Data as at: 27/03/2024

Gearing

Gearing policy

The Board may amend the Company’s borrowing policy from time to time, although the Board may not increase or decrease the Company’s maximum borrowing ratio without the prior consent of the Investment Manager. This borrowing policy does not apply to and does not limit the leverage inherent in the use of derivative instruments.

Borrowing limits

The Board has adopted a policy pursuant to which the borrowing ratio of the Company, defi ned for this purpose as the ratio of the aggregate principal amount of all borrowed money (including margin loans) to total assets (pursuant to the latest annual or semi-annual Financial Statements of the Company), shall in no event exceed 50% at the time of incurrence of any borrowing or its drawdown.

Ways in which investment companies can magnify income and capital returns, but which can also magnify losses.

At its simplest, gearing means borrowing money to buy more assets in the hope the company makes enough profit to pay back the debt and interest and leave something extra for shareholders.

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how gearing works table

However, if the investment portfolio doesn’t perform well, gearing can increase losses. The more an investment company gears, the higher the risk.

Investment companies can usually borrow at lower rates of interest than you’d get as an individual. They also have flexible ways to borrow – for example they might get an ordinary bank loan or, for split capital investment companies, issue different classes of share.

Not all investment companies use gearing, and most use relatively low levels of gearing.

An indication of the maximum and minimum levels that the company would expect to be geared in normal market conditions.

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