- Herald was first of seven trusts to face a vote on Saba takeover proposals
The board of Herald Investment Trust has claimed victory over Saba Capital after shareholders rejected the hedge fund’s attempt to seize control of the company.
Herald was the first of seven London-listed investment trusts targeted by Saba Capital to see the hedge fund’s proposals taken to a shareholder vote.
In a display of shareholder democracy, investors turned out en-masse to vote, with many doing so via proxy votes or their investment platforms.
More than 65 per cent of total votes cast and a majority of total voting rights rejected eight Saba proposals at a meeting on Wednesday, despite City concerns that low voter turnout could seal the vote in favour of the hedge fund.
Saba, which has steadily built substantial stakes in each of the trusts, is proposing to oust board and management with plans to later take control of each function itself.
Just 0.15 per cent of votes cast by shareholders other than Saba voted in favour of the resolutions, which Herald’s board described as ‘a damning indictment of Saba’s proposals by the company’s non-Saba shareholders’.
Defeated: Saba founder Boaz Weinstein loses first of seven shareholder votes on proposals to seize control of London-listed investment trusts
Saba had critcised Herald’s board for failing to sufficiently tackle a persistently large discount to net asset value, while the performance of manager Katie Potts came under particularly strong criticism from the hedge fund’s founder Boaz Weinstein.
Proxy advisers Glass Lewis and ISS had both urged Herald shareholders to back the trust’s board.
Saba’s plans for the investment trusts are to then merge ‘some of or all’ of the funds into a new strategy investing in trusts trading at a discount.
Herald chair Andrew Joy said the vote provided ‘a clear, complete and incontrovertible rebuttal of Saba’s attempt to take control’ of the trust and ‘change its strategy against the wishes and interests of its non-Saba shareholders’.
He added: ‘It is perfectly clear that the reason Saba’s proposals were rejected is that they were intended to lead to an outcome, namely Saba managing Herald, which the existing shareholders were simply not interested in.
‘The reason shareholders invested, and continue to invest, in Herald is for long-term capital appreciation through investing in smaller technology companies, and they do not wish to be deprived of the opportunity to enjoy more of the same. They did not invest in Herald to become part of a short-term trading strategy.’
Joy said the saga ‘has already cost shareholders money, which unfortunately we cannot reclaim from Saba’.
He added: ‘We look forward to engaging with our shareholders, including Saba, now that our shareholders have voted resoundingly in favour of the Board and by extension, the mandate and the Manager.
‘The Board will be taking advice from our advisers on the next steps. Shareholders have voted overwhelmingly to continue with what has been a unique and highly successful strategy, and we look forward to discussing future developments further with them.’
The next London-listed fund to face a vote on Saba’s proposals is Baillie Gifford US Growth on 3 February.
Broker Peel Hunt has highlighted 21 Saba-owned investment trusts potentially vulnerable to similar action.
Asset management giant BlackRock revealed earlier on Wednesday it had come to a deal with Saba to avoid such action.
This is Money has contacted Saba for comment.
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