Interim Results

Capital Gearing Trust PLC 01 December 2004 CAPITAL GEARING TRUST plc INTERIM REPORT FOR THE SIX MONTHS ENDED 5 OCTOBER 2004 CONTENTS PAGE Chairman's Interim Statement 1 Distribution of Invested Funds at 5 October 2004 2 Major Investments of the Company at 5 October 2004 3 Statement of Total Return 4 Balance Sheet 5 Cash Flow 6 Notes 7 CHAIRMAN'S INTERIM STATEMENT Chairman's Statement The Trust has achieved a satisfactory return over the half year to 5th October, with the net asset value per share rising by 5.7% to 1574p excluding accrued income of 10p per share. This result may be compared with rises in the FTSE Investment Companies Index of 2.2%, the FTSE All Share Index of 4.2% and the FTSE Government All Stocks Index of 0.1%. The improvement reflects performance across the portfolio with equity stock selection, zero dividend preference shares and index linked holdings being the main drivers. The revenue account has been a little stronger than anticipated in my last statement, but this should not be taken as an indication of the outcome for the year. Markets have continued to benefit from easy money policies although short term interest rates have been rising in America and the UK as authorities seek to slow house price inflation and buoyant consumer expenditure while maintaining stable economic conditions, a delicate balancing act given the electoral background. We judge markets to be fragile and will remain so until the major structural imbalances most notably in America have been addressed. Accordingly, we intend to maintain our generally cautious stance focusing on specific stocks and limited areas of perceived value. Over the last year, the Board has spent considerable time and energy reviewing its governance procedures in order to comply with current regulations. It has been more a matter of codifying our existing arrangements than changing their substance, but it has been a useful exercise. The Board has noted the increased premium to net asset value at which the Trust's shares currently trade. Shareholders will recall that limited powers have been granted to the Directors to issue shares on a non pre-emptive basis provided this is to the benefit of existing shareholders. I have had the privilege of being Chairman of Capital Gearing Trust for ten years now. During that time the net asset value of the shares has trebled to the benefit of us all. I owe considerable thanks to my Board colleagues who have all contributed to this success and in particular to our investment manager Peter Spiller. I believe it is now appropriate for me to hand over my position and the Board has invited Tony Pattison to succeed me on 1st January 2005. He is well qualified to do so. Mark Cornwall-Jones 1 December 2004 -1- DISTRIBUTION OF INVESTED FUNDS Percentage of assets As at As at 5/10/04 5/4/04 ------ ------ North UK America Europe Asia Elsewhere Total Total Investment Trust % % % % % % % Assets: Ordinary Shares 16.4 2.6 3.8 - 1.0 23.8 28.1 Capital Shares - - - - - - - Zero Dividend 34.0 - 2.4 - - 36.4 32.9 Preference Shares Other assets: Fixed interest 0.9 - 15.3 - - 16.2 19.5 Index linked - 6.4 8.9 - - 15.3 14.1 Cash 4.5 - - - - 4.5 2.1 Endowment funds 3.8 - - - - 3.8 3.3 ----- ------- ------ ------ ------- ------ ------ 59.6 9.0 30.4 - 1.0 100.0 100.0 ===== ======= ====== ====== ======= ====== ====== The basis of distribution of the invested funds has been amended to an actual rather than a see through basis at 5 October 2004 and the distribution at 5 April 2004 has been restated accordingly. - 2 - MAJOR INVESTMENTS OF THE COMPANY AT 5 OCTOBER 2004 £'000 1. INVESTMENT TRUST ORDINARY SHARES Rutland Trust 1,077 Life Offices Opportunities Trust 936 Eurovestech 866 SVM UK Active Fund 822 Ecofin Water & Power Income Shares 627 London & St Lawrence Investment Trust 604 2. INDEX LINKED SECURITIES AND FIXED INTEREST Sweden (Kingdom of) 3.5% Inflation Linked Bonds 01/12/2028 3,025 France (Govt of) 5.5% OAT 25/04/2029 2,344 Germany (Federal Republic) 4.75% Bonds 04/07/2028 2,105 Germany (Federal Republic) 4% Bonds 2009 1,424 USA Treasury Notes 3.625% Inflation Indexed 15/04/2028 1,407 ======= 3. INVESTMENT TRUST ZERO DIVIDEND PREFERENCE SHARES Jupiter Split Investment Trust - Zero Dividend 2,734 Aberdeen Development - Zero Dividend 2,100 Premium Trust - Zero Dividend 1,103 Premier Utilities Euro - Zero Dividend 916 ======= Total detailed above representing 53% of the market value of the 22,090 investments ======= -3- STATEMENT OF TOTAL RETURN (UNAUDITED) FOR THE SIX MONTHS ENDED 5 OCTOBER 2004 (Unaudited) (Unaudited) (Audited) 6 months to 5 October 2004 6 months to 5 October 2003 Year to 5 April 2004 Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Gains on - 2,447 2,447 - 4,633 4,633 - 6,649 6,649 investments Income 459 - 459 408 - 408 795 - 795 from investments Bank 23 - 23 2 - 2 26 - 26 interest GROSS 482 2,447 2,929 410 4,633 5,043 821 6,649 7,470 RETURN Management (63) (147) (210) (35) (140) (175) (113) (263) (376) expenses Other (119) - (119) (111) - (111) (201) - (201) administrative expenses (182) (147) (329) (146) (140) (286) (314) (263) (577) RETURN ON ORDINARY ACTIVITIES BEFORE TAX 300 2,300 2,600 264 4,493 4,757 507 6,386 6,893 Tax on ordinary activities (24) 24 - (52) 52 - (63) 63 - TO EQUITY SHAREHOLDERS 276 2,324 2,600 212 4,545 4,757 444 6,449 6,893 DIVIDENDS - - - - - - (344) - (344) TRANSFER TO RESERVES 276 2,324 2,600 212 4,545 4,757 100 6,449 6,549 RETURN PER ORDINARY SHARE (NOTE 2) 10.02p 84.35p 94.37p 8.30p 178.10p 186.40p 16.74p 243.08p 259.82p -4- BALANCE SHEET (UNAUDITED) AS AT 5 OCTOBER 2004 (Unaudited) (Unaudited) (Audited) 5 October 5 October 2003 5 April 2004 2004 £'000 £'000 £'000 FIXED ASSETS Investments 41,301 36,051 40,491 ------- ------- ------- CURRENT ASSETS Debtors 2,328 3,338 923 Bank 164 - 131 ------- ------- ------- 2,492 3,338 1,054 CREDITORS: amounts falling due within (162) (150) (514) one year ------- ------- ------- NET CURRENT ASSETS 2,330 3,188 540 ------- ------- ------- NET ASSETS 43,631 39,239 41,031 ======= ======= ------- CAPITAL EMPLOYED Called up share capital 689 689 689 Share premium account 7,296 7,296 7,296 Capital redemption reserve 16 16 16 Capital reserve 34,925 30,697 32,601 Revenue reserve 705 541 429 ------- ------- ------- TOTAL EQUITY SHAREHOLDERS' FUNDS 43,631 39,239 41,031 ======= ======= ------- NET ASSETS PER ORDINARY SHARE 1,583.7p 1,424.3p 1,489.3p ======= ======= ======= -5- CASH FLOW (UNAUDITED) FOR THE SIX MONTHS ENDED 5 OCTOBER 2004 (Unaudited) (Unaudited) (Audited) 6 months to 6 months to Year to 5 October 2004 5 October 2003 5 April 2004 --------------- --------------- -------------- £'000 £'000 £'000 Cash inflow from operating 177 164 282 activities (see below) Capital expenditure and financial investment: Purchase of investments (5,385) (2,981) (13,470) Sales of investments 7,022 2,870 11,082 Equity dividends paid (344) (407) (407) Management of liquid resources - cash paid to brokers awaiting investment (1,437) (954) (525) Financing - issue of new - 1,204 3,070 shares -------- -------- -------- Increase/(decrease) in cash 33 (104) 32 ======== ======== -------- Cash and cash equivalents: Balance at beginning of 131 99 99 period Net cash movement 33 (104) 32 -------- -------- -------- Balance at end of period 164 (5) 131 ======== ======== -------- Operating cash flows: Profit before tax 300 264 507 Expenses charged to capital (147) (140) (263) Change to accrued income and 32 26 (1) sundry debtors Change to sundry creditors (8) 14 39 -------- -------- -------- 177 164 282 ======== ======== ======== -6- NOTES 1. Status of financial statements The financial information for the six months to 5 October 2004 and 5 October 2003, 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 2004 statutory accounts. The management expenses in the unaudited accounts for the six months ended 5 October 2003 are allocated on the previous basis of 20% to revenue and 80% to capital rather than the allocation of 30% to 70% used in the six months to 5 October 2004 and the year ended 5 April 2004. The abridged financial information for the year ended 5 April 2004 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. 2. Earnings per share The calculations of earnings per share is based on results after tax divided by the weighted average number of shares in issue during the period of 2,754,906 (2003: 2,551,647; 2004: 2,653,261). -7- This information is provided by RNS The company news service from the London Stock Exchange

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