Murray International Regulatory News (MYI)

MURRAY INTERNATIONAL TRUST PLC

Legal Entity Identifier (LEI): 549300BP77JO5Y8LM553

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2023

Performance Highlights

Financial Calendar

Dividends

Financial Highlights

STRATEGIC REPORT

Chair's Statement

I am pleased to present this Annual Report following my appointment as Chair on 31 December 2023 and would like to take this opportunity to reiterate, on behalf of the Board, all our thanks to David Hardie for his contribution to the Company, particularly in his willingness to take on the role of Chair following the sad death of his predecessor, Simon Fraser.

Background

The disparity that so often exists between economic fundamentals and financial market performance proved extremely pronounced in 2023. The impacts of sharply rising interest rates, which had begun in earnest in early 2022, began to have a negative impact on most global economies. Scrutinised by sceptical bond markets, Central Banks remained vigilant about ongoing inflationary pressures. Interest rates continued to rise, debt servicing costs increased further and economic stagnation remained a constant threat. Whilst most countries experienced decelerating rates of inflation, overall prices continued to rise, putting further pressure on already stretched household budgets. With no tangible relief in the cost-of-living crisis throughout the indebted Developed World, it was no surprise that global consumption struggled to support growth. Corporate profit margins also succumbed to input cost increases, revenue declines and general wage pressures. The overall environment of tighter liquidity, constrained earnings and fragile confidence could hardly have been described as positive for financial markets. Yet what transpired most definitely defied expectations. Whilst economic fundamentals generally tend to reflect reality, global financial fundamentals are always open to a variety of interpretations. So it proved once again. Global equity markets treaded water for most of the year, but markets' performance during the final two months of 2023 was nothing short of remarkable. Fuelled by a resurgence in positive sentiment towards a perceived end to interest rate hikes, global equity markets surged higher. Such positive market momentum towards year end, combined with ongoing robustness in the Company's income statement, delivered another year of strong total returns on net assets. It is also pleasing to report that once again the proposed increase in the Company's dividend is fully covered by the net revenue generated from the portfolio.

Performance

The Company's net asset value ("NAV") posted a total return for the year (i.e. with net income reinvested) of 8.6%. Although the Company does not use a benchmark, it is worth noting that over the same period the UK Retail Prices Index rose 5.2% and the Reference Index (the FTSE All World TR Index) increased 15.7%. The share price posted a lower total return of 1.1% (2022: 20.6%), reflecting a widening in the discount to NAV. Revenue return per share generated from the Company's portfolio amounted to 12.1p for the year (2022: 12.0p, restated for the share subdivision in April 2023), enabling the ongoing improvement in the total level of dividend. The Manager's investment focus continues to emphasise both geographical and sector diversification across a broad range of quality companies in order to deliver both income and capital growth. Such characteristics tend not to be represented in more concentrated indices where fashionable growth stocks are inclined to dominate.

Dividends

Three interim dividends of 2.4p per share (2022: three interims of 2.4p as restated) have been declared during the year. Your Board is recommending an increased final dividend of 4.3p per Ordinary 5p share (2022: 4.0p as restated). If approved at the Annual General Meeting, this final dividend will be paid on 20 May 2024 to Shareholders on the register on 26 April 2024 (ex dividend 25 April 2024). If the final dividend is approved, the total Ordinary dividend for the year will amount to 11.5p (2022: 11.2p as restated), an increase over the previous year of 2.7%. This represents the 19th year of dividend increases for the Company, which remains an AIC 'Next Generation Dividend Hero'.

As a long-established investment trust, the Company has the benefit of over £75 million of distributable revenue reserves on its balance sheet at 31 December 2023 (2022: £69.2m), which have been accumulated by the Company over many years from retained earnings. The payment of the final dividend, if approved, will result in the movement of over £4 million to the revenue reserves, to strengthen them for future years, and dividend cover at year end of 1.05x (2022: 1.07x).

The Board intends to maintain the Company's progressive dividend policy. This means that, in some years, revenue will be added to reserves while, in others, some revenue may be taken from reserves to supplement revenue earned during that year, in order to pay the annual dividend. Shareholders should not be surprised or concerned by either outcome as, over time, the Company will aim to pay out what the underlying portfolio earns in sterling terms.

Currency fluctuations may also have an impact on income and therefore the level of dividend. The Board, however, is maintaining the present policy not to hedge the sterling translation risk of revenue arising from non-UK assets.

Manager Succession

As we reported in the Half Yearly Report in August 2023, Bruce Stout, the Company's lead investment manager since 16 June 2004, has announced that he will be retiring from abrdn in June 2024. 

During his time as lead manager, Bruce has been assisted by Martin Connaghan and Samantha Fitzpatrick who have worked together with Bruce for over 20 years. In recent years, Martin and Samantha's input into the management of the portfolio, and the Company itself, has increased and many of you may have met or heard from them at meetings or presentations, including AGMs and online webinars. We are delighted to confirm that Martin and Samantha have assumed co-managerial responsibility for the Company's investments alongside Bruce in order to ensure the smoothest of handovers and no change in abrdn's approach to the investment management of the Company going forward. On behalf of the Board, I would like to thank Bruce sincerely for all his efforts, expertise and insights. Shareholders will have the opportunity to thank Bruce in person at the forthcoming Annual General Meeting.

Online Presentation and Annual General Meeting ("AGM")

Following the success of similar events over the last few years, the Board has decided to hold another online presentation this year, at 11.00 a.m. on Friday 5 April 2024. This is in addition to the in-person AGM. During the online presentation, shareholders will receive updates from me, as Chair, and the investment management team, and there will be an interactive question and answer session. We see this as an opportunity for shareholders, who may be unable to attend the AGM, to hear directly from the Board and the investment team and to pose any questions that they may have. Full details on how to join the online shareholder presentation can be found in my accompanying letter and further information on how to register for the event can be found at www.murray-intl.co.uk.

Following the online presentation, shareholders will still have plenty of time in which to submit their proxy votes prior to the AGM. I would encourage all shareholders (whether or not they intend to attend the AGM in person) to lodge their votes in advance in this manner. Shareholders on the main register can do this by completing and returning the proxy form which has been sent to them. If you hold your shares on a platform via a nominee, please note that the Association of Investment Companies has provided helpful information on how to vote investment company shares held on some of the major platforms. This information can be found at www.theaic.co.uk/how-to-vote-your-shares.

The AGM has been convened for 12:30 p.m. on 19 April 2024, at Wallacespace Spitalfields, 15 Artillery Lane, London E1 7HA, and will be followed by a buffet lunch and an opportunity to meet the Board and the investment management team.

Ahead of the online presentation and AGM, I would encourage shareholders to send in any questions that they may have for either forum to:  murray-intl@abrdn.com.

Management of Discount and Share Capital

At the AGM held in April 2023, shareholders approved the five for one subdivision of Ordinary shares of 25p each into Ordinary shares of 5p each which became effective on 24 April 2023.

During the year, the Board acted to reduce the volatility of the share price as it fluctuated between a premium and a discount to the net asset value. During May 2023, while the Company was trading at a premium, the Company sold 1,050,000 Ordinary shares of 5p each from Treasury at a weighted average premium of 2.5%, raising almost £2.8 million. This represented an increase in the issued share capital of 0.2%.

In line with most of the investment trust sector, the discount of the Company widened from mid-July to 9.6% by late October, when the industry average discount reached over 16%, the widest reported since the Global Financial Crisis in 2008, before narrowing towards the end of the year. As its discount widened in the second half of the year, the Company bought back 5,248,133 Ordinary Shares of 5p for Treasury at a total cost of £12.4 million and at a weighted average discount of 5.7%, representing 0.8% of the issued share capital.

At the AGM in 2024 the Board will be seeking approval from shareholders to renew the buyback authority together with the authority to allot new shares or sell shares from Treasury. As in previous years, new or Treasury shares will only be issued or sold at a premium to NAV and shares will only be bought back at a discount to NAV. Resolutions to this effect will be proposed at the AGM and the Directors strongly encourage shareholders to support these proposals.

Your Board continues to believe that, in normal market conditions, it is appropriate to seek to address temporary imbalances of supply and demand for the Company's shares which might otherwise result in a recurring material discount or premium. The Board believes that this process is in all shareholders' interests as it seeks to reduce volatility in the discount or premium to underlying NAV whilst also making a small positive contribution to the NAV. At the latest practicable date, the NAV (excluding income) per share was 262.77p and the share price was 244.25p, equating to a discount of -7.1% per Ordinary share compared to a discount of -4.0% per Ordinary share at the year end.

Gearing

At the year end, total borrowings amounted to £140 million (2022: £200m), representing net gearing (calculated by dividing the total borrowings less cash by shareholders' funds) of 8.0% (2022: 11.2%), all of which is drawn in sterling. In May 2023, the Company repaid its maturing £60m fixed rate loan using the proceeds of sales from the portfolio. At the time, the Board considered options to replace this loan but acceptable commercial terms were not available.

The Company is now considering options for the next fixed rate loan which is due to expire in May 2024 and amounts to £30m. The Company will update shareholders in due course. 

Ongoing Charges Ratio ("OCR")

The Board remains focused on controlling costs and on delivering value to shareholders. The OCR for 2023 was broadly flat ending the year at 0.53% (2022: 0.52%). 

The Board has been monitoring developments in the field of cost disclosure regulations and fully supports the industry-led initiative that is seeking to exclude listed closed ended investment companies from regulations that have created an uneven playing field both domestically and internationally.

Environmental, Social and Governance ("ESG") and Climate Change

The Company is not an ESG fund. However, as part of its responsible stewardship of shareholders' assets, your Board continues to engage actively with the Manager with regard to the ongoing assessment and further integration of ESG factors into the Manager's investment process. The Board receives regular assessments of the Company's holdings and portfolio, including a MSCI fund ratings report which currently gives the Company's portfolio a rating of 'A'. Further information on the important work undertaken on ESG and climate change by the Manager is provided in the 'ESG and Climate Related Factors' section on pages 114 to 116 of the published Annual Report and Financial Statements for the year ended 31 December 2023.

Board of Directors

As part of the ongoing succession planning Gregory Eckersley joined the Board on 1 May 2023 and Wendy Colquhoun joined on 1 September 2023. With a background in equity investment and a professional career in asset management and leadership roles within the financial sector, Gregory has already contributed significantly to the Board's deliberations. In addition, Wendy's legal background as a former partner in CMS Cameron McKenna with over 25 years' experience in corporate transactional, and regulatory matters places the Board in a strong position following David Hardie's retirement from the Board on 31 December 2023.

The Board recognises the benefits and is supportive of, and gives due regard to, the principle of diversity when recruiting new Directors whilst ensuring that Board appointments are always made on merit. The Company is compliant with the recommendations of the Parker Review on diversity in the UK boardroom.

Outlook

Trying to make sense of financial markets is difficult even at the best of times. Contradictions invariably present themselves, for example, between evaluating historical precedents, considering country-specific dynamics, acknowledging global conflicts of interest and accepting financial constraints from sometimes polarised political priorities. It is not surprising that attempts to predict the future are so often doomed to failure. The outlook for your Company is rooted in the more tangible variables of corporate fundamentals. This means identifying the key drivers of businesses across a broad and diversified range of sectors, focusing on key concepts such as positive cash flows, robust earnings, growing dividends and strong balance sheets, and then investing from a "bottom up" basis, in good quality, growing companies that are held for the long term to maximise potential positive upside. Through the vagaries of numerous business cycles, global catastrophes and financial market dislocations this investment style has served the Company well. Despite mounting global uncertainties in what currently appears to be an increasingly divided and fractious world, the Manager remains deeply committed to the Company's investment strategy, believing such a proven investment process will continue to identify appropriate opportunities to deliver the Company's objectives. 

Your Board greatly values shareholder comments and I encourage you to email me with your views at: VirginiaHolmes.Chair@abrdn.com.

Virginia Holmes Chair29 February 2024

Investment Manager's Review

Background

"Sir Isaac Newton tells us why,an apple falls down from the sky,

And from this fact it's very plain,all other objects do the same,

A bolt, a bar, a brick, a cup,invariably fall down, not up.?..!"

Defying gravity best describes the behaviour of global equity markets over the past twelve months. Seemingly no amount of economic despair, political discord, policy disharmony, geopolitical disunity nor rational doubt was enough to dampen the animal spirits of unquestioning market exuberance. Confronted with enough economic evidence to chill the spine of even the most optimistic investor, positive equity market returns bore no reflection of underlying ubiquitous strife. "Gravitational" forces associated with higher interest rates pulled down disposable incomes, inflation rates, house prices and overall economic activity. The weight of increasing protectionism and escalating geopolitical tensions constrained global trade and investment. Consumer credit creaked under pressure from increasing financing costs. Government balance sheets, bloated over decades by the grotesque largesse of printed money, buckled under similar dynamics. Gravity also finally caught up with fiscal spending, cutting budgets as future funding costs became prohibitive. Confronted by such realism it might appear incredible for global equity markets to anticipate amelioration amongst such angst. Yet against any rational expectations that is exactly what happened. Towards the year end, markets hastily equated positive policy statements suggesting an end to monetary tightening with unquestioning acceptance of imminent interest rate reductions. Surging global bond and equity markets reflected this temporary shift in sentiment, but such simplistic causational logic implies "laws of inevitable consequences" that need not materialise in practice.

Deep down, do global equity markets really believe speculative excesses accumulated over decades can be painlessly erased by simply reigniting credit growth? Such naivety beggars belief. Superficially, declining inflationary trends witnessed throughout the Developed World in 2023 undoubtably generated widespread complacency. Financial market participants were desperate to believe policymakers had successfully conquered inflation. Yet scratching below the surface revealed a seismic shift in global protectionism, wage expectations, immobility of labour, debt-servicing dynamics plus a host of additional rigidities to effective free market pricing. Short-term respite in food and energy costs temporarily tempered the tourniquet on consumer purchasing power but no evidence emerged of a sustainable end to pricing pressures. For an investment generation nurtured on global disinflation for the past twenty years, accepting the inevitable end to such favourable circumstances was never going to be easy. Such misplaced market euphoria towards the year end was testimony to that.

Decelerating economic activity dominated most global economies over the period. Personal consumption bore the brunt of the higher interest rate environment. Dwindling savings, combined with soaring mortgage and debt costs dramatically reduced disposable incomes. Economic growth was constantly constrained, although outright contractions (recessions) were miraculously avoided by remarkable resilience in labour markets. "Hoarding" labour until painful retention costs become too acute is nothing new in economic history. When the painful contraction begins, the dramatic rise in redundancies is invariably more pronounced. Should the events of previous business cycles repeat themselves, then higher unemployment throughout 2024 looks inevitable. Bond markets generally endured a torrid twelve months against a backdrop of constantly rising interest rates. On course for a third consecutive year of negative returns, until the fourth quarter rally restored some semblance of respectability, an obvious irony escaped most investors' attention. Mountainous, unsustainable debt liabilities in the Developed World suggest neither inflation nor interest rates will continue as the predominant influence over future bond market pricing. Absent their buyer of last resort, (Governments) - solely culpable in distorting bond yields over the past twenty years - the price of future debt (bonds) becomes hostage to unforgiving market forces. Enormous excess supply and deteriorating credit-worthiness of issuers is a toxic, unpalatable cocktail for such historically "low risk" assets to swallow. Like it or not, deteriorating asset quality remains the single most unquantifiable "skeleton" still lurking in the cupboard of recent interest rate tightening. Uncovering such bones of bankrupt businesses suggests additional grim realities for markets to digest.

As the Western World waits for "Godot", financial fundamentals elsewhere paint a very different picture. Unburdened by aging demographics, excessive systemic debt and free to benefit from prudent, long-term orthodox economics, the Developing World evolves without its delusions and the psychological baggage of false entitlement. Most of all, from an investment perspective, modest expectations are achievable. Lessons learned throughout Asia and Latin America over many decades suggest a healthy aversion to banking risk, credit risk, corporate leverage and dollar dependency. International risk appetite towards most Emerging Market assets remained largely indifferent last year, impaired by high profile problems emanating from China and geopolitical tensions impacting currencies. Positive sentiment towards the asset class remained a scarce commodity as investors were generally rewarded in passive investment vehicles. Yet numerous historical examples exist where such complacency can rapidly change. The catalyst invariably emerges unexpectedly, but escalating concerns over increasingly narrow, excessively valued stockmarkets in the Developed World may prove the decisive factor this time.

Trying to make sense of financial markets is always problematic. The gravity defying antics of the past twelve months present cognitive contradictions for even the most seasoned rational investors. That global financial fundamentals are always open to a variety of interpretations is irrefutable, but the sense of wishful thinking that permeated the so called current consensus by the year end has seldom been so acute. Expectations and reality deviated markedly, never a comfortable combination when the weight of history suggests otherwise.

Global Review

With populist politicians throughout the Developed World scrambling to take credit for "the halving" of inflation during the period, it seemed extraordinary that dissenting voices did not assert the blatantly obvious. Politicians took no blame for causing the re-emergence of inflation since 2021, so how could they claim credence for containing it! Such crass contentions featured prominently in political rhetoric, as did contradictory communications from policymakers. Central Banks preached tough inflation-fighting credentials with commitment to interest rate rises, but not one admitted responsibility for causing inflation in the first place. Printing money before and during the Covid pandemic unequivocally fuelled the resurgence of inflation. As the world witnessed money in circulation turn negative for only the second time in forty years, inflation seemed to be miraculously tamed! Yet again, deception and deceit dominated public debate with the inevitable erosion of trust.

Events evolving in the United States over the past twelve months emphasised the familiar ongoing polarisation between reality and delusion. Whilst Main Street muddled through the malaise associated with contracting purchasing power and deteriorating living standards, Wall Street fantasised over history repeating itself: in essence, a year of division between fundamentals and froth. The former confronted numerous hurdles instantly recognisable as direct consequences of the rising interest rate environment. Declining property prices and potentially rising credit delinquencies cast a dark shadow over consumer confidence. More ominously, irresponsible balance sheet management by commercial banks exposed just how fragile financial stability invariably can be to sharply rising bond yields. Depositor panic ensued. The spectacle of queues outside branches returned, emphasising the vulnerability of the US banking system following years of gratuitous excess. Quickly brushed under the carpet, the US Central Bank deployed its classic Pavlovian responses: more money printing and aggressive arm twisting to "ensure" rescue bids were forthcoming. Stability was grudgingly restored, but not before three of the five largest bank failures in history had occurred. Most worrisome of all, financial markets barely batted an eye. Drowning in debt and stagnating without stimulus, the US economy constantly buckled during the period. Seemingly what mattered most to investors was that it did not quite break - at least not yet! Superficially freed from facing fundamental facts, financial markets frothed with anticipation of better times ahead. Sharply declining bond yields from October 2023 onwards were interpreted by equity markets that nirvana lay ahead. By the year end surging US stock prices had priced in numerous imminent interest rate cuts, no economic recession, double-digit profit growth for 2024 and inflation dead and buried! In the absence of such perfection materialising, suffice to say great scope exists for disappointment in the outlook for US financial assets over the medium term.

For European financial markets, similar dynamics between current fundamentals and future expectations dragged investor sentiment across polar extremes of the mood spectrum. Growth-wise, most European economies certainly provided little to cheer about. Germany just managed to dodge outright recession, France stagnated at virtually zero GDP growth all year, and Italy endured decelerating economic momentum throughout. On the periphery, Spain managed a modicum of growth, but the Celtic Tiger of Ireland suffered spectacular contractions in activity following many years of being Europe's poster child. Yet despite such depressing domestic economic fundamentals, investment opportunities initiated since the darkest days of Covid continued to perform well. High quality industrial companies, leading global energy providers and conservatively managed financials feature prominently amongst Europe's corporate titans. Unburdened by unrealistic expectations, often overlooked by prejudiced perceptions, such European exposures contributed significantly (again) to overall performance and total return. Conversely, numerous structural and cyclical frailties continued to erode investors' confidence in the UK. Popular acclamations that "the market was cheap" and "the market's attractive defensive nature and dividend paying culture" fell on deaf ears. Yet again UK equities failed to match the performance and growth opportunities found elsewhere in the world. Outwith the confines of the City of London this should come as no surprise. Losing its status as a centre for raising capital, be it by constant political instability in Westminster, the Brexit debacle, pension fund diversification, increased red tape or whatever, the relentless malaise continues. Regardless of whatever the prime factors of disillusionment are, the hard facts depict a beleaguered, shrinking market plagued with constant outflows now reduced to a total market capitalisation less than US technology giant, Apple (which also continues to defy gravity as its market cap reaches £2.3 trillion!). Twenty years ago 40% of the portfolio assets were in UK equities: by the end of 2023 this figure was just 4%. Given current UK investment opportunities for global growth and income objectives remain constantly surpassed by what is available elsewhere, this current position is unlikely to change any time soon.

Conversely, prospects brightened for numerous developing nations throughout the Developing World. Economic orthodoxy, firmly established by proactive policy initiatives in response to Covid related dislocations, began to bear fruit. Given the superior quality of Government and household balance sheets, Central Banks and policymakers across Asia and Latin America remained credible entities comfortably in control of current circumstances. As pricing pressures abated, relief from belt-tightening began. Both Brazil and Chile cut interest rates during 2023. Korea, Indonesia, India and Mexico witnessed inflation rates falling back to below targeted levels, suggesting evolving fundamentals firmly supportive of imminent rate cuts in these nations too. As always, individual market performance varied significantly across the Developing World over the twelve months. For the tenth time in twenty years, Latin America delivered the strongest performance of any global region! Constantly underappreciated by the wider global investor audience blinkered by aversion, apathy and animosity, such ill-informed scepticism remains baffling. From a self-interested portfolio perspective, long may this continue, with superior growth and dividend opportunities, not to mention diversification benefits, positively contributing to delivering the investment mandate. Elsewhere, whilst fundamentals in Asia also improved, the one noticeable exception was China. Suffering from fragile confidence and negative property prices, Asia's largest economy struggled to shrug off its post Covid hangover. With inflation periodically flirting with negative rates (deflation) concerns were expressed that Chinese fundamentals were turning "Japanese". Whilst Japanese history shows just how destructive a deflationary mindset can impact a consumer economy, it is premature to resign China to such a fate just yet. The Government's measures to stimulate policies to positively impact Chinese growth, are gaining momentum, but the world will watch future developments with more than a modicum of trepidation.

Performance

The NAV total return for the year to 31 December 2023 with net dividends reinvested was +8.6%. This compared with the Reference Index (FTSE All World) total return of 15.7%. The top five and bottom five stock contributors are detailed below:

Over the full financial year, the 8.6% NAV total return was welcomed, marking a return to real growth given the moderating UK Retail Prices inflation rate of 5.2%. Whereas overall global equity index strength tended to be extremely concentrated in just a handful of large US technology stocks, the portfolio's positive performance in total return terms was spread across numerous regions, sectors and businesses. For the second consecutive year, Latin America delivered by far the strongest regional index returns. This was partially reflected in portfolio returns with a +16% contribution to overall total return from the region. Whilst mining exposures to iron ore and lithium in Brazil and Chile struggled to make much progress in a world of falling commodity prices, consumer focused businesses such as Grupo Asur, Kimberly Clark de Mexico, Walmex and Banco Bradesco all performed strongly. The strongest regional portfolio performance was recorded from Europe with a +22% total return from the diversified asset exposure. A combination of strong earnings and dividend growth relative to muted expectations provided the impetus for above average returns from Swedish industrials Epiroc and Atlas Copco, German conglomerate Siemens, Italian electric utility Enel and BE Semiconductor in the Netherlands. In what proved to be a particularly profitable period for European exposures, only Swiss pharmaceutical company Roche lost any noticeable value.

Less impressive, yet still positive, total returns were also delivered by North American and Asian exposures. The majority of holdings in the United States contributed positively to total returns, with the portfolio's largest holding, technology giant Broadcom, being the standout performer. Unfortunately negative absolute performance from Canadian holdings constrained overall regional performance. Severely constrained by negative sentiment towards China (where existing portfolio holdings suffered yet another turbulent year), exposures to Asia ex Japan experienced the brunt of negative sentiment despite relatively robust fundamentals. A total return of just +3% was heavily skewed towards income contributions from holdings in Singapore, Thailand and Australia with only Samsung Electronics in South Korea and GlobalWafers in Taiwan contributing any meaningful capital performance. Whilst the UK equity market delivered a positive return over the twelve month period, the three UK portfolio holdings confronted tough operating conditions which proved punitive to overall performance and contributions. Lastly the residual Emerging Market Bond exposures witnessed the full brunt of Sterling's strength but still managed a positive +3% return for the year as bond markets rallied towards the year end. With a current running yield of 8.2% and many holdings still priced below par, it is expected that current exposures will be maintained.

Predicting dividend income over the financial year proved relatively straightforward notwithstanding the usual difficulties associated with accurately estimating dividends from cyclical businesses involved in energy, commodities and technology. Whilst positive cash flows on which dividends depend are arithmetically uncomplicated to identify, the "willingness to pay" remains very much in the hands of the pursekeeper. Thankfully the majority of holdings did not disappoint. Dividend increases from portfolio holdings generally matched conservative estimates, with 80% falling into this category. Over the period the net effect from positive surprises (Oversea-Chinese Bank Corp, Grupo Asur, Tryg Insurance) versus negative surprises (BE Semiconductor, Sociedad Quimica Y Minera) was negligible. Overall gross income accrued marginally increased year-on-year, with earnings per share growth of +1.7% reflecting fewer shares outstanding than the previous period.

Attribution Analysis

The attribution analysis below details the various influences on portfolio performance. In summary, of the 530 basis points (before expenses) of performance below the Reference Index, asset allocation detracted 130 basis points and stock selection detracted 400 basis points. Structural effects, relating to the fixed income portfolio and gearing net of borrowing costs, added 20 basis points of relative performance.

Portfolio Activity

Portfolio turnover of 7% of gross assets over the period continued its recent decline to more normal levels. In a year when extended price distortions seldom prevailed, the lack of volatility in global markets limited new investment opportunities. Choosing to repay a £60m fixed rate loan that matured on 31 May 2023 reduced the overall level of outstanding loans to £140 million. Borrowing rates above 6% were deemed too expensive for five year equity gearing and hence not in our shareholders' best interests. This translated into gross asset exposure as a percentage of total exposure declining to 108% from 111%. Consequently overall equity gearing declined from 103% to 101% over the period. 

European exposure witnessed a reduction in investment at the transaction level with profit taking in Swedish industrials Epiroc and Atlas Copco plus the outright sale of Swedish bank Nordea only partially offset by the new purchase of the French global drinks manufacturer Pernod Ricard. It is worth noting, however, that total gross asset exposure to Europe actually increased over the period due to strong European stock performance. In the UK, the proceeds from the outright sale of Vodafone were reinvested very gradually in a new position in Diageo, another leading global drinks distributor but with a distinctly different product portfolio and market focus than its French counterpart. Overall UK exposure declined to its lowest level in over four decades based on adjudged better growth and income opportunities elsewhere in the world. Finally within Developed Markets, portfolio activity in the North American region was extremely muted. Close to 1% of gross assets was raised from top-slicing Broadcom as exceptionally strong stock performance kept pushing the portfolio's largest holding above the 5% maximum investment guideline for any one position. Periodic weakness in global pharmaceuticals provided the opportunity to reinvest some of this cash into building up the existing position in leading global pharmaceutical company, Merck.

Portfolio activity in Developing Markets reflected changes in relative valuations and stock preferences. Overall Asian exposure declined slightly, featuring outright sales of Taiwan Mobile and Lotus Retail in Thailand coupled with the exit of MTN Corp in South Africa. All three divestments were prompted by rising concerns over the sustainability of future dividend growth. One new holding was established in Asia with the purchase of Hong Kong Exchanges, one of the world's leading securities trading companies. As regards Latin America, proceeds raised from profit taking in Grupo Asur in Mexico, to keep the holding size below 5%, and the outright sale of Kimberly Clark de Mexico, a long-term holding deemed to be more than fully valued, were reinvested in a new position in Walmex, a leading multi merchandise retailer in Mexico 70% owned by US Walmart. Finally, exposure to Emerging Market Bonds was marginally reduced with the outright sales of Ecuadorian Government Bonds due to a restructuring tender of the country's debt.

From an overall investment perspective, the emphasis continues to favour diversified asset exposures in companies deemed to be beneficiaries of the evolving backdrop, maintaining a "barbell" strategy of owning both growth and cyclical stocks. Selective growth companies, where yields tend to be lower, should continue to benefit from accelerating trends in industrial automation, semiconductor miniaturisation and digital communications. The greatest potential for positive cyclical momentum upside surprises can still be identified in Asia and other countries where substantial infrastructure spending and pent up consumer demand exist. Corporate earnings may be under recessionary threat in many parts of the world, but upwards earnings and dividend revisions in Latin America and Asia will likely emerge as domestic interest rates decline. In such regions, sectors and businesses the portfolio remainsmeaningfully invested.

Summary of Investment Changes During the Year

Outlook

Forty years of relentlessly rising bond markets up until 2020 suggests very few current investment practitioners can lay claim to having witnessed a bear market in bonds. At least not in the Developed World. But even Sir Isaac Newton would not argue that the force that pulled yields downwards for four decades was in any way gravitational. The explanation here is more straightforward, the answer to be found in the abhorrent practice of printing money rather than the pages of a quantum physics textbook! Now, as every discredited Central Bank in the Developed World moves centre stage again in what financial markets currently view as crunch time for policy "leadership", expectations are sky high. Having reacquainted themselves with the most intoxicating financial stimulant of all - hope - equity markets expect nothing less than recent history repeating itself. Such naivety simply inflates expectations without recourse to reality.

Throughout 2023 the compulsion to hang firmly onto the belief in a return to the 2% 'inflationary mean' of the past decade remained all consuming. Such a delusion was not confined to just financial markets and investors either. Central Bankers in the Developed World remained evangelical in their unwavering commitment towards 'returning to the 2% trend'. Perhaps even more incredulously, the widespread belief persisted that this would be engineered without causing economic recessions, without raising unemployment, without deteriorating asset quality and without financial dislocations despite the previous decade of misappropriate capital allocation. The harsh reality is an evolving economic and financial backdrop in which a 2% target remains totally unrealistic short of orchestrating enormous economic pain and suffering. Political practicalities of general elections across the globe in 2024 are unlikely to entertain even the thought!

Meanwhile the sheer magnitude of leverage in the Developed World's Government sector drives over-extended balance sheets towards breaking point, leaving Central Banks paralysed due to dwindling policy options. Such enormous leverage exposes maturing bonds to be priced by markets, where real rates of return are essential. Any compromise or attempted fudge on inflation targeting is likely to send yields spiking higher regardless of movements in short rates. Despite the market euphoria of late 2023, the transition from printing money to prudent money remains the single most important, and necessary, change to monetary conditions going forward. The money supply contractions currently being witnessed in major global economies suggest the process is already under way. Such practice has broad implications for long-term equity multiples (lower), prevailing bond yields (higher) and optimal stock selection. It is reasonable to assume equity valuations adjust to reflect real tangible value ascribed to profitability, cash flows and dividends. The implications might be lower overall returns from financial assets for the next decade simply because risk-based assets would need to compete with the not-yet-recognised costs of the stunning rise in government debt. The practicalities of securing positive real returns in such an environment could prove demanding, but through focusing on quality, real assets and broad global and sector diversification the Company maintains the flexibility to achieve its investment objectives.

abrdn Investments Limited 29 February 2024

The Manager's Investment Process

The Company's Alternative Investment Fund Manager is abrdn Fund Managers Limited ("aFML") which is authorised and regulated by the Financial Conduct Authority. Day-to-day management of the portfolio is delegated to abrdn Investments Limited ("aIL"). aIL and aFML are collectively referred to as the "Investment Manager" or the "Manager". The ultimate parent of aIL and aFML is abrdn plc. The management team comprises Bruce Stout, Martin Connaghan and Samantha Fitzpatrick who form part of abrdn's 16 strong income team (or 'pod') providing investment strategies that aim to provide premium, sustainable yields and strong risk-adjusted total returns driven through investing in equities.

The Manager is dedicated to finding compelling investment opportunities across the world through first-hand, forward-looking, fundamental research.

By rigorously assessing companies on their business model, sustainability and competitive advantage, the Manager seeks out the current and potential leaders and innovators in their industries, which can help deliver long-term returns for investors. The Manager aims to identify performance drivers that are not yet understood by the market and are mispriced - or spot imminent change that is set to transform a company's prospects.

As well as delivering a financial return, the Manager is committed to using equity investment and corporate engagement to make a positive difference to society and the wider world. The Manager actively engages with companies to raise standards of environmental, social and governance practice (ESG) - and identify those companies leading the global transition to net zero carbon emissions.

The Investment Process, Philosophy and Style

Idea Generation

When searching for investments for the Company's portfolio, the management team benefits from the insights and ideas from the Manager's c.60-strong Developed Markets Equity division and Global Emerging Market and Asian Equity teams, and cross-asset class insights from conversations held between the management team and other teams such as Credit, Real Estate, Multi-Asset, Quant and Risk as well as the macro-economic research from the abrdn Research Institute.

Analyst recommendations on every stock under coverage are quantitively measured, recognising company insights are a critical component of alpha generation in portfolios over time.

The Manager's reputation as a responsible long-term investor in these markets means that the management team has first-rate access to the companies under research. Through structured meetings and regular conversations, the Manager gathers insights from both executive management teams and non-executive directors.

Research

To leverage fully the benefits of the Manager's considerable research resource, the management team uses a common investment language and research framework that structures how the Manager expresses its thinking on companies. This facilitates the effective and unambiguous articulation of research insights. The Manager has also developed a proprietary research platform used by all its Equity, Credit and ESG teams. This gives instant access to research globally. The analysts are supported by a number of other proprietary tools and ongoing improvements and refinements that are made to the research. The company research focuses on three key pillars:

Putting quality first. To ensure proper context when completing company research, the Manager captures key business fundamentals through the lens of its quality assessment, using its five aspects of quality. The Manager looks to uncover strong business models, clear competitive advantages, and industry leaders and innovators. In short, business quality is established first. A quality score ('Q score') is given to every company under coverage from one to five (where a score of one denotes the highest quality and a score of five, the lowest), both at an overall level and on five distinct criteria: (i) financials; (ii) business model and moat; (iii) management; (iv) industry background; and (v) ESG. Assessing quality will determine if the Manager believes a company is appropriate for investment, and the view of changing dynamics and the company's valuation drive the timing of that investment.

Always looking forward. The Manager aims to understand what lies ahead for the business and the factors that will determine corporate value over time. By understanding what is changing, both in terms of the fundamentals of a business and market sentiment towards it, the Manager ensures it is always well positioned for the future. This means that opportunities for outperformance can be found where there is a mismatch between consensus and the Manager's own analysis.

Valuation. Having understood the foundations of the business and how key drivers are changing, the Manager focuses on valuing the company's shares. The aim being to understand what the equity market is pricing in (both in terms of the expected earnings trajectory and what valuation multiples reveal about how the market is thinking), and then the Manager builds its own assessment of how the stock should be priced based on its fundamental insights. The Manager uses a wide range of valuation techniques and metrics in order to gauge the upside potential, as well as to evaluate potential downside scenarios.

Integrated ESG and Climate Change Analysis

Whilst ESG factors are not the over-riding criteria in relation to the investment decisions taken by the management team for the Company, significant attention is given to ESG and climate related factors throughout the investment process. The primary goal is to generate the best long-term outcomes possible for the Company. By embedding ESG analysis into the active equity investment process the Manager aims to enhance potential value for shareholders, reducing risk and investing in companies that can contribute positively to the world. As well as better-informed investment decisions the Company also benefits from active ownership of its assets.

In the Manager's view, companies that successfully manage climate change risks will perform better in the long term. It is important that the Manager assesses the financial implications of material climate change risks across all asset classes, including real assets, to make portfolios more resilient to climate risk.

The detailed analysis of the Manager's embedded ESG process is contained on pages 114 to 116.

Peer Review

Having a common investment language facilitates effective communication and comparison of investment ideas through peer review which is a critical part of the process. All investment ideas are subject to rigorous peer review, both at regular meetings and on an ad hoc basis - and all team members debate stocks and meet companies from all industries.

Portfolio Construction/Risk Controls

Portfolios are built from the bottom up, prioritising high conviction stock ideas in a risk aware framework, giving clients access to the best investment ideas. Portfolio risk budgets are derived from clients' investment objectives and required outcomes. Peer review is an essential component of the construction process with dedicated portfolio construction pods (smaller dedicated groups of senior team members that have clear accountability for the strategy) debating stock holdings, portfolio structure and risk profiles.

As an active equity investor the Manager has adopted a principled portfolio construction process which actively takes appropriate and intentional risk to drive returns. The largest component of the active risk will be stock-specific risk, along with appropriate levels of diversification. Risk systems monitor and analyse risk exposures across multiple perspectives breaking down the risk within the portfolio by industry and country factors, by currency and macro factors, and by other fundamental factors (quality, momentum, etc). Consideration of risk starts at the stock level with the rigorous company research helping the Manager to avoid stock specific errors. The Manager ensures that any sector or country risk is appropriately sized and managed relative to the overall objectives of the Company.

Operational Risk and Independent Governance Oversight

Risk management is an integral part of the Manager's management process and portfolios built by the Portfolio Managers are formally reviewed on a regular basis with the Manager's Global Head of Equities, the Manager's Investment Governance & Oversight Team (IGO) and members of the Manager's Investment Risk Team. This third party oversight both monitors portfolio risk and also oversees operational risk to ensure client objectives are met.

Delivering the Investment Policy

Day-to-day management of the Company's assets has been delegated to the Manager. The Manager invests in a diversified range of international companies and securities in accordance with the investment objective.

The management team comprises Bruce Stout, Martin Connaghan and Samantha Fitzpatrick. The team utilises a "Global Coverage List", which is constructed by each of the specialist country management teams. This list contains all buy (and hold) recommendations, which are then used by the portfolio managers as the Company's investment universe. From this pool of companies, the management team looks to construct a focused portfolio of 40 - 60 companies, selecting companies with the most attractive quality and valuation characteristics, offering the best expected risk-adjusted returns within a diversified portfolio. There is a barbell approach to balancing the positioning in the portfolio. In delivering the investment objective, there is a need for exposure to companies with high dividend yields, where the management team will be scrutinising characteristics including dividend growth, dividend cover, free cash flows and balance sheet strength. There is also a desire for exposure to businesses where the absolute level of dividend yield may be lower but where the opportunity for growth in the dividend and capital via the share price may be higher. Continuous analysis of revenue forecasts and current revenue positioning by the management team allows for accurate insights into the appropriate allocation. Top-down investment factors are secondary in the portfolio construction process, with stock diversification rather than formal controls guiding stock and sector weights. Market capitalisation is not a primary concern.

In addition to equity exposures, the investment mandate provides the flexibility to invest in fixed income securities. The process of identifying, selecting and monitoring both sovereign and corporate bonds follows exactly the same structure and methodology as that for equity investment, fully utilising the global investment resources of the Manager. As in the case of equity exposure, the total amount, geographical preference, sector bias and specific securities will ultimately depend upon relative valuation and future prospects.

At the year end, the Company's portfolio consisted of 49 equity and 14 bond/preference share holdings. The Manager is authorised by the Board to hold between 45 and 150 holdings in the portfolio. A comprehensive analysis of the Company's portfolio is disclosed on pages 40 to 47 of the published Annual Report and Financial Statements for the year ended 31 December 2023 including a description of the ten largest investments, the portfolio of investments by value and a sector and geographical analysis of investments. The portfolio attribution analysis is on page 16 of the published Annual Report and Financial Statements for the year ended 31 December 2023.

abrdn Investments Limited

29 February 2024

Key Performance Indicators (KPIs)

The Board uses a number of financial and operating performance measures to assess the Company's success in achieving its investment objective and to determine the progress of the Company in pursuing its investment policy. The main KPIs (refer to glossary on page 120 of the published Annual Report and Financial Statements for the year ended 31 December 2023 for definitions) identified by the Board in relation to the Company which are considered at each Board meeting are as follows:

Performance Track Record

Total Return

Ten Year Financial Record

Investment Objective and Investment Policy

Investment trusts, such as the Company, are long-term investment vehicles. Typically, investment trusts are externally managed, have no employees, and are overseen by an independent non-executive board of directors. Your Company's Board of Directors sets the investment mandate, monitors the performance of all service providers (including the Manager) and is responsible for reviewing strategy on a regular basis. All of this is done with the aim of preserving and enhancing shareholder value over the longer term.

Reference Index

The Company does not have a Benchmark. However, performance is considered against a number of measures including a Reference Index, the FTSE All World TR Index, which was adopted in April 2020. Given the composition of the portfolio and the Manager's investment process, it is likely that the Company's investment performance may diverge, possibly significantly, from this Reference Index. Longer term performance is measured against a blend of the old composite Benchmark (40% of the FTSE World UK Index and 60% of the FTSE World ex-UK Index) up to 27 April 2020 and the FTSE All World TR Index thereafter.

Investment Objective

The aim of the Company is to achieve an above average dividend yield, with long-term growth in dividends and capital ahead of inflation, by investing principally in global equities.

Investment Policy

There are a number of elements set out in the investment policy delegated to the Manager which are set out below:

Asset Allocation

The Company's assets are currently invested in a diversified portfolio of international equities and fixed income securities spread across a range of industries and economies. The Company's investment policy is flexible and it may, from time to time, hold other securities including (but not limited to) index-linked securities, convertible securities, preference shares, unlisted securities, depositary receipts and other equity-related securities. The Company may invest in derivatives for the purposes of efficient portfolio management in the furtherance of its investment objective.

The Company's investment policy does not impose any geographical, sectoral or industrial constraints upon the Manager. The Board has set guidelines which the Manager is required to work within. It is the investment policy of the Company to invest no more than 15% of its gross assets in other listed investment companies (including listed investment trusts), at the time of purchase. The Company currently does not have any investments in other investment companies. The Manager is authorised to enter into stocklending contracts and the Company undertakes limited stocklending activity.

Risk Diversification

The Manager actively monitors the Company's portfolio and attempts to mitigate risk primarily through diversification. The Company is permitted to invest up to 15% of its investments by value in any single holding (at the time of purchase) although, typically, individual investments do not exceed 5% of the total portfolio.

Gearing

The Board considers that returns to shareholders can be enhanced by the judicious use of borrowing. The Board is responsible for the level of gearing in the Company and reviews the position on a regular basis. Any borrowing, except for short-term liquidity purposes, is used for investment purposes or to fund the purchase of the Company's own shares.

Total gearing will not in normal circumstances exceed 30% of net assets with cash deposits netted against the level of borrowings. At the year end, there was net gearing of 8.0% (calculated in accordance with Association of Investment Companies guidance). Particular care is taken to ensure that any bank covenants permit maximum flexibility in investment policy.

Changes to Investment Policy

Any material change to the investment policy will require the approval of the shareholders by way of an ordinary resolution at a general meeting.

Ten Largest Investments

As at 31 December 2023

List of Investments

Summary of Net Assets

Sector/Geographical Analysis

Directors' Report

The Directors present their report and the audited financial statements for the year ended 31 December 2023.

Results and Dividends

Details of the Company's results and proposed dividend are shown on pages 8 and 9 of the published Annual Report and Financial Statements for the year ended 31 December 2023.

Investment Trust Status

The Company is registered as a public limited company (registered in Scotland No. SC006705) and 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 January 2012. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 December 2023 so as to enable it to comply with the ongoing requirements for investment trust status.

Individual Savings Accounts

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.

Share Capital

The Company's capital structure is summarised in note 14 to the financial statements. On 24 April 2023, the Company confirmed the completion of the sub-division of the Ordinary shares of 25 pence each into new Ordinary shares of 5 pence each on a five for one basis which had been approved by shareholders at the Company's AGM held on 21 April 2023. The new Ordinary shares of 5p continue to be listed and trading on the London Stock Exchange, albeit under a new ISIN and SEDOL, as follows:

New ISIN: GB00BQZCCB79

New SEDOL: BQZCCB7

The ticker for the New Ordinary Shares remained the same (MYI).

At 31 December 2023, there were 620,866,332 fully paid Ordinary shares of 5p each (2022 - 625,064,465 Ordinary shares - restated for subdivision) in issue. At the year end there were 26,193,683 (2022 - 21,995,550 - restated for subdivision) Ordinary shares held in Treasury.

During the year 5,248,133 Ordinary shares were bought back for Treasury representing 0.8% of the Company's total issued share capital (2022 - 4,244,815 Ordinary shares - restated). Further details on buybacks are provided in note 14 to the financial statements. In addition, 1,050,000 Ordinary shares were sold from Treasury at a premium to NAV (2022 - nil).

Share Rights

Ordinary shareholders are entitled to vote on all resolutions which are proposed at general meetings of the Company. The Ordinary shares carry a right to receive dividends and, 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.

Management and Secretarial Arrangements

The Company has appointed abrdn Fund Managers Limited ("aFML"), a wholly owned subsidiary of abrdn plc, as its alternative investment fund manager under the terms of an investment management agreement dated 14 July 2014 (as amended). Under the terms of the agreement, the Company's portfolio is managed by abrdn Investments Limited ("aIL") by way of a group delegation agreement in place between aFML and aIL. Investment management services are provided to the Company by aFML. Company secretarial, accounting and administrative services have been delegated by aFML to abrdn Holdings Limited.

The management fee is charged at the rate of 0.5% per annum of Net Assets up to £500m and 0.4% per annum of Net Assets above £500m. In addition, a fee of 1.5% per annum remains chargeable on the value of any unlisted investments. The investment management fee is chargeable 30% against revenue and 70% against realised capital reserves in line with the Board's long-term expectation of returns from revenue and capital. No fees are charged in the case of investments managed or advised by the abrdn Group.

The management agreement may be terminated by either party on the expiry of six months' written notice. On termination, the Manager would be entitled to receive fees which would otherwise have been due up to that date.

The Board considers the continued appointment of the Manager on the terms agreed to be in the interests of the shareholders as a whole because the abrdn Group has the investment management, secretarial, promotional and administrative skills and expertise required for the effective operation of the Company.

The Board

The Board currently consists of six non-executive Directors.

The names and biographies of the current Directors are disclosed on pages 50 to 52 of the published Annual Report and Financial Statements for the year ended 31 December 2023 indicating their range of experience as well as length of service. Mr Eckersley was appointed to the Board on 1 May 2023 and Ms Colquhoun was appointed to the Board on 1 September 2023.

All Directors will retire at the AGM in April 2024 and, with the exception of Mr Eckersley and Ms Colquhoun, each Director will stand for re-election (with Mr Eckersley and Ms Colquhoun both standing for election). 

The Board considers that there is a balance of skills and experience within the Board relevant to the leadership and direction of the Company and that all the Directors contribute effectively. The reasons for the re-election or election of the individual Directors are set out on pages 50 to 52 of the published Annual Report and Financial Statements for the year ended 31 December 2023.

Board Diversity

As indicated in the Strategic Report, 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 it to fulfil its obligations. The Board also recognises the benefits and is supportive of, and will give due regard to, the principle of diversity in its recruitment of new Board members. The Board will not display any bias for age, gender, race, sexual orientation, socio-economic background, religion, ethnic or national origins or disability in considering the appointment of Directors. The Board will continue to ensure that all appointments are made on the basis of merit against the specification prepared for each appointment. The Board takes account of the targets set out in the FCA's Listing Rules, which are set out below.

As an externally managed investment company, the Board employs no executive staff, and therefore does not have a chief executive officer (CEO) or a chief financial officer (CFO)- both of which are deemed senior board positions by the FCA. However, the Board considers the Chair of the Audit and Risk Committee to be a senior board position and the following disclosure is made on this basis. Other senior board positions recognised by the FCA are chair of the board and senior independent director (SID). In addition, the Board has resolved that the Company's year end date be the most appropriate date for disclosure purposes.

The following information has been voluntarily disclosed by each Director and is correct as at 31 December 2023. The Board confirms that the Company is in compliance with the recommendations of the Parker Review on diversity in the UK boardroom.

1. Meets target that at least 40% of Directors are women as set out in LR 9.8.6R (9)(a)(i).2. Meets target that at least one Director is from a minority ethnic background as set out in LR 9.8.6R (9)(a)(iii).

The Role of the Chair and Senior Independent Director

The Chair of the Company 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 Chair facilitates the effective contribution, and encourages active engagement, by each Director. In conjunction with the Company Secretary, the Chair ensures that Directors receive accurate, timely and clear information to assist them with effective decision-making. The Chair leads the evaluation of the Board and individual Directors, and acts upon the results of the evaluation process by recognising strengths and addressing any weaknesses. The Chair also engages with major shareholders and ensures that all Directors understand shareholder views.

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

Management of Conflicts of Interest

No Director has a service contract with the Company although Directors are issued with letters of appointment upon appointment. The Directors' interests in contractual arrangements with the Company are as shown in note 21 to the financial statements and the Directors' Remuneration Report. No Directors had any other interest in contracts with the Company during the period or subsequently. 

The Board has a procedure in place to deal with a situation where a Director has a conflict of interest, as required by the Companies Act 2006. As part of this process, the Directors are required to disclose other positions held and all other conflict situations that may need to be authorised either in relation to the Director concerned or his or 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 their wider duties is affected. Each Director is required to notify the Company Secretary of any potential or actual conflict situations that will need authorising by the Board. Authorisations given by the Board are reviewed at each Board meeting. All proposed significant external appointments are also required to be approved, in advance, by the Chair and then communicated to other Directors for information.

The Company has a policy of conducting its business in an honest and ethical manner. The Company takes a zero tolerance approach to bribery and corruption and has procedures in place that are proportionate to the Company's circumstances to prevent them. The Manager also adopts a group-wide zero tolerance approach and has its own detailed policy and procedures in place to prevent bribery and corruption. Copies of the Manager's anti-bribery and corruption policies are available on its website.

In relation to the corporate offence of failing to prevent tax evasion, it is the Company's policy to conduct all 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 is committed to acting professionally, fairly and with integrity in all its business dealings and relationships. 

Corporate Governance

The Corporate Governance Statement forms part of the Directors' Report. The Company is committed to high standards of corporate governance. The Board is accountable to the Company's shareholders for good governance and this statement describes how the Company has applied the principles identified in the UK Corporate Governance Code as published in July 2018 (the "UK Code"), which is available on the Financial Reporting Council's (the "FRC") website: frc.org.uk.

The Board has also considered the principles and provisions of the AIC Code of Corporate Governance as published in February 2019 (the "AIC Code"). The AIC Code addresses the principles and provisions set out in the UK Code, as well as setting out additional provisions on issues that are of specific relevance to the Company. The AIC Code is available on the AIC's website: theaic.co.uk.

The Board considers that reporting against the principles and provisions of the AIC Code, which has been endorsed by the FRC, provides more relevant information to shareholders.

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

The UK Code includes provisions relating to:

- interaction with the workforce (provisions 2, 5 and 6);

- the role and responsibility of the chief executive (provisions 9 and 14);

- previous experience of the chair of a remuneration committee (provision 32); and

- executive directors' remuneration (provisions 33 and 36 to 40).

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. 

The full text of the Company's Corporate Governance Statement can be found on the Company's website, murray-intl.co.uk. The Board is cognisant of the recently published updated Corporate Governance Code 2024, effective for financial years commencing on or after 1 January 2025 and, during 2024, will consider any implications on operations and governance.

The table below details Directors' attendance at scheduled Board and Committee meetings held during the year ended 31 December 2023 (with eligibility to attend the relevant meeting in brackets). In addition there were a number of other ad hoc Board meetings held during the year.

Board Committees

Terms of Reference

The terms of reference of all the Board Committees may be found on the Company's website murray-intl.co.uk and copies are available from the Company Secretary upon request. The terms of reference are reviewed and re-assessed by the Board for their adequacy on anannual basis.

Audit and Risk Committee

The Report of the Audit and Risk Committee is on pages 65 and 66 of the published Annual Report and Financial Statements for the year ended 31 December 2023.

Management Engagement Committee ("MEC")

The MEC comprises all of the Directors and is chaired by Ms Holmes. The Committee reviews the performance of the Manager and its compliance with the terms of the management and secretarial agreement. The terms and conditions of the Manager's appointment, including an evaluation of fees, are reviewed by the Committee on an annual basis. The Committee believes that the continuing appointment of the Manager on the terms that havebeen agreed is in the interests of shareholders as a whole. The Committee is also responsible for the oversight and annual review of all other key service provider relationships.

Nomination Committee

All appointments to the Board of Directors are considered by the Nomination Committee which comprises the entire Board and is chaired by Ms Holmes. The Board's overriding priority in appointing new Directors to the Board is to identify the candidate with the best range of skills and experience to complement existing Directors. The Board also recognises the benefits of diversity and its policy on diversity is referred to in the Strategic Report on page 30 of the published Annual Report and Financial Statements for the year ended 31 December 2023. When Board positions become available as a result of retirement or resignation, the Company ensures that a diverse group of candidates is considered.

The Board's policy on tenure is that continuity and experience are considered to add significantly to the strength of the Board. The Board also takes the view that independence is not necessarily compromised by length of tenure on the Board. However, in compliance with the provisions of the AIC Code, it is expected that Directors will serve in accordance with the time limits laid down by the AIC Code. It is the policy of the Board that the Chair of the Company should retire once he or she has served as a Director for nine years in line with current best practice of the Financial Reporting Council. However there could be circumstances where it might be appropriate to ask a Chair to stay on for a limited period and in this case the reasons for the extension would be fully explained to shareholders and a timetable for the departure of the Chair clearly set out.

During the year the Board conducted separate searches for the appointment of Ms Colquhoun and Mr Eckersley using the services of Fletcher Jones and Longwater Partners respectively, both being independent external recruitment consultants that have no other connections or conflicts with the Company. 

The Committee has put in place the necessary procedures to conduct, on an annual basis, an appraisal of the Chair of the Board, Directors' individual self-evaluation and a performance evaluation of the Board as a whole. An external evaluation was undertaken during the year using the services of Lintstock, an independent external board evaluation service provider that does not have any other connections with the Company. This external evaluation included the completion of questionnaires covering the Board, individual Directors, the Chair and the Audit and Risk Committee Chair. The detailed findings were then considered by the Board and the Chair discussed the responses individually with each Director and the Senior Independent Director provided appraisal feedback to the Chair. 

In accordance with Principle 23 of the AIC's Code of Corporate Governance which recommends that all directors of investment companies should be subject to annual re-election by shareholders, all the members of the Board, will retire at the forthcoming Annual General Meeting and will offer themselves for re-election (Mr Eckersley and Ms Colquhoun will be offering themselves for election). The Committee has reviewed each of the proposed reappointments and concluded that each of the Directors has the requisite high level and range of business and financial experience and recommends their re-election at the forthcoming AGM. Details of the contributions provided by each Director during the year are disclosed on pages 50 and 52 of the published Annual Report and Financial Statements for the year ended 31 December 2023.

Remuneration Committee

The level of fees payable to Directors is considered by the Remuneration Committee which comprises the entire Board excluding the Chair who attends by invitation and which is chaired by Mr Melhuish.

The Company's remuneration policy is to set remuneration at a level to attract individuals of a calibre appropriate to the Company's future development. Further information on remuneration is disclosed in the Directors' Remuneration Report on pages 61 to 64 of the published Annual Report and Financial Statements for the year ended 31 December 2023.

Going Concern

The Directors have undertaken a robust review of the Company's viability (refer to statement on page 37 of the published Annual Report and Financial Statements for the year ended 31 December 2023) and ability to continue as a going concern and consider that there are no material uncertainties. The Company's assets consist of a diverse portfolio of listed equity shares and bonds. The equities and a majority of the bond portfolio are, in most circumstances, realisable within a very short timescale and the Company itself has a strong balance sheet with considerable levels of distributable reserves.

The Company has a £30 million fixed rate loan facility which is due to mature in May 2024. The Directors are currently reviewing options to replace the facility including the use of the Loan Note Shelf Facility. If acceptable terms are available, the Company expects to continue to access a similarly sized level of gearing. However, should the Board decide not to replace the facility, any maturing debt would be repaid through the proceeds of equity and/or bond sales.

The Directors are mindful of the principal risks and uncertainties disclosed on pages 35 and 36 of the published Annual Report and Financial Statements for the year ended 31 December 2023 and have reviewed forecasts detailing revenue and liabilities. Notwithstanding the continuing uncertain economic environment, the Directors believe that the Company has adequate financial resources to continue its operational existence for 12 months from the date of this Annual Report. Accordingly, the Directors continue to adopt the going concern basis in preparing these financial statements.

Accountability and Audit

Each Director confirms that, so far as he or she is aware, there is no relevant audit information of which the Company's auditor is unaware, and he or she has taken all the steps that they ought 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.

Independent Auditor

BDO LLP was appointed independent auditor to the Company with effect from the AGM on 27 April 2020. BDO LLP has expressed its willingness to continue to be the Company's independent auditor and a Resolution to re-appoint BDO LLP as the Company's auditor will be put to the forthcoming AGM, along with a separate Resolution to authorise the Directors to fix the auditor's remuneration.

Internal Controls and Risk Management

Details of the financial risk management policies and objectives relative to the use of financial instruments by the Company including information on exposure to price risk, credit risk, liquidity risk and cash flow risk are set out in note 18 to the financial statements. The Board of Directors is ultimately responsible for the Company's system of internal control and for reviewing its effectiveness. Following the Financial Reporting Council's publication of "Guidance on Risk Management, Internal Controls and Related Financial and Business Reporting" (the "FRC Guidance"), the Directors confirm that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place for the full year under review and up to the date of approval of the financial statements, and this process is regularly reviewed by the Board and accords with the relevant sections of the FRC Guidance.

The Board has reviewed the effectiveness of the system of internal control and, in particular, it has reviewed the process for identifying and evaluating the significant risks faced by the Company and the policies and procedures by which these risks are managed.

The Directors have delegated the investment management of the Company's assets to aFML within overall guidelines and this embraces implementation of the system of internal control, including financial, operational and compliance controls and risk management. Internal control systems are monitored and supported by aFML's internal audit function which undertakes periodic examination of business processes, including compliance with the terms of the management agreement, and ensures that recommendations to improve controls are implemented.

Risks are identified and documented through a risk management framework by each function within the Manager's activities. Risk is considered in the context of the FRC Guidance and includes financial, regulatory, market, operational and reputational risk. This helps the Manager's internal audit risk assessment model to identify those functions for review. Any relevant weaknesses identified through internal audit's review are reported to the Board and timetables are agreed for implementing improvements to systems, processes and controls. The implementation of any remedial action required is monitored and feedback provided to the Board.

The key components designed to provide effective internal control for the year under review and up to the date of this Report are outlined below:

- the Manager prepares forecasts and management accounts which allow the Board to assess the Company's activities and review its investment performance;

- the Board and Manager have agreed clearly defined investment criteria;

- there are specified levels of authority and exposure limits. Reports on these issues, including performance statistics and investment valuations, are regularly submitted to the Board. The Manager's investment process and financial analysis of the companies concerned include detailed appraisal and due diligence;

- as a matter of course the internal audit and compliance departments of aFML continually review the Manager's operations;

- written agreements are in place which specifically define the roles and responsibilities of the Manager and other third party service providers and monitoring reports are received from these providers when required;

- the Board has considered the need for an internal audit function but, because of the compliance and internal control systems in place at the Manager, has decided to place reliance on the Manager's systems and internal audit procedures; and

- twice a year, at its Board meetings, the Board carries out an assessment of the effectiveness of internal controls and risk management by considering documentation from the Manager, including its internal audit and compliance functions and taking account of events since the relevant period end.

In addition the Manager operates a 'three lines of defence' model over its activities with the abrdn business units responsible for adhering to applicable rules and regulations; the compliance team is then responsible for checking that the rules are being followed and then internal audit is responsible for independently reviewing these arrangements.

The Manager ensures that clearly documented contractual arrangements exist in respect of any activities that have been delegated to external professional organisations. The Board meets annually with representatives from BNY Mellon and reviews a control report covering the activities of the depositary and custodian. 

Representatives from the Internal Audit Department of the Manager report six monthly to the Audit and Risk Committee of the Company and have direct access to the Directors at any time.

The Board has reviewed the effectiveness of the Manager's system of internal control including its annual internal controls report prepared in accordance with the International Auditing and Assurance Standards Board's International Standard on Assurances Engagements ("ISAE") 3402, "Assurance Reports on Controls at a Service Organisation". The Board has also reviewed the Manager's process for identifying and evaluating the significant risks faced by the Company and the policies and procedures by which these risks are managed. The internal control systems are designed to meet the Company's particular needs and the risks to which it is exposed. Accordingly, the internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and, by their nature, can provide reasonable but not absolute assurance against material misstatement or loss.

Future Developments

A detailed outlook for the Company including any likely future developments is provided in the Chair's Statement.

There have been no post balance sheet events to report.

Substantial Interests

The Board is aware of the following shareholders that owned 3% or more of the issued Ordinary share capital of the Company at 31 December 2023:

On 28 February 2024, Evelyn Partners notified the Company that its total holding of Ordinary shares was 30,978,688 representing 5.01%. There have been no other significant changes notified in respect of the above holdings between 31 December 2023 and 29 February 2024.

The UK Stewardship Code and Proxy Voting

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 Manager.

The Manager is a tier 1 signatory of the UK Stewardship Code which aims to enhance the quality of engagement by investors with investee companies in order to improve their socially responsible performance and the long-term investment return to shareholders.

Business of the Annual General Meeting

Issue of Shares

In terms of the Companies Act 2006 (the "Act"), the Directors may not allot shares unless so authorised by the shareholders. Resolution 12 in the Notice of Annual General Meeting which will be proposed as an Ordinary Resolution will, if passed, give the Directors the necessary authority to allot shares up to an aggregate nominal amount of £3,104,332 (equivalent to 62,086,633 Ordinary shares of 5p or 10% of the Company's existing issued share capital at 29 February 2024, the latest practicable date prior to the publication of this Annual Report). Such authority will expire on the date of the 2025 Annual General Meeting or on 30 June 2025, whichever is earlier. This means that the authority will have to be renewed at the next Annual General Meeting.

When shares are to be allotted for cash, Section 561 of the Act provides that existing shareholders have pre-emption rights and that the new shares 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 otherwise than by a pro rata issue to existing shareholders. Special Resolution 13 will, if passed, also give the Directors power to allot for cash equity securities up to an aggregate nominal amount of £3,104,332 (equivalent to 62,086,633 Ordinary shares of 5p or 10% of the Company's existing issued share capital at 29 February 2024, the latest practicable date prior to the publication of this Annual Report), as if Section 561 of the Act does not apply. This is the same nominal amount of share capital which the Directors are seeking the authority to allot pursuant to Resolution 12. This authority will also expire on the date of the 2025 Annual General Meeting or on 30 June 2025, 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 12 and 13 to allot shares and disapply pre-emption rights only in circumstances where this will be clearly beneficial to shareholders as a whole. Accordingly, issues will only be made where shares can be issued at a premium of 0.5% or more to NAV and there will never be any dilution for existing shareholders. The issue proceeds will 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. Resolution 13 will also disapply pre-emption rights on the sale of Treasury shares as envisaged above. Once again, the pre-emption rights would only be disapplied where the Treasury shares are sold at a premium to NAV of not less than 0.5%.

Share Buybacks

At the Annual General Meeting held on 21 April 2023, 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 last Annual General Meeting. The principal aim of a share buyback facility is to enhance 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 Annual General Meeting.

Under the Listing Rules, the maximum price that may be paid on the exercise of this authority must not be more than the higher of (i) an amount equal to 105% of the average of the middle market quotations for a share taken from the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which the share is purchased; and (ii) the higher of the last independent trade and the current highest independent bid on the trading venue where the purchase is carried out. The minimum price which may be paid is the nominal value of the share. It is currently proposed that any purchase of shares by the Company will be made from the capital reserve of the Company. The purchase price will normally be paid out of the cash balances held by the Company from time to time.

Special Resolution 14 will permit the Company to buy back shares and any shares bought back by the Company may be cancelled or held as Treasury 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. The Company would only sell on Treasury shares at a premium to NAV. When shares are held in Treasury, all voting rights are suspended and no distribution (either by way of dividend or by way of a winding up) is permitted in respect of Treasury shares. If the Directors believe that there is no likelihood of re-selling shares bought back, such shares would be cancelled. During the year to 31 December 2023 the Directors have successfully used the share buyback authority to acquire 5,248,133 shares for Treasury.

Special Resolution 14 in the Notice of Annual General Meeting will renew the authority to purchase in the market a maximum of 14.99% of shares in issue at the date of the Annual General Meeting (amounting to 93,067,863 Ordinary shares of 5p as at 29 February 2024). Such authority will expire on the date of the 2025 Annual General Meeting or on 30 June 2025, whichever is earlier. This means in effect that the authority will have to be renewed at the next Annual General Meeting or earlier if the authority has been exhausted.

Recommendation

The Directors consider that the authorities requested above are in the best interests of the shareholders taken as a whole and recommend that all shareholders vote in favour of the resolutions, as the Directors intend to in respect of their own beneficial holdings of Ordinary shares amounting in aggregate to 80,065 shares, representing approximately 0.01% of the Company's issued share capital as at 29 February 2024.

By order of the Board of Murray International Trust PLCabrdn Holdings LimitedSecretary 1 George Street, Edinburgh EH2 2LL29 February 2024

Statement of Directors' Responsibilities

Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice, the requirements of the Companies Act 2006 and 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 for 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 judgements 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;

- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business; and

- prepare a director's report, a strategic report and director's remuneration report which comply with the requirements of the Companies Act 2006.

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. In accordance with their responsibilities, the Directors confirm that, to the best of their knowledge, 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 position, performance, business model and strategy.

Website Publication

The Directors are responsible for ensuring the Annual Report and the financial statements are made available on a website. Financial statements are published on murray-intl.co.uk, the Company's website, in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

Directors' Responsibilities Pursuant to DTR4

The Directors confirm to the best of their knowledge:

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

- The Annual Report includes a fair review of the development and performance of the business and the financial position of the company, together with a description of the principal risks and uncertainties that they face.

For Murray International Trust PLCVirginia Holmes Chair29 February 2024

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flows