --------
2012 Subscription share price (mid-market)                       13.00p               -                -
                                                               --------        --------         --------
Discount to net asset value (diluted)                             10.6%            9.3%                -
                                                               ========        ========         ========
Gross market exposure†                                           110.9%  
       111.2%                -
                                                               ========        ========         ========
                                         For              For           Change
                                         the              the                %
                                        year             year
                                       ended            ended
                                          31               31
                                     January          January
                                        2013             2012
Revenue
Net revenue after taxation (US$'000)   3,433              919           +273.6
Final dividend per ordinary share      6.50c                -                -
Revenue return per ordinary share      7.77c            1.87c           +315.5
Total return per ordinary share       52.52c         (117.75c)             
 -
Ongoing charges ratio~                  1.2%             1.1%
                                    ========         ========         ========
                                                                              

* The change in net assets reflects market movements during the year, tender offers, share buy backs and the conversion of subscription shares.

** Based on an exchange rate of 1.5854 (2012:1.5780).
# There is no dilution as at 31 January 2012.
† Long positions plus short positions as a percentage of net assets.
~ Calculated in accordance with AIC guidelines.                            
Chairman's Statement
Background
Eastern European markets have performed well despite the continuation of the
challenging market environment in Central Europe and in other developed world
markets in the year under review. The early positive start to the year was set
back by concerns over the need to address the high levels of government debt in
much of the developed world. This in turn has contributed to lacklustre growth
in most developed economies, and slowing activity in emerging economies.
Sentiment across global markets began to deteriorate in the spring of 2012 and
worsened in the summer. However, in late 2012 conditions began to improve amid
much needed support from policy makers in the US, Europe, Japan and China.
Latterly, world markets have strengthened significantly ending the year in
a
much more positive mood.
Performance
In the year to 31 January 2013 the Company's undiluted net asset value ("NAV")
returned 13.3% (12.8% in sterling terms) and the share price increased by 8.8%
(8.3% in sterling terms). This compares with the return from the benchmark
index of 15.3% in US dollar terms and 14.7% in sterling terms. Since the year
end and up until the close of business on 21 March 2013 the Company's undiluted NAV
per share has decreased by 5.6% compared with the fall in the benchmark of 5.9% over
the same period (in US dollar terms).

Revenue return and dividends

The Company's undiluted revenue return for the year amounted to 7.77 cents per
share. Following the changes to Company Law in respect of the payment of
dividends out of capital, the Company must pay a dividend in order to retain
its favourable tax status as an investment trust. The Directors are therefore
recommending the payment of a final dividend of 6.50 cents per share. The
dividend will be paid in sterling on 28 June 2013 to shareholders on the
Company's register on 24 May 2013; the ex dividend date is 22 May 2013.
Shareholders who wish to receive their dividend in US dollars should either
complete the currency election form which will be sent with the annual report,
or make the appropriate election via CREST.

Continuation vote

Shareholders are given the opportunity to vote on the future of the Company
every three years and an ordinary resolution in relation to the continuation of
the Company as an investment trust will be proposed at the forthcoming AGM. The
Board believes that the region offers excellent value against both traditional
and many other emerging markets and this positive outlook together with the
Company's performance since BlackRock's appointment provide strong reasons for
shareholders to support continuation. In the period since 30 April 2009 when
BlackRock took over as Investment Manager, the Company's undiluted NAV has
increased by 103.0% in US dollar terms against the benchmark return of 99.2%.
The Board therefore recommends that shareholders vote in favour of the
continuation of the Company.

Discount control and tender offers

The Board seeks to manage the share price discount to NAV and is committed to
keep this below 10% in normal market conditions. The Board uses periodic tender
offers together with share buy backs as its discount management tools. In the
year to 31 January 2013 the discount to the NAV has averaged 9.25% and at the
date of this report is estimated at 11.6%.
In the July 2012 periodic tender offer, 3,464,053 ordinary shares were
repurchased by the Company for a total consideration of £9,022,000
(US$14,132,000) and transferred into treasury. In the January 2013 periodic
tender offer 3,183,118 ordinary shares were repurchased by the Company for a
total consideration of £9,558,000 (US$15,326,000) and also transferred into
treasury.
In addition to the tender offers 299,700 ordinary shares were purchased for
cancellation in the year for a total consideration of £748,000 (US$1,206,000)
(including costs). Since the year end a further 150,000 ordinary shares have
been bought back for cancellation at a total cost of £422,000 (US$628,000).
The Board periodically undertakes a thorough review of the Company's strategy
to ensure that its policies and plans are appropriate to today's markets and to
its shareholders' needs. Such a review is nearing completion and an
announcement will be made shortly.  A document setting out the Board's
proposals in full and its recommendations will be posted to shareholders in due
course. It is expected that these recommendations will include
modifications to the Company's investment policy  and to the discount control
mechanism to ensure a good fit with this revised strategy. Consideration is
also being given to the basis for the management fee.

2011 Subscription shares

During the year the Company issued a total of 16,159 ordinary shares, following
the conversion of 2011 subscription shares into ordinary shares, for total
proceeds of £58,000 (US$91,000). The subscription rights in respect of the
remaining 10,023,846 2011 subscription shares lapsed on 16 July 2012. The 2011
subscription shares continue to form part of the Company's share capital
however they have no voting rights (other than at a class meeting) and their listing
has been suspended until further notice. As set out below a class meeting will be
convened to enable the 2011 subscription shares and the listing to be cancelled.

2012 Subscription shares

A total of 8,546,454 2012 subscription shares were allotted to shareholders on
the Company's register on 26 July 2012, by way of a bonus issue, on the basis
of one subscription share for every five ordinary shares held at that date.

During the year the Company issued 13,426 ordinary shares following the conversion of 2012 subscription shares into ordinary shares for a total consideration of £37,000 (US$59,000).

2012 subscription shareholders may subscribe for all or any of the ordinary
shares to which the subscription shares relate on 2 April 2013 and 1 July 2013
at 273p per share. At the close of business on 21 March the Company's diluted NAV was
306.41p and the share price was 271.00p compared with the subscription share exercise
price of 273p per share.

The Retail Distribution Review

From 1 January 2013 the implementation of the Financial Services Authority's
Retail Distribution Review ("RDR") means that advisers have to charge their
clients for advice rather than receiving commissions from the funds in which
their clients invest. Investment trusts should now therefore be on a level
playing field with their open ended counterparts such as unit trusts. This
should further enhance the attraction of investment trusts which have the
ability to gear to enhance overall returns and are quoted companies which can
be readily traded on the stockmarket. In addition, as part of the FSA's
platform review, which will be implemented in 2014, open-ended funds are likely
to be placed on the same footing as investment trusts as it is proposed that
payments from funds to platforms are to be prohibited. Furthermore, we
anticipate that strongly performing investment trusts will see increased demand
from retail platforms and online brokers. We are actively looking to increase
our profile in this area.
Board of Directors
Following the conclusion of the Company's financial year Ed Warner retired as a
non-executive Director of the Company. We would like to thank Ed for his
outstanding contribution to the Company and we wish him the very best for the
future.
Annual General Meeting
The AGM will be held at 12 noon on 21 June 2013 at the offices of BlackRock at
12 Throgmorton Avenue, London EC2N 2DL. We hope that as many shareholders as
possible will attend. Following the AGM there will be a presentation by Sam
Vecht, the Portfolio Manager, on the Company's performance and the outlook for
the year ahead.

General Meeting and Class Meetings

A General Meeting has been convened and will take place following the
conclusion of the AGM. The Company will be seeking shareholder approval for the
redesignation of the outstanding 2011 subscription shares and the outstanding
2012 subscription shares (if any) as deferred shares following the possible
lapse of the 2012 subscription share rights on 1 July 2013 and the amendment of
the Company's Articles to remove all references to the subscription shares. The
purpose of the proposals is to enable the Company to continue to be in a
position to be approved as a UK investment trust. Separate class meetings for
both the 2011 subscription shares and the outstanding 2012 subscription shares
will also be held.
Outlook

Despite the global economic uncertainties that have contributed to subdued economic growth in the major developed economies and to slowing activities in emerging markets, the long term outlook for Eastern European equity markets looks very promising.

With the improving economic background in Turkey, Hungary and with the Russian
election now well out of the way, sentiment in the region is beginning to look
more positive. There are also many opportunities to invest in the region at
very attractive valuations. A number of companies in the Eastern European
region have started to pay attractive dividends, particularly in Russia where
the dividend yield is now above that of global emerging markets overall.
Neil England
Chairman
25 March 2013
Principal risks

The key risks faced by the Company are set out below. The Board regularly reviews and agrees policies for managing each risk, as summarised below:

u Performance risk - The Board is responsible for deciding the investment
policy to fulfil the Company's objectives and for monitoring the performance of
the Investment Manager and the strategy adopted. An inappropriate policy or
strategy may lead to poor performance, dissatisfied shareholders and a widening
discount. To manage these risks the Board regularly reviews the Company's
investment mandate and long term strategy. The Investment Manager provides an
explanation of significant stock selection decisions, the rationale for the
composition of the investment portfolio and movements in the level of gearing.
The Board monitors the maintenance of an adequate spread of investments in
order to minimise the risks associated with particular countries or factors
specific to particular sectors, based on the diversification requirements
inherent in the Company's investment policy. Past performance is not
necessarily a guide to future performance and the value of your investment in
the Company and the income from it can fluctuate as the value of the underlying
investments fluctuate.
u Regulatory risk - The Company operates as an investment trust in accordance
with Chapter 4 of Part 24 of the Corporation Tax Act 2010. As such, the Company
is exempt from capital gains tax on the profits realised from the sale of its
investments. The Investment Manager monitors investment movements and the
amount of retained income to ensure that the provisions of Chapter 4 of Part 24
of the Corporation Tax Act 2010 are not breached.
The Company must also comply with the provisions of the Companies Act 2006 and,
as its shares are admitted to the Official List, the UKLA Listing Rules, the
Disclosure and Transparency Rules and the Prospectus Rules. A breach of the
Companies Act 2006 could result in the Company and/or the Directors being fined
or the subject of criminal proceedings. A breach of the UKLA Listing Rules
could result in the Company's shares being suspended from listing, which in
turn would breach the requirements of Chapter 4 of Part 24 of the Corporation
Tax Act 2010. The Board relies on the services of its professional advisers and
its corporate Company Secretary, BlackRock Investment Management (UK) Limited
to ensure compliance with all relevant regulations. The Company Secretary has
stringent compliance procedures in place and monitors regulatory developments
and changes.
u Operational risk - In common with most other investment trust companies, the
Company has no employees. The Company therefore relies upon the services
provided by third parties and is dependent on the control systems of the
Investment Manager and the Company's other service providers. The security, for
example, of the Company's assets, dealing procedures, accounting records and
maintenance of regulatory and legal requirements, depend on the effective
operation of these systems. These have been regularly tested and monitored and
an internal controls report, which includes an assessment of risks together
with procedures to mitigate such risks, is prepared by the Investment Manager
and reviewed by the Audit Committee at least twice a year. BlackRock and the
custodian, Bank of New York Mellon (International) Limited ("BNYM"), also
produce annual and quarterly reports, respectively, which are reviewed by their
reporting accountants and give assurance regarding the effective operation of
controls. The Board also considers succession arrangements for key employees of
the Investment Manager and the business continuity arrangements for the
Company's key service providers.
u Market risk - Market risk arises from volatility in the prices of the
Company's investments. It represents the potential loss the Company might
suffer through realising investments in the face of negative market movements.
Developing and emerging markets tend to be more volatile than the more
established markets and therefore present a higher degree of risk. In addition
the securities markets of developing countries are not as large as the more
established securities markets and have substantially less trading volume,
which may result in a lack of liquidity and higher price volatility.
Accounting, auditing and financial reporting standards and practices and
disclosure requirements applicable to many companies in developing countries
are less rigorous. As a result there may be less information available publicly
to investors in such securities. Such information which is available is often
less reliable. The Board considers asset allocation, stock selection and levels
of gearing on a regular basis and has set investment restrictions and
guidelines which are monitored and reported on by the Investment Manager. The
Board monitors the implementation and results of the investment process with
the Investment Manager.

u Financial risks - The Company's investment activities expose it to a variety of financial risks which include foreign currency risk and interest rate risk. Further details are disclosed in note 20 of the Annual Report together with a summary of the policies for managing these risks.

u Third party risks - The Company has no employees and the Directors have all
been appointed on a non-executive basis. The Company must therefore rely upon
the performance of third party service providers to perform its executive
functions. In particular, the Investment Manager, the Administrator, the
Registrar, the Custodian and their respective delegates, if any, will perform
services that are integral to the Company's operations and financial performance.
The Company, and where appropriate the Investment Manager, undertake extensive due
diligence prior to the appointment of any third party service provider in order to
mitigate this risk. Terms of appointment are agreed in advance and service level
agreements are put in place with providers, other than the Investment Manager, to
ensure that a high level of service is provided. In the case of the Investment Manager,
service levels are defined in the Investment Management Agreement. Failure by any service
provider to carry out its obligations to the Company in accordance with the terms of its
appointment, to exercise due care and skill, or to perform its obligations to the Company
at all as a result of insolvency, bankruptcy or other causes could have a material
adverse effect on the Company's performance and returns to holders of ordinary
shares. The termination of the Company's relationship with any third party service provider
or any delay in appointing a replacement for such service provider, could materially disrupt
the business of the Company and could have a material adverse effect on the Company's performance
and returns to holders of ordinary shares.

Related party transactions

The Investment Manager is regarded as a related party under the Listing Rules
and details of the investment management and performance fees payable are set
out below.
BlackRock provides management and administration services to the Company under
a contract which is terminable by either party on giving not less than six
months' written notice. BlackRock receives an annual management fee of 0.8% of
the Company's market capitalisation plus a performance fee equal to 10.0% of
the geometric outperformance of the adjusted undiluted NAV per share annualised
on a three year rolling basis (on a US dollar total return basis) over the MSCI
EM Europe10-40 Index (on a US dollar total return basis) subject to a
cumulative high watermark relative to the benchmark. The amount of performance
fee payable in any one year will be capped at 0.95% of NAV or 10% of
cumulative outperformance since inception.

The investment management fee for the year charged by BlackRock was US$1,423,000 (2012: US$1,784,000). No performance fee has been accrued for the current year (2012: US$ nil). Further details are given in note 4.

At the year end, an amount of US$1,330,000 (2011: US$673,000) was outstanding in respect of these fees.

The Company may from time to time have a holding in BlackRock's Institutional
US dollar Liquidity Fund ("ILF"), a money market fund, which is viewed as a
readily realisable asset and which is used to invest cash balances that would
otherwise be placed on short term deposit. At the year end the Company had no
investment in the ILF (2012: US$ nil).
The Board consists of six non-executive Directors, all of whom are considered
to be independent by the Board. None of the Directors has a service contract
with the Company. The Chairman receives an annual fee of £37,000, the Chairman
of the Audit Committee receives an annual fee of £27,000 and each other Director
receives an annual fee of £23,500.
Five members of the Board hold ordinary and/or subscription shares in the
Company. Neil England holds 162,000 ordinary shares, 32,400 2012 subscription
shares and 32,400 2011 subscription shares, Robert Sheppard holds 10,000
ordinary shares and 2,000 2012 subscription shares, Rory Landman holds 12,000
ordinary shares, 2,400 2012 subscription shares and 2,400 2011 subscription
shares, Rachel Beagles owns 10,096 ordinary shares and 2,019, 2012 subscription
shares and Philippe Delpal owns 12,000 ordinary shares.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the annual report, the Directors'
Remuneration Report and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law). Under
company law the Directors must not approve the financial statements unless they
are satisfied that they give a true and fair view of the state of affairs of
the Company and of the net return or loss of the Company for that period. In
preparing these financial statements, the Directors are required to:

 select suitable accounting policies and then apply them consistently;

 make judgements and accounting estimates that are reasonable and prudent;

 state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the financial statements
respectively; and

 prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors have delegated responsibility to the Investment Manager for the
maintenance and the integrity of the Company's corporate and financial
information included on the Investment Manager's website. Legislation in the
United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.

Each of the Directors confirms that to the best of their knowledge:

 the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and net return of the Company; and

 the annual report includes a fair review of the development and performance
of the business and the position of the Company, together with a description of
the principal risks and uncertainties that it faces.
By order of the Board
Neil England
25 March 2013
Investment Manager's Report
Market overview
In the twelve months to 31 January 2013, global markets have vacillated between
the despair of the Eurozone crisis and a global economic slowdown, and the hope
that policy makers will be able to deploy the correct tools to allay investor
fears.
The period has generated a new lexicon of issues which captured investors'
imaginations only to fall from headlines just as quickly as they appeared. Many
of these issues were focused on Greek politics as it required three elections
to create a government. In that time, Alexis Tsipras, the leader of Greece's
main left-wing opposition party, Syriza, temporarily appeared to hold the fate
of the Eurozone project in his hands. Other issues included the likelihood of
an Israeli strike on Iran and the prospects of a `hard landing' for the Chinese
economy. While risks will always continue to surface, it does highlight the
dangers of relying on the 24 hour news cycle to discover what is important for
investors as many of these issues have now faded from view.
At the beginning of 2012, eyes were trained on the elections in Russia as
Vladimir Putin sought a return to the Presidency. Putin was duly elected with
64% of the vote. There were reports of irregularities and anti-Putin protests
in Moscow, where his support is much lower than in the regions. However,
despite doubts surrounding the electoral process, Putin remains the most
popular politician in Russia and the popular legitimacy of his position is not
in doubt.
In Russia, there were a series of positive announcements during 2012. Russia
finally acceded to the WTO after nearly two decades of negotiations. As part of
a new economic policy program, Russian ministers announced proposals to
increase the dividends paid by state-controlled companies. Practical progress
has already been made; Gazprom, for instance, has doubled its dividend
year-on-year. Private companies such as LUKoil have followed the example,
increasing its dividend payout by 25% this year. For the first time Russia has
a dividend yield above that of global emerging markets and further progress is
possible.
Turkey has been the strongest performer over the year. The Turkish economy
performed well during the financial crisis but subsequently, throughout 2011,
suffered from a persistently high current account deficit which had a negative
impact on the currency, inflation and the bond markets. However, with growth
cooling throughout 2012, the deficit started to close as import substitution
took effect, and that improved balance in the economy has been positive for
further sustainable economic growth and supportive of equity valuations.
Turkey's strong performance was led by the financial sector as funding
pressures eased and profit margins expanded.
Performance in Hungary was volatile over the year as uncertainty increased due
to Prime Minister Oban's particular brand of brinkmanship which has reduced the
likelihood of an agreement being struck to seek support from the IMF and the
European Union in alleviating budgetary pressures.

Hungary ultimately performed well as improvement in sentiment surrounding the Eurozone crisis proved positive for risk assets across Europe.

Portfolio overview

In the year to 31 January 2013, the Company's NAV returned 13.3%,
underperforming the MSCI EM Europe 10-40 Index by 2.0% (all percentages in US
dollar terms with income reinvested). Clearly, relative performance over the
year has been disappointing. Some of this has been caused by poor stock
selection, but much can be attributed to the performance of already expensive
stocks that we do not own. As long term investors who focus on allocating
capital efficiently, we believe that it is not in the Company's interests to
buy a series of companies at the wrong valuation. The long term track record in
emerging markets of momentum strategies and `theme'-led approaches has been
unexciting.
Stock selection in Turkey contributed positively to performance over the year.
A better than expected earnings season from Turkish banks buoyed the markets as
a fall in market interest rates was supportive for Net Interest Margin
expansion and gains on securities. The position in Halk Bank was the largest
individual contributor to performance.

Allocations to Hungary were also positive. The key driver of markets, particularly in the second half of the year, was the fact that emerging European stocks were exceptionally cheap, universally disliked and widely misunderstood. As such, minor changes in sentiment were able to have a meaningful impact on prices.

The biggest single detractor from performance was Kazakhstan's mining company,
Eurasian Natural Resources Company ("ENRC"), which fell on concerns surrounding
the future pricing of ferrochrome and iron ore as materials demand weakened,
particularly from China. Performance also suffered through an underweight
position in Russian supermarket chain, Magnit. Although the stock trades on
over 20x price to earnings, in comparison to just over 5x for the broader
Russian market, the company's ability to raise margins back to peak levels
was
rewarded.
Market Outlook
Russian and Eastern European markets have significant long term structural
advantages. They benefit from flexible and dynamic economies with undervalued
currencies and educated and skilled workforces, allowing the countries of the
region to remain competitive in a globalised market. That said, the region has
not been immune from sentiment stemming from the problems which have beset the
Eurozone. Action from the ECB has reduced systemic financial risk and that has
been positive for all risk assets.
In Russia, the announcement that state-owned companies will return a target 25%
of profits to shareholders through dividends is positive. Private companies
have also followed suit, bringing dividend yields in Russia above global
emerging market averages of circa 4% for the first time. In addition, buyback
programs from companies across Russia and CIS have exceeded US$10 billion,
demonstrating that companies see value in their own capital.

Elsewhere, macroeconomic conditions in Turkey have improved and Hungary has accessed international bond markets for the first time in twenty months to underpin the country's fiscal position.

Although we still see upside for the region, we remain mindful of the risks which could potentially emanate from three places; US, Europe or China.

The fortunes of global markets are still tied to varying degrees to the fate of
the US recovery which, although bumpy, is underway as reflected in a housing
market which is slowly returning to health. A fragile recovery, by definition,
could be blown off course and that is a risk for all markets, not just those of
emerging Europe.
A slowdown in China will affect the demand for commodities, the prices of which
impact sentiment surrounding Russia, although this will be positive for Turkey
and central Europe, commodity importers.
While recent measures to stabilise the Eurozone have been positive, any
deterioration in the crisis will have implications for emerging Europe despite
their clear contrast to the economies of peripheral Europe. It is important to
remember that the economies of emerging European markets typically have lower
government budget deficits and lower debt burdens.

Despite the attendant risks, valuations are still attractive and many of these risks remain reflected (and more) in the price. The long term outlook for emerging Europe looks bright.

Sam Vecht
BlackRock Investment Management (UK) Limited
25 March 2013

Performance Attribution

for the year ended 31 January 2013

                        Contribution to return against
                                the benchmark(1)
Country        Stocks  Allocation         Stock    Total  Commentary
                 Held      Effect     Selection   Effect
               During                         &
                  the               Interaction
               Period
Turkey             20       (0.7)           2.2     1.5  Overweight positions in banking
               ------      ------        ------  ------  stocks contributed to
                                                         performance with Halk Bank and
                                                         Garanti Bank the largest
                                                         individual contributors.
                                                         Although the official policy
                                                         rate in Turkey was changed a
                                                         little in 2012, the Central Bank
                                                         embarked on a significant easing
                                                         cycle, reducing the overnight
                                                         rate from 11% to 5%, over the
                                                         course of the year through repo
                                                         operations.  This easing
                                                         resulted in a growth pick-up and
                                                         generally strong earnings
                                                         performance for Turkish banks,
                                                         as they benefited from bond
                                                         gains and expanding Net Interest
                                                         Margins.  Halk Bank recorded a
                                                         30% increase in net profit in
                                                         2012, against market
                                                         expectations of a flat net
                                                         profit at the beginning of the
                                                         year.
Central &          21        (0.8)         1.4      0.6  Detracting from performance was
Eastern Europe  -----       ------      ------    -----  an underweight position in
                                                         Poland. Despite the problems
Poland             13        (0.4)         0.7      0.3  besetting the Polish economy,
Czech Republic      5        (0.5)         0.5        -  the stock market has performed
Hungary             3         0.1          0.2      0.3  well as many investors searching
                                                         for perceived defensive stocks
                                                         have crowded in the large cap
                                                         constituents of the WIG despite
                                                         a declining earnings outlook.
                                                         The Company remains underweight
                                                         Polish stocks. At the beginning
                                                         of the year, investors were
                                                         concerned that problems in the
                                                         Eurozone would spread to the
                                                         financial systems of peripheral
                                                         Europe. As those concerns
                                                         abated, risk assets rallied
                                                         strongly across Europe,
                                                         including in Hungary with the
                                                         country's largest bank, OTP, a
                                                         notable outperformer.
Russia & CIS       44        (1.0)        (3.4)    (4.4) The relative performance of
                -----       ------       ------   -----  Russia in 2012 has been
                                                         disappointing. Some of this has
Russia             38        (0.3)        (2.8)    (3.1) been caused by poor stock
Ukraine             3         0.1         (0.6)    (0.5) selection, but much can be
Kazakhstan          2        (0.9)           -     (0.9) attributed to the valuations of
Turkmenistan        1         0.1            -      0.1  already expensive stocks
                                                         becoming ever more stretched.
                                                         For example, Russian supermarket
                                                         chain, Magnit, trades on 20x
                                                         price to earnings but was able
                                                         to maintain this valuation as
                                                         investors crowded into the stock
                                                         as the company returned to peak
                                                         margins.
Regional            1         0.1            -      0.1  Austrian bank Raiffeisen
growth          ------     ------      -------    -----  contributed positively to
                                                         performance. Developments in the
                                                         Eurozone to stabilise the
                                                         banking sector have led to a
                                                         normalisation of financial risk
                                                         and the bank, which has
                                                         extensive operations throughout
                                                         Eastern Europe, will be a
                                                         beneficiary of improving
                                                         sentiment.
Cash/gearing         -          -            -     (0.2)
                 -----   --------     --------     -----  --------
Other factors                   -            -       0.4
                -----    --------     --------     -----  --------
Management fee                                     (0.7)
Other                                               1.0  Other includes the impact of the
                                                         tender offer, the conversion of
                                                         subscription shares, operating
                                                         expenses, taxation and finance
                                                         charges.
                -----    --------     --------    -----   --------
Total                                              (2.0)
                -----    --------      --------   -----
                                                                                         
(1) Due to the limitations of a static attribution methodology, the numbers
quoted are indicative and not exact.                                       

Ten Largest Equity Investments

Sberbank - 11.7% (2012: 8.2%) is Russia's largest state-owned bank. It has
branches throughout the country and a 50% share of the retail deposit market.
The bank continues to develop its restructuring strategy that has driven much
of its success over the past few years, improving its services and the
efficiency with which they are delivered. In September 2012, a widely
anticipated secondary public offering was announced, removing the stock
overhang.
Gazprom - 9.0% (2012: 8.4%) is Russia's largest gas producer and transporter,
with an export monopoly. The company has experienced mixed fortunes over the
past year. The company has enjoyed continued improvement in domestic gas tariffs.
However it did have to make incremental concessions on gas export pricing as gas
spot rates stayed low relative to contract prices. Gazprom increased its dividend
in 2012, more than doubling the cash amount received by shareholders in 2011, which
is a positive step for corporate governance. However, capital expenditures were
disappointingly raised beyond expectations in the latter part of the year.
Garanti Bank - 5.4% (2012: 5.5%) is Turkey's second largest private bank.
Garanti Bank performed strongly during the year as concerns on the Turkish
macro-economic outlook abated.  This led to a multiple expansion from an almost
trough Price to Book Ratio of 1x at the beginning of the year to 1.7x by the
end of the year.  The current multiple is more in line with its historical
average and reflective of the sustainable returns that the bank can generate.

MTS - 4.9% (2012: 2.8%) is the leading telecommunications group in Russia, offering mobile and fixed voice, broadband, pay TV as well as content and entertainment services. The competitive environment improved over the course of the year as operators scaled back promotions. This led to an expansion in profit margins and strong earnings growth.

Surgutneftegaz (preference shares) - 4.0% (2012: 4.2%) is a Russian oil and gas
producer which accounts for almost 13% of the country's crude output and 25% of
gas produced by domestic oil companies. Surgutneftegaz is the most cash
generative of the major Russian oil producers and the preference shares, in
which the company invests, pay a higher dividend than ordinary shares.

Komercni Banka - 3.8% (2012: 2.6%) is the largest listed bank in the Czech Republic with 1.6 million customers, served by nearly 400 branches. Developments in the Eurozone to stabilize the banking sector have led to a normalization of financial risk and the bank will be a beneficiary of improving sentiment.

Mail.Ru - 3.6% (2012: 1.7%) is the largest internet company in the Russian-speaking world, focusing on social networks. During 2012, the company announced a special dividend, funded from the partial sale of the stake in Facebook, which provided an 11.5% dividend yield.

PKO Bank Polski - 3.0% (2012: nil) is Poland's largest bank. At the year end, the company placed €1.2 billion of stock, removing a 12% overhang for the stock.

Turkcell - 3.0% (2012: 2.0%) is the leading mobile phone operator in Turkey,
with circa 35 million subscribers. The stock pays an attractive dividend yield,
stands on a low valuation and there is substantial scope for growth through
increasing data usage. Since the year-end, the company has announced increased
year-on-year profits, which exceeded market expectations.

LUKoil - 2.9% (2012: 8.1%) is the second largest Russian oil company. The company has successfully implemented a recovery in production at existing facilities due to improved drilling techniques. LUKoil will continue to invest in more complex drilling technology in order to return the company to growth.

All investments reflect the value of the holding as a percentage of net assets.
Percentages in brackets represents the value of the holding at 31 January 2012.
Together, the ten largest investments represents 51.3% of net assets (ten
largest investments as at 31 January 2012: 43.5%).

Top 5 and Bottom 5 contributors to relative performance

Top 5 Positive Contributors
Halk Bank (total effect on relative performance 0.8%). Halk Bank performed well
as part of margin expansion across the banking sector as funding pressures
eased.

Rostelecom (total effect on relative performance 0.6%) is the state telecommunications company in Russia. It is the major player in the fixed telephony market and also has a mobile presence. The portfolio remained underweight in the stock as it was more expensive than the private mobile operators, who have higher growth, generate higher cash flow yields and return more money to shareholders through dividends.

Garanti Bank (total effect on relative performance 0.6%) was a beneficiary of improving macroeconomic conditions in Turkey which, in conjunction with loosening of monetary conditions, was extremely positive for margin expansion.

VTB Bank (total effect on relative performance 0.5%) the company remained
underweight in Russia's second largest Bank, VTB, over the year. The bank was
low on capital and the announcement of a secondary placing offer (SPO) of
US$2 billion came shortly after Russian peer, Sberbank had completed its own
SPO of US$5.1 billion.
Telekomunikacja Polska (total effect on relative performance 0.4%) the
Company's underweight position in Poland's former telephone monopoly
contributed positively to relative returns over the year. In an environment of
increased competition, the stock which has long been regarded by investors as a
`safe' dividend stock, announced that the dividend would be halved, leading to
a 30% fall in the share price.

Top 5 Negative Contributors

ENRC (total effect on relative performance -1.2%) the biggest single detractor from performance over the year was Kazakhstan's mining company, ENRC, which fell on concerns surrounding future pricing of ferrochrome and iron ore as materials demand weakened.

Magnit (total effect on relative performance -0.8%) the Company's performance
also suffered from an underweight position in Russian supermarket chain,
Magnit. The stock trades on over 20x price to earnings, in comparison to just
over 5x for the broader Russian market. However, a successful expansion plan
and margins returning to peak levels drove the share price higher over the
year.
Gazprom (total effect on relative performance -0.7%) Russian oil and gas
producer, Gazprom, failed to take part in the general market rally, following
unresolved concerns surrounding long term gas contract pricing, which remained
under pressure due to weak demand and competition from coal imports.
JKX (total effect on relative performance -0.6%) Ukrainian energy stock, JKX,
experienced severe delays to its new Russian project whilst production in the
mature Ukrainian fields continued to decline.
Federal Grid (total effect on relative performance -0.6%) a Russian utility,
Federal Grid's share price suffered on proposals to reorganise state
electricity grid holdings and an increase in tariffs which were below market
expectations. The holding was sold before the year end.
Portfolio Analysis
31 January 2013
                                                                              Net                             MSCI
              Czech  Russia  Poland  Hungary  Kazakhstan  Turkey  Other   current        %        %             EM
           Republic                                                       assets/      net      net         Europe
                                                                    

(liabilities) assets assets 10-40

31.01.13 31.01.12 Index 31.01.13

Consumer
Discretionary    0.5      -       -        -           -       -      -         -      0.5      0.5            1.1
Consumer Staples  -     3.6       -        -           -     1.7    1.1         -      6.4      2.0            6.2
Energy            -    26.5     0.2      1.8         1.4       -    1.5         -     31.4     39.9           34.9
Financials       3.8   11.7     4.2      2.9           -    12.2    1.4         -     36.2     27.6           31.8
Healthcare        -     1.7       -      2.3           -       -      -         -      4.0      1.9              -
Industrials       -     4.0       -        -           -       -      -         -      4.0      1.3            2.1
Information
Technology        -     3.6       -        -           -       -      -         -      3.6      2.1            0.3
Materials         -     5.8    (0.9)       -         1.0     1.5      -         -      7.4      8.1            9.7
Telecommunications
Services          -     7.9     0.1        -           -     3.0      -         -     11.0      8.3            8.6
Utilities       1.5       -       -        -           -       -      -         -      1.5      6.3            5.3
Other             -       -     3.0        -           -       -      -      (9.0)    (6.0)     2.0              -
% net assets
31.01.13        5.8    64.8     6.6      7.0         2.4    18.4    4.0      (9.0)   100.0                       -
% net assets
31.01.12        9.3    53.2    10.3      4.5         3.9    14.6    2.2       2.0        -     100.0             -
MSCI EM Europe
10-40 Index
31.01.13        2.7    59.1    15.3      2.5           -    20.4      -         -        -         -         100.0
The table above shows the analysis of the net assets as at 31 January 2013 by
sector and region, compared with the net assets as at 31 January 2012 and the
MSCI EM Europe 10-40 Index breakdown as at 31 January 2013.
Investments
as at 31 January 2013
                                  Principal       Long      Short        Net          %
                                    country   exposure   exposure   exposure         of
                                         of    US$'000    US$'000    US$'000        net
                                  operation                                      assets
Financials
Sberbank                             Russia     23,098                23,098       11.7
Garanti Bank                         Turkey     10,611                10,611        5.4
Komercni Banka               Czech Republic      7,545                 7,545        3.8
PKO Bank Polski                      Poland      5,894                 5,894        3.0
OTP Bank                            Hungary      5,709                 5,709        2.9
Turkiye Is Bank                      Turkey      4,727                 4,727        2.4
Halk Bank                            Turkey      3,590                 3,590        1.8
Sinpas GYO                           Turkey      2,865                 2,865        1.4
Raiffeisen Bank                     Austria      2,856                 2,856        1.4
TSKB                                 Turkey      2,387                 2,387        1.2
PZU                                  Poland      2,353                 2,353        1.2
                                              --------   --------   --------   --------
                                                71,635          -     71,635       36.2
                                              --------   --------   --------   --------
Energy
Gazprom                              Russia     17,912                17,912        9.0
Surgutneftegaz (preference shares)   Russia      7,874                 7,874        4.0
LUKoil                               Russia      5,844                 5,844        2.9
Transneft                            Russia      4,703                 4,703        2.4
Novatek                              Russia      4,173                 4,173        2.1
TNK-BP                               Russia      3,987                 3,987        2.0
Volga Gas                            Russia      3,945                 3,945        2.0
MOL                                 Hungary      3,578                 3,578        1.8
Rushydro                             Russia      3,162                 3,162        1.6
Dragon Oil                     Turkmenistan      2,771                 2,771        1.4
KazMunaiGas EP                   Kazakhstan      2,700                 2,700        1.4
Rosneft                              Russia        957                   957        0.5
JKX                                 Ukraine        228                   228        0.1
Long CFD position - 3Legs Resources  Poland        334                   334        0.2
                                              --------   --------   --------   --------
                                                62,168          -     62,168       31.4
                                              --------   --------   --------   --------
Telecommunications Services
MTS                                  Russia      9,731                 9,731        4.9
Turkcell                             Turkey      5,882                 5,882        3.0
Vimpelcom                            Russia      4,599                 4,599        2.3
Rostelecom                           Russia      1,447                 1,447        0.7
Telekomunikacja Polska               Poland        189                   189        0.1
                                              --------   --------   --------   --------
                                                21,848          -     21,848       11.0
                                              --------   --------   --------   --------
Materials
MMC Norilsk Nickel                   Russia      3,314                 3,314        1.7
Koza Altin                           Turkey      3,080                 3,080        1.5
Rusal                                Russia      2,921                 2,921        1.5
Uralkali                             Russia      1,997                 1,997        1.0
ENRC                             Kazakhstan      1,990                 1,990        1.0
Highland Gold Mining                 Russia      1,705                 1,705        0.9
Severstal                            Russia      1,454                 1,454        0.7
Short CFD position                   Poland          -     (1,866)    (1,866)      (0.9)
                                              --------   --------   --------   --------
                                                16,461     (1,866)    14,595        7.4
                                              --------   --------   --------   --------
Consumer Staples
Magnit                               Russia      5,163                 5,163        2.6
BIM                                  Turkey      3,133                 3,133        1.6
MHP                                 Ukraine      2,062                 2,062        1.1
Dixy                                 Russia      2,017                 2,017        1.0
Anadolu Efes                         Turkey        239                   239        0.1
                                              --------   --------   --------   --------
                                                12,614          -     12,614        6.4
                                              --------   --------   --------   --------
Healthcare
Gideon Richter                      Hungary      4,705                 4,705        2.3
MD Medical Group                     Russia      3,315                 3,315        1.7
                                              --------   --------   --------   --------
                                                 8,020          -      8,020        4.0
                                              --------   --------   --------   --------
Industrials
HMS Group                            Russia      4,052                 4,052        2.0
NCSP                                 Russia      3,953                 3,953        2.0
                                              --------   --------   --------   --------
                                                 8,005          -      8,005        4.0
                                              --------   --------   --------   --------
Information Technology
Mail.Ru                              Russia      7,194                 7,194        3.6
                                              --------   --------   --------   --------
                                                 7,194          -      7,194        3.6
                                              --------   --------   --------   --------
Utilities
CEZ                          Czech Republic      2,926                 2,926        1.5
                                              --------   --------   --------   --------
                                                 2,926          -      2,926        1.5
                                              --------   --------   --------   --------
Consumer Discretionary
Central European Media       Czech Republic        930                   930        0.5
                                              --------   --------   --------   --------
                                                   930          -        930        0.5
                                              --------   --------   --------   --------
Other
Long CFD position - Midwig           Poland      5,919                 5,919        3.0
                                              --------   --------   --------   --------
                                                 5,919          -      5,919        3.0
                                              --------   --------   --------   --------
Total investments - gross exposure             217,720     (1,866)   

215,854 109.0

                                              ========   ========   ========   ========
Add back: gross exposure on CFDs               (6,253)     1,866     (4,387)      (2.2)
                                              ========   ========   ========   ========
Equity investments held at fair value          211,467          -    211,467      106.8
Net current liabilities                        (13,494)         -    (13,494)      (6.8)
Preference shares                                  (19)         -        (19)      (0.0)
                                               --------   --------   --------   --------
Net assets                                     197,954          -    197,954      100.0
                                               ========   ========   ========   ========
Long positions                                 217,720                            110.0
Short position                                   1,866                              0.9
                                              ========                         ========
Gross positions                                219,586                            110.9
                                              ========                         ========
The total number of investments (excluding CFD positions) held at 31 January
2013 was 48 (31 January 2012: 48). All investments are in equity shares unless
otherwise stated. At 31 January 2013, the Company did not hold any equity
interests comprising more than 3% of any company's share capital other than Volga
Gas PLC in which the Company held an interest of 3.35%.
During the year, the Company entered CFDs to gain long and short exposure on
individual securities. At the year end, 1 (2012: 6) short CFD was outstanding
with a net fair value profit of US$21,000 (2012: loss of US$1,599,000); and an
underlying market value of US$1,866,000 (2012: US$13,545,000). In addition, 2
long CFD positions were held (2012: 2) with a net fair value profit of
US$492,000 (2012: loss of US$1,173,000 and an underlying market value of
US$6,253,000 (2012: US$2,518,000).
Ten Largest Investments
Security                       Principal
                                 country                                    2013                   2012
                                      of                              Market          %     Market          %
                               operation                               value         of      value         of
                                                           Sector    US$'000        net    US$'000        net
                                                                                 assets                assets
Sberbank                          Russia               Financials     23,098       11.7     16,798        8.2
Gazprom                           Russia                   Energy     17,912        9.0     17,171        8.4
Garanti Bank                      Turkey               Financials     10,611        5.4     11,395        5.5
MTS                               Russia       Telecommunications      9,731        4.9      5,786        2.8
Surgutneftegaz (preference shares)Russia                   Energy      7,874        4.0      8,714        4.2
Komercni Banka            Czech Republic               Financials      7,545        3.8      5,459        2.6
Mail.Ru                           Russia   Information Technology      7,194        3.6      3,471        1.7
PKO Bank Polski                   Poland               Financials      5,894        3.0          -          -
Turkcell                          Turkey       Telecommunications      5,882        3.0      4,154        2.0
LUKoil                            Russia                   Energy      5,844        2.9     16,620        8.1
Income Statement

for the year ended 31 January 2013

                      Notes    Revenue    Revenue    Capital    Capital      Total      Total
                                  2013       2012       2013       2012       2013       2012
                               US$'000    US$'000    US$'000    US$'000    US$'000    US$'000
Gains/(losses) on
investments held at
fair value through
profit or loss                       -          -     19,113    (63,754)    19,113    (63,754)
Exchange (losses)/
gains                                -          -       (260)         3      (260)          3
Net returns on
contracts for
difference                        (389)      (965)      1,002      3,540      613       2,575
Income from
investments held at
fair value through
profit or loss            3      7,425      5,333          -          -      7,425      5,333

Interest receiveable      3          1          7          -          -          1          7
Investment management
and performance fees      4     (1,423)    (1,784)         -      1,674     (1,423)      (110)
Other operating
expenses                  5     (1,076)      (929)       (76)      (168)    (1,152)    (1,097)
                              --------   --------   --------   --------   --------   --------
Net return/(loss)
before finance costs
and taxation                     4,538      1,662     19,779    (58,705)    24,317    (57,043)
Finance costs                     (107)       (52)         -          -       (107)       (52)
                              --------   --------   --------   --------   --------   --------
Net return/(loss) on
ordinary activities
before taxation                  4,431      1,610     19,779    (58,705)    24,210    (57,095)
Taxation charges                  (998)      (691)         -          -       (998)      (691)
                              --------   --------   --------   --------   --------   --------
Net return/(loss) on
ordinary activities
after taxation                   3,433        919     19,779    (58,705)    23,212    (57,786)
                              ========   ========   ========   ========   ========   ========
Return/(loss) per
ordinary share -
basic and diluted
(cents)                   7       7.77       1.87      44.75    (119.62)     52.52    (117.75)
                              ========   ========   ========   ========   ========   ========

The total column of this statement represents the Income Statement of the Company.

The supplementary revenue and capital columns are both prepared under guidance
published by the Association of Investment Companies ("AIC"). The Company had
no recognised gains or losses other than those disclosed in the Income
Statement and the Reconciliation of Movements in Shareholders' Funds. All items
in the above statement derive from continuing operations. All income is
attributable to the equity holders of The Eastern European Trust PLC.
There is no material difference between the profit on ordinary activities before
taxation and the profit for the financial year stated above and their historical
costs equivalents.

Reconciliation of Movements in Shareholders' Funds

                                       Called      Share     Capital    Capital    Revenue      Total
                                           up    premium  redemption   reserves    reserve    US$'000
                                        share    account     reserve    US$'000    US$'000
                                      capital    US$'000     US$'000
                                      US$'000
For the year ended 31
January 2013
At 1 February 2012                      5,409     41,259       4,519    177,190    (22,857)   205,520
Net return for the year                     -          -           -     19,779      3,433     23,212
Shares purchased and held in treasury    (775)         -         775    (29,458)         -    (29,458)
Shares purchased and cancelled            (30)         -          30     (1,206)         -     (1,206)
Subscription shares issue costs            85          -           -       (349)         -       (264)
Conversion of subscription shares           3        147           -          -          -        150
                                     --------   --------    --------   --------   --------   --------
 At 31 January 2013                     4,692     41,406       5,324    165,956    (19,424)   197,954
                                     --------   --------    --------   --------   --------   --------
For the year ended 31
January 2012
At 1 February 2011                      5,401      3,849       3,714    293,786    (23,776)   282,974
Net (loss)/return for the year              -          -           -    

(58,705) 919 (57,786)

Repurchase and
cancellation of
subscription shares                      (11)          -          11       (292)         -       (292)
Shares purchased and
held in treasury                         (781)         -         781   

(56,554) - (56,554)

Shares purchased and
cancelled                                 (13)         -          13       (653)         -       (653)
Subscription shares
issue costs                               101          -           -       (392)         -       (291)
Conversion of
subscription shares                       712     37,410           -          -          -     38,122
                                     --------   --------    --------   --------   --------   --------
At 31 January 2012                      5,409     41,259       4,519    177,190    (22,857)   205,520
                                     --------   --------    --------   --------   --------   --------
Balance Sheet
as at 31 January 2013                                Notes       2013       2012
                                                              US$'000    US$'000
Fixed assets
Investments held at fair value through profit or loss         211,467    212,395
                                                             --------   --------
Current assets
Debtors                                                         2,668      3,266 
Amounts due in respect of contracts for difference                530      
  42
Cash at bank and in hand                                            1      3,001
                                                             --------   --------
                                                                3,199      6,309
                                                             --------   --------
Creditors - amounts falling due within one year               (16,676)   

(10,351)

Amounts due in respect of contracts for difference                (17)    (2,814)
                                                              --------   --------
                                                              (16,693)   (13,165)
                                                             --------   --------
Net current liabilities                                       (13,494)    (6,856)
                                                             --------   --------
Total assets less current liabilities                         197,973    205,539
Creditors - amounts falling due after more than one year         (19)      
 (19)
                                                             --------   --------
Net assets                                                     197,954   205,520
                                                              ========   ========
Capital and reserves
Called up share capital                              8          4,692      5,409
Share premium account                                9         41,406     41,259
Capital redemption reserve                           9          5,324      4,519
Capital reserves                                     9        165,956    177,190
Revenue reserve                                     10        (19,424)   (22,857)
                                                             --------   --------
Total equity shareholders' funds                              197,954    

205,520

                                                             ========   

======== Net asset value per ordinary share (cents) - basic 7 504.17 445.03

                                                             ========   

======== Net asset value per ordinary share (cents) - diluted 7 491.43 445.03

                                                             ========   

========

The financial statements were approved and authorised for issue by the Board of Directors on 25 March 2013 and signed on its behalf by Neil England, Chairman.

The Eastern European Trust PLC

Registered number 02984526

Cash Flow Statement

for year ended 31 January 2013

                                                     Notes       2013       2012
                                                              US$'000    US$'000
                                                                                 

Net cash inflow/(outflow) from operating activities 5(b) 5,552 (195) Returns on investment and servicing of finance

Overdraft interest                                               (107)       (52)
CFD financing interest                                           (193)      (276)
                                                             --------   --------
                                                                 (300)      (328)
Taxation paid                                                  (1,072)      (796)
                                                             --------   --------
                                                                                 
Capital expenditure and financial investment                               
Purchase of investments                                      (218,622)  (318,341)
Proceeds from sale of investments                             236,078    

335,295

                                                             --------   --------
Net cash inflow from capital expenditure and
financial investment                                           17,456     16,954
                                                             --------   --------
Net cash inflow before financing                               21,636     15,635
                                                             --------   --------
Financing
Repurchase of shares into treasury                            (30,596)   

(37,148)

Repurchase of subscription shares                                   -      

(292)

Proceeds from conversion of subscription shares                   150     38,122
Subscription share issue costs paid                                 -      

(283)

                                                              --------   --------
Net cash (outflow)/inflow from financing                      (30,446)     

399

                                                             --------   --------
(Decrease)/increase in cash in the year                        (8,810)    

16,034

                                                             ========   

========

Notes to the Financial Statements

1. Principal activities

The principal activity of the Company is that of an investment trust company within the meaning of section 1158 of the Corporation Tax Act 2010.

2. Accounting policies

(a) Basis of preparation

The Company's financial statements have been prepared on a going concern basis
and on the historical cost basis of accounting, modified to include the
revaluation of fixed asset investments and derivatives at fair value through
profit or loss in accordance with the Companies Act 2006, applicable accounting
standards in the United Kingdom ("UK GAAP") and with the Statement of
Recommended Practice `Financial Statements of investment trust companies' and
venture capital trusts ("SORP"), revised in January 2009. The principal
accounting policies adopted by the Company are set out below. The policies have
been applied consistently throughout the year and are consistent with those
applied in the preceding year. All of the Company's operations are of a
continuing nature.

The Company's financial statements are presented in US dollars, which is the functional and presentational currency of the Company. The US dollar is the functional currency because it is the currency most closely related to the primary economic environment in which the Company invests. All values are rounded to the nearest thousand dollars (US$'000) except where otherwise indicated.

(b) Presentation of the Income Statement

In order to reflect better the activities of an investment trust company and in
accordance with guidance issued by the Association of Investment Companies
("AIC"), supplementary information which analyses the Income Statement between
items of a revenue and a capital nature has been presented alongside the Income
Statement.
(c) Segmental reporting

The Directors are of the opinion that the Company is engaged in a single segment of business being investment business.

(d) Income

Dividends receivable (including, where appropriate, overseas withholding taxes)
on equity shares are treated as revenue for the year on an ex-dividend basis.
Where no ex-dividend date is available, dividends receivable on or before the
year end are treated as revenue for the year. Provisions are made for dividends
not expected to be received. The return on a debt security is recognised on a
time apportionment basis so as to reflect the effective yield on the debt
security.

Special dividends, if any, are treated as a capital receipt or a revenue receipt depending on the facts or circumstances of each particular case.

Interest income is accounted for on an accruals basis.

Where the Company has elected to receive its dividends in the form of
additional shares rather than in cash, the amount of the cash dividend foregone
is recognised as income. Any excess in the value of the shares received over
the amount of the cash dividend foregone is recognised in capital reserves.

(e) Expenses

All expenses are accounted for on an accruals basis. Expenses which are
incidental to the acquisition of an investment are charged to the capital
column of the Income Statement. Expenses incurred on the sale of investments
are deducted from the proceeds of the sale of the investments. Fees payable to
the Investment Manager are charged to the revenue column of the Income
Statement except for performance fees which are charged to the capital column
of the Income Statement to the extent that performance is generated through
capital returns from the investment portfolio.

Transaction charges in relation to the purchase and sale of investments are charged to the capital column of the Income Statement.

(f) Finance costs

Finance costs are accounted for on an accruals basis in the revenue column of the Income Statement using the effective interest rate method.

(g) Taxation

The current tax effect of different items of expenditure is allocated between
capital and revenue on the marginal basis using the Company's effective rate of
corporation taxation for the accounting period.
Deferred tax is recognised in respect of all timing differences at the balance
sheet date, where transactions or events that result in an obligation to pay
more tax in the future or right to pay less tax in the future have occurred at
the balance sheet date. Deferred tax assets are recognised only when, on the
basis of available evidence, it is more likely than not that there will be
taxable profits in the future against which the deferred tax asset can be
offset. Deferred tax assets and liabilities are not discounted to reflect the
time value of money. Deferred tax is provided at the amount expected to be paid
/recovered using the tax rates and laws which have been enacted or
substantially enacted at the balance sheet date.

(h) Investments held at fair value through profit or loss

The Company's investments (fixed assets and current assets) are classified as held at fair value through profit or loss in accordance with FRS 26 - `Financial Instruments: Recognition and Measurement' and are managed and evaluated on a fair value basis in accordance with its investment strategy.

All investments are designated upon initial recognition as held at fair value
through profit or loss. Sales of assets are recognised at the trade date of the
disposal. Proceeds will be measured at fair value which will be regarded as the
proceeds of sale less any transaction costs.
The fair value of the financial investments is based on their quoted bid price
at the balance sheet date on the exchange on which the investment is quoted,
without deduction for the estimated future selling costs.
Changes in the value of investments held at fair value through profit or loss
and gains and losses on disposal are recognised in the capital column of the
Income Statement as "gains or losses on investments held at fair value through
profit or loss". Also included within this heading are transaction costs in
relation to the purchase or sale of investments.
In order to improve the disclosure of how companies measure the fair value of
their financial investments, the disclosure requirements in FRS 29 - `Financial
Instruments: Disclosures' have been extended to include a fair value hierarchy.
The fair value hierarchy consists of the following three levels:

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability

Level 3 - inputs for the asset or liability that are not based on observable market data

Fair values for unquoted investments, or investments for which the market is
inactive, are established by using various valuation techniques. These may
include recent arm's length market transactions or the current fair value of
another instrument which is substantially the same. Where no reliable fair
value can be estimated for such instruments, they are carried at cost subject
to any provision for impairment.

(i) Valuation of derivative financial instruments

Derivatives are initially accounted and measured at fair value on the date the
derivative contract is entered into and subsequently measured at fair value.
The gain or loss on re-measurement is taken to the Income Statement. The
sources of the return under the derivative contract (e.g. notional dividends,
financing costs, interest returns and capital charges) are allocated to the
revenue and capital columns of the Income Statement in alignment with the
nature of the underlying source of income and in accordance with the guidance
given in the AIC SORP.
(j) Preference shares

The Company's preference shares are classified as a liability under Financial Reporting Standard 25: "Financial Instruments: Disclosure and Presentation".

(k) Dividends payable

Under FRS 21 final dividends should not be accrued in the financial statements
unless they have been approved by shareholders before the balance sheet date.
Dividends payable to equity shareholders are recognised in the Reconciliation
of movement in shareholders' funds when they have been approved by the
shareholders and become a liability of the Company. Interim dividends are only
recognised in the financial statements in the period in which they are paid.

(l) Foreign currency translation

All transactions in foreign currencies are translated into US dollars at the
rates of exchange ruling on the dates of such transactions. Foreign currency
assets and liabilities at the balance sheet date are translated into US dollars
at the exchange rates ruling at that date. Exchange differences arising on the
revaluation of investments held as fixed assets are included in the capital
column of the Income Statement.

Exchange differences arising on the translation of foreign currency assets and liabilities are taken to the capital column of the Income Statement.

(m) Cash and cash equivalents

Cash comprises cash in hand and on demand deposits. Cash equivalents are short
term, highly liquid investments that are readily convertible to known amounts
of cash and that are subject to an insignificant risk of changes in value.

(n) Capital redemption reserve

The nominal value of ordinary share capital repurchased for cancellation is transferred out of share capital and into the capital redemption reserve.

(o) Shares repurchased and held in treasury

The full cost of shares repurchased and held in treasury is charged to capital
reserves. Where treasury shares are subsequently reissued, any surplus is taken
to the share premium account.

(p) Capital reserves

The following transactions are accounted for in capital reserves:

 gains and losses on the disposal of fixed asset investments;

 realised exchange differences of a capital nature;

 cost of professional advice, including irrecoverable VAT, relating to the capital structure of the Company;

 other capital charges and credits charged or credited to this reserve in accordance with the above policies;

 cost of purchases of own ordinary and subscription shares;

 increases and decreases in the valuation of investments held at the year end; and

 unrealised exchange differences of a capital nature.

(q) Going concern

The Company's Articles of Association require that an ordinary resolution be
put to the Company's shareholders at three yearly intervals at the AGM to
approve the continuation of the Company. The last such resolution was put to
shareholders at the 2010 AGM and the next such resolution will be put to
shareholders at the forthcoming AGM in 2013. The Directors are satisfied that
the Company has adequate resources to continue in operational existence for the
foreseeable future and therefore consider the going concern assumption to be
appropriate.
3. Income
                                                                 2013       2012
                                                              US$'000    US$'000
Investment income:
UK dividends                                                       60        128
Overseas dividends                                              7,365      5,205
                                                             --------   --------
                                                                7,425      5,333
Interest receivable:
Deposit interest                                                    1          7
                                                             --------   --------
                                                                7,426      5,340
                                                             ========   ========

4. Investment management and performance fees

                                    2013                             2012
                             Revenue    Capital      Total    Revenue    Capital      Total
                             US$'000    US$'000    US$'000    US$'000    US$'000    US$'000
                                                                                        
Investment management fees     1,423          -      1,423      1,784      
   -      1,784
Performance fees                   -          -          -          -     (1,674)    (1,674)
                            --------   --------   --------   --------   --------   --------
                               1,423          -      1,423      1,784     (1,674)       110
                            ========   ========   ========   ========   ========   ========

5. Other operating expenses

                                                                 2013       2012
                                                              US$'000    US$'000
                                                                                 
(a) Other operating expenses                                               
Custody fee                                                       300        215
Directors' emoluments                                             281        212
Auditor's remuneration:
- fees for statutory audit                                         40         46
Other administrative costs                                        455        456
                                                             --------   --------
                                                                1,076        929 
Transaction charges - capital                                      76      
 168
                                                             --------   --------
                                                                1,152      1,097
                                                             ========   ========  
The Company's ongoing charges - calculated in accordance         1.2%       1.1%
with the AIC guidelines were:                                ========   

========

No fees were paid to the auditor for other services in respect of the year
under review (2012: US$19,000 in respect of the tender price computation). The
underlying audit fee is invoiced in sterling and is therefore susceptible to
exchange rate fluctuations.
Expenses of US$76,000 (2012: US$168,000) charged to the capital return column
of the Income Statement relate to transaction costs charged by the custodian on
the purchases and sales of investments.
                                                                 2013       2012
                                                              US$'000    US$'000
                                                                                 
(b) Reconciliation of net return before finance costs and
taxation to net flow from operating activities
Net return/(loss) before finance costs and taxation            24,317    

(57,043)

(Less)/add: capital (return)/loss before finance costs and    (19,779)    58,705
taxation                                                     --------   --------
                                                                                 
Net revenue return before finance costs and taxation            4,538      1,662
Contracts for difference financing payable                        193        276
Expenses (charged)/credited to capital                            (76)     1,506
Decrease/(increase) in accrued income                              68      

(62)

Decrease in other debtors                                          10         60
Increase/(decrease) in creditors                                  819     

(3,637)

                                                             --------   --------
Net cash inflow/(outflow) from operating activities             5,552      
(195)
                                                             ========   ========
6. Dividends
The Directors have proposed a final dividend of 6.50 cents per ordinary shares
(2012: cents nil). The dividend will be paid on 28 June 2013, to shareholders
on the Company's register on 24 May 2013.
The total dividend proposed in respect of the year ended 31 January 2013 meets
the requirements of section 1158 of the Corporation Tax Act 2010 and section
833 of the Companies Act 2006.
                                                                 2013       2012
                                                              US$'000    US$'000
                                                                                 
Dividend payable on equity shares:
Final proposed of 6.50* cents per ordinary share (2012: nil     2,542      
   -
cents)                                                       --------   --------
                                                                2,542          -
                                                             ========   ========
                                                                                 
* Based on 39,113,427 in issue on 25 March 2013.                           

7. Return and net asset value per ordinary share

Revenue and capital returns per share are shown below and have been calculated
using the following:
Basic                                                                       2013        2012
Net revenue return attributable to ordinary shareholders (US$'000)         3,433         919
Net capital return/(loss) attributable to ordinary shareholders (US$'000) 19,779     (58,705)
                                                                        --------    --------
Total return/(loss) (US$'000)                                             23,212     (57,786)
                                                                        --------    --------
Total equity shareholders' funds (US$'000)                               

197,954 205,520

-------- -------- The weighted average number of ordinary shares in issue during the year on which the basic return per ordinary

share was calculated was:                                             44,195,647  49,073,405
                                                                     

---------- ---------- The actual number of ordinary shares in issue at the end of each year on which the basic net asset value was

calculated was:                                                       39,263,427  46,180,713
                                                                      ==========  ==========
Basic                               2013                             2012
                         Revenue    Capital      Total    Revenue    Capital      Total
                           cents      cents      cents      cents      cents      cents
Return per share
Calculated on weighted
average number of
shares                      7.77      44.75      52.52       1.87    (119.62)   (117.75)
Calculated on actual
number of shares            8.74      50.38      59.12       1.99    (127.12)   (125.13)
                          ------   --------   --------   --------  
--------   -------- Net asset value per share                       504.17                           445.03
Ordinary share price*                           439.16                           403.57
Subscription share price*                        20.61                     
       1.18
                          ======   ========   ========   ========   ========   ========
                                                                                        
* The Company's ordinary share price is quoted in sterling and the above
represents the US dollar equivalent using an exchange rate of 1.5854 (2012:
1.5780).
Diluted*                                                              2013       2012
                                                                                 
Net revenue return attributable to ordinary shareholders (US$'000)   3,433          -
Net capital return attributable to ordinary shareholders (US$'000)  19,779 
        -
                                                                  --------   --------
Total return (US$'000)                                              23,212          -
                                                                  ========   ======== 
Equity shareholders' funds (US$'000)                               234,886 

-

                                                                  --------  

-------- The weighted average number of ordinary shares in issue during the year on which the diluted return per ordinary

share was calculated was:                                       44,195,647          -
                                                                  --------   --------

The number of ordinary shares on which the diluted net asset value was calculated was:

                                 47,796,455          -
                                                                  ========   ========
                                                                                 
* As the undiluted NAV and share price as at 31 January 2013 are both above the
current subscription share conversion price of 273p there is dilution as at 31
January 2013. In contrast, as the undiluted NAV and share price as at 31
January 2012 were both below the then current subscription share conversion
price of 357p, there was no dilution.                                      
                                   2013                              2012
Diluted                  Revenue    Capital      Total    Revenue    Capital      Total
                           cents      cents      cents      cents      cents      cents
Return per share
Calculated on weighted
average number of
shares                         -          -          -          -          -          -
Calculated on actual
number of shares               -          -          -          -          -          -
                        --------   --------   --------   --------   --------   --------
Net asset value per share                       491.43                           445.03
Ordinary share price*                           439.16                           403.57
Subscription share price*                        20.61                             1.18
                                              ========                         ========
                                                                                        
* The Company's ordinary share price is quoted in sterling and the above
represents the US dollar equivalent using an exchange rate of 1.5854 (2012:             1.5780).

** No diluted earnings per share have been calculated for 31 January 2013 or 31 January 2012 due to the conversion price of 273p (2012: 357p) being in excess

of the average share price for each of the periods.
At the year end, the Company had in issue 8,533,028 (2012: 10,040,005) 2012
subscription shares which confer the right to subscribe at set times for all or
any of the ordinary shares to which the subscription shares relate at a price
of 273p (2012: 357p) per ordinary share. At 31 January 2013, the Company's NAV
was in excess of the exercise price therefore the subscription shares were
considered to be dilutive and a fully diluted NAV per share was calculated by
adjusting the total equity for consideration receivable on the exercise of all
2012 subscription shares in existence at the time. There was no dilution to the
return per share as the average share price of the ordinary shares for the
period since the 2012 subscription shares were issued was below the exercise
price of the subscription shares.

8. Called up share capital

                          Ordinary    Treasury          2011          2012       Total    US$'000
                            shares      shares  Subscription  Subscription      shares
                            number      number        shares        shares
                                                      number        number
Allotted, called up and
fully paid share
capital comprised:
Ordinary shares of 10
cents each and
subscription shares of
1 cent each:
Shares in issue at 1
February 2012           46,180,713   6,900,000    10,040,005             -  63,120,718      5,409

Exercise of 2011
subscription shares at
357p per share              16,159           -       (16,159)            -           -          2
Shares transferred into
treasury pursuant to
the tender offer on 23
July 2012               (3,464,053)  3,464,053             -             -           -          -
Shares transferred into
treasury pursuant to
the tender offer on 22
January 2013            (3,183,118)  3,183,118             -             -           -          -
Shares purchased for
cancellation              (299,700)          -             -             -    (299,700)       (30)
Shares cancelled from
treasury on 23 July
2012                             -  (4,364,053)            -             -  (4,364,053)      (437)
Shares cancelled from
treasury on 22 January
2013                             -  (3,383,118)            -             -  (3,383,118)      (338)
Issue of 2012
subscription shares              -           -             -     8,546,454   8,546,454         85
Exercise of 2012
subscription shares at
273p per share              13,426           -             -       (13,426)          -          1
                          --------    --------      --------      -------- 

-------- -------- At 31 January 2013 39,263,427 5,800,000 10,023,846 8,533,028 63,620,301 4,692

                          ========    ========      ========      ========  

======== ========

During the year 6,647,171 (2012: 11,465,158) ordinary shares were repurchased
pursuant to the tender offers and held in treasury at a total cost of
US$29,458,000 (2012: US$56,554,000). Transaction costs relating to the tender
offers was US$296,000 (2012:US$ 281,000). In addition, 299,700 (2012: 127,000)
ordinary shares were bought back at a total cost of US$1,206,000 (2012:
US$653,000) for cancellation. Transaction costs incurred on share repurchases
totalled US$8,000 (2012: US$5,000).

4,364,053 shares held in treasury were cancelled on 23 July 2012. A further 3,383,118 ordinary shares held in treasury were cancelled on 22 January 2013.

The Company issued 8,546,454 2012 subscription shares on 27 July 2012 as part
of a bonus issue on the basis of 1 subscription share for every 5 ordinary
shares held. In the year to 31 January 2013, 13,426 (2012: 7,911,691) ordinary
shares were issued following the exercise of 13,426 (2012: 7,911,691)
subscription shares for total proceeds of US$59,000 (2012: US$38,096,000). At
the year end there were 8,533,028 2012 subscription shares in issue.
The number of 2011 subscription shares outstanding on 31 January 2012 was
10,040,005. In the year to 31 January 2013, 16,159 ordinary shares were issued
following the exercise of 16,159 2011 subscription shares for total proceeds of
US$91,000. The remaining 10,023,846 2011 subscription share rights expired on
31 July 2012.
The number of ordinary shares in issue at the year end was 39,263,427 (2012:
46,180,713) excluding 5,800,000 (2012: 6,900,000) ordinary shares held in
treasury. Since the year end and up to the date of this report the Company has
bought back 150,000 ordinary shares for cancellation.
The ordinary shares (excluding any shares held in treasury) carry the right to
receive any dividends and have one voting right per ordinary share. There are
no restrictions on the voting rights of the shares or on transfer of the
shares.
The subscription shares do not carry the right to receive any dividends and do
not have any voting rights, other than at a class meeting. There are no restrictions
on the transfer of the subscription shares.

9. Share premium account and reserves

                                                       Share     Capital      Capital      Capital
                                                     premium  redemption      reserve      reserve
                                                     account     reserve     (arising     (arising
                                                     US$'000     US$'000           on           on
                                                                          investments  investments
                                                                                 sold)        held)
                                                                              US$'000      US$'000
                                                                                     
At 1 February 2012                                    41,259       4,519   

202,064 (24,874)

Movement during the year:
Cost of shares repurchased and held in treasury            -           -      (29,458)           -
Cancellation  of treasury shares                           -          775            -           -
Exercise of subscription shares                          147           -            -            -
Subscription share issue costs                             -           -         (349)           -
Repurchase and cancellation of shares                      -          30       (1,206)           -
Losses on sales of investments                             -           -       (9,186)           -
Change in investment holdings gains                        -           -            -       28,299
Losses on foreign currency transactions                    -           -         (260)           -
(Losses)/gains on contracts for difference                 -           -       (2,283)       3,285
Interest and expenses charged to capital after taxation    -           -   
      (76)           -
                                                    --------    --------     --------     --------
At 31 January 2013                                    41,406       5,324      159,246        6,710
                                                    ========    ========     ========     ========
10. Revenue reserve
Revenue reserve                                                         US$'000
At 1 February 2012                                                      (22,857)
Net return for the year                                                   3,433
                                                                       --------
At 31 January 2013                                                      (19,424)
                                                                       ========

10. Publication of non statutory accounts

The financial information contained in this announcement does not constitute
statutory accounts as defined in the Companies Act 2006. The 2013 annual report
and financial statements will be filed with the Registrar of Companies shortly.

The report of the Auditor for the year ended 31 January 2013 contains no qualification or statement under section 498(2) or (3) of the Companies Act 2006.

The comparative figures are extracts from the audited financial statements of
The Eastern European Trust PLC for the year ended 31 January 2012, which have
been filed with the Registrar of Companies, unless otherwise stated. The report
of the Auditor on those accounts contained no qualification or statement under
section 498 of the Companies Act.
This announcement was approved by the Board of Directors on 25 March 2013.

14. Annual Report

Copies of the annual report will be sent to members shortly and will also be
available from the registered office, c/o The Company Secretary, The Eastern
European Trust PLC, 12 Throgmorton Avenue, London EC2N 2DL.

15. Annual General Meeting

The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue, London EC2N 2DL on Friday, 21 June 2013 at 12 noon.

ENDS

The Annual Report will also be available on the BlackRock Investment Management
website at http://www.blackrock.co.uk/est. Neither the contents of the
Investment Manager's website nor the contents of any website accessible from
hyperlinks on the Investment Manager's website (or any other website) is
incorporated into, or forms part of, this announcement.

For further information, please contact:

Simon White, Managing Director, Investment Trusts, BlackRock Investment Management (UK) Limited Tel: 020 7743 5284

Emma Phillips, Media & Communication, BlackRock Investment Management (UK) Limited Tel: 020 7743 2922

Henrietta Guthrie, Lansons Communications
Tel: 020 7294 3612
25 March 2013
12 Throgmorton Avenue
London EC2N 2DL

(Source: PR Newswire )
(Source: Quotemedia)

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