The Company currently has a 5.5% debenture stock 2021 in issue for £38m together with a 4.05% private placement note for £50m, for repayment in September 2028 and a 2.99% private placement loan for £25m, for repayment in October 2047.
Liquidity and borrowings are managed with the aim of increasing returns to shareholders. The Company’s gearing range may fluctuate between 0% and 30%, based on the current balance sheet structure, with an absolute limit of 50%.
Discount management policy
The Board of Directors attach considerable importance to any premium or discount to Net Asset Value (NAV) at which the shares trade, both in absolute terms and relative to the average rating at which the UK Equity Income sector of Investment Trusts as a whole is trading. Premiums judged to be excessive will be addressed by repeated share issues, either new or from Treasury. Discounts judged to be excessive will be addressed by repeated share buybacks, for Treasury or cancellation. The Directors are prepared to be proactive in premium / discount management to minimise potential disadvantages to shareholders.
In order to avoid substantial oversupply or shortages of shares in the market the Board asks shareholders to approve resolutions which allow for the buyback of shares and their issuance which can assist in the management of the discount. Regular demand generated by monthly investment in the Savings Scheme and the use of marketing and promotional activity also assist in keeping the discount at an acceptable level. However, market sentiment is beyond the absolute control of the Portfolio Manager and Board.
Management Fee Summary
For investment management services provided pursuant to the Alternative Investment Fund Managers Directive (AIFMD), including associated risk management monitoring, a fee of 0.35% p.a, payable quarterly, based on the value of the investments (including cash) of the Company together with a fee of £125,000 p.a, plus or minus 0.005% of the value of the investments of the Company, above or below £750 million. Under a Secretarial Services agreement, the manager also receives an annual fee of £46,845. There is no performance fee.
Ongoing Charge (2017) including stated management fee
Charges to capital risk
Please note that a portion (60%) of the Company’s expenses are charged to its capital account rather than to its income, which has the effect of increasing income (which may be taxable) whilst reducing its capital to an equivalent extent. This could constrain future capital and income growth.