PDF BMO UK High Income Trust PLC

BMO UK High Income Trust PLC

Ordinary Shares

October 2019

Manager Commentary Philip Webster

After a weak August, the Trust had a much better September. The month witnessed a shift in sentiment towards some of the UK consumer cyclicals and value, although this was at a stock-specific level. I'm not going to call this a trend, as it isn't; it's a shot across the bow of the expensive quality growth names and a reminder that there is value available if you're willing to be patient. For clarity, I've not positioned the fund to take advantage of a bounce in financials, utilities or telecoms, which may revert to the mean. I've chosen to play quality business models in areas that are currently unloved -- owning commoditised business models that might be cheap is not what we do.

It's becoming painful writing these monthly factsheets, as nothing seems to change. The political jostling around Brexit continues to surprise on an almost daily basis, and I'm not sure I can see much difference. I'm also very happy with the positioning of the portfolio, although earnings volatility remains high and reactions to profit warnings have been extreme.

In terms of activity, we trimmed our holding in Just Eat following the bid from . Trading at a sizeable premium (?7.96) to the offer price (at the time) of around ?7.30, we didn't see the likelihood of the offer being increased or another bidder appearing. Over the past few weeks, the share price has retreated to pre-bid levels, which feels anomalous -- although the price is linked to that of its acquirer, given it's a paper, and not a cash, deal. We also added to our position in Asos, which was exceptionally weak following a poor trading update. On this occasion, the weakness was not driven by weak trading or poor end markets (although they remain tough), but by poor execution in ramping up their new distribution centres. These are transformational

projects for the long-term success of the group, but in the short-term have impacted the customer proposition, competitiveness and pricing of Asos's products. Management have been open about the challenges and have put a roadmap in place to resolve these issues in the coming quarter. I don't expect this to be concluded in three months' time, but I see a business that is undervalued as a result of fear rather than fundamentals.

Key facts as at 30.09.2019

Trust aims: To provide an attractive return to shareholders each year in the form of dividends and/or capital returns, together with prospects for capital growth. In pursuit of this objective, the Company invests predominantly in UK equities and equity-related securities of companies across the market capitalisation spectrum. Benchmark: FTSE All-Share Index (Pre 05/07/2018 FTSE All-Share Capped 5% Index). Fund type: Investment Trust Launch date: 1 March 2007 Total assets: ?130.3 million Share price: 94.00p NAV: 104.66p Discount/Premium(-/+): -10.2% Dividend payment dates: Feb, May, Aug, Nov Net dividend yield : 5.54% Net gearing/Net cash*: 2.78% Management fee rate**: 0.65% Ongoing charges**: 0.98% Year end: 31 March Sector: UK Equity Income Currency: Sterling Website:

** Ongoing charges calculated in accordance with AIC recommendations. Please refer to the latest annual report as to how the fee is structured.

Fund performance as at 30.09.2019

40 35 30 25 20 % 15 10 5 0 -5

NAV Share price Benchmark

YTD

1 Year

Cumulative performance (%) as at 30.09.2019

1 Month

Year to date

NAV

3.88

16.57

Share price

2.17

12.33

Benchmark

2.95

14.41

Discrete annual performance (%) as at 30.09.2019

2019/2018

2018/2017

NAV

1.93

1.38

Share price

-1.75

2.43

Benchmark

2.68

5.46

3 Years

5 Years

1 Year 1.93 -1.75 2.68

3 Years 12.60 11.41 20.85

5 Years 29.78 26.19 38.71

2017/2016 8.96 10.70 11.60

2016/2015 17.42 15.27 16.72

2015/2014 -1.84 -1.74 -1.66

Lines may be recorded

Key risks

Stock market movements may cause the value of investments and the income from them to fall as well as rise and investors may not get back the amount originally invested. A fund investing in a specific country carries a greater risk than a fund diversified across a range of countries. Changes in rates of exchange may have an adverse effect on the value, price or income of investments. If markets fall, gearing can magnify the negative impact on performance.

Past performance is not a guide to future performance. Source: Lipper and BMO. Basis: Percentage growth, total return, bid to bid price with net income reinvested in sterling. The discrete performance table refers to 12 month periods, ending at the date shown.

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Trust codes

Stock exchange code

BMO UK High Income

BHI

BMO UK High Income B BHIB

BMO UK High Income Units BHIU

Sedol B1N4G29 B1N4H59 B1N4H93

Top 10 holdings (%)*

GlaxoSmithKline British American Tobacco RELX Compass Group Close Brothers Group Prudential Royal Dutch Shell Intermediate Capital Group Kerry Group Cairn Homes

Portfolio Weight % 6.93 6.61 5.82 4.24 4.13 4.01 3.83 3.51 3.47 3.38

Benchmark Weight % 3.70 2.97 1.57 1.44 0.09 1.66 8.31 0.17 0.00 0.00

All figures are subject to rounding. Not all holdings are in the FTSE All-Share Index.

Difference % 3.23 3.64 4.25 2.81 4.04 2.35 -4.48 3.34 3.47 3.38

Net dividend distributions pence per share (paid)/(declared)

2015

2016

2017

2018

February

1.11

1.14

1.17

1.21

May

1.15

1.18

1.21

1.25

August

1.14

1.17

1.21

1.25

November

1.14

1.17

1.21

1.25

Total

4.54

4.66

4.80

4.96

All figures are subject to rounding.

2019 1.25 1.29 1.29 1.29 5.12

Glossary Bid price

Dividend

Net asset value

Investment trust shares are sold via the stock exchange at the bid price. This price is determined by supply and demand.

Income paid to shareholders by the company they invest in.

A key measure of the value of a company or trust ? the total value of assets less liabilities, divided by the number of shares.

Total summary FTSE 100 FTSE 250 Non-Index Overseas AIM Cash

Sector Health Care Consumer Goods Consumer Services Consumer Services

Financials Financials Oil & Gas Financials Consumer Goods Consumer Goods

% assets 46.01 35.33 6.63 5.29 3.60 3.14

All data as at 30.09.2019 unless otherwise stated. All information is sourced from BMO, unless otherwise stated. All percentages are based on gross assets, unless stated otherwise. The yield is calculated using the intended distributions for the company's financial year to 31 March 2020 and the closing share price and exchange rate as at the end of the relevant month. In the absence of unforeseen circumstances, the company intends that the aggregate distributions for the financial year to 31 March 2020 will be 5.21 pence per share. *Net gearing is total assets less cash and cash equivalents divided by shareholders' funds and expressed as a percentage. Net cash is net exposure to cash and cash equivalents expressed as a percentage of shareholders funds after any offset against gearing. **Ongoing charges and management fee as at the end of 31 March 2019. Please refer to the latest annual report as to how the fee is structured. Ongoing charges are calculated in accordance with AIC recommendations. The share price may either be below (at a discount) or above (at a premium) the NAV. Discounts and premiums vary continuously. Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any funds that may be mentioned. The factsheet is issued and approved by BMO, a trading name of BMO Asset Management Limited. Authorised and regulated in the UK by the Financial Conduct Authority. Registered office: Exchange House, Primrose Street, London EC2A 2NY. Registered in England No 517895. (10/19).

0800 136420

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bmoinvestments.co.uk

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