REG-Capital Gearing Tst: Half-yearly Report

CAPITAL GEARING TRUST P.L.C

Announcement of the Half-Year Financial Report
for the six months ended 5 October 2009

Interim Management Report

Chairman's Overview

Over the six months to 5 October 2009, the net asset value per share
rose by 10.8% to a record high of 2,355.8p. The principal objective of
achieving an absolute return has therefore been met.

Assisted by the accommodative monetary polices being adopted by
central banks in the wake of last year's banking crisis, investors' appetite
for risk increased during the period under review. This has led to an
exceptionally strong recovery in equity markets, albeit from a low base. It is
worth noting that even after a 25.8% rise since 5 April 2009, the FTSE
All-Share Index remains over 25% below its peak.

Bearing in mind that it is our aim to preserve as well as to grow the
assets of the Company we will continue to adopt a cautious investment approach
and therefore not attempt to chase relative returns against any asset class if
this might compromise our principal objective.

Investment Review

The allocation to equities was modest throughout, ending at roughly 25%, but
at least that part of the portfolio significantly outperformed the market,
with the UK investment trusts up by 38% and those in the US, Europe, Japan and
the Emerging Markets all performing better than that. Less happy was the
index-linked bond exposure in the US. The US Dollar fell by 7.7% against
Sterling and the TIPS themselves rose by only a little over 5%. The
conventional bonds in Europe and the short index-linked in the UK rose by 4%
and 5% respectively. The zero dividend preference shares, two of which are
quasi-equity, rose by 16%. Ecofin Power & Water issued some attractive zero
preference shares, in which the Company participated.

Restructurings were relatively rare in the period, though tenders were
accepted in Ceres Agriculture, Directors Dealing Investment Trust (which has
just announced a further tender) and Principle Capital. Glasgow Income and
Active Capital were re-organised. Other trusts, such as Henderson Global
Property, saw a dramatic shrinkage in their discount and the Company was able
to reduce its holding. As a general comment, though, corporate governance in
investment trusts with respect to discounts did not improve, despite better
underlying liquidity removing the one reasonable excuse for inaction.

Investment Outlook

Investors are offered a rather unappetising menu. For the cautious, cash
yields less than inflation in Sterling, the Euro and the US Dollar. In the UK,
short index-linked gilts have negative real yields, even before tax, and
conventional gilts combine low yields with significant risks to capital value.
Retail investors have responded by buying equities and property, both for
yield and some protection against inflation. Meanwhile, institutional
investors have seen their cash flows boosted by Bank of England printing that
has led to a net redemption of gilts at a time of huge fiscal deficits. The
only countervailing force has been rights issues and these have so far been
comfortably absorbed; there are many more to come, though, starting with £13.5
billion for Lloyds Bank.

The fundamentals for equities have improved since the first quarter, notably
in the stabilisation of the financial system. In addition, corporate profits
have held up reasonably well, with a fall of 30% looking to be a trough in the
US and the UK. This has been partly a result of aggressive cost-cutting;
partly that pricing power has been stronger than expected. Corporate profits
will improve from here, with easy comparisons, but the consensus expectations
of 20% growth for each of the next three years look stretched against a
background of a continuing extended balance sheet recession characterised by a
fading stimulus cycle in 2010.

However, the tightening fiscal policy that seems inevitable in the US and the
UK will ensure that monetary policy will remain accommodative for a long time
- maybe until 2012 or later. Otherwise both economies could relapse into a
deflationary recession. Real interest rates will therefore be very low at the
short end of the interest rate curve and can continue to diminish further out.
That should provide a favourable background to index-linked bonds (outside the
UK) and to conventional bonds in Germany and Switzerland, where inflation is
less threatening than in the US and the UK.

The delayed implementation of exit strategies by the Federal Reserve and the
Bank of England means that monetary policy might boost equities still further,
but it is dangerous to buy stocks in a liquidity driven market that is
significantly overpriced. On long term measures such as `q' - replacement cost
- and the cyclically adjusted PER, equities do now look expensive. Further
evidence of optimism lies in the price of Real Estate Investment Trusts, which
trade on a 10-20% premium to NAV. For the long term, there is little
temptation to increase the allocation to equities at these levels.

Principal Risks and Uncertainties

The principal risks and uncertainties facing the Company were explained in
detail within the Annual Report issued in May 2009, and they continue to be
the same for the Company and its investors for the period under review and
moving forward.

AIFM Directive

New rules proposed by the European Council's Alternative Investment Fund
Managers (AIFM) Directive (the `Directive') released earlier this year call
for further regulation of Alternative Investment Funds, a classification that
will include investment trusts.

Our trade body, the Association of Investment Companies (`AIC') have expressed
concern that the proposals will increase compliance burdens and reduce
investment companies' commercial flexibility and are, therefore, lobbying UK
and EU policy makers to amend the rules in order to lesson their negative
impact. The Directive is currently still in draft format, with the publication
of amendments expected by Easter 2010 and full implementation estimated by the
AIC to occur in 2012.

The Board is following the progress of the Directive closely and will keep
shareholders informed of the ongoing consultations as they develop, through
the regular financial reports that the Company publishes.

Related Party Transactions

Details of related party transactions are contained in the Annual Report
issued in May 2009. There have been no further related party transactions and
there have been no material changes in the nature and type of the related
party transactions as stated within the Annual Report.

Statement of Directors' Responsibilities

Each of the Directors confirm that, to the best of their knowledge:

(a) The condensed set of financial statements has been prepared in accordance
with the Accounting Standards Board's statement `Half-Yearly Financial
Reports';

(b) The Interim Management Report includes a fair review of the information
required by Disclosure and Transparency Rule 4.2.7R (indication of important
events during the first six months of the financial year and description of
principal risks and uncertainties for the remaining six months of the
financial year); and

(c) The Interim Management Report includes a fair review of the information
required by Disclosure and Transparency Rule 4.2.8R (disclosure of related
party transactions and changes therein).

The condensed set of financial statements are published on the Company's
website, www.capitalgearingtrust.com, which is a website maintained by TMF
Corporate Secretarial Services Limited. The Directors are responsible for the
maintenance and integrity of the Company's corporate website and financial
information included within the website. Legislation in the UK governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.

For and on behalf of the Board

Mr T R Pattison
Chairman
5 November 2009

Independent Review Report to Capital Gearing Trust p.l.c

Introduction

We have been engaged by the Company to review the condensed set of financial
statements in the Half-Year Financial Report for the six months ended 5
October 2009, which comprises the Income Statement, Statement of Total
Recognised Gains and Losses, Reconciliation of Movements in Shareholders'
Funds, Balance Sheet, Cash Flow Statement and related notes. We have read the
other information contained in the Half-Year Financial Report and considered
whether it contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial statements.

Directors' responsibilities

The Half-Year Financial Report is the responsibility of, and has been approved
by, the Directors. The Directors are responsible for preparing the Half-Year
Financial Report in accordance with the Disclosure and Transparency Rules of
the UK's Financial Services Authority.

As disclosed in note 1, the annual financial statements are prepared in
accordance with UK Accounting Standards (UK Generally Accepted Accounting
Practice). The condensed set of financial statements included in this
Half-Year Financial Report has been prepared in accordance with pronouncements
on half-yearly financial reports issued by the UK Accounting Standards Board.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the Half-Year Financial Report based on our
review. This report, including the conclusion, has been prepared for and only
for the Company for the purpose of the Disclosure and Transparency Rules of
the Financial Services Authority and for no other purpose. We do not, in
producing this report, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, `Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and consequently
does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the Half-Year
Financial Report for the six months ended 5 October 2009 is not prepared, in
all material respects, in accordance with the Statement `Half-Yearly Financial
Reports' issued by the UK Accounting Standards Board and the Disclosure and
Transparency Rules of the UK's Financial Services Authority.

PricewaterhouseCoopers LLP
Chartered Accountants
Belfast, 5 November 2009

Distribution of Investment Funds

at 5 October 2009

Distribution of Investment Funds of £65,319,000 (5 April 2009: £58,617,000)

5 October 5 April
North 2009 2009
UK America Europe Elsewhere Total Total

% % % % % %
Investment
Trust
assets:
Ordinary 11.2 2.5 3.3 4.1 21.1 16.0
shares
Endowment 3.3 - - - 3.3 3.6
funds
Zero 12.8 - - - 12.8 10.7
dividend
preference
shares
Other
assets:
Fixed 2.8 - 24.7 - 27.5 32.3
interest
Index linked 11.5 18.0 1.1 - 30.6 33.8
Floating 0.7 - - - 0.7 1.8
interest
Cash 4.0 - - - 4.0 1.8
46.3 20.5 29.1 4.1 100.0 100.0

Major Investments of the Company

at 5 October 2009

Market value greater than £500,000

5 October 2009
£'000
Investment Trust Ordinary Shares and Endowment Funds:
Allianz Dresdner 2nd Endowment Policy Trust 2009 1,678
North Atlantic Smaller Companies 1,255
London & St Lawrence Investment Company 935
TR Property Investment Trust Sigma 895
Oryx International Growth Fund 590
ETFS Metal Securities Ltd (gold) 517
Other (53 investments) 10,068

15,938

Investment Trust Zero Dividend Preference Shares:
Utilico Finance Ltd 2012 1,642
Premier Energy & Water Trust 1,300
EW&PO Finance Plc 1,218
EPIC Securities 962
Utilico Finance Ltd 2016 526
Other (10 investments) 2,737

8,385

Index-Linked Securities and Fixed Interest:
Treasury 2.5% Index Linked 2013 4,291
Switzerland (Govt of) 2% Index Linked Bonds 2014 4,099
Switzerland (Govt of) 3% Bonds 2018 3,301
France (Govt of) 5.5% OAT 2029 3,278
Germany (Federal Republic) 4.75% Bonds 2028 3,050
USA Treasury 2.0% Index Linked Bonds 2016 2,760
USA Treasury 1.375% Index Linked Bonds 2018 2,741
USA Treasury 2.0% Index Linked Bonds 2026 2,057
USA Treasury 0.625% Index Linked Bonds 2013 1,632
Treasury 2.5% Index Linked 2011 1,203
Treasury 1.25% Index Linked 2017 1,164
Germany (Federal Republic) 4.75% Bonds 2034 1,134
USA Treasury 3.625% Index Linked Bonds 2028 1,037
Canada (Govt of) 4% Index Linked 2031 1,036
Treasury 2.5% Index Linked 2016 879
The Cayenne Trust 3.25% Convertible Unsecured Loan Stock 2011 768
Germany (Federal Republic) 4% Bonds 2037 699
Sweden (Kingdom of) 3.5% Index Linked Bonds 2028 692
Switzerland (Govt of) 2.5% Bonds 2036 591
Other (6 investments) 1,537

37,949
Floating interest
Smith & Williamson Investment Funds (cash) 451
Total investments 62,723

Amounts due from brokers, on deposit 2,596
Total investment funds 65,319

Income Statement (unaudited)

for the six months ended 5 October 2009

(unaudited) (unaudited) (audited)
6 months ended 6 months ended Year ended
5 October 2009 5 October 2008 5 April 2009

Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

Net
gains/(losses)
on
investments - 7,349 7,349 - (2,618) (2,618) - (4,566) (4,566)
Exchange
(losses)/
gains - (530) (530) - 204 204 - 4,293 4,293
Investment
income
(note 2) 713 - 713 679 - 679 1,417 - 1,417

Gross
return/(loss) 713 6,819 7,532 679 (2,414) (1,735) 1,417 (273) 1,144

Investment
management
fee (79) (185) (264) (72) (169) (241) (147) (344) (491)
VAT refund on
investment
management fee - - - 92 216 308 101 237 338
Transaction
costs - (33) (33) - (37) (37) - (75) (75)
Other expenses (154) - (154) (192) - (192) (357) - (357)
Net
return/(loss)
on ordinary
activities
before tax 480 6,601 7,081 507 (2,404) (1,897) 1,014 (455) 559

Tax on
ordinary
activities (66) 39 (27) (80) 41 (39) (218) 92 (126)

Net
return/(loss)
attributable
to equity
shareholders 414 6,640 7,054 427 (2,363) (1,936) 796 (363) 433

Return/(loss)
per Ordinary
Share(note 3) 14.81p 237.58p 252.39p 15.28p (84.55)p (69.27)p 28.48p (12.99)p 15.49p

The total column of this statement is the Income Statement of the Company. The
revenue return and capital return columns are supplementary to this and are
prepared under guidance issued by the Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing
operations.

Statement of Total Recognised Gains and Losses (unaudited)

for the six months ended 5 October 2009

(unaudited) (unaudited) (audited)
6 months to 6 months to Year to
5 October 5 October 5 April
2009 2008 2009
£'000 £'000 £'000

Net return/(loss) attributable to equity shareholders 7,054 (1,936) 433

Total gains and losses recognised for the period 7,054 (1,936) 433

Reconciliation of Movements in Shareholders' Funds (unaudited)

for the six months ended 5 October 2009

Capital Capital
Called reserve reserve
up Share Capital arising on arising on
share premium redemption investments investments Revenue
capital reserve reserve held sold reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000

Balance at 6
April 2009 699 8,114 16 3,247 45,614 1,714 59,404
Exchange
losses
on investments - - - (530) - - (530)
Net gains on
realisation of
investments - - - - 2,156 - 2,156
Net increase
in unrealised
appreciation - - - 5,193 - - 5,193
Transfer on
disposal of
investments - - - 1,444 (1,444) - -
Transaction
costs - - - (28) (5) - (33)
Costs charged
to capital - - - - (185) - (185)
VAT refund - - - - - - -
Tax on costs
charged to
capital - - - - 39 - 39
Net revenue
for the period - - - - - 414 414

Total 699 8,114 16 9,326 46,175 2,128 66,458

Dividends
(note 4) - - - - - (615) (615)

Balance at 5
October 2009 699 8,114 16 9,326 46,175 1,513 65,843

for the six months ended 5 October 2008

Capital Capital
Called reserve reserve
up Share Capital arising on arising on
share premium redemption investments investments Revenue
capital reserve reserve held sold reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000

Balance at 6
April 2008 699 8,114 16 8,009 41,215 1,379 59,432
Exchange gains
on investments - - - 125 79 - 204
Net gains on
realisation of
investments - - - - 1,588 - 1,588
Net decrease
in unrealised
appreciation - - - (4,206) - - (4,206)
Transfer on
disposal of
investments - - - (292) 292 - -
Transaction
costs - - - (32) (5) - (37)
Costs charged
to capital - - - - (169) - (169)
VAT refund - - - - 216 - 216
Tax on costs
charged to
capital - - - - 41 - 41
Net revenue
for the period - - - - - 427 427

Total 699 8,114 16 3,604 43,257 1,806 57,496

Dividends
(note 4) - - - - - (461) (461)

Balance at 5
October 2008 699 8,114 16 3,604 43,257 1,345 57,035

Balance Sheet (unaudited)

at 5 October 2009

(unaudited) (unaudited) (audited)
5 October 5 October 5 April
2009 2008 2009
£'000 £'000 £'000

Fixed Assets
Listed investments 62,723 53,910 57,550

Current Assets
Debtors 3,051 3,032 1,525
Cash at bank 401 368 634
3,452 3,400 2,159
Creditors: amounts falling due within one year (332) (275) (305)

Net current assets 3,120 3,125 1,854

Net assets 65,843 57,035 59,404

Capital and Reserves
Called up share capital 699 699 699
Share premium account 8,114 8,114 8,114
Capital redemption reserve 16 16 16
Capital reserve arising on investments held 9,326 3,604 3,247
Capital reserve arising on investments sold 46,175 43,257 45,614
Revenue reserve 1,513 1,345 1,714

Total equity shareholders' funds 65,843 57,035 59,404

Net asset value per Ordinary Share 2,355.8p 2,040.7p 2,125.4p

The Half-Year Financial Report for the six months ended 5 October 2009 was
approved by the Board of Directors on 5 November 2009 and signed on its behalf
by:

Mr T R Pattison
Chairman
5 November 2009

Cash Flow Statement (unaudited)

for the six months ended 5 October 2009

(unaudited) (unaudited) (audited)
6 months 6 months
ended ended Year ended
5 October 5 October 5 April
2009 2008 2009
£'000 £'000 £'000

Net cash inflow from operating activities
(note 5) 296 283 942
Foreign tax paid on investment income - - (60)

Capital expenditure and financial investment
Payments to acquire investments (5,624) (9,357) (24,013)
Receipts from sale of investments 7,238 7,848 20,966
1,614 (1,509) (3,047)

Equity dividends paid (615) (461) (461)

Management of liquid resources
Change in cash held by custodians awaiting
investment (1,528) 1,816 3,021
(Decrease)/increase in cash (note 6) (233) 129 395

Notes to the Financial Statements

1. Accounting Policies

The financial information for the six months to 5 October 2009 and 5 October
2008 has been prepared under the historical cost convention, modified to
include the revaluation of investments and in accordance with Accounting
Standards applicable in the UK, pronouncements on interim reporting issued by
the UK Accounting Standards Board and the Statement of Recommended Practice
for Investment Trusts issued in January 2009 by the Association of Investment
Companies (the `AIC'). The half-year financial statements have been prepared
on the basis of the accounting policies set out in the financial statements
for the year ended 5 April 2009.

2. Investment Income

6 months to 6 months to Year to
5 October 5 October 5 April
2009 2008 2009
£'000 £'000 £'000
Income from investments
Income from UK bonds 158 95 265
Income from UK equity and non-equity
investments 171 124 241
Overseas interest 383 402 836
712 621 1,342
Deposit interest 1 58 75

Total income 713 679 1,417

3. Return/(loss) per Ordinary Share

The calculation of return per Ordinary Share is based on results after tax
divided by the weighted average number of shares in issue during the period of
2,794,906 (2008: 2,794,906).

The revenue, capital and total return/(loss) per Ordinary Share is shown on
the Income Statement.

4. Dividends

6 months to 6 months to Year to
5 October 2009 5 October 2008 5 April 2009
Pence per
share 22.0p 16.50p 16.50p
Total cost £615,000 £461,000 £461,000

5. Reconciliation of net revenue before finance costs and taxation to net cash
inflow from operating activities

6 months to 6 months to Year to
5 October 5 October 5 April
2009 2008 2009
£'000 £'000 £'000
Net revenue before finance costs and
taxation 480 507 1,014
Investment management fee charged to
capital (185) (169) (344)
VAT refund credited to capital - 216 237
Decrease in accrued income 3 31 11
Increase in creditors - 20 23
(Increase)/decrease in debtors (2) (322) 1

Net cash inflow from
operating activities 296 283 942

6. Reconciliation of net cash flow to movement in net funds

6 months to 6 months to Year to
5 October 5 October 5 April
2009 2008 2009
£'000 £'000 £'000
Net funds at beginning of the period 634 239 239
(Decrease)/increase in
cash for the period (233) 129 395

Net funds at the end of the period 401 368 634

7. Taxation

Capital returns and dividend income are not subject to corporation tax within
an investment trust company. The provision for corporation tax arises from the
excess of unfranked investment income over management expenses and tax losses
brought forward.

8. Comparative information

The financial information contained in this Half-Year Financial Report does
not constitute statutory accounts as defined in Section 434 of the Companies
Act 2006. The financial information for the half-years ended 5 October 2008
and 5 October 2009 has not been audited by the Company's auditors. The
abridged financial information for the year ended 5 April 2009 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 and did not contain a statement under either Section
498(2) or Section 498(3) of the Companies Act 2006.

A copy of this announcement and other documents of the Company are available
on the Company's website at www.capitalgearingtrust.com. A pdf copy of the
printed Half-Year Financial Report, for posting to shareholders, will also be
available shortly on the website.

END