The boards of the Henderson Opportunities trust and The European Smaller Companies trust have urged shareholders to vote against proposed resolutions that would remove the current boards of the trusts and replace them with nominees from Saba Capital.
If the votes were to go through, the board of the Opportunities trust said there could be a change in the current windup policy, which would remove the option for a full cash exit.
The board today announced a scheme that under the current conditions, would either allow investors to transition their investment to the open-ended Janus Henderson UK Equity Income & Growth Fund or receive the entitlement in cash.
See also: Baillie Gifford: ‘We are appalled by Saba’s actions and conduct’
In Saba’s letter to shareholders on 18 December, it said if the new board members were put in place, they would asses “all go-forward options available to the trusts”, including liquidity events that would offer shareholders “to receive substantial liquidity near NAV”.
Wendy Colquhoun, chairman of Henderson Opportunities trust, said: “Saba is attempting to take control of the Company with no assurances as to what will happen to shareholders’ investments. Saba wants to remove a strong and highly qualified independent Board that acts in the interests of all shareholders and replace it with its own non-independent board that may put Saba’s interests first.
“The Board’s message to shareholders is clear: please exercise your vote and don’t let Saba take unnecessary risks with your money.”
The European Smaller companies trust said that if the board was overtaken by Saba, its plans “indicate that they will not continue to invest in the European small cap sector”. In the past five years, the trust has had a share price total return of 73.6%, compared to a sector average 37.8%.
James Williams, chair of The European Smaller Companies trust, said: “Saba is attempting to take control of your Company by removing a highly qualified, independent board that acts in all shareholders’ interests. It’s clear that Saba’s motives are self-serving. It would like to install directors who would not be independent of the Company’s largest shareholder and has indicated that it may appoint itself as investment manager.
“This could endanger shareholder protections, radically alter the Company’s investment risk profile and deny investors the opportunity to benefit from the proven European small cap investment strategy.
“The Board is therefore recommending that shareholders vote against all resolutions proposed. Saba is counting on a high proportion of shareholders not voting. Investor participation is key and will determine the Company’s future.”
Saba launched a campaign in December to replace the boards of seven investment trusts, claiming that they “have not taken sufficient steps to resolve the trusts’ structural issues, depriving shareholders of superior returns”. It pointed to the narrowing of the trust’s discount since Saba’s building stake in the company. The trust currently trades on a 3.15% discount.
In response to the claims by Janus Henderson, Saba stated: “Over the last three years, Janus Henderson’s ESCT and HOT have both traded at a disappointing ~13.5% average discount to NAV. These respective double-digit discounts demonstrate that the trusts’ boards and portfolio managers have failed shareholders.
“During Chair Wendy Colquhoun’s tenure, HOT shareholders have suffered -40% cumulative underperformance. This disastrous track record is the result of poor investment decisions by the manager and negligent oversight by the board. Janus Henderson’s proposed reconstruction scheme for HOT is inferior to our nominees’ plan and their claim that Saba would seek higher fees at shareholders’ expense if selected as investment manager is made up. Do not be fooled – this scheme is simply a last-ditch attempt to protect the underperforming board, continue lining their own pockets with shareholder capital and distract from an indefensible track record.”