SCHEDULE: MFS High Yield Municipal Trust and Bulldog Investors Amend Standstill Agreement, Extend Term and Set Liquidity Event Conditions

MFS High Yield Municipal Trust and activist investor Bulldog Investors have amended their standstill agreement, extending its term until December 31, 2025, and establishing conditions for a potential liquidity event based on the fund's trading discount.

Summary

• MFS High Yield Municipal Trust (the Fund) and Massachusetts Financial Services Company (MFS) have amended their Tender Offer and Standstill Agreement with Bulldog Investors, LLP.
• The amendment extends the agreement's term until December 31, 2025, or an earlier mutually agreed date.
• A key change mandates the Fund's Board of Trustees to approve a "Liquidity Event" unless the Fund's shares trade at an "Average Trading Discount" of 7.50% or less for any consecutive 30-calendar-day "Trigger Period" between July 15, 2025, and December 31, 2025.
• The "Average Trading Discount" is calculated as the simple average of daily trading discounts (or premiums) relative to Net Asset Value (NAV) during the Trigger Period.
• Bulldog Investors, LLP, and its affiliates are bound by a standstill provision until December 31, 2025, which restricts them from making shareholder proposals, soliciting against Board recommendations, seeking control, or removing Board members, with certain exceptions for legally required voting.
• As of July 15, 2025, Bulldog Investors, LLP beneficially owns 2,695,237 shares (10.57% of outstanding), Phillip Goldstein beneficially owns 3,076,451 shares (12.07%), and Andrew Dakos beneficially owns 2,671,037 shares (10.48%).
• The Fund had 25,492,782 shares of common stock outstanding as of November 30, 2024.
• Bulldog Investors purchased 10,000 shares on July 11, 2025, at $3.2900.

Sentiment

Score: 6

Explanation: The amendment provides a structured path for addressing the fund's trading discount, which is a positive for shareholders concerned about value. However, it also extends the standstill agreement, limiting immediate activist influence. The outcome is conditional, leading to a moderately positive but not overwhelmingly strong sentiment.

Positives

• The agreement provides a clear mechanism for a potential "Liquidity Event" for the Fund, which could benefit shareholders if the trading discount persists.
• The extension of the agreement provides continued stability in the relationship between the Fund's management and a significant activist investor.
• The defined "Trigger Period" and "Average Trading Discount" criteria offer transparency regarding the conditions under which a liquidity event would be required.

Negatives

• Bulldog Investors remains subject to a standstill agreement, limiting its ability to actively engage in corporate governance or propose shareholder actions until at least December 31, 2025.
• The requirement for a liquidity event is conditional on the trading discount remaining above 7.50%, meaning it is not guaranteed.

Risks

• The "Liquidity Event" may not occur if the Fund's shares trade at an Average Trading Discount of 7.50% or less during any 30-day Trigger Period between July 15, 2025, and December 31, 2025.
• The standstill agreement restricts Bulldog Investors' ability to influence the Fund's management or policies, potentially limiting shareholder advocacy from this significant investor.

Future Outlook

The amended agreement sets a clear path for a potential liquidity event for the Fund, contingent on its shares trading performance relative to NAV. The agreement's extended term until December 31, 2025, provides a defined period for these conditions to be met and for the standstill provisions to remain in effect.

Management Comments

• "This Amendment embodies the entire agreement and understanding between the Parties hereto, and supersedes all prior agreement and understandings relating to this Amendment's subject matter."

Industry Context

This amendment reflects ongoing dynamics between closed-end funds and activist investors, who often target funds trading at significant discounts to their Net Asset Value (NAV). Such agreements aim to address shareholder concerns about persistent discounts, often by setting conditions for liquidity events (like tender offers, liquidations, or conversions to open-end funds) in exchange for a standstill on activist campaigns. This is a common strategy employed by activist investors like Bulldog Investors to unlock shareholder value in closed-end funds.

Comparison to Industry Standards

• The 7.50% average trading discount threshold for triggering a liquidity event is a specific negotiated term. While there's no universal standard, activist campaigns in closed-end funds frequently target discounts ranging from 5% to 15% or more. For example, Saba Capital Management, another prominent activist in the closed-end fund space, has similarly engaged with funds like BlackRock and Nuveen to implement discount management policies or liquidity events.
• The standstill agreement, which restricts Bulldog's ability to propose nominees or solicit proxies, is a standard component of such agreements, providing management with a period of stability in exchange for concessions on shareholder value initiatives.
• The extension of the agreement until December 31, 2025, provides a defined timeframe for the fund to address the discount, similar to other agreements that set specific deadlines for performance or corporate actions.

Corporate Governance

Stakeholder Impact

• Shareholders: Potential for a liquidity event to address the trading discount, which could unlock value. However, the standstill agreement limits activist influence for a defined period.
• Management/Board of Trustees: Gains a period of stability from activist pressure in exchange for committing to a conditional liquidity event.
• Bulldog Investors, LLP: Secures a commitment from the Fund regarding a potential liquidity event, aligning with its activist objectives, while agreeing to temporary restrictions on its actions.

Next Steps

• MFS to perform calculations of the Average Trading Discount as soon as practical after each Business Day during a Trigger Period.
• The Fund's Board of Trustees will be required to approve a Liquidity Event if the Average Trading Discount condition is not met during the Trigger Period.
• The agreement will remain in effect until December 31, 2025, unless terminated earlier by mutual written agreement.

Key Dates

Recommendation

Keywords

MFS High Yield Municipal Trust, Bulldog Investors, SEC filing, Schedule 13D, Tender Offer, Standstill Agreement, Liquidity Event, Trading Discount, NAV, Closed-End Fund, Activist Investor, Corporate Governance, Shareholder Agreement