The Edinburgh Investment Trust Plc Annual Financial Report 2022 - Flipbook - Page 86
84 / OTHER INFORMATION FOR SHAREHOLDERS / THE EDINBURGH INVESTMENT TRUST PLC
Glossary of Terms and Alternative
Performance Measures / continued
NET GEARING OR NET CASH (APM)
Net gearing reflects the amount of net borrowings invested, i.e. borrowings less cash and cash equivalents (incl. investments in
money market funds). It is based on net borrowings as a percentage of net assets. Net cash reflects the net exposure to cash and cash
equivalents, as a percentage of net assets, after any offset against total borrowings.
Page
2022
£’000
18,204
–
Debenture stock – debt at market value (note 15)
68
102,734
109,041
Less: cash and cash equivalents
55
Unsecured Senior Loan Notes – debt at market value (note 15)
Net borrowings
Net asset value – debt at market value (note 15)
68
Net gearing
2021
£’000
(68,728)
(32,570)
a
52,210
76,471
b
1,174,773
1,081,813
c = a/b
4.4%
7.1%
LEVERAGE
Leverage, for the purposes of the Alternative Investment Fund Managers Directive (AIFMD), is not synonymous with gearing as
defined above. In addition to borrowings, it encompasses anything that increases the Company’s exposure, including foreign currency
and exposure gained through derivatives. Leverage expresses the Company’s exposure as a ratio of the Company’s net asset value.
Accordingly, if a Company’s exposure was equal to its net assets it would have leverage of 100%. Two methods of calculating such
exposure are set out in the AIFMD, gross and commitment. Under the gross method, exposure represents the aggregate of all the
Company’s exposures other than cash balances held in base currency and without any offsetting. The commitment method takes into
account hedging and other netting arrangements designed to limit risk, offsetting them against the underlying exposure.
NET ASSET VALUE (NAV)
Also described as shareholders’ funds, the NAV is the value of total assets less liabilities. Liabilities for this purpose include current and
long-term liabilities. The NAV per share is calculated by dividing the net asset value by the number of ordinary shares in issue (excluding
shares held in treasury). For accounting purposes assets are valued at fair (usually market) value and liabilities are valued at amortised
cost (their repayment – often nominal – value). An alternative, NAV with debt at market value, values long term liabilities at their market
(fair) value and is shown in note 15 on page 68.
ONGOING CHARGES RATIO (APM)
The ongoing administrative costs of operating the Company are encapsulated in the ongoing charges ratio, which is calculated in
accordance with guidance issued by the AIC. The calculation incorporates charges allocated to capital in the financial statements as well
as those allocated to revenue, but excludes non-recurring costs, transaction costs of investments, finance costs, taxation, and the costs
of buying back or issuing shares. The ongoing charges ratio is the aggregate of these costs expressed as a percentage of the daily average
net asset value reported in the year.
Page
2022
£’000
2021
£’000
Investment management fee
61
5,040
3,387
Other expenses
62
986
827
(34)
(38)
Less: costs in relation to custody dealing
charges and one off legal costs
Total recurring expenses
a
5,992
4,176
Average daily net assets
b
1,157,887
974,141
Ongoing charges ratio %
c = a/b
0.52%
0.43%
Investment management fee waiver
Ongoing charges ratio (pro-forma) %
d
–
750
c = (a+d)/b
0.52%
0.51%