CT UK CAPITAL AND INCOME INVESTMENT TRUST PLC

Audited Statement of Results for the year ended 30 September 2024

LEI: 21380052ETTRKV2A6Y19

29 November 2024

CT UK Capital and Income Investment Trust PLC ("CTUK" / the "Company") today announces its results for the year ended 30 September 2024.

·      Net Asset Value ("NAV") per share total return of 18.4%, compared to the FTSE All-Share Index (our "Benchmark") total return of 13.4% and Share Price total return of 16.6%.

·      The Board is pleased to declare a fourth quarterly dividend of 3.95p per share ⁽¹⁾. Together with the three dividends already paid for this financial year, this takes the total dividend for the year to 12.50p per share, an increase of 2.9% compared to last year. This provides Shareholders with an annual dividend yield of 3.7% ⁽²⁾.

·      This is the 31^st consecutive year of increased annual dividend payments, maintaining the Company's status as an AIC Dividend Hero. 

(1) The fourth interim dividend will be paid on 20 December 2024 to Shareholders on the register on 6 December 2024.  The ex-dividend date is 5 December 2024.

(2) Calculated as the total of the four most recent quarterly dividends declared divided by the period end share price.

The Chair, Jane Lewis, said:

"We are delighted to report another year of strong performance for the full year to 30 September 2024, with the NAV total return of 18.4% significantly ahead of the Benchmark and the dividend continuing to grow. Despite the challenging economic conditions, the Company continues to deliver on its objective of long-term capital and income growth.

"We are proud that the Company is an AIC Dividend Hero, having increased its dividend every year since launch in 1992. It is firmly our intention to continue this record and we are supported in that ambition by the strength of our revenue reserve, currently at £11.1 million.

"Looking ahead, while uncertainties remain, we take confidence in the resilience demonstrated by the global economy in adapting to recent challenges. 2024 has been the year of democracy, with around 2 billion people eligible to vote across the world in key elections.  That these outcomes are now largely known and settled should allow a course of greater clarity next year and into the following electoral cycle.  In turn, this should help companies to plan better and therefore to invest and execute their strategies more efficiently."

Chair's Statement

I am pleased to write to you with my report for the year to 30 September 2024.

Over the year, the total return gain in our Net Asset Value per share was 18.4%, comfortably outperforming the total return over the same period of 13.4% for the Company's Benchmark, the FTSE All-Share Index ("the Index"). The Fund Manager's Review, in the Report and Accounts for the Year Ended 30 September 2024, gives more detail on market movements and our performance.

Although it has been a challenging year, stock markets have generally been positive. The global geo-political situation was troubled before the year began as Russia's invasion of Ukraine continues, but into this, the escalating conflict in the Middle East has added yet greater uncertainty and misery. Economic growth in the UK has shown some improvement after the mild recession of the second half of 2023, but growth rates are pretty lacklustre by historic standards.

More positively, inflation, which had escalated rapidly with the recovery from COVID-19, continued to decrease and having started our financial year at 6.7%, the UK Consumer Price Index ("CPI") fell to 2.2% at our year end, having been at the Bank of England's target level of 2.0% in the summer. This reduction in inflationary pressure was supportive for equity markets as it was expected to be the prelude to meaningful interest rate cuts.

Total Return - The Company offers a reliable income while at the same time seeking to grow the size of your investment

Looking at our performance over the last three years. Our performance somewhat lagged that of the Index in 2022 in an environment of rising interest rates and particularly around the period of the infamous mini-budget that caused so much turmoil in investment markets. With conditions more stable over the last year, we have produced stronger results and a large part of the deficit has been clawed back.

Over the longer term, looking at the 10 and 25 year periods, our performance has been well ahead of the Index. As an active managed investment, it is impossible to guarantee consistent performance in excess of the Index, but our performance when markets have been stable or rising has more than outweighed the periods of more challenging performance, which have generally coincided with times when the equity market has suffered more turmoil. Our investment process and its attention to long-term fundamentals has generated positive absolute investment returns and outperformance of the Index over the long-term, and our attractive dividend yield and annual dividend growth are an integral part of this.

Income Growth - The Company has increased its dividend every year since it was launched, through the market's ups and downs

Our earnings fell last year as the dividends paid to us by our investee companies declined. At face value, this is surprising given the strength of the UK stock market and our own NAV growth. The decline in our income should not be taken as a negative indicator for performance either historically or prospectively, but partly as a change in the balance between capital and income returns that we happened to receive last year.

The reasons behind this are explained in detail in the Fund Manager's Review, but in summary there were three major factors at play. First, our previous year's figures had been boosted by special dividends which were not repeated this year. Secondly, one of our major investments has decided to redirect its cash return to shareholders into a share buyback programme and this is arguably leading to greater capital growth in that investment, albeit at the expense of dividend income. And thirdly, corporate activity has led to the take-overs of a number of our higher yielding investments, again boosting capital returns, but reducing our dividend income. 

With these results, the Board is declaring a dividend for our fourth quarter of 3.95 pence per share to give a total for the year of 12.50 pence. This is a rate of increase over one year of 2.9%, which compares to CPI of 1.7%. The Board recognises the importance to Shareholders of reliable and growing dividends. Our steady, incremental approach to increasing the dividend has led to considerable outperformance of CPI and the implied dividend from our main benchmark, the FTSE All-Share Index over the longer term. For example, over 25 years, growth in these three comparators has been 160% in our dividend, 85% for CPI and 138% for the dividend from the FTSE All-Share Index.

Translating these figures to compound annual rates of growth, over 25 years we have grown your Company's dividend by a rate of 3.2%, compared to 2.5% for CPI and 2.9% for the FTSE All-Share Index.

In addition to the growth in the dividend, the starting yield is also of significance to Shareholders, and as at 30 September 2024, the yield on the shares was 3.7% compared to 3.6% from the FTSE All-Share Index.

We are proud that your Company is an AIC Dividend Hero and has increased its dividend every year since launch in 1992. It is firmly our intention to continue this record of dividend growth and we are supported in that ambition by the strength of our revenue reserve, currently at £11.1 million. As in other years when our earnings were not quite sufficient to match our dividend, we have drawn from this reserve this year in order to grow the dividend, and we are confident that in years to come, where earnings exceed the dividend, this reserve will be added to.

Share Price discount to NAV

Over the year, the Company's shares traded at an average discount to the underlying NAV of 3.8% and within a range of -1.4% and -5.8%.

The focus in my statement up to this point has been on NAV per share, as that is what your investment manager is most directly able to influence. However, the Board is very aware that the investment experience of Shareholders is directly linked to the Company's share price. The Board has long believed it is in Shareholders' interests that the Company's shares should not trade at prices that are too detached from the underlying NAV per share. To try to create the right conditions for this, the Company has the ability to buyback its own shares if the share price stands at a discount compared to the underlying NAV per share and to issue its own shares if the share price is at a sufficient premium.

Last year, your Company bought back 4.3 million of its own shares at an average discount of 4.2% and increasing the NAV of the Company by 0.2%. This is more than in any other year and is in large part a consequence of selling by the beneficiaries of maturing Child Trust Funds, set up in the early 2000's, many of which bought shares in your Company.

At the forthcoming Annual General Meeting, the Board will again ask Shareholders to renew its authorities to issue shares at a premium and buyback at a discount. This will assist the Board in continuing to protect the discount to NAV at which the Company's shares may trade.

Gearing

We have borrowed additional funds to invest in our portfolio throughout the year. These borrowings are on a flexible, short-term basis with the cost being linked to short-term interest rates. Borrowing for additional investment adds value for Shareholders if the cost of the borrowing is less than the additional returns achieved by extra investments and that was clearly the case last year.

Costs

Costs are an inevitable drag on performance and it is one of our objectives to run your Company as efficiently as possible. The largest expense is the contract for the investment management of our portfolio. This is directly related to the value of the investment assets and so increased over the last year. Other expenses also rose across the board as a result of inflation-linked price increases. Press and publication expenses increased 20% as the Company marketed its proposition to Shareholders. Overall, the cost ratio at 0.67% still remains at a competitive level.

ESG

Your investment manager integrates the consideration of financially material Environmental, Social and Governance ("ESG") factors into its research and investment process. Pages 24 to 27 in the Report and Accounts for the Year Ended 30 September 2024 explain Columbia Threadneedle Investment's ESG policies and how these are implemented with respect to management of the investment portfolio. There are also examples of its engagement with our investee companies.

Directorate Change

I was appointed to the Board in November 2015 and became Chair with effect from 1 July 2023. As part of the Board's ongoing succession planning and in accordance with corporate governance best practice, I will retire from the Board at the conclusion of the Company's 2025 Annual General Meeting.

Upon my retirement, it is intended that Nicky McCabe, the Company's Senior Independent Director, who was appointed to the Board in January 2021 will become Chair. Nicky has extensive sector experience as she was formerly Head of Product and Investment Trusts at Fidelity International as well as a director and Chief Operating Officer of a number of Fidelity companies. Nicky is currently a non-executive director of abrdn Asian Income Fund Ltd, Artemis Investment Management Limited and EFG Asset Management (UK) Limited. I am delighted that the Company and Shareholders will benefit from her extensive experience, knowledge and leadership.

As she becomes Chair, Nicky will hand over her other roles within the Company to Board colleagues. Thus at the conclusion of the 2025 AGM, it is intended that Patrick Firth will be appointed Senior Independent Director and Christopher Metcalfe will become Chair of the Management Engagement Committee.

As a further part of the Board's succession planning a search company was commissioned to find a new Director for the Board. It is anticipated that a new Director will be appointed to the Board shortly.

Cancellation of Share Premium Account

The Board agreed during the year to propose the cancellation of the Company's share premium account at the forthcoming Annual General Meeting ("AGM"). The Company has a sizeable share premium account which is non-distributable and the Board believes that converting the share premium account to a distributable reserve will provide a significant pool of reserves which can be used in future, if required, to fund dividends, share buybacks and other returns of capital in accordance with applicable law.

AGM

The AGM will be held at 12.30pm on 6 March 2025 at the offices of Columbia Threadneedle Investments, Cannon Place, 78 Cannon Street, London, EC4N 6AG. This will be followed by a presentation by our manager, Julian Cane, on the Company and its investment portfolio.

For Shareholders who are unable to attend, any questions they may have regarding the resolutions proposed at the AGM or the performance of the Company can be directed to a dedicated email account, ctukagm@columbiathreadneedle.com, by Thursday 27 February 2025. We will endeavour, in so far as reasonably practicable, to address all such questions at the meeting. In addition, the meeting will be recorded and will be available to view on the Company's website, www.ctcapitalandincome.co.uk shortly thereafter.

To ensure that your votes will count, I would encourage all Shareholders especially those that cannot attend in person to complete and submit their Form of Proxy or Form of Direction in advance of the AGM.

Outlook

While there may be many uncertainties to be faced in the coming year and beyond, there should be recognition that the UK and the world have been largely able to navigate the hugely difficult environment of recent years. This resilience should help to give some confidence about the future.

The challenges, including COVID-19, geo-political issues, war in Europe, inflationary bursts and interest rates rising rapidly from all-time low levels, have definitely played a part in setting future direction. 2024 has been the year of democracy with around 2 billion people eligible to vote across the world in key elections. That these outcomes are now largely known and settled should allow a course of greater clarity next year and into the following electoral cycle. In turn, this should help companies to plan better and therefore to invest and execute their strategies more efficiently.

The inflationary surge experienced across most of the world brought on largely by the impact on supply chains from responses to COVID-19 and the monetary and fiscal support to keep economies operating, seems to be easing in most places.  This is clearly a positive development and should allow short-term interest rates to be reduced in most key economies, but the battle against inflation may yet prove to be more protracted and hence the reduction in rates may consequentially be somewhat delayed.  As and when rates are lowered, this should be advantageous for economic growth and stock markets.  As ever, skilled stock selection will be key.

It has been a great honour to serve on the Company's Board first as a non-executive director and latterly as its Chair. I would like to thank Julian Cane, our Fund Manager, for his continuing quiet professionalism throughout my tenure regardless of what the markets and the geo-political landscape deliver, ensuring always that Shareholders benefit from his investment skills honed through a long career. Further thanks are due to Scott McEllen, our Company Secretary for his diligence and good natured keeping of order at Board meetings and to Marrack Tonkin, Columbia Threadneedle's head of investment trusts, who treads a difficult line between representing the management house and supporting an independent Board.

Finally, on behalf of the Board, I would like to thank Shareholders for their continued support.

Jane Lewis

Chair

28 November 2024

Principal Risks and Future Prospects

The principal risks together with their mitigations are set out below. The Board's processes for monitoring them and identifying emerging risks are set out on page 51 and in note 21 of the Annual Report & Accounts. The global economy continues to suffer considerable disruption due to the effects of the war in Ukraine, events in the Middle East and the after-effects of a high inflation environment.

The Directors continue to review the key risk register for the Company which identifies the risks that the Company is exposed to, the controls in place and the actions being taken to mitigate them.

The principal risks identified as most relevant to the assessment of the Company's future prospects and viability are detailed below.

Emerging risks represent new information which could significantly change how an existing risk is perceived, but where the impact or likelihood remains uncertain.

Future Prospects

Through a series of connected stress tests ranging from moderate to extreme scenarios and based on historical information, but forward looking over the five years commencing 1 October 2024, the Board assessed the risks of:

•              potential illiquidity of the Company's portfolio;

•              the effects of any substantial future falls in investment values and income receipts on the ability to repay and renegotiate borrowings;

•              potential breaches of loan covenants, the maintenance of dividend payments and retention of investors; and

•              the potential need for extensive share buybacks in the event of share price volatility and a move to a wide discount.

The Board also took into consideration the perceived viability of its principal service providers, potential effects of anticipated regulatory changes and the potential threat from competition. The Board's conclusions are set out under the Five Year Horizon Statement on page 30 of the Annual Report & Accounts. A five year period is considered to be a reasonable time frame for measuring and assessing medium to long term investment performance. A five year period has also been selected as the shares may not be suitable for investors intending to hold them for less than that period.

Principal Risks

·      Market and Political Risks

Risk description:  Macroeconomic and geopolitical risk including rising international tensions arising from the war in Ukraine, dispute in the South China Sea, events in the Middle East and the emerging policies of the newly elected UK Government.

No change in overall risk during the year.

Mitigation:   The Company has a clearly defined and approved strategy which is reviewed and approved on an annual basis. The Board can hold additional board meetings at short notice to discuss the impact of significant changes in the macroeconomic and geopolitical environment. The Company maintains a portfolio of diversified stocks.

Forward looking stress tests ranging from moderate to extreme scenarios are provided by the Manager to the Board to support the Five Year Horizon Statement.

·      Investment Performance Risk

Risk description: Unfavourable markets or asset allocation, sector and stock selection and management and use of cash and gearing are inappropriate giving rise to investment underperformance as well as impacting capacity to pay dividends.

No change in overall risk during the year.

Mitigation: The portfolio of quoted securities is diversified and the Company's structure enables it to take a long term view notwithstanding the current market volatility. Investment policy, performance, revenue and gearing are reviewed at each Board meeting. The Manager's Investment Risk team provides independent oversight on investment risk management. The Board regularly considers operating costs along with underlying dividend income and the implications for the dividend payment capacity of the Company taking into account revenue reserves.

·      Legal and Regulatory Risks 

Risk description: To maintain its investment trust status, the Company is required to comply with Section 1158 of the UK Corporation Taxes Act. The Company is also required to comply with UK company law, is subject to the requirements of the AIFMD and the relevant regulations of the London Stock Exchange and the Financial Conduct Authority.

No change in overall risk during the year.

Mitigation: The Board receives regular control reports from the Manager covering risk and compliance. The Board has access to the Manager's Risk Manager and requires any significant issues directly relevant to the Company to be reported immediately. The Depositary is specifically liable for loss of any of the Company's securities and cash held in custody.

·      Product Strategy Risk

Risk description:  Inappropriate business or marketing strategy particularly in relation to investor needs or sentiment giving rise to a share price discount to NAV per share.

No change in overall risk during the year.

Mitigation: To gauge investor sentiment, the Board holds an investor satisfaction survey which is conducted every five years ahead of a vote on whether the Company should continue. The Board holds a separate annual meeting to consider the Company's strategy. The appointment of the Manager is also reviewed annually. Share buybacks can be employed to help moderate discount volatility, while share issues can be made when the shares are trading at a premium. At each Board meeting the Directors receive an update on the marketing activities undertaken by the Manager. The Company's Broker provides periodic updates to the Board relating to the Company's trading in the wider market.

·      Cyber Risks

Risk description: Theft of Company and customer assets or data.

No change in overall risk during the year.

Mitigation: The Manager has as Information Security team with the objective to protect its clients from malicious external attacks.

Supervision of the Manager's third-party service providers, including State Street and SS&C, is maintained by Columbia Threadneedle Investments and includes assurances regarding IT security and cyber-attack prevention.

·      Third Party Service Provider Risks 

Risk description:  Errors, fraud or control failures at service providers or business continuity failure could damage reputation or investors' interests or result in losses.

No change in overall risk during the year.

Mitigation: The Board receives regular control reports from the Manager covering risk and compliance including oversight of third-party service providers. The Board has access to the Manager's Risk Manager and requires any significant issues directly relevant to the Company to be reported immediately. The Depositary is specifically liable for loss of any of the Company's securities and cash held in custody.

Five Year Horizon

In accordance with the UK Code, the Directors have assessed the future prospects of the Company over the coming five years. Based on this assessment, and in the context of the Company's business model, strategy and operational arrangements, the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five year period ending November 2029. For this reason, the Board also considers it appropriate to continue adopting the going concern basis in preparing these financial statements.

Statement of Directors' Responsibilities 

In accordance with Chapter 4 of the Disclosure Guidance and Transparency Rules, each of the Directors listed on page 36 of the Annual Report confirm to the best of their knowledge that:

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

·      the Strategic report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face; and

·      the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for Shareholders to assess the Company's position and performance, business model and strategy.

On behalf of the Board

Jane Lewis

Chair

28 November 2024

Income Statement

The total column of this statement is the profit and loss account of the Company. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

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

A statement of Comprehensive Income is not required as all gains and losses of the Company have been reflected in the above statement.

Statement of Changes in Equity

Balance Sheet

Statement of Cash Flows

Notes

1    Return per ordinary share

Revenue return

The revenue return per share of 11.18p (2023: 13.26p) is based on the revenue return attributable to Shareholders of £11,439,000 profit (2023: £14,056,000 profit).

Capital return

The capital return per share of 43.12p (2023: 22.89p) is based on the capital return attributable to Shareholders of £44,114,000 profit (2023: £24,267,000 profit).

Total return

The total return per share of 54.30p (2023: 36.15p) is based on the total return attributable to Shareholders of £55,553,000 profit (2023: £38,323,000 profit).

Weighted average ordinary shares in issue

The returns per share are based on a weighted average of 102,309,411 (2023: 106,023,426) ordinary shares in issue during the year.

2    Dividends

The Directors have declared a fourth interim dividend in respect of the year ended 30 September 2024 of 3.95 pence per share, payable on 20 December 2024 to all Shareholders on the register at close of business on 6 December 2024, ex-dividend 5 December 2024.

3    Financial risk management

The Company is an investment company, listed on the London Stock Exchange, and conducts its affairs so as to qualify in the United Kingdom ("UK") as an investment trust under the provisions of section 1158 of the Corporation Tax Act. In so qualifying, the Company is exempted in the UK from corporation tax on capital gains on its portfolio of investments.

The Company's investment objective is to secure long-term capital and income growth from a portfolio consisting mainly of FTSE All-Share companies. The Company can also have exposure to overseas companies, with the value of the non-UK portfolio not exceeding 10% of the Company's gross assets. In pursuing this objective, the Company is exposed to financial risks which could result in a reduction of either or both of the value of the net assets and the profits available for distribution by way of dividend. These financial risks are principally related to the market (currency movements, interest rate changes and security price movements), liquidity and credit. The Board, together with the Manager, is responsible for the Company's risk management.

The full details of financial risks are contained in note 21 of the Report and Accounts.

4      Annual General meeting

The 2025 Annual General Meeting ("AGM") of the Company will be held at 12.30pm on Thursday 6 March 2025 at the offices of Columbia Threadneedle Investments, Cannon Place, 78 Cannon Street, London EC4N 6AG. This will be followed by a presentation by our manager Julian Cane on the Company and its investment portfolio.

For Shareholders who are unable to attend, any questions they may have regarding the resolutions proposed at the AGM or the

performance of the Company can be directed to a dedicated email account, ctukagm@columbiathreadneedle.com, by Thursday 27 February 2025. We will endeavour, in so far as reasonably practicable, to address all such questions at the meeting. In addition, the meeting will be recorded and will be available to view on the Company's website, www.ctcapitalandincome.co.uk shortly thereafter.

To ensure that your votes will count we would encourage all Shareholders that cannot attend in person to complete and submit their Form of Proxy or Form of Direction in advance of the AGM.

5      Report and accounts

The report and accounts for the year ended 30 September 2024 will be posted to Shareholders and made available on the website www.ctcapitalandincome.co.uk shortly. Copies may also be obtained by mailing the Company's registered office, Cannon Place, 78 Cannon Street, London EC4N 6AG.

By order of the Board

Columbia Threadneedle Investment Business Limited, Secretary

28 November 2024