BlackRock Greater Europe Investment Trust Plc - Final Results
LEI: 5493003R8FJ6I76ZUW55
Annual Report and Financial Statements
Performance record
As at As at
31 August 31 August
2024 2023
Net assets (£’000)1 640,300 565,710
Net asset value per ordinary share (pence) 644.60 560.11
Ordinary share price (mid-market) (pence) 601.00 527.00
Discount to cum income net asset value2 6.8% 5.9%
FTSE World Europe ex UK Index 2219.24 1916.71
========= =========
For the year For the year
ended ended
31 August 31 August
2024 2023
Performance (with dividends reinvested)
Net asset value per share2 16.4% 19.2%
Ordinary share price2 15.5% 17.1%
FTSE World Europe ex UK Index 15.8% 15.8%
========= =========
For the period For the period
since inception4 since inception4
to 31 August to 31 August
2024 2023
Performance (with dividends reinvested)
Net asset value per share2 797.6% 671.0%
Ordinary share price2 747.3% 633.9%
FTSE World Europe ex UK Index 461.2% 384.7%
========= =========
For the year For the year
ended ended
31 August 31 August Change
2024 2023 %
Revenue
Net profit on ordinary
activities after taxation 7,379 6,920 +6.6
(£’000)
Revenue earnings per ordinary 7.35 6.85 +7.3
share (pence)3
--------------- --------------- ---------------
Dividends (pence)
Interim dividend 1.75 1.75 –
Final dividend 5.25 5.00 +5.0
--------------- --------------- ---------------
Total dividends payable/paid 7.00 6.75 +3.7
========= ========= =========
1 The change in net assets reflects payments for shares repurchased into treasury, portfolio movements and dividends paid.
2 Alternative Performance Measures, see Glossary in the Annual Report and Financial Statements.
3 Further details are given in the Glossary in the Annual Report and Financial Statements.
4
Chairman’s Statement
Overview
The European economy entered 2024 on a weaker footing than previously expected after narrowly avoiding a technical recession in the second half of 2023. This was against a background of weak consumer demand. The
Performance
Against this background, I am pleased to report that the portfolio performed well during the year, outperforming its reference index. The Company’s net asset value per share (NAV) returned +16.4% and the share price +15.5%. In comparison, the FTSE World Europe ex
More details on this and the significant contributors to and detractors from performance during the year are given in the Investment Manager’s Report below. Since the financial year end and up to close of business on
Revenue earnings and dividends
Your Company’s total revenues each year are a reflection of the dividends we receive from portfolio companies. The revenue return per share for the year ended
At present, the dividends paid from the Russian securities in the Company’s portfolio are held in a custody ‘S’ account in
The Board also monitors the underlying local value of the Russian securities on the
In April, the Board declared an interim dividend of 1.75p per share (2023: 1.75p) and the Board is proposing the payment of a final dividend of 5.25p per share for the year (2023: 5.00p). This, together with the interim dividend, makes a total dividend for the year of 7.00
p
per share (2023: 6.75p), an increase of 3.7
%.
The dividend will be funded from revenue received in the year. Subject to shareholder approval, the dividend will be paid on
Management of share rating
Over the year to
As reported in the Half Yearly Financial Report, the Directors exercised their discretion not to operate the half yearly tender offers in
The Directors recognise the importance to investors that the market price of the Company’s shares should not trade at a significant premium or discount to the underlying NAV. Accordingly, in normal market conditions, the Board may use the Company’s share buy back and share issue powers, or operate six monthly tender offers, to ensure that the share price does not go to an excessive discount or premium to the underlying NAV. Resolutions to renew the Company’s semi-annual tender offers and the authorities to issue and buy back shares will be put to shareholders at the forthcoming Annual General Meeting.
Board composition and policy on tenure
Having served as a Director of the Company since
The Board has also decided to introduce guidelines on
Directors’ tenure, with the intention that (under normal conditions) no Director will normally serve on the
The Board is cognisant of the benefits of a diverse range of skills on the Board and the Company is compliant with the Parker Review recommendation that
Shareholder communications
The Board appreciates how important access to regular information is to our shareholders. To supplement our website, we offer shareholders the ability to sign up to the Trust Matters newsletter which includes information on the Company, as well as news, views and insights. Further information on how to sign up is included on the inside cover of the Annual Report and Financial Statements.
Outlook
There are uncertainties in the outlook based on events such as the recent elections both in the US and
Annual General Meeting
The Annual General Meeting (AGM) of the Company will be held in person at the offices of BlackRock at
For the benefit of shareholders who are unable to attend this year’s AGM in person, we have arranged for the proceedings to be viewed via a webinar. You can register to watch the AGM by scanning the QR Code inside the cover of the Annual Report and Financial Statements or by visiting our website at www.blackrock.com/uk/brge and clicking on the registration banner. Please note that it is not possible to speak or vote at the AGM via this medium and joining the webinar does not constitute attendance at the AGM. Shareholders wishing to exercise their right to attend, speak and vote at the AGM should either attend in person or exercise their right to appoint a proxy to do so on their behalf.
Chairman
Investment Manager’s Report
Market review
For the year ended
Reviewing events chronologically, the Company’s financial year started with persistently high interest rates weighing on sentiment. Equity markets moved off their lows from
Beginning in the early second quarter of 2024 the market’s enthusiasm ebbed, with higher inflation and weaker growth data causing a repricing in interest rate expectations, a re-emergence of ‘hard landing’ fears and a coincident change in equity market leadership – with defensive and value stocks favoured over cyclicals and growth.
The distressing ongoing conflicts in
Portfolio performance
Defensives
Reviewing performance at the single stock level, two very different defensive businesses –
Over the last year Novo shares continued to rise due to strong sales growth of its GLP-1 drugs, ongoing expansion into the obesity treatment market, positive clinical trial results, as well as regulatory approvals. Its obesity blockbuster drug Wegovy experienced surging demand globally, particularly so in the US, with sales increasing by over 200% year-on-year in 2023, adding approximately
Despite the gradual emergence of new players in the obesity market, we take comfort from the fact that most new entrants are still in the early development stage with potentially new drugs years away from entering this highly attractive market; they also fail to offer clear differentiation from Novo’s injectable product portfolio thus far.
Additionally, the combination of a large total addressable market in obesity and continued supply shortages experienced by the leading manufacturers means this segment should offer room for multiple players; in fact, having more than two players would help to develop the category benefiting all companies involved. For now, we expect the obesity market to remain dominated by Novo and Eli Lilly.
Looking ahead, we remain positive on Novo’s outlook. We anticipate several catalysts to drive the shares higher, including positive Phase III data for CagriSema, which is currently undergoing clinical trials. Early results have shown promising efficacy in weight reduction and glycaemic control compared to existing treatments, which could make it the best-in-class drug when it launches in the second half of 2025.
The closure of the Catalent deal, a strategic collaboration to expand production capacity for Wegovy, should significantly boost manufacturing capacity to serve currently unmet demand, as 1.2 billion people are expected to live with obesity by 2030, up from 800 million in 2020. From here, we expect
Secondly, RELX showed strong share price developments on the back of a step change in its organic sales growth profile. As a leading provider of information-based analytics and decision tools for professional and business customers, RELX has undergone a significant business transformation in recent years. It has invested heavily in value-add tools, particularly in their subscription-based ‘Scientific, Technical, and Medical’ (STM) and ‘Legal’ divisions, which tend to run on contract structures of at least three to five years. This provides excellent revenue visibility, as for many of its clients renewing those subscriptions represents a business-critical decision, with high switching costs.
Above all, RELX’s strength lies in the vast amount of data they possess. Instead of just selling data, they build state of the art analytical tools. One example of this is in the Legal division which allows lawyers to search for historic case verdicts and assist in drafting legal documents. Their Legal division generated 2% organic growth pre-Covid which has accelerated to 6% since then.
Finally, following years of investing smartly in those capabilities, RELX has managed to emerge as an ‘artificial intelligence (AI) winner’. It benefits from holding intellectual property (IP) and has made significant steps in monetising AI, already generating revenue from their AI tools, leaving potential for further acceleration in revenue growth in future years.
Consumer cyclical
Shares in high-end sports car manufacturer
Ferrari
, a quasi-luxury company in the autos sector, also contributed successfully rising by 50% over the period. This success can be attributed primarily to a strong build out of its order book, a significant shift in mix and personalisation revenues that increased the average sale price per car by over 10% over the past year.
Ferrari’s strategy of focusing on limited production volumes, selling just 14,000 cars per year, continues to create elevated levels of brand desire, an unparalleled degree of pricing power and has demonstrably enhanced its earnings resilience over time. Despite weakness in the broader consumer market, particularly among ‘aspirational buyers’, Ferrari has managed to stay largely unaffected as 74% of its cars were sold to existing customers in 2023.
Major upcoming product launches, including the 12 Cilindri and 12 Cilindri Spider sportscars, ensure the group’s product pipeline remains strong and should also support attractive growth in the coming years. Additionally, brand equity remains carefully managed with its high-quality management team ensuring that the second-hand market supports their overall pricing strategy.
One of Ferrari’s greatest advantages lies in its unique ability to increase or restrict supply of any one model at any given time, allowing for increased levels of control over the progression in its operating margins and cashflows. Ferrari enjoys excellent visibility provided by an order book that provides revenue coverage well into 2026. All told, we consider the company to be among royalty in European markets as Ferrari remains one of the highest quality assets in our universe with operating earnings compounding at +10% for the foreseeable future.
Unlike Ferrari, the broader luxury sector has struggled this past year, with our long-term holding in LVMH being among the largest detractors. Indeed Hermès , which operates a business model more aligned to Ferrari, has also faced some difficulties.
For the better part of a decade the luxury goods sector has enjoyed strong momentum delivering 10% organic growth on average. In the past three years this stellar growth accelerated further, with top brands benefiting from both pricing power and very positive global consumption trends. This was despite the Chinese consumer contributing materially less to growth than in prior years. Overall, we identify two negative factors being faced by luxury companies that have led to a more muted near-term growth outlook and, in some cases, operating deleverage, namely: a weaker-for-longer consumer backdrop in
Zooming in on
Industrial cyclical
Technology, and more specifically the semiconductor subsector, was the source of some of the biggest winners of the year in the wafer fabrication equipment companies
ASML
and
ASM International
(ASMI) but also the biggest detractor in
STMicroelectronics
.
We have regularly cited in previous reports the attraction of running large exposures to this industry as the segment serves many structurally growing end markets. The businesses we own in this industry can be regarded as enablers of large transformational changes occurring in the world around us. Those include the decarbonisation of transport, elevated demand for computing power to conduct data analytics, the omnipresence of inter-connected devices, Industry 4.0, as well as accelerated demand for high end logic chips as we move to more wide scaled adoption of generative AI applications, which in itself demands significant build out of data infrastructure.
Overall, demand for leading edge chips was driven by a significant increase in investment spend by US tech giants such as
Last year we argued we were seeing a trough in the semiconductor cycle and were positioned to play a multi-year recovery in the sector. This recovery has started to materialise, with order numbers coming through strongly. In 2023, ASML achieved net sales of €27.6 billion, reflecting 30% growth compared to the previous year. By the end of 2023 ASML had built a robust order backlog of €39 billion, bolstered by a record order intake of €6.3 billion in the fourth quarter of 2023. This growth was driven by high demand for their cutting-edge lithography tools, Extreme Ultraviolet systems. With 2024 guided to be a transition year for the company, ASML is preparing for a healthy market recovery in 2025 as it ramps-up capacity and expects further growth driven by advancements in AI and demand for new high bandwidth memory technologies.
Like ASML, ASMI also enjoyed strong order momentum, despite experiencing heavy quarterly fluctuations during 2023. By the first quarter of 2024, ASMI’s order intake had risen to €698 million, showing a 10% increase compared to the first quarter of 2023, supported by strong demand in advanced semiconductor technologies like gate-all-around (GAA) and increased memory orders. ASMI’s fortunes are closely tied to leading edge chip architectures moving to 2 nano-meter nodes with manufacturers like TSMC adopting ASMI’s cutting edge GAA technology in the process. ASMI also made strides in silicon carbide Epitaxy technology, a key growth area, primarily used in high-power and high-temperature applications. We expect both companies to experience multi-year growth as the semiconductor cycle continues to recover and technology roadmaps of its key clients require increased spend well into the second half of the decade.
Against this stronger background, the industry has also faced challenges as normalisation of extraordinary demand patterns experienced during Covid led to a prolonged period of order disappointments and inventory destocking in auto and industrial verticals.
STMicroelectronics, the portfolio’s largest detractor over the period, struggled primarily due to losing market share in
The subsequent decline in customer orders led to underutilised fabrication plants, causing adverse effects on STMicroelectronics’ operating profitability and significant downgrades to consensus expectations. Considering the continued weaker outlook for both the auto and industrial end markets and taking into consideration the general predicament traditional European car manufacturers find themselves in, we are currently re-assessing positioning in this part of the portfolio.
Portfolio changes
As long-term investors we aim to give portfolio company management teams sufficient time to execute on their respective value creating strategies and, with this in mind, it is pleasing to note that over the course of the financial year portfolio turnover was just below 22% – in line with target holding periods of three to five years. The key transactions accounting for this turnover and summaries of the careful due diligence undertaken are outlined below.
Danish freight forwarding and logistics company
DSV
had been held since 2016 and one of the key tenets of the investment case was the management team’s track record in creating value through acquisitions and fostering a best-in-class culture. However, several red flags started to emerge over the course of last year. Firstly, the company announced a
Diminished faith in company management was also a contributing factor in the sale of pharmaceutical equipment supplier
Sartorius Stedim
. The company saw its revenues drop by 18% in the first nine months of 2023 and was forced to revise down
its full-year sales and earnings guidance due to reduced demand and excess inventories held by clients. Whilst this appears a forgivable event, we took serious issue with the overpriced acquisition of
Finally, we added
L’Oréal
to the portfolio. The company has been almost uniquely focused on the beauty category since its foundation in 1909. As the world’s largest cosmetics company, L’Oréal benefits from a diverse brand portfolio that spans mass-market to luxury beauty products, appealing to a wide range of consumers. The company’s consistent investment in research and development keeps it at the forefront of beauty trends, such as the growing demand for sustainable and eco-friendly products, while its investments in technology and data analytics have enhanced its ability to understand consumer preferences and deliver personalised experiences, meaning it is well placed to capitalise on the growing online beauty market. Additionally, its continued expansion into emerging markets, particularly in
Outlook
Following the “AI Boom” at the beginning of 2024, at the time of writing the global investment community had begun a more critical assessment of the return on investment on the large amounts of money pouring into the build-out of AI infrastructure. Market concerns have centred around the sustainability of this AI capital expenditure cycle. While some of the initial excitement was clearly overdone, we remain of the view that new technological breakthroughs often follow a familiar pattern – investors overestimate their potential in the near term while underestimating what is possible in the medium to longer term. We suspect the adoption of AI and its different use cases are no different in that regard. The race to build leading AI infrastructure is still in its infancy, with significant competitive momentum pushing cash rich companies to continue to innovate and invest to stay ahead. It is clear hardware infrastructure roadmaps are not keeping up with the pace of development in AI, leading to a widening gap between model training computational needs and the key infrastructure that is available in compute, rack design, network, cooling systems and power. None of today’s technology leaders can afford to be left behind in delivering breakthrough technologies in what could be the defining technological development of this generation.
This is relevant to us because the European market is home to an ecosystem of companies which possess the enabling technologies required in these transformational changes – not just AI adoption, but also the energy transition and global efforts to reorganise supply chains. Many of these businesses sell to global customer bases and are the world leaders in their fields. These competitively advantaged and secular growth businesses have become an increasingly important component of the overall market whilst undifferentiated ‘ older economy sectors ’ like telcos, auto and energy producers have shrunk in size over the last decade.
Alongside the investment opportunities afforded by these structural forces, we detect a cyclical upturn in a variety of industries like construction, life-sciences and chemicals which have suffered from pronounced volume declines for the best part of two years. Global manufacturing Purchasing Managers Indices have stayed below 50 for the last 23 months, signalling the longest period of contraction since 1951; importantly, in many end markets management teams are now talking about stabilisation of demand with painful inventory adjustments having come to an end. European construction is a good example, where easing financial conditions are helping activity levels to recover following the 40-45% collapse in new built residential volumes over the past couple of years.
Against the backdrop of a structurally improved market composition and a cyclical recovery, we see valuations in the European market at a record wide discount relative to the US. This dichotomy does not make sense to us. A healthy market operates as a discounting mechanism and the investment community’s myopic focus on near term problems should soon make way for the medium- to long-term opportunities. We see 2025 as a recovery year for earnings and beyond that we envisage a multi-year period of healthy profit growth, alongside the potential for this historic valuation gap to the US to narrow. Those prepared to take the optimistic view should be rewarded over time.
STEFAN GRIES AND
Ten largest investments
Together, the Company’s ten largest investments represented 51.8% of the Company’s portfolio as at
1 ►
Health Care company
Market value: £61,540,000
Share of investments: 8.9%
2
▲
ASML
(2023: 3rd)
Technology company
Market value: £49,827,000
Share of investments: 7.2%
ASML is a Dutch company specialising in photolithography systems for the semiconductor industry. The company is at the forefront of technological change, investing in leading research and development to capture the structural growth opportunity coming from growth in mobile devices and microchip components. High barriers to entry within the industry give ASML a protected position with strong pricing power allowing growth in margins.
3
▲
RELX
(2023: 4th)
Consumer Discretionary company
Market value: £44,732,000
Share of investments: 6.5%
RELX is a
4
▼
LVMH
(2023: 2nd)
Consumer Discretionary company
Market value: £36,935,000
Share of investments: 5.3%
LVMH is a French multinational corporation specialising in luxury goods. The group has a strong and well-diversified portfolio of luxury brands ranging from handbags to spirits to cosmetics. LVMH’s business model enjoys high barriers to entry due to the heritage, provenance and exquisite quality of its product offering. Its consistent brand investment through economic cycles has helped to spur brand desirability and allowed for significant pricing power.
5
▲
Ferrari
(2023: 11th)
Consumer Discretionary company
Market value: £30,706,000
Share of investments: 4.4%
Ferrari is an Italian luxury sports car manufacturer emphasising exclusivity, performance and quality globally, with a strong focus on innovation and delivering unique driving experiences to its clientele. There is a lot of excitement for 2024 as limited release models are being introduced including the SF90 XX Stradale, followed by the Spider. Both cars are expected to come at higher price points that will be additive to Ferrari’s overall revenue mix. Demand will remain strong beyond 2024, with the company’s order book already sold out up to 2026.
6
▲
Hermès
(2023: 7th)
Consumer Discretionary company
Market value: £28,156,000
Share of investments: 4.1%
Hermès is a French luxury design house specialising in leather goods, lifestyle accessories, home furnishings, perfumery, jewellery, watches and high-end clothing. With good brand management and craftsmanship, Hermès products are supply constrained and the company enjoys strong earnings visibility as some of its most iconic products are sold on allocation via waiting lists. Hermès has been run in a conservative fashion for generations with strategic decisions taken with the longest of timeframes.
7
▲
Safran
(2023: 10th)
Industrials company
Market value: £27,166,000
Share of investments: 3.9%
Safran is a French multinational supplier of aerospace, defence and security systems. The industry has emerged from a heavy investment period and Safran is well-placed to benefit from continued strength in its best in class after-market business and strong execution in its LEAP engine program which should drive growth for the next decade.
8
▲
Schneider Electric
(2023: n/a)
Industrials company
Market value: £26,774,000
Share of investments: 3.9%
Schneider Electric is a French multinational corporation specialising in digital automation and energy management. The group is a global industrial technology leader in electrification, automation and digitization to smart industries, resilient infrastructure, future-proof data centers, intelligent buildings and intuitive homes.
9
▲
ASM International
(2023: 13th)
Technology company
Market value: £26,551,000
Share of investments: 3.8%
ASM International is a Dutch international company that designs and manufactures equipment and process solutions to produce semiconductor devices for wafer processing. The company aims to create sustainable, long-term value for their stakeholders and a degree of recovery in logic/foundry. The company is also set to benefit from the increasing importance of power emerging technologies such as Artificial Intelligence (AI), where we have seen a step change with the roll out of generative AI tools in 2023.
10
▲
Linde
(2023: n/a)
Basic Materials
Market value: £26,276,000
Share of investments: 3.8%
Linde is a global multinational chemical company and, since 2018, domiciled in
All percentages reflect the value of the holding as a percentage of total investments.
Arrows indicate the change in relative ranking of the position in the portfolio compared to its ranking as at
Investments as at
Market
Country of value % of
operation £’000 investments
Industrials
Safran France 27,166 3.9
Schneider Electric France 26,774 3.9
Sika Switzerland 21,723 3.1
Belimo Switzerland 20,675 3.0
Adyen Netherlands 19,778 2.9
Atlas Copco Sweden 16,866 2.4
Kingspan Ireland 15,810 2.3
Rational Germany 14,515 2.1
VAT Group Switzerland 9,252 1.3
Epiroc Sweden 8,026 1.2
Kone Finland 3,001 0.4
--------------- ---------------
183,586 26.5
========= =========
Consumer Discretionary
RELX United Kingdom 44,732 6.5
LVMH France 36,935 5.3
Ferrari Italy 30,706 4.4
Hermès France 28,156 4.1
L’Oréal France 18,438 2.7
--------------- ---------------
158,967 23.0
========= =========
Technology
ASML Netherlands 49,827 7.2
ASM International Netherlands 26,551 3.8
BE Semiconductor Netherlands 24,279 3.5
Hexagon Sweden 11,549 1.7
STMicroelectronics Switzerland 8,937 1.3
ALTEN Group France 5,926 0.9
--------------- ---------------
127,069 18.4
========= =========
Health Care
Novo Nordisk Denmark 61,540 8.9
Lonza Group Switzerland 23,468 3.4
ChemoMetec Denmark 11,184 1.6
Straumann Switzerland 10,549 1.5
--------------- ---------------
106,741 15.4
========= =========
Financials
Allied Irish Banks Ireland 25,238 3.6
Partners Group Switzerland 23,187 3.4
KBC Groep Belgium 13,151 1.9
Sberbank* Russia 1 –
--------------- ---------------
61,577 8.9
========= =========
Basic Materials
Linde United States 26,276 3.8
IMCD Netherlands 21,429 3.1
--------------- ---------------
47,705 6.9
========= =========
Consumer Staples
Lindt Switzerland 6,186 0.9
--------------- ---------------
6,186 0.9
========= =========
Energy
Lukoil* Russia – –
--------------- ---------------
Total investments 691,831 100.0
========= =========
* The investments in Sberbank and Lukoil have been marked down to a nominal value of £0.01 as the secondary listings of depositary receipts of Russian companies have been suspended from trading.
All investments are in ordinary shares unless otherwise stated. The total number of investments held at
Industry classifications in the table above are based on the Industrial Classification Benchmark standard for categorisation of companies by industry and sector.
As at
Investment exposure as at
Market capitalisation
___________________________ | |% | | |of portfolio| |______________|____________| |<€1bn |1.6 | |______________|____________| |€1bn to €10bn |12.6 | |______________|____________| |€10bn to €20bn|10.3 | |______________|____________| |€20bn to €50bn|22.4 | |______________|____________| |>€50bn |53.1 | |______________|____________|
Investment size
________________________________________________ | |Number of investments|% of portfolio| |___________|_____________________|______________| |<£1m |2 |0.0 | |___________|_____________________|______________| |£3m to £5m |1 |0.4 | |___________|_____________________|______________| |£5m to £10m|5 |5.6 | |___________|_____________________|______________| |>£10m |26 |94.0 | |___________|_____________________|______________|
Distribution of investments
___________________________ | |% | |______________________|____| |Industrials |26.5| |______________________|____| |Consumer Discretionary|23.0| |______________________|____| |Technology |18.4| |______________________|____| |Health Care |15.4| |______________________|____| |Financials |8.9 | |______________________|____| |Basic Materials |6.9 | |______________________|____| |Consumer Staples |0.9 | |______________________|____|
Source: BlackRock.
Strategic Report
The Directors present the Strategic Report of the Company for the year ended
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
Principal activity
The Company carries on business as an investment trust and is listed on the
Investment objective
The Company’s objective is the achievement of capital growth, primarily through investment in a focused portfolio constructed from a combination of the securities of large, mid and small capitalisation European companies, together with some investment in the developing markets of
Strategy, business model and investment policy
Strategy
The Company invests in accordance with the objective given above. The Board is collectively responsible to shareholders for the long-term success of the Company and is its governing body. There is a clear division of responsibility between the
Business model
The Company’s business model follows that of an externally managed investment trust. Therefore, the Company does not have any employees and outsources its activities to third-party service providers including the Manager, who is the principal service provider. In accordance with the Alternative Investment Fund Managers’ Directive (AIFMD), as implemented, retained and onshored in the
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
The Company delegates fund accounting services to the Manager, which in turn sub-delegates these services to
Investment policy
The Company’s policy is that the portfolio should consist of approximately 30-70 securities and the majority of the portfolio will be invested in larger capitalisation companies, being companies with a market capitalisation of over €5 billion. Up to 25% of the portfolio may be invested in companies in developing
As at
Investment in developing European securities may be either direct or through other funds, including those managed by
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
While the Company may hold shares in other investment companies (including investment trusts), the Board has agreed that the Company will not invest more than 15%, in aggregate, of its total assets in other listed closed-ended investment funds.
In order to comply with the current Listing Rules, the Company will also not invest more than 10% of its gross asset value in other listed closed-ended investment funds which themselves may invest more than 15% of their gross assets in other listed closed-ended investment funds. This restriction does not form part of the Company’s investment policy.
The Company achieves an appropriate spread of risk by investing in a diversified portfolio of securities.
The Investment Manager believes that appropriate use of gearing can add value over time. This gearing typically is in the form of an overdraft facility which can be repaid at any time. The level and benefit of any gearing is discussed and agreed regularly by the Board. The Investment Manager generally aims to be fully invested and it is anticipated that gearing will not exceed 15% of net asset value (NAV) at the time of drawdown of the relevant borrowings. At the balance sheet date, the Company had net gearing of 8.0% (2023: 5.1%).
Performance
In the year to
Results and dividends
The results for the Company are set out in the Income Statement in the Financial Statements. The total profit for the year, after taxation, was £91,610,000 (2023: total profit, after taxation, of £91,591,000) which is reflected in the increase in the net asset value of the Company. The revenue return amounted to £7,379,000 (2023: £6,920,000) and relates to net revenue earnings from dividends received during the year after adjusting for expenses allocated to revenue.
As explained in the Company’s Half Yearly Financial Report, the Directors declared an interim dividend of 1.75p per share (2023: 1.75p). The Directors recommend the payment of a final dividend of 5.25p per share, making a total dividend of 7.00p per share (2023: 6.75p). Subject to approval at the forthcoming Annual General Meeting, the dividend will be paid on
Future prospects
The Board’s main focus is to achieve capital growth. The future performance of the Company is dependent upon the success of the investment strategy and, to a large extent, on the performance of financial markets. The outlook for the Company is discussed in both the Chairman’s Statement and Investment Manager’s Report.
Social, community and human rights issues
As an investment trust, the Company has no direct social or community responsibilities or impact on the environment and the Company has not adopted an ESG investment strategy or exclusionary screens. However, the Directors believe that it is important and in shareholders’ interests to consider human rights issues and environmental, social and governance factors when selecting and retaining investments. Details of the Company’s approach to ESG integration and socially responsible investment is set out in the Annual Report and Financial Statements.
Modern Slavery Act
As an investment vehicle the Company does not provide goods or services in the normal course of business and does not have customers. Accordingly, the Directors consider that the Company is not required to make any slavery or human trafficking statement under the Modern Slavery Act 2015. In any event, the Board considers the Company’s supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.
Directors, gender representation and employees
The Directors of the Company on
Key performance indicators
At each Board meeting, the Directors consider a number of performance measures to assess the Company’s success in achieving its objectives. The key performance indicators (KPIs) used to measure the progress and performance of the Company over time, and which are comparable to other investment trusts, are set out below. As indicated in footnote 2 to the table below, some of these KPIs fall within the definition of ‘Alternative Performance Measures’ (APMs) under guidance issued by the
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
As at As at
31 August 31 August
2024 2023
Net asset value per share 644.60p 560.11p
Share price 601.00p 527.00p
Net asset value total return1, 2 16.4% 19.2%
Share price total return1, 2 15.5% 17.1%
Discount to net asset value2 6.8% 5.9%
Revenue return per share 7.35p 6.85p
Ongoing charges2, 3 0.95% 0.98%
========= =========
1 This measures the Company’s net asset value and share price total return, which assumes dividends paid by the Company have been reinvested.
2 Alternative Performance Measures, see Glossary in the Annual Report and Financial Statements
3 Ongoing charges represent the management fee and all other operating expenses, excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation, prior year expenses written back and certain non-recurring items, as a % of average daily net assets.
Principal risks
The Company is exposed to a variety of risks and uncertainties. As required by the 2018 UK Corporate Governance Code (the
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
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
Emerging risks are considered by the Board as they come into view and are incorporated into the existing review of the Company’s risk register. Additionally, the Manager considers emerging risks in numerous forums and the Risk and Quantitative Analysis team produces an annual risk survey. Any material risks of relevance to the Company identified through the annual risk survey will be communicated to the Board.
Emerging risks that have been considered by the Board over the year include the impact of climate change, escalating geo-political conflict and technological advances.
The key emerging risks identified are as follows:
Climate change: Investors can no longer ignore the impact that the world’s changing climate will have on their portfolios, with the impact of climate change on returns, including climate related natural disasters, now potentially significant and with the potential to escalate more swiftly than one is able to predict. The Board receives ESG reports from the Manager on the portfolio and the way ESG considerations are integrated into the investment decision-making, so as to mitigate risk at the level of stock selection and portfolio construction.
Artificial Intelligence (‘AI’): Advances in computing power means that AI has become a powerful tool that will impact a huge range of areas and with a wide range of applications that have the potential to dislocate established business models and disrupt labour markets, creating uncertainty in corporate valuations. The significant energy required to power this technological revolution will create further pressure on environmental resources and carbon emissions.
Geo-political risk: Escalating geo-political tensions (including, but not limited to tensions in the
The Board will continue to assess these risks on an ongoing basis. In relation to the
The principal risks and uncertainties faced by the Company during the financial year, together with the potential effects, controls and mitigating factors are set out below.
Counterparty
Principal risk
The potential loss that the Company could incur if a counterparty is unable (or unwilling) to perform on its commitments.
Mitigation/Control
Due diligence is undertaken before contracts are entered into and exposures are diversified across a number of counterparties.
The Depositary is liable for restitution for the loss of financial instruments held in custody unless able to demonstrate the loss was a result of an event beyond its reasonable control.
Investment performance
Principal risk
Returns achieved are reliant primarily upon the performance of the portfolio.
The Board is responsible for:
· deciding the investment strategy to fulfil the Company’s objective; and
· monitoring the performance of the Investment Manager and the implementation of the investment strategy.
An inappropriate investment strategy may lead to:
· underperformance compared to the reference index and the Company’s peer group;
· a reduction or permanent loss of capital; and
· dissatisfied shareholders and reputational damage.
The Board is also cognisant of the long-term risk to performance from inadequate attention to ESG issues and in particular the impact of climate change.
Mitigation/Control
To manage this risk the Board:
· regularly reviews the Company’s investment mandate and long-term strategy;
· has set investment restrictions and guidelines which the Investment Manager monitors and regularly reports on;
· receives from the Investment Manager a regular explanation of stock selection decisions, portfolio exposure, gearing and any changes in gearing and the rationale for the composition of the investment portfolio;
· monitors the maintenance of an adequate spread of investments in order to minimise the risks associated with particular countries or factors specific to particular sectors, based on the diversification requirements inherent in the investment policy; and
·
receives and reviews regular reports showing an analysis of the Company’s performance against the FTSE World Europe ex
ESG analysis is integrated into the Manager’s investment process as set out in the Annual Report and Financial Statements. This is monitored by the Board.
Legal and regulatory compliance
Principal risk
The Company has been approved by HM Revenue & Customs as an investment trust, subject to continuing to meet the relevant eligibility conditions and operates as an investment trust in accordance with Chapter 4 of Part 24 of the Corporation Tax Act 2010. As such, the Company is exempt from corporation tax on capital gains on the profits realised from the sale of its investments.
Any breach of the relevant eligibility conditions could lead to the Company losing investment trust status and being subject to corporation tax on capital gains realised within the Company’s portfolio. In such event, the investment returns of the Company may be adversely affected.
A serious regulatory breach could result in the Company and/or the Directors being fined or the subject of criminal proceedings, or the suspension of the Company’s shares which could in turn lead to a breach of the Corporation Tax Act 2010.
Amongst other relevant laws, the Company is required to comply with the provisions of the Companies Act 2006, the Alternative Investment Fund Managers’ Directive, the
Mitigation/Control
The Investment Manager monitors investment movements, the level and type of forecast income and expenditure and the amount of proposed dividends to ensure that the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010 are not breached. The results are reported to the Board at each meeting.
Compliance with the accounting rules affecting investment trusts are also carefully and regularly monitored.
The Company Secretary, Manager and the Company’s professional advisers provide regular reports to the Board in respect of compliance with all applicable rules and regulations. The Board and the Manager also monitor changes in government policy and legislation which may have an impact on the Company.
The Company’s Investment Manager, BlackRock, at all times complies with the sanctions administered by the
Market
Principal risk
Market risk arises from volatility in the prices of the Company’s investments. It represents the potential loss the Company might suffer through realising investments in the face of negative market movements.
Changes in general economic and market conditions, such as currency exchange rates, interest rates, rates of inflation, industry conditions, tax laws and political events can also substantially and adversely affect the securities and, as a consequence, the Company’s prospects and share price.
Market risk includes the potential impact of events which are outside the Company’s control, including (but not limited to) heightened geo-political tensions and military conflict, a global pandemic and high inflation.
Companies operating in the sectors in which the Company invests may be impacted by new legislation governing climate change and environmental issues, which may have a negative impact on their valuation and share price.
Mitigation/Control
The Board considers the diversification of the portfolio, asset allocation, stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines which are monitored and reported on by the Investment Manager.
The Board monitors the implementation and results of the investment process with the Investment Manager.
The Board also recognises the benefits of a closed-end fund structure in extremely volatile markets such as those experienced as a consequence of the COVID-19 pandemic and
The portfolio managers spend a considerable amount of time understanding the environmental, social and governance (ESG) risks and opportunities facing companies and industries in the portfolio. The Company does not exclude investment in stocks based on ESG criteria, but the portfolio managers consider ESG information when conducting research and due diligence on new investments and again when monitoring investments in the portfolio.
Operational
Principal risk
In common with most other investment trust companies, the Company has no employees. The Company therefore relies on the services provided by third parties and is dependent on the control systems of the Manager, the Depositary and Fund Accountant which maintain the Company’s assets, dealing procedures and accounting records.
The security of the Company’s assets, dealing procedures, accounting records and adherence to regulatory and legal requirements depend on the effective operation of the systems of these other third-party service providers. There is a risk that a major disaster, such as floods, fire, a global pandemic, or terrorist activity, renders the Company’s service providers unable to conduct business at normal operating capacity and effectiveness.
Failure by any service provider to carry out its obligations to the Company could have a material adverse effect on the Company’s performance. Disruption to the accounting, payment systems or custody records (including cyber security risk) could prevent the accurate reporting and monitoring of the Company’s financial position.
Mitigation/Control
Due diligence is undertaken before contracts are entered into with third-party service providers. Thereafter, the performance of the provider is subject to regular review and reported to the Board.
The Board reviews on a regular basis an assessment of the fraud risks that the Company could potentially be exposed to and also a summary of the controls put in place by the Manager, Depositary, Custodian, Fund Accountant and Registrar specifically to mitigate these risks.
Most third-party service providers produce Service Organisation Control (SOC 1) reports to provide assurance regarding the effective operation of internal controls as reported on by their reporting accountants. These reports are provided to the
The Company’s financial instruments held in custody are subject to a strict liability regime and, in the event of a loss of such financial instruments held in custody, the Depositary must return financial instruments of an identical type or the corresponding amount, unless able to demonstrate the loss was a result of an event beyond its reasonable control.
The Board reviews the overall performance of the Manager, Investment Manager and all other third-party service providers on a regular basis and compliance with the Investment Management Agreement annually.
The Board also considers the business continuity arrangements of the Company’s key service providers on an ongoing basis and reviews these as part of its review of the Company’s risk register.
Financial
Principal risk
The Company’s investment activities expose it to a variety of financial risks which include interest rate risk, counterparty credit risk and liquidity risk.
Mitigation/Control
Details of these risks are disclosed in note 16 to the Financial Statements, together with a summary of the policies for managing these risks.
Marketing
Principal risk
Marketing efforts are inadequate or do not comply with relevant regulatory requirements. There is a failure to communicate adequately with shareholders or reach out to potential new shareholders resulting in reduced demand for the Company’s shares and a widening of the discount.
Mitigation/Control
The Board reviews marketing strategy and initiatives and the Manager is required to provide regular updates on progress. BlackRock has a dedicated investment trust sales team visiting both existing and potential clients on a regular basis. Data on client meetings and issues raised are provided to the Board on a regular basis.
All investment trust marketing documents are subject to appropriate review and authorisation.
Viability statement
In accordance with provision 31 of the 2018 UK Corporate Governance Code, the Directors have assessed the prospects of the Company over a longer period than the twelve months referred to by the ‘Going Concern’ guidelines. The Company is an investment trust with the objective of achieving capital growth.
The Directors expect the Company to continue for the foreseeable future and have therefore conducted this review for the period up to the Annual General Meeting in 2029. The Directors believe that five years is an appropriate investment horizon to assess the viability of the Company. This is based on the Company’s long-term mandate, the low turnover in the portfolio and the investment holding period investors generally consider while investing in the European sector.
In making an assessment on the viability of the Company, the Board has considered the following:
· the impact of a significant fall in European equity markets on the value of the Company’s investment portfolio;
· the ongoing relevance of the Company’s investment objective, business model and investment policy in the prevailing market;
· the principal and emerging risks and uncertainties, as set out on the previous pages, and their potential impact;
· the level of ongoing demand for the Company’s shares;
· the Company’s share price discount/premium to NAV;
· the liquidity of the Company’s portfolio; and
· the level of income generated by the Company and future income and expenditure forecasts.
The Directors have concluded that there is a reasonable expectation that the Company will continue in operation and meet its liabilities as they fall due over the period of their assessment based on the following considerations:
· the Investment Manager’s compliance with the investment objective and policy, its investment strategy and asset allocation;
· the portfolio is liquid and mainly comprises of readily realisable assets, which continue to offer a broad range of investment opportunities for shareholders as part of a balanced investment portfolio;
· the operational resilience of the Company and its key service providers and their ability to continue to provide a good level of service for the foreseeable future;
· the effectiveness of business continuity plans in place for the Company and its key service providers;
· the ongoing processes for monitoring operating costs and income which are considered to be reasonable in comparison to the Company’s total assets;
· the Board’s discount management policy; and
· the Company is a closed-end investment company and therefore does not suffer from the liquidity issues arising from unexpected redemptions.
In addition, the Board’s assessment of the Company’s ability to operate in the foreseeable future is included in the Going Concern Statement which can be found in the Annual Report and Financial Statements in the Directors’ Report.
Section 172 Statement: promoting the success of the Company
The Companies (Miscellaneous Reporting) Regulations 2018 require directors to explain in greater detail how they have discharged their duties under Section 172(1) of the Companies Act 2006 in promoting the success of their companies for the benefit of members as a whole. This includes the likely consequences of their decisions in the longer term and how they have taken wider stakeholders’ needs into account.
The disclosure that follows covers how the Board has engaged with and understands the views of stakeholders and how stakeholders’ needs have been taken into account, the outcome of this engagement and the impact that it has had on the Board’s decisions. The Board considers the main stakeholders in the Company to be the Manager, Investment Manager and the shareholders. In addition to this, the Board considers investee companies and key service providers of the Company to be stakeholders; the latter comprise the Company’s Custodian, Depositary, Registrar and Broker.
Stakeholders
Shareholders
Continued shareholder support and engagement are critical to the continued existence of the Company and the successful delivery of its long-term strategy. The Board is focused on fostering good working relationships with shareholders and on understanding the views of shareholders in order to incorporate them into the Board’s strategy and objectives in delivering long-term capital growth.
Manager and Investment Manager
The Board’s main working relationship is with the Manager, who is responsible for the Company’s portfolio management (including asset allocation, stock and sector selection) and risk management, as well as ancillary functions such as administration, secretarial, accounting and marketing services. The Manager has sub-delegated portfolio management to the Investment Manager. Successful management of shareholders’ assets by the Investment Manager is critical for the Company to successfully deliver its investment strategy and meet its objective. The Company is also reliant on the Manager as AIFM to provide support in meeting relevant regulatory obligations under the AIFMD and other relevant legislation.
Other key service providers
In order for the Company to trade on the London Stock Exchange’s (LSE) Main Market for listed securities and generally function as an investment trust with a listing on the official list of the
Investee companies
Portfolio holdings are ultimately shareholders’ assets and the Board recognises the importance of good stewardship and communication with investee companies in meeting the Company’s investment objective and strategy. The Board monitors the Manager’s stewardship arrangements and receives regular feedback from the Manager in respect of meetings with the management of portfolio companies.
A summary of the key areas of engagement undertaken by the Board with its key stakeholders in the year under review and how Directors have acted upon this to promote the long-term success of the Company are set out below.
Area of Engagement
Investment mandate and objective
Issue
The Board is committed to promoting the role and success of the Company in delivering on its investment mandate to shareholders over the long term. The Board also has responsibility to shareholders to ensure that the Company’s portfolio of assets is invested in line with the stated investment objective and in a way that ensures an appropriate balance between spread of risk and portfolio returns.
Engagement
The Board worked closely with the Investment Manager throughout the year in further developing investment strategy and underlying policies, not simply for the purpose of achieving the Company’s investment objective but in the interests of shareholders and future investors. In addition to the scheduled Board meetings each year, the Board holds a Strategy session which is dedicated to an in-depth review of the Company’s strategy in conjunction with key advisers, including the Company’s Broker.
The Company does not exclude investment in stocks based on Environmental, Social and Governance (ESG) criteria, but the approach of the portfolio managers to the consideration of ESG factors in respect of the Company’s portfolio, as well as engagement with investee companies, is to encourage the adoption of sustainable business practices which support long-term value creation.
Impact
The portfolio activities undertaken by the Investment Manager can be found in their report in the Annual Report and Financial Statements.
The Investment Manager aims to construct a portfolio that is high conviction and concentrated in nature but diversified by end market exposures.
Details regarding the Company’s NAV and share price performance can be found in the Chairman’s Statement and in this Strategic Report in the Annual Report and Financial Statements.
Shareholders
Issue
Continued shareholder support and engagement are critical to the continued existence of the Company and the successful delivery of its long-term strategy.
Engagement
The Board is committed to maintaining open channels of communication and to engage with shareholders. The Company welcomes and encourages attendance and participation from shareholders at its Annual General Meetings. Shareholders will have the opportunity to meet the Directors and Investment Manager and to address questions to them directly. The Investment Manager will also provide a presentation on the Company’s performance and the outlook.
The Annual Report and Half Yearly Financial Report are available on the BlackRock website and are also circulated to shareholders either in printed copy or via electronic communications. In addition, regular updates on performance, monthly factsheets, the daily NAV and other information are also published on the Manager’s website at www.blackrock.com/uk/brge .
The Board also works closely with the Manager to develop the Company’s marketing strategy, with the aim of ensuring effective communication with shareholders. Unlike trading companies, one-to-one shareholder meetings normally take the form of a meeting with the Portfolio Managers as opposed to members of the Board. The Company’s willingness to enter into discussions with institutional shareholders is also demonstrated by the programmes of institutional presentations by the portfolio managers.
If shareholders wish to raise issues or concerns with the Board, they are welcome to do so at any time. The Chairman is available to meet directly with shareholders periodically to understand their views on governance and the Company’s performance where they wish to do so. He may be contacted via the Company Secretary whose details are given in the Annual Report and Financial Statements.
Impact
The Board values any feedback and questions from shareholders ahead of and during Annual General Meetings in order to gain an understanding of their views and will take action when and as appropriate. Feedback and questions will also help the Company evolve its reporting, aiming to make reports more transparent and understandable.
Feedback from all substantive meetings between the Investment Manager and shareholders will be shared with the Board. The Directors will also receive updates from the Company’s Broker on any feedback from shareholders, as well as share trading activity, share price performance and an update from the Investment Manager.
The portfolio management team attended a number of professional investor meetings and held discussions with a number of wealth management desks and offices in respect of the Company during the year under review. The portfolio managers also held group webcasts in the year to provide investors with portfolio updates.
Portfolio holdings are ultimately shareholders’ assets and the Board recognises the importance of good stewardship and communication with investee companies in meeting the Company’s investment objective and strategy. The Board monitors the Manager’s stewardship activities and receives regular feedback from the Investment Manager in respect of meetings with the management of portfolio companies.
Responsible investing
Issue
Good governance and consideration of sustainable investment are key factors in making investment decisions. Climate change is becoming a defining factor in companies’ long-term prospects across the investment spectrum, with significant and lasting implications for economic growth and prosperity.
Engagement
The Company does not exclude investment in stocks based on ESG criteria but the Board believes that responsible investment and sustainability are integral to the longer-term delivery of the Company’s success. The Board works closely with the Investment Manager to regularly review the Company’s performance, investment strategy and underlying policies to ensure that the Company’s investment objective continues to be met in an effective and responsible way in the interests of shareholders and future investors.
The Investment Manager’s approach to the consideration of ESG factors in respect of the Company’s portfolio, as well as the Investment Manager’s engagement with investee companies are kept under review by the Board. The Board also expects to be informed by the Manager of any sensitive voting issues involving the Company’s investments.
The Investment Manager reports to the Board in respect of its ESG policies and how these are integrated into the investment process; a summary of BlackRock’s approach to ESG is set out in the Annual Report and Financial Statements.The Investment Manager’s engagement and voting policy is detailed in the Annual Report and Financial Statements and on the BlackRock website.
Impact
The Investment Manager believes there is likely to be a positive correlation between strong ESG practices and investment performance over time. Details of the Company's performance in the year are given in the Chairman's Statement and the Performance Record in the Annual Report and Financial Statements.
Management of share rating
Issue
The Board recognises that it is in the long-term interests of shareholders that shares do not trade at a significant discount or premium to their prevailing NAV. Therefore, where deemed to be in shareholders’ long-term interests, the Board may exercise its powers to issue shares or buy back shares with the objective of ensuring that an excessive premium or discount does not arise.
Engagement
The Board monitors the Company’s share rating on an ongoing basis and receives regular updates from the Manager and the Company’s Broker regarding the level of discount or premium and the drivers behind this.
The Board believes that the best way of maintaining the share rating at an optimal level over the long term is to create demand for the shares in the secondary market. To this end, the Investment Manager is devoting considerable effort to broadening the awareness of the Company, particularly to wealth managers and to the wider retail market.
In addition, the Board has worked closely with the Manager to develop the Company’s marketing strategy, with the aim of ensuring effective communication with existing shareholders and to attract new shareholders to the Company in order to improve liquidity in the Company’s shares and to sustain the share rating of the Company.
Impact
The Board will continue to monitor the Company’s premium/discount to NAV and will look to issue, buy back shares and/or operate six monthly tender offers if it is deemed to be in the interests of shareholders as a whole.
The Board decided not to implement a semi-annual tender offer in
During the financial year the Company did not reissue any ordinary shares from treasury. The Company bought back 2,762,011 ordinary shares both during the financial year and since the year end (up to close of business
Service levels of third-party providers
Issue
The Board acknowledges the importance of ensuring that the Company’s principal suppliers are providing a suitable level of service, including the Manager in respect of investment performance and delivering on the Company’s investment mandate; the Custodian and Depositary in respect of their duties towards safeguarding the Company’s assets; the Registrar in its maintenance of the Company’s share register and dealing with investor queries; and the Company’s Broker in respect of the provision of advice and acting as a market maker for the Company’s shares.
Engagement
The Manager reports to the Board on the Company’s performance on a regular basis. The Board carries out a robust annual evaluation of the Manager’s performance, their commitment and available resources.
The Board performs an annual review of the service levels of all third-party service providers and concludes on their suitability to continue in their role. The Board receives regular updates from the AIFM, Depositary, Registrar and Broker on an ongoing basis.
The Board works closely with the Manager to gain comfort that relevant business continuity plans are in place and operating effectively for all of the Company’s key service providers.
Impact
All performance evaluations were performed on a timely basis and the Board concluded that all key third-party service providers, including the Manager, were operating effectively and providing a good level of service.
The Board has received updates in respect of business continuity planning from the Company’s Manager, Custodian, Depositary, Fund Accountant, Registrar, Printer and Broker and is confident that arrangements in place are appropriate.
Board composition
Issue
The Board is committed to ensuring that its own composition brings an appropriate balance of knowledge, experience and skills, and that it is compliant with best corporate governance practice under the
Engagement
During 2023, the Board engaged the services of an external search consultant to identify potential candidates to replace
All Directors are subject to a formal evaluation process on an annual basis (more details and the conclusions of the 2024 evaluation process are given in the Annual Report and Financial Statements). All Directors stand for re-election by shareholders annually.
Shareholders may attend the Annual General Meeting and raise any queries in respect of Board composition or individual Directors in person or may contact the Company Secretary or the Chairman using the details provided in the Annual Report and Financial Statements with any issues.
Impact
As a result of the recruitment process, Ms
As at the date of this report, the Board was comprised of three men and two women. Two Board Directors,
Details of each Directors’ contribution to the success and promotion of the Company are set out in the Directors’ Report in the Annual Report and Financial Statements and details of Directors’ biographies can be found in the Annual Report and Financial Statements.
The Directors are not aware of any issues that have been raised directly by shareholders in respect of Board composition in the year under review. Details of the proxy voting results in favour and against individual Directors’ re-election at the 2023 Annual General Meeting are given on the Manager’s website at www.blackrock.com/uk/brge .
Environmental, Social and Governance issues and approach
The Company’s approach to ESG
Environmental, social and governance (ESG) issues can present both opportunities and risks to long-term investment performance. Whilst the Company does not exclude investment in stocks purely on ESG criteria, material ESG analytics are integrated into the investment process when weighing up the risk and reward benefits of investment decisions and the Board believes that communication and engagement with portfolio companies is important and can lead to better outcomes for shareholders and the environment than merely excluding investment in certain areas.
More information on BlackRock’s global approach to ESG integration, as well as activity specific to the
BlackRock’s approach to ESG integration
BlackRock believes that sustainability risks, including climate risks, are investment risks. As a fiduciary, BlackRock manages material risks and opportunities that could impact portfolios. Sustainability can be a driver of investment risks and opportunities, and BlackRock incorporates them in its firm wide processes when they are material. This in turn (in BlackRock’s view) is likely to drive a significant reallocation of capital away from traditional carbon intensive industries over the next decade. BlackRock believes that carbon-intensive companies will play an integral role in unlocking the full potential of the energy transition, and to do this, they must be prepared to adapt, innovate and pivot their strategies towards a low carbon economy.
BlackRock incorporates into its firmwide processes relevant, financially material information, including financially material data and information related to ESG. BlackRock’s investment view is that doing so can provide better risk-adjusted returns for its clients over the long term.
BlackRock’s clients have a wide range of perspectives on a variety of issues and investment themes, including sustainable and low-carbon transition investing. Given the wide range of unique and varied investment objectives sought by its clients, BlackRock’s investment teams have a range of approaches to considering financially material E, S, and/or G factors. As with other investment risks and opportunities, the financial materiality of E, S and/or G considerations may vary by issuer, sector, product, mandate, and time horizon. Depending on the investment approach, this financially material E, S and/or G data or information may help inform due diligence, portfolio or index construction, and/or monitoring processes of client portfolios, as well as BlackRock’s approach to risk management.
BlackRock’s ESG integration framework is built upon its history as a firm founded on the principle of thorough and thoughtful risk management. Aladdin, BlackRock’s core risk management and investment technology platform, allows investors to leverage financially material E, S and/or G data or information as well as the combined experience of BlackRock’s investment teams to effectively identify investment opportunities and investment risks. BlackRock’s heritage in risk management combined with the strength of the Aladdin platform enables BlackRock’s approach to ESG integration.
BlackRock structures its approach around three main pillars: investment processes, material insights and transparency. These pillars underpin ESG integration at BlackRock and they are supported by equipping BlackRock employees with investment relevant E, S and/or G data, tools, and education.
More information in respect of BlackRock’s approach to ESG integration can be found at https://www.blackrock.com/ corporate/literature/publication/blk-esg-investment-statement-web.pd f.
BlackRock Investment Stewardship
The BlackRock portfolio management team has excellent access to company management teams and undertakes about 700 company meetings each year to identify high quality, cash generative businesses with strong management teams that are able to generate growth in a more challenging economic environment. In addition, BlackRock also has a separate Investment Stewardship (BIS) team that is responsible for engaging with investee companies, proxy voting on the behalf of clients when authorised, contributing to industry dialogue on stewardship and reporting on its activities. For the year to
Year ended
31 August
2024
Number of engagements held1 42
Number of companies met1 25
% of equity investments covered2 74
Shareholder meetings voted at3 31
Number of proposals voted on3 543
Number of votes against management1 45
% of total items voted represented by votes against management 6.7
=========
1
Source: BlackRock as at
2
Source: BlackRock. As a percentage of total portfolio holdings at
3
Source: BlackRock,
Engagement Topics 1
______________________________________ |Biodiversity |3 | |___________________________________|__| |Climate Risk Management |10| |___________________________________|__| |Deforestation/Land Use |3 | |___________________________________|__| |Water and Waste |4 | |___________________________________|__| |Board Composition and Effectiveness|22| |___________________________________|__| |Business Oversight/Risk Management |5 | |___________________________________|__| |Corporate Strategy |8 | |___________________________________|__| |Executive Management |7 | |___________________________________|__| |Governance Structure |7 | |___________________________________|__| |Remuneration |21| |___________________________________|__| |Sustainability Reporting |8 | |___________________________________|__| |Diversity and Inclusion |4 | |___________________________________|__| |Health and Safety |3 | |___________________________________|__| |Human Capital Management |8 | |___________________________________|__| |Social Risks and Opportunities |4 | |___________________________________|__| |Supply Chain Labour Management |4 | |___________________________________|__| |Other* |7 | |___________________________________|__|
* Other:
Other company impacts on the environment 1; Board gender diversity 1; Business ethics and integrity 2;
Community relations 1; Other human capital management issues 1; and Privacy and data security 1.
Engagement Themes 1
________________ |Governance |39| |_____________|__| |Social |16| |_____________|__| |Environmental|11| |_____________|__|
1 Engagements include multiple company meetings during the year with the same company. Most engagement conversations cover multiple topics and are based on our vote guidelines and our engagement priorities found here: https://www.blackrock.com/corporate/literature/publication/blk-stewardship-priorities-final.pdf
Source: BlackRock.
BlackRock Investment Stewardship
The BlackRock Investment Stewardship (BIS) team takes a long-term approach in its stewardship efforts, reflecting the investment horizons of the majority of BlackRock’s clients. BIS’ activities include engaging with companies, proxy voting on clients’ behalf, contributing to industry dialogue on stewardship, and reporting on its activities. These activities are the main components of the stewardship toolkit and are performed all year long. BIS aims to take a globally consistent approach, while recognising the unique markets and sectors in which companies operate.
BIS benchmark policies
The BIS Global Principles, regional voting guidelines and engagement priorities (collectively, the ‘BIS benchmark policies’) set out the core elements of corporate governance that guide BIS’ efforts globally and within each regional market, including when engaging with companies and voting at shareholder meetings when authorised to do so on behalf of clients. BIS is committed to transparency in terms of disclosure of its stewardship activities on behalf of clients and publishes these benchmark policies to help BlackRock’s clients understand its work to advance their interests as long-term investors in public companies. Each year, BIS reviews its benchmark policies and updates them as necessary to reflect changes in market standards and regulations, insights gained over the year through third-party and its own research, and feedback from clients and companies. Additionally, BIS publishes both annual and quarterly reports detailing its stewardship activities, as well as vote bulletins that describe its rationale for certain votes at high-profile shareholder meetings. More detail in respect of BIS reporting can be found at www.blackrock.com/corporate/insights/investment-stewardship.
Global principles
The BIS Global Principles reflect BIS’ views on the globally-applicable fundamental elements of corporate governance that contribute to a company’s ability to create long-term financial value.
The Global Principles are available on BIS’ website: https://www.blackrock.com/corporate/literature/fact-sheet/blk- responsible-investment-engprinciples-global.pd f.
Regional voting guidelines
The BIS regional voting guidelines provide context on local market rules and norms within the framework of BIS’ overarching global corporate governance principles. The regional voting guidelines help provide clients, companies, and others guidance on BIS’ position on common voting matters in each market. BIS’ regional voting guidelines are available on its website: https://www.blackrock.com/corporate/insights/investment-stewardship#stewardship-policies.
Engagement priorities
The BIS engagement priorities are the five themes on which BIS most frequently engages with companies, where they are relevant and a source of material business risk or opportunity. The engagement priorities are available on BIS’ website: https://www.blackrock.com/corporate/literature/publication/blk-stewardship-priorities-final.pdf.
BlackRock’s reporting and disclosures
In terms of its own reporting, BlackRock believes that the
BY ORDER OF THE BOARD
FOR AND ON BEHALF OF
Company Secretary
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
· 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
Each of the Directors at the date of this report, confirm to the best of their knowledge that:
· the financial statements, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and
· the Strategic Report contained in the Annual Report and Financial Statements includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
The
FOR AND ON BEHALF OF THE BOARD
Chairman
Income Statement for the year ended
2024 2023
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Gains on
investments
held at
fair value 10 – 88,991 88,991 – 87,830 87,830
through
profit or
loss
Gains on
foreign – 1,075 1,075 – 1,149 1,149
exchange
Income from
investments
held at
fair value 3 11,969 31 12,000 10,699 – 10,699
through
profit or
loss
--------------- --------------- --------------- --------------- --------------- ---------------
Total 11,969 90,097 102,066 10,699 88,979 99,678
income
========= ========= ========= ========= ========= =========
Expenses
Investment
management 4 (994) (3,976) (4,970) (888) (3,554) (4,442)
fee
Other
operating 5 (2,420) (9) (2,429) (1,934) (89) (2,023)
expenses
--------------- --------------- --------------- --------------- --------------- ---------------
Total
operating (3,414) (3,985) (7,399) (2,822) (3,643) (6,465)
expenses
========= ========= ========= ========= ========= =========
Net profit
on ordinary
activities
before 8,555 86,112 94,667 7,877 85,336 93,213
finance
costs and
taxation
Finance 6 (467) (1,870) (2,337) (167) (665) (832)
costs
--------------- --------------- --------------- --------------- --------------- ---------------
Net profit
on ordinary
activities 8,088 84,242 92,330 7,710 84,671 92,381
before
taxation
Taxation (709) (11) (720) (790) – (790)
charge
--------------- --------------- --------------- --------------- --------------- ---------------
Net profit
on ordinary
activities 7 7,379 84,231 91,610 6,920 84,671 91,591
after
taxation
========= ========= ========= ========= ========= =========
Earnings
per
ordinary 7 7.35 83.88 91.23 6.85 83.77 90.62
share
(pence)
========= ========= ========= ========= ========= =========
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
The net profit on ordinary activities for the year disclosed above represents the Company’s total comprehensive income.
Statement of Changes in Equity for the year ended
Called Share Capital
up share Premium redemption Special Capital Revenue
capital account reserve reserve reserves reserve Total
Notes £’000 £’000 £’000 £’000 £’000 £’000 £’000
For the year
ended 31
August 2024
At 31 August 117 85,325 130 68,558 400,631 10,949 565,710
2023
Total
comprehensive
income:
Net profit – – – – 84,231 7,379 91,610
for the year
Transaction
with owners,
recorded
directly to
equity:
Ordinary
shares 14,15 – – – (10,171) – – (10,171)
repurchased
into treasury
Share buyback 14,15 – – – (56) – – (56)
costs
Dividends 8 – – – – – (6,793) (6,793)
paid1
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 August 117 85,325 130 58,331 484,862 11,535 640,300
2024
========= ========= ========= ========= ========= ========= =========
For the year
ended 31
August 2023
At 31 August 117 85,325 130 71,572 315,960 10,695 483,799
2022
Total
comprehensive
income:
Net profit – – – – 84,671 6,920 91,591
for the year
Transaction
with owners,
recorded
directly to
equity:
Ordinary
shares – – – (3,001) – – (3,001)
repurchased
into treasury
Share buyback – – – (13) – – (13)
costs
Dividends – – – – – (6,666) (6,666)
paid2
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 August 117 85,325 130 68,558 400,631 10,949 565,710
2023
========= ========= ========= ========= ========= ========= =========
1
Interim dividend paid in respect of the year ended
2
Interim dividend paid in respect of the year ended
Balance Sheet as at
2024 2023
Notes £’000 £’000
Non current assets
Investments held at fair value through 10 691,831 594,727
profit or loss
Current assets
Current tax asset 3,100 2,350
Debtors 11 748 1,517
Cash and cash equivalents - cash at 8 –
bank
--------------- ---------------
Total current assets 3,856 3,867
========= =========
Current liabilities
Cash and cash equivalents - bank 13,16(c) (50,150) (27,617)
overdraft
Other creditors 12 (5,237) (5,267)
--------------- ---------------
Total current liabilities (55,387) (32,884)
========= =========
Net current liabilities (51,531) (29,017)
========= =========
Net assets 640,300 565,710
========= =========
Equity
Called up share capital 14 117 117
Share premium account 15 85,325 85,325
Capital redemption reserve 15 130 130
Special reserve 15 58,331 68,558
Capital reserves 15 484,862 400,631
Revenue reserve 15 11,535 10,949
--------------- ---------------
Total shareholders’ funds 9 640,300 565,710
========= =========
Net asset value per ordinary share 9 644.60 560.11
(pence)
========= =========
Statement of Cash Flows for the year ended
2024 2023
Note £’000 £’000
Operating activities
Net profit on ordinary activities before 92,330 92,381
taxation
Add back finance costs 2,337 832
Gains on investments held at fair value (88,991) (87,830)
through profit or loss
Gains on foreign exchange (1,075) (1,149)
Sale of investments held at fair value 134,209 86,863
through profit or loss
Purchase of investments held at fair value (142,473) (115,924)
through profit or loss
Net amount for capital special dividends (20) –
received
Increase in debtors (21) (25)
Increase in other creditors 630 1,231
Taxation on investment income (2,291) (1,763)
Interest paid (2,337) (832)
Refund of withholding tax reclaims 821 542
--------------- ---------------
Net cash used in operating activities (6,881) (25,674)
========= =========
Financing activities
Ordinary shares repurchased into treasury (9,926) (3,592)
Dividends paid 8 (6,793) (6,666)
--------------- ---------------
Net cash used in financing activities (16,719) (10,258)
========= =========
Decrease in cash and cash equivalents (23,600) (35,932)
========= =========
Cash and cash equivalents at the start of (27,617) 7,166
the year
Effect of foreign exchange rate changes 1,075 1,149
--------------- ---------------
Cash and cash equivalents at the end of the (50,142) (27,617)
year
========= =========
Comprised of:
Cash at bank 8 –
Bank overdraft (50,150) (27,617)
--------------- ---------------
(50,142) (27,617)
========= =========
Notes to the Financial Statements for the year ended
1. Principal activity
The Company was incorporated on
2. Accounting policies
The principal accounting policies adopted by the Company are set out below:
(a) Basis of preparation
The financial statements have been prepared on a going concern basis in accordance with The Financial Reporting Standard applicable in the
Substantially, all of the assets of the Company consist of securities that are readily realisable and, accordingly, the Directors are satisfied that the Company has adequate resources to continue in operational existence for the period to
The Directors have considered the impact of climate change on the value of the investments included in the Financial Statements and have concluded that there was no further impact of climate change to be considered as the investments are valued based on market pricing as required by FRS 102.
None of the Company’s other assets and liabilities were considered to be potentially impacted by climate change.
The principal accounting policies adopted by the Company are set out below. Unless specified otherwise, the policies have been applied consistently throughout the year and are consistent with those applied in the preceding year. All of the Company’s operations are of a continuing nature.
The Company’s financial statements are presented in Sterling, which is the functional currency of the Company and the primary economic environment in which the Company operates. All values are rounded to the nearest thousand pounds (£’000) except where otherwise indicated.
(b) Presentation of Income Statement
In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and a capital nature has been presented on the face of the Income Statement.
(c) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single segment of business being investment business.
(d) Income
Dividends receivable on equity shares are treated as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the year end are treated as revenue for the year. Provisions are made for dividends not expected to be received.
Special dividends are recognised on an ex-dividend basis and treated as capital or revenue depending on the facts or circumstances of each particular dividend.
Dividends are accounted for in accordance with Section 29 of FRS 102 on the basis of income actually receivable, without adjustment for tax credits attaching to the dividend. Dividends from overseas companies continue to be shown gross of withholding tax.
Deposit interest receivable is accounted for using the effective interest rate method in accordance with Section 11 of FRS 102.
Where the Company has elected to receive its dividends in the form of additional shares rather than in cash, the cash equivalent of the dividend is recognised as revenue. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital.
(e) Expenses
All expenses, including finance costs, are accounted for on an accruals basis. Expenses have been charged wholly to the revenue account of the Income Statement, except as follows:
· expenses which are incidental to the acquisition or disposal of an investment are treated as capital. Details of transaction costs on the purchases and sales of investments are disclosed in note 10 in the annual reports and finanical statements;
· expenses are treated as capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated; and
· the investment management fee and finance costs have been allocated 20% to the revenue account and 80% to the capital account of the Income Statement in line with the Board’s expected long-term split of returns, in the form of capital gains and income respectively, from the investment portfolio.
(f) Taxation
The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Income Statement because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that were applicable at the balance sheet date.
The current tax effect of different items of expenditure is allocated between capital and revenue on the marginal basis using the Company’s effective rate of corporation tax for the accounting period.
Deferred taxation is recognised in respect of all timing differences at the financial reporting date, where transactions or events that result in an obligation to pay more taxation in the future or right to less taxation in the future have occurred at the balance sheet date. Deferred taxation is measured on a non-discounted basis, at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. This is subject to deferred taxation assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the timing differences can be deducted.
(g) Investments held at fair value through profit or loss
The Company’s investments are classified as held at fair value through profit or loss in accordance with Sections 11 and 12 of FRS 102 and are managed and evaluated on a fair value basis in accordance with its investment strategy.
All investments are classified upon initial recognition as held at fair value through profit or loss. Purchases of investments are recognised on a trade date basis. Sales are recognised at the trade date of the disposal and the proceeds are measured at fair value, which is regarded as the proceeds of the sale less any transaction costs.
The fair value of the financial investments is based on their quoted bid price at the balance sheet date on the exchange on which the investment is quoted, without deduction for the estimated future selling costs.
Unquoted investments are valued by the Directors at fair value using International Private Equity and Venture Capital Valuation Guidelines. This policy applies to all current and non-current asset investments of the Company.
Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Income Statement as ‘Gains or losses on investments held at fair value through profit or loss’. Also included within this heading are transaction costs in relation to the purchase or sale of investments.
The fair value hierarchy consists of the following three levels:
Level 1 – Quoted market price for identical instruments in active markets.
Level 2 – Valuation techniques using observable inputs.
Level 3 – Valuation techniques using significant unobservable inputs.
(h) Debtors
Debtors include sales for future settlement, other debtors and prepayments and accrued income in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.
(i) Creditors
Creditors include purchases for future settlement, interest payable, share buy back costs and accruals in the ordinary course of business. Creditors are classified as creditors – amounts due within one year if payment is due within one year or less (or in the normal operating cycle of business if longer). If not, they are presented as creditors – amounts due after more than one year.
(j) Dividends payable
Under Section 32 of FRS 102, final dividends should not be accrued in the financial statements unless they have been approved by shareholders before the balance sheet date. Dividends payable to equity shareholders are recognised in the Statement of Changes in Equity when they have been approved by shareholders and have become a liability of the Company. Interim dividends are only recognised in the financial statements in the period in which they are paid.
(k) Cash and cash equivalents
Cash comprises cash in hand and on demand deposits. Cash equivalents include bank overdrafts repayable on demand and short term, highly liquid investments, that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.
(l) Foreign currency translation
In accordance with Section 30 of FRS 102, the Company is required to nominate a functional currency being the currency in which the Company predominately operates. The functional and reporting currency is Sterling, reflecting the primary economic environment in which the Company operates. Transactions in foreign currencies are translated into Sterling at the rates of exchange ruling on the date of the transaction. Foreign currency monetary assets and liabilities are translated into Sterling at the rates of exchange ruling at the balance sheet date. Profits and losses thereon are recognised in the capital account of the Income Statement and taken to the capital reserves.
(m) Share repurchases, share reissues and new share issues
Shares repurchased and subsequently cancelled – share capital is reduced by the nominal value of the shares repurchased and the capital redemption reserve is correspondingly increased in accordance with Section 733 of the Companies Act 2006. The full cost of the repurchase is charged to the special reserve.
Shares repurchased and held in treasury – the full cost of the repurchase is charged to the special reserve.
Where treasury shares are subsequently reissued:
· amounts received to the extent of the repurchase price are credited to the special reserve and capital reserves based on a weighted average basis of amounts utilised from these reserves on repurchases; and
· any surplus received in excess of the repurchase price is taken to the share premium account.
Where new shares are issued, the par value is taken to called up share capital and amounts received to the extent of any surplus received in excess of the par value are taken to the share premium account.
Share issue costs are charged to the share premium account. Costs on share reissues are charged to the special reserve and capital reserves.
(n) Bank borrowings
Bank overdrafts are recorded as the proceeds received. Finance charges are accounted for on an accruals basis in the Income Statement.
(o) Critical accounting estimates and judgements
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results. Estimates and judgements are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Directors do not believe that any accounting judgements or estimates have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.
3. Income
2024 2023
£’000 £’000
Investment income:
UK dividends 807 764
Overseas dividends 10,687 9,907
Overseas special dividends 475 27
--------------- ---------------
Total investment income 11,969 10,698
========= =========
Other income:
Interest received – 1
--------------- ---------------
Total 11,969 10,699
========= =========
Dividends and interest received in cash during the year amounted to £8,119,000 and £nil respectively (2023: £7,781,000 and £1,000).
Special dividends of £31,000 have been recognised in capital during the year (2023: £nil).
4. Investment management fee
2024 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment
management 994 3,976 4,970 888 3,554 4,442
fee
--------------- --------------- --------------- --------------- --------------- ---------------
Total 994 3,976 4,970 888 3,554 4,442
========= ========= ========= ========= ========= =========
With effect from
Up to and including
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
2024 2023
£’000 £’000
Allocated to revenue:
Broker fees 48 48
Custody fees 65 36
Depositary fees 70 65
Audit fees1 64 57
Legal fees 26 26
Registrar’s fees 94 97
Directors’ emoluments2 186 173
Marketing fees 157 97
Postage and printing fees 46 68
AIC fees 22 21
Professional fees 37 66
Stock exchange listing fees 30 35
Write back of prior year expense accruals3 (12) (23)
Other administration costs 30 24
Provision for doubtful debts4 1,557 1,144
--------------- ---------------
Total revenue expenses 2,420 1,934
========= =========
Allocated to capital:
Custody transaction costs5 9 89
--------------- ---------------
Total 2,429 2,023
========= =========
The Company’s ongoing charges6, calculated as a
percentage of average daily net assets and using
the management fee and all other operating
expenses, excluding finance costs, direct
transaction costs, custody transaction charges, 0.95% 0.98%
VAT recovered, taxation, prior year expenses
written back and certain non-recurring items
were:
========= =========
1 No non-audit services are provided by the Company’s auditors (2023: none).
2 Further information on Directors’ emoluments can be found in the Directors’ Remuneration Report in the Annual Report and Financial Statements.The Company has no employees.
3
Relates to professional fees and postage and printing fees written back in the year ended
4
Provision for doubtful debts relate to dividend income from Sberbank which has not been received due to measures imposed by the Russian authorities in response to the sanctions that have been imposed on
5
For the year ended
6 Alternative Performance Measure, see Glossary in the Annual Report and Financial Statements.
6. Dividends
Dividends paid 2024 2023
on equity Record date Payment date £’000 £’000
shares
2022 Final
dividend of 18 November 2022 16 December 2022 – 4,899
4.85p
2023 Interim
dividend of 19 May 2023 19 June 2023 – 1,767
1.75p
2023 Final
dividend of 17 November 2023 20 December 2023 5,041 –
5.00p
2024 Interim
dividend of 24 May 2024 19 June 2024 1,752 –
1.75p
--------------- ---------------
6,793 6,666
========= =========
The Directors have proposed a final dividend of 5.25p per share in respect of the year ended
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
2024 2023
Dividends paid or proposed on equity shares £’000 £’000
Interim paid of 1.75p (2023: 1.75p) 1,752 1,767
Final proposed of 5.25p* (2023: 5.00p) 5,158 5,041
--------------- ---------------
6,910 6,808
========= =========
*
Based on 98,238,150 ordinary shares (excluding treasury shares) in issue on
All dividends paid or payable are distributed from the Company’s current year revenue profits and, if required, from brought forward revenue reserves.
7. Earnings and net asset value per ordinary share
Revenue, capital earnings and net asset value per ordinary share are shown below and have been calculated using the following:
2024 2023
Net revenue profit attributable to ordinary 7,379 6,920
shareholders (£’000)
Net capital profit attributable to ordinary 84,231 84,671
shareholders (£’000)
----------------- -----------------
Total profit attributable to ordinary 91,610 91,591
shareholders (£’000)
========== ==========
Total shareholders’ funds (£’000) 640,300 565,710
========== ==========
Earnings per share
The weighted average number of ordinary
shares in issue during the year on which the 100,411,682 101,067,709
earnings per ordinary share was calculated
was:
The actual number of ordinary shares in
issue at the end of the year on which the 99,332,161 101,000,161
net asset value per ordinary share was
calculated was:
Calculated on weighted average number of
ordinary shares:
Revenue earnings per share (pence) – basic 7.35 6.85
and diluted
Capital earnings per share (pence) – basic 83.88 83.77
and diluted
----------------- -----------------
Total earnings per share (pence) – basic and 91.23 90.62
diluted
========== ==========
As at As at
31 August 31 August
2024 2023
Net asset value per share (pence) 644.60 560.11
Ordinary share price (pence) 601.00 527.00
========= =========
There were no dilutive securities at the year end (2023: none).
8. Called up share capital
Ordinary Treasury Total Nominal
shares shares shares value
number number number £’000
Allotted,
called up
and fully
paid share
capital
comprised:
Ordinary
shares of
0.1 pence
each:
At 31 101,000,161 16,928,777 117,928,938 117
August 2023
Ordinary
shares
repurchased (1,668,000) 1,668,000 – –
into
treasury
------------------- ------------------- ------------------- -------------------
At 31 99,332,161 18,596,777 117,928,938 117
August 2024
=========== =========== =========== ===========
During the year, 1,668,000 ordinary shares (2023: 698,692) were repurchased and held in treasury for a net consideration after expenses of £10,227,000 (2023: £3,014,000).
Since
9. Reserves
Distributable Reserves
Capital
Capital reserve
reserve (arising on
Share Capital (arising on revaluation of
premium redemption Special investments investments Revenue
account reserve reserve1 sold) held) reserve
£’000 £’000 £’000 £’000 £’000 £’000
At 31 August 85,325 130 68,558 251,181 149,450 10,949
2023
Movement
during the
year:
Total
comprehensive
income:
Net profit – – – 4,166 80,065 7,379
for the year
Transaction
with owners,
recorded
directly to
equity:
Ordinary
shares – – (10,171) – – –
repurchased
into treasury
Share buyback – – (56) – – –
costs
Dividends
paid during – – – – – (6,793)
the year
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 August 85,325 130 58,331 255,347 229,515 11,535
2024
========= ========= ========= ========= ========= =========
Distributable Reserves
Capital
Capital reserve
reserve (arising on
Share Capital (arising on revaluation of
premium redemption Special investments investments Revenue
account reserve reserve1 sold) held) reserve
£’000 £’000 £’000 £’000 £’000 £’000
At 31 August 85,325 130 71,572 261,370 54,590 10,695
2022
Movement
during the
year:
Total
comprehensive
(loss)/income:
Net
(loss)/profit – – – (10,189) 94,860 6,920
for the year
Transaction
with owners,
recorded
directly to
equity:
Ordinary
shares – – (3,001) – – –
repurchased
into treasury
Share buyback – – (13) – – –
costs
Dividends paid
during the – – – – – (6,666)
year
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 August 85,325 130 68,558 251,181 149,450 10,949
2023
========= ========= ========= ========= ========= =========
1
Relates to amount transferred from the share premium account to a special reserve pursuant to Court approval received on
The share premium account and capital redemption reserve are not distributable reserves under the Companies Act 2006. In accordance with ICAEW Technical Release 02/17BL on Guidance on Realised and Distributable Profits under the Companies Act 2006, the special reserve and capital reserves may be used as distributable reserves for all purposes and, in particular, the repurchase by the Company of its ordinary shares and for payments such as dividends. In accordance with the Company’s Articles of Association, the special reserve, capital reserves and the revenue reserve may be distributed by way of dividend. The gain on the capital reserve arising on the revaluation of investments held of £229,515,000 (2023: gain of £149,450,000) is subject to fair value movements and may not be readily realisable at short notice, as such it may not be entirely distributable. The investments are subject to financial risks, as such the capital reserves (arising on investments sold) and the revenue reserve may not be entirely distributable if a loss occurred during the realisation of these investments.
10. Valuation of financial instruments
Financial assets and financial liabilities are either carried in the Balance Sheet at their fair value (investments) or at an amount which is a reasonable approximation of fair value (due from brokers, dividends and interest receivable, due to brokers, accruals, cash at bank and bank overdrafts). Section 34 of FRS 102 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Company are explained in the accounting policies note to the Financial Statements can be found in the Annual Report and Financial Statements.
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset.
The fair value hierarchy has the following levels:
Level 1 – Quoted market price for identical instruments in active markets
A financial instrument is regarded as quoted in an active market if quoted prices are readily available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The Company does not adjust the quoted price for these instruments.
Level 2 – Valuation techniques using observable inputs
This category includes instruments valued using quoted prices for similar instruments in markets that are considered less active, or other valuation techniques where significant inputs are directly or indirectly observable from market data.
Level 3 – Valuation techniques using significant unobservable inputs
This category includes all instruments where the valuation technique includes inputs not based on market data and these inputs could have a significant impact on the instrument’s valuation.
This category also includes instruments that are valued based on quoted prices for similar instruments where significant entity determined adjustments or assumptions are required to reflect differences between the instruments and instruments for which there is no active market. The Investment Manager considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability including an assessment of the relevant risks including but not limited to credit risk, market risk, liquidity risk, business risk and sustainability risk. The determination of what constitutes ‘observable’ inputs requires significant judgement by the Investment Manager and these risks are adequately captured in the assumptions and inputs used in the measurement of Level 3 assets or liabilities.
Fair values of financial assets and financial liabilities
The table below is an analysis of the Company’s financial instruments measured at fair value at the balance sheet date.
Financial assets
at fair value Level 1 Level 2 Level 3 Total
through profit £’000 £’000 £’000 £’000
or loss at 31
August 2024
Equity 691,830 – 1 691,831
investments
--------------- --------------- --------------- ---------------
Total 691,830 – 1 691,831
========= ========= ========= =========
Financial assets
at fair value Level 1 Level 2 Level 3 Total
through profit £’000 £’000 £’000 £’000
or loss at 31
August 2023
Equity 593,785 – 942 594,727
investments
--------------- --------------- --------------- ---------------
Total 593,785 – 942 594,727
========= ========= ========= =========
The Company held two Level 3 securities as at
A reconciliation of fair value measurement in Level 3 is set out below.
Level 3 Financial assets at fair value through profit or loss
2024 2023
£’000 £’000
Opening fair value 942 3
(Loss)/gain on investments included in gains on (941) 939
investments in the Income Statement
--------------- ---------------
Closing balance 1 942
========= =========
As at
For exchange listed equity investments, the quoted price is the bid price. Substantially, all investments are valued based on unadjusted quoted market prices. Where such quoted prices are readily available in an active market, such prices are not required to be assessed or adjusted for any price related risks, including climate risk, in accordance with the fair value related requirements of the Company’s financial reporting framework.
11. Transactions with the Investment Manager and AIFM
The investment management fee is levied quarterly based on a tiered basis: 0.85% per annum on the month-end net asset value up to £350 million and 0.75% per annum on the month-end net asset value above £350 million. Up to and including
In addition to the above services, BIM (
During the year, the Manager pays the amounts due to the Directors. These fees are then reimbursed by the Company for the amounts paid on its behalf. As at
The ultimate holding company of the Manager and the Investment Manager is BlackRock, Inc., a company incorporated in
12. Related party disclosure
Disclosures of the Directors’ interests in the ordinary shares of the Company and fees and expenses payable to the Directors are set out in the Directors’ Remuneration Report in the Annual Report and Financial Statements. At
Significant holdings
The following investors are:
a.
funds managed by the
b.
investors (other than those listed in (a) above) who held more than 20% of the voting shares in issue in the Company and are, as a result, considered to be related parties to the Company (
Total % of shares
held by Number of Significant
Significant Investors
Total % of shares Investors who are who are not
held by Related not affiliates of affiliates of
BlackRock Funds BlackRock BlackRock Group or
Group or BlackRock, BlackRock, Inc.
Inc.
As at 31 August 2024 1.3 n/a n/a
As at 31 August 2023 1.4 n/a n/a
13. Contingent liabilities
There were no contingent liabilities at
14. PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information contained in this announcement does not constitute statutory accounts as defined in the Companies Act 2006. The Annual Report and Financial Statements for the year ended
The figures set out above have been reported upon by the auditor, whose report for the year ended
The comparative figures are extracts from the audited financial statements of
15. ANNUAL REPORT
Copies of the Annual Report and Financial Statements will be published shortly and will be available from the registered office, c/o The Company Secretary,
16. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at the offices of BlackRock,
ENDS
The Annual Report will also be available on the BlackRock website at blackrock.com/uk/brge. Neither the contents of the Manager’s website nor the contents of any website accessible from hyperlinks on the Manager’s website (or any other website) is incorporated into, or forms part of, this announcement.
For further information please contact:
Sarah Beynsberger, Director, Closed End Funds,
Tel: 020 7743 3000
Tel: 020 7743 3000
Press enquiries:
Tel:
020 7294 3620
E-mail:
BlackRockInvestmentTrusts@lansons.com
or
EdH@lansons.com
EC2N 2DL
5 November
Release
