Half Yearly Report

RNS Number : 3006Z

North American Income Trust (The)

17 September 2015

 

17 September 2015

THE NORTH AMERICAN INCOME TRUST PLC

HALF YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS TO 31 JULY 2015

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

Dividend

The Directors have declared a second quarterly dividend of 6.5p per share, which will take the total dividends for the first half of the fiscal year to 13.0p (2014 - 12.0p), an 8.3% increase. The second quarterly dividend is payable on 30 October 2015 to shareholders on the register on 2 October 2015.

The revenue return per Ordinary share for the six months ended 31 July 2015 amounted to 17.3p compared to 13.8p for the equivalent period in 2014. Our investments continue to increase their dividends and we remain cautiously optimistic. 

Portfolio

During the review period, the Trust's performance did not keep pace with the S&P 500 Index which, whilst not a perfect index, is used as a reference.  The Company's net asset value per share declined by 3.9% on a total return basis (in sterling terms) compared to a rise of 2.6% total return (in sterling terms) in the S&P 500 Index.

Broadly speaking, higher-yielding companies lagged the overall market as growth-oriented companies continued to diverge from their value-oriented counterparts. To give some context, over the twelve months to 31 July 2015 the Russell 1000 Growth outpaced the Russell 1000 Value by more than 15% (in sterling terms), with the latter making up a significant proportion of dividend paying stocks. Understandably this was a difficult backdrop for the Trust's holdings to outperform, but we also recognise that several of the portfolio's holdings did not perform as we had hoped.

At the asset allocation level, the portfolio's relative underweighting to the lower yielding sectors such as healthcare and consumer discretionary caused relative underperformance as these areas of the market were the strongest performers.   In contrast, given the uncertainties over rising interest rates, the higher yielding sectors such as utilities underperformed by more than 10% while many industrial and materials companies also lagged given a slower economic backdrop, particularly overseas.  Amid on-going weakness in commodity and oil prices, several of the Trust's equity holdings in the materials and energy sectors were the largest individual detractors from performance although yields remained attractive and dividends were largely well covered - particularly for many of the larger and more diversified energy companies.

The revenue account remains in good shape, however, underpinned by above-average dividend growth.   We continue to believe that the overall quality of the underlying companies in the portfolio is on track to grow the Trust's dividends and add to revenue reserves for this financial year. 

As at 31 July 2015, the portfolio consisted of 40 equity positions and 12 corporate bonds, the latter of which represented approximately 5% of total assets and provided 6.5% of our total income earned compared to 12% over the six-month period ended 31 July 2014.  During the reporting period, the Company received premiums totalling £1.3 million (versus £767,000 for the same period a year earlier) for entering into stock option transactions. This option income represents 17.3% of total income (2014 - 12.3%), the generation of which is consistent with the Manager's company-focused investment process. Bond coupons and option premia will remain of course secondary sources of income given our belief that income from dividends must remain the overwhelming source of income available for distribution. Further details of the portfolio are shown below.

Market and Economic Review

North American stocks finished in positive territory for the six-month period ended 31 July 2015, although they did not move in a straight line. There were several gyrations in the market as investors reacted to economic data reports and various geopolitical events. In the midst of a plethora of information a few market themes stood out, including the latest comments regarding monetary policy from the US Federal Reserve (Fed) and slowing growth in China, together with the prolonged slump in oil and commodity prices. While the latter generally has been good news for consumers as it translated into cheaper fuel, it weighed on the energy and materials sectors which were the weakest performers within the US broader-market S&P 500 Index over the review period. It appears that the probability of higher interest rates has already been priced into the US fixed income market. Bond prices fell modestly over the period as US Treasury yields rose.

According to FactSet, almost three quarters of S&P 500 constituents that had reported second-quarter 2015 earnings had exceeded consensus estimates. However, this actually represented a 1.0% drop in aggregate earnings due to the large declines in the energy sector. This represented the first year-on-year decrease in earnings for the index since the third quarter of 2012 (also -1.0%). Companies most often cited negative currency effects as the primary detractor from performance, followed by the fiscal crisis in the Eurozone and economic weakness in China. Unsurprisingly, from a sector perspective, energy companies posted the largest year-on-year decreases, whilst the healthcare sector reported the largest increase in earnings.

Gearing

The Company continued to make use of a closed ended company's opportunity to gear through its 2.18% fixed term loan facility of $51.1 million (£32.7 million). Additional drawings under the revolving element of the facility provided by State Street amount to £7.9 million, making the total debt as at 31 July 2015 of £40.6 million.  At the period end, the Company's cash position of £19.9 million largely represented the cash pledged as collateral or ringfenced for potential liabilities in relation to the open options position at the period end. 

Discount

Shareholders approved the annual resolution at the Annual General Meeting in May to authorise the Company to buy back up to 14.99% of its issued share capital.

During the six month period ended 31 July 2015 the Company bought back 1,491,848 Ordinary shares for cancellation. These purchases represent 4.5% of opening period share capital and cost £12.8 million.

A further 186,500 Ordinary shares have been bought back for cancellation at a cost of £1.5 million between 31 July 2015 and 15 September 2015. The Board continues to monitor the discount at which the share price trades to the net asset value and will make judicious use of share buybacks. At 15 September 2015 the discount was 8.9%.

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.

Annual General Meeting ("AGM")

The Company's AGM was held in Edinburgh on 28 May 2015 at which all resolutions, including the continuation of the Company, were passed by shareholders. A further vote on continuation will be put to shareholders in accordance with the articles in 2018.

Investment Manager

On 30 June 2015, Ralph Bassett and Fran Radano assumed the management of our portfolio. They are experienced members of Aberdeen Asset Management's North American Equities team based in Philadelphia. They succeeded Paul Atkinson, formerly Head of North American Equities, who left Aberdeen to return to Europe with his family.

Aberdeen's approach is very much team-based with a strong emphasis on the fundamentals of individual companies. Ralph and Fran continue to adhere to this well-developed investment philosophy.

The Board would like to thank Paul for his considerable contribution in developing the investment policy for the Company and the establishment of our portfolio, since he assumed responsibility for management of our assets in 2012.

Outlook

The US market has been struggling to digest the potential for rising interest rates domestically while also reacting to macro events abroad. The notion of the US market de-coupling from other key global economies has been reinforced with continued reductions in unemployment levels, increases in wages and still muted inflation levels. However, this has also, in part, caused some of the more recent currency moves.  Slowing growth in China has exacerbated matters, as has weakness in commodity prices.

External events such as the Iran nuclear agreement, the debt crisis in Greece, weakness in energy prices and slower growth in China will continue to dominate the headlines and drive short-term market sentiment and direction. The macroeconomic backdrop remains constrained, but business fundamentals should provide support for the equity markets. Balance sheets remain healthy and will allow for continued investment into businesses as well as additional shareholder distributions. Corporate appetite for deal-making has also increased. It is expected that the Federal Reserve will start to raise interest rates later this year, or in early 2016, which should provide support for equities although perhaps slower growth abroad is a broader concern. We continue to believe that our Manager's bottom-up investment process should help in this environment, finding value in these markets and delivering on the Trust's objectives of above average dividend income together with long term capital growth.

James Ferguson

Chairman

16 September 2015

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 in the 2015 Annual Report. 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 July 2015 the Company had £40.6 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% of net assets.

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 and the Companies Acts, 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.

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 bank 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. 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 2015 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

16 September 2015

FINANCIAL HIGHLIGHTS

	31 July 2015	31 January 2015	% change
Net asset value per Ordinary share	885.4p	938.9p	-5.7
Share price per Ordinary share (mid)	803.5p	865.0p	-7.1
Discount to net asset value	9.3%	7.9%
Revenue return per Ordinary share{A}	17.3p	13.8p	+25.4
Interim dividends	13.0p{B}	12.0p{C}	+8.3
{A}    Comparison uses the six months ended 31 July 2014.
{B}     Includes a first interim dividend of 6.50p paid on 31 July 2015 and a second interim dividend of 6.50p payable on 30 October 2015.
{C}    Interim dividend for the six months ended 31 July 2014.

PERFORMANCE - TOTAL RETURN

	Six months ended	Year ended
	31 July 2015	31 January 2015
Net asset value per Ordinary share	-3.9%	+15.5%
Share price per Ordinary share	-5.1%	+18.9%
S&P 500 Index (in sterling terms)	+2.6%	+25.0%

INVESTMENT PORTFOLIO - EQUITIES

As at 31 July 2015

			Total
		Valuation	portfolio
Company	Industry classification	£'000	%
Philip Morris	Tobacco	12,997	4.3
Verizon Communications	Diversified Telecommunication Services	11,148	3.7
Microsoft	Systems Software	10,481	3.5
Sysco	Food & Staples Retailing	9,558	3.2
Molson Coors Brewing	Beverages	9,406	3.1
CME Group	Investment Services	9,244	3.1
Ventas	Real Estate Investment Trusts (REITs)	9,235	3.1
Pepsico	Beverages	9,166	3.1
Dow Chemical	Chemicals	9,006	3.0
Procter & Gamble	Household Products	8,542	2.8
Ten largest equity investments		98,783	32.9
Republic Services	Commercial Services & Supplies	8,501	2.8
Wells Fargo	Commercial Banks	8,170	2.7
Potash Corp of Saskatchewan	Chemicals	8,012	2.7
CMS Energy	Multi-Utilities	7,977	2.7
Telus	Diversified Telecommunication Services	7,940	2.6
Target	Multiline Retail	7,777	2.6
WEC Energy	Multi-Utilities	7,523	2.5
TransCanada	Oil, Gas & Consumable Fuels	7,511	2.5
Chevron	Oil, Gas & Consumable Fuels	7,496	2.5
Kraft Heinz	Food Products	6,971	2.4
Twenty largest equity investments		176,661	58.9
ConocoPhillips	Oil, Gas & Consumable Fuels	6,944	2.3
Pfizer	Pharmaceuticals	6,932	2.3
National Oilwell Varco	Energy Equipment & Services	6,782	2.3
Cisco Systems	Telecommunications Equipment	6,713	2.2
Starwood Hotels & Resorts	Hotels, Restaurants & Leisure	6,489	2.2
Johnson & Johnson	Pharmaceuticals	6,357	2.1
Lockheed Martin	Aerospace & Defense	6,241	2.1
Intel	Semiconductors & Semiconductor Equipment	6,153	2.0
Paychex	IT Services	6,120	2.0
M&T Bank	Commercial Banks	6,060	2.0
Thirty largest equity investments		241,452	80.4
Digital Realty Trust	Real Estate Investment Trusts (REITs)	5,906	2.0
Sonoco Products	Containers & Packaging	5,891	2.0
Nucor	Metals & Mining	5,859	1.9
Royal Bank of Canada	Commercial Banks	5,732	1.9
Emerson Electric	Electrical Equipment	5,399	1.8
Blackrock	Capital Markets	4,375	1.5
Staples	Specialty Retail	3,503	1.2
Regions Financial	Commercial Banks	3,329	1.1
Praxair	Chemicals	2,553	0.8
Freeport-McMoRan	Metals & Mining	26	0.0
Total equity investments		284,025	94.6

INVESTMENT PORTFOLIO - FIXED INTEREST

As at 31 July 2015

			Total
		Valuation	portfolio
Company	Industry classification	£'000	%
General Electric Capital  7.125% Non-Cum Perp Pref	Diversified Financial Services	2,615	0.9
Qwest 7.25% 15/10/35	Telephone Communications	2,401	0.8
Onemain Financial Holdings 6.75% 15/12/19	Specialty Finance	2,033	0.7
HSBC Finance  6.676% 15/01/21	Consumer Finance	2,022	0.7
International Lease Finance Corp 6.25% 15/05/19	Diversified Financial Services	1,680	0.6
Cincinnati Bell 8.375% 15/10/20	Diversified Telecommunication Services	1,015	0.3
First Data 7.375% 15/06/19	IT Services	935	0.3
First Quantum Minerals 7.25% 15/05/22	Metals & Mining	812	0.3
Post Holdings 7.375% 15/02/22	Food Products	756	0.3
Seagate HDD Cayman 4.75% 01/06/23	Computer & Office Equipment	650	0.1
Ten largest fixed interest investments		14,919	5.0
Corrections Corporation of America 4.625% 01/05/23	Real Estate Investment Trusts (REITs)	636	0.2
Nationstar 6.5% 01/06/22	Thrifts & Mortgage Finance	585	0.2
Total fixed interest investments		16,140	5.4
Total investments		300,165	100.0

GEOGRAPHICAL ANALYSIS

As at 31 July 2015

	Equities	Bonds	Total
Country	%	%	%
Canada	9.7	0.3	10.0
USA	84.9	5.1	90.0
	________	________	________
	94.6	5.4	100.0
	________	________	________

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

	Six months ended 31 July 2015
		(unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
(Losses)/gains on investments	-	(15,993)	(15,993)
Net currency 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)
	________	________	________
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 Condensed Statement of Comprehensive Income.
All revenue and capital items in the above statement derive from continuing operations.
No operations were acquired or discontinued in the period.

	Six months ended 31 July 2014
		(unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
(Losses)/gains on investments	-	15,238	15,238
Net currency gains	-	175	175
Income (note 2)	6,231	-	6,231
Investment management fee	(338)	(789)	(1,127)
Administrative expenses (note 3)	(341)	-	(341)
	________	________	________
Net return before finance costs and taxation	5,552	14,624	20,176
Finance costs	(54)	(126)	(180)
	________	________	________
Return on ordinary activities before taxation	5,498	14,498	19,996
Taxation (note 4)	(899)	196	(703)
	________	________	________
Return on ordinary activities after taxation	4,599	14,694	19,293
	________	________	________
Return per share (pence) (note 6)	13.80	44.07	57.87
	________	________	________

CONDENSED STATEMENT OF FINANCIAL POSITION

		As at	As at
		31 July 2015	31 January 2015
		(unaudited)	(audited)
	Notes	£'000	£'000
Non-current assets
Investments at fair value through profit or loss		300,165	342,722
		________	________
Current assets
Debtors and prepayments		754	712
Cash and short-term deposits		19,935	9,231
		________	________
		20,689	9,943
		________	________
Creditors: amounts falling due within one year
Bank loans		(7,908)	(8,158)
Other creditors		(1,795)	(1,247)
		________	________
		(9,703)	(9,405)
		________	________
Net current assets		10,986	538
		________	________
Total assets less current liabilities		311,151	343,260
		________	________
Creditors: amounts falling due after more than one year
Bank loan		(32,711)	(33,987)
		________	________
Net assets		278,440	309,273
		________	________
Capital and reserves
Called-up share capital		7,862	8,235
Share premium account		48,467	48,467
Capital redemption reserve		14,698	14,325
Capital reserve	8	200,305	228,822
Revenue reserve		7,108	9,424
		________	________
Equity shareholders' funds		278,440	309,273
		________	________
Net asset value per share (pence)	9	885.42	938.92
		________	________

CONDENSED STATEMENT OF CHANGES IN EQUITY

Six months ended 31 July 2015 (unaudited)
		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
	_____	_______	________	______	______	______
Six months ended 31 July 2014 (unaudited)
		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	(7)	-	7	(202)	-	(202)
Return on ordinary activities after taxation	-	-	-	14,694	4,599	19,293
Dividends paid (note 5)	-	-	-	-	(5,334)	(5,334)
	_____	_______	________	______	______	______
Balance at 31 July 2014	8,328	48,467	14,232	207,539	7,143	285,709
	_____	_______	________	______	______	______

CONDENSED STATEMENT OF CASH FLOWS

	Six months ended	Six months ended
	31 July 2015	31 July 2014
	(unaudited)	(unaudited)
	£'000	£'000
Net return on ordinary activities before taxation	(8,975)	20,176
Adjustment for:
Losses/(gains) on investments	15,993	(15,238)
Foreign exchange gains	(1,121)	(175)
Amortisation of fixed income book cost	11	(38)
Increase in accrued income	(33)	(100)
Increase in other debtors	(23)	(1,991)
Increase in other creditors	887	517
	________	________
Net cash inflow from operating activities	6,739	3,151
Servicing of finance
Interest paid	(605)	(180)
Taxation
Overseas withholding tax paid	(938)	(628)
	________	________
Net tax paid	(938)	(628)
Financial investment
Purchases of investments	(48,379)	(35,343)
Sales of investments	74,933	41,769
	________	________
Net cash inflow from financial investment	26,554	6,426
Equity dividends paid	(7,878)	(5,334)
	________	________
Net cash inflow before financing	23,872	3,435
Financing
Buyback of Ordinary shares	(12,763)	(202)
Drawdown of bank loan	-	15,817
	________	________
Net cash (outflow)/inflow from financing	(12,763)	15,615
	________	________
Increase in cash	11,109	19,050
	________	________
Analysis of changes in cash during the period
Opening net debt	(32,914)	(7,274)
Increase in cash as above	11,109	19,050
Foreign exchange movements	1,121	175
Drawdown of bank loan	-	(15,817)
	________	________
Closing net debt	(20,684)	(3,866)
	________	________

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.
		These condensed financial statements are the first since FRS 102 (The Financial Reporting Standard applicable in the UK and Republic of Ireland) came into effect for accounting periods beginning on or after 1 January 2015. An assessment of the impact of adopting FRS 102 has been carried out and found that no restatement of balances as at the transition date, 1 January 2014, or comparative figures in the Condensed Statement of Financial Position or the Condensed Statement of Comprehensive Income is considered necessary.
		The interim financial statements have been prepared using the same accounting policies as the preceding annual financial statements.

		Six months ended	Six months ended
		31 July 2015	31 July 2014
2.	Income	£'000	£'000
	Income from overseas listed investments
	Dividend income	5,359	4,387
	REIT income	287	330
	Interest income from investments	485	746
		________	________
		6,131	5,463
		________	________
	Other income from investment activity
	Traded option premiums	1,285	767
	Deposit interest	-	1
		________	________
		1,285	768
		________	________
	Total income	7,416	6,231
		________	________

		Six months ended	Six months ended
		31 July 2015	31 July 2014
		(unaudited)	(unaudited)
3.	Administration expenses	£'000	£'000
	Directors' fees	38	27
	Secretarial and administration fees	52	51
	Marketing contribution	106	106
	Auditor's remuneration:
	fees payable to the Company's auditor for the audit of the annual accounts	8	8
	Custodian charges	13	16
	Registrar's fees	28	38
	Professional fees	36	27
	Depositary charges	19	3
	Other	58	65
		________	________
		358	341
		________	________

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 2016 is an effective rate of 20.17%. This is above the current corporation tax rate of 20% as, prior to 1 April 2015, the prevailing corporation tax rate was 21%.
	Detailed below is an analysis of the tax charge for each period.
		Six months ended 31 July 2015			Six months ended 31 July 2014
		Revenue	Capital	Total	Revenue	Capital	Total
	Taxation	£'000	£'000	£'000	£'000	£'000	£'000
	UK corporation tax	223	(223)	-	238	(238)	-
	Overseas tax suffered	800	-	800	661	-	661
		________	________	_______	________	________	_______
	Current tax charge for the period	1,023	(223)	800	899	(238)	661
	Deferred taxation	-			-	42	42
		________	________	_______	________	________	_______
	Total tax	1,023	(223)	800	899	(196)	703
		________	________	_______	________	________	_______

		Six months ended	Six months ended
		31 July 2015	31 July 2014
5.	Dividends	£'000	£'000
	3rd interim dividend for 2015 - 6.5p (2014 - 6.0p)	2,141	2,000
	Final dividend for 2015 - 11.5p (2014 - 10.0p)	3,679	3,334
	1st interim dividend for 2016 - 6.5p	2,058	-
		________	________
		7,878	5,334
		________	________
	The Company pays four dividends per year. The first interim dividend of 6.5p (2015 - 6.0p) for the year ending 31 January 2016 was paid on 31 July 2015 to shareholders on the register at 3 July 2015, with an ex-dividend date of 2 July 2015. A second interim dividend of 6.5p (2015 - 6.0p) for the year ending 31 January 2016 will be paid on 30 October 2015 to shareholders on the register at 2 October 2015. The ex-dividend date is 1 October 2015.

		Six months ended	Six months ended
		31 July 2015	31 July 2014
6.	Return per Ordinary share	£'000	£'000
	Based on the following figures:
	Revenue return	5,562	4,599
	Capital return	(15,754)	14,694
		________	________
	Total return	(10,192)	19,293
		________	________
	Weighted average number of shares in issue	32,095,089	33,336,648
		________	________
		p	p
	Revenue return per Ordinary share	17.33	13.80
	Capital return per Ordinary share	(49.09)	44.07
		________	________
	Total return per Ordinary share	(31.76)	57.87
		________	________

7.	Transaction costs
	During the six months ended 31 July 2015 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 2015	31 July 2014
		£'000	£'000
	Purchases	63	35
	Sales	116	50
		________	________
		179	85
		________	________

8.	Capital reserve
	The capital reserve reflected in the Statement of Financial Position at 31 July 2015 includes gains of £42,958,000 (31 January 2015 - £65,139,000) 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 2015	31 January 2015
	Net assets attributable (£'000)	278,440	309,273
	Number of Ordinary shares in issue	31,447,234	32,939,082
	Net asset value per Ordinary share (p)	885.42	938.92

		At		Exchange	At
		1 February 2015	Cashflow	movements	31 July 2015
10.	Analysis of changes in net debt	£'000	£'000	£'000	£'000
	Cash and short term deposits	9,231	11,109	(1,905)	18,435
	Bank loans	(42,145)	-	3,026	(39,119)
		________	________	________	________
		(32,914)	11,109	1,121	(20,684)
		________	________	________	________

11.	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:
	Class A: quoted prices for identical instruments in active markets;
	Class B: prices of recent transactions for identical instruments; and
	Class C: valuation techniques using observable and unobservable market data.
	The financial assets and liabilities measured at fair value in the Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:
						Class C
						Observable	Unobservable
				Class A	Class B	Inputs	Inputs	Total
	As at 31 July 2015		Note	£'000	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities		a)	284,025	-	-	-	284,025
	Quoted bonds		b)	16,140	-	-	-	16,140
				_______	_______	________	________	_______
	Total			300,165	-	-	-	300,165
				_______	_______	________	________	_______
	Financial liabilities at fair value through profit or loss
	Derivatives		c)	(387)	-	-	-	(387)
				_______	_______	________	________	_______
	Net fair value			299,778	-	-	-	299,778
				_______	_______	________	________	_______
						Class C
						Observable	Unobservable
				Class A	Class B	Inputs	Inputs	Total
	As at 31 January 2015		Note	£'000	£'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
				_______	_______	________	________	_______
	Total			342,722	-	-	-	342,722
				_______	_______	________	________	_______
	Financial liabilities at fair value through profit or loss
	Derivatives		c)	(65)	-	-	-	(65)
				_______	_______	________	________	_______
	Net fair value			342,657	-	-	-	342,657
				_______	_______	________	________	_______
	a)	Quoted equities and preference shares
		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 Class A 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 Classes A and B include Government Bonds and Corporate Bonds. Investments categorised as Class B are not considered to trade in active markets.
	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 hence are categorised in Fair Value Class A.

12.	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 £1,161,000 (31 July 2014 - £1,127,000) of investment management fees were earned by the Manager, with a balance of £561,000 (31 July 2014 - £576,000) being payable to AFML at the period end.
	The secretarial fee of £104,000 per annum is chargeable 100% to revenue and is payable monthly in arrears. During the period £52,000 (31 July 2014 - £51,000) of secretarial fees were earned by the Manager, with a balance of £17,000 (31 July 2014 - £17,000) being payable 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 2014 - £106,000) of fees were earned, with a balance of £71,000 (31 July 2014 - £18,000) being payable to AFML at the period end.

13.	Subsequent events
	A further 186,500 Ordinary shares have been bought back and cancelled by the Company subsequent to the reporting period end for a total consideration of £1.5 million. As at 15 September 2015 there were 31,260,734 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 2015 has been extracted from published accounts that have been delivered to the Registrar of Companies and on which the report of the auditors was unqualified and contained no statement under Section 498 (2), (3) or (4) of the Companies Act 2006. The interim financial statements have been prepared using the same accounting policies as contained within the preceding annual financial statements.

15.	This Half-Yearly Financial Report was approved by the Board on 16 September 2015.

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 2015 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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