Portfolio Update

BLACKROCK GREATER EUROPE INVESTMENT TRUST plc (LEI - 5493003R8FJ6I76ZUW55)
All information is at30 September 2018 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)	-0.6%	5.2%	11.6%	62.8%	389.0%
Net asset value* (diluted)	-0.6%	5.2%	11.6%	62.8%	389.4%
Share price	-1.2%	3.0%	11.0%	60.5%	365.6%
FTSE World Europe ex UK	-0.5%	3.1%	2.0%	51.6%	250.1%

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

At month end

Net asset value (capital only):	375.24p
Net asset value (including income):	379.79p
Net asset value (capital only)1:	375.24p
Net asset value (including income)1:	379.79p
Share price:	358.50p
Discount to NAV (including income):	5.6%
Discount to NAV (including income)1:	5.6%
Net cash:	1.8%
Net yield2:	1.5%
Total assets (including income):	£328.4m
Ordinary shares in issue3:	86,459,691
Ongoing charges4:	1.10%

1  Diluted for treasury shares.
2  Based on a final dividend of 3.70p per share for the year ended 31 August 2017 and an interim dividend of 1.75p per share for the year ended 31 August 2018.
3  Excluding 23,869,247 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 2017.

Sector Analysis	Total Assets (%)		Country Analysis	Total Assets (%)
Industrials	35.3		Switzerland	18.4
Health Care	22.3		France	15.4
Financials	11.4		Germany	13.0
Technology	9.4		Denmark	10.6
Consumer Goods	9.4		Netherlands	7.5
Consumer Services	3.4		Sweden	5.8
Basic Materials	3.3		Russia	4.9
Oil & Gas	2.0		Italy	4.8
Telecommunications	1.7		Spain	4.6
Net current assets	1.8		Israel	3.3
	-----		Finland	2.5
	100.0		United Kingdom	2.4
	=====		Ireland	2.2
			Belgium	1.8
			Greece	1.0
			Net current assets	1.8
				-----
				100.0
				=====

Ten Largest Equity Investments
Company	Country	% of Total Assets
Lonza Group	Switzerland	7.3
SAP	Germany	5.4
Safran	France	5.1
Novo Nordisk	Denmark	4.6
Sika	Switzerland	4.6
Fresenius Medical Care	Germany	3.7
Thales	France	3.3
Unilever	Netherlands	3.2
Sberbank	Russia	2.9
Ferrari	Italy	2.9

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

During the month, the Company’s NAV fell by 0.6% and the share price fell by 1.2%. For reference, the FTSE World Europe ex UK Index returned -0.5% during the period.

September proved a relatively volatile month for European ex UK equities, with some short-term market phases being masked by the eventual decline of the index. From a political standpoint, investor focus remained on Italy. Towards the end of the month, more detail emerged around the forthcoming Italian budget, with the proposed target fiscal deficit for 2019 of 2.4% being worse than the market feared. This target could lead to confrontation between the European Commission and Italy. Investors remain concerned that the populist government may seek to roll-back both previous reforms and introduce Universal Basic Income. Despite this, Italian-listed equities appreciated during September, led up by consumer discretionary firms with global customer exposure and banks with more domestic revenue streams.

In macroeconomic terms, September saw a continuation of global growth led by the US, with the Federal Reserve raising interest rates towards the end of the month. The Euro continues to trade around 1.16. As we approach the end of Quantitative Easing, expectations of actual rate increases in the Eurozone remain subdued. The Eurozone Services PMI rebounded slightly, although the Manufacturing weakened. The market overall was led by energy, as brent crude prices reached a four year high.

The Company performed broadly in-line with the market over the month. Whilst stock selection was positive for Company performance, sector allocation detracted. The higher weighting when compared to the reference index towards technology, proved the largest detractor. This was primarily driven by stocks exposed to the semiconductor cycle, where we are seeing slowing near term trends, particularly emanating from China.

The lower allocation than the reference index to the oil & gas sector detracted from returns, as it moved higher with the oil price. We continue to hold a lower allocation to this sector as we believe shale oil, sourced primarily from the Permian Basin in the US, will become the marginal barrel of oil in the medium term, putting a cap on the oil price given its cheaper economics of extraction.

The lower allocation to financials also detracted from performance. A position in Alpha Bank proved the largest detractor over the period, followed by Danske Bank which has been hit by headlines around money laundering, resulting in the departure of the CEO. Conversely, a position in Sberbank Russia contributed positively to performance.

Lonza was also a contributor to performance as it rallied following a capital markets day in which the company confirmed its 2022 guidance and said the outlook beyond was positive. The company is experiencing good synergies from the Capsugel deal it did last year and the CEO pointed to many opportunities in formulation – the process of adding the active pharmaceutical ingredients and other substances to bulk or protect the drug.

Safran was also a positive contributor, as the company raised full year guidance for 2018 after a strong first half performance period. Earnings before interest and tax (EBIT) in the first half of the year was 8% ahead of consensus, driven by the Zodiac business, as well as strong operational performance in the engine and equipment businesses.

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

The apparent attractiveness of European equities has waned year-to-date. Political headlines have shifted sentiment towards the region and expectations have been reset lower. These expectations, and indeed market positioning, have however come from bullish levels at the onset of 2018. We continue to see earnings progressing positively in the region and note that foreign exchange impacts are probably past their worst. The continued global growth has supported revenues in Europe. Risks are clearly present in the market, but resolutions on trade wars could prove a catalyst for the region and particularly for stocks with depressed valuations. We believe navigating risks and extreme valuations through active stock selection is increasingly important at this stage in the cycle. From a fundamental standpoint, there are ample attractive investment opportunities within Europe which can deliver earnings growth and strong cash flow irrespective of the political environment.

17 October 2018

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.