Half-year Report

RNS Number : 3677U

BMO UK High Income Trust PLC

02 December 2021

 

To:  RNS

From:  BMO UK High Income Trust PLC

Date: 2 December 2021

LEI:                   213800B7D5D7RVZZPV45

 

Unaudited Interim Results

The Board of BMO UK High Income Trust PLC announces the unaudited interim results of the Company for the six month period to 30 September 2021.

 

Highlights

· Net asset value total return⁽¹⁾ per share for the six months was +4.4%, compared to the Benchmark⁽²⁾ total return of +8.0%.

· Ordinary share price total return for the six months was +10.2% compared to the Benchmark total return of +8.0%.

· B share price total return for the six months was +16.4% compared to the Benchmark total return of +8.0%.

· Distribution yield⁽¹⁾ of 5.5% on Ordinary shares and 5.2% on B shares at 30 September 2021, compared to the yield on the FTSE All-Share Index of 3.1%.

Notes:

1.  Total return and yield - see Alternative Performance Measures.

2.  Benchmark - From launch on 1 March 2007, the Company's benchmark index was the FTSE All-Share Capped 5% Index. Following shareholder approval at the Company's AGM on 5 July 2018, the benchmark was changed to the FTSE All-Share Index.

Chairman's Statement

Investment performance

For the six months to 30 September 2021 the net asset value ("NAV") total return for both the Ordinary shares and B shares was +4.4%, while the equivalent total return for the FTSE All-Share Index (the benchmark) was +8.0%.

The Manager has constructed a focused portfolio consisting of approximately 35 investments with a high level of commitment behind each one. I have mentioned in previous statements that there could be a relatively low correlation between the portfolio performance and that of the benchmark and recent periods have proven that to be the case.

The Company was consistently geared over the period and therefore the underperformance relative to the benchmark was due to stock selection.

The first six months of this financial year saw an almost complete reversal from the update written at the time of our full-year results to 31 March 2021. Having witnessed investors desert cyclicals and sectors that faced the brunt of the pandemic, we were always going to see a risk-on environment as restrictions and lockdowns came to an end. Sectors that had almost completely stopped, burst back to life. Travel and leisure, industrials, high-street retail, and real estate have all seen a very strong recovery, off a very low base. Recent data shows that several of these sectors are back to 70%-80% of 2019 levels and in some cases closer to 90% which is positive for growth, jobs and the outlook for the UK economy.

We have also seen a surge in the price of a barrel of oil, and an exceptional rise in gas prices, lift the oil sector close to pre-pandemic levels. These larger sectors, which we are not invested in, can drag on performance in the short-term, but the Manager is comfortable that this recovery will slow as we get back to normal consumption patterns.

Our over-indexation to digital assets has also been a headwind. Digital performed exceptionally well through 2020, and early 2021. Just Eat Takeaway nearly doubled from the pandemic low but has since retreated below the levels of the crisis, due to short-term investment and competition concerns. This is not just a UK phenomenon and we have seen profit-taking and share price weakness across most of the digital platforms. The Manager has met with all these holdings and is comfortable with the structural growth and the medium-term thesis.

While there remain several hurdles to negotiate, we are encouraged by the work the Manager has done on the medium-term opportunities. While the market is being very short-term in the pursuit of depressed earnings, and cyclical recovery, your Manager has been identifying businesses he feels will come out of the crisis stronger. This may be driven by taking market share from weaker competitors, or structurally reduced costs. I would note that has not led to any wholesale change, turnover in holdings has been very low; more a nuanced shift to allocate more capital to those companies he feels have a better earnings trajectory than we have seen historically.

Share price performance

Over the period there was a welcome narrowing of the discount to NAV at which the shares in the Company traded. For the Ordinary shares the discount closed from -7.8% at 31 March 2021 to -2.9% at 30 September 2021. Consequently, the share price total return for the Ordinary shares for the period was +10.2%.

The B shares were also trading at a discount to NAV of -7.8% on 31 March 2021 but ended the period valued at a premium to NAV of +2.6% thus generating a share price total return of +16.4% for the period under review.

Your Board and Manager have been working hard to increase the awareness of the Company, particularly among self-directed investors and we are pleased to see the ownership of the Company's shares by these groups increasing on a consistent basis, be that through the BMO Savings plans or via direct purchase by investors.

No buybacks in either share class were undertaken in the period under review.

At 30 September 2021 the distribution yields on the Ordinary shares (5.5%) and B shares (5.2%) were both greater than the benchmark index yield (3.1%) and at levels which are significantly higher than other interest rates. These are attractive yields in the current low interest rate environment.

Earnings, dividends and capital repayments

As noted in the 2021 Annual Report, revenue earnings declined significantly in the year to 31 March 2021 reflecting the sharp reduction in dividend payments made by UK companies as the economic chaos caused by the COVID-19 pandemic impacted. In the period under review your Company's revenue earnings per share have risen by 79.7% in comparison to the six months to 30 September 2020. The recovery in dividend payment levels by UK corporates has been rapid and most encouraging - an indication of long-term confidence by Boards and management alike.

Your Board was pleased to increase dividends and capital repayments to shareholders against a very weak background for earnings in the year to 31 March 2021. This was made possible by the ability to utilise the revenue reserves that your Company has consistently built up over the years.

I am pleased to say that revenue has recovered faster than anticipated and that the revenue forecast for the year to 31 March 2022 currently looks robust. Having maintained the first two quarterly interim dividends for the current financial year to 31 March 2022 the Board was pleased to announce that the third quarterly interim dividend will be increased to 1.32p per Ordinary Share and that in the absence of unforeseen circumstances, it is currently intended that the aggregate dividend for the current financial year to 31 March 2022 will be at least 5.4p per Ordinary share.

One of the benefits of the Investment Trust structure is the ability to create and use revenue reserves to help smooth the level of dividend payments to shareholders over the longer term. The past two years have shown how effectively this structure can work.

Ownership of the Manager

On 8 November 2021, Columbia Threadneedle Investments, part of Ameriprise Financial acquired BMO's EMEA asset management business ('BMO GAM (EMEA)').  This added £97 billion of assets under management ('AUM') to Columbia Threadneedle increasing its AUM to £530 billion. This was a transaction that was discussed in the Chairman's Statement in respect of the year to 31 March 2021. Your Board maintained a regular dialogue with BMO and has met with representatives of the now new owners.  We look forward to benefitting from the increase in scale and resources that the combined BMO/Columbia Threadneedle business can provide, however there will be no changes to the personnel running the activities of your Company in terms of both Fund Management and Administration.

Outlook

Stock markets anticipated the economic recovery from the dislocation caused by the COVID-19 pandemic and this was reflected in the high capital returns generated by markets in the second half of calendar year 2020 and in the first half of 2021. The recent period has seen focus shift to the issues created by a rapid resurgence of industrial and commercial activity around the world. This coupled with the added confusion of Brexit related issues has, in the UK, been reflected in much publicised supply bottlenecks, rapidly rising energy prices, inflation reaching recent high levels and much speculation about interest rates rising from all-time lows.

In addition, the need for Central Banks around the world to scale back the level of support provided via the various forms of Quantitative Easing creates an uncertain macro background.

The rate of inflation in the UK and in most developed economies is challenging, not least because it remains unclear as to whether this is a short-term factor caused by shortages, or the beginnings of a prolonged spell of price adjustment. Policy response to these scenarios would be different and as yet unclear- a further cause of uncertainty.

Overarching all of these economic and market developments is the fact that the course of the pandemic remains uncertain and the virus has the capacity continually to surprise. The course of the economic recovery is likely to be smoother than that of stock markets.   Set against this is the evidence of a strong recovery in corporate profits and with it, dividends. Your Board is pleased that the revenue for your Company has recovered so quickly and looks forward to a continued improvement into 2022.

John M Evans

Chairman

2 December 2021

Condensed Unaudited Statement of Comprehensive Income

For the six month period to 30 September 2021

	Six months to 30 September 2021
Notes	Revenue	Capital	Total
	£'000	£'000	£'000
Gains on investments held at fair value	-	2,850	2,850
Exchange differences	-	1	1
Income                                                               2	2,993	-	2,993
Investment management fee                             3	(117)	(272)	(389)
Other expenses	(247)	-	(247)
Profit before finance costs and taxation	2,629	2,579	5,208
Net finance costs
Interest on bank loans	(41)	(95)	(136)
Total finance costs	(41)	(95)	(136)
Profit before tax	2,588	2,484	5,072
Tax on ordinary activities                                   4	(23)	-	(23)
Profit for the period	2,565	2,484	5,049
Total comprehensive income for the period	2,565	2,484	5,049
Earnings per share                                            5	2.21p	2.15p	4.36p

The total column of this statement represents the Company's Income Statement and Statement of Comprehensive Income, prepared in accordance with IFRS.  The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing operations.

All of the profit and comprehensive income for the period is attributable to the owners of the Company.

Condensed Unaudited Statement of Comprehensive Income

	Six months to 30 September 2020			Year to March 2021*
Notes	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair value	-	12,797	12,797	-	29,988	29,988
Exchange differences	-	(17)	(17)	-	(35)	(35)
Income                                                               2	1,803	-	1,803	3,788	-	3,788
Investment management fee                             3	(105)	(245)	(350)	(212)	(494)	(706)
Other expenses	(220)	-	(220)	(480)	-	(480)
Profit before finance costs and taxation	1,478	12,535	14,013	3,096	29,459	32,555
Net finance costs
Interest on bank loans	(32)	(74)	(106)	(69)	(160)	(229)
Total finance costs	(32)	(74)	(106)	(69)	(160)	(229)
Profit before tax	1,446	12,461	13,907	3,027	29,299	32,326
Tax on ordinary activities                                   4	(7)	-	(7)	(7)	-	(7)
Profit for the period	1,439	12,461	13,900	3,020	29,299	32,319
Total comprehensive income for the period	1,439	12,461	13,900	3,020	29,299	32,319
Earnings per share                                            5	1.23p	10.67p	11.90p	2.59p	25.16p	27.75p

The total column of this statement represents the Company's Income Statement and Statement of Comprehensive Income, prepared in accordance with IFRS.  The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing operations.

All of the profit and comprehensive income for the period is attributable to the owners of the Company. 

*these figures are audited.

Condensed Unaudited Statement of Financial Position

Notes	30 Sept	30 Sept	31 March
	2021	2020	2021*
	£'000	£'000	£'000
Non-current asset s
Investments held at fair value through profit or loss  9	127,861	109,398	123,249
	127,861	109,398	123,249
Current assets
Receivables	562	300	990
Cash and cash equivalents	1,999	552	2,310
	2,561	852	3,300
Total assets	130,422	110,250	126,549
Current liabilities
Payables	(518)	(519)	(542)
Bank loans   10	(13,000)	(2,000)	(3,500)
	(13,518)	(2,519)	(4,042)
Non-current liabilities
Bank loan  10	-	(7,500)	(7,500)
	-	(7,500)	(7,500)
Total liabilities	(13,518)	(10,019)	(11,542)
Net assets	116,904	100,231	115,007
Capital and Reserves
Share capital  11	134	134	134
Share premium	153	153	153
Capital redemption reserve	5	5	5
Buy back reserve	80,394	81,038	80,394
Special capital reserve	12,505	14,133	13,340
Capital reserves	18,876	(446)	16,392
Revenue reserve	4,837	5,214	4,589
Equity shareholders' funds	116,904	100,231	115,007
Net asset value per Ordinary share   12	100.88p	85.94p	99.25p
Net asset value per B share    12	100.88p	85.94p	99.25p

Approved by the Board, and authorised for issue, on 2 December 2021 and signed on its behalf by:

John M Evans, Director

*these figures are audited.

Condensed Unaudited Statement of Changes in Equity

for the six months to 30 September 2021

	Share Capital	Share Premium	Capital Redemption Reserve	Buy Back Reserve	Special Capital Reserve	Capital Reserves	Revenue Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 1 April 2021	134	153	5	80,394	13,340	16,392	4,589	115,007
Profit for the period	-	-	-	-	-	2,484	2,565	5,049
Dividends paid on Ordinary shares	-	-	-	-	-	-	(2,317)	(2,317)
Capital returns paid on B shares	-	-	-	-	(835)	-	-	(835)
Balance as at 30 September 2021	134	153	5	80,394	12,505	18,876	4,837	116,904

for the six months to 30 September 2020

	Share Capital	Share Premium	Capital Redemption Reserve	Buy Back Reserve	Special Capital Reserve	Capital Reserves	Revenue Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 1 April 2020	134	153	5	81,157	14,945	(12,907)	6,034	89,521
Profit for the period	-	-	-	-	-	12,461	1,439	13,900
Shares bought back for treasury	-	-	-	(119)	-	-	-	(119)
Dividends paid on Ordinary shares	-	-	-	-	-	-	(2,259)	(2,259)
Capital returns paid on B shares	-	-	-	-	(812)	-	-	(812)
Balance as at 30 September 2020	134	153	5	81,038	14,133	(446)	5,214	100,231

for the year to 31 March 2021 *

	Share Capital	Share Premium	Capital Redemption Reserve	Buy Back Reserve	Special Capital Reserve	Capital Reserves	Revenue Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 1 April 2020	134	153	5	81,157	14,945	(12,907)	6,034	89,521
Profit for the year	-	-	-	-	-	29,299	3,020	32,319
Shares bought back for treasury	-	-	-	(763)	-	-	-	(763)
Dividends paid on Ordinary shares	-	-	-	-	-	-	(4,465)	(4,465)
Capital returns paid on B shares	-	-	-	-	(1,605)	-	-	(1,605)
Balance as at 31 March 2021	134	153	5	80,394	13,340	16,392	4,589	115,007

*These figures are audited

Condensed Unaudited Cash Flow Statement

	Six months to 30 Sept 2021	Six months to 30 Sept 2020	Year to 31 March 2021*
	£'000	£'000	£'000
Cash flows from operating activities
Profit before tax	5,072	13,907	32,326
Adjustments for:
Gains on investments held at fair value     through profit or loss	(2,850)	(12,797)	(29,988)
Exchange (gains)/losses	(1)	17	35
Interest income	-	(1)	(1)
Interest received	-	1	1
Dividend income	(2,993)	(1,802)	(3,787)
Dividend income received	3,444	2,354	3,638
Decrease in receivables	2	4	8
(Decrease)/increase in payables	(23)	12	33
Finance costs	136	106	229
Overseas tax suffered	(52)	(23)	(21)
Cash flows from operating activities	2,735	1,778	2,473
Cash flows from investing activities
Purchases of investments	(5,675)	(11,665)	(19,430)
Sales of investments	3,913	7,744	18,849
Cash flows from investing activities	(1,762)	(3,921)	(581)
Cash flows from financing activities
Dividends paid on Ordinary shares	(2,317)	(2,259)	(4,465)
Capital returns paid on B shares	(835)	(812)	(1,605)
Interest on bank loans	(133)	(101)	(763)
Shares purchased for treasury	-	(119)	(217)
Drawdown of loan	2,000	2,000	3,500
Cash flows from financing activities	(1,285)	(1,291)	(3,550)
Net decrease in cash and cash   equivalents	(312)	(3,434)	(1,658)
Effect of movement in foreign exchange	1	(17)	(35)
Opening net cash and cash equivalents	2,310	4,003	4,003
Closing cash and cash equivalents	1,999	552	2,310

*These figures are audited

 

Notes to the Condensed Financial Statements (unaudited)

1.  Accounting Policies

The condensed unaudited financial statements have been prepared on a going concern basis and in accordance with IAS 34 Interim Financial Reporting and the accounting policies set out in the statutory financial statements of the Company for the year ended 31 March 2021. The condensed financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the financial statements of the Company for the year ended 31 March 2021, which were prepared under IFRS requirements.

2.  Income

	30 Sept 2021	30 Sept 2020	31 March 2021
	£'000	£'000	£'000
UK dividend income	2,147	1,694	3,379
UK dividend income - special dividends	601	-	86
Overseas dividend income	179	67	220
Property income distributions	66	41	102
	2,993	1,802	3,787
Other income
Interest on cash and cash equivalents	-	1	1
	2,993	1,803	3,788

3. The Company's investment Manager BMO Investment Business Limited receives an investment management fee of 0.65 per cent per annum of the net asset value of the Company payable quarterly in arrears.

4.  The taxation charge for the period represents withholding tax suffered on overseas dividend income.

5.  The earnings per share are based on the net profit for the period and on 115,881,403 shares (period to 30 September 2020 - 116,765,010; year to 31 March 2021 - 116,451,266), being the weighted average number of shares in issue during the period.

6.  Earnings for the six months to 30 September 2021 should not be taken as a guide to the results of the full year.

7.  The Board has considered the requirements of IFRS 8 'Operating Segments'. The Board is of the view that the Company is engaged in a single segment of business, of investing in equity securities, and that therefore the Company has only a single operating segment. The Board of Directors, as a whole, has been identified as constituting the chief operating decision maker of the Company. The key measure of performance used by the Board to assess the Company's performance is the total return on the Company's net asset value as calculated under IFRS and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in the condensed financial statements.

 

8.  Dividends and capital repayments

	Payment Date	Six months to 30 Sept 2021	Six months to 30 Sept 2020	Year to 31 March 2021
		£'000	£'000	£'000
In respect of the previous period:
Fourth interim dividend at 1.43p (2020: 1.34p) per Ordinary share	7 May 21	1,218	1,151	1,151
Fourth capital repayment at 1.43p (2020: 1.34p) per B share	7 May 21	439	414	414
In respect of the period under review:
First interim dividend at 1.29p (2021: 1.29p) per Ordinary share	6 Aug 21	1,099	1,108	1,108
First capital repayment at 1.29p (2021: 1.29p) per B share	6 Aug 21	396	398	398
Second interim dividend (2021: 1.29p) per Ordinary share		-	-	1,107
Second capital repayment (2021: 1.29p) per B share		-	-	397
Third interim dividend (2021: 1.29p) per Ordinary share		-	-	1,099
Third capital repayment (2021: 1.29p) per B share		-	-	396
		3,152	3,071	6,070

A second interim dividend for the year to 31 March 2022, of 1.29p per Ordinary share, was paid on 5 November 2021 to Ordinary shareholders on the register on 8 October 2021.

A second quarter capital repayment of 1.29p per B share was paid on 5 November 2021 to B shareholders on the register on 8 October 2021.

Although these payments relate to the period ended 30 September 2021, under IFRS they will be accounted for in the six months to 31 March 2022, being the period during which they are paid.

 

9.  Investments held at fair value through profit or loss

	Listed/ Quoted (Level 1) £'000	Subsidiary/ Unlisted (Level 3) £'000	Total £'000
Cost brought forward	109,690	250	109,940
Gains brought forward	13,309	-	13,309
Fair value of investments at 31 March 2021	122,999	250	123,249
Movement in the period:
Purchases at cost	5,675	-	5,675
Sales proceeds	(3,913)	-	(3,913)
Gains on investments sold in the period	505	-	505
Gains on investments held at 30 September 2021	2,345	-	2,345
Fair value of investments at 30 September 2021	127,611	250	127,861
Cost at 30 September 2021	111,957	250	112,207
Gains at 30 September 2021	15,654	-	15,654
Fair value of investments at 30 September 2021	127,611	250	127,861

Accounting standards recognise a hierarchy of fair value measurements for financial instruments which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The classification of financial instruments depends on the lowest significant applicable input, as follows:

· Level 1 - quoted (unadjusted) prices in active markets for identical assets or liabilities.

· Level 2 - other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly. The Company held no such instruments during the period under review.

· Level 3 - techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data. The Company's investment in its subsidiary undertaking, Investors Securities Company Limited, is included in Level 3 and is valued at its net asset value.

There were no transfers between levels of the fair value hierarchy during the six months ended 30 September 2021.

10.  Bank loans

The Company has a £7.5 million unsecured term loan from Scotiabank Europe plc until 28 September 2022 and at a fixed interest rate of 2.58 per cent per annum. The fair value of the £7.5 million term loan, calculated using a discounted cashflow technique, is not materially different from the value reflected in the Unaudited Statement of Financial Position.

The Company also has a £7.5 million unsecured multicurrency revolving credit facility ("RCF") with Scotiabank (Ireland) Designated Activity Company, available until 28 September 2022. £5.5 million of the RCF was drawn down at 30 September 2021 at an interest rate of 1.5% (30 September 2020 - £2 million; 31 March 2021 - £3.5 million).

 

11.  Share capital

  Allotted, issued and fully paid

	Listed		Held in Treasury		In Issue
	Number	£	Number	£	Number	£
Ordinary Shares of 0.1p each
Balance at 1 April 2021	102,067,144	102,067	(16,894,491)	(16,894)	85,172,653	85,173
Balance at 30 September 2021	102,067,144	102,067	(16,894,491)	(16,894)	85,172,653	85,173
B Shares of 0.1p each
Balance at 1 April 2021	32,076,703	32,077	(1,367,953)	(1,368)	30,708,750	30,709
Balance at 30 September 2021	32,076,703	32,077	(1,367,953)	(1,368)	30,708,750	30,709
Total at 30 September 2021	134,143,847	134,144	(18,262,444)	(18,262)	115,881,403	115,882

During the period, the Company bought back nil Ordinary shares and bought back nil B shares to hold in treasury (period to 30 September 2020 - 100,000 Ordinary shares and 50,000 B shares; year to 31 March 2021 - 750,000 Ordinary shares and 150,000 B shares).

At 30 September 2021 the Company held 16,894,491 Ordinary shares and 1,367,953 B shares in treasury (30 September 2020 - 16,244,491 Ordinary shares and 1,267,953 B shares; 31 March 2021 - 16,894,491 Ordinary shares and 1,367,953 B shares).

12.  The net asset value per share is based on shareholders' funds at the period end and on 85,172,653 Ordinary shares and 30,708,750 B shares, being the number of shares in issue at the period end (30 September 2020 - 85,822,653 Ordinary shares and 30,808,750 B shares; 31 March 2021 - 85,172,653 Ordinary shares and 30,708,750 B shares).

13.       The fair values of the Company's financial assets and liabilities are not materially different from their carrying values in the financial statements.

The Company's financial risk management objectives and policies are consistent with those disclosed in the Company's financial statements for the year ended 31 March 2021.

14.    Changes in liabilities arising from financing activities

	Six months to 30 September 2021	Six months to 30 September 2020		Year to 31 March 2021
	£'000	£'000		£'000
Opening net debt at beginning of   period/year	11,000	7,500		7,500
Cash flows:
Drawdown of revolving credit facility	2,000	2,000		3,500
Closing net debt at end of period/year	13,000	9,500		11,000

15.      Going concern

In assessing the going concern basis of accounting, the Directors have had regard to the guidance issued by the Financial Reporting Council (including that due to COVID-19) and have undertaken a rigorous review of the Company's ability to continue as a going concern and specifically in the context of the COVID-19 pandemic.

          The Company's investment objective and policy, which is subject to regular Board monitoring processes, is designed to ensure that the Company is invested mainly in liquid, listed securities. The value of these investments exceeds the Company's liabilities by a significant margin. The Company retains title to all assets held by its custodian and has agreements relating to its borrowing facilities with which it has complied. Cash is held only with banks approved and regularly reviewed by the Manager.

 As part of the going concern review, the Directors noted that borrowing facilities of a £7.5 million fixed term loan and a £7.5 million revolving credit facility are committed to the Company until 28 September 2022 and loan covenants are reviewed by the Board on a regular basis.

        The Directors believe, having assessed the principal risks and other matters, including the COVID-19 pandemic and in light of the controls and review processes noted and bearing in mind the nature of the Company's business and assets and revenue and expenditure projections, that the Company has adequate resources to continue in operational existence for a period of at least twelve months from the date of approval of the financial statements. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

16. Related party transactions

The Directors of the Company are considered a related party. The Directors receive aggregated remuneration for services as Directors and for which there were no outstanding balances at the period end. There have been no transactions with related parties during the first six months of the current financial year that have materially affected the financial position or performance of the Company during the period and there have been no changes in the related party transactions described in the last Annual Report that could do so.

17.  The Company's auditor, Deloitte LLP, has not audited or reviewed the Interim Report to 30 September 2021 pursuant to the Auditing Practices Board guidance on 'Review of Interim Financial Information'. These are not full statutory financial statements in terms of Section 434 of the Companies Act 2006 and are unaudited. Statutory financial statements for the year ended 31 March 2021, which received an unqualified audit report and which did not contain a statement under Section 498 of the Companies Act 2006, have been lodged with the Registrar of Companies. The condensed financial statements shown for the year ended 31 March 2021 are an extract from those financial statements. No full statutory financial statements in respect of any period after 31 March 2021 have been reported on by the Company's auditor or delivered to the Registrar of Companies.

The Interim Report to 30 September 2021 is available on the website maintained on behalf of the Company at www.bmoukhighincome.com 

 

Statement of Principal Risks and Uncertainties

Most of the Company's principal risks and uncertainties that could threaten its objective, strategy, future performance, liquidity and solvency are market related and comparable to those of other investment trusts investing primarily in listed securities.

These risks, and the way in which they are managed, are described under the heading 'Principal Risks and Uncertainties and Viability Statement' within the Strategic Report in the Company's Annual Report for the year ended 31 March 2021.

The Company's principal risks and uncertainties have not changed materially since the date of that report and are not expected to change materially for the remainder of the Company's financial year.

The principal risks identified in the Annual Report were:

• Financial Risk. The Company's assets consist mainly of listed equity securities and its principal financial risks are therefore market related and include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk

• Investment and strategic risk

• Regulatory risk

• Operational risk

• Custody risk

These include risks in relation to failures at service providers or loss or sabotage of data through cyber threats or business continuity failure.

The Board has also considered the impact of Coronavirus (COVID-19) which has increased uncertainty and volatility in markets and has impacted the value of investments. In addition, the operational resilience of the Manager and the Company's other third party service providers has been considered. This is included within financial risk and operational risk.

Statement of Directors' Responsibilities in Respect of the Interim Report

We confirm that to the best of our knowledge:

·the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

· the Chairman's Statement and the Statement of Principal Risks and Uncertainties (together constituting the Interim Management Report) include a fair review of the information required by the Disclosure Guidance and Transparency Rule ('DTR') 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements;

· the Statement of Principal Risks and Uncertainties shown above is a fair review of the principal risks and uncertainties for the remainder of the financial year; and

· the Chairman's Statement together with the condensed set of financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period, and any changes in the related party transactions described in the last Annual Report that could do so.

On behalf of the Board

John M Evans

Director

2 December 2021

 

Alternative Performance Measures ("APMs")

The Company uses the following APMs:

Discount/premium - the share price of an investment company is derived from buyers and sellers trading their shares on the stock market. This price is not identical to the net asset value (NAV) per share of the underlying assets less liabilities of the Company. If the share price is lower than the NAV per share, the shares are trading at a discount. This usually indicates that there are more sellers of shares than buyers. Shares trading at a price above NAV per share are deemed to be at a premium usually indicating there are more buyers of shares than sellers.

		30 September 2021			31 March 2021
		Ordinary Shares	B Shares	Units	Ordinary Shares	B Shares	Units
Net asset value per share	(a)	100.88p	100.88p	403.52p	99.25p	99.25p	397.00p
Share price	(b)	98.00p	103.50p	389.00p	91.50p	91.50p	365.00p
(Discount)/premium (c=(b-a)/(a))	(c)	(2.9)%	2.6%	(3.6)%	(7.8)%	(7.8)%	(8.1)%

Gearing - represents the excess amount above shareholders' funds of total investments, expressed as a percentage of the shareholders' funds.  If the amount calculated is negative, this is a 'net cash' position and no gearing.

		30 September 2021 £'000	31 March 2021 £'000
Investments held at fair value through profit or loss	(a)	127,861	123,249
Net assets	(b)	116,904	115,007
Gearing (c=(a/b)-1)%	(c)	9.4%	7.2%

Total Return - the theoretical return to shareholders calculated on a per share basis by adding dividends/capital repayments paid in the period to the increase or decrease in the share price or NAV in the period.  The dividends/capital repayments are assumed to have been re-invested in the form of shares or net assets, respectively, on the date on which the shares were quoted ex-dividend.

The effect of reinvesting these dividends/capital repayments on the respective ex-dividend dates and the NAV total returns and Share price total returns are shown below.

	30 September 2021		31 March 2021
	Ordinary shares/B shares	Units	Ordinary shares/B shares	Units
NAV per share at start of period/year	99.25p	397.00p	76.66p	306.64p
NAV per share at end of period/year	100.88p	403.52p	99.25p	397.00p
Change in the period/year	1.6%	1.6%	29.5%	29.5%
Impact of dividend/capital repayment reinvestment†	2.8%	2.8%	7.9%	7.9%
NAV total return	4.4%	4.4%	37.4%	37.4%

^† During the six months to 30 September 2021 dividends/capital repayments totalling 2.72p (Ordinary shares/B shares) and 10.88p (units) went ex-dividend. During the year to 31 March 2021 the equivalent figures were 5.21p (Ordinary shares/B shares) and 20.84p (units).

	30 September 2021			31 March 2021
	Ordinary Shares	B Shares	Units	Ordinary Shares	B Shares	Units
Share price per share at start of period/year	91.5p	91.5p	365.0p	69.5p	67.5p	273.0p
Share price per share at end of period/year	98.0p	103.5p	389.0p	91.5p	91.5p	365.0p
Change in the period/year	7.1%	13.1%	6.6%	31.7%	35.6%	33.7%
Impact of dividend/capital repayment reinvestment†	3.1%	3.3%	2.3%	9.1%	9.3%	6.9%
Share price total return for the period/year	10.2%	16.4%	8.9%	40.8%	44.9%	40.6%

^† During the six months to 30 September 2021 dividends/capital repayments totalling 2.72p (Ordinary shares/B shares) and 10.88p (units) went ex-dividend. During the year to 31 March 2021 the equivalent figures were 5.21p (Ordinary shares/B shares) and 20.84p (units).

Yield - The total annual dividend/capital repayment expressed as a percentage of the period end share price.

		30 September 2021*			31 March 2021
		Ordinary Shares	B Shares	Units	Ordinary Shares	B Shares	Units
Annual dividend/capital repayment	(a)	5.40p	5.40p	21.60p	5.30p	5.30p	21.20p
Share price	(b)	98.00p	103.50p	389.00p	91.50p	91.50p	365.00p
Yield (c=a/b)	(c)	5.5%	5.2%	5.6%	5.8%	5.8%	5.8%

*Based on expected minimum annual dividend/capital repayment of 5.40 pence per share in respect of the year ending 31 March 2022.

For further information, please contact:

Philip Webster, Fund Manager  0207 628 8000

Ian Ridge, Company Secretary  0207 628 8000

 

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