TIDMSIT
Sanditon Investment Trust plc
INTERIM ACCOUNTS
For the six months
to 31 December 2015
COMPANY NUMBER 09040176
Investment Objective
The Company's investment objective is to:
* Deliver absolute returns of at least 2% per annum, compounded annually, above
RPIX; and
* Be an asset diversifier for shareholders by targeting low correlation with
leading large capitalisation equity indices.
Contents
Investment Objective
Chairman's Statement 1
Investment Manager's Report 2-4
Portfolio 5
Income Statement 6-7
Statement of Financial Position 8
Statement of Changes in Equity 8
Notes to the Interim Accounts 10-12
Interim Management Report 13-15
Directors and Officers 16
Chairman's Statement
for the six months to 31 December 2015
Performance
Your Company had a disappointing six months with the net asset value closing at
99.3p which, after including the 0.45p maiden dividend paid to shareholders in
December, amounted to a loss of 3.25% over the period. Your Company's share
price closed the year at 107.4p, up 0.8% since 30 June 2015, leaving the shares
trading at an expanded premium of 8.2% to net asset value. Inflation over the
period remained becalmed with the RPIX up just 1.3% p.a. in December and
returns from the UK equity market in the second half of 2015 fell by over 3.5%
affected by sharp falls in commodity shares. The Investment Manager gives a
thorough review of performance in the report that follows.
Stake in Sanditon Asset Management
Your Company's only unlisted holding, a 20% stake in Sanditon Asset Management
(SAM), has continued to make good progress with asset gathering finishing 2015
with assets under management of just over GBP630 million, more than double the
amount at the start of the year. Approximately 35% of the assets are in hedge
fund structures. Whilst this is an encouraging start for a business which
launched its first fund in the summer of 2014, the key to SAM's future growth
will be improving the investment performance of its fund range.
In these interim accounts we continue to value the stake in SAM at cost but as
previously communicated to shareholders we have reviewed the basis of valuation
which we will use in the 30 June 2016 annual accounts. Valuing a stake in an
unlisted asset management company is as much an art as a science. After
consulting with your Company's auditor and broker and reviewing listed
companies' valuations and the valuation methodologies used by a range of
unlisted asset management companies, the Board is close to completing its
review of the valuation metrics it proposes to use for your stake in SAM. As I
said in my last report to you, the Board are keen to have a methodology which
was as simple as possible, conservative and which we hope will remain constant.
We have decided to use a simple 50/50 hybrid of a percentage of funds under
management and an adjusted after tax profit multiple, based on SAM's audited
results to 31 March 2016. Both multiples will be at significant discounts to
listed peers to reflect, inter alia, the infancy of the business, a narrow
product range, the lack of historical higher margin assets compared to peers
and a greater concentration of customers than its competitors.
We believe this approach will produce a valuation which is both conservative
but fair and we hope it is one which can remain constant, although the Board
will review the nominal multiples we decide upon annually in relation to quoted
peers.
Director
Mr. Charles Harman retired from the Board in December 2015, having taken up a
full time position with your Company's broker. I would like to take this
opportunity to thank Charles for his thoughtful insights and contribution to
the Board since launch. The Board is in the process of interviewing a
replacement non-executive director, the outcome of which will be announced in
due course.
Outlook
In my previous reports I stated that the investment environment was likely to
be challenging through 2015. So it remains. The turn in the U.S interest rate
cycle, the ongoing collapse in the price of most commodities and worrying signs
that Chinese growth is slowing very sharply have contributed to a dramatic
collapse in risk appetite as we start 2016. Quantitative easing worked in
boosting asset prices post the 2008 crash but even a modest tightening of the
monetary tiller makes it look as if preserving capital is going to be the real
challenge for all investors in 2016.
Rupert Barclay
Chairman
18 February 2016
Investment Manager's Report
for the six months to 31 December 2015
The performance of your Company's underlying assets over the second half of
2015 was disappointing. Whilst the share price held relatively stable, the net
asset value fell back to 99.3p. The loss for the half year of 3.25% was well
behind the reported inflation rate at the end of December 2015 (RPIX was 1.3%),
even if modestly ahead of the FTSE A All Share's capital return of -3.6% for
the period.
If shareholders look back at our first two reports since launch (which can be
seen on our website at www.sanditonam.com), you will see that we have been
broadly right about how generating returns from equities was likely to get a
lot more difficult for all investors. It remains our view that all investors
should be very wary of pretty much every asset class, so distorted have all
assets been by extraordinary monetary experiments undertaken by most of the
world's leading central banks. Over the 18 month period since your Company
launched, the FTSE A All Share Index has had four corrections of roughly 10%
only to bounce back to levels roughly where we started. At the end of December
2015 the index was down 4.4% since launch and I am sure shareholders will have
seen that volatility continuing at the start of 2016. We have broadly done well
in the down periods for equity markets but have given back gains into equity
rallies. This sort of volatility is not untypical towards the end of bull
markets and we are probably closer to the stage when one of these corrections
is the start of something more significant.
MSCI Europe Growth Index/MSCI Europe Value Index - normalised as of 31/01/1995
[GRAPHIC REMOVED]
Source: Bloomberg
The reason for our lagging the rallies is illustrated in the chart below which
shows the outperformance of 'growth' stocks against 'value' stocks as
represented by the MSCI indices. We have, since launch, been short of growth
stocks and our value bias is best seen by the average price earnings ratio of
our long book at December 2015 of 16.5x being not far off half the price
earnings ratio of our short book at 32.4x. Not since the TMT boom in 1999 has
growth been so highly rated relative to value and the outperformance has now
lasted for a decade, with only a brief renaissance for value in the early days
of Quantitative Easing programmes in 2009. Of course, charts like these tell
you about the past and not necessarily about the future but as a business cycle
investor we are always interested in areas of the market which have gone in a
continuous line for too long. Cycles, be they economic or investment, usually
correct such linear extensions and we are minded to be patient with our current
value tilt.
Market Review
The second half of 2016 was dominated by two events - the continuing collapse
in commodity prices with oil, for example, falling from $50 to $30 over the
period and the first increase in interest rates in the U.S. since the crisis of
2008. The collapse in oil was a continuation of a trend that has now lasted
five years with OPEC's latest meeting failing or unwilling to make production
cuts to offset the increase in supply coming from US shale and the re-emergence
of Iran on the world stage. The collapse in commodities may cause many
corporate casualties, which is clearly what Saudi Arabia is hoping for in its
battle with US shale. Time will tell whether over-leveraged companies can
survive a lower for longer commodity environment - especially in US shale where
we understand some low quality crude grades are now selling for less than $2 a
barrel. As we wrote last time, falling prices always lead to a collapse in
capital spending and if that is exacerbated by corporate casualties tightening
supply in the longer term, prices are likely to stabilise and then increase. We
know there are plenty of believers predicting the end of the fossil fuel age,
but it strikes us that the one thing ensuring that is an unlikely outcome is
low fossil fuel prices.
The Federal Reserve eventually raised rates in December having been scared off
in October by weak markets and weak data from China. What changed in China
between October and December to convince the Fed to move is not entirely clear
to this investor, but we are generally of the view that the move was better
late than never. That is not to say that it might not have a more significant
impact on both the economy and markets than one would normally expect from a
modest first increase in rates. We fully expect it to. The removal of zero
rates should change investors reckless chasing of all other risk assets and we
rather expect within the market it may have an impact on the chart above.
A modest tightening in US monetary policy is coming at a time of significant
market tightening in the credit markets and at the same time as a huge
unwinding of foreign currency reserves from China, Saudi Arabia and many other
commodity surplus countries which are now fighting serious deteriorations in
their budgetary positions. It will be interesting to see whether the Fed feel
able to push through further interest rate increases as Ms. Yellen tries to
normalise rates. We suspect one more might be enough to push the US decisively
into a downturn. The markets are bound to test her and other policy makers'
nerves in the months ahead. It seems very safe to predict that our own
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February 18, 2016 02:00 ET (07:00 GMT)
Governor's nerves are not up to much. The MPC look incapable of making a
decision and it looks assured we will go into the next downturn with no
conventional monetary levers to pull.
Portfolio Structure and Performance
The shape of your portfolio was little changed over the six months, although we
increased our exposure to 'growth' shorts to -23.5% net from -15% last time and
increased our exposure to defensives to +14.5% from +9%.
Our overall net position ended the period at +6%, (almost market neutral and
little changed over the previous period end) but we did use the FTSE futures
through the period as a quick way to adjust our net position into sharp falls
and rallies with our net exposure range through the period being +18% to -16%.
Our futures activity added 1.25% to NAV (positive contributions from both a
short position in the middle of the period and a long position towards the end)
helping to mitigate what was generally a poor portfolio shape for the period
under review.
Over the period our long book lost 1.9% and our short book lost 0.55%,
representing returns on capital employed of -3.6% and -1.1% respectively. Our
biggest losses came from being long commodities (-2.7%) where we were
demonstrably too early removing our shorts in this space earlier in the year.
Unsurprisingly, given the continued sharp falls in commodity prices, the oil &
gas and the mining sectors were the worst two in the market with falls of 15%
and 40% respectively. We were particularly hit by BHP Billiton's exposure to
the Samarco mining disaster in Brazil which cost 1% and the continuing
precipitous collapse in Anglo-American which cost 1.1%. We bought the shares
almost 80% off their peak and they have more than halved again as investors
have taken fright of anything with financial leverage. It is incontrovertible
that the more a share price falls, the higher the debt/equity ratio becomes and
the more dilutive an equity raise will be. In Anglo's case their debt
maturities of over 6 years should have given them some breathing space but the
market is in a fear phase and Anglo, like many others, have left it rather late
to raise equity, so the market is fearful it will have to sell good assets at
the wrong stage of the cycle. We do not deny that trying to time the bottom of
a commodity cycle is a perilous task and we have been too early so far,
although we did not get carried away with the size of our positions.
Our short position to 'growth' stocks was also costly in the second half (-2.1%
to NAV). The only positive came from Ocado which fell by 32% adding 1.1%, which
was gratifying as we wrote about it last time. Shorts in Just Eat and
Moneysupermarket, amongst others, were less successful. All our shorts are
highly rated, have seen insider selling and have business models which seem to
us could be as easily disrupted as they have disrupted others. They are also
generally asset light so when things do go wrong share price falls could be
precipitate as they were in the aftermath of the TMT boom. It remains the
highest conviction view in your Company at present.
We expect the outlook for equity markets to remain very tricky so are unlikely
to change our low net exposure approach at present. However, like Pavlov's dog,
we are becoming conditioned to expect the market to have sharp rallies after
steep falls and our current approach of adding to our net exposure into falls
always runs the risk that one of the falls turns into something more dramatic.
We are certainly not reassured that Central bankers can continue to support
markets like they have since 2009.
2016 will see several electoral events (Scottish elections, US presidential
elections and a possible Brexit referendum) which combined with continuing
competitive currency devaluations and significant geopolitical tensions in the
Middle East are likely to result in a volatile year for markets. It is likely
that capital preservation will remain our goal in the near-term.
Sanditon Asset Management Limited
18 February 2016
Portfolio
as at 31 December 2015
Country Breakdown (% of NAV)*
Long Short Net Gross
United Kingdom 42.2 -35.4 6.8 77.6
France 0.0 -3.0 -3.0 3.0
Germany 0.0 -4.7 -4.7 4.7
Italy 0.0 -4.2 -4.2 4.2
Denmark 1.0 0.0 1.0 1.0
Netherlands 4.5 0.0 4.5 4.5
_______ _______ _______ _______
47.7 -47.3 0.4 95.0
====== ====== ====== ======
Business Cycle Groupings (% of NAV)*
Long Short Net Gross
Commodity 4.5 0.0 4.5 4.5
Cyclicals
Consumer 8.5 -0.9 7.6 9.4
Cyclicals
Industrial 4.6 -15.5 -10.9 20.1
Cyclicals
Growth 1.4 -24.9 -23.5 26.3
Financial 9.0 -0.9 8.1 9.9
Growth Defensives 14.8 -3.4 11.4 18.2
Value Defensives 4.8 -1.7 3.1 6.5
Top 20 Long Positions (% of NAV)**
%
TM Sanditon UK Select Fund 10.39
FTSE 100 Future Mar'16 5.00
Babcock 4.81
RELX 4.52
Ashmore Group 4.86
Melrose Industries 3.66
Diageo 2.81
HSBC 2.16
Mothercare 2.15
Man Group 2.00
WPP 1.89
BT 1.81
BHP Billiton 1.68
Kingfisher 1.66
Ophir Energy 1.64
GlaxoSmithKline 1.52
WM Morrison Supermarkets 1.49
Equiniti Group 1.43
Spirent Communication 1.43
Capita 1.22
_______
Total 58.13
======
Total number of positions** 49
======
*?Excluding holdings in Sanditon Asset Management, TM Sanditon UK Select and
Future.
**?Including holdings in Sanditon Asset Management, TM Sanditon UK Select and
Future.
Income Statement
for the six months to 31 December 2015
(Unaudited) (Unaudited) (Audited)
Six months to 31 Period from 14 May 2014 For the period from 14
December 2015 to 31 December 2014 May 2014 to 30 June
2015
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
(Losses)/
gains on
investments
held at fair
value
through - (1,740) (1,740) - 226 226 - 2,177 2,177
profit or
loss
Income 431 - 431 299 - 299 571 - 571
Management 2 (48) (144) (192) (48) (145) (193) (95) (286) (381)
fee
Other (137) - (137) (115) - (115) (220) - (220)
expenses
_______ _______ _______ _______ _______ _______ _______ _______ _______
Return 246 (1,884) (1,638) 136 81 217 256 1,891 2,147
before
finance
costs &
taxation
Finance - - - - - - - - -
costs
_______ _______ _______ _______ _______ _______ _______ _______ _______
Return on 246 (1,884) (1,638) 136 81 217 256 1,891 2,147
ordinary
activities
before
taxation
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Taxation on (3) - (3) - - - (11) - (11)
ordinary
activities
_______ _______ _______ _______ _______ _______ _______ _______ _______
Return on
ordinary
activities
after
taxation
attributable 243 (1,884) (1,641) 136 81 217 245 1,891 2,136
to
shareholders
====== ====== ====== ====== ====== ====== ====== ====== ======
Return per 0.49 (3.77) (3.28) 0.27 0.16 0.43 0.49 3.78 4.27
Ordinary
Share
(pence):
====== ====== ====== ====== ====== ====== ====== ====== ======
The notes on pages 10 to 12 form part of these accounts.
The total column of this statement is the profit and loss account of the
Company. All the revenue and capital items in the above statement derive from
continuing operations.
There is no other comprehensive income.
Statement of Financial Position
as at 31 December 2015
(Unaudited) (Unaudited) (Audited)
31 December 31 December 30 June
2015 2014 2015
Notes GBP000 GBP000 GBP000
Fixed assets
Investments at fair 4 11,106 13,085 12,772
value through profit
or loss
_______ _______ _______
Current assets
Debtors 44 20 25
Amounts due in 1,853 1,472 1,157
respect of contracts
for difference
Collateral paid in 8,072 9,432 11,844
respect of contracts
for difference
UK Treasury Bills 21,483 22,484 21,481
Cash and short term 14,677 5,756 8,457
deposits
_______ _______ _______
46,129 39,164 42,964
Creditors - amounts
falling due within
one year
Creditors (200) (121) (133)
Amounts payable in (7,393) (2,539) (4,095)
respect of contracts
for difference
_______ _______ _______
Creditors (7,593) (2,660) (4,228)
_______ _______ _______
Net current assets 38,536 36,504 38,736
Total assets less 49,642 49,589 51,508
current liabilities
_______ _______ _______
Net assets 49,642 49,589 51,508
_______ _______ _______
Capital and reserves
Share capital 500 500 500
Share premium 48,872 48,872 48,872
Capital reserve 7 81 1,891
Revenue reserve 263 136 245
_______ _______ _______
Total shareholders' 49,642 49,589 51,508
funds
====== ====== ======
Net asset value per 99.28 99.18 103.02
share - Ordinary
Share (pence)
====== ====== ======
The notes on pages 10 to 12 form part of these accounts.
Statement of Changes in Equity
Six months to 31 December 2015 (unaudited)
Share
Share Premium Capital Revenue
Capital Account Reserve Reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 30 500 48,872 1,891 245 51,508
June 2015
Return on _______ _______ _______ _______ _______
ordinary
activities
after taxation - - (1,884) 243 (1,641)
Ordinary - - - (225) (225)
dividends paid
_______ _______ _______ _______ _______
Balance at 31 500 48,872 7 263 49,642
December 2015
====== ====== ====== ====== ======
For the period
from 14 May
2014 to 31
December 2014
(unaudited)
Share
Share Premium Capital Revenue
Capital Account Reserve Reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 14 - - - - -
May 2014
_______ _______ _______ _______ _______
Return on
ordinary
activities
after taxation - - 81 136 217
Issue of 500 49,500 - - 50,000
Ordinary
Shares
IPO costs - (628) - - (628)
_______ _______ _______ _______ _______
Balance at 31 500 48,872 81 136 49,589
December 2014
====== ====== ====== ====== ======
For the period
from 14 May
2014 to 30
June 2015
(audited)
Share
Share Premium Capital Revenue
Capital Account Reserve Reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 14 - - - - -
May 2014
_______ _______ _______ _______ _______
Return on
ordinary
activities
after taxation - - 1,891 245 2,136
Issue of 500 49,500 - - 50,000
Ordinary
Shares
IPO costs - (628) - - (628)
_______ _______ _______ _______ _______
Balance at 30 500 48,872 1,891 245 51,508
June 2015
====== ====== ====== ====== ======
The notes on pages 10 to 12 form part of these accounts.
Notes to the Interim Accounts
1. ACCOUNTING POLICIES
A summary of the principal accounting policies is set out below:
(a) Basis of accounting
The financial statements have been prepared in accordance with the applicable
UK Accounting Standards, being FRS102 -The Financial Reporting Standard - and
with the Statement of Recommended Practice "Financial Statements of Investment
Trust Companies and Venture Capital Trusts" (issued in November 2014). The
half-year accounts are prepared in accordance with Financial Reporting Standard
104 - Interim Financial Reporting.
Previously, the financial statements were prepared in accordance with UK
Generally Accepted Accounting Practice ("UK GAAP"). The transition to FRS did
not result in any significant changes to the accounting policies.
The financial information for the period ended 30 June 2015 included in this
report, has been taken from the Company's full accounts, as restated to comply
with FRS from the transition date 1 July 2015. Restatement of opening balances
relating to equity values, assets and liabilities and profits and losses of the
Company between UK GAAP as previously reported and under FRS as restated have
not been presented as there have been no required changes to the reported
amounts. Therefore restatement tables have not been prepared for any of the
primary statements.
They have also been prepared on the assumption that approval as an investment
trust will continue to be granted. The financial statements have been prepared
on a going concern basis.
2. INVESTMENT MANAGEMENT FEE
(Unaudited) (Unaudited) (Audited)
Six months ended Period ended Period ended
31 December 31 December 30 June
2015 2014 2015
GBP000 GBP000 GBP000
Basic fee:
25% charged to 48 48 95
revenue
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75% charged to 144 145 286
capital
_______ _______ _______
192 193 381
====== ====== ======
Performance fee
charged 100% to
capital:
Performance fee - - -
accrual
_______ _______ _______
- - -
====== ====== ======
The Company's investment manager is Sanditon Asset Management Limited. With
effect from Admission, the Manager shall be entitled to receive from the
Company in respect of its services provided under the Management Agreement, a
management fee accrued daily and payable monthly in arrears calculated at the
rate of one-twelfth of 0.75 per cent. per calendar month of the Company's Net
Asset Value. In accordance with the Directors' policy on the allocation of
expenses between income and capital, in each financial period 75 per cent. of
the management fee payable is expected to be charged to capital and the
remaining 25 per cent. to income.
The Manager is also entitled to a performance fee which equals 15 per cent. of
the amount by which the Reference Amount at the end of a Performance Period
exceeds the higher of (a) the Hurdle (the "Hurdle" means the Initial Gross
Proceeds adjusted for the total amount of any dividends paid or payable)
increased by RPIX plus 2 per cent. per annum, compounded annually (on a
pro-rata basis where applicable) from Admission and (b) the High Watermark (the
"High Watermark" means, as at the end of the relevant Performance Period, the
highest of (i) the Reference Amount of the previous Performance Period, (ii)
the Reference Amount of the most recent Performance Period in respect of which
a performance fee was paid; and (iii) the Initial Gross Proceeds; and in each
case adjusted for any repurchases by the Company of Ordinary Shares or any
dividends paid or payable during the relevant Performance Period multiplied by
the time weighted average of the total number of Shares in issue during that
Performance Period).
The first "Performance Period" is the period from 27 June 2014 (the date of
Admission to the London Stock Exchange) to the end of the Company's third
accounting period and each subsequent Performance Period begins immediately
after the previous Performance Period and ends at the end of the Company's
third accounting period thereafter; provided that where the Management
Agreement is terminated the date of such termination shall be the end of the
then current Performance Period.
The "Reference Amount" means, in respect of a given Performance Period, the
lower of (i) the Net Asset Value on the last Business Day of a Performance
Period and (ii) the average of the closing mid-market prices for the five
Business Days ending on the last Business Day of a Performance Period of an
Ordinary Share as derived from the Official List of the UK Listing Authority,
multiplied by the number of Ordinary Shares in issue on the last Business Day
of that Performance Period; and in each case adjusted for the total amount of
any dividends paid or payable during that Performance Period and any accrual
for unpaid performance fees.
3. DIVIDEND
No interim dividend has been declared in respect of the six months to 31
December 2015.
Consideration will be given to an annual dividend in respect of the year ended
30 June 2016 at a Board meeting to be held in September 2016. An announcement
will be made shortly after that meeting.
4. INVESTMENTS
(Unaudited) (Unaudited) (Audited)
Six months ended Period ended Period ended
31 December 31 December 30 June
2015 2014 2015
GBP000 GBP000 GBP000
Investments listed on
a recognised
investment exchange:
UK 10,906 12,006 11,059
Overseas - 879 1,513
Unquoted investments:
UK 200 200 200
_______ _______ _______
11,106 13,085 12,772
====== ====== ======
5. SHARE CAPITAL
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited)
31 December 31 December 31 December 31 December 30 June 2015 30 June
2015 2015 2014 2014 2015
No. of Shares GBP000 No. of Shares GBP000 No. of Shares GBP000
Allotted,
issued &
fully
paid:
Ordinary 50,000,000 500 50,000,000 500 50,000,000 500
Shares of
GBP0.01
______________ _______ ______________ _______ ______________ _______
50,000,000 500 50,000,000 500 50,000,000 500
============ ====== ============ ====== ============ ======
Interim Management Report
six months ended 31 December 2015
General
The Company was incorporated in England and Wales as a public limited Company
on 14 May 2014 with registered number 09040176. On 3 June 2014 the Company
announced it had published a prospectus in connection with an initial public
offering of up to 50 million ordinary shares at 100 pence per ordinary share.
Following the closing of the placing and offer for subscription for ordinary
shares the Board of the Company announced on 24 June 2014 that an aggregate of
50,000,000 ordinary shares in the Company ("Ordinary Shares") would be issued
at a price of GBP1 per Ordinary Share. 13,494,900 Ordinary Shares were issued
pursuant to the offer and 36,505,100 were issued under the placing. The fund
raise was oversubscribed. The shares were admitted to the Official List on 27
June 2014 and dealings commenced on that day.
Investment Objective
The Company's investment objective is to:
* Deliver absolute returns of at least 2 per cent per annum, compounded
annually, above RPIX; and
* Be an asset diversifier for Shareholders by targeting low correlation with
leading large capitalisation equity indices.
Alternative Investment Fund Managers Directive ("AIFMD")
In order to comply with AIFMD, the Company has appointed Sanditon Asset
Management Limited ("SAM") to act as its Alternative Investment Fund Manager
("AIFM"). SAM has been approved as a Small Authorised UK Alternative Investment
Fund Manager by the UK's Financial Conduct Authority.
Going Concern
The Directors believe that, having considered the Company's investment
objectives, risk management policies, capital management policies and
procedures, nature of the portfolio and expenditure projections, the Company
has adequate resources and an appropriate financial structure in place to
continue in operational existence for the foreseeable future. The assets of the
Company consist mainly of securities which are readily realisable. For these
reasons, they consider that there is reasonable evidence to continue to adopt
the going concern basis in preparing the accounts.
As at 31 December 2015 the Company had net assets of GBP49.6 million and it has
sufficient cash balances to meet current obligations as they fall due. The
Company continues to meet day-to-day liquidity needs through its cash
resources.
The Directors have a reasonable expectation that the Company will continue in
existence for the foreseeable future.
Principal risks and uncertainties
The key risks to the Company fall broadly under the following categories:
* Investment and strategy
The Board will regularly review the investment mandate and long-term investment
strategy in relation to the market and economic conditions. The Board also
regularly monitors the Company's investment performance against the objective
to deliver at least 2% above inflation and its compliance with the investment
guidelines.
* Accounting, legal and regulatory
In order to qualify as an investment trust, the Company must comply with the
provisions contained in Section 1158 of the Corporation Taxes Act 2010. A
breach of Section 1158 in an accounting period could lead to the Company being
subject to corporation tax on gains realised in that accounting period. Section
1158 qualification criteria are continually monitored by the Investment Manager
and the results reported to the Board at its regular meetings. The Company must
also comply with the Companies Act and the UKLA Listing Rules. The Board relies
on the services of the administrator, Northern Trust Global Services Limited
and its professional advisers to ensure compliance with the Companies Act and
the UKLA Listing Rules.
* Loss of investment team or Investment Manager
A sudden departure of the Investment Manager or several members of the
investment management team could result in a short-term deterioration in
investment performance.
* Discount
A disproportionate widening of the discount relative to the Company's peers
could result in loss of value for shareholders. A potential buy-back of shares
would be in accordance with London Stock Exchange rules and at the Board's
discretion.
* Operational
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Sanditon Investment (LSE:SIT)
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From Jul 2023 to Jul 2024
