Requisitions General Meetings of Shareholders
of Seven Investment Trusts Currently Managed by Baillie Gifford,
Herald Investment Management, Janus Henderson Investors and
Manulife | CQS Investment Management
Intends to Reconstitute the Boards with
Experienced Directors Who Will “Mind the Gap” Between the Trusts’
Trading Price and Net Asset Value
Details Plan to Quickly Deliver Substantial
Liquidity and Long-Term Returns for All Shareholders
Visit www.mindthegap-uktrusts.com to Sign Up
for Important Campaign Updates, Meet Saba’s Director Candidates and
Learn How to Support Saba’s Resolutions at the General Meetings
Saba Capital Management, L.P. (together with certain of its
affiliates, “Saba” or “we”) today announced that it has
requisitioned the Boards of Directors (the “Boards”) of Baillie
Gifford US Growth Trust PLC (USA:LSE), CQS Natural Resources Growth
& Income PLC (CYN:LSE), Edinburgh Worldwide Investment Trust
PLC (EWI:LSE), European Smaller Companies Trust PLC (ESCT:LSE),
Henderson Opportunities Trust PLC (HOT:LSE), Herald Investment
Trust PLC (HRI:LSE) and Keystone Positive Change Investment Trust
PLC (KPC:LSE) (collectively, the “Trusts”) to convene general
meetings of shareholders (the “General Meetings”) to provide
shareholders the opportunity to vote on resolutions to remove the
Trusts’ existing directors and appoint highly qualified directors
to replace them. Saba is convening the General Meetings because we
believe the current Boards of Directors and investment managers
have failed to perform versus their benchmarks and have, therefore,
required Saba’s investment to narrow the deep trading discounts to
net asset value and deliver returns for shareholders.
In connection with its requisitions, Saba today issued the
following open letter to its fellow shareholders. For more
information on the director candidates and Saba’s plans for the
Trusts, including its intent that the current investment managers
be replaced, visit: www.mindthegap-uktrusts.com.
LEGAL DISCLAIMER: NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION
IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY IN, INTO OR FROM ANY
JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION.
***
18 December 2024
Fellow Shareholders,
On behalf of Saba Capital Management, L.P. (together with
certain of its affiliates, “Saba” or “we”), I am writing to inform
you that we have requested the Boards of Directors (the “Boards”)
of seven investment trusts (listed below) convene general meetings
(the “General Meetings”). The seven trusts are Baillie Gifford US
Growth Trust PLC, CQS Natural Resources Growth & Income PLC,
Edinburgh Worldwide Investment Trust PLC, European Smaller
Companies Trust PLC, Henderson Opportunities Trust PLC, Herald
Investment Trust PLC and Keystone Positive Change Investment Trust
PLC (collectively, the “Trusts”). We called these General Meetings
because the current Boards have failed to hold the investment
managers accountable for the Trusts’ wide trading discounts to net
asset value (“NAV”) and their inability to deliver sufficient
shareholder returns.
Saba holds an interest in approximately 19% to 29% of each
Trust’s shares, making us the largest investor in each Trust,
aligning our interests with yours and giving us the right to
requisition the General Meetings. We believe that the Boards have
not minded the trading gap, which is why we want to offer you the
opportunity to elect new directors with a concrete plan to deliver
shareholder value.
Saba’s Strong Track Record and Views on
the U.K. Investment Trust Industry
Investment trusts first caught my eye as an individual investor
more than two decades ago, early in my career at Deutsche Bank. I
was drawn to the inconsistency: while some trusts traded near fair
value, others were stuck at a yawning discount. This discrepancy
fascinated me. I saw an opportunity to apply techniques from my
institutional markets experience to a space largely driven by small
investors. It was the perfect arena to combine my analytical skills
and passion for navigating the odds, whether as an investor,
blackjack card counter or chess master.
Today, it’s a core strategy for us at Saba Capital, as we seek
to help millions of individual investors realize significant value.
What has caught my attention for the past three years is that the
U.K. trust industry’s discounts have deepened as a consequence of
investors losing faith in managers after shockingly poor
performance in certain trusts. At the same time, the boards have
not held those managers accountable.
Saba prefers private engagement with the boards of the trusts we
invest in, but underperformance, persistent trading discounts and
disengaged management teams leave us no choice but to act. The
value creation opportunities are vast when trusts are overseen by
skilled managers and boards operating with best-in-class
governance. This is why we believe change is
urgently needed at these Trusts.
As one of the world’s single-largest investors in investment
trusts, Saba has a track record of pursuing changes that return
discounted trusts to their full NAV and create long-term value for
shareholders. We have negotiated dozens of shareholder-friendly
corporate actions – such as tenders, share buybacks, restructurings
and discount management plans – and changes to investment
approaches in investment vehicles where shareholders had previously
suffered from prolonged poor performance and subpar management.
With our industry expertise, we have identified a clear path
forward to transform these Trusts and deliver greater shareholder
value than under the current Boards and respective investment
managers, as outlined below.1
Mind the Gap: Why Saba Believes New
Boards Are Necessary to Correct Underperformance
Saba is concerned that the current managers’ and Boards’
inability to mind the gap between each Trust’s trading price and
NAV has destroyed significant value for shareholders. It is
important to note that the Trusts’ discounts to NAV have narrowed
significantly over the last six months. We consider this to be a
direct result of Saba building our total stake in these Trusts to
£1.5 billion. Without such buyer demand or the prospect of active
steps being taken to improve returns to shareholders, there is a
risk of the Trusts’ share prices falling and discounts widening
again if we are unsuccessful in our pursuit to reconstitute the
Boards of the seven Trusts.
As evidenced in the chart below, the Trusts have also delivered
underwhelming, and in some cases disastrous, total shareholder
returns (“TSR”) compared to their respective benchmark indices
during the last three years.2,3
Trust
3-Year Average Discount to
NAV
3-Year TSR vs.
Benchmark
USA
-13.8%
-52.8%
KPC
-12.0%
-47.0%
EWI
-12.9%
-43.1%
CYN
-14.0%
-30.0%
HOT
-13.4%
-26.9%
HRI
-14.7%
-7.4%
ESCT
-13.5%
11.0%
Source: Bloomberg. Data is in GBP
and as of 13 December 2024.
The takeaway is clear: the Trusts’ managers and their directors
have failed shareholders. Performance demonstrates that they have
not taken sufficient steps to resolve the Trusts’ structural
issues, depriving shareholders of superior returns. While there are
multiple levers to narrow these persistent discounts, inaction has
been the consistent course of current leadership.
Saba’s Resolutions: Reconstitute the
Trusts’ Boards with Exceptionally Qualified
Directors
The current Boards’ failure to hold management accountable for
the Trusts’ poor performance has left us no choice but to take the
extraordinary step of requisitioning a General Meeting for each of
the seven Trusts. To swiftly capitalize on the significant upside
opportunity for all shareholders, we have requested that each Board
conduct its General Meeting as soon as possible and expect that all
General Meetings will be scheduled, at the latest, by early
February 2025.4
At each of these meetings, shareholders
will have the opportunity to vote on two critical resolutions (the
“Resolutions”) proposed by Saba to 1.) remove all current directors
of the Trusts, and 2.) appoint new, highly qualified candidates to
replace them.5
By fully reconstituting the Trusts’ Boards, we believe that we
can unlock greater value for shareholders and address the long-term
structural issues that have hamstrung the Trusts’ return potential
under current leadership. Each of the director candidates shares a
deep commitment to improving shareholder returns and putting your
interests above their own.
We have proposed to replace the full Board of each Trust with
the director appointees set out in the following table:
Proposed New Directors &
Summary Biographies
Baillie Gifford US Growth
Trust PLC (USA:LSE)
Boaz Weinstein is a leading hedge
fund manager overseeing $5.5 billion in assets at Saba Capital, one
of the world’s single-largest investors in investment trusts with a
track record of pursuing changes that create long-term value for
shareholders.
- Founder and Chief Investment Officer of Saba, which was named
Hedge Fund of the Year by Risk.net and two-time Activist Hedge Fund
Manager of the Year by Institutional Investor.
- Former Co-Head of Global Credit Trading at Deutsche Bank, where
he had dual responsibility for proprietary trading and market
making.
Miriam Khasidy is a legal
professional and former business consultant based in London who has
experience advising clients on growth strategy, operational
optimization, due diligence processes, banking and finance
arrangements, M&A activity and investor relations.
- Former Director at Pantechnicon Capital LLC, an alternative
investment manager, and former Executive Director at Caerus Group,
a real estate investment and development company.
- Former U.S. Capital Markets Associate at Clifford Chance LLP,
an international law firm where she specialized in advising and
managing disclosure requirements and complex execution mechanics
for cross-border transactions.
CQS Natural Resources Growth
& Income PLC (CYN:LSE)
Paul Kazarian is the Principal
Executive Officer of Saba’s publicly traded investment trusts,
leads Saba’s investment trust and exchange-traded fund strategy and
products, and has extensive experience as an investment trust
director.
- Partner and Closed-End Fund Portfolio Manager at Saba.
- Serves on the Board of Trustees of various publicly traded
trusts.
Marc Loughlin is an investment and
exchange-traded fund expert with nearly three decades of experience
on the buy- and sell-side of the sector.
- Director of Closed-End Fund and Exchange-Traded Fund Trading
Solutions at WallachBeth Capital, a leading provider of
institutional execution services.
- Former Head of Non-Standard Arbitrage at Société Générale in
London, where he spent 13 years, and Head of U.S. Closed-End Fund
Sales at Canaccord Genuity.
Edinburgh Worldwide Investment
Trust PLC (EWI:LSE)
Paul Kazarian. See bio above.
Jonathan Zucker is a seasoned
investment manager and former lawyer with 13 years of experience in
the investment and finance industries.
- Principal of JOAD Investments, a private investment firm, since
2011.
- Former Assistant District Attorney at The Bronx County District
Attorney’s Office in New York City.
European Smaller Companies
Trust PLC (ESCT:LSE)
Paul Kazarian. See bio above.
Doug Hirsch has significant
investment experience, which includes serving on the Board of
Directors of several investment funds and an affiliate of a
formerly publicly traded U.K. company.
- Founder and Managing Partner of Seneca Capital Investments, a
value-oriented, event-driven investment partnership, which is now a
family office.
- Serves on the Board of Directors for several funds managed by
Greenlight Capital and an affiliate of Cerberus Capital Management,
and previously served on the Board of Directors of Smith New Court
New York, an affiliate of Smith New Court PLC, Britain’s largest
independent stockbroker until its sale to Merrill Lynch.
Henderson Opportunities Trust
PLC (HOT:LSE)
Paul Kazarian. See bio above.
Simon Reeves is a wealth management
industry veteran, with more than 25 years of investment experience,
specializing in advising high-net-worth individuals and
families.
- Managing Partner at Pasadena Private Financial Group, a private
wealth advisory firm catering to affluent families and their
businesses. Former Member of the American Stock Exchange and CBOE
making markets in stock options.
- Currently on the investment committee of the Catalyst Fund, an
early-stage venture fund led by the Alliance for SoCal Innovation.
Previously served on the Board of Directors of Saddleback Memorial
Foundation, one of southern California’s leading hospital chains,
helping manage their endowment.
Herald Investment Trust PLC
(HRI:LSE)
Paul Kazarian. See bio above.
Jassen Trenkow is a former finance
and banking executive with 20 years of experience at Wall Street’s
top banking institutions.
- Founder and Managing Partner of DynamiCOO, where he serves as
an on-demand Chief Operating Officer for companies of various
sizes.
- Former Head of Finance Structural Reform and Transformation at
Barclays, and Former Chief Operating Officer of Goldman Sachs Asset
Management in Asia.
Keystone Positive Change
Investment Trust PLC (KPC:LSE)
Paul Kazarian. See bio above.
John Karabelas has 25 years of
experience in fixed income investments, including overseeing the
development, implementation and operation of credit products for a
global bank’s institutional investor client base.
- Head of US Institutional Sales at MUFG since 2019.
- Former Partner and President of Kildonan Castle Asset
Management, an opportunistic credit alternative asset management
firm.
The Plan: Deliver Substantial Liquidity
& Long-Term Returns for Shareholders
We have identified a clear path forward to transform these seven
Trusts and deliver greater value than you could otherwise realize
under the current Boards and managers. Our plan is simple: with a
reconstituted Board, we intend to provide shareholders with
long-overdue liquidity options alongside the opportunity for
greater long-term returns under a new investment strategy and
manager.
If appointed, the new directors will transparently assess all
go-forward options available to the Trusts, including:
- Offering liquidity events, including tender offers and share
buybacks, so that all shareholders immediately have the opportunity
to receive substantial liquidity near NAV, if they wish.
- Terminating the Trusts’ current investment management
agreements.
- Replacing the Trusts’ current investment managers.
- Refocusing the Trusts’ investment mandates on purchasing
discounted trusts and/or combining them with other investment
trusts, where appropriate, to realize scale benefits and
synergies.
The Opportunity: Unlock Value with a
Proven Investment Manager
Saba has seen demand from investors to bring a product similar
to our CEFS exchange-traded fund, which actively invests in
discounted closed-end funds, to the U.K. market. This campaign
answers this call.
At each Trust where shareholders pass our Resolutions, the Board
will be changed immediately, and each newly appointed Board will
consider the optimal investment strategy and manager going forward.
If a new Board, in accordance with its fiduciary duties, decides to
proceed with replacing the existing manager and introducing a new
investment policy, we anticipate the following process:
- The anticipated notice period of three months (EWI, KPC), six
months (CYN, ESCT, HOT, USA) and 12 months (HRI) for each
investment management agreement will be followed.
- If the Board of a Trust decides to proceed with the termination
of any existing investment management agreement, new arrangements
will be considered and put in place prior to its expiry.
- We intend to propose Saba as the new investment manager to each
of the Boards for their consideration.
- If a Board ultimately decides to vote on the appointment of
Saba, Mr. Weinstein and Mr. Kazarian will recuse themselves from
voting on Board decisions related to Saba.
- To ensure compliance with the highest standards of governance,
it is intended that one or more further independent directors will
also be appointed to each Board as soon as reasonably possible
following the Trusts’ General Meetings.
If the director candidates are
appointed, they intend to first assess options to provide
shareholders the opportunity to achieve substantial liquidity near
NAV if they do not wish to remain in a Trust with a new investment
manager and mandate. If a newly reconstituted Board
selects Saba as the new investment manager, we intend to deliver
attractive terms and greater value to shareholders by shifting the
Trusts’ investment mandates to focus on purchasing discounted
trusts consistent with our successful strategy at CEFS, as
investors have consistently called for.
Vote “FOR” Saba’s Resolutions at
the Upcoming General Meetings
As shareholders, you deserve an investment that provides
reliable returns, Boards that advocate for your best interests and
managers that are focused on delivering enhanced value.
If you are ready for positive change, then we strongly urge you
to vote in favour of the
Resolutions as we firmly believe they are the only credible,
long-term way to earn outsized returns on your investment. Saba
believes that passing all the Resolutions is in the best interests
of each Trust and its shareholders. Accordingly, Saba will exercise
all our voting rights in favour of each Resolution at the Trusts’
General Meetings.
We look forward to continuing this dialogue with you and
appreciate your consideration. We are available to discuss our
Resolutions and our campaign to #MindTheGap.
Sincerely,
Boaz Weinstein Founder & Chief Investment Officer, Saba
Capital
***
SABA HOLDINGS IN EACH TRUST
As of 18 December 2024, Saba, directly or indirectly, has the
following aggregate interest in each of the Trusts (including at
least a 5% holding of shares in each Trust):
Trust
Manager of Interest
Aggregate Interest6
Baillie Gifford US Growth Trust
PLC
Saba Capital Management, L.P.
25.2%
CQS Natural Resources Growth
& Income PLC
Saba Capital Management, L.P.
25.1%
Edinburgh Worldwide Investment Trust
PLC
Saba Capital Management, L.P.
21.1%
European Smaller Companies Trust
PLC
Saba Capital Management, L.P.
29.1%
Henderson Opportunities Trust
PLC
Saba Capital Management, L.P.
23.4%
Herald Investment Trust PLC
Saba Capital Management, L.P.
18.6%
Keystone Positive Change Investment Trust
PLC
Saba Capital Management, L.P.
29.2%
Saba’s interest in each Trust is currently less than 30% of the
issued share capital of each relevant Trust. Although Saba has no
current intention to acquire 30% or more of any Trust, following
the potential replacement of applicable investment managers, Saba,
as a shareholder, intends to explore possible means by which
portfolios of the Trusts may be aggregated, where appropriate, to
realise scale benefits and synergies.
***
White & Case LLP is acting as legal adviser to Saba Capital
Management, L.P.
About Saba
Saba Capital Management, L.P. is a global alternative asset
management firm that seeks to deliver superior risk-adjusted
returns for a diverse group of clients. Founded in 2009 by Boaz
Weinstein, Saba is a pioneer of credit relative value strategies
and capital structure arbitrage. Saba has offices in New York City
and London. Learn more at www.sabacapital.com.
DISCLAIMER
Saba Capital Management, L.P. (“Saba”) is publishing this
announcement solely for the information of other shareholders in
each of Baillie Gifford US Growth Trust PLC (USA:LSE), CQS Natural
Resources Growth & Income PLC (CYN:LSE), Edinburgh Worldwide
Investment Trust PLC (EWI:LSE), European Smaller Companies Trust
PLC (ESCT:LSE), Henderson Opportunities Trust PLC (HOT:LSE), Herald
Investment Trust PLC (HRI:LSE) and Keystone Positive Change
Investment Trust PLC (KPC:LSE) (the “Trusts”). This
announcement is not intended to be and does not constitute or
contain any investment recommendation as defined by Regulation (EU)
No 596/2014 (as it forms part of the domestic law in the United
Kingdom by virtue of the European Union (Withdrawal) Act 2018). No
information in this announcement should be construed as
recommending or suggesting an investment strategy. Nothing in this
announcement or in any related materials is a statement of or
indicates or implies any specific or probable value outcome in any
particular circumstance. This announcement is provided merely for
general informational purposes and is not intended to be, nor
should it be construed as (1) investment, financial, tax or legal
advice, or (2) a recommendation to buy, sell or hold any security
or other investment, or to pursue any investment style or strategy.
Neither the information nor any opinion contained in this
announcement constitutes an inducement or offer to purchase or sell
or a solicitation of an offer to purchase or sell any securities or
other investments in the Trusts or any other trust by Saba or any
of its affiliates in any jurisdiction. This announcement does not
consider the investment objective, financial situation, suitability
or the particular need or circumstances of any specific individual
who may access or review this announcement and may not be taken as
advice on the merits of any investment decision. This announcement
is not intended to provide the sole basis for evaluation of, and
does not purport to contain all information that may be required
with respect to, any potential investment in the Trusts. Any person
who is in any doubt about the matters to which this announcement
relates should consult an authorised financial adviser or other
person authorised under the UK Financial Services and Markets Act
2000. To the best of Saba’s ability and belief, all information
contained herein is accurate and reliable, and has been obtained
from public sources that Saba believes to be accurate and reliable.
However, such information is presented “as is”, without warranty of
any kind, whether express or implied, and Saba has not
independently verified the data contained therein. All expressions
of opinion are subject to change without notice, and Saba does not
undertake to update or supplement any of the information, analysis
and opinion contained herein.
The reference herein to CEFS (and Saba as its portfolio manager)
is solely provided for context in discussing the proposals related
to the Trusts and is not intended to be, nor is it, an offer to
sell interests of that fund or any other Saba-managed or subadvised
vehicle.
Saba may continue transacting in the shares and securities of
the Trusts, and/or derivatives referenced to them (which may
include those providing long and short economic exposure) for an
indefinite period following the date of this announcement and may
increase or decrease its interests in such shares, securities
and/or derivatives at any time.
FORWARD LOOKING STATEMENTS
This announcement contains certain forward-looking statements
and information that are based on Saba’s beliefs, as well as
assumptions made by, and information currently available to, Saba.
These statements include, but are not limited to, statements about
strategies, plans, objectives, expectations, intentions,
expenditures and assumptions and other statements that are not
historical facts. When used herein, words such as “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “plan” and “project” and
similar expressions (or their negative) are intended to identify
forward-looking statements. These statements reflect Saba’s current
views with respect to future events, are not guarantees of future
performance and involve risks and uncertainties that are difficult
to predict. Further, certain forward-looking statements are based
upon assumptions as to future events that may not prove to be
accurate. Actual results, performance or achievements may vary
materially and adversely from those described herein. There is no
assurance or guarantee with respect to the prices at which any
securities of the Trusts or any other trust will trade, and such
securities may not trade at prices that may be implied herein. Any
estimates, projections or potential impact of the opportunities
identified by Saba herein are based on assumptions that Saba
believes to be reasonable as of the date hereof, but there can be
no assurance or guarantee that actual results or performance will
not differ, and such differences may be material and adverse. No
representation or warranty, express or implied, is given by Saba or
any of its officers, employees or agents as to the achievement or
reasonableness of, and no reliance should be placed on, any
projections, estimates, forecasts, targets, prospects or returns
contained herein. Neither Saba nor any of its directors, officers,
employees, advisers or representatives shall have any liability
whatsoever (for negligence or misrepresentation or in tort or under
contract or otherwise) for any loss howsoever arising from any use
of information presented in this announcement or otherwise arising
in connection with this announcement. Any historical financial
information, projections, estimates, forecasts, targets, prospects
or returns contained herein are not necessarily a reliable
indicator of future performance. Nothing in this announcement
should be relied upon as a promise or representation as to the
future. Nothing in this announcement should be considered as a
profit forecast.
PERMITTED RECIPIENTS
In relation to the United Kingdom, this announcement is being
issued only to, and is directed only at, (i) investment
professionals specified in Article 19(5) of the Financial Services
and Markets Act 2000 (Financial Promotion) Order 2005 as amended
(the “Order”), (ii) high net worth entities, and other
persons to whom it may lawfully be communicated, falling within
Article 49(2)(a) to (d) of the Order and (iii) persons to whom an
invitation or inducement to engage in investment activity (within
the meaning of section 21 of the Financial Services and Markets Act
2000) in connection with the issue or sale of any securities of the
Trusts or any member of their respective groups may otherwise
lawfully be communicated or caused to be communicated (all such
persons together being referred to as “Permitted
Recipients”). Persons who are not Permitted Recipients must not
act or rely on the information contained in this announcement.
DISTRIBUTION
Not for release, publication or distribution, in whole or in
part, directly or indirectly, in, into or from any jurisdiction
where to do so would constitute a violation of the relevant laws of
that jurisdiction. The distribution of this announcement in certain
countries may be restricted by law and persons who access it are
required to inform themselves and to comply with any such
restrictions. Saba disclaims all responsibility where persons
access this announcement in breach of any law or regulation in the
country of which that person is a citizen or in which that person
is residing or is domiciled.
1 The Trusts’ investment managers include Baillie Gifford,
Herald Investment Management, Janus Henderson Investors and
Manulife | CQS Investment Management. 2 The list of benchmark
indices includes S&P 500 Index (USA), MSCI ACWI Index (KPC),
S&P Global Small Cap Index (EWI), MSCI World Energy Sector
Index (CYN), FTSE All-Share Index (HOT), Russell 2000 Tech Index
(HRI) and MSCI Europe ex U.K. Small Cap Index (ESCT). 3 Source:
Bloomberg. TSR data is inclusive of dividends and as of 13 December
2024. 4 Following receipt of the notice in accordance with
applicable law and each Trust’s articles of association. 5 For USA,
there will be a third resolution to reduce the minimum permitted
board size from three to two directors. 6 Having consulted with the
Takeover Panel, Saba is not aware of other interests or holdings in
any Trust of persons considered by the Takeover Panel to be acting
in concert with it.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241217573649/en/
Investor Contact Alliance
Advisors Timothy Marshall / Adam Riches, 0800-102-6570
saba@allianceadvisors.com
Media Contact Longacre
Square Partners Charlotte Kiaie / Kate Sylvester, +1-646-386-0091
ckiaie@longacresquare.com / ksylvester@longacresquare.com
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