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. ------------------------------------------------------------------- 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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