Having taken over as Chair of Murray Income Trust plc (the “Company”) at the Centenary Annual General Meeting (“AGM”) in November 2023, I am delighted to present my first Half-Yearly Report for the Company for the six months ended 31 December 2023 (the “Period”). Last year was historic for the Company. Not only did it celebrate its centenary, it also increased its annual dividend for the 50th consecutive year, giving it one of the longest records of progressive dividend growth in the investment trust sector. Our aim is to continue the trend of capital and income growth which we have seen over many years - and a dividend yield of 4.5% at 31 December 2023 is a good place to start.

Investment Team

abrdn is our appointed investment management company. Charles Luke has been our lead portfolio manager since 2006 and works alongside co-manager Iain Pyle and Rhona Millar as part of abrdn’s Developed Markets Equities team.

Investment Process

Our Manager’s investment process is best summarised as a search for good quality companies at attractive valuations. The Manager defines a quality company as one capable of strong and predictable cash generation, sustainably high returns on capital and with attractive growth opportunities over the longer term. These typically result from a sound business model, a robust balance sheet, good management and strong environmental, social and governance characteristics. The Board also welcomed 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.

Performance

The Company’s net asset value (“NAV”) per share (with debt at fair value) increased by 4.5% over the Period, as compared to the rise of 5.2% in the FTSE All-Share Index (the “Benchmark”), both figures in total return terms. The fair value of the Company’s long-term debt was adversely affected by interest rate movements during the Period, which weighed on the Company’s NAV return. The share price total return was 6.2% following a narrowing of the discount from 8.2% to 6.9%.

Cumulative performance (%)

Annual General Meeting (“AGM”)

The 2023 AGM for the Company was held in Glasgow on 7 November 2023, celebrating the centenary of its launch in that city in 1923. The Company was initially called “The Second Scottish Western Investment Company”, changing its name to Murray Income Trust plc in 1984, at which time it also altered its remit to invest for a high and growing income from a portfolio of predominantly UK equities. It was encouraging to see such a strong and enthusiastic turn-out for this special event. A further centenary event for the Company was held in December 2023 when I, as Chair, had the pleasure of officiating at the closing ceremony of the London Stock Exchange, where I was joined by most of the Board, representatives from abrdn and our corporate broker, as well as the three most recent former Chairs.

Board

Following the retirement of Neil Rogan and resignation of Merryn Somerset Webb at the conclusion of the 2023 AGM, the Board was delighted to announce the appointment of Angus Franklin as a new non-executive director from 1 January 2024. Angus joined the Board following a distinguished career in various senior investment roles with Bailie Gifford & Co. Having, myself, assumed the role as Chair, my former position as Senior Independent Director is now held by Alan Giles who has been a Board member for three years. The other members of the Board are Stephanie Eastment, as Chair of the Audit Committee, and Nandita Sahgal Tully, who specialises in investment and ESG matters.

Dividend

The dividend for the year ended 30 June 2023 was increased by 4.2% to 37.5p per share, giving a year-end historic yield for the Company of 4.5%. Whilst intending to maintain the Company’s progressive dividend policy for the year to 30 June 2024, the Board also decided to rebalance the quarterly dividend pay-outs, allowing shareholders to access more quickly and more evenly their dividend income throughout the year. As announced in November 2023, the first three dividend payments for the year ended 30 June 2024 are 9.5p per share (previously 8.25p per share). As a result, the fourth interim dividend will be lower than that for last year but it is anticipated to be not less than 9.5p per share, giving an expected total for the year of a minimum of 38.0p per share.

Five year dividend table (p)

Total return; NAV to NAV, net income reinvested, GBP. Share price total return is on a mid-to-mid basis. Dividend calculations are to reinvest as at the ex-dividend date. NAV returns based on NAVs with debt valued at fair value. Source: abrdn Investments Limited, Lipper and Morningstar. Past performance is not a guide to future results.

Environmental, Social and Governance (“ESG”)

ESG considerations are deeply embedded into the company analysis carried out by our Manager with the aim of mitigating risk and enhancing returns. There is frequent dialogue with investee companies, focused on ensuring that the companies in the portfolio are acting in the best long-term interests of both their shareholders and society at large. By way of example, the Investment Manager’s Report describes engagement during the Period with Standard Chartered, National Grid and London Stock Exchange Group.

It is important to note that the policy pursued by our Manager on our behalf is dynamic rather than static. ESG conclusions can evolve if the inputs change: for example, one might reassess Russia’s invasion of Ukraine or the conflict in the Middle East and conclude that the social factor of national security and safety is more important now than previously considered.

Update

At 29 February 2024 (the latest practicable date prior to approval of this Report), the net asset value per share (with debt at fair value) and share price were 906.98p and 821.00p, respectively. Accordingly, for the period from 31 December 2023 to 29 February 2024, the net asset value total return (with debt at fair value) and share price total return were -1.4% and -4.0%, respectively, while the Benchmark total return was -1.1%.

Outlook

The previous calendar year (2023) was a mixed bag for equity markets with a strong recovery in technology stocks, resulting in a 25% gain in the US S&P index, but a more modest 7.9% increase in the UK FTSE All-Share Index, the Company’s own benchmark. With other non-UK markets also performing well during the year, the portfolio benefited from its near 20% exposure to overseas stocks including Accton Technology, Novo Nordisk and VAT Group, which each rose by more than 20% in the six months ended 31 December 2023.

As we turn our attention to 2024, one question I am asking myself is why has the UK market been a laggard and what might cause the situation to improve in the months and years ahead? There is, of course, never one definitive reason for market performance, but such reasons could include higher than anticipated inflation and interest rates, the impact of the Ukraine war on energy supply and utility bills, a lack of technology stocks in the Benchmark, a continuing Brexit hangover (dissuading foreign investors from the market) and the sharp reduction in equity exposure, particularly UK equity exposure, by UK Defined Benefit pension schemes. Information published by the Pensions and Lifetime Savings Association shows that, 20 years ago, UK Defined Benefit pension schemes invested about half of their assets in UK equities, but that this had fallen to only about 3% by 2023.

As a result, as noted in the Investment Manager’s Report, the UK market now looks very cheap compared to its own history and to international markets. Of course, there will be headwinds along the way, but interest rate trends are usually very important for equity market movements. The anticipation of falling UK interest rates later this calendar year could attract the attention of potential investors, particularly given the appealing combination of a market dividend yield of 4.0% and forecast dividend and earnings growth in 2024, according to a Bloomberg consensus of estimates in January, of 9.2% and 10.1%, respectively, despite the lacklustre outlook for overall economic growth.

From a Murray Income shareholder perspective, your starting point is a higher yield of 4.6%, and the shares standing on a 9.5% discount to net asset value (as at the date of this Report, with debt at fair value). The potential, therefore, for positive returns from owning the Company’s shares is encouraging, with a good yield and the capacity for earnings growth, together with a discount to net asset value at present. Markets can be blown off-course by many exogenous factors, and there remain significant risks in the current geo-political situation, emanating from the continuing Russian war in Ukraine, the current Middle East crisis, and tensions between China and both Taiwan and the USA, not to mention the fact that nearly half of the world’s population will be participating in general elections during the course of 2024. But the Company has prospered over the years through multiple economic, social and political crises. There are many good reasons to believe that it will continue to thrive in the years to come.

For a more detailed review of the UK market and the outlook for the Company’s portfolio, please see the Investment Manager’s Report on pages 7 to 9.

Performance

Discrete performance (%)

Risk factors

Risk factors you should consider prior to investing:

• The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested.
• Past performance is not a guide to future results.
• Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
• The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.
• The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.
• The Company may charge expenses to capital which may erode the capital value of the investment.
• Derivatives may be used, subject to restrictions set out for the Company, in order to manage risk and generate income. The market in derivatives can be volatile and there is a higher than average risk of loss.
• There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
• As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen.
• Certain trusts may seek to invest in higher yielding securities such as bonds, which are subject to credit risk, market price risk and interest rate risk. Unlike income from a single bond, the level of income from an investment trust is not fixed and may fluctuate.
• Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.

Other important information:

Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG. abrdn Investments Limited, registered in Scotland (No. 108419), 10 Queen’s Terrace, Aberdeen AB10 1XL. Both companies are authorised and regulated by the Financial Conduct Authority in the UK.

Find out more at www.murray-income.co.uk or by registering for updates. You can also follow us on social media: X and LinkedIn.