Half-year Report

RNS Number : 4973L

North American Income Trust (The)

03 October 2016

 

3 October 2016

THE NORTH AMERICAN INCOME TRUST PLC

HALF YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS TO 31 JULY 2016

The investment objective of The North American Income Trust plc is to provide investors with above average dividend income and long term capital growth through active management of a portfolio consisting predominantly of S&P 500 US equities.

For further information, please contact:-

Gary Jones

Aberdeen Asset Management PLC                                                           0207 463 6000

INTERIM BOARD REPORT

CHAIRMAN'S STATEMENT

Performance

Over the six month period to 31 July 2016 the Company's net asset value per share rose by 28.0% on a total return basis, in sterling terms, outperforming both its reference indices, the S&P 500 and the Russell 1000 Value, which provided total returns of 21.0% and 23.2% respectively in sterling terms.

The Company's performance over one year has been particularly strong, outperforming both the S&P 500 and Russell 1000 Value by 13.3% and 13.5% respectively, and it is the best performing investment trust in its sector. 

Dividend

The Directors have declared a second quarterly dividend of 7.0p per share, which will take the total dividends for the first half of the fiscal year to 14.0p (2015 - 13.0p), a 7.7% increase. The second quarterly dividend is payable on 31 October 2016 to shareholders on the register on 14 October 2016.

The Trust's dividend yield, using the share price of 1,070.0p at the end of the reporting period on 31 July 2016, was 3.2% compared to a 2.0% yield from the S&P 500 Index and a 2.6% yield from the Russell 1000 Value.

Portfolio

As of 31 July 2016, the Trust had 45 equity holdings and 11 other holdings, including corporate bonds - the latter represented approximately 4.1% of total assets and provided 6.1% of the portfolio's total income earned compared to 7.3% for the 2016 fiscal year.

Most of the Trust's equity holdings continued their established record of dividend growth with almost half of the holdings announcing dividend increases over the six month period.  Those who announced dividend increases grew their dividends at an average of 8%. However, Potash Corp of Saskatchewan and ConocoPhillips announced reductions to their dividends over the period, amid the prolonged slump in global oil and commodities prices.  The Manager believes that each of them has made the right decision in reducing their respective payouts to support their respective businesses and balance sheets. 

Total revenue from the equity holdings in the portfolio was £5.0 million over the six month period to 31 July 2016, representing a decrease of roughly £340,000 compared to the same period last year as we switched some overvalued stocks into better value companies that have scope for increasing dividends. 

During the six month period ended 31 July 2016, the Company received premiums totalling £1.3 million (full year 2016 - £2.8 million) in exchange for entering into listed stock option transactions. This option income, the generation of which remains consistent with the Manager's company-focused investment process, represents 18.8% of total income (full year 2016 - 18.8%). Bond coupons and option premiums will remain secondary sources of income for us in the belief that dividends must remain the overwhelming source of income available for distribution. Further details of the portfolio are shown below.

The Company's share price rose by 31.3% to 1,070.0p and ended the reporting period at a 9.0% discount to total net asset value, compared with a 12.9% discount at the financial year end. We continue to work with the Manager in both promoting the Company to a wider audience and providing liquidity to the market through the use of share buybacks. During the six-month review period, 1.2 million shares were repurchased at a cost of £10.7 million. Since the end of the interim report period, a further 81,380 shares have been repurchased at a cost of £876,000 and the discount stood at 7.6% at 29 September 2016. We seek to manage the level of discount at which the shares trade and will exercise discretion to repurchase shares.

Gearing

We continued to make use of our capacity to gear through the $71.0 million facility with State Street. £30.0 million of this was fixed in July 2014 (equivalent to $51.0 million at that time) for three years at an all-in rate of 2.18% and was fully drawn down. The remaining balance of the facility of $20.0 million is uncommitted, repayable with no penalty and provides finance at a margin of 0.9% over Libor.  Half of the uncommitted facility (approximately £7.5 million) remained drawn down at the period end.  With the strengthening of the US dollar against the sterling over the course of the review period, the Company's gearing increased to £46.0 million at 31 July 2016 (31 January 2016 - £43.0 million), with net gearing of 10.6%. 

Market & Economic Review

North American equity markets weathered several periods of volatility as investors waited for firmer guidance on monetary policy from the US Federal Reserve (Fed) and, later in the period, the UK's unexpected referendum result to leave the European Union ("Brexit"). 

After increasing the federal funds rate by 25 basis points to a range of 0.25% to 0.50% in mid-December 2015, the Fed left it unchanged following its first five monetary policy meetings of 2016. However, US payroll growth for June and July exceeded consensus expectations, and housing starts climbed 4.8% month-over-month in June, buoyed by historically low mortgage rates. Notwithstanding increased speculation that the Fed might see sufficient impetus for a rate increase following its September meeting, caution prevailed as inflation was below the Fed's 2% target.

The result of the Brexit vote had an impact on global stock markets in late June with investors turning to safe-haven assets such as US Treasuries and other global government securities. The downturn was fleeting, however, as equities rebounded sharply at the end of the month and into July. The turmoil in the financial markets had a negative impact on oil prices, which reversed the upward trend that had started in mid-February. Sterling fell to a 30-year low against the US dollar and declined nearly 7% over the six-month review period.

Outlook

We are pleased with the progress of both the capital and the revenue accounts, which year-to-date have achieved successful execution of the Trust's dual aim of income and capital preservation in real terms.  At this stage, 2016 has supported our Manager's judgement at the beginning of the year that the outsized dividend growth which we had expected to see coming out of the recession would in future moderate and follow earnings growth. This has been the case with US companies overall, and to a lesser degree, with our investments.  We remain optimistic that our holdings will continue to invest sensibly for the longer term without expanding their balance sheets unnecessarily by borrowing to pay dividends. We expect the best companies to continue to generate healthy levels of free cash flow, despite an environment where it is more difficult to achieve expansion of margins after many years of delivering consistent improvements to profitability.   Our Manager continues to focus on investing in those companies which have a disciplined and balanced capital allocation policy and good prospects for sustainable dividend growth.

James Ferguson

Chairman

30 September 2016

PRINCIPAL RISKS AND UNCERTAINTIES

There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. The Board has identified the principal risks and uncertainties facing the Company together with a description of the mitigating actions it has taken.  They can be summarised under the following headings:

-     Market Risk

-     Gearing Risk

-     Discount Volatility

-     Income and Dividend Risk

-     Regulatory Risk

-     Derivatives

Details of these risks are provided in detail on pages 7 to 8 of the 2016 Annual Report.   The principal risks have not changed nor are they expected to change in the second half of the financial year ended 31 January 2017.

There are a large number of international political and economic uncertainties which could impact the performance of US markets.

GOING CONCERN

In accordance with the Financial Reporting Council's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued in September 2014, the Directors have undertaken a rigorous review and consider both that there are no material uncertainties and that the adoption of the going concern basis of accounting is appropriate. The Company's assets consist entirely of equity shares in companies which are, in most circumstances, realisable within a short timescale.

The Company has a bank credit facility in place which is available until July 2017. The Directors have a reasonable expectation that the Company has adequate financial resources to continue in operational existence for the foreseeable future and at least 12 months from the date of approval of this Half-Yearly Report. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

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

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors are responsible for preparing the Half-Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

-      the condensed set of Financial Statements has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting);

-      the Half-Yearly Board Report includes a fair review of the information required by rule 4.2.7R of the Disclosure and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the financial year); and

-      the Half-Yearly Board Report includes a fair review of the information required by 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so).

The Half-Yearly Financial Report for the six months ended 31 July 2016 comprises the Interim Board Report, the Directors' Responsibility Statement and the condensed set of Financial Statements.

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

James Ferguson

Chairman

30 September 2016

FINANCIAL HIGHLIGHTS

	31 July 2016	31 January 2016	% change
Net asset value per Ordinary share	1175.3p	935.6p	+25.6
Share price per Ordinary share (mid)	1070.0p	815.0p	+31.3
Discount to net asset value	9.0%	12.9%
Revenue return per Ordinary share{A}	18.0p	17.3p	+4.0
Interim dividends	14.0p{B}	13.0p{C}	+7.7
{A}      Comparison uses the six months ended 31 July 2015.
{B}       Includes a first interim dividend of 7.0p paid on 5 August 2016 and a second interim dividend of 7.0p payable on 31 October 2016.
{C}      Interim dividend for the six months ended 31 July 2015.

PERFORMANCE - TOTAL RETURN

	6 months ended	Year ended	3 Years ended	31 May 2012{A}
	31 July 2016	31 July 2016	31 July 2016	to 31 July 2016
Total return*	(%)	(%)	(% pa)	(% pa)
Net asset value per Ordinary share	28.0	37.4	13.8	16.2
Share price per Ordinary share	34.1	38.4	10.6	16.1
S&P 500 Index (in sterling terms)	21.0	24.1	16.2	19.5
Russell 1000 Value Index	23.2	23.9	13.9	19.2
*Capital return plus dividends reinvested
{A}Date of investment mandate change.

INVESTMENT PORTFOLIO - EQUITIES

As at 31 July 2016

			Total
		Valuation	portfolio
Company	Industry classification	£'000	%
Wells Fargo	Banks	14,452	3.9
Pfizer	Pharmaceuticals	13,893	3.8
Dow Chemical	Chemicals	13,744	3.8
CME Group	Diversified Financial Services	13,091	3.6
Microsoft	Software	12,807	3.5
Molson Coors Brewing	Beverages	11,926	3.2
Chevron	Oil, Gas & Consumable Fuels	11,578	3.2
Rockwell Automation	Electrical Equipment	10,771	2.9
Verizon Communications	Diversified Telecommunication Services	10,433	2.8
Johnson & Johnson	Pharmaceuticals	10,375	2.8
Ten largest equity investments		123,070	33.5
Intel	Semiconductors & Semiconductor Equipment	9,190	2.5
Pepsico	Beverages	9,024	2.4
TransCanada	Oil, Gas & Consumable Fuels	8,742	2.4
Philip Morris	Tobacco	8,684	2.4
Ventas	Real Estate Investment Trusts (REITs)	8,031	2.2
Sonoco Products	Containers & Packaging	7,672	2.1
BB&T	Banks	7,637	2.1
Telus	Diversified Telecommunication Services	7,570	2.0
Cisco Systems	Communications Equipment	7,473	2.0
Texas Instruments	Semiconductors & Semiconductor Equipment	7,355	2.0
Twenty largest equity investments		204,448	55.6
WEC Energy	Multi-Utilities	7,333	2.0
Target	Multiline Retail	7,092	1.9
Potash Corporation Of Saskatchewan	Chemicals	7,050	1.9
Union Pacific	Road & Rail	7,008	1.9
Regions Financial	Banks	6,907	1.9
Blackrock	Capital Markets	6,896	1.9
CMS Energy	Multi-Utilities	6,806	1.9
Paychex	IT Services	6,697	1.8
Abbott Laboratories	Pharmaceuticals	6,067	1.6
Nucor	Metals & Mining	6,060	1.6
Thirty largest equity investments		272,364	74.0
Sysco	Food & Staples Retailing	5,851	1.6
Republic Services	Commercial Services & Supplies	5,791	1.6
Schlumberger	Oil Equipment, Services & Distribution	5,761	1.6
Royal Bank Of Canada	Banks	5,746	1.6
Meredith	Media	5,745	1.6
Lockheed Martin	Aerospace & Defence	5,711	1.5
Coach	Personal Goods	5,682	1.5
ConocoPhillips	Oil, Gas & Consumable Fuels	5,534	1.5
Digital Realty Trust	Real Estate Investment Trusts (REITs)	5,507	1.5
Procter & Gamble	Household Products	5,480	1.5
Forty largest equity investments		329,172	89.5
Canadian Western Bank	Banks	5,387	1.5
Glacier Bancorp	Banks	5,193	1.4
Tiffany	Specialty Retail	4,860	1.3
Staples	Specialty Retail	4,548	1.2
Genuine Parts	Distributors	3,850	1.1
Total equity investments		353,010	96.0

INVESTMENT PORTFOLIO - FIXED INTEREST

As at 31 July 2016

			Total
		Valuation	portfolio
Company	Industry classification	£'000	%
Qwest 7.25% 15/10/35	Telecommunications	2,837	0.8
HSBC Finance  6.676% 15/01/21	Diversified Financial Services	2,311	0.6
International Lease Finance Corp 6.25% 15/05/19	Diversified Financial Services	1,986	0.5
Western Digital Corp 7.375% 01/04/23	Technology	1,644	0.4
HCA 5.875% 15/02/26	Healthcare Services	1,212	0.3
First Data 6.75% 01/11/20	Software	1,179	0.3
Cincinnati Bell 8.375% 15/10/20	Telecommunications	982	0.3
Post Holdings 7.375% 15/02/22	Food	928	0.3
Corrections Corp of America 4.625% 01/05/23	Real Estate Investment Trusts (REITs)	768	0.2
Nationstar 6.5% 01/06/22	Diversified Financial Services	636	0.2
Transdigm 6.5% 15/07/24	Industrials	334	0.1
		________	________
Total fixed interest investments		14,817	4.0
		________	________
Total investments		367,827	100.0
		________	________

GEOGRAPHICAL ANALYSIS

As at 31 July 2016

	Equities	Bonds	Total
Country	%	%	%
Canada	9.4	-	9.4
USA	86.6	4.0	90.6
	________	________	________
	96.0	4.0	100.0
	________	________	________

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

	Six months ended 31 July 2016
	Revenue	Capital	Total
	£'000	£'000	£'000
Gains /(losses) on investments	-	72,343	72,343
Exchange (losses)/gains	-	(2,297)	(2,297)
Income (note 2)	7,076	-	7,076
Investment management fee	(377)	(880)	(1,257)
Administrative expenses (note 3)	(376)	-	(376)
	________	________	________
Net return before finance costs and taxation	6,323	69,166	75,489
Finance costs	(141)	(330)	(471)
	________	________	________
Return on ordinary activities before taxation	6,182	68,836	75,018
Taxation (note 4)	(936)	190	(746)
	________	________	________
Return on ordinary activities after taxation	5,246	69,026	74,272
	________	________	________
Return per share (pence) (note 6)	17.97	236.49	254.46
	________	________	________
The total column of the Condensed Statement of Comprehensive Income is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.

	Six months ended 31 July 2015
	Revenue	Capital	Total
	£'000	£'000	£'000
Gains /(losses) on investments	-	(15,993)	(15,993)
Exchange (losses)/gains	-	1,121	1,121
Income (note 2)	7,416	-	7,416
Investment management fee	(348)	(813)	(1,161)
Administrative expenses (note 3)	(358)	-	(358)
	________	________	________
Net return before finance costs and taxation	6,710	(15,685)	(8,975)
Finance costs	(125)	(292)	(417)
	________	________	________
Return on ordinary activities before taxation	6,585	(15,977)	(9,392)
Taxation (note 4)	(1,023)	223	(800)
	________	________	________
Return on ordinary activities after taxation	5,562	(15,754)	(10,192)
	________	________	________
Return per share (pence) (note 6)	17.33	(49.09)	(31.76)
	________	________	________

CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

		As at	As at
		31 July 2016	31 January 2016
	Notes	£'000	£'000
Non-current assets
Investments at fair value through profit or loss		367,827	312,983
		________	________
Current assets
Debtors and prepayments		10,255	743
Cash and short-term deposits		11,795	11,685
		________	________
		22,050	12,428
		________	________
Creditors: amounts falling due within one year
Bank loans		(45,978)	(7,050)
Traded options		(73)	(66)
Other creditors		(5,476)	(1,666)
		________	________
		(51,454)	(8,782)
		________	________
Net current (liabilities)/assets		(29,477)	3,646
		________	________
Total assets less current liabilities		338,350	316,629
		________	________
Creditors: amounts falling due after more than one year
Bank loan		-	(35,985)
		________	________
Net assets		338,350	280,644
		________	________
Capital and reserves
Called-up share capital		7,197	7,499
Share premium account		48,467	48,467
Capital redemption reserve		15,363	15,061
Capital reserve	8	257,226	198,866
Revenue reserve		10,097	10,751
		________	________
Equity shareholders' funds		338,350	280,644
		________	________
Net asset value per share (pence)	9	1,175.27	935.55
		________	________

CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

Six months ended 31 July 2016
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2016	7,499	48,467	15,061	198,866	10,751	280,644
Buyback of Ordinary shares	(302)	-	302	(10,666)	-	(10,666)
Return on ordinary activities after taxation	-	-	-	69,026	5,246	74,272
Dividends paid (note 5)	-	-	-	-	(5,900)	(5,900)
	_____	_______	________	______	______	______
Balance at 31 July 2016	7,197	48,467	15,363	257,226	10,097	338,350
	_____	_______	________	______	______	______
Six months ended 31 July 2015
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2015	8,235	48,467	14,325	228,822	9,424	309,273
Buyback of Ordinary shares	(373)	-	373	(12,763)	-	(12,763)
Return on ordinary activities after taxation	-	-	-	(15,754)	5,562	(10,192)
Dividends paid (note 5)	-	-	-	-	(7,878)	(7,878)
	_____	_______	________	______	______	______
Balance at 31 July 2015	7,862	48,467	14,698	200,305	7,108	278,440
	_____	_______	________	______	______	______

CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)

	Six months ended	Six months ended
	31 July 2016	31 July 2015
	£'000	£'000
Operating activities
Net return on ordinary activities before finance costs and taxation	75,489	(8,975)
Adjustments for:
Net (gains)/losses on investments	(72,343)	15,993
Realised (gains)/losses on foreign exchange transactions	(645)	406
Decrease/(increase) in dividend income	9	(43)
(Increase)/decrease in fixed interest income	(52)	10
Increase in other debtors	(5)	(23)
Increase in other creditors	38	887
Tax on overseas income	(746)	(938)
Amortisation of fixed income book cost	26	11
	________	________
Net cash flow from operating activities	1,771	7,328
Investing activities
Purchases of investments	(59,656)	(48,379)
Sales of investments	71,441	74,933
	________	________
Net cash flow from investing activities	11,785	26,554
Financing activities
Interest paid	(468)	(605)
Equity dividends paid	(5,900)	(7,878)
Buyback of Ordinary shares	(10,666)	(12,763)
	________	________
Net cash used in financing activities	(17,034)	(21,246)
	________	________
(Decrease)/increase in cash and cash equivalents	(3,478)	12,636
	________	________
Analysis of changes in cash and cash equivalents during the period
Opening balance	11,685	9,231
Effect of exchange rate fluctuations on cash held	3,588	(1,932)
(Decrease)/increase in cash as above	(3,478)	12,636
	________	________
Closing balance	11,795	19,935
	________	________

NOTES:

1.	Accounting policies
	(a)	Basis of accounting
		The condensed financial statements have been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting) and with the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted.
		The half-yearly financial statements have been prepared using the same accounting policies applied as the preceding annual accounts. The Company has early adopted Amendments to FRS 102 - Fair Value Hierarchy Disclosures, issued by the Financial Reporting Council in March 2016.

		Six months ended	Six months ended
		31 July 2016	31 July 2015
2.	Income	£'000	£'000
	Income from overseas listed investments
	Dividend income	5,014	5,359
	REIT income	297	287
	Interest income from investments	428	485
		________	________
		5,739	6,131
		________	________
	Other income from investment activity
	Traded option premiums	1,329	1,285
	Deposit interest	8	-
		1,337	1,285
		________	________
	Total income	7,076	7,416
		________	________

		Six months ended	Six months ended
		31 July 2016	31 July 2015
3.	Administration expenses	£'000	£'000
	Directors' fees	40	38
	Secretarial and administration fees	53	52
	Promotional activities	106	106
	Auditor's remuneration:
	Fees payable to the Company's auditor for the audit of the annual accounts	9	8
	Custodian charges	11	13
	Registrar's fees	31	28
	Professional fees	37	36
	Depositary charges	20	19
	Other	69	58
		________	________
		376	358
		________	________

4.	Taxation
	The taxation expense reflected in the Condensed Statement of Comprehensive Income is based on the estimated annual tax rate expected for the full financial year. The annual corporation tax rate used for the year to 31 January 2017 is a rate of 20%.
	Detailed below is an analysis of the tax charge for each period.
		Six months ended 31 July 2016			Six months ended 31 July 2015
		Revenue	Capital	Total	Revenue	Capital	Total
	Taxation	£'000	£'000	£'000	£'000	£'000	£'000
	UK corporation tax	190	(190)	-	223	(223)	-
	Overseas tax suffered	746	-	746	800	-	800
		________	_______	_______	________	_______	_______
	Total tax charge for the period	936	(190)	746	1,023	(223)	800
		________	_______	_______	________	_______	_______

		Six months ended	Six months ended
		31 July 2016	31 July 2015
5.	Dividends	£'000	£'000
	3rd interim dividend for 2016 - 7.0p (2015 - 6.5p)	2,111	2,141
	Final dividend for 2016 - 13.0p (2015 - 11.5p)	3,789	3,679
	1st interim dividend for 2016 - 6.5p	-	2,058
		________	________
		5,900	7,878
		________	________
	The Company pays four dividends per year. The first interim dividend of 7.0p (2016 - 6.5p) for the year ending 31 January 2017 was paid on 5 August 2016 to shareholders on the register at 15 July 2016, with an ex-dividend date of 14 July 2016. A second interim dividend of 7.0p (2016 - 6.5p) for the year ending 31 January 2017, will be paid on 31 October 2016 to shareholders on the register at 14 October 2016. The ex-dividend date is 13 October 2016.

		Six months ended	Six months ended
		31 July 2016	31 July 2015
6.	Return per Ordinary share	£'000	£'000
	Based on the following figures:
	Revenue return	5,246	5,562
	Capital return	69,026	(15,754)
		________	________
	Total return	74,272	(10,192)
		________	________
	Weighted average number of shares in issue	29,187,655	32,095,089
		________	________
		p	p
	Revenue return per Ordinary share	17.97	17.33
	Capital return per Ordinary share	236.49	(49.09)
		________	________
	Total return per Ordinary share	254.46	(31.76)
		________	________

7.	Transaction costs
	During the six months ended 31 July 2016 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/(losses) on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows:
		Six months ended	Six months ended
		31 July 2016	31 July 2015
		£'000	£'000
	Purchases	76	63
	Sales	86	116
		________	________
		162	179
		________	________

8.	Capital reserve
	The capital reserve reflected in the Condensed Statement of Financial Position at 31 July 2016 includes gains of £111,078,000 (31 January 2016 - £50,718,000) which relate to the revaluation of investments held at the reporting date.

		As at	As at
9.	Net asset value per Ordinary share	31 July 2016	31 January 2016
	Net assets attributable (£'000)	338,350	280,644
	Number of Ordinary shares in issue	28,789,134	29,997,734
	Net asset value per Ordinary share (p)	1,175.27	935.55

10.	Fair value hierarchy
	FRS 102 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 Company has early adopted Amendments to FRS102 - Fair value hierarchy disclosures issued by the Financial Reporting Council in March 2016. This has not resulted in any reclassifications in levelling and the prior year comparative has been disclosed under the new hierarchy. The fair value hierarchy shall have the following classifications:
	Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date.
	Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.
	Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability.
	The financial assets and liabilities measured at fair value in the Condensed Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:
				Level 1	Level 2
	As at 31 July 2016		Note	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities		a)	353,010	-
	Quoted bonds		b)	-	14,817
				________	________
	Total			353,010	14,817
				________	________
	Financial liabilities at fair value through profit or loss
	Derivatives		c)	-	(73)
				________	________
	Net fair value			353,010	14,744
				________	________
				Level 1	Level 2
	As at 31 January 2016		Note	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities		a)	298,353	-
	Quoted bonds		b)	-	14,630
				________	________
	Total			298,353	14,630
				________	________
	Financial liabilities at fair value through profit or loss
	Derivatives		c)	-	(66)
				________	________
	Net fair value			298,353	14,564
				________	________
	a)	Quoted equities
		The fair value of the Company's investments in quoted equities and preference shares has been determined by reference to their quoted bid prices at the reporting date. Quoted equities and preference shares 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. Quoted bonds included in Fair Value Level 2 are not actively traded on recognised stock exchanges.
	c)	Derivatives
		The fair value of the Company's investments in Exchange Traded Options has been determined using observable market inputs on an exchange traded basis and has been included in Fair Value Level 2.

11.	Transactions with the Manager
	The Company has agreements with Aberdeen Fund Managers Limited ("AFML" or the "Manager") for the provision of investment management, secretarial, accounting and administration and promotional activity services.
	The management fee is payable quarterly in arrears based on an annual amount of 0.8% of the value of net assets. The investment management fee is chargeable 30% to revenue and 70% to capital. During the period £1,257,000 (31 July 2015 - £1,161,000) of investment management fees were payable to the Manager, with a balance of £680,000 (31 July 2015 - £561,000) being due to AFML at the period end.
	The secretarial fee of £105,000 per annum is chargeable 100% to revenue and is payable monthly in arrears. During the period £53,000 (31 July 2015 - £52,000) of secretarial fees were payable to the Manager, with a balance of £9,000 (31 July 2015 - £17,000) being due to AFML at the period end.
	The promotional activities fee is based on a current annual amount of £213,000, payable quarterly in arrears. During the period £106,000 (31 July 2015 - £106,000) of fees were payable, with a balance of £18,000 (31 July 2015 - £71,000) being due to AFML at the period end.

12.	Segmental information
	The Company is engaged in a single segment of business, which is to invest in equity securities and debt instruments. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based on the Company as one segment.

13.	Subsequent events
	A further 81,380 Ordinary shares have been bought back and cancelled by the Company subsequent to the reporting period end for a total consideration of £879,000. Following the buyback of shares there were 28,707,754 Ordinary shares in issue.

14.	Half-Yearly Financial Report
	The financial information contained in this Half-Yearly Financial Report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 31 July 2016 and 31 July 2015 has not been audited.
	The information for the year ended 31 January 2016 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditor on those accounts contained no qualification or statement under Section 498 of the Companies Act 2006.

15.	This Half-Yearly Financial Report was approved by the Board on 30 September 2016.

16.     The Half-Yearly Financial Report has not been reviewed by the Company's auditors.

17.     The Half-Yearly Financial Report is available on the Company's website, www.northamericanincome.co.uk.  The Half-Yearly Report will be posted to shareholders in September 2016 and copies will be available from the Company Secretary.

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 and may be affected by exchange rate movements.  Investors may not get back the amount they originally invested.

For The North American Income Trust plc

Aberdeen Asset Management PLC, Secretary

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