Murray Income Trust Regulatory News (MUT)

MURRAY INCOME TRUST PLC

Legal Entity Identifier (LEI): 549300IRNFGVQIQHUI13

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020

FINANCIAL HIGHLIGHTS

FINANCIAL CALENDAR

CHAIRMAN'S STATEMENT

Highlights

· Total dividends per share increased by 0.7% to 34.25p, the 47th year of consecutive increase.

· Dividend yield of 4.5%, based on the year end share price of 768.0p.

· Share Price Total Return of -5.8% and Net Asset Value Total Return -5.3% both well ahead of the FTSE All-Share Index Total Return of -13.0%.

· Our Manager, Aberdeen Standard Investments, has a strong, long-established ESG process. The Company has been awarded a Morningstar Sustainability Rating of four out of five globes.

Review of the Year

I am pleased to report another very strong year of relative performance for the Company and a 47th consecutive year of dividend increases.

Net Asset Value ("NAV") per share fell by 5.3% over the year in total return terms. While it is always disappointing to record short term losses, we are reassured by the fact that our relative performance was well ahead of the benchmark index (FTSE All-Share) return of -13.0%, on a total return basis. With the discount of share price to NAV widening slightly from 4.3% to 5.0% over the year, the share price total return was -5.8%. Performance is explained in more detail in the Investment Manager's Report but the main contributing factor is Aberdeen Standard Investments' relentless focus on quality. Among the key characteristics for a "quality" company for Aberdeen Standard Investments are the strength of the business model, management and balance sheet. This has helped avoid the worst of the dividend shocks.

The Board declared, on 5 August 2020, a fourth interim dividend per share of 9.50p which makes a total for the year of 34.25p, an increase of 0.7% on the 34.00p per share paid in the previous year. This will represent 47 consecutive years of dividend growth and allows us to retain our place on the AIC's list of Dividend Heroes, the investment trusts that have successfully increased their dividend each year for at least 20 years. Shareholders may recall that approval was given at the last AGM for the Company to pay four interim dividends, evenly spaced throughout the year, thus avoiding the considerable delay resulting from the final dividend not being paid until after the relevant resolution was passed at the AGM.

Relative to our NAV per share, our share price moved between a 3.4% premium and a 6.9% discount over the year. The average discount was 3.6%. Discounts widened across the UK Equity Income sector as the impact of the Covid-19 pandemic ("Covid-19") on dividends became clearer.

The people and process behind the Company are unchanged over the year. Charles Luke has been our lead manager since 2006 and is supported as deputy by Iain Pyle. They form part of the six-strong UK Equity Income Team at Aberdeen Standard Investments which in turn is part of the sixteen-strong UK Equities team headed by Andrew Millington. It is worth repeating that the 2017 merger between Aberdeen Asset Management PLC and Standard Life plc has resulted in a much-strengthened UK Equities team. Years of rehearsing for disaster recovery proved invaluable when the decision was made at Aberdeen Standard Investments to move to home working in March: the switch surprised everyone by proceeding without a hitch.

Environmental, Social and Governance ("ESG")

ESG is one of the key components of Aberdeen Standard Investments' philosophy as it seeks to mitigate risk and enhance returns. The Company benefits from the significant amount of time and resource that the Manager dedicates to focusing on the ESG characteristics of the companies in which they invest. ESG considerations are deeply embedded in the company analysis carried out by the Manager who is also able to draw on the expertise of more than 30 in-house ESG specialists. This results in frequent dialogue with investee companies and helps to ensure that the companies in the portfolio are acting in the best long term interests of their shareholders and society at large. The Company has been awarded a Morningstar Sustainability Rating of four out of five.

Proposed Combination with Perpetual Income & Growth Investment Trust plc

We are thrilled to have won a highly competitive tender run by the board of Perpetual Income and Growth Investment Trust plc ("PLI"). It is a recognition of the strength of the people, process and performance of our management team led by Charles Luke, supported by Iain Pyle and the rest of their UK team at Aberdeen Standard Investments. Combined with a projected 0.38% blended management fee, which compares to pre-combination blended fee rates of 0.48% for the Company and 0.55% for PLI, our proposal proved compelling. The two companies have very similar objectives, delivering high and growing income combined with capital growth. If approved by shareholders, the proposed combination with PLI will create a company with gross assets in excess of £1 billion.

And while we are not allowed to forecast dividends, we can say that we are proud of our Dividend Hero status that comes from our record of increasing our dividend payments in each of the past 47 years and the Board intends to retain this hard-earned record of growing dividends.

We hope that most PLI shareholders will choose to take up their new shares in our Company and look forward to welcoming them. We expect to be announcing details of the combination, including convening the shareholder meeting that the Company will be required to hold, shortly.

The Company will celebrate its centenary in 2023. With a strong management team and an excellent performance track record and with its larger size leading to greater liquidity and lower costs, subject to the successful completion of the combination with PLI, we can look forward with confidence to continuing to meet our shareholders' objectives.

Board

One of the reasons that there are not as many investment trust transactions as there should be is the inability of Boards to agree on who should move on to the combined Board. Directors of both trusts do not want to vote to lose their jobs and directors of the surviving trust do not want to increase the number of directors. So trusts stay independent longer than they should. This is despite it usually being in both sets of shareholders' interests that the proposed combination proceeds and despite it being good for the reputation of the industry that weaker trusts merge into the stronger ones.

PLI's chairman Richard Laing together with Alan Giles and Georgina Field have been invited to join the Board of the Company subject to approval by shareholders of the combination and we are delighted to welcome them. The three Directors who will each have completed nine years' cumulative service on either or both of the companies' boards - namely Richard Laing, Jean Park and Donald Cameron - will then retire by the close of the 2021 AGM when the Board will reduce back from nine to six Directors. The five and one years' respective service for Alan and Georgina, as directors of PLI, will count towards their maximum nine-year terms. The extra salary costs in the first year are within the shareholder approved ceiling on Directors' fees and are substantially offset by not needing to pay two sets of recruitment costs to find replacements for Jean and Donald. We thank Victoria Cochrane, Bob Yerbury and Mike Balfour, the PLI directors who are not joining the Board, for their contributions to the combination and wish them every success in the future.

Income and Dividend Policy

Covid-19 has led to a sudden, large and unexpected cut in dividend payments from many UK companies. Hit hard by declining revenues, companies have chosen to conserve cash or followed guidance to suspend dividends whilst in receipt of government furlough funding or other assistance. Calendar year 2020 dividends, for the market, are currently expected to be 40% below 2019 levels. Our Manager is currently forecasting a 14% reduction in our portfolio income in 2020. The purpose of building our revenue reserves over the years is to give us the ability to smooth dividend payments to shareholders in times such as these. So we are able to increase our full year dividend per share for the year ended 30 June 2020 to 34.25p by paying out 30.50p as this year's revenue supplemented by 3.75p from revenue reserves, which represents the 47th year of consecutive dividend increases. This reduces our revenue reserves per share from 27.8p to 24.1p, the latter representing 70.3% of the full year dividend.

We are not allowed to bring over the revenue reserves of PLI due to the technicalities of the Section 110 restructuring process. In light of the likely reduction in the Company's income in the near term, combined with the Company's planned combination with PLI (and the corresponding dilution to the Company's revenue reserves that any issue of new shares would bring), the Board is keen to ensure that it can make dividend increases in the future during any period of uncertainty. Left unchecked, depleted revenue reserves may mean lower future dividend growth for shareholders if the Company sought to rebuild the revenue reserves to provide a sufficient cushion against future shocks. Your Board is therefore of the view that the ability to pay a portion of future dividends judiciously out of capital reserves provides a valuable degree of flexibility and offsets any potential drawback of the planned combination with PLI. Your Board also believes that having this additional weapon in its armoury should improve the Company's appeal to investors, given the additional capability that the Company would have to maintain its dividend in a variety of circumstances. As a consequence, your approval is therefore being sought at the forthcoming AGM to a change in the Company's Articles of Association to permit such payments, which is now commonplace in the sector. Further details are set out in the Directors' Report.

Ongoing Charges

The figure for ongoing charges represents the total charges to shareholders for managing and administering the Company. The management fee payable to Aberdeen Standard Investments for their management of the investment portfolio is the largest component of this. Since 1 January 2018, the management fee has been calculated on net assets as follows: at 0.55% up to £350m, 0.45% between £350m and £450m and 0.25% over £450m. At 30 June 2020, based on net assets of £534.4m, our blended management fee is therefore 0.48%.

In addition to the management fee, there is an annual marketing fee of £407,000 and a secretarial fee of £90,000, both including applicable VAT. The total ongoing charges figure aggregates all charges and as a percentage of NAV was 0.64% for the year ended 30 June 2020. There is one further cost to shareholders on top of the ongoing charges figure which is the transaction costs of changes in the investment portfolio. Because of the low portfolio turnover stemming from the Manager's long-term investment process, total transaction costs amounted to only 0.14% of NAV for this financial year.

Gearing

The Board continues to believe that sensible use of modest and flexible borrowings (otherwise known as gearing) should enhance returns of both capital and income to shareholders over the longer term. It is indeed an advantage of investment trusts that they are able to borrow money in order to enhance returns to shareholders. Net gearing increased from 3.1% to 5.3% over the year. The Company has £60m of short and long-term borrowings split between £40m of 10-year loan notes with an annual coupon of 2.51% expiring in 2027 and a £20m multi-currency three-year bank borrowing facility from Scotiabank, committed until November 2020.

Part of the combination with PLI involves bringing together the long term borrowings of the two companies. This would result in a blended cost of long term borrowing of 3.63% with £40m due in 2027 and £60m due in 2029. Together with our rolling short-term borrowing facility of £20m this would take the full borrowing potential to £120m, which is 10.8% of the aggregated net assets of the Company and PLI, as at 30 June 2020. With the beta of the investment portfolio currently running at 0.89 (meaning that statistically the portfolio is expected to capture 89% of any market movement) the Board presently believes that the appropriate neutral gearing rate is 10%. The annualised cost of the Company's current borrowings is 0.21% of NAV.

Annual General Meeting

At the time of writing, various guidance has been issued by the UK, Scottish and Welsh Governments, respectively, regarding measures to reduce the transmission of Covid-19 in the UK. These measures are, and will continue to be, subject to periodic amendment and currently impose rules on social distancing and limitations on, among other things, public gatherings. It is unclear how long these measures will be in place. The safety, security and health of the Company's shareholders, their guests and our advisers, including the Manager's personnel, is of paramount importance to the Board. Accordingly, in view of this guidance, the Board is changing the format of the AGM this year.

The AGM will be held in London at 12.30pm on Friday 27 November 2020 at the offices of Aberdeen Standard Investments in Bow Bells House, 1 Bread Street, London EC4M 9HH, but will follow the minimum legal requirements for an AGM. Only the formal business set out in the Notice will be considered, with no presentation by the Investment Manager and no refreshments nor shareholder buffet lunch. In line with this guidance, shareholders are strongly discouraged from attending the meeting and indeed entry will be refused if current UK Government guidance is unchanged. Arrangements will be made by the Company to ensure that a minimum number of shareholders required to form a quorum will attend the meeting in order that the meeting may proceed. The presentation that would normally be given at the AGM will be uploaded to the Company's website on 27 November 2020.

However, the Board is keen to ensure shareholders have an opportunity to interact with the Board and the Manager later in the year when it is hoped that the measures have been relaxed further. Therefore, in due course, we intend to publish on the Company's website details of a webcast during which the Chairman and Investment Manager will be available to present and answer your questions. As it is likely that Shareholders may not be able to attend the AGM in person, where possible, I would encourage you, in advance of the AGM, to lodge your vote either electronically via the registrar's online portal or by completion and return of a proxy (for direct shareholders) or a letter of direction (for Aberdeen Standard Investment Plan Participants).

I always welcome questions from our shareholders at the AGM but this year, given the format and the prevailing circumstances, I would ask shareholders to submit their questions to the Board prior to the meeting (and in any event by no later than 13 November 2020). The Board and/or the Investment Manager will respond to all such questions received either before or after the AGM. You may submit questions on the Company, the Annual Report or Notice of AGM in advance by email to the Board and Manager by sending such questions to murray.income@aberdeenstandard.com.

The situation in relation to Covid-19 continues to evolve and the Company will update shareholders as to any changes to the above arrangements for the AGM through its website at www.murray-income.co.uk and, where appropriate, through announcement on the London Stock Exchange. I trust that shareholders will be understanding and supportive of this format. The proposed resolutions are set out in the Notice of AGM in the published Annual Report and explained in the Directors' Report.

Update

From 30 June 2020 to 21 September 2020, being the latest practicable date prior to approval of this Report, the NAV per share fell by 2.3% outperforming the FTSE All-Share Index which fell by 5.0%, both figures on a total return basis.

Outlook

It is a tough time to write an outlook section. There are too many variables that are difficult to predict, so any residual forecast would necessarily have a very low level of confidence. It is simply not a time for big predictions nor for taking large risks.

Aggregate UK company dividends are currently forecast to be down 40% in 2020 versus 2019. Holders of unit trusts or OEICs will experience sharp falls in their income payments in many cases. Investment trusts have the structure and ability to smooth income payments by using their accumulated reserves, thus most investment trusts will be able to at least maintain dividends.

Quality companies with attractive dividend yields, sound growth prospects and strong balance sheets are likely to be prized more than ever. The Company's focus on quality should mean that it is particularly well placed to serve shareholders who are searching for a reliable, diversified and growing income stream.

Neil RoganChairman

22 September 2020

STRATEGIC REPORT - RESULTS

Financial Highlights

Performance (total return)

Dividends

Ten Year Financial Record

STRATEGIC REPORT - INVESTMENT MANAGER'S REPORT

Background

For the majority of the 12 months to 30 June 2020 it looked like the salient issues affecting the UK equity market would be domestic politics, Brexit and the circumstances surrounding US-China trade relations, but it was what came to pass at the start of Spring, namely the impact of the Covid-19 pandemic ("Covid-19"), that will frame the period under review for a long time to come. During March the market took significant fright at the potential for Covid-19 to deliver an unprecedented threat to global growth through a combination of a supply and demand shock, leading to elevated credit and liquidity concerns. This manifested itself in a collapse in share prices representing one of the fastest bear markets in history and precipitated a similarly sharp fall in oil prices. Towards the end of the period concerns over the spread of Covid-19 started to ameliorate as containment efforts began to take effect and governments' policies helped to ease the situation with market volatility abating and share prices in aggregate recouping some of their losses. The FTSE All-Share Index, having increased by 5.5% during the first 6 months of the period subsequently fell by 17.5% in the second half of the financial year and ended the 12 month period 13.0% lower (all figures on a total return basis, that is with dividends reinvested).

The first six months of the period witnessed equity markets progress gently higher with the domestic and global economies performing anaemically despite a backdrop of very modest levels of unemployment and low interest rates with the latter in particular boosting investor sentiment. In the UK, concerns regarding Brexit and the potential market-unfriendly nature of a Labour government were important factors in prompting Sterling to weaken and consequently helped to buoy those companies with overseas earnings. The failure of Parliament to agree on a withdrawal agreement resulted in the resignation of Theresa May as Prime Minister. Her successor, Boris Johnson, was more successful and with the prospect that the most negative Brexit scenarios would be removed, domestic assets responded positively. The Conservative Party majority in the General Election provided a further fillip to domestically exposed UK companies. Although we entered 2020 with valuations at high levels, investors took comfort from the prospect of easier fiscal and monetary policy, an improving trade backdrop and an environment in the UK seemingly set fair for domestically-focused companies to benefit. Internationally, the ongoing trade dispute between the US and China provided the main area of focus with signs of progress and delay affecting sentiment. Concerns over the impact on the global economy, and in particular manufacturing, led the US Federal Reserve and the European Central Bank to reduce interest rates. Towards the end of the calendar year, a sense that a lasting trade agreement would be possible buoyed markets.

It was impossible to predict Covid-19 and its impact on the global economy. The slow realisation of the potential impact on health and economies caused some weakness in markets during late January and early February, but as the virus spread outside China to South Korea, Iran and to Italy in particular, the dawning of the consequences resulted in a collapse in share prices in the last week of February and first three weeks of March. Volatility soared together with safe-haven assets such as US Treasury bonds and gold while shares and the price of oil plummeted, the latter compounded by the initial inability of Saudi Arabia and Russia to reach an agreement to cut production. There is an apophthegm that 'markets stop panicking when governments start panicking' and we have seen a very significant fiscal and monetary response from governments and central banks around the world including a reduction by the Bank of England of the base rate to 0.1% and further UK government and sterling corporate bond purchases. This, together with an acknowledgement that social distancing can halt the spread of the virus, has brought some calm to markets but the longer term effect of the virus on the global economy is as yet unknown.

Economic data for the year prior to the virus is effectively redundant and the severe economic impact of the immediate aftermath of the virus is only now becoming clear. In the UK, GDP for the second quarter of 2020 is estimated to have fallen by a record 20.4% following a 2.2% fall in the first quarter. Bank of England forecasts suggest that GDP is not likely to exceed its level in the final quarter of 2019 until the end of 2021 yet this might well be optimistic. Domestic unemployment has increased but the true picture will only become clear once the support from temporary government furlough schemes (which have benefitted close to 10m workers) is removed with estimates pointing to a 7.5% unemployment rate by the end of the calendar year. CPI inflation was 1.0% in July and is likely to trend lower in the short term given the impact of the virus together with lower energy and VAT rates.

Overseas, the economic landscape paints a broadly similar picture, albeit not quite so bad. Global GDP is estimated to have fallen 9% in the second quarter of 2020, considerably worse than during the global financial crisis. In the second quarter of calendar 2020, Euro area GDP is estimated to have fallen by 12.1% and US GDP by 9.5%. A significant outlier has been the performance of the Chinese economy, which having been the first country to suffer and together with robust enforcement actions and stimulus, emerged more quickly with a strong recovery exhibiting GDP growth of 11.5% in the second quarter.

Performance

The Company generated a negative net asset value per share total return of 5.3% in the year to 30 June 2020, which represents a short term loss in absolute terms but compares to a larger fall in the benchmark FTSE All-Share Index of 13.0%. Outperformance relative to the benchmark was evenly distributed across both halves of the year as stock selection proved to be strong in an environment where the focus on quality companies proved its worth again. As we saw during the period, these high quality companies provided the ability to participate when the equity market performed well given the structural growth characteristics of the holdings yet outperformed a falling market as their strong balance sheets and robust business models demonstrated defensive attributes.

On a total return basis, the Company's share price fell by 5.8%, which reflected a marginal widening of the discount to Net Asset Value at which the shares traded compared to the previous year end. During the period the Company did not buy back any shares. On a gross assets basis, the equity portfolio outperformed the benchmark by 8.5%. Gearing reduced returns by 0.6%. The Company maintained the level of debt at a steady rate of around £46m for the period, split between £40m of Senior Secured Fixed Rate Notes at a coupon of 2.51% and £6 million drawn down from an unsecured multi-currency revolving credit loan facility agreement with Scotia Bank Europe PLC. The notes are denominated in sterling however the bank debt has been drawn down in a mixture of US dollars, euros and Swiss francs, and Danish and Norwegian krone, broadly matching the mix of non-UK-listed portfolio holdings.

Two large sectors that were particularly weak over the period were the oil and gas producers and the banks sectors. For the former, weaker oil prices, concerns around the energy transition and a greater focus on ESG proved to be a challenging series of headwinds. For the banks sector, low interest rates, impairment concerns and the deferral of dividends were barriers to performance. Conversely, the pharmaceutical and utilities sectors performed relatively strongly as investors sought to invest capital in cash-generative defensive areas of the market able to maintain their dividend payments.

Performance Attribution for the year ended 30 June 2020

From a size perspective, the FTSE 100 Index underperformed both the Mid 250 and Small Cap Index. The FTSE 350 High Yield Index significantly underperformed the FTSE 350 Low Yield index during the period.

Looking specifically at the Company's portfolio, stock selection and asset allocation were both positive, the former in particular. Stock selection was positive in all sectors apart from Consumer Goods and Consumer Services. Asset Allocation was significantly beneficial in Oil & Gas.

Turning to the individual holdings, there were a number of companies that demonstrated strong share price increases. Roche performed well given its defensive growth status aided by a series of new products and a diminished threat from generic competition that led to earnings upgrades over the year. Strong demand for its cloud products helped Microsoft to perform very robustly. Assura benefited from the quasi-government rental income for its GP surgeries helping it to perform strongly.

On the other hand, there were a series of disappointments mostly related to the impact of Covid-19: the lack of travel affected National Express and WH Smith, and the shutdown severely limited Euromoney's exhibition division's revenues (albeit a relatively modest part of the company's operations).

Portfolio Activity and Structure

Turnover of 26% was a little higher than the prior year although the number of name changes was more substantial with an increased emphasis away from the largest companies in the market and a desire to increase the active share of the portfolio which is now approximately 67%. Where possible we sought to further improve the quality of the portfolio and maintain the focus on capital and dividend growth with the period of increased volatility caused by Covid-19 providing a catalyst for many of the changes that follow.

We added fourteen new holdings to the portfolio of which nine were mid cap companies. The first was Convatec, a medical devices company with a strong position in wound and ostomy care. The company has suffered from mostly self-inflicted issues which we believe the management can cure allowing the potential for the company to take greater advantage of its attractive end-markets. The second mid cap purchase was Polypipe, a piping systems company where we believe the competitive position of the business and the regulatory growth drivers are under-appreciated. A holding in National Express was introduced to the portfolio. The company was purchased on the basis that it looked attractively valued given a number of interesting growth drivers and opportunities to increase returns.

A weak trading update provided an opportunity to purchase a holding in John Laing which through its investment and management of infrastructure and renewables projects has generated a long history of strong returns. A modest holding in Sanne, an alternatives fund administrator with attractive exposure to the growth of alternatives investments as an asset class, outsourcing and regulation with high levels of recurring revenues, high switching cost and attractive margins, was also added to the portfolio. We also purchased shares in Fever-Tree, the high quality premium tonic company which has a strong brand, an attractive capital-light business model, a strong balance sheet and exciting growth opportunity in the United States. Another mid cap new holding was Diversified Gas & Oil, a conventional natural gas producer focused on mature assets in the Appalachian region of the United States. The company has a very attractive dividend yield and benefits from low oil prices given the reduction in production of associated gas. The penultimate new mid cap was Unite, the leading student accommodation provider which benefits from strong relationships with universities with significant scope for purpose-built student accommodation to take market share from more traditional student 'digs'. Finally, in the mid cap space, we started a position in Dechra Pharmaceuticals, an international veterinary pharmaceutical company which enjoys strong fundamentals driven by growing pet ownership in emerging markets and increasing per capita spend on pets in developed markets.

There were five large cap company introductions. The first of these was Telenor, a good quality Scandinavian telecoms company with attractive emerging markets assets. A modest holding in Mowi, a Norwegian supplier of sustainable salmon was added to the portfolio. The company benefits from strong demand growth, diversified supply and an attractive dividend yield. We also purchased a holding in Mondi, a high quality cyclical paper company with a strong balance sheet, a conservative management team and with some interesting growth prospects. A holding in Total the French oil major was added to the portfolio. The company offers a relatively defensive profile given its high quality portfolio with its low oil price breakeven and long cycle upstream assets coupled with an attractive dividend yield. Finally we purchased shares in Coca Cola Hellenic, the second largest soft drink bottler of Coca-Cola product focused on Eastern Europe, Italy, Nigeria and Russia which offers good growth potential from higher volumes, premiumisation, innovation and pricing.

Furthermore, we increased exposure to a number of our existing holdings which we believe have high quality characteristics with attractive long term growth prospects including: Diageo; Croda; Euromoney; Standard Chartered and Relx.

We sold seventeen holdings during the period. Firstly, InterContinental Hotels Group which was sold given concerns over its relatively high gearing following the Six Senses acquisition and the special dividend payment, potential cyclical pressures and the relatively low dividend yield. Nordea was sold due to our lack of confidence in the sustainability of its dividend and the pressure on earnings from weak macroeconomic conditions and low interest rates. Hiscox was sold given concerns around weak trading and a more challenging competitive environment. Given a deterioration in quality and our lack of confidence in the company's strategy and its ability to maintain its dividend, the holding in Imperial Brands was sold. The holding in St James's Place was sold due to our concerns around a more challenging regulatory environment. The position in London Stock Exchange was sold following a period of very strong share price performance that had left the valuation somewhat stretched and the balance sheet relatively highly geared assuming the potential acquisition of Refinitiv is completed. The holding in HSBC was sold given concern that the company would need to reduce its dividend due to the impact of Covid-19 and more generally very challenging trading conditions not least due to low interest rates. The small holding in Signature Aviation was sold given concerns about the company's operational and financial leverage given that Covid-19 would likely lead to a sharp fall in business jet activity. The holding in Compass was sold given concern around the impact of Covid-19 on the company's operations not least the cancellation of sporting events and the likelihood of a greater proportion of the workforce working from home, coupled with the company's weak balance sheet. We sold the small holding in Diploma given the full valuation and some concern about the cyclicality of the business given the impact of Covid-19. The impact of Covid-19 and a lack of scale led to the sale of the small holding in Hostelworld. We also sold our shares in Scandinavian Tobacco Group as we saw more attractive opportunities elsewhere. The holding in WH Smith was sold on the basis that the investment thesis had changed considerably following Covid-19 such that the company's ability to benefit from the growth of its travel assets had been curtailed and the valuation less attractive than before. Concern around the impact of higher unemployment coupled with a relatively unattractive valuation and a low dividend yield provided the basis for selling the holding in Experian. We exited the small holding in Workspace as we believe that the outlook for flexible workspace in London has deteriorated considerably given the impact of Covid-19 and it will be difficult for the company to maintain pricing and attract new clients in the medium term. Our small residual holding in Vodafone was sold given our preference for Telenor which has a more attractive geographic exposure, better growth potential and a stronger balance sheet. Finally, we sold the position in Shell given the less attractive dividend and a more challenging outlook particularly as the company negotiates the energy transition.

In addition, we took profits in a number of holdings that had performed strongly and where the valuation had started to look less attractive such as Howden Joinery, Kone, Rentokil, Novo Nordisk, Roche and Microsoft.

We continued our judicious option-writing programme with a significant bias during the period before the advent of Covid-19 towards call options. Now more than ever we feel that the option writing strategy has been of benefit to the Company by diversifying and increasing the level of income generated and providing a good discipline for optimising our exposure to individual holdings. The income from writing options increased in absolute and percentage terms accounting for approximately 10% of total income compared to 7% during the prior year.

With our longer term investment horizon, we continue to put significant effort into engagement with the companies in the portfolio to ensure that they are run in shareholders' best interests. Examples of the subjects of our engagement during the year have included issues such as board composition, diversity, experience and expertise; capital allocation and M&A activity; risk management including issues such as cyber security and data protection; and dividend and balance sheet policies; remuneration; climate change, sustainability and environmental issues; child labour; and accounting policies. These issues have been pursued through meetings with the executive management of the companies as well as the non-executives: particularly the chairs of the board, remuneration, and audit committees and other company representatives.

Our aspiration in terms of portfolio construction is simple: to invest in good quality companies with attractive growth prospects through a sensibly diversified portfolio with appealing dividend characteristics. The ability to invest up to 20% of gross assets overseas is helpful in achieving these aims and at the year end, the portfolio comprised 56 holdings with the overseas exposure representing 14.0% of gross assets.

Income

For the financial year ended 30 June 2020, the Company witnessed a fall in the level of income generated due mostly to the impact of Covid-19 in the final quarter of the financial year but part of this reduction also incorporated our desire to focus more on companies with better capital and dividend growth characteristics rather than just a high headline yield. The income from investments reduced by approximately 14% partly offset by an increase in option income leading to a fall in income generated of 11%. Included in income from investments were three special dividends (from John Laing, M&G and Rio Tinto) that were recognised as revenue items. We believe that this recognition is appropriate given that the return of cash was from a build-up of profits generated by ongoing operations rather than a sale of assets. On a per share basis, taking account of expenses and taxation, the earnings per share reduced from 34.93p to 30.50p. In a number of cases related to the impact of Covid-19, although there was an ability to pay dividends, intervention by authorities or a very prudent view on the outlook led to dividend reductions or cancellations. Given our focus on robust business models and strong balance sheets we would expect the majority of those companies in the portfolio that have cancelled or suspended their dividends to return quickly to the dividend list and in some cases to pay the suspended dividends at a later date. Forecasts suggest that for calendar year 2020 the level of dividend income paid out will fall by at least 40% across the UK market, our analysis suggests that the portfolio will materially outperform that reduction in income. We believe that for the market as a whole the outlook for dividends is likely to remain challenging given that for some companies pay-out ratios were arguably too high beforehand and Covid-19 provides the cover to reduce distributions while for other companies the primary focus will be on reducing debt rather than returning dividend payments to prior levels.

Outlook

Uncertainties abound. Although the trajectory of an economic recovery will be dependent on a range of factors including further government support, the magnitude of any second wave of the virus, the timing and availability of a vaccine, and behavioural changes, it seems likely that the post-coronavirus environment will be characterised by a long period of sub-par growth, limited inflation, low interest rates and high corporate debt. In addition, the end of the transition period for Brexit adds a further layer of ambiguity regarding our future relationship with the EU and as a consequence of those negotiations, the rest of the world. Furthermore, the outcome of the upcoming US election is too close to call. In these difficult circumstances we believe that companies with attractive dividend yields, sound growth prospects and strong balance sheets are likely to be prized more highly than ever. Therefore it seems eminently sensible to maintain our careful and measured approach to these high quality companies that should be able to thrive in this challenging environment and emerge in a stronger competitive position.

Charles Luke and Iain Pyle,

Aberdeen Asset Managers Limited

Investment Manager

22 September 2020

MANAGER'S ESG ENGAGEMENT

Environmental, Social and Governance ("ESG") Engagement

Whilst the management of the Company's investments is not undertaken with any specific instructions to exclude certain asset types or classes, the Manager embeds ESG into the research of each asset class as part of the investment process. ESG investment is about active engagement with the goal of improving the performance of assets held around the world.

The Manager aims to make the best possible investments for the Company by understanding the whole picture of the investments - before, during and after an investment is made. That includes understanding the environmental, social and governance risks and opportunities they present - and how these could affect longer-term performance. ESG considerations underpin all investment activities. With 1,000+ investment professionals, the Manager is able to take account of ESG factors in its company research, stock selection and portfolio construction - supported by more than 50 ESG specialists around the world.

Active Engagement

Through engagement and exercising voting rights, the Manager, on behalf of the Company, actively works with companies to improve corporate standards, transparency and accountability. By making ESG central to its investment capabilities, the Manager looks to deliver improved financial performance in the longer term as well as actively contributing to a fairer, more sustainable world.

The primary goal is to generate the best long-term outcomes for the Company in order to fulfil fiduciary responsibilities to the Company. The Manager sees ESG factors as being financially material and impacting corporate performance. ESG factors put the 'long-term' in long-term investing. The Manager focuses on understanding the ESG risks and opportunities of investments alongside other financial metrics to make better investment decisions. The Manager aims for better risk-adjusted returns by actively undertaking informed and constructive engagement and asset management to generate better performance from the investments. This helps to enhance the value of clients' assets. Comprehensive assessment of ESG factors, combined with constructive company engagement, should lead to better long term performance for clients.

Investment Case Studies

LondonMetric Property

LondonMetric Property is a property company formed following the merger of London & Stamford and Metric Property in 2013. Since then the company has moved away from retail parks and offices and focused on distribution (particularly urban and regional logistics) and 'long income' which, for example, comprises convenience stores. Urban and regional logistics has benefited from the rise of ecommerce with e-tailing requiring three times the space of store based sales. The purchase of A&J Mucklow in 2019 has further enhanced the company's property portfolio. Strong occupier and property relationships shape portfolio decisions with the management team keeping close to their tenants in order to anticipate changing needs. Supply is relatively constrained as the most favourable logistics sites are already occupied. Furthermore, customers tend to be loyal as restructuring supply chains carries significant risk. The company benefits from an experienced management team who are aligned with shareholders. It has modest gearing, a long average lease length and its REIT status provides tax-exemption on profits. It aims to deliver attractive and dependable income returns and enhance capital for which it has generated a strong track record.

Croda International

Croda International is a specialty chemicals company focused on natural ingredients and technologies that improve people's lives by enhancing everyday products. The company operates globally selling primarily into three sectors: Personal Care, Life Sciences and Performance Technologies. Most of the end-markets are defensive but offer exposure to attractive long term growth trends such as beauty, health, wellbeing and sustainability. The company's pricing power allows an attractive margin given its intellectual property and the relatively low cost yet high importance of its products. Croda's business model is further enhanced by its strong customer intimacy, preferring direct sales rather than distributors as well as its capital light model. It benefits from a diverse product portfolio and a broad and extensive range of customers. The company has a low operating leverage given its low fixed cost base. The earnings resilience, strong cashflow and low financial leverage are also appealing attributes.

STRATEGIC REPORT - OVERVIEW OF STRATEGY

Murray Income Trust PLC (the "Company") is an investment trust whose Ordinary shares are listed on the premium segment of the London Stock Exchange.

Business Model

The Company is governed by a Board of Directors (the "Board"), all of whom are non-executive, and has no employees. The Board is responsible for determining the Company's investment objective and investment policy. Like other investment companies, the day-to-day investment management and administration of the Company is outsourced by the Board to an investment management group, the Standard Life Aberdeen Group, and other third party providers. The Company has appointed Aberdeen Standard Fund Managers Limited ("ASFML", the "Manager", or "AIFM") as its alternative investment fund manager, which has in turn delegated certain responsibilities, including investment management, to Aberdeen Asset Management Limited ("AAML" or the "Investment Manager"). The Company complies with the investment policy test in Section 1158 of the Corporation Tax Act 2010 which permits the Company to operate as an investment trust.

Investment Objective

The Company aims for a high and growing income combined with capital growth through investment in a portfolio principally of UK equities.

Investment Policy

In pursuit of the Company's investment objective, the Company's investment policy is to invest in the shares of companies that have potential for real earnings and dividend growth, while at the same time providing an above-average portfolio yield. The emphasis is on the management of risk and on the absolute return and yield from the portfolio as a whole rather than the individual companies which the Company invests in, which is achieved by ensuring an appropriate diversification of stocks and sectors within the portfolio, with a high proportion of assets in strong, well-researched companies. The Company makes use of borrowing facilities to enhance shareholder returns when appropriate.

Delivering the Investment Policy

The Company maintains a diversified portfolio of the equity securities of UK and overseas companies with an emphasis on investing in quality companies with good management, strong cash flow, a sound balance sheet and which are generating a reliable earnings stream.

The Investment Manager follows 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.

Investment Limits

The Board sets investment guidelines within which the Investment Manager must operate. The portfolio typically comprises between 30 and 70 holdings (but without restricting the Company from holding a more or less concentrated portfolio from time to time). The Company may invest up to 100% of its gross assets in UK-listed equities and other securities and is permitted to invest up to 20% of its gross assets in other overseas-listed equities and securities. The Investment Manager may invest in any market sector, however, the top five holdings may not exceed 40% of the total value of the portfolio and the top three sectors represented in the portfolio may not exceed 50%. The Company may invest no more than 15% of its gross assets in other listed investment companies (including investment trusts).

The Company may use derivatives for the purpose of enhancing portfolio returns and for hedging purposes in a manner consistent with the Company's broader investment policy. The Investment Manager is permitted to invest in options and in structured products, provided that any structured product issued in the form of a note or bond has a minimum credit rating of "A".

Gearing

The Board is responsible for setting the gearing policy of the Company and for the limits on gearing. The Manager is responsible for gearing within the limits set by the Board. The Board has set its gearing limit at a maximum of 25% of NAV at the time of draw down. Gearing - borrowing money - is used selectively to leverage the Company's portfolio in order to enhance returns where this is considered appropriate. Particular care is taken to ensure that any financial covenants permit maximum flexibility of investment policy. Significant changes to gearing levels are communicated to shareholders.

Key Performance Indicators

At each Board meeting, the Directors consider a number of Key Performance Indicators ("KPIs") to assess the Company's success in achieving its objectives, and these are described below, with those also categorised as Alternative Performance Measures marked with an asterisk:

Principal Risks and Uncertainties

There are a number of principal risks and uncertainties which, if realised, could have a material adverse effect on the Company's business model, future performance, solvency and liquidity. The Board, through the Audit Committee, has put in place a robust process to identify, assess and monitor the principal risks, including emerging risks, and uncertainties. This is described in the Audit Committee's report in the published Annual Report. As part of this, the Committee uses a Risk Control Self-Assessment and Risk Heat Map to identify the Company's principal risks and uncertainties. These, together with potential effects, controls and mitigating factors, are summarised below.

The key, principal uncertainty for the Company emerging during the second half of the Company's financial year was the outbreak of the Covid-19 pandemic ("Covid-19") which caused significant economic disruption and contributed to global stock market volatility. The longer term effects of Covid-19 are as yet unknown. The Manager, on behalf of the Board, sought assurances from the Company's key service providers, as well as from its own operations, that they had invoked business continuity procedures and appropriate contingency arrangements to ensure that they remain able to meet their contractual obligations to the Company.

In carrying out the assessment, the Board also considered the uncertainty arising from the end of the transition period on 31 December 2020 for the UK leaving the EU ("Brexit"). Overall, the Board does not expect the Company's business model, over the longer term, to be materially affected by Brexit.

The following are other risks identified by the Board which could have a major impact on the Company, but due to mitigation are not deemed to be principal risks:

The principal risks associated with an investment in the Company's shares can be found in the pre-investment disclosure document ("PIDD") published by the AIFM, which is available from the Company's website murray-income.co.uk

Viability Statement

The Company does not have a fixed period strategic plan but the Board does formally consider risks and strategy on at least an annual basis. The Board regards the Company, with no fixed life, as a long term investment vehicle, but for the purposes of this viability statement has decided that a period of five years (the "Review Period") is an appropriate timeframe over which to report. The Board considers that this Review Period reflects a balance between looking out over a long term horizon and the inherent uncertainties of looking out further than five years.

In assessing the viability of the Company over the Review Period the Directors have focused upon the following factors:

· the Company's principal risks and uncertainties as set out in the Strategic Report;

· the relevance of the Company's investment objective, particularly in light of the present lower yield environment;

· the demand for the Company's shares indicated by the level of premium and/or discount;

· the level of income generated by the Company's portfolio as compared to its expenses;

· the overall liquidity of the Company's investment portfolio;

· the likelihood of the Company being able to continue to meet the covenants under its current borrowing arrangements, and the covenants attaching to any replacement borrowing arrangements, over the next five years;

· the £40m senior loan notes, which are repayable in November 2027; and

· any requirement for the Company to repay or refinance the drawn-down element of its £20 million bank loan facility prior to, or at, its maturity in November 2020.

In making this assessment, the Board has considered in particular the potential short and longer term impact of Covid-19, in the form of a large economic shock, a period of increased stock market volatility and/or markets at depressed levels, a significant reduction in the liquidity of the portfolio or changes in investor sentiment or regulation, and how these factors might affect the Company's prospects and viability in the future. The Board undertook scenario analysis in reaching its conclusions, including the potential for lower dividend income in the future as companies suspended or cancelled dividends, but recognising that the Company's expenses are significantly lower than its total income.

The Directors have considered the Company's future with or without the proposed combination with Perpetual Income and Growth Investment Trust plc ("PLI") and do not consider that either outcome would affect their conclusions as to the Company's viability and going concern. 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 five years from the date of this Report.

Performance, Financial Position and Outlook

A review of the Company's activities and performance during the year ended 30 June 2020, including future developments, is set out in the Chairman's Statement and in the Investment Manager's Report. These cover market background, investment activity, portfolio strategy, dividend policy, gearing and investment outlook. A comprehensive analysis of the portfolio is provided below while the full portfolio of investments is published monthly on the Company's website. The Company's Statement of Financial Position shows the assets and liabilities at the year end. Borrowing facilities at the year end comprised a mix of fixed and floating debt: a three year £20 million bank loan and the £40 million of 10 year senior loan notes. Details of these are shown in notes 12 and 13 respectively.

The future strategic direction and development of the Company is regularly discussed as part of Board meeting agendas. The Board also considers the Manager's promotional strategy for the Company, including effective communications with shareholders. As set out in the Chairman's Statement, the proposed combination with PLI, if approved by shareholders, will be the key corporate development during the Company's year ended 30 June 2021.

Environmental, Social and Human Rights Issues

The Company has no employees and, accordingly, there are no disclosures to be made in respect of employees. The Company's environmental, social and governance policy is outlined in the Directors' Report. 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.

Board Diversity

The Board recognises the importance of having a range of skilled, experienced individuals with the right knowledge represented on the Board in order to allow the Board to fulfil its obligations. The Board also recognises the benefits, and is supportive, of the principle of diversity in its recruitment of new Board members. The Board will not display any bias for age, gender, race, sexual orientation, religion, ethnic or national origins, or disability in considering the appointment of its Directors. The Board will continue to ensure that all appointments are made on the basis of merit against the specification prepared for each appointment and therefore the Company does not consider it appropriate to set diversity targets. At 30 June 2020, there were three male Directors and three female Directors. Further information regarding the three Directors who would join the Board as a result of the proposed combination with PLI may be found in the published Annual Report.

Neil Rogan

Chairman22 September 2020

PROMOTING THE SUCCESS OF THE COMPANY

For years ended on or after 30 June 2020, the Board has a new requirement to report how it has discharged its duties and responsibilities under section 172 of the Companies Act 2006 during the year under review. Under this requirement, the Directors have a duty to promote the success of the Company for the benefit of its members (shareholders) 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. In addition the Directors must act fairly between shareholders and be cognisant of maintaining the reputation of the Company. Included within this assessment is the impact on the Company of the emergence of Covid-19 since March 2020 and the need for the Directors to protect, where possible, stakeholders' interests in the face of this significant societal, economic and financial threat.

The Purpose of the Company and Role of the Board

The Company has been established as an investment vehicle for the purpose of delivering its investment objective which is set out above. Investment trusts, such as the Company, are long-term investment vehicles that are typically externally-managed, have no employees, and are overseen by an independent non-executive board of directors.

The Board is responsible for all decisions relating to the Company's investment objective and policy, gearing, corporate governance and strategy, and for monitoring the performance of the Company's third party service providers, including the Manager.

The Board's philosophy is that the Company should foster a culture where all parties are treated with respect. The Directors provide mutual support combined with constructive challenge. Integrity, openness and diligence are defining characteristics of the Board's culture. The Company has a number of policies and procedures in place to aid a culture of good governance, such as those relating to Director's conflicts of interests and dealings in the Company's shares, annual evaluation of Directors, anti-bribery and anti-tax evasion. At its regular meetings, the Board engages with the Manager to understand its culture and receives regular reporting and feedback from the other key service providers.

The Company's primary stakeholders have been identified as its shareholders, the Manager, other key third party service providers, lenders and investee companies and the following table sets out details of the Company's engagement.

Specific Examples of Stakeholder Consideration During the Year

While the importance of giving due consideration to the Company's stakeholders is not a new requirement, and is considered as part of every Board decision, the Directors were particularly mindful of stakeholder considerations during the following decisions reached during the year ended 30 June 2020.

Management of the Portfolio

During the height of Covid-19, between March and June 2020, the Board met more frequently to oversee the Company's operations during periods of stock market volatility when the portfolio value had been subject to significant fluctuations and there had been greater uncertainty over the income level that the Company might receive in the future.

Dividends Paid to Shareholders

The level, frequency and timing of dividends paid are key considerations for the Board, taking into account net earnings for the year and the Company's objective of providing shareholders with a high and growing income combined with the Company's Dividend Hero status. The total dividend of 34.25p in respect of the year and the Company's dividend policy to enable earlier payment of the fourth interim dividend reflects this and approval of the latter was proposed to shareholders for the first time at last year's AGM. In addition, to provide flexibility should it be required, the Board concluded that a resolution to enable payment of dividends from capital should be put to shareholders at the forthcoming AGM. The proposed amendment to the Articles of Association would remove the current prohibition of payment of dividends from capital.

Audit tender

The Directors undertook an audit tender in August 2019, after which it was agreed to recommend to shareholders that PricewaterhouseCoopers LLP be appointed auditor, in succession to EY.

Directorate

The Board has continued to progress its succession plans during the year resulting in the decision to appoint Merryn Somerset Webb as an independent non-executive director on 7 August 2019. Further details are included in the Chairman's statement. Shareholder interests are best served by ensuring a smooth and orderly succession for the Board which serves to provide continuity and maintain the Board's open and collegiate style as well as a range of diversity and experience.

Long Term Investment

The investment Manager's investment process seeks to outperform over the longer term. The Board has in place the necessary procedures and processes to continue to promote the long term success of the Company. The Board will continue to monitor, evaluate and seek to improve these processes as the Company continues to grow over time, to ensure that the investment proposition is delivered to shareholders and other stakeholders in line with their expectations.

Proposed Combination with Perpetual Income and Growth Investment Trust plc ("PLI")

The Board devoted significant time to evaluating the benefit to the Company, and its shareholders, of the proposed combination with PLI. As set out in the Chairman's Statement, the Board considered the best interests of shareholders in assessing the costs and benefits which would result from the proposed combination with PLI, including taking advice from the Company's independent advisers Investec Bank plc and Dentons UK and Middle East LLP.

DIRECTORS' REPORT

Status

The Company, which was incorporated in 1923, is registered as a public limited company in Scotland under company number SC012725 and is an investment company within the meaning of Section 833 of the Companies Act 2006.

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 July 2012. The Directors are of the opinion that the Company has conducted its affairs during the year ended 30 June 2020 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.

Capital Structure

At 30 June 2020, the Company had 66,110,413 (2019 - 66,110,413) fully paid Ordinary shares of 25p each with voting rights in issue and an additional 2,483,045 (2019 - 2,483,045) shares in treasury. During the year no shares were bought back into treasury (2019 - 561,900).

Ordinary shareholders are entitled to vote on all resolutions which are proposed at general meetings of the Company. The Ordinary shares, excluding treasury shares, carry a right to receive dividends. 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. There are no restrictions on the transfer of Ordinary shares in the Company other than certain restrictions which may be applied from time to time by law (for example, insider trading law).

Results and Dividend Policy

The financial statements for the year ended 30 June 2020 indicate a total loss attributable to equity shareholders for the year of £29,816,000 (2019 - gain of £42,574,000).

At the AGM on 5 November 2019, shareholders approved a dividend policy to pay four quarterly interim dividends per year. The first, second and third interim dividends, each of 8.25p per Ordinary share, for the year ended 30 June 2020, were paid to shareholders on 20 December 2019, 20 March 2020 and 19 June 2020, respectively.

The Company announced on 5 August 2020 the payment to shareholders on 18 September 2020 of a fourth interim dividend for the year of 9.50p per share with an ex-dividend date of 20 August 2020 and a record date of 21 August 2020. The Board is proposing renewal of the dividend policy introduced in 2019. In line with good corporate governance, the Board therefore proposes to put the Company's dividend policy to Shareholders for approval at the AGM as resolution 4.

Manager and Company Secretary

Aberdeen Standard Fund Managers Limited ("ASFML") has been appointed by the Company, under a management agreement ("MA"), to provide investment management, risk management, administration and company secretarial services as well as promotional activities. The Company's portfolio is managed by Aberdeen Asset Managers Limited ("AAML") by way of a group delegation agreement in place between ASFML and AAML. In addition, ASFML has sub-delegated promotional activities to AAML and administrative and secretarial services to Aberdeen Asset Management PLC.

Under the MA, ASFML is entitled to a monthly fee of one-twelfth of: 0.55% pa on the first £350 million of net assets, 0.45% pa on net assets between £350 million and £450 million and 0.25% pa on any net assets in excess of £450 million.

The value of any investments in unit trusts, open ended and closed ended investment companies and investment trusts of which the Manager, or another company within the Standard Life Aberdeen Group, is the operator, manager or investment adviser, is deducted from net assets when calculating the fee.

An annual secretarial fee of £75,000 (plus applicable VAT) is payable to Aberdeen Asset Management PLC, which is chargeable 100% to revenue. An annual fee equivalent to up to 0.05% of gross assets (calculated at 30 September each year) is paid to AAML to cover promotional activities undertaken on behalf of the Company.

The finance costs and investment management fees are charged 70% to capital and 30% to revenue in line with the Board's expectation of the split of future investment returns.

The management, secretarial and promotional activity fees paid to Standard Life Aberdeen Group companies during the year are shown in notes 4 and 5 to the financial statements.

Directors

As at the date of this Report, the Board consisted of a non-executive Chairman and five non-executive Directors. Neil Rogan, Jean Park, Stephanie Eastment, Donald Cameron and Peter Tait were Directors throughout the year while Merryn Somerset Webb was appointed a Director on 7 August 2019. Jean Park is Senior Independent Director and Stephanie Eastment is Chairman of the Audit Committee.

The names and biographies of each of the Directors are shown on the Company's website and include their experience, length of service and the contribution that each Director makes to the Board. Each Director has the requisite high level and range of business and financial experience which enables the Board to provide clear and effective leadership and proper stewardship of the Company.

Subject to approval by shareholders of the proposed combination with PLI at a general meeting of the Company to be held on 27 October 2020, prospective Directors Georgina Field, Alan Giles and Richard Laing will join the Board on that date, as set out in the Chairman's Statement. Thereafter, Georgina Field, Alan Giles and Richard Laing will each retire and seek election as Directors at the AGM under resolutions 11, 12 and 13. These resolutions will be withdrawn if the votes to combine the two companies are not passed by their respective shareholders. The prospective Directors' experience, skills and expected contribution to the Board is set out in the published Annual Report.

Directors' Insurance and Indemnities

The Company maintains insurance in respect of Directors' and Officers' liabilities in relation to their acts on behalf of the Company. Furthermore, each Director of the Company is entitled to be indemnified out of the assets of the Company to the extent permitted by law against all costs, charges, losses, expenses and liabilities incurred by them in the actual or purported execution and/or discharge of their duties and/or the exercise or purported exercise of their powers and/or otherwise in relation to or in connection with their duties, powers or office. These rights are included in the Articles of Association of the Company and the Company has granted indemnities to each Director on this basis.

Corporate Governance

The Company is committed to high standards of corporate governance and its Statement of Corporate Governance is set out in the published Annual Report.

Board Committees

The Board has appointed a number of Committees as set out below. Copies of their terms of reference, which define the responsibilities and duties of each Committee, are available on the Company's website and from the Company Secretaries on request.

The Role of the Chairman and Senior Independent Director

The Chairman is responsible for providing effective leadership to the Board, by setting the tone of the Company, demonstrating objective judgement and promoting a culture of openness and debate. The Chairman facilitates the effective contribution of, and encourages active engagement by, each Director. In conjunction with the Company Secretary, the Chairman ensures that Directors receive accurate, timely and clear information to assist them with effective decision-making. The Chairman acts upon the results of the Board evaluation process by recognising strengths and addressing any weaknesses and also ensures that the Board engages with major shareholders and that all Directors understand shareholder views.

The Senior Independent Director acts as a sounding board for the Chairman and acts as an intermediary for other directors, when necessary. The Senior Independent Director takes responsibility for an orderly succession process for the Chairman and leads the annual appraisal of the Chairman's performance. The Senior Independent Director is also available to shareholders to discuss any concerns they may have.

Audit Committee

The Audit Committee's Report may be found in the published Annual Report.

Management Engagement Committee

The terms and conditions of the Company's agreement with the Manager are considered by the Management Engagement Committee which comprises the whole Board and is chaired by Neil Rogan.

In monitoring the performance of the Manager, the Committee considers the investment record of the Company over the short and long term, taking into account its performance against the benchmark index, peer group investment trusts and open-ended funds, and against its delivery of the investment objective to shareholders. The Committee also reviews the management processes, risk control mechanisms and promotional activities of the Manager. As a result of these reviews, the Directors consider the continuing appointment of the Manager to be in the interests of shareholders because they believe that the Manager has the investment management, promotional and associated secretarial and administrative skills required for the effective operation of the Company.

Nomination Committee

The Board has established a Nomination Committee, comprising all of the Directors, with Neil Rogan as Chairman. The Committee is responsible for: determining the overall size and composition of the Board; longer term succession planning, including setting a policy on tenure of individual Directors and the Chairman; undertaking an annual evaluation of the Directors; and, oversight of appointments to the Board, including engagement of independent search consultants. The Committee has adopted a policy whereby Directors, including the Chairman, will not stand for re-election as a Director of the Company later than the AGM following the ninth anniversary of their appointment to the Board.

The Committee's overriding priority in appointing new Directors is to identify the candidate with the optimal range of skills and experience to complement the existing Directors. The Board also recognises the benefits, and is supportive, of the principle of diversity in its recruitment of new Directors.

The Directors attended meetings during the year ended 30 June 2020 as follows (with their eligibility to attend the relevant meeting in brackets). In addition, Directors attended several ad-hoc meetings during the year.

A Appointed as a Director on 7 August 2019 and attended all meetings for which she was eligible.

Remuneration Committee

Directors' remuneration is considered by the Remuneration Committee which comprises the whole Board and is chaired by Jean Park. Further information may be found in the Directors' Remuneration Report in the published Annual Report.

Accountability and Audit

The responsibilities of the Directors and the Auditor in connection with the financial statements appear in the published Annual Report.

The Directors who held office at the date of this Report each confirm that, so far as they are aware, there is no relevant audit information of which the Company's Auditor is unaware and that they have taken all the steps that they could reasonably be expected to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information. Further, there have been no important, additional events since the year end which warrant disclosure.

The Directors confirm that no non-audit services were provided by the Auditor during the year and, after reviewing the Auditor's procedures in connection with the provision of any such services, remain satisfied that the Auditor's objectivity and independence is being safeguarded.

Management of Conflicts of Interest, Anti-Bribery Policy and Tax Evasion Policy

The Board has a procedure in place to deal with a situation where a Director has a conflict of interest. As part of this process, the Directors prepare a list of other positions held and all other conflict situations that may need to be authorised either in relation to the Director concerned or his/her connected persons. The Board considers each Director's situation and decides whether to approve any conflict, taking into consideration what is in the best interests of the Company and whether the Director's ability to act in accordance with his/her wider duties is affected. Each Director is required to notify the Company Secretaries of any potential, or actual, conflict situations which will need authorising by the Board. Authorisations given by the Board are reviewed at each Board meeting.

The Board takes a zero-tolerance approach to bribery and has adopted appropriate procedures designed to prevent bribery. Standard Life Aberdeen plc also takes a zero-tolerance approach and has its own detailed policy and procedures in place to prevent bribery and corruption.

It is the Company's policy to conduct all of its business in an honest and ethical manner. The Company takes a zero-tolerance approach to facilitation of tax evasion, whether under UK law or under the law of any foreign country and its full policy on tax evasion may be found on its website.

Going Concern

The Directors have undertaken a rigorous review and consider both that there are no material uncertainties and that the adoption of the going concern basis of accounting is appropriate. This conclusion is consistent with the longer term Viability Statement.

The Company's assets consist primarily of a diverse portfolio of listed equity shares nearly all of which, in most circumstances, are realisable within a very short timescale. The Board has set limits for borrowing and regularly reviews the level of any gearing, cash flow projections and compliance with banking and loan note covenants.

The Directors are mindful of the principal risks and uncertainties, including the major disruption caused by the Covid-19 pandemic ("Covid-19"), and have reviewed forecasts detailing revenue and liabilities. Notwithstanding the continuing uncertain economic outlook caused by Covid-19, the Directors are satisfied that: the Company has adequate resources to continue in operational existence for the foreseeable future and at least 12 months from the date of approval of this Annual Report; the Company is financially sound; and the Company's key third party service providers had in place appropriate business continuity plans and had, and will, be able to maintain service levels despite the ongoing impact of the pandemic.

Substantial Interests

As at 30 June 2020 and 31 August 2020 the following interests over 3% in the issued Ordinary share capital of the Company had been disclosed in accordance with the requirements of the UK Listing Authority's Disclosure Guidance and Transparency Rules:

The above interests as at 31 August 2020 were unchanged as at the date of approval of this Report.

Environmental, Social and Governance ("ESG") Policy

The Board has a duty to act in the best interests of the Company. As an investment trust, the Company has no direct environmental, social or governance responsibilities. However, the Board recognises that to be sustainable over the long term the Company and the Manager must have regard to ethical and environmental issues that impact society at large, and has encouraged and welcomed the Manager's integration and ongoing evolving of ESG into its investment process.

The Board acknowledges that there are risks associated with investment in companies which fail to conduct business in a responsible manner and therefore ensures that the Manager takes regular account of ESG factors which may affect the performance or value of the Company's investments.

UK Stewardship Code and Proxy Voting as an Institutional Shareholder

Responsibility for actively monitoring the activities of portfolio companies, including assessing ESG factors, has been delegated by the Board to the AIFM which has sub-delegated that authority to the Investment Manager.

Further information, including how the Investment Manager discharges its obligations under the 2020 Stewardship Code, may be found at: www.aberdeenstandard.com/en/responsible-investing.

Relations with Shareholders

The Directors place great importance on communication with shareholders. The Company's shareholder register is retail-dominated and the Manager, together with the Company's broker, regularly meets with current and prospective shareholders to discuss performance. The Board receives investor relations updates from the Manager on at least a quarterly basis. Any changes in the shareholder register as well as shareholder feedback is discussed by the Directors at each Board meeting

Regular updates are provided to shareholders through the Annual Report, Half Yearly Report, monthly factsheets, company announcements, including daily net asset value announcements, all of which are available through the Company's website at: murray-income.co.uk. The Annual Report is also widely distributed to other parties who have an interest in the Company's performance. Shareholders and investors may obtain up-to-date information on the Company through its website or via Aberdeen Standard Investments' Customer Services Department.

The Board's policy is to communicate directly with shareholders and their representative bodies without the involvement of the management group (either the Company Secretary or Aberdeen Standard Investments) in situations where direct communication is required and representatives from the Board offer to meet with major shareholders on an annual basis in order to gauge their views. The Company Secretary acts on behalf of the Board, not the Manager, and there is no filtering of communication. At each Board meeting the Board receives full details of any communication from shareholders to which the Chairman responds, as appropriate, on behalf of the Board.

In addition, in relation to institutional shareholders, members of the Board may either accompany the Manager or conduct meetings in the absence of the Manager.

The Company's Annual General Meeting ordinarily provides a forum, both formal and informal, for shareholders to meet and discuss issues with the Directors and Investment Manager. The Notice of AGM included within the Annual Report is normally sent out at least 20 working days in advance of the meeting.

Global Greenhouse Gas Emissions

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

Disclosures Required by FCA Listing Rule 9.8.4

The above rule requires listed companies to report certain information in a single identifiable section of their annual financial reports. None of the prescribed information is applicable to the Company in the year under review.

Future Developments of the Company

Disclosures relating to the future developments of the Company may be found in the Overview of Strategy.

Annual General Meeting ("AGM")

Among the special business being put at the AGM of the Company to be held on 27 November 2020, the following resolutions will be proposed:

Authority to allot shares and disapply pre-emption rights (Resolutions 16 and 17)

Ordinary resolution No. 16 will renew the authority to allot the unissued share capital up to an aggregate nominal amount of £0.8m (equivalent to approximately 3.3m Ordinary shares, or, if less, 5% of the Company's existing issued share capital (excluding treasury shares) on the date of passing of this resolution). Such authority will expire on the date of the AGM in 2021 or on 31 December 2021, whichever is earlier. This means that the authority will require to be renewed at the next AGM. This authority will not substitute or revoke the authority granted at the shareholders' meeting to issue new shares to the PLI shareholders in connection with the combination with PLI.

When shares are to be allotted for cash, Section 561 of the Companies Act 2006 (the "Act") provides that existing shareholders have pre-emption rights and that the new shares to be issued, or sold from treasury, must be offered first to such shareholders in proportion to their existing holding of shares. However, shareholders can, by special resolution, authorise the Directors to allot shares or sell from treasury otherwise than by a pro rata issue to existing shareholders. Special resolution No. 17 will, if passed, give the Directors power to allot for cash or sell from treasury equity securities up to an aggregate nominal amount of £1.65m (equivalent to approximately 6.6m Ordinary shares, or, if less, 10% of the Company's existing issued share capital (excluding treasury shares) on the date of passing of this resolution, as if Section 561 of the Act does not apply). This authority will also expire on the date of the AGM in 2021 or on 31 December 2021, whichever is earlier. This authority will not be used in connection with a rights issue by the Company.

The Directors intend to use the authorities given by resolutions 16 and 17 to allot shares or sell shares from treasury and disapply pre-emption rights only in circumstances where this will be clearly beneficial to shareholders as a whole. The issue proceeds would be available for investment in line with the Company's investment policy. No issue of shares will be made which would effectively alter the control of the Company without the prior approval of shareholders in general meeting. It is the intention of the Board that any issue of shares or any re-sale of treasury shares would only take place at a price not less than 0.5% above the NAV per share prevailing at the date of sale. It is also the intention of the Board that sales from treasury would only take place when the Board believes that to do so would assist in the provision of liquidity to the market.

Purchase of the Company's own Ordinary shares (Resolution 18)

At the AGM held on 5 November 2019, shareholders approved the renewal of the authority permitting the Company to repurchase its Ordinary shares.

The Directors wish to renew the authority given by shareholders at the previous AGM. A share buy-back facility enhances shareholder value by acquiring shares at a discount to NAV as and when the Directors consider this to be appropriate. The purchase of shares, when they are trading at a discount to NAV per share, should result in an increase in the NAV per share for the remaining shareholders. This authority, if conferred, will only be exercised if to do so would result in an increase in the NAV per share for the remaining shareholders and if it is in the best interests of shareholders generally. Any purchase of shares will be made within guidelines established from time to time by the Board. It is proposed to seek shareholder authority to renew this facility for another year at the AGM.

Under the FCA's Listing Rules, the maximum price that may be paid on the exercise of this authority must not exceed the higher of (i) 105% of the average of the middle market quotations for the shares over the five business days immediately preceding the date of purchase and (ii) the higher of the last independent trade and the highest current independent bid on the trading venue where the purchase is carried out. The minimum price which may be paid is 25p per share. Shares which are purchased under this authority will either be cancelled or held as treasury shares. Special resolution No. 18 will renew the authority to purchase in the market a maximum of 14.99% of shares in issue at the date of passing of the resolution (amounting to approximately 9.9m Ordinary shares). Such authority will expire on the date of the AGM in 2021, or on 31 December 2021, whichever is earlier. This means in effect that the authority will have to be renewed at the next AGM, or earlier, if the authority has been exhausted. No dividends may be paid on any shares held in treasury and no voting rights will attach to such shares. The benefit of the ability to hold treasury shares is that such shares may be sold at short notice. This should give the Company greater flexibility in managing its share capital, and improve liquidity in its shares.

Adoption of new Articles of Association (Resolution 19)

Resolution 19, which will be proposed as a special resolution, seeks shareholder approval to adopt new Articles of Association (the "New Articles") in order to update the Company's current Articles of Association (the "Existing Articles"). The changes include (i) allowing the Company to pay dividends from the Company's realised capital profits, (ii) enabling the Company to hold virtual and hybrid general meetings (including annual general meetings) in the future, (iii) enabling the Company to postpone annual and general meetings where it becomes impossible or impractical to hold any meeting on the scheduled date, (iv) explicitly stating the Board's powers in relation to controlling the conduct of any annual or general meeting, (v) changes in response to the requirements of the Alternative Investment Fund Managers Directive (2011/61/EU) ("AIFMD") , (vi) changes in response to the introduction of international tax regimes requiring the exchange of information and (vii) in response to developments in mental health legislation and to reflect the position in the model articles for public companies as set out in the Companies (Model Articles) Regulations 2008/3229, updating the provision relating to termination of a director's appointment on mental health grounds.

Nothing in the New Articles will prevent the Company from holding physical general meetings. The changes under (ii) are being sought in response to challenges posed by government restrictions on social interactions as a result of Covid-19, which have made it impossible for shareholders to attend physical general meetings. In the Chairman's Statement, the Board recognises that the AGM is an important occasion where shareholders can meet and ask questions of the Board and the Manager.

The Board is committed to ensuring that future general meetings (including AGMs) incorporate a physical meeting when law and regulation permits and where shareholders can meet with the Board face to face. The potential to hold a general meeting through wholly electronic means is intended as a solution to be adopted as a contingency to ensure the continued smooth operation of the Company in extreme operating circumstances where physical meetings are prohibited. The Company has no present intention of holding a wholly electronic general meeting but wants to be prepared for the future.

While the New Articles will permit the Company to pay dividends from realised capital profits, the Investment Manager remains positive about the dividend generation from the investments and the Board does not presently intend to change its approach to the payment of dividends by utilising this new power to pay dividends out of capital. However, the Board may seek to use this power in the future where it considers it is in the best interests of shareholders to do so.

The material changes introduced in the New Articles are summarised in the appendix to the Notice of AGM in the published Annual Report. Other changes, which are of a minor, technical or clarifying nature, have not been noted in the appendix.

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.

On behalf of the Board

Neil Rogan

Chairman 

22 September 2020

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the 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 the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law) 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 the profit or loss of the Company for that period.

In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgments 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; and

· adopt a going concern basis of accounting for the financial statements unless it is inappropriate to assume that the Company will continue in business.

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 the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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

The financial statements are published on www.murray-income.co.uk which is a website maintained by the Company's Manager. The work carried out by the auditor does not involve consideration of the maintenance and integrity of the website and, accordingly, the auditor accepts no responsibility for any changes that have occurred to the financial statements since being initially presented on the website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors confirms to the best of his or her knowledge that:

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

· the Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces;

· in the opinion of the Board, the Annual Report and financial statements 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; and

· the financial statements are prepared on an ongoing concern basis.

For and on behalf of the Board of Murray Income Trust PLC

Neil Rogan

Chairman

22 September 2020

MURRAY INCOME TRUST PLC

Statement of Comprehensive Income

MURRAY INCOME TRUST PLC

Statement of Financial Position

MURRAY INCOME TRUST PLC

Statement of Changes in Equity

MURRAY INCOME TRUST PLC

Statement of Cash Flows

MURRAY INCOME TRUST PLC

Notes to the Financial Statements

Year Ended 30 June 2020