DEFA14A: BlackRock Defends Health Sciences Term Trust Against Saba Capital's Proposal

BlackRock urges shareholders to vote against Saba Capital's proposal to terminate the investment management agreement for the BlackRock Health Sciences Term Trust (BMEZ), highlighting BMEZ's outperformance and value delivery.

Summary

• BlackRock is soliciting votes against a proposal by Saba Capital Management to terminate BlackRock's investment management agreement for the BlackRock Health Sciences Term Trust (BMEZ).
• BlackRock highlights BMEZ's outperformance of its peers in 2023, increased target yield on NAV, and narrowing discount to NAV due to share repurchases.
• The document emphasizes that BMEZ outperformed its peers in 2023 with a total shareholder return of 12.3%.
• BMEZ's actual yield was 5.05%, and the target yield is 12.0%.
• BlackRock has narrowed BMEZ's discount to NAV through open market share repurchases, spending $96 million and repurchasing $17.7 million shares.
• BlackRock argues that Saba's actions are aimed at quick profits at the expense of long-term CEF shareholders.
• BlackRock claims its CEFs have delivered long-term value, generating $3.6 billion in gains in 2023 and paying $3.1 billion per year via dividends.
• BlackRock has repurchased $1.3 billion in shares, generating over $200 million in gains.
• The document states that Saba's CEF track record is marked by failure and underperformance, citing the example of BRW.
• Effective May 20, 2024, the Trust will pay monthly distributions based on an annual rate of 12% of the Funds 12-month rolling average daily net asset value.
• The Trust estimates that it has distributed more than its income and net-realized capital gains in the current fiscal year; therefore, a portion of your distribution may be a return of capital.
• The Trust's average annual total return for the period ending 4/30/2024 was 4.32%.

Sentiment

Score: 7

Explanation: The document presents a positive view of BlackRock's management of BMEZ, emphasizing outperformance and value delivery. However, the ongoing proxy fight and the need to defend against Saba's proposal introduce an element of uncertainty and risk.

Positives

• BMEZ outperformed its peers in 2023, achieving a total shareholder return of 12.3%.
• The fund's target yield on NAV has increased to 12.0%.
• BlackRock has narrowed the discount to NAV through share repurchases, spending $96 million.
• BlackRock claims its CEFs generated $3.6 billion in gains in 2023 and paid $3.1 billion per year via dividends.
• BlackRock has repurchased $1.3 billion in shares, generating over $200 million in gains.

Negatives

• Saba Capital Management is attempting to terminate BlackRock's investment management agreement.
• The Trust estimates that it has distributed more than its income and net-realized capital gains in the current fiscal year; therefore, a portion of your distribution may be a return of capital.
• The Trust's average annual total return for the period ending 4/30/2024 was 4.32%.

Risks

• The potential termination of the investment management agreement with BlackRock could negatively impact the fund's performance.
• Saba Capital's actions may prioritize short-term profits over long-term shareholder value.
• The distribution rate under the Plan is subject to change at the discretion of the Board.
• The amendment or termination of the Plan could have an adverse effect on the market price of the Trusts shares.
• A return of capital distribution does not necessarily reflect the Trusts investment performance and should not be confused with yield or income.

Future Outlook

The distribution rate is subject to change at the discretion of the Board, and the Plan will be subject to ongoing review to determine whether it should be continued, modified, or terminated.

Management Comments

• BlackRock is fighting for you.
• Vote now and make your voice heard.
• Defend your fund, save your income.
• BlackRock is delivering real value.
• This is no time for taking chances.
• We need all shareholders to vote on the enclosed WHITE proxy card today to preserve YOUR Fund.

Industry Context

This announcement reflects the ongoing activist investor activity in the closed-end fund space, where firms like Saba Capital seek to influence fund management and policies. The document positions BlackRock as a defender of long-term shareholder value against short-term activist tactics.

Comparison to Industry Standards

• The document compares BMEZ's performance to its peers, HQL and HQH, highlighting its outperformance in total shareholder return.
• It also contrasts BlackRock's CEF management with Saba's, citing BRW's performance under Saba's control as an example of underperformance compared to BlackRock's bank loan funds.
• The document references Morningstar data to support its claims about relative performance.

Stakeholder Impact

• Shareholders are directly impacted by the outcome of the vote, which will determine the investment management of the fund.
• The fund's performance and distribution policy affect shareholder returns.
• Employees of BlackRock Advisors, LLC could be affected if the investment management agreement is terminated.

Next Steps

• Shareholders are urged to vote using the WHITE proxy card to elect BlackRock's nominees and reject Saba Capital's proposal.
• Shareholders are encouraged to contact Georgeson LLC for any questions regarding the proposals.

Key Dates

Keywords

BlackRock, Saba Capital, BMEZ, Health Sciences Term Trust, Proxy Fight, Investment Management Agreement, Shareholder Value, Closed-End Fund, CEF, Distributions, NAV, Share Repurchase