BMO Capital and Income Investment Trust : Interim Results and Dividend Announcement

Date: 01 June 2020

Contact: Julian Cane

BMO Investment Business Limited

020 7628 8000

LEI:21380052ETTRKV2A6Y19

BMO Capital and Income Investment Trust PLC

Unaudited Statement of Results

for the half-year ended 31 March 2020

Highlights for the half-year ended 31 March 2020:

'The Company has continued to achieve unbroken growth in half yearly dividends. In addition, it recorded its highest share price and Net Asset Value per share since launch prior to market setbacks resulting from the onset of the Coronavirus pandemic.'

· The dividend for the period of 5.2 pence represents an increase of 2.0% over the previous period⁽¹⁾

· Share price total return⁽²⁾ was -25.9% with the price ending the period at 236p, having reached a record high of 358p during the period prior to the outbreak of the Coronavirus pandemic

· Net Asset Value per share total return⁽²⁾ ended the period down 27.5%, underperforming the -22.0% return from the benchmark FTSE All-Share Index, having been ahead of benchmark until mid-March

'The Board has utilised some revenue reserves built up in prior years to deliver the increased dividend in respect of the half-year and will continue to monitor the Company's use of reserves, mindful of Shareholders' desire for income in addition to capital growth - particularly during these challenging times.'

Jonathan Cartwright

Chairman

SUMMARY OF RESULTS

(1)The first interim dividend of 2.65 pence per share was paid on 31 March 2020 and the second interim dividend of 2.55 pence per share is payable on 30 June 2020 to Shareholders registered on 12 June 2020, ex-dividend date 11 June 2020.

(2)Total Return - the return to Shareholders calculated on a per share basis adding dividends paid in the period to the increase or decrease in the Share Price or Net Asset Value 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.

The Chairman, commenting on the results, said:

This is my first report to you since being appointed Chairman following Steve Bates' retirement at the end of March and I would like to thank him, on behalf of all Shareholders, for his thoughtful and informed leadership of the Board over almost nine years.

I shall comment on events and the performance of the Company for the period from 1 October 2019 to 31 March 2020 but first my thoughts are towards you as our Shareholders and I very much hope you are managing during this Coronavirus crisis as well as possible. We are aware that many investors rely on their dividend income to meet everyday living expenses and that is a key factor in our considerations and in the way the Investment Manager looks after your portfolio.

Rarely has such a short period encapsulated such sharp swings in performance. Against a background of stable but unexciting economic growth, our share price and Net Asset Value (NAV) had risen to record high levels in January. The

spread of Coronavirus and the almost universal response by governments worldwide to impose lockdowns have had the inevitable effect of causing severe disruption to individuals, companies, economies and financial markets. The long-term impact of a previously unknown virus cannot be fully foreseen and international governmental responses are unparalleled. Lockdowns, in various formulations, have kept many billions of people away from their usual activities in order to slow the spread of the infection, reduce the burden on health facilities and hence reduce the number of fatalities. One inevitable consequence is that economic activity has collapsed, quite possibly at the fastest rate ever, and some businesses have all but ceased trading, at least temporarily. Fortunately, governments and central banks have responded in very supportive ways, recognising the immense difficulty of the situation for many people and

businesses.

The equity market is right at the forefront of this stress given the position of equity in the capital structure of companies. Equity holders own the profits of a company after all its other costs, including all borrowings and tax. Although schemes are in place for lenders to support borrowers, these are generally payment deferrals or extensions, rather than interest free gifts. For this reason, the equity market experienced a collapse which in speed and depth rivals any of those in the last century.

Even in these difficult circumstances your Investment Manager has maintained its focus on Environmental, Social and Governance issues.

Performance

Not only was our share price and NAV at record high levels in January, but our performance was better than that of our benchmark until the middle of March. These facts are not of much comfort given the results at the end of March, but they do show just how volatile the situation has been.

Over the six months under review, the share price total return was -25.9% and the NAV total return was -27.5%; these compare to the total return in the FTSE All-Share Index, our benchmark, of -22.0%. Many of the main detractors to our performance were from the Financials sector: the total returns of the share prices of Arrow Global, Burford Capital, Beazley and OneSavings Bank were -51%, -49%, -36% and -32% respectively. These were partly offset by a relatively low exposure to mainstream banks. We also have relatively little exposure to the two UK quoted oil majors, Royal Dutch Shell and BP. Their total returns were -40% and -31% respectively. The oil market has had its own additional issues as

oversupply of oil has compounded the effects of a fall in demand and this led to the price of a barrel of Brent crude falling from above US$65 at its recent peak in January to just over US$26 at the end of March.

The initial impact of the pandemic on the Company's performance has been more severe than on the UK market as a whole. The magnitude of the downturn has inevitably impacted our longer-term performance figures as well, but I'm glad to report that over 5 years to 31 March 2020 both our share price and NAV have still made absolute gains (+5.5% and +7.2% respectively) and that these are ahead of our benchmark (+2.9%).

Premium / Discount

It is clearly very difficult to isolate our share price from the volatility of the overall equity market and hence the range of our premium / discount has been wider than usual with a peak premium of 6.8% and a discount of 5.1%. However, we are vigilant to try to ensure the share price trades closely in line with the NAV and we have been broadly successful in this with the shares trading at an average premium across the six months of 0.1%.

Share Issuance

Demand from new and existing investors has been such that we issued a total of 1,265,000 new shares across eight separate occasions over the six months. We have issued further shares since the half-year end taking the number of new shares issued in the financial year to date to 3,025,000, making this already the second busiest year of share issuance in your Company's history.

New shares are only issued at a premium to the 'cum income' NAV, meaning existing Shareholders are not disadvantaged. To the extent that a larger Company is able to spread its fixed costs across a wider base, all Shareholders will benefit from the increase in size brought about by the share issuance, together with enhanced liquidity in the shares themselves.

Income and Dividends

Although the crisis did not impact on companies and markets for the majority of our reporting period, the effect is still

noticeable in our income (dividends received from our investee companies) and hence ultimately our revenue return per share. In order to preserve cash a number of companies have decided to cancel or defer dividend payments to their Shareholders. In some cases, such as banks, this has been advised by their regulators, in other instances, companies

have needed to in order to maintain adequate liquidity and in yet others, the decision has been more precautionary in nature. Whatever the reason, the effect is the same; March is one of the busiest months for dividend announcements and ex-dividend dates, particularly from companies reporting results for calendar 2019 and the timing of this has been the main driver behind the fall in our revenue return per share of 9.5% when measured against the comparative period last year.

At the end of our first financial quarter there was no storm on the horizon and we announced an increase in the first quarter's dividend from 2.55 pence per share to 2.65 pence per share. With this set of results, we are announcing a dividend for the second quarter of 2.55 pence per share, unchanged from the comparative quarter last year, which will

be paid on 30 June 2020 to Shareholders on the register on 12 June 2020 with an ex-dividend date of 11 June 2020. The aggregate dividends paid and payable therefore in respect of the half-year represent a 2.0% increase over the first half last year.

Balance Sheet, Gearing and Liquidity

We entered the new financial year with a loan drawn down of £10.0 million and cash of £4.2 million. During the six months your investment manager invested the cash and then in response to falling share prices borrowed and invested a further £10 million in new and follow-on opportunities where negative market movements were considered to be overdone. At the half-year end, the total borrowed, including overdraft, was £21.9 million, giving a gearing figure of 9.0%. In the very short-term the use of debt has been detrimental to performance, but the cost of our borrowing is very modest and it would not require much return at all from our investments to make the borrowing positive for performance.

Our portfolio of investments is highly liquid with more than half of holdings being constituents of the FTSE 100 Index, the index of the largest and generally the most liquid stocks in the UK. There are no unlisted companies in the portfolio. We highlight this positive characteristic although the circumstances in which we would need liquidity are very unlikely. The loan facility of £30 million extends until March 2021 and you can be assured we will seek arrangements to renew this well ahead of time, if, indeed it is still required.

Outlook

There are some things we can be mostly sure about and others that are much more difficult to assess. It is surely reasonable to hope that, in time, a vaccine and/or cure for the Coronavirus will be found; thus allowing for life to return to a form of normal. We should expect, however, substantial changes in businesses' organisational structures and work practises. The timing of these is, of course, uncertain, but there has never been an occasion when so much collective effort on a worldwide basis has been directed at a single problem. Governments have very difficult choices to make in the meantime in how to handle the outbreak, aiming for a balance between allowing people liberty and businesses the ability to operate, whilst protecting against a resurgence of the disease.

For the majority of companies, financial results for 2020 will be affected by the impact of the pandemic, but, assuming this is an exceptional period and therefore not likely to be repeated, the adverse impact should not be significant when

viewed from a longer-term valuation perspective. Looking further ahead, or indeed back for historic comparisons, suggests that if companies are able to recover their profitability within a couple of years then current valuations are attractive, certainly relative to the ultra-low returns available from bonds or deposit rates. Although the current crisis

may be all enveloping, we are mindful other issues such as Brexit and international trade disputes have potential to cause additional disruption.

Approaching half of all UK listed companies have cut, deferred or cancelled their dividend payments in response to the crisis and this figure, for now at least, is only increasing. When and at what level dividends restart will depend both on the speed of the economic reset and the financial situation the individual companies are in. Increased debt levels are to be expected right across the corporate sector and this would suggest dividends are likely to be at lower levels, at least until the extra debt is repaid.

As I said at the start of this statement, the Board is very mindful of Shareholders' desire for income in addition to capital growth. We are also very proud of being an Association of Investment Companies 'Dividend Hero' having increased our dividend every year since launch in 1992. In the majority of these years we have paid out a little less in dividends than we have earned, thus building up revenue reserves of £15.1 million by the beginning of the current financial year and prior to the fourth interim dividend in respect of 2019. This is a valuable resource for Shareholders when market returns become extremely challenging - as is now the case. Your Board has decided to utilise £0.2 million of those reserves to enable the Company to pay dividends in respect of the first half-year 2% greater than the same period last year. Notwithstanding the challenge occasioned by the impact on equity markets of the Coronavirus pandemic, the Company remains well placed to achieve its twin aims of growing net assets and dividends over the longer term.

Jonathan Cartwright

29 May 2020

Forward -looking statements

This interim report may contain forward-looking statements with respect to the financial condition, results of operations and business of the Company. 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 report. Nothing should be construed as a profit forecast.

Directors' Statement of Principal Risks and Uncertainties

Most of the Company's principal risks and uncertainties are market related and no different from those of other investment trusts investing primarily in listed equities. They are described in more detail under the heading 'Principal risks and future prospects' within the Strategic Report in the Company's Annual Report for the year ended 30 September 2019.

The principal risks identified in the Annual Report were:

· An inappropriate business or marketing strategy particularly in relation to investor needs or sentiment giving rise to a share price discount to NAV per share;

· Unfavourable markets or asset allocation, sector and stock selection and use of gearing and derivatives are inappropriate giving rise to investment underperformance as well as impacting capacity to pay dividends; and

· Errors, fraud or control failures at service providers, or loss of data through increasing cyber-threats or business continuity failure could damage reputation or investors interests or result in losses.

Since the beginning of 2020 the global economy has suffered considerable disruption due to the effects of the Coronavirus pandemic. The Directors have reviewed the key risk register for the Company which identifies the risks that the Company is exposed to, the controls in place and the actions being taken to mitigate them.

The Board considers that with the spread of the pandemic the threat from the principal risks has increased and have considered this in relation to going concern.

It is noted that:

· As at 28 May 2020, the last practicable date before publication of the Company's Interim Report the Company's shares are trading at a small discount of 0.4% to NAV indicating that the strategy of the Company remains in investor demand;

· Performance in the period prior to the spread of the Coronavirus was strong, as can be seen in the analysis within the Chairman's Statement.

· In addition, the Board has noted that home working arrangements have been implemented at the Manager and many of the Company's key suppliers without any noticeable impact upon service delivery and operations.

Directors' Statement of Responsibilities in Respect of the Half-Yearly Financial Report

In accordance with Chapter 4 of the Disclosure and Transparency Rules the Directors confirm, that to the best of their knowledge:

· the condensed set of financial statements has been prepared in accordance with applicable UK Accounting Standards on a going concern basis and gives a true and fair view of the assets, liabilities, financial position and net return of the Company;

· the half-yearly report includes a fair review of the development and performance of the Company and important events that have occurred during the first six months of the financial year and their impact on the financial statements;

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

· the half-yearly report includes a fair review of the related party transactions that have taken place in the first six months of the financial year.

On behalf of the Board

Jonathan Cartwright

Chairman

29 May 2020

Condensed Income Statement

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

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

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

Condensed Statement of Changes in Equity

Condensed Balance Sheet

Condensed Statement of Cash Flows

Notes

1 Basis of preparation

These condensed financial statements, which are unaudited, have been prepared on a going concern basis in

accordance with the Companies Act 2006, FRS 102, Interim Financial Reporting (FRS104) and the Statement of

Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('SORP')

issued by the AIC in October 2019.

The accounting policies applied in the condensed set of financial statements are set out in the Company's annual

report for the year ended 30 September 2019.

2 Net return per ordinary share

Return per ordinary share attributable to Shareholders reflects the overall performance of the Company in the period. Net revenue recognised in the first six months is not necessarily indicative of the total likely to be received in the full accounting year.

3 Dividend

The second interim dividend of 2.55 pence per share in respect of the year ending 30 September 2020 will be paid on 30 June 2020 to Shareholders on the register on 12 June 2020. The total cost of this dividend, based on 105,809,268 shares in issue, and entitled to the dividend on 28 May 2020 is £2,698,000.

4 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 is suffering considerable disruption due to the effects of the Coronavirus pandemic 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 May 2020, the last practicable date before publication of this report, borrowings amounted to £20 million. This is in comparison to a Net Asset Value of £278.4 million. In accordance with its investment policy the Company is mainly invested in readily realisable, FTSE All-Share listed securities.

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. The Directors have noted that home working arrangements have been implemented at the Manager and many of the Company's key suppliers without any noticeable impact upon service delivery and operations.

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 at least twelve months from the date of approval of these financial statements. Accordingly, these financial statements have been prepared on a going concern basis.

5 Results

The results for the half-year ended 31 March 2020 and 31 March 2019, which are unaudited, constitute non-statutory accounts within the meaning of Section 434 of the Companies Act 2006. The latest published accounts which have been delivered to the Registrar of Companies are for the year ended 30 September 2019; the report of the independent auditors thereon was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The abridged financial statements shown above for the year ended 30 September 2019 are an extract from those accounts.

6 Half-yearly report and accounts

The Company's report and accounts are available on the internet at www.bmocapitalandincome.com.

Printed copies may be obtained from the Company's Registered Office, Exchange House, Primrose Street, London EC2A 2NY.

By order of the Board

BMO Investment Business Limited, Secretary

Exchange House, Primrose Street, London EC2A 2NY

29 May 2020