Half Yearly Results

RNS Number : 9165B

North American Income Trust (The)

26 September 2018

 

Legal Entity Identifier (LEI): 5493007GCUW7G2BKY360

26 September 2018

THE NORTH AMERICAN INCOME TRUST PLC

HALF YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS TO 31 JULY 2018

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

For further information, please contact:-

Gary Jones

Aberdeen Asset Management PLC                                                           0207 463 6000

INTERIM BOARD REPORT - CHAIRMAN'S STATEMENT

Performance

Over the six-month period ended 31 July 2018, the Company's net asset value per share rose by 7.2% on a total return basis in sterling terms, outperforming the Russell 1000 Value Index's return of 6.7%.  The S&P 500 Index's return for the period was 9.2%.The Russell 1000 Value Index is used as a reference index since it reflects the objectives of the Trust more appropriately and is the industry standard for equity income funds. 

The Company's absolute and relative performance over the intermediate term has been strong. For the three-year period ended 31 July 2018, the cumulative NAV return was 85.6% compared to the 56.2% return of the Russell 1000 Value Index and 69.5% return of the S&P 500 Index.

Dividend

The revenue return per Ordinary share increased by 22.7% to 25.4p for the six-month period. The Board has declared a second quarterly dividend of 8.0p per share, giving total dividends for the first half of the year of 16.0p (2017 - 15.0p), a 6.7% increase. The second quarterly dividend is payable on 26 October 2018 to shareholders on the register on 5 October 2018.

Portfolio

As of 31 July 2018, the portfolio comprised 41 equity holdings and 11 corporate bonds, with equities representing 93% of total assets.

Total revenue from equity holdings in the portfolio over the six-month period was £6.2 million (full year to 31 January 2018 - £12.9 million).  Most of the Trust's equity holdings continued their established record of dividend growth. Nearly 90% of the equity holdings raised their dividends over the past year, with a weighted average increase of approximately 11%.  Shareholders should note that growth of revenue can be subject to currency movements as shown in the graph.

During the first half of the financial year, the Company received premiums totaling £2.5 million (full year to 31 January 2018 - £2.4 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 26.5% of total income for the half year (full year to 31 January 2018 - 14.9%). As the Company's exposure to corporate bonds has decreased over recent years, interest income from investments was lower and represented 3.2% of total income for the six month period (full year to 31 January 2018 - 4.3%). Bond coupons and option premiums will remain secondary sources of income in the belief that dividends must remain the overwhelming source of income available for distribution.

The amount of option income received in Q1 2018 was significantly larger than in previous quarters as a number of larger options were written during a period of increased volatility.  This level of increased option income is not expected be maintained for the whole financial year.

Further details of the portfolio are shown below.

Market & Economic Review

Major North American equity market indices moved higher over the six-month period ended 31 July 2018, buoyed by generally upbeat economic data reports and positive corporate earnings news. This offset investors' concerns regarding rising interest rates and US trade policy under the administration of President Trump.

In the second half of the review period, investors became increasingly concerned about the potential impact of the trade dispute between the US and China. On 6 July 2018, the US imposed a 25% tariff on US$34 billion of imports from China and the expectation is that Beijing will retaliate with levies on US imports. However, the issue extends beyond those two nations, with the Trump administration also implementing tariffs on imports from the European Union, Canada and Mexico. At the same time, the flattening of the US Treasury yield curve raised questions about the risk of recession. With yields on short dated bonds rising more sharply than long dated, the ten- to two-year spread had tightened by 50%, ending the review period at 0.29%- the narrowest margin since 2007.

As widely expected, the US Federal Reserve (Fed) raised its benchmark interest rate by 0.75% in three increments to a range of 1.75% to 2.00% following its meetings in December 2017, and March and June 2018. In a statement accompanying its rate increase in June, the Fed commented that "the labor market has continued to strengthen and……economic activity has been rising at a solid rate." The consensus expectation is for the Fed to implement two more rate increases for the remainder of the 2018 calendar year.

US GDP growth climbed from 2.2% to 4.1% between the first and second quarters of 2018. The 4.1% increase in the second quarter - the highest growth rate in four years - was attributable mainly to rises in consumer spending and exports, which more than offset the negative impact of declines in private inventory investment and residential fixed investment. US employment expanded by a monthly average of roughly 221,000 over the six-month reporting period, and the unemployment rate declined to 3.9%, just above the 50-year low of 3.8% that it reached in May 2018.

Gearing

The Board believes that sensible use of modest financial gearing should enhance returns to our shareholders over the longer term. The Company's loan facility agreement with Scotiabank (Ireland) Designated Activity Company for $75 million is currently drawn in an amount of $50 million. Net gearing at 31 July 2018 was £20.2 million (31 January 2018 - £12.0 million), representing 4.9% of net assets (31 January 2018 - 3.1%), which includes the offset of cash held used as collateral against open option positions. $50 million is currently drawn down at an interest rate of 97.5 basis points above LIBOR. 

Board Composition

Guy Crawford and Archie Hunter retired from the Board on 18 September 2018. Both have served this Company over many years and I thank them on behalf of  shareholders for their wise counsel and the expertise that they both brought to bear in their roles as non-executive directors.

Karyn Lamont and Susannah Nicklin were appointed as non-executive directors of the Company with effect from 18 September 2018; both bring with them a wealth of experience.  Karyn, a chartered accountant and a former partner of PwC, joins as Audit Committee Chairman.  She has been involved with auditing for over 25 years, specialising in the financial services sector across the UK. Susannah is an investment and financial services professional with over 20 years of international experience.

Outlook

The Manager believes that empirical evidence continues to indicate a robust U.S. economy, which thus far has translated into a healthy start to the third-quarter 2018 earnings season. However, there has been a growing variability of results across the economy and there have been examples of margin pressure driven by higher input costs from rising raw materials prices as well as labour costs.  These pressures may largely abate given the ability to push through prices despite near-term lags in passing through such costs. In addition, demand in the housing and automotive markets has become more erratic as high housing prices have yet to generate a strong supply response, and vehicle sales appear to be flattening.

At this point in the cycle, questions arise more frequently about the sustainability of above-trend revenue growth for many of the companies that we hold in the portfolio. In the light of this our Manager continues to emphasise its bottom-up analysis for stock selection, continuing to seek companies that it believes have the best prospects under varying market conditions.

James Ferguson

Chairman

25 September 2018

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 9 to 10 of the 2018 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 2019.

There are a large number of global 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, 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 2018 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

25 September 2018

FINANCIAL HIGHLIGHTS

	As at	As at
	31 July 2018	31 January 2018	% change
Net asset value per Ordinary share	1451.3p	1377.6p	+5.3
Share price per Ordinary share (mid)	1350.0p	1300.0p	+3.8
Discount to net asset value	7.0%	5.6%
Ongoing charges ratio{A}	0.96%	0.98%
{A} Ongoing charges ratio calculated in accordance with guidance issued by the AIC as the total of the investment management fee and administrative expenses (annualised) divided by the average cum income net asset value throughout the year. The ratio for 31 July 2018 is based on forecast ongoing charges for the year ending 31 January 2019. Considered to be an Alternative Performance Measure.
	Six months to	Six months to
	31 July 2018	31 July 2017	% change
Revenue return per Ordinary share	25.4p	20.7p	+22.7
Interim dividends	16.0p{A}	15.0p	+6.7
{A}       Includes a first interim dividend of 8.0p paid on 3 August 2018 and a second interim dividend of 8.0p payable on 26 October 2018.

PERFORMANCE - TOTAL RETURN

	6 months ended	Year ended	3 Years ended	31 May 2012{B}
	31 July 2018	31 July 2018	31 July 2018	to 31 July 2018
	%	%	% pa	% pa
Net asset value per Ordinary share{A}	7.2	14.2	21.5	15.6
Share price per Ordinary share{A}	5.8	17.9	22.9	16.0
Russell 1000 Value Index	6.7	10.1	16.0	16.9
S&P 500 Index (in sterling terms)	9.2	16.8	19.2	18.6
{A}       Total return represents capital return plus dividends reinvested. Considered to be an Alternative Performance Measure.
{B}      Date of investment mandate change.

INVESTMENT PORTFOLIO - EQUITIES

As at 31 July 2018

			Total
		Valuation	portfolio
Company	Industry classification	£'000	%
BB&T	Banks	17,431	4.0
Chevron	Oil, Gas & Consumable Fuels	17,327	4.0
Philip Morris	Tobacco	16,447	3.8
Johnson & Johnson	Pharmaceuticals	16,164	3.7
Cisco Systems	Communications Equipment	16,120	3.7
Procter & Gamble	Household Products	15,415	3.5
Pfizer	Pharmaceuticals	15,220	3.5
Royal Bank Of Canada	Banks	14,270	3.3
Regions Financial	Banks	14,187	3.3
DowDuPont	Chemicals	14,155	3.3
Ten largest equity investments		156,736	36.1
Nutrien	Chemicals	12,398	2.8
CME Group	Capital Markets	12,130	2.8
Verizon Communications	Diversified Telecommunication Services	11,810	2.7
Huntington Bancshares	Banks	11,771	2.7
Union Pacific	Road & Rail	11,427	2.6
Telus	Diversified Telecommunication Services	11,136	2.6
Genuine Parts	Distributors	11,127	2.6
Provident Financial	Thrifts & Mortgage Finance	10,709	2.4
Schlumberger	Energy Equipment & Services	10,295	2.4
TransCanada	Oil, Gas & Consumable Fuels	10,277	2.4
Twenty largest equity investments		269,816	62.1
Molson Coors Brewing	Beverages	10,215	2.4
CMS Energy	Multi-Utilities	9,213	2.1
Meredith	Media	9,117	2.1
Microsoft	Software	8,896	2.0
Texas Instruments	Semiconductors & Semiconductor Equipment	8,486	2.0
American International	Insurance	8,418	1.9
Umpqua	Banks	8,119	1.9
Iron Mountain	Equity Real Estate Investment Trusts (REITs)	8,030	1.9
Orion Engineered Carbons	Chemicals	7,501	1.7
Abbott Laboratories	Health Care Equipment & Supplies	7,494	1.7
Thirty largest equity investments		355,305	81.8
Gilead Sciences	Biotechnology	7,417	1.7
Nucor	Metals & Mining	7,143	1.6
Pepsico	Beverages	7,014	1.6
Glacier Bancorp	Banks	6,510	1.5
Ventas	Equity Real Estate Investment Trust (REITs)	6,447	1.5
Canadian Western Bank	Banks	6,410	1.5
Praxair	Chemicals	6,385	1.5
L Brands	Specialty Retail	6,036	1.4
Tapestry	Textiles, Apparel & Luxury Goods	5,388	1.3
ConocoPhillips	Oil, Gas & Consumable Fuels	4,401	1.0
Forty largest equity investments		418,456	96.4
Paychex	IT Services	4,209	1.0
Total equity investments		422,665	97.4

INVESTMENT PORTFOLIO - FIXED INTEREST

As at 31 July 2018

			Total
		Valuation	portfolio
Company	Industry classification	£'000	%
HCA 5.875% 15/02/26	Healthcare Facilities	1,450	0.3
CCO Holdings Capital 5.5% 01/05/26	Media	1,419	0.3
Qwest 7.25% 15/10/35	Telecommunications	1,201	0.3
Cheniere Corpus Christi 5.875%  31/03/25	Oil, Gas & Consumable Fuels	1,196	0.3
Parsley Energy Finance 5.375% 15/01/25	Exploration & Production	1,143	0.2
Lennar 4.5% 30/04/24	Construction	964	0.2
First Data 7% 01/12/23	Consumer Finance	879	0.2
Graham Holdings 5.75% 01/06/26	Diversified Consumer Services	831	0.2
Harland Clarke Holdings 6.875% 01/03/20	IT Services	828	0.2
Symantec 5% 15/04/25	Software	805	0.2
Nationstar 6.5% 01/06/22	Diversified Financial Services	760	0.2
		______	______
Total fixed interest investments		11,476	2.6
		______	______
Total investments		434,141	100.0
		______	______

GEOGRAPHICAL ANALYSIS

As at 31 July 2018

	Equities	Bonds	Total
Country	%	%	%
Canada	12.6	-	12.6
USA	84.8	2.6	87.4
	______	______	______
	97.4	2.6	100.0
	______	______	______

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

		Six months ended 31 July 2018
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Gains/(losses) on investments	2	-	23,421	23,421
Exchange (losses)/gains		-	(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)	7	25.38	72.34	97.72
		________	________	________
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 2017
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Gains/(losses) on investments	2	-	(4,034)	(4,034)
Exchange (losses)/gains		-	1,109	1,109
Income	3	7,941	-	7,941
Investment management fee		(442)	(1,030)	(1,472)
Administrative expenses	4	(377)	-	(377)
		________	________	________
Net return before finance costs and taxation		7,122	(3,955)	3,167
Finance costs		(144)	(334)	(478)
		________	________	________
Return before taxation		6,978	(4,289)	2,689
Taxation	5	(1,072)	168	(904)
		________	________	________
Return after taxation		5,906	(4,121)	1,785
		________	________	________
Return per share (pence)	7	20.67	(14.42)	6.25
		________	________	________

CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

		As at	As at
		31 July 2018	31 January 2018
	Notes	£'000	£'000
Non-current assets
Investments at fair value through profit or loss		434,141	406,593
		________	________
Current assets
Debtors and prepayments		882	620
Cash and short-term deposits		17,901	19,636
		________	________
		18,783	20,256
		________	________
Creditors: amounts falling due within one year
Traded options		(126)	(561)
Other creditors		(2,072)	(2,995)
Bank loans		(38,117)	(31,644)
		________	________
		(40,315)	(35,200)
		________	________
Net current liabilities		(21,532)	(14,944)
		________	________
Net assets		412,609	391,649
		________	________
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	327,377	306,809
Revenue reserve		14,205	13,813
		________	________
Equity shareholders' funds		412,609	391,649
		________	________
Net asset value per share (pence)	10	1,451.29	1,377.57
		________	________

CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

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
	_____	_______	________	______	______	______
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 for cancellation	(38)	-	38	(1,836)	-	(1,836)
Return after taxation	-	-	-	(4,121)	5,906	1,785
Dividends paid (note 6)	-	-	-	-	(6,295)	(6,295)
	_____	_______	________	______	______	______
Balance at 31 July 2017	7,123	48,467	15,437	289,752	11,976	372,755
	_____	_______	________	______	______	______

CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)

	Six months ended	Six months ended
	31 July 2018	31 July 2017
	£'000	£'000
Operating activities
Net return before finance costs and taxation	29,202	3,167
Adjustments for:
Net (gains)/losses on investments	(23,421)	4,034
Realised losses/(gains) on foreign exchange transactions	1,876	(1,109)
Increase in dividend income receivable	(129)	(133)
(Increase)/decrease in fixed interest income receivable	(5)	32
Increase/(decrease) in derivatives	435	(134)
Decrease in other debtors	3	3
(Decrease)/increase in other creditors	(890)	216
Tax on overseas income	(923)	(902)
Amortisation of fixed income book cost	16	15
	_______	_______
Net cash flow from operating activities	6,164	5,189
Investing activities
Purchases of investments	(77,111)	(60,016)
Sales of investments	71,933	63,724
	_______	_______
Net cash flow from investing activities	(5,178)	3,708
Financing activities
Interest paid	(495)	(473)
Equity dividends paid	(6,823)	(6,295)
Buyback of Ordinary shares for cancellation	-	(1,836)
	_______	_______
Net cash used in financing activities	(7,318)	(8,604)
	_____	_______
(Decrease)/increase in cash	(6,332)	293
	_______	_______
Analysis of changes in cash during the period
Opening balance	19,636	12,609
Effect of exchange rate fluctuations on cash held	4,597	(746)
(Decrease)/increase in cash as above	(6,332)	293
	_______	_______
Closing balance	17,901	12,156
	_______	_______

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 July 2018	31 July 2017
2.	Gains/(losses) on investments	£'000	£'000
	Realised gains on sales{A}	25,366	23,676
	Movement in investment holding gains	(1,945)	(27,710)
		_______	_______
		23,421	(4,034)
		_______	_______
	{A} Includes losses realised on the exercise of traded options of £917,000 (31 July 2017 - £874,000) 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 2018	31 July 2017
3.	Income	£'000	£'000
	Income from overseas listed investments
	Dividend income	6,208	6,100
	REIT income	432	302
	Interest income from investments	304	372
		_______	_______
		6,944	6,774
		_______	_______
	Other income from investment activity
	Traded option premiums	2,544	1,138
	Deposit interest	102	29
		_______	_______
		2,646	1,167
		_______	_______
	Total income	9,590	7,941
		_______	_______

		Six months ended	Six months ended
		31 July 2018	31 July 2017
4.	Administrative expenses	£'000	£'000
	Directors' fees	57	47
	Secretarial and administration fees	56	54
	Promotional activities	106	106
	Auditor's remuneration:
	Fees payable to the Company's auditor for the audit of the annual accounts	8	9
	Custodian charges	10	14
	Registrar's fees	32	33
	Professional fees	111	31
	Depositary charges	24	24
	Other	95	59
		_______	_______
		499	377
		_______	_______

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 2019 is a rate of 19%.
	Detailed below is an analysis of the tax charge for each period.
		Six months ended 31 July 2018			Six months ended 31 July 2017
		Revenue	Capital	Total	Revenue	Capital	Total
	Taxation	£'000	£'000	£'000	£'000	£'000	£'000
	UK corporation tax	374	(374)	-	168	(168)	-
	Overseas tax suffered	923	-	923	904	-	904
		_______	_______	_______	_______	______	______
	Total tax charge for the period	1,297	(374)	923	1,072	(168)	904
		_______	_______	_______	_______	______	______

		Six months ended	Six months ended
		31 July 2018	31 July 2017
6.	Dividends	£'000	£'000
	3rd interim dividend for 2018 - 8.0p (2017 - 7.5p)	2,274	2,149
	Final dividend for 2018 - 16.0p (2017 - 14.5p)	4,549	4,146
		_______	_______
		6,823	6,295
		_______	_______
	The Company pays four dividends per year. The first interim dividend of 8.0p (2018 - 7.5p) for the year ending 31 January 2019 was paid on 3 August 2018 to shareholders on the register at 20 July 2018, with an ex-dividend date of 19 July 2018. A second interim dividend of 8.0p (2018 - 7.5p) for the year ending 31 January 2019, will be paid on 26 October 2018 to shareholders on the register at 5 October 2018. The ex-dividend date is 4 October 2018.

		Six months ended	Six months ended
		31 July 2018	31 July 2017
7.	Return per Ordinary share	£'000	£'000
	Based on the following figures:
	Revenue return	7,215	5,906
	Capital return	20,568	(4,121)
		_______	_______
	Total return	27,783	1,785
		_______	_______
	Weighted average number of shares in issue	28,430,504	28,582,134
		_________	_________
		p	p
	Revenue return per Ordinary share	25.38	20.67
	Capital return per Ordinary share	72.34	(14.42)
		_______	_______
	Total return per Ordinary share	97.72	6.25
		_______	_______

8.	Transaction costs
	During the six months ended 31 July 2018 expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains/(losses) on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows:
		Six months ended	Six months ended
		31 July 2018	31 July 2017
		£'000	£'000
	Purchases	29	28
	Sales	59	61
		_______	_______
		88	89
		_______	_______

9.	Capital reserve
	The capital reserve reflected in the Condensed Statement of Financial Position at 31 July 2018 includes gains of £99,441,000 (31 January 2018 - £101,386,000) 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 2018	31 January 2018
	Net assets attributable (£'000)	412,609	391,649
	Number of Ordinary shares in issue	28,430,504	28,430,504
	Net asset value per Ordinary share (p)	1,451.29	1,377.57

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 2018			Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities			a)	422,665	-	-	422,665
	Quoted bonds			b)	-	11,476	-	11,476
					_______	_______	_______	_______
	Total				422,665	11,476	-	434,141
					_______	_______	_______	_______
	Financial liabilities at fair value through profit or loss
	Derivatives			c)	-	(126)	-	(126)
					_______	_______	_______	_______
	Net fair value				422,665	11,350	-	434,015
					_______	_______	_______	_______
					Level 1	Level 2	Level 3	Total
	As at 31 January 2018			Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities			a)	397,944	-	-	397,944
	Quoted bonds			b)	-	8,649	-	8,649
					_______	_______	_______	_______
	Total				397,944	8,649	-	406,593
					_______	_______	_______	_______
	Financial liabilities at fair value through profit or loss
	Derivatives			c)	-	(561)	-	(561)
					_______	_______	_______	_______
	Net fair value				397,944	8,088	-	406,032
					_______	_______	_______	_______
	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 2018 and 31 January 2018 have been fair valued using a marked-to-market model and has been classed as Level 2.

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 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 £1,434,000 (31 July 2017 - £1,472,000) of investment management fees were payable to the Manager, with a balance of £756,000 (31 July 2017 - £752,000) being due to AFML at the period end.
	The secretarial fee of £112,000 per annum is chargeable 100% to revenue and is payable monthly in arrears. During the period £56,000 (31 July 2017 - £54,000) of secretarial fees were payable to the Manager, with a balance of £19,000 (31 July 2017 - £18,000) 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 2017 - £106,000) of fees were payable, with a balance of £18,000 (31 July 2017 - £18,000) being due to AFML 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.	Subsequent events
	There has been no buyback of Ordinary shares by the Company subsequent to the reporting period end.

15.	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 2018 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 2018 and 31 July 2017 has not been audited or reviewed by the Company's auditor.

16.	This Half-Yearly Financial Report was approved by the Board on 25 September 2018.

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 2018 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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