Interim Results

Capital Gearing Trust PLC 09 November 2005 CAPITAL GEARING TRUST plc INTERIM REPORT FOR THE SIX MONTHS ENDED 5 OCTOBER 2005 CONTENTS PAGE Chairman's Interim Statement 1 Distribution of Invested Funds at 5 October 2005 2 Investments of the Company at 5 October 2005 3 Statement of Total Return 4 Balance Sheet 5 Cash Flow 6 Notes 7 CHAIRMAN'S INTERIM STATEMENT The Trust recorded a positive return during the half year to 5th October 2005. Over this period, the net asset value per share has increased by 8.1% to 1815p excluding accrued income of 9.3p. This performance is consistent with our stated investment objective of delivering capital growth in absolute terms rather than relative to any particular stock market index. As a matter of record, it compares with rises in the FTSE Investment Companies Index of 16.7%, the FTSE All Share Index of 9.8% and the FTSE Government All Stocks Index of 2.6%. After a weak April, equity markets moved ahead strongly up to the end of September. It is therefore not surprising that the equity content, representing approximately a third of the underlying investment portfolio, was the main performance driver. In particular, our investments in venture capital funds Rutland Trust, Eurovestech and Martin Currie Capital Return performed well. The European and South African trusts held in the portfolio benefited from strong asset performances coupled with a narrowing of discounts relative to their share prices. Our bond and zero preference shareholdings also produced reasonable returns but less than the equity markets. Looking ahead, we believe that equity markets are likely to become more volatile with the positive short-term impact of seemingly abundant liquidity, increasing takeover and merger activity and exceptionally high levels of financial speculation being counter-balanced by further monetary tightening in the US and Europe and a general slow-down in economic and corporate profits growth. Perhaps one of the biggest concerns and in our view a major market risk is that the US housing market bubble is now showing tentative signs of coming to an end. When it finally bursts the negative impact on US consumption as the saving rate recovers from its current negative levels will, in the absence of offsetting demand elsewhere, lead to recessionary pressures throughout the world economy. Against this background, index linked and some conventional bonds should do well and this is reflected in our cautious investment stance and our relatively high exposure to these securities. Shareholders will recall that at the last Annual General Meeting held on 7th July 2005, the Directors were granted limited powers to issue shares on a non pre-emptive basis provided this was to the benefit of existing shareholders. I am pleased to report that in order to satisfy investor demand, a total of 40,000 shares were issued in September in two tranches at issue prices that represented a 15% premium to the then prevailing net asset value. Finally, the Board and I am sure long standing shareholders were very sorry to learn of the recent death of Alan Tyser who served for 17 years as both a Director and subsequently Chairman of Capital Gearing Trust plc until his retirement in 1998. He will be sadly missed by us all. Tony Pattison 9th November 2005 -1- DISTRIBUTION OF INVESTED FUNDS Distribution of investment funds of £50,790,000 (5 April 2005 -£46,271,000 as restated) As at As at 5/10/05 5/4/05 North UK America Europe Elsewhere Total Total Investment Trust Assets: % % % % % % Ordinary Shares 24.2 3.2 4.4 1.7 33.5 29.5 Endowment funds 3.7 - - - 3.7 4.3 Zero Dividend Preference 15.2 - 2.7 - 17.9 23.5 Shares Other assets: Fixed interest stocks 0.8 - 17.4 - 18.2 18.9 Index linked 8.1 5.1 8.3 - 21.5 21.6 Cash 5.2 - - - 5.2 2.2 57.2 8.3 32.8 1.7 100.0 100.0 - 2 - INVESTMENTS OF THE COMPANY AT 5 OCTOBER 2005 MARKET VALUE GREATER THAN £500,000 £'000 INVESTMENT TRUST ORDINARY SHARES Rutland Trust 1,559 Allianz Dresdner 2nd Endowment Policy Trust 2006 1,409 Life Offices Opportunities Trust 1,374 Eurovestech 1,176 Active Capital Trust 1,119 North Atlantic Smaller Companies 934 TR Property Investment Trust 813 American Opportunities Trust 689 F&C Private Equity 'A' 657 Invesco English & Intl 644 London & St Lawrence Investment Company 595 Henderson Euro Trust 537 Falcon Investment Trust 516 Other (34 investments) 6,912 18,934 INDEX LINKED SECURITIES AND FIXED INTEREST Sweden (Kingdom of) 3.5% Bonds 01/12/28 3,343 France (Govt of) 5.5% OAT 25/04/29 2,651 Germany (Fed Rep) 4.75% Bunds 04/07/28 2,399 Treasury 2.5% Index Linked 2013 2,279 Canada (Govt of) 4% Index-Linked 01/12/31 1,707 Germany (Fed Rep) 4.0% Bunds 04/07/09 1,424 Treasury 2.5% Index Linked 2011 1,073 Switzerland (Govt of) 3.0% Bonds 2018 971 Germany (Fed Rep) 4.75% Bunds 04/07/34 900 USA Treasury 3.625% TIPS 15/04/28 890 Treasury 2.5% Index Linked 2016 766 France (Govt of) 3.15% BD 25/07/2032 502 Other (5 investments) 1,245 20,150 INVESTMENT TRUST ZERO DIVIDEND PREFERENCE ADC Units 1,660 Utilico Investment Trust 1,264 Premium Trust 1,170 European Utilities Trust 1,015 Premier Utilities Trust 968 NFS Securities 601 Other (9 investments) 2,403 9,081 Cash 2,625 Total investment funds 50,790 -3- STATEMENT OF TOTAL RETURN (UNAUDITED) FOR THE SIX MONTHS ENDED 5 OCTOBER 2005 (Unaudited) (Unaudited) (Audited) (Restated) (Restated) 6 months to 5 October 2005 6 months to 5 October 2004 Year to 5 April 2005 Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Gains on - 3,787 3,787 - 2,451 2,451 - 5,817 5,817 investments Income from 449 - 449 459 - 459 876 - 876 investments Bank interest 29 - 29 23 - 23 - - - GROSS RETURN 478 3,787 4,265 482 2,451 2,933 876 5,817 6,693 Management (73) (171) (244) (63) (147) (210) (131) (308) (439) expenses Other (116) - (116) (119) - (119) (234) - (234) administrative expenses (189) (171) (360) (182) (147) (329) (365) (308) (673) RETURN ON ORDINARY ACTIVITIES BEFORE TAX 289 3,616 3,905 300 2,304 2,604 511 5,509 6,020 Tax on ordinary activities (31) 31 - (24) 24 - (50) 50 - RETURN ATTRIBUTABLE TO EQUITY SHAREHOLDERS 258 3,647 3,905 276 2,328 2,604 461 5,559 6,020 DIVIDENDS (358) - (358) (344) - (344) (344) - (344) TRANSFER TO (100) 3,647 3,547 (68) 2,328 2,260 117 5,559 5,676 RESERVES RETURN PER ORDINARY SHARE (NOTE 2) 141.42p 94.52p 218.52p The results for the year ended 5 April 2005 and the six months ended 5 October 2004 have been restated in accordance with Financial Reporting Standards 21, 22 and 26. More details are given in note 1 on page 7. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. The total column of this statement is the profit and loss account of the Company. -4- BALANCE SHEET (UNAUDITED) AS AT 5 OCTOBER 2005 (Unaudited) (Unaudited) (Audited) (Restated) (Restated) 5 October 5 October 5 April 2005 2004 2005 £'000 £'000 £'000 FIXED ASSETS Investments 48,165 40,866 45,258 CURRENT ASSETS Debtors 2,902 2,328 1,378 Bank 91 164 151 2,993 2,492 1,529 CREDITORS: amounts falling due within one year (171) (162) (175) NET CURRENT ASSETS 2,822 2,330 1,354 NET ASSETS 50,987 43,196 46,612 CAPITAL EMPLOYED Called up share capital (note 3) 699 689 689 Share premium account 8,114 7,296 7,296 Capital redemption reserve 16 16 16 Capital reserve 41,368 34,490 37,721 Revenue reserve 790 705 890 TOTAL EQUITY SHAREHOLDERS' FUNDS 50,987 43,196 46,612 NET ASSETS PER ORDINARY SHARE 1,824.3p 1,568.0 p 1,692.0p p Certain figures for the year ended 5 April 2005 and the six months ended 5 October 2004 have been restated in accordance with Financial Reporting Standards 21, 22 and 26. More details are given in note 1 on page 7. -5- CASH FLOW (UNAUDITED) FOR THE SIX MONTHS ENDED 5 OCTOBER 2005 (Unaudited) (Unaudited) (Audited) 6 months to 6 months to Year to 5 October 5 October 5 April 2005 2004 2005 £'000 £'000 £'000 Cash inflow from operating activities (see below) 203 177 186 Capital expenditure and financial investment: Purchase of investments (9,105) (5,385) (15,634) Sales of investments 9,985 7,022 16,245 Equity dividends paid (358) (344) (344) Management of liquid resources - cash with brokers awaiting investment (1,613) (1,437) (433) Financing - issue of new shares 828 - - (Decrease)/increase in cash (60) 33 20 Cash and cash equivalents: Balance at beginning of period 151 131 131 Net cash movement (60) 33 20 Balance at end of period 91 164 151 Operating cash flows: Profit before tax 289 300 511 Expenses charged to capital (171) (147) (308) Change to accrued income and sundry debtors 89 32 (22) Change to sundry creditors (4) (8) 5 203 177 186 -6- NOTES 1. Status of financial statements The financial information for the six months to 5 October 2005 and 5 October 2004, which is unaudited and does not constitute statutory accounts, has been prepared using accounting policies consistent with those set out in the Company's 5 April 2005 statutory accounts, except as stated below. The abridged financial information for the year ended 5 April 2005, which has been restated for the matters described below, has been extracted from the Company's statutory accounts for that year, which have been filed with the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain a statement under either Article 245(2) or Article 245(3) of the Companies (Northern Ireland) Order 1986. Modifications to UK GAAP as a result of the issue of new Financial Reporting Standards ('FRS') have been applied to all periods being reported in these accounts. The effects of the restatements of prior results are as follows: Valuation of investments FRS 26: 'Financial Instruments: Measurement' requires that investments are valued at their fair value. Listed investments, which were formerly valued at middle market prices, have been valued at bid price. As a result, prior year's figures have been adjusted and this has resulted in (a) a reduction of net assets attributable to shareholders at 5 October 2004 and 5 April 2005 of £435,000 and £351,000 respectively and (b) an increase in net return to shareholders for the 6 months ended 5 October 2004 and the year ended 5 April 2005 of £4,000 and £88,000 respectively. Dividends FRS 21: 'Events after the Balance Sheet Date' states that final dividends declared and approved by the Company after the balance sheet date should not be recognised as a liability of the Company at the balance sheet date, and interim dividends cannot be included in the accounts until paid. Prior results have accordingly been restated and this has led to an increase in net assets attributable to shareholders of £358,000 for the year ended 5 April 2005. As a result, the dividends shown on page 4 are those actually paid in the period, the pay date being the date on which the money was sent to the Registrars in order to fund the dividend. In respect of the year ended 5 April 2005, the Company declared a dividend of 13.00 pence per share (£358,000). No dividends were declared in respect of the periods ended 5 October 2004 and 5 October 2005. Return per Ordinary Share Under FRS 22: 'Earnings per share' the Company is only permitted to show one return per share on the Statement of Total Return. The revenue and capital returns per share for the periods to 5 October 2005, 5 October 2004 and the year ended 5 April 2005 are shown below: 6 months to 5 October 6 months to 5 October Year to 2005 2004 5 April 2005 Revenue 9.34p 10.02p 16.73p Capital 132.08p 84.50p 201.79p 2. Return per ordinary share The calculations of return per share are based on results after tax divided by the weighted average number of shares in issue during the period of 2,761,300 (2004: 2,754,906; 2005: 2,754,906). -7- NOTES 3. Issue of new shares In order to satisfy market demand, new ordinary shares of 25p were issued as follows: Consideration Date Number of shares £ 2 September 2005 30,000 620,000 20 September 2005 10,000 208,000 -8- This information is provided by RNS The company news service from the London Stock Exchange

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