To: RNS
From: CT UK High Income Trust PLC
Date: 1 June 2023
LEI: 213800B7D5D7RVZZPV45
Statement of Audited Results for the year ended 31 March 2023
Financial Highlights
· Distribution yield(1) of 6.7% on Ordinary shares at 31 March 2023, compared to the yield on the FTSE All-Share Index of 3.6%. Total dividends increased by 1.1% to 5.51p per Ordinary share compared to the prior year.
· Distribution yield(1) of 6.5% on B shares at 31 March 2023, compared to the yield on the FTSE All-Share Index of 3.6%. Total capital repayments increased by 1.1% to 5.51p per B share compared to the prior year.
· Net asset value total return(1) per share for the financial year was -0.4%, compared to the total return of the Benchmark(2) of +2.9%.
· Ordinary share price total return(1) per share for the financial year was +0.6%, compared to the total return of the Benchmark(2) of +2.9%.
· B share price total return(1) per share for the financial year was +2.3% compared to the total return of the Benchmark(2) of +2.9%.
(1) Yield and total return - 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
"Tenth consecutive year of dividend/capital repayment increases and at 31 March 2023 the Ordinary shares and B shares had yields of 6.7% and 6.5% respectively."
I am pleased to present the first annual results of CT UK High Income Trust PLC since becoming the Company's Chairman upon the retirement of John Evans at the conclusion of the 2022 AGM. I have put on record my thanks to John for his nine years of unswerving service to shareholders and am pleased to reiterate my appreciation for his guidance and leadership.
The year under review has been yet another difficult one for investors in conventional equity investments. The unprovoked invasion by Russia into Ukraine's territory has become a full-on war which, apart from the tragic and needless loss of life, has created and exacerbated global price rises of energy, commodities, raw materials, grain and most other foodstuffs leading to severe inflationary pressures. This has become a global problem and the UK has not escaped its effects with headline inflation exceeding 10%. The Bank of England was slow to acknowledge the threat of escalating prices to the stability of the economy but it is expected that, after twelve rises in Bank interest rates to 4.5%, its actions will have the desired effect of reining in the beast before the calendar year end. Meanwhile, full employment has been maintained and recession avoided so, being an optimist, I am prepared to say that I think the worst is behind us.
Against this backdrop, managing an investment company investing predominantly in a differentiated but concentrated portfolio of UK-quoted equities for income and capital growth has not been a walk in the park. Your Portfolio Manager, Philip Webster, deserves due credit for maintaining his focus during what has now been a trying three years. He has taken positions in quality stocks at depressed prices over the last few months and is continuing to see other opportunities. Your Board has the utmost confidence in Philip to deliver income and capital returns over the coming years.
Performance
In the year to 31 March 2023 your Company produced a Net Asset Value ('NAV') total return of -0.4% versus the total return from the FTSE All-Share Index, the benchmark index, of +2.9%. Whilst it is disappointing to lag the index, given the backdrop I have described, the shortfall is not unexpected. Philip goes into his usual detail on the portfolio holdings in the Manager's Review but the Board is well aware and supportive of what he is aiming to achieve by investing in a concentrated number of positions, differentiated from the benchmark index. This can lead to the portfolio's performance being periodically at variance with that of the benchmark index when, say, energy companies (to which the Company has no exposure but tend to be large and thus in the index) see their share prices increase sharply purely on the back of rising wholesale costs of oil and gas due to the war in Ukraine. On the positive side, however, not being bound to invest solely to reflect index constituents, offers many opportunities for superior growth prospects.
Share Price Performance and Discount to NAV
At the financial year end, the Company's Ordinary share and B share prices stood at discounts to the net asset value of 8.9% and 6.1% respectively. These were tighter than at 31 March 2022 and consequently, the share price total return for the Ordinary shares and B shares was +0.6% and +2.3% respectively. The average discount levels at which the Company's Ordinary shares and B shares traded relative to net asset value in the year were 7.5% and 4.3% respectively.
Dividends and Capital Repayments
Your Board recognises the importance of dividends to shareholders and has utilised the Company's revenue reserve to maintain and increase dividend payments to Ordinary shareholders in recent years and has done so again in the year to 31 March 2023. Total distributions to shareholders increased by 1.1% to 5.51p per share compared to the previous year. In order to pay this total dividend to Ordinary shareholders, £497,000 was drawn from the Company's revenue reserve. After payment of the fourth interim dividend on 5 May 2023, the revenue reserve is £2.4 million, representing 2.83p per Ordinary share.
Your Company has now increased its distribution to shareholders in each financial year since 2013. The total dividend/capital repayment for the year to 31 March 2023 represented a yield of 6.7% and 6.5% based on the Ordinary share price and B share price of 82.0p and 84.5p respectively at 31 March 2023.
As I mentioned in the Company's Interim Report, it is the Board's intention to rebuild the revenue reserve and return to a covered dividend as soon as practicable.
Gearing
As at the end of the year under review, the Company had a total borrowing facility of £15 million through an unsecured Revolving Credit Facility with The Royal Bank of Scotland International Limited. Your Board believes that an investment company should use gearing to enhance returns to shareholders whenever possible and encourages the Portfolio Manager to use his discretion accordingly. As at the year end, £12 million of this facility had been drawn down and invested in quality stocks including during one of the market's increasingly common "risk-off" periods, hence at advantageous prices and decent yields. More details can be found in the Manager's Review.
Responsible Investment
Environmental, Social and Governance ('ESG') engagement is an activity in which your Manager has a long and respected record of achievement and these considerations lie at the core of your Manager's investment process. Our approach to Responsible Investment is set out in the Annual Report and Financial Statements and illustrates the engagement the Manager has had with investments within our portfolio.
Board Change
As mentioned in my Interim Statement, I am pleased to report that Angus Pottinger joined the Board as a non-executive Director with effect from 24 November 2022. He has huge experience in the investment world and over 22 years working directly with investment companies as Head of Invesco's accounting, company secretariat and administration functions. His deep knowledge of the sector and relevant experience will be of direct benefit to shareholders.
Manager and Name Change
As previously reported, Columbia Threadneedle Investments, part of Ameriprise Financial acquired BMO's EMEA asset management business ('BMO GAM (EMEA)'), which included your Company's Manager ('BMO Investment Business Limited'). The rebranding of the BMO GAM (EMEA) business was completed towards the start of July 2022 and your Company's Board decided that continuing to align with the brand of the Manager and its savings plans would avoid unnecessary confusion.
Accordingly, on 29 June 2022, your Company therefore announced that it had changed its name to CT UK High Income Trust PLC with immediate effect. The Company's website address was also changed to ctukhighincome.co.uk and its trading instrument display mnemonics ("TIDM") changed to CHI, CHIB and CHIU for the Company's Ordinary shares, B shares and Units respectively.
There has been no change to the personnel running the activities of your Company in terms of both portfolio management and administration.
Annual General Meeting (AGM)
The AGM will be held at 12 noon on 20 July 2023 at Exchange House, Primrose Street, London EC2A 2NY. It is an opportunity for shareholders to engage with the Board and Manager and I hope you will be able to attend.
Outlook
After two years of COVID and dealing with its aftermath, the world was plunged into further uncertainty by Russia. The effects on shareholder returns have been magnified in both directions over that three-year period, first fueled by a total change in working practices amid massive (and expensive) Government support packages and then through rising energy prices and supply chain shortages leading to yet more (expensive) support, especially for the vulnerable and elderly. Added to this, in the UK came the advent of three Prime Ministers in a matter of weeks; the haphazard policy announcements that ensued caused serious disquiet in the gilt market which has only recently subsided.
A long period of near-zero interest rates probably led many to believe that borrowing money at such levels was the norm and unlikely to change anytime soon. The slowly dawning realisation that interest rates had to rise to defeat inflation has had the anticipated effect on the country but, miraculously, has not collapsed the economy, regardless of the inevitable squeeze on household budgets, or affected employment numbers as businesses still find it difficult to fill vacancies. Nor has it led to recession or to a stock market rout.
However, uncertainty is always the enemy and whilst the resilience of all the above is commendable, a period of calm in the wider world and stock markets in particular would be welcome and possibly key to making positive headway. Given war is on Europe's doorstep and the rhetoric more alarming by the day, it is all the more remarkable that the UK's FTSE 100 index recently hit an all-time high.
I sound all doom and gloom and I really don't mean to be. It is likely that interest rates and inflation have peaked with the latter forecast to be nearer 5% by the end of 2023. This should help resolve many of the difficulties currently being experienced brought about by the likes of soaring energy prices, now thankfully abating, and wage demands, with more realistic settlements likely to be achieved. Your Board oversees a Portfolio Manager dedicated to the task of securing growth in capital and income for shareholders and he works for an organisation that supplies all the resources he needs to carry out that objective. The Company has changed in many ways over the six years I have been on the Board, but I firmly believe - as do my fellow Directors - that it is in the best shape possible, with a balanced but differentiated and concentrated portfolio of quality stocks, to achieve the Company's objectives over the coming years.
As ever, thank you for being a shareholder in CT UK High Income Trust PLC.
Andrew Watkins
Chairman
31 May 2023
Manager's Review
There is no doubt that this has been another challenging year to navigate. I'm beginning to sound like a broken record as this was exactly what I said in the 2021 and 2022 Annual Report. What I can say is that every year has been totally unique; first with the Covid pandemic, then the Ukraine war and now a cost-of-living crisis. This is also the first time in over a decade where we have seen interest rates closer to longer term historic averages, which will have a slow but significant impact on consumer spending. This has brought with it considerable debate about whether or not the UK experiences a mild slowdown rather than a hard recession.
UK politics has also played a significant part in the turbulence we have seen over the last year. In September, the appointment of Liz Truss as Prime Minister was the start of what was to be seen as an unprecedented time in UK politics, with three Prime Ministers in as many months. The demise of Truss was driven by Chancellor Kwasi Kwarteng's ill-conceived mini-budget, which was received very poorly by the markets. The bond market took fright from the initial £45 billion tax giveaway which was seen as fiscally irresponsible, sending UK Gilts and the pound into freefall. The ensuing crisis of confidence led to her swift replacement by Rishi Sunak, with Jeremy Hunt appointed as his new Chancellor. According to many commentators, the Chancellor, faced a 'politically impossible' budget U-turn, but one that has ultimately stabilised the economy. His package consisted of £30 billion in spending cuts and a massive £25 billion increase in taxes. There was help for the poorest, with benefits and pensions being increased in line with inflation, while manifesto spending plans that had been promised, were scrapped as they sought to balance the books. The budget has helped the UK bond yield recover, a key tenet for the mortgage market. We have also seen the pound recover, another positive sign that the UK is deemed to be on a firmer footing.
Events of the last few weeks in March, with the collapse of Silicon Valley Bank ('SVB') and Credit Suisse have sent shockwaves through the banking sector. SVB was the 16th largest bank in the US with $209 billion of assets, and the 2nd largest bank failure in US history. Regulators had to act swiftly to stabilise the system; deposit guarantees, and additional lines of liquidity being offered to mitigate any contagion risk. While this event seems to have been contained it has yet again raised concerns about the fragility of the banking system and whether this failure is the start of something more significant.
You would expect these headlines would have caused investors to shy away from equity markets. Quite the reverse is true, with the FTSE All-Share close to all-time highs. This does mask vast differences when you break the market down by size and sector, which we will come back to later, but evidence suggests that the UK equity market remains an attractive proposition for global investors.
If further corroboration was needed, we have also seen private equity takeover activity rise. Offers have been made for Wood Group, Network International, Dechra Pharmaceuticals and, in mid-April, Apollo tabled an offer for THG, which is one of the Company's holdings. With the strength of the US dollar over the last few years and depressed valuations, it's not a surprise to see a rise in dealmaking as private equity firms look to deploy capital.
Performance
The net asset value ('NAV') total return of the Company declined 0.4% over the year to 31 March 2023, underperforming the 2.9% total return from the FTSE All-Share index. As mentioned previously, size has been a major contributor to performance with some of the more defensive, or commodity exposed sectors, performing well post the outbreak of the Ukraine war. The FTSE 100 rose 5.4% (total return) over the Company's financial year. Meanwhile, the FTSE 250 index of mid-market capitalised stocks fell 7.9% and the FTSE Small Cap (ex-investment trusts) index a more extreme 12.9% decline (all total return).
The Company's investment portfolio has been constructed to have a larger focus on the mid-market, where we see better quality assets and growth over the medium-term, but as we discussed in the 2022 Annual Report, there will be periods where the performance of the benchmark behemoths can significantly outweigh the performance of these smaller index constituents.
An analysis of the investment portfolio by index is provided in the Annual Report and Financial Statements and shows its significant exposure down the market cap spectrum. Including AIM and non-index positions, this now accounts for nearly 40% of our invested assets.
When you include the 15% from our European (overseas) holdings approximately 50% of the exposure is to businesses outside the FTSE 100. This is by design, differentiating your Company from some of our more index-tracking peers.
At a stock specific level; not owning BP, Unilever, AstraZeneca, Shell and HSBC have been a 4.3% drag in relative performance over the last year. I have consistently defended this stance on quality grounds, when it comes to the oil majors. It has taken a war and energy crisis for these names to deliver decent returns on capital employed, a level which I don't believe is sustainable - unless of course you can provide assurance that the oil price is going back to $100 a barrel. I see better quality businesses than Unilever in the staples sector. The outlier in these names is AstraZeneca. This has performed significantly better than I thought it would, and one I can look back and concede I was wrong to sell.
I am not going to blame the shape of the index for the Company's performance. The way the investment portfolio is built means it will always perform differently to the index, and despite the 4.3% headwind, I'm happy with the underlying portfolio performance this year and the growth outlook. We have used the recent volatility to buy quality businesses at valuations that have not been seen for years. Over our financial year, additions have included Rotork, Hiscox, Hargreaves Lansdown, OSB Group, Persimmon and Schneider Electric. These are all market leaders in their respective fields, and businesses that have structural growth to deliver returns for years to come. They also, in several cases, have attractive and growing dividend yields, which are supportive of the revenue we generate and the high dividend yield of the Company.
Many of the Company's holdings have had a very good year, including Richemont, with luxury goods spending continuing to recover sharply post the pandemic. This will be buoyed by the opening of China which has already seen some of Richemont's peers deliver sales growth ahead of expectations. UK industrial, Rotork, has also delivered much better results since initiation, allowing the share price to rise over 30% in the last year. OSB Group has been another recent new position that has performed ahead of expectations. The buy-to-let lender, to the professional investor market, has seen growth hold up better than the market expected. This allowed them to pay a special dividend with their full year results, on top of an already high 7% dividend yield.
Dividends
Calendar 2022 saw UK dividends rise 8.0% to £94.3 billion, but this figure was held back by a one-third decline in one-off special payments. This was in part mitigated by a weak pound which boosted the payouts by £3.8 billion. Record mining dividends accounted for £1 in every £6 distributed, although payouts fell sharply towards the second half of the calendar year. Banks made the largest contribution to growth, followed by the oil majors. When you look at the underlying statistics though (excluding special dividends) the FTSE 100 dividends rose 14.8%, while the Mid-250 index, where the Company has a larger exposure, saw growth of 23.8%. This is one of the major attractions of our mid-cap exposure, the compounding effect of earnings and dividend growth at the right point in the cycle.
Discussions with the Company's Board at the outset of the financial year were focused on capital growth and returning the Company towards a covered dividend. The focus has therefore been two-fold, adding quality at the right price, mentioned above, whilst also adding to the revenue. Whilst it may appear that the revenue has been flat, the current financial year had £557,000 less in special dividends including those paid by Rio Tinto and Berkeley Group in the prior financial year.
I have sold several of the zero yielding names; Melrose, Just Eat Takeaway and Scout24 and also sold Prudential and Haleon, the latter following the split from GlaxoSmithKline. I wasn't comfortable adding to Haleon given the level of its gearing and lack of a dividend, even though they have defensive earnings qualities from their over-the-counter pharmacy sales. I also reduced some of the better performers in the investment portfolio where yields had contracted, such as Deutsche Boerse, Richemont, Intermediate Capital and Beazley. We used these proceeds to build up positions in Legal & General, Phoenix Group and OSB Group, alongside some of the newer additions. At acquisition these three holdings yielded 8.0%, 9.0% and 7.0% respectively, almost twice the level of the FTSE All-Share of 3.6% at 31 March 2023.
The final, and very important piece of the jigsaw is the gearing. With interest rates set to rise we took the tough decision to reduce gearing in December 2021. While strategically this was the right decision, we sacrificed revenue to protect capital. With rates now closer to the possible peak, and post the collapse of SVB, we felt there was an opportunity to raise our gearing. We used this additional capital to opportunistically add to our diversified financial holdings, which had been caught in the crossfire of the banking sector sell off and where declines felt unwarranted and valuations were cheap. At 31 March 2023 we have drawn down £12 million of the £15 million facility, which will help increase the level of revenue for the year to 31 March 2024.
The dividend outlook for 2023 is however less rosy, according to Link Asset Monitor. They are forecasting headline payouts to decline 2.8%, and with sales and profits under pressure from inflation, they expect special dividends to be down further. It is difficult to quantify this as we have very little line of sight on earnings at this stage of the year. I am however encouraged that the changes I have made in the investment portfolio have increased the number of holdings with improved dividend cover and strong balance sheets which should stand the Company in good stead to weather a downturn.
Outlook
I have consistently said that this year will likely see investor sentiment wax and wane. This has so far played out with markets starting the year very strongly. In the first two months of 2023, the FTSE All-Share rose 6% (total return), before being hit by the collapse of SVB. This weakness has, however, been short-lived with the FTSE All-Share close to highs, as investors look through the current volatility.
Commentators remain nervous about the impact of a recession, which may well be worse in the US than it is in Europe. It would be foolish to believe we would be immune, although China has the power to support growth as its economy reopens. While these are all interesting topics to debate, building an investment portfolio to manage this from a top-down perspective is an exceptionally difficult exercise. Given the work we have done on the investment portfolio and the qualities visible in the business models we are comfortable with positioning. There is a scenario where the behemoths continue to outperform as investors seek the relative safe haven of these mega-caps, but how long will it last? The follow-on question is; is it possible to be good (or fortunate) enough to time this and turn the portfolio to quality mid-caps that will outperform when we do see a rally down the cap scale?
To try and defensively manage through what might be a tough period is thus less preferable to focusing on quality assets at the right valuation. I prefer the latter strategy and to seek out the relative safety of quality business models with strong balance sheets and pricing power. These will be the ultimate winners. I can't tell you exactly when this will turn, but when it does, the portfolio is well placed to capitalise on the upside.
Philip Webster
Portfolio Manager
Columbia Threadneedle Investment Business Limited
31 May 2023
Statement of Comprehensive Income
| | | Year to31 March 2023 | ||
| | Note | Revenue | Capital | Total |
| |
| £'000 | £'000 | £'000 |
| |
|
|
|
|
| Capital losses on investments |
|
|
|
|
| Losses on investments held at fair value through profit or loss | |
- |
(4,177) |
(4,177) |
| Exchange gains/(losses) |
| 3 | (16) | (13) |
| Revenue | | | | |
| Income |
| 5,007 | - | 5,007 |
|
|
|
|
|
|
| Total income | | 5,010 | (4,193) | 817 |
|
| | | | |
| Expenditure | | | | |
| Investment management fee | | (183) | (427) | (610) |
| Other expenses |
| (521) | - | (521) |
|
|
|
|
|
|
Total expenditure | | (704) | (427) | (1,131) |
| | |
|
|
|
| Profit/(loss) before finance costs and tax | | 4,306 | (4,620) | (314) |
|
|
|
|
|
|
| Finance costs | | | | |
| Interest on bank loans | | (67) | (155) | (222) |
|
|
|
|
|
|
| Total finance costs | | (67) | (155) | (222) |
| | |
|
|
|
| Profit/(loss) before tax | | 4,239 | (4,775) | (536) |
| Taxation |
| (47) | - | (47) |
| |
|
|
|
|
| Profit/(loss) and total comprehensive income/(expense) for the year |
|
4,192 |
(4,775) |
(583) |
|
| |
|
|
|
| Earnings per share | 2 | 3.62p | (4.12)p | (0.50)p |
The total column of this statement represents the Company's Income Statement and Statement of Comprehensive Income, prepared in accordance with UK-adopted International Accounting Standards.
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.
No operations were acquired or discontinued in the year.
Statement of Comprehensive Income
| | | Year to31 March 2022 | ||
| | Note | Revenue | Capital | Total |
| |
| £'000 | £'000 | £'000 |
| |
|
|
|
|
| Capital losses on investments |
|
|
|
|
| Losses on investments held at fair value through profit or loss | |
- |
(1,087) |
(1,087) |
| Exchange gains |
| - | 5 | 5 |
| Revenue |
|
|
|
|
| Income | | 5,013 | - | 5,013 |
|
|
|
|
|
|
| Total income |
| 5,013 | (1,082) | 3,931 |
| | |
|
|
|
| Expenditure | | | | |
| Investment management fee | | (227) | (529) | (756) |
| Other expenses | | (506) | - | (506) |
| |
|
|
|
|
| Total expenditure |
| (733) | (529) | (1,262) |
| | |
|
|
|
Profit/(loss) before finance costs and tax | | 4,280 | (1,611) | 2,669 |
| | | | | |
| Finance costs |
|
|
|
|
| Interest on bank loans | | (78) | (183) | (261) |
| | |
|
|
|
| Total finance costs |
| (78) | (183) | (261) |
| | |
|
|
|
| Profit/(loss) before tax | | 4,202 | (1,794) | 2,408 |
| Taxation | | (24) | - | (24) |
| | | | | |
| Profit/(loss) and total comprehensive income/(expense) for the year |
|
4,178 |
(1,794) |
2,384 |
| |
|
|
|
|
| Earnings per share | 2 | 3.61p | (1.55)p | 2.06p |
The total column of this statement represents the Company's Income Statement and Statement of Comprehensive Income, prepared in accordance with UK-adopted International Accounting Standards.
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.
No operations were acquired or discontinued in the year.
Statement of Financial Position
as at 31 March
| |
| 2023 | 2022 | |||
| | | Note | £'000 |
| £'000 |
|
| Non-current assets |
| | | | |
|
| Investments held at fair value through profit or loss |
| |
113,018 | |
111,362 |
|
| |
| | | | |
|
| Current assets |
| | | | |
|
| Receivables |
| | 1,394 | | 3,210 |
|
| Cash and cash equivalents |
| | 2,288 | | 4,686 |
|
| |
| | 3,682 | | 7,896 |
|
| Total assets |
|
| 116,700 |
| 119,258 |
|
| |
| | | | |
|
| Current liabilities |
| | | | |
|
| Payables |
| | (529) | | (543) |
|
| Bank loan |
| | (12,000) | | (7,500) |
|
| |
| | (12,529) | | (8,043) |
|
| Total liabilities |
|
| (12,529) |
| (8,043) |
|
| Net assets |
|
| 104,171 |
| 111,215 |
|
|
Equity attributable to equity shareholders |
| | | | |
|
| Share capital | | | 134 | | 134 |
|
| Share premium | | | 153 | | 153 |
|
| Capital redemption reserve | | | 5 | | 5 |
|
| Buy back reserve | | | 80,315 | | 80,394 |
|
| Special capital reserve | | | 10,012 | | 11,704 |
|
| Capital reserves | | | 9,823 | | 14,598 |
|
| Revenue reserve | | | 3,729 | | 4,227 |
|
| Equity shareholders' funds |
|
| 104,171 |
| 111,215 |
|
| | | | | | |
|
| | | | | | |
|
| Net asset value per Ordinary share | | 6 | 89.97p | | 95.97p |
|
| Net asset value per B share | | 6 | 89.97p | | 95.97p |
|
Cash Flow Statement
for the year to 31 March
| |
|
|
| | Year to 31 March 2023 | Year to 31 March 2022 |
| | £'000 | £'000 |
| | | |
| Cash flows from operating activities | | |
| (Loss)/profit before taxation | (536) | 2,408 |
| Adjustments for: | | |
| Losses on investments held at fair value through profit or loss |
4,177 |
1,087 |
| Exchange losses/(gains) | 13 | (5) |
| Interest income | (70) | (5) |
| Interest received | 70 | 5 |
| Dividend income | (4,937) | (5,008) |
| Dividend income received | 4,698 | 4,935 |
| Increase in receivables | (64) | (5) |
| (Decrease)/increase in payables | (15) | 2 |
| Finance costs | 222 | 261 |
| Overseas tax suffered | (76) | (49) |
| Cash flows from operating activities | 3,482 | 3,626 |
| Cash flows from investing activities Purchases of investments Sales of investments |
(45,856) 42,153 |
(10,594) 19,264 |
| Cash flows from investing activities | (3,703) | 8,670 |
| Cash flows before financing activities | (221) | 12,296 |
| Cash flows from financing activities | | |
| Dividends paid on Ordinary shares | (4,690) | (4,540) |
| Capital returns paid on B shares | (1,692) | (1,636) |
| Shares purchased for treasury | (79) | - |
| Interest on bank loans | (203) | (249) |
| Drawdown/(repayment) of loan | 4,500 | (3,500) |
| Cash flows from financing activities | (2,164) | (9,925) |
|
| | |
| Net (decrease)/increase in cash and cash equivalents | (2,385) | 2,371 |
| Cash and cash equivalents at the beginning of the year | 4,686 | 2,310 |
| Effect of movement in foreign exchange | (13) | 5 |
| Cash and cash equivalents at the end of the year | 2,288 | 4,686 |
| Represented by: | | |
| Cash at bank | 199 | 77 |
| Short term deposits | 2,089 | 4,609 |
|
| 2,288 | 4,686 |
Statement of Changes in Equity
for the year to 31 March 2023
| |
Share Capital |
Share Premium |
Capital Redemption Reserve |
Buy Back Reserve |
Special Capital Reserve | Capital Reserve - Investments sold | Capital Reserve - Investments held |
Revenue Reserve |
Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| |
|
|
|
|
|
|
|
|
|
| Balance as at 31 March 2022 | 134 | 153 | 5 | 80,394 | 11,704 | 8,001 | 6,597 | 4,227 | 111,215 |
| Movement during the year ended 31 March 2023 |
|
|
|
|
|
|
|
|
|
| (Loss)/profit for the year | - | - | - | - | - | (36) | (4,739) | 4,192 | (583) |
| Total comprehensive income/ (expense) for the year |
- |
- |
- |
- |
- |
(36) |
(4,739) |
4,192 |
(583) |
| Transactions with owners of the Company recognised directly in equity |
|
|
|
|
|
|
|
|
|
| Shares bought back for treasury | - | - | - | (79) | - | - | - | - | (79) |
| Dividends paid on Ordinary shares | - | - | - | - | - | - | - | (4,690) | (4,690) |
| Capital returns paid on B shares | - | - | - | - | (1,692) | - | - | - | (1,692) |
| Balance as at 31 March 2023 | 134 | 153 | 5 | 80,315 | 10,012 | 7,965 | 1,858 | 3,729 | 104,171 |
Statement of Changes in Equity
for the year to 31 March 2022
| |
Share Capital |
Share Premium |
Capital Redemption Reserve |
Buy Back Reserve |
Special Capital Reserve | Capital Reserve - Investments sold | Capital Reserve - Investments held |
Revenue Reserve |
Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| |
|
|
|
|
|
|
|
|
|
| Balance as at 31 March 2021 | 134 | 153 | 5 | 80,394 | 13,340 | 3,083 | 13,309 | 4,589 | 115,007 |
| Movement during the year ended 31 March 2022 |
|
|
|
|
|
|
|
|
|
| Profit/(loss) for the year | - | - | - | - | - | 4,918 | (6,712) | 4,178 | 2,384 |
| Total comprehensive income/ (expense) for the year |
- |
- |
- |
- |
- |
4,918 |
(6,712) |
4,178 |
2,384 |
| Transactions with owners of the Company recognised directly in equity |
|
|
|
|
|
|
|
|
|
| Dividends paid on Ordinary shares | - | - | - | - | - | - | - | (4,540) | (4,540) |
| Capital returns paid on B shares | - | - | - | - | (1,636) | - | - | - | (1,636) |
| Balance as at 31 March 2022 | 134 | 153 | 5 | 80,394 | 11,704 | 8,001 | 6,597 | 4,227 | 111,215 |
CT UK High Income Trust PLC
Principal Risks and Uncertainties and Viability Statement
As an investment company investing primarily in listed securities, most of the Company's principal risks and uncertainties that could threaten the achievement of its objective, strategy, future performance, liquidity and solvency are market-related.
A summary of the Company's risk management and internal control arrangements is included within the Report of the Audit Committee in the Annual Report and Financial Statements. By means of the procedures set out in that summary, the Board has established an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. The Board also considers emerging risks which might affect the Company and related updates from the Manager on such risks are also considered. During the year emerging risks included the outlook for inflation and the war in Ukraine. Any emerging risks that are identified and that are considered to be of significance would be included in the Company's risk register with any mitigations. These significant risks, emerging risks and other risks are regularly reviewed by the Audit Committee and the Board. While the effect of the COVID-19 pandemic appears to have eased, increased market volatility due to recent macroeconomic and geopolitical concerns have been considered and is referred to in Financial Risk. They have also regularly reviewed the effectiveness of the Company's risk management and internal control systems for the period.
As was explained in the 31 March 2022 Annual Report and Financial Statements, the Company's Manager, which was part of BMO GAM (EMEA) was acquired by Ameriprise and the integration of its business with Columbia Threadneedle Investments is now well advanced. The Board looks favourably upon this transaction and there has been little change for your Company. Nevertheless, an acquisition such as this introduces some uncertainty, until the integration of systems is fully implemented. A critical milestone is the move to a new order management system, Aladdin, which is widely regarded as market leading. Therefore the Board will continue to monitor this risk closely.
The principal risks and uncertainties faced by the Company, and the Board's mitigation approach, are described below.
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.
Increased uncertainty in markets since the COVID-19 pandemic, the war in Ukraine and macroeconomic and geopolitical concerns has led to volatility in the Company's NAV.
Climate change is likely to have an impact on some of our investee companies in the coming years potentially affecting their operating models for example, supply chains and energy costs.
Increase in overall risk during the year, given the war in Ukraine and macroeconomic and geopolitical concerns.
Mitigation:
The Board regularly considers the composition and diversification of the Investment Portfolio and considers individual stock performance together with purchases and sales of investments. Investments and markets are discussed in detail with the Manager on a regular basis.
Engagement on environmental, social and governance matters is undertaken by the Manager and its approach is explained in the Annual Report and Financial Statements.
The Board has, in particular, considered the impact of heightened market volatility since the COVID-19 pandemic, macroeconomic and geopolitical concerns and inflation. As a closed-end investment company, it is not constrained by asset sales to meet redemptions so can remain invested through volatile market conditions and is well suited to investors seeking longer term returns.
An explanation of these risks and the way in which they are managed are contained in the notes to the financial statements.
Investment and strategic risk.
Incorrect strategy, asset allocation, stock selection, inappropriate capital structure, insufficient monitoring of costs, failure to maintain an appropriate level of discount/premium and the use of gearing could all lead to poor returns for shareholders including impacting the capacity to pay dividends.
Increase in overall risk during the year, given the war in Ukraine and macroeconomic and geopolitical concerns.
Mitigation:
The Company's objective and investment policy and performance against peers and the benchmark are considered by the Board at each meeting and strategic issues are considered regularly. The Investment Portfolio is diversified and comprises listed securities and its composition is reviewed regularly with the Board. The Manager's Investment Risk team provides oversight on investment risk management.
Market intelligence is maintained via the Company's broker and the effectiveness of the marketing strategy together with the level of discount to NAV at which the Company's shares trade are also reviewed at each meeting. The Manager also meets with major shareholders.
The Board regularly considers ongoing charges combined with underlying dividend income from portfolio companies and the consequent dividend paying capacity of the Company.
Regulatory.
Breach of regulatory rules could lead to the suspension of the Company's Stock exchange listing, financial penalties, or a qualified audit report. Breach of section 1158 of the Corporation Tax Act 2010 could lead to the Company being subject to tax on capital gains. Changes to tax regulations could alter the attractions of the Company's B shares.
No change in overall risk.
Mitigation:
The Board liaises with advisors to ensure compliance with laws or regulations.
The Manager and its Operational Risk Management team provide regular reports to the Board and Audit Committee on their monitoring and oversight of such rules and are reviewed by the Board. This includes the conditions to maintain investment trust status including the income distribution requirement.
The Board has access to the Manager's Head of Operational Risk Management and requires any significant issues directly relevant to the Company to be reported immediately.
Operational.
Failure of the Manager as the Company's main service provider or disruption to its business, or that of an outsourced or third party service provider, could lead to an inability to provide accurate reporting and monitoring or a misappropriation of assets leading to a potential breach of the Company's investment mandate or loss of shareholders' confidence.
This risk includes failures or disruption as a consequence of external events such as the COVID-19 pandemic.
External cyber attacks could cause such failure or could lead to the loss or sabotage of data.
No change in overall risk but due to the integration with Columbia Threadneedle's systems, this risk remains heightened.
Mitigation:
The Board meets regularly with the management of the Manager and its Operational Risk Management team to review internal control and risk reports which includes oversight of it's own third party service providers. The Manager's appointment is reviewed annually and the contract can be terminated with six months' notice. The Manager has a business continuity plan in place to ensure that it is able to respond quickly and effectively to an unplanned event that could affect the continuity of its business.
The Manager has outsourced trade processing, valuation and middle office tasks and systems to State Street Bank and Trust Company ('State Street') and supervision of such third party service providers, including SS&C who administer the Manager's savings plans, has been maintained by the Manager. This includes the review of IT security and heightened cyber threats.
Further to the acquisition of the Company's Manager by Ameriprise, the Board continues to monitor the integration of its business with Columba Threadneedle Investments. Comfort is taken from its long-term financial strength and resources and commitment towards the investment trust business and savings plans.
The Manager also closely monitors the performance of its technology platform to ensure it is functioning within acceptable service levels.
Custody Risk.
Safe custody of the Company's assets may be compromised through control failures by the custodian.
No change in overall risk.
Mitigation:
The Board receives quarterly reports from the Depositary confirming safe custody of the Company's assets and cash and holdings are reconciled to the Custodian's records. The Custodian's internal controls reports are also reviewed by the Manager and key points reported to the Audit Committee. The Board also receives periodic updates from the custodian on its own cyber-security controls.
The Depositary is specifically liable for loss of any of the Company's assets that constitute financial instruments under the AIFMD.
Viability assessment and statement
In accordance with the UK Corporate Governance Code, the Board is required to assess the future prospects for the Company and has considered that a number of characteristics of its business model and strategy were relevant to this assessment:
· The Board looks to long-term outperformance rather than short-term opportunities.
· The Company's investment objective, strategy and policy, which are subject to regular Board monitoring, mean that the Company is invested primarily in liquid listed securities and that the level of borrowing is restricted.
· The Company is a listed closed-end investment trust, whose shares are not subject to redemptions by shareholders.
· Subject to shareholder continuation votes, in the event that the net asset value total return performance of the Company is less than that of the FTSE All-Share Index over the relevant period, the Company's business model and strategy is not time limited. The next such performance measurement period will cover the three years to 31 March 2025.
Also relevant were a number of aspects of the Company's operational arrangements:
· The Company retains title to all assets held by the Custodian under the terms of the formal agreement with the Custodian and Depositary.
· The borrowing facility, which remains available until September 2025, is also subject to a formal agreement, including financial covenants with which the Company complied in full during the year.
· Revenue and expenditure forecasts are reviewed by the Directors at each Board Meeting.
· Cash is held with banks approved and regularly reviewed by the Manager.
· The operational robustness of key service providers and the effectiveness of alternative working arrangements.
· That alternative service providers could be engaged at relatively short notice if necessary.
In considering the viability of the Company, the Directors carried out a robust assessment of the principal risks and uncertainties which could threaten the Company's objective and strategy, future performance and solvency. This included the impact of market volatility and a significant fall in equity markets on the Company's investment portfolio. These risks, their mitigations and the processes for monitoring them are set out above within Principal Risks and Uncertainties and in the Report of the Audit Committee and in the notes of the financial statements within the Annual Report.
The Directors have also considered:
· The level of ongoing charges incurred by the Company which are modest and predictable and total 1.02% of average net assets.
· Future revenue and expenditure projections.
· Its ability to meet liquidity requirements given the Company's investment portfolio consists mainly of readily realisable listed equity securities which can be realised if required.
· The ability to undertake share buybacks if required.
· Whether the Company's objective and investment policy continue to be relevant to investors.
· The effect of significant future falls in investment values and the ability to maintain dividends and capital repayments, particularly given the impact of increased market volatility since the COVID-19 pandemic, the war in Ukraine and macroeconomic and geopolitical concerns.
As the Company's performance measurement period was reduced from five years to three years (following shareholder approval at the 2022 AGM), these matters were assessed over a three year period to May 2026, and the Board will continue to assess viability over three year rolling periods. As part of this assessment the Board considered stress tests and scenarios which considered the impact of severe stock market volatility on shareholders' funds and declines in income over a three year period. The results demonstrated the impact on the Company's net assets and its expenses and its ability to meet its liabilities over that period. A rolling three year period represents the horizon over which the Directors believe they can form a reasonable expectation of the Company's prospects, balancing the Company's financial flexibility and scope with the current outlook for longer-term economic conditions affecting the Company and its shareholders.
Based on their assessment, and in the context of the Company's business model, strategy and operational arrangements set out above, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to May 2026.
Statement of Directors' Responsibilities in Relation to the Annual Report and Financial Statements
The Directors confirm, in respect of the Annual Report and Financial Statements for the year ended 31 March 2023 of which this statement of results is an extract, that to the best of their knowledge:
· the financial statements contained within the Annual Report have been prepared in accordance with UK-adopted International Accounting Standards, give a true and fair view of the assets, liabilities, financial position and return of the Company;
· the Strategic Report and the Report of the Directors include 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
· taken as a whole, the Annual Report and Financial Statements are fair, balanced and understandable and provide the information necessary for shareholders to assess the performance, strategy and business model of the Company.
On behalf of the Board
Andrew Watkins
Chairman
31 May 2023
Notes
1. The financial statements of the Company which are the responsibility of, and were approved by, the Board on 31 May 2023, have been prepared on a going concern basis and in accordance with the Companies Act 2006 and UK-adopted International Accounting Standards.
The Company's subsidiary undertaking Investors Securities Company Limited has not been consolidated in the financial statements as it is exempt in accordance with Section 405(2) of the Companies Act 2006 on grounds of materiality. Investors Securities Company Limited has been classified at fair value through profit or loss in the Statement of Financial Position.
Where presentational guidance set out in the Statement of Recommended Practice (''SORP'') for investment trusts issued by the Association of Investment Companies (''AIC'') is consistent with the requirements of UK-adopted International Accounting Standards, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.
2. The Company's earnings per share are based on the loss for the year of £(583,000) (year to 31 March 2022: profit of £2,384,000) and on 85,118,954 Ordinary shares (2022: 85,172,653) and 30,708,750 B shares (2022: 30,708,750), being the weighted average number of shares in issue of each share class during the year.
The Company's revenue earnings per share are based on the revenue profit for the year of £4,192,000 (year to 31 March 2022: £4,178,000) and on the weighted average number of shares in issue as above.
The Company's capital earnings per share are based on the capital loss for the year of £(4,775,000) (year to 31 March 2022: loss £(1,794,000)) and on the weighted average number of shares in issue as above.
3. A fourth interim dividend in respect of the year ended 31 March 2023 of 1.55p per Ordinary share was paid on 5 May 2023 to Ordinary shareholders on the register on 11 April 2023. A fourth capital repayment in respect of the year ended 31 March 2023 of 1.55p per B share was paid on 5 May 2023 to B shareholders on the register on 11 April 2023.
4. At 31 March 2023, the Company has an unsecured revolving credit facility ("RCF") with The Royal Bank of Scotland International Limited for £15 million which is available until 28 September 2025. At 31 March 2023, £12 million was drawn down.
The loan agreement contains certain financial covenants with which the Company must comply. These include a financial covenant with respect to the ratio of the Adjusted Portfolio Value (as defined in the loan agreement) to the level of debt and also that the Adjusted Portfolio Value does not fall below £50 million. The Company complied with the required financial covenants throughout the period since drawdown.
Until 28 September 2022, the Company had a £7.5 million unsecured term loan from Scotiabank Europe plc at a fixed interest rate of 2.58% per annum. It also had a £7.5 million unsecured multicurrency revolving credit facility ('RCF') with Scotiabank (Ireland) Designated Activity Company. On 28 September 2022 both loan facilities matured and the £7.5 million unsecured term loan was repaid to Scotiabank Europe plc. At that time, £nil was drawn down under the RCF.
5. During the year the Company bought back 100,000 Ordinary shares (2022: nil Ordinary shares) to hold in treasury at a cost of £79,000 (2022: £nil). During the year the Company bought back nil B shares (2022: nil B shares).
At 31 March 2023 the Company held 16,994,491 Ordinary shares (2022: 16,894,491 Ordinary shares) and 1,367,953 B shares (2022: 1,367,953 B shares) in treasury.
6. The Company's basic net asset value per share of 89.97p (2022: 95.97p) is based on the equity shareholders' funds of £104,171,000 (2022: £111,215,000) and on 115,781,403 equity shares, consisting of 85,072,653 Ordinary shares and 30,708,750 B shares (2022: 115,881,403 equity shares, consisting of 85,172,653 Ordinary shares and 30,708,750 B shares), being the number of shares in issue at the year end.
The Company's shares may also be traded as units, each unit consisting of three Ordinary shares and one B share. The basic net asset value per unit as at 31 March 2023 was therefore 359.88p (2022: 383.88p).
The Company's treasury net asset value per share, incorporating the 16,994,491 Ordinary shares and 1,367,953 B shares held in treasury at the year end (2022: 16,894,491 Ordinary shares and 1,367,953 B shares), was 89.97p (2022: 95.97p). The Company's treasury net asset value per unit at the end of the year was 359.88p (2022: 383.88p). The Company's current policy is to only re‑sell shares held in treasury at a price not less than the net asset value per share.
7. Financial Instruments
The Company's financial instruments comprise equity investments, cash balances, receivables and payables that arise directly from its operations and borrowings. As an investment trust the Company holds a portfolio of financial assets in pursuit of its investment objective. The Company makes use of borrowings to achieve enhanced returns. The downside risk of borrowings can be mitigated by raising the level of cash balances held.
The Company may use derivatives for efficient portfolio management from time to time. No derivative financial instruments were used during the current year or prior year. The Company may also write call options over some investments held in the investment portfolio. There were no call options written during the current year or prior year.
The fair value of the financial assets and liabilities of the Company at 31 March 2023 is not materially different from their carrying value in the financial statements.
The Company is exposed to various types of risk that are associated with financial instruments. The most important types are credit risk, market price risk, liquidity risk, interest rate risk and foreign currency risk.
The Board reviews and agrees policies for managing its risk exposure. These policies are summarised below and have remained unchanged for the year under review.
Credit risk
Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Company.
The Company's principal financial assets are bank balances and cash and other receivables, whose carrying amounts in the Statement of Financial Position represent the Company's maximum exposure to credit risk in relation to financial assets. The Company did not have any exposure to any financial assets which were past due or impaired at the current or prior year end.
The Company is exposed to potential failure by counterparties to deliver securities for which the Company has paid, or to pay for securities which the Company has delivered. A list of pre-approved counterparties used in such transactions is maintained and regularly reviewed by the Manager, and transactions must be settled on a basis of delivery against payment. Broker counterparties are selected based on a combination of criteria, including credit rating, balance sheet strength and membership of a relevant regulatory body. Risk relating to unsettled transactions is considered to be small due to the short settlement period involved and the acceptable quality of the brokers used. The rate of default in the past has been insignificant.
All of the investments of the Company are held by JPMorgan Chase Bank, the Company's custodian. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to the securities held by the custodian to be delayed or limited. The Board monitors the Company's risk by reviewing the custodian's internal control reports.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings, normally rated A or higher, assigned by international credit rating agencies. Bankruptcy or insolvency of such financial institutions may cause the Company's ability to access cash placed on deposit to be delayed, limited or lost.
The Company has no significant concentration of credit risk with exposure spread over a number of counterparties and financial institutions.
Market price risk
The fair value of equity and other financial securities held in the Company's portfolio fluctuates with changes in market prices. Prices are themselves affected by movements in currencies and interest rates and by other financial issues, including the market perception of future risks. Other external events such as protectionism, inflation or deflation, economic recessions and terrorism could also affect share prices in particular markets. The Company's strategy for the management of market price risk is driven by the Company's investment policy. The Board sets policies for managing this risk and meets regularly to review full, timely and relevant information on investment performance and financial results. The management of market price risk is part of the fund management process and is typical of equity investment. The portfolio is managed with an awareness of the effects of adverse price movements through detailed and continuing analysis with an objective of maximising overall returns to shareholders. Investment performance is discussed in more detail in the Manager's Review in the Annual Report and Financial Statements.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in realising assets or otherwise raising funds to meet financial commitments. The risk of the Company not having sufficient liquidity at any time is not considered by the Board to be significant, given the liquid nature of the portfolio of investments and the level of cash and cash equivalents ordinarily held. Cash balances are held with a spread of reputable banks with a credit rating of normally A or higher, usually on overnight deposit. The Manager reviews liquidity at the time of making each investment decision. The Board reviews liquidity exposure at each meeting.
In certain circumstances, the terms of the Company's bank facility entitle the lender to demand early repayment and, in such circumstances, the Company's ability to maintain dividend levels and the net asset value attributable to equity shareholders could be adversely affected. Such early repayment may be required on the occurrence of certain events of default which are customary for facilities of this type. These include events of non payment, breach of other obligations, misrepresentations, insolvency and insolvency proceedings, illegality and a material adverse change in the financial condition of the Company.
Interest rate risk
Some of the Company's financial instruments are interest bearing. They are a mix of both fixed and variable rate instruments with differing maturities. As a consequence, the Company is exposed to interest rate risk due to fluctuations in the prevailing market rate. The Company's exposure to floating interest rates gives cashflow interest rate risk and its exposure to fixed interest rates gives fair value interest rate risk.
Floating rate
When the Company retains cash balances the majority of the cash is held in deposit accounts. The benchmark rate which determines the interest payments received on cash balances is the bank base rate, which was 4.25 per cent at 31 March 2023 (2022: 0.75 per cent).
When the Company draws down amounts under its revolving credit facility, interest is payable based on SONIA (which can vary on a daily basis) plus a margin. In the prior year, interest was based on LIBOR and was fixed at the time of drawdown.
Fixed rate
At 31 March 2023 and 31 March 2022, the Company's investment portfolio did not contain any fixed interest or floating rate interest assets. At 31 March 2023 the Company had no fixed interest liabilities.
During the year, the £7.5 million term loan which carried a fixed interest rate of 2.58% per annum matured and was repaid on 28 September 2022.
Foreign currency risk
It is not the Company's policy to hedge any overseas currency exposure on equity investments.
8. Going Concern
The Company's investment objective and investment 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 facility with which it has complied during the year. Cash is only held with banks approved and regularly reviewed by the Manager.
In assessing the going concern basis of accounting, the Directors have had regard to the guidance issued by the Financial Reporting Council. After making enquiries, and bearing in mind the nature of the Company's business and assets, the Directors consider 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. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
9. The Directors of the Company are considered a related party. There are no transactions with the Board other than aggregated remuneration for services as Directors as disclosed in the Directors' Remuneration Report within the Annual Report and Financial Statements. There are no outstanding balances with the Board at year end. The beneficial interests of the Directors in the Ordinary shares and B shares of the Company are disclosed in the Annual Report and Financial Statements.
Transactions between the Company and Columbia Threadneedle Investment Business Limited are detailed in the notes to the financial statements. The existence of an independent Board of Directors demonstrated that the Company is free to pursue its own financial and operating policies and therefore under the AIC SORP, the Manager is not considered a related party.
10. This statement was approved by the Board on 31 May 2023. It is not the Company's full statutory financial statements in terms of Section 434 of the Companies Act 2006. The statutory Annual Report and Financial Statements for the year ended 31 March 2023 has been approved and audited and received an unqualified audit report and did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report. This will be sent to shareholders in early June 2023 and will be available for inspection at 6th Floor, Quartermile 4, 7a Nightingale Way, Edinburgh, EH3 9EG the registered office of the Company.
The full Annual Report and Financial Statements are available on the website maintained on behalf of the Company at ctukhighincome.co.uk
The Annual General Meeting of CT UK High Income Trust PLC will be held at 12 noon on 20 July 2023 at Exchange House, Primrose Street, London EC2A 2NY.
The audited financial statements for the year to 31 March 2023 will be lodged with the Registrar of Companies following the Annual General Meeting.
Alternative Performance Measures ("APMs")
The Company uses the following Alternative Performance Measures ("APMs"):
Discount/Premium - the share price of an Investment Trust 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.
| | | At 31 March 2023 | ||
| | | Ordinary shares | B shares | Units |
| Net asset value per share | (a) | 89.97p | 89.97p | 359.88p |
| Share price | (b) | 82.00p | 84.50p | 323.00p |
| Discount (c=(b-a)/(a)) | (c) | -8.9% | -6.1% | -10.2% |
Ongoing Charges - all operating costs expected to be incurred in future and that are payable by the Company, expressed as a proportion of the average net assets of the Company over the reporting year. The costs of buying and selling investments and derivatives are excluded, as are interest costs, taxation, non‑recurring costs and the costs of buying back or issuing shares.
Ongoing charges calculation
| | | 31 March 2023 £'000 |
|
| Total expenditure | | 1,131 |
|
| Less revolving credit facility commitment fee | | (44) |
|
| Less non-recurring expenses | | (21) |
|
| Total | (a) | 1,066 |
|
| Average daily net assets | (b) | 104,494 |
|
| Ongoing charges (c = a/b) | (c) | 1.02% |
|
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.
| | | 31 March 2023 £'000 |
| Investments held at fair value through profit or loss | (a) | 113,018 |
| Net assets | (b) | 104,171 |
| Gearing (c = (a/b)-1)% | (c) | 8.5% |
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 share price total returns and NAV total returns are shown below.
| | 31 March 2023 | |
| | Ordinary shares/ B shares | Units |
| NAV per share at start of financial year | 95.97p | 383.88p |
| NAV per share at end of financial year | 89.97p | 359.88p |
| Change in the year | -6.3% | -6.3% |
| Impact of dividend/capital repayment reinvestment† | +5.9% | +5.9% |
| NAV total return for the year | -0.4% | -0.4% |
†During the year to 31 March 2023 dividends/capital repayments totalling 5.51p (Ordinary shares/B shares) and 22.04p (units) went ex dividend.
| | 31 March 2023 | ||
| | Ordinary shares | B shares | Units |
| Share price per share at start of financial year | 87.0p | 88.0p | 336.0p |
| Share price per share at end of financial year | 82.0p | 84.5p | 323.0p |
| Change in the year | -5.7% | -4.0% | -3.9% |
| Impact of dividend/capital repayment reinvestment† | +6.4% | +6.3% | +5.7% |
| Share price total return for the year | +0.6% | +2.3% | +1.9% |
†During the year to 31 March 2023 dividends/capital repayments totalling 5.51p (Ordinary shares/B shares) and 22.04p (units) went ex dividend.
Yield - The total annual dividend/capital repayment expressed as a percentage of the year end share price.
| | | 31 March 2023 | ||
| | | Ordinary shares | B shares | Units |
| Annual dividend/capital repayment | (a) | 5.51p | 5.51p | 22.04p |
| Share price | (b) | 82.00p | 84.50p | 323.00p |
| Yield = (c=a/b) | (c) | 6.7% | 6.5% | 6.8% |
For further information, please contact:
Philip Webster
Portfolio Manager to CT UK High Income Trust PLC Tel: 0207 628 8000
Ian Ridge
For Columbia Threadneedle Investment Business Limited
Company Secretary to CT UK High Income Trust PLC Tel: 0207 628 8000
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