Principal risks

The principal risks and uncertainties facing the business of The Scottish Investment Trust PLC (the Company) are as follows:

 

Principal risks

Mitigation

Strategic

Risks in relation to the ongoing attractiveness and sustainability of the Company’s investment objective placing pressure on the share price discount to net asset value per share.

 

The Board considers strategy and the business model on a periodic basis, including the discount levels and the marketing plans for the business.

Investment portfolio and performance

The holding of securities and investing activities involve certain inherent risks, principally in relation to market risk.

A contrarian investment approach is a distinctive style that may deviate from comparator indices and peer group performance over discrete periods.

 

Company performance is monitored at each Board meeting, including investment performance.

The Manager seeks to maintain a diversified portfolio.

The contrarian investment approach is explained in our marketing content and through meetings with media and the investor community.

Financial

The Company’s normal business activities are exposed to market risk (including market price risk, foreign currency risk and interest rate risk), liquidity risk, credit risk and counterparty risk.

 

The Company holds a portfolio which is well diversified across industrial and geographical areas. Most assets are held in listed securities and are therefore readily realisable. All debenture stocks and secured bonds are at fixed rates. Only approved counterparties are used and within agreed limits.

Operational

Failure of the Company’s or third party service providers’ systems could result in a misappropriation of assets or an inability to report to shareholders. There could be a possible impact on reputation if any such events were to occur. The Company is also exposed to the operational risk that one or more of its service providers may not provide the required level of service.

The threat of cyber attack has become more prevalent across all sectors.

 

The Company monitors the performance of its service providers, whether internal (S.I.T Savings Limited is the Company’s AIFM) or external (custody and depositary, company secretarial, administration and accounting services) through regular meetings and review of available internal control reports.

Tax, legal and regulatory

The Company is required to comply with a range of legislation and regulation and may be impacted by changes in the external environment.

 

The Company employs internal and external resource to ensure compliance with relevant legislation and regulation and the Board receives periodic reports on any issues and potential changes.