Annual Financial Report

BlackRock North American Income Trust plc Annual Results Announcement 31 October 2013 Investment Objective The Company's investment objective is to provide an attractive and growing level of income return with capital appreciation over the long term, predominantly through investment in a diversified portfolio of primarily large-cap U.S. equities. Summary Investment Policy The Company invests predominantly in a diversified portfolio of equity securities quoted in the U.S., with a focus on companies that pay and grow their dividends. The Company may invest through an active options overlay strategy utilising predominantly covered call options and may also hold other securities from time-to-time including, inter alia, convertible securities, fixed interest securities, preference shares, non-convertible preferred stock, and depositary receipts. Performance Record Financial Highlights 31 October Attributable to ordinary shareholders 2013 Net assets (£'000) 111,289 Net asset value per ordinary share 112.00p Ordinary share price (mid-market) - ex 4th interim dividend 112.50p Ordinary share price (mid-market) - cum 4th interim dividend1 113.50p Premium to cum income net asset value2 1.3% Performance for the period since launch to 31 October 2013 Net asset value per share (with income reinvested)3 +17.1% Russell 1000 Value Index +27.4% Share price (with income reinvested)2 +16.5% 1 the share price went ex-dividend for the 4th interim dividend of 1p per share on 9 October 2013; however, this interim dividend is not accounted for in the NAV at 31 October 2013 as a liability in accordance with IFRS. 2 based on cum dividend ordinary share price. 3 based on NAV at launch after launch costs of 1.75% of issue price of 100p. Source: BlackRock and Datastream Chairman's Statement This is the first Annual Report to shareholders of BlackRock North  American Income Trust plc for the period from the date of incorporation on 30 August 2012 to 31 October 2013. Overview Recovery from the punishing 2007-2009 recession remains slow and the global economic outlook has hardly changed with modest growth and low inflation. The growth backdrop favoured developed markets in contrast with mainstream emerging markets and, in the U.S., the economy appeared more resilient with solid corporate earnings, rising consumer confidence and a slow but steady strengthening in the housing market. However, there was still uncertainty following the brief government shutdown and congressional gridlock. Although a last minute deal in October averted a potential default on the national debt and ended the partial shutdown, there are still concerns about the lack of a long term plan and the potential for sequential crises. There is also fresh uncertainty about the timing of tapering by the Federal Reserve, coupled with the scheduled leadership change. The delay in tapering has led to a favourable environment for equities with solid corporate operating margins. Against this backdrop, I am able to report that for the period since launch on 24 October 2012, the Company's net asset value per share (after launch costs) returned 17.1% including reinvestment of dividends totalling 3.1%. During the same period, the share price returned 16.5%. Overall we maintained our focus on higher quality stocks. We note that short term performance has been disappointing due to the outperformance of lower quality stocks, but the Board continues to believe that owning strong businesses can provide the best defence against uncertainty and will provide the best returns over time. Since the period end, the Company's net asset value per share and the share price have remained unchanged. Earnings and dividends Revenue earnings per share for the period to 31 October 2013 amounted to 4.28p. As set out in the Company's Prospectus, it was the Company's intention to pay dividends amounting to at least 4.0p per share for the period ending 31 October 2013, details of which are set out in note 7 to the Financial Statements. I am pleased to report that we reached this target and paid quarterly dividends totalling 4.0p per share. It is the Directors' intention to pay dividends amounting to at least 4.0p per share for the year ending 31 October 2014. Our ability to match or exceed this target will depend on dividend distributions and option writing from our underlying portfolio and should not be interpreted as a profit forecast. The target level represents a yield of 3.6% based on the share price as at close of business on 31 October 2013. Share issues For the period to 31 October 2013, the Company's shares traded at an average premium of 2.4% to their NAV. In the light of continuing demand for the shares and having regard to the benefits of enlarging the Company, a general meeting was held on 8 February 2013 to seek further shareholder authority to issue new shares under a Placing Programme. In addition, as the authorities under the February Placing Programme were shortly expected to be substantially utilised, the Company published a prospectus in September 2013 to renew shareholder authority for a further Placing Programme which was approved at a general meeting held on 10 October 2013. The Directors also considered that the Company should raise additional capital through an issue of C shares, to meet immediate demand from potential investors, at the same time as renewal of the Company's Placing Programme in October. The Placing, Open Offer and Offer for Subscription of C shares resulted in applications for 15,500,000 C shares and the C shares converted into ordinary shares at a rate of 0.9047 ordinary shares for each C share. A total of 14,022,805 ordinary shares were issued as a result of the conversion and were admitted to trading on 23 October 2013. In addition, a further 20,338,500 shares have been issued at a premium to NAV pursuant to the share allotment authority granted to Directors on launch and the Placing Programmes in the period to 31 October 2013. Since the period end and up to the date of this report a further 400,000 shares have been issued. At launch the Company issued 65,000,000 shares and there are now 99,761,305 shares in issue. Tender offers In view of the fact that since launch the Company's shares have traded at either a premium to NAV or a very narrow discount, the Board announced on 14 May 2013 and 14 November 2013 that it had decided not to proceed with the tender offers in July 2013 and January 2014. A resolution for the renewal of the Company's semi-annual tender authorities will be put to shareholders at the forthcoming Annual General Meeting. Alternative Investment Fund Managers' Directive The Alternative Investment Fund Managers' Directive (the 'Directive') is a European Directive which seeks to reduce systemic risk by regulating alternative investment fund managers ('AIFMs'). AIFMs are responsible for managing investment products that fall within the category of Alternative Investment Funds ('AIFs') and investment trusts are included in this. The Directive was implemented on 22 July 2013 although the Financial Conduct Authority permits a transitional period of one year after that during which UK AIFMs must seek authorisation. The Board has taken, and will continue to take, independent advice on the consequences for the Company of the implementation of the Directive. It has decided in principle that BlackRock Fund Managers Limited will be appointed as its AIFM before the end of the transitional period on 22 July 2014. New reporting requirements There have been a number of revisions to reporting requirements for companies with accounting periods ending on or after 30  September 2013. These changes are intended to increase the quality and structure of reporting and include the introduction of a new Strategic Report which is intended to replace the Business Review section of the Directors' Report, providing insight into the Company's objectives, strategy and principal risks. The Strategic Report should also enable shareholders to assess how effective Directors have been in promoting the success of the Company during the course of the period under review. Other changes comprise additional Audit Committee reporting requirements on the external audit process, as set out on pages 31 to 33 of the Annual Report, and changes to the structure and voting requirements in respect of the Directors' Remuneration Report which are explained in more detail on pages 23 to 25 of the Annual Report. Annual General Meeting The Annual General Meeting of the Company will be held at BlackRock's offices at 12 Throgmorton Avenue, London EC2N 2DL on Thursday, 13 February 2014 at 12.00 noon. Details of the business of meeting are set out in the Notice of Meeting on pages 59 to 62 of the Annual Report. The Investment Manager will make a presentation to shareholders on the Company's performance and the outlook for the year ahead. Outlook The global growth outlook remains steady, driven by a gradual strengthening of business and consumer confidence in the U.S. There are also clear signs of stabilisation in Europe and marginal improvements in current account balances within emerging markets. U.S. fundamentals continue to be reasonable and third quarter earnings results have been ahead of expectations. Protracted fiscal negotiations could be a potential drag on growth in the U.S. On the other hand, there is much less risk of international shocks than there has been in the past. In this environment, the Investment Manager will continue to focus on higher quality stocks with a real competitive advantage and an emphasis on shareholder returns. Simon Miller 12 December 2013 Investment Manager's Report Market overview For the period ended 31 October 2013, U.S. large cap stocks, as represented by the S&P 500® Index, advanced 27.2% (in U.S. Dollar terms). U.S. equity markets were range-bound in the closing months of 2012, before rebounding strongly at the beginning of 2013 after the nation's 'fiscal cliff' had been averted. Signs of a steady improvement in the U.S. economy underpinned the rally. As economic data became more mixed, financial markets around the world were dominated by speculation on monetary policy decisions from global central banks, particularly the U.S. Federal Reserve (the 'Fed'). Equity markets broadly traded based on investor perception of when the Fed planned to taper its bond buying programme. In total, the Fed's dovish monetary policy and decision to delay tapering its $85 billion monthly bond buying programme proved beneficial for U.S. stocks. Companies have performed strongly enough to generate positive corporate earnings, while continued high unemployment and low inflation rates have reinforced the need for sustained U.S. Federal Reserve stimulus until a more robust economic recovery is underway. Combined with a declining risk of military involvement in Egypt and Syria, and the U.S. government reaching a temporary debt-ceiling resolution (albeit after a government shutdown and lengthy political brinkmanship), the result is an environment with few short term macroeconomic risks currently apparent. All of these factors have led to robust equity returns for the trailing one year, particularly in the months of September and October as investors have gained increasing clarity. Portfolio overview Although the portfolio provided good absolute returns over the period it nonetheless returned less than the benchmark index. On a sector basis, the largest positive contributor to Company performance for the period was the overweight position in industrials compared to the benchmark. Our overweight position in consumer discretionary shares also proved beneficial, as did our underweight exposure to the energy sector. Our choice of shares in the utility sector also contributed to relative performance for the period. The largest detractor from relative performance was our stock selection, and underweight stance in, the information technology sector. Stock selection and an underweight to financials also significantly detracted from relative returns, as did stock selection in consumer staples and consumer discretionary. Lastly, stock selection in industrials and a combination of stock selection and an overweight to materials also hurt relative returns. During the period we have increased our weighting to the financials sector by over 2.5%. We initiated new positions in Citigroup and regional banks such as SunTrust Banks and Fifth Third Bancorp. We also increased our exposure to the insurance industry by buying MetLife and adding to existing positions in Travelers Companies, Chubb Corporation and Prudential Financial. We remain positive about financials given the U.S. housing recovery and its positive impact on mortgage and loan growth. We view incremental clarity on government regulation and the sector's attractive valuations to be positive factors as well. Conversely, we have reduced our exposure to the utilities and telecommunication services sectors. Given investor demand for yield in a low interest rate environment, we have seen these sectors increasingly in demand relative to the rest of the equity market. Given what we believed were premium valuations, we sold out of utilities holdings such as Consolidated Edison, FirstEnergy, Southern Co., American Electric Power and PPL. Similarly, in telecoms we sold out of our positions in Vodafone Group and CenturyLink. The Company currently has a lower exposure to consumer staples, materials, industrials, consumer discretionary and telecommunications than the Russell 1000 Value Index and is also underweight the financials, health care, information technology, energy and the utilities sectors. Below is an overview of our top three active overweight and top three active underweight sectors. Consumer Staples - 6.2% overweight (12.2% of portfolio) We believe many consumer staples stocks have ample room for cost cutting, which may ultimately provide an opportunity for accelerating earnings growth and multiple expansion within the sector. As wealthier middle classes proliferate in developing economies, this sector should be a prime beneficiary. Materials - 4.1% overweight (7.0% of portfolio) We believe infrastructure development and spending will continue to be a critical part of the investment landscape, both domestically and abroad. Within the industry, scale matters. We prefer companies with assets in place that have competitive advantages and should be able to reap the benefits of high barriers to entry within the space. Industrials - 3.2% overweight (13.4% of portfolio) We believe, in many cases, operating leverage has yet to be fully exploited by growing volumes in an improving global economy. The sector contains a wide variety of industries, many of which are well positioned to thrive in a slower-growth world, but could also benefit from a future strengthening in the domestic housing market. Financials - 8.1% underweight (20.7% of portfolio) Given the stabilization of U.S. markets and improving corporate strength, we have been adding to insurance companies and higher-quality regional banks within the space, while reducing exposure to Canadian banks. Despite being the Company's largest underweight, the sector also remains the largest absolute weighting. We anticipate more dividend increases and continued upside as headwinds, regulatory or otherwise, fade in the coming years. Health Care - 3.9% underweight (9.1% of portfolio) The federal government is the largest consumer of health services across many underlying industries, which should elicit caution given budget deficits, cost overruns and general lack of fiscal direction. However, we are finding investment opportunities among the diversified pharmaceutical manufacturers and companies that should benefit from rising volumes given new legislation. Information Technology - 3.5% underweight (5.2% of portfolio) The sector's relatively low capital discipline, highly variable supply/demand characteristics and cyclicality are inherently unattractive for dividend investing. During the next few years, companies may exhibit increasingly stable characteristics with regard to cash flow and less income variability. Where applicable, we continue to look for exposure to big data, analytics and cloud computing, as these areas are likely to gain from incremental spending in the future. Positioning and outlook We continue to focus on identifying inherently attractive businesses to invest in for the long term. The Company remains positioned in higher-quality, cash rich, dividend growth companies with defensible competitive advantages and the ability to self-fund should markets become more volatile. We are overweight consumer staples, materials and industrials given our belief that these sectors are poised to benefit from a rebound in U.S. housing, global growth and persistent (albeit slowing) industrialisation in developing markets. As the potential for rate increases becomes a reality, we believe significant risk can be found in the lower-capitalised, fundamentally weaker, segment of the U.S. equity market, where the structural decline in businesses may have been masked by advances in stock prices in recent quarters. Although this segment of the market has recently performed well, we simply believe that this performance cannot last forever. We have positioned the portfolio to benefit from a shift in market leadership and will continue to emphasize growth of income, relative protection and long term total return as the core of our process. Overall, the portfolio remains well-insulated but ready to participate should markets continue to experience gains through the end of the year. Bob Shearer and Kathleen Anderson BlackRock Investment Management (UK) Limited 12 December 2013 Ten Largest Investments 31 October 2013 Wells Fargo - 3.2% (2013: 3.1%) is a U.S. diversified bank with over $1 trillion in assets. Wells Fargo boasts a strong and stable management team, led by CEO John Stumpf, who has been with the firm for nearly 30 years. The company is an industry leader in cross-selling financial products and services, which has built deep customer relationships and added to the bank's pricing and earnings power. JPMorgan Chase - 3.1% (2013: 3.2%) is a U.S. based diversified financial company with over $2 trillion in assets and operations in dozens of countries. JPMorgan's capital base remains one of the strongest in the industry and it provides a measure of safety and financial flexibility. Overall, we believe JPMorgan offers strong earnings power while also affording shareholders a dividend yield in the top-quartile of the S&P 500 Index. Chevron Corporation - 3.1% (2013: 3.3%) is the second largest integrated oil company in the U.S. with exploration, production and refining operations worldwide. Chevron has one of the strongest balance sheets and lowest debt to capital ratios among its peers, and currently generates a sector leading profitability of $23.88 per barrel of oil equivalent in 1H 2013. We believe the firm's success in deep-water exploration in recent years will be a significant driver of earnings growth moving forward. General Electric - 2.6% (2013: 2.4%) is a diversified industrials conglomerate with operations in technology infrastructure, energy infrastructure, home & business services and capital services. The firm's strong management team, depth and breadth of products and ability to secure pricing make it a desirable long term holding. General Electric has demonstrated a remarkable ability to change and evolve over time. Of the 12 companies Charles Dow chose to make up his original Dow Jones industrial average in 1896, GE is the only one still in the index. Comcast - 2.5% (2013: 2.3%) is the largest operator in the U.S. cable industry, currently reaching 53 million households. We are positive on the firm's purchase of NBC Universal, one of the world's leading media and entertainment companies. Comcast is now unique in the cable industry because they own the distribution network as well as some of their own programming (television channels). We believe this will help the firm offset rising cable costs better than some of its competitors. Pfizer - 2.5% (2013: 2.4%) is the world's largest pharmaceuticals company with annual sales of approximately $60 billion. Pfizer offers investors strong free cash flow, a history of generating high returns on invested capital and an attractive and consistent dividend yield. At this stage in the company's business cycle, we believe it will be important for recently launched products to be well-received in the market in order for pipeline momentum to continue. Home Depot - 2.4% (2013: 2.4%) is the world's largest home improvement retailer, with over 2,200 warehouse-format stores and more than 300,000 employees. The firm has been an immediate beneficiary of a recovering U.S. housing market and we continue to believe that upward earnings revisions are likely as the segment continues to garner strength. Home Depot remains committed to growing its dividend, raising its quarterly payout by 34% from 2012 to 2013. Verizon Communications - 2.1% (2013: 2.2%) is the largest provider of wire line and wireless communications in the United States, with 101 million retail customers. Verizon maintains strong industry positioning given its network coverage (95% of the U.S. population) and overall network quality. Verizon's sustainable dividend yield of 4%+ continues to make the stock an attractive long term investment in the portfolio. Exxon Mobil - 2.1% (2013: 2.2%) is an integrated oil and gas company based out of the United States. The firm is one of only a few U.S. companies to boast an AAA credit rating. Exxon's geographic footprint and diversified operations continue to make it an industry leader. Management remains committed to generating shareholder returns, paying almost $40 billion in dividends and repurchasing approximately $130 billion worth of stock over the last five years. Merck - 1.9% (2013: 2.0%) is a global pharmaceuticals company with over 83,000 employees worldwide. We believe Merck is through the worst of its patent cliff and that the firm is favourably positioned for long term growth. New drugs such as Januvia (for diabetes), Isentress (for HIV) and the Gardasil vaccine represent potential blockbusters. Additionally, we believe Merck's restructuring efforts should reduce costs and improve margins over the long term. All percentages reflect the value of the holding as a percentage of total investments. Percentages in brackets represent the value of the holding as at 30 April 2013. Together, the ten largest investments represent 25.5% of the Company's portfolio (30 April 2013: 25.6%). All data in U.S. dollar terms. Investments as at 31 October 2013 Country Sector Market % of Company value total £'000 portfolio Wells Fargo United Financials Ordinary 3,574 3.2 States Shares Options (6) JPMorgan Chase United Financials Ordinary 3,488 3.1 States Shares Options (1) Chevron United Oil & Gas Ordinary 3,468 3.1 States Shares Options (7) General Electric United Industrials Ordinary 2,935 2.6 States Shares Options (9) Comcast United Consumer Services Ordinary 2,809 2.5 States Shares Options (20) Pfizer United Health Care Ordinary 2,788 2.5 States Shares Options (23) Home Depot United Consumer Services Ordinary 2,694 2.4 States Shares Options (11) Verizon United Telecommunications Ordinary 2,397 2.1 Communications States Shares Options (14) Exxon Mobil United Oil & Gas Ordinary 2,303 2.1 States Shares Options (3) Merck United Health Care Ordinary 2,074 1.9 States Shares Options (3) Philip Morris United Consumer Goods Ordinary 2,043 1.8 International States Shares Options (4) Prudential Financial United Financials Ordinary 2,032 1.8 States Shares Options (5) Bristol-Myers Squibb United Health Care Ordinary 2,031 1.8 States Shares Options (32) Johnson & Johnson United Health Care Ordinary 1,949 1.7 States Shares Options (11) Raytheon United Industrials Ordinary 1,936 1.7 States Shares Options (23) BHP Billiton Australia Basic Materials Ordinary 1,913 1.7 Shares Options (9) United Technologies United Industrials Ordinary 1,881 1.7 States Shares Options (2) IBM United Technology Ordinary 1,808 1.6 States Shares Options (1) Du Pont United Basic Materials Ordinary 1,776 1.6 States Shares Options (6) Deere United Industrials Ordinary 1,763 1.6 States Shares Options (4) Microsoft United Technology Ordinary 1,718 1.5 States Shares Options (12) Total France Oil & Gas Ordinary 1,708 1.5 Shares Options (7) US Bancorp United Financials Ordinary 1,708 1.5 States Shares Options (1) Suntrust Banks United Financials Ordinary 1,651 1.5 States Shares Options (3) McDonald's United Consumer Services Ordinary 1,645 1.5 States Shares Options (2) American Express United Financials Ordinary 1,597 1.4 States Shares Options (19) Enbridge Canada Oil & Gas Ordinary 1,518 1.4 Shares Options (8) Procter & Gamble United Consumer Goods Ordinary 1,448 1.3 States Shares Options (7) AT&T United Telecommunications Ordinary 1,416 1.3 States Shares Options (7) Diageo United Consumer Goods Ordinary 1,406 1.3 Kingdom Shares Options (3) Travelers Companies United Financials Ordinary 1,400 1.3 States Shares Options (2) Northrop Grumman United Industrials Ordinary 1,374 1.2 States Shares Options (16) Coca-Cola United Consumer Goods Ordinary 1,366 1.2 States Shares Citigroup United Financials Ordinary 1,359 1.2 States Shares Honeywell United Industrials Ordinary 1,359 1.2 States Shares Options (7) Ace United Financials Ordinary 1,315 1.2 States Shares Options (4) United Parcel United Industrials Ordinary 1,290 1.1 Services States Shares Options (12) Unilever Netherlands Consumer Goods Ordinary 1,259 1.1 Shares Options (1) Fifth Third Bank United Financials Ordinary 1,216 1.1 States Shares Options (3) VF Corporation United Consumer Goods Ordinary 1,206 1.1 States Shares Options (5) Mondelez United Consumer Goods Ordinary 1,200 1.1 International States Shares Options (5) Occidental Petroleum United Oil & Gas Ordinary 1,180 1.1 States Shares Options (5) Toronto-Dominion Bank Canada Financials Ordinary 1,164 1.0 Shares Options (13) Dominion Resources United Utilities Ordinary 1,156 1.0 States Shares Options (2) NextEra Energy United Utilities Ordinary 1,151 1.0 States Shares Options (3) 3M Company United Industrials Ordinary 1,151 1.0 States Shares Options (5) Intel Corporation United Technology Ordinary 1,104 1.0 States Shares Options (4) Lorillard United Consumer Goods Ordinary 1,052 0.9 States Shares Options (13) Kimberly-Clark United Consumer Goods Ordinary 1,042 0.9 States Shares Options (13) Chubb United Financials Ordinary 1,020 0.9 States Shares Options (2) General Mills United Consumer Goods Ordinary 1,017 0.9 States Shares Options (5) Union Pacific United Industrials Ordinary 1,000 0.9 States Shares Options (9) Marathon Oil United Oil & Gas Ordinary 949 0.8 States Shares Options (4) Motorola United Technology Ordinary 912 0.8 States Shares Options (2) Marathon Petroleum United Oil & Gas Ordinary 910 0.8 States Shares Options (3) Praxair United Basic Materials Ordinary 832 0.7 States Shares Options (1) International Paper United Basic Materials Ordinary 822 0.7 Company States Shares Options 0 American Water Works United Utilities Ordinary 772 0.7 Association States Shares Options (4) Kinder Morgan United Oil & Gas Ordinary 768 0.7 (Delaware) States Shares Options (2) Meadwestvaco United Industrials Ordinary 725 0.6 States Shares Mattel United Consumer Goods Ordinary 718 0.6 States Shares Options (2) Public Service United Utilities Ordinary 707 0.6 Enterprise Group States Shares Options (2) Dow Chemical United Basic Materials Ordinary 681 0.6 States Shares Options (2) Schlumberger United Oil & Gas Ordinary 681 0.6 States Shares Options (3) WalMart United Consumer Services Ordinary 663 0.6 States Shares Options (1) Altria United Consumer Goods Ordinary 648 0.6 States Shares Options (5) ConocoPhillips United Oil & Gas Ordinary 644 0.6 States Shares Options (5) Walt Disney United Consumer Services Ordinary 627 0.6 States Shares Options (6) Johnson Controls United Consumer Goods Ordinary 616 0.5 States Shares Options (5) Sempra Energy United Utilities Ordinary 595 0.5 States Shares Options (4) Kraft Foods United Consumer Goods Ordinary 560 0.5 States Shares Options (3) Quest Diagnostics United Health Care Ordinary 534 0.5 States Shares Options (2) Spectra Energy United Utilities Ordinary 532 0.5 States Shares Options (1) Newmont Mining United Basic Materials Ordinary 524 0.5 States Shares AbbVie United Health Care Ordinary 513 0.5 States Shares Options (3) Weyerhaeuser United Financials Ordinary 507 0.5 States Shares Options (1) Metlife United Financials Ordinary 494 0.4 States Shares Options 0 Duke Energy United Utilities Ordinary 491 0.4 States Shares Options (1) Wisconsin Energy United Utilities Ordinary 470 0.4 States Shares Options (3) Northeast Utilities United Utilities Ordinary 470 0.4 States Shares Options (3) Edison International United Utilities Ordinary 467 0.4 States Shares Options (1) Rockwell Automation United Industrials Ordinary 441 0.4 States Shares Options (2) American Tower United Financials Ordinary 426 0.4 States Shares Options (2) Abbott Laboratories United Health Care Ordinary 385 0.3 States Shares Options (1) Phillips 66 United Oil & Gas Ordinary 379 0.3 States Shares Options (3) BCE Canada Telecommunications Ordinary 353 0.3 Shares Options (1) Automatic Data United Industrials Ordinary 343 0.3 Processing States Shares Options (1) Southern Copper Peru Basic Materials Ordinary 306 0.3 Shares ITC Holdings United Utilities Ordinary 302 0.3 States Shares Options (3) Royal Dutch Shell Netherlands Oil & Gas Ordinary 281 0.3 Shares Options 0 M&T Bank United Financials Ordinary 269 0.2 States Shares Options 0 Olin United Basic Materials Ordinary 254 0.2 States Shares Options (1) -------- -------- Portfolio 111,954 100.0 ======== ======== All investments are in ordinary shares unless otherwise stated. The number of holdings as at 31 October 2013 was 92. The total number of open options as at 31 October 2013 was 188. The negative valuations of £475,000 in respect of options held represent the notional cost of repurchasing the contracts at market prices as at 31 October 2013. Principal risks - Extract from the Strategic Report: The key risks faced by the Company are set out below. The Board regularly reviews and agrees policies for managing each risk, as summarised below. * Performance risk - The Board is responsible for deciding the investment strategy to fulfil the Company's objectives and for monitoring the performance of the Investment Manager. An inappropriate strategy may lead to underperformance against the benchmark index and the Company's peer group. To manage this risk the Investment Manager provides an explanation of significant stock selection decisions and the rationale for the composition of the investment portfolio. The Board monitors and mandates 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 Company's investment policy. The Board also receives and reviews regular reports showing an analysis of the Company's performance against the Russell 1000 Value Index and other similar indices. * Income/dividend risk - The amount of dividends and future dividend growth will depend on the Company's underlying portfolio. Any change in the tax treatment of the dividends or interest received by the Company (including as a result of withholding taxes or exchange controls imposed by jurisdictions in which the Company invests) may reduce the level of dividends received by shareholders. The Board monitors this risk through the receipt of detailed income forecasts and considers the level of income at each meeting. * Regulatory risk - The Company operates as an investment trust in accordance with the requirements of 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. The Investment Manager monitors investment movements, the level and type of forecast income and expenditure and the amount of proposed dividends, if any, to ensure that the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010 are not breached and the results are reported to the Board at each meeting. The Board and the Investment Manager also monitor changes in government policy and legislation which may have an impact on the Company. The Company must also comply with the provisions of the Companies Act 2006 and, as its shares are admitted to the Official List, the UKLA Listing Rules, the Disclosure and Transparency Rules and the Prospectus Rules. A breach of the Companies Act 2006 could result in the Company and/or the Directors being fined or the subject of criminal proceedings. A breach of the UKLA Listing Rules could result in the Company's shares being suspended from listing, which in turn would breach the requirements of Chapter 4 of Part 24 of the Corporation Tax Act 2010. The Board relies on the services of its professional advisers and its Company Secretary to ensure compliance with all relevant regulations. The Company Secretary has stringent compliance procedures in place and monitors regulatory developments and changes. * Operational risk - In common with most other investment trust companies, the Company has no employees. The Company therefore relies upon the services provided by third parties and is dependent on the control systems of the Investment Manager and the Company's other service providers. The security, for example, of the Company's assets, dealing procedures, accounting records and maintenance of regulatory and legal requirements, depend on the effective operation of these systems. These have been regularly tested and monitored and an internal controls report, which includes an assessment of risks together with procedures to mitigate such risks, is prepared by the Investment Manager and reviewed by the Audit and Management Engagement Committee at least twice a year. The Investment Manager, the custodian, Bank of New York Mellon (International) Limited ('BNYM'), and BNP Paribas Securities Services (the 'fund accountant') also produce regular Service Organisation Control reports (SOC 1) or AAF 01/06 reports which are reviewed by their reporting accountants and give assurance regarding the effective operation of controls. The Board also considers succession arrangements for key employees of the Investment Manager and the business continuity arrangements for the Company's key service providers. * Market 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 interest rates, rates of inflation, industry conditions, tax laws, political events and trends can also substantially and adversely affect the securities and, as a consequence, the Company's prospects and share price. The Board considers 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. * Financial risks - The Company's investment activities expose it to a variety of financial risks which include market risk, currency risk, interest rate risk, market price risk, liquidity risk and credit risk. Further details are disclosed in note 15 to the Financial Statements on pages 47 to 52 of the Annual Report, together with a summary of the policies for managing these risks. * Gearing risk - The Company has the power to borrow money (gearing) and does so when the Investment Manager is confident that market conditions and opportunities exist to enhance investment returns. However, if the investments fall in value, any borrowings will magnify the extent of this loss. All borrowings require the approval of the Board and gearing levels are discussed by the Board and Investment Manager. Related Party Transactions BlackRock Investment Management (UK) Limited, the Manager, is considered to be a related party of the Company in terms of the IFRS definitions. Transactions and relationship details are set out in the Director's Report of the Annual Report. The investment management fee for the period was £873,000 as disclosed in note 4. As at 31 October 2013, an amount of £482,000 was outstanding in respect of these fees. The Board consists of four non-executive Directors, all of whom are considered to be independent of the Manager by the Board. None of the Directors has a service contract with the Company. For the period ended 31 October 2013, the Chairman received an annual fee of £30,000, the Chairman of the Audit and Management Engagement Committee received an annual fee of £25,000 and each of the other Directors received an annual fee of £21,000. The fees for the year ending 31 October 2014 remain unchanged. As at 31 October 2013, an amount of £8,080 was payable to Directors in respect of their annual fees. All four members of the Board hold ordinary shares in the Company. Simon Miller holds 38,094 ordinary shares, Christopher Casey holds 19,047 ordinary shares, Andrew Irvine holds 38,094 ordinary shares and Alice Ryder holds 9,047 ordinary shares. Statement of Directors' Responsibilities The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable United Kingdom law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the financial statements under IFRS as adopted by the European Union. 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 and of the profit or loss of the Company for that period. In preparing these 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 IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors 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 the financial statements have been prepared in accordance with IFRS as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; * provide additional disclosures when compliance with the specific requirements in IFRS as adopted by the European Union is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company`s financial position and financial performance; 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, 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 Investment Manager for the maintenance and integrity of the Company's corporate and financial information included on the Investment Manager's 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, whose names are listed on page 13 of the Annual Report, confirm to the best of their knowledge that: * the financial statements, which have been prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and net return of the Company; and * the Annual Report 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 2012 UK Corporate Governance Code also requires Directors to ensure that the Annual Report and Accounts 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 Accounts 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 33 of the Annual Report. As a result, the Board has concluded that the Annual Report for the period ended 31 October 2013, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy. For and on behalf of the Board Simon Miller Chairman 12 December 2013 Statement of Comprehensive Income for the period from 30 August 2012 (date of incorporation) to 31 October 2013 Notes Revenue Capital Total 2013 2013 2013 £'000 £'000 £'000 Gains on investments held at fair value through profit or loss - 8,825 8,825 Gains on foreign exchange - 754 754 Income from investments held at fair value through profit or loss 3 2,600 - 2,600 Other income 3 1,868 - 1,868 -------- -------- -------- Total income 4,468 9,579 14,047 -------- -------- -------- Expenses Investment management fees 4 (218) (655) (873) Other operating expenses 5 (326) (15) (341) -------- -------- -------- Total operating expenses (544) (670) (1,214) -------- -------- -------- Net profit on ordinary activities before finance costs and taxation 3,924 8,909 12,833 Finance costs (4) (11) (15) -------- -------- -------- Net profit on ordinary activities before taxation 3,920 8,898 12,818 Taxation (666) 156 (510) -------- -------- -------- Net profit on ordinary activities after taxation 3,254 9,054 12,308 ======== ======== ======== Earnings per ordinary share 7 4.28p 11.91p 16.19p ======== ======== ======== The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union. 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. No operations were acquired or discontinued during the period. The Company does not have any other recognised gains or losses. The net profit for the period disclosed above represents the Company's total comprehensive income. Statement of Changes in Equity for the period from 30 August 2012 (date of incorporation) to 31 October 2013 Notes Called up Share Capital Special Capital Revenue Total share premium redemption reserve reserves reserve £'000 capital account reserve £'000 £'000 £'000 £'000 £'000 £'000 For the period ended 31 October 2013 Total Comprehensive Income: Net profit for the period - - - - 9,054 3,254 12,308 Transactions with owners, recorded directly to equity: Issue of management shares 8 50 - - - - - 50 Issue of ordinary shares 8 854 86,833 - - - - 87,687 Share issue costs 9 - (1,899) - - - - (1,899) Cancellation of share premium account 9 - (63,213) - 63,213 - - - Dividends paid 9 - - - - - (2,307) (2,307) Share issue - C shares 9 1,550 13,950 - - - - 15,500 Share conversion - C shares to ordinary shares 9 (1,410) - 1,410 - - - - Redemption and cancellation of management shares 9 (50) - 50 - (50) - (50) -------- -------- -------- -------- -------- -------- -------- At 31 October 2013 994 35,671 1,460 63,213 9,004 947 111,289 -------- -------- -------- -------- -------- -------- -------- Statement of Financial Position as at 31 October 2013 Notes 31 October 2013 £'000 Non current assets Investments held at fair value through profit or loss 112,429 -------- Current assets Other receivables 1,097 Cash and cash equivalents 227 -------- 1,324 Current liabilities Bank overdraft (555) Derivative financial instruments (475) Other payables (1,434) -------- Net current liabilities (1,140) -------- Net assets 111,289 ======== Equity attributable to equity holders Called up share capital 8 994 Share premium account 9 35,671 Capital redemption reserve 9 1,460 Special reserve 9 63,213 Capital reserves 10 9,004 Revenue reserve 10 947 -------- Total equity shareholders' funds 111,289 ======== Net asset value per ordinary share 7 112.00p ======== Cash Flow Statement for the period from 30 August 2012 (date of incorporation) to 31 October 2013 31 October 2013 £'000 Operating activities Profit before taxation 12,818 Add back interest paid 15 Less: gains on investments held at fair value through profit or loss (8,825) Net movement on foreign exchange (754) Sales of investments held at fair value through profit or loss 52,861 Purchases of investments held at fair value through profit or loss (155,990) Increase in other receivables (169) Increase in other payables 666 Increase in amounts due from brokers (228) Increase in amounts due to brokers 352 -------- Net cash outflow from operating activities before interest and taxation (99,254) -------- Interest paid (15) Taxation on investment income included within gross income (406) -------- Net cash outflow from operating activities (99,675) -------- Financing activities Dividends paid (2,307) Proceeds from issue of ordinary shares 102,509 Share issue costs paid (1,609) -------- Net cash inflow from financing activities 98,593 -------- Decrease in cash and cash equivalents (1,082) -------- Cash and cash equivalents at start of period - Effects of foreign exchange rate changes 754 -------- Cash and cash equivalents at end of period (328) -------- Comprised of: Cash and cash equivalents 227 Bank overdraft (555) -------- (328) ======== 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. The financial statements cover the period from the date of incorporation on 30 August 2012 to 31 October 2013. The Company's ordinary shares were listed on the Official List of the UK Listing Authority and admitted to trading on the main market for listed securities of the London Stock Exchange on 24 October 2012. As this is the Company's first accounting period, no comparative figures are presented. 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 in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU') and as applied in accordance with the provisions of the Companies Act 2006. All of the Company's operations are of a continuing nature. The Company's financial statements are presented in sterling because that is the currency of the Company's share capital, the currency of the country in which the majority of shareholders reside and the currency in which the shareholders' dividend distributions will be made. All values are rounded to the nearest thousand pounds (£'000) except where otherwise indicated. Insofar as the Statement of Recommended Practice ('SORP') for investment trust companies and venture capital trusts issued by the AIC, revised in January 2009, is compatible with IFRS, the financial statements have been prepared in accordance with the guidance set out in the SORP. A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2013, and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the measurement of the amounts recognised in the financial statements of the Company. However, IFRS 9 'Financial Instruments' issued in November 2009 is expected to change the classification of financial assets, but is not expected to have an impact on the measurement basis of the financial assets since the majority of the Company's financial assets are measured at fair value through profit or loss. IFRS 9 deals with classification and measurement of financial assets and its requirements represent a significant change from the existing requirements in IAS 39 in respect of financial assets. The standard contains two primary measurement categories for financial assets: at amortised cost and fair value. A financial asset would be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, and the asset's contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. All other financial assets would be measured at fair value. The standard eliminates the existing IAS 39 categories of 'held to maturity', 'available for sale' and 'loans and receivables'. The standard has not yet been approved by the EU. Earlier application is permitted. The Company does not plan to adopt this standard early. IFRS 10 Consolidated Financial Statements (effective 1 January 2014) establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled, and therefore are required to be consolidated by a parent. The Company does not prepare consolidated financial statements hence the provisions of this statement are not applicable. IFRS 11 Joint Arrangements (effective 1 January 2014) removes the option to account for jointly controlled entities using proportionate consolidation. This is not applicable to the Company as it holds no interests in joint arrangements. IFRS 12 Disclosure of Involvement with Other Entities (effective 1 January 2014) now requires additional disclosures that relate to an entity`s interests in subsidiaries, joint arrangements, associates and structured entities. This is not expected to apply to the Company as it does not prepare consolidated financial statements and does not invest in structured entities. IFRS 13 Fair Value measurement (effective 1 January 2013) establishes a single source of guidance under IFRS for all fair value measurements. It does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. There will be no material impact on the financial position and performance of the Company given the simplicity of the portfolio. (b) Presentation of the Statement of Comprehensive Income In order to reflect better the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and a capital nature has been presented alongside the Statement of Comprehensive Income. (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 recognised as revenue for the period on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the period end are treated as revenue for the period. Provision is made for any dividends not expected to be received. Special dividends, if any, are treated as a capital or a revenue receipt depending on the facts or circumstances of each particular case. The return on a debt security is recognised on a time apportionment basis so as to reflect the effective yield on the debt security. Interest income and expenses are accounted for on an accruals basis. Options may be purchased or written over securities held in the portfolio for generating or protecting capital returns, or for generating or maintaining revenue returns. Where the purpose of the option is the generation of income, the premium is treated as a revenue item. Where the purpose of the option is the maintenance of capital, the premium is treated as a capital item. The value of the option is subsequently marked to market to reflect the fair value of the option based on traded prices. Option premium income is recognised as revenue evenly over the life of the option contract and included in the revenue column of the Statement of Comprehensive Income unless the option has been written for the maintenance and enhancement of the Company's investment portfolio and represents an incidental part of a larger capital transaction, in which case any premia arising are allocated to the capital column of the Statement of Comprehensive Income. Where the premium is taken to revenue, an appropriate amount is shown as capital return such that the total return reflects the overall change in the fair value of the option. When an option is closed out or exercised the gain or loss is accounted for as capital. (e) Expenses All expenses, including finance costs, are accounted for on an accruals basis. Expenses have been charged wholly to the revenue column of the Statement of Comprehensive Income, except as follows: * expenses which are incidental to the acquisition of an investment are included within the cost of the investment. Details of transaction costs on the purchases and sales of investments are disclosed within note 9 of the Financial Statements in the Annual Report. * 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 fees and finance costs of borrowing borne by the Company have been allocated 75% to the capital column and 25% to the revenue column of the Statement of Comprehensive Income in line with the Board's expectations of the 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. Tax payable is based on the taxable profit for the year. Taxable profit differs from profit before tax as reported in the Statement of Comprehensive Income because it excludes items of income or expense 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 have been enacted or substantively enacted by the balance sheet date. Deferred taxation is recognised in respect of all temporary differences that have originated but not reversed at the financial reporting date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the financial reporting date. This is subject to deferred tax 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 temporary differences can be deducted. Deferred tax assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise. (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 IAS 39 - 'Financial Instruments: Recognition and Measurement' and are managed and evaluated on a fair value basis in accordance with its investment strategy. All investments are initially recognised as held at fair value through profit or loss. Purchases of investments are recognised on a trade date basis. Sales of investments are recognised on the trade date of the disposal. Proceeds are measured at fair value, which is regarded as the proceeds of sale less any transaction costs. The fair value of the financial investments is based on their quoted bid price, or as otherwise stated at the financial reporting date, without deduction for the estimated selling costs. This policy applies to all current and non current asset investments held by 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 Statement of Comprehensive Income as 'Gains or losses on investments held at fair value through profit or loss'. Also included within the heading are transaction costs in relation to the purchase or sale of investments. (h) Other receivables and other payables Other receivables and other payables do not carry any interest and are short term in nature and are accordingly stated at their nominal value. (i) Dividends payable Under IFRS interim dividends are recognised when paid to shareholders. Final dividends, if any, are only recognised after they have been approved by shareholders. (j) Foreign currency translation Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities are translated into sterling at the rate ruling on the financial reporting date. Foreign exchange differences arising on translation are recognised in the Statement of Comprehensive Income as a revenue or capital item depending on the income or expense to which they relate. (k) Cash and cash equivalents Cash comprises cash in hand and on demand deposits. Cash equivalents are 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) Bank borrowings Bank overdrafts are recorded as the proceeds received. Finance charges are accounted for on an accruals basis in the Statement of Comprehensive Income using the effective interest rate method and are added to the carrying amount of the instruments to the extent that they are not settled in the period in which they arise. 3. Income 2013 £'000 Investment income: UK listed dividends 42 Overseas listed dividends 2,558 -------- 2,600 Other income: Deposit interest on cash balances 2 Option premium income 1,866 -------- 1,868 -------- Total 4,468 ======== During the period, the Company received premiums totalling £2,017,000 for writing covered call options for the purposes of revenue generation, of which £ 1,866,000 was amortised to income. All derivative transactions were based on constituent stocks in the Russell 1000 Value Index. At 31 October 2013, there were 188 open positions with an associated liability of £475,000. 4. Investment management fee 2013 Revenue Capital Total £'000 £'000 £'000 Investment management fee 218 655 873 -------- -------- -------- Total 218 655 873 ======== ======== ======== The Company has entered into a management agreement with BlackRock Investment Management (UK) Limited ('BlackRock') under which BlackRock is entitled to an investment management fee, payable in arrears, calculated at the rate of one-quarter of 1 per cent per quarter of the Company's market capitalisation. 5. Other operating expenses 2013 £'000 Custody fee 22 Auditors' remuneration: - audit services 26 - non-audit services1 14 Registrar's fee 20 Directors' emoluments 86 Other administration costs 158 -------- 326 ======== The Company's ongoing charges, calculated as a percentage of average net assets and using expenses, excluding interest costs, was 1.4%. Fees for non-audit services of £6,000 (exclusive of VAT) relate to review of the interim financial statements. In addition, the auditor performed work in respect of the Company's C share issue for fees of £8,000 (exclusive of VAT). For the period from 30 August 2012 to 31 October 2013 a fee of £70,000 (exclusive of VAT) was paid to Ernst & Young LLP for services provided in relation to the launch of the Company and issues of ordinary shares. These have been included within share issue costs of £1,899,000 debited to the share premium account within the Statement of Changes in Equity. 6. Dividends The Directors have declared a fourth interim dividend of 1 pence per share. The dividend was paid on 4 December 2013, to shareholders on the Company's register on 11 October 2013. Under IFRS, the fourth interim dividend has not been recognised as a liability in the financial statements as interim dividends are not recognised in the financial statements until they are paid. They are also debited directly to revenue  reserves. The interim dividend payable in respect of the period ended 31 October 2013 meets the requirements of section 1158 of the Corporation Tax Act  2010 and section 833 of the Companies Act 2006. 2013 £'000 Dividends on equity shares: 1st interim dividend of 1 pence paid on 2 April 2013 (based on 70,050,000 ordinary shares) 701 2nd interim dividend of 1 pence paid on 2 July 2013 (based on 76,175,000 ordinary shares) 761 3rd interim dividend of 1 pence paid on 2 October 2013 (based on 84,488,500 ordinary shares) 845 -------- Accounted for in the financial statements 2,307 -------- 4th interim dividend of 1 pence paid on 4 December 2013 (based on 84,488,500 ordinary shares) 845 -------- Total dividends in respect of the period ended 31 October 2013 3,152 ======== 7. Earnings and net asset value per ordinary share 2013 Net revenue profit attributable to ordinary shareholders (£'000) 3,254 Net capital profit attributable to ordinary shareholders (£'000) 9,054 -------- Total profit attributable to ordinary shareholders (£'000) 12,308 -------- Total equity attributable to shareholders (£'000) 111,289 -------- The weighted average number of ordinary shares in issue during the period, on which the earnings per ordinary share was calculated, was: 76,004,895 -------- The actual number of ordinary shares in issue at the end of the period, on which the net asset value was calculated, was: 99,361,305 -------- Revenue earnings per share 4.28p Capital earnings per share 11.91p -------- Total earnings per share 16.19p -------- Net asset value per share - basic and diluted 112.00p -------- Share price - ex-dividend 112.50p ======== Basic and diluted earnings per share and net asset value per share are the same as the Company does not have any dilutive securities outstanding. 8. Called up share capital Total number Total number Nominal of shares of C shares value in issue in issue £'000 Allotted, called up and fully paid share capital comprised: Ordinary shares of 1 pence each and C shares of 10 pence Allotted, issued and fully paid: Issue of ordinary shares at launch 65,000,000 - 650 C Shares issued - 15,500,000 1,550 Conversion of C shares to ordinary shares 14,022,805 (15,500,000) (1,410) Further issues of ordinary shares 20,338,500 - 204 -------- -------- -------- Shares issued 99,361,305 - 994 Management shares of £1 each: Allotted, issued and fully paid: Issue of management shares 50,000 - 50 Redemption and cancellation of management shares (50,000) - (50) -------- -------- -------- At 31 October 2013 99,361,305 - 994 ======== ======== ======== On incorporation the Company issued 50,000 management shares which were redeemed and cancelled on 18 October 2012. On 24 October 2012 the Company issued 65,000,000 ordinary shares at 100p per share. The total consideration after deduction of issue costs was £63,863,000. During the period to 31 October 2013, the Company issued a further 34,361,305 shares for a total consideration of £37,425,000 after deduction of issue costs, including the conversion of the Company's C shares into 14,022,805 ordinary shares. Since 31  October 2013, and up to the date of this report, the Company has issued 400,000 ordinary shares for a total consideration of £454,000 after deduction of issue costs. On 11 October 2013 the Company issued 15,500,000 C shares with a nominal value of 10 pence each. On 18 October 2013 the C shares were converted into ordinary shares. The conversion ratio of 0.9047 was calculated by reference to the total assets of the Company and the net assets attributable to C share holders at the close of business on 17 October 2013. 9. Share premium account and special reserve Share Capital Special premium redemption reserve account reserve £'000 £'000 £'000 Issue of ordinary shares 86,833 - - Share issue costs (1,899) - - Issue of C shares 13,950 - - Conversion of C shares to ordinary shares - 1,410 - Cancellation of share premium account (63,213) - 63,213 Redemption and cancellation of management shares - 50 - -------- -------- -------- At 31 October 2013 35,671 1,460 63,213 ======== ======== ======== Pursuant to a resolution of the Company passed on 7 September 2012, the Company applied to the Court for cancellation of its share premium account, so that the amount standing to the credit of that account immediately following the issue of ordinary shares pursuant to the offer, be cancelled. Court approval was received on 12 December 2012, the order was filed with the Registrar of Companies on 19 December 2012 and £63,213,000 was transferred from the share premium account to a special reserve which is a distributable reserve. 10. Reserves Capital Capital Revenue reserve reserve reserve arising on arising on £'000 investments revaluation of sold investments £'000 held £'000 Total Comprehensive Income: Gains on realisation of investments 2,279 - - Cancellation of management shares (50) - - Changes in investment holdings gains - 6,546 - Gains on foreign currency transactions 754 - - Finance costs and investment management fee charged to capital after taxation (525) - - Revenue return for the period - - 3,254 Dividends paid - - (2,307) -------- -------- -------- At 31 October 2013 2,458 6,546 947 ======== ======== ======== 11. Transactions with Investment Manager BlackRock Investment Management (UK) Limited, the Investment Manager, is considered to be a related party of the Company under the UK Listing Rules definitions. Transactions and relationship details are set out in the Directors' Report on page 18 of the Annual Report. The investment management fee for the period was £873,000, as discussed in note 4. At 31 October 2013, an amount of £482,000 was outstanding in respect of these fees. 12. Related party disclosure The Board consists of four non-executive Directors, all of whom are considered to be independent of the Investment Manager by the Board. None of the Directors has a service contract with the Company. Effective from 24 October 2012, the Chairman receives an annual fee of £30,000, the Chairman of the Audit and Management Engagement Committee receives an annual fee of £25,000 and the other Directors receive an annual fee of £21,000. As at 31 October 2013, an amount of £8,080 was payable to Directors in respect of their annual fees. At 31 October 2013, the Directors' interests in the Company's ordinary shares were as follows: 31 October 2013 Ordinary shares Simon Miller (Chairman) 38,094 Christopher Casey 19,047 Andrew Irvine 38,094 Alice Ryder 9,047 13. 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 2013 Annual Report and Financial Statements will be filed with the Registrar of Companies shortly. The report of the auditor for the period ended 31 October 2013 contains no qualification or statement under section 498(2) or (3) of the Companies Act 2006. This announcement was approved by the Board of Directors on 12 December 2013. 14. Annual Report Copies of the Annual Report will be sent to members shortly and will be available from the registered office c/o The Company Secretary, BlackRock North American Income Trust plc, 12 Throgmorton Avenue, London, EC2N 2DL. 15. Annual General Meeting The Annual General Meeting of the Company will be held at 12 Throgmorton Avenue, London, EC2N 2DL on Thursday 13 February 2014 at 12.00 noon. ENDS The Annual Report will also be available on the BlackRock Investment Management website at http://www.blackrock.co.uk/intermediaries/literature/annual-report/ blackrock-north-american-income-trust-plc-annual-report-2013.pdf. Neither the contents of the Investment Manager's website nor the contents of any website accessible from hyperlinks on the Investment Manager's website (or any other website) is incorporated into, or forms part of, this announcement. For further information, please contact: Jonathan Ruck Keene, Chairman, Specialist Client Group, BlackRock Investment Management (UK) Limited Tel: 020 7743 2178 Alexandra Ring, Media Relations, BlackRock Investment Management (UK) Limited Tel: 020 7743 3583 12 December 2013 12 Throgmorton Avenue London EC2N 2DL

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