## CT UK Capital and ## Income Investment ## Trust PLC ## Report and Accounts 2023 Forward looking statements This document may contain forward looking statements with respect to the financial condition, results of operations and business of CT UK Capital and Income Investment Trust PLC. Such statements involve risk and uncertainty because they relate to future events and circumstances that could cause actual results to differ materially from those expressed or implied by forward looking statements. The forward looking statements are based on the Directors’ current view and on information known to them at the date of this document. Nothing should be construed as a profit forecast. ## Contents Overview Independent Auditors’ Report 56 Company Overview 2 Financial Highlights for the year ended 30 September 2023 3 Financial Report Income Statement 61 Chair’s Statement 4 Statement of Changes in Equity 62 Balance Sheet 63 | Strategic Report | Statement of Cash Flows 64 | | --- | --- | | Thirty Years of Dividend Growth 8 | Notes to the Accounts 65 | | Fund Manager’s Review 9 | Ten Year Record (Unaudited) 82 | | Purpose, Strategy and Business Model 13 | Analysis of Ordinary Shareholders (Unaudited) 83 | Key Performance Indicators 15 Twenty Largest Holdings 16 Notice of Annual General Meeting 84 Investment Portfolio by Sector 18 | List of Investments 21 | Other Information | | --- | --- | | The Fund Manager’s Investment Philosophy and Process 22 | Information for Shareholders 88 | | Our Approach to Responsible Investment 24 | How to Invest 89 | | Principal Risks and Future Prospects 28 | Alternative Performance Measures 91 | | Promoting the Success of the Company | Glossary of Terms 93 | – Section 172 statement 31 Policy Summary 33 Financial calendar Governance Report Directors 36 Fourth interim dividend for 2023 18 December 2023 Directors’ Report 37 | Corporate Governance Statement 42 | Annual General Meeting 7 March 2024 | | | --- | --- | --- | | Report of the Nomination and Remuneration Committee 45 | First interim dividend for 2024 | March 2024 | | Directors’ Remuneration Report 47 | Interim results for 2024 announced May 2024 | | Report of the Audit and Risk Committee 50 Second interim dividend for 2024 June 2024 Report of the Management Engagement Committee 53 Third interim dividend for 2024 September 2024 Statement of Directors’ Responsibilities 54 Final results for 2024 announced November 2024 Management and Advisers 55 Fourth interim dividend for 2024 December 2024 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the action you should take, you are recommended to seek your own independent financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 if you are in the United Kingdom or, if not, from another appropriately authorised financial adviser. If you have sold or otherwise transferred all your ordinary shares in CT UK Capital and Income Investment Trust PLC please forward this document, together with the accompanying documents, immediately to the purchaser or transferee or to the stockbroker, bank or agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. If you have sold or otherwise transferred only part of your holding of shares, you should retain these documents. Report and Accounts 2023 | 1 ## Company Overview ## Consistently growing income from investing in some of the UK’s best businesses ### With an objective to secure long term capital and income growth from a portfolio consisting ### mainly of FTSE All-Share companies, we offer Shareholders a reliable income while at the same ### time seeking to grow the size of your investment. ### We have been searching out the very best of the UK’s large and medium sized businesses ### since 1992 to give our Shareholders access to a range of quality UK stocks in one place. ### We carefully identify companies that are growing and profitable today and have the sustainable ### foundations to be able to continue that profitable growth into the future. ### We choose to invest in companies we strongly believe in. Most of them generate much of their ### revenues outside the UK which means you benefit from international growth and diversification. ### Our fund manager, Julian Cane, has managed the Company’s investments for over 25 years, ### outperforming its Benchmark over that period. The Manager’s results have driven the increase ### in dividend every year since the launch of the Company, through the market’s ups and downs. ### We are an “AIC Dividend Hero” in recognition of 30 consecutive years of increased annual ### dividends. ### Our Ongoing Charges figure of 0.66% represents very good value for Shareholders. ### Whether you are looking for regular income now, or to reinvest your dividends for ### long term growth, we believe that CT UK Capital and Income Investment Trust ### can play an important part in your investments. ## Visit our website at ctcapitalandincome.co.uk ### DIVIDEND ### HERO Registered in England and Wales with company registration number 02732011. Legal Entity Identifier: 21380052ETTRKV2A6Y19 Potential investors are reminded that the value of investments and the income from them may go down as well as up and investors may not receive back the full amount invested. Tax benefits may vary as a result of statutory changes and their value will depend on individual circumstances. CT UK Capital and Income Investment Trust is suitable for retail investors in the UK, professionally advised private clients and institutional investors who seek growth over the longer term in capital and income, and who understand and are willing to accept the risks and rewards of exposure to equities. 2 | CT UK Capital and Income Investment Trust PLC Overview Overview Chart & Statement Strategic Report Government Report Auditing Report Financial Report Notes of Meeting Other Information # Financial Highlights for the year ended 30 September 2023 12.15p Ordinary dividends – 30th consecutive annual increase Dividends for the year represent a 3.0% increase on the prior year, our thirtieth consecutive annual rise. 4.1% Dividend Yield The annual dividend yield for the Company is 4.1% based on the paid and proposed dividends for the 2023 financial year and the share price as at 30 September of 298.0p. 13.1% Net Asset Value per share total return* The Net Asset Value per share total return for the year was 13.1%, underperforming the Benchmark FTSE All-Share Index which returned 13.8%. 10.9% Share price total return* With the shares trading at a discount of 1.2% at 30 September 2023 in comparison to a premium of 0.8% at the prior year end, the share price total return for the year of 10.9% was lower than the Net Asset Value total return. (1.2)% Shares ended the year at a discount of 1.2% The shares traded at an average discount to NAV of 3.1% over the year. * Total return – the return to Shareholders calculated on a per share basis by adding gross dividends paid in the period to the increase or decrease in the Share Price or NAV in the period. The dividends 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. Report and Accounts 2023 | 3 ## Chair’s Statement ## “Our long term dividend record provides evidence for the success of our ## steady, incremental approach. Over 30 years, our dividend has grown 257.4%, ## providing considerably greater growth than either CPI at 103.7% or the FTSE ## All-Share Index at 169.7%.” ## Jane Lewis, Chair Dear Shareholder, a more positive background against which the UK stock market was able to record a strong return of +13.8% for the FTSE All-Share Index I am pleased to write to you with my first report as Chair following the (the “Index”). Having been ahead of the Index at our half yearly stage retirement of Jonathan Cartwright on 1 July 2023. Jonathan joined and through Spring, the total return of our Net Asset Value (“NAV”) of the Board in 2019 and became Chair in 2020. We thank him for his 13.1% was modestly behind the Index at our year end. leadership and guidance throughout his tenure. The Fund Manager’s Review contains greater analysis of performance Total Return – The Company offers a reliable income while at and the companies identified with strong, sustainable foundations to the same time seeking to grow the size of your investment deliver profitable growth into the future. After the political turmoil of the previous year with three Prime During the year, the transition to a new period of higher interest rates Ministers and four Chancellors, Russia’s invasion of Ukraine and then and bond yields brought about some apparently contradictory moves in | the unsettling Mini-Budget from the Truss/Kwarteng administration, | | | | the portfolio. Our performance over the last twelve months was helped | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | the year under review was much more stable. This helped to provide | | | | by strong returns from a number of cyclically sensitive companies such | | | | | | | Performance over one year (%) | | | | Performance over three years (%) | | | | | | | | 120 | | | | 150 | | | | | | | 115 | | | | 140 | | | | | | | 110 | | | | 130 | | | | | | | 105 | | | | 120 | | | | | | | 100 | | | | 110 | | | | | | | 95 | | | | 100 | | | | | | | 90 | | | | 90 | | | | | | | | | Sep 23Jul 23May 23Mar 23Jan 23Nov 22Sep 22 | | | | | Sep 22Sep 21Sep 20 | Sep 23 | | | | CT UK Capital and Income - share price total return* | | | | CT UK Capital and Income - share price total return* | | | | | | | CT UK Capital and Income - NAV total return* | | | | CT UK Capital and Income - NAV total return* | | | | | | | FTSE All-Share – total return | | | | FTSE All-Share – total return | | | | | | Source: Refinitiv Eikon | | | | Source: Refinitiv Eikon | | Rebased to 100 at 30 September 2020Rebased to 100 at 30 September 2022 | | | *See Alternative Performance Measures on pages 91 and 92 for explanation. 4 | CT UK Capital and Income Investment Trust PLC Chair’s Statement as the housebuilder Vistry and kitchen manufacturer and seller Howden Income Growth – The Company has increased its dividend Chair’s StatementOverview Auditors’ Report Joinery, as the economy proved to be more stable than some had every year since it was launched, through the market’s ups feared, but the rise in interest rates had a negative impact on others, and downs such as the specialist bank OSB, property owner LXi REIT and brick manufacturer Forterra. During the year, in addition to rebounding capital values, the increase in dividends from our investee companies led to growth in our revenue Our financial year end three years ago was close to the bottom of return per share of 10.2%. This is encouraging as it is clearly a strong the equity market, driven by fears over the impact of COVID-19. Our rate of growth for any one year. In these more inflationary times, Strategic Report Governance Report Financial Report Notice of Meeting recovery from that low point was initially much stronger even than that companies with pricing power for their services and products should of the Index, but we subsequently lost relative performance in the latter be able to raise their prices, protect their profits and pay increased stages, most notably during Russia’s initial invasion of Ukraine and dividends. In this way, they should be able to provide some cover the Truss/Kwarteng administration period. Performance of the Index against inflation for their shareholders. during the three year period has been driven largely by some of the very biggest stocks, in particular Shell (which rose 207.5% with an average With these results, the Board is declaring a dividend for our fourth weight in the FTSE All-Share Index of 6.1%) and HSBC (+145.2% with quarter of 3.9 pence per share to give a total for the year of 12.15p. an average weight in the Index of 4.3%). Partly by virtue of their size Over one year, this is a rate of growth for our dividend of 3.0%, which and international exposure, these companies have been seen as quite compares to the Consumer Price Index (“CPI”) of 6.7% and growth defensive and therefore more resilient than the average UK company in in the implied dividend from the FTSE All-Share Index of 9.1%. While difficult conditions. Our portfolio had only a relatively small investment our dividend growth may lag these two comparators in the short term, in Shell and nothing in HSBC, so compared to the Index these positions there are echoes of Aesop’s Fable of the Tortoise and the Hare as we, were detrimental to our performance. Over three years, our NAV total the Tortoise, aim to grow our dividend each and every year – and have return of 35.5% lagged that of the Index, which returned 39.8%. done so over our 30 years since launch. So, while the Index, the Hare, may grow its dividend rapidly some years, there are other periods Looking at longer term performance, we are ahead of the benchmark (such as during COVID-19 and in response to the Global Financial over both 10 and 25 years, with our performance in more stable Crisis) when the dividend from the market is cut sharply. or rising markets outweighing the more challenging periods. This is evidence that our investment process and its attention to long Our long term dividend record provides evidence for the success of term fundamentals does generate attractive investment returns, an our steady, incremental approach. Over 30 years, our dividend has important component of which is our track record of annual dividend grown 257.4%, providing considerably greater growth than either CPI at | growth. | | 103.7% or the FTSE All-Share Index at 169.7%. | | | --- | --- | --- | --- | | Performance over ten years (%) | | Performance over twenty five years (%) | | | | 195 | | 580 | 540 500 460 170 420 380 340 145 300 260 220 120 180 140 100 | 95 | | | | | 60 | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Sep 13 | | Sep 15 Sep 17 Sep 19 Sep 23 | | Sep 21 | Sep 98 | | Sep 03 Sep 08 Sep 13 | | Sep 18 | Sep 23 | | | | CT UK Capital and Income - share price total return* | | | | | CT UK Capital and Income - share price total return* | | | | | | | | CT UK Capital and Income - NAV total return* | | | | | CT UK Capital and Income - NAV total return* | | | | | | | | FTSE All-Share – total return | | | | | FTSE All-Share – total return | | | | | Other Information | | Source: Refinitiv Eikon | | | Rebased to 100 at 30 September 2013 | | Source: Refinitiv Eikon | | | Rebased to 100 at 30 September 1998 | | | | *See Alternative Performance Measures on pages 91 and 92 for explanation. Report and Accounts 2023 | 5 Share price premium/(discount) to NAV over one year (%)* Cost of running the Company as a % of average net assets* 1 | | 2013 | 0.62 | | | --- | --- | --- | --- | | 0 | 2014 | | 0.66 | | | 2015 | | 0.64 | -1 2016 0.64 2017 0.59 -2 2018 0.58 -3 2019 0.58 2020 0.58 -4 2021 0.59 -5 2022 0.59 2023 0.66 -6 May 23 Sep 23Mar 23Jan 23Nov 22Sep 22 Jul 23 Source: Columbia Threadneedle Investments Source: Columbia Threadneedle Investments *See Alternative Performance Measures on pages 91 and 92 for explanation. *See Alternative Performance Measures on pages 91 and 92 for explanation. Translating these figures to compound annual rates of growth, over 30 buy back at a discount. This will assist the Company in continuing to years we have grown our dividend by a rate of 4.3%, compared to 2.4% protect the discount to NAV at which the shares may trade. for CPI and 3.4% for the FTSE All-Share Index. Gearing In addition to our dividend growing faster than the dividend from the Throughout the year we have borrowed additional money to invest in Index over the long term, our dividend yield as at the financial year end our portfolio, with the amount borrowed ranging from £24 million to was 4.1%, which is above the yield from the Index of 3.8%. £29 million. This is decided on an assessment of the returns available from the portfolio and individual investments in comparison with the We are proud to be one of the Association of Investment Companies’ cost of borrowing. Our interest costs for the borrowing are linked to (“AIC”) Dividend Heroes as we have increased our dividend every year short term interest rates, so with the increases in the Bank of England since launch in 1992. It remains firmly our intention to continue to Base Rate, these have been increasing during the course of the year. extend this record and the recovering strength of our Revenue Reserve Overall, the cost of our borrowing was lower than the returns achieved of £12.3 million or 11.8 pence per share gives us considerable from the portfolio so gearing has been advantageous for shareholders. confidence that this will be achievable. Costs Share Price discount to NAV One of our objectives is to run your Company as efficiently as possible. The Board has long believed it is in Shareholders’ interests that the This year there was an increase in the ratio of ongoing charges which Company’s shares should not trade at a price that is too detached was a combination of two effects. First, although the management fee from the underlying NAV per share. In order to try to create the right was lower (reflecting the fact that assets were on average lower across conditions for this, the Company has the ability to buy back its own the last four quarter ends than the previous year), other expenses did shares if the price stands at a discount compared to the underlying rise. While total recurring expenses rose 4.6%, this was lower than NAV per share and to issue its own shares if the price is at a premium. CPI for the year. Secondly, average daily net assets were lower year In total during the year, the Company bought back almost 2.5 million on year. This reflects the timing of market movements and also the shares at an average discount of 4.1% and issued 75,000 shares at impact of share buy backs reducing the size of the Company. The cost an intraday premium of 1.7%. ratio at 0.66%, although a little higher than the previous eight years, still remains at a very competitive level. Over the year the shares traded on average at a discount of 3.1% to the underlying NAV, with the share price trading in a range between ESG being in line with the NAV and a 6.0% discount. Consideration of Environmental, Social and Governance (“ESG”) issues have long been an important part of the investment process At the forthcoming Annual General Meeting, the Board will again ask of your investment manager, which has one of the largest and Shareholders to renew its authority to issues shares at a premium and longest established teams dedicated to ESG issues. There is a 6 | CT UK Capital and Income Investment Trust PLC 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 Chair’s Statement detailed commentary on pages 24 to 27 which explains Columbia complete and submit their Form of Proxy or Form of Direction in Chair’s StatementOverview Auditors’ Report Threadneedle’s ESG policies, how these are implemented with respect advance of the AGM. to management of the investment portfolio, and its engagement with our investee companies. Outlook The immediate economic background is far from promising with growth Directorate Change expected to be at only very pedestrian levels in the UK and many other The Board recognises the value in both attracting fresh talent and the developed economies, but as we have seen over the last year and maintenance of continuity and accordingly a plan has been developed many years in the past, it would be wrong to believe that stock market Strategic Report Governance Report Financial Report Notice of Meeting to ensure an orderly succession as Directors retire. performance is linked too closely to domestic economic growth. On a more positive front, inflation and interest rates are widely expected to As part of this plan, at the Annual General Meeting to be held on fall and this should be supportive of markets. 7 March 2024, Tim Scholefield, the Company’s Senior Independent Director will retire from the Board. Tim has served as a Director since Over the next twelve months, the UK is likely to have another General November 2014. I wish to place on record the Board’s appreciation for Election and most probably, on present polling, to face a change in his support and guidance throughout his tenure and to thank him for government. It seems though, whichever political party is in power, his contribution to the Company’s success. Upon his retirement Nicky that the government of the day will be fairly heavily constrained in the McCabe will be appointed Senior Independent Director. actions it can take by a range of factors. Moreover, it is far from just the UK that is facing elections as it is estimated that 2024 will be With Tim Scholefield’s forthcoming retirement, a search company was the biggest election year in history with more than 40% of the world’s commissioned to find a replacement. Following this selection process, population having the chance to cast a ballot. the Board is pleased to announce that Christopher Metcalfe, will be appointed to the Board and its committees with effect from 8 March There have been a number of substantial challenges for the UK 2024. and international economies and stock markets to face in recent years, most obviously the impact of COVID-19, Russia’s invasion of Christopher is Chairman of Martin Currie Global Portfolio Trust plc Ukraine, rising inflation and interest rates. Since our financial year and the Senior Independent Non Executive Director of JP Morgan US end, Hamas’s attack on Israel has increased the chance of war in the Smaller Companies Investment Trust plc. He has extensive equity Middle East, while China, experiencing rapid economic deterioration of fund management and investment trust experience having previously its own, has ongoing aspirations with regard to Taiwan. worked in senior positions at Newton Investment Management, Schroder Investment Management and Henderson Administration Against this somewhat uncertain and difficult background we remain Group. confident that valuations in our portfolio are attractive and with a combination of its dividend generating capacity and our revenue AGM reserve we will strive to extend our record of dividend growth into the The Annual General Meeting (“AGM”) will be held at 12.30pm on future. 7 March 2024 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. Jane Lewis Chair For Shareholders who are unable to attend, any questions they 29 November 2023 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 29 February 2024. 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. Other Information To ensure that your votes will count, I would encourage all Shareholders especially those that cannot attend in person to Report and Accounts 2023 | 7 ## Thirty Years of Dividend Growth ## Consistently growing income from investing in some of the UK’s best businesses 2023 is the thirtieth consecutive year that the Company has increased A key feature of the structure of an investment trust is that it allows its annual dividend paid to Shareholders. This is despite facing diverse companies such as ours to accumulate a Revenue Reserve from challenges including the UK recession of the early 1990s, the Asian undistributed income in good years and then to draw down from it when Financial Crisis, the September 11 attack on the New York World Trade circumstances are more challenging. The Board knows that Shareholders Centre, the Global Financial Crisis, COVID-19 and more recently the appreciate a steadily rising dividend and, for example, during COVID-19, ongoing war in Ukraine. chose to pay dividends to Shareholders in two years that were not fully covered by annual earnings. ### Over that time, an initial investment of Dividend Progression since launch in September 1992 ## £1,000 in CT UK CAPITAL AND INCOME ## INVESTMENT TRUST has yielded £2,376 ### in gross income, assuming dividends had ### not been reinvested. ## This compares to just £1,076 paid out on ## the FTSE ALL-SHARE INDEX based on the ### annual dividend yield, and ## £1,132 earned from a SAVINGS ACCOUNT ### paying the Bank of England base rate over ### the same period. Annual Dividends Special Dividends Source: Columbia Threadneedle Investments Cumulative income received by Shareholders from a £1,000 AIC Dividend Hero investment at launch in September 1992 Companies which have consistently grown their annual dividend for over twenty years are classed by the AIC as Dividend Heroes. Our Company is one of a small group of investment trusts which have achieved this standard. The Board is proud that the Company is an AIC Dividend Hero and it is our intention to continue to extend this record of continuous growth in annual dividend. £2,500 13.00 12.00 11.00 £2,000 | 10.00 | | | | DIVIDEND | | | --- | --- | --- | --- | --- | --- | | 9.00 | | | | | HERO | | | | CT UK Capital & Income Investment TrustFTSE All-Share Index | Savings Account | | | | £1,500 8.00 | | | | | | | 7.00 | Source: Columbia Threadneedle Investments and Refinitiv Eikon | | | | | 6.00 £1,000 5.00 pence per share 4.00 3.00 £500 8 | CT UK Capital and Income Investment Trust PLC 2.00 1.00 0.00 £0 1993 1998 2003 2008 2018 2023 1992 1997 2002 2007 2012 2017 2013 2023 Strategic Report # Fund Manager's Review ![img-0.jpeg](img-0.jpeg) "We are confident in the companies in which we have invested as they have an attractive balance of good products or services with strong market positions, sound finances and quality management." Julian Cane, Fund Manager This report marks your Company's thirtieth consecutive annual dividend increase, a period which has seen considerable change and many major events. The cumulative effect has driven substantial income return to Shareholders as well as share price appreciation. ## Review of the UK Stock Market Our financial year started amongst the fall out from the Truss-Kwarteng 'Mini-Budget' which had been so badly received by investment markets. The rapid replacement of the Prime Minister and Chancellor of the Exchequer stabilised the UK's political position and restored some confidence in the bond market. This in turn allowed the FTSE All-Share to record a strong gain through until mid-February, but at this point the recovery was complete and the equity market did not make any further progress for the rest of the year. The UK and most other developed economies, last year had to face the twin difficulties of higher inflation and very pedestrian rates of economic growth. The CPI in the UK peaked at 11.1% in October 2022 and has since been on a downward trajectory, falling to 6.7% for the year to September 2023. This decline has been broadly in line with the forecasts of the Bank of England, but its concerns have been around the extent to which inflation might persist in the economy for longer by becoming embedded in wage settlements. The latest inflation adjusted GDP figures show the UK economy has grown by less than 0.6% over the year to September 2023, so although it is clear that inflation is not the result of excess economic growth, the Bank of England has continued to raise short term base rates in order to dampen inflationary pressure and reduce expectations of future inflation. Base rates started the year at 2.25% and finished the year at 5.25%, while the yields on the 10 year UK government bond for the same dates were 4.1% and 4.4%. While the move in bond yields between the start and end points of the year is fairly modest, the longer term move over the last three years from a yield of 0.2% in September 2020 is very significant and a medium term headwind for equity markets. ## Individual Stock Performance Table A overleaf shows the list of the strongest and weakest share prices over the last year. Amongst the ten strongest share prices over the last year, there are five companies which featured on the list of the ten weakest share prices during the previous year. As was said in last year's annual report, we felt that the falls in share prices of those companies were not justified by fundamental factors and that consequently those share prices were attractively valued. We had been selectively adding to some of those holdings and therefore the rebound in those share prices was particularly positive. The company in the portfolio with the strongest share price, Burford Capital, is a ground breaking business in the UK, providing finance to companies to pursue litigation claims. The strength of its share price over the last year is largely a result of its successful claim in the US courts against the Government of Argentina over the nationalisation of YPF, an oil business. This is a large, high profile case, which could potentially be worth multiples of Burford's market capitalisation, but the case does rather obscure the growing success the rest of the business has had. The list of the weakest share prices shows the impact of rising interest rates as well as some company specific effects. Forterra, a brick manufacturer, LXI REIT, an owner of property, and OSB, a mortgage provider, have all been impacted by the rise in interest rates, but we believe in each case the share price moves exaggerate any change in the companies' long term value. These companies are strategically well positioned with sound finances and their greater intrinsic value should be realised in future. St. James's Place was a new addition to the portfolio during the year, and the timing of the purchase was clearly poor as it was before the recent fee restructuring. St. James's Place's level of customer satisfaction has been relatively high and its charges, which were historically broadly in line with its peer group, are being restructured to Overview What's Statement Strategic Report Government Report Auditors' Report Financial Report Notes of Meeting Other Information Report and Accounts 2023 | 9 be more customer friendly. We will monitor carefully how this evolution portfolio as well as the size and performance of every stock included in develops. the Benchmark Index. The fall in the share price of Pennon Group was partly in response to In addition to the positive contributions from the strongest performers rising bond yields, but also ahead of the five yearly determination by as shown in Table A, we can also see the benefit of not having invested OFWAT of future pricing. This has proven to be relatively benign with the in Anglo American and Vodafone, whose share prices were very weak, share price starting to recover some of its losses. and similarly the benefit of not having a full index weighting in British American Tobacco. Table B, below, shows the ten stocks that made the greatest contribution (both positive and negative) to our performance relative The list of the negative contributors shows the effect of not owning to that of the Index. This analysis builds on Table A as it also takes three large companies that performed well, HSBC, Rolls-Royce and 3i, into account the impact of the size of the investment position in the as well as the impact of the share price falls on some of the larger interest rate sensitive holdings noted previously. Table A: Absolute performance of stocks held during the year Portfolio Average Total Return to Portfolio Average Total Return to 10 Strongest share prices Weight (%) the Company (%) 10 Weakest share prices Weight (%) the Company (%) Burford Capital 2.92 71.94 IG Group 1.57 -10.05 Vistry Group 3.75 67.58 FDM Group (Holdings) 0.44 -11.92 CRH 2.07 59.31 British American Tobacco 1.52 -13.36 Melrose Industries 0.64 53.52 Smith & Nephew 0.97 -13.80 Howden Joinery Group 1.84 50.74 OSB Group 5.88 -14.10 Ferguson 1.40 49.16 Diageo 4.40 -18.20 Intermediate Capital Group 3.76 48.96 Pennon Group 1.24 -21.35 Babcock International Group 0.45 48.38 LXI REIT 2.92 -22.16 XP Power 1.22 47.70 St. James’s Place 0.64 -28.05 Sage Group 0.79 45.17 Forterra 1.42 -31.79 Source: Columbia Threadneedle Investments Table B: Relative to the Benchmark Index | | | | | | | Total | | | | | | | | | Total | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Portfolio | | | Average | | Return | Contribution | | | Portfolio | | | Average | | Return | Contribution | | | | Average | | | Weight | | to the | To Relative | | | Average | | | Weight | | to the | To Relative | | | Top 10 | Weight | | Relative to | | Company | | Performance | | Bottom 10 | Weight | | Relative to | | Company | | Performance | | | Contributors | | (%) | the Index (%) | | | (%) | | (%) | Contributors | | (%) | the Index (%) | | | (%) | | (%) | Vistry Group 3.75 3.64 67.58 1.52 Diageo 4.40 1.01 -18.20 -0.34 Burford Capital 2.92 2.92 71.94 1.30 IG Group 1.57 1.45 -10.05 -0.34 Intermediate Capital 3.76 3.60 48.96 0.94 3i Group 0.00 -0.68 – -0.35 Group Howden Joinery 1.84 1.69 50.74 0.47 Pennon Group 1.24 1.15 -21.35 -0.37 Group Ferguson 1.40 1.40 49.16 0.39 Beazley 3.54 3.38 0.34 -0.38 Anglo American 0.00 -1.40 – 0.38 Rolls-Royce Holdings 0.00 -0.50 – -0.50 British American 1.52 -1.31 -13.36 0.38 Forterra 1.42 1.40 -31.79 -0.74 Tobacco CRH 2.07 0.85 59.31 0.35 LXI REIT 2.92 2.85 -22.16 -1.13 XP Power 1.22 1.20 47.70 0.31 HSBC Holdings 0.00 -4.93 – -1.25 Vodafone Group 0.00 -0.89 – 0.31 OSB Group 5.88 5.80 -14.10 -1.37 Source: Columbia Threadneedle Investments 10 | CT UK Capital and Income Investment Trust PLC Strategic Report ## Portfolio Turnover When we analyse and evaluate the companies in which we wish to invest, we do this with a long term perspective. We are not looking for short term trading opportunities or where there are only relatively small uplifts in value, but for companies which have considerable potential to drive long term value. Although this value could be realised rapidly, it is generally our intention to be stable, supportive shareholders and for our returns to be driven by a mixture of share price appreciation, dividends and dividend growth. Net total sales from the portfolio last year were £25 million and net total new investments (excluding share buy backs) were £17 million. The total number of investee companies in the portfolio remained at 47, as 3 companies left the portfolio and were replaced by 3 new additions. Compared to average assets of £322 million, the rate of turnover was 7%. ## Revenue and Earnings Per Share Our portfolio's income has continued to grow from the low point caused by the COVID-19 pandemic, but within this, there has been considerable variation in the growth rates of the dividends paid by our investee companies. Below is a table showing the dividend growth rates and dividend yield of those stocks that were the ten largest contributors to income last year. ### Dividend Growth and Yield from the Ten Largest Contributors to Income | | % increase in dividends per share | dividend yield as at 30.9.23 | | --- | --- | --- | | OSB | 7.4% | 9.8% | | Legal & General | 5.0% | 8.8% | | Vistry | -8.3% | 6.0% | | Rio Tinto | -38.9% | 6.2% | | Intermediate Capital | 2.0% | 5.6% | | Phoenix | 4.8% | 10.8% | | LXI REIT | 23.9% | 7.0% | | Unilever | 4.1% | 3.7% | | AstraZeneca | No change | 2.6% | | British American Tobacco | 4.8% | 8.8% | There were substantial cuts in the dividends paid by Rio Tinto and GSK. Rio Tinto has explicitly linked its dividend to its profitability, which in turn is closely linked to commodity prices, in particular, that of iron ore. A fall in profits at Rio Tinto therefore resulted in lower dividends, but the dividend yield is still very attractive. The fall in dividend from GSK stems from its demerger of Haleon and the rebasing of the dividend to reflect the smaller size of the business that is left, but from this lower level the dividend should now grow. The increase in dividend from OSB of 7.4% reflects only the ordinary dividends paid by the company. During the course of the year OSB also paid a special dividend to reflect the exceptional returns the company has been making and the fact it does not need the capital for further growth or to strengthen its finances. Including the special dividend that we received during the year takes the dividend increase to 46.6% and a yield of 13.3%. ## Valuation The most straightforward valuation measures for equity markets are the price/earnings multiple and the dividend yield. The price/earnings ("p/e") multiple relates the price of an index (or share) to the earnings that are generated by the index (or share) in a year, so all other things being equal a lower p/e is a sign of a cheaper investment. The dividend yield by contrast records the cash dividend received in a year from an investment relative to the price, so a higher yield will be more attractive than a lower yield. The charts below and overleaf show how these ratios have changed over 30 years, together with an average for this period. These are far from perfect measures of value and are backward looking, but do have the benefit of consistency and a long data series which covers a number of economic cycles. On both measures, UK equities appear to be more cheaply valued than the historic average. ### FTSE All-Share Index – Price/Earnings Ratio (%) ![img-1.jpeg](img-1.jpeg) Report and Accounts 2023 | 11 Overview Chart's Statement Strategic Report Government Report A Report Report Financial Report Notes of Meeting Other Categories ### FTSE All-Share Index – Dividend Yield (%) ![img-2.jpeg](img-2.jpeg) As a further comparison, it is worth looking at the dividend yield from equities versus the yields available from alternative assets. This clearly shows how the yield on the 10 year UK government bond reduced from over 8% in 1994 to less than 1% in 2020 with the Bank of England's base rate following a fairly similar course of travel. Equity yields by contrast have remained in a much smaller range over the period, thus suggesting that the headline yields on bonds and cash may not be that instrumental in determining the valuation of equities. The sharp recent rise in both bond and cash yields definitely marks a significant change to the post Great Financial Crisis period that started in 2008/09 as rising bond and cash yields do now have a competitive investment yield and so provide a headwind to equities for the first time in well over a decade. However, the long term perspective shown in the chart indicates that bond and cash yields of around 5% were prevalent in the market between 2000 and 2008, when equity yields were even lower. This suggests there is no inherent reason why equity yields would need to be higher now (and therefore prices lower) just because interest rates and bond yields have themselves moved higher. ### Yields from investment assets (%) ![img-3.jpeg](img-3.jpeg) ### Outlook It is an important distinction to make that stock market prices and company results are all reported in nominal terms, while economic growth is always quoted in real terms, after adjusting for inflation. In the short term and during periods of low inflation the distinction may not be so important, but in periods of higher inflation and over longer periods of time, it is an important factor that should help to give investors in equities some protection from inflation, and it is a point of difference when comparing equities against bonds, where returns are fixed. Last year, the UK economy barely grew in real terms as inflation rose into double digits, yet the stock market rose reasonably strongly; this should be seen as an example of equities giving protection from inflation. The rise in the market was also not a consequence of its valuation changing materially. Arguably the largest factor driving an investor's future returns is the price they pay for the investment. The valuation charts discussed hopefully give Shareholders confidence that the UK stock market remains attractively valued. The immediate future course of inflation is expected to decrease in the UK and most major markets, which combined with lower rates of interest, should help to provide some more support to equities. At times there can be an undue focus put on forecasts for the UK economy, with this being assumed to be a major determinant in the subsequent performance of UK shares, but the UK equity market and your portfolio derive well over 50% of their income from overseas. Even beyond the geographical mismatch, individual company performance is mostly driven by very company specific factors. In this regard, we are confident in the companies in which we have invested as they have an attractive balance of good products or services with strong market positions, sound finances and quality management. **Julian Cane** **Fund Manager** **29 November 2023** 12 | CT UK Capital and Income Investment Trust PLC Strategic Report Chair’s StatementOverview Auditors’ Report ## Purpose, Strategy and Business Model Strategic Report Governance Report Financial Report Notice of Meeting Purpose and strategy Alignment of values and culture The purpose of CT UK Capital and Income Investment Trust (the In addition to strong investment performance from the Manager, the “Company”) is to provide investors with long term capital and income Board expects it to adhere to the very highest standards of responsible growth. investment and that its values, culture, expectations and aspirations align with its own. As an original signatory to the United Nations The strategy is to invest in companies, mainly in the FTSE All-Share Principles for Responsible Investment (“UNPRI”), the Manager has Index, that have good long term prospects with attractive returns on achieved the maximum rating of A+ for key areas of its responsible invested capital. investment approach and active ownership in listed equities. The investment philosophy and processes underpinning this strategy The Board considers the Manager’s culture and values as part of the are set out on pages 22 and 23. annual assessment of its performance and in determining whether its reappointment is in the interests of Shareholders. As part of Columbia The aim is to position the Company as a compelling investment choice, Threadneedle Investments, the Manager can be expected to continue particularly for retail investors. its long established culture of diversity, collaboration and inclusion, all of which are anchored by shared values, in keeping with the Board’s Business model own expectations and beliefs. CT UK Capital and Income Investment Trust PLC is a listed, closed-end investment company, known as an investment trust. Responsible investment impact The Company’s ESG approach is set out on page 24 and helps deliver The Company’s Board of non-executive Directors looks after the sustainable investment performance over the longer term. interests of Shareholders. It has the responsibility for decisions on strategy, corporate governance, risk and control assessment, setting The direct carbon impact of the Company’s activities is minimal as it policies as detailed on pages 33 to 35, setting limits on gearing and has no employees, premises, physical assets or operations either as a asset allocation, monitoring investment performance and setting and producer or a provider of goods or services, while its Shareholders are monitoring marketing budgets. effectively its customers. In consequence, it does not directly generate any greenhouse gas or other emissions or pollution. The Company’s Within these policies the management of the Company’s assets indirect impact occurs through the investments that it makes and this including asset allocation, gearing, stock selection and portfolio is mitigated by the Manager’s responsible investment approach as risk, has been contractually delegated to Columbia Threadneedle explained on pages 24 to 27. Investment Business Limited (the “Manager”). Manager evaluation As an investment trust, the Company does not need to sell investments Investment performance and responsible ownership are fundamental to meet redemptions. This allows the Company to take a longer term to delivering sustainable long term growth in capital and income for view and to remain invested whatever the market conditions. Shareholders and the Board therefore exercises a robust annual evaluation of the Manager’s performance. Having the ability to borrow to invest is also a significant advantage over a number of other investment fund structures. Borrowing allows The process for the evaluation for the year under review and the basis Other Information the Company to have more resources to invest on behalf of its on which the decision to reappoint the Manager for another year are Shareholders. set out on page 53. Report and Accounts 2023 | 13 Fund Manager and management of the assets With approximately 90% of the shares held by retail investors with share As Fund Manager on behalf of the Manager, Julian Cane is responsible saving schemes and platforms representing an increasingly significant for developing and implementing the Company’s investment strategy and growing element of the Shareholder base, the Board remains with the Board and for the day-to-day management of the portfolio. He focused with the Manager on promoting its success to this audience. All is supported in carrying out research and in the selection of stocks by appropriate channels are used including the internet and social media. a team of investment professionals. During the year, the Company employed an external agency to review its marketing strategy. The outcomes of this review will drive the marketing Managing risks and opportunities strategy of the Company for retail investors for future years. Like all businesses, investment opportunities do not come without risks and uncertainties and so the performance of the Manager is Communication with Shareholders includes reporting the Company’s monitored at each Board meeting on a number of levels. In addition activities and performance through the publication of its financial to managing the Company’s assets, the ancillary functions of statements. The vast majority of Shareholders and CT Savings Plan administration, secretarial, accounting and marketing services are investors prefer not to receive such detailed information. To avoid losing all carried out by the Manager. The Board receives reports on the this essential line of communication, we instead make available a short investment portfolio; the wider portfolio structure; risks; compliance notification summary of the main highlights of our half yearly and annual with borrowing covenants; income, dividend and expense forecasts; any results. Shareholders and CT Savings Plan investors are able to locate errors; internal control procedures; marketing; Shareholder and other the full information on our website, ctcapitalandincome.co.uk. stakeholder issues, including the Company’s share price premium or discount to NAV; and accounting and regulatory updates. The Annual General Meeting (“AGM”) of the Company provides a forum, both formal and informal, for Shareholders to meet and discuss issues Shareholders can assess the financial performance from the Key with the Directors and the Fund Manager. Through the Manager, the Performance Indicators that are set out on page 15 and, on page 28, Company ensures that the CT Savings Plan investors are encouraged can see what the Directors consider to be the Principal Risks that the to attend and vote at AGMs alongside those who hold their shares as Company faces. The risk of not achieving the Company’s objective or members on the main Shareholder register. Details of the proxy voting of consistently underperforming the Benchmark or competitors, may results on each resolution are published on the Company’s website arise from any or all of inappropriate asset allocation, poor market where there is also a link to the daily publication of our NAV and our conditions, ineffective or expensive gearing, poor cost control, loss of monthly factsheet. assets and service provider governance issues. In addition to regularly monitoring the Manager’s performance, its commitment and available The Company holds a five yearly continuation vote. At the AGM held on resources and its systems and controls, the Directors also review the 9 March 2023, Shareholders voted 99.5% in favour of the continuation services provided by other principal suppliers. These include JP Morgan of the Company. In advance of the vote, during 2022, the Board Chase Bank, (the “Custodian”) and JP Morgan Europe Limited (the surveyed investors who held the Company’s shares within the CT “Depositary”) in their duties towards the safeguarding of the assets. Savings Plans. Common themes amongst responses included the importance of performance, dividend growth, low fees and the The principal policies that support the strategy are set out from page reputation of the Manager. The next continuation vote is scheduled to 33, whilst the Fund Manager’s Review of activity in the year begins be held in 2028. on page 9. In light of the strategy, investment processes and control environment (relating to both the oversight of the Company’s service The Company’s next AGM will be held at 12.30pm on 7 March 2024 at providers and the effectiveness of the risk mitigation activities), the Cannon Place, 78 Cannon Street, London, EC4N 6AG. Board has set out on page 38 its reasonable expectation that the Company will continue in operation and meet its liabilities over the The Manager also has in place a programme of visits designed to coming five years. foster good relations with wealth managers and underlying investors in promoting the Company’s investment proposition. These visits are Communications and marketing with key stakeholders reported regularly to the Board. The Chair and Senior Independent The Company fosters good working relationships with its key Director are available to meet with major investors on request. stakeholders: Shareholders, the Manager, suppliers and service providers. As an investment trust, the Company has no employees. 14 | CT UK Capital and Income Investment Trust PLC Strategic Report Chair’s StatementOverview Auditors’ Report ## Key Performance Indicators ## The Board assesses its performance in meeting the Company’s objective against the following key ## measures. Commentary can be found in the Chair’s Statement and Fund Manager’s Review. Strategic Report Governance Report Financial Report Notice of Meeting Total return performance 1 Year 3 Years 5 Years 10 Years % % % % This is used to measure the performance of the Manager in terms of (1) NAV per share 13.1 35.5 12.7 74.4 Capital and Income growth by comparison to the return of the benchmark index. Benchmark index: FTSE All-Share 13.8 39.8 19.7 71.8 This is used to measure the return to Shareholders in terms of capital (1) Share Price 10.9 34.5 10.5 71.6 growth and the dividends they have received in comparison to the return of the benchmark index. Source: Columbia Threadneedle Investment Business Limited and Refinitiv Eikon Compound annual dividend growth | | 1 Year | | 3 Years | | 5 Years | | 10 Years | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | % | | % | | % | | % | | | Company dividend 3.0 1.8 2.1 2.5 | | | | | | | | | This shows the Company's dividend growth which is compared to the | changes in the UK Consumer Price Index ("CPI") and the average dividend Inflation (CPI) 6.7 6.6 4.4 2.9 paid by the broad UK stock market, as represented by the FTSE All-Share FTSE All-Share Index - implied dividend 9.1 1.7 0.0 3.0 Index. Source: Columbia Threadneedle Investment Business Limited, Refinitiv Eikon and Office of National Statistics Share price (discount)/premium to NAV per share as at 30 September | | | 2023 | | 2022 | 2021 | | | --- | --- | --- | --- | --- | --- | --- | | | | | % | % | % | | | | (1) | | | | | This is the difference between the share price and the NAV per share. It is | | (Discount) / premium | | (1.2) 0.8 (2.0) | | | | | an indicator of excess supply over demand in the case of a discount and Average discount to NAV during the (1) (3.1) (1.8) (1.6) the excess demand over supply in the case of a premium. year Source: Columbia Threadneedle Investment Business Limited Ongoing charges as at 30 September | | | 2023 | | 2022 | | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | % | | % | | % | | | | (1) | | | | | | | This shows whether the Company is being run efficiently. It measures the | | Ongoing charges | | 0.66 0.59 0.59 | | | | | | | running costs as a percentage of the average net assets. Other Information Source: Columbia Threadneedle Investment Business Limited (1) See Alternative Performance Measures on pages 91 and 92 for explanation. Report and Accounts 2023 | 15 ## Twenty Largest Holdings | | | | | 2023 | 2023 | 2022 | | --- | --- | --- | --- | --- | --- | --- | | | | | % of total | | Value | Value | | 2023 2022 | | | investments | | £’000s | £’000s | | 1 2 | AstraZeneca | (Health Care) | | 5.8 19,647 17,892 | | | A major international pharmaceutical company. Its pipeline of new drugs is proving successful and producing strong growth now with more potential further out. 2 18 Vistry Group (Consumer Discretionary) 5.0 16,872 6,297 The company will be refocusing solely on its partnership operations, where it builds new homes in conjunction with others, such as local authorities, housing associations and Homes England. This should make the business less exposed to the economic cycle than traditional housebuilders. 3 8 RELX (Consumer Discretionary) 4.5 14,985 11,885 RELX is a global provider of information based analytics and decision tools for professional and business customers across a range of industries. It also has a leading global events business. It generates high returns which we expect will improve further. 4 1 OSB Group (Financials) 4.4 14,733 18,918 This specialist challenger bank continues to generate good returns and to grow well at carefully controlled risk levels. The sharp rise in interest rates did bring about a substantial accounting hit to profits this year, but we believe the longer- term results should not be impacted much. 5 11 Intermediate Capital (Financials) 4.2 14,107 10,023 A specialist lender to private companies both on its own behalf and increasingly for third party investors. It has been generating good returns despite the difficult conditions and has great long term potential to grow the business further. 6 4 Unilever (Consumer Staples) 4.1 13,809 14,288 A leading manufacturer of branded fast moving consumer goods with more than half of its sales in emerging markets which have greater growth potential. 7 3 Diageo (Consumer Staples) 3.9 13,198 16,517 The largest producer of premium branded spirits in the world and also a major brewer. The strength of the brands and substantial exposure to markets with greater growth potential should lead to attractive returns. 8 15 Burford Capital (Financials)* 3.9 13,180 7,744 Burford is the leading international provider of litigation funding. It is a fast evolving and growing market with attractive returns for those able to navigate its complexities well. 9 6 Rio Tinto (Basic Materials) 3.8 12,935 12,240 One of the world’s foremost mining companies. It has a diversified asset base, but its most significant interests are in low cost, high quality iron ore. It is our only current exposure to the mining sector. 10 9 Legal and General (Financials) 3.6 12,015 11,691 A focus on generating a strong and growing cash flow allows this UK life assurer to pay an attractive and growing dividend. Although a slowing economy and rising interest rates are a more challenging background, concerns over its credit exposure and solvency appear overdone. 16 | CT UK Capital and Income Investment Trust PLC Strategic Report Chair’s StatementOverview Auditors’ Report Strategic Report Governance Report Financial Report Notice of Meeting | | | | | 2023 | 2023 | 2022 | | --- | --- | --- | --- | --- | --- | --- | | | | | % of total | | Value | Value | | 2023 2022 | | | investments | | £’000s | £’000s | | 11 12 | Shell | (Energy) | | 3.3 11,075 9,548 | | | A leading international oil exploration, production and marketing group. For a while the industry struggled to generate good returns, but a higher oil price is causing profits and returns to increase sharply. 12 5 Beazley (Financials) 3.3 11,060 12,408 A specialist insurer with a diverse underwriting portfolio that has historically generated good returns and growth. It has become increasingly recognised for the strength of its cyber insurance operations, which complement its other underwriting activities. 13 10 Compass (Consumer Discretionary) 2.8 9,400 10,108 Compass is the global leader in outsourced catering. A structural shift towards more outsourcing was disrupted by the pandemic, but good rates of growth have returned. It has unrivalled scale helping it to offer its clients great value. 14 7 LXi REIT (Real Estate) 2.6 8,742 11,919 This company invests in commercial property assets, mostly in the UK. These are 100% occupied on very long leases, 98% of which are inflation linked or with fixed uplifts. Its debt is all either fixed or with a capped rate and the tenant covenants are strong. 15 17 BP (Energy) 2.5 8,502 6,930 A leading international oil exploration, production and marketing group, returns are improving with a higher oil price. 16 24 CRH (Industrials) 2.4 8,176 5,528 CRH manufactures and supplies a wide range of building materials, used across the range from public infrastructure projects to residential homes. It operates in more than 30 countries, with the US accounting for over half of sales. 17 14 GSK (Health Care) 2.4 8,130 7,835 After many years of lacklustre performance, current management is under significant pressure to reinvigorate the business. The demerger of the health care business (Haleon) focuses more attention on the revival of the pharmaceutical business. 18 16 Phoenix (Financials) 2.1 6,941 7,582 A UK domestic life assurer growing both by taking on new customers and through taking part in consolidation of the sector. Increased scale drives operational and capital efficiencies and diversification benefits that underpin an attractive dividend. 19 30 Howden Joinery (Consumer Discretionary) 2.0 6,775 4,949 This business designs, manufactures and sells fitted kitchens, mostly in the UK. Its integrated value chain and efficiency make it a high returning business with the potential to grow and improve returns further. 20 28 Round Hill Music Royalty Fund (Financials) 1.9 6,308 5,096 This business owns high quality music intellectual property which generates a growing income, particularly from digital streaming. As at our year end, it was in the process of being taken over by another music industry business. The value of the twenty largest holdings represents 68.5% (30 September 2022: 67.1%) of the Company’s total investments. Other Information *Quoted on the Alternative Investment Market in the UK. Report and Accounts 2023 | 17 ## Investment Portfolio by Sector Performance Performance of this sector of this in the FTSE Average Average FTSE Impact on sector in the All-Share Portfolio All-Share relative portfolio Index weighting weighting performance % % % % % Energy The oil majors BP and Shell together represent 11% of the +23.7 +21.3 5.2 11.4 –0.3 FTSE All-Share Index and therefore very nearly all of this industry segment. They both gained strongly in value last year (+28.1% and +20.6% respectively), helped by the rising price of oil. The price of a barrel of Brent crude was at the same level of $75 at the end of June as it was at the start of our year, but experienced a sharp rise to over $90 by the end of September. Our investment weight in those companies and the industry is less than that of the Index as we observe that the oil price and therefore returns from the industry is unpredictable and it is not clear how companies will manage the transition of the majority of their existing operations to a zero-carbon future, particularly with the risk of governments becoming more interventionist. Basic Materials Our only investment in this industry is Rio Tinto (+12.3%). We +12.3 +3.5 3.8 7.8 +0.7 believe that amongst its peers it has some of the highest quality mining assets and that over the long-term these should provide attractive returns and performance superior to the industry average. Industrials Our performance within this industry grouping was reasonably +19.7 +25.2 12.8 11.4 –0.4 strong, but didn’t match the rise of the same segment in the Index. Ferguson and CRH were the two most significant contributors to performance (+49.2% and +59.3% respectively) as they are not only showing operational strength but are both moving their listings from the UK and heading towards the more highly rated US markets. Our investments in Babcock International, Melrose Industries and XP Power all also rose by around 50% during the year, but our industry return was held back by the brick manufacturers Forterra (-31.8%) and Ibstock (-8.2%) as well as not owning Rolls-Royce (+217.4%) and BAE Systems (+30.0%). Consumer Staples The performance of one of our larger investments in this area, –2.4 –1.7 13.8 15.5 +0.2 Diageo (-18.2%) was disappointing on a combination of weaker than expected trading and a lower valuation. Our strongest performer was Coca-Cola HBC (+22.1%) which was rebounding from its weak performance in the prior year, helped by strong growth in its emerging markets. 18 | CT UK Capital and Income Investment Trust PLC Strategic Report | | Performance of this sector in the portfolio % | Performance of this sector in the FTSE All-Share Index % | Average Portfolio weighting % | Average FTSE All-Share weighting % | Impact on relative performance % | | --- | --- | --- | --- | --- | --- | | **Health Care** Our long-standing investments in the pharmaceutical companies AstraZeneca (+14.0%) and GSK (+18.9%) performed reasonably well, but our newer investment in Smith & Nephew (-13.8% since purchase) has struggled somewhat. The business is in a turn-around phase with a relatively new Chief Executive and we believe the longer-term potential is considerable. | +11.6 | +15.4 | 9.0 | 11.3 | -0.3 | | **Consumer Discretionary** This is a wide-ranging industry, including retail, travel, media and housebuilding. It was the strongest contributing industry in our portfolio, led by the recovery of Vistry (+67.6%) and Howden Joinery (+50.7%). Both of these had been particularly depressed at the start of the financial year by rising bond yields and the UK's political chaos. | +36.7 | +27.0 | 14.3 | 11.3 | +1.5 | | **Telecommunications** Our investment process has long led us to be sceptical of investments in the telecommunications industry. It is plain that demand for telecommunications products and services has increased materially over many years, but a mixture of poor pricing power and heavy required levels of investment has so far stopped companies being able to turn this demand and growth into attractive returns for shareholders. | - | -13.7 | 0.0 | 1.5 | +0.4 | | **Utilities** Our longer-standing investments in National Grid (+10.9%) and SSE (+11.5%) performed adequately last year, but our newer investment in Pennon, bought in September 2022 (-21.4%) was disappointing. We had bought it at a discount to its Regulatory Asset Value, which has historically been an attractive price point, but continued adverse publicity and concerns about future regulation drove the share price lower. | +0.5 | +14.8 | 4.0 | 3.5 | -0.5 | | **Financials** There were two major factors that held back performance in this industry group. First, we have no investment in HSBC (+46.0%), which was the strongest performing of the UK banks and secondly, as our exposure to UK domestic banks is mostly in OSB (-14.1%), which had a profit warning as a result of rising interest rates. These two factors countered the considerable success of our investments in Burford Capital (+71.9%) and Intermediate Capital (+49.0%) and the take-over of Round Hill Music Royalty Fund (+31.2%). | +11.9 | +17.2 | 30.5 | 22.7 | -1.2 | Report and Accounts 2023 | 19 Overview Case's Statement Strategic Report Settlement Report Averages Report Financial Report Notes of Meeting Other Information | | Performance of this sector in the portfolio % | Performance of this sector in the FTSE All-Share Index % | Average Portfolio weighting % | Average FTSE All-Share weighting % | Impact on relative performance % | | --- | --- | --- | --- | --- | --- | | **Technology** Our only investment in this industry is Sage Group which rose strongly in the year on the back of accelerating growth and expanding margins. | +45.2 | +23.0 | 0.8 | 1.2 | +0.1 | | **Real Estate** Within this industry segment, there was a considerable range of outcomes for our investments, from the strength of Sirius Real Estate (+29.0%) to the fall of LXi REIT (-22.2%), with LondonMetric Property (+3.9%) in between. Rising interest rates and bond yields provided a headwind for property valuations, but the movements of some share prices to large discounts to the revised property valuations seems excessive. | -6.7 | -0.0 | 5.8 | 2.5 | -0.9 | The figures shown in the first two columns compare the total return of the group of investments held within the portfolio in each Industry sector against the total return of all Industry sector constituents of the FTSE All-Share Index over the year to 30 September 2023. All figures shown are before operating costs and the effect of gearing. 20 | CT UK Capital and Income Investment Trust PLC Strategic Report Chair’s StatementOverview Auditors’ Report ## List of Investments Strategic Report Governance Report Financial Report Notice of Meeting | | 30 September 2023 | | | 30 September 2023 | | | --- | --- | --- | --- | --- | --- | | | Value | % of total | | Value | % of total | | Quoted investments Holding | £’000s | investments | Quoted investments Holding | £’000s | investments | | UNITED KINGDOM – EQUITIES | | | EUROPE (EX UK) – EQUITIES | | | | AstraZeneca 177,000 19,647 5.8 | | | Heineken 63,000 3,888 1.2 | | | Babcock International 500,000 2,067 0.6 Beazley 2,000,000 11,060 3.3 EUROPE (EX UK) TOTAL EQUITY 3,888 1.2 BP 1,600,000 8,502 2.5 Bridgepoint 500,000 963 0.3 TOTAL INVESTMENTS 336,112 100.0 British American Tobacco 180,000 4,638 1.4 The number of investments in the portfolio is 47 (2022: 47). Burberry 185,000 3,531 1.1 Burford Capital* 1,165,362 13,180 3.9 *Quoted on the Alternative Investment Market in the UK. Close Brothers Group 455,000 4,031 1.2 Investments shown in italics are new additions to the portfolio during the year. Coca-Cola HBC 145,000 3,260 1.0 Compass 470,000 9,400 2.8 CRH 180,000 8,176 2.4 Diageo 435,000 13,198 3.9 DS Smith 1,272,727 3,654 1.1 Experian 156,000 4,198 1.2 FDM 226,881 1,178 0.4 Ferguson 40,000 5,426 1.6 Forterra 2,550,000 3,794 1.1 GSK 545,000 8,130 2.4 Hipgnosis Songs Fund 6,500,000 5,213 1.6 Howden Joinery 920,000 6,775 2.0 Ibstock 3,400,000 4,842 1.4 IG 740,000 4,758 1.4 Intermediate Capital 1,020,000 14,107 4.2 Intertek 100,000 4,111 1.2 Legal and General 5,400,000 12,015 3.6 LondonMetric Property 3,420,474 5,883 1.8 LXi REIT 9,628,000 8,742 2.6 M&G 1,100,000 2,170 0.6 National Grid 590,000 5,782 1.7 OSB Group 4,500,000 14,733 4.4 Pearson 500,000 4,342 1.3 Pennon Group 735,000 4,303 1.3 Phoenix 1,439,776 6,941 2.1 RELX 540,000 14,985 4.5 Rio Tinto 250,000 12,935 3.8 Round Hill Music Royalty Fund 6,813,160 6,308 1.9 Sage 332,716 3,291 1.0 Shell 425,000 11,075 3.3 Sirius Real Estate 4,728,140 4,073 1.2 Smith & Nephew 500,000 5,113 1.5 SSE 210,000 3,380 1.0 St James's Place 350,000 2,913 0.9 Unilever 340,000 13,809 4.1 Vistry Group 1,850,000 16,872 5.0 XP Power 200,000 4,720 1.4 Other Information UNITED KINGDOM TOTAL EQUITIES 332,224 98.8 Report and Accounts 2023 | 21 ## The Fund Manager’s Investment ## Philosophy and Process ## With an objective to secure long term capital and income growth from a portfolio consisting ## mainly of FTSE All-Share companies, we offer Shareholders a reliable income while at the same time ## seeking to grow the size of your investment. We have been searching out the very best of the UK’s large and companies can also become attractive because of adverse market medium sized businesses since 1992 to give our Shareholders reaction to short term difficulties or simply because a sector has access to a range of quality UK stocks in one place. become unfashionable. If companies are able to generate attractive returns over long periods, there is evidence the market eventually We believe share prices may not fully reflect the future prospects and rewards this success with higher valuations. returns of companies. We believe it is possible to identify significant differences between market prices and a conservative assessment of This philosophy leads naturally to long term investment thinking and a business’s value. the generation and preservation of value over the longer term. We are not looking to trade shares, nor are we making short term bets By investing in such companies at attractive prices, superior on market movements, but instead are looking to the longer term. investment performance can be generated. In particular, we believe Over time, we expect high corporate returns to be reflected in share that companies with the potential to compound returns at sustainably prices, which will in turn benefit further from valuation increases as high rates over many years are frequently underestimated by the the market recognises the level and sustainability of those returns. market initially, and are therefore undervalued. The valuations of As shareholders, we are part owners of businesses, and take our The Investment Process Focuses on Three Aspects for Each Company ### • Understandable ### • Durable competitive advantages ### • Attractive business model ### Q u a l i t y ### • Strong sustainability characteristics ### • Margin of safety • Proven operators ### • Present value of future • Responsible capital cash flows allocators ### • Sustainable superior • Aligned interests returns ### • Appropriate incentives ### t ### • ESG score embedded n ### • Strong governance ### e ### V in proprietary valuation ### a m ### l method e ### u g ### a a ### t n ### i o ### n a ### M 22 | CT UK Capital and Income Investment Trust PLC Strategic Report responsibilities seriously, engaging with the company’s management Our research is conducted in-house and is peer reviewed by the Chair’s StatementOverview Auditors’ Report and non-executives if necessary, and voting on all resolutions at wider investment team prior to any purchase decision. This ensures company meetings. the benefit of shared knowledge and experience is brought to bear on each investment. Subsequent to a purchase of the shares, the Risk is often seen as the flipside of return. The standard economic and progress of the company and its share price will then be monitored business academic approach to risk measures it in terms of volatility. regularly with in-depth reviews and retesting of the original investment Sharp upward moves in share prices are seen as just as “risky” as an thesis particularly if the company or its share price do not perform as equivalent downward move. We prefer an approach which focuses on initially expected. Strategic Report Governance Report Financial Report Notice of Meeting companies with attractive returns and relatively little debt where we expect to be able to reduce the risk of a permanent loss of capital. Like all investors, we are having to make assessments about the future and take decisions in the face of uncertainty. There is a real We carry out detailed analysis of all the companies in which we invest, possibility of being wrong. We believe that we can mitigate this risk looking in particular at three aspects: the Quality of the company; its by following this long term philosophy, emphasising a number of Management; and the Valuation of the shares. Amongst the most factors: thorough analysis; peer review; the need for a margin of important issues examined are a thorough assessment of the safety on purchase; continuous monitoring; and diversification of sustainability of the company’s competitive position and the returns the investment portfolio. Reasons to sell can be driven by positive it can generate, and the ability of the management team and its or negative factors: positive, if the value of the company has risen to alignment with shareholders. Integral to our assessment of these our assessment of its value, or negative, if the assessment of the factors is an analysis of the ESG issues that face the company and company’s long term value deteriorates significantly. An investment its responses to them. More detail on this is given on pages 24 to may also be sold if, for example, a similar, but cheaper alternative can 27. Our valuation approach focuses on discounted cash flows but is be found or if the size of the investment position has become larger pragmatic enough to realise this does not work for all companies in all than is preferred for risk purposes. sectors so other valuation methods are also used. Before buying, we look at whether the share price is cheap relative to the intrinsic value Julian Cane of the business, giving us a margin of safety on the investment. Fund Manager 29 November 2023 Implementation of the Investment Process ## “We carefully identify ### o u s m o n ### n u i t ## companies that are growing t i o ### n r i ### o n ### C g ## > ## and profitable today and ## have the strong, sustainable ### Pre-defined ## foundations to be able to ### review triggers ## continue that profitable ### Clear sell ### D ## growth into the future. e discipline ### t ### a ## i l > ### e ### w d Peer review ## > ### i e ### v r ### e ### e ### r s ## We choose to invest in e ### n a ### o ### i r T ### t c h ### e s i e w ### a h i s r e v ## companies we strongly ### u Other Information ### l ### a ### V ## believe in.” Report and Accounts 2023 | 23 ## Our Approach to Responsible Investment ## As stewards of £315 million of assets, we support positive change. The Company benefits from the ## Manager’s leadership in this field and its £481 billion of assets under management. Our approach Responsible ownership Responsible Investment issues can present both opportunities and We and the Manager believe that companies with strong management threats to the long term investment performance we, the Board, focus on Environmental, Social and Governance (“ESG”) have the aim to deliver to you, our Shareholders. We, believe in the power of potential to reduce risks facing their business and deliver sustainable engaged, long term ownership as a force for positive change. performance over the longer term. We have a Manager that applies high standards of responsible Investee company boards are expected to disclose to their investment in managing the investments on behalf of the Company. shareholders that they are applying appropriate oversight on material Our approach covers our own governance responsibilities too on issues such as labour standards, environmental management and matters such as the composition of the Board. tax policies. If we have concerns, we also believe that engaging with companies is usually best in the first instance rather than simply The primary purpose of this report is to provide you with a clear divesting or excluding investment opportunities. understanding of our approach to responsible investment and how it is integrated into the Fund Manager’s investment process. We also Active use of our voting rights is also an important component of explain our stewardship in terms of: our stewardship approach. The Manager has been empowered by the Board to exercise discretion in the use of the Company’s voting • engagement with portfolio companies and our voting practice; rights, in accordance with its own corporate governance policies. • how we measure our progress, including with regard to climate These policies take a robust line on key governance issues such change; and as executive pay and integrate sustainability issues into the voting • how we have performed against those measures through process, particularly climate change. milestone examples. We recognise that the most material way in which the Company We recognise the importance of disclosing information that is can have an impact is through its responsible ownership of its relevant, reliable and, as far as possible, ensuring that it is presented investments. We have therefore appointed a manager that engages in a consistent way from year to year in order that our progress can actively with the management of investee companies to encourage be assessed. that high standards of ESG practice are adopted. The Manager has long been at the forefront of the investment industry in its Our governance responsibilities consideration of these issues and has one of the longest established The Company’s compliance with the revised AIC Code of Corporate and largest teams focused solely on Responsible Investment. Governance is detailed in the Corporate Governance Statement on pages 42 to 44. In addition, the Policy Summary statement on pages The Manager is a signatory of the UK Stewardship Code and 33 to 35 notes the Company’s policies towards board diversity, its statement of compliance can be found on its website at integrity and business ethics, prevention of the facilitation of tax columbiathreadneedle.com. The Manager is also a signatory to the evasion and the Modern Slavery Act 2015. United Nations Principles for Responsible Investment (“UNPRI”) under which signatories contribute to the development of a more sustainable global financial system. As a signatory, the Manager aims to incorporate ESG factors into its investment processes. 24 | CT UK Capital and Income Investment Trust PLC Strategic Report ESG and the investment process comprehensive. There are two main outcomes of this research. Chair’s StatementOverview Auditors’ Report ESG issues are an integral part of the Manager’s investment process, First, the research is used to initiate discussions with the investee forming part of the assessment of the Quality and Management company, to clarify the Manager’s understanding of the issues criteria for possible and ongoing investments. The Manager’s involved, to create a dialogue and to encourage higher standards Responsible Investment team works closely with the Fund Manager where appropriate. In this the Manager may join with other major to create an internally generated assessment of the relevant ESG investors in order to be a yet more powerful force to drive change. issues for each company. As part of the review process, the Manager Secondly, it is used to adjust the Manager’s assessment of the will also note if the investment is aligned explicitly with any of the UN weighted average cost of capital for the investee company; this is an Strategic Report Governance Report Financial Report Notice of Meeting Sustainable Development Goals. Details of these goals can be found important component of the valuation model, such that companies at www.un.org/sustainabledevelopment/sustainable-development- with higher ESG standards will warrant a lower cost of capital goals/. and in turn a higher valuation, and vice-versa. In these ways, ESG affects each of the cornerstones of the investment process, Quality, The Manager’s own ESG assessment is cross referenced against Management and Valuation, as well as driving an ongoing dialogue external sources, for example MSCI ESG Research, to check it is between the Manager and the investee company. ## Engagement Issues raised with companies on engagement Labour Standards 26 Corporate Governance 17 Climate Change 13 Environmental Standards 12 Human Rights 12 Public Health 9 Business Conduct 1 Source: Columbia Threadneedle Investments In the year under review, the Manager engaged with 16 investee namely requesting that modern slavery statements be approved at companies held by the Company on the range of ESG topics above. board level, and board effectiveness. Another topic of engagement was climate change, including Net Zero, energy transition and resilience and Labour standards were a key theme for engagement over the reporting adaptation. period. This is a central focus for companies when managing social issues. The Manager spoke to companies on potential forced The Manager’s strategic approach to engagement helps to achieve labour risks in global supply chains both individually and as part of positive outcomes, or ‘milestones’, relating to the targets that collaborative engagement on requirements of the UK Modern Slavery have been set under each of the sustainable development goals. Act. The Manager also engaged with companies on their corporate These are instances of change in company practice which they governance practices. Good corporate governance is instrumental to rank from one to three stars, three being the highest, based on Other Information supporting the delivery of strategic objectives and in driving sustainable their assessment of the importance of the change. Examples of performance, as well as maintaining legal requirements and ethical engagement and milestones achieved in the reporting period are set standing. Topics raised with investee companies included ESG oversight, out overleaf. Report and Accounts 2023 | 25 Examples in the reporting period Unilever Unilever has set a new benchmark for the industry in terms of disclosure. The company will disclose the performance of its product portfolio against six government endorsed nutrient profiling models and their own internal model. The commitment followed a series of collaborative engagement calls that the Manager’s Responsible Investment team participated in coordinated by ShareAction Healthy ## Markets and is an important step in continuing to develop their strategy and targets for healthier products.  Compass Compass published a Global Supplier Code of Conduct outlining expectations for suppliers in relation to food quality and safety. The Manager’s Responsible Investment team had engaged the company on this topic in 2021, at the time of the school meals scandal in the ## UK.  BP BP’s Modern Slavery Statement has now been approved by its Board of Directors, as required by the Modern Slavery Act 2015. The Manager’s Responsible Investment team engaged with BP as part of a collaborative investor initiative. Adherence to the requirements of the Modern Slavery Act signifies a culture of appropriate human rights risk management and places accountability for effectiveness of the ## policy with the Board and senior management.  CRH CRH is the biggest contributor to the portfolio’s carbon emissions. In November 2022 the Manager’s Responsible Investment team conducted a site visit to CRH’s Platin cement plant and Roadstone quarry in Ireland to understand more about its decarbonisation and ESG strategy. The visit continued an ongoing engagement with CRH on its climate change and net zero strategy; CRH used the trip to stress the importance of aligning capex with its net zero strategy, and to illustrate to investors clearly which levers are being utilised to achieve its target of operation wide net zero emissions by 2030. CRH showcased some promising ‘win-win’ products such as reclaimed asphalt (up to 60% recycled materials) and cement with recycled materials and lower clinker factor (cost and carbon saving). The Manager is interested to see how the demand for these products grows. CRH published its updated climate reporting in March 2023, which was a significant improvement on last year’s disclosure, including an analysis on physical risks, and clearer assumptions in its scenario analysis. The Manager’s Responsible Investment team has since met with the company on two occasions to discuss climate risks and the transition to Net Zero. Key: As discussed on page 25, stars represent positive outcomes from engagement with three stars being the highest based on the Manager’s assessment of the change. 26 | CT UK Capital and Income Investment Trust PLC Strategic Report Voting on portfolio investments where the Manager invests. The Manager has supported, and in Chair’s StatementOverview Auditors’ Report The Manager’s Corporate Governance Guidelines set out many cases led, the development of high standards of stewardship expectations of the boards of investee companies in terms of good and recognises the UK Stewardship Code 2020 as a significant step corporate governance. The Board expects to be informed by the in the further raising of those standards – indeed under the previous Manager of any sensitive voting issues involving the Company’s Code, the Manager was ranked in the highest tier. investments. The Manager has been empowered by the Board to exercise discretion in the use of the Company’s voting rights and We expect the Company’s shares to be voted on all holdings where reports at each meeting to the Board on its voting record. The possible. During the year, the Manager voted at 53 meetings of Strategic Report Governance Report Financial Report Notice of Meeting Manager will vote on all investee company resolutions. investee companies held by the Company. With respect to all items voted, the Manager supported over 97% of all management The Manager has long been an active and leading voice in support resolutions. The most contentious issues were director related, of robust corporate governance standards and environmental, social followed by compensation. and business ethics practices for companies in all jurisdictions ## Climate change Of all the ESG issues the Manager considers, climate change is 120 one of the most important, both in terms of the scale of potential 100 impact and in how widespread this impact could be across sectors and regions. The Company expects the Manager to incorporate 80 considerations around climate change risks and opportunities in its investment processes. 60 40 In June 2023 the Manager published an update to its 2022 climate Tons CO₂e / sales $m change report, which details how it manages climate related risks 20 and opportunities, in line with the recommendations of the Taskforce on Climate related Financial Disclosures (“TCFD”). 0 2023 CT UK Capital and Income Investment Trust PLC FTSE All-Share Source: MSCI ESG In the adjacent table, the Company is disclosing the carbon footprint of its investments. This measures the amount of greenhouse gas The biggest contributor to the portfolio’s carbon emissions was emissions produced by each investee company, per US$1m of CRH. revenue they generate. This is then aggregated for the Company as a whole, using the portfolio weights of the investee companies, and In the last year the Manager has intensified its focus on the compared with the Benchmark. materials and building supplies industry, given this sector’s contribution to the overall carbon intensity of the Company’s assets. The carbon footprint is a measure of the carbon intensity of the This included the site visit to CRH outlined on page 26. The Manager companies the Company invests in. Whilst it does not provide a full published research on the challenges of net zero cement, and some picture of climate risks – since it does not, for instance, capture the of the potential solutions which will inform its engagement with innovation that companies may be undertaking to find solutions – it the sector going forward. www.columbiathreadneedle.co.uk/en/ is a valuable starting point both for analysis and for shareholder inst/insights/esg-viewpoint-the-challenges-of-realising-zero-carbon- dialogue. The table highlights that the Company’s portfolio has a cement/ higher exposure to high carbon emitters than the Benchmark. 2024 In 2024 the Manager will continue focusing on its priority engagement themes: climate change; environmental stewardship; public Other Information health; labour standards; human rights; corporate governance and business conduct. The Manager will identify and prioritise companies for engagement based on a number of factors including: the impact of ESG risk and opportunity factors; the investment team’s and research analysts’ judgement and expertise; previous engagement track record and level of exposure. Report and Accounts 2023 | 27 ## Principal Risks and Future Prospects ## The Board has carried out a robust assessment of the Company’s principal and emerging risks and ## the disclosures in the Annual Report that describe the principal risks, the procedures in place to ## identify emerging risks and explain how they are being managed or mitigated. The principal risks together with their mitigations are set out in the The Directors continue to review the key risk register for the Company table below. The Board’s processes for monitoring them and identifying which identifies the risks that the Company is exposed to, the controls emerging risks are set out on page 51 and in note 21 to the accounts. in place and the actions being taken to mitigate them. The global economy continues to suffer considerable disruption due to The principal risks identified as most relevant to the assessment of the effects of the war in Ukraine, recent events in Israel and Gaza and the Company’s future prospects and viability are detailed below. inflationary pressures. Principal Risks Mitigation Actions taken on Principal Risks in the year Market and Political Risks The Company has a clearly defined and approved strategy which is reviewed and approved on an annual At each meeting of the Board, the Directors consider and discuss the investment performance of the Company with Julian Cane, the Company’s Fund Manager. The Board held its Macroeconomic and geopolitical risk including rising international basis. The Board can hold additional board meetings at short notice to discuss the impact of significant annual strategy meeting in July 2023. At this meeting, after due consideration, the Board confirmed that the Company’s strategy remained appropriate. tensions arising from the war in Ukraine, dispute in the South changes in the macroeconomic and geopolitical environment. The Company maintains a portfolio of At the November 2023 Audit and Risk Committee meeting, the Directors reviewed updated forward looking stress tests prepared by the Manager providing support for the Five Year China Sea and recent events in Israel and Gaza. diversified stocks. Horizon Statement disclosed on page 30. Forward looking stress tests ranging from moderate to extreme scenarios are provided by the Manager to the Increase in overall risk during the year. Board to support the Five Year Horizon Statement. Investment Performance Risks The portfolio of quoted securities is diversified and the Company’s structure enables it to take a long term At each meeting of the Board, the Directors consider and discuss the investment performance of the Company with Julian Cane, the Company’s Fund Manager. The Board held a Unfavourable markets or asset allocation, sector and stock view notwithstanding the current market volatility. Investment policy, performance, revenue and gearing are strategy meeting in July 2023 which considered, amongst other topics, investment performance and wider economic issues. selection and use of gearing and derivatives are inappropriate reviewed at each Board meeting. The Manager’s Investment Risk team provides independent oversight on giving rise to investment underperformance as well as impacting investment risk management. The Board regularly considers operating costs along with underlying dividend capacity to pay dividends. income and the implications for the dividend payment capacity of the Company taking into account revenue reserves. The Company had no derivative exposure during the year. No change in overall risk during the year. Cyber, Legal and Regulatory Risks The Board receives regular control reports from the Manager covering risk and compliance including oversight The Manager continues to strengthen and develop its Risk, Compliance and Internal Control functions including IT security. Supervision of third party service providers has been Errors, fraud or control failures at service providers or loss of data of third party service providers. The Board has access to the Manager’s Risk Manager and requires any maintained by the Manager and includes assurances regarding IT security and cyber threat. The Depositary oversees custody of investments and cash and reports to the Company through increasing cyber threats or business continuity failure could significant issues directly relevant to the Company to be reported immediately. The Depositary is specifically in accordance with the Alternative Investment Fund Managers Directive (“AIFMD”). damage reputation or investors’ interests or result in losses. liable for loss of any of the Company’s securities and cash held in custody. No change in overall risk during the year. Product Strategy Risks To gauge investor sentiment, the Board holds an investor satisfaction survey which is conducted every At the Annual General Meeting held on 9 March 2023, Shareholders voted 99.5% in favour of continuation of the Company. In July 2023, the Board agreed to the continuing appointment Inappropriate business or marketing strategy particularly in five years ahead of a vote on whether the Company should continue. The Board holds a separate annual of the Manager, which has continued to deliver on the Company’s objective. At each Board meeting the marketing activities of the Manager are reported. To encourage the retention of relation to investor needs or sentiment giving rise to a share price meeting to consider the Company’s strategy and performance together with opportunities and threats to maturing CTF funds, the Manager has introduced a Lifetime ISA and undertaken specific marketing targeted at holders of the maturing Child Trust Funds. Further proposals to encourage discount to NAV per share. its business. The appointment of the Manager is also reviewed annually in terms of sustainable long term retention are being investigated by the Manager. An external consultancy was appointed to undertake a strategic marketing review for the Company. The outcomes of this process will drive growth in capital and income, which includes the growing recognition of the importance of the application of the Company’s marketing strategy for future years. During the year 2,445,358 shares were bought back at a small discount to NAV. The Company also re-issued from treasury 75,000 high standards of ESG practice. Share buybacks can be employed to help moderate discount volatility, while shares at a small premium to NAV. Since the year end to 28 November 2023, the Company has bought back 600,000 shares to be held in treasury. No shares have been issued. These share issues can be made when the shares are trading at a premium. At each Board meeting the Directors actions moderated share price volatility and enhanced NAV per share for continuing Shareholders. receive an update on the marketing activities undertaken by the Manager. This includes details of the level of maturing Child Trust Funds and the decisions, if any, taken by their holders. The Company’s Broker provides No change in overall risk during the year. periodic updates to the Board relating to the Company’s trading in the wider market. 28 | CT UK Capital and Income Investment Trust PLC Strategic Report Emerging risks represent new information which could significantly change how an existing risk is perceived, but where the impact or likelihood remains uncertain. 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 2023, 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. 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. # Actions taken on Principal Risks in the year At each meeting of the Board, the Directors consider and discuss the investment performance of the Company with Julian Cane, the Company's Fund Manager. The Board held its annual strategy meeting in July 2023. At this meeting, after due consideration, the Board confirmed that the Company's strategy remained appropriate. At the November 2023 Audit and Risk Committee meeting, the Directors reviewed updated forward looking stress tests prepared by the Manager providing support for the Five Year Horizon Statement disclosed on page 30. At each meeting of the Board, the Directors consider and discuss the investment performance of the Company with Julian Cane, the Company's Fund Manager. The Board held a strategy meeting in July 2023 which considered, amongst other topics, investment performance and wider economic issues. The Manager continues to strengthen and develop its Risk, Compliance and Internal Control functions including IT security. Supervision of third party service providers has been maintained by the Manager and includes assurances regarding IT security and cyber threat. The Depositary oversees custody of investments and cash and reports to the Company in accordance with the Alternative Investment Fund Managers Directive ("AIFMD"). At the Annual General Meeting held on 9 March 2023, Shareholders voted 99.5% in favour of continuation of the Company. In July 2023, the Board agreed to the continuing appointment of the Manager, which has continued to deliver on the Company's objective. At each Board meeting the marketing activities of the Manager are reported. To encourage the retention of maturing CTF funds, the Manager has introduced a Lifetime ISA and undertaken specific marketing targeted at holders of the maturing Child Trust Funds. Further proposals to encourage retention are being investigated by the Manager. An external consultancy was appointed to undertake a strategic marketing review for the Company. The outcomes of this process will drive the Company's marketing strategy for future years. During the year 2,445,358 shares were bought back at a small discount to NAV. The Company also re-issued from treasury 75,000 shares at a small premium to NAV. Since the year end to 28 November 2023, the Company has bought back 600,000 shares to be held in treasury. No shares have been issued. These actions moderated share price volatility and enhanced NAV per share for continuing Shareholders. Report and Accounts 2023 | 29 Overview Case & Statement Strategic Report Seventeen & Report Auditor's Report Financial Report Notes / Meeting Other Information Viability Statement – Five Year Horizon In accordance with the UK Corporate Governance Code, the Directors The Board gave careful consideration to the impact of the war in have assessed the future prospects of the Company over the coming Ukraine, recent events in Israel and Gaza and inflationary pressures five years. Factors that the Board considered were: and the resulting volatility in stockmarkets and economic disruption when making this assessment. • The Company has a long term investment strategy under which it invests mainly in readily realisable, UK publicly listed securities As discussed in note 20 to the Financial Report on page 75, the and which restricts the level of borrowings. Company has a number of banking covenants and at present the Company’s financial position does not suggest that any of these • At the Annual General Meeting of the Company held on 9 March are close to being breached. The primary risk is that there is a very 2023, Shareholders voted 99.5% in favour of the continuation substantial decrease in the NAV of the Company in the short to of the Company. The next continuation vote for the Company is medium term. The Directors have considered the remedial measures scheduled to be held in 2028. that are open to the Company if such a covenant breach appears possible. As at 28 November 2023, the last practicable date before • The Company is inherently structured to generate long term publication of this report, borrowings amounted to £25 million. This returns, with a five year period viewed as a reasonable time frame is in comparison to a net asset value of £310 million. In accordance for measuring and assessing medium to longer term investment with its investment policy the Company is invested mainly in readily performance. realisable, FTSE All-Share listed securities. These can be realised, if necessary, to repay the loan facility and fund the cash requirements • The Company is able to take advantage of its closed-end for future dividend payments. investment trust structure, including the ability to use short term borrowings by way of loans and overdrafts and the capacity to The Company operates within a robust regulatory environment. The secure additional finance well in excess of five years. Company retains title to all assets held by the Custodian. Cash is held with banks approved and regularly reviewed by the Manager. • There is robust monitoring of the headroom under the Company’s bank borrowing covenants. Based on this assessment, and in the context of the Company’s business model, strategy and operational arrangements set out • Regular and robust review of revenue and expenditure forecasts above, the Board has a reasonable expectation that the Company will is undertaken throughout the year. be able to continue in operation and meet its liabilities as they fall due over the five year period ending November 2028. • The Company retains title to all of its assets which are safeguarded as described under “Safe custody of assets” and “Depositary” on page 40. 30 | CT UK Capital and Income Investment Trust PLC Strategic Report Chair’s StatementOverview Auditors’ Report ## Promoting the Success of the Company ## – Section 172 Statement Strategic Report Governance Report Financial Report Notice of Meeting Under Section 172 of the Companies Act 2006, the Directors have a appointment remains in the best interests of Shareholders, is set out duty to act in the way they consider, in good faith, would be most likely on page 53. to promote the success of the Company for the benefit of its members as a whole, and in doing so, have regard, amongst other matters, to: Service providers such as, JP Morgan Chase Bank (the “Bank” and “Custodian”), JP Morgan Europe Limited (the “Depositary”), Cavendish • the likely consequences of any decision in the long term; (the “Broker”) and Computershare Investor Services PLC (the • the interests of the Company’s Shareholders; “Registrar”) are also considered key stakeholders. The Board receives • the need to foster the Company’s business relationships with regular reports from them and evaluates them to ensure expectations suppliers, customers and others; on service delivery are met. • the impact of the Company’s operations on the community and environment; The Directors value engagement with Shareholders. The Company’s • the desirability of the Company maintaining a reputation for website www.ctcapitalandincome.co.uk is available to all Shareholders high standards of business conduct; and and key decisions are announced to the London Stock Exchange • the need to act fairly as between members of the Company. through a Regulatory News Service. The Company holds an Annual General Meeting. Shareholders are invited to attend, and this provides As explained on page 13, the Company is an externally managed an open forum for them to discuss issues and matters of concern investment company and has no employees, customers or premises. with the Board and representatives of the Manager and the Company’s The key stakeholders are the Shareholders, the Manager, suppliers, advisors. regulators and service providers. At the Annual General Meeting held on 9 March 2023, Shareholders The Board believes that the optimum basis for meeting its duty to voted 99.5% in favour of continuation of the Company. In advance promote the success of the Company is by appointing and managing of the continuation vote, the Board surveyed Shareholders. The next third parties with the requisite performance records, resources, continuation vote is scheduled to be held in 2028. infrastructure, experience and control environments to deliver the services required to achieve the investment objective and successfully Shareholders are invited to communicate with the Board through the operate the Company. By developing strong and constructive working Chair or Company Secretary. Alternatively, issues can be discussed with relationships with these parties, the Board seeks to ensure high the Company’s Senior Independent Director, who can be contacted at standards of business conduct are adhered to at all times and service the Company’s registered office address detailed on page 55. levels are enhanced whenever possible. This combined with the careful management of costs is for the benefit of all Shareholders who are The Company’s Shareholders are always considered when the Board also key stakeholders. makes decisions and examples include: The Company’s primary working relationship is with the Manager. The Dividends portfolio activities undertaken by the Fund Manager and the impact of The Board is aware that dividend income is important to Shareholders decisions taken are set out in the Fund Manager’s Review on pages 9 and dividend growth is therefore a Key Performance Indicator of the to 12. On pages 24 to 27 information is provided on the Company’s Company. Prudent stewardship in prior years combined with careful approach towards responsible investment. The Directors are supportive stock selection has given the Company distributable reserves providing of the Manager’s approach, which focuses on engagement with the some resilience to pay dividends in years when there is a shortfall in Other Information investee companies on ESG issues and how this links with the United investment income. Therefore, despite the COVID-19 pandemic, the war Nations Sustainable Development Goals (“SDGs”). Further information in Ukraine, recent events in Israel and Gaza and inflationary pressures, on the annual evaluation of the Manager, to ensure its continued Report and Accounts 2023 | 31 the Company has increased its annual dividends paid to Shareholders, Retail investors and maintained its “AIC Dividend Hero” status. The Company’s Shareholders are predominantly retail investors who invest through savings or execution only platforms. A significant As part of the decision making process, the Manager has provided the proportion invest through the CT Savings Plans and the Board remains Board with estimates of dividend income for the forthcoming year and focused with the Manager on the optimal delivery of the Company’s the estimated impact upon the distributable reserves of the Company. investment proposition for the benefit of all Shareholders. The Manager remains committed to its savings plans and its relationship with its Share issuance and buy-backs customers and is investing significantly to improve digital capabilities, Ensuring that liquidity is maintained for the Company’s shares is access and information for Shareholders through the savings plans. important to Shareholders. During the year, the Company bought back for treasury 2,445,358 shares at a small discount. The Company also An external consultancy was appointed to undertake a strategic reissued from treasury 75,000 shares at a small premium to NAV. marketing review of the Company. The objective of the work was to These actions moderated share price volatility. differentiate the Company, making clear the benefits of investing with it and to inform how to efficiently attract new investors. These outcomes Board succession planning from the process will drive the Company’s marketing strategy for future The Board is committed to ensuring that its composition is compliant years. with best corporate governance practice under the revised AIC Code including guidance on tenure. Following a thorough selection process which included the services of a search company, Dunke Afe was appointed to the Board with effect from 1 June 2023. Dunke Afe is an accomplished marketing executive with extensive experience in raising brand and product awareness. On 1 July 2023 Jonathan Cartwright retired from the Board. Following Board discussion, Jane Lewis, who joined the Board in April 2015 was appointed Chair upon his retirement. Jane Lewis has extensive sector experience through her career in investment company corporate broking at Winterflood and business development at leading investment trust houses. She has also been appointed to a number of investment trust boards including as Chair. Tim Scholefield will retire from the Board at the conclusion of the Company’s Annual General Meeting to be held on 7 March 2024 having served nine years. Upon Tim Scholefield’s retirement Nicky McCabe will be appointed Senior Independent Director. These changes allow for the retirement of the Company’s longest serving Director while maintaining an appropriate balance of skills and experience on the Board. As a further part of the Board’s succession planning, another search company was commissioned to find a new Director for the Board. Following this selection process, the Board is pleased to announce that Christopher Metcalfe, will be appointed to the Board and its committees with effect from 8 March 2024. Christopher is Chairman of Martin Currie Global Portfolio Trust plc and the Senior Independent Non Executive Director of JP Morgan US Smaller Companies Investment Trust plc. He has extensive equity fund management and investment trust experience having previously worked in senior positions at Newton Investment Management, Schroder Investment Management and Henderson Administration Group. 32 | CT UK Capital and Income Investment Trust PLC Strategic Report Chair’s StatementOverview Auditors’ Report ## Policy Summary Strategic Report Governance Report Financial Report Notice of Meeting Investment The total value of its investments held outside the UK must The Company is required to have a publicly stated investment not exceed 10% of the Company’s gross assets at the time of objective and policy from which Shareholders, prospective investors investment but no individual country limits are imposed. The and other stakeholders can understand the scope of its investment proportion of the portfolio held in FTSE All-Share and AIM listed remit and constraints imposed under it. Any material changes to companies as at 30 September 2023 was 96% and 4% respectively. this objective and policy can only be made with the approval of Only 1% of the total portfolio was held outside the UK, all in a Shareholders and the Financial Conduct Authority. continental European stock. The Company’s investment objective is to secure long term capital No more than 10% of its gross assets can be invested in other listed and income growth from a portfolio consisting mainly of UK listed investment companies (including investment trusts) unless they companies. themselves have stated they will invest no more than 15% of their gross assets in other listed investment companies. Provided they The Company seeks to achieve this objective by identifying have, the Company’s limit becomes 15%. investments in companies which have good long term prospects but whose share prices do not reflect their intrinsic value, either because The Company may use derivatives principally for the purpose of of relative short term underperformance giving rise to adverse income enhancement and efficient portfolio management. Options investor sentiment or simply because they are unfashionable. Many may only be written on quoted stocks and the total notional exposure of the stocks purchased have a higher than average dividend yield. is limited to a maximum of 5% of gross assets at the time of investment for both put and call options. The exposure arising from Investment risk is reduced by investing mainly in FTSE All-Share any futures contracts entered by the Company is included within the companies. The majority of holdings are in large and mid- calculation of the 20% limit on cash and gearing. capitalisation companies, although the Company also holds investments in smaller companies. At the year end the Company The Board carries out due diligence with regard to the investment was invested in 47 holdings. During the year the Company had no policy and underlying policies at each of its Board meetings receiving exposure to derivatives. regular reports from the Fund Manager. Confirmation of adherence to the investment restrictions and limitations set by the Board are There are no maximum limits across sectors. The Company can required at each meeting. The Fund Manager’s Review on pages 9 to invest in securities listed on the Alternative Investment Market 12 provides an overview of the outcome from the application of the (“AIM”) up to a limit of 10% of gross assets at the time of investment policy and the underlying policies during the course of investment. the year. No single investment in the portfolio may exceed 10% of the Using its closed-end investment company structure, the Company Company’s gross assets at the time of purchase and no unquoted can borrow over short, medium or long term periods within a range of securities may be purchased without the prior approval of the Board. 0 to 20% of gross assets to enhance Shareholder returns. Gearing No holding in an unquoted security should exceed 5% of the value was a modest contributor to returns for the year under review. As at of gross assets at the time of investment and no more than five 30 September 2023 the Company had borrowings of £25 million. Other Information unquoted securities may be held in the portfolio at any one time. The Board monitors borrowing levels and covenant headroom at each Board meeting. Report and Accounts 2023 | 33 Dividend correct taxation returns annually to HMRC; settles promptly any The Company’s revenue account is managed with the objective of taxation due; and claims back, where possible, all taxes suffered in continuing the Company’s record of delivering a stable and growing excess of taxation treaty rates on non UK dividend receipts. dividend to Shareholders over time. Prudent use of long established revenue reserves is made whenever necessary to help meet any Board diversity revenue shortfall. Dividends can also be paid from capital reserves. The policy towards the appointment of non-executive Directors is based on the Board’s belief in the benefits of having a diverse range The Board determines payments by taking account of timely income of experience, skills, length of service and backgrounds, including forecasts, brought forward distributable reserves, prevailing inflation gender. rates, the dividend payment record and Corporation Tax rules governing investment trust status. Risks to the dividend policy have The policy is always to appoint the best person for the job and, by been considered as part of the Principal Risks and Future Prospects way of this policy statement it is confirmed that there will be no reviews noted on pages 28 to 30. discrimination on the grounds of gender, ethnicity, socioeconomic background, religion, sexual orientation, age or physical ability. The consistent application of this policy has enabled the Company to pay an increased dividend every year since launch in 1992. The overriding aim of the policy is to ensure that the Board is composed of the best combination of people to deliver the objective. Premium/Discount The policy is applied for the purpose of appointing individuals that, The Company issues shares in order to meet Shareholder demand together as a Board, will continue to achieve that aim as well as which cannot be satisfied through the market and to moderate any ensuring optimal promotion of the Company’s investment proposition premium at which the shares have traded in relation to the NAV per in the marketplace. share. When the shares revert to trading at a price lower than the NAV per share, the Board has the flexibility to buy back shares in The Board is conscious of the diversity targets set out in the FCA accordance with the authority given by Shareholders. Shares bought Listing Rules. back can either be cancelled or held in treasury for potential resale at a premium. This policy has the benefit of enhancing NAV per share In accordance with Listing Rule 9.8.6R (9), (10) and (11) the Board for continuing Shareholders. The Board reviews the discount and has provided the following information in relation to its diversity. The premium levels at each meeting. The shares traded at an average information has been voluntarily disclosed by each Director and is discount of 3.1% throughout the year. The shares ended the year at correct as at 30 September 2023. a 1.2% discount. During the year ended 30 September 2023, the (1) Company bought back for treasury 2,445,358 shares at a small Board Gender as at 30 September 2023 discount. The Company also reissued from treasury 75,000 shares Number of at a small premium to NAV. During the year ended 30 September | | | Number of | Percentage of | | senior positions | | | --- | --- | --- | --- | --- | --- | --- | | 2022, the Company bought back for treasury 757,819 shares and | | | | | | (2) | | | Board Members | | | the Board | on the Board | | re-issued 175,000 of them. Since the year end to 28 November Men 2 40% 1 2023, the Company has bought back 600,000 shares to be held in (3) (4) Women 3 60% 1 treasury. No shares have been issued. (1) The Company has opted not to disclose against the number of Directors in executive management as this is not applicable for an investment trust. Taxation (2) Composed of the Chair and the Senior Independent Director. (3) This meets the Listing Rules target of 40%. The policy towards taxation is one of full commitment to complying (4) This meets the Listing Rules target of 1. with applicable legislation and statutory guidelines. It is essential that the Company always retains its investment trust tax status by complying with Section 1158 of the Corporation Tax Act 2010 (“Section 1158”) such that it does not suffer UK Corporation Tax on capital gains. In applying due diligence towards the retention of Section 1158 status and adhering to its tax policies, the Board receives regular reports from the Manager. The Company has received approval from HMRC as an investment trust under Section 1158 and has since continued to comply with the eligibility conditions. The Manager also ensures that the Company submits 34 | CT UK Capital and Income Investment Trust PLC Strategic Report (1) UK Financial Sanctions and Prevention of the Facilitation Chair’s StatementOverview Auditors’ Report Board Ethnic Background as at 30 September 2023 of Tax Evasion Number of The Board is fully committed to complying with all legislation, Number of Percentage of senior positions regulation and relevant guidelines including those relating to the UK (2) Board Members the Board on the Board financial sanctions regime in the context of the Company’s business White British and also the UK’s Criminal Finances Act 2017, designed to prevent or other white tax evasion and the facilitation of tax evasion in the jurisdictions in (including 4 80% 2 minority-white which the Company operates. Professional advice is sought as and groups) Strategic Report Governance Report Financial Report Notice of Meeting when deemed necessary. Black/African/ (3) Caribbean/ 1 20% – Jane Lewis Black British Chair (1) The Company has opted not to disclose against the number of Directors in executive 29 November 2023 management as this is not applicable for an investment trust. (2) Composed of the Chair and the Senior Independent Director. (3) This meets the Listing Rules target of 1. As evidenced above, the Company has met all the diversity targets set out in Listing Rule 9.8.6R (9). The Board will continue to take all matters of diversity into account as part of its succession planning. The information included in the above tables has been obtained following confirmation from the individual Directors. The Board will continue to take diversity into account as part of its succession planning and recruitment process. Integrity and business ethics The Company applies a strict anti-bribery and anti-corruption policy insofar as it applies to any Directors or employee of the Manager or of any other organisation with which the Company conducts business. The Board also ensures that adequate procedures are in place and followed in respect of third party appointments, acceptance of gifts and hospitality and similar matters. Prevention of the facilitation of tax evasion The Company is committed to compliance with the UK’s Criminal Finances Act 2017, designed to prevent tax evasion in the jurisdictions in which it operates. The policy is based on a risk assessment undertaken by the Board and professional advice is sought as and when deemed necessary. Modern Slavery Act 2015 As an investment company with no employees or customers and which does not provide goods or services in the normal course of business, the Company considers that it does not fall within the scope of the Modern Slavery Act 2015 and it is not, therefore, obliged to make a human trafficking statement. The Company’s own supply chain which consists predominantly of professional advisers and service providers in the financial services industry, Other Information which is highly regulated, is considered to be low risk in relation to this matter. A statement by the Manager under the Act has been published on its website columbiathreadneedle.co.uk. Report and Accounts 2023 | 35 ## Directors | Jane Lewis, Chair of the Company | Patrick Firth, Chair of the Audit and Risk | | --- | --- | | Jane was appointed to the Board on 24 | Committee | | November 2015 and became Chair on | Patrick was appointed to the Board on 21 July | | 1 July 2023. She was last re-elected by | 2022 and became Chair of the Audit and Risk | | Shareholders on 9 March 2023. She is a | Committee on 1 January 2023. He was elected | | non-executive director of BlackRock World | by Shareholders on 9 March 2023. Patrick is a | | Mining Trust PLC, Majedie Investments PLC | qualified Chartered Accountant and a member | | and the Senior Independent Director of | of the Chartered Institute for Securities and | | JPMorgan Global Growth and Income PLC. | Investment. He worked in the fund industry | | She was Chairman of Invesco Perpetual UK | in Guernsey since 1992 and was Managing | | Smaller Companies Investment Trust PLC | Director of third party fund administration | | and until August 2013 was a Director of | businesses and a non-executive director of a | | Corporate Finance and Broking at Winterflood | number of management companies, general | | Investment Trusts. Prior to this she worked | partners and investment companies. Currently | | at Henderson Global Investors and Gartmore | he is Chair of the Audit and Risk Committees | | Investment Management Limited in | of Riverstone Energy Limited, NextEnergy Solar | | investment trust business development and | Fund Limited and India Capital Growth Fund. | at WestLB Panmure as an investment trust broker. Nicky McCabe, Chair of the Management Engagement Committee | Dunke Afe, Chair of the Nomination and | Nicky was appointed to the Board on 1 January | | --- | --- | | Remuneration Committee | 2021 and was last re-elected by Shareholders | | Dunke was appointed to the Board on 1 June | on 9 March 2023. Nicky has extensive sector | | 2023 and became Chair of the Nomination | experience as she was formerly Head of | | and Remuneration Committee on 20 July | Product and Investment Trusts at Fidelity | | 2023. Dunke is an accomplished global | International as well as a director and Chief | | marketing and commercial professional | Operating Officer of a number of Fidelity | | with extensive experience in raising brand | companies. Nicky is currently a non-executive | | and product awareness. She has previously | director of Aberdeen Asian Income Fund Ltd, | | worked with top blue chip multinationals | Artemis Investment Management Limited and | | including Unilever, Kimberly Clark and Estee | EFG Asset Management (UK) Limited. | Lauder Companies. Tim Scholefield, Senior Independent Director Tim was appointed to the Board on 25 November 2014 and last re-elected by Shareholders on 9 March 2023. He is Chairman of Invesco Bond Income Plus Ltd and Chairman of Allianz Technology Trust PLC. He is a non-executive director of Abrdn UK Smaller Companies Growth Trust PLC and Jupiter Unit Trust Managers Limited. Tim has 35 years of investment experience, including his role as Head of Equities at Baring Asset Management No Director holds a directorship elsewhere in common with other members of the Board. until April 2014. Tim will retire from the All Directors are members of the Management Engagement Committee and the Nomination Board at the conclusion of the Company’s and Remuneration Committee. forthcoming Annual General Meeting to be All Directors with the exception of Jane Lewis are members of the Audit and Risk Committee. held on 7 March 2024. 36 | CT UK Capital and Income Investment Trust PLC Governance Report Chair’s StatementOverview Auditors’ Report ## Directors’ Report ## The Directors submit the Report and Accounts of the Company for the year ended 30 September ## 2023. The Directors’ biographies, Corporate Governance Statement; the Report of the Nomination ## and Remuneration Committee; the Directors’ Remuneration Report; the Report of the Audit and Risk ## Committee Report and the Report of the Management Engagement Committee form part of this Strategic Report Governance Report Financial Report Notice of Meeting ## Directors’ Report. Statement regarding Report and Accounts 18 December 2023 to Shareholders on the register on 8 December The Directors consider that following advice from the Audit and 2023. This dividend, together with the other three interim dividends Risk Committee, the Report and Accounts, taken as a whole, is paid in respect of the financial year ended 30 September 2023 fair, balanced and understandable and provides the information makes a total dividend of 12.15 pence per share. This represents an necessary for Shareholders to assess the Company’s position and increase of 3.0% over the 11.80 pence per share paid in respect of performance, business model and strategy. The Audit and Risk the previous financial year. Committee has reviewed the draft Report and Accounts for the purposes of this assessment. The market outlook for the Company As dividends are paid quarterly as interim dividends in March, can be found on page 12. Principal risks can be found on page 28 June, September and December, the Company does not pay a final with further information on page 76. dividend in February that would require formal Shareholder approval at the AGM. However, formal approval of the Company’s dividend Shareholders will be asked to approve the adoption of the Report policy of paying four quarterly interim dividends in each financial and Accounts for the financial year ended 30 September 2023 at year will be sought at the AGM. the AGM (Resolution 1). Company status Results and dividends The Company is a public limited company and an investment The results for the year are set out in the attached accounts. The company as defined by section 833 of the Companies Act 2006. Company’s dividend payments are set out below. The Company is limited by shares and is registered in England and Wales with company registration number 02732011. It is subject to the FCA’s listing rules, UK legislation and regulations including Dividends paid in the year ended 30 September 2023 company law, financial reporting standards, taxation law and its own £’000s articles of association. Fourth of four interims for the year ended 30 September 2022 of 3.85p per share 4,108 The Company is exempt from Streamlined Energy and Carbon First of four interims for the year ended 30 September 2023 Reporting Disclosures as it has consumed less than 40,000 Kwh of 2.75p per share 2,928 of energy in the United Kingdom during the year. Second of four interims for the year ended 30 September 2023 | of 2.75p per share | 2,907 | Taxation | | --- | --- | --- | | Third of four interims for the year ended 30 September 2023 | | As set out on page 34 and in note 7 to the accounts, as an | | of 2.75p per share | 2,876 | investment trust, the Company is exempt from UK Corporation Tax | on its worldwide dividend income and from UK Corporation Tax on 12,819 any capital gains arising from its portfolio of investments, provided it complies at all times with section 1158 of the Corporation Tax Further details are provided in note 9 to the financial statements. Act 2010. Dividends received from investee companies domiciled Other Information outside the UK are subject to taxation in those countries in As explained in the Chair’s Statement, the Board has announced a accordance with relevant double taxation treaties. fourth interim dividend of 3.90 pence per share. This will be paid on Report and Accounts 2023 | 37 ## Accounting and going concern The financial statements, starting on page 61, comply with current UK financial reporting standards, supplemented by the Statement of Recommended Practice “Financial Statements of Investment Trust Companies and Venture Capital Trusts” (“SORP”). The significant accounting policies of the Company are set out in note 2 to the accounts. The unqualified auditor’s opinion on the financial statements appears on pages 56 to 60. As discussed in the Five Year Horizon Statement on page 30 and note 20 to the financial statements on page 75, additional considerations were given to assessing the applicability of the going concern basis of accounting this year. Recently, the war in Ukraine, events in Israel and Gaza and inflationary concerns have resulted in increased volatility in financial markets and economic disruption. When assessing going concern the Directors have therefore considered these in addition to the Company’s objective, strategy and policy, its current cash position, the availability of its loan facility and compliance with its covenants and the operational resilience of the Company and its service providers. The Board has considered the impact of falls in the NAV of the Company and the ability of it to meet its banking covenants. The primary risk is that there is a very substantial decrease in the NAV of the Company in the short to medium term. The Board considers that the possibility of a fall of this magnitude is remote. In addition, the Company has remedial measures if such a covenant breach appeared possible. Further details on this assessment are provided on pages 29, 30 and 75. Based on this assessment, and in light of the controls and monitoring processes that are in place, the Directors believe that the Company has adequate resources to continue in operational existence for the twelve month period from the date of the approval of the financial statements. Accordingly, it is reasonable for the financial statements to continue to be prepared on a going concern basis. The Company’s longer term viability is considered in the Future Prospects “Five Year Horizon” Statement on page 30. ## Capital structure As at 30 September 2023 there were 107,289,022 ordinary shares of 25 pence each in issue including 2,953,177 shares held in treasury. As at 28 November 2023 (being the latest practicable date before publication of this report) the number of ordinary shares in issue was 107,289,022 including 3,553,177 shares held in treasury. All ordinary shares rank equally for dividends and distributions and carry one vote each. There are no restrictions concerning the transfer of securities in the Company, no special rights with regard to control attached to securities, no agreements between holders of securities regarding their transfer known to the Company and no agreement which the Company is party to that affects its control following a takeover bid. Details of the capital structure can be found in note 15 to the accounts. The revenue profits of the Company (including accumulated revenue reserves), together with the realised capital profits, are available for distribution by way of dividends to the holders of the ordinary shares. Upon a winding up, after meeting the liabilities of the Company, the surplus assets would be distributed to Shareholders pro rata to their holdings of ordinary shares. Full details are set out in the Company’s articles of association. ## Issue and buyback of shares At the AGM held on 9 March 2023 Shareholders renewed the Board’s authority to issue ordinary shares up to 10% of the number then in issue. To satisfy demand for the Company’s shares, mainly from holders through the CT Savings Plans, the Company issued shares on one occasion in the year under review. A total of 75,000 shares with an aggregate nominal value of £18,750 were issued at a price of 298.0 pence per share for a total consideration of £223,500 before the deduction of issue costs. Subject to annual Shareholder approval, the Company may also purchase up to 14.99% of its own issued ordinary shares at a discount to NAV per share. The shares bought back can either be cancelled or held in treasury to be sold as and when the share price returns to a premium. At the AGM held on 9 March 2023 Shareholders gave the Board authority to buy back ordinary shares up to 14.99% of the number then in issue. During the year under review 2,445,358 shares were purchased, representing 2.3% of the number of shares issued and fully paid at 30 September 2022, in 21 tranches and held in treasury. The price paid ranged from 276.5 pence per share to 310.0 pence per share. As noted above, the Company also re-issued from treasury 75,000 shares at a small premium to NAV. Since the year end to 28 November 2023, the Company has bought back 600,000 shares to be held in treasury. No shares have been issued. ## Voting rights As at 28 November 2023 the Company had 107,289,022 ordinary shares in issue including 3,553,177 shares held in treasury. Total voting rights were therefore 103,735,845. As at 30 September 2023 and 28 November 2023 no notifications of significant voting 38 | CT UK Capital and Income Investment Trust PLC Governance Report rights had been received under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules. ### Borrowings and financial risk management The Company has a one year multicurrency revolving facility agreement of up to £40 million with The Bank of Nova Scotia, London Branch ("Scotiabank") expiring in March 2024. The interest rate margin and the commitment fees on the Scotiabank facility have been set at commercial rates. It is anticipated that a replacement facility will be entered into upon the expiry of the current facility. Details of the financial risk management of the Company are provided in note 21 beginning on page 76. An ongoing overdraft arrangement is available to the Company by the Custodian for settlement of investment trades if necessary. ### Remuneration Report The Directors' Remuneration Report, which can be found on pages 47 to 49, provides detailed information on the remuneration arrangements for Directors of the Company including the Directors' Remuneration Policy. Shareholders are asked to approve the policy at an AGM every three years. There have been no changes to the policy since approval by Shareholders at the Company's AGM held in March 2023. Remuneration is set at a level commensurate with the skills and experience necessary for the effective stewardship of the Company and the expected contribution of the Board as a whole in continuing to achieve the investment objective. It is intended that this policy will continue for the three year period ending at the AGM in 2026. Shareholders will be asked to approve the Remuneration Report in respect of the financial year ended 30 September 2023 at the upcoming AGM (Resolution 3). As detailed on page 47, the Directors' fees are reviewed each year. Following this review in respect of the financial year ended 30 September 2023, the Directors have agreed that the annual remuneration of the Chair will increase from £40,500 to £42,750, the Chair of the Audit and Risk Committee from £32,500 to £35,750, the Senior Independent Director from £28,500 to £31,500 and other Directors from £27,000 to £28,500. These increases were effective from 1 October 2023. The previous increase to Directors' annual remuneration occurred on 1 October 2022. The Company's articles of association limit the aggregate fees payable to the Board to a total of £250,000 per annum. ### Director election or re-elections The names of the current Directors, along with their biographical details, are set out on page 36. During the year, Sharon Brown retired on 31 December 2022 and Jonathan Cartwright on 1 July 2023. All Directors, with the exception of Tim Scholefield, will seek election or re-election at the forthcoming AGM. Tim Scholefield will retire from the Board at the conclusion of the Company's forthcoming AGM to be held on 7 March 2024, having served nine years. Following a review of their performance, the Board believes that each of the Directors standing for election or re-election has made a valuable and effective contribution to the Company. The skills and experience each Director brings to the Board for the long term sustainable success of the Company are set out below. The Board recommends that Shareholders vote in favour of the election or re-election of the Directors (Resolutions 4 to 7). Resolution 4 relates to the re-election of Jane Lewis who has served eight years on the Board. She has extensive sector experience through her career in investment company corporate broking at Winterflood and business development at leading investment trust houses. She has held a number of investment trust directorships including as Chair. Jane became Chair of the Board on 1 July 2023. Resolution 5 relates to the election of Dunke Afe who was appointed to the Board on 1 June 2023 and became Chair of the Nomination and Remuneration Committee on 20 July 2023. Dunke is an accomplished global marketing and commercial professional with extensive experience in raising brand and product awareness. She has previously worked with top blue chip multinationals including Unilever, Kimberly Clark and Estee Lauder Companies. Resolution 6 relates to re-election of Patrick Firth who was appointed to the Board on 21 July 2022 and became Chair of the Audit and Risk Committee on 1 January 2023. Patrick is a qualified Chartered Accountant and a member of the Chartered Institute for Securities and Investment. He worked in the fund industry in Guernsey from 1992 and was Managing Director of third party fund administration businesses and a non-executive director of a number of management companies, general partners and investment companies. Currently he is Chair of the Audit and Risk Committees of Riverstone Energy Limited, NextEnergy Solar Fund Limited and India Capital Growth Fund. Resolution 7 relates to the re-election of Nicky McCabe who was appointed to the Board on 1 January 2021. 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 Aberdeen Asian Income Overview Case's Statement Last Report Governance Report Auditing Report Financial Report Notice of Meeting New Information Report and Accounts 2023 | 39 Fund Ltd, Artemis Investment Management Limited and EFG Asset responsibilities, which are set out in an Investor Disclosure Management (UK) Limited. Document on the Company’s website, include: cash monitoring; ensuring the proper segregation and safekeeping of the Company’s Directors’ interests and indemnification financial instruments that are held by the Custodian; and There were no contracts to which the Company was a party and in monitoring the Company’s compliance with investment and leverage which a Director is, or was, materially interested during the year. limits requirements. The Depositary receives for its services a fee There are no agreements between the Company and its Directors of one basis point per annum on the value of the Company’s net concerning compensation for loss of office. assets, payable monthly in arrears. The Company has granted a deed of indemnity to the Directors Although the Depositary has delegated the safekeeping of all in respect of liabilities that may attach to them in their capacity assets held within the Company’s investment portfolio to the as Directors of the Company. This covers any liabilities that may Custodian, in the event of loss of those assets that constitute arise to a third party for negligence, default or breach of trust or financial instruments under the AIFMD, the Depositary will be duty. This deed of indemnity is a qualifying third party provision obliged to return to the Company financial instruments of an (as defined by section 234 of the Companies Act 2006) and has identical type, or the corresponding amount of money, unless it can been in force throughout the period under review and remains in demonstrate that the loss has arisen as a result of an external place as at the date of this report. It is available for inspection event beyond its reasonable control, the consequences of which at the Company’s registered office during normal business hours would have been unavoidable despite all reasonable efforts to the and will be available for inspection at the AGM. The Company also contrary. maintains directors’ and officers’ liability insurance. The Manager’s fee Statement as to disclosure of information to the auditors A quarterly fee of 0.1% of funds under management is payable Each of the Directors confirms that, to the best of his or her in arrears to the Manager in respect of the management, knowledge and belief, there is no information relevant to the administration and ancillary services provided to the Company (see preparation of the Report and Accounts of which BDO LLP are note 4 to the accounts). unaware and they have taken all the steps a Director might reasonably be expected to have taken to be aware of relevant AGM audit information and to establish that BDO LLP is aware of that The Notice of the AGM to be held on 7 March 2024 is set out on information. pages 84 to 87. Appointment of auditor and auditor’s remuneration As well as the matters set out above, the Board will propose at the The auditor of a company has to be appointed at each Annual AGM resolutions in relation to the following matters. General Meeting at which accounts are laid before Shareholders. BDO LLP has expressed their willingness to continue in office as Authority to allot shares and sell shares from treasury auditor and resolutions proposing their re-appointment and for the (resolutions 10 and 11) Audit and Risk Committee to determine their remuneration for the Resolutions 10 and 11 are similar in content to the authorities financial year ended 30 September 2024 will be proposed at the and power previously given to the Directors by Shareholders. By AGM. (Resolutions 8 and 9). law, the Directors are not permitted to allot new shares (or to grant rights over shares) unless authorised to do so by Shareholders. In Safe custody of assets addition, the Directors require specific authority from Shareholders The Company’s listed investments are held in safe custody by JP before allotting new shares (or granting rights over shares) or Morgan Chase Bank (the “Custodian”). Operational matters with selling shares out of treasury for cash without first offering them to the Custodian are carried out on the Company’s behalf by the existing Shareholders in proportion to their holdings. Manager in accordance with the provisions of the management agreement. The Custodian is paid a variable fee dependent on the Resolution 10 gives the Directors, for the period until the number of trades transacted and location of the securities held. conclusion of the Annual General Meeting in 2025 or, if earlier, 15 months from the passing of the resolution, the necessary Depositary authority to allot securities up to an aggregate nominal amount of JPMorgan Europe Limited acts as the Company’s Depositary (the £2,593,396 (10,373,584 ordinary shares). This is equivalent to “Depositary”) in accordance with the AIFMD. The Depositary’s 40 | CT UK Capital and Income Investment Trust PLC Governance Report approximately 10% of the issued share capital of the Company as at 28 November 2023 excluding shares held in treasury. **Resolution 11**, which will be proposed as a special resolution and which is conditional on the passing of Resolution 10, seeks authority for the Directors to allot shares or sell shares held in treasury on a non pre-emptive basis for cash up to an aggregate nominal amount of £2,593,396 (representing 10% of the issued ordinary share capital of the Company (excluding shares held in treasury) as at 28 November 2023). These authorities and powers will provide the Directors with a degree of flexibility to increase the assets of the Company by the issue of new shares or the sale of treasury shares, in accordance with the policies set out on page 34 or should any other favourable opportunities arise to the advantage of Shareholders. The Directors anticipate that they will principally use the authorities granted by Resolutions 10 and 11 to satisfy demand from participants in the CT Savings Plans when they believe it is advantageous to plan participants and the Company's Shareholders to do so. In no circumstances would the Directors use these authorities to issue or sell any shares from treasury unless the existing shares in issue are trading at a premium to NAV. As at 28 November 2023, 3,553,177 ordinary shares were held by the Company in treasury. #### **Authority for the Company to purchase its own shares (resolution 12)** **Resolution 12**, which will be proposed as a special resolution, authorises the Company to purchase up to a maximum of 15,550,003 ordinary shares (equivalent to approximately 14.99% of the issued share capital excluding shares held in treasury as at 28 November 2023) at a minimum price of 25 pence per share and a maximum price per share (exclusive of expenses) of the higher of (i) 5% above the average of the middle market quotations for an ordinary share (as derived from the London Stock Exchange Daily Official List) for the five business days immediately before the date of purchase and (ii) the higher of the last independent trade and the highest current independent bid on the London Stock Exchange. The Directors intend to use this authority with the objective of enhancing Shareholder value. Purchases would only be made, within guidelines established from time to time by the Board, through the market for cash at prices below the prevailing Net Asset Value per ordinary share which would have the effect of enhancing that value for remaining Shareholders. Any ordinary shares that are purchased would either be placed into treasury or cancelled. The authority will expire at the conclusion of the 2025 annual general meeting of the Company or, if earlier, on the date which is 15 months after the date on which Resolution 12 is passed. #### **Form of proxy** Registered Shareholders will find enclosed a form of proxy for use at the AGM. Shareholders also have the option of lodging their proxy votes electronically as set out in Note 4 of the Notice of AGM. For shares held through CREST, proxy appointments may be submitted via the CREST proxy voting system. Proxy appointments should be lodged as soon as possible and, in any event, not later than 12.30pm on 5 March 2024. #### **Form of direction** If you are an investor in any of the CT Savings Plans you will have received a form of direction for use at the AGM and you will also have the option of lodging your voting directions electronically as set out in Note 4 of the Notice of AGM. All voting directions should be submitted as soon as possible in accordance with the instructions on the form of direction and, in any event, not later than 12:30pm on 29 February 2024. #### **Recommendation** The Board considers that the resolutions to be proposed at the meeting are in the best interests of the Company and Shareholders as a whole. The Directors recommend that Shareholders vote in favour of each resolution, as they intend to do in respect of their own beneficial holdings. **By order of the Board** **Columbia Threadneedle Investment Business Limited** **Secretary** **29 November 2023** Report and Accounts 2023 | 41 Overview Case's Statement Earnings Report Governance Report Auditor's Report Financial Report Notice of Meeting Date Information ## Corporate Governance Statement Introduction Company’s strategy, operations and compliance with regulations. The Board adheres to the principles and recommendations of The Manager is the Company’s AIFM. the revised AIC Code of Corporate Governance (the “AIC Code”) published in 2019. Articles of association The Company’s articles of association may only be amended by The Board believes that the Company has complied with the current special resolution at general meetings of Shareholders. recommendations of the AIC Code during the year under review and up to the date of this report and, except as regards the provisions The Board set out below, has thereby complied with the relevant provisions The Board’s responsibilities are outlined on page 13. More of the 2018 revision to the UK Corporate Governance Code (“UK specifically, the Board is responsible for the effective stewardship Code”): of the Company’s affairs and has adopted a formal schedule of matters reserved for its decision. It has responsibility for all The UK Code includes provisions relating to: corporate strategic issues, corporate governance matters, dividend • the role of the chief executive; policy, share issue and buyback policy, risk and control assessment, • executive directors’ remuneration; and investment performance monitoring and budget approval. It is also • the need for an internal audit function. responsible for the review and approval of annual and half yearly reports and other public documents. For the reasons set out in the AIC Corporate Governance Guide for Investment Companies, the Board considers these provisions as In order to enable the Directors to discharge their responsibilities, not being relevant to the Company, as it is an externally managed they all have full and timely access to relevant information. The investment company. In particular, all of the Company’s day-to-day Board normally meets at least four times a year and also holds a management and administrative functions have been delegated to strategy meeting. At each meeting, the Board reviews the Company’s the Manager. As a result, the Company has no executive Directors, management information, which includes reports on investment employees or internal operations. Therefore, with the exception performance and strategic matters and financial analyses. of the need for an internal audit function, which is addressed on Income forecasts and costs are reviewed within set budgets. The page 51, the Company has not reported further in respect of these Board monitors compliance with the Company’s objectives and provisions. is responsible for setting the asset allocation, investment and gearing ranges within which the Manager has discretion to act. Key Detailed information on the Directors’ Remuneration can be found in representatives of the Manager attend each Board meeting. Board the Directors’ Remuneration Report on pages 47 to 49 and in note 5 meetings are also held on an ad hoc basis to consider particular to the accounts. issues as they arise. The following table sets out the Directors’ meeting attendance in the year under review. Committees of the Copies of both codes may be found on the respective websites Board met during the year to undertake business such as the theaic.co.uk and frc.org.uk. approval of the Company’s final results and dividends. AIFMD Each Director has a signed letter of appointment to formalise the The Company is defined as an Alternative Investment Fund (“AIF”) terms of their engagement as a non-executive Director, copies of under the AIFMD issued by the European Parliament, and which which are available for inspection at the Company’s registered has been implemented into UK law. This requires that all AIFs must office during normal business hours and are also available at each appoint a Depositary and an Alternative Investment Fund Manager Shareholder meeting. (“AIFM”). The Board remains fully responsible for all aspects of the 42 | CT UK Capital and Income Investment Trust PLC Governance Report Chair’s StatementOverview Auditors’ Report Director attendance – year ended 30 September 2023 Nomination and Annual General Audit and Risk Management Remuneration Board Meeting Committee Engagement Committee Committee No. of meetings (4) Jane Lewis 6 1 3 2 3 (1) Dunke Afe 2 N/A 1 1 1 Patrick Firth 6 1 3 2 3 Strategic Report Governance Report Financial Report Notice of Meeting Nicky McCabe 6 1 3 2 3 Tim Scholefield 6 1 3 2 3 (2) Sharon Brown 1 N/A 1 1 1 (3) (4) Jonathan Cartwright 4 1 2 1 2 (1) Attended all meetings since appointment on 1 June 2023. (2) Attended all meetings until retirement on 31 December 2022. (3) Attended all meetings until retirement on 1 July 2023. (4) The Chair of the Company is invited to attend the Audit and Risk Committee although he or she is not a member. The Board also held three committee meetings during the year. way of confidential interviews between the Chair and each Director. The appraisal of the Chair was carried out by the Board under Directors are able to seek independent professional advice at the the leadership of the Senior Independent Director. The Board Company’s expense in relation to their duties. No such professional considers that the appraisal process is a constructive means of advice was taken by Directors during the year under review. The evaluating the contribution of individual Directors and identifying Board has direct access to the company secretarial advice and ways to improve the functioning and performance of the Board and services of the Manager which, through its nominated representative, its committees and building on and improving collective strengths, is responsible for ensuring that Board and committee procedures including assessing any training needs. The option of using external are followed and applicable regulations are complied with. The consultants to conduct this evaluation is kept under review. proceedings at all Board and other meetings are fully recorded through a process that allows any Director’s concerns to be recorded Independence of Directors in the minutes. The Board has the power to appoint or remove The Board, which is composed solely of independent non-executive the Secretary in accordance with the terms of the management Directors, regularly reviews the independence of the individual agreement. The powers of the Board relating to the buying back or Directors. All the Directors have been assessed by the Board as issuance of the Company’s shares are explained on pages 40 and 41. remaining independent of the Manager and of the Company itself; none has a past or current connection with the Manager and Appointments each remains independent in character and judgement with no Under the articles of association of the Company, the number of relationships or circumstances relating to the Company that are likely Directors on the Board cannot exceed ten. An induction process to affect that judgement. takes place for new appointees and all Directors are encouraged to attend relevant training courses and seminars. Directors may be Conflicts of interest appointed by the Company by ordinary resolution or by the Board. All A company director has a statutory obligation to avoid a situation new appointments by the Board are subject to subsequent election in which he or she has, or potentially could have, a direct or by Shareholders at the next Annual General Meeting. All Directors indirect interest that conflicts with the interests of the Company (a will stand for re-election by Shareholders annually. “situational conflict”). The Board therefore has procedures in place for the authorisation and review of situational conflicts relating to the Directors must seek Board approval prior to accepting additional Company’s Directors. listed external roles. Other than the formal authorisation of the Directors’ other Board effectiveness directorships and appointments, no authorisations have been Other Information During the year, in order to review the effectiveness of the Board, sought. They are reviewed throughout the year at each Board its Committees and the individual Directors, the Board carried out meeting and the authorisation of each individual Director’s conflicts a process of formal annual self appraisal. This was facilitated by or potential conflicts annually. These authorisations were reviewed in Report and Accounts 2023 | 43 July 2023 when it was concluded that in each case these situational conflicts had not affected any individual in their role as a Director of the Company. Aside from situational conflicts, the Directors must also comply with the statutory rules requiring Company Directors to declare any interest in an actual or proposed transaction or arrangement with the Company. In the year under review there have been no instances of a Director being required to be excluded from a discussion or abstain from voting because of a conflict of interest. Relations with Shareholders The Company welcomes the views of Shareholders and places importance on communication with its members. Representatives of the Manager hold meetings with the Company’s largest Shareholders and report back to the Board on these meetings. Each year, the Company will hold an Annual General Meeting to be followed by a presentation by the Fund Manager in London. In accordance with the UK Code, in the event that votes of 20 per cent or more are cast against a resolution at a General Meeting the Company will announce the actions it intends to take to consult Shareholders to understand the reasons behind the result. A further update will be published within six months. No such votes were received during 2023. Tim Scholefield will be the Senior Independent Director until his retirement at the conclusion of the Company’s AGM to be held on 7 March 2024. Upon his retirement Nicky McCabe will be appointed Senior Independent Director. The Senior Independent Director is available to Shareholders if they have concerns which initial contact through the Chair or Company Secretary has failed to resolve or for which such contact is inappropriate. Shareholders wishing to communicate with the Chair or other members of the Board may do so by writing to CT UK Capital and Income Investment Trust PLC, Cannon Place, 78 Cannon Street, London, EC4N 6AG. By order of the Board Columbia Threadneedle Investment Business Limited Secretary 29 November 2023 44 | CT UK Capital and Income Investment Trust PLC Governance Report Chair’s StatementOverview Auditors’ Report ## Report of the Nomination and ## Remuneration Committee Strategic Report Governance Report Financial Report Notice of Meeting Role of the Nomination and Remuneration Committee (“the agreeing the selection criteria and the method of recruitment, selection Committee”) and appointment. The Committee met three times during the year. Its primary role is to review and make recommendations to the Board with regard to Board On 1 July 2023 Jonathan Cartwright retired from the Board. Following structure, size and composition, the balance of knowledge, experience, Board discussion, Jane Lewis, who joined the Board in April 2015 was skill ranges and diversity, consider succession planning and tenure appointed Chair upon his retirement. Jane Lewis has extensive sector policy and remuneration policy and levels. Its responsibilities include: experience through her career in investment company corporate broking at Winterflood and business development at leading investment trust • Board structure and size of the Board and its composition, houses. She has also been appointed to a number of investment trust particularly in terms of succession planning and the experience and boards including as Chair. skills of the individual Directors and diversity across the Board as a whole; As part of the Board’s succession planning, Audeliss, a search company • tenure policy; without connection to the Company or any individual Director, was • the criteria for future Board appointments and the methods of commissioned to find a new Director to join the Board. Following a recruitment, selection and appointment; thorough selection process, Dunke Afe was appointed as a Director • the reappointment of those Directors standing for re-election at of the Company with effect from 1 June 2023. Dunke Afe is an Annual General Meetings; accomplished global marketing and commercial professional with • the attendance and time commitment of the Directors in fulfilling extensive experience in raising brand and product awareness. She has their duties, including the extent of their other directorships; previously worked with top blue chip multinationals including Unilever, • the question of each Director’s independence prior to publication of Kimberly Clark and Estee Lauder Companies. the Report and Accounts; • the authorisation of each Director’s situational conflicts of interests Tim Scholefield, the Company’s Senior Independent Director, who joined in accordance with the provisions of the Act and the policy and the Board in November 2014, will retire at the conclusion of the 2024 procedures established by the Board in relation to these provisions; Annual General Meeting, having served nine years. Upon his retirement • remuneration policy; and Nicky McCabe will be appointed Senior Independent Director. • the periodic review of the level of Directors’ fees, including the Chair of the Board and Committees. As a further part of the Board’s succession planning, Fletcher Jones, a search company without connection to the Company or any individual Composition of the Committee Director, was commissioned to find a new Director for the Board. All of the Directors are members of the Committee. Following this selection process, the Board is pleased to announce that Christopher Metcalfe, will be appointed to the Board and its committees In accordance with corporate governance best practice and following with effect from 8 March 2024. her appointment as Chair of the Company, Jane Lewis stepped down as Chair of the Committee on 20 July 2023. With effect from that date, Christopher is Chairman of Martin Currie Global Portfolio Trust plc Dunke Afe was appointed Chair of the Committee. and the Senior Independent Non Executive Director of JP Morgan US Smaller Companies Investment Trust plc. He has extensive equity fund The terms of reference of the Committee can be found on the management and investment trust experience having previously worked Company’s website at ctcapitalandincome.co.uk. in senior positions at Newton Investment Management, Schroder Investment Management and Henderson Administration Group. Other Information Directorate change and succession planning Appointments of all new Directors are made on a formal basis, normally using independent, professional search consultants, with the Committee Report and Accounts 2023 | 45 Diversity and tenure The Board’s diversity policy, objective and progress in achieving it are set out on page 34. In normal circumstances the Chair and Directors are expected to serve for no more than nine years, but this may be adjusted for reasons of flexibility and continuity. Committee evaluation The activities of the Committee were considered as part of the Board appraisal process completed in accordance with standard governance arrangements as summarised on page 53. The conclusion from the process was that the Committee was operating effectively, with the right balance of membership, experience and skills. Dunke Afe Chair of the Nomination and Remuneration Committee 29 November 2023 46 | CT UK Capital and Income Investment Trust PLC Governance Report # Directors' Remuneration Report Dear Shareholder, I am pleased to introduce the Directors' Remuneration Report for the year ended 30 September 2023. This report sets out the Company's forward looking Directors' Remuneration Policy and the Remuneration Report which describes how this policy has been applied during the year. I would welcome any comments you may have. Directors' Remuneration Policy The Board's policy is to set Directors' remuneration at a level commensurate with the skills and experience necessary for the effective stewardship of the Company and the expected contribution of the Board as a whole in continuing to achieve the investment objective. The policy aims to be fair and reasonable in relation to comparable investment trusts and other similar sized financial companies. Time committed to the Company's affairs and the role that individual Directors fulfil in respect of Board and Committee responsibilities are taken into account. The policy also provides for the Company's reimbursement of all reasonable travel and associated expenses incurred by the Directors in attending Board and committee meetings, including those treated as a benefit in kind subject to tax and national insurance. The Directors are not eligible for bonuses, pension benefits, share options, long term incentive schemes or other benefits. This policy was last approved by Shareholders in March 2023 with 94.5% voting in favour and 5.5% against. The policy will next be put to Shareholders for renewal at the AGM to be held in 2026. The Board has not received any views from Shareholders in respect of the levels of Directors' remuneration. The Company's articles of association limit the aggregate fees payable to the Board to a total of £250,000 per annum. Within that limit, it is the responsibility of the Board as a whole to determine and approve the Directors' fees, following a recommendation from the Nomination and Remuneration Committee. The fees are fixed and are payable in cash, quarterly in arrears. The fees are reviewed each year. Following this review the Board agreed that the annual remuneration of the Chair will increase from £40,500 to £42,750, the Chair of the Audit and Risk Committee from £32,500 to £35,750, the Senior Independent Director from £28,500 to £31,500 and other Directors from £27,000 to £28,500. These increases were effective from 1 October 2023. The previous increase to Directors' annual remuneration occurred on 1 October 2022. The Board is composed solely of non-executive Directors, none of whom has a service contract with the Company. Each new Director is provided with a letter of appointment. There is no provision for compensation upon early termination of appointment. The letters of appointment are available for inspection at the Company's registered office during business hours and will be available for 15 minutes before and during the forthcoming AGM. The dates on which each Director was appointed to the Board and was last elected or re-elected by Shareholders are set out on page 36. Each Director's appointment is subject to election at the first Annual General Meeting and continues thereafter subject to re-election at each subsequent Annual General Meeting. The appointment can be terminated on one month's notice. All the Directors, with the exception of Tim Scholefield, will stand for election or re-election at the AGM on 7 March 2024. The fees for specific responsibilities are set out in the table below. Annual fees for Board Responsibilities | For the year ending 30 September | 2024 £'000s | 2023 £'000s | 2022 £'000s | | --- | --- | --- | --- | | Chair | 42.8 | 40.5 | 38.5 | | Director | 28.5 | 27.0 | 25.5 | | Senior Independent Director | 31.5 | 28.5 | 27.0 | | Audit and Risk Committee Chair | 35.8 | 32.5 | 31.0 | Report and Accounts 2023 | 47 Overview Chair's Statement Stockholder Report Governance Report Auditors' Report Finance Report Notice of Meeting Date Information Directors’ Shareholdings – Directors’ share interests (audited) Fees for services to the Company (audited) At 30 September 2023 2022 Taxable (1) | | | | | | Fees | Benefits | | | Total | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Number of shares held | | Number of shares held | | | | | | | | | | | | | £’000s | | | £’000s | £’000s | | | | (audited) | | (audited) | | | | | | | | | | | | (audited) | | (audited) | | (audited) | | Jane Lewis 3,095 3,095 Director 2023 2022 2023 2022 2023 2022 Dunke Afe* – n/a (2) Jonathan Cartwright 30.5 38.5 2.0 0.1 32.5 38.6 Patrick Firth – – (3) Jane Lewis 30.3 25.5 2.4 2.0 32.7 27.5 Nicky McCabe 3,420 3,420 (4) Sharon Brown 8.1 31.0 1.6 4.8 9.7 35.8 Tim Scholefield 8,500 8,500 (5) Patrick Firth 31.1 5.0 2.6 0.4 33.7 5.4 As at 30 September 2023 the shareholding of the Company’s fund manager, Julian Cane, was Tim Scholefield 28.5 27.0 1.8 0.1 30.3 27.1 337,329 shares (2022: 324,122 shares). The Company’s register of Directors’ interests contains full details of Directors’ Nicky McCabe 27.0 25.5 5.0 1.8 32.0 27.3 shareholdings. (6) Dunke Afe 9.0 n/a – n/a 9.0 n/a *Appointed as a non-executive Director with effect from 1 June 2023. Total 164.5 152.5 15.4 9.2 179.9 161.7 (1) Comprises amounts reimbursed for expenses incurred in carrying out There have been no changes in any of the Directors’ shareholdings business for the Company, which have been grossed up to include PAYE and NI detailed above between 30 September 2023 and the date of this contributions. (2) Retired 1 July 2023. report. No Director held any interests in the issued shares of the (3) Appointed Chair with effect from 1 July 2023. (4) Retired 31 December 2022. Company other than as stated above. There is no requirement for (5) Appointed Audit Committee Chair with effect from 1 January 2023. the Directors to hold shares in the Company. (6) Appointed as a non-executive Director with effect from 1 June 2023. Policy implementation The table below sets out the annual percentage change in fees for The Directors’ Remuneration Report is subject to an annual advisory each Director who served in the year under review. vote and therefore an ordinary resolution for its approval will be put to Shareholders at the forthcoming AGM. At the last meeting, Fees annual percentage change Shareholders approved the Directors’ Remuneration Report in | | | 2023 | | 2022 | | 2021 | | 2020 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | respect of the year ended 30 September 2022. 95.4% of votes were | Director | | % | | % | | % | | % | | cast in favour of the resolution and 4.6% against. | Jonathan Cartwright | | (1) | | | | (2) | | | | | | -20.8 | | +4.1 +37.0 | | | | | n/a | | | Jane Lewis | | (3) | | | | | | | | | | +18.8 | | +4.1 - +2.1 | | | | | | | Directors’ remuneration report | | | (4) | | | | | | | | | Sharon Brown | -73.9 | | +3.3 - +3.4 | | | | | | The Directors who served during the year received the following Patrick Firth (5) +522.0 n/a n/a n/a amounts for services as non-executive Directors for the years ended Tim Scholefield (6) +5.6 +8.4 +1.6 +2.1 30 September 2023 and 2022. | Nicky McCabe | | (7) | | | --- | --- | --- | --- | | | +5.9 +38.8 | | n/a n/a | | Dunke Afe | n/a n/a n/a n/a | | | (1) Retired 1 July 2023. (2) Appointed as non executive Director on 26 November 2019, became Chair with effect from 1 April 2020. Increase reflects the first full year in the role. (3) Appointed Chair with effect from 1 July 2023, increase reflects the change in position held. (4) Retired 31 December 2022. (5) Appointed as non executive Director on 21 July 2022, became Audit and Risk Committee Chair with effect from 1 January 2023. Increase reflects the first full year with the Company and change in position held. (6) Appointed Senior Independent Director on 14 July 2021. (7) Appointed as a non executive Director with effect from 1 January 2021, increase reflects the first full year with the Company. 48 | CT UK Capital and Income Investment Trust PLC Governance Report The table below shows the actual expenditure during the year in relation to Directors' remuneration (excluding taxable benefits) and Shareholder distributions: # **Relative importance of pay** | Actual Expenditure Year ended 30 September | 2023 £'000s | 2022 £'000s | % Change | | --- | --- | --- | --- | | Aggregate Directors' fees | 164.5 | 152.5 | 7.9 | | Management and other expenses^{(1)} | 2,129.0 | 2,109.0 | 0.9 | | Dividends paid to Shareholders | 12,819.0 | 12,532.0 | 2.3 | (1) Includes Directors' remuneration. # **Company performance** The Board is responsible for the Company's investment strategy and performance. The management of the investment portfolio is delegated to the Manager. An explanation of the performance of the Company for the year ended 30 September 2023 is given in the Chair's Statement and Fund Manager's Review. A comparison of the Company's performance over the required ten year period is set out in the graph. This shows the total return (assuming all dividends are reinvested) to ordinary Shareholders against the Benchmark. # **Shareholder total return vs Benchmark total return over ten years (rebased to 100 at 30 September 2013) (%)** ![img-4.jpeg](img-4.jpeg) Source: Refinitiv Eikon **Dunke Afe** **Chair of the Nomination and Remuneration Committee** **29 November 2023** Report and Accounts 2023 | 49 Overview Chair's Statement Strategic Report Governance Report Auditor's Report Financial Report Notice of Meeting Other Information ## Report of the Audit and Risk Committee ## The primary responsibilities of the Audit and Risk Committee (the “Committee”) are to ensure the ## integrity of the financial reporting of the Company and the appropriateness of the internal controls ## and risk management processes. Role of the Committee the impact of the war in Ukraine, recent events in Israel and Gaza and The Committee met on three occasions during the year, and the inflationary pressures upon the risks, operations and accounting basis attendance of each of the members is set out on page 43. The Trust of the Company. Accountant, the Fund Manager and Risk Managers of the Manager were invited to attend certain meetings to report on relevant matters. Mindful of the guidance issued by the Financial Reporting Council, when The external auditor, BDO LLP, attended two of the committee meetings assessing going concern the Directors have considered this in addition and also met in private session with the Committee Chair. to taking note of the Company’s objective, strategy and policy, its cash position, availability of the loan facility and the operational resilience The Committee considered, monitored and reviewed the following of its service providers. Further analysis of the application of the going matters: concern principle is detailed in note 20 to the Financial Report. • The audited annual results statement and Report and Accounts The Board retains ultimate responsibility for all aspects relating to and the unaudited half yearly results statement and Report and external financial statements and other significant published financial Accounts; information as is noted in the Statement of Directors’ Responsibilities • The accounting policies of the Company; on page 54. On broader control policy issues, the Committee has • The principal risks faced by the Company and the effectiveness of received confirmation that bribery and corruption are managed by the Company’s internal control and risk management environment, the Manager’s Global Code of Conduct and Anti-Corruption Policy and including consideration of the assumptions underlying the Board’s Guidelines. The Manager and its employees are subject to both the future prospects statement on viability; Code and the Policy. The Committee has also received confirmation • The effectiveness of the external audit process and the current that the Manager has in place a Whistleblowing Policy under which its independence and objectivity of BDO LLP; directors and staff may, in confidence, raise concerns about possible • The policy on the engagement of the external auditor to supply non- improprieties in financial reporting or other matters. The necessary audit services and approval of any such services; arrangements are in place for communication to this Committee • The need for the Company to have its own internal audit function; where matters might impact the Company with appropriate follow up • The ISAE/AAF and SSAE16 reports or their equivalent from the action. In the year under review, there were no such concerns raised Manager, the Custodian, Depositary and a due diligence report with the Committee. from the Company’s share registrar; and • The Committee’s terms of reference, which can be found on the Composition of the Committee website at ctcapitalandincome.co.uk. All the Directors of the Company are independent. All Directors, with the exception of the Chair of the Company, were members of the Comprehensive papers and reports relating to each of these matters Committee. This is in accordance with developing Corporate Governance were considered by the Committee and recommendations were then best practice. The Chair, however, has been invited to attend. Until made to the Board as appropriate. 31 December 2022 Sharon Brown was Chair of the Committee. On that date she retired from the Board and the Committee. Upon this As noted within Principal Risks and Future Prospects on page 28 the retirement Patrick Firth was appointed Chair of the Committee. He is a Directors have reviewed the risk register of the Company. qualified Chartered Accountant and a member of the Chartered Institute for Securities and Investment. He has worked in the fund industry in Throughout the preparation processes for both the interim report for Guernsey since 1992 and has been, and continues to be a director of the six month period ended 31 March 2023 and the annual report for a number of management companies, general partners and investment the year ended 30 September 2023 the Committee has considered companies, including Chair of the Audit and Risk Committees. 50 | CT UK Capital and Income Investment Trust PLC Governance Report The other members of the Committee have a combination of relevant control systems. The assessment included a review of the Manager’s Chair’s StatementOverview Auditors’ Report financial, investment and business experience through the senior posts risk management infrastructure and the report on policies and held throughout their careers. The Committee considers that collectively procedures in operation and tests for the year to 31 October 2022 (the the members have sufficient recent and relevant sector and financial “ISAE/AAF Report”). The Manager has provided further assurance experience to discharge their responsibilities. The performance of the that controls have operated satisfactorily since that date. This had Committee was evaluated as part of the Board appraisal process. been prepared by the Manager for all its investment trust clients to the International Standard on Assurance Engagement (“ISAE”) No.3402 Management of risk and to the standards of the Institute of Chartered Accountants in Strategic Report Governance Report Financial Report Notice of Meeting The Manager’s Business Risk department provides regular control England and Wales Technical Release AAF (01/20). report updates to the Committee covering risk and compliance while any significant issues of direct relevance to the Company are required The ISAE/AAF Report, containing an unqualified opinion from to be reported to the Board immediately. During the year the internal independent reporting accountants KPMG, sets out the Manager’s audit function of the Manager presented to the Board on their recent control policies and procedures with respect to the management of its and planned activities within Columbia Threadneedle Investments. clients’ investments and maintenance of their financial records. The effectiveness of these controls is monitored by the Manager’s Group A key risk register is produced by the Manager in consultation with Audit and Compliance Committee, which receives regular reports from the Board to identify the risks to which the Company is exposed, the its Internal Audit department. Procedures are also in place to capture controls in place and the actions being taken to mitigate them. The and evaluate any failings and weaknesses within the Manager’s control Board has a robust process for considering the resulting risk matrix and environment and those extending to any outsourced service providers reviews the significance of the risks and the reasons for any changes. to ensure that action would be taken to remedy any significant issues. Any errors or breaches relating to the Company are reported at each The Company’s Principal Risks and their mitigations are set out on Board meeting by the Manager. No failings or weaknesses material to pages 28 and 29 with additional information given in note 21 to the the overall control environment and financial statements were identified accounts. The integration of these risks into the analyses underpinning in the Company’s year under review. The Committee also reviewed the “Five Year Horizon” Statement on page 30 was fully considered the control reports of the Custodian, the Depositary and the Share and the Committee concluded that the Board’s statement was soundly Registrar and were satisfied that there were no material exceptions. based. Through the reviews and reporting arrangements set out above and Internal controls by direct enquiry of the Manager and other relevant parties, the The Board has overall responsibility for the Company’s systems of Committee and the Board have satisfied themselves that there were internal controls, for reviewing their effectiveness and ensuring that no material control failures or exceptions affecting the Company’s risk management and control processes are embedded in the day-to- operations during the year or to the date of this report. day operations, which are managed by the Manager. The Committee has reviewed and reported to the Board on these controls, which aim Based on review, observation and enquiry by the Committee and Board to ensure that the assets of the Company are safeguarded, proper of the processes and controls in place within the Manager, including accounting records are maintained, and the financial information used the unqualified opinion of a reputable independent accounting firm that within the business and for publication is reliable. Control of the risks those controls operated satisfactorily, the Committee has concluded identified, covering financial, operational, compliance and overall risk that there is no current need for the Company to have an internal audit management, is exercised by the Committee and the Board through function and the Board has concurred. regular reports provided by the Manager. The reports cover investment performance, compliance with agreed and regulatory investment External audit process and significant issues considered by restrictions, financial analyses, revenue estimates, performance of the the Committee third party administrators of the CT Savings Plans and other relevant In carrying out its responsibilities, the Committee has considered the management issues. planning arrangements, scope, materiality levels and conclusions of the 2023 external audit. The table on the next page describes the The systems of internal controls are designed to manage rather than significant judgements and issues considered by the Committee in eliminate risk of failure to achieve business objectives and can only conjunction with BDO LLP in relation to the financial statements for Other Information provide reasonable, but not absolute, assurance against material the year and how these issues were addressed. The Committee also misstatement, loss or fraud. Further to the review by the Committee, included in their review the areas of judgements and estimates referred the Board has assessed the effectiveness of the Company’s internal to in note 2(c)(xv) to the accounts. Report and Accounts 2023 | 51 ## Significant judgements and issues considered by the Committee in 2023 | Matter | Action | | --- | --- | | **Investment Portfolio Valuation** | | | The Company's portfolio is invested in listed securities. Although the vast majority of the securities are highly liquid and listed on recognised stock exchanges, errors in the valuation could have a material impact on the Company's Net Asset Value per share. | The Board reviews the full portfolio valuation at each Board meeting and receives quarterly monitoring and control reports from the AIFM and Depository. The Committee reviewed the Manager's ISAE/AAF Report for the year ended 31 October 2022, which is reported on by independent external accountants and which details the systems, processes and controls around the daily pricing of equity and fixed interest securities. The Manager has provided further assurance that controls have operated satisfactorily since that date. The valuation and existence of investments were tested and reported on by the auditors as set out on page 57. | | **Misappropriation of Assets** | | | Misappropriation or non-existence of the Company's investments or cash balances could have a material impact on its Net Asset Value per share. | The Committee reviewed the Manager's ISAE/AAF Report for the year ended 31 October 2022, which details the controls around the reconciliation of the Manager's records to those of the Custodian. The Committee also reviewed the Custodian's annual internal control report to 31 March 2023, which is reported on by independent external accountants and which provides details regarding its control environment. Regular updates from the Manager, Depository and Custodian, in respect of controls operating in subsequent periods up to 30 September 2023, were also reviewed and agreed as being satisfactory. | | **Income Recognition** | | | Incomplete or inaccurate income recognition could have an adverse effect on the Company's Net Asset Value and earnings per share and its level of dividend cover. | The Committee reviewed the Manager's ISAE/AAF Report and subsequent confirmation referred to above. It also assessed the final level of income received for the year against the budget which was set at the start of the year and discussed the accounting treatment of special dividends with the Manager. Investment income was also tested and reported on by the auditors as set out on page 57. | The Committee met in November 2023 to discuss the draft Report and Accounts, with representatives of BDO LLP and the Manager in attendance. BDO LLP submitted their Year End report to the Committee and confirmed that they anticipated issuing an unqualified audit opinion in respect of the Report and Accounts. The Committee established that there were no material issues or findings arising which needed to be brought to the attention of the Board and confirmed that the Report and Accounts were in their view fair, balanced and understandable in accordance with accounting standards, regulatory requirements and best practice. The Independent Auditors' Report, which sets out their unqualified audit opinion, the scope of the audit and the areas of focus, in compliance with applicable auditing standards, can be found on pages 56 to 60. ### Auditor assessment and independence The Committee has been satisfied with the effectiveness of BDO LLP's performance on the audit of the Company's accounts. BDO LLP has confirmed its independence of the Company and has complied with relevant auditing standards. In evaluating BDO LLP, the Committee took into consideration the standing, skills and experience of the firm and the audit team and also took note of BDO LLP's audit performance through the FRC's Audit Quality Review. The fee for the audit was £42,000 (2022: £35,000) as shown in note 5 to the accounts. ### Non-audit services The Committee regards the continued independence of the auditor to be a matter of the highest priority. The Company's policy with regard to the provision of non-audit services by the external auditor ensures that no engagement will be permitted if: - the provision of the services would contravene any regulation or ethical standard; - the auditors are not considered to be expert providers of the non-audit services; - the provision of such services by the auditor creates a conflict of interest for either the Board or the Manager; and - the services are considered to be likely to inhibit the auditor's independence or objectivity as auditors. In particular, the Committee has a policy that the costs of all non-audit services sought from the auditors in any one year should not exceed 70% of the average audit fee paid over the last three consecutive years. There were no non-audit services for the year ended 30 September 2023. **Patrick Firth** **Chair of the Audit and Risk Committee** **29 November 2023** 52 | CT UK Capital and Income Investment Trust PLC Governance Report Chair’s StatementOverview Auditors’ Report ## Report of the Management ## Engagement Committee Strategic Report Governance Report Financial Report Notice of Meeting Role of the Management Engagement Committee (“the Manager continued to commit the necessary resources in all areas Committee”) of their responsibilities, including investment, ESG, marketing and The primary role of the Committee is to review annually the administrative services towards the achievement of the Company’s performance of and the fee paid to the Manager for the services it objective. The Committee met in closed session following the provides under the management agreement together with the terms presentation and concluded that in its opinion, in the light of longer- of the agreement. As part of this process it receives reports on any term investment performance and the quality of the overall service services delegated by the Manager to outsourced service providers. provided, the continuing appointment of the Manager on the terms The Committee considers any extra charges and services proposed by agreed was in the interests of Shareholders as a whole. The Board the Manager in addition to the management fees. ratified this recommendation. The Committee reviews annually the performance of all service Nicky McCabe providers to the Company and monitors fees payable to them. It will Chair of the Management Engagement Committee make any necessary recommendations to the Board. 29 November 2023 Composition of the Committee All of the Directors are members of the Committee. The Committee is chaired by Nicky McCabe. The terms of reference can be found on the website at ctcapitalandincome.co.uk. Manager and supplier evaluation process Investment performance is considered by the Board at every meeting, with the formal annual evaluation undertaken by the Committee including the wider services provided by the Manager. In evaluating the performance, the Committee considers a range of factors including the investment performance of the portfolio and the skills, experience and depth of the team involved in managing the Company’s assets. For the purposes of its ongoing monitoring, the Board had received detailed reports and views from the Fund Manager on investment policy, asset allocation, gearing and risk. The Board had also received comprehensive performance and risk management schedules to enable it to assess: the success or failure of the management of the portfolio against the performance objectives set by the Board; the sources of positive and negative contribution to the portfolio in terms of gearing, asset allocation and stock selection; and the risk/ return characteristics. The Committee also monitors the level of the Manager’s fee, the service provided by the Manager and the service and fees of all of the Company’s third party service providers. Other Information Manager reappointment The annual evaluation that took place in July 2023 included a presentation from the Manager’s Head of Investment Trusts. The Report and Accounts 2023 | 53 ## Statement of Directors’ Responsibilities The Directors are responsible for preparing the Report and reasonable steps for the prevention and detection of fraud and Accounts, the Directors’ Remuneration Report and the financial other irregularities. statements in accordance with applicable law and regulations. The Report and Accounts is published on the Company law requires the Directors to prepare financial statements ctcapitalandincome.co.uk website, which is maintained by the for each financial year. Under that law the Directors have prepared Manager. The Directors are responsible for the maintenance and the financial statements in accordance with United Kingdom integrity of the Company’s website. Visitors to the website need Accounting Standards, comprising FRS 102 and applicable law to be aware that legislation in the United Kingdom governing the (United Kingdom Generally Accepted Accounting Practice). preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair Statement under Disclosure Guidance and Transparency view of the state of affairs of the Company and of the profit or Rule 4.1.12 loss of the Company for that period. In preparing these financial Each of the Directors listed on page 36 confirm to the best of their statements, the Directors are required to: knowledge that: • select suitable accounting policies and then apply them • the financial statements, prepared in accordance with consistently; applicable accounting standards give a true and fair view of the • make judgements and accounting estimates that are assets, liabilities, financial position and profit of the Company; reasonable and prudent; • the Strategic Report includes a fair review of the development • state whether applicable UK Accounting Standards have been and performance of the business and the position of the followed, subject to any material departures disclosed and Company, together with a description of the principal risks and explained in the financial statements respectively; uncertainties that they face; and • prepare the financial statements on the going concern basis • the Annual Report and financial statements, taken as a unless it is inappropriate to presume that the Company will whole, are fair, balanced and understandable and provide continue in business; and the information necessary for Shareholders to assess the • prepare a Directors’ Report, a Strategic Report and a Directors’ Company’s position and performance, business model and Remuneration Report which comply with the requirements of strategy. the Companies Act 2006. The Directors confirm that they have complied with the above requirements in preparing the financial statements. On behalf of the Board The Directors are responsible for keeping adequate accounting Jane Lewis Chair records that are sufficient to show and explain the Company’s 29 November 2023 transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking 54 | CT UK Capital and Income Investment Trust PLC Governance Report Chair’s StatementOverview Auditors’ Report ## Management and Advisers Strategic Report Governance Report Financial Report Notice of Meeting | The Manager | The Secretary and the Company’s | The Depositary | | --- | --- | --- | | CT UK Capital and Income Investment Trust | Registered Office | JPMorgan Europe Limited | | PLC is managed by Columbia Threadneedle | Columbia Threadneedle Investment | 25 Bank Street, Canary Wharf | | Investment Business Limited, a wholly- | Business Limited | London E14 5JP | | owned subsidiary of Columbia Threadneedle | Cannon Place, 78 Cannon Street | | | AM (Holdings) PLC which is ultimately owned | London EC4N 6AG | The Registrars | | by Ameriprise Financial, Inc. Columbia | | Computershare Investor Services PLC | | Threadneedle Investment Business Limited | Telephone: 0131 573 8300 | The Pavilions, Bridgwater Road | | is authorised and regulated in the UK by the | Website: ctcapitalandincome.co.uk | Bristol BS99 6ZZ | | Financial Conduct Authority and is appointed | Email: invest@columbiathreadneedle.com | | | under a management agreement with the | | Telephone: 0370 889 4094 | | Company setting out its responsibilities for | The Auditors | | | investment management, administration and | BDO LLP | The Legal Counsel | | marketing. | 55 Baker Street | Dickson Minto W.S. | | | London W1U 7EU | Broadgate Tower, 20 Primrose Street | | The Manager also acts as the Alternative | | London EC2A 2EW | | Investment Fund Manager. | The Bank | | | | JPMorgan Chase Bank | The Broker | | Julian Cane Fund Manager and director of | 25 Bank Street, Canary Wharf | Cavendish (formerly Cenkos Securities plc) | | UK equities at the Manager, has managed | London E14 5JP | 1 Bartholomew Close | | the Company’s investments since March | | London EC1A 7BL | | 1997. He joined the Manager in 1993. | The Custodian | | JPMorgan Chase Bank Marrack Tonkin Head of Investment Trusts 25 Bank Street, Canary Wharf at the Manager. He has responsibility for the London E14 5JP relationship with the Company. He joined the Manager in 1989. Scott McEllen Represents the Manager as Company Secretary and is responsible for the Company’s statutory compliance. He joined the Manager in 2007. . Other Information Report and Accounts 2023 | 55 ## Independent Auditors’ Report ## Independent auditor’s report to the members of CT UK Capital and Income Investment Trust PLC Opinion on the financial statements Conclusions relating to going concern In our opinion the financial statements: In auditing the financial statements, we have concluded that the • give a true and fair view of the state of the Company’s affairs as Directors’ use of the going concern basis of accounting in the at 30 September 2023 and of its profit for the year then ended; preparation of the financial statements is appropriate. Our evaluation • have been properly prepared in accordance with United Kingdom of the Directors’ assessment of the Company’s ability to continue to Generally Accepted Accounting Practice; and adopt the going concern basis of accounting included: • have been prepared in accordance with the requirements of the • Evaluating the appropriateness of the Directors’ method of Companies Act 2006. assessing going concern in light of market volatility by reviewing the information used by the Directors in completing their We have audited the financial statements of CT UK Capital and assessment; Income Investment Trust PLC (the “Company”) for the year ended 30 • Assessing the liquidity of the investment portfolio, which September 2023 which comprise the income statement, statement underpins the ability to meet the future obligations and operating of changes in equity, the Balance sheet, the statement of cash expenses for a period of 12 months from the date of approval of flows and notes to the financial statements, including a summary these financial statements; of significant accounting policies. The financial reporting framework • Reviewing the loan agreements to identify relevant covenants and that has been applied in their preparation is applicable law and assessing the likelihood of them being breached based on the United Kingdom Accounting Standards, including Financial Reporting Directors’ forecast and sensitivity analysis; | Standard 102 | The Financial Reporting Standard applicable in the | | | | --- | --- | --- | --- | | UK and Republic of Ireland | | (United Kingdom Generally Accepted | Based on the work we have performed, we have not identified | | Accounting Practice). | | | any material uncertainties relating to events or conditions that, | individually or collectively, may cast significant doubt on the Basis for opinion Company’s ability to continue as a going concern for a period of We conducted our audit in accordance with International Standards on at least twelve months from when the financial statements are Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under authorised for issue. those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We In relation to the Company’s reporting on how it has applied the UK believe that the audit evidence we have obtained is sufficient and Corporate Governance Code, we have nothing material to add or draw appropriate to provide a basis for our opinion. Our audit opinion is attention to in relation to the Directors’ statement in the financial consistent with the additional report to the audit committee. statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting. Independence Following the recommendation of the audit committee, we were Our responsibilities and the responsibilities of the Directors with appointed by the Board of Directors on 11 February 2020 to audit respect to going concern are described in the relevant sections of the financial statements for the year ending 30 September 2020 this report. and subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments is four years, An overview of the scope of our audit covering the years ended 30 September 2020 to 30 September Our audit was scoped by obtaining an understanding of the Company 2023. We remain independent of the Company in accordance with and its environment, including the Company’s system of internal control, the ethical requirements that are relevant to our audit of the financial and assessing the risks of material misstatement in the financial statements in the UK, including the FRC’s Ethical Standard as applied statements. We also addressed the risk of management override of to listed public interest entities, and we have fulfilled our other ethical internal controls, including assessing whether there was evidence responsibilities in accordance with these requirements. The non-audit of bias by the Directors that may have represented a risk of material services prohibited by that standard were not provided to the Company. misstatement. 56 | CT UK Capital and Income Investment Trust PLC Independent Auditors' Report # Overview | | | 2023 | 2022 | | --- | --- | --- | --- | | **Key audit matters** | Valuation and ownership of quoted investments | ✓ | ✓ | | | Revenue recognition | ✓ | ✓ | | **Materiality** | **Company financial statements as a whole** £3.1m (2022: £2.9m) based on 1% (2022: 1%) of Net assets | **Specific materiality** £0.71m based on 5% (2022: 5%) of net revenue returns attributable to equity Shareholders before tax (2022: £0.60m). | | # Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. | Key audit matter | How the scope of our audit addressed the key audit matter | | --- | --- | | **Valuation and ownership quoted of investments** **(Note 2c (i) on page 68 and 10 on page 74)** | The investment portfolio at the year-end comprised of 100% of listed equity investments held at fair value through profit or loss. There is a risk that the prices used for the valuation of the listed investments held by the Company are not reflective of fair value and the risk that errors made in the recording of investment holdings result in the incorrect reflection of investments owned by the Company. Therefore we considered the valuation and ownership of quoted investments to be the most significant audit area as the quoted investments also represent the most significant balance in the financial statements and underpin the principal activity of the entity. For these reasons and the materiality of the balance in relation to the financial statements as a whole, we considered this to be a key audit matter. | | **Revenue recognition** **(Note 2c (v) on page 67 and Note 3 on page 68)** | Income arises from dividends and is a key factor in demonstrating the performance of the portfolio. As such there may be an incentive to recognise income as revenue where it is more appropriately of a capital nature. Additionally, judgement is required by management in determining the allocation of dividend income to revenue or capital for certain corporate actions or special dividends. For this reason, we considered revenue recognition to be a key audit matter | | | We responded to this matter by testing the valuation and ownership of the whole portfolio of quoted investments. We performed the following procedures: - Confirmed the year-end bid price was used by agreeing to externally quoted prices; - Assessed if there were contra indicators, such as liquidity considerations, to suggest bid price was not the most appropriate indication of fair value by considering the realisation period for individual holdings; - Obtained direct confirmation of the number of shares held per equity investment from the custodian regarding all investments held at the balance sheet date; and - Recalculated the valuation by multiplying the number of shares held per the statement obtained from the custodian by the valuation per share. **Key observations:** Based on our procedures performed we did not identify any matters to suggest that the valuation and ownership of quoted investments was not appropriate. | | | We assessed the treatment of dividend income from corporate actions and special dividends and challenged if these had been appropriately accounted for as income or capital by reviewing the underlying reason for issue of the dividend and whether it could be driven by a capital event. We analysed the whole population of dividend receipts to identify items for further discussion that could indicate a capital distribution, for example where a dividend represents a particularly high yield. In these instances we performed a combination of inquiry with management and our own independent research, including inspection of financial statements of investee companies, to ascertain whether the underlying event was indeed of a capital nature. We derived our own expectation of income for the whole portfolio during the year using data analytics based on the investment holdings and distributions from independent sources and traced a sample of dividend income receipts to bank. **Key observations:** Based on our procedures performed we found the judgements made by management in determining the allocation of income to revenue or capital to be appropriate. | Report and Accounts 2023 | 57 Overview Chart's Statement Strategic Report Government Report Auditors' Report Financial Report Strategy Meeting Other Information ### Our application of materiality We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows: | Company financial statements | 2023 £m | 2022 £m | | --- | --- | --- | | **Materiality** | 3.1 | 2.9 | | **Basis for determining materiality** | 1% of Net assets | 1% of Net assets | | **Rationale for the benchmark applied** | As an investment trust, the net asset value is the key measure of performance for users of the financial statements. | As an investment trust, the net asset value is the key measure of performance for users of the financial statements. | | **Performance materiality** | 2.3 | 2.2 | | **Basis for determining performance materiality** | 75% of materiality | 75% of materiality | | **Rationale for the percentage applied for performance materiality** | The level of performance materiality applied was set after having considered a number of factors including the expected total value of known and likely misstatements and the level of transactions in the year. | The level of performance materiality applied was set after having considered a number of factors including the expected total value of known and likely misstatements and the level of transactions in the year. | ### Specific Materiality We also determined that for items impacting revenue return, a misstatement of less than materiality for the financial statements as a whole, specific materiality, could influence the economic decisions of users. As a result, we determined materiality for these items to be £0.71m (2022: £0.64m) based on 5% (2022: 5%) of net revenue returns attributable to equity Shareholders before tax. We further applied a performance materiality level of 75% (2022: 75%) of specific materiality to ensure that the risk of errors exceeding specific materiality was appropriately mitigated. ### Reporting threshold We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £62,000 (2022: £60,000) for the financial statements as a whole. We also set a separate reporting threshold of £35,000 (2022: £30,000) for the transactions and balances that impact on the revenue return. We also agreed to report differences below these thresholds that, in our view, warranted reporting on qualitative grounds. ### Other information The directors are responsible for the other information. The other information comprises the information included in the Report and Accounts other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. ### Corporate governance statement The Listing Rules require us to review the Directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Company's compliance with the provisions of the UK Corporate Governance Code specified for our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit. 58 | CT UK Capital and Income Investment Trust PLC Independent Auditors’ Report Chair’s StatementOverview Auditors’ Report Going concern and longer-term viability • The Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 38; and • The Directors’ explanation as to their assessment of the Company’s prospects, the period this assessment covers and why the period is appropriate set out on page 30. Other Code provisions • Directors’ statement on fair, balanced and understandable set out on page 54; • Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 28; • The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 51; and Strategic Report Governance Report Financial Report Notice of Meeting • The section describing the work of the audit committee set out on page 50. Other Companies Act 2006 reporting Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below. Strategic report and Directors’ report In our opinion, based on the work undertaken in the course of the audit: • the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report. Directors’ remuneration In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. Matters on which we are required to We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires report by exception us to report to you if, in our opinion: • adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or • the financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Responsibilities of Directors the financial statements as a whole are free from material As explained more fully in the statement of Directors’ misstatement, whether due to fraud or error, and to issue an responsibilities, the Directors are responsible for the preparation of auditor’s report that includes our opinion. Reasonable assurance the financial statements and for being satisfied that they give a true is a high level of assurance, but is not a guarantee that an audit and fair view, and for such internal control as the Directors determine conducted in accordance with ISAs (UK) will always detect a material is necessary to enable the preparation of financial statements that misstatement when it exists. Misstatements can arise from fraud or are free from material misstatement, whether due to fraud or error. error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic In preparing the financial statements, the Directors are responsible decisions of users taken on the basis of these financial statements. for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using Extent to which the audit was capable of detecting irregularities, the going concern basis of accounting unless the Directors either including fraud intend to liquidate the Company or to cease operations, or have no Irregularities, including fraud, are instances of non-compliance realistic alternative but to do so. with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements Other Information Auditor’s responsibilities for the audit of the financial in respect of irregularities, including fraud. The extent to which our statements procedures are capable of detecting irregularities, including fraud is Our objectives are to obtain reasonable assurance about whether detailed below: Report and Accounts 2023 | 59 Non-compliance with laws and regulations Our procedures in respect of the above included: Based on: • The procedures set out in the Key Audit Matters section above; • Our understanding of the Company and the industry in which it • Recalculating investment management fees in total; operates; • Obtaining independent confirmation of bank balances; and • Discussion with management and those charged with • Testing material period end journals by agreeing to supporting governance and Audit Committee; and documentation and evaluating whether there was evidence of • Obtaining and understanding of the Company’s policies and bias by the Investment Manager and Directors that represented procedures regarding compliance with laws and regulations. a risk of material misstatement due to fraud. We considered the significant laws and regulations to be Companies We also communicated relevant identified laws and regulations and Act 2006, the FCA listing and DTR rules, the principles of the AIC potential fraud risks to all engagement team members who were Code of Corporate Governance, industry practice represented by the all deemed to have appropriate competence and capabilities and AIC SORP, the applicable accounting framework, and qualification as remained alert to any indications of fraud or non-compliance with an Investment Trust under UK tax legislation as any non-compliance laws and regulations throughout the audit. of this would lead to the Company losing various deductions and exemptions from corporation tax. Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of Our procedures in respect of the above included: not detecting a material misstatement due to fraud is higher than the • Agreement of the financial statement disclosures to underlying risk of not detecting one resulting from error, as fraud may involve supporting documentation; deliberate concealment by, for example, forgery, misrepresentations • Enquiries of management and those charged with governance or through collusion. There are inherent limitations in the audit relating to the existence of any non-compliance with laws and procedures performed and the further removed non-compliance with regulations; laws and regulations is from the events and transactions reflected in • Reviewing minutes of meetings of those charged with the financial statements, the less likely we are to become aware of governance throughout the period for instances of non- it. compliance with laws and regulations; and • Reviewing the calculation in relation to Investment Trust A further description of our responsibilities is available on compliance to check that the Company was meeting its the Financial Reporting Council’s website at: www.frc.org.uk/ requirements to retain its Investment Trust Status. auditorsresponsibilities. This description forms part of our auditor’s report. Fraud We assessed the susceptibility of the financial statement to material Use of our report misstatement including fraud. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our risk assessment procedures included: Our audit work has been undertaken so that we might state to the • Enquiry with management and those charged with governance Company’s members those matters we are required to state to them regarding any known or suspected instances of fraud; in an auditor’s report and for no other purpose. To the fullest extent • Obtaining an understanding of the Company’s policies and permitted by law, we do not accept or assume responsibility to anyone procedures relating to: other than the Company and the Company’s members as a body, for • Detecting and responding to the risks of fraud; and our audit work, for this report, or for the opinions we have formed. • Internal controls established to mitigate risks related to fraud. Peter Smith (Senior Statutory Auditor) • Review of minutes of meeting of those charged with governance For and on behalf of BDO LLP, Statutory Auditor London for any known or suspected instances of fraud; and 29 November 2023 • Discussion amongst the engagement team as to how and where fraud might occur in the financial statements. BDO LLP is a limited liability partnership registered in England and Based on our risk assessment, we considered the areas most Wales (with registered number OC305127). susceptible to be revenue recognition and management override of controls. 60 | CT UK Capital and Income Investment Trust PLC Financial Report Chair’s StatementOverview Auditors’ Report ## Income Statement Strategic Report Governance Report Financial Report Notice of Meeting for the year ended 30 September | | | | | 2023 | | | 2022 | | --- | --- | --- | --- | --- | --- | --- | --- | | Revenue notes | Capital notes | | | | | | | | | | Revenue | Capital | Total | Revenue | Capital | Total | | | | £’000s | £’000s | £’000s | £’000s | £’000s | £’000s | | | 10 Gains/(losses) on investments – 25,619 25,619 – (57,259) (57,259) | | | | | | | Foreign exchange (losses)/gains (4) 4 – (1) – (1) | 3 17 | Income 16,179 – 16,179 14,495 – 14,495 | | --- | --- | | 4 4 | Management fee (693) (693) (1,386) (714) (714) (1,428) | | 5 5 | Other expenses (742) (1) (743) (680) (1) (681) | Net return before finance costs and taxation 14,740 24,929 39,669 13,100 (57,974) (44,874) 6 6 Finance costs (662) (662) (1,324) (192) (192) (384) Net return before taxation 14,078 24,267 38,345 12,908 (58,166) (45,258) 7 7 Taxation (22) – (22) (18) – (18) Net return attributable to Shareholders 14,056 24,267 38,323 12,890 (58,166) (45,276) 8 8 Return per share – basic and diluted 13.26p 22.89p 36.15p 12.03p (54.29p) (42.26p) 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 AIC. 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. The notes on pages 65 to 81 form an integral part of the financial statements. Other Information Report and Accounts 2023 | 61 ## Statement of Changes in Equity for the year ended 30 September 2023 | | | | Share | | Capital | | | | | Total | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Share | premium | | redemption | | Special | Capital | Revenue | Shareholders’ | | | | capital | account | | | reserve | reserve | reserve | reserve | | funds | | Notes | £’000s | | £’000s | | £’000s | £’000s | £’000s | £’000s | | £’000s | Balance at 30 September 2022 26,822 141,380 4,146 2,642 110,200 11,093 296,283 Movements during the year ended 30 September 2023 | | 9 | Dividends paid – – – – – (12,819) (12,819) | | --- | --- | --- | | | 16 | Ordinary shares issued from treasury – – – 224 – – 224 | | 16,17 | | Ordinary shares bought back and held in treasury – – – (2,866) (4,380) – (7,246) | | | 16 | Costs relating to broker – (13) – – (5) – (18) | Net return attributable to Shareholders – – – – 24,267 14,056 38,323 Balance at 30 September 2023 26,822 141,367 4,146 – 130,082 12,330 314,747 for the year ended 30 September 2022 | | | | Share | | Capital | | | | | Total | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Share | premium | | redemption | | Special | Capital | Revenue | Shareholders’ | | | | capital | account | | | reserve | reserve | reserve | reserve | | funds | | Notes | £’000s | | £’000s | | £’000s | £’000s | £’000s | £’000s | | £’000s | Balance at 30 September 2021 26,822 141,374 4,146 4,432 168,366 10,735 355,875 Movements during the year ended 30 September 2022: | 9 | Dividends paid – – – – – (12,532) (12,532) | | --- | --- | | 16 | Ordinary shares issued from treasury – 21 – 568 – – 589 | | 16 | Ordinary shares bought back and held in treasury – – – (2,358) – – (2,358) | | 16 | Costs relating to broker – (15) – – – – (15) | Net return attributable to Shareholders – – – – (58,166) 12,890 (45,276) Balance at 30 September 2022 26,822 141,380 4,146 2,642 110,200 11,093 296,283 The notes on pages 65 to 81 form an integral part of the financial statements. 62 | CT UK Capital and Income Investment Trust PLC Financial Report Chair’s StatementOverview Auditors’ Report ## Balance Sheet Strategic Report Governance Report Financial Report Notice of Meeting at 30 September 2023 2022 Notes £’000s £’000s Fixed assets 10 Investments 336,112 318,796 Current assets 11 Debtors 2,833 5,106 14 Cash and cash equivalents 2,378 906 Total current assets 5,211 6,012 Current liabilities 12 Creditors: amounts falling due within one year (1,576) (4,525) 13,14 Bank loan (25,000) (24,000) Total current liabilities (26,576) (28,525) Net current liabilities (21,365) (22,513) Total assets less current liabilities 314,747 296,283 Capital and reserves | 15 | Share capital 26,822 26,822 | | --- | --- | | 16 | Share premium account 141,367 141,380 | | 16 | Capital redemption reserve 4,146 4,146 | | 16 | Special reserve – 2,642 | | 17 | Capital reserve 130,082 110,200 | | 17 | Revenue reserve 12,330 11,093 | Total Shareholders’ funds 314,747 296,283 18 Net Asset Value per ordinary share – pence 301.67 277.66 The notes on pages 65 to 81 form an integral part of the financial statements. The Financial Statements were approved by the Board on 29 November 2023 and signed on its behalf by Other Information Jane Lewis, Chair Report and Accounts 2023 | 63 ## Statement of Cash Flows for the year ended 30 September | | 2023 | 2022 | | --- | --- | --- | | Notes | £’000s | £’000s | | 19 Cash flows from operating activities before dividends and interest (2,162) (2,241) | | | Dividends received 15,777 14,133 Interest received 91 9 Interest paid (1,298) (376) Cash flows from operating activities 12,408 11,525 Investing activities Purchase of investments (20,000) (22,303) Sale of investments 27,924 25,189 Other capital charges (1) (1) Cash flows from investing activities 7,923 2,885 Cash flows before financing activities 20,331 14,410 Financing activities | | 9 | Equity dividends paid (12,819) (12,532) | | --- | --- | --- | | | 16 | Net proceeds from issuance of shares from treasury 224 589 | | | 16 | Broker costs associated with share issues and buybacks (18) (15) | | 16,17 | | Costs of shares bought back and held in treasury (7,246) (2,358) | | 13,14 | | Drawdown/(repayment) of bank loan 1,000 (1,000) | Cash flows from financing activities (18,859) (15,316) | 14 | Net movement in cash and cash equivalents 1,472 (906) | | --- | --- | | 14 | Cash and cash equivalents at the beginning of the year 906 1,813 | | 14 | Effect of movement in foreign exchange – (1) | | 14 | Cash and cash equivalents at the end of the year 2,378 906 | Represented by: Cash at bank 88 36 Short term deposits 2,290 870 2,378 906 The notes on pages 65 to 81 form an integral part of the financial statements. 64 | CT UK Capital and Income Investment Trust PLC Financial Report Chair’s StatementOverview Auditors’ Report ## Notes to the Accounts Strategic Report Governance Report Financial Report Notice of Meeting 1. General information CT UK Capital and Income Investment Trust PLC is an investment company incorporated in England (UK) with a premium listing on the London Stock Exchange. The Company registration number is 02732011 and the registered office is Cannon Place, 78 Cannon Street, London, EC4N 6AG, United Kingdom. The Company has conducted its affairs so as to qualify as an investment trust under the provisions of Section 1158 of the Corporation Tax Act 2010. Approval of the Company under Section 1158 has been received. The Company intends to conduct its affairs so as to enable it to continue to comply with the requirements. Such approval exempts the Company from UK Corporation Tax on gains realised in the relevant year on its portfolio of fixed asset investments. The accounting policies have been applied consistently throughout the year ended 30 September 2023 with no significant changes, as set out in note 2 below. 2. Significant accounting policies (a) Going concern As referred to on page 38 and note 20 to the accounts, the Directors believe that it is appropriate for the accounts to be prepared on a going concern basis. (b) Basis of accounting The accounts of the Company have been prepared on a going concern basis under the historical cost convention, modified to include fixed asset investments, and in accordance with the Companies Act 2006, Financial Reporting Standards (FRS) 102 applicable in the United Kingdom and with the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ (“SORP”) issued by the Association of Investment Companies. All of the Company’s operations are of a continuing nature. The functional and reporting currency of the Company is pounds sterling because that is the currency of the primary economic environment in which the Company operates. The Directors are of the opinion that the Company’s activities comprise a single operating segment, which is investing in the UK and Europe in equities to secure long term growth in income and capital. In accordance with the SORP, the Income Statement has been analysed between a revenue account (dealing with items of a revenue nature) and a capital account (relating to items of a capital nature). Revenue returns include, but are not limited to, dividend income, operating expenses and tax (insofar as the expenses and tax are not allocated to capital, as described in note 2(c)). Net revenue returns are allocated via the revenue account to the revenue reserve, out of which four interim dividend payments are made. Capital returns include, but are not limited to, realised and unrealised profits and losses on investments, income identified as being capital in nature, expenses allocated to capital and currency profits and losses on cash and borrowings. Net capital returns are allocated via the capital account to the capital reserve. Dividends paid to Shareholders are shown in the Statement of Changes in Equity. Other Information (c) Principal accounting policies The policies set out below have been applied consistently throughout the year ended 30 September 2023 and the prior year. Report and Accounts 2023 | 65 (i) Financial instruments Financial instruments include fixed asset investments, cash and short term deposits, debtors and creditors. Accounting standards recognise a hierarchy of fair value measurements for financial instruments which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The classification of financial instruments depends on the lowest significant applicable input, as follows: Level 1 – The unadjusted quoted price in an active market for identical assets or liabilities that the Company can access at the measurement date. Level 2 – Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly. Level 3 – External inputs are unobservable for the asset or liability. Value is the Directors’ best estimate, based on advice from relevant knowledgeable experts, use of recognised valuation techniques and on assumptions as to what inputs other market participants would apply in pricing the same or similar instrument. Included within this category are unquoted investments. All of the Company’s investments held during the year have been classified as Level 1. (ii) Fixed asset investments and derivative financial instruments As an investment trust, the Company measures its fixed asset investments at “fair value through profit or loss” and treats all transactions on the realisation and revaluation of investments as transactions on the Capital Account. Purchases and sales are recognised on a trade date basis. Quoted investments are valued at bid value at the close of business on the relevant date on the exchange on which the investment is quoted. Investments which are not quoted or which are not frequently traded are stated at Directors’ best estimate of fair value. In arriving at their estimate, the Directors make use of recognised valuation techniques and may take account of recent arms’ length transactions in the same or similar instruments. Where no reliable fair value can be estimated, investments are carried at cost or, where subsequently revalued, at their previous carrying amount less any provision for impairment. (iii) Debt Instruments Loans and overdrafts are recorded initially at proceeds received, less direct issue costs, and subsequently measured at amortised cost using the effective interest method. Finance charges, including interest, are accrued using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period. See 2(c)(vi) on page 67 for allocation of finance charges within the Income Statement. (iv) Foreign currency Monetary assets, monetary liabilities and equity investments denominated in a foreign currency are expressed in sterling at rates of exchange ruling at the Balance Sheet date. Purchases and sales of investment securities, dividend income, interest income and expenses are translated at the rates of exchange prevailing at the respective dates of such transactions. Foreign exchange profits and losses on fixed asset investments are included within the changes in fair value in the capital account. Foreign exchange profits and losses on other currency balances are separately credited or charged to the capital account except where they relate to revenue items when they are credited or charged to the revenue account. (v) Income Income from equity shares is brought into the revenue account (except where, in the opinion of the Directors, its nature indicates it should be recognised within the capital account) on the ex-dividend date or, where no ex-dividend date is quoted, when the Company’s right to receive payment is established. Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis so as to reflect the effective yield on the investment. Dividends are accounted for in accordance with FRS 102 on the basis of income actually receivable. Dividends from overseas companies are shown gross of withholding tax. 66 | CT UK Capital and Income Investment Trust PLC Financial Report Where the Company has elected to receive its dividends in the form of additional shares rather than in cash (scrip dividends), the amount Chair’s StatementOverview Auditors’ Report of the cash dividend foregone is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend foregone is recognised in the capital account. Underwriting commission is recognised when the Company’s right to receive payment is established. Deposit interest is accounted for on an accruals basis. (vi) Expenses, including finance charges Strategic Report Governance Report Financial Report Notice of Meeting Expenses, inclusive of associated value added tax (VAT), are charged to the revenue account of the Income Statement, except as noted below: – expenses incidental to the acquisition or disposal of fixed asset investments which are recognised immediately in the capital return of the Income Statement and are thus charged to capital reserve – realised; and – 50% of management fees and 50% of finance costs are allocated to capital reserve – realised, in accordance with the Board’s long term expected split of returns from the investment portfolio of the Company. All expenses are accounted for on an accruals basis. (vii) Taxation Deferred tax is provided for in accordance with FRS102 on all timing differences that have been enacted at the Balance Sheet date and are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of timing differences can be deducted. In line with the recommendations of the SORP, the allocation method used to calculate the tax relief on expenses charged to capital is the “marginal” basis. Under this basis, if taxable income is capable of being offset entirely by expenses charged through the revenue account, then no tax relief is transferred to the capital account. (viii) Dividends payable Dividends are included in the financial statements on the date on which they are declared. Dividends paid and payable in respect of the year are set out in note 9. The amount estimated to be transferred to revenue reserves is less than the maximum allowed under rules in the Corporation Tax Act 2010. The Board assesses the minimum level of dividend payable in respect of any period in accordance with section 1158 rules, after taking into account the audited annual net revenue available for distribution, and ensures that payments for each period comfortably exceed that minimum level. (ix) Share capital Share capital represents the nominal value of ordinary shares in issue. (x) Share premium account (non-distributable reserve) The following is accounted for in this reserve: – proceeds of shares issued, net of the 25p nominal value of the shares and after deducting any associated costs of issuance. – proceeds less cost of purchasing and selling shares from treasury. (xi) Capital Redemption Reserve The nominal value of ordinary share capital purchased and cancelled is transferred out of called-up share capital and into the capital redemption reserve on the trade date. (xii) Special reserve (distributable reserve) The following are accounted for in this reserve: – costs of purchasing shares for cancellation; and Other Information – costs of purchasing or selling shares to be held in, or sold out of, treasury. (xiii) Capital reserves (distributable reserves) Capital reserve – arising on investments sold The following are accounted for in this reserve: Report and Accounts 2023 | 67 - gains and losses on the disposal of fixed asset investments and derivatives; - settled foreign exchange differences of a capital nature; - costs of professional advice, including related irrecoverable VAT, relating to the capital structure of the Company; - other capital charges and credits charged or credited to this account in accordance with the above policies. - costs of purchasing shares for cancellation; and - costs of purchasing or selling shares to be held in, or sold out of, treasury. Capital reserve – arising on investments held The following are accounted for in this reserve: - increases and decreases in the valuation of fixed asset investments and derivatives held at the year end; and - unsettled foreign exchange valuation differences of a capital nature. # (xiv) Revenue reserve The revenue reserve represents accumulated revenue profits retained by the Company that have not currently been distributed to Shareholders as a dividend. # (xv) Use of judgements and estimates The presentation of the financial statements in accordance with accounting standards requires the Board to make judgements, estimates and assumptions that affect the accounting policies and reported amounts of assets, liabilities, income and expenses. Estimates and judgements are continually evaluated and are based on perceived risks, historical experience, expectations of plausible future events and other factors. Actual results may differ from these estimates. The areas requiring the most significant judgement and estimation in preparation of the financial statements include: accounting for the value of unquoted investments and recognising and classifying unusual or special dividends received as either revenue or capital in nature. The policy for valuation of unquoted securities is set out in note 2(c)(ii). Dividends received which appear to be unusual in size or circumstance are assessed on a case-by-case basis, based on interpretation of the investee companies' relevant statements, to determine their allocation in accordance with the SORP to either the Revenue or Capital accounts. Dividends which have clearly arisen out of the investee company's reconstruction or reorganisation are usually considered to be capital in nature and allocated to Capital Reserves. Investee company dividends which appear to be paid in excess of current year profits may nevertheless still be considered to be wholly revenue in nature unless evidence suggests otherwise. The value of dividends received in the year treated as capital in nature is disclosed in note 17 to the accounts. The value of special dividends receivable in any period cannot be foreseen as such dividends are declared and paid by investee companies without prior reference to the Company. # 3. Income | | 2023 £'000s | 2022 £'000s | | --- | --- | --- | | Income from investments: | | | | UK dividend income | 14,270 | 13,742 | | UK dividend income – special dividends ^{(1)} | 527 | 114 | | Overseas dividend income | 390 | 364 | | Property income distributions | 901 | 266 | | | 16,088 | 14,486 | | Other income: | | | | Interest on cash and cash equivalents | 91 | 9 | | Total income | 16,179 | 14,495 | (1) Special dividends classified as revenue in nature in accordance with note 2(d)(xv). There were no dividends recognised as capital in nature, per judgements & estimates note 2(c)(xv), during the year (2022: none). 68 | CT UK Capital and Income Investment Trust PLC Financial Report #### 4. Management fee | | 2023 | | | 2022 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue £'000s | Capital £'000s | Total £'000s | Revenue £'000s | Capital £'000s | Total £'000s | | Management fee | 693 | 693 | 1,386 | 714 | 714 | 1,428 | The Manager provides investment management and general administrative services to the Company for a quarterly management fee payable in arrears equal to 0.1% of the funds under management. Funds under management represents total assets less current liabilities excluding borrowings and adjusted for the proceeds of recent share issues and buybacks. The management agreement may be terminated upon six months' notice given by either party. The Company may terminate this agreement upon 60 days' written notice to the Manager if there is a change of control of the Manager, provided such notice is served within six months of the said change of control. Management fees have been allocated 50% to capital reserve in accordance with the Company's accounting policy. #### 5. Other expenses | | 2023 | | | 2022 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue £'000s | Capital £'000s | Total £'000s | Revenue £'000s | Capital £'000s | Total £'000s | | Auditors' remuneration: | | | | | | | | – for audit services^{(1)} | 50 | – | 50 | 43 | – | 43 | | Directors' fees for services to the Company^{(2)} | 165 | – | 165 | 153 | – | 153 | | Directors' and Officers' liability insurance | 12 | – | 12 | 10 | – | 10 | | Loan commitment fee | 10 | – | 10 | 11 | – | 11 | | Marketing^{(3)} | 88 | – | 88 | 126 | – | 126 | | Professional fees | 117 | – | 117 | 98 | – | 98 | | Printing and postage | 85 | – | 85 | 75 | – | 75 | | Registrars' fees | 31 | – | 31 | 28 | – | 28 | | Subscriptions and listing fees | 58 | – | 58 | 55 | – | 55 | | Sundry expenses^{(4)} | 126 | 1 | 127 | 81 | 1 | 82 | | Total other expenses | 742 | 1 | 743 | 680 | 1 | 681 | All expenses are stated gross of irrecoverable VAT, where applicable. (1) Total Auditors' remuneration for 2023 audit services, exclusive of VAT amounts to £42,000 (2022: £35,000). (2) See the Directors' Remuneration Report on pages 47 to 49. (3) 2022 marketing figure included an under accrual brought forward from the prior year. (4) Sundry expenses have increased primarily as a result of additional one-off consultancy fees related to the marketing of the Company. #### 6. Finance costs | | 2023 | | | 2022 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue £'000s | Capital £'000s | Total £'000s | Revenue £'000s | Capital £'000s | Total £'000s | | Loan interest | 661 | 661 | 1,322 | 190 | 190 | 380 | | Overdraft interest | 1 | 1 | 2 | 2 | 2 | 4 | | Total finance cost | 662 | 662 | 1,324 | 192 | 192 | 384 | Finance costs have been allocated 50% to capital reserve in accordance with the Company's accounting policy. Report and Accounts 2023 | 69 Overview Chart's Statement Earnings Report Revenues & Report Auditor's Report Financial Report Notes of Meeting Other Information ## 7. Taxation on ordinary activities ### (a) Analysis of tax charge for the year | | Revenue £'000s | Capital £'000s | 2023 Total £'000s | Revenue £'000s | Capital £'000s | 2022 Total £'000s | | --- | --- | --- | --- | --- | --- | --- | | Overseas taxation | 22 | – | 22 | 18 | – | 18 | | Total taxation charge (see note 7(b)) | 22 | – | 22 | 18 | – | 18 | The tax assessed for the year is lower than the standard rate of corporation tax in the UK (25%) (2022: 19%). Factors affecting the taxation charge are set out below. ### (b) Factors affecting the current tax charge for the year | | Revenue £'000s | Capital £'000s | 2023 Total £'000s | Revenue £'000s | Capital £'000s | 2022 Total £'000s | | --- | --- | --- | --- | --- | --- | --- | | Net return on ordinary activities before taxation | 14,078 | 24,267 | 38,345 | 12,908 | (58,166) | (45,258) | | Return on ordinary activities multiplied by the pro rata effective rate of corporation tax of 22% (2022: 19%) | 3,097 | 5,339 | 8,436 | 2,452 | (11,052) | (8,600) | | Effects of: | | | | | | | | Dividends | (3,341) | – | (3,341) | (2,752) | – | (2,752) | | Excess expenses not utilised in the year | 244 | 298 | 542 | 300 | 172 | 472 | | Overseas taxation not relieved | 22 | – | 22 | 18 | – | 18 | | Capital returns | – | (5,637) | (5,637) | – | 10,880 | 10,880 | | Total taxation (see note 7(a)) | 22 | – | 22 | 18 | – | 18 | The potential deferred tax asset of £7.7 million based on the 25% Corporation Tax rate in respect of unutilised expenses and unrelieved overseas taxation at 30 September 2023 (2022: £6.6 million) has not been recognised as it is unlikely that these expenses will be utilised. ## 8. Return per share | | Revenue | Capital | 2023 Total | Revenue | Capital | 2022 Total | | --- | --- | --- | --- | --- | --- | --- | | Net return attributable to equity Shareholders – £'000s | 14,056 | 24,267 | 38,323 | 12,890 | (58,166) | (45,276) | | Return per share – pence | 13.26 | 22.89 | 36.15 | 12.03 | (54.29) | (42.26) | Both the revenue and capital returns per share are based on a weighted average of 106,023,426 ordinary shares in issue during the year (2022: 107,131,967). 70 | CT UK Capital and Income Investment Trust PLC Financial Report | 9. Dividends | | | Chair’s StatementOverview Auditors’ Report | | --- | --- | --- | --- | | | 2023 | 2022 | | | Dividends on ordinary shares Register date Payment date | £’000s | £’000s | | Fourth of four interims for the year ended 30 September 2021 of 3.75p per share 03-Dec-21 17-Dec-21 – 4,019 First of four interims for the year ended 30 September 2022 of 2.65p per share 11-Mar-22 31-Mar-22 – 2,841 Second of four interims for the year ended 30 September 2022 of 2.65p per share 10-Jun-22 30-Jun-22 – 2,839 Third of four interims for the year ended 30 September 2022 of 2.65p per share 02-Sep-22 30-Sep-22 – 2,833 Fourth of four interims for the year ended 30 September 2022 of 3.85p per share 09-Dec-22 19-Dec-22 4,108 – Strategic Report Governance Report Financial Report Notice of Meeting First of four interims for the year ended 30 September 2023 of 2.75p per share 10-Mar-23 31-Mar-23 2,928 – Second of four interims for the year ended 30 September 2023 of 2.75p per share 16-Jun-23 30-Jun-23 2,907 – Third of four interims for the year ended 30 September 2023 of 2.75p per share 08-Sep-23 30-Sep-23 2,876 – 12,819 12,532 The Directors have declared a fourth interim dividend in respect of the year ended 30 September 2023 of 3.90 pence per share, payable on 18 December 2023 to all Shareholders on the register at close of business on 8 December 2023. The fourth interim dividend has not been included as a liability in these financial statements. The dividends paid and payable in respect of the financial year ended 30 September 2023, which form the basis of the retention test for section 1159 of the Corporation Tax Act 2010, are set out below: 2023 £’000s Net revenue return attributable to Shareholders 14,056 First of four interims for the year ended 30 September 2023 of 2.75p per share (2,928) Second of four interims for the year ended 30 September 2023 of 2.75p per share (2,907) Third of four interims for the year ended 30 September 2023 of 2.75p per share (2,876) (1) Fourth of four interims for the year ended 30 September 2023 of 3.90p per share (4,046) Transferred to revenue reserve 1,299 (1) Based on shares in issue and their entitlement to the dividend at 28 November 2023. Other Information Report and Accounts 2023 | 71 10. Investments | | 2023 | 2022 | | --- | --- | --- | | | Total | Total | | (Level 1) | | (Level 1) | | | £’000s | £’000 | Cost brought forward 260,060 256,643 Gains brought forward 58,736 121,777 Fair value of investments brought forward 318,796 378,420 Purchases at cost 16,946 26,398 Sales proceeds (25,353) (28,876) Gains on investments sold in year 4,771 5,781 Gains/(losses) on investments held at year end 20,952 (62,927) Fair value of investments at 30 September 336,112 318,796 Cost at 30 September 256,528 260,060 Gains at 30 September 79,584 58,736 Fair value of investments at 30 September 336,112 318,796 2023 2022 £’000s £’000s Gains on investments sold in year 4,771 5,781 Gains/(losses) on investments held at year end 20,952 (62,927) Investment transaction costs (104) (113) Total gains/(losses) in year 25,619 (57,259) All investments held by the Company were classified as Level 1 in nature as described in note 2(c)(i) and are listed on recognised stock exchanges. Investments sold during the year have been revalued over time since their original purchase, and until they were sold any unrealised gains or losses were included in the fair value of the investments. The investment portfolio is set out on page 21. 11. Debtors 2023 2022 £’000s £’000s Accrued income 1,607 1,318 Investments sold awaiting settlement 1,116 3,687 Prepayments 24 16 Overseas taxation recoverable 86 85 2,833 5,106 12. Creditors: amounts falling due within one year 2023 2022 £’000s £’000s Management fee 339 318 Investments purchased awaiting settlement 1,041 4,095 Loan interest 35 9 Accruals 161 103 1,576 4,525 72 | CT UK Capital and Income Investment Trust PLC Financial Report | 13. Loans | | | Chair’s StatementOverview Auditors’ Report | | --- | --- | --- | --- | | | 2023 | 2022 | | | | £’000s | £’000s | | Sterling loans: falling due within one year 25,000 24,000 In March 2018 the Company entered into a £30 million multi-currency revolving loan facility with The Bank of Nova Scotia. This was increased to £40 million in March 2022 and extended on revised terms in March 2023 for a further one year period. The loan is subject to compliance with the loan covenants which have all been met during the period. The amount utilised and the interest rate thereon are set Strategic Report Governance Report Financial Report Notice of Meeting on a short term basis. Interest rates and commitment fees payable on non-utilised amounts are based on the commercial terms agreed with The Bank of Nova Scotia. As at 30 September 2023 the Company had drawn down £25 million of the loan facility. 14. Analysis of changes in net debt | | | | 2023 | | | | 2022 | | --- | --- | --- | --- | --- | --- | --- | --- | | Cash | Bank loans | | Total | Cash | Bank loans | | Total | | £’000s | | £’000s | £’000s | £’000s | | £’000s | £’000s | Net debt brought forward 906 (24,000) (23,094) 1,813 (25,000) (23,187) Cash flows: Drawdown of bank loan – (7,000) (7,000) – (2,500) (2,500) Repayment of bank loan – 6,000 6,000 – 3,500 3,500 Net movement in cash and cash equivalents 1,472 – 1,472 (906) – (906) Non-cash: Effect of movement in foreign exchange – – – (1) – (1) Net debt carried forward as at 30 September 2,378 (25,000) (22,622) 906 (24,000) (23,094) 15. Share capital 2023 2022 Total Listed Held in Treasury Issued and fully paid Issued and fully paid Number £’000s Number £’000s Number £’000s Number £’000s Ordinary shares of 25 pence each Balance brought forward 107,289,022 26,822 582,819 145 106,706,203 26,677 107,289,022 26,822 Ordinary shares issued from – – (75,000) (19) 75,000 19 175,000 44 treasury Ordinary shares bought back & – – 2,445,358 611 (2,445,358) (611) (757,819) (189) held in treasury Balance at 30 September 107,289,022 26,822 2,953,177 737 104,335,845 26,085 106,706,203 26,677 During the year ended 30 September 2023, 75,000 (2022: 175,000) ordinary shares of 25p each in nominal value were issued from treasury with a total consideration of £223,000 (2022: £589,000) and 2,445,358 (2022: 757,819) ordinary shares were bought back and held in treasury at a cost of £7,245,000 (2022: £2,358,000). From 30 September 2023 until 28 November 2023, the last practicable date prior to publication, the Company has bought back 600,000 shares to be held in treasury. No shares have been issued. Other Information Report and Accounts 2023 | 73 16. Reserves | | Share | | Capital | | | --- | --- | --- | --- | --- | | Premium | | Redemption | | Special | | account | | | Reserve | Reserve | | £’000s | | | £’000s | £’000s | Balance brought forward as at 1 October 2022 141,380 4,146 2,642 Ordinary shares issued from treasury – – 224 Ordinary shares bought back and cancelled or held in treasury – – (2,851) Stamp duty on shares bought back – – (15) Broker costs associated with the issue of new issues (13) – – Balance carried forward as at 30 September 2023 141,367 4,146 – Balance brought forward as at 1 October 2021 141,374 4,146 4,432 Ordinary shares issued from treasury – – 568 Ordinary shares bought back and cancelled or held in treasury – – (2,346) Stamp duty on shares bought back – – (12) Premium on issue of shares from treasury 21 – – Broker costs associated with the issue of new issues (15) – – Balance carried forward as at 30 September 2022 141,380 4,146 2,642 17. Other reserves | Capital reserve | | | Capital reserve | | Capital reserve | | Revenue | | --- | --- | --- | --- | --- | --- | --- | --- | | | – realised | | – unrealised | | | – total | reserve | | | | £’000s | | £’000s | | £’000s | £’000s | Movements during the year ended 30 September 2023: Gains on investments sold in year (see note 10) 4,771 – 4,771 – Gains on investments held at year end (see note 10) – 20,952 20,952 – Transaction costs – (104) (104) – Foreign exchange gains 4 – 4 – Management fee (see note 4) (693) – (693) – Finance costs (see note 6) (662) – (662) – Ordinary shares bought back and held in treasury (4,359) – (4,359) – Stamp duty on shares bought back (21) – (21) – Broker costs associated with share buybacks (5) – (5) – Other capital charges (see note 5) (1) – (1) – Revenue return – – – 14,056 Return attributable to Shareholders (966) 20,848 19,882 14,056 Dividends paid in year (see note 9) – – – (12,819) Balance at 30 September 2022 51,463 58,737 110,200 11,093 Balance at 30 September 2023 50,497 79,585 130,082 12,330 Included within the capital reserve movement for the year are £91,000 of transaction costs including stamp duty on purchases of investments (2022: £97,000) and £13,000 of transaction costs on sales of investments (2022: £16,000). There were no dividends recognised as capital during the year (2022: none). 74 | CT UK Capital and Income Investment Trust PLC Financial Report # **18. Net Asset Value per ordinary share** | | 2023 | 2022 | | --- | --- | --- | | Net asset value per share – pence | 301.67 | 277.66 | | Net assets attributable at the year end – (£'000s) | 314,747 | 296,283 | | Number of ordinary shares in issue at the year end | 104,335,845 | 106,706,203 | # **19. Reconciliation of total return before taxation to net cash flows from operating activities** | | 2023 £'000s | 2022 £'000s | | --- | --- | --- | | Net return on ordinary activities before taxation | 38,345 | (45,258) | | Adjustments for non-cash flow items, dividend income and interest: | | | | (Gains)/losses on investments (note 10) | (25,619) | 57,259 | | Transaction costs on investments (note 10) | (104) | (113) | | Foreign exchange movements | – | 1 | | Non-operating expenses of a capital nature (note 5) | 1 | 1 | | Dividend income receivable (note 3) | (16,088) | (14,486) | | Interest receivable (note 3) | (91) | (9) | | Interest payable (note 6) | 1,324 | 384 | | (Increase)/decrease in other debtors | (9) | 3 | | Increase/(decrease) in other creditors | 79 | (23) | | | (40,507) | 43,017 | | Cash outflows from operating activities before dividends and interest | (2,162) | (2,241) | # **20. Going concern** In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council. They have also considered the Company's objective, strategy and policy, the current cash position of the Company, the availability of the loan facility and compliance with its covenants and the operational resilience of the Company and its service providers. At present the global economy continues to suffer disruption due to the effects of the war in Ukraine, recent events in Israel and Gaza and inflationary pressures and the Directors have given serious consideration to the consequences for this Company. The Company has a number of banking covenants and at present the Company's financial position does not suggest that any of these are close to being breached. The primary risk is that there is a very substantial decrease in the Net Asset Value of the Company in the short to medium term. The Directors have considered the remedial measures that are open to the Company if such a covenant breach appears possible. As at 28 November 2023, the last practicable date before publication of this report, borrowings amounted to £25 million. This is in comparison to a Net Asset Value of £310 million. In accordance with its investment policy the Company is invested mainly in readily realisable, FTSE All-Share listed securities. These can be realised, if necessary, to repay the loan facility and fund future dividend payments. The Company operates within a robust regulatory environment. The Company retains title to all assets held by the Custodian. Cash is held with banks approved and regularly reviewed by the Manager and the Board. At the Annual General Meeting of the Company held on 9 March 2023, Shareholders voted 99.5% in favour of the continuation of the Company. The next continuation vote for the Company is scheduled to be held in 2028. Accordingly, based on this information the Directors believe that the Company has the ability to meet its financial obligations as they fall due for a period of twelve months from the date of approval of these financial statements. Accordingly, these financial statements have been prepared on a going concern basis. Report and Accounts 2023 | 75 Overview Case's Statement Earnings Report Revenues & Gains Earnings Report Financial Report Notes of Financial Other Information 21. 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, as set out in detail in the Strategic Report and Directors’ Report. The Directors’ policies and processes for managing the financial risks are set out in (a), (b) and (c) on the following pages. The accounting policies which govern the reported Balance Sheet carrying values of the underlying financial assets and liabilities, as well as the related income and expenditure, are set out in note 2 to the accounts. The policies are in compliance with UK accounting standards and best practice. The Company does not make use of hedge accounting rules. Sensitivity analysis tables presented in the following sections relating to currency, interest and market exposures have been calculated on the level of change considered to be a reasonable illustration based on observation of current market and economic conditions. (a) Market risks The fair value of equity and other financial securities including derivatives 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. The Board sets policies for managing these risks within the Company’s objective and meets regularly to review full, timely and relevant information on investment performance and financial results. The Manager assesses exposure to market risks when making each investment decision and monitors ongoing market risk within the portfolio. As up to 10% of the Company’s gross assets can be invested in non-UK assets, other assets and liabilities may be denominated in currencies other than sterling and may also be exposed to interest rate risks. The Manager and the Board regularly monitor these risks. The Company does not normally hold significant cash balances. Whilst it is not the Board’s general policy to borrow in currencies other than sterling and euros, any such borrowings would be limited to amounts and currencies commensurate with the portfolio’s exposure to those currencies, thereby limiting the Company’s exposure to future changes in foreign exchange rates. Gearing may be short or long term in foreign currencies and enables the Company to take a long term view of the countries and markets in which it is invested without having to be concerned about short term volatility. Income earned in foreign currencies is converted to sterling on receipt. The Board regularly monitors the effects on net revenue of interest earned on deposits and paid on gearing. Currency Exposure The principal foreign currencies to which the Company was exposed during the year were the euro and US dollar. As stated above, the exposure to investments listed in currencies other than sterling cannot exceed 10% of the Company’s gross assets. The exchange rates for the euro and US dollar applying against sterling at 30 September and the average rates during the year ended 30 September were as follows: | | | | 2023 | | | | 2022 | | --- | --- | --- | --- | --- | --- | --- | --- | | At 30 September | | Average for | | At 30 September | | Average for | | | | 2023 | | the year | | 2022 | | the year | Euro 0.867 0.870 0.877 0.847 US dollar 0.819 0.815 0.895 0.781 76 | CT UK Capital and Income Investment Trust PLC Financial Report The following calculations demonstrate the approximate effect of a weakening or strengthening of sterling against other currencies and are Chair’s StatementOverview Auditors’ Report based on the following: – applicable balance sheet date exchange rates; – for capital returns the financial assets and liabilities held at the year end date, including investments, cash, debtors and creditors; – for revenue returns the current year income received in currencies other than sterling as a best estimate of future receipts; and – for both capital and revenue, the management fee adjusted for changes in the funds under management as a result of changes in investment values when applying different exchange rates. A 10% change in the sterling exchange rate would have the following approximate effect on returns attributable to Shareholders and Strategic Report Governance Report Financial Report Notice of Meeting on the NAV per share: Weakening of sterling by 10% against other currencies | | | | | Adjusted | | | | | | 2023 | | | 2022 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Sterling | | income, assets | | | Impact on | | Movement in | | | Movement in | | | | | equivalent | 10% weakened | and liabilities | | management fee | | | | net return | | | net return | | | Local currency Return Local currency | £’000s | sterling fx rate | | £’000s | | | £’000s | | | £’000s | | | £’000s | Euro Revenue 883 766 0.7807 689 – (77) 81 Euro Capital 4,582 3,975 0.7807 3,577 – (398) 443 US Dollar Revenue 302 247 0.7373 223 – (24) 23 US Dollar Capital 7,776 6,370 0.7373 5,733 – (637) 567 Movement in net return attributable to Shareholders (1,136) 1,114 Shares in issue 104,335,845 106,706,203 Effect on NAV per share - pence (1.09) 1.04 Strengthening of sterling by 10% against other currencies | | | | | | Adjusted | | | | | | 2023 | | | 2022 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Sterling | | 10% | income, assets | | | Impact on | | Movement in | | | Movement in | | | | | equivalent | strengthened | | and liabilities | | management fee | | | | net return | | | net return | | | Local currency Return Local currency | £’000s | sterling fx rate | | | £’000s | | | £’000s | | | £’000s | | | £’000s | Euro Revenue 883 766 0.9542 843 – 77 (66) Euro Capital 4,582 3,975 0.9542 4,372 – 398 (362) US Dollar Revenue 302 247 0.9011 272 – 24 (19) US Dollar Capital 7,776 6,370 0.9011 7,007 – 637 (463) Movement in net return attributable to Shareholders 1,136 (910) Shares in issue 104,335,845 106,706,203 Effect on NAV per share - pence 1.09 (0.85) These effects are representative of the exposure to currencies other than sterling by the Company as at 30 September 2023 although the level of exposure will fluctuate in accordance with the investment and risk management process. Other Information Report and Accounts 2023 | 77 21. Financial Risk Management (continued) The fair values of the Company’s assets and liabilities at 30 September by currency are shown below: | | Short term | | Cash and cash | | | | Short term | | | Short term | | | Net monetary | | | | | Net | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | debtors | | equivalents | | creditors – other | | | creditors – loans | | | (liabilities)/assets | | | Investments | | exposure | | | 2023 | | £’000s | | | £’000s | | | £’000s | | | £’000s | | | £’000s | | £’000s | £’000s | | Sterling 2,747 2,315 (1,576) (25,000) (21,514) 325,916 304,402 Other 86 63 – – 149 10,196 10,345 Total 2,833 2,378 (1,576) (25,000) (21,365) 336,112 314,747 | | Short term | | Cash and cash | | | | Short term | | | Short term | | | Net monetary | | | | | Net | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | debtors | | equivalents | | creditors – other | | | creditors – loans | | | (liabilities)/assets | | | Investments | | exposure | | | 2022 | | £’000s | | | £’000s | | | £’000s | | | £’000s | | | £’000s | | £’000s | £’000s | | Sterling 5,021 906 (4,525) (24,000) (22,598) 309,802 287,204 Other 85 – – – 85 8,994 9,079 Total 5,106 906 (4,525) (24,000) (22,513) 318,796 296,283 Interest rate exposure The exposure of the financial assets and liabilities to interest rate movements at 30 September was: | Within | More than | | 2023 | Within | More than | | 2022 | | --- | --- | --- | --- | --- | --- | --- | --- | | one year | | one year | Total | one year | | one year | Total | | £’000s | | £’000s | £’000s | £’000s | | £’000s | £’000s | Exposure to floating rates: Cash and cash equivalents 2,378 – 2,378 906 – 906 Loans (25,000) – (25,000) (24,000) – (24,000) Net exposure (22,622) – (22,622) (23,094) – (23,094) The Company had no exposure to fixed interest rates at the year end. Exposures vary throughout the year as a consequence of changes in the composition of the net assets of the Company arising out of the investment and risk management processes. Interest received on cash balances, or paid on bank overdrafts and borrowings, is at ruling market rates. The Company’s total returns and net assets are sensitive to changes in interest rates on cash and borrowings. Based on the financial assets and liabilities held that are affected by changes in interest rates, such as cash and bank loans, and the interest rates ruling at each balance sheet date, an increase or decrease in interest rates of 2% (2022: 2%) would have the following approximate effects on the Income Statement revenue and capital returns after tax and on the NAV per share: | | | 2023 | | | 2022 | | --- | --- | --- | --- | --- | --- | | Increase | Decrease | | Increase | Decrease | | | in rate | | in rate | in rate | | in rate | | £’000s | | £’000s | £’000s | | £’000s | Revenue return (202) 202 (222) 222 Capital return (250) 250 (240) 240 Total return (452) 452 (462) 462 NAV per share – pence (0.43) 0.43 (0.43) 0.43 78 | CT UK Capital and Income Investment Trust PLC Financial Report Other market risk exposures Chair’s StatementOverview Auditors’ Report The portfolio of investments, valued at £336,112,000 at 30 September 2023 (2022: £318,796,000) is exposed to market price changes. The Manager assesses these exposures at the time of making each investment decision. The Board reviews overall exposures at each meeting against indices and other relevant information. An analysis of the portfolio by country and major industrial sector is set out in the investment portfolio by sector and list of investments on pages 18 to 21. Based on the portfolio of investments held at each Balance Sheet date, and assuming other factors, including the management charge, remain constant, an increase or decrease in the fair value of the portfolio in sterling terms by 20% would have had the following approximate effects on Strategic Report Governance Report Financial Report Notice of Meeting the net capital return attributable to Shareholders and on the NAV per share: | | | 2023 | | | 2022 | | --- | --- | --- | --- | --- | --- | | Increase | Decrease | | Increase | Decrease | | | in value | in value | | in value | in value | | | £’000s | | £’000s | £’000s | | £’000s | Capital return 67,222 (67,222) 63,759 (63,759) NAV per share – pence 64.43 (64.43) 59.75 (59.75) (b) Liquidity risk The Company is required to raise funds to meet commitments associated with financial instruments and share buybacks. These funds may be raised either through the realisation of assets or through increased borrowing. The risk of the Company not having sufficient liquidity at any time is not considered by the Board to be significant, given: the number of quoted investments held in the Company’s portfolio (100% at 30 September 2023 and 100% at 30 September 2022); the liquid nature of the portfolio of investments; the industrial and geographical diversity of the portfolio (see pages 18 to 21); and the existence of an ongoing loan and overdraft facility agreement. Cash balances are held with approved banks, usually on overnight deposit. The Manager reviews liquidity at the time of making each investment decision. The Board reviews liquidity exposure at each meeting. The Company has a £40 million unsecured revolving floating rate credit facility available until March 2024. As at 30 September 2023 the Company had drawn down £25 million of the loan facility and bank overdrafts of £nil. The contractual maturities of the financial liabilities at each Balance Sheet date, based on the earliest date on which payment can be required, were as follows: | | Three | More than three | | | | | | --- | --- | --- | --- | --- | --- | --- | | | months | months but less | | More than | | | | | or less | than one year | | | one year | Total | | 2023 | £’000s | | £’000s | | £’000s | £’000s | Current liabilities – others 1,576 – – 1,576 Loans 25,000 – – 25,000 26,576 – – 26,576 | | Three | More than three | | | | | --- | --- | --- | --- | --- | --- | | | months | months but less | | More than | | | | or less | than one year | | one year | Total | | 2022 | £’000s | | £’000s | £’000s | £’000s | Current liabilities – others 4,525 – – 4,525 Loans 24,000 – – 24,000 28,525 – – 28,525 Other Information Report and Accounts 2023 | 79 21. Financial Risk Management (continued) (c) Credit risk and counterparty exposure 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. Such transactions must be settled on the basis of delivery against payment (except where local market conditions do not permit). Responsibility for the approval, limit setting and monitoring of counterparties is delegated to the Manager. Counterparties are selected based on a combination of criteria, including credit rating, balance sheet strength and membership of a relevant regulatory body. The rate of default in the past has been negligible. Cash and deposits are held with approved banks. The Company has an ongoing contract with its custodian for the provision of custody services. The contract is reviewed periodically. Details of securities held in custody on behalf of the Company are received and reconciled monthly. The Company’s Depositary, JP Morgan Europe Limited, has regulatory responsibilities relating to segregation and safe keeping of the Company’s financial assets, amongst other duties, as set out in the Directors’ Report. The Board has direct access to the Depositary and receives regular reports from it via the Manager. To the extent that the Manager carries out management and administrative duties (or causes similar duties to be carried out by third parties) on the Company’s behalf, the Company is exposed to counterparty risk. The Board assesses this risk through regular meetings with the management of Columbia Threadneedle Investments (including the Fund Manager) and with Columbia Threadneedle Investments’ Risk Management function. In reaching its conclusions, the Board also reviews the Manager’s parent group’s annual audit and assurance faculty report. None of the Company’s financial liabilities is past their due date or impaired. (d) Fair values of financial assets and liabilities The assets and liabilities of the Company are, in the opinion of the Directors, reflected in the Balance Sheet at fair value, or at a reasonable approximation thereof. Borrowings under loan and overdraft facilities do not have a value materially different from their capital repayment amount. (e) Capital risk management The objective of the Company is stated as being to secure long term capital and income growth from a portfolio consisting mainly of FTSE All-Share companies. In pursuing this long term objective, the Board has a responsibility for ensuring the Company’s ability to continue as a going concern. It must therefore maintain an optimal capital structure through varying market conditions. This involves the ability to: issue and buy back share capital within limits set by the Shareholders in general meeting; borrow monies in the short and long term; and pay dividends to Shareholders out of current year revenue earnings as well as out of brought forward revenue reserves. Changes to ordinary share capital are set out in note 15, dividend payments in note 9 and details of loans in note 13. 22. Transactions with related parties and Manager The following are considered related parties: the Board, including their spouses and dependents, and the Manager (Columbia Threadneedle Investment Business Limited). There are no transactions with the Board other than: aggregated remuneration for services as Directors as disclosed in the Directors’ Remuneration Report on page 48 and as set out in note 5; and the beneficial interests of the Directors in the ordinary shares of the Company as disclosed on page 48. There are no outstanding balances with the Board at the year end. Transactions between the Company and the Manager are detailed in note 4 on management fees and the outstanding balance is detailed in note 12. 80 | CT UK Capital and Income Investment Trust PLC Financial Report 23. AIFMD Chair’s StatementOverview Auditors’ Report In accordance with the AIFM Directive, information in relation to the Company’s leverage and the remuneration of the Company’s AIFM, Columbia Threadneedle Investment Business Limited, is required to be made available to investors. Detailed regulatory disclosures including those on the AIFM’s remuneration policy and costs are available on the Company’s website or from Columbia Threadneedle Investments on request. The Company’s maximum and average actual leverage levels at 30 September 2023 are shown below: Gross Commitment Strategic Report Governance Report Financial Report Notice of Meeting Leverage exposure method method Maximum limit 200% 200% Actual 107% 107% The leverage limits are set by the AIFM and approved by the Board and are in line with the maximum leverage levels permitted in the Company’s articles of association. The AIFM is also required to comply with the gearing parameters set by the Board in relation to borrowings. 24. Securities financing transactions (“SFR”) The Company has not, in the year to 30 September 2023 (2022: same), participated in any: repurchase transactions; securities lending or borrowing; buy-sell back transactions; margin lending transactions; or total return swap transactions (collectively called SFT). As such, it has no disclosure to make in satisfaction of the EU regulations on transparency of SFT, issued in November 2015. Other Information Report and Accounts 2023 | 81 # Ten Year Record (Unaudited) All Company data are based on assets, liabilities, earnings and expenses as reported in accordance with the Company's accounting policies and is unaudited but derived from the audited Accounts or specified third party data providers. ## Assets at 30 September | £'000s | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Total assets (before debt) | 244,708 | 251,387 | 256,876 | 297,027 | 332,463 | 347,472 | 348,149 | 286,395 | 380,875 | 320,283 | **339,747** | | Loans | 20,000 | 20,000 | 20,000 | 25,000 | 20,000 | 20,000 | 10,000 | 20,000 | 25,000 | 24,000 | **25,000** | | Net assets | 224,708 | 231,387 | 236,876 | 272,027 | 312,463 | 327,472 | 338,149 | 266,395 | 355,875 | 296,283 | **314,747** | ## Net Asset Value (NAV) at 30 September | | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | NAV per share – pence | 251.4 | 251.8 | 250.5 | 281.1 | 317.1 | 324.0 | 329.0 | 249.7 | 331.7 | 277.7 | **301.7** | ## Total Returns$^{(1)}$ (rebased to 100 at 30 September 2013) | | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | NAV per share | 100.0 | 103.9 | 107.5 | 125.5 | 146.6 | 154.7 | 163.0 | 128.7 | 177.4 | 154.1 | **174.4** | | Middle market price per share | 100.0 | 106.0 | 109.3 | 127.4 | 147.5 | 155.3 | 160.2 | 127.6 | 172.9 | 154.8 | **171.6** | | FTSE All-Share Index | 100.0 | 106.1 | 103.6 | 121.1 | 135.5 | 143.5 | 147.3 | 122.9 | 157.2 | 150.9 | **171.8** | ## Returns excluding dividends$^{(1)}$ (rebased to 100 at 30 September 2013) | | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | NAV per share | 100.0 | 100.2 | 99.6 | 111.8 | 126.1 | 128.9 | 130.9 | 99.3 | 131.9 | 110.5 | **120.0** | | Middle market price per share | 100.0 | 102.2 | 101.4 | 113.7 | 127.1 | 129.5 | 128.7 | 98.6 | 128.7 | 110.9 | **118.0** | | FTSE All-Share Index | 100.0 | 102.6 | 96.9 | 109.0 | 117.6 | 119.9 | 117.9 | 95.3 | 117.9 | 109.3 | **119.8** | (1) See Alternative Performance Measures on pages 91 and 92 for explanation. 82 | CT UK Capital and Income Investment Trust PLC Financial Report # **Share Price** at 30 September | | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Middle market price per share – pence | 252.5 | 258.0 | 256.0 | 287.0 | 321.0 | 327.0 | 325.0 | 249.0 | 325.0 | 280.0 | **298.0** | | Premium/(discount) to NAV – % | 0.4 | 2.5 | 2.2 | 2.1 | 1.2 | 0.9 | (1.2) | (0.3) | (2.0) | 0.8 | **(1.2)** | | Share price high – pence | 269.0 | 271.8 | 277.0 | 289.8 | 327.5 | 350.0 | 337.0 | 358.0 | 339.0 | 343.5 | **317.0** | | Share price low – pence | 222.8 | 248.0 | 233.8 | 234.8 | 274.0 | 309.5 | 276.5 | 193.8 | 237.5 | 273.0 | **259.0** | # **Revenue** for the year ended 30 September | | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Available for ordinary shares (£'000s) | 9,941 | 9,575 | 9,475 | 10,785 | 11,459 | 11,710 | 13,426 | 8,758 | 11,310 | 12,890 | **14,056** | | Return per share – pence | 11.26 | 10.56 | 10.10 | 11.26 | 11.71 | 11.70 | 13.12 | 8.34 | 10.56 | 12.03 | **13.26** | | Dividends per share – pence | 9.45 | 9.85 | 10.10 | 10.30 | 10.65 | 10.95 | 11.40 | 11.50 | 11.60 | 11.80 | **12.15** | # **Revenue Performance** (rebased to 100 at 30 September 2013) | | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Return per share | 100.0 | 93.8 | 89.7 | 100.0 | 104.0 | 103.9 | 116.5 | 74.1 | 93.8 | 106.8 | **117.8** | | Dividends per share | 100.0 | 104.2 | 106.9 | 109.0 | 112.7 | 115.9 | 120.6 | 121.7 | 122.8 | 124.9 | **128.6** | | CPI | 100.0 | 101.2 | 101.1 | 102.1 | 105.1 | 107.7 | 109.5 | 110.1 | 113.5 | 124.9 | **133.2** | # **Cost of running the Company (Ongoing charges)$^{(1)}$** for the year ended 30 September | | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Expressed as a percentage of average net assets: | | | | | | | | | | | | | Ongoing charges | 0.62 | 0.66 | 0.64 | 0.64 | 0.59 | 0.58 | 0.58 | 0.58 | 0.59 | 0.59 | **0.66** | # **Gearing$^{(1)}$** at 30 September | | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Net gearing % | 3.81 | 4.43 | 10.32 | 9.32 | 4.81 | 4.51 | 1.71 | 7.06 | 6.52 | 7.79 | **7.19** | (1) See Alternative Performance Measures pages 91 and 92 for explanation ## Analysis of Ordinary Shareholders (Unaudited) | Category | Holding % at 30 September 2023 | Holding % at 30 September 2022 | | --- | --- | --- | | CT Savings Plans | **80.3** | 79.5 | | Retail Investors (excluding those investing through CT Savings Plans) | **9.9** | 9.6 | | Institutions | **5.0** | 6.1 | | Intermediaries | **4.8** | 4.8 | | | **100.0** | 100.0 | Source: Columbia Threadneedle Investments Report and Accounts 2023 | 83 Overview Chart's Statement Earnings Report Revenues Report Auditing Report Financial Report Notes of Meeting Other Information # Notice of Annual General Meeting Notice is hereby given that the thirty-first Annual General Meeting of the Company will be held at Cannon Place, 78 Cannon Street, London EC4N 6AG on Thursday 7 March 2024 at 12.30pm for the following purposes: Ordinary Resolutions: To consider and, if thought fit, pass the following resolutions as ordinary resolutions: 1. To receive and adopt the audited financial statements of the Company for the financial year ended 30 September 2023 together with the reports of the directors and the auditor on those financial statements. 2. To approve the Company's dividend policy as set out on page 37 of the Annual Report and Accounts for the financial period ended 30 September 2023. 3. To receive, adopt and approve the Directors' Remuneration Report for the financial year ended 30 September 2023. 4. To re-elect Jane Lewis as a director of the Company. 5. To elect Dunke Afe as a director of the Company. 6. To re-elect Patrick Firth as a director of the Company. 7. To re-elect Nicky McCabe as a director of the Company. 8. To re-appoint BDO LLP as auditors to the Company to hold office from the conclusion of the annual general meeting until the conclusion of the next annual general meeting of the Company. 9. To authorise the Audit and Risk Committee to determine the remuneration of the Company's auditors. 10. THAT, in substitution for any existing authority, but without prejudice to the exercise of any such authority prior to the passing of this resolution, the directors of the Company (the "Directors") be and are hereby generally and unconditionally authorised, in accordance with section 551 of the Companies Act 2006 (the "Act"), to exercise all the powers of the Company to allot shares in the Company and to grant rights to subscribe for, or convert any security into, shares in the Company ("Rights") up to an aggregate nominal amount of £2,593,396 (being equal to approximately 10 per cent of the Company's issued share capital (excluding treasury shares) as at 28 November 2023) generally from time to time on such terms as the Directors may determine, such authority to expire at the conclusion of the Annual General Meeting of the Company in 2025 or, if earlier, on the date which is 15 months after the date on which this resolution is passed (unless previously revoked, varied or extended by the Company in general meeting) save that the Company may at any time prior to the expiry of this authority make offers or enter into agreements which would or might require shares in the Company to be allotted or Rights to be granted after such expiry and notwithstanding such expiry the Directors may allot shares in the Company or grant Rights in pursuance of such offers or agreements as if the authority conferred by this resolution had not expired. Special Resolutions: To consider and, if thought fit, pass the following resolutions as special resolutions: 11. THAT, subject to the passing of Resolution 10 set out in the notice of the annual general meeting to be held on 7 March 2024 ("Resolution 10") and in substitution for any existing power, but without prejudice to the exercise of any such power prior to the passing of this resolution, the directors of the Company (the "Directors") be and are hereby generally and unconditionally empowered, pursuant to sections 570 and 573 of the Companies Act 2006 (the "Act"), to allot or make offers or agreements to allot, equity securities (within the meaning of section 560 of the Act) for cash pursuant to the authority conferred by Resolution 10, and/or by way of a sale of treasury shares for cash, as if section 561(1) of the Act did not apply to any such allotment or sale, provided that this power: (i) shall be limited to the allotment of equity securities and the sale of treasury shares up to an aggregate nominal amount of £2,593,396 (representing approximately 10 per cent. of the issued share capital of the Company (excluding treasury shares) as at 28 November 2023); and (ii) shall expire at the conclusion of the next annual general meeting of the Company held after the passing of this resolution or, if earlier, on the date which is 15 months after the date on which this resolution is passed (unless previously renewed, varied or revoked by the Company in general meeting), save that the Company may before such expiry make offers and enter into agreements which would or might require equity securities to be allotted or treasury shares to be sold after such expiry and the Directors may allot equity securities or sell treasury shares in pursuance 84 | CT UK Capital and Income Investment Trust PLC Notice of Meeting of such an offer or agreement as if the power conferred by this resolution had not expired. This power applies in relation to the sale of treasury shares as if in the opening sentence of this resolution the words “subject to the passing of Resolution 10 set out in the notice of the annual general meeting to be held on 7 March 2024 (“Resolution 10”) and” were omitted. 12. THAT, in substitution for any existing authority but without prejudice to the exercise of any such authority prior to the passing of this resolution, the Company be and is hereby generally and unconditionally authorised, pursuant to and in accordance with section 701 of the Companies Act 2006 (the “Act”), to make market purchases (within the meaning of section 693(4) of the Act) of fully paid ordinary shares of 25 pence each in the capital of the Company (“ordinary shares”) on such terms and in such manner as the directors of the Company (the “Directors”) may from time to time determine (either for retention as treasury shares for future reissue, resale or transfer, or cancellation), provided that: (a) the maximum aggregate number of ordinary shares hereby authorised to be purchased is 15,550,003 or, if less, the number being 14.99 per cent. of the issued ordinary share capital of the Company (excluding ordinary shares held in treasury) immediately prior to the passing of this resolution; (b) the minimum price which may be paid for an ordinary share purchased pursuant to this authority shall be 25 pence; (c) the maximum price which may be paid for an ordinary share purchased pursuant to this authority shall be the higher of (i) an amount equal to 105% of the average of the middle market quotations for an ordinary share (as derived from the London Stock Exchange Daily Official List) over the five business days immediately preceding the date on which the ordinary share is contracted to be purchased; and (ii) the higher of the price of the last independent trade of an ordinary share and the highest current independent bid for such a share on the London Stock Exchange at the time the purchase is carried out; (d) the minimum and maximum prices per ordinary share referred to in sub-paragraphs (b) and (c) of this resolution are in each case exclusive of any expenses payable by the Company; (e) the authority hereby conferred shall expire at the conclusion of the next annual general meeting of the Company held after the passing of this resolution or, if earlier, on the date which is 15 months after the date on which this resolution is passed, unless such authority is varied, revoked or renewed prior to such time by the Company in general meeting; (f) the Company may, prior to the expiry of the authority hereby conferred, enter into a contract to purchase ordinary shares under such authority which will or may be completed or executed wholly or partly after such expiry and may make a purchase of ordinary shares pursuant to any such contract. By Order of the Board Columbia Threadneedle Investment Business Limited, Secretary 29 November 2023 Registered office: Cannon Place 78 Cannon Street London EC4N 6AG Registered number: 02732011 Notes: 1. A member is entitled to appoint one or more proxies to exercise all or any of the member’s rights to attend, speak and vote at the meeting. A proxy need not be a member of the Company but must attend the meeting for the member’s vote to be counted. If a member appoints more than one proxy to attend the meeting, each proxy must be appointed to exercise the rights attached to a different share or shares held by that member. 2. Any person holding 3% or more of the voting rights in the Company who appoints a person other than the Chair of the meeting as his/her proxy will need to ensure that both he/she and such person complies with their respective disclosure obligations under the Disclosure Guidance and Transparency Rules. 3. A Form of Proxy is provided with this notice for members. If a member wishes to appoint more than one proxy and so requires additional proxy forms, the member should contact Computershare Investor Services PLC on 0370 889 4094. To be valid, the Form of Proxy and any power of attorney or other authority under which it is signed (or a notarially certified copy of such authority) must be received by post or (during normal business hours only) by hand at the Company’s Registrar, Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZZ, not less than 48 hours excluding non-working days before the time of the holding of the meeting or any adjourned meeting. Amended instructions must also be received by the Company’s Registrar by the deadline for receipt of Forms of Proxy. 4. Alternatively, members may register the appointment of a proxy for the meeting electronically, by accessing the website www.eproxyappointment.com where full instructions for the procedure are given. The Control Number, Shareholder Reference and PIN as printed on the Form of Proxy will be required in order to use the electronic proxy appointment system. This website is operated by Computershare Investor Services PLC. The proxy appointment and any power of attorney or other authority under Report and Accounts 2023 | 85 Overview | Chair's Statement | Meeting Report | Sevename's View | Audit Report | Financial Report | Notice of Meeting | Time Information which the proxy appointment is made must be received by as you will be bound by them and they will govern the electronic Computershare Investor Services PLC not less than 48 hours appointment of your proxy. excluding non-working days before the time for holding the meeting 9. CREST members who wish to appoint a proxy or proxies through or adjourned meeting or (in the case of a poll taken otherwise than the CREST electronic proxy appointment service may do so for the at or on the same day as the meeting or adjourned meeting) for the meeting and any adjournment(s) thereof by using the procedures taking of the poll at which it is to be used. If you want to appoint described in the CREST Manual. CREST Personal Members or other more than one proxy electronically please contact Computershare CREST sponsored members, and those CREST members who have Investor Services PLC on 0370 889 4094. appointed a voting service provider(s), should refer to their CREST 5. Investors holding shares in the Company through the CT Investment sponsor or voting service provider(s), who will be able to take the Trust ISA, Junior ISA, Child Trust Fund, General Investment appropriate action on their behalf. Account and/or Junior Investment Account should ensure that 10. In order for a proxy appointment or instruction made using the forms of direction are returned to Computershare Investor CREST service to be valid, the appropriate CREST message Services PLC not later than 12.30pm on 29 February 2024. (a “CREST Proxy Instruction”) must be properly authenticated Alternatively, voting directions can be submitted electronically in accordance with Euroclear UK & International Limited’s at www.eproxyappointment.com by entering the Control Number, specifications and must contain the information required for such Shareholder Reference Number and PIN as printed on the form of instruction, as described in the CREST Manual (available via www. direction. Voting directions must be submitted electronically no euroclear.com/CREST). The message, regardless of whether it later than 12.30pm on 29 February 2024. constitutes the appointment of a proxy or is an amendment to the 6. Any person receiving a copy of this notice as a person nominated instruction given to a previously appointed proxy must, in order by a member to enjoy information rights under section 146 of to be valid, be transmitted so as to be received by the issuer’s the Act (a “Nominated Person”) should note that the provisions agent (ID number 3RA50) by the latest time(s) for receipt of proxy in notes 1 to 4 above concerning the appointment of a proxy or appointments specified in notes 3 and 4. For this purpose, the time proxies to attend the meeting in place of a member do not apply of receipt will be taken to be the time (as determined by the time to a Nominated Person as only Shareholders have the right to stamp applied to the message by the CREST Application Host) from appoint a proxy. However, a Nominated Person may have a right which the issuer’s agent is able to retrieve the message by enquiry under an agreement between the Nominated Person and the to CREST in the manner prescribed by CREST. After this time, any member by whom he or she was nominated to be appointed, or change of instructions to proxies appointed through CREST should to have someone else appointed, as a proxy for the meeting. If a be communicated to the appointee through other means. Nominated Person has no such proxy appointment right or does 11. CREST members and, where applicable, their CREST sponsors not wish to exercise it, he/she may have a right under such an or voting service provider(s) should note that Euroclear UK & agreement to give instructions to the member as to the exercise of International Limited does not make available special procedures voting rights at the meeting. in CREST for any particular messages. Normal system timings and 7. Pursuant to Regulation 41(1) of the Uncertificated Securities limitations will therefore apply in relation to the input of CREST Regulations 2001 (as amended) and for the purposes of section Proxy Instructions. It is the responsibility of the CREST member 360B of the Act, the Company has specified that only those concerned to take (or, if the CREST member is a CREST personal members registered on the register of members of the Company member or sponsored member or has appointed a voting service as at close of business on 5 March 2024 (the “Specified Time”) provider(s), to procure that his CREST sponsor or voting service (or, if the meeting is adjourned to a time more than 48 hours provider(s) take(s)) such action as shall be necessary to ensure after the Specified Time, by close of business on the day which that a message is transmitted by means of the CREST system by is two working days prior to the time of the adjourned meeting) any particular time. In this connection, CREST members and, where shall be entitled to attend and vote at the meeting in respect of applicable, their CREST sponsors or voting service provider(s) the number of shares registered in their name at that time. If the are referred, in particular, to those sections of the CREST Manual meeting is adjourned to a time not more than 48 hours after the concerning practical limitations of the CREST system and timings Specified Time, the Specified Time will also apply for the purpose of (www.euroclear.com/CREST). determining the entitlement of members to attend and vote (and for 12. The Company may treat as invalid a CREST Proxy Instruction in the the purposes of determining the number of votes they may cast) at circumstances set out in Regulation 35(5)(a) of the Uncertificated the adjourned meeting. Changes to the register of members after Securities Regulations 2001 (as amended). the relevant deadline shall be disregarded in determining the rights 13. Any corporation which is a member can appoint one or more of any person to attend and vote at the meeting. corporate representatives who may exercise on its behalf all of its 8. If you are an institutional investor you may be able to appoint a powers as a member provided that, if it is appointing more than one proxy electronically via the Proxymity platform, a process which has corporate representative, it does not do so in relation to the same been agreed by the Company and approved by the Registrar. For shares. further information regarding Proxymity, please go to www.proxymity. 14. Under section 527 of the Act, members meeting the threshold io. Your proxy must be lodged by 12.30pm on 5 March 2024 in requirements set out in that section have the right to require the order to be considered valid. Before you can appoint a proxy via Company to publish on a website a statement setting out any this process you will need to have agreed to Proxymity’s associated matter relating to: terms and conditions. It is important that you read these carefully 86 | CT UK Capital and Income Investment Trust PLC Notice of Meeting (a) the audit of the Company's Accounts (including the auditors' report and the conduct of the audit) that are to be laid before the meeting; or (b) any circumstances connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual Accounts and Reports were laid in accordance with section 437 of the Act. 15. The Company may not require the members requesting any such website publication to pay its expenses in complying with sections 527 or 528 of the Act. Where the Company is required to place a statement on a website under section 527 of the Act, it must forward the statement to the Company's auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the meeting includes any statement that the Company has been required under section 527 of the Act to publish on a website. 16. Any member attending the meeting has the right to ask questions. The Company must cause to be answered any question relating to the business being dealt with at the meeting put by a member attending the meeting. However, members should note that no answer need be given in the following circumstances: (a) if to do so would interfere unduly with the preparation of the meeting or would involve a disclosure of confidential information; or (b) if the answer has already been given on a website in the form of an answer to a question; or (c) if it is undesirable in the interests of the Company or the good order of the meeting that the question be answered. 17. As at 28 November 2023, being the latest practicable date before the publication of this notice, the Company's issued capital consisted of 107,289,022 ordinary shares of 25p each including 3,553,177 shares held in treasury. Therefore, the total voting rights in the Company as at 28 November 2023 were 103,735,845. 18. This notice, together with the information required by Section 311A of the Act, will be available at ctcapitalandincome.co.uk. 19. Copies of the letters of appointment between the Company and its Directors; a copy of the Articles of Association of the Company; the register of Directors' holdings; and a deed relating to the Directors' deeds of indemnity will be available for inspection at the registered office of the Company during usual business hours on any weekday (Saturdays, Sundays and Bank Holidays excluded) until the date of the meeting and also at the place of the meeting from 15 minutes prior to the commencement of the meeting until the conclusion thereof. 20. No Director has a service agreement with the Company. 21. Under section 338 of the Act, a member or members meeting the qualification criteria set out at note 23 below, may, subject to certain conditions, require the Company to circulate to members notice of a resolution which may properly be moved and is intended to be moved at that meeting. The conditions are that: (i) the resolution must not, if passed, be ineffective (whether by reason of inconsistency with any enactment or the Company's constitution or otherwise); (ii) the resolution must not be defamatory of any person, frivolous or vexatious; and (iii) the request: (a) may be in hard copy form or in electronic form; (b) must identify the resolution of which notice is to be given by either setting out the resolution in full or, if supporting a resolution sent by another member, clearly identifying the resolution which is being supported; (c) must be authenticated by the person or persons making it; and (d) must be received by the Company not later than six weeks before the meeting to which the requests relate. 22. Under Section 338A of the Act, a member or members meeting the qualification criteria set out at note 23 below, may, subject to certain conditions, require the Company to include in the business to be dealt with at the meeting a matter (other than a proposed resolution) which may properly be included in the business (a matter of business). The conditions are that: (i) the matter of business must not be defamatory of any person, frivolous or vexatious; and (ii) the request: (a) may be in hard copy form or in electronic form; (b) must identify the matter of business by either setting it out in full or, if supporting a statement sent by another member, clearly identify the matter of business which is being supported; (c) must be accompanied by a statement setting out the grounds for the request; (d) must be authenticated by the person or persons making it; and (e) must be received by the Company not later than 6 weeks before the meeting to which the requests relate. 23. In order to be able to exercise the members' right to require: (i) circulation of a resolution to be proposed at the meeting (see note 21); or (ii) a matter of business to be dealt with at the meeting (see note 22), the relevant request must be made by: (a) a member or members having a right to vote at the meeting and holding at least 5% of total voting rights of the Company; or (b) at least 100 members having a right to vote at the meeting and holding, on average, at least £100 of paid up share capital. Report and Accounts 2023 | 87 Overview Other Information Strategic Report Geographic Report Auditor's Report Financial Report Notice of Meeting Other Information ## Information for Shareholders Net Asset Value and share price Share dealing The Company’s NAV, or Net Asset Value, per share is released Investors wishing to purchase more shares in the Company or sell daily to the London Stock Exchange on the working day following all or part of their existing holding may do so through a stockbroker. the calculation date. The current share price of CT UK Capital and Most banks also offer this service. Alternatively, please go to Income Investment Trust PLC is shown in the investment trust www.computershare.com/dealing/uk for a range of dealing section of the stock market page in most leading newspapers, services made available by Computershare. under “CT UK Capital and Income” and on the London Stock Exchange website. Common reporting standards Tax legislation requires investment fund companies to provide Performance information information annually to the local tax authority on the tax Information on the Company’s performance is provided in the half- residencies of a number of non-UK based certificated Shareholders yearly and final reports which are sent to Shareholders in June and and corporate entities who have purchased shares in investment December respectively. More up-to-date performance information is trusts. All new Shareholders, excluding those whose shares are available on the Internet at ctcapitalandincome.co.uk. This website held in CREST, who are entered onto the share register are sent a also provides a monthly update on the Company’s geographic spread certification form for the purpose of collecting this information. and largest holdings, along with comments from the Fund Manager. For further information, please see HMRC’s Quick Guide: Automatic AIC Exchange of Information – information for account holders gov.uk/ The Company is a member of the AIC, which publishes a monthly government/publications/exchange-of-information-account-holders. statistical information service in respect of member companies. The publication also has details of ISA and other investment plans Registered in England and Wales with Company Registration No 02732011. available. For further details, please contact the AIC on 020 7282 5555, or visit the website: theaic.co.uk Electronic communications Computershare provides a service to enable Shareholders to receive Shareholder correspondence electronically (including annual and half yearly financial reports) if they wish. If a Shareholder opts to receive documents in this way, paper documents will only be available on request. Shareholders who opt for this service will receive a Notice of Availability via e-mail from Computershare with a link to the relevant section of the Company’s website where the documents can be viewed or printed. For more information, to view the terms and conditions and to register for this service, please visit Computershare’s internet site at investorcentre.co.uk (you will need your Shareholder reference number which can be found on your share certificate or dividend confirmation). 88 | CT UK Capital and Income Investment Trust PLC Other Information # How to Invest One of the most convenient ways to invest in CT UK Capital and Income Investment Trust PLC is through one of the savings plans run by Columbia Threadneedle Investments. ## CT Individual Savings Account (ISA) You can use your ISA allowance to make an annual tax efficient investment of up to £20,000 for the current tax year with a lump sum from £100 or regular savings from £25 a month. You can also transfer any existing ISAs to us whilst maintaining the tax benefits. ## CT Junior Individual Savings Account (JISA)* A tax efficient way to invest up to £9,000 per tax year for a child. Contributions start from £100 lump sum or £25 a month. JISAs or CTFs with other providers can be transferred to Columbia Threadneedle Investments. ## CT Lifetime Individual Savings Account (LISA) For those aged 18-39, a LISA could help towards purchasing your first home or retirement in later life. Invest up to £4,000 for the current tax year and receive a 25% Government bonus up to £1,000 per year. Invest with a lump sum from £100 or regular savings from £25 a month. ## CT General Investment Account (GIA) This is a flexible way to invest in our range of Investment Trusts. There are no maximum contributions, and investments can be made from £100 lump sum or £25 a month. ## CT Junior Investment Account (JIA) This is a flexible way to save for a child in our range of Investment Trusts. There are no maximum contributions, and the plan can easily be set up under bare trust (where the child is noted as the beneficial owner) or kept in your name if you wish to retain control over the investment. Investments can be made from a £100 lump sum or £25 a month per account. You can also make additional lump sum top-ups at any time from £100 per account. ## CT Child Trust Fund (CTF)* If your child already has a CTF, you can invest up to £9,000 per birthday year, from £100 lump sum or £25 a month. CTFs with other providers can be transferred to Columbia Threadneedle Investments. ## Charges Annual management charges and other charges apply according to the type of plan. ## Annual account charge **ISA/LISA:** £60+VAT **GIA:** £40+VAT **JISA/JIA/CTF:** £25+VAT You can pay the annual charge from your account, or by direct debit (in addition to any annual subscription limits). ## Dealing charges £12 per fund (reduced to £0 for deals placed through the online Columbia Threadneedle Investor Portal) for ISA/GIA/LISA/JIA and JISA. There are no dealing charges on a CTF. Dealing charges apply when shares are bought or sold but not on the reinvestment of dividends or the investment of monthly direct debits. Government stamp duty of 0.5% also applies on the purchase of shares (where applicable). **The value of investments can go down as well as up and you may not get back your original investment. Tax benefits depend on your individual circumstances and tax allowances and rules may change. Please ensure you have read the full Terms and Conditions, Privacy Policy and relevant Key Features documents before investing.** For regulatory purposes, please ensure you have read the Pre-sales Cost & Charges disclosure related to the product you are applying for, and the relevant Key Information Documents (KIDs) for the investment trusts you want to invest in, these can be found at ctnvest.co.uk/documents. ## How to Invest To open a new Columbia Threadneedle Savings Plan, apply online at ctnvest.co.uk. Online applications are not available if you are transferring an existing Savings Plan with another provider to Columbia Threadneedle Investments, or if you are applying for a new Savings Plan in more than one name but paper applications are available at ctnvest.co.uk/documents or by contacting Columbia Threadneedle Investments. Overview Other's Statement Strategic Report Government Report Auditing Report Financial Report Notes of Meeting Other Information Report and Accounts 2023 | 89 New Customers: Existing Savings Plan Holders: Call: 0800 136 420** (8:30am – 5:30pm, weekdays) Call: 0345 600 3030** (9:00am – 5:00pm, weekdays) Email: invest@columbiathreadneedle.com Email: investor.enquiries@columbiathreadneedle.com By post: Columbia Threadneedle Management Limited PO Box 11114 Chelmsford CM99 2DG You can also invest in the trust through online dealing platforms for private investors that offer share dealing and ISAs. Companies include: AJ Bell, Barclays Stockbrokers, EQi, Halifax, Hargreaves Lansdown, HSBC, Interactive Investor, Lloyds Bank, The Share Centre. Notes *The CTF and JISA accounts are opened by parents in the child’s name and they have access to the money at age 18. **Calls may be recorded or monitored for training and quality purposes. ## Manage your ## investments on ## the go ### With our CT UK app you can: ### – Make changes to your investment choices ### – Add cash to invest later, or withdraw cash ### – Make lump sum investments ### Search 'CT UK' to download the app ## To find out more, ## visit ctinvest.co.uk ## 0345 600 3030, 9.00am – 5.00pm, ## weekdays, calls may be recorded or ## monitored for training and quality purposes. © 2023 Columbia Threadneedle Investments. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies. Financial promotions are issued for marketing and information purposes by Columbia Threadneedle Management Limited, authorised and regulated in the UK by the Financial Conduct Authority. 90 | CT UK Capital and Income Investment Trust PLC Other Information Chair’s StatementOverview Auditors’ Report ## Alternative Performance Measures The Company uses the following Alternative Performance Measures (“APMs”). APMs do not have a standard meaning prescribed by GAAP Strategic Report Governance Report Financial Report Notice of Meeting and therefore may not be comparable to similar measures presented by other entities. No new APMs have been identified or added since the prior year end. Premium or Discount – the share price of an Investment Company is derived from buyers and sellers trading their shares on the stock market. This price is not identical to the Net Asset Value (“NAV”) per share of the Company. If the share price is lower than NAV per share, the shares are trading at a discount. This usually indicates that there are more sellers of shares than buyers. The discount is shown as a percentage of the NAV per share. Shares trading at a price above NAV per share are deemed to be at a premium. | 30 September | | 30 September | | | --- | --- | --- | --- | | | 2023 | | 2022 | | | pence | | pence | Net Asset Value per share (a) 301.67 277.66 Share price per share (b) 298.00 280.00 Premium or (Discount) (c= (b-a)/a) (c) (1.2%) 0.8% Gearing – this is the ratio of the borrowings of the Company to its net assets. Borrowings have a “prior charge” over the assets of a company, ranking before ordinary Shareholders in their entitlement to capital and/or income. They may include: preference shares; debentures; overdrafts and short and long term loans from banks; and derivative contracts. If the Company has cash assets, these may be assumed either to net off against borrowings, giving a “net” or “effective” gearing percentage, or to be used to buy investments, giving a “gross” or “fully invested” gearing figure. Where cash assets exceed borrowings, the Company is described as having “net cash”. The Company’s maximum permitted level of gearing is set by the Board and is described within the Strategic Report and Directors’ Report. | 30 September | | 30 September | | | --- | --- | --- | --- | | | 2023 | | 2022 | | | £’000 | | £’000 | Loan 25,000 24,000 Less cash and cash equivalents (2,378) (906) Total (a) 22,622 23,094 Net Asset Value (b) 314,747 296,283 Gearing (c = a/b) (c) 7.19% 7.79% Other Information Report and Accounts 2023 | 91 Ongoing Charges – are those expenses of a type which are likely to recur in the foreseeable future, whether charged to capital or revenue, and which relate to the operation of the investment company, expressed as a proportion of the average net assets of the Company over the reporting year (see Ten Year Record). 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 are based on costs incurred in the year as being the best estimate of future costs. | | 30 September | | 30 September | | | --- | --- | --- | --- | --- | | | | 2023 | | 2022 | | Ongoing charges calculation | | £’000 | | £’000 | Management fees 1,386 1,428 Other expenses 742 680 Broker fee 18 15 Less loan arrangement fees – (16) Ad-hoc non-recurring expenses (24) (80) Total (a) 2,122 2,027 Average daily net assets (b) 322,195 343,168 Ongoing charges (c = a/b) (c) 0.66% 0.59% Total Return – the theoretical return to Shareholders calculated on a per share basis by adding dividends paid in the period to the increase or decrease in the share price or NAV in the period. The dividends are assumed to have been re-invested in the form of shares or added to net assets respectively, on the date on which the shares were quoted ex-dividend. Net Asset Value Share price NAV/Share price per share at 30 September 2022 (pence) 277.66 280.00 NAV/Share price per share at 30 September 2023 (pence) 301.67 298.00 Change in the year 8.6% 6.4% Impact of dividend reinvestments 4.5% 4.5% Total return for the year 13.1% 10.9% 92 | CT UK Capital and Income Investment Trust PLC Other Information Chair’s StatementOverview Auditors’ Report ## Glossary of Terms Strategic Report Governance Report Financial Report Notice of Meeting AAF Report – Report prepared in accordance with Audit and Assurance Faculty guidance issued by the Institute of Chartered Accountants in England and Wales. Administrator – State Street Bank and Trust Company. AIC – Association of Investment Companies, the trade body for Closed-end Investment Companies. AIC Code – the principles set out in the Association of Investment Companies Code of Corporate Governance. AIM – the Alternative Investment Market. AIFMD – Alternative Investment Fund Managers Directive requires that all investment vehicles (“AIFs”) must appoint a Depositary and an Alternative Investment Fund Manager (“AIFM”). The Board of Directors of an Investment Trust, nevertheless, will remain fully responsible for all aspects of the Company’s strategy, operations and compliance with regulations. The Company’s AIFM is the Manager. Broker – The Broker is Cavendish, previously known as Cenkos Securities plc. The duties of the Broker include transacting buy or sell orders in the Company’s shares, maintain a regular dialogue with core Shareholders, and provide advice on trading of the Company’s shares and significant movements in share price. CT UK Capital and Income Investment Trust PLC – the “Company”. CT Savings Plans – the CT General Investment Account, CT Junior Investment Account, CT Investment Trust ISA, CT Junior ISA, CT Lifetime ISA and CT Child Trust Fund operated by Columbia Threadneedle Management Limited, a company authorised and regulated by the Financial Conduct Authority. Benchmark – the FTSE All-Share Index (the “Index”) is the benchmark against which the increase or decrease in the Company’s Net Asset Value is measured. The Index averages the performance of a defined selection of companies on the London Stock Exchange and gives an indication of how a wide range of companies traded on the London Stock Exchange taken as a whole have performed in any period. As the investments within the Index are not identical to those held by the Company, the Index does not take account of operating costs and the Company’s strategy does not include replicating (tracking) this index, there is likely to be some level of divergence between the performance of the Company and the Index. Closed-end company – a company, including an Investment Company, with a fixed issued ordinary share capital which is traded on an exchange at a price not necessarily related to its Net Asset Value and the shares of which can only be issued or bought back by the Company in certain circumstances. Cum-dividend – shares are classified as cum-dividend when the buyer of a security is entitled to receive a dividend that has been declared, but not paid. Shares which are not cum-dividend are described as ex-dividend. Other Information Custodian – The Custodian is JPMorgan Chase Bank. A custodian is a specialised financial institution responsible for safeguarding, worldwide, the listed securities and certain cash assets of the Company, as well as the income arising therefrom, through provision of custodial, settlement and associated services. Report and Accounts 2023 | 93 Depositary – The Depositary is JPMorgan Europe Limited. Under AIFMD rules, the Company must appoint a depositary, whose duties in respect of investments, cash and similar assets include: safekeeping; verification of ownership and valuation; and cash monitoring. The appointed depositary has strict liability for the loss of the financial assets in respect of which it has safe keeping duties. The Depositary’s oversight duties will include, but are not limited to, oversight of share buy backs, dividend payments and adherence to investment limits. Derivative – a contract between two or more parties, the value of which fluctuates in accordance with the value of an underlying security. The contract is usually short term (for less than one year). Examples of derivatives are Put and Call Options, Swap contracts, Futures and Contracts for Difference. A derivative can be an asset or a liability and is a form of gearing because the fluctuations in its value are usually greater than the fluctuations in the underlying security’s value. Distributable Reserves – Reserves distributable by way of dividend or for the purpose of buying back ordinary share capital (see note 2 to the accounts). Company Law requires that Share Capital, the Share Premium Account and the Capital Redemption Reserve may not be distributed. The Company’s articles of association allow distributions by way of dividend out of Capital Reserves. Dividend payments are currently made out of Revenue Reserve. The cost of any share buybacks are deducted from the Special and Capital Reserves. Dividend Dates – Reference is made in announcements of dividends to three dates. The “record” date is the date after which buyers of the shares will not be recorded on the register of Shareholders as qualifying for the pending dividend payment. The “payment” date is the date that dividends are credited to Shareholders’ bank accounts. The “ex-dividend” date is normally the business day prior to the record date. Fund Manager – Julian Cane, an employee of the Manager with overall management responsibility for the total portfolio. GAAP – Generally Accepted Accounting Practice. This includes UK GAAP and International GAAP (IFRS or International Financial Reporting Standards applicable in the European Union). Investment Company (section 833) – UK Company Law allows an Investment Company to make dividend distributions out of realised distributable reserves, even in circumstances where it has made capital losses in any year (see note 2 to the accounts), provided the Company’s assets remaining after payment of the dividend exceed 150% of the liabilities. An Investment Company is defined as investing its funds in shares, land or other assets with the aim of spreading investment risk. Investment Trust taxation status (section 1158) – UK Corporation Tax law allows an Investment Company (referred to in tax law as an Investment Trust) to be exempted from tax on its profits realised on investment transactions, provided it complies with certain rules. These are similar to section 833 Company law rules but further require that the Company must be listed on a regulated stock exchange and that it cannot retain more than 15% of income received. The Directors’ Report contains confirmation of the Company’s compliance with this law and its consequent exemption from taxation on capital gains. ISAE Report – Report prepared in accordance with the International Standard on Assurance Engagements. Leverage – as defined under AIFMD rules, leverage is any method by which the exposure of an AIF (being an investment vehicle under the AIFMD) is increased through borrowing of cash or securities or leverage embedded in derivative positions. Leverage is broadly equivalent to gearing, but is expressed as a ratio between the net assets (excluding borrowings) and the net assets (after taking account of borrowings). Under the gross method, exposure represents the sum of the Company’s positions after deduction of cash balances, without taking account of any hedging or netting arrangements. Under the commitment method, exposure is calculated without the deduction of cash balances and after certain hedging and netting positions are offset against each other. Manager – Columbia Threadneedle Investment Business Limited, (AIFM), and its sister company Columbia Threadneedle Management Limited. These two companies are owned by Ameriprise Financial, Inc. 94 | CT UK Capital and Income Investment Trust PLC Other Information Net Asset Value (NAV) – the assets less liabilities of the Company, as set out in the Balance Sheet, all valued in accordance with Chair’s StatementOverview Auditors’ Report the Company’s Accounting Policies (see note 2 to the accounts) and UK Accounting Standards. The net assets correspond to Total Shareholders’ Funds, which comprise the share capital account, capital redemption reserve, share premium account, special reserve and capital and revenue reserves. Non-executive Director – a Director who has a contract for services, rather than a contract of employment, with the Company. The Company does not have any executive Directors. Non-executive Directors’ remuneration is described in detail in the Directors’ Remuneration Report. The duties of the Directors, who govern the Company through the auspices of a Board and Committees of the Strategic Report Governance Report Financial Report Notice of Meeting Board, are set out in the Corporate Governance Statement. Open-end investment vehicle – a collective investment scheme which issues shares or units directly to investors, and redeems directly from investors, at a price that is linked to the Net Asset Value of the fund. Price/earnings multiple – This is a calculation carried out as a simple assessment of a company’s valuation. It is the result of dividing the share price of a company by its earnings per share, therefore showing the multiple of earnings at which the shares trade. Registrar – Computershare Investor Services PLC provide share registration services to the Company. They maintain the register of members and arrange the payment of dividends. Shares held by investors in the CT Savings Plans are held on the register in one nominee account under the name of State Street Nominees Limited. SORP – Statement of Recommended Practice. The accounts of the Company are drawn up in accordance with the Investment Trust SORP, issued by the AIC, as described in note 2 to the accounts. SSAE16 – Statement on Standards for Attestation Engagements 16, issued by the American Institute of Certified Public Accountants, is an independent snapshot of an organisation’s control environment. UK Code of Corporate Governance (UK Code) – the standards of good practice in relation to board leadership and effectiveness, remuneration, accountability and relations with Shareholders that all companies with a Premium Listing on the London Stock Exchange are required to report on in their Annual Report and Accounts. Other Information Report and Accounts 2023 | 95 Warning to Shareholders – Beware of Share Fraud. Fraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer to sell to you shares that turn out to be worthless or non-existent, or to buy your shares at an inflated price in return for an upfront payment following which the proceeds are never received. If you receive unsolicited investment advice or requests: • Check the Financial Services Register from fca.org.uk to see if the person or firm contacting you is authorised by the FCA • Call the Financial Conduct Authority (“FCA”) on 0800 111 6768 if the firm does not have contact details on the Register or you are told they are out of date • Search the list of unauthorised firms to avoid at fca.org.uk/scams • Consider that if you buy or sell shares from an unauthorised firm you will not have access to the Financial Ombudsman Service or Financial Services Compensation Scheme • Think about getting independent financial and professional advice If you are approached by fraudsters please tell the FCA by using the share fraud reporting form at fca.org.uk/scams where you can find out more about investment scams. You can also call the FCA Consumer Helpline on 0800 111 6768. If you have already paid money to share fraudsters you should contact Action Fraud on 0300 123 2040. 96 | CT UK Capital and Income Investment Trust PLC ## CT UK Capital and Income ## Investment Trust PLC ## Report and Accounts ## 2023 ## Contact us Registered office: Cannon Place, 78 Cannon Street, London EC4N 6AG 0131 573 8300 ctcapitalandincome.co.uk invest@columbiathreadneedle.com Registrars: Computershare Investor Services PLC The Pavilions, Bridgwater Road Bristol BS99 6ZZ 0370 889 4094 computershare.com web.queries@computershare.co.uk ## To find out more visit columbiathreadneedle.com © 2023 Columbia Threadneedle Investments. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.