Half Yearly Report

RNS Number : 3524N

North American Income Trust (The)

24 September 2019

 

Legal Entity Identifier (LEI): 5493007GCUW7G2BKY360

24 September 2019

THE NORTH AMERICAN INCOME TRUST PLC

HALF YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS TO 31 JULY 2019

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.

INTERIM BOARD REPORT - CHAIRMAN'S STATEMENT

Performance

Over the six-month period ended 31 July 2019, the Company's net asset value per share rose by 12.7% on a total return basis in sterling terms. This underperformed the 16.8% return of the Russell 1000 Value index.

The longer term performance of the Company has been positive.  Over the three and five year periods to 31 July 2019, the Company's NAV rose by 44.1% and 111.2% respectively, compared to three and five year returns of 42.2% and 102.7%  from the Russell 1000 Value index.

Dividend

The revenue return per Ordinary share increased by 5.6% to 5.35p for the six-month period. The Board has declared a second quarterly dividend of 1.7p per share, giving total dividends for the first half of the year to 31 January 2020 of 3.4p (2019 - 3.2p), a 6.3% increase. The second quarterly dividend is payable on 25 October 2019 to shareholders on the register on 4 October 2019.

Portfolio

As of 31 July 2019, the portfolio consisted of 39 equity holdings and 9 corporate bonds, with equities representing over 95% of total assets. 

Total revenue from the investment portfolio over the six-month period was £7.9 million (31 July 2018 - £6.9 million), of which 91% (31 July 2018: 89%) was generated by the equity portfolio.  The majority of the Company's equity holdings continued their established record of dividend growth.

In addition the Company received option premia totalling £1.9 million (31 July 2018: £2.5 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, represented 19.2% of total income (31 July 2018: 26.5%).

While the Company's exposure to corporate bonds has decreased over recent years, interest income from investments was broadly similar to last year, representing 3.2% of total income (31 July 2018: 3.2%). Bond coupons and option premiums will remain secondary sources of income in the belief that dividends must remain the overwhelming source of sustainable income available for distribution. Further details of the portfolio are shown below.

Market & Economic Review

Major North American equity indices posted notable gains for the six-month period ended 31 July 2019, which was marked by increasing US-China trade tensions on the one hand, and easing monetary policy conditions on the other. The prolonged tariff war between the world's two largest economies caused some volatility in global markets, though it was not the sole "tariff tussle" during the review period. Late in the period, US President Trump also opened up a new front in the trade war, threatening tariffs on Mexico if it did not curb illegal immigrants entering the US. Soon thereafter, however, Trump scaled back his threat after he announced that the US and Mexico reached an agreement to reduce the flow of migrants to the border between the countries. Furthermore, in June, India's government raised tariffs on 28 US products in retaliation to the US government's removal of India from preferential treatment for trade, which had allowed it to export duty-free goods to the US.

Regarding monetary policy over the review period, the US Federal Reserve (the Fed) left the federal funds rate unchanged until the last day of the review period on 31 July 2019 when they reduced the rate by 25 basis points to a range of 2.00% to 2.25% - its first rate cut since December 2008.

Gearing

The Board believes that sensible use of modest financial gearing should enhance returns to our shareholders over the longer term. The Company has in place a $75 million loan facility agreement with Scotiabank (Ireland) Designated Activity Company. During the six month period under review, $10 million of the loan facility was repaid and at the end of the period $40 million was drawn down.  At the same time, cash held as collateral against open option positions had increased.  As a result, net gearing at 31 July 2019 was reduced to £656,000 (31 January 2019: £19.4 million), representing 0.1% of net assets (31 January 2019: 5.7%).

Events during the Period

At the Company's Annual General Meeting on 4 June 2019, all resolutions were passed, including the proposal to undertake a five-for-one sub-division of the Company's ordinary shares. On 10 June 2019, the effective date of the share split, the Company's issued ordinary share capital comprised 142,152,520 new ordinary shares of 5p each.  There have been no subsequent changes to the Company's issued share capital.

Discount/premium

The Company's share price rose by 16.6% to 312.5p and ended the period end at a 0.7% premium to net asset value, compared with a 4.4% discount at 31 January 2019.  During the six month period under review, the shares mainly traded between a 2% premium and a 3% discount. At the AGM in June 2019, shareholder approval was obtained to renew the annual authorities to issue up to 10% of the Company's issued share capital for cash at a premium and to buyback up to 14.99% of the issued share capital at a discount.  During the six month period to 31 July 2019, no buybacks or share issuance were undertaken.  The Board monitors the rating of the Company's shares and, taking account of prevailing market conditions, will exercise discretion in buying back shares at a discount or issuing shares at a premium.

Outlook

Following its rate-cut announcement at the end of July, the Fed highlighted the downside risk from weaker global economic growth and trade tensions. Nonetheless, the Fed would not commit to further rate cuts, which frustrated investors. We take comfort that domestic economic data points remain reasonable and corporate earnings have been well received by the market and are still decent for this point in the cycle. As the Fed highlighted in its Federal Open Market Committee statement following its rate announcement, while consumer spending remains robust, there has not been similar strength in business-driven fixed investment. This has been demonstrated by weakening Purchasing Managers Index (PMI) of manufacturing activity domestically, and China's PMI remaining below 50 (signaling a contraction in manufacturing activity) since earlier this year. Many industrial-exposed companies posting results in July reported revenue weakness that coincides with this softening economic data, but also margin issues in many cases due to tariffs.

Notwithstanding US GDP returning closer to longer-term averages and capital investment being subdued due to trade policy impasses, strong cash flows and capital discipline continue to generate progressive shareholder distributions for our investee companies. Interest rates and inflation remain subdued and thus consumer spending remains robust. However, with the macro environment showing some signs of stress, our Investment Manager remains cautiously optimistic for the well-run companies within NAIT's portfolio and their continued ability to deliver a sustainable income stream.

James Ferguson

Chairman

23 September 2019

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 considered 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 8 to 9 of the 2019 Annual Report.  

In addition to these risks, the outcome and potential impact of the UK Government's negotiations with the European Union on Brexit is still unclear at the date of this report.  This remains an economic risk for the Company, principally in relation to the potential impact of Brexit on currency volatility and the Manager's operations.  Aberdeen Standard Investments has a significant Brexit program in place aimed at ensuring that they can continue to satisfy their clients' investment needs post Brexit. 

In all other respects, the Company's principal risks and uncertainties have not changed nor are they expected to change in the second half of the financial year ending 31 January 2020.

Going Concern

In accordance with the Financial Reporting Council's Guidance on Risk Management, Internal Control and Related Financial and Business, 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 substantially of equity shares in companies listed on recognised stock exchanges and, in most circumstances, are realisable within a short timescale.  The Company has a bank credit facility in place which is available until December 2020.  The Directors have a reasonable expectation that the Company has adequate financial resources to continue in operational existence for the foreseeable future and the ability to meet all its liabilities and ongoing expenses from its assets.  Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

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 2019 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

23 September 2019

FINANCIAL HIGHLIGHTS

	As at	As at
	31 July 2019	31 January 2019	% change
Net asset value per Ordinary share{A}	310.4p	280.4p	+10.7
Share price per Ordinary share (mid){A}	312.5p	268.0p	+16.6
Premium/(discount) to net asset value{B}	0.7%	(4.4%)
Net gearing{B}	0.1%	5.7%
Ongoing charges ratio{B}	0.91%	0.95%
{A} Comparative figures for the year ended 31 January 2019 and six months to 31 July 2018 have been restated due to the sub-division of each existing Ordinary share of 25p into five Ordinary shares of 5p each on 10 June 2019.
{B} Considered to be an Alternative Performance Measure. Further details can be found below.
	Six months to	Six months to
	31 July 2019	31 July 2018	%  change
Revenue return per Ordinary share{A}	5.35p	5.07p	+5.6
Interim dividends{A}	3.40p{B}	3.20p	+6.3
{A}    Comparative figures for the year ended 31 January 2019 and six months to 31 July 2018 have been restated due to the sub-division of each existing Ordinary share of 25p into five Ordinary shares of 5p each on 10 June 2019.
{B}    Includes a first interim dividend of 1.70p paid on 2 August 2019 and a second interim dividend of 1.70p payable on 25 October 2019.

PERFORMANCE (TOTAL RETURN){A}

	6 months ended	Year ended	3 Years ended	5 years ended
	31 July 2019	31 July 2019	31 July 2019	31 July 2019
	%	%	%	%
Net asset value per Ordinary share{A}	12.7	10.2	44.1	111.2
Share price per Ordinary share{A}	18.8	19.3	60.1	128.5
Russell 1000 Value Index (in sterling terms)	16.8	12.7	42.2	102.7
S&P 500 Index (in sterling terms)	19.6	15.7	57.9	135.9
{A}         Capital return plus dividends reinvested.  Considered to be an Alternative Performance Measure. Further details can be found below.

INVESTMENT PORTFOLIO - EQUITIES

As at 31 July 2018

			Total
		Valuation	portfolio
Company	Industry classification	£'000	%
Chevron	Oil, Gas & Consumable Fuels	22,622	5.1
Philip Morris	Tobacco	20,485	4.6
Citigroup	Banks	17,435	3.9
BB&T	Banks	16,834	3.8
Cisco Systems	Communications Equipment	15,836	3.6
Johnson & Johnson	Pharmaceuticals	14,889	3.4
Bristol-Myers Squib	Pharmaceuticals	14,508	3.3
Verizon Communications	Diversified Telecommunication Services	13,542	3.1
CME Group	Capital Markets	13,496	3.0
Gilead Sciences	Biotechnology	13,377	3.0
Ten largest equity investments		163,024	36.8
Regions Financial	Banks	13,010	3.0
Coca-Cola	Beverages	12,895	2.9
Gaming & Leisure Properties	Equity Real Estate Investment Trusts (REITs)	12,319	2.8
Schlumberger	Energy Equipment & Services	12,241	2.8
Umpqua	Banks	12,120	2.7
TC Energy	Oil, Gas & Consumable Fuels	12,057	2.7
Lockheed Martin	Aerospace & Defense	11,831	2.7
Huntington Bancshares	Banks	11,638	2.6
Nutrien	Chemicals	11,191	2.5
Molson Coors Brewing	Beverages	11,023	2.5
Twenty largest equity investments		283,349	64.0
Meredith	Media	10,753	2.4
Pfizer	Pharmaceuticals	10,151	2.3
Provident Financial Services	Thrifts & Mortgage Finance	9,874	2.2
Hanesbrands	Textiles, Apparel & Luxury Goods	9,198	2.1
American International	Insurance	9,145	2.1
Royal Bank Of Canada	Banks	9,075	2.1
Intl Paper Co	Containers & Packaging	8,965	2.0
Telus	Diversified Telecommunication Services	8,851	2.0
Medtronic	Health Care Equipment & Supplies	8,325	1.9
Nucor	Metals & Mining	7,994	1.8
Thirty largest equity investments		375,680	84.9
Tapestry	Textiles, Apparel & Luxury Goods	7,578	1.7
Union Pacific	Road & Rail	7,348	1.7
Iron Mountain	Equity Real Estate Investment Trusts (REITs)	7,206	1.6
Texas Instruments	Semiconductors & Semiconductor Equipment	6,636	1.5
Orion Engineered Carbons	Chemicals	6,364	1.4
Genuine Parts	Distributors	6,346	1.4
Dow	Chemicals	5,934	1.4
Dupont De Nemours	Chemicals	4,911	1.1
Tiffany & Co	Speciality Retail	4,602	1.0
Total equity investments		432,605	97.7

INVESTMENT PORTFOLIO - FIXED INTEREST

As at 31 July 2019

			Total
		Valuation	portfolio
Company	Industry classification	£'000	%
CCO Holdings Capital 5.5% 01/05/26	Media	1,702	0.4
HCA 5.875% 15/02/26	Healthcare Services	1,671	0.4
Cheniere Corpus Christi 5.875%  31/03/25	Oil, Gas & Consumable Fuels	1,337	0.3
Parsley Energy Finance 5.375% 15/01/25	Exploration & Production	1,247	0.3
Lennar 4.5% 30/04/24	Construction	1,110	0.2
Graham Holdings 5.75% 01/06/26	Diversified Consumer Services	941	0.2
Qwest Cap Funding 7.75% 15/02/31	Telecommunications	854	0.2
Diamond 1 Fin Diamond 2 6.02% 15/06/26	Technology	691	0.2
NRG Energy 5.25% 15/06/29	Electric	405	0.1
		______	______
Total fixed interest investments		9,958	2.3
		______	______
Total investments		442,563	100.0
		______	______

GEOGRAPHICAL ANALYSIS
	Equities	Bonds	Total
Country	%	%	%
Canada	9.3	-	9.3
USA	88.4	2.3	90.7
		______	______
	97.7	2.3	100.0
		______	______

ALTERNATIVE PERFORMANCE MEASURES
Alternative performance measures are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes FRS 102 and the AIC SORP. The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies.
Total return
Total return is considered to be an alternative performance measure. NAV and share price total returns show how the NAV and share price has performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. NAV total return involves investing the net dividend in the NAV of the Company with debt at fair value on the date on which that dividend goes ex-dividend. Share price total return involves reinvesting the net dividend in the share price of the Company on the date on which that dividend goes ex-dividend.
The tables below provide information relating to the NAVs and share prices of the Company on the dividend reinvestment dates during the six months ended 31 July 2019 and the year ended 31 July 2019 and total return for the periods.
	Dividend			Share
Six months ended 31 July 2019	rate	NAV		price
31 January 2019	N/A	280.44p		268.00p
9 May 2019	3.60p	286.52p		282.00p
18 July 2019	1.70p	303.56p		304.00p
31 July 2019	N/A	310.44p		312.50p
		______		______
Total return		+12.7%		+18.8%
		______		______
	Dividend			Share
Year ended 31 July 2019	rate	NAV		price
31 July 2018	N/A	290.26p		270.00p
4 October 2018	1.60p	293.23p		273.00p
24 January 2019	1.70p	276.08p		264.00p
9 May 2019	3.60p	286.52p		282.00p
18 July 2019	1.70p	303.56p		304.00p
31 July 2019	N/A	310.44p		312.50p
		______		______
Total return		+10.2%		+19.3%
		______		______
Net gearing
Net gearing measures the total borrowings of £32,668,000 (31 January 2019 - £38,010,000) less cash and cash equivalents of £32,012,000 (31 January 2019 - £15,272,000) divided by shareholders' funds of £441,300,000 (31 January 2019 - £398,657,000), expressed as a percentage. Under AIC reporting guidance cash and cash equivalents includes amounts due and to brokers at the period end as well as cash and short term deposits.
Premium/(discount) to net asset value per share
The premium/(discount) is the amount by which the share price of 312.50p (31 January 2019 - 268.00p) is higher/(lower) than the net asset value per share of 310.44p (31 January 2019 - 280.44p), expressed as a percentage of the net asset value per share.
Ongoing charges ratio
Ongoing charges ratio is considered to be an alternative performance measure. The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC which is defined as the total of investment management fees and administrative expenses and expressed as a percentage of the average net asset values with debt at fair value throughout the year. The ratio for 31 July 2019 is based on forecast ongoing charges for the year ending 31 January 2020.
			31 July		31 January
			2019		2019
Investment management fees (£'000)			3,143		2,913
Administrative expenses (£'000)			739		852
			______		______
Ongoing charges (£'000)			3,882		3,765
			______		______
Average net assets{A} (£'000)			427,945		396,330
			______		______
Ongoing charges ratio			0.91%		0.95%
			______		______
{A} During both years net asset values with debt at fair value equated to net asset value with debt at amortised cost due to the short-term nature of the bank loans.
The ongoing charges ratio provided in the Company's Key Information Document is calculated in line with the PRIIPs regulations.

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

		Six months ended 31 July 2019
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Gains on investments	2	-	44,847	44,847
Exchange losses		-	(1,101)	(1,101)
Income	3	9,923	-	9,923
Investment management fee		(463)	(1,081)	(1,544)
Administrative expenses	4	(374)	-	(374)
		______	______	______
Net return before finance costs and taxation		9,086	42,665	51,751
Finance costs		(181)	(421)	(602)
		______	______	______
Return before taxation		8,905	42,244	51,149
Taxation	5	(1,297)	325	(972)
		______	______	______
Return after taxation		7,608	42,569	50,177
		______	______	______
Return per share (pence){A}	7	5.35	29.95	35.30
		______	______	______
{A} Comparative figures for the six months ended 31 July 2018 have been restated due to the sub-division of each existing Ordinary share of 25p into five Ordinary shares of 5p each on 10 June 2019.
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.
The accompanying notes are an integral part of the financial statements.

		Six months ended 31 July 2018
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Gains on investments	2	-	23,421	23,421
Exchange losses		-	(1,876)	(1,876)
Income	3	9,590	-	9,590
Investment management fee		(430)	(1,004)	(1,434)
Administrative expenses	4	(499)	-	(499)
		______	______	______
Net return before finance costs and taxation		8,661	20,541	29,202
Finance costs		(149)	(347)	(496)
		______	______	______
Return before taxation		8,512	20,194	28,706
Taxation	5	(1,297)	374	(923)
		______	______	______
Return after taxation		7,215	20,568	27,783
		______	______	______
Return per share (pence){A}	7	5.07	14.47	19.54
		______	______	______

CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

		As at	As at
		31 July 2019	31 January 2019
	Notes	£'000	£'000
Non-current assets
Investments at fair value through profit or loss		442,563	421,469
Current assets
Debtors and prepayments		635	2,772
Cash and short-term deposits		32,012	18,593
		______	______
		32,647	21,365
		______	______
Creditors: amounts falling due within one year
Traded options		(255)	(118)
Other creditors		(987)	(6,049)
Bank loan		(32,668)	(38,010)
		______	______
		(33,910)	(44,177)
		______	______
Net current liabilities		(1,263)	(22,812)
		______	______
Net assets		441,300	398,657
		______	______
Capital and reserves
Called-up share capital		7,108	7,108
Share premium account		48,467	48,467
Capital redemption reserve		15,452	15,452
Capital reserve	9	353,489	310,920
Revenue reserve		16,784	16,710
		______	______
Equity shareholders' funds		441,300	398,657
		______	______
Net asset value per share (pence){A}	10	310.44	280.44
		______	______
{A} Comparative figures for the year ended 31 January 2019 have been restated due to the sub-division of each existing Ordinary share of 25p into five Ordinary shares of 5p each on 10 June 2019.

CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

Six months ended 31 July 2019
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2019	7,108	48,467	15,452	310,920	16,710	398,657
Return after taxation	-	-	-	42,569	7,608	50,177
Dividends paid (note 6)	-	-	-	-	(7,534)	(7,534)
	______	______	______	______	______	______
Balance at 31 July 2019	7,108	48,467	15,452	353,489	16,784	441,300
	______	______	______	______	______	______
Six months ended 31 July 2018
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2018	7,108	48,467	15,452	306,809	13,813	391,649
Return after taxation	-	-	-	20,568	7,215	27,783
Dividends paid (note 6)	-	-	-	-	(6,823)	(6,823)
	______	______	______	______	______	______
Balance at 31 July 2018	7,108	48,467	15,452	327,377	14,205	412,609
	______	______	______	______	______	______

CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)

	Six months ended	Six months ended
	31 July 2019	31 July 2018
	£'000	£'000
Operating activities
Net return before finance costs and taxation	51,751	29,202
Adjustments for:
Net gains on investments	(44,847)	(23,421)
Realised losses on foreign exchange transactions	1,101	1,876
Decrease/(increase) in dividend income receivable	156	(129)
Decrease /(increase) in fixed interest income receivable	20	(5)
Decrease/(increase) in derivatives	(136)	435
Decrease in other debtors	18	3
Increase/(decrease) in other creditors	388	(890)
Tax on overseas income	(875)	(923)
Amortisation of fixed income book cost	8	16
	______	______
Net cash flow from operating activities	7,584	6,164
Investing activities
Purchases of investments	(79,212)	(77,111)
Sales of investments	99,636	71,933
	______	______
Net cash flow from investing activities	20,424	(5,178)
Financing activities
Interest paid	(612)	(495)
Equity dividends paid	(7,534)	(6,823)
(Repayment)/drawdown of loans	(7,729)	3,510
	______	______
Net cash used in financing activities	(15,875)	(3,808)
	______	______
Increase/(decrease) in cash	12,133	(2,822)
	______	______
Analysis of changes in cash during the period
Opening balance	18,593	19,636
Effect of exchange rate fluctuations on cash held	1,286	1,087
Increase/(decrease) in cash as above	12,133	(2,822)
	______	______
Closing balance	32,012	17,901
	______	______

NOTES:

1.	Accounting policies
	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 condensed interim financial statements have been prepared using the same accounting policies as the preceding annual financial statements.

		Six months ended	Six months ended
		31-Jul-19	31-Jul-18
2.	Gains on investments	£'000	£'000
	Realised gains on sales{A}	32,286	25,366
	Movement in investment holding gains	12,561	(1,945)
		______	______
		44,847	23,421
		______	______
	{A} Includes losses realised on the exercise of traded options of £1,548,000 (31 July 2018 - £917,000) which are reflected in the capital column of the Condensed Statement of Comprehensive Income in accordance with accounting policies.

		Six months ended	Six months ended
		31 July 2019	31 July 2018
3.	Income	£'000	£'000
	Income from overseas listed investments
	Dividend income	7,136	6,208
	REIT income	411	432
	Interest income from investments	322	304
		______	______
		7,869	6,944
		______	______
	Other income from investment activity
	Traded option premiums	1,903	2,544
	Deposit interest	151	102
		______	______
		2,054	2,646
		______	______
	Total income	9,923	9,590
		______	______

		Six months ended	Six months ended
		31 July 2019	31 July 2018
4.	Administrative expenses	£'000	£'000
	Directors' fees	62	57
	Secretarial and administration fees	58	56
	Promotional activities	104	106
	Auditor's remuneration:
	- Fees payable to the Company's auditor for the audit of the annual accounts	9	8
	Custodian charges	10	10
	Registrar's fees	34	32
	Professional fees	17	111
	Depositary charges	26	24
	Other	54	95
		______	______
		374	499
		______	______

5.	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 2020 is 19% (2019 - 19%).
	Detailed below is an analysis of the tax charge for each period.
		Six months ended 31 July 2019			Six months ended 31 July 2018
		Revenue	Capital	Total	Revenue	Capital	Total
	Taxation	£'000	£'000	£'000	£'000	£'000	£'000
	UK corporation tax	325	(325)	-	374	(374)	-
	Overseas tax suffered	972	-	972	923	-	923
		______	______	______	______	______	______
	Total tax charge for the period	1,297	(325)	972	1,297	(374)	923
		______	______	______	______	______	______

		Six months ended	Six months ended
		31 July 2019	31 July 2018
6.	Dividends	£'000	£'000
	3rd interim dividend for 2019 - 1.7p (2018 - 1.6p){A}	2,417	2,274
	Final dividend for 2019 - 3.6p (2018 - 3.2p){A}	5,117	4,549
		______	______
		7,534	6,823
		______	______
	{A} Rates have been restated due to the sub-division of each existing Ordinary share of 25p into five Ordinary shares of 5p each on 10 June 2019.
	The Company pays four dividends per year. The first interim dividend of 1.7p (2019 - 1.6p) for the year ending 31 January 2020 was paid on 2 August 2019 to shareholders on the register at 19 July 2019, with an ex-dividend date of 18 July 2019. A second interim dividend of 1.7p (2019 - 1.6p) for the year ending 31 January 2020, will be paid on 25 October 2019 to shareholders on the register at 4 October 2019. The ex-dividend date is 3 October 2019.

		Six months ended	Six months ended
		31 July 2019	31 July 2018
7.	Return per Ordinary share	£'000	£'000
	Based on the following figures:
	Revenue return	7,608	7,215
	Capital return	42,569	20,568
		______	______
	Total return	50,177	27,783
		______	______
	Weighted average number of shares in issue{A}	142,152,520	142,152,520
		_________	_________
		p	p
	Revenue return per Ordinary share{A}	5.35	5.07
	Capital return per Ordinary share{A}	29.95	14.47
		______	______
	Total return per Ordinary share{A}	35.30	19.54
		______	______
	{A} Comparative figures for the six months ended 31 July 2018 have been restated due to the sub-division of each existing Ordinary share of 25p into five Ordinary shares of 5p each on 10 June 2019.

8.	Transaction costs
	During the six months ended 31 July 2019 expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows:
		Six months ended	Six months ended
		31 July 2019	31 July 2018
		£'000	£'000
	Purchases	31	29
	Sales	73	59
		______	______
		104	88
		______	______

9.	Capital reserve
	The capital reserve reflected in the Condensed Statement of Financial Position at 31 July 2019 includes gains of £72,454,000 (31 January 2019 - £59,893,000) which relate to the revaluation of investments held at the reporting date.

		As at	As at
10.	Net asset value per Ordinary share	31 July 2019	31 January 2019
	Net assets attributable (£'000)	441,300	398,657
	Number of Ordinary shares in issue{A}	142,152,520	142,152,520
	Net asset value per Ordinary share (p){A}	310.44	280.44
	{A} Comparative figures for the year ended 31 January 2019 have been restated due to the sub-division of each existing Ordinary share of 25p into five Ordinary shares of 5p each on 10 June 2019.

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:
	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 2019		Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities		a)	432,605	-	-	432,605
	Quoted bonds		b)	-	9,958	-	9,958
	Total			432,605	9,958	-	442,563
	Financial liabilities at fair value through profit or loss
	Derivatives		c)	-	(255)	-	(255)
				______	______	______	______
	Net fair value			432,605	9,703	-	442,308
				______	______	______	______
				Level 1	Level 2	Level 3	Total
	As at 31 January 2019		Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities		a)	410,252	-	-	410,252
	Quoted bonds		b)	-	11,217	-	11,217
				______	______	______	______
	Total			410,252	11,217	-	421,469
				______	______	______	______
	Financial liabilities at fair value through profit or loss
	Derivatives		c)	-	(118)	-	(118)
				______	______	______	______
	Net fair value			410,252	11,099	-	421,351
				______	______	______	______
	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 bid prices at the reporting date. Investments categorised as Level 2 are not considered to trade in active markets
	c)	Derivatives
		The Company's investment in exchange traded options have been fair valued using quoted prices and have been classified as Level 2 as they are not considered to trade in active markets.

12.	Transactions with the Manager
	The Company has agreements with Aberdeen Standard Fund Managers Limited ("ASFML" or the "Manager") for the provision of investment management, secretarial, accounting and administration and promotional activity services.
	The annual management fee is charged on gross assets after deducting current liabilities and borrowings and excluding commonly managed funds (Net Assets), on a tiered basis. The annual management fee is charged at 0.75% of Net Assets up to £350 million, 0.6% of Net Assets between £350 million and £500 million, and 0.5% of Net Assets above £500 million. The management fee is chargeable 30% to revenue and 70% to capital. During the period £1,544,000 (31 July 2018 - £1,434,000) of investment management fees were payable to the Manager, with a balance of £800,000 (31 July 2018 - £756,000) being due to ASFML at the period end.
	The secretarial fee of £115,000 per annum is chargeable 100% to revenue and is payable monthly in arrears. During the period £58,000 (31 July 2018 - £56,000) of secretarial fees were payable to the Manager, with a balance of £19,000 (31 July 2018 - £19,000) being due to ASFML 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 £104,000 (31 July 2018 - £106,000) of fees were payable, with a balance of £70,000 (31 July 2018 - £18,000) being due to ASFML at the period end.

13.	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.

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 2019 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 2019 and 31 July 2018 have not been audited or reviewed by the Company's auditor.

15.	This Half-Yearly Financial Report was approved by the Board on 23 September 2019.

16.     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 October 2019 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

For further information, please contact:-

Company Secretary

Aberdeen Standard Investments                                                                       0131 528 4000

 

END

 

 

IR EXLFLKKFLBBZ