Portfolio Update

BLACKROCK GREATER EUROPE INVESTMENT TRUST plc (LEI - 5493003R8FJ6I76ZUW55)
All information is at30 APRIL 2017 and unaudited.

Performance at month end with net income reinvested
 

One
Month
Three
Months
One
Year
Three
Years
Launch
(20 Sep 04)
Net asset value (undiluted) 2.5% 6.9% 24.4% 34.0% 300.3%
Net asset value* (diluted) 2.5% 6.9% 25.2% 35.7% 300.7%
Share price 1.6% 5.9% 25.1% 31.2% 283.6%
FTSE World Europe ex UK 1.0% 7.8% 28.8% 32.4% 218.1%

* Diluted for treasury shares and subscription shares.
Sources: BlackRock and Datastream
 

At month end

Net asset value (capital only): 314.69p
Net asset value (including income): 317.47p
Net asset value (capital only)1: 314.69p
Net asset value (including income)1: 317.47p
Share price: 301.88p
Discount to NAV (including income): 4.9%
Discount to NAV (including income)1: 4.9%
Net gearing: 1.3%
Net yield2: 1.8%
Total assets (including income): £302.5m
Ordinary shares in issue3: 95,295,953
Ongoing charges4: 1.07%

1  Diluted for treasury shares.
2  Based on a final dividend of 3.65p per share for the year ended 31 August 2016 and an interim dividend of 1.75p per share declared on 26 April 2017.
3  Excluding 15,032,985 shares held in treasury.
4  Calculated as a percentage of average net assets and using expenses, excluding interest costs, after relief for taxation, for the year ended 31 August 2016.

Sector Analysis Total 
Assets 
(%) 
Country Analysis Total 
Assets 
(%) 
Industrials 28.9  France 19.0 
Financials 19.0  Netherlands 15.6 
Consumer Goods 13.1  Germany 12.1 
Consumer Services 10.6  Denmark 11.2 
Health Care 9.9  Switzerland 9.1 
Technology 7.3  Sweden 5.4 
Basic Materials 7.1  Russia 5.3 
Oil & Gas 3.0  Ireland 5.0 
Telecommunications 2.4  Finland 4.7 
Net current liabilities (1.3) Spain 3.1 
-----  Belgium 2.8 
100.0  Luxembourg 2.1 
=====  Poland 1.9 
Italy 1.7 
Ukraine 1.7 
Turkey 0.6 
Net current liabilities (1.3)
----- 
100.0 
===== 

   

Ten Largest Equity Investments
Company Country % of
Total Assets
RELX Netherlands 3.4
Bayer Germany 3.3
Compagnie Financière Richemont Switzerland 3.2
ASML Netherlands 3.2
Inditex Spain 3.1
Vinci France 3.1
Wartsila Finland 2.9
Schneider Electric France 2.7
DSV Denmark 2.6
Danske Bank Denmark 2.6

Commenting on the markets, Vincent Devlin, representing the Investment Manager noted:

During the month, the Company’s NAV rose by 2.5% and the share price increased by 1.6%. For reference, the FTSE World Europe ex UK Index was up 1.0% during the period.

Europe ex UK equities continued to rally in April as a strong start to the earnings season and reduced uncertainty post the first round of the French Presidential election supported markets. This relief from the election also supported the largest inflows since 2015 into the European equity asset class. Macro data continued to be strong with the Eurozone PMIs, as well as German IFO, beating expectations in April. Sector leadership came from the industrials and consumer discretionary sectors where earnings proved particularly supportive. Telecoms lagged the market after being aggressively sold off, as well as energy given weak commodity prices.

Stock selection was the primary driver of positive relative returns over the month, with particularly strong outcomes in health care and financials. Sector allocation also aided performance; the greater allocations to industrials proved positive as the sector continued to see robust earnings momentum.  The lower allocation versus the index to utilities and oil & gas, which both lagged the market, also aided performance.

At an individual stock level, an overweight in Polish insurer, PZU, contributed to returns most as the company saw significant earnings growth amplified by a new CEO who reaffirmed the existing corporate and dividend policy.

Marine and energy solutions and services business Wartsila also proved profitable over the month. The company’s stock has performed strongly year-to-date and rallied further in April on news of orders placed for two new LNG carrier vessels, which are high margin for the business.

Performance in dental implant business Straumann was also robust as the company reported organic growth of 15% and an upgrade to full year 2017 earnings guidance. The company’s growth is supported across all regions with bone level tapered implants proving especially instrumental in revenue generation.

Holdings in mid cap health care stocks, GN Store Nord and Lonza Group, were also beneficial for returns. The latter posted a strong first quarter update, upgrading full year sales guidance to high single digit growth, with earnings to grow double digit.

Finally, given the strength of French markets following the more benign outcome in the first round of the French Presidential election, the Company benefited from holdings in Vinci, Thales and Schneider Electric.

Less positively, a holding in Tenaris detracted from performance as stocks related to Shale oil fell back on the weaker energy and commodity prices.

Outlook

Overall, the outlook for European equities has improved, with positive economic momentum and fundamental improvements in company data. This is evident in the European Economic Sentiment latest data point, with both the industry and consumer confidence significantly increasing, along with the manufacturing PMI reaching a six year high. The earnings revision data in Europe has followed suit, reaching five year highs. As political risk subsides, there is more chance for the eurozone economic growth to surprise on the upside this year.  Against this backdrop, we anticipate that investors will reassess the risk / reward profile and increase weightings to the asset class. Importantly, intra-market stock correlation, which adversely impacted performance last year as narratives of reflation and rising rates gripped the market, has come down, making the environment more suited to generating stock specific alpha. In regards to the interest rate and inflationary environment in Europe, whilst we acknowledge there will likely be marginal upwards trends in both, our expectation is that this is more gradual than the market expects. We have seen higher prints in headline inflation, which the ECB targets; however, this is largely influenced by the oil price which will annualize out over the year and thus cause this figure to fall. Crucially, we think it is also important to recognise that long-term factors which keep downward pressure on rates remain – namely, demographics, the deflationary impact of technology, and high levels of worldwide indebtedness.

12 May 2017

ENDS

Latest information is available by typing www.brgeplc.co.uk on the internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV terminal).  Neither the contents of the Manager’s website nor the contents of any website accessible from hyperlinks on the Manager’s website (or any other website) is incorporated into, or forms part of, this announcement.

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