Herald shareholders reject Saba. Will other investment trusts follow suit?

Note: for the latest developments related to this story, see our live coverage of investment trust votes.

Shareholders in the Herald Investment Trust (LON:HRIL) have voted against Saba Capital’s proposals to remove the trust’s current board.

A total of 26.4 million votes – 65% of total votes cast – were against Saba’s requisitioned resolutions, which sought to replace the investment trust’s leadership with its own appointees.

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Herald is the first of seven trusts with which Saba has requisitioned general meetings to vote on its proposals.

"Today non-Saba shareholders have almost unanimously rejected Saba's self-interested proposals,” said Andrew Joy, chairman of Herald following the vote on 22 January. “The fact that 99.78% of all votes cast by non-Saba shareholders were voted against Saba’s resolutions and in favour of the existing Board provides a clear, complete and incontrovertible rebuttal of Saba’s attempt to take control of your company and change its strategy against the wishes and interests of its non-Saba shareholders.

“I would like to thank all Herald’s shareholders, both large and small, for their support. I very much regret that this episode has already cost shareholders money, which unfortunately we cannot reclaim from Saba. 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,” he added.

Richard Stone, chief executive of the Association of Investment Companies (AIC), called the result “a victory for shareholder democracy”.

Saba Capital, and chief investment officer Boaz Weinstein, had previously insisted that their activities have already benefited shareholders of the trusts in question.

Following the Herald vote, Saba released a statement to say that it appreciated “the thoughtful engagement from fellow HRI shareholders in recent weeks, which only reinforces the dire state of the UK investment trust industry and need for Saba’s presence in the market”.

The statement continued: “Over a brief period, our campaign has already enhanced value for shareholders and incited positive change at HRI – and elsewhere in the UK market – as evidenced by discounts to net asset value narrowing and numerous trusts announcing shareholder-friendly actions.”

Saba added that it “remains committed to putting shareholders’ interests first” and called on shareholders to support its proposals at the general meetings of the other six trusts.

It’s safe to say that Saba’s confidence isn’t shared by many others in the investment trust industry. Darius McDermott, managing director at Chelsea Financial Services, said following the Herald vote that “investors need to build on the positive momentum.

“In hindsight, this may be looked upon as a famous victory for the retail investor, and the sector,” he added.

Saba’s BlackRock resolution

Many industry observers had accused Saba of hoping to exploit voter apathy in order to assume control of Herald and the other six investment trusts.

That just relates to Saba’s ambitions in London. In the US, it has pursued similar campaigns against ten close-ended funds managed by BlackRock.

Eight of the funds voted against Saba’s proposed candidates to join their boards in Spring 2024, and on 21 January Saba announced a settlement with another two (the BlackRock Innovation and Growth Term Trust (NYSE: BIGZ) and the BlackRock Health Sciences Term Trust (NYSE: BMEZ)) that will see the funds make tender offers for 50% and 40% of their shares, respectively, at 99.5% of net asset value (NAV) per share.

The tender offers are expected to commence on March 21, 2025, in the case of BMEZ, and on June 9, 2025, in the case of BIGZ, and will close 20 business days later.

When are the other six trusts voting?

Management of the other six UK trusts will hope that their shareholders will follow Herald’s example – a view shared with the AIC.

“There are six other trusts with votes just around the corner,” said Stone. “It’s vital that all shareholders vote on the future of their investment trust. Shareholders need to act now.”

Voting dates for the other six investment trusts targeted by Saba can be found here.

On 24 January, ISS, the independent proxy advisor, issued statements advising shareholders in Keystone Positive Change and Baillie Gifford US Growth to vote against Saba’s proposals, as well as a reminder to shareholders in CQS Natural Resources to do likewise.

“We are pleased that ISS supports the view that the full cash exit or tax-efficient rollover option proposed by the independent board will yield a better outcome for KPC shareholders. Now shareholders must come out and vote,” said Karen Brade, Chair of Keystone Positive Change.