BAILLIE GIFFORD EUROPEAN GROWTH TRUST PLC
The European Investment Trust plc
Interim Management Statement
for the quarter ended 30 June 2014
The Board of The European Investment Trust plc ("the Company") announces its
Interim Management Statement for the period from 1 April 2014 to 30 June 2014.
This statement is required by the UK Listing Authority's Disclosure and
Transparency Rules and should not be relied upon for any other purpose.
Objective
The objective of the Company is to achieve long-term capital growth through a
diversified portfolio of Continental European securities.
%
Financial summary 30 June 2014 31 March 2014 Change
Net assets £354.31m £360.28m -1.7
Net asset value ("NAV") per share 842.20p 856.40p -1.7
Share price 781.00p 773.00p 1.0
Share price discount to net asset 7.3% 9.7%
value
Investment Manager's review
Performance
During the quarter ended 30 June 2014, the NAV per share of the Company
decreased from 856.40p to 842.20p, resulting in a total return of -1.7%. This
compares with a total return of 0.3% in the FTSE All-World Europe ex UK Index
in sterling. The Company's share price increased by 1.0% from 773.00p to
781.00p in the three month period and, as a consequence, the share price
discount to NAV decreased from 9.7% to 7.3%.
Review of markets
Following significant rises in recent years, European stock markets stalled
over the three months to 30 June 2014. This pause coincided with inconsistent
economic news which, when combined with persistently low inflation, has led the
European Central Bank to maintain a very accommodative monetary policy stance.
Portfolio strategy
There was a substantial increase in exposure to the health care sector. There
are two reasons for this; the first is sector specific and the second, a
rebalancing of the investment portfolio. We have become more positive on the
underlying outlook for the sector. Following a long lean period in terms of
productivity, the research and development departments of the pharmaceutical
and biotech industry appear to be turning technological developments into
healthy product pipelines again. When combined with increasing trends to
specialisation in patient populations and disease categories, both industries
could deliver healthy sales and profit growth over the next five to ten years.
As at 30 June 2014 total exposure to the health care sector was 15.8%, a sharp
increase from the 8.0% held at the start of the quarter. Recent purchases
included Sanofi and Roche, in addition to which we increased the Company's
existing holding in BB Biotech. BB Biotech is a Swiss based investment company
which provides diversified exposure to the biotech industry, where stock
specific risk can be very high. The company trades at a significant discount to
its net asset value.
The second reason for increasing health care exposure relates to a portfolio
rebalancing. As stock markets have risen over the past few years many valuation
imbalances have largely corrected and it is appropriate to start considering
reducing exposure to companies with more cyclical or recovery characteristics,
where shares are now viewed as being almost fully valued. Accordingly,
investing in the health care sector, which we believe offers good long term
value, makes sense from this perspective.
Sources of funding for this increase in health care exposure have included the
disposals of Swatch, the Swiss watch manufacturer and distributor, and Gazprom,
the Russian energy group. Swatch has been a strong performer since purchase
resulting, in our view, the shares becoming fully valued. Gazprom has been a
disappointing investment since purchase and, after a reappraisal of its long
term prospects, following a share price rally, the shares were sold.
Outlook
Although markets are currently trading at more demanding valuation levels, the
accommodative stance from monetary authorities is likely to continue. We remain
vigilant with regard to the valuation of individual companies within the
portfolio, particularly their risk/reward profiles; however, at present, there
is no reason to change from our fully invested stance.
Gearing
The Company announced, on 1 July 2014, that the Euro 30,000,000 secured
multicurrency revolving loan facility agreement with Scotiabank Europe PLC
would be cancelled with effect from 3 July 2014.
Alternative Investment Fund Manager's Directive
In order to comply with the Alternative Investment Fund Managers' Directive, on
18 July 2014, the Company appointed Edinburgh Partners AIFM Limited to act as
its Alternative Investment Fund Manager ("AIFM"), and Northern Trust Global
Services Limited to act as its Depositary. Custody services, which were
previously supplied by JPMorgan Chase Bank, NA, are now being provided by The
Northern Trust Company. The AIFM has delegated the function of managing the
Company's investment portfolio to Edinburgh Partners Limited, the manager of
the Company's assets since 1 February 2010.
Portfolio of investments as at 30 June 2014
% of
Ranking Company Sector Country Net Assets
1 Aryzta Consumer Goods Switzerland 3.1
2 PostNL Industrials Netherlands 3.0
3 Danske Bank Financials Denmark 3.0
4 Gerresheimer Health Care Germany 3.0
5 ENI Oil & Gas Italy 3.0
6 Volkswagen* Consumer Goods Germany 3.0
7 Valeo Consumer Goods France 3.0
8 Prysmian Industrials Italy 2.9
9 Roche Health Care Switzerland 2.9
10 Indra Sistemas Technology Spain 2.9
11 Piaggio Consumer Goods Italy 2.9
12 Belgacom Telecommunications Belgium 2.9
13 Royal Dutch Shell** Oil & Gas Netherlands 2.8
14 Novartis Health Care Switzerland 2.7
15 GAM Financials Switzerland 2.6
16 Delta Lloyd Financials Netherlands 2.5
17 BBVA Financials Spain 2.5
18 BB Biotech Health Care Switzerland 2.5
19 Sanofi Health Care France 2.5
20 GEA Industrials Germany 2.4
21 Ryanair Consumer Services Ireland 2.4
22 KPN Telecommunications Netherlands 2.4
23 Portugal Telecom Telecommunications Portugal 2.3
24 Orange Telecommunications France 2.3
25 Total Oil & Gas France 2.2
26 TDC Telecommunications Denmark 2.2
27 Vivendi Consumer Services France 2.2
28 Ahold Consumer Services Netherlands 2.2
29 Fresenius Medical Care Health Care Germany 2.2
30 Unipol Gruppo Financials Italy 2.1
31 BNP Paribas Financials France 2.1
32 Heineken Consumer Goods Netherlands 2.1
33 Pirelli Consumer Goods Italy 2.1
34 Swedbank Financials Sweden 2.0
35 SAP Technology Germany 2.0
36 Nutreco Consumer Goods Netherlands 2.0
37 Ipsos Consumer Services France 1.9
38 ABB Industrials Switzerland 1.9
39 Outotec Industrials Finland 1.9
40 Feintool International Industrials Switzerland 1.6
Total equity investments 98.2
Cash and other net assets 1.8
100.0
* The investment is in non-voting preference shares.
** The investment is in Class A ordinary shares.
Sector distribution
30 June 2014
% of Net Assets
Consumer Goods 18.2
Financials 16.8
Health Care 15.8
Industrials 13.7
Telecommunications 12.1
Consumer Services 8.7
Oil & Gas 8.0
Technology 4.9
Cash and other net 1.8
assets
100.0
Geographical distribution
30 June 2014
% of Net Assets
Switzerland 17.3
Netherlands 17.0
France 16.2
Italy 13.0
Germany 12.6
Spain 5.4
Denmark 5.2
Belgium 2.9
Ireland 2.4
Portugal 2.3
Sweden 2.0
Finland 1.9
Cash and other net 1.8
assets
100.0
Further information
Further information, including monthly factsheets and daily net asset values
published since the end of the quarter, can be found on the Company's website:
www.theeuropeaninvestmenttrust.com and the Edinburgh Partners' website:
www.edinburghpartners.com.
Past performance is not a guide to future performance.
Other than as detailed above, the Board is not aware of any significant events
or transactions that have occurred between 30 June 2014 and the date of
publication of this statement which would have a material impact on the
financial position of the Company.
13 August 2014
Enquiries:
Dale Robertson
Kenneth Greig
Tel: 0131 270 3800
Alternative Investment Fund Manager:
Edinburgh Partners AIFM Limited, 27-31 Melville Street, Edinburgh EH3 7JF
Investment Manager:
Edinburgh Partners Limited, 27-31 Melville Street, Edinburgh EH3 7JF
Registered Office of the Company:
Beaufort House, 51 New North Road, Exeter EX4 4EP
Neither the contents of The European Investment Trust plc's website nor the
contents of any website accessible from hyperlinks on the website (or any other
website) is incorporated into, or forms part of, this announcement.EUROPEAN INVESTMENT : Interim Management Statement
August 13, 2014 at 12:44 pm EDT
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