BlackRock Greater Europe Investment Trust Plc - Final Results

BlackRock Greater Europe Investment Trust plc

LEI:  5493003R8FJ6I76ZUW55

Annual Report and Financial Statements 31 August 2024

Performance record

1 The change in net assets reflects payments for shares repurchased into treasury, portfolio movements and dividends paid.

2 Alternative Performance Measures, see Glossary in the Annual Report and Financial Statements.

3 Further details are given in the Glossary in the Annual Report and Financial Statements.

4 20 September 2004.

Chairman’s Statement

Overview
The European economy entered 2024 on a weaker footing than previously expected after narrowly avoiding a technical recession in the second half of 2023. This was against a background of weak consumer demand. The European Central Bank maintained a tight monetary policy despite improving inflation, and adopted a cautious stance in light of persistent geopolitical instability and underlying inflationary risks. Despite the above, European equities delivered strong positive returns in the first half of 2024, as inflation figures continued their downward trend and in the expectation of further interest rate cuts by central banks.

Performance
Against this background, I am pleased to report that the portfolio performed well during the year, outperforming its reference index. The Company’s net asset value per share (NAV) returned +16.4% and the share price +15.5%. In comparison, the FTSE World Europe ex UK Index returned +15.8% over the same period (all percentages calculated in Sterling terms with dividends reinvested).

More details on this and the significant contributors to and detractors from performance during the year are given in the Investment Manager’s Report below. Since the financial year end and up to close of business on 1 November 2024, the Company’s NAV has decreased by 7.0% compared with a fall in the FTSE World Europe ex UK Index of 3.4% over the same period.

Revenue earnings and dividends
Your Company’s total revenues each year are a reflection of the dividends we receive from portfolio companies. The revenue return per share for the year ended 31 August 2024 amounted to 7.35p per share, which compares with 6.85p per share for the previous year, an increase of 7.3%.

At present, the dividends paid from the Russian securities in the Company’s portfolio are held in a custody ‘S’ account in Moscow. The balance on the ‘S’ account as at 31 August 2024 was equivalent to approximately £2.45 million at the exchange rate applicable on that date. The Company’s Investment Manager is monitoring the receipts into the ‘S’ account against dividends announced by the portfolio companies, although there is no certainty that the sums in the ‘S’ account will ever be received by the Company. They are not recognised in the Company’s net asset value or in its income statement.

The Board also monitors the underlying local value of the Russian securities on the Moscow Stock Exchange which at 31 August 2024 were approximately £23.1 million at the exchange rate applicable on that date, although again there is much uncertainty whether the Company will ever be able to receive any value in respect of these securities. These investments have been held at a nominal value of £0.01 in the net asset value at 31 August 2024.

In April, the Board declared an interim dividend of 1.75p per share (2023: 1.75p) and the Board is proposing the payment of a final dividend of 5.25p per share for the year (2023: 5.00p). This, together with the interim dividend, makes a total dividend for the year of 7.00p per share (2023: 6.75p), an increase of 3.7%. The dividend will be funded from revenue received in the year. Subject to shareholder approval, the dividend will be paid on 20 December 2024 to shareholders on the Company’s register on 22 November 2024, the ex-dividend date being 21 November 2024.

Management of share rating
Over the year to 31 August 2024, the Company’s shares have traded at an average discount of 5.6%. During the year, the Company purchased 1,668,000 ordinary shares at an average price of 613.13p per share and an average discount of 5.4% for a total cost of £10,227,000. Since the year end up to 4 November 2024, a further 1,094,011 ordinary shares have been bought back at an average price of 578.60p per share for a total cost of £6,330,000. All shares have been placed in treasury.

As reported in the Half Yearly Financial Report, the Directors exercised their discretion not to operate the half yearly tender offers in November 2023 and May 2024. It was also announced on 24 September 2024 that the Board had decided not to implement a semi-annual tender offer in November 2024. Over the six months to 31 August 2024, the average discount to NAV (cum income) was 4.9% and the discount as at close of business on 23 September 2024 was 5.6%. Against a background of volatile market conditions and the Company trading at the narrowest discount within its peer group at that date, the Board concluded that it was not in the interests of shareholders as a whole to implement a semi-annual tender offer in November 2024.

The Directors recognise the importance to investors that the market price of the Company’s shares should not trade at a significant premium or discount to the underlying NAV. Accordingly, in normal market conditions, the Board may use the Company’s share buy back and share issue powers, or operate six monthly tender offers, to ensure that the share price does not go to an excessive discount or premium to the underlying NAV. Resolutions to renew the Company’s semi-annual tender offers and the authorities to issue and buy back shares will be put to shareholders at the forthcoming Annual General Meeting.

Board composition and policy on tenure
Having served as a Director of the Company since April 2013, and as Chair since November 2016, it is my intention to step down from the Board in due course, subject to a suitable successor being identified. As part of orderly succession planning, the Board commenced a search in the year to identify a new Director, assisted by a third-party recruitment firm. As part of this process, consideration is being given to ensuring that the Board retains an appropriate balance of skills, knowledge and experience, independence and diversity that meets or exceeds relevant best practice. The process is underway and a further announcement will be made in due course.

The Board has also decided to introduce guidelines on Directors’ tenure, with the intention that (under normal conditions) no Director will normally serve on the Board for more than nine years, or twelve years in the case of the Chairman. The longer time limit for the Chairman’s tenure is to allow for continuity of leadership in circumstances where a Chairman is appointed from the ranks of existing Board members after having already served on the Board for a period of time. In setting this policy, the Board is mindful that two Board members have exceeded the proposed nine-year limit. To ensure an orderly Board refreshment process, the implementation of the new guidance on tenure will therefore be phased in over a period of time.

The Board is cognisant of the benefits of a diverse range of skills on the Board and the Company is compliant with the Parker Review recommendation that FTSE 350 companies have at least one director from an ethnically diverse background by 2024. In accordance with the Listing Rules we have disclosed the ethnicity of the Board and policy on matters of diversity in the Corporate Governance Statement in the Annual Report and Financial Statements. The Board is also compliant with the recommendations of the FTSE Women Leaders Review. The review set targets for FTSE 350 companies which are designed to achieve boards with 40% female representation (previously 33%) and at least one woman in the role of Chair or Senior Independent Director on the board.

Shareholder communications
The Board appreciates how important access to regular information is to our shareholders. To supplement our website, we offer shareholders the ability to sign up to the Trust Matters newsletter which includes information on the Company, as well as news, views and insights. Further information on how to sign up is included on the inside cover of the Annual Report and Financial Statements.

Outlook
There are uncertainties in the outlook based on events such as the recent elections both in the US and Europe, inflation and interest rates, as well as geo-politics. However, a combination of interest rates starting to trend downwards (the ECB has indicated a clear direction after easing policy twice since June) and signs of moderate but improving economic momentum, give reasons for cautious optimism for the European economy and its stock markets. European stocks are attractively valued both relative to their history and global markets, especially so in comparison to the US market. This could bring positive returns, helped by the macroeconomic environment, the potential for improvement in corporate earnings and the increased use of buybacks by European management teams returning capital to shareholders.

Annual General Meeting
The Annual General Meeting (AGM) of the Company will be held in person at the offices of BlackRock at 12 Throgmorton Avenue, London EC2N 2DL on Tuesday, 10 December 2024 at 12 noon. Details of the business of the meeting are set out in the Notice of Annual General Meeting in the Annual Report and Financial Statements.

For the benefit of shareholders who are unable to attend this year’s AGM in person, we have arranged for the proceedings to be viewed via a webinar. You can register to watch the AGM by scanning the QR Code inside the cover of the Annual Report and Financial Statements or by visiting our website at www.blackrock.com/uk/brge and clicking on the registration banner. Please note that it is not possible to speak or vote at the AGM via this medium and joining the webinar does not constitute attendance at the AGM. Shareholders wishing to exercise their right to attend, speak and vote at the AGM should either attend in person or exercise their right to appoint a proxy to do so on their behalf.

ERIC SANDERSON
Chairman
5 November 2024

Investment Manager’s Report

Market review
For the year ended 31 August 2024 performance was positive with a share price total return of 15.5% and underlying NAV return of 16.4%. By way of comparison, the reference index (FTSE World Europe ex UK Index) returned 15.8% over the same period. All percentages are calculated in Sterling terms with dividends reinvested. Despite the strong performance, the market was volatile, driven by rapidly shifting market narratives concerning the resilience (or lack thereof) of global economic growth and the future path of interest rates.

Reviewing events chronologically, the Company’s financial year started with persistently high interest rates weighing on sentiment. Equity markets moved off their lows from October 2023 as inflation in both the US and Europe surprised to the downside leading to a downward shift in interest rate expectations and enabling policy makers at the Federal Reserve and the European Central Bank to pause further rate hikes. Cyclical and long-duration assets led the charge as investors anticipated rate cuts in 2024. This positive momentum carried over into the first quarter of 2024, finding additional support from better-than-expected macroeconomic data as well as robust corporate earnings. 2023 full year results – reported in the first quarter of 2024 – saw capital expenditure announcements from large US technology groups which surprised significantly to the upside and led to strong share price moves in technology and semiconductor related issuers. The market overall favoured cyclical and quality growth assets, which generally benefited the Company’s portfolio positioning during this period.

Beginning in the early second quarter of 2024 the market’s enthusiasm ebbed, with higher inflation and weaker growth data causing a repricing in interest rate expectations, a re-emergence of ‘hard landing’ fears and a coincident change in equity market leadership – with defensive and value stocks favoured over cyclicals and growth.

The distressing ongoing conflicts in Ukraine and the Middle East were never far from the news. While the human costs of these events are enormous and tragic, the impact on financial markets has been limited – with major commodity prices generally well behaved and an imperceptible influence on major European company earnings. Closer to home, French parliamentary elections led to a temporary rise in risk premia applied to French domiciled assets, but there is limited evidence of any impact on future earnings so far.

Portfolio performance
Defensives
Reviewing performance at the single stock level, two very different defensive businesses – Novo Nordisk (Novo) and RELX – were top contributors. Novo was the Company’s top performing stock over the period. Several years of exceptional share price developments have left the company’s merits better recognised by market participants today, with Novo growing into the largest holding in the Company over the past two years.

Over the last year Novo shares continued to rise due to strong sales growth of its GLP-1 drugs, ongoing expansion into the obesity treatment market, positive clinical trial results, as well as regulatory approvals. Its obesity blockbuster drug Wegovy experienced surging demand globally, particularly so in the US, with sales increasing by over 200% year-on-year in 2023, adding approximately US$2.4 billion to group revenues.

Despite the gradual emergence of new players in the obesity market, we take comfort from the fact that most new entrants are still in the early development stage with potentially new drugs years away from entering this highly attractive market; they also fail to offer clear differentiation from Novo’s injectable product portfolio thus far.

Additionally, the combination of a large total addressable market in obesity and continued supply shortages experienced by the leading manufacturers means this segment should offer room for multiple players; in fact, having more than two players would help to develop the category benefiting all companies involved. For now, we expect the obesity market to remain dominated by Novo and Eli Lilly.

Looking ahead, we remain positive on Novo’s outlook. We anticipate several catalysts to drive the shares higher, including positive Phase III data for CagriSema, which is currently undergoing clinical trials. Early results have shown promising efficacy in weight reduction and glycaemic control compared to existing treatments, which could make it the best-in-class drug when it launches in the second half of 2025.

The closure of the Catalent deal, a strategic collaboration to expand production capacity for Wegovy, should significantly boost manufacturing capacity to serve currently unmet demand, as 1.2 billion people are expected to live with obesity by 2030, up from 800 million in 2020. From here, we expect Novo Nordisk to continue growing sales at 20% top line with over proportional growth in operating earnings.

Secondly, RELX showed strong share price developments on the back of a step change in its organic sales growth profile. As a leading provider of information-based analytics and decision tools for professional and business customers, RELX has undergone a significant business transformation in recent years. It has invested heavily in value-add tools, particularly in their subscription-based ‘Scientific, Technical, and Medical’ (STM) and ‘Legal’ divisions, which tend to run on contract structures of at least three to five years. This provides excellent revenue visibility, as for many of its clients renewing those subscriptions represents a business-critical decision, with high switching costs.

Above all, RELX’s strength lies in the vast amount of data they possess. Instead of just selling data, they build state of the art analytical tools. One example of this is in the Legal division which allows lawyers to search for historic case verdicts and assist in drafting legal documents. Their Legal division generated 2% organic growth pre-Covid which has accelerated to 6% since then.

Finally, following years of investing smartly in those capabilities, RELX has managed to emerge as an ‘artificial intelligence (AI) winner’. It benefits from holding intellectual property (IP) and has made significant steps in monetising AI, already generating revenue from their AI tools, leaving potential for further acceleration in revenue growth in future years.

Consumer cyclical
Shares in high-end sports car manufacturer Ferrari, a quasi-luxury company in the autos sector, also contributed successfully rising by 50% over the period. This success can be attributed primarily to a strong build out of its order book, a significant shift in mix and personalisation revenues that increased the average sale price per car by over 10% over the past year.

Ferrari’s strategy of focusing on limited production volumes, selling just 14,000 cars per year, continues to create elevated levels of brand desire, an unparalleled degree of pricing power and has demonstrably enhanced its earnings resilience over time. Despite weakness in the broader consumer market, particularly among ‘aspirational buyers’, Ferrari has managed to stay largely unaffected as 74% of its cars were sold to existing customers in 2023.

Major upcoming product launches, including the 12 Cilindri and 12 Cilindri Spider sportscars, ensure the group’s product pipeline remains strong and should also support attractive growth in the coming years. Additionally, brand equity remains carefully managed with its high-quality management team ensuring that the second-hand market supports their overall pricing strategy.

One of Ferrari’s greatest advantages lies in its unique ability to increase or restrict supply of any one model at any given time, allowing for increased levels of control over the progression in its operating margins and cashflows. Ferrari enjoys excellent visibility provided by an order book that provides revenue coverage well into 2026. All told, we consider the company to be among royalty in European markets as Ferrari remains one of the highest quality assets in our universe with operating earnings compounding at +10% for the foreseeable future.

Unlike Ferrari, the broader luxury sector has struggled this past year, with our long-term holding in LVMH being among the largest detractors. Indeed Hermès, which operates a business model more aligned to Ferrari, has also faced some difficulties.

For the better part of a decade the luxury goods sector has enjoyed strong momentum delivering 10% organic growth on average. In the past three years this stellar growth accelerated further, with top brands benefiting from both pricing power and very positive global consumption trends. This was despite the Chinese consumer contributing materially less to growth than in prior years. Overall, we identify two negative factors being faced by luxury companies that have led to a more muted near-term growth outlook and, in some cases, operating deleverage, namely: a weaker-for-longer consumer backdrop in China and ‘aspirational’ buyers cutting back on discretionary spending in the US.

Zooming in on China, this has been a major growth engine for the luxury sector for much of the past decade, driven by fast-rising wealth and increasing consumer awareness. However, in more recent times, a weaker economic environment, declining property values and restrictive government policy has dampened consumer confidence. This has resulted in more volatile demand trends in what remains an important luxury end-market, comprising circa 30% of sales on average for most brands. Currently, only a select few operators, counting Hermès and Louis Vuitton among them, are enjoying positive growth with Chinese consumers, while most are suffering. Despite those cyclical headwinds we believe that long-term prospects for luxury goods consumption in China are bright and structural drivers remain firmly intact. In the face of negative headlines, average incomes are still rising year-on-year, the middle class continues to expand and it is expected that China’s ultra-high-net-worth population grows 47% between 2023 and 2028 (source: Knight Frank). Meanwhile, a recent shift in government policy suggests more of a focus on stimulating consumption as a driver of GDP growth than in the past. While we are not out of the woods just yet, we believe that Chinese appetite for luxury goods remains intact.

Industrial cyclical
Technology, and more specifically the semiconductor subsector, was the source of some of the biggest winners of the year in the wafer fabrication equipment companies ASML and ASM International (ASMI) but also the biggest detractor in STMicroelectronics.

We have regularly cited in previous reports the attraction of running large exposures to this industry as the segment serves many structurally growing end markets. The businesses we own in this industry can be regarded as enablers of large transformational changes occurring in the world around us. Those include the decarbonisation of transport, elevated demand for computing power to conduct data analytics, the omnipresence of inter-connected devices, Industry 4.0, as well as accelerated demand for high end logic chips as we move to more wide scaled adoption of generative AI applications, which in itself demands significant build out of data infrastructure.

Overall, demand for leading edge chips was driven by a significant increase in investment spend by US tech giants such as Amazon Web Services, Microsoft, Alphabet and Meta which in large part went into the expansion of their AI capabilities. ASML and ASMI are prime examples of why technological breakthroughs are not just contained to the US, with some of the key enabling technologies coming out of those two businesses listed in Europe.

Last year we argued we were seeing a trough in the semiconductor cycle and were positioned to play a multi-year recovery in the sector. This recovery has started to materialise, with order numbers coming through strongly. In 2023, ASML achieved net sales of €27.6 billion, reflecting 30% growth compared to the previous year. By the end of 2023 ASML had built a robust order backlog of €39 billion, bolstered by a record order intake of €6.3 billion in the fourth quarter of 2023. This growth was driven by high demand for their cutting-edge lithography tools, Extreme Ultraviolet systems. With 2024 guided to be a transition year for the company, ASML is preparing for a healthy market recovery in 2025 as it ramps-up capacity and expects further growth driven by advancements in AI and demand for new high bandwidth memory technologies.

Like ASML, ASMI also enjoyed strong order momentum, despite experiencing heavy quarterly fluctuations during 2023. By the first quarter of 2024, ASMI’s order intake had risen to €698 million, showing a 10% increase compared to the first quarter of 2023, supported by strong demand in advanced semiconductor technologies like gate-all-around (GAA) and increased memory orders. ASMI’s fortunes are closely tied to leading edge chip architectures moving to 2 nano-meter nodes with manufacturers like TSMC adopting ASMI’s cutting edge GAA technology in the process. ASMI also made strides in silicon carbide Epitaxy technology, a key growth area, primarily used in high-power and high-temperature applications. We expect both companies to experience multi-year growth as the semiconductor cycle continues to recover and technology roadmaps of its key clients require increased spend well into the second half of the decade.

Against this stronger background, the industry has also faced challenges as normalisation of extraordinary demand patterns experienced during Covid led to a prolonged period of order disappointments and inventory destocking in auto and industrial verticals.

STMicroelectronics, the portfolio’s largest detractor over the period, struggled primarily due to losing market share in China and seeing its industrial business shrink by half. Uncharacteristically, the company had to lower its full-year guidance twice in 2023, attributing the cuts to weakening demand in key sectors like automotives and industrials. Those challenges were caused above all by a slowdown in electric vehicle sales in Europe, as well as inventory build-up across different industry verticals.

The subsequent decline in customer orders led to underutilised fabrication plants, causing adverse effects on STMicroelectronics’ operating profitability and significant downgrades to consensus expectations. Considering the continued weaker outlook for both the auto and industrial end markets and taking into consideration the general predicament traditional European car manufacturers find themselves in, we are currently re-assessing positioning in this part of the portfolio.

Portfolio changes
As long-term investors we aim to give portfolio company management teams sufficient time to execute on their respective value creating strategies and, with this in mind, it is pleasing to note that over the course of the financial year portfolio turnover was just below 22% – in line with target holding periods of three to five years. The key transactions accounting for this turnover and summaries of the careful due diligence undertaken are outlined below.

Danish freight forwarding and logistics company DSV had been held since 2016 and one of the key tenets of the investment case was the management team’s track record in creating value through acquisitions and fostering a best-in-class culture. However, several red flags started to emerge over the course of last year. Firstly, the company announced a US$10 billion exclusive logistics joint venture with Saudi’s NEOM city project. Not only did this raise concerns about corporate governance, capital intensity of the project and pointed to a material shift in a well-rehearsed strategy, it also raised questions around heightened execution risks potentially destroying value over time. Additionally, DSV made significant leadership changes in early 2024 with its highly regarded CEO stepping down after 15 years in the job. Lastly, from an organic growth perspective, DSV’s operations continued to be adversely impacted by low growth in global trading volumes which remain on a slow recovery path overall. This combination of factors lowered our conviction in the investment thesis and led to exiting the shares.

Diminished faith in company management was also a contributing factor in the sale of pharmaceutical equipment supplier Sartorius Stedim. The company saw its revenues drop by 18% in the first nine months of 2023 and was forced to revise down its full-year sales and earnings guidance due to reduced demand and excess inventories held by clients. Whilst this appears a forgivable event, we took serious issue with the overpriced acquisition of Polyplus which was closed in the summer of 2023. This deal raised questions around capital allocation, as the multiple paid was high: partially interpreted as an attempt to buy in growth at a time of weaker demand, Stedim had to raise equity to finance the transaction diluting existing shareholders in the process. Like DSV, we felt this was a material break of our original thesis and decided to redeploy capital into issuers where conviction levels were meaningfully higher.

Finally, we added L’Oréal to the portfolio. The company has been almost uniquely focused on the beauty category since its foundation in 1909. As the world’s largest cosmetics company, L’Oréal benefits from a diverse brand portfolio that spans mass-market to luxury beauty products, appealing to a wide range of consumers. The company’s consistent investment in research and development keeps it at the forefront of beauty trends, such as the growing demand for sustainable and eco-friendly products, while its investments in technology and data analytics have enhanced its ability to understand consumer preferences and deliver personalised experiences, meaning it is well placed to capitalise on the growing online beauty market. Additionally, its continued expansion into emerging markets, particularly in Asia and Latin America, offers substantial growth opportunities, whilst further premiumisation of its product offerings could boost profitability.

Outlook
Following the “AI Boom” at the beginning of 2024, at the time of writing the global investment community had begun a more critical assessment of the return on investment on the large amounts of money pouring into the build-out of AI infrastructure. Market concerns have centred around the sustainability of this AI capital expenditure cycle. While some of the initial excitement was clearly overdone, we remain of the view that new technological breakthroughs often follow a familiar pattern – investors overestimate their potential in the near term while underestimating what is possible in the medium to longer term. We suspect the adoption of AI and its different use cases are no different in that regard. The race to build leading AI infrastructure is still in its infancy, with significant competitive momentum pushing cash rich companies to continue to innovate and invest to stay ahead. It is clear hardware infrastructure roadmaps are not keeping up with the pace of development in AI, leading to a widening gap between model training computational needs and the key infrastructure that is available in compute, rack design, network, cooling systems and power. None of today’s technology leaders can afford to be left behind in delivering breakthrough technologies in what could be the defining technological development of this generation.

This is relevant to us because the European market is home to an ecosystem of companies which possess the enabling technologies required in these transformational changes – not just AI adoption, but also the energy transition and global efforts to reorganise supply chains. Many of these businesses sell to global customer bases and are the world leaders in their fields. These competitively advantaged and secular growth businesses have become an increasingly important component of the overall market whilst undifferentiated ‘older economy sectors’ like telcos, auto and energy producers have shrunk in size over the last decade.

Alongside the investment opportunities afforded by these structural forces, we detect a cyclical upturn in a variety of industries like construction, life-sciences and chemicals which have suffered from pronounced volume declines for the best part of two years. Global manufacturing Purchasing Managers Indices have stayed below 50 for the last 23 months, signalling the longest period of contraction since 1951; importantly, in many end markets management teams are now talking about stabilisation of demand with painful inventory adjustments having come to an end. European construction is a good example, where easing financial conditions are helping activity levels to recover following the 40-45% collapse in new built residential volumes over the past couple of years.

Against the backdrop of a structurally improved market composition and a cyclical recovery, we see valuations in the European market at a record wide discount relative to the US. This dichotomy does not make sense to us. A healthy market operates as a discounting mechanism and the investment community’s myopic focus on near term problems should soon make way for the medium- to long-term opportunities. We see 2025 as a recovery year for earnings and beyond that we envisage a multi-year period of healthy profit growth, alongside the potential for this historic valuation gap to the US to narrow. Those prepared to take the optimistic view should be rewarded over time.

STEFAN GRIES AND ALEXANDRA DANGOOR
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
5 November 2024

Ten largest investments

Together, the Company’s ten largest investments represented 51.8% of the Company’s portfolio as at 31 August 2024 (2023: 53.4%)

1 ► Novo Nordisk (2023: 1st)
Health Care company
Market value: £61,540,000
Share of investments: 8.9%

Novo Nordisk is a Danish multinational pharmaceutical company and a leader in diabetes care. Novo Nordisk is expected to post strong earnings and cashflow growth driven by demand for Ozempic which treats Type 2 diabetes and its weight management drug Wegovy. The latter has recently provided evidence of reducing major adverse cardiovascular events by 20%.

2 ▲ ASML (2023: 3rd)
Technology company
Market value: £49,827,000
Share of investments: 7.2%

ASML is a Dutch company specialising in photolithography systems for the semiconductor industry. The company is at the forefront of technological change, investing in leading research and development to capture the structural growth opportunity coming from growth in mobile devices and microchip components. High barriers to entry within the industry give ASML a protected position with strong pricing power allowing growth in margins.

3 ▲ RELX (2023: 4th)
Consumer Discretionary company
Market value: £44,732,000
Share of investments: 6.5%

RELX is a UK based multinational information and analytics company with high barriers to entry in most of its divisions, including scientific publishing. Their capital light business model enables a high rate of cash conversion with repeat subscription-based revenues. The business benefits from increasing usage of data globally supporting their data analytics business.

4 ▼ LVMH (2023: 2nd)
Consumer Discretionary company
Market value: £36,935,000
Share of investments: 5.3%

LVMH is a French multinational corporation specialising in luxury goods. The group has a strong and well-diversified portfolio of luxury brands ranging from handbags to spirits to cosmetics. LVMH’s business model enjoys high barriers to entry due to the heritage, provenance and exquisite quality of its product offering. Its consistent brand investment through economic cycles has helped to spur brand desirability and allowed for significant pricing power.

5 ▲ Ferrari (2023: 11th)
Consumer Discretionary company
Market value: £30,706,000
Share of investments: 4.4%

Ferrari is an Italian luxury sports car manufacturer emphasising exclusivity, performance and quality globally, with a strong focus on innovation and delivering unique driving experiences to its clientele. There is a lot of excitement for 2024 as limited release models are being introduced including the SF90 XX Stradale, followed by the Spider. Both cars are expected to come at higher price points that will be additive to Ferrari’s overall revenue mix. Demand will remain strong beyond 2024, with the company’s order book already sold out up to 2026.

6 ▲ Hermès (2023: 7th)
Consumer Discretionary company
Market value: £28,156,000
Share of investments: 4.1%

Hermès is a French luxury design house specialising in leather goods, lifestyle accessories, home furnishings, perfumery, jewellery, watches and high-end clothing. With good brand management and craftsmanship, Hermès products are supply constrained and the company enjoys strong earnings visibility as some of its most iconic products are sold on allocation via waiting lists. Hermès has been run in a conservative fashion for generations with strategic decisions taken with the longest of timeframes.

7 ▲ Safran (2023: 10th)
Industrials company
Market value: £27,166,000
Share of investments: 3.9%

Safran is a French multinational supplier of aerospace, defence and security systems. The industry has emerged from a heavy investment period and Safran is well-placed to benefit from continued strength in its best in class after-market business and strong execution in its LEAP engine program which should drive growth for the next decade.

8 ▲ Schneider Electric (2023: n/a)
Industrials company
Market value: £26,774,000
Share of investments: 3.9%

Schneider Electric is a French multinational corporation specialising in digital automation and energy management. The group is a global industrial technology leader in electrification, automation and digitization to smart industries, resilient infrastructure, future-proof data centers, intelligent buildings and intuitive homes.

9 ▲ ASM International (2023: 13th)
Technology company
Market value: £26,551,000
Share of investments: 3.8%

ASM International is a Dutch international company that designs and manufactures equipment and process solutions to produce semiconductor devices for wafer processing. The company aims to create sustainable, long-term value for their stakeholders and a degree of recovery in logic/foundry. The company is also set to benefit from the increasing importance of power emerging technologies such as Artificial Intelligence (AI), where we have seen a step change with the roll out of generative AI tools in 2023.

10 ▲ Linde (2023: n/a)
Basic Materials
Market value: £26,276,000
Share of investments: 3.8%

Linde is a global multinational chemical company and, since 2018, domiciled in Ireland and headquartered in the United Kingdom. Linde is the world’s largest industrial gas company by market share and revenue, serving customers in the health care, petroleum refining, food, beverage carbonation, fiber-optics, steel making, material handling equipment, chemicals and water treatment industries.

All percentages reflect the value of the holding as a percentage of total investments.
Arrows indicate the change in relative ranking of the position in the portfolio compared to its ranking as at 31 August 2023.

Investments as at 31 August 2024

* The investments in Sberbank and Lukoil have been marked down to a nominal value of £0.01 as the secondary listings of depositary receipts of Russian companies have been suspended from trading.

All investments are in ordinary shares unless otherwise stated. The total number of investments held at 31 August 2024 was 34 (31 August 2023: 39).

Industry classifications in the table above are based on the Industrial Classification Benchmark standard for categorisation of companies by industry and sector.

As at 31 August 2024, the Company did not hold any equity interests comprising more than 3% of any company’s share capital.

Investment exposure as at 31 August 2024

Market capitalisation

Investment size

Distribution of investments

Source: BlackRock.

Strategic Report

The Directors present the Strategic Report of the Company for the year ended 31 August 2024. The aim of the Strategic Report is to provide shareholders with the information to assess how the Directors have performed their duty to promote the success of the Company for the collective benefit of shareholders.

The Chairman’s Statement together with the Investment Manager’s Report form part of this Strategic Report. The Strategic Report was approved by the Board at its meeting on 5 November 2024.

Principal activity
The Company carries on business as an investment trust and is listed on the London Stock Exchange. Its principal activity is portfolio investment. Investment trusts are pooled investment vehicles which allow exposure to a diversified range of assets through a single investment, thus spreading investment risk.

Investment objective
The Company’s objective is the achievement of capital growth, primarily through investment in a focused portfolio constructed from a combination of the securities of large, mid and small capitalisation European companies, together with some investment in the developing markets of Europe. The Company also has the flexibility to invest in any country included in the FTSE World Europe ex UK Index, as well as the freedom to invest in developing countries not included in the index but considered by the Manager and the Directors as part of greater Europe.

Strategy, business model and investment policy
Strategy
The Company invests in accordance with the objective given above. The Board is collectively responsible to shareholders for the long-term success of the Company and is its governing body. There is a clear division of responsibility between the Board and BlackRock Fund Managers Limited (the Manager). Matters reserved for the Board include setting the Company’s strategy, including its investment objective and policy, setting limits on gearing, capital structure, governance, and appointing and monitoring of performance of service providers, including the Manager.

Business model
The Company’s business model follows that of an externally managed investment trust. Therefore, the Company does not have any employees and outsources its activities to third-party service providers including the Manager, who is the principal service provider. In accordance with the Alternative Investment Fund Managers’ Directive (AIFMD), as implemented, retained and onshored in the UK, the Company is an Alternative Investment Fund (AIF). BlackRock Fund Managers Limited is the Company’s Alternative Investment Fund Manager.

The management of the investment portfolio and the administration of the Company have been contractually delegated to the Manager who in turn (with the permission of the Company) has delegated certain investment management and other ancillary services to BlackRock Investment Management (UK) Limited (BIM (UK) or the Investment Manager). The Manager, operating under guidelines determined by the Board, has direct responsibility for the decisions relating to the day-to-day running of the Company and is accountable to the Board for the investment, financial and operating performance of the Company.

The Company delegates fund accounting services to the Manager, which in turn sub-delegates these services to The Bank of New York Mellon (International) Limited (BNY). Other service providers include the Depositary (also BNY) and the Registrar, Computershare Investor Services PLC. Details of the contractual terms with the Manager and the Depositary and more details of arrangements in place governing custody services are set out in the Directors’ Report.

Investment policy
The Company’s policy is that the portfolio should consist of approximately 30-70 securities and the majority of the portfolio will be invested in larger capitalisation companies, being companies with a market capitalisation of over €5 billion. Up to 25% of the portfolio may be invested in companies in developing Europe. The Company may also invest up to 5% of the portfolio in unquoted investments. However, overall exposure to developing European companies and unquoted investments will not in aggregate exceed 25% of the Company’s portfolio.

As at 31 August 2024, the Company held 34 investments. None (2023: none) of the portfolio was invested in developing Europe. The Company had no unquoted investments.

Investment in developing European securities may be either direct or through other funds, including those managed by BlackRock Fund Managers Limited, subject to a maximum of 15% of the portfolio. Direct investment in Russia is limited to 10% of the Company’s assets. Investments may also include depositary receipts or similar instruments representing underlying securities.

The Company also has the flexibility to invest up to 20% of the portfolio in debt securities, such as convertible bonds and corporate bonds. No bonds were held at 31 August 2024. The use of any derivative instruments such as financial futures, options and warrants and the entering into of stock lending arrangements will only be for the purposes of efficient portfolio management.

While the Company may hold shares in other investment companies (including investment trusts), the Board has agreed that the Company will not invest more than 15%, in aggregate, of its total assets in other listed closed-ended investment funds.

In order to comply with the current Listing Rules, the Company will also not invest more than 10% of its gross asset value in other listed closed-ended investment funds which themselves may invest more than 15% of their gross assets in other listed closed-ended investment funds. This restriction does not form part of the Company’s investment policy.

The Company achieves an appropriate spread of risk by investing in a diversified portfolio of securities.

The Investment Manager believes that appropriate use of gearing can add value over time. This gearing typically is in the form of an overdraft facility which can be repaid at any time. The level and benefit of any gearing is discussed and agreed regularly by the Board. The Investment Manager generally aims to be fully invested and it is anticipated that gearing will not exceed 15% of net asset value (NAV) at the time of drawdown of the relevant borrowings. At the balance sheet date, the Company had net gearing of 8.0% (2023: 5.1%).

Performance
In the year to 31 August 2024, the Company’s NAV per share increased by 16.4% (compared with an increase in the reference index of 15.8%) and the share price rose by 15.5% (all percentages calculated in Sterling terms with dividends reinvested). The Investment Manager’s Report includes a review of the main developments during the year, together with information on investment activity within the Company’s portfolio.

Results and dividends
The results for the Company are set out in the Income Statement in the Financial Statements. The total profit for the year, after taxation, was £91,610,000 (2023: total profit, after taxation, of £91,591,000) which is reflected in the increase in the net asset value of the Company. The revenue return amounted to £7,379,000 (2023: £6,920,000) and relates to net revenue earnings from dividends received during the year after adjusting for expenses allocated to revenue.

As explained in the Company’s Half Yearly Financial Report, the Directors declared an interim dividend of 1.75p per share (2023: 1.75p). The Directors recommend the payment of a final dividend of 5.25p per share, making a total dividend of 7.00p per share (2023: 6.75p). Subject to approval at the forthcoming Annual General Meeting, the dividend will be paid on 20 December 2024 to shareholders on the register of members at the close of business on 22 November 2024.

Future prospects
The Board’s main focus is to achieve capital growth. The future performance of the Company is dependent upon the success of the investment strategy and, to a large extent, on the performance of financial markets. The outlook for the Company is discussed in both the Chairman’s Statement and Investment Manager’s Report.

Social, community and human rights issues
As an investment trust, the Company has no direct social or community responsibilities or impact on the environment and the Company has not adopted an ESG investment strategy or exclusionary screens. However, the Directors believe that it is important and in shareholders’ interests to consider human rights issues and environmental, social and governance factors when selecting and retaining investments. Details of the Company’s approach to ESG integration and socially responsible investment is set out in the Annual Report and Financial Statements.

Modern Slavery Act
As an investment vehicle the Company does not provide goods or services in the normal course of business and does not have customers. Accordingly, the Directors consider that the Company is not required to make any slavery or human trafficking statement under the Modern Slavery Act 2015. In any event, the Board considers the Company’s supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.

Directors, gender representation and employees
The Directors of the Company on 31 August 2024 are set out in the Directors’ Biographies in the Annual Report and Financial Statements The Board consists of three male Directors and two female Directors. The Company’s policy on diversity is set out in the Annual Report and Financial Statements. The Company does not have any executive employees.

Key performance indicators
At each Board meeting, the Directors consider a number of performance measures to assess the Company’s success in achieving its objectives. The key performance indicators (KPIs) used to measure the progress and performance of the Company over time, and which are comparable to other investment trusts, are set out below. As indicated in footnote 2 to the table below, some of these KPIs fall within the definition of ‘Alternative Performance Measures’ (APMs) under guidance issued by the European Securities and Markets Authority (ESMA) and additional information explaining how these are calculated is set out within the Glossary in the Annual Report and Financial Statements.

Additionally, the Board regularly reviews the performance of the portfolio, as well as the net asset value and share price of the Company and compares this against various companies and indices. The Company does not have a benchmark. However, the Board reviews performance and ongoing charges against a peer group of European investment trusts and open-ended funds, as well as the FTSE World Europe ex UK Index.

1 This measures the Company’s net asset value and share price total return, which assumes dividends paid by the Company have been reinvested.

2 Alternative Performance Measures, see Glossary in the Annual Report and Financial Statements

3 Ongoing charges represent the management fee and all other operating expenses, excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation, prior year expenses written back and certain non-recurring items, as a % of average daily net assets.

Principal risks
The Company is exposed to a variety of risks and uncertainties. As required by the 2018 UK Corporate Governance Code (the UK Code), the Board has in place a robust ongoing process to identify, assess and monitor the principal risks and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. A core element of this process is the Company’s risk register which identifies the risks facing the Company and assesses the likelihood and potential impact of each risk and the quality of controls operating to mitigate it. A residual risk rating is then calculated for each risk based on the outcome of the assessment.

The risk register, its method of preparation and the operation of key controls in BlackRock’s and third-party service providers’ systems of internal control, are reviewed on a regular basis by the Audit and Management Engagement Committee. In order to gain a more comprehensive understanding of BlackRock’s and other third-party service providers’ risk management processes and how these apply to the Company’s business, BlackRock’s internal audit department provides an annual presentation to the Audit Committee chairs of the BlackRock investment trusts setting out the results of testing performed in relation to BlackRock’s internal control processes. The Audit and Management Engagement Committee also periodically receives and reviews internal control reports from BlackRock and the Company’s service providers.

The Board has undertaken a robust assessment of both the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. For instance, the risk that unforeseen or unprecedented events including (but not limited to) heightened geo-political tensions such as the war in Ukraine and conflict in the Middle East, inflation and the current cost of living crisis has had a significant impact on global markets. The Board has taken into consideration the risks posed to the Company by these events and incorporated them into the Company’s risk register. The threat of climate change has also reinforced the importance of more sustainable practices and environmental responsibility.

Emerging risks are considered by the Board as they come into view and are incorporated into the existing review of the Company’s risk register. Additionally, the Manager considers emerging risks in numerous forums and the Risk and Quantitative Analysis team produces an annual risk survey. Any material risks of relevance to the Company identified through the annual risk survey will be communicated to the Board.

Emerging risks that have been considered by the Board over the year include the impact of climate change, escalating geo-political conflict and technological advances.

The key emerging risks identified are as follows:

Climate change: Investors can no longer ignore the impact that the world’s changing climate will have on their portfolios, with the impact of climate change on returns, including climate related natural disasters, now potentially significant and with the potential to escalate more swiftly than one is able to predict. The Board receives ESG reports from the Manager on the portfolio and the way ESG considerations are integrated into the investment decision-making, so as to mitigate risk at the level of stock selection and portfolio construction.

Artificial Intelligence (‘AI’): Advances in computing power means that AI has become a powerful tool that will impact a huge range of areas and with a wide range of applications that have the potential to dislocate established business models and disrupt labour markets, creating uncertainty in corporate valuations. The significant energy required to power this technological revolution will create further pressure on environmental resources and carbon emissions.

Geo-political risk: Escalating geo-political tensions (including, but not limited to tensions in the Middle East and the ongoing war in Ukraine, or deteriorating relations between China and the US/other countries) have a significant negative impact on global markets, with an increasing use of tariffs and domestic regulations making global trade more complex and driving economic fragmentation.

The Board will continue to assess these risks on an ongoing basis. In relation to the UK Code, the Board is confident that the procedures that the Company has put in place are sufficient to ensure that the necessary monitoring of risks and controls has been carried out throughout the reporting period.

The principal risks and uncertainties faced by the Company during the financial year, together with the potential effects, controls and mitigating factors are set out below.

Counterparty
Principal risk
The potential loss that the Company could incur if a counterparty is unable (or unwilling) to perform on its commitments.

Mitigation/Control
Due diligence is undertaken before contracts are entered into and exposures are diversified across a number of counterparties.

The Depositary is liable for restitution for the loss of financial instruments held in custody unless able to demonstrate the loss was a result of an event beyond its reasonable control.

Investment performance
Principal risk
Returns achieved are reliant primarily upon the performance of the portfolio.

The Board is responsible for:

· deciding the investment strategy to fulfil the Company’s objective; and

· monitoring the performance of the Investment Manager and the implementation of the investment strategy.

An inappropriate investment strategy may lead to:

· underperformance compared to the reference index and the Company’s peer group;

· a reduction or permanent loss of capital; and

· dissatisfied shareholders and reputational damage.

The Board is also cognisant of the long-term risk to performance from inadequate attention to ESG issues and in particular the impact of climate change.

Mitigation/Control
To manage this risk the Board:

· regularly reviews the Company’s investment mandate and long-term strategy;

· has set investment restrictions and guidelines which the Investment Manager monitors and regularly reports on;

· receives from the Investment Manager a regular explanation of stock selection decisions, portfolio exposure, gearing and any changes in gearing and the rationale for the composition of the investment portfolio;

· monitors the maintenance of an adequate spread of investments in order to minimise the risks associated with particular countries or factors specific to particular sectors, based on the diversification requirements inherent in the investment policy; and

· receives and reviews regular reports showing an analysis of the Company’s performance against the FTSE World Europe ex UK Index and other similar indices.

ESG analysis is integrated into the Manager’s investment process as set out in the Annual Report and Financial Statements. This is monitored by the Board.

Legal and regulatory compliance
Principal risk
The Company has been approved by HM Revenue & Customs as an investment trust, subject to continuing to meet the relevant eligibility conditions and operates as an investment trust in accordance with Chapter 4 of Part 24 of the Corporation Tax Act 2010. As such, the Company is exempt from corporation tax on capital gains on the profits realised from the sale of its investments.

Any breach of the relevant eligibility conditions could lead to the Company losing investment trust status and being subject to corporation tax on capital gains realised within the Company’s portfolio. In such event, the investment returns of the Company may be adversely affected.

A serious regulatory breach could result in the Company and/or the Directors being fined or the subject of criminal proceedings, or the suspension of the Company’s shares which could in turn lead to a breach of the Corporation Tax Act 2010.

Amongst other relevant laws, the Company is required to comply with the provisions of the Companies Act 2006, the Alternative Investment Fund Managers’ Directive, the UK Listing Rules, Disclosure Guidance and Transparency Rules, the Sanctions and Anti-Money Laundering Act 2018 and the Market Abuse Regulation.

Mitigation/Control
The Investment Manager monitors investment movements, the level and type of forecast income and expenditure and the amount of proposed dividends to ensure that the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010 are not breached. The results are reported to the Board at each meeting.

Compliance with the accounting rules affecting investment trusts are also carefully and regularly monitored.

The Company Secretary, Manager and the Company’s professional advisers provide regular reports to the Board in respect of compliance with all applicable rules and regulations. The Board and the Manager also monitor changes in government policy and legislation which may have an impact on the Company.

The Company’s Investment Manager, BlackRock, at all times complies with the sanctions administered by the UK Office of Financial Sanctions Implementation, the United States Treasury’s Office of Foreign Assets Control, the United Nations, European Union member states and any other applicable regimes.

Market
Principal risk
Market risk arises from volatility in the prices of the Company’s investments. It represents the potential loss the Company might suffer through realising investments in the face of negative market movements.

Changes in general economic and market conditions, such as currency exchange rates, interest rates, rates of inflation, industry conditions, tax laws and political events can also substantially and adversely affect the securities and, as a consequence, the Company’s prospects and share price.

Market risk includes the potential impact of events which are outside the Company’s control, including (but not limited to) heightened geo-political tensions and military conflict, a global pandemic and high inflation.

Companies operating in the sectors in which the Company invests may be impacted by new legislation governing climate change and environmental issues, which may have a negative impact on their valuation and share price.

Mitigation/Control
The Board considers the diversification of the portfolio, asset allocation, stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines which are monitored and reported on by the Investment Manager.

The Board monitors the implementation and results of the investment process with the Investment Manager.

The Board also recognises the benefits of a closed-end fund structure in extremely volatile markets such as those experienced as a consequence of the COVID-19 pandemic and Russia/Ukraine and Middle East conflicts. Unlike open-ended counterparts, closed-end funds are not obliged to sell down portfolio holdings at low valuations to meet liquidity requirements for redemptions. During times of elevated volatility and market stress, the ability of a closed-end fund structure to remain invested for the long term enables the portfolio managers to adhere to disciplined fundamental analysis from a bottom-up perspective and be ready to respond to dislocations in the market as opportunities present themselves.

The portfolio managers spend a considerable amount of time understanding the environmental, social and governance (ESG) risks and opportunities facing companies and industries in the portfolio. The Company does not exclude investment in stocks based on ESG criteria, but the portfolio managers consider ESG information when conducting research and due diligence on new investments and again when monitoring investments in the portfolio.

Operational
Principal risk
In common with most other investment trust companies, the Company has no employees. The Company therefore relies on the services provided by third parties and is dependent on the control systems of the Manager, the Depositary and Fund Accountant which maintain the Company’s assets, dealing procedures and accounting records.

The security of the Company’s assets, dealing procedures, accounting records and adherence to regulatory and legal requirements depend on the effective operation of the systems of these other third-party service providers. There is a risk that a major disaster, such as floods, fire, a global pandemic, or terrorist activity, renders the Company’s service providers unable to conduct business at normal operating capacity and effectiveness.

Failure by any service provider to carry out its obligations to the Company could have a material adverse effect on the Company’s performance. Disruption to the accounting, payment systems or custody records (including cyber security risk) could prevent the accurate reporting and monitoring of the Company’s financial position.

Mitigation/Control
Due diligence is undertaken before contracts are entered into with third-party service providers. Thereafter, the performance of the provider is subject to regular review and reported to the Board.

The Board reviews on a regular basis an assessment of the fraud risks that the Company could potentially be exposed to and also a summary of the controls put in place by the Manager, Depositary, Custodian, Fund Accountant and Registrar specifically to mitigate these risks.

Most third-party service providers produce Service Organisation Control (SOC 1) reports to provide assurance regarding the effective operation of internal controls as reported on by their reporting accountants. These reports are provided to the Audit and Management Engagement Committee for review. The Committee would seek further representations from service providers if not satisfied with the effectiveness of their control environment.

The Company’s financial instruments held in custody are subject to a strict liability regime and, in the event of a loss of such financial instruments held in custody, the Depositary must return financial instruments of an identical type or the corresponding amount, unless able to demonstrate the loss was a result of an event beyond its reasonable control.

The Board reviews the overall performance of the Manager, Investment Manager and all other third-party service providers on a regular basis and compliance with the Investment Management Agreement annually.

The Board also considers the business continuity arrangements of the Company’s key service providers on an ongoing basis and reviews these as part of its review of the Company’s risk register.

Financial
Principal risk
The Company’s investment activities expose it to a variety of financial risks which include interest rate risk, counterparty credit risk and liquidity risk.

Mitigation/Control
Details of these risks are disclosed in note 16 to the Financial Statements, together with a summary of the policies for managing these risks.

Marketing
Principal risk
Marketing efforts are inadequate or do not comply with relevant regulatory requirements. There is a failure to communicate adequately with shareholders or reach out to potential new shareholders resulting in reduced demand for the Company’s shares and a widening of the discount.

Mitigation/Control
The Board reviews marketing strategy and initiatives and the Manager is required to provide regular updates on progress. BlackRock has a dedicated investment trust sales team visiting both existing and potential clients on a regular basis. Data on client meetings and issues raised are provided to the Board on a regular basis.

All investment trust marketing documents are subject to appropriate review and authorisation.

Viability statement
In accordance with provision 31 of the 2018 UK Corporate Governance Code, the Directors have assessed the prospects of the Company over a longer period than the twelve months referred to by the ‘Going Concern’ guidelines. The Company is an investment trust with the objective of achieving capital growth.

The Directors expect the Company to continue for the foreseeable future and have therefore conducted this review for the period up to the Annual General Meeting in 2029. The Directors believe that five years is an appropriate investment horizon to assess the viability of the Company. This is based on the Company’s long-term mandate, the low turnover in the portfolio and the investment holding period investors generally consider while investing in the European sector.

In making an assessment on the viability of the Company, the Board has considered the following:

· the impact of a significant fall in European equity markets on the value of the Company’s investment portfolio;

· the ongoing relevance of the Company’s investment objective, business model and investment policy in the prevailing market;

· the principal and emerging risks and uncertainties, as set out on the previous pages, and their potential impact;

· the level of ongoing demand for the Company’s shares;

· the Company’s share price discount/premium to NAV;

· the liquidity of the Company’s portfolio; and

· the level of income generated by the Company and future income and expenditure forecasts.

The Directors have concluded that there is a reasonable expectation that the Company will continue in operation and meet its liabilities as they fall due over the period of their assessment based on the following considerations:

· the Investment Manager’s compliance with the investment objective and policy, its investment strategy and asset allocation;

· the portfolio is liquid and mainly comprises of readily realisable assets, which continue to offer a broad range of investment opportunities for shareholders as part of a balanced investment portfolio;

· the operational resilience of the Company and its key service providers and their ability to continue to provide a good level of service for the foreseeable future;

· the effectiveness of business continuity plans in place for the Company and its key service providers;

· the ongoing processes for monitoring operating costs and income which are considered to be reasonable in comparison to the Company’s total assets;

· the Board’s discount management policy; and

· the Company is a closed-end investment company and therefore does not suffer from the liquidity issues arising from unexpected redemptions.

In addition, the Board’s assessment of the Company’s ability to operate in the foreseeable future is included in the Going Concern Statement which can be found in the Annual Report and Financial Statements in the Directors’ Report.

Section 172 Statement: promoting the success of the Company
The Companies (Miscellaneous Reporting) Regulations 2018 require directors to explain in greater detail how they have discharged their duties under Section 172(1) of the Companies Act 2006 in promoting the success of their companies for the benefit of members as a whole. This includes the likely consequences of their decisions in the longer term and how they have taken wider stakeholders’ needs into account.

The disclosure that follows covers how the Board has engaged with and understands the views of stakeholders and how stakeholders’ needs have been taken into account, the outcome of this engagement and the impact that it has had on the Board’s decisions. The Board considers the main stakeholders in the Company to be the Manager, Investment Manager and the shareholders. In addition to this, the Board considers investee companies and key service providers of the Company to be stakeholders; the latter comprise the Company’s Custodian, Depositary, Registrar and Broker.

Stakeholders
Shareholders
Continued shareholder support and engagement are critical to the continued existence of the Company and the successful delivery of its long-term strategy. The Board is focused on fostering good working relationships with shareholders and on understanding the views of shareholders in order to incorporate them into the Board’s strategy and objectives in delivering long-term capital growth.

Manager and Investment Manager
The Board’s main working relationship is with the Manager, who is responsible for the Company’s portfolio management (including asset allocation, stock and sector selection) and risk management, as well as ancillary functions such as administration, secretarial, accounting and marketing services. The Manager has sub-delegated portfolio management to the Investment Manager. Successful management of shareholders’ assets by the Investment Manager is critical for the Company to successfully deliver its investment strategy and meet its objective. The Company is also reliant on the Manager as AIFM to provide support in meeting relevant regulatory obligations under the AIFMD and other relevant legislation.

Other key service providers
In order for the Company to trade on the London Stock Exchange’s (LSE) Main Market for listed securities and generally function as an investment trust with a listing on the official list of the FCA, the Board relies on a diverse range of advisors for support in meeting relevant obligations and safeguarding the Company’s assets. For this reason, the Board considers the Company’s Custodian, Depositary, Registrar and Broker to be stakeholders. The Board maintains regular contact with its key external service providers and receives regular reporting from them through the Board and committee meetings, as well as outside of the regular meeting cycle.

Investee companies
Portfolio holdings are ultimately shareholders’ assets and the Board recognises the importance of good stewardship and communication with investee companies in meeting the Company’s investment objective and strategy. The Board monitors the Manager’s stewardship arrangements and receives regular feedback from the Manager in respect of meetings with the management of portfolio companies.

A summary of the key areas of engagement undertaken by the Board with its key stakeholders in the year under review and how Directors have acted upon this to promote the long-term success of the Company are set out below.

Area of Engagement
Investment mandate and objective
Issue
The Board is committed to promoting the role and success of the Company in delivering on its investment mandate to shareholders over the long term. The Board also has responsibility to shareholders to ensure that the Company’s portfolio of assets is invested in line with the stated investment objective and in a way that ensures an appropriate balance between spread of risk and portfolio returns.

Engagement
The Board worked closely with the Investment Manager throughout the year in further developing investment strategy and underlying policies, not simply for the purpose of achieving the Company’s investment objective but in the interests of shareholders and future investors. In addition to the scheduled Board meetings each year, the Board holds a Strategy session which is dedicated to an in-depth review of the Company’s strategy in conjunction with key advisers, including the Company’s Broker.

The Company does not exclude investment in stocks based on Environmental, Social and Governance (ESG) criteria, but the approach of the portfolio managers to the consideration of ESG factors in respect of the Company’s portfolio, as well as engagement with investee companies, is to encourage the adoption of sustainable business practices which support long-term value creation.

Impact
The portfolio activities undertaken by the Investment Manager can be found in their report in the Annual Report and Financial Statements.

The Investment Manager aims to construct a portfolio that is high conviction and concentrated in nature but diversified by end market exposures.

Details regarding the Company’s NAV and share price performance can be found in the Chairman’s Statement and in this Strategic Report in the Annual Report and Financial Statements.

Shareholders
Issue
Continued shareholder support and engagement are critical to the continued existence of the Company and the successful delivery of its long-term strategy.

Engagement
The Board is committed to maintaining open channels of communication and to engage with shareholders. The Company welcomes and encourages attendance and participation from shareholders at its Annual General Meetings. Shareholders will have the opportunity to meet the Directors and Investment Manager and to address questions to them directly. The Investment Manager will also provide a presentation on the Company’s performance and the outlook.

The Annual Report and Half Yearly Financial Report are available on the BlackRock website and are also circulated to shareholders either in printed copy or via electronic communications. In addition, regular updates on performance, monthly factsheets, the daily NAV and other information are also published on the Manager’s website at www.blackrock.com/uk/brge.

The Board also works closely with the Manager to develop the Company’s marketing strategy, with the aim of ensuring effective communication with shareholders. Unlike trading companies, one-to-one shareholder meetings normally take the form of a meeting with the Portfolio Managers as opposed to members of the Board. The Company’s willingness to enter into discussions with institutional shareholders is also demonstrated by the programmes of institutional presentations by the portfolio managers.

If shareholders wish to raise issues or concerns with the Board, they are welcome to do so at any time. The Chairman is available to meet directly with shareholders periodically to understand their views on governance and the Company’s performance where they wish to do so. He may be contacted via the Company Secretary whose details are given in the Annual Report and Financial Statements.

Impact
The Board values any feedback and questions from shareholders ahead of and during Annual General Meetings in order to gain an understanding of their views and will take action when and as appropriate. Feedback and questions will also help the Company evolve its reporting, aiming to make reports more transparent and understandable.

Feedback from all substantive meetings between the Investment Manager and shareholders will be shared with the Board. The Directors will also receive updates from the Company’s Broker on any feedback from shareholders, as well as share trading activity, share price performance and an update from the Investment Manager.

The portfolio management team attended a number of professional investor meetings and held discussions with a number of wealth management desks and offices in respect of the Company during the year under review. The portfolio managers also held group webcasts in the year to provide investors with portfolio updates.

Portfolio holdings are ultimately shareholders’ assets and the Board recognises the importance of good stewardship and communication with investee companies in meeting the Company’s investment objective and strategy. The Board monitors the Manager’s stewardship activities and receives regular feedback from the Investment Manager in respect of meetings with the management of portfolio companies.

Responsible investing
Issue
Good governance and consideration of sustainable investment are key factors in making investment decisions. Climate change is becoming a defining factor in companies’ long-term prospects across the investment spectrum, with significant and lasting implications for economic growth and prosperity.

Engagement
The Company does not exclude investment in stocks based on ESG criteria but the Board believes that responsible investment and sustainability are integral to the longer-term delivery of the Company’s success. The Board works closely with the Investment Manager to regularly review the Company’s performance, investment strategy and underlying policies to ensure that the Company’s investment objective continues to be met in an effective and responsible way in the interests of shareholders and future investors.

The Investment Manager’s approach to the consideration of ESG factors in respect of the Company’s portfolio, as well as the Investment Manager’s engagement with investee companies are kept under review by the Board. The Board also expects to be informed by the Manager of any sensitive voting issues involving the Company’s investments.

The Investment Manager reports to the Board in respect of its ESG policies and how these are integrated into the investment process; a summary of BlackRock’s approach to ESG is set out in the Annual Report and Financial Statements.The Investment Manager’s engagement and voting policy is detailed in the Annual Report and Financial Statements and on the BlackRock website.

Impact
The Investment Manager believes there is likely to be a positive correlation between strong ESG practices and investment performance over time. Details of the Company's performance in the year are given in the Chairman's Statement and the Performance Record in the Annual Report and Financial Statements.

Management of share rating
Issue
The Board recognises that it is in the long-term interests of shareholders that shares do not trade at a significant discount or premium to their prevailing NAV. Therefore, where deemed to be in shareholders’ long-term interests, the Board may exercise its powers to issue shares or buy back shares with the objective of ensuring that an excessive premium or discount does not arise.

Engagement
The Board monitors the Company’s share rating on an ongoing basis and receives regular updates from the Manager and the Company’s Broker regarding the level of discount or premium and the drivers behind this.

The Board believes that the best way of maintaining the share rating at an optimal level over the long term is to create demand for the shares in the secondary market. To this end, the Investment Manager is devoting considerable effort to broadening the awareness of the Company, particularly to wealth managers and to the wider retail market.

In addition, the Board has worked closely with the Manager to develop the Company’s marketing strategy, with the aim of ensuring effective communication with existing shareholders and to attract new shareholders to the Company in order to improve liquidity in the Company’s shares and to sustain the share rating of the Company.

Impact
The Board will continue to monitor the Company’s premium/discount to NAV and will look to issue, buy back shares and/or operate six monthly tender offers if it is deemed to be in the interests of shareholders as a whole.

The Board decided not to implement a semi-annual tender offer in November 2024 as, over the six months to 31 August 2024, the average discount to NAV (cum income) was 4.9%. It also decided not to implement the May 2024 semi-annual tender offer, as over the six months to 29 February 2024, the average discount to NAV (cum income) was 6.3%. Against a background of volatile market conditions and the Company trading at a narrow discount versus its peers, the Board concluded that it was not in the interests of shareholders to implement the latest semi-annual tender offers.

During the financial year the Company did not reissue any ordinary shares from treasury. The Company bought back 2,762,011 ordinary shares both during the financial year and since the year end (up to close of business 4 November 2024) . As at 4 November 2024 the Company’s shares were trading at a discount of 6.8% to the cum income NAV.

Service levels of third-party providers
Issue
The Board acknowledges the importance of ensuring that the Company’s principal suppliers are providing a suitable level of service, including the Manager in respect of investment performance and delivering on the Company’s investment mandate; the Custodian and Depositary in respect of their duties towards safeguarding the Company’s assets; the Registrar in its maintenance of the Company’s share register and dealing with investor queries; and the Company’s Broker in respect of the provision of advice and acting as a market maker for the Company’s shares.

Engagement
The Manager reports to the Board on the Company’s performance on a regular basis. The Board carries out a robust annual evaluation of the Manager’s performance, their commitment and available resources.

The Board performs an annual review of the service levels of all third-party service providers and concludes on their suitability to continue in their role. The Board receives regular updates from the AIFM, Depositary, Registrar and Broker on an ongoing basis.

The Board works closely with the Manager to gain comfort that relevant business continuity plans are in place and operating effectively for all of the Company’s key service providers.

Impact
All performance evaluations were performed on a timely basis and the Board concluded that all key third-party service providers, including the Manager, were operating effectively and providing a good level of service.

The Board has received updates in respect of business continuity planning from the Company’s Manager, Custodian, Depositary, Fund Accountant, Registrar, Printer and Broker and is confident that arrangements in place are appropriate.

Board composition
Issue
The Board is committed to ensuring that its own composition brings an appropriate balance of knowledge, experience and skills, and that it is compliant with best corporate governance practice under the UK Code, including guidance on tenure and the composition of the Board’s committees.

Engagement
During 2023, the Board engaged the services of an external search consultant to identify potential candidates to replace Ms Curling who retired as a Director following the Annual General Meeting on 12 December 2023. The Nomination Committee agreed the selection criteria and the method of selection, recruitment and appointment.

All Directors are subject to a formal evaluation process on an annual basis (more details and the conclusions of the 2024 evaluation process are given in the Annual Report and Financial Statements). All Directors stand for re-election by shareholders annually.

Shareholders may attend the Annual General Meeting and raise any queries in respect of Board composition or individual Directors in person or may contact the Company Secretary or the Chairman using the details provided in the Annual Report and Financial Statements with any issues.

Impact
As a result of the recruitment process, Ms Sapna Shah was appointed as a Director of the Company following the Annual General Meeting held on 12 December 2023.

As at the date of this report, the Board was comprised of three men and two women. Two Board Directors, Mr Sanderson and Mr Baxter, have a tenure in excess of nine years. The Board has recently retained the services of an external search consultant to identify suitable candidates to replace Mr Sanderson. Board diversity, including gender, is taken into account when establishing recruitment criteria.

Details of each Directors’ contribution to the success and promotion of the Company are set out in the Directors’ Report in the Annual Report and Financial Statements and details of Directors’ biographies can be found in the Annual Report and Financial Statements.

The Directors are not aware of any issues that have been raised directly by shareholders in respect of Board composition in the year under review. Details of the proxy voting results in favour and against individual Directors’ re-election at the 2023 Annual General Meeting are given on the Manager’s website at www.blackrock.com/uk/brge.

Environmental, Social and Governance issues and approach
The Company’s approach to ESG
Environmental, social and governance (ESG) issues can present both opportunities and risks to long-term investment performance. Whilst the Company does not exclude investment in stocks purely on ESG criteria, material ESG analytics are integrated into the investment process when weighing up the risk and reward benefits of investment decisions and the Board believes that communication and engagement with portfolio companies is important and can lead to better outcomes for shareholders and the environment than merely excluding investment in certain areas.

More information on BlackRock’s global approach to ESG integration, as well as activity specific to the BlackRock Greater Europe Investment Trust plc portfolio, is set out below. BlackRock has defined ESG integration as the practice of incorporating financially material E, S and/or G data and information and consideration of sustainability risks into investment decisions with the objective of enhancing risk-adjusted returns. ESG integration does not change the Company’s investment objective. More information on sustainability risks may be found in the AIFMD Fund Disclosures document of the Company available on the Company’s website at www.blackrock.com/uk/individual/literature/policies/itc-disclosure-blackrock-greater-europe-investment-trust-plc.pdf

BlackRock’s approach to ESG integration
BlackRock believes that sustainability risks, including climate risks, are investment risks. As a fiduciary, BlackRock manages material risks and opportunities that could impact portfolios. Sustainability can be a driver of investment risks and opportunities, and BlackRock incorporates them in its firm wide processes when they are material. This in turn (in BlackRock’s view) is likely to drive a significant reallocation of capital away from traditional carbon intensive industries over the next decade. BlackRock believes that carbon-intensive companies will play an integral role in unlocking the full potential of the energy transition, and to do this, they must be prepared to adapt, innovate and pivot their strategies towards a low carbon economy.

BlackRock incorporates into its firmwide processes relevant, financially material information, including financially material data and information related to ESG. BlackRock’s investment view is that doing so can provide better risk-adjusted returns for its clients over the long term.

BlackRock’s clients have a wide range of perspectives on a variety of issues and investment themes, including sustainable and low-carbon transition investing. Given the wide range of unique and varied investment objectives sought by its clients, BlackRock’s investment teams have a range of approaches to considering financially material E, S, and/or G factors. As with other investment risks and opportunities, the financial materiality of E, S and/or G considerations may vary by issuer, sector, product, mandate, and time horizon. Depending on the investment approach, this financially material E, S and/or G data or information may help inform due diligence, portfolio or index construction, and/or monitoring processes of client portfolios, as well as BlackRock’s approach to risk management.

BlackRock’s ESG integration framework is built upon its history as a firm founded on the principle of thorough and thoughtful risk management. Aladdin, BlackRock’s core risk management and investment technology platform, allows investors to leverage financially material E, S and/or G data or information as well as the combined experience of BlackRock’s investment teams to effectively identify investment opportunities and investment risks. BlackRock’s heritage in risk management combined with the strength of the Aladdin platform enables BlackRock’s approach to ESG integration.

BlackRock structures its approach around three main pillars: investment processes, material insights and transparency. These pillars underpin ESG integration at BlackRock and they are supported by equipping BlackRock employees with investment relevant E, S and/or G data, tools, and education.

More information in respect of BlackRock’s approach to ESG integration can be found at https://www.blackrock.com/corporate/literature/publication/blk-esg-investment-statement-web.pdf.

BlackRock Investment Stewardship
BlackRock Greater Europe Investment Trust plc – BlackRock Investment Stewardship engagement with portfolio companies for the year ended 31 August 2024
The BlackRock portfolio management team has excellent access to company management teams and undertakes about 700 company meetings each year to identify high quality, cash generative businesses with strong management teams that are able to generate growth in a more challenging economic environment. In addition, BlackRock also has a separate Investment Stewardship (BIS) team that is responsible for engaging with investee companies, proxy voting on the behalf of clients when authorised, contributing to industry dialogue on stewardship and reporting on its activities. For the year to 31 August 2024, BIS held 42 company engagements on a range of governance issues with the management teams of 25 companies in the BlackRock Greater Europe Investment Trust portfolio, representing 74% of the portfolio holdings at 31 August 2024. Additional information is set out in the table and charts below and in the Annual Report and Financial Statements as well as the key engagement themes for the meetings held in respect of the Company’s portfolio holdings.

1 Source: BlackRock as at 31 August 2024.

2 Source: BlackRock. As a percentage of total portfolio holdings at 31 August 2024.

3 Source: BlackRock, Institutional Shareholder Services as at 31 August 2024.

Engagement Topics1

* Other:

Other company impacts on the environment 1; Board gender diversity 1; Business ethics and integrity 2;

Community relations 1; Other human capital management issues 1; and Privacy and data security 1.

Engagement Themes1

1 Engagements include multiple company meetings during the year with the same company. Most engagement conversations cover multiple topics and are based on our vote guidelines and our engagement priorities found here: https://www.blackrock.com/corporate/literature/publication/blk-stewardship-priorities-final.pdf

Source: BlackRock.

BlackRock Investment Stewardship
The BlackRock Investment Stewardship (BIS) team takes a long-term approach in its stewardship efforts, reflecting the investment horizons of the majority of BlackRock’s clients. BIS’ activities include engaging with companies, proxy voting on clients’ behalf, contributing to industry dialogue on stewardship, and reporting on its activities. These activities are the main components of the stewardship toolkit and are performed all year long. BIS aims to take a globally consistent approach, while recognising the unique markets and sectors in which companies operate.

BIS benchmark policies
The BIS Global Principles, regional voting guidelines and engagement priorities (collectively, the ‘BIS benchmark policies’) set out the core elements of corporate governance that guide BIS’ efforts globally and within each regional market, including when engaging with companies and voting at shareholder meetings when authorised to do so on behalf of clients. BIS is committed to transparency in terms of disclosure of its stewardship activities on behalf of clients and publishes these benchmark policies to help BlackRock’s clients understand its work to advance their interests as long-term investors in public companies. Each year, BIS reviews its benchmark policies and updates them as necessary to reflect changes in market standards and regulations, insights gained over the year through third-party and its own research, and feedback from clients and companies. Additionally, BIS publishes both annual and quarterly reports detailing its stewardship activities, as well as vote bulletins that describe its rationale for certain votes at high-profile shareholder meetings. More detail in respect of BIS reporting can be found at www.blackrock.com/corporate/insights/investment-stewardship.

Global principles
The BIS Global Principles reflect BIS’ views on the globally-applicable fundamental elements of corporate governance that contribute to a company’s ability to create long-term financial value.

The Global Principles are available on BIS’ website: https://www.blackrock.com/corporate/literature/fact-sheet/blk-responsible-investment-engprinciples-global.pdf.

Regional voting guidelines
The BIS regional voting guidelines provide context on local market rules and norms within the framework of BIS’ overarching global corporate governance principles. The regional voting guidelines help provide clients, companies, and others guidance on BIS’ position on common voting matters in each market. BIS’ regional voting guidelines are available on its website: https://www.blackrock.com/corporate/insights/investment-stewardship#stewardship-policies.

Engagement priorities
The BIS engagement priorities are the five themes on which BIS most frequently engages with companies, where they are relevant and a source of material business risk or opportunity. The engagement priorities are available on BIS’ website: https://www.blackrock.com/corporate/literature/publication/blk-stewardship-priorities-final.pdf.

BlackRock’s reporting and disclosures
In terms of its own reporting, BlackRock believes that the Sustainability Accounting Standards Board provides a clear set of standards for reporting sustainability information across a wide range of issues, from labour practices to data privacy to business ethics. For evaluating and reporting climate-related risks, as well as the related governance issues that are essential to managing them, the Task Force on Climate-related Financial Disclosures (TCFD) provides a valuable framework. BlackRock recognises that reporting to these standards requires significant time, analysis, and effort. BlackRock’s 2023 TCFD report can be found at www.blackrock.com/corporate/literature/continuous-disclosure-and-important-information/tcfd-report-2023-blkinc.pdf.

BY ORDER OF THE BOARD
CAROLINE DRISCOLL
FOR AND ON BEHALF OF
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
Company Secretary
5 November 2024

Statement of Directors’ Responsibilities in respect of the Annual Report and Financial Statements

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company as at the end of each financial year and of the profit or loss of the Company for that period. In preparing those financial statements, the Directors are required to:

· present fairly the financial position, financial performance and cash flows of the Company;

· select suitable accounting policies and then apply them consistently;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· make judgements and estimates that are reasonable and prudent;

· state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are also responsible for preparing the Strategic Report, the Directors’ Report, the Directors’ Remuneration Report, the Corporate Governance Statement and the Report of the Audit and Management Engagement Committee in accordance with the Companies Act 2006 and applicable regulations, including the requirements of the Listing Rules and the Disclosure Guidance and Transparency Rules. The Directors have delegated responsibility to the Manager for the maintenance and integrity of the Company’s corporate and financial information included on the BlackRock website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors at the date of this report, confirm to the best of their knowledge that:

· the financial statements, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

· the Strategic Report contained in the Annual Report and Financial Statements includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

The UK Corporate Governance Code also requires Directors to ensure that the Annual Report and Financial Statements are fair, balanced and understandable. In order to reach a conclusion on this matter, the Board has requested that the Audit and Management Engagement Committee advise on whether it considers that the Annual Report and Financial Statements fulfils these requirements. The process by which the Committee has reached these conclusions is set out in the Audit and Management Engagement Committee’s Report in the Annual Report and Financial Statements. As a result, the Board has concluded that the Annual Report and Financial Statements for the year ended 31 August 2024, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s position, performance, business model and strategy.

FOR AND ON BEHALF OF THE BOARD
ERIC SANDERSON
Chairman
5 November 2024

Income Statement for the year ended 31 August 2024

The total columns of this statement represent the Company’s profit and loss account. The supplementary revenue and capital accounts are both prepared under guidance published by the Association of Investment Companies (AIC). All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. All income is attributable to the equity holders of the Company.

The net profit on ordinary activities for the year disclosed above represents the Company’s total comprehensive income.

Statement of Changes in Equity for the year ended 31 August 2024

1 Interim dividend paid in respect of the year ended 31 August 2024 of 1.75p per share was declared on 2 May 2024 and paid on 19 June 2024. Final dividend paid in respect of the year ended 31 August 2023 of 5.00p per share was declared on 8 November 2023 and paid on 20 December 2023.

2 Interim dividend paid in respect of the year ended 31 August 2023 of 1.75p per share was declared on 10 May 2023 and paid on 19 June 2023. Final dividend paid in respect of the year ended 31 August 2022 of 4.85p per share was declared on 3 November 2022 and paid on 16 December 2022.

Balance Sheet as at 31 August 2024

Statement of Cash Flows for the year ended 31 August 2024

Notes to the Financial Statements for the year ended 31 August 2024

1. Principal activity
The Company was incorporated on 1 June 2004 and its principal activity is that of an investment trust company within the meaning of Section 1158 of the Corporation Tax Act 2010.

2. Accounting policies
The principal accounting policies adopted by the Company are set out below:

(a) Basis of preparation
The financial statements have been prepared on a going concern basis in accordance with The Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) and the revised Statement of Recommended Practice – Financial Statements of Investment Trust Companies and Venture Capital Trusts (SORP), issued by the Association of Investment Companies (AIC) in October 2019 and updated in July 2022, and the provisions of the Companies Act 2006.

Substantially, all of the assets of the Company consist of securities that are readily realisable and, accordingly, the Directors are satisfied that the Company has adequate resources to continue in operational existence for the period to 30 November 2025, being a period of at least 12 months from the date of approval of the financial statements, and therefore consider the going concern assumption to be appropriate. The Directors have reviewed compliance with covenants associated with the bank overdraft facility, income and expense projections and the liquidity of the investment portfolio in making their assessment.

The Directors have considered the impact of climate change on the value of the investments included in the Financial Statements and have concluded that there was no further impact of climate change to be considered as the investments are valued based on market pricing as required by FRS 102.

None of the Company’s other assets and liabilities were considered to be potentially impacted by climate change.

The principal accounting policies adopted by the Company are set out below. Unless specified otherwise, the policies have been applied consistently throughout the year and are consistent with those applied in the preceding year. All of the Company’s operations are of a continuing nature.

The Company’s financial statements are presented in Sterling, which is the functional currency of the Company and the primary economic environment in which the Company operates. All values are rounded to the nearest thousand pounds (£’000) except where otherwise indicated.

(b) Presentation of Income Statement
In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and a capital nature has been presented on the face of the Income Statement.

(c) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single segment of business being investment business.

(d) Income
Dividends receivable on equity shares are treated as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the year end are treated as revenue for the year. Provisions are made for dividends not expected to be received.

Special dividends are recognised on an ex-dividend basis and treated as capital or revenue depending on the facts or circumstances of each particular dividend.

Dividends are accounted for in accordance with Section 29 of FRS 102 on the basis of income actually receivable, without adjustment for tax credits attaching to the dividend. Dividends from overseas companies continue to be shown gross of withholding tax.

Deposit interest receivable is accounted for using the effective interest rate method in accordance with Section 11 of FRS 102.

Where the Company has elected to receive its dividends in the form of additional shares rather than in cash, the cash equivalent of the dividend is recognised as revenue. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital.

(e) Expenses
All expenses, including finance costs, are accounted for on an accruals basis. Expenses have been charged wholly to the revenue account of the Income Statement, except as follows:

· expenses which are incidental to the acquisition or disposal of an investment are treated as capital. Details of transaction costs on the purchases and sales of investments are disclosed in note 10 in the annual reports and finanical statements;

· expenses are treated as capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated; and

· the investment management fee and finance costs have been allocated 20% to the revenue account and 80% to the capital account of the Income Statement in line with the Board’s expected long-term split of returns, in the form of capital gains and income respectively, from the investment portfolio.

(f) Taxation
The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Income Statement because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that were applicable at the balance sheet date.

The current tax effect of different items of expenditure is allocated between capital and revenue on the marginal basis using the Company’s effective rate of corporation tax for the accounting period.

Deferred taxation is recognised in respect of all timing differences at the financial reporting date, where transactions or events that result in an obligation to pay more taxation in the future or right to less taxation in the future have occurred at the balance sheet date. Deferred taxation is measured on a non-discounted basis, at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. This is subject to deferred taxation assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the timing differences can be deducted.

(g) Investments held at fair value through profit or loss
The Company’s investments are classified as held at fair value through profit or loss in accordance with Sections 11 and 12 of FRS 102 and are managed and evaluated on a fair value basis in accordance with its investment strategy.

All investments are classified upon initial recognition as held at fair value through profit or loss. Purchases of investments are recognised on a trade date basis. Sales are recognised at the trade date of the disposal and the proceeds are measured at fair value, which is regarded as the proceeds of the sale less any transaction costs.

The fair value of the financial investments is based on their quoted bid price at the balance sheet date on the exchange on which the investment is quoted, without deduction for the estimated future selling costs.

Unquoted investments are valued by the Directors at fair value using International Private Equity and Venture Capital Valuation Guidelines. This policy applies to all current and non-current asset investments of the Company.

Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Income Statement as ‘Gains or losses on investments held at fair value through profit or loss’. Also included within this heading are transaction costs in relation to the purchase or sale of investments.

The fair value hierarchy consists of the following three levels:

Level 1 – Quoted market price for identical instruments in active markets.

Level 2 – Valuation techniques using observable inputs.

Level 3 – Valuation techniques using significant unobservable inputs.

(h) Debtors
Debtors include sales for future settlement, other debtors and prepayments and accrued income in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.

(i) Creditors
Creditors include purchases for future settlement, interest payable, share buy back costs and accruals in the ordinary course of business. Creditors are classified as creditors – amounts due within one year if payment is due within one year or less (or in the normal operating cycle of business if longer). If not, they are presented as creditors – amounts due after more than one year.

(j) Dividends payable
Under Section 32 of FRS 102, final dividends should not be accrued in the financial statements unless they have been approved by shareholders before the balance sheet date. Dividends payable to equity shareholders are recognised in the Statement of Changes in Equity when they have been approved by shareholders and have become a liability of the Company. Interim dividends are only recognised in the financial statements in the period in which they are paid.

(k) Cash and cash equivalents
Cash comprises cash in hand and on demand deposits. Cash equivalents include bank overdrafts repayable on demand and short term, highly liquid investments, that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.

(l) Foreign currency translation
In accordance with Section 30 of FRS 102, the Company is required to nominate a functional currency being the currency in which the Company predominately operates. The functional and reporting currency is Sterling, reflecting the primary economic environment in which the Company operates. Transactions in foreign currencies are translated into Sterling at the rates of exchange ruling on the date of the transaction. Foreign currency monetary assets and liabilities are translated into Sterling at the rates of exchange ruling at the balance sheet date. Profits and losses thereon are recognised in the capital account of the Income Statement and taken to the capital reserves.

(m) Share repurchases, share reissues and new share issues
Shares repurchased and subsequently cancelled – share capital is reduced by the nominal value of the shares repurchased and the capital redemption reserve is correspondingly increased in accordance with Section 733 of the Companies Act 2006. The full cost of the repurchase is charged to the special reserve.

Shares repurchased and held in treasury – the full cost of the repurchase is charged to the special reserve.

Where treasury shares are subsequently reissued:

· amounts received to the extent of the repurchase price are credited to the special reserve and capital reserves based on a weighted average basis of amounts utilised from these reserves on repurchases; and

· any surplus received in excess of the repurchase price is taken to the share premium account.

Where new shares are issued, the par value is taken to called up share capital and amounts received to the extent of any surplus received in excess of the par value are taken to the share premium account.

Share issue costs are charged to the share premium account. Costs on share reissues are charged to the special reserve and capital reserves.

(n) Bank borrowings
Bank overdrafts are recorded as the proceeds received. Finance charges are accounted for on an accruals basis in the Income Statement.

(o) Critical accounting estimates and judgements
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results. Estimates and judgements are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Directors do not believe that any accounting judgements or estimates have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.

3. Income

Dividends and interest received in cash during the year amounted to £8,119,000 and £nil respectively (2023: £7,781,000 and £1,000).

Special dividends of £31,000 have been recognised in capital during the year (2023: £nil).

4. Investment management fee

With effect from 1 January 2023, the investment management fee is levied quarterly based on a tiered basis: 0.85% per annum of the month-end net asset value up to £350 million and 0.75% per annum of the month-end net asset value above £350 million.

Up to and including 31 December 2022, the investment management fee was levied quarterly, based on 0.85% per annum of the net asset value on the last day of each month.

The investment management fee is allocated 20% to the revenue account and 80% to the capital account of the Income Statement. There is no additional fee for company secretarial and administration services.

5. Other operating expenses

1 No non-audit services are provided by the Company’s auditors (2023: none).

2 Further information on Directors’ emoluments can be found in the Directors’ Remuneration Report in the Annual Report and Financial Statements.The Company has no employees.

3 Relates to professional fees and postage and printing fees written back in the year ended 31 August 2024 (2023: legal fees and registrar’s fees).

4 Provision for doubtful debts relate to dividend income from Sberbank which has not been received due to measures imposed by the Russian authorities in response to the sanctions that have been imposed on Russia as a result of the invasion of Ukraine.

5 For the year ended 31 August 2024, expenses of £9,000 (2023: £89,000) were charged to the capital account of the Income Statement. These relate to transaction costs charged by the custodian on sale and purchase trades.

6 Alternative Performance Measure, see Glossary in the Annual Report and Financial Statements.

6. Dividends

The Directors have proposed a final dividend of 5.25p per share in respect of the year ended 31 August 2024. The final dividend will be paid on 20 December 2024, subject to shareholders’ approval on 10 December 2024, to shareholders on the Company’s register on 22 November 2024. The proposed final dividend has not been included as a liability in these financial statements as final dividends are only recognised in the financial statements when they have been approved by shareholders.

The total dividends payable in respect of the year which form the basis of determining retained income for the purpose of Section 1158 of the Corporation Tax Act 2010 and Section 833 of the Companies Act 2006, and the amount proposed for the year ended 31 August 2024, meet the relevant requirements as set out in this legislation.

* Based on 98,238,150 ordinary shares (excluding treasury shares) in issue on 4 November 2024.

All dividends paid or payable are distributed from the Company’s current year revenue profits and, if required, from brought forward revenue reserves.

7. Earnings and net asset value per ordinary share
Revenue, capital earnings and net asset value per ordinary share are shown below and have been calculated using the following:

There were no dilutive securities at the year end (2023: none).

8. Called up share capital

During the year, 1,668,000 ordinary shares (2023: 698,692) were repurchased and held in treasury for a net consideration after expenses of £10,227,000 (2023: £3,014,000).

Since 31 August 2024 and up to the latest practicable date of 4 November 2024, a further 1,094,011 ordinary shares have been repurchased for a net consideration after expenses of £6,330,000 and placed in treasury.

9. Reserves