Murray Income Trust Plc

Half-Yearly Report for the 6 months ended 31 December 2019

The Directors of Murray Income Trust PLC report the unaudited results for the six months ended 31 December 2019.

Financial Highlights

Performance (total return)

Financial Calendar

CHAIRMAN'S STATEMENT

I am pleased to report another strong six months of performance from our Manager, Aberdeen Standard Fund Managers Limited. The Company's net asset value (“NAV”) per share rose 9.0% in the six months ended 31 December 2019 in total return terms, outperforming the FTSE All-Share Index (the “Index”) return of 5.5%. The share price total return was 7.7% with the discount widening slightly from 4.3% to 5.5%.

Looking over longer periods to 31 December 2019, performance is ahead of the Index over one, three and five and ten years. At the same time we continue to grow our dividend, with a dividend increase chalked up in every one of the past forty-six years. This puts us into the top ten on the AIC's list of 'Dividend Heroes', as measured by the number of years of dividend growth, the investment trusts with the longest records of consecutive annual dividend growth.

Investment Objective

The Company aims for a high and growing income combined with capital growth through investment in a portfolio principally of UK equities. Plain vanilla if you like, it is a diversified portfolio of quality companies.

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. These typically result from a sound business model, a robust balance sheet, good management and strong environmental, social and governance characteristics.

Investment People

Charles Luke has been our portfolio manager since 2006. If you were not able to come to our Annual General Meeting in November, you can find his latest presentation on our website. His deputy is Iain Pyle and they are members of the Manager's five-strong UK Equity Income team which itself is part of the sixteen-strong UK Equity Team headed by Andrew Millington.

Performance

The FTSE All-Share Index is the Board's primary benchmark by which to assess performance and the headline numbers are recorded previously. Performance attribution again shows UK stock selection as the main contributor to outperformance. Charles and Iain assess performance in more detail in the Manager's Portfolio Report. The Directors also look at performance relative to other investment trusts in the UK Equity Income sector. The last six months have improved our relative rankings considerably such that we were third, out of 18 trusts, over one, three and five years to 31 December 2019, in NAV total return terms.

Fully Independent Board

Your Directors are all fully independent and are responsible for the governance of the Company, appointing the Manager, setting dividend policy and so on. Merryn Somerset Webb was appointed a Director on 7 August 2019.

Dividends

At 31 December 2019, the Company's shares were yielding 3.8% (calculated as dividing the total dividends paid in the past 12 months of 34p by the period end share price of 896p). This compares to the 4.1% yield available from the FTSE All-Share Index and the size-weighted average yield of 3.7% for trusts in the AIC UK Equity Income Sector.

A final dividend of 10.0p per share was paid on 8 November 2019 following shareholder approval at the AGM on 5 November 2019. Also at the AGM, shareholders approved a policy whereby the Company will pay four interim dividends for the years ending on and after 30 June 2020, in place of the previous pattern of three interim dividends and a final dividend. The purpose of this was to pay shareholders their dividends both earlier and at regular three-month intervals.

Following the introduction of this revised policy, the Company announced in November 2019 that it would pay 8.25p per share on 20 December 2019, 20 March 2020 and 19 June 2020 for the first, second and third interim dividends, respectively.  The practical impact of this is that shareholders will have received the final dividend for the 2018-2019 year in November 2019 and the first interim dividend for the current year in December 2019. The Board will announce the rate for its fourth interim dividend in early August 2020, with payment expected in September 2020.

Share Capital

The Company did not issue nor buy back any shares during the six months ended 31 December 2019.

Ongoing Charges

Lower ongoing charges are a competitive advantage for investment trusts compared with open ended funds. Our ongoing charges for the year ended 30 June 2019 were 0.65% and we continue to aim to trend lower, as evidenced by the annualised 0.62% recorded for the review period. The management fee, which is the largest component of ongoing charges, is tiered (see note 4 for details). On net assets of £627m at 31 December 2019, the blended management fee rate was equivalent to 0.45%. The marginal rate of management fees is 0.25% per annum charged on net assets above £450m.

Engaging Individual Shareholders

We have a high proportion of the Company owned by individual investors and are committed to making sure that up-to-date information on the Company is easily accessible. In the year ahead, we plan to continue the enhancements to the content on the Company's website, maintained by the Manager, at murray-income.co.uk and continue in our commitment to find ways to reach new investors as well as how better to reach investors who use third-party platforms. In particular, shareholders may have seen the additional coverage we achieved last year in promoting November's Annual General Meeting. The Directors and Manager were delighted to meet so many shareholders at that meeting in London and we had positive feedback both on Charles' presentation and the lunch. This year's Annual General Meeting will be held in Glasgow on Tuesday 3 November 2020.

Update

From 31 December 2019 to 31 January 2020, the net asset value per share total return and share price total return were -1.3% and +0.7%, respectively, while the discount had narrowed from 5.5% to 3.7%. The FTSE All-Share Index total return was -3.3%.

Electronic Communications for Registered Shareholders

As we reported in September, the Board is proposing to move to more electronic-based forms of communication with its registered shareholders. Increased use of electronic communications should be a more cost effective, as well as faster and more environmentally friendly way of providing information to shareholders. Registered shareholders will therefore find enclosed with this Half-Yearly Report a letter containing our electronic communications proposals and an opportunity to supply an email address to the Registrar, Link Asset Services. Registered shareholders who wish to continue to receive hard copies of documents and communications by post will need to send back their replies in the enclosed prepaid envelope as soon as possible, but in any event by 31 March 2020.

Shareholders who hold their shares through the Aberdeen Standard Investment Trust Share Plan, ISA and Children's Plan (Planholders) will continue to receive all documentation by post in hard copy form for the time being.  Aberdeen Asset Managers Limited, the plan manager, is currently assessing how to adopt more electronically-based communications within the savings plans, and planholders will be contacted directly with more detail in due course.

Outlook

There is still plenty to worry about and the world's media and stock markets are very good at worrying. The transition period on leaving the EU, President Trump, trade wars and tariffs, Prime Minister Johnson, the Middle East, the coronavirus, there are potential negative headlines everywhere you look. There are further obstacles to overcome this year: Trade deals with the EU, US and beyond will be difficult to negotiate in a tight timetable. The US Presidential election in November will dominate headlines.

Climate change is far more than just a one-year problem and those governments and companies that are not doing enough will come under ever-increasing pressure. Companies seen to be taking this issue seriously will be rewarded for their endeavours and the Manager's extensive dialogue with those in the portfolio aims to ensure that this is the case.

Irrespective of which way you leaned on Brexit or the UK General Election, the removal of political uncertainty is usually positive for stock markets. It is uncertainty that stops companies from committing to new capital expenditure plans, and uncertainty that makes consumers wait before spending. Now that the UK has left the European Union and now that the new UK Government has a very strong majority to take it through the next five years, it is likely that many of those spending decisions will be made sooner rather than later. Add to this the Government's announced commitment to infrastructure and regional spending plus the Bank of England's loose monetary conditions and it is not impossible that we will start to worry about the UK economy overheating before too long. That would be another negative but the journey from here to there would be interesting for investors. Very interesting.

Neil Rogan, Chairman