Portfolio Update

BLACKROCK GREATER EUROPE INVESTMENT TRUST plc (LEI - 5493003R8FJ6I76ZUW55)
All information is at 31 May 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)	10.0%	4.8%	12.2%	29.7%	442.7%
Net asset value* (diluted)	10.4%	4.7%	12.2%	29.7%	442.9%
Share price	8.2%	4.7%	14.3%	28.9%	430.3%
FTSE World Europe ex UK	8.3%	0.4%	1.9%	4.7%	251.1%

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

At month end

Net asset value (capital only):	407.92p
Net asset value (including income):	408.44p
Net asset value (capital only)1:	407.92p
Net asset value (including income)1:	408.44p
Share price:	395.00p
Discount to NAV (including income):	3.3%
Discount to NAV (including income)1:	3.3%
Net cash:	9.0%
Net yield2:	1.5%
Total assets (including income):	£344.4m
Ordinary shares in issue3:	84,323,101
Ongoing charges4:	1.1%

1  Diluted for treasury shares.
2  Based on a final dividend of 4.10p per share for the year ended 31 August 2019 and an interim dividend of 1.75p for the year ending 31 August 2020.
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  (%)
Technology	24.0		Denmark	18.2
Health Care	19.7		France	12.5
Industrials	16.3		Switzerland	12.4
Consumer Goods	11.0		Netherlands	12.2
Consumer Services	10.5		Germany	9.7
Financials	9.4		Italy	6.1
Oil & Gas	4.0		Russia	5.7
Basic Materials	3.3		Sweden	5.7
Telecommunications	2.7		United Kingdom	5.3
Net Current Liabilities	-0.9		Spain	3.1
	-----		Israel	2.5
	100.0		Belgium	2.4
	=====		Finland	2.1
			Ireland	1.9
			Poland	0.9
			Greece	0.2
			Net Current Liabilities	-0.9
				-----
				100.0
				=====

Ten Largest Equity Investments
Company	Country	% of Total Assets
ASML	Netherlands	6.2
Novo Nordisk	Denmark	6.0
SAP	Germany	5.3
RELX	United Kingdom	5.3
Kering	France	5.2
Sika	Switzerland	5.1
Lonza Group	Switzerland	5.0
Royal Unibrew	Denmark	4.6
DSV	Denmark	3.7
Safran	France	3.3

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

During the month, the Company’s NAV rose by 10.0% and the share price by 8.2%. For reference, the FTSE World Europe ex UK Index returned 8.3% during the period.

Europe ex UK markets continued to perform strongly during the month. Markets were up on rising consumer confidence and the relaxation of lockdown measures in several European countries. The announcement of a €750bn EU recovery fund was further taken positively by the market. The fund would be made up of €500bn in grants and €250bn in loans, with countries hit the hardest by the coronavirus including Italy and Spain benefiting the most. While this proposal needs to be passed by each EU member’s parliament, France and Germany backing this concept is seen as a positive sign.

The utilities sector led the market in May. Industrials, technology, consumer services and basic materials also outperformed over the month, as we saw cyclical names benefiting from an early re-opening across many European countries with very little signs of a second wave of the COVID-19 virus, as yet.

Traditional defensive sectors underperformed over the month. These include telecoms and health care. Travel and leisure also underperformed as a sector, with some major airlines accepting shareholder dilution as the price of national financial support. Finally, financials underperformed as markets remained unsure about the depth and duration of the default cycle.

The Company outperformed the reference index over the month, driven by both strong sector allocation and stock selection. In sector terms, the Company benefited from a higher allocation to the technology and industrials sectors and a lower allocation to consumer goods and financials. The Company’s lower allocation to utilities and basic materials, as well as an overweight to health care, detracted.

The Company benefited from its stock selection within the health care sector. Our position in Italian biotechnology company DiaSorin was the top contributor over the month due to its role in developing tests and antibody tests for COVID-19. The crisis has helped the group raise its profile and both the speed of development, as well as accuracy of its tests, compare well to its much larger US peers. The Company’s long-standing holding in Lonza also contributed to performance given its announced partnership with Moderna on their potential COVID-19 vaccination.

The Company saw a positive contribution from a number of positions that are expected to experience a faster recovery from this spring’s economic trough. For example, buildings materials name Kingspan rose on more positive sentiment towards construction markets. Headlines that the European Green Deal may be at the centre of the EU’s recovery efforts drove shares in Kingspan higher, as the company specialises in insulated panels and boards which reduce energy wastage.

Also benefiting from the recovery theme during the month, Adidas was lifted higher on improving consumer confidence and better data from China. The Company’s energy positions in Neste OYJ and Lukoil were also amongst the top contributors as they benefited from the oil price bouncing off its lows. Not owning defensive benchmark constituents such as Roche, Nestlé and Novartis aided returns, as defensive assets underperformed cyclicals during the month.

The Company’s position in bioscience company Grifols was the largest detractor from returns, seeing weakness from a cyclical rotation, as well as pressures from positive trial data from Dutch competitor Argenx. On the negative side we also saw BE Semiconductor detracting from this month’s performance due to increased concerns around the US/ China trade tensions. At this point there is a potential that European companies will have to stop selling into Huawei which negatively impacted the sector. While BE Semiconductor has no direct exposure to this issue, shares fell with the sector.

Elsewhere, luxury goods group Kering gave back some of its gains due to concerns about their underlying brand momentum and a more bearish view on the outlook of the recovery in China on the back of Moncler’s CEO indicating a slower recovery than other brands. Our analysis of data on internal credit card spending continues to show positive momentum for many luxury goods groups in mainland China, including Gucci, and we have added to positions there.

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

Outlook

The current global economic downturn is politically induced; a consequence of governments taking actions to preserve life due to the outbreak of a global pandemic. As a result, assessing the shape of the economic recovery will likely come down more to health and disease related data than traditional indicators or outlook for profits for specific companies.

We remain relatively optimistic about the resilience of the global economy, noting this has been a recession for services, not goods. Our views are informed not by traditional macro data, but by dialogue with our companies and unstructured data which we often use to corroborate or challenge their assertions. At BlackRock, we have invested significant resource in tracking of disease related data points by region in order to understand the potential fallout and indeed the speed at which economies can start to normalise. Overall, we can observe that most datapoints seem to have bottomed, with a pick-up now evident globally. Stimulus measures thus far have been sufficiently substantial to help consumers and SMEs get through the lockdown.

From a fundamental perspective, it is evident structural challenges remain in numerous end markets within Europe, which makes it paramount to take an active approach to investing with clearly defined investment criteria. Our research focuses on companies which are often exposed to secular growth drivers, with superior market positions and products, brands or contract structures that should allow for a greater degree of value creation over time. As always, we will be guided by our understanding of company earnings and cashflows on a multi-year basis, looking for exceptional companies which can prove resilience of their business model over the long term.

18 June 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.