Half-yearly Report

BlackRock North American Income Trust plc Performance Record Financial Highlights 30 April 2013 Attributable to ordinary shareholders Net assets (£'000) 84,693 Net asset value per ordinary share 111.18p Ordinary share price (mid-market) 114.38p Premium to cum income net asset value 2.9% -------- Performance for the period since launch to 30 April 2013 Net asset value per share (with income reinvested) +14.2% -------- Russell 1000 Value Index +19.2% -------- Ordinary share price (with income reinvested) +15.4% -------- Chairman's Statement for the period to 30 April 2013 Overview This is my first formal report on your Company since it came to the market in October last year. I am delighted to report good progress. The Company's results for the period show a rise in net asset value ("NAV") of 14.2%, the shares continue to command a premium to NAV and, since launch, a further 12,575,000 shares have been issued in response to investor demand. The economic challenges following the 2007 to 2009 financial crisis were still very much in evidence during the period under review. However, despite a continued low growth environment, US macroeconomic data demonstrated improving economic momentum. Although there was heightened focus on the resolution of the 'fiscal cliff' and higher tax proposals, the housing market is very much on the road to recovery, employment growth was positive and manufacturing data improved. Companies also took advantage of the very low cost of debt and benefited from healthy balance sheets and the highest level of free cash flows. Your Board believes that high quality stocks which have the ability to grow their dividends consistently will outperform over time. The Manager continues to focus on attractively valued blue chip stocks with strong balance sheets, sustainable competitive advantages and consistent revenue and earnings growth. This high-quality focus by the Manager has served investors well over the long term, although it has recently contributed to short term relative underperformance against the benchmark index in a market where lower quality, lower margin companies with higher debt levels have outperformed. For the period since launch on 24 October 2012 to 30 April 2013, the Company's NAV rose by 14.2%, compared with a rise of 19.2% in the Russell 1000 Value Index. During the same period, the share price rose by 15.4% (all figures in sterling terms with income reinvested). Since the period end, the Company's NAV has returned 0.4% and the share price has returned 1.1% (in sterling with income reinvested). Share issues Since inception, the Company's shares have consistently traded at a premium 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 the period since launch in October 2012 and up to the date of this report, the Company has allotted a further 12,575,000 shares for a total consideration of £13,739,000 (before deduction of issue costs) and there are now 77,575,000 shares in issue. Earnings and dividends Revenue earnings per share for the period to 30 April 2013 amounted to 2.09p based on the weighted average number of shares in issue during the period. The target for the year ending 31 October 2013 is to pay dividends amounting to at least 4.00p per share. The first quarterly dividend of 1.00p per share was paid on 2 April 2013 and the second quarterly dividend of 1.00p per share will be paid on 2 July 2013 to shareholders on the register on 24 May 2013. As a consequence of issuing new shares pursuant to the Placing Programme, there is a slight shortfall in revenue to cover the second interim dividend payment although it should be noted that the issue of new shares has provided a gross capital uplift of £321,000, including income of £84,000. Further to the Company's Prospectus and an order of the High Court of Justice (Chancery Division) dated 12 December 2012, the cancellation of the Company's share premium account and the creation of a new special reserve was approved. Accordingly, the Company has sufficient distributable reserves to support the dividend policy and we expect that any deficit of income to dividend payable will be recouped by the year end. Tender offer In view of the fact that since launch the Company's shares have traded at a premium to NAV, the Board announced on 14 May 2013 its intention not to implement the first tender offer as at 31 July 2013. Alternative Investment Fund Managers' Directive As mentioned on pages 12 and 13 of the Company's Prospectus the Alternative Investment Fund Managers' Directive (the "Directive") is due to be transposed by EU member states into national law in 2013. The implementation of the Directive will require all investment trusts to appoint an alternative investment fund manager ("AIFM") or become an AIFM themselves and also to appoint an independent depositary. The latter will fulfil a broader role than that currently performed by a custodian, and will be obliged to ensure that companies comply with the relevant rules on portfolio composition and diversification. We expect the implementation of the Directive to be effective from 22 July 2013, although it is currently anticipated that the Financial Conduct Authority will permit a transitional period of one year within which UK AIFMs must seek authorisation. The Board is currently taking independent advice from Dickson Minto W.S. on the consequences for the Company and will inform shareholders when we have decided on the most appropriate course of action. Board of Directors We are very pleased to welcome Alice Ryder to the Board today. Alice is an investment professional with more than 25 years experience, comprising the last decade as an investment consultant in the charity sector and as a fund manager from 1985 to 2002. She will also serve as a member of the Company's Audit and Management Engagement Committee. Outlook Despite the volatility in markets over the period since launch and the ongoing global macroeconomic concerns, we believe the sector represents an appealing opportunity for investors. Although the coming year is likely to see a further period of only moderate growth, the headwinds are diminishing and the US economy appears stronger with a better capitalised financial system in place. In addition, US equities are currently trading at attractive valuations and many companies are showing profit margins and cash levels above their historical norms. The Investment Manager's focus on investing in high quality, dividend paying, large-cap stocks at attractive valuations offers the potential for long term stable income yields and superior performance. Simon Miller Chairman 12 June 2013 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 A detailed explanation of the risks relating to the Company was set out on pages 10 to 20 of the Company's Prospectus dated 14 September 2012. This document is available on the website maintained by the Investment Manager, BlackRock Investment Management (UK) Limited, at www.blackrock.co.uk/brna. The principal risks faced by the Company can be divided into various areas as follows: - Performance; - Income/dividend; - Regulatory; - Operational; - Market; - Financial; - Gearing; and - Third party risk In the view of the Board, there have not been any changes to the fundamental nature of these risks since the publication of the Company's Prospectus dated 14 September 2012, and these principal risks and uncertainties are equally applicable to the remaining six months of the financial year as they were to the period under review. Related party disclosure and transactions with Investment Manager The Investment Manager is regarded as a related party under the Listing Rules and details of the management fees payable are set out in note 4 and note 10. The related party transactions with the Directors are set out in note 9. Going concern The Directors 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 have adopted 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. 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 the 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. The half yearly financial report has been reviewed by the Company's auditor. The half yearly financial report was approved by the Board on 12 June 2013 and the above responsibility statement was signed on its behalf by the Chairman. Simon Miller For and on behalf of the Board 12 June 2013 Investment Manager's Report Market overview US equity markets traded relatively flat in the closing months of 2012, before rebounding strongly in the first four months of 2013, after the worst of the nation's fiscal cliff had been averted. Signs of a steady improvement in the US economy underpinned the rally and the large-cap Russell 1000 Index posted a robust gain of 17.8% for the period ending 30 April 2013. Large-cap value stocks outperformed growth stocks during this period, with the Russell 1000 Value Index gaining 19.2% while the Russell 1000 Growth Index appreciated by 16.3%. US equities persevered through flare-ups in the Eurozone as investors looked toward the positive momentum building in economic data domestically. Key factors included an improving labour market and rising home prices, while upside surprises in manufacturing and retail sales figures also gave stocks a boost. Fourth-quarter US gross domestic product (GDP) growth was revised upward from a contraction of 0.1% to an expansion of 0.4%, and first-quarter US GDP delivered 2.5% growth on an annualised basis. Portfolio changes Upon inception, the portfolio was constructed to reflect a higher degree of confidence in sectors and industries that, in the team's view, are likely to benefit from positive demand growth, market share gains and margin expansion over the course of a complete business cycle. In most cases the companies purchased at portfolio inception are global leaders with the potential to perform strongly, generate high cash flow and grow dividends for shareholders in the near term. As a result of bottom up construction, the portfolio's strongest allocations, in absolute terms, resided in the financials, industrials, energy and consumer staples sectors. Smaller portfolio weights were in telecommunications, information technology, utilities and materials. Given the low turnover, higher conviction nature of the team's process and the longer term investment horizon, wholesale changes are typically not made during any given monthly or quarterly reporting period. Thus, relatively few changes were implemented in the Company during the period ending on 30 April 2013. While weightings relative to the Russell 1000 Value Index did remain largely unchanged for the period, on an absolute basis we did make some structural changes to the portfolio. We increased our exposure to the financials sector and reduced our exposure to the industrials, telecommunication services, utilities and consumer discretionary sectors. The rationale for these transactions was two-fold. Firstly, we added incremental beta/cyclicality to the portfolio and, secondly, we reduced exposure to areas of the market we believe are more richly valued and offer weaker growth prospects in the future. In financials, we initiated a position in Citigroup, a US diversified bank with a global footprint. We added Citigroup to the portfolio given the firm's improved capital ratios, favourable valuation relative to peers and our belief in Citigroup's commitment and ability to grow its dividend moving forward. We also initiated positions in two regional banks during the period, including Fifth Third Bank and SunTrust Banks. Both banks offer a similar thesis - improving mortgage and loan growth given the US housing recovery, attractive relative valuations and encouraging prospects for delivering dividend growth to shareholders. In industrials, we sold out of our position in Caterpillar given less promising prospects in their mining segment, which accounts for approximately one third of the firm's revenues. We believe global output increases in iron ore production and slowing growth in Chinese steel production will continue to depress iron ore prices over the short to medium term. These dynamics are contributing to intensified competition in the mining equipment market and, as a result, we removed Caterpillar from the portfolio. Additionally, we sold out of our position in Canadian National Railway given our belief that the stock was fully valued and there was likely limited additional upside in the short term. Lastly, we reduced our exposure to the utilities and telecommunication sectors during the period. Given investor demand for yield in a low interest rate environment, we have seen these sectors increasingly bid-up relative to the rest of the equity market. Given valuations, we sold out of utilities holdings such as Consolidated Edison, FirstEnergy and Southern and telecom holdings such as Vodafone and CenturyLink. The Company is currently overweight to consumer staples, industrials, materials, consumer discretionary and telecommunication services relative to the Russell 1000 Value Index. The Company maintains a neutral weighting in utilities and is underweight to the financials, health care, information technology and energy sectors. Options overlay Over the last six months, volatility in markets has generally been in a moderate decline as equity prices have moved higher and the macroeconomic backdrop has improved notwithstanding a few small and short lived spikes. As a result, derivative positioning has generally been moving higher to take advantage opportunistically of spikes in volatility and the rally in the underlying equity process. By combining this opportunistic strategy with call options struck out of the money, the overlay has provided incremental value to the portfolio even in the face of a strong equity market. Looking ahead, we expect the declines in volatility to moderate which should provide support for option income. Positioning and outlook In the current environment, we have positioned the portfolio to perform well in a wide range of economic scenarios. This has been done by emphasising companies that carry a diverse group of assets, have extensive customer bases among both retail and institutional clients, and are less sensitive to broad changes in macroeconomic variables. By taking less factor-specific risk, the portfolio is better protected than the market, but able to capture upside as equity markets and the broader economy gain momentum. By owning companies that can participate in all parts of a cycle, not just early or late-cycle names, we can feel better about the 'moat' afforded the portfolio during less certain times. We continue to search for brand leadership and industry dominance among our companies, preferring to own a firm with the number 1 or number 2 products on the shelf and not taking chances on concept stocks or companies with something to prove. Markets have appreciated sharply in 2013 on the heels of accommodative monetary policy, improving US housing and employment data, and progressing investor sentiment. While many companies have reported Q1 earnings with tempered guidance, we are optimistic about a strong equity market for the remainder of 2013. Any weakness up until this point has been driven largely by a hangover from accumulated cost cutting over the past few years and a lack of substantial revenue growth, which we believe will come as the initial shock from higher taxes and health care costs begins to fade. Concerns about a lack of leadership and political gridlock in Washington seems to have abated for the time being and consumer confidence is returning to more normal levels, hitting a four month high at the end of March. Collectively, these factors should provide tailwinds for the US equity market. Dividends in the marketplace have grown markedly in recent quarters and look well positioned for continued growth. There are now 408 companies paying dividends in the S&P, close to a 15 year high, and the value of dividends paid in the last twelve months was US$281 billion, an all-time record for the US equity market. With high cash levels, the ability of companies to pay and grow dividends is evident and the willingness on the part of corporate management teams looks squarely in place given the demand for income in the market. We expect that dividends and dividend growth will be a significant contributor to total return for investors over the next couple of years and look forward to an enriched dividend commitment from our companies in the quarters to come. Bob Shearer and Kathleen Anderson BlackRock Investment Management (UK) Limited 12 June 2013 Ten Largest Investments 30 April 2013 Chevron - 3.3% is the second largest integrated oil company in the US 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 US$24.50 per barrel of oil equivalent. We believe the firm's success in deep-water exploration in recent years will be a significant driver of earnings growth moving forward. JPMorgan Chase - 3.2% is a US based diversified financial company with over US$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. Wells Fargo - 3.1% is a US diversified bank with over US$1 trillion in assets. Wells boasts a strong and stable management team, led by CEO John Stumpf, who has been with the firm for nearly 30 years. Wells Fargo is an industry leader in cross-selling financial products and services, which has built deep customer relationships and added to the bank's pricing and earnings power. Pfizer - 2.4% is the world's largest pharmaceuticals company with annual sales of approximately US$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% 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 US 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 payout by 34% in the first quarter of 2013. General Electric - 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, it is the only one still in the index. Comcast - 2.3% is the largest operator in the US cable industry, currently reaching 53 million households. We are positive on the firm buying the rest of NBC Universal from General Electric, notably, one year earlier than expected. 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. Verizon Communications - 2.2% is the largest provider of wire line and wireless communications in the United States, with 94 million retail customers. Verizon maintains strong industry positioning given its network coverage (95% of the US population) and overall network quality. Verizon's sustainable dividend yield of over 4% continues to make the stock an attractive long term investment in the portfolio. Exxon Mobil - 2.2% is an integrated oil and gas company based out of the United States. The firm is one of only a few US 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 US$40 billion in dividends and repurchasing approximately US$130 billion worth of stock over the last five years. Philip Morris International - 2.1% is the second largest seller of cigarettes in the world. The firm owns international rights to Marlboro, an iconic global cigarette franchise which generates more sales volume than the next three best-selling international brands combined. We believe Philip Morris is a stable long term portfolio holding given its cash flow generation of 30% of revenues and attractive 3.5% plus dividend yield. Together, the ten largest investments represents 25.6% of the Company's portfolio. All percentages reflect the value of the holding as a percentage of total investments. Sector & Geographical Breakdown as at 30 April 2013 Sector Australia Canada France Netherlands Peru UK United Grand % % % % % % States Total % % Basic Materials 1.7 - - - 0.3 - 3.7 5.7 ======== ======== ======= ======== ======== ======== ======== ======== Consumer Goods - - - 1.3 - 1.3 12.8 15.4 ======== ======== ======= ======== ======== ======== ======== ======== Consumer Services - - - - - - 7.5 7.5 ======== ======== ======== ======== ======== ======== ======== ======== Financials - 2.0 - - - - 17.4 19.4 ======== ======== ======== ======== ======== ======== ======== ======== Health Care - - - - - - 8.4 8.4 ======== ======== ======== ======== ======== ======== ======== ======== Industrials - - - - - - 13.9 13.9 ======== ======== ======== ======== ======== ======== ======== ======== Oil & Gas - 1.6 1.4 0.3 - - 10.5 13.8 ======== ======== ======== ======== ======== ======== ======== ======== Technology - - - - - - 4.5 4.5 ======== ======== ======== ======== ======== ======== ======== ======== Telecommunications - 0.3 - - - - 3.6 3.9 ======== ======== ======== ======== ======== ======== ======== ======== Utilities - - - - - - 7.5 7.5 -------- -------- -------- -------- -------- -------- -------- -------- Grand Total 1.7 3.9 1.4 1.6 0.3 1.3 89.8 100.0 ======== ======== ======== ======== ======== ======== ======== ======== Investments as at 30 April 2013 Market % value of Company Country Sector £'000 total portfolio Chevron United Oil & Gas Ordinary 2,849 States shares Options (9) 3.3 -------- -------- -------- JPMorgan Chase United Financials Ordinary 2,706 States shares Options (4) 3.2 -------- -------- -------- Wells Fargo United Financials Ordinary 2,610 States shares Options (7) 3.1 -------- -------- -------- Pfizer United Health Care Ordinary 2,059 States shares Options (2) 2.4 -------- -------- -------- Home Depot United Consumer Services Ordinary 2,064 States shares Options (12) 2.4 -------- -------- -------- General Electric United Industrials Ordinary 2,029 2.4 States shares -------- -------- -------- Comcast United Consumer Services Ordinary 1,951 States shares Options (6) 2.3 -------- -------- -------- Verizon United Telecommunications Ordinary 1,891 Communications States shares Options (26) 2.2 -------- -------- -------- Exxon Mobil United Oil & Gas Ordinary 1,837 States shares Options (1) 2.2 -------- -------- -------- Philip Morris United Consumer Goods Ordinary 1,768 International States shares Options (11) 2.1 -------- -------- -------- Merck United Health Care Ordinary 1,736 States shares Options (8) 2.0 -------- -------- -------- Ace United Financials Ordinary 1,689 States shares Options (5) 2.0 -------- -------- -------- IBM United Technology Ordinary 1,640 1.9 States shares -------- -------- -------- Deere United Industrials Ordinary 1,543 States shares Options (2) 1.8 -------- -------- -------- BHP Billiton Australia Basic Materials Ordinary 1,464 1.7 shares -------- -------- -------- McDonald's United Consumer Services Ordinary 1,397 1.6 States shares Options (3) -------- -------- -------- United United Industrials Ordinary 1,336 Technologies States shares Options (1) 1.6 -------- -------- -------- Enbridge Canada Oil & Gas Ordinary 1,336 shares Options (6) 1.6 -------- -------- -------- DuPont United Basic Materials Ordinary 1,310 States shares Options (18) 1.5 -------- -------- -------- Bristol-Myers United Health Care Ordinary 1,281 Squibb States shares Options (4) 1.5 -------- -------- -------- Microsoft United Technology Ordinary 1,293 States shares Options (20) 1.5 -------- -------- -------- US Bancorp United Finanicals Ordinary 1,242 States shares Options (3) 1.5 -------- -------- -------- VF Corporation United Consumer Goods Ordinary 1,236 States shares Options (11) 1.4 -------- -------- -------- Travelers United Financials Ordinary 1,207 Companies States shares Options (3) 1.4 -------- -------- -------- Raytheon United Industrials Ordinary 1,215 States shares Options (13) 1.4 -------- -------- -------- AT&T United Telecommunications Ordinary 1,175 States shares Options (2) 1.4 -------- -------- -------- Coca-Cola United Consumer Goods Ordinary 1,171 States shares Options (5) 1.4 -------- -------- -------- Total France Oil & Gas Ordinary 1,170 shares Options (7) 1.4 -------- -------- -------- Procter & Gamble United Consumer Goods Ordinary 1,104 1.3 States shares -------- -------- -------- Diageo UK Consumer Goods Ordinary 1,099 shares Options (5) 1.3 -------- -------- -------- American Express United Financials Ordinary 1,090 States shares Options (5) 1.3 -------- -------- -------- Unilever Netherlands Consumer Goods Ordinary 1,083 shares Options (7) 1.3 -------- -------- -------- Honeywell United Industrials Ordinary 945 States shares Options (3) 1.1 -------- -------- -------- Johnson & United Health Care Ordinary 941 1.1 Johnson States shares -------- -------- -------- Prudential United Financials Ordinary 935 Financial States shares Options (5) 1.1 -------- -------- -------- United Parcel United Industrials Ordinary 915 Services States shares Options (1) 1.1 -------- -------- -------- Dominion United Utilities Ordinary 911 Resources States shares Options (2) 1.1 -------- -------- -------- NextEra Energy United Utilities Ordinary 917 States shares Options (8) 1.1 -------- -------- -------- Mondelez United Consumer Goods Ordinary 917 International States shares Options (17) 1.1 -------- -------- -------- Occidental United Oil & Gas Ordinary 917 Petroleum States shares Options (12) 1.1 -------- -------- -------- Intel United Technology Ordinary 877 Corporation States shares Options (12) 1.0 -------- -------- -------- Bank of Nova Canada Financials Ordinary 850 1.0 Scotia shares -------- -------- -------- Toronto-Dominion Canada Financials Ordinary 852 Bank shares Options (6) 1.0 -------- -------- -------- General Mills United Consumer Goods Ordinary 823 States shares Options (4) 1.0 -------- -------- -------- Northrop Grumman United Industrials Ordinary 827 States shares Options (13) 1.0 -------- -------- -------- Kimberly-Clark United Consumer Goods Ordinary 802 States shares Options (3) 0.9 -------- -------- -------- Marathon United Oil & Gas Ordinary 800 Petroleum States shares Options (2) 0.9 -------- -------- -------- 3M Company United Industrials Ordinary 794 0.9 States shares -------- -------- -------- Union Pacific United Industrials Ordinary 770 States shares Options (2) 0.9 -------- -------- -------- Lorillard United Consumer Goods Ordinary 724 States shares Options (8) 0.8 -------- -------- -------- Citigroup United Financials Ordinary 717 States shares Options (1) 0.8 -------- -------- -------- Fifth Third Bank United Financials Ordinary 715 States shares Options (6) 0.8 -------- -------- -------- Marathon Oil United Oil & Gas Ordinary 711 States shares Options (3) 0.8 -------- -------- -------- Kinder Morgan United Oil & Gas Ordinary 688 (Delaware) States shares Options (5) 0.8 -------- -------- -------- SunTrust Banks United Financials Ordinary 684 States shares Options (3) 0.8 -------- -------- -------- Public Service United Utilities Ordinary 623 Enterprise Group States shares Options (4) 0.7 -------- -------- -------- American Water United Utilities Ordinary 610 Works States shares Association Options (5) 0.7 -------- -------- -------- Praxair United Basic Materials Ordinary 609 States shares Options (4) 0.7 -------- -------- -------- Mattel United Consumer Goods Ordinary 604 States shares Options (9) 0.7 -------- -------- -------- MeadWestvaco United Industrials Ordinary 583 0.7 States shares -------- -------- -------- Walmart United Consumer Services Ordinary 544 States shares Options (1) 0.6 -------- -------- -------- Altria United Consumer Goods Ordinary 521 States shares Options (2) 0.6 -------- -------- -------- Heinz United Consumer Goods Ordinary 499 0.6 States shares -------- -------- -------- Newmont Mining United Basic Materials Ordinary 497 0.6 States shares -------- -------- -------- Dow Chemical United Basic Materials Ordinary 488 States shares Options (7) 0.6 -------- -------- -------- Walt Disney United Consumer Services Ordinary 464 States shares Options (2) 0.6 -------- -------- -------- American United Utilities Ordinary 466 Electric Power States shares Options (5) 0.5 -------- -------- -------- ConocoPhillips United Oil & Gas Ordinary 446 0.5 States shares -------- -------- -------- Schlumberger United Oil & Gas Ordinary 445 0.5 States shares -------- -------- -------- Kraft Foods United Consumer Goods Ordinary 437 States shares Options (1) 0.5 -------- -------- -------- Sempra Energy United Utilities Ordinary 442 States shares Options (5) 0.5 -------- -------- -------- Duke Energy United Utilities Ordinary 420 States shares Options (1) 0.5 -------- -------- -------- Edison United Utilities Ordinary 422 International States shares Options (4) 0.5 -------- -------- -------- Weyerhaeuser United Financials Ordinary 411 States shares Options (1) 0.5 -------- -------- -------- Quest United Health Care Ordinary 405 0.5 Diagnostics States shares -------- -------- -------- Wisconsin Energy United Utilities Ordinary 407 States shares Options (5) 0.5 -------- -------- -------- Northeast United Utilities Ordinary 399 Utilities States shares Options (3) 0.5 -------- -------- -------- AbbVie United Health Care Ordinary 396 States shares Options (5) 0.5 -------- -------- -------- Johnson Controls United Consumer Goods Ordinary 396 States shares Options (4) 0.5 -------- -------- -------- Spectra Energy United Utilities Ordinary 389 States shares Options (2) 0.5 -------- -------- -------- American Tower United Financials Ordinary 372 States shares Options (4) 0.4 -------- -------- -------- Abbott United Health Care Ordinary 316 Laboratories States shares Options (1) 0.4 -------- -------- -------- BCE Canada Telecommunications Ordinary 310 shares Options (1) 0.4 -------- -------- -------- Phillips 66 United Oil & Gas Ordinary 290 0.3 States shares -------- -------- -------- Southern Copper Peru Basic Materials Ordinary 291 shares Options (2) 0.3 -------- -------- -------- Rockwell United Industrials Ordinary 283 0.3 Automation States shares -------- -------- -------- Automatic Data United Industrials Ordinary 255 Processing States shares Options (2) 0.3 -------- -------- -------- Olin United Basic Materials Ordinary 242 0.3 States shares -------- -------- -------- Chubb United Financials Ordinary 238 States shares Options (1) 0.3 -------- -------- -------- Royal Dutch Netherlands Oil & Gas Ordinary 236 Shell shares Options (1) 0.3 -------- -------- -------- PPL United Utilities Ordinary 217 States shares Options (2) 0.2 -------- -------- -------- M&T Bank United Financials Ordinary 206 States shares Options (1) 0.2 -------- -------- -------- ITC Holdings United Utilities Ordinary 203 0.2 States shares -------- -------- -------- Rockwell Collins United Industrials Ordinary 182 0.2 States shares -------- -------- -------- Packaging United Industrials Ordinary 141 Corporation of States shares America Options (1) 0.2 -------- -------- -------- Portfolio 84,910 100.0 ======== ======== ======== All investments are in ordinary shares unless otherwise stated. The number of holdings as at 30 April 2013 was 95. The total number of open options as at 30 April 2013 was 139. The negative valuations of £408,000 in respect of options held represent the notional cost of repurchasing the contracts at market prices as at 30 April 2013. Statement of Comprehensive Income for the period from 30 August 2012 (date of incorporation) to 30 April 2013 Notes Revenue Capital Total 2013 2013 2013 £'000 £'000 £'000 (unaudited) (unaudited) (unaudited) Gains on investments held at fair value through profit or loss - 7,844 7,844 Gains on foreign exchange - 653 653 Income from investments held at fair value through profit or loss 3 1,237 - 1,237 Option premium income 3 759 - 759 Other income 3 2 - 2 -------- -------- -------- Total income 1,998 8,497 10,495 -------- -------- ------- Expenses Investment management fees 4 (98) (293) (391) Other operating expenses 5 (156) - (156) -------- -------- -------- Total operating expenses (254) (293) (547) -------- -------- -------- Net profit on ordinary activities before finance costs and taxation 1,744 8,204 9,948 Finance costs (3) (10) (13) -------- -------- -------- Net profit on ordinary activities before taxation 1,741 8,194 9,935 Taxation (284) 71 (213) -------- -------- -------- Net profit on ordinary activities after taxation 1,457 8,265 9,722 ======== ======== ======== Earnings per ordinary share - basic and diluted 7 2.09p 11.85p 13.94p ======== ======== ======== The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies ("AIC"). All items in the above statement derive from continuing operations. All income is attributable to the equity holders of BlackRock North American Income Trust plc. The Company does not have any other recognised gains or losses. The net profit for the period disclosed above represents the Company's comprehensive income. Statement of Changes in Equity for the period from 30 August 2012 (date of incorporation) to 30 April 2013 Notes Called Share Capital Special Capital Revenue Total up premium redemption reserve reserves reserve £'000 share account reserve £'000 £'000 £'000 capital £'000 £'000 £'000 For the period ended 30 April 2013 (unaudited) Total comprehensive income: Net profit for the period - - - - 8,265 1,457 9,722 Transaction with owners, recorded directly to equity: Issue of management shares 8 50 - - - - - 50 Issue of ordinary shares 8 762 76,377 - - - - 77,139 Share issue costs - (1,467) - - - - (1,467) Cancellation of share premium - (63,213) - 63,213 - - - Redemption and cancellation of management shares (50) - 50 - (50) - (50) Dividends paid* 6 - - - - - (701) (701) -------- -------- -------- -------- -------- -------- -------- At 30 April 2013 762 11,697 50 63,213 8,215 756 84,693 ======== ======== ======== ======== ======== ======== ======== * In respect of the period ending 31 October 2013, an interim dividend of 1.00p per share was declared on 14 February 2013 and paid on 2 April 2013. The transaction costs incurred on the acquisition and disposal of investments are included within the capital reserves and amounted to £76,000 for the period from 24 October 2012 to 30 April 2013. 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 at Companies House on 19 December 2012 and £63,213,000 was transferred from the share premium account to a special reserve which is a distributable reserve. Statement of Financial Position as at 30 April 2013 Notes 30 April 2013 £'000 (unaudited) Non current assets Investments held at fair value through profit or loss 85,318 -------- Current assets Other receivables 1,336 Cash and cash equivalents 60 -------- 1,396 Current liabilities Bank overdraft (65) Derivative financial instruments (408) Other payables (1,548) -------- (2,021) -------- Net current liabilities (625) -------- Net assets 84,693 ======== Equity attributable to equity holders Called up share capital 8 762 Share premium account 11,697 Capital redemption reserve 50 Special reserve 63,213 Capital reserves 8,215 Revenue reserve 756 -------- Total equity shareholders' funds 84,693 ======== Net asset value per ordinary share 7 111.18p ======== Cash Flow Statement for the period from 30 August 2012 (date of incorporation) to 30 April 2013 30 April 2013 £'000 (unaudited) Operating activities Profit before taxation 9,935 Add back interest paid 13 Gains on investments held at fair value through profit or loss (7,844) -------- Net movement on foreign exchange (653) Sale of investments held at fair value through profit or loss 27,687 Purchases of investments held at fair value through profit or loss (104,753) Increase in other receivables (114) Increase in other payables 551 Increase in amounts due from brokers (1,213) Increase in amounts due to brokers 520 -------- Net cash outflow from operating activities before interest and taxation (75,871) -------- Interest paid (13) Taxation on investment income included within gross income (204) -------- Net cash outflow from operating activities (76,088) -------- Financing activities Dividends (701) Proceeds from issue of ordinary shares 77,139 Share issue costs paid (1,009) -------- Net cash inflow from financing activities 75,430 -------- Decrease in cash and cash equivalents (658) -------- Cash and cash equivalents at start of period - Effect of foreign exchange rate changes 653 -------- Cash and cash equivalents at end of period (5) -------- Comprised of: Cash and cash equivalents 60 Bank overdraft (65) -------- (5) ======== Notes to the Financial Statements for the period from 30 August 2012 (date of incorporation) to 30 April 2013 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 30 April 2013. The Company's 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 will 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 (effective 1 January 2015) 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 is effective for annual periods beginning on or after 1 January 2015 but is not yet 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 2013) 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 2013) 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 2013) now requires additional disclosures that relate to an entity`s interests in subsidiaries, joint arrangements, associates and structured entities. This is not applicable to the Company as it does not prepare consolidated financial statements. 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. The Company is currently assessing the impact that this standard will have on the financial position and performance. (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. - 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 (unaudited) Investment income: Overseas listed dividends 1,228 UK listed dividends 9 -------- 1,237 Other income: Deposit interest on cash balances 2 Option premium income 759 -------- 761 -------- Total 1,998 ======== During the period, the Company received premiums totalling £884,000 for writing covered call options for the purposes of revenue generation, of which £759,000 was taken to income. All derivative transactions were based on constituent stocks in the Russell 1000 Value Index. At 30 April 2013, there were 139 open positions with an associated liability of £408,000. 4. Investment management fee 2013 Revenue Capital Total £'000 £'000 £'000 (unaudited) (unaudited) (unaudited) Investment management fee 98 293 391 -------- -------- -------- Total 98 293 391 ======== ======== ======== The Company has entered into a management agreement with BlackRock Investment Management (UK) Limited under which BlackRock is entitled to an investment management fee, payable in arrears, calculated at the rate of 0.25 per cent per quarter of the Company's average market capitalisation. Average market capitalisation is calculated as the aggregate of the closing mid-market share price, multiplied by the number of shares in issue on each business day during the quarter, divided by the number of business days in the quarter. 5. Other operating expenses 2013 £'000 (unaudited) Custody fee 8 Auditor's remuneration: - audit services 12 - other audit services 6 Registrar's fee 18 Directors' emoluments 39 Other administration costs 73 -------- 156 ======== The Company's ongoing charges, calculated as a percentage of average net assets and using expenses, excluding interest costs, were 1.3%. Other administration costs include legal and professional fees of £8,000 for the conversion of the share premium account to a special reserve. Other audit services related to the review of the half yearly financial report. For the period from 30 August 2012 to 30 April 2013 a fee of £84,000 (inclusive of VAT) was paid to Ernst & Young LLP for services provided in relation to the launch of the Company and further issues of shares since the launch of the Company. These have been included within share issue costs of £1,467,000 debited to the share premium account within the Statement of Changes in Equity. 6. Dividends The Directors have declared a second quarterly interim dividend of 1.00p per share. The dividend will be paid on 2 July 2013, to shareholders on the Company's register on 24 May 2013. Under IFRS, the second interim dividend has not been recognised as a liability in the financial statements as interim dividends are not recognised in the financial statements until they are paid. They are also debited directly to revenue reserves. Dividends on equity shares during the period were: 2013 £'000 (unaudited) Dividends on equity shares: 1st Interim dividend of 1.00p per 701 ordinary share paid on 2 April 2013* 2nd Interim dividend of 1.00p per 762 ordinary share payable on 2 July 2013** -------- 1,463 -------- * based on 70,050,000 ordinary shares. ** based on 76,175,000 ordinary shares. 7. Earnings and net asset value per ordinary share 2013 (unaudited) Net revenue profit attributable to ordinary shareholders (£'000) 1,457 Net capital profit attributable to ordinary shareholders (£'000) 8,265 -------- Total profit attributable to ordinary shareholders (£'000) 9,722 -------- Total equity attributable to shareholders (£'000) 84,693 -------- The weighted average number of ordinary shares in issue during the period, on which the earnings per ordinary share was calculated, was: 69,720,106 -------- The actual number of ordinary shares in issue at the end of the period, on which the net asset value was calculated, was: 76,175,000 -------- Revenue earnings per share 2.09p Capital earnings per share 11.85p -------- Total earnings per share - basic and diluted 13.94p -------- Net asset value per share - basic and diluted 111.18p -------- Share price 114.38p ======== 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. Share capital Total Nominal number value of £'000 shares in issue Allotted, called up and fully paid share capital comprised: Ordinary shares of 1 pence each: Allotted, issued and fully paid: Issue of ordinary shares at launch 65,000,000 650 Further issues of ordinary shares 11,175,000 112 -------- -------- Shares issued 76,175,000 762 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 30 April 2013 76,175,000 762 ======== ======== 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. The total consideration after deduction of issue costs was £63,863,000. During the period to 30 April 2013 the Company issued a further 11,175,000 shares for a total gross consideration of £12,139,000 before deduction of issue costs. Since 30 April 2013 and up to the date of this report, a further 1,400,000 shares have been issued for a total gross consideration of £1,600,000 before deduction of issue costs. 9. Related party disclosure The Board consists of three 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. With effect from 24 October 2012, the Chairman receives an annual fee of £30,000, the Chairman of the Audit Committee receives an annual fee of £25,000 and the other Directors receive an annual fee of £21,000. At 30 April 2013, the Directors' interests in the Company's ordinary shares were as follows: 30 April 2013 Simon Miller (Chairman) 20,000 Christopher Casey 10,000 Andrew Irvine 20,000 -------- Since the period end and up to the date of this report, there have been no changes in Directors' holdings. Alice Ryder was appointed as a Director of the Company on 12 June 2013 but does not currently hold any shares in the Company. 10. Transactions with Investment Manager BlackRock Investment Management (UK) Limited ("BlackRock") provides management and administration services to the Company under a contract which is terminable on six months' notice in writing, such notice not to take effect prior to 24 October 2014. BlackRock is entitled to receive from the Company a management fee payable quarterly in arrears calculated at the rate of 0.25 per cent. per quarter of the average market capitalisation, together with reimbursement of reasonable expenses properly incurred by it in the performance of its duties. For details, see note 4. The investment management and performance fees for the period ended 30 April 2013 were £391,000. At the period end, an amount of £391,000 was outstanding in respect of the investment management fees. 11. Contingent liabilities There were no contingent liabilities at 30 April 2013. 12. Publication of non-statutory accounts The financial information contained in this half yearly financial report does not constitute statutory accounts, as defined in section 435 of the Companies Act 2006. The financial information for the period ended 30 April 2013 has not been audited. Independent Review Report to BlackRock North American Income Trust plc Introduction We have been engaged by the Company to review the condensed set of financial statements in the half yearly financial report for the period from incorporation on 24 October 2012 to 30 April 2013 which comprises the Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Financial Position and Cash Flow Statement, and the related notes. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the condensed set of financial statements. This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed. Directors' responsibilities The half yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half yearly financial report in accordance with the Listing Rules of the Financial Conduct Authority. As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The condensed set of financial statements included in this half yearly financial report has been prepared in accordance with the Accounting Standards Board Statement "Half Yearly Financial Reports". Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half yearly financial report based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half yearly financial report for the period ended 30 April 2013 is not prepared, in all material respects, in accordance with the Accounting Standards Board Statement "Half Yearly Financial Reports" and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority. Ernst & Young LLP London 12 June 2013 The Half Yearly Financial Report will also be available on the BlackRock Investment Management website at www.blackrock.co.uk/brna. Neither the contents of the Manager’s website nor the contents of any website accessible from hyperlinks on the Manager’s website (or any other website) is incorporated into, or forms part of, this announcement. For further information, please contact: Jonathan Ruck Keene, Chairman, Specialist Client Group, BlackRock Investment Management (UK) Limited – Tel: 020 7743 2178 Scott Malatesta, Senior Product Strategist, BlackRock Investment Management (UK) Limited – Tel: 020 7743 3000 Emma Philips, Media & Communications, BlackRock Investment Management (UK) Limited – Tel: 020 7743 2922

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