ESCT The European Smaller Companies Trust Plc

Read the Truth About Saba’s Track Record, Objectives, Nominees and Plan to Deliver Substantial Liquidity and Long-Term Returns for All Shareholders

Register for Webinar on 14 January at 1PM GMT Where Saba Founder & CIO Boaz Weinstein Will Detail Plan to Deliver Shareholder Value at All Seven Trusts and Answer Questions from the Audience: www.bit.ly/saba-uk-webinar

Visit www.mindthegap-uktrusts.com to Learn How to Vote FOR Saba’s Resolutions at Each Trust

Saba Capital Management, L.P. (together with certain of its affiliates, “Saba” or “we”), today addressed the misleading claims made recently by 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”) with key facts that reinforce the need for shareholder-driven change.

As a reminder, Saba has requisitioned General Meetings of these seven Trusts to provide shareholders the opportunity to vote on resolutions to remove the Trusts’ existing directors and appoint highly qualified directors to replace them.1 Saba is convening the General Meetings because we believe the current Boards of Directors (the “Boards”) and investment managers have failed to perform versus their benchmarks, resulting in deep trading discounts to net asset value (“NAV”), which we believe have only recently narrowed as a result of Saba’s investment.

Saba Founder and CIO Boaz Weinstein will be hosting a live webinar on Tuesday, 14 January at 1:00 p.m. GMT to explain why the Boards must be replaced immediately, outline Saba’s strategy to deliver substantial liquidity and long-term returns for all shareholders and take questions from the audience. To access the webinar, visit: www.bit.ly/saba-uk-webinar.

Misleading Claims from the Trusts Regarding Saba’s Campaign

The Facts

“Saba’s motives are self-serving and will not benefit all shareholders.”

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• As the largest investor in each Trust, our interests are directly aligned with those of all shareholders.

• We have a proven track record of pursuing changes that return discounted funds to their full NAV and create long-term value for all shareholders.

• If Saba were selected as manager, our strategy of buying undervalued trusts would accrue to the benefit of the very industry (and shareholders) that managers are claiming we would hurt.

 

“Saba wishes to take control of your Company for its own economic benefit rather than due to concerns about the Company's performance.”

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• Saba’s investment and engagement in the U.K. investment trust industry is already driving positive results for shareholders.

• The Trusts’ discounts to NAV have narrowed significantly over the last six months, which we believe is due to Saba’s buying.

• Only after direct pressure from Saba and through growing our holdings have the majority of the Trusts taken shareholder-friendly actions – including offering full cash exits, increased buybacks and tender offers.

 

“Saba has not offered a plan for the benefit of all Shareholders.”

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• As disclosed in our 18 December letter, Saba’s plan is simple: with a reconstituted Board, we intend to provide shareholders with liquidity options plus the opportunity for greater long-term returns under a new investment strategy and manager.

• For HRI shareholders, Saba announced its intent to encourage the new Board to offer a full cash exit at 99% of NAV if shareholders support Saba’s resolutions to reconstitute the HRI Board.

 

“Saba brings uncertainty and risk.”

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• We’re giving shareholders the chance to get out of an underperforming Trust if they so desire. If they want to remain invested, we’re providing shareholders with the opportunity to profit from this sector rather than be a casualty of it.

• If Saba is selected as manager, our plan is to offer a U.K.-listed product that will mainly buy trusts at discounts and encourage management to take action, so investors can profit.

• We intend to use the same proven investment process as the Saba Capital Closed-End Funds ETF (“CEFS”), which invests in discounted U.S. closed-end funds, to the extent shareholders agree. Material changes to the investment policy would require the approval of the relevant Trust’s shareholders.

 

“Saba wants to appoint a non-independent board.”

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• Saba has put forth independent director candidates across the seven Trusts. All nominees other than Paul Kazarian and Boaz Weinstein are independent from Saba, meaning half of the Board of each Trust will be independent if our proposed resolutions are passed.

• To ensure compliance with the highest standards of governance, our nominees intend to add one or more additional independent directors to each Board as soon as reasonably possible following the Trusts’ General Meetings.

 

“The new Board would not meet the standards of both the UK Corporate Governance Code and AIC Code of Corporate Governance.”

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• If Saba’s nominees are elected, the Board of each Trust will be legally compliant at all times under the FCA Listing Rules and will ensure compliance with the highest standards of governance.

• Following the General Meetings, each Board will comply with the AIC Code of Corporate Governance as soon as practicable, as the nominees intend to appoint one or more additional independent directors with suitable experience.

 

“We believe Saba’s plan […] may introduce substantially inflated fees.”

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• This is a fear-mongering tactic being peddled by numerous managers to distract from poor performance.

• Saba’s U.K. investment trust strategy – like its closed-end fund strategy in the U.S. – is anchored in protecting shareholder rights by:
  • Pursuing changes that return discounted trusts to their full NAV.
  • Creating long-term value for shareholders through low fees and better management.

• Saba maintains a highly competitive 1.1% management fee for CEFS. The fund has experienced substantial demand from investors, allowing it to issue new shares every year since its 2017 launch.2

 

Misleading Claims from Herald

The Facts

“Since launch in 1994, Herald Investment Trust's investment strategy has delivered outstanding investment performance.”

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• HRI significantly underperformed its benchmark this past year and the past three years, despite beginning 2024 with its largest position in Super Micro Computer – a company that experienced a huge surge, rising more than 300%.3

• This underperformance is attributed to Katie Potts’s mismanagement of both the Super Micro Computer position and the overall portfolio.

 

“The Board reiterates its belief that, since Saba started investing in 2009, it has materially underperformed Herald.”

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• This is a complete fabrication: Saba’s public funds did not start investing in 2009. Saba’s CEFS inception was in 2017, and Saba only became the manager of its two closed-end funds in 2023 and 2021. There is no way to compare performance to HRI since 2009.

• In stark contrast to CEFS delivering a 46.0% gain over the last three years, HRI posted a 9.7% NAV loss.4

 

“If Saba gains control […] significant value could be lost for Shareholders as a result of forced selling of parts of [HRI’s] Portfolio.”

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• Given our 25.5% ownership of HRI (compared to the current Board holding under 0.05%), it is illogical to suggest that Saba would favour a fire sale that undervalues the very assets in which we are the single largest shareholder.

Misleading Claims from Baillie Gifford

The Facts

“The Keystone board accepts that the company has been through a challenging period of performance against a difficult backdrop and has already taken steps to address this and provide certainty and options for all shareholders […]”

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• Since Baillie Gifford took over KPC four years ago, performance has been abysmal. The Board’s own benchmark is up 38.3%, while KPC’s NAV return is at -26.1%.5

• KPC Chair Karen Brade has overseen cumulative underperformance of nearly 130% since assuming her role in 2018 – a staggering loss and destruction of wealth for retail holders and retirees.6

 

“[USA] is successfully delivering on its investment mandate, with strong long-term performance, and it provides Shareholders with access to leading private companies of this generation, such as SpaceX, Databricks and Stripe, at low cost.”

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• We consider Saba’s buying to be the key driver of today’s premium at USA. Without our buying, USA (and EWI) would continue to trade at discounts – just like they did previously.

• Baillie Gifford’s Scottish Mortgage Investment Trust (SMT:LSE) and Schiehallion Fund (MNTN:LSE) have similar positions in private companies like SpaceX, yet they trade at double-digit discounts.

Misleading Claims from Janus Henderson

The Facts

“ESCT is a well-managed investment company whose strategy has delivered long-term outperformance for you.”

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• Over the last three years, Janus Henderson’s ESCT and HOT have both traded at a disappointing ~-13.5% average discount to NAV.7

• These respective double-digit discounts demonstrate that the Trusts’ Boards and portfolio managers have failed shareholders.

 

“The Board of HOT is offering you a full cash exit at NAV and/or the option to rollover into an open-ended vehicle managed by Janus Henderson Investors. These opportunities are at risk of being cancelled by Saba.”

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• This scheme is simply a last-ditch attempt to protect the underperforming Board, continue lining the manager’s own pockets with shareholder capital and distract from an indefensible track record.

• We believe Janus Henderson’s proposed reconstruction scheme for HOT is inferior to our nominees’ plan, which will deliver substantial liquidity and long-term returns.

 

Misleading Claims from Manulife | CQS

The Facts

“Your Board has overseen strong performance.”

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• CYN Chair Christopher Casey cannot hide from poor performance. At CYN, he “delivered” a -14% discount for shareholders and -30% underperformance versus its benchmark over the past three years.8

Six of the seven Trusts have scheduled their Requisitioned General Meetings:

HRI: 22 January 2025 at 12p.m. GMT USA: 3 February 2025 at 12p.m. GMT KPC: 3 February 2025 at 12p.m. GMT CYN: 4 February 2025 at 11a.m. GMT HOT: 4 February 2025 at 10a.m. GMT ESCT: 5 February 2025 at 12:30p.m. GMT

Note: The voting deadlines for each Trust will be earlier than the dates of the General Meetings.

To learn how to vote FOR Saba’s resolutions at each Trust visit, https://www.mindthegap-uktrusts.com/meeting-information.

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About Saba

Saba Capital Management, L.P. is a global alternative asset management firm that seeks to deliver superior risk-adjusted returns for a diverse group of clients. Founded in 2009 by Boaz Weinstein, Saba is a pioneer of credit relative value strategies and capital structure arbitrage. Saba has offices in New York City and London. Learn more at www.sabacapital.com.

DISCLAIMER

Saba Capital Management, L.P. (“Saba”) is publishing this announcement solely for the information of other shareholders in each 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) (the “Trusts”). This announcement is not intended to be and does not constitute or contain any investment recommendation as defined by Regulation (EU) No 596/2014 (as it forms part of the domestic law in the United Kingdom by virtue of the European Union (Withdrawal) Act 2018). No information in this announcement should be construed as recommending or suggesting an investment strategy. Nothing in this announcement or in any related materials is a statement of or indicates or implies any specific or probable value outcome in any particular circumstance. This announcement is provided merely for general informational purposes and is not intended to be, nor should it be construed as (1) investment, financial, tax or legal advice, or (2) a recommendation to buy, sell or hold any security or other investment, or to pursue any investment style or strategy. Neither the information nor any opinion contained in this announcement constitutes an inducement or offer to purchase or sell or a solicitation of an offer to purchase or sell any securities or other investments in the Trusts or any other trust by Saba or any of its affiliates in any jurisdiction. This announcement does not consider the investment objective, financial situation, suitability or the particular need or circumstances of any specific individual who may access or review this announcement and may not be taken as advice on the merits of any investment decision. This announcement is not intended to provide the sole basis for evaluation of, and does not purport to contain all information that may be required with respect to, any potential investment in the Trusts. Any person who is in any doubt about the matters to which this announcement relates should consult an authorised financial adviser or other person authorised under the UK Financial Services and Markets Act 2000. To the best of Saba’s ability and belief, all information contained herein is accurate and reliable, and has been obtained from public sources that Saba believes to be accurate and reliable. However, such information is presented “as is”, without warranty of any kind, whether express or implied, and Saba has not independently verified the data contained therein. All expressions of opinion are subject to change without notice, and Saba does not undertake to update or supplement any of the information, analysis and opinion contained herein.

The reference herein to CEFS (and Saba as its portfolio manager) is solely provided for context in discussing the proposals related to the Trusts and is not intended to be, nor is it, an offer to sell interests of that fund or any other Saba-managed or subadvised vehicle.

Saba may continue transacting in the shares and securities of the Trusts, and/or derivatives referenced to them (which may include those providing long and short economic exposure) for an indefinite period following the date of this announcement and may increase or decrease its interests in such shares, securities and/or derivatives at any time.

FORWARD LOOKING STATEMENTS

This announcement contains certain forward-looking statements and information that are based on Saba’s beliefs, as well as assumptions made by, and information currently available to, Saba. These statements include, but are not limited to, statements about strategies, plans, objectives, expectations, intentions, expenditures and assumptions and other statements that are not historical facts. When used herein, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and “project” and similar expressions (or their negative) are intended to identify forward-looking statements. These statements reflect Saba’s current views with respect to future events, are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Further, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual results, performance or achievements may vary materially and adversely from those described herein. There is no assurance or guarantee with respect to the prices at which any securities of the Trusts or any other trust will trade, and such securities may not trade at prices that may be implied herein. Any estimates, projections or potential impact of the opportunities identified by Saba herein are based on assumptions that Saba believes to be reasonable as of the date hereof, but there can be no assurance or guarantee that actual results or performance will not differ, and such differences may be material and adverse. No representation or warranty, express or implied, is given by Saba or any of its officers, employees or agents as to the achievement or reasonableness of, and no reliance should be placed on, any projections, estimates, forecasts, targets, prospects or returns contained herein. Neither Saba nor any of its directors, officers, employees, advisers or representatives shall have any liability whatsoever (for negligence or misrepresentation or in tort or under contract or otherwise) for any loss howsoever arising from any use of information presented in this announcement or otherwise arising in connection with this announcement. Any historical financial information, projections, estimates, forecasts, targets, prospects or returns contained herein are not necessarily a reliable indicator of future performance. Nothing in this announcement should be relied upon as a promise or representation as to the future. Nothing in this announcement should be considered as a profit forecast.

PERMITTED RECIPIENTS

In relation to the United Kingdom, this announcement is being issued only to, and is directed only at, (i) investment professionals specified in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 as amended (the “Order”), (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order and (iii) persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with the issue or sale of any securities of the Trusts or any member of their respective groups may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “Permitted Recipients”). Persons who are not Permitted Recipients must not act or rely on the information contained in this announcement.

DISTRIBUTION

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 of that jurisdiction. The distribution of this announcement in certain countries may be restricted by law and persons who access it are required to inform themselves and to comply with any such restrictions. Saba disclaims all responsibility where persons access this announcement in breach of any law or regulation in the country of which that person is a citizen or in which that person is residing or is domiciled.

1 For USA, there will be a third resolution to reduce the minimum permitted board size from three to two directors. 2 Saba Closed-End Funds ETF Annual Reports and public disclosures. Link. 3 The referenced HRI benchmark is the Russell 2000 Technology Index, which is one of HRI’s two self-selected benchmarks and which Saba believes is a more appropriate benchmark than the Deutsche Numis SC + AIM (ex. ICs) Index given HRI’s focus on smaller companies in the technology and communications sector. 4 Bloomberg. Data is as of 13 December 2024. Past performance is no guarantee of future results. Any information pertaining to CEFS is for illustrative purposes only and is in response to HRI’s previous statements with respect to Saba’s track record. This communication does not constitute an offer to sell or a solicitation of an offer to buy interests in CEFS. 5 Bloomberg. Data is as of 13 December 2024. KPC’s benchmark is the MSCI ACWI Index. 6 Bloomberg. Total shareholder return data is in GBP and runs from 18 January 2018 to 13 December 2024. KPC’s benchmark is the MSCI ACWI Index. 7 Bloomberg. Data is in GBP and as of 13 December 2024. 8 Bloomberg. Data is in GBP and as of 13 December 2024. CYN’s benchmark is the MSCI World Energy Sector Index.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250112475354/en/

Investor Contact Alliance Advisors Timothy Marshall / Adam Riches, 0800-102-6570 saba@allianceadvisors.com

Media Contact Longacre Square Partners Charlotte Kiaie / Kate Sylvester, +1-646-386-0091 ckiaie@longacresquare.com / ksylvester@longacresquare.com