TIDMKPC
RNS Number : 2284W
Keystone Positive Change I.T. PLC
08 December 2023
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 28 November 2023, Keystone
Positive Change Investment Trust plc ("the Company") announces that
the Company's Annual Report and Financial Statements for the year
ended 30 September 2023, 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's page of the Baillie
Gifford website at: www.keystonepositivechange.com (as is the
preliminary statement of audited annual results announced by the
Company on 28 November 2023).
Statement of Directors' Responsibilities in respect of the
Annual Report and Financial Statements
Each of the Directors, whose names and functions are listed
within the Directors and Management section of the Annual Report
and Financial Statements, confirm that, to the best of their
knowledge:
3/4 the 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;
3/4 the Strategic Report 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; and
3/4 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 and Emerging Risks relating to the Company
As explained on pages 66 and 67 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 impact of heightened market volatility
since the Covid-19 pandemic and over recent months due to
macroeconomic and geopolitical concerns to be factors which
exacerbate existing risks, rather than discrete risks, within the
context of an investment trust. Their impact is considered within
the relevant risks .
What is the risk? How is it managed? Current assessment
of risk
------------------------------------ -------------------------------- --------------------------
Financial Risk: The Company's In order to oversee This risk remains
assets consist mainly of this risk, the Board high due to market
listed securities and its considers at each meeting volatility as a
principal and emerging financial the composition and result of heightened
risks are therefore market diversification of macroeconomic and
related and include market the portfolio by impact geopolitical concerns.
risk (comprising currency theme and holding size,
risk, interest rate risk along with sales and
and other price risk), liquidity purchases of investments.
risk and credit risk. An Individual
explanation of those risks investments are discussed
and how they are managed with the investment
is contained in note 19 to managers together with
the Financial Statements. 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 over recent
months owing to macroeconomic
and geopolitical concerns.
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
rate movements on the
Company's US$ denominated
borrowings.
------------------------------------ -------------------------------- --------------------------
What is the risk? How is it managed? Current assessment
of risk
------------------------------------ -------------------------------- --------------------------
Investment strategy risk: To mitigate this risk, This risk remains
Pursuing an investment the Board regularly high as the market's
strategy to fulfil the Company's reviews and monitors: appetite for the
objective which the Company's objective innovative growth
the market perceives to be and investment policy stocks typically
unattractive or and strategy; the investment held by the Company
inappropriate, or the ineffective portfolio and its performance remains subdued,
implementation of an attractive in terms of impact owing to macroeconomic
or appropriate strategy, and shareholder returns; and geopolitical
may lead to reduced returns the level of discount/premium concerns.
for shareholders and, as to net asset value
a result, a decreased demand at which the shares
for the Company's trade; and movements
shares. This may lead to in the share register,
the Company's shares trading and raises any matters
at a widening discount to of concern with the
their net asset value . Managers.
------------------------------------ -------------------------------- --------------------------
What is the risk? How is it managed? Current assessment
of risk
------------------------------------ -------------------------------- --------------------------
Climate and governance risk: This is mitigated by The Managers continue
As investors place increased the Managers' strong to employ strong
emphasis on Environmental, ESG stewardship and ESG stewardship
Social and Governance ('ESG') engagement policies, and engagement policies.
issues, perceived inaction which have been endorsed
on ESG matters in an investee by the Company, and
company could lead to that which are fully integrated
company's shares being less into the investment
attractive to investors, process, as well as
adversely affecting its share the extensive up-front
price, in addition to potential and ongoing due diligence
valuation issues arising which the Managers
from any direct impact of undertake on each investee
the failure to address the company. This due diligence
ESG weakness on the operations includes assessment
or management of the investee of the risks inherent
company (for example a failure in climate change.
to identify a pathway to
Net Zero or poor employment
practices). Repeated failure
by the Managers to identify
ESG weaknesses in investee
companies could lead to the
Company's own shares being
less attractive to investors,
adversely affecting its own
share price.
------------------------------------ -------------------------------- --------------------------
What is the risk? How is it managed? Current assessment
of risk
------------------------------------ -------------------------------- --------------------------
Discount risk: The price To manage this risk, The Company's discount
at which the Company's shares the Board monitors widened during the
trade relative to its net the level of discount/ year.
asset value can change. The premium at which the
risk of a widening discount shares trade and the
is that it may undermine reasons for movements
investor confidence in the in either direction.
Company and the wider investment The Board has a range
trust sector, and attract of options available
arbitrageurs whose interests to address widening
may not be aligned with those discounts and/or premiums,
of long-term investors. including reviewing
the investment strategy
or marketing approach.
The Company also 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. During
the year, the Chair
and the Company's brokers
met with shareholders
to discuss their concerns,
including attitudes
to the widening discount
and the Board has committed
to offer a Continuation
Vote after five full
financial years of
the Positive Change
strategy.
------------------------------------ -------------------------------- --------------------------
What is the risk? How is it managed? Current assessment
of risk
------------------------------------ -------------------------------- --------------------------
Regulatory risk: Failure To mitigate this risk, All control procedures
to comply with applicable Baillie Gifford's Business are working effectively.
legal and regulatory requirements Risk, Internal Audit There have been
such as the tax rules for and Compliance Departments no material regulatory
investment trust companies, provide regular reports changes that have
the FCA Listing rules and to the Audit Committee impacted the Company
the Companies Act could lead on Baillie Gifford's during the year.
to the Company being subject monitoring programmes.
to tax on capital gains, Major regulatory change
suspension of the Company's could impose disproportionate
Stock Exchange listing, financial compliance burdens
penalties or a qualified on the Company. In
audit report. 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.
------------------------------------ -------------------------------- --------------------------
What is the risk? How is it managed? Current assessment
of risk
------------------------------------ -------------------------------- --------------------------
Custody and depositary risk: To mitigate this risk, All control procedures
Safe custody of the Company's the Board receives are working effectively.
assets may be compromised six-monthly reports
through control failures from the depositary
by the depositary, including confirming safe custody
breaches of cyber security. 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.
------------------------------------ -------------------------------- --------------------------
What is the risk? How is it managed? Current assessment
of risk
------------------------------------ -------------------------------- --------------------------
Operational risk: Failure To mitigate this risk, All control procedures
of Baillie Gifford's systems Baillie Gifford has are working effectively.
or those of other third party a comprehensive business
service providers could lead continuity plan which
to an inability to provide facilitates continued
accurate reporting and monitoring operation of the business
or a misappropriation of in the event of a service
assets. disruption or major
disaster. The Audit
Committee reviews Baillie
Gifford's Report on
Internal Controls and
the reports by other
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.
------------------------------------ -------------------------------- --------------------------
What is the risk? How is it managed? Current assessment
of risk
------------------------------------ -------------------------------- --------------------------
Gearing risk: The Company To mitigate this risk The Company's revolving
may borrow money for investment all borrowings require loan facility can
purposes. If the investments the prior approval be repaid with no
fall in value, any borrowings of the Board and gearing penalties, should
will magnify the extent of levels are discussed the decision be
this loss. If borrowing facilities by the Board and Managers taken to reduce
are not renewed, the Company at every meeting. Covenant the gearing.
may have to sell investments levels are monitored
to repay borrowings. The regularly. The majority
Company can also make use of the Company's investments
of derivative contracts. are in listed securities
that are readily realisable.
Further information
on gearing can be found
on page 36 of the Annual
Report and Financial
Statements and in the
Glossary of Terms and
Alternative Performance
Measures.
------------------------------------ -------------------------------- --------------------------
What is the risk? How is it managed? Current assessment
of risk
------------------------------------ -------------------------------- --------------------------
Political and associated To mitigate this risk, This risk remains
economic financial risk: developments are closely high due to the
Political change in areas monitored and considered conflicts in Ukraine
in which the Company invests by the Board. The Board and Gaza and ongoing
or may invest may increasingly has particular regard US/China tensions.
have practical consequences to macroeconomic and
for the Company. geopolitical tensions,
and monitors portfolio
diversification by
revenue stream where
appropriate, as well
as by investee companies'
primary location, to
mitigate against the
negative impact of
military action or
trade barriers.
------------------------------------ -------------------------------- --------------------------
What is the risk? How is it managed? Current assessment
of risk
------------------------------------ -------------------------------- --------------------------
Cyber security risk: A cyber To mitigate this risk, All control procedures
attack on Baillie Gifford's the Audit Committee are working effectively.
network or that of a third reviews Reports on
party service provider could Internal Controls published
impact the confidentiality, by Baillie Gifford
integrity or availability and other third party
of data and systems. service providers.
Baillie Gifford's Business
Risk Department report
to the Audit Committee
on the effectiveness
of information security
controls in place at
Baillie Gifford and
its business continuity
framework. Cyber security
due diligence is performed
by Baillie Gifford
on third party service
providers which includes
a review of crisis
management and business
continuity frameworks.
------------------------------------ -------------------------------- --------------------------
What is the risk? How is it managed? Current assessment
of risk
------------------------------------ -------------------------------- --------------------------
Emerging risks: The Board This is mitigated by No change in emerging
has regular discussions on the Managers' close risks.
principal risks and uncertainties, links to the investee
including any risks which companies and their
are not an immediate threat ability to ask questions
but could arise in the longer on contingency plans.
term. The Board considers The Managers believe
that the key emerging risks the impact of such
arise from the interconnectedness events may be to slow
of global economies and the the pace of growth
related exposure of the investment rather than to invalidate
portfolio to emerging threats the investment rationale
such as the societal and over the long term.
financial implications of
geopolitical tensions, energy
price rises or supply failures,
climate transition, food
insecurity, cyber risk including
AI and quantum computing
capabilities, and new coronavirus
variants or similar public
health threats.
------------------------------------ -------------------------------- --------------------------
Increasing risk Decreasing risk No change
Baillie Gifford & Co Limited
Company Secretaries
8 December 2023
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END
ACSFSFFLAEDSEIE
(END) Dow Jones Newswires
December 08, 2023 09:53 ET (14:53 GMT)
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