Portfolio Update

BLACKROCK GREATER EUROPE INVESTMENT TRUST plc (LEI - 5493003R8FJ6I76ZUW55)
All information is at31 January 2019 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)	2.9%	-4.2%	-4.7%	36.4%	331.7%
Net asset value* (diluted)	2.9%	-4.2%	-4.7%	37.1%	332.1%
Share price	3.3%	-2.8%	-4.3%	35.9%	316.8%
FTSE World Europe ex UK	3.1%	-2.1%	-7.8%	35.6%	221.7%

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

At month end

Net asset value (capital only):	331.21p
Net asset value (including income):	331.49p
Net asset value (capital only)1:	331.21p
Net asset value (including income)1:	331.49p
Share price:	317.00p
Discount to NAV (including income):	4.4%
Discount to NAV (including income)1:	4.4%
Net gearing:	1.7%
Net yield2:	1.8%
Total assets (including income):	£283.0m
Ordinary shares in issue3:	85,373,101
Ongoing charges4:	1.09%

1  Diluted for treasury shares.
2  Based on a final dividend of 4.00p per share and an interim dividend of 1.75p per share for the year ended 31 August 2018.
3  Excluding 24,955,837 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 2018.

Sector Analysis	Total Assets (%)		Country Analysis	Total Assets (%)
Industrials	30.0		Switzerland	17.3
Health Care	24.3		France	16.8
Technology	12.7		Germany	14.3
Financials	11.0		Denmark	12.2
Consumer Goods	10.0		Netherlands	9.5
Consumer Services	6.7		Italy	7.1
Basic Materials	4.0		United Kingdom	4.2
Telecommunications	2.1		Israel	3.8
Net Current Liabilities	-0.8		Sweden	3.7
	-----		Russia	2.7
	100.0		Finland	2.4
	=====		Spain	2.2
			Ireland	2.0
			Belgium	1.9
			Greece	0.7
			Net Current Liabilities	-0.8
				-----
				100.0
				=====

Ten Largest Equity Investments
Company	Country	% of Total Assets
Safran	France	6.9
Novo Nordisk	Denmark	5.9
SAP	Germany	5.6
Sika	Switzerland	5.2
Lonza Group	Switzerland	5.0
RELX	United Kingdom	4.2
Fresenius Medical Care	Germany	4.1
ASML	Netherlands	3.6
Unilever	Netherlands	3.5
DSV	Denmark	3.0

Commenting on the markets, Stefan Gries, representing the Investment Manager noted:

During the month, the Company’s NAV rose by 2.9% and the share price increased by 3.3%. For reference, the FTSE World Europe ex UK Index returned 3.1% during the period.

Following a volatile Q4 2018, European ex UK markets had a strong start to the year. All sectors except for telecoms saw positive absolute returns, as the risk-on mode returned to the market.

Early macro data suggests that the Eurozone economy has started 2019 on a flat note. Purchasing Managers’ Index (PMI) Manufacturing activity slowed further in January, slipping to 50.5 from 51.4 in December. German industrial production came in well below expectations, putting Germany on track for a potential second consecutive quarter of negative GDP growth.

The European Central Bank (ECB) adopted a dovish tone to policy in stating that the risks to the Eurozone growth outlook ‘have moved to the downside’. Those comments came just a month after the ECB stopped net asset purchases. While officials have made no suggestion that they might loosen policy further, the general weakness across the region may make it hard to maintain expectations of a rate hike this year.

Sector allocation drove the Company’s slight underperformance over the month. The higher allocation to health care dragged on performance, as did the lower allocation to consumer goods. The greater allocation to industrials, however, was positive.

The top performing stock over the period was a holding in Sberbank Russia, as risk assets moved higher over the month. We also saw our position in Ferrari recover, despite reporting revenues slightly below consensus, but better volume growth. Some investors had been concerned about 2019 guidance, but EBIT (earnings before interest and taxes) was in line with expectations leading to a relief rally. To our minds, the long-term investor case remains compelling with strong potential from the Monza supercar (limited to 499 invitation-only buyers paying circa EUR1.6 million each) and the Portofino. In our view, Ferrari maintains a strong grasp on pricing power, especially relative to some competitors in the Auto space.

A position in transportation business DSV also contributed strongly over the month, as it announced a bid for Panalpina. DSV also announced good results during January.

Bezeq, an Israeli incumbent telcom company, fell over the month as restructuring costs posed a threat to the dividend, leading to a churn in the investor base. We still believe in the fundamentals of the stock and potential for business turnaround.

A position in French-listed Thales also detracted. We do not believe there are any operational issues at the company. However, in the absence of any new news – the Gemalto acquisition is to our minds positive, but also well known – the stock detracted in a risk-on January.

At the end of the period, the Company had a higher allocation than the reference index towards industrials, technology, consumer services and health care. A lower allocation was held in financials, consumer goods, utilities, telecommunications, basic materials and oil & gas.

Outlook

Global political uncertainty remains high and continues to impact markets adversely. The European market is set to face a number of issues this year, not least the impending Brexit date. However, we believe a lot has been priced into equity markets, including a greater potential of recession than fundamentals currently point to. We see opportunity for a gentle increase in European growth as we move through the year. This could be driven by fiscal stimulus, abating headwinds and resilience of the consumer. Given the significantly bearish sentiment and positioning towards European equities, we could be nearing the point of maximum pain for the European market, particularly if fundamentals stabilise and improve from here. Where optimism for growth is low, optimism for earnings seems slightly overeager in our view and we see risks of earnings downgrades across the market, particularly in leveraged companies. We believe a selective, stock focused approach could provide meaningful uplift to investors’ portfolios in this higher volatility environment. Our portfolios have become more defensive at the margin but we are selectively adding to high conviction ideas which have experienced pull back in their share price with limited or no change to fundamentals.

20 February 2019

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.