Keystone Positive Change Investment Trust plc
Publication of Circular
Recommended proposals for the reconstruction and voluntary winding up of the Company
Introduction
On 30 September 2024 the Board of Keystone Positive Change Investment Trust plc (the “Company” or “Keystone“) announced that it would put forward proposals for a scheme of reconstruction and members’ voluntary winding-up of the Company under section 110 of the Insolvency Act (the “Proposals” or the “Scheme“). Further to this announcement, the Board of the Company is pleased to announce the publication of a Circular in relation to the Scheme (the “Circular“).
Pursuant to the Proposals, which are conditional upon, among other things, the approval of Shareholders at the Shareholder Meetings, each Ordinary Shareholder on the Register on the Record Date (save for any Excluded Shareholder) will be entitled to elect to receive, in respect of some or all of their Ordinary Shares:
- New BGPC Shares in the Baillie Gifford Positive Change Fund (the “Rollover Option“); and/or
- cash (the “Cash Option“).
The Board considers the Proposals to be in the best interests of Shareholders as a whole and recommends that Shareholders vote in favour of the Resolutions required to implement the Proposals at the Shareholder Meetings, as the Directors intend to do in respect of their own beneficial holdings, which in aggregate amount to 109,891 Ordinary Shares (representing approximately 0.19 per cent. of the Company’s issued Ordinary Share capital as at the Latest Practicable Date).
Background to and reasons for the Proposals
In early 2021, Shareholders approved the Company’s adoption of Baillie Gifford & Co’s (“Baillie Gifford” or the “Investment Manager“) “Positive Change” strategy, which seeks to generate attractive long term capital returns and to contribute towards a more sustainable and inclusive world. The Board retains a high degree of conviction in this strategy and believes it is well suited to the investment trust structure, which enables the Investment Manager to access the significant impact opportunities available from committing primary capital to private companies and investing in less liquid public companies.
Notwithstanding this confidence in the long term prospects for the strategy, the Board recognises that there has been a challenging period of performance during a difficult backdrop for the investment trust sector. During the financial year ended 30 September 2024, the Board took a number of steps with a view to enhancing value for Shareholders including commencing a share buyback programme, introducing a continuation vote and increasing marketing activity. However, as announced on 9 September 2024, the Board nonetheless concluded that the interests of Shareholders may 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 they have been trading to Net Asset Value, while enabling Ordinary Shareholders to retain exposure to a global impact strategy should they wish to do so.
The Board subsequently considered additional Shareholder feedback and the Company’s options to retain exposure to the strategy. As announced on 30 September 2024, the Board recognises that the Company has not received sufficient support from Shareholders to allow the strategy the time needed to play out over the period to the recently introduced February 2027 continuation vote and the Board has therefore reluctantly agreed to propose the Scheme, which will provide Ordinary Shareholders with an opportunity to continue their investment through the Rollover Option while, at the same time, offering Ordinary Shareholders the option of a full cash exit (subject to the Cash Option Discount). That said, Shareholders should also refer to the section titled “Illiquid Investments” below.
Summary information on the Baillie Gifford Positive Change Fund
Under the terms of the Scheme, Ordinary Shareholders will be offered the opportunity to roll over their investment into the Baillie Gifford Positive Change Fund (“BGPC“).
BGPC is a sub-fund of Baillie Gifford Investment Funds ICVC (the “ICVC“), an open-ended investment company with variable capital incorporated in Great Britain under the OEIC Regulations.
BGPC is also managed by Baillie Gifford and, as at the Latest Practicable Date, it has net assets of around £1.8 billion. Kate Fox and Lee Qian, the portfolio managers of the Company, are also key decision makers of BGPC together with Thaiha Nguyen, Ed Whitten and Apricot Wilson. It has a similar investment objective to Keystone, as it also pursues Baillie Gifford’s “Positive Change” investment strategy, and it shares a material overlap of portfolio holdings with the Company. BGPC uses a ‘Sustainability Impact’ label for the purposes of the UK Sustainable Disclosure Requirements and investment labels rules.
There are also certain differences between Keystone and BGPC that should be drawn to the attention of Shareholders. In particular, given that open-ended vehicles are required to retain sufficient liquidity to meet redemption requests on an ongoing basis, BGPC’s portfolio does not contain any private company investments. Accordingly, the Illiquid Investments held by Keystone (as described in further detail below) will not be transferred to BGPC as part of the Rollover Pool.
Further information on BGPC and the ICVC is set out in Part 2 of the Circular and in the ICVC Prospectus. Shareholders should also refer to the risk factors set out in Part 5 of the Circular and should not subscribe for any BGPC Shares except on the basis of information provided in the ICVC Prospectus. Please note that the Board takes no responsibility for the contents of the ICVC Prospectus, the Key Information Document or the ICVC Supplementary Information Document.
Options for Shareholders and default positions under the Scheme
Ordinary Shareholders (save for Excluded Shareholders) are being offered the Rollover Option into BGPC and/or the Cash Option in respect of some or all of their Ordinary Shares in the Company. There is no limit on the amount of Ordinary Shares which may be elected for the Cash Option (by returning a Form of Election) and Ordinary Shareholders can make different Elections in respect of different parts of their holdings.
Subject to the satisfaction of Baillie Gifford’s KYC Checks, the Rollover Option is the default option under the Scheme. Ordinary Shareholders (other than Excluded Shareholders) who, in respect of all or part of their holding of Ordinary Shares, do not make a valid Election for the Cash Option under the Scheme will therefore be deemed to have elected for New BGPC Shares in respect of such holding provided that they have satisfied the KYC Checks.
Individual Shareholders who hold Ordinary Shares directly on the Register, and do not already have a Baillie Gifford UK OEIC account, MUST complete and return the KYC Application Form enclosed with the Circular if they wish to receive New BGPC Shares under the Rollover Option. Institutional Shareholders who wish to receive New BGPC Shares and do not already have a Baillie Gifford UK OEIC account MUST contact Baillie Gifford to determine the information required to be provided (if any) to complete the KYC Checks. Shareholders with existing Baillie Gifford UK OEIC accounts do not need to return a KYC Application Form or contact Baillie Gifford in order to receive New BGPC Shares.
Ordinary Shareholders who have not satisfied the KYC Checks, as determined at the sole discretion of Baillie Gifford, by 1.00 p.m. on 23 January 2025 will be deemed to have elected for the Cash Option in respect of their entire holding of Ordinary Shares.
Further information on the KYC Application Form and the KYC Checks, including Baillie Gifford’s contact details, are set out in paragraph 3 of Part 3 of the Circular.