BlackRock Greater Europe Investment Trust Regulatory News (BRGE)

BLACKROCK GREATER EUROPE INVESTMENT TRUST PLC

LEI: 5493003R8FJ6I76ZUW55

Annual Report and Financial Statements 31 August 2023

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.

Chairman’s Statement

Introduction2023 has turned out to be a better year for both markets and economies than envisaged, whereas 2022 was a challenging year for investors as stocks and bonds fell together. Having lost its biggest supplier of energy following Russia’s invasion of Ukraine, feared economic disruption caused by energy shortages never materialised due to warmer temperatures and effective stock piling of natural gas. However, energy prices were significantly higher and substantial financial support has been given to Ukraine from across the region. A swift intervention by central banks following three large bank failures in the US and the rescue of Credit Suisse in Europe also helped stabilise markets. Although the region has faced economic headwinds and there has been a steady deterioration in the manufacturing sector, respite has been provided by the larger services sector and consumer spending post the COVID-19 pandemic.

PerformanceAgainst this background, I am pleased to report that the portfolio performed well during the year, delivering a strong positive return and outperforming its reference index, the FTSE World Europe ex UK Index. The Company’s net asset value per share (NAV) returned +19.2% and the share price +17.1%. In comparison, the reference index returned +15.8% over the same period (all percentages calculated in Pound Sterling terms with dividends reinvested). As at 31 August 2023, our Company’s NAV total return has outperformed every other investment trust in the AIC Europe sector over one and five year periods.

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 equity markets have faced a challenging environment and up to close of business on 3 November 2023, the Company’s NAV has decreased by 4.8% compared with a fall in the reference index of 2.0% over the same period.

Revenue earnings and dividendsYour 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 2023 declined to 6.85p per share, which compares with 7.65p per share for the previous year, a fall of 10.5%.

In April, the Board declared an interim dividend of 1.75p per share (2022: 1.75p) and is now proposing the payment of a final dividend of 5.00p per share for the year (2022: 4.85p). This, together with the interim dividend, makes a total dividend for the year of 6.75p per share (2022: 6.60p), an increase of 2.3%. The dividend will be funded from revenue received in the year. Subject to shareholder approval, the dividend will be paid on 20 December 2023 to shareholders on the Company’s register on 17 November 2023, the ex-dividend date being 16 November 2023.

Management of share ratingThe 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. It is worth noting that the Company became a constituent of the FTSE 250 on 25 May 2023.

Over the year to 31 August 2023, the Company’s shares have traded at an average discount of 5.4%. During the year, the Company purchased 698,692 ordinary shares at an average price of 431.38p per share and an average discount of 6.2% for a total cost of £3,014,000. Since the year end up to 3 November 2023, a further 188,000 ordinary shares have been bought back at an average price of 528.72p per share for a total cost of £994,000. All shares have been placed in treasury. No shares were issued during the year.

As reported in the 2023 Half Yearly Financial Report, the Directors exercised their discretion not to operate the half yearly tender offers in November 2022 and May 2023. It was also announced on 20 September 2023 that the Board had decided not to implement a semi-annual tender offer in November 2023. Over the six-months to 31 August 2023, the average discount to NAV (cum income) was 5.4% and the discount as at close of business on 19 September 2023 was 4.4%. 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 2023.

Portfolio ManagerAs announced on 28 September 2023, we are delighted that Alexandra Dangoor has been named as co-portfolio manager of the Company, alongside lead manager Stefan Gries. Alexandra joined the BlackRock Fundamental European Equity Team in 2019 after two years in BlackRock’s graduate rotation program where she was an analyst in the Natural Resources and European Equity teams. Her research support for Stefan’s strategies, including those of the Company, has given her a chance to develop a deep understanding of the philosophy of running concentrated, high conviction, low turnover portfolios.

The co-portfolio manager appointment reflects Alexandra’s strong track record as a research analyst, as well as the European Equity team’s ongoing commitment to the development of talent from within. The appointment also returns the Company to a co-portfolio manager structure. The investment objective and policy of the Company is unchanged.

Board compositionDavina Curling has informed the Board of her intention to retire as a Director of the Company following the Annual General Meeting in December 2023 and, accordingly, will not be seeking re-election. Davina joined the Board in December 2011 and the Board would like to express its strong appreciation for Davina’s wise counsel and invaluable contribution to the Company. Her departure marks the beginning of a Board refreshment policy.

During the year, the Board commenced a search to identify a new Director and we are delighted to announce that Sapna Shah will be appointed following the forthcoming Annual General Meeting. Sapna has 20 years of investment banking experience advising UK companies, including listed REITs and investment companies, on IPOs, equity capital market transactions and mergers and acquisitions. Sapna was appointed as a non-executive director of The Association of Investment Companies (AIC) in January 2021 and is a member of the AIC remuneration committee. She is also a senior adviser at Panmure Gordon Limited and prior to this held senior investment banking roles at UBS AG, Oriel Securities (now Stifel Nicolaus Europe) and Cenkos Securities. Sapna is currently a non-executive director of Supermarket Income REIT plc and BioPharma Credit PLC.

Following Davina’s departure the Board has agreed to appoint Paola Subacchi as the Senior Independent Director.

Visit to DenmarkThe Board takes its governance duties very seriously and in May 2023 joined representatives of the Manager on a three-day trip to Denmark to meet the management teams of some of the Company’s largest holdings. This represented a significant time commitment from the Board and the aim of the trip was to gain a deeper understanding of the portfolio manager’s due diligence processes when meeting with investee companies, as well as gaining enhanced knowledge of these companies and their business models and the operational challenges that they are facing in current markets. During the course of the visit the Board undertook site tours and met with representatives from Novo Nordisk, Royal Unibrew and DSV (collectively representing 16.3% of the Company’s portfolio as at 31 August 2023) as well as the Chief Equity Strategist at Danske Bank who provided insight into challenges facing global markets and the Danish economy.

Shareholder communicationsThe 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 this report.

OutlookEuropean equities have defied expectations and produced strong performance over the past 12 months. The rebound has been driven by a combination of rising valuations and improved earnings expectations, as the mild winter averted an energy crisis in Europe. However, it remains a challenging environment especially with the war in Ukraine, the conflict in the Middle East and with above-target inflation forcing the European Central Bank to initiate multiple interest-rate hikes and the impact now being felt in the real economy. Levels of uncertainty therefore remain high and market volatility is expected to remain a key theme for the foreseeable future.

Against this background, our portfolio managers will continue to favour companies that have resilience, robust balance sheets, strong cash flows and management teams with deep experience through multiple cycles. Your Board remains fully supportive of their approach, as markets tend to reward companies with stronger quality credentials amid heightened uncertainty.

Annual General MeetingThe Annual General Meeting of the Company will be held in person at the offices of BlackRock at 12 Throgmorton Avenue, London EC2N 2DL on Tuesday, 12 December 2023 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.

Eric SandersonChairman7 November 2023

Investment Manager’s Report

Market reviewEuropean equity markets rallied over the past year despite ongoing expectations of an economic downturn. Certain economic indicators, such as Purchasing Manager Indices (PMIs) have looked weak, but company earnings and guidance have exceeded expectations across a wide range of industries. We believe this divergence between the top-down and the bottom-up is best explained by the aftermath of COVID-19 disruptions. Pent up demand for services and travel, improving supply chains and efforts to reduce inventories to more normal levels, have led to temporary demand weakness, de-stocking and subsequent recoveries across different parts of the market and at different times.

Most of the period saw cyclical sectors outperform defensives, perhaps reflecting that expectations had become too pessimistic as the result of an aggressive rate hiking cycle, as well as the previously anticipated weaker economic growth due to higher energy costs after the Russian invasion of Ukraine.

In this report, we will discuss the portfolio’s performance over the last 12 months, offer examples of high conviction ideas held in the portfolio, briefly touch on limited portfolio changes and conclude with our expectations for what the future holds. For the year ended 31 August 2023, performance was positive with a share price total return of 17.1% and a NAV return of 19.2%. By way of comparison, the reference index, the FTSE World Europe ex UK Index, returned 15.8% over the same period. All percentages calculated in Pound Sterling terms with dividends reinvested.

Portfolio performanceFollowing the headwinds of 2022 (see the 2022 Annual Report and Financial Statements) it is pleasing to note the strong positive contribution to relative returns arising from investments in the semiconductor industry, where we had maintained our positions. Our investment in BE Semiconductor (BESI) was the top performer over the past year. The company designs and produces mission critical semiconductor assembly equipment used by chip manufacturers, assembly subcontractors and electronics and industrial companies. Specifically, they are a leading provider of packaging solutions such as hybrid bonding, which is set to become an increasingly important technology in enabling semiconductor chips to continue getting smaller, yet more powerful and energy efficient.

BESI’s strong share price performance of almost 130% over the last 12 months, was driven by a better-than-expected earnings (Q2 2023 results showed revenues up by 21.8% compared to the previous quarter, although down 24% year-on-year but more importantly gross margins exceeded 65%) and a positive re-assessment of the future prospects of the company following an update from Nvidia. The US based chip designer said they were seeing ‘surging demand’ for data centre products used in generative Artificial Intelligence (AI), such as ChatGPT. To meet the demands of emerging AI technologies, semiconductor chips will have to become more powerful, meaning chip manufacturers will need to markedly increase their use of advanced packaging tools such as those sold by BESI.

A number of other semiconductor companies held in the portfolio also added to returns. ASM International, a company specialising in “atomic layer deposition” (depositing a fine layer of chemicals on a microchip resulting in uniform surfaces and better control of voltage along with current flow/leakage) delivered results in-line with expectations but talked about new orders to improve during the second half of 2023 helped by new technologies. Similarly, ASML, a manufacturer of lithography machines (etching intricate patterns on silicon wafer) reported that overall demand continued to outstrip supply, with an order backlog of approximately EUR 38 billion.

A very different but equally exciting company was another significant driver of returns. Novo Nordisk is a Danish-listed diabetes specialist and producer of the semaglutide molecule which has already experienced significant commercial success in diabetes under brand names Ozempic (injection) and Rybelsus (oral tablet). However, it was its use in an obesity care setting which is rapidly developing under brand name Wegovy (injection) that moved the share price higher by over 60% during the past year.

We believe the obesity market opportunity is significant. Whilst there are an estimated 764 million people living globally with obesity, only a small percentage of these seek help from a healthcare professional. Even fewer are treated with medications and the side effect profiles of older therapies mean only a quarter stay on treatment for more than a year. With its strong efficacy profile in weight loss, a well-established side effect profile and database from its use in diabetes already, Wegovy has an opportunity to disrupt this market and help people continue with their treatment.

The investment case became even more compelling towards the end of the period as Novo Nordisk reported results from its ‘SELECT’ cardiovascular outcomes clinical trial which showed a statistically significant 20% reduction in major adverse cardiovascular events for patients on Wegovy, a very positive outcome and above investor expectations. We believe these results will help underpin the validity of this new category of obesity drugs, leading to further uptake from commercial insurers, physicians, government programmes and patients.

Novo Nordisk sales franchise split 2012:

Novo Nordisk sales franchise split 2022:

Source: BlackRock.

Negative contribution came mainly from two areas: a potential competitive threat to payments provider Adyen and unexpected order weakness in the life sciences and biopharma industries. Firstly, Adyen is a low-cost payments provider with a best-in-class single-stack technology platform, which had driven profitable growth through market share gains in the past. However, in the summer of 2023, Adyen surprised markets with an earnings miss that led to a fall in the share price by more than 40%. Management reported slowing growth driven by increased pricing competition in North America. We had spoken to the company throughout the year and tracked industry results where possible.

The change in competition comes from Braintree, a unit within PayPal, which we believe may try to undercut Adyen despite a higher cost stack and therefore accepting a near zero-profit as a result. The initial share price reaction was extreme, even accounting for a derating reflecting lower confidence in future forecasts: North America represents 25% of Adyen’s business and the ‘Digital’ business (i.e. online purchases only) which is impacted by the new competition represents circa 15%. Whilst revenue of the impacted business is unlikely to decline to zero, a lower take rate would result in slower top line growth and lower profitability. To what degree that will be the case is under review at the time of writing. We have reduced our position reflecting lower conviction. Secondly, several of the portfolio’s life science holdings detracted from performance. The industry faced headwinds from rising interest rates as funding costs increased which in turn led to a decline in the funding required for their customers’ (typically large pharma companies) drug development programmes.

The key casualty in the portfolio was ChemoMetec, a company that specialises in the sale of analytical equipment (primarily cell counters). While funding pressures have recently led to weaker orders from customers, we expect these trends to stabilise in the coming quarters and continue to see the business as an excellent way of accessing the rapidly growing market for cell-based therapies without taking product specific risk. Sartorius, a supplier of single use equipment used to manufacture drugs, was particularly impacted by this phenomenon but we do not believe there has been any change in the underlying structural drivers and we expect to see a return to historical growth rates through 2024. Finally, Lonza Group, the specialist in contract drug manufacturing, faced weakness in its nutraceutical business (vitamins and capsules), but its core business (large scale commercial biologics) continued to see very strong demand and performed well and we see no evidence of weakening long-term fundamentals.

High conviction areasAmid the increasing volume of soundbites about regime change regarding the interest rate environment, we remain focused on investing in companies whose profits are aligned to long-term spending trends that will persist irrespective of the level of interest rates, inflation and near-term economic growth. One such spending trend, supported by supernational programmes, is the effort to re-organise and improve the resilience of supply chains, bring manufacturing closer to domestic markets and increase automation in the face of higher labour costs or deteriorating demographics. An example of a company that we believe will benefit from this “capex renaissance” is Swedish-listed Atlas Copco (Atlas), a world leading manufacturer of compressors, vacuum solutions, generators, pumps, power tools and assembly systems.

Atlas is an exceptionally well managed business with a long-term culture and strong customer focus, aided by a decentralised structure with devolved decision making. They pride themselves on integrating with their customers and thus being able to provide rapid and extensive services and support of their installed base of equipment. The largest part of Atlas’ revenue is derived from producing, selling, and servicing compressed air solutions such as industrial compressors and air management systems which have a wide range of applications across the industrial complex. Increasing factory automation is a structural tailwind, as is producing the most energy efficient compressors, and we believe Atlas is well positioned to benefit from customers’ desire to reduce their total cost of ownership.

Atlas’ vacuum business is a global leading supplier of vacuum solutions – primarily to the semiconductor and electronics manufacturing markets. We believe it is well set to benefit from the expansion of the North American semiconductor manufacturing market, which has become a national priority. Currently only 10% of the world’s chips are made in the US. However, as the chart in the Annual Report and Financial Statements shows, we are seeing major investment in semiconductor manufacturing facilities. Atlas is following suit with new facilities in Arizona and Massachusetts to support the burgeoning industry.

Another long duration spending stream – the “renovation wave” - results from global efforts to decarbonise. For instance, to meet the European Union’s (EU) 2050 net-zero target, the European housing stock needs to be improved as it is estimated that 75% of the EU building stock is energy inefficient and buildings account for circa 40% of energy consumption and 36% of greenhouse gas emissions in the EU. It is estimated that the region’s total energy consumption and carbon dioxide emission could be reduced by 5% to 6% by renovating the existing building stock. Landlords and tenants alike are being pushed to act by regulation and landlords have the additional incentive of moving quickly to avoid their properties becoming stranded assets. As a result, companies such as Sika, a leader in providing specialty chemicals to the construction industry, should see its earnings underpinned for more than a decade. Sika’s products are used in flooring, roofing, sealing, bonding and waterproofing – key applications needed for building and renovation work. With sales to both renovation projects, as well as new builds, the company offers exposures to multiple points of the construction cycle.

Kingspan is another beneficiary; the building materials company makes insulated panels and boards often used in buildings such as warehouses, data centres and battery factories where we expect strong demand in the near-term future.

An area where we have historically seldom deployed much capital, but where market dynamics are changing, is the banking sector. Higher interest rates, lower leverage and a remarkable benign default environment have combined to create a profitable backdrop for the sector. That said, in the large economies in Europe, there is little evidence that many banks will meet our long-term investment criteria due to our scepticism on their ability to earn a spread between their returns and their cost of capital on a prolonged basis. An exception to this is Allied Irish Banks (AIB) which we added to the portfolio at the beginning of 2023. AIB not only benefits from a higher interest rate regime but also from an improved structural backdrop in Ireland. The economy has materially de-levered post the Global Financial Crisis (GFC) meaning that credit quality is significantly better than during the previous cycle and loan to deposit ratios of the banks are circa 65% to 70%, some of the lowest in Europe. The Irish banking market has also become highly consolidated, allowing AIB to have a 31% market share in mortgages and 37% share in deposits. As the rate cycle progresses, we believe that AIB has the tools to reduce its sensitivity to rates if needed, which makes it one of a few banks to hold on a long-term view.

Structural change is favourable for market leaders

Figure 1: Ireland mortgage market share, 2020

Figure 2: Ireland mortgage market share, 2022 post M&A

Figure 3: Ireland deposit market share, 2020

Figure 4: Ireland deposit market share, 2022 post M&A

AIB: Allied Irish Banks plcPTSB: Permanent TSB Group Holdings plcKBC: KBC Bank Ireland plcBIRG: Bank of Ireland Group plc

Source: Central Bank of Ireland.

Portfolio changesAs long term and concentrated investors, ‘competition for capital’ is high and therefore we typically do not change our positioning unless we see a fundamental change to an investment case or there is an opportunity that is significantly better than an asset we already own. Portfolio turnover over the last year was 16%, implying a more-than-six year holding period. As described above, we added a position in AIB to the portfolio at the beginning of the year. We exited from National Bank of Greece, Bank Pekao and Avanza Bank, hence the overall weight to financials was reduced.

Our technology exposure increased over the period as we added a position in STMicroelectronics (STM) which creates semiconductor technologies. STM has been outgrowing its end markets given a number of new innovative product launches around auto, smartphones and industrial projects. We expect this trend to continue helped by continued innovation in power chips for electric vehicles, sensors for consumer electronics and connectivity for industrial applications. All these areas should see secular growth ahead, as devices need to become smarter as well as more energy efficient. Following the sell-off in technology assets in 2022, the shares’ valuation offered an attractive entry point to make an investment.

Elsewhere in the sector, we bought engineering and technology consulting company ALTEN Group, which serves customers across a range of industries both in the private and public sector. ALTEN Group is a beneficiary of increasing digitisation trends, as companies everywhere seek to become more agile and efficient with higher technology budgets. It joins a sizeable cohort of companies in the portfolio which are founder-led: a trait which often results in management teams focused on delivering long-term sustainable and profitable growth.

Finally, we exited Diasorin and Polypeptide. Diasorin is an Italian-listed diagnostics company that develops, produces and sells reagent kits and instruments for diagnosis and research. We decided to sell the position after losing conviction in the firm’s management team upon poor execution on their Luminex deal. Similarly, Polypeptide suffered a number of technical and manufacturing process issues which led to a temporary suspension of two manufacturing lines. Following those events, we reduced our weightings and ultimately sold the positions.

Holdings in Russian stocksPrior to Russia’s invasion of Ukraine, 5.7% (£36.9 million) of the Company’s portfolio was invested in stocks with exposure to Russia (as at 31 January 2022). During the year under review, the Company was able to partially realise its holding in Fix Price Group for proceeds of £0.3 million compared to a carrying value of £0.9 million as at 31 January 2022, resulting in an uplift of 0.1% to the Company’s NAV per share on 5 October 2023 as this position was previously fair valued at zero. In addition, and subsequent to the year end, the Company was also able to realise in full its holding in Ozon Holdings for £3.2 million (compared to a carrying value of £4.3 million as at 31 January 2022), resulting in an uplift of 0.61% to the Company’s NAV per share on 5 October 2023 as this position was previously fair valued at zero. The Company’s holdings in both Fix Price Group and Ozon were in the form of Depositary Receipts (rather than direct equity exposure) and there were no sanctions restrictions in respect of the disposal of these holdings.

OutlookThe noise around market moves seems to increase with every passing year. More recently, the war in the Middle East has further complicated matters and has, for now, put a risk premium on equities. As with all geographical risks, we monitor the situation very carefully.

We make no attempt to predict to the basis point the next quarters’ gross domestic product (GDP), growth inflation or unemployment rate. Nor do we pay much heed to top-down indicators or what they may reveal about the health of the global economy. As described earlier in this report, the world is clearly in the midst of several transitions: COVID-19 to post COVID-19, inflation to disinflation, low interest rates to high interest rates. These dynamics must be considered when assessing the health of the global economy and the prospects for equity markets. Various end markets may continue to imply weak demand as inventories are run down, while others – perhaps those associated with Chinese real estate – may have more prolonged problems.

However, assessing the economy from the bottom-up, company by company, we see no reason for investors with a reasonable time horizon to be alarmed. Household debt relative to assets is low in large economies, interest rate sensitivity is lower than in previous cycles and real wages are growing. Similarly, corporate balance sheets are strong after 15 years of deleveraging, margins remain at healthy levels and we may be at the foothills of an increase in capital expenditure spending resulting in a ‘modern era industrial revolution’. Long-term structural trends and large amounts of stimulus in both Europe and the US can drive demand for years to come, for example in areas such as infrastructure, automation, innovation in medicines, the shift to electric vehicles, digitisation or decarbonisation. We believe the portfolio is well aligned to many of these structural spending streams that should continue to support earnings in the medium to long term.

As investors we must be forward looking, we must anticipate areas of enduring demand and identify those special companies whose characteristics enable them to capitalise on this demand and, in doing so, benefit their stakeholders and shareholders. We remain optimistic about the prospects of companies held in our portfolio.

Stefan Gries and Alexandra DangoorBlackRock Investment Management (UK) Limited7 November 2023

Ten largest investments

Ten largest investments represented 53.4% of the portfolio as at 31 August 2023 (2022: 53.7%)

1 ► Novo Nordisk (2022: 1st)Health Care companyMarket value: £55,500,000Share of investments: 9.3%

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 ▲ LVMH (2022: 3rd)Consumer Discretionary companyMarket value: £43,689,000Share of investments: 7.3%

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.

3 ▼ ASML (2022: 2nd)Technology companyMarket value: £39,724,000Share of investments: 6.7%

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.

4 ► RELX (2022: 4th)Consumer Discretionary companyMarket value: £32,544,000Share of investments: 5.5%

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

5 ▲ DSV Panalpina (2022: 6th)Industrials companyMarket value: £26,104,000Share of investments: 4.4%

DSV Panalpina is a Danish freight forwarding and logistics company run by an excellent management team with a strong track record in creating value through acquisitions and by instilling a best-in-class culture. Their success in making acquisitions has been facilitated by a strong technology platform which drives operational efficiencies leading to high conversion margins.

6 ▼ Lonza Group (2022: 5th)Health Care companyMarket value: £26,021,000Share of investments: 4.4%

Lonza Group is a Swiss healthcare services and life-sciences company which has established itself as one of the leading contract-manufacturers of high-end biological drugs, as well as cell and gene therapy. The company’s competitive advantages stem from the complexity of the production process – where few peers can match its offering. This is cemented by high barriers to entry given that all production facilities are required to be certified by the Food and Drug Administration.

7 ▲ Hermès (2022: 9th)Consumer Discretionary companyMarket value: £25,094,000Share of investments: 4.2%

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.

8 ▲ STMicroelectronics (2022: n/a)Technology companyMarket value: £24,426,000Share of investments: 4.1%

STMicroelectronics is a Dutch technology company creating semiconductor technologies. The company has been outgrowing its end markets due to a number of new innovative product launches in automobile, smartphone and industrial segments. The portfolio managers expect this trend to continue, helped by continued innovation in power chips for electric vehicle cars, sensors for consumer electronics and microcontrollers for industrial applications.

9 ▲ BE Semiconductor (2022: 18th)Technology companyMarket value: £23,811,000Share of investments: 4.0%

BE Semiconductor is a Dutch supplier of semiconductor assembly equipment. The company can continue to grow its market share of an overall growing market given its best-in-class position to capture the advanced packaging segment of the assembly market. The chip makers will have to rely on more innovative packaging solutions (e.g. hybrid bonding) to continue to improve chip efficiency (faster processing, lower power consumption) while also keeping control over manufacturing costs.

10 ▲ Safran (2022: 12th)Industrials companyMarket value: £20,699,000Share of investments: 3.5%

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.

All percentages reflect the value of the holding as a percentage of total investments.

Investments as at 31 August 2023

+ Investment held at Directors’ valuation.

* The investments in Ozon Holdings, 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 2023 was 39 (31 August 2022: 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 2023, the Company did not hold any equity interests comprising more than 3% of any company’s share capital.

Investment exposure as at 31 August 2023

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 2023. 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 7 November 2023.

Principal activityThe Company carries on business as an investment trust and has a premium listing 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 objectiveThe 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 policyStrategyThe 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 modelThe 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 (BNYM). Other service providers include the Depositary (also BNYM) 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 in the Annual Report and Financial Statements.

Investment policyThe 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 2023, the Company held 39 investments. None (2022: 3.4%) 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 2023. 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 5.1% (2022: nil).

PerformanceIn the year to 31 August 2023, the Company’s NAV per share increased by 19.2% (compared with an increase in the reference index of 15.8%) and the share price rose by 17.1% (all percentages calculated in Pound 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 dividendsThe results for the Company are set out in the Income Statement in the Financial Statements. The total profit for the year, after taxation, was £91,591,000 (2022: total loss, after taxation, of £201,365,000) which is reflected in the increase in the net asset value of the Company. The revenue return amounted to £6,920,000 (2022: £7,728,000) 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 (2022: 1.75p). The Directors recommend the payment of a final dividend of 5.00p per share, making a total dividend of 6.75p per share (2022: 6.60p). Subject to approval at the forthcoming Annual General Meeting, the dividend will be paid on 20 December 2023 to shareholders on the register of members at the close of business on 17 November 2023.

Future prospectsThe 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 above.

Social, community and human rights issuesAs 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 below.

Modern Slavery ActAs 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 employeesThe Directors of the Company on 31 August 2023 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 indicatorsAt 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 in 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 share price and NAV 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 risksThe 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, high 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.

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 riskPrincipal riskThe potential loss that the Company could incur if a counterparty is unable (or unwilling) to perform on its commitments.

Mitigation/ControlDue 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 riskPrincipal riskReturns 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/ControlTo 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 below. This is monitored by the Board.

Legal & Compliance riskPrincipal riskThe 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/ControlThe 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 riskPrincipal riskMarket 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/ControlThe 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 conflict. 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 riskPrincipal riskIn 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/ControlDue 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 riskPrincipal riskThe Company’s investment activities expose it to a variety of financial risks which include interest rate risk, counterparty credit risk and liquidity risk.

Mitigation/ControlDetails of these risks are disclosed in note 16 to the Financial Statements in the Annual Report and Financial Statements, together with a summary of the policies for managing these risks.

Marketing riskPrincipal riskMarketing 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/ControlThe 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 statementIn 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 2028. 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 above, 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 Directors’ Report in the Annual Report and Financial Statements.

Section 172 Statement: promoting the success of the CompanyThe 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.

StakeholdersShareholdersContinued 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 ManagerThe 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 providersIn order for the Company to function as an investment trust with a listing on the premium segment of the official list of the FCA and trade on the London Stock Exchange’s (LSE) main market for listed securities, 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 companiesPortfolio 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 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 EngagementInvestment mandate and objectiveIssueThe 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.

EngagementThe 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.

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.

ImpactThe portfolio activities undertaken by the Investment Manager can be found in their report above.

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 (above).

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

EngagementThe 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.

ImpactThe 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 (many by video conference) and held discussions with a number of wealth management desks and offices in respect of the Company during the year under review.

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.

Area of EngagementResponsible investingIssueGood 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.

EngagementThe Company does not exclude investment in stocks based on ESG criteria and 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 and sustainability is set out below. The Investment Manager’s engagement and voting policy is detailed above and on the BlackRock website.

ImpactThe 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 above.

Area of EngagementManagement of share ratingIssueThe 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.

EngagementThe 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.

ImpactThe 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 2023 as, over the six months to 31 August 2023, the average discount to NAV (cum income) was 5.4%. It also decided not to implement the May 2023 semi-annual tender offer, as over the six months to 28 February 2023, the average discount to NAV (cum income) was 5.5%. 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 886,692 ordinary shares both during the financial year and since the year end. As at 3 November 2023 the Company’s shares were trading at a discount of 7.6% to the cum income NAV.

Area of EngagementService levels of third-party providersIssueThe 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.

EngagementThe 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.

ImpactAll 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.

Area of EngagementBoard compositionIssueThe 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.

EngagementDuring the year, the Board engaged the services of an external search consultant to identify potential candidates to replace Ms Curling who retires as a Director following the forthcoming Annual General Meeting. 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 2023 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.

ImpactAs a result of the recruitment process, Ms Sapna Shah will be appointed as a Director of the Company following the Annual General Meeting being 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 Ms Curling, have a tenure in excess of nine years. Ms Curling will retire at the Company's Annual General Meeting in December.

The Board considers that the tenure of the Chairman and Directors should be determined principally by how the Board’s purpose in providing strategic leadership, governance and bringing challenge and support to the Manager can best be maintained, whilst also recognising the importance of independence, refreshment, diversity and retention of accumulated knowledge. It firmly believes that an appropriate balance of these factors is essential for an effective functioning board and, at times, will naturally result in some longer serving Directors. Furthermore, the Board wishes to retain the flexibility to recruit outstanding candidates when they become available rather than simply adding new Directors based upon a predetermined timetable.

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 2022 Annual General Meeting are given on the Manager’s website at www.blackrock.com/uk/brge.

Environmental, Social and Governance issues and approachThe Company’s approach to ESGEnvironmental, social and governance (ESG) issues can present both opportunities and threats to long-term investment performance. Whilst the Company does not exclude investment in stocks purely on ESG criteria, ESG analytics are integrated into the investment process when weighing up the risk and reward benefits of investment decisions and the Investment Manager 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 ESG information and consideration of sustainability risks into investment decisions in order to enhance risk-adjusted returns. ESG integration does not change the Company’s investment objective or constrain the Investment Manager’s investable universe and does not mean that an ESG or impact focused investment strategy or any exclusionary screens have been or will be adopted by the Company. Similarly, ESG integration does not determine the extent to which the Company may be impacted by sustainability risks. More information on sustainability risks may be found in the AIFMD Fund Disclosures document of the Company available on the Company’s website at https://www.blackrock.com/uk/literature/policies/itc-disclosures-blackrock-greater-europe-investment-trust-plc.pdf.

BlackRock Greater Europe Investment Trust plc – BlackRock Investment Stewardship Engagement with portfolio companies for the year ended 31 August 2023The Company benefits from the 20-strong European Equity team. The team has excellent access to company management teams and undertakes in excess of 2,000 company meetings each year to identify the best management teams in the region with the ability to create value for shareholders over the long term. In addition, BlackRock also has a separate Investment Stewardship team (BIS) that is committed to promoting sound corporate governance through engagement with investee companies, development of proxy voting policies that support best governance practices and wider engagement on public policy issues. For the year to 31 August 2023, BIS held 57 company engagements on a range of governance issues with the management teams of 26 companies in the BlackRock Greater Europe Investment Trust plc portfolio, representing 67.7% of the portfolio by value at 31 August 2023. To put this into context, there were 39 companies in the BlackRock Greater Europe Investment Trust plc portfolio as at 31 August 2023. Additional information is set out in the tables below, as well as the key engagement themes for the meetings held in respect of the Company’s portfolio holdings.

1 Source: BlackRock as at August 2023.

2 Source: BlackRock. Company valuation as included in the portfolio at 31 August 2023 as a percentage of the total portfolio value.

Engagement themes¹

¹ Most engagement conversations cover multiple topics. The engagement statistics reflect the primary topics discussed during the meeting.

More detail about BIS’ engagement priorities can be found here: www.blackrock.com/corporate/literature/publication/blk-stewardship-priorities-final.pdf. Percentages reflect the number of meetings held in respect of the Company’s portfolio holdings at which a particular topic is discussed as a percentage of the total meetings held; as more than one topic is discussed at each meeting, the total will not add up to 100%.

Source: BlackRock.

BlackRock’s approach to ESG integrationBlackRock believes that sustainability risks, including climate risks, are investment risks. As a fiduciary, we manage material risks and opportunities that could impact portfolios. Sustainability can be a driver of investment risks and opportunities, and we incorporate them in our 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.

As part of BlackRock’s structured investment process, material ESG risks and opportunities (including sustainability/climate risk) are considered within the portfolio management team’s fundamental analysis of companies and industries and the Company’s portfolio managers work closely with BlackRock's Investment Stewardship (BIS) team to assess the governance quality of companies and investigate any potential issues, risks or opportunities.

As part of their approach to ESG integration, the portfolio managers use ESG information when conducting research and due diligence on new investments and again when monitoring investments in the portfolio. In particular, portfolio managers at BlackRock now have access to 1,200 key ESG performance indicators in Aladdin (BlackRock’s proprietary trading system) from third-party data providers. BlackRock’s internal sustainability research framework scoring is also available alongside third-party ESG scores in core portfolio management tools. BlackRock’s analysts’ sector expertise and local market knowledge allows it to engage with companies through direct interaction with management teams and conducting site visits. In conjunction with the portfolio management team, BIS engages with company leadership to understand how they are identifying and managing material business risks and opportunities, including sustainability-related risks and the potential impacts these may have on long-term performance. BIS and the portfolio management team’s understanding of material sustainability related risks and opportunities is further supported by BlackRock’s Sustainable and Transition Solutions (STS) function. STS looks to advance ESG research and integration, active engagement and the development of sustainable investment solutions across the firm.

Investment stewardshipConsistent with BlackRock’s fiduciary duty as an asset manager, BIS seeks to support investee companies in their efforts to deliver long-term financial value on behalf of their clients. These clients include public and private pension plans, governments, insurance companies, endowments, universities, charities and, ultimately, individual investors, among others. BIS serves as a link between BlackRock’s clients and the companies they invest in. Clients depend on BlackRock to help them meet their investment goals; the business and governance decisions that companies make may have a direct impact on BlackRock’s clients’ long-term investment outcomes and financial wellbeing.

Global PrinciplesThe BIS Global Principles, regional voting guidelines and engagement priorities (collectively, the ‘BIS policies’) set out the core elements of corporate governance that guide BIS’ investment stewardship 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. Each year, BIS reviews its 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. BIS’ Global Principles are available on its website at www.blackrock.com/corporate/literature/fact-sheet/blk-responsible-investment-engprinciples-global.pdf.

Regional voting guidelinesBIS’ voting guidelines are intended to help clients and companies understand its thinking on key governance matters. They are the benchmark against which it assesses a company’s approach to corporate governance and the items on the agenda to be voted on at the shareholder meeting. BIS applies its guidelines pragmatically, taking into account a company’s unique circumstances where relevant. BlackRock informs voting decisions through research and engages as necessary. BIS reviews its voting guidelines annually and updates them as necessary to reflect changes in market standards, evolving governance practice and insights gained from engagement over the prior year. BIS’ regional voting guidelines are available on its website at www.blackrock.com/corporate/insights/investment-stewardship#stewardship-policies.

BlackRock is committed to transparency in terms of disclosure of its stewardship activities on behalf of clients. BIS publishes its stewardship policies – such as the BIS Global Principles, regional voting guidelines and engagement priorities – to help BlackRock’s clients understand its work to advance their interests as long-term investors in public 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.

BlackRock’s reporting and disclosuresIn 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 2022 TCFD report can be found at www.blackrock.com/corporate/literature/continuous-disclosure-and-important-information/tcfd-report-2022-blkinc.pdf.

By order of the BoardCAROLINE DRISCOLLFor and on behalf ofBlackRock Investment Management (UK) LimitedCompany Secretary7 November 2023

RELATED PARTY TRANSACTIONS

BlackRock Fund Managers Limited (BFM, AIFM or the Manager) was appointed as the Company’s AIFM with effect from 2 July 2014. BlackRock Investment Management (UK) Limited (BIM (UK) or Investment Manager) acts as the Company’s Investment Manager under a delegation agreement with BFM. BIM (UK) also acted as the Secretary of the Company throughout the year.

The management contract is terminable by either party on six months’ notice. The Board continues to be independent from the AIFM. The agreement provides the appropriate balance between the Board’s control over the Company, its investment policies and compliance with regulatory obligations. The AIFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to the Investment Manager.

The AIFM receives an annual management fee which is calculated based on 0.85% of net asset value on net assets up to £350 million and 0.75% per annum of net asset value on net assets thereafter on the last day of each month. Where the Company invests in other investments or cash funds managed by BIM (UK), any underlying fee charged is rebated. Fees are adjusted by adding all dividends declared during the period. No penalty on termination of the investment management contract would be payable by the Company in the event that six months’ written notice is given to the Manager. There are no provisions relating to the payment of fees in lieu of notice.

The Company contributes to a focused investment trust sales and marketing initiative operated by BlackRock on behalf of the investment trusts under its management. The Company’s contribution to the consortium element of the initiative, which enables the trusts to achieve efficiencies by combining certain sales and marketing activities, represents a budget of up to 0.025% per annum of its net assets (£501 million as at 31 December 2022) and this contribution is matched by BIM (UK). In addition, a budget of a further £25,000 has been allocated for Company specific sales and marketing activity. Total fees paid or payable for these services for the year ended 31 August 2023 amounted to £97,000 (excluding VAT) (2022: £130,000). The purpose of the programme overall is to ensure effective communication with existing shareholders and to attract new shareholders to the Company. This has the benefit of improving liquidity in the Company’s shares and helps sustain the stock market rating of the Company.

The Board currently consists of five non-executive Directors, all of whom are considered to be independent of the Company’s Manager. None of the Directors has a service contract with the Company. With effect from 1 September 2023, the Chairman receives an annual fee of £46,500, the Chairman of the Audit and Management Engagement Committee receives an annual fee of £37,000 and each other Director receives an annual fee of £31,500. The Senior Independent Director receives an additional fee of £1,000. Four members of the Board hold shares in the Company. Eric Sanderson holds 4,000 ordinary shares, Peter Baxter holds 11,000 ordinary shares, Paola Subacchi holds 11,109 ordinary shares and Ian Sayers holds 4,000 ordinary shares.

As at 31 August 2023, an amount of £14,000 (2022: £14,000) was outstanding in respect of Directors' fees.

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, whose names are listed in the Annual Report and Financial Statements, 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 2023, 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 BoardERIC SANDERSONChairman7 November 2023

Income Statement for the year ended 31 August 2023

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/(loss) on ordinary activities for the year disclosed above represents the Company’s total comprehensive income/(loss).

Statement of Changes in Equity for the year ended 31 August 2023

1 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.

2 Interim dividend paid in respect of the year ended 31 August 2022 of 1.75p per share was declared on 11 May 2022 and paid on 17 June 2022. Final dividend paid in respect of the year ended 31 August 2021 of 4.55p per share was declared on 5 November 2021 and paid on 17 December 2021.

For information on the Company’s distributable reserves, please refer to note 9 below.

Balance Sheet as at 31 August 2023

Statement of Cash Flows for the year ended 31 August 2023

1 Cash Fund represents funds held on deposit with the BlackRock Institutional Cash Series plc - Euro Liquid Environmentally Aware Fund.

Notes to the Financial Statements for the year ended 31 August 2023

1. Principal activityThe 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 policiesThe principal accounting policies adopted by the Company are set out below:

(a) Basis of preparationThe 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 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; and

– the risk is adequately captured in the assumptions and inputs used in measurement of Level 3 assets, as noted in note 10 below.

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 Pound 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 StatementIn 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 reportingThe Directors are of the opinion that the Company is engaged in a single segment of business being investment business.

(d) IncomeDividends 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 on an accruals basis.

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) ExpensesAll 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 Report and Financial 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) TaxationThe 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 lossThe Company’s investments are classified as held at fair value through profit or loss in accordance with Section 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) DebtorsDebtors 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) CreditorsCreditors 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 payableUnder 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 equivalentsCash 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 translationIn 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 Pound Sterling, reflecting the primary economic environment in which the Company operates. Transactions in foreign currencies are translated into Pound Sterling at the rates of exchange ruling on the date of the transaction. Foreign currency monetary assets and liabilities are translated into Pound 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 reserve.

(m) Share repurchases, share reissues and new share issuesShares 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 borrowingsBank 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 judgementsThe 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 £7,781,000 and £1,000 respectively (2022: £8,893,000 and £nil).

No special dividends have been recognised in capital during the year (2022: £177,000).

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 auditor (2022: none).

2 For the year ended 31 August 2022, legal fees of £117,000 related to legal work for the aborted issuance of a long-dated loan note.

3 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.

4 Relates to legal fees and registrar’s fees written back in the year ended 31 August 2023 (31 August 2022: legal fees, postage and printing fees, professional fees, miscellaneous fees and Directors’ expenses).

5 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.

6 For the year ended 31 August 2023, expenses of £89,000 (2022: £40,000) were charged to the capital account of the Income Statement. These relate to transaction costs charged by the custodian on sale and purchase trades.

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

6. Dividends

The Directors have proposed a final dividend of 5.00p per share in respect of the year ended 31 August 2023. The final dividend will be paid on 20 December 2023, subject to shareholders’ approval on 12 December 2023, to shareholders on the Company’s register on 17 November 2023. 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 2023, meet the relevant requirements as set out in this legislation.

* Based on 100,812,161 ordinary shares (excluding treasury shares) in issue on 7 November 2023.

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 shareRevenue, capital earnings/(loss) 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.

8. Called up share capital

During the year, 698,692 ordinary shares (2022: 601,558) were repurchased and held in treasury for a net consideration after expenses of £3,014,000 (2022: £2,812,000).

During the year, no new ordinary shares (2022: 4,300,000) were issued for a net consideration after expenses of £nil (2022: £30,015,000).

During the year, no ordinary shares (2022: 1,945,000) were reissued from treasury for a net consideration after expenses of £nil (2022: £12,535,000).

Since 31 August 2023 and up to the latest practicable date of 7 November 2023, no new ordinary shares have been issued and no ordinary shares have been reissued from treasury. A further 188,000 ordinary shares have been repurchased for a net consideration after expenses of £994,000 and placed in treasury.

9. RESERVES