Capital Gearing Trust plcAnnual General Meeting

July 2018

For Professional Investors Only

2018 was the 36th anniversary since Peter Spiller started managing Capital Gearing Trust

CGT

Source: Morningstar

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

CGT

MSCI UK

15% CAGR

11% CAGR

CGT TR 45% 49% 29% 35% 47% 3% 30% 2% 19% 18% 30% 18% 5% 20% 13% 17% 4% 10% 11% 10% 3% 22% 15% 15% 5% 7% 0% 18% 8% 10% 11% (2)% 5% 3% 13% 0%

2

Capital Gearing Trust – NAV Total Return History (Rebased) Apr 1982 to Jun 2018

Capital Gearing Trust has the dual objective of preserving shareholders real wealth and to achieve absolute returns

3

Capital Gearing Trust

Source: Morningstar

Capital Gearing Trust – NAV Performance Since 2000

Update

0

100

200

300

400

500

Capital Gearing NAV MSCI UK UK RPI

Fund Reporting

5

There are two key pillars to CG Asset Management’s investment strategy

Investment Strategy

Long Only Absolute Return

Equity Alpha Asset Allocation

Aim:

Strategy:

Execution:

Capital protection

Multi asset portfolio construction

Broad investment across bond markets

Superior returns on risk exposure

Value focused specialist equity investing

Focus on listed closed ended funds,

ETFs and other collective vehicles

Downside Protection Superior Equity Returns

1 2

Disciplined investment in the closed ended fund universe offers opportunities for alpha, however discounts today are very narrow

6

Equity Alpha

Source: Bloomberg Portfolio Analytics

Risk Assets include funds invested in equities, property, infrastructure, private equity, hedge funds and loans.

CGT – Risk Asset Only –Three Year Returns (%)

1

CGT – Risk Asset Only – Returns and Risk

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Jun-1

5

Aug-

15

Oct

-15

Dec-

15

Feb-1

6

Apr-

16

Jun-1

6

Aug-

16

Oct

-16

Dec-

16

Feb-1

7

Apr-

17

Jun-1

7

Aug-

17

Oct

-17

Dec-

17

Feb-1

8

Apr-

18

CGT Risk Assets MSCI UK All Cap

Investment Trust Index

CGT Risk

Assets

MSCI All Share

Investment

Trust Index

0%

10%

20%

30%

40%

50%

60%

1.5 2.0 2.5 3.0 3.5

3 Y

ear

Tota

l R

etu

rn3 Year Standard Deviation

Disciplined investment in the closed ended fund universe offers opportunities for alpha, however discounts today are very narrow

7

Equity Alpha

Source: Numis

Investment Trust Discounts – 2005 to 2018

1

-30

-25

-20

-15

-10

-5

0

5

10

15Q

4 05

Q2

06

Q4

06

Q2

07

Q4

07

Q2

08

Q4

08

Q2

09

Q4

09

Q2

10

Q3

10

Q2

11

Q3

11

Q2

12

Q3

12

Q2

13

Q3

13

Q1

14

Q3

14

Q1

15

Q3

15

Q4

15

Q3

16

Q4

16

Q3

17

Q4

17

Pre

miu

m(+

) /

Dis

cou

nt

(-)

%

Equity Funds Alternative Funds

How liquid are the risk assets compared to their history?

8

Source: CG Asset Management Analysis and Estimates. Based on

0%

10%

20%

30%

40%

2014 2015 2016 2017 2018

% Of Risk Assets Capable Of Liquidation In 1 Day Based on 10% Market Participation

Equity Alpha

1

With prospective returns low, duration is short, waiting for more attractive opportunities to present themselves

CGT Asset Allocation – June 2018 – By Asset Class

9

Source: CG Asset Management Analysis and Estimates, Northern Trust, Bloomberg Portfolio Analytics, Morningstar

Asset Allocation

2

Equities

Property

Alternatives

Gold

Index Linked

Bonds

Conventional

Bonds

Cash & T-

Bills

0%

20%

40%

60%

80%

100%

7%

14%

3%

-1%

0%

3%

0%

Equities

Property

Alternatives

Gold

Index Linked

Bonds

Conventional

Bonds

Cash & T-Bills

CGT 12 Month Asset Class Return – to June 2018

Summary 12M Return

CGT

UK MSCI All Cap

UK RPI

3%

8%

3%

Over the last three year the defensive asset allocation has lowered returns but also significantly lowered risk

CGT 3 year total return (Jun 2015 = 100)

10

Source: Bloomberg, Northern Trust, Morningstar

Asset Allocation

CGT 3 year total return & Max Drawdown

2

CGT

MSCI UK

UK Gilt Index

0%

5%

10%

15%

20%

25%

30%

35%

2.0% 4.0% 6.0% 8.0% 10.0%3 Y

ear

Tota

l R

etu

rn3 Year Maximum Drawdown

80

90

100

110

120

130

140

Jul-15

Sep-1

5

Nov-

15

Jan-1

6

Mar

-16

May

-16

Jul-16

Sep-1

6

Nov-

16

Jan-1

7

Mar

-17

May

-17

Jul-17

Sep-1

7

Nov-

17

Jan-1

8

Mar

-18

May

-18

Capital Gearing NAV MSCI UK UK RPI

Strongest returns were generated by property holdings, and the weakest by disappointing special situation investment trusts

Contributors and Detractors – 12m to Jun 2018

11

Source: CG Asset Management Analysis and Estimates, Northern Trust, Bloomberg

Asset Allocation

Largest Positions -12 Months to Jun 2018

Asset Return Av

Weight

Cont’

Equities % % %

North Atlantic Smallers 12 2.8 0.3

Vanguard FTSE Japan 9 2.8 0.2

Vonovia 22 2.8 0.6

Deutsche Wohnen 27 1.9 0.5

Residential Secured Income -3 1.8 0.0

Bonds

UK Index Linked 2019 0 6.6 0.0

US TIPS 2026 0 4.4 0.0

US TIPS 2025 0 3.9 0.0

UK Index Linked 2025 0 2.3 0.0

Swedish Index Linked 2022 -5 1.9 -0.1

Zeros/Credit

NB Private Equity Zero 5 1.7 0.1

JZ Capital Partners Zero 5 1.2 0.1

Asset Return Av

Weight

Cont’

Top Contributors % % %

Vonovia 22 2.8 0.6

Deutsche Wohnen 27 1.9 0.5

Unite Group 37 1.1 0.4

North Atlantic Smallers 12 2.8 0.3

Segro 27 0.5 0.2

LEG Immobilien 18 0.9 0.2

Largest Detractors

Ground Rents Income Fund -18 1.1 -0.2

EPE Special Opportunities -50 0.3 -0.2

Swedish Index Linked 22 -5 1.9 -0.1

Candover -17 0.3 -0.1

US TIPS 2020 -0.4 1.1 0.0

Residential Secure Income -3 1.8 0.0

Macro Outlook

CGAM’s asset allocation is built on two simple principles

13

Asset Allocation

Asset returns mean revert over a long horizon

Market timing is possible over a long horizon

therefore

Valuations today suggest prospective returns will be modest and risk is elevated

14

S&P 10 Year Return Model – 1982 to 2018

Source: CG Asset Management Analysis, Shiller CAPE, Bloomberg

10 Year Index Linked Bond Yields – 1982 to 2018

Return Prospects

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

US Real Yield UK Real Yield ImpliedDividend + Earnings Growth + Valuation Change

15

GlobalDebt

The key feature of recent years has been dramatic build of debt, which has continued since the financial crisis

0

20

40

60

80

100

120

140

160

180

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

USD

Tri

llion

GDP Debt

Global Non-financial Debt Stock vs. Global GDP ($ tn)

Source: BIS, CGAM Analysis

Unemployment is low, global growth is strong and there are signs that wages are starting to pick-up

16

Global Economy

Unemployment Rate – US, UK & Germany (%)

Source: Bloomberg (LHS), IMF (RHS)

Real GDP Growth –World (%)

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

20

18f

An

nu

al R

eal G

DP

Gro

wth

(%

)

0

2

4

6

8

10

12

14

1992

1993

1995

1997

1998

2000

2002

2003

2005

2007

2008

2010

2012

2013

2015

2017

Unem

plo

yment

Rat

e (

%)

Germany UK US

Forecast for 2018 of 3.7%

in line with average since

1992 of 3.6%

0

5,000

10,000

15,000

20,000

25,000

Jul-08

Nov-

08

Mar

-09

Jul-09

Nov-

09

Mar

-10

Jul-10

Nov-

10

Mar

-11

Jul-11

Nov-

11

Mar

-12

Jul-12

Nov-

12

Mar

-13

Jul-13

Nov-

13

Mar

-14

Jul-14

Nov-

14

Mar

-15

Jul-15

Nov-

15

Mar

-16

Jul-16

Nov-

16

Mar

-17

Jul-17

Nov-

17

Mar

-18

Jul-18

Nov-

18

Mar

-19

Jul-19

Nov-

19

Mar

-20

$ b

n

PBOC ECB BoJ Fed SNB BoE

17

Monetary Policy

Yet globally interest rates are at emergency levels and monetary policy remains extreme

Source: PBOC, ECB, BOJ, Federal Reserve, SNB, BoE, Bloomberg, CGAM Analysis & Estimates

CGAM

Forecasts

Major Central Bank Balance Sheets –Total Assets (USD bn)

The New York Fed’s UIG has proved to be a good leading indicator of inflation and points to a firming inflationary environment

18

US Core CPI vs. FRBNY Underlying Inflation Gauge (Advanced 15 Months)

US Inflation

Source: BLS, New York Fed, CGAM Analysis

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

% C

hn

g YO

Y

Core CPI FRBNY Underlying Inflation Gauge (15 Months Advanced)

Today’s situation is reminiscent of the late 1960s in the US with a combination of full employment and rising fiscal deficits

19

US CPI and U3 Unemployment (%)

History

Source: BLS, US Office of Management & Budget, Federal Reserve Bank of St Louis

Federal Budget Balance (% GDP)

0

1

2

3

4

5

6

7

8

Jan

-60

Jul-

60

Jan

-61

Jul-

61

Jan

-62

Jul-

62

Jan

-63

Jul-

63

Jan

-64

Jul-

64

Jan

-65

Jul-

65

Jan

-66

Jul-

66

Jan

-67

Jul-

67

Jan

-68

Jul-

68

Jan

-69

Jul-

69

Jan

-70

Jul-

70

%

CPI (YOY) Unemployment -3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970

%

20

Historically few assets have provided protection against rising inflation

Asset Performance

Source: Credit Suisse Global Investment Returns Yearbook 2012, Dimson and Marsh

-74%

-62%

-52%

-33%

-20%

26%

-100% -50% 0% 50%

Bonds

Bills

Equities

Real Estate

Housing

Gold

Regression of annual real return vs. same year inflation

across 19 developed countries

“Equities are at best a partial hedge against inflation;

their nominal returns tend to be higher during inflation,

but not by a large enough margin to ensure that real

returns completely resist inflation.”

Dimson and Marsh, February 2012

Credit Suisse Year Book

“For a variety of reasons reviewed here, inflation tends

to raise investors’ required real rate of return on

equity and to lower real capital income for tax-related

reasons. As a result there is a strong negative

correlation between inflation and real and nominal stock

prices.”

John Tatom, November 2011

Inflation and Asset Prices

Real Return vs. Inflation 1900-2011

Historically gold has performed well during financial repression, however it now stands at a premium to its long term value

Gold

Source: Bloomberg, CGAM analysis

21

30

60

120

240

480

960

1,920

1971

1973

1974

1976

1978

1979

1981

1983

1984

1986

1988

1989

1991

1993

1994

1996

1998

1999

2001

2003

2004

2006

2008

2009

2011

2013

2014

2016

Gold Price - Indexed to 100 August 1973 CPI - Indexed to 100 August 1973

Gold Price & CPI Indexed to 100 in August 1973 (Log Scale)

Capital Gearing Trust has the dual objective of preserving shareholders real wealth and to achieve absolute returns

22

Capital Gearing Trust

Source: Morningstar

Capital Gearing Trust – NAV Performance Since 2000

Update

0

100

200

300

400

500

Capital Gearing NAV MSCI UK UK RPI

DISCLAIMER

This presentation is issued and intended for professional investors and eligible market

counterparties only. Performance figures have been calculated by CG Asset Management Ltd

based on information provided by Morningstar and Northern Trust International Fund

Administration Services (Ireland) Ltd. CG Asset Management Ltd has an obligation to point out

that the value of all investments and the income there from can go down as well as up and the

investor may not get back the amount invested. Past performance is not necessarily a guide to

future performance.

CGAM IS AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT

AUTHORITY

REGISTERED IN ENGLAND NO 4056163

23