Capital Gearing
Trust P.l.c.
Annual Report and
Financial Statements
For the year ended
31 March 2023
The Company
Capital Gearing Trust P.l.c (the “Company”) is
an investment trust and was admitted to the
London Stock Exchange in 1973.
Investment objective
The Company’s objective is to preserve and,
over time, to grow shareholders’ real wealth.
Capital structure and
voting rights
The share capital comprises Ordinary shares
of 25pence each. As at 31March 2023,
26,258,763 shares were in issue and 321,500
shares were held in treasury. Each Ordinary
share has one vote.
Discount/premium control policy
(“DCP”)
The Company aims to purchase or issue
shares to ensure, in normal market conditions,
that the shares trade consistently close to
theirunderlying Net Asset Value per share.
Dividends
The Company pays an annual dividend but
focuses on total return rather than any net
income level.
Website
www.capitalgearingtrust.com
Management and administration
Investment management is carried out
by CGAsset Management (“CGAM” or the
“Investment Manager”) for an annual fee of
0.60% of net assets up to £120m, 0.45%on net
assets above £120m up to £500mand 0.30%
thereafter. CGAM, including Peter Spiller, has
managed the Company since 1982.
Company secretarial and various
administrative services, including the
operation of the DCP, are provided by
Juniper Partners. Custodial and depositary
services are carried out by TheNorthern
TrustCompany.
ISA
The Company manages its affairs to be a
fully qualifying investment trust under the
individual savings account (“ISA”) rules.
AGM
The Annual General Meeting (“AGM”)
ofthe Company will be held at the
Numis Auditorium, 45Gresham Street,
London EC2V7BF on Wednesday, 5 July
2023 at 11.30a.m. Further details on the
arrangementsfor the AGM are provided on
page73.
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Company Summary
The Company is a member of the Association of Investment Companies.
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Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 01
The Board’s Strategic Report Governance Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder InformationCompany Summary
Company Summary Inside front cover
Contents 1
Financial Highlights
2
Performance and Asset Allocation
3
The Strategic Report
Chairman’s Statement 4
Investment Manager’s Report 7
Portfolio Analysis 9
List of the Largest Portfolio Investments
10
The Board 12
The Investment Mana
gement Team 14
Strategic Review 15
Governance Report
Directors’ Report 26
Corporate Governance Statement 31
Directors’ Remuneration Report 36
Audit and Risk
Committee Report 41
Directors’ Responsibilities Statement 45
Independent Auditors’ Report 46
Financial Statements
Income Statement 52
Statement of Changes in Equity 53
Statement of Financial Position 54
Cash Flow Statement 55
Notes to the Financial Statements 56
Alternative Performance Measures 71
Notice of Annual General Meeting
73
Shareholder Information
76
Historic Data
78
Glossary of Terms and Definitions
80
Management and Administration
81
Contents
Information disclaimer
This report has been produced for shareholders of the Company to provide them with information relating to the Company
and its financial results for the year under review. This report contains subjective opinion, analysis and forward-looking
statements which, by their very nature, involve uncertainty. Past performance is no guarantee of future performance.
Investment returns are not guaranteed and you may not get back the amount you originally invested. The Board and its
advisers, including CG Asset Management and Juniper Partners, have endeavoured to produce these audited accounts
in good faith and in accordance with legislation, regulations, reporting standards and to be useful to all stakeholders in
theCompany.
02 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Highlights
31 March 2023 31 March 2022
Share price 4,730.0p 5,140.0p
NAV per Ordinary share 4,797.3p 5,025.1p
Dividend per share 60p 46p
Share price discount/premium to NAV -1.4% 2.3%
Shareholders’ funds £1,259.7m £1,049.8m
Market capitalisation £1,242.0m £1,073.8m
Ongoing charges ratio
(1)
0.46% 0.52%
Total return performance (to 31 March)
1 year 3 years 5 years 10 years
Share price total return
(1)
-7.1% 15.8% 26.9% 45.9%
NAV total return
(1)
-3.6% 20.1% 31.6% 60.6%
MSCI UK Index 5.6% 51.0% 31.6% 72.8%
Retail Price Index 13.4% 25.5% 31.9% 47.6%
Consumer Price Index 10.1% 18.7% 22.8% 31.4%
(1)
Historical data is contained on pages 78 to 79, and includes total return performance. Please refer to pages 71 to 72 for
definitions and a reconciliation of the Alternative Performance Measures to the year-end results.
Financial Highlights
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 03
The Board’s Strategic Report Governance Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder InformationCompany Summary
The Company does not have a formal benchmark but uses the MSCI UK Index and the UK Retail
Price Index (RPI) as relative measures over the medium to longer term.
Net asset value total return performance over 5 years to 31 March 2023
NAV Total Return MSCI UK Total Return
2018 2019 2020 2021 2022
As at 31 March
90
80
70
100
110
120
130
140
150
RPI
2023
* Source: CG Asset Management Limited, data rebased to 100 in 2018. Share price total return chart is contained on page 39.
Asset allocation
0%
20%
40%
60%
80%
100%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Funds/
Equities
Pref. Shares/
Corp. Debt
Conventional
Bonds
Index-Linked
Govt. Bonds
Gold
Cash
Performance and Asset Allocation
04 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Chairman’s Statement
The past year
This has been a difficult year for traded markets
generally and for Capital Gearing Trust. It is only the
second year in the last 41 years, when the Company
has failed to achieve a positive return. At 31 March
2023, the net asset value (NAV) per share was 4,797.3p,
representing a NAV total return over the year of -3.6%.
The share price total return over the period was -7.1%,
as the shares moved from a modest premium to a
small discount to the NAV, ending the year at 4,730p.
Inflation, as measured by the UK Retail Price index (RPI),
increased quickly after the start of the Ukraine conflict
as rising energy prices and then labour costs took their
toll. Central Bank base rates, which have been low for
a long period, rose sharply to a current level of 4.50%
in the UK and 5.25% in US and this unsettled markets
accustomed to a low interest rate environment for more
than a decade. RPI rose by 13.4% over the last year,
and by comparison equity markets, as represented
by the MSCI UK index, rose by 5.6%. Other measures,
affecting parts of the portfolio, include the Sterling Bond
index which fell over 15% and the FTSE Investment
Trust index which fell by 10%. Against the US Dollar,
sterling was extraordinarily volatile, initially falling from
$1.31 at 31 March 2022 to $1.04 in September before
rising steadily to end the year at $1.23. In essence, the
Company has not been immune from extraordinary
uncertainty affecting all corners of the market.
One of the key objectives of the Company is to preserve
shareholders’ wealth by limiting the downside from the
portfolio. In a year with a synchronised bond and equity
bear market, the portfolio loss was restricted to 3.6%.
The Company’s secondary objective is to grow
shareholders’ real wealth over time, and even
after a disappointing year, the compound
portfolio return over the last five years has
been 5.7%, which is in line with inflation.
The Investment Managers have been proved right in
their cautious approach over the last year, and have
held a low percentage in risk assets, whilst retaining
a high proportion in index-linked gilts and corporate
bonds, as well as UK short-dated Treasuries. The
corporate bond portion was successfully reduced
before the latest banking crisis in the US and Europe.
Risk assets accounted for just 26% of the portfolio at
31 March 2023. Property investments were reduced
as the year progressed, but rising interest rates and
substantial discounts emerging across the property
sector midway through the year, resulted in negative
returns, which did little to help the Company’s
performance. By contrast, the corporate bond portfolio
made a positive contribution, which far exceeded bond
market returns. Index-linked gilts also performed well.
As the year progressed, the Investment Managers
reduced US TIPS in favour of UK index-linked (“I/L”)
gilts. At 31 March 2023, 21% of the portfolio was
invested in UK I/L gilts with an average duration of
4 years, and 20% in US TIPS with a duration of 9½
years, reflecting the value that each represents.
Earnings and dividends
With increased bond exposure and higher interest
rates, the income account has been strong this year.
The revenue return per share, after tax and expenses,
for the financial year was 70.67p, an increase of
24.4% on last year. The Company currently pays
out one dividend per year, which is proposed as
60p per share. It will be payable on 10 July 2023
for those on the share register as at 2June 2023,
subject to approval at the forthcoming AGM.
The Company’s portfolio is not managed with any
income criteria, or distribution level, in mind. What
the Company receives in dividends and interest is
the outcome of the application of the investment
policy, and the distribution to shareholders is in
line with meeting the income distribution test to
maintain investment trust status. However, given
the bond component of the portfolio and the
significant increase in bond income being projected,
the income may be higher again next year.
Performance comparison review
The Company does not have a formal benchmark,
but over the years it has compared its performance
over the medium to longer term against two principal
measures, RPI and the MSCI UK index. Following some
helpful comments from shareholders, the Board
has commenced a review of these performance
comparators. For example, RPI is increasingly being
replaced by the Consumer Price Index (“CPI”) as a
measure of inflation. Dependent on the outcome
of that review, changes to the current performance
comparators may be made during the coming year.
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 05
Company Summary Governance Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder InformationThe Board’s Strategic Report
Costs
As the Company has grown, the Board is pleased to
report that the running costs have reduced substantially
as a percentage of the Company’s net asset value.
The key measure of the overall costs is the ongoing
charges ratio (“OCR”). This is reported in two ways.
The OCR measured solely on the costs of running
the Company has reduced from 0.52% last year to
0.46% this year. As disclosed in the Key Information
Document (“KID”), when the management costs
of the underlying funds into which the Company
invests are also taken into account, the OCR has
fallen from 0.78% last year to 0.64% this year.
Share issuance and buybacks
The discount control policy (“DCP”) continues to
operate satisfactorily, and provides liquidity to both
buyers and sellers in the market at around NAV.
Issuing at a premium and buying back at a discount
under the DCP more than compensates for its
operational costs and is modestly accretive to NAV.
Activity under the DCP added 0.5% to shareholder
total returns over the last financial year.
Up to December 2022, the Company issued
5,688,288 shares raising some £288 million, but
more recently the Company has bought back
around 321,500 shares at a cost of £15 million,
resulting in net issuance of 5,366,788, with a net
value of £272 million for the year, after costs.
Board matters
We operate with a relatively small board with each
experienced member closely engaged in oversight
of the Company’s activities. In September 2022,
we engaged an external advisory firm, Lintstock,
to undertake an independent review of Board
performance. The result of the review was very
satisfactory but, as was already in train, the report drew
attention to the need to plan for Board succession.
Robin Archibald, the current Audit Chairman and
SID, will have served nine years on the Board in
mid 2024. The Board have therefore sought to
identify a candidate who would assume the role of
Audit Chairman on Robin’s retirement and aims to
manage this transition over the forthcomingyear.
Following a thorough recruitment search the
Directors are pleased to announce that Ravi
Anand has accepted the Board’s invitation to join
the Board with effect from 1 August 2023.
We are fortunate to have identified Ravi who is a highly
experienced corporate financier and qualified as a
chartered accountant and has been involved in financial
services and with investment companies for much of
hiscareer.
Following Ravi’s proposed appointment, the Board
will have a complement of five Directors and will
be in compliance with the recommendations of the
Listing Rules and the Parker Review on diversity
in the UK boardroom. It will also continue to be
compliant with the FTSE Women Leaders Review.
Although I only stepped up to acting as Chairman in
July 2020, I will also have completed nine years on the
Board in 2024. Following discussion with my Board
colleagues, and to avoid two long standing Directors
departing at the same time, as well as achieving better
board rotation, it has been agreed that I should remain
on the Board for a further period of one or two years
beyond 2024 to enable a further Board member to be
recruited and an orderly handover to a new Chairman.
Annual General Meeting
The AGM will be held on Wednesday 5 July 2023
at 11.30am. The Notice convening the sixtieth
AGM of the Company is set out on pages 73 to
74. The Managers will give a presentation at the
AGM and we welcome all shareholders to attend
in person. The AGM will be held at the Numis
Auditorium, 45Gresham Street, London EC2V 7BF.
Further details on the resolutions can be found
on pages 28 and 29 of the Directors’ Report.
The Board firmly believes that all the resolutions being
proposed are in the best interests of the Company
and its shareholders and encourages shareholders to
vote by proxy in favour of the resolutions, as the Board
intends to do in respect of their own shareholdings.
We would encourage shareholders to return their
votes by electronic proxy, including by instructing
their platform providers to vote on their behalf if
their shares as held through platform nominees.
Chairman’s Statement (continued)
06 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Chairman’s Statement (continued)
Outlook
There is a sense that the interest rate cycle is returning
to normal, after more than a decade of virtually zero
rates. The recent rise in rates has failed to quell inflation,
which has led to large wage rise demands as people
struggle to offset the increase in the cost of living.
Our Investment Manager believes that the headline
inflation rate will subside in the near term, assisted by
anniversary effects. They believe however, that inflation
will remain persistent as wage demands continue to
build until the unemployment level rises materially.
The policy response from governments and central
banks has been somewhat confused, with tighter policy
affecting real incomes, but fiscal policy remaining
stimulative. This makes economic growth difficult to
predict and it is considered likely that there will be a
recession at some point. As the stock of government
debt continues to grow, public debt to GDP has fallen
slightly, aided by the elevated levels of inflation that
the economy has experienced over the past year.
Markets remain fragile and unpredictable. History
suggests that, in times of low interest rates, the
misallocation of capital becomes prevalent. It may
take a while before this becomes apparent, but we
welcome the return to a more rational interest rate
environment. The recent demise of Silicon Valley
Bank (SVB) has exposed bank’s tier one capital as
being less robust after their assets are marked to
market on the back of higher interest rates.
There is some value emerging in markets, but it is
someway off a really attractive entry level. This being
so, our Investment Manager remains cautious and
is keen to steward shareholders’ funds wisely by
retaining a defensive stance until the outlook becomes
clearer, and value is noticeably more attractive. They
have navigated their way through difficult markets
before now and the Board has confidence that they
can do so again. The Board is also keen to see the
Company revert to achieving positive returns for
shareholders, even if these are unlikely to offset the
higher levels of inflation in the near term. There will
be a time, hopefully in the not too distant future,
when we can send a more optimistic message.
Jean Matterson
Chairman
23 May 2023
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 07
Company Summary Governance Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder InformationThe Board’s Strategic Report
Investment Manager’s Report
Review
Your Company delivered an NAV total return of
-3.6% for the year, the worst result in the 41 years
since we began managing it and only the second
time that the Company has had a negative return.
Clearly it has been a disappointing period.
The year was characterised by surging inflation and
surging interest rates. The inflation was the all too
predictable result of monetary and fiscal authorities’
response to the Covid pandemic: huge expansion of
the monetary supply and large scale fiscal support (in
particular, direct transfers to consumers). These actions
to stimulate demand were set against constrained
supply of goods and services, due to disrupted
supply chains and a service economy that had been
put into suspended animation for the duration of
the pandemic. This inflationary dynamic was made
very much worse by Russia’s invasion of Ukraine.
It is hard to overstate the significance of the change in
interest rates. No part of our portfolio was untouched.
At the start of the year the Company’s UK treasury
bill portfolio yielded 0.5%, at the end it was 4.2%.
Similarly, the credit portfolio rose in yield from 2.3%
to 6.2% and the US TIPS portfolio from -0.9% to 1.4%.
Rising yields means falling prices and this created
a headwind for the portfolio. In that context it was
satisfying that the bond portfolio delivered positive
returns during the year especially when compared,
as the Chairman notes in her report, to the returns
from the sterling aggregate bond index of -15%. We
believe that central banks are close to the end of the
rate hiking cycle and so what has been a headwind
to performance will become, at a minimum, neutral
and perhaps an outright tailwind. In the meantime,
the portfolio enjoys much higher running yields.
The repricing of government bonds was most dramatic
in the UK, culminating in the debacle of the brief Truss/
Kwarteng administration. As better values emerged
we doubled the exposure to UK index-linked gilts,
increasing the overall exposure to index-linked bonds
from 35% at the start of the year to 46% at the end.
Ironically, it has been outside our bond holdings
that the effect of the change in interest rates has
been most acute. In recent years, confronted with
a sterling government bond market which we
judged uninvestable, we replaced it with a modest
allocation to alternatives (property, infrastructure,
etc.) judging that their high spreads to government
bonds, combined with the index-linked nature of
their cashflows, would deliver satisfactory returns
even in a rising rate environment. We got this
wrong. Indeed losses from our property holdings
were responsible for the entire loss the Company
experienced in the year. In response, the Company’s
weighting to property was reduced from 16.5% to 4%
by year end. We judge the prospective returns from
the remaining holdings to be excellent, if volatile.
Outside of alternatives, our equities performed
well returning 6% over the year with particularly
strong performances from our overweights to the
UK (15% return), Japan (6%) and Energy stocks
(10%). Our allocation to renewable infrastructure
was helpful, returning 7% over the year, and
would have been higher were it not for the UK
government’s capricious and misguided windfall tax.
Currency movements in the year were generally
favourable with Sterling depreciating against the Euro
and US Dollar. During the brief Truss administration,
Sterling fell precipitously and we took the opportunity
to sell Dollars. With hindsight we should have sold
more. Over the course of the year, we increased the
Company’s exposure to the Japanese Yen to around
9% across equities, Japanese index-linked bonds
and treasury bills. The Yen is extraordinarily cheap
compared to the US Dollar and could prove to be a
valuable safe haven. In light of Sterling’s depreciation
the overall exposure to overseas currencies
reduced slightly during the year to around 48%.
Outlook
The last 15 years have been characterised by low
inflation and weak aggregate demand. This environment
favoured speculation over investment and financial
engineering over productivity improvements. The result
has been depressingly familiar: a gross misallocation
of capital, economic sclerosis, rising inequality and
rising economic fragility. The central bank response –
ever more extreme monetary policy – was iatrogenic.
It didn’t fix the demand problem and contributed
to the speculation and misallocation of capital.
The future is unknowable and any forecast we make
can only be one of a wide possibility of outcomes.
But, it seems that this era is ending and a new era
is upon us. Of course, it is possible that – after a
recession – inflation and growth will fall back to their
post-GFC trends and central banks revert to their
recent playbooks. The balance of probability suggests
otherwise. The economic forces that defined the last
15 years are waning and new forces are rising.
08 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Investment Manager’s Report (continued)
The deflationary impulse from China is receding
as wages begin to approach Western levels and,
for the first time, Chinese consumption growth
exceeds fixed capital formation. Globalisation
is in retreat and protectionism on the rise.
War
1
is the ultimate inflationary force. Defence
spending is an economic potlatch. In peace it
is merely economically unproductive, in war it
brings about destruction of capital, to say nothing
of death and human misery. Further resources
must be diverted to replace the capital that war
destroys. Trade is disrupted, sanctions imposed
and, when trade resumes, it flows along political
not economic lines – by definition at greater cost.
Tackling climate change is inflationary. The explicit
aim of divestment is to drive up the cost of fossil
fuels by increasing the cost of capital of producers
and reducing exploration expenditure. Carbon
taxes will add further to their cost. The switch
from an energy system based predominantly on
hydrocarbons to electricity will be hugely expensive
requiring investment not just in renewable energy
sources, but upgrades to grid infrastructure
and technologies to mitigate intermittency.
Finally it appears that the relationship between
capital and labour, and governments and labour,
is shifting. In recent years it was commonly
held that wage spirals could not occur because
of the lack of unionisation. The relationship is
probably the other way round: unionisation is a
response to inflation, not its primary cause.
Monetary policy is grappling with these macro-
trends as well as central banks’ own mis-steps
during the pandemic: money creation on a truly
unprecedented scale. In addition, rising rates have
led to, or brought into focus, financial fragility: mark
to market losses on bank balance sheets; consumers
refinancing large mortgages and highly leveraged
businesses rolling their debts at much higher rates.
What makes central banks’ jobs even harder is the
largess of fiscal authorities even as monetary authorities
attempt austerity. The US is the most extreme example:
unemployment is at generational lows, inflation is
proving persistent and yet the forecast budget deficit
this year is 5.3% of GDP. Monetary policy works best
when fiscal policy is working with, not against, it. To
compensate, monetary policy has to work harder
than would otherwise be the case. This increases the
likelihood that it will be the financial system that breaks
before the economy does. We have already seen
several examples in the financial sphere: LDI Pensions,
FTX, Silicon Valley Bank and Credit Suisse. It seems
unlikely that these will be the last shoes to drop.
Even if we are wrong, and a financial crisis is averted,
it seems likely that a recession is on the horizon. One
consequence of ructions in the banking market is
that credit standards have tightened dramatically,
consistent with levels that historically have presaged
recession and, with inflation remaining sticky, inflation
hawks in central banks on both sides of the Atlantic
are in the ascendancy. Global equity markets do
not share our analysis and have rallied 8.5% year to
date. We are taking the opportunity to reduce our
exposure to risk assets and take shelter in treasury
bills. Our exposure to index-linked bonds is at record
levels. While we sit on the side-lines of equity markets,
we take great comfort from the fact that, for the
first time in 15 years, we are being paid to wait.
Peter Spiller Alastair Laing Christopher Clothier
23 May 2023
1
What follows is a purely economic description of war. It is not intended in anyway to trivialize the horror and suffering arising from Russia’s invasion
of Ukraine.
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 09
Company Summary Governance Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder InformationThe Board’s Strategic Report
Portfolio Analysis
Asset allocation
2023 2022
Index-Linked Government Bonds 46% 35%
Conventional Government Bonds 12% 4%
Preference Shares/Corporate Debt 14% 11%
Funds/Equities 26% 44%
Cash 1% 5%
Gold 1% 1%
100% 100%
In addition to the above table, the asset allocation chart on page 3 shows the change in asset allocation over ten years.
Further analysis as at 31 March 2023
Equities
Property
Alternatives
Gold
Bonds
Index-Linked
Credit
Cash & T-Bills
Risk Assets
Bonds
Index-Linked
0%
Dry Powder
20%
40%
60%
80%
100%
By Asset Class
n
By Risk Category
n
n
n
n
n
n
n
Reduce portfolio duration & volatility
Provide optionality
Deliver better returns than cash
Provide hedge against risk assets
Perform well under financial repression
Positive real returns
Seek inflation protection
Lower beta (in aggregate) than equities
n Positive real yields
Currency allocation
2023 2022
Sterling 52% 50%
US Dollar 26% 25%
Japanese Yen 9% 11%
Euro 5% 7%
Swedish Krona 4% 3%
Other 4% 4%
100% 100%
10 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
2023
£’000
2022
£’000
Index-Linked Government Bonds
Index-Linked Bonds – United Kingdom 267,376 75,146
Index-Linked Bonds – United States 248,154 226,600
Index-Linked Bonds – Japan 29,840 27,321
Index-Linked Bonds – Canada 16,693 –
Index-Linked Bonds – Sweden 10,997 26,880
Index-Linked Bonds – Germany 5,236 4,900
Index-Linked Bonds – Australia 4,834 3,871
583,130 364,718
Conventional Government Bonds
Conventional Government Bond – United Kingdom 95,319 40,589
Conventional Government Bonds – Japan 34,978 –
Conventional Government Bonds – Sweden 19,304 –
Conventional Government Bonds – United States 5,638 –
155,239 40,589
Preference Shares/Corporate Debt
Unite (USAF) 3.374% 2028 8,691 3,887
Grainger 3.375% 2028 7,484 –
Tesco 3.322% 2025 5,337 4,484
Pacific National 5% 2023 5,159 –
Akelius Residential Property 2.375% 2025 5,123 –
Burford Capital 6.125% 2025 4,878 2,779
Western Power 3.875% 2024 4,801 –
Dexia Credit 1.625% 2023 4,499 –
Burford Capital 5.0% 2026 4,481 3,132
Deutsche Pfandbriefbank 7.625% 2025 4,207 –
Other Preference Shares/Corporate Debt Investments 117,127 99,019
171,787 113,301
Funds/Equities
iShares MSCI Japan ESG Screened UCITS ETF 46,301 37,753
SPDR MSCI Europe Energy UCITS ETF 34,236 18,427
Lyxor STOXX Europe 600 Basic Resources UCITS ETF 18,670 10,840
North Atlantic Smaller Companies Investment Trust 15,335 16,302
Greencoat UK Wind 14,815 13,047
Grainger 11,327 20,677
Aker Asa 8,838 7,104
iShares S&P 500 Energy Sector UCITS ETF 7,795 6,328
List of the Largest Portfolio Investments
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 11
Company Summary Governance Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder InformationThe Board’s Strategic Report
2023
£’000
2022
£’000
Funds/Equities(continued)
GCP Infrastructure Investments 7,618 8,825
International Public Partnerships 7,558 –
Other Fund/Equity Investments 156,104 320,834
328,597 460,137
Gold
Wisdomtree Physical Swiss Gold 13,048 13,148
13,048 13,148
Total Investments 1,251,801 991,893
Cash 13,766 50,611
Total 1,265,567 1,042,504
The full portfolio listing of the Company as at 31March 2023 is available at www.capitalgearingtrust.com.
List of the Largest Portfolio Investments
(continued)
12 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
The Board members are all experienced Directors who work closely with Juniper Partners and CGAM in the day to
dayoperations of the Company. Apart from the scheduled Board meetings, the Board is in regular contact on
mattersarising and all of the Board have demonstrated sufficient commitment and experience to carry out
theirresponsibilities.
Jean Matterson
Independent Non-Executive Director, Chairman
Robin Archibald
Independent Non-Executive Director, Chairman
of the Audit and Risk Committee and Senior
Independent Director
Appointed a Director in May 2015 and assumed
the position of Chairman on 3 July 2020. Jean, until
2020, was a partner of Rossie House Investment
Management in Edinburgh which specialises in
private client portfolio management with particular
emphasis on investment trusts. She was previously
with Stewart Ivory & Co Ltd for 20 years, as an
Investment Manager and director. She is a director
of Herald Investment Management Limited and HIML
Holdings Limited.
Appointed a Director in May 2015 and as Audit Chair
in July 2019. Robin was formerly head of corporate
finance and broking at Winterflood Investment Trusts
until April 2014, when he retired from his executive
roles. He qualified as a chartered accountant in 1983
and subsequently worked with Samuel Montagu, SG
Warburg Securities, Natwest Wood Mackenzie and as
partner and corporate financier with the corporate
finance division of a Scottish accountancy firm. Since
the early nineties, he has concentrated on advising
and managing transactions in the UK closed-ended
funds sector. Heis currently senior independent
director and audit chair of Shires Income plc,
chairman of Albion Technology and General VCT plc
(retiring in June 2023) and senior independent director
and audit chair of Henderson European Focus Trust
plc. Robin has also served on the boards of two other
investment companies, acting as senior independent
director and audit chair of both.
The Board
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The Board (continued)
Wendy Colquhoun
Independent Non-Executive Director and
Chairman of the Remuneration Committee
Paul Yates
Independent Non-Executive Director
Appointed a Director in January 2021. Until May
2020, Wendy was a senior corporate partner at
international law firm CMS Cameron McKenna
Nabarro Olswang LLP where she specialised in
financial services. She has over 25 years of experience
in providing advice to investment trusts. After
qualifying as a solicitor in 1987, Wendy held roles
with Dickson Minto WS and Linklaters before heading
up the UK corporate group at Dundas & Wilson (a
leading Scottish law firm) prior to its merger with
CMS Cameron McKenna in 2014. She is chairman of
Henderson Opportunities Trust plc, a non-executive
director of Schroder UK Mid Cap Fund plc and, with
effect from 1September 2023, will be a non-executive
director of Murray International Trust plc.
Appointed a Director in December 2019. Paul is
chairman of the advisory board of 33 St James’s
Limited and is a non-executive director of Fidelity
European Trust PLC, where is he also the senior
independent director, and Witan Investment Trust
PLC, where he is also chairman of the Remuneration
Committee. His extensive career in investment
management began at Samuel Montagu & Co in 1980.
He joined Phillips and Drew in 1985, being the year
that it was acquired by UBS. During his time at UBS
he held a number of positions covering management,
portfolio management, pensions, strategy and client
service. He was CEO of UBS Global Asset Management
(UK) Limited between 2001 and 2005 and, after
undertaking a number of global roles at UBS, he
retired in 2007.
14 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
The Investment Management Team
The Company is managed by CG Asset Management, which is authorised and regulated by the Financial Conduct
Authority. The investment team consists of Peter Spiller, Alastair Laing and Christopher Clothier, supported by a team
of investment analysts.
Peter Spiller
Founder, CIO, Co-manager
Alastair Laing
CEO, Co-manager
Prior to founding CGAM in 2000, Peter was a partner
and strategy director at Cazenove & Co Capital
Management and a US equity investor at Capel Cure
& Myers. Peter has managed Capital Gearing Trust
plc since 1982. Peter studied Politics, Philosophy and
Economics at Christ Church, Oxford.
Alastair joined CGAM in 2011 and has co-managed the
funds since that date. Alastair joined CGAM from Hg
Capital LLP (a pan-European private equity fund) and
previously worked with the mergers and acquisitions
team at Deloitte LLP. Alastair was educated at
Edinburgh University and was an MBA Scholar at
London Business School. He is a member of the
Institute of Chartered Accountants of Scotland.
Chris Clothier
CFO, Co-manager
Chris joined CGAM in 2015 and has co-managed the
funds since that date. Prior to that he was a director
at IPGL Limited, a private investment vehicle with a
range of public and private interests predominantly in
the financial services industry, where he worked for
six years. Before that he worked at MMC Ventures,
an early-stage venture capital firm. Chris studied
Chemistry at New College, Oxford.
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 15
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Business model and investment strategy
The Company, as an investment trust, is a UK closed-
ended public limited company which invests in a
diversified portfolio of assets meeting the investment
trust tax conditions. Investment trusts, such as the
Company, are long-term investment vehicles and are
typically externally managed and are overseen by
experienced independent non-executive Directors.
The Company has no employees, and the Board
outsources its entire operational infrastructure to
third party organisations. In particular, the Board
appoints and oversees CG Asset Management, an
independent Investment Manager, to manage the
investment portfolio. CG Asset Management also
acts as the Company’s Alternative Investment Fund
Manager. The Board sets the Company’s strategy,
decides the appropriate financial policies to manage
the assets of the Company, ensures compliance
with tax, legal and regulatory requirements and
reports regularly to shareholders on the Company’s
performance. The Directors do not envisage any change
to this model in the foreseeable future. The Company
also appoints an Administrator, Juniper Partners to
provide administration services for the Company,
which includes company secretarial, accounting and
management of discount and premium control services.
The Company seeks to preserve shareholders’ real
wealth and deliver absolute total returns through
the construction of a multi asset portfolio with a
specialist focus on investment company equities
and related securities. Portfolio construction is
the key tool to mitigate capital loss in any given
year. The Investment Manager allocates across
asset classes based on an assessment of capital
markets and macro-economic risks, with the aim of
avoiding capital loss. In addition, a portion of the
portfolio is invested into closed-ended investment
companies with the aim of exploiting inefficiencies
to generate risk adjusted returns that are superior
to those available in more liquid equity markets.
Objective
The Company’s objective is to preserve and, over time,
to grow shareholders’ real wealth.
Investment policy
As preserving shareholders’ real wealth is core
to the investment objective, greater emphasis is
placed on avoiding loss than maximising returns.
Achieving the investment objective implies returns
at least in line with inflation over the short term and
significantly ahead of inflation over the long term.
The Company does not have a formal benchmark
but reports against the UK Retail Price Index (a
measure of inflation) and the MSCI UK Equity Index.
The Company does not have a target dividend
payment. It is anticipated that capital return is
likely to be the larger component of the returns.
The Investment Manager has the authority to invest
in equities, bonds, commodities and cash. Equity
investments are typically in listed collective investment
vehicles, including investment trusts, ETFs, investment
holding companies and property companies.
Asset allocation is flexible and responds to changes in
asset values and to the macro-economic environment.
A broad mix of assets will be maintained, with a
maximum equity exposure of 80% and a minimum
of 20%. The Investment Manager has the authority
to invest in any geographical region and has no set
limits on industry sector or country exposure.
The Company will not invest more than 15% of
its investment portfolio in any single security.
The Investment Manager is not permitted to
invest in derivatives (such as options, swaps or
forward contracts) without prior Board approval.
Investments in other funds managed by the
Investment Manager also requires Board approval.
The Company has the authority to borrow up to 20%
of net assets, subject to prior Board approval.
Promoting the success of the Company
The Board is required to describe to the Company’s
shareholders how the Directors have discharged
their duties and responsibilities over the course
of the financial period under section 172 of the
Companies Act 2006 (the “Section 172 Statement”).
This requires an explanation of how the Directors
have promoted the success of the Company for
the benefit of its members as a whole, taking into
account the likely long-term consequences of
decisions, the need to foster relationships with all
stakeholders in the Company and the impact of
the Company’s operations on theenvironment.
Strategic Review
16 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Strategic Review (continued)
Role of the Board
The Board currently comprises four (five with effect from 1 August 2023) independent non-executive Directors
who have a broad range of skills and experience across all major functions that affect the Company. The Board has
responsibility for decisions relating to the Company’s investment objective and policy, gearing, corporate governance
and strategy, and for monitoring the performance of the Company’s various service providers. Gender and diversity
disclosures can be found on pages 33 and 34.
The Company’s main stakeholders are shareholders, the Investment Manager and its service providers. The Company also
engages with its investee companies where appropriate, particularly on performance and corporate governance issues.
How the Board engages with stakeholders
The Board considers its stakeholders at Board meetings and receives feedback on the Investment Manager’s
interactions with them.
Stakeholder How we engage
Shareholders
Shareholders are key stakeholders and the Board places great importance
on communication with them, both through written communication from the
Company and interaction with the Investment Manager. The Board welcomes all
shareholders’ views and aims to act fairly between shareholders. The Company’s
shareholder register is retail investor orientated and has wealth managers and
private client brokers on it representing private investors. As a constituent of the
FTSE-250 Index, the Company also has index tracking investors. The Investment
Manager and Company’s broker regularly meet with current and prospective
shareholders to discuss the Company, its performance and outlook. The
Chairman is available to talk directly with shareholders. Shareholder feedback
is discussed by the Directors at Board meetings. The Board is kept appraised
of changes to the share register and the Investment Manager is in contact with
investor platforms to identify how best to communicate with the direct retail
investor community. The operation of the DCP is crucial to providing secondary
market liquidity for investors and in providing stability of pricing at close to the
prevailing net asset value.
Last year the Board decided to enhance the quality and clarity of its shareholder
communications. In June 2022 the new website was launched, this was soon
followed by rebranded factsheets and the Half Yearly Report. The Annual
Report is also in a new format and the Board will aim to improve its reporting to
shareholders where possible.
Regular updates are provided to shareholders through the Annual Report, Half
Yearly Report, announcements, including daily net asset value announcements,
and the Company’s website. The Investment Manager prepares monthly
factsheets and quarterly reports and maintains a website which includes current
information for investors.
The Company’s Annual General Meeting typically provides a forum, both formal
and informal, for shareholders to meet and discuss issues with the Directors and
Investment Manager. The Board encourages as many shareholders as possible
to attend the Annual General Meeting and to provide feedback on the Company.
The Company Secretary also deals with regular shareholder queries on behalf
of the Board. The Board encourages shareholders to vote on all Company
business, which includes specific exercises to obtain votes for general meetings
to maintain issuance authorities if they become exhausted between annual
generalmeetings.
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Strategic Review (continued)
Stakeholder How we engage
Investment Manager
The Investment Manager’s Report on pages7 and 8 details the key investment
decisions taken during the year. The Investment Manager has continued to
manage the Company’s assets in accordance with the Company’s investment
policy, with the oversight of the Board. The Investment Manager is represented
and attends all formal Board meetings.
The Board reviews regularly the Company’s performance against the investment
objective and the application of its investment policy and restrictions. The Board
undertakes an annual strategy review meeting to ensure that the Company is
positioned well for the future delivery of its objective for its stakeholders.
The Board receives presentations from the Investment Manager at every Board
meeting to help it to exercise effective oversight of the Investment Manager and
the Company’s strategy in operation.
The Board, through the Management Engagement Committee, formally reviews
the performance of the Investment Manager at least annually. Risks and
emerging risks are considered at each Board meeting.
Communities and
the environment
The Board supports the Investment Manager on ESG matters in line with good
stewardship practices, and an approach agreed with the Board. The Board is
also acutely aware of the importance of providing an investment product which
meets the needs of its investors in both protecting and growing value over time.
The Board takes appropriate account of broader ESG concerns and the need for
the Company to act as a good ‘corporate citizen’. An investment approach that
meets the needs of investors provides a service valuable to the communities in
which the Company operates, not least as a means for financial planning and
saving. See the ESG/engagement section on pages21 to 25.
Other service
providers
The Board seeks to maintain constructive relationships with all of the Company’s
suppliers either directly or through the Investment Manager with regular
communications and meetings. A key relationship is with Juniper Partners who
provide company secretarial, administration and accounting services, as well as
operating the DCP. The Board is in continued direct contact with Juniper Partners.
The Management Engagement Committee conducts an annual review of the
performance and terms and conditions of engagement of the Company’s main
service providers to ensure they are performing in line with Board expectations
and providing value for money.
18 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Strategic Review (continued)
Specific examples of stakeholder consideration
during the year
The Board has always been mindful of its responsibilities
to the stakeholders of the Company, and this has been
part of both scheduled Board meetings and discussions
between these meetings as required.
Jean Matterson, with Paul Yates, met a large shareholder
to gather their views on the performance and general
operation of the Company, including the DCP. The
Board also met with two brokers to ascertain their
views on the Company, its performance and views of
investors. The Investment Manager also held an Investor
Day in November 2022, which was well attended by
shareholders and potential investors, as well as by Jean
Matterson, representing theBoard.
The operation of the DCP is a fundamental part of the
Company’s operating structure. It offers liquidity in
the secondary market close to the prevailing net asset
value and the removal of pricing volatility around net
asset value either when selling or buying shares in the
Company. Ensuring that the DCP continues to operate
effectively requires constant monitoring, maintaining
the requisite authorities in place, and having sufficient
liquidity in the portfolio. The Board, together with Juniper
Partners, is responsible for maintaining the operational
resilience for both buyback and issuance. During the
year, the Company both issued and bought back shares.
The Board has engaged with the industry body, the
AIC, on matters which impact on the operations of the
Company, which included a meeting with the new chief
executive of the AIC.
Management of the portfolio and agents
to the Company
The Investment Manager’s Report on pages7 and 8
details the key investment decisions taken during the
year ended 31March 2023. The overall diversified
shape and structure of the investment portfolio is an
important factor in delivering the Company’s stated
investment objective.
As explained in more detail on page27, during the year,
the Management Engagement Committee decided that
the continuing appointment of the Investment Manager
was in the best interests of shareholders. A similar
conclusion was reached on the continued appointment
of the Company’s other service providers and there
were no changes during the year.
Key performance indicators (“KPIs”)
The Board monitors KPI indices and ratios for the
purpose of assessing and reporting investment
performance and these are discussed further in
the Chairman’s Statement. The Board monitors the
performance of the Investment Manager against RPI
over the short-term (3 years) and the MSCI UK Index
over the longer-term (10years). Further information
on these measures can be found on pages71 and 72.
As referred to in the Chairman’s Statement, the Board is
considering the appropriateness of these performance
comparator measures.
Tables and graphs showing the performance of the
Company’s NAV per share compared with RPI and the
MSCI UK Index are shown on pages2 and 3.
In addition, the Board monitors the following KPIs:
n Share price discount/premium 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 or issued. At the start of the year under review
the premium to NAV was 2.3%, compared with a
discount of -1.4% at 31March 2023, with an average
premium of 1.5% for the year ended 31March 2023;
and
n Ongoing charges ratio (“OCR”), calculated using the
methodology recommended by the Association of
Investment Companies which enables the Board
to measure and monitor the control of costs. This
was 0.46% for the year to 31March 2023 (2022:
0.52%). Since the introduction of the DCP in 2015
the Companies OCR has fallen by 52% from 0.96% to
0.46%. Further information can be found on page72.
Principal and emerging risks
The world has been subject to the most extraordinary
challenges since 2020. It is impossible to quantify
the extent of damage that may be wrought over the
longer term and the emerging risks that will be faced
for the Company, not least the economic impact.
Ever since the emergence of covid in early 2020, the
Company has been subject to significant economic
headwinds, such as substantial market movements,
inflationary pressures and increasing interest rates.
All of which make preserving shareholders’ real
wealth, far less growing it, challenging. The central
aims remain to preserve value in the Company’s
portfolio and liquidity in the Company’s shares.
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Strategic Review (continued)
The Directors try to ensure that the Company
maintains its investment strategy, has operational
resilience, meets its regulatory requirements as an
investment trust and navigates the financial and
economic circumstances in these uncertaintimes.
The Directors have carried out a robust assessment
of the principal and emerging risks facing the
Company, including those that would threaten its
business model, future performance, solvency or
liquidity. The principal risks and uncertainties facing
the Company, together with the mitigating actions
the Board takes, are set out in the tablebelow.
The Company faces heightened risks of rising inflation
and geopolitical risks of events such as the invasion of
Ukraine. It is difficult to assess how these exogenous
risks will impact the Company, but they do introduce
caution on returns that might be achieved in the
future given the inflationary impact on equity and
bond returns and the risk of market shocks caused by
geopolitical risk. The Investment Manager continues
to apply protective measures in constructing the
portfolio but is also aware that an ‘oversold market’
can present opportunities as well and it retains
liquidity in the portfolio to exploit these if it can.
Risk Mitigation
Investment strategy
and performance
The Board is responsible for setting the
investment strategy of the Company and
monitoring investment performance.
Inappropriate strategy and/or poor
investment performance may have an
adverseeffect on shareholder returns.
There is increasing awareness of the
challenges and emerging risks posed by
climate change. The investment process
considers ESG factors, as set out in the
Strategic Review. Overall the specific potential
effects of climate change are difficult, if not
impossible, to predict and the Board and
Investment Manager will continue to monitor
developments in this area.
Geopolitical risk has always been part of the
investment process. The risk has heightened
as a result of the Russian invasion of Ukraine,
with the resultant effects on global trade,
higher levels of inflation, rising interest rates,
and volatility in stockmarkets. Inflation and
rising interest rates have had and will continue
to have a significant impact on the Company
and its investment portfolio.
Increased overall risk due to rising
inflation, higher interest rates, supply
issues and ongoing global political
tensions and the impact of increased
interest rates.
The Company’s strategy is formally reviewed by the Board at
least annually, considering investment performance, shareholder
views, developments in the marketplace and the structure of the
Company.
Investment performance is reviewed by the Board on a regular
basis against RPI and the MSCI UK Index. The composition of
the portfolio is provided at each Board meeting and allows
the monitoring of the spread of investments and associated
investment risks. The Investment Manager’s approach to ESG is
set out on pages21 to 25. The Company has limited direct impact
on the environment as it invests primarily in government bonds
and closed ended and other collective investment vehicles. Stock
selection, portfolio composition and liquidity are explained in
detail by the Investment Manager at eachmeeting.
The Investment Manager is formally appraised at least annually by
the Management Engagement Committee.
20 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Strategic Review (continued)
Risk Mitigation
Premium/discount level
The Company’s share price could be impacted
by a range of factors causing it to be higher
than (at a premium to) or lower than (at a
discount to) the underlying NAV per share.
Excessive demand for, or supply of, shares can
create liquidity issues, restricting the ability
of investors to buy and sell shares in the
secondarymarket.
Fluctuations in the share price can cause
volatility which may not be reflective of the
underlying investment portfolio.
Risk remains relatively unchanged
The Company operates a discount/premium control policy, under
which it will aim to purchase or issue shares to ensure, in normal
market conditions, that the shares trade close to their underlying
NAV per share. The DCP increases liquidity and reduces volatility
by preventing the build-up of excessive demand and/or supply
for the Company’s shares which, the Board believes, is in the best
interests of shareholders. The DCP continues to be reviewed to
ensure liquidity for issuance and buyback.
The levels of issuance/buyback of shares are reported to the
Board on an ongoing basis and at each Board meeting the Board
considers the Investment Manager’s ability to invest new proceeds
(in the case of issuance) and maintain sufficient liquidity (in the
case of buybacks) to meet the demands of the DCP. During the
past year, there has been significant share issuance, however in
the latter part of the year the Company has bought back shares.
The Company Secretary monitors the relevant authority levels,
which are regularly reported to the Board, to maintain, as far as
possible, uninterrupted operation of the DCP.
Operational
The Company is reliant on third-party service
providers including CGAM as Investment
Manager, Juniper Partners as Company
Secretary and administrator and Northern
Trust as custodian and key teams at such
service providers. Failure of the internal
control systems of these third parties could
result in inaccurate information being
reported or risk to the Company’s assets.
Risk remains relatively unchanged
The Audit and Risk Committee formally reviews each service
provider at least annually, considering their reports on internal
controls, information security, and the resources available to them.
The Management Engagement Committee reviews the service
levels and how the service providers have performed.
The operational requirements of the Company from its service
providers are subject to rigorous testing including the use of
office/home working and online communication. Additionally,
the Investment Manager’s and Administrator’s technology
environments are continually maintained and subject to regular
testing, vulnerability scans and patch management. To date the
operational arrangements have proven robust.
Further details of the Company’s internal control and risk
management system is provided on pages34 and 35.
Regulatory and governance
The Company operates in a regulatory
environment. Failure to comply with section
1158 of the Corporation Tax Act 2010 could
result in the Company losing investment trust
status and being subject to tax on capital
gains. Failure to comply with other regulations
could result in financial penalties or the
suspension of the Company’s listing on the
London Stock Exchange.
Risk remains relatively unchanged
Compliance with relevant regulations is monitored on an ongoing
basis by the Company Secretary and Investment Manager who
report regularly to the Board. The Board also takes into account
increasing governance requirements and complies with them
wherever practical or explains why there is any divergence.
The Board monitors changes in the regulatory environment
and receives regulatory updates from the Investment Manager,
Company Secretary, lawyers and auditors as relevant.
The Board is appraised of corporate governance issues and
changes and as far as practical the Company complies with
governance guidance or explains where it does not and meets the
guidance of the AIC Code (refer to page31).
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Risk Mitigation
Financial and economic
The Company’s investments are impacted
by financial and economic factors including
market prices, interest rates, foreign exchange
rates and credit which could cause losses to
the investmentportfolio.
Risk has been heightened by inflationary
and interest rate increases and
geopolitical events, including the
invasion of Ukraine
The Board regularly reviews and monitors the management of
market risk, interest rate risk, foreign currency risk and credit risk.
These are explained in detail in note 14 to the financial statements
on pages64 to 70. Inflation, and geopolitical risks, are considered a
component of market risk, with the impact of higher inflation and
interest rates and events in Ukraine taken into account.
The Company has sufficient cash resources and liquidity in
its portfolio to meet its operating requirements, including the
operation of DCP. In common with most commercial operations,
there are always exogenous risks and consequences, which are
difficult to predict and plan for in advance. The Company does
what it can to address these risks when they emerge, not least
operationally and in trying to meet its investment objective.
Share issuance and buybacks
During the year the Company issued 5,688,288 new
shares for an aggregate consideration of £287.2m.
The Company also bought back 321,500 shares for
an aggregate consideration of £15.3m. Shares were
issued at a premium or bought back at a discount
to the NAV thereby covering the costs of the DCP,
associated portfolio transaction costs and to provide
some accretion to the NAV per share. All shares were
issued/bought back in accordance with the DCP, which
is detailed further on page20. Since the year end, the
Company has bought back a further 223,000 shares.
ESG and the investment process
In 2023, the Investment Manager applied to
become signatories to the UK Stewardship Code.
The Company aims to conduct itself responsibly,
ethically and fairly and has sought to ensure that the
Investment Manager’s management of the portfolio
of investments takes account of environmental, social
and governance (“ESG”) matters where appropriate.
The Company has limited direct impact on the
environment as it invests primarily in government
bonds and closed-ended and other collective
investment vehicles. The investment sectors chosen
do not generally raise ethical issues. The majority
of the Company’s assets are bonds issued by
governments of countries which have, in the opinion
of the Investment Manager, robust social institutions
and goodcreditquality. These judgements are
based on both qualitative and quantitative factors.
Qualitative factors include respect for the rights
of individuals and of property, free speech, lack of
corruption, transparency and freedom ofthe press.
The balance of the investment portfolio comprises
corporate bonds, preference shares and equity funds.
Within these asset classes the Investment Manager
does not directly invest into companies in the tobacco,
defence or gambling sectors. However, through broad
holdings of collective equity funds, there will be small
indirect holdings of companies that operate in these
sectors. These holdings are not considered to be
material in the context of overall assets managed.
The Board monitors, through the Investment Manager,
and is satisfied with, the underlying investee companies’
policies to act with due regard to community, welfare
and environmental factors. The Investment Manager
is a signatory to UN Principles of Responsible
Investing. Further information on the Investment
Manager’s governance and policies can be found
at www.cgasset.com/governance-and-policies.
In meeting its responsibilities to its own shareholders,
the Company aims to preserve value in its portfolio
and liquidity in its shares. The Board is mindful of
all of its stakeholders, including the employees of
the agents who provide services to the Company
and is operating to protect those interests.
Strategic Review (continued)
22 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Strategic Review (continued)
The Investment Manager’s investment approach to ESG
1
Be honest
No greenwashing, no PR-lead initiatives, no jargon. CGAM believes stakeholders are best served
by an accurate presentation of their activities rather than a marketing campaign dressed up in the
language ofstewardship.
2
One firm, one rule
CGAM do not have an ethical fund range (and by implication an unethical fund range). CGAM‘s
standards apply to all the funds they advise.
3
Ethics, not mathematics
Securing appropriate data is essential to all aspects of investment decision making, including
judgements around sustainability. However data has to be interpreted within a specific context. There
is no formula that can be applied in a uniform way to every situation; CGAM emphasise judgement
over simplistic third party quantitative scoring.
4
Engagement over disinvestment
When investors have the influence to effect change it is most valuable to encourage positive
transition rather than pursuing disinvestment.
5
Targeted, not scatter-shot
Whilst supporting positive transition might be the optimal strategy, effective engagement is time
consuming. As a small firm CGAM must focus their efforts where they will have the most impact rather
than taking a generalist approach.
6
Driven by governance
Improved governance leads to improved social, environmental and financial outcomes. Investors
have multiple direct mechanisms to influence governance, so our engagement activities invariably
focus on governance, even when the ultimate objective is positive social or environmental change.
7
Integration, not separation
CGAM are a small firm and the entire team is collectively responsible for the stewardship activities with
the ultimate responsibility lying with the chief executive. CGAM do not have a standalone Responsible
Investment Team or ESG analysts as this does not seem to us to represent true integration.
Strategic prioritisation
A majority of the assets held are securities issued by governments such as bonds, bills and currency. As well as
government securities, there are a minority of assets held in securities issued by corporations, typically collective
investment vehicles such as investment trusts, real estate investment trusts or ETFs.
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 23
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Strategic Review (continued)
Different asset classes lend themselves to different stewardship approaches based on data quality and the potential
for CGAM to effectively engage and influence the issuer. As a small firm it is essential that CGAM focus their resources
strategically, targeting their engagement activities where they have most influence.
This means they focus their most intense efforts on those corporate issuers in those market segments where they
have a long history of engagement and know many of the participants. This means focusing primarily on listed closed
ended funds and listed property companies.
Where CGAM does not have influence, they are more likely to pursue exclusions. In their assessment, exclusions are a
less effective and productive form of stewardship but it makes no sense to expend significant resources on engaging
in areas they are less likely to impact. These areas include those where the Company has relatively small holdings
(such as corporate credit) or limited ability influence (such as government bonds).
ESG Data
Quality
Potential for
Engagement Exclusions Engagement
Priority
Focus
Gov’t Bonds
and Cash
High Low
X
Corporate
Credit
Low Med
X
3
Preference
Shares
Low Med
X
3
Listed
Property
Med High
3
Listed closed
ended funds
Low High
3
ETF’s
Med Low
X
CGAM’s ESG approach to the Company’s investments by asset class
1. Direct government securities
A significant proportion of the assets held by the Company are invested in direct holdings of securities issued by
governments including bonds, bills and cash. As CGAM’s capacity to influence governments is extremely limited, its
primary approach is to exclude sovereigns that do not maintain high ESG standards. In order to help assess these
criteria, CGAM considers indices compiled by a range of Non-Governmental Organisations (refer to the table below)
and requires sovereigns, at a minimum, to achieve strong rankings in at least four out of five of these criteria. In
addition to using third party indices, CGAM also overlays its own subjective assessments, which typically leads to
additional exclusions.
Index Criteria
World Bank governance effectiveness index Top quartile
World press freedom index Good or satisfactory
Global freedom score Free rating
UN Human development index Very high human development rank
Net zero by 2050 statement Statement of intent by 2050 or earlier
24 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Strategic Review (continued)
2. Direct corporate credit and preference shares
The Company holds small quantities of direct credit and preference share holdings issued by corporate issuers. Given
CGAM’s small participation in the market and therefore limited influence, CGAM’s primary approach is to exclude
corporate issuers who are primarily engaged in the following activities:
Exclusion area Exclusion sub-area Threshold
Controversial weapons Anti-personnel mines, cluster munitions, chemical weapons 0%
Tobacco Manufacture or marketing <5%
Thermal Coal Coal mining or coal-based energy production <5%
Oil sands or arctic drilling Production <5%
Gambling Services <5%
Adult entertainment Production or broadcasting <5%
Firearms Manufacture <5%
Predatory lending Services <5%
CGAM does not invest directly in companies with primary activities in the above areas, although it cannot always
identify immaterial non-core activities. As a result, CGAM employs a revenue threshold in certain areas.
3. Listed closed-ended funds including, investment trusts, REITs and property companies
CGAM has a long history of active engagement in the London market for listed closed ended funds and other collective
investment companies including REITs. In this priority area for engagement, CGAM seeks to achieve positive transition
so does not employ systematic exclusions. Listed investment companies are fundamentally different to operating
companies and typically have the following features:
n they hold a broad portfolio of securities on behalf of their shareholders;
n external investment managers, rather than executive management teams;
n no employees or customers; and
n have a board of directors to represent shareholder interests and concerns.
Given the prominent role that directors play in investment companies, CGAM frequently undertakes activities that
aim to influence boards and ultimately improve governance. The techniques employed vary based on the specific
scenario but include those listed in the table below. As well as engagement in the sector, CGAM places particular
weight on providing primary capital to high impact investment companies with an environmental or social focus. In
its assessment, by providing primary capital, via IPO sponsorship or follow-on fund raisings, investors have a greater
impact than by simply trading securities in the secondary market.
Activist engagement technique Frequency of employment
Management engagement Continuous
Board engagement Continuous
Shareholder co-ordination Frequent
Voting against significant resolutions Frequent
Raising ESG matters in fund reporting Frequent
Amplification through press engagement Periodic
Replacing directors to improve governance Periodic
Publishing open letters Periodic
Publishing research incorporating ESG views Periodic
Threatening to requisition meetings Periodic
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 25
Company Summary Governance Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder InformationThe Board’s Strategic Report
Strategic Review (continued)
4. Exchange traded funds (‘ETFs’)
The Company holds exchange traded funds. ETFs are listed
collective funds which typically track an index and provide
low cost, efficient access to a broad portfolio of securities.
CGAM does engage directly with its approved panel of ETF
providers to encourage improved stewardship standards.
Typically, this is via ESG screened ETFs which is a dynamic
and growing sector. The programme of identifying and
conducting due diligence on these products is ongoing.
Going concern
The Audit and Risk Committee has undertaken an
assessment of whether the Company is a going concern.
The Company’s investment objective and business
activities, together with the main factors likely to affect its
future development and performance, including prevailing
macro-economic conditions, are described above.
The financial position of the Company, including its cash
flows and liquidity positions, is set out in detail in the
financial statements. Note 14 to the financial statements
describes the Company’s processes for managing its
capital, its financial risk management objectives, details
of its financial instruments and its exposures to market
price, interest rates, foreign currency, credit and liquidity
risk. The Board works closely with the Investment
Manager and the Company Secretary to ensure that
the Company’s operations are resilient, and its portfolio
robust enough to meet challenges and opportunities.
The Directors also take into account the liquidity of the
portfolio and scenario stress testing when considering
the viability of the Company and its ability to meet
liabilities as they fall due and to fulfil the ongoing
operation of the DCP. The stress tests examined
downside scenarios which combined a substantial fall
in stockmarkets, and therefore asset values, with a
considerable loss of income. The impact of such severe
scenarios are then mitigated by a significant reduction
in management fees and most expenses. The results
of the stress testing indicated that there was sufficient
portfolio liquidity and net income for the Company to
continue in operation. The stress tests also examined
the operation of the DCP in the event of the Company
having to buy back a substantial number ofshares.
The Directors believe that the Company is well placed
to manage its business risks successfully and consider
that the Company currently has adequate resources, an
appropriate financial structure and suitable management
arrangements in place to continue in operational
existence, including meeting the provisions of the DCP. For
this reason, they continue to adopt the going concern basis
in preparing the annual report and financial statements.
The Directors do not consider that there are any material
uncertainties to the Company’s ability to continue to
adopt this approach over a period of 12 months from
the date of approval of these financial statements.
Viability statement
The Board has carried out a robust assessment of the
principal risks facing the Company including those that
would threaten its business model, future performance,
solvency or liquidity. The Board has drawn up a matrix
of the risks facing the Company and has put in place
appropriate processes and controls in order to mitigate
these risks as far as practicable. The principal risks which
have been identified, and the steps taken by the Board
to manage these, are detailed on pages19 and 21.
The Company is a long-term investor and the Board
believes it is appropriate to assess the Company’s
viability over a three-year period in recognition of the
Investment Manager’s long-term horizon and also
what the Directors believe to be investors’ horizons,
taking account of the Company’s current position
and the potential impact of the principal risks and
uncertainties, the operation of the DCP and the
circumstances of investment companies more generally.
As mentioned under the going concern paragraph
above, the Directors also take into account the liquidity
of the portfolio and scenario stress testing when
considering the viability of the Company. The results
of the stress testing indicated there was sufficient
portfolio liquidity and net income for the Company
to continue in operation for at least three years.
The Directors do not expect there to be any significant
change in the principal risks that have been identified
and the adequacy of the controls in place. Also, the
Directors do not envisage any change in the Company’s
strategy or its objective or any events that would prevent
the Company from continuing to operate over that period
as the Company’s assets are liquid, its commitments are
limited, and the Company intends to continue to operate
as an investment trust. The Directors believe that only
a dramatic downturn in financial markets, deteriorating
economic circumstances, or other crises besetting global
markets, could have an impact on thisassessment.
Based on this assessment, the Directors have a
reasonable expectation that the Company will be
able to continue in operation and meet its liabilities
as they fall due over the next three years.
The Board’s Strategic Report contained on pages4 to
25 have been approved by the Board and signed on its
behalf by:
Jean Matterson
Chairman
23 May 2023
26 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
The Directors present their report and financial
statements of Capital Gearing Trust P.l.c. for the
year ended 31March 2023.
Company status
The Company is an investment company as defined by
section 833 of the Companies Act 2006 and operates
as an investment trust in accordance with Chapter 4 of
Part 24 of the Corporation Tax Act 2010 (the “CT Act”).
This legislation provides conditions that the Company
must meet in respect of each accounting period. The
Company will continue to conduct its affairs as an
investment trust. The Company does not fall within
the definition of a ‘close company’ under the CT Act.
Revenue and dividend
The net revenue return attributable to shareholders for
the financial year to 31March 2023 was £17,606,000
(periodto 31March 2022: £9,813,000).
The Company does not aim to invest for income to
support any target dividend payment or target yield,
and dividend payments are affected by the requirement
to distribute a certain level of income to maintain
investment truststatus. The Company is generating
substantially more income than it has in the past, both
through its growth in assets and from higher interest
from bonds and other fixed interest securities.
The Board recommends the payment of a dividend of
60p per share for the year ended 31March 2023, (2022:
46p) for approval by shareholders at the forthcoming
Annual General Meeting. The dividend will be payable
on 10July 2023 to shareholders on the register of
members on 2June 2023, the associated ex-dividend
date being 1June 2023. Under FRS 102, final dividends
should not be accrued in the financial statements unless
they are approved by shareholders before the balance
sheet date. As such, the amount recognised in the 2023
financial statements comprises the 2022 final dividend.
Net asset value per share
The net asset value per share of the Company as at
31March 2023 was 4,797.3p, compared with 5,025.1p as
at 31March 2022.
The financial position of the Company is set out in detail
in the financial statements. Note 14 to the financial
statements describes the Company’s processes for
managing its capital, its financial risk management
objectives, details of its financial investments and
its exposure to market price, interest rates, foreign
currency, credit and liquidity risk.
Share capital
The Company’s share capital comprises Ordinary
shares of 25p each nominal value. The voting rights of
the shares on a poll are one vote for each share held.
As at 31March 2023, 26,258,763 shares were in issue
(31March 2022: 20,891,975) and 321,500 shares were
held in treasury (31March 2022: nil).
As at 22 May 2023, the latest practicable date prior to
the publication of this report, the issued share capital
consisted of 26,035,763
shares and 544,500 shares were
held in treasury. Whilst shares are held in treasury,
nodividends are paid on them and they have no
votingrights.
Substantial shareholders
At 31March 2023, the Board received notifications
of the following interest in the voting rights of the
Company:
Notified interests
% of Issued share
capital held
LGT Group 7.1%
JM Finn & Co 4.6%
Since 31March 2023 to the date of this report, the
Company has not been informed of any changes. In
addition to the above, as at 31March 2023, directors
and employees of CGAM were interested in shares
representing 1.7% of the issued share capital.
Management and contracts
Investment Manager
The Company’s investments are managed by CG Asset
Management under an agreement dated 10November
2017. Under this agreement, CGAM receives an annual
investment management fee of 0.60% of the net assets
of the Company up to £120m, 0.45% of net assets above
£120m up to £500m, and 0.30% thereafter, based on
quarterly valuations and payable quarterly in arrears.
The agreement is terminable on six months’ notice, and
in the event of termination otherwise than at the end
of a quarter, the Company is obliged to pay to CGAM a
due proportion of the fee for the period ended on the
termination of the agreement, calculated by reference
to the net assets of the Company as at the date of
termination. No other compensation would arise in the
event of termination.
CGAM was appointed as the Company’s AIFM in
November 2017.
Directors’ Report
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 27
Company Summary The Board’s Strategic Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder InformationGovernance Report
The Investment Manager operates under the
investment policy and guidelines drawn up by the
Board as detailed on page15. Any proposed deviation
from these guidelines is required to be discussed with
and agreed by the Board or by the Chairman where
authority is required between Board meetings. In
addition, the Investment Manager presents a report
at each Board meeting detailing compliance with the
policy during the preceding quarter and outlining any
instances where approval for investment decisions was
sought from either the Board or the Chairman.
The Investment Manager also provides marketing
and investor relation services under the investment
management agreement.
Performance, evaluation and the continuing
appointment of the Investment Manager
The Directors held detailed reviews into the investment
strategy adopted by the Investment Manager at the
Committee meeting on 11May 2023. The performance
of the Investment Manager during the year to 31March
2023 and the contractual arrangements with the
Investment Manager were discussed at this meeting.
The Investment Manager was not present during the
course of the Board discussions.
In reviewing the Investment Manager’s performance,
the Directors consider the following:
n adherence to the pre-agreed investment policy and
guidelines as prescribed by the Board;
n whether the strategy adopted by the Investment
Manager has been and continues to be consistent
with the Company’s aims;
n the asset value performance achieved in the year
under review as well as over the longer term and
whether this satisfies the investment objective as
communicated to shareholders;
n performance comparison to a selected peer group;
and
n compliance and administration competence.
Based on investment performance over the year
to 31March 2023, the Directors concluded that the
continuing appointment of the Investment Manager
on the existing terms is in the best interests of the
shareholders as a whole.
Company secretarial, administrative
and accounting services
Juniper Partners was appointed by the Company in
2015 to provide company secretarial, administrative
and accounting services under an Administration
Agreement. Juniper Partners also provides discount
and premium control services to the Company. This
agreement may be terminated on three months’
notice. With effect from 1April 2022, Juniper Partners,
in respect of administration and company secretarial
services, receive a fixed fee of £145,000 per annum plus
0.02% of the value of shareholders’ funds up to and
including £1 billion: 0.01% of the value of shareholders’
funds over £1 billion up to and including £2 billion:
and 0.00625% of the value of shareholders’ funds on
any amounts over £2 billion. For the year to 31March
2023, Juniper Partners received a fee of £293,082
(2022:£153,865).
In respect of services provided in connection with
the DCP, Juniper Partners, with effect from 1April
2022, receive a fixed fee of £30,000 per annum plus
commission of 0.1% of the aggregate consideration paid
in respect of any Ordinary shares bought back by the
Company or received in respect of any Ordinary shares
issued by the Company up to and including £250million:
commission of 0.075% of the aggregate consideration
paid in respect of any Ordinary shares bought back by
the Company or received in respect of any Ordinary
shares issued by the Company over £250million up to
and including £500million: and commission of 0.05%
of the aggregate consideration paid in respect of any
Ordinary shares bought back by the Company or
received in respect of any Ordinary shares issued by the
Company over £500million. These fees amounted to
£324,006 (2022: £355,061).
Depositary and custodian
The Northern Trust Company (“Northern Trust”)
was appointed in 2011 to provide custodial services
for the portfolio and subsequently appointed to
act as depositary on 20December 2019 to fulfil the
requirements of the AIFMD. Pursuant to the terms of
this agreement, Northern Trust receives a depositary fee
which is based on the net asset value of the Company,
subject to a minimum of £50,000 per annum, and safe-
keeping and transaction fees which vary by market.
Termination of the depositary and custody agreement
requires six month’s written notice.
Details of the fees paid during the year are recorded in
note 4 of the financial statements on page59.
Directors’ Report (continued)
28 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Conflicts of interest
In line with the Companies Act 2006, the Board has the
power to authorise any potential conflicts of interest
that may arise and impose such limits or conditions as
it thinks fit. A register of interests and potential conflicts
is maintained and is reviewed at every Board meeting
to ensure all details are kept up to date. Appropriate
authorisation is sought prior to the appointment of
any new Director or if any new conflicts or potential
conflictsarise.
Directors
The Directors of the Company who held office at 31March
2023 and at the date of approval of this report are set
out on pages 12 and 13, together with their biographies.
Directors’ interests in the shares of the Company are set
out in the Directors’ Remuneration Report on page38.
There are no agreements between the Company and its
Directors concerning compensation for loss of office.
Retirement and re-election of Directors
In accordance with the AIC Code, all Directors offer
themselves for either election or re-election at the
forthcoming AGM and on an annual basis going forward.
After due consideration of the results of the
performance evaluation, the Board confirms that the
performance of each Director continues to be effective
and that each Director demonstrates commitment to
their role, including the necessary commitment of time
for Board and Committee meetings and other duties
as required. The Board believes that the election or
re-election of all Directors is in the best interests of the
Company and its shareholders.
Directors’ indemnity
The Company maintains Directors’ and officers’ liability
insurance in place for all Directors, which is reviewed
periodically. Subject to the provisions of UK legislation,
the Company’s Articles of Association (the “Articles”)
provide the Directors with a qualifying third-party
indemnity provision against costs which they may incur
relating to the defence of any proceedings brought
against them arising out of their positions as Directors,
in which they are acquitted or judgment is given in
their favour by the courts. The qualifying third-party
indemnity provision was in force throughout the
financial year and at the date of approval of the annual
report. No claims have been brought against the
Company or theDirectors.
Whistleblowing policy
As the Company has neither executive Directors nor
employees, a formal whistleblowing policy has not been
adopted. However, the Board has agreed a procedure
by means of which any Directors or employees of
external service providers can bring to the attention of
the Chairman or Senior Independent Director matters
of concern to them. No matters of concern have been
raised during the year to 31March 2023.
Information about securities carrying
voting rights
The following information is disclosed in accordance
with Section 992 of the Companies Act 2006:
n the Company’s capital structure is summarised on
page 26;
n the details of the substantial shareholders in the
Company are listed on page 26;
n the rules on the appointment and replacement
of the Directors are set out in the Articles and are
summarised on page33. Any change to the Articles
would be governed by the Companies Act 2006;
n the Directors’ powers to issue and buy back shares,
in force at the financial year-end, are recorded on
page29; and
n there are: no restrictions concerning the transfer
of securities in the Company; no special rights
with regard to control attached to securities; no
agreements between holders of securities regarding
their transfer known to the Company; and no
agreements which the Company is party to that
might affect its control following a takeover bid.
Annual General Meeting (the “AGM”)
The AGM of the Company will be held on 5July 2023
at11.30a.m. at the Numis Auditorium, 45Gresham
Street, London EC2V7BF. The formal notice of such is
set out on pages73 to 74. Shareholders are strongly
advised to appoint the Chairman of the meeting to vote
on their behalf by completing and returning their form
of proxy or when submitting their votes through an
investment platform.
Directors’ Report (continued)
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 29
Company Summary The Board’s Strategic Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder InformationGovernance Report
Shareholders are encouraged to submit
questions to the Board using the email address
company.secretary@capitalgearingtrust.com by
Monday, 3July 2023. The proxy voting results, answers
to any questions raised ahead of the AGM and the
presentation from the Investment Manager will be
made available on the Company’s website following
theAGM.
There are 14 resolutions being proposed at the AGM,
11 of which are ordinary resolutions, two of which are
being considered as special business, and three of
which (resolutions 12 to 14) are special resolutions.
Resolutions 1 to 3 concern the receiving of the
accounts, approving the Directors’ remuneration report,
and approving the final dividend of 60p per share.
Resolutions 4 to 7
are for the re-election of the existing
Directors. Resolution 8 is for the re-appointment of BDO
as auditors and resolution9 is to authorise the Directors
to determine their remuneration.
Additional information on the resolutions relating to
special business is detailed below:
Resolution 10 – Aggregate Directors’ remuneration
The current Articles of Association provide that
Directors’ fees shall not, in aggregate, exceed £180,000
per annum. Although there are currently no plans
to make any significant changes to the levels of fees
paid to the non-executive Directors, the Board wish to
propose an increase to the fee limit contained in the
Articles of Association to reflect the increased size of
the Board, following the proposed appointment of Ravi
Anand as a non-executive director on 1August 2023,
as part of the continued refreshment of the Board.
It is now proposed that the fee limit be increased to
£230,000 per annum in aggregate and is designed to
facilitate the succession planning exercise referred to in
the Chairman’s Statement. Directors’ remuneration will
continue to be paid in accordance with the Directors’
Remuneration Policy.
Resolutions 11 and 12 – Directors’ authority to allot
shares and disapply pre-emption rights
At the AGM held on 12July 2022 (the “2022 AGM”),
the Directors were given the authority until the date
of the following AGM to allot up to 7,505,056 shares
and to disapply pre-emption rights in respect of up to
4,503,034 of these shares. Details of the shares issued
under these authorities can be found in Note 11 on
page62.
At this year’s AGM, the Directors are seeking authority
to allot up to 8,678,587 shares, in aggregate a nominal
value of £2,169,646.75, representing one third of the
issued share capital as at 22May 2023. The Directors
are also seeking to disapply pre-emption rights in
respect of the allotment of up to 20% of the issued
share capital of the Company, (equivalent to 5,207,152
shares at 22May 2023 with an aggregate nominal value
of £1,301,788.00), including any shares which have been
bought back as treasury shares.
The Board recognises institutional investor guidelines
which state that non pre-emptive issues should
be limited to a maximum of 20% for investment
companies. The Board believe that the continued
operation of the DCP in a cost-effective manner is in the
best interest of both existing and new shareholders.
Resolution 13 – Authority to make market purchases
of the Company’s shares
At the 2022 AGM, the Directors were given the authority
until the date of the following AGM to buy back up to
3,375,023 shares (14.99% of the issued share capital at
the date of the 2022 AGM).
At this year’s AGM, the Directors are seeking authority to
buy back up to 3,902,760 shares (14.99% of the issued
share capital as at 22May 2023) for cancellation or
holding up to 10% in treasury for re-sale into the market
during more favourable market conditions at values
equal or at a premium to NAV.
If approved, the powers, as detailed above under
Resolutions 11
to 13 and in the formal notice of the
AGM, will expire at the AGM to be held in 2024 unless
previously renewed, varied or revoked by the Company
in general meeting. These powers will be exercised only
if the Board is of the opinion that it would result in an
enhancement to the NAV per share of the Company and
therefore have a positive effect on shareholder funds.
The ability to buy back shares is an important part of the
operation of the DCP, if and when required.
Resolution 14 – Notice of general meetings
At the 2022 AGM, a resolution was passed to allow
the Company to call a general meeting other than an
AGM on at least 14 clear days’ notice. Such shareholder
authority must be renewed annually, and must exclude
AGMs, which can only be held on 21 clear days’ notice.
Without such shareholder authority, all general
meetings need 21 clear days’ notice.
The Board considers it prudent to retain the ability to
call general meetings other than AGMs on the shorter
notice period of 14 clear days, and this resolution seeks
such approval from shareholders.
Directors’ Report (continued)
30 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Directors’ Report (continued)
Recommendation
The Directors consider that all the resolutions detailed
in the formal notice of the AGM are in the best interests
of the Company and the shareholders taken as a whole
and therefore unanimously recommend to shareholders
that they vote in favour of each resolution, as the
Directors intend to in respect of their own holdings.
Statutory auditor
The Audit and Risk Committee is satisfied that BDO
is independent of the Company and, as mentioned
above, a resolution to re-appoint BDO LLP as the
Company’s auditors will be put to shareholders at
theforthcomingAGM.
Directors’ statement as to disclosure
of information to auditors
The Directors who were members of the Board at the
time of approving the Directors’ Report are listed on
pages 12 and 13. Each Director in office at the date of
this report confirms that:
n to the best of each Director’s knowledge and belief,
there is no information relevant to the preparation
of their report of which the Company’s auditors are
unaware; and
n each Director has taken all the steps a Director might
reasonably be expected to have taken to be aware of
relevant audit information and to establish that the
Company’s auditors are aware of that information.
This information is given and should be interpreted in
accordance with the provisions of section 418 of the
Companies Act 2006.
Business ethics
The Company is an investment company with no
employees or customers and does not provide goods
or services in the normal course of business. It has
appointed third parties to manage the investments and
to carry out administrative and secretarial services. The
Company’s own supply chain consists predominately
of professional advisers and service providers in the
financial services industry, which is highly regulated
and the Board has sought assurances from its suppliers
that they comply with the provisions of the UK Modern
Slavery Act 2015 and maintain adequate safeguards in
keeping with the provisions of the Bribery Act 2010 and
Criminal Finances Act 2017.
Bribery Act 2010
The Company has zero tolerance towards bribery and
is committed to carrying out business fairly, honestly
and openly. The Investment Manager also adopts a zero
tolerance approach and has policies and procedures in
place to prevent bribery.
Criminal Finances Act 2017
The Company has a commitment to zero tolerance
towards the criminal facilitation of tax evasion.
Greenhouse gas emissions
The Company’s approach to ESG is set out on
pages21 to 25 and are aligned towards the delivery of
sustainable investment performance over the longer
term. The direct impact of the Company’s activities is
minimal as it has no employees, premises, physical
assets or operations either as a producer or a provider
of goods or services, while its shareholders are
effectively its customers. As such it does not directly
generate any greenhouse gas or other emissions or
pollution. Nor does it have any emissions-producing
sources to report under the Companies Act 2006
and associated regulations. As the Company did not
consume more than 40,000 kWh of energy during the
past year, it is exempt from reporting under Streamlined
Energy and Carbon Reporting regulations.
Taskforce for Climate Related Financial
Disclosures (‘TCFD’)
The Company notes the TCFD recommendations on
climate-related financial disclosures. The Company
is an investment trust and, as such, it is exempt from
the Listing Rules requirement to report against the
TCFDframework.
Political and charitable contributions
No contributions were made during the year for political
or charitable purposes (2022: nil).
Post balance sheet events
Since 31March 2023, there are no post balance sheet
events which would require adjustment of or disclosure
in the financial statements.
By order of the Board
Juniper Partners Limited
Company Secretary
23 May 2023
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 31
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Corporate Governance Statement
This Corporate Governance Statement forms part of the
Directors’ Report.
Compliance with the recommendations
of AIC Code and UK Corporate
Governance Code
The Board has considered the principles and provisions
of the AIC Code of Corporate Governance (the “AIC
Code”). The AIC Code is endorsed by the Financial
Reporting Council and adapts the principles and
provisions set out in the UK Corporate Governance
Code to make them relevant to investment companies.
The Board believes that the AIC Code, which
incorporates the UK Corporate Governance Code,
provides the most appropriate governance framework
for the Company. Accordingly, the Company reports
against the principles and provisions of the AIC Code as
the Board believes this should provide more relevant
information to shareholders. The 2019 edition of the AIC
Code is applicable to the year under review and can be
found at www.theaic.co.uk.
The UK Corporate Governance Code includes provisions
relating to the role of the chief executive, executive
directors’ remuneration, the need for an internal audit
function and workforce engagement. For the reasons
set out in the AIC Code and as explained in the UK
Corporate Governance Code, the Board considers that
these provisions are not relevant to the position of the
Company, being an externally managed investment
company. In particular, the Company’s day-to-day
management and administrative functions are
outsourced to third parties. As a result, the Company
has no executive directors, employees or internal
operations and has therefore not reported further in
respect of these provisions.
During the financial year the Company has complied
with the provisions of the AIC Code and the relevant
provisions of the UK Corporate Governance Code.
Application of the AIC Code
Operation of the Board
The Board is ultimately responsible for framing and
executing the Company’s strategy and for closely
monitoring risks. The Board has a formal schedule of
matters specifically reserved for its decision, which are
categorised under various headings, including strategy,
management, structure, capital, financial reporting,
internal controls, gearing, asset allocation, share price
premium/discount, contracts, investment policy, finance,
risk, investment restrictions, performance, corporate
governance and Board membership andappointments.
It has delegated investment management, within
clearly defined parameters and dealing limits, to CG
Asset Management and the company secretarial and
administration functions have been delegated to Juniper
Partners. The Board reviews the performance of the
Company at Board meetings and sets the objectives for
the Investment Manager.
The Company Secretary is responsible to the Board,
inter alia, for ensuring that Board procedures are
followed and for compliance with applicable rules and
regulations including the AIC Code.
The Board believes that the content and presentation
of Board papers circulated before each meeting contain
sufficient information concerning the financial condition
of the Company. Key representatives of the Investment
Manager attend each Board meeting enabling the
Directors to probe on matters of concern or seek
clarification on certain issues.
Biographies of those Directors in office at the date of
signing of the financial statements are set out on pages
12 and 13.
Audit and Risk Committee
The Audit and Risk Committee is a formally constituted
Committee of the Board with defined terms of
reference. The Committee is chaired by RobinArchibald.
Its role and responsibilities are set out in the Report of
the Audit and Risk Committee on page41. As the Board
is small, Jean Matterson, the Chairman of the Board, was
appointed a member of the Audit and Risk Committee
with effect from 26January 2022. The Board is satisfied
that members of the Audit and Risk Committee have
relevant and recent financial experience to fulfil their
role effectively and also have sufficient experience
relevant to the closed ended investment company
sector and UK listed companies. The auditor, who the
Board has identified as being independent, is invited
to attend the Committee meeting at which the annual
accounts are considered and any other meetings that
the Committee deems necessary.
32 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Nomination Committee
A Nomination Committee, comprising all the
independent Directors, oversees the annual appraisal
of the Board members, including the chair, to assess
whether individual Board members should be
nominated for re-election each year, evaluates the
overall composition of the Board from time to time,
taking into account the existing balance of skills and
knowledge on the Board and considers succession
planning accordingly. This Committee is chaired by
JeanMatterson.
The Committee, when assessing the performance
of Directors and for making recommendations as
to whether they should remain in office and be
put forward for election or re-election at the AGM,
uses extensive questionnaires and reviews by the
Chairman. In September 2022, the Board, following
a tender process, engaged Lintstock Limited, an
independent governance specialist, to complete an
externally facilitated Board evaluation. The Senior
Independent Director is responsible for the appraisal of
the Chairman. This review did not identify any causes
forconcern.
Management Engagement Committee
A Management Engagement Committee comprises
all the independent Directors of the Company and
is chaired by Paul Yates. The Committee meets at
least once a year to consider the performance and
remuneration of the Investment Manager and to review
the terms of the investment management contract.
The Management Engagement Committee also reviews
the terms and performance of the other key service
suppliers to the Company on an annual basis, including
the costs of these services and how effective they have
been during the year.
Remuneration Committee
A Remuneration Committee comprises all the
independent Directors of the Company and is chaired
by Wendy Colquhoun. The Committee meets at least
once a year to consider the Directors’ Remuneration
Policy and the remuneration of the Directors.
During the year, the Committee considered the Directors’
fees over the last eight years, fees paid by its investment
trust peer group and the results of Trust Associate’s
2022 fee review. After considering this information
and the work and responsibilities of the Directors, the
Committee concluded that for the forthcoming financial
year it was appropriate to increase the fees as detailed
in the Directors’ Remuneration Report on page 37. The
additional fee payable to the Senior Independent Director
would remain at £2,000.
The Directors’ Remuneration Report can be found on
pages36 to 40.
Directors’ meeting attendance
The number of formal meetings held during the year ended 31 March 2023 and the Directors’ attendance is
detailedbelow.
Board
Audit
and Risk
Committee
Management
Engagement
Committee
Nomination
Committee
Remuneration
Committee
Miss J G K Matterson 5/5 3/3 1/1 3/3 1/1
Mr R Archibald 5/5 3/3 1/1 3/3 1/1
Ms W M Colquhoun 5/5 3/3 1/1 3/3 1/1
Mr P T Yates 5/5 3/3 1/1 3/3 1/1
* invited as an attendee only
Apart from regular Board meetings, members of the Board attended a number of ad hoc committee meetings during
the year, for strategic discussions, succession planning and continued implementation of the discount/ premium
control policy. Members of the Board are also in contact with representatives of the Investment Manager and the
Company Secretary on an informal and regular basis. In addition, all members of the Board attended the AGM on
12July 2022.
Corporate Governance Statement (continued)
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 33
Company Summary The Board’s Strategic Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder InformationGovernance Report
Corporate Governance Statement (continued)
Independence of the Directors
Each of the Directors is independent of any association
with the Investment Manager and has no other
relationships or circumstances which might be
perceived to interfere with the exercise of independent
judgement on the affairs of the Company. The Board
is firmly of the view that all of the Directors can be
considered to be independent. In arriving at this
conclusion the Board makes a clear distinction between
the activities of an investment trust and a conventional
trading company. An investment trust has no employees
or executive Directors, the most significant relationship
being with the Investment Manager. In overseeing
this relationship it is the view of the Board that long
service can aid the understanding and judgement of the
Directors. The Directors have a range of business and
financial skills and experience relevant to the direction
of the Company. Robin Archibald is currently the Senior
Independent Director, having been appointed to this
role in January 2020. Mr Archibald has significant
direct corporate and market experience of investment
companies and of acting as a senior independent
director, non-executive director and audit chair for
other investment companies.
Director tenure
In accordance with the AIC Code all Directors are subject
to annual re-election. Board support for re-election
is based on the outcome of an annual performance
evaluation. The Chairman also speaks with each
Director individually. The performance of each Director
and nominations for re-election are then discussed by
the Board as a whole.
The Board’s view is that length of tenure is not
necessarily an issue, with the Director’s contribution, and
ability being important factors in determining the value
the individual brings to the Board. The Directors are
conscious of the benefits of continuity on the Board and
believe that retaining Directors with sufficient experience
of both the Company and the markets is of great benefit
to the Company. The Chairman and Directors would
generally be expected to serve a term of up to nine years.
However, as stated in the Chairman’s statement, certain
circumstances, such as significant corporate change
and the need to maintain cohesion, and continuity may
require this term to be adjusted.
Director remuneration
The Company’s policy on Director remuneration is
set out within the Directors’ Remuneration Report on
pages36 to 40.
Board diversity
The Board is focused on having an effective Board which
consists of experienced non-executive Directors who
can function well together and have a good operational
knowledge of the Company and the closed ended
investment company sector more generally. The Board
currently consists of four independent Directors in Jean
Matterson, Robin Archibald, Wendy Colquhoun and Paul
Yates. As mentioned in the Chairman’s statement on
page 5, Ravi Anand will be appointed with effect from
1August 2023.
The Board supports the principle of boardroom diversity
in its broadest sense, in terms of gender, expertise,
geographic background, age and race. The Company is
specialised and the Board’s priority is to have a relatively
small and effective independent Board of non-executive
Directors with the requisite abilities and experience to
oversee the Company, its investments and its corporate
structure, including its third-party advisers. Any new
appointee would make an appropriate contribution
to those skills. It is the Board’s policy to review its
composition regularly and, when appropriate, to refresh
the Board through recruitment, with the aim of having
the blend of skills and attributes that will best serve
shareholders in the future and will not discriminate on
the grounds of gender, race, ethnicity, socio-economic
background, religion, sexual orientation, age or
physicalability.
The Nomination Committee is conscious of the diversity
targets set out in the FCA Listing Rules and the Board
complies with the AIC Code of Corporate Governance
in appointing appropriately diverse, independent
non-executive Directors who set the operational and
moral standards of the Company and aims to have an
appropriate level of diversity on theBoard.
In accordance with Listing Rule 9.8.6R (9), (10) and (11)
the Board has provided the following information in
relation to its diversity as at 31 March 2023, being the
financial year-end of the Company. The information
included in the tables below has been obtained
following confirmation from the individual Directors. As
shown in the tables, the Company did not meet the FCA
ethnic diversity target as at 31March 2023, however
with effect from 1August 2023 and the appointment of
Ravi Anand, the Company will meet the new target. The
Board will continue to take all matters of diversity into
account as part of its succession planning.
34 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Corporate Governance Statement (continued)
Board gender as at 31 March 2023
1
Number
of Board
members
Percentage
of the
Board
Number
of senior
positions
on the
Board
Men 2 50% 1
Woman 2 50%
2
1
3
Board ethnic background as at 31 March 2023
1
Number
of Board
members
Percentage
of the
Board
Number
of senior
positions
on the
Board
White British
or other White
(including
minority-white
groups) 4 100% 2
Mixed/Multiple
Ethnic Groups – –
4
-
(1) The Company does not disclose the number of Directors in executive
management as this is not applicable for an investment trust.
(2) This meets the Listing Rules target of 40% in terms of gender diversity.
(3) The Chairman of the Board is a woman. The position of the Chairman
of the Remuneration Committee is also held by a woman however
this is not currently defined as a senior position.
(4) Following the appointment of Ravi Anand on 1 August 2023, the
Company will meet the Listing Rules target on ethnic diversity.
Directorate
The Board believes that shareholders’ interests are best
served by ensuring a smooth and orderly refreshment
of the Board with experienced candidates whilst
maintaining continuity of knowledge and expertise.
Induction and training
New Directors appointed to the Board are provided
with an induction programme which is tailored to the
particular circumstances of the appointee. Regular
briefings are provided covering industry and regulatory
matters and the Directors receive other relevant training
as required.
Ongoing evaluation
On an annual basis the Nomination Committee
formally reviews the Board’s performance, together
with that of the Audit and other Board committees and
the effectiveness and contribution of the individual
Directors, including the Chairman, within the context
of service on those bodies. This year the review was
externally facilitated by Lintstock Limited, an independent
governance specialist, and was conducted by way of
evaluation questionnaires, the results of which were
discussed by the Directors in September 2022. The
Senior Independent Director led the annual evaluation of
the Chairman. The outcome of the external review was
positive with no significant concerns expressed.
As the Company is a constituent of the FTSE 250,
the Board intends to hold an externally facilitated
performance evaluation of the Board, its Committees,
the Chairman and the individual Directors, every three
years. The next externally facilitated evaluation is
scheduled to take place in 2025/26.
Shareholder communications
Shareholder relations are given high priority by both
the Board and the Investment Manager. The principal
medium by which the Company communicates with
shareholders is through half yearly and annual reports.
The information contained therein is supplemented by
daily NAV announcements and by a monthly fact sheet
and quarterly report available on the Company’s website.
The Board largely delegates responsibility for
communication with shareholders to CGAM and,
through feedback, from the Investment Manager,
expects to be able to develop an understanding of
shareholders’ views. There is also a communication
line with shareholders through Juniper Partners in
its role as company secretary and operator of the
DCP. The Board receives a quarterly report from the
Investment Manager summarising any shareholder
correspondence. Members of the Board are always
happy to meet with shareholders for the purpose of
discussing matters in relation to the operation and
prospects of the Company.
The Board encourages investors to attend the AGM and
welcomes questions and discussion on issues of concern or
areas of uncertainty. Shareholders who have any questions
are encouraged to address these through the Company
Secretary and the Board will respond accordingly.
The Investment Manager typically makes a presentation
at the AGM outlining the key investment issues that
face the Company. The presentation will also be made
available on the Company’s website.
Accountability, internal controls and audit
The Board pays careful attention to ensuring that all
documents released by the Company, including the
Annual Report, present a fair and accurate assessment
of the Company’s position and prospects.
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 35
Company Summary The Board’s Strategic Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder InformationGovernance Report
Corporate Governance Statement (continued)
The Board has overall responsibility for the Company’s
systems of internal controls and for reviewing
their effectiveness. In common with the majority of
investment trusts, the Board has determined that
the most efficient and effective management of the
Company is achieved by the Directors determining
the investment strategy, and the Investment Manager
being responsible for the day to day investment
management decisions on behalf of the Company.
Accounting, company secretarial and custodial services
have also been delegated to organisations that are
specialists in these areas, and which can provide,
because of their size and specialisation, economies
of scale, segregation of duties and all that is required
to provide proper systems of internal control within a
regulatedenvironment.
As the Company has no employees and its operational
functions are undertaken by third parties, the Audit and
Risk Committee does not consider it necessary for the
Company to establish its own internal audit function.
Instead, the Audit and Risk Committee examines
internal control reports received from its principal
service providers to satisfy itself as to the controls in
place. The internal controls aim to ensure that assets
of the Company are safeguarded, proper accounting
records are maintained, and the financial information
used within the business and for publication is reliable.
Control of risks identified, covering financial,
operational, compliance and risk management, is
embedded in the controls of the Company by a series
of regular investment performance statements,
financial and risk analyses, Investment Manager reports
and control reports. Key risks have been identified
and controls put in place to mitigate them, including
those not directly the responsibility of the Investment
Manager. The effectiveness of the internal controls
is assessed on a continuing basis by the Investment
Manager, the custodian and the Company Secretary.
Each maintains its own system of internal controls, and
the Board and Audit and Risk Committee receive regular
reports from them. The control systems are designed to
provide reasonable, but not absolute, assurance against
material misstatement or loss and to manage, rather
than eliminate, risk of failure to achieve objectives.
It is a requirement that the Board monitors the
Company’s risk management and internal controls
systems and, at least annually, carries out a review
of their effectiveness. The Board has established a
process for identifying, evaluating and managing the
principal risks faced by the Company in accordance
with the Financial Reporting Council’s guidance
document “Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting”.
Business risks have also been analysed by the Board
and recorded in a risk map that is reviewed regularly.
The Board confirms that no significant failings or
weaknesses were identified from the ongoing review of
the efficacy of internal controls during the year under
review. These controls have been in place throughout
the year under review and up to the date of signing the
financial statements.
The Board continues to work closely with all of its
agents, directly or indirectly, to ensure that internal
controls and the resilience of operating systems
continue to be in place, which has proven to be the case.
The systems and controls have proven to be robust
todate.
By order of the Board
Juniper Partners Limited
Company Secretary
23 May 2023
36 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
This section provides details of the remuneration policy
for the Directors of the Company. All Directors are
non-executive, appointed under the terms of letters of
appointment, and none have a service contract. Each
Director’s appointment is subject to their re-election
every year at the AGM. The Company has no employees.
The Board has prepared this report in accordance
with the requirements of the Companies Act 2006.
The shareholders approved the remuneration policy
at the Annual General Meeting in 2022 and it will be
put to shareholders again at the AGM to be held in
2025. This policy, together with the Directors’ letters
of appointment, may be inspected at the Company’s
registered office.
The Board has established a Remuneration Committee
consisting of all the independent Directors, chaired
by Wendy Colquhoun. The Committee considers
and determines all matters relating to the Directors’
remuneration at the beginning of each financial year.
The Directors are remunerated exclusively by fixed fees
in cash. There are no performance related elements to
the Directors’ fees and the Company does not operate
any type of incentive, share scheme or pension scheme.
Therefore, no Directors receive bonus payments or
pension contributions from the Company or hold
options to acquire shares in the Company. Directors are
entitled to receive reasonable out of pocket expenses
incurred in connection with their responsibilities, which
largely relate to travel and accommodation expenses.
Policy on Directors’ remuneration
The Company’s policy is that the remuneration of
each Director should be commensurate with the
duties, responsibilities and time commitment of each
respective role and consistent with the requirement
to attract and retain Directors of appropriate quality
and experience. The remuneration should also be
comparable to that of similar investment trusts within
the AIC Flexible Investment Sector and other investment
trusts which are similar in size and structure. Given the
nature of the Company, there may be circumstances
where additional remuneration is paid to Directors for
requirements outside the normal activities of the Board.
The remuneration policy is not subject to employee
consultation as the Company has no employees. As
such, there are no employee comparative data to
provide in relation to the setting of the remuneration
policy of the Directors.
The Board, at its discretion, shall determine Directors’
remuneration subject to the aggregate annual fees
not exceeding the amount set out in the Company’s
Articles from time to time. The current limit of the total
aggregate annual fees payable is £180,000. This limit can
be increased by ordinary resolution of the shareholders.
Remuneration is solely composed of Directors’ fees and
Directors are not eligible for any other remuneration for
their duties. Fees for each financial year are agreed and
approved by the Remuneration Committee.
It is intended that this policy will remain in place for the
next and subsequent financial years.
Shareholder views
The Board will consider any comments received from
shareholders on the remuneration policy on an ongoing
basis and will take account of these views where
appropriate. No shareholder has expressed any views to
the Company in respect of the remuneration policy and
the Directors’ remuneration.
Loss of office
A Director may be removed from office without notice
and no compensation will be due on loss of office.
Expenses
All Directors are entitled to the reimbursement of
reasonable out of pocket expenses incurred by
them in order to perform their duties as Directors
oftheCompany.
Review of remuneration policy
The Board reviews the above remuneration policy at
least annually toensure that it remains appropriate.
Amendment to the Articles
As noted above, the current aggregate annual
remuneration limited within the Articles is £180,000 per
annum. A resolution to increase this limit to £230,000
will be proposed at the 2023 AGM. This increase reflects
the appointment of an additional Director to the
Board from 1August 2023, and is designed to facilitate
the succession planning exercise referred to in the
Chairman’s Statement and to allow some headroom for
future increases to Director’s fees.
Audit requirements
The Company’s auditors are required to report on
certain information contained within this report. These
elements are described below as ‘audited’. The auditors’
opinion is included within the auditors’ report set out on
pages46 to 51.
Directors’ Remuneration Report
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 37
Company Summary The Board’s Strategic Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder InformationGovernance Report
Directors’ Remuneration Report (continued)
Directors’ fees
The Directors who served during the year received remuneration as detailed below. The fee rates, having been
determined are applied from the date, which is not necessarily the commencement of a reporting year, where a
director is appointed or assumes additional responsibilities.
The Directors are remunerated exclusively by fixed fees and do not receive bonus payments, share options or
pension contributions from the Company apart from reimbursement of allowable expenses. Directors’ fees are
reviewed every year and a detailed review was undertaken in May 2023 and the agreed new fee rates shown in the
table below took effect from 1April 2023.
Annual fee rates
2024
£
2023
£
2022
£
Chairman 46,500 42,350 38,500
Audit and Risk Committee Chairman* 38,000 36,300 33,000
All other Directors 31,000 30,000 27,500
* The Senior Independent Director, who is also Chairman of the Audit and Risk Committee, receives an additional fee of £2,000 per annum.
Aggregate Director’s remuneration
The total remuneration for the Board as a whole, including Directors who have retired, over the previous five years is
summarised below and there were no performance related, pension or other taxable benefits paid:
Fees
£
To 31March 2023 140,650
To 31March 2022 128,500
To 5April 2021 113,577
To 5April 2020 121,000
To 5April 2019 99,000
Single total figure of remuneration (audited)
The single total figure of remuneration for the Board as a whole for the year ended 31March 2023 was £140,650
(Period to 31March 2022: £128,500). The single total figure table for the total remuneration of each Director, together
with the prior year’s comparative, is set out in the table below:
Total
Directors
2023
£
2022
£
Miss J G K Matterson (Chairman of the Board with effect from 3July 2020) 42,350 38,500
Mr R Archibald (Chairman of the Audit and Risk Committee and Senior
Independent Director) 38,300 35,000
Ms W M Colquhoun 30,000 27,500
Mr P T Yates 30,000 27,500
140,650 128,500
There were no other transactions with Directors during the year.
No payments were made to any former Directors and no loss of office payments were made to any person who has
previously served as a Director of the Company at any time during the financial year ended 31March 2023 (period to
31March 2022: nil).
38 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Annual percentage change in remuneration of Directors
The table below is a disclosure requirement under The Companies (Directors’ Remuneration Policy and Directors’
Remuneration Report) Regulations 2019 and sets out the annual percentage change in each director’s remuneration
received in the financial year ended 31March 2023 compared to the financial period ended 31March 2022. The
percentage change reflects changes in roles on the Board compared to previous remuneration and less than full
yearappointment.
Directors
2023
Total Fees
% change
2022
Total Fees
% change
2021
Total Fees
% change
Miss J G K Matterson (Chairman of the Board with effect from
3July 2020) 10.0% 18.5% 29.2%
Mr R Archibald (Chairman of the Audit and Risk Committee and
Senior Independent Director) 9.4% 9.4% 10.3%
Ms W M Colquhoun (appointed 5January 2021) 9.1% 384.8% n/a
Mr P T Yates (appointed 2December 2019) 9.1% 10.0% 212.5%
Directors and their interests (audited)
The Directors in office at 31March 2023 and the number of shares in the Company over which they held an interest
are listed below. The interests of each Director include the interests of their connected persons:
Ordinary shares of 25p each
31March
2023
31 March
2022
Miss J G K Matterson
Non-executive Chairman 18,650 16,700
Mr R Archibald
Non-executive Director and Senior Independent Director 2,432 2,432
Ms W M Colquhoun
Non-executive Director 400 400
Mr P T Yates
Non-executive Director 1,000 1,000
No changes in these holdings have been notified since 31March 2023 up to the date of this report. The Company has
no share options or any share schemes, and does not operate a pension scheme. None of the Directors are required
to own shares in the Company.
Directors’ Remuneration Report (continued)
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 39
Company Summary The Board’s Strategic Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder InformationGovernance Report
Directors’ Remuneration Report (continued)
Performance graph
The following graph compares the Company’s share price total return to shareholders over the last ten years with the
MSCI UK Index. This index has been selected for the purposes of comparing the Company’s share price performance
as it has been the Company’s equity performance comparator since 2017.
Share price Total Return MSCI UK Total Return
2013
2014 2015 2016 2017
As at 31 March
90
80
70
100
110
120
130
140
150
160
170
180
190
2018 2019 2020 2021 2022 2023
* Source: CG Asset Management Limited, data rebased to 100 in 2013
Relative importance of spend on pay
Actual expenditure by the Company on remuneration and distributions to shareholders for the current and prior year
are detailed in the table below:
2023
£’000
2022
£’000
Absolute
change
£’000
Remuneration paid to all Directors 141 129 12
Distribution to shareholders by way of dividend* 15,755 9,610 6,145
* Dividend for 2023 comprises the final dividend proposed for the year but not yet paid (estimated on 26,258,763 shares, being the number of shares
in issue, excluding shares held in treasury, as at 31March 2023).
Statement of voting at the last Annual General Meeting
An ordinary resolution for the approval of this report will be put to the members at the forthcoming AGM and every
year thereafter. To date, no shareholders have commented in respect of the remuneration report or policy. Should
there be any significant vote against approval of the remuneration report or policy in the future, the Directors will
seek to discuss with relevant shareholders the reasons for any such vote and any actions in response will be disclosed
in future reports. At the last AGM held on 12July 2022, shareholders, on a show of hands, passed the resolution to
approve the Directors’ Remuneration Report: of the 6,058,805 proxy votes cast, 6,047,429 (99.8%) were cast in favour
and 11,376 (0.2%) were cast against. 9,413 votes were withheld.
At the AGM held on 12July 2022, shareholders, on a show of hands, passed the resolution to approve the Directors’
Remuneration Policy: of the 6,057,769 proxy votes cast, 6,047,109 (99.8%) votes were cast in favour and 10,660 (0.2%)
were cast against. 10,449 votes were withheld.
40 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Annual statement
On behalf of the Board, I confirm that the above Directors’ Remuneration Report summarises as appropriate for the
year ended 31March 2023:
a) the major decisions on Directors’ remuneration;
b) any substantial changes relating to Directors’ remuneration made during the year; and
c) the context in which those changes occurred and decisions were taken.
On behalf of the Board
Wendy Colquhoun
Chairman of the Remuneration Committee
23 May 2023
Directors’ Remuneration Report (continued)
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 41
This report describes the range of work that the
Committee has considered, been engaged in and the
judgements it has exercised.
Composition
The Committee comprises Jean Matterson, Wendy
Colquhoun, Paul Yates and Robin Archibald, as
Chairman, all of whom have recent and relevant
financial experience from their senior management
and other non-executive roles in the closed-ended
sector. Robin Archibald is a chartered accountant and
corporate financier with considerable financial and
investment company experience, including serving as
audit chair for various other investment companies over
the last ten years. The biographies of the Committee
members can be found on pages 12 and 13. As the
Board is small, Jean Matterson, the Chairman of the
Board, was appointed a member of the Audit and Risk
Committee with effect from 26January 2022. Previously
Jean attended Committee meetings by invitation
only. Collectively, the Committee brings considerable
corporate and investment company experience to bear
on the Company’s activities.
Role and responsibilities
The principal objective of the Committee is to provide
assurance to the Board as to the effectiveness of the
Company’s internal controls and the integrity of its
financial reporting and monitoring the appointment,
effectiveness and objectivity of the external auditor. In
doing so, the Committee operates within its terms of
reference, which are reviewed at each meeting and are
available on the Company’s website.
The Committee discharges the following key functions:
n to review the internal financial and non-financial
controls, identify the principal risks, including
emerging risks, and monitor the mitigating
controls. This includes meeting representatives
of the Investment Manager, Administrator and
Custodian and receiving reports on the quality
and effectiveness of the accounting records and
management information maintained on behalf of
the Company;
n to consider the integrity of and recommend to the
Board for approval the contents of the draft half-
yearly and annual reports to shareholders and
related announcements;
n to review the accounting policies and significant
financial reporting judgements;
n to assess going concern and viability of the
Company, including the assumptions used;
n to ensure the Annual Report, taken as a whole, is
fair, balanced and understandable;
n to review the external auditors’ independence,
objectivity, effectiveness, appointment,
remuneration and the quality of the services
provided and to approve, if appropriate, any non-
audit services to be carried out by the auditor;
n together with the Company Secretary, to review
the Company’s compliance with financial reporting,
regulatory and governance requirements; and
n to assess the need for an internal audit function,
taking account of the assurances received from the
various external agents to the Company on their
internal controls and systems.
The Committee met in full three times during the year,
and its members met more regularly on an informal
basis, as well as reviewing and commenting on
documentation between formal committee meetings.
The Company’s auditor is invited to attend meetings as
appropriate. The Committee has continued to support
the Board in fulfilling its oversight responsibilities,
reviewing the financial reporting process, the systems
of internal control and management of risk, the audit
process and the Company’s process for monitoring
compliance with laws and regulations and its own code
of businessconduct.
In particular, the Committee focussed on the
followingareas:
Financial reporting
During the year, the Committee considered the
significant issues and areas of key audit risk in respect
of the Annual Report and Financial Statements and
in the production of the interim accounts, including
emerging risks and changes to the Company’s risk
profile. The Committee reviewed the external audit plan
in November 2022 and concluded that the appropriate
areas of audit risk relevant to the Company had been
identified and that suitable audit procedures had
been put in place to obtain reasonable assurance that
the financial statements as a whole would be free of
material misstatements and that the accounting policies
applied continue to be appropriate.
Audit and Risk Committee Report
Company Summary The Board’s Strategic Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder InformationGovernance Report
42 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Financial reporting (continued)
As part of the review of the financial statements, the Committee considered the following significant issues:
Significant issue How the issue was addressed
Ownership and valuation
of investments
The appointed Depositary is responsible for the custody and controlling
of all assets of the Company entrusted for safekeeping. Controls are in
place to ensure that valuations are appropriate, and existence is verified
by Juniper Partners via reconciliations to custodial records. The valuation
of investments is undertaken in accordance with the accounting policies
disclosed in note 1 to the financial statements on page56.
Ongoing impact of higher
inflation, rising interest rates, and
heightened geopolitical risks
The Committee reviewed inflation, rising interest rates, and geopolicial
risks as part of the review of the investment portfolio and the
assetallocation.
Revenue recognition, particularly
from delisted trusts, where
returns may be of capital rather
than income, and any other
returns from investments which
constitutecapital rather than
revenue returns
Revenue was recognised in accordance with investment policies and
enquiry was made on revenue of an atypical nature, such as special
dividends or capital receipts.
The Investment Manager reported to the Committee that less than 0.1% of
the Company’s portfolio is invested in delisted investment trusts. Receipts
from these investments are reviewed by the Company Secretary and
Investment Manager to ensure they are appropriately allocated to revenue
or capital.
Potential for management override
of controls and maintaining
appropriate internal controls
The Committee together with the Board have established clear lines of
responsibility between the Investment Manager, Custodian, Company
Secretary and Administrator and receive appropriate reports from each
of them regarding the operation and review of those organisations’
internalcontrols.
Going concern The content of the investment portfolio, trading activity, portfolio
diversification and the cash balances are discussed at each Board meeting.
After due consideration, the Committee concluded it was appropriate to
prepare the Company’s financial statements on a going concern basis and
made this recommendation to the Board. The Company’s continued ability
to meet its investment objective, apply its investment policy, fulfil the aims
of the discount and premium control policy, having a widely diversified and
relatively liquid investment portfolio of largely listed securities and being
ungeared, with the operational expenses of the Company covered by net
income, were all factored into the consideration of both going concern and
viability of the Company.
Compliance with s1158 Corporation
tax Act 2000 (Investment trust
status) and other taxation issues
impacting on the Company
The Committee reviews the Company Secretary’s procedures for ensuring
compliance with relevant regulations, including maintenance of investment
trust status and regularly seeks confirmation of compliance with the
relevant regulations. A separate accounting firm is appointed to oversee
and advise tax matters impacting on the Company.
Audit and Risk Committee Report
(continued)
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 43
Company Summary The Board’s Strategic Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder InformationGovernance Report
Audit and Risk Committee Report
(continued)
Financial statements
The production and the audit of the Company’s Annual
Report and Financial Statements is a comprehensive
process requiring input from a number of different
contributors. One of the main governance requirements
of the Company’s Annual Report and Financial Statements
is that they are fair, balanced and understandable. The
Board has requested that the Committee advise on
whether it considers that the Annual Report and Financial
Statements fulfil these requirements, and that the
Committee has given consideration to the following:
a) the comprehensive reviews that are undertaken
at different levels in the production process of
the Annual Report and Financial Statements, by
the Investment Manager, Company Secretary and
Auditor and the Committee that aim to ensure
consistency and overall balance; and
b) the controls that are in place at the Investment
Manager and third-party service providers to
ensure the completeness and accuracy of the
Company’s financial records and the security of the
Company’sassets.
As a result of the work performed, the Committee
has concluded that the Annual Report and Financial
Statements for the year ended 31March 2023, taken
as a whole, are fair, balanced and understandable and
provide the information necessary for shareholders to
assess the Company’s performance, position, business
model and strategy and has reported on these findings
to the Board. The Board’s conclusions in this respect are
set out in the Statement of Directors’ Responsibilities
onpage45.
Climate change
The Committee have considered the impact of
climate change insofar as they are reasonably able,
particularly in the context of the climate-related risks.
These considerations did not have a material impact
on the financial reporting judgements and estimates
in the current year, nor were they expected to have
a significant impact on the Company’s going concern
orviability.
Audit appointment and tenure
The Company’s current auditors, BDO LLP, have acted in
this role since their appointment in July 2020, following
a formal tender process. As described below, the
Committee reviews the performance of the auditors
annually, taking into consideration the services and
advice provided to the Company and the fees charged
for these services. The audit partner is required to
be rotated at least every five years. BDO were first
appointed in 2020 with Vanessa Bradley as audit
partner. During 2022, BDO transferred the audit to their
Edinburgh office and the audit partner, with effect from
November 2022, is now Chris Meyrick. Based on existing
regulation the audit must be put out to tender at least
every ten years. The Company confirms that it complied
with the provisions of The Statutory Audit Services for
Large Companies Market Investigation (Mandatory Use
of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014 during the financial year
ended 31March 2023.
Policy on non-audit services
The Company operates on the basis whereby the
provision of non-audit services by the auditor is
permissible where no conflict of interest arises, where
the independence of the auditor is not likely to be
impinged on by undertaking the work and the quality
and objectivity of both the non-audit work and audit
work will not be compromised. There was no non-
audit work carried out during the year by BDO, nor
since its appointment in 2020. Taxation services for the
Company are provided by a separate accounting firm,
Grant Thornton.
Audit plan and fees
The Committee considered the plan and scope of the
audit, the principal risks that BDO would address, the
timetable and proposed fees. The audit fee of £43,000
for the current year’s audit, an increase from £38,000
from the previous year, both figures excluding VAT, was
approved by the Committee. There has been a trend
for increased audit fees throughout the accounting
industry, particularly for listed companies, including
investment companies. It is expected that the Company
will be impacted by this but that the fees remain
competitive for what is being provided and for the
circumstances of the Company and the Committee
will endeavour to ensure that value is provided for
feesrendered.
Representatives of BDO attend the Committee and
subcommittee meetings at which the draft Annual
Report and Financial Statements are reviewed and
are given the opportunity to speak to the Committee
members without the presence of the representatives
of the Investment Manager or the Company Secretary.
44 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Audit and Risk Committee Report
(continued)
Assessment of the efficacy of the
external auditprocess
The Committee has adopted a framework in its review
of the effectiveness of the external audit process
and audit quality. This includes a review of the
followingareas:
a) the quality of the audit engagement partner and
the audit team;
b) the expertise of the audit firm and the resources
available to it;
c) planning, scope and execution of the audit,
including identification of areas of audit risk;
d) consideration of the appropriateness of the level of
audit materiality adopted;
e) role of the Board, Company Secretary, and third-
party service providers in an effective audit
process;
f) communications by the auditor with the
Committee;
g) how the auditor supports the work of the
Committee and contributes added value; and
h) a review of independence and objectivity of the
audit firm.
Following the completion of the external audit each
year, the Committee reviews the effectiveness of the
external audit process against these criteria and is
satisfied that audit quality continues to be sufficient
to allow the Company to meet its obligations, and to
gain value from the services provided. The Committee
is satisfied that the external audit was carried out
effectively and recommends the re-appointment of BDO
as the Company’s auditor for the forthcoming financial
year and the fixing of their remuneration for that year.
Internal audit function
Systems are in operation to safeguard the Company’s
assets and shareholders’ investments, to maintain
proper accounting records and to ensure that financial
information used within the business, or published,
is reliable. Being an investment company with no
employees, all executive activities are delegated
to service providers, principally among them, the
Investment Manager and the Administrator. The
Board places reliance on the Company’s framework
of internal control and the Committee’s view on
reporting received from the Investment Manager
and the Administrator. The Board has therefore
concluded that it is not necessary for the Company
to have its own internal audit function.
Committee evaluation
The Board conducts a formal annual review of the
Committee’s effectiveness, using an evaluation
questionnaire. The outcome was positive with no
concerns expressed.
2023-2024 action plan
During the year to 31March 2024, the Committee
will continue to examine changes to the regulatory,
governance and economic environment, and the risks
and opportunities so presented. The annual report
and financial statements and the half yearly statement
will occupy much of the Committee time, as will
examining the resilience of the Company’s operations,
the internal controls of its agents and the integrity of
financial records and external financial reporting, Risks
will continue to be monitored, particularly the impact
of increasing inflation and geopolitical risks, whether
current or emerging.
Robin Archibald
Chairman of the Audit and Risk Committee
23 May 2023
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 45
Company Summary The Board’s Strategic Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder InformationGovernance Report
The Directors are responsible for preparing the Annual
Report and the Financial Statements in accordance with
applicable law and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have prepared the financial statements in
accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 102 “The Financial Reporting
Standard applicable in the UK and Republic of Ireland”,
and applicable law). Under company law, the Directors
must not approve the financial statements unless they
are satisfied that they give a true and fair view of the
state of affairs of the Company and of the net return of
the Company for that year. In preparing these financial
statements, the Directors are required to:
n select suitable accounting policies and then apply
them consistently;
n state whether applicable UK Accounting Standards,
comprising FRS 102, have been followed, subject to
any material departures disclosed and explained in
the financial statements;
n make judgements and accounting estimates that are
reasonable and prudent; and
n prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Company will continue in business.
The Directors 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 Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and 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.
The Annual Report and Financial Statements are
published on the Company’s website which is
maintained by the Investment Manager. The Investment
Manager is responsible for the maintenance and
integrity of the Company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
Declaration
Each of the Directors, whose names and functions are
listed in the Governance Report, confirms that, to the
best of his or her knowledge:
n the Company’s Financial Statements, which have
been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 102,
and applicable law), give a true and fair view of the
assets, liabilities, financial position and net return of
the Company;
n the Board’s Strategic Report 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; and
n the Annual Report, taken as a whole, is fair, balanced
and understandable and provides information
necessary for shareholders to assess the Company’s
position and performance, business model
andstrategy.
For and on behalf of the Board
Jean Matterson
Chairman
23 May 2023
Directors’ Responsibilities Statement
in Respect of the Annual Report and the Financial Statements
46 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Opinion on the financial statements
In our opinion the financial statements:
n give a true and fair view of the state of the
Company’s affairs as at 31 March 2023 and of its loss
for the year then ended;
n have been properly prepared in accordance with
United Kingdom Generally Accepted Accounting
Practice; and
n have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements of Capital
Gearing Trust P.l.c. (the ‘Company’) for the year ended
31 March 2023 which comprise the Income Statement,
Statement of Changes in Equity, Statement of Financial
Position, Cash Flow Statement and notes to the
financial statements, including a summary of significant
accounting policies. The financial reporting framework
that has been applied in their preparation is applicable
law and United Kingdom Accounting Standards,
including Financial Reporting Standard 102 The
Financial Reporting Standard applicable in the UK and
Republic of Ireland (United Kingdom Generally Accepted
AccountingPractice).
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our responsibilities under those
standards are further described in the Auditor’s
responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence
we have obtained is sufficient and appropriate to
provide a basis for our opinion. Our audit opinion is
consistent with the additional report to the Audit and
Risk Committee.
Independence
Following the recommendation of the Audit and Risk
Committee, we were appointed by shareholders on
3July 2020 to audit the financial statements for the year
ended 5 April 2021 and subsequent financial periods.
The period of total uninterrupted engagement including
retenders and reappointments is 3 years, covering
the periods ended 5 April 2021 to 31 March 2023. We
remain independent of the Company in accordance
with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
The non-audit services prohibited by that standard were
not provided to the Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded
that the Directors’ use of the going concern basis
of accounting in the preparation of the financial
statements is appropriate. Our evaluation of the
Directors’ assessment of the Company’s ability to
continue to adopt the going concern basis of
accountingincluded:
n Evaluating the appropriateness of the Directors’
method of assessing the going concern in light of
market volatility and the present uncertainties in
economic recovery created by the ongoing geo-
political issues by reviewing the information used by
the Directors in completing their assessment;
n Assessing the appropriateness of the Directors’
assumptions and judgements made in their revenue
forecast including consideration of the available
cash resources relative to forecast expenditure and
commitments; and
n Assessing the liquidity position available to meet
the future obligations and operating expenses for
a period of 12 months from the date of approval of
these financial statements.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Company’s ability to continue as
a going concern for a period of at least twelve months
from when the financial statements are authorised
forissue.
In relation to the Company’s reporting on how it has
applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation
to the Directors’ statement in the financial statements
about whether the Directors considered it appropriate
to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the
Directors with respect to going concern are described in
the relevant sections of this report.
Independent auditors’ report
to the members of Capital Gearing Trust P.l.c.
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 47
Company Summary The Board’s Strategic Report Governance Report Financial Statements Notice of AGM Shareholder InformationIndependent Auditor’s Report
Overview
Key audit matters
Valuation and ownership of listed investments
2023
4
2022
4
Materiality Company financial statements as a whole
£12.6m (2022: £10.4m) based on 1% (2022: 1%) of Net assets.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Company and its environment, including the Company’s
system of internal control, and assessing the risks of material misstatement in the financial statements. We also
addressed the risk of management override of internal controls, including assessing whether there was evidence of
bias by the Directors that may have represented a risk of material misstatement.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Key audit matter How the scope of our audit addressed the key
audit matter
Valuation and
ownership
of listed
investments
(Notes 8
and 14 to
the financial
statements)
The investment portfolio at the year-end
comprised of investments held at fair
value through profit or loss.
We considered there to be a risk of
error that the prices used for the listed
investments held by the Company are not
reflective of fair value.
The is also a risk that errors made in the
recording of investment holdings result in
the financial statements not appropriately
reflecting investments owned by the
Company.
We considered the valuation and
existence of listed investments to be the
most significant audit area as the listed
investments represent the most significant
balance in the financial statements and
underpin the principal activity of the
Company.
For these reasons and the materiality of
the balance in relation to the financial
statements as a whole, we considered this to
be a key audit matter.
We responded to this matter by testing the valuation
and ownership of the whole portfolio of listed
investments. We performed the following procedures:
n Confirmed the year-end bid price was used by
agreeing to externally quoted prices;
n Assessing if there were contra indicators, such as
liquidity considerations, to suggest bid price is not
the most appropriate indication of fair value by
considering the realisation period for individual
holdings;
n Obtained direct confirmation of the investment
holdings from the custodian regarding all
investments held at the balance sheet date; and
n Recalculating the valuation by multiplying the
holdings per the statement obtained from the
custodian by the valuation per share.
Key observations
Based on our procedures performed we did not
identify any matters to suggest the valuation
or ownership of the listed investments was not
appropriate.
Independent auditors’ report (continued)
to the members of Capital Gearing Trust P.l.c.
48 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Independent auditors’ report (continued)
to the members of Capital Gearing Trust P.l.c.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could
influence the economic decisions of reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we
use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly,
misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the
nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect
on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and
performance materiality as follows:
Company financial statements
2023
£m
2022
£m
Materiality 12.6 10.4
Basis for determining
materiality
1% of Net assets 1% of Net assets
Rationale for the
benchmark applied
As an investment trust, the net asset
value is the key measure of performance
for users of the financial statements.
As an investment trust, the net asset
value is the key measure of performance
for users of the financial statements.
Performance materiality 9.4 7.87
Basis for determining
performance materiality
75% of materiality 75% of materiality
Rationale for determining
performance materiality
The level of performance materiality
applied was set after having considered
a number of factors including the
expected total value of known and
likely misstatements and the level of
transactions in the year.
The level of performance materiality
applied was set after having considered
a number of factors including the
expected total value of known and
likely misstatements and the level of
transactions in the year.
Reporting threshold
We agreed with the Audit and Risk Committee that we would report to them all individual audit differences in excess
of £252,000 (2022: £208,000). We also agreed to report differences below this threshold that, in our view, warranted
reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the information included in
the Annual Report other than the financial statements and our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report,
we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a
material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 49
Company Summary The Board’s Strategic Report Governance Report Financial Statements Notice of AGM Shareholder InformationIndependent Auditor’s Report
Independent auditors’ report (continued)
to the members of Capital Gearing Trust P.l.c.
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and
that part of the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK
Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained
during the audit.
Going concern and
longer-term viability
n The Directors’ statement with regards to the appropriateness of adopting the
going concern basis of accounting and any material uncertainties identified; and
n The Directors’ explanation as to their assessment of the Company’s prospects, the
period this assessment covers and why the period is appropriate.
Other Code provisions
n Directors’ statement on fair, balanced and understandable;
n Board’s confirmation that it has carried out a robust assessment of the emerging
and principal risks;
n The section of the annual report that describes the review of effectiveness of risk
management and internal control systems set out on pages; and
n The section describing the work of the Audit and Risk Committee.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are
required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and
Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
n the information given in the Strategic report and the Directors’ report for the
financial year for which the financial statements are prepared is consistent with
the financial statements; and
n the Strategic report and the Directors’ report have been prepared in accordance
with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment
obtained in the course of the audit, we have not identified material misstatements in
the strategic report or the Directors’ report.
Directors’ remuneration In our opinion, the part of the Directors’ remuneration report to be audited has been
properly prepared in accordance with the Companies Act 2006.
Matters on which we
are required to report
by exception
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
n adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
n the financial statements and the part of the Directors’ remuneration report to be
audited are not in agreement with the accounting records and returns; or
n certain disclosures of Directors’ remuneration specified by law are not made; or
n we have not received all the information and explanations we require for our audit.
50 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Independent auditors’ report (continued)
to the members of Capital Gearing Trust P.l.c.
Responsibilities of Directors
As explained more fully in the Directors’ Responsibilities
Statement, the Directors are responsible for the
preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary to
enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors
are responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going
concern basis of accounting unless the Directors either
intend to liquidate the Company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of
these financial statements.
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect
of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities,
including fraud is detailed below:
Non compliance with laws and regulations
Based on:
n Our understanding of the Company and the industry
in which it operates;
n Discussion with management, those charged with
governance and the Audit and Risk Committee; and
n Obtaining and understanding of the Company’s
policies and procedures regarding compliance with
laws and regulations,
we considered the significant laws and regulations to
be Companies Act 2006, the FCA listing and DTR rules,
the principles of the AIC Code of Corporate Governance,
industry practice represented by the AIC SORP, the
applicable accounting framework, and the Company’s
qualification as an Investment Trust under UK tax
legislation as any non-compliance of this would lead to
the Company losing various deductions and exemptions
from corporation tax.
Our procedures in respect of the above included:
n Agreement of the financial statement disclosures to
underlying supporting documentation;
n Enquiries of management and those charged with
governance relating to the existence of any non-
compliance with laws and regulations;
n Reviewing minutes of meeting of those charged with
governance throughout the period for instances of
non-compliance with laws and regulations; and
n Reviewing the calculation in relation to Investment
Trust compliance to check that the Company was
meeting its requirements to retain their Investment
Trust Status.
Fraud
We assessed the susceptibility of the financial statement
to material misstatement including fraud.
Our risk assessment procedures included:
n Enquiry with management, those charged with
governance and the Audit and Risk Committee,
regarding any known or suspected instances of
fraud;
n Obtaining an understanding of the Company’s
policies and procedures relating to:
n Detecting and responding to the risks of fraud;
and
n Internal controls established to mitigate risks
related to fraud.
n Review of minutes of meeting of those charged with
governance for any known or suspected instances of
fraud; and
n Discussion amongst the engagement team as to
how and where fraud might occur in the financial
statements.
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 51
Company Summary The Board’s Strategic Report Governance Report Financial Statements Notice of AGM Shareholder InformationIndependent Auditor’s Report
Independent auditors’ report (continued)
to the members of Capital Gearing Trust P.l.c.
Based on our risk assessment, we considered the
area most susceptible to be management override of
controls.
Our procedures in respect of above included:
n The procedures set out in the Key Audit Matters
section above;
n Recalculating investment management fees in total;
n Obtaining independent confirmation of bank
balances; and
n Testing the material period end journals by agreeing
to supporting documentation and evaluating
whether there was evidence of bias by the
Investment Manager and Directors that represented
a risk of material misstatement due to fraud.
We also communicated relevant identified laws and
regulations and potential fraud risks to all engagement
team members, who were all deemed to have
appropriate competence and capabilities, and remained
alert to any indications of fraud or non-compliance with
laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks
of material misstatement in the financial statements,
recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are
inherent limitations in the audit procedures performed
and the further removed non-compliance with laws and
regulations is from the events and transactions reflected
in the financial statements, the less likely we are to
become aware of it.
A further description of our responsibilities is available
on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This
descriptionforms part of our auditor’s report.
Use of our report
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company’s
members those matters we are required to state to
them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the
Company and the Company’s members as a body, for
our audit work, for this report, or for the opinions we
have formed.
Chris Meyrick (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Edinburgh, UK
23 May 2023
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
52 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Year ended 31March 2023 Period ended 31March 2022
Note
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Net (losses)/gains on investments 8 – (68,449) (68,449) – 57,875 57,875
Net currency (losses)/gains – (547) (547) – 530 530
Investment income 2 24,846 – 24,846 14,677 – 14,677
Other income 2 93 – 93 – – –
Gross return 24,939 (68,996) (44,057) 14,677 58,405 73,082
Investment management fee 3 (4,620) – (4,620) (3,627) – (3,627)
Other expenses 4 (974) – (974) (727) – (727)
Net return before tax 19,345 (68,996) (49,651) 10,323 58,405 68,728
Tax charge on net return 5 (1,739) – (1,739) (510) – (510)
Net return attributable to
equity shareholders 17,606 (68,996) (51,390) 9,813 58,405 68,218
Net return per Ordinary share 7 70.67p (276.96)p (206.29)p 56.81p 338.14p 394.95p
The total column of this statement represents 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
InvestmentCompanies.
All revenue and capital items in the above statement derive from continuing operations.
There are no gains or losses other than those recognised in the income statement and therefore no statement of
comprehensive income has been presented.
The notes on pages56 to 70 form an integral part of these financial statements.
Income Statement
for the year ended 31 March 2023
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 53
Company Summary The Board’s Strategic Report Governance Report Independent Auditor’s Report Notice of AGM Shareholder InformationFinancial Statements
Note
Called-up
share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Realised
capital
reserve*
£’000
Unrealised
capital
reserve*
£’000
Revenue
reserve*
£’000
Total
equity
share-
holders’
funds
£’000
Opening balance at
6April 2021 3,453 463,437 16 120,242 38,136 8,762 634,046
Net return attributable to
equity shareholders and
total comprehensive income
for the period – – – 39,319 19,086 9,813 68,218
New shares issued 1,770 352,572 – – – – 354,342
Dividends paid 6 – – – – – (6,771) (6,771)
Total transactions with
owners recognised directly
in equity 1,770 352,572 – – – (6,771) 347,571
Closing balance at
31 March 2022 5,223 816,009 16 159,561 57,222 11,804 1,049,835
Opening balance at
1 April 2022 5,223 816,009 16 159,561 57,222 11,804 1,049,835
Net return attributable to
equity shareholders and
total comprehensive income
for the year – – – (3,801) (65,195) 17,606 (51,390)
New shares issued 1,422 285,744 – – – – 287,166
Shares bought back – – –
(15,334) – – (15,334)
Dividends paid 6 – – – – – (10,558) (10,558)
Total transactions with
owners recognised directly
in equity 1,422 285,744 – (15,334) – (10,558) 261,274
Closing balance at
31March 2023 6,645 1,101,753 16 140,426 (7,973) 18,852 1,259,719
* These reserves are available for distribution (except for Level 3 investments detailed in Note 14).
The notes on pages56 to 70 form an integral part of these financial statements.
Statement of Changes in Equity
for the year ended 31 March 2023
54 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Note
31March
2023
£’000
31 March
2022
£’000
Fixed assets
Investments held at fair value through profit or loss 8 1,251,801 991,893
Current assets
Debtors 9 7,892 15,386
Cash at bank and in hand 13,766 50,611
21,658 65,997
Creditors: amounts falling due within one year 10 (13,740) (8,055)
Net current assets 7,918 57,942
Total assets less current liabilities 1,259,719 1,049,835
Capital and reserves
Called-up share capital 11 6,645 5,223
Share premium account 1,101,753 816,009
Capital redemption reserve 16 16
Capital reserve 132,453 216,783
Revenue reserve 18,852 11,804
Total equity shareholders’ funds 1,259,719 1,049,835
Net asset value per Ordinary share 12 4,797.3p 5,025.1p
The financial statements on pages52 to 70 were approved by the Board on 23 May 2023 and signed on its behalf by:
Jean Matterson
Chairman
The notes on pages56 to 70 form an integral part of these financial statements.
Statement of Financial Position
as at 31 March 2023
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 55
Company Summary The Board’s Strategic Report Governance Report Independent Auditor’s Report Notice of AGM Shareholder InformationFinancial Statements
Note
Year ended
31March
2023
£’000
Period ended
31 March
2022
£’000
Net cash inflow from operating activities 13 16,499 9,759
Payments to acquire investments (1,037,482) (833,682)
Receipts from sale of investments 713,875 496,426
Net cash outflow from investing activities (323,607) (337,256)
Equity dividends paid 6 (10,558) (6,771)
Repurchase of Ordinary shares (15,315) –
Proceeds from the issue of Ordinary shares 297,172 348,313
Cost of share issues (1,036) (676)
Net cash inflow from financing activities 270,263 340,866
(Decrease)/increase in cash and cash equivalents (36,845) 13,369
Cash and cash equivalents at start of year 50,611 37,242
Cash and cash equivalents at end of year 13,766 50,611
The notes on pages56 to 70 form an integral part of these financial statements.
Cash Flow Statement
for the year ended 31 March 2023
56 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
1 Significant accounting policies
The current reporting year is 1April 2022 to 31March
2023. The comparative information is for the period
6April 2021 to 31March 2022.
a) Basis of accounting
Capital Gearing Trust P.l.c. is a public company limited
by shares, is incorporated and domiciled in Northern
Ireland and carries on business as an investment trust.
The accounts are prepared in accordance with the
Companies Act 2006, United Kingdom Generally
Accepted Accounting Practice (Accounting Standards
“UK GAAP”) including Financial Reporting Standard
(FRS) 102 “The Financial Reporting Standard applicable
in the UK and Republic of Ireland” and the Statement
of Recommended Practice “Financial Statements of
Investment Trust Companies and Venture Capital
Trusts” (the “SORP”) issued by the Association of
Investment Companies in 2022. All of the Company’s
operations are of a continuing nature.
The accounts have been prepared on a going concern
basis under the historical cost convention, as modified
by the revaluation of investments held at fair value
through profit or loss. A robust assessment of going
concern by the Audit and Risk Committee is set out
in the Board’s Strategic Report and can be found on
page25. In concluding on going concern basis, the
Directors have taken into account the liquidity of the
portfolio, forecasts and obligations under theDCP.
The principal accounting policies are set out below.
These policies have been applied consistently
throughout the current year and prior period.
Estimates and judgements are continually evaluated
and are based on historical experience and other
factors, including expectations of future events that are
believed to be reasonable under the circumstances.
There are no critical accounting estimates or
judgements.
b
) Valuation of investments
The Company has elected to adopt Sections 11 and
12 of FRS 102 in respect of investments and other
financial instruments. The Company’s business is
investing in financial assets with a view to profiting
from their total return in the form of income and capital
growth. This portfolio of financial assets is managed
and its performance evaluated on a fair value basis in
accordance with a documented investment strategy
and information is provided internally on that basis
to the Board. Accordingly, upon initial recognition
the investments are designated by the Company as
“held at fair value through profit or loss”. Investments
are included initially at fair value which is taken to be
their cost, including expenses incidental to purchase.
Subsequently the investments are valued at fair value,
which are quoted bid prices for investments traded
in active markets. Where trading in the securities of
an investee company is suspended, the investment is
valued at the Board’s estimate of its net realisable value.
All purchases and sales are accounted for on a trade
date basis.
c
) Accounting for reserves
Gains and losses on sales of investments and any other
capital charges are included in the Income Statement
and dealt with in the capital reserve. Increases and
decreases in the valuation of investments held at the
year end and foreign exchange gains and losses on
cash balances held at the year end are also included
in the Income Statement and dealt with in the capital
reserve. The cost of repurchasing the Company’s own
shares for cancellation including the related stamp duty
and transaction costs is charged to the distributable
elementof the capital reserve. The costs relating to
theissue of new Ordinary shares are charged to the
share premium account.
d
) Dividends
In accordance with FRS 102 the final dividend is included
in the financial statements in the year that it is approved
by shareholders.
e
) Income
Dividends receivable on listed equity shares are
recognised on the ex-dividend date as a revenue return,
and the return on zero dividend preference shares is
recognised as a capital return.
Dividends receivable on equity shares where no ex-
dividend date is quoted are recognised when the
Company’s right to receive payment is established.
Special dividends receivable are taken to capital where
relevant circumstances indicate that the dividends are
capital in nature.
Notes to the Financial Statements
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 57
Company Summary The Board’s Strategic Report Governance Report Independent Auditor’s Report Notice of AGM Shareholder InformationFinancial Statements
Income from fixed-interest securities is recognised as
revenue on a time apportionment basis so as to reflect
their effective yield.
Income from securities where the return is linked to an
inflation index is recognised on a time apportionment
basis so as to reflect their effective yield, including the
anticipated inflationary increase in their redemption
value. The element of the total effective yield that
relates to the inflationary increase in their redemption
value is considered to represent a capital return, and is
included in the Income Statement as such in accordance
with the SORP.
f
) Expenses
All expenses are charged to revenue and include, where
applicable, value added tax (“VAT”).
g
) Taxation policy
Current tax payable is based on the taxable profit
for the year. Deferred taxation is provided using the
liability method on all timing differences, calculated at
the rate at which it is anticipated the timing differences
will reverse. Owing to the Company’s status as an
investment trust, and the intention to continue to
meet the conditions required to obtain approval in
the foreseeable future, the Company has not provided
deferred tax on any capital gains and losses arising on
the revaluation of investments.
h
) Other debtors and creditors
Other debtors and creditors do not carry any interest,
are short-term in nature and initially recognised at fair
value and then held at amortised cost, with debtors
reduced by appropriate allowances for estimated
irrecoverable amounts.
Cash at bank and in hand may comprise cash and
demand deposits which are readily convertible to a
known amount of cash and are subject to insignificant
risk of changes in value.
i
) Foreign currency
The results and financial position of the Company are
expressed in pounds sterling, which is the functional
and presentational currency of the Company. The
directors, having regard to the currency of the
Company’s share capital and the predominant currency
in which the Company operates, have determined the
functional currency to be sterling.
Transactions denominated in foreign currencies are
recorded in the functional currency at actual exchange
rates as at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies at
the year end are reported at the rates of exchange
prevailing at the year end.
j
) Capital reserve
The following are accounted for in this reserve:
n gains and losses on the realisation of investments;
n increases and decreases in the valuation of
investments held at the year end;
n realised foreign currency differences of a capital
nature; and
n unrealised foreign currency differences of a capital
nature.
k
) Repurchases of shares into treasury and
subsequent re-issue
The cost of repurchasing shares into treasury, including
the related stamp duty and transaction costs is dealt
with in the Statement of Changes in Equity. Share
repurchase transactions are accounted for on a
trade date basis. Where shares held in treasury are
subsequently cancelled, the nominal value of those
shares is transferred out of “called-up share capital” and
into “capital redemption reserve”.
The sales proceeds of treasury shares re-issued are
treated as a realised profit up to the amount of the
purchase price of those shares and is transferred to
capital reserves. The excess of the sales proceeds over
the purchase price is transferred to “share premium”.
Notes to the Financial Statements (continued)
58 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Notes to the Financial Statements (continued)
2 Investment income
2023
£’000
2022
£’000
Income from investments:
Interest from UK bonds 6,049 1,584
Income from UK equity and non-equity investments 11,057 8,163
Interest from overseas bonds 4,973 2,083
Income from overseas equity and non-equity investments 2,767 2,847
Total income from investments 24,846 14,677
2023
£’000
2022
£’000
Total income comprises:
Dividends 10,731 7,868
Property Income and Interest Distributions 3,022 3,142
Interest 11,093 3,667
Deposit interest 81 –
Other income 12 –
24,939 14,677
2023
£’000
2022
£’000
Income from investments comprises:
Listed in the UK 17,106 9,747
Listed overseas 7,740 4,930
24,846 14,677
3 Investment management fee
2023
£’000
2022
£’000
Investment management fee 4,620 3,627
The Company’s Investment Manager CG Asset Management Limited received an annual management fee equal
to 0.60% of the net assets of the Company up to £120m, 0.45% on net assets above £120m to £500m and 0.30%
thereafter (2022: the same basis). At 31March 2023 £1,177,000 (31March 2022: £1,020,000) was payable. The terms
of theinvestment management agreement are detailed on page26.
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 59
Company Summary The Board’s Strategic Report Governance Report Independent Auditor’s Report Notice of AGM Shareholder InformationFinancial Statements
Notes to the Financial Statements (continued)
4 Other expenses
2023
£’000
2022
£’000
Company secretarial, administration and accountancy services 293 154
Directors’ remuneration (refer to Directors’ Remuneration Report) 141 129
Depositary fees 116 127
Stock Exchange and FCA fees 75 45
Custody services 64 37
Registrar fees 44 41
Fees payable to Company’s auditors for the audit of Company financial statements 43 38
General expenses 198 156
974 727
The Company registered for VAT in 2022 and the above expenses exclude VAT where appropriate. Irrecoverable VAT
is included within general expenses.
5 Taxation
2023 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Current tax:
Overseas withholding tax 103 – 103 44 – 44
Corporation tax 1,636 – 1,636 466 – 466
Current tax charge 1,739 – 1,739 510 – 510
The tax assessed for the year is lower (2022: lower) than the standard rate of corporation tax in the UK of 19%
(2022: 19%). The differences are explained below:
2023 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Net return before tax 19,345 (68,996) (49,651) 10,323 58,405 68,728
Return at the standard rate of
UK corporation tax 3,676 (13,109) (9,433) 1,961 11,097 13,058
Adjusted for the effects of:
Non-taxable UK franked dividends (2,040) – (2,040) (1,495) – (1,495)
Non-taxable capital returns* – 13,109 13,109 – (11,097) (11,097)
Irrecoverable overseas withholding tax 103 – 103 44 – 44
Current tax charge 1,739 – 1,739 510 – 510
* The Company is an Investment Trust as defined by section 1158 of the Corporation Tax Act 2010 and capital gains are not subject to UK corporation
tax within an Investment Trust.
As the Company’s has no unrelieved management expenses, a corporation tax charge of £1,636,000 is payable in
respect of the year ended 31March 2023 (period to 31March 2022: £466,000).
60 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Notes to the Financial Statements (continued)
6 Dividends
2023
£’000
2022
£’000
Ordinary shares
2022 dividend paid 15July 2022 (46p per share) 10,558 –
2021 dividend paid 16July 2021 (45p per share) – 6,771
The 2022 dividend was paid on 15July 2022 to shareholders on the register on 10June 2022 when there were
22,951,270 Ordinary shares in issue. The 2021 dividend was paid on 16July 2021 to shareholders on the register on
11June 2021 when there were 15,047,463 Ordinary shares.
The Directors have recommended to shareholders a final dividend of 60p per share for the year ended 31March
2023. If approved, this dividend will be paid to shareholders on 10July 2023. This dividend is subject to approval by
shareholders at the AGM and, therefore, in accordance with FRS 102, it has not been included as a liability in these
financial statements. The total estimated dividend to be paid, based on the number of shares in issue at 31March
2023, is £15,755,000. However the actual amount of the dividend to be paid will be based on the number of shares in
issue on 2June 2023, the dividend record date.
2023
£’000
2022
£’000
Revenue available for distribution by way of dividend for the year 17,606 9,813
Proposed final dividend of 60p for the year ended 31March 2023 (15,755) (9,610)
1,851 203
7 Net return per Ordinary share
The net return per Ordinary share of (206.29)p (2022: 394.95p) is based on the total net losses after taxation for the
financial year of £51,390,000 (2022: net gains of £68,218,000) and on 24,912,016 (2022: 17,272,426) Ordinary shares,
being the weighted average number of Ordinary shares in issue in each period.
Revenue return per Ordinary share of 70.67p (2022: 56.81p) is based on the net revenue gains after taxation of
£17,606,000 (2022: £9,813,000) and on 24,912,016 (2022: 17,272,426) Ordinary shares, being the weighted average
number of Ordinary shares in issue in each period.
Capital return per Ordinary share of (276.96)p (2022: 338.14p) is based on the net capital losses for the financial year
of £68,996,000 (2022: net gains of £58,405,000) and on 24,912,016 (2022: 17,272,426) Ordinary shares, being the
weighted average number of Ordinary shares in issue in each period.
The Company does not have dilutive securities. Therefore the basic and diluted returns per share are the same.
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 61
Company Summary The Board’s Strategic Report Governance Report Independent Auditor’s Report Notice of AGM Shareholder InformationFinancial Statements
Notes to the Financial Statements (continued)
8 Investments held at fair value through profit or loss
2023
£’000
2022
£’000
Investments comprise –
Listed investment companies:
Ordinary shares UK 173,176 228,809
Ordinary shares overseas 38,303 164,043
Zero dividend preference shares UK 14,594 22,415
Listed UK government bonds 362,695 115,735
Listed UK non-government bonds 101,410 74,268
Listed overseas government bonds 375,674 289,572
Listed overseas non-government bonds 55,783 16,618
Exchange traded funds 130,166 80,433
1,251,801 991,893
Opening cost of investments 934,906 556,030
Unrealised appreciation 56,987 38,200
Opening fair value of investments 991,893 594,230
Additions at cost 1,042,262 840,165
Effective yield adjustment* 301 (135)
Sales proceeds (714,206) (500,242)
(Losses)/gains on investments (68,449) 57,875
Closing fair value of investments 1,251,801 991,893
Closing book cost of investments 1,259,886 934,906
Unrealised (depreciation)/appreciation (8,085) 56,987
1,251,801 991,893
Realised (losses)/gains on disposals (3,377) 39,088
(Decrease)/increase in unrealised appreciation (65,072) 18,787
Net (losses)/gains on investments (68,449) 57,875
The Company received proceeds of £714,206,000 (2022: £500,242,000) from investments sold in the year. The
average book cost of these investments when they were purchased was £717,583,000 (2022: £461,154,000). These
investments have been revalued over time and until they were sold any unrealised gains/losses were included in the
fair value of investments. Included within these proceeds are capital repayments of £250,000 (2022: £565,000), which
are considered to be capital dividends.
The geographical spread of investments is shown on page9.
The total transaction costs on additions were £531,000 (2022: £546,000) and on sales were £179,000 (2022: £124,000).
These costs are included in the book cost of acquisitions and the net proceeds of sales.
* See Income section of Accounting Policies on page56 for a fuller description.
62 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Notes to the Financial Statements (continued)
9 Debtors
2023
£’000
2022
£’000
Due from brokers 4,661 13,333
Accrued interest 2,792 1,573
Dividends receivable 231 417
Prepayments and other debtors 186 51
Taxation 22 12
7,892 15,386
10 Creditors: amounts falling due within one year
2023
£’000
2022
£’000
Due to brokers 11,406 6,626
Accruals and deferred income 1,309 1,168
Corporation tax 1,005 243
Other creditors 20 18
13,740 8,055
11 Called-up share capital
2023
£’000
2022
£’000
Allotted and fully paid Ordinary shares of 25p each
At the beginning of the year: 20,891,975 Ordinary shares (2022: 13,813,113) 5,223 3,453
Allotted during the year: 5,688,288 Ordinary shares (2022: 7,078,862) 1,422 1,770
At the end of the year: 26,580,263 Ordinary shares (2022: 20,891,975) 6,645 5,223
During the year to 31March 2023, the Company issued 5,688,288 (2022: 7,078,862) new Ordinary shares for cash
proceeds totalling £287,166,000 (2022: £354,342,000). No Ordinary shares (2022: nil) were re-issued from treasury by
the Company.
During the year to 31March 2023, 321,500 (2022: nil) Ordinary shares were repurchased by the Company for a total
cost of £15,334,000 (2022: nil). No shares were purchased for cancellation during the year (2022: nil) and at the year-end
321,500 shares were held in treasury (2022:nil).
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 63
Company Summary The Board’s Strategic Report Governance Report Independent Auditor’s Report Notice of AGM Shareholder InformationFinancial Statements
Notes to the Financial Statements (continued)
12 Net asset value per Ordinary share
The net asset value per Ordinary share and the net asset value attributable to the Ordinary shares at the year end,
calculated in accordance with the Articles, were as follows:
Net asset value per Ordinary share attributable to
2023 2022
Ordinary shares 4,797.3p 5,025.1p
Net assets attributable to
2023
£’000
2022
£’000
Ordinary shares 1,259,719 1,049,835
Net asset value per Ordinary share is based on the net assets, as shown above, and on 26,258,763 (2022: 20,891,975)
Ordinary shares, being the number of Ordinary shares in issue at the year end.
13 Reconciliation of net return on ordinary activities before tax to net cash inflow
from operating activities
2023
£’000
2022
£’000
Net return on ordinary activities before tax (49,651) 68,728
Adjustments for:
Capital return before tax 68,996 (58,405)
Increase in prepayments (5) (32)
Increase in accruals and accrued income 39 349
Overseas withholding tax paid (115) (44)
Increase in recoverable tax (10) (3)
UK Corporation tax paid (874) (596)
Decrease/(increase) in dividends receivable 186 (228)
Increase in accrued interest (1,520) (540)
(Losses)/gains on foreign currency transactions (547) 530
Net cash inflow from operating activities 16,499 9,759
64 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Notes to the Financial Statements (continued)
14 Financial instruments
The Company has the following financial instruments:
2023
£’000
2022
£’000
Financial assets at fair value through profit or loss
– Investments held at fair value through profit and loss 1,251,801 991,893
Financial assets that are debt instruments measured at amortised cost
– Cash at bank and at hand 13,766 50,611
– Other debtors 4,779 13,333
– Accrued income 3,023 1,978
1,273,369 1,057,815
2023
£’000
2022
£’000
Financial liabilities measured at amortised cost
– Other creditors 11,406 6,626
– Accruals 1,309 1,168
12,715 7,794
The Company’s financial instruments comprise:
n investment company ordinary shares, zero dividend preference shares, exchange traded funds and fixed and
index-linked securities that are held in accordance with the Company’s investment objective;
n cash and liquid resources that arise directly from the Company’s operations; and
n debtors and creditors.
The main risks arising from the Company’s financial instruments are market risk, interest rate risk, foreign currency
risk and credit risk. The Board regularly reviews and monitors the management of each of these risks and they are
summarised below.
Other debtors and creditors do not carry any interest and are short-term in nature and accordingly are stated at their
nominal value.
Market risk
Market risk arises mainly from uncertainty about the future prices of financial instruments held. It represents the
potential loss the Company might suffer through holding market positions in the face of price movements.
The Company invests in the shares of other investment companies. These companies may use borrowings or other
means to gear their balance sheets which may result in returns that are more volatile than the markets in which they
invest, and the market value of investment company shares may not reflect their underlying assets.
To mitigate these risks, the Board’s investment strategy is to select investments for their fundamental value. Stock
selection is therefore based on disciplined financial, market and sector analysis, with the emphasis on long-term
investments. An appropriate spread of investments is held in the portfolio in order to reduce both the systemic risk
and the risk arising from factors specific to a country or sector. The Investment Manager actively monitors market
prices throughout the year and reports to the Board, which meets regularly to consider investment strategy. A list
of the largest investments held by the Company is shown on pages10 to 11 and the full portfolio listing is available
on the Company’s website at www.capitalgearingtrust.com. All investments are stated at bid value, which in the
Directors’ opinion is equal to fair value.
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 65
Company Summary The Board’s Strategic Report Governance Report Independent Auditor’s Report Notice of AGM Shareholder InformationFinancial Statements
Notes to the Financial Statements (continued)
14 Financial instruments (continued)
Price risk sensitivity
The following table illustrates the sensitivity of the net return after taxation for the year and the net assets to an
increase or decrease of 10% (2022: 10%) in market prices. This level of change is considered to be reasonably possible
based on an observation of current market conditions. The sensitivity analysis is based on the Company’s investments
at the Statement of Financial Position date with all other variables held constant.
2023 2022
10% increase
in market
prices
£’000
10% decrease
in market
prices
£’000
10% increase
in market
prices
£’000
10% decrease
in market
prices
£’000
Income Statement – net return after tax
Revenue return (374) 374 (294) 294
Capital return 125,180 (125,180) 99,190 (99,190)
Total return after taxation 124,806 (124,806) 98,896 (98,896)
Change to net assets attributable to shareholders 124,806 (124,806) 98,896 (98,896)
Interest rate risk
Bond and preference share yields, and as a consequence their prices, are determined by market perception as
to the appropriate level of yields given the economic background. Key determinants include economic growth
prospects, inflation, the Government’s fiscal position, short-term interest rates and international market comparisons.
The Investment Manager takes all these factors into account when making any investment decisions as well as
considering the financial standing of the potential investee company.
Returns from bonds and preference shares are fixed at the time of purchase, as the fixed coupon payments are
known, as are the final redemption proceeds. This means that if a bond is held until its redemption date, the total
return achieved is unaltered from its purchase date. However, over the life of a bond the market price at any given
time will depend on the market environment at that time. Therefore, a bond sold before its redemption date is likely
to have a price different from its purchase level and a profit or loss may be incurred.
Interest rate sensitivity
As at 31 March 2023, the Investment Manager’s investment models indicated that the valuation of fixed income
instruments, consisting of government bonds, corporate bonds and ZDPs, would fall by £15,818,000 (2022: £18,899,000)
if interest rates increased by 1%. However, if interest rates reduced by 1%, then the value of the securities would
increase by £17,750,000 (2022: £21,267,000). This analysis only relates to capital return and the interest rate movement
is in isolation of other variables.
The following table illustrates the sensitivity of the net revenue return after taxation for the year and the net assets to an
increase or decrease of 1% (2022: 1%) in regard to the Company’s monetary financial assets and financial liabilities. The
financial assets affected by interest rates are funds held by the custodian on deposit. There are no financial liabilities
affected by interest rates. This level of change is considered to be reasonably possible based on an observation of
current market conditions. The sensitivity analysis is based on the Company’s monetary financial instruments at the
Statement of Financial Position date with all other variables held constant.
2023 2022
1% increase
in interest
rates
£’000
1% decrease
in interest
rates
£’000
1% increase
in interest
rates
£’000
1% decrease
in interest
rates
£’000
Income Statement – net return after tax
Revenue return 112 (112) 410 (410)
Change to net assets attributable to shareholders 112 (112) 410 (410)
66 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Notes to the Financial Statements (continued)
14 Financial instruments (continued)
The interest rate profile of the Company’s assets at 31March 2023 was as follows:
Total
(as per
Statement
of Financial
Position)
£’000
Floating
rate
£’000
Index-
linked
£’000
Other
fixed
rate
£’000
Assets/
(liabilities)
on which
no interest
is paid
£’000
Weighted
average
interest
rate
%
Weighted
average
period
for which
rate is
fixed
(years)
Assets
Investment trusts &
other funds 356,239 – – – 356,239 – –
UK index-linked
government bonds 267,376 – 267,376 – – 0.33 4.16
UK index-linked
non-government bonds 12,817 – 12,817 – – 3.14 4.85
UK government bonds 95,319 – – – 95,319 – –
UK non-government bonds 88,593 – – 88,593 – 5.36 7.28
Overseas index-linked
government bonds 315,754 – 315,754 – – 1.01 10.18
Overseas index-linked
non-government bonds 5,601 – 5,601 – – 3.40 5.47
Overseas government bonds 59,920 – – 22,362 37,558 0.67 0.26
Overseas non-government
bonds 50,182 – – 50,182 – 5.59 8.57
Invested funds 1,251,801 – 601,548 161,137 489,116
Cash at bank 13,766 13,766 – – – – –
Other debtors 7,892
– – – 7,892 – –
Liabilities
Creditors (13,740) – – – (13,740) – –
Total net assets 1,259,719 13,766 601,548 161,137 483,268
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 67
Company Summary The Board’s Strategic Report Governance Report Independent Auditor’s Report Notice of AGM Shareholder InformationFinancial Statements
Notes to the Financial Statements (continued)
14 Financial instruments (continued)
The interest rate profile of the Company’s assets at 31 March 2022 was as follows:
Total
(as per
Statement
of Financial
Position)
£’000
Floating
rate
£’000
Index-
linked
£’000
Other
fixed
rate
£’000
Assets/
(liabilities)
on which
no interest
is paid
£’000
Weighted
average
interest
rate
%
Weighted
average
period
for which
rate is
fixed
(years)
Assets
Investment trusts &
other funds 495,700 – – – 495,700 – –
UK index-linked
government bonds 75,146 – 75,146 – – 0.38 1.87
UK index-linked
non-government bonds 18,175 – 18,175 – – 3.64 1.99
UK government bonds 40,589 – – – 40,589 – –
UK non-government bonds 52,825 – – 52,825 – 3.93 2.21
Overseas index-linked
government bonds 289,572 – 289,572 – – 0.68 8.33
Overseas index-linked
non-government bonds 4,276 – 4,276 – – 1.44 7.71
Overseas non-government
bonds 15,610 – – 15,610 – 2.99 1.88
Invested funds 991,893 – 387,169 68,435 536,289
Cash at bank 50,611 50,611 – – – – –
Other debtors 15,386 – – – 15,386 – –
Liabilities
Creditors
(8,055) – – – (8,055) – –
Total net assets 1,049,835 50,611 387,169 68,435 543,620
Fair value of financial assets and liabilities
Financial Reporting Standard 102 requires an entity to classify fair value measurements using a fair value hierarchy
that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the
following levels:
Level 1: valued using unadjusted quoted prices in active markets for identical assets.
Level 2: valued using observable inputs other than quoted prices included within Level 1.
Level 3: valued using inputs that are unobservable and are valued by the Directors using International Private Equity
and Venture Capital Valuation (‘IPEV’) guidelines, such as earnings multiples, recent transactions and net
assets, which equate to their fair values.
The Company’s assets are measured at fair value through profit or loss. The fair value of financial instruments traded
in active markets is based on quoted market prices at the Statement of Financial Position date. A market is regarded
as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing
service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an
arm’s length basis.
68 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Notes to the Financial Statements (continued)
14 Financial instruments (continued)
The financial assets and liabilities measured at fair value in the Balance Sheet are grouped into the fair value
hierarchy at 31March 2023 as follows:
Financial assets at
fair value through
profit orloss
2023 2022
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
Quoted securities 1,251,177 – – 1,251,177 988,276 2,842 – 991,118
Delisted equities – – 624 624 – – 775 775
Net fair value 1,251,177 – 624 1,251,801 988,276 2,842 775 991,893
Quoted equities included in fair value Level 1 are actively traded on recognised stock exchanges and the fair value of
these investments has been determined by reference to their quoted bid prices at the reporting date.
Delisted investments
The fair value of the Company’s investments in unquoted stocks have been determined by reference to primary
valuation techniques described in note 1(b).
During the year to 31March 2023, two assets (Jupiter Emerging and Frontier Income Trust and Fundsmith Emerging
Equities Trust) were moved from Level 1 to Level 3 as they delisted. During 2022 two assets (Gabelli Value Plus
Investment Trust and Weiss Korea Opportunities Fund (Realisation Shares)) were moved from Level 1 to Level 3 as
they delisted.
A reconciliation of fair value measurements in Level 3 is set out in the following table:
2023
Total
£’000
2022
Total
£’000
Opening balance 775 426
Purchases – –
Sales (2,607) (9,949)
Transfers 2,599 9,335
Total gains/(losses) on investments in the Income Statement:
on assets sold 8 614
on assets held at the end of the year (151) 349
Closing balance 624 775
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 69
Company Summary The Board’s Strategic Report Governance Report Independent Auditor’s Report Notice of AGM Shareholder InformationFinancial Statements
Notes to the Financial Statements (continued)
14 Financial instruments (continued)
Foreign currency risk
The Company’s investments in foreign currency securities are subject to the risk of currency fluctuations. The
Investment Manager monitors current and forward exchange rate movements in order to mitigate this risk. The
Company’s investments denominated in foreign currencies are:
2023 2022
Cash and
Investments
£’000
Accrued
interest
£’000
Cash and
Investments
£’000
Accrued
interest
£’000
Canadian Dollar 16,693 93 – –
Euro 77,899 57 78,916 5
US Dollar 326,699 789 282,579 473
Swedish Krona 41,772 168 39,449 50
Norwegian Krone 10,776 10 7,104 –
Australian Dollar 8,676 14 7,926 13
Japanese Yen 67,748 2 36,283 2
550,263 1,133 452,257 543
Foreign currency sensitivity
The following table illustrates the sensitivity of the net return after taxation for the year and the net assets to an
increase or decrease of 10% in the rates of exchange of foreign currencies relative to sterling. This level of change is
considered to be reasonably possible based on an observation of current market conditions. The sensitivity analysis
is based on the Company’s foreign currency investments at the Statement of Financial Position date with all other
variables held constant.
2023 2022
10%
appreciation
of sterling
£’000
10%
depreciation
of sterling
£’000
10%
appreciation
of sterling
£’000
10%
depreciation
of sterling
£’000
Income statement – net return after taxation
Revenue return (627) 627 (399) 399
Capital return (55,026) 55,026 (45,226) 45,226
Total return after taxation (55,653) 55,653 (45,625) 45,625
Net assets attributable to shareholders (55,653) 55,653 (45,625) 45,625
Liquidity risk
Liquidity risk is not considered to be significant as the Company has no bank loans or other borrowings and the
majority of the Company’s assets are investments in quoted securities which are readily realisable. All liabilities are
payable within three months.
70 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Notes to the Financial Statements (continued)
14 Financial instruments (continued)
Credit risk
In addition to interest rate risk, the Company’s investment in bonds, the majority of which are government bonds, is
also exposed to credit risk which reflects the ability of a borrower to meet its obligations. Generally, the higher the
quality of the issue, the lower the interest rate at which the issuer can borrow money. Issuers of a lower quality will
tend to have to pay more to borrow money to compensate the lender for the extra risk taken. As at 31 March 2023,
73% (2022: 55%) of the portfolio was held in fixed income instruments. Of these, 58% (2022: 39%) was in government
bonds issued by governments which are rated AA or better. The Investment Manager judges these to have very low
credit risk given that each of the issuers are monetarily sovereign, that is to say they borrow in their own currency. Of
the 14% (2022: 11%) of the portfolio that was held in corporate debt, the majority is investment grade and relatively
short duration. Cash balances of 1% (2022: 5%) were held with Northern Trust which has a short-term credit rating
of A-1 with Standard & Poor’s. Investment transactions are carried out with a number of brokers whose standing
is reviewed periodically by the Investment Manager. The Investment Manager assesses the risk associated with
these investments by prior financial analysis of the issuing companies as part of his normal scrutiny of existing and
prospective investments and reports regularly to the Board. Cash is held with a reputable bank with a high-quality
external credit rating.
A further credit risk is the failure of a counterparty to a transaction to discharge its obligations under that transaction,
which could result in a loss to the Company. The following table shows the maximum credit risk exposure.
Credit risk exposure
Compared to the Statement of Financial Position, the maximum credit risk exposure is:
2023 2022
Statement
of Financial
Position
£’000
Maximum
exposure
£’000
Statement
of Financial
Position
£’000
Maximum
exposure
£’000
Fixed assets – investments at fair value
through profit and loss 1,251,801 910,156 991,893 496,193
Debtors – amounts due from the custodian,
dividends and interest receivable 7,802 7,802 15,311 15,311
Cash at bank 13,766 13,766 50,611 50,611
1,273,369 931,724 1,057,815 562,115
Capital management policies and procedures
The Company’s capital management objectives are to ensure that it will be able to continue as a going concern andto
maximise the capital and income return to its equity shareholders. The Company’s capital comprises its equity share
capital and reserves. The Board, with the assistance of the Investment Manager, monitors and reviews the broad
structure of the Company’s capital on an ongoing basis. Further details can be found in the Strategic Report.
15 Related party transactions
With the exception of the management fee (as disclosed on page26), and the Directors’ fees and shareholdings (as
disclosed in the Directors Remuneration Report on pages37 and 38), there have been no related party transactions in
the year ended 31March 2023.
16 Company information
Capital Gearing Trust P.l.c. is a closed-ended investment company, registered in Northern Ireland No NI005574,
with its Ordinary shares listed on the London Stock Exchange. The address of the registered office is Murray House,
Murray Street, Belfast BT1 6DN.
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 71
Alternative Performance Measures
The Alternative Performance Measures (‘APMs’) detailed below are used by the Board to assess the Company’s
performance against a range of criteria and are viewed as particularly relevant to an investment trust. Other terms
detailed below are for reference.
NAV Total Return Net asset value total return measures the increase or decrease in net asset value per
share plus the dividends paid in the year, which are assumed to be reinvested at the NAV
at the time that the shares are quoted ex-dividend.
2023 2022
Opening NAV per share A 5,025.1p 4,590.2p
Closing NAV per share B 4,797.3p 5,025.1p
% change in NAV C=(B-A)/A -4.5% 9.5%
Impact of dividend reinvested D 0.9% 1.0%
NAV total return E=C+D -3.6% 10.5%
Share Price Total Return Share price total return measures the increase or decrease in share price plus the
dividends paid in the year, which are assumed to be reinvested at the share price at the
time that the shares are quoted ex-dividend.
2023 2022
Opening share price A 5,140.0p 4,715.0p
Closing share price B 4,730.0p 5,140.0p
% change in share price C=(B-A)/A -8.0% 9.0%
Impact of dividend reinvested D 0.9% 1.0%
Share price total return E=C+D -7.1% 10.0%
Premium/Discount
to NAV
The amount by which the share price is higher/lower than the net asset value per share,
expressed as a percentage of the net asset value per share.
2023 2022
NAV per share A 4,797.3p 5,025.1p
Share price B 4,730.0p 5,140.0p
Discount/premium C=(B-A)/A -1.4% 2.3%
Company Summary The Board’s Strategic Report Governance Report Independent Auditor’s Report Notice of AGM Shareholder InformationFinancial Statements
72 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Alternative Performance Measures (continued)
MSCI UK Index
Total Return
The MSCI UK Index has been selected by the Board as the Company’s equity
performance comparator for the purposes of comparing the Company’s NAV and share
price performance, however the MSCI UK Index is not technically an APM. The total
return on the MSCI UK Index, on a closing market price basis, assumes that all dividends
received were reinvested into the shares of the underlying companies at the time their
shares were quoted ex dividend.
Ongoing Charges The Company publishes its ongoing charges (‘ongoing charges ratio’ or ‘OCR’) on two
bases, the first excluding and the second including fees of collective funds invested in by
the Company. The management fee and all other administrative expenses expressed as
a percentage of the average daily net assets during the year.
The following calculation shows the ongoing charges ratio excluding the costs suffered
within underlying investee funds:
2023
£0,000
2022
£0,000
Investment Management fee 4,620 3,627
Administrative expense 974 727
Fixed element of DCP fee 30 30
Ongoing charges A 5,624 4,384
Average net assets during the year B 1,223,668 848,922
Ongoing charges ratio excluding
costs of underlying funds C=A/B 0.46% 0.52%
The following calculation shows the additional costs indirectly suffered within underlying
investee funds (for example, investment trusts held in the Company’s investment
portfolio) and the ongoing charges ratio including these costs:
2023 2022
Ongoing cost ratio from above A 0.46% 0.52%
Impact of underlying investee fund costs B 0.18% 0.26%
Ongoing charges ratio including
costs of underlying funds C=A+B 0.64% 0.78%
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 73
NOTICE IS HEREBY GIVEN THAT the sixtieth Annual
General Meeting of the Company will be held at
the Numis Auditorium, 45Gresham Street, London
EC2V7BF on Wednesday, 5 July 2023 at 11.30a.m. for
the following purposes:
Ordinary business
To consider, and, if thought fit, pass the following
resolutions which will be proposed as ordinary resolutions:
1. To receive the Report of the Directors and the
audited financial statements for the year ended
31March 2023.
2. To approve the Directors’ Remuneration Report for
the year ended 31March 2023, together with the
report of the auditor thereon.
3
. To declare a final dividend of 60 pence per
Ordinary share.
4
. To re-elect Jean Matterson as a Director.
5. To re-elect Robin Archibald as a Director.
6. To re-elect Paul Yates as a Director.
7. To re-elect Wendy Colquhoun as a Director.
8. To re-appoint BDO LLP as auditors of the Company.
9. To authorise the Directors to determine the
remuneration of the auditors.
Special business
To consider and, if thought fit, pass the following
resolutions, of which resolutions 10 and 11 will be
proposed as ordinary resolutions and resolutions 12 to
14 will be proposed as special resolutions:
Ordinary resolutions
Aggregate Directors’ remuneration
10
. To increase the aggregate limit on Directors’
remuneration from £180,000 to £230,000
perannum.
Directors’ authority to allot shares
11
. THAT the Directors be generally and unconditionally
authorised, pursuant to section 551 of the
Companies Act 2006 (the “Act”), to exercise all
powers of the Company to allot relevant securities
(within the meaning of section 551 of the Act) up to a
maximum aggregate nominal value of £2,169,646.75
(being one third of the issued share capital of
the Company as at 22May 2023, being the latest
practicable date prior to the publication of this
Notice, and representing 8,678,587 Ordinary shares
of 25 pence each), provided that such authority shall
expire at the conclusion of the AGM of the Company
to be held in 2024, unless previously revoked, varied
or renewed by the Company in general meeting
and provided that the Company shall be entitled to
make, prior to the expiry of such authority, an offer
or agreement which would or might require relevant
securities to be allotted after such expiry and the
Board may allot relevant securities pursuant to such
offer or agreement as if the authority conferred
hereby had not expired.
Special resolutions
Directors’ authority to disapply pre-emption rights
12
. THAT the Directors be and are hereby empowered
pursuant to section 570 of the Companies Act
2006 (the “Act”) to allot equity securities (within the
meaning of section 560 of the Act) for cash pursuant
to the authority conferred on them by resolution 11
above or otherwise as if section 561 of the Act did
not apply to any such allotment, and be empowered
pursuant to section 573 of the Act to sell relevant
equity securities (within the meaning of section
560 of the Act) if, immediately before the sale, such
equity securities were held by the Company as
treasury shares (as defined in section 724 of the
Act (“treasury shares”)), for cash as if section 561
of the Act did not apply to any such sale, provided
that this power shall be limited to the allotment of
equity securities and the sale of treasury shares, in
connection with and pursuant to:
a) an offer of equity securities open for
acceptance for a period fixed by the Board
where the equity securities respectively
attributable to the interests of holders
of Ordinary shares of 25 pence each in
the Company (the “Ordinary shares”) are
proportionate (as nearly as may be) to the
respective numbers of Ordinary shares held by
them but subject to such exclusions or other
arrangements in connection with the issue as
the Board may consider necessary, appropriate
or expedient to deal with equity securities
representing fractional entitlements or to deal
with legal or practical problems arising in any
overseas territory, the requirements of any
regulatory body or stock exchange, or any other
matter whatsoever; and
Notice of Annual General Meeting
Company Summary The Board’s Strategic Report Governance Report Independent Auditor’s Report Financial Statements Shareholder InformationNotice of AGM
74 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
b) otherwise than pursuant to sub-paragraph
a) above, up to an aggregate nominal value
of £1,301,788.00 or, if less, the number
representing 20% of the issued share capital
of the Company at the date of the meeting at
which this resolution is proposed; and
this power shall expire at the conclusion of the
AGM of the Company to be held in 2024, unless
previously renewed, varied or revoked by the
Company in general meeting and provided
that the Company shall be entitled to make,
prior to the expiry of such authority, an offer or
agreement which would or might require equity
securities to be allotted or treasury shares to
be sold after such expiry and the Board may
allot equity securities or sell treasury shares
pursuant to such offer or agreement as if the
power conferred hereby had not expired.
Authority to make market purchases of the Company’s
own shares
13
. THAT the Company be and is hereby generally and
unconditionally authorised in accordance with section
701 of the Companies Act 2006 (the “Act”) to make
market purchases (within the meaning of section 693
of the Act) of Ordinary shares of 25 pence each in the
Company (the “Ordinary shares”), provided that:
a) the maximum aggregate number of Ordinary
shares to be purchased shall be 3,902,760 or,
if less, the number representing 14.99% of the
issued share capital of the Company at the
date of the meeting at which this resolution
isproposed;
b) the minimum price which may be paid for an
Ordinary share shall be 25 pence;
c) the maximum price, excluding expenses,
which may be paid for an Ordinary share shall
be an amount equal to the higher of:
(i) 105% of the average of the middle
market quotations for an Ordinary share
as derived from the Daily Official List of
the London Stock Exchange for the five
business days immediately preceding the
day on which such purchase is made; and
(ii) the higher of the last independent trade
and the highest current independent bid
relating to an Ordinary share on the trading
venue where the purchase is carried out;
d) the authority hereby conferred shall expire
at the conclusion of the AGM of the Company
to be held in 2024 unless such authority is
renewed prior to such time; and
e) the Company may enter into a contract to
purchase Ordinary shares under this authority
prior to the expiry of such which will or may be
completed or executed wholly or partly after
the expiration of such authority.
Notice of general meetings
14
THAT a general meeting other than an Annual
General Meeting may be called on not less than
14clear days’ notice.
By order of the Board
Juniper Partners
Company Secretary
Registered Office:
Carson McDowell LLP
Murray House
Murray Street
Belfast BT1 6DN
23 May 2023
Location of Annual General Meeting
Numis Auditorium
45 Gresham Street
London EC2V7BF
at 11.30a.m. on Wednesday, 5July 2023
Shareholders are encouraged to vote in favour of
the resolutions to be proposed at the AGM by form
of proxy. Ifshares are not held directly (including
through any platform) shareholders are encouraged
to arrange for their nominee to vote on their behalf.
Notice of Annual General Meeting (continued)
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 75
Company Summary The Board’s Strategic Report Governance Report Independent Auditor’s Report Financial Statements Shareholder InformationNotice of AGM
Notice of Annual General Meeting (continued)
Notes
1. Members are entitled to attend, speak and vote at the
AGM. A member entitled to attend, speak and vote at
the AGM is also entitled to appoint one or more proxies
to attend, speak and vote instead of him/her. The proxy
need not be a member of the Company. A member may
appoint more than one proxy in relation to the AGM,
provided that each proxy is appointed to exercise the
rights attached to different shares.
To have the right to vote at the AGM (and also for the
purposes of calculating how many votes a member
may cast on a poll) shareholders must be registered
in the Register of Members of the Company no later
than 6.30p.m. on the day which is two days (excluding
non-working days) before the day of the AGM or any
adjourned meeting. Changes to the Register of Members
after the relevant deadline shall be disregarded
in determining the rights of any person to vote at
themeeting.
2. A form of proxy is enclosed with this notice, together
with a pre-paid reply envelope. Completion and return
of such form of proxy either by post or through
www.investorcentre.co.uk/eproxy or submission of any
CREST Proxy Instruction (as described in note 7 below) will
not prevent a member from subsequently attending the
AGM and voting in person if they so wish.
3. To be valid any form of proxy or other instrument
appointing a proxy, together with any power of attorney
or other authority under which it is signed, or certified
copy thereof, must be received by post or (during normal
business hours only) by hand to Computershare Investor
Services PLC, The Pavilions, Bridgwater Road, Bristol
BS996ZY or through www.investorcentre.co.uk/eproxy
or no later than 48 hours (excluding non-working days)
before the time of the meeting or any adjourned meeting.
4. A person who is not a member of the Company, but
has been nominated by a member of the Company (the
“relevant member”) under section 146 of the Companies
Act 2006 to enjoy information rights (the “nominated
person”), does not have a right to appoint any proxies
under note 1 above. A nominated person may have a
right under an agreement with the relevant member to
be appointed or to have somebody else appointed as a
proxy for the AGM. If a nominated person does not have
such a right, or has such a right and does not wish to
exercise it, he/she may have a right under an agreement
with the relevant member to give instructions as to the
exercise of voting rights. It is important to remember
that a nominated person’s main contact in terms of their
investment remains as the relevant member (or perhaps
the custodian or broker who administers the investment)
and a nominated person should continue to contact them
(and not the Company) regarding any changes or queries
relating to their personal details and holding (including
any administration thereof). The only exception to this is
where the Company writes to a nominated person directly
for a response.
5. In the case of joint holders the vote of the senior who
tenders the vote shall be accepted to the exclusion of the
votes of the other joint holders. For this purpose, seniority
shall be determined by the order in which the names
stand in the register of members.
6. Any corporation which is a member can appoint one or
more corporate representatives who may exercise on its
behalf all of its powers as a member provided that they
do not do so in relation to the same shares.
7. CREST members who wish to appoint a proxy or proxies
through the CREST electronic proxy appointment service
may do so for the AGM and any adjournment(s) thereof
by using the procedures described in the CREST Manual
(available via www.euroclear.com).
The message, regardless of whether it constitutes
the appointment of a proxy or an amendment to the
instruction given to a previously appointed proxy must, in
order to be valid, be transmitted so as to be received by
the Company’s agent (ID: 3RA50) by the latest time(s) for
receipt of proxy appointments specified in the notice of
AGM. For this purpose, the time of the receipt will be taken
to be the time (as determined by the timestamp applied to
the message by the CREST Applications Host) from which
the Company’s agent is able to retrieve the message by
enquiry to CREST in the manner prescribed by CREST.
8. Any member attending the AGM has the right to ask
questions. Shareholders are also invited to submit their
questions to the Board in advance and the answers to
these questions will be posted on our website after the
AGM. Please submit questions to the Board using the email
address company.secretary@capitalgearingtrust.com.
9. Resolutions 1 to 11 are proposed as ordinary resolutions
which, to be passed, require more than half of the votes
cast to be in favour of the resolution. Resolutions 12 to 14
are proposed as special resolutions which, to be passed,
require at least three-quarters of the votes cast to be in
favour of the resolution.
10. As at 22 May 2023 (being the last practicable date prior
to the publication of this document) the total number of
Ordinary shares of 25p each in issue with voting rights
attached was 26,035,763.
11. Biographical details of the Directors seeking election and
re-election can be found on pages 12 and 13.
12. A copy of this notice, and other information required by
section 311A of the Companies Act 2006, can be found at
www.capitalgearingtrust.com.
13. The members of the Company may require the Company
(without payment) to publish, on the website, a statement
(which is also to be passed to the Auditor) setting out any
matter relating to the audit of the Company’s accounts,
including the Auditor’s report and the conduct of the
audit. The Company will be required to do so once
it has received such requests from either members
representing at least 5% of the total voting rights of the
Company or at least 100 members who have a relevant
right to vote and hold shares in the Company on which
there has been paid up an average sum per member of
at least £100. Such requests must be made in writing and
must state the member’s full name and address and be
sent to the registered address of the Company.
76 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Financial Calendar
31 March May July November
Financial year end
Annual results for the
yearended 31March
2023 published
Annual Report published
Annual General
Meeting
Dividend payment date
Interim results for
the six months ended
30September
Half Year Report published
Financial Reporting
Copies of the Company’s Annual and Half-Year Reports may be obtained from
the Company Secretary and electronic copies can be accessed on the Company’s
website www.capitalgearingtrust.com.
Contacting the Board
Any shareholders wishing to communicate directly with the Board should do so
via the Company Secretary.
Capital Gains Tax
As at 31March 1982 the adjusted value for capital gains tax purposes of the 25p
Ordinary shares was 21.25p.
Frequency of NAV Publication
Daily
Share Price The Company’s share price can be found on the London Stock Exchange website
by using the Company’s TIDM code ‘CGT’ within the price search facility. The
share price is also available on the Company’s website.
How to Invest
Via your bank, stockbroker, execution only platforms or financial advisor.
Sources of Further Information
Company’s website www.capitalgearingtrust.com
AIC www.theaic.co.uk
For registrar queries contact Computershare on 0370 873 5864.
Share Identification Codes SEDOL: 0173861
ISIN: GB0001738615
BLOOMBERG: CGT:LN
TIDM: CGT
FT: CGT:LSE
LEI: 213800T2PJTPVF1UGW53
Nominee Share Code The Company will arrange for copies of shareholder documents to be made
available on request to interested parties and operators of nominee accounts.
Disability Act
Access for the hard of hearing to the services of the registrar to the Company,
Computershare Investor Services PLC, is provided by their contact centre’s text
phone service on 0370 702 0005. Alternatively, if you prefer to go through a
‘typetalk’ operator (provided by the RNID) you should dial 18001 followed by the
number you wish to dial.
Data Protection
The Company is committed to ensuring the privacy of any personal data
provided to us. Further details of the Company’s privacy policy can be found on
the Company’s website www.capitalgearingtrust.com.
Key Information Document
In line with the European regulations for packaged investment products, which
came into force in January 2018, a key information document (KID) has been
produced for the Company by its AIFM and is available on the Company’s
website. The KID, which is not the responsibility of the Company, is produced in
a prescribed form, with little scope for deviation. Investor’s should note that the
procedures for calculating risks, costs and potential returns contained in the KID
are prescribed by law. These may not reflect the expected returns for the Company
and anticipated returns cannot be guaranteed. The costs disclosed in the KID
include transaction charges and look through costs, being the operating costs of
investee funds, in addition to the ongoing charges of the Company.
Shareholder Information
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 77
Company Summary The Board’s Strategic Report Governance Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder Information
Non-Mainstream Pooled Investment Rules
The Company’s shares are ‘excluded securities’ for the purposes of the rules relating to non-mainstream pooled
investment products. This means they can be recommended by independent financial advisors to their ordinary retail
clients, subject to normal suitability requirements.
Alternative Investment Fund Managers Directive (‘AIFMD’)
The Company is an Alternative Investment Fund (“AIF”) as defined by the AIFMD and CG Asset Management is the
Company’s Alternative Investment Fund Manager (“AIFM”). CG Asset Management is authorised as a Full Scope UKAIFM.
Although the investment policy of the Company permits gearing, including the use of derivatives, the Board has no
current intention to employ gearing.
In accordance with the AIFMD, information in relation to the Company’s leverage and the remuneration of the
Company’s AIFM, CG Asset Management, is required to be made available to investors. In accordance with the
Directive, the AIFM’s remuneration policy and the numerical remuneration disclosures in respect of the AIFM’s
relevant reporting period (year ending 30April 2022) are available from CG Asset Management on request.
Leverage, for the purposes of the AIFM Directive, is any method which increases the company’s exposure to
stockmarkets whether through borrowings, derivatives, or any other means. It is expressed as a ratio of the
Company’s exposure to its NAV. In summary, the gross method measures the Company’s exposure before applying
hedging or netting arrangements. The commitment method allows certain hedging or netting arrangements to
be offset. As at 31March 2023 and 2022, the Company had no hedging or netting arrangements. The Company’s
maximum and actual leverage levels at 31March 2023 and 2022 are shown below:
Gross
Method
Commitment
Method
Maximum limit 200% 200%
Actual 100% 100%
The investor disclosure document and all additional periodic disclosures required in accordance with the
requirements of the FCA Rules implementing the AIFMD in the UK are made available on the Company’s website
(www.capitalgearingtrust.com).
Shareholder Analysis
Beneficial owner analysis
31March
2023
% of
Issued
share
capital
31 March
2022
% of
Issued
share
capital
Platforms/Execution only brokers 40.2 40.3
Wealth management 16.7 14.7
Private client stockbrokers 15.7 18.2
Private client fund management 5.3 6.4
Asset managers 4.3 3.5
Private investors 3.2 3.5
Other* 14.6 13.4
100.0 100.0
Source: RD:IR
* which includes pension funds, insurance corporations and non-financial corporations
Shareholder Information (continued)
78 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Historic Data
to 31 March, with exception of data from 2013 to 2021 which are to 5 April
Key Data
Year
Total Net
Assets
(£m)
Market
Capitalisation
(£m)
Shares
in issue
(with voting
rights)
NAV per
Share
(pence)
Share Price
(pence)
Discount/
premium to
NAV
Ongoing
Charges
Ratio
2023 1,259.7 1,242.0 26,258,763 4,797.3 4,730.0 -1.4% 0.46%
2022 1,049.8 1,073.8 20,891,975 5,025.1 5,140.0 2.3% 0.52%
2021 634.0 651.3 13,813,113 4,590.2 4,715.0 2.7% 0.58%
2020 470.1 482.2 11,509,263 4,084.2 4,190.0 2.6% 0.65%
2019 321.9 328.9 7,886,589 4,082.0 4,170.0 2.2% 0.70%
2018 219.5 225.3 5,762,919 3,809.0 3,910.0 2.6% 0.77%
2017 169.5 172.4 4,453,174 3,805.0 3,870.5 1.7% 0.89%
2016 107.9 109.1 3,191,062 3,382.0 3,420.0 1.1% 1.04%
2015 96.5 97.1 2,926,906 3,297.6 3,316.5 0.6% 0.96%
2014 91.3 97.7 2,926,906 3,119.7 3,339.5 7.0% 1.24%
2013 93.5 100.1 2,921,906 3,198.9 3,425.0 7.1% 1.26%
Year
Earnings
per Share
(pence)
Total
Dividend
per Share
(pence)
Share Price
Total Return
NAV
Total Return
MSCI UK
Index
Total Return
UK Retail
Price Index
(at 31 March)
UK Consumer
Price Index
(at 31 March)
2023 70.67 60 -7.1% -3.6% 5.6% 13.4% 10.1%
2022 56.81 46 10.0% 10.5% 18.7% 9.0% 7.0%
2021 51.04 45 13.6% 13.9% 26.6% 1,5% 0.7%
2020 59.12 42 1.3% 0.8% -24.8% 2.6% 1.5%
2019 51.12 35 7.4% 7.9% 7.9% 2.4% 1.9%
2018 37.04 27 1.5% 0.0% 1.8% 3.3% 2.5%
2017 18.26 20 13.8% 13.4% 25.5% 3.1% 2.3%
2016 16.91 20 3.7% 3.4% -8.0% 1.6% 0.5%
2015 26.82 20 -0.7% 5.6% 5.6% 0.8% 0.0%
2014 10.77 16 -2.5% -2.5% 10.7% 2.5% 1.6%
2013 21.32 16 13.6% 10.4% 13.5% 3.3% 2.8%
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 79
Company Summary The Board’s Strategic Report Governance Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder Information
Allocation of portfolio
Year
Index-Linked
Government
Bonds
Conventional
Government
Bonds
Preference
Shares/
Corporate
Debt
Funds/
Equities Cash Gold
2023 46.1% 12.3% 13.6% 25.9% 1.1% 1.0%
2022 35.0% 3.9% 10.9% 44.1% 4.8% 1.3%
2021 29.9% 6.2% 10.3% 46.0% 5.8% 1.8%
2020 25.1% 18.8% 14.0% 34.1% 6.9% 1.1%
2019 33.0% 10.3% 17.6% 35.2% 2.9% 1.0%
2018 37.9% 1.1% 17.3% 36.9% 5.8% 1.0%
Net asset value performance 1982 to 2023
Based on the Company’s NAV per Ordinary share, the graph below illustrates the total return to investors in the
Company since 1982, compared with the total return on the MSCI UK Index*. Each measure is rebased to 100 in 1982.
As at 31 March
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2015
2013
2017
2018
2019
2020
2021
Capital Gearing Trust NAV Total Return
MSCI UK Total Return
2022
2023
100
80
200
300
500
1,000
2,000
4,000
6,000
8,000
10,000
16,000
20,000
16,000
* Source: CG Asset Management Limited
Historic Data (continued)
80 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
Alternative Performance
Measures
Alternative performance measures are numerical measures of the Company’s
current, historical or future performance, financial position or cash flows, other than
financial measures defined or specified in the applicable financial framework. The
Company’s applicable financial framework includes UK GAAP, including FRS 102, and
the AIC SORP. Further information is provided above. These numerical measures
are used by the Board to assess the Company’s performance against a range of
criteria and are viewed as particularly relevant for an investment company.
DCP A discount and premium control policy (‘DCP’) that seeks to ensure that the
Company’s shares trade at close to net asset value, in normal market conditions,
through a combination of share buy-backs and share issues. The DCP creates
liquidity in the shares and should reduce premium/discount volatility.
Drawdown A maximum drawdown is the maximum observed negative period of return from
a peak to a trough, as measured at month end NAV. Maximum drawdown is an
indicator of downside risk that can be used to assess the relative riskiness of one
portfolio relative toanother.
Earnings per share The earnings per share (‘EPS’) is calculated by dividing the net revenue return
attributable to equity shareholders by the weighted average number of shares
inissue.
Equity ETF An exchange-traded fund (‘ETF’) is a type of pooled investment security that
operates similarly to a mutual fund. Typically, ETFs will track a particular index,
sector, commodity, or other asset, but unlike mutual funds, ETFs can be purchased
or sold on a stock exchange the same way that a regular listed stock can. The price
of an ETF’s shares will change throughout the trading day reflecting the underlying
value of the security.
Market Capitalisation The value of the Company’s total market value of its shares and is calculated by
multiplying the total number of shares in issue with the current share price.
Net Asset Value (‘NAV’) The value of total assets less liabilities. To calculate the net asset value per share
the net asset value is divided by the number of shares in issue.
Ongoing Charges The Company publishes its ongoing charges (‘ongoing charges ratio’ or ‘OCR’) on
two bases, the first excluding and the second including fees of collective funds
invested in by the Company. The management fee and all other administrative
expenses are expressed as a percentage of the average daily net assets during
theyear.
Premium/Discount to NAV The amount by which the share price is higher/lower than the net asset value per
share, expressed as a percentage of the net asset value per share.
Total Return Net asset value/share price total return measures the increase or decrease in net
asset value per share/share price plus the dividends paid in the period, which are
assumed to be reinvested at the time that the share price is quoted ex-dividend
either in the net asset value or share price of the Company.
Treasury shares Shares that have been repurchased by the Company but not cancelled. These
shares are held in a treasury account and remain part of the Company’s share
capital but do not carry any rights to receive dividends or vote at general meetings.
Glossary of Terms and Definitions
Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023 81
Company Summary The Board’s Strategic Report Governance Report Independent Auditor’s Report Financial Statements Notice of AGM Shareholder Information
Investment Manager
CG Asset Management Limited
20 King Street
London EC2V 8EG
Telephone: 020 3906 1633
As at 31 March 2023, CGAM had total funds under
management of£4.1 billion.
Depositary, Custodian and Banker
The Northern Trust Company
50 Bank Street
Canary Wharf
London E14 5NT
Company Secretary and Administrator
Juniper Partners Limited
28 Walker Street
Edinburgh EH3 7HR
E-mail: company.secretary@capitalgearingtrust.com
Telephone: 0131 378 0500
Registered Office
Carson McDowell LLP
Murray House
Murray Street
Belfast BT1 6DN
Registered Number
NI005574
AIC
Association of Investment Companies
www.theaic.co.uk
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Telephone: 0370 873 5864
Independent Auditors
BDO LLP
City Point
65 Haymarket Terrace
Edinburgh EH12 5HD
Corporate Stockbroker
JP Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Management and Administration
82 Capital Gearing Trust P.l.c. Annual Report and Financial Statements 2023
In recent years there has been an increase in the number of sophisticated but fraudulent financial scams. This is
often by a phone call or email which can originate from outside UK. Shareholders may receive unsolicited phone
calls or correspondence concerning investment matters that imply a connection to the Company. These are typically
from overseas ‘brokers’ who target UK shareholders offering to sell them what often turn out to be worthless or high
riskshares.
Shareholders may also be advised that there is an imminent offer for the Company, and the caller may offer to buy
shares at significantly above the market price if an administration fee is paid. This is known as ‘boiler room fraud’.
Please note that it is very unlikely that either the Company, or the Company’s Registrar, would make unsolicited
telephone calls to Shareholders and never in respect of ‘investor advice’.
If you are contacted, we recommend that you do not respond with any personal information, including access to
financial information or bank accounts. If you are in any doubt you should seek financial advice before taking any action.
You can find more information about investment scams at the Financial Conduct Authority (FCA) website:
www.fca.org.uk/consumer/protect-yourself-scams. You can also call the FCA Consumer Helpline on 0800 111 6768.
There has also been an increase in imposter websites and internet scams. Investors should take care to discriminate
between legitimate corporate websites and those that might try to represent corporates, where an objective of the
scam would be to data capture private investor information or encourage investors to provide banking information.
Beware of Share Fraud
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