Annual Financial Report

 --------Performance record

Attributable to ordinary shareholders	31 October  2016	31 October  2015
Net assets (£’000)¹	109,479	98,046
Net asset value per ordinary share	158.78p	122.50p
Ordinary share price (mid-market)	155.75p	113.00p
Discount to cum income net asset value	1.9%	7.8%
Performance
Net asset value per share (total return)	+34.2%	+4.9%
Russell 1000 Value Index (total return)	+34.6%	+4.1%
Share price (total return)	+43.0%	+4.7%

1. The change in net assets reflects market movements and share buybacks during the year.

	Year ended  31 October  2016	Year ended  31 October  2015	Change  %
Revenue
Net revenue after taxation (£’000)	3,730	3,883	-3.9
Revenue return per ordinary share	5.17p	4.54p	+13.9
Interim dividends
1st interim	1.10p	1.00p	+10.0
2nd interim	1.20p	1.10p	+9.1
3rd interim	1.20p	1.10p	+9.1
4th interim	1.20p	1.10p	+9.1
	--------	--------	--------
Total dividends paid	4.70p	4.30p	+9.3
	=====	=====	=====

Chairman’s statement

Performance

Over the twelve months to 31 October 2016, the Company’s net asset value per share (NAV) increased by 34.2%* compared with a rise of 34.6%* in the Russell 1000 Value Index. The share price rose by 43.0%*. Further information is set out in the Investment Manager’s Report. At the close of business on 14 December 2016, the Company’s NAV had increased by 4.9%.

Market overview

U.S. labour market statistics continued to show resilience, with a combination of healthy employment and real earnings growth. Concerns over China have also receded in recent months as the government supported further growth in credit. This has in turn boosted the price of many commodities. In addition, the agreement of the Organisation of Petroleum Exporting Countries to production cuts has also led to a rally in the oil price and oil related shares. The impact of the U.K.’s Brexit referendum was less than initially feared and, following a significant market sell-off, markets rebounded.

Earnings and dividends

The Company’s revenue earnings per share for the year amounted to 5.17p (2015: 4.54p), an increase of 13.9%. The first quarterly dividend of 1.10p per share was paid on 4 April 2016 and two further dividends of 1.20p per share were paid on 1 July 2016 and 7 October 2016. A fourth interim dividend of 1.20p per share has been declared and will be paid on 5 January 2017. The substantial fall in sterling against the U.S. dollar since the Brexit referendum has boosted the Company’s income.

It is the Directors’ intention to pay dividends of at least 1.20p per share each quarter for the year ending 31 October 2017. The ability to match or exceed this target will depend on portfolio dividend distributions, currency movements, and option writing from the underlying portfolio. This should not be interpreted as a profit forecast.

Discount control

The Directors recognise the importance to shareholders that the market price of the Company’s shares in the stock market should not trade at a significant discount to the underlying NAV. Therefore, the Board has concluded that the Company’s share buy back and share issuance powers will, in normal market conditions, be used to ensure that the share price does not trade at a significant discount to the underlying NAV per share.

During the year and up to the date of this report, the Company has repurchased 11,090,000 ordinary shares in the market. These shares have been placed in treasury to be subsequently reissued to satisfy market demand. Shares will only be reissued at a premium to the estimated NAV at the time of issue.

The Directors have the authority from shareholders to reissue up to 10% of the Company’s issued ordinary share capital and to buy back up to 14.99% of the Company’s issued ordinary share capital. The authorities to reissue and buy back shares expire at the conclusion of the 2017 Annual General Meeting and resolutions will be put to shareholders to renew them.

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 Tuesday, 21 February 2017 at 12.00 noon. Details of the business of the meeting are set out in the Notice of Meeting on pages 69 to 72 the Annual Report. 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 63 of the Annual Report.

Outlook

Markets are still digesting the long term implications of the victory of Donald Trump in the U.S. presidential election. Bond markets have already reacted in a way which suggests that investors are now expecting higher inflation. Unpicking how much of the pre-election rhetoric will be translated into actionable government policy is difficult to discern with any accuracy at this stage. It seems likely that growth in global trade will be hampered by a reluctance to sign new trade partnerships, although given the integration of supply chains it will be difficult to unscramble existing trade agreements. On the face of it, proposed tax cuts and infrastructure spending are likely to see growth prospects improve but also government finances deteriorate in the short term. Given the strong labour market it also seems likely that the Federal Reserve will continue to increase interest rates during the course of next year.

The recent increase in the oil price augurs well for the U.S. oil industry and associated investments. Our Portfolio Managers will continue to position the portfolio to focus on attractively-priced, quality dividend growth stocks with sound balance sheets which should be particularly well positioned for today’s environment. Dividend growth, rather than the prevailing level of interest rates, will be the more important driver of long term returns.

SIMON MILLER
15 December 2016

*All percentages calculated in sterling terms with income reinvested.

Strategic report

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

Principal activity

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

Objective and investment policy

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 with a focus on companies that pay and grow their dividends. The Company invests 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. The Company may also invest in listed large-cap equities quoted on exchanges outside the U.S., subject to the restrictions set out below, and in securities denominated in U.S. dollars and non-U.S. dollar currencies.

Strategy

In order to achieve the Company’s investment objective, the Manager adopts a stock specific approach in managing the Company’s portfolio, selecting investments that it believes will both increase in value over the long term and provide income. The Company does not invest in companies which are not listed, quoted or traded at the time of investment, although it may have exposure to such companies where, following investment, the relevant securities cease to be listed, quoted or traded. Typically, it is expected that the investment portfolio will comprise of between 80 and 120 securities (excluding its active options overlay strategy).

Business model and investment policy

The Company may invest through derivatives for efficient portfolio management and may, for investment purposes, employ an active options overlay strategy utilising predominantly covered call options. Any use of derivatives for efficient portfolio management and options for investment purposes is made on the basis of the same principles of risk spreading and diversification that apply to the Company’s direct investments. For the avoidance of doubt, the Company does not enter into physical or synthetic short positions or write any uncovered options.

Portfolio risk is mitigated by investing in a diversified spread of investments. In particular, the Company observes the following investment restrictions: no single investment (including for the avoidance of doubt, any single derivative instrument) will, at the time of investment, account for more than 10% of the gross assets; no more than 20% of the gross assets, at the time of investment, will be invested in securities issued outside of the U.S.; no more than 35% of the gross assets, at the time of investment, will be exposed to any one sector; and no more than 20% of the Company’s portfolio will be under option at any given time.

The Company’s foreign currency investments are not hedged to sterling as a matter of general policy. However, the investment team may employ currency hedging, either back to sterling or between currencies (i.e. cross-hedging of portfolio investments).

In order to comply with the current Listing Rules, the Company also complies with the following investment restrictions (which do not form part of the Company’s investment policy): the Company will not conduct any trading activity which is significant in the context of its group as a whole; the Company will not invest more than 10% of its gross assets in other listed closed-ended investment funds, whether managed by the Manager or not, except that this restriction shall not apply to investments in listed closed-ended investment funds which themselves have stated investment policies to invest no more than 15% of their gross assets in other listed closed-ended investment funds; and the Company will not invest more than 15% of its gross assets in other listed closed-ended investment funds, notwithstanding whether or not such funds have stated policies to invest no more than 15% of their gross assets in other closed-ended investment funds.

The Company may borrow up to 20% of its net assets (calculated at the time of draw down), although the Board intends only to utilise borrowings representing up to 10% of net assets at the time of draw down. Borrowings may be used for investment purposes. The Company has entered into a multi-currency overdraft facility with its custodian for this purpose. The Company may enter into interest rate hedging arrangements.

Information regarding the Company’s investment exposures is contained within the schedule of investments. Further information regarding investment risk and activity throughout the year can be found in the Investment Manager’s Report.

No material change will be made to the investment policy without the approval of shareholders by ordinary resolution.

Performance

Over the year ended 31 October 2016, the Company’s net asset value returned +34.2% compared with a return of +34.6% in the Russell 1000 Value Index. The ordinary share price returned +43.0% (all percentages are 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 Statement of Comprehensive Income. The total return for the year, after taxation, was £27,701,000 (2015: £5,671,000) of which the revenue return amounted to £3,730,000 (2015: £3,883,000) and the capital return amounted to £23,971,000 (2015: £1,788,000).

The Company pays dividends quarterly. One quarterly interim dividend of 1.10p per share was paid on 4 April 2016, two quarterly dividends of 1.20p per share were paid on 1 July 2016 and 7 October 2016 and a further dividend of 1.20p per share will be paid on 5 January 2017. Total dividends of 4.30p per share were paid in the year to 31 October 2015.

Key performance indicators

The Directors consider a number of performance measures to assess the Company’s success in achieving its objectives. The key performance indicators (KPIs) used to measure the progress and performance of the Company over time and which are comparable to those reported by other investment trusts are set out below.

	Year ended  31 October  2016	Year ended  31 October  2015
Net asset value per share	158.78p	122.50p
Share price	155.75p	113.00p
Benchmark index(1)	34.6%	4.1%
Dividends per share	4.70p	4.30p
Discount to cum income net asset value	1.9%	7.8%
Ongoing charges(2)	1.04%	1.24%

1. Russell 1000 Value Index.

2. Ongoing charges represent the management fee and all other operating expenses excluding interest as a % of average shareholders’ funds.

The ongoing charges ratio has decreased in the year due to a lower management fee rate.

Performance is assessed on a total return basis for the NAV, share price and the benchmark.

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 performance of the Company against its peer group of investment trusts with similar investment objectives.

Share rating

The Directors recognise the importance to investors that shares should not trade at a significant discount to their prevailing net asset value. Accordingly, the Board has concluded that the Company’s share buy back and share issuance powers will, in normal market conditions, be used to ensure that the share price does not trade at a significant discount to the underlying net asset value per share. In the year under review, the Company’s shares have traded at a discount in the range of 0.7% to 12.7% on a cum income basis and were trading at a discount of 1.9% as at close of business on 14 December 2016.

Principal risks

The key risks faced by the Company are set out on the following pages. 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 the controls operating to mitigate it. A residual risk rating is then calculated for each risk based on the outcome of this assessment. This approach allows the effect of any mitigating procedures to be reflected in the final assessment.

The risk register and the operation of the 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 reviews internal 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 principal risks and uncertainties faced by the Company during the year, together with the potential effects, controls and mitigating factors, are set out in the table below.

Principal Risk	Mitigation/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 now 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 and maintains 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 Russell 1000 Value 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, the UK Listing Rules, Disclosure and Transparency Rules and the Market Abuse Regulation.	The Investment Manager monitors investment movements, the level of forecast income and expenditure and the amount of proposed dividends to ensure that the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010 are not breached. The results are reported to the Board at each meeting. Compliance with the accounting rules affecting investment trusts are also carefully and regularly monitored. The Company Secretary, Manager and the Company’s professional advisers provide regular reports to the Board in respect of compliance with all applicable rules and regulations. The Board and 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 U.K. leaving the EU and the results of the recent U.S. presidential election, 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, 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. Third party service providers produce internal control 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 assets, the Depositary must return assets of an identical type or the corresponding amount, unless able to demonstrate the loss was a result of an event beyond its reasonable control. The Board reviews the overall performance of the Manager, Investment Manager and all other third party service providers on a regular basis and compliance with the Investment Management Agreement annually. The Board also considers the business continuity arrangements of the Company’s key service providers.
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 14 on pages 52 to 60 of the Annual Report, 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 2014 UK Corporate Governance Code, the Directors have assessed the prospects of the Company for a period of three years. In its assessment of the viability of the Company the Directors have noted that:

• the Company invests in highly liquid, large listed companies so its assets are readily realisable;
• the Company is not exposed to any one investment or sector because it sets parameters for its investments;
• 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 Company will undertake a continuation vote at the Annual General Meeting in 2019 and the Board has reviewed the potential impact that this may have on the Company’s viability. The Board is confident that the continuation vote will be passed and has prepared the viability statement under this assumption.

The Directors have also reviewed:

• the Company’s principal risks and uncertainties as set out above;
• the impact of a significant fall in U.S. equity markets on the value of the Company’s investment portfolio;
• the ongoing relevance of the Company’s investment objective, business model and investment policy in the current environment; and
• the level of demand for the Company’s shares.

The Directors have also considered the Company’s revenue and expense forecasts and the fact that expenses and liabilities are relatively stable. 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 and 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 the results of this analysis the Directors have concluded that there is a reasonable expectation that the Company will continue in operation and be able to meet its liabilities as they fall due over the period of their assessment.

Future prospects

The Board’s main focus is to provide an attractive and growing level of income return with capital appreciation over the long term and the future of the Company is dependent upon the success of the investment strategy. The outlook for the Company is discussed in both the Chairman’s Statement and in the Investment Manager’s Report.

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 page 31 of the Annual Report.

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 October 2016, all of whom held office throughout the year, are set out in the Governance Structure and Directors’ biographies on page 20 of the Annual Report. The Board consists of three male Directors and one female Director. The Company does not have any employees; therefore there are no disclosures to be made in that respect.

The information set out on pages 10 to 19 of the Annual Report forms part of this Strategic Report. The Strategic Report was approved by the Board at its meeting on 15 December 2016.

By order of the Board
BlackRock Investment Management (UK) Limited
Company Secretary
15 December 2016

Transactions with the Manager and Related Party Transactions

BlackRock Fund Managers Limited (BFM) was appointed as the Company’s AIFM with effect from 2 July 2014. BIM has (with the Company’s consent) delegated certain portfolio and risk 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 21 and 22 of the Annual Report.

The investment management fee due for the year ended 31 October 2016 amounted to £747,000 (2015: £977,000). At the year end, £400,000 was outstanding in respect of the management fee (2015: £448,000).

In addition to the above services, BlackRock has provided the Company with marketing services. The total fees paid or payable for these services for the year ended 31 October 2016 amounted to £35,000 excluding VAT (2015: £92,000) before write back of prior year marketing expenses of £59,000 (2015: £64,000). An amount of £20,000 (2015: £105,000) was outstanding at 31 October 2016.

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. For the year ended 31 October 2016, the Chairman received an annual fee of £30,000, the Chairman of the Audit & Management Engagement Committee received an annual fee of £25,000 and each of the other Directors received an annual fee of £21,000. With effect from 1 November 2016, the remuneration of the Chairman was increased to £36,000, the Chairman of the Audit and Management Engagement Committee to £30,000 and for the other Directors to £25,000.

The related party transactions with Directors are set out in the Directors’ Remuneration Report on pages 27 and 28 of the Annual Report. At 31 October 2016, £8,000 (2015: £8,000) was outstanding in respect of Directors’ fees.

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

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected 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 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 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 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, whose names are listed on page 20 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 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 fulfil 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 33 to 35 of the Annual Report. As a result, the Board has concluded that the Annual Report and Financial Statements for the year ended 31 October 2016, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s position, performance, business model and strategy.

For and on behalf of the Board

SIMON MILLER
Chairman
15 December 2016

Investment manager’s report

Market overview

For the year ended 31 October 2016, U.S. large cap stocks, as represented by the S&P 500 Index, advanced by 4.5% (in U.S. dollar terms). The final two months of 2015 served as a transition point for equity markets as well as U.S. Federal Reserve (‘the Fed’) monetary policy. Performance was relatively muted during the period as better than expected U.S. payroll and economic data were offset by fears of slowing Chinese growth, the impact of lower crude oil prices, and uncertainty related to the Paris terror attacks. Notably, the Fed raised U.S. interest rates at the end of 2015 for the first time since 2006, and cited potential future rate hikes as being gradual and data dependent.

Equity market volatility spiked during the first six weeks of 2016 as headlines were dominated by slowing global growth fears and geopolitical events, which were offset by dovish Fed comments and worldwide central bank easing. The S&P 500 Index experienced a -10.3% drawdown, in U.S. dollar terms, before rebounding sharply higher as the commodities complex rallied and global growth fears abated. U.S. stocks continued to climb higher in the months ahead until the U.K.’s vote to exit from the European Union (‘Brexit’) unexpectedly jolted global markets. Although Brexit initially triggered a sharp sell-off, U.S. equities shrugged off the headline news and rebounded to pre-Brexit levels during the final trading days in June.

In recent months, U.S. equity markets have accelerated higher as improving economic data has further eased global growth concerns, and global central bank asset purchases have continued to stifle overall equity market volatility. As U.S. investors looked towards the final two months of 2016, focus shifted to the U.S. presidential election results and impacts, as well as the trajectory of U.S. company earnings trends.

Portfolio overview

The largest contributor to relative performance during the year was a combination of stock selection and an overweight to the energy sector. Notable portfolio contributors included an overweight position to Pioneer Natural Resources and the ownership of non-benchmark holding Suncor Energy. The decision not to own benchmark holding Kinder Morgan also proved to be beneficial. A combination of stock selection and an overweight position to the aerospace & defence industry also boosted relative returns. Broadly, the industry benefited from an inflection in higher U.S. defence spending and this has contributed to strong top line growth for portfolio positions such as Northrop Grumman and Raytheon. Another notable contributor included our decision to be underweight the automobiles industry. We believe low automobile valuations are justified and that long term investment prospects are unattractive for several reasons: robust sales in recent years are showing signs of slowing, margins may be at a peak after years of positive mix shift from cars to higher margin trucks/SUVs, and mid to long term risks from autonomous driving and potential competitive disintermediation. Lastly, stock selection in the health care sector added to relative returns during the reporting period.

The largest detractor from relative performance for the year was stock selection in the consumer staples sector. Notably, non-benchmark holding Kroger underperformed after lowering 2016 guidance and reporting weaker-than-consensus earnings, due in part to food deflation and increasing competition. We believe these headwinds are transitory and remain shareholders of the company. A combination of stock selection and allocation decisions in the financial sector also hurt relative returns. Falling U.S. interest rates negatively impacted our overweight position in life insurer MetLife and property & casualty insurer, The Travelers Companies, which underperformed due to pricing challenges in its commercial business. Lower interest rates also proved to be a headwind for our U.S. bank holdings including Citigroup and Wells Fargo. Stock selection in the information technology sector also dampened relative returns. Notably, non-benchmark holding Lenovo Group lagged after delivering weaker than expected revenue growth in its mobile and enterprise business segments. The decision to not own benchmark securities Hewlett Packard and Apple also proved to be costly. Lastly, stock selection in materials detracted from relative performance for the one year period.

As expected, writing covered call options in a rising equity environment capped upside returns during the year and therefore detracted modestly from absolute performance. As designed, the Company’s option overwrite component enhanced the portfolio’s income during the year.

Below is a comprehensive overview of our allocations (in sterling) at the end of the year.

	Total %	Benchmark %
Consumer Discretionary	6.1	4.6
Consumer Staples	7.3	8.9
Energy	11.9	13.3
Financials	25.8	24.4
Real Estate	0.4	4.9
Health Care	14.7	11.1
Industrials	12.5	9.8
Information Technology	9.4	9.9
Materials	3.6	2.8
Telecommunication services	2.4	3.7
Utilities	5.9	6.6

Source: BlackRock

Health Care – 3.6% overweight (14.7% of portfolio)

The Company’s overweight in health care is concentrated in the pharmaceuticals and managed care industries. In pharmaceuticals, valuations are more expensive than in years past, but we believe that the industry remains attractively priced relative to other defensive, higher-yielding sectors. Underlying fundamentals are also strong, with companies offering robust drug pipelines, improved research and development efficiency, strong free cash flow generation and lower patent expirations going forward. In the managed care industry, notable portfolio holdings include Anthem (1.5% of the portfolio), Aetna (1.5% of the portfolio) and UnitedHealth Group (1.3% of the portfolio). These companies exhibit many of the quality and stability characteristics that we like, along with solid earnings and dividend growth prospects.

Industrials – 2.7% overweight (12.5% of portfolio)

The Company’s overweight position to industrials is concentrated in the aerospace & defence industry. We are particularly bullish on the defence stocks given their solid balance sheets, strong free cash flows and the potential for further increases in defence spending in light of mounting geopolitical tensions globally. We also maintain exposure to industrial conglomerates such as General Electric (3.2% of the portfolio) and Honeywell (1.5% of the portfolio) given their diverse revenue streams, stable growth profiles and healthy dividend yields.

Consumer Discretionary – 1.5% overweight (6.1% of portfolio)

After years of deleveraging, the balance sheet for U.S. households has improved. Consumers have also benefited from a recovering domestic housing market, solid jobs growth, lower gas prices and moderate wage growth. Although these factors are undoubtedly a positive for the economy and consumer-related spending, changing consumer preferences (i.e. spending on experiences versus things) and shifts in consumer behaviour (i.e. growth in internet retail) are notable disruptors to traditional business models. Therefore, the Company’s overweight in the consumer discretionary sector is premised on stock-specific ideas. Our largest position in this sector is Comcast Corporation (1.8% of the portfolio).

Materials – 0.8% overweight (3.6% of portfolio)

Our exposure to the materials sector is primarily based in the chemical industry. In particular, we believe that longer term secular trends in global population growth will benefit well positioned companies in the agricultural chemical industry. In addition, we see opportunity in higher margin specialty chemicals. M&A is likely to be a positive catalyst for the industry and, ultimately, we believe that companies with scale, focus and high-quality assets will be able to deliver stronger earnings and dividend growth.

Financials – 1.4% overweight (25.8% of portfolio)

Financials is the Company’s largest sector allocation and we maintain a high level of conviction in the sector. We are particularly bullish on the U.S. banks and capital markets stocks. Our bullishness is predicated on our belief that these banks are safer and sounder investments today than before the financial crisis. These banks have improving balance sheets, low credit losses, high capital levels, and attractive valuations. In addition, the headwinds from litigation and regulation are diminishing. As such, we believe that the banks are well positioned for future dividend growth.

Information Technology – 0.5% underweight (9.4% of portfolio)

Although the Company remains underweight in information technology, we are increasingly positive on the sector. Our preference is to own large-cap, cash rich companies that are competitively insulated from disruptors and well-positioned for growth in areas such as cloud computing. Valuations remain attractive and companies such as Microsoft (2.4% of the portfolio), Oracle (1.8% of the portfolio), Samsung Electronics (1.4% of the portfolio) and Qualcomm (1.3% of the portfolio) offer a compelling mix of healthy balance sheets, strong free cash flow generation and growing dividend streams.

Utilities – 0.7% underweight (5.9% of portfolio)

Our utilities exposure is concentrated in regulated operators, given their durable dividend profiles and resilience in slow growth environments. From a fundamental standpoint, we believe the sector is increasingly bifurcated in terms of the differences between strong and weak companies. As such, we are focused on owning firms with clear plans for future growth that are trading at attractive valuations. We also prefer to invest in firms that are not entirely dependent on demand and are in a unique position to focus on strategic capital expenditures. We believe that these factors will be increasingly important given slowing demand and declining electricity usage rates across the industry.

Telecommunication Services – 1.3% underweight (2.4% of portfolio)

We are underweight to telecoms and our allocation remains concentrated in diversified telecommunication bellwether, Verizon Communications. Wireless operations drive revenue in the sector and service bundling has led to stickier consumers, better earnings visibility and less customer churn, all of which are positives. Overall, this sector offers healthy dividend yields and opportunity for steady, longer term growth.

Energy – 1.4% underweight (11.9% of portfolio)

The Company’s allocation to the energy sector steadily increased during the trailing 12-month period. A sharp drawdown in WTI crude oil prices in early 2016 presented an attractive buying opportunity and we have continued to add exposure in recent months to quality operators that we believe are trading at a discount. Interestingly, the price of WTI crude oil is unchanged year-on-year ($46.83 per barrel as of 31 October 2016 versus $46.40 per barrel on 31 October 2015), albeit sharply higher from its low of $26.19 per barrel on 11 February 2016. Importantly, investor sentiment has improved year-on-year given the expectation for a more balanced supply and demand picture in 2017. Fundamentally, we continue to favour oil-weighted companies over those levered to natural gas. At the industry level we look for companies with experienced management teams and strong balance sheets that are operating on the lower-end of the production cost curve. Companies with the ability to grow production throughout the operating cycle are also attractive from an investment perspective.

Consumer Staples – 1.6% underweight (7.3% of portfolio)

The Company has traditionally maintained an overweight in consumer staples due to the sector’s recurring purchase theme, solid-brand leadership, stable earnings and dividend growth potential. We are now underweight due to concerns about high valuations, slowing earnings growth, and potential disruptions from online competition/changing consumer preferences. Within the sector we favour tobacco stocks as they are immune to most of the aforementioned pressures and are beneficiaries of the improved macroeconomic backdrop for low-end consumers.

Real Estate – 4.5% underweight (0.4% of portfolio)

The Company is underweight to the real estate sector given our view that valuations are expensive. Notably, the correlation of returns exhibited by real estate companies, relative to the performance of long term U.S. Treasury bonds, are elevated relative to history. We anticipate U.S. interest rates increasing from current levels and believe that this outcome may negatively impact the sector’s performance.

Positioning and outlook

We believe opportunities and risks remain balanced as investors look to the remaining months of 2016. Notably, powerful secular forces, including demographic trends and disruptive technologies, are further complicating an investment landscape characterised by slow global economic growth and geopolitical risks. We are mindful of these concerns, but see opportunity for investors with a multi-year time horizon and the ability to weather short term market volatility. Importantly, the U.S. economy remains on a solid footing: steady job growth in recent years has restored the labour force to near full employment, incomes are slowly rising, and consumer spending and housing demand remain upward trends. For these reasons, the U.S. economy is likely to continue its slow growth trajectory, albeit with potential bursts of volatility and more moderate return expectations given current valuations and the business cycle’s overall duration.

In this environment, we continue to emphasise the core tenets of our investment philosophy: disciplined application of value investment principles, an emphasis on owning quality and sustainable businesses, dividend growth and a long term investment horizon. We believe that attractively-priced, dividend growth stocks with sound balance sheets are particularly well positioned for today’s environment. These companies typically yield more than 10-year and 30-year U.S. Treasuries and offer the potential for future capital appreciation and income growth.

The Company is positioned to benefit from the maturing U.S. business cycle and the slow growth environment we see unfolding over time. Our largest exposures are in the financials, health care and industrials sectors. In recent months, we increased the portfolio exposure to the financial sector by initiating a new position in Keycorp and increasing our allocation to Bank of America. We also increased our health care allocation through adding to existing holdings in AstraZeneca, Anthem and Aetna. Other notable portfolio additions included initiating new positions in Experian and Publicis Groupe. Conversely, we reduced our exposure to the information technology sector by trimming our position in Intel. We also reduced our exposure to the consumer discretionary sector by exiting our position in McDonald’s.

TONY DESPIRITO AND BOB SHEARER
BlackRock Investment Management LLC
15 December 2016

Ten largest investments as at 31 October 2016

JPMorgan Chase: 3.5% (2015: 4.1%) is a U.S. based diversified financial company. 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 investors the potential for future earnings power through broadening customer relationships, increasing loan growth and efficient management of expenses.

Pfizer: 3.4% (2015: 2.9%) is a diversified pharmaceutical firm with a history of generating returns in excess of its cost of capital, which has translated to strong free cash flow generation and an attractive and consistent dividend yield over time. Pfizer trades at an attractive valuation, offers investors a healthy drug pipeline, and has the balance sheet flexibility to deliver long term shareholder value through a variety of avenues.

Bank of America: 3.4% (2015: 1.5%) is one of the largest financial institutions in the U.S. and the world, with lending operations in the consumer, small-business, and corporate markets, in addition to asset management and investment banking divisions. Bank of America’s advantages range from its massive deposit and consumer lending franchise to the ‘thundering herd’ of Merrill Lynch’s brokers and wealth managers.

General Electric: 3.2% (2015: 3.0%) is a diversified industrials conglomerate with operations in technology infrastructure, energy infrastructure, home and business services and capital services. GE’s strong management team, depth and breadth of products and ability to secure pricing, continue to make it a desirable long term holding.

Wells Fargo: 2.7% (2015: 3.9%) is a U.S. diversified bank with a strong west coast franchise and growing national footprint. Wells Fargo is an industry leader in building deep customer relationships and the firm’s ability to integrate products and services into client solutions has historically added to the bank’s pricing and earnings power. Finally, the bank has a strong focus on capital return with above average dividends and buybacks versus peers.

Citigroup: 2.5% (2015: 3.2%) is a U.S. based money centre bank with a global footprint. We believe Citigroup is attractively valued on both a price-to-earnings and book value basis. The firm has demonstrated an ability to achieve its efficiency targets and cut costs, which we believe will ultimately contribute to stronger earnings power and increasing capital return to shareholders.

Microsoft: 2.4% (2015: 2.3%) is a global technology leader that is engaged in developing and licensing both software and hardware products & services. We view Microsoft as an attractive long term investment given the firm’s overall ‘ecosystem’, which historically has resulted in pricing power and efficient free cash flow generation over time. As technology spending continues to shift towards the cloud (i.e. delivery of software and services over the internet), we believe Microsoft has the right mix of assets and enterprise business relationships to drive top line growth moving forward.

Merck: 2.3% (2015: 2.1%) is a global pharmaceuticals operator with a diversified drug pipeline in areas including immuno?oncology and treatments for Alzheimer’s, Hepatitis-C and Diabetes. We believe Merck trades at a discounted valuation that underappreciates the company’s portfolio of assets and overall earnings potential.

Occidental Petroleum: 2.1% (2015: 1.7%) is a U.S. based oil and gas exploration & production company. The firm has three primary business segments including Oil & Gas (O&G), Chemical and Midstream, and Marketing (M&M). Notably, Occidental has a low cost advantage relative to peers given its strong shale acreage within the U.S. Permian basin.

SunTrust Banks: 1.9% (2015: 1.8%) is a regional bank based in the southeastern U.S. SunTrust has executed well in recent years and we believe the stock warrants a premium multiple relative to its regional bank peers. Central to our investment thesis is a belief that the firm can further reduce core expenses, reach efficiency targets and return increasing capital to shareholders.

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 31 October 2015. Together, the ten largest investments represent 27.4% of the Company’s portfolio (31 October 2015: 29.0%). All data in U.S. dollar terms.

Investments as at 31 October 2016

Company	Country	Sector	Securities	Market value  £’000	% of total  portfolio
JPMorgan Chase	United States	Financials	Ordinary shares	3,674	3.5
Pfizer	United States	Health Care	Ordinary shares Option	3,591 (4)	3.4
Bank of America	United States	Financials	Ordinary shares	3,532	3.4
General Electric	United States	Industrials	Ordinary shares Option	3,249 (2)	3.2
Wells Fargo	United States	Financials	Ordinary shares Option	2,877 (5)	2.7
Citigroup	United States	Financials	Ordinary shares	2,590	2.5
Microsoft	United States	Information Technology	Ordinary shares Option	2,507 (13)	2.4
Merck	United States	Health Care	Ordinary shares Option	2,374 (1)	2.3
Occidental Petroleum	United States	Energy	Ordinary shares Option	2,207 (6)	2.1
SunTrust Banks	United States	Financials	Ordinary shares Option	1,999 (2)	1.9
Comcast	United States	Consumer Discretionary	Ordinary shares Option	1,896 (1)	1.8
Oracle	United States	Information Technology	Ordinary shares Option	1,842 (2)	1.8
Raytheon	United States	Industrials	Ordinary shares Option	1,839 (1)	1.7
Morgan Stanley	United States	Financials	Ordinary shares	1,696	1.7
Exxon Mobil	United States	Energy	Ordinary shares	1,688	1.6
Chevron	United States	Energy	Ordinary shares Option	1,685 (5)	1.6
Total	France	Energy	Ordinary shares Option	1,685 (7)	1.6
Northrop Grumman	United States	Industrials	Ordinary shares Option	1,662 (17)	1.6
Home Depot	United States	Consumer Discretionary	Ordinary shares Option	1,638 (5)	1.5
Anthem	United States	Health Care	Ordinary shares	1,617	1.5
Dollar General	United States	Consumer Discretionary	Ordinary shares Option	1,615 (7)	1.5
American International Group	United States	Financials	Ordinary shares	1,591	1.5
Aetna	United States	Health Care	Ordinary shares Option	1,592 (2)	1.5
Suncor Energy	Canada	Energy	Ordinary shares Option	1,576 (12)	1.5
Johnson & Johnson	United States	Health Care	Ordinary shares Option	1,573 (10)	1.5
Honeywell International	United States	Industrials	Ordinary shares Option	1,563 (10)	1.5
Du Pont	United States	Materials	Ordinary shares	1,553	1.5
NextEra Energy	United States	Utilities	Ordinary shares Option	1,555 (9)	1.5
Verizon Communications	United States	Telecommunication services	Ordinary shares Option	1,539 (1)	1.5
US Bancorp	United States	Financials	Ordinary shares Option	1,538 (11)	1.4
Samsung Electronics	United States	Information Technology	Ordinary shares	1,520	1.4
Kroger	United States	Consumer Staples	Ordinary shares Option	1,513 (19)	1.4
Prudential Financial	United States	Financials	Ordinary shares Option	1,423 (4)	1.3
AstraZeneca	United Kingdom	Health Care	Ordinary shares Option	1,406 (2)	1.3
UnitedHealth Group	United States	Health Care	Ordinary shares Option	1,386 (4)	1.3
Dow Chemical	United States	Materials	Ordinary shares	1,376	1.3
Qualcomm	United States	Information Technology	Ordinary shares Option	1,364 (10)	1.3
Lockheed Martin	United States	Industrials	Ordinary shares Option	1,348 (2)	1.3
Coca-Cola	United States	Consumer Staples	Ordinary shares Option	1,284 (2)	1.2
MetLife	United States	Financials	Ordinary shares Option	1,246 (3)	1.2
Quest Diagnostics	United States	Health Care	Ordinary shares Option	1,225 (1)	1.2
Procter & Gamble	United States	Consumer Staples	Ordinary shares Option	1,212 (6)	1.1
Dominion Resources	United States	Utilities	Ordinary shares Option	1,178 (7)	1.1
Intel Corporation	United States	Information Technology	Ordinary shares	1,098	1.0
United Parcel Service	United States	Industrials	Ordinary shares Option	1,100 (3)	1.0
Goldman Sachs	United States	Financials	Ordinary shares	996	0.9
Travelers Companies	United States	Financials	Ordinary shares Option	995 (1)	0.9
CME	United States	Financials	Ordinary shares	992	0.9
Public Service Enterprise	United States	Utilities	Ordinary shares	921	0.9
Motorola Solutions	United States	Information Technology	Ordinary shares Option	881 (2)	0.8
Diageo	United Kingdom	Consumer Staples	Ordinary shares Option	873 (2)	0.8
Gap	United States	Consumer Discretionary	Ordinary shares Option	865 (20)	0.8
Unilever	Netherlands	Consumer Staples	Ordinary shares	825	0.8
Hess	United States	Energy	Ordinary shares Option	812 (1)	0.8
Marathon Petroleum	United States	Energy	Ordinary shares Option	813 (4)	0.8
Exelon	United States	Utilities	Ordinary shares Option	759 (3)	0.7
Becton Dickinson	United States	Health Care	Ordinary shares Option	748 (3)	0.7
CMS Energy	United States	Utilities	Ordinary shares Option	686 (2)	0.6
Invesco	United States	Financials	Ordinary shares	663	0.6
Union Pacific	United States	Industrials	Ordinary shares	613	0.6
SK Telecom	South Korea	Telecommunication Services	Ordinary shares Option	604 (1)	0.6
Mondelez International	United States	Consumer Staples	Ordinary shares Option	604 (6)	0.6
Philip Morris International	United States	Consumer Staples	Ordinary shares Option	563 (2)	0.5
Spectra Energy	United States	Utilities	Ordinary shares Option	538 (2)	0.5
Marsh & McLennan	United States	Financials	Ordinary shares Option	536 (1)	0.5
Nielsen	United States	Industrials	Ordinary shares Option	536 (2)	0.5
International Paper	United States	Materials	Ordinary shares	534	0.5
ConocoPhillips	United States	Energy	Ordinary shares Option	531 (2)	0.5
Allstate	United States	Financials	Ordinary shares Option	530 (1)	0.5
Publicis Groupe	France	Consumer Discretionary	Ordinary shares	508	0.5
Lenovo	China	Information Technology	Ordinary shares	505	0.5
Schlumberger	United States	Energy	Ordinary shares Option	488 (3)	0.5
Altria Group	United States	Consumer Staples	Ordinary shares Option	461 (6)	0.4
3M	United States	Industrials	Ordinary shares	455	0.4
Keycorp	United States	Financials	Ordinary shares Option	454 (10)	0.4
Weyerhaeuser	United States	Real Estate	Ordinary shares	440	0.4
Experian	Ireland	Industrials	Ordinary shares	418	0.4
Reynolds American	United States	Consumer Staples	Ordinary shares Option	394 (30)	0.3
Praxair	United States	Materials	Ordinary shares Option	328 (1)	0.3
Anadarko Petroleum	United States	Energy	Ordinary shares Option	324 (1)	0.3
BCE	Canada	Telecommunication services	Ordinary shares	314	0.3
Rockwell Automation	United States	Industrials	Ordinary shares Option	302 (1)	0.3
Marathon Oil	United States	Energy	Ordinary shares	297	0.3
Pioneer Natural Resources	United States	Energy	Ordinary shares Option	295 (2)	0.3
Nvidia	United States	Information Technology	Ordinary shares Option	267 (5)	0.2
Mead Johnson Nutrition	United States	Consumer Staples	Ordinary shares	257	0.2
American Water Works Association	United States	Utilities	Ordinary shares	217	0.2
DTE Energy	United States	Utilities	Ordinary shares Option	202 (1)	0.2
First Energy	United States	Utilities	Ordinary shares	160	0.2
				--------------	--------------
Portfolio				105,415	100.0
				========	========

All investments are in ordinary shares unless otherwise stated. The number of holdings as at 31 October 2016 was 89 (31 October 2015: 87). The total number of individual open options as at 31 October 2016 was 186 (31 October 2015: 151).

The negative valuation of £311,000 in respect of options held represents the notional cost of repurchasing the contracts at market prices as at 31 October 2016 (31 October 2015: £618,000).

At 31 October 2016, the Company did not hold any equity interests comprising more than 3% of any company’s share capital.

Statement of comprehensive income for the year ended 31 October 2016

	Note	Revenue  2016	Revenue  2015	Capital  2016	Capital  2015	Total  2016	Total  2015
		£’000	£’000	£’000	£’000	£’000	£’000
Income from investments held at fair value through profit or loss	3	2,772	2,814	–	–	2,772	2,814
Other income	3	2,144	2,425	–	–	2,144	2,425
		--------	--------	--------	--------	--------	--------
		4,916	5,239	–	–	4,916	5,239
		--------	--------	--------	--------	--------	--------
Profits on investments held at fair value through profit or loss		–	–	24,078	2,572	24,078	2,572
Profit/(loss) on foreign exchange		–	–	378	(175)	378	(175)
		--------	---------	---------	---------	---------	---------
Total revenue		4,916	5,239	24,456	2,397	29,372	7,636
		--------	--------	--------	--------	--------	--------
Expenses
Investment management fees	4	(187)	(244)	(560)	(733)	(747)	(977)
Other operating expenses	5	(267)	(329)	(37)	(25)	(304)	(354)
Total operating expenses		(454)	(573)	(597)	(758)	(1,051)	(1,331)
		--------	--------	--------	--------	--------	--------
Net profit on ordinary activities before finance costs and taxation		4,462	4,666	23,859	1,639	28,321	6,305
Finance costs		–	–	–	(1)	–	(1)
		========	========	========	========	========	========
Net profit on ordinary activities before taxation		4,462	4,666	23,859	1,638	28,321	6,304
Taxation		(732)	(783)	112	150	(620)	(633)
		========	========	========	========	========	========
Net profit on ordinary activities after taxation		3,730	3,883	23,971	1,788	27,701	5,671
		========	========	========	========	========	========
Earnings per ordinary share	7	5.17p	4.54p	33.20p	2.10p	38.37p	6.64p
		========	========	========	========	========	========

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 (EU). 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 year. All income is attributable to the equity shareholders of the Company. There are no minority interests. The Company does not have any other comprehensive income. 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 October 2016

	Note	Called  up  share  capital	Share  premium  account	Capital  redemption  reserve	Special  reserve	Capital  reserves	Revenue  reserve	Total
		£’000	£’000	£’000	£’000	£’000	£’000	£’000
For the year ended 31 October 2016
At 31 October 2015		1,004	36,774	1,460	37,956	19,190	1,662	98,046
Total Comprehensive Income:
Net profit for the year		–	–	–	–	23,971	3,730	27,701
Transactions with owners, recorded directly to equity:
Share purchase costs		–	–	–	60	–	–	60
Ordinary shares purchased into treasury		–	–	–	(12,987)	–	–	(12,987)
Dividend paid	6	–	–	–	–	–	(3,341)	(3,341)
		--------	--------	--------	--------	--------	--------	--------
At 31 October 2016		1,004	36,774	1,460	25,029	43,161	2,051	109,479
		--------	--------	--------	--------	--------	--------	--------
For the year ended 31 October 2015
At 31 October 2014		1,004	36,774	1,460	63,213	17,402	1,346	121,199
Total Comprehensive Income:
Net profit for the year		–	–	–	–	1,788	3,883	5,671
Transactions with owners, recorded directly to equity:
Ordinary shares purchased into treasury pursuant to a tender offer		–	–	–	(24,737)	–	–	(24,737)
Share issue and purchase costs		–	–	–	(233)	–	–	(233)
Ordinary shares purchased into treasury		–	–	–	(287)	–	–	(287)
Dividend paid	6	–	–	–	–	–	(3,567)	(3,567)
		--------	--------	--------	--------	--------	--------	--------
At 31 October 2015		1,004	36,774	1,460	37,956	19,190	1,662	98,046
		========	========	========	========	========	========	========

Statement of financial position as at 31 October 2016

	Notes	31 October  2016	31 October  2015
		£’000	£’000
Non current assets
Investments designated as held at fair value through profit or loss		105,726	95,936
		--------	--------
Current assets
Other receivables		154	2,755
Cash held on margin deposit with brokers		125	–
Cash and cash equivalents		4,686	2,003
		--------	--------
		4,965	4,758
		--------	--------
Total assets		110,691	100,694
		--------	--------
Current liabilities
Derivative financial liabilities held at fair value through profit or loss		(311)	(618)
Other payables		(901)	(2,030)
		--------	--------
		(1,212)	(2,648)
		--------	--------
Net assets		109,479	98,046
		========	========
Equity attributable to equity holders
Called up share capital	8	1,004	1,004
Share premium		36,774	36,774
Capital redemption reserve		1,460	1,460
Special reserve		25,029	37,956
Capital reserves		43,161	19,190
Revenue reserve		2,051	1,662
		--------	--------
Total equity		109,479	98,046
		========	========
Net asset value per share	7	158.78p	122.50p
		========	========

Cash flow statement for the year ended 31 October 2016

	31 October  2016	31 October 2015
	£’000	£’000
Operating activities
Profit before taxation*	28,321	6,304
Add back interest paid	–	1
Less: gains on investments held at fair value through profit or loss	(24,078)	(2,572)
Net movement on foreign exchange	(378)	175
Sales of investments held at fair value through profit or loss	78,286	101,048
Purchases of investments held at fair value through profit or loss	(64,305)	(72,575)
Increase in other receivables	(4)	(16)
Decrease in other payables	(21)	(3)
Decrease/(increase) in amounts due from brokers	2,619	(2,523)
Net movement in cash held on margin deposit with brokers	(125)	–
(Decrease)/increase in amounts due to brokers	(1,017)	1,090
	--------	--------
Net cash inflow from operating activities before interest and taxation	19,298	30,929
	--------	--------
Interest paid	–	(1)
Taxation on investment income included within gross income	(689)	(626)
	--------	--------
Net cash inflow from operating activities	18,609	30,302
	--------	--------
Financing activities
Dividends paid	(3,341)	(3,567)
Shares purchased into treasury pursuant to tender offer	–	(24,737)
Shares purchased into treasury	(12,987)	(287)
Share issue and share purchase costs paid	(36)	(456)
Share issue costs rebated	60	–
	--------	--------
Net cash outflow from financing activities	(16,304)	(29,047)
	========	========
Increase in cash and cash equivalents	2,305	1,255
	--------	--------
Cash and cash equivalents at start of year	2,003	923
Effect of foreign exchange rate changes	378	(175)
	========	========
Cash and cash equivalents at end of year	4,686	2,003
	----------	---------
Comprised of:
Cash at bank	4,686	2,003
	========	========
	4,686	2,003
	========	========

* Includes dividends and interest received during the year of £2,786,000 and £1,000 (2015: £2,795,000 and £2,000).

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

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

(a) Basis of preparation

The financial statements have been prepared under the historical cost convention modified by revaluation of financial assets and financial liabilities held at fair value through profit or loss and in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, International Financial Reporting Interpretations Committee interpretations 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 November 2014, 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 on or after 1 January 2016, and have not been applied in preparing these financial statements (major changes and new standards issued detailed below). None of these are expected to have a significant effect on the measurement of the amounts recognised in the financial statements of the Company.

IFRS 9 Financial Instruments (2014) replaces IAS 39 and deals with a package of improvements including principally a revised model for classification and measurement of financial instruments, a forward looking expected loss impairment model and a revised framework for hedge accounting. In terms of classification and measurement, the revised standard is principles based depending on the business model and nature of cash flows. Under this approach, instruments are measured at either amortised cost or fair value. Under IFRS 9, equity and derivative investments will be held at fair value because they fail the ‘solely payments of principal and interest’ test and debt investments will be held at fair value because the business model is to manage them on a fair value basis. The scope of the fair value option is reduced within IFRS 9. The standard is effective from 1 January 2018 with earlier application permitted but has not yet been endorsed by the European Commission. The Company does not plan to early adopt this standard.

Amendments to IAS 1 (effective 1 January 2016) require changes to the presentation of financial instruments. The amendments are not expected to have a significant effect on the measurement of amounts recognised in the financial statements of the Company.

Amendments to IAS 7 - Disclosure Initiative Statement of Cash Flows (effective 1 January 2017). The amendments are not expected to have a significant effect on the presentation of the Statement of Cash Flows within the financial statements of the Company.

Amendments to IAS 12 - Recognition of deferred tax assets for unrealised losses (effective 1 January 2017). The amendment is not expected to have a significant effect on the measurement of amounts recognised in the financial statements of the Company.

IFRS 15 Revenue from Contracts with Customers (effective 1 January 2017) specifies how and when an entity should recognise revenue and enhances the nature of revenue disclosures. Given the nature of the Company’s revenue streams from financial instruments, the provisions of this standard are not expected to be applicable.

 (b) Presentation of the Statement of Comprehensive Income

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 Statement of Comprehensive Income between items of a revenue and a capital nature has been presented alongside the Statement of Comprehensive Income. In accordance with the Company’s Articles, and as at the date of publication of this report, net capital returns may not be distributed by way of dividend.

(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 year 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.

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.

(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 charged to capital. Details of transaction costs on the purchases and sales of investments are disclosed within note 9 on pages 50 and 51 of 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.

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

Deferred taxation is recognised in respect of all 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

All investments are initially recognised and subsequently measured 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.

Purchases of investments are recognised on a trade date basis. Sales of investments are recognised at 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

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.

(m) Derivatives

Derivatives are held at fair value based on the bid/offer prices of the options written to which the Company is exposed. The value of the option is subsequently marked to market to reflect the fair value of the option based on traded prices. 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 a capital gain or loss.

3. Income

	2016  £’000	2015  £’000
Investment income:
UK listed dividends	74	26
Overseas listed dividends	2,698	2,788
	--------	--------
	2,772	2,814
	--------	--------
Other income:
Deposit interest	1	2
Option premium income	2,143	2,423
	--------	--------
	2,144	2,425
	--------	--------
Total	4,916	5,239
	========	========

During the period, the Company received premiums totalling £2,149,000 (2015: £2,348,000) for writing covered call options for the purposes of revenue generation. Option premiums of £2,143,000 (2015: £2,423,000) were amortised to income. All derivative transactions were based on constituent stocks in the Russell 1000 Value Index. At 31 October 2016, there were 186 (2015: 151) open positions with an associated liability of £311,000 (2015: £618,000).

4. Investment management fees

	2016			2015
	Revenue  £’000	Capital  £’000	Total  £’000	Revenue  £’000	Capital  £’000	Total  £’000
Investment management fee	187	560	747	244	733	977
	---------	---------	---------	---------	---------	---------
Total	187	560	747	244	733	977
	========	========	========	========	========	========

With effect from 1 November 2015, the investment management fee is payable in quarterly arrears, calculated at the rate of 0.75% of the Company’s net assets (2015: 1.0% of the Company’s market capitalisation).

5. Other operating expenses

	2016  £’000	2015  £’000
Allocated to revenue:
Custody fee	3	4
Auditors’ remuneration:
– audit services	28	27
Registrar’s fee	27	26
Marketing fees	35	92
Marketing fees written back	(59)	(64)
Directors’ emoluments	105	101
Other administration costs	128	143
	--------	--------
	267	329
Allocated to capital:
Transaction charges	37	25
	--------	----------
	304	354

The Company’s ongoing charges, calculated as a percentage of average net assets and using expenses, excluding interest costs were 1.04% (2015: 1.24%).

6. Dividends

The Directors have declared a fourth interim dividend of 1.20p per share. The dividend will be paid on 5 January 2017, to shareholders on the Company’s register on 25 November 2016. 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 year ended 31 October 2016 meets the requirements of section 1158 of the Corporation Tax Act 2010 and section 833 of the Companies Act 2006.

Dividends on equity shares:

	2016  £’000	2015  £’000
4th interim dividend of 1.10p per share paid for the year ended 31 October 2015 (2014: 1.00p)	877	1,004
1st interim dividend of 1.10p per share paid for the year ended 31 October 2016 (2015: 1.00p)	802	803
2nd interim dividend of 1.20p per share paid for the year ended 31 October 2016 (2015: 1.10p)	835	880
3rd interim dividend of 1.20p per share paid for the year ended 31 October 2016 (2015: 1.10p)	827	880
	--------	--------
Accounted for in the financial statements	3,341	3,567
	========	========
4th interim dividend of 1.20p per share payable on 5 January 2017 for the year ended 31 October 2016 (2015: 1.10p)	827	880
	--------	--------
	4,168	4,447
	========	========

7. Earnings and net asset value per ordinary share

	2016	2015
Net revenue profit attributable to ordinary shareholders (£’000)	3,730	3,883
Net capital profit attributable to ordinary shareholders (£’000)	23,971	1,788
	--------	--------
Total profit attributable to ordinary shareholders (£’000)	27,701	5,671
	--------	--------
Total equity attributable to shareholders (£’000)	109,479	98,046
	--------	--------
The weighted average number of ordinary shares in issue during the year, on which the earnings per ordinary share was calculated was:	72,193,444	85,447,775
	========	========
The actual number of ordinary shares in issue at the year end, on which the net asset value per ordinary share was calculated was:	68,949,044	80,039,044
	========	========
Revenue earnings per share	5.17p	4.54p
Capital earnings per share	33.20p	2.10p
	========	========
Total earnings per share	38.37p	6.64p
	========	========
Net asset value per share – basic and diluted	158.78p	122.50p
	========	========
Share price – ex-dividend	155.75p	113.00p
	========	========

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

	Number of  ordinary  shares in  issue	Treasury  shares	Total  shares	Nominal  value  £’000
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 1 pence each
Allotted, issued and fully paid:
At 31 October 2015	80,039,044	20,322,261	100,361,305	1,004
Purchase of ordinary shares	(11,090,000)	11,090,000	–	–
	--------	--------	--------	--------
At 31 October 2016	68,949,044	31,412,261	100,361,305	1,004
	========	========	========	========

During the year ended 31 October 2016, the Company purchased 11,090,000 (2015: 20,322,261) shares for a total consideration of £12,927,000 (2015: £25,257,000) including costs. No shares have been purchased since the year end and up to the date of this report

9. Contingent liabilities

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

10. 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 October 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 auditors, whose report for the year ended 31 October 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 North American Income Trust plc for the year ended 31 October 2015, which have been filed with the Registrar of Companies. The report of the auditors on those financial statements contained no qualification or statement under section 498 of the Companies Act.

11. 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 North American Income Trust plc, 12 Throgmorton Avenue, London EC2N 2DL.

12. 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 Tuesday, 21 February 2017 at 12.00 noon.

ENDS

The Annual Report will also be available on the BlackRock website at blackrock.co.uk/brna. 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: [phone]

Press enquires:

Lucy Horne, Lansons Communications - 020 7294 3689
E-mail: [e-mail]

BlackRock Investment Management (UK) Limited
12 Throgmorton Avenue
London
EC2N 2DL

15 December 2016