Final Results

Capital Gearing Trust PLC
28 May 2004

                                                                          Page 1

To RNS

Please find below a Preliminary Announcement for the above Company.

Contacts:

Andrew Kane          01582 643272
Keith Hawkins        01582 643276

From Ernst & Young LLP



                                                                          Page 2
CAPITAL GEARING TRUST plc 
PRELIMINARY ANNOUNCEMENT 
5 APRIL 2004 

Chairman's Statement 
________________________________________________________________________________

When I reported to you at this time last year, equities had just experienced
their final climactic sell-off in the long bear market while fixed interest
holdings had offered investors protection from the general rout. In the three
years to 5 April 2003 the FTSE All Share Index fell by 39.7% while the FTSE All
Stocks Gilt Index fell by 1.2%, both in capital terms. It is no mean achievement
to have seen the net asset value per share of the Trust rise by 23.5% over this
tempestuous period. While the Board remained cautious last June it did seem that
fixed interest stocks were fully valued in the face of deteriorating government
finances and concern about incipient inflation. 

In the year to 5 April 2004 I am pleased to report a further improvement in the
net asset value of 20.7% to £14.89 per share. While we have not quite matched
the FTSE All Shares Index which rose by 22.8%, we have performed well given our
continuing cautious stance. For the record, the FTSE All Stocks Gilt Index fell
by 3.7% and the FTSE Investment Companies Index rose by 35.9%. 

The main tactical changes to the balance of the portfolio are best seen in the
table on page 6 of the Accounts. We have reduced exposure to fixed interest
holdings, broadly maintained the index linked weighting and taken a position in
endowment funds. The investment manager's comments on the portfolio are on page
5 of the Accounts. 

Earnings per share for the period came to 16.7p compared with 21.1p last year.
There are three good reasons for this decline - a reduction in fixed interest
holdings, an increase in costs reflecting the Trust's greater size and the
investment manager's higher percentage fee (on which I commented last year) and
the decision of the Board to charge a smaller proportion of investment
management costs to capital as set out in Note 1(d) to the Accounts. It is also
the case that other costs are up due partly to the increased regulatory burden
placed on companies. 

Last year I advised shareholders that of the total recommended dividend of l6p,
6p should be regarded as a special dividend. This year the Board recommends a
dividend of 10.5p (2003 - 10p) and a special dividend of 2p, making a total
distribution of 12.5p. We will be content in 2004-5 if we cover the base
dividend of 10.5p. 

In recent months the Board has given time and thought to its own regeneration. I
am pleased that Graham Meek, who has broad financial experience in stock broking
and investment banking, has accepted our invitation to become a director and a 
resolution will be put to the AGM proposing his election. 

During the year the Board used its power authorised by shareholders to issue
209,000 ordinary shares of 25p each (8.2%) on a non-pre-emptive basis at a
premium to net asset value. At the AGM the Board will again put forward a
resolution seeking authority to issue up to 10% of the present share capital in
the coming year, should the occasion arise. We have already indicated to
shareholders our readiness to buy in shares should the supply and demand ratio
change - provided this is at a discount to net asset value. Accordingly,  we
again also seek power to buy in stock in the terms set out in the resolution  in
the Notice of Meeting. 

Turning to the year ahead, the world economy is in a recovery phase led by
America, the Far East, and China. But this recovery is fragile in that it is
based on fiscal laxity and ballooning consumer debt particularly in America. The
recipe may hold until after the US election in November but at some stage the
evident imbalances must be addressed. We see no reason to alter our cautious
stance recognising that in the short term in volatile markets we may lag the
index on the upside. We hope nevertheless to report on a positive result for the
year as a whole. 


Mark Cornwall-Jones 

28 May, 2004 

                                                                          Page 3
Investment Manager's Report and Portfolio Analysis 
________________________________________________________________________________

After three years of falling equity markets, the latest financial year saw a
large rally with the UK FTSE All Share Index rising by 22.8%. Bonds, by
contrast, which had done very well before, made no progress. The proximate
reason underlying the performance of both was a good recovery in the US economy.
Fiscal and monetary policy were stimulative and rising equity and housing
markets kept consumer confidence up and savings rates down. By maintaining the
Federal Funds rate at emergency levels, the Federal Reserve has managed to defer
the problems normally associated with the bursting of  bubbles as happened in
2000. 

Unfortunately, deferring is not the same as addressing the problems. The
principal headwind facing the economy was excessive debt. At the personal level,
debt ratios have actually deteriorated and of course the deterioration in the
public finances has been more rapid than at any time in history; only corporate
debt has stabilised. We therefore regard the recovery in the US as fragile and a
relapse there, say in 2005, would likely cause relapses everywhere. 

The very low level of interest rates saw risk premia collapse, whether in
spreads for emerging market and junk bonds or in the rating of technology
stocks. It also encouraged US buying of equities and property and led to a fall
in the Dollar. 

Against this background, the Trust remained very defensively invested, with
an underlying exposure to equities that never exceeded 40% of the total.
Fortunately, those equities and the zero preference portfolio performed well,
producing an overall capital return for the Trust of 20% which compares quite
well with our absolute return benchmark, but is well behind the FTSE Investment 
Companies Index. 

Our best investment was Eurovestech, a technology-based venture capital company. 
Largely by dint of one spectacular investment, the shares rose to 10p at the 
year end, after we reduced our holdings at levels between 8p and 14p against a 
purchase cost of 1.5p. The shares still have considerable potential. A 
successful reconstruction was also seen in Smaller Companies Investment Trust. 

Among our zero preference shares, Premium Trust benefited from the removal of
its potential liability to Lloyds Insurance. Our holding in American Trust
zero preference was sold at 26.5p, having been purchased at 4.5p.

The overall shape of the portfolio did not change by much over the year. Perhaps 
the most notable feature has been that over the last few months we have built up 
a holding of about 5% of our assets in endowment trusts. These deeply 
unfashionable stocks trade at good discounts to their asset values and have an 
underlying portfolio - roughly 35% equity, 15% property, and 50% bonds - that we 
prefer to 100% equities. Let us hope that the steady drip of bad news is coming 
to an end. 

Outlook 

With the background of a fragile economy, over-valued equity markets and rising 
short-term interest rates in the USA and the UK, capital preservation is more 
important than trying to achieve large returns. Some significant parts of our 
portfolio will be subject to corporate restructuring. Jupiter Split Trust and 
Jupiter Enhanced Trust should both redeem their zero preference shares at the 
end of October, European Utilities Trust in July and Invesco Geared 
Opportunities Trust in early 2005. There will be an opportunity in June to 
realise our holding in Martin Currie Portfolio Trust and both Electra and Martin 
Currie Capital Return 'A' should continue their capital distributions. Wigmore 
Property Trust has recently announced its liquidation. In total, holdings with 
probable reconstructions within our current fiscal year amount to 24% of the 
total portfolio. There remain good opportunities for re-investment in stocks 
that should outperform the market. 

The outlook for bonds is mixed. We believe that Eurozone bonds, given the low
inflation prospects, look good value on yields close to 5%. but we recognise
that the weakness in US Treasuries and UK Gilts could lead to temporary 
weakness. However, when the next downturn for the world economy develops, 
Eurozone bonds should do very well. We have nevertheless reduced the duration
of the portfolio. 

In conclusion, we hope to produce a modest positive real return for the 
portfolio; the outlook is exceptionally uncertain. 

R.P.A. Spiller
28 May, 2004

                                                                          Page 4
Statement of Total Return (incorporating the Revenue Account)
for the year ended 5 April 2004
________________________________________________________________________________


                                               2004                        2003

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

Gains on investments            -     6,649   6,649         -       674     674

Income                        821         -     821       765         -     765
                          -------   -------  -------  -------   ------- -------
GROSS RETURN                  821     6,649   7,470       765       674   1,439

Investment management
fees                         (113)     (263)   (376)      (48)     (190)   (238)

Other expenses               (201)        -    (201)     (148)        -    (148)
                          -------   -------  -------  -------   ------- -------

RETURN ON ORDINARY 
ACTIVITIES BEFORE
TAXATION                      507     6,386   6,893       569       484   1,053

Tax on ordinary 
activities                    (63)       63       -       (57)       57       -      
                          -------   -------  -------  -------   ------- -------

RETURN ATTRIBUTABLE 
TO EQUITY 
SHAREHOLDERS                  444     6,449   6,893       512       541   1,053

Dividends on 
ordinary shares:              

  Dividend payable
  12.5p per
  
  ordinary share
  (2003 - 16p)               (344)        -    (344)     (407)        -    (407)
                          -------   -------  -------  -------   ------- -------
TRANSFER TO RESERVES          100     6,449   6,549       105       541     646
                          -------   -------  -------  -------   ------- -------

RETURN PER 
ORDINARY SHARE              16.74p   243.08p 259.82p    21.14p    22.34p  43.48p
                          -------   -------  -------  -------   ------- -------

                          --------------------------  -------------------------

The revenue column of this statement is the profit and loss account of the 
company.

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



                                                                          Page 5
Balance sheet - 5 April 2004
________________________________________________________________________________

                                                       2004          2003
                                                      £'000         £'000

FIXED ASSETS                                         
Investments:
  Listed investments                                 40,491        31,454
                                                    -------       -------

CURRENT ASSETS
Debtors                                                 923           397
Cash at bank                                            131            99
                                                    -------       -------
                                                      1,054           496

CREDITORS: amounts falling due within one year          514           538
                                                    -------       -------
NET CURRENT ASSETS (LIABILITIES)                        540           (42)
                                                    -------       -------
NET ASSETS                                           41,031        31,412
                                                    -------       -------


CAPITAL AND RESERVES
Called up share capital                                 689           636
Share premium account                                 7,296         4,279
Capital redemption reserve                               16            16
Capital reserve - unrealised                          5,796         2,295
Capital reserve - realised                           26,805        23,857
Revenue reserve                                         429           329
                                                    -------       -------
TOTAL SHAREHOLDERS' FUNDS - EQUITY                   41,031        31,412
                                                    -------       -------

NET ASSET VALUE PER ORDINARY SHARE                   1489.3p       1233.8p
                                                    -------       -------

                                                                          Page 6
Cash Flow Statement
for the year ended 5 April 2004
________________________________________________________________________________

NET CASH INFLOW FROM OPERATING ACTIVITIES
                                                       2004          2003
                                                      £'000         £'000

NET CASH INFLOW FROM OPERATING ACTIVITIES               282           230
                                                    -------       -------

TAXATION
Income tax recovered                                      -            37
                                                    -------       -------

CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payments to acquire investments                     (13,470)      (13,230)
Receipts from sale of investments                    11,082         9,243
                                                    -------       -------
                                                     (2,388)       (3,987)
                                                    -------       -------
EQUITY DIVIDENDS PAID                                  (407)         (209)
                                                    -------       -------

MANAGEMENT OF LIQUID RESOURCES
Cash paid to brokers awaiting investment               (525)        1,143
                                                    -------       -------

FINANCING 
Issue of new shares                                   3,070         2,726
                                                    -------       -------

                                                    -------       -------
INCREASE (DECREASE) IN CASH                              32           (60)
                                                    -------       -------

The financial information set out above does not constitute the company's
statutory accounts for the years ended 5 April 2004 or 2003. The financial
information for the year ended 5 April 2003 is derived from the statutory
accounts for that year which have been delivered to the Registrar of
Companies. The auditors reported on those accounts and their report was
unqualified and did not contain a statement under either Article 245 (2) or
Article 245 (3) of the Companies (Northern Ireland) Order 1986. The financial
information for the year ended 5 April 2004 has been prepared using the same
accounting policies as adopted in the company's statutory accounts for the
year ended 5 April 2003. The statutory accounts for the year ended 5 April
2004 will be finalised on the basis of the financial information presented by
the directors in this preliminary announcement and will be delivered to the
Registrar of Companies following the company's Annual General Meeting. 

Dividend 

The dividend will be paid on 9 July 2004 to shareholders on the register as
at 18 June 2004. 

For queries, please contact:

Andrew Kane or Keith Hawkins, Ernst & Young LLP     01582 643 000
Campbell Morton, Senior Independent Director        02890 763 631



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