Portfolio Update

The information contained in this release was correct as at 30 September 2022. Information on the Company’s up to date net asset values can be found on the London Stock Exchange website at:

https://www.londonstockexchange.com/exchange/news/market-news/market-news-home.html. 

BLACKROCK GREATER EUROPE INVESTMENT TRUST PLC (LEI - 5493003R8FJ6I76ZUW55)

All information is at 30 September 2022 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)	-6.5%	-3.4%	-30.0%	15.7%	504.5%
Share price	-9.2%	-3.4%	-36.6%	12.4%	468.8%
FTSE World Europe ex UK	-4.9%	-2.3%	-12.8%	6.8%	297.7%

Sources: BlackRock and Datastream

At month end

Net asset value (capital only):	439.05p
Net asset value (including income):	444.77p
Share price:	414.00p
Discount to NAV (including income):	6.9%
Net cash:	1.3%
Net yield1:	1.5%
Total assets (including income):	£451.1m
Ordinary shares in issue2:	101,425,411
Ongoing charges3:	0.99%

1  Based on a final dividend of 4.55p per share for the year ended 31 August 2021 and an interim dividend of 1.75p per share for the year ended 31 August 2022.
2  Excluding 16,503,527 shares held in treasury.
3  The Company’s ongoing charges are calculated as a percentage of average daily net assets and using the management fee and all other operating expenses excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered and certain non-recurring items for the year ended 31 August 2022.
 

Sector Analysis Total Assets (%) Industrials 21.2 Health Care 20.9 Consumer Discretionary 20.0 Technology 14.3 Financials 12.8 Consumer Staples 6.3 Basic Materials 3.2 Net Current Assets 1.3 ----- 100.0 =====

Country Analysis Total Assets (%) Denmark 19.0 Switzerland 17.7 Netherlands 15.3 France 15.0 United Kingdom 7.3 Italy 7.1 Sweden 6.6 Belgium 2.8 Spain 2.4 Greece 1.8 Poland 1.5 Germany 1.2 Ireland 1.0 Net Current Assets 1.3 ----- 100.0 =====

Top 10 holdings	Country	Fund %
Novo Nordisk	Denmark	8.8
LVMH Moët Hennessy	France	7.3
RELX	United Kingdom	6.2
ASML	Netherlands	6.1
Lonza Group	Switzerland	5.7
DSV Panalpina	Denmark	4.1
Royal Unibrew	Denmark	3.7
Hermès International	France	3.7
Sika	Switzerland	3.7
IMCD	Netherlands	3.3

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

During the month, the Company’s NAV fell  by 6.5% and the share price declined by 9.2%. For reference, the FTSE World Europe ex UK Index returned -4.9% during the period.

Europe ex UK markets saw another tumultuous month during September. Markets were impacted once again by higher month-on-month inflation numbers in the US, as this spurred concerns around which price central banks are willing to pay to get inflation under control. Indeed, both the US Federal Reserve and the European Central Bank raised interest rates by 75bps during the month.

Outside of our Europe ex UK investment universe, but impacting global equity and bond markets, we saw UK politics leading to a sell-off in long-term UK gilts, which in return drove up yields on both sides of the Atlantic, further rattling risk assets. The severe gilt sell-off forced the Bank of England to step in and start buying bonds to stabilise markets.

All sectors in the market delivered negative absolute returns, with real estate and telecommunications taking the largest hit whilst financials held up better.

Overall, September finished another grim quarter for both equities and bonds. It is worth highlighting though, that we are starting to see some brighter spots emerging, even if it remains key to stay highly selective in European markets. The team met with over 100 companies during September, which made it abundantly clear how important it is to be on the right side of energy prices right now, with strong demand coming through for some of our energy transition holdings. Overall, our portfolio companies continue to deliver robust results. The consumer is holding up so far, underpinned by low unemployment, high saving ratios and government programmes to support households with rising energy bills. 

During the month, the Company underperformed its reference index. Sector allocation was positive while stock selection was negative.

In sector terms, the Company’s higher weight to technology and industrials was negative as the market once again punished cyclical assets. The Company’s lower weight to the financials sector detracted from returns, although this was significantly offset by strong stock selection. Our lower weights to telecoms, real estate and energy were positive for performance.

During September the largest negative performance came from the health care sector. In particular, Chemometec ended up being the largest single stock detractor. While the company gave weaker than expected revenue growth guidance for the 2022 and 2023 calendar years, September's share price move appeared more driven by the risk-off positioning in equity markets as interest rates rose. In our view, the company tends to be quite conservative in its market communication and fundamentals remain strong. Within the same sector, positions in Straumann and Polypeptide detracted, while not owning Roche was also negative. 

The Company’s position in DSV was another large detractor in relative returns. Fears around slowing freight volumes weighed on the stock, which was partially fuelled by a warning from American delivery business FedEx. Whilst FedEx is not a direct competitor of DSV by any means, its warning had a negative impact on the logistics industry overall. 

Elsewhere, investors showed concern for pressure on the consumer and cyclical exposures in general, driving share price losses in Adyen, ASML and ASMi.

A positive contribution came from our positioning in European banks. FinecoBank was the best performer, closely followed by KBC, while Avanza Bank also outperformed the falling market. We have been building positions in the sector since the beginning of the year on the view that there is potential for earnings upgrades from higher rates driving net investment income, stable costs, improved balance sheets and a controlled loan loss environment. 

Lastly, Novo Nordisk was another positive contributor to returns. There were a number of encouraging read outs on drug trials in diabetes and obesity treatments that would add to strong growth in their product portfolio. We expect the company to be able to grow 10-15% out to 2025 with earnings before interest and tax margins in the low 40% range.

At the end of the period, the Company had a higher allocation than the reference index towards consumer discretionary, technology, health care and industrials. The Company had an underweight allocation to energy, utilities, financials, consumer staples, telecoms, materials and real estate.

Outlook

So far 2022 has been challenging, with concerns over the economic implications of the Russian invasion of Ukraine, rising interest rates and continued supply chain disruptions weighing on equity returns.

We are incrementally more cautious on the environment but see opportunities for attractive returns in select areas. Large amounts of fiscal spending via the Recovery Fund, Green Deal and the REPowerEU Plan in Europe can drive demand for years to come, for example in areas such as infrastructure, automation, the shift to electric vehicles, digitisation, renewables or the refurbishment of building stock. We believe the portfolio is well aligned to many of these spending streams.

We continue to stay close to our companies which allows us to understand the environment they are operating in. We expect greater dispersion between sector and stock outcomes and with that a need for greater selectivity. In our view this will favour well-managed, well-organised businesses with an element of pricing power and we believe that holding these businesses will benefit our shareholders over the medium to long term.

17 October 2022

ENDS

Latest information is available by typing www.blackrock.com/uk/brge 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.