Keystone
Positive Change Investment Trust plc
Legal
Entity Identifier: 213800JUA8RKIDDLH380
6 January
2025
Posting of Circular and
Notice of Requisitioned General Meeting called by Saba Capital
Management, L.P.
THE DIRECTORS URGE
SHAREHOLDERS
TO VOTE
AGAINST ALL THE REQUISITIONED RESOLUTIONS
The Board of Keystone Positive
Change Investment Trust plc (the "Company") announces that it has today
published a circular (the "Circular") setting out details of the
Company's response to the letters and accompanying notices dated 18
December 2024 from Barclays Capital Securities Client Nominees
Limited, acting as nominee of Saba Capital Management, L.P. and why
the Board believes Shareholders should VOTE AGAINST ALL of the proposed
Requisitioned Resolutions.
The Circular contains a Notice of Requisitioned
General Meeting to be held at the offices of Deutsche
Numis, 45 Gresham Street, London EC2V 7BF on 3 February 2025 at 12
noon.
YOUR
VOTE IS VERY
IMPORTANT. The Requisitioned Resolutions
are each being proposed as ordinary resolutions. This means that
they only require more than 50 per cent of the votes cast to be voted in favour in order to pass. Saba
has declared interests in approximately 28 per cent. of the
Company's issued Ordinary Share capital. Therefore, the Board
believes that other Shareholders representing at
least 30 per cent. of the Company's issued Ordinary Share
capital are required to VOTE AGAINST
the Requisitioned Resolutions in order to ensure they are blocked.
FAILURE TO TAKE ACTION MAY LEAD TO
SABA TAKING CONTROL OF YOUR COMPANY.
Karen Brade, Chair of Keystone Positive Change plc,
said:
"We are
appalled by Saba's actions and conduct. We believe its
proposed resolutions would be highly detrimental to the interests
of all other shareholders. Be under no illusion - we believe this
US hedge fund manager is acting opportunistically, seeking to seize
control of the Board without a controlling shareholding, to pursue
its own agenda. We believe Saba's plan lacks transparency, would
flagrantly disregard good governance, and may introduce
substantially inflated fees. The proposed resolutions are not in
the best interest of all shareholders and create significant
uncertainty.
In absolute contrast to Saba,
your Board has actively engaged with shareholders in recent months
to understand their priorities and concerns. In response, we have
put forward a credible plan that reflects the feedback received,
and aligns with Saba's own prior request for a cash exit by Q1
2025. Our plan offers shareholders clear choices: an uncapped cash
exit; a transfer to a more liquid fund pursuing a similar
investment strategy, or a combination of
both.
Your Board remains unwavering in
its rejection of Saba's proposals. Given Saba's considerable voting
position, every vote against its resolutions is vital. We
strongly urge all shareholders to vote against all resolutions - a
high turn-out is critical. Refraining from voting will risk ceding
control of your Company to Saba."
The Board believes that VOTING AGAINST all the Requisitioned
Resolutions is in the best interests of Shareholders as a whole for
the following reasons:
1. The Board has already proposed a credible plan
that provides choice and certainty for ALL
Shareholders
· Following its consultation with a broad group of Shareholders,
including Saba, the Board proposed a section 110 scheme of
reconstruction and winding-up of the Company (the "Scheme") that will, if implemented,
provide Shareholders with the option to either: (a) realise their
investment in the Company by way of an uncapped cash exit; or (b)
rollover their investment in the Company in a tax-efficient manner
into the Baillie Gifford Positive Change Fund.
· The
Board retains a high degree of conviction in Baillie Gifford's
Positive Change strategy which seeks to generate attractive long
term capital returns and to contribute towards a more sustainable
and inclusive world. The Scheme's rollover option into the Baillie
Gifford Positive Change Fund enables Shareholders who so wish to
retain their exposure to its impact strategy.
· The
Board's decision to propose the Scheme was taken in order to
address the small size of the Company, the low liquidity in the
Ordinary Shares and the discount at which the Ordinary Shares have
been trading relative to the Company's Net Asset Value per Ordinary
Share.
· Saba,
an activist US hedge fund manager which first declared an interest
in the Company's Ordinary Shares in September 2023 and currently
has declared interests of approximately 28 per cent., was
approached as part of the Board's consultation exercise. Saba had
advocated for a solution to return cash which the Board
incorporated through proposing the Scheme with an uncapped cash
exit. The Board notes that the cash option discount applied to the
uncapped cash exit under the Scheme is only 1 per cent., which the
Board believes to be competitive for a transaction of this
nature.
2. Saba is now intent on disrupting the Scheme and
taking control of the Company for its own commercial
self-interest
· Despite the prior engagement, Saba has now stated its
intention to block the Board's proposal. This will cause additional
costs, unnecessary delay and considerable uncertainty for all
Shareholders.
o In
justifying its blocking of the Scheme, Saba has, in subsequent
conversations, referred to concerns around the Scheme's method for
crystalising value from the Company's private investments which
only represented approximately 2.6 per cent. of the Company's
portfolio as at 30 November 2024.
o The
Board is disappointed that Saba appears to be using this as an
excuse to oppose the Scheme and is confident that the proposed
orderly realisation of the Company's private investments is the
optimum route to achieve best value for Shareholders.
o The
Board considers the disproportionate emphasis placed by Saba on the
small number of private investments to be disingenuous, and an
exercise in misdirection.
· Instead of supporting the Scheme, Saba is intent on replacing
the Company's five experienced, independent non-executive
Directors, with its own two nominees, Paul Kazarian and John
Karabelas (the "Proposed
Nominees"). Were these Proposed Nominees appointed, this
would result in 100 per cent. of the Company's board having been
nominated by Saba, with one of the two Directors directly employed
by Saba. This would give Saba effective control of the Company,
without paying a control premium. Further, Shareholders should
question whether these individuals would be capable of exercising
independent judgement and making decisions based upon the interests
of all Shareholders.
· One of
the two Proposed Nominees, Paul Kazarian, a partner at Saba, has
also been nominated to act as a director at five of the six other
UK investment trusts being targeted by Saba (the "Targeted Trusts"). This raises serious
governance concerns and potential conflicts of interest,
particularly given Saba has stated that, if it were to obtain the
management mandate of the Company, its strategy would possibly
include combining investment trusts, which the Board believes would
include the Targeted Trusts. Your Board also questions whether Mr
Kazarian, if appointed to each of these boards, would be able to
devote sufficient time and effort to his duties to each of the
Targeted Trusts so as to successfully and diligently discharge his
fiduciary duties and other responsibilities.
· Arrangements are being made for the Board to meet John
Karabelas, Saba's other Proposed Nominee. From the information made
available by Saba to date, the Board has concerns that Mr Karabelas
lacks relevant experience in UK investment trusts, with a
background in US institutional credit sales.
· This
is not the first time Saba has deployed aggressive tactics for its
own gain. Saba has been involved in several public US lawsuits
concerning closed-end funds, including those managed by BlackRock,
Franklin Resources and Nuveen, among others, and has also recently
been appointed as manager of two funds listed on the New York Stock
Exchange. Saba's simultaneous attack on the Targeted Trusts
suggests an expansion of its hostile strategy into
Europe.
3. Saba has not offered a plan for the benefit of
all Shareholders. Its proposal pays no heed to the Company's
specific circumstances, is aimed at Saba being selected as the
investment manager, and would likely come at significant expense to
all Shareholders.
· The
Board has sought to engage constructively with Saba, including most
recently by hosting a call with them on 2 January 2025. While
reiterating its intention to vote the Scheme down, Saba failed to
set out any alternative suggestions that the Board believes would
be in the interests of all Shareholders.
· Saba
has publicly stated that, were the Proposed Nominees elected to act
as Directors, the options to be assessed by the new Board would
include Saba being selected as the Company's new investment
manager, and the Company's investment mandate being changed to
Saba's strategy of purchasing discounted trusts and/or combining
the Company with other investment trusts.
· The
Directors have received limited information regarding Saba's
proposal. However, it is clear that, in contrast to the
Scheme:
o Saba's proposed mandate bears no resemblance to the Company's
current global impact mandate, to which a number of Shareholders
have indicated that they wish to retain exposure; and
o Saba's proposal does not offer an uncapped cash
exit.
· The
Board is concerned that Saba's proposal may come with high costs,
in terms of the costs already incurred in respect of the Scheme it
is seeking to block, the costs of implementing its proposed
changes, including terminating Baillie Gifford's management
agreement, and the ongoing costs of its strategy.
4. If the Requisitioned Resolutions are blocked by
Shareholders and the current Directors remain in office, they will
continue to pursue the interests of Shareholders as a whole and
specifically will remain committed to implementing an uncapped cash
exit from the Company.
The Board strongly recommends that
Shareholders VOTE AGAINST
each of the Requisitioned Resolutions to be proposed at the
Requisitioned General Meeting, as the Directors intend to do in
respect of their own beneficial interests in the Company's
Shares.
A copy of the Circular has been
submitted to the National Storage Mechanism and will shortly be
available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism and on the
Company's website at www.bailliegifford.com/KeystonePositiveChange-SabaDefence.
All Shareholders are encouraged to
VOTE AGAINST each of the
Requisitioned Resolutions to be proposed at the Requisitioned
General Meeting and, if Shareholders do not hold their Ordinary
Shares directly, to arrange for their nominee to VOTE AGAINST each of the Requisitioned
Resolutions on their behalf. Shareholders who hold their Ordinary
Shares through an investment platform provider or nominee are
encouraged to contact their investment platform provider or nominee
as soon as possible to arrange for VOTES AGAINST each of the Requisitioned
Resolutions to be lodged on their behalf. If Shareholders have any
questions as to how they can arrange for their investment platform
provider or nominee to VOTE
AGAINST each of the Requisitioned Resolutions or would like
guidance on this process, they should email the Company's proxy
solicitation agent at keystone@georgeson.com.
EXPECTED TIMETABLE OF
PRINCIPAL EVENTS
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2025
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Publication of the Circular
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6 January
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Latest time and date for lodging Forms of Proxy
or submitting proxy instructions electronically or through CREST in
respect of the Requisitioned General Meeting
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12 noon on 30
January
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Record time and date for entitlement
to vote at the Requisitioned General Meeting
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6.00 p.m. on 30
January
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Requisitioned General
Meeting
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12 noon on 3
February
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Notes
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1.
All references to time above are to London (UK)
time, unless otherwise stated.
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2.
The times and dates set out in the expected
timetable above may be adjusted by the Company, in which event
details of the new times and/or dates will be notified, as
required, to the FCA and the London Stock Exchange and, where
appropriate, to Shareholders and an announcement will be made
through a Regulatory Information Service.
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For
further information please contact:
Deutsche Numis (Financial Adviser and Corporate
Broker)
Nathan Brown
Tel: 020 7260 1426
Matt Goss
Tel: 020 7260 1642
Baillie Gifford & Co (Investment
Manager)
Naomi Cherry
Tel 0131 275 2000
Greenbrook Advisory (PR Advisor)
Rob White, Peter Hewer and
Ksenia Galouchko
Tel: 020
7952 2000
Email: KeystonePositiveChange@greenbrookadvisory.com
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FURTHER
DETAILS
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Introduction
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As announced on 18 December 2024, your Board
has received a request to requisition a general meeting of the
Company (the "Requisition")
from Barclays Capital Securities Client Nominee Limited (the
"Requisitioning Member") as
nominee on behalf of Saba Capital Management, L.P. ("Saba"), an activist US hedge fund
manager. At the time the Requisition was received, Saba held
interests in approximately 29 per cent. of the Company's issued
Ordinary Share capital, represented by a 5.7 per cent. holding of
Ordinary Shares and a 23.6 per cent. holding through financial
instruments. Saba subsequently declared, on 19 December 2024, that
it held interests in approximately 28 per cent. of the Company's
issued Ordinary Share capital.
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For the reasons set out above and summarised
below, your Board is firmly of the view that, in calling the
Requisitioned General Meeting and proposing the Requisitioned
Resolutions, Saba is attempting to disrupt the Board's credible,
published plan for the winding up of the Company which involves an
uncapped cash exit in order to pursue its own commercial
self-interest to the detriment of the interests of Shareholders as
a whole.
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However, under the Companies Act, the Company
is required to convene the Requisitioned General Meeting for the
purpose of allowing Shareholders to consider and vote on the
Requisitioned Resolutions. The Requisitioned Resolutions are, in
summary, seven ordinary resolutions to:
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a) remove each of the current
independent Directors of the Company from office; and
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b) appoint two individuals
nominated by Saba, John Karabelas and Paul Kazarian (the
"Proposed Nominees"), as
Directors,
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in each case with effect from the end of
Requisitioned General Meeting. In order to be passed, each
Requisitioned Resolution will require more than 50 per cent of the
votes cast in person or by proxy to be voted in favour of
it.
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YOUR VOTE IS
VERY IMPORTANT. YOU ARE STRONGLY ENCOURAGED TO VOTE AGAINST ALL THE
REQUISITIONED RESOLUTIONS.
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YOUR VOTE IS
VERY IMPORTANT. The Requisitioned Resolutions
are each being proposed as ordinary resolutions. This means that
they only require more than 50 per cent of the votes cast to be voted in favour in order to pass. Saba
has declared interests in approximately 28 per cent. of the
Company's issued Ordinary Share capital. Therefore, the Board
believes that other Shareholders representing at
least 30 per cent. of the Company's issued Ordinary Share
capital are required to VOTE
AGAINST the Requisitioned Resolutions in order to ensure
they are blocked. FAILURE TO TAKE
ACTION MAY LEAD TO SABA TAKING CONTROL OF YOUR
COMPANY.
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It is
important that as many votes as possible are cast (whether in
person or by proxy) in order for there to be a fair and reasonable
representation of all Shareholders' opinion at the Requisitioned
General Meeting. You are therefore strongly urged to complete, sign
and return your Form of Proxy, or to appoint a proxy electronically
(either through the share portal service or through CREST), as soon
as possible.
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Key
considerations
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As set out in detail in the Circular, your
Board believes that it is in the best interests of all Shareholders
that Shareholders VOTE
AGAINST the Requisitioned Resolutions for the following
reasons:
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1.
By proposing the Scheme, which is well advanced, your Board has
already put forward a credible plan that provides choice and
certainty for ALL Shareholders.
2.
Despite prior engagement, Saba is now intent on disrupting the
Scheme and taking control of the Company for its own commercial
self-interest, proposing the replacement of the existing,
independent Directors with its two Proposed Nominees. Shareholders
should question, among other things, whether these individuals
would be capable of exercising independent judgement and making
decisions based upon the interests of all Shareholders.
3.
Saba has not offered a plan for the benefit of all Shareholders.
Its proposal pays no heed to the Company's specific circumstances,
does not offer an uncapped cash exit, is aimed at Saba being
selected as the investment manager to pursue its own strategy, and
would likely come at a high cost to all Shareholders.
4.
Saba has publicly stated that, were the Proposed Nominees elected
to act as Directors, the options to be assessed by the new Board
would include Saba being selected as the Company's new investment
manager, and the Company's investment mandate being changed to
Saba's strategy of purchasing discounted trusts and/or combining
the Company with other investment trusts. This strategy bears no
resemblance to the Company's current global impact mandate, to
which a number of Shareholders have indicated that they wish to
retain exposure and which the Scheme enables.
If the
Requisitioned Resolutions are blocked by Shareholders and the
current Directors remain in office, they will continue to pursue
the interests of Shareholders as a whole and specifically will
remain committed to implementing an uncapped cash exit from the
Company.
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Background to
the Requisitioned General Meeting and the Requisitioned
Resolutions
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On 30 September 2024, the Board announced that,
notwithstanding its confidence in the long-term prospects for
Baillie Gifford's "Positive Change" strategy, which the Company has
pursued since early 2021, it intended to put forward proposals for
the winding-up of the Company pursuant to the Scheme that will, if
implemented, provide Shareholders with the option to either: (a)
realise their investment in the Company by way of an uncapped cash
exit; or (b) rollover their investment in the Company in a
tax-efficient manner into the Baillie Gifford Positive Change
Fund.
This announcement followed a series of
engagements with a broad range of Shareholders, including Saba,
following which the Board concluded that the interests of all
Shareholders would be best served by implementing a transaction in
the near term to address the size of the Company, the low liquidity
in the Ordinary Shares and the discount at which the Ordinary
Shares have been trading relative to the Company's Net Asset Value
per Ordinary Share, while enabling Shareholders to retain exposure
to the Positive Change strategy should they wish.
The Board was disappointed by Saba's lack of
substantive engagement with the Company following the 30 September
announcement, and subsequently by its repeated refusal to be
consulted on the specifics of the Scheme proposal before it was
announced.
Absent such engagement, the Board proceeded, on
6 December 2024, to publish a detailed proposal for the Scheme,
implementation of which is subject to, among other things, approval
by Shareholders of certain resolutions to be put to Shareholders at
the general meetings of the Company currently scheduled to be held
on 27 January 2025 and 7 February 2025.
Given the Company's attempt to engage
constructively with Saba throughout the period during which Saba
has held an interest in the Company's Ordinary Shares, and the
Board's proposal to implement the Scheme which, in part, reflected
Saba's feedback that pushed for capital to be returned to
Shareholders, the Board was appalled to be served with the
Requisition on 18 December 2024. The Requisition was received as
part of a co-ordinated attack by Saba against the seven Targeted
Trusts: in an open letter to the shareholders of the Targeted
Trusts, Saba explained that it intended to requisition each of the
boards of the Targeted Trusts to convene general meetings by, at
the latest, early February 2025 with a view to removing each of the
Targeted Trusts' existing directors and appointing Saba nominated
directors in their place. Saba also confirmed in this letter that
its nominated directors, if elected to office, would consider
terminating each of the Targeted Trusts' existing management
contracts and offering liquidity near to net asset value, and that
the newly constituted boards would then consider new managers, with
Saba proposing itself to each board. Were Saba to be appointed as
manager, Saba has confirmed it will follow an investment strategy
of purchasing discounted investment trusts and/or combining the
portfolios of investment trusts, which the Board believes would
include the Targeted Trusts that it hopes to manage, in an attempt
to achieve the benefits of scale. To this end, the Requisitioned
Resolutions seek to remove each of the Company's experienced and
independent Directors from office and replace them with Saba's
Proposed Nominees.
The Company has since re-engaged with Saba,
seeking to better understand its objections to the Scheme and also
to investigate the potential for a compromise solution that would
be in the interests of Shareholders as a whole. In this discussion
Saba stated that its primary objection to the Scheme was
dissatisfaction with the proposed orderly realisation of the
Company's private investments, which the Directors find
unconvincing given that these investments represented only 2.6 per
cent. of the Company's portfolio as at 30 November 2024. As a
result, and as set out in detail in the Circular, the Directors
believe Saba's motivation is more likely driven by its desire to
gain control of the Board for its own commercial
self-interest.
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In
light of the above, the Board has decided to proceed without delay
to convene the Requisitioned General Meeting to provide all
Shareholders with the opportunity to determine the Company's
future.
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The
Board strongly recommends that Shareholders VOTE AGAINST each of
the Requisitioned Resolutions to be proposed at the Requisitioned
General Meeting, as the Directors intend to do in respect of their
own beneficial interests in the Company's Shares.
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IMPORTANT INFORMATION
Unless the context provides otherwise, words and expressions
defined in the Circular shall have the same meanings in this
announcement.
END
