--------------------------------------------------------------------------------
THE BLACKROCK NORTH AMERICAN GOVERNMENT INCOME TRUST INC.
SEMI-ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISOR
--------------------------------------------------------------------------------
May 31, 2000
Dear Shareholder:
The Federal Reserve continued to aggressively tighten in an attempt to
achieve its objective of a soft-landing for the explosive U.S. economy. As a
result, the Federal Reserve tightened short-term rates by 0.75% during the
period and raised rates by another 0.50% at the May FOMC meeting to 6.50%. In
the first four months of the new millennium we have been witness to
unprecedented volatility in both the Treasury yield curve and the spread
sectors. The Treasury curve inverted sharply as expectations of continued Fed
tightening in the wake of an insatiable U.S. economy, while anticipation of a
significant buyback at the long end of the maturity spectrum led to lower
yields on long Treasuries. The yield curve inversion along with the premium
placed on the dwindling outstanding Treasuries caused a dramatic
underperformance of spread sectors relative to the performance of the Treasury
sectors, especially in the 10- to 30-year part of the curve.
At this juncture, the general implication for spread product is negative,
but the potential for spread widening is more limited. Most of the negatives
for high quality spread product in terms of relative supply differentials
between Treasuries and non-Treasuries as well as equity market volatility have
been priced into the market. Given current market conditions, we maintain a
significant overweight in high quality spread product. Treasuries are fully
valued even considering the strong technicals in the market. While near-term
volatility is virtually guaranteed by an active Federal Reserve, a successful
soft landing of the economy would ultimately result in a healthier U.S.
economy.
This report contains a summary of market conditions during the semi-annual
period and a review of portfolio strategy by your Trust's managers in addition
to the Trust's unaudited financial statements and a detailed list of the
portfolio's holdings. Continued thanks for your confidence in BlackRock. We
appreciate the opportunity to help you achieve your long-term investment goals.
Sincerely,
/s/ LAURENCE D. FINK /s/ RALPH L. SCHLOSSTEIN
-------------------- ------------------------
Laurence D. Fink Ralph L. Schlosstein
Chairman President
1
<PAGE>
May 31, 2000
Dear Shareholder:
Please find for your review the unaudited semi-annual report for The
BlackRock North American Government Income Trust Inc. ("the Trust") for the six
months ended April 30, 2000. We would like to take this opportunity to review
the Trust's stock price and net asset value (NAV) performance, summarize market
developments in the United States and Canada and discuss recent portfolio
management activity.
The Trust is a non-diversified, actively managed closed-end bond fund
whose shares are traded on the New York Stock Exchange under the symbol "BNA".
The Trust's investment objective is to provide high monthly income consistent
with the preservation of capital. The Trust seeks this objective by investing
in Canadian and U.S. dollar-denominated investment grade fixed income
securities, with typically 65% of the Trust's assets to be Canadian
dollar-denominated securities (primarily Canadian provincial debt, Canadian
Treasury securities and Canadian mortgage-backed securities). The U.S. portion
of the portfolio is expected to consist primarily of mortgage-backed securities
backed by U.S. Government agencies (such as Fannie Mae, Freddie Mac or Ginnie
Mae) and, to a lesser extent, U.S. Government securities, asset-backed
securities and privately issued mortgage-backed securities. All of the Trust's
assets must be rated "BBB" by Standard & Poor's,"Baa" Moody's, or determined by
the advisors to be of similar quality at time of purchase or be issued or
guaranteed by the Canadian or U.S. governments or their agencies.
The table below summarizes the performance of the Trust's stock price and
NAV over the period:
<TABLE>
<CAPTION>
----------------------------------------------------------------
4/30/00 10/31/99 CHANGE HIGH LOW
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STOCK PRICE $ 9.625 $ 9.6875 (0.65%) $ 9.9375 $ 9.00
----------------------------------------------------------------------------------------------
NET ASSET VALUE (NAV) $11.25 $11.45 (1.75%) $11.60 $11.25
----------------------------------------------------------------------------------------------
CURRENCY EXCHANGE RATE $ 0.6758 $ 0.6794 (0.53%) $ 0.6970 $ 0.6734
----------------------------------------------------------------------------------------------
10-YEAR U.S. TREASURY NOTE 6.22% 6.02% 3.32% 6.79% 5.77%
----------------------------------------------------------------------------------------------
</TABLE>
THE U.S. AND CANADIAN FIXED INCOME MARKETS
The dynamic expansion of the U.S. economy continues undaunted by Federal
Reserve Chairman Greenspan's attempt to brake the economy, short of stalling it
into a recession. The labor markets remain tight, growth remains strong with
5%+ annualized growth rates and inflation pressures continue to be offset by
increased productivity. However, the Fed remains cautious, in their February
minutes it was noted that: "Other members acknowledged that the Committee might
need to move more aggressively at a later meeting should imbalances continue to
build and inflation expectations clearly begin to pick up." At the Federal
Reserve meeting in November, February and March the Fed raised the discount
rate by 0.25% at each meeting and a 0.50% increase was made in May to bring the
current discount rate to 6.50%.
The Treasury Yield curve experienced a complex set of dynamics, which has
inverted the curve and may continue to invert the curve for the foreseeable
future. The yields on the short-end of the curve increased sharply during the
period in response to three Federal Reserves increases to the discount rate and
perceived future Fed actions in the coming months. The long-end of the curve is
reacting to the "official" announcement that the Treasury will buy back $30
billion of Treasuries with maturities ranging 10 to 30 years. With a decreasing
supply of available Treasuries, a balanced budget, and an unchanged demand for
longer maturity Treasuries, we would anticipate this condition to continue.
This condition is further augmented by Treasury auction activity, as they
reduce the available bonds on the long end of the curve they continue to add
supply in the 1-10 year range through periodic auctions. For the semi-annual
period, the yield of the 10-year Treasury security rose from 6.02% on October
31, 1999 to 6.22% on April 30, 2000.
2
<PAGE>
Canadian bonds modestly outperformed versus intermediate Treasuries during
the period. The yield on a 10-year Canadian decreased 0.14% versus an increase
of 0.20% for a 10 year Treasury. For the first time since July of 1998 economic
growth slowed, and decreased by 0.4% in February. This broke a streak of
economic gain that has not been witnessed since 1961, when GDP was first
measured. Many analysts have forecasted GDP growth to run at about 4.1%
annualized, slightly lower than last years 4.2% expansion. Despite the February
slowdown, exports to the U.S., domestic demand, consumer spending, business
investment and housing continue to fuel Canadian expansion. Despite little sign
of inflation in the economy, the Bank of Canada (BOC) has stayed in step with
the last three U.S. hikes as both countries have tried to keep inflation in
check. Another reason for BOC shadowing U.S. policy is to support the dollar,
which potentially could be weakened if higher U.S. rates attract investments
away from the Canadian Dollar. Slower economic growth during February occurred
across several sectors, but was led by auto manufacturing, which fell 1.9%.
Despite February's weakness the BOC will probably not be persuaded to alter
it's position of gradually tightening rates to keep a lid on inflation.
THE TRUST'S PORTFOLIO AND INVESTMENT STRATEGY
BlackRock actively manages the Trust's portfolio holdings consistent with
BlackRock's overall market outlook and the Trust's investment objectives. The
total portfolio's duration (or interest rate sensitivity) is managed to
approximate the duration of the U.S. 10-year Treasury; this means that for
given a change in interest rates, the movement in the Trust's NAV can be
expected to approximate the price movement of the 10-year Treasury note. The
Trust's Canadian and U.S. holdings are managed as two separate portfolios. The
Trust's Canadian dollar and asset exposure have generally remained between 65%
and 75% of the portfolio's assets; however, this allocation may be adjusted in
relation to BlackRock's views and expectations regarding interest rates and
changes in the currency exchange rates between the U.S. and Canadian dollar.
The following chart compares the Trust's current and October 31, 1999 asset
composition:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
SECTOR BREAKDOWN
--------------------------------------------------------------------------------
COMPOSITION APRIL 30, 2000 OCTOBER 31, 1999
--------------------------------------------------------------------------------
<S> <C> <C>
CANADIAN PORTFOLIO ALLOCATION 53% 59%
--------------------------------------------------------------------------------
Canadian Government Securities 23% 27%
--------------------------------------------------------------------------------
Canadian Corporate Bonds 15% 17%
--------------------------------------------------------------------------------
Ontario 5% 5%
--------------------------------------------------------------------------------
New Brunswick 4% 4%
--------------------------------------------------------------------------------
Nova Scotia 3% 3%
--------------------------------------------------------------------------------
Prince Edward Island 2% 2%
--------------------------------------------------------------------------------
Newfoundland 1% 1%
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
--------------------------------------------------------------------------------
U.S. PORTFOLIO ALLOCATION 47% 41%
--------------------------------------------------------------------------------
U.S. Government Securities 9% 3%
--------------------------------------------------------------------------------
Interest Only Mortgage-Backed Securities 8% 7%
--------------------------------------------------------------------------------
Adjustable & Inverse Floating Rate Mortgages 7% 5%
--------------------------------------------------------------------------------
FHA Project Loans 7% 7%
--------------------------------------------------------------------------------
Agency Mortgage Pass-Throughs 6% 7%
--------------------------------------------------------------------------------
Principal Only Mortgage-Backed Securities 5% 5%
--------------------------------------------------------------------------------
Agency Multiple Class Mortgage Pass-Throughs 4% 5%
--------------------------------------------------------------------------------
Commercial Mortgage-Backed Securities 1% 1%
--------------------------------------------------------------------------------
Non-Agency Multiple Class Mortgage Pass-Throughs -- 1%
--------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
The Trust moderately decreased its exposure to both Canadian Government
bonds and the Canadian dollar during the semi-annual period. The reductions
that were made were primarily on the long end of the curve, which outperformed
shorter maturities. The short-end of the curve continues to be pressured by the
Bank of Canada's efforts to combat inflation, which resulted in three increases
to the discount rate during the period. On the US side the trust has continued
to emphasize mortgage product with relatively strong prepayment
characteristics, including bonds backed by lower coupon mortgages and
structured bonds with payment lockout. The Trust also purchased IOs
(Interest-Only securities) as a defensive strategy. IOs help to protect the
value of a portfolio in a rising interest rate environment by appreciating when
mortgages extend. The Trust also purchased Adjustable and Inverse Floating Rate
Mortgages. Although rates have trended up recently, and spreads have widened
significantly, BlackRock believes that longer-term spreads will tighten and
benefit the Trust.
We will continue to manage the Trust to seek to benefit from the
opportunities available to investors in the fixed income markets as well as to
maintain the Trust's ability to meet its investment objectives. We thank you
for your investment in the BlackRock North American Government Income Trust
Inc. Please feel free to contact our marketing center at (800) 227- 7BFM (7236)
if you have specific questions which were not addressed in this report.
Sincerely,
/s/ ROBERT S. KAPITO /s/ MICHAEL P. LUSTIG
-------------------- ----------------------
Robert S. Kapito Michael P. Lustig
Vice Chairman and Portfolio Manager Managing Director and Portfolio Manager
BlackRock Advisors, Inc. BlackRock Advisors, Inc.
--------------------------------------------------------------------------------
THE BLACKROCK NORTH AMERICAN GOVERNMENT INCOME TRUST INC.
--------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BNA
--------------------------------------------------------------------------------
Initial Offering Date: December 20, 1991
--------------------------------------------------------------------------------
Closing Stock Price as of 4/30/00: $ 9.625
--------------------------------------------------------------------------------
Net Asset Value as of 4/30/00: $11.25
--------------------------------------------------------------------------------
Yield on Closing Stock Price as of 4/30/00 ($9.625)1: 8.73%
--------------------------------------------------------------------------------
Current Monthly Distribution per Share2: $ 0.07
--------------------------------------------------------------------------------
Current Annualized Distribution per Share2: $ 0.84
--------------------------------------------------------------------------------
1 Yield on Closing Stock Price is calculated by dividing the current annualized
distribution per share by the closing stock price per share.
2 Distribution is not constant and is subject to change.
4
<PAGE>
--------------------------------------------------------------------------------
THE BLACKROCK NORTH AMERICAN
GOVERNMENT INCOME TRUST INC.
PORTFOLIO OF INVESTMENTS
APRIL 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENTS-128.1%
UNITED STATES SECURITIES-60%
MORTGAGE PASS-THROUGHS-16.7%
Federal Home Loan Mortgage
Corp.,
$ 8,592@ 6.50%, 2/01/28 - 6/01/29 ............. $ 8,026,589
Federal Housing Administration,
GMAC,
1,994 Series 37, 7.43%, 10/01/22 .......... 1,984,192
928 Series 44, 7.43%, 8/01/22 ........... 919,888
1,602 Series 59, 7.43%, 7/01/21 ........... 1,595,858
698 Series 65, 7.43%, 12/01/21 .......... 691,050
Merrill,
2,836 Series 29, 7.43%, 6/01/22 ........... 2,827,623
22,989 Series 42, 7.43%, 9/01/22 ........... 22,795,493
Reilly, Series B-11,
2,168 7.40%, 4/01/21 ....................... 2,160,693
Westmore Project 8240,
2,223 7.25%, 4/01/21 ....................... 2,213,244
Federal National Mortgage
Association,
18,163@ 5.50%, 12/01/13 - 2/01/14,
15 year .............................. 16,630,971
4,628 7.00%, 2/01/24 - 1/01/29 ............. 4,440,393
Government National Mortgage
Association,
1,103 8.00%, 4/15/24 - 11/15/25 ............ 1,104,976
------------
65,390,970
------------
AGENCY MULTIPLE CLASS MORTGAGE
PASS-THROUGHS-4.7%
Federal Home Loan Mortgage
Corp., Multiclass Mortgage
Participation Certificates,
4,629@ Series 1104, Class 1104-L,
6/15/21 ............................. 4,744,775
1,751 Series 1577, Class 1577-SC,
9/15/23 ............................. 1,236,944
2,000@ Series 1601, Class 1601-SE,
10/15/08 ............................ 1,540,625
4,122 Series 1649, Class 1649-S,
12/15/08 ............................ 3,762,517
Federal National Mortgage
Association, REMIC
Pass-Through Certificates,
2,582@ Trust 1989-90, Class 90-E,
12/25/19 ............................ 2,643,710
660@ Trust 1993-210, Class 210-A,
1/25/23 ............................. 640,652
424 Trust 1993-224, Class 224-SD,
11/25/23 ............................ 456,666
1,680 Trust 1995-10, Class 10-Z,
3/25/24 ............................. 1,655,730
2,100 Trust 1996-14, Class 14-M,
10/25/21 ............................ 1,804,026
------------
18,485,645
------------
NON-AGENCY MULTIPLE CLASS
MORTGAGE PASS-THROUGHS-0.2%
AAA 980 Summit Mortgage Trust,
Series 2000-1, Class B1,
12/28/12** .......................... 922,383
------------
ADJUSTABLE & INVERSE FLOATING RATE
MORTGAGES-9.3%
Countrywide Funding Corp.,
Aaa 2,903 Series 1993-7, Class 7-AS3,
11/25/23 ............................ 2,389,896
AAA 1,696 Series 1993-10, Class 10-A8,
1/25/24 ............................. 1,470,974
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage Participation
Certificates,
2,500@ Series 1526, Class 1526-SA,
6/15/23 ............................. 1,817,100
1,575 Series 1560, Class 1560-SL,
8/15/23 ............................. 1,216,701
1,096@ Series 1570, Class 1570-SA,
8/15/23 ............................. 973,004
665 Series 1590, Class 1590-OA,
10/15/23 ............................ 690,463
1,225 Series 1590, Class 1590-T,
10/15/23 ............................ 660,609
250 Series 1608, Class 1608-S,
11/15/23 ............................ 204,061
161 Series 1609, Class 1609-LN,
11/15/23 ............................ 130,407
4,785 Series 1625, Class 1625-SC,
12/15/08 ............................ 3,720,446
1,653 Series 1666, Class 1666-S,
1/15/24 ............................. 1,278,924
638 Series 1669, Class 1669-MD,
2/15/24 ............................. 562,085
2,250 Series 1688, Class 1688-S,
12/15/13 ............................ 2,061,563
3,092 Series 1699, Class 1699-ST,
3/15/24 ............................. 2,177,634
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
ADJUSTABLE & INVERSE FLOATING RATE
MORTGAGES (CONTINUED)
$ 271 Series 1862, Class 1862-SF,
4/15/23 ........................ $ 239,628
426 Series 2063, Class 2063-SM,
5/15/27 ........................ 272,349
4,064 Series 2190, Class 2190-S,
10/15/14 ....................... 3,421,302
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
562 Trust 1991-145, Class 145-S,
10/25/06 ....................... 591,713
615@ Trust 1991-87, Class 87-S,
8/25/21 ........................ 609,366
1,469 Trust 1993-97, Class 97-SB,
5/25/23 ........................ 719,903
809 Trust 1993-113, Class 113-SB,
7/25/23 ........................ 810,515
1,612 Trust 1993-170, Class 170-SC,
9/25/08 ........................ 1,569,200
1,581 Trust 1993-179, Class 179-SB,
10/25/23 ....................... 1,216,346
102 Trust 1993-183, Class 183-SM,
10/25/23 ....................... 100,690
738 Trust 1993-208, Class 208-SE,
11/25/23 ....................... 552,566
2,097@ Trust 1993-214, Class 214-S,
12/25/08 ....................... 1,874,553
1,099 Trust 1993-256, Class 256-F,
11/25/23 ....................... 873,520
1,808 Trust 1994-23, Class 23-PS,
4/25/23 ........................ 1,697,101
1,414 Trust 1999-1, Class 1-S,
7/25/23 ........................ 1,414,288
Aaa 895 Prudential Home Mortgage
Securities Co., Mortgage
Pass-Through Certificates,
Series 1993-54, Class A28,
1/25/24 ........................ 697,895
----------
36,014,802
----------
INTEREST ONLY MORTGAGE-BACKED
SECURITIES-9.8%
BA Mortgage Securities Inc.,
AAA 907 Series 1997-1, Class X,
7/25/26 ........................ 168,967
AAA 1,853 Series 1998-1, Class 2X,
5/25/13 ........................ 379,318
AAA 23,533 Countrywide Funding Corp.,
Series 1997-8, Class A-5,
1/25/28 ........................ 220,621
AAA 140,406 Countrywide Funding Corp.,
Series 1998-6, Class 6-X,
6/25/13 ........................ 1,886,711
AAA 8,669 Credit Suisse First Boston
Mortgage Corp.,
Series 1997-C1, Class C1-AX,
4/20/22** ...................... 703,208
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal Home Loan Mortgage
Corp., Multiclass Mortgage
Participation Certificates,
$ 2,756 Series 1254, Class 1254-Z,
4/15/22 ........................ $ 576,896
5,500 Series 1353, Class 1353-S,
8/15/07 ........................ 457,274
625 Series 1379, Class 1379-P,
8/15/18 ........................ 5,435
1,874 Series 1397, Class 1397-IO,
10/15/22 ....................... 524,691
1,000 Series 1611, Class 1611-JC,
8/15/23 ........................ 892,500
19,002@ Series 1809, Class 1809-SC,
12/15/23 ....................... 1,313,256
4,053 Series 1900, Class 1900-SV,
8/15/08 ........................ 266,597
7,000 Series 2002, Class 2002-HJ,
10/15/08 ....................... 833,853
3,792 Series 2039, Class 2039-PI,
2/15/12 ........................ 581,234
4,956 Series 2044, Class 2044-PF,
6/15/20 ........................ 577,234
2,430 Series 2066, Class 2066-PJ,
12/15/26 ....................... 590,557
6,482 Series 2080, Class 2080-PL,
1/15/27 ........................ 1,997,016
6,620 Series 2103, Class 2103-PI,
5/15/12 ........................ 1,261,968
10,173 Series 2130, Class 2130-SC,
3/15/29 ........................ 600,819
1,385 Series 2137, Class 2137-CI,
10/15/26 ....................... 313,319
5,264 Series 2140, Class 2140-UK,
9/15/11 ........................ 862,005
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
16,304 Trust 302, Class 302-2,
6/01/29 ........................ 5,232,473
816 @ Trust G1992-5, Class 5-H,
1/25/22 ........................ 219,420
2,200 Trust 1993-46, Class 46-S,
5/25/22 ........................ 70,062
1,700 Trust 1993-196, Class 196-SC,
10/25/08 ....................... 1,547,714
7,117 Trust 1993-199, Class 199-SB,
10/25/23 ....................... 146,796
2,425 Trust 1993-202, Class 202-QA,
6/25/19 ........................ 143,156
6,697 Trust 1995-26, Class 26-SW,
2/25/24 ........................ 694,276
5,047 Trust 1997-50, Class 50-SI,
4/25/23 ........................ 151,420
10,224 Trust 1997-65, Class 65-SG,
2/25/15 ........................ 1,051,150
4,500 Trust 1998-25, Class 25-PG,
3/18/22 ........................ 743,265
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST ONLY MORTGAGE-BACKED
SECURITIES (CONTINUED)
$ 7,259 Trust 1998-46, Class 46-SC,
5/18/28 ......................... $ 435,524
Aaa 2,320@ G. E. Capital Mortgage Services,
Trust 1993-13, Class 13-A2,
10/25/08 ........................ 50,436
GMAC Commercial Mortgage
Securities Inc., Mortgage
Certificates,
AAA 17,835 Trust 1997-C1, Class C1-X,
7/15/27 ......................... 1,326,932
AAA 67,826 Trust 1998-C2, Class C2-X,
8/15/23 ......................... 2,552,535
AAA 28,674 Goldman Sachs Mortgage
Securities Corp., Mortgage
Participation Certifcates,
Series 1998-5, Class 5-IO,
6/19/27** ....................... 757,172
Government National Mortgage
Association,
2,96@ Trust 1998-14, Class 14-PK,
11/20/26 ........................ 605,859
4,822 Trust 1999-3, Class 3-S,
2/16/29 ......................... 229,029
37,554 Trust 1999-5, Class 5-S,
2/16/29 ......................... 809,754
21,037 Trust 1999-8, Class 8-S,
3/16/29 ......................... 433,878
AAA 18,185 Hanover Grantor Trust,
Series 1999-A, Class A1-IO,
8/28/27** ....................... 633,626
Aaa 19,361 Headlands Mortgage Securities Inc.,
Series 1997-1, Class X1,
3/25/27 ......................... 363,024
AAA 53,495 Merrill Lynch Mortgage
Investors, Inc.,
Series 1997-C2, Class C2-IO,
12/10/29 ........................ 3,394,909
AAA 5,758 Morgan Stanley Capital 1 Inc.,
Trust 1997-HF1, Class HF1-X,
6/15/17** ....................... 388,568
Aaa 119,115 Norwest Asset Securities Corp.,
Series 1997-12, Class A11,
9/25/27 ......................... 297,787
AAA 60,560 Prudential Home Mortgage
Securities Co., Mortgage
Pass-Through Certificates,
Series 1994-5, Class A-9,
2/25/24 ......................... 596,138
AAA 820 Residential Funding Mortgage
Securities I Inc.,
Series 1998-S30, Class A7,
12/25/28 ........................ 366,606
----------
38,254,988
----------
PRINCIPAL ONLY MORTGAGE-BACKED
SECURITIES-6.4%
Federal Home Loan Mortgage
Corp., Multiclass Mortgage
Participation Certificates,
1,073 Series G-50, Class G50-AM,
4/25/24 ......................... 571,969
9,319 Series 1570, Class 1570-C,
8/15/23 ......................... 6,681,009
5,658@ Series 1686, Class 1686-B,
2/15/24 ......................... 3,021,462
1,055 Series 1691, Class 1691-G,
3/15/24 ......................... 723,742
1,368 Series 1739, Class 1739-B,
2/15/24 ......................... 967,590
378 Series 1857, Class 1857-PB,
12/15/08 ........................ 305,906
6,297 Series 2009, Class 2009-HJ,
10/15/22 ........................ 3,772,258
2,481 Series 2073 Class 2073-PO,
7/15/28 ......................... 1,089,172
4,000 Series 2082, Class 2082-PN,
1/15/24 ......................... 1,843,083
408 Series 2087, Class 2087-PO,
9/15/25 ......................... 279,080
1,142 Series 2217, Class 2217-PO,
2/15/30 ......................... 688,587
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
900 Trust 279, Class 279-1,
7/01/26 ......................... 661,448
1,050 Trust 1996-38, Class 38-E,
8/25/23 ......................... 341,313
204 Trust 1997-85, Class 85-LE,
10/25/23 ........................ 129,048
3,301 Trust 1998-26, Class 26-L,
3/25/23 ......................... 2,097,797
631 Trust 1998-48, Class 48-P,
8/18/28 ......................... 376,099
AAA 6,055 Fund America Investment Corp.,
Series 1993-C, Class B,
4/29/30 ......................... 859,301
918 Government National Mortgage
Association, REMIC
Pass-Through Certificates,
Trust 1999-40, Class 40-N,
6/20/27 ......................... 541,884
----------
24,950,748
----------
COMMERCIAL MORTGAGE-BACKED
SECURITIES-1.6%
AAA 1,550 LB Commercial Conduit
Mortgage Trust,
Series 1999-C1, Class A2,
6.78%, 4/15/09 .................. 1,450,687
AAA 5,000 Prudential Securities Secured
Financing Corp.,
Series 1998-C1, Class A1B,
6.506%, 7/15/08 ................. 4,644,860
----------
6,095,547
----------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S GOVERNMENT AND AGENCY
SECURITIES-11.3%
Overseas Private Investment Corp.,
$ 290 5.46%, 5/29/12 .............................. $ 258,711
264 5.79%, 5/29/12 .............................. 236,749
341 5.88%, 5/29/12 .............................. 309,610
220 6.27%, 5/29/12 .............................. 206,582
386 6.81%, 5/29/12 .............................. 364,865
440 6.84%, 5/29/12 .............................. 423,120
1,012 6.91%, 5/29/12 .............................. 966,460
275 7.35%, 5/29/12 .............................. 265,375
3,169 Small Business Administration,
Series 1996-20K,
6.95%, 11/01/16 ............................. 3,004,562
10,321@ U.S. Treasury Bond,
3.875%, 4/15/29, TIPS ....................... 10,343,403
U.S. Treasury Notes,
27,595@ 6.00%, 8/15/09 .............................. 26,956,728
225@ 6.125%, 8/15/07 ............................. 220,325
150 6.50%, 5/31/01 .............................. 149,906
610@ 7.25%, 8/15/04 .............................. 624,488
-----------
44,330,884
-----------
Total United States Securities
(cost $245,891,127)............................ 234,445,967
-----------
CANADIAN SECURITIES-68.1%
CANADIAN CORPORATE BONDS-19.1%
A2 C$ 3,500 Bell Canada,
11.45%, 4/15/10 ............................. 3,133,905
AA- 4,500 Canadian Imperial Bank of
Commerce,
8.50%, 2/05/07 .............................. 3,122,895
Aa3 10,000 Canadian Imperial Bank, Toronto,
8.15%, 4/25/06 .............................. 7,177,527
A+ 12,000 Daimler Benz AG,
9.50%, 10/30/01 ............................. 8,440,289
European Investment Bank,
AAA 22,800 8.50%, 8/30/05 .............................. 16,610,175
AAA 6,500 9.125%, 9/20/04 ............................. 4,790,837
A1 10,000 Ford Credit Canada Ltd.,
5.66%, 11/19/01 ............................. 6,664,866
A2 5,000 Greater Toronto Airports Authority,
6.45%, 12/03/27 ............................. 3,126,916
BBB- 10,500 Lindsey Morden Group Inc.,
7.00%, 6/16/08** ............................ 6,210,379
A 14,000 407 International Inc.,
6.47%, 7/27/29 .............................. 8,744,682
A2 10,000 General Motors Acceptance Corp.,
5.90%, 6/24/02 .............................. 6,647,984
-----------
74,670,455
-----------
CANADIAN GOVERNMENT
SECURITIES-29.2%
Canadian Government Bonds,
C$ 20,579 4.00%, 12/01/31 RRB ......................... $14,982,344
3,589@ 4.25%, 12/01/26 RRB ......................... 2,680,081
62,500@ 5.25%, 9/01/03 .............................. 40,904,179
39,000 5.50%, 6/01/09 .............................. 25,113,377
20,000@ 7.00%, 9/01/01 .............................. 13,647,782
250 7.25%, 6/01/07 .............................. 178,280
6,240@ 8.00%, 6/01/23 .............................. 5,219,032
200 8.00%, 6/01/27 .............................. 172,490
15,100@ 9.00%, 12/01/04 ............................. 11,269,684
-----------
114,167,249
-----------
CANADIAN PROVINCIAL SECURITIES-19.8%
NEW BRUNSWICK-5.5%
New Brunswick Province,
AA- 13,000 7.625%, 7/14/00 ............................. 8,816,500
A1 14,600 10.125%, 10/31/11 ........................... 12,548,172
-----------
21,364,672
-----------
NEWFOUNDLAND-2.1%
Baa1 10,000 Newfoundland Province,
8.45%, 2/05/26 .............................. 8,139,712
-----------
NOVA SCOTIA-3.4%
NR 15,000 Nova Scotia Province,
9.60%, 1/30/22 .............................. 13,287,899
-----------
ONTARIO-5.9%
Aa3 10,000 Hamilton Wentworth Regional
Municipality,
7.00%, 6/06/01 .............................. 6,806,672
Ontario Province,
Aa3 8,500 5.70%, 12/01/08 ............................. 5,425,214
Aa3 11,500 6.15%, 4/01/09 .............................. 7,444,676
AA+ 5,000 Toronto Metropolitan Municipality,
7.75%, 12/01/05 ............................. 3,556,891
-----------
23,233,453
-----------
PRINCE EDWARD ISLAND-2.6%
A3 13,000 Prince Edward Island Province,
8.50%, 10/27/15 ............................. 10,142,792
-----------
QUEBEC-0.3%
A+ 2,000 Quebec Province,
7.50%, 12/01/03 ............................. 1,391,721
-----------
Total Canadian Provincial Securities .......... 77,560,249
-----------
Total Canadian Securities
(cost $274,123,377).......................... 266,397,953
-----------
Total Investments before
investment sold short
(cost $520,014,504).......................... 500,843,920
-----------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENTS SOLD SHORT-(7.6%)
United States Treasury Bonds,
$(6,000) 6.125%, 8/15/29 ................... $ (6,014,040)
United States Treasury Notes,
(16,000) 4.75%, 11/15/08 ................... (14,287,520)
(9,310) 6.50%, 2/15/10 .................... (9,494,710)
------------
(proceeds $30,041,094)............. (29,796,270)
------------
Total investments, net of investments
sold short-120.5% ................. 471,047,650
------------
Liabilities in excess of other
assets-(20.5)% (79,968,096)
------------
NET ASSETS-100% ..................... $391,079,554
============
</TABLE>
---------------------
* Using the higher of Standard & Poor's, Moody's or Fitch's rating.
** Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified institutional buyers.
@ Entire or partial principal amount pledged as collateral for reverse
repurchase agreements or financial futures contracts.
---------------------------------------------------------------------
KEY TO ABBREVIATIONS:
REMIC -- Real Estate Mortgage Investment Conduit.
RRB -- Real Return Bond.
TIPS -- Treasury Inflation Protection Securities.
---------------------------------------------------------------------
See Notes to Financial Statements.
9
<PAGE>
--------------------------------------------------------------------------------
THE BLACKROCK NORTH AMERICAN
GOVERNMENT INCOME TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $520,014,504) (Note 1) ..... $500,843,920
Canadian dollars, at value (cost $56,794,297)........... 56,549,101
Deposits with brokers as collateral for securities
sold short (Note 1) .................................. 35,809,231
Receivable for investments sold ........................ 16,602,170
Interest receivable .................................... 8,531,939
Interest rate caps, at value
(amortized cost $290,884) (Notes 1 & 3)............... 498,114
Forward currency contracts-amount receivable
from counterparties .................................. 3,592
------------
618,838,067
------------
LIABILITIES
Reverse repurchase agreements (Note 4) ................. 151,259,622
Payable for investments purchased ...................... 44,425,336
Investments sold short, at value
(proceeds received $30,041,094) (Note 1).............. 29,796,270
Interest payable ....................................... 901,216
Forward currency contracts-amount payable
to counterparties .................................... 693,785
Due to broker-variation margin (Notes 1 & 3) ........... 202,598
Investment advisory fee payable (Note 2) ............... 197,001
Administration fee payable (Note 2) .................... 32,834
Other accrued expenses ................................. 249,851
------------
227,758,513
------------
NET ASSETS ............................................. $391,079,554
============
Net assets were comprised of:
Common stock, at par (Note 5) ........................ $ 347,740
Paid-in capital in excess of par ...................... 442,715,046
Cost of 1,433,100 shares held in treasury ............. (14,109,740)
------------
428,953,046
------------
Distributions in excess of net investment income....... (2,957,073)
Accumulated net realized gain on investments .......... 1,138,803
Net unrealized depreciation on investments ............ (9,551,739)
Accumulated net realized and unrealized
foreign currency loss ............................... (26,503,483)
------------
Net assets, April 30, 2000 ............................. $391,079,554
============
Net asset value per share:
($391,079,554 (division sign) 34,773,993 shares of
common stock issued and outstanding) ................. $ 11.25
============
</TABLE>
--------------------------------------------------------------------------------
THE BLACKROCK NORTH AMERICAN
GOVERNMENT INCOME TRUST INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Income
Interest earned (net of premium amortization of
$3,218,012 and interest expense of $4,266,939)..... $13,198,040
-----------
Operating Expenses
Investment advisory ............................... 1,203,708
Administration .................................... 200,618
Custodian ......................................... 125,000
Independent accountants ........................... 52,500
Reports to shareholders ........................... 37,500
Directors ......................................... 36,000
Transfer agent .................................... 18,000
Registration ...................................... 16,000
Legal ............................................. 10,000
Miscellaneous ..................................... 50,972
-----------
Total operating expenses .......................... 1,750,298
-----------
Net investment income ............................... 11,447,742
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Net realized gain (loss) on:
Investments ....................................... 954,671
Futures ........................................... 544,502
Short sales ....................................... (1,082,395)
Foreign currency .................................. 1,865,313
-----------
2,282,091
-----------
Net change in unrealized appreciation
(depreciation) on:
Investments ....................................... (3,260,309)
Futures ........................................... (988,131)
Interest rate caps ................................ 283,373
Short sales ....................................... 122,651
Foreign currency .................................. (3,332,513)
-----------
(7,174,929)
-----------
Net loss on investments and foreign currency
transactions ...................................... (4,892,838)
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........................... $6,554,904
===========
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
--------------------------------------------------------------------------------
THE BLACKROCK NORTH AMERICAN
GOVERNMENT INCOME TRUST INC.
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
RECONCILIATION OF NET INCREASE IN
NET ASSETS RESULTING FROM OPERATIONS
TO NET CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES
Net increase in net assets resulting from operations ..... $ 6,554,904
-----------
Increase in investments .................................. (2,559,041)
Net realized gain ........................................ (2,282,091)
Decrease in unrealized appreciation ...................... 7,174,929
Increase in interest rate cap ............................ (203,039)
Decrease in receivable for investments sold .............. 36,345,854
Decrease in receivable for forward currency
contracts .............................................. 348,389
Increase in interest receivable .......................... (324,075)
Decrease in due to broker-variation margin ............... (353,527)
Increase in payable for investments purchased ............ 34,911,312
Increase in payable for forward currency
contracts .............................................. 693,785
Increase in interest payable ............................. 267,049
Decrease in accrued expenses and other liabilities ....... (115,452)
Increase in deposits with brokers ........................ (21,349,331)
Increase in payable for investments sold short ........... 15,642,979
-----------
Total adjustments ....................................... 68,197,741
-----------
Net cash flows provided by operating activities .......... $74,752,645
===========
INCREASE (DECREASE) IN CASH
AND FOREIGN CURRENCY
Net cash flows provided by operating activities .......... $74,752,645
-----------
Cash flows used for financing activities:
Increase in reverse repurchase agreements .............. 1,913,314
Cash dividends paid ..................................... (14,760,136)
Cost of Trust shares reacquired ......................... (6,893,440)
-----------
Net cash flows used for financing activities ............. (19,740,262)
-----------
Net realized and unrealized foreign currency gain........ (681,436)
Net increase in cash and foreign currency ............... 54.330,947
Cash and foreign currency at beginning of period ........ 2,218,154
-----------
Cash and foreign currency at end of period .............. $56,549,101
===========
</TABLE>
--------------------------------------------------------------------------------
THE BLACKROCK NORTH AMERICAN
GOVERNMENT INCOME TRUST INC.
STATEMENTS OF CHANGES
IN NET ASSETS (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
2000 1999
------------------ ----------------
INCREASE (DECREASE)
IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income ................ $ 11,447,742 $ 30,452,154
Net realized gain (loss) ............. 2,282,091 (946,600)
Net change in unrealized
depreciation ........................ (7,174,929) (15,851,619)
------------- ------------
Net increase in net
assets resulting from
operations .......................... 6,554,904 13,653,935
Dividends and distributions:
Dividends from net investment
income .............................. (11,803,063) (30,366,425)
Distributions in excess of net
investment income ................. (2,957,073) -
------------- ------------
Total dividends and distributions..... (14,760,136) (30,366,425)
------------- ------------
Cost of Trust shares reacquired ...... (6,893,440) (7,216,300)
------------- ------------
Total decrease ....................... (15,098,672) (23,928,790)
NET ASSETS
Beginning of period .................. 406,178,226 430,107,016
------------- ------------
End of period (including
undistributed net investment
income of $0 and $355,321,
respectively) ..................... $ 391,079,554 $406,178,226
============= ============
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
--------------------------------------------------------------------------------
THE BLACKROCK NORTH AMERICAN GOVERNMENT INCOME TRUST INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30,
2000
----
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ....................... $ 11.45
-----------
Net investment income (net of interest expense of $0.12,
$0.28, $0.26, $0.22, $0.41 and $0.35, respectively)........ .33
Net realized and unrealized gain (loss) on investments..... (.14)
-----------
Net increase from investment operations .................... .19
-----------
Dividends and distributions:
Dividends from net investment income ...................... (.34)
Distributions in excess of net investment income .......... (.08)
Return of capital distributions ........................... -
-----------
Total dividends and distributions .......................... (.42)
-----------
Increase resulting from Trust shares repurchased ........... .03
-----------
Net asset value, end of period* ............................ $ 11.25
===========
Per share market value, end of period* ..................... $ 9.63
===========
TOTAL INVESTMENT RETURN+ .................................. 3.82%
RATIOS TO AVERAGE NET ASSETS:
Operating expenses ......................................... 0.86%+++
Operating expenses and interest expense .................... 2.97%+++
Net investment income ...................................... 5.64%+++
SUPPLEMENTAL DATA:
Average net assets (in thousands) .......................... $ 407,930
Portfolio turnover ......................................... 52%
Net assets, end of period (in thousands) ................... $ 391,080
Reverse repurchase agreements outstanding,
end of period (in thousands) .............................. $ 151,260
Asset coverage++ ........................................... $ 3,585
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ....................... $ 11.88 $ 12.47 $ 12.33 $ 11.36 $ 10.07
------- ------- -------- -------- --------
Net investment income (net of interest expense of $0.12,
$0.28, $0.26, $0.22, $0.41 and $0.35, respectively)........ .84 .78 .89 .93 .89
Net realized and unrealized gain (loss) on investments..... (.46) (.53) .09 .92 1.37
------- -------- -------- -------- --------
Net increase from investment operations .................... .38 .25 .98 1.85 2.26
------- -------- -------- -------- --------
Dividends and distributions:
Dividends from net investment income ...................... (.84) (.81) (.84) (.29) -
Distributions in excess of net investment income .......... - (.03) - - -
Return of capital distributions ........................... - - - (.59) (.97)
------- -------- -------- -------- --------
Total dividends and distributions .......................... (.84) (.84) (.84) (.88) (.97)
------ -------- -------- -------- --------
Increase resulting from Trust shares repurchased ........... .03 - - - -
------ -------- -------- -------- --------
Net asset value, end of period* ............................ $ 11.45 $ 11.88 $ 12.47 $ 12.33 $ 11.36
======= ======== ======== ======== ========
Per share market value, end of period* ..................... $ 9.69 $ 9.88 $ 10.56 $ 10.13 $ 10.13
======= ======== ======== ======== ========
TOTAL INVESTMENT RETURN+ .................................. 6.70% 1.34% 13.23% 9.48% 22.88%
RATIOS TO AVERAGE NET ASSETS:
Operating expenses ......................................... 0.85% 0.88% 0.93% 0.97% 0.96%
Operating expenses and interest expense .................... 3.18% 3.01% 2.74% 4.63% 4.34%
Net investment income ...................................... 7.14% 6.39% 7.30% 8.24% 8.58%
SUPPLEMENTAL DATA:
Average net assets (in thousands) .......................... $426,283 $444,051 $440,465 $409,644 $374,975
Portfolio turnover ......................................... 186% 153% 146% 151% 78%
Net assets, end of period (in thousands) ................... $406,178 $430,107 $451,419 $446,394 $411,295
Reverse repurchase agreements outstanding,
end of period (in thousands) .............................. $149,346 $173,520 $206,126 $217,135 $202,703
Asset coverage++ ........................................... $ 3,720 $ 3,479 $ 3,190 $ 3,056 $ 3,028
</TABLE>
----------
* Net asset value and market value published in BARRON'S on Saturday and THE
WALL STREET JOURNAL on Monday.
+ Total investment return is calculated assuming a purchase of common stock
at the current market price on the first day and a sale at the current
market price on the last day of each period reported. Dividends and
distributions, if any, are assumed for purposes of this calculation to be
reinvested at prices obtained under the Trust's dividend reinvestment plan.
Total investment return does not reflect brokerage commissions. Total
investment return for period less than one full year is not annualized.
++ Per $1,000 of reverse repurchase agreement outstanding.
+++ Annualized.
The information above represents the unaudited operating performance data for a
share of common stock outstanding, total investment return, ratios to average
net assets and other supplemental data, for the periods indicated. This
information has been determined based upon financial information provided in
the financial statements and market value data for the Trust's shares.
See Notes to Financial Statements.
12
<PAGE>
--------------------------------------------------------------------------------
THE BLACKROCK NORTH AMERICAN
GOVERNMENT INCOME TRUST INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
NOTE 1. ORGANIZATION
& ACCOUNTING The BlackRock North American
POLICIES Government Income Trust Inc.,
(the "Trust"), a Maryland
corporation, is a non-diversified, closed-end management investment company.
The investment objective of the Trust is to achieve high monthly income
consistent with preservation of capital. The ability of issuers of debt
securities held by the Trust to meet their obligations may be affected by
economic developments in a specific country, industry or region. No assurance
can be given that the Trust's investment objective will be achieved.
The following is a summary of significant accounting policies followed by
the Trust.
BASIS OF PRESENTATION: The financial statements of the Trust are prepared in
accordance with United States generally accepted accounting principles using
the United States dollar as both the functional and reporting currency.
SECURITIES VALUATION: In valuing the Trust's assets, quotations of foreign
securities in a foreign currency are converted to U.S. dollar equivalents at
the then current currency value. The Trust values mortgage-backed, asset-backed
and other debt securities, interest rate swaps, caps, floors, and non-exchange
traded options on the basis of current market quotations provided by dealers or
pricing services approved by the Trust's Board of Directors. In determining the
value of a particular security, pricing services may use certain information
with respect to transactions in such securities, quotations from dealers,
market transactions in comparable securities, various relationships observed in
the market between securities, and calculated yield measures based on valuation
technology commonly employed in the market for such securities. Exchange-traded
options are valued at their last sales price as of the close of options trading
on the applicable exchanges. In the absence of a last sale, options are valued
at the average of the quoted bid and asked prices as of the close of business.
Futures contracts are valued at the last sale price as of the close of the
commodities exchange on which it trades unless the Trust's Board of Directors
determines that such price does not reflect its fair value, in which case it
will be valued at its fair value as determined by the Trust's Board of
Directors. Any securities or other assets for which such current market
quotations are not readily available are valued at fair value as determined in
good faith under procedures established by and under the general supervision
and responsibility of the Trust's Board of Directors.
Short-term securities which mature in 60 days or less are valued at
amortized cost, if their term to maturity from date of purchase is 60 days or
less. Short-term securities with a term to maturity greater than 60 days from
the date of purchase are valued at current market quotations until maturity or
disposition.
In connection with transactions in repurchase agreements, the Trust's
custodian takes possession of the underlying collateral securities, the value
of which at least equals the principal amount of the repurchase transaction,
including accrued interest. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market on a
daily basis to ensure the adequacy of the collateral. If the seller defaults
and the value of the collateral declines or if bankruptcy proceedings are
commenced with respect to the seller of the security, realization of the
collateral by the Trust may be delayed or limited.
OPTION SELLING/PURCHASING: When the Trust sells or purchases an option, an
amount equal to the premium received or paid by the Trust is recorded as a
liability or an asset and is subsequently adjusted to the current market value
of the option written or purchased. Premiums received or paid from writing or
purchasing options which expire unexercised are treated by the Trust on the
expiration date as realized gains or losses. The difference between the premium
and the amount paid or received on effecting a closing purchase or sale
transaction, including brokerage commissions, is also treated as a realized
gain or loss. If an option is exercised, the premium paid or received is added
to the proceeds from the sale or cost of the purchase in determining whether
the Trust has realized a gain or a loss on investment transactions. The Trust,
as writer of an option, may have no control over whether the underlying
securities may be sold (call) or purchased (put) and as a result bears the
market risk of an unfavorable change in the price of the security underlying
the written option.
Options, when used by the Trust, help in maintaining a targeted duration.
Duration is a measure of the price sensitivity of a security or a portfolio to
relative changes in interest rates. For instance, a duration of "one" means
that a portfolio's or a security's price would be expected to change by
approximately one percent with a one percent change in interest rates, while a
duration of five would imply that the price would move approximately five
percent in relation to a one percent change in interest rates.
Option selling and purchasing is used by the Trust to effectively "hedge"
positions, or collections of positions, so that changes in interest rates do
not change the duration of the portfolio unexpectedly. In general, the Trust
uses options to hedge a long or short position or an overall portfolio that is
13
<PAGE>
longer or shorter than the benchmark security. A call optiongives the purchaser
of the option the right (but not obligation) to buy, and obligates the seller
to sell (when the option is exercised), the underlying position at the exercise
price at any time or at a specified time during the option period. A put option
gives the holder the right to sell and obligates the writer to buy the
underlying position at the exercise price at any time or at a specified time
during the option period. Put options can be purchased to effectively hedge a
position or a portfolio against price declines if a portfolio is long. In the
same sense, call options can be purchased to hedge a portfolio that is shorter
than its benchmark against price changes. The Trust can also sell (or write)
covered call options and put options to hedge portfolio positions.
The main risk that is associated with purchasing options is that the
option expires without being exercised. In this case, the option expires
worthless and the premium paid for the option is considered the loss. The risk
associated with writing call options is that the Trust may forego the
opportunity for a profit if the market value of the underlying position
increases and the option is exercised. The risk in writing put options is that
the Trust may incur a loss if the market value of the underlying position
decreases and the option is exercised. In addition, as with futures contracts,
the Trust risks not being able to enter into a closing transaction for the
written option as the result of an illiquid market.
INTEREST RATE SWAPS: In an interest rate swap, one investor pays a floating
rate of interest on a notional principal amount and receives a fixed rate of
interest on the same notional principal amount for a specified period of time.
Alternatively, an investor may pay a fixed rate and receive a floating rate.
Rate swaps are efficient as asset/liability management tools. In more complex
swaps, the notional principal amount may decline (or amortize) over time.
During the term of the swap, changes in the value of the swap are
recognized as unrealized gains or losses by "marking-to-market" to reflect the
market value of the swap. When the swap is terminated, the Trust will record a
realized gain or loss equal to the difference between the proceeds from (or
cost of) the closing transaction and the Trust's basis in the contract, if any.
The Trust is exposed to credit loss in the event of non-performance by
the other party to the swap. However, the Trust closely monitors swaps and does
not anticipate non-performance by any counterparty.
SWAP OPTIONS: Swap options are similar to options on securities except that
instead of selling or purchasing the right to buy or sell a security, the
writer or purchaser of the swap option is granting or buying the right to enter
into a previously agreed upon interest rate swap agreement at any time before
the expiration of the option. Premiums received or paid from writing or
purchasing options are recorded as liabilities or assets and are subsequently
adjusted to the current market value of the option written or purchased.
Premiums received or paid from writing or purchasing options which expire
unexercised are treated by the Trust on the expiration date as realized gains
or losses. The difference between the premium and the amount paid or received
on effecting a closing purchase or sale transaction, including brokerage
commission, is also treated as a realized gain or loss. If an option is
exercised, the premium paid or received is added to the proceeds from the sale
or cost of the purchase in determining whether the Trust has realized a gain or
loss on investment transactions.
The main risk that is associated with purchasing swap options is that the
swap option expires without being exercised. In this case, the option expires
worthless and the premium paid for the swap option is considered the loss. The
main risk that is associated with the writing of a swap option is the market
risk of an unfavorable change in the value of the interest rate swap underlying
the written swap option.
Swap options may be used by the Trust to manage the duration of the
Trust's portfolio in a manner similar to more generic options described above.
FINANCIAL FUTURES CONTRACTS: A futures contract is an agreement between two
parties to buy and sell a financial instrument for a set price on a future
date. Initial margin deposits are made upon entering into futures contracts and
can be either cash or securities. During the period the futures contract is
open, changes in the value of the contract are unrealized gains or losses by
"marking-to-market" on a daily basis to reflect the market value of the
contract at the end of each day's trading. Variation margin payments are made
or received, depending upon whether unrealized gains or losses are incurred.
When the contract is closed, the Trust records a realized gain or loss equal to
the difference between the proceeds from (or cost of) the closing transaction
and the Trust's basis in the contract.
Financial futures contracts, when used by the Trust, help in maintaining
a targeted duration. Futures contracts can be sold to effectively shorten an
otherwise longer duration portfolio. In the same sense, futures contracts can
be purchased to lengthen a portfolio that is shorter than its duration target.
Thus, by buying or selling futures contracts, the Trust can effectively "hedge"
positions so that changes in interest rates do not change the duration of the
portfolio unexpectedly.
The Trust may invest in financial futures contracts primarily for the
purpose of hedging its existing portfolio securities or securities the Trust
intends to purchase against fluctuations in value caused by changes in
prevailing market
14
<PAGE>
interest rates. Should interest rates move unexpectedly, the Trust may not
achieve the anticipated benefits of the financial futures contracts and may
realize a loss. The use of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts, interest rates and
the underlying hedged assets. The Trust is also at risk of not being able to
enter into a closing transaction for the futures contract because of an
illiquid secondary market. In addition, since futures are used to shorten or
lengthen a portfolio's duration, there is a risk that the portfolio may have
temporarily performed better without the hedge or that the Trust may lose the
opportunity to realize appreciation in the market price of the underlying
positions.
FORWARD CURRENCY CONTRACTS: The Trust enters into forward currency contracts
primarily to facilitate settlement of purchases and sales of foreign
securities. A forward contract is a commitment to purchase or sell a foreign
currency at a future date (usually the security transaction settlement date) at
a negotiated forward rate. In the event that a security fails to settle within
the normal settlement period, the forward currency contract is renegotiated at
a new rate. The gain or loss arising from the difference between the settlement
value of the original and renegotiated forward contracts is isolated and is
included in net realized losses from foreign currency transactions. Risks may
arise as a result of the potential inability of the counterparties to meet the
terms of their contract.
Forward currency contracts, when used by the Trust, help to manage the
overall exposure to the foreign currency backing many of the investments held
by the Trust (the Canadian dollar). Forward currency contracts are not meant to
be used to eliminate all of the exposure to the Canadian dollar, rather they
allow the Trust to limit its exposure to foreign currency within a narrow band
to the objectives of the Trust.
FOREIGN CURRENCY TRANSLATION: Canadian dollar ("C$") amounts are translated
into United States dollars on the following basis:
(i) market value of investment securities, other assets and
liabilities-at the New York City noon rates of exchange.
(ii) purchases and sales of investment securities, income and
expenses-at the rates of exchange prevailing on the respective dates of
such transactions.
The Trust isolates that portion of the results of operations arising as a
result of changes in the foreign exchange rates from the fluctuations arising
from changes in the market prices of securities held at period end. Similarly,
the Trust isolates the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of portfolio securities
sold during the period.
Net realized and unrealized foreign exchange losses of $1,467,200 include
realized foreign exchange gains and losses from sales and maturities of foreign
portfolio securities, maturities of foreign reverse repurchase agreements,
sales of foreign currencies, currency gains or losses realized between the
trade and settlement dates on securities transactions, the difference between
the amounts of interest and discount recorded on the Trust's books and the US
dollar equivalent amounts actually received or paid and changes in unrealized
foreign exchange gains and losses in the value of portfolio securities and
other assets and liabilities arising as a result of changes in the exchange
rate.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of domestic
origin, including unanticipated movements in the value of the Canadian dollar
relative to the U.S. dollar.
The exchange rate for the Canadian dollar at April 30, 2000 was
US$ 0.6758 to C$1.00.
SHORT SALES: The Trust may make short sales of securities as a method of
hedging potential price declines in similar securities owned. When the Trust
makes a short sale, it may borrow the security sold short and deliver it to the
broker-dealer through which it made the short sale as collateral for its
obligation to deliver the security upon conclusion of the sale. The Trust may
have to pay a fee to borrow the particular securities and may be obligated to
pay over any payments received on such borrowed securities. A gain, limited to
the price at which the Trust sold the security short, or a loss, unlimited as
to dollar amount, will be recognized upon the termination of a short sale if
the market price is greater or less than the proceeds originally received.
SECURITY LENDING: The Trust may lend its portfolio securities to qualified
institutions. The loans are secured by collateral at least equal, at all times,
to the market value of the securities loaned. The Trust may bear the risk of
delay in recovery of, or even loss of rights in, the securities loaned should
the borrower of the securities fail financially. The Trust receives
compensation for lending its securities in the form of interest on the loan.
The Trust also continues to receive interest on the securities loaned, and any
gain or loss in the market price of the securities loaned that may occur during
the term of the loan will be for the account of the Trust.
INTEREST RATE CAPS: Interest rate caps are similar to interest rate swaps,
except that one party agrees to pay a fee, while the other party pays the
excess, if any, of a floating rate over a specified fixed or floating rate.
Interest rate caps are intended to both manage the duration of the
Trust's portfolio and its exposure to changes in short term rates. Owning
interest rate caps reduces the portfolio's duration, making it less sensitive
to changes in interest
15
<PAGE>
rates from a market value perspective. The effect on income involves protection
from rising short term rates, which the Trust experiences primarily in the form
of leverage.
The Trust is exposed to credit loss in the event of non-performance by
the other party to the interest rate cap. However, the Trust does not
anticipate non-performance by any counterparty.
Transactions fees paid or received by the Trust are recognized as assets
or liabilities and amortized or accreted into interest expense or income over
the life of the interest rate cap. The asset or liability is subsequently
adjusted to the current market value of the interest rate cap purchased or
sold. Changes in the value of the interest rate cap are recognized as
unrealized gains and losses.
INTEREST RATE FLOORS: Interest rate floors are similar to interest rate swaps,
except that one party agrees to pay a fee, while the other party pays the
deficiency, if any, of a floating rate under a specified fixed or floating
rate.
Interest rate floors are used by the Trust to both manage the duration of
the portfolio and its exposure to changes in short-term interest rates. Selling
interest rate floors reduces the portfolio's duration, making it less sensitive
to changes in interest rates from a market value perspective. The Trust's
leverage provides extra income in a period of falling rates. Selling floors
reduces some of that advantage by partially monetizing it as an up front
payment which the Trust receives.
The Trust is exposed to credit loss in the event of non-performance by
the other party to the interest rate floor. However, the Trust does not
anticipate non-performance by any counterparty.
Transactions fees paid or received by the Trust are recognized as assets
or liabilities and amortized or accreted into interest expense or income over
the life of the interest rate floor. The asset or liability is subsequently
adjusted to the current market value of the interest rate floor purchased or
sold. Changes in the value of the interest rate floor are recognized as
unrealized gains and losses.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
recorded on the trade date. Realized and unrealized gains and losses are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis, and the Trust accretes discount or amortizes premium on
securities purchased using the interest method.
FEDERAL INCOME TAXES: For Federal income tax purposes, substantially all of the
Trust's Canadian transactions are accounted for using the Canadian dollar as
the functional currency. Accordingly, only realized currency gains and losses
resulting from the repatriation of Canadian dollars into United States dollars
are recognized for tax purposes.
No provision has been made for U.S. income or excise taxes because it is
the Trust's policy to continue to meet the requirements of the United States
Internal Revenue Code applicable to regulated investment companies and to
distribute sufficient amounts of its taxable income to shareholders.
DIVIDENDS AND DISTRIBUTIONS: The Trust declares and pays dividends and
distributions monthly first from net investment income, then from realized
short-term capital gains and other sources, if necessary. Net long-term capital
gains, if any, in excess of loss carryforwards may be distributed annually.
Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
DEFERRED COMPENSATION PLAN: Under a deferred compensation plan approved by the
Board of Directors on February 24, 2000, non-interested Directors may elect to
defer receipt of all or a portion of their annual compensation.
Deferred amounts earn a return as though equivalent dollar amounts had
been invested in common shares of other BlackRock funds selected by the
Directors. This has the same economic effect as if the Directors had invested
the deferred amounts in such other BlackRock funds.
The deferred compensation plan is not funded and obligations thereunder
represent general unsecured claims against the general assets of the Trust. The
Trust may, however, elect to invest in common shares of those funds selected by
the Directors in order to match its deferred compensation obligations.
NOTE 2. AGREEMENTS The Trust has an Investment
Advisory Agreement with BlackRock
Advisors, Inc. (the "Advisor"), which is a wholly-owned subsidiary of
BlackRock, Inc. which in turn is an indirect majority-owned subsidiary of PNC
Financial Services Group, Inc. The Trust has an Administration Agreement with
Prudential Investments Fund Management LLC ("PIFM"), a wholly-owned subsidiary
of The Prudential Insurance Co. of America.
The investment advisory fee paid to the Advisor is computed weekly and
payable monthly at an annual rate of
16
<PAGE>
0.60% of the Trust's average weekly net assets. The administration fee paid to
PIFM is also computed weekly and payable monthly at an annual rate of 0.10% of
the Trust's average weekly net assets.
Pursuant to the agreements, the Advisor provides continuous supervision
of the investment portfolio and pays the compensation of officers of the Trust.
PIFM pays for occupancy and provides certain clerical and accounting services
to the Trust. The Trust bears all other costs and expenses.
NOTE 3. PORTFOLIO Purchases and sale s of
SECURITIES AND investment securities, other
OTHER INVESTMENTS than short-term investments
and dollar rolls, for the
period ended April 30, 2000 aggregated $270,028,727 and $256,315,318,
respectively.
The Trust may invest without limit in securities which are not readily
marketable, including those which are restricted as to disposition under
securities law ("restricted securities"). At April 30, 2000, the Trust did not
hold any illiquid securities.
The Trust may from time to time purchase in the secondary market certain
mortgage pass-through securities packaged or master serviced by PNC Mortgage
Securities Corp. (or Sears Mortgage if PNC Mortgage Securities Corp. succeeded
to rights and duties of Sears) or mortgage related securities containing loans
or mortgages originated by PNC Bank or its affiliates, including Midland Loan
Services, Inc. It is possible under certain circumstances, that PNC Mortgage
Securities Corp. or its affiliates, including Midland Loan Services, Inc. could
have interests that are in conflict with the holders of these mortgage backed
securities, and such holders could have rights against PNC Mortgage Securities
Corp. or its affiliates, including Midland Loan Services, Inc.
The federal income tax basis of the Trust's investments at April 30, 2000
was $510,572,203, and accordingly, net unrealized depreciation for federal
income tax purposes was $9,728,283 (gross unrealized appreciation $13,182,348;
gross unrealized depreciation $22,910,631).
Details of open financial futures contracts at April 30, 2000 are as
follows:
<TABLE>
<CAPTION>
VALUE AT VALUE AT UNREALIZED
NUMBER OF EXPIRATION TRADE APRIL 30, APPRECIATION/
CONTRACTS TYPE DATE DATE 2000 (DEPRECIATION)
----------- -------------------- ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Short Position:
31 Eurodollar Mar. '00 $7,323,611 $7,224,550 $ 99,061
749 30 Yr. U.S. T-Bond June '00 71,331,661 72,325,313 (993,652)
Long Position:
230 10 Yr. U.S.T-Note June '00 21,991,155 22,299,219 308,064
----------
$ (586,527)
==========
</TABLE>
Details of open forward currency contracts at April 30, 2000 are as
follows:
<TABLE>
<CAPTION>
VALUE AT VALUE AT UNREALIZED
SETTLEMENT CONTRACT SETTLEMENT APRIL 30, APPRECIATION/
DATE TO RECEIVE DATE 2000 (DEPRECIATION)
------------ --------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Purchase:
5/8/00 C$54,750,000 $37,673,660 $36,979,875 $ (693,785)
5/8/00 25,000,000 16,882,196 16,885,788 3,592
----------
$ (690,193)
==========
</TABLE>
The Trust holds one interest rate cap. Under the agreement the Trust
receives the excess, if any, of a floating rate over a fixed rate. The Trust
paid a transaction fee for the agreement. Details of the cap at April 30, 2000
are as follows:
<TABLE>
<CAPTION>
NOTIONAL VALUE AT
AMOUNT FIXED TERMINATION AMORTIZED APRIL 30, UNREALIZED
(000) RATE FLOATING RATE DATE COST 2000 APPRECIATION
---------- ---------- --------------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 25,000 6.00% 3 mth. LIBOR 2/19/02 $290,884 $498,114 $207,230
========
</TABLE>
NOTE 4. BORROWINGS REVERSE REPURCHASE AGREE-
MENTS: The Trust enters into
reverse repurchase agreements with qualified, third party broker-dealers as
determined by and under the direction of the Trust's Board of Directors.
Interest on the value of reverse repurchase agreements issued and outstanding is
based upon competitive market rates at the time of issuance. At the time the
Trust enters into a reverse repurchase agreement, it establishes and maintains a
segregated account with the lender containing liquid high grade securities
having a value not less than the repurchase price, including accrued interest,
of the reverse repurchase agreement.
The average daily balance of United States reverse repurchase agreements
outstanding during the period ended April 30, 2000 was approximately
$118,810,566 at a weighted average interest rate of approximately 5.79%. Also,
the average daily balance of Canadian reverse repurchase agreements outstanding
during the period ended April 30, 2000 was approximately C$15,536,101 at a
weighted average interest rate of 4.89%. The maximum amount of total reverse
repurchase agreements outstanding at any month-end during the period was
$154,464,880 as of January 31, 2000, which was 27% of total assets.
DOLLAR ROLLS: The Trust may enter into dollar rolls in which the Trust sells
securities for delivery in the current month and simultaneously contracts to
repurchase substantially similar (same type, coupon and maturity) securities on
a specified future date. During the roll period the Trust forgoes principal and
interest paid on the securities. The Trust will be compensated by the interest
earned on the cash proceeds of the initial sale and by the lower repurchase
price at the future date.
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<PAGE>
The Trust had no outstanding dollar rolls during the six months ended
April 30, 2000.
NOTE 5. CAPITAL There are 200 million shares
of $.01 par value common
stock authorized. Of the 34,773,993 shares outstanding at April 30, 2000, the
Advisor owned 7,093 shares.
During the six months ended April 30, 2000, the Trust repurchased a total
of 708,900 shares of its outstanding common stock at a cost of $6,893,440, at
an average discount of approximately 15.9% from its net asset value. These
shares are being held in treasury.
NOTE 6. DIVIDENDS Subsequent to April 30, 2000, the
Board of Directors of the Trust
declared dividends from undistributed earnings of $0.07 per share payable May
31, 2000 to shareholders of record on May 15, 2000.
18
<PAGE>
--------------------------------------------------------------------------------
THE BLACKROCK NORTH AMERICAN GOVERNMENT INCOME TRUST INC.
DIVIDEND REINVESTMENT PLAN
--------------------------------------------------------------------------------
Pursuant to the Trust's Dividend Reinvestment Plan (the "Plan"),
shareholders may elect to have all distributions of dividends and capital gains
reinvested by State Street Bank and Trust Company (the "Plan Agent") in Trust
shares pursuant to the Plan. Shareholders who do not participate in the Plan
will receive all distributions in cash paid by check in United States dollars
mailed directly to the shareholders of record (or if the shares are held in
street or other nominee name, then to the nominee) by the transfer agent, as
dividend disbursing agent.
The Plan Agent serves as agent for the shareholders in administering the
Plan. After the Trust declares a dividend or determines to make a capital gain
distribution, the Plan Agent will, as agent for the participants, receive the
cash payment and use it to buy Trust shares in the open market on the New York
Stock Exchange or elsewhere, for the participants' accounts. The Trust will not
issue any new shares in connection with the Plan.
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent and will receive certificates for whole Trust shares and a cash
payment will be made for any fraction of a Trust share.
The Plan Agent's fees for the handling of the reinvestment of dividends
and distributions will be paid by the Trust. However, each participant will pay
a pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. The automatic reinvestment of dividends and distributions
will not relieve participants of any federal, state or local income taxes that
may be payable on such dividends or distributions.
The Trust reserves the right to amend or terminate the Plan as applied to
any dividend or distribution paid subsequent to written notice of the change
sent to all shareholders of the Trust at least 90 days before the record date
for the dividend or distribution. The Plan also may be amended or terminated by
the Plan Agent upon at least 90 days' written notice to all shareholders of the
Trust. All correspondence concerning the Plan should be directed to the Plan
Agent at (800) 699-1BFM. The addresses are on the front of this report.
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<PAGE>
--------------------------------------------------------------------------------
THE BLACKROCK NORTH AMERICAN GOVERNMENT INCOME TRUST INC.
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
ANNUAL MEETING OF TRUST SHAREHOLDERS. There have been no material changes in
the Trust's investment objectives or policies that have not been approved by
the shareholders or to its charter or by-laws or in the principal risk factors
associated with investment in the Trust. There have been no changes in the
persons who are primarily responsible for the day-to-day management of the
Trust's portfolio.
The Annual Meeting of Trust Shareholders was held May 18, 2000 to vote on
the following matters:
(1) To elect three Directors as follows:
DIRECTOR CLASS TERM EXPIRING
-------- ----- ---- -------
Frank J. Fabozzi ................... II 3 years 2003
Walter F. Mondale .................. II 3 years 2003
Ralph L. Schlosstein ............... II 3 years 2003
Directors whose term of office continues beyond this meeting are
Richard E. Cavanagh, Laurence D. Fink, Andrew F. Brimmer, James
Clayburn La Force, Jr., and Kent Dixon.
(2) To ratify the selection of Deloitte & Touche LLP as independent public
accountants of the Trust for the fiscal year ending October 31, 2000.
(3) To approve or reject the shareholder proposal requesting that BNA shall
afford all shareholders an opportunity to realize net asset value for
their shares by converting to an open-end fund.
Shareholders elected the three Directors, ratified the selection of Deloitte
& Touche LLP and rejected the Shareholder proposal to convert to an open-end
fund. The results of the voting was as follows:
<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST ABSTENTIONS
--------- ------------- -----------
<S> <C> <C> <C>
Frank J. Fabozzi ......................... 21,876,176 - 7,272,144
Walter F. Mondale ........................ 21,769,848 - 7,378,472
Ralph L. Schlosstein ..................... 21,899,583 - 7,248,737
Ratification of Deloitte & Touche LLP .... 28,525,706 185,691 436,923
To approve shareholder proposal .......... 11,132,932 7,263,863 888,203
</TABLE>
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--------------------------------------------------------------------------------
THE BLACKROCK NORTH AMERICAN GOVERNMENT INCOME TRUST INC.
INVESTMENT SUMMARY
--------------------------------------------------------------------------------
THE TRUST'S INVESTMENT OBJECTIVE
The BlackRock North American Government Income Trust's investment objective is
to manage a portfolio of investment grade securities to achieve high monthly
income consistent with preservation of capital. The Trust will seek to achieve
its objective by investing in Canadian and U.S. dollar-denominated securities.
WHO MANAGES THE TRUST?
BlackRock Advisors, Inc. ("BlackRock") is an SEC-registered investment advisor.
As of March 31, 2000, the Advisor and its affiliates (together, "BlackRock")
managed $173 billion on behalf of taxable and tax-exempt clients worldwide.
Strategies include fixed income, equity and cash and may incorporate both
domestic and international securities. Domestic fixed income strategies utilize
the government, mortgage, corporate and municipal bond sectors. BlackRock
managed twenty-two closed-end funds that are traded on either the New York or
American stock exchanges, and a $29 billion family of open-end funds. BlackRock
manages over 590 accounts, domiciled in the United States and overseas.
WHAT CAN THE TRUST INVEST IN?
The Trust will invest primarily in securities issued or guaranteed by the
federal governments of Canada and the United States, their political
subdivisions (which include the Canadian provinces) and their agencies and
instrumentalities. The Trust's investments will be either government securities
or securities rated "BBB" or higher at the time of investment by Standard &
Poor's or "Baa" by Moody's, or securities which BlackRock deems as of
comparable quality. Examples of types of securities in which the Trust may
invest include Canadian and U.S. government or government agency residential
mortgage-backed securities, privately issued mortgage-backed securities,
Canadian provincial debt securities, U.S. Government securities, commercial
mortgage-backed securities, asset-backed securities and other debt securities
issued by Canadian and U.S. corporations and other entities. Under current
market conditions, BlackRock expects that the primary investments of the Trust
to be Canadian mortgage-backed securities, Canadian provincial debt securities,
Canadian Corporate bonds, U.S. government securities, securities backed by U.S.
government agencies (such as residential mortgage-backed securities), privately
issued mortgage-backed securities and commercial mortgage- backed securities.
WHAT IS THE ADVISOR'S INVESTMENT STRATEGY?
The Adviser will seek to meet the Trust's investment objective by managing the
asset of the Trust so as to provide high monthly income consistent with the
preservation of capital. The Trust will seek to provide monthly income that is
greater than that which could be obtained by investing in U.S. Treasury
securities with an average life similar to that of the Trust's assets. In
seeking the investment objective, BlackRock actively manages the Trust's assets
in relation to market conditions and changes in general economic conditions in
Canada and the U.S., including its expectations regarding interest rate changes
and changes in currency exchange rates between the U.S. dollar and the Canadian
dollar, to attempt to take advantage of favorable investment opportunities in
each country. As such, the allocation between Canadian and U.S. securities will
change from time to time. Under current market conditions, the average life of
the Trust's assets is expected to be in the range of seven to ten years. Under
other market conditions, the Trust's average life may vary and may not be
predictable using any formula.
While the Adviser has the opportunity to hedge against currency risks
associated with Canadian securities, the Trust is intended to provide exposure
to the Canadian marketplace. As a result, historically, currency hedging has
not been widely practiced by the Trust. However, BlackRock will attempt to
limit interest rate risk by constantly monitoring the duration (or price
sensitivity with respect to changes in interest rates) of the Trust's assets so
that it is within the range of U.S. Treasury securities with average lives of
seven to ten years. In doing so, the Adviser will attempt to locate securities
with better predictability of cash flows such as U.S. commercial
mortgage-backed securities. In addition, the Canadian mortgage-backed
securities in which the Trust invests are not prepayable, contributing to the
predictability of the Trust's cash flows. Traditional residential U.S. mortgage
pass-through securities make interest and principal payments on a monthly basis
and can be a source of attractive levels of income to the Trust. While the U.S.
mortgage-backed securities in the Trust are of high credit quality, they
typically offer a yield spread over Treasuries due to the uncertainty of the
timing of their cash flows as they are subject to prepayment exposure when
interest rates change and mortgage holders refinance their mortgages or move.
While U.S. mortgage-backed securities do offer the opportunity for attractive
yields, they
21
<PAGE>
subject a portfolio to interest rate risk and prepayment exposure which result
in reinvestment risk when prepaid principal must be reinvested.
HOW ARE THE TRUST'S SHARES PURCHASED AND SOLD? DOES THE TRUST PAY DIVIDENDS
REGULARLY?
The Trust's shares are traded on the New York Stock Exchange which provides
investors with liquidity on a daily basis. Orders to buy or sell shares of the
Trust must be placed through a registered broker or financial advisor. The
Trust pays monthly dividends which are typically paid on the last business day
of the month. For shares held in the shareholder's name, dividends may be
reinvested in additional shares of the Trust through the Trust's transfer
agent, State Street Bank & Trust Company. Investors who wish to hold shares in
a brokerage account should check with their financial advisor to determine
whether their brokerage firm offers dividend reinvestment services.
LEVERAGE CONSIDERATIONS IN THE TRUST
Under current market conditions, leverage increases the income earned by the
Trust. The Trust employs leverage primarily through the use of reverse
repurchase agreements and dollar rolls. Leverage permits the Trust to borrow
money at short-term rates and reinvest that money in longer-term assets which
typically offer higher interest rates. The difference between the cost of the
borrowed funds and the income earned on the proceeds that are invested in
longer term assets is the benefit to the Trust from leverage. In general, the
portfolio is typically leveraged at approximately 331|M/3% of total assets.
Leverage also increases the duration (or price volatility of the net assets) of
the Trust, which can improve the performance of the Trust in a declining rate
environment, but can cause net assets to decline faster than the market in a
rapidly rising rate environment. BlackRock's portfolio managers continuously
monitor and regularly review the Trust's use of leverage and the Trust may
reduce, or unwind, the amount of leverage employed should the Advisor consider
that reduction to be in the best interest of shareholders.
SPECIAL CONSIDERATIONS AND RISK FACTORS RELEVANT TO THE TRUST
THE TRUST IS INTENDED TO BE A LONG-TERM INVESTMENT AND IS NOT A SHORT-TERM
TRADING VEHICLE.
INVESTMENT OBJECTIVE. Although the objective of the Trust is to provide high
monthly income consistent with preservation of capital, there can be no
assurance that this objective will be achieved.
DIVIDEND CONSIDERATIONS. The income and dividends paid by the Trust are likely
to vary over time as fixed income market conditions change. Future dividends
may be higher or lower than the dividend the Trust is currently paying.
CURRENCY EXCHANGE RATE CONSIDERATIONS. Because the Trust's net asset value is
expressed in U.S. dollars, and the Trust invests a substantial percentage of
its assets in Canadian dollar-denominated assets, any change in the exchange
rate between these two currencies will have an effect on the net asset value of
the Trust. As a result, if the U.S. dollar appreciates against the Canadian
dollar, the Trust's net asset value would decrease if not offset by other
gains.
INTEREST-ONLY SECURITIES (IO). The yield to maturity on an IO class is
extremely sensitive to the rate of principal payments (including prepayments)
on the related underlying Mortgage Assets, and a rapid rate of principal
payments may have a material adverse effect on such security's yield to
maturity. If the underlying Mortgage Assets experience greater than anticipated
prepayments of principal, the Trust may fail to recoup fully its initial
investment in these securities even if the securities are rated AAA by S&P or
Aaa by Moody's.
LEVERAGE. The Trust utilizes leverage through reverse repurchase agreements and
dollar rolls, which involves special risks. The Trust's net asset value and
market value may be more volatile due to its use of leverage.
MARKET PRICE OF SHARES. The shares of closed-end investment companies such as
the Trust trade on the New York Stock Exchange (NYSE symbol: BNA) and as such
are subject to supply and demand influences. As a result, shares may trade at a
discount or a premium to their net asset value.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The cash flow and yield
characteristics of these securities differ from traditional debt securities.
The major differences typically include more frequent payments and the
possibility of prepayments on certain U.S. mortgage-backed securities which
will change the yield to maturity of the security.
CORPORTE DEBT SECURITIES. The value of corporate debt securities generally
varies inversely with changes in prevailing market interest rates. The Trust
may be subject to certain reinvestment risks in environments of declining
interest rates.
ILLIQUID SECURITIES. The Trust may invest in securities that are illiquid,
although under current market conditions the Trust expects to do so to only a
limited extent. These securities involve special risks.
ANTITAKEOVER PROVISIONS. Certain antitakeover provisions will make a change in
the Trust's business or management more difficult without the approval of the
Trust's Board of Directors and may have the effect of depriving shareholders of
an opportunity to sell their shares at a premium above the prevailing market
price.
22
<PAGE>
--------------------------------------------------------------------------------
THE BLACKROCK NORTH AMERICAN GOVERNMENT INCOME TRUST INC.
GLOSSARY
--------------------------------------------------------------------------------
ADJUSTABLE RATE MORTGAGE-BACKED Mortgage instruments with interest rates that
SECURITIES (ARMS): adjust at periodic intervals at a fixed amount
over the market levels of interest rates as
reflected in specified indexes. ARMS are
backed by mortgage loans secured by real
property.
ASSET-BACKED SECURITIES: Securities backed by various types of
receivables such as automobile and credit card
receivables.
CANADIAN MORTGAGE SECURITIES: Canadian Mortgage instruments which are
guaranteed by the Canadian Mortgage Housing
Corporation (CMHC), a federal agency backed by
the full faith and credit of the Canadian
Government.
CLOSED-END FUND: Investment vehicle which initially offers a
fixed number of shares and trades on a stock
exchange. The fund invests in a portfolio of
securities in accordance with its stated
investment objectives and policies.
COLLATERALIZED Mortgage-backed securities which separate
MORTGAGE OBLIGATIONS (CMOS): mortgage pools into short, medium, and
long-term securities with different priorities
for receipt of principal and interest. Each
class is paid a fixed or floating rate of
interest at regular intervals. Also known as
multiple-class mortgage pass-throughs.
COMMERCIAL MORTGAGE Mortgage-backed securities secured or backed
BACKED SECURITIES (CMBS): by mortgage loans on commercial properties.
DISCOUNT: When a fund's net asset value is greater than
its stock price the fund is said to be trading
at a discount.
DIVIDEND: Income generated by securities in a portfolio
and distributed to shareholders after the
deduction of expenses. This Trust declares and
pays dividends on a monthly basis.
DIVIDEND REINVESTMENT: Shareholders may elect to have all
distributions of dividends and capital gains
automatically reinvested into additional
shares of the Trust.
FHA: Federal Housing Administration, a government
agency that facilitates a secondary mortgage
market by providing an agency that guarantees
timely payment of interest and principal on
mortgages.
FHLMC: Federal Home Loan Mortgage Corporation, a
publicly owned, federally chartered
corporation that facilitates a secondary
mortgage market by purchasing mortgages from
lenders such as savings institutions and
reselling them to investors by means of
mortgage-backed securities. Obligations of
FHLMC are not guaranteed by the U.S.
government, however, they are backed by
FHLMC's authority to borrow from the U.S.
government. Also known as Freddie Mac.
FNMA: Federal National Mortgage Association, a
publicly owned, federally chartered
corporation that facilitates a secondary
mortgage market by purchasing mortgages from
lenders such as savings institutions and
reselling them to investors by means of
mortgage-backed securities. Obligations of
FNMA are not guaranteed by the U.S.
government, however, they are backed by FNMA's
authority to borrow from the U.S. government.
Also known as Fannie Mae.
GNMA: Government National Mortgage Association, a
government agency that facilitates a secondary
mortgage market by providing an agency that
guarantees timely payment of interest and
principal on mortgages. GNMA's obligations are
supported by the full faith and credit of the
U.S. Treasury. Also known as Ginnie Mae.
23
<PAGE>
GOVERNMENT SECURITIES: Securities issued or guaranteed by the U.S.
government, or one of its agencies or
instrumentalities, such as GNMA, FNMA and
FHLMC.
INTEREST-ONLY SECURITIES: Mortgage securities including CMBS that
receive only the interest cash flows from an
underlying pool of mortgage loans or
underlying pass-through securities. Also known
as a STRIP.
INVERSE-FLOATING RATE MORTGAGES: Mortgage instruments with coupons that adjust
at periodic intervals according to a formula
which sets inversely with a market level
interest rate index.
MARKET PRICE: Price per share of a security trading in the
secondary market. For a closed-end fund, this
is the price at which one share of the fund
trades on the stock exchange. If you were to
buy or sell shares, you would pay or receive
the market price.
MORTGAGE DOLLAR ROLLS: A mortgage dollar roll is a transaction in
which the Trust sells mortgage- backed
securities for delivery in the current month
and simultaneously contracts to repurchase
substantially similar (although not the same)
securities on a specified future date. During
the "roll" period, the Trust does not receive
principal and interest payments on the
securities, but is compensated for giving up
these payments by the difference in the
current sales price (for which the security is
sold) and lower price that the Trust pays for
the similar security at the end date as well
as the interest earned on the cash proceeds of
the initial sale.
MORTGAGE PASS-THROUGHS: Mortgage-backed securities issued by FNMA,
NET ASSET VALUE (NAV): FHLMC, FHA or GNMA. Net asset value is the
total market value of all securities held by
the Trust, plus income accrued on its
investments, minus any liabilities including
accrued expenses, divided by the total number
of outstanding shares. It is the underlying
value of a single share on a given day. Net
asset value for the Trust is calculated weekly
and published in BARRON'S on Saturday and THE
WALL STREET JOURNAL on Monday.
RINCIPAL-ONLY SECURITIES: Mortgage securities that receive only the
principal cash flows from an underlying pool
of mortgage loans or underlying pass-through
securities. Also known as a STRIP.
JECT LOANS: Mortgages for multi-family, low- to middle-
PREMIUM: income housing. When a fund's stock price is
greater than its net asset value, the fund is
said to be trading at a premium.
RESIDUALS: Securities issued in connection with
collateralized mortgage obligations that
generally represent the excess cash flow from
the mortgage assets underlying the CMO after
payment of principal and interest on the other
CMO securities and related administrative
expenses.
REVERSE REPURCHASE AGREEMENTS: In a reverse repurchase agreement, the Trust
sells securities and agrees to repurchase them
at a mutually agreed date and price. During
this time, the Trust continues to receive the
principal and interest payments from that
security. At the end of the term, the Trust
receives the same securities that were sold
for the same initial dollar amount plus
interest on the cash proceeds of the initial
sale.
STRIPPED MORTGAGE BACKED Arrangements in which a pool of assets is
SECURITIES separated into two classes that receive
different proportions of the interest and
principal distribution from underlying
mortgage-backed securities. IO's and PO's are
examples of STRIPs.
24
<PAGE>
--------------------------------------------------------------------------------
BLACKROCK ADVISORS, INC.
SUMMARY OF CLOSED-END FUNDS
--------------------------------------------------------------------------------
TAXABLE TRUSTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STOCK MATURITY
SYMBOL DATE
PERPETUAL TRUSTS ---------- ---------
<S> <C> <C>
The BlackRock Income Trust Inc. BKT N/A
The BlackRock North American Government Income Trust Inc. BNA N/A
The BlackRock High Yield Trust BHY N/A
TERM TRUSTS
The BlackRock Target Term Trust Inc. BTT 12/00
The BlackRock 2001 Term Trust Inc. BTM 06/01
The BlackRock Strategic Term Trust Inc. BGT 12/02
The BlackRock Investment Quality Term Trust Inc. BQT 12/04
The BlackRock Advantage Term Trust Inc. BAT 12/05
The BlackRock Broad Investment Grade 2009 Term Trust Inc. BCT 12/09
</TABLE>
TAX-EXEMPT TRUSTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STOCK MATURITY
SYMBOL DATE
PERPETUAL TRUSTS --------- ---------
<S> <C> <C>
The BlackRock Investment Quality Municipal Trust Inc. BKN N/A
The BlackRock California Investment Quality Municipal Trust Inc. RAA N/A
The BlackRock Florida Investment Quality Municipal Trust RFA N/A
The BlackRock New Jersey Investment Quality Municipal Trust Inc. RNJ N/A
The BlackRock New York Investment Quality Municipal Trust Inc. RNY N/A
The BlackRock Pennsylvania Strategic Municipal Trust BPS N/A
The BlackRock Strategic Municipal Trust BSD N/A
TERM TRUSTS
The BlackRock Municipal Target Term Trust Inc. BMN 12/06
The BlackRock Insured Municipal 2008 Term Trust Inc. BRM 12/08
The BlackRock California Insured Municipal 2008 Term Trust Inc. BFC 12/08
The BlackRock Florida Insured Municipal 2008 Term Trust BRF 12/08
The BlackRock New York Insured Municipal 2008 Term Trust Inc. BLN 12/08
The BlackRock Insured Municipal Term Trust Inc. BMT 12/10
</TABLE>
IF YOU WOULD LIKE FURTHER INFORMATION PLEASE DO NOT HESITATE TO CALL BLACKROCK
AT (800) 227-7BFM (7236)
OR CONSULT WITH YOUR FINANCIAL ADVISOR.
25
<PAGE>
--------------------------------------------------------------------------------
BLACKROCK ADVISORS, INC.
AN OVERVIEW
--------------------------------------------------------------------------------
BlackRock Advisors, Inc. (the "Advisor") is an SEC-registered investment
advisor. As of March 31, 2000, the Advisor and its affiliates (together,
"BlackRock") managed $173 billion on behalf of taxable and tax-exempt clients
worldwide. Strategies include fixed income, equity and cash and may incorporate
both domestic and international securities. BlackRock manages twenty-two
closed-end funds that are traded on either the New York or American stock
exchanges, and a $29 billion family of open-end funds. BlackRock manages over
590 accounts, domiciled in the United States and overseas.
BlackRock's fixed income product was introduced in 1988 by a team of
highly seasoned fixed income professionals. These professionals had extensive
experience creating, analyzing and trading a variety of fixed income
instruments, including the most complex structured securities. In fact, several
individuals at BlackRock were responsible for developing many of the major
innovations in the mortgage-backed and asset-backed securities markets,
including the creation of the first CMO, the floating rate CMO, the
senior/subordinated pass-through and the multi-class asset-backed security.
BlackRock is unique among asset management and advisory firms in the
emphasis it places on the development of proprietary analytical capabilities.
Over one quarter of the firm's professionals are dedicated to the design,
maintenance and use of these systems, which are not otherwise available to
investors. BlackRock's proprietary analytical tools are used for evaluating,
and designing fixed income investment strategies for client portfolios.
Securities purchased include mortgages, corporate bonds, municipal bonds and a
variety of hedging instruments.
BlackRock has developed investment products that respond to investors'
needs and has been responsible for several major innovations in closed-end
funds. In fact, BlackRock introduced the first closed-end mortgage fund, the
first taxable and tax-exempt closed-end funds to offer a finite term, the first
closed-end fund to achieve a AAA rating by Standard & Poor's, and the first
closed-end fund to invest primarily in North American Government securities.
Currently, BlackRock's closed-end funds have dividend reinvestment plans, which
are designed to provide ongoing demand for the stock in the secondary market.
BlackRock manages a wide range of investment vehicles, each having specific
investment objectives and policies.
In view of our continued desire to provide a high level of service to all
our shareholders, BlackRock maintains a toll-free number for your questions.
The number is (800) 227-7BFM (7236). We encourage you to call us with any
questions that you may have about your BlackRock funds and we thank you for the
continued trust that you place in our abilities.
IF YOU WOULD LIKE FURTHER INFORMATION
PLEASE DO NOT HESITATE TO CALL BLACKROCK AT (800) 227-7BFM
26
<PAGE>
---------------
BlackRock
---------------
DIRECTORS
Laurence D. Fink, CHAIRMAN
Andrew F. Brimmer
Richard E. Cavanagh
Kent Dixon
Frank J. Fabozzi
James Clayburn La Force, Jr.
Walter F. Mondale
Ralph L. Schlosstein
OFFICERS
Ralph L. Schlosstein, PRESIDENT
Scott Amero, VICE PRESIDENT
Keith T. Anderson, VICE PRESIDENT
Michael C. Huebsch, VICE PRESIDENT
Robert S. Kapito, VICE PRESIDENT
Richard M. Shea, VICE PRESIDENT/TAX
Henry Gabbay, TREASURER
James Kong, ASSISTANT TREASURER
Karen H. Sabath, SECRETARY
INVESTMENT ADVISOR
BlackRock Advisors, Inc.
400 Bellevue Parkway
Wilmington, DE 19809
(800) 227-7BFM
ADMINISTRATOR
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
(800) 699-1BFM
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1434
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
LEGAL COUNSEL - INDEPENDENT DIRECTORS
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
The accompanying financial statements as of April 30, 2000 were not
audited and, accordingly, no opinion is expressed on them.
This report is for shareholder information. This is not a prospectus
intended for use in the purchase or sale of any securities.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the fund may purchase, from time to time, shares of
its common stock at market prices.
THE BLACKROCK NORTH AMERICAN
GOVERNMENT INCOME TRUST INC.
c/o Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 227-7BFM
[Logo Omitted] Printed on recycled paper 092475-10-2
The BlackRock
NORTH AMERICAN
GOVERNMENT
INCOME TRUST INC.
=======================
SEMI-ANNUAL REPORT
APRIL 30, 2000
[Graphic Omitted]
