RNS Announcement
Keystone Positive Change Investment
Trust plc (KPC)
Legal Entity Identifier:
5493002H3JXLXLIGC563
Regulated Information
Classification: Interim Financial Report
Results for the six months to 31
March 2024
Over the six months to 31 March 2024, the Company's net asset
value total return was 10.7% compared to a total return
of 16.3% for the comparative index*. The share price total
return was 13.5% as the discount narrowed from 14.0% to
11.9%.
Keystone Positive Change's objective
is 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 cent. per annum over rolling five-year
periods; and contribute towards a more sustainable and inclusive
world by investing in companies whose products or services make a
positive social or environmental impact. At 31 March 2024 the
Company had total assets of £174 million.
Keystone Positive Change is managed
by Baillie Gifford, an Edinburgh-based fund management group with
approximately £230 billion under management and advice as at 31
March 2024.
Keystone Positive Change 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 Positive
Change at keystonepositivechange.com‡.
Past performance is not a guide to
future performance. Total return information is sourced from
LSEG/Baillie Gifford and relevant underlying index providers. See
disclaimer at end of this announcement.
*
MSCI All Country World Index in sterling
terms.
‡ 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.
For further information please
contact:
Naomi Cherry, Baillie Gifford &
Co
Tel: 0131 275 2000
Jonathan Atkins, Director, Four
Communications
Tel: 0203 920 0555 or 07872
495396
The following is the unaudited
Interim Financial Report for the six months to 31 March 2024 which
was approved by the Board on 2 May 2024.
Responsibility statement
We confirm that to the best of our
knowledge:
a. the condensed set of
Financial Statements has been prepared in accordance with FRS 104
'Interim Financial Reporting';
b. the Interim Management
Report includes a fair review of the information required by
Disclosure Guidance and Transparency Rule 4.2.7R (indication of
important events during the first six months, their impact on the
Financial Statements and a description of the principal risks and
uncertainties for the remaining six months of the year);
and
c. the Interim Financial
Report includes a fair review of the information required by
Disclosure Guidance and Transparency Rule 4.2.8R (disclosure of
related party transactions and changes therein).
On behalf of the Board
Karen Brade
Chair
2 May 2024
Interim management report
Much has happened in the three years
since we took on the management of Keystone Positive Change
Investment Trust, including the outbreak of war in Ukraine and the
Middle East; supply chain challenges as the world re-opened
post-pandemic; the end of easy monetary policy and the sharpest
rise in interest rates in four decades; and increasing evidence of
the devastation caused by global warming.
Against this dynamic and complex
back-drop we have remained resolutely committed to delivering on
Keystone's dual objectives of generating attractive long-term
investment returns and contributing towards a more sustainable and
inclusive world. We continue to believe that capital owners and
allocators can play a valuable role in addressing global challenges
by channelling capital towards businesses that are intent on
developing, scaling production of, and successfully selling
products and services that will help create a more inclusive,
healthier and more environmentally stable world.
Performance
Following eleven consecutive interest
rate increases in the US and fourteen in the UK, we seem to be in a
period of greater calm on this front with no changes in recent
months and an expectation that rates will remain stable or even
fall from here. Performance in a rising interest rate environment
has been more challenging for the Company which invests in 'long
duration growth stocks', i.e., companies whose share prices are
skewed towards cash flows generated in the future. The more stable
interest rate environment is helpful for long-term growth
investors. But what matters more is the strong operational progress
being made by portfolio holdings as we believe it is fundamental
progress in earnings that drives share prices over the long
term.
Over the six months to 31 March 2024
the benchmark increased by 16.3%, the Company's share price rose by
13.5% and NAV grew by 10.7%.
Two of the larger holdings in the
portfolio, TSMC and ASML, were among the top positive contributors
to performance over the period, despite 2023 being a challenging
year for the semiconductor industry. ASML grew revenues by 30% and
TSMC outperformed its competitors, testament to the technological
leadership of these companies and their willingness to invest in
both capacity expansion and R&D so they can remain at the
vanguard of their industries. Both companies are cautiously
optimistic that end-market demand has bottomed and will recover
thanks not just to demand for advanced chips enabling AI and
advanced computing, but also the growing need for chips in the
energy transition, for electrification and for digitalisation. Nu
Holdings, the Brazilian digital bank providing access to financial
services to a hundred million people in Latin America, reported
phenomenal results, outpacing our predictions when we took a
position when it listed in 2021. In 2023 the company grew its
customer base by 26% and its average revenue per customer by 23%
while achieving positive net profits for the first time. Duolingo,
the leading digital language learning app, beat expectations by
growing revenues by 45% with its monthly active users increasing to
88m and the percentage of paying subscribers continuing on a
positive trajectory.
Detractors to performance included
WuXi and Remitly. WuXi, the global leader in outsourced research
and development services to many of the world's biotech and pharma
companies, has been subject to tension between the US and China.
The emergence of draft bills related to the BioSecure Act in the US
resulted in significant share price falls. We have spoken with the
CEO and some of WuXi's customers and understand the company has
minimal reliance on projects at risk and that customers are not
overly concerned. Geopolitical uncertainty is likely to persist
with the pending US election, and we are closely monitoring the
situation. However, we take comfort from steps WuXi has taken to
establish its manufacturing footprint outside China to minimise
geopolitical risk.
The mobile remittance provider,
Remitly, was also a detractor to performance over the six-month
period, despite it performing extremely well operationally, growing
its customer base and revenues by over 40% in 2023 and improving
profitability as its network scales and its data advantage grows.
The market seems worried about Remitly's increased
marketing spending, but we see it as a necessary investment for
long-term growth, as long as the return from that marketing spend
remains attractive. Remitly ended the year with just under 6m
customers benefiting from its fast, secure and affordable means of
sending money to their families and friends in low- and
middle-income countries.
One of the attractive features of the
Company is its ability to invest in private companies. At the end
of March 2024, 5.3% of the portfolio was invested across five
private companies that are developing exciting new technologies
from quantum computing to carbon removal solutions. In terms of
operational progress, Boston Metal, which is commercialising a
novel technology to decarbonise steel production and recover
high-value metal from mining waste, was selected by the US
Department of Energy to enter into negotiations for $50m of federal
funding for a manufacturing plant in West Virginia; and in March
2024 it inaugurated its first facility in Brazil where it will
start recovering high-value metal from mining waste at commercial
scale. Carbon removal company, Climeworks, continues to sign
new carbon removal agreements with customers from a range of
industries, from airlines to toy manufacturers, as it works towards
the launch of its new plant in Iceland in early
summer. Operational progress at Swedish battery developer and
manufacturer, Northvolt, has been slower than expected in a
higher cost environment and for the sheer scale of what the company
is trying to achieve. On a more positive note, its progress in
securing long-term contracts to the value of over $55bn with
esteemed partners is helping it secure financing to fund its
expansion of Europe's first home-grown gigafactory and realise its
plans for battery recycling.
Interest rates and geopolitical
fragility dominate the headlines, often masking the 'secret silent
miracle of human progress'1. We endeavour to find the
companies contributing to human progress through products and
services that address global challenges; we believe that these
companies will thrive in the long term; and we believe that share
prices follow fundamentals. With this in mind, it is worth
highlighting the strong fundamentals of the portfolio: companies
within the portfolio have delivered 10.9% annual earnings growth
over the last five years compared to 8.0% for the index and are
forecast to deliver 16.8%2 per annum for the next three
years compared to 9.4% for the index; portfolio companies have
stronger balance sheets than the index with net debt/EBITDA of 1x
compared to 1.6x for the index; and the portfolio holdings are
investing in their future more than index constituents with capex
and R&D spend equating to 19% of revenues compared to 10% for
the benchmark. For these superior fundamental characteristics -
faster growth, stronger balance sheets and more investment - the
portfolio is on a one year forward PE of 27x, a premium of 55% to
the benchmark3. This compares to a premium of 63% to the
index three years ago.
Portfolio
We have made three complete sales and
three new purchases for the Company over the past six months. The
sale of Daikin, a leading player in the heating, ventilation and
air conditioning industry, due to the emergence of new information
related to its involvement in the production of white phosphorous
smoke bombs used by the Japanese Ministry of Defence for training
purposes, was addressed in the full year statement. Danish offshore
wind operator Ørsted has faced operational challenges. Rising material costs,
higher interest rates and changes to government support for
projects in the US led to significant write-downs to projects
there, undermining our confidence in the management team's ability
to allocate capital: we have decided to move on. M3, a Japanese
provider of digital services for the healthcare system, is growing
in complexity as it acquires more and bigger businesses in
different geographies. We think this comes with execution risk, so
the position was sold. In both cases we sold at a lower price to
when we purchased shares in February 2021; both companies were
among the bigger detractors to performance since then.
We are excited to have taken three
new holdings, all quite different in terms of their business model
and how they are driving change. Katitas is a Japanese company that
refurbishes vacant homes to sell to first-time buyers at affordable
prices. It is poised to benefit from structural changes with new
homes being unsustainable, expensive and in short supply, while
younger generations are more open to second-hand purchases. Its
scale and unique expertise mean it dominates the pre-owned
market. We are excited about its ability to grow in this
niche market while contributing to greater circularity.
Despite a weakening of demand for
electric vehicles due to higher interest rates and weaker
economies, we remain excited about investment opportunities
associated with electrification of transportation. Rivian is a US
company that makes electric SUVs, pick-up trucks and commercial
vans. It is well poised to contribute to the electrification of the
automotive sector with its strong brand, vertically integrated
manufacturing business model and strong commitment to reducing
carbon emissions.
Grab, South East Asia's leading
platform for ride-hailing and food delivery services, is the third
new holding. We expect demand for its services to grow as the
region's economy expands and admire the competitive edge it has
carved out through its network, scale and technology. We believe
that its digital platform is playing a pivotal role in helping
micro, small and medium sized enterprise (SME)
owners scale their businesses, enhance their financial resilience
and, importantly, improve their quality of life.
Positive Conversations
We recently published
Positive Conversations, an
annual report that focuses on the business practices of portfolio
holdings, including the carbon footprint, outlines progress towards
Net Zero alignment, and provides a record of our engagements with
portfolio holdings. Through our engagements we aim to grow our
understanding, build relationships with management teams and seek
to influence where we think engagement can be of value to companies
and society. The report includes detail on positive conversations
with Illumina on strategy, governance and remuneration; with
Moderna on vaccine equality; and with Tesla on supply chains. This
report complements the Annual Impact Report which details how
portfolio holdings are contributing towards a more sustainable and
inclusive world across the four impact themes.
Outlook
'It's not what you look at
that matters, it's what you see'4.
We can all look at inflation figures
and the US Federal Reserve's most recent meeting minutes; or at the
horrendous footage of the conflicts in Ukraine and the Middle East;
anyone can look at charts illustrating the rise in global
temperatures or the exponential spread of viruses.
Looking around us we see a world
facing significant environmental and social challenges; we see
individuals and businesses innovating and developing new products
and services or new business models that have the potential to
address these global challenges. We see investment opportunities in
businesses that are challenging the status quo. What we see is
encapsulated in our dual objectives: to contribute towards a more
sustainable, inclusive and healthier world while generating
attractive investment returns for shareholders. To do this we endeavour to see what matters most, rather than
being distracted by trying to predict short-term sentiment on
interest rates or geopolitics.
It could be said that society is at a
watershed moment in time, faced with the choice of continuing along
the path we are on, or having the bravery, ambition and determined
optimism needed to help steer us onto a more sustainable and
inclusive trajectory.
This watershed moment is rich with
investment opportunities for the brave and ambitious. Some
interesting areas we are exploring include the electrification of
mining equipment, new treatments for obesity, and companies helping
improve access to medication.
Thank you for seeing what we see in
our philosophy; thank you for believing that we see things that
others don't, and for sharing our excitement in that.
Kate Fox and Lee Qian
Portfolio Managers
2 May 2024
1 Hans
Rosling, Swedish physician and academic.
2 Third
party analyst expectations.
3 These
statistics exclude private companies.
4 Henry
David Thoreau - American naturalist, essayist, poet, and
philosopher
For a definition of terms see
Glossary of Terms and Alternative Performance Measures at the end
of this announcement.
Past performance is not a guide to
future performance
List of investments
as at 31 March 2024
Name
|
Business
|
Impact theme
|
Fair value
£'000
|
% of
total
assets
|
TSMC
|
Semiconductor
manufacturer
|
Social
|
12,149
|
7.0
|
ASML
|
Supplier to semiconductor
industry
|
Social
|
11,427
|
6.6
|
MercadoLibre
|
Ecommerce platform and
fintech
|
Social
|
11,332
|
6.5
|
Dexcom
|
Continuous glucose
monitoring
|
Healthcare
|
8,943
|
5.1
|
Moderna
|
Messenger RNA
therapeutics
|
Healthcare
|
8,364
|
4.8
|
Bank Rakyat Indonesia
|
Bank
|
Base
|
8,360
|
4.8
|
Xylem
|
Innovative water
solutions
|
Environment
|
8,238
|
4.7
|
Shopify
|
Online commerce platform
|
Social
|
7,930
|
4.6
|
Autodesk
|
Software products for architecture,
engineering, construction, and manufacturing industries
|
Environment
|
7,349
|
4.2
|
Deere
|
Agricultural equipment
|
Environment
|
6,936
|
4.0
|
Nu Holdings
|
Digital banking company
|
Social
|
6,630
|
3.8
|
Remitly Global
|
Online money transfer payments for
immigrants
and their families
|
Base
|
5,992
|
3.4
|
Duolingo
|
Language learning website and mobile
app
|
Social
|
5,691
|
3.3
|
Ecolab
|
Water, hygiene and infection
prevention services
|
Environment
|
5,325
|
3.1
|
Illumina
|
Gene sequencing equipment
|
Healthcare
|
5,242
|
3.0
|
HDFC Bank
|
Mortgage provider
|
Social
|
5,215
|
3.0
|
Alnylam Pharmaceuticals
|
Biotechnology
|
Healthcare
|
5,036
|
2.9
|
Sartorius
|
Biopharmaceutical and laboratory
tooling
|
Healthcare
|
4,385
|
2.5
|
Coursera
|
Online learning
|
Social
|
3,451
|
2.0
|
Tesla
|
Electric cars and renewable energy
solutions
|
Environment
|
3,406
|
2.0
|
Grab#
|
Superapp in Southeast Asia,
providing mobility, deliveries and digital financial
services
|
Social
|
3,388
|
1.9
|
Northvolt AB u
|
Battery developer and manufacturer,
specialising
in lithium-ion technology for electric vehicles
|
Environment
|
3,333
|
1.9
|
Umicore
|
Global materials technology and
recycling
|
Environment
|
3,104
|
1.8
|
Katitas#
|
Refurbishes vacant homes in Japan
and sells
to first-time buyers on an affordable basis
|
Environment
|
3,056
|
1.8
|
Safaricom
|
Telecommunications and mobile
payments
|
Base
|
2,415
|
1.4
|
10x Genomics
|
Life science technology
|
Healthcare
|
2,116
|
1.2
|
Climeworks u
|
Direct air carbon capture
|
Environment
|
1,725
|
1.0
|
Boston Electrometallurgical
Corp u
|
Novel technology for producing green
steel
|
Environment
|
1,672
|
1.0
|
PsiQuantum u
|
Silicon photonic quantum
computing
|
Social
|
1,572
|
0.9
|
Discovery Holdings
|
Life and health insurance
provider
|
Healthcare
|
1,556
|
0.9
|
Joby Aviation
|
Electric aircraft
|
Environment
|
1,459
|
0.8
|
AbCellera Biologics
|
Antibody drug discovery
tools
|
Healthcare
|
1,445
|
0.8
|
WuXi Biologics
|
Contract research, development and
manufacturing organisation focusing on biologics drugs
|
Healthcare
|
1,433
|
0.8
|
Novonesis
|
Biological solutions
|
Environment
|
1,166
|
0.7
|
Spiber u
|
Novel protein
biomaterials
|
Environment
|
901
|
0.5
|
Rivian Automotive#
|
Electric sports utility vechicles
and pickup trucks
|
Environment
|
618
|
0.4
|
Total investments
|
|
|
172,360
|
99.1
|
Net liquid assets†
|
|
|
1,594
|
0.9
|
Total assets†
|
|
|
173,954
|
100.0
|
|
Listed
equities
%
|
Unlisted
securities‡
%
|
Net liquid
assets†
%
|
Total
assets†
%
|
31
March 2024
|
93.8
|
5.3
|
0.9
|
100.0
|
30 September 2023
|
93.7
|
5.9
|
0.4
|
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.
† For a definition of terms see
Glossary of terms and Alternative Performance Measures at the end
of this announcement.
# New purchase during the period.
Complete sales during the period were: Ørsted, Daikin Industries,
and M3. Chr Hansen merged with Novozymes to form
Novonesis.
‡ Includes holdings in ordinary
shares, preference shares and promissory notes.
u
Denotes unlisted/private company
holding.
Baillie Gifford's approach to
valuing private companies
We aim to hold our private company
investments at 'fair value', i.e. the price that would be paid in
an open-market transaction. Valuations are adjusted both during
regular valuation cycles and on an ad hoc basis in response to
'trigger events'. Our valuation process ensures that private
companies are valued in both a fair and timely manner.
The valuation process is overseen by
a valuations group at Baillie Gifford, which takes advice from an
independent third party (S&P Global). The valuations group is
independent from the investment team, with all voting members being
from different operational areas of the firm, and the investment
managers
only receive final notifications
once they have been applied.
We revalue the private holdings on a
three-month rolling cycle, with one-third of the holdings
reassessed each month. During stable market conditions, and
assuming all else is equal, each investment would be valued twice
in a six month period. For investment trusts, the prices are also
reviewed twice per year, at the interim and financial year end, by
the respective investment trust boards and are subject to the
scrutiny of external auditors in the annual audit
process.
Beyond the regular cycle, the
valuations team also monitors the portfolio for certain 'trigger
events'. These may include: changes in fundamentals; a takeover
approach; an intention to carry out an Initial Public Offering
('IPO'); company news which is identified by the valuation team or
by the portfolio managers, or significant changes to the valuation
of comparable public companies. Any ad hoc change to the fair
valuation of any holding is implemented swiftly and reflected in
the next published net asset value. There is no delay.
The valuations team also monitors
relevant market indices on a weekly basis and updates valuations in
a manner consistent with our external valuer's (S&P Global)
most recent valuation report where appropriate.
Portfolio companies split by impact
theme
as at 31 March 2024
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
|
%
|
TSMC
|
12,149
|
7.0
|
Xylem
|
8,238
|
4.7
|
Dexcom
|
8,943
|
5.1
|
Bank Rakyat Indonesia
|
8,360
|
4.8
|
ASML
|
11,427
|
6.6
|
Autodesk
|
7,349
|
4.2
|
Moderna
|
8,364
|
4.8
|
Remitly Global
|
5,992
|
3.4
|
MercadoLibre
|
11,332
|
6.5
|
Deere
|
6,936
|
4.0
|
Illumina
|
5,242
|
3.0
|
Safaricom
|
2,415
|
1.4
|
Shopify
|
7,930
|
4.6
|
Ecolab
|
5,325
|
3.1
|
Alnylam Pharmaceuticals
|
5,036
|
2.9
|
|
16,767
|
9.6
|
Nu Holdings
|
6,630
|
3.8
|
Tesla
|
3,406
|
2.0
|
Sartorius
|
4,385
|
2.5
|
|
|
|
Duolingo
|
5,691
|
3.3
|
Northvolt AB u
|
3,333
|
1.9
|
10x Genomics
|
2,116
|
1.2
|
|
|
|
HDFC Bank
|
5,215
|
3.0
|
Umicore
|
3,104
|
1.8
|
Discovery Holdings
|
1,556
|
0.9
|
|
|
|
Coursera
|
3,451
|
2.0
|
Katitas
|
3,056
|
1.8
|
AbCellera Biologics
|
1,445
|
0.8
|
|
|
|
Grab
|
3,388
|
1.9
|
Climeworks u
|
1,725
|
1.0
|
WuXi Biologics
|
1,433
|
0.8
|
|
|
|
PsiQuantum u
|
1,572
|
0.9
|
Boston Electrometallurgical
Corp u
|
1,672
|
1.0
|
|
38,520
|
22.0
|
|
|
|
|
68,785
|
39.6
|
Joby Aviation
|
1,459
|
0.8
|
|
|
|
|
|
|
|
|
|
Novonesis
|
1,166
|
0.7
|
|
|
|
|
|
|
|
|
|
Spiber u
|
901
|
0.5
|
|
|
|
|
|
|
|
|
|
Rivian Automotive
|
618
|
0.4
|
|
|
|
|
|
|
|
|
|
|
48,288
|
27.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net liquid assets*
|
1,594
|
0.9
|
|
|
|
|
|
|
|
|
Total assets*
|
173,954
|
100.0
|
* For a definition of terms see
Glossary of Terms and Alternative Performance Measures at the end
of this announcement.
u
Denotes unlisted private company
holding
Income statement
(unaudited)
|
|
For the
six months ended 31 March 2024
|
|
For the
six months ended 31 March 2023
|
|
For the
year ended 30 September 2023 (audited)
|
|
Notes
|
Revenue
£'000
|
Capital
£'000
|
Total
£'000
|
|
Revenue
£'000
|
Capital
£'000
|
Total
£'000
|
|
Revenue
£'000
|
Capital
£'000
|
Total
£'000
|
Gains on investments
|
|
-
|
15,470
|
15,470
|
|
-
|
19,505
|
19,505
|
|
-
|
9,884
|
9,884
|
Currency gains
|
|
-
|
219
|
219
|
|
-
|
722
|
722
|
|
-
|
589
|
589
|
Income from investments and interest
receivable
|
|
915
|
-
|
915
|
|
1,021
|
-
|
1,021
|
|
1,618
|
-
|
1,618
|
Investment management fee
|
3
|
(118)
|
(354)
|
(472)
|
|
(110)
|
(331)
|
(441)
|
|
(223)
|
(668)
|
(891)
|
Other administrative
expenses
|
|
(252)
|
-
|
(252)
|
|
(242)
|
-
|
(242)
|
|
(477)
|
-
|
(477)
|
Net return before finance costs and
taxation
|
|
545
|
15,335
|
15,880
|
|
669
|
19,896
|
20,565
|
|
918
|
9,805
|
10,723
|
Finance costs of
borrowings
|
|
(136)
|
(389)
|
(525)
|
|
(104)
|
(295)
|
(399)
|
|
(234)
|
(666)
|
(900)
|
Net return on ordinary activities
before taxation
|
|
409
|
14,946
|
15,355
|
|
565
|
19,601
|
20,166
|
|
684
|
9,139
|
9,823
|
Tax on ordinary
activities
|
|
(155)
|
7
|
(148)
|
|
(167)
|
(12)
|
(179)
|
|
(244)
|
(7)
|
(251)
|
Net return on ordinary activities
after taxation
|
|
254
|
14,953
|
15,207
|
|
398
|
19,589
|
19,987
|
|
440
|
9,132
|
9,572
|
Net return per ordinary
share
|
4
|
0.41p
|
24.39p
|
24.80p
|
|
0.64p
|
31.69p
|
32.33p
|
|
0.71p
|
14.77p
|
15.48p
|
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 profit and total comprehensive income
for the period.
Balance sheet (unaudited)
|
Notes
|
At 31 March
2024
£'000
|
At 30 September
2023
(audited)
£'000
|
Fixed assets
|
|
|
|
Investments held at fair value
through profit or loss
|
6
|
172,360
|
161,497
|
Current assets
|
|
|
|
Debtors
|
|
431
|
313
|
Cash at bank
|
|
1,608
|
728
|
|
|
2,039
|
1,041
|
Creditors
|
|
|
|
Amounts falling due within one
year:
|
|
|
|
Bank loan
|
7
|
(15,044)
|
(15,245)
|
Other creditors
|
|
(445)
|
(383)
|
|
|
(15,489)
|
(15,628)
|
Net current liabilities
|
|
(13,450)
|
(14,587)
|
Total assets less current
liabilities
|
|
158,910
|
146,910
|
Creditors
|
|
|
|
Amounts falling due after more than
one year:
|
|
|
|
Cumulative preference
shares
|
8
|
(250)
|
(250)
|
Provision for tax
liability
|
9
|
-
|
(7)
|
Net assets
|
|
158,660
|
146,653
|
Capital and reserves
|
|
|
|
Share capital
|
10
|
6,760
|
6,760
|
Share premium account
|
|
3,449
|
3,449
|
Capital redemption
reserve
|
|
466
|
466
|
Capital reserve
|
|
147,425
|
135,396
|
Revenue reserve
|
|
560
|
582
|
Shareholders' funds
|
|
158,660
|
146,653
|
Net asset value per ordinary
share*
|
|
262.3p
|
237.3p
|
* For a
definition of terms see Glossary of Terms and Alternative
Performance Measures at the end of this announcement.
Statement of changes in equity
(unaudited)
For
the six months ended 31 March 2024
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
2023
|
|
6,760
|
3,449
|
466
|
135,396
|
582
|
146,653
|
Net return on ordinary activities
after taxation
|
|
-
|
-
|
-
|
14,953
|
254
|
15,207
|
Ordinary shares bought into
treasury
|
|
-
|
-
|
-
|
(2,924)
|
-
|
(2,924)
|
Dividends paid during the
period
|
5
|
-
|
-
|
-
|
-
|
(276)
|
(276)
|
Shareholders' funds at 31 March
2024
|
|
6,760
|
3,449
|
466
|
147,425
|
560
|
158,660
|
For
the six months ended 31 March 2023
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
2022
|
|
6,760
|
3,449
|
466
|
126,264
|
389
|
137,328
|
Net return on ordinary activities
after taxation
|
|
-
|
-
|
-
|
19,589
|
398
|
19,987
|
Dividends paid during the
period
|
5
|
-
|
-
|
-
|
-
|
(247)
|
(247)
|
Shareholders' funds at 31 March
2023
|
|
6,760
|
3,449
|
466
|
145,853
|
540
|
157,068
|
* The
Capital reserve balance at 31 March 2024 includes investment
holding losses of £12,785,000 (31 March 2023 - losses of
£41,834,000).
Condensed cash flow statement
(unaudited)
|
Six months to
31 March 2024
£'000
|
Six months to
31 March 2023
£'000
|
Cash flows from operating
activities
|
|
|
Net return before finance costs and
taxation
|
15,880
|
20,565
|
Net gains on investments
|
(15,470)
|
(19,505)
|
Currency gains
|
(258)
|
(718)
|
Overseas tax incurred
|
(142)
|
(94)
|
Changes in debtors and
creditors
|
(123)
|
(474)
|
Net cash inflow from investing
activities
|
4,607
|
732
|
Net cash inflow from operating
activities*
|
4,494
|
506
|
Cash flows from financing
activities
|
|
|
Net cash inflow from drawdown of
bank loans
|
60
|
225
|
Interest and cumulative preference
share dividends paid
|
(522)
|
(379)
|
Ordinary shares bought
back
|
(2,873)
|
-
|
Dividends paid
|
(276)
|
(247)
|
Net cash outflow from financing
activities
|
(3,611)
|
(401)
|
Increase in cash at bank
|
883
|
105
|
Exchange movements
|
(3)
|
(36)
|
Cash at bank at start of
period
|
728
|
962
|
Cash at bank at end of
period
|
1,608
|
1,031
|
* Cash from
operating activities includes dividends received of £798,000 (31
March 2023 - £588,000) and interest received of £6,000 (31 March
2023 - £10,000).
Notes to the condensed Financial
Statements (unaudited)
1 Basis of
accounting
The condensed Financial Statements
for the six months to 31 March 2024 comprise the statements set out
above together with the related notes below. They have been
prepared in accordance with FRS 104 'Interim Financial Reporting'
and the AIC's Statement of Recommended
Practice issued in July 2022. They have not been audited or
reviewed by the auditor pursuant to the
Auditing Practices Board Guidance on 'Review of Interim Financial
Information'. The condensed Financial Statements for the six months
to 31 March 2024 have been prepared on the
basis of the same accounting policies as set out in the Company's
Annual Report and Financial Statements at 30 September
2023.
Going concern
The Directors have considered the
Company's principal risks and uncertainties, as set out at the end
of this announcement, together with the Company's current position,
investment objective and policy, the level of demand for the
Company's shares, the nature of its assets, its liabilities and
projected income and expenditure. The Board has, in particular,
considered the ongoing impact of geopolitical and macroeconomic
challenges. The Company's assets, the majority of which are
investments in listed securities which are readily realisable,
exceed its liabilities significantly. The Board approves borrowing
and gearing limits and reviews regularly the amounts of any
borrowing and the level of gearing as well as compliance with
borrowing covenants. The Company has continued to comply with the
investment trust status requirements of section 1158 of the
Corporation Tax Act 2010 and the Investment Trust (Approved
Company) Regulations 2011. Accordingly, the Directors consider it
appropriate to adopt the going concern basis of accounting in
preparing these condensed Financial Statements and confirm that
they are not aware of any material uncertainties which may affect
the Company's ability to continue to do so over a period of at
least twelve months from the date of approval of these condensed
Financial Statements.
2 Financial
information
The financial information contained
within the Interim Financial Report does not constitute statutory
accounts as defined in sections 434 to 436 of the Companies Act
2006. The financial information for the year ended 30 September
2023 has been extracted from the statutory accounts which have been
filed with the Registrar of Companies. The Auditors' Report on
those accounts was not qualified, did not include a reference to
any matters to which the Auditors drew attention by way of emphasis
without qualifying their report, and did not contain statements
under sections 498(2) or (3) of the Companies Act 2006.
3
Investment
management fee
Baillie Gifford & Co Limited, a
wholly owned subsidiary of Baillie Gifford & Co, has been
appointed by the Company as its Alternative Investment Fund Manager
and Company Secretary. Baillie Gifford & Co Limited has
delegated the investment management services to Baillie Gifford
& Co.
The Management Agreement can be
terminated on three months' notice. 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.
4
Net return per
ordinary share
|
Six months to
31 March 2024
£'000
|
Six months to
31 March 2023
£'000
|
Year to
30 September 2023 (audited)
£'000
|
Revenue return on ordinary
activities after taxation
|
254
|
398
|
440
|
Capital return on ordinary
activities after taxation
|
14,953
|
19,589
|
9,132
|
Total net return
|
15,207
|
19,987
|
9,572
|
Weighted average number of ordinary
shares in issue
|
61,299,161
|
61,815,632
|
61,815,632
|
The net return per ordinary share
figures are based on the above totals of revenue and capital and
the weighted average number of ordinary shares in issue (excluding
treasury shares) during each period.
There are no dilutive or potentially
dilutive shares in issue.
5 Dividends
|
Six months
to 31 March
2024
£'000
|
Six months
to 31 March
2023
£'000
|
Year
to
30 September
2023
(audited)
£'000
|
Amounts recognised as distributions in the
period:
|
|
|
|
Previous year's final dividend of
0.45p (2023 - 0.40p) paid 8 February 2024
|
276
|
247
|
247
|
Amounts paid and payable in respect of the
period:
|
|
|
|
Final dividend (2023 -
0.45p)
|
-
|
-
|
276
|
6 Fair Value
Hierarchy
The Company's investments are
financial assets held at fair value through profit or loss. The
fair value hierarchy used to analyse the basis on which the fair
values of financial instruments held at fair value through profit
or loss are measured is described below. The levels are determined
by the lowest (that is the least reliable or least independently
observable) level of input that is significant to the fair value
measurement for the individual investment in its
entirety.
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).
An analysis of the Company's
financial asset investments based on the fair value hierarchy
described above is shown below.
Investments held at fair value through profit or
loss
As at 31 March 2024
|
Level
1
£'000
|
Level
2
£'000
|
Level
3
£'000
|
Total
£'000
|
Listed equities
|
163,157
|
-
|
-
|
163,157
|
Unlisted securities
|
-
|
-
|
9,203
|
9,203
|
Total financial asset investments
|
163,157
|
-
|
9,203
|
172,360
|
As at 30 September 2023
(audited)
|
Level
1
£'000
|
Level
2
£'000
|
Level
3
£'000
|
Total
£'000
|
Listed equities
|
151,847
|
-
|
-
|
151,847
|
Unlisted securities
|
-
|
-
|
9,650
|
9,650
|
Total financial asset investments
|
151,847
|
-
|
9,650
|
161,497
|
The fair value of listed security
investments is bid price or, in the case of FTSE 100 constituents
and holdings on certain recognised overseas exchanges, last traded
price. Listed Investments are categorised as Level 1 if they are
valued using unadjusted quoted prices for identical instruments in
an active market and as Level 2 if they do not meet all these
criteria but are, nonetheless, valued using market data. Unlisted
investments are valued at fair value by the Directors following a
detailed review and appropriate challenge of the valuations
proposed by the Managers. The Managers' unlisted investment policy
applies methodologies consistent with the International Private
Equity and Venture Capital Valuation guidelines ('IPEV'). These
methodologies can be categorised as follows: (a) market approach
(multiples, industry valuation benchmarks and available market
prices); (b) income approach (discounted cash flows); and (c)
replacement cost approach (net assets). The Company's holdings in
unlisted investments are categorised as Level 3 as unobservable
data is a significant input to their fair value
measurements.
7 Bank loans
The Company has a 3 year £25 million
multicurrency unsecured floating rate facility with The Royal Bank
of Scotland International Limited which expires on 31 August 2024.
At 31 March 2024 drawings were as follows: US$9.5 million at an
interest rate of 1.25% over SOFR and £7.5 million at an interest
rate of 1.25% over SONIA, both maturing in June 2024 (30 September
2023 - US$9.5 million and £7.5 million maturing in December
2023).
8 Cumulative preference
shares
Long term creditors include 250,000
5% cumulative preference shares of £1 each. The preference shares
dividend is paid bi-annually, in March and September.
9 Provision for tax
liability
The tax liability provision at 31
March 2024 of nil (30 September 2023 - £7,000) relates to a
potential tax liability for Indian capital gains tax that may arise
on the Company's Indian investments should they be sold in the
future, based on the net unrealised taxable gain at the period end
and on enacted Indian tax rates. The amount of any future tax
amounts payable may differ from this provision, depending on the
value and timing of any future sales of such investments and future
Indian tax rates.
10 Share capital: allotted,
called up and fully paid
|
At 31 March 2024
|
At 30
September 2023 (audited)
|
Number
|
£'000
|
Number
|
£'000
|
Ordinary shares of 10p each in
issue
|
60,491,865
|
6,049
|
61,815,632
|
6,182
|
Ordinary shares of 10p each held in
treasury
|
7,102,130
|
711
|
5,778,363
|
578
|
|
67,593,995
|
6,760
|
67,593,995
|
6,760
|
In the six months to 31 March 2024,
the Company bought back 1,323,767 ordinary shares into treasury at
a total cost of £2,924,000 and issued no new shares (six months to
31 March 2023 - no shares bought back, none issued).
At 31 March 2024 the Company had
authority remaining to buy back 8,711,985 ordinary shares on an ad
hoc basis as well as a general authority to issue shares and an
authority to issue shares or sell shares from treasury on a non
pre-emptive basis up to an aggregate nominal amount of £618,156. In
accordance with authorities granted at the last Annual General
Meeting in February 2024, buy-backs will only be made at a discount
to net asset value and the Board has authorised use of the issuance
authorities to issue new shares or sell shares from treasury at a
premium to net asset value, in both cases in order to enhance the
net asset value per share for existing shareholders and improve the
liquidity of the Company's shares.
11 Related party
transactions
There have been no transactions with
related parties during the first six months of the current
financial year that have materially affected the financial position
or the performance of the Company during that period and there have
been no changes in the related party transactions described in the
last Annual Report and Financial Statements that could have had
such an effect on the Company during that period.
None of the views expressed in this
document should be construed as advice to buy or sell a particular
investment.
Principal risks and uncertainties
The principal and emerging risks
facing the Company are: the risk that the Company's strategy and
business model are unsuccessful in achieving its investment
objective; discount/premium risk; financial risk; gearing risk;
operational risk; custody and depositary risk; climate and
governance risk; political and associated economic risk; and
regulatory risk. An explanation of these risks and how they are
managed is set out on pages 41 to 45 of the Company's Annual Report
and Financial Statements for the year to 30 September 2023 which is
available on the Company's website: keystonepositivechange.com. The
principal risks and uncertainties have not changed materially since
the date of that report.
‡ 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.
The Interim Financial Report will be
available on the Company's page of the Managers' website
keystonepositivechange.com‡
on or around 15 May 2024.
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Source: MSCI. The MSCI information
may only be used for your internal use, may not be reproduced or
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of the MSCI information is intended to constitute investment advice
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Glossary of terms and alternative
performance measures ('APM')
Total assets
This is the Company's definition of
Adjusted Total Assets, being the total value of all assets held
less all liabilities (other than liabilities in the form of
borrowings).
Net
asset value
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). For
the current period, the difference between borrowings at book
value, borrowings at par and borrowings at market value is
negligible 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. For the year to 30 September 2023, a reconciliation is
provided below, as the NAV per share differs by 0.1p owing to
roundings.
Net
asset value per share (APM)
|
|
At 31
March
2024
|
At 30
September
2023
|
Shareholders' funds (net
assets)
|
a
|
£158,660,000
|
£146,653,000
|
Ordinary shares in issue (excluding
treasury shares)
|
b
|
60,491,865
|
61,815,632
|
Net
asset value per share ('NAV')
|
(a ÷ b x 100)
|
262.3p
|
237.2p
|
|
|
|
At 30
September
2023
|
Shareholders' funds (net
assets)
|
|
|
£146,653,000
|
Add back: debt at
book/par
|
|
|
£15,495,000
|
Less: debt at market
value
|
|
|
(£15,484,000)
|
Net asset value with debt at market
value
|
|
a
|
£146,664,000
|
Ordinary shares in issue (excluding
treasury shares)
|
|
b
|
61,815,632
|
Net
asset value per share ('NAV') with debt at market
value
|
|
(a ÷ b x 100)
|
237.3p
|
Discount/Premium (APM)
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 NAV per share from
the share price 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.
|
|
At 31
March
2024
|
At 30
September
2023
|
Net asset value per ordinary
share
|
a
|
262.3p
|
237.3p
|
Share price
|
b
|
231.0p
|
204.0p
|
(Discount)/premium
|
(b-a) ÷ a expressed as a
percentage
|
(11.9%)
|
(14.0%)
|
Net
liquid assets
Net liquid assets comprises current
assets less current liabilities excluding borrowings.
Total return (APM)
The total return is the return to
shareholders after reinvesting the net dividend on the date that
the share price goes ex-dividend. In periods where no dividend is
paid, the total return equates to the capital return.
|
|
31
March
2024
NAV
|
31
March
2024
Share
price
|
30
September 2023
NAV
|
30
September 2023
Share
price
|
Closing NAV/price per
share
|
a
|
262.3p
|
231.0p
|
237.3p
|
204.0p
|
Dividend adjustment
factor*
|
b
|
1.001775
|
1.00203
|
1.00166
|
1.00914
|
Adjusted closing NAV/price per
share
|
c = a x b
|
262.8p
|
231.5p
|
237.7p
|
204.4p
|
Opening NAV/price per
share
|
d
|
237.3p
|
204.0p
|
222.2p
|
192.8p
|
Total return
|
(c ÷ d) -1
|
10.7%
|
13.5%
|
7.0%
|
6.0%
|
* The
dividend adjustment factor is calculated on the assumption that the
dividends paid by the Company during the period were reinvested
into shares of the Company at the cum income NAV/share price at the
relevant ex-dividend date.
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.
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.
Private (unlisted) company
A private or unlisted company means
a company whose shares are not available to the general public for
trading and are not listed on a stock exchange.
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).
|
|
31
March
2024
|
30
September 2023
|
Borrowings (at book cost)
|
a
|
£15,294,000
|
£15,495,000
|
Less: cash and cash
equivalents
|
|
(£1,608,000)
|
(£728,000)
|
Less: sales for subsequent
settlement
|
|
-
|
-
|
Add: purchases for subsequent
settlement
|
|
50
|
-
|
Adjusted borrowings
|
b
|
£13,736,000
|
£14,767,000
|
Shareholders' funds
|
c
|
£158,660,000
|
£146,653,000
|
Gross gearing
|
a ÷ c
|
9.6%
|
10.6%
|
Net
gearing
|
b ÷ c
|
8.6%
|
10.1%
|
- Ends
-