Interim Results

Capital Gearing Trust PLC
01 December 2004


CAPITAL GEARING TRUST plc

INTERIM REPORT

FOR THE SIX MONTHS ENDED 5 OCTOBER 2004



CONTENTS                                                                  PAGE

Chairman's Interim Statement                                                 1

Distribution of Invested Funds at 5 October 2004                             2

Major Investments of the Company at 5 October 2004                           3

Statement of Total Return                                                    4

Balance Sheet                                                                5

Cash Flow                                                                    6

Notes                                                                        7




CHAIRMAN'S INTERIM STATEMENT


Chairman's Statement


The Trust has achieved a satisfactory return over the half year to 5th October,
with the net asset value per share rising by 5.7% to 1574p excluding accrued
income of 10p per share.  This result may be compared with rises in the FTSE
Investment Companies Index of 2.2%, the FTSE All Share Index of 4.2% and the
FTSE Government All Stocks Index of 0.1%.  The improvement reflects performance
across the portfolio with equity stock selection, zero dividend preference
shares and index linked holdings being the main drivers.  The revenue account
has been a little stronger than anticipated in my last statement, but this
should not be taken as an indication of the outcome for the year.


Markets have continued to benefit from easy money policies  although short term
interest rates have been rising in America and the UK as authorities seek to
slow house price inflation and buoyant consumer expenditure while maintaining
stable economic conditions, a delicate balancing act given the electoral
background.  We judge markets to be fragile and will remain so until the major
structural imbalances most notably in America have been addressed.  Accordingly,
we intend to maintain our generally cautious stance focusing on specific stocks
and limited areas of perceived value.


Over the last year, the Board has spent considerable time and energy reviewing
its governance procedures in order to comply with current regulations. It has
been more a matter of codifying our existing arrangements than changing their
substance, but it has been a useful exercise.


The Board has noted the increased premium to net asset value at which the
Trust's shares currently trade.  Shareholders will recall that limited powers
have been granted to the Directors to issue shares on a non pre-emptive basis
provided this is to the benefit of existing shareholders.


I have had the privilege of being Chairman of Capital Gearing Trust for ten
years now.  During that time the net asset value of the shares has trebled to
the benefit of us all.  I owe considerable thanks to my Board colleagues who
have all contributed to this success and in particular to our investment manager
Peter Spiller.  I believe it is now appropriate for me to hand over my position
and the Board has invited Tony Pattison to succeed me on 1st January 2005.  He
is well qualified to do so.





Mark Cornwall-Jones

1 December 2004







                                      -1-



DISTRIBUTION OF INVESTED FUNDS


Percentage of assets

                                                                                    As at       As at
                                                                                  5/10/04      5/4/04
                                                                                   ------      ------
                                North
                     UK       America       Europe       Asia       Elsewhere       Total       Total
Investment Trust      %             %            %          %               %           %           %
Assets:

Ordinary Shares    16.4           2.6          3.8          -             1.0        23.8        28.1
Capital  Shares       -             -            -          -               -           -           -
Zero Dividend      34.0             -          2.4          -               -        36.4        32.9
Preference
Shares
Other assets:
Fixed interest      0.9             -         15.3          -               -        16.2        19.5
Index linked          -           6.4          8.9          -               -        15.3        14.1
Cash                4.5             -            -          -               -         4.5         2.1
Endowment funds     3.8             -            -          -               -         3.8         3.3
                    -----       -------       ------     ------         -------      ------      ------
                   59.6           9.0         30.4          -             1.0       100.0       100.0
                    =====       =======       ======     ======         =======      ======      ======



The basis of distribution of the invested funds has been amended to an actual
rather than a see through basis at 5 October 2004 and the distribution at 5
April 2004 has been restated accordingly.




                                     - 2 -


MAJOR INVESTMENTS OF THE COMPANY AT 5 OCTOBER 2004

                                                                         £'000
1.         INVESTMENT TRUST ORDINARY SHARES
                                                                         
Rutland Trust                                                            1,077
Life Offices Opportunities Trust                                           936
Eurovestech                                                                866
SVM UK Active Fund                                                         822
Ecofin Water & Power Income Shares                                         627
London & St Lawrence Investment Trust                                      604
                                                                         
2.         INDEX LINKED SECURITIES AND FIXED INTEREST
                                                                         

Sweden (Kingdom of) 3.5% Inflation Linked Bonds 01/12/2028               3,025
France (Govt of) 5.5% OAT 25/04/2029                                     2,344
Germany (Federal Republic) 4.75% Bonds 04/07/2028                        2,105
Germany (Federal Republic) 4% Bonds 2009                                 1,424
USA Treasury Notes 3.625% Inflation Indexed 15/04/2028                   1,407
                                                                         =======
                                                                         
3.         INVESTMENT TRUST  ZERO DIVIDEND PREFERENCE SHARES
                                                                         
                                                                         
Jupiter Split Investment Trust - Zero Dividend                           2,734
Aberdeen Development - Zero Dividend                                     2,100
Premium Trust - Zero Dividend                                            1,103
Premier Utilities Euro - Zero Dividend                                     916
                                                                         =======
                                                                       

Total detailed above representing  53% of the market value of the       22,090
investments                                                              =======




                                      -3-


STATEMENT OF TOTAL RETURN (UNAUDITED)

FOR THE SIX MONTHS ENDED 5 OCTOBER 2004

                         (Unaudited)                               (Unaudited)                      (Audited)          
                 6 months to 5 October 2004                6 months to 5 October 2003         Year to 5 April 2004     
                  Revenue   Capital  Total               Revenue        Capital   Total     Revenue   Capital   Total 
                                                                                                                      
                     £'000    £'000  £'000                  £'000          £'000   £'000       £'000     £'000   £'000

  Gains on               -    2,447  2,447                      -          4,633   4,633           -     6,649   6,649
  investments                                                                                                         
                                                                                                                      
  Income               459        -    459                    408              -     408         795         -     795
  from                                                                                                                
  investments                                                                                                         
                                                                                                                      
  Bank                  23        -     23                      2              -       2          26         -      26
  interest                                                                                                            

  GROSS                482    2,447  2,929                    410          4,633   5,043         821     6,649   7,470
  RETURN                                                                                                              
                                                                                                               
  Management          (63)   (147)   (210)                   (35)          (140)   (175)       (113)     (263)   (376)
  expenses

  Other              (119)       -   (119)                  (111)              -   (111)       (201)         -   (201)
  administrative     
  expenses

                     (182)   (147)   (329)                  (146)          (140)   (286)       (314)     (263)   (577)

  RETURN ON 
  ORDINARY                                                                                     
  ACTIVITIES 
  BEFORE TAX           300   2,300   2,600                    264          4,493   4,757         507     6,386   6,893  
                                                            
                                                  
  Tax on 
  ordinary                                                                                        
  activities          (24)      24       -                   (52)             52       -        (63)        63       -
                                                                                                          
  TO EQUITY 
  SHAREHOLDERS        276    2,324   2,600                    212          4,545   4,757         444     6,449   6,893  
                                                        
                                               
  DIVIDENDS             -        -       -                      -              -       -       (344)         -   (344)
                                                                                         
  TRANSFER TO 
  RESERVES            276    2,324  2,600                     212          4,545   4,757         100     6,449   6,549
                                                                                                                     
  RETURN PER 
  ORDINARY                                                                                                
  SHARE (NOTE 2)   10.02p   84.35p 94.37p                   8.30p        178.10p 186.40p      16.74p   243.08p 259.82p 





                                      -4-


BALANCE SHEET (UNAUDITED)

AS AT 5 OCTOBER 2004

                                                                   
                                         (Unaudited)    (Unaudited)    (Audited)

                                         5 October    5 October 2003   5 April
                                              2004                        2004

                                             £'000            £'000      £'000

FIXED ASSETS

Investments                                 41,301           36,051     40,491
                                           -------          -------    -------

CURRENT ASSETS

Debtors                                      2,328            3,338        923
Bank                                           164                -        131
                                           -------          -------    -------

                                             2,492            3,338      1,054

CREDITORS: amounts falling due within         (162)            (150)      (514)
one year                                   -------          -------    -------

NET CURRENT ASSETS                           2,330            3,188        540
                                           -------          -------    -------

NET ASSETS                                  43,631           39,239     41,031
                                           =======          =======    -------


CAPITAL EMPLOYED

Called up share capital                        689              689        689
Share premium account                        7,296            7,296      7,296
Capital redemption reserve                      16               16         16
Capital reserve                             34,925           30,697     32,601
Revenue reserve                                705              541        429
                                           -------          -------    -------

TOTAL EQUITY SHAREHOLDERS' FUNDS            43,631           39,239     41,031
                                           =======          =======    -------

NET ASSETS PER ORDINARY SHARE              1,583.7p         1,424.3p   1,489.3p
                                           =======          =======    =======





                                      -5-


CASH FLOW (UNAUDITED)

FOR THE SIX MONTHS ENDED 5 OCTOBER 2004


                                                             
                                 (Unaudited)      (Unaudited)      (Audited)
                                 6 months to      6 months to       Year to

                                5 October 2004   5 October 2003   5 April 2004
                                ---------------  ---------------  --------------

                                        £'000            £'000           £'000

Cash inflow from operating                177              164             282
activities (see below)

Capital expenditure and
financial investment:

Purchase of investments                (5,385)          (2,981)        (13,470)
Sales of investments                    7,022            2,870          11,082

Equity dividends paid                    (344)            (407)           (407)

Management of liquid resources
- cash paid to brokers
awaiting investment                    (1,437)            (954)           (525)
                                       

Financing - issue of new                    -            1,204           3,070
shares
                                       --------         --------        --------
Increase/(decrease) in cash                33             (104)             32
                                       ========         ========        --------
Cash and cash equivalents:

Balance at beginning of                   131               99              99
period
Net cash movement                          33             (104)             32
                                       --------         --------        --------
Balance at end of period                  164               (5)            131
                                       ========         ========        --------

Operating cash flows:

Profit before tax                         300              264             507
Expenses charged to capital              (147)            (140)           (263)
Change to accrued income and               32               26              (1)
sundry debtors
Change to sundry creditors                 (8)              14              39
                                       --------         --------        --------
                                          177              164             282
                                       ========         ========        ========




                                      -6-



NOTES



1.   Status of financial statements


     The financial information for the six months to 5 October 2004 and 5 
     October 2003, which is unaudited and does not constitute statutory
     accounts, has been prepared using accounting policies consistent with those 
     set out in the Company's 5 April 2004 statutory accounts. The management 
     expenses in the unaudited accounts for the six months ended 5 October 2003 
     are allocated on the previous basis of 20% to revenue and 80% to capital 
     rather than the allocation of 30% to 70% used in the six months to 5 
     October 2004 and the year ended 5 April 2004.


     The abridged financial information for the year ended 5 April 2004 has been 
     extracted from the Company's statutory accounts for that year, which have 
     been filed with the Registrar of Companies.  The report of the auditors on
     those accounts was unqualified.


2.   Earnings per share


     The calculations of earnings per share is based on results after tax 
     divided by the weighted average number of shares in issue during the period
     of 2,754,906       (2003: 2,551,647; 2004: 2,653,261).


                                      -7-


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