Saba Capital Launches Campaign to Deliver Value to Shareholders of Seven U.K. Investment Trusts

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.

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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)