Annual Financial Report

RNS Number : 3500I

North American Income Trust (The)

25 March 2015

 

THE NORTH AMERICAN INCOME TRUST PLC

 

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JANUARY 2015

INVESTMENT OBJECTIVE

To provide investors with above average dividend income and long term capital growth through active management of a portfolio consisting predominately of S&P 500 US equities. 

STRATEGIC REPORT 

1.         FINANCIAL RESULTS

Financial Highlights

	31 January 2015	31 January 2014	% change
Total assets	£351,418,000	£286,555,000	+22.6
Equity shareholders' funds	£309,273,000	£271,952,000	+13.7
Share price (mid market)	865.00p	775.00p	+11.6
Net asset value per share{A}	938.92p	815.73p	+15.1
Discount (difference between share price and net asset value)	7.9%	5.0%
Dividends and earnings
Revenue return per share	32.71p	29.80p	+9.8
Dividends per share (including proposed final dividend)	30.00p	27.00p	+11.1
Dividend yield (based on year end share price)	3.5%	3.5%
Dividend cover	1.09	1.10
Revenue reserves per share:
Prior to payment of third interim dividend declared and proposed final dividend	28.61p	23.63p
After payment of third interim dividend declared and proposed final dividend	11.02p	7.63p
Operating costs
Ongoing charge{B}	1.03%	1.04%
{A}      Including undistributed revenue.
{B}      The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of investment management fees and administrative expenses divided by the average cum income net asset value throughout the year.

	PERFORMANCE
		1 year return	3 year return{A}	5 year return{A}
Total return (Capital return plus dividends reinvested)		%	%	%
Share price		+15.5	+42.8	+80.7
Net asset value per share		+18.9	+45.9	+87.4
S&P 500 Index (in sterling terms)(reference Index)		+25.0	+70.3	+120.2
{A} Cumulative return
The Company's investment objective changed on 29 May 2012 from a S&P 500 index-tracker trust to being actively managed and seeking to provide above average dividend income and long term capital growth. The three and five year performance figures shown reflect periods of time when the Company ran with these two different objectives.

2.         CHAIRMAN'S STATEMENT

Dividend

It is pleasing to report that for the year ended 31 January 2015, the revenue return per Ordinary share rose by 9.8% from 29.8p to 32.7p. The Directors declared a third quarterly dividend of 6.5p per Ordinary share (2014 - 6.0p) which was paid on 13 February and we are recommending a final dividend of 11.5p per Ordinary share (2014 - 10.0p), which will take the total dividends for the year to 30.0p per Ordinary share (2014 - 27.0p), an increase of 11.1%.  This leaves a balance of approximately 2.7p per Ordinary share which will be added to the revenue reserve, making a second consecutive annual increase.  This gives the Company flexibility for future years. The total dividend represents a yield of 3.5%, using the share price of 865.0p at the year end, compared to the 1.9% yield from the S&P 500 index at that date.  Since 2012 the total dividend has increased from 9.4p per Ordinary share and the revenue reserve has risen from 5.5p to 10.61p per Ordinary share.

The proposed final dividend will be payable on 1 June 2015 to shareholders on the register on 8 May 2015.  The quarterly dividends are paid in August, November, February and June each year.

Portfolio

The Company's net asset value per share rose by 18.9% on a total return basis, in sterling terms. It is interesting to compare this result over the year with the S&P 500 index; this is not a benchmark for us but gives an indication of the performance of the US equity market.  The S&P 500 provided a total return of 25.0% in sterling terms (14.2% in US dollar terms).  Much of the difference in performance compared to this index came from sector allocation - primarily in the healthcare and information technology sectors. These were the two sectors in which we were most underweight and which contributed most to the performance of the index over the period.  This below-index weighting reflected the difficulty in finding good quality companies with sustainable and growing dividend streams within these sectors.  Sterling's appreciation against the Canadian dollar was also unhelpful to the sterling based performance of our four Canadian investments.  We continue to believe that overall the underlying companies in the portfolio can provide above average dividend growth as well as good performance in capital terms.

As of 31 January 2015, the portfolio consisted of 41 equity holdings and 12 other holdings including corporate bonds; the latter representing approximately 5.2% of total assets and providing 9.5% of our total income earned compared to last year's 12.6%.  During the year, the Company derived premia totalling £3.1 million (2014 - £2.5 million) in exchange for entering into listed stock option transactions.  This option income represents 21.7% of total income (2014 - 19.6%), the generation of which was consistent with the Manager's company focused investment process.  Bond coupons and option premia will remain secondary sources of income in the belief that income from dividends must remain the overwhelming source of income available for distribution.  Further details of the portfolio are provided below.

The Company's share price rose by 11.6% from 775.0p to 865.0p and ended the year at a 7.9% discount to net asset value, compared with a 5.0% discount at the end of the 2014 financial year.  During the financial year 399,500 shares were bought back at a cost of £3.5 million.  Since the year end, a further 598,450 shares have been bought back at a cost of £5.2 million.  The Company aims to try to manage the level of discount at which the shares trade: we will exercise our discretion to repurchase shares if the discount at which they trade exceeds 5% for any significant period of time, assuming normal market conditions.

Gearing

In July 2014 the Company's loan facility provided by State Street Bank & Trust Company was increased from £30 million to £45 million and extended to July 2017.  This extension is consistent with the Company's optimistic long term view. £30 million (equivalent to $51.0 million) was fixed for this three year term at an all-in rate of 2.18% and was fully drawn down.  The balance of the facility of £15 million is uncommitted, is repayable with no penalty and provides finance at a margin of 0.9% over Libor.

At the year-end £42.1 million (equivalent to $63.2 million) of the total facility was drawn down.  Further details on rates can be found in the notes to the financial statements.

Market & Economic Review

The strong performance of the S&P 500 Index over the twelve months was attributable mainly to positive economic data and corporate earnings reports, which offset concerns over softness in Europe and Asia, as well as ongoing concerns about geopolitical tensions in the Middle East and Ukraine.  The Barclays U.S. Aggregate Bond Index, the US fixed income market benchmark, also recorded a healthy positive return. 

The US economic recovery slowed in the first quarter of 2014. GDP growth fell by an annualised rate of 2.1% after a relatively positive 2013, hampered mainly by a slowdown in consumer spending resulting from severe winter weather in much of the country.  However, the economy appeared to bounce back over the next two quarters before the growth rate decelerated again in the fourth quarter due primarily to an upturn in imports helped by the stronger US dollar, which resulted in a larger trade deficit. Despite quarter to quarter variations, the direction of economic momentum remains positive.

The former US Federal Reserve (Fed) vice chair Janet Yellen succeeded Ben Bernanke as Fed chief in February 2014.  As expected, the Fed began to reduce its $85 billion-per-month asset purchase program in $10 billion increments in January and ended its tapering in late October.  In December, the Federal Open Market Committee's statement was balanced, citing healthy US growth tempered by the effect of declining energy prices on the rate of inflation.

Board

Susan Rice was appointed as a Director of the Company on 17 March 2015.  Susan brings a wealth of experience having been Managing Director, Lloyds Banking Group Scotland, and previously Chief Executive then Chairman of Lloyds TSB Scotland.  She was previously a non-executive director of the Bank of England and SSE plc.  Originally from the United States, her early career was at Yale and Colgate universities and then at NatWest Bancorp.  She was the first woman to head a UK clearing bank in 2000 and alongside her roles as both a commercial banker and non-executive director of J Sainsbury, she was also a member of the recent First Minister's Council of Economic Advisers.  Susan chairs the Edinburgh International Book Festival and Edinburgh's Festivals Forum, and works extensively with Scotland's National Galleries to ensure a vibrant cultural base in the country.  She stands for election at the forthcoming AGM and I recommend her appointment to shareholders.

Manager

In January 2015, the Board announced that Paul Atkinson, Head of North American Equities, would be leaving Aberdeen Asset Management PLC to return to Europe with his family at the end of June 2015 and that the management of the portfolio will be assumed by Ralph Basset and Fran Radano, who are experienced managers within Aberdeen's North American Equities team operating in Philadelphia.  Aberdeen's approach is team based with a strong emphasis on the fundamentals of individual companies.  This will be continued by Ralph and Fran.  The Board would like to thank Paul for his considerable contribution in developing the new investment policy for the Company and the establishment of our portfolio since he assumed responsibility for management of our assets in 2012.

Promotional Activity

The Board continues to promote the Company through the Manager's initiative which provides a series of savings schemes through which savers can invest in the Company in a low cost and convenient manner. 

Up-to-date information about the Company, including monthly factsheets, interviews with the Manager and the latest net asset value and price of the Ordinary shares may be found on the Company's website at www.northamericanincome.co.uk.

Alternative Investment Fund Managers (AIFM) Directive

The Company reported the changes made to its arrangements with Aberdeen in July last year as a result of the implementation of the AIFM Directive in the UK.  This resulted in the appointments of an alternative investment fund manager, Aberdeen Fund Managers Limited ("AFML"), and a depositary, BNP Paribas Securities Services.  These regulatory changes have also placed additional periodic disclosure requirements on the Company's Manager, AFML.  As a result, the annual report now contains additional unaudited disclosures.

Continuation Vote

The three-yearly resolution for the continuation of the Company as an investment trust will be proposed at the Annual General Meeting ("AGM") on 28 May 2015.  In the event that the resolution is not passed, the Board must convene a General Meeting, to be held within four months after the AGM, at which a special resolution would be proposed requiring the Company to be wound up voluntarily or to approve an unitisation of the vehicle.

The Board believes that the prospects for North American markets continue to be positive and the Company's investment objective and policy remain attractive.  The Company has continued to deliver a yield higher than that generally available in the North American equity market and steady growth in the dividend, as well as capital growth through a portfolio of good quality companies run by strong management teams.  The Board therefore strongly recommends that shareholders vote in favour of continuation.

Outlook

We expect the trend of higher market volatility that began in the second half of 2014 to continue for some considerable time.  Higher volatility may present challenges but also should create opportunities for the Manager to add to our holdings at lower prices.

The revenue account has seen good growth and gives a solid foundation for the year ahead.  We believe our investments will continue to make good, long term capital allocation decisions and we are encouraged by the scale and speed of adjustments made by those companies affected by the recent slide in commodity prices.  For the best companies, abundant cash flows have been sufficient to satisfy the need for disciplined reinvestment as well as growing dividends, buying back company stock and leaving scope for strategic acquisitions.  Our Manager remains focused on investing in those companies with good prospects for sustainable dividend growth.

Using the Manager's own company earnings forecasts and the belief in sustainability of profit margins, company prospects look fairly valued with scope to improve if official interest rates stay lower for longer than expected.  We believe that a concentrated portfolio of high quality companies paying attractive and growing dividends will provide a solid foundation for future capital appreciation and income growth for shareholders.

Annual General Meeting ("AGM")

The Company's AGM will be held at 2 p.m. on Thursday 28 May 2015 at 40 Princes Street, Edinburgh.  I hope that we shall see as many shareholders as possible.

3.         MANAGER'S REVIEW

Market review

North American equities gained ground for the year ended 31 January 2015. The US broader-market S&P 500 Index climbed an impressive 25.0% in sterling terms. Returns were driven against a background of generally positive macro economic developments and resilient corporate earnings that offset persistent concerns over softness in Europe and Asia.

Returns were broad based with all but one of the S&P 500 sectors registering double-digit gains for the year. Gains were led by utilities, healthcare and consumer staples. The energy sector posted a single-digit positive return, dragged down in the second half of the period as oil prices tumbled more than 50% from their peak levels reached in June 2014. The telecommunication services and materials sectors also lagged the overall market troubled by regulatory and price competition from new entrants.    

Politically this was a more stable period although the lack of bi-partisanship persists. In the mid-term US Congressional elections held late last year, the Republican Party forged a majority in the Senate, at the same time as they expanded their majority over the Democratic Party in the House of Representatives. Consequently, the Republicans assumed control of both houses of Congress. Note that President Obama retains power of veto over Congress thus limiting Republican policy impact.

Reflective of the improving backdrop, the Federal Reserve completed its asset purchase programme in October. The program of Quantitative Easing was finished almost six years after it had begun. This was followed in December by the Federal Open Market Committee (FOMC) removing the reference to "considerable time" from its forward interest rate guidance. However, its overall statement was more balanced, citing healthy US growth tempered with below-historical-trend inflation due to declining energy prices. Fourth-quarter 2014 US GDP growth came in at a lower-than-expected revised annualised rate of 2.1%, down sharply from the 5.0% rate in the previous quarter. The deceleration was attributable mainly to an upturn in imports helped by the stronger U.S. dollar and resulted in a larger trade deficit.

Expectations for the timing of the first rise in official interest rates ebbed and flowed and generated a fair amount of market volatility. Few companies talked about meaningful inflationary pressure. Managements expressed increasing confidence as the period wore on but five years on from the financial crisis, whole-hearted confidence in the economy was elusive.        

Trust performance

During the review period, capital and revenue accounts delivered strong absolute returns. The Company's net asset value on a total return basis increased by 18.9% in sterling terms over the year versus the 25.0% return of the S&P 500 Index. Relative performance was impacted by an overweight in the energy sector and an underweight in technology companies.

Significant stock contributors to performance included Digital Realty Trust, Target Corp., and Republic Services. Technology-related REIT Digital Realty Trust showed that it had recovered well from prior year management and operating issues as leasing outcomes to new customers improved at the same time it made good progress in reducing its inventory of unleased properties. Retailer Target had a turbulent year that culminated in a CEO change and the closure and subsequent writedown of its ill-fated Canadian operations. Its new management team headed by Brian Cornell made an impressive start that reinvigorated in-store sales as well as boosting performance in the previously neglected e-commerce channel. Waste management services provider Republic Services reported generally positive results during the review period.The company benefited mainly from healthy revenue growth in its industrial segment that more than offset relative weakness in its slower growing residential business.

Significant detractors included Freeport-McMoRan Copper & Gold and toy-maker Mattel, along with our non-holding in Apple. Shares of Freeport-McMoRan Copper & Gold fell along with those of its peers, hampered by the continuing steady declines in copper and oil prices. Mattel recorded disappointing sales at home and abroad with particular weakness in its key Barbie and Fisher-Price brands. CEO Bryan Stockton resigned earlier this year to be replaced by interim CEO Richard Dickson who is credited with the prior success of Barbie sales. The Trust's non-holding of Apple is based on our view that its earnings are over reliant on smartphone sales where the pace of innovation will be insufficient to offset developed market saturation.

Portfolio activity

Equities

As a consequence of the decision to refinance and expand the Trust's loan facility, we were able to increase our equity investments. We initiated three new companies consistent with our focus on forward fundamentals and management quality.

Ventas is a real estate investment trust that owns and operates senior living properties as well as owning medical office buildings and some hospitals. CEO Debra Cafaro has an excellent track record and is one of the longest serving CEO's in corporate America. The stock yields in excess of 4% with the potential to grow its cash flow payout ratio. We also purchased shares of Sonoco Products Co., a relatively small manufacturer of industrial and consumer packaging products. We believe its integrated manufacturing base and recently expanded geographical reach will drive higher levels of profit that will fund a stable and growing dividend in the years to come. Lastly, we introduced National Oilwell Varco that is a leading manufacturer of equipment and components for oil and gas drilling and production. In retrospect, the timing of the purchase could have been better. We believe its best in class status and strong financials will ensure it emerges from the current cycle stronger than many of its competitors.   

Sales were predominantly valuation led and reflected that investors search for yield pushed some valuations beyond levels we were comfortable with. We exited our small holding in Colgate-Palmolive, having previously reduced our ownership levels in favour of alternative dividend growth opportunities. Similarly, we sold our investment in Genuine Parts Co. an auto and industrial parts manufacturer and distributor. CEO Tom Gallagher is one of the most impressive leaders of any company we know and when valuation allows, we will invest back into the business. Our sales of electric utility Southern Company reflected our concerns that its expansion of nuclear generation capacity is over budget and the stock too expensive whilst the sale of Healthcare Realty Trust was driven by uncertainty of future dividend increases. Aflac, a provider of supplemental life and health insurance, was sold due to a slowing growth outlook in its core Japanese market.      

Bonds

Sales of the Trust's corporate bond holdings were made with an eye to the timing of future interest rate rises and managing of credit risks. By the period end, corporate bond holdings were approximately 5% of the Trust's total assets. In aggregate, average credit quality was a single notch below investment grade with B- the lowest rated bond. Average current yield was close to 6.5% with duration managed down to 3.5 years. 

Options

As in prior years, the Trust continued to make selective use of its option writing program. Each month, typically five or so stocks had either call or put options written on them. This activity is a useful top up source of income but will always remain a relatively small proportion of the Trust's total income. This year, option premia contributed about 22% of the Trust's total income.

Dividend growth

This was a good year with Trust holdings continuing to build upon their established track record of dividend growth. Over 90% of holdings raised dividends this past year and over three quarters of them raised by 5% or more. The average increase was double digit. Noteworthy among this group include Dow Chemical with two increases, National Oilwell Varco, Target, Wells Fargo and Molson Coors. These and other Trust holdings are generating significant amounts of cash from operating activities that is sufficient to finance re-investment as well as dividend increases and selective equity buy-back programs. We, along with other active shareholders, are also encouraging certain companies to divest non-core operations to boost re-investment rates and shareholder pay outs. At period end, the prospective dividend yield on a weighted basis was over 3.5% and just under 3.5% on a trailing basis.  

Outlook

We recognise that the bull market is entering its seventh year, that there are signs of emerging wage inflation and the Fed is closer to raising rates than it was last year. On top of this, external risks, whether economic or geo-political refuse to dissipate. Against this backdrop, we expect the trend of higher market volatility that began in the second half of the year to remain with us for some considerable time. Higher volatility will present challenges to our investment views but also create opportunities to add to our favourite holdings at lower prices. 

Our favourite holdings remain those we believe have the ability to generate increasing levels of cash flow from one business cycle to the next. Cashflow growth is after all the basic building block of the Trust's twin objectives. Our expectations for mid to high single digit cashflow growth in the year ahead are similar to the prior period and are driven by the prospects for higher levels of economic growth and a continuation of disciplined expense management. The rebound in corporate profitability since the financial crisis has been impressive and remains durable. We do not expect meaningful profit compression from higher labour, commodity or financing costs. We are believers that many US companies, including select financials, are in the best shape they have been for a generation having reaped the positives from the advance of technology, globalisation and cheap money.

We expect our investments to continue to make good capital allocation decisions and we are encouraged by the scale and speed of adjustments made by those holdings most recently affected by the slide in commodity prices. We disagree with those who believe US companies have systematically under-invested in growth capital at the expense of shareholder distributions. For the best companies, abundant cashflows have been sufficient to satisfy the need for disciplined re-investment as well as growing dividends, offsetting equity issuance and leaving scope for strategic acquisitions. We acknowledge that aggressive share buy backs do flatter earnings on a per share basis which is why we pay closer attention to operating profit dollar growth.

Valuations are always a function of company specifics and broader market related issues. As we have noted, company specifics of our investments are solid aside the current concerns we have with prospects at Mattel and Freeport McMoran. In aggregate, our holdings are valued similar to the broader market albeit using our own more conservative forward earnings estimates. We don't view valuation to be excessive. As our investors know, our portfolio of holdings materially differ from the S&P 500 being skewed to dividend growers that average 1.5x a higher dividend yield than the market. This requires us to be sensitive to valuations amongst these types of companies. Those valuation disciplines currently prohibit us from holding more meaningful positions in power utilities and we see this as unlikely to change in the near term.

We do not consider ourselves to be particularly skilled currency forecasters and therefore we limit our forward thinking to understanding the potential earnings impact of currency moves rather than outright predicting them. A stronger dollar reduces the value of overseas earnings as well as the quantum through the diminished purchasing power of international economies. These affects create additional valuation pressures for companies like Emerson Electric, Pepsi and Cisco Systems. We expect US interest rate differentials to widen with the rest of the world in the next twelve months and this, if correct, is likely to mean that overseas earnings continue to be pressured.

This past year was a good one for the revenue and capital accounts. Dividend distributions from our holdings grew at a very healthy double digit clip as well as a successive year of adding to capital reserves. We continue to believe that dividend growth prospects for our investments remain attractive although a year of lower dividend growth as companies step up capital investment is a more realistic assumption for the next twelve months. After payment of the final dividend, revenue reserves will stand at £3.6 million or 11.0p per Ordinary share. The momentum of the revenue account is a testimony to the companies we are invested in. Switching to the capital account outlook, returns of 20% or more are notoriously difficult to predict and whilst being confident of attractive future returns, we caution against an expectation that matches returns of the last twelve months.

4.         OVERVIEW OF STRATEGY

Introduction

The Company is an investment trust and its Ordinary shares are listed on the premium segment of the London Stock Exchange. The Company aims to attract long term private and institutional investors wanting to benefit from the income and growth prospects of North American companies.

The Directors do not envisage any change in the Company's activity in the foreseeable future. 

Reference Index

The Board reviews performance against relevant factors, including the S&P 500 Index (in sterling terms) as well as peer group comparisons. The aim to provide investors with above average dividend income from predominantly US equities means that investment performance can diverge, possibly quite materially in either direction, from this or any other index.

Investment Objective

To provide investors with above average dividend income and long term capital growth through active management of a portfolio consisting predominately of S&P 500 US equities.

Investment Policy

The Company invests in a portfolio predominantly comprised of S&P 500 constituents. The Company may also invest in Canadian stocks and US mid and small capitalisation companies to provide for diversified sources of income. The Company may invest up to 20% of its gross assets in fixed income investments, which may include non-investment grade debt.

The Company's investment policy is flexible, enabling it to invest in all types of securities, including (but not limited to) equities, preference shares, debt, convertible securities, warrants, depositary receipts and other equity-related securities.

The maximum single investment will not exceed 10% of gross assets at the time of investment and it is expected that the portfolio will contain around 50 holdings (including fixed income investments), with an absolute minimum of 35 holdings.

The composition of the Company's portfolio is not restricted by minimum or maximum market capitalisation, sector or country weightings.

The Company may borrow up to an amount equal to 20% of its net assets.

Subject to the prior approval of the Board, the Company may also use derivative instruments for efficient portfolio management, hedging and investment purposes. The Company's aggregate exposure to such instruments for investment purposes (excluding collateral held in respect of any such derivatives) will not exceed 20% of the Company's net assets at the time of the relevant acquisition, trade or borrowing.

The Company does not generally intend to hedge its exposure to foreign currency.

The Company will not acquire securities that are unlisted or unquoted at the time of investment (with the exception of securities which are about to be listed or traded on a stock exchange). However, the Company may continue to hold securities that cease to be listed or quoted, if appropriate.

The Company may participate in the underwriting or sub-underwriting of investments where appropriate to do so.

The Company may invest in open-ended collective investment schemes and closed-ended funds that invest

in the North American region. However, the Company will not invest more than 10%, in aggregate, of the value of its gross assets in other listed investment companies (including listed investment trusts), provided that this restriction does not apply to investments in any such investment companies which themselves have stated investment policies to invest no more than 15% of their gross assets in other listed investment companies.

The Company will normally be substantially fully invested in accordance with its investment objective but, during periods in which changes in economic conditions or other factors so warrant, the Company may reduce its exposure to securities and increase its position in cash and money market instruments.

Alternative Investment Fund Manager

The Board has appointed Aberdeen Fund Managers Limited ("AFML" or "Manager") to act as the alternative investment fund manager appointed as required by EU Directive 2011/61/EU, authorised and regulated by the Financial Conduct Authority ("FCA").

The Directors are responsible for determining the investment policy and the investment objective of the Company.  The Company's portfolio is managed on a day-to-day basis by Aberdeen Asset Managers Ltd ("AAM" or "Investment Manager") by way of a delegation agreement in place between AFML and AAM.

The Investment Manager invests in a range of North American companies, following a bottom-up investment process based on a disciplined evaluation of companies through direct visits by its fund managers. Stock selection is the major source of added value, concentrating on quality first, then price. Top-down investment factors are secondary in the Investment Manager's portfolio construction, with diversification rather than formal controls guiding stock and sector weights.

Pre-investment Disclosure Document (PIDD)

The Alternative Investment Fund Manager Directive ("AIFMD") requires AFML to make available to investors certain information prior to such investors' investment in the Company. The AIFMD is intended to offer increased protection to investors in investment products that do not fall under the existing European Union regime for regulation of investment products known as "UCITS".

The Company's PIDD is available for viewing at http://www.invtrusts.co.uk/doc.nsf/Lit/PressReleaseUKClosedaschitalternativeinvestmentfundmanagersdirectivepidd

Principal Risks and Uncertainties

The principal risks facing the Company relate to the Company's investment activities and include market risk (comprising interest rate risk and other price risk), liquidity risk and credit risk. An explanation of these risks and how they are managed is contained in note 18 to the financial statements.  The Board has adopted a matrix of the key risks that affect its business.

Market and performance risk

The Company is exposed to the effect of variations in share prices and movements in the US$/£ exchange rate due to the nature of its business.  A fall in the market value of its portfolio would have an adverse effect on shareholders' funds.

Gearing risk

As at 31 January 2015 the Company had £42.1 million of borrowings. Gearing has the effect of exacerbating market falls and gains. In order to manage the level of gearing, the Board has set a maximum gearing ratio of 20%. 

Discount volatility

The Company's share price can trade at a discount to its underlying net asset value. The Board monitors the discount level of the Company's shares and will consider share buybacks when the discount exceeds 5% for any significant period of time assuming normal market conditions.

Regulatory risk

The Company operates in a complex regulatory environment and faces a number of regulatory risks. Breaches of regulations, such as Section 1158 of the Corporation Tax Act 2010, the UKLA Listing Rules, Companies Act 2006 and the Alternative Investment Fund Managers Directive, could lead to a number of detrimental outcomes and reputational damage. The Audit Committee monitors compliance with regulations by reviewing internal control reports from the Manager.

Dividend

The ability of the Company to pay dividends and any future dividend growth will depend primarily on the level of income received from its investments (which may be affected by currency movements, exchange controls or withholding taxes imposed by jurisdictions in which the Company invests) and the timing of receipt of such income by the Company. Accordingly, there is no guarantee that the Company's dividend income objective will continue to be met and the amount of the dividends paid to Ordinary Shareholders may fluctuate and may go down as well as up.

Derivatives

The Company uses derivatives primarily to enhance the income generation of the Company. The risks associated with such contracts are managed within guidelines set by the Board. 

Debt securities

Any debt securities that may be held by the Company will be affected by general changes in interest rates that will in turn result in increases or decreases in the market value of those instruments. When interest rates decline, the value of the Company's investments in fixed rate debt obligations can be expected to rise and, when interest rates rise, the value of those investments may decline. Adverse changes in the financial position of an issuer of debt securities or general economic conditions may impair the ability of the issuer to meet interest payments and repayments of principal. Accordingly, debt securities that may be held by the Company will also be subject to the inherent credit or default risks associated with the debt securities and there can be no assurance as to the levels of default and/or recovery that may be experienced by the Company with regard to such securities.

Performance and Outlook

At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives.  The Board also considers the promotion of the Company, including effective communications with shareholders, which is explained in more detail on page 53 of the published 2015 Annual Report. The future strategic direction and development of the Company is regularly discussed as part of Board meeting agendas.

A review of the Company's activities and performance during the year to 31 January 2015 and future developments is detailed in the Chairman's Statement and the Manager's Review. This covers market background, investment activity, portfolio strategy, dividend and gearing policy and investment outlook. A comprehensive analysis of the portfolio is provided in the Investment Portfolio of and Geographical and Sector Analyses below.

Key Performance Indicators (KPIs)

The main KPIs used by the Board in assessing the Company's performance include:

·      Net asset value v reference index (total return) and peer group

·      Premium/Discount

·      Dividend yield

·      Ongoing charges

Details of the Company's results are provided above. 

Duration

The Company does not have a fixed winding-up date, but shareholders are given the opportunity to vote on the continuation of the Company every three years at the Annual General Meeting.  The next continuation vote will be at the AGM in May 2015.

Board Diversity

The Board recognises the importance of having a range of skilled, experienced individuals with the appropriate knowledge in order to allow the Board to fulfill its obligations.  At 31 January 2015, the Board consisted of three male Directors while a female Director was appointed on 17 March 2015. The Company has no employees.

Employee and Socially Responsible Policies

As the Company has delegated the management of the portfolio, it has no employees and therefore has no requirement for disclosures in this area. The Company's socially responsible investment policy is out in the Statement of Corporate Governance.

Global Greenhouse Gas Emissions

The Company has no greenhouse gas emissions to report from the operations of its business, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013. 

The Manager's corporate socially responsible policy including environmental policy can be found on http://www.aberdeen-asset.com/aam.nsf/groupCsr/home.

James Ferguson

Chairman

24 March 2015

PORTFOLIO INVESTMENTS

Investment Portfolio - Ten Largest Equity Investments

As at 31 January 2015

		Valuation	Total	Valuation
		2015	assets	2014
Company	Industry classification	£'000	%	£'000
Target
Target Corporation operates general merchandise stores in the United States and Canada.	Multiline Retail	12,312	3.5	4,715
Philip Morris
Philip Morris International Inc., through its subsidiaries, manufactures and sells cigarettes and other tobacco products.	Tobacco	11,940	3.4	8,454
Microsoft
Microsoft manufactures and licenses software products for operating systems, applications, software development and internet services.	Systems Software	11,923	3.4	11,535
Verizon Communications
Verizon Communications Inc., through its subsidiaries, provides communications, information, and entertainment products and services to consumers, businesses, and governmental agencies worldwide.	Diversified Telecommunication Services	11,316	3.2	6,574
Starwood Hotels & Resorts
Starwood Hotels & Resorts Worldwide, Inc. operates as a hotel and leisure company worldwide.	Hotels, Restaurants & Leisure	10,777	3.1	-
Sysco
Sysco Corporation, through its subsidiaries, markets and distributes a range of food and related products primarily to the foodservice or food-away-from-home industry.	Food & Staples Retailing	10,713	3.0	3,214
Republic Services
Republic Services, Inc., together with its subsidiaries, provides non-hazardous solid waste collection, transfer, and recycling and disposal services for commercial, industrial, municipal, and residential customers in the United States and Puerto Rico.	Commercial Services & Supplies	10,151	2.9	7,488
Nucor
Nucor Corporation, together with its subsidiaries, engages in the manufacture and sale of steel and steel products in North America and internationally.	Metals & Mining	10,144	2.9	8,083
Pfizer
Pfizer Inc. discovers, develops, manufactures, and sells healthcare products worldwide.	Pharmaceuticals	9,800	2.8	7,399
Baxter International
Baxter International Inc. develops, manufactures, and markets products for people with hemophilia, immune disorders, infectious diseases, kidney diseases, trauma, and other chronic and acute medical conditions.	Healthcare Equipment & Supplies	9,754	2.8	7,998
Ten largest equity investments		108,830	31.0

Investment Portfolio - Other Equity Investments
As at 31 January 2015
		Valuation	Total	Valuation
		2015	assets	2014
Company	Industry classification	£'000	%	£'000
Wells Fargo	Commercial Banks	9,171	2.6	7,319
CMS Energy	Multi-Utilities	9,128	2.6	6,918
National Oilwell Varco	Energy Equipment & Services	9,104	2.6	-
Chevron	Oil, Gas & Consumable Fuels	9,026	2.6	6,997
TransCanada	Oil, Gas & Consumable Fuels	8,907	2.5	7,928
Wisconsin Energy	Multi-Utilities	8,897	2.5	5,515
Kraft Foods	Food Products	8,883	2.5	6,504
Exxon Mobil	Oil, Gas & Consumable Fuels	8,580	2.5	4,671
CME Group	Investment Services	8,530	2.4	5,513
Dow Chemical	Chemicals	8,465	2.4	6,038
Twenty largest equity investments		197,521	56.2
Telus	Diversified Telecommunication Services	8,263	2.4	7,670
Cisco Systems	Telecommunications Equipment	8,110	2.3	6,159
Pepsico	Beverages	8,039	2.3	9,068
Digital Realty Trust	Real Estate Investment Trusts (REITs)	7,693	2.2	9,761
Ventas	Real Estate Investment Trusts (REITs)	7,519	2.1	-
Molson Coors Brewing	Beverages	7,145	2.0	4,046
Potash Corporation of Saskatchewan	Chemicals	7,058	2.0	8,631
Johnson & Johnson	Pharmaceuticals	6,601	1.9	6,185
Procter & Gamble	Household Products	6,314	1.8	4,772
Lockheed Martin	Aerospace & Defense	6,199	1.8	4,539
Thirty largest equity investments		270,462	77.0
Emerson Electric	Electrical Equipment	6,172	1.8	4,518
Freeport-McMoRan	Metals & Mining	5,986	1.7	5,427
Royal Bank of Canada	Commercial Banks	5,749	1.6	8,430
ConocoPhillips	Oil, Gas & Consumable Fuels	5,703	1.6	8,181
Mattel	Leisure Equipment & Products	5,418	1.5	4,713
Paychex	IT Services	4,888	1.4	4,128
Blackrock	Capital Markets	4,602	1.3	3,712
Sonoco Products	Containers & Packaging	4,432	1.3	-
Staples	Specialty Retail	4,219	1.2	2,976
Intel	Semiconductors & Semiconductor Equipment	3,805	1.1	6,577
Forty largest equity investments		321,436	91.5
Praxair	Chemicals	2,802	0.8	2,649
Total equity investments		324,238	92.3

Investment Portfolio - Other Investments
As at 31 January 2015
		Valuation	Total	Valuation
		2015	assets	2014
Company	Industry classification	£'000	%	£'000
General Electric Capital 7.125% Non-Cum Perp Pref	Diversified Financial Services	2,740	0.8	2,414
Qwest 7.25% 15/10/35	Telephone Communications	2,552	0.7	2,270
First Data 7.375% 15/06/19	IT Services	2,432	0.7	2,262
HSBC Finance 6.676% 15/01/21	Consumer Finance	2,181	0.6	2,482
Onemain Financial Holdings 6.75% 15/12/19	Specialty Finance	2,070	0.6	-
International Lease Finance Corp 6.25% 15/05/19	Diversified Financial Services	1,766	0.5	1,592
Cincinnati Bell 8.375% 15/10/20	Diversified Telecommunication Services	1,060	0.3	1,657
First Quantum Minerals 7.25% 15/05/22	Metals & Mining	948	0.3	-
Post Holdings 7.375% 15/02/22	Food Products	781	0.2	748
Seagate HDD Cayman 4.75% 01/06/23	Computer & Office Equipment	712	0.2	-
Ten largest other investments		17,242	4.9
Corrections Corporation of America 4.625% 01/05/23	Real Estate Investment Trusts (REITs)	666	0.2	-
Nationstar 6.5% 01/06/22	Thrifts & Mortgage Finance	576	0.1	-
Total other investments		18,484	5.2
Total equity investments		324,238	92.3
Total investments		342,722	97.5
Net current assets{A}		8,696	2.5
Total assets{A}		351,418	100.0
{A} Excluding bank loans of £8,158,000.

Geographical Analysis

As at 31 January 2015

	Equity	Fixed interest	Total
Country	%	%	%
Canada	8.7	0.3	9.0
US	85.9	5.1	91.0
	________	________	________
	94.6	5.4	100.0
	________	________	________

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the financial statements, in accordance with applicable law and regulations. 

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with UK Accounting Standards. 

The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. 

In preparing these financial statements, the Directors are required to: 

·        select suitable accounting policies and then apply them consistently; 

·        make judgments and estimates that are reasonable and prudent;

·        state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and 

·        prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.  

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. 

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations. 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Declaration

The Directors, being the persons responsible, hereby confirm to the best of their knowledge, that:

·        the financial statements, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

·        that in the opinion of the Directors, the Annual Report taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's performance, business model and strategy; and

·        the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.

For and on behalf of the The North American Income Trust plc

James Ferguson

Chairman

24 March 2015

GOING CONCERN

The Company's assets comprise mainly readily realisable securities which can be sold to meet funding commitments if necessary. The Company has a credit facility in place which is available until July 2017. The Board considers that the Company has adequate financial resources to continue in operational existence for the foreseeable future. Accordingly, the Directors believe that it is appropriate to prepare the financial statements on a going concern basis.

The Directors' assessment of going concern is also based on the assumption that ordinary resolution 10 to be proposed at the AGM of the Company on 28 May 2015, that the Company continues as an investment trust, is passed by shareholders as it has been at AGMs held in prior years. The Directors consult with major shareholders and, as at the date of approval of this Report, had no reason to believe that this assumption was incorrect.

DIVIDENDS

	Rate	xd date	Record date	Payment date
1st Interim dividend 2015	6.00p	2 July 2014	4 July 2014	1 August 2014
2nd Interim dividend 2015	6.00p	1 October 2014	3 October 2014	31 October 2014
3rd Interim dividend 2015	6.50p	22 January 2015	23 January 2015	13 February 2015
Proposed final dividend 2015	11.50p	7 May 2015	8 May 2015	1 June 2015
	________
Total dividends 2015	30.00p
	________
1st Interim dividend 2014	5.50p	3 July 2013	5 July 2013	2 August 2013
2nd Interim dividend 2014	5.50p	2 October 2013	4 October 2013	1 November 2013
3rd Interim dividend 2014	6.00p	22 January 2014	24 January 2014	14 February 2014
Final dividend 2015	10.00p	7 May 2014	9 May 2014	3 June 2014
	________
Total dividends 2014	27.00p
	________

FINANCIAL STATEMENTS

INCOME STATEMENT

		Year ended 31 January 2015			Year ended 31 January 2014
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Net gains on investments	9	-	43,182	43,182	-	12,652	12,652
Net currency (losses)/gains	17	-	(2,295)	(2,295)	-	56	56
Income	2	14,531	-	14,531	12,929	-	12,929
Management fee	3	(709)	(1,654)	(2,363)	(667)	(1,555)	(2,222)
Administrative expenses	5	(672)	-	(672)	(616)	-	(616)
		______	______	_____	______	______	_____
Net return on ordinary activities before finance costs and taxation		13,150	39,233	52,383	11,646	11,153	22,799
Finance costs	4	(183)	(427)	(610)	(94)	(219)	(313)
		______	______	_____	______	______	_____
Return on ordinary activities before taxation		12,967	38,806	51,773	11,552	10,934	22,486
Taxation	6	(2,090)	443	(1,647)	(1,863)	669	(1,194)
		______	______	_____	______	______	_____
Return on ordinary activities after taxation		10,877	39,249	50,126	9,689	11,603	21,292
		______	______	_____	______	______	_____
Return per Ordinary share (pence)	8	32.71	118.05	150.76	29.80	35.69	65.49
		______	______	_____	______	______	_____
The total column of this statement represents the profit and loss account of the Company.
A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement.
All revenue and capital items in the above statement derive from continuing operations.
The accompanying notes are an integral part of the financial statements.
Proposed final dividend
The Board is proposing a final dividend of 11.5p per share (£3,719,000), making a total dividend of 30.00p per share (£9,857,000) for the year to 31 January 2015 which, if approved, will be payable on 1 June 2015 (see note 7).
For the year ended 31 January 2014, the final dividend was 10.00p per share (£3,334,000) making a total dividend of 27.00p per share (£8,947,000).

BALANCE SHEET

		As at	As at
		31 January 2015	31 January 2014
	Notes	£'000	£'000
Fixed assets
Investments at fair value through profit or loss	9	342,722	279,010
		________	________
Current assets
Debtors and prepayments	10	712	949
Cash and short term deposits	17	9,231	7,329
		________	________
		9,943	8,278
		________	________
Creditors: amounts falling due within one year
Bank loan	11/12	(8,158)	(14,603)
Other payables	11	(1,247)	(733)
		________	________
		(9,405)	(15,336)
		________	________
Net current assets/(liabilities)		538	(7,058)
		________	________
Total assets less current liabilities		343,260	271,952
Creditors: amounts falling due after more than one year
Bank loan	11/12	(33,987)	-
		________	________
Net assets		309,273	271,952
		________	________
Capital and reserves
Called-up share capital	13	8,235	8,335
Share premium account		48,467	48,467
Capital redemption reserve		14,325	14,225
Capital reserve	14	228,822	193,047
Revenue reserve		9,424	7,878
		________	________
Equity shareholders' funds		309,273	271,952
		________	________
Net asset value per share (pence)	15	938.92	815.73
		________	________

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

For the year ended 31 January 2015
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2014	8,335	48,467	14,225	193,047	7,878	271,952
Buyback of Ordinary shares	(100)	-	100	(3,474)	-	(3,474)
Return on ordinary activities after taxation	-	-	-	39,249	10,877	50,126
Dividends paid (see note 7)	-	-	-	-	(9,331)	(9,331)
	_____	______	______	______	______	______
Balance at 31 January 2015	8,235	48,467	14,325	228,822	9,424	309,273
	_____	______	______	______	______	______
For the year ended 31 January 2014
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2013	7,870	32,643	14,225	181,444	5,887	242,069
Issue of Ordinary shares	465	15,824	-	-	-	16,289
Return on ordinary activities after taxation	-	-	-	11,603	9,689	21,292
Dividends paid (see note 7)	-	-	-	-	(7,698)	(7,698)
	_____	______	______	______	______	______
Balance at 31 January 2014	8,335	48,467	14,225	193,047	7,878	271,952
	_____	______	______	______	______	______
The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.
The accompanying notes are an integral part of the financial statements.

CASH FLOW STATEMENT

		Year ended		Year ended
		31 January 2015		31 January 2014
	Notes	£'000	£'000	£'000	£'000
Net cash inflow from operating activities	16		12,017		9,956
Servicing of finance
Interest paid			(388)		(313)
Taxation
Overseas withholding tax suffered			(1,588)		(1,240)
			______		______
Financial investment
Purchases of investments		(115,392)		(100,760)
Sales of investments		94,811		82,336
		______		______
Net cash outflow from financial investment			(20,581)		(18,424)
Equity dividends paid			(9,331)		(7,698)
			______		______
Net cash outflow before financing			(19,871)		(17,719)
Financing
Buyback of Ordinary shares		(3,474)		-
Issue of Ordinary shares		-		16,289
Drawdown of bank loan		23,357		-
		______		______
Net cash inflow from financing			19,883		16,289
			______		______
Increase/(decrease) in cash			12		(1,430)
			______		______
Reconciliation of net cash flow to movement in net debt
Decrease in cash as above			12		(1,430)
Drawdown of bank loan			(23,357)		-
Exchange movements			(2,295)		56
			______		______
Movement in net debt in the year			(25,640)		(1,374)
Opening net debt			(7,274)		(5,900)
			______		______
Closing net debt	17		(32,914)		(7,274)
			______		______

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 January 2015

1.	Accounting policies
	A summary of the principal accounting policies, all of which, unless otherwise stated, have been consistently applied throughout the year and the preceding year is set out below.
	(a)	Basis of preparation and going concern
		The financial statements have been prepared under the historical cost convention, as modified to include the revaluation of investments and in accordance with the applicable UK Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. They have also been prepared on the assumption that approval as an investment trust will continue to be granted.
		The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. Further detail is included in the Directors' Report (unaudited) in the published 2015 Annual Report and Accounts.
		The financial statements and the net asset value per share figures have been prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP).
	(b)	Income
		Income from investments (other than special dividends), including taxes deducted at source, is included in revenue by reference to the date on which the investment is quoted ex dividend. Special dividends are credited to capital or revenue, according to the circumstances.
		The fixed returns on debt securities are recognised on a time apportionment basis so as to reflect the effective yield on the debt securities and shares.
		Interest receivable from cash and short-term deposits and interest payable is accrued to the end of the year.
	(c)	Expenses
		All expenses are accounted for on an accruals basis and are charged to the Income Statement. Expenses are charged against revenue except as follows:
		transaction costs on the acquisition or disposal of investments are charged to the capital account in the Income Statement;
		expenses are charged to realised capital reserves where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect, the investment management fee is allocated 30% to revenue and 70% to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth.
	(d)	Deferred taxation
		Deferred taxation is provided on all timing differences, that have originated but not reversed at the Balance Sheet date, where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the Balance Sheet date, measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. Due to the Company's status as an investment trust company, and the intention to continue to meet the conditions required to obtain approval for the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
	(e)	Investments
		All purchases and sales of investments are recognised on the trade date, being the date the Company commits to purchase or sell the investment. Investments are initially recognised and subsequently re-measured at fair value in the Income Statement. Transaction costs on purchases and sales are expensed through the Income Statement.
	(f)	Borrowings
		Monies borrowed to finance the investment objectives of the Company are stated at the amount of the net proceeds immediately after issue plus cumulative finance costs less cumulative payments made in respect of the debt. The finance costs of such borrowings are accounted for on an accruals basis using the effective interest rate method and are charged 30% to revenue and 70% to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth.
	(g)	Dividends payable
		Interim and final dividends are recognised in the period in which they are paid.
	(h)	Capital reserve
		Gains or losses on realisation of investments and changes in fair values of investments which are readily convertible to cash, without accepting adverse terms, are transferred to the capital reserve. The costs of share buybacks are also deducted from this reserve.
	(i)	Foreign currency
		Assets and liabilities in foreign currencies are translated at the rates of exchange ruling on the Balance Sheet date. Transactions involving foreign currencies are converted at the rate ruling on the date of the transaction. Gains and losses on the realisation of foreign currencies are recognised in the Income Statement and are then transferred to the capital reserve.
	(j)	Traded options
		The Company may enter into certain derivatives (e.g. options). Option contracts are accounted for as separate derivative contracts and are therefore shown in other assets or other liabilities at their fair value. The initial fair value is based on the initial premium, which is recognised upfront. The premium received and fair value changes in the open position which occur due to the movement in underlying securities are recognised in the revenue column, losses realised on the exercise of the contracts are recorded in the capital column of the Income Statement.
		In addition, the Company may enter into derivative contracts to manage market risk and gains or losses arising on such contracts are recorded in the capital column of the Income Statement.

		2015	2014
2.	Income	£'000	£'000
	Income from overseas listed investments
	Dividend income	9,292	8,210
	REIT income	704	544
	Interest income from investments	1,386	1,634
		______	______
		11,382	10,388
		______	______
	Other income from investment activity
	Traded option premiums	3,147	2,534
	Deposit interest	2	7
		______	______
		3,149	2,541
		______	______
	Total income	14,531	12,929
		______	______
	During the year, the Company was entitled to premiums totalling £3,147,000 (2014 - £2,534,000) in exchange for entering into derivative transactions. This figure includes a mark to market on derivative contracts open at each year end. At the year end there was 1 open position, valued at a liability of £65,000 (2014 - liability of £14,000) as disclosed in note 11. Losses realised on the exercise of derivative transactions are disclosed in note 9.

		2015			2014
		Revenue	Capital	Total	Revenue	Capital	Total
3.	Management fee	£'000	£'000	£'000	£'000	£'000	£'000
	Management fee	709	1,654	2,363	667	1,555	2,222
		______	______	______	______	______	______
	For the year ended 31 January 2015 management services were provided by Aberdeen Asset Managers Limited ("AAML") until 18 July 2014 and thereafter by Aberdeen Fund Managers Limited ("AFML"). There were no changes to the commercial arrangements. Under the terms of an agreement effective from 18 July 2014 (which replaced existing arrangements with AAML), the Company has appointed AFML to provide management, accounting, administrative and secretarial services. The fee is at an annual rate of 0.8% of gross assets after deducting current liabilities and borrowings and excluding commonly managed funds, payable quarterly. The balance due at the year end was £624,000 (2014 - £548,000). The fee is allocated 30% (2014 - 30%) to revenue and 70% (2014 - 70%) to capital.
	The management agreement between the Company and Aberdeen is terminable by either party on three months' notice. In the event of a resolution being passed at the AGM to wind up the Company the Manager shall be entitled to three months' notice from the date the resolution was passed. In the event of termination on not less than the agreed notice period, compensation is payable in lieu of the unexpired notice period.

		2015			2014
		Revenue	Capital	Total	Revenue	Capital	Total
4.	Finance costs	£'000	£'000	£'000	£'000	£'000	£'000
	Bank loans	183	427	610	94	219	313
		______	______	______	______	______	______

			2015	2014
5.	Administrative expenses		£'000	£'000
	Directors' fees		54	54
	Registrar's fees		65	50
	Custody and bank charges		27	31
	Secretarial fees		103	100
	Auditor's remuneration (excluding irrecoverable VAT):
	Fees payable to the Company's auditor for the audit of the annual accounts		16	15
	Fees payable to the Company's auditor for other services:
		other services	1	1
	Promotional activities		212	184
	Printing, postage and stationery		28	25
	Fees, subscriptions and publications		41	54
	Standard & Poors' licence fee		-	6
	Professional fees		71	58
	Depositary charges		22	-
	Other expenses		32	38
			______	______
			672	616
			______	______
	For the year ended 31 January 2015 secretarial and administration services were provided by Aberdeen Asset Managers Limited ("AAML") until 18 July 2014 and thereafter by Aberdeen Fund Managers Limited ("AFML"). There were no changes to the commercial arrangements. The fee is payable monthly in advance and based on an index-linked annual amount of £103,000 (2014 - £100,000) and there was a accrual of £17,000 (2014 - £17,000) at the year end. The agreement is terminable on three months' notice.
	During the year £212,000 (2014 - £184,000) was paid to AAML in respect of promotional activities for the Company through Aberdeen's Investment Trust Initiative and the balance due at the year end was £71,000 (2014 - £71,000).

			2015			2014
			Revenue	Capital	Total	Revenue		Capital	Total
6.	Taxation		£'000	£'000	£'000	£'000		£'000	£'000
	(a)	Analysis of charge for the year
		UK corporation tax	784	(507)	277	605		(605)	-
		Overseas tax suffered	1,306	-	1,306	1,258		-	1,258
		Current tax charge for the year	2,090	(507)	1,583	1,863		(605)	1,258
		Deferred taxation	-	64	64	-		(64)	(64)
			______	______	_____	______		______	_____
		Total tax	2,090	(443)	1,647	1,863		(669)	1,194
			______	______	_____	______		______	_____
	(b)	Factors affecting the tax charge for the year
		The UK corporation tax rate was 23% until 31 March 2014 and 21% from 1 April 2014 giving an effective rate of 21.33% (2014 - effective rate of 23.17%). The tax assessed for the year is lower than the rate of corporation tax. The differences are explained below:
			2015			2014
			Revenue	Capital	Total	Revenue	Capital		Total
			£'000	£'000	£'000	£'000	£'000		£'000
		Net profit on ordinary activities before taxation	12,967	38,806	51,773	11,552	10,934		22,486
			______	______	_____	______	______		_____
		Corporation tax at 21.33% (2014 - 23.17%)	2,766	8,277	11,043	2,676	2,533		5,209
		Effects of:
		Non taxable overseas dividends	(1,982)	-	(1,982)	(1,902)	-		(1,902)
		Unutilised management expenses	-	(63)	(63)	(169)	(194)		(363)
		Irrecoverable overseas withholding tax	1,306	-	1,306	1,258	-		1,258
		Capital gains not taxable	-	(9,211)	(9,211)	-	(2,931)		(2,931)
		Currency losses/(gains) not taxable	-	490	490	-	(13)		(13)
			______	______	_____	______	______		_____
		Current tax charge	2,090	(507)	1,583	1,863	(605)		1,258
			______	______	_____	______	______		_____
	(c)	Provision for deferred taxation
		No provision for deferred taxation has been made in the current year due to the Company fully utilising the losses brought forward from the previous year (2014 - £64,000). The Company has not provided for deferred tax on capital gains or losses arising on the revaluation or disposal of investments as it is exempt from tax on these items because of its status as an investment trust company.

		2015	2014
7.	Dividends	£'000	£'000
	Amounts recognised as distributions to equity holders in the year:
	3rd interim dividend for 2014 - 6.0p per share	2,000	-
	Final dividend for 2014 - 10.0p per share (2013 - 13.0p)	3,334	4,092
	1st interim dividend for 2015 - 6.0p per share (2014 - 5.5p)	2,000	1,798
	2nd interim dividend for 2015 - 6.0p per share (2014 - 5.5p)	1,997	1,815
	Unclaimed dividends from previous years	-	(7)
		______	______
		9,331	7,698
		______	______
	The proposed third interim dividend was unpaid at the year end and the final dividend for 2015 is subject to approval by shareholders at the Annual General Meeting. Accordingly, neither has been included as a liability in these financial statements.
	The table below sets out the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of Sections 1158-1159 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £10,876,000 (2014 - £9,689,000).
		2015	2014
		£'000	£'000
	1st interim dividend for 2015 - 6.0p per share (2014 - 5.5p)	2,000	1,798
	2nd interim dividend for 2015 - 6.0p per share (2014 - 5.5p)	1,997	1,815
	3rd interim dividend for 2015 - 6.5p per share (2014 - 6.0p)	2,141	2,000
	Proposed final dividend for 2015 - 11.5p per share (2014 - 10.0p)	3,719	3,334
	Unclaimed dividends from previous years	-	(7)
		______	______
		9,857	8,940
		______	______
	Subsequent to the year end the Company has purchased for cancellation a further 598,450 Ordinary shares; therefore the amount reflected above for the cost of the proposed final dividend for 2015 is based on 32,340,632 Ordinary shares in issue, being the number of Ordinary shares in issue at the date of this Report.

		2015		2014
8.	Return per Ordinary share	£'000	p	£'000	p
	Based on the following figures:
	Revenue return	10,877	32.71	9,689	29.80
	Capital return	39,249	118.05	11,603	35.69
		______	______	_____	______
	Total return	50,126	150.76	21,292	65.49
		______	______	_____	______
	Weighted average number of Ordinary shares in issue		33,249,205		32,511,787
			_________		_________

		2015	2014
9.	Investments	£'000	£'000
	Fair value through profit or loss:
	Opening fair value	279,010	248,001
	Opening investment holdings gains	(30,746)	(36,295)
		______	______
	Opening book cost	248,264	211,706
	Purchases at cost	115,392	100,760
	Sales - proceeds	(94,811)	(82,336)
	Sales - realised gains{A}	8,789	18,201
	Amortisation of fixed income book cost	(51)	(67)
		______	______
	Closing book cost	277,583	248,264
	Closing investment holdings gains	65,139	30,746
		______	______
	Closing fair value	342,722	279,010
		______	______
	Listed on overseas stock exchanges	342,722	279,010
		______	______
		2015	2014
	Gains on investments	£'000	£'000
	Realised gains on sales{A}	8,789	18,201
	Movement in investment holdings gains	34,393	(5,549)
		______	______
		43,182	12,652
		______	______
	{A} Includes losses realised on the exercise of traded options of £1,692,000 (2014 - £1,524,000) offset by premium received of £3,147,000 (2014 - £2,534,000) per note 2.
	Transaction costs
	During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Income Statement. The total costs were as follows:
		2015	2014
		£'000	£'000
	Purchases	117	113
	Sales	134	129
		______	______
		251	242
		______	______

		2015	2014
10.	Debtors: amounts falling due within one year	£'000	£'000
	Dividends receivable	446	412
	Interest receivable	208	417
	Deferred tax	-	64
	Taxation recoverable	11	-
	Other debtors and prepayments	38	47
	Overpayment of dividend	9	9
		______	______
		712	949
		______	______

		2015	2014
11.	Creditors	£'000	£'000
	Amounts falling due within one year:
	Bank loans (note 12)	8,158	14,603
	Investment management fee payable	624	548
	Interest payable	226	4
	Traded option contracts	65	14
	UK corporation tax payable	151	-
	Other creditors	181	167
		______	______
		9,405	15,336
		______	______
		2015	2014
		£'000	£'000
	Amounts falling due after more than one year:
	Bank loan (note 12)	33,987	-
		______	______

			2015	2014
12.	Bank loans		£'000	£'000
	Unsecured bank loans repayable:
	within one year
	-	US$24,000,000  at 1.6595% - 28 February 2014	-	14,603
	-	US$10,000,000 at 1.06675% - 24 February 2015	6,658	-
	-	£1,500,000 at 1.40163% - 24 February 2015	1,500	-
	in more than one year but no more than five years
	-	US$51,045,000 at 2.18% - 17 July 2017	33,987	-
			______	______
			42,145	14,603
			______	______
	At the year end, the Company's secured floating rate bank loans of US$10,000,000 and £1,500,000 (2014 - US$24,000,000) and fixed rate bank loan of US$51,045,000 (2014 - £nil) equivalent to £42,145,000 (2014 - £14,603,000) were drawn down from the £45 million multi-currency revolving loan facility provided by State Street Bank and Trust Company. This facility was signed on 17 July 2014 and replaces the previous £30 million multi-currency revolving loan facitity with the same lender.
	At the date of signing this report, the Company's secured floating rate bank loans of US$10,000,000 and £1,500,000 were drawn down to 24 March 2015 at interest rates of 1.0715% and 1.40381% respectively.
	The terms of the loan facility contain covenants that gross borrowings should not exceed 25% of net assets and should not exceed 30% of adjusted assets.

		2015	2014
13.	Called-up share capital	£'000	£'000
	Allotted, called-up and fully paid:
	Opening balance	8,335	7,870
	Shares issued during the year	-	465
	Shares bought back during the year	(100)	-
		______	______
	32,939,082 (2014 - 33,338,582) Ordinary shares of 25p each	8,235	8,335
		______	______
	During the year the Company bought back 399,500 (2014 - issued 1,860,000) Ordinary shares of 25p each for a total cost of £3,474,000 (2014 - proceeds of £16,289,000).
	Since the year end a further 598,450 Ordinary shares of 25p each have been bought back for a total cost of £5,153,000, leaving 32,340,632 Ordinary shares in issue at the date of this report.

		2015	2014
14.	Capital reserve	£'000	£'000
	At 1 February	193,047	181,444
	Movement in fair value gains	43,182	12,652
	Foreign exchange movements	(2,295)	56
	Tax relief to capital	507	605
	Deferred tax	(64)	64
	Costs of share buybacks	(3,474)	-
	Finance costs of bank loan	(427)	(219)
	Investment management fees	(1,654)	(1,555)
		______	______
	At 31 January	228,822	193,047
		______	______
	Included in the total above are investment holdings gains at the year end of £65,139,000 (2014 - £30,746,000).
	The Directors regard the total capital reserve as being available to fund share buy-backs.

15.	Net asset value per equity share
	The net asset value per share and the net assets attributable to the Ordinary shareholders at the year end were as follows:
		2015	2014
	Net assets attributable	£309,273,000	£271,952,000
	Number of Ordinary shares in issue	32,939,082	33,338,582
	Net asset value per share	938.92p	815.73p

16.	Reconciliation of net return before finance costs and	2015	2014
	taxation to net cash inflow from operating activities	£'000	£'000
	Return on ordinary activities before finance costs and taxation	52,383	22,799
	Adjustments for:
	Net gains on investments	(43,182)	(12,652)
	Foreign exchange movements	2,295	(56)
	Amortisation of fixed income book cost	51	67
	Decrease/(increase) in accrued income	169	(58)
	Decrease/(increase) in other debtors	9	(2)
	Increase/(decrease) in other creditors	292	(142)
		______	______
	Net cash inflow from operating activities	12,017	9,956
		______	______

		At			At
		1 February	Cash	Exchange	31 January
		2014	flow	movements	2015
17.	Analysis of changes in net debt	£'000	£'000	£'000	£'000
	Cash and short term deposits	7,329	12	1,890	9,231
	Debt due within one year	(14,603)	6,556	(111)	(8,158)
	Debt due after more than one year	-	(29,913)	(4,074)	(33,987)
		______	______	_____	______
	Net debt	(7,274)	(23,345)	(2,295)	(32,914)
		______	______	_____	______
	A statement reconciling the movement in net debt to the net cash flow has not been presented as there are no differences from the above analysis.

18.	Financial instruments and risk management
	The Company's investment activities expose it to various types of financial risk associated with the financial instruments and markets in which it invests. The Company's financial instruments other than derivatives, comprise securities and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income.
	Subject to Board approval, the Company also has the ability to enter into derivative transactions, in the form of traded options, for the purpose of enhancing income returns and portfolio management. During the year, the Company entered into certain derivative contracts. As disclosed in note 2, the premium received and fair value changes in respect of options written in the year was £3,147,000. Positions closed during the year realised a loss of £1,692,000. The largest position in derivative contracts held during the year at any given time was £716,000 (2014 - £886,000). The Company had one open position in derivative contracts at 31 January 2015 valued at a liability of £65,000 as disclosed in note 11.
	The Board has delegated the risk management function to Aberdeen Fund Managers limited ("AFML" or "the Manager") under the terms of its management agreement with AFML (further details of which are included under note 3). The Board regularly reviews and agrees policies for managing each of the key financial risks identified with the Manager. The types of risk and the Manager's approach to the management of each type of risk, are summarised below. Such approach has been applied throughout the year and has not changed since the previous accounting period. The numerical disclosures exclude short-term debtors and creditors.
	The Company's Manager has an independent Investment Risk department for reviewing the investment risk parameters of all core equity, fixed income and alternative asset classes on a regular basis. The department reports to the Manager's Performance Review Committee which is chaired by the Manager's Chief Investment Officer. The department's responsibility is to review and monitor ex-ante (predicted) portfolio risk and style characteristics using best practice, industry standard multi-factor models.
	Risk management framework
	The directors of AFML collectively assume responsibility for AFML's obligations under the AIFMD including reviewing investment performance and monitoring the Company's risk profile during the year.
	AFML is a fully integrated member of the Aberdeen Asset Management PLC ("Aberdeen") group of companies (referred to as "the Group"), which provides a variety of services and support to AFML in the conduct of its business activities, including in the oversight of the risk management framework for the Company. The AIFM has delegated the day to day administration of the investment policy to Aberdeen Asset Managers Limited, which is responsible for ensuring that the Company is managed within the terms of its investment guidelines and the limits set out in FUND 3.2.2R (details of which can be found on the Company's website). The AIFM has retained responsibility for monitoring and oversight of investment performance, product risk and regulatory and operational risk for the Company.
	The Manager conducts its risk oversight function through the operation of the Group's risk management processes and systems which are embedded within the Group's operations. The Group's Risk Division supports management in the identification and mitigation of risks and provides independent monitoring of the business. The Division includes Compliance, Business Risk, Market Risk, Risk Management and Legal. The team is headed up by the Group's Head of Risk, who reports to the Chief Executive Officer of the Group. The Risk Division achieves its objective through embedding the Risk Management Framework throughout the organisation using the Group's operational risk management system ("SWORD").
	The Group's Internal Audit Department is independent of the Risk Division and reports directly to the Group CEO and to the Audit Committee of the Group's Board of Directors. The Internal Audit Department is responsible for providing an independent assessment of the Group's control environment.
	The Group's corporate governance structure is supported by several committees to assist the board of directors of Aberdeen, its subsidiaries and the Company to fulfil their roles and responsibilities. The Group's Risk Division is represented on all committees, with the exception of those committees that deal with investment recommendations. The specific goals and guidelines on the functioning of those committees are described on the committees' terms of reference.
	Risk management
	The main risks the Company faces from its financial instruments are (i) market risk (comprising interest rate risk, currency risk and price risk), (ii) liquidity risk and (iii) credit risk.
	The Board regularly reviews and agrees policies for managing each of these risks. The Manager's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term debtors and creditors, other than for currency disclosures.
	(i)	Market risk
		The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, currency risk and price risk.
		Interest rate risk
		Interest rate movements may affect:
		the fair value of the investments in fixed interest rate securities;
		the level of income receivable on cash deposits;
		interest payable on the Company's variable rate borrowings.
		Management of the risk
		The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.
		The Board reviews on a regular basis the values of the fixed interest rate securities.
		The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise fixed rate, revolving, and uncommitted facilities. Details of borrowings at 31 January 2015 are shown in note 12.
		Interest risk profile
		The interest rate risk profile of the portfolio of financial assets and liabilities at the Balance Sheet date was as follows:
			Weighted
			average
			period for		Weighted				Non-
			which		average		Fixed	Floating	interest
			rate is fixed		interest rate		rate	rate	bearing
		At 31 January 2015	Years		%		£'000	£'000	£'000
		Assets
		Sterling	-		0.51		-	1,420	-
		US Dollar	5.45		4.57		18,484	7,722	301,319
		Canadian Dollar	-		-		-	89	22,919
							_____	______	______
		Total assets					18,484	9,231	324,238
							_____	______	______
		Liabilities
		Bank loan - US$10,000,000	0.07		1.07		(6,658)	-	-
		Bank loan - £1,500,000	0.07		1.40		(1,500)	-	-
		Bank loan - US$51,045,000	2.46		2.18		(33,987)	-	-
							______	______	_____
		Total liabilities					(42,145)	-	-
							______	______	_____
			Weighted
			Average
			period for		Weighted				Non-
			Which		average		Fixed	Floating	interest
			rate is fixed		interest rate		rate	rate	bearing
		At 31 January 2014	Years		%		£'000	£'000	£'000
		Assets
		Sterling	-		0.25		-	3,568	-
		US Dollar	7.28		6.22		24,125	3,587	230,857
		Canadian Dollar	-		-		-	174	24,028
							______	______	_____
		Total assets					24,125	7,329	254,885
							______	______	_____
		Liabilities
		Bank loans	0.08		1.66		(14,603)	-	-
							______	______	_____
		Total liabilities					(14,603)	-	-
							______	______	_____
		The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on bank loans is based on the interest rate payable, weighted by the total value of the loans. The maturity date of the Company's loan is disclosed in note 12.
		The floating rate assets consist of cash deposits at prevailing market rates.
		The non-interest bearing assets represent the equity element of the portfolio.
		Short-term debtors and creditors have been excluded from the above tables.
		Interest rate sensitivity
		The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the Balance Sheet date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates.
		The rate of interest on the loan is the percentage rate per annum which is the aggregate of the applicable margin, adjusted LIBOR Offered Rate and mandatory cost if any.
		If interest rates had been 100 basis points higher or lower (based on current parameter used by Manager's Investment Risk Department on risk assessment) and all other variables were held constant, the Company's revenue return for the year ended 31 January 2015 would increase/decrease by £92,000 (2014 - increase/decrease by £73,000). This is mainly attributable to the Company's exposure to interest rates on its floating rate cash balances. These figures have been calculated based on cash positions at each year end.
		In the opinion of the Directors, the above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently as part of the interest rate risk management process used to meet the Company's objectives. The risk parameters used will also fluctuate depending on the current market perception.
		Foreign currency risk
		The Company's portfolio is invested mainly in US quoted securities and the Balance Sheet can be significantly affected by movements in foreign exchange rates.
		Management of the risk
		It is not the Company's policy to hedge this risk on a continuing basis but the Company may, from time to time, match specific overseas investment with foreign currency borrowings. A significant proportion of the Company's borrowings, as detailed in note 13, is in foreign currency as at 31 January 2015. Foreign currency risk exposure by currency of denomination is detailed under Interest Risk Profile.
		The revenue account is subject to currency fluctuation arising on overseas income. The Company does not hedge this currency risk.
		Foreign currency sensitivity
		There is no sensitivity analysis included as the Company's significant foreign currency financial instruments are in the form of equity investments, and they have been included within the other price risk sensitivity analysis so as to show the overall level of exposure.
		Price risk
		Price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.
		Management of the risk
		It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular country or sector. The allocation of assets to international markets and the stock selection process both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are listed on various stock exchanges.
		Price risk sensitivity
		If market prices at the Balance Sheet date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders for the year ended 31 January 2015 would have increased/decreased by £34,272,000 (2014 - increase/decrease of £27,901,000) and equity reserves would have increased/decreased by the same amount.
	(ii)	Liquidity risk
		This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
		Management of the risk
		Liquidity risk is not considered to be significant as the Company's assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of loan (note 12).
	(iii)	Credit risk
		This is failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss.
		Management of the risk
		·      where the Manager makes an investment in a bond, corporate or otherwise, the credit ratings of the issuer are taken into account so as to manage the risk to the Company of default;
		·      investments in quoted bonds are made across a variety of industry sectors so as to avoid concentrations of credit risk;
		·      transactions involving derivatives are entered into only with investment banks, the credit rating of which is taken into account so as to minimise the risk to the Company of default;
		·      investment transactions are carried out with a number of brokers, whose credit-standing is reviewed periodically by the Manager, and limits are set on the amount that may be due from any one broker;
		·      the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a daily basis. In addition, both stock and cash reconciliations to the custodian's records are performed on a daily basis to ensure discrepancies are investigated on a timely basis. The Manager's Compliance department carries out periodic reviews of the custodian's operations and reports its finding to the Manager's Risk Management Committee.
		·      cash is held only with reputable banks with acceptable credit quality. It is the Manager's policy to trade only with A- and above (Long Term rated) and A-1/P-1 (Short Term rated) counterparties.
		Credit risk exposure
		In summary, compared to the amounts in the Balance Sheet, the exposure to credit risk at 31 January 2015 was as follows:
				2015				2014
				Balance		Maximum		Balance	Maximum
				Sheet		exposure		Sheet	exposure
				£'000		£'000		£'000	£'000
		Debtors and prepayments		712		712		949	949
		Cash and short term deposits		9,231		9,231		7,329	7,329
				______		______		_____	______
				9,943		9,943		8,278	8,278
				______		______		_____	______

19.	Capital management policies and procedures
	The capital of the Company consists of equity, comprising issued capital, reserves and retained earnings. The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes the impact of share buybacks and the extent to which revenue should be retained. The Company is not subject to any externally imposed capital requirements.

20.	Fair value hierarchy
	FRS 29 'Financial Instruments: Disclosures' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
	Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
	Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (ie as prices) or indirectly (ie derived from prices); and
	Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
	The financial assets and liabilities measured at fair value in the Balance Sheet of financial position are grouped into the fair value hierarchy as follows:
	As at 31 January 2015
			Level 1	Level 2	Level 3	Total
		Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities	a)	324,238	-	-	324,238
	Quoted bonds	b)	18,484	-	-	18,484
			______	______	_____	______
	Net fair value		342,722	-	-	342,722
			______	______	_____	______
	Financial liabilities at fair value through profit or loss
	Derivatives	c)	(65)	-	-	(65)
			______	______	_____	______
	Net fair value		(65)	-	-	(65)
			______	______	_____	______
	As at 31 January 2014
			Level 1	Level 2	Level 3	Total
		Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities	a)	252,471	-	-	252,471
	Quoted bonds	b)	26,539	-	-	26,539
			______	______	_____	______
	Net fair value		279,010	-	-	279,010
			______	______	_____	______
	Financial liabilities at fair value through profit or loss
	Derivatives	c)	(14)	-	-	(14)
			______	______	_____	______
	Net fair value		(14)	-	-	(14)
			______	______	_____	______
	a) Quoted equities
	The fair value of the Company's investments in quoted equities has been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges.
	b) Quoted bonds
	The fair value of the Company's investments in quoted bonds has been determined by reference to their quoted bid prices at the reporting date. Bonds included in Fair Value Level 1 include Corporate Bonds.
	c) Derivatives
	The fair value of the Company's investments in exchange traded options has been determined using quoted prices on an exchange traded basis and therefore have been classed as Level 1.

21.	Related party transactions and transactions with the Manager
	Fees payable during the year to the Directors and their interests in shares of the Company are disclosed within the Directors' Remuneration Report of the published 2015 Annual Report.
	The Company has agreements with Aberdeen Fund Managers Limited for the provision of management, secretarial, accounting and administration services and an agreement with Aberdeen Asset Managers Limited for the provision of promotional activities. Details of transactions during the year and balances outstanding at the year end disclosed in notes 3 and 5.

ADDITIONAL NOTES TO THE ANNUAL FINANCIAL REPORT

This Annual Financial Report announcement is not the Company's statutory accounts for the year ended 31 January 2015. The statutory accounts for the year ended 31 January 2015 received an audit report which was unqualified.

The statutory accounts for the financial year ended 31 January 2015 were approved by the Directors on 24 March 2015 but will not be filed with the Registrar of Companies until after the Company's Annual General Meeting which is to be held at 2.00 pm on 28 May 2015 at 40 Princes Street, Edinburgh EH2 2BY.

The Annual Report will be posted to shareholders in April 2015 and additional copies will be available from the Manager (Investor Helpline - Tel. [phone]) or by download from the Company's webpage

(www.northamericanincome.co.uk)

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise. Investors may not get back the amount they originally invested.

For The North American Income Trust plc

Aberdeen Asset Management PLC, Secretaries

 

END

 

 

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