Murray Income Trust Regulatory News (MUT)

MURRAY INCOME TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018

FINANCIAL HIGHLIGHTS

FINANCIAL CALENDAR

CHAIRMAN'S STATEMENT

Highlights

- Dividend yield of 4.2%1

- Total dividends per share increased to 33.25p (the 45th year of consecutive increase)

- Share price Total Return +3.3%2

- Net Asset Value Total Return +3.9%2

- FTSE All-Share Index Total Return +9.0%2

1 Full year dividend per share divided by 30 June 2018 share price

2 30 June 2017 - 30 June 2018

Performance

Murray Income Trust PLC ("Murray Income" or the "Company") was founded in Glasgow in 1923 as The Second Scottish Western Investment Company. Welcome to its 94th Annual Report! I hope you will find it informative and please, if you are a shareholder, come to our Annual General Meeting in Glasgow on 5 November 2018.

Murray Income's aim is to provide a high and growing income combined with capital growth from a portfolio of predominantly UK company shares. We consider that the three parts of this objective are stated in order of priority. With our shares yielding 4.2% at 30 June 2018, we are well above the dividend yield of both the FTSE All-Share Index of 3.6% and the average yield of the AIC UK equity income sector of 3.7%.

The Board is recommending a final dividend per share of 9.25p (2017 - 11.75p), which makes a total for the year of 33.25p, an increase of 1.53% on the 32.75p per share paid in the previous year. If approved by shareholders at the AGM, this will constitute 45 consecutive years of dividend growth.

The performance of investment trusts is usually judged by comparison with a suitable benchmark index and with the performance of comparable trusts within the same sector. Whilst your portfolio is not constructed with reference to any particular index or benchmark, your Board considers the FTSE All-Share Index to be the primary benchmark against which Murray Income's performance can be measured. Performance against an index is conventionally measured on a total return basis, that is combining the returns from both capital and income for the trust's net asset value per share and also the index. Over one year Murray Income returned +3.9% which is disappointing when compared to the FTSE All-Share Index return of +9.0%. Performance attribution analysis shows that UK sector allocation accounted for about three quarters of this underperformance, with UK stock selection the other quarter. Being less than half weighted in the strongly performing oil and gas sector was the main culprit; although Provident Financial, now sold, was the worst performing stock. A fuller explanation of performance follows in the Investment Manager's Report.

Dividend

The proposal to pay a final dividend per share of 9.25p (2017 - 11.75p) follows the payment of three interim dividends of 8.00p, increased from 7.00p in the previous year, on 12 January 2018, 29 March 2018 and 29 June 2018. These interim dividend payments represented a material increase in the proportion of distributable revenue which the Company has previously paid by way of interim dividends. The objective was to rebalance the proportion of the dividends paid by the Company so that shareholders receive a greater proportion of the Company's dividend distributions earlier in the financial year by way of interim dividends. For the year ended 30 June 2018, 72% of total dividends were received in the form of interim dividends, assuming shareholder approval of the proposed final dividend per share. Our intention is again to pay three quarterly interim dividends of 8.00p in the forthcoming year with a final dividend to be determined after the end of the Company's year.

Last year we increased the dividend by less than the increase in earnings per share as we felt that there was a temporary boost to revenues received from sterling weakness and were unsure of the portfolio's ability to sustain increases from special dividends and option revenue. This proved prudent with earnings per share in the year to 30 June 2018 falling to 33.60p from 34.90p, still enough to cover our dividend increase to 33.25p and add a little to our revenue reserves.

Share Capital and Discount

The Company bought back into treasury 350,145 shares during the year, representing 0.5% of shares outstanding at the start of the year. The discount of the Company's share price to its NAV per share (including income) increased from 7.6% on 30 June 2017 to 8.4% at 30 June 2018. During the year it ranged from 6.5% to 9.9%. UK Equity Income Funds in the open-ended sector have seen substantial net outflows in the past year. The sentiment behind such flows has probably been one of the factors influencing the Company's discount.

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. With effect from 1 January 2018, the Company benefited from a negotiated reduction in the management fee with the annual fee now calculated on net assets, at 0.55% up to £350m, 0.45% between £350m and £450m and 0.25% over £450m.

In addition to the management fee, there is an annual marketing fee of £480,000, a secretarial fee of £90,000, interest on the new fixed and floating debt (which was payable from November 2017) and various smaller charges as shown in note 5 to the financial statements. The total ongoing charges figure aggregates all charges and as a percentage of net asset value fell from 0.72% in the year to June 2017 to 0.69% in the year to June 2018. 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 0.11% of net asset value for this financial year.

Your Company has historically charged 50% of the Company's management fee and financing costs to revenue and 50% to capital. With effect from 1 July 2018, the allocation has changed so as to charge 70% to capital and 30% to revenue.

Gearing

Another advantage of investment trusts is that they can gear (or borrow money) in order to enhance capital and income returns to shareholders. This is obviously only successful in rising markets. In November 2017, the Company replaced its £80m 3-year revolving multi-currency bank loan with £60m of short and long-term borrowings split between £20m of new bank borrowings from Scotiabank and the issue of £40m of 10-year loan notes. £6.4m of the bank borrowings were drawn down as at 30 June 2018. We considered that the period of ultra-low interest rates since 2008 may now be ending and, through the issue of the £40m loan notes at an annual coupon of 2.51%, the Company has obtained fixed-rate long-dated sterling denominated financing at an interest rate that is below the current dividend yield of the portfolio.

The Board continues to believe that sensible use of modest and flexible borrowings will enhance returns of both capital and income to shareholders over the longer term. Combined, these borrowing facilities of £60m represented 10.5% of the Company's net asset value at 30 June 2018.

Board

During the year, Neil Honebon and Mike Balfour retired from the Board. Neil stepped down as Chairman after twelve years on the Board, the last three as Chairman, following the last annual general meeting.

Under the UKLA's Listing Rules: a director of more than one investment trust managed by the same management company is not necessarily considered independent. As Mike is also a director of Standard Life Investments Property Trust Limited, following the completion of the merger between Aberdeen and Standard Life, Mike stepped down from Murray Income. Both Neil and Mike left the Board with our thanks for their strong contributions and with our best wishes.

Peter Tait joined the Board on 7 November 2017. Peter is a career UK fund manager, mostly at the Nestlé UK Pension Fund and Nestlé Capital Management but also at Blackrock, Dunedin and Scottish Widows. He brings strong UK fund management skills to the Board.

Stephanie Eastment was appointed as a Director of the Company on 2 August 2018. Stephanie joined the Board following a 30-year career in financial services and was latterly with Invesco Perpetual in the role of Head of Specialist Funds Company Secretariat and Accounts. Stephanie is a Fellow of the Institute of Chartered Accountants in England and Wales and a Fellow of the Institute of Chartered Secretaries and Administrators.

Both Peter and Stephanie were appointed following wide-ranging searches undertaken by Nurole, an independent consultancy. Peter and Stephanie will both stand for formal election as Directors of the Company at the annual general meeting and I encourage shareholders to vote in favour of their election.

We have adopted a succession planning policy that, under normal circumstances, directors will retire after the annual general meeting following their ninth anniversary of joining. Our Senior Independent Director, David Woods, will therefore retire from the Board after November's meeting. If re-elected, Jean Park will become the new Senior Independent Director and Chairman of the Remuneration Committee. Stephanie Eastment, if elected, will become Chair of the Audit Committee. We will commence a search for a new director in the new year. I should like to take this opportunity to thank David for his service since December 2008, particularly in his latter role as Senior Independent Director. The Board, and shareholders, have benefited from David's experience of investment markets through different cycles and his significant contribution to Directors' deliberations; we wish him well in his retirement.

Investment Manager

We have been watching closely as the merger of our investment manager Aberdeen Asset Management with Standard Life completed. Our assessment is that it has strengthened the investment team behind our manager Charles Luke. Iain Pyle has been appointed as our Deputy Manager and there is now a five-strong UK Equity Income team within a sixteen-strong UK Equity team headed by Andrew Millington. The investment process has improved in our opinion. It is too early to tell if this marks a recovery in performance but the early signs are encouraging and we have confidence in Charlie, Iain and Andrew.

Regulatory Changes

There have been a number of regulatory changes implemented or announced, recently. Investors should be aware that the Packaged Retail and Insurance-based Investment Products (PRIIPS) Regulation requires the Manager, as the Company's PRIIP "manufacturer," to prepare a Key Information Document ("KID") in respect of the Company. This KID must be made available by the Manager to retail investors prior to a prospective investor making any investment decision and is available via the Company's website. The Manager, not the Company, is responsible for the information contained in the KID and investors should note that the procedures for calculating the risks, costs and potential returns are prescribed by regulation. We recommend that all investors should note that the figures in the KID may not reflect returns expected of the Company and that anticipated performance returns cannot be guaranteed.

The Criminal Finances Act 2017 introduced a new corporate criminal offence of "failing to take reasonable steps to prevent the facilitation of tax evasion". The Board has confirmed that it is the Company's policy to conduct all of its business in an honest and ethical manner. The Board takes a zero-tolerance approach to facilitation of tax evasion, whether under UK law or under the law of any foreign country.

Data protection rights were harmonised across the European Union following the implementation of the General Data Protection Regulation ("GDPR") on 25 May 2018. The Board has taken the necessary steps to seek appropriate assurances from its third-party service providers to ensure compliance with the new regulations.

Annual General Meeting

The Annual General Meeting will be held at 12.30pm on Monday 5 November 2018 in the Strathclyde Suite of the Glasgow Royal Concert Hall, 2 Sauchiehall Street, Glasgow, G2 3NY. One of the great advantages of investment trusts is that all shareholders are invited to attend the AGM, to meet the Directors and the Investment Managers and of course to vote on and ask questions about the AGM resolutions. There will be a buffet lunch after the formal AGM has closed when shareholders can ask further questions informally. Shareholders may bring a guest with them to the meeting. It is the Board's intention to hold the 2019 Annual General Meeting in London.

Action to be Taken

Shareholders will find enclosed with this Annual Report a Form of Proxy for use in relation to the AGM. Whether or not you propose to attend the AGM, you are encouraged to complete the Form of Proxy in accordance with the instructions printed on it and return it in the prepaid envelope as soon as possible but in any event so as to be received no later than 12.30pm on 1 November 2018. Completion of a Form of Proxy does not prevent you from attending and voting in person at the AGM if you wish to do so.

If you hold your shares in the Company via a share plan or a platform and would like to attend and/or vote at the AGM, then you will need to make arrangements with the administrator of your share plan or platform. For this purpose, investors that hold their shares in the Company via the Aberdeen Standard Investment Plan for Children, the Aberdeen Standard Investment Trust Share Plan and/or the Aberdeen Standard Investment Trust ISA will find a Letter of Direction and Invitation Card enclosed. Shareholders are encouraged to complete and return both the Letter of Direction and Invitation Card in accordance with the instructions printed thereon.

Further details on how to Attend and Vote at Company Meetings for holders of shares via share plans and platforms can be found in the published Annual Report and at www.theaic.co.uk/shareholder-voting-consumer-platforms.

Update

As at the close of business on 17 September 2018, the NAV per share was 843.3p (including income) and the share price was 756.0p equating to a discount of 10.4% per Ordinary share. To this date from 30 June 2018 the Company has bought back a further 367,900 shares, representing 0.6% of total share capital, excluding treasury shares, at the start of the new financial year. Relative performance from 30 June 2018 to 17 September 2018 has improved with the net asset value total return of -1.5%, ahead of the FTSE All-Share Index total return of -3.0%.

Outlook

I wrote in January that equity markets were likely to be dominated by the political news from Brexit, President Trump and the fortunes of the UK Government. There is no sign of these forces diminishing, so uncertainty and market volatility are likely to continue. Economic numbers remain especially difficult to forecast while there is so much disagreement about the effect of these political outcomes, even whether a particular outcome is good or bad. Despite everything, the UK economy is growing at 1.2% year-on-year in real terms. The global economy is growing faster, projected to grow at 3.9% in real terms by the IMF in 2018 and 2019. Such growth presents the opportunity for UK companies to grow their top-line revenue numbers and their dividend payments. The Investment Manager's focus on quality should ensure that the companies in our investment portfolio have the management and financial strength to withstand and ultimately benefit from this time of change.

N A H Rogan

Chairman

20 September 2018

STRATEGIC REPORT - OVERVIEW OF STRATEGY

Murray Income Trust PLC (the "Company") is an approved 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, Standard Life Aberdeen plc, and other third party providers. The Company has appointed Aberdeen Fund Managers Limited ("AFML", 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 and Risk Diversification

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 from the portfolio, which is achieved by ensuring an appropriate diversification of stocks and sectors, 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.

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.

Principal Risks and Uncertainties

There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial position, performance and prospects. The Board has carried out a robust assessment of these risks, which include those that would threaten its business model, future performance and solvency and identified the delegated controls it has established to manage the risks and address the uncertainties:

An explanation of other risks relating to the Company's investment activities, specifically market price, interest rate, liquidity and credit risks, and a note of how these risks are managed, is contained in note 17 to the financial statements.

The principal risks associated with an investment in the Company's shares are also published monthly in the Company's factsheet or they can be found in the pre-investment disclosure document ("PIDD") published by the AIFM, both of which are 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 three 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 three years.

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

a) the Company's principal risks and uncertainties as set out above;

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

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

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

e) the overall liquidity of the Company's investment portfolio;

f) the £40m senior secured loan notes issued in November 2017, which are repayable in November 2027; and

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

In addition, the Board has considered that significant economic or stock market volatility, or further regulatory uncertainty, could have an impact on its assessment of the Company's prospects and viability in the future.

Accordingly, taking into account the Company's current position and the potential impact of its principal risks and uncertainties, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of this Report.

Performance, Financial Position and Outlook

A review of the Company's activities and performance during the year ended 30 June 2018, 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 new three year £20 million bank loan and £40 million of 10 year senior loan notes issued by the Company during the year. 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.

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:

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 socially responsible investment 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 2018, there were four male Directors and one female Director, with a further female Director appointed on 2 August 2018.

Duration

The Company does not have a fixed life.

N A H Rogan

Chairman

20 September 2018

STRATEGIC REPORT - INVESTMENT MANAGER'S REPORT

Background

The UK equity market finished the year to the end of June 2018 higher, reaching a new peak towards the end of May following the very strong returns of the prior year during which the market recovered from the initial shock of the Brexit referendum decision. The FTSE All-Share Index increased by 9.0% on a total return basis (that is with dividends reinvested). The market was particularly volatile in the second half of the financial year with sharp falls during the first quarter of calendar 2018 recouped in the following period. A number of factors provided the backdrop to the market's good performance: a relatively benign global economic environment; robust commodity prices (being broadly a function of the global economic backdrop); the benefits of tax reform in the United States; and a relatively limited disjoint from Brexit.

The domestic economy demonstrated resilience in the first half of the Company's financial year with GDP growing by 0.4% quarter on quarter in the third and final quarters of calendar 2018. However, the impact of the poor weather conditions and uncertainty around Brexit led to a weak first quarter of calendar 2018 with growth of 0.2%. Some of these concerns were assuaged as growth picked up to 0.4% as services output recovered in the second quarter of calendar 2018. At the start of the period the tone of the Monetary Policy Committee became more hawkish leading to the first interest rate rise (by 25bps to 0.5%) in a decade in November. With unemployment reaching its lowest level in 40 years in the three months to the end of June 2018, the degree of slack in the economy has reduced considerably. To some extent, this has been reflected in wage growth with average earnings excluding bonuses rising by 2.7% for the three months to the end of June 2018 part of a gradual improvement over the 12 month period. Indeed, we are now seeing a period of real wage growth given that the Consumer Price Index measure of inflation ended the period little changed from the start of the period at 2.4% although it did rise to 3.0% for a number of months around the turn of the calendar year. Sterling strengthened against the US Dollar for the first nine months of the period before giving back its gains as the US Dollar strengthened and concerns around Brexit took hold. The currency remained little changed against the Euro for the whole period. The International Monetary Fund expects UK GDP growth for calendar 2018 to be 1.4% before improving marginally to 1.5% in 2019. However, the outturn for 2019 in particular remains principally dependent on the terms of the withdrawal from the European Union.

Overseas, the economic environment during the period has been relatively benign with consensus forecast suggesting close to 4.0% global GDP expansion in 2018 compared to 3.7% in 2017. Growth in the United States has generally been strong aided by a robust labour market, strong household expenditure and a noteworthy fiscal stimulus. This prompted the Federal Reserve to raise interest rates by 0.75% over the period as it seeks to normalise policy. In the Eurozone, economies generally performed well in the first half of the period aided by the European Central Bank's accommodative policies but more recently there have been signs of a slowdown particularly in France and Germany. Emerging markets including China having also performed robustly in the first half of the period aided by the strength of the global economy, strong commodity prices and a benign US dollar but have subsequently lost momentum impacted by trade tensions and a stronger US dollar. Growth now appears to be more uneven with a divergence between the United States on the one hand, and Europe and Emerging Markets on the other hand. The downside risks have increased as trade tensions become more prominent and financial conditions tighten.

Company Performance

The Company generated a positive net asset value per share total return of 3.9% in the year to 30 June 2018, compared to a rise in the benchmark FTSE All-Share Index of 9.0%.The first half of the year proved to be a particularly challenging period reflecting a number of broad themes as well as one particular stock specific disappointment. Firstly, cyclical sectors and in particular oil and gas companies performed strongly. Secondly, in contrast, companies with defensive growth characteristics underperformed. These two broad factors were not helpful for a portfolio generally comprised of good quality companies that combine attractive dividend yields and/or those with good scope for dividend growth with a relatively high degree of dividend security. In addition, we are keen to ensure that the capital and income exposure is diversified across the portfolio and that the income contribution from any particular holding is relatively modest. As a function of this, Royal Dutch Shell (which is an underweight position relative to the benchmark despite being one of the largest holdings in the portfolio) performed very strongly, accounting for around a quarter of the underperformance. While unfortunately a further third of the underperformance can be attributed to Provident Financial whose share price fell sharply following a significant profit warning which resulted in the sale of the holding (the factors behind this are explained in more detail below).

Performance Attribution for the year ended 30 June 2018

On a total return basis, the Company's share price returned 3.3%, which reflected a small widening of the discount to Net Asset Value at which the shares traded compared to the previous year end. During the period, the Company bought back 350,145 shares to be held in Treasury. On a gross assets basis, the equity portfolio underperformed the benchmark by 4.8%.

Gearing increased returns by 0.3%. The company maintained the level of debt at a steady rate of around £47m for most of the period. At the beginning of November the Company replaced its floating rate £80m Sterling facility with a mixture of fixed and floating: £40m of Senior Secured Fixed Rate Notes at a coupon of 2.51% and a new £20m three-year unsecured multi-currency revolving credit loan facility agreement with Scotia Bank Europe PLC. The notes are denominated in sterling and the bank debt can be been drawn down in a mixture of currencies to offset the portfolio's non-UK holdings. To date, US dollars, euros, Swedish krona and Swiss francs have been drawn down, broadly matching the mix of non-UK listed exposure in the portfolio.

Looking specifically at the performance of the market, for the second year in a row the poorest performing area of the market was the telecoms sector. This was principally due to the continuing disappointing performance of BT (not held in the portfolio) which suffered from slowing volume growth as consumer-facing markets mature and competition increased. The tobacco sector, which is held in the portfolio, also performed poorly, a function of concerns around rising bond yields, high debt burdens and the impact of next generation products.

Conversely, the oil and gas sector performed very strongly as the oil price increased by nearly $30 per barrel over the period. Similarly, the mining sector repeated its impressive performance as commodity prices continued to increase, management teams exercised capital discipline and in the case of BHP Billiton activist investors called for portfolio re-shaping.

From a size perspective, the FTSE 100 Index continued to underperform the Mid 250 Index. However the Small Cap Index underperformed both indices given the greater exposure to domestic economic factors and concerns around Brexit. The FTSE 350 High Yield Index underperformed the FTSE 350 Low Yield index during the period.

Looking specifically at the Company's portfolio, stock selection and asset allocation were both negative. Within oil & gas, the underweight exposure to oil & gas producers was detrimental. Within basic materials, good stock selection in the mining sector was offset by being underweight the sector. The overweight position in healthcare coupled with poor stock selection hurt performance. In consumer services, being underweight food retail and poor stock selection in media impacted returns. Finally, stock selection was beneficial in the technology sector but a significant drag in the financials sector.

Turning to the individual holdings, there were a number of companies that demonstrated substantial share price increases. Aveva's share price more than doubled during the period due to its merger with Schneider Electric's software business and a recovery in its end-markets. Strong demand for its cloud products helped Microsoft to perform well. XP Power's exposure to strong capital equipment markets coupled with new design wins entering production resulted in an impressive uplift in profits. At the end of the period Dunedin Smaller Companies Investment Trust announced that it intended to merge with Standard Life UK Smaller Companies Trust. Finally, Rotork performed well buoyed by a recovery in the expenditure of its oil and industrial customers.

On the other hand, there were a number of disappointments. By far and away the most significant of these was Provident Financial which issued a profit warning towards the beginning of the period in which it announced that there had been a significant deterioration in trading at the company's Home Collected Credit business, an investigation into Vanquis Bank by the Financial Conduct Authority ("FCA"), the decision to cancel the company's dividend, and the removal of the company's Chief Executive. We were particularly disappointed and puzzled to discover that that as a result of intervention by the FCA the company had stopped selling its highly profitable "Repayment Option Plan" in April 2016 to new customers but did not deem this worthy of public disclosure. Following a strong performance in the prior year, Nordea Bank's share price weakened over the period given delays to its cost savings programme, competition in the Swedish mortgage market and the likelihood that interest rate increases would be delayed. Weakness in Inmarsat's maritime business, delays to the company's aviation revenues and the additional capex required to achieve these resulted in lower earnings estimates and a fall in the share price. However, in June the company was approached by EchoStar, a US peer about a potential acquisition which resulted in a sharp recovery in the share price although the share price still fell by a quarter during the year. Finally, despite also staging a part recovery in its share price, Ultra Electronics performed poorly due to a profit warning caused by budgetary pressure on UK defence programmes and the resignation of its Chief Executive.

Portfolio Activity and Structure

Turnover was significantly more brisk than usual during the period (with turnover of 21% compared to 12% in the prior year) as we sought to enhance our focus on dividend growth rather than just a high income, diversify the income and capital exposure, and take advantage of a number of attractively valued companies that we had identified in the mid cap area of the market.

We introduced 17 new holdings during the year over half of which were non-large cap companies. LondonMetric Property, is a mid cap property company mainly focused on distribution assets for retailers. The company benefits from the growth of internet retailing, a sticky customer base and an attractive dividend yield. We purchased a holding in Euromoney International Investor, a mid cap B2B information company providing services to a range of sectors including asset management, banking and commodities. The company, which trades at a modest valuation compared to its peers, benefits from low capital intensity and has recently enhanced its dividend policy to increase the payout ratio. GIMA TT is an Italian-listed mid cap which came to the market during the period. The company produces manufacturing and packaging machines for the tobacco industry with a particularly strong niche in next generation products, an area where we would expect to see attractive long term growth. We introduced a small position in Diploma, a mid-cap distributor with high margins and attractive returns. The company has a net cash balance sheet (providing some scope for special dividends) and although the dividend yield is relatively low it should grow quickly. Bodycote is a mid cap engineer focused on thermal processing, its under-appreciated quality characteristics (including a net cash balance sheet and history of special dividends) made it an attractive option despite the relatively modest dividend yield. We also purchased a small holding in Saga, a mid cap specialist provider of services (mostly insurance) to people in the UK aged 50 and over. Although the dividend has limited scope for growth the yield of 7% is attractive and the valuation appealing. We bought a small holding in VAT Group, a Swiss mid cap company which is the global leader in vacuum valve technology. Although the industry is cyclical, the company is exposed to attractive structural drivers and maintains a strong balance sheet and an attractive dividend yield that should grow strongly. Telecom Plus offers household services such as telecoms and utilities through a network of agents. The company regularly comes top in customer satisfaction surveys and with changes to the standard variable tariff for utilities should become more competitive compared to other market participants. The company has a net cash balance sheet and a dividend yield above 4%. Finally, in the mid cap space, we introduced Chesnara, the mid cap insurance company focused on closed businesses in the UK and an open life and pensions business in Sweden and the Netherlands. The company operates in an attractive niche, has an appealing dividend yield and a good track record of growth through acquisitions. We also introduced a modest position in one small cap company, Hostelworld, a leading internet booking site for hostels which represent a growth market. The company has a net cash balance sheet and a generous dividend yield. As a result of these purchases, the mid and small cap exposure in the portfolio at the year end has increased to 31% of gross assets compared to around 25% at the prior year end.

The large cap company introductions were as follows. Rentokil Initial, which offers long term structural growth from its Pest Control division. Although the dividend yield is low, dividend growth should be strong. We purchased a holding in Experian, the FTSE 100 credit information services company, which we believe can deliver strong earnings and dividend growth helped by new products and supportive end-markets. We introduced Kone, the elevator company listed in Finland. The company offers access to a long term growth industry with a strong competitive position and generous market share particularly in Asia. The company has a net cash balance sheet and a generous dividend yield approaching 4%. We purchased a holding in InterContinental Hotels. The company has good brands, a strong pipeline of new rooms and attractive financial characteristics, particularly its low capex requirements and long term contracted revenues. Relx (the old Reed Elsevier) operates a variety of strong businesses with high barrier to entry and good growth potential. Although the dividend yield is relatively low, there should be good scope for growth over the longer term. Finally, we purchased a holding in Rio Tinto. The mining company owns a number of very high quality, low cost deposits, particularly of iron ore and copper. Management is focused on enhancing returns and using capital in the most efficient manner. The company's balance sheet has been repaired and although the dividend policy has evolved from a progressive dividend to one that is more dependent on nearer term conditions, the shares currently offer a generous dividend yield.

Furthermore, we increased the exposure to a number of companies with attractive prospects including Assura as part of a fund raising to buy assets, Croda International given expectations for strong growth, Aveva due to the market underappreciating the benefits of its merger with Schneider Electric's software business, and Diageo where we became more positive on the outlook for growth in the company's American and Emerging Market operations.

In contrast, we sold ten holdings. The position in Essentra was sold given concerns over potential operational and cyclical risks within the business and with a valuation that we believed had largely factored in a recovery in earnings. The holding in Wood Group was also sold following a reappraisal of the company's quality characteristics. In particular, following the purchase of Amec Foster Wheeler the uncertainty over liabilities taken on, the high level of debt (which made the dividend less secure) and the valuation which failed to look particularly cheap. Inmarsat was sold following the approach by EchoStar. The issues around weakness in the maritime division, delays to aviation revenues and the debt burden led to a reappraisal of the quality characteristics of the company. The potential bid provided the opportunity to sell the shares at a more attractive valuation. The small residual holding in Linde was also sold following a strong performance after the announcement of the merger with Praxair which had already factored in most of the benefits of the deal. The holding in Sage was sold given concerns that the company is finding the transition of its products to the cloud to be challenging, coupled with worries that the company's staff were not easily adjusting to the high performance culture that management want to introduce. The holding in Svenska Handelsbanken was sold given concerns around the conservatism of lending in the UK, greater competition and the reduced likelihood of a special dividend. We also sold the holding in Pearson given the high level of uncertainty over future earnings in the key North American Higher Education division, likely profit erosion from the stake in Penguin Random House, coupled with the move to pay a reduced dividend. Capita was sold from the portfolio as we had become more cautious on a number of issues including the risk of further earnings shortfalls given the challenging environment, the need for further investment in the business, a weak balance sheet and the potential for a cut in the dividend (which subsequently occurred). Finally, given the significant deterioration in the quality of the company and the breakdown in trust with the management we took the difficult decision to sell the holding in Provident Financial.

We reduced a number of holdings including GlaxoSmithKline in recognition that the dividend risk for the company had increased. We also reduced Unilever and AstraZeneca to manage the capital exposure following a period of strong performance. And also Aberforth Smaller Companies as the holdings in individual mid cap names increased.

In addition to the trades outlined above, a number of Call Options were assigned in companies that had performed strongly, including Microsoft, Prudential and BBA Aviation leading to a marginal reduction in the exposure to these names. Conversely, the assignment of Put Options led to small increases in Vodafone, British American Tobacco and Weir. These assignments were part of our broader option writing programme which continued to provide the benefit of increasing and diversifying the income available to the Company. The income from writing options decreased in percentage terms accounting for 6.8% of total income compared to 7.4% of total income during the prior year. We continue to feel that the option writing strategy has been of benefit to the Company by increasing the level of income generated and providing a good discipline for optimising our exposure to individual holdings.

With our long term investment horizon, we 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: board composition, diversity, experience and expertise; capital allocation and M&A activity; risk management including issues such as cyber security, data protection and GDPR; dividend and balance sheet policies; remuneration; environmental issues; innovation; 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. We have also attended various Annual General Meetings (in many cases being the only institutional shareholder present).

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 13.8% of gross assets.

Income

For the financial year ended 30 June 2018, the Company witnessed a small fall in the level of income generated overall, following a particularly strong performance in the prior year, leading to a reduction in the revenue return per share of 3.7% from 34.9p to 33.6p. Income from investments reduced due to a reduction in Inmarsat's final dividend and the cancellation of Provident Financial's interim dividend, lower special dividend income, marginally stronger sterling, the repayment of £10m of borrowings at the end of the prior year as well as lower option income. In total there were three special dividends (from Aveva, Aberforth Smaller Companies and Scandinavian Tobacco Group), of which £0.9m was recognised as revenue. 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. In addition, higher borrowing costs given the fixed rate notes and marginally higher interest rates on the bank borrowing offset the benefits of the lower management fee. There was a very marginal earnings enhancement from fewer shares in issue. Revenue reserves now stand at £23.9m (prior to the payment of the final dividend).

Although the weakness of sterling has improved the dividend picture from a translational perspective in recent years, currency movements are notoriously difficult to predict and much hinges on the outcome of the negotiations around the withdrawal from the European Union. In addition, average dividend payout ratios remain elevated compared to historic levels. Current consensus forecasts for the UK equity market as whole suggest dividend growth for calendar 2019 of 5.0% which would appear to be reasonable barring a significant appreciation of sterling or a period of very weak economic growth.

Outlook

Although the global economic environment seems relatively benign supported by a robust growth dynamic, there are indications that underlying growth momentum may be gently slowing and regional divergence increasing. Furthermore, an increase in protectionism could have a significant impact on growth with the potential to also increase inflationary pressures. Closer to home, the likely shape of Brexit remains opaque and until a clearer picture emerges, this uncertainty is likely to act as a brake on growth. We are concerned that valuations are now beginning to look expensive again. Therefore, we will continue to take a careful and measured approach to capital allocation favouring companies whose market positions, competitive advantages and balance sheets afford them the best opportunity to prosper over the longer term.

Charles Luke

Iain Pyle

Aberdeen Asset Managers Limited

Investment Manager

20 September 2018

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 2018 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 2018, the Company had 66,672,313 fully paid Ordinary shares of 25p each (2017 - 67,022,458 Ordinary shares) with voting rights in issue and an additional 1,921,145 (2017 - 1,571,000) shares in treasury. During the year ended 30 June 2018, 350,145 Ordinary shares, equivalent to 0.5% of the Company's issued share capital excluding treasury shares as at 30 June 2017, were bought back into treasury. A further 367,900 shares were bought back into treasury between 1 July 2018 and the date of approval of this report, resulting in 66,304,413 Ordinary shares in issue, with voting rights, and 2,289,045 shares held in treasury.

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 Dividends

The financial statements for the year ended 30 June 2018 indicate a total gain attributable to equity shareholders for the year of £21,099,000 (2017 - £88,982,000).

The final dividend for the year ended 30 June 2017, of 11.75p per Ordinary share, was paid to shareholders on 9 November 2017. The first, second and third interim dividends, each of 8.0p per Ordinary share, for the year ended 30 June 2018, were paid to shareholders on 12 January 2018, 29 March 2018 and 29 June 2018, respectively.

The Directors now recommend a final dividend for the year ended 30 June 2018 of 9.25p per Ordinary share, payable to shareholders on 8 November 2018. The ex-dividend date is 27 September 2018 and the record date is 28 September 2018. A resolution in respect of the final dividend will be proposed at the forthcoming Annual General Meeting.

Dividends are paid by means of three interim dividends, normally in January, March and June, and a final dividend in November, after approval by shareholders at the Annual General Meeting. Further information on dividends is contained in the Chairman's Statement.

Manager and Company Secretary

AFML 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 AFML and AAML. In addition, AFML has sub-delegated promotional activities to AAML and administrative and secretarial services to Aberdeen Asset Management PLC.

Until 31 December 2017, a monthly fee was payable to AFML at the rate of one-twelfth of 0.55% per annum on the first £400 million of net assets, 0.45% per annum on the next £150 million of net assets and 0.25% per annum on the excess over £550 million.

With effect from 1 January 2018, AFML is entitled to a monthly fee of one-twelfth of 0.55% per annum on the first £350 million of net assets, 0.45% per annum on net assets between £350 million and £450 million and 0.25% per annum on any net assets in excess of £450 million, and is otherwise calculated on the same basis as previously.

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 Standard Life Aberdeen Group, is the operator, manager or investment adviser, is deducted from net assets when calculating the fee.

There is no performance fee. A secretarial fee of £75,000 per annum (plus applicable VAT) is payable to Aberdeen Asset Management PLC, which is chargeable 100% to revenue. An annual fee equivalent to up to 0.075% 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 were charged 50% to revenue and 50% to capital during the year ended 30 June 2018. This charging allocation changed to 70% to capital and 30% to revenue with effect from 1 July 2018 in line with the Board's expectation of the split of future investment returns. In so changing the Company has moved to the most common allocation used in the UK equity income sector. The Directors consider that, while reducing, to an extent, the capital return, this change will enhance net revenue and increase the net earnings available to pay out to shareholders. The Directors believe that shareholders will welcome any increase in yield, albeit small.

The management, secretarial and promotional activity fees paid to Standard Life Aberdeen Group companies during the year ended 30 June 2018 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, David Woods, Jean Park and Donald Cameron held office throughout the year ended 30 June 2018. Neil Honebon and Mike Balfour resigned as Directors on 6 November 2017 and 8 December 2017, respectively, while Peter Tait was appointed a Director on 7 November 2017. Neil Rogan was appointed Chairman of the Company in succession to Neil Honebon. Subsequent to the year end, Stephanie Eastment was appointed a Director on 2 August 2018. David Woods held the office of Senior Independent Director throughout the year under review except for the period from 14 August to 26 October 2017 during which time he was not considered independent, for the reasons set out below in 'Corporate Governance'.

The names and biographies of each of the Directors are shown on the Company's website and in the published Annual Report and include their experience as well as length of service. 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.

The Directors attended Board and Committee meetings during the year ended 30 June 2018 as follows (with their eligibility to attend the relevant meeting in brackets):

Notes: Committee Meetings of the Board may not involve all Directors

A One Board meeting and three Committee meetings, held on same day, missed due to illness

B Appointed as a Director on 7 November 2017

C Resigned as Chairman and as a Director on 6 November 2017

D Resigned as a Director on 8 December 2017

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. The Board is accountable to the Company's shareholders for good governance and, as required by the Listing Rules of the UK Listing Authority, this statement describes how the Company applies the main principles identified in the UK Corporate Governance Code published in April 2016 (the "UK Code") and which applies to the Company's year ended 30 June 2018. The UK Code is available on the Financial Reporting Council's ("the FRC") website: frc.org.uk.

The Board has also considered the principles and recommendations of the AIC Code of Corporate Governance as published in July 2016 ("the AIC Code") by reference to the AIC Corporate Governance Guide for Investment Companies ("the AIC Guide"). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to investment trusts. The AIC Code and AIC Guide are available on the AIC's website: theaic.co.uk

The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Code), will provide better information to shareholders.

The Board confirms that, during the year, the Company complied with the recommendations of the AIC Code and the relevant provisions of the UK Code, except as set out below.

The UK Code includes provisions relating to:

a) the role of the chief executive (A.1.2);

b) executive directors' remuneration (D.1.1 and D.1.2); and

c) the need for an internal audit function (C.3.6).

For the reasons set out in the AIC Guide and UK Code, the Board considers that these provisions are not relevant to the position of the Company, being an externally managed investment company. In particular, all of the Company's day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has therefore not reported further in respect of these provisions.

Following the merger of Aberdeen Asset Management PLC and Standard Life plc on 14 August 2017, David Woods and Mike Balfour no longer qualified as independent Directors of the Company under the UKLA's Listing Rules as a director is not considered independent if he or she serves on the board of more than one investment trust managed by the same Manager. David Woods was a non-executive director of Standard Life UK Smaller Companies Trust plc ("SLSC") while Mike Balfour was a non-executive director of Standard Life Investments Property Income Trust Limited both of which are managed by subsidiaries of Standard Life Aberdeen plc. David Woods retired from the board of SLSC in October 2017, and accordingly temporarily stepped back from his role as Senior Independent Director of the Company during this period, but resumed his appointment following his retirement from the SLSC board on 26 October 2017. In relation to the role of the senior independent director, UK Code provision A.4.2, the Board notes that the Company was in compliance during the year other than for the period between 14 August 2017 and 26 October 2017 when there was no Senior Independent Director.

All of the Directors will retire at the AGM on 5 November 2018. Stephanie Eastment and Peter Tait, each being eligible, submit themselves for individual election as Directors at the AGM. David Woods has indicated that he will not stand for re-election as a Director. Neil Rogan, Donald Cameron and Jean Park, being eligible, seek individual re-election as Directors at the AGM.

With effect from the conclusion of the AGM, Jean Park will succeed David Woods as Senior Independent Director while Stephanie Eastment will succeed Jean Park as Chairman of the Audit Committee.

The Board considers that all Directors are independent of the AIFM and therefore a majority of the Board is independent of the Manager. Furthermore, the Board believes that each Director remains free of any relationship which could materially interfere with the exercise of his or her judgement on issues of strategy, performance, resources and standards of conduct and confirms that, following formal performance evaluations, the individuals' performance continues to be effective and demonstrates time commitment to the role. The Board therefore has no hesitation in recommending to shareholders at the AGM, the individual election as Directors of the Company, of Stephanie Eastment and Peter Tait, and the individual re-election as Directors of the Company of Donald Cameron, Jean Park and Neil Rogan.

The Company's Statement of Corporate Governance (which may be found on its website: murray-income.co.uk) includes further information on the operation of the Board, including the matters reserved to the Board for consideration, Board independence, the annual performance of the Directors and the recruitment process for new Directors.

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. Further information on the functioning of the Board Committees may be found in the Statement of Corporate Governance published on the Company's website.

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 was chaired during the year by Neil Honebon until 6 November 2017 and by Neil Rogan thereafter.

In monitoring the performance of the Manager, the Committee considers the investment record of the Company over the short term and longer term, taking into account both its performance against the benchmark index and peer group investment trusts and open-ended funds. 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

All appointments to the Board of Directors are considered by the Nomination Committee which comprises the whole Board and was chaired during the year by Neil Honebon until 6 November 2017 and by Neil Rogan thereafter.

The Committee's overriding priority in appointing new Directors to the Board 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.

Remuneration Committee

Directors' remuneration is considered by the Remuneration Committee which comprises the whole Board and was chaired during the year by David Woods. 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 below, and in the published Annual Report, respectively.

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

The Directors have reviewed the level of non-audit services provided by the Auditor during the year, together with the Auditor's procedures in connection with the provision of such services, and 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. The Company's assets consist of a diverse portfolio of listed equity shares nearly all of which, in most circumstances, are realisable within a very short timescale. The Directors are mindful of the principal risks and uncertainties and have reviewed forecasts detailing revenue and liabilities and they believe that the Company has adequate financial resources to continue its operational existence for the foreseeable future and at least 12 months from the date of approval of this Annual Report.

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.

Substantial Interests

As at 30 June 2018 and 31 August 2018 (the latest practicable date before the approval of this Report), the following interests over 3% in the issued Ordinary share capital of the Company have been disclosed in accordance with the requirements of the UK Listing Authority's Disclosure Guidance and Transparency Rules:

UK Stewardship Code and Proxy Voting as an Institutional Shareholder

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

The full text of the Company's response to the Stewardship Code may be found on the Company's website.

Socially Responsible Investment Policy

The Board is aware of its duty to act in the best interests of the Company. As an investment trust, the Company has no direct social, environmental or community responsibilities. However, the Board acknowledges that there are risks associated with investment in companies which fail to conduct business in a socially responsible manner and the Board, therefore, ensures that the Manager takes regular account of the social, environment and ethical factors, which may affect the performance or value of the Company's investments.

Relations with Shareholders

The Directors place great importance on communication with shareholders. The Annual Report is 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, murray-income.co.uk, or via the Standard Life Aberdeen Group's Customer Services Department. The Company responds to letters from shareholders.

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 the Aberdeen Group) 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 only 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, members of the Board accompany the Manager when undertaking a series of meetings with institutional shareholders.

The Notice of AGM included within the Annual Report is normally sent out at least 20 working days in advance of the meeting. All shareholders have the opportunity to put questions to the Board and Investment Manager at the Company's AGM.

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 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.

Annual General Meeting ("AGM")

Among the resolutions being put at the AGM of the Company to be held on 5 November 2018, the following resolutions will be proposed:

Authority to allot shares and disapply pre-emption rights

Ordinary Resolution No. 11 in the Notice of AGM will renew the authority to allot the unissued share capital up to an aggregate nominal amount of £828,805 (equivalent to approximately 3.3m Ordinary shares, or if less, 5 per cent 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 2019 or on 31 December 2019, whichever is earlier. This means that the authority will require to be renewed at the next AGM.

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. 12 will, if passed, give the Directors power to allot for cash or sell from treasury equity securities up to an aggregate nominal amount of £1.7m (equivalent to approximately 6.6m Ordinary shares, or if less, 10 per cent of the Company's existing issued share capital (exluding 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 2019 or on 31 December 2019, whichever is earlier. This authority will not be used in connection with a rights issue by the Company.

The Directors intend to use the authority given by Resolutions 11 and 12 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

At the AGM held on 6 November 2017, 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 current 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. 13 in the Notice of AGM 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 2019, or on 31 December 2019, 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. The Directors recommend that shareholders vote in favour of Resolution No. 13. 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 resold. This should give the Company greater flexibility in managing its share capital, and improve liquidity in its shares.

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.

By Order of the Board

N A H Rogan

Chairman

20 September 2018

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 the law they have elected to prepare the financial statements in accordance with UK Accounting Standards. The financial statements are required by law to 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:

a) select suitable accounting policies and then apply them consistently;

b) make judgments and estimates that are reasonable and prudent; and

c) state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

d) adopt a going concern basis of accounting unless it is inappropriate to assume that the Company will continue in business.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.

The Directors of the Company each confirm, to the best of their knowledge, that:

a) 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 or loss of the Company;

b) that in the opinion of the Directors, the Annual Report and financial statements taken as a whole, is fair, balanced and understandable and it provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy;

c) the Strategic Report and Directors' Report include 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; and

d) the financial statements are prepared on a going concern basis.

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

N A H Rogan

Chairman

20 September 2018

STRATEGIC REPORT - RESULTS

Financial Highlights

Performance (total return)

Dividends

Ten Year Financial Record

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 2018