North American Regulatory News (NAIT)

THE NORTH AMERICAN INCOME TRUST PLC

ANNUAL FINANCIAL REPORT ANNOUNCEMENT FOR THE YEAR ENDED 31 JANUARY 2020

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

Financial Highlights

Results Summary

Dividends

CHAIRMAN'S STATEMENT

As this is written both the news and stockmarkets are dominated by the development of the COVID-19 pandemic. The net asset value per share of NAIT, which was 288.91p at our year end has fallen to 241.65p at 21 April 2020 and the outlook for dividends from our investments is uncertain. However, our Managers have examined the portfolio with great care and are as confident as they can be that we are invested in companies with the strength to survive.

Performance

Over the year to 31 January 2020, the Company's net asset value per share rose by 6.2% on a total return basis in sterling terms. This underperformed the 14.6% return in sterling terms from the Russell 1000 Value Index, the Company's primary reference index. The Company's relative underperformance for the year was attributable mainly to stock selection in the materials, communication services and consumer discretionary sectors. Conversely, strong stock selection in the energy, industrials and healthcare sectors bolstered the Company's performance.

The longer-term performance of the Company had been stronger. Over the three- and five-year periods to 31 January 2020, the Company's NAV return was 19.1% and 79.2%, respectively, compared to the corresponding 22.3% and 72.9% returns from the Russell 1000 Value Index.

Dividend

For the year ended 31 January 2020, the revenue return per Ordinary share rose by 13.7% from 10.04p to 11.42p. In contrast to previous years, the Board has announced the payment of a fourth interim dividend, rather than recommending a final dividend for approval by shareholders. Announcing this fourth dividend as an interim, instead of a final dividend, means that the payment of the dividend will not be delayed by any postponement of the AGM.

A fourth interim dividend of 4.3p, which will take the total for dividends for the year to 9.5p, an increase of 11.8% from last year, will be payable on 5 June 2020, to shareholders on the register on 8 May 2020. The quarterly dividends are paid in August, November, February and June each year.

The total dividend represented a yield of 3.3%, using the share price of 290.0p at the year-end on 31 January, compared to the 2.6% yield from the Russell 1000 Value Index at that date. The Trust continues to provide a stream of income that exceeds the level of the reference index and has not compromised the capital account over the long-run. 

After payment of the fourth interim dividend, the undistributed balance of the revenue account will be added to the Company's revenue reserves, which will represent approximately 8.28p per share. This will provide the Company with added flexibility for future years and some cushion against adverse economic circumstances and a more challenging dividend environment.

Portfolio

As of 31 January 2020, the portfolio consisted of 39 equity holdings and 8 corporate bonds, with equities representing 95% of total assets.

Total revenue from equity holdings in the portfolio over the financial year was £16.3 million (2019 - £14.3 million). Most of the Trust's equity holdings continued their established record of dividend growth. Over 84% of the equity holdings raised their dividends over the past 12 months, with a weighted average increase of approximately 8.4%.

During the financial year, the Company received premiums totalling £4.0 million (2019 - £3.9 million) in exchange for entering into stock option transactions. This option income, the generation of which remains consistent with the Manager's company-focused investment process, represented 19.1% of total income (2019 - 20.5%). As the Company's exposure to corporate bonds has decreased over recent years, interest income from investments was lower and represented 2.7% of total income (2019 - 3.3%). 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. Further details of the portfolio are shown below.

Market & Economic Review

Major North American equity indices posted notable gains for the year ended January 2020, which was marked by increasing US-China trade tensions and a subsequent "phase one" deal, monetary policy conditions and, towards the end of the period, investors' fears surrounding the potential negative impact of the coronavirus (COVID-19) on the US economy and corporate earnings.

China and the US signed an agreement on a phase one trade deal in January 2020. The pact included a partial backtrack on Chinese export tariffs in exchange for an increase in purchases of US farm, energy and manufactured goods, as well as greater openness in its financial sector and stronger intellectual property protection.

Politics took centre stage in the last months of the period and culminated in the acquittal of President Donald Trump at the impeachment inquiry which alleged that he had illegally sought help from Ukraine to boost his chances of re-election in November 2020. The financial markets' reaction was relatively muted throughout the impeachment inquiry and trial.

The economic ramifications of the measures taken to contain the spread of the coronavirus, including substantial travel restrictions, extended holidays and workplace shutdowns, have resulted in significant downward revisions in global first-quarter 2020 economic growth forecasts. Commodity prices have fallen as a result of weaker growth expectations and sharp reductions in demand. Governments and central banks are taking steps to prevent the global economy from seizing up, although the magnitude and duration of the coronavirus is still unknown.

Management of Premium and Discount

The Company's share price rose by 8.2% to 290.0p and ended the year at a 0.4% premium to total net asset value, compared with a 4.4% discount at the end of the 2019 financial year. During the year under review, the shares mainly traded between a 1% premium and a 2% discount. At the AGM in June 2019, approval was obtained to renew the annual authorities to issue up to 10% of the Company's issued share capital for cash at a premium and to buy-back up to 14.99% of the issued share capital at a discount. The Board monitors the rating of the Company's shares and, taking account of prevailing market conditions, will exercise discretion in buying back shares at a discount or issuing shares at a premium. The Board believes that this is in shareholders' interests as it seeks to reduce volatility in the premium or discount to underlying NAV whilst also making a small positive contribution to the NAV.

During the year, 1,125,000 shares were issued at a premium to NAV and no Ordinary shares were purchased for cancellation. At 21 April 2020, the NAV was 241.65p and the share price was 232.0p equating to a discount of 4.0% per Ordinary share.

The Board will be seeking approval from shareholders to renew both authorities at the 2020 AGM. As in previous years, new shares will only be issued at a premium to NAV and shares will only be bought back at a discount to NAV. Resolutions to this effect will be proposed at the AGM and the Directors strongly encourage shareholders to support these proposals.

Gearing

The Board believes that sensible use of modest financial gearing should enhance returns to our shareholders over the longer term. The total amount available under the Company's loan facility agreement with Scotiabank (Ireland) Designated Activity Company is $75 million, of which $50 million was drawn down initially. During the year under review, $25 million of the loan facility was repaid and so at the end of the period $25 million was drawn down. At the same time, cash held as collateral against open option positions had increased. As a result, net gearing at 31 January 2020 was effectively reduced to nil (31 January 2019: 5.7%).

Promotional Activity

The Board continues to promote the Company through the Manager's initiatives, which include investor meetings, targeted press coverage, online marketing, direct mail advertising, and providing a series of savings schemes through which savers can invest in the Company in a low-cost and convenient manner(see pages 72 to 74 of the published 2020 Annual Report).

Up-to-date information about the Company, including monthly factsheets, interviews with the Manager and the latest net asset value and price of the Ordinary shares, may be found on the Company's website at www.northamericanincome.co.uk.

Outlook

As expected, the US Federal Reserve's monetary policy was unchanged in January but subsequently the Fed Funds rate was lowered to zero following the spreading of the coronavirus in March. This move came in tandem with quantitative easing as a mechanism to keep the financial markets from seizing up. Central banks immediately followed the Federal Reserve's lead despite having far less scope to boost their local economies. The US government has also deployed multiple measures to help the recently unemployed, cash payments to nearly all lower and middle class families, forgivable loans for small business and a myriad of policy changes that will allow corporates a better change to manage through this nearly complete stop to the economy at large.

While the US consumer had remained a bright spot in the US economy, the potential for mass unemployment causing a recession now exists. Many stores are being forced to close, and without knowing the duration of these closures, employers are essentially being forced to make their employees redundant during this period of uncertainty. The same can be said for the housing market, which had been strengthening towards the end of 2019, as interest rates became more favourable. When combined with the positive employment backdrop, this led to record levels of housing affordability. It appears that this position has been altered entirely as the economy is approaching a standstill until the virus can be contained.

It would seem that the impact on the global economy and markets is going to be severe. The magnitude of the effect will depend largely upon the spread, scale (number of individuals infected), the duration of the outbreak and governmental actions taken. The total number of coronavirus infections has already exceeded the number of severe acute respiratory syndrome (SARS) cases reported in 2003, suggesting that the total impact on the global economy will be greater. Given that China is a much larger share of the global economy and is also more integrated than it was in 2003, we believe that the spillover to the rest of the world will also be larger.

We are keeping in close communication with all of the companies under coverage given these unprecedented times. We have not had any dividend cuts or suspensions up to this point, but that is likely a matter of time since certain end markets are effectively closed for business with no certain time for re-opening. Furthermore, there has been some rhetoric from government officials about the suspension of dividends of those companies furloughing employees which may impact dividend payments in subsequent months.

The Trust has built reserves which will help to maintain its dividend payments should the dividend environment become more difficult in the near term.

Annual General Meeting ("AGM")

The Board have been monitoring closely the impact of the COVID-19 pandemic upon the arrangements for the Company's upcoming AGM. The intention is to hold the AGM at 11.00 am on 2 June 2020 at the offices of Dickson Minto WS at 17 Charlotte Square, Edinburgh EH2 4DF.

In the light of the developing Government guidance and measures, including the restrictions on public gatherings and maintaining social distancing, and the possibility that these measures will remain in place until June, this year's AGM will follow the minimum legal requirements for an AGM. Arrangements will be made by the Company to ensure that the minimum number of shareholders required to form a quorum will attend the meeting in order that the meeting may proceed and the business concluded. The Board considers these arrangements to be in the best interests of shareholders in the current circumstances.

The Board strongly advises that all shareholders should not attend the AGM in person and instead exercise their votes in respect of the meeting in advance. Any questions which shareholders may have should be submitted to the company secretary at North.american@aberdeen-asset.co.uk.

James Ferguson,

Chairman

22 April 2020

INVESTMENT MANAGER'S REVIEW

At the time of the writing of this report, the whole world is in the grips of the COVID-19 pandemic, which looks set to have a more far-reaching impact on for all global economies than anything experienced in peacetime. Consequently, the following is a statement of historical record, but it should be noted that governments and central banks globally are taking unprecedented measures in order to try to prevent their economies from seizing up during this period of restrictive movement and social distancing. There is no precedent for this in the modern day economy, and thus we are being conservative with our portfolio management decisions whilst still maintaining a diversified fully invested portfolio.

Market review

Despite numerous bouts of volatility, major North American equity market indices posted sizeable gains over the 12-month period ended 31 January 2020. Markets were buoyed for much of the review period by generally positive economic data reports and news of a phase one agreement in the US-China trade dispute. However, towards the end of the period stock prices fell sharply on investors' fears surrounding the potential negative impact of the coronavirus (COVID-19) on the US economy and corporate earnings. These fears proved to be justified following the end of the financial year, with the stockmarket declining sharply in February and March. The depth and duration of the impact of the coronavirus remains unknown, and investors broadly have taken down market exposure in the near term.

The North American Income Trust's reference index, the Russell 1000 Value Index, gained 14.6% in sterling terms, with 10 of the 11 sectors delivering positive returns for the period. The more cyclical technology sector led the upturn amid the risk-on market environment for much of the period, while the relatively higher dividend-paying utilities and communication services stocks performed well as US Treasury yields moved lower across the curve. Conversely, energy was the lone sector to record a negative return, hampered by declines in crude oil and natural gas prices during the period.

Regarding monetary policy, the US Federal Reserve (Fed) left its benchmark interest rate unchanged for the first five months of the review period, but subsequently trimmed the rate by a cumulative total of 75 basis points to a range of 1.50% to 1.75% following its meetings in July, September and October 2019. The Fed then paused monetary policy easing for the remainder of the period and following the January meeting, noting continued weakness in business investment and exports and that inflation remained benign. More recently, in March the Fed reduced interest rates to a range of 0.0% to 0.25% due to a near-shutdown of the economy driven by the coronavirus. This was followed by other quantitative easing (QE) measures and government support to those parties most affected.

On 11 March, the World Health Organization (WHO) declared a global pandemic for COVID-19. Governments globally have been working to slow the spread of the disease, implementing strict travel restrictions, closing schools and universities, and encouraging social distancing. These events, and the uncertainty about how things will continue to develop, have led to significant market volatility and forced central banks to take unprecedented action. However, as of early April, this had done little to calm market fears.

In economic news, US GDP grew at annualised rates of 3.1% in the first quarter and just over 2.0% in the final three quarters of the year as consumer spending continued to drive the US economy while corporate spending was hampered by trade policy negotiations globally. US payrolls expanded by an average of 171,000 per month during the financial year, and the unemployment rate declined 0.4 percentage points to 3.6%.

Average hourly earnings rose 3.1% year on year in January 2020, up from the 2.9% annualised rate in December 2019. This strength in employment is already being tested as many consumer-facing companies selling non-essential goods and services are being forced to close until health officials deem the threat of the virus to have subsided, and there is limited visibility as to when that might occur.

Performance

The North American Income Trust underperformed the Russell 1000 Value Index over the 12-month period ended 31 January 2020. The net asset value in sterling total return terms gained 6.2% versus the 14.6% from the Russell 1000 Value. The portfolio gained 7.1% in sterling terms on a gross basis before expenses. The revenue account remained in good shape, building upon the record established in prior years.

The Trust's underperformance relative to the reference index for the review period was attributable mainly to stock selection in the materials, communication services and consumer discretionary sectors. The primary detractors from performance amid individual holdings included diversified media company Meredith Corp., specialty carbon products maker Orion Engineered Carbons, and luxury goods retailer Tapestry Inc.

Meredith Corp.'s stock price fell after management provided earnings guidance for its 2020 fiscal year that was well below expectations. The company has experienced generally faster-than-expected declines in advertising revenue and subscribers in its Time Inc. business, which the company acquired in January 2018. Orion Engineered Carbons saw year-on-year decreases in revenue and earnings over the12-month review period due to lower total volumes of carbon black, a fine carbon powder used as a colour pigment. In addition, early in the period, the company issued a tempered business outlook for its 2019 fiscal year. Tapestry reported generally positive results for its 2019 fiscal year. However, management issued a tempered business outlook for 2020.

In contrast, strong stock selection in the energy, industrials and healthcare sectors bolstered the Trust's performance for the review period. The largest individual stock contributors were holdings in defence contractor Lockheed Martin and pharmaceutical firm Bristol-Myers Squibb, along with the lack of exposure to integrated oil and gas company Exxon Mobil.

Lockheed Martin saw healthy revenue and earnings growth given strength in all four of its business segments: Aeronautics, Missiles & Fire Control, Rotary & Mission Systems, and Space. Shares of Bristol-Myers Squibb moved higher following its announcement that the company and its proposed merger partner, Celgene, reached an agreement to sell a psoriasis drug to Amgen for US$13.4 billion (£10.3 billion) that satisfied regulators competition concerns and at a price that exceeded the market's expectations. The merger was completed in November 2019.

Portfolio activity

The Trust's equity investments remained consistent with our high-quality, cash-generative stock selection process during the review period. We initiated equity positions in financial services company Citigroup; quick-service restaurant chain operator Restaurant Brands International; transportation and logistics company United Parcel Service; healthcare services provider UnitedHealth Group; asset manager Blackstone Group; semi-conductor manufacturer Maxim Integrated Products; biopharmaceutical firm Abbvie; and healthcare-focused REIT Omega Healthcare.

At the same time, we exited the Company's equity positions in both Corteva Agriscience and specialty chemicals producer DuPont de Nemours, which we had received from the spin-off from the former holding in DowDuPont; Canadian Western Bank; beverage and snack foods maker PepsiCo; luxury goods retailer Tapestry; Canadian telecommunications company Telus Corp.; pharmaceutical firm Pfizer; data storage and information management company Iron Mountain, diversified healthcare company Johnson & Johnson; and New Jersey-based commercial bank Provident Financial Services.

A sector analysis chart of the portfolio can be found on page 25 of the published 2020 Annual Report.

Within the Trust's corporate bond portfolio over the review period, we initiated positions in Qwest Capital Funding and NRG Energy. Conversely, we exited the positions in Exela Intermediate, Harland Clarke Holdings, Centene Corp., and Graham Holdings. We continue to work closely with Aberdeen Standard Investments' fixed income specialists to monitor credits and market conditions.

Dividend growth

The Trust's holdings continue to build upon an established track record of dividend growth. Molson Coors Beverage Co. boosted its quarterly payout by 39%, which management indicated is in line with its target of distributing 20%-25% of their earnings before interest, tax, depreciation and amortization (EBITDA) for the trailing 12 months. Semiconductor manufacturer Texas Instruments raised its dividend by nearly 17% which reflects the company's strong free cash flow generation and its commitment to return excess cash to stockholders.

Other company holdings announcing double-digit dividend increases during the review period included alternative asset management firm The Blackstone Group (24%); financial services companies Citigroup and BB&T Corp. (13% and 11%, respectively); commercial bank Regions Financial, biopharmaceutical firm Gilead Sciences (11% each); and freight railroad operator Union Pacific (10%).

The potential risks posed by the Covid-19 virus will likely result in the suspension or cutting of dividends of some holdings in the Trust. We continue to be careful stewards of the Trust and, since the end of the financial year, have adjusted the portfolio so that it is better placed to provide the proper balance of diversification, preservation of capital, growth and income in these extraordinary times.

Outlook

As expected, Fed monetary policy remained on hold in January, but the subsequent easing of its benchmark interest rate to near 0% in March was clearly unexpected at the start of this year as the coronavirus essentially led to an economic shutdown. The Fed has also embarked on additional QE as a means to prevent the monetary system from seizing up. The fourth-quarter 2019 earnings season in the US was largely "better than feared." The pace and the severity of the reversal, driven by the market's reaction to the spread of COVID-19, is more marked than anything seen in developed markets for generations. The situation is developing so fast that it is hard for anyone to make any predictions about when a meaningful recovery will take hold.

We are undertaking a thorough review and stress test of the portfolio as the situation has developed and we have incrementally become more defensive and increased the weightings of the highest-quality companies in the portfolio. We have been raising cash selectively and reinvesting into new positions in more high-quality companies with sales visibility. We have initiated several positions in what we feel are best-in-class companies that had been on our watchlist due their relatively attractive valuations. We also have been extremely selective in writing options. Consequently, we are confident that we have further upgraded the overall quality of the Trust's portfolio.

Aberdeen Asset Management Inc.**

22 April 2020

** on behalf of Aberdeen Standard Fund Managers Limited.

Both companies are subsidiaries of Standard Life Aberdeen plc.

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 Directors do 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 predominately of S&P 500 US equities.

Reference Index

The Board reviews performance against relevant factors, including the Russell Value Index 1000 (in sterling terms) and the S&P 500 Index (in sterling terms) as well as peer group comparisons. 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 these indices.

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 intend to 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 Aberdeen Standard Fund Managers Limited ("ASFML" or "Manager") to act as the alternative investment fund manager ("AIFM" or "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 Aberdeen Asset Management Inc. ("AAMI" or "Investment Manager") by way of a delegation agreement in place between ASFML and AAMI.

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. 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:

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 newly emerging risks. This process is supported by the adoption of 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 table below, 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 effects of geopolitical instability or change which could have an adverse impact on stockmarkets and the Company's portfolio. The Board is cognisant of the risks arising from the outbreak and worsening spread of the Coronavirus around the world, including economic and stockmarket instability and the impact on the operations of the third party suppliers, including the Manager. The Manager has undertaken an assessment of the Company's portfolio and is in close communication with the underlying investee companies in order to navigate and guide the Company through the current challenges. The services from third parties have continued to be supplied effectively and the Board will continue to monitor arrangements through regular updates from the Manager.

The potential impact of Brexit remains an economic risk for the Company, principally in relation to the potential impact of Brexit on currency volatility and the Manager's operations. Aberdeen Standard Investments has a significant Brexit program in place aimed at ensuring that they can continue to satisfy their clients' investment needs post Brexit.

In all other respects, the Company's principal risks and uncertainties have not changed 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 Company consists of five Directors and 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 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 reports back to the Board on issues raised at these meetings. The Investment Manager, who is based in the Manager's Philadelphia office, will attend such meetings in person. The Board encourage all shareholders to attend and participate in the Company's AGM in normal circumstances and can 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.

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, including investment performance and responsible ownership, 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 bi-annual basis. This enables the Board to conduct due diligence of the fund management and research teams. The portfolio activities undertaken by the Manager on behalf of the Company can be found in the Manager's Review and details of the Board's relationship with the Manager and other third party providers, including oversight, is provided in the Statement of Corporate Governance.

During the year, the Board focused on the performance of the Manager in achieving the Company's investment objective within an appropriate risk framework. In the last year, the key decisions which affected stakeholders were: the declaration of four quarterly dividends which in total represented an increase of 11.8% versus the previous year; the decision by the Management Engagement committee to continue with the appointment of the Manager and the reappointment of the Company's service providers; the sub-division of the Company's share capital to improve the marketability of the Company's shares; and the issue of new ordinary shares to meet market demand.

The Board is supportive of the Manager's philosophy that Environmental, Social and Governance (ESG) factors are fundamental components to evaluate when investing. ESG considerations are embedded in the investment process undertaken by the Manager and the Manager dedicates a significant amount of time and resource on focusing on the ESG characteristics of the companies in which they invest. Further details of how the Manager have sought to address ESG matters across the portfolio are disclosed in the Statement of Corporate Governance.

The Manager is also a tier 1 signatory of the UK Stewardship Code which aims to enhance the quality of engagement by investors with investee companies in order to improve their socially responsible performance and the long term investment return to shareholders.

The Company is a long term investor and the Board has in place the necessary procedures and processes to continue to deliver the Company's investment proposition and to promote the long term success of the Company for the benefit of its shareholders and stakeholders.

Duration

The Company does not have a fixed winding-up date, but shareholders are given the opportunity to vote on the continuation of the Company every three years at the Annual General Meeting. The next continuation vote will be at the AGM in June 2021.

Board Diversity

The Board recognises the importance of having a range of skilled, experienced individuals with the appropriate knowledge in order to allow the Board to fulfil its obligations. At 31 January 2020 the Board consisted of two men and three women.

Environmental, Social and Human Rights Issues

The Company has no employees as the Board has delegated day to day management and administrative functions to Aberdeen Standard Fund Managers Limited. There are therefore no disclosures to be made in respect of employees. The Company's socially responsible investment policy is outlined below.

Socially Responsible Investment Policy

The Board acknowledges that there are risks associated with investment in companies which fail to conduct business in a socially responsible manner and has noted the Manager's policy on social responsibility. The Investment Manager considers social, environmental and ethical factors which may affect the performance or value of the Company's investments as part of its investment process. In particular, the Investment Manager encourages companies in which investments are made to adhere to best practice in the area of corporate governance. It believes that this can best be achieved by entering into a dialogue with company management to encourage them, where necessary, to improve their policies in this area. The Company's ultimate objective, however, is to deliver long term growth on its investments for its shareholders. Accordingly, whilst the Investment Manager will seek to favour companies which pursue best practice in the above areas, this must not be to the detriment of the return on the investment portfolio.

Global Greenhouse Gas Emissions

The Company has no greenhouse gas emissions to report from the operations of its business, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.

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 our brokers and shareholders, where available;

- The Directors noted that there is a continuation vote due at the AGM in 2021 and confirm that it is their current intention to recommend approval to shareholders that the Company should continue in existence;

- The principal risks detailed in the strategic report above and the steps taken to mitigate these risks; in particular, we have considered the operational ability of the Company to continue in the current environment which has been impacted by the global COVID 19 pandemic and we have considered the ability of our key third party suppliers to continue to provide essential services to us;

- 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 (see above) which can be used to top up the dividend in tougher times:

- The Company is invested in readily realisable listed securities; recent stress testing has confirmed this, despite the more uncertain and volatile economic environment;

- The level of gearing is closely monitored; and

- The availability of loan facilities. The Company has a loan facility of $75 million in place until December 2020; covenants are actively monitored and there is adequate headroom in place. Initial discussions with the bank have commenced with a view to renewing the facility.

Accordingly, taking into account the Company's current position and the potential impact of its principal risks and uncertainties, the Directors have 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 stockmarket volatility (including those as a result of a greater than anticipated economic impact of the spread of the coronavirus), 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.

James Ferguson,

Chairman

22 April 2020

PORTFOLIO INVESTMENTS

Ten Largest Investments

As at 31 January 2020

Geographical Analysis

As at 31 January 2020

GOING CONCERN

The Company's assets comprise mainly readily realisable securities which can be sold to meet funding commitments if necessary. The Board has reviewed the results of stress testing prepared by the Manager in relation to the ability of the assets to be realised in the current market environment. The Company has a credit facility which is available until December 2020. It is the Board's intention to renew such a facility, as this supports the gearing of the Company, and initial discussions with the bank have been commenced.

The Board considers that the Company has adequate financial resources to continue in operational existence for the foreseeable future. Accordingly, the Directors believe that it is appropriate to prepare the financial statements on a going concern basis.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and financial statements 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 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 the annual report and accounts, 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 plc

James Ferguson

Chairman22 April 2020

FINANCIAL STATEMENTS

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cashflows

Notes to the Financial Statements

For the year ended 31 January 2020