BLAZZARD, GROOD a HASENAUER, P.C.
Attorneys at Law
943 Post Road East
P.O. Box 5108
WestpQrt, CT 06880
(203) 226-7866
May 4, 1995
Securities and Exchangs Commission
Division of Investment Management
Office of Insurance Products and
Legal Compliance
450 Fifth Street, N.W.
Washington, O. C. 2o549
Re: Neuberger & Berman Advisers Management
Trust File Nos. 2-88566
______________________________________
Dear Sirs:
Pursuant to Rule 497(e) under the Securities Act of 1933, enclosed for
filing please find one copy of the definitive Statement of Additlonal
Intormation for the above named registrant.
Should you have any questions concerning the above please do not hesitate
to contact the undersigned.
Sincerely,.
BLAZZARD, GRODD & HASENAUER, P.C
By: /s/ RAYMOND A. O'HARA III
__________________________
Raymond A. O'Hara lIl
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NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
Dated May 1, 1995
The Balanced Portfolio, Government Income Portfolio, Growth Portfolio,
International Portfolio, Limited Maturity Bond Portfolio, Liquid Asset
Portfolio and Partners Portfolio (each a Portfolio) of Neuberger & Berman
Advisers Management Trust (Trust) offer shares pursuant to a Prospectus dated
May 1, 1995 and invest all of their net investable assets in AMT Balanced
Investments, AMT Government Income Investments, AMT Growth Investments, AMT
International Investments, AMT Limited Maturity Bond Investments, AMT Liquid
Asset Investments and AMT Partners Investments (each a Series), respectively.
The Portfolios Prospectus provides the basic information that an investor
ought to know before investing. A copy of the Prospectus may be obtained,
without charge, by writing the Trust at 605 Third Avenue, 2nd Floor, New York,
NY 10158-0006.
This Statement of Additional Information ("SAI") is not a prospectus and
should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this SAI in connection
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been
authorized by a Portfolio or its distributor. The Prospectus and this SAI do
not constitute an offering by a Portfolio or its distributor in any
jurisdiction in which such offering may not lawfully be made.
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TABLE OF CONTENTS
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Page
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INVESTMENT INFORMATION 1
Investment Policies and Limitations 2
Top-down approach to regional and country diversification 9
Bottom-up approach to security selection 9
Currency Risk Management - AMT International Investments 9
Additional Investment Information 15
CERTAIN RISK CONSIDERATIONS 46
PERFORMANCE INFORMATION 46
TRUSTEES AND OFFICERS 49
Substantial Shareholders 53
INVESTMENT MANAGEMENT, ADVISORY AND ADMINISTRATION SERVICES 54
Expense Reimbursement 58
Management and Control of N&B Management 58
Sub-Adviser 59
Investment Companies Advised 60
Management and Control of BNP-N&B Global 63
DISTRIBUTION ARRANGEMENTS 63
ADDITIONAL REDEMPTION INFORMATION 64
Suspension of Redemptions 64
DIVIDENDS AND OTHER DISTRIBUTIONS 64
ADDITIONAL TAX INFORMATION 65
Taxation of the Portfolios 65
Taxation of the Series 66
VALUATION OF PORTFOLIO SECURITIES 69
PORTFOLIO TRANSACTIONS 70
All Series (except AMT International Investments) 70
AMT International Investments 71
All Series 71
Portfolio Turnover 76
REPORTS TO SHAREHOLDERS 76
CUSTODIAN 76
INDEPENDENT AUDITORS 76
LEGAL COUNSEL 76
REGISTRATION STATEMENT 77
Appendix A A-1
RATINGS OF SECURITIES A-1
Appendix B B-1
ROY NEUBERGERS ALMANAC B-1
</TABLE>
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INVESTMENT INFORMATION
Each Portfolio is a separate series of the Trust, a Delaware business
trust registered with the Securities and Exchange Commission ("SEC") as an
open-end management investment company. Each Portfolio seeks its investment
objective by investing all of its net investable assets in the corresponding
Series of Advisers Managers Trust ("Managers Trust"), which has an investment
objective identical to, and a name similar to, that of the Portfolio. Each
Series, in turn, invests in accordance with an investment objective, policies
and limitations identical to those of its corresponding Portfolio. (The Trust
and Managers Trust, which also is an open-end management investment company,
are together referred to below as the "Trusts.") All Series of Managers Trust,
except for AMT International Investments, are managed by Neuberger & Berman
Management Incorporated (N&B Management). AMT International Investments is
advised by BNP-N&B Global Asset Management L.P. (BNP-N&B Global), a company
jointly owned by Neuberger & Berman, L.P. (Neuberger & Berman) and Banque
Nationale de Paris (BNP).
The following information supplements the discussion in the Prospectus of
the investment objective, policies, and limitations of each Portfolio and
each Series. Unless otherwise specified, those investment policies and
limitations are not fundamental. However, although any investment policy or
limitation that is not fundamental may be changed by the trustees of the Trust
("Portfolio Trustees") or of Managers Trust ("Series Trustees") without
shareholder approval, each Portfolio intends to notify its shareholders before
implementing any material change in any non-fundamental policy or limitation.
The fundamental investment policies and limitations of a Portfolio or a
Series may not be changed without the approval of the lesser of (1) 67% of the
total units of beneficial interest ("shares") of the Portfolio or Series
represented at a meeting at which more than 50% of the outstanding Portfolio
or Series shares are represented or (2) a majority of the outstanding shares
of the Portfolio or Series. This vote is required by the Investment Company
Act of 1940 ("1940 Act") and is referred to in this SAI as a "1940 Act
majority vote." Whenever a Portfolio is called upon to vote on a change in
the investment objective or a fundamental investment policy or limitation of
its corresponding Series, the Portfolio casts its votes thereon in proportion
to the votes of its shareholders at a meeting thereof called for that purpose.
<PAGE>
INVESTMENT POLICIES AND LIMITATIONS
Each Portfolio has the following fundamental investment policy, to enable
it to invest in its corresponding Series:
Notwithstanding any other investment policy of the Portfolio, the Portfolio
may invest all of its net investable assets (cash, securities and receivables
relating to securities) in an open-end management investment company having
substantially the same investment objective, policies, and limitations as the
Portfolio.
All other fundamental investment policies and limitations, and the
non-fundamental investment policies and limitations, of each Portfolio and
its corresponding Series are identical. Therefore, although the following
discusses the investment policies and limitations of the Series, it applies
equally to their corresponding Portfolios. Because each Portfolio invests all
of its net investable assets in its corresponding Series, however, a Series'
investment policies and limitations govern the type of investments in which
the corresponding Portfolio has an indirect interest.
For purposes of the investment limitation on concentration in particular
industries, N&B Management identifies the issuer of a municipal obligation
that is not a general obligation note or bond on the basis of the obligations
characteristics. The most significant of these characteristics is the source
of funds for the payment of principal and interest on the obligation. If an
obligation is backed by an irrevocable letter of credit or other guarantee,
without which the obligation would not qualify for purchase under a Portfolios
quality restrictions, an issuer of the letter of credit or the guarantee is
considered an issuer of the obligation. If an obligation meets the quality
restrictions of AMT Limited Maturity Bond Investments and AMT Balanced
Investments without credit support, the Series treats the commercial developer
or the industrial user, rather than the governmental entity or the guarantor,
as the issuer of the obligation, even if the obligation is backed by a letter
of credit or other guarantee.
Except for the limitation on borrowing, any investment policy or
limitation that involves a maximum percentage of securities or assets will not
be considered to be violated unless the percentage limitation is exceeded
immediately after, and because of, a transaction by a Series.
The Series' fundamental investment policies and limitations are as
follows:
1. Borrowing. Each Series may not borrow money, except that a Series
may (i) borrow money from banks for temporary or emergency purposes and not
for leveraging or investment (except for AMT INTERNATIONAL INVESTMENTS which
may borrow for leveraging or investment, and AMT GOVERNMENT INCOME INVESTMENTS
which may borrow for any purpose, including to meet redemptions or increase
the amount available for investment) and (ii) enter into reverse repurchase
agreements for any purpose; provided that (i) and (ii) in combination do not
exceed 33-1/3% of the value of its total assets (including the amount
borrowed) less liabilities (other than borrowings). If at any time
borrowings exceed 33-1/3% of the value of a Series' total assets, the Series
will reduce its borrowings within three days (excluding Sundays and holidays)
to the extent necessary to comply with the 33-1/3% limitation.
2. Commodities. Each Series may not purchase physical commodities or
contracts thereon, unless acquired as a result of the ownership of securities
or instruments, but this restriction shall not prohibit a Series from
purchasing futures contracts or options (including options on futures (and,
with respect to AMT INTERNATIONAL INVESTMENTS, foreign currencies and forward
contracts) but excluding options or futures contracts on physical commodities)
or from investing in securities of any kind.
3. Diversification. Each Series may not, with respect to 75% of the
value of its total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government, or any of its agencies
or instrumentalities) if, as a result, (i) more than 5% of the value of the
Series' total assets would be invested in the securities of that issuer or
(ii) the Series would hold more than 10% of the outstanding voting securities
of that issuer.
4. Industry Concentration. Each Series may not purchase any security
if, as a result, 25% or more of its total assets (taken at current value)
would be invested in the securities of issuers having their principal business
activities in the same industry. This limitation does not apply to purchases
of (i) the securities issued or guaranteed by the U.S. Government, or its
agencies or instrumentalities, (ii) investments by all Series (except AMT
PARTNERS INVESTMENTS, AMT GOVERNMENT INCOME INVESTMENTS and AMT INTERNATIONAL
INVESTMENTS) in certificates of deposit or bankers acceptances issued by
domestic branches of U.S. banks, or (iii) investments by AMT GOVERNMENT INCOME
INVESTMENTS in mortgage- and asset-backed securities (regardless of whether
they are issued or guaranteed by the U.S. Government or its agencies or
instrumentalities). Mortgage- and asset-backed securities are considered to
be a single industry.
5. Lending. Each Series may not lend any security or make any other
loan if, as a result, more than 33-1/3% of its total assets (taken at current
value) would be lent to other parties, except in accordance with its
investment objective, policies, and limitations, (I) through the purchase of a
portion of an issue of debt securities or (ii) by engaging in repurchase
agreements.
6. Real Estate. (ALL SERIES EXCEPT AMT INTERNATIONAL INVESTMENTS). Each
Series may not purchase real estate unless acquired as a result of the
ownership of securities or instruments, but this restriction shall not
prohibit a Series from purchasing
<PAGE>
securities issued by entities or investment vehicles that own or deal in real
estate or interests therein, or instruments secured by real estate or
interests therein.
(AMT INTERNATIONAL INVESTMENTS). The Series may not invest any part of
its total assets in real estate or interests in real estate unless acquired as
a result of the ownership of securities or instruments, but this restriction
shall not prohibit the Series from purchasing readily marketable securities
issued by entities or investment vehicles that own or deal in real estate or
interests therein or instruments secured by real estate or interests therein.
7. Senior Securities. Each Series may not issue senior securities,
except as permitted under the 1940 Act.
8. Underwriting. Each Series may not underwrite securities of other
issuers, except to the extent that a Series, in disposing of portfolio
securities, may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 ("1933 Act").
For purposes of fundamental investment limitation number 3 above, as
applied to AMT GOVERNMENT INCOME INVESTMENTS, mortgage- and asset-backed
securities will not be considered to have been issued by the same issuer
because they have the same sponsor, and such securities issued by a finance or
other single purpose subsidiary of a corporation that are not guaranteed by
the parent corporation will be considered to be issued by an issuer separate
from the parent corporation.
The following non-fundamental investment policies and limitations apply
to the Series:
1. Borrowing. (ALL SERIES EXCEPT AMT GOVERNMENT INCOME INVESTMENTS AND
AMT INTERNATIONAL INVESTMENTS). Each Series may not purchase securities if
outstanding borrowings, including any reverse repurchase agreements, exceed 5%
of its total assets.
2. Lending. Except for the purchase of debt securities and engaging in
repurchase agreements, each Series may not make any loans other than
securities loans.
3. Investments in Other Investment Companies. (AMT PARTNERS
INVESTMENTS, AMT GOVERNMENT INCOME INVESTMENTS, AND AMT INTERNATIONAL
INVESTMENTS). Each Series may not purchase securities of other investment
companies, except to the extent permitted by the 1940 Act and in the open
market at no more than customary brokerage commission rates. This limitation
does not apply to securities received or acquired as dividends, through offers
of exchange, or as a result of a reorganization, consolidation, or merger.
<PAGE>
4. Margin Transactions. Each Series may not purchase securities on
margin from brokers, except that a Series may obtain such short-term credits
as are necessary for the clearance of securities transactions. For all Series
except AMT LIQUID ASSET INVESTMENTS, margin payments in connection with
transactions in futures contracts and options on futures contracts shall not
constitute the purchase of securities on margin and shall not be deemed to
violate the foregoing limitation.
5. Short Sales. (AMT LIQUID ASSET INVESTMENTS , AMT GROWTH INVESTMENTS,
AMT BALANCED INVESTMENTS, AMT LIMITED MATURITY BOND INVESTMENTS, AND AMT
PARTNERS INVESTMENTS). Each Series may not sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold (or, in the case of AMT BALANCED INVESTMENTS and AMT
GROWTH INVESTMENTS, not more than 10% of the Series net assets (taken at
current value) is held as collateral for such sale at any one time).
Transactions in futures contracts and options shall not constitute selling
securities short.
(AMT GOVERNMENT INCOME INVESTMENTS). The Series may not sell securities
short, unless it covers the short sale as required by current rules or
positions of the Securities and Exchange Commission and its staff, provided
that the Series may not sell securities short if (i) the dollar amount of the
short sales would exceed 5% of its net assets or (ii) the value of securities
of an issuer sold short by the Series would exceed the lesser of 2% of the
Series net assets or 2% of a class of the issuers outstanding securities.
Transactions in futures contracts and options shall not constitute selling
securities short.
(AMT INTERNATIONAL INVESTMENTS). The Series will not engage in a short
sale (except a short sale against-the-box), if, as a result, the dollar amount
of all short sales will exceed 25% of its net assets, or if, as a result, the
value of securities of any one issuer in which the Series would be short will
exceed 2.0% of the value of the Series net assets or 2.0% of the securities of
any class of any issuer. Transactions in forward foreign currency contracts,
futures contracts and options are not considered short sales.
6. Ownership of Portfolio Securities by Officers and Trustees. (FOR ALL
SERIES, EXCEPT AMT INTERNATIONAL INVESTMENTS). Each Series may not purchase
or retain the securities of any issuer if, to the knowledge of the Series
management, those officers and trustees of the Trusts and officers and
directors of N&B Management who each own individually more than of 1% of the
outstanding securities of such issuer, together own more than 5% of such
securities.
(AMT INTERNATIONAL INVESTMENTS). The Series may not purchase or retain
the securities of any issuer if, to the knowledge of the Series' Investment
Adviser, those officers and trustees of the Trusts and officers and directors
of BNP-N&B Global who each own individually more than 1/2 of 1% of the
outstanding securities of such issuer, together own more than 5% of such
securities.
<PAGE>
7. Unseasoned Issuers. Each Series may not purchase the securities of
any issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than 5%
of the Series' total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation. For AMT GOVERNMENT INCOME INVESTMENTS, this
restriction does not apply to mortgage- and asset-backed securities.
8. Illiquid Securities. Each Series may not purchase any security if,
as a result, more than 10% of its net assets would be invested in illiquid
securities. Illiquid securities include securities that cannot be sold within
seven days in the ordinary course of business for approximately the amount at
which the Series has valued the securities, such as repurchase agreements
maturing in more than seven days.
9. Restricted Securities. (AMT INTERNATIONAL INVESTMENTS). The Series
may not purchase a security restricted as to resale if, as a result thereof,
more than 10% of the Series' total assets would be invested in restricted
securities. Securities that can be sold freely in the principal market in
which they are traded are not considered restricted, even if they cannot be
sold in the U.S.
10. Warrants. (AMT INTERNATIONAL INVESTMENTS). The Series may not
invest more than 5% of its net assets in warrants, whether or not such
warrants are listed on the New York Stock Exchange ("NYSE") or the American
Stock Exchange ("AmEx"), or more than 2% of its net assets in unlisted
warrants. For purposes of this limitation, warrants are valued at the lower of
cost or market value and warrants acquired by the Series in units or attached
to securities are deemed to be without value, even if the warrants are later
separated from the unit.
11. Oil and Gas Programs. (AMT PARTNERS INVESTMENTS, AMT GOVERNMENT
INCOME INVESTMENTS, AMT INTERNATIONAL INVESTMENTS). Each Series may not
invest in participations or other direct interests in oil, gas, or other
mineral leases or exploration or development programs, (but each of AMT
PARTNERS INVESTMENTS and AMT INTERNATIONAL INVESTMENTS may purchase securities
of companies that own interests in any of the foregoing).
12. Real Estate. (AMT GOVERNMENT INCOME INVESTMENTS AND AMT
INTERNATIONAL INVESTMENTS). Each Series may not invest in real estate limited
partnerships.
13. Investments in Any One Issuer. (AMT GOVERNMENT INCOME INVESTMENTS).
The Series may not purchase the securities of any one issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies
or instrumentalities) if, as a result, more than 5% of the Series total assets
would be invested in the securities of that issuer.
<PAGE>
(AMT INTERNATIONAL INVESTMENTS). At the close of each quarter of the
Series' taxable year, (i) no more than 25% of its total assets will be
invested in the securities of a single issuer, and (ii) with regard to 50% of
its total assets, no more than 5% of its total assets will be invested in the
securities of a single issuer. These limitations do not apply to U.S.
government securities, as defined for tax purposes.
14. Puts, Calls, Straddles, or Spreads. (AMT PARTNERS INVESTMENTS).
The Series may not invest in puts, calls, straddles, spreads, or any
combination thereof, except that the Series may (i) write (sell) covered call
options against portfolio securities having a market value not exceeding 10%
of its net assets and (ii) purchase call options in related closing
transactions. The Series does not construe the foregoing limitation to
preclude it from purchasing or writing options on futures contracts.
15. Foreign Securities. (AMT PARTNERS INVESTMENTS). The Series may not
invest more than 10% of the value of its total assets in securities of foreign
issuers, provided that this limitation shall not apply to foreign securities
denominated in U.S. dollars.
RATING AGENCIES. As discussed in the Prospectus, each Series may
purchase securities rated by Standard & Poors Ratings Group (S&P), Moodys
Investors Service, Inc. (Moodys), or any other nationally recognized
statistical rating organization (NRSRO). The ratings of an NRSRO represent
its opinion as to the quality of securities it undertakes to rate. Ratings
are not absolute standards of quality; consequently, securities with the same
maturity, coupon, and rating may have different yields. Among the NRSROs, the
Series rely primarily on ratings assigned by S&P and Moodys, which are
described in Appendix A to this SAI.
INTERNATIONAL INVESTING - AMT INTERNATIONAL INVESTMENTS. Equity
portfolios consisting solely of domestic investments have not enjoyed the
higher returns foreign opportunities can offer. For more than thirty years,
for example, the growth rate of many foreign economies has outpaced that of
the U.S. While the U.S. accounted for almost 66% of the world's total
securities market capitalization in 1970, it accounted for less than 45% of
that total at the end of 1993 - or less than half of the world's available
stocks and bonds today (source: Morgan Stanley Capital International).
Over time, a number of international equity markets have outperformed
their U.S. counterparts. Although there are no guarantees, foreign markets
could continue to provide attractive investment opportunities.
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AVERAGE ANNUAL TOTAL RETURN FOR 10 YEARS (1)
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U.S.A. _______________14.28%
AUSTRALIA _________________15.97%
NORWAY __________________16.03%
JAPAN ___________________ 16.86%
UNITED KINGDOM ____________________ 17.73%
GERMANY _____________________18.73%
SPAIN _______________________20.05%
FRANCE ________________________20.83%
BELGIUM ____________________________24.90%
HONG KONG ______________________________26.50%
_____________________________________________________
0.00% 10.00% 20.00% 30.00% 40.00%
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1/ Source: Lipper Analytical Services, Inc. For the period ended
12/31/94. Average annual total returns are measured in U.S. dollars and
include changes in share price, dividends paid and the gross effect of
reinvesting dividends. In some years, the average of international markets has
underperformed that of the U.S. market. The foreign countries shown above
were selected from the Morgan Stanley Capital International
<PAGE>
Europe, Australia, Far East (EAFE) Index, which is an unmanaged index of
non-U.S. equity market performance. The average annual total return of the
EAFEIndex was 17.89% for the ten-year period. This chart reflects the past
performance of the U.S. and major non-U.S. stock markets and is not
representative of future performance of those markets and is not intended to
represent past or future performance of the Portfolio. EAFE is the property
of Morgan Stanley & Co. Incorporated.
In addition, according to Morgan Stanley Capital International, the
leading companies in any given sector are not always U.S.-based. For example,
22 of the largest 25 automobile companies are based outside the U.S. as are 20
of the top 25 banks.
A principal advantage of investing overseas is diversification. A
diversified portfolio gives investors the opportunity to pursue increased
overall return while reducing risk. It is prudent to diversify by taking
advantage of investment opportunities in more than one country's stock or bond
market. By investing in several countries through a worldwide portfolio,
investors can lower their exposure and vulnerability to weakness in any one
market. Investors should be aware, however, that international investing is
not a guarantee against market risk and may be affected by economic factors
described in the Prospectus, such as the prospects of individual companies,
and other risks such as currency fluctuations or controls, expropriation,
nationalization and confiscatory taxation.
Furthermore, for the individual investor, buying foreign stocks and bonds
can be difficult, involving many decisions. Accessing international markets
is complicated; few individuals have the time or resources to thoroughly
evaluate foreign companies and markets, or the ability to incur the high
transaction costs of direct investment in such markets. A mutual fund
investing in foreign securities offers an investor broad diversification at a
relatively low cost.
AMT International Investments invests primarily in equity securities of
companies located in developed foreign economies, as well as in the "emerging
markets." In all cases the investment process of the Series' Investment
Adviser includes a combination of "top-down country allocation" and "bottom-up
security selection."
TOP-DOWN APPROACH TO REGIONAL AND COUNTRY DIVERSIFICATION
BNP-N&B Global uses extensive economic research to identify countries
that offer attractive investment opportunities, by analyzing factors such as
Gross Domestic Product growth rates, interest rate trends, and currency
exchange rates. Market valuations, combined with correlation and volatility
comparisons, provide BNP-N&B Global with a target allocation across 20 or more
countries.
BOTTOM-UP APPROACH TO SECURITY SELECTION
BNP-N&B Global's value-driven style seeks out attractively priced issues,
by concentrating on criteria such as a low price-to-earnings ratio relative to
earnings growth
<PAGE>
rate, balance sheet strength, low price to cash flow, and management quality.
Typically, over 100 individual issues will comprise the portfolio. The
portfolio will be comprised of medium- to large - capitalization companies in
relation to each individual national market.
CURRENCY RISK MANAGEMENT - AMT INTERNATIONAL INVESTMENTS
Exchange rate movements and volatility are important factors in
international investing. BNP-N&B Global believes in actively managing the
Series' currency exposure, in an effort to capitalize on foreign currency
trends and to reduce overall portfolio volatility. Currency risk management
is performed separately from equity analysis. BNP-N&B Global intends to use a
combination of economic analysis to guide the Series' longer-term posture and
quantitative trend analysis to assist in timing decisions with respect to
whether (or when) to invest in instruments denominated in a particular foreign
currency, or whether or when to hedge particular foreign currencies in which
liquid foreign exchange markets exist.
An Interview with Felix Rovelli, Portfolio Manager of AMT International
Investments
Q: Why should investors allocate a portion of their assets to
international markets?
A: First, an investor who does not invest internationally misses out on
more than two-thirds of the world's potential investment opportunities. The
U.S. stock market today represents less than one-half of the world's stock
market capitalization, and the U S. portion continues to shrink as other
countries around the world introduce or expand the size of their equity
markets. Privatizations of government-owned corporations, initial public
offerings, and the occasional creation of official stock exchanges in emerging
economies, continuously present new opportunities for capital in an expanding
global market.
Second, many foreign economies are in earlier stages of development than
ours and are growing fast. Economic growth can often mean potential for
investment growth.
Finally, international investing helps an investor increase
diversification and can reduce risk. Domestic and foreign markets generally
do not all move in the same direction, so gains in one market may offset
losses in another.
<PAGE>
Q: Does international investing involve special risks?
A: Currency risk is one important risk presented by international
investing. Fluctuations in exchange rates can either add to or reduce an
investor's returns, a fact that anyone who invests in foreign markets should
keep in mind.
Other risks include, but are not limited to, greater market volatility,
less government supervision and availability of public information and the
possibility of adverse economic or political developments. The special risks
of foreign investing are discussed in greater detail in the Prospectus.
Q: What are some of the advantages of investing in an international
fund?
A: An international mutual fund can be a convenient way to invest
internationally and diversify assets among several markets to reduce risk.
Additionally, the considerable burden of obtaining timely, accurate and
comprehensive information about foreign economies and securities is left to
seasoned professional managers.
Q: What is your investment approach?
A: BNP-N&B Global seeks to capitalize on investments in countries where
positive economic and political factors are likely to produce above-average
returns. Studies have shown that the allocation of assets among countries
is typically the most important factor contributing to portfolio
performance. BNP-N&B Global believes that in the long term, a nation's
economic growth and the performance of its equity market are highly
correlated. Therefore, BNP-N&B Global will continuously evaluate the global
economic outlook as well as individual country data to guide country
allocation. Our process also leads to diversification across many countries,
typically 20 or more, in an effort to limit total portfolio risk.
BNP-N&B Global strives to invest in companies within the selected
countries that are in the best position to capitalize on such positive
developments or companies that are most attractively valued. BNP-N&B Global
will usually include in the Series' investments the securities of
large-capitalization companies in relation to each individual national market,
as well as securities of faster-growing, medium-sized companies that offer
potentially higher returns but are often associated with higher risk.
The criteria for security selection focuses on companies with leadership
in specific markets or niches within specific industries, which appear to
exhibit positive fundamentals, and seem undervalued relative to their earnings
potential or the worth of their assets. Typically, in emerging markets,
BNP-N&B Global will invest in relatively large, established companies which
BNP-N&B Global believes possess the managerial, financial, and marketing
strength to exploit successfully the growth of a dynamic economy. In more
<PAGE>
developed markets, such as Europe and Japan, the Series may invest to a higher
degree in medium-sized companies. Medium-sized companies can often provide
above average growth, and are less followed by market analysts, a fact that
sometimes leads to inefficient valuation.
Finally, BNP-N&B Global will strive to limit total portfolio volatility
and increase returns by selectively hedging the Series' foreign currency
exposure in times when BNP-N&B Global expects the U.S. Dollar to strengthen.
Q: How do you perceive the current outlook?
A: There is still an abundance of exciting investment opportunities
around the world. Many equity markets still have not reached the maturity
stage of the U.S. market and have much more room to grow. There are new
markets opening up to foreign investments and many changes are occurring in
markets where equity investments have traditionally commanded less attention
than fixed-income securities.
In addition, it appears that both Europe and Japan are currently at the
bottom of their economic cycles. In many economies, the current recession
has been the most severe of all recessions in the last five decades. With
global inflation still in check, many economies should continue to have lower
interest rates, which, coupled with a forecast of recovery in profits, could
positively impact stock market returns.
Margaret Didi Weinblatt and Stephen A. White: Portfolio Managers of AMT
Limited Maturity Bond Investments, AMT Balanced Investments (debt securities
portion), and AMT Government Income Investments.
Investors are accustomed to thinking of yield or interest rate figures as
the same as total return on their investment, because savings accounts,
conventional money market funds, and CDs do indeed return the stated yield.
But bond funds are different -- bonds not only pay interest, they also
fluctuate in value. For example, a decline in prevailing levels of interest
rates generally increases the value of debt securities in a bond funds
portfolio, while an increase in rates usually reduces the value of those
securities. As a result, interest rate fluctuations will affect a funds net
asset value (and total return) but not the income received by the fund from
its portfolio securities. Both the yield and risk to principal usually
increase as the maturity of the bond increases.
So looking at yield alone carries high risk because the highest yielding
bonds historically tend to be the ones with the longest maturities. The risk
to principal in these bonds can be nearly as great as the risk in stocks and
may not produce the same reward.
What advice does Ms. Theresa Havell, the manager of the Fixed Income
Group of Neuberger & Berman, have for investors seeking the highest returns on
their fixed income investments? Look beyond interest rates to total return,
she states unequivocally. Total
<PAGE>
return includes the yield from the bond and the increase or decrease in the
market value (price) of the bond.
Once you consider the risk to principal, then total return is the only
concept that can measure what you are actually earning from your fixed income
securities, Ms. Havell says.
The Limited Maturity Bond Portfolio is intended for investors who seek
the highest current income with less net asset value fluctuations from
interest rate changes than that of a longer-term bond fund. Both the yield
and risk to principal usually increase as the maturity of the bond increases.
The Portfolios corresponding Series provides active fixed income portfolio
management through investment in securities with an average weighted portfolio
maturity of no longer than five years. Studies of bond returns have shown
total returns were best in bonds having maturities of two to five years.
These limited maturity bonds have historically provided the best value in the
bond market and outperformed both shorter- and longer-term securities.
Bonds of two-to-five year maturities have yields that have historically
captured up to 95% of yields of longer bonds, but with substantially less
price volatility, Ms. Havell explains. Thats why studies show that limited
maturity bonds may provide the best value in the bond market.
Fixed income securities should preserve capital and provide the highest
total return consistent with preservation of capital, says Ms. Weinblatt,
manager of AMT Limited Maturity Bond Investments.
From time to time, however, due to changes in monetary and fiscal
policies, the government bond yield curve may tilt steeply, causing
longer-term bonds to offer significantly higher yields than shorter- or
intermediate-term bonds. At such times, investors may be rewarded with higher
returns by investing in longer-term bonds, either directly or through a fund
such as the Government Income Portfolio, says Mr. White, manager of AMT
Government Income Investments.
The Government Income Portfolio is designed for investors who seek a
higher level of income and total return than money market or
short-to-intermediate bond funds generally provide and are willing to accept
more principal fluctuation in order to achieve that objective. N&B Management
follows a flexible investment strategy depending on market conditions and
interest rate trends. This opportunistic strategy looks aggressively for
opportunities to maximize income and total return by adjusting the maturity to
take maximum advantage of interest rates. The Government Income Portfolio may
be a suitable complement to lower risk, lower return bond funds and a
complement to an equity fund portfolio. On a risk level, longer-term bonds
have a standard deviation between common stocks (represented by the S&P 500"
Composite Stock Price Index (S&P 500 Index)) and intermediate-term 5-year U.S.
Treasury Bonds. Standard deviation is a statistical measure of the degree to
which the value of an individual security may vary (or deviate) from the mean.
<PAGE>
At times, N&B Management may use the concept of duration when describing
the investment program of AMT Government Income Investments. As Mr. White
explains, duration is a measure of the expected life of a fixed income
security and is an indicator of a securitys price volatility or risk
associated with changes in interest rates. Whereas a debt securitys term to
maturity measures only the time until the final payment thereon is made, its
duration also takes into account the present value of each payment thereunder
expected to be received through maturity.
Mark R. Goldstein, Portfolio Manager of AMT Growth Investments.
The investment objective of AMT Growth Investments is capital
appreciation, without regard to income. The Series differs from the other
Series in its willingness to invest in stocks with price/earnings ratios or
price-to-cash-flow ratios that are reasonable relative to a companys growth
prospects and that of the general market, says Mark Goldstein, its portfolio
manager. Mr. Goldstein has consistently followed this approach as a portfolio
manager at N&B Management. He looks for stocks of financially sound companies
with a special market capability, a competitive advantage or product that
makes them particularly attractive over the long term, but likes to purchase
them at a reasonable price relative to their growth rates. Mr. Goldstein
calls this approach GARP -- growth at a reasonable price. An investor
shouldnt try to beat the market by trading funds like stocks. The hardest
thing to do -- but the best thing to do -- is to put in some money when the
market is down and keep it there. Thats how one really builds wealth over the
long term -- a mutual fund is a great long-term investment.
We view value both on a relative and an absolute basis, so we may buy
stocks with somewhat higher multiples than the other Series, Mr. Goldstein
explains. We also tend to stay more fully invested when we think the market
is attractive for quality growth companies. But we will get out of stocks
into cash when we think there are no reasonable values available.
Michael M. Kassen, Co-Manager of AMT Partners Investments
The investment objective of AMT Partners Investments is capital growth,
says its co-manager Michael Kassen. We want to make money in good markets and
not give up those gains during rough times.
Our investors seek consistent performance and have a moderate risk
tolerance. They do know, however, that stock investments can provide the
long-term upside potential essential to meeting their long-term investment
goals, particularly a comfortable retirement and planning for a college
education.
We look for stocks that are undervalued in the market-place: stocks with
strong fundamentals such as low price-to-earnings ratios, consistent cash
flow, and support from asset values. If the market goes down, those stocks we
elect to hold, historically, go down less.
<PAGE>
Mr. Kassen monitors stocks of medium-sized companies that often are not
closely scrutinized by other investors. He researches these companies in
order to determine if they will produce a new product, become an acquisition
target, or undergo a financial restructuring. Mr. Kassen also focuses on
companies that dominate certain markets because market leaders tend to earn
higher levels of profits.
Additional Investment Information
Some or all of the Series, as indicated below, may make the following
investments, among others although they may not buy all of the types of
securities, or use all of the investment techniques, that are described.
Repurchase Agreements. (ALL SERIES). Repurchase agreements are
agreements under which a Series purchases securities from a bank that is a
member of the Federal Reserve System (or with respect to AMT International
Investments, from a foreign bank or a U.S. branch or agency of a foreign
bank), or a securities dealer, that agrees to repurchase the securities from
the Series at a higher price on a designated future date. Repurchase
agreements generally are for a short period of time, usually less than a week.
No Series will enter into a repurchase agreement with a maturity of more than
seven business days if, as a result, more than 10% of the value of its net
assets would then be invested in such repurchase agreements and other illiquid
securities. A Series will enter into a repurchase agreement only if (1) the
underlying securities are of the type (excluding maturity limitations) that
the Series' investment policies and limitations would allow it to purchase
directly, (2) the market value of the underlying securities, including accrued
interest, at all times equals or exceeds the value of the repurchase
agreement, and (3) payment for the underlying securities is made only upon
satisfactory evidence that the securities are being held for the Series'
account by the custodian or a bank acting as the Series' agent.
Securities Loans. (ALL SERIES). In order to realize income, each Series
may lend portfolio securities with a value not exceeding 33-1/3% of its total
assets to banks, brokerage firms, or institutional investors judged
creditworthy by N&B Management, or with respect to AMT International
Investments, BNP-N&B Global. Borrowers are required continuously to secure
their obligations to return securities on loan from the Series by depositing
collateral, which will be marked to market daily, in a form determined to be
satisfactory by the Series Trustees and equal to at least 100% of the market
value of the loaned securities, which will also be marked to market daily.
N&B Management (and with respect to AMT International Investments, BNP-N&B
Global) believes the risk of loss on these transactions is slight because, if
a borrower were to default for any reason, the collateral should satisfy the
obligation. However, as with other extensions of secured credit, loans of
portfolio securities involve some risk of loss of rights in the collateral
should the borrower fail financially.
Restricted Securities and Rule 144A Securities. (ALL SERIES). Each
Series may invest in restricted securities, which are securities that may not
be sold to the public without
<PAGE>
an effective registration statement under the 1933 Act or, if they are
unregistered, may be sold only in a privately negotiated transaction or
pursuant to an exemption from registration. In recognition of the increased
size and liquidity of the institutional markets for unregistered securities
and the importance of institutional investors in the formation of capital, the
SEC has adopted Rule 144A under the 1933 Act, which is designed to further
facilitate efficient trading among institutional investors by permitting the
sale of certain unregistered securities to qualified institutional buyers.
To the extent privately placed securities held by a Series qualify under Rule
144A, and an institutional market develops for those securities, the Series
likely will be able to dispose of the securities without registering them
under the 1933 Act. To the extent that institutional buyers become, for a
time, uninterested in purchasing these securities, investing in Rule 144A
securities could have the effect of increasing the level of a Series
illiquidity. N&B Management (or with respect to AMT International
Investments, BNP-N&B Global), acting under guidelines established by the
Series Trustees, may determine that certain securities qualified for trading
under Rule 144A are liquid. Foreign securities that can be freely sold in the
markets in which they are principally traded are not considered by a Series to
be restricted. Regulation S under the 1933 Act permits the sale abroad of
securities that are not registered for sale in the U.S.
Where registration is required, a Series may be obligated to pay all or
part of the registration expenses, and a considerable period may elapse
between the decision to sell and the time the Series may be permitted to sell
a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Series might obtain a
less favorable price than prevailed when it decided to sell. To the extent
privately placed securities, including Rule 144A securities, are illiquid,
purchases thereof will be subject to each Series' 10% limit on investments in
illiquid securities. Restricted securities for which no market exists are
priced at fair value as determined in accordance with procedures approved and
periodically reviewed by the Series Trustees.
Reverse Repurchase Agreements. (ALL SERIES). A reverse repurchase
agreement involves a Series' sale of portfolio securities subject to its
agreement to repurchase the securities at a later date for a fixed price
reflecting a market rate of interest; these agreements are considered
borrowings for purposes of each Series' investment limitations and policies
concerning borrowings. While a reverse repurchase agreement is outstanding, a
Series will maintain with its custodian in a segregated account cash, U.S.
Government or Agency Securities, or other liquid, high-grade debt securities,
marked to market daily, in an amount at least equal to the Series' obligations
under the agreement. There is a risk that the contra-party to a reverse
repurchase agreement will be unable or unwilling to complete the transaction
as scheduled, which may result in losses to the Series.
Banking and Savings Institution Securities. (AMT LIQUID ASSET
INVESTMENTS, AMT LIMITED MATURITY BOND INVESTMENTS, AMT GOVERNMENT INCOME
INVESTMENTS AND AMT BALANCED INVESTMENTS). Each of these Series may invest in
banking and savings institution obligations, which include CDs, time deposits,
bankers' acceptances, and other short-term debt obligations issued by
commercial banks and CDs, time deposits, and other
<PAGE>
short-term obligations issued by savings institutions. CDs are receipts for
funds deposited for a specified period of time at a specified rate of return;
time deposits generally are similar to CDs, but are uncertificated; and
bankers' acceptances are time drafts drawn on commercial banks by borrowers,
usually in connection with international commercial transactions. The CDs,
time deposits, and bankers' acceptances in which a Series invests typically
are not covered by deposit insurance.
These Series may invest in securities issued by a commercial bank or
savings institution only if (1) the bank or institution has total assets of at
least $1,000,000,000, (2) the bank or institution is on N&B Management's
approved list, (3) in the case of a U.S. bank or institution, its deposits are
insured by the Federal Deposit Insurance Corporation, and (4) in the case of a
foreign bank or institution, the securities are, in N&B Management's opinion,
of an investment quality comparable with other debt securities that may be
purchased by the Series. These limitations do not prohibit investments in
securities issued by foreign branches of U.S. banks that meet the foregoing
requirements. These Series (except AMT Government Income Investments) do not
currently intend to invest in any security issued by a foreign savings
institution.
Leverage. (AMT INTERNATIONAL INVESTMENTS AND AMT GOVERNMENT INCOME
INVESTMENTS). Each of these Series may make investments when borrowings are
outstanding. Leveraging a Series creates an opportunity for increased net
income but, at the same time, creates special risk considerations. For
example, leveraging may exaggerate changes in the net asset value of Portfolio
shares and in the Portfolio's yield. Although the principal of such
borrowings will be fixed, a Series' assets may change in value during the time
the borrowing is outstanding. Leveraging will create interest expenses for a
Series which can exceed the income from the assets retained. To the extent
the income derived from securities purchased with borrowed funds exceeds the
interest a Series will have to pay, the Series' net income will be greater
than it would be if leveraging were not used. Conversely, if the income from
the assets retained with borrowed funds is not sufficient to cover the cost of
leveraging, the net income of the Series will be less than if leveraging were
not used, and therefore the amount available for distribution to stockholders
as dividends will be reduced. Reverse repurchase agreements which a Series
does not fully collateralize create leverage, a speculative factor, and will
also be considered as borrowings for purposes of the Series' investment
limitations.
Generally, each of these Series does not intend to use leverage for
investment purposes. AMT International Investments may, however, use leverage
to purchase securities needed to close out short sales entered into for
hedging purposes and to facilitate other hedging transactions.
Foreign Securities. (ALL SERIES). Each of the Series may invest in U.S.
dollar-denominated securities issued by foreign issuers (including
governments, quasi-governments and, with respect to AMT International
Investments, banks) and foreign branches of U.S. banks, including negotiable
CDs, commercial paper and, with respect to
<PAGE>
AMT International Investments, bankers acceptances. These investments are
subject to each Series quality and, in the case of each fixed income Series,
their maturity standards.
While investments in foreign securities are intended to reduce risk by
providing further diversification (with respect to all Series but AMT
International Investments), such investments involve sovereign and other
risks, in addition to the credit and market risks normally associated with
domestic securities. These additional risks include the possibility of
adverse political and economic developments (including political instability)
and the potentially adverse effects of unavailability of public information
regarding issuers, reduced governmental supervision regarding financial
markets, reduced liquidity of certain financial markets, and the lack of
uniform accounting, auditing, and financial standards or the application of
standards that are different or less stringent than those applied in the U.S.
Each Series (except AMT Liquid Asset Investments) may invest in equity
(except AMT Government Income Investments and AMT Limited Maturity Bond
Investments), debt, or other income-producing securities (of issuers in
countries whose governments are considered stable by N&B Management with
respect to AMT Limited Maturity Bond, Growth, Partners, Balanced and
Government Income Investments, or by BNP-N&B Global with respect to AMT
International Investments) that are denominated in or indexed to foreign
currencies, including, but not limited to, (1) common and preferred stocks,
with respect to all Series except AMT Government Income Investments and AMT
Limited Maturity Bond Investments (2) convertible securities, with respect to
AMT Balanced, Growth, Partners and International Investments (3) warrants
(subject to non-fundamental limitation number 10), with respect to AMT
International Investments (4) CDs, commercial paper, fixed-time deposits, and
bankers' acceptances issued by foreign banks, (5) obligations of other
corporations, and (6) obligations of foreign governments, or their
subdivisions, agencies, and instrumentalities, international agencies, and
supranational entities. Investing in these securities includes the special
risks associated with investing in non-U.S. issuers described in the preceding
paragraph and the additional risks of (1) nationalization, expropriation, or
confiscatory taxation, (2) adverse changes in investment or exchange control
regulations (which could prevent cash from being brought back to the U.S.),
and (3) expropriation or nationalization of foreign portfolio companies.
Additionally, dividends and interest payable on foreign securities may be
subject to foreign taxes, including taxes withheld from those payments, and
there are generally higher commission rates on foreign portfolio transactions.
Fixed commissions on foreign securities exchanges are generally higher than
negotiated commissions on U.S. exchanges, although each Series endeavors to
achieve the most favorable net results on portfolio transactions. There is
generally less government supervision and regulation of securities exchanges,
brokers, dealers and listed companies than in the U.S. Mail service between
the U.S. and foreign countries may be slower or less reliable than within the
United States, thus increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities.
Prices of foreign securities and exchange rates for foreign currencies
may be affected by the interest rates prevailing in other countries. The
interest rates in other
<PAGE>
countries are often affected by local factors, including the strength of the
local economy, the demand for borrowing, the governments fiscal and monetary
policies, and the international balance of payments.
Foreign securities often trade with less frequency and in less volume
than domestic securities and therefore may exhibit greater price volatility.
Additional costs associated with an investment in foreign securities may
include higher custodian fees than apply to domestic custodial arrangements,
and transaction costs of foreign currency conversions. Changes in foreign
exchange rates also will affect the value of securities denominated or quoted
in currencies other than the U.S. dollar.
Foreign markets also have different clearance and settlement procedures,
and in certain markets there have been times when settlements have been unable
to keep pace with the volume of securities transactions, making it difficult
to conduct such transactions. Such delays in settlement could result in
temporary periods when a portion of the assets of a Series is uninvested and
no return is earned thereon. The inability of a Series to make intended
security purchases due to settlement problems could cause a Series to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to a
Series due to subsequent declines in value of the portfolio securities, or, if
a Series has entered into a contract to sell the securities, could result in
possible liability to the purchaser. In addition, with respect to certain
foreign countries, there is the possibility of expropriation or confiscatory
taxation, political or social instability, or diplomatic developments which
could affect a Series' investments in those countries. Moreover, individual
foreign economies may differ favorably or unfavorably from the U.S. economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
With respect to all Series except AMT International Investments and AMT
Liquid Asset Investments, in order to limit the risk inherent in investing in
foreign- currency-denominated securities, each Series may not purchase any
such security if after such purchase more than 10% of its total assets (taken
at market value) (except 25% with respect to AMT Limited Maturity Bond and
Government Income Investments) would be invested in such securities. Within
such limitation, however, a Series is not restricted in the amount it may
invest in securities denominated in any one foreign currency.
Variable or Floating Rate Securities. (AMT LIQUID ASSET INVESTMENTS, AMT
LIMITED MATURITY BOND INVESTMENTS, AMT GOVERNMENT INCOME INVESTMENTS AND AMT
BALANCED INVESTMENTS). Variable rate securities provide for automatic
adjustment of the interest rate at fixed intervals (e.g., daily, monthly, or
semi-annually); floating rate securities provide for automatic adjustment of
the interest rate whenever some specified interest rate index changes. The
interest rate on variable and floating rate securities (collectively,
"Variable Rate Securities") ordinarily is determined by reference to a
particular bank's prime rate, the 90-day U.S. Treasury Bill rate, the rate of
return on commercial paper or bank CDs, an index of short-term tax-exempt
rates or some other objective measure. The
<PAGE>
Variable Rate Securities in which each Series invests frequently permit the
holder to demand payment of the securities' principal and accrued interest at
any time or at specified intervals not exceeding one year. The demand feature
usually is backed by a credit instrument (e.g., a bank letter of credit) from
a creditworthy issuer and sometimes by insurance from a creditworthy insurer.
Without these credit enhancements, the Variable Rate Securities might not meet
the quality standards applicable to obligations purchased by the Series.
Accordingly, in purchasing these securities, each Series relies primarily on
the creditworthiness of the credit instrument issuer or the insurer. A Series
will not invest more than 5% of its total assets in securities backed by
credit instruments from any one issuer or by insurance from any one insurer
(excluding securities that do not rely on the credit instrument or insurance
for their rating, i.e., stand on their own credit).
A Series can also buy fixed rate securities accompanied by demand
features or put options, permitting the Series to sell the security to the
issuer or third party at a specified price. A Series may rely on the
creditworthiness of issuers of puts in purchasing these securities.
In calculating its maturity, each Series is permitted to treat certain
variable and floating rate securities as maturing on a date prior to the date
on which principal is due to be paid. In applying such maturity shortening
devices, N&B Management considers whether the interest rate reset is expected
to cause the security to trade at approximately its par value.
Mortgage-Backed Securities. (AMT LIQUID ASSET INVESTMENTS, AMT LIMITED
MATURITY BOND INVESTMENTS, AMT GOVERNMENT INCOME INVESTMENTS AND AMT BALANCED
INVESTMENTS). Mortgage-backed securities represent direct or indirect
participations in, or are secured by and payable from, pools of mortgage
loans. They may be issued or guaranteed by a U.S. Government agency or
instrumentality (though not necessarily backed by the full faith and credit of
the United States), such as the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association ("FNMA"), and the Federal
Home Loan Mortgage Corporation ("FHLMC"), or may be issued by private issuers.
Mortgage-backed securities may be issued in the form of collateralized
mortgage obligations ("CMOs") or mortgage-backed bonds. CMOs are obligations
fully collateralized directly or indirectly by a pool of mortgages on which
payments of principal and interest are passed through to the holders of the
CMOs, although not necessarily on a pro rata basis, on the same schedule as
they are received. Mortgage-backed bonds are general obligations of the
issuer fully collateralized directly or indirectly by a pool of mortgages.
The mortgages serve as collateral for the issuer's payment obligations on the
bonds, but interest and principal payments on the mortgages are not passed
through either directly (as with mortgage-backed "pass-through" securities
issued or guaranteed by U.S. Government agencies or instrumentalities) or on a
modified basis (as with CMOs). Accordingly, a change in the rate of
prepayments on the pool of mortgages could change
<PAGE>
the effective maturity of a CMO but not that of a mortgage-backed bond
(although, like many bonds, mortgage-backed bonds may be callable by the
issuer prior to maturity).
Governmental, government-related, and private entities may create
mortgage loan pools to back mortgage pass-through and mortgage-collateralized
investments in addition to those described above. Commercial banks, savings
institutions, private mortgage insurance companies, mortgage bankers, and
other secondary market issuers, including securities broker-dealers and
special purpose entities (which generally are affiliates of the foregoing
established to issue such securities), also create pass-through pools of
residential mortgage loans. In addition, such issuers may be the originators
and/or servicers of the underlying mortgage loans as well as the guarantors of
the mortgage-backed securities. Pools created by non-governmental issuers
generally offer a higher rate of interest than government and
government-related pools because of the absence of direct or indirect
government or agency guarantees. Timely payment of interest and principal of
these pools may be supported by various forms of insurance or guarantees,
including individual loan, title, pool, and hazard insurance, and letters of
credit. The insurance and guarantees are issued by governmental entities,
private insurers, and the mortgage poolers. Such insurance and guarantees, as
well as the creditworthiness of the issuers thereof will be considered in
determining whether a mortgage-backed security meets a Series investment
quality standards. There can be no assurance that the private insurers or
guarantors can meet their obligations under the insurance policies or
guarantee arrangements.
A Series may buy mortgage-backed securities without insurance or
guarantees, if N&B Management determines that the securities meet the Series'
quality standards. A Series will not purchase mortgage-backed securities or
any other assets that, in N&B Management's opinion, are illiquid if, as a
result, more than 10% of the value of the Series' net assets will be illiquid.
N&B Management will, consistent with a Series objective, policies and
limitations, and quality standards, consider making investments in new types
of mortgage-backed securities as such securities are developed and offered to
investors.
Because many mortgages are repaid early, the actual maturity of many
mortgage-related securities is shorter than their stated final maturity. In
calculating its maturity, a Series may apply certain industry conventions
regarding the maturity of mortgage-backed instruments. A change in market
interest rates will affect the rate at which homeowners prepay or refinance
their mortgages and, consequently, will change the effective maturities of
most mortgage-related securities.
Asset-Backed Securities. (AMT LIQUID ASSET INVESTMENTS, AMT LIMITED
MATURITY BOND INVESTMENTS, AMT GOVERNMENT INCOME INVESTMENTS AND AMT BALANCED
INVESTMENTS). These Series may purchase asset-backed securities, including
commercial paper. Asset-backed securities represent direct or indirect
participations in, or are secured by and payable from, pools of assets such as
motor vehicle installment sales contracts, installment loan contracts, leases
of various types of real and personal property, and receivables from revolving
credit (credit card) agreements. These assets are securitized
<PAGE>
through the use of trusts and special purpose corporations. Payments or
distributions of principal and interest on asset-backed securities may be
supported by credit enhancements, such as various forms of cash collateral
accounts or letters of credit. Like mortgage-related securities, asset-backed
securities are subject to the risk of prepayment. The risk that recovery on
repossessed collateral might be unavailable or inadequate to support payments
on asset-backed securities, however, is greater than is the case for
mortgage-backed securities.
Certificates for Automobile Receivables ("CARS") represent undivided
fractional interests in a trust whose assets consist of a pool of motor
vehicle retail installment sales contracts and security interests in the
vehicles securing the contracts. Payments of principal and interest on CARS
are "passed-through" monthly to certificate holders and are guaranteed up to
specified amounts by a letter of credit issued by a financial institution
unaffiliated with the trustee or originator of the trust. Underlying
installment sales contracts are subject to prepayment, which may reduce the
overall return to certificate holders. Certificate holders also may
experience delays in payment or losses on CARS if the full amounts due on
underlying installment sales contracts are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts, or
because of depreciation, damage, or loss of the vehicles securing the
contracts, or other factors.
Credit card receivable securities are backed by receivables from
revolving credit card agreements ("Accounts"). Credit balances on Accounts
are generally paid down more rapidly than are automobile contracts. Most of
the credit card receivable securities issued publicly to date have been
pass-through certificates. In order to lengthen the maturity of credit card
receivable securities, most such securities provide for a fixed period during
which only interest payments on the underlying Accounts are passed through to
the security holder and principal payments received on the Accounts are used
to fund the transfer to the pool of assets supporting the securities of
additional credit card charges made on the Accounts. Usually, the initial
fixed period also may be shortened upon the occurrence of specified events
that signal a potential deterioration in the quality of the assets backing the
security, such as the imposition of a cap on interest rates. The ability of
the issuer to extend the life of an issue of credit card receivable securities
thus depends on the continued generation of additional principal amounts in
the underlying Accounts and the non-occurrence of specified events. The
nondeductibility of consumer interest, as well as competitive and general
economic factors, could adversely affect the rate at which new receivables are
created in an Account and conveyed to an issuer, shortening the expected
weighted average life of the related security and reducing its yield. An
acceleration in cardholders' payment rates or any other event that shortens
the period during which additional credit card charges on an Account may be
transferred to the pool of assets supporting the related security could have a
similar effect on its weighted average life and yield.
Credit cardholders are entitled to the protection of state and federal
consumer credit laws, many of which give a holder the right to set off certain
amounts against balances
<PAGE>
owed on the credit card, thereby reducing amounts paid on Accounts. In
addition, unlike most other asset-backed securities, Accounts are unsecured
obligations of the cardholders.
Dollar Rolls. (AMT LIMITED MATURITY BOND INVESTMENTS, AMT GOVERNMENT
INCOME INVESTMENTS AND AMT BALANCED INVESTMENTS). A dollar roll involves the
sale by a Series of securities for delivery in the current month and the
Series simultaneously agreeing to repurchase substantially similar (same type
and coupon) securities on a specified future date from the same party. A
covered roll is a specific type of dollar roll for which there is an
offsetting cash position or a cash equivalent security position that matures
on or before the forward settlement date of the dollar roll transaction.
These techniques are considered borrowings for purposes of each Series
investment policies and limitations concerning borrowings. There is a risk
that the contra-party will be unable or unwilling to complete the transactions
as scheduled, which may result in losses to each Series.
Forward Commitments and When-Issued Securities. (ALL SERIES EXCEPT AMT
LIQUID ASSET INVESTMENTS). Each Series may purchase securities (including,
with respect to AMT Limited Maturity Bond, Government Income and Balanced
Investments, mortgage-backed securities such as GNMA, FHMA, and FHLMC
certificates) on a when-issued basis, that is, by committing to purchase
securities (to secure an advantageous price and yield at the time of the
commitment) and completing the purchase by making payment against delivery of
the securities at a future date. AMT International Investments may purchase
securities on a when-issued basis or purchase or sell securities on a forward
commitment basis. These transactions involve a commitment by a Series to
purchase or sell securities at a future date (ordinarily one or two months
later). The price of the underlying securities (usually expressed in terms of
yield) and the date when the securities will be delivered and paid for (the
settlement date) are fixed at the time the transaction is negotiated.
When-issued purchases and forward commitment transactions are negotiated
directly with the other party, and such commitments are not traded on
exchanges.
When-issued purchases and forward commitment transactions enable a Series
to "lock in" what the adviser believes to be an attractive price or yield on a
particular security for a period of time, regardless of future changes in
interest rates. For instance, in periods of rising interest rates and falling
prices, a Series might sell securities it owns on a forward commitment basis
to limit its exposure to falling prices. In periods of falling interest rates
and rising prices, a Series might purchase a security on a when-issued or
forward commitment basis and sell a similar security to settle such purchase,
thereby obtaining the benefit of currently higher yields.
The value of securities purchased on a when-issued or forward commitment
basis and any subsequent fluctuations in their value are reflected in the
computation of a Series' net asset value starting on the date of the agreement
to purchase the securities. A Series does not earn interest on the securities
it has committed to purchase until they are paid for and delivered on the
settlement date. When a Series makes a forward commitment to sell
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securities it owns, the proceeds to be received upon settlement are included
in a Series' assets. Fluctuations in the market value of the underlying
securities are not reflected in a Series' NAV as long as the commitment to
sell remains in effect. Settlement of when-issued purchases and forward
commitment transactions generally takes place within two months after the date
of the transactions, but a Series may agree to a longer settlement period.
A Series will purchase securities on a when-issued basis or purchase or
sell securities on a forward commitment basis only with the intention of
completing the transaction and actually purchasing or selling the securities.
If deemed advisable as a matter of investment strategy, however, a Series may
dispose of or renegotiate a commitment after it has been entered into. A
Series also may sell securities it has committed to purchase before those
securities are delivered to the Series on the settlement date. A Series may
realize a capital gain or loss in connection with these transactions.
When a Series purchases securities on a when-issued basis, it maintains,
in a segregated account with its custodian, until payment is made, cash, U.S.
government securities, or other liquid, high-grade debt securities having an
aggregate market value equal to the amount of its purchase commitment. In the
case of a forward commitment to sell portfolio securities, the custodian will
hold the portfolio securities themselves in a segregated account while the
commitment is outstanding. These procedures are designed to ensure that a
Series will maintain sufficient assets at all times to cover its obligations
under when-issued purchases and forward commitments.
Covered Call (ALL SERIES EXCEPT AMT LIQUID ASSET INVESTMENTS) and Put
(AMT LIMITED MATURITY BOND INVESTMENTS, AMT GOVERNMENT INCOME INVESTMENTS, AMT
BALANCED INVESTMENTS AND AMT INTERNATIONAL INVESTMENTS) Options on Individual
Securities. AMT Limited Maturity Bond Investments, AMT Government Income
Investments and AMT Balanced Investments may write or purchase put and call
options on securities. Each of AMT Partners and AMT Growth Investments may
write or purchase covered call options on securities it owns valued at up to
10% of its net assets. Generally, the purpose of writing and purchasing these
options is to reduce the effect of the securities price fluctuations that
effect a Portfolios NAV. AMT Limited Maturity Bond, Government Income and
Balanced Investments may also write covered call options to earn premium
income.
AMT International Investments may write call options and purchase put
options on securities in order to hedge (i.e., write or purchase options to
reduce the effect of price fluctuations of securities held by the Series that
affect the Portfolio's NAV). The Series may also purchase or write put
options, purchase call options and write covered call options in an attempt to
enhance income.
The obligation under any option terminates upon expiration of the option
or at an earlier time, when the writer offsets the option by entering into a
"closing purchase
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transaction" to purchase an option of the same series. If an option is
purchased by a Series and is never exercised, the Series will lose the entire
amount of the premium paid.
A Series will receive a premium for writing a put option, which will
obligate the Series to acquire a certain security at a certain price at any
time until a certain date if the purchaser of the option decides to sell such
security. The writer of the option may be obligated to purchase the security
at more than its current value.
When a Series purchases a put option, it pays a premium to the writer for
the right to sell a security to the writer for a specified amount at any time
until a certain date. A Series would purchase a put option in order to
protect itself against a decline in the market value of a security it owns.
When a Series writes a call option, it is obligated to sell a security to
a purchaser at a specified price at any time the purchaser requests, until a
certain date, for a premium. Each Series intends to write only covered call
options on securities it owns. So long as the obligation of the writer of the
call option continues, the writer may be assigned an exercise notice,
requiring it to deliver the underlying security against payment of the
exercise price. The writer may be obligated to deliver securities underlying
an option at less than the market price thereby giving up any additional gain
on the security.
When a Series purchases a call option, it pays a premium for the right to
purchase a security from the writer at a specified price until a specified
date. A call option would be purchased by a Series in order to protect
against an increase in the price of the securities it intends to purchase or
to offset a previously written call option.
Portfolio securities on which call and put options may be written and
purchased by a Series are purchased solely on the basis of investment
considerations consistent with the Series' investment objective. The writing
of covered call options is a conservative investment technique believed to
involve relatively little risk (in contrast to the writing of "naked" or
uncovered call options, which a Series will not do), but is capable of
enhancing a Series' total return. When writing a covered call option, a
Series, in return for the premium, gives up the opportunity for profit from a
price increase in the underlying security above the exercise price, but
conversely retains the risk of loss should the price of the security decline.
When writing a put option, a Series, in return for the premium, takes the risk
that it must purchase the underlying security at an exercise price, which may
be more than the current market price of the security. If a call or put
option that a Series has written expires unexercised, the Series will realize
a gain in the amount of the premium; however, in the case of a call option,
that gain may be offset by a decline in the market value of the underlying
security during the option period. If the call or put option is exercised,
the Series will realize a gain or loss from the sale or purchase of the
underlying security.
Securities options are traded both on exchanges and in the
over-the-counter ("OTC") market. Exchange-traded options are issued by a
clearing organization affiliated with the exchange on which the option is
listed; the clearing organization in effect
<PAGE>
guarantees completion of every exchange-traded option. In contrast, OTC
options are contracts between a Series and its counter-party with no clearing
organization guarantee. Thus, when a Series sells or purchases an OTC option,
it generally will be able to "close out" the option prior to its expiration
only by entering into a "closing purchase transaction" with the dealer to whom
or from whom the Series originally sold or purchased the option. There can be
no assurance that a Series would be able to liquidate an OTC option at any
time prior to expiration. Unless a Series is able to effect a closing
purchase transaction in a covered OTC call option it has written, it will not
be able to liquidate securities used as cover until the option expires or is
exercised or different cover is substituted. In the event of the
counter-party's insolvency, a Series may be unable to liquidate its option
position and the associated cover. N&B Management, or with respect to AMT
International Investments, BNP-N&B Global, monitors the creditworthiness of
dealers with which a Series may engage in OTC options, and will limit a
Series' counterparties in such transactions to dealers with a net worth of at
least $20 million as reported in their latest financial statements.
The assets used as cover (and held in a segregated account) for OTC
options sold or written by a Series will be considered illiquid for purposes
of the non-fundamental policies and limitations of the Series unless the OTC
options are sold to qualified dealers who agree that the Series may repurchase
any OTC option it writes at a maximum price to be calculated by a formula set
forth in the option agreement. The cover for an OTC call option written
subject to this procedure will be considered illiquid only to the extent that
the maximum repurchase price under the formula exceeds the intrinsic value of
the option.
The premium received (or paid) by a Series when it writes (or purchases)
a call or put option is the amount at which the option is currently traded on
the applicable exchange, less (or plus) a commission. The premium may
reflect, among other things, the current market price of the underlying
security, the relationship of the exercise price to the market price, the
historical price volatility of the underlying security, the length of the
option period, the general supply of and demand for credit, and the general
interest rate environment. The premium received by a Series for writing a
covered call or put option is recorded as a liability on the Series' statement
of assets and liabilities. This liability is adjusted daily to the option's
current market value, which is the sales price on the option's last trade on
that day before the time the Series' NAV is computed or, in the absence of any
trades thereof on that day, the mean between the bid and ask prices as of that
time.
Each Series pays the brokerage commissions in connection with purchasing
or writing options, including those used to close out existing positions.
These brokerage commissions normally are higher than those applicable to
purchases and sales of portfolio securities.
Closing transactions are effected in order to realize a profit on an
outstanding option, to prevent an underlying security from being called, or to
permit the sale or the put of the underlying security. Furthermore, effecting
a closing transaction permits a Series to write another call option on the
underlying security with either a different exercise price
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or expiration date or both. If a Series desires to sell a particular security
on which it has written a call option (or if it desires to protect itself
against having to purchase a security on which it has written a put option),
it will seek to effect a closing transaction prior to, or concurrently with,
the sale (or purchase) of the security. There is, of course, no assurance
that a Series will be able to effect closing transactions at favorable prices.
If a Series cannot enter into such a transaction, it may be required to hold
a security that it might otherwise have sold, (or purchase a security that it
would not have otherwise bought), in which case it would continue to be
subject to market risk on the security.
Options normally have expiration dates between three and nine months from
the date written. AMT International Investments may purchase both
European-style options and American-style options. European-style options are
only exercisable immediately prior to their expiration. American-style
options, in contrast, are exercisable at any time prior to their expiration
date. The exercise price of an option may be below, equal to, or above the
current market value of the underlying security at the time the option is
written. From time to time, a Series may purchase an underlying security for
delivery in accordance with an exercise notice of a call option assigned to
it, rather than delivering the security from its portfolio. In those cases,
additional brokerage commissions are incurred.
A Series will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the call or put option. However, because increases in
the market price of a call option generally reflect increases in the market
price of the underlying security, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security owned by a Series.
Put and Call Options on Securities Indices. (AMT INTERNATIONAL
INVESTMENTS). AMT International Investments may write or purchase put and
call options on securities indices for the purpose of hedging against the risk
of unfavorable price movements adversely affecting the value of the Series'
securities or securities the Series intends to buy. However, the Series
currently does not expect to invest a substantial portion of its assets in
securities index options. Unlike a securities option, which gives the holder
the right to purchase or sell a specified security at a specified price, an
option on a securities index gives the holder the right to receive a cash
"exercise settlement amount" equal to (i) the difference between the exercise
price of the option and the value of the underlying securities index on the
exercise date multiplied by (ii) a fixed "index multiplier."
A securities index fluctuates with changes in the market values of the
securities included in the index. Options on stock indexes are currently
traded on the Chicago Board Options Exchange, the NYSE, the AmEx and foreign
exchanges.
The Series may purchase put options in order to hedge against an
anticipated decline in securities market prices that might adversely affect
the value of the Series' portfolio securities. If the Series purchases a put
option on a securities index, the amount of the payment it would receive upon
exercising the option would depend on the extent of
<PAGE>
any decline in the level of the securities index below the exercise price.
Such payments would tend to offset a decline in the value of the Series'
portfolio securities. However, if the level of the securities index increases
and remains above the exercise price while the put option is outstanding, the
Series will not be able to exercise the option profitably and will lose the
amount of the premium and any transaction costs. Such loss may be partially
offset by an increase in the value of the Series's portfolio securities.
The Series may purchase call options on securities indices in order to
participate in an anticipated increase in securities market prices. If the
Series purchases a call option on a securities index, the amount of the
payment it receives upon exercising the option depends on the extent of any
increase in the level of the securities index above the exercise price. Such
payments would, in effect, allow the Series to benefit from securities market
appreciation even though it may not have had sufficient cash to purchase the
underlying securities. Such payments may also offset increases in the price
of securities that the Series intends to purchase. If, however, the level of
the securities index declines and remains below the exercise price while the
call option is outstanding, the Series will not be able to exercise the option
profitably and will lose the amount of the premium and transaction costs.
Such loss may be partially offset by a reduction in the price the Series pays
to buy additional securities for its portfolio.
The Series may write securities index options in order to close out
positions in securities index options which it has purchased. These closing
sale transactions enable the Series immediately to realize gains or minimize
losses on its options positions. If the Series is unable to effect a closing
sale transaction with respect to options that it has purchased, it would have
to exercise the options in order to realize any profit and may incur
transaction costs upon the purchase or sale of underlying securities.
The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent that the options
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying markets that cannot
be reflected in the options markets.
The effectiveness of hedging through the purchase of securities index
options will depend upon the extent to which price movements in the portion of
the securities portfolio being hedged correlate with price movements in the
selected securities index. Perfect correlation is not possible because the
securities held or to be acquired by the Series will not exactly match the
composition of the securities indices on which options are available. In
addition, the purchase of securities index options involves the risk that the
premium and transaction costs paid by the Series in purchasing an option will
be lost as a result of unanticipated movements in prices of the securities
comprising the securities index on which the option is based.
Other Risks of Options Transactions. All securities index options
purchased by AMT International Investments will be listed and traded on an
exchange. There is no assurance that a liquid secondary market on a domestic
or foreign options exchange will exist for anyexchange-traded option, or at
any particular time, and for some options no secondary market on an exchange
or elsewhere may exist. If the Series is unable to effect a closing purchase
transaction with respect to covered options it has written, it will not be
able to sell the underlying securities or dispose of assets held in a
segregated account until the options expire or are exercised. AMT
International Investments may purchase and sell both options that are traded
on U.S. and foreign exchanges and certain options traded in the OTC market in
transactions with broker-dealers who make markets in such options.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient interest in trading
certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities; (iv) unusual or
unforeseen circumstances may interrupt normal operations on an exchange; (v)
the facilities of an exchange or its clearing organization may not at all
times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange (or
in that class or series of options) would cease to exist, although outstanding
options on that exchange that had been issued by the clearing organization as
a result of trades on that exchange would continue to be exercisable in
accordance with their terms.
The writing and purchase of options is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. The writing of options on
securities involves a risk that a portfolio will be required to sell or
purchase such securities at a price less favorable than the current market
price and will lose the benefit of appreciation or depreciation in the market
price of such securities.
The Series would incur brokerage commissions or spreads in connection
with its options transactions as well as for purchases and sales of underlying
securities. Brokerage commissions from options transactions are generally
higher than for portfolio securities transactions. The writing of options
could result in a significant increase in the Series' turnover rate.
Indexed Securities. (AMT LIMITED MATURITY BOND INVESTMENTS, AMT
GOVERNMENT INCOME INVESTMENTS, AMT INTERNATIONAL INVESTMENTS AND AMT BALANCED
INVESTMENTS). These Series may invest in securities linked to foreign
currencies, interest rates, commodities, indices, or other financial
indicators (indexed securities). Most indexed securities are short- to
intermediate-term fixed income securities whose value at maturity or interest
rate rises or falls according to the change in one or more specified
underlying instruments. Indexed securities may be positively or negatively
indexed (i.e., their value may increase or decrease if the underlying
instrument appreciates) and may have return characteristics similar to direct
investments in the underlying instrument or to
<PAGE>
one or more options thereon. However, some indexed securities are more
volatile than the underlying instrument itself.
Futures Contracts and Options Thereon. (AMT INTERNATIONAL INVESTMENTS,
AMT LIMITED MATURITY BOND INVESTMENTS, AMT GOVERNMENT INCOME INVESTMENTS AND
AMT BALANCED INVESTMENTS). AMT International Investments may enter into
futures contracts for the purchase or sale of individual securities and
futures contracts on securities indices which are traded on exchanges licensed
and regulated by the Commodity Futures Trading Commission ("CFTC") or on
foreign exchanges. Trading on foreign exchanges is subject to the legal
requirements of the jurisdiction in which the exchange is located and the
rules of such foreign exchange. AMT International Investments may purchase
and sell futures for bona fide hedging purposes and non-hedging purposes
(i.e., in an effort to enhance income) as defined in regulations of the CFTC.
AMT Limited Maturity Bond, Government Income and Balanced Investments may
purchase and sell interest-rate futures contracts and options thereon. These
Series engage in interest rate futures and options transactions in an attempt
to hedge against changes in securities prices resulting from expected changes
in prevailing interest rates, and they engage in foreign currency Futures and
options transactions in an attempt to hedge against expected changes in
prevailing currency exchange rates. Because the Futures markets may be more
liquid than the cash markets, the use of Futures permits a Series to enhance
portfolio liquidity and maintain a defensive position without having to sell
portfolio securities. These Series do not engage in transactions in futures
or options thereon for speculation; they view investment in (1) interest-rate
Futures and options thereon as a maturity management device and/or a device to
reduce risk and preserve total return in an adverse interest rate environment
and (2) foreign currency Futures and options thereon as a means of
establishing more definitely the effective return on securities denominated in
foreign currencies held or intended to be acquired by them.
A futures contract on a security is a binding contractual commitment
which, if held to maturity, will result in an obligation to make or accept
delivery of securities having a standardized face value and rate of return
during a particular month. By purchasing futures on securities, a Series will
legally obligate itself to accept delivery of the underlying security and to
pay the agreed price. By selling futures on securities, the Series will
legally obligate itself to make delivery of the security and receive payment
of the agreed price.
Open futures positions on securities are valued at the most recent
settlement price, unless such price does not reflect the fair value of the
contract, in which case the position will be valued by or under the direction
of the Trustees of Managers Trust.
Futures contracts on securities are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a
profit or loss. While futures contracts on securities entered into by a
Series will usually be liquidated in this manner, the Series may instead make
or take delivery of the underlying securities whenever it appears economically
advantageous for it to do so. A clearing corporation associated withexchange
on which futures on securities are traded assumes responsibility for closing
out contracts and guarantees that, if a contract is still open, the sale or
purchase of securities will be performed on the settlement date.
Similarly, a securities index futures contact does not require the
physical delivery of securities, but merely provides for profits and losses
resulting from changes in the market value of the contract to be credited or
debited at the close of each trading day to the respective accounts of the
parties to the contract. On the contract's expiration date, a final cash
settlement occurs and the futures positions are simply closed out. Changes in
the market value of a particular securities index futures contract reflect
changes in the specified index of the securities on which the futures contract
is based.
A Series sells futures contracts in order to offset a possible decline in
the value of its securities. When a futures contract is sold by a Series, the
value of the contract will tend to rise when the value of the Series'
securities declines and will tend to fall when the value of such securities
increases. A Series purchases future contracts in order to fix what is
believed to be a favorable price for securities a Series intends to purchase.
If a futures contract is purchased by a Series, the value of the contract will
tend to change together with changes in the value of such securities.
A Series may also purchase put and call options on futures contracts for
bona fide hedging and, with respect to AMT International Investments,
non-hedging purposes. A put option purchased by a Series would give it the
right to assume a position as the seller of a futures contract (assume a
"short position"). A call option purchased by a Series would give it the
right to assume a position as the purchaser of a futures contract (assume a
"long position"). The purchase of an option on a futures contract requires a
Series to pay a premium. In exchange for the premium, a Series becomes
entitled to exercise the benefits, if any, provided by the futures contract,
but is not required to take any actions under the contract. If the option
cannot be profitably exercised before it expires, the Series' loss will be
limited to the amount of the premium and any transaction costs.
In addition, a Series may write (sell) put and call options on futures
contracts for bona fide hedging and, with respect to AMT International
Investments, non-hedging purposes. The writing of a put option on a futures
contract generates a premium, which may partially offset an increase in the
price of securities that a Series intends to purchase. However, a Series
becomes obligated to purchase a futures contract, which may have a value lower
than the exercise price. Conversely, the writing of a call option on a
futures contract generates a premium which may partially offset a decline in
the value of a Series' assets. By writing a call option, a Series becomes
obligated, in exchange for the premium, to sell a futures contract, which may
have a value higher than the exercise price.
A Series may enter into closing purchase or sale transactions in order to
terminate a futures contract. A Series may close out an option which it has
purchased or written by selling or purchasing an offsetting option of the same
series. There is no guarantee that such closing transactions can be effected.
A Series' ability to enter into closingdepends on the development and
maintenance of a liquid market, which may not be available at all times.
Although futures and options transactions are intended to enable a Series
to manage interest rate, stock market or currency exchange risks,
unanticipated changes in interest rates, market prices or currency exchange
rates could result in poorer performance than if a Series had not entered into
these transactions. Even if N&B Management, or, with respect to AMT
International Investments, BNP-N&B Global, correctly predicts interest rate,
market price or currency rate movements, a hedge could be unsuccessful if
changes in the value of a Series' futures position did not correspond to
changes in the value of its investments. This lack of correlation between a
Series' futures and securities or currency positions may be caused by
differences between the futures and securities or currency markets or by
differences between the securities underlying the Series' futures position and
the securities held by or to be purchased for the Series. N&B Management, or,
with respect to AMT International Investments, BNP-N&B Global, will attempt to
minimize these risks through careful selection and monitoring of a Series'
futures and options positions. The ability to predict the direction of the
securities markets, interest rates and currency exchange rates involves skills
different from those used in selecting securities.
The prices of futures contracts depend primarily on the value or level of
the securities or indices on which they are based. Because there is a limited
number of types of futures contracts, it is likely that the standardized
futures contracts available to a Series will not exactly match the securities
the Series wishes to hedge or intends to purchase, and consequently will not
provide a perfect hedge against all price fluctuation. To compensate for
differences in historical volatility between positions a Series wishes to
hedge and the standardized futures contracts available to it, a Series may
purchase or sell futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase.
Foreign Currency Transactions. (ALL SERIES EXCEPT AMT LIQUID ASSET
INVESTMENTS). The Series may engage in foreign currency exchange
transactions. Foreign currency exchange transactions will be conducted either
on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through entering into forward contracts to
purchase or sell foreign currencies ("forward contracts") (in amounts not
exceeding 5% of each Series net assets, with respect to AMT Partners and
Growth Investments). A Series may enter into forward contracts in order to
protect against uncertainty in the level of future foreign currency exchange
rates. AMT International Investments may also enter forward contracts for
non-hedging purposes. A forward contract involves an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of
days (usually less than one year) from the date of the contract agreed upon by
the parties, at a price set at the time of the contract. These contracts are
traded in the interbank market conducted directly between traders (usually
large commercial banks) and their customers. A forward contract generally has
no deposit requirement, and no commissions are charged at any stage for
trades. Although foreign exchange dealers do not charge a fee for conversion,
they do realize a profit based on the
<PAGE>
difference (the spread) between the price at which they are buying and selling
various currencies.
When a Series enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may wish to "lock in" the U.S.
dollar price of the security. By entering into a forward contract for the
purchase or sale, for a fixed amount of U.S. dollars, of the amount of foreign
currency involved in the underlying security transactions, a Series will be
able to protect itself against a possible loss. Such loss would result from
an adverse change in the relationship between the U.S. dollar and the foreign
currency during the period between the date on which the security is purchased
or sold and the date on which payment is made or received.
When N&B Management, or with respect to AMT International Investments,
BNP-N&B Global, believes that the currency of a particular foreign country may
suffer a substantial decline against the U.S. dollar, it may also enter into a
forward contract to sell the amount of foreign currency for a fixed amount of
dollars which approximates the value of some or all of a Series' securities
denominated in such foreign currency. The precise matching of the forward
contract amounts and the value of the securities involved will not generally
be possible, since the future value of such securities denominated in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures.
A Series may also engage in cross-hedging by using forward contracts in
one currency to hedge against fluctuations in the value of securities
denominated in a different currency, when N&B Management, or with respect to
AMT International Investments, BNP-N&B Global, believes that there is a
pattern of correlation between the two currencies. AMT International
Investments may also purchase and sell forward contracts for non-hedging
purposes when BNP-N&B Global anticipates that the foreign currency will
appreciate or depreciate in value, but securities in that currency do not
present attractive investment opportunities and are not held in the Series'
portfolio.
When a Series engages in forward contracts for hedging purposes, it will
not enter into forward contracts to sell currency or maintain a net exposure
to such contracts if their consummation would obligate the Series to deliver
an amount of foreign currency in excess of the value of the Series' portfolio
securities or other assets denominated in that currency. At the consummation
of the forward contract, a Series may either make delivery of the foreign
currency or terminate its contractual obligation to deliver by purchasing an
offsetting contract obligating it to purchase the same amount of such foreign
currency at the same maturity date. If the Series chooses to make delivery of
the foreign currency, it may be required to obtain such currency through the
sale of portfolio securities denominated in such currency or through
conversion of other assets of the Series into such currency. If the Series
engages in an offsetting transaction, it will incur a gain or a loss to the
extent that there has been a change in forward contract prices. Closing
purchase transactions with respect to forward contracts are usually made with
the currency trader who is a party to the original forward contract.
<PAGE>
The Series are not required to enter into such transactions and will not
do so unless deemed appropriate by N&B Management, or with respect to AMT
International Investments, by BNP-N&B Global.
Using forward contracts to protect the value of a Series' portfolio
securities against a decline in the value of a currency does not eliminate
fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange which can be achieved at some future point in
time. The precise projection of short-term currency market movements is not
possible, and short-term hedging provides a means of fixing the dollar value
of only a portion of a Series' foreign assets.
While a Series may enter forward contracts to reduce currency exchange
rate risks, transactions in such contracts involve certain other risks. Thus,
while a Series may benefit from such transactions, unanticipated changes in
currency prices may result in a poorer overall performance for the Series than
if it had not engaged in any such transactions. Moreover, there may be
imperfect correlation between a Series' portfolio holdings of securities
denominated in a particular currency and forward contracts entered into by the
Series. Such imperfect correlation may cause the Series to sustain losses
which will prevent the Series from achieving a complete hedge or expose the
Series to risk of foreign exchange loss.
An issuer of fixed income securities purchased by a Series may be
domiciled in a country other than the country in whose currency the instrument
is denominated. AMT International Investments may also invest in debt
securities denominated in the European Currency Unit ("ECU"), which is a
"basket" consisting of a specified amount in the currencies of certain of the
member states of the European Community. The specific amounts of currencies
comprising the ECU may be adjusted by the Council of Ministers of the European
Community from time to time to reflect changes in relative values of the
underlying currencies. In addition, the Series may invest in securities
denominated in other currency "baskets." The market for ECUs may become
illiquid at times of uncertainty or rapid change in the European currency
markets, limiting the Series' ability to prevent potential losses.
A Series' activities in forward contracts, currency futures contracts and
related options and currency options (see below) may be limited by the
requirements of federal income tax law applicable to its corresponding
Portfolio for qualification as a regulated investment company (RIC). See
"Additional Tax Information."
Currency Futures and Related Options. (AMT INTERNATIONAL INVESTMENTS, AMT
LIMITED MATURITY BOND INVESTMENTS, AMT GOVERNMENT INCOME INVESTMENTS AND AMT
BALANCED INVESTMENTS). Each of these Series may enter into currency futures
contracts and options on such futures contracts in domestic and foreign
markets. Each of these Series may sell a currency futures contract or a call
option, or it may purchase a put option on such futures contract, if N&B
Management, or with respect to AMT International Investments, BNP-N&B Global,
anticipates that exchange rates for a particular currency
<PAGE>
will fall. Such a transaction will be used as a hedge (or, in the case of a
sale of a call option, a partial hedge) against a decrease in the value of a
Series' securities denominated in such currency. If N&B Management, or with
respect to AMT International Investments, BNP-N&B Global, anticipates that
exchange rates will rise, a Series may purchase a currency futures contract or
a call option to protect against an increase in the price of securities which
are denominated in a particular currency and which the Series intends to
purchase. AMT International Investments may also purchase a currency futures
contract, or a call option thereon, for non-hedging purposes when BNP-N&B
Global anticipates that a particular currency will appreciate in value, but
securities denominated in that currency do not present an attractive
investment and are not included in the Series' portfolio. Each Series will
use these futures contracts and related options for hedging purposes and, with
respect to AMT International Investments, for non-hedging purposes as well
(i.e., in an effort to enhance income) as defined in CFTC regulations.
The sale of a currency futures contract creates an obligation by a
Series, as seller, to deliver the amount of currency called for in the
contract at a specified future time for a specified price. The purchase of a
currency futures contract creates an obligation by a Series, as purchaser, to
take delivery of an amount of currency at a specified future time at a
specified price. Although the terms of currency futures contracts specify
actual delivery or receipt, in most instances the contracts are closed out
before the settlement date without the making or taking of delivery of the
currency. Closing out of a currency futures contract is effected by entering
into an offsetting purchase or sale transaction. To close out a currency
futures contract sold by a Series, the Series may purchase a currency futures
contract for the same aggregate amount of currency and same delivery date. If
the price in the sale exceeds the price in the offsetting purchase, the Series
is immediately paid the difference. Similarly, to close out a currency
futures contract purchased by a Series, the Series sells a currency futures
contract. If the offsetting sale price exceeds the purchase price, the Series
realizes a gain. Likewise, if the offsetting sale price is less than the
purchase price, the Series realizes a loss.
Unlike a currency futures contract, which requires the parties to buy and
sell currency on a set date, an option on a futures contract entitles its
holder to decide on or before a future date whether to enter into such a
contract. If the holder decides not to enter into the contract, the premium
paid for the option is lost. For the holder of an option, there are no daily
payments of cash for "variation" or "maintenance" margin payments to reflect
the change in the value of the underlying contract as there are by a purchaser
or seller of a currency futures contract.
A risk in employing currency futures contracts to protect against price
volatility of portfolio securities which are denominated in a particular
currency is that the prices of such securities subject to currency futures
contracts may not completely correlate with the behavior of the cash prices of
the Series' securities. The correlation may be distorted by the fact that the
currency futures market may be dominated by short-term traders seeking to
profit from changes in exchange rates. This would reduce the value of such
contracts used for hedging purposes over a short-term period. Such
distortions are generally minor
<PAGE>
and would diminish as the contract approached maturity. Another risk is that
N&B Management, or with respect to AMT International Investments, BNP-N&B
Global, could be incorrect in its expectation as to the direction or extent of
various exchange rate movements or the time span within which the movements
take place. When a Series engages in the purchase of currency futures
contracts, an amount equal to the market value of the currency futures
contract (minus any required margin) will be deposited in a segregated account
of securities, cash, or cash equivalents to collateralize the position and
thereby limit the use of such futures contracts.
Put and call options on currency futures have characteristics similar to
those of other options. In addition to the risks associated with investing in
options on securities, however, there are particular risks associated with
transactions in options on currency futures. In particular, the ability to
establish and close out positions on such options will be subject to the
development and maintenance of a liquid secondary market for such options.
Options on Foreign Currencies. (ALL SERIES EXCEPT AMT LIQUID ASSET
INVESTMENTS). Each of these Series may write and purchase covered call and put
options on foreign currencies (in amounts not exceeding 5% of each Series net
assets, with respect to AMT Growth and Partners Investments) for the purpose
of protecting against declines in the U.S. dollar value of portfolio
securities or protecting the dollar equivalent of dividend, interest, or other
payment on those securities and against increases in the U.S. dollar cost of
securities. A decline in the dollar value of a foreign currency in which
portfolio securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such decreases in the value of portfolio securities,
a Series may purchase put options on the foreign currency. If the value of
the currency declines, a Series will have the right to sell such currency for
a fixed amount of dollars which exceeds the market value of such currency.
This would result in a gain that may offset, in whole or in part, the negative
effect of currency depreciation on the value of the Series' securities
denominated in that currency.
Conversely, if a rise in the dollar value of a currency is projected for
those securities to be acquired, thereby increasing the cost of such
securities, a Series may purchase call options on such currency. If the value
of such currency increases, the purchase of such call options would enable the
Series to purchase currency for a fixed amount of dollars which is less than
the market value of such currency. Such a purchase would result in a gain
that may offset, at least partially, the effect of any currency-related
increase in the price of securities a Series intends to acquire. As in the
case of other types of options transactions, however, the benefit a Series
derives from purchasing foreign currency options will be reduced by the amount
of the premium and related transaction costs. In addition, if currency
exchange rates do not move in the direction or to the extent anticipated, a
Series could sustain losses on transactions in foreign currency options which
would deprive it of a portion or all of the benefits of advantageous changes
in such rates.
A Series may also write options on foreign currencies for hedging
purposes. For example, if a Series anticipated a decline in the dollar value
of foreign currency
<PAGE>
denominated securities because of declining exchange rates, it could, instead
of purchasing a put option, write a call option on the relevant currency. If
the expected decline occurs, the option will most likely not be exercised, and
the decrease in value of portfolio securities will be offset by the amount of
the premium received by the Series.
Similarly, a Series could write a put option on the relevant currency,
instead of purchasing a call option, to hedge against an anticipated increase
in the dollar cost of securities to be acquired. If exchange rates move in
the manner projected, the put option will expire unexercised and allow the
Series to offset such increased cost up to the amount of the premium.
However, as in the case of other types of options transactions, the writing of
a foreign currency option will constitute only a partial hedge up to the
amount of the premium, and only if rates move in the expected direction. If
unanticipated exchange rate fluctuations occur, the option may be exercised
and the Series would be required to purchase or sell the underlying currency
at a loss which may not be fully offset by the amount of the premium. As a
result of writing options on foreign currencies, a Series also may be required
to forego all or a portion of the benefits which might otherwise have been
obtained from favorable movements in currency exchange rates. Certain options
on foreign currencies are traded on the OTC market and involve liquidity and
credit risks that may not be present in the case of exchange-traded currency
options.
AMT International Investments may purchase call options on currency for
non-hedging purposes when BNP-N&B Global anticipates that the currency will
appreciate in value, but the securities denominated in that currency do not
present attractive investment opportunities and are not included in the
Series' portfolio. AMT International Investments may write (sell) put and
covered call options on any currency in order to realize greater income than
would be realized on portfolio securities alone. However, in writing covered
call options for additional income, AMT International Investments may forego
the opportunity to profit from an increase in the market value of the
underlying currency. Also, when writing put options, AMT International
Investments accepts, in return for the option premium, the risk that it may be
required to purchase the underlying currency at a price in excess of the
currency's market value at the time of purchase.
AMT International Investments would normally purchase call options for
non-hedging purposes in anticipation of an increase in the market value of a
currency. AMT International Investments would ordinarily realize a gain if,
during the option period, the value of such currency exceeded the sum of the
exercise price, the premium paid and transaction costs. Otherwise the Series
would realize either no gain or a loss on the purchase of the call option.
Put options may be purchased by AMT International Investments for the purpose
of benefiting from a decline in the value of currencies which it does not own.
The Series would ordinarily realize a gain if, during the option period, the
value of the underlying currency decreased below the exercise price
sufficiently to more than cover the premium and transaction costs. Otherwise
the Series would realize either no gain or a loss on the purchase of the put
option.
<PAGE>
A call option written on foreign currency by a Series is "covered" if the
Series owns the underlying foreign currency subject to the call, or if it has
an absolute and immediate right to acquire that foreign currency without
additional cash consideration. This also would apply to additional cash
consideration held in a segregated account by its custodian, upon conversion
or exchange of other foreign currency held in its portfolio. A call option is
also covered if a Series holds a call on the same foreign currency for the
same principal amount as the call written where the exercise price of the call
held is (a) equal to or less than the exercise price of the call written or
(b) greater than the exercise price of the call written if the amount of the
difference is maintained by the Series in cash or liquid, high-grade debt
securities in a segregated account with its custodian.
Limitations on Transactions in Options, Futures Contracts and Foreign
Currency Transactions. A Series is required to maintain margin deposits with
brokerage firms through which it effects futures contracts, and must deposit
"initial margin" each time it enters into a futures contract. Such "initial
margin" is usually equal to a percentage of the contract's value. In
addition, due to current industry practice, daily variation margin payments in
cash are required to reflect gains and losses on open futures contracts. As a
result, a Series may be required to make additional margin payments during the
term of a futures contract. A Series may not purchase or sell futures
contracts (including currency futures contracts) or related options on foreign
or U.S. exchanges if immediately thereafter the sum of the amounts of initial
margin deposits on the Series' existing futures contracts and premiums paid
for options on futures (excluding futures contracts and options on futures
entered into for bona fide hedging purposes and net of the amount the
positions are "in the money") would exceed 5% of the market value of the
Series' total assets. In instances involving the purchase of futures
contracts or the writing of put options thereon by a Series, an amount of
cash, cash equivalents or securities denominated in the appropriate currency
equal to the market value of the futures contracts and options (less any
related margin deposits) will be deposited in a segregated account with its
custodian to collateralize the position, thereby limiting the use of such
futures contracts.
The extent to which a Series may enter into futures contracts and option
transactions may be limited by the requirements of federal income tax law
applicable to its corresponding Portfolio for qualification as a RIC. See
"Additional Tax Information." A Series generally will not enter into a
forward contract with a term of greater than one year. A Series may
experience delays in the settlement of its foreign currency transactions.
When a Series engages in forward contracts for the sale or purchase of
currencies, the Series will either cover its position or establish a
segregated account. The Series will consider its position covered if it has
securities in the currency subject to the forward contract, or otherwise has
the right to obtain that currency at no additional cost. In the alternative,
the Series will place cash which is not available for investment, liquid,
high-grade debt securities or other securities (denominated in the foreign
currency subject to the forward contract) in a separate account. The amounts
in such separate account will equal the value of the Series' total assets
which are committed to the consummation of foreign currency exchange
contracts. If the value of the securities placed in the separate
<PAGE>
account declines, the Series will place additional cash or securities in the
account on a daily basis so that the value of the account will equal the
amount of the Series' commitments with respect to such contracts.
Short Sales (AMT INTERNATIONAL INVESTMENTS) and Short Sales
Against-the-Box (AMT PARTNERS INVESTMENTS, AMT GROWTH INVESTMENTS, AMT
BALANCED INVESTMENTS AND AMT INTERNATIONAL INVESTMENTS). AMT International
Investments may enter into short sales of securities to the extent permitted
by the Series' nonfundamental investment policies and limitations. Under
applicable guidelines of the staff of the SEC, if the Series engages in a
short sale of the type referred to in the Prospectus, it must put in a
segregated account (not with the broker) an amount of cash or U.S. government
securities equal to the difference between (1) the market value of the
securities sold short at the time they were sold short and (2) any cash or
U.S. government securities required to be deposited as collateral with the
broker in connection with the short sale (not including the proceeds from the
short sale). In addition, until the Series replaces the borrowed security, it
must daily maintain the segregated account at such a level that (3) the amount
deposited in it plus the amount deposited with the broker as collateral will
equal the current market value of the securities sold short, and (4) the
amount deposited in it plus the amount deposited with the broker as collateral
will not be less than the market value of the securities at the time they were
sold short.
The effect on the Series of engaging in short selling is similar to the
effect of leverage. Short selling may exaggerate changes in the Portfolio's
NAV and yield. Short selling may also produce higher than normal portfolio
turnover which may result in increased transaction costs to the Series and may
result in gains from the sale of securities deemed to have been held for less
than three months. Such gains must be limited in order for AMT International
Investments to qualify as a RIC. See "Additional Tax Information."
AMT Partners, Growth, Balanced and International Investments may make
short sales against-the-box, in which the Series sells short securities it
owns or has the right to obtain without payment of additional consideration.
Foreign Corporate and Government Debt Securities. (ALL SERIES). Each
Series may invest in foreign corporate bonds and debentures and sovereign debt
instruments issued or guaranteed by foreign governments, their agencies or
instrumentalities.
Foreign debt securities are subject to risks similar to those of other
foreign securities. In addition, foreign debt securities are subject to the
risk of an issuer's inability to meet principal and interest payments on the
obligations ("credit risk") and are also subject to price volatility due to
such factors as interest rate sensitivity, market perception of the
creditworthiness of the issuer, and general market liquidity ("market risk").
Lower-rated securities are more likely to react to developments affecting
market and credit risk than are more highly rated securities, which react
primarily to movements in the general level of interest rates. Debt
securities in the lowest rating categories may involve a substantial risk of
default or may be in default. Changes in economic conditions or
<PAGE>
developments regarding the individual issuer are more likely to cause price
volatility and weaken the capacity of the issuers of such securities to make
principal and interest payments than is the case for higher grade debt
securities. An economic downturn affecting the issuer may result in an
increased incidence of default. The market for lower-rated securities may be
thinner and less active than for higher-rated securities. Pricing of thinly
traded securities requires greater judgment than pricing of securities for
which market transactions are regularly reported. N&B Management and, with
respect to AMT International Investments, BNP-N&B Global, will invest in such
securities only when it concludes that the anticipated return to the Series
and the Portfolio on such an investment warrants exposure to the additional
level of risk. A further description of the ratings used by Moody's and S&P
is included in the Appendix to the SAI. Subsequent to its purchase by the
Series, an issue of securities may cease to be rated or its rating may be
reduced. In such a case, N&B Management and, with respect to AMT
International Investments, BNP-N&B Global, will make a determination as to
whether the Series should dispose of the downgraded securities.
Convertible Securities. (AMT INTERNATIONAL INVESTMENTS, AMT GROWTH
INVESTMENTS, AMT BALANCED INVESTMENTS AND AMT PARTNERS INVESTMENTS). A
convertible security entitles the holder to receive interest paid or accrued
on debt or the dividend paid on preferred stock until the convertible security
matures or is redeemed, converted or exchanged. Before conversion,
convertible securities ordinarily provide a stream of income with generally
higher yields than those of common stocks of the same or similar issuers, but
lower than the yield on non-convertible debt. Convertible securities are
usually subordinated to comparable-tier nonconvertible securities but rank
senior to common stock in a corporation's capital structure. The value of a
convertible security is a function of (1) its yield in comparison with the
yields of other securities of comparable maturity and quality that do not have
a conversion privilege and (2) its worth, at market value, if converted into
the underlying common stock.
Convertible securities are typically issued by smaller capitalized
companies whose stock prices may be volatile. The price of a convertible
security often reflects such variations in the price of the underlying common
stock in a way that nonconvertible debt does not. A convertible security may
be subject to redemption at the option of the issuer at a price established in
the security's governing instrument. If a convertible security held by a
Series is called for redemption, the Series will be required to convert it
into the underlying common stock, sell it to a third party or permit the
issuer to redeem the security. Any of these actions could have an adverse
effect on the fund's ability to achieve its investment objective.
Preferred Stock. (AMT INTERNATIONAL INVESTMENTS, AMT GROWTH INVESTMENTS,
AMT BALANCED INVESTMENTS AND AMT PARTNERS INVESTMENTS). Unlike interest
payments on debt securities, dividends on preferred stock are generally
payable at the discretion of the issuer's board of directors, although
preferred shareholders may have certain rights if dividends are not paid.
Shareholders may suffer a loss of value if dividends are not paid, and
generally have no legal recourse against the issuer. The market prices of
preferred
<PAGE>
stocks are generally more sensitive to changes in the issuer's
creditworthiness than are the prices of debt securities.
Commercial Paper. (ALL SERIES). Commercial paper is a short-term debt
security issued by a corporation or bank for purposes such as financing
current operations. AMT Growth, Partners, Liquid Asset and International
Investments may invest only in commercial paper receiving the highest rating
from S&P (A-1) or Moody's (P-1), or deemed by N&B Management and, with respect
to AMT International Investments, by BNP-N&B Global, to be of equivalent
quality. AMT International Investments may invest in such commercial paper,
as a defensive measure, to maintain adequate liquidity or as needed for
segregated accounts.
Each Series may invest in commercial paper that cannot be resold to the
public without an effective registration statement under the 1933 Act. While
such restricted securities are normally deemed illiquid, N&B Management, or
with respect to AMT International Investments, BNP-N&B Global, may in certain
cases determine that such paper is liquid, pursuant to guidelines established
by Managers Trusts Board of Trustees.
Zero Coupon Securities. (ALL SERIES). Each of these Series may invest in
zero coupon securities (up to 5% of its net assets, with respect to AMT
Partners Investments and AMT Limited Maturity Bond Investments), which are
debt obligations that do not entitle the holder to any periodic payment of
interest prior to maturity or specify a future date when the securities begin
paying current interest. Rather, they are issued and traded at a discount
from their face amount or par value, which discount varies depending on
prevailing interest rates, the time remaining until cash payments begin, the
liquidity of the security, and the perceived credit quality of the issuer.
The discount on zero coupon securities ("original issue discount") is
taken into account by each Series prior to the receipt of any actual payments.
Because each Portfolio must distribute to its shareholders substantially all
of its income (including its share of its corresponding Series original issue
discount) for income tax purposes (see "Additional Tax Information"), a Series
may have to dispose of portfolio securities under disadvantageous
circumstances to generate cash, or may be required to borrow, to satisfy its
corresponding Portfolio's distribution requirements.
The market prices of zero coupon securities generally are more volatile
than the prices of securities that pay interest periodically and are likely to
respond to changes in interest rates to a greater degree than do other types
of debt securities having similar maturities and credit quality.
Municipal Obligations. (AMT LIMITED MATURITY BOND INVESTMENTS AND AMT
BALANCED INVESTMENTS). Municipal obligations are issued by or on behalf of
states (as used herein, including the District of Columbia), territories and
possessions of the United States and their political subdivisions, agencies,
and instrumentalities; the interest on which is exempt from federal income
tax. Municipal obligations include general obligation
<PAGE>
securities, which are backed by the full taxing power of a municipality, and
revenue securities, which are backed only by the income from a specific
project, facility, or tax. Municipal obligations also include industrial
development and private activity bonds which are issued by or on behalf of
public authorities, but are not backed by the credit of any governmental or
public authority. Anticipation notes, which are also municipal obligations,
are issued by municipalities in expectation of future proceeds from the
issuance of bonds, or from taxes or other revenues, and are payable from those
bond proceeds, taxes, or revenues. Municipal obligations also include
tax-exempt commercial paper, which is issued by municipalities to help finance
short-term capital or operating requirements.
The value of municipal obligations is dependent on the continuing payment
of interest and principal when due by the issuers of the municipal obligations
in which a Series invests (or, in the case of industrial development bonds,
the revenues generated by the facility financed by the bonds or, in certain
other instances, the provider of the credit facility backing the bonds). As
with other fixed income securities, an increase in interest rates generally
will reduce the value of the Series investments in municipal obligations,
whereas a decline in interest rates generally will increase that value.
Current efforts to restructure the federal budget and the relationship between
the federal government and state and local governments may impact the
financing of some issuers of municipal securities. Some states and localities
are experiencing substantial deficits and may find it difficult for political
or economic reasons to increase taxes. Both of these factors could affect the
ability of an issuer of municipal securities to meet its obligations.
Interest Rate Protection Transactions. (AMT GOVERNMENT INCOME
INVESTMENTS). AMT Government Income Investments may enter into interest rate
swaps, caps, floors, and collars. An interest rate swap involves an agreement
between two parties to exchange payments that are based, for example, on
variable and fixed rates of interest and that are calculated on the basis of a
specified amount (the "notional principal amount"). In an interest rate cap
or floor transaction, one party agrees to make payments to the other party
when a specified market interest rate goes above (in the case of a cap) or
below (in the case of a floor) a designated level on predetermined dates or
during a specified time period. An interest rate collar transaction involves
both a cap and a floor (that is, one party agrees to make payments to the
other party when a specified market interest rate goes outside a specified
range).
The Series enters into these transactions only with banks and recognized
securities dealers believed by N&B Management to present minimal credit risks
in accordance with guidelines established by the Trustees, for the purpose of
(1) preserving a return or spread on a particular investment or portion of its
portfolio, (2) protecting against an increase in the price of securities it
anticipates purchasing at a later date, or (3) effectively fixing the rate of
interest it pays on borrowings. The Series uses interest rate protection
transactions as hedges and not as speculative investments; these transactions
are subject to risks comparable to those described herein with respect to
other hedging strategies. If the Series enters into such a transaction and
N&B Management incorrectly forecasts interest
<PAGE>
rates, market values, or other economic factors, the Series would have been in
a better position had it not hedged at all. The Series does not treat these
transactions as being subject to its borrowing restrictions.
The Series will maintain appropriate liquid assets in a segregated
custodial account to cover its current obligations under swap agreements. If
the Series enters into a swap agreement on a net basis, it will segregate
assets with a daily value at least equal to the excess, if any, of its accrued
obligations under the swap agreement over the accrued amount it is entitled to
receive under the agreement. If the Series enters into a swap agreement on
other than a net basis, it will segregate assets with a value equal to the
full amount of its accrued obligations under the agreement.
The swap market has grown substantially in recent years, with a large
number of the participants utilizing standardized swap documentation. Swap
agreements are treated as liquid if they can be expected, in N&B Management's
judgment, to be able to be sold within seven days at approximately the price
at which they are valued. Caps, floors, and collars are more recent
innovations for which documentation is less standardized, and accordingly they
are less liquid than swaps.
Short-Term Trading. (AMT GOVERNMENT INCOME INVESTMENTS). AMT Government
Income Investments may engage in short-term trading. Securities may be sold
in anticipation of a market decline (a rise in interest rates) or purchased in
anticipation of a market rise (a decline in interest rates). In addition, a
security may be sold and another purchased at approximately the same time to
take advantage of what N&B Management believes to be a temporary disparity in
the normal yield relationship between the two securities. Yield disparities
may occur for reasons not directly related to the investment quality of
particular issues or the general movement of interest rates, such as changes
in the overall demand for or supply of various types of fixed income
securities or changes in the investment objectives of investors.
Fixed Income Securities. (ALL SERIES). Each Series may invest in money
market instruments, U.S. Government or Agency securities, and corporate bonds
and debentures receiving one of the four highest ratings from S&P, Moody's, or
any other NRSRO or, if not rated by any NRSRO, deemed comparable by N&B
Management, or by BNP-N&B Global with respect to AMT International
Investments, to such rated securities (Comparable Unrated Securities); in
addition, AMT Partners Investments may invest up to 15% of its net assets in
corporate debt securities rated below investment grade or Comparable Unrated
Securities. The ratings of an NRSRO represent its opinion as to the quality
of securities it undertakes to rate. Ratings are not absolute standards of
quality; consequently, securities with the same maturity, coupon, and rating
may have different yields. A Series relies on the credit evaluations
performed by N&B Management and, with respect to AMT International
Investments, BNP-N&B Global, and on ratings assigned by S&P and Moody's, which
are described in Appendix A to this SAI.
<PAGE>
Fixed income securities are subject to the risk of an issuer's inability
to meet principal and interest payments on the obligations ("credit risk") and
also may be subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and
general market liquidity ("market risk"). Lower-rated securities are more
likely to react to developments affecting market and credit risk than are more
highly rated securities, which react primarily to movements in the general
level of interest rates. Subsequent to its purchase by a Series an issue of
securities may cease to be rated or its rating may be reduced, so that the
securities would not be eligible for purchase by the Series. In such a case,
with respect to all Series except AMT Liquid Asset Investments, N&B
Management, or BNP-N&B Global, with respect to AMT International Investments,
will engage in an orderly disposition of the downgraded securities to the
extent necessary to ensure that the Series' holdings of such securities will
not exceed 5% of the Series' net assets. With respect to AMT Liquid Asset
Investments, N&B Management will consider the need to dispose of such
securities in accordance with the requirements of Rule 2a-7.
CERTAIN RISK CONSIDERATIONS
Although each Series seeks to reduce risk by investing in a diversified
portfolio, diversification does not eliminate all risk. There can, of course,
be no assurance that any Series will achieve its investment objective, and an
investment in a Portfolio involves certain risks that are described in the
sections entitled "Investment Program" and "Description of Investments" in the
Prospectus and "Investment Information" in this SAI.
PERFORMANCE INFORMATION
A Portfolio's performance may be quoted in advertising in terms of yield
or total return if accompanied by performance of an insurance company's
separate account. Each Portfolio's performance figures are based on
historical earnings and are not intended to indicate future performance. The
share price (except in the case of the Liquid Asset Portfolio), yield and
total return of each Portfolio will vary, and an investment in the Portfolio,
when redeemed, may be worth more or less than the original purchase price.
Yield Calculations
The Liquid Asset Portfolio may advertise its current yield and effective
yield. The Portfolios CURRENT YIELD is based on a seven-day period and is
computed by determining the net change (excluding capital changes) in the
value of a hypothetical account having a balance of one share at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from
shareholder accounts, and dividing the difference by the value of the account
at the beginning of the base period. The result is a base period return,
which is then annualized -- that is, the amount of income generated during the
seven-day period is assumed to be generated each week over a 52-week period --
and shown as an annual percentage of the investment.
The EFFECTIVE YIELD of the Portfolio is calculated similarly, but the
base period return is assumed to be reinvested. The assumed reinvestment is
calculated by adding 1 to the
<PAGE>
base period return, raising the sum to a power equal to 365 divided by seven,
and subtracting one from the result, according to the following formula:
365/7
Effective Yield = [(Base Period Return+1)] - 1
For the seven calendar days ended December 31, 1994, the current yield of the
predecessor of the Liquid Asset Portfolio was 4.93%. For the same period, the
effective yield was 5.05%.
Limited Maturity Bond Portfolio and Government Income Portfolio. Each of
these Portfolios may advertise its yield based on a 30-day (or one-month)
period. This YIELD is computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period. The result then is annualized and shown as an annual
percentage of the investment.
The annualized yield for each of the predecessors of the Limited Maturity
Bond Portfolio and the Government Income Portfolio for the 30-day period ended
December 31, 1994 was 6.41% and 5.59%, respectively.
Total Return Computations. (All Portfolios except Liquid Asset and
International).
A Portfolio may advertise certain total return information. An average
annual compounded rate of return ("T") may be computed by using the redeemable
value at the end of a specified period ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of time ("n") according to the
formula:
P (1 + T ) SUP = ERV
The average annual total return smooths out year-to-year variations and, in
that respect, differs from actual year-to-year results. Of course, past
performance cannot be a guarantee of future results. These calculations assume
that all dividends and distributions are reinvested.
The average annual total returns for the predecessor of the Growth
Portfolio for the one-, five-, and ten-year periods ended December 31, 1994,
were -4.99%, 5.77%, and 11.89%, respectively.
The average annual total returns for the predecessor of the Limited
Maturity Bond Portfolio for the one-, five-, and ten-year periods ended
December 31, 1994, were -0.15%, 6.19%, and 7.96%, respectively.
The average annual total returns for the predecessor of the Balanced
Portfolio for the one-year and five-year periods ended December 31, 1994, and
for the period from February 28, 1989 (commencement of operations), through
December 31, 1994, were - 3.36%, 6.81%, and 8.59%, respectively.
The total return for the predecessor of the Partners Portfolio from
March 22, 1994 (commencement of operations) through December 31, 1994 was
- -2.30%.
The total return for the predecessor of the Government Income Portfolio
from March 22, 1994 (commencement of operations) through December 31, 1994 was
1.50%.
<PAGE>
N&B Management has reimbursed certain of the predecessors to the
Portfolios for certain expenses during the periods shown, which has the effect
of increasing total return.
Total returns quoted for the Portfolios include the effect of deducting a
Portfolio's expenses, but may not include charges and expenses attributable to
any particular insurance product. Since you can only purchase shares of a
Portfolio through a variable annuity or variable life insurance contract, you
should carefully review the prospectus of the insurance product you have
chosen for information on relevant charges and expenses. Excluding these
charges from quotations of a Portfolio's performance has the effect of
increasing the performance quoted. You should bear in mind the effect of
these charges when comparing a Portfolio's performance to that of other mutual
funds.
Comparative Information
From time to time a Portfolios performance may be compared with
(1) data (that may be expressed as rankings or ratings) published by
independent services or publications (including newspapers, newsletters, and
financial periodicals) that monitor the performance of mutual funds, such as
Lipper Analytical Services, Inc. (Lipper), C.D.A. Investment Technologies,
Inc. (C.D.A.), Wiesenberger Investment Companies Service (Wiesenberger),
Investment Company Data Inc., Morningstar, Inc. (Morningstar), Micropal
Incorporated, VARDS and quarterly mutual fund rankings by Money, Fortune,
Forbes, Business Week, Personal Investor, and U.S. News & World Report
magazines, The Wall Street Journal, New York Times, Kiplingers Personal
Finance, and Barrons Newspaper, or
(2) recognized stock and other indices, such as the S&P 500 Composite
Stock Price Index (S&P 500 Index"), S&P Small Cap 600 (S&P 600"), S&P Mid Cap
400 (S&P 400"), Russell 2000 Stock Index, Dow Jones Industrial Average (DJIA),
Wilshire 1750, NASDAQ, Value Line Index, U.S. Department of Labor Consumer
Price Index (Consumer Price Index), College Board Survey of Colleges Annual
Increases of College costs, Kanon Blochs Family Performance Index, the Barra
Growth Index, the Barra Value Index, the EAFE Index, the Financial Times World
XUS Index, and various other domestic, international, and global indices. The
S&P 500 Index is a broad index of common stock prices, while the DJIA
represents a narrower segment of industrial companies. The S&P 600 includes
stocks that range in market value from $27 million to $880 million, with an
average of $302 million. The S&P 400 measures mid-sized companies with an
average market capitalization of $1.2 billion. The EAFE Index is an unmanaged
index of common stock prices of more than 900 companies from Europe,
Australia, and the Far East translated into U.S. dollars. The Financial Times
World XUS Index is an index of 24 international markets, excluding the U.S.
market. Each assumes reinvestment of distributions and is calculated without
regard to tax consequences or the costs of investing. The Portfolios invest
in different types of securities from those included in some of these indices.
Evaluations of a Portfolios performance and a Portfolios total return and
comparisons may be used in advertisements and in information furnished to
present and prospective shareholders. The Portfolios may also be compared to
individual asset classes such as common stocks, small cap stocks, or Treasury
bonds, based on information supplied by Ibbotson and Sinquefield.
TRUSTEES AND OFFICERS
The following table sets forth information concerning the trustees and
officers of the Trusts, including their addresses and principal business
experience during the past five years. Some persons named as trustees and
officers also serve in similar capacities for other funds and their
corresponding portfolios, advised by Neuberger & Berman and N&B Management.
<TABLE>
<CAPTION>
<S> <C> <C>
Positions Held with
Name, Address and Age (1) the Trusts Principal Occupation(s) (2)
- -------------------------- -------------------- -------------------------------------
Stanley Egener* Chairman of the Partner of Neuberger & Berman;
Age: 60 Board (Chief President and Director of N&B
Executive Officer) Management; Chairman of the
and Trustee of each Board, Chief Executive Officer,
Trust and Trustee of other mutual funds
for which N&B Management acts
as investment adviser, manager,
or administrator.
Faith Colish Trustee of each Attorney at law, Faith Colish, A
63 Wall Street Trust Professional Corporation.
24th Floor
New York, NY 10005
Age: 59
Walter G. Ehlers Trustee of each Consultant; Director of The Turner
6806 Suffolk Place Trust Corporation, A.B. Chance
Harvey Cedars, NJ 08008 Company, Crescent Jewelry, Inc.
Age: 62 and The China Medical Board
Leslie A. Jacobson Trustee of each Counsel to Fried, Frank, Harris,
Hickory Kingdom Road Trust Shriver & Jacobson, attorneys at
Bedford, NY 10506 law; previously a partner of that
Age: 84 firm.
Robert M. Porter Trustee of each Retired September, 1991;
P.O. Box 33366 Trust Formerly Director of Customer
Kerrville, TX 78029-3366 Relations, Aetna Life & Casualty
Age: 69 Company.
Ruth E. Salzmann Trustee of each Retired; Director of John Deere
1556 Pine Street Trust Insurance Group; Actuarial
Stevens Point, WI 54481 Consultant.
Age: 75
Peter P. Trapp* Trustee of each Consultant; Formerly Vice
777 Ridge Road Trust President, Sentry Insurance a
Stevens Point, WI 54481 Mutual Company, and President
Age: 50 and Chief Operating Officer,
Sentry Investors Life Insurance
Company.
Lawrence Zicklin* President and Partner of Neuberger & Berman;
Age: 59 Trustee of each Director of N&B Management;
Trust President and Trustee of other
mutual funds and portfolios for
which N&B Management acts as
investment adviser, manager, or
administrator.
Daniel J. Sullivan Vice President of Senior Vice President of N&B
Age: 55 each Trust Management since 1992; prior
thereto, Vice President of N&B
Management; Vice President of
other mutual funds for which N&B
Management acts as investment
adviser, manager, or
administrator.
Michael J. Weiner Vice President and Senior Vice President and
Age: 48 Principal Financial Treasurer of N&B Management
Officer of each since 1992; prior thereto, Vice
Trust President and Treasurer of N&B
Management; Vice President and
Principal Financial Officer of other
mutual funds for which N&B
Management acts as investment
adviser, manager, or
administrator.
Claudia A. Brandon Secretary of each Vice President of N&B
Age: 38 Trust Management; Secretary of other
mutual funds for which N&B
Management acts as investment
adviser, manager, or
administrator.
Richard Russell Treasurer and Vice President of N&B Manage
Age: 48 Principal ment since 1993; prior thereto,
Accounting Officer Assistant Vice President of N&B
of each Trust Management; Treasurer or
Assistant Treasurer and Principal
Accounting Officer of other mutual
funds for which N&B Management
acts as investment adviser,
manager, or administrator.
Stacy Cooper-Shugrue Assistant Secretary Assistant Vice President of N&B
Age: 32 of each Trust Management since 1993; prior
thereto, an employee of N&B
Management; Assistant Secretary
of other mutual funds for which
N&B Management acts as
investment adviser, manager, or
administrator.
C. Carl Randolph Assistant Secretary Partner of Neuberger & Berman
Age: 57 of each Trust since 1992; employee thereof
since 1971; Assistant Secretary of
other mutual funds for which N&B
Management acts as investment
adviser, manager, or adminis
trator.
</TABLE>
<PAGE>
_______________________
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the position
shown for at least the last five years.
* Indicates an "interested person" of each Trust within the meaning of the
1940 Act. Messrs. Egener and Zicklin are interested persons by virtue of the
fact that they are officers and directors of N&B Management and partners of
Neuberger & Berman. Mr. Trapp is an interested person by virtue of the fact
that he is an officer of one of the Life Company shareholders of the Trust.
Each Trust's Declaration of Trust provides that it will indemnify the
Trustees and its officers against liabilities and expenses reasonably incurred
in connection with litigation in which they may be involved because of their
offices with the Trust, unless it is adjudicated that they engaged in bad
faith, wilful misfeasance, gross negligence, or reckless disregard of the
duties involved in their offices. In the case of settlement, such
indemnification will not be provided unless it has been determined -- by a
court or other body approving the settlement or other disposition, or by a
majority of disinterested Trustees, based upon a review of readily available
facts, or in a written opinion of independent counsel -- that such officers or
Trustees have not engaged in wilful misfeasance, bad faith, gross negligence,
or reckless disregard of their duties.
Trustees who are not officers or employees of N&B Management, Neuberger &
Berman, BNP-N&B Global, and/or the Life Companies or any of their affiliates
are paid trustees' fees. For the year ended December 31, 1994, a total of
$39,500 in fees was paid to the Trustees as a group by the predecessor to the
Trust. The following table shows 1994 compensation by Trustee.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(1) (2) (3) (4) (5)
Pension or Total
Aggregate Retirement Estimated Compensation
Compensation Benefits Accrued Annual From Trust
Name of Person, From As Part of Trusts Benefits Upon and Fund
Complex
Position Trust Expenses Retirement Paid to Trustees
Stanley Egener, None None None None
Chairman and Trustee
Faith Colish, $ 8,500 None None $ 39,000
Trustee
Walter G. Ehlers, $ 8,000 None None $ 8,000
Trustee
Leslie A. Jacobson, $ 7,500 None None $ 37,500
Trustee
Robert M. Porter, $ 7,500 None None $ 7,500
Trustee
Ruth E. Salzmann, $ 8,000 None None $ 8,000
Trustee
Peter P. Trapp, None None None None
Trustee
Lawrence Zicklin, None None None None
President and Trustee
</TABLE>
<PAGE>
SUBSTANTIAL SHAREHOLDERS
Shares of the Portfolios are issued and redeemed in connection with
investments in and payments under certain variable annuity contracts and
variable life insurance policies (collectively, "Variable Contracts") issued
through separate accounts of life insurance companies (the "Life Companies").
Shares of the Balanced Portfolio are also offered directly to Qualified Plans.
As of March 31, 1995, the separate accounts of the Life Companies were known
to the Board of Trustees and the management of the Trust to own of record all
shares of the Growth, Liquid Asset, Limited Maturity Bond, Partners, and
Government Income Portfolios of the Trust and approximately 1.3% of the shares
of the Balanced Portfolio of the Trust. There were no shareholders of the
International Portfolio as of this same date. A Trustee of the Trust owns a
Variable Contract, the underlying Trust shares of which constitute less than
1% of the total Trust shares issued and outstanding.
As of March 31, 1995, the Liquid Asset Portfolio was controlled by Sentry
Life Insurance Company and Sentry Life Insurance Company of New York through
their share ownership interests in the Liquid Asset Portfolio; the Growth
Portfolio was controlled by Nationwide Life Insurance Company (Nationwide)
through its share ownership interests in the Growth Portfolio; the Limited
Maturity Bond Portfolio was controlled by American Skandia Life Assurance
Corporation (Skandia) and Nationwide through their respective share ownership
interests in the Limited Maturity Bond Portfolio; the Balanced Portfolio was
controlled by Nationwide and Skandia through their respective share ownership
interests in the Balanced Portfolio; the Partners Portfolio was controlled by
Nationwide through its share ownership interests in the Partners Portfolio;
and the Government Income Portfolio was controlled by Security Life of Denver
Insurance Company through its share ownership interests in the Government
Income Portfolio.
INVESTMENT MANAGEMENT, ADVISORY AND ADMINISTRATION SERVICES
ALL PORTFOLIOS AND THEIR CORRESPONDING SERIES (EXCEPT INTERNATIONAL
PORTFOLIO AND ITS CORRESPONDING SERIES)
Because all of the Portfolios net investable assets are invested in
their corresponding Series, the Portfolios do not need an investment manager.
With the exception of AMT International Investments, N&B Management serves as
each Series' investment manager pursuant to a Management Agreement dated as of
May 1, 1995 ("Management Agreement") that was approved by the holders of the
interests in all the Series on April 13, 1994.
The Management Agreement provides in substance that N&B Management will
make and implement investment decisions for the Series in its discretion and
will continuously develop an investment program for each Series's assets. The
Management Agreement permits N&B Management to effect securities transactions
on behalf of each Series through associated persons of N&B Management. The
Management Agreement also specifically permits N&B Management to compensate,
through higher commissions,
<PAGE>
brokers and dealers who provide investment research and analysis to the
Series, but N&B Management has no current plans to do so.
N&B Management provides to each Series, without cost, office space,
equipment, and facilities and personnel necessary to perform executive,
administrative, and clerical functions and pays all salaries, expenses, and
fees of the officers, trustees, and employees of Managers Trust who are
officers, directors, or employees of N&B Management. Two officers of N&B
Management (who also are partners of Neuberger & Berman), who also serve as
directors of N&B Management, presently serve as trustees and officers of the
Trusts. See "Trustees and Officers." N&B Management provides similar
facilities and services to each Portfolio pursuant to an administration
agreement dated May 1, 1995 ("Administration Agreement"). Each Portfolio was
authorized to become subject to the Administration Agreement by vote of the
Trustees on May 26, 1994, and became subject to it on May 1, 1995.
Prior to May 1, 1995, N&B Management provided investment advisory and
administrative services to the predecessor of each Portfolio (except the
International Portfolio) under an Investment Advisory Agreement (Prior
Agreement) with that Portfolio. As compensation for these services, the
predecessors to the Liquid Asset Portfolio and Limited Maturity Bond Portfolio
paid N&B Management a fee at the annual rate of 0.50% of the average daily net
assets of each of the two Portfolios; the predecessor to the Government Income
Portfolio paid N&B Management a fee at the annual rate of 0.60% of the average
daily net assets of the Portfolio; the predecessor to the Balanced Portfolio
paid N&B Management a fee at the annual rate of 0.70% of the average daily net
assets of the Portfolio; and the predecessors to the Growth and Partners
Portfolios paid N&B Management a fee at the rate of 0.70% of the first $250
million of average asset value, 0.675% of the next $250 million of average
asset value, 0.650% of the next $250 million of average asset value, 0.625% of
the next $250 million of average asset value and 0.60% of the average asset
value in excess of $1 billion. The fee rate paid by each predecessor
Portfolio under its Prior Agreement is 0.15% lower than the combined
management and administrative fees paid by the corresponding successor
Portfolio and its corresponding Series under the Management and Administration
Agreements.
The predecessors of each of the Portfolios paid advisory fees for the
years ended December 31, 1992, 1993 and 1994 as follows. For the year ended
December 31, 1992, N&B Management was paid advisory fees as follows: $128,698,
Liquid Asset Portfolio; $1,794,228, Growth Portfolio; $654,873, Limited
Maturity Bond Portfolio; and $382,013, Balanced Portfolio. For the year ended
December 31, 1993, N&B Management was paid advisory fees as follows: $44,324,
Liquid Asset Portfolio; $2,376,645, Growth Portfolio; $1,304,236, Limited
Maturity Bond Portfolio; and $879,956, Balanced Portfolio. For the year ended
December 31, 1994, N&B Management was paid advisory fees as follows: $28,699,
Liquid Asset Portfolio; $2,508,627 Growth Portfolio; $1,806,336, Limited
Maturity Bond Portfolio; $1,217,370, Balanced Portfolio; $4,752, Government
Income Portfolio; and $19,769, Partners Portfolio.
<PAGE>
The Management and Administration Agreements each continue until May 1,
1997 with respect to each Series or Portfolio, respectively. The Management
Agreement is renewable thereafter from year to year with respect to each
Series, so long as its continuance is approved at least annually (1) by the
vote of a majority of Managers Trust's Trustees who are not "interested
persons" of N&B Management or Managers Trust ("Independent Series Trustees"),
cast in person at a meeting called for the purpose of voting on such approval,
and (2) by the vote of a majority of Managers Trust's Trustees or by a 1940
Act majority vote of the outstanding shares in that Series. After the first
two years, the Administration Agreement is renewable from year to year with
respect to a Portfolio, so long as its continuance is approved at least
annually (1) by the vote of a majority of the Portfolio Trustees who are not
"interested persons" of N&B Management or the Trust ("Independent Portfolio
Trustees"), cast in person at a meeting called for the purpose of voting on
such approval, and (2) by the vote of a majority of the Portfolio Trustees or
by a 1940 Act majority vote of the outstanding shares in that Portfolio. The
Management Agreement is terminable with respect to a Series without penalty on
60 days' written notice either by Managers Trust or by N&B Management. The
Administration Agreement is terminable with respect to a Portfolio without
penalty by N&B Management upon at least 120 days' prior written notice to the
Portfolio, and by the Portfolio if authorized by the Portfolio Trustees,
including a majority of the Independent Portfolio Trustees, on at least 30
days' written notice to N&B Management. Each Agreement terminates
automatically if it is assigned.
INTERNATIONAL PORTFOLIO AND ITS CORRESPONDING SERIES
BNP-N&B Global, a partnership jointly owned by Banque Nationale de
Paris ("BNP") and Neuberger & Berman, serves as the investment adviser of the
Series. BNP-N&B Global was organized as a partnership of BNP and Neuberger &
Berman in May, 1994, combining the experience of two long-established firms to
provide advisory services. BNP-N&B Global has its headquarters in New York.
The partnership, which is registered as an investment adviser with the U.S.
Securities and Exchange Commission, was formed to provide asset management
services to institutions and high net worth individuals.
BNP-N&B Global has access to the substantial resources of both BNP and
Neuberger & Berman. Such resources include economic analysis, foreign
exchange analysis, securities analysis and portfolio management.
BNP is one of the largest banks and asset managers in Europe. BNP,
together with its predecessor firms, has engaged in commercial banking since
1848 and is established in 77 countries on six continents and maintains a 25
person global economics department with over 40 financial analysts in London,
Paris, Hong Kong, Frankfurt and Sydney. It operates in all major financial
centers around the world, including the U.S., New York, Chicago, Houston,
Dallas, Miami, San Francisco and Los Angeles.
As of December 31, 1994, BNP had consolidated net equity of approximately
$9 billion. BNP has an AA credit rating from all major credit rating
agencies. The portfolios
<PAGE>
managed by BNP on a discretionary basis accounted for more than $63 billion at
the end of 1993. BNP manages equity, fixed income and balanced assets in all
major markets including France, Europe and Asia. BNP has been selected for
the last two years by Mieux Vivre magazine as the best long-term French
manager based on the results of its French SICAV's (a type of collective
investment fund).
Neuberger & Berman is an investment management firm with headquarters in
New York. The firm's focus is on U.S. fixed income, equity and balanced fund
management. Total assets under management by Neuberger & Berman and its
affiliates were approximately $29 billion as of December 31, 1994. Founded in
1939 to manage portfolios for high net worth individuals, the firm entered the
mutual fund management business in 1950, and began offering active management
for pension funds and institutions in the mid-1970's. Most money managers
that come to the Neuberger & Berman organization have at least fifteen years
of experience. Neuberger & Berman and N&B Management employ experienced
professionals that work in a competitive environment.
Because the Portfolio's net investable assets are invested in the Series,
the Portfolio does not need an investment adviser. BNP-N&B Global serves as
the Series' investment adviser pursuant to an Investment Advisory Agreement
with Managers Trust, on behalf of the Series, dated as of May 1, 1995
("Investment Advisory Agreement").
The Investment Advisory Agreement provides in substance that BNP-N&B
Global will make and implement investment decisions for the Series in its
discretion and will continuously develop an investment program for the
Series's assets. The Investment Advisory Agreement permits BNP-N&B Global to
effect securities transactions on behalf of the Series through associated
persons of BNP-N&B Global. The Investment Advisory Agreement also
specifically permits BNP-N&B Global to compensate, through higher commissions,
brokers and dealers who provide investment research and analysis to the
Series, but BNP-N&B Global has no current plans to do so.
N&B Management provides to the Series office space, equipment, and
facilities and personnel necessary to perform executive, administrative, and
clerical functions and pays all salaries, expenses, and fees of the officers,
trustees, and employees of Managers Trust who are officers, directors, or
employees of N&B Management, pursuant to an Administration Agreement dated May
1, 1995 ("Series Administration Agreement"). Two officers of N&B Management
(who also are partners of Neuberger & Berman), who also serve as directors of
N&B Management, presently serve as trustees and officers of the Trusts. See
"Trustees and Officers." N&B Management also provides similar facilities and
services to the Portfolio pursuant to an administration agreement dated May 1,
1995 ("Portfolio Administration Agreement"). The Portfolio was authorized to
become subject to the Portfolio Administration Agreement by vote of the
Portfolio Trustees on February 28, 1995, and became subject to it on May 1,
1995.
The Investment Advisory Agreement continues as to the Series for a period
of two years after the date the Series became subject thereto. The Investment
Advisory
<PAGE>
Agreement is renewable thereafter from year to year with respect to the
Series, so long as its continuance is approved at least annually (1) by the
vote of a majority of the Series Trustees who are not "interested persons" of
BNP-N&B Global or Managers Trust ("Independent Series Trustees"), cast in
person at a meeting called for the purpose of voting on such approval, and (2)
by the vote of a majority of the Series Trustees or by a 1940 Act majority
vote of the outstanding shares in the Series.
The Series Administration Agreement and the Portfolio Administration
Agreement continue as to the Series and Portfolio, respectively, for a period
of two years after the date the Series or the Portfolio became subject
thereto. After the first two years, the Administration Agreements are
renewable from year to year, so long as their continuance is approved at least
annually (1) by the vote of a majority of the Portfolio or Series Trustees (as
appropriate) who are not "interested persons" of N&B Management, BNP-N&B
Global, or the Trust ("Independent Trustees"), cast in person at a meeting
called for the purpose of voting on such approval, and (2) by the vote of a
majority of the Portfolio or Series (as appropriate) Trustees or by a 1940 Act
majority vote of the outstanding shares in the Portfolio or Series (as
appropriate). The Investment Advisory Agreement is terminable with respect to
the Series without penalty on 60 days' written notice either by Managers Trust
or by BNP-N&B Global. The Administration Agreements are terminable with
respect to the Portfolio or Series (as appropriate) without penalty by N&B
Management upon at least 120 days' prior written notice to the Portfolio or
Series, and by the Series or Portfolio if authorized by the Trustees,
including a majority of the Independent Trustees, on at least 30 days' written
notice to N&B Management. All of the
agreements discussed above will terminate automatically if they are assigned
EXPENSE REIMBURSEMENT
ALL PORTFOLIOS AND THEIR CORRESPONDING SERIES (EXCEPT INTERNATIONAL
PORTFOLIO AND ITS CORRESPONDING SERIES)
As noted in the Prospectus under Management and Administration -
Expenses, N&B Management has voluntarily undertaken to reimburse each
Portfolio for certain operating expenses (including, if necessary, the fees
under the Administration Agreement with respect to the Government Income and
Liquid Asset Portfolios) and its pro rata share of its corresponding Series
operating expenses (including, if necessary, its fees under the Management
Agreement with respect to the Government Income and Liquid Asset Portfolios).
A similar arrangement existed with respect to the predecessors of these
Portfolios. For the year or period ended December 31, 1994, N&B Management
reimbursed the predecessors of the Liquid Asset and Government Income
Portfolios $785 and $11,752, respectively. No reimbursements were necessary
for the years ended December 31, 1993 and 1992 for the predecessor fund of the
Liquid Asset Portfolio.
<PAGE>
INTERNATIONAL PORTFOLIO AND ITS CORRESPONDING SERIES
As noted in the Prospectus under Management and Administration -
Expenses, BNP-N&B Global and N&B Management have each voluntarily undertaken
to reimburse certain operating expenses of AMT International Investments
(BNP-N&B Global) and the International Portfolio (N&B Management),
respectively. The International Portfolio and AMT International Investments
have not yet commenced investment operations.
MANAGEMENT AND CONTROL OF N&B MANAGEMENT
The directors and officers of N&B Management, all of whom have offices at
the same address as N&B Management, are Richard A. Cantor, Chairman of the
Board and director; Stanley Egener, President and director; Theresa A. Havell,
Vice President and director; Irwin Lainoff, director; Marvin C. Schwartz,
director; Lawrence Zicklin, director; Alan R. Dynner, Executive Vice
President; Daniel J. Sullivan, Senior Vice President; Michael J. Weiner,
Senior Vice President and Treasurer; Claudia A. Brandon, Vice President; Clara
Del Villar, Vice President; Mark R. Goldstein, Vice President; Farha-Joyce
Haboucha, Vice President; Michael M. Kassen, Vice President; Josephine P.
Mahaney, Vice President; Lawrence Marx III, Vice President; Ellen Metzger,
Vice President and Secretary; Stephen E. Milman, Vice President; Janet W.
Prindle, Vice President; Richard Russell, Vice President; Kent C. Simons, Vice
President; Frederick Soule, Vice President; Judith M. Vale, Vice President;
Margaret Didi Weinblatt, Vice President; Stephen A. White, Vice President;
Andrea Trachtenberg, Vice President of Marketing; Patrick T. Byrne, Assistant
Vice President; Robert Conti, Assistant Vice President; Stacy Cooper-Shugrue,
Assistant Vice President; Barbara DiGiorgio, Assistant Vice President; Roberta
D'Orio, Assistant Vice President; Lorri Esnard, Assistant Vice President;
Robert Gendelman, Assistant Vice President; Leslie Holliday-Soto, Assistant
Vice President; Carmen G. Martinez, Assistant Vice President; Paul Metzger,
Assistant Vice President; Susan Switzer, Assistant Vice President; Susan
Walsh, Assistant Vice President; Celeste Wischerth, Assistant Vice President;
and Ernest E. Ellis, Assistant Treasurer. Messrs. Cantor, Egener, Lainoff,
Schwartz, Zicklin, Goldstein, Kassen, Marx, MiIman, and Simons and Mmes.
Havell and Prindle are general partners of Neuberger & Berman.
Messrs. Egener and Zicklin are trustees and officers, and Messrs.
Sullivan, Weiner, and Russell and Mmes. Brandon and Cooper-Shugrue are
officers, of each Trust. C. Carl Randolph, a general partner of Neuberger &
Berman, also is an officer of each Trust.
All of the outstanding voting stock in N&B Management is owned by persons
who are also general partners of Neuberger & Berman.
SUB-ADVISER
N&B Management retains Neuberger & Berman, 605 Third Avenue, New York, NY
10158, as a sub-adviser with respect to each Series except the International
Series pursuant to a Sub-Advisory Agreement dated May 1, 1995. The
Sub-Advisory Agreement
<PAGE>
was authorized by the Portfolios predecessors shareholders on August 25, 1994
and was approved by the holders of the interests in each Series on April 13,
1994.
The Sub-Advisory Agreement provides in substance that Neuberger & Berman
will furnish to N&B Management such investment recommendations and research
information, of the same type as Neuberger & Berman from time to time provides
to its partners and employees for use in managing client accounts, as N&B
Management reasonably requests. In this manner, N&B Management expects to
have available to it, in addition to research from other professional sources,
the capability of the research staff of Neuberger & Berman. This research
staff consists of approximately fourteen investment analysts, each of whom
specializes in studying one or more industries, under the supervision of
research partners who are also available for consultation with N&B Management.
The Sub-Advisory Agreement provides that the services rendered by Neuberger &
Berman will be paid for by N&B Management on the basis of the direct and
indirect costs to Neuberger & Berman in connection with those services.
Neuberger & Berman also serves as a sub-adviser for all of the other mutual
funds advised by N&B Management.
The Sub-Advisory Agreement continues until May 1, 1997, and is renewable
from year to year thereafter, subject to approval of its continuance in the
same manner as the Management Agreement. The Sub-Advisory Agreement is
subject to termination, without penalty, with respect to each Series by the
Series Trustees, by a 1940 Act majority vote of the outstanding Series shares,
by N&B Management, or by Neuberger & Berman on not less than 30 nor more than
60 days' written notice. The Sub-Advisory Agreement also terminates
automatically with respect to each Series if it is assigned or if the
Management Agreement terminates with respect to the Series.
Investment Companies Advised
Currently, BNP-N&B Global advises only one other investment company, the
International Portfolio of Global Managers Trust. However, N&B Management, an
affiliate of Neuberger & Berman and the administrator and distributor of the
Portfolios, currently serves as investment adviser or manager of the following
investment companies with aggregate net assets of approximately $7.7 billion,
as of February 28, 1995. Neuberger & Berman acts as sub-adviser to these
investment companies.
<TABLE>
<CAPTION>
<S> <C>
Approximate Net
Assets at
Name February 28, 1995
- ------------------------------------------------------ -----------------------
Neuberger & Berman Cash Reserves . . . . . . . . . $ 304,396,649
Portfolio (investment portfolio for
Neuberger & Berman Cash Reserves)
Neuberger & Berman Government Income . . . . . . $ 9,577,334
Portfolio (investment portfolio for
Neuberger & Berman Government Income
Fund and Neuberger & Berman Government
Income Trust)
Neuberger & Berman Government Money . . . . . . $ 269,087,557
Portfolio (investment portfolio for
Neuberger & Berman Government Money Fund)
Neuberger & Berman Limited Maturity Bond . . . . $ 303,067,739
Portfolio (investment portfolio for
Neuberger & Berman Limited Maturity
Bond Fund and Neuberger & Berman
Limited Maturity Bond Trust)
Neuberger & Berman Ultra Short Bond . . . . . . . . $ 90,730,864
Portfolio (investment portfolio for
Neuberger & Berman Ultra Short Bond
Fund and Neuberger & Berman Ultra Short
Bond Trust)
Neuberger & Berman Municipal Money . . . . . . . . $ 148,377,575
Portfolio (investment portfolio for
Neuberger & Berman Municipal Money Fund)
Neuberger & Berman Municipal Securities . . . . . . $ 42,231,503
Portfolio (investment portfolio for
Neuberger & Berman Municipal Securities Trust)
Neuberger & Berman New York Insured . . . . . . . . $ 11,390,342
Intermediate Portfolio (investment portfolio
for Neuberger & Berman New York Insured
Intermediate Fund)
Neuberger & Berman Genesis Portfolio . . . . . . . . $ 131,759,901
(investment portfolio for Neuberger & Berman
Genesis Fund and Neuberger & Berman
Genesis Trust)
Neuberger & Berman Guardian Portfolio . . . . . . . $ 2,826,811,767
(investment portfolio for Neuberger & Berman
Guardian Fund and Neuberger & Berman
Guardian Trust)
Neuberger & Berman Manhattan Portfolio . . . . . . $ 503,733,536.23
(investment portfolio for Neuberger & Berman
Manhattan Fund and Neuberger & Berman
Manhattan Trust)
International Portfolio* $ 21,000,100
(investment portfolio for Neuberger & Berman
International Fund)
Neuberger & Berman Partners Portfolio . . . . . . . . $ 1,320,074,415
(investment portfolio for Neuberger & Berman
Partners Fund and Neuberger & Berman
Partners Trust)
Neuberger & Berman Focus Portfolio . . . . . . . . $ 673,176,465
(investment portfolio for Neuberger & Berman
Focus Fund and Neuberger & Berman Focus
Trust)
Neuberger & Berman Socially Responsive . . . . . $ 76,214,085
Portfolio (investment portfolio for Neuberger &
Berman Socially Responsive Fund,
Neuberger & Berman NYCDC Socially
Responsive Trust, and Neuberger & Berman
Socially Responsive Trust)
Neuberger & Berman Advisers Management $977,894,845
Trust (six series)
</TABLE>
* International Portfolio is managed by BNP-N&B Global.
In addition, Neuberger & Berman serves as investment adviser to two
investment companies, Plan Investment Fund, Inc. and AHA Investment Fund,
Inc., with assets of $123,248,655 and $105,879,695, respectively, at February
28, 1995.
The investment decisions concerning each Series and the other funds and
portfolios referred to above (collectively, "Other N&B Funds") have been and
will continue to be made independently of one another. In terms of their
investment objectives, most of the Other N&B Funds differ from the Series.
Even where the investment objectives are similar, however, the methods used by
the Other N&B Funds and the Series to achieve their objectives may differ.
There may be occasions when a Series and one or more of the Other N&B
Funds will be contemporaneously engaged in purchasing or selling the same
securities from or to third parties. When this occurs, the transactions will
be averaged as to price and allocated as to amounts in accordance with a
formula considered to be equitable to the funds involved. Although in some
cases this arrangement could have a detrimental effect on the price or volume
of the securities as to a Series, in other cases it is believed that a
Series's ability to participate in volume transactions may produce better
executions for it. In any case, it is the judgment of the Series Trustees
that the desirability of each Series having its advisory arrangements with N&B
Management, or BNP-N&B Global with respect to AMT International Investments,
outweighs any disadvantages that may result from contemporaneous transactions.
The investment results achieved by all of the funds advised by N&B
Management, Neuberger & Berman (as adviser and sub-adviser) and BNP have
varied from one another in the past and are likely to vary in the future.
MANAGEMENT AND CONTROL OF BNP-N&B GLOBAL
The management committee and officers of BNP-N&B Global are Vivien
Levy-Garboua, Chairman and committee member; Richard Allen Cantor, committee
member;
<PAGE>
Georges Chodren de Courcel, committee member; Philipe Bernard, committee
member; Gilles de Vaugrigmeuse, committee member; Jonathan David Lyon,
committee member; Theresa Ann Havell, committee member; Robert Ronald
McComsey, committee member; Martin McKerrow, Chief Executive Officer and
committee member; Felix Rovelli, Senior Vice President and Senior Portfolio
Manager; and Robert Cresci, Assistant Portfolio Manager. Mr. de Courcel is
also a director of BNP. Messrs. Cantor, McComsey and McKerrow, and Ms. Havell
are also partners of Neuberger & Berman.
DISTRIBUTION ARRANGEMENTS
N&B Management serves as the distributor ("Distributor") in connection
with the offering of each Portfolio's shares. In connection with the sale of
its shares, each Portfolio has authorized the Distributor to give only the
information, and to make only the statements and representations, contained in
the Prospectus and this SAI or that properly may be included in sales
literature and advertisements in accordance with the 1933 Act, the 1940 Act,
and applicable rules of self-regulatory organizations. Sales may be made only
by the Prospectus, which may be delivered either personally or through the
mails. The Distributor is the Portfolio's "principal underwriter" within the
meaning of the 1940 Act and, as such, acts as agent in arranging for the sale
of each Portfolio's shares without sales commission or other compensation and
bears all advertising and promotion expenses incurred in the sale of the
Portfolios shares. The Board of Trustees of the Trust has adopted a non-fee
Distribution Plan for each Portfolio of the Trust, which is described in the
Prospectus.
The Trust, on behalf of each Portfolio, and the Distributor are parties
to a Distribution Agreement dated May 1, 1995, that continues until May 1,
1997. The Distribution Agreement may be renewed annually thereafter if
specifically approved by (1) the vote of a majority of the Portfolio Trustees
or a 1940 Act majority vote of the Portfolio's outstanding shares and (2) the
vote of a majority of the Independent Portfolio Trustees, cast in person at a
meeting called for the purpose of voting on such approval. The Distribution
Agreement may be terminated by either party and will automatically terminate
on its assignment, in the same manner as the Management Agreement and the
Investment Advisory Agreement.
ADDITIONAL REDEMPTION INFORMATION
Suspension of Redemptions
The Portfolios are normally open for business each day the NYSE is open
(Business Day). The right to redeem a Portfolio's shares may be suspended or
payment of the redemption price postponed (1) when the NYSE is closed (other
than weekend and holiday closings), (2) when trading on the NYSE is
restricted, (3) when an emergency exists as a result of which disposal by the
Portfolios corresponding Series of securities owned by it is not reasonably
practicable or it is not reasonably practicable for that Series fairly to
determine the value of its net assets, or (4) for such other period as the SEC
may by order permit for the protection of a Portfolio's shareholders; provided
that applicable
<PAGE>
SEC rules and regulations shall govern as to whether the conditions prescribed
in (2) or (3) exist. If the right of redemption is suspended, shareholders
may withdraw their offers of redemption or they will receive payment at the
NAV per share in effect at the close of business on the first Business Day
after termination of the suspension.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Portfolio distributes to its shareholders amounts equal to
substantially all of its proportionate share of its corresponding Series' net
investment income (after deducting expenses incurred directly by the
Portfolio), net capital gains (both long-term and short-term) and, with
respect to all Portfolios except the Liquid Asset Portfolio, net realized
gains from foreign currency transactions, if any. Each Portfolio calculates
its net investment income and NAV as of the close of regular trading on the
NYSE on each Business Day (currently 4:00 p.m. Eastern time). Shares of the
Portfolios begin earning income dividends on the Business Day after the
proceeds of the purchase order have been converted to federal funds and
continue to earn dividends through the Business Day they are redeemed. A
Series' net investment income consists of all income accrued on portfolio
assets less accrued expenses; realized gains and losses are reflected in a
Series' NAV (and, hence, its corresponding Portfolio's NAV) until they are
distributed and are not included in net investment income. With respect to
the Government Income, Growth, Partners, Balanced, Limited Maturity Bond and
International Portfolios, dividends from net investment income and
distributions of net realized capital gains and net realized gains from
foreign currency transactions, if any, normally are paid once annually, in
February. The Liquid Asset Portfolio distributes to its shareholders
substantially all of its share of its corresponding Series net investment
income (net of the Portfolios expenses) and net realized capital gains.
Income dividends are declared daily for the Liquid Asset Portfolio at the time
its NAV is calculated and are paid monthly, and net realized capital gains, if
any, are normally distributed annually in February.
ADDITIONAL TAX INFORMATION
Taxation of the Portfolios
In order to continue to qualify for treatment as a RIC under the Internal
Revenue Code of 1986, as amended (Code), each Portfolio must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income, net short-term
capital gain, and, with respect to all Portfolios except the Liquid Asset
Portfolio, net gains from certain foreign currency transactions)
("Distribution Requirement") and must meet several additional requirements.
With respect to each Portfolio, these requirements include the following: (1)
the Portfolio must derive at least 90% of its gross income each taxable year
from dividends, interest, payments with respect to securities loans, and gains
from the sale or other disposition of securities or foreign currencies, or
other income (including gains from options, futures, and forward contracts
(collectively, "Hedging Instruments")) derived with respect to its business of
investing in securities or those currencies ("Income Requirement"); (2) the
Portfolio must derive less than 30% of its gross income each taxable year from
the sale or other disposition of securities, or any of the following, that
were held for less than three months -- Hedging Instruments (other than those
on foreign currencies), or foreign currencies (or Hedging Instruments thereon)
that are not directly related to the Portfolio's principal business of
investing in securities (or options and futures with respect thereto)
("Short-Short Limitation"); and (3) at the close of each quarter of the
Portfolio's taxable year, (i) at least 50% of the value of its total assets
must be represented by cash and cash items, U.S. Government securities, and
other securities limited, in respect of any one issuer, to an amount that does
not exceed 5% of the value of the Portfolio's total assets and does not
represent more than 10% of the issuer's outstanding voting securities, and
(ii) not more than 25% of the value of its total assets may be invested in
securities (other than U.S. Government securities) of any one issuer.
Certain funds managed by N&B Management have received a ruling from the
Internal Revenue Service (Service) that each such fund, as an investor in a
corresponding series of an open-end management investment company (in a
master/feeder fund structure similar to that involving the Portfolios and the
Series), will be deemed to own a proportionate share of the series assets and
income for purposes of determining whether the fund satisfies the requirements
described above to qualify as a RIC. Although this ruling may not be relied
on as precedent by the Portfolios and the Series, N&B Management believes that
the reasoning thereof, and hence this conclusion, applies to them as well.
The Trust and Managers Trust, on behalf of each Portfolio and Series, have
applied to the Service for a similar ruling.
See the next section for a discussion of the tax consequences to the
Portfolios of distributions to them from the Series, investments by the Series
in certain securities, and (except for AMT Liquid Asset Investments) hedging
transactions engaged in by the Series.
Taxation of the Series
Certain portfolios managed by N&B Management have received rulings from
the Service to the effect that, among other things, each such portfolio will
be treated as a separate partnership for federal income tax purposes and will
not be a "publicly traded partnership." Although these rulings may not be
relied on as precedent by the Series, BNP-N&B Global and N&B Management
believe the reasoning thereof, and hence this conclusion, apply to the Series
as well. As a result, no Series will be subject to federal income tax;
instead, each investor in a Series, such as a Portfolio, will be required to
take into account in determining its federal income tax liability its share of
the Series' income, gains, losses, deductions, and credits, without regard to
whether it has received any cash distributions from the Series. The Trust and
Managers Trust, on behalf of each Series, have applied to the Service for a
private letter ruling to the same effect with respect to the Series. A Series
also will not be subject to Delaware or New York income or franchise tax.
Because, as noted above, each Portfolio will be deemed to own a
proportionate share of its corresponding Series' assets and income for
purposes of determining whether
<PAGE>
the Portfolio satisfies the requirements to qualify for treatment as a RIC,
each Series intends to conduct its operations so that its corresponding
Portfolio will be able to satisfy all those requirements.
Distributions to a Portfolio from its corresponding Series (whether
pursuant to a partial or complete withdrawal or otherwise) will not result in
the Portfolio's recognition of any gain or loss for federal income tax
purposes, except that (1) gain will be recognized to the extent any cash that
is distributed exceeds the Portfolio's basis for its interest in the Series
before the distribution, (2) income or gain will be recognized if the
distribution is in liquidation of the Portfolio's entire interest in the
Series and includes a disproportionate share of any unrealized receivables
held by the Series, (3) loss will be recognized if a liquidation distribution
consists solely of cash and/or unrealized receivables and (4) gain (and, in
certain situations, loss) may be recognized on an in-kind distribution by the
Portfolios. A Portfolio's basis for its interest in its corresponding Series
generally will equal the amount of cash and the basis of any property the
Portfolio invests in the Series, increased by the Portfolio's share of the
Series' net income and gains and decreased by (a) the amount of cash and the
basis of any property the Series distributes to the Portfolio and (b) the
Portfolio's share of the Series' losses.
Dividends and interest received by a Series may be subject to income,
withholding, or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between
certain countries and the United States may reduce or eliminate these foreign
taxes, however, and foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
AMT Balanced, Growth, Partners, and International Investments may invest
in the stock of "passive foreign investment companies" ("PFICs"). A PFIC is a
foreign corporation that, in general, meets either of the following tests:
(1) at least 75% of its gross income is passive or (2) an average of at least
50% of its assets produce, or are held for the production of, passive income.
Under certain circumstances, if a Series holds stock of a PFIC, its
corresponding Portfolio (indirectly through its interest in the Series) will
be subject to federal income tax on a portion of any "excess distribution"
received on the stock or of any gain on disposition of the stock
(collectively, "PFIC income"), plus interest thereon, even if the Portfolio
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Portfolio's investment
company taxable income and, accordingly, will not be taxable to it to the
extent that income is distributed to its shareholders.
If a Series invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund," then in lieu of its corresponding Portfolio's
incurring the foregoing tax and interest obligation, the Portfolio would be
required to include in income each year its pro rata share of the Series' pro
rata share of the qualified electing fund's annual ordinary earnings and net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) -- which most likely would have to be distributed by the
Portfolio to satisfy the Distribution Requirement -- even if those earnings
and gain were not received by the Series. In most
<PAGE>
instances it will be very difficult, if not impossible, to make this election
because of certain requirements thereof.
The "Tax Simplification and Technical Corrections Bill of 1993," passed
in May 1994 by the House of Representatives, would have substantially modified
the taxation of U.S. shareholders of foreign corporations, including
eliminating the provisions described above dealing with PFICS and replacing
them (and other provisions) with a regulatory scheme involving entities called
"passive foreign corporations." Three similar bills were passed by Congress
in 1991 and 1992 and vetoed. It is unclear at this time whether, and in what
form, the proposed modifications may be enacted into law.
Pursuant to proposed regulations, open-end RICs, such as the Portfolios,
would be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each
taxable year the excess, as of the end of that year, of the fair market value
of each such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
The use by the Series (except AMT Liquid Asset Investments) of hedging
strategies, such as writing (selling) and purchasing Futures Contracts and
options and entering into forward contracts, involves complex rules that will
determine for income tax purposes the character and timing of recognition of
the gains and losses they realize in connection therewith. Income from
foreign currencies (except certain gains therefrom that may be excluded by
future regulations), and income from transactions in Hedging Instruments
derived by a Series with respect to its business of investing in securities or
foreign currencies, will qualify as permissible income for its corresponding
Portfolio under the Income Requirement. However, income from the disposition
by a Series of options and Futures Contracts (other than those on foreign
currencies) will be subject to the Short-Short Limitation for its
corresponding Portfolio if they are held for less than three months. Income
from the disposition of foreign currencies, and Hedging Instruments thereon,
that are not directly related to a Series' principal business of investing in
securities (or options and Futures with respect thereto) also will be subject
to the Short-Short Limitation for its corresponding Portfolio if they are held
for less than three months.
If a Series (except AMT Liquid Asset Investments) satisfies certain
requirements, any increase in value of a position that is part of a
"designated hedge" will be offset by any decrease in value (whether realized
or not) of the offsetting hedging position during the period of the hedge for
purposes of determining whether its corresponding Portfolio satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. A
Series will consider whether it should seek to qualify for this treatment for
its hedging transactions. To the extent a Series does not so qualify, it may
be forced to defer the closing out of certain Hedging Instruments beyond the
time when it otherwise would be advantageous to do so, in order for its
corresponding Portfolio to continue to qualify as a RIC.
<PAGE>
Exchange-traded Futures Contracts and listed options thereon constitute
"Section 1256 Contracts." Section 1256 Contracts are required to be
"marked-to-market" (that is, treated as having been sold at market value) at
the end of a Series' taxable year. Sixty percent of any gain or loss
recognized as a result of these "deemed sales," and 60% of any net realized
gain or loss from any actual sales, of Section 1256 contracts are treated as
long-term capital gain or loss, and the remainder is treated as short-term
capital gain or loss.
AMT Limited Maturity Bond Investments may invest in municipal bonds that
are purchased with market discount (that is, at a price less than the bonds
principal amount or, in the case of a bond that was issued with original issue
discount (OID), a price less than the amount of the issue price plus accrued
OID) (municipal market discount bonds). If a bonds market discount is less
than the product of (1) 0.25% of the redemption price at maturity times (2)
the number of complete years to maturity after the taxpayer acquired the bond,
then no market discount is considered to exist. Gain on the disposition of a
municipal market discount bond purchased by the Series after April 30, 1993
(other than a bond with a fixed maturity date within one year from its
issuance), generally is treated as ordinary (taxable) income, rather than
capital gain, to the extent of the bonds accrued market discount at the time
of disposition. Market discount on such a bond generally is accrued ratably,
on a daily basis, over the period from the acquisition date to the date of
maturity. In lieu of treating the disposition gain as above, the Series may
elect to include market discount in its gross income currently, for each
taxable year to which it is attributable.
AMT Partners and AMT Government Income Investments each may acquire zero
coupon or other securities issued with OID. As the holder of those
securities, each Series (and, through it, its corresponding Portfolio) must
take into account the OID that accrues on the securities during the taxable
year, even if no corresponding payment on the securities is received during
the year. Because each Portfolio annually must distribute substantially all
of its income (including its share of its corresponding Series accrued OID) in
order to satisfy the Distribution Requirement, it may be required in a
particular year to distribute as a dividend an amount that is greater than its
share of the total amount of cash its corresponding Series actually receives.
Those distributions will be made from a Portfolios (or its share of its
corresponding Series) cash assets or, if necessary, from the proceeds of the
Series sales of portfolio securities. A Series may realize capital gains or
losses from those sales, which would increase or decrease its corresponding
Series investment company taxable income and/or net capital gain. In addition,
any such gains may be realized on the disposition of securities held for less
than three months. Because of the Short-Short Limitation, any such gains would
reduce a Series ability to sell other securities or Hedging Instruments held
for less than three months that it might wish to sell in the ordinary course
of its portfolio management.
<PAGE>
VALUATION OF PORTFOLIO SECURITIES
The Liquid Asset Portfolio relies on Rule 2a-7 under the 1940 Act to use
the amortized cost method of valuation to stabilize the purchase and
redemption price of its shares at $1.00 per share. This method involves the
corresponding Series valuing portfolio securities at their cost at the time of
purchase and thereafter assuming a constant amortization (or accretion) to
maturity of any premium (or discount), regardless of the impact of interest
rate fluctuations on the market value of the securities. The Liquid Asset
Series uses that valuation method to try to enable its corresponding Portfolio
to so stabilize those prices. Although the Portfolios reliance on Rule 2a-7
and the Series use of that valuation method should enable the Portfolio, under
most conditions, to maintain a stable $1.00 share price, there can be no
assurance they will be able to do so. An investment in the Liquid Asset
Portfolio is neither insured nor guaranteed by the U.S. Government.
AMT International Investments invests primarily in securities of foreign
issuers which are traded on foreign exchanges or in other foreign markets.
Foreign securities may trade on days when the NYSE is closed, such as
Saturdays and U.S. national holidays. However, the International Portfolio's
net asset value ("NAV") will be determined only on the days when the NYSE is
open for trading. Therefore, the International Portfolio's NAV may be
significantly affected by such foreign trading on days when shareholders have
no access to redeem or purchase shares of the Portfolio.
PORTFOLIO TRANSACTIONS
ALL SERIES (EXCEPT AMT INTERNATIONAL INVESTMENTS)
Neuberger & Berman acts as each Seriess principal broker in the purchase
and sale of portfolio securities and in connection with the writing of covered
call options on their securities. Transactions in portfolio securities for
which Neuberger & Berman serves as broker will be effected in accordance with
Rule 17e-1 under the 1940 Act.
Purchases and sales of portfolio securities generally are transacted with
the issuers, underwriters, or dealers serving as primary market-makers acting
as principals for the securities on a net basis. The Series usually do not
pay brokerage commissions for such purchases and sales. Instead, the price
paid for newly issued securities usually includes a concession or discount
paid by the issuer to the underwriter, and transactions placed through dealers
serving as market-makers reflect a spread between the bid and the asked prices
from which the dealer derives a profit.
In purchasing and selling portfolio securities other than as described
above (for example, in the secondary market), each Series policy is to seek
best execution at the most favorable prices through responsible broker-dealers
and, in the case of agency transactions, at competitive commission rates. In
selecting broker-dealers to execute transactions, N&B Management considers
such factors as the price of the security, the rate of commission, the size
and difficulty of the order, the reliability, integrity, financial
<PAGE>
condition, and general execution and operational capabilities of competing
broker-dealers, and may consider the brokerage and research services they
provide to the Series or N&B Management. Under certain conditions, a Series
may pay higher brokerage commissions in return for brokerage and research
services, although no Series has a current arrangement to do so. In any case,
each Series may effect principal transactions with a dealer who furnishes
research services, designate any dealer to receive selling concessions,
discounts, or other allowances, or otherwise deal with any dealer in
connection with the acquisition of securities in underwritings.
AMT INTERNATIONAL INVESTMENTS
Neuberger & Berman and BNP-International Financial Services Corporation
(BNP-International) may act as brokers for AMT International Investments in
the purchase and sale of portfolio securities and in the purchase and sale of
options, and for those services would receive brokerage commissions.
ALL SERIES
During the years ended December 31, 1994, 1993 and 1992, the Growth
Portfolios predecessor paid total brokerage commissions of $410,537, $853,501
and $510,619 respectively, of which $321,277, $707,176 and $393,283
respectively were paid to Neuberger & Berman. Transactions in which that
predecessor used Neuberger & Berman as broker comprised 83.4% and 86.4%
respectively of the aggregate dollar amount of transactions involving the
payment of commissions, and 78.3% and 82.9% respectively of the aggregate
brokerage commissions paid by it during the years ended December 31, 1994 and
1993. 87.1% of the $89,260 paid to other brokers by that Portfolio during the
year ended December 31, 1994 (representing commissions on transactions
involving approximately $33,414,132) and 97.5% of the $146,325 paid to other
brokers by that Portfolio during the year ended December 31, 1993
(representing commissions on transactions involving approximately $68,277,651)
was directed to those brokers because of research services they provided.
During the year ended December 31, 1994, the predecessor acquired securities
of the following of its Regular B/Ds: Morgan Stanley Group, Exxon Credit Corp.
and General Electric Capital; at that date, that predecessor held the
securities of its Regular B/Ds with an aggregate value as follows: Morgan
Stanley Group - $4,425,000.
During the years ended December 31, 1994, 1993 and 1992, the Balanced
Portfolios predecessor paid total brokerage commissions of $135,836, $228,483
and $131,222 respectively, of which $107,420, $190,263 and $112,862
respectively were paid to Neuberger & Berman. Transactions in which that
predecessor used Neuberger & Berman as broker comprised 82.9% and 87.3%
respectively of the aggregate dollar amount of transactions involving the
payment of commissions, and 79.1% and 83.3% respectively of the aggregate
brokerage commissions paid by it during the years ended December 31, 1994 and
1993. 85.5% of the $28,416 paid to other brokers by that Portfolio during the
year ended December 31, 1994 (representing commissions on transactions
<PAGE>
involving approximately $10,593,478) and 98.9% of the $38,220 paid to other
brokers by that Portfolio during the year ended December 31, 1993
(representing commissions on transactions involving approximately $16,209,987)
was directed to those brokers because of research services they provided.
During the year ended December 31, 1994, the predecessor acquired securities
of the following of its Regular B/Ds: Exxon Credit Corp., General Electric
Capital Corp. and Merrill Lynch & Co., Inc. ; at that date, that predecessor
held the securities of its Regular B/Ds with an aggregate value as follows:
Morgan Stanley Group - $1,475,000, General Electric Capital Corp. - $516,000.
During the period March 22, 1994 to December 31, 1994, the Partners
Portfolios predecessor paid total brokerage commissions of $27,115, of which
$26,321 was paid to Neuberger & Berman. Transactions in which that
predecessor used Neuberger & Berman as broker comprised 97.4% of the aggregate
dollar amount of transactions involving the payment of commissions, and 97.1%
of the aggregate brokerage commissions paid by it during the period ended
December 31, 1994. 91.5% of the $794 paid to other brokers by that Portfolio
during the period ended December 31, 1994 (representing commissions on
transactions involving approximately $275,017) was directed to those brokers
because of research services they provided. During the period ended December
31, 1994, the predecessor acquired securities of the following of its Regular
B/Ds: General Electric Capital Corp. and Exxon Credit Corp.; at that date,
that predecessor held the securities of its Regular B/Ds with an aggregate
value as follows: General Electric Capital Corp. - $440,000.
During the year ended December 31, 1994, the Liquid Asset Portfolios
predecessor acquired securities of the following of its Regular B/Ds: General
Electric Capital Corp. Goldman, Sachs Group L.P. and Merrill Lynch & Co.,
Inc.; at that date that predecessor did not own any securities of its Regular
B/Ds.
During the year ended December 31, 1994, the Limited Maturity Bond
Portfolios predecessor acquired securities of the following of its Regular
B/Ds: Goldman, Sachs Group L.P. and Merrill Lynch & Co., Inc.; at that date
that predecessor did not own any securities of its Regular B/Ds.
During the period March 22, 1994 to December 31, 1994, the Government
Income Portfolios predecessor did not own any securities of its Regular B/Ds.
Insofar as portfolio transactions of AMT Partners Investments result from
active management of equity securities, and insofar as portfolio transactions
of AMT Growth Investments result from seeking capital appreciation by selling
securities whenever sales are deemed advisable without regard to the length of
time the securities may have been held, it may be expected that the aggregate
brokerage commissions paid by those Series to brokers (including Neuberger &
Berman where it acts in that capacity) may be greater than if securities were
selected solely on a long-term basis.
<PAGE>
Portfolio securities are from time to time loaned by AMT Growth, Partners
and International Investments to Neuberger & Berman in accordance with the
terms and conditions of an order issued by the Securities and Exchange
Commission, excepting such transactions from certain provisions of the 1940
Act which would otherwise prohibit such transactions, subject to certain
conditions. Among the conditions of the order, securities loans made by each
Series to Neuberger & Berman must be fully secured by cash collateral. Under
the order, the portion of the income on cash collateral from securities loans
involving Neuberger & Berman which may be shared with that firm is determined
with reference to the concurrent arrangements between Neuberger & Berman and
other non-affiliated lenders with which it engages in similar transactions.
In addition, where Neuberger & Berman borrows securities from a Series in
order to relend them to others, Neuberger & Berman is required to pay over to
the Series, on a quarterly basis, certain excess earnings that Neuberger &
Berman otherwise has derived from the relending of securities borrowed from
the Series. When Neuberger & Berman desires to borrow a security which a
Series has indicated a willingness to lend, Neuberger & Berman must borrow
such security from the Series rather than from an unaffiliated lender unless
an unaffiliated lender is willing to lend such security on more favorable
terms (as specified in the order) than the Series. If a Series expenses
exceed its income in any securities loan transaction with Neuberger & Berman,
Neuberger & Berman must reimburse the Portfolio for such loss.
Each Series may also lend securities to unaffiliated entities, including
brokers or dealers, banks and other recognized institutional borrowers of
securities, provided that cash or equivalent collateral, equal to at least
100% of the market value of the securities loaned, is continuously maintained
by the borrower with the Series. During the time securities are on loan, the
borrower will pay the Series an amount equivalent to any dividends or interest
paid on such securities, and the Series may invest the cash collateral and
earn income, or it may receive an agreed upon amount of interest income from
the borrower who has delivered equivalent collateral. These loans are subject
to termination at the option of the Series or the borrower. The Series may
pay reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker. The Series does not have the
right to vote securities on loan, but would terminate the loan and regain the
right to vote if that were considered important with respect to the
investment.
In effecting securities transactions, each Series generally seeks to
obtain the best price and execution of orders. Commission rates, being a
component of price, are considered along with other relevant factors. Each
Series may use Neuberger & Berman and BNP-International as broker where, in
the judgment of N&B Management, or BNP-N&B Global with respect to AMT
International Investments, (which are affiliated with Neuberger & Berman and
BNP-International), the firm is able to obtain a price and execution at least
as favorable as other qualified brokers. To the Series' knowledge, however,
no affiliate of any Series receives give-ups or reciprocal business in
connection with its securities transactions. All brokerage transactions with
Neuberger & Berman (or
<PAGE>
any other affiliated broker-dealer) will be conducted in accordance with Rule
17e-1 under the 1940 Act.
The use of either Neuberger & Berman or BNP-International as a broker
(these brokers may collectively be referred to hereinafter as Affiliated
Brokers) for a Series is subject to the requirements of Section 11(a) of the
Securities Exchange Act of 1934 ("Section 11(a)"). Section 11(a) prohibits
members of national securities exchanges from executing exchange transactions
for accounts which they or their affiliates manage, except in situations where
they have obtained the express authorization of the persons authorized to
transact business for the account and comply with certain annual reporting
requirements. The Board of Trustees of the Series has expressly authorized
the Affiliated Brokers to execute exchange transactions for the Series, and
the Affiliated Brokers comply with the reporting requirements of Section
11(a).
Under the 1940 Act, commissions paid by a Series to an Affiliated Broker
in connection with a purchase or sale of securities offered on a securities
exchange may not exceed the usual and customary broker's commission.
Accordingly, it is each Series' policy that the commissions to be paid to an
Affiliated Broker must, in N&B Managements judgment or, with respect to AMT
International Investments, in BNP-N&B Global's judgment, be (1) at least as
favorable as those that would be charged by other brokers having comparable
execution capability and (2) at least as favorable as commissions
contemporaneously charged by the Affiliated Broker on comparable transactions
for its most favored unaffiliated customers, except for accounts for which the
Affiliated Broker acts as a clearing broker for another brokerage firm and
customers of the Affiliated Broker considered by a majority of the Independent
Series Trustees not to be comparable to the Series. The Series do not deem it
practicable and in their best interest to solicit competitive bids for
commissions on each transaction. However, consideration regularly is given to
information concerning the prevailing level of commissions charged on
comparable transactions by other brokers during comparable periods of time.
The 1940 Act generally prohibits an Affiliated Broker from acting as principal
in the purchase or sale of securities for a Series's account, unless an
appropriate exemption is available.
A committee of Independent Series Trustees from time to time reviews,
among other things, information relating to the commissions charged by an
Affiliated Broker to the Series and to its other customers and information
concerning the prevailing level of commissions charged by other brokers having
comparable execution capability. In addition, the procedures pursuant to
which an Affiliated Broker effects brokerage transactions for the Series must
be reviewed and approved no less often than annually by a majority of the
Independent Series Trustees.
Each Series expects that it will continue to execute a portion of its
transactions through brokers other than an Affiliated Broker. In selecting
those brokers, N&B Management, and with respect to AMT International
Investments, BNP-N&B Global will consider the quality and reliability of
brokerage services, including execution capability and performance and
financial responsibility, and may consider the research and other
<PAGE>
investment information provided by those brokers, and the willingness of
particular brokers to sell the Variable Contracts issued by the Life
Companies.
A committee, comprised of N&B Management officers and partners of
Neuberger & Berman who are portfolio managers of some of the Series and Other
N&B Funds (collectively, N&B Funds) and some of Neuberger & Bermans managed
accounts (Managed Accounts) and, with respect to AMT International
Investments, the Series' portfolio manager, evaluates semi-annually the nature
and quality of the brokerage and research services provided by other brokers
and, based on this evaluation, establishes a list and projected ranking of
preferred brokers for use in determining the relative amounts of commissions
to be allocated to those brokers. Ordinarily the brokers on the list effect a
large portion of the brokerage transactions for the N&B Funds and the Managed
Accounts that are not effected by an Affiliated Broker. However, in any
semi-annual period, brokers not on the list may be used, and the relative
amounts of brokerage commissions paid to the brokers on the list may vary
substantially from the projected rankings. These variations reflect the
following factors, among others: (1) brokers not on the list or ranking below
other brokers on the list may be selected for particular transactions because
they provide better price and/or execution, which is the primary consideration
in allocating brokerage; and (2) adjustments may be required because of
periodic changes in the execution or research capabilities of particular
brokers, or in the execution or research needs of the N&B Funds and/or the
Managed Accounts; and (3) the aggregate amount of brokerage commissions
generated by transactions for the N&B Funds and the Managed Accounts may
change substantially from one semi-annual period to the next.
The commissions charged by a broker other than an Affiliated Broker may
be greater than the amount another firm might charge if N&B Management, or
with respect to AMT International Investments, BNP-N&B Global, determines in
good faith that the amount of those commissions is reasonable in relation to
the value of the brokerage and research services provided by the broker. N&B
Management, or with respect to AMT International Investments, BNP-N&B Global,
believes that those research services provide the Series with benefits by
supplementing the research otherwise available to them. That research
information may be used by BNP-N&B Global, Neuberger & Berman, BNP and N&B
Management in servicing their respective funds and, in some cases, by
Neuberger & Berman in servicing the Managed Accounts. On the other hand,
research information received by N&B Management, or with respect to AMT
International Investments, by BNP-N&B Global from brokers effecting portfolio
transactions on behalf of the Other N&B Funds and by Neuberger & Berman from
brokers executing portfolio transactions on behalf of the Managed Accounts may
be used for the Series' benefit.
Theresa A. Havell, Mark R. Goldstein and Michael M. Kassen, each of whom
is a general partner of Neuberger & Berman and a Vice President of N&B
Management (and, with respect to Ms. Havell, also a director of N&B
Management), and Josephine P. Mahaney, Margaret Didi Weinblatt, Stephen A.
White and Robert I. Gendelman, each of whom is an employee of Neuberger &
Berman and an Assistant Vice President of N&B Management, are the persons
primarily responsible for making decisions as to specific
<PAGE>
action to be taken with respect to the investment portfolios of the Series
(except AMT International Investments). Each of them has full authority to
take action with respect to portfolio transactions and may or may not consult
with other personnel of N&B Management prior to taking such action.
Felix Rovelli, a Senior Vice President and Senior Portfolio Manager of
BNP-N&B Global, is the person primarily responsible for making decisions as to
specific action to be taken with respect to the Series. He has full authority
to take action with respect to portfolio transactions and may or may not
consult with other personnel of BNP-N&B Global prior to taking such action.
Portfolio Turnover
The portfolio turnover rate is the lesser of the cost of the securities
purchased or the value of the securities sold, excluding all securities,
including options, whose maturity or expiration date at the time of
acquisition was one year or less, divided by the average monthly value of such
securities owned during the year.
REPORTS TO SHAREHOLDERS
Shareholders of each Portfolio receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the
independent auditors for the Portfolio and for its corresponding Series. Each
Portfolios report shows the investments owned by its corresponding Series and
the market values thereof and provides other information about the Portfolio
and its operations. In addition, the report contains the Portfolios financial
statements, including the Portfolios beneficial interest in its corresponding
Series.
CUSTODIAN
Each Portfolio and Series has selected State Street Bank and Trust
Company ("State Street"), 225 Franklin Street, Boston, Massachusetts 02110
as custodian for its securities and cash.
INDEPENDENT AUDITORS
Each Portfolio and Series has selected Ernst & Young LLP, 200 Clarendon
Street, Boston MA 02216 as the independent auditors who will audit its
financial statements.
LEGAL COUNSEL
Each Portfolio and Series has selected Blazzard, Grodd & Hasenauer, P.C.,
943 Post Road East, Westport, Connecticut 06880 as legal counsel.
<PAGE>
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included
in the Trust's registration statement filed with the SEC under the 1933 Act
with respect to the securities offered by the Prospectus. Certain portions of
the registration statement have been omitted pursuant to SEC rules and
regulations. The registration statement, including the exhibits filed
therewith, may be examined at the SEC's offices in Washington, D.C.
Statements contained in this SAI and in the Prospectus as to the contents
of any contract or other document referred to are not necessarily complete,
and in each instance reference is made to the copy of the contract or other
document filed as an exhibit to the registration statement, each such
statement being qualified in all respects by such reference.
<PAGE>
Appendix A
RATINGS OF SECURITIES
S&P corporate bond ratings:
AAA - Bonds rated AAA have the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds
in this category than for bonds in higher rated categories.
BB, B, CCC, CC, C - Bonds rated BB, B, CCC, CC, and C are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
PLUS (+) OR MINUS (-) - The ratings above may be modified by the addition
of a plus or minus sign to show relative standing within the major categories.
Moody's corporate bond ratings
AAA - Bonds rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or an exceptionally stable
margin, and principal is secure. Although the various protective elements are
likely to change, the changes that can be visualized are most unlikely to
impair the fundamentally strong position of the issuer.
<PAGE>
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as "high
grade bonds." They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa-rated securities, fluctuation of
protective elements may be of greater amplitude, or there may be other
elements present that make the long-term risks appear somewhat larger than in
Aaa-rated securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
that suggest a susceptibility to impairment sometime in the future.
BAA - Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
BA - Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
CA - Bonds rated Ca represent obligations that are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C - Bonds rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
MODIFIERS - Moody's may apply numerical modifiers 1, 2, and 3 in each
generic rating classification described above. The modifier 1 indicates that
the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that
the issuer ranks in the lower end of its generic rating category.
<PAGE>
S&P commercial paper ratings
A-1 - This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+).
Moody's commercial paper ratings
Issuers rated Prime-1 (or related supporting institutions), also known as
P-1, have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics:
- -Leading market positions in well-established industries.
- -High rates of return on funds employed.
- -Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
- -Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- -Well-established access to a range of financial markets and assured sources
of alternate liquidity.
<PAGE>
Appendix B
ROY NEUBERGER'S ALMANAC
RULE #1: Be flexible. My philosophy has
necessarily changed from time to time
because of events and because of mistakes.
My views change as economic, political, and
technological changes occur both on and
sometimes off our planet. It is imperative
that you be willing to change your thoughts
to meet new conditions.
RULE #2: Take your temperament into account.
Recognize whether you are by nature very
speculative or just the opposite fearful,
timid of taking risks. But in any event
RULE #3: Be broad-gauged. Diversify your
investments, make sure that some of your
principal is kept safe, and try to increase
your income as well as your capital.
RULE #4: Always remember there are many ways
to skin a cat! Ben Graham did it by
understanding basic values, Ben Smith did it
by knowing when and how to sell short, T.
Rowe Price appreciated the importance of the
growth of new industries; each was
successful in his own way. But to be
successful, remember to
RULE #5: Be skeptical. To repeat a few well-worn useful phrases:
A. Dig for yourself.
B. Be from Missouri.
C. There's a sucker born every minute.
(Compliments of P.T. Barnum.)
A FEW THOUGHTS ABOUT TIMING
By timing, I mean when is it a good time to
get in the market to buy; and when is it a
good time to get out, stay out that is, to
sell. Timing may not be everything, but it's
an awful lot. The best long-term investment
can look terrible for years ahead if you buy
at the wrong time. And sometimes you can
<PAGE>
make money in highly speculative stocks by
buying at the right moment. The very best
security analysts can do well without
following market trends, but it's a lot
easier to work with them.
A speculator or investor is often successful
because he is willing to commit large sums
on the buy side when the market is very weak
and he gets a lot of securities for his
money. On the opposite side he creates his
eventual buying power by having the guts to
sell in the very strong markets where you
sell comparatively few securities for high
prices and get large sums. That's a very
simple principle. I've used the word "guts,"
but it's really more a matter of sticking to
a common sense viewpoint.
Timing is partly intuitive, partly contrary,
and requires independence in thinking. Over
U.S. financial history there have been a
host of both bull and bear markets. Often
the uptrend occurs during a business cycle
downtrend and declines come in periods of
full prosperity. Paul Samuelson wrote, "The
stock market has forecast eight of the last
three recessions." True enough, and
intuition then becomes temporarily as
important as analytic security knowledge.
Remember, too, that timing is delicate,
sometimes exquisite. To go short the right
stock at the wrong time (on the way up) may
be horrendously expensive ask those who went
short Litton, Teleprompter, Levitz
Furniture, Memorex, and many others rightly
but too soon. I knew a man once who lost his
shirt selling short in the summer of 1929;
he didn't have the reserves to hold out
until autumn.
Bull markets tend to be longer than bear
markets, and prices tend to go up more
slowly or erratically than they go down.
<PAGE>
Bear markets tend to be shorter, more
severe, more intense. But the market does
have certain fairly consistent habits.
Rarely do the market and business rise
concurrently for more than six months.
Rarely do they decline together longer than
six months.
INTEREST RATES AND THE MONEY SUPPLY
Of all the tools for market trend
predicting, no single tool is more important
than the trend of interest rates. In
addition to the trend itself, there is the
difference in yield between stocks and bonds
to worry about. When bond interest remained
low for many years, public utility stocks
(as in the 1950's) were comparatively very
attractive. But now high yielding bonds are
competing with equities for investment
money. Usually when both short-term and
long-term rates start rising, they tell the
stock investor one story: Run For The Hills.
But how do you tell which way interest rates
are going to go? It's become popular to
watch the money supply, and I think it's
possible that the market sometimes makes a
mistake in being bearish because of a big
money supply. The market fears in such
situations that the Federal Reserve will
lift short-term interest rates in order to
hold the money supply in check. But where is
this money going to go? It can be used in
business, but if business is sluggish the
money will probably search for another
outlet. Among the possible outlets are the
bond market and the stock market. Of course,
if interest rates are very high, the bond
market may out-compete the stock market for
that money.
PSYCHOLOGY
Don't underrate the importance of psychology
in the stock market. When people buy they
are more anxious to buy than the seller, and
<PAGE>
vice versa. So many things go into the buy
or sell decision besides economic statistics
or security analysis. A bad (or good) buy or
sell decision may be made merely because of
a headache.
Some people try to guess what the crowd will
do, believing they can be swept along in a
favorable current. But this is dangerous.
The crowd may be very late in acting.
Suppose it's an institutional crowd.
Sometimes they over-influence each other and
are the victims of their own habits.
Personally, I like to be contrary. When
things look awful, I become optimistic. When
the crowd and the world look most rosy, I
like to be a seller, perhaps prematurely,
but usually profitably.
Ancient Wall Street Cliche: The bulls make
money, the bears make money, but what
happens
to the pigs?
SOME FORGOTTEN CONCEPTS
ASSET VALUES
In the 1960's, investors paid less attention
to real assets than they did early in the
20th century. By real assets, I mean the
value of the plant and equipment and cash
behind each share. But now that the affluent
society concept is fading fast and the
energy crunch is coming in strong, investors
are becoming more interested again in real
assets. So companies with lots of extra oil
and gas reserves, real estate, unused coal
and copper mines, great stands of forests,
these and other assets are again being given
a substantial plus in appraising a stock's
worth. And why not? The last several years
have seen enormous price appreciation in
many tangibles: antique furniture, ancient
art, modern art, real estate, and others. So
if a company owns a lot of real property of
<PAGE>
one sort or another, it has to be a reason
for wanting to own the stock. To be sure, in
the long run these assets have to be
connected with a company's earning power
and, therefore, tied into its ultimate
worth.
DIVIDENDS
In recent years most institutional investors
paid too little attention to the actual
dividends paid out. Paradoxically,
individual investors concerned with
maximizing their income often make the size
of the dividend too important a
consideration. For years the big growth
stocks zoomed while paying two percent; on
the other hand, utility stocks have had a
very hard time since the early 1960's even
though the dividends may have been 4% back
then and 7 to 8% right now. Dividends are an
important plus because, if the company's
dividend is safe, it helps put a floor on
the price.
Incidentally, you should check into a
company's payout policy. If it pays out 90%
of its earnings, beware. It's usually a
danger signal of a dividend cut ahead. If
it pays out 10%, vice versa. An average
company would pay out 40 to 60% of earnings
as dividends; most utility companies are
more generous.
"GROWTH" STOCKS AND PRICE EARNINGS MULTIPLES
In the 1920's, a prime market influence was
a book by Edgar Smith called "Common Stocks
for Long-Term Investment." It was a
brilliant and important book. Mr. Smith's
main point was to advocate the benefit to
corporate growth of the application of
retained earnings and depreciation. Thus
capital appreciates. The book was perhaps
influential in changing accepted multiples
of 10 times earnings to higher multiples of
20 to 30 times earnings.
<PAGE>
But people have often paid too much for
assumed persistent growth, only to find out
that a general economic decline, an act of
war, or a series of government controls will
change either the appraisal of the growth
rate or change the growth rate itself.
Rarely can securities be valued correctly at
over 15 times earnings, because rarely is
there any clear prospect that a company's
earnings will grow sufficiently in the
future to make it worth that price. We know
that there are exceptions, but they account
for perhaps 1% of the cases. So the odds are
against you when you pay a very high
multiple.
What is a "growth stock"? One intelligent
growth stock adherent thinks it's a company
discovered in an early stage of its
potential. Often the label stays with it
after it's become mature. The growth has
slowed, but people or institutions continue
to buy it because their imagination doesn't
go beyond the obvious.
In any case, there is no magic to the phrase
"growth stock." The word "growth" describes
what we are all trying to do. Long before
the phrase became popular, investors and
speculators were trying to foresee which
companies in the future were going to fare
well in earnings, gross business,
reputation, and so forth. Everyone hopes to
unearth a company that produces a new
article that will become commonly used. The
trick is to discover those companies before
you have to pay too big a price for them in
terms of the earnings multiple.
Sometimes, after a price decline, some
companies need to be rediscovered. The
stocks that were the rage and sold at very
high multiples in the late sixties and early
seventies came down drastically in price
after that period. In the best cases, the
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problem was not with the companies but with
the price of the stocks, and at some point
several of the stocks became attractive
again. These were companies that had stood
the test of time; they were much better than
the average big company, and their growth
rates were much better and more sustained. A
multiple of between 10 and 15 on an
outstanding company is acceptable to me even
if there are many stocks selling between 6
and 10. There may be acceptable values in
both groups.
Of course, deciding what represents good
value is a matter of judgment. Sometimes you
can get a better grasp on values by looking
at aggregates. You should always be summing
up the total market value of a company. I
remember that at one point in the late
seventies, IBM was selling at 40 billion
dollars. Since the total corporate wealth of
the U.S. was estimated at $900 billion,
IBM's $40 billion was a big figure, but IBM
was a very special company. On the other
hand, in 1961, when IBM was much smaller,
there was a period of months when the
company was selling in the market for $16
billion, but the figure at that time worked
out to 80 times earnings. That was too high,
and in 1962 the price dropped by 50%. Or
take the case of Avon Products, which in
1972 was selling in the market for $8
billion when it was earning about $125
million, or 64 times earnings. That also
turned out to be too high.
THE "ONE DECISION CONCEPT"
This means buying but not selling. There is
only "one decision," namely when to buy.
Some brilliant investors have used one
decision concepts and have been successful.
But the odds are so much against your being
right that I think that very few people
should use this concept. The institutions
made this a successful formula for several
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years and indeed created a cult concept for
a certain number of stocks. The tax laws
helped to institutionalize the practice; why
sell if the governments (federal, state,
city) took more and more of the profits? But
this approach assumes that a company goes
only one way, and we have seen that it can
and does backfire.
CALENDAR COMMENTS
Mark Twain covered the calendar with wise
stock comments. He said: "October is one of
the peculiarly dangerous months to speculate
in stocks. The others are July, January,
September, April, November, May, March,
June, December, August, and February."
Are there stocks for the seasons? Should toy
stocks be bought in late summer for fall to
Xmas hopes? Should retail stores be? Should
beer stocks be bought in the spring if you
anticipate a hot summer? I doubt it. To
borrow a title from a great play, I prefer a
stock for all seasons.
MORE ON THE SEASONS
Almanacs deal with events in man's calendar.
The seasons, even with their infinite minor
variations one year to next, are really
repetitive milestones in time's passage.
Some people, noting that stock market
behavior is often repetitive, try to find
some correlation to the seasons.
Many people assume or hope the market will
be dull in summer so that vacations can be
taken without care. Some years, summer is
the time to be around, as with the price
freeze in '70 or throughout the summer of
1929.
In the autumn there is often the expectation
of a business activity increase consonant
with the fall-style weather but sometimes
fall surprises are hurricanes also a fall
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phenomenon.
Then comes bleak winter and everyone thinks
the world is cold; but there is the hope of
the New Year. A bad winter means more salt
and fuel are used; a bad winter may mean
more skiing and resort business.
Our greatest hopes are always in springtime.
The world is new again as fresh rainfall and
new plants usher in the daylight saving
days. The ants scurry outside their nests
and the birds are on the wing. In Wall
Street it's time for judging agricultural
developments: Will the world need more
fertilizer? Tractors? Hybrid seed? But in
reality such decisions can be made at any
time; it's unnecessary to invest by the
calendar. Just realize there are
opportunities at all times for the
adventuresome investor and that the joys of
living and investing are enhanced by the
variability of the seasons.
WATCHING THE KETTLE BOIL
A sizable part of the Wall Street community
has in recent years developed an obsession.
It appears to be overzealous in finding out
what is happening minute by minute to
corporate earnings. The fever has spread as
well to corporation executives, who appear
to worry excessively over reported quarter-to-quarter earnings. The greatest
game among
a number of research firms seems to be to
determine the next quarter's earnings before
someone else does. This focus on short-term
earnings appears to ignore the significance
of longer-term trends in earnings.
Corporations often must make current
expenditures, with an effect on current
earnings, to build for the future. If the
goal of immediate reported earnings gains
becomes dominant, it can become detrimental
to a company's future. Gains in earnings
should be the result of long-term
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strategies, excellence in management, good
exploitation of opportunities and so on. If
these things fall in place properly, short-term earnings should not be of
major
importance.
Another trouble with overattention to each
quarter is the upset when a favorite stubs
its toe. Then the unexpected causes a stock
price drop which can be both precipitous and
shocking.
FADS
There seem always to have been fads in Wall
Street. For some reason or other the move in
Stutz Bearcat autos was a fad in the 1920's.
In the late 50's and into the early 60's,
bowling stocks had their own ten strike.
People believed every adult American man,
woman and child would become a bowler. Like
the hula hoop, this fad too came to an end.
Those who bought early prospered; those who
bought late at very high multiples were
taken to the alleys.
Conglomerates were a fad in the 1960's when
reported earnings were often helped by some
athletic bookkeeping. In any case, the
criteria for purchase of any substantial
amount of stock should remain on solid
grounds: 1 good products, 2 a necessary
product, 3 an honest management, 4 honest
reporting. The investment can always be
helped by a bit of luck, but fads come and
go. Beware.
FALLING IN LOVE
One should fall in love with ideas, with
people, or with idealism based on the
possibilities that exist in this
adventuresome world. In my book, the last
thing to fall in love with is a particular
security. It is after all just a sheet of
paper indicating a part ownership in a
corporation and its use is purely mercenary.
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The fact that a number of people have been
extremely fortunate in the past by falling
in love with something that went their way
is not necessarily proof that it will always
be that way. Stay in love with a security
until the security gets overvalued, then let
somebody else fall in love.
SOME THOUGHTS ON TECHNIQUES
LOSSES
I must admit to being wrong perhaps about
20% of the time over a long period which
totals to an awful lot of losses. However,
it was the 80% that mattered. The goal was
to be a bit like Ty Cobb rather than Babe
Ruth. An important factor in investing is
the matter of judgment, and you can't avoid
being wrong at times. The important thing is
to recognize an error in judgment as quickly
as possible. One rule is to take a loss
pretty habitually at approximately 10%. The
technique I have practiced is to take a
profit occasionally on something that has
gone up to a price over what was expected
and simultaneously to take losses wherever
misjudgment seems evident. This creates a
reservoir of buying power that can be used
to make fresh judgments on what are the best
values in the market at that time. The
mistake of many is to make one decision and
to get locked into that position. Perhaps
half of those "one decision ideas" work out
favorably to those who have carried the
stocks for a long period to avoid taxes.
Others don't work out. The buyers have
become stubborn and kept them too long with
large losses. All in all, the essence of
taking losses, which is ultimately a
question of character, is to acknowledge
when one is wrong.
PROFITS
This is the name of the game. Something that
<PAGE>
goes your way, and where your judgment or
your luck is helping to improve your
fortunes, usually requires patience in
holding. These are the types of securities
where it is advisable to restrain one's
greed.
When a particular security starts to sell
above a reasonable intrinsic value, your
only problem in selling is one of taxes.
That is a good time to take profits even if
it is short of the top of the market. Mr.
Bernard Baruch was an advocate of buying a
bit too soon and selling a bit too soon. His
fame has endured.
BEING RIGHT
If any investor were right all of the time
he would have accumulated a considerable
portion of the world's wealth. Obviously
this is a possibility but in actuality it
has never happened except among liars. There
are billionaires (some temporary) who have
owned a large part of a corporation that in
their lifetime has grown to immense size and
success. This formula for investment is not
one I am trying to advocate. I can add,
however, that up to age 65, I consistently
reinvested profits in my own business to
satisfactory advantage.
NON-IMPORTANCE OF BREAKING EVEN
I have referred above to an often successful
method of taking losses semiautomatically at
the 10% level. The use of the money
elsewhere has usually been more fruitful
than in maintaining the mistaken position. I
have, on the other hand, often seen the
person who has stubbornly stuck to his
position, increase his potential loss and
wait many years to break even in the stock.
<PAGE>
There also exists the investor who, after
showing paper losses, and then having the
opportunity to break even, eagerly gets out
without trying to reappraise the current
situation. Nine times out of ten, the
security was then a buy rather than a sell.
The lesson one can learn from such
situations is that the market does not know
about these individual transactions. There
is no magic to the price you paid for a
security, and one must often learn the hard
way the market's antics of evaluation and
re-evaluation.
HEDGING
I would not recommend this procedure of
being "short" some stocks and "long" others
at the same time for more than a very small
percentage of the readers. One has to have a
stubborn, perverse and patient attitude in
selling short securities that are too high
in one's eyes. But, if it is done
methodically and continuously, it is an
excellent method to help in the accumulation
of capital and education. Here are the
advantages: 1. It gives one more patience to
hold on to undervalued long positions. 2. It
makes one less concerned with the psychology
of fear that dominates the market from time
to time, as it permits you to have an
"anchor to windward." Even if things go
down you benefit.
I would prefer not to make too much of this
philosophy. In remembrances of things past,
however, it stood me in good stead in late
September of 1929. My portfolio was down
about 12% and I had an uneasy feeling about
the market and conditions in general. Those
were days of 10% margin and I studied the
lists carefully for a stock that was
overvalued in my opinion and which I could
sell short as a hedge. I came across RCA at
about $100 per share. It had recently split
<PAGE>
5 for 1 and appeared overvalued. There were
no dividends, little income, a low net worth
and a weak financial position. Its only
bullish aspect was hope for the future age
of radio. I sold short a dollar value of
this stock equal to the dollar value of my
long portfolio. It proved to be a timely and
profitable move. The bear market that
occurred in 1930-32 made it imperative to
sell short if you wanted to make a profit.
The habit has become somewhat ingrained in
me by now, although it is quite possible to
do well without it.
NEW TECHNIQUES
The market today has many new techniques,
such as index funds, and futures based on
the Standard & Poor's 500 and other stock
indexes. In addition, put and call options
are used to a far greater degree than they
were twenty or thirty years ago. Many of
these techniques permit one to buy a lot
more while putting up a very small amount,
and they also can be used for hedging
purposes in place of selling short. Low
margins mean that your investment is subject
to huge percentage swings. The opportunities
for gain are much greater, but the risk of
loss is also much greater. People became
enamored of these new toys in 1985, '86 and
'87. But in October 1987, the Easter eggs
turned into bombs. Without common sense,
moderation and judgment, new techniques make
an old game far more dangerous.
INVESTMENT BALANCE
Only a small portion of the population have
all their money in the so-called "market"
although there are over 20 million
investors. Investors range from those with
10% or less of their wealth invested in
securities to over 100% of their wealth. I
think personal temperament is a very
important factor in how much to invest. When
interest rates are very high, perhaps a
<PAGE>
considerable portion of the average person's
position should be in bonds. Many years ago,
one could compound annually in the bond
market only at around 5%. I had a reasonable
preference for risk-taking and tried to
compound at 10-15% or more. This is hard for
many investors to attain. To do this
requires a large segment of common stock
risk at a time of deep pessimism in the
market, and a search for companies whose
products are necessary for the ongoing
economy.
Returning to balance, however, one must be
flexible. I know someone who has only
recently contemplated buying the first bond
he ever owned in 50 years. He has done very
well without them in the past.
It is better to do some hard work and to do
your own choosing rather than to take tips.
However, a tip from a brilliant man is like
a word to the wise and one should scrutinize
that kind of idea. If a second person
unrelated to the first should mention the
same security, it is time to really dig in.
But if one is following the other, do as I
said before beware. Don't play follow the
leader.
PHYSICAL CONDITION
One of the best ways to be a good investor
is to be in good physical condition. And by
good physical condition, I also mean good
mental condition. Early to bed and early to
rise is perhaps too ideal. To drink in
moderation is perhaps better than not to
drink at all and to eat in moderation is
certainly better than not to eat at all. In
any case, to walk at least one hour a day,
either by yourself or with someone else, is
a good way to improve your investing ideas.
Walking is better than running; you can't
work out an idea running.
<PAGE>
GENERAL PHILOSOPHY
Over a period of time the market seems to
have long waves of advances lasting about
two years; it has waves of declines lasting
a shorter period, perhaps one half the
period of the upswing. During the down
cycle, there is extreme irregularity in most
individual securities, affording
institutions and people great opportunities
for enhancement of wealth. If one is not too
fearful in bad times and not too optimistic
in good times; if one accepts a small loss
because of poor judgment; if one is willing
to pay the taxes because of enormous gains
when securities become overvalued, then one
can generally gain by investing in so-called
Wall Street, which now stretches across the
country.
<PAGE>
Appendix 1
Description of Photographs
1. Cover of Almanac -- 3 different
photographs (profiles) of Roy
Neuberger, Founder of Neuberger &
Berman.
2. Page 3 of Almanac -- Picture of Roy
Neuberger, Founder of Neuberger &
Berman.
3. Page 5 of Almanac -- Picture of Roy
Neuberger, Founder of Neuberger &
Berman, holding a piece of paper.
4. Page 7 of Almanac -- Picture of Roy
Neuberger, Founder of Neuberger &
Berman.
5. Page 8 of Almanac -- Picture of Roy
Neuberger, Founder of Neuberger &
Berman wearing glasses, reading a
report.
6. Page 11 of Almanac -- Picture of Roy
Neuberger, Founder of Neuberger &
Berman, wearing glasses, reading a
newspaper.
7. Page 14 of Almanac -- Picture of Roy
Neuberger, Founder of Neuberger &
Berman, sitting in a chair, holding his
glasses in his hands.
<PAGE>
