Final Results - Replacement
Capital Gearing Trust PLC
5 June 2000
The issuer has made the following amendment to the 'Final Results'
announcement released today at 15.12 under RNS No 6974L.
At the end of the second paragraph the following wording has been added. 'This
dividend will be paid on 5th July, 2000 to shareholders on the register as at
16th June, 2000.'
All other details remain unchanged.
The full corrected version is shown below.
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CAPITAL GEARING TRUST P.L.C - Preliminary Results
Chairman's Statement
Capital Gearing Trust provided a sound but relatively subdued
return in the year to 5th April, 200 with an increase in net
asset value per share of 9.7 per cent. This may be compared
with a rise in the FTSE All Share Index of 4.1 per cent. while
our benchmark index, the FT Investment Trust Index, rose by no
less than 31.0 per cent. Over the year, investment trusts
generally benefited from strong equity markets particularly
overseas, and a rather greater appetite amongst the private
investors for the sector. As a trust whose objective is to
achieve capital growth principally through investing in
investment trusts, we have supported the AITC's Its campaign.
The industry has itself reacted creatively to changes in the
savings market, and this process is likely to continue.
However, the institutional overhang remains, as is evident from
the discount at which many investment trusts shares trade. The
obverse of this coin is the interesting opportunities that exist
for long-term investors.
The Trust has now completed its first full year since the major
review of its management arrangements and accounting approach in
1998 including the decision to charge 80 per cent. of investment
management costs to capital. Earnings per share for the year
come out at 8.66p and the directors now recommend a first and
final dividend of 7.00p, more than meeting the indication
previously given to shareholders. This dividend will be paid on
5th July, 2000 to shareholders on the register as at 16th June,
2000.
Last year I reported we were planning how best to reorganise our
secretarial and administrative requirements, increasingly
important in today's regulatory environment. I am please to
report that we have reached agreement with Capel Cure Sharp
Holdings Ltd. to take on much of the administrative work
currently undertaken in Belfast and to provide the Trust with
full secretarial services following the conclusion of this
year's AGM.
Manager's Report And Portfolio Analysis
The past year has been one of mixed fortunes. The first half of
our fiscal year saw stock markets depressed, but aggressive
additions of liquidity by the central banks under the leadership
of the Federal Reserve led to a dramatic turnaround in October.
This monetary stimulation encouraged more rapid economic growth,
with its associated increase in corporate profits. As
importantly, it gave credence to the idea of the 'Greenspan
put', the naive belief that equity investment entailed limited
risk, since the Federal Reserve would always ensure that any
incipient bear market would be offset by substantial injections
of liquidity. The result was an enthusiasm for shares,
particularly in the areas of telephone, media and technology,
that can only be described as manic. Your company benefited
from substantial rises in Fleming India, North Atlantic Smaller
Companies, Lloyds Smaller Company capital shares, which were
sold before the year end, and Scottish Value whose perceptive
management exploited trusts with exposure in New Japan and in
high technology. The shares more than doubled and our holding
was markedly reduced in the early part of 2000. Profitable
reconstruction occurred in Commodities Trust, Value Realisation,
Martin Currie Smaller Companies Trust, Venturi, Aberdeen
Development and just after the year end, Five Arrows Chile.
Overall, though, a cautious attitude was adopted throughout
because of the exceptionally poor valuation of equity markets
relative to history and to bond and cash interest rates. High
exposures were maintained to the zero preference market, which,
however, produced a very modest return; issuance overwhelmed
demand. Our portfolio is of short duration and now offers
highly attractive returns for little risk in particular holdings
in the portfolio. The bond holdings were mixed. The US Index-
Linked Treasuries ('TIPS') benefited from a higher rating and a
strong currency, but bonds denominated in Euros suffered. Latin
American Extra Yield, a trust that owns Brady Bonds, saw its
discount narrow in anticipation of reconstruction, but the Asian
High Yield Bond Fund saw the discount actually widen to over
50%; prospective returns seem quite exciting. Performance
attribution therefore would credit almost the whole increase in
assets of 9.7% to the 30% of the portfolio held in equities.
Outlook
With an overheated economy as well as a highly valued stock
market, the outlook for the US is poor. The economy has been
allowed to grow at above trend rates because of an initial
absence of inflation, but this has been achieved by a huge
expansion of credit; a soft landing seems difficult to achieve.
Unfortunately, if a general bear market does develop in the US,
as opposed to a correction in the NASDAQ, the effects will be
felt in all equity markets. We therefore continue to believe
that risk aversion is appropriate for long term private funds.
Within the equity holdings, Siam Selective and Five Arrows Chile
are in the process of liquidating and Electra will tender for
25% of its own shares. Fleming Income Growth capital has
already been repaid. The largest holding is in Tor Capital
shares, which are due to mature in July 2001 and there is a good
investment in British Assets Growth shares and Investors Capital
Growth shares where corporate developments are likely in or
before September 2001. In short, the opportunities for
shareholders to benefit from narrowing discounts in trusts with
good quality assets remain attractive.
In the fixed interest portfolio, a weaker sterling might
increase the gains made from eventually lower interest rates as
economies cool down in 2001. The zero preference portfolio is
of good quality and should produce a return of about 8%.
Statement of Total Return
(incorporating the revenue account)
For the year ended 5 April 200
2000 1999
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Realised gains on
investments - 1,585,803 1,585,803 - 1,579,978 1,579,948
Realised gains on life
assurance policies - - - 11,111 11,111
Net change in unrealised
appreciation - 605,416 605,416 - (705,696) (705,696)
Income 36,947 - 336,947 295,339 - 295,339
Gross Return 336,947 2,191,219 2,528,166 295,339 885,363 1,180,702
Investment
management fees (37,318) (149,668) (186,986) (12,411) (49,644) (62,055)
Other expenses (95,577) - (95,577)(103,972) (85,452) (189,424)
Return on ordinary
activities Before
Taxation 204,052 2,041,551 2,245,603 178,956 750,267 929,223
Tax on ordinary
activities (2,250) - (2,250) (21,076) - (21,076)
Return attributable
to equity
shareholders 201,802 2,041,551 2,243,353 157,880 750,267 908,147
Dividends on ordinary shares:
Dividend payable - 7p per
Ordinary Share
(1999 - 5p) (163,163) - (163,163) 116,545) - (116,545)
Transfer to
reserves 38,639 2,041,551 2,080,190 41,335 750,267 791,602
Return per ordinary
share* 8.66p 87.58p 96.24p 7.06p 33.57p 40.63p
* There was no dilution of the above return in either year.
The revenue column of this statement is the profit and loss
account of the company.
All revenue and capital items in the above statement derive from
continuing operations.
Cash Flow Statement
For the year ended 5 April 2000
2000 1999
£ £
Net cash inflow from operating activities 348,797 246,458
Taxation
Corporation tax recovered/(paid) 12,921 (13,187)
Capital expenditure and financial investment
Payments to acquire investments (12,323,954) (14,364,605)
Receipts from sale of investments 11,235,875 13,561,068
Maturity of life assurances policies - 621,471
(1,088,079) (182,066)
Equity dividends paid (116,545) (61,350)
Financing
Issue of ordinary share capital - 920,500
(Decrease)/increase in cash (843,206) 910,355
Net asset value per share 998.9p 909.7p
The financial information set out above does not constitute the
company's statutory accounts for the years ended 5 April 1999
and 2000 but is derived from those accounts. Statutory accounts
for 1999 have been delivered to the Registrar of companies and
those for 2000 will be delivered following the company's Annual
General Meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain statements
under Section 237 (2) or (3) of the Companies Act 1985.
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