DEFC14A: Eaton Vance Funds Face Proxy Battle as Saba Capital Seeks Board Seats

Eaton Vance California and New York Municipal Bond Funds are urging shareholders to vote for their nominees amidst a proxy contest initiated by Saba Capital Management.

Summary

• Eaton Vance California Municipal Bond Fund and Eaton Vance New York Municipal Bond Fund are holding their 2024 Annual Meeting of Shareholders on September 9, 2024.
• The Board of Trustees unanimously recommends shareholders vote FOR the reelection of Mark R. Fetting, Valerie A. Mosley, and Keith Quinton.
• Saba Capital Master Fund, Ltd. has proposed two nominees to serve as trustees, which the Board does NOT endorse.
• The Board believes Saba opportunistically targets closed-end funds for short-term profits at the expense of long-term shareholders.
• The Board urges shareholders to discard any proxy cards received from Saba and only use the enclosed WHITE proxy card to vote for the Board Nominees.
• The Board has increased the distribution rates for both funds in January 2024, with California Municipal Bond Fund's monthly distribution rate increasing by 31.2% and New York Municipal Bond Fund's distribution rate increasing by 32.7%.

Sentiment

Score: 4

Explanation: The document is primarily defensive, aimed at countering the influence of an activist investor. While the Board highlights positive actions taken, the overall tone is cautious and concerned about potential disruption.

Positives

• The Board Nominees have extensive experience in the asset management industry.
• The Board Nominees are deeply familiar with each Fund and its investment objective.
• The Board has taken action to enhance investor value, including increasing fund distribution rates.
• The Board is committed to ensuring that members of the Board are well-qualified and knowledgeable about the operations of closed-end funds.

Negatives

• Saba Capital Management is attempting to place two nominees on each Board, which the current Boards oppose.
• The Board believes Saba is seeking short-term profits at the expense of long-term shareholders.
• Saba's nominees appear to have little or no experience with closed-end funds.
• If the Saba Nominees are elected, the composition and governance of each Board could be significantly altered.

Risks

• The proxy contest initiated by Saba Capital Management could lead to changes in the composition and governance of the Boards.
• Saba's actions could be harmful to long-term shareholders if they prioritize short-term profits.
• Closed-end fund discounts are impacted by a range of factors, some of which are outside of a fund's control, and there is no simple mechanism for eliminating a fund's discount over the long-term.
• There is ongoing litigation related to by-law amendments implemented by another fund in the Eaton Vance fund complex, in which the Saba Hedge Fund has filed counterclaims.

Future Outlook

The document focuses on the upcoming Annual Meeting and the proxy contest, with no specific forward-looking financial guidance provided.

Management Comments

• The Board takes corporate governance very seriously and is committed to ensuring that members of the Board are well-qualified and knowledgeable about the operations of closed-end funds.
• Given Saba's activist campaign history, the Board believes Saba opportunistically targets closed-end funds to seek short-term profits for itself and its clients at the expense of the funds long-term shareholders.
• Each Board believes Saba's actions are harmful to long-term shareholders and strongly encourages you to continue to show your support for your Fund(s) by voting FOR the Board Nominees.

Industry Context

Activist investors like Saba Capital Management frequently target closed-end funds trading at a discount to their net asset value (NAV). This proxy contest reflects a broader trend of increased shareholder activism in the investment management industry.

Comparison to Industry Standards

• The document mentions that as of July 8, 2024, both closed-end funds managed by Saba were trading at a discount to their NAV, including one fund trading at a 9.79% discount to NAV.
• This suggests that even under Saba's management, eliminating discounts to NAV can be challenging, a common issue in the closed-end fund industry.
• Comparable companies facing similar activist pressures include other closed-end funds managed by Eaton Vance and other firms, such as those targeted by Bulldog Investors or Karpus Management.

Legal Proceedings

• There is ongoing litigation related to by-law amendments implemented by another fund in the Eaton Vance fund complex, in which the Saba Hedge Fund has filed counterclaims. The Funds are not directly involved in this litigation.

Stakeholder Impact

• The outcome of the proxy contest will directly impact shareholders, as it will determine the composition of the Board of Trustees.
• Employees of Eaton Vance could be affected if Saba's nominees are elected and the investment manager is replaced.
• The proxy contest could also impact the Funds' service providers, depending on the outcome of the vote.

Next Steps

• Shareholders need to vote using the WHITE proxy card before the Annual Meeting on September 9, 2024.
• The Funds will continue to solicit proxies to ensure sufficient votes for the Board Nominees.
• The Board will continue to monitor the situation and respond to any further actions by Saba Capital Management.

Key Dates

Keywords

proxy contest, Saba Capital, Board of Trustees, closed-end funds, shareholder vote, Eaton Vance, municipal bonds, corporate governance, trustees, nominees