Portfolio Update
BLACKROCK GREATER EUROPE INVESTMENT TRUST plc
All information is at 31 August 2014 and unaudited.
Performance at month end with net income reinvested
One Three One Three launch
Month Months Year Years (20 Sep 04)
Net asset value* (undiluted) 1.1% -6.4% 4.3% 39.2% 184.9%
Net asset value* (diluted) 1.1% -6.0% 4.5% 39.7% 185.1%
Share price 1.8% -8.2% 2.8% 37.7% 175.0%
FTSE World Europe ex UK 2.1% -3.9% 10.4% 41.5% 135.4%
Sources: BlackRock and Datastream
At month end
Net asset value (capital only): 234.89p
Net asset value (including income): 238.09p
Net asset value (capital only)*: 234.89p
Net asset value (including income)*: 238.09p
Share price: 228.50p
Discount to NAV (including income): 4.0%
Discount to NAV (including income)*: 4.0%
Subscription share price: 10.00p
Net gearing: 0.0%
Net yield**: 2.6%
Total assets (including income): £259.1m
Ordinary shares in issue***: 108,828,058
Subscription shares: 20,647,848
Ongoing charges****: 0.9%
* Diluted for subscription shares and treasury shares.
** Based on a final dividend of 4.5p per share for the year ended 31 August
2013 (excluding special dividend) and an interim dividend of 1.5p per share for
the year ending 31 August 2014.
*** Excluding 5,429,676 shares held in treasury.
**** calculated as a percentage of average net assets and using expenses,
excluding performance fees and interest costs, after relief of taxation for the
year ended 31 August 2013.
Sector Analysis Total Assets (%) Country Analysis Total Assets (%)
Financials 30.5 Switzerland 18.9
Industrials 18.6 France 18.4
Health Care 9.7 Germany 11.2
Consumer Services 9.3 Italy 9.1
Consumer Goods 8.8 Netherlands 8.6
Basic Materials 8.0 Sweden 7.5
Oil & Gas 5.4 Denmark 4.9
Technology 5.1 Ireland 4.0
Utilities 3.0 Russia 3.7
Net current assets 1.6 Turkey 2.8
----- Portugal 2.6
100.0 Belgium 2.4
===== Finland 1.9
Spain 1.3
Hungary 1.1
Net current assets 1.6
-----
100.0
=====
Ten Largest Equity Investments (in alphabetical order)
Company
Bayer Germany
Continental Germany
Eni Italy
GDF Suez France
ING Netherlands
KBC Belgium
Novo Nordisk Denmark
Roche Switzerland
Schneider Electric France
Zurich Insurance Switzerland
Commenting on the markets, Vincent Devlin, representing the Investment Manager
noted:
During the month the Company's NAV gained 1.1% and the share price gained 1.8%.
For reference, the FTSE World Europe ex UK Index gained 2.1% during the same
period.
European markets returned in the region of 2% during August following a strong
rally mid-month. However, Europe continued to underperform global equities as
concerns over the domestic growth trajectory continued. The Euro also weakened
against the dollar, falling back to 1.31 dollars and thereby falling back to
the same level seen in Q3 2013. Central bank policy continued to influence
markets: a statement made by Mario Draghi at the annual Jackson Hole event led
to a greater expectation on QE in Europe and potentially the beginning of
'Private' Quantitative Easing via the purchases of ABS in Europe. Tensions in
Russia and Ukraine also continued, with European diplomats discussing the
potential for extra sanctions against Russia. Within the market at a sector
level, health care, technology and financials saw the strongest gains and basic
resources saw the weakest.
Stock selection drove the underperformance during August while sector
allocation had a minimal impact on returns. An underweight position in the
telecoms sector contributed positively to performance as the sector fell during
August underperforming the market, although an underweight position in consumer
goods and oil & gas offset this.
A position in French telecom business Iliad was the Company's largest detractor
after they announced their intentions to buy a majority holding in US mobile
operator T-Mobile. Investors sold out of the stock as this was seen as a step
away from their core business.
In contrast to previous months, stock selection within the health care sector
significantly detracted from returns as a position in GN Store Nord performed
poorly, while not holding large benchmark constituents, Novartis and Sanofi,
also hindered returns. GN Store Nord fell during the month after the company
announced mixed results. While several of their divisions saw strong growth,
organic growth margins were slightly weaker than expected. The market has begun
to worry that their expectations for the second half of the year may be too
high, which along with increased competition in their ReSound business, could
lead to downgrades on their guidance. Not holding Novartis also impacted
returns as the company announced strong results from a trial on one of its key
pipeline drugs.
On a more positive note, positions in several financial stocks performed well
as the market recovered and investors moved back into 'risk on' mode buying
positions in KBC, ING, UBS and Partners Group. Positions in cyclical industrial
names such as Saint-Gobain and Airbus also aided performance.
At the end of the month, the Company was positioned overweight Industrials,
Consumer Services, Health Care, Financials and Technology while underweight Oil
& Gas, Consumer Goods, Telecoms, Basic Materials and Utilities.
Outlook
The outlook for European equities on the whole looks to be improving. From a
fundamental standpoint, and notwithstanding some geopolitical issues in Russia
and the Middle East, we have not witnessed a significant shift in the direction
of the economy or earnings cycle in Europe during the period. We believe that
the rotation was a temporary setback and Europe will still see a slow and
grinding recovery which will pick up in the latter half of this year. We
believe that the ECB actions will be profoundly positive for the Eurozone
economy in the coming months and has notable benefits for a banking sector that
is already in a stronger capital position relative to five years ago. Whilst it
will take time for the benefits of cheaper lending to filter through to the
real economy in the form of lending to SMEs and households, we are encouraged
to see that there is certainly an improving credit demand. We think that the
situation could potentially get better once the stress test and AQR exercise
are completed, after which banks will have more visibility on their level of
capitalisation, which will give them more confidence to lend and to return
excess capital to shareholders.
European valuations have re-rated over the last year and look to be in line
with their long-term average. However, we think that earnings should recover
from here, in line with the improvements in industrial output. Consensus
earnings estimates have moderated since the beginning of the year in part due
to unfavourable FX, but they are beginning to inflect upwards from a low base.
European domestic earnings are now more realistic and have scope to benefit
from a domestic recovery. A weaker euro should also help end deflationary
pressure and is a strong support to earnings with over 50% of European
corporates earnings coming from outside Europe.
15 September 2014
ENDS
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website) is incorporated into, or forms part of, this announcement.