Data as at: 22/04/2024

Gearing

Gearing policy

The Company employs gearing with the objective of improving shareholder returns. Debt is typically secured at the asset level and potentially at the Company level with or without a charge over some or all of the Company’s assets, depending on the optimal structure for the Company and having consideration to key metrics including lender diversity, cost of debt, debt type and maturity profiles.

Borrowing limits

The Board continues to keep the level of borrowings under review with the aggregate borrowings always subject to the absolute maximum set at 50% of gross assets, calculated at the time of drawdown for a property purchase. Despite a target gearing level of 35%, the actual level of gearing may fluctuate over the Company’s life as and when new assets are acquired or whilst short term asset management initiatives are being undertaken. Where borrowings are secured against a group of assets, such group of assets shall not exceed 25% of Gross Assets in order to ensure that investment risk remains suitably spread.

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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