DEFA14A: Neuberger Berman Defends Board Nominees Against Saba Capital's Challenge

Neuberger Berman is urging shareholders to vote for its incumbent director nominees for the Neuberger Berman Next Generation Connectivity Fund Inc. (NBXG) and Neuberger Berman Municipal Fund Inc. (NBH), arguing that Saba Capital's nominee is conflicted and unqualified.

Summary

• Neuberger Berman is actively campaigning against Saba Capital's efforts to place its own nominee on the boards of NBXG and NBH.
• The document argues that Saba Capital has a history of prioritizing short-term gains over the long-term interests of all shareholders, often exiting funds after implementing strategies that benefit Saba at the expense of other investors.
• Neuberger Berman highlights the experience and independence of its incumbent director nominees, emphasizing their commitment to protecting shareholder interests and overseeing the funds effectively.
• The presentation reviews the performance of both NBXG and NBH, discussing market conditions, investment strategies, and distribution policies.
• NBXG's performance was impacted by market shifts and its underweighting of mega-cap stocks, but it has maintained consistent distributions and narrowed its discount compared to peers.
• NBH increased its monthly distribution rate by 43.5% to enhance its competitiveness and attract investor demand.
• The document also addresses the fee structures of both funds, comparing them to peer averages and explaining the factors that influence their expense ratios.

Sentiment

Score: 7

Explanation: The document presents a strong defense of Neuberger Berman's board nominees and a critical view of Saba Capital's tactics. While highlighting positive aspects of fund performance and distribution policies, it also acknowledges challenges and risks. The overall tone is assertive and confident in the board's ability to deliver value to shareholders.

Positives

• The incumbent director nominees are experienced, independent, and committed to acting in the best interests of all stockholders.
• NBXG has maintained consistent monthly distributions since inception.
• NBXG's discount has narrowed compared to peers.
• NBH has increased its distribution rate significantly to enhance its competitiveness.
• NBH's management fees are lower than the peer group average.

Negatives

• Saba Capital is accused of prioritizing short-term profits over the long-term interests of all shareholders.
• Saba's nominee is an employee of Saba, creating a potential conflict of interest.
• NBXG's performance was negatively impacted by its underweighting of mega-cap stocks.
• NBH's total expense ratio is higher than the peer group average due to higher investment-related expenses (cost of leverage).

Risks

• Saba Capital's actions could harm CEF stockholders and increase fund expenses.
• Replacing existing directors could impair the board's balance of skills.
• Market volatility and changes in interest rates could impact the performance of both funds.
• NBH's reliance on Variable Municipal Term Preferred stock (VMTPs) for leverage makes it more sensitive to interest rate changes compared to funds using Tender Option Bonds (TOBs).

Future Outlook

Neuberger Berman and the Funds Board continue to be focused on delivering value to stockholders and enhancing the Funds competitiveness in the secondary market.

Management Comments

• The Funds Boards and management teams create value for all stockholders.
• Rigorous and Independent Board oversight ensures all stockholders are protected.

Industry Context

The document highlights the increasing activism in the closed-end fund space, particularly from firms like Saba Capital, and the strategies employed by these activists to influence fund management and governance. It also touches on the impact of macroeconomic factors, such as interest rate policies, on the valuation and performance of leveraged closed-end funds.

Comparison to Industry Standards

• NBXG is compared to BlackRock Science and Technology Trust II (BSTZ) and BlackRock Innovation & Growth Trust (BIGZ) for performance.
• NBH's performance and fees are compared to a peer group of municipal CEFs.
• The document notes that NBH's leverage costs are higher than many peer CEFs due to its use of Variable Municipal Term Preferred stock (VMTPs), while other CEFs use Tender Option Bonds (TOBs), which are a less costly form of leverage.

Management Changes

Stakeholder Impact

• Shareholders are directly impacted by the outcome of the board election and the funds' performance and distribution policies.
• Financial advisors are targeted with information to support their recommendations to clients.
• The document aims to reassure stakeholders about the board's commitment to protecting their interests.

Next Steps

• Shareholders will vote on the election of directors at the upcoming meeting.
• The Board will continue to monitor the Funds discount and consider discount mitigation techniques.
• Neuberger Berman will continue to engage with stockholders and financial advisors to increase CEF visibility.

Key Dates

Keywords

Neuberger Berman, Saba Capital, closed-end funds, board nominees, proxy statement, NBXG, NBH, distributions, discount, corporate governance