DEFC14A: Shareholder Axel Merk Urges Vote Against Saba Capital's Board Expansion and Nominee, Citing Risk to Fund's Gold Mandate

Axel Merk, a significant shareholder and COO of ASA Gold and Precious Metals Limited, is actively soliciting proxies to oppose Saba Capital Management's proposals to expand the Board and elect their nominee, fearing a fundamental shift in the Fund's investment strategy.

Summary

• Axel Merk, holding 1.68% of shares outstanding (317,660 shares as of April 3, 2025), is soliciting proxies against Saba Capital Management, L.P.'s proposals at the upcoming Special Meeting on June 13, 2025.
• Saba Capital proposes to increase the Board size from 4 to 5 members and to elect Maryann Bruce (Saba Nominee) to the new fifth seat.
• Merk believes these actions are not in the best interests of Fund shareholders, as Saba already has 2 of the current 4 directors and owns 17.11% of the Fund as of April 7, 2025.
• Merk expresses concern that Saba's proposals could lead to Saba controlling the Board (3 out of 5 seats) and potentially converting the Fund from a gold and precious metals fund into a fixed-income fund without full shareholder understanding.
• Axel Merk is personally funding this proxy solicitation, with estimated costs including a $160,000 fee for Sodali & Co and an additional $240,000 for other related expenses.
• Shareholders are urged to vote AGAINST both proposals using the WHITE proxy card, even if they have previously voted with Saba's gold proxy card, as only the latest validly executed proxy will be counted.

Sentiment

Score: 3

Explanation: The document expresses strong negative sentiment regarding Saba Capital's proposals, framing them as a threat to shareholder control and the Fund's core investment mandate. It is a defensive and cautionary communication from a concerned shareholder/officer.

Positives

• Axel Merk, as President of Merk Investments LLC (the Fund's investment adviser), is actively defending the Fund's current gold and precious metals investment mandate.
• Merk Investments LLC generated approximately $2.67 million in advisory fees in 2024, after voluntary fee waivers, indicating a stable revenue stream for the adviser under the current structure.

Negatives

• Saba Capital's proposals could result in Saba-nominated directors holding a majority (3 of 5) of the Board seats, potentially ceding control of the Fund to Saba.
• There is a significant risk of the Fund's investment mandate being changed from gold and precious metals to fixed-income, which is not fully disclosed in Saba's proxy materials.
• The lack of transparency regarding Saba's full plans for the Fund and the relationship of the Saba Nominee with Saba is highlighted as a concern for shareholders.
• Shareholders may unknowingly approve a fundamental strategic shift for the Fund by voting for Saba's proposals.

Risks

• Potential loss of control for existing shareholders if Saba Capital gains a majority on the Board.
• Risk of a fundamental and undisclosed change in the Fund's investment mandate from gold and precious metals to fixed-income.
• Uncertainty regarding the long-term implications of Saba Capital's plans for the Fund's strategy and operations.
• Potential for the Fund to deviate significantly from its stated investment objectives, which could negatively impact shareholders who invested based on the current mandate.

Future Outlook

The document's future outlook is primarily defensive, aiming to prevent a potential fundamental shift in the Fund's investment mandate from gold and precious metals to fixed-income, as feared by Axel Merk if Saba Capital's proposals are approved. It implicitly advocates for maintaining the current strategic direction.

Management Comments

• "I believe that these actions [increasing the Board from 4 to 5 members and electing the Saba Nominee] are not in the best interests of Fund shareholders."
• "I fear that voting for Sabas Proposals could result in shareholders ceding control of the Fund to Saba, thereby triggering a transition to a completely different investment mandate without fully knowing the implications."
• "I do not believe it is in shareholders best interests to hand over complete control of the Fund to Saba."

Industry Context

This proxy solicitation highlights a common dynamic in the closed-end fund industry, where activist shareholders like Saba Capital Management seek to influence corporate governance and potentially alter investment strategies to unlock perceived value. The attempt to convert a specialized fund (gold and precious metals) into a broader fixed-income fund reflects a strategic divergence that can occur when activist investors believe a different mandate could yield better returns or facilitate liquidation, often clashing with existing management's long-term vision or specialized expertise.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards, comparable companies, projects, or results. It focuses solely on the internal governance dispute and the potential strategic shift within ASA Gold and Precious Metals Limited.

Management Changes

Corporate Governance

Related Party Transactions

• Axel Merk serves as President of Merk Investments LLC, the Fund's investment adviser, which received approximately $2.67 million in advisory fees from the Fund in 2024. This relationship is disclosed as a potential conflict of interest.

Stakeholder Impact

• **Shareholders**: Face a potential loss of control over the Fund's strategic direction and a risk of a fundamental change in investment mandate (from gold/precious metals to fixed-income) without explicit consent or full transparency.
• **Merk Investments LLC (Investment Adviser)**: Faces the risk of losing its advisory role and associated fees if Saba Capital gains control and decides to change the Fund's adviser or mandate.

Next Steps

• Shareholders are urged to sign, date, and mail the enclosed WHITE proxy card TODAY to vote AGAINST Proposal 1 (Board increase) and Proposal 2 (Saba Nominee election).
• Shareholders who have already voted using Saba's gold proxy card are advised to revoke it by submitting the WHITE proxy card, as only the latest validly executed proxy will be counted.
• The Special Meeting is scheduled for June 13, 2025, at 11:00 a.m. (Eastern Time) via live webcast, where the proposals will be voted upon.

Key Dates

Recommendation

Keywords

ASA Gold and Precious Metals, Axel Merk, Saba Capital Management, Proxy Fight, Shareholder Activism, Corporate Governance, Board Election, Investment Mandate, Closed-End Fund, Gold, Precious Metals, Fixed-Income