Half-yearly report

Chairman's Half-Year Statement

During the half-year  to 5th October 2007, Capital Gearing Trust
recorded a 0.4% increase in its net asset value per share to
2,019.4p, excluding accrued income of 10.3p. Over the same period,
the FTSE Equity Investment Instruments Index increased by 4.8%, the
FTSE All Share Index by 1.6% and the FTSE Government All Stock Index
fell by 0.2%.

In my annual report to shareholders, I commented upon the market
outlook and the increasing risks to the stability of financial
markets resulting from a combination of factors including the
continuing weakness in the US housing market, the high levels of
consumer debt, the excessive leverage of many financial institutions
and rising energy and commodity prices. Many of these concerns began
to be reflected in very volatile markets during this reporting
period.

From April until early July, leading equity markets continued to move
ahead but then succumbed to double digit percentage falls before
rallying in September. The catalyst for the correction was the much
publicised problems in the US sub prime mortgage market. In short, as
a result of easy monetary conditions, too much money had been loaned
to borrowers with poor credit ratings and with very little chance of
meeting their repayments. Through the process of financial alchemy,
many of these loans had been repackaged in off-balance sheet special
investment vehicles and sold on to a myriad of banks, leveraged hedge
funds and other financial institutions around the world. As
conditions worsened in the housing market, banks began to get
increasingly concerned about the rise in defaults and simply refused
to lend to each other. The US Federal Reserve and the European
Central Bank responded quickly by making extra liquidity available
within the banking system. In contrast, the Bank of England, worried
over the "moral hazard" of bailing out reckless lenders, did not take
action immediately but was eventually forced to intervene and offer
on-going credit facilities to Northern Rock in order to protect its
savers and mortgage customers.

Fearing that the crisis in the credit markets would spill over into
the real economy and increase the risk of a recession, the Federal
Reserve reversed its previous stance of progressive rises in interest
rates with a 1/2% cut in August. The dollar weakened further against
most currencies and to an all time low against the Euro, as a result
of this interest rate move.

Even if a US recession is avoided, there is no doubt that there will
be a marked slowdown in economic growth as past excesses are worked
through the system and consumers rein back on their spending. As a
result, top line sales growth for most US businesses and
international companies with big US interests will come under
pressure and downgrades to 2008 profits forecasts are likely.

A lot has been made of the growth in the emerging market economies
such as China, India, Russia and Brazil counter-balancing a slowdown
in the US. However, much of this decoupling argument seems to be
already reflected in both commodity and share prices which now look
to be over-extended.

As fears over economic growth become more widespread, it is likely
that investors' appetite for risk will also diminish. This should
increase the relative attractions of bonds and index linked issues,
where our Investment Manager, supported by the Board, continues to
maintain a high exposure.  During the period under review, other
changes to the portfolio were modest.  Exposure to real estate,
largely through TR Property, was reduced, though in retrospect by not
enough; a modest weighting in infrastructure and commodities,
including gold, was introduced.  Venture Capital was reduced further
as realisations continue.  In fixed interest, Swiss Franc bonds were
increased.

Turning to Board matters, the first tranche of changes to the new
Listing Rules for Closed-Ended Investment Funds came into effect in
September, with the remainder to be introduced in the first quarter
of 2008. Your Board will take the necessary actions to ensure that
these new Rules are complied with. In particular, these Rules make
changes to the requirements for the content and publication of the
investment policy. Your Board will, therefore, review this policy to
ensure that it meets the requirements of the new Rules and will also
consider if it should be revised to allow the Trust to take advantage
of the greater flexibility in its choice of investment strategies.

The Companies Act 2006 is also being implemented gradually throughout
the years 2007 to 2009. Your Board is taking advice in this regard
and will make the required changes to its corporate governance
procedures as necessary.

Following the European Court of Justice's judgement with regard to
VAT on management fees in June 2007, HM Revenue and Customs has now
accepted that investment trusts are entitled to an exemption. Your
Board will consider the practical implications with regard to tax
reclamation once a final ruling on this matter is made. Meanwhile, no
further VAT will be payable on management fees.

Finally, in accordance with the UK Listing Authority's new Disclosure
and Transparency Rules, interim management statements are now
produced. These together with the annual and half-year reports are
published on the company website, www.capitalgearingtrust.com.


Mr T R Pattison
Chairman
13 November 2007


Distribution of Investment Funds
at 5 October 2007


Distribution of Investment Funds of £56,462,000 (5 April 2007:
£56,200,000)

                                                                        5     5
                                                                  October April
                                                                     2007  2007
                                           North
                                      UK America Europe Elsewhere   Total Total
Investment Trust assets:               %       %      %         %       %     %

    Ordinary shares                 19.0     5.2    1.3       4.8    30.3  35.1
    Endowment funds                  6.7       -      -         -     6.7   6.5
    Zero dividend preference shares 18.3       -      -         -    18.3  17.6
Other assets:
    Fixed interest                   2.4       -   13.9       2.2    18.5  16.0
    Index linked                     7.5     4.2   11.4         -    23.1  18.7
    Cash                             3.1       -      -         -     3.1   6.1
                                    57.0     9.4   26.6       7.0     100   100

Major Investments of the Company
at 5 October 2007


Market value greater than £500,000

                                                               £'000
Investment Trust Ordinary Shares and Endowment Funds:
Life Offices Opportunities Trust                               2,205
North Atlantic Smaller Companies                               1,534
TR Property Investment Trust                                   1,086
Oryx International Growth Fund Limited                         1,077
Advance Developing Markets Trust                               1,023
Active Capital Trust                                             902
Allianz Dresdner Endowment Policy Trust 2009                     901
London & St Lawrence Investment Company                          857
Gresham House                                                    849
Advance UK Trust                                                 792
Close Enhanced Commodities                                       630
Gartmore Smaller Companies                                       583
Pacific Assets Trust                                             582
Barclays Global Investors Endowment Fund II Limited              542
Alpha Tiger Property Trust                                       520
F & C Private Equity 'A'                                         510
Other: 37 investments                                          6,271
                                                              20,864




Investment Trust Zero Dividend Preference Shares:
Utilico Finance                                             1,361
New Fulcrum Securities                                      1,334
Premier Utilities Trust                                     1,135
European Utilities Trust                                    1,134
JP Morgan Fleming Income & Capital                          1,040
Aberdeen Development Capital 2010                             859
Aberdeen Development Capital 2012                             855
EPIC Securities                                               810
M & G Income Investment Company                               657
JZ Equity Partners                                            650
Edinburgh New Income Trust                                    508
                                                           10,343


Major Investments of the Company
at 5 October 2007

Market value greater than £500,000 (continued)

                                                           £'000
Index-Linked Securities and Fixed Interest:
Sweden (Kingdom of) 3.5% Index Linked Bonds 2028           3,238
Treasury 2.5% Index Linked 2013                            2,351
France (Govt of) 5.5% OAT 2029                             2,311
Germany (Federal Republic) 4.75% Bonds 2028                2,111
Canada (Govt of) 4% Index Linked 2031                      1,646
Switzerland (Govt of) 2% Index Linked Bonds 2014           1,565
Germany (Federal Republic) 4% Bonds 2009                   1,383
Treasury 2.5% Index Linked 2011                            1,118
Treasury 4.25%  2011                                         975
Switzerland (Govt of) 3% Bonds 2018                          822
Treasury 2.5% Index Linked 2016                              788
Germany (Federal Republic) 4.75% Bonds 2034                  777
USA Treasury NTS 3.625% Index Linked Bonds 2028              754
Sweden (Kingdom of) 1% Bonds 2012                            751
Oest Kontrollerbank 1.8% 2010                                642
Bank Nederlandse 0.8% Bonds 2008                             629
Other: 5 investments                                       1,626
                                                          23,487

Total investments                                         54,694

Cash                                                       1,768

Total investment funds                                    56,462


Income Statement (unaudited)
for the six months ended 5 October 2007


                              (unaudited)                  (unaudited)                     (audited)
                           6 months ended               6 months ended                    Year ended
                           5 October 2007               5 October 2006                  5 April 2007

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

Gains on             -        70       70         -     1,099    1,099         -     3,417     3,417
investments
Exchange             -       373      373         -     (561)    (561)         -     (717)     (717)
gains/(losses)
Income from        444         -      444       439         -      439       926         -       926
investments
Bank interest       98         -       98        17         -       17        64         -        64

Gross Return       542       443      985       456       538      994       990     2,700     3,690

Management        (84)     (196)    (280)      (81)     (189)    (270)     (164)     (383)     (547)
expenses
Administrative
and              (131)      (29)    (160)     (112)      (34)    (146)     (250)      (76)     (326)
transaction
costs
                 (215)     (225)    (440)     (193)     (223)    (416)     (414)     (459)     (873)
Return on
ordinary           327       218      545       263       315      578       576     2,241     2,817
activities
before tax

Tax on            (38)        38        -      (26)        26        -      (54)        54         -
ordinary
activities

Return
attributable       289       256      545       237       341      578       522     2,295     2,817
to
equity
shareholders

Return per
Ordinary Share                     19.50p                       20.68p                       100.79p
(Note 2)



All revenue and capital items in the above statement derive from
continuing operations.  No operations were acquired or discontinued
in the period.

The total column of this statement is the profit and loss account of
the Company.

There were no recognised gains and losses other than the return
attributable to shareholders.

Reconciliation of Movements in Shareholders' Funds (unaudited)
for the six months ended 5 October 2007


              Called   Share    Capital    Capital  Capital Revenue  Total
                  up premium redemption  reserve -  reserve reserve
               share reserve    reserve unrealised        -
             capital                               realised
                £000    £000       £000       £000     £000    £000   £000

Balance at 6     699   8,114         16      8,692   37,881   1,174 56,576
April 2007
Exchange           -       -          -        373        -       -    373
gains
on
investments
Net gains on       -       -          -          -      341       -    341
realisation
of
investments
Net decrease       -       -          -      (271)        -       -  (271)
in
unrealised
appreciation
Transfer on        -       -          -    (1,346)    1,346       -      -
disposal of
investments
Transaction        -       -          -       (20)      (9)       -   (29)
costs
Costs              -       -          -          -    (196)       -  (196)
charged to
capital
Tax on costs       -       -          -          -       38       -     38
charged to
capital
Net revenue        -       -          -          -        -     289    289
for the
period
Total            699   8,114         16      7,428   39,401   1,463 57,121
Dividends          -       -          -          -        -   (391)  (391)
Balance at 5     699   8,114         16      7,428   39,401   1,072 56,730
October 2007


Balance Sheet (unaudited)
at 5 October 2007

                                     Unaudited   Unaudited    Audited
                                      6 months    6 months       Year
                                         ended       ended      ended
                                     5 October   5 October    5 April
                                          2007        2006       2007

                                          £000        £000       £000

Fixed Assets
Listed investments                      54,694      52,863     52,721

Current Assets
Debtors                                  2,101       1,604      3,857
Cash at bank                               127          58        228
                                         2,228       1,662      4,085
Creditors: amounts falling due           (192)       (188)      (230)
within one year

Net current assets                       2,036       1,474      3,855

Net assets                              56,730      54,337     56,576

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 - unrealised             7,428       9,301      8,692
Capital reserve - realised              39,401      35,318     37,881
Revenue reserve                          1,072         889      1,174

Total equity shareholders' funds        56,730      54,337     56,576

Net asset value per ordinary share    2,029.7p    1,944.0p   2,024.2p



The Half-Year Report for the six months ended 5 October 2007 was
approved by the Board of Directors on 13 November 2007 and signed on
its behalf by:


Mr T R Pattison
Chairman
13 November 2007




Cash Flow Statement (unaudited)
for the six months ended 5 October 2007

                              Unaudited   Unaudited           Audited
                               6 months    6 months              Year
                                  ended       ended             ended
                              5 October   5 October           5 April
                                   2007        2006              2007

                                   £000        £000              £000

Operating cash flows:
Profit before tax                   327         263               576
Expenses charged to capital       (196)       (189)             (383)
Change to accrued income and         45         102               121
sundry debtors
Change to sundry creditors         (37)        (21)                20
Cash inflow from operating          139         155               334
activities

Capital expenditure and
financial investment:
Payment to acquire              (7,734)     (5,665)          (14,037)
investments
Sales of investments              6,174       6,213            16,948

Equity dividends paid             (391)       (377)             (377)

Management of liquid
resources
Decrease/ (Increase) in           1,711       (413)           (2,785)
balance due from brokers
Financing
Issue of new shares                   -           -                 -
Increase/(decrease) in cash       (101)        (87)                83

Cash and cash equivalents:
Balance at beginning of             228         145               145
period
Net cash movement                 (101)        (87)                83
Balance at end of period            127          58               228



Notes

1. Status of financial statements
The financial information for the six months to 5 October 2007 and 5
October 2006, 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 2007 statutory accounts.

The abridged financial information for the year ended 5 April 2007
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 Article 245(2) or Article 245(3) of
the Companies (Northern Ireland) Order 1986.


2. Return 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 (2006: 2,778,009; 2007: 2,794,906).

Under FRS 22: 'Earnings per share' the Company is only permitted to
show one return per share on the Income Statement.  The revenue and
capital returns per share for the period to 5 October 2007 and 5
October 2006 and the year ended 5 April 2007 are shown
below:

                6 months to        6 months to            Year to
             5 October 2007     5 October 2006       5 April 2007


Revenue              10.34p              8.48p             18.68p
Capital               9.16p             12.20p             82.11p



3. Dividends

                      6 months to       6 months to          Year to
                   5 October 2007    5 October 2006     5 April 2007


Pence per share            14.00p            13.50p           13.50p
Total cost               £391,000          £377,000         £377,000



4. Taxation
No taxation arises because capital returns and dividend income are
not subject to Corporation Tax within an Investment Trust company and
management expenses exceeded unfranked investment income.


Statement of Directors' Responsibilities
The Directors are responsible for preparing the Half-Year Report, in
accordance with applicable law and regulations.  The Directors
confirm that to the best of their knowledge, this condensed set of
financial statements:
* have been prepared in accordance with applicable accounting
  standards, with the Statement of Recommended Practice 'Financial
  Statements of Investment Trust Companies' revised December 2005 and
  the Statement "Half - Yearly Financial Reports" produced by the
  Accounting Standards Board;
* give a true and fair view of the assets, liabilities, financial
  position and return of the Company; and
* includes a fair review of the information required by the Financial
  Services Authority's Disclosure and Transparency Rules 4.2.7R and
  4.2.8R and includes in the Chairman's Statement a description of
  the principal risks and uncertainties for the remaining six months
  of the financial year.

Details of the current Directors of Capital Gearing Trust plc can be
found at www.capitalgearingtrust.com.

By order of the Board


Mr T R Pattison
Chairman
13 November 2007

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