Half-year Report

BLACKROCK NORTH AMERICAN INCOME TRUST PLC
LEI:  549300WWOCXSC241W468 - Article 5 Transparency Directive, DTR 4.2
 

Half Yearly Financial Report for the six months ended 30 April 2018

PERFORMANCE RECORD

FINANCIAL HIGHLIGHTS
 

Attributable to ordinary shareholders	30  April  2018	31  October  2017	Change  %
Assets
Net assets (£’000)1	114,224	118,295	-3.4
Net asset value per ordinary share – with dividend reinvested	165.84p –	171.76p –	-3.4  -1.6
Ordinary share price (mid-market) – with dividend reinvested	154.50p –	160.50p –	-3.7  -1.8
Russell 1000 Value Index (total return)	1097.95	1117.13	-1.7
Discount to cum income net asset value	6.8%	6.6%

	For  the  six  months  ended  30 April  2018	For the  six months  ended  30 April  2017	Change  %
Revenue
Net profit after taxation (£’000)	1,784	1,763	+1.2
Revenue earnings per ordinary share	2.59p	2.56p	+1.2
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1 The change in net assets reflects market movements during the period.

ANNUAL PERFORMANCE SINCE LAUNCH ON 24 OCTOBER 2012 TO 30 APRIL 2018

	NAV Total Return	Russell 1000 Value Index Total Return	Share Price Total Return
2013	17.1	27.4	16.5
2014	11.8	16.9	2.4
2015	4.9	4.1	4.7
2016	34.2	34.6	43.0
2017	11.4	8.3	6.3
2018	-1.6	-1.7	-1.8

Sources: BlackRock and Datastream
Performance figures have been calculated in sterling terms on a total return basis

CHAIRMAN’S STATEMENT FOR THE SIX MONTHS ENDED 30 APRIL 2018

MARKET OVERVIEW
Following a solid finish to 2017, U.S. equities began the year strongly, buoyed by ongoing strength in economic data, tax reforms and accelerating corporate earnings. However, equity market volatility moved higher amid concerns over inflation and the impact of U.S.-China trade sanctions.

PERFORMANCE
For the six month period ended 30 April 2018, the Company’s net asset value per share (NAV) returned -1.6% compared with a return of -1.7% in the Russell 1000 Value Index. The Company’s share price returned -1.8% over the same period (all figures in sterling terms with dividend reinvested).

Details of the factors which have contributed to or detracted from performance are set out in the Investment Manager’s Report.

Since the period end and up to close of business on 21 June 2018, the Company’s NAV has increased by 4.8% and the share price has risen by 12.7% (both percentages in sterling with dividend reinvested).

EARNINGS AND DIVIDENDS
The Company’s revenue return per share for the six months ended 30 April 2018 amounted to 2.59p compared with 2.56p for the six months to 30 April 2017. On 6 March 2018 the Board declared the first quarterly dividend of 2.00p per share which was paid on 13 April 2018. A second quarterly dividend of 2.00p per share has been declared and will be paid on 29 June 2018 to shareholders on the register on 25 May 2018. This represents an increase of 63.3% on the payments for the corresponding period in 2017.

As stated in the Annual Report, in line with the commitment to a progressive dividend policy, the Board has resolved to pay a quarterly dividend of 2.00p per share in the current financial year, and full year distribution of 8.00p per share, which represents a dividend yield of 5.2% based on the share price as at 30 April 2018. A small amount of the Company’s capital profits will be paid out to achieve this.

DISCOUNT/SHARE REPURCHASES
During the six month period the share price traded at an average discount of 5.7% to NAV. The discount ranged between 2.3% and 9.9% and ended the period at 6.8%. The Directors continue to monitor the discount at which the ordinary shares trade to their prevailing NAV. The shares were trading at a premium of 0.1% as at the close of business on 21 June 2018.

No shares were repurchased during the six month period under review, or in the period up to the close of business on 21 June 2018.

OUTLOOK
Most leading indicators show continuing strength in the U.S. economy. This is supported by tax cuts and government expenditure plans. However, rising inflation and increased tensions in trade relations, together with possible interest rate hikes, could lead to pressure on valuations and your Portfolio Managers continue to be aware of the inherent risks attached to the bull market which has existed since 2009.

Simon Miller
22 June 2018

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:

• Counterparty;

• Investment performance;

• Legal & Compliance;

• Market;

• Operational;

• Financial; and

• Marketing.

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 2017. A detailed explanation can be found in the Strategic Report on pages 8 and 9 and in note 14 on pages 56 to 66 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 after any relief for taxation) are 1.07% of net assets for the year ended 31 October 2017 and it is expected that this is unlikely to change significantly going forward.

RELATED PARTY DISCLOSURE AND TRANSACTIONS WITH THE 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 fees payable are set out in note 4 and note 10.

The related party transactions with the Directors are set out in note 11.

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 International Accounting Standard 34 – ‘Interim Financial Reporting’; 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 22 June 2018 and the above responsibility statement was signed on its behalf by the Chairman.

Simon Miller
For and on behalf of the Board
22 June 2018

INVESTMENT MANAGER’S REPORT

MARKET OVERVIEW
For the six month period ended 30 April 2018, U.S. large cap stocks, as represented by the S&P 500 Index, advanced by 3.8% (in U.S. dollar terms). The S&P 500 Index closed 2017 with strong returns in both November and December, capping a historic calendar year where the index delivered positive returns in all 12 months for the first time in its history. In contrast, the first four months of 2018 were a bumpy ride for investors as U.S. equities surged higher in January, retraced lower in February and March, and then registered modest gains in April. Notably, the U.S. Federal Reserve continued its path towards normalising U.S. interest rates to higher levels, which in our view is indicative of a healthy and expanding domestic economy. Economic fundamentals support this narrative as well. The U.S. continues to operate at full employment with the unemployment rate standing at 3.9%. Business and consumer confidence levels are also high, with manufacturing and consumer spending trends suggesting robust demand for goods and services.

PORTFOLIO OVERVIEW
Over the six months to 30 April 2018, the Company’s NAV return was -1.6% and the share price return was -1.8% (both figures in sterling terms with dividend reinvested). The Company's benchmark, the Russell 1000 Value Index, returned -1.7% over the same period (on a total return basis). The largest contributor to relative performance was a combination of stock selection and allocation decisions in the health care sector. Notably, stock selection in the pharmaceuticals industry boosted relative returns, as did our overweight position in the health care providers & services industry. In consumer staples, stock selection in the beverages industry was the primary contributor to relative performance. An underweight position in Procter & Gamble, a large benchmark holding, also added to relative returns in the sector. Stock selection in energy also bolstered relative returns, as our underweight to the U.S. integrated oil & gas operators and our overweight to their non-U.S. domiciled peers proved to be beneficial during the period.

The largest detractor from relative performance was stock selection in financials. Notably, stock selection in the insurance industry dampened relative results, including our overweight positions in American International Group and MetLife. Stock selection in the banks and capital markets industries also hurt relative returns in the sector. In information technology, stock selection in semiconductors & semiconductor equipment and an underweight to the communications equipment industry also weighed on relative performance. Lastly, stock selection in the materials sector dampened relative returns during the period.

The Company’s option overwrite component enhanced the portfolio’s income during the period. However, whilst writing covered call options in a rising equity environment detracted modestly from absolute performance, it does provide an element of downside protection to the Company during periods of volatility.

Below is an overview of our allocations (in sterling) at the end of the period.

Health Care: 3.4% overweight (17.7% of portfolio)
Demographics are a key driver of long-term growth potential in the sector as longer life expectancy and lower fertility rates are contributing to aging populations globally. All else equal, older populations spend more on health care than younger populations, which in our view translates to a powerful long-term demand picture. In the U.S., a combination of greater demand for health care services and rising costs are driving a need for increased efficiency within the health care eco-system. We believe operators that can contribute to health care innovation (i.e. pharmaceuticals) and strong cost control (i.e. health maintenance organisations) ultimately stand to benefit. Broadly, we prefer to invest in health care companies which exhibit many of the quality and earnings stability characteristics that we target, along with solid earnings and dividend growth prospects.

Information Technology: 2.3% overweight (11.4% of portfolio)
Artificial intelligence. Big data. Disruption. These terms have increasingly become a part of our everyday vernacular. Some areas of the information technology (IT) sector still incubate companies similar to the nascent, high-flying and cash-poor innovators that ushered the U.S. equity market into the sharp rise and eventual tumble known as the dot-com bubble of the year 2000. While the fundamental identity of the sector remains growth-oriented, an increasing number of technology companies have transcended to what we refer to as ‘industrial tech’ – highly efficient and productive profit engines. These firms are competitively insulated from industry disruptors, well-positioned to take advantage of long-term secular tailwinds, and are exhibiting growth in earnings and free cash flow. We believe valuations remain attractive for companies such as Oracle (3.0% of the portfolio), Microsoft (2.6% of the portfolio), and Qualcomm (1.2% of the portfolio). These firms offer a compelling mix of healthy balance sheets, strong free cash flow generation and growing dividend streams. Additionally, we believe the sector should continue to benefit from an increase in capital spending.

Financials: 1.7% overweight (28.6% of portfolio)
Financials represent the Company’s largest absolute sector allocation. We believe U.S. banks are safer and sounder investments today than before the financial crisis. The U.S. banks have improved balance sheets, low credit losses, high capital levels, and attractive valuations. Further, their growing dividends are attractive from a capital return perspective. In our view, the banking industry is also uniquely positioned to benefit from rising short-term U.S. interest rates. Banks operate as a spread business, taking in deposits from savers in exchange for interest payments and then loaning out this money to borrowers while charging a higher interest rate fee. Banks then earn net interest margin, or the spread between the interest income a bank collects from borrowers and the interest it pays to savers. Rising interest rates can therefore result in net interest margin expansion, and greater profitability, for bank operators. This business architecture has historically enabled the banks to act as a potential hedge against rising interest rates and inflation risks.

Energy: 0.4% overweight (12.1% of portfolio)
Over the trailing six-months ending 30 April 2018, West Texas Intermediate (WTI) crude oil has increased over 26% to $68.57 per barrel of oil. In contrast, the Russell 1000 Value Index energy sector has returned 10.6% during the same period. We believe this performance differential, combined with a favourable supply-demand picture, creates potential opportunities for investors. The surge in the oil price coincides with both the extension of OPEC production cuts and rising tensions in the Persian Gulf. Yet, fundamental underpinnings of global oil supply and demand also bear discussion. In our view, oil markets have structurally exited the cycle weakness experienced during 2015-2017. The catalyst for this shift is declining oil production rates from some mature oil fields globally, allowing for co-existence of higher prices and robust U.S. production growth. In our portfolio, we favour exposure to mega-cap integrated oil & gas operators with healthy balance sheets, strong free cash flow generation, visible growth prospects and healthy dividend yields. In the oil exploration & production industry we favour disciplined capital allocators with oil-weighted, low-cost resource assets that are trading at discounted valuations.

Telecommunication Services: 0.1% overweight  (2.8% of portfolio)
We are overweight to telecoms and our allocation remains concentrated in diversified telecommunication bellwether Verizon Communications (2.4% of the portfolio). Our stock specific exposure in the sector is to companies that offer healthy dividend yields and opportunity for steady, long-term growth.

Consumer Staples: 0.7% overweight (7.8% of portfolio)
The consumer staples sector is a common destination for the conservative equity income investor. Historically, many of these companies have offered investors recognisable brands, diverse revenue streams, exposure to growing end markets and the ability to garner pricing power. These characteristics, in turn, have translated into strong and often stable free cash flow and growing dividends for shareholders. In recent years some of these secular advantages have become challenged, in our view, due to changing consumer preferences, greater end market competition from local brands, and disruption from the rapid adoption of online shopping. A seclective approach is critical given these challenges. Notably, we prefer ownership of companies with underappreciated growth profiles, sticky customer bases, and the ability to grow market share and/or improve profit margins.

Materials: 0.6% underweight (2.3% of portfolio)
Our exposure to the materials sector is primarily based in the chemicals industry. In particular, we believe longer-term secular trends in global population growth will benefit well positioned companies in the agricultural chemical space. We believe companies with scale and high-quality assets will be able to deliver stronger earnings and dividend growth. Our largest portfolio holding in the chemicals industry is DowDuPont (1.2% of the portfolio).

Utilities: 0.9% underweight (5.1% of portfolio)
Strong investor demand for equity income in recent years has resulted in elevated valuations for many high dividend yielding stocks, including utility companies. Despite rich valuations at the sector level, we are finding pockets of opportunity in U.S. regulated utilities such as PG&E Corporation (1.3% of the portfolio), FirstEnergy (1.2% of the portfolio), Public Service Enterprise Group (1.2% of the portfolio) and NextEra Energy (1.1% of the portfolio). Public Service Enterprise Group and NextEra Energy add a level of stability and defensiveness to the portfolio through their durable dividend profiles and healthy earnings growth potential. Alternatively, PG&E and FirstEnergy offer us exposure to companies with good underlying regulated franchises with some near-term uncertainties. These uncertainties, in our view, create opportunity for patient long-term investors that are willing and capable of doing deep analysis on complex investment issues.

Industrials: 0.2% overweight (8.2% of portfolio)
We have reduced our exposure to the industrials sector over the past year, and the Company holds an allocation that is marginally overweight to its benchmark. Despite reducing our overall exposure, we remain optimistic within specific pockets of the sector. In particular, we are bullish on the large-cap aerospace & defence operators. These firms have strong balance sheets, good visibility into sales and earnings, and historically have demonstrated shareholder friendly capital return policies. Further, we believe there is a potential for an upward inflection, globally, in defence spending. We also maintain exposure to industrial conglomerates such as General Electric (1.2% of the portfolio) and Honeywell International (1.2% of the portfolio).

Consumer Discretionary: 2.7% underweight (4.0% of portfolio)
The balance sheet for U.S. consumers has improved in recent years, aided by a recovering domestic housing market, strong jobs growth, and accelerating wages. These factors have also contributed to an increase in consumer confidence. However, these positive tailwinds have failed to translate into stronger retail sales for many brick & mortar stores as changing consumer preferences, technological innovation and new competitors threaten traditional business models. We remain cautious within the sector given these disruptive forces. Our positioning in the sector reflects stock-specific opportunities that, in our view, are trading at discounted valuations or are somewhat insulated from these disruptive pressures. For example, we are positive on Comcast Corporation (1.5% of the portfolio), a low-cost provider of high speed data service, and Lowe’s Companies (0.5% of the portfolio) a home improvement retailer.

Real Estate: 4.6% underweight (0.0% of portfolio)
Our largest underweight position in the Company is in the real estate sector. We maintain a 0% weighting in the space due to our view that valuations are unattractive at current levels. Further, the returns of real estate stocks relative to the returns of Long Treasury Bonds are highly correlated today. Therefore, we believe the prospects for higher interest rates in the U.S. are a potential headwind for the sector as well.

POSITIONING AND OUTLOOK
Our investment outlook, which is based on an amalgamation of our company specific research, aligns closely with the observations we have expressed over the past year. First, we believe the opportunity for investors lies in the persistence of today’s positive economic backdrop being a catalyst for additional corporate earnings growth. Stimulus from U.S. tax reform and the recently passed federal budget help in this regard, and the prospect for reduced regulation is a potentially underappreciated tailwind as well. Second, we believe more moderate return expectations are prudent given elevated U.S. equity market valuations. Price-to-earnings ratios are unlikely to continue expanding, in our view, and it can be reasonably deduced that the pressure on companies to demonstrate meaningful earnings growth is high.

Although our base case is for a continuation of the current U.S. economic expansion, there are also several key risks to our investment outlook. For example, we continue to monitor the trajectory of inflation and interest rates for signs of economic overheating, as these factors can potentially pull forward the end of the current business cycle more quickly. The rise of U.S. protectionism in regards to global trade and tariffs also bears monitoring. We view the trade actions implemented so far as unlikely to derail the benign economic and market backdrop, although further escalation could impact investor sentiment and expectations for economic growth.

Tony DeSpirito, Franco Tapia and David Zhao
BlackRock Investment Management LLC
22 June 2018

TEN LARGEST INVESTMENTS AS AT 30 APRIL 2018

JPMorgan Chase: 4.4% (2017: 4.1%) is a U.S. based diversified financial company. JPMorgan’s capital base is one of the strongest in the banks industry and it provides a measure of safety and financial flexibility. Overall, JPMorgan is a well-managed, quality global franchise with above average organic growth and returns relative to industry peers.

Bank of America: 4.3% (2017: 4.0%) is one of the largest financial institutions in the U.S. with lending operations in the consumer, small-business, and corporate markets, in addition to asset management and investment banking divisions. Bank of America has delivered consistent results over the last year, with particular strength within their consumer bank and investments divisions.

Pfizer: 3.8% (2017: 3.9%) is a diversified pharmaceutical firm based in the U.S. In our view, Pfizer offers many of the quality and stability characteristics that we prefer from an investment philosophy standpoint. The stock trades at an attractive valuation, pays a healthy dividend yield, and has the balance sheet flexibility to deliver long-term shareholder value.

Citigroup: 3.6% (2017: 3.9%) is a U.S. based money center bank with a global footprint. We believe Citigroup is attractively valued on both a price-to-earnings and book value basis, has self-help opportunities within its consumer banking segment, and offers the potential for dividend growth.

Oracle: 3.0% (2017: 3.2%) is a vertically integrated software company that offers both applications and underlying database software. Oracle’s database and enterprise markets are sticky in terms of customer retention, which we like. Further, we are positive on Oracle’s ability to successfully convert customers from an on premise licensing model (i.e. customers pay for an upfront license and ongoing maintenance) to a higher margin, cloud based subscription model (i.e. delivery of software and services over the internet).

Wells Fargo: 3.0% (2017: 3.0%) is a U.S. bank which operates in three segments including community banking, wholesale banking and wealth and investment management. Wells Fargo has a strong deposit franchise, and we are encouraged by the company’s history of strong investment returns and prudent credit risk management. In our view, shares of the company are underappreciated today in an environment characterised by low credit losses and ample access to liquidity.

Anthem: 2.6% (2017: 2.6%) is one of the largest health maintenance organisations in the U.S. with offerings in the commercial (large and small employer), Medicare, Medicaid and individual markets. We believe Anthem has an undervalued competitive position given their overall scale and investment in technology. These structural advantages have the potential to drive down costs and improve the company’s profitability.

Microsoft: 2.6% (2017: 2.2%) 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. We are bullish on the stock given the firm’s dominant position in business and enterprise software and the opportunity for greater client engagement and usage by shifting from on premise to a cloud distribution model.

Royal Dutch Shell: 2.5% (2017: 1.9%) is an integrated oil and gas company. Royal Dutch Shell offers a 5% dividend yield and trades at an attractive valuation relative to the company’s history and relative to its integrated oil & gas peers.

Verizon Communications: 2.4% (2017: 1.5%) is a U.S. telecom services provider. We like the company’s stable, cash generative business and the stock’s high dividend yield. Further, we believe the stock trades at an attractive valuation relative to the broader U.S. equity market.

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 2017. Together, the ten largest investments represent 32.2% of the Company’s portfolio (31 October 2017: 31.3%).

PORTFOLIO ANALYSIS 30 APRIL 2018

Sectors	Canada  %	China  %	Denmark  %	France  %	Germany  %	Ireland  %	Netherlands  %	South  Korea  %	United  Kingdom  %	United  States  %	Total  %	31.10.17  Total  %
Financials	–	–	–	–	–	–	–	–	–	28.6	28.6	28.2
Health Care	–	–	0.8	–	0.5	1.3	–	–	2.0	13.1	17.7	18.0
Energy	2.4	–	–	1.8	–	–	2.5	–	1.2	4.2	12.1	11.3
Information Technology	0.6	0.3	–	–	–	–	–	–	–	10.5	11.4	10.7
Industrials	–	–	–	–	–	0.7	1.7	–	0.4	5.4	8.2	10.1
Consumer Staples	–	–	–	0.3	–	–	0.8	–	1.7	5.0	7.8	6.1
Utilities	–	–	–	–	–	–	–	–	–	5.1	5.1	5.8
Consumer Discretionary	–	–	–	0.2	–	–	–	–	–	3.8	4.0	3.7
Telecommunication Services	0.3	–	–	–	–	–	–	0.1	–	2.4	2.8	2.4
Materials	–	–	–	–	–	0.8	–	–	–	1.5	2.3	3.7
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% Portfolio 30.04.18	3.3	0.3	0.8	2.3	0.5	2.8	5.0	0.1	5.3	79.6	100.0
	--------	--------	--------	--------	--------	--------	--------	--------	--------	--------	--------	--------
% Portfolio 31.10.17	3.2	0.4	0.8	2.3	–	2.1	4.5	0.6	4.3	81.8		100.0
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INVESTMENTS AS AT 30 APRIL 2018

Company	Country	Sector	Securities	Market value £’000		of total portfolio
JPMorgan Chase	United tates	Financials	Ordinary shares Options	4,835 (3)	}	4.4
Bank of America	United States	Financials	Ordinary shares Options	4,773 (4)	}	4.3
Pfizer	United States	Health Care	Ordinary shares Options	4,229 (7)	}	3.8
Citigroup	United States	Financials	Ordinary shares	3,914		3.6
Oracle	United States	Information Technology	Ordinary shares Options	3,263 (3)	}	3.0
Wells Fargo	United States	Financials	Ordinary shares Options	3,251 (2)	}	3.0
Anthem	United States	Health Care	Ordinary shares Options	2,900 (21)	}	2.6
Microsoft	United States	Information Technology	Ordinary shares Options	2,816 (6)	}	2.6
Royal Dutch Shell	Netherlands	Energy	Ordinary shares Options	2,783 (14)	}	2.5
Verizon Communications	United States	Telecommunication Services	Ordinary shares Options	2,698 (8)	}	2.4
Suncor Energy	Canada	Energy	Ordinary shares Options	2,696 (31)	}	2.4
American International Group	United States	Financials	Ordinary shares	2,256		2.1
AstraZeneca	United Kingdom	Health Care	Ordinary shares Options	2,228 (5)	}	2.0
Morgan Stanley	United States	Financials	Ordinary shares Options	2,009 (1)	}	1.8
Total	France	Energy	Ordinary shares Options	1,996 (22)	}	1.8
Koninklijke Philips	Netherlands	Industrials	Ordinary shares Options	1,883 (11)	}	1.7
Aetna	United States	Health Care	Ordinary shares	1,846		1.7
MetLife	United States	Financials	Ordinary shares Options	1,782 (6)	}	1.6
Merck	United States	Health Care	Ordinary shares Options	1,729 (16)	}	1.6
Comcast Corporation	United States	Consumer Discretionary	Ordinary shares Options	1,661 * –	}	1.5
Diageo	United Kingdom	Consumer Staples	Ordinary shares Options	1,512 * –	}	1.4
US Bancorp	United States	Financials	Ordinary shares Options	1,493 (1)	}	1.4
Medtronic	Ireland	Health Care	Ordinary shares Options	1,485 (2)	}	1.3
Goldman Sachs	United States	Financials	Ordinary shares Options	1,436 * –	}	1.3
PG & E	United States	Utilities	Ordinary shares	1,376		1.3
General Electric	United States	Industrials	Ordinary shares	1,371		1.2
First Energy	United States	Utilities	Ordinary shares	1,368		1.2
Honeywell International	United States	Industrials	Ordinary shares Options	1,356 (2)	}	1.2
Travelers Companies	United States	Financials	Ordinary shares	1,315		1.2
Public Service Enterprise Group	United States	Utilities	Ordinary shares Options	1,322 (12)	}	1.2
Hess	United States	Energy	Ordinary shares Options	1,308 (21)	}	1.2
DowDuPont	United States	Materials	Ordinary shares Options	1,272 (1)	}	1.2
BP Group	United Kingdom	Energy	Ordinary shares Options	1,279 (9)	}	1.2
Qualcomm	United States	Information Technology	Ordinary shares Options	1,265 * –	}	1.2
SunTrust Banks	United States	Financials	Ordinary shares Options	1,242 (1)	}	1.1
NextEra Energy	United States	Utilities	Ordinary shares Options	1,218 (5)	}	1.1
UnitedHealth Group	United States	Health Care	Ordinary shares Options	1,134 (2)	}	1.0
Motorola Solutions	United States	Information Technology	Ordinary shares Options	1,032 (3)	}	0.9
Altria Group	United States	Consumer Staples	Ordinary shares Options	997 * –	}	0.9
Mckesson	United States	Health Care	Ordinary shares	940		0.9
Northrop Grumman	United States	Industrials	Ordinary shares Options	937 * –	}	0.9
Marathon Petroleum	United States	Energy	Ordinary shares Options	916 (4)	}	0.8
Chevron	United States	Energy	Ordinary shares Options	913 (5)	}	0.8
Unilever	Netherlands	Consumer Staples	Ordinary shares Options	873 (3)	}	0.8
Novo–Nordisk	Denmark	Health Care	Ordinary shares Options	863 (1)	}	0.8
Marsh & McLennan	United States	Financials	Ordinary shares Options	862 (1)	}	0.8
Devon Energy	United States	Energy	Ordinary shares Options	862 (9)	}	0.8
CRH	Ireland	Materials	Ordinary shares Options	850 (7)	}	0.8
Procter & Gamble	United States	Consumer Staples	Ordinary shares Options	841 * –	}	0.8
Prudential Financial	United States	Financials	Ordinary shares Options	824 (2)	}	0.7
Experian	Ireland	Industrials	Ordinary shares Options	787 (9)	}	0.7
CDW	United States	Information Technology	Ordinary shares	734		0.7
CVS Health	United States	Consumer Staples	Ordinary shares Options	724 (6)	}	0.7
Interpublic Group of Companies	United States	Consumer Discretionary	Ordinary shares Options	703 (1)	}	0.6
Union Pacific	United States	Industrials	Ordinary shares Options	703 (3)	}	0.6
Kroger	United States	Consumer Staples	Ordinary shares Options	700 (4)	}	0.6
Cardinal Health	United States	Health Care	Ordinary shares	672		0.6
Constellation Software	Canada	Information Technology	Ordinary shares	662		0.6
Samsung Electronics	United States	Information Technology	Ordinary shares	619		0.6
Nielsen	United States	Industrials	Ordinary shares Options	617 * –	}	0.6
Cisco Systems	United States	Information Technology	Ordinary shares Options	610 (5)	}	0.6
Dr Pepper Snapple	United States	Consumer Staples	Ordinary shares Options	601 (1)	}	0.5
Kellogg Co	United States	Consumer Staples	Ordinary shares Options	600 (1)	}	0.5
Bayer	Germany	Health Care	Ordinary shares Options	600 (6)	}	0.5
Taiwan Semiconductor Manufacturing	United States	Information Technology	Ordinary shares Options	588 * –	}	0.5
Lowe's Companies	United States	Consumer Discretionary	Ordinary shares Options	580 (1)	}	0.5
Schwab (Charles)	United States	Financials	Ordinary shares Options	578 (3)	}	0.5
Keycorp	United States	Financials	Ordinary shares Options	551 (3)	}	0.5
Lockheed Martin	United States	Industrials	Ordinary shares Options	540 * –	}	0.5
Pepsico	United States	Consumer Staples	Ordinary shares Options	536 * –	}	0.5
Mattel	United States	Consumer Discretionary	Ordinary shares Options	528 * –	}	0.5
General Mills	United States	Consumer Staples	Ordinary shares Options	526 * –	}	0.5
Dollar General	United States	Consumer Discretionary	Ordinary shares Options	510 (2)	}	0.5
Humana	United States	Health Care	Ordinary shares	496		0.5
Quest Diagnostics	United States	Health Care	Ordinary shares	494		0.4
Pentair	United Kingdom	Industrials	Ordinary shares Options	470 * –	}	0.4
Cognizant Technology Solutions	United States	Information Technology	Ordinary shares Options	433 (1)	}	0.4
3M	United States	Industrials	Ordinary shares Options	387 * –	}	0.4
Halliburton	United States	Energy	Ordinary shares Options	390 (7)	}	0.3
International Paper	United States	Materials	Ordinary shares Options	379 * –	}	0.3
British American Tobacco	United Kingdom	Consumer Staples	Ordinary shares	373		0.3
Lenovo	China	Information Technology	Ordinary shares Options	349 * –	}	0.3
Edison International	United States	Utilities	Ordinary shares	333		0.3
Danone	France	Consumer Staples	Ordinary shares Options	302 (1)	}	0.3
BCE	Canada	Telecommunication Services	Ordinary shares Options	293 * –	}	0.3
Time Warner	United States	Consumer Discretionary	Ordinary shares	224		0.2
Lincoln National Corporation	United States	Financials	Ordinary shares	209		0.2
Plains GP Holdings	United States	Energy	Ordinary shares Options	204 (1)	}	0.2
Publicis	France	Consumer Discretionary	Ordinary shares	198		0.2
Williams Companies	United States	Energy	Ordinary shares Options	147 (1)	}	0.1
Brighthouse Financial	United States	Financials	Ordinary shares	128		0.1
SK Telecom	South Korea	Telecommunication Services	Ordinary shares Options	116 * –	}	0.1
				--------		--------
Portfolio				109,897		100.0
				========		========

* Market Value less than £1,000.

All investments are in ordinary shares unless otherwise stated. The number of holdings as at 30 April 2018 was 92 (31 October 2017: 90). The total number of individual open options as at 30 April 2018 was 225 (31 October 2017: 175).

The negative valuation of £307,000 in respect of options held represents the notional cost of repurchasing the contracts at market prices as at 30 April 2018 (31 October 2017: £532,000).

At 30 April 2018, the Company did not hold any equity interests comprising more than 3% of any company’s share capital.

STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 APRIL 2018

	Notes	Revenue £’000			Capital £’000			Total £’000
		Six  months  ended  30.04.18  (unaudited)	Six  months  ended  30.04.17  (unaudited)	Year  ended  31.10.17  (audited)	Six  months  ended  30.04.18  (unaudited)	Six  months  ended  30.04.17  (unaudited)	Year  ended  31.10.17  (audited)	Six  months  ended  30.04.18  (unaudited)	Six  months  ended  30.04.17  (unaudited)	Year  ended  31.10.17  (audited)
Income from investments held at fair value through profit or loss	3	1,396	1,480	3,017	–	–	–	1,396	1,480	3,017
Other income	3	989	877	1,990	–	–	–	989	877	1,990
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Total revenue		2,385	2,357	5,007	–	–	–	2,385	2,357	5,007
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Net (loss)/profit on investments held at fair value through profit or loss		–	–	–	(3,131)	5,895	9,664	(3,131)	5,895	9,664
Net loss on foreign exchange		–	–	–	(245)	(375)	(541)	(245)	(375)	(541)
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Total		2,385	2,357	5,007	(3,376)	5,520	9,123	(991)	7,877	14,130
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Expenses
Investment management fees	4	(109)	(106)	(217)	(325)	(319)	(651)	(434)	(425)	(868)
Other operating expenses	5	(184)	(172)	(378)	(10)	(7)	(16)	(194)	(179)	(394)
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Total operating expenses		(293)	(278)	(595)	(335)	(326)	(667)	(628)	(604)	(1,262)
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Net profit/(loss) on ordinary activities before finance costs and taxation		2,092	2,079	4,412	(3,711)	5,194	8,456	(1,619)	7,273	12,868
Taxation (charge)/credit		(308)	(316)	(681)	62	62	126	(246)	(254)	(555)
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Profit/(loss) for the period		1,784	1,763	3,731	(3,649)	5,256	8,582	(1,865)	7,019	12,313
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Earnings/(loss) per ordinary share (pence)	7	2.59	2.56	5.41	(5.30)	7.62	12.46	(2.71)	10.18	17.87
		=====	=====	=====	=====	=====	=====	=====	=====	=====

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 disposed of during the period. All income is attributable to the equity holders of the Company.

The Company does not have any other comprehensive income. The net profit/(loss) for the period disclosed above represents the Company’s total comprehensive income.

STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 APRIL 2018

	Note	Called-up  share  capital  £’000	Share  premium  account  £’000	Capital  redemption  reserve  £’000	Special  reserve  £’000	Capital  reserves  £’000	Revenue  reserve  £’000	Total  £’000
For the six months ended 30 April 2018 (unaudited)
At 31 October 2017		1,004	36,774	1,460	24,910	51,743	2,404	118,295
Total comprehensive income:
Net (loss)/profit for the period		–	–	–	–	(3,649)	1,784	(1,865)
Transaction with owners, recorded directly to equity:
Share purchase costs written back		–	–	–	33	–	–	33
Dividends paid (a)	6	–	–	–	_	(517)	(1,722)	(2,239)
		--------	--------	--------	--------	--------	--------	--------
At 30 April 2018		1,004	36,774	1,460	24,943	47,577	2,466	114,224
		--------	--------	--------	--------	--------	--------	--------
For the six months ended 30 April 2017 (unaudited)
At 30 October 2016		1,004	36,774	1,460	25,029	43,161	2,051	109,479
Total comprehensive income:
Net profit for the period		–	–	–	–	5,256	1,763	7,019
Transaction with owners, recorded directly to equity:
Dividends paid (b)		–	–	–	–	–	(1,655)	(1,655)
		--------	--------	--------	--------	--------	--------	--------
At 30 April 2017		1,004	36,774	1,460	25,029	48,417	2,159	114,843
		--------	--------	--------	--------	--------	--------	--------
For the year ended 31 October 2017 (audited)
At 30 October 2016		1,004	36,774	1,460	25,029	43,161	2,051	109,479
Total comprehensive income:
Net profit for the year		–	–	–	–	8,582	3,731	12,313
Transaction with owners, recorded directly to equity:
Ordinary shares purchased into treasury		–	–	–	(118)	–	–	(118)
Share purchase costs		–	–	–	(1)	–	–	(1)
Dividends paid (c)		–	–	–	–	–	(3,378)	(3,378)
		--------	--------	--------	--------	--------	--------	--------
At 31 October 2017		1,004	36,774	1,460	24,910	51,743	2,404	118,295
		=====	=====	=====	=====	=====	=====	=====

(a) 4th interim dividend of 1.25p per share for the year ended 31 October 2017, declared on 2 November 2017 and paid on 5 January 2018 and 1st interim dividend of 2.00p per share for the year ending 31 October 2018, declared on 6 March 2018 and paid on 13 April 2018.

(b) 4th interim dividend of 1.20p per share for the year ended 31 October 2016, declared on 3 November 2016 and paid on 5 January 2017 and 1st interim dividend of 1.20p per share for the year ending 31 October 2017, declared on 21 February 2017 and paid on 4 April 2017.

(c) 4th interim dividend of 1.20p per share for the year ended 31 October 2016, declared on 3 November 2016 and paid on 5 January 2017; 1st interim dividend of 1.20p per share for the year ended 31 October 2017, declared on 21 February 2017 and paid on 4 April 2017; 2nd interim dividend of 1.25p per share for the year ended 31 October 2017, declared on 3 May 2017 and paid on 30 June 2017; and 3rd interim dividend of 1.25p per share for the year ended 31 October 2017, declared on 8 August 2017 and paid on 6 October 2017.

Costs related to the acquisition and disposal of investments amounted to £36,000 and £10,000, respectively for the six months ended 30 April 2018 (six months ended 30 April 2017: £37,000 and £18,000; year ended 31 October 2017: £82,000 and £32,000).

STATEMENT OF FINANCIAL POSITION AS AT 30 APRIL 2018

	Notes	30 April  2018  £’000  (unaudited)	30 April  2017  £’000  (unaudited)	31 October  2017  £’000  (audited)
Non current assets
Investments held at fair value through profit or loss		110,204	109,439	114,234
		--------	--------	--------
Current assets
Other receivables		1,168	478	466
Cash and cash equivalents		4,755	6,038	7,509
		--------	--------	--------
		5,923	6,516	7,975
		--------	--------	--------
Total assets		116,127	115,955	122,209
Current liabilities
Other payables		(1,596)	(768)	(3,382)
Derivative financial liabilities held at fair value through profit or loss		(307)	(344)	(532)
		--------	--------	--------
		(1,903)	(1,112)	(3,914)
		--------	--------	--------
Net assets		114,224	114,843	118,295
		========	========	========
Equity attributable to equity holders
Called up share capital	8	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		24,943	25,029	24,910
Capital reserves		47,577	48,417	51,743
Revenue reserve		2,466	2,159	2,404
		--------	--------	--------
Total equity		114,224	114,843	118,295
		========	========	========
Net asset value per ordinary share (pence)	7	165.84	166.56	171.76
		========	========	========

CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 APRIL 2018

	Six months  ended  30 April  2018  £’000  (unaudited)	Six months  ended  30 April  2017  £’000  (unaudited)	Year  ended  31 October  2017  £’000  (audited)
Operating activities
Net (loss)/profit before taxation	(1,619)	7,273	12,868
Net loss/(profit) on investments and options held at fair value through profit or loss (including transaction costs)	3,131	(5,895)	(9,664)
Net loss on foreign exchange	245	375	541
Sales of investments held at fair value through profit or loss	43,877	43,167	95,600
Purchases of investments held at fair value through profit or loss	(43,203)	(40,952)	(94,223)
(Increase)/decrease in other receivables	(42)	12	34
(Decrease)/increase in other payables	(246)	(102)	338
Increase in amounts due from brokers	(645)	(349)	(356)
(Decrease)/increase in amounts due to brokers	(1,534)	(18)	2,125
Net movement in cash collateral held with brokers	–	125	125
	--------	--------	--------
Net cash (outflow)/inflow from operating activities before taxation	(36)	3,636	7,388
	--------	--------	--------
Taxation on investment income included within gross income	(267)	(254)	(532)
	--------	--------	--------
Net cash (outflow)/inflow from operating activities	(303)	3,382	6,856
	--------	--------	--------
Financing activities
Ordinary shares purchased into treasury	–	–	(118)
Share purchase costs paid	–	–	(1)
Share purchase costs written back	33	–	5
Dividends paid	(2,239)	(1,655)	(3,378)
	--------	--------	--------
Net cash outflow from financing activities	(2,206)	(1,655)	(3,492)
	--------	--------	--------
(Decrease)/increase in cash and cash equivalents	(2,509)	1,727	3,364
Effect of foreign exchange rate changes	(245)	(375)	(541)
	--------	--------	--------
Change in cash & cash equivalents	(2,754)	1,352	2,823
Cash and cash equivalents at start of period	7,509	4,686	4,686
	--------	--------	--------
Cash and cash equivalents at end of period	4,755	6,038	7,509
	--------	--------	--------
Comprised of:
Cash at bank	4,755	6,038	7,509
	--------	--------	--------
	4,755	6,038	7,509
	========	========	========

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 APRIL 2018

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. BASIS OF PRESENTATION
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 2017 (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 and venture capital trusts issued by the Association of Investment Companies (AIC), revised in November 2014 is compatible with IFRS, the financial statements have been prepared in accordance with guidance set out in the SORP.

3. INCOME
 

	Six months  ended  30 April  2018  £’000  (unaudited)	Six months  ended  30 April  2017  £’000  (unaudited)	Year  ended  31 October  2017  £’000  (audited)
Investment income:
UK listed dividends	109	80	143
Overseas listed dividends	1,287	1,375	2,849
Overseas listed special dividends	–	25	25
	--------	--------	--------
	1,396	1,480	3,017
Other income:
Deposit interest	31	5	36
Option premium income	958	872	1,954
	--------	--------	--------
	989	877	1,990
	--------	--------	--------
Total income	2,385	2,357	5,007
	========	========	========

During the period, the Company received premiums in cash totalling £935,000 (six months ended 30 April 2017: £888,000; year ended 31 October 2017: £1,947,000) for writing covered call options for the purposes of revenue generation. Option premiums of £958,000 (six months ended 30 April 2017: £872,000; year ended 31 October 2017: £1,954,000) were amortised to income. All derivative transactions were based on constituent stocks in the Russell 1000 Value Index. At 30 April 2018 there were 225 open positions with an associated liability of £307,000 (30 April 2017: 218 open positions with an associated liability of £344,000; 31 October 2017: 175 open positions with an associated liability of £532,000).

Dividends and interest received in cash during the period amounted to £1,350,000 and £31,000 (six months ended 30 April 2017: £1,477,000 and £5,000; year ended 31 October 2017: £3,032,000 and £36,000) respectively.

Special dividends of £3,000 have been recognised in capital (six months ended 30 April 2017: nil; year ended 31 October 2017: £13,000).

4. INVESTMENT MANAGEMENT FEE
 

	Six months ended 30 April 2018 (unaudited)			Six months ended 30 April 2017 (unaudited)			Year ended 31 October 2017 (audited)
	Revenue  £’000	Capital  £’000	Total  £’000	Revenue  £’000	Capital  £’000	Total  £’000	Revenue  £’000	Capital  £’000	Total  £’000
Investment management fee	109	325	434	106	319	425	217	651	868
	--------	--------	--------	--------	--------	--------	--------	--------	--------
Total	109	325	434	106	319	425	217	651	868
	========	========	========	========	========	========	========	========	========

The investment management fee is payable quarterly in arrears, calculated at the rate of 0.75% of the Company’s net assets.

5. OTHER OPERATING EXPENSES
 

	Six months  ended  30 April  2018  £’000  (unaudited)	Six months  ended  30 April  2017  £’000  (unaudited)	Year  ended  31 October  2017  £’000  (audited)
Allocated to revenue:
Custody fee	2	2	5
Auditors’ remuneration: audit services	14	14	28
Registrar’s fee	12	11	26
Directors’ emoluments	58	58	123
Broker fees	20	20	37
Depositary fees	7	7	13
Marketing fees	14	30	29
Marketing fees prior year adjustment	(4)	(7)	8
Printing expenses	11	8	22
Directors’ expenses	11	(1)	6
Other administration costs	39	30	81
	--------	--------	--------
	184	172	378
	--------	--------	--------
Allocated to capital:
Transaction charges – capital	10	7	16
	========	========	========
	194	179	394
	========	========	========

6. DIVIDENDS
The Directors have declared a second quarterly interim dividend of 2.00p per share. The dividend will be paid on 29 June 2018 to shareholders on the Company’s register on 24 May 2018. This dividend has not been accrued in the financial statements for the six months ended 30 April 2018, as under IFRS, interim dividends are not recognised until paid. Dividends are debited directly to reserves.

Dividends on equity shares during the period were:

	Six months  ended  30 April  2018  £’000  (unaudited)
Fourth interim dividend of 1.25p per ordinary share paid on 5 January 2018*	861
First interim dividend of 2.00p per ordinary share paid on 13 April 2018*	1,378
	--------
	2,239
Second interim dividend of 2.00p per ordinary share payable on 29 June 2018*	1,378
	--------
	3,617
	========

* Based on 68,874,044 ordinary shares.

7. EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE
Total revenue and capital returns per share and net asset value per share are shown below and have been calculated using the following:

	Six months  ended  30 April  2018  (unaudited)	Six months  ended  30 April  2017  (unaudited)	Year  ended  31 October  2017  (audited)
Net revenue profit attributable to ordinary shareholders (£’000)	1,784	1,763	3,731
Net capital (loss)/profit attributable to ordinary shareholders (£’000)	(3,649)	5,256	8,582
	--------	--------	--------
Total (loss)/profit attributable to ordinary shareholders (£’000)	(1,865)	7,019	12,313
	--------	--------	--------
Equity shareholders' funds (£’000)	114,224	114,843	118,295
	--------	--------	--------
The weighted average number of ordinary shares in issue during the period on which the earnings per ordinary share was calculated was:	68,874,044	68,949,044	68,920,483
	--------	--------	--------
The actual number of ordinary shares in issue at the end of each period on which the net asset value per ordinary share was calculated was:	68,874,044	68,949,044	68,874,044
	--------	--------	--------
Return per share
Revenue earnings per share (pence)	2.59	2.56	5.41
Capital (loss)/earnings per share (pence)	(5.30)	7.62	12.46
	--------	--------	--------
Total (loss)/earnings per share (pence)	(2.71)	10.18	17.87
	========	========	========

There were no diluted securities at the period end (six months ended 30 April 2017: nil; year ended 31 October 2017: nil).

	As at  30 April  2018  (unaudited)	As at  30 April  2017  (unaudited)	As at  31 October  2017  (audited)
Net asset value per ordinary share (pence)	165.84	166.56	171.76
	--------	--------	--------
Ordinary share price (pence)	154.50	158.00	160.50
	========	========	========

8. CALLED UP SHARE CAPITAL
 

	Ordinary  shares in  issue  (number)	Treasury  shares  (number)	Total  shares  (number)	Nominal  value  £’000
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 1 pence each:
At 31 October 2017	68,874,044	31,487,261	100,361,305	1,004
	--------	--------	--------	--------
At 30 April 2018	68,874,044	31,487,261	100,361,305	1,004
	========	========	========	========

During the period to 30 April 2018, no ordinary shares were purchased for cancellation or transferred to treasury (period ended 30 April 2017: nil; year ended 31 October 2017: 75,000 ordinary shares at a total cost of £119,000).

No treasury shares were cancelled during the period (six months ended 30 April 2017: nil; year ended 31 October 2017: nil).

Since 30 April 2018 and up to the date of this report, no ordinary shares have been purchased for cancellation or placed in treasury.

9. VALUATION OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are either carried in the Statement of Financial Position at their fair value (investments 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. The valuation techniques used by the Company are explained in the accounting policies note 2(g) as set out in the Company’s Annual Report and Financial Statements for the year ended 31 October 2017.

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 prices in an active market for an identical instrument.

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. The Company does not adjust the quoted price for these instruments.

Level 2 – Valuation techniques using observable inputs.

This category includes instruments valued using quoted prices for similar instruments in markets that are considered less 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 market 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 entity determined 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.

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 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/(liabilities) at fair value through profit or loss at 30 April 2018 (unaudited)	Level 1  £’000	Level 2  £’000	Level 3  £’000	Total  £’000
Assets:
Equity investments	110,204	–	–	110,204
Liabilities:
Derivative financial instruments – written options	–	(307)	–	(307)
	--------	--------	--------	--------
	110,204	(307)	–	109,897
	========	========	========	========

Financial assets/(liabilities) at fair value through profit or loss at 30 April 2017 (unaudited)	Level 1  £’000	Level 2  £’000	Level 3  £’000	Total  £’000
Assets:
Equity investments	109,439	–	–	109,439
Liabilities:
Derivative financial instruments – written options	–	(344)	–	(344)
	--------	--------	--------	--------
	109,439	(344)	–	109,095
	========	========	========	========

Financial assets/(liabilities) at fair value through profit or loss at 31 October 2017 (audited)	Level 1  £’000	Level 2  £’000	Level 3  £’000	Total  £’000
Assets:
Equity investments	114,234	–	–	114,234
Liabilities:
Derivative financial instruments – written options	–	(532)	–	(532)
	--------	--------	--------	--------
	114,234	(532)	–	113,702
	========	========	========	========

There were no transfers between levels for financial assets and financial liabilities during the period recorded at fair value as at 30 April 2018, 30 April 2017 and 31 October 2017. The Company did not hold any Level 3 securities throughout the financial period under review or as at 30 April 2018, 30 April 2017 and 31 October 2017.

10. TRANSACTIONS WITH AIFM AND INVESTMENT MANAGER
BlackRock Fund Managers Limited (BFM) is the Company’s Alternative Investment Fund Manager (AIFM). 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)).

The investment management fee due to BFM for the six months ended 30 April 2018 amounted to £434,000 (six months ended 30 April 2017: £425,000; year ended 31 October 2017: £868,000). At the period end, £657,000 was outstanding in respect of the investment management fee (six months ended 30 April 2017: £427,000; year ended 31 October 2017: £868,000).

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 period ended 30 April 2018 amounted to £14,000 excluding VAT (six months ended 30 April 2017: £30,000; year ended 31 October 2017: £29,000). Marketing fees of £35,000 excluding VAT (period ended 30 April 2017: £38,000; year ended 31 October 2017: £22,000) were outstanding as at 30 April 2018.

11. 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 £36,000, the Chairman of the Audit and Management Engagement Committee receives an annual fee of £30,000, and the other Directors each receive an annual fee of £25,000. At 30 April 2018, an amount of £10,000 (30 April 2017: £10,000; 31 October 2017: £10,000) was outstanding in respect of Directors’ fees.

At 30 April 2018 interests of the Directors in the ordinary shares of the Company were as set out below:

	Six months  ended  30 April  2018  (unaudited)	Six months  ended  30 April  2017  (unaudited)	Year  ended  31 October  2017  (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.

12. CONTINGENT LIABILITIES
There were no contingent liabilities at 30 April 2018 (30 April 2017 and 31 October 2017: nil).

13. 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 six months ended 30 April 2018 and 30 April 2017 has not been audited.

The information for the year ended 31 October 2017 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 qualification or statement under sections 498(2) or 498(3) of the Companies Act 2006.

14. ANNUAL RESULTS
The Board expects to announce the annual results for the year ending 31 October 2018 in late December 2018.

Copies of the annual results announcement can be obtained from the Secretary on 0207 743 3000 or [e-mail]. The Annual Report and Financial Statements should be available by the beginning of January 2019 with the Annual General Meeting being held in March 2019.

FOR FURTHER INFORMATION, PLEASE CONTACT:

Simon White, Managing Director, Investment Trusts, BlackRock Investment Management (UK) Limited
Tel: [phone]
Press enquiries:
Lucy Horne, Lansons Communications – Tel:  [phone]
E-mail:  [e-mail]

22 June 2018
12 Throgmorton Avenue
London EC2N 2DL

END