European Equity Update

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Dale Mills
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1 European Equity Update Matt Williams, Director, European Equities May 2017

2 Flow as a % of AUM Yield spread European equities are not popular Positioning Significant outflows from the region... driven by anxiety around political risk 30% 35 French political risk premium 20% 25 10% 15 0% 5-10% -5-20% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 17 Feb US UK Eurozone Japan EM But fundamentals are stronger 10-year zero-coupon yield spread: France vs a basket made of 75% Germany, 14% Spain and 11% Italy Source: Bloomberg, JPMorgan, 1 February Data representation and based on the 25 biggest ETF's with a mandate to invest in a particular region. Source: Kepler Cheuvreux March

3 European political landscape Earnings UK: article 50 triggered in March 17 France: Presidential Election May, 2017 Germany: General Election September, 2017 Political uncertainty to remain in

4 01/ / / / / / / / / / / / / / / / / / /20 05/20 09/20 01/2017 Index Index 2017: strong start to the year Macro Global Manufacturing PMIs 60 European Manufacturing PMIs US China Eurozone Germany France Italy Spain UK Solid economic activity across all regions Source: Thomson Reuters Datastream, BlackRock Investment Institute, March Note: Purchasing Manager s Indexes (PMI) are economic indicators derived from monthly surveys of private sector companies. A number of 50 indicates an improvement while anything below 50 suggests a decline. 4

5 Employment (%) Annual Change (%) Labour market and credit growth are healing Macro Year-over Year Changes in Employment 2001 through 20* Eurozone Loans to Private Sector (2) 5 (4) (6) 0 (8) European Union U.S. Private Sector Households Non-Financial Corporates Europe s recovery is on track Source: Empirical Research. European Central Bank, Bureau of Labor Statistics, Empirical Research Partners Analysis.*Data for the European Union through Q3 20. March Source: Thomson Reuters Datastream, Local Statistics Agencies and BlackRock investment Institute. March

6 1Q '09 2Q '09 3Q '09 4Q '09 1Q '10 2Q '10 3Q '10 4Q '10 1Q '11 2Q '11 3Q '11 4Q '11 1Q '12 2Q '12 3Q '12 4Q '12 1Q '13 2Q '13 3Q '13 4Q '13 1Q '14 2Q '14 3Q '14 4Q '14 1Q '15 2Q '15 3Q '15 4Q '15 1Q ' 2Q ' 3Q ' 4Q ' European Sales Growth, y/y EBITDA Margin (%) Activity and pricing Earnings Europe Sales growth, % year on year 15% European margins 19% 10% 5% 0% 19% 18% -5% 18% -10% -15% -20% 17% 17% MSCI Europe EBITDA margin - ex Financials Median will help corporate margins to rebound Source: JPMorgan 31 March Source: JPMorgan, 31 March

7 Earnings revisions ratio EPS growth (%) European Earnings are turning positive Earnings Earning revison ratio in Europe Quarterly Eurozone EPS growth since Q % % 10% 0% 8% 1% 1% 12% 18% 13% 8% 9% 4% 4% 1% 12% % -20% -12% -14% -4% -10% -5% -14% -4% % -33% -40% 1Q '12 3Q '12 1Q '13 3Q '13 1Q '14 3Q '14 1Q '15 3Q '15 1Q ' 3Q ' Europe 9-wk avg Euro Stoxx EPS Growth, %yoy Earnings revisions the strongest in 5 years Source: Barclays Research, DataStream, MSCI, IBES. 31 March Source: JPMorgan, March

8 02/01/ /02/ /03/ /04/ /05/ /06/ /07/ /08/ /09/ /10/ /11/ /12/ /01/ /02/ /03/ /04/ /05/ /06/ /07/ /08/ /09/ /10/ /11/ /12/ /01/20 02/02/20 02/03/20 02/04/20 02/05/20 02/06/20 02/07/20 02/08/20 02/09/20 02/10/20 02/11/20 02/12/20 02/01/ /02/2017 Euribor What about European Banks? Earnings 3 month Euribor futures (YE17-YE19) Euribor FY17 Euribor FY18 Euribor FY19 The outlook has improved, but rates remain low Source: Bloomberg, BlackRock, March

9 Price to Earnings Shiller P/E Yield European equities may not be cheap but are not expensive Valuation MSCI Europe: 12 month forward price to earnings Shiller P/E versus US Equities Equity, Sovereign and credit yields N12M PE Median US: Shiller's P/E = 29.8x MSCI EMU: Dividend Yield Bund 10yr yield Iboxx Euro Corp bond yield Relative valuations supportive Source: Chart 1: Morgan Stanley. 3 April Chart 2: Source: Credit Suisse- shows valuation discount of Europe versus US using Shiller PE. 31 March Chart 3: Source: Barclays, March

What investment opportunities are we focusing on?

capex EM consumers EM consumers Reference to the names of

explaining the investment strategy, and should not be

10 What investment opportunities are we focusing on? Global cyclicals Global cyclicals US shale capex US shale capex EM consumers EM consumers Reference to the names of each company mentioned in this communications is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies. 10

Market Capitalisation BlackRock European Dynamic Fund: Overview Europe ex UK equities All Cap Style: Flexible Tracking error range: 4.0% - 10.

(Domicile) Benchmark LARG E European Dynamic Europe ex UK Alister Hibbert BFM (UK) FTSE World Europe ex UK Fund size 2,206m as at 31 March 2017 MID 35-65 shares SMALL Style Flexible Flexible,

11 Market Capitalisation BlackRock European Dynamic Fund: Overview Europe ex UK equities All Cap Style: Flexible Tracking error range: 4.0% % Driven by: rigorous process proven stock picking portfolio construction skills Performance objective: 1st quartile versus peer group over 3 and 5 years Investment Region Manager Vehicle (Domicile) Benchmark LARG E European Dynamic Europe ex UK Alister Hibbert BFM (UK) FTSE World Europe ex UK Fund size 2,206m as at 31 March 2017 MID shares SMALL Style Flexible Flexible, all-cap, high alpha product Source: BlackRock. Relevant peer group is the IMA Europe ex UK peer group of mutual funds. Target tracking error range: there is no guarantee that this will be achieved. Please refer to Morningstar disclaimer on page. 11

% Return BlackRock European Dynamic Fund: Performance to 31 March 2017 Performance (D Share Class, Net, GBP) 30 25 20 15 10 5 0 YTD 2017 1 yr 3yr p.a. 5yr p.a. BlackRock European Dynamic Fund 7.8 22.

12 % Return BlackRock European Dynamic Fund: Performance to 31 March 2017 Performance (D Share Class, Net, GBP) YTD yr 3yr p.a. 5yr p.a. BlackRock European Dynamic Fund FTSE World Europe ex UK Inception date: 28 February Basis: D share class, fund returns in Sterling, Dealing Bid to Bid prices, net income reinvested, net of expenses. Past performance is not a guide to future performance and should not be the sole factor of consideration when selecting a product. Source: BlackRock. 12

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Global Allocation Fund

FOR PROFESSIONAL CLIENTS AND QUALIFIED INVESTORS ONLY NOVEMBER 2018 Global Allocation Fund A sub-fund of BlackRock Global Funds Investing for the long term The potential for lower expected returns and