Keystone Positive Change PLC Year-end Report

RNS Number : 9819H

Keystone Positive Change I.T. PLC

30 November 2022

 

RNS Announcement

Keystone Positive Change Investment Trust plc (KPC)

Regulated Information Classification: Annual Financial and Audit Reports

Legal Entity Identifier: 5493002H3JXLXLIGC563

Results for the year to 30 September 2022

Over the year to 30 September 2022, the Company's net asset value per share (NAV) total return was (35.2%) compared to a total return of (3.7%) for the Comparative Index (in sterling terms). The share price total return for the same period was (43.3%)  as the discount widened from 0.9% to 13.2%.

Past performance is not a guide to future performance. Total return information is sourced from Baillie Gifford/ Refinitiv. See disclaimer at the end of this announcement. For a definition of terms see Glossary of Terms and Alternative Performance Measures at the end of this announcement.

Keystone Positive Change Investment Trust plc ('Keystone' or 'the Company') aims to generate long term capital growth with the aim of the NAV total return exceeding that of the MSCI AC World Index in sterling terms by at least 2% per annum over rolling five year periods; and to contribute towards a more sustainable and inclusive world by investing in the equities of companies whose products or services make a positive social or environmental impact. The performance target stated is in no way guaranteed. Capital growth takes priority over income and dividends. Keystone is managed by Baillie Gifford & Co, an independent fund management group, which has around £230 billion under management and advice.

Keystone is a listed UK company. The value of its shares and any income from them can fall as well as rise and investors may not get back the amount invested. The Company is listed on the London Stock Exchange and is not authorised or regulated by the Financial Conduct Authority. You can find up to date performance information about Keystone at keystonepositivechange.com ‡ . Past performance is not a guide to future performance. See disclaimer at the end of this announcement.

‡ Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.

30 November 2022

For further information please contact:

Alex Blake, Baillie Gifford & Co

Tel: [phone]

Jonathan Atkins, Four Communications

Tel: [phone] or 07872 495396

The following is the Preliminary Results Announcement for the year to 30 September 2022 which was approved by the Board on 29 November 2022.

Chair's Statement

The past year has been characterised by turmoil in the financial markets, high inflation and rising interest rates. Much of it has been due to the challenging measures introduced globally in response to the pandemic and the effects of the war in Ukraine. Keystone Positive Change ('KPC') has two objectives of equal importance: to generate attractive long-term returns and to invest in companies instrumental in contributing to solutions in areas such as healthcare, education, social inclusion and the environment. The Positive Change team have an investment horizon of five years and beyond for these structural themes to play out. Notwithstanding the extremely disappointing financial performance of the Company during the year under review, your Board remains confident in the long-term investment and strategic rationale behind the positive change strategy and the team implementing it. As you would expect, your Board has closely monitored the Manager's rationale and belief in the operational strength of the portfolio companies, ensuring that the process includes regular challenge of the initial theses for investment. We are confident that the high conviction portfolio will come good.

Performance

Over the year to 30 September 2022, the Company's net asset value ('NAV') total return (in sterling terms) was -35.2% compared to -3.7% for the comparative index, the MSCI All Country World Index. The  Managers' Report on pages 4 to 6 provides further detail on the main contributors to performance over the period.

The share price total return was -43.3%, as the discount widened from 0.9% to 13.2% reflecting a widening of discounts across investment companies generally, and exacerbated by a broader deterioration in sentiment towards growth style mandates. The Company has the power to buy back its own shares and will do so when the Board considers that such activity will benefit ongoing shareholders. The Board does not consider that buying back shares during periods when market sentiment is universally negative will improve the Company's rating. Shrinking the asset base, thereby increasing the ongoing charges ratio and reducing the shares' liquidity, may however be detrimental. The Board will, of course, be mindful of the range of options at its disposal to address, where possible, the discount at which the Company's shares trade relative to its NAV.

Impact

The Company is focused on listed and private companies for whom solving a social or environmental challenge is core to their business. Amid a backdrop of uncertainty we believe that now, more than ever, investing for positive change is important and full of opportunity. We aim to invest in exceptional companies whose products, services and behaviour generate meaningful improvements. Companies held in the portfolio must be positioned to make a significant contribution to solutions in one of four impact areas:

-  Social Inclusion and Education;

-  Environment and Resources;

-  Healthcare and Quality of Life; and

-  Base of the Pyramid (addressing the needs of the poorest four billion people in the world).

The Manager's impact analysis is based on robust, bottom-up research that is independent from, but complementary to, the investment analysis. Two senior impact analysts form part of the decision-making team, with additional impact analysts providing support. Further details of the Manager's approach are provided on the following pages.

In August 2022, the Company published its inaugural KPC Impact Report on the contribution that all companies within the portfolio have made towards a more sustainable and inclusive world, through monitoring and measuring the impact that their products and services are having on society and the environment. The Impact Report is available on the Company's website. 

Gearing

The Company started the financial year with net gearing of 4.6%, having drawn down £10 million of a £25 million multi-currency revolving credit facility provided by The Royal Bank of Scotland International Limited. At 30 September 2022, net gearing stood at 10.6%, the Company having drawn down an additional £5 million during December 2021 and dollar strength increasing the value of the US$ element of the loan in sterling terms. The Company is expected to continue to maintain a modest level of structural gearing, which should enhance shareholder returns over the long term.

Costs

Under the new management arrangements, the annual management fee is 0.70% on the first £100 million of market capitalisation, 0.65% on the next £150 million of market capitalisation and 0.55% on the remaining market capitalisation. Baillie Gifford waived their management fee for the first six months following their appointment in February 2021.

The ongoing charges for the year to 30 September 2022 were 0.90%. Last year, the ongoing charges were 0.51% (and would have been 0.82% without Baillie Gifford's fee waiver). The Board expects the Company to grow, and benefit increasingly from the lower rate of management fee at the upper tier as it does so. The higher base fee recognises the Manager's investment of time and resource in pursuit of the Company's twin objectives, and the Board is confident that long-term performance, in financial and impact terms, will justify the level of ongoing charges in the meantime. No performance fee is payable under the new management arrangements.

Dividend

KPC's investment objective is to generate returns from the Company's portfolio, predominantly from capital growth.  A change to the Company's dividend policy was approved at the Annual General Meeting ('AGM') in February 2022, such that no interim dividends will be paid, and any annual dividends will be paid only to the extent needed for the Company to maintain its investment trust status. In accordance with the dividend policy, the Board is recommending a final dividend of 0.4p per share. This will be proposed for shareholders' approval at the AGM to be held on 8 February 2023 and, if approved, will be paid on 15 February 2023 to shareholders on the register at close of business on 20 January 2023.

The Board

Andrew Fleming was appointed as a Director on 1 March 2022 to replace John Wood, who retired at the last AGM John's wise counsel will be missed, but Andrew brings considerable fund management, investment trust and impact investment experience to the Board. The Company is compliant with the gender representation requirements of the FCA's recently published new rules on diversity and inclusion on company boards, which target that at least 40% of directors will be women and at least one of the senior positions on each board will be held by a woman. The most recent recruitment process had a shortlist that comprised 50% women and 33% candidates of a non-white ethnic background.

Annual General Meeting

We anticipate welcoming shareholders to the AGM in London on 8 February 2023. Notwithstanding the relaxation of government controls, Covid-19 related rules might tighten at short notice in the event of a winter resurgence, restricting the meeting to the minimum number. To ensure your votes are counted in that eventuality, I would ask shareholders to submit their votes by proxy before the applicable deadline on 6 February 2023 and to submit any questions for the Board or Manager in advance by email to [e-mail] or by calling 0800 917 2112 (Baillie Gifford may record your call). This will not impede your subsequent attendance in person should you wish to be present, assuming regulations permit. Any changes to the AGM arrangements will be announced to the London Stock Exchange regulatory news service and made available at keystonepositivechange.com .

Outlook

The Positive Change team's investment horizon of five years and beyond allows the team to focus on long-term structural trends which present compelling investment opportunities in support of a sustainable and inclusive world. The Board supports the team in making full use of the unique features of the investment trust structure, including investing in both public and private companies. We are grateful for the continued support of our long-term shareholders and we are delighted to welcome our many new shareholders.

Karen Brade

Chair

29 November 2022

Past performance is not a guide to future performance. Total return information is sourced from Baillie Gifford/ Refinitiv. See disclaimer at the end of this announcement. For a definition of terms used see Glossary of Terms and Alternative Performance Measures at the end of this announcement.

Managers' Report

The past year has been an unsettling one in several ways. Our hearts go out to those whose lives have been upended by conflicts. While geopolitical events have dominated the headlines, the pace of climate change has also accelerated, as evidenced by heatwaves in India and Europe and the devastating flooding in Pakistan. This challenging backdrop, combined with supply chain disruptions and higher inflation and interest rates, created a much tougher environment for equity investors, especially those focusing on growth equities. Over the past twelve months, the Company's NAV total return was minus 35.2%, compared to minus 3.7% for the benchmark MSCI All Country World Index (in sterling terms).

The short-term underperformance is understandably painful for the Company's shareholders. Stock selection and gearing were the dominant drivers of negative returns over the year. The most notable detractor to performance was Moderna, a company that played a critical role during the Covid-19 pandemic.  However, somewhat contrary to broader sentiment and while not wanting to downplay the phenomenal progress and societal impact the company has achieved during the pandemic, it is the broader potential of Moderna's technology which underpins the long-term investment case.  Messenger RNA ('mRNA') technology has potential far beyond the Covid-19 vaccine, spanning respiratory diseases more broadly (such as flu and RSV), latent diseases (such as HIV), rare diseases and in the treatment of cancer, to name a few. ASML, the leading manufacturer of lithography equipment which performs a critical role in the manufacturing of semiconductors, was also a negative contributor. Despite macro-economic concerns that drive uncertainty for its customers, including inflation, consumer confidence and the risk of a recession, the overall demand for its systems remains robust given the expanding use cases for semiconductors from automotive to healthcare applications, and from cloud computing to AI. The management team remain confident in the long-term opportunity for ASML to play an important role in the continuation of Moore's Law and are investing in capacity to meet the growing demand for its products.

In contrast to ASML and Moderna, where the operational progress has been positive, there are some companies where the operational performance has been more challenging and consequently contributed to those companies underperforming.  One example would be the single cell tooling business, 10x Genomics, which has experienced weaker than expected revenue growth due to some short-term challenges related to Covid restrictions and supply chains.  However, longer term, we are enthused by the opportunity for 10x Genomics to help inform our understanding of biology on a more granular level.

Stocks that contributed positively to performance include Alnylam, a biotechnology company developing a new class of highly innovative drugs. The company now has five drugs approved and a healthy pipeline. Tesla was another positive contributor to performance over the twelve month period, having delivered strong operational results, exceeding our expectations on the level of profitability it has been able to reach, which is particularly notable given the inflationary environment and challenging supply chains.

Actions over the past year:

Philosophy - unchanged

When we were appointed the Managers of Keystone Positive Change in February 2021, we outlined our ambition; one based on investing in innovative, growth companies whose products and services are helping to address global sustainability challenges. Despite the short-term volatility since then, we remain absolutely committed to this vision. Events of the past year have shown the necessity of transitioning towards a prosperous, sustainable, and inclusive world. At the same time, technological progress is enabling innovative solutions towards global challenges. As the late Hans Rosling reminded us in his excellent book, Factfulness, "Step-by-step, year-by-year, the world is improving." With this sound advice in mind, we continued to make progress towards our vision.

Portfolio

While near-term market volatility does not alter our long-term investment philosophy, it would be unwise to remain ignorant of its effects. We conducted portfolio analysis on exposures to inflation, interest rates, and geopolitical risks, and reperformed in-depth, fundamental research on individual companies. Throughout the year, we reviewed a number of holdings whose share price had fallen significantly. We distinguished between companies facing operational challenges and those performing well operationally but whose share price declines, in our view, were mostly attributable to changes in market sentiment. We used this as a prompt to move on from companies where we had lost conviction and redeployed capital towards companies where the divergence between share price and operating performance created an attractive opportunity for additions.

As an example of the former, we sold our holding in Beyond Meat. While we still believe in the plant-based meat market's long-term prospects, and admire the ambition of Ethan Brown, Beyond Meat's founder and CEO, a number of operational missteps reduced our assessment of its probability of success. We also sold out of Alibaba, where the combination of regulatory intervention and internal issues dampened our belief that the company can continue to grow at a rapid pace and drive positive change in Chinese society.

In contrast, we added to our holding in MercadoLibre, which has strengthened its competitive position in the Latin American ecommerce market and made impressive progress in building out its financial services offerings. We also took the opportunity to add to the position in Sartorius, the leading provider of consumable products that support the biotech industry, owing to what we believe was a dislocation between the share price relative to the company's operational progress and long-term opportunity. Several levers for growth underpin that opportunity, including growing use of biologics and increasing penetration of single-use products.  As mentioned above, 10x Genomics experienced some operational challenges that we believe are short term in nature. This provided an opportunity to add to the position, reflecting our optimism over the long term for 10x to play an important role in improving our understanding of health and disease as more labs buy and use its equipment that enables more granular analysis of cells. 

These are three examples among a handful of portfolio additions.  We have also continued our hunt for new portfolio holdings and made two new investments in public companies over the period:  Nu, the disruptive digital bank in Latin America; and Duolingo, the educational technology company focused on language learning, as discussed in the Interim Report.

These additions and purchases were funded by selling companies where we have lost conviction as noted above; by reducing positions in companies where we felt the valuation was more stretching such as Tesla and heat-pump manufacturer, Nibe; and by some small reductions to larger positions such as Moderna and ASML.

As identified in last year's Managers' Report, a key attraction of the Company's closed-ended structure is its ability to invest in private companies. This enables the provision of primary capital to companies, helping them to invest in technology, hire talent, and scale their businesses. While private market activity slowed this year, we continue to find interesting companies. A good example is Climeworks, which we invested in earlier this year. Climeworks' direct air capture (DAC) technology helps to remove CO2 from ambient air. In addition to drastic emissions reductions, carbon removal solutions such as direct air capture and storage are essential for removing historic and unavoidable CO2 emissions from the air. The company's first facility in Iceland can capture 3,600 tons of CO2 annually after accounting for its own emissions, and its next plant will have ten times the capacity. Even that will be a drop in the ocean compared to the gigatons of removal that is estimated to be required annually. This shows the size of the challenge that remains, but also the opportunity for Climeworks if it can succeed. After investing in Climeworks, the Company now invests in four private companies, accounting for 6.7% of net assets.

Pipeline

We continue to build our knowledge of thematically-relevant topics that excite us over the long term, including climate technology, food and agriculture, and financial inclusion. To complement desk research, members of the team travelled to Brazil to meet companies including Nu and MercadoLibre, attended a conference in San Diego focusing on carbon negative technologies, studied renewable energy infrastructure in Orkney, and visited companies in the U.S., Europe, and Japan. After a hiatus on travel owing to Covid-19, we were pleased to be engaging in person with companies again and learning first-hand about new technologies and innovation. It reinforces  enthusiasm for the future, both in terms of investment opportunities and global development prospects.

Positive Change

Over the past year, investee companies continued to make positive contributions towards a sustainable future. In August 2022, Ørsted's Hornsea 2 Offshore Windfarm became fully operational. The 1.3 GW project is the world's largest offshore windfarm, generating enough renewable electricity to power 1.4 million homes. In 2021, Ørsted's renewable energy generation helped to avoid 15.1 million metric tons of CO2 emissions. Thanks to the work of companies such as  Tesla, Umicore, and Northvolt, electrification continues to gather pace. In 2021, Tesla delivered almost 1 million electric vehicles and its products and services have enabled customers to avoid 8.4 million metric tons of CO2 emissions. On social impact, mobile and digital technologies are improving access to essential services such as  education and finance. As of December 2021, Nu had 41 million monthly active users of its financial services, including 5.6 million people accessing a bank account or credit card for the first time. Both Coursera and Duolingo provided educational content to millions of users across the world. In expanding offshore wind capacity, increasing the number of electric vehicles sold or the number of monthly active users, these businesses are also growing their financial metrics and deepening their competitive advantages.

The Company's Impact Report for 2021 contains more detailed information on the social and environmental impact of all investee companies' products and services. In addition, the Positive Conversations Report for 2021 covers our engagement with portfolio companies and our assessments of Environmental, Social, and Governance factors. Both reports can be found on the Company's website, and we would welcome your feedback, as this is a new and rapidly-evolving area of reporting and we are eager to understand, and meet, shareholders' expectations.

Outlook: 

Against the concerning geopolitical backdrop and complex global challenges, we remain committed to our long-term philosophy of investing in innovative companies that are supporting the transition towards a more prosperous, sustainable, and inclusive future. Our confidence is built on the existence of structural trends such as the advancement of science and technology, continued deflation of renewable energy, and the growing awareness of sustainability issues. These trends provide exciting opportunities for innovative and mission-driven companies. By investing in a subset of them, which are led by outstanding management teams and have the potential to build durable competitive advantages, we believe that the Company can generate attractive long-term investment returns for its shareholders and contribute towards a better future. 

Kate Fox

Lee Qian

29 November 2022

Past performance is not a guide to future performance.

Total return information is sourced from Baillie Gifford/Refinitiv. See disclaimer at the end of this announcement.

For a definition of terms used see Glossary of Terms and Alternative Performance Measures at the end of this announcement.

Investing for Positive Change

Delivering Attractive Long-Term Investment Returns

We aim to deliver attractive investment returns, which we define as meaningful outperformance (by 2% annually net of fees) of the MSCI ACWI over rolling five-year periods.

Our emphasis on growth and competitive advantage means that we expect the delivered returns of the portfolio to come primarily from revenue and profit growth at the companies we hold, rather than from changes in valuation. In broad terms, we look for companies with the potential to double in value over a five year period, while still having significant growth prospects thereafter.

Patience is required to tolerate short-term volatility that we embrace in order to generate superior long-term financial returns. We expect our portfolio of 30-60 listed and private companies to differ significantly from the benchmark index, many of whose major constituents are likely to suffer from precisely the challenges that we outline in our four Impact Themes below, and whose very scale makes it difficult for them to innovate. While measuring portfolio returns relative to a benchmark index can be a helpful way to monitor the output of our investment process, we do not consider the benchmark when constructing the portfolio.

Delivering a Positive Impact

We look for listed and private companies for whom delivering a positive impact is core to their business; whose products and services represent a significant improvement to the status quo; and who conduct business with honesty and integrity. We look for areas where there is a meaningful, and widely-accepted, opportunity gap between the current situation and the desirable social outcome, and for companies that are proactively narrowing that gap through their business activities. To this end, we have identified four Impact Themes.

Similar to financial returns, making a meaningful positive impact requires patience and perseverance. We are not looking for quick fixes, but genuine improvements which often take years, if not decades, of hard work. We believe a period of five to ten years is a useful timeframe for assessing companies' social and environmental contributions. We expect the four Impact Themes to evolve over time, hopefully as challenges are resolved. We review the themes on a regular basis.

Four Impact Themes

Social Inclusion and Education

Income and wealth inequalities have risen significantly over the past 30 years and now threaten our acceptance of capitalism as a force for good. We look for companies that are building a more inclusive society through their products and services. We also look for companies that are improving the quality or accessibility of education as we believe that the diffusion of skills and knowledge is one of the best tools to reduce inequality.

Environment and Resource Needs

The environmental impact of human activities is increasing, and basic resources such as food and water are becoming scarcer. Throughout history, climate change and famine have repeatedly limited the development of nations. Left unresolved, those problems could jeopardise international relations, destabilise our society and damage our planet. We are looking for companies that are improving our resource efficiency and reducing the environmental impact of our economic activities.

Healthcare and Quality of Life

We are living longer but we are not necessarily healthier. We are richer but we are not necessarily happier. The stress of modern life is damaging our physical and mental health. We are searching for companies that are actively improving the quality of life in developed and developing countries.

Base of the Pyramid

Economic growth has led to improvements in living conditions in many parts of the world. However, the fruits of human ingenuity have not filtered down to everyone. We are looking for companies that are addressing the basic and aspirational needs of the billions of people at the bottom of the global income ladder.

Investment Process

Analysing Investment and Impact Using a Robust and Consistent Process

Both our objectives are of equal importance. To reflect this, we have established a six-stage process which allows both the impact and investment objectives to be considered equally in the key parts of our process: research, portfolio construction and reporting.

1.  What we look for - A vast opportunity set for long-term stock pickers

The universe of companies in which we can invest is vast. We make no attempt to cover the whole universe. Neither do we use quantitative screens to cut it down to a manageable size. Instead, we rely on a clear and consistent set of filters to focus our attention on the relatively small number of businesses that might be of interest to us. These filters flow naturally from our dual objectives, and focus on: (1) the company's potential to address one of our four thematic global challenges; (2) its potential to build a profitably growing business.

2.  Idea generation - Ideas naturally flow from our dual objectives. Curiosity is key

We are bottom-up stock pickers who let our curiosity and enthusiasm drive our research agenda. Idea generation takes place throughout the investment process: when we meet companies; through attendance at conferences; during team meetings; and through general reading. Our long-term time horizon, focus on fundamental in-house research and desire to take a different perspective means we use diverse sources of information, from independent research to engaging with academics and industry experts. Sharing a common objective with the rest of our investment colleagues (seeking high quality growth companies), we are fortunate in being able to leverage the intellectual resources of our wider investment department of around a hundred investors, including regional and global teams and sector specialists, and our ESG team.

3.  Fundamental company research: eight questions - Consistent framework focuses on dual objectives

Our company analysis consists of two stages: fundamental company research and impact analysis.

Our fundamental company research involves an Investment Manager examining eight questions relating to the quality of the business and its growth prospects as well as the impact the company is expected to deliver:

1.  What change is the company driving?

2.  What is the scale of the growth opportunity and how might it evolve over time?

3.  What is required to unlock the opportunity and how quickly can the company capitalise on it?

4.  What is the competitive edge and how might it develop?

5.  What attributes of the culture, governance, and management attitude will support or detract from the company's ability to capitalise on the opportunity?

6.  What are the financial characteristics today and how might they evolve?

7.  What might the company look like and what might its valuation be in 5 to 10 years?

8.  What will it take to be an outlier?

To assess the growth potential and quality of a business, we consider the company's broad opportunity set, the strength and durability of the competitive advantage, the financial characteristics and management attitudes. To assess the expected impact of a holding, we consider the challenge the company is tackling, its product characteristics and business practices.

Valuation analysis focuses on whether we think the long-term growth prospects of a company are under-appreciated. Here, we use a range of measures for valuing companies and remain very much focused on the potential for a business in five years' time. If a company has backing from an Investment Manager, it will be taken forward to the second stage of research: the Impact Analysis.

4.  Impact analysis - Independent and disciplined

The second stage of research focuses specifically on the impact potential of a business. This is carried out by one of the Positive Change Team's Impact Analysts. Analysing impact is complex and can be highly subjective. Our impact analysis is carried out independent of the investment case using a rigorous, qualitative framework that is based upon three factors: (1) Intent - Forward looking strategy that supports the positive outcome? Backed up by actions, commitments and structures? Uses influence to drive solutions in the wider industry? (2) Product impact - Relationship between the product and the impact? Breadth and depth of impact? Materiality in the context of the business and the problem? Linkage with the United Nations Sustainable Development Goals (UN SDGs)? (3) Business practices - Addresses impacts across the full value chain? Transparent in its actions? Leads the industry in business practices?

This analysis is holistic: we recognise that there is no perfect company and under each of these three factors we also consider areas of controversy, the negative consequences of operations and a company's awareness of those issues.

Monitoring and reporting impact is important: as one of our dual objectives it is as important as monitoring and reporting financial performance. The monitoring of impact is ongoing and is interwoven with our monitoring of the investment case for a company. We look at company reports and disclosures and are engaged with management, we monitor significant news, always with a focus on the long term and the key milestones we expect a company to reach in order to deliver impact.

5.  Portfolio construction -Two Elements - Investment and impact considered in tandem

The Positive Change team meet regularly to discuss new ideas and the level of conviction in existing holdings. The team's conviction in both the impact and investment potential of a company is taken into consideration when making portfolio decisions and sizing positions. Investment decisions are made by the five decision makers: three Investment Managers: Kate Fox, Lee Qian and Thaiha Nguyen, and two Senior Impact Analysts: Michelle O'Keeffe and Edward Whitten. Every stock must have the backing of an Investment Manager and at least one Senior Impact Analyst. The group heavily relies on and respects the opinions of team members to help inform individual views. We think this process allows us to harness diverse perspectives while also retaining conviction and accountability of individual decision-making and reducing personal bias.

We are active investors and our portfolio will differ significantly from the benchmark, many of whose major constituents are likely to face headwinds from the challenges we identify. In order for a company to enter our portfolio, it must meet both of our objectives - there are no compromises.

With a long-term investment horizon, portfolio turnover will be low, we expect it to be below 20% per annum over the long term. We will carefully monitor the companies in which we invest through ongoing research and engagement with management teams. It is inevitable that businesses will have setbacks and we are happy to own companies through periods of short-term operational weakness. However, if longer-term concerns develop that are not addressed by management, if we detect a deterioration in the fundamental investment case, for either element of our dual objectives, we will sell a holding.

6.  Monitoring, engagement and reporting - Rigorous, ongoing and with a long-term focus

Once we have taken a holding, we continue to monitor operational performance and progress towards delivering positive change. In doing so we engage with management teams on an ongoing basis. We report on how the strategy has delivered on both its financial objective and its impact objective.

The impact different companies make is not always quantifiable, nor should it be. Furthermore, comparing impact across companies with very different activities is problematic. And, where impact is more easily quantifiable, it is not always measured and disclosed in a uniform way. Despite its challenges, we have developed a robust approach using our in depth knowledge of companies, and we report annually, though we always remain focused on our five-year-plus time horizon.

6.1 Company Impact

Consistent with our bottom-up, fundamental investment approach, we identify bespoke metrics or milestones for each company that will help us monitor its progress in delivering positive change. We represent this impact through 'The Positive Chain', a model which demonstrates how each company is contributing to positive outcomes and impacts through its inputs, activities and outputs. We depend primarily on company reported data but do not  limit ourselves to current levels of disclosure: where there are gaps we will engage with companies and request more information.

Company engagement more broadly is ongoing, and we will discuss with management teams both areas where we would like to see improvements as well as areas where companies excel.

6.2 Portfolio Contribution to United Nations Sustainable Development goals

At an overall portfolio level, we also link the product impact for each company to the 'United Nations' Sustainable Development Goals' ('UN SDG'). The UN developed the SDGs in 2015 as part of an ambitious programme which aims to end poverty in all forms, to build peaceful and inclusive societies, to protect human rights and promote gender equality, and to ensure the protection of the planet and its natural resources by the end of 2030. With 17 goals split into 169 specific targets covering a broad range of topics, we do not  intend the portfolio to address every single goal. However, mapping the contribution of individual holdings to these goals via the underlying 169 targets allows us to assess the contribution of the portfolio as a whole using an independent framework.

The companies in the portfolio take different approaches and we hope to gain insight into what works best and to share our learnings across holdings. For those companies that report how their business is aligned with the 'SDGs', we take this into consideration when making the linkage to the goals, but we are selective in order to be as consistent as possible across all holdings.

Investment Portfolio by Impact Theme as at 30 September 2022

Social Inclusion and Education	Value £'000	%	Environment and Resource Needs	Value £'000	%	Healthcare and Quality of Life	Value £'000	%	Base of the Pyramid	Value £'000	%
ASML	10,057	6.6	Deere	8,941	5.8	Moderna	9,480	6.2	Bank Rakyat Indonesia	6,262	4.1
MercadoLibre	8,652	5.7	Tesla	6,503	4.3	Dexcom	7,743	5.1
TSMC	8,126	5.3	Novozymes	5,355	3.5	Alnylam Pharmaceuticals	7,522	4.9	Safaricom	4,249	2.8
Duolingo	2,783	1.8	Xylem	5,312	3.5
PsiQuantum	1,687	1.1	Ørsted	5,237	3.4	Illumina	5,251	3.4
Nu Holdings	1,652	1.1	Northvolt AB	4,710	3.1	Abiomed	4,676	3.1
Coursera	1,550	1.0	Umicore	4,593	3.0	Sartorius	4,129	2.7
Shopify	1,443	0.9	NIBE Industrier	3,434	2.2	M3	3,635	2.4
FDM	1,128	0.7	Ecolab	2,927	1.9	Chr. Hansen	3,140	2.1
			Climeworks	2,056	1.3	Discovery Holdings	2,999	2.0
			Spiber	736	0.5	AbCellera Biologics	2,083	1.4
			Joby Aviation	388	0.3	10x Genomics	1,744	1.1
						Teladoc	1,446	0.9
						Peloton Interactive	289	0.2
						Berkeley Lights	149	0.1
	37,078	24.2		50,192	32.8		54,286	35.6		10,511	6.9
								Net Liquid Assets*		786	0.5
								Total assets *		152,853	100.0

*  For a definition of terms used, see Glossary of Terms and Alternative Performance Measures at the end of this announcement.

  List of Investments at 30 September 2022

Name	Business	Impact theme*	Fair value £'000	% of total assets†	Cumulative % of total assets†
ASML	Supplier to semiconductor industry	Social	10,057	6.6
Moderna	Messenger RNA therapeutics	Healthcare	9,480	6.2
Deere	Agricultural equipment	Environment	8,941	5.8
MercadoLibre	Latin American ecommerce platform and fintech	Social	8,652	5.7
TSMC	Semiconductor manufacturer	Social	8,126	5.3
Dexcom	Continuous glucose monitoring	Healthcare	7,743	5.1
Alnylam Pharmaceuticals	Biotechnology	Healthcare	7,522	4.9
Tesla	Electric cars and renewable energy solutions	Environment	6,503	4.3
Bank Rakyat Indonesia	Bank	Base	6,262	4.1
Novozymes	Biological solutions	Environment	5,355	3.5	51.5
Xylem	Innovative water solutions	Environment	5,312	3.5
Illumina	Gene sequencing equipment	Healthcare	5,251	3.4
Ørsted	Renewable energy	Environment	5,237	3.4
Northvolt AB U	Battery developer and manufacturer, specialising  in lithium-ion technology for electric vehicles	Environment	4,710	3.1
Abiomed	Medical implant manufacturer	Healthcare	4,676	3.1
Umicore	Global materials technology and recycling	Environment	4,593	3.0
Safaricom	Telecommunications and mobile payments	Base	4,249	2.8
Sartorius	Biopharmaceutical and laboratory tooling	Healthcare	4,129	2.7
M3	Online medical services	Healthcare	3,635	2.4
NIBE Industrier	Sustainable energy solutions	Environment	3,434	2.2	81.1
Chr. Hansen	Biological solutions	Healthcare	3,140	2.1
Discovery Holdings	Life and health insurance provider	Healthcare	2,999	2.0
Ecolab	Water, hygiene and infection prevention services	Environment	2,927	1.9
Duolingo	Language learning website and mobile app	Social	2,783	1.8
AbCellera Biologics	Antibody drug discovery tools	Healthcare	2,083	1.4
Climeworks U	Direct air carbon capture	Environment	2,056	1.3
10x Genomics	Life science technology	Healthcare	1,744	1.1
PsiQuantum U	Silicon photonic quantum computing	Social	1,687	1.1
Nu Holdings	Digital banking company based in Brazil	Social	1,652	1.1
Coursera	Online learning	Social	1,550	1.0	95.9
Teladoc	Healthcare services provider	Healthcare	1,446	0.9
Shopify	Online commerce platform	Social	1,443	0.9
FDM	IT-focused professional services provider	Social	1,128	0.7
Spiber U	Novel protein biomaterials	Environment	736	0.5
Joby Aviation	Electric aircraft	Environment	388	0.3
Peloton Interactive	Connected home fitness technology	Healthcare	289	0.2
Berkeley Lights	Life science technology	Healthcare	149	0.1
Total investments			152,067	99.5	99.5
Net liquid assets†			786	0.5
Total assets †			152,853	100.0	100.0

*  Abbreviated as follows: Healthcare - Healthcare and Quality of Life; Social - Social Inclusion and Education; Environment - Environment and Resource Needs; Base - Base of the Pyramid.

^U  Denotes unlisted/private company holding.

† For a definition of terms used see Glossary of Terms and Alternative Performance Measures at the end of this announcement.

Income Statement

	For the year ended 30 September 2022			For the year ended 30 September 2021
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
(Losses)/gains on investments (note 2)	-	(72,765)	(72,765)	-	30,478	30,478
Currency (losses)/gains	-	(1,333)	(1,333)	-	859	859
Income	1,459	-	1,459	2,353	-	2,353
Investment management fee (note 3)	(247)	(741)	(988)	(150)	(451)	(601)
Other administrative expenses	(506)	-	(506)	(427)	(166)	(593)
Net return before finance costs and taxation	706	(74,839)	(74,133)	1,776	30,720	32,496
Finance costs of borrowings	(101)	(266)	(367)	(50)	(111)	(161)
Net return on ordinary activities before taxation	605	(75,105)	(74,500)	1,726	30,609	32,335
Tax on ordinary activities	(216)	-	(216)	(121)	-	(121)
Net return on ordinary activities after taxation	389	(75,105)	(74,716)	1,605	30,609	32,214
Net return per ordinary share (note 4)	0.63p	(121.50p)	(120.87p)	2.60p	49.49p	52.09p
Note: Dividends per share paid and payable in respect of the year (note 5)	0.40p			11.20p

The total column of this statement represents the profit and loss account of the Company. The supplementary revenue and capital columns are prepared under guidance issued by the Association of Investment Companies.

All revenue and capital items in this statement derive from continuing operations.

A Statement of Comprehensive Income is not required as the Company does not have any other comprehensive income and the net return on ordinary activities after taxation is both the (loss)/profit and total comprehensive (expense)/income for the year.

Balance Sheet

		For the year ended 30 September		For the year ended 30 September
	Notes	2022 £'000	2022 £'000	2021 £'000	2021 £'000
Fixed assets
Investments	6		152,067		224,464
Current assets
Debtors		199		132
Cash and cash equivalents		962		593
		1,161		725
Creditors
Amounts falling due within one year	7	(15,650)		(10,422)
Net current liabilities			(14,489)		(9,697)
Total assets less current liabilities			137,578		214,767
Creditors
Amounts falling due after more than one year	7		(250)		(250)
Net assets			137,328		214,517
Capital and reserves
Share capital			6,760		6,760
Share premium account			3,449		3,449
Capital redemption reserve			466		466
Capital reserve			126,264		203,842
Revenue reserve			389		-
Total shareholders' funds	8		137,328		214,517

Statement of Changes in Equity

For the year ended 30 September 2022

	Notes	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 October 2021		6,760	3,449	466	203,842	-	214,517
Net return on ordinary activities after taxation		-	-	-	(75,105)	389	(74,716)
Dividends paid during the year	5	-	-	-	(2,473)	-	(2,473)
Shareholders' funds at 30 September 2022		6,760	3,449	466	126,264	389	137,328

For the year ended 30 September 2021

	Notes	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 October 2020		6,760	3,449	466	174,808	4,842	190,325
Net return on ordinary activities after taxation		-	-	-	30,609	1,605	32,214
Ordinary shares bought back and held in treasury	9	-	-	-	(1,100)	-	(1,100)
Dividends paid during the year	5	-	-	-	(475)	(6,447)	(6,922)
Shareholders' funds at 30 September 2021		6,760	3,449	466	203,842	-	214,517

Cash Flow Statement

		For the year ended 30 September		For the year ended 30 September
	Notes	2022 £'000	2022 £'000	2021 £'000	2021 £'000
Cash flow from operating activities
Net return before finance costs and taxation			(74,133)		32,496
Tax on overseas income			(207)		(111)
Adjustments for:
Purchase of investments		(20,553)		(360,107)
Sale of investments		20,185		376,529
			(368)		16,422
Losses/(gains) on investments held at fair value			72,765		(30,478)
Movement in unrealised currency gains and losses			1,374		(183)
Increase in debtors			(76)		(88)
Increase/(decrease) in creditors			41		(89)
Net cash (outflow)/inflow from operating activities			(604)		17,969
Cash flow from financing activities
Interest and facility fee paid on bank facility		(329)		(150)
Preference dividends paid		(12)		(12)
Bank facility drawn down/(repaid) and overdraft (repaid)		3,727		(9,833)
Shares bought back and held in treasury		-		(1,100)
Net equity dividends paid	5	(2,473)		(6,922)
Net cash inflow/(outflow) from financing activities			913		(18,017)
Net increase/(decrease) in cash and cash equivalents			309		(48)
Exchange movements			60		21
Repayment of overdraft			-		650
Cash and cash equivalents at start of the year			593		(30)
Cash and cash equivalents at the end of the year			962		593
Reconciliation of cash and cash equivalents to the Balance Sheet is as follows:
Cash held at custodian			962		593
Cash and cash equivalents			962		593
Cash flow from operating activities includes:
Dividends received			1,434		2,298
Interest received			2		-

Notes to the Financial Statements

1.  The Financial Statements for the year to 30 September 2022 have been prepared in accordance with FRS 102, 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and on the basis of the accounting policies set out in the Annual Report and Financial Statements which are unchanged from the prior year and have been applied consistently.

2.  (Losses)/gains on Investments

	2022 £'000	2021 £'000
(Losses)/gains on investments:
Realised (losses)/gains on sales	(6,963)	4,060
Changes in investment holding gains and losses	(65,802)	26,418
	(72,765)	30,478

3.  Management Fee

Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, was appointed by the  Company as its Alternative Investment Fund Manager and Company Secretary with effect from 11 February 2021. Baillie Gifford & Co Limited has delegated the investment management services to Baillie Gifford & Co. The annual management fee is 0.70% on the first £100 million of market capitalisation, 0.65% on the next £150 million of market capitalisation and 0.55% on the remaining market capitalisation. Management fees are calculated and payable on a quarterly basis. Market capitalisation is calculated using middle market quotations derived from the Stock Exchange Daily Official List and the weighted average number of shares in issue during the quarter. In respect of 2021, Baillie Gifford & Co Limited waived the first six months' fee following the transfer of the mandate from Invesco. Invesco Fund Managers Limited received a management fee in respect of each of the quarterly periods ending on 31 March, 30 June, 30 September and 31 December each year of 0.1125% calculated on the average value of the market capitalisation of the Company's shares for the ten business days ending on the relevant quarter end date. The final fee payable by the Company to Invesco Fund Managers Limited was for the period from 1 January to 7 March 2021.

4.  Net Returns per Ordinary Share

	2022 Revenue	2022 Capital	2022 Total	2021 Revenue	2021 Capital	2021 Total
Net return per ordinary share	0.63p	(121.50p)	(120.87p)	2.60p	49.49p	52.09p

Revenue return per ordinary share is based on the net revenue return on ordinary activities after taxation of £389,000 (2021 - £1,605,000) and on 61,815,632 (2021 - 61,846,509) ordinary shares of 10p, being the weighted average number of ordinary shares in issue during the year. Capital return per ordinary share is based on the net capital loss for the financial year of £75,105,000 (2021 - gain of £30,609,000) and on 61,815,632 (2021 - 61,846,509) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

There are no dilutive or potentially dilutive shares in issue.

5.  Ordinary Dividends

	2022 p	2022 £'000	2021 p	2021 £'000
Amounts recognised as distributions in the year:
Fourth interim dividend in lieu of a final dividend (prior year)	4.00	2,473	4.00	2,473
First interim dividend	-	-	2.40	1,483
Second interim dividend	-	-	2.40	1,483
Third interim dividend	-	-	2.40	1,483
	4.00	2,473	11.20	6,922

We also set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of section 1158 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £389,000 (2021 - £1,605,000).

	2022 p	2022 £'000	2021 p	2021 £'000
Amounts paid and payable in respect of the financial year:
First interim dividend	-	-	2.40	1,483
Second interim dividend	-	-	2.40	1,483
Third interim dividend	-	-	2.40	1,483
Proposed final (payable 15 February 2023)/fourth interim dividend	0.40	247	4.00	2,473
	0.40	247	11.20	6,922

The Board recommends a final dividend of 0.4p per ordinary share for the year. If approved, the recommended final dividend will be paid on 15 February 2023 to shareholders on the register at the close of business on 20 January 2023. The ex-dividend date is 19 January 2023.

6.  Investments

As at 30 September 2022	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Listed equities	142,878	-	-	142,878
Unlisted securities	-	-	9,189	9,189
Total financial asset investments	142,878	-	9,189	152,067

As at 30 September 2021	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Listed equities	219,818	-	-	219,818
Unlisted securities	-	-	4,646	4,646
Total financial asset investments	219,818	-	4,646	224,464

Investments in securities are financial assets held at fair value through profit or loss. In accordance with Financial Reporting Standard 102, the tables above provide an analysis of these investments based on the fair value hierarchy described beneath, which reflects the reliability and significance of the information used to measure their fair value.

Fair Value Hierarchy

The fair value hierarchy used to analyse the basis on which the fair values of financial instruments held at fair value through the profit and loss account are measured is described below. Fair value measurements are categorised on the basis of the lowest level input that is significant to the fair value measurement.

Level 1 - using unadjusted quoted prices for identical instruments in an active market;

Level 2 - using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable (based on market data); and

Level 3 - using inputs that are unobservable (for which market data is unavailable).

The Company's unlisted investments at 30 September 2022 were valued using a variety of techniques. These include using comparable company multiples, net asset values, assessment of comparable company performance and assessment of milestone achievement at the investee companies. The determinations of fair value included assumptions that the trading multiples and comparable companies chosen for the multiples approach provide a reasonable basis for the determination of fair value. Valuations are cross-checked for reasonableness to alternative multiples-based approaches or benchmark index movements as appropriate. In some cases the latest dealing price is considered to be the most appropriate valuation basis, but only following assessment using the techniques described above.

The valuation techniques used by the Company are further explained in the accounting policies on pages 50 and 51 of the Annual Report and Financial Statements. A sensitivity analysis by valuation technique of the unlisted securities is on page 62 of the Annual Report and Financial Statements.

The purchases and sales proceeds figures disclosed in note 9 of the Annual Report and Financial Statements include transaction costs of £5,000 (2021 - £137,000) and £8,000 (2021 - £226,000) respectively. The Company received £20,185,000 (2021 - £376,529,000) from investments sold during the year. The book cost of these investments when they were purchased was £27,148,000 (2021 - £372,693,000). These investments have been revalued over time and, until they were sold, any unrealised gains/losses were included in the fair value of the investments. Of the realised losses on sales of investments during the year of £6,963,000 (2021 - gain of £4,060,000), a net loss of £2,218,000 was included in investment holding gains at the previous year end (2021 - loss of £152,000)

7.  Creditors

Creditors falling due within one year include drawings under the following borrowing facilities:

At 30 September 2022 the Company had a 3 year £25 million multi-currency unsecured floating rate revolving facility with The Royal Bank of Scotland International Limited, which expires on 31 August 2024.

At 30 September 2022 drawings were as follows:

¾ The Royal Bank of Scotland International Limited: US$8.7 million at an interest rate of 1.25% over US LIBOR and £7.5 million at an interest rate of 1.25% over SONIA, both maturing in December 2022 (2021 - US$6.9 million at an interest rate of 1.25% over US LIBOR and £5 million at an interest rate of 1.25% over SONIA, both maturing in December 2021).

The main covenants relating to the above loans are that total borrowings shall not exceed 25% of the Company's adjusted portfolio value and the Company's minimum adjusted portfolio value shall be £100 million.

There were no breaches of loan covenants during the year.

Creditors falling due after more than one year comprise 5% cumulative preference shares of £1 each.

	2022 Par value £'000	2022 Book value £'000	2022 Market value £'000	2021 Par value £'000	2021 Book value £'000	2021 Market value £'000
Bank loans due within one year	15,275	15,275	15,275	10,114	10,114	10,114
5% cumulative preference shares	250	250	239	250	250	248
	15,525	15,525	15,514	10,364	10,364	10,362

8.  Shareholders' Funds Per Ordinary Share

	2022	2021
Shareholders' funds	£137,328,000	£214,517,000
Number of ordinary shares in issue at the year end	61,815,632	61,815,632
Shareholders' funds per ordinary share	222.2p	347.0p

The shareholders' funds figures above have been calculated after deducting borrowings at book value, in accordance with the provisions of FRS 102. For the current and prior year, the difference between borrowings at book value, borrowings at par and borrowings at market value is negligible (see note 7 above) and no reconciliation between NAV at book/par value and NAV at market/fair value is provided, as the NAV per share is the same on both bases.

9.  Shares in Issue

In the year to 30 September 2022, the Company issued and bought back no ordinary shares. (2021 - 423,735 shares were bought back during the year over 14 separate occasions at an average price of 257.8p to be held in treasury for subsequent re-issue or cancellation). At 30 September 2022 the Company had authority to buy back 9,266,163 ordinary shares and to allot or sell from treasury 6,181,563 ordinary shares without application of pre-emption rights. Under the provisions of the Company's Articles of Association share buy-backs are funded from the capital reserve.

10.  Related Parties and Transactions with the Managers

The Directors' fees and shareholdings are detailed in the Directors' Remuneration Report on pages 37 and 38 of the Annual Report and Financial Statements. No Director has a contract of service with the Company. During the year no Director was interested in any contract or other matter requiring disclosure under section 412 of the Companies Act 2006.

Baillie Gifford & Co Limited has been appointed as the Company's Alternative Investment Fund Manager ('AIFM') and Company Secretaries. Details of the terms of the Investment Management Agreement are set out on page 28 of the Annual Report and Financial Statements and details of the fees during the year and the balances outstanding at the year end are shown in notes 3 and 11 respectively of the Annual Report and Financial Statements.

11.  The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2022 or 2021 but is derived from those accounts. Statutory accounts for 2021 have been delivered to the Registrar of Companies and those for 2022 will be delivered in due course. The auditor has reported on these accounts; the reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

12.  The Report and Accounts will be available on the Managers' website keystonepositivechange.com‡ on or around 9 December 2022.

‡ Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.

None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

Glossary of Terms and Alternative Performance Measures (APM)

Total Assets

The total value of all assets held less all liabilities (other than liabilities in the form of borrowings).

Shareholders' Funds

Shareholders' Funds is the value of all assets held less all liabilities, with borrowings deducted at book cost.

Net Asset Value (APM)

When a Company's borrowings are all short-term, flexible facilities, Net Asset Value (NAV) equates to shareholders' funds, being the value of all assets held less all liabilities (including borrowings). Per share amounts are calculated by dividing the relevant figure by the number of ordinary shares in issue (excluding shares held in treasury) as per note 8 above. For the current and prior year, the difference between borrowings at book value, borrowings at par and borrowings at market value is negligible (see note 7 above) and no reconciliation between NAV at book/par value and NAV at fair value is provided, as the NAV per share is the same on both bases.

		2022	2021
Shareholders' funds (Net Asset Value)	a	£137,328,000	£214,517,000
Ordinary shares in issue (excluding treasury shares)	b	61,815,632	61,815,632
Net asset value per share	(a ÷ b x 100)	222.2p	347.0p

Discount/Premium (APM)

As stockmarkets and share prices vary, an investment trust's share price is rarely the same as its NAV. When the share price is lower than the NAV per share it is said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the NAV per share and is usually expressed as a percentage of the NAV per share. If the share price is higher than the NAV per share, this situation is called a premium.

Net Liquid Assets

Net liquid assets comprise current assets less current liabilities (excluding borrowings).

Active Share (APM)

Active share, a measure of how actively a portfolio is managed, is the percentage of the portfolio that differs from its comparative index. It is calculated by deducting from 100 the percentage of the portfolio that overlaps with the comparative index. An active share of 100 indicates no overlap with the index and an active share of zero indicates a portfolio that tracks the index.

Total Return (APM)

The total return is the return to shareholders after reinvesting the dividend on the date that the share price goes ex-dividend, as detailed below.

		2022 NAV	2022 Share price	2021 NAV	2021 Share price
Closing NAV per share/share price	a	222.2p	192.8p	347.0p	344.0p
Dividend adjustment factor *	b	1.01228	1.01242	1.0338	1.0360
Adjusted closing NAV per share/share price	c = a x b	224.9p	195.2p	358.7p	356.4p
Opening NAV per share/share price	d	347.0p	344.0p	305.8p	253.0p
Total return	(c ÷ d) -1	(35.2%)	(43.3%)	17.3%	40.9%

* The dividend adjustment factor is calculated on the assumption that dividends of 4.0p (2021 - 11.2p) paid by the Company during the year were reinvested into shares of the Company at the cum income NAV/share price, as appropriate, at the ex-dividend dates.

Ongoing Charges (APM)

The total expenses ( excluding dealing and borrowing costs) incurred by the Company as a percentage of the daily average net asset value (with borrowings at fair value), as detailed below.

		2022	2021
Investment management fee		£988,000	£601,000
Other administrative expenses		£506,000	£593,000
Less: non-recurring expenses		-	(£166,000)
Total recurring expenses	a	£1,494,000	£1,028,000
Average daily cum-income net asset value	b	£166,326,000	£202,840,000
Ongoing charges	a ÷ b	0.90%	0.51%

Baillie Gifford & Co Limited was appointed on 11 February 2021 and agreed to waive its management fee for six months from the date of its appointment. The calculation for 2021 above was therefore not representative of future management fees. The reconciliation below shows the ongoing charges figure if the management fee waiver had not been in place.

		2022	2021
Investment management fee		£988,000	£601,000
Investment management fee waiver		-	£643,000
Other administrative expenses		£506,000	£593,000
Non-recurring expenses		-	(£166,000)
Total expenses	a	£1,494,000	£1,671,000
Average daily cum-income net asset value	b	£166,326,000	£202,840,000
Ongoing charges	a ÷ b	0.90%	0.82%

Gearing (APM)

At its simplest, gearing is borrowing. Just like any other public company, an investment trust can borrow money to invest in additional investments for its portfolio. The effect of the borrowing on the shareholders' assets is called 'gearing'. If the Company's assets grow, the shareholders' assets grow proportionately more because the debt remains the same. But if the value of the Company's assets falls, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets.

Gross gearing, also referred to as potential gearing is the Company's borrowings expressed as a percentage of shareholders' funds (a ÷ c in the table below).

Net gearing, also referred to as invested gearing is borrowings at book value less cash and cash equivalents (any certificates of deposit are not deducted) and brokers' balances expressed as a percentage of shareholders' funds (b ÷ c in the table below).

		2022	2021
Borrowings (at book cost)	a	£15,525,000	£10,364,000
Less: cash and cash equivalents		(£962,000)	(£593,000)
Less: sales for subsequent settlement		-	-
Add: purchases for subsequent settlement		-	-
Adjusted borrowings	b	£14,563,000	£9,771,000
Shareholders' funds	c	£137,328,000	£214,517,000
Gross gearing	a ÷ c	11.3%	4.8%
Net gearing	b ÷ c	10.6%	4.6%

Leverage (APM)

For the purposes of the Alternative Investment Fund Managers (AIFM) Regulations, leverage is any method which increases the Company's exposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between the Company's exposure and its net asset value and can be calculated on a gross and a commitment method. Under the gross method, exposure represents the sum of the Company's positions after the deduction of sterling cash balances, without taking into account any hedging and netting arrangements. Under the commitment method, exposure is calculated without the deduction of sterling cash balances and after certain hedging and netting positions are offset against each other.

Unlisted (Private) Company

An unlisted or private company means a company whose shares are not available to the general public for trading and are not listed on a stock exchange.

Compound Annual Return (APM)

The compound annual return converts the return over a period of longer than one year to a constant annual rate of return applied to the compounded value at the start of each year.

Treasury Shares

The Company has the authority to make market purchases of its ordinary shares for retention as treasury shares for future reissue, resale, transfer, or for cancellation. Treasury shares do not receive distributions and the Company is not entitled to exercise the voting rights attaching to them.

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MSCI Index Data

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FTSE Index Data

Source: London Stock Exchange Group plc and its group undertakings (collectively, the 'LSE Group'). © LSE Group 2022. FTSE Russell is a trading name of certain of the LSE Group companies. 'FTSE®' 'Russell®', 'FTSE Russell®', is/are a trade mark(s) of the relevant LSE Group companies and is/are used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company's express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

Regulated Information Classification : Annual Financial and Audit Reports.

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