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19.10.2016 | 17:31
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BlackRock Greater Europe Investment Trust plc

Annual results announcement
For the year ended 31 August 2016

FINANCIAL HIGHLIGHTS


Attributable to ordinary shareholders
As at
31 August 2016
As at
31 August 2015
Change
%
Assets
Net asset value per ordinary share - undiluted287.43p250.66p+14.7
- with income reinvested**--+16.9
Net asset value per ordinary share - diluted287.43p250.22p+14.9
- with income reinvested**--+17.1
Net assets (£'000)*294,908261,459+12.8
Ordinary share price (mid-market)272.00p244.00p+11.5
- with income reinvested**--+13.8
For the year ended
31 August 2016
For the year ended
31 August 2015
Change
%
Revenue
Net revenue return after taxation (£'000)5,7825,609+3.1
Revenue return per ordinary share5.60p5.28p+6.1
------------------------------------------
Dividends:
- Interim1.65p1.65p-
- Final3.65p3.35p+9.0
------------------------------------------
Total dividends paid and payable5.30p5.00p+6.0
========================

* The change in net assets reflects the tender offer implemented in the year, market movements and the exercise of subscription shares.

** Net asset value and share price performance include the dividend reinvestments.

CHAIRMAN'S STATEMENT

OVERVIEW
I am pleased to present the Annual Report to shareholders for the year ended 31 August 2016.

PERFORMANCE

Over the twelve months to 31 August 2016, the Company's net asset value per share (NAV) increased by 16.9%, compared with a rise of 15.4% in the FTSE World Europe ex UK Index. The share price rose by 13.8% over the same period. (All percentages calculated in sterling terms with income reinvested.) Details of the factors which have contributed to performance are set out in the Investment Manager's Report.

Since the year end and up to close of business on 18 October 2016, the Company's NAV per share has increased by 4.7% compared with a rise in the FTSE World Europe ex UK Index of 5.5% over the same period.

MARKET OVERVIEW

Global equity market returns have been muted in the past two years with high levels of market uncertainty and lacklustre growth. Stocks staged a recovery from the February lows, shaking off fears of a global recession, an oil price collapse and a Chinese currency devaluation. The rally was driven by a normalisation in commodity prices and the European Central Bank's announcement to expand the duration and scope of its stimulus programme. There was also a marked change in expectations for emerging markets, benefiting from a weaker U.S. dollar and a stabilisation in China's slowing economy. Political risk also influenced markets, particularly around the Brexit debate. Although the unexpected Brexit vote initially led to a significant market sell-off, markets rebounded in July.

REVENUE EARNINGS AND DIVIDENDS

The Company's revenue return per share for the year amounted to 5.60p per share, which compares with 5.28p per share for the previous year, an increase of 6.1%. The Board is proposing the payment of a final dividend of 3.65p per share for the year (2015: 3.35p). This, together with the interim dividend of 1.65p per share (2015: 1.65p), makes a total dividend for the year of 5.30p per share (2015: 5.00p). The dividend will be paid on 5 December 2016 to shareholders on the Company's register on 4 November 2016, the ex-dividend date being 3 November 2016.

DISCOUNT CONTROL AND TENDER OFFERS

The Board has the option to implement a tender in order to assist in controlling the discount to NAV at which the shares are traded. In addition, it will consider buying back shares in the market between tenders when it is considered to be in the interests of shareholders to do so.

The Directors exercised their discretion to operate the half yearly tender offer in November 2015, which in common with previous tenders, was for up to 20% of the ordinary shares in issue at the prevailing NAV. Valid tenders for 1,236,927 shares (1.19% of the shares in issue excluding treasury shares) were received at a price of 250.56p per share. The Board concluded that it was not in the interests of shareholders to implement the May semi-annual tender offer, having taken into consideration the narrow discount, the costs of the exercise, and the low take-up last November.

It was announced on 19 September 2016 that the next semi-annual tender offer will take place on 30 November 2016. The tender offer will be for up to 20% of the ordinary shares in issue (excluding treasury shares) at the prevailing cum income fully diluted NAV per share subject to a discount of 2%. A Circular relating to the tender offer is enclosed with this Annual Report. The Circular will be available on the BlackRock website at blackrock.co.uk/brge, and additional copies may be requested from the Company's registered office c/o The Secretary, BlackRock Greater Europe Investment Trust plc, 12 Throgmorton Avenue, London EC2N 2DL.

In addition to the tender offer, during the year and up to the date of this report, the Company has repurchased 1,600,000 ordinary shares in the market.

Resolutions to renew the Company's semi-annual tender authorities and share buy back authority will be put to shareholders at the forthcoming Annual General Meeting.

SUBSCRIPTION SHARES

In the year under review, the Company issued a total of 530,377 ordinary shares following the conversion of subscription shares into ordinary shares. Total proceeds amounted to £1,315,000. The final opportunity to subscribe for ordinary shares under the subscription share rights was 29 April 2016. As the subscription conversion price, which was 248p per share, was greater than the prevailing share price between 29 April 2016 and 13 May 2016, the 20,014,801 outstanding subscription shares which had not been exercised on or before the final exercise date ceased to have any value and lapsed. The remaining subscription shares were subsequently reclassified as deferred shares and redeemed. The Company currently has 102,003,113 ordinary shares in issue, excluding 8,325,825 shares held in treasury.

THE BOARD

As mentioned at the interim stage, I will be stepping down as Chairman following the Annual General Meeting but will remain on the Board as a non-executive Director. Eric Sanderson will replace me as Chairman and Peter Baxter will succeed Eric as Chairman of the Audit and Management Engagement Committee. After serving on the Board since the Company's launch in 2004, it is my intention to retire as a Director after the Annual General Meeting in 2017. The process of refreshing the Board will continue this December with the search for an additional Director.

OUTLOOK

The United Kingdom's vote to leave the European Union (EU) has increased market anxiety over Europe's future and we should expect an ongoing period of market volatility as the implications of a major country leaving the EU are digested. We are also facing some key events in the coming months, including the Italian referendum on their constitution at the end of the year, the U.S. elections in November, as well as several general elections in European countries in 2017. Amid this uncertainty, and in the current low interest rate environment, our Portfolio Managers will position the portfolio to focus on quality companies with rising dividends, strong cash flows and the ability to grow.

ANNUAL GENERAL MEETING

The Annual General Meeting of the Company will be held at the offices of BlackRock at 12 Throgmorton Avenue, London EC2N 2DL on Wednesday, 30 November 2016 at 12 noon. As in previous years, the Portfolio Managers will make a presentation to shareholders on the Company's performance and the outlook for the year ahead.

This year, for the first time, shareholders who are unable to attend in person will be able to watch the meeting via a live stream. Further details of how to register for this are given on page 62 of the Annual Report and Financial Statements.

We, the Directors of your Company, regard the Annual General Meeting as the most important meeting of the year and we encourage you to come along. We have considered the resolutions proposed in the Notice of the Annual General Meeting and believe that all are in the interests of shareholders as a whole. We therefore recommend that you vote in favour of each resolution.

CAROL FERGUSON
19October 2016

STRATEGIC REPORT

The Directors present the Strategic Report of the Company for the year ended 31 August 2016.

PRINCIPAL ACTIVITY

The Company carries on business as an investment trust and its principal activity is portfolio investment.

INVESTMENT OBJECTIVE

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

STRATEGY, BUSINESS MODEL AND INVESTMENT POLICY

STRATEGY

The Company invests in accordance with the investment objective. The Board is collectively responsible to shareholders for the long term success of the Company and is its governing body. There is a clear division of responsibility between the Board and the Manager. Matters for the Board include setting the Company's strategy, including its investment objective and policy, setting limits on gearing, capital structure, governance, and appointing and monitoring of performance of service providers, including the Manager.

BUSINESS MODEL

The Company's business model follows that of an externally managed investment trust; therefore the Company does not have any employees and outsources its activities to third party service providers including the Manager who is the principal service provider.

The management of the investment portfolio and the administration of the Company have been contractually delegated to BlackRock Fund Managers Limited (the Manager). The Manager, operating under an Investment Management Agreement, has direct responsibility for the decisions relating to the day-to-day running of the Company and is accountable to the Board for the investment, financial and operating performance of the Company.

Other service providers include the Depositary, BNY Mellon Trust & Depositary (UK) Limited. The Company delegates fund accounting services to BlackRock Investment Management (UK) Limited (BIM (UK) or the Investment Manager), which in turn sub-delegates these services to Bank of New York Mellon (International) Limited and also sub-delegates registration services to the Registrar, Computershare Investor Services PLC.

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% may be invested in companies in developing Europe with the flexibility to invest up to 5% of the portfolio in unquoted investments. However, overall exposure to developing European companies and unquoted investments together will not exceed 25% of the Company's portfolio.

As at 31 August 2016, the Company held 59 investments and 8.2% of the portfolio was invested in developing Europe. The Company had no unquoted investments.

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

The Company also has the flexibility to invest up to 20% of the portfolio in debt securities, such as convertible bonds and corporate bonds. No bonds were held at 31 August 2016. The use of any derivative instruments such as financial futures, options and warrants and the entering into of stock lending arrangements will only be for the purposes of efficient portfolio management.

While the Company may hold shares in other investment companies (including investment trusts), the Board has agreed that the Company will not invest more than 15%, in aggregate, of its gross assets in other listed closed-ended investment funds (save to the extent that such closed-ended investment funds have published investment policies to invest no more than 15% of their total assets in such other listed closed-ended investment funds).

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 draw down of the relevant borrowings. At the balance sheet date the Company had net gearing of 0.2% (2015: nil).

The Directors recognise that it is in the long term interests of shareholders that shares do not trade at a significant discount to their prevailing NAV. The Board believes that this may be achieved through the use of regular tender offers and the use of share buy back powers. In the year to 31 August 2016, the Company's share price premium/discount to NAV ranged from a premium of 2.2% to a discount of 7.7% calculated on an undiluted cum income NAV (diluted NAV: from a premium of 2.2% to a discount of 7.9% respectively).

PERFORMANCE

In the year to 31 August 2016, the Company's undiluted NAV per share returned +16.9% (compared with a return in the FTSE World Europe ex UK Index of +15.4%) and the share price returned +13.8% (all percentages calculated in sterling terms with income reinvested).

The Investment Manager's Report includes a review of the main developments during the year, together with information on investment activity within the Company's portfolio.

RESULTS AND DIVIDENDS

The results for the Company are set out in the Income Statement. The total profit for the year, after taxation, was £42,881,000 (2015: £18,958,000). The revenue return amounted to £5,782,000 (2015: £5,609,000).

As explained in the Company's Half Yearly Financial Report, the Directors declared an interim dividend of 1.65p per share (2015: 1.65p). The Directors recommend the payment of a final dividend of 3.65p per share making a total dividend of 5.30p per share (2015: 5.00p). Subject to approval at the forthcoming Annual General Meeting, the dividend will be paid on 5 December 2016 to shareholders on the register of members at the close of business on 4 November 2016.

KEY PERFORMANCE INDICATORS

The Directors consider a number of performance measures to help 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 those reported by other investment trusts are set out below.

As at
31 August 2016
As at
31 August 2015
Net asset value per share - undiluted287.43p250.66p
Net asset value per share - diluted287.43p250.22p
Share price272.00p244.00p
Discount to net asset value - undiluted5.4%2.7%
Discount to net asset value - diluted5.4%2.5%

Year ended
31 August 2016
Year ended
31 August 2015
Revenue return per share - undiluted5.60p5.28p
Ongoing charges*1.07%0.89%
Ongoing charges#1.07%1.22%

* Ongoing charges (excluding interest costs and any performance fees, after any relief for taxation) as a % of average shareholders' funds.

# Ongoing charges (including performance fees but excluding interest costs, after any relief for taxation) as a % of average shareholders' funds.

The Board monitors the above KPIs on a regular basis. Additionally, it regularly reviews a number of indices and ratios to understand the impact on the Company's relative performance of the various components such as asset allocation and stock selection. The Board also assesses the Company's performance against its peer group of investment trusts with similar investment objectives.

PRINCIPAL RISKS

The key risks faced by the Company are set out below. The Board has put in place a robust process to assess and monitor these risks. A core element of this is the Company's risk register. This identifies the risks facing the Company and assesses the likelihood and potential impact of each risk and the quality of controls operating to mitigate it. A residual risk rating is then calculated for each risk based on the outcome of the assessment. This approach allows the effect of any mitigating procedures to be reflected in the final assessment.

The risk register, its method of preparation and the operation of key controls in the Manager's and other third party service providers' systems of internal control, are reviewed on a regular basis by the Audit and Management Engagement Committee. In order to gain a more comprehensive understanding of the Manager's and other third party service providers' risk management processes and how these apply to the Company's business, the Audit and Management Engagement Committee periodically receives presentations from BlackRock's Internal Audit and Risk & Quantitative Analysis teams and receives Service Organisation Control (SOC 1) Reports from the Company's service providers.

In relation to the 2014 update to the UK Corporate Governance Code, the Board is confident that the procedures that the Company has put in place are sufficient to ensure that the necessary monitoring of risks and controls has been carried out throughout the reporting period. The Board will continue to assess the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity, on an ongoing basis.

The current risk register includes 53 risks. 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 in the table below and on pages 8 and 9 of the Annual Report and Financial Statements.

PRINCIPAL RISKMITIGATION/CONTROL
COUNTERPARTY
The potential loss that the Company could incur if a counterparty is unable (or unwilling) to perform on its commitments.

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
Returns achieved are reliant primarily upon the performance of the portfolio.
An inappropriate investment policy may lead to underperformance compared to the benchmark index, a loss of capital and dissatisfied shareholders.

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;
- receives and reviews regular reports showing an analysis of the Company's performance against the FTSE World Europe ex UK Index and other similar indices; and
- ensures that the Investment Manager has training and development programmes in place for its employees and its recruitment and remuneration packages are developed in order to retain key staff.
LEGAL & COMPLIANCE
The Company has been accepted 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 capital gains tax 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.
Any serious 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 would in turn lead to a breach of the Corporation Tax Act 2010.
The Company is required to comply with the provisions of the Companies Act 2006, the Alternative Investment Fund Managers' Directive and the UK Listing Rules and Disclosure and Transparency Rules.

The Investment Manager monitors investment movements 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 is 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 regulation. The Board and Manager also monitor changes in government policy and legislation which may have an impact on the Company.
MARKET
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, political events and trends, including the impact of the UK leaving the EU, can also substantially and adversely affect the securities and, as a consequence, the Company's prospects and share price.

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.
OPERATIONAL
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, BNY Mellon Trust & Depositary (UK) Limited (the Depositary) and the Bank of New York Mellon (International) Limited (the fund accountant), who 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 third party service providers.
Failure by any service provider to carry out its obligations could have a material adverse effect on the Company's performance. Disruption to the accounting, payment systems or custody records could prevent the accurate reporting and monitoring of the Company's financial position.

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.
Most third party service providers produce Service Organisation Control (SOC 1) reports to provide assurance regarding the effective operation of internal controls as reported on by their reporting accountants. These reports are provided to the Audit and Management Engagement Committee.
The Company's assets are subject to a strict liability regime and in the event of a loss of financial instruments held in custody, the Depositary must return assets of an identical type or the corresponding amount, unless able to demonstrate that 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.
FINANCIAL
The Company's investment activities expose it to a variety of financial risks which include market risk, counterparty credit risk, liquidity risk and the valuation of financial instruments.

Details of these risks are disclosed in note 16 on pages 52 to 60 of the Annual Report and Financial Statements, together with a summary of the policies for managing these risks.
MARKETING
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.

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 C.2.2 of the UK Corporate Governance Code, the Directors have assessed the prospects of the Company over a longer period than the 12 months referred to by the 'Going Concern' guidelines. The Board conducted this review for a period of three years. This is generally the investment holding period investors consider while investing in the European sector.

In its assessment of the viability of the Company, the Directors have noted that:

- the Company invests predominantly in highly liquid, large listed companies so its assets are readily realisable;

- the Company has limited gearing and no concerns around facilities, headroom or covenants; and

- the business model should remain attractive for much longer than three years, unless there is significant economic or regulatory change.

The Directors have also reviewed:

- the Company's principal risks and uncertainties as set out above;

- the ongoing relevance of the Company's investment objective, business model and investment policy in the current environment; and

- the level of demand for the Company's shares.

The Directors reviewed the assumptions and considerations underpinning the Company's existing going concern assertion which are based on:

- processes for monitoring costs;

- key financial ratios;

- evaluation of risk management controls;

- compliance with the investment objective;

- portfolio risk profile;

- share price discount;

- gearing; and

- counterparty exposure and liquidity risk.

These were extended forward for three years and based on this analysis 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.

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 in the next twelve months is discussed in both the Investment Manager's Report and Chairman's Statement.

SOCIAL, COMMUNITY AND HUMAN RIGHTS ISSUES

As an investment trust with no employees, the Company has no direct social or community responsibilities or impact on the environment. However, the Company believes that it is in shareholders' interests to consider human rights issues and environmental, social and governance factors when selecting and retaining investments. Details of the Company's policy on socially responsible investment are set out on pages 29 and 30 of the Annual Report and Financial Statements.

MODERN SLAVERY ACT

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

DIRECTORS, GENDER REPRESENTATION AND EMPLOYEES

The Directors of the Company on 31 August 2016, all of whom held office throughout the year, are set out in the Governance Structure and Directors' Biographies on page 17 of the Annual Report and Financial Statements. The Board currently consists of two male Directors and two female Directors. The Company does not have any employees; therefore there are no disclosures to be made in that respect.

The Chairman's Statement on pages 4 and 5 of the Annual Report and Financial Statements, including the Investment Manager's Report and portfolio analysis on pages 11 to 16 of the Annual Report and Financial Statements, form part of the Strategic Report. The Strategic Report was approved by the Board at its meeting on 19 October 2016.

BY ORDER OF THE BOARD
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
Company Secretary
19October 2016

RELATED PARTY TRANSACTIONS

BlackRock Fund Managers Limited (BFM) was appointed as the Company's AIFM with effect from 2 July 2014, having been authorised as an AIFM by the FCA on 1 May 2014. The management contract is terminable by either party on six months' notice.

BlackRock Investment Management (UK) Limited (BIM (UK)) continues to act as the Company's Investment Manager under a delegation agreement with BFM. BIM (UK) also acted as the Secretary of the Company throughout the year. Up to and including 31 August 2015, BFM received an annual fee of 0.70% of market value plus a performance fee of 15% of any outperformance of the FTSE World Europe ex UK Index, up to a maximum total investment management fee of 1.15% of performance fee market value. With effect from 1September 2015, the arrangements were replaced with a base fee of 0.85% of net asset value and the performance fee was removed.

Where the Company invests in other investment or cash funds managed by BIM (UK), any underlying fee charged is rebated. Fees are adjusted by adding all dividends declared during the period. Further details are disclosed in note 4.

The Company contributes to a focused investment trust sales and marketing initiative operated by BIM (UK) on behalf of the investment trusts under its management. The Company's contribution to the consortium element of the initiative, which enables the trusts to achieve efficiencies by combining certain sales and marketing activities, represents a budget of up to 0.025% per annum of its net assets (£270 million) as at 31 December 2015 and this contribution is matched by BIM (UK). In addition, a budget of a further £15,000 has been allocated for Company specific sales and marketing activity. Total fees paid or payable for these services for the year ended 31 August 2016 amounted to £49,000 (excluding VAT) (2015: £48,000). The purpose of the programme overall is to ensure effective communication with existing shareholders and to attract new shareholders to the Company. This has the benefit of improving liquidity in the Company's shares and helps sustain the stock market rating of the Company.

The Board consists of four non-executive Directors, all of whom are considered to be independent by the Board. None of the Directors has a service contract with the Company. The Chairman receives an annual fee of £33,000, the Chairman of the Audit and Management Engagement Committee receives an annual fee of £27,500 and each other Director receives an annual fee of £23,000. Two members of the Board hold shares in the Company. Carol Ferguson holds 57,600 ordinary shares and Eric Sanderson holds 4,000 ordinary shares. Davina Curling and Peter Baxter do not hold any shares in the Company.

As at 31August2016, fees of £9,000 (2015: £11,000) were outstanding to Directors in respect of their annual fees.

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS

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

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

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

- select suitable accounting policies in accordance with United Kingdom Generally Accepted Accounting Practice and then apply them consistently;

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

- make judgements and estimates that are reasonable and prudent;

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

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

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

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

Each of the Directors at the date of this report, whose names are listed on page 17 of the Annual Report and Financial Statements, confirm to the best of their knowledge that:

- the financial statements, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss 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 2014 UK Corporate Governance Code also requires Directors to ensure that the Annual Report and Financial Statements are fair, balanced and understandable. In order to reach a conclusion on this matter, the Board has requested that the Audit and Management Engagement Committee advise on whether it considers that the Annual Report and Financial Statements fulfils these requirements. The process by which the Committee has reached these conclusions is set out in the Audit and Management Engagement Committee's Report on pages 31 to 34 of the Annual Report and Financial Statements. As a result, the Board has concluded that the Annual Report for the year ended 31 August 2016, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position, performance, business model and strategy.

FOR AND ON BEHALF OF THE BOARD
CAROL FERGUSON

Chairman
19October 2016

INVESTMENT MANAGER'S REPORT

MARKET OVERVIEW

The Company's share price and underlying net asset value (NAV) gained over the last twelve months to 31 August 2016 by 13.8% and 16.9% respectively. By way of comparison, the FTSE World Europe ex UK Index rose by 15.4% during the same period. (All figures in sterling terms with income reinvested.)

During the year, the underlying trend for the Europe ex-UK market was downwards, falling by 1.2% in Euro terms. However, returns in sterling terms were strong as the pound weakened from a price of €1.36 against the pound, to €1.18 by the end of the year. This substantial depreciation in sterling was driven principally by the UK referendum on the European Union (EU), with an unexpected decision by the British electorate to 'leave'. This substantial event was one of many influences upon market uncertainty during the year.

Over the year to 31 August 2016, Europe continued its trajectory of low growth and low inflation expectations. In March, this environment triggered the European Central Bank to extend its monetary stimulus programme, reducing several key rates and expanding the size and duration of its asset purchase programme. Whilst this is supportive for European markets generally, unprecedented low rates put pressure on the earnings power of the banking sector. In addition to this, financial stocks have been impacted by regulatory uncertainty during the year - especially concerning the treatment, and ultimately the value, of non-performing loans of Italian banks. Consequently, banks have been the weakest performers over the year.

While monetary policy has remained accommodative, political risk has created a drag on returns. In addition to Brexit, heightened uncertainty of the future of the 'European Project', with multiple upcoming European elections, has led investors towards 'safe haven' assets. Therefore, we have seen the best performance within sectors characterised by stable cash flows, such as telecoms, tobacco and food and beverage companies. High levels of market uncertainty have further incentivised investors to bid the valuations of these more expensive stocks even higher.

Policy abroad has also helped shape the European market over the year, with stimulus in China driving a resurgence in metal prices early in 2016. While the injection in capital would likely only have a temporary effect, materials stocks rallied strongly in response, even though the earnings outlook for many companies within this sector looked challenged. The market also saw a revival in energy demand as the oil price stabilised, with oil & gas related stocks outperforming the broader market.

PORTFOLIO ACTIVITY

In an environment characterised by uncertainty, and with markets influenced by policy and political risks, stock selection proved to be a very strong driver of the portfolio's performance when compared with the broader market, whilst the allocation of capital by sector was less profitable. On a sector basis, the decision to have a lower weighting towards the consumer goods sector, caused by the high prices of many of the stocks within it, detracted from performance. The larger relative weighting towards the financial sector also proved negative for performance, although stock selection within this sector was very strong. The greater exposure to both technology and industrials, when compared with the broader market, was positive for performance. The decision to have a small allocation to cash, given the heightened volatility in the market over the twelve months, was a small drag on performance.

Adidas, the German sportswear brand, proved the greatest contributor to performance over the year when compared with the broader market. The share price increased by 164% as investors warmly received the company's plans for restructuring with a new CEO recently joining the company. Both sales and earnings momentum have been very strong for the group, in particular through the UEFA Euro 2016 football tournament where they saw record football-related sales of €2.5 billion during the quarter. Straumann, a Swiss dental implant manufacturer, also provided strong returns. The company has continually reported robust results over the year driven by solid sales growth globally and efficient cost management.

A number of positions within emerging Europe also proved profitable, with allocation to the region over the year being positive for performance. In particular, we saw strong returns in our Russian positions Yandex and Sberbank. Yandex, an IT company specialising in internet-related services and products and operating the largest search engine in Russia, performed well as internet advertising accelerated with the recovery of the Russian economy. Sberbank, Russia's largest state-owned bank with a 50% share in the retail deposit market, reported strong results in the first half of 2016. The bank continues to build on its restructuring strategy that has driven much of its success over the past few years, through improving its services and the efficiency with which they are delivered.

On a less positive note, detractions came from a number of names within the financial sector, including Italian bank Intesa Sanpaolo and asset manager Anima. Anima was especially impacted by the market volatility seen over the year, despite inflows into the business remaining solid. However, concerns in the Italian banking system pertaining to bank capitalisation have impacted a number of Anima's distribution partners and thus raised questions about the future ability of the asset manager to gather assets. Given this, we have reduced the size of the position.

A position in Mail.Ru, a Russian IT company providing social media platforms and gaming, detracted from returns as the online gaming business posted negative results in the first half of 2016. However, we believe that the stock remains attractive as the recent introduction of in-stream mobile advertising has the potential to drive revenues in the medium term as 70 million of Russia's 80 million internet users have active VK (Russia's most popular social network VKontakte) accounts.

Bank of Ireland also detracted from performance. Partially, the falling share price came as a result of the UK's decision to exit the EU, given its large exposure to the UK economy, where the bank garners 25% of its profitability. More broadly, the stock was impacted by political pressures at home, as well as increasing regulatory costs and a UK banking tax. However, despite the environment of compressing yields, company results showed resilience within its core operations and we believe the stock has room to recover.

At the end of the year, the portfolio was particularly weighted towards positions in the industrials, technology and consumer services sectors. Exposure to the financial sector was reduced throughout the twelve months, especially through holdings in banks. The portfolio maintained lower levels of exposure to oil & gas, basic materials, utilities and consumer goods during the year, although investment in the consumer goods sector increased during 2016. In general, the portfolio had a focus on businesses that are able to deliver attractive growth in a low growth environment, selected income opportunities (especially as dividend yields relative attraction has grown as bond yields have fallen) and companies which offer resilient cash flows.

OUTLOOK

Our outlook remains cautiously positive for the market. Given the low overall growth rate and relatively full valuation of the market when compared with historical levels, we believe that an active approach to stock selection is key to generating returns in the present climate. Low volatility and low trading volume characterised markets over the summer and mixed economic data underscored the uncertain global growth outlook. European companies can offer significant value at present, with the spread between dividend yields and corporate bond yields at an all-time high. The accommodative policy from the European Central Bank continues to keep the growth of the economy in place, with plenty of room for further recovery in earnings in the coming years.

We believe that positioning the portfolio towards cash generative businesses such as Anheuser-Busch Inbev and Vinci; those with the ability to restructure and improve efficiencies, such as Zurich Insurance Group and Carlsberg; and those with the ability to generate growth in what remains a low growth economy, such as Lonza Group and Ontex, will help provide superior returns.

VINCENT DEVLIN AND SAM VECHT
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED

19October 2016

TEN LARGEST INVESTMENTS AS AT 31 AUGUST 2016

Zurich Insurance Group: 3.4% (2015: 2.8%) is a Swiss insurance company which we believe has the potential to enhance efficiencies through restructuring the business. The group's new CEO is focusing on organisational and management changes, as well as redefining group strategy. We expect him to be able to deliver on costs, efficiency improvements (potentially making disposals) and improve underwriting performance. We believe this should lead to reduced earnings volatility and an improved dividend paying capacity.

Vinci: 2.9% (2015: nil) is a French concession and construction company which, following its 2015 acquisitions, is one of the world's top five airport operators. The company is also prominent within the road transport sector, operating more than half of France's motorways under concession. Both the contracting and concessions businesses are performing well, reflected in positive traffic and construction growth. Management is looking to steer the business towards concessions and international exposure, which we believe warrants a higher price multiple for the stock than it has historically traded at. The business is attractively valued with focus on margin recovery.

Tenaris: 2.9% (2015: nil) is one of the leading suppliers of steel tubes in oil wells (80% of sales) and thus exposed to the oil industry, particularly U.S. shale. In the context of a very challenging outlook for oil services companies, Tenaris is relatively well positioned with a strong balance sheet and geographic exposure to some attractive end markets for medium term oil supply growth. We believe Tenaris can benefit from a resumption in production of U.S. shale as the oil price stabilises.

RELX: 2.9% (2015: 2.3%) is a world-leading provider of information and analytics for professional and business customers across a multitude of industries. The company is aiming to evolve its core business by building out new products. RELX has established high barriers to entry, giving confidence to its competitive position and allowing for more predictable revenues going forward. The stock offers steady compounding growth for an attractive valuation.

Adidas: 2.9% (2015: nil) is one of the global leaders in the sporting goods industry. Whilst the company has a solid market share in Europe, it has lagged the Nike brand in the U.S. The company has the opportunity to vastly improve market share in this area through increasing focus towards social media, sponsorships and new products. Since purchasing the stock, we have seen Adidas branded sales growth (circa 85% of total sales) already begin to accelerate. In addition, the company can benefit from an improvement in cost management with a new CEO who joined the group in 2016.

Unibail-Rodamco: 2.8% (2015: 2.5%) is a large commercial real estate company, specialising in high quality shopping centres in France. The company has a strong portfolio of assets, consistently growing rents above indexation and can create value through the development of its portfolio. The company also offers an attractive dividend yield in today's low rate environment.

Anheuser-Busch Inbev: 2.8% (2015: nil) is the world's largest brewer, headquartered in Belgium. The company is benefiting from exposure to a growing end market in Brazil and has the potential to expand into markets such as Africa with the SAB Miller deal. The deal would bring together a complementary footprint in markets with significant growth opportunities and expected synergies.

Bayer: 2.7% (2015: 3.9%) is a German Life Science company, specialising in pharmaceuticals, consumer health, crop science and animal health. The stock offers M&A optionality, with the proposed deal to buy Monsanto reinforcing Bayer's core business segments as well as targeting attractive long term growth industries in crop protection. Monsanto is an innovative biotech business which is highly cash generative; the deal is expected to be greatly beneficial to core earnings over time.

KPN: 2.6% (2015: 1.4%) is a Dutch telecommunications company. The company has a strong market position which it can build upon through cross-selling to households. KPN has introduced a cost cutting programme which, in addition to price increases the business can put through to consumers, has the potential to drive operating leverage and earnings higher.

CRH: 2.5% (2015: nil) is a holding company with subsidiaries which manufacture and supply a wide range of materials for the construction industry. The stock provides exposure to the potentially rising infrastructure spend in developed markets, and to the U.S. which is already growing at attractive rates. Given energy costs are a significant input for CRH, they have been able to benefit from globally declining energy prices.

All percentages reflect the value of the holding as a percentage of total assets.
Percentages in brackets represent the value of the holding as at 31 August 2015.
Together, the ten largest investments represent 28.4% of the Company's portfolio (31 August 2015: 34.0%).

INVESTMENTS AS AT 31 AUGUST 2016

Country of
operation
Market value
£'000
% of
investments
INDUSTRIALS
VinciFrance8,6782.9
CRHIreland7,2542.5
HexagonSweden6,5912.2
ThalesFrance6,5352.2
DSVDenmark6,4212.2
KoneFinland6,1722.1
Assa AbloySweden6,0322.1
SafranFrance5,6081.9
GeberitSwitzerland5,1341.7
WartsilaFinland4,5511.5
FerrovialSpain4,5131.5
AtlantiaItaly3,7541.3
KingspanIreland3,2101.1
TeleperformanceFrance2,6470.9
Dassault AviationFrance1,9830.7
-------------------
79,08326.8
-------------------
FINANCIALS
Zurich Insurance GroupSwitzerland9,9443.4
Unibail-RodamcoFrance8,4042.8
SberbankRussia4,8541.7
KBC GroepBelgium4,7281.6
PZUPoland3,9181.3
Sampo OyjFinland3,7581.3
Bank of IrelandIreland3,6611.3
Halk BankTurkey3,2751.1
Avanza BankSweden3,2231.1
Garanti BankTurkey3,0331.0
AnimaItaly2,4950.8
HelvetiaSwitzerland1,7850.6
AzimutItaly1,5770.5
-------------------
54,65518.5
-------------------
CONSUMER GOODS
AdidasGermany8,4512.9
Anheuser-Busch InbevBelgium8,3202.8
HeinekenNetherlands5,8612.0
Pernod RicardFrance5,7702.0
PandoraDenmark5,7531.9
CarlsbergDenmark5,3241.8
Remy CointreauFrance4,9881.7
GlanbiaIreland2,9501.0
Steinhoff International HoldingsGermany2,5140.8
OntexBelgium2,1130.7
SEBFrance2,0710.7
-------------------
54,11518.3
-------------------
CONSUMER SERVICES
RELXNetherlands8,4752.9
AholdNetherlands6,7432.3
EliorFrance4,8071.6
TUIGermany3,7581.3
Paddy Power BetfairIreland3,6191.2
ProSiebenGermany2,9941.0
TelenetBelgium2,4200.8
-------------------
32,81611.1
-------------------
TECHNOLOGY
CapgeminiFrance7,2542.5
ASMLNetherlands6,2272.1
Mail.RuRussia5,1191.6
LuxoftUkraine4,0391.4
Scout24Germany2,8721.0
-------------------
25,5118.6
-------------------
HEALTH CARE
Fresenius Medical CareGermany6,1692.1
Lonza GroupSwitzerland6,0132.0
StraumannSwitzerland5,1431.7
William DemantDenmark4,9021.7
RocheSwitzerland2,9181.0
-------------------
25,1458.5
-------------------
BASIC MATERIALS
TenarisLuxembourg8,4852.9
BayerGermany8,0032.7
-------------------
16,4885.6
-------------------
TELECOMMUNICATIONS
KPNNetherlands7,7792.6
-------------------
7,7792.6
-------------------
TOTAL INVESTMENTS295,592100.0
==========

All investments are in ordinary shares unless otherwise stated. The total number of investments held at 31 August 2016 was 59 (31 August 2015: 53).
As at 31 August 2016, the Company did not hold any equity interests comprising more than 3% of any company's share capital.

INVESTMENT EXPOSURE

MARKET CAPITALISATION AS AT 31 AUGUST 2016

% of Portfolio% of Index
<€1bn1.10.1
€1bn to €10bn32.617.8
€10bn to €20bn22.716.1
€20bn to €50bn37.132.1
>€50bn6.533.8


Source: BlackRock

INVESTMENT SIZE AS AT 31 AUGUST 2016

Number of Investments% of Portfolio
<£1m00.0
£1m to £3m1310.5
£3m to £5m1824.7
£5m to £10m2864.8
>£10m00.0


Source: BlackRock

DISTRIBUTION OF INVESTMENTS AS AT 31 AUGUST 2016

CompanyIndex
%%
Industrials26.815.2
Financials18.520.6
Consumer Goods18.320.1
Consumer Services11.15.6
Technology8.64.6
Health Care8.513.5
Basic Materials5.68.2
Telecommunications2.63.9
Oil & Gas0.04.3
Utilities0.03.8


Source: BlackRock

INCOME STATEMENT FOR THE YEAR ENDED 31 AUGUST 2016

Notes2016
Revenue
£'000
2015
Revenue
£'000
2016
Capital
£'000
2015
Capital
£'000
2016
Total
£'000
2015
Total
£'000
Gains on investments held at fair value through profit or loss--38,02815,11238,02815,112
Exchange gains on foreign exchange--967710967710
Income from investments held at fair value through profit or loss36,3066,931--6,3066,931
Other income3162195--162195
------------------------------------------------
Total income6,4687,12638,99515,82245,46322,948
Investment management and performance fees4(462)(358)(1,850)(2,306)(2,312)(2,664)
Operating expenses5(544)(561)(36)(18)(580)(579)
------------------------------------------------
Total operating expenses(1,006)(919)(1,886)(2,324)(2,892)(3,243)
Net profit before finance costs and taxation5,4626,20737,10913,49842,57119,705
Finance costs(53)(17)(10)(34)(63)(51)
------------------------------------------------
Net profit on ordinary activities before taxation5,4096,19037,09913,46442,50819,654
Taxation credit/(charge)373(581)-(115)373(696)
------------------------------------------------
Net profit on ordinary activities after taxation75,7825,60937,09913,34942,88118,958
==============================
Earnings per ordinary share75.60p5.28p35.94p12.57p41.54p17.85p
==============================

The total column of this statement represents the profit or loss of the Company.

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

The net profit for the year disclosed above represents the Company's total comprehensive income.

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 AUGUST 2016

NoteCalled up
share
capital
£'000
Share
premium
account
£'000
Capital
redemption
reserve
£'000
Capital
reserves
£'000
Special
reserve
£'000
Revenue
reserve
£'000
Total
£'000
For the year ended 31 August 2016
At 31 August 201513061,899110178,96010,11510,245261,459
Total comprehensive income:
Profit for the year---37,099-5,78242,881
Transactions with owners, recorded directly to equity:
Exercise of subscription shares-1,315----1,315
Ordinary shares purchased into treasury----(5,582)-(5,582)
Subscription shares cancelled(20)-20----
Share purchase costs written back----22-22
Dividend paid (a)6-----(5,187)(5,187)
-----------------------------------------------------------
At 31 August 201611063,214130216,0594,55510,840294,908
-----------------------------------------------------------
For the year ended 31 August 2015
At 31 August 201413561,644105165,61121,6309,862258,987
Total comprehensive income:
Profit for the year---13,349-5,60918,958
Transactions with owners, recorded directly to equity:
Exercise of subscription shares-255----255
Ordinary shares purchased into treasury----(317)-(317)
Ordinary shares purchased and cancelled(5)-5-(11,043)-(11,043)
Share purchase costs----(155)-(155)
Dividend paid (b)6-----(5,226)(5,226)
-----------------------------------------------------------
At 31 August 201513061,899110178,96010,11510,245261,459
-----------------------------------------------------------

(a) Interim dividend paid in respect of the year ended 31 August 2016 of 1.65p per share was declared on 19 April 2016 and paid on 27 May 2016. Final dividend paid in respect of the year ended 31 August 2015 of 3.35p per share was declared on 22 October 2015 and paid on 18 December 2015.

(b) Interim dividend paid in respect of the year ended 31 August 2015 of 1.65p per share was declared on 23 April 2015 and paid on 29 May 2015. Final dividend paid in respect of the year ended 31 August 2014 of 3.20p per share was recommended on 21 October 2014 and paid on 12 December 2014.

BALANCE SHEET AS AT 31 AUGUST 2016

Notes2016
£'000
2015
£'000
Fixed assets
Investments held at fair value through profit or loss295,592260,507
----------------------
Current assets
Debtors1,8412,206
Cash and cash equivalents4322,420
----------------------
2,2734,626
----------------------
Creditors - amounts falling due within one year
Other creditors(2,957)(3,674)
----------------------
Net current (liabilities)/assets(684)952
----------------------
Net assets294,908261,459
============
Capital and reserves
Called-up share capital8110130
Share premium account63,21461,899
Capital redemption reserve130110
Capital reserves216,059178,960
Special reserve4,55510,115
Revenue reserve10,84010,245
----------------------
Total shareholders' funds294,908261,459
============
Net asset value per ordinary share - undiluted7287.43p250.66p
============
Net asset value per ordinary share - diluted7287.43p250.22p
============

STATEMENT OF CASH FLOWS FOR YEAR ENDED 31 AUGUST 2016

Note2016
£'000
2015
£'000
Operating activities
Net profit before taxation*42,50819,654
Interest expense6351
Gains on investments held at fair value through profit or loss(38,028)(15,112)
Net gains on foreign exchange(997)(38)
Sales of investments held at fair value through profit or loss191,634254,006
Purchases of investments held at fair value through profit or loss(188,018)(242,004)
(Increase)/decrease in debtors(100)86
(Decrease)/increase in creditors(761)1,156
Tax on investment income(858)(1,210)
Refund of withholding tax reclaim1,0241,183
----------------------
Net cash generated from operating activities6,46717,772
----------------------
Financing activities
Purchase of ordinary shares(5,582)(11,360)
Shares issue and share purchase costs refunded/(paid)65(124)
Proceeds from issue of subscription shares1,315255
Interest paid(63)(42)
Dividends paid6(5,187)(5,226)
----------------------
Net cash used in financing activities(9,452)(16,497)
----------------------
(Decrease)/increase in cash and cash equivalents(2,985)1,275
Cash and cash equivalents at the start of the year2,4201,107
Effect of foreign exchange rate changes99738
----------------------
Cash and cash equivalents at the end of the year4322,420
----------------------
Comprised of:
Cash at bank295
BlackRock's Institutional Cash Series plc - Euro Assets Liquidity Fund4302,325
----------------------
4322,420
============

* Dividends and interest received in the year amounted to £6,198,000 and £162,000 (2015: £7,012,000 and £238,000) respectively.

NOTES TO THE FINANCIAL STATEMENTS

1. PRINCIPAL ACTIVITY

The principal activity of the Company is that of an investment trust company within the meaning of section 1158 of the Corporation Tax Act 2010.

2. ACCOUNTING POLICIES

(a) Basis of preparation

This is the first year that the Company has presented its results and financial position under FRS 102, 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (FRS 102), which forms part of revised Generally Accepted Accounting Practice (New UK GAAP) issued by the Financial Reporting Council (FRC) in 2013. The last financial statements prepared under the previous UK GAAP were for the year ended 31 August 2015.

The financial statements have been prepared on a going concern basis in accordance with FRS 102 and the revised Statement of Recommended Practice - 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (SORP) issued by the Association of Investment Companies (AIC) in November 2014.

As a result of the first time adoption of New UK GAAP and the revised SORP, comparative amounts and presentation formats have been amended where required. The changes to accounting policies relate to the composition of cash and cash equivalents, change in the presentation of cash flows (see below) and fair value hierarchy of financial instruments (see note 16 of the Annual Report and Financial Statements). There were no adjustments to the Company's Income Statement for the financial year ended 31 August 2016 and the total equity as at 1 September 2014 and 31 August 2014 between UK GAAP as previously reported and FRS 102 as a result of changes to accounting policies.

The Company's Statement of Cash Flows reflects the presentation requirements of FRS 102, which are different to that prepared under previous UK GAAP. In addition, the Statement of Cash Flows reconciles to cash and cash equivalents, whereas under previous UK GAAP the Statement of Cash Flows reconciled to cash. Cash and cash equivalents are defined in FRS 102 as 'cash in hand and demand deposits, 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' whereas cash is defined in previous UK GAAP as 'cash in hand and deposits repayable on demand with any qualifying institution, less overdrafts from any qualifying institution repayable on demand'. The Company's investment in BlackRock's Institutional Cash Series plc - Euro Assets Liquidity Fund of £430,000 (2015: £2,325,000) is managed as part of the Company's cash management policy and, accordingly, this investment along with purchases and sales of this investment has been classified in the Balance Sheet and Statement of Cash Flows as cash and cash equivalents. The comparative figures in the Statement of Cash Flows have been restated.

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 currency of the primary economic environment in which the Company operates. All values are rounded to the nearest thousand pounds (£'000) except where otherwise stated.

(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 alongside 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. Fixed returns on non equity securities are recognised on an effective yield basis. Interest income is accounted for on an accruals basis.

Special dividends are treated as a capital receipt or revenue receipt depending on the facts or circumstances of each particular case.

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.

Where the Company has elected to receive its dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised in the capital column of the Income Statement.

(e) Expenses

All expenses are accounted for on an accruals basis. Expenses have been treated as revenue except as follows:

- expenses including finance costs which are incidental to the acquisition or disposal of an investment are charged to capital. Details of transaction costs on the purchases and sales of investments are disclosed in note 10, on page 50 of the Annual Report and Financial Statements;

- the investment management fee has been allocated 80% to the capital column and 20% to the revenue column 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) Finance costs

Finance costs are accounted for on an effective yield method and on an accruals basis. Finance costs are allocated, insofar as they relate to the financing of the Company's investments, 80% to the capital column and 20% to the revenue column 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.

(g) 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 period. 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.

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 tax 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.

Where expenses are allocated between capital and revenue any tax relief in respect of the expenses is allocated between capital and revenue returns on the marginal basis using the Company's effective rate of corporation taxation for the accounting period.

(h) 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 Section 11 and 12 of FRS 102 and are managed and evaluated on a fair value basis in accordance with its investment strategy.

All investments are designated 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 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.

Amendments to FRS 102 - Fair value hierarchy disclosures amends paragraphs 34.22 and 34.42 of FRS 102, revising the disclosure requirements for financial instruments held at fair value and aligning the disclosures with those required by EU-adopted IFRS. The Company has chosen to early adopt these amendments to FRS 102; however, there were no changes to the classification within the fair value hierarchy. There are no accounting policy or disclosure changes as a result of this adoption.

The fair value hierarchy consists of the following three levels:

Level 1 - Quoted prices for identical instruments in active markets

Level 2 - Valuation techniques using observable inputs

Level 3 - Valuation techniques using significant unobservable inputs

(i) Debtors

Debtors include sales for future settlement, other debtors and pre-payments 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. Debtors are recognised initially at fair value and, where applicable, subsequently measured at amortised cost using the effective interest rate method.

(j) Creditors

Creditors include purchases for future settlements, interest payable, share buyback 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. If not, they are presented as creditors - amounts falling due after more than one year. Creditors are recognised initially at fair value and, where applicable, subsequently measured at amortised cost using the effective interest rate method.

(k) 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.

(l) Cash and cash equivalents

Cash comprises cash in hand and 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.

(m) Foreign currency translation

All transactions in foreign currencies are translated into sterling at the rates of exchange ruling on the dates of such transactions. Foreign currency assets and liabilities at the balance sheet date are translated into sterling at the exchange rates ruling at that date. Exchange differences arising on the revaluation of investments held as fixed assets are included in capital reserves. Exchange differences arising on the translation of foreign currency assets and liabilities are taken to capital reserves.

3. INCOME

2016
£'000
2015
£'000
Investment income:
Overseas dividends6,3066,931
------------------
6,3066,931
------------------
Other income:
Bank interest-10
Interest on WHT reclaims162185
------------------
162195
------------------
Total6,4687,126
==========

Special dividends of £410,000 have been recognised in capital (2015: £182,000) and deducted from investment cost.

4. INVESTMENT MANAGEMENT AND PERFORMANCE FEES

2016
Revenue
£'000
2016
Capital
£'000
2016
Total
£'000
2015
Revenue
£'000
2015
Capital
£'000
2015
Total
£'000
Investment management fee4621,8502,3123581,4341,792
Performance fee----872872
----------------------------------------------
Total4621,8502,3123582,3062,664
========================

Effective from 1 September 2015, the investment management fee is levied quarterly, based on 0.85% per annum of net asset value on the last day of each month. Until 31 August 2015, the investment management fee was 0.70% per annum of the market capitalisation of the Company's ordinary shares on the last day of each month. The investment management fee is allocated 80% to capital reserves and 20% to the revenue reserve.

Effective from 1 September 2015, the Company no longer pays a performance fee (2015: £872,000). The performance fee accrued at 31 August 2015 was based on the outperformance of the Company's share price relative to the FTSE World Europe ex UK Index over a three year rolling period.

5. OPERATING EXPENSES

2016
£'000
2015
£'000
Taken to revenue:
Custody fees3026
Depositary fees3736
Audit fees2425
Registrar's fees8482
Directors' emoluments116118
Marketing fees4948
Other administration costs204226
--------------
544561
--------------
Taken to capital:
Transaction charges3618
--------------
580579
--------------
The Company's ongoing charges, calculated as a percentage of average shareholders' funds and using operating expenses, excluding performance fees, finance costs, and taxation were:1.07%0.89%
--------------
The Company's ongoing charges, calculated as a percentage of average shareholders' funds and using operating expenses, including performance fees but excluding finance costs, after relief for any taxation were:1.07%1.22%
==========

6. DIVIDENDS

Record datePayment date2016
£'000
2015
£'000
2014 Final dividend of 3.20p31 October 201412 December 2014-3,482
2015 Interim dividend of 1.65p1 May 201529 May 2015-1,744
2015 Final dividend of 3.35p6 November 201518 December 20153,494-
2016 Interim dividend of 1.65p29 April 201627 May 20161,693-
----------------
5,1875,226
========

The Directors have proposed a final dividend of 3.65p per share in respect of the year ended 31 August 2016. The dividend will be paid on 5 December 2016, subject to shareholders' approval on 30 November 2016, to shareholders on the Company's register on 4 November 2016. The proposed final dividend has not been included as a liability in these financial statements, as final dividends are only recognised in the financial statements when they have been approved by shareholders, or in the case of special dividends not recognised until they are paid.

The total dividends payable in respect of the year which form the basis of determining retained income for the purpose of section 1158 of the Corporation Tax Act 2010 and section 833 of the Companies Act 2006, and the amount proposed for the year ended 31 August 2016, meet the relevant requirements as set out in this legislation.

2016
£'000
2015
£'000
Dividends paid or proposed on equity shares
Interim paid of 1.65p (2015: 1.65p)1,6931,744
Final proposed of 3.65p* (2015: 3.35p)3,7233,494
---------------
5,4165,238
========

* Based on 102,003,113 ordinary shares (excluding treasury shares) in issue on 19 October 2016.

All dividends paid or payable are distributed from the Company's revenue profits.

7. EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE

Revenue and capital earnings per share are shown below and have been calculated using the following:

Undiluted20162015
Net revenue profit attributable to ordinary shareholders (£'000)5,7825,609
Net capital profit attributable to ordinary shareholders (£'000)37,09913,349
--------------------------------
Total profit attributable to ordinary shareholders (£'000)42,88118,958
--------------------------------
Total shareholders' funds (£'000)294,908261,459
--------------------------------
The weighted average number of ordinary shares in issue during the year on which the earnings per ordinary share was calculated was:103,222,155106,194,950
--------------------------------
The actual number of ordinary shares in issue at the end of the year on which the net asset value was calculated was:102,603,113104,309,663
--------------------------------
The number of ordinary shares in issue, including treasury shares, at the year end was:110,328,938109,798,561
==================

2016
Revenue
p
2016
Capital
p
2016
Total
p
2015
Revenue
p
2015
Capital
p
2015
Total
p
Earnings per share
Calculated on weighted average number of shares in issue during the year5.6035.9441.545.2812.5717.85
Calculated on actual number of shares in issue at the year end5.6436.1541.795.3812.8018.18
------------------
Net asset value per share287.43250.66
------------------
Ordinary share price272.00244.00
Subscription share price*n/a12.63
------------------

* Expired and cancelled on 1 June 2016.

20162015
Diluted
Net revenue profit attributable to ordinary shareholders (£'000)5,7825,609
Net capital profit attributable to ordinary shareholders (£'000)37,09913,349
--------------------------------
Total profit attributable to ordinary shareholders (£'000)42,88118,958
--------------------------------
Equity shareholders' funds* (£'000)294,908312,411
--------------------------------
The weighted average number of ordinary shares in issue during the year, on which the diluted return per ordinary share was calculated was:103,222,155106,194,950
--------------------------------
The actual number of ordinary shares and subscription shares, at the year end on which the fully diluted net asset value was calculated was:102,603,113124,854,841
==================

2016
Revenue
p
2016
Capital
p
2016
Total
p
2015
Revenue
p
2015
Capital
p
2015
Total
p
Earnings per share
Calculated on weighted average number of shares in issue during the year**5.6035.9441.545.2812.5717.85
------------------
Net asset value per share*287.43250.22
==========

* In accordance with the AIC SORP, to the extent that the Company's NAV is in excess of the exercise price, the subscription shares are considered to be dilutive for the calculation of the NAV per share. During the year ended 31 August 2016, 530,377 subscription shares were converted into ordinary shares and, following the final conversion in April 2016, the opportunity to subscribe for ordinary shares lapsed. As the subscription share price was greater than the prevailing share price, the outstanding subscription shares ceased to have any value and, as such, 20,014,801 subscription shares were cancelled. The diluted NAV per share at 31 August 2015 was calculated by adjusting equity shareholders' funds for consideration receivable on the exercise of 20,545,178 subscription shares, at the exercise price of 248 pence per share, and dividing by the total number of shares that would have been in issue at 31 August 2015 had all the subscription shares been exercised. As the Company's NAV was not in excess of the exercise price at 31 August 2015 no dilutive price was calculated for 2015.

** In accordance with FRS 102, there is no dilutive impact on the return per share for the year ended 31 August 2015 as the average mid-market price of the ordinary shares for the year of 239.20p was below the exercise price of the subscription shares of 248 pence per share.

8. SHARE CAPITAL

Ordinary
shares
number
Treasury
shares
number
Subscription
shares
number
Total
shares
£
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 0.1p each
At 31 August 2015104,309,6635,488,898-109,798,561109,798
Shares repurchased and held in treasury pursuant to tender offer(1,236,927)1,236,927---
Shares repurchased and held in treasury(1,000,000)1,000,000---
---------------------------------------------------------------------------
102,072,7367,725,825-109,798,561109,798
Subscription shares of 0.1p each
At 31 August 2015--20,545,17820,545,17820,545
Conversion of subscription shares into ordinary shares530,377-(530,377)--
Cancellation of subscription share rights--(20,014,801)(20,014,801)(20,015)
---------------------------------------------------------------------------
At 31 August 2016102,603,1137,725,825-110,328,938110,328
=========================================

During the year, 2,236,927 ordinary shares were repurchased and held in treasury (2015: 4,489,088 repurchased and cancelled and 131,977 held in treasury) for a total consideration, including expenses, of £5,560,000 (2015: £11,515,000). The number of ordinary shares in issue at the year end was 110,328,938 (2015: 109,798,561) of which 7,725,825 were held in treasury (2015: 5,488,898) and there were no subscription shares in issue (2015: 20,545,178). No treasury shares were cancelled during the year (2015: 72,755) and no shares issued from treasury in 2016 (2015: nil). As a result of the conversion of 530,377 subscription shares (2015: 102,670), 530,377 new ordinary shares were issued for a total consideration of £1,315,000 (2015: £255,000). Following the final conversion on 29 April 2016, the opportunity to subscribe for ordinary shares lapsed and the remaining 20,014,801 subscription shares which had not been exercised were cancelled.

9. TRANSACTIONS WITH MANAGER AND INVESTMENT MANAGER

BlackRock Fund Managers Limited (BFM) provides management and administration services to the Company under a contract which is terminable on six months' notice. BFM has (with the Company's consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Further details of the investment management contract are disclosed in the Directors' Report on pages 18 and 19 of the Annual Report and Financial Statements.

Effective from 1 September 2015, the investment management fee is levied quarterly, based on 0.85% per annum of net asset value on the last day of each month. Until 31 August 2015, the investment management fee was 0.70% per annum of the market capitalisation of the Company's ordinary shares on the last day of each month. The investment management fee due for the year ended 31 August 2016 amounted to £2,312,000 (2015: £1,792,000). At the year end, £1,190,000 was outstanding in respect of the management fee (2015: £927,000).

Effective from 1 September 2015, the Company no longer pays a performance fee. The performance fee payable at 31 August 2015 of £872,000 was based on the outperformance of the Company's share price relative to the FTSE World Europe ex UK Index over a three year rolling period. A performance fee of nil (2015: £872,000) was outstanding at the year end.

The Company held an investment in BlackRock's Institutional Cash Series plc - Euro Assets Liquidity Fund liquidity of £430,000 (2015: £2,325,000), a money market fund managed by BlackRock Group, which for the year ended 31 August 2016 has been presented in the financial statements as cash equivalents.

In addition to the above services, BlackRock provided the Company with marketing services. The total fees paid or payable for these services for the year ended 31 August 2016 amounted to £49,000 excluding VAT (2015: £48,000). Marketing fees of £45,000 excluding VAT were outstanding at 31 August 2016 (2015: £161,000).

10. 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 on pages 25 and 26 of the Annual Report and Financial Statements. At 31 August 2016, £9,000 (2015: £11,000) was outstanding in respect of Directors' fees.

11. CONTINGENT LIABILITIES

There were no contingent liabilities at 31 August 2016 (2015: nil).

12. 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 31 August 2016 will be filed with the Registrar of Companies after the Annual General Meeting.

The figures set out above have been reported upon by the auditor, whose report for the year ended 31 August 2016 contains no qualification or statement under section 498(2) or (3) of the Companies Act 2006.

The comparative figures are extracts from the audited financial statements of BlackRock Greater Europe Investment Trust plc for the year ended 31 August 2015, which have been filed with the Registrar of Companies. The report of the auditor on those financial statements contained no qualification or statement under section 498 of the Companies Act.

13. ANNUAL REPORT

Copies of the Annual Report will be published shortly and will be available from the registered office, c/o The Company Secretary, BlackRock Greater Europe Investment Trust plc, 12 Throgmorton Avenue, London EC2N 2DL.

14. ANNUAL GENERAL MEETING

The Annual General Meeting of the Company will be held at the offices of BlackRock, 12 Throgmorton Avenue, London EC2N 2DL on Wednesday, 30 November 2016 at 12.00 noon.

ENDS

The Annual Report will also be available on the BlackRock website at blackrock.co.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:

Simon White, Managing Director, Investment Trusts, BlackRock Investment Management (UK) Limited
Tel: 020 7743 5284

Vincent Devlin, Fund Manager, BlackRock Investment Management (UK) Limited
Tel: 020 7743 3000

Press enquiries:

Lucy Horne, Lansons Communications - Tel: 020 7294 3689
E-mail: lucyh@lansons.com

12 Throgmorton Avenue
London
EC2N 2DL
19October 2016


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