The European Smaller Companies Trust (ESCT) has issued a statement this morning in which its board reiterates that it unanimously recommends shareholders vote against what it refers to as “Saba’s Damaging Proposals”. ESCT’s board says that it has noted the announcement by Saba on 13 January 2025, the webinar it held on 14 January 2025 and the presentation it published on 16 January 2025, “in which Saba has made clear its intentions while continuing to make misleading statements regarding [ESCT]”. It also makes a plea to shareholders saying “Your voice matters: stand against Saba, safeguard your investment”.

Saba seeking effective control

ESCT’s board says that Saba intends to take effective control and drastically alter shareholders’ investment exposure, noting the following:

• Saba has confirmed its intention is to take over the management of ESCT, with Saba being the beneficiary of the future fees it would earn as manager.
• Saba intends to radically change ESCT’s investment strategy away from European small cap equities, at a time when the sector is attractively valued.
• This means ESCT would no longer invest in European smaller companies but would become an investment trust which will invest in other investment companies.
• Shareholders may end up invested in a vehicle which no longer meets their investment objectives.

“Misleading statements”

ESCT’s board says that Saba continues to make misleading statements regarding its performance. The board’s view of Saba is damning. It says that Saba’s strategy is one of deliberate misdirection and that it is choosing to ignore the strong investment performance of ESCT to advance its own agenda. It says that ESCT has outperformed its benchmark over one, three, five and ten years and since the current portfolio manager, Ollie Beckett, took over the management of the portfolio in 2011. It adds that ESCT has generated NAV total returns of 51.6% over five years and 202.2% over ten years to 31 December 2024, delivering strong absolute and relative returns to shareholders over the long-term. It also notes that ESCT has introduced a policy of targeting a mid-single digit discount, in normal market conditions.

ESCT targeted because of low voter turnout

ESCT’s board says that it believes Saba targeted ESCT, which has a long-term record of investment outperformance, because a sufficient number of shareholders will not vote, allowing it to obtain effective control so it can benefit from the future fees it would earn as manager.

Reflecting the above, ESCT’s board unanimously recommends that shareholders “VOTE AGAINST ALL Resolutions” at the General Meeting requisitioned by Saba. This meeting will be held at 12.30pm on 5 February 2025 at 201 Bishopsgate, London EC2M 3AE and the deadline for the receipt of proxies is 12.30 p.m. on 3 February 2025. However, shareholders voting via a platform should note that their deadline will be earlier than this.

Comments from James Williams, chairman of ESCT

“Saba’s intentions are now clear, they want to seize control of your company, appoint themselves as manager, profit from the prospective management fees and change the investment approach. This will deny shareholders the opportunity to benefit from a proven investment strategy in European smaller companies. It could also leave them invested in a vehicle which may be wholly unsuitable for their investment objectives.

“We encourage all the Company’s shareholders to urgently review the circular. This contains the information necessary for you to make an informed decision as the outcome of the vote will impact your investment.  It is incredibly important that as many shares as possible are voted so that shareholders’ wishes are made absolutely clear.”