DEFA14A: Eaton Vance Funds Face Activist Challenge: Board Urges Shareholders to Vote White Proxy

Eaton Vance California and New York Municipal Bond Funds are urging shareholders to vote for the Board-approved nominees on the WHITE proxy card, resisting an activist investor's attempt to gain board seats.

Summary

• The Boards of Trustees of Eaton Vance California Municipal Bond Fund (EVM) and Eaton Vance New York Municipal Bond Fund (ENX) are recommending shareholders vote FOR their Board-approved Trustee nominees using the WHITE proxy card.
• The recommendation is in response to a challenge from Saba Capital Management, an activist investor, who has nominated two individuals for the Board.
• The Board believes Saba is seeking short-term profits at the expense of other shareholders and that Saba's nominees lack relevant experience.
• The Board highlights the incumbent Trustees' experience, their focus on shareholder interests, and recent actions such as increasing monthly distribution rates by 31.2% for EVM and 32.7% for ENX in January 2024.
• The Board also emphasizes the share repurchase program, which allows each Fund to repurchase up to 10% of its common shares outstanding when trading at a discount.
• Shareholders are urged not to vote using the GOLD proxy card sent by Saba, as it may cancel their vote for the current Board.

Sentiment

Score: 6

Explanation: The document conveys a neutral to slightly positive sentiment, as the Board is actively defending its position and highlighting its actions to benefit shareholders. However, the presence of an activist investor introduces uncertainty and potential disruption.

Positives

• The current Board has a consistent focus on ensuring that each Fund continues to deliver on its investment objective of providing high current income exempt from certain taxes.
• The Board approved appreciable increases to each Funds monthly distribution rates, increasing EVMs rate by 31.2% and ENXs rate by 32.7% in January 2024.
• The Board-approved share repurchase program authorizes each Fund to repurchase up to 10% of its common shares outstanding as of the last day of the prior calendar year at market prices when shares are trading at a discount to net asset value.

Negatives

• Saba Capital Management, an activist investor, is attempting to gain board seats, which the current Board believes could be detrimental to long-term shareholder interests.
• Shares of closed-end funds often trade at a discount to their NAV, which is a characteristic of listed closed-end funds that the Board expects active participants in the closed-end funds industry, such as Saba, to be well-aware of, and there is no simple mechanism for narrowing or eliminating a funds discount over long-term periods.

Risks

• Saba's involvement could interfere with the Funds' investment program, distract management, raise fund expenses, and reduce trading liquidity.
• There is a risk that Saba's nominees, if elected, may not act in the best long-term interests of all shareholders.
• Activist campaigns can be costly and time-consuming for the Funds.

Future Outlook

The Board aims to continue delivering on the investment objective of providing high current income exempt from certain taxes and to maintain a focus on the interests of shareholders overall.

Management Comments

• George J. Gorman, Chairperson of the Board, urges shareholders to vote for the Board-approved nominees to prevent Saba from advancing its self-serving agenda.
• The Board believes Saba opportunistically targets closed-end funds to seek short-term profits for itself at the expense of other closed-end fund shareholders.

Industry Context

Activist investors targeting closed-end funds is a known trend in the investment management industry. Saba Capital is a well-known player in this space, with a history of engaging in proxy contests and agitating for changes in fund management.

Comparison to Industry Standards

• Closed-end funds often trade at a discount to their net asset value (NAV), a common characteristic in the industry.
• Activist investors like Saba Capital often exploit this discount by buying shares and pushing for actions that benefit them, sometimes at the expense of other shareholders.
• Other activist investors in the closed-end fund space include Bulldog Investors and Karpus Management, who similarly target funds trading at a discount.

Stakeholder Impact

• Shareholders are directly impacted by the outcome of the vote, as it will determine the composition of the Board.
• The Funds' management and employees could be affected by changes resulting from Saba's involvement.
• The Funds' investment strategy and performance could be influenced by the Board's decisions.

Next Steps

• Shareholders need to vote using the WHITE proxy card.
• The Funds will hold an Annual Meeting where the vote will take place.

Key Dates

Keywords

proxy contest, activist investor, Saba Capital, closed-end funds, board of trustees, shareholder vote, Eaton Vance, municipal bonds, investment management