DEFC14A: BlackRock Science and Technology Term Trust Faces Proxy Fight from Saba Capital

BlackRock Science and Technology Term Trust is urging shareholders to vote against proposals from Saba Capital Management to replace board members and terminate the investment management agreement with BlackRock Advisors, LLC.

Summary

• BlackRock Science and Technology Term Trust (BSTZ) is holding its annual shareholder meeting on June 18, 2024, to vote on board nominees and a proposal from Saba Capital Management.
• Saba Capital is seeking to nominate three individuals to the Board and terminate the investment management agreement between the Trust and BlackRock Advisors, LLC.
• The Board of BSTZ unanimously opposes both the Saba nominees and the proposal.
• The Board recommends shareholders vote FOR the Board's nominees (R. Glenn Hubbard, W. Carl Kester, and John M. Perlowski) and AGAINST the Saba proposal to terminate the investment management agreement.
• The Board believes its nominees have the necessary skills and experience to oversee the Trust and that terminating the agreement with BlackRock Advisors is not in the best interest of shareholders.
• The Trust's performance since inception (June 27, 2019 March 31, 2024) has been a cumulative return of 57.9% on a NAV basis.
• The Trust has generated approximately $8.5 million in shareholder profits through share buybacks.
• Georgeson LLC has been retained to assist in the proxy solicitation at an estimated cost of $444,600.
• The Board argues that terminating the Investment Management Agreement would deprive the Trust of BlackRock's experience and expertise, plunge the Trust into uncertainty, and that the Board is best positioned to evaluate BlackRock's performance.

Sentiment

Score: 4

Explanation: The document is largely defensive, outlining the Board's opposition to Saba's proposals. While highlighting past performance, the overall tone is cautious due to the ongoing proxy fight and potential disruption.

Positives

• The Board believes its nominees have the necessary skills and experience to oversee the Trust.
• The Board highlights that the current Board Members have demonstrated their ability to consistently deliver value to shareholders, all while implementing shareholder-friendly initiatives, such as share buybacks that have generated approximately $8.5 million in shareholder profits.
• The Trust has returned 57.9% cumulatively on a NAV basis since inception (June 27, 2019 March 31, 2024).
• Shareholders currently receive monthly distributions at a distribution rate of 6.4% on market price.
• The Trust has repurchased over $41.6 million in Trust shares at a discount to net asset value.
• The Board believes that BlackRock's scale and deep relationships have historically given it enhanced access to private investments and high-demand initial public offerings.

Negatives

• Saba Capital Management is attempting to replace board members and terminate the investment management agreement, creating potential disruption.
• The Board believes Saba engages in these tactics to benefit itself and its own hedge funds and investors, and that Sabas actions are harmful to long-term shareholders of the Trust.
• If Proposal 2 is approved, the Investment Management Agreement will, by its terms, automatically terminate 60 days following the shareholder meeting, potentially leaving the Trust orphaned (i.e., without an investment adviser), causing significant disruptions to the Trusts investment activities and leaving it exposed to substantial risk and expense.
• Termination would require the Trusts Board to search for a suitable new investment adviser and conduct the requisite due diligence of a potential replacement, the costs of which would be borne by the Trust and likely be significant.
• The uncertainty associated with the Trusts portfolio management could be catastrophic to the performance and share trading price of the Trust.

Risks

• The proxy contest initiated by Saba Capital introduces uncertainty and potential disruption to the Trust's management.
• Terminating the investment management agreement with BlackRock Advisors could lead to instability and increased expenses.
• Failure to secure shareholder approval for a new investment management agreement could leave the Trust without an advisor.
• The Board believes Saba engages in these tactics to benefit itself and its own hedge funds and investors, and that Sabas actions are harmful to long-term shareholders of the Trust.
• The uncertainty associated with the Trusts portfolio management could be catastrophic to the performance and share trading price of the Trust.

Future Outlook

The Board will continue to review the Investment Management Agreement annually and act in the best interests of the Trust and its shareholders. The Board will also continue to monitor the Trust's performance and consider shareholder-friendly initiatives.

Management Comments

• The Board believes the Board Nominees have the skills, qualifications and requisite experience in overseeing investment companies to act in the best interests of ALL shareholders.
• The Board believes that termination of the investment management agreement between the Trust and BlackRock Advisors, LLC is NOT in the best interests of the Trust and its shareholders.
• The Board believes Saba engages in these tactics to benefit itself and its own hedge funds and investors, and that Sabas actions are harmful to long-term shareholders of the Trust.

Industry Context

Activist investors like Saba Capital Management often target closed-end funds to unlock value through various strategies, including tender offers, open-ending, or management changes. This proxy fight reflects a broader trend of increased activism in the closed-end fund space.

Comparison to Industry Standards

• The document mentions that Tony Kim's flagship fund has delivered over 20% in annualized returns since he took over portfolio management responsibilities in 2013 and is in the top performance quartile of its peer group.
• The document mentions the MSCI ACWI Information Technology Index as a benchmark, which includes largeand mid-cap Information Technology securities across 23 Developed Markets countries and 24 Emerging Markets countries.

Stakeholder Impact

• Shareholders face uncertainty regarding the future management and direction of the Trust.
• Employees of BlackRock Advisors could be affected if the investment management agreement is terminated.
• The outcome of the proxy fight could impact the Trust's ability to attract and retain investors.

Next Steps

• Shareholders need to vote on the proposals by June 18, 2024.
• The Board will continue to engage with shareholders and provide updates on the situation.
• The Trust will hold its annual meeting on June 18, 2024, to count the votes and determine the outcome of the proposals.

Key Dates

Keywords

proxy statement, Saba Capital, BlackRock, board nominees, investment management agreement, shareholder meeting, closed-end fund, BSTZ