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