Half-yearly Report

BlackRock North American Income Trust plc

Investment objective

The Company’s 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.

Performance record

Financial Highlights

Attributable to ordinary shareholders 30 
April 
2015
31 
October 
2014
Change 
Assets
Net assets (£’000)1 100,831 121,199 -16.8
Net asset value per ordinary share 125.59p 120.76p +4.0
– with income reinvested +5.7
Ordinary share price (mid-market) 117.50p 112.00p    +4.9
– with income reinvested +6.7
 ========  ========  ========

   

For 
the 
six 
months 
ended 
30 
April 
2015
For 
the 
six 
months 
ended 
30 
April 
2014
Change 
Revenue
Net profit after taxation (£’000) 2,066 2,113 -2.2
Earnings per ordinary share 2.27p 2.11p +7.6
 ========  ========  ========
1The change in net assets reflects market movements and the implementation of the tender offer in the period.

Chairman’s statement

for the six months to 30 April 2015

Overview

Economic data provided a mixed and sometimes conflicting picture of the state of the U.S. economy over the six months under review. During the fourth quarter of 2014, steady growth in employment, a moderate housing recovery and rising capital expenditure all pointed towards a sustainable recovery. A rise in household wealth, helped by continuing low interest rates and falling energy prices, also bode well for consumer spending and U.S. major indices pushed ahead strongly. However, the unusually harsh winter weather, a strong U.S. dollar and a slowdown in exports meant that the U.S. economy grew well below forecasts in the first three months of 2015. The steep rally in the dollar came to a halt in late March, driven by weaker economic data and a more dovish U.S. central bank, although policymakers have suggested that recent economic weakness has been caused in part by transitory factors; employment figures have for the most part remained strong.

Performance

In the six months to 30 April 2015, the Company’s net asset value (‘NAV’) returned +5.7% compared with a return of +7.1% in the Russell 1000 Value Index. Although the gap between the portfolio and the Index narrowed, the market background remained unfavourable for our Portfolio Manager’s investment approach, which is to focus on companies capable of generating dividend growth and not those with a high initial yield. Your Board is conscious that performance relative to the Index has been disappointing and has stressed to the Manager the importance of seeking an improvement in this area. The Company’s share price returned +6.7% over the same period (all figures in sterling terms with income reinvested). Further information on investment performance is given in the Investment Manager’s Report.

Since the period end, the Company’s NAV has increased by 0.3% and the share price has fallen by 2.9% (in sterling with income reinvested).

Earnings and dividends

The Company’s revenue return per share for the six months ended 30 April 2015 amounted to 2.27p compared with 2.11p per share for the corresponding period last year. The first quarterly dividend of 1.00p per share was paid on 7 April 2015. A second quarterly interim dividend of 1.10p per share will be paid on 1 July 2015 to shareholders on the register on 22 May 2015. This represents an increase of 10% on the first quarterly dividend and it is the Board’s current intention to maintain this quarterly pay-out.

Tender offers

The Directors exercised their discretion to operate the half yearly tender offer with a calculation date of 2 February 2015, being the succeeding business day to 31 January 2015, for up to 20% of the shares in issue at the prevailing NAV less 2%. The tender offer was oversubscribed with 26,792,753 shares being tendered at a price of 123.24p per share. Shareholders who tendered had their basic entitlement satisfied in full and their election for further shares was scaled-back pro rata with each shareholder receiving 61.3269% of their election for further shares. All shares tendered were repurchased by the Company and placed in treasury.

On 6 May 2015, the Directors announced that they had decided not to implement a semi-annual tender offer in July 2015. Following shareholder consultation, the Board concluded that a tender was not in the interests of shareholders as a whole or the Company as the tender process results in the Company shrinking in size with the resultant negative impact on liquidity and ongoing charges. The Board will continue to monitor the Company’s discount to NAV and use its buy back authority when appropriate, with the objective of ensuring that the Company’s shares do not trade at a significant discount to their NAV.

Outlook

The recent first quarter U.S. economic growth figures were weaker than expected but most commentators have concluded that these represented a temporary weakening of the economy. In recent years first quarter growth has often disappointed only to rebound later in the year. The unemployment rate has also dropped to a pre-crisis low. Fiscal challenges are also abating and even if, as is widely expected, the Federal Reserve start tightening in 2015, monetary policy should remain highly accommodative. The timing and pace of any rises will remain dependent on the economic data.

The Investment Manager continues to position the portfolio in companies that are well managed, soundly financed and which have the capacity to grow their dividends. Although higher interest rates may induce greater market volatility, if the background for rising rates is an improving economy, markets have historically been able to continue to make progress. Our expectation is that we will now witness greater differentiation between the performance of individual shares within sectors and this will provide an environment which will reward active stock picking.

Simon Miller
11 June 2015

Interim management report and responsibility statement

The Chairman’s Statement and the Investment Manager’s Report give details of the important events which have occurred during the period and their impact on the financial statements.

Principal risks and uncertainties

The principal risks faced by the Company can be divided into various areas as follows:

  • Performance;
  • Income/dividend;
  • Regulatory;
  • Operational;
  • Market;
  • Financial; and
  • Gearing.

The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 31 October 2014. A detailed explanation can be found in the Strategic Report on pages 6 and 7 and in note 14 on pages 49 to 57 of the Annual Report and Financial Statements which are available on the website maintained by BlackRock at blackrock.co.uk/brna.

In the view of the Board, there have not been any changes to the fundamental nature of these risks since the previous report and these principal risks and uncertainties are equally applicable to the remaining six months of the financial year as they were to the six months under review.

Going concern

The Directors, having considered the nature and liquidity of the portfolio, the Company’s investment objective and the Company’s projected income and expenditure, are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future and is financially sound. For this reason, they continue to adopt the going concern basis in preparing the financial statements. The Company has a portfolio of investments which are considered to be readily realisable and is able to meet all of its liabilities from its assets and income generated from these assets. Ongoing charges (excluding interest costs and taxation) are approximately 1.3% of net assets.

Related party disclosure and transactions with the AIFM and Investment Manager

BlackRock Fund Managers Limited (‘BFM’) was appointed as the Company’s AIFM with effect from 2 July 2014. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (‘BIM (UK)’). Both BFM and BIM (UK) are regarded as related parties under the Listing Rules. Details of the management and marketing fees payable are set out in note 3 and note 10. Fees payable to Directors and their interests in the ordinary shares of the Company are set out in note 9.

Directors’ responsibility statement

The Disclosure and Transparency Rules (‘DTR’) of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements.

The Directors confirm to the best of their knowledge that:

  • the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with applicable UK Accounting Standards and the Accounting Standards Board’s Statement ‘Half Yearly Financial Reports’; and

  • the Interim Management Report, together with the Chairman’s Statement and Investment Manager’s Report, include a fair review of the information required by 4.2.7R and 4.2.8R of the FCA’s Disclosure and Transparency Rules.

This half yearly financial report has not been audited or reviewed by the Company’s auditors.

The half yearly financial report was approved by the Board on 11 June 2015 and the above responsibility statement was signed on its behalf by the Chairman.

Simon Miller
For and on behalf of the Board
11 June 2015

Investment manager’s report

Market overview

For the six month period ended 30 April 2015, U.S. large-cap stocks, as represented by the S&P 500® Index, advanced by 4.4% (in U.S. dollar terms).

U.S. equities benefited from a strengthening domestic economy in the fourth quarter of 2014, although market volatility increased as investors considered slowing growth in other parts of the world, the impending tightening of U.S. monetary conditions and rising political turmoil globally. In the first four months of 2015, divergent monetary policies dominated media headlines as quantitative easing measures in Europe and Japan stood in contrast to the Federal Reserve, setting the stage for higher interest rates in the U.S. This dynamic created volatile conditions in the currency markets and exerted upward pressure on the U.S. dollar. Economic data in the U.S. generally softened to start the year; however, employment gains and robust merger and acquisition activity were strong enough to overcome negative revisions to earnings expectations. Overall, we remain mindful of current equity valuations and inflation, as well as the potential impact of currency markets and lower oil prices on global capital flows and investment.

Portfolio overview

The largest detractor from relative performance during the past six months was stock selection in financials. Notably, selection in the insurance industry proved to be costly as portfolio holdings Prudential and MetLife lagged relative to benchmark peers. We view falling U.S. interest rates during the period as a short term headwind and remain overweight to both companies given their current valuations, underlying fundamentals and ability to return capital to shareholders. Other notable detractors in financials include our ownership of non-benchmark holding American Express, which underperformed following the loss of its partnership with Costco and JetBlue, and non-benchmark holding Toronto-Dominion Bank. A combination of stock selection and an underweight in health care also dragged on relative performance. Our underweight position to the managed care industry hurt relative returns as benchmark peers, including Cigna and Aetna, outperformed. The Company is now modestly overweight the managed care industry after initiating positions in UnitedHealth Group and Anthem in January 2015. Lastly, stock selection in the information technology and consumer discretionary sectors also had a negative impact on relative performance for the six month period.

A combination of stock selection and a general underweight position to the energy sector was the largest contributor to relative returns. WTI crude oil prices declined by over 41% from peak to trough during the period, before rebounding to -25% by April month-end. Notable stock level contributors include our underweight to Exxon Mobil and overweight to refiner Marathon Petroleum. Stock selection in utilities also added to relative performance for the period, as a timely exit from Duke Energy in January proved to be beneficial. We eliminated our position in Duke due to its valuation and concerns related to potential delays in asset sales. Other notable contributors to performance for the period include non-benchmark holding Kraft, which benefited from the news that 3G Capital will acquire the company and merge it with H.J. Heinz, and Kroger Co., which exceeded earnings estimates on strong same-store sales growth and solid market share gains.

Below is a comprehensive overview of our allocations at the end of the period.

Industrials: 4.9% overweight (15.2% of portfolio)

The Company’s overweight position to industrials is driven primarily by our preference for aerospace and defence stocks due to their strong free cash flows, healthy balance sheets, attractive valuations and dividend growth potential. These stocks may also benefit from a potential increase in defence spending, both domestically and internationally, in the light of rising geopolitical concerns. We also maintain exposure to industrial conglomerates given their diverse revenue streams, stable growth profiles and healthy dividends.

Materials: 1.8% overweight (4.9% of portfolio)

We believe that infrastructure development and spending will continue to be a critical part of the investment landscape, both in the U.S. and abroad. We also believe that companies with higher quality, diverse assets in locations close to developing markets will be able to reap the benefits of high barriers to entry within local industries and deliver stronger growth.

Consumer Discretionary: 1.1% overweight (7.7% of portfolio)

The balance sheet for U.S. consumers is improving, aided by a recovering domestic housing market, recent robust equity returns and stronger jobs growth. These factors have generated an increase in consumer confidence. Although an improved consumer balance sheet is a positive for the economy and for consumer-related spending, the Company’s modest overweight position in the consumer discretionary sector is more a reflection of stock-specific factors. The Company’s largest active weights in the sector include Comcast (2.7% of portfolio) and Home Depot (2.5% of portfolio).

Telecommunication Services: 0.4% overweight (2.6% of portfolio)

Within telecoms, our allocation is concentrated in industry bellwether Verizon Communications, given the firm’s ability to manage competitive pressures and deliver revenue growth. Wireless operations continue to drive revenues across the sector and the proliferation of data-heavy smartphones should help certain companies in the sector strengthen margins. Service bundling has led to stickier consumers, better earnings visibility and less customer churn, all of which are positives for the industry. Overall, this sector offers attractive dividend yields and opportunity for steady, longer term growth.

Consumer Staples: 0.4% underweight (6.7% of portfolio)

The Company has traditionally maintained an overweight position in consumer staples due to the sector’s recurring purchase theme, solid brand leadership, stable earnings and dividend growth potential. Although these characteristics remain long term positives, we have selectively reduced our exposure to the sector in recent quarters due to concerns about valuations and the potential for slowing earnings and dividend growth in the near term.

Health Care: 0.6% underweight (13.8% of portfolio)

Our traditional underweight in health care has been driven, at least in part, by our wariness of the longer term growth prospects of the health care services sector. We are encouraged by changes shaped by the Affordable Care Act, especially as it relates to managed-care providers, and recently initiated positions in providers UnitedHealth Group (1.8% of portfolio) and Anthem (0.8% of portfolio) as a result. Additionally, we continue to focus our efforts on opportunities in the pharmaceutical industry, especially in companies with healthy balance sheets, strong drug pipelines and multiple potential drivers of future growth.

Information Technology: 0.7% underweight (8.6% of portfolio)

We have gradually increased our exposure to information technology in recent months, with a preference for large-cap, mature companies with the ability to return capital to shareholders. We believe that valuations remain attractive and companies such as Microsoft (2.7% of portfolio), Intel (1.9% of portfolio), and Qualcomm (1.3% of portfolio) offer a compelling mix of healthy balance sheets, strong free cash flow generation and growing dividend streams.

Utilities: 0.8% underweight (5.3% of portfolio)

Our exposure to utilities has been dominated primarily by regulated names, given their durable dividend profiles and resilience in slow growth environments. From a fundamental standpoint, we believe that 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.

Energy: 1.7% underweight (9.7% of portfolio)

Despite the recent sharp decline in crude oil prices, we believe that many of the long term fundamentals for the energy sector remain positive. We favour oil-weighted companies over those levered to natural gas. We especially prefer large-cap integrated oil and independent oil & gas producers due to their valuations, diverse revenue streams and balance sheet strength. At the industry level, strong competitive positioning, operating specialization and pricing power remain most desirable from an investment perspective.

Financials: 4.0% underweight (25.5% of portfolio)

While underweight relative to the benchmark index, financials are the Company’s largest sector allocation on an absolute basis and we maintain a high level of conviction in the sector. We are particularly bullish on large-cap U.S. banks and capital markets stocks given their improved balance sheets, low credit losses, high capital levels and attractive valuations. Notably, we are encouraged by the Fed’s March 2015 stress tests results and believe there is potential upside to earnings if the U.S. Federal Reserve raises interest rates.

Positioning and outlook

We have positioned the portfolio to take advantage of the maturing U.S. business cycle and the higher interest rate environment that we see unfolding over time. Towards that end we have increased our exposure to financials, health care, industrials and information technology in recent quarters on the basis of attractive valuations and greater potential for future dividend growth. Conversely, we have reduced exposure to the higher-yielding sectors of the market including consumer staples, utilities and telecommunication services due to concerns related to valuation and limited dividend growth potential in the future. We have also selectively trimmed our exposure to the consumer discretionary sector in recent months. In the Company we continue to emphasise investment in high quality dividend-paying companies, with consideration towards balancing capital appreciation and current income over time.

Bob Shearer and Tony DeSpirito
BlackRock Investment Management LLC
11 June 2015

Ten largest investments

as at 30 April 2015

Wells Fargo: 3.8% (2014: 3.7%) is a U.S. diversified bank with a strong west coast franchise and growing national footprint. Wells boasts a strong and stable management team, led by CEO John Stumpf, who has been with the firm for over 30 years. Wells Fargo 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: 3.5% (2014: 3.4%) is a U.S. based diversified financial company with over U.S. $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 that JPMorgan offers strong earnings power while also affording shareholders a healthy dividend yield.

General Electric: 2.7% (2014: 2.7%) is a diversified industrials conglomerate with operations in technology infrastructure, energy infrastructure, home and business services and capital services. In April 2015, GE announced plans to divest the majority of its GE Capital business, the firm’s financial arm. We are positive on the news and believe the transaction adds financial flexibility and enables the firm to focus on growing its core industrial units moving forward. GE’s strong management team, depth and breadth of products and ability to secure pricing, continue to make it a desirable long term holding.

Comcast: 2.7% (2014: 2.9%) is the largest operator in the U.S. cable industry. We are positive on Comcast’s best-in-class cable assets, its ability to continue to increase market share and the continued growth potential at NBC Universal. 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 that this will help the firm offset rising cable costs better than some of its competitors.

Microsoft: 2.7% (2014: 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 should drive pricing power and efficient free cash flow generation over time. In the near term, we believe the firm’s strength in its enterprise and cloud units offers upside potential. We are also positive on the prospects for a pickup in IT capex spending, a dynamic which should benefit the tech sector moving forward.

Pfizer: 2.5% (2014: 2.3%) 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. We are positive on the company’s prospects for future growth given their pipeline of early Phase I and II drugs with blockbuster potential. Additionally, we believe Pfizer’s recent U.S.$17 billion acquisition of Hospira will strengthen their global established pharma business and position the company for share gains in biosimilars, a growth segment of the pharma market.

Home Depot: 2.5% (2014: 2.6%) is the world’s largest home improvement retailer with over 2,200 warehouse-format stores and more than 365,000 employees. Home Depot has shown an ability to drive market share gains, currently owning a 20% share of the home improvement space. We remain encouraged by the company’s focus on the in-store shopping experience and emphasis on controlling costs through utilising new technology to assist its inventory management. Overall, we are positive on the stock given the company’s strong execution and the ongoing recovery in consumer home improvement spending and the domestic housing market.

Merck: 2.3% (2014: 2.3%) is a best-in-class global pharmaceuticals company with a strengthening pipeline of potential blockbuster drugs including Januvia (for diabetes), Isentress (for HIV) and the Gardasil vaccine. We believe that Merck is favourably positioned for long term growth and that the firm’s restructuring efforts should reduce costs and improve margins over the long term. Notably, Merck posted strong first quarter 2015 earnings results, exceeding analyst expectations and raising full year earnings guidance.

Bristol-Myers Squibb: 2.1% (2014: 2.0%) is a global pharmaceuticals manufacturer with strong growth potential in its diabetes and immuno-oncology business segments. The firm’s drug pipeline in immuno-oncology is particularly robust with multiple drugs in phase I and II clinical trials. Overall, the company offers a healthy dividend yield and an attractive risk and reward profile.

Raytheon: 2.1% (2014: 2.2%) is an aerospace and defence contractor that benefits from spending on reconnaissance-type products within the defence industry. The firm generates approximately 30% of its sales internationally and produces smaller, more exportable equipment that is less exposed to one programme, which we like from a diversification standpoint. Looking forward, we are positive on Raytheon’s income visibility from long term contracts, strong free cash flow generation and willingness to return capital to shareholders.

All percentages reflect the value of the holding as a percentage of total investments (including derivative financial instruments). Percentages in brackets represent the value of the holding as at 31 October 2014. Together, the ten largest investments represent 26.9% of the Company’s portfolio (ten largest investments at 31 October 2014: 26.9%).

Portfolio analysis

30 April 2015

 
Sector 
and 
geographical 
breakdown 
 
 
Australia 
Canada 
France 
Netherlands 
Peru 
South 
Korea 
United 
Kingdom 
United 
States 
Total 
Benchmark 
weight 
Consumer Discretionary – – – – – – – 7.7 7.7 6.6
Consumer Staples – – – 0.2 – – 0.9 5.6 6.7 7.1
Energy – – 1.7 – – – – 8.0 9.7 11.4
Financials – – – – – – – 25.5 25.5 29.5
Health Care – – – – – – – 13.8 13.8 14.4
Industrials – – – – – – – 15.2 15.2 10.3
Information
Technology
– – – – – 0.9 – 7.7 8.6 9.3
Materials 0.5 – – – – – – 4.4 4.9 3.1
Telecommunication
Services
– 0.3 – – – 0.5 – 1.8 2.6 2.2
Utilities – – – – – – – 5.3 5.3 6.1
 ------  --------  -----  --------  -----  -----  -----  -----  -----  -------
% Portfolio 30.04.15 0.5 0.3 1.7 0.2 – 1.4 0.9 95.0 100.0 100.0
 ------  --------  -----  --------  -----  -----  -----  -----  -----  -------
% Portfolio 31.10.14 0.9 1.1 1.3 0.4 0.3 – 1.0 95.0 100.0
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Investments

as at 30 April 2015

 
Company 
 
Country Sector Securities Market 
value

of 
total 
portfolio
£’000
Wells Fargo United States Financials Ordinary Shares  3,864  3.8
Options (7)
JPMorgan Chase United States Financials Ordinary Shares  3,498  3.5
General Electric United States Industrials Ordinary Shares  2,765  2.7
Options (20)
Comcast United States Consumer Discretionary Ordinary Shares 2,718 2.7
Options  (8)
Microsoft United States Information Technology Ordinary Shares  2,694  2.7
Pfizer United States Health Care Ordinary Shares  2,571  2.5
Options (1)
Home Depot United States Consumer Discretionary Ordinary Shares  2,537  2.5
Merck United States Health Care Ordinary Shares  2,331  2.3
Options (9)
Bristol-Myers Squibb United States Health Care Ordinary Shares  2,165  2.1
Options (3)
Raytheon United States Industrials Ordinary Shares  2,145  2.1
Options (1)
Citigroup United States Financials Ordinary Shares  2,105  2.1
Intel Corporation United States Information Technology Ordinary Shares  1,937  1.9
Procter & Gamble United States Consumer Staples Ordinary Shares  1,931  1.9
Options (7)
Verizon Communications United States Telecommunication Services Ordinary Shares 1,858 1.8
Options  (5)
United Health United States Health Care Ordinary Shares  1,821  1.8
Options (2)
DuPont United States Materials Ordinary Shares  1,808  1.8
Options (1)
Johnson & Johnson United States Health Care Ordinary Shares  1,741  1.7
Options (1)
SunTrust Banks United States Financials Ordinary Shares  1,730  1.7
Options (3)
Exxon Mobil United States Energy Ordinary Shares  1,686  1.7
Options (4)
US Bancorp United States Financials Ordinary Shares  1,682  1.7
Options (1)
Total France Energy Ordinary Shares  1,670  1.7
Options (5)
Occidental Petroleum United States Energy Ordinary Shares  1,572  1.5
Options (14)
Northrop Gruman United States Industrials Ordinary Shares  1,525  1.5
Options (1)
Lockheed Martin United States Industrials Ordinary Shares  1,445  1.4
Honeywell United States Industrials Ordinary Shares  1,362  1.3
Qualcomm United States Information Technology Ordinary Shares  1,351  1.3
Travelers Companies United States Financials Ordinary Shares  1,319  1.3
Options (1)
3M Company United States Industrials Ordinary Shares  1,239  1.2
MetLife United States Financials Ordinary Shares  1,215  1.2
NextEra Energy United States Utilities Ordinary Shares  1,198  1.2
United Technologies United States Industrials Ordinary Shares  1,192  1.2
Options (1)
Prudential Financial United States Financials Ordinary Shares  1,180  1.2
Options (6)
Morgan Stanley United States Financials Ordinary Shares  1,162  1.2
Bank of America United States Financials Ordinary Shares  1,153  1.1
International Paper Company United States Materials Ordinary Shares  1,141  1.1
United Parcel Service United States Industrials Ordinary Shares  1,137  1.1
Dominion Resources United States Utilities Ordinary Shares  1,115  1.1
Options (4)
Chevron United States Energy Ordinary Shares  1,069  1.1
Options (3)
McDonald's United States Consumer Discretionary Ordinary Shares 1,067 1.1
Options  (4)
Ace United States Financials Ordinary Shares  1,055  1.1
Goldman Sachs United States Financials Ordinary Shares  1,049  1.0
Marathon Petroleum United States Energy Ordinary Shares  1,041  1.0
Options (4)
Quest Diagnostics United States Health Care Ordinary Shares  985  1.0
Union Pacific United States Industrials Ordinary Shares  976  1.0
Kroger United States Consumer Staples Ordinary Shares  960  1.0
Diageo United Kingdom Consumer Staples Ordinary Shares  947  0.9
American Express United States Financials Ordinary Shares  901  0.9
Options (3)
Samsung Electronics South Korea Information Technology Ordinary Shares  897  0.9
CME United States Financials Ordinary Shares  891  0.9
Options (3)
Fifth Third Bank United States Financials Ordinary Shares  860  0.9
Options (5)
IBM United States Information Technology Ordinary Shares 852 0.8
Options  (1)
American Water Works Association United States Utilities Ordinary Shares 835 0.8
Options  (2)
Anthem United States Health Care Ordinary Shares  827  0.8
Options (1)
American International United States Financials Ordinary Shares 787 0.8
Options  (4)
Dow Chemical United States Materials Ordinary Shares  773  0.8
Options (7)
VF Corporation United States Consumer Discretionary Ordinary Shares 746 0.7
Options  (1)
Dollar General United States Consumer Discretionary Ordinary Shares  738  0.7
Motorola Solutions United States Information Technology Ordinary Shares  733  0.7
Marathon Oil United States Energy Ordinary Shares  707  0.7
Options (9)
Praxair United States Materials Ordinary Shares  692  0.7
Options (1)
Becton Dickinson United States Health Care Ordinary Shares  632  0.6
Options (1)
Altria United States Consumer Staples Ordinary Shares  619  0.6
Options (2)
Sempra Energy United States Utilities Ordinary Shares  603  0.6
AbbVie United States Health Care Ordinary Shares  589  0.6
Schlumberger United States Energy Ordinary Shares  590  0.6
Options (8)
Lorillard United States Consumer Staples Ordinary Shares  573  0.6
Options (2)
Chubb United States Financials Ordinary Shares  553  0.6
ConocoPhillips United States Energy Ordinary Shares  524  0.5
Options (3)
BHP Billiton Australia Materials Ordinary Shares  522  0.5
Options (3)
SK Telecom South Korea Telecommunication Services Ordinary Shares  512  0.5
Mondelez International United States Consumer Staples Ordinary Shares 507 0.5
Options  (5)
Coca-Cola United States Consumer Staples Ordinary Shares  494  0.5
Options (1)
Philip Morris International United States Consumer Staples Ordinary Shares 490  0.5
Options  (1)
Spectra Energy United States Energy Ordinary Shares  484  0.5
Options (1)
Wisconsin Energy United States Utilities Ordinary Shares  471  0.5
Weyerhaeuser United States Financials Ordinary Shares  468  0.5
Tyco International United States Industrials Ordinary Shares  461  0.5
Eversource Energy United States Utilities Ordinary Shares  451  0.4
CSX United States Industrials Ordinary Shares  440  0.4
Options (6)
CMS Energy United States Utilities Ordinary Shares  435  0.4
Options (1)
Abbott Laboratories United States Health Care Ordinary Shares  417  0.4
Options (1)
Rockwell Automation United States Industrials Ordinary Shares  411  0.4
Options (1)
Nielsen United States Industrials Ordinary Shares  395  0.4
Options (1)
Phillips 66 United States Energy Ordinary Shares  385  0.4
Options (1)
Automatic Data Processing United States Information Technology Ordinary Shares 330 0.3
Options  (1)
BCE Canada Telecommunication Services Ordinary Shares  308  0.3
ITC Holdings United States Utilities Ordinary Shares  287  0.3
Options (1)
Unilever Netherlands Consumer Staples Ordinary Shares 218 0.2
Options  (1)
Portfolio  ----------
100,926
 ---------100.0
 =====  =====

The negative valuation of £194,000 in respect of options held represents the notional cost of repurchasing the contracts at market prices as at 30 April 2015.

Statement of comprehensive income

for the six months ended 30 April 2015

Notes Revenue £’000 Capital £’000 Total £’000
Six 
months 
ended 
30.04.15 
(unaudited)
Six 
months 
ended 
30.04.14 
(unaudited)
Year 
ended 
31.10.14 
(audited)
Six 
months 
ended 
30.04.15 
(unaudited)
Six 
months 
ended 
30.04.14 
(unaudited)
Year 
ended 
31.10.14 
(audited)
Six 
months 
ended 
30.04.15 
(unaudited)
Six 
months 
ended 
30.04.14 
(unaudited)
Year 
ended 
31.10.14 
(audited)
Gains/(losses) on investments held at fair value through profit or loss – – – 5,021 (208) 9,067 5,021 (208) 9,067
(Losses)/gains on foreign exchange – – – (353) 198 13 (353) 198 13
Income from investments held at fair value through profit or loss 2 1,505 1,539 3,123 – – – 1,505 1,539 3,123
Other income 2 1,300 1,330 2,670 – – – 1,300 1,330 2,670
 --------  --------  --------  --------  --------  --------  --------  --------  --------
Total income 2,805 2,869 5,793 4,668 (10) 9,080 7,473 2,859 14,873
 --------  --------  --------  --------  --------  --------  --------  --------  --------
Expenses
Investment management fees 3 (132) (137) (273) (397) (412) (819) (529) (549) (1,092)
Other operating expenses 4 (191) (181) (386) (26) (18) (37) (217) (199) (423)
 --------  --------  --------  --------  --------  --------  --------  --------  --------
Total operating expenses (323) (318) (659) (423) (430) (856) (746) (748) (1,515)
 --------  --------  --------  --------  --------  --------  --------  --------  --------


 

Net profit on ordinary activities before finance costs and taxation 2,482 2,551 5,134 4,245 (440) 8,224 6,727 2,111 13,358
Finance costs – (1) (2) – (4) (6) – (5) (8)
 --------  --------  --------  --------  --------  --------  --------  --------  --------
Net profit on ordinary activities before taxation 2,482 2,550 5,132 4,245 (444) 8,218 6,727 2,106 13,350
Taxation (416) (437) (876) 81 91 180 (335) (346) (696)
 --------  --------  --------  --------  --------  --------  --------  --------  --------
Net profit on ordinary activities after taxation 2,066 2,113 4,256 4,326 (353) 8,398 6,392 1,760 12,654
 --------  --------  --------  --------  --------  --------  --------  --------  --------
Earnings per ordinary share – basic and diluted 6 2.27p 2.11p 4.25p 4.76p (0.35p) 8.38p 7.03p 1.76p 12.63p
 --------  --------  --------  --------  --------  --------  --------  --------  --------

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. All income is attributable to the equity holders of BlackRock North American Income Trust plc.

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 six months ended 30 April 2015

Notes 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 six months ended 30 April 2015 (unaudited)
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 period – – – – 4,326 2,066 6,392
Transaction with owners, recorded directly to equity:
Shares purchased and held in treasury 7 – – – (24,737) – – (24,737)
Tender costs – – – (216) – – (216)
Dividends paid (a) 5 – – – – – (1,807) (1,807)
 ------  ------  ------  ------  ------  ------  ------
At 30 April 2015 1,004 36,774 1,460 38,260 21,728 1,605 100,831
 ------  ------  ------  ------  ------  ------  ------
For the period ended 30 April 2014 (unaudited)
At 31 October 2013 994 35,671 1,460 63,213 9,004 947 111,289
Total comprehensive income: -
Net profit for the period – – – – (353) 2,113 1,760
Transaction with owners, recorded directly to equity:
Issue of ordinary shares 7 10 1,108 – – – – 1,118
Share issue costs – (5) – – – – (5)
Dividends paid (b) 5 – – – – – (1,849) (1,849)
 ------  ------  ------  ------  ------  ------  ------
At 30 April 2014 1,004 36,774 1,460 63,213 8,651 1,211 112,313
 ------  ------  ------  ------  ------  ------  ------
For the year ended 31 October 2014 (audited)
At 31 October 2013 994 35,671 1,460 63,213 9,004 947 111,289
Total comprehensive income:
Net profit for the year – – – – 8,398 4,256 12,654
Transaction with owners, recorded directly to equity:
Issue of ordinary shares 7 10 1,108 – – – – 1,118
Share issue costs – (5) – – – – (5)
Dividends paid (c) 5 – - – – – (3,857) (3,857)
 ------  ------  ------  ------  ------  ------  ------
At 31 October 2014 1,004 36,774 1,460 63,213 17,402 1,346 121,199
 ------  ------  ------  ------  ------  ------  ------

(a)   Final dividend of 1p per share for the year ended 31 October 2014, declared on 6 November 2014 and paid on 5 January 2015 and 1st interim dividend of 1p per share for the year ending 31 October 2015, declared on 12 February 2015 and paid on 7 April 2015.

(b)   Final dividend of 1p per share for the period ended 31 October 2013, declared on 3 October 2013 and paid on 4 December 2013 and 1st interim dividend of 1p per share for the year ended 31 October 2014, declared on 13 February 2014 and paid on 2 April 2014.

(c)   4th interim dividend of 1p per share for the period ended 31 October 2013, declared on 3 October 2013 and paid on 4 December 2013 (based on 84,488,500 ordinary shares); 1st interim dividend of 1p each for the year ended 31 October 2014, declared on 13 February 2014 and paid on 2 April 2014, 2nd interim dividend of 1p each for the year ended 31 October 2014, declared on 14 May 2014 and paid on 2 July 2014 and 3rd interim dividend of 1p each for the year ended 31 October 2014, declared on 6 August 2014 and paid on 2 October 2014 (based on 100,361,305 ordinary shares).

The transaction costs incurred on the acquisition and disposal of investments are included within the capital reserves and amounted to £10,000 for the six months ended 30 April 2015 (period ended 30 April 2014: £18,000; year ended 31 October 2014: £51,000).

Statement of financial position

as at 30 April 2015

Notes 30 
April 
2015
30 
April 
2014
31 
October 
2014
£’000 
(unaudited)
£’000 
(unaudited)
£’000 
(audited)
Non current assets
Investments held at fair value through profit or loss 101,120 114,798 121,965
 --------  --------  --------
Current assets
Other receivables 225 586 218
Cash and cash equivalents 1,583 580 923
 --------  --------  --------
1,808 1,166 1,141
 --------  --------  --------
Current liabilities
Bank overdraft – (1,088) –
Derivative financial instruments (194) (449) (746)
Other payables (1,903) (2,114) (1,161)
 --------  --------  --------
(2,097) (3,651) (1,907)
 --------  --------  --------
Net current liabilities (289) (2,485) (766)
 --------  --------  --------
Net assets 100,831 112,313 121,199
 ========  ========  ========
Equity attributable to equity holders
Called-up share capital 7 1,004 1,004 1,004
Share premium account 36,774 36,774 36,774
Capital redemption reserve 1,460 1,460 1,460
Special reserve 38,260 63,213 63,213
Capital reserves 21,728 8,651 17,402
Revenue reserve 1,605 1,211 1,346
 --------  --------  --------
Total equity shareholders’ funds 100,831 112,313 121,199
 ========  ========  ========
Net asset value per ordinary share 6 125.59p 111.91p 120.76p
 ========  ========  ========

Cash flow statement

for the six months ended 30 April 2015

Six 
months 
ended 
30 
April 
2015
Six 
months 
ended 
30 
April 
2014
Year 
ended 
31 
October 
2014
£’000 
(unaudited)
£’000 
(unaudited)
£’000 
(audited)
Operating activities
Profit before taxation 6,727 2,106 13,350
Add back interest paid – 5 8
(Gains)/losses on investments held at fair value through profit or loss (5,021) 208 (9,067)
Net movement on foreign exchange 353 (198) (13)
Sale of investments held at fair value through profit or loss 71,282 45,364 91,353
Purchases of investments held at fair value through profit or loss (45,968) (47,578) (91,551)
(Increase)/decrease in other receivables (127) 57 88
Increase in other payables 307 278 89
(Increase)/decrease in amounts due from brokers (16) (216) 129
Increase/(decrease) in amounts due to brokers 812 561 (351)
 --------  --------  --------
Net cash inflow from operating activities before interest and taxation 28,349 587 4,035
 --------  --------  --------
Interest paid – (5) (8)
Taxation on investment income included within gross income (333) (224) (720)
 --------  --------  --------
Net cash inflow from operating activities 28,016 358 3,307
 --------  --------  --------
Financing activities
Dividends paid (1,807) (1,849) (3,857)
Proceeds from issue of ordinary shares – 1,118 1,796
Tender offer repurchase of shares (24,737) – –
Tender offer costs paid (216) – –
Share issue costs paid (243) (5) (8)
 --------  --------  --------
Net cash outflow from financing activities (27,003) (736) (2,069)
 --------  --------  --------
Increase/(decrease) in cash and cash equivalents 1,013 (378) 1,238
 --------  --------  --------
Cash and cash equivalents at start of period 923 (328) (328)
Effect of foreign exchange rate changes (353) 198 13
 --------  --------  --------
Cash and cash equivalents at end of period 1,583 (508) 923
 --------  --------  --------
Comprised of:
Cash and cash equivalents 1,583 580 923
Bank overdraft – (1,088) –
  -------------- --------------  --------------
1,583 (508) 923
 ========  ========  ========


 

Notes to the financial statements

for the six months ended 30 April 2015

1. Principal activity and basis of preparation

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 half yearly financial statements have been prepared using the same accounting policies as set out in the Company’s Annual Report and Financial Statements for the year ended 31 October 2014 (which were 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) and in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’. Insofar as the Statement of Recommended Practice (‘SORP’) for investment trust companies (‘AIC’), revised in January 2009 is compatible with IFRS, the financial statements have been prepared in accordance with guidance set out in the SORP.

2. Income

Six 
months 
ended 
30 
April 
2015
Six 
months 
ended 
30 
April 
2014
Year 
ended 
31 
October 
2014
(unaudited) 
£’000
(unaudited) 
£’000
(audited) 
£’000
Investment income:
Overseas listed dividends 1,494 1,525 3,088
UK listed dividends 11 14 35
 --------  --------  --------
1,505 1,539 3,123
Other income:
Deposit interest on cash balances 1  3  4
Option premium income  1,299  1,327  2,666
 --------  --------  --------
 1,300  1,330  2,670
 --------  --------  --------
Total 2,805 2,869 5,793
 ========  ========  ========

During the period, the Company received premiums totalling £1,436,000 (period ended 30 April 2014: £1,497,000; year ended 31 October 2014: £2,747,000) for writing covered call options for the purposes of revenue generation, of which £1,299,000 (period ended 30 April 2014: £1,327,000; year ended 31 October 2014: £2,666,000) was taken to income. All derivative transactions were based on constituent stocks in the Russell 1000 Value Index. At 30 April 2015, there were 123 open positions with an associated liability of £194,000 (period ended 30 April 2014: 165 open positions with associated liability of £449,000 and year ended 31 October 2014: 130 open positions with associated liability of Â£746,000).

3. Investment management fee

Six months ended
30 April 2015
(unaudited)
Six months ended
30 April 2014
(unaudited)
Year ended
31 October 2014
(audited)
Revenue 
£’000
Capital 
£’000
Total 
£’000
Revenue 
£’000
Capital 
£’000
Total 
£’000
Revenue 
£’000
Capital 
£’000
Total 
£’000
Investment management fee 132 397 529 137 412 549 273 819  1,092
 -------  -------  -------  -------  -------  -------  -------  -------  -------
Total 132 397 529 137 412 549 273 819  1,092
 =======  =======  =======  ======  =======  =======  =======  =======  =======

The Company has a management agreement with BlackRock Fund Managers Limited (‘BFM’) under which BFM is entitled to an investment management fee, payable in arrears, calculated at the rate of 0.25 per cent. per quarter of the Company’s average market capitalisation. Average market capitalisation is calculated as the aggregate of the closing mid-market share price, multiplied by the number of shares in issue on each business day during the quarter, divided by the number of business days in the quarter.

4. Other Operating expenses

Six 
months 
ended 
30 
April 
2015
Six 
months 
ended 
30 
April 
2014
Year 
ended 
31 
October 
2014
(unaudited) 
£’000
(unaudited) 
£’000
(audited) 
£’000
Taken to revenue:
Custody fee 3 2 5
Auditors’ remuneration:
– audit services 13 14 26
– other audit services – 6 6
Registrar’s fee 9 13 30
Marketing fees 42 38 77
Directors’ emoluments 49 48 104
Other administration costs 75 60 138
 --------  --------  --------
191 181 386
Taken to capital:
Transaction costs – custody 26 18 37
 --------  --------  --------
217 199 423
 ========  ========  ========

5. Dividends

The Directors have declared a second quarterly interim dividend of 1.10p per share. The dividend will be paid on 1 July 2015 to shareholders on the Company’s register on 22 May 2015. Under IFRS, the second 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.

Dividends on equity shares during the period were:

Six 
months 
ended 
30 
April 
2015 
£’000
(unaudited)
Dividends on equity shares:
Fourth interim of 1.00p per ordinary share paid on 5 January 2015* 1,004
 --------
First interim dividend of 1.00p per ordinary share paid on 7 April 2015** 803
 --------
Accounted for in the financial statements 1,807
 --------
Second interim dividend of 1.10p per ordinary share payable on 1 July 2015*** 880
 --------
2,687
 --------
*               based on 100,361,305 ordinary shares.
**             based on 80,289,044 ordinary shares.
***            based on 80,039,044 ordinary shares.

6. Earnings and net asset value per ordinary share

Six 
months 
ended 
30 
April 
2015
Six 
months 
ended 
30 
April 
2014
Year 
ended 
31 
October 
2014
(unaudited) (unaudited) (audited)
Net revenue profit attributable to ordinary shareholders (£’000) 2,066 2,113 4,256
Net capital profit/(losses) attributable to ordinary shareholders (£’000)  4,326 (353) 8,398
 --------  --------  --------
Total profit attributable to ordinary shareholders (£’000) 6,392 1,760 12,654
 --------  --------  --------
Total equity attributable to shareholders (£’000) 100,831 112,313 121,199
 --------  --------  --------
The weighted average number of ordinary shares in issue during the period on which the earnings per ordinary share was calculated was: 90,935,105 99,997,217 100,180,757
 --------  --------  --------
The actual number of ordinary shares in issue at the end of the period on which the net asset value was calculated was: 80,289,044 100,361,305 100,361,305
 --------  --------  --------
Revenue earnings per share 2.27p 2.11p 4.25p
Capital earnings per share 4.76p (0.35p) 8.38p
 --------  --------  --------
Total earnings per share – basic and diluted 7.03p 1.76p 12.63p
 --------  --------  --------
Net asset value per share – basic and diluted 125.59p 111.91p 120.76p
 --------  --------  --------
Share price 117.50p 109.75p 112.00p
  ========  ======== ========

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.

7. Share capital

Ordinary 
shares 
in 
issue 
(number)
Treasury 
shares 
(number)
Total 
shares 
in 
issue
(number)
Nominal 
value 
£’000
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 1 pence each:
At 1 November 2014 100,361,305 – 100,361,305 1,004
 --------  --------  --------  --------
At 30 April 2015 80,289,044 20,072,261 100,361,305 1,004
 ========  ========  ========  ========

During the period to 30 April 2015, 20,072,261 ordinary shares were purchased (period ended 30 April 2014: nil) via the tender offer to be held in treasury at a total cost of £24,737,000.

No ordinary shares were cancelled during the period (period ended 30 April 2014: nil). Since the period end and up to the date of this report, 250,000 ordinary shares have been purchased and placed in treasury at a total cost of £287,000.

8. Valuation of financial instruments

Financial assets and financial liabilities are either carried in the Statement of Financial Position at their fair value (investment and derivatives) or at an amount which is a reasonable approximation of fair value (due from brokers, dividends and interest receivable, due to brokers, accruals, cash at bank and bank overdrafts). IFRS 13 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows.

The fair value hierarchy has the following levels:

Level 1 – quoted market price in an active market for an identical instrument. These include exchange traded derivative option contracts. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

Level 2 – Valuation techniques used to price securities based on observable inputs. This category includes quoted prices for similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.

Valuation techniques used for non-standardised financial instruments such as options, currency swaps and other over-the-counter derivatives, include the use of comparable recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity specific inputs.

Level 3 – Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs could have a significant impact on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments and instruments for which there is no active market. The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The determination of what constitutes ‘observable’ requires significant judgement by the Investment Manager. The Investment Manager considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

Over-the-counter derivative option contracts have been classified as level 2 investments as their valuation has been based on market observable inputs represented by the underlying quoted securities to which these contracts expose the Company.

The table below sets out fair value measurements using the IFRS 13 fair value hierarchy.

Financial assets at fair value through profit or loss at 30 April 2015 Level 

£’000
Level 

£’000
Level 

£’000
Total 
£’000
Assets:
Equity investments 101,120 – – 101,120
Liabilities:
Derivative financial instruments – written options (161) (33) – (194)
 --------  --------  --------  --------
100,959 (33) – 100,926
 ========  ========  ========  ========

   

Financial assets at fair value through profit or loss at 30 April 2014 Level 

£’000
Level 

£’000
Level 

£’000
Total 
£’000
Assets:
Equity investments 114,798 – – 114,798
Liabilities:
Derivative financial instruments – written options (336) (113) – (449)
 --------  --------  --------  --------
114,462 (113) – 114,349
 ========  ========  ========  ========

   

Financial assets at fair value through profit or loss at 31 October 2014 Level 

£’000
Level 

£’000
Level 

£’000
Total 
£’000
Assets:
Equity investments 121,965 – – 121,965
Liabilities:
Derivative financial instruments – written options (554) (192) – (746)
 --------  --------  --------  --------
121,411 (192) – 121,219
 ========  ========  ========  ========

There were no transfers between levels for financial assets and financial liabilities during the period recorded at fair value as at 30 April 2015, 30 April 2014 and 31 October 2014. The Company did not hold any level 3 securities throughout the financial period or as at 30 April 2015, 30 April 2014 and 31 October 2014.

9. Related party disclosure

The Board consists of four non-executive Directors all of whom are considered to be independent by the Board. None of the Directors has a service contract with the Company. The Chairman receives an annual fee of £30,000, the Chairman of the Audit and Management Engagement Committee receives an annual fee of £25,000 and the other Directors each receive an annual fee of £21,000. At 30 April 2015, an amount of £8,080 (30 April 2014: £8,080; 31 October 2014: £9,489) was outstanding in respect of Directors’ fees.

At 30 April 2015, the Directors’ interests in the Company’s ordinary shares were as follows:

Six 
months 
ended 
30 
April 
2015
(unaudited)
Six 
months 
ended 
30 
April 
2014
(unaudited)
Year 
ended 
31 
October 
2014
(audited)
Simon Miller (Chairman) 38,094 38,094 38,094
 --------  --------  --------
Christopher Casey 19,047 19,047 19,047
 --------  --------  --------
Andrew Irvine 38,094 38,094 38,094
 --------  --------  --------
Alice Ryder 9,047 9,047 9,047
 --------  --------  --------

Since the period end and up to the date of this report there have been no changes in Directors’ holdings.

10. Transactions with the Investment Manager

BlackRock Fund Managers Limited (‘BFM’) was appointed as the Company’s Alternative Investment Fund Manager (‘AIFM’) with effect from 2 July 2014. BFM provides management and administration services to the Company under a contract which is terminable on six months’ notice in writing. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited. For details, see note 3.

The investment management fee for the six months ended 30 April 2015 was £529,000 (period ended 30 April 2014: £549,000; year ended 31 October 2014: £1,092,000). At the period end, an amount of £529,000 (period ended 30 April 2014: £265,000; year ended 31 October 2014: £356,000) was outstanding in respect of the investment management fee.

In addition to the above services, with effect from 1 November 2013 BlackRock has provided the Company with marketing services. The total fees paid or payable for these services for the period ended 30 April 2015 amounted to £42,000 excluding VAT (period ended 30 April 2014: £38,000; year ended 31 October 2014: £77,000). At 30 April 2015, £119,000 (period ended 30 April 2014: £38,000; year ended 31 October 2014: £77,000) was outstanding.

11. Contingent liabilities

There were no contingent liabilities at 30 April 2015, 30 April 2014 or 31 October 2014.

12. Publication of non statutory accounts

The financial information contained in this half yearly financial report does not constitute statutory accounts, as defined in section 435 of the Companies Act 2006. The financial information for the periods ended 30 April 2015 and 30 April 2014 has not been audited.

The information for the year ended 31 October 2014 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on these financial statements contained no qualifications or statement under sections 498(2) or 498(3) of the Companies Act 2006.

13. Annual results

The Board expects to announce the annual results for the year ended 31 October 2015 in mid December 2015.

Copies of the annual results announcement can be obtained from the Secretary on 0207 743 3000. The annual report should be available by late December 2015 with the Annual General Meeting being held in February 2016.

For further information, please contact:

Simon White, Head of Investment Trusts, BlackRock Investment Management (UK) Limited –

Tel: 020 7743 5284

Scott Malatesta, Senior Product Strategies, BlackRock Investment Management (UK) LLC –

Tel: 020 7743 3000

Emma Philips, Media & Communications, BlackRock Investment Management (UK) Limited –

Tel: 020 7743 2922

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