A Scottish investment trust is facing a renewed attempt by a New York hedge fund to oust its entire board.
Saba Capital Management has written to the board of Baillie Gifford-managed Edinburgh Worldwide Investment Trust revealing its plan to call a general meeting.
Boaz Weinstein, Saba’s founder and chief investment officer, said that as a beneficial owner of interests in approximately 30% of the shares it has been “profoundly disappointed” by the trust’s share price performance “for some time”.
In January this year it called a general meeting as part of a campaign aimed at the performance of seven trusts, three of them in Scotland.
EWIT chair Jonathan Simpson-Dent warned at the time that it faced an “existential threat” from Saba. At the meeting held in February 63.8% shareholders voted against Saba’s proposals, completing a clean sweep of trusts to reject the US firm’s advances.
In today’s letter to Mr Simpson-Dent, the Saba chairman said: “At that time, you vigorously rejected our legitimate concerns and encouraged shareholders to dismiss them”.
He noted that that Mr Simpson-Dent had promised to “deliver the performance our shareholders rightly expect.”
He added: “The board has since objectively and categorically failed to execute that job. Despite the trust shareholders placed in you to “protect” their investment, your failure to deliver is undeniable.
“We remain profoundly frustrated by the board’s prolonged inertia, especially given the decisive actions taken by the boards of several other UK investment trusts to increase share prices and narrow persistent discounts to NAV.
“We do not have faith in the current board’s ability to implement the necessary strategic changes. As the Company’s largest shareholder, we feel a duty to our fellow shareholders to drive this essential change.
“Therefore, we will requisition a general meeting of the company to remove the entire incumbent board and, in its place, appoint a new board composed solely of qualified, independent directors who are committed to delivering long-term value for all shareholders.
“Given the positive, transformational effect our engagement has helped drive across the UK investment trust market this past year, similar improvements at the company are urgently required. Shareholders deserve a board that champions and fights for their interests every single day.”
In response, EWIT highlighted its positive performance, with a net asset value total return of +17.5% over the past year, outperforming its benchmark index, the S&P Global Small Cap Index, which returned +4.8%.
The company also noted its discount to net asset value is currently 5.6%, significantly narrower than the peer group average of 10.9%.
While open to discussing board composition, the trust rejected proposals to replace the entire board.
Mr Simpson-Dent said: “Throughout the last year we have sought to engage with Saba to understand their objectives and to enter into a constructive dialogue regarding options for an equitable and holistic solution, including a return of capital.
“Saba’s open letter does not represent the significant progress EWIT has made since this board reset the company on a path for growth a year ago.”
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