If You Invested in Neuberger Municipal Fund (NBH)

Neuberger Berman Municipal Fund Inc. (NYSE American: NBH) is a closed-end management investment company in the financial services sector. According to its public disclosures, the fund invests mainly in municipal securities and seeks to provide its common stockholders with a high level of current income that is exempt from regular federal income tax. As a closed-end fund, NBH issues a fixed number of shares that trade on the NYSE American exchange under the ticker symbol NBH.

The fund’s stated objective is to generate income that is generally free from regular federal income tax. Its announcements note that distributions may be subject to the federal alternative minimum tax for some stockholders. The fund’s distributions can consist of net investment income, realized capital gains, and return of capital. When distributions exceed net investment income over a yearly period, the excess may represent realized gains and/or a return of capital, which can reduce the fund’s net asset value per share and lower an investor’s cost basis.

NBH is managed by Neuberger Berman Investment Advisers LLC, part of Neuberger Berman, an employee-owned, private, independent investment manager founded in 1939. Neuberger Berman manages portfolios in areas such as equities, fixed income, private equity, real estate and hedge funds for institutions, advisors and individuals globally. The firm describes its investment philosophy as founded on active management, fundamental research and engaged ownership.

In its distribution notices, NBH explains that, in compliance with Section 19 of the Investment Company Act of 1940, a notice is provided for any distribution that does not consist solely of net investment income. This notice is described as informational and not for tax reporting purposes, and it discloses estimated portions of each distribution, if any, that are attributable to net investment income, capital gains and return of capital. Final determinations of the source and tax characteristics of distributions are made after the end of each year.

NBH has also been involved in corporate actions within the Neuberger Berman municipal fund complex. A prior announcement stated that the reorganizations of Neuberger Berman California Municipal Fund Inc. (NBW) and Neuberger Berman New York Municipal Fund Inc. (NBO) with and into NBH were expected to become effective after the close of business on a specified date. That announcement indicated that common stockholders of NBW and NBO who received newly issued NBH shares and held them as of the relevant record date would be eligible for the NBH distribution described in that notice.

Shareholder governance has been a topic of discussion around NBH. A separate communication from Saba Capital Management, L.P., which identified itself as the largest shareholder of Neuberger Berman Municipal Fund and another Neuberger Berman closed-end fund, commented on the voting standards used at a joint annual meeting of shareholders. That release discussed preliminary voting results for a Saba director nominee and incumbent directors, and criticized the majority vote standard applied to board elections at the funds. These comments reflect ongoing debate among some shareholders and the fund’s external stakeholders regarding governance practices at closed-end funds managed by Neuberger Berman.

NBH’s regular public announcements emphasize the potential risks and uncertainties associated with investing in the fund. These include the adverse effect from a decline in securities markets or a decline in the fund’s performance, a general downturn in the economy, competition from other closed-end investment companies, changes in government policy or regulation, the ability of the fund’s investment adviser to attract or retain key employees, the fund’s ability to implement its investment strategy, and the potential impact of legal proceedings or investigations by governmental and self-regulatory organizations. These risk statements are presented as forward-looking and subject to change.

Business focus and structure

Neuberger Berman Municipal Fund Inc. is described as a closed-end management investment company that focuses mainly on municipal securities. Its purpose is to provide stockholders with income that is exempt from regular federal income tax, subject to the possibility that some distributions may be taxable under the federal alternative minimum tax. As a closed-end fund, NBH’s shares trade on an exchange rather than being issued and redeemed on demand at net asset value.

The fund’s manager, Neuberger Berman Investment Advisers LLC, is part of a broader global investment management organization. Neuberger Berman reports that it is employee-owned and private, with operations in multiple countries and a range of investment strategies. These characteristics position NBH within a family of funds that draw on the firm’s research and active management approach.

Distributions and tax characteristics

NBH issues monthly distribution declarations that specify the per-share amount, payable date, record date and ex-date. In these announcements, the fund reiterates its goal of providing income exempt from regular federal income tax. However, it also notes that distributions may be subject to the federal alternative minimum tax for some stockholders.

The fund explains that its distributions may include:

• Net investment income
• Realized capital gains
• Return of capital

When a distribution includes a return of capital, the fund notes that its net asset value per share may decline and an investor’s cost basis in their shares will be reduced. The fund also states that, for any distribution not consisting solely of net investment income, it will provide a Section 19 notice under the Investment Company Act of 1940. That notice is described as informational and not a substitute for year-end tax reporting, and it includes estimated portions of the distribution attributable to income, gains and return of capital.

Corporate actions and reorganizations

NBH has served as the acquiring fund in reorganizations involving other Neuberger Berman municipal funds. A prior press release stated that the reorganizations of Neuberger Berman California Municipal Fund Inc. (NBW) and Neuberger Berman New York Municipal Fund Inc. (NBO) with and into NBH were expected to be effective after the close of business on a specified date. The same announcement indicated that the distribution declared by NBH at that time was expected to be payable with respect to common stockholders of NBW and NBO who received newly issued NBH shares and held those shares as of the NBH distribution record date.

Manager background: Neuberger Berman

Neuberger Berman describes itself as an employee-owned, private, independent investment manager founded in 1939. Across its various communications, the firm states that it manages strategies in equity, fixed income, quantitative and multi-asset class, private equity, real estate and hedge funds for institutions, advisors and individual investors globally. The firm highlights an investment philosophy based on active management, fundamental research and engaged ownership, and notes recognition in surveys of workplaces in money management. These characteristics provide context for the management resources available to NBH as one of the funds advised by Neuberger Berman Investment Advisers LLC.

Risk considerations

NBH’s public releases include cautionary language about forward-looking statements. They identify risks and uncertainties such as:

• Declines in securities markets or in the fund’s performance
• General economic downturns
• Competition from other closed-end investment companies
• Changes in government policy or regulation
• The fund’s ability to implement its investment strategy
• The investment adviser’s ability to attract or retain key employees
• Costs and effects related to legal proceedings or investigations by governmental and self-regulatory organizations

These disclosures are intended to highlight that actual outcomes may differ from expectations expressed in forward-looking statements about the fund.

Shareholder governance context

In addition to the fund’s own announcements, a separate release from Saba Capital Management, L.P. discussed shareholder voting at a joint annual meeting of Neuberger Berman Municipal Fund and another Neuberger Berman closed-end fund. Saba described itself as the largest shareholder of NBH and commented on the majority vote standard used for electing directors, presenting preliminary voting results for its nominee and incumbent directors. While this communication reflects the perspective of an external shareholder, it provides context on governance debates that can arise around closed-end funds such as NBH.

Investment classification

Based on its own description, Neuberger Berman Municipal Fund Inc. is classified as a closed-end management investment company that invests mainly in municipal securities, with an objective of providing income exempt from regular federal income tax. It operates within the financial services sector and the asset management industry, under the management of Neuberger Berman Investment Advisers LLC.