North American Regulatory News (NAIT)

THE NORTH AMERICAN INCOME TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JANUARY 2024

Legal Entity Identifier (LEI): 5493007GCUW7G2BKY360

Investment Objective

To provide investors with above average dividend income and long-term capital growth through active management of a portfolio consisting predominately of S&P 500 US equities.

Financial Results and Performance

Performance Highlights

Financial Calendar, Dividends and Highlights

Dividends

Highlights

Strategic Report

Chair's Statement

Market Review

Macroeconomic uncertainty prevailed during the Company's financial year to 31 January 2024. Investors were particularly focused on monetary policy developments, geopolitical tensions and the uncertainty surrounding the possibility of either a recession or a soft landing for the US economy.

Against this backdrop, the Company's net asset value (NAV) total return per share (which includes dividends reinvested) decreased by 1.6% in sterling terms compared to a 2.6% rise in the total return of the Company's primary reference index, the Russell 1000 Value Index, in sterling terms. The Company's share price total return fell by 0.9% as the Company's discount to NAV narrowed marginally to 9.1%, from 9.3% at the previous year end.

The investment trust sector, in general, experienced a widening of discounts over much of 2023, exacerbated by global uncertainty and higher interest rates available for cash which in turn led to increased activity in the sector in an effort to realise shareholder value. The Company uses its shareholder authority to buyback its own shares seeking to limit discount volatility and also provide liquidity in the Company's shares while signalling our confidence in the intrinsic value of the Company's portfolio.

Even with the volatility witnessed in financial markets, US equities recorded gains over the year, with growth stocks significantly outperforming value stocks. The Investment Manager's Review goes into further detail on performance.

The US Federal Reserve (the "Fed") continued with its monetary tightening measures in the first half of the financial year, with the central bank increasing the target range for the federal funds rate to 5.25%-5.50%, a level unseen in over two decades. In the latter half of the financial year, the Fed maintained interest rates and the messaging turned more dovish as price pressures reduced, fuelling expectations of monetary easing. However, annual core inflation remained above the Fed's 2% target, while conflicts in the Middle East and Ukraine increased the risk of an uptick in inflation and, at the end of 2023, the Fed signalled that it would proceed cautiously.

On a positive note, the US economy remained strong and avoided the widely anticipated recession after the Fed's prolonged period of monetary tightening, as well as the banking sector failures that occurred earlier in 2023. The US government reached an agreement in June 2023 to suspend its debt ceiling, thereby avoiding a government shutdown, which helped markets. As the financial year progressed, investors embraced the likelihood of a soft landing for the economy, as opposed to a recession. Nevertheless, as I allude to in the Outlook section, the Board and Manager are well aware that macroeconomic uncertainty continues, especially with the ongoing conflicts in the Middle East and Ukraine and the upcoming US election.

Performance

The Company's portfolio underperformed its reference benchmark in sterling terms over the year to 31 January 2024. Stock selection, mainly in the materials sector, weighed on performance relative to the Russell 1000 Value Index, the primary reference index. Sector allocation, especially in the industrials sector, was also negative.

For more details on performance, refer to the Investment Manager's review.

The Board monitors portfolio performance regularly and receives quarterly reports from the Manager on portfolio changes and the decisions behind them.

Revenue Account

The Company's equity portfolio generated £17.1 million in revenue during the financial year, close to the £17.8 million in the previous year. Options continue to be part of the portfolio and represented 17.2% of the Company's total gross income, whilst corporate bonds accounted for only 2.6%. The Company's revenue return per ordinary share dipped marginally to 12.0 pence compared to last year's 12.2 pence.

Dividend

The Board remains committed to the Company's progressive dividend policy and extending the track record of thirteen consecutive years of dividend growth. The Board declared, on 28 March 2024, a fourth interim dividend of 3.9 pence per share, resulting in total dividends for the year ended 31 January 2024 of 11.7 pence per share (2023 - 11.0p) and representing annual growth of 6.4%. The fourth interim dividend will be paid on 3 May 2024 to shareholders on the register on 12 April 2024 (ex-dividend date: 11 April 2024).

In reaching its decision on dividends, the Board always balances the wish to increase the amount distributed to shareholders with the recognition that currency can have a variable impact on earnings per share. The Investment Manager's continued efforts to build the revenue reserve, which stands at over one year's cover, gives comfort that at times of stress the Company can dip into this reserve to maintain the dividend.

Management of Premium and Discount

The Company's share price ended the year at 289.0 pence, a 9.1% discount to the total NAV of 317.8 pence. This compares to a 9.3% discount at the end of the 2023 financial year. The Board continues to work with the Manager in both promoting the Company's benefits to a wider audience and providing liquidity to the market through the use of share buybacks. Over the course of the year, the Company's shares mainly traded at discounts ranging between 9.0% and 15.0%.

During the year, 2,882,402 shares were bought back and cancelled at an average price of 275 pence and an average discount of 11.5%. The total cost was £8.0 million. Since 31 January 2024, the Company has bought back an additional 1,187,253 Ordinary shares at a cost of £3.3m.

Gearing

The Board believes that the sensible use of gearing should enhance returns to our shareholders over the longer term. The Company benefits from its long-term financing agreements totalling US$50 million with MetLife which comprise two loans of US$25 million with terms of 10 and 15 years. These are fixed at 2.7% and 3.0% per annum expiring in December 2030 and 2035 respectively. Net gearing at 31 January 2024 stood at 4.1% (2023: 2.9%).

Promotional Activity

During the last year we have continued to work with our Manager to strengthen and modernise our marketing efforts. We aim to keep all shareholders informed and updated on their investment, particularly during periods of volatility. Updates include commentary, articles and videos allowing investors to hear directly from the Investment Manager on a regular basis - to understand both the outlook and the decisions being made within the portfolio itself. All of this communication can be found on the Company's website, northamericanincome.co.uk, and helps to inform shareholders' investment decisions to ensure they remain aligned with their individual needs.

You can also follow 'abrdn Investment Trusts' on LinkedIn and X (previously Twitter) or register for email updates here: northamericanincome.co.uk/signup

The Board also notes the announcement by abrdn plc, in December 2023, that it had commenced a programme whereby it would purchase shares in the Company equivalent to six months' management fees; as at the date of approval of this report, 254,476 shares had been purchased by the Manager at an aggregate cost of £727,000.

Environmental, Social and Governance ("ESG") Matters

The Investment Manager continues to engage regularly with the portfolio's holdings to understand their processes, prospects and reports, including on matters related to environmental, social and governance issues. More information regarding the Manager's approach to ESG integration in Equities can be found in the published Annual Report.

Board Activity

In May 2023, the Board was pleased to travel to North America and meet with the Investment Manager and local experts, including analysts, senior management and economists. Directors also met with one of the investee companies which provided a deeper level of engagement than can be attained in the board room. The benefit of these face-to-face meetings is evident in the follow-up afterwards. Since our visit, the Board has focused in particular on performance attribution reporting and the Board keeps under review the most appropriate reference index against which to measure the performance of the Company. We also continue to receive updates on people change within the wider abrdn investment team and developments in these areas are being monitored with interest.

Also, during the year, Directors took the opportunity to meet with investors to gain a deeper understanding of their interests in the Company and address questions on a more informal basis. As usual, we encourage all shareholders to contact the Board with any queries by email to: northamericanincome@abrdn.com.

In the Interim Report, I announced my intention to retire as a Director of the Company at the conclusion of the forthcoming Annual General Meeting ("AGM"), having served for nine years. Since then, the Board has been reviewing its succession planning, and undertook a thorough process to appoint the next Chair. This involved the appointment of a committee to consider the skills required for the role and whether the Board had any suitable internal candidates or whether an external search was required in this instance. Charles Park put himself forward as an internal candidate and the committee, excluding Charles Park, considered his suitability for the role as Chair. Charles Park has been a strong contributor since he joined the Board in 2017 and has significant business experience and understanding of the Company that make him a preferred candidate for the role. The committee therefore unanimously recommended the appointment of Charles Park as the Chair, with effect from the conclusion of the AGM on 21 June 2024. We are delighted that he has agreed to accept the role. Patrick Edwardson has agreed to step up to become the Senior Independent Director with effect from the same date.

In view of these changes in the Board composition, the Board plans to conduct an external process to appoint a new independent Non-Executive Director. The intention is that the successful candidate will be appointed later this year and an announcement will be made to the London stock exchange in due course.

As usual, towards the end of the year, the Board undertook its board evaluation. Whilst the Board does not currently consider it appropriate to utilise an external agent for this process, due to the current size and composition of the Board, the approach is kept under review. The results of the board evaluation are outlined in the Statement of Corporate Governance in the published Annual Report.

Outlook

At the time of writing, investors expect the Fed to end its rate-hiking cycle and begin monetary easing in 2024. This is despite the Fed's somewhat conservative tone as its favoured measure of annual inflation, the core Personal Consumption Expenditures Price Index, remained above 2%. Additionally, conflict in the Middle East has increased the risk of a resurgence in inflation, due to possible oil-supply disruptions and rising shipping costs.

While a robust US economy helped the country to avoid a recession in 2023, the risk has not completely gone. The Board and Investment Manager believe that a mild recession or soft landing remain in the balance. Meanwhile, the upcoming US election may add to market volatility, as investors remain focused on potential changes to government policies. Added to this, geopolitical issues elsewhere in the world could affect the global economy and financial markets in general.

It is pleasing therefore to note that the Investment Manager has designed the Company's portfolio to include financially robust companies with strong income-generating potential and sound governance practices. The investment team continues to review the portfolio and seek opportunities to ensure its ability to withstand any volatility surrounding the forthcoming US Presidential election, as well as a possible economic downturn, as it seeks to protect against downside risks. The Company has made progressive annual dividend payments for thirteen consecutive years, including the period through the Covid-19 pandemic. The Board continues to remain positive on the strategy's ability to face turbulent times together with the sustainability of the Company's income and the comfort of the revenue reserve which has been built up to the equivalent of over one year's full dividend.

Annual General Meeting ("AGM") and Online Shareholder Presentation

AGM & Continuation Vote

The Company's AGM will be held at 12.00 Noon on 21 June 2024, at the Manager's offices at 1 George Street, Edinburgh, EH2 2LL and, as ever, the Board would welcome your attendance.

The Company is required to hold a continuation vote every three years and the next one is at the forthcoming AGM. The Directors will be voting in favour of continuation and would encourage shareholders to do likewise in the belief that the Company has a successful long-term investment formula. The Board continues to believe that the Company's investment objective of seeking to provide above average dividend income and capital growth from investment in a diversified portfolio of North American securities remains relevant for shareholders and new investors alike. Our history of annual dividend increases since 2011 means that we are included in the Association of Investment Companies 'Next Generation Dividend Heroes' listing and we hope that this progression continues.

Online Shareholder Presentation

In order to encourage as much interaction as possible with our shareholders, there will also be an online shareholder presentation at 2.00p.m. on 10 June 2024. At this event, you will receive a presentation from the Investment Manager and have the opportunity to ask questions of the Chair and the Investment Manager. As with last year, the online presentation is being held ahead of the AGM to allow shareholders to submit their proxy votes prior to the meeting. Full details on how to register for this online event are available via the website.

Shareholders are also encouraged to submit questions, in advance of both the online shareholder presentation and the AGM, to the following email address: northamericanincome@abrdn.com.

If you are unable to attend the online event, the Investment Manager's presentation will be available on the Company's website shortly after the presentation. We encourage all shareholders to complete and return the form of proxy enclosed with the Annual Report to ensure that your votes are represented at the meeting (whether or not you intend to attend in person). If you hold your shares in the Company via a share plan or a platform and would like to attend and/or vote at the AGM, then you will need to make arrangements with the administrator of your share plan or platform.

Dame Susan RiceChair4 April 2024

Overview of Strategy

Introduction

The Company is an investment trust and its Ordinary shares are listed on the premium segment of the London Stock Exchange. The Company aims to attract long-term private and institutional investors wanting to benefit from the income and growth prospects of North American companies. The Board does not envisage any change in the Company's activity in the foreseeable future. 

Investment Objective and Purpose

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.

Reference Index

The Board reviews performance against the index which it considers to be the most relevant, the Russell 1000 Value Index, together with peer group comparators (in sterling terms). The aim is to provide investors with above average dividend income from predominantly US equities which means that investment performance can diverge, possibly quite materially in either direction, from this index. The Board also compares performance against the S&P 500 Index whilst having regard to the very different make-up of this index and its inclusion of many of the fast growing tech companies which often do not pay dividends.

Investment Policy

The Company invests in a portfolio predominantly comprised of S&P 500 constituents. The Company may also invest in Canadian stocks and US mid and small capitalisation companies to provide for diversified sources of income. The Company may invest up to 20% of its gross assets in fixed income investments, which may include non-investment grade debt. The Company's investment policy is flexible, enabling it to invest in all types of securities, including (but not limited to) equities, preference shares, debt, convertible securities, warrants, depositary receipts and other equity-related securities.

The maximum single investment will not exceed 10% of gross assets at the time of investment and it is expected that the portfolio will contain around 50 holdings (including fixed income investments), with an absolute minimum of 35 holdings. The composition of the Company's portfolio is not restricted by minimum or maximum market capitalisation, sector or country weightings.

The Company may borrow up to an amount equal to 20% of its net assets.

Subject to the prior approval of the Board, the Company may also use derivative instruments for efficient portfolio management, hedging and investment purposes. The Company's aggregate exposure to such instruments for investment purposes (excluding collateral held in respect of any such derivatives) will not exceed 20% of the Company's net assets at the time of the relevant acquisition, trade or borrowing.

The Company does not generally hedge its exposure to foreign currency. The Company will not acquire securities that are unlisted or unquoted at the time of investment (with the exception of securities which are about to be listed or traded on a stock exchange). However, the Company may continue to hold securities that cease to be listed or quoted, if appropriate.

The Company may participate in the underwriting or sub-underwriting of investments where appropriate to do so.

The Company may invest in open-ended collective investment schemes and closed-ended funds that invest in the North American region. However, the Company will not invest more than 10%, in aggregate, of the value of its gross assets in other listed investment companies (including listed investment trusts), provided that this restriction does not apply to investments in any such investment companies which themselves have stated investment policies to invest no more than 15% of their gross assets in other listed investment companies.

The Company will normally be substantially fully invested in accordance with its investment objective but, during periods in which changes in economic conditions or other factors so warrant, the Company may reduce its exposure to securities and increase its position in cash and money market instruments.

Management

The Board has appointed abrdn Fund Managers Limited ("aFML") to act as the alternative investment fund manager ("AIFM" or the "Manager").

The Directors are responsible for determining the investment policy and the investment objective of the Company. The Company's portfolio is managed on a day-to-day basis by abrdn Inc. (the "Investment Manager") by way of a delegation agreement in place between aFML and abrdn Inc.

The Investment Manager invests in a range of North American companies, following a bottom-up investment process based on a disciplined evaluation of companies through direct visits by its fund managers. Stock selection is the major source of added value, concentrating on quality first, then price. The Investment Manager seeks companies that are well-positioned in their sector with strong balance sheets and cash generation and proven management through various economic cycles.Top-down investment factors are secondary in the Investment Manager's portfolio construction, with diversification rather than formal controls guiding stock and sector weights.

Key Performance Indicators ("KPIs")

The Board uses a number of financial performance measures to assess the Company's success in achieving its objective and determining the progress of the Company in pursuing its investment policy. The main KPIs identified by the Board in relation to the Company which are considered at each Board meeting are as follows:

A Considered to be an Alternative Performance Measure..

Principal Risks and Uncertainties

There are a number of risks which, if realised, could have a material adverse effect on the Company and its business model, financial position, performance and prospects. The Board has in place a robust process to identify, assess and monitor the principal risks and uncertainties facing the Company and to identify and evaluate emerging risks, such as geopolitical developments. This process is supported by a risk matrix which identifies the key risks for the Company, including emerging risks, and covers strategy, investment management, operations, shareholders, regulatory and financial obligations and third party service providers. This risk matrix is reviewed on a regular basis. A summary of the principal risks and uncertainties facing the Company, which have been identified by the Board, is set out in the following table, together with a description of the mitigating actions it has taken.

The principal risks associated with an investment in the Company's shares are published monthly in the Company's factsheet or they can be found in the pre-investment disclosure document ("PIDD") published by the Manager, both of which are on the Company's website.

In addition to these risks, the Company is exposed to the impact of geopolitical tensions, such as Russia's invasion of Ukraine, conflict in the Middle East, ongoing tension between the US and China or other changes which could have an adverse impact on stock markets and the Company's portfolio.

The Board is also conscious of the elevated threat posed by climate change and continues to monitor, through reporting from the Investment Manager, the potential risk that the portfolio investments may fail to adapt to the requirements imposed by climate change. The investment portfolio primarily consists of listed equities and corporate bonds and the quoted market (being bid) price is expected to reflect market participants' view of climate change risk so the impact of climate change is not considered to be material to the financial statements. Further details relating to the Manager's Approach to ESG Integration in Equities, including consideration of the impact of climate change, can be found in the published Annual Report..

The Company's principal risks and uncertainties have not changed materially since the year end.

Promoting the Success of the Company

The Board is required to report on how it has discharged its duties and responsibilities under section 172 of the Companies Act 2006 (the "s172 Statement"). Under section 172, the Directors have a duty to promote the success of the Company for the benefit of its members as a whole, taking into account the likely long-term consequences of decisions, the need to foster relationships with the Company's stakeholders and the impact of the Company's operations on the environment.

The Board comprises five Directors at the time of writing this report and the Company has no employees or customers in the traditional sense. As the Company has no employees, the culture of the Company is embodied in the Board of Directors. The Board seeks to promote a culture of strong governance and to challenge, in a constructive and respectful way, the Company's advisers, third parties and other stakeholders.

The Board's principal concern has been, and continues to be, the interests of the Company's shareholders and potential investors. The Manager undertakes an annual programme of meetings with the largest shareholders and investors and reports back to the Board on issues raised at these meetings. The investment managers are based in abrdn's US offices and regularly present at these meetings either by video conference or in person when visiting the UK.

The Board encourages all shareholders to attend and participate in the Company's AGM and shareholders may contact the Directors via the Company Secretary. Shareholders and investors can obtain up-to-date information on the Company through its website and the Manager's information services and have direct access to the Company through the Manager's customer services team or the Company Secretary. The Chair offers to meet with shareholders on at least an annual basis. The Chair also held a live webinar ahead of the 2023 AGM, taking questions with the Investment Manager. This was made available on the Company's website for shareholders to access. 

As an investment trust, a number of the Company's functions are outsourced to third parties. The key outsourced function is the provision of investment management services to the Manager and other stakeholders support the Company by providing secretarial, administration, depositary, custodial, banking and audit services.

The Board undertakes a robust evaluation of the Manager to ensure that the Company's objective of providing sustainable income and capital growth for its investors is met. The Board typically visits the Manager's offices in the US on a periodic basis and last visited the Manager in May 2023. This enables the Board to conduct face to face review meetings with the fund management and research teams. The portfolio activities undertaken by the Investment Manager on behalf of the Company can be found below and details of the Board's relationship with the Manager and other third party providers, including oversight, is provided in the Directors' Report in the published Annual Report. 

Key decisions and actions during the year ended 31 January 2024, which required the Directors to have greater focus on stakeholders included:

Directorate

The Board is mindful of the importance of having a well- considered and orderly succession plan for continuity of performance and delivery of the Company's strategy. There were no changes made to the Board composition during the financial year. However, as announced in the 2023 Interim Report, as part of the Board's orderly succession plan, Dame Susan Rice will retire from the Board at the conclusion of the 2024 AGM and will be succeeded by Charles Park, who has served on the Board since 2017. Patrick Edwardson will succeed Charles Park as Senior Independent Director. A search process will be conducted later this year for a new Director, which will have due regard to the benefits of diversity.

Marketing strategy

The Board continued to engage with investors directly this year. This included meeting with investors, along with the fund manager, and the Company's second webinar in May 2023, where shareholders had a chance to ask questions prior to exercising their proxy votes for the 2023 AGM. In addition, the Board worked with the Manager on key performance indicators for marketing services and additional means for targeted promotion of the Company. 

Dividends paid to shareholders

During the year, the Board implemented the revised dividend payment policy approved by shareholders at the 2023 AGM. Accordingly, four interim dividends have been proposed for the financial year ending 31 January 2024 (see above for details) and paid at more even quarterly intervals throughout the year. The Board recognises the importance of dividends to shareholders and the importance of receiving a regular income over the long-term.

Share buybacks

During the year the Board bought back 2.9m Ordinary shares for cancellation. This provided a small accretion to the NAV and a degree of liquidity to the market in an effort to manage the discount to the NAV per share.

Management of the portfolio

As in previous years, the Board focused on the performance of the Manager in achieving the Company's investment objective within an appropriate risk framework and in the context of the wider market environment. As explained in more detail in the Strategic Report, during the year, the Board reviewed portfolio and NAV performance against a reference benchmark and other peers on a regular basis.

Duration

The Company does not have a fixed winding-up date; however, shareholders are given the opportunity to vote on the continuation of the Company every three years. The Company's next continuation vote is scheduled for the forthcoming AGM in June 2024.

Board Diversity

The Board recognises the importance of having a range of skilled, experienced individuals with appropriate knowledge in order to allow the Board to fulfil its obligations. 

Environmental, Social and Human Rights Issues

The Company has no employees as the Board has delegated day to day management and administrative functions to aFML. There are therefore no disclosures to be made in respect of employees.

Modern Slavery Act

Due to the nature of the Company's business, being a company that does not offer goods and services to customers, the Board considers that it is not within the scope of the Modern Slavery Act 2015 because it has no turnover. The Company is therefore not required to make a slavery and human trafficking statement. The Board also considers the Company's supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.

Global Greenhouse Gas Emissions and Streamlined Energy and Carbon Reporting ("SECR")

All of the Company's activities are outsourced to third parties. The Company therefore has no greenhouse gas emissions to report from the operations of its business other than directors' travel, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013. For the same reasons as set out above, the Company considers itself to be a low energy user under the SECR regulations and therefore is not required to disclose energy and carbon information.

The Investment Manager has access to a range of ESG tools. These tools allow it to look at the overall carbon footprint of its portfolios and compare with the reference index. It also allows them to identify the highest carbon emissions stocks across portfolios. Furthermore, the carbon footprint tool has been used to help further guide the Investment Manager's engagement with companies.

Task Force for Climate-Related Financial Disclosures ("TCFD")

Under Listing Rule 15.4.29(R), the Company, as a closed ended investment company, is exempt from complying with the TCFD. The Manager has, however, produced a product level report on the Company in accordance with the FCA's rules and guidance regarding the disclosure of climate-related financial information consistent with TCFD Recommendations and Recommended Disclosures. The product level report on the Company is available on the Manager's website at: invtrusts.co.uk.

Viability Statement

The Company does not have a formal fixed period strategic plan but the Board does formally consider risks and strategy on at least an annual basis. The Board considers the Company to be a long-term investment vehicle but for the purposes of this Viability Statement has decided that a period of three years is an appropriate period over which to report. The Board considers that this period reflects a balance between looking out over a long-term horizon and the inherent uncertainties of looking out further than three years.

In assessing the viability of the Company over the review period the Directors have focused upon the following factors:

- The ongoing relevance of the Company's investment objective in the current environment and recent feedback from the Company's brokers and shareholders, where available.

- A resolution for the continuation of the Company to be put to shareholders at the AGM in June 2024. The Directors recommend that shareholders vote to approve the resolution, and that the Company should continue in existence.

- The principal risks detailed in the strategic report and the steps taken to mitigate these risks. In particular, the Board has considered the operational ability of the Company to continue in the current environment, including the impact of geopolitical developments, and the ability of the key third party suppliers to continue to provide essential services to the Company. Third party services have continued to be provided effectively.

- The Company is invested in readily realisable listed securities. Recent stress testing has confirmed that the portfolio can be easily liquidated, despite the more uncertain and volatile economic environment.

- The level of revenue surplus generated by the Company and its ability to achieve the dividend policy. The Company has continued to deliver dividend growth whilst building up revenue reserves which can be used to top up the dividend in tougher times.

- The level of gearing is closely monitored by the Board and the Manager. Covenants are actively reviewed and there is adequate headroom in place.

- The availability of long-term gearing facilities. The Company's gearing comprises $25 million of ten year loan notes (until December 2030) and $25 million of 15 year loan notes (until December 2035). 

Accordingly, taking into account the Company's current position and the potential impact of its principal risks and uncertainties, the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of this Report. In making this assessment, the Board has considered that matters such as significant economic or stock market volatility, a substantial reduction in the liquidity of the portfolio, or changes in investor sentiment could have an impact on its assessment of the Company's prospects and viability in the future.

Dame Susan RiceChair4 April 2024

Results

Performance (total return)

Ten Year Financial Record

Investment Manager's Review

Market review

US share prices, as measured by the Company's primary reference index, the Russell 1000 Value Index, rose in local-currency terms over the year to 31 January 2024 albeit by less in sterling terms as the pound strengthened against the US dollar by 3.4%.

Faced with a relatively resilient and robust economy, including a strong labour market, the US Federal Reserve (Fed) continued to tighten monetary policy through 2023. The Fed raised interest-rates by 25 basis points (bps) at each of its meetings between February and May, with the last increase in July 2023 taking the target range for the Fed funds rate to 5.25-5.50%, the highest level since 2001. At its January 2024 meeting, after eleven rate increases since March 2022, the Fed finally removed the tightening bias from its statement. That said, it aims to keep policy restrictive and proceed carefully for now, continuing with its data-dependent approach as it awaits more transparency over underlying macroeconomic trends. However, given the sustained fall in the Fed's targeted inflation measure, three rate cuts - as forecast by committee members in December's 'dot plot' - are still possible in 2024. There could also be further easing to come in 2025 and 2026.

US stock markets rose steadily over most of the period, even shaking off turmoil in the banking sector in March 2023, when two regional banks, Silicon Valley Bank and Signature Bank, collapsed. In particular, investor sentiment was helped by the long-awaited news in May of an agreement to raise the US debt ceiling. Investor concern that interest rates would stay higher for longer led to stocks weakening in August through to October. However, equities then rebounded notably towards the end of the year as these fears eased due to more encouraging inflation trends.

Over the year to 31 January 2024, growth-focused stocks performed relatively well. In particular, there was a strong performance from the technology sector, especially artificial intelligence-related companies, such as NVIDIA, Microsoft and Alphabet. During the year to 31 January 2024, the top seven (or "Magnificent Seven") technology stocks contributed nearly 65% of the total return of the S&P 500 Index. These stocks are more sensitive to the prospect of monetary tightening coming to an end, which will lower the discount rate applied to these long duration assets.

The communication services, technology and industrials sectors were the strongest performers within the Russell 1000 Value index, while the utilities, materials and energy sectors were the primary market laggards for the period.

Performance

The Company returned -1.6% per share on a net asset value basis in sterling terms for the year ended 31 January 2024, underperforming the 2.6% return of the Russell 1000 Value Index. The revenue account remained healthy, maintaining a level of cover established in prior years.

At a sector level, the main detractor from the Company's performance was the materials sector due to negative stock selection. The second-largest detractor was the industrials sector due to stock selection and, to a lesser extent, an underweight exposure.

The largest individual stock detractors from performance included:

- agricultural sciences company, FMC Corporation, a producer of crop-protection chemicals, suffered from inventory destocking which forced management to materially reduce its guidance. The weakness was derived from farmers over-ordering crop inputs after being unable to procure supplies in 2022 due to supply-chain disruptions.

- Pharmaceutical firm, Bristol-Myers Squibb ("Bristol-Myers"), underperformed due to a combination of new US government pricing measures affecting the pharmaceutical industry and a pipeline that has not yet received full approval for launching new drugs.

- Drugstore chain CVS Health was another weak performer as it contended with rising patient utilisation in its managed care segment and investors debated the cost of its acquisition of Oak Street Health, a provider of value-based care to the Medicare population.

On the positive side, the two largest contributors to the Company's performance at the sector level were energy and technology due to stock selection.

At a stock level, the largest individual contributors included:

- Semiconductor supplier Broadcom performed strongly, alongside other companies with artificial intelligence (AI) exposure, after reports indicated a significant increase in demand for AI solutions. Broadcom subsequently reported earnings that confirmed these improving demand trends.

- Phillips 66, the oil refiner, discussed options to improve operational performance, along with various strategic alternatives, with activist investor Elliot Management ("Elliot"). Elliot established a $1 billion position in Phillips 66, will nominate two new board members, and publicly outlined a strategy to unlock shareholder value.

- Comcast, the telecommunications conglomerate, also fared well after reporting earnings that were betterthan expected. The company was able to offset the loss of broadband subscribers with higher pricing, while the theme parks division continues to experience robust growth.

The top five contributors and bottom five contributors over the year ended 31 January 2024 are detailed below

Portfolio activity

The Company's investments continue to align with our high-quality stock selection process, which emphasises generating consistent cash flow. However, market volatility created opportunities to add quality companies into the portfolio at compelling prices.

We initiated positions in five companies during the year.

- the leading renewable energy and utility company NextEra Energy: NextEra Energy owns Florida Power & Light Company, the US's largest regulated electric utility, serving more than 12 million people. The utility business is high quality due to the large backlog of growth projects combined with a constructive regulatory environment allowing for relatively high returns. The company also owns NextEra Energy Resources, which is the world's largest generator of renewable energy from wind and solar assets as well as a leader in battery storage. Altogether, NextEra Energy combines two excellent businesses that support peer-leading earnings growth, along with a secure dividend.

- Genuine Parts Company, a leading global distributor of automotive and industrial replacement parts. The company has a track record of consistent execution and prudent capital allocation, which has driven its profitable growth. It has established itself as a premier supplier of automotive aftermarket parts, led by its flagship NAPA brand.

- Beverage firm Keurig Dr Pepper has products in both the cold drinks segment (led by the flagship Dr Pepper brand) and, following the merger with Keurig, in coffee. Keurig is the dominant player in the single-serve coffee segment. Historically, the cold drinks business has grown in line with, or above, the market, benefiting from the company's strength in (non-cola) flavours and its status as a preferred distributor and acquiror of niche brands.

- Essential Utilities, a diversified utility with two-thirds of its earnings from the water business and one-third from the gas business. In the short run, the gas business should grow faster given the infrastructure upgrades required. However, the water business should grow at a comparable pace over the intermediate term due to several small acquisition opportunities given that around 85% of the country is served by small, privately-run municipal operations.

- The energy infrastructure company Enbridge, a premier midstream company that operates one of the most advantaged oil pipeline networks in North America, with a strong collection of natural gas infrastructure and utility assets and a growing renewable energy platform. The company's diversified asset portfolio generates predictable cash flows thanks to its regulated and long-term contracts with customers.

We sold out of five companies during the year.

- Home Depot: as we believe higher interest rates, elevated inflation and the resumption of student loan payments will prove to be large headwinds for the consumer, pressuring earnings estimates over time. 

- Clothing company, VF Corporation. Despite having a portfolio of well-admired brands like Vans, The North Face, Timberland, Supreme, and Dickies, the company has faced multiple setbacks due to its poor execution.

- Hannon Armstrong Sustainable Infrastructure Capital, after concluding the stock would remain under pressure in a higher-for-longer interest-rate environment, with investors becoming increasingly concerned that higher funding costs would negatively affect the company's return profile.

- CI Financial, given the company's management has become more aggressive from a capital deployment perspective, with an acceleration in buybacks and the rapid acquisition of US wealth management businesses. While strategically sound, these actions are raising leverage at a time of higher interest rates.

- Energy infrastructure firm TC Energy, using the proceeds to fund our investment in competitor Enbridge. Factors primarily outside TC Energy's control have created delays on new projects and put upward pressure on costs, negatively affecting project-level returns.

Within the Company's corporate bond portfolio, we initiated several positions over the year to take advantage of more attractive valuations, as yields climbed higher due to further monetary tightening together with concerns over what an economic slowdown could mean for the instruments' credit quality. We exited some other positions as the valuation of these bonds traded above what we deemed to be their fair value. We continue to work closely with abrdn's fixed income specialists to monitor credits and market conditions for new opportunities and to manage downside risk.

Dividend growth

The Company's holdings continued to build upon an established track record of dividend growth during the review period, with several companies announcing double-digit increases. Semiconductor suppliers Broadcom and Analog Devices boosted their payouts by 14% and 13%, respectively. Insurance provider AIG Group increased its dividend by 13%. Derivatives exchange operator CME Group, renewable energy company NextEra Energy, and healthcare provider CVS each raised their quarterly dividend payouts by 10%.

Additionally, two holdings in the portfolio announced special dividend payments to shareholders during the review period. Derivatives exchange operator CME Group declared an annual variable dividend of US$5.25 per share in December 2023. The company uses this approach to facilitate paying out all cash that it generates over the year beyond a minimum threshold. Gaming-focused REIT Gaming and Leisure Properties Inc. declared a special earnings and profits cash dividend of $0.25 per share.

Outlook

US economic growth has been resilient, benefiting from several factors such as unwinding supply-chain pressures, falling energy prices, and higher productivity growth. Despite tighter credit conditions and greatly reduced household savings, we believe the chances of a soft landing versus a mild recession are becoming more balanced as inflation subsides.

We believe the underlying companies in the portfolio are well positioned to manage through potential election year volatility and, equally important, we feel comfortable with the current valuations of these companies. The underlying cash flows and balance sheets remain strong and thus we expect continued dividend growth prospects for 2024.

The portfolio's sector exposure is modestly defensive and we continue to seek all-weather companies, where macro tailwinds are not needed for growth.

Fran Radano abrdn Inc.4 April 2024

Ten Largest Investments

As at 31 January 2024

List of Investments

Geographical/Sector Analysis

Geographic Analysis

Investment Case Studies

Phillips 66

Phillips 66 is a diversified energy company formed in 2012 after ConocoPhillips separated its upstream and downstream operations. The company's portfolio consists of Midstream, Refining, Chemicals, Renewable Fuels, and Retail businesses. More simply, Phillips 66 processes, transports, stores, and markets fuels and refined products globally via its twelve refiners, 72,000 miles of pipelines, and over 8,000 retail locations.

Over the past decade management has focused on optimising the company's portfolio by divesting non-core assets, investing in higher growth businesses, and improving operational efficiency. Together, these initiatives have better positioned the company competitively, including improving profitability, reducing earnings volatility, and allowing for greater shareholder returns. At this point, after years of investment and portfolio reshaping, the company has completed many of these initiatives and is now considered one of the largest and most integrated energy companies globally. This level of integration and scale is unique within the energy complex creating competitive advantages that are difficult to replicate. Despite the progress, Phillips 66 recently embarked on another iteration of continuous improvement that we believe will add shareholder value over the long-term.

While many view the energy transition as a risk, Phillips 66 has taken a proactive approach in addressing these concerns. The company has spent several billion dollars on environmental protection and alternative energy projects since 2015. This includes the "Rodeo Renewed" project in California which will convert a traditional refinery into one of the largest renewable fuel facilities in the world. At the same time, management has established long-term GHG emission reduction targets with interim goals to track the company's progress. There are several other partnerships, initiatives, and projects helping position the company for a lower carbon future, thereby increasing our confidence in the long-term sustainability of the company's business model.

JPMorgan Chase & Co

JPMorgan Chase & Co. ("JPMorgan") is a leading financial services firm with nearly $4 trillion in assets, over $300 billion of common equity, and more than 300,000 employees around the globe. In 2023, JPMorgan generated over $158 billion in net revenues and earned a 17% return on its common equity, translating into $50 billion of net income, an increase of 32% from 2022. JPMorgan has the largest retail deposit share in the United States, is the largest US credit card issuer, and is amongst the largest investment banks in the world.

Between 2004 and 2022, a period that included the global financial crisis and COVID-19, JPMorgan grew its tangible book value per share at a compound annual growth rate of 9%, nearly twice the rate of its five largest peers, a testament to its diversified business model, fortress balance sheet, and best-in-class management team. In 2023, tangible book value per share grew an additional 18% driven by record high earnings, demonstrating JPMorgan's ability to navigate a complicated macro-economic environment and the conclusion of the Federal Reserves' aggressive interest rate tightening cycle.

In the spring of 2023, JPMorgan engineered a win-win rescue of First Republic Bank, partnering with the Federal Deposit Insurance Corporation to acquire the assets and deposits of the bank after the failure of Silicon Valley Bank sparked contagion in the regional banking industry as a result of rapidly rising interest rates. The acquisition helped stem the crisis and added a valuable franchise focused on affluent customers to the fold.

In 2021, JPMorgan unveiled its Sustainable Development Target goal to finance and facilitate $2.5 trillion to support sustainable development and address climate change through the end of 2030. The bank is off to a strong start, having achieved $482 billion through the end of 2022, including $176 billion in green initiatives, $204 billion in development finance in emerging economies, and $102 billion of community development in developed markets. In addition, JPMorgan utilises a Carbon Assessment Framework to include climate considerations in its business decision making in order to support the global goal of net-zero emissions by 2050.

Directors' Report

The Company, which was incorporated in 1902, is registered as a public limited company and is an investment company within the meaning of Section 833 of the Companies Act 2006. The Company's registration number is SC005218. 

The Company has been accepted by HM Revenue & Customs as an investment trust subject to the Company continuing to meet the relevant eligibility conditions of Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 for all financial years commencing on or after 1 February 2012. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 January 2024 so as to enable it to comply with the ongoing requirements for investment trust status.

The Company has conducted its affairs so as to satisfy the requirements as a qualifying security for Individual Savings Accounts. The Directors intend that the Company will continue to conduct its affairs in this manner.

Results and Dividends

The audited financial statements for the year ended 31 January 2024 may be found below. Details of dividends for the year to 31 January 2024 can be found above.

Share Capital and Rights attaching to the Company's Shares

At 31 January 2024, the Company's capital structure consisted of 137,352,347 Ordinary shares of 5p each (2023 - 140, 234,749 Ordinary shares of 5p each). During the year to 31 January 2024, the Company bought back 2,882,402 Ordinary shares for cancellation. Since 1 February 2024, 1,187,253 Ordinary shares have been repurchased for cancellation.

The Ordinary shares carry a right to receive dividends which are declared from time to time by an ordinary resolution of the Company (up to the amount recommended by the Board) and to receive any interim dividends which the Company may resolve to pay. On a winding-up, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to their shareholdings. On a show of hands, every shareholder present in person, or by proxy, has one vote and, on a poll, every Ordinary shareholder present in person has one vote for each share held and a proxy has one vote for every share represented. 

There are no restrictions concerning the holding or transfer of the Company's shares and there are no special rights attached to any of the shares. The Company is not aware of any agreements between shareholders which may result in restriction on the transfer of shares or the voting rights. The rules concerning amendments to the Articles of Association and powers to issue or buyback the Company's shares are contained in the Articles of Association of the Company and the CompaniesAct 2006. 

Significant Agreements

The Company is not aware of any significant agreements to which it is a party that take effect, alter or terminate upon a change of control of the Company following a takeover and there are no agreements between the Company and its Directors concerning compensation for loss of office. Other than the management agreement with the Manager and the depositary agreement, further details of which are set out below, the Company is not aware of any contractual or other agreements which are essential to its business which ought to be disclosed in the Directors' Report.

Management Agreement

The Company has appointed abrdn Fund Managers Limited ("aFML" or the "Manager"), a wholly owned subsidiary of abrdn plc, as its alternative investment fund manager ("AIFM"). aFML has been appointed to provide the Company with investment management, risk management, administration, company secretarial services and promotional activities. The Company's portfolio is managed by abrdn Inc. (the "Investment Manager") by way of a delegation agreement in place between aFML and abrdn Inc. In addition, aFML has sub-delegated promotional activities to abrdn Investments Limited and administrative and secretarial services to abrdn Holdings Limited. Details of the management agreement, including notice period and fees paid during the year ended 31 January 2024 are shown in note 5.

Depositary Agreement

The Company has appointed BNP Paribas Trust Corporation UK Limited ("BNPP") as its depositary.

Loan Note Agreement

In December 2020, the Company entered into a long-term financing agreement for US$50 million with MetLife comprising two loans of US$25 million with terms of ten and 15 years at an all-in cost of 2.70% and 2.96% respectively, giving a blended rate for ten years of 2.83% (the "Long-Term Financing Agreement").

Directors

Details of the Directors of the Company who were in office during the year to 31 January 2024 and up to the date of this report are shown on the Company's website. Dame Susan Rice is the Chair and Charles Park is the Senior Independent Director.

No contract or arrangement existed during the period in which any of the Directors was materially interested. No Director has a service contract with the Company.

Directors' & Officers' Liability Insurance

The Company maintains insurance in respect of Directors' and Officers' liabilities in relation to their acts on behalf of the Company for the year to 31 January 2024 and up to the date of this report. Each Director of the Company shall be entitled to be indemnified out of the assets of the Company to the extent permitted by law against any loss or liability incurred by him in the execution of his duties in relation to the affairs of the Company. These rights are included in the Articles of Association of the Company.

Corporate Governance

The Statement of Corporate Governance, which forms part of the Directors' Report, is shown in the published Annual Report.

Substantial Interests

As at 31 January 2024 the Company had received notification or was aware of the following interests in its Ordinary shares:

In the period between 31 January 2024 and 4 April 2024, the Company was notified that Canaccord Genuity Wealth Management held 6,834,528 shares (5.0% of shares in issue) as at 15 March 2024 and 6,802,785 (5.0% of the shares in issue) as at 20 March 2024. There have been no other changes to the above interests in the Company's shares notified as at 4 April 2024.

Accountability and Audit

The Directors who held office at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditor is unaware; and each Director has taken all the steps that he/she could reasonably be expected to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

The Audit Committee has reviewed the services provided by the auditor during the year, together with the auditor's fees and procedures in connection with the provision of non-audit services. There were no non-audit service fees paid during the year. The Board remains satisfied that PricewaterhouseCoopers LLP's objectivity and independence is being safeguarded.

Going Concern

The Company's assets consist substantially of securities in companies listed on recognised stock exchanges and in normal circumstances are realisable within a short timescale and which can be sold to meet funding commitments if necessary. 

The Board has set gearing limits and regularly reviews actual exposures, cash flow projections and compliance with banking covenants.

The Company undertakes a continuation vote every three years. The last continuation vote was passed at the AGM held in June 2021 with 98.6% of votes in favour. Based on feedback from major shareholders, the Directors consider that it is reasonable to assume that the continuation vote will be passed at the AGM to be held in June 2024 and therefore that the Company will continue in existence.

The Board has considered the impact of geopolitical developments and believes that there will be a limited resulting financial impact on the Company's portfolio, its operational resources and existence. Given that the Company's portfolio comprises primarily "Level One" assets (listed on a recognisable exchange and realisable within a short timescale), and the Company's relatively low level of gearing, the Company has the ability to raise sufficient funds so as to remain within its debt covenants and pay expenses.

Taking the above factors into consideration, the Directors have a reasonable expectation that the Company has adequate financial resources to continue in operational existence for the foreseeable future and for at least twelve months from the date of this Report. Accordingly, the Board continues to adopt the going concern basis in preparing the financial statements.

Annual General Meeting

The Notice of General Meeting is included in the published Annual Report. Among the resolutions being put at the Annual General Meeting ("AGM") of the Company to be held on 21 June 2024 at 12.00 Noon, the following resolutions will be proposed as special business:

(i) Aggregate fees payable to Directors

The Board carried out a review of the level of Directors' fees during the financial year. The resulting increases, which were effective from 1 February 2024, are detailed in the Directors' Remuneration Report in the published Annual Report.

In view of these increases in fees, and in order to ensure that the Board has ongoing flexibility to manage succession planning and attract candidates of appropriate expertise and calibre to the role, Resolution 3, an ordinary resolution, will seek shareholders' approval to increase the maximum aggregate limit of remuneration of the Directors each year in respect of their services as Directors from £175,000 to £250,000. Whilst the Board does not intend to rely on this increase, it is believed to be necessary and appropriate, in line with peer companies, and will be a more appropriate cap for the foreseeable future.

(ii) Continuation of the Company

Resolution 10, which is an ordinary resolution, will, if approved, allow the Company to continue as an investment trust company.

(iii) Section 551 Authority to Allot Shares

Resolution 11, which is an ordinary resolution, seeks to renew the Directors' authority under section 551 of the Companies Act to allot shares (excluding treasury shares) up to an aggregate nominal amount of £2,246,724 or, if less, the number representing 33.33% of the issued Ordinary share capital of the Company as at the date of the passing of the resolution. This authority will expire on 31 July 2025 or, if earlier, at the conclusion of the AGM to be held in 2025 (unless previously revoked, varied or extended). The Directors will only exercise this authority if they believe it is advantageous and in the best interests of shareholders. There are no treasury shares in issue.

(iv) Dis-application of Pre-emption Provisions

Resolution 12, which is a special resolution, seeks to renew the dis-application of statutory pre-emption rights in relation to the issue of shares (or sale of shares out of treasury) up to an aggregate nominal amount of £680,825 or, if less, the number representing 10% of the issued Ordinary share capital of the Company as at the date of the passing of the resolution. This authority will expire on 31 July 2025 or, if earlier, at the conclusion of the AGM to be held in 2025. The Directors will only exercise this authority if they believe it is advantageous and in the best interests of shareholders. Ordinary shares would only be issued for cash at a price not less than the NAV per share.

(v) Share Repurchases

Resolution 13, which is a special resolution, seeks to renew the Company's authority for the Company to make market purchases of its own Ordinary shares, up to a maximum of 14.99% of the issued Ordinary share capital of the Company as at the date of the passing of the resolution. Shares so repurchased will be cancelled or held in treasury.

The principal reasons for share buybacks are:

- to enhance net asset value for continuing shareholders by purchasing shares at a discount to the prevailing net asset value; and

- to address any imbalance between the supply of and demand for the Company's shares that results in a discount of the quoted market price to the published NAV per share.

Recommendation

The Directors believe that the resolutions to be proposed at the AGM are in the best interests of the Company and its shareholders as a whole and recommend that shareholders vote in favour of the resolutions, as the Directors intend to do in respect of their own beneficial shareholdings totalling, in aggregate, 47,718 Ordinary shares, and representing 0.04% of the existing issued Ordinary share capital of the Company.

By order of the Boardabrdn Holdings Limited Secretary, Edinburgh4 April 2024

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report in accordance with applicable law and regulations. 

Company law requires the Directors to prepare financial statements for each financial year. Under that law they are required to prepare the financial statements in accordance with UK accounting standards, including FRS 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland. 

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period. In preparing these financial statements, the Directors are required to: 

- select suitable accounting policies and then apply them consistently; 

- make judgements and accounting estimates that are reasonable and prudent;

- state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; 

- assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

- use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. 

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the Directors in respect of the annual financial report

We confirm that to the best of our knowledge: 

- the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and 

- the Strategic Report includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face. 

We consider this Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

For and on behalf of

The North American Income Trust plcDame Susan Rice Chair4 April 2024

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flows

Notes to the Financial Statements

For the year ended 31 January 2024