Why consider MYI?

Global investors were initially encouraged by President Trump’s pro-growth agenda and in 2025 the US market rallied by c 4.5% until mid-February. However, since then, US stocks have struggled and funds have flowed to more reasonably priced regions, such as Europe and the UK, during a period of fast-moving global events. This environment should play to MYI’s strengths as its managers take a long-term view, seeking ‘good businesses at good prices’ across the globe that can deliver both income and capital growth, while protecting capital in volatile markets.

Subject to shareholder approval of the final FY24 dividend, MYI will have delivered 20 consecutive years of dividend growth, which will elevate the company to the AIC’s list of dividend heroes. While the managers aim to have a covered dividend, there are meaningful revenue reserves to supplement income when required to enable a progressive distribution policy.

There are no sector or geographic constraints, enabling the managers to focus on their best ideas across the world. The trust is notable for its underweight US and overweight emerging markets exposures. Annual turnover is low, with some portfolio positions having a greater than 20-year holding period. Historically, MYI traded close to NAV, so there is scope for a narrower discount when investor sentiment improves. This is a popular trust for retail investors seeking dependable income growth and an attractive dividend yield from a global portfolio; they do not buy this trust in anticipation of it keeping pace with strong markets.

MYI: Income and capital growth, with an above-average yield

MYI is a broadly diversified global fund, which aims to deliver an above-average dividend yield, with income and capital growth ahead of the UK inflation rate. With 20 years of consecutive dividend growth the trust is now one of 20 AIC dividend heroes. MYI has a relatively high c 30% exposure to emerging markets based on their above-average growth prospects and attractive valuations, while, unusually, the trust has no exposure to the ‘Magnificent 7’ large-cap US technology companies. There are no geographic or sector constraints, and with a value-based approach, MYI’s performance is likely to diverge from that of its all-world reference index.

The importance of diversification is illustrated by the regional total return performance of the reference index over the last 20 years. Over this period, the region that has led for the greatest number of years, which some may find surprising, is Latin America (eight), followed by the US (seven), Japan (two), Asia-Pacific ex-Japan (two), Europe ex-UK (one) and the UK (0).

MYI exhibits relatively resilient performance in down markets. Data from the company show that over the last 20 years, in 155 months of up markets, the trust’s average monthly relative return was -0.36%. However, in the 85 down months, MYI’s relative average monthly relative return was +0.74%.

Current portfolio positioning

In the 12 months to the end of February 2025, the largest changes in MYI’s geographic exposure were a 5.2pp higher weighting in North American equities, with lower allocations to Europe ex-UK (-3.5pp) and Latin America (-2.8pp). The number of portfolio holdings declined by two to 50 equities and 13 fixed-income securities (51 equities and 14 fixed-income securities at the end of February 2024), which compares to the requirement of a total of 45 to 150 positions. There have been no new fixed-income holdings over the last decade.

At the end of February 2025, MYI’s top 10 positions made up 32.3% of the portfolio, which was a lower concentration compared with 34.9% 12 months earlier; eight names were common to both periods. The top 10 is a mix of higher-yielding stocks and companies with lower yields but growing dividends; all portfolio companies contribute to MYI’s income. TSMC and Broadcom remain among the largest holdings, despite having been trimmed following significant share price appreciation, as they reached 5% of the portfolio.

Portfolio activity

Portfolio turnover in FY24 was 13% of gross assets, which was higher than 7% in FY23, and was partly due to asset sales ahead of a debt repayment in May 2024. In H124 there were four disposals: China Vanke, Epiroc, Roche and TC Energy, and one new holding, Mercedes-Benz Group, which we covered in our August 2024 update. H224 saw three new additions to the portfolio and no complete sales.

Within the consumer staples sector, Coca-Cola had been relatively weak on concerns about weight loss drugs and the associated negative effects on the company’s volumes. Coca-Cola has a very high brand value, with 30 billion-dollar brands and an extensive distribution network. It has a five-year organic annual growth rate of 9% and a 62-year record of consecutive higher dividends.

World-leading medtech company Medtronic’s growth is supported by an ageing global population and an increasing prevalence of chronic diseases. The company has a diversified product portfolio: 36% cardiovascular; 29% neurosciences; 26% surgical; 8% diabetes; and 1% other.

Taylor Wimpey is one of the UK’s largest regional developers. Business growth is supported by a shortage of housing stock, which the government is working to address, including via a more supportive planning environment. The company has a healthy eight-year land bank and a robust balance sheet, and offers an attractive c 8.5% dividend yield.

The managers’ perspectives on the investment backdrop

Connaghan and Fitzpatrick emphasise the importance of a growing dividend to MYI’s shareholders. They consider that the outlook for dividends is healthy. In 2024, the managers tracked 53 relevant (primarily investee company) dividends: 39 were increased (some were double-digit gains), three were maintained, 10 were cut and one was cancelled (China Vanke, which was sold). So far in 2025, most of the tracked dividends have increased.

The managers point to a very uncertain macroeconomic backdrop. They believe that stock market leadership will broaden out, having been led by large-cap US technology stocks in 2024. Connaghan and Fitzpatrick note the wide valuation spread between regions, with the US (with and without large-cap technology stocks) far more expensive than its historical range. Other regions are within their historical ranges, with China and the UK looking particularly inexpensive versus history.

Inflation is proving to be stickier than initially thought and President Trump’s policy of imposing tariffs is likely to be inflationary. This should hamper the US Federal Reserve’s ability to reduce interest rates, which are likely to stay higher for longer. However, the European Central Bank should have more flexibility for a looser monetary policy given low economic growth and trade uncertainty in the region.

So far in 2025, there has been a reversal in market fortunes, with investors favouring Europe and the UK, while US stocks, particularly the large-cap technology names, are coming under pressure. Given the uncertain backdrop, the managers will maintain their long-term measured approach, running a diversified portfolio aiming to generate income and capital growth, while preserving capital during periods of stock market weakness.

Performance: Behind the reference index in FY24

Exhibit 3 shows the six significantly sized funds in the AIC Global Equity Income sector. The selected peer group will be further reduced as Henderson International Income is combining with JPMorgan Global Growth & Income Trust, which has already made a series of meaningful acquisitions. MYI’s NAV total returns are above average over the last 12 months but below average over the other periods shown, ranking third, third and fourth over the last three, five and 10 years, respectively. The trust has an above-average discount in a group where one fund is currently trading at a premium. MYI has a competitive ongoing charge and, in common with the rest of the group, no performance fee is payable. The trust has the second-highest level of gearing and offers the highest dividend yield in the group, which is 70bp above the mean. Also, unlike most of its peers, MYI pays dividends purely out of income, without dipping into capital reserves.

MYI and Henderson International Income are classified by Morningstar as large-cap value funds, while the other four are considered large-cap blended funds. MYI has the second-lowest exposure to cyclical sectors (c 25% of the fund), the second-highest (c 30%) to defensive sectors and a broadly average c 45% weighting to sensitive sectors, which are those with moderate exposure to the business cycle. In terms of geography, MYI has by far the lowest US exposure (less than 30%) versus its peers, who are in a range of 38–73%. The trust is the only fund in the selected peer group with a notable c 10% exposure to Latin America.

In FY24, MYI’s NAV and share price total returns of +8.1% and +4.5%, respectively, trailed the reference index’s +19.8% total return but were ahead of the rate of UK inflation (RPI was +3.5%). The underperformance was primarily due to asset allocation (c 90%) rather than stock selection.

In absolute terms, MYI’s strongest equity markets were North America (+28.1%) and the UK (+17.0%), with the weakest being Latin America (-26.3%) and Europe ex-UK (-1.4%). Latin America is a particularly volatile market; while it was a standout in negative terms in FY24, this region was the second-best performer in FY23 and the best in FY22.

By sector, unsurprisingly IT led the field by a wide margin (+50.4) followed by consumer staples (+16.8%) and financials (+16.3%). MYI’s worst performing sectors were consumer discretionary (-32.8%) and materials (-32.5%).

Looking at individual stocks, in relative terms the largest positive contributors in FY24 were Broadcom (+2.75pp), TSMC (+1.55pp) and Hon Hai Precision Industry (+0.99pp). The largest detractors were GlobalWafers (1.10pp), Walmart de México y Centroamérica (-1.09pp) and Samsung Electronics (-1.09pp).

MYI’s upside/downside analysis

Exhibit 8 shows MYI’s cumulative upside and downside capture over the last decade. The trust’s defensive nature is highlighted by its less than 100% capture rates, which are very similar (upside of 88% and downside of 89%). These suggest that MYI is likely to underperform by just over 10% in both rising and falling markets and re-enforces the trust’s strategy, which aims to preserve capital in weak markets and to deliver a broader return for shareholders based on both income and capital, rather than just capital appreciation.

Dividends: Joining the AIC dividend heroes

Subject to shareholder approval of the final FY24 dividend at the 24 April 2025 AGM, MYI will become the 20th fund on the AIC’s list of dividend heroes, which are funds with 20 or more years of consecutive dividend growth.

In FY24, MYI’s revenue per share was 11.6p, which was a 4.1% decline versus 12.1p in FY23 as income declined by 5.2% to £84.2m. The proposed annual dividend of 11.8p per share is 2.6% higher y-o-y. It was 0.98x covered by income with 0.2p per share utilised from revenue reserves, which stood at c £74m (12.3p per share and equivalent to around 1x the annual dividend) at the end of FY24.

Valuation: Discount has scope to narrow

Over the last three years, MYI has traded in a range of a 2.8% premium to a 12.3% discount. The latest 8.4% discount compares with the 9.1%, 5.6%, 4.6% and 2.0% average discounts over the last one, three, five and 10 years respectively. There is scope for a narrower discount when investor sentiment improves as the trust historically traded closer to NAV. However, MYI has traded at a persistent discount since mid-2023.

Renewed annually, the board has the authority to issue up to 10% and repurchase up to 14.99% of MYI’s issued share capital. Aiming to reduce volatility in the trust’s valuation and make a small positive contribution to the NAV, the board repurchases shares if they trade at a persistent discount to ex-income NAV, while issuing shares if they trade at a persistent premium to cum-income NAV. During FY24, c 17.7m shares (c 2.8% of the share base) were repurchased at a weighted average discount of 9.6%.

Fund profile: Differentiated geographic exposure

Launched in December 1907, MYI is one of the oldest UK investment trusts; it is listed on the Main Market of the London Stock Exchange. In 2023, long-term manager Bruce Stout announced his intention to retire at the end of June 2024, so his colleagues Martin Connaghan and Samantha Fitzpatrick, who had worked with him since 2001, were made MYI’s co-managers with immediate effect. Connaghan and Fitzpatrick aim to generate long-term capital growth (while preserving capital during periods of stock market weakness) and an above-average dividend yield from a globally diversified portfolio of equities and fixed-income securities. Around 30% of the fund is invested in emerging markets as the managers believe these regions offer the prospect of higher economic growth than developed markets, along with relatively attractive company valuations.

MYI’s performance is measured against an all-world reference index; before 27 April 2020 it was benchmarked against a composite measure (40% UK and 60% world ex-UK). The trust’s investment objective was also changed on this date, aiming to achieve an above-average dividend yield, with long-term growth in dividends and capital ahead of inflation, by investing principally in global equities (MYI’s prior aim was to achieve a total return greater than its benchmark by investing predominantly in equities worldwide). The board believes the different wording gives shareholders a clearer picture of what the trust is trying to deliver. There are no geographic or sector limits on portfolio construction, but at the time of investment, a maximum 5% of the fund is permitted in a single security, although in practice this percentage is much lower. From time to time, the trust may invest in equity-related securities such as depositary receipts, preference shares or unlisted companies, and derivatives are permitted for efficient portfolio management. Its currency exposure is unhedged. Gearing of up to 30% of NAV is permitted (in normal market conditions).

Investment process: Bottom-up stock selection

Stocks are selected on a bottom-up basis, so sector, regional and country allocations are a result of these decisions. Aberdeen Group employs a long-term approach, focusing on companies that its research analysts identify as high quality. Firms are considered on five key factors: the durability of its business model and its economic moat; the attractiveness of the industry in which it operates; the strength of its financials; the capability of its management team; and an assessment of its ESG credentials. Company valuations are considered across a variety of relevant measures, including earnings yields, free cash flow yields and dividend yields. The managers select companies that have the most attractive quality and valuation characteristics, while offering the best expected risk-adjusted returns. Aberdeen Group uses a global coverage list that is constructed by each of the specialist regional analyst teams (developed markets, Asia Pacific ex-Japan, Japan and emerging markets) containing all companies with buy-and-hold recommendations, which provides the trust’s investment universe.

For MYI’s fixed-income holdings, the process for selecting and monitoring both sovereign and corporate bonds follows the same methodology used for equity investment. Portfolio geographic and sector exposures are a function of each security’s relative valuation and prospects. Within the portfolio there are typically 60–80 companies across the market-cap spectrum with position sizes of between c 1% and c 5%. Equity holdings are generally initiated at around 1.0% to 1.5% of the fund, while initial fixed income positions tend to be smaller. If a holding reaches 5% of the portfolio, it is trimmed within 30 days and the managers will sell a holding within 30 days if it is no longer on Aberdeen Group’s global coverage list, subject to the timing of dividend payments.

MYI’s approach to ESG

Although ESG and climate-related factors are not the overriding criteria in relation to the managers’ portfolio decisions, they do form a very important part of the investment process and have done so for more than 30 years for three key reasons:

• Financial returns – ESG factors can be financially material; companies that take their responsibilities seriously tend to outperform those that do not.
• Fuller insight – systematically assessing a company’s ESG risks and opportunities alongside other financial metrics leads to better investment decisions.
• Corporate advancement – informed and constructive engagement helps foster higher-quality companies, thereby protecting and enhancing the value of MYI’s investments.

The managers can draw on the resources of Aberdeen Group’s ESG equity analysts and central ESG investment team (more than 20 experienced specialists) who collaborate to generate a deep understanding of the ESG risks and opportunities associated with each company analysed.

Climate change risks are vast and becoming increasingly financially material for many of Aberdeen Group’s investments, not only in the high-emitting sectors, such as energy, utilities and transportation, but also along the supply chain, for providers of finance and those reliant on agricultural outputs and water. Companies that successfully manage climate change risks are expected to perform better over the long term.

A systematic and globally applied approach to evaluating stocks allows Aberdeen Group to compare companies consistently on their ESG credentials, both regionally and against their peer group. Findings from research and company meetings are captured in formal research notes. All firms analysed are allocated an ESG rating between 1 and 5, where 1 is best in class; 2, leader; 3, average; 4, below average; and 5, laggard. Once Aberdeen Group invests in a company, it is committed to helping it maintain or further raise its ESG standards. Regular engagement is seen as a necessary fulfilment of its duty as a responsible steward of clients’ assets and provides an opportunity to share examples of best practice seen in other companies.

Gearing

Having repaid a £30m loan in May 2024, at the end of FY24, MYI had borrowings of £110m in unsecured loan notes with a weighted cost of 2.56%; they will not be repayable until 2031 at the earliest. The £30m loan was not replaced as at the time, the proposed terms were not commercially attractive.

Fees and charges

MYI has a tiered fee structure of 0.5% of NAV up to £500m and 0.4% of NAV above this level; it is split 30:70 between the revenue and capital accounts respectively. In FY24, the trust’s ongoing charge was 0.52%, which was 1bp lower than 0.53% in FY23, and is the second lowest in the AIC Global Equity Income sector.

Capital structure

MYI is a conventional investment trust with one class of share. There are 593.7m ordinary shares in issue, with a further 53.3m shares held in treasury. Average daily trading volume over the last 12 months was c 823k shares.

The board

Alexandra Mackesy will be retiring at the end of the April 2025 AGM. The board is concluding the search for a new non-executive director using an independent recruitment firm; an announcement will be made in due course.

Exhibit 14: MYI’s board at the end of 2024

Source: MYI