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.
The Trusts have delivered underwhelming total shareholder returns ("TSR") compared to their respective benchmark indices during the last three years:1
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 not taken sufficient steps to address the Trusts’ structural issues and have deprived shareholders of superior returns in the process.
Saba’s Resolutions: Reconstitute the Trusts’ Boards with Exceptionally Qualified Directors
Saba has requested that each Board conduct its General Meeting as soon as possible and we expect that all General Meetings will be scheduled, at the latest, by early February 2025.2
At each of the General Meetings, shareholders will have the opportunity to vote on two important resolutions proposed by Saba to:
The Plan: Substantial Liquidity & Long-Term Returns for Shareholders
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 carefully and 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 to focus on purchasing discounted trusts and/or combining them with other investment trusts, where appropriate, to realize scale benefits and synergies.
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.
We have identified new, highly qualified director candidates who possess the right skillsets and mix of experience to unlock greater value for shareholders and address the long-term structural issues that have hamstrung the Trusts' return potential under current leadership.
1 The list of benchmark indices include 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). Source: Bloomberg. TSR data is inclusive of dividends and as of 13 December 2024.
2 Following receipt of the notice in accordance with applicable law and each Trust’s articles of association.
3 For USA, there will be a third resolution to reduce the minimum permitted board size from three to two directors.