Murray International Trust – Half-year Report

MURRAY INTERNATIONAL TRUST PLC (the “Company”)

Legal Entity Identifier (LEI):  549300BP77JO5Y8LM553

HALF YEARLY REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2021

The Directors of Murray International Trust PLC report the unaudited results of the Company for the six months ended 30 June 2021

INTERIM BOARD REPORT – CHAIRMAN'S STATEMENT

It is with deep sadness that I have to report that Simon Fraser, the Chairman of the Company, died in the early hours of 9 August 2021 following a short illness.  On an interim basis, the Directors have asked me, David Hardie, to chair the Company.

Simon joined the Board in May 2020 and was appointed Chairman in April 2021 and had already, in this short time, contributed significantly to the Company. Simon's experience, measured leadership, focus and good humour will be greatly missed by the Board and the management team alike.  I should like to take this opportunity, on behalf of the Board, shareholders and the Manager, to extend our sincerest condolences to Simon's family.

Background

Global financial markets embraced the first few months of calendar 2021 with great optimism as vaccination programmes and easing of social mobility constraints gathered momentum. The message from most politicians and policymakers generally accentuated positives associated with clinical progress and strengthening economic activity following twelve tough months of pandemic-related disruptions. Such sentiment prevailed relatively unchallenged up to the end of the first quarter of the year, but thereafter serious doubts began to emerge.  Renewed challenges from viral mutations sharply reversed declining infection trends, particularly in the developing world; increasing recognition of debilitating legacies from lengthy economic dislocations became more apparent as government debt burdens escalated; plus the emergence of rising inflationary pressures inflicted a sobering constraint on financial markets as the implications of potentially higher interest rates came sharply into focus. With stressed supply chains failing to keep up with surging global demand, the prevailing shortages caused widespread price increases in commodities, raw materials and services, reigniting concerns over inflation. By period end, investor confidence had cooled significantly. 

Performance and Dividends

The net asset value (NAV) total return, with net income reinvested, for the six months to 30 June 2021 was 8.7%. The Company does not have a benchmark but this compared with the 11.4% return of the Company's Reference Index (the FTSE All World TR Index). Over the six month period, the share price total return was 7.3%, reflecting a small widening of the discount at which the shares traded over the NAV. The Manager's Review contains more information about the drivers of performance in the period and the portfolio changes effected.

Two interim dividends of 12.0p (2020: 12.0p) have been declared in respect of the period to 30 June 2021. The first interim dividend is payable on 16 August 2021 to shareholders on the register on 2 July 2021 and the second interim dividend will be paid on 19 November 2021 to shareholders on the register on 8 October 2021.  As stated previously, the Board intends to maintain a progressive dividend policy given the Company's investment objective. This means that in some years revenue will be added to reserves while, in others, revenue may be taken from reserves to supplement earned revenue for that year to pay the annual dividend.  Shareholders should not be surprised or concerned by either outcome as, over time, the Company will aim to pay out what the underlying portfolio earns. The Board currently intends in 2021 at least to match the dividend payout of 54.5p per share in 2020. It is expected that this will again entail some use of the significant revenue reserves built up over prior years for occasions such as the current pandemic.  At the end of June 2021 the Balance Sheet revenue reserves amounted to £58.2m.

Annual General Meeting

At the Annual General Meeting held on 23 April 2021 all resolutions were duly passed by shareholders.  In addition to the usual business, shareholders approved the Board's proposals to adopt new Articles of Association which became effective from the date of the AGM.  I should like to thank shareholders for their continuing support and forbearance given that, for the second year running, we were required to hold a purely functional AGM in light of the continuing Covid-19 pandemic.  However, it was very pleasing indeed to be able to communicate with a significant number of existing and prospective shareholders during the Online Shareholder Presentation held in April 2021.  Given the significant turnout and excellent level of interaction, this is something that the Board will consider repeating in the future, in addition to a physical AGM.  The Board remains very keen to have an opportunity to meet shareholders and, subject to any legal requirements or constraints that may apply at the time, we hope to be able to return to holding a normal, in-person AGM next year, on 23 April 2022 in London.

Management of Premium and Discount

The Board continues to believe that it is appropriate to seek to address temporary imbalances of supply and demand for the Company's shares which might otherwise result in a recurring material discount or premium. Subject to existing shareholder permissions (given at the last AGM) and prevailing market conditions over time, the Board intends to continue to buy back shares and issue new shares (or sell shares from Treasury) if shares trade at a persistent significant discount to NAV (excluding income) or premium to NAV (including income). The Board believes that this process is in all 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 period under review, the Company has purchased for Treasury 69,709 Ordinary shares at a discount to the underlying exclusive of income NAV. At the latest practicable date, the NAV (excluding income) per share was 1164.2p and the share price was 1137.0p equating to a discount of 2.3% per Ordinary share.

Gearing

In May 2021 the Company finalised new long-term fixed rate borrowings through the issuance of a £50 million 10 year Senior Unsecured Loan Note at an all-in rate of 2.24%.  The proceeds of the issue were used to repay the Company's £50 million revolving credit facility with the Royal Bank of Scotland International Limited, London Branch that matured at that time.  Under the terms of the Loan Note Agreement, up to an additional £150 million will also be available for drawdown by the Company for a five year period and the Board's current intention is to only use this additional amount to repay the Company's existing RBS debt as it falls due over the coming years.

The Company's total borrowings are £200m, which represents a net gearing level of 12.7% based on the Company's NAV at 30 June 2021.

Ongoing Charges Ratio (“OCR”)

The Board remains focused upon delivering value to shareholders and regularly reviews the OCR.  During the review period it is pleasing to note that the OCR has reduced from 0.68% to 0.60% reflecting the increase in net assets over the period combined with the results of the Board's continuing focus on reducing administrative expenses. A full breakdown of the OCR calculation is provided on below.

Directorate

This Half Yearly Report has been overshadowed by the death of Simon Fraser.  As I reported above, on an interim basis, I have agreed to chair the Company and, in addition, Alexandra Mackesy has agreed to become Senior Independent Director and to chair the Remuneration Committee.

On 23 April 2021 Dr Kevin Carter and Ms Marcia Campbell retired from the Board. I should like to take this opportunity to reiterate the Board's sincere thanks to Kevin for his huge contribution to the Company as Chairman and to reiterate our appreciation of the very significant contribution from Marcia as Audit and Risk Committee Chair. 

As part of the Board's succession planning, on 1 May 2021 we welcomed Mr Nicholas Melhuish to the Board as an independent non executive Director.  Nick brings a wealth of valuable global investment expertise to the Board having joined Corpus Christi College, Oxford as Fellow and Bursar in 2018 following a portfolio management career most recently as Head of Global Equities at Amundi SA.  He is a non executive director of JPMorgan Claverhouse Investment Trust PLC, a trustee of the Trusthouse Charitable Foundation and a director and trustee of The London Clinic.

Outlook

Notwithstanding the continuing battle against Covid-19 and its variants, there can be no doubt that a global economic recovery is underway with practically every country in the world projected to register a meaningful rebound in annual average GDP growth this year. Yet it must also be noted that rates of economic expansion are likely to prove extremely erratic on a quarterly basis and vary enormously between continents, countries and regional economies. For individual sectors, industries and companies, the path towards normality is unlikely to be straightforward. Both in terms of new patterns of consumption brought about through necessity during the past twelve months and production constraints associated with satisfying pent-up demand going forward from here, the pricing environment for goods and services is likely to remain volatile for some considerable time. How global financial markets ultimately cope should persistent inflation re-emerge remains to be seen, but the Company remains well diversified in quality companies with real tangible assets, seeking to capitalise on the numerous growth and income investment opportunities that currently prevail. 

David Hardie,

Interim Chairman

12 August 2021