New York activist hedge fund Saba Capital Management has made a fresh attempt to replace the entire board of the £850 million Edinburgh Worldwide Investment Trust (EWIT), which is managed by Baillie Gifford.

Saba Capital Management says that “together with certain of its affiliates” it is the “beneficial owner of interests in approximately 30%” of Edinburgh Worldwide.

Saba released a letter it has sent to Edinburgh Worldwide’s board of directors regarding its intention “to requisition a general meeting of the company to provide shareholders the opportunity to vote on a resolution 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.”

Saba’s Founder & Chief Investment Officer is activist investor Boaz Weinstein.

In response, Jonathan Simpson-Dent, chair of EWIT, said: “We are disappointed by Saba’s open letter. 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. Since then, NAV total return has been +17.5% to date, well ahead of the S&P Global Small Cap Index (+4.8%), the Company’s benchmark index.

“The benchmark cited in Saba’s open letter, the FTSE All-Share, is not EWIT’s. It makes little sense to judge a global small-cap trust against a UK all-cap benchmark, a point noted by the sell-side analyst community today.

“Furthermore, the Company’s actions over the last year have supported a tightly managed discount, currently 5.6%, significantly narrower than the Global Smaller Companies peer group weighted average discount of 10.9%.

“While we are open to discuss Board composition with Saba, we would strongly reject any proposal to replace the entire Board and the ambiguity that would follow.

“The Board continues to seek constructive dialogue with Saba. The Board’s Financial Adviser had already requested a meeting with Saba ahead of receiving today’s open letter, which Saba had requested be deferred until next week. We will update shareholders on further developments in due course.”

The Association of Investment Companies (AIC) responded to Saba’s announcement.

AIC CEO Richard Stone said: “It is vital that shareholders vote their shares. Retail investors are significant holders of this investment trust so, once confirmed, it’s essential platforms notify their customers about this meeting and encourage them to vote.

“To enable all shareholders to express their views, information must be made available and the voting process must be as simple as possible.

“We have information on how to vote and attend general meetings on our website for investors who hold investment trusts on platforms. It’s important that shareholders understand that the final decision rests with them. Every vote counts.”

Saba Capital Management’s letter read:

Dear Members of the Board,

Saba Capital Management, L.P. (“Saba”), a beneficial owner of interests in approximately 30% of the shares of Edinburgh Worldwide Investment Trust PLC (the “Company”), is writing to formally notify you of our intent to requisition a general meeting of the Company for the purpose of reconstituting the Board.

As you know, we have been profoundly disappointed with the share price performance of the Company for some time, which led us to requisition a general meeting nearly a year ago. At that time, you vigorously rejected our legitimate concerns and encouraged shareholders to dismiss them, imploring them to “Protect your Trust.” Following last year’s general meeting, Mr. Simpson-Dent, as Chair of the Board, appeared to belatedly acknowledge the validity of our campaign, stating: “… Our job now is to deliver the performance our shareholders rightly expect.”

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:

• Five-Year Total Returns: The Company’s Net Asset Value (“NAV”) return of -30.8% and Share Price return of -35.0% have massively underperformed its self-selected benchmark, the FTSE All-Share Index (+71.4%), by more than 100 percentage points! The magnitude of this value destruction is unprecedented among peer UK equity investment trusts over this period.

• Consistent Underperformance: This failure is not isolated; the Company has consistently underperformed across the one-, three-, and five-year periods.

• Inadequate Buybacks: The Company’s buyback activity over the past three years has fallen below the average for UK investment trusts executing buybacks over the same period, further demonstrating a lack of decisive action to narrow the prolonged discount to NAV.

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.

Formal requisition documents will be sent to you in due course, and we request that the requisitioned meeting be convened as soon as you are lawfully able.

Yours faithfully,

Boaz Weinstein

Founder and Chief Investment Officer

For and on behalf of Saba Capital Management, L.P.