Half-year Report

RNS Number : 8813R

North American Income Trust (The)

27 September 2017

 

Legal Entity Identifier (LEI): 5493007GCUW7G2BKY360

27 September 2017

THE NORTH AMERICAN INCOME TRUST PLC

HALF YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS TO 31 JULY 2017

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 months to 31 July 2017, the Company's net asset value per share was up by 0.6% on a total return basis in sterling terms. This was slightly ahead of the Russell 1000 Value index return of 0.5% but behind the S&P 500 index return of 4.5%.

Dividend

The revenue return per Ordinary share increased by 15% to 20.7p for the six month period. The Board has declared a second quarterly dividend of 7.5p per share, which will mean total dividends for the first half of the fiscal year will be 15.0p (2016 - 14.0p), a 7.1% increase  following last year's increase of 9.1%. The second quarterly dividend is payable on 31 October 2017 to shareholders on the register on 13 October 2017.

The Company's dividend yield, using the share price of 1,180.0p at the end of the reporting period on 31 July 2017, was 3.1% compared to yields from the Russell 1000 Value and S&P 500 Indices of 2.4% and 2.0% respectively.

Portfolio

As of 31 July 2017, the portfolio had holdings in 45 equities and 8 corporate bonds; the latter representing approximately 2.9% of total assets and providing 4.7% of the portfolio's total income compared to 5.8% for the 2017 fiscal year. During the half year, the Company received premiums totalling £1.1 million (2016 - £1.3 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 14.3% of total income for the half year (full year 2017 - 19.2%).

Total revenue from equity holdings in the portfolio over the six month period was £6.1 million (2016 - £5.0 million).  The Trust's equity holdings continued their established record of dividend growth and approximately half of the holdings raised their dividends over the past six months, with an average increase of around 8%. Bond coupons and option premiums will remain secondary sources of income in the belief that dividends must remain the overwhelming source of income that is available for distribution. Further details of the portfolio are shown below.

The Company's share price fell by 4.2% from 1,232.0p at 31 January 2017 to 1,180.0p at 31 July 2017 and ended the half year at a 9.8% discount to total net asset value. The Board continues to work with the Manager in both promoting the Company's benefits to a wider audience and providing liquidity to the market through the use of share buybacks. During the six-month period, 152,500 shares were repurchased at a cost of £1.8 million. Since the end of the period, a further 33,000 shares have been repurchased at a cost of £390,000. The Board aims to try to manage the level of discount at which the shares trade and exercises its discretion to repurchase shares. As at 26 September 2017 the discount stood at 8.6%.

Gearing

The Company continues to make use of an investment trust company's ability to gear. On 17 July 2017 the Company converted its fully drawn $51.045m fixed term loan with State Street to a revolving loan facility. This remains with State Street and will expire on 31 December 2017. The facility is repayable with no penalty and provides finance at a margin of 0.9% over Libor. The remaining $20m revolving loan facility was allowed to expire in July. Net gearing at 31 July 2017 stood at 7.8%, which includes the offset of cash held used as collateral against open option positions. 

Market & Economic Review

Major North American equity market indices recorded positive returns over the six-month period ended 31 July 2017.  Nine of the eleven sectors within the S&P 500 Index posted gains over the period. The strongest performers included the information technology, healthcare and utilities sectors. Conversely, the energy and telecommunication services sectors recorded negative returns and significantly underperformed the overall market for the period.

The US Federal Reserve (Fed) raised its benchmark interest rate with two increases of 0.25% in March and June 2017. Following its meeting in late July, the Fed commented that it plans to begin implementing its balance sheet normalisation programme "relatively soon, provided that the economy evolves broadly as anticipated…" US economic data reports released over the six month period were generally positive..

Board Composition

In the 2017 Annual Report, we reported that the Board was in the process of establishing a succession plan.  I am pleased to report the appointment of Charles Park as an independent non-executive Director with effect from 13 June 2017.   Charles has over 25 years' investment management experience, with particular expertise on US markets.  

Investment Manager

The recent merger between the Company's Manager, Aberdeen Asset Management PLC, and Standard Life plc has produced the new investment arm which is Aberdeen Standard Investments. The new Group's investment approach will remain team-based with a strong emphasis on the fundamentals of individual companies. Co-managers Ralph Bassett and Fran Radano will maintain this investment process. The Board will continue to monitor closely any impact of this merger on the Company to ensure that satisfactory arrangements are in place for its effective management and successful performance.

Outlook

GDP growth of 2.6% was recorded for the second quarter of 2017, which was much improved relative to the revised 1.4% growth in the first quarter and was consistent with our Manager's outlook for improvement throughout this year. Growth was supported by an increase in consumer spending, whilst business investment also had a positive impact. Achievement of the 4% growth target of the Trump administration seems unlikely in the medium-term, particularly given the continued political stalemate, which reduces the likelihood of policy initiatives being implemented.

Our Manager however, at present believes that corporate fundamentals continue to improve steadily. Valuations remain above long-term averages; this is supported by the continued environment of low interest rates. Companies will need to show an acceleration in earnings and cash flow growth for share prices to appreciate further. Earnings growth is also now increasingly reliant on economic growth,  given that it has  become more difficult to expand profit margins as  wage and input inflation both increase.

There has been a wide divergence in returns between various investment styles and sectors, with high growth companies in technology and healthcare having outperformed materially over the past year. Many cash generative companies which pay dividends have been out of favour but this sector of the market is becoming more attractive because the risk of higher interest rates has been discounted.  We therefore believe that this sector is attracting more interest and our Manager feels we are well positioned for the future. The longer term prospects for underlying dividend growth in our companies provides strong support for future growth in the Company's dividends.

James Ferguson

Chairman

26 September 2017

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 2017 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 2018.

There are a large number of international political and economic uncertainties which could have an impact on 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 December 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 2017 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

26 September 2017

FINANCIAL HIGHLIGHTS

	31 July 2017	31 January 2017	% change
Net asset value per Ordinary share	1308.3p	1323.5p	-1.1
Share price per Ordinary share (mid)	1180.0p	1232.0p	-4.2
Discount to net asset value	9.8%	6.9%
Revenue return per Ordinary share{A}	20.7p	18.0p	+15.0
Interim dividends	15.0p{B}	14.0p{C}	+7.1
{A}       Comparison uses the six months ended 31 July 2016.
{B}       Includes a first interim dividend of 7.5p paid on 4 August 2017 and a second interim dividend of 7.5p payable on 31 October 2017.
{C}       Interim dividend for the six months ended 31 July 2016.

PERFORMANCE - TOTAL RETURN

	6 months ended	Year ended	3 Years ended	31 May 2012{B} to
	31 July 2017	31 July 2017	31 July 2017	31 July 2017
Total return{A}	%	%	% pa	% pa
Net asset value per Ordinary share	0.6	14.5	18.8	15.9
Share price per Ordinary share	-2.4	13.8	17.5	15.6
S&P 500 Index (in sterling terms)	4.5	16.9	20.4	19.0
Russell 1000 Value Index	0.5	14.6	17.8	18.3
{A} Capital return plus dividends reinvested
{B} Date of investment mandate change.

INVESTMENT PORTFOLIO - EQUITIES

As at 31 July 2017

			Total
		Valuation	portfolio
Company	Industry classification	£'000	%
Dow Chemical	Chemicals	16,567	4.2
BB&T	Banks	16,511	4.1
Pfizer	Pharmaceuticals	16,349	4.1
Chevron	Oil, Gas & Consumable Fuels	14,908	3.7
CME Group	Capital Markets	13,951	3.5
Molson Coors Brewing	Beverages	12,824	3.2
Regions Financial	Banks	12,736	3.2
Procter & Gamble	Household Products	12,056	3.0
Telus	Diversified Telecommunication Services	10,925	2.7
TransCanada	Oil, Gas & Consumable Fuels	10,625	2.7
Ten largest equity investments		137,452	34.4
Cisco Systems	Communications Equipment	10,139	2.5
Glacier Bancorp	Banks	9,933	2.5
Microsoft	Software	9,926	2.5
Coach	Textiles, Apparel & Luxury Goods	9,475	2.4
Intel	Semiconductors & Semiconductor Equipment	9,417	2.4
Philip Morris	Tobacco	9,295	2.3
ConocoPhillips	Oil, Gas & Consumable Fuels	8,948	2.2
Pepsico	Beverages	8,845	2.2
Abbott Laboratories	Health Care Equipment & Supplies	8,580	2.2
Canadian Western Bank	Banks	8,492	2.1
Twenty largest equity investments		230,502	57.7
Royal Bank Of Canada	Banks	8,462	2.1
Potash Corporation Of Saskatchewan	Chemicals	8,147	2.0
Meredith	Media	8,117	2.0
Gilead Sciences	Biotechnology	8,080	2.0
Texas Instruments	Semiconductors & Semiconductor Equipment	8,025	2.0
Ventas	Equity Real Estate Investment	7,663	1.9
Johnson & Johnson	Pharmaceuticals	7,550	1.9
American International	Insurance	7,447	1.9
Genuine Parts	Distributors	7,086	1.8
Union Pacific	Road & Rail	7,029	1.8
Thirty largest equity investments		308,108	77.1
Sonoco Products	Containers & Packaging	6,435	1.6
Verizon Communications	Diversified Telecommunication Services	6,241	1.6
WEC Energy	Multi-Utilities	5,732	1.4
Paychex	IT Services	5,705	1.4
CMS Energy	Multi-Utilities	5,612	1.4
Lockheed Martin	Aerospace & Defence	5,540	1.4
Nucor	Metals & Mining	5,468	1.4
Praxair	Chemicals	5,430	1.4
Digital Realty Trust	Equity Real Estate Investment	5,249	1.3
Schlumberger	Energy Equipment & Services	5,203	1.3
Forty largest equity investments		364,723	91.3
Staples	Specialty Retail	5,004	1.2
Target	Multiline Retail	4,943	1.2
Helmerich & Payne	Energy Equipment & Services	4,800	1.2
Provident Financial Services	Thrifts & Mortgage Finance	4,226	1.1
Blackrock	Capital Markets	4,044	1.0
Total equity investments		387,740	97.0

INVESTMENT PORTFOLIO - FIXED INTEREST

As at 31 July 2017

			Total
		Valuation	portfolio
Company	Industry classification	£'000	%
Qwest 7.25% 15/10/35	Diversified Telecommunications	2,801	0.7
HSBC Finance  6.676% 15/01/21	Banks	2,325	0.6
International Lease Finance Corp 6.25% 15/05/19	Trading Companies & Distributors	1,953	0.5
Western Digital Corp 7.375% 01/04/23	Technology Hardware, Storage & Peripherals	1,669	0.4
HCA 5.875% 15/02/26	Health Care Providers & Services	1,243	0.3
First Data 6.75% 01/11/20	IT Services	902	0.2
Nationstar 6.5% 01/06/22	Thrifts & Mortgage Finance	779	0.2
Prestige Brands 6.375% 01/02/24	Pharmaceuticals	172	0.1
Total fixed interest investments		11,844	3.0
Total investments		399,584	100.0

GEOGRAPHICAL ANALYSIS

As at 31 July 2017

Country	%	%	%
Canada	11.7	-	11.7
USA	85.3	3.0	88.3
	________	________	________
	97.0	3.0	100.0
	________	________	________

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

		Six months ended 31 July 2017
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
(Losses)/gains on investments		-	(4,034)	(4,034)
Exchange gains/(losses)		-	1,109	1,109
Income	2	7,941	-	7,941
Investment management fee		(442)	(1,030)	(1,472)
Administrative expenses	3	(377)	-	(377)
		________	________	________
Net return before finance costs and taxation		7,122	(3,955)	3,167
Finance costs		(144)	(334)	(478)
		________	________	________
Return on ordinary activities before taxation		6,978	(4,289)	2,689
Taxation	4	(1,072)	168	(904)
		________	________	________
Return on ordinary activities after taxation		5,906	(4,121)	1,785
		________	________	________
Return per share (pence)	6	20.67	(14.42)	6.25
		________	________	________
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 2016
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
(Losses)/gains on investments		-	72,343	72,343
Exchange gains/(losses)		-	(2,297)	(2,297)
Income	2	7,076	-	7,076
Investment management fee		(377)	(880)	(1,257)
Administrative expenses	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	4	(936)	190	(746)
		________	________	________
Return on ordinary activities after taxation		5,246	69,026	74,272
		________	________	________
Return per share (pence)	6	17.97	236.49	254.46
		________	________	________

CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

		As at	As at
		31 July 2017	31 January 2017
	Notes	£'000	£'000
Non-current assets
Investments at fair value through profit or loss		399,584	410,344
		________	________
Current assets
Debtors and prepayments		782	3,940
Cash and short-term deposits		12,156	12,609
		________	________
		12,938	16,549
		________	________
Creditors: amounts falling due within one year
Bank loans		(38,719)	(40,573)
Traded options		(105)	(30)
Other creditors		(943)	(7,189)
		________	________
		(39,767)	(47,792)
		________	________
Net current liabilities		(26,829)	(31,243)
		________	________
Net assets		372,755	379,101
		________	________
Capital and reserves
Called-up share capital		7,123	7,161
Share premium account		48,467	48,467
Capital redemption reserve		15,437	15,399
Capital reserve	8	289,752	295,709
Revenue reserve		11,976	12,365
		________	________
Equity shareholders' funds		372,755	379,101
		________	________
Net asset value per share (pence)	9	1,308.26	1,323.45
		________	________

CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

Six months ended 31 July 2017
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2017	7,161	48,467	15,399	295,709	12,365	379,101
Buyback of Ordinary shares	(38)	-	38	(1,836)	-	(1,836)
Return on ordinary activities after taxation	-	-	-	(4,121)	5,906	1,785
Dividends paid (note 5)	-	-	-	-	(6,295)	(6,295)
	_____	_______	________	______	______	______
Balance at 31 July 2017	7,123	48,467	15,437	289,752	11,976	372,755
	_____	_______	________	______	______	______
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
	_____	_______	________	______	______	______

CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)

	Six months ended	Six months ended
	31 July 2017	31 July 2016
	£'000	£'000
Operating activities
Net return on ordinary activities before finance costs and taxation	3,167	75,489
Adjustments for:
Net losses/(gains) on investments	4,034	(72,343)
Realised losses/(gains) on foreign exchange transactions	744	(645)
(Increase)/decrease in dividend income receivable	(133)	9
Decrease/(increase) in fixed interest income receivable	32	(52)
Increase in other debtors	(131)	(5)
Increase in other creditors	216	38
Tax on overseas income	(902)	(746)
Amortisation of fixed income book cost	15	26
	________	________
Net cash flow from operating activities	7,042	1,771
Investing activities
Purchases of investments	(60,016)	(59,656)
Sales of investments	63,724	71,441
	________	________
Net cash flow from investing activities	3,708	11,785
Financing activities
Interest paid	(473)	(468)
Equity dividends paid	(6,295)	(5,900)
Buyback of Ordinary shares	(1,836)	(10,666)
	________	________
Net cash used in financing activities	(8,604)	(17,034)
	________	________
Increase/(decrease) in cash	2,146	(3,478)
	________	________
Analysis of changes in cash and cash equivalents during the period
Opening balance	12,609	11,685
Effect of exchange rate fluctuations on cash held	(2,599)	3,588
Increase/(decrease) in cash as above	2,146	(3,478)
	________	________
Closing balance	12,156	11,795
	________	________

NOTES:

1.	Accounting policies
	(a)	Basis of preparation
		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 financial statements.

		Six months ended	Six months ended
		31 July 2017	31 July 2016
2.	Income	£'000	£'000
	Income from overseas listed investments
	Dividend income	6,100	5,014
	REIT income	302	297
	Interest income from investments	372	428
		________	________
		6,774	5,739
		________	________
	Other income from investment activity
	Traded option premiums	1,138	1,329
	Deposit interest	29	8
		________	________
		1,167	1,337
		________	________
	Total income	7,941	7,076
		________	________

		Six months ended	Six months ended
		31 July 2017	31 July 2016
3.	Administration expenses	£'000	£'000
	Directors' fees	47	40
	Secretarial and administration fees	54	53
	Promotional activities	106	106
	Auditor's remuneration:
	Fees payable to the Company's auditor for the audit of the annual accounts	9	9
	Custodian charges	14	11
	Registrar's fees	33	31
	Professional fees	31	37
	Depositary charges	24	20
	Other	59	69
		________	________
		377	376
		________	________

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 estimated annual corporation tax rate used for the year to 31 January 2018 is a rate of 19.17%.  This is above the current tax rate of 19% because prior to 1 April 2017 the prevailing corporation tax rate was 20%.
	Detailed below is an analysis of the tax charge for each period.
		Six months ended 31 July 2017			Six months ended 31 July 2016
		Revenue	Capital	Total	Revenue	Capital	Total
	Taxation	£'000	£'000	£'000	£'000	£'000	£'000
	UK corporation tax	168	(168)	-	190	(190)	-
	Overseas tax suffered	904	-	904	746	-	746
		______	______	______	______	______	______
	Total tax charge for the period	1,072	(168)	904	936	(190)	746
		______	______	______	______	______	______

		Six months ended	Six months ended
		31 July 2017	31 July 2016
5.	Dividends	£'000	£'000
	3rd interim dividend for 2017 - 7.5p (2016 - 7.0p)	2,149	2,111
	Final dividend for 2017 - 14.5p (2016 - 13.0p)	4,146	3,789
		______	______
		6,295	5,900
		______	______
	The Company pays four dividends per year. The first interim dividend of 7.5p (2017 - 7.0p) for the year ending 31 January 2018 was paid on 4 August 2017 to shareholders on the register at 14 July 2017, with an ex-dividend date of 13 July 2017. A second interim dividend of 7.5p (2017 - 7.0p) for the year ending 31 January 2018, will be paid on 31 October 2017 to shareholders on the register at 13 October 2017. The ex-dividend date is 12 October 2017.

		Six months ended	Six months ended
		31 July 2017	31 July 2016
6.	Return per Ordinary share	£'000	£'000
	Based on the following figures:
	Revenue return	5,906	5,246
	Capital return	(4,121)	69,026
		______	______
	Total return	1,785	74,272
		______	______
	Weighted average number of shares in issue	28,582,134	29,187,655
		_________	_________
		p	p
	Revenue return per Ordinary share	20.67	17.97
	Capital return per Ordinary share	(14.42)	236.49
		______	______
	Total return per Ordinary share	6.25	254.46
		______	______

7.	Transaction costs
	During the six months ended 31 July 2017 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 (losses)/gains on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows:
		Six months ended	Six months ended
		31 July 2017	31 July 2016
		£'000	£'000
	Purchases	28	76
	Sales	61	86
		______	______
		89	162
		______	______

8.	Capital reserve
	The capital reserve reflected in the Condensed Statement of Financial Position at 31 July 2017 includes gains of £104,299,000 (31 January 2017 - £132,009,000) 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 2017	31 January 2017
	Net assets attributable (£'000)	372,755	379,101
	Number of Ordinary shares in issue	28,492,504	28,645,004
	Net asset value per Ordinary share (p)	1,308.26	1,323.45

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 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	Level 3	Total
	As at 31 July 2017		Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities		a)	387,740	-	-	387,740
	Quoted bonds		b)	-	11,844	-	11,844
				______	______	______	______
	Total			387,740	11,844	-	399,584
				______	______	______	______
	Financial liabilities at fair value through profit or loss
	Derivatives		c)	-	(105)	-	(105)
				______	______	______	______
	Net fair value			387,740	11,739	-	399,479
				______	______	______	______
				Level 1	Level 2	Level 3	Total
	As at 31 January 2017		Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities		a)	396,609	-	-	396,609
	Quoted bonds		b)	-	13,735	-	13,735
				______	______	______	______
	Total			396,609	13,735	-	410,344
				______	______	______	______
	Financial liabilities at fair value through profit or loss
	Derivatives		c)	-	(30)	-	(30)
				______	______	______	______
	Net fair value			396,609	13,705	-	410,314
				______	______	______	______
	a)	Quoted equities
		The fair value of the Company's investments in quoted equities has been determined by reference to their quoted 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 prices at the reporting date. Quoted bonds included in Fair Value Level 2 are not actively traded on recognised stock exchanges.
	c)	Derivatives
		The Company's investment in over the counter options at 31 July 2017 and 31 January 2017 have been fair valued using a marked-to-market model and has been classed as 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 £1,472,000 (31 July 2016 - £1,257,000) of investment management fees were payable to the Manager, with a balance of £752,000 (31 July 2016 - £680,000) being due to AFML at the period end.
	The secretarial fee of £108,000 per annum is chargeable 100% to revenue and is payable monthly in arrears. During the period £54,000 (31 July 2016 - £53,000) of secretarial fees were payable to the Manager, with a balance of £18,000 (31 July 2016 - £9,000) 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 2016 - £106,000) of fees were payable, with a balance of £18,000 (31 July 2016 - £18,000) 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 33,000 Ordinary shares have been bought back and cancelled by the Company subsequent to the reporting period end for a total consideration of £387,552. Following the buyback of shares there were 28,459,504 Ordinary shares in issue.

14.	Half-Yearly Financial Report
	The financial information in this Report does not comprise statutory accounts within the meaning of Section 434 - 436 of the Companies Act 2006. The financial information for the year ended 31 January 2017 has been extracted from published accounts that have been delivered to the Registrar of Companies and on which the report of the Company's auditor was unqualified and contained no statement under Section 498 (2), (3) or (4) of the Companies Act 2006. The condensed interim financial statements have been prepared using the same accounting policies as contained within the preceding annual financial statements.
	The financial information for the six months ended 31 July 2017 and 31 July 2016 has not been audited or reviewed by the Company's auditor.

15.	This Half-Yearly Financial Report was approved by the Board on 26 September 2017.

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 2017 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

 

END

 

 

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