Portfolio Update

BLACKROCK GREATER EUROPE INVESTMENT TRUST plc (LEI - 5493003R8FJ6I76ZUW55)
All information is at 31 January 2020 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)	-0.1%	4.7%	26.3%	45.7%	445.4%
Net asset value* (diluted)	0.1%	4.5%	26.1%	45.4%	444.8%
Share price	0.5%	7.6%	31.1%	50.8%	446.3%
FTSE World Europe ex UK	-1.6%	0.9%	15.0%	25.3%	269.8%

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

At month end

Net asset value (capital only):	412.33p
Net asset value (including income):	412.43p
Net asset value (capital only)1:	411.54p
Net asset value (including income)1:	411.62p
Share price:	409.00p
Discount to NAV (including income):	0.8%
Discount to NAV (including income)1:	0.8%
Net gearing:	8.5%
Net yield2:	1.4%
Total assets (including income):	£347.8m
Ordinary shares in issue3:	84,323,101
Ongoing charges4:	1.09%

1  Diluted for treasury shares.
2  Based on a final dividend of 4.10p per share and an interim dividend of 1.75p for the year ended 31 August 2019.
3  Excluding 26,005,837 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 2019.

Sector Analysis	Total   Assets  (%)		Country Analysis	Total   Assets  (%)
Industrials	19.8		Denmark	16.7
Health Care	19.5		Switzerland	16.4
Technology	18.9		France	13.6
Consumer Goods	15.4		Germany	12.8
Consumer Services	9.8		Italy	7.2
Financials	9.3		Netherlands	6.7
Basic Materials	3.1		United Kingdom	6.0
Telecommunications	3.1		Sweden	5.1
Oil & Gas	1.6		Spain	4.7
Net current liabilities	-0.5		Israel	2.4
	-----		Ireland	1.9
	100.0		Poland	1.7
	=====		Finland	1.6
			Belgium	1.5
			Russia	1.4
			Greece	0.8
			Net current liabilities	-0.5
				-----
				100.0
				=====

Ten Largest Equity Investments
Company	Country	% of Total Assets
SAP	Germany	6.0
RELX	United Kingdom	6.0
Safran	France	5.6
Novo Nordisk	Denmark	5.6
Royal Unibrew	Denmark	5.4
Sika	Switzerland	5.3
Adidas	Germany	5.2
Lonza Group	Switzerland	4.6
ASML	Netherlands	4.3
DSV	Denmark	4.3

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

During the month, the Company’s NAV was flat and the share price rose by 0.5%. For reference, the FTSE World Europe ex UK Index returned -1.6% during the period.

European ex UK markets fell during January with investors concerned about the Coronavirus outbreak in China and its potential impact on financial markets and global trade. Those sectors with share prices less correlated to global growth benefited from the risk-off environment, leading to an outperformance versus the market of utilities and health care. The oil & gas and basic materials sectors declined as commodity prices fell on the back of weakening demand due to the virus and travel bans.

The Company outperformed the reference index over the month, driven by strong stock selection while sector allocation slightly detracted. On a sector basis, the Company’s lower exposures to both European banks and autos contributed positively to performance.

During the month, the market experienced an unwind of the Q4 2019 ‘hope-trade’ which had driven banks and autos higher on expectations for improved output and profitability in 2020. Our analysis suggests that earnings forecasts for banks remain too high going into 2020. Equally, a host of meetings with auto manufacturers and suppliers have highlighted that the auto industry is likely to face another difficult year in 2020.

Given investors allocating greater capital to sectors deemed ‘lower risk’ during the month, our lower exposure to utilities and consumer services detracted. Relative to the reference index, the Company saw the strongest returns from a lower allocation to the oil & gas sector, as well as accurate stock selection. For example, not owning any of the large-cap oil majors, such as Total, was beneficial for performance. Our exposure to this sector is highly selective. We own the global leader in renewable biofuels – Neste Oil – which performed strongly against the weak sector backdrop. Market fundamentals for renewable fuels are strong as they offer both the auto and aviation industry a route to meeting carbon targets. The airline industry aims to be carbon free by 2050 and more efficient engines, as well as renewable fuels, can play a big part in meeting those targets. We believe demand will outstrip supply for the foreseeable future which is a good environment for value creation and share price outcomes.

Lonza Group was the single best performer during January. The Swiss company reported strong 2019 numbers with better-than-expected sales and profit driven by strength in their pharma and biotech division where they are seen as one of the global leaders in contract manufacturing of high end drugs.

Over the month, the Company experienced some relative losses versus the reference index due to overarching market moves. This included not holding large benchmark constituents considered less economically exposed and thus lower risk, such as Nestlé and Roche. However, our holding in Royal Unibrew contributed positively. Furthermore, not owning Enel and Iberdrola was negative as the stocks rallied in line with the sector.

A number of positions, including Rémy Cointreau, DSV and Kering were also caught up in fears around the Coronavirus, as well as temporary weakness in global trade. Both travel retail and Chinese New Year are important sales occasions for luxury goods and spirits producers. While we realise that the travel ban related to the Coronavirus could affect short-term results for these companies, we are confident that it will not alter the medium to long-term earnings power of these businesses.

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

Outlook

After breaking out of its 20-year trading range, we think there are a number of factors in the market that can continue to drive European equities higher. Investors are warming up to the region after a multi-year hiatus due in part to political tensions and weakening end markets. If the industrial economy does continue to recover, we could see the economic cycle being stretched further. Whilst this is positive for equity markets, we continue to caution the less discerning approach to the region. From a fundamental perspective, it is evident structural challenges remain in numerous end markets within Europe, not least the margin pressure European auto producers are facing from the transition to Electric Vehicles. We prefer those companies in the region which are often also exposed to secular growth themes but with superior market positions and products, brands or contract structures which allow for a greater sustainability of returns.

24 February 2020

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.