Toronto-based
The fund is selling 3.5 million class A shares in the U.S. at US$4.37 apiece, or about C$6.71 each.
Some US$13.6 million of the proceeds will be used to buy 22,400 oz. gold and 1.1 million oz. silver, with roughly US$800,000 retained as cash. Following the closing of the deal on Jan. 30, the total number of issued and outstanding class A shares will be 39.3 million, and the number of common shares will remain at 40,000.
The common shareholders hold all the power in the Central Fund, as only they can vote at company meetings. At last count, Central Fund Chairman Philip Spicer and his family held 49% of the common shares and a further 110,700 class A shares.
Assuming the above bullion purchases are carried out, the fund will hold about 261,000 oz. gold (in 100- and 400-oz. bars), 13 million oz. silver (in 1,000-oz. bars) and US$3.9 million in cash and short-term securities.
Virtually 99% of Central Fund’s gold and silver is held as fine bullion, with the remainder held in the form of gold and silver certificates. Bullion is stored in treasury vaults of the Canadian Imperial Bank of Commerce in Toronto, Calgary and Vancouver. The bullion is held on a fully segregated basis and inspected by the fund twice a year.
As for its small portfolio of equity securities, the company says it will focus on high-quality, senior gold and/or silver producers.
Founded in 1961 by Philip Spicer and now run by his son Stefan (who is president and CEO), the Central Fund is designed to allow shareholders to own gold and silver bullion without the hassles of contracts, transaction and storage fees, sales taxes, insurance costs, and assays.
Under its articles of incorporation, the Central Fund must hold at least 75% of its non-cash assets in the form of gold- and silver-related investments.
In more practical terms, the stated objective of the fund is to have at least 90% of its net assets in gold and silver bullion — bullion that will not be loaned, subjected to options, or encumbered in any way.
In addition to its TSX listing, the Central Fund’s A shares trade on the American Stock Exchange under the ticker symbol cef.
The Central Fund’s financial year ended Oct. 31, 2002, and its annual results were highlighted by a doubling of net assets to US$132.4 million, owing both to the non-dilutive issuance of 16.4 million class A shares and the rise in gold and silver prices.
On a per-class-A-share basis, the net asset value rose to US$3.70 (C$5.77) on Oct. 31, 2002, up from US$3.42 (C$5.42) a year earlier. At presstime, the fund was trading in the markets at US$4.91 and C$7.53.
Meanwhile, the net asset value of the common shares rose to US70 from US42 over the same period.
For the year, the fund posted a US$1.9-million loss (US7 per class A share and US8 per common share) on interest income of US$44,000. The loss stems mostly from a US$907,000 loss on the sale of investments and US$749,000 spent on various expenses. For the previous years, the net loss was US$573,000 (US3 and US4, respectively).
During the previous fiscal year, the fund’s five senior officers received no remuneration, and its directors received a total of US$47,000 in fees. As well, the fund has no loans outstanding to its officers and directors. However, during the year ended Oct. 31, the fund did pay out a US$448,000 management fee to privately held Central Group of Alberta, which is controlled by the Spicer family.
The company’s most recent annual dividend, totalling US1 per class A share, was paid out in November 2002.
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