Data as at: 22/02/2024

Gearing

Gearing policy

The Group’s gearing policy is set out in the Investment Policy section of the Report of the Directors. The Group is not subject to externally imposed regulatory capital requirements but does have banking covenants on which it monitors and reports on a quarterly basis. Included in these covenants are requirements to monitor loan to value ratios which is calculated as the amount of outstanding debt divided by the market value of the properties secured.

Borrowing limits

Gearing, calculated as borrowings as a percentage of the Group’s gross assets, may not exceed 65% The Board intends that borrowings of the Group at the time of draw down will not exceed 25% of the Total Assets of the Group (the Company is lowly geared). This low gearing limit means that the Company should, barring exceptional circumstances, have adequate resources to service and repay its debt. The Board receives recommendations on gearing levels from the Investment Manager and is responsible for setting the gearing range within which the Investment Manager may operate.

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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