DEFR14A: BlackRock Science and Technology Term Trust Amends Proxy Statement to Include Standstill Agreement with Karpus Management

BlackRock Science and Technology Term Trust amended its proxy statement to include a standstill agreement with Karpus Management, which involves a discount management program featuring potential tender offers.

Summary

• BlackRock Science and Technology Term Trust (the Fund) filed an amendment to its proxy statement on May 7, 2024, related to the annual shareholder meeting on June 18, 2024.
• The amendment adds information about a standstill agreement entered into on May 3, 2024, with Karpus Management, Inc. (Karpus).
• The agreement includes the adoption of a discount management program where the Trust may commence tender offers to repurchase 2.5% of its outstanding Common Shares at 98% of the Trust's net asset value (NAV) per share.
• These tender offers are conditional and will occur if the Common Shares trade at an average daily discount to NAV greater than 7.50% during a three-month measurement period.
• Measurement periods commence on April 1, 2024, and continue for 12 months.
• Karpus has agreed to certain standstill covenants and to vote its Common Shares in accordance with the Board's recommendations.
• The agreement remains in effect until the earliest of May 3, 2027, 10 days before the record date for the 2027 annual meeting, or if the Trust fails to commence a required Conditional Tender Offer within 15 business days of the applicable calendar quarter end, 16 business days after the applicable calendar quarter end, or the date the Trust determines not to conduct a Conditional Tender Offer.
• The amendment clarifies that it should be read in conjunction with the original proxy statement filed on April 25, 2024, and that the amendment controls in case of conflicting information.

Sentiment

Score: 7

Explanation: The announcement is moderately positive as it introduces a mechanism to potentially reduce the discount to NAV, which is generally favorable for shareholders. The standstill agreement also suggests a cooperative approach with an activist investor.

Positives

• The discount management program could potentially reduce the discount to NAV, benefiting shareholders.
• The standstill agreement with Karpus provides stability and alignment in voting decisions.
• The tender offer at 98% of NAV offers shareholders an opportunity to exit at a premium to the market price if the discount is high.

Negatives

• The tender offer is conditional on the discount to NAV exceeding 7.50%, so there's no guarantee it will be triggered.
• The repurchase is limited to 2.5% of outstanding shares, which may not significantly impact the overall discount.

Risks

• The discount to NAV may not consistently exceed 7.50%, preventing the tender offer from being triggered.
• The agreement could terminate early under certain conditions, potentially disrupting the discount management program.
• The effectiveness of the discount management program in reducing the discount to NAV is uncertain.

Future Outlook

The Trust intends to commence tender offers to repurchase shares if the discount to NAV exceeds 7.50% during measurement periods, as part of the discount management program.

Industry Context

Closed-end funds often trade at a discount to their NAV, and discount management programs are a common strategy to address this issue. Standstill agreements are sometimes used to ensure cooperation between the fund and activist investors.

Comparison to Industry Standards

• Other closed-end funds, such as those managed by Eaton Vance or Nuveen, have implemented similar discount management programs, including tender offers and share repurchases.
• The 2.5% repurchase target is within the typical range seen in similar programs, although some funds have repurchased larger percentages.
• The 98% of NAV tender offer price is also standard, as it provides an incentive for shareholders to participate while still offering a discount to the fund.

Stakeholder Impact

• Shareholders may benefit from a reduced discount to NAV and the potential to sell shares at 98% of NAV in a tender offer.
• The agreement with Karpus could lead to more stable governance and voting outcomes.

Next Steps

• The Trust will monitor the average daily discount to NAV over three-month measurement periods.
• If the discount exceeds 7.50%, the Trust intends to commence a tender offer to repurchase 2.5% of its outstanding Common Shares.
• Shareholders will vote on proposals at the annual meeting on June 18, 2024.

Key Dates

Keywords

standstill agreement, Karpus Management, discount management program, tender offer, NAV, BlackRock Science and Technology Term Trust, proxy statement