CAPITAL GEARING TRUST P.L.C (the 'Company')
PRELIMINARY ANNOUNCEMENT OF ANNUAL RESULTS FOR THE YEAR ENDED 5 APRIL
2009
FINANCIAL HIGHLIGHTS
+-------------------------------------------------------------------+
| | 5 April 2009 | 5 April 2008 | % Change |
| | | | |
|--------------------------+--------------+--------------+----------|
| Share Price | 2,370.0p | 2,135.0p | +11.0 |
|--------------------------+--------------+--------------+----------|
| Net Asset Value per | 2,125.4p | 2,126.4p | - |
| Share | | | |
|--------------------------+--------------+--------------+----------|
| Premium | 11.5% | 0.4% | - |
|--------------------------+--------------+--------------+----------|
| Shareholders' Funds | £59.4m | £59.4m | - |
|--------------------------+--------------+--------------+----------|
| Market Capitalisation | £66.2m | £59.7m | +11.0 |
|--------------------------+--------------+--------------+----------|
| Total Expense Ratio* | 1.6% | 1.5% | +6.7 |
|--------------------------+--------------+--------------+----------|
| Dividend per Share# | 22.0p | 16.5p | +33.3 |
+-------------------------------------------------------------------+
* Operating Expenses (excluding the VAT refund received during the
year) divided by Total Assets less Current Liabilities
# If approved at the AGM, the following timetable will be followed:
payment date: 13 July 2009, record date: 5 June 2009, ex-dividend
date: 3 June 2009
CHAIRMAN'S STATEMENT
Overview
In what is now widely regarded to have been one of the most difficult
and traumatic periods in the history of financial markets, it is with
a certain degree of satisfaction coupled with some obvious relief
that I am able to report that as at 5 April 2009, the net asset value
per share of 2,125.4p has barely changed from the figure of 2,126.4p
reported last year. To put this performance into context, over the
same period, the FTSE Equity Investment Instruments Index and the
FTSE All-Share Index fell by 33.7% and 32.5% respectively. Against a
background of stock market turmoil and investors' flight to
relatively safe havens, the FTSE Government All Stock Index rose by
4.2% over the same period.
Earnings per share for the period amounted to 28.5p compared to 21.3p
in 2008.
From my previous reports, shareholders will be aware that our
Investment Manager, supported by the Board, has for some while now
adopted an investment strategy geared to preserving capital rather
than taking undue risks in pursuit of high returns. To meet this
objective a defensive asset allocation policy has been employed
throughout the year. At the year-end, fixed interest, index linked
securities and cash represented 69.7% of total assets with another
10.7% and 3.6% held respectively in zero dividend preference shares
and endowment funds. Major movements within asset classes during the
year included a decrease in equities and endowment funds and an
increase in both fixed interest and index linked securities.
Dividend
Last year, a total distribution of 16.5p was paid. This was made up
of 13.0p plus a special dividend of 3.5p. At the next Annual General
Meeting, and subject to shareholder approval, the Board will
recommend a total distribution of 22.0p made up of 14.0p plus a
special dividend of 8.0p. The special dividend continues to reflect
the relatively high exposure to bonds that might at some stage be
switched into lower yielding growth investments and this year
includes the VAT refund on management fees received during the year.
Continuation of the Company
In November 2008, the Board honoured its long standing commitment to
shareholders by offering them the opportunity to realise their
investment in the Company by way of a sale and purchase facility
whereby your Company's stockbrokers matched those wishing to sell all
or part of their holdings with potential buyers.
We are delighted that as a result of the facility the Company
continued in the form of an investment trust with no restructuring
required; 67,535 Ordinary Shares were offered for sale by existing
shareholders and all such shares were placed at a price of 2,090.0p
per share, a 3.1% premium to the net asset value as at the close of
business on 10 December 2008. It is the Board's intention to offer
shareholders a similar opportunity to realise their investment in
2015.
Annual General Meeting
This year, the AGM will be held in London on Wednesday 8 July 2009 at
11.00 a.m. The Notice convening the forty sixth AGM of the Company is
set out in the Annual Report and I and the rest of the Board look
forward to meeting you then. As usual, after the formal business of
the meeting has concluded, our investment manager will be making a
short presentation on the outlook for markets and the Company's
investments in particular.
Issuance and Repurchase of Shares
The Board continues to operate an informal discount/premium control
mechanism whereby major market supply and demand imbalances are
satisfied by either the issuance of shares at a premium to net asset
value or buying back shares at a discount. At the last AGM
shareholders approved the necessary resolutions to enable these
policies to be renewed and although no change in the issued capital
took place during our last financial year, similar resolutions will
again be put forward at this year's AGM.
The Board
This year Mr R P A Spiller, Mr J C Morton and I will retire at the
AGM, and being so eligible, all offer ourselves for re-election.
Retirement is in line with the guidelines for good practice set out
in the AIC Code of Corporate Governance and the Combined Code. Mr
Spiller has an on-going connection with the Investment Manager and
has served in excess of nine years on the Board as have both Mr
Morton and myself. Further details in respect of each Director's
retirement, evaluation and re-election are given in the Annual
Report.
Regulatory Changes
The Articles of Association of the Company were amended at the 2008
Annual General Meeting for the changes made to the Companies Act 2006
which became effective in October 2008. The final implementation
stage of the Companies Act 2006 will take place in October 2009; the
Articles will therefore be amended again in 2010 to take into account
the final provisions implemented by the Companies Act 2006.
Outlook
For the remainder of this year, it is likely that world economic
growth will recover from a very low base as inventories are rebuilt
and the fiscal stimulus resulting from a combination of low interest
rates and the quantitative easing measures adopted by the Fed and the
Bank of England begin to take effect. Against this background, equity
markets could well rally in the short term. However, the structural
weakness in western economies has not improved with both household
and corporate balance sheets continuing to look stretched. At the
same time, the cost of rescuing the banking system from near collapse
has left the authorities and the taxpayer with a long term legacy of
indebtedness. Without a bout of inflation, this will take years to
correct and lead to sub trend growth for some while. With this view
in mind, a cautious investment policy is still warranted.
Mr T R Pattison
Chairman
27 May 2009
BUSINESS REVIEW AND PRINCIPAL RISKS
The Business Review has been prepared in accordance with the
requirements of Section 417 of the Companies Act 2006. A review of
the year's activities and an indication of future policy are given in
the Chairman's Statement and Investment Manager's Report. The
principal risks and uncertainties facing the Company are detailed
below and in the Notes to the Financial Statements. The very nature
of forward looking statements involves uncertainty as events beyond
the control of the Company may affect actual results. Performance
and results may therefore differ from the plans and objectives of the
Company; neither the Directors, nor the Company take responsibility
for matters outside of its control.
Investment Objective
The investment objective and policy are monitored to ensure continued
investor interest and for consideration of continuation of the
Company in its present form. Investment performance is monitored and
the Investment Manager presents a report to each board meeting for
consideration and discussion.
Premium/Discount Level
The Board regularly reviews the level of premium/discount and, in the
event of prolonged trading at a discount, consideration is given to
enhancement strategies for the share price. The Board operates an
informal discount control mechanism and will buy in shares as and
when necessary to manage the discount at an appropriate level.
Stock Price
Uncertainty of future stock prices presents a risk in relation to
potential losses on market positions held. The Board, with the
Investment Manager, considers asset allocation on a regular basis to
minimise potential risks where possible.
Shareholder Register
The Board reviews all large transactions and periodically considers a
full shareholder analysis. In the event of activist shareholders
being attracted onto the Register, the Board would be able to
consider quickly whether any action was required.
Other Risks
Risks associated with the Company's financial instruments include
Market Price, Interest Rate, Credit and Foreign Currency; information
relating to such risks is given in the Annual Report.
Social, Community and Environmental Matters
The Company does not have any employees. The Company invests
primarily in closed ended and other collective investment vehicles
with the objective of achieving capital growth. The Board is of the
opinion that the underlying investee companies have policies to act
with due regard to community, welfare and environmental factors and
do not therefore intervene in these areas.
Political and Charitable Contributions
No contributions were made during the year for political or
charitable purposes (2008: nil).
Key Performance Indicators ('KPIs')
The Board monitors numerous KPI indices and ratios for the purpose of
assessing and reporting investment performance. The Chairman, in his
statement, has summarised performance of the Company's Net Asset
Value ('NAV') per Share for the year to 5 April 2009 and has compared
this year's capital growth (in absolute terms) against the FTSE
Equity Investment Instruments Index, the FTSE All-Share Index and the
FTSE Government All Stock Index. He also describes the earnings per
Share and dividends paid for the year.
A graph showing the Company's NAV per Share compared with the FTSE
Equity Investment Instruments Index over the period from 1982 is
shown in the Annual Report and Accounts. A comparison of the
Company's share price total return over the last five years, compared
with the FTSE Equity Investment Instruments Index which reflects the
performance of similar companies, is also shown in the Annual Report.
In addition, the Board monitors the following additional KPIs:
* Share price premium/discount to NAV, an important measure of
demand for the Company's shares and a key indicator of the need for
shares to be bought back (if discount to NAV is high) or issued (if
share price is at a premium to NAV). At the start of the year
under review the premium to NAV was 0.4% compared with 11.5% at the
year end.
* Expense ratios, which enable the Board to measure the
control of costs and help in meeting the dividend payment
objective. The ratio of operating expenses to net assets continues
to remain relatively stable at 1.6% (excluding the VAT refund
received during the year).
Statement of Directors' responsibilities in respect of the Annual
Report and the Financial Statements
The Directors are responsible for preparing the Annual Report, the
Directors' Remuneration Report and the Financial Statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have elected to
prepare the financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law). The financial statements are required
by law to give a true and fair view of the state of affairs of the
Company and of the net return of the Company for that period.
In preparing those financial statements, the Directors are required
to:
* select suitable accounting policies and then apply them
consistently;
* make judgements and estimates that are reasonable and
prudent;
* state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
* prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business, in which case there should be supporting
assumptions or qualifications as necessary.
The Directors confirm that they have complied with the above
requirements in preparing the financial statements.
The Directors are responsible for keeping proper accounting records
that disclose with reasonable accuracy at any time the financial
position of the Company and enable them to ensure that the financial
statements and the Directors' Remuneration Report comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The financial statements are published on the Company's website,
www.capitalgearingtrust.com, which is a website maintained by TMF
Corporate Secretarial Services Limited. The Directors are responsible
for the maintenance and integrity of the Company's corporate website
and financial information included within the website. The work
carried out by the Auditors does not involve consideration of these
matters and, accordingly, the Auditors accept no responsibility for
changes that may have occurred to the financial statements since they
were initially presented on the website. Legislation in the United
Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed in the
Annual Report confirm that, to the best of their knowledge:
the financial statements, which have been prepared in accordance with
United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law), give a true and fair view
of the assets, liabilities, financial position and net return of the
Company; and
the Report of the Directors includes a fair review of the development
and performance of the business and the position of the Company,
together with a description of the principal risks and uncertainties
that it faces.
INVESTMENT MANAGER'S REPORT
Review
With the FTSE All-Share Index down 32.5%, the essentially unchanged
NAV per share may be viewed as satisfactory. The year saw a dramatic
weakening of the world economy, much lower interest rates and a
weaker UK Pound. As a result the portfolio benefited from its
holdings in overseas, partially US, index linked bonds and
conventional bonds in Euros and Swiss Francs; the exposures to
equities and property cost money and even the small exposure to
commodities fell a little.
Over the period the allocation to index linked bonds was increased
and within that category, the US rose from 4% to 20% while Sweden
fell from 9% to 1%. In conventional governments, the Japanese Yen
bonds were sold after a huge appreciation of the currency, leaving
the assets concentrated in Euros and Swiss Francs; the returns varied
from 19% to 32%.
2009 was a poor year for investment trusts. Not only was investment
performance poor, but corporate governance was tested and found
wanting. In particular, a number of funds made commitments to
discount control which were not met. This has led to opportunity for
the trust as well as frustration. For example, the trust was able to
buy Henderson Global Properties, which had been launched with an
assurance that the discount would not exceed 5% (and could probably
not have been able to raise the money without such a commitment) on a
discount in excess of 30%. No attempt seems to have been made by the
Board (of HGP) to meet its commitment either before or since;
however, a continuation vote in December has been introduced.
Every dog has his day and in December funds of hedge funds, whose
high charges had previously led to their exclusion from the
portfolio, fell to 40% discounts and purchases were made in Goldman
Sachs Dynamic Opportunities, Ceres Agriculture, Tapestry and Dexion
Absolute; this last was tendered back to the company on an 11%
discount.
Outlook
The outlook for the major economies is even less easy to predict than
usual. The winds of deflation inherent in the long balance sheet
recession that began in 2008 continue to blow powerfully, but the
level of fiscal and monetary stimulus is unprecedented. Within this
extended recession, strong shorter term inventory cycles will yield
misleading impressions of recovery and relapse.
The fundamental imbalances of the world economy though, are
depressing in every sense of the word. The worst imbalances revolve
around the overleveraged banking system and the extensive debts of
the private, in particular the household, sector. At the time of
writing, bank shares have recovered strongly, but a glance at the
forecasts of the IMF reveals a further capital requirement of $1.7
trillion to return US and European banks to the capital ratios that
they enjoyed in the mid 1990's. This could likely require
significant further public as well as private capital. History
indicates that credit will not flow freely until capital ratios are
restored and in any case credit conditions have, in past financial
crises, not recovered until two to three years after output
recovers. So far, the reaction of the major governments has been
active, but has fallen short of the wholesale nationalisation of weak
banks with the re-issue of the 'good' banks.
Consumers, meanwhile, are addressing their stretched balance sheets
and savings rates have risen from negligible levels to between 4% and
5% in the UK and the US. Unfortunately, past financial crises have
often led to savings rates of 10% or more, and in any case normal
sustainable levels look to be about the 8% that prevailed before the
recent boom. Furthermore, the boost to consumers from weak commodity
prices and lower interest rates has made the initial adjustment
easier - the next rise in saving will be tougher. More importantly,
the process of reducing debt will, in the absence of inflation, take
a number of years.
Significant inflation, though, seems ultimately all but certain in
the Anglo-Saxon countries, where high fiscal deficits are being
financed through printing, as suggested by Chairman Bernanke's
writing. The pattern of inflation looks clear; short term
deflationary pressures resulting from an unprecedented output gap of
8% will be followed by inflation resulting from the debasement of the
currency. The timing is uncertain. However, real yields in excess
of 2% in the US Treasury Inflation Protected Securities market look
anomalously high and offer the prospect of significant capital gains
in addition to protection from inflation.
In Europe though, the appetite for printing is far less pronounced;
the outlook may be more similar to the experience of Japan following
its 1980's boom. In that case, the nominal yields on German bonds of
4% may fall by as much as half, again yielding significant capital
gains.
The environment for corporate profits, though, continues to be poor
and will remain so throughout the investment horizon. Large numbers
of companies require more capital and many rights issues are
expected. Meanwhile, long term valuation measures such as Schiller's
long term cyclically adjusted p/e ratios indicate a stock market that
is fair value rather than cheap - the current long term p/e ratio in
the US is 16 which compares to an average of 16.1 in the last 100
years. It seems likely that there will be an opportunity to buy
equities at lower prices and maybe much lower prices - the Schiller
p/e ratio has troughed at less than 7 times in previous crises.
On the other hand, the trough may be close in property shares, where
yields on real estate of close to 8% on the IPD may discount much of
the 25% - 30% fall in rents that can be expected and shares can be
bought on significant discounts themselves, with further discounts on
funds of property shares.
In currency markets, continued volatility seems assured, but Sterling
is still a concern. The finances of the UK Government are close to
being out of control and the magnitude of printing already announced
is alarmingly high and likely to be repeated in future years.
Moreover, the repayment of the £700 billion funding gap in the UK
banking system that was borrowed from overseas between 2002 and 2008
will put persistent downward pressure on the currency.
Overall, then, the next 12 months will be another year in which the
preservation of capital will be more important than making money.
Meanwhile, there are some opportunities now and may be more as 2009
progresses.
Mr R P A Spiller
27 May 2009
PORTFOLIO ANALYSIS
Distribution of investment funds of £58,617,000 (2008: £58,939,000)
+-------------------------------------------------------------------+
| | | | | | 2009 | 2008 |
| | | | | | | |
|-------------+------+---------+--------+-----------+-------+-------|
| | UK | North | Europe | Elsewhere | Total | Total |
| | | America | | | | |
|-------------+------+---------+--------+-----------+-------+-------|
| | % | % | % | % | % | % |
|-------------+------+---------+--------+-----------+-------+-------|
| Investment | | | | | | |
| Trust | | | | | | |
| assets: | | | | | | |
|-------------+------+---------+--------+-----------+-------+-------|
| Ordinary | 9.3 | 1.7 | 1.9 | 3.1 | 16.0 | 21.2 |
| shares | | | | | | |
|-------------+------+---------+--------+-----------+-------+-------|
| Endowment | 3.6 | - | - | - | 3.6 | 7.3 |
| funds | | | | | | |
|-------------+------+---------+--------+-----------+-------+-------|
| Zero | 10.7 | - | - | - | 10.7 | 11.4 |
| dividend | | | | | | |
| preference | | | | | | |
| shares | | | | | | |
|-------------+------+---------+--------+-----------+-------+-------|
| Other | | | | | | |
| assets: | | | | | | |
|-------------+------+---------+--------+-----------+-------+-------|
| Fixed | 5.8 | - | 26.5 | - | 32.3 | 22.7 |
| interest | | | | | | |
|-------------+------+---------+--------+-----------+-------+-------|
| Index | 12.2 | 20.5 | 1.1 | - | 33.8 | 30.5 |
| linked | | | | | | |
|-------------+------+---------+--------+-----------+-------+-------|
| Floating | 1.8 | - | - | - | 1.8 | - |
| interest | | | | | | |
|-------------+------+---------+--------+-----------+-------+-------|
| Cash | 1.8 | - | - | - | 1.8 | 6.9 |
|-------------+------+---------+--------+-----------+-------+-------|
| | 45.2 | 22.2 | 29.5 | 3.1 | 100.0 | 100.0 |
+-------------------------------------------------------------------+
INCOME STATEMENT
for the year ended 5 April 2009
+-----------------------------------------------------------------------------------+
| | | | | 2009| | | 2008|
|----------------------------+----+-------+--------+--------+-------+-------+-------|
| |Note|Revenue| Capital| Total|Revenue|Capital| Total|
|----------------------------+----+-------+--------+--------+-------+-------+-------|
| | | £'000| £'000| £'000| £'000| £'000| £'000|
|----------------------------+----+-------+--------+--------+-------+-------+-------|
| | | | | | | | |
|----------------------------+----+-------+--------+--------+-------+-------+-------|
|Net losses on investments | | -| (4,566)| (4,566)| -| (14)| (14)|
|----------------------------+----+-------+--------+--------+-------+-------+-------|
|Exchange gains | | -| 4,293| 4,293| -| 3,008| 3,008|
|----------------------------+----+-------+--------+--------+-------+-------+-------|
|Investment income | 2| 1,417| -| 1,417| 1,123| -| 1,123|
|----------------------------+----+-------+--------+--------+-------+-------+-------|
| | | | | | | | |
|----------------------------+----+-------+--------+--------+-------+-------+-------|
|Gross return/(loss) | | 1,417| (273)| 1,144| 1,123| 2,994| 4,117|
|----------------------------+----+-------+--------+--------+-------+-------+-------|
|Investment management fee | 4| (147)| (344)| (491)| (159)| (370)| (529)|
|----------------------------+----+-------+--------+--------+-------+-------+-------|
|VAT refund on investment | 4,9| 101| 237| 338| -| -| -|
| management fee | | | | | | | |
|----------------------------+----+-------+--------+--------+-------+-------+-------|
|Transaction costs | | -| (75)| (75)| -| (68)| (68)|
|----------------------------+----+-------+--------+--------+-------+-------+-------|
|Other expenses | | (357)| -| (357)| (273)| -| (273)|
|----------------------------+----+-------+--------+--------+-------+-------+-------|
| | | | | | | | |
|----------------------------+----+-------+--------+--------+-------+-------+-------|
| | | | | | | | |
|----------------------------+----+-------+--------+--------+-------+-------+-------|
|Net return/(loss) on | | 1,014| (455)| 559| 691| 2,556| 3,247|
|ordinary activities before | | | | | | | |
|tax | | | | | | | |
|----------------------------+----+-------+--------+--------+-------+-------+-------|
|Tax on ordinary activities | 3| (218)| 92| (126)| (95)| 95| -|
|----------------------------+----+-------+--------+--------+-------+-------+-------|
| | | | | | | | |
|----------------------------+----+-------+--------+--------+-------+-------+-------|
|Net return/(loss) | | 796| (363)| 433| 596| 2,651| 3,247|
|attributable to equity | | | | | | | |
|shareholders | | | | | | | |
|----------------------------+----+-------+--------+--------+-------+-------+-------|
| | | | | | | | |
|----------------------------+----+-------+--------+--------+-------+-------+-------|
|Return/(loss) per Ordinary | 6| 28.48p|(12.99)p| 15.49p| 21.32p| 94.85p|116.17p|
|Share | | | | | | | |
+-----------------------------------------------------------------------------------+
The total column of this statement is the Income Statement of the
Company. The revenue return and capital return columns are
supplementary to this and are prepared under guidance issued by the
Association of Investment Companies.
All revenue and capital items in the above statement derive from
continuing operations.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 5 April 2009
2009 2008
£'000 £'000
Net return attributable to equity shareholders 433 3,247
Total gains and losses recognised for the year 433 3,247
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 5 April 2009
Note Called Share Capital Capital Capital
up premium redemption reserve - reserve Revenue
share reserve reserve unrealised - reserve Total
capital realised
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 6
April 2007 699 8,114 16 8,692 37,881 1,174 56,576
Exchange
gains on - - - 3,008 - - 3,008
investments
Net gains on
realisation
of - - - - 601 - 601
investments
Net decrease
in
unrealised - - - (615) - - (615)
appreciation
Transfer on
disposal of - - - (3,028) 3,028 - -
investments
Transaction - - - (48) (20) - (68)
costs
Costs
charged to - - - - (370) - (370)
capital
Tax on costs
charged to - - - - 95 - 95
capital
Net revenue
for the year - - - - - 596 596
Total 699 8,114 16 8,009 41,215 1,770 59,823
Dividends 8 - - - - - (391) (391)
Balance at 5
April 2008 699 8,114 16 8,009 41,215 1,379 59,432
Balance at 6
April 2008 699 8,114 16 8,009 41,215 1,379 59,432
Exchange
gains on - - - 3,627 666 - 4,293
investments
Net gains on
realisation
of - - - - 2,527 - 2,527
investments
Net decrease
in
unrealised - - - (7,093) - - (7,093)
appreciation
Transfer on
disposal of - - - (1,232) 1,232 - -
investments
Transaction - - - (64) (11) - (75)
costs
Costs
charged to - - - - (344) - (344)
capital
VAT refund 9 - - - - 237 - 237
Tax on costs
charged to - - - - 92 - 92
capital
Net revenue
for the year - - - - - 796 796
Total 699 8,114 16 3,247 45,614 2,175 59,865
Dividends 8 - - - - - (461) (461)
Balance at 5
April 2009 699 8,114 16 3,247 45,614 1,714 59,404
BALANCE SHEET
at 5 April 2009
Note 2009 2008
£'000 £'000
Fixed assets
Investments:
Listed investments 57,550 54,851
Current assets
Debtors 1,525 4,558
Cash at bank 634 239
2,159 4,797
Creditors: amounts falling due within one year (305) (216)
Net current assets 1,854 4,581
Net assets 59,404 59,432
Capital and Reserves
Called up share capital 699 699
Share premium account 8,114 8,114
Capital redemption reserve 16 16
Capital reserve - unrealised 3,247 8,009
Capital reserve - realised 45,614 41,215
Revenue reserve 1,714 1,379
Total shareholders' funds 59,404 59,432
Net asset value per Ordinary Share 7 2,125.4p 2,126.4p
Approved by the Board on 27 May 2009
Mr T R Pattison
Chairman
CASH FLOW STATEMENT
for the year ended 5 April 2009
Note 2009 2008
£'000 £'000
Net cash inflow from operating activities 942 215
Foreign tax paid on investment income (60) -
Capital expenditure and financial investment
Payments to acquire investments (24,013) (15,030)
Receipts from sale of investments 20,966 15,826
(3,047) 796
Equity dividends paid 8 (461) (391)
Management of liquid resources
Cash received from/(paid to) brokers awaiting 3,021 (609)
investment
Increase in cash 395 11
NOTES TO THE FINANCIAL STATEMENTS
5 April 2009
1 Accounting Policies
The financial statements have been prepared on the basis
of the accounting policies set out in the audited financial
statements for the year ended 5 April 2008.
2 Investment Income
2009 2008
£'000 £'000
Income from investments:
Income from UK bonds 265 127
Income from UK equity and non-equity investments 241 214
Overseas interest 836 606
1,342 947
Deposit interest 75 176
Total income 1,417 1,123
2009 2008
£'000 £'000
Total income comprises:
Dividends 241 214
Interest 1,176 909
1,417 1,123
Income from investments comprises:
Listed in the UK 506 341
Listed overseas 836 606
1,342 947
3 Tax on ordinary activities
2009 2008
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Current tax:
Corporation (203) 92 (111) (95) 95 -
tax
Foreign tax (15) - (15) - - -
Total current tax (218) 92 (126) (95) 95 -
The current tax charge is reconciled to the standard rate of
Corporation Tax of 28% (2008: 30%) by the following factors:
2009 2008
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Return on ordinary 1,014 (455) 559 691 2,556 3,247
activities before
taxation
Return on ordinary
activities at the 284 (127) 157 207 767 974
standard rate of UK
Corporation Tax
UK franked dividends* (68) - (68) (64) - (64)
Capital returns* - 97 97 - (862) (862)
Adjustment for reduced (13) 6 (7) (48) - (48)
rate of tax
Losses brought forward - (68) (68) - - -
Irrecoverable foreign tax 15 - 15 - - -
Current tax charge for 218 (92) 126 95 (95) -
the year
* these items are not subject to Corporation Tax within an investment
trust company.
No Provision for deferred tax was required at 5 April 2009.
4 Investment management fee
2009 2008
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee 147 344 491 159 370 529
VAT refund on investment (101) (237) (338) - - -
management fee (note 9)
Net investment management 46 107 153 159 370 529
fee
The Company's Investment Manager CG Asset Management Limited received
an annual management fee equal to 0.85% of the gross assets of the
Company. At 5 April 2009 £123,678 (2008: £124,812) was payable. All
costs until October 2007 were inclusive of VAT. The payment of VAT on
management fees was suspended by HM Revenue and Customs from October
2007. During the year a VAT refund was received in respect of VAT
charged on investment management fees prior to October 2007. This is
further explained in note 9.
70% of the total investment management fee and connected costs are
allocated to the capital reserve - realised.
5 Directors' fees
2009 2008
Total Total
£'000 £'000
The fees payable to the Directors were as follows:
Mr T R Pattison 20 12
Mr J C Morton 15 9
Mr R P A Spiller 13 7
Mr E G Meek 13 7
61 35
Mr R P A Spiller's fees are paid directly to his employer and VAT is
an additional cost thereon. The Company made no pension
contributions (2008: £nil) in respect of Directors and no pension
benefits are accruing to any Director (2008: £nil).
Mr R P A Spiller received remuneration totalling £55,000 (2008:
£43,000) from CG Asset Management Limited in respect of services
provided by that company to Capital Gearing Trust p.l.c.
Details of transactions with CG Asset Management Limited, of which Mr
R P A Spiller is a director, are disclosed in note 4. There were no
other transactions with Directors during the year.
6 Return/(loss) per Ordinary Share
The return per Ordinary Share of 15.49p (2008:116.17p) is based on
the total net return after taxation for the financial year of
£433,000 (2008: £3,247,000) and on 2,794,906 (2008:2,794,906)
Ordinary Shares, being the weighted average number of Ordinary Shares
in issue in each year.
Revenue return per Ordinary Share of 28.48p (2008: 21.32p) is based
on the net revenue return on ordinary activities after taxation of
£796,000 (2008: £596,000) and on 2,794,906 (2008: 2,794,906) Ordinary
Shares, being the weighted average number of Ordinary Shares in issue
in each year.
Capital loss per Ordinary Share of 12.99p (2008: return of 94.85p) is
based on the net capital loss for the financial year of £363,000
(2008: return £2,651,000) and on 2,794,906 (2008: 2,794,906) Ordinary
Shares, being the weighted average number of Ordinary Shares in issue
in each year.
7 Net Asset Value per Share
The net asset value per share and the net asset values attributable
to each class of share at the year end calculated in accordance with
the Articles of Association were as follows:
Net Asset Value per Share attributable to
2009 2008
Ordinary Shares (basic) 2,125.4p 2,126.4p
Net Asset Values attributable to
+-------------------------------------------+
| | £'000 | £'000 |
|-------------------------+--------+--------|
| Ordinary Shares (basic) | 59,404 | 59,432 |
+-------------------------------------------+
The movements during the year in the assets attributable to the
Ordinary Shares were as follows:
Assets attributable to Ordinary
Shares
£'000
Total net assets attributable at 6 59,432
April 2008
Total recognised gains for year 433
Dividends appropriated in the year (461)
Total net assets attributable at 5 59,404
April 2009
Net asset value per Ordinary Share is based on the net assets, as
shown above, and on 2,794,906 (2008: 2,794,906) Ordinary Shares,
being the number of Ordinary Shares in issue at the year end.
8 Dividends
2009 2008
Total Total
£'000 £'000
Ordinary Shares
2008 dividend paid 14 July 2008 (16.5p per share) 461 -
2007 dividend paid 17 August 2007 (14.0p per share) - 391
The Directors have recommended to shareholders a final dividend of
22.0 pence per share for the year ended 5 April 2009. If approved,
this dividend will be paid to shareholders on 13 July 2009. This
dividend is subject to approval by shareholders at the Annual General
Meeting and, therefore, in accordance with FRS 21, it has not been
included as a liability in these financial statements. The total
estimated dividend to be paid is £615,000.
2009 2008
Total Total
£'000 £'000
Revenue available for distribution by way of dividend for 796 596
the year
Proposed final dividend of 22.0p for the year ended 5 (615) (461)
April 2009
Undistributed revenue for section 842 Income and 181 135
Corporate Taxes Act 1988 purposes*
* Undistributed revenue comprises approximately 13.5% (2008:14.3%) of
income from investments of £1,342,000 (2008: £947,000).
9 VAT refund on investment management fee
The VAT refund relates to a decision of the European Court of Justice
in June 2007 that investment trusts should be exempt from paying VAT
on management fees. During the year the Company received £307,000 in
respect of this VAT refund together with £31,000 in respect of
interest thereon. The VAT refund was apportioned to revenue and
capital in the same ratio as the management fees as described in note
4 above.
10 Related Party Transactions
Related party transactions with Mr R P A Spiller, a Director of the
Company, are disclosed in note 5 above. There were no other related
party transactions.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 5 April 2009 or
2008. The financial information for the year ended 5 April 2008 is
derived from the statutory accounts for that year which have been
delivered to the Registrar of Companies. The Auditors reported on
those accounts and their report was unqualified and did not contain a
statement either under Section 498(2) or Section 498(3) of the
Companies Act 2006. The financial information for the year ended 5
April 2009 has been prepared using the same accounting policies as
adopted in the Company's statutory accounts for the year ended 5
April 2008. The statutory accounts for the year ended 5 April 2009
will be finalised on the basis of the financial information presented
by the Directors in this preliminary announcement and will be
delivered to the Registrar of Companies following the Company's
Annual General Meeting.
Copies of the Company's Annual Report for the year ended 5 April 2009
will be sent to shareholders in June 2009 and will be available on
the Company's website www.capitalgearingtrust.com and on request from
the Company Secretary - TMF Nominees Limited, 400 Capability Green,
Luton LU1 3AE, Telephone: 01582 439200; E-mail:
company.secretary@capitalgearingtrust.com.
For queries, please contact:
Campbell Morton, Senior Independent Director
Tel. 02890 763 631
TMF Corporate Secretarial Services
Limited
company.secretary@capitalgearingtrust.com
Tel. 01582 439200
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This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
