Murray Income Trust — In a celebratory mood

Murray Income Trust (LSE: MUT)

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Research: Investment Companies

Murray Income Trust — In a celebratory mood

Murray Income Trust (MUT) is currently celebrating two key milestones. This year marks its 100-year anniversary, and 50 years of consistently rising dividends. MUT’s FY23 dividend of 37.5p (up from 36.0p in FY22) represents a current yield of 4.7% and MUT’s board has stated that maintaining the trust’s record of annually increasing dividends remains a priority. Performance has improved after a rare bout of underperformance last year. In the year ended September 2023, MUT returned 14.5%, in line with the benchmark, and in the 10 years to September, it delivered an average annual return of 6.1% on an NAV basis, versus a market return of 5.6%. The trust’s managers, Charles Luke and Iain Pyle, are confident its exposure to some ‘unstoppable long-term trends’ means it is well-positioned to continue delivering positive returns and growing income over the long term.

Joanne Collins

Written by

Joanne Collins

Analyst, Investment Trusts

Murray-International-Trust_resized

Investment Companies

Murray Income Trust

MUT: A long history and reasons for a confident future

Investment trusts
UK equity income

1 November 2023

Price ord

779.0p

Market cap

£851.7m

AUM

£1,095.7m

NAV*

851.2p

Discount to NAV

8.5%

*Including income. At 27 October 2023.

Yield

4.7%

Shares in issue

109.3m

Code Ord/A-share

MUT

Primary exchange

LSE

AIC sector

UK Equity Income

52-week high/low

884.0p

766.0p

953.1p

837.2p

*Including income.

Gearing

Net gearing at 20 October 2023

7.6%

Fund objective

Murray Income Trust (MUT) aims to provide a high and growing income combined with capital growth, through investment in a portfolio principally of UK equities. MUT focuses on companies that have potential for real earnings and dividend growth, while also providing an above-average portfolio yield. The emphasis is on the management of risk and the portfolio’s absolute return. MUT measures its performance versus the broad UK stock market.

Bull points

An experienced manager with a well-established track record of outperformance of the market.

50 consecutive years of dividend growth and an attractive prospective yield, at a competitive fee.

Scope for the discount to narrow as performance returns to form.

Bear points

The UK market may remain out of favour with investors.

A quality focus means the trust underperforms during value rallies.

MUT’s gearing level increases its vulnerability to any market downturn.

Analyst

Joanne Collins

+44 (0)20 3077 5700

Murray Income Trust is a research client of Edison Investment Research Limited

Murray Income Trust (MUT) is currently celebrating two key milestones. This year marks its 100-year anniversary, and 50 years of consistently rising dividends. MUT’s FY23 dividend of 37.5p (up from 36.0p in FY22) represents a current yield of 4.7% and MUT’s board has stated that maintaining the trust’s record of annually increasing dividends remains a priority. Performance has improved after a rare bout of underperformance last year. In the year ended September 2023, MUT returned 14.5%, in line with the benchmark, and in the 10 years to September, it delivered an average annual return of 6.1% on an NAV basis, versus a market return of 5.6%. The trust’s managers, Charles Luke and Iain Pyle, are confident its exposure to some ‘unstoppable long-term trends’ means it is well-positioned to continue delivering positive returns and growing income over the long term.

Maintaining a long-term record of growing dividends

Source: Refinitiv, Edison Investment Research

The analyst’s view

MUT may appeal to investors seeking exposure to a diversified portfolio of high-quality, resilient, mainly UK stocks. The trust is diversified by sector and by income source: 80% of portfolio income is sourced from abroad, which provides significant protection from any deterioration in the UK’s economic climate. A programme of option writing provides a further modest, uncorrelated supplement to portfolio revenues.

The trust’s good long-term performance track record of outright gains and outperformance of the market and most of its AIC peers should interest potential investors.

Those seeking a regular, competitive and rising income will appreciate MUT’s commitment to its policy of annually increasing dividends, delivered via quarterly dividend payments.

Another potential drawcard for investors is that UK equity valuations are currently low on an absolute and relative basis versus other major markets.

Celebrating its centenary anniversary…

The team at Murray Income Trust (MUT) is in a celebratory mood. The trust is marking both its centenary and its record of 50 consecutive years of dividend growth. When the trust was founded in Glasgow in June 1923, it was called the Second Scottish Western Investment Company, and it invested mainly in bonds and preference shares, but its name and remit have evolved over the years. In 1984 it adopted its current name and changed its remit to focus on achieving high and growing income, combined with capital growth, from UK equities. The trust’s manager at that time, Murray Johnstone, was taken over by Aberdeen Asset Management in 2000, and MUT has been part of the abrdn stable since then.

…and 50 consecutive years of dividend growth

While the loss of historical paper records means it is not possible to calculate the trust’s performance since inception, MUT’s 50-year record of dividend growth is well-documented. The trust aims to provide investors with a high and growing dividend, paid quarterly in December, March, June and September each year. In 1973, the trust paid a dividend of 0.47p, unchanged from the previous year. Dividends have risen every year since. The dividend for the financial year ended June 2023 (FY23) was 37.5p (FY22: 36.00p), which represents compound annual dividend growth of 9.2% pa over the 50 years since 1973, although perhaps a more meaningful comparison is the 6.0% compound annual growth rate achieved since the trust adopted its current UK equity income strategy in 1984. Based on the current share price, the FY23 dividend represents a dividend yield of 4.7%. (See the chart on page one for details of recent dividend payments.) MUT’s board has clearly signalled its intention to keep building on its impressive dividend record. In the trust’s recently released annual report, the board confirmed that maintaining the trust’s record of annually increasing dividends is ‘a priority for the future’.

And unlike some investment companies, MUT seeks to fund dividend payments from current revenues, rather than reserves, in normal market conditions. The FY23 dividend was more than fully covered by revenues, as portfolio revenues per share amounted to 38.7p (103% of the dividend per share). After the excess revenues were transferred to revenue reserves, reserves per share rose to 20.2p, up from 17.5p in FY22, sufficient to cover 54% of the FY23 dividend (FY22: 48%). This degree of dividend cover is consistent with the board’s preference that revenue reserves per share comprise between 50% and 100% of a full year’s dividend per share.

MUT’s long-term performance is good

MUT’s performance has improved over the past year, after a rare bout of underperformance last year (Exhibit 2). Over the year to end September, returns totalled 14.5%, in line with the benchmark return (represented throughout this note by the CBOE UK All Companies Index), while its share price rose 17.1%, reflecting a narrowing of the trust’s discount over the year. However, these returns mask some deterioration in relative returns in the three months to end September 2023, when the trust rose 0.7% in NAV terms and 1.1% on a share price basis, compared to the market return of 2.2%. And returns over the past year have lagged those of most of MUT’s AIC peers (see Exhibit 4). Relative performance against both the market and peers over three years has been adversely affected by the trust’s underperformance last year; MUT’s average annual return over the three years ended September 2023 was 8.8% in NAV terms and 9.0% in share price terms, compared to the benchmark return of 12.4%. However, it is arguably more meaningful to judge performance over longer periods, especially for trusts with a long-term investment approach. On this basis, MUT has delivered outright gains and outperformance of the market, and the average of its peers, over five and 10 years. In the 10 years ended 30 September 2023, the trust delivered an average annualised return of 6.1% in NAV terms, compared to an average benchmark return of 5.6%. The average share price return of 5.4% pa reflects some widening of discount over this period (see Exhibit 3 and Exhibit 4 and discussion in the Performance and Peer group comparison sections).

Managers confident MUT can maintain its strong track record

MUT’s managers, Charles Luke and Iain Pyle, are positive about the future, and they cite several reasons for their optimism. Perhaps the most significant is the fact that the trust’s portfolio has exposure to several ‘unstoppable long-term trends’, which the managers expect to provide major tailwinds to earnings and dividend growth over the medium term. One such trend is ageing populations and MUT is exposed to this theme via its holdings of several pharmaceutical names including UK-listed AstraZeneca, Denmark’s Novo Nordisk, and Switzerland’s Roche. It is leveraged to the digital transformation trend via positions in overseas companies US software giant Microsoft and Swiss-based VAT Group, which provides vacuum valves for many industries including semiconductor manufacturing. UK-listed companies providing exposure to this theme include Sage Group, which supplies business software apps, and RELX, an information-based analytics company. The inexorable transition to renewable energy and zero-carbon emissions will benefit MUT’s positions in National Grid, the UK energy system operator, SSE, a UK electricity supplier, and French energy producer TotalEnergies. Rising global wealth will boost demand for everyday items and luxury goods, benefiting several of MUT portfolio companies including producers of household staples such as Coca-Cola HBC, Unilever and Nestlé, and purveyors of prestige brands such as LVMH and beverage supplier Diageo.

In the managers’ view, near-term economic developments may be challenging for many companies. Although economic activity has been holding up surprisingly well in the face of aggressive interest rate increases, Luke and Pyle expect tight monetary policy to eventually slow growth in the UK and elsewhere, resulting in a ‘relatively rapid fall in inflationary pressures’, which should facilitate ‘significant interest rate cuts over the next 18 months’. If they are correct, UK equities in general may be in for some rougher weather. However, the managers are confident that their high-quality, predominantly global businesses are well-placed to sail through any squalls, maintain their income generation and emerge in a stronger position, thanks to their pricing power, high margins and balance sheet strength.

And Luke and Pyle have a positive view of the UK equity market’s prospects over the medium term. They argue that the valuations of UK-listed companies remain attractive in absolute terms, and relative to both historical levels and other markets. With a current P/E multiple of 10.8x, the UK market is cheaper than at any time over the past 30 years, except during the global financial crisis. The UK market’s dividend yield also remains at an appealing premium to other regional equity markets. In their words, ‘investors are benefiting from global income at a knock down price’.

Yet both domestic and foreign investors are, for the moment, seemingly blind to the market’s attractions and remain underweight. It may take smoother economic waters, and perhaps a more certain political climate beyond the forthcoming UK general election, for investors to recommit to this market, but for Luke and Pyle, the case for doing so is compelling and will eventually tempt more players to return to the UK market. MUT’s quality holdings are likely to do better than others when this tide turns.

Wider than usual discount has scope to narrow

For those who share the managers’ confidence in the longer-term prospects of the UK market, and MUT’s portfolio holdings, now might be a good time to invest, as its share price discount is wider than usual and there is, in our view, scope for it to narrow over time. MUT’s share price historically trades at a discount to its NAV. Over the past 10 years, the discount has averaged around 4.8%. However, discounts across the investment trust sector have widened in the past year or more, including in the UK equity income sector. There are several possible reasons for this. As discussed above, UK equities are currently out of favour with international investors thanks to political uncertainties, low growth, poor productivity and persistently high inflation. In addition, high interest rates mean that for the first time in many years, cash and bonds are offering relatively attractive, low-risk returns that are a viable alternative to investments in equities and investments companies more generally. The cost-of-living crisis also means individuals and households have less free cash to allocate to savings products.

As a result of these developments, and also, perhaps, last year’s underperformance, MUT’s discount has widened to 8.5% at present, from 4.5% and end June 2022. MUT’s board has responded to these developments by stepping up share buybacks to support the share price. The trust repurchased 5.0m shares over FY23, amounting to 4.3% of shares in issue at the end of FY22. It has repurchased a further 2.5m since then (up until 30 October 2023). These buybacks should, over time, have a favourable impact on the discount. So too should any sustained improvement in MUT’s performance. An increase in investors’ appetite for UK equities would also help. There are, therefore, several reasons to suggest that the discount may, in time, move back towards its long-term average.

Exhibit 1: Share price premium/discount to NAV (including income) over 10 years (%) 

Source: Refinitiv, Edison Investment Research 

Performance: Competitive, risk-adjusted returns

Exhibit 2: Five-year discrete performance data

12 months ending

Share price
(%)

NAV
(%)

CBOE UK All Companies (%)

MSCI AC World
(%)

30/09/19

15.3

9.4

2.7

7.9

30/09/20

(10.0)

(7.6)

(17.9)

5.8

30/09/21

25.4

24.6

28.5

22.7

30/09/22

(11.7)

(9.7)

(3.4)

(3.7)

30/09/23

17.1

14.5

14.5

11.0

Source: Refinitiv. Note: All % on a total return basis in pounds sterling.

MUT’s performance over 2023 has been supported by both sector allocation and stock selection in the technology and consumer staples sectors, partially offset by underweight exposures to energy and poor stock selection in the consumer discretionary and industrial sectors. Holdings in tech companies Sage Group, VAT Group and Aveva, which specialises in industrial software and sustainable technologies, contributed most to relative performance. The manager’s decision to avoid British America Tobacco and Vodafone also enhanced returns as both struggled at the operational level.

Performance was also bolstered thanks to merger and acquisition activity. During FY23, the trust’s holdings in Aveva, Euromoney, Industrials REIT, Dechra Pharmaceuticals and Countryside Properties were all subject to takeover bids. All these holdings were sold to their respective bidders – transactions that in aggregate benefited relative returns. MUT retains a holding in Vistry Group, the residential construction company that acquired Countryside Properties. Vistry shares have done well in recent months as the market has welcomed the company’s decision to focus on its partnerships with housing associations, government bodies and local communities.

However, the largest positive contributor to recent performance has been the favourable movement in the fair (or market) value of the MUT’s long-term gearing. The trust has £100m of long-term borrowings, of which £40m is due in 2027 and £60m is due in 2029. The blended cost of this debt is 3.6%. As interest rates rose above this level, the market value of this liability diminished. (The trust also has access to a £50m short-term multi-currency facility, which was drawn down by £6.4m at end FY23.)

The main adverse impacts on performance over FY23 were stock-specific developments in Marshalls, a building materials supplier, Watkins Jones, a residential construction company, and Direct Line, a diversified insurer. Each of these names suffered due to their exposure to high inflation and/or rising interest rates. The managers’ decision not to hold HSBC or online gambling company Flutter also had a significant adverse impact on relative performance, as both did relatively well over the period. The underweight to HSBC continued to detract from performance in August and September.

Exhibit 3: Investment company performance to 30 September 2023

Price, NAV and index total return performance over three years, rebased

Price, NAV and index total return performance (%)

Source: Refinitiv, Edison Investment Research. Note: Three-, five- and 10-year performance figures annualised.

Peer group comparison

MUT is a member of the AIC’s UK Equity Income sector, which comprises 17 investment trusts, although it is differentiated from many of the constituents of this sector in several respects. While MUT is focused on companies with high-quality characteristics, several of its peers have a more value-oriented investment approach. MUT’s portfolio is more diversified than some, across sectors, stocks and geographies, as around a quarter of its portfolio is invested in mid-cap stocks and more than 10% is held in international stocks. The manager also seeks to supplement and diversify income sources with modest option writing.

MUT’s merger with Perpetual Income & Growth (PLI) in November 2020 doubled its market capitalisation, making it the fifth largest fund in this sector (Exhibit 4). The trust has lagged most of its peers over one and three years, as discussed above, but it is ranked in the top three performers over five years and the top six over 10 years. MUT’s ongoing charge is the second lowest among peers following the merger, reflecting the benefits of its scale. Its discount is above the average, and its gearing is lower. MUT’s dividend yield is also below the average of its peers.

Exhibit 4: UK Equity Income peer group as at 20 October 2023*

% unless stated

Market
cap £m

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Ongoing
charge

Perf.
fee

Disc/prem
(cum-fair)

Net
gearing

Dividend
yield

Murray Income Trust

853.3

11.2

21.2

31.4

66.3

0.5

No

(9.9)

108

4.7

abrdn Equity Income Trust

143.4

(0.5)

22.1

(10.1)

19.4

0.9

No

0.9

112

7.6

BlackRock Income and Growth

36.5

11.5

29.7

25.3

73.6

1.2

No

(10.7)

102

4.1

Chelverton UK Dividend Trust

30.4

(3.4)

26.9

(10.0)

27.3

2.4

No

6.8

169

8.8

City of London

1,905.1

9.9

36.2

22.0

62.9

0.4

No

(1.3)

105

5.3

Diverse Income Trust

254.8

(2.9)

3.3

5.0

58.6

1.1

No

(3.9)

100

5.1

Dunedin Income Growth

378.7

12.3

16.3

32.7

60.0

0.6

No

(11.2)

109

5.1

Edinburgh Investment

1,024.1

19.1

45.3

18.9

70.2

0.5

No

(9.7)

110

4.1

Finsbury Growth & Income

1,641.6

5.6

9.4

26.1

118.8

0.6

No

(5.1)

101

2.3

JPMorgan Claverhouse

374.9

12.3

28.1

19.4

60.4

0.7

No

(6.5)

108

5.4

Law Debenture Corporation

959.6

13.0

42.4

39.9

104.0

0.5

No

(3.6)

122

4.2

Lowland

288.4

12.3

35.8

4.6

35.5

0.6

No

(14.7)

115

5.7

Merchants Trust

715.6

2.8

48.3

28.5

56.0

0.6

No

(0.9)

113

5.7

Schroder Income Growth

173.7

11.9

33.3

24.7

68.1

0.7

No

(11.4)

114

5.5

Shires Income

64.7

8.2

22.4

22.9

66.0

1.0

No

(10.9)

123

6.7

Temple Bar

671.4

19.2

63.8

15.4

42.5

0.5

No

(6.1)

100

4.1

Troy Income & Growth

157.9

5.3

4.5

7.4

56.3

0.9

No

(1.1)

100

3.1

Simple average

569.1

8.7

28.8

17.9

61.5

0.8

(5.9)

113

5.1

MUT rank in sector

5

9

13

3

6

=2

13

=9

11

Source: Morningstar, Edison Investment Research. Note: *Performance to 19 October 2023 based on ex-par NAV. TR, total return. Net gearing is total assets less cash and equivalents as a percentage of net assets (100 = ungeared).

Asset allocation

Current portfolio positioning

MUT targets good-quality companies at attractive valuations. For its managers, quality companies are characterised by their strong and predictable cash flow generation, sound business models, sustainable high returns on capital and attractive growth opportunities. Luke and Pyle adopt a patient buy and hold approach, but they also maintain a constant effort to improve the quality of the portfolio.

New additions to the portfolio over the past year have included three UK mid-cap companies, Games Workshop, Genus and Rotork, along with three overseas holdings, Roche, and two French companies, luxury goods producer LVMH and cosmetics supplier L’Oréal. Games Workshop is a fantasy wargames company, operating in a unique field and possessing strong quality characteristics and an attractive dividend yield. Its significant growth opportunities outside the UK have been boosted by a potential Amazon TV series. Genus is a global leader in animal genetics. Its leading product, disease-resistant pigs, is a global market leader with major long-term growth potential. Rotork is an industrial machinery business with good quality characteristics and what the managers believe to be underappreciated growth opportunities.

MUT has scope to invest up to 20% of gross assets in overseas listed companies. This provides the managers with flexibility to access industries not available within the UK market, to diversify risk and to invest in ‘better quality proxies of UK listed companies’. As a result, MUT owns some of the world’s leading companies, with great long-term growth prospects in their respective industries (Exhibit 5).

The managers were attracted to Roche by its healthy balance sheet and interesting drugs pipeline, which they believe is undervalued by the market. They like LVMH’s portfolio of well-known brands, which they believe will generate long-term growth, especially in Asia. This business also offers MUT exposure to a market not available via UK-listed companies. L’Oréal also boasts several well-known brands in markets with solid growth dynamics. These acquisitions take the number of overseas holdings to 13, which together comprise c 19% of the portfolio.

Exhibit 5: MUT’s overseas holdings as at 31 August 2023

Company

Country

Sector

% of portfolio end August 2023

TotalEnergies

France

Oil & gas producers

3.7

OCBC

Singapore

Financials

2.3

Nordea

Finland

Financials

1.7

Novo-Nordisk

Denmark

Pharmaceuticals & biotechnology

1.5

Microsoft

US

Software & computer services

1.5

Nestlé

Switzerland

Food producers

1.2

VAT Group

Switzerland

Industrial engineering

1.2

Kone

Finland

Industrial engineering

1.1

LVMH

France

Luxury goods

1.0

Telenor

Norway

Industrial engineering

1.0

Roche

Switzerland

Pharmaceuticals

0.9

L’Oréal

France

Cosmetics and skin care

0.8

Accton Technology

Taiwan

Telecommunications equipment

0.8

Total non-UK exposure

18.7

Source: MUT, Edison Investment Research

Attractive valuations also motivated top-ups to positions in several existing holdings, including the portfolio’s largest positions, RELX, Unilever and Sage. Exposures to Nestlé, Howden Joinery, Kone, which produces lifts and elevators, Overseas-Chinese Banking Corporation, a high yielding Singaporean bank, Oxford Instruments, a supplier of semiconductor equipment and materials, and London Stock Exchange Group were also increased. The managers added to Mondi, a producer of paper products, in September following an agreement to sell its Russian business.

In addition to the five names sold due to takeover bids (mentioned above), the managers closed positions in 10 other names, including four real estate names, which they viewed as vulnerable to higher interest rates, high debt levels and deteriorating market conditions. Positions in homebuilder Watkins Jones, Sirius Real Estate, a real estate services company, Unite Group, a diversified real estate investment trust (REIT), and Assura, a healthcare facilities REIT, were all closed. Several small holdings were also exited to make way for other, more attractive opportunities, while a few positions, including AstraZeneca, Novo Nordisk, BHP and TotalEnergies, were trimmed due to what the managers believed to be excessive valuations, in favour of other more appealing names in their respective sectors.

In all, the total number of portfolio holdings fell to 52, from 61 at end FY22, so the portfolio is more concentrated than previously, although as can be seen from Exhibits 6 and 7, the overall structure of the portfolio has not changed dramatically. As discussed above, there has been a decline in exposure to real estate, while positions in consumer discretionary and industrials have risen somewhat.

Exhibit 6: Top 10 holdings (as at 30 September 2023)

Company

Country

Industry

Portfolio weight %

30 September 2023

30 September 2022*

RELX

UK

Media

5.5

4.2

AstraZeneca

UK

Healthcare

5.3

6.0

Unilever

UK

Consumer goods

5.1

4.6

Diageo

UK

Consumer goods

4.6

5.6

BP

UK

Oil & gas producers

4.2

2.9

TotalEnergies

France

Oil & gas producers

3.8

3.5

London Stock Exchange

UK

Financial exchanges

3.1

N/A

Sage Group

UK

Software applications

2.9

N/A

BHP

Australia

Metals & mining

2.6

3.4

Anglo American

UK

Materials & mining

2.6

2.9

Top 10 (% of portfolio)

39.7

38.9

Source: MUT, Edison Investment Research, Bloomberg, Morningstar. Note: *N/A where not in end-September 2022 top 10.

Exhibit 7: Portfolio sector exposure* versus benchmark (% unless stated)

Portfolio end-Sept 2023

Portfolio end-Sept 2022

Change
(pp)

Index weight

Active weight vs index (pp)

Trust weight/index weight (x)

Financials

18.2

16.9

1.3

23.3

(5.1)

0.8

Industrials

16.7

13.7

3.0

10.7

6.0

1.6

Healthcare

12.7

13.8

(1.1)

11.8

0.9

1.1

Consumer discretionary

12.4

8.0

4.4

11.8

0.6

1.0

Consumer staples

12.3

14.5

(2.3)

14.7

(2.4)

0.8

Energy

8.1

6.5

1.5

12.0

(3.9)

0.7

Basic materials

6.3

8.3

(2.0)

7.4

(1.1)

0.9

Utilities

5.4

6.6

(1.2)

3.5

1.9

1.5

Technology

4.6

5.8

(1.2)

1.2

3.4

3.8

Telecommunications

1.9

1.6

0.4

1.2

0.7

1.6

Real estate

1.4

4.3

(2.8)

2.4

(1.0)

0.6

100.0

100.0

100.0

Source: MUT, Edison Investment Research. Note: *Adjusted for cash.

Option writing provides income diversification

Luke continues to write a modest number of options to supplement and diversify portfolio income. At present the portfolio has calls on Anglo American, BHP and Nordea. The income generated from these positions also provides the manager with greater capacity to invest in companies with lower starting yields, but better dividend and capital growth prospects. Income from option-writing totalled £2.8m in FY23, representing 5.6% of total income. Current call positions include Coca-Cola HBC, Howden and RELX.

The board

MUT’s board comprises six independent non-executive directors. It is chaired by Neil Rogan, who will step down after the annual general meeting (AGM) scheduled for 7 November 2023, after 10 years of service. Peter Tait, currently senior independent director, will take over as chair. Alan Giles will assume the position of senior independent director. Merryn Somerset Webb will also stand down from the board at the end of the AGM. A recruitment search is underway for suitable candidates to replenish board numbers.

For details on MUT’s fund profile, investment policy and fees and charges, see our November 2022 note.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Murray Income Trust and prepared and issued by Edison, in consideration of a fee payable by Murray Income Trust. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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On 30 October, Lepidico announced the updated economics of its 2020 definitive feasibility study (DFS) on its integrated lithium hydroxide mine and chemical plant to show a base case NPV8 of US$457m post-tax, which equates to 9.4 Australian cents per share on a pre-funding basis. In our January 2019 report Gold stars and black holes, we calculated that companies with completed DFSs typically have an EV/NPV ratio of 30.9%, which would imply a pre-funding valuation for Lepidico of 2.9c/share, to which its shares are currently trading at a significant 69.0% discount.

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