Annual Financial Report

CAPITAL GEARING TRUST P.L.C 12 June 2009 REPORT AND ACCOUNTS FOR THE YEAR ENDED 5 APRIL 2009 In accordance with Listing Rule 9.6.1, two copies of the Report and Accounts for the year ended 5 April 2009, Notice of the 2009 Annual General Meeting and the related Form of Proxy have been submitted to the UK Listing Authority and are available for inspection at the UK Listing Authority's Document Viewing Facility which is situated at: Financial Services Authority 25 The North Colonnade Canary Wharf London, E14 5HS The Report and Accounts for the year ended 5 April 2009 have also been posted to shareholders and are available to view at Explanatory Note and Warning On 27 May 2009, the Company made its Preliminary Results announcement, which included a condensed set of financial statements, management reports, a summary of the principal risks and uncertainties faced, a responsibility statement and details of related party transactions. The primary purpose of this announcement is to inform the market about the publication of the Company's Report and Accounts for the year ended 5 April 2009 (the "2009 Annual Report"). The information below, which is extracted from the 2009 Annual Report, is included solely for the purpose of complying with Disclosure and Transparency Rule (DTR) 6.3.5 and the requirements it imposes on issuers as to how to make public annual financial reports. It should be read in conjunction with the Company's Preliminary Results announcement issued on 27 May 2009. Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the 2009 Annual Report. Page numbers, note references and other cross-references in the extracted information below refer to page numbers, notes and cross-references in the 2009 Annual Report. ADDITIONAL INFORMATION REQUIRED BY DISCLOSURE AND TRANSPARENCY RULE 6.3.5 In compliance with DTR 6.3.5, further details of the principal risks and uncertainties faced, extracted from note 20 to the 2009 Annual Report, are set out below. Details of the principal risks and uncertainties faced In addition to the summary of principal risks, which can be found on page 8 of the 2009 Annual Report and was included in the Company's Preliminary Results announcement issued on 27 May 2009, the 2009 Annual Report also contains within note 20 to the financial statements on pages 31 to 34, details of the risks associated with the Company's financial instruments as follows: The main risks arising from the Company's financial instruments are market price risk, interest rate risk, credit risk and currency risk. The Board regularly reviews and agrees policies for managing each of these risks and they are summarized below. Other debtors and creditors do not carry any interest and are short term in nature and accordingly are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. Market price risks Market price risk arises mainly from uncertainty about the future prices of financial instruments held. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. The Company invests in the shares of other investment companies. These companies may use borrowings or other means to gear their balance sheets which may result in returns that are more volatile than the markets in which they invest, and the market value of investment company shares may not reflect their underlying assets. To mitigate these risks the Board's investment strategy is to select investments for their fundamental value. Stock selection is therefore based on disciplined financial, market and sector analysis, with the emphasis on long term investments. An appropriate spread of investments is held in the portfolio in order to reduce both the systemic risk and the risk arising from factors specific to a country or sector. The Investment Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to consider investment strategy. A list of the main investments held by the Company is shown on pages 5 and 6. All investments are stated at bid value, which in the Directors' opinion is equal to fair value. Interest rate risk Bond and preference share yields, and as a consequence their prices, are determined by market perception as to the appropriate level of yields given the economic background. Key determinants include economic growth prospects, inflation, the Government's fiscal position, short-term interest rates and international market comparisons. The Investment Manager takes all these factors into account when making any investment decisions as well as considering the financial standing of the potential investee company. Returns from bond and preference shares are fixed at the time of purchase, as the fixed coupon payments are known, as are the final redemption proceeds. This means that if a bond is held until its redemption date, the total return achieved is unaltered from its purchase date. However, over the life of a bond the market price at any given time will depend on the market environment at that time. Therefore, a bond sold before its redemption date is likely to have a different price to its purchase level and a profit or loss may be incurred. Foreign currency risk The Company's investments in foreign currency securities are subject to the risk of currency fluctuations. The Investment Manager monitors current and forward exchange rate movement in order to mitigate this risk. Liquidity risk Liquidity risk is not considered to be significant as the Company has no bank loans or other borrowings. All liabilities are payable within one year. Credit risk In addition to interest rate risk, the Company's investment in bonds, the majority of which are government bonds, is also exposed to credit risk which reflects the ability of a borrower to meet its obligations. Generally, the higher the quality of the issue, the lower the interest rate at which the issuer can borrow money. Issuers of a lower quality will tend to have to pay more to borrow money to compensate the lender for the extra risk taken. The Investment Manager assesses the risk associated with these investments by prior financial analysis of the issuing companies as part of his normal scrutiny of prospective investments. A further credit risk is the failure of a counterparty to a transaction to discharge its obligations under that transaction which could result in a loss to the Company. TMF Nominees Limited Company Secretary 01582 439276 12 June 2009 END ---END OF MESSAGE--- This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.