Annual Financial Report

RNS Number : 3059V

Keystone Positive Change I.T. PLC

10 December 2021

 

Keystone Positive Change Investment Trust plc (KPC)

Legal Entity Identifier: 5493002H3JXLXLIGC563

Regulated Information Classification: Annual Financial and Audit Reports

Annual Report and Financial Statements

Further to the preliminary statement of audited annual results announced to the Stock Exchange on 26 November 2021, Keystone Positive Change Investment Trust plc ("the Company") announces that the Company's Annual Report and Financial Statements for the year ended 30 September 2021, including the Notice of Annual General Meeting, has today been posted to shareholders and submitted electronically to the National Storage Mechanism where it will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism  

It is also available on the Company page of the Baillie Gifford website at: www.keystonepositivechange.com (as is the preliminary statement of audited annual results announced by the Company on 26 November 2021).

Covid-19 coronavirus - arrangements for the Annual General Meeting (AGM)

Subject to Government measures restricting public gatherings, and related public health guidance associated with the Covid-19 pandemic, the Annual General Meeting of the Company will be held at the Institute of Directors, 116 Pall Mall, London SW1Y 5ED on Wednesday, 9 February 2022, at 1.15pm. Given the ongoing uncertainty, the Board will continue to monitor developments and may be forced to prohibit shareholders from attending in person. The Board therefore encourages all shareholders to exercise their votes at the Annual General Meeting by completing and submitting a form of proxy; and to monitor the Company's website at www.keystonepositivechange.com where any updates will be posted.  Should shareholders have questions for the Board or the Managers or any queries as to how to vote, they are welcome as always to submit them by email to [e-mail] or call 0800 917 2112. Baillie Gifford may record your call.

Responsibility Statement of the Directors in respect of the Annual Financial Report

The Directors confirm that, to the best of their knowledge:

¾ the Financial Statements set out in the Annual Report and Financial Statements, which have been prepared in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', give a true and fair view of the assets, liabilities, financial position and net return of the Company;

¾ the Strategic Report set out in the Annual Report and Financial Statements includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces (as also set out below); and

¾ the Annual Report and Financial Statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

Principal Risks relating to the Company

As explained on pages 31 and 32 of the Annual Report and Financial Statements there is an ongoing process for identifying, evaluating and managing the risks faced by the Company on a regular basis. The Directors have carried out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, regulatory compliance, solvency or liquidity. A description of these risks and how they are being managed or mitigated is set out below.

The Board considers the ongoing Covid-19 pandemic and Brexit-related factors to be matters which exacerbate existing risks, rather than discrete risks, within the context of an investment trust. Their impact is considered within the relevant risks.

Investment Strategy Risk   - pursuing an investment strategy to fulfil the Company's objective which the market perceives to be unattractive or inappropriate, or the ineffective implementation of an attractive or appropriate strategy, may lead to reduced returns for shareholders and, as a result, a decreased demand for the Company's shares. This may lead to the Company's shares trading at a widening discount to their net asset value. To mitigate this risk, the Board regularly reviews and monitors: the Company's objective and investment policy and strategy; the investment portfolio and its performance in terms of impact and shareholder returns; the level of discount/premium to net asset value at which the shares trade; and movements in the share register, and raises any matters of concern with the Managers.

Discount/Premium Risk - the price at which the Company's shares trade relative to its net asset value can change. The risk of a widening discount is that it may undermine investor confidence in the Company. To manage this risk, the Board monitors the level of discount/premium at which the shares trade and the Company has authority to buy back or issue shares when deemed by the Board to be in the best interests of the Company and its shareholders.

Financial Risk - the Company's assets consist mainly of listed securities and its principal and emerging financial risks are therefore market related and include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. An explanation of those risks and how they are managed is contained in note 19 to the Financial Statements on pages 58 to 62 of the Annual Report and Financial Statements. In order to oversee this risk, the Board considers at each meeting the composition and diversification of the portfolio by impact theme and holding size, along with sales and purchases of investments. Individual investments are discussed with the investment managers together with their general views on the various investment markets and sectors. A strategy meeting is held annually. The Board has, in particular, considered the impact of heightened market volatility during the Covid-19 pandemic. The value of the Company's investment portfolio would be affected by any impact, positively or negatively, on sterling but such impact would be partially offset by the effect of exchange movements on the Company's US$ denominated borrowings.

Gearing Risk - the Company may borrow money for investment purposes. If the investments fall in value, any borrowings will magnify the impact of this loss. If borrowing facilities are not renewed, the Company may have to sell investments to repay borrowings. The Company can also make use of derivative contracts. To mitigate this risk, all borrowings require the prior approval of the Board and gearing levels are discussed by the Board and investment managers at every meeting. Covenant levels are monitored regularly. The majority of the Company's investments are in listed securities that are readily realisable. Further information on gearing can be found on page 3 and the Glossary of Terms and Alternative Performance Measures on pages 73 and 74 of the Annual Report and Financial Statements.

Operational Risk - failure of Baillie Gifford's systems or those of other third party service providers could lead to an inability to provide accurate reporting and monitoring or a misappropriation of assets. To mitigate this risk, Baillie Gifford has a comprehensive business continuity plan which facilitates continued operation of the business in the event of a service disruption (including any disruption resulting from the Covid-19 pandemic) or major disaster. Baillie Gifford staff continued to work from home to maintain a business-as-usual service throughout the Covid-19 pandemic. Following the removal of Covid-19 restrictions by the Scottish and UK Governments, a hybrid model is now operating, with staff determining the most appropriate split between working from home and working in the office, which ensures ongoing resilience. The Audit Committee reviews Baillie Gifford's Report on Internal Controls and reports by other key third party providers are reviewed by Baillie Gifford on behalf of the Board and a summary of the key points is reported to the Audit Committee and any concerns investigated. In the year under review, the other key third party service providers have not experienced significant operational difficulties affecting their respective services to the Company.

Custody and Depositary Risk - safe custody of the Company's assets may be compromised through control failures by the Depositary, including breaches of cyber security. To mitigate this risk, the Board receives six monthly reports from the Depositary confirming safe custody of the Company's assets held by the Custodian. Cash and portfolio holdings are independently reconciled to the Custodian's records by the Managers. The Custodian's internal controls reports are reviewed by Baillie Gifford's Business Risk Department and a summary of the key points is reported to the Audit Committee and any concerns investigated.

Political and Associated Economic Risk - political change in areas in which the Company invests or may invest may increasingly have practical consequences for the Company. To mitigate this risk, developments are closely monitored and considered by the Board. Following the departure of the UK from the European Union, the Board continues to assess the potential consequences for the Company's future activities. The Board believes that the Company's global portfolio, with only 1% of the portfolio exposed to the United Kingdom, positions the Company to be suitably insulated from Brexit-related risk.

Regulatory Risk - failure to comply with applicable legal and regulatory requirements such as the tax rules for investment trust companies, the FCA Listing Rules and the Companies Act could lead to the Company being subject to tax on capital gains, suspension of the Company's Stock Exchange listing, financial penalties, or a qualified audit report. To mitigate this risk, Baillie Gifford's Business Risk, Internal Audit and Compliance Departments provide regular reports to the Audit Committee on Baillie Gifford's monitoring programmes. Major regulatory change could impose disproportionate compliance burdens on the Company. In such circumstances, representation is made to ensure that the special circumstances of investment trusts are recognised. Shareholder documents and announcements, including the Company's published Interim and Annual Report and Financial Statements, are subject to stringent review processes and procedures are in place to ensure adherence to the Transparency Directive and the Market Abuse Directive with reference to inside information.

Baillie Gifford & Co Limited

Company Secretaries

10 December 2021

 

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