ISS Supports Saba Capital’s Nominee at Neuberger Berman Municipal Fund and Neuberger Berman Next Generation Connectivity Fund

Rhea-AI Summary

ISS has recommended shareholders of Neuberger Berman Municipal Fund (NBH) and Neuberger Berman Next Generation Connectivity Fund (NBXG) vote for Saba Capital's nominee, Paul Kazarian, to the Funds' Boards at the 2024 Joint Annual Meeting. ISS cited concerns with NBH's governance, performance, and fees, noting its significant NAV discount deterioration and underperformance. For NBXG, ISS highlighted performance issues and the Board's disregard for shareholder will. ISS concluded Saba "has presented a compelling case for change" at both Funds. Saba, the largest shareholder, aims to address persistent trading discounts and prioritize shareholder interests.

Positive

• ISS recommends shareholders vote for Saba's nominee, Paul Kazarian, to the Funds' Boards
• Saba is the largest shareholder of NBH and NBXG
• ISS affirms Saba's case for boardroom change

Negative

• NBH has experienced significant deterioration in NAV discount
• NBH delivered negative returns and underperformed peers and benchmark
• NBH has an above-market expense ratio despite below-market performance
• NBXG has traded at a NAV discount in excess of 15 percent
• NBXG has underperformed peers over all measurement periods
• Both Funds' Boards have shown disregard for shareholders' rights

Insights

Corporate Governance Expert

The ISS recommendation for Saba Capital's nominee at Neuberger Berman funds is a significant development in corporate governance. ISS's support highlights serious concerns about the funds' performance, governance and shareholder rights. Key issues include:

• Persistent NAV discounts wider than peers
• Underperformance across multiple time periods
• Above-market expense ratios despite poor returns
• Boards' disregard for shareholder will, including implementing the Maryland Control Share Acquisition Act

The recommendation for Paul Kazarian could bring fresh perspective and shareholder-aligned governance. This situation underscores the importance of active shareholder engagement in closed-end funds to drive accountability and protect investor interests.

Financial Analyst

The ISS recommendation reveals critical financial issues at NBH and NBXG. Both funds have shown significant underperformance, with NBH delivering negative returns across all measured periods. NBXG's NAV discount has consistently exceeded 15%, worse than its peers. Despite poor performance, NBH maintains an above-market expense ratio, directly impacting shareholder returns. These factors contribute to the funds' persistent trading discounts, a key concern for closed-end fund investors. The potential addition of Paul Kazarian to the boards could drive initiatives to narrow these discounts and improve performance, potentially leading to enhanced shareholder value in the medium to long term.

Investment Strategist

The ISS recommendation presents a strategic inflection point for NBH and NBXG. Saba Capital's push for board representation signals a shift towards activist investing in closed-end funds, which could have broader market implications. If successful, this move could:

• Pressure other underperforming funds to improve governance and returns
• Encourage more activist involvement in the closed-end fund space
• Potentially lead to fund restructurings or liquidations if performance doesn't improve

For investors, this situation highlights the importance of monitoring fund governance and being prepared for potential value-unlocking events. The outcome of this proxy contest could set a precedent for how closed-end funds address persistent NAV discounts and shareholder rights issues.

Recommends NBH and NBXG Shareholders Vote FOR the Election of Saba Nominee Paul Kazarian on the GOLD Proxy Card

Concludes Saba “Has Presented a Compelling Case for Change” at Both Funds

NEW YORK--(BUSINESS WIRE)-- Saba Capital Management, L.P. (together with certain of its affiliates, “Saba” or “we”), the largest shareholder of the Neuberger Berman Municipal Fund (NYSE: NBH) and the Neuberger Berman Next Generation Connectivity Fund (NYSE: NBXG) (collectively, the “Funds”), today announced that Institutional Shareholder Services Inc. (“ISS”) has recommended NBH and NBXG shareholders elect Saba’s director candidate, Paul Kazarian, to the Funds’ Boards of Directors (the “Boards”) at the 2024 Joint Annual Meeting of Shareholders.

In its full report on NBH, ISS affirmed Saba’s case for boardroom change, citing deficiencies in NBH’s governance, performance and fees:¹

• “… NBH has experienced significant deterioration in [its NAV discount], and now trades at a wider discount than the peers it once consistently outperformed.”

• “…NBH delivered negative returns and underperformed both peers and its benchmark over all measurement periods prior to the public entrance of the dissident.”

• “Despite delivering below-market performance, NBH has an above-market expense ratio.”

• “[T]he corporate governance structure provides shareholders with little reason to have faith in the board.”

• “Dissident nominee Paul Kazarian is independent, has meaningful CEF experience, and would impart the perspective of a large shareholder, all of which would be additive at this juncture. As such, a vote FOR dissident nominee Paul Kazarian on the dissident GOLD card is warranted.”

In its full report on NBXG, ISS also noted concerns with NBXG’s performance and its Board’s decision-making:²

• “There are clear concerns in nearly all areas of performance.”

• “NBXG has generally traded at a NAV discount in excess of 15 percent, and has fared worse than peers over all measurement periods.”

• “The board's willingness to brazenly ignore the will of shareholders is just further evidence in support of a case for change.”

• “[N]ot only is the board classified, but the fund has a majority vote standard for both uncontested and contested elections.”

• “[The] fund was not only willing to disenfranchise shareholders by actively opting into the [Maryland Control Share Acquisition Act], but is now apparently unwilling to remove ambiguity about the applicability of the provision.”

Paul Kazarian, Partner and Portfolio Manager of Saba, commented:

“We are pleased that ISS agrees change is urgently needed in both NBH and NBXG’s boardrooms. For far too long, these Funds have delivered underwhelming returns for shareholders while trading at excessive discounts to NAV. To make matters worse, the Funds’ Boards have demonstrated a consistent disregard for shareholders’ rights by instituting several of the most unacceptable governance practices. As the Funds’ largest shareholder, we will bring the necessary ownership mentality and much-needed accountability to the NBH and NBXG Boards to address the Funds’ persistent trading discounts and prioritize the best interest of all shareholders.”

About Saba Capital

Saba Capital Management, L.P. is a global alternative asset management firm that seeks to deliver superior risk-adjusted returns for a diverse group of clients. Founded in 2009 by Boaz Weinstein, Saba is a pioneer of credit relative value strategies and capital structure arbitrage. Saba is headquartered in New York City. Learn more at www.sabacapital.com.

_________________________
¹ Permission to quote ISS was neither sought nor obtained.
² Permission to quote ISS was neither sought nor obtained.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240805869494/en/

Longacre Square Partners

Charlotte Kiaie / Kate Sylvester, 646-386-0091

ckiaie@longacresquare.com / ksylvester@longacresquare.com

Source: Saba Capital Management, L.P.

FAQ

What did ISS recommend for NBH and NBXG shareholders?

ISS recommended that shareholders of NBH and NBXG vote FOR the election of Saba's nominee, Paul Kazarian, to the Funds' Boards of Directors at the 2024 Joint Annual Meeting of Shareholders.

What concerns did ISS raise about NBH's performance?

ISS noted that NBH has experienced significant deterioration in its NAV discount, delivered negative returns, and underperformed both peers and its benchmark over all measurement periods prior to Saba's involvement.

How has NBXG's performance been according to ISS?

ISS reported that NBXG has generally traded at a NAV discount in excess of 15 percent and has performed worse than peers over all measurement periods.

What governance issues did ISS highlight for NBH and NBXG?

ISS criticized the Funds' corporate governance structure, noting that the boards have shown a willingness to ignore shareholder will, implemented classified board structures, and in NBXG's case, opted into the Maryland Control Share Acquisition Act.

Who is the largest shareholder of NBH and NBXG?

Saba Capital Management, L.P. (together with certain of its affiliates) is the largest shareholder of both NBH and NBXG.