DEFA14A: BlackRock Funds Receive Support from Glass Lewis and ISS in Proxy Battle Against Saba Capital

BlackRock announced that Glass Lewis and ISS recommended shareholders vote for BlackRock's board nominees and against Saba Capital's proposals to terminate BlackRock as investment adviser for certain funds.

Summary

• BlackRock is engaged in a proxy battle with Saba Capital Management, L.P. regarding board nominees and investment advisory agreements for several closed-end funds.
• Glass Lewis and Institutional Shareholder Services (ISS) have recommended that shareholders vote in favor of BlackRock's board nominees at BlackRock California Municipal Income Trust (BFZ), BlackRock New York Municipal Income Trust (BNY), and BlackRock MuniYield New York Quality Fund (MYN).
• Both Glass Lewis and ISS recommend voting against Saba Capital's proposal to terminate BlackRock as investment adviser of BFZ and BlackRock Science and Technology Term Trust (BSTZ).
• ISS also recommends voting for BlackRock's board nominees at BNY and BlackRock MuniYield Pennsylvania Quality Fund (MPA), and for Arthur Steinmetz at BlackRock MuniHoldings New York Quality Fund (MHN) and MYN.
• BlackRock has recently announced enhancements across its closed-end fund complex, including discount management programs, distribution increases, and fee waivers, providing $2.9 billion in liquidity.
• The annual meetings of shareholders for BFZ, BNY, and MYN will be held on June 17, 2024, and for MHN, MPA, and BSTZ on June 18, 2024.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive as BlackRock receives support from key proxy advisors, but the ongoing proxy battle introduces uncertainty.

Positives

• Independent proxy advisory firms Glass Lewis and ISS support BlackRock's board nominees.
• Glass Lewis and ISS recommend against Saba Capital's proposal to terminate BlackRock as investment adviser for certain funds.
• BlackRock has implemented enhancements providing $2.9 billion in liquidity across its closed-end fund complex.
• ISS recognizes that Saba has not presented a compelling case for change at BNY and MPA.
• ISS acknowledges that BFZ has effectively maintained a stable state of affairs over the past year.

Negatives

• Saba Capital is attempting to replace BlackRock's board nominees and terminate BlackRock as investment adviser for certain funds.
• ISS disagrees with Glass Lewis's support for Phillip Holloman on MYN.
• ISS recommends voting in favor of Saba's nominees for BFZ and BSTZ, which BlackRock disagrees with.

Risks

• The outcome of the proxy vote is uncertain.
• Saba Capital's actions could lead to harmful liquidity events or changes in investment strategies.
• Changes in political, economic, or industry conditions could impact the funds' net asset value.
• Increased competition could negatively impact the funds' performance.
• Unfavorable resolution of legal proceedings could adversely affect the funds.

Future Outlook

BlackRock will update performance and certain other data for the funds on a monthly basis on their website in the Closed-end Funds section of www.blackrock.com, as well as certain other material information as necessary from time to time.

Management Comments

• R. Glenn Hubbard, Chair of the Boards of BlackRock Closed-End Funds, stated that the recommendations signal the strength of BlackRock and the Boards fund management.
• Hubbard added that Congress has taken notice of the loophole allowing activists like Saba to force closed-end funds into harmful liquidity events or radically change their investment strategies.
• Hubbard stated that Saba's campaign has never been about governance, performance or investment mandates.

Industry Context

This announcement reflects the ongoing trend of activist investors targeting closed-end funds to unlock value through various strategies, including board representation and fund termination.

Comparison to Industry Standards

• The document mentions that the unaffected one-, threeand five-year TSRs of BFZ are better than the TSRs of most or all of the funds in the Peer Group.
• ISS noted that MPA's distributions have been on par with peers, the NAV discount has been narrower, and fees have been more competitive.
• ISS stated that MYN and MHN's TSR, NAV discount, distributions, and expenses are all in alignment with peers.

Stakeholder Impact

• The outcome of the proxy vote will impact shareholders, as it will determine the composition of the board and the investment adviser for the funds.
• Employees of BlackRock could be affected if Saba Capital succeeds in terminating BlackRock as investment adviser for certain funds.

Next Steps

• Shareholders will vote on the board nominees and the proposal to terminate BlackRock as investment adviser at the upcoming annual meetings.
• BlackRock will continue to solicit proxies in favor of its board nominees.

Key Dates

Keywords

BlackRock, Saba Capital, proxy battle, board nominees, investment adviser, closed-end funds, Glass Lewis, ISS, BFZ, BNY, MYN, MPA, MHN, BSTZ