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Portfolio at April 30, 2004 |  |
Corporate Information
| Investor Inquiries The Central Group (Alberta) Ltd. | Head Office | |
| P.O. Box 7319 55 Broad Leaf Crescent Ancaster, Ontario Canada L9G 3N6 | Hallmark Estates 805, 1323-15th Avenue S.W. Calgary, Alberta Canada T3C 0X8 | |
Telephone: (905) 648-7878 Fax: (905) 648-4196 | Telephone: (403) 228-5861 Fax: (403) 228-2222 | |
| Website: www.centralfund.com | ||
| E-mail: info@centralfund.com | ||
Stock Exchange Listings | ||||
| | Electronic Ticker Symbol | Newspaper Quote Symbol | ||
|---|---|---|---|---|
| AMEX: | ||||
| Class A shares | CEF | CFCda | ||
TSX: | ||||
| Class A shares | CEF.A | CFund A | ||
The net asset value per Class A share is available daily by calling Investor Inquiries.
The Thursday net asset value is published in financial newspapers in the United States and Canada.
In Canada the net asset value is also published daily in theGlobe and Mail Report on Business Fund Asset Values table.
2nd QUARTER |  | INTERIM REPORT TO SHAREHOLDERS for the six months ended April 30, 2004 |
2nd QUARTER REPORT
Central Fund is currently 97.3% invested in gold and silver bullion. At April 30, 2004 Central Fund's gold holdings were 518,330 fine oz. of physical bullion and 5,261 fine oz. of gold bullion certificates. Silver holdings were 25,928,142 oz. of physical bullion and 245,572 oz. of silver bullion certificates. The physical bullion is unencumbered and held in safekeeping in allocated, segregated and insured vault storage by a Canadian chartered bank. Central Fund continues to fulfil its mandate as "The Sound Monetary Fund".
On behalf of the Board of Directors:
"J.C. STEFAN SPICER"
J.C. Stefan Spicer, President
MANAGEMENT DISCUSSION & ANALYSIS
Results of Operations — Change in Net Assets
Net assets increased by approximately $174,383,000 during the six months ended April 30, 2004. Of that amount, $71,451,000 was the result of the issuance of 15,050,000 Class A shares through a public offering on December 19, 2003 and $108,912,000 was the result of the issuance of 19,500,000 Class A shares through a public offering on April 8, 2004. In both public offerings, the shares were issued at a premium to net asset value that was non-dilutive and accretive to the net asset value per share of pre-existing Class A shareholders, after all related share issue costs.
The share capital now issued and outstanding is 79,296,320 fully-participating Class A shares listed on the American Stock Exchange and The Toronto Stock Exchange. Common shares remain at 40,000 issued and outstanding. |
The $0.30, or 6.9% increase in net assets per Class A share, expressed in U.S. dollar terms, during the past six months was due primarily to the 0.6% increase in the price of gold and the 15.9% increase in the price of silver during the period. Net assets per Class A share, expressed in Canadian dollar terms, increased at a rate of 11.1%, being $0.64 per Class A share. This greater percentage increase was a result of the 3.9% increase in the U.S. dollar relative to the Canadian dollar. The components of the change in net asset value per Class A share in U.S. and Canadian dollars are summarized in the adjacent table. |
| Net Asset Value per Class A Share | ||||||||
| | U.S.$ Terms | Cdn. $ Terms | ||||||
|---|---|---|---|---|---|---|---|---|
| October 31, 2003 | $ | 4.35 | $ | 5.74 | ||||
| Changes due to: | ||||||||
| Gold price | .02 | .03 | ||||||
| Silver price | .30 | .41 | ||||||
| Weaker Cdn. $ | .22 | N/A | ||||||
| Other | (.02 | ) | (.02 | ) | ||||
| Total changes | .30 | .64 | ||||||
| April 30, 2004 | $ | 4.65 | $ | 6.38 | ||||
Results of Operations — Net Loss
The net loss, being primarily the costs of stewardship for the six months ended April 30, 2004, was $1,121,408 compared to $718,705 in 2003. Since April 30, 2003, net assets have increased by approximately $195,828,000 or 113%. The Company has used the bulk of the proceeds of two non-dilutive Class A share issues over the past twelve months to purchase gold and silver bullion, primarily in bar form. Certain expenses, such as administration fees that are scaled, and taxes, vary in proportion to net asset levels, or, in the case of stock exchange fees (included in shareholder information), with the total market value of Class A shares. Safekeeping fees and bullion insurance costs increased as a result of the purchases of additional physical gold and silver bullion discussed above. Administrative fees remitted to The Central Group Alberta Limited for the six months increased to $484,508 from $313,106, such increase being fees at the rate of one-quarter of one percent per annum on the increased assets under administration.
Despite an increase in overall expense levels, the operating expenses which exclude taxes, as a percentage of average net assets, declined to 0.28% for the six months ended April 30, 2004 compared to 0.35% for the same six-month period in 2003. The issuances of Class A shares during the past six months resulting in increased net asset levels have been instrumental in substantially reducing the ongoing operating expenses on a per share basis.
Liquidity and Capital Resources
Central Fund's dollar liquidity objective is to hold cash reserves primarily for the payment of operating expenses, taxes and Class A share dividends. Should Central Fund not have sufficient currency to meet its cash requirements, a nominal portion of Central Fund's liquid monetary bullion holdings may be sold to fund tax and dividend payments, provide working capital and pay for redemptions of Class A shares, if any.
For the six months ended April 30, 2004, Central Fund's cash reserves increased by $6,470,399 as amounts used to pay operating expenses, taxes and the Class A share dividend were more than offset by amounts retained in interest-bearing cash deposits for working capital purposes from the public offerings in December 2003 and April 2004. Management monitors Central Fund's cash position with an emphasis on maintaining its mandate to hold maximum amounts of gold and silver bullion.
Statements of Net Assets
(expressed in U.S. dollars, unaudited)(note 1)
| | April 30 2004 | October 31 2003 | |||||
|---|---|---|---|---|---|---|---|
| Net Assets: | |||||||
| Gold bullion at market, average cost $206,043,206 (2003: $111,164,364) (note 2) | $ | 203,415,241 | 114,733,517 | ||||
| Silver bullion at market, average cost $181,213,466 (2003: $103,068,226) (note 2) | 155,733,599 | 76,236,168 | |||||
| Marketable securities at market, average cost $89,430 | 57,193 | 70,998 | |||||
| Interest-bearing cash deposits | 10,785,866 | 4,315,467 | |||||
| Prepaid insurance, interest receivable and other | 27,682 | 62,545 | |||||
370,019,581 | 195,418,695 | ||||||
| Accrued liabilities | (973,332 | ) | (307,883 | ) | |||
| Dividends payable | — | (447,463 | ) | ||||
Net assets representing shareholders' equity | $ | 369,046,249 | 194,663,349 | ||||
| Represented by: | |||||||
| Capital Stock (note 3): | |||||||
| 79,296,320 (2003:44,746,320) Class A shares issued | $ | 371,511,394 | 191,148,354 | ||||
| 40,000 Common shares issued | 19,458 | 19,458 | |||||
371,530,852 | 191,167,812 | ||||||
| Contributed surplus (note 4) | 25,655,466 | 26,776,874 | |||||
| Unrealized depreciation of investments | (28,140,069 | ) | (23,281,337 | ) | |||
Total Shareholders' Equity | $ | 369,046,249 | 194,663,349 | ||||
| Net Asset Value Per Share (expressed in U.S. dollars): | |||||||
| Class A shares | $ | 4.65 | 4.35 | ||||
| Common shares | $ | 1.65 | 1.35 | ||||
| Net Asset Value Per Share (expressed in Canadian dollars): | |||||||
| Class A shares | $ | 6.38 | 5.74 | ||||
| Common shares | $ | 2.26 | 1.78 | ||||
| Exchange rate: U.S. $1.00 = Cdn. | $ | 1.3706 | 1.3197 | ||||
Statements of Changes in Net Assets
(expressed in U.S. dollars, unaudited)(note 1)
| | Six months ended April 30 | Three months ended April 30 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2004 | 2003 | 2004 | 2003 | ||||||||
| Net assets at beginning of period | $ | 194,663,349 | 132,447,600 | $ | 287,409,904 | 163,470,861 | ||||||
| Add (deduct): | ||||||||||||
| Unrealized appreciation (depreciation) of investments during the period | (4,858,732 | ) | 3,735,743 | (26,653,548 | ) | (13,244,550 | ) | |||||
| Net loss | (1,121,408 | ) | (718,705 | ) | (622,107 | ) | (384,373 | ) | ||||
| Net issuance of Class A Shares | 180,363,040 | 37,753,154 | 108,912,000 | 23,375,854 | ||||||||
| Increase in net assets during the period | 174,382,900 | 40,770,192 | 81,636,345 | 9,746,931 | ||||||||
| Net assets at end of period | $ | 369,046,249 | 173,217,792 | $ | 369,046,249 | 173,217,792 | ||||||
Statements of Loss
(expressed in U.S.dollars, unaudited)(note 1)
| | Six months ended April 30 | Three months ended April 30 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2004 | 2003 | 2004 | 2003 | ||||||||
| Income: | ||||||||||||
| Interest | $ | 22,240 | 23,542 | $ | 12,489 | 13,861 | ||||||
| Dividends | 281 | 115 | 184 | 60 | ||||||||
| 22,521 | 23,657 | 12,673 | 13,921 | |||||||||
| Expenses: | ||||||||||||
| Administration fees | 484,508 | 313,106 | 270,943 | 165,711 | ||||||||
| Shareholder Information | 126,962 | 71,597 | 72,563 | 40,651 | ||||||||
| Safekeeping, insurance and bank charges | 100,159 | 69,454 | 56,296 | 37,450 | ||||||||
| Professional fees | 29,543 | 37,440 | 19,977 | 19,446 | ||||||||
| Registrar and transfer agents' fees | 28,220 | 24,334 | 21,550 | 17,575 | ||||||||
| Directors' fees and expenses | 26,269 | 25,518 | 10,942 | 11,982 | ||||||||
| Miscellaneous | 971 | 789 | 625 | 449 | ||||||||
| Foreign currency exchange loss | 14,786 | 12,530 | 6,785 | 5,703 | ||||||||
| 811,418 | 554,768 | 459,681 | 298,967 | |||||||||
| Loss from operations before income taxes | (788,897 | ) | (531,111 | ) | (447,008 | ) | (285,046 | ) | ||||
| Income taxes | (332,511 | ) | (187,594 | ) | (175,099 | ) | (99,327 | ) | ||||
| Net loss (note 5) | $ | (1,121,408 | ) | (718,705 | ) | $ | (622,107 | ) | (384,373 | ) | ||
| Net loss per share: | ||||||||||||
| Class A shares | $ | (.02 | ) | (.02 | ) | $ | (.01 | ) | (.01 | ) | ||
| Common shares | $ | (.02 | ) | (.02 | ) | $ | (.01 | ) | (.01 | ) | ||
Notes:
- 1.
- The accounting policies used in the preparation of these unaudited interim financial statements conform with those presented in Central Fund's October 31, 2003 audited annual financial statements. These unaudited interim financial statements do not include all of the disclosures included in the annual financial statements and accordingly should be read in conjunction with the annual financial statements.
- 2.
- Details of gold and silver bullion holdings at April 30, 2004, are as follows:
| Holdings | Gold | | Silver | |||
|---|---|---|---|---|---|---|
| 100 & 400 fine oz bars | 518,330 | 1000 oz bars | 25,928,142 | |||
| Certificates | 5,261 | Certificates | 245,572 | |||
| Total fine ounces | 523,591 | Total ounces | 26,173,714 | |||
| Market Value: | Per Fine Ounce | Per Ounce | ||
|---|---|---|---|---|
| October 31, 2003 | U.S. $386.25 | U.S. $5.1350 | ||
| April 30, 2004 | U.S. $388.50 | U.S. $5.9500 | ||
- 3.
- On December 19, 2003, the Company, through a public offering, issued 15,050,000 Class A shares for proceeds of $71,951,040 net of underwriting fees of $2,997,960. Costs relating to this public offering were approximately $500,000 and net proceeds were approximately $71,451,040.
The Company used the net proceeds from this public offering to purchase 98,386 fine ounces of gold at a cost of $40,328,690 and 4,919,333 ounces of silver at a cost of $28,015,600, in physical bar form. The balance of the net proceeds of approximately $3,106,750 was retained by the Company in interest bearing cash deposits for working capital purposes.
On April 8, 2004, the Company, through a public offering, issued 19,500,000 Class A shares for proceeds of $109,512,000 net of underwriting fees of $4,563,000. Costs relating to this public offering were approximately $600,000 and net proceeds were approximately $108,912,000.
The Company used the net proceeds from this public offering to purchase 128,160 fine ounces of gold at a cost of $54,550,152 and 6,408,000 ounces of silver at a cost of $50,129,640, in physical bar form. The balance of the net proceeds of approximately $4,232,208 was retained by the Company in interest-bearing cash deposits for working capital purposes.
- 4.
- Contributed surplus is used to eliminate any deficit that may arise from losses and for the payment of the Class A shares' stated dividend. Accordingly, $1,121,408 (2003, $718,705) has been transferred from contributed surplus on April 30, 2004 and 2003 representing the net loss for the six months then ended. This change does not affect the net asset value of the Company.
- 5.
- Under Canadian generally accepted accounting principles, the Company records the unrealized appreciation (depreciation) of its investments as a component of shareholders' equity. Under accounting principles generally accepted for investment companies in the United States, these amounts are reflected in the statements of income or loss. Under United States principles, net income (loss) for the six months ending April 30, 2004 would be ($5,980,149); (2003, $3,017,038). The net assets of the Company are identical under both Canadian and United States generally accepted accounting principles.
Net Asset Value Information