Neuberger Berman muni funds plan tender offers, tender offer programs

By Susanna Moon

Chicago, Feb. 6 - The boards of directors of Neuberger Berman California Intermediate Municipal Fund Inc., Neuberger Berman Intermediate Municipal Fund Inc. and Neuberger Berman New York Intermediate Municipal Fund Inc. said each fund will hold a tender offer for 10% of its outstanding common shares at 98% of its net asset value per share.

Pricing will be set on the tender expiration date. The offer dates have yet to be determined.

In addition to the initial tender offers, each board has authorized a semiannual tender offer program consisting of up to four tender offers over two years. Under each program, if a fund's shares trade at an average daily discount to net asset value per share, or NAV, of greater than 10% during a 12-week period, the fund will conduct a tender offer for between 5% and 20% of its outstanding common shares at 98% of its NAV determined on the day the tender offer expires.

Each board will determine the measurement periods for its fund, currently expected to begin in the third quarter of 2009, and the three subsequent measurement periods will follow semiannually, according to a press release by Neuberger Berman Management LLC, the funds' New York-based investment manager.

If a fund's common shares trade at an average daily discount to the net asset value per share during a measurement period that is above 10%, its board will determine the maximum size of the tender offer.

In making that determination, the board will consider the following:

• Market conditions and outlook for the fund's portfolio securities, sectors and asset classes;

• Size of the average daily discount;

• Potential impact of a tender offer at different levels on the fund's expense ratio;

• Potential tax consequences of the tender offer on the fund and non-tendering shareholders;

• Shareholders' potential need for added liquidity; and

• Potential impact on the fund as a whole.

Each board believes that by retaining discretion over the maximum size of the tender offers, it can more appropriately exercise its fiduciary duties and consider the best interests of the fund and all shareholders in light of the then-current market conditions, the release said.

Each board retains the ability, consistent with its fiduciary duty, to opt out of its tender offer program should circumstances arise that would cause a material negative effect on the fund or its shareholders.

In approving the tender offers and the tender offer programs, Neuberger said the boards considered that the tender offers could enable shareholders to tender a portion of their shares at a price that is greater than what they could realize in the secondary market at that time.

The boards also considered that the tender offers and tender offer programs would increase liquidity for common shareholders, may have a marginally accretive impact to NAV for common shareholders who remain invested and may assist in narrowing the discount to NAV at which common shares trade at certain times.

There can be no assurance that the tender offers or tender offer programs will cause the discount at which the funds' common shares trade to narrow or that the common shares will trade at a price equal to their NAV, the company said.

There also can be no assurance that a fund's initial tender offer and tender offer program would not hurt its earnings per share.

The boards also considered the potential negative effects tender offers might have on the funds' expense ratios and on the amount of leverage the funds can maintain. They also considered what effect the tender offers may have on management of the funds' portfolios.

To offset some of the expenses from the tender offer programs, Neuberger said it agreed to extend the fee waivers currently in place for each of the three muni funds.

Neuberger said the tender offers and the tender offer programs are the latest in a series of steps to address the discount at which fund common shares have typically traded. The boards will continue their comprehensive review of potential actions that may benefit the funds and their shareholders.

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