DEFA14A: Neuberger Berman Defends Board Structure Against Saba Nominee, Cites Potential Cost Increases and Inefficiencies

Neuberger Berman addresses concerns raised by Institutional Shareholder Services (ISS) regarding the potential addition of a Saba Nominee to the NBH and NBXG Boards, arguing it would lead to increased costs and operational inefficiencies.

Summary

• Neuberger Berman has responded to questions from Institutional Shareholder Services (ISS) regarding the potential addition of a Saba Nominee to the boards of Neuberger Berman Municipal Fund Inc. (NBH) and Neuberger Berman Next Generation Connectivity Fund Inc. (NBXG).
• The company argues that adding a Saba Nominee would result in increased costs and inefficiencies due to the need for separate meetings and the loss of the benefits of a unitary board structure.
• Neuberger Berman estimates that the additional costs associated with a non-unitary board arrangement would be at least threefold, including direct costs of running separate meetings, management and legal costs associated with producing separate materials, and costs to board members in terms of loss of context, efficiency, and overall leverage.
• The company also presents data comparing the performance of Saba Capital Income & Opportunities Fund (BRW) to the Morningstar US CEF Senior Loan category, indicating that BRW has underperformed since Saba took over management on June 4, 2021.
• Specifically, BRW's annualized NAV Total Return has trailed the M-Star CEF Sr Loan category by 2.4%, while its annualized Market Price Total Return has trailed by 1.1%.

Sentiment

Score: 4

Explanation: The document presents a defensive stance against potential changes to the board structure and highlights underperformance, suggesting a somewhat negative outlook.

Positives

• The current unitary board structure is presented as efficient and effective, providing directors with broader and more complete information.
• Neuberger Berman emphasizes the benefits of the current board structure in terms of cost-effectiveness and informed decision-making.

Negatives

• The potential addition of a Saba Nominee is portrayed as a negative development that would lead to increased costs and inefficiencies.
• The underperformance of BRW since Saba took over management is highlighted as a concern.

Risks

• The potential disruption to the current board structure could negatively impact the governance and oversight of the funds.
• The increased costs associated with a non-unitary board arrangement could reduce profitability.
• Continued underperformance of BRW could erode investor confidence.

Future Outlook

The document does not explicitly provide a future outlook, but it implies that maintaining the current unitary board structure is crucial for the continued efficient and effective governance of the funds.

Management Comments

• The Neuberger Berman fund complex is currently overseen by a unitary board and its committees, which means that the same board members serve on the boards and committees for each fund in the complex.
• This creates efficient and effective governance for each Fund because, among other things, the directors/trustees have broader and more complete information by virtue of sitting on the boards of other funds/trusts in the Neuberger Berman fund complex.
• Without getting into specific dollar amounts that include non-public information, we have included certain items below that would result in additional costs and inefficiencies for the Funds.

Industry Context

This announcement reflects the ongoing tension between activist investors like Saba Capital and established fund managers regarding board representation and fund performance.

Comparison to Industry Standards

• The document compares the performance of BRW to the Morningstar US CEF Senior Loan category, a common benchmark for closed-end funds investing in senior loans.
• The underperformance of BRW relative to this benchmark suggests that Saba's management has not delivered superior results compared to its peers.

Stakeholder Impact

• Shareholders could be impacted by potential changes to the board structure and the resulting costs and inefficiencies.
• The performance of BRW could affect shareholder returns and investor confidence.

Key Dates

Keywords

Neuberger Berman, Saba Capital, Board Structure, Proxy Statement, Unitary Board, Costs, Efficiency, BRW, Performance, Governance