<PAGE>
As filed with the Securities and Exchange Commission on November 15, 1996
1933 Act Registration No. 33-62872
1940 Act Registration No. 811-7724
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [__X__]
Pre-Effective Amendment No. [_____] [_____]
Post-Effective Amendment No. [__4__] [__X__]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [__X__]
Amendment No. [__4__] [__X__]
(Check Appropriate Box or Boxes)
NEUBERGER & BERMAN INCOME TRUST
-------------------------------
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue
New York, New York 10158-0180
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (212) 476-8800
Theodore P. Giuliano, President
Neuberger & Berman Income Trust
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., 2nd Floor
Washington, D.C. 20036-1800
(Names and Addresses of Agents for Service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b)
_____ on _________________ pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
__X__ on February 3, 1997 pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on __________ pursuant to paragraph (a)(2)
<PAGE>
Registrant has filed a declaration pursuant to Rule 24f-2 under
the Investment Company Act of 1940, as amended, and the notice required by
such rule for its 1996 fiscal year will be filed on or about December 23,
1996.
Neuberger & Berman Income Trust is a "master/feeder fund." This
Post-Effective Amendment No. 4 includes a signature page for the master
fund, Income Managers Trust, and appropriate officers and trustees
thereof.
Page _____ of _____
Exhibit Index
Begins on Page _____
- 2 -
<PAGE>
NEUBERGER & BERMAN INCOME TRUST
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 4 ON FORM N-1A
This Post-Effective Amendment consists of the following papers
and documents:
Cover Sheet
Contents of Post-Effective Amendment No. 4 on Form N-1A
Cross Reference Sheet
Neuberger & Berman Limited Maturity Bond Trust
Neuberger & Berman Ultra Short Bond Trust
----------------------------------------------
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Pages
- 3 -
<PAGE>
NEUBERGER & BERMAN INCOME TRUST
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 4 ON FORM N-1A
CROSS REFERENCE SHEET
This cross reference sheet relates to the Prospectus
and Statement of Additional Information for
Neuberger & Berman Limited Maturity Bond Trust
and Neuberger & Berman Ultra Short Bond Trust
<TABLE>
<CAPTION>
Form N-1A Item No. Caption in Part A Prospectus
------------------ ----------------------------
<S> <C> <C>
Item 1. Cover Page Front Cover Page
Item 2. Synopsis Expense Information; Summary
Item 3. Condensed Financial Financial Highlights; Information
Performance Information
Item 4. General Description of Investment Programs; Description
Registrant of Investments; Special
Information Regarding
Organization, Capitalization, and
Other Matters
Item 5. Management of the Fund Management and Administration;
Back Cover Page
Item 6. Capital Stock and Other Front Cover Page; Dividends,
Securities Other Distributions, and Taxes;
Special Information Regarding
Organization, Capitalization, and
Other Matters
Item 7. Purchase of Securities Being Shareholder Services; Share
Offered Prices and Net Asset Value;
Management and Administration
Item 8. Redemption or Repurchase Shareholder Services; Share
Prices and Net Asset Value
Item 9. Pending Legal Proceedings Not Applicable
- 4 -
<PAGE>
Caption in Part B Statement of
Form N-1A Item No. Additional Information
------------------ ------------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and Not Applicable
History
Item 13. Investment Objectives and Investment Information; Certain
Policies Risk Considerations
Item 14. Management of the Fund Trustees And Officers
Item 15. Control Persons and Principal Control Persons And Principal
Holders of Securities Holders of Securities
Item 16. Investment Advisory and Other Investment Management and
Services Administration Services; Trustees
And Officers; Distribution
Arrangements; Reports To
Shareholders; Custodian And
Transfer Agent; Independent
Auditors
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Investment Information;
Securities Additional Redemption Information;
Dividends and Other Distributions
Item 19. Purchase, Redemption and Distribution Arrangements;
Pricing of Securities Being Additional Exchange Information;
Offered Additional Redemption Information
Item 20. Tax Status Dividends and Other Distributions;
Additional Tax Information
Item 21. Underwriters Investment Management and
Administration Services;
Distribution Arrangements
Item 22. Calculation of Performance Performance Information
Data
Item 23. Financial Statements Financial Statements
</TABLE>
- 5 -
<PAGE>
Part C
------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Post-Effective Amendment
No. 4.
- 6 -
<PAGE>
Neuberger&Berman
INCOME TRUST
No-Load Bond Funds
-------------------------------------------------------------------------
Neuberger&Berman ULTRA SHORT BOND TRUST(REGISTERED TRADEMARK)
Neuberger&Berman LIMITED MATURITY BOND TRUST(REGISTERED
TRADEMARK)
YOU CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT
WITH A PENSION PLAN ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION
(EACH AN "INSTITUTION") WHICH PROVIDES ACCOUNTING, RECORDKEEPING AND OTHER
SERVICES TO INVESTORS AND WHICH HAS AN ADMINISTRATIVE SERVICES AGREEMENT
WITH NEUBERGER&BERMAN MANAGEMENT INCORPORATED ("N&B MANAGEMENT").
-------------------------------------------------------------------------
EACH OF THE ABOVE-NAMED FUNDS (A "FUND") INVESTS ALL OF ITS NET
INVESTABLE ASSETS IN A CORRESPONDING PORTFOLIO (A "PORTFOLIO") OF INCOME
MANAGERS TRUST ("MANAGERS TRUST"), AN OPEN-END MANAGEMENT INVESTMENT
COMPANY MANAGED BY N&B MANAGEMENT. EACH PORTFOLIO INVESTS IN SECURITIES IN
ACCORDANCE WITH AN INVESTMENT OBJECTIVE, POLICIES, AND LIMITATIONS
IDENTICAL TO THOSE OF ITS CORRESPONDING FUND. THE INVESTMENT PERFORMANCE
OF EACH FUND DIRECTLY CORRESPONDS WITH THE INVESTMENT PERFORMANCE OF ITS
CORRESPONDING PORTFOLIO. THIS "MASTER/FEEDER FUND" STRUCTURE IS DIFFERENT
FROM THAT OF MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE AND
MANAGE THEIR OWN PORTFOLIOS OF SECURITIES. FOR MORE INFORMATION ON THIS
UNIQUE STRUCTURE THAT YOU SHOULD CONSIDER, SEE "SUMMARY" ON PAGE 5 AND
"SPECIAL INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND OTHER
MATTERS" ON PAGE 16.
The Funds are no-load mutual funds, so there are no sales
commissions or other charges when buying or redeeming shares. The Funds do
not pay "12b-1 fees" to promote or distribute their shares. The Funds
declare income dividends daily and pay them monthly.
Please read this Prospectus before investing in either of the
Funds and keep it for future reference. It contains information about the
Funds that a prospective investor should know before investing. A
Statement of Additional Information ("SAI") about the Funds and
Portfolios, dated February 3, 1997, is on file with the Securities and
Exchange Commission ("SEC"). The SAI is incorporated herein by reference
(so it is legally considered a part of this Prospectus). You can obtain a
free copy of the SAI by calling N&B Management at 800-877-9700.
Prospectus Dated February 3, 1997
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT
INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND
ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Funds and Portfolios . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
EXPENSE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 5
Shareholder Transaction Expenses for Each Fund . . . . . . . . . . . 6
Annual Fund Operating Expenses . . . . . . . . . . . . . . . . . . . 6
Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . 9
Selected Per Share Data and Ratios . . . . . . . . . . . . . 8
Ultra Short Bond Trust . . . . . . . . . . . . . . . . . . . . . . . 8
Limited Maturity Bond Trust . . . . . . . . . . . . . . . . . . . . 9
INVESTMENT PROGRAMS . . . . . . . . . . . . . . . . . . . . . . . . . 11
Short-Term Trading; Portfolio Turnover . . . . . . . . . . . . . . . 12
Ratings of Securities . . . . . . . . . . . . . . . . . . . . . . . . 12
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Other Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 14
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Yield and Total Return Information . . . . . . . . . . . . . . . . . 15
SPECIAL INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND OTHER
MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
The Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
The Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SHAREHOLDER SERVICES . . . . . . . . . . . . . . . . . . . . . . . . 17
How to Buy Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 17
How to Sell Shares . . . . . . . . . . . . . . . . . . . . . . . . . 18
Exchanging Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SHARE PRICES AND NET ASSET VALUE . . . . . . . . . . . . . . . . . . 19
DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES . . . . . . . . . . . . . . 19
Distribution Options . . . . . . . . . . . . . . . . . . . . . . . . 20
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
MANAGEMENT AND ADMINISTRATION . . . . . . . . . . . . . . . . . . . . 21
Trustees and Officers . . . . . . . . . . . . . . . . . . . . . . . . 21
Investment Manager, Administrator, Distributor, and Sub-Adviser . . . 21
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
DESCRIPTION OF INVESTMENTS . . . . . . . . . . . . . . . . . . . . . 23
USE OF JOINT PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION . . . 27
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 28
DIRECTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
FUNDS ELIGIBLE FOR EXCHANGE . . . . . . . . . . . . . . . . . . . . . 28
<PAGE>
SUMMARY
The Funds and Portfolios
--------------------------------------------------------------------------
Each Fund is a series of Neuberger&Berman Income Trust (the
"Trust") and invests in a corresponding Portfolio that, in turn, invests
in securities in accordance with an investment objective, policies, and
limitations that are identical to those of the Fund. This is sometimes
called a master/feeder fund structure, because each Fund "feeds"
shareholders' investments into its corresponding Portfolio, a "master"
fund. The structure looks like this:
Shareholders
BUY SHARES IN
Funds
INVEST IN
Portfolios
INVEST IN
Debt Securities & Other Securities
The trustees who oversee the Funds believe that this structure
may benefit shareholders; investment in a Portfolio by investors in
addition to a Fund may enable the Portfolio to achieve economies of scale
that could reduce expenses. For more information about the organization of
the Funds and the Portfolios, including certain features of the
master/feeder fund structure, see "Special Information Regarding
Organization, Capitalization, and Other Matters" on page 16.
The following table is a summary highlighting features of the
Funds and their corresponding Portfolios. You may want to invest in one or
both of the Funds depending on your particular investment needs. Of
course, there can be no assurance that a Fund will meet its investment
objective.
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Neuberger&Berman Income Investment Comparative
Trust Objective Principal Portfolio Investments Information
----------------------- --------- ------------------------------- -----------
Ultra Short Current income with minimal Money market instruments and Lower expected price
risk to principal and liquidity investment grade debt fluctuation; maximum average
securities of government and duration of two years
non-government issuers
Limited Maturity Highest current income Debt securities, primarily More potential price
consistent with low risk to investment grade; maximum 10% fluctuation; maximum average
principal and liquidity; and below investment grade, but no duration of four years
secondarily, total return lower than B*
</TABLE>
* Securities that are below investment grade will be purchased only
if rated B or higher by either Moody's Investors Service, Inc.
("Moody's) or Standard & Poor's ("S&P"), or if unrated by either
of those entities, deemed by N&B Management to be of comparable
quality. See page 13.
Risk Factors
------------------------------------------------------------------------
An investment in either Fund involves certain risks, depending
upon the types of investments made by its corresponding Portfolio. The
Portfolios invest in fixed income securities, which are likely to decline
in value in times of rising market interest rates and to rise in value in
times of falling interest rates. In general, the longer the maturity of a
fixed income security, the more pronounced is the effect of a change in
interest rates on the value of the security. Special risk factors apply
to investments, which may be made by one or both Portfolios, in foreign
securities, options and futures contracts, zero coupon bonds, and debt
securities rated below investment grade. For more details about each
Portfolio, its investments and their risks, see "Investment Programs" on
page 16 and "Description of Investments" on page 24.
4
<PAGE>
Management
------------------------------------------------------------------------
N&B Management, with the assistance of Neuberger&Berman, LLC
("Neuberger&Berman") as sub-adviser, selects investments for the
Portfolios. N&B Management also provides administrative services to the
Portfolios and the Funds and acts as distributor of Fund shares. See
"Management and Administration" on page 22. If you want to know how to
buy and sell shares of the Funds or exchange them for shares of other
Neuberger&Berman Funds(REGISTERED TRADEMARK) made available through an
Institution, see "Shareholder Services - How to Buy Shares" on page 18,
"Shareholder Services - How to Sell Shares" on page 19, "Shareholder
Services - Exchanging Shares" on page 19, and the policies of the
Institution through which you are purchasing shares.
EXPENSE INFORMATION
This section gives you certain information about the expenses of
each Fund and its corresponding Portfolio. See "Performance Information"
for important facts about the investment performance of each Fund, after
taking expenses into account.
5
<PAGE>
Shareholder Transaction Expenses for Each Fund
-------------------------------------------------------------------------
As shown by this table, there are no transaction charges when you
buy or sell Fund shares.
Sales Charge Imposed on Purchases NONE
Sales Charge Imposed on Reinvested Dividends NONE
Deferred Sales Charges NONE
Redemption Fees NONE
Exchange Fees NONE
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
-------------------------------------------------------------------------
The following table shows annual Total Operating Expenses for
each Fund, which are paid out of the assets of the Funds and which include
each Fund's pro rata portion of the Operating Expenses of its
corresponding Portfolio. A Fund's Total Operating Expenses are borne
indirectly by the Fund's shareholders. Each Fund pays N&B Management an
administration fee based on the Fund's average daily net assets. Each
Portfolio pays N&B Management a management fee, based on the Portfolio's
average daily net assets; a pro rata portion of this fee is borne
indirectly by the corresponding Fund. Therefore, the table combines
management and administration fees. The Funds and Portfolios also incur
other expenses for things such as accounting and legal fees, maintaining
shareholder records, and furnishing shareholder statements and Fund
reports. "Operating Expenses" exclude interest, taxes, brokerage
commissions, and extraordinary expenses. The Funds' expenses are factored
into their share prices and dividends and are not charged directly to Fund
shareholders. For more information, see "Management and Administration"
and the SAI.
<TABLE>
Neuberger&Berman Income Management and 12b-1 Other Total Operating
Trust Administration Fees* Fees Expenses* Expenses*
<S> <C> <C> <C> <C>
ULTRA SHORT __% None __% __%
LIMITED MATURITY __% None __% __%
</TABLE>
* (Reflects N&B Management's expense reimbursement undertaking described
below)
Total Operating Expenses for each Fund are based upon current
administration fees for the Fund and management fees for its corresponding
Portfolio, with "Other Expenses" based on each Fund's and Portfolio's
expenses for the past fiscal year. The trustees of the Trust believe that
the aggregate per share expenses of each Fund and its corresponding
6
<PAGE>
Portfolio will be approximately equal to the expenses the Fund would incur
if its assets were invested directly in the type of securities held by its
corresponding Portfolio. The trustees of the Trust also believe that
investment in a Portfolio by investors in addition to a Fund may enable
the Portfolio to achieve economies of scale which could reduce expenses.
The expenses, and accordingly, the returns of other funds that may invest
in the Portfolios may differ from those of the Funds.
The previous table reflects N&B Management's voluntary
undertaking to reimburse each Fund for its Operating Expenses and pro rata
share of its corresponding Portfolio's Operating Expenses which, in the
aggregate, exceed the following percentage per annum of the Fund's average
daily net assets: ULTRA SHORT, 0.75%; LIMITED MATURITY, 0.80%. Each
undertaking can be terminated by N&B Management by giving a Fund at least
60 days' prior written notice. Absent the reimbursement, Management and
Administration Fees would be ___% and ____%, Other Expenses would be ____%
and ____%, and Total Operating Expenses would be ____% and ____% per annum
of the average daily net assets of ULTRA SHORT and LIMITED MATURITY,
respectively, based upon the expenses of each Fund for its 1996 fiscal
year.
For more information about the current expense reimbursement
undertakings, see "Expenses" on page 23.
Example
---------------------------------------------------------------------
To illustrate the effect of Operating Expenses, let's assume that
each Fund's annual return is 5% and that it had Total Operating Expenses
described in the table above. For every $1,000 you invested in each Fund,
you would have paid the following amounts of total expenses if you closed
your account at the end of each of the following time periods:
Neuberger&Berman 1 year 3 years 5 years 10 years
Income Trust
ULTRA SHORT $ $ $ $
LIMITED MATURITY $ $ $ $
The assumption in this example of a 5% annual return is required
by regulations of the SEC applicable to all mutual funds. THE INFORMATION
IN THE PREVIOUS TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR RETURNS MAY BE
GREATER OR LESS THAN THOSE SHOWN, AND MAY CHANGE IF EXPENSE REIMBURSEMENTS
CHANGE.
7
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios
-----------------------------------------------------------------------
The financial information in the following tables is for each
Fund as of October 31, 1996, and the prior periods. This information has
been audited by the Funds' independent auditors. You may obtain, at no
cost, further information about the performance of the Funds in their
annual report to shareholders. The auditors' reports are incorporated in
the SAI by reference to the annual report. Please call 800-877-9700 for a
free copy of the annual report and up-to-date information. Also, see
"Performance Information."
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Ultra Short Bond Trust
-------------------------------------------------------------------------
The following table includes selected data for a share
outstanding throughout each year and other performance information derived
from the Financial Statements. The per share amounts and ratios which are
shown reflect income and expenses, including the Fund's proportionate
share of its corresponding Portfolio's income and expenses. It should be
read in conjunction with its corresponding Portfolio's Financial
Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
September 7,
Year Ended 1993(1) to
October 31, October 31,
---------- ------------
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $9.79 $9.97 $10.00
Income From Investment Operations
Net Investment Income .53 .37 .05
Net Gains or Losses on Securities (both realized and unrealized) .06 (.18) (.03)
Total From Investment Operations .59 .19 .02
Less Distributions
Dividends (from net investment income) (.53) (.37) (.05)
Net Asset Value, End of Year $9.85 $9.79 $9.97
Total Return~ +6.15% +1.92% +0.17%(2)
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $1.7 $1.2 $0.2
Ratio of Expenses to Average Net Assets(3) .72% .65% .65%(4)
Ratio of Net Investment Income to Average Net Assets(3) 5.42% 3.86% 2.98%(4)
</TABLE>
See Notes to Financial Highlights.
8
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Limited Maturity Bond Trust
-------------------------------------------
The following table includes selected data for a share
outstanding throughout each year and other performance information
derived from the Financial Statements. The per share amounts and ratios
which are shown reflect income and expenses, including the Fund's
proportionate share of its corresponding Portfolio's income and
expenses. It should be read in conjunction with its corresponding
Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
Year Ended August 30, 1993(1) to
October 31, October 31,
----------- ---------------------
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $9.43 $9.97 $10.00
Income From Investment Operations
Net Investment Income .58 .54 .08
Net Gains or Losses on Securities (both realized and
unrealized) .18 (.54) (.03)
Total From Investment Operations .76 - .05
Less Distributions
Dividends (from net investment income) (.58) (.54) (.08)
Net Asset Value, End of Year $9.61 $9.43 $9.97
Total Return~ +8.36% -0.01% +0.55%(2)
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $11.9 $6.7 $0.1
Ratio of Expenses to Average Net Assets(3) .77% .70% .65%(4)
Ratio of Net Investment Income to Average Net Assets(3) 6.16% 5.72% 4.99%(4)
</TABLE>
See Notes to Financial Highlights.
9
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
1) The date investment operations commenced.
2) Not annualized.
3) After reimbursement of expenses by N&B Management. Had N&B Management
not undertaken such action the annualized ratios to average daily net
assets would have been:
Neuberger&Berman Period from
ULTRA SHORT Year Ended September 7, 1993
Bond Trust October 31, to October 31,
--------------- --------- ----------------
1996 1995 1994 1993
---- ---- ---- ----
Expenses 2.50% 2.50% 2.50%
Net Investment Income 3.64% 2.01% 1.13%
Neuberger&Berman Period from
LIMITED MATURITY Year Ended August 30, 1993
Bond Trust October 31, to October 31,
----------------- ----------- -----------------
1996 1995 1994 1993
---- ---- ---- ----
Expenses 2.18% 2.50% 2.50%
Net Investment Income 4.75% 3.92% 3.14%
4) Annualized.
5) Each Fund invests only in its corresponding Portfolio, and that
Portfolio, rather than the Fund, engages in securities transactions.
Therefore, neither Portfolio calculates a portfolio turnover rate.
The portfolio turnover rates for each Portfolio were as follows:
Period from July 2,
1993 (Commencement
Year Ended of Operations) to
October 31, October 31,
----------- -----------------
1996 1995 1994 1993
---- ---- ---- ----
Neuberger&Berman ULTRA SHORT Bond
Portfolio 148% 94% 46%
Neuberger&Berman LIMITED MATURITY
Bond Portfolio 88% 102% 71%
~ Total return based on per share net asset value reflects the effects
of changes in net asset value on the performance of each Fund during
each year or other fiscal period shown in the table and assumes
dividends and capital gain distributions, if any, were reinvested.
10
<PAGE>
Results represent past performance and do not guarantee future
results. Investment returns and principal may fluctuate and shares
when redeemed may be worth more or less than original cost. Total
returns would have been lower if N&B Management had not reimbursed
certain expenses.
INVESTMENT PROGRAMS
The investment policies and limitations of each Fund are identical to
those of its corresponding Portfolio. Each Fund invests only in its
corresponding Portfolio. Therefore, the following shows you the kinds of
securities in which each Portfolio invests. For an explanation of some
types of investments, see "Description of Investments" on page 24.
Investment policies and limitations of the Funds and the Portfolios
are not fundamental unless otherwise specified in this Prospectus or the
SAI. While a non-fundamental policy or limitation may be changed by the
trustees of the Trust or of Managers Trust without shareholder approval,
the Funds intend to notify shareholders before making any material change
to such policies or limitations. Fundamental policies may not be changed
without shareholder approval.
The investment objectives of the Funds and Portfolios are not
fundamental. There can be no assurance that the Funds or Portfolios will
achieve their objectives. Each Fund, by itself, does not represent a
comprehensive investment program.
Additional investment techniques, features, and limitations
concerning the Portfolios' investment programs are described in the SAI.
The value of fixed income securities is likely to rise in times of
falling market interest rates and fall in times of rising interest rates.
Investments in shorter-term income securities normally are less affected
by interest rate changes than are investments in longer-term securities.
The value of income securities is also affected by changes in the
creditworthiness of the issuer.
The investment objective of Neuberger&Berman ULTRA SHORT Bond Trust
and Portfolio is to provide current income with minimal risk to principal
and liquidity. The investment objective of Neuberger&Berman LIMITED
MATURITY Bond Trust and Portfolio is to provide the highest current income
consistent with low risk to principal and liquidity; and secondarily,
total return.
Each Portfolio invests in a diversified portfolio of fixed and
variable rate debt securities and seeks to increase income and preserve or
enhance total return by actively managing average portfolio duration in
light of market conditions and trends.
11
<PAGE>
Neuberger&Berman ULTRA SHORT Bond Portfolio invests in a diversified
portfolio of U.S. Government and Agency Securities and investment grade
debt securities issued by financial institutions, corporations, and
others. The Portfolio's dollar-weighted average duration will not exceed
two years, although the Portfolio may invest in individual securities of
any duration. Securities in which the Portfolio may invest include
mortgage-backed and asset-backed securities, money market instruments,
repurchase agreements with respect to U.S. Government and Agency
Securities, and U.S. dollar-denominated securities of foreign issuers.
The Portfolio may also enter into futures contracts and purchase and sell
options on futures contracts. The Portfolio may invest 25% or more of its
total assets in U.S. Government and Agency Securities or in certificates
of deposit or bankers' acceptances issued by domestic branches of U.S.
banks.
Neuberger&Berman LIMITED MATURITY Bond Portfolio invests in a
diversified portfolio consisting primarily of U.S. Government and Agency
Securities and investment grade debt securities issued by financial
institutions, corporations, and others. The dollar-weighted average
duration of the Portfolio will not exceed four years, although the
Portfolio may invest in individual securities of any duration. The
Portfolio's dollar-weighted average portfolio maturity may range up to
five years. Securities, in which the Portfolio may invest, include
mortgage-backed and asset-backed securities, repurchase agreements with
respect to U.S. Government and Agency Securities, and foreign investments.
The Portfolio may invest up to 10% of its net assets in fixed income
securities that are below investment grade, including unrated securities
deemed by N&B Management to be of comparable quality. The Portfolio will
not invest in such securities unless they are rated at least B by Moody's
or S&P, or if unrated by either of those entities, deemed by N&B
Management to be of comparable quality. For information on the risks
associated with investments in securities rated below investment grade,
see "Ratings of Securities." The Portfolio may purchase and sell covered
call and put options, interest-rate futures contracts, and options on
those futures contracts and may lend portfolio securities. The Portfolio
may invest up to 5% of its net assets in municipal securities when N&B
Management believes such securities may outperform other available issues.
Short-Term Trading; Portfolio Turnover
--------------------------------------------------------------------------
Although neither Portfolio purchases securities with the intention
of profiting from short-term trading, each Portfolio may sell portfolio
securities prior to maturity when N&B Management believes that such action
is advisable. The portfolio turnover rates of Neuberger&Berman ULTRA SHORT
Bond Portfolio and Neuberger&Berman LIMITED MATURITY Bond Portfolio for
1996 and earlier years are set forth under "Notes to Financial
Highlights." Turnover rates in excess of 100% generally result in higher
12
<PAGE>
transaction costs (which are borne directly by the Portfolio) and a
possible increase in realized short-term capital gains or losses.
Ratings of Securities
--------------------------------------------------------------------------
HIGH-QUALITY DEBT SECURITIES. High-quality debt securities are
securities that have received a rating from at least one nationally
recognized statistical rating organization ("NRSRO"), such as Standard &
Poor's ("S&P") or Moody's, in one of the two highest rating categories
(the highest category in the case of commercial paper) or, if not rated by
any NRSRO, such as U.S. Government and Agency Securities, have been
determined by N&B Management to be of comparable quality.
INVESTMENT GRADE DEBT SECURITIES. Investment grade debt securities
are securities that have received a rating from at least one NRSRO in one
of the four highest rating categories or, if not rated by any NRSRO, have
been determined by N&B Management to be of comparable quality. Moody's
deems securities rated in its fourth highest category (Baa) to have
speculative characteristics; a change in economic factors could lead to a
weakened capacity of the issuer to repay.
LOWER RATED DEBT SECURITIES (Neuberger&Berman Limited Maturity Bond
Portfolio). Securities rated below investment grade are described as
"speculative" by both Moody's and S&P. Securities rated B are judged to be
predominantly speculative with respect to their capacity to pay interest
and repay principal in accordance with the terms of the obligations.
Changes in economic conditions or developments regarding the individual
issuer are more likely to cause price volatility and weaken the capacity
of the issuer 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. N&B Management seeks to reduce the risks
associated with investing in such securities by limiting the Portfolio's
holdings in them and by extensively analyzing the potential benefits of
such an investment in relation to the associated risks.
The following table shows the ratings of debt securities held by
Neuberger&Berman LIMITED MATURITY Bond Portfolio for the year ended
October 31, 1996. These percentages are historical only and are not
necessarily representative of the ratings of current and future holdings.
13
<PAGE>
<TABLE>
<CAPTION>
Neuberger & Berman LIMITED MATURITY Bond Portfolio's
Holdings of Debt Securities, by Rating for the Year Ended October 31, 1996
---------------------------------------------------------------------------
Moody's
Investors Service, Inc. Standard & Poor's
(as a % of investments) (as a % of investments)
Rating Average Rating Average
------ ------- ------ -------
<S> <C> <C> <C> <C>
INVESTMENT GRADE
Highest quality Aaa _____% AAA _____%
High quality Aa _____% AA _____%
Upper-medium grade A _____% A _____%
Medium grade Baa _____% BBB _____%
LOWER QUALITY
Moderately speculative Ba _____% BB _____%
Speculative B _____% B _____%
Highly Speculative Caa _____% CCC _____%
Poor Quality Ca _____% CC _____%
Lowest quality, no C _____% C _____%
interest
In default, in arrears - _____% D _____%
_____% _____%
</TABLE>
14
<PAGE>
(as a % of investments)
Securities not Rated by Moody's or S&P~
Investment Grade~ _____%
Lower Quality~~ _____%
Total _____%
~ The dollar-weighted average percentages reflected in the table may
include securities rated by other NRSROs, as well as unrated securities.
~~ As determined by N&B Management
Further information regarding the ratings assigned to securities
purchased by the Portfolios, and the meanings of those ratings, is
included in the SAI and the Funds' annual report.
Borrowings
------------------------------------------------------------------------
Each Portfolio has a fundamental policy that it may not borrow money,
except that it may (1) borrow money from banks for temporary or emergency
purposes and not for leveraging or investment and (2) enter into reverse
repurchase agreements for any purpose, so long as the aggregate amount of
borrowings and reverse repurchase agreements does not exceed one-third of
the Portfolio's total assets (including the amount borrowed) less
liabilities (other than borrowings). Neither Portfolio expects to borrow
money or to enter into reverse repurchase agreements. As a non-fundamental
policy, neither Portfolio may purchase portfolio securities if its
outstanding borrowings, including reverse repurchase agreements, exceed 5%
of its total assets. Dollar rolls are treated as reverse repurchase
agreements.
Other Investments
--------------------------------------------------------------------------
For temporary defensive purposes, each Portfolio may invest up to
100% of its total assets in cash or cash equivalents, commercial paper,
U.S. Government and Agency Securities and certain other money market
instruments, as well as repurchase agreements on U.S. Government and
Agency Securities, and may adopt shorter than normal weighted average
maturities or durations.
15
<PAGE>
Duration
--------------------------------------------------------------------------
Duration is a measure of the sensitivity of debt securities to
changes in market interest rates, based on the entire cash flow associated
with the securities, including interest payments occurring before the
final repayment of principal. N&B Management utilizes duration as a tool
in portfolio selection instead of the more traditional measure known as
"term to maturity." "Term to maturity" measures only the time until a debt
security provides its final payment, taking no account of the pattern of
the security's payments prior to maturity. Duration incorporates a bond's
yield, coupon interest payments, final maturity and call features into one
measure. Duration therefore provides a more accurate measurement of a
bond's likely price change in response to a given change in market
interest rates. The longer the duration, the greater the bond's price
movement will be as interest rates change. For any fixed income security
with interest payments occurring prior to the payment of principal,
duration is always less than maturity.
Futures, options and options on futures have durations which are
generally related to the duration of the securities underlying them.
Holding long futures or call option positions will lengthen a Portfolio's
duration by approximately the same amount as would holding an equivalent
amount of the underlying securities. Short futures or put options have
durations roughly equal to the negative duration of the securities that
underlie these positions, and have the effect of reducing portfolio
duration by approximately the same amount as would selling an equivalent
amount of the underlying securities.
There are some situations where even the standard duration
calculation does not properly reflect the interest rate exposure of a
security. For example, floating and variable rate securities often have
final maturities of ten or more years; however, their interest rate
exposure corresponds to the frequency of the coupon reset. Another
example where the interest rate exposure is not properly captured by
duration is the case of mortgage-backed securities. The stated final
maturity of such securities is generally 30 years, but current and
expected prepayment rates are critical in determining the securities'
interest rate exposure. In these and other similar situations, N&B
Management, where permitted, will use more sophisticated analytical
techniques that incorporate the economic life of a security into the
determination of its interest rate exposure.
PERFORMANCE INFORMATION
The performance of the Funds can be measured as YIELD or as TOTAL
return. The Portfolios invest in various kinds of fixed income securities,
so their performance is related to changes in interest rates. Generally,
investments in shorter-term income securities are less affected by
interest rate changes than are investments in longer-term income
16
<PAGE>
securities. For this reason, longer-term bond funds usually have higher
yields and carry more risk than shorter-term bond funds. The
creditworthiness of issuers of income securities also affects their risk;
for example, U.S. Government and Agency Securities are generally
considered to have less risk than bonds rated "investment grade."
The table under "Summary - The Funds and Portfolios" shows the
investment objective, principal types of investments, and comparative
information for each Fund and its corresponding Portfolio. This should
help you decide which Fund best fits your needs. For more detailed
information, see "Investment Programs" and "Description of Investments."
Further information regarding each Fund's performance is presented in its
annual report to shareholders, which is available without charge by
calling 800-877-9700.
Yield
------------------------------------------------------------------------
YIELD refers to the income generated by an investment over a
particular period of time, which is annualized (assumed to have been
generated for one year) and expressed as an annual percentage rate.
EFFECTIVE YIELD is yield assuming that all distributions are reinvested.
Total Return
------------------------------------------------------------------------
TOTAL RETURN is the change in value of an investment in a fund over a
particular period, assuming that all distributions have been reinvested.
Thus, total return reflects not only income earned, but also variations in
share prices from the beginning to the end of a period.
An average annual total return is a hypothetical rate of return that,
if achieved annually, would result in the same cumulative total return as
was actually achieved for the period. This smooths out year-to-year
variations in actual performance. Past results do not, of course,
guarantee future performance. Share prices may vary, and your shares when
redeemed may be worth more or less than your original purchase price.
Yield and Total Return Information
------------------------------------------------------------------------
You can obtain current performance information about each Fund by
calling N&B Management at 800-877-9700. N&B Management has reimbursed the
Funds for certain expenses, which has the effect of increasing their
yields and total returns.
17
<PAGE>
SPECIAL INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND OTHER
MATTERS
The Funds
-----------------------------------------------------------------------
Each Fund is a separate series of the Trust, a Delaware business
trust organized pursuant to a Trust Instrument dated as of May 6, 1993.
The Trust is registered under the Investment Company Act of 1940 (the
"1940 Act") as a diversified, open-end management investment company,
commonly known as a mutual fund. The Trust has two separate series. Each
Fund invests all of its net investable assets in its corresponding
Portfolio, in each case receiving a beneficial interest in that Portfolio.
The trustees of the Trust may establish additional series or classes of
shares without the approval of shareholders. The assets of each series
belong only to that series, and the liabilities of each series are borne
solely by that series and no other.
DESCRIPTION OF SHARES. Each Fund is authorized to issue an unlimited
number of shares of beneficial interest (par value $0.001 per share).
Shares of each Fund represent equal proportionate interests in the assets
of that Fund only and have identical voting, dividend, redemption,
liquidation, and other rights. All shares issued are fully paid and
non-assessable, and shareholders have no preemptive or other rights to
subscribe to any additional shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to hold
annual meetings of shareholders of the Funds. The trustees will call
special meetings of shareholders of a Fund only if required under the 1940
Act or in their discretion or upon the written request of holders of 10%
or more of the outstanding shares of that Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the
shareholders of a Fund will not be personally liable for the obligations
of any Fund; a shareholder is entitled to the same limitation of personal
liability extended to shareholders of a corporation. To guard against the
risk that Delaware law might not be applied in other states, the Trust
Instrument requires that every written obligation of the Trust or a Fund
contain a statement that such obligation may be enforced only against the
assets of the Trust or Fund and provides for indemnification out of Trust
or Fund property of any shareholder nevertheless held personally liable
for Trust or Fund obligations, respectively.
The Portfolios
-----------------------------------------------------------------------
Each Portfolio is a separate operating series of Managers Trust, a
New York common law trust organized as of December 1, 1992. Managers Trust
is registered under the 1940 Act as a diversified, open-end management
investment company. Managers Trust has seven separate operating
18
<PAGE>
portfolios. The assets of each Portfolio belong only to that Portfolio,
and the liabilities of each Portfolio are borne solely by that Portfolio
and no other.
FUNDS' INVESTMENTS IN PORTFOLIOS. Each Fund is a "feeder fund" that
seeks to achieve its investment objective by investing all of its net
investable assets in its corresponding Portfolio, which is a "master
fund." The Portfolio, which has the same investment objective, policies,
and limitations as the Fund, in turn invests in securities; its
corresponding Fund thus acquires an indirect interest in those securities.
Historically, N&B Management, which is the administrator of each Fund and
the investment manager of each Portfolio, has sponsored, with
Neuberger&Berman, traditionally structured mutual funds since 1950.
However, it has operated 11 master funds and 18 feeder funds since August
1993 and now operates 20 master funds and 32 feeder funds. This
"master/feeder fund" structure is depicted in the "Summary" on page 5.
Each Fund's investment in its corresponding Portfolio is in the form
of a non-transferable beneficial interest. Members of the general public
may not purchase a direct interest in a Portfolio. Two mutual funds that
are series of Neuberger&Berman Income Funds ("N&B Income Funds"),
Neuberger&Berman ULTRA SHORT Bond Fund and Neuberger&Berman LIMITED
MATURITY Bond Fund, invest all of their respective net investable assets
in the two Portfolios described herein. The shares of each series of N&B
Income Funds are available for purchase by members of the general public.
Each Portfolio may also permit other investment companies and/or other
institutional investors to invest in the Portfolio. All investors will
invest in a Portfolio on the same terms and conditions as a Fund and will
pay a proportionate share of the Portfolio's expenses. The Trust does not
sell its shares directly to members of the general public. Other investors
in a Portfolio (including the series of N&B Income Funds) that might sell
shares to members of the general public are not required to sell their
shares at the same public offering price as a Fund, could have a different
administration fee and expenses than a Fund, and (except N&B Income Funds)
might charge a sales commission. Therefore, Fund shareholders may have
different returns than shareholders in another investment company that
invests exclusively in the Portfolio. Information regarding any fund that
may invest in a Portfolio in the future will be available from N&B
Management by calling 800-877-9700.
The trustees of the Trust believe that investment in a Portfolio by a
series of N&B Income Funds or by other potential investors in addition to
a Fund may enable the Portfolio to realize economies of scale that could
reduce its operating expenses, thereby producing higher returns and
benefitting all shareholders. However, a Fund's investment in its
corresponding Portfolio may be affected by the actions of other large
investors in the Portfolio, if any. For example, if a large investor in a
Portfolio (other than a Fund) redeemed its interest in the Portfolio, the
Portfolio's remaining investors (including the Fund) might, as a result,
experience higher pro rata operating expenses, thereby producing lower
returns.
19
<PAGE>
Each Fund may withdraw its entire investment from its corresponding
Portfolio at any time, if the trustees of the Trust determine that it is
in the best interests of the Fund and its shareholders to do so. A Fund
might withdraw, for example, if there were other investors in a Portfolio
with power to, and who did by a vote of all investors (including the
Fund), change the investment objective, policies, or limitations of the
Portfolio in a manner not acceptable to the trustees of the Trust. A
withdrawal could result in a distribution in kind of portfolio securities
(as opposed to a cash distribution) by the Portfolio to the Fund. That
distribution could result in a less diversified portfolio of investments
for the Fund and could affect adversely the liquidity of the Fund's
investment portfolio. If the Fund decided to convert those securities to
cash, it usually would incur brokerage fees or other transaction costs. If
a Fund withdrew its investment from a Portfolio, the trustees of the Trust
would consider what action might be taken, including the investment of all
of the Fund's net investable assets in another pooled investment entity
having substantially the same investment objective as the Fund or the
retention by the Fund of its own investment manager to manage its assets
in accordance with its investment objective, policies, and limitations.
The inability of the Fund to find a suitable replacement could have a
significant impact on shareholders.
INVESTOR MEETINGS AND VOTING. Each Portfolio normally will not hold
meetings of investors except as required by the 1940 Act. Each investor in
a Portfolio will be entitled to vote in proportion to its relative
beneficial interest in the Portfolio. On most issues subjected to a vote
of investors, as required by the 1940 Act and other applicable law, a Fund
will solicit proxies from its shareholders and will vote its interest in
the Portfolio in proportion to the votes cast by the Fund's shareholders.
If there are other investors in a Portfolio, there can be no assurance
that any issue that receives a majority of the votes cast by Fund
shareholders will receive a majority of votes cast by all Portfolio
investors; indeed, if other investors hold a majority interest in a
Portfolio, they could have voting control of the Portfolio.
CERTAIN PROVISIONS. Each investor in a Portfolio, including a Fund,
will be liable for all obligations of the Portfolio. However, the risk of
an investor in a Portfolio incurring financial loss beyond the amount of
its investment on account of such liability would be limited to
circumstances in which the Portfolio had inadequate insurance and was
unable to meet its obligations out of its assets. Upon liquidation of a
Portfolio, investors would be entitled to share pro rata in the net assets
of the Portfolio available for distribution to investors.
20
<PAGE>
SHAREHOLDER SERVICES
How to Buy Shares
-----------------------------------------------------------------------
YOU CAN BUY AND OWN FUND SHARES ONLY THROUGH AN ACCOUNT WITH AN
INSTITUTION WHICH PROVIDES ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES
TO INVESTORS AND WHICH HAS AN ADMINISTRATIVE SERVICES AGREEMENT WITH N&B
MANAGEMENT. N&B Management and the Funds do not recommend, endorse, or
receive payments from any Institution. N&B Management compensates
Institutions for services they provide under an administrative services
agreement. N&B Management does not provide investment advice to any
Institution or its clients or make decisions regarding their investments.
Each Institution will establish its own procedures for the purchase
of Fund shares, including minimum initial and additional investments for
shares of each Fund and the acceptable methods of payment for shares.
Shares are purchased at the next price calculated on a day the New York
Stock Exchange ("NYSE") is open, after a purchase order is received and
accepted by an Institution. Prices for Fund shares are usually calculated
as of 4 p.m. Eastern time. Your Institution may be closed on days when the
NYSE is open. As a result, prices for shares of the Funds may be
significantly affected on days when you have no access to your Institution
to buy shares.
Other Information:
o An Institution must pay for shares it purchases in U.S. dollars.
o Each Fund has the right to suspend the offering of its shares for
a period of time. Each Fund also has the right to accept or
reject a purchase order in its sole discretion, including certain
purchase orders through an exchange of shares. See "Shareholder
Services - Exchanging Shares."
o The Funds will not issue a certificate for your shares.
How to Sell Shares
-------------------------------------------------------------------------
You can sell (redeem) all or some of your Fund shares only through an
account with an Institution. Each Institution will establish its own
procedures for the sale of Fund shares. Shares are sold at the next price
calculated on a day the NYSE is open, after a sales order is received and
accepted by an Institution. Prices for Fund shares are usually calculated
as of 4 p.m. Eastern time. Your Institution may be closed on days when the
NYSE is open. As a result, prices for shares of the Funds may be
significantly affected on days when you have no access to your Institution
to sell shares.
21
<PAGE>
Other Information:
o Redemption proceeds will be paid to Institutions as agreed with
each Fund but in any case within three business days (under
unusual circumstances a Fund may take longer, as permitted by
law).
o Each Fund may suspend redemptions or postpone payments on days
when the NYSE is closed (besides weekends and holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
Exchanging Shares
--------------------------------------------------------------------------
Through an account with an Institution, you may be able to exchange
shares of a Fund for shares of another Neuberger & Berman Fund(REGISTERED
TRADEMARK). Each Institution will establish its own exchange policy and
procedures. Shares are exchanged at the next price calculated on a day
the NYSE is open, after the exchange order is received and accepted by an
Institution.
o Shares can be exchanged only between accounts registered in the
same name, address, and taxpayer ID number of the Institution.
o An exchange can be made only into a mutual fund whose shares are
eligible for sale in the state where the Institution is located.
o An exchange may have tax consequences.
o Each Fund may refuse any exchange orders from any Institution if,
for any reason, they are deemed not to be in the best interests
of the Fund and its shareholders.
o Each Fund may impose other restrictions on the exchange
privilege, or modify or terminate the privilege, but will try to
give each Institution advance notice whenever it can reasonably
do so.
SHARE PRICES AND NET ASSET VALUE
Each Fund's shares are bought or sold at a price that is the Fund's
net asset value ("NAV") per share. The NAVs for each Fund and its
corresponding Portfolio are calculated by subtracting liabilities from
total assets (in the case of a Portfolio, the market value of the
securities the Portfolio holds plus cash and other assets; in the case of
a Fund, its percentage interest in its corresponding Portfolio, multiplied
by the Portfolio's NAV, plus any other assets). Each Fund's per share NAV
is calculated by dividing its NAV by the number of Fund shares outstanding
and rounding the result to the nearest full cent. Each Fund and its
corresponding Portfolio calculate their NAVs as of the close of regular
22
<PAGE>
trading on the NYSE, usually 4 p.m. Eastern time, on each day the NYSE is
open.
Each Portfolio values its securities on the basis of bid quotations
from independent pricing services or principal market makers, or, if
quotations are not available, by a method that the trustees of Managers
Trust believe accurately reflects fair value. The Portfolios periodically
verify valuations provided by the pricing services. Short-term securities
with remaining maturities of less than 60 days are valued at cost which,
when combined with interest earned, approximates market value.
DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES
Each Fund distributes substantially all of its share of any net
investment income (net of the Fund's expenses) and any net realized
capital gains earned by its corresponding Portfolio. Income dividends are
declared daily for each Fund at the time its NAV is calculated and are
paid monthly, and net realized capital gains, if any, are normally
distributed annually in December. Investors who are considering the
purchase of Fund shares in December should take this into account because
of the tax consequences of such distributions. Income dividends will
accrue beginning on the day after an investor's purchase order is
converted to "federal funds."
Distribution Options
------------------------------------------------------------------------
REINVESTMENT IN SHARES. All dividends and other distributions, paid
on shares of a Fund are automatically reinvested in additional shares of
that Fund, unless an Institution elects to receive them in cash. Dividends
are reinvested at the Fund's per share NAV on the last business day of
each month. Each other distribution is reinvested at the Fund's per share
NAV, usually as of the date the distribution is payable.
DISTRIBUTIONS IN CASH. An Institution may elect to receive dividends
in cash, with other distributions being reinvested in additional Fund
shares, or to receive all dividends and other distributions in cash.
Taxes
-----------------------------------------------------------------------
Each Fund intends to continue to qualify for treatment as a regulated
investment company for federal income tax purposes so that it will be
relieved of federal income tax on that part of its taxable income and
realized gains that it distributes to its shareholders.
An investment has certain tax consequences, depending on the type of
account and the type of Fund in which you invest. IF YOU HAVE AN ACCOUNT
UNDER A QUALIFIED RETIREMENT PLAN OR AN INDIVIDUAL RETIREMENT ACCOUNT,
TAXES ARE DEFERRED.
23
<PAGE>
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income
tax and may also be subject to state and local income taxes. Distributions
are taxable when they are paid, whether in cash or by reinvestment in
additional Fund shares, except that distributions declared in December to
shareholders of record on a date in that month and paid in the following
January are taxable as if they were paid on December 31 of the year in
which the distributions were declared. Investors who buy Fund shares just
before a Fund deducts a distribution from its NAV will pay the full price
for the shares and then receive a portion of the price back in the form of
a taxable distribution.
For federal income tax purposes, income dividends and distributions
of net short-term capital gain are taxed as ordinary income. Distributions
of net capital gain (the excess of net long-term capital gain over net
short-term capital loss), when designated as such, are generally taxed as
long-term capital gain no matter how long you have owned your shares.
Distributions of net capital gain may include gains from the sale of
portfolio securities that appreciated in value before you bought your
shares. Neuberger&Berman LIMITED MATURITY Bond Portfolio may invest in
municipal securities. Any distributions of income derived from these
securities, however, are not tax-exempt, because the Portfolio is not
permitted to invest the percentage of its assets in municipal securities
required under federal tax law in order for its corresponding Fund to be
eligible to distribute tax-free income.
Every January, each Fund will send each Institution that is a
shareholder therein a statement showing the amount of distributions paid
in the previous year. Information accompanying that statement shows the
portion of those distributions that generally are not taxable in certain
states.
TAXES ON REDEMPTIONS. Capital gains realized on redemption of Fund
shares, including redemptions in connection with exchanges to other
Neuberger&Berman Funds(REGISTERED TRADEMARK), are subject to tax. A
capital gain or loss is the difference between the amount paid for shares
(including the amount of any dividends and other distributions that were
reinvested) and the amount received when shares are sold.
When an Institution sells shares, it will receive a confirmation
statement showing the number of shares sold and the price. Every January,
Institutions will also receive a consolidated transaction statement for
the previous year.
Each Institution annually will send investors in its accounts
statements showing distribution and transaction information for the
previous year.
The foregoing is only a summary of some of the important tax
considerations affecting each Fund and its shareholders. See the SAI for
additional tax information. There may be other federal, state, local, or
24
<PAGE>
foreign tax considerations applicable to a particular investor. Therefore,
investors should consult their tax advisers.
MANAGEMENT AND ADMINISTRATION
Trustees and Officers
--------------------------------------------------------------------
The trustees of the Trust and the trustees of Managers Trust, who are
currently the same individuals, have oversight responsibility for the
operations of each Fund and each Portfolio, respectively. The SAI contains
general background information about each trustee and officer of the Trust
and of Managers Trust. The trustees and officers of the Trust and of
Managers Trust who are officers and/or directors of N&B Management and/or
principals of Neuberger&Berman serve without compensation from the Funds
or the Portfolios. The trustees of the Trust and of Managers Trust,
including a majority of those trustees who are not "interested persons"
(as defined in the 1940 Act) of the Trust or of Managers Trust, have
adopted written procedures reasonably appropriate to deal with potential
conflicts of interest between the Trust and Managers Trust, including, if
necessary, creating a separate board of trustees of Managers Trust.
Investment Manager, Administrator, Distributor, and Sub-Adviser
-------------------------------------------------------------------------
N&B Management serves as the investment manager of each Portfolio, as
administrator of each Fund, and as distributor of the shares of each Fund.
N&B Management and its predecessor firms have specialized in the
management of no-load mutual funds since 1950. In addition to serving the
two Portfolios, N&B Management currently serves as investment manager of
other mutual funds. Neuberger&Berman, which acts as sub-adviser for the
Portfolios and other mutual funds managed by N&B Management, also serves
as investment adviser of three other investment companies. The mutual
funds managed by N&B Management and Neuberger&Berman had aggregate net
assets of approximately $____ billion as of ______, 1996.
As sub-adviser, Neuberger&Berman furnishes N&B Management with
investment recommendations and research without added cost to the
Portfolios. Neuberger&Berman is a member firm of the NYSE and other
principal exchanges and may act as the Portfolios' principal broker to the
extent that a broker is used in the purchase and sale of portfolio
securities and the sale of covered call options. Neuberger&Berman and its
affiliates, including N&B Management, manage securities accounts that had
approximately $____ billion of assets as of ____________, 1996. All of the
voting stock of N&B Management is owned by individuals who are principals
of Neuberger&Berman.
Theodore P. Giuliano, the President and a Trustee of the Trust and of
Managers Trust, is a principal of Neuberger&Berman and a director and Vice
25
<PAGE>
President of N&B Management. Mr. Giuliano is the Manager of the Fixed
Income Group of Neuberger&Berman, which he helped to establish in 1984.
The Fixed Income Group manages fixed income accounts that had
approximately $_____ billion of assets as of ________, 1996.
The following members of the Fixed Income Group are, along with
Theodore Giuliano, primarily responsible for the day-to-day management of
the listed Portfolios:
Neuberger&Berman ULTRA SHORT Bond Portfolio -- Josephine P. Mahaney.
Ms. Mahaney, who has been a Senior Portfolio Manager in the Fixed Income
Group since 1984, and a Vice President of N&B Management since
November 1994, has been primarily responsible for Neuberger&Berman ULTRA
SHORT Bond Portfolio since July 1993. She was an Assistant Vice President
of N&B Management from 1986 to 1994.
Neuberger&Berman LIMITED MATURITY Bond Portfolio -- Thomas G. Wolfe.
Mr. Wolfe has been primarily responsible for Neuberger&Berman LIMITED
MATURITY Bond Portfolio since October 1995. He has been a Senior
Portfolio Manager in the Fixed Income Group since July 1993, Director of
Fixed Income Credit Research since July 1993 and a Vice President of N&B
Management since October 1995. From November 1987 to June 1993, he was
Vice President in the Corporate Finance Department of Standard & Poor's.
The principals and employees of Neuberger&Berman and officers and
employees of N&B Management, together with their families, have invested
over $100 million of their own money in Neuberger&Berman Funds(REGISTERED
TRADEMARK).
To mitigate the possibility that a Portfolio will be adversely
affected by employees' personal trading, the Trust, Managers Trust, N&B
Management, and Neuberger&Berman have adopted policies that restrict
securities trading in the personal accounts of the portfolio managers and
others who normally come into possession of information on portfolio
transactions.
Expenses
-------------------------------------------
N&B Management provides investment management services to each
Portfolio that include, among other things, making and implementing
investment decisions and providing facilities and personnel necessary to
operate the Portfolio. N&B Management provides administrative services to
each Fund that include furnishing similar facilities and personnel for the
Fund and performing accounting, recordkeeping, and other services for
Institutions and their accounts. For such administrative services, each
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<PAGE>
Fund pays N&B Management a fee at the annual rate of 0.50% of that Fund's
average daily net assets. With a Fund's consent, N&B Management may
subcontract to third parties, including Institutions, some of its
responsibilities to that Fund under the administration agreement and may
compensate third parties that provide such services. For investment
management services, each Portfolio pays N&B Management a fee at the
annual rate of 0.25% of the first $500 million of the Portfolio's average
daily net assets, 0.225% of the next $500 million, 0.20% of the next
$500 million, 0.175% of the next $500 million, and 0.15% of average daily
net assets in excess of $2 billion. During the fiscal year ended
October 31, 1996, each Fund accrued administration fees, and a pro rata
portion of the corresponding Portfolio's management fees, of ____% of each
Fund's average daily net assets.
Each Fund bears all expenses of its operations other than those
borne by N&B Management as administrator of the Fund and as distributor of
its shares. Each Portfolio bears all expenses of its operations other than
those borne by N&B Management as investment manager of the Portfolio.
These expenses include, but are not limited to, for the Funds and
Portfolios, legal and accounting fees and compensation for trustees who
are not affiliated with N&B Management; for the Funds, transfer agent fees
and the cost of printing and sending reports and proxy materials to
shareholders; and for the Portfolios, custodial fees for securities.
See "Expense Information -- Annual Fund Operating Expenses" for
information about how these fees and expenses may affect the value of your
investment.
N&B Management has voluntarily undertaken to reimburse each Fund for
its Operating Expenses (including its administration fees) and its pro
rata share of its corresponding Portfolio's Operating Expenses (including
its management fees) that exceed, in the aggregate, the following
percentage per annum of the Fund's average daily net assets:
Neuberger&Berman ULTRA SHORT Bond Trust 0.75%
Neuberger&Berman LIMITED MATURITY Bond Trust 0.80%
Each undertaking can be terminated by N&B Management by giving a Fund
at least 60 days' prior written notice. The effect of reimbursement by
N&B Management is to reduce a Fund's expenses and thereby increase its
total return.
For the fiscal year ended October 31, 1996, each Fund bore total
operating expenses as a percentage of its average daily net assets (after
taking into consideration N&B Management's expense reimbursement for each
Fund), as follows:
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<PAGE>
Neuberger&Berman ULTRA SHORT Bond Trust
Neuberger&Berman LIMITED MATURITY Bond Trust
Transfer Agent
-------------------------------------------------------------------------
The Funds' transfer agent is State Street Bank and Trust Company
("State Street"). State Street administers purchases, redemptions, and
transfers of Fund shares with respect to Institutions and the payment of
dividends and other distributions to Institutions. All correspondence
should be sent to Neuberger&Berman Funds, Institutional Services,
605 Third Avenue, 2nd Floor, New York, NY 10158-0180.
DESCRIPTION OF INVESTMENTS
In addition to the securities referred to in "Investment Programs"
herein, each Portfolio, as indicated below, may make the following
investments, among others, individually or in combination, although it may
not necessarily buy all of the types of securities or use all of the
investment techniques that are described. For additional information on
the following investments or other types of investments which the
Portfolios may make, see the SAI.
U.S. GOVERNMENT AND AGENCY SECURITIES. U.S. Government Securities are
obligations of the U.S. Treasury backed by the full faith and credit of
the United States. U.S. Government Agency Securities are issued or
guaranteed by U.S. Government agencies, or by instrumentalities of the
U.S. Government, such as the Government National Mortgage Association
("GNMA"), Federal National Mortgage Association ("FNMA"), Federal Home
Loan Mortgage Corporation ("FHLMC"), Student Loan Marketing Association,
and Tennessee Valley Authority. Some U.S. Government Agency Securities are
supported by the full faith and credit of the United States, while others
may be supported by the issuer's ability to borrow from the U.S. Treasury,
subject to the Treasury's discretion in certain cases, or only by the
credit of the issuer. U.S. Government Agency Securities include U.S.
Government mortgage-backed securities. The market prices of U.S.
Government Securities are not guaranteed by the Government and generally
fluctuate with changing interest rates.
VARIABLE AND FLOATING RATE SECURITIES. Variable and floating rate
securities have interest rate adjustment formulas that may help to
stabilize their market value. Many of these instruments carry a demand
feature which permits a Portfolio to sell them during a determined time
period at par value plus accrued interest. The demand feature is often
backed by a credit instrument, such as a letter of credit, or by a
creditworthy insurer. A Portfolio may rely on the credit instrument or the
creditworthiness of the insurer in purchasing a variable or floating rate
security. For purposes of determining its dollar-weighted average
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<PAGE>
maturity, each Portfolio calculates the remaining maturity of variable and
floating rate instruments as provided in Rule 2a-7 under the 1940 Act.
REPURCHASE AGREEMENTS/SECURITIES LOANS. In a repurchase agreement, a
Portfolio buys a security from a Federal Reserve member bank or a
securities dealer and simultaneously agrees to sell it back at a higher
price, at a specified date, usually less than a week later. The underlying
securities must fall within the Portfolio's investment policies and
limitations (but not limitations as to maturity or duration). The
Portfolios also may lend portfolio securities to banks, brokerage firms or
institutional investors to earn income. Costs, delays, or losses could
result if the selling party to a repurchase agreement or the borrower of
portfolio securities becomes bankrupt or otherwise defaults. N&B
Management monitors the creditworthiness of sellers and borrowers.
ILLIQUID SECURITIES. Each Portfolio may invest up to 10% of its net
assets in illiquid securities which are securities that cannot be expected
to be sold within seven days at approximately the price at which they are
valued. Due to the absence of an active trading market, a Portfolio may
experience difficulty in valuing or disposing of illiquid securities. N&B
Management determines the liquidity of the Portfolios' securities, under
general supervision of the trustees of Managers Trust.
RESTRICTED SECURITIES AND RULE 144A SECURITIES. Each Portfolio may
invest in restricted securities and Rule 144A securities. Restricted
securities cannot be sold to the public without registration under the
Securities Act of 1933 ("1933 Act"). Unless registered for sale, these
securities can be sold only in privately negotiated transactions or
pursuant to an exemption from registration. Rule 144A securities, although
not registered, may be resold to qualified institutional buyers in
accordance with Rule 144A under the 1933 Act. Unregistered securities may
also be sold abroad pursuant to Regulation S under the 1933 Act. Foreign
securities that are freely tradeable in their principal market are not
considered restricted securities even if they are not registered for sale
in the United States. Restricted securities are generally considered
illiquid. N&B Management, acting pursuant to guidelines established by the
trustees of Managers Trust, may determine that some restricted or Rule
144A securities are liquid.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. In a reverse
repurchase agreement, a Portfolio sells securities to a bank or securities
dealer and simultaneously agrees to repurchase the same securities at a
higher price on a specific date. During the period before the repurchase,
the Portfolio continues to receive principal and interest payments on the
securities. A Portfolio will maintain a segregated account consisting of
cash or appropriate liquid securities to cover its obligations under
reverse repurchase agreements. Dollar rolls are similar to reverse
repurchase agreements. In a dollar roll, a Portfolio sells securities for
delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type and coupon) securities on a specified
29
<PAGE>
future date from the same party. During the period before the repurchase,
the Portfolio forgoes principal and interest payments on the securities.
The Portfolio is compensated by the difference between the current sales
price and the forward price for the future purchase (often referred to as
the "drop"), as well as by the interest earned on the cash proceeds of the
initial sale. Reverse repurchase agreements and dollar rolls may increase
the fluctuation in a Portfolio's and its corresponding Fund's NAV and may
be viewed as a form of leverage. N&B Management monitors the
creditworthiness of parties to reverse repurchase agreements and dollar
rolls.
WHEN-ISSUED TRANSACTIONS. In a when-issued transaction, a Portfolio
commits to purchase securities at a future date (generally within three
months) in order to secure an advantageous price and yield at the time of
the commitment and pays for the securities when they are delivered. If the
seller fails to complete the sale, a Portfolio may lose the opportunity to
obtain a favorable price and yield. When-issued securities may decline or
increase in value during the period from the Portfolio's investment
commitment to the settlement of the purchase, which may magnify
fluctuations in a Portfolio's and its corresponding Fund's NAVs.
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities represent
interests in, or are secured by and payable from, pools of mortgage loans,
including collateralized mortgage obligations. These securities include
U.S. Government mortgage-backed securities, which are 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 GNMA,
FNMA, and FHLMC certificates. Other mortgage-backed securities are issued
by private issuers, generally originators of and investors in mortgage
loans. These issuers include savings associations, mortgage bankers,
commercial banks, investment bankers, and special purpose entities.
Private mortgage-backed securities may be supported by U.S. Government
mortgage-backed securities or some form of non-governmental credit
enhancement. Mortgage-backed securities may have either fixed or
adjustable interest rates. Tax or regulatory changes may adversely affect
the mortgage securities market. In addition, changes in the market's
perception of the issuer may affect the value of mortgage-backed
securities. The rate of return on mortgage-backed securities may be
affected by prepayments of principal on the underlying loans, which
generally increase as market interest rates decline; as a result, when
interest rates decline, holders of these securities normally do not
benefit from appreciation in market value to the same extent as holders of
other non-callable debt securities. N&B Management determines the
effective life of mortgage-backed securities based on industry practice
and current market conditions. If N&B Management's determination is not
borne out in practice, it could positively or negatively affect the value
of the Portfolio when market interest rates change. Increasing market
interest rates generally extend the effective maturities of
mortgage-backed securities, increasing their sensitivity to interest rate
charges.
30
<PAGE>
ASSET-BACKED SECURITIES. Asset-backed securities represent interests
in, or are secured by and payable from, pools of assets, such as consumer
loans, CARS(SERVICEMARK) ("Certificates for Automobile Receivables"),
credit card receivables, and installment loan contracts. Although these
securities may be supported by letters of credit or other credit
enhancements, payment of interest and principal ultimately depends upon
individuals paying the underlying loans, which may be affected adversely
by general downturns in the economy. The risk that recovery on repossessed
collateral might be unavailable or inadequate to support payments on
asset-backed securities is greater than in the case of mortgage-backed
securities.
FOREIGN INVESTMENTS. The Portfolios may invest in U.S.
dollar-denominated foreign securities. Foreign securities may be affected
by potentially adverse local political, economic, social or diplomatic
developments in foreign countries, the investment significance of which
may be difficult to discern. Foreign companies may not be subject or
diplomatic to accounting standards or governmental supervision comparable
to U.S. companies, and there may be less public information about their
operations. In addition, foreign markets may be less liquid or more
volatile than U.S. markets and may offer less protection to investors. It
may be difficult to invoke legal process or enforce contractual
obligations abroad. Neuberger&Berman LIMITED MATURITY Bond Portfolio may
invest in foreign securities denominated in or indexed to foreign
currencies. Such securities may also be affected by special risks, such
as governmental regulation of foreign exchange transactions and the
fluctuation of the foreign currencies relative to the U.S. dollar which
could result in losses, irrespective of the performance of the underlying
investment. In addition, Neuberger&Berman LIMITED MATURITY Bond Portfolio
may enter into forward foreign currency contracts or futures contracts
(agreements to exchange one currency for another at a specified price at a
future date) and related options to manage currency risks and to
facilitate transactions in foreign securities. Although these contracts
can protect the Portfolio from adverse exchange rate changes, they involve
a risk of loss if N&B Management fails to predict foreign currency values
correctly; see the discussion of Hedging Instruments, below.
PUT AND CALL OPTIONS, FUTURES CONTRACTS, AND OPTIONS ON FUTURES
CONTRACTS. Each Portfolio may try to reduce the risk of securities price
changes (hedge) or manage portfolio duration by (1) entering into
interest-rate futures contracts traded on futures exchanges and
(2) purchasing and writing options on futures contracts. Neuberger&Berman
LIMITED MATURITY Bond Portfolio also may write covered call options and
purchase put options on debt securities in its portfolio or on foreign
currencies for hedging purposes or for the purpose of producing income.
Neuberger&Berman LIMITED MATURITY Bond Portfolio will write a call option
on a security or currency only if it holds that security or currency or
has the right to obtain the security or currency at no additional cost.
These investment practices involve certain risks, including price
volatility and a high degree of leverage. The Portfolios may engage in
transactions in futures contracts and related options only as permitted by
regulations of the Commodity Futures Trading Commission.
31
<PAGE>
The primary risks in using put and call options, futures contracts,
options on futures contracts, forward foreign currency contracts or
options on foreign currencies ("Hedging Instruments") are (1) imperfect
correlation or no correlation between changes in market value of the
securities or currencies held by a Portfolio and the prices of Hedging
Instruments; (2) possible lack of a liquid secondary market for Hedging
Instruments and the resulting inability to close out Hedging Instruments
when desired; (3) the fact that use of Hedging Instruments is a highly
specialized activity that involves skills, techniques, and risks
(including price volatility and a high degree of leverage) different from
those needed to select a Portfolio's securities; and (4) the fact that,
although use of these instruments for hedging purposes can reduce the risk
of loss, they also can reduce the opportunity for gain, or even result in
losses, by offsetting favorable price movements in hedged investments.
When a Portfolio uses Hedging Instruments, the Portfolio will place cash
or appropriate liquid securities in a segregated account, or will cover
its position, to the extent required by SEC staff policy. Another risk of
Hedging Instruments is the possible inability of a Portfolio to purchase
or sell a security at a time that would otherwise be favorable for it to
do so, or the possible need for a Portfolio to sell a security at a
disadvantageous time, due to its need to maintain "cover" or to segregate
securities in connection with its use of these instruments. Futures,
options, and forward contracts are considered "derivatives." Losses that
may arise from certain futures transactions are potentially unlimited.
MUNICIPAL OBLIGATIONS (NEUBERGER&BERMAN LIMITED MATURITY BOND
PORTFOLIO). Municipal obligations are issued by or on behalf of states,
the District of Columbia, and U.S. territories and possessions and their
political subdivisions, agencies, and instrumentalities. The interest on
municipal obligations is exempt from federal income tax. Municipal
obligations include "general obligation" securities, which are backed by
the full taxing power of a municipality, and "revenue" securities, which
are backed by the full taxing power of a municipality, and "revenue"
securities, and "revenue" securities, which are backed by the income from
a specific project, facility, or tax. Municipal obligations also include
industrial development and other private activity bonds -- the interest on
which may be a tax preference item for purposes of the federal alternative
minimum tax -- which are issued by or on behalf of public authorities and
are not backed by the credit of any governmental or public authority.
"Anticipation notes" 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. Current efforts to restructure the federal budget and the
relationship between the federal government and state and local
governments may adversely 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. Efforts are underway that may result in a
32
<PAGE>
restructuring of the federal income tax system. These developments could
reduce the value of all municipal securities or the securities of
particular issuers.
ZERO COUPON SECURITIES. Zero coupon securities do not pay interest
currently; instead, they are sold at a deep discount from their face value
and are redeemed at face value when they mature. Because zero coupon
securities do not pay current income, their prices can be very volatile
when interest rates change. In calculating their daily income, the
Portfolios accrue a portion of the difference between a zero coupon
security's purchase price and its face value.
USE OF JOINT PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
---------------------------------------------------------------
Each Fund and its corresponding Portfolio acknowledges that it is
solely responsible for all information or lack of information about that
Fund and Portfolio in this Prospectus or in the SAI, and no other Fund or
Portfolio is responsible therefor. The trustees of the Trust and of
Managers Trust have considered this factor in approving each Fund's use of
a single combined Prospectus and combined SAI.
33
<PAGE>
OTHER INFORMATION
DIRECTORY
Investment Manager, Administrator,
Rand Distributor
Neuberger&Berman Management Incorporated
605 Third Avenue, 2nd Floor
New York, NY 10158-0180
Sub-Adviser
Neuberger&Berman, LLC
605 Third Avenue
New York, NY 10158-3698
Custodian and Transfer Agent
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Address correspondence to:
Neuberger&Berman Funds
Institutional Services
605 Third Avenue
2nd Floor
New York, NY 10158-0180
800-877-9700
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW, 2nd Floor
Washington, DC 20036-1800
FUNDS ELIGIBLE FOR EXCHANGE
Equity Trust
Neuberger&Berman
Focus Trust
Neuberger&Berman
Genesis Trust
Neuberger&Berman
Guardian Trust
Neuberger&Berman
Manhattan Trust
Neuberger&Berman
Partners Trust
Income Trust
Neuberger&Berman
Limited Maturity Bond Trust
Neuberger&Berman
Ultra Short Bond Trust
Neuberger&Berman, Neuberger&Berman Management Inc., and the above named
Funds are service marks of Neuberger&Berman Management Inc.
(COPYRIGHT)1996 Neuberger&Berman Management Inc.
34
<PAGE>
_________________________________________________________________
NEUBERGER & BERMAN INCOME TRUST AND PORTFOLIOS
STATEMENT OF ADDITIONAL INFORMATION
DATED FEBRUARY 3, 1997
Neuberger & Berman Neuberger & Berman
Ultra Short Bond Trust Limited Maturity Bond Trust
(and Neuberger & Berman (and Neuberger & Berman
Ultra Short Bond Limited Maturity Bond
Portfolio) Portfolio)
No-Load Mutual Funds
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
_________________________________________________________________
Neuberger & Berman ULTRA SHORT Bond Trust ("ULTRA SHORT")
and Neuberger & Berman LIMITED MATURITY Bond Trust ("LIMITED MATURITY")
(each a "Fund") are no-load mutual funds that offer shares pursuant to a
Prospectus dated February 3, 1997. The above-named Funds invest all of
their net investable assets in Neuberger & Berman ULTRA SHORT Bond
Portfolio and Neuberger & Berman LIMITED MATURITY Bond Portfolio (each a
"Portfolio"), respectively.
AN INVESTOR CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN
ACCOUNT WITH A BROKER-DEALER, PENSION PLAN ADMINISTRATOR, OR OTHER
INSTITUTION (EACH AN "INSTITUTION") THAT PROVIDES ACCOUNTING,
RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND THAT HAS AN
ADMINISTRATIVE SERVICES AGREEMENT WITH NEUBERGER & BERMAN MANAGEMENT
INCORPORATED ("N&B MANAGEMENT").
The Funds' Prospectus provides basic information that an
investor should know before investing. A copy of the Prospectus may be
obtained, without charge, from N&B Management, Institutional Services, 605
Third Avenue, 2nd Floor, New York, NY 10158-0180 or by calling 800-877-
9700.
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 Fund or its distributor. The Prospectus and
this SAI do not constitute an offering by a Fund or its distributor in any
jurisdiction in which such offering may not lawfully be made.
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
-----------------
Page
----
<S> <C>
INVESTMENT INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 1
Investment Policies and Limitations . . . . . . . . . . . . 1
Rating Agencies . . . . . . . . . . . . . . . . . . . . . . 5
Theodore P. Giuliano and Josephine P. Mahaney: Portfolio
Co-Managers of Neuberger & Berman Ultra Short
Bond Portfolio . . . . . . . . . . . . . . . . . . . 5
Theodore P. Giuliano and Thomas G. Wolfe: Portfolio
Co-Managers of Neuberger & Berman Limited
Maturity Bond Portfolio
Additional Investment Information . . . . . . . . . . . . . 7
Risks of Fixed Income Securities . . . . . . . . . . . . . . 26
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 26
Yield Calculations . . . . . . . . . . . . . . . . . . . . . 26
Total Return Computations . . . . . . . . . . . . . . . . . 27
Comparative Information . . . . . . . . . . . . . . . . . . 28
Other Performance Information . . . . . . . . . . . . . . . . 29
CERTAIN RISK CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . 30
TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . 30
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES . . . . . . . . . . 36
Investment Manager and Administrator . . . . . . . . . . . . 36
Sub-Adviser . . . . . . . . . . . . . . . . . . . . . . . . 38
Investment Companies Managed . . . . . . . . . . . . . . . . 39
Management and Control of N&B Management . . . . . . . . . . 42
DISTRIBUTION ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 43
ADDITIONAL EXCHANGE INFORMATION . . . . . . . . . . . . . . . . . . . 43
ADDITIONAL REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . 45
DIVIDENDS AND OTHER DISTRIBUTIONS . . . . . . . . . . . . . . . . . . 46
ADDITIONAL TAX INFORMATION . . . . . . . . . . . . . . . . . . . . . 47
Taxation of the Funds . . . . . . . . . . . . . . . . . . . 47
Taxation of the Portfolios . . . . . . . . . . . . . . . . . 48
Taxation of the Funds' Shareholders . . . . . . . . . . . . 51
- i -
<PAGE>
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 51
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . 52
REPORTS TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 52
CUSTODIAN AND TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . 52
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . 52
LEGAL COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES . . . . . . . . . 53
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . 54
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 54
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
RATINGS OF SECURITIES . . . . . . . . . . . . . . . . . . . 55
Appendix B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
THE ART OF INVESTMENT: A CONVERSATION WITH ROY NEUBERGER . . 58
</TABLE>
- ii -
<PAGE>
INVESTMENT INFORMATION
Each Fund is a separate operating series of Neuberger &
Berman Income Trust ("Trust"), a Delaware business trust that is
registered with the Securities and Exchange Commission ("SEC") as an open-
end management investment company. Each Fund seeks its investment
objective by investing all of its net investable assets in a Portfolio of
Income Managers Trust ("Managers Trust") that has an investment objective
identical to, and a name similar to, that of the Fund. Each Portfolio, in
turn, invests in securities in accordance with an investment objective,
policies, and limitations identical to those of its corresponding Fund.
(The Trust and Managers Trust, which is an open-end management investment
company managed by N&B Management, are together referred to below as the
"Trusts.")
The following information supplements the discussion in
the Prospectus of the investment objective, policies, and limitations of
each Fund and Portfolio. The investment objective and, unless otherwise
specified, the investment policies and limitations of each Fund and
Portfolio are not fundamental. Although any investment policy or
limitation that is not fundamental may be changed by the trustees of the
Trust ("Fund Trustees") or of Managers Trust ("Portfolio Trustees")
without shareholder approval, each Fund intends to notify its shareholders
before changing its investment objective or implementing any material
change in any non-fundamental policy or limitation. The fundamental
investment policies and limitations of a Fund or a Portfolio may not be
changed without the approval of the lesser of (1) 67% of the total units
of beneficial interest ("shares") of the Fund or Portfolio represented at
a meeting at which more than 50% of the outstanding Fund or Portfolio
shares are represented or (2) a majority of the outstanding shares of the
Fund or Portfolio. These percentages are required by the Investment
Company Act of 1940 ("1940 Act") and are referred to in this SAI as a
"1940 Act majority vote." Whenever a Fund is called upon to vote on a
change in a fundamental investment policy or limitation of its
corresponding Portfolio, the Fund casts its votes thereon in proportion to
the votes of its shareholders at a meeting thereof called for that
purpose.
Investment Policies and Limitations
-----------------------------------
Each Fund has the following fundamental investment
policy, to enable it to invest in its corresponding Portfolio:
Notwithstanding any other investment policy of the Fund,
the Fund may invest all of its investable assets (cash,
securities, and receivables relating to securities) in an
open-end management investment company having substan-
tially the same investment objective, policies, and
limitations as the Fund.
<PAGE>
All other fundamental investment policies and limitations
and the non-fundamental investment policies and limitations of each Fund
are identical to those of its corresponding Portfolio. Therefore,
although the following discusses the investment policies and limitations
of the Portfolios, it applies equally to their corresponding Funds.
For purposes of the investment limitation on
concentration in a particular industry, N&B Management determines the
"issuer" of a municipal obligation that is not a general obligation note
or bond based on the obligation's 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 Neuberger & Berman LIMITED
MATURITY Bond Portfolio's quality restrictions, the issuer of the letter
of credit or the guarantee is considered an issuer of the obligation. If
an obligation meets the Portfolio's quality restrictions without credit
support, the Portfolio treats the commercial developer or the industrial
user, rather than the governmental entity or the guarantor, as the only
issuer of the obligation, even if the obligation is backed by a letter of
credit or other guarantee.
Except for the limitation on borrowing and the limitation
on ownership of portfolio securities by officers and trustees, 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 Portfolio.
The Portfolios' fundamental investment policies and
limitations are as follows:
1. Borrowing. Neither Portfolio may borrow money,
except that a Portfolio may (i) borrow money from banks for temporary or
emergency purposes and not for leveraging or investment and (ii) enter
into reverse repurchase agreements; 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 Portfolio's
total assets, that Portfolio 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. Neither Portfolio may 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 Portfolio from purchasing futures contracts or options
(including options on futures contracts, but excluding options or futures
contracts on physical commodities) or from investing in securities of any
kind.
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<PAGE>
3. Diversification. Neither Portfolio may, 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 ("U.S. Government
and Agency Securities")) if, as a result, (i) more than 5% of the value of
the Portfolio's total assets would be invested in the securities of that
issuer or (ii) the Portfolio would hold more than 10% of the outstanding
voting securities of that issuer.
4. Industry Concentration. Neither Portfolio may
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 (i) purchases of U.S. Government and Agency
Securities, or (ii) investments by Neuberger & Berman ULTRA SHORT Bond
Portfolio in certificates of deposit ("CDs") or banker's acceptances
issued by domestic branches of U.S. banks. Mortgage- and asset-backed
securities are considered to be a single industry.
5. Lending. Neither Portfolio may 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. Neither Portfolio may purchase real
estate unless acquired as a result of the ownership of securities or
instruments, but this restriction shall not prohibit a Portfolio from
purchasing 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. Neither Portfolio may issue
senior securities, except as permitted under the 1940 Act.
8. Underwriting. Neither Portfolio may underwrite
securities of other issuers, except to the extent that a Portfolio, in
disposing of portfolio securities, may be deemed to be an underwriter
within the meaning of the Securities Act of 1933 ("1933 Act").
The Portfolios' non-fundamental investment policies and
limitations are as follows:
1. Investments in Any One Issuer. Neuberger &
Berman ULTRA SHORT Bond Portfolio may not purchase the securities of any
one issuer (other than U.S. Government and Agency Securities) if, as a
result, more than 5% of the Portfolio's total assets would be invested in
the securities of that issuer.
2. Illiquid Securities. Neither Portfolio may
purchase any security if, as a result, more than 10% of its net assets
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<PAGE>
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 Portfolio has valued
the securities, such as repurchase agreements maturing in more than seven
days.
3. Unseasoned Issuers. Neither Portfolio may
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 Portfolio's 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 purposes of this limitation, pass-through
entities and other special purpose vehicles or pools of financial assets
are not considered to be business enterprises.
4. Ownership of Portfolio Securities by Officers and
Trustees. Neither Portfolio may purchase or retain the securities of any
issuer if, to the knowledge of N&B Management, those officers and trustees
of Managers Trust and officers and directors of N&B Management who each
owns individually more than 1/2 of 1% of the outstanding securities of
such issuer, together own more than 5% of such securities.
5. Investments in Other Investment Companies.
Neither Portfolio may 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.
6. Oil and Gas Programs. Neither Portfolio may
invest in participations or other direct interests in oil, gas, or other
mineral exploration or development programs or leases.
7. Borrowing. Neither Portfolio may purchase secu-
rities if outstanding borrowings, including any reverse repurchase agree-
ments, exceed 5% of its total assets.
8. Lending. Except for the purchase of debt
securities and engaging in repurchase agreements, neither Portfolio may
make any loans other than securities loans.
9. Margin Transactions. Neither Portfolio may
purchase securities on margin from brokers or other lenders, except that a
Portfolio may obtain such short-term credits as are necessary for the
clearance of securities transactions. 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.
10. Short Sales. Neither Portfolio may sell
securities short, unless it owns, or has the right to obtain without
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<PAGE>
payment of additional consideration securities equivalent in kind and
amount to the securities sold. Transactions in forward contracts, futures
contracts and options shall not constitute selling securities short.
11. Puts, Calls, Straddles, or Spreads. Neither
Portfolio may invest in puts, calls, straddles, spreads, or any
combination thereof, except that each Portfolio may (i) purchase
securities with rights to put the securities to the seller in accordance
with its investment program and (ii) purchase call options and write
(sell) put options to close out options previously written by the
Portfolio, and Neuberger & Berman LIMITED MATURITY Bond Portfolio may
write covered call options and purchase put options. The Portfolios do
not construe the foregoing limitation to preclude them from purchasing or
selling options on futures contracts or from purchasing securities with
rights to put the security to the issuer or a guarantor.
12. Real Estate Limited Partnerships. Neither
Portfolio may invest in partnership or similar interests in real estate
limited partnerships.
Rating Agencies
---------------
As discussed in the Prospectus, the Portfolios may
purchase securities rated by Standard & Poor's ("S&P"), Moody's Investors
Service, Inc. ("Moody's"), 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, duration, coupon, and rating may have different yields.
Although the Portfolios may rely on the ratings of any NRSRO, the Port-
folios primarily refer to ratings assigned by S&P and Moody's, which are
described in Appendix A to this SAI.
Theodore P. Giuliano and Josephine P. Mahaney: Portfolio Co-Managers of
Neuberger & Berman ULTRA SHORT Bond Portfolio
------------------------------------------------------------------------
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 almost always
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 fund's portfolio, while an increase in rates usually
reduces the value of those securities. As a result, interest rate
fluctuations will affect a bond fund's net asset value (and total return)
but not necessarily the income received by the fund from its portfolio
securities. Both the yield and risk to principal usually increase as the
duration of the bond increases.
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<PAGE>
So looking at yield alone carries high risk because the
highest yielding bonds historically tend to be the ones with the longest
durations. The risk to principal in these bonds can be nearly as great as
the risk in stocks and may not produce the same reward.
ULTRA SHORT is appropriate for investors who seek current
income with minimal risk to principal and liquidity.
Theodore P. Giuliano and Thomas G. Wolfe: Portfolio Co-Managers of
Neuberger & Berman LIMITED MATURITY Bond Portfolio
-------------------------------------------------------------------
LIMITED MATURITY is intended for investors who seek the
highest current income with less volatility and risk than that of a
longer-term bond fund. The Fund's corresponding Portfolio provides active
fixed income portfolio management through investments in securities with
an average portfolio duration of no longer than four years. Studies of
historical bond returns have shown that risk-adjusted total returns were
best in bonds having durations of two to five years. The bonds in this
duration range have provided significantly higher returns than shorter-
term securities and nearly the same return as longer-term fixed income
securities with far less volatility. The portfolio managers attempt to
increase the Portfolio's value by actively managing duration in response
to interest rate trends and fundamental economic developments. They seek
to protect principal by shortening duration when interest rates are rising
and enhance returns by lengthening duration in a falling interest rate
market.
LIMITED MATURITY also enhances return and limits risk by
following a broadly diversified investment program across the various
sectors of the fixed income market. Over long periods of time, corporate,
mortgage- and asset-backed bonds have provided higher returns than
Treasury securities. Relying on extensive internal research, the
portfolio managers attempt to increase the value of the Portfolio by
purchasing securities at significant yield premiums to Treasury bonds.
Neuberger & Berman uses sector weightings, which are based on an analysis
of the key factors that it believes will impact the relative value and
risk for each sector. These factors include the economic cycle, credit
quality trends and supply/demand analysis for each security type. Within
the sectors found attractive, individual bonds are rigorously analyzed for
credit, cash flow and liquidity risk. Those that appear to offer
attractive risk reward ratios are purchased. While overall portfolio
quality is high, Neuberger & Berman believes that, by careful evaluation
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<PAGE>
of credit risk, the Portfolio benefits from the inclusion of lower-rated
bonds with only moderate incremental increase in risk.
Additional Investment Information
---------------------------------
Some or all of the Portfolios, 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 (Both Portfolios). Repurchase
agreements are agreements under which a Portfolio purchases securities
from a bank that is a member of the Federal Reserve System or from a
securities dealer that agrees to repurchase the securities from the
Portfolio at a higher price on a designated future date. Repurchase
agreements generally are for a short period of time, usually less than a
week. Repurchase agreements with a maturity of more than seven days are
considered to be illiquid securities. Neither Portfolio may enter into
such a repurchase agreement 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 Portfolio may enter into a repurchase
agreement only if (1) the underlying securities are of the type (excluding
maturity and duration limitations) that the Portfolio's 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 repurchase price, and (3) payment for the
underlying securities is made only upon satisfactory evidence that the
securities are being held for the Portfolio's account by its custodian or
a bank acting as the Portfolio's agent.
Securities Loans (Both Portfolios). In order to realize
income, each Portfolio 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. Borrowers
are required continuously to secure their obligations to return securities
on loan from the Portfolio by depositing collateral in a form determined
to be satisfactory by the Portfolio Trustees. The collateral, which must
be marked to market daily, must be equal to at least 100% of the market
value of the loaned securities, which will also be marked to market daily.
N&B Management 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 (Both
Portfolios). Each Portfolio may invest in restricted securities, which
are securities that may not be sold to the public without an effective
registration statement under the 1933 Act. Before they are registered,
such securities may be sold only in a privately negotiated transaction or
pursuant to an exemption from registration. In recognition of the
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<PAGE>
increased size and liquidity of the institutional market for unregistered
securities and the importance of institutional investors in the formation
of capital, the SEC has adopted Rule 144A under the 1933 Act. Rule 144A
is designed further to 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 Portfolio qualify under Rule 144A and an institutional market
develops for those securities, the Portfolio 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
increase the level of a Portfolio's illiquidity. N&B Management, acting
under guidelines established by the Portfolio Trustees, may determine that
certain securities qualified for trading under Rule 144A are liquid.
Foreign securities that are freely tradeable in their principal market are
not considered to be restricted. Regulation S under the 1933 Act permits
the sale abroad of securities that are not registered for sale in the
United States.
Where registration is required, a Portfolio 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 Portfolio may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market
conditions were to develop, the Portfolio might obtain a less favorable
price than prevailed when it decided to sell. To the extent restricted
securities, including Rule 144A securities, are illiquid, purchases
thereof will be subject to each Portfolio's 10% limit on investments in
illiquid securities. Restricted securities for which no market exists are
priced by a method that the Portfolio Trustees believe accurately reflects
fair value.
Commercial Paper (Both Portfolios). Commercial paper is
a short-term debt security issued by a corporation, bank, municipality, or
other issuer, usually for purposes such as financing current operations.
Each Portfolio may invest in commercial paper that cannot be resold to the
public without an effective registration statement under the 1933 Act.
While restricted commercial paper normally is deemed illiquid, N&B
Management may in certain cases determine that such paper is liquid,
pursuant to guidelines established by the Portfolio Trustees.
Reverse Repurchase Agreements (Both Portfolios). In a
reverse repurchase agreement, a Portfolio sells 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 the Portfolios' investment policies
and limitations concerning borrowings. While a reverse repurchase
agreement is outstanding, a Portfolio 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
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<PAGE>
at least equal to the Portfolio's 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 Portfolio.
Banking and Savings Institution Securities (Both Portfo-
lios). The Portfolios 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 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. 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 the Portfolios invest typically are not
covered by deposit insurance.
A Portfolio may invest in securities issued by a commer-
cial 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 insti-
tution, 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 Port-
folio. These limitations do not prohibit investments in securities issued
by foreign branches of U.S. banks that meet the foregoing requirements.
The Portfolios do not currently intend to invest in any security issued by
a foreign savings institution.
Variable or Floating Rate Securities; Demand and Put
Features (Both Portfolios). 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 a specified interest rate or
index changes. The interest rate on variable and floating rate securities
(collectively, "Adjustable 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 Adjustable Rate Securities in which the Portfolios
invest frequently permit the holder to demand payment of the obligations'
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, some Adjustable Rate Securities might not meet the
Portfolios' quality standards. Accordingly, in purchasing these
securities, each Portfolio relies primarily on the creditworthiness of the
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<PAGE>
credit instrument issuer or the insurer. A Portfolio may 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 Portfolio can also buy fixed rate securities
accompanied by a demand feature or by a put option, which permits the
Portfolio to sell the security to the issuer or third party at a specified
price. A Portfolio may rely on the creditworthiness of issuers of the
credit enhancements in purchasing these securities.
In calculating its maturity and duration, each Portfolio
is permitted to treat certain Adjustable Rate Securities as maturing on a
date prior to the date on which the final repayment of principal must
unconditionally be made. 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 (Both Portfolios). 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 (such as the
Government National Mortgage Association ("GNMA"), Federal National
Mortgage Association ("FNMA"), and Federal Home Loan Mortgage Corporation
("FHLMC")), though not necessarily backed by the full faith and credit of
the United States, or may be issued by private issuers.
Because many mortgages are repaid early, the actual
maturity and duration of mortgage-backed securities are typically shorter
than their stated final maturity and their duration calculated solely on
the basis of the stated life and payment schedule. In calculating its
maturity and duration, a Portfolio may apply certain industry conventions
regarding the maturity and duration of mortgage-backed instruments.
Different analysts use different models and assumptions in making these
determinations. The Portfolios use an approach that N&B Management
believes is reasonable in light of all relevant circumstances.
Mortgage-backed securities may be issued in the form of
collateralized mortgage obligations ("CMOs") or mortgage-backed bonds.
CMOs are obligations that are fully collateralized, directly or
indirectly, by a pool of mortgages; payments of principal and interest on
the mortgages 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
that are fully collateralized, directly or indirectly, by a pool of
mortgages. The mortgages serve as collateral for the issuer's payment
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<PAGE>
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
the effective maturity or the duration 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). To the extent that rising
interest rates cause prepayments to occur at a slower than expected rate,
a CMO could be converted into a longer-term security that is subject to
greater risk of price volatility.
Governmental, government-related, and private entities
(such as commercial banks, savings institutions, private mortgage
insurance companies, mortgage bankers, and other secondary market issuers,
including securities broker-dealers and special purpose entities that
generally are affiliates of the foregoing established to issue such secu-
rities) may create mortgage loan pools to back mortgage pass-through and
mortgage-collateralized investments. 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
governmental and government-related pools because of the absence of direct
or indirect government or agency guarantees. Various forms of insurance
or guarantees, including individual loan, title, pool, and hazard
insurance and letters of credit, may support timely payment of interest
and principal of non-governmental pools. Governmental entities, private
insurers, and mortgage poolers issue these forms of insurance and
guarantees. N&B Management considers such insurance and guarantees, as
well as the creditworthiness of the issuers thereof, in determining
whether a mortgage-backed security meets a Portfolio's investment quality
standards. There can be no assurance that private insurers or guarantors
can meet their obligations under insurance policies or guarantee
arrangements.
A Portfolio may buy mortgage-backed securities without
insurance or guarantees, if N&B Management determines that the securities
meet the Portfolio's quality standards. A Portfolio may not purchase
mortgage-backed securities that, in N&B Management's opinion, are illiquid
if, as a result, more than 10% of the Portfolio's net assets would be
invested in illiquid securities. N&B Management will, consistent with the
Portfolios' investment 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.
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<PAGE>
Asset-Backed Securities (Both Portfolios). The
Portfolios may purchase asset-backed securities, including commercial
paper. Asset-backed securities represent direct or indirect parti-
cipations 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 through the use of trusts and special purpose corporations.
Credit enhancements, such as various forms of cash collateral accounts or
letters of credit, may support payments of principal and interest on
asset-backed securities. Asset-backed securities are subject to the same
risk of prepayment described with respect to mortgage-backed securities.
The risk that recovery on repossessed collateral might be unavailable or
inadequate to support payments, however, is greater for asset-backed
securities than for mortgage-backed securities.
Certificates for Automobile Receivables(SERVICEMARK)
("CARS(SERVICEMARK)") 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 those contracts.
Payments of principal and interest on the underlying contracts 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(SERVICEMARK) if the trust
does not realize the full amounts due on underlying installment sales
contracts because of unanticipated legal or administrative costs of
enforcing the contracts; depreciation, damage, or loss of the vehicles
securing the contracts; or other factors.
Credit card receivable securities are backed by receiv-
ables 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 their
maturity or duration, most such securities provide for a fixed period
during which only interest payments on the underlying Accounts are passed
through to the security holder; principal payments received on the
Accounts are used to fund the transfer of additional credit card charges
made on the Accounts to the pool of assets supporting the securities.
Usually, the initial fixed period may be shortened if specified events
occur which signal a potential deterioration in the quality of the assets
backing the security, such as the imposition of a cap on interest rates.
An issuer's ability to extend the life of an issue of credit card
receivable securities thus depends on the continued generation of
principal amounts in the underlying Accounts and the non-occurrence of the
specified events. The non-deductibility of consumer interest, as well as
competitive and general economic factors, could adversely affect the rate
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<PAGE>
at which new receivables are created in an Account and conveyed to an
issuer, thereby 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 those laws give a holder
the right to set off certain amounts against balances owed on the credit
card, thereby reducing amounts paid on Accounts. In addition, unlike the
collateral for most other asset-backed securities, Accounts are unsecured
obligations of the cardholder.
U.S. Dollar-Denominated Foreign Debt Securities (Both
Portfolios). The Portfolios may invest in U.S. dollar-denominated debt
securities of foreign issuers (including banks, governments and quasi-
governmental organizations) and foreign branches of U.S. banks, including
negotiable CDs, bankers' acceptances, and commercial paper. These
investments are subject to each Portfolio's quality, maturity, and
duration standards. While investments in foreign securities are intended
to reduce risk by providing further diversification, 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, less
governmental supervision and regulation of financial markets, reduced
liquidity of certain financial markets, and the lack of uniform
accounting, auditing, and financial reporting standards or the application
of standards that are different or less stringent than those applied in
the United States.
Foreign Currency Denominated Foreign Securities
(Neuberger & Berman LIMITED MATURITY Bond Portfolio). The Portfolio may
invest in debt or other income-producing securities (of issuers in
countries whose governments are considered stable by N&B Management) that
are denominated in or indexed to foreign currencies, including (1) CDs,
commercial paper, fixed time deposits, and bankers' acceptances issued by
foreign banks, (2) obligations of other corporations, and (3) obligations
of foreign governments or their subdivisions, agencies, and instrumentali-
ties, international agencies, and supranational entities. Investing in
foreign currency denominated securities includes the special risks asso-
ciated with investing in non-U.S. issuers described in the preceding
section and the additional risks of (1) adverse changes in foreign
exchange rates, (2) nationalization, expropriation, or confiscatory taxa-
tion, and (3) adverse changes in investment or exchange control
regulations (which could prevent cash from being brought back to the
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United States). Additionally, dividends and interest payable on foreign
securities may be subject to foreign taxes, including taxes withheld from
those 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 custodial fees than apply to
domestic custody arrangements, and transaction costs of foreign currency
conversions.
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 the Portfolio are uninvested and no return is earned
thereon. The inability of the Portfolio to make intended security
purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to the
Portfolio due to subsequent declines in value of the portfolio securities
or, if the Portfolio has entered into a contract to sell the securities,
could result in possible liability to the purchaser.
Interest rates prevailing in other countries may affect
the prices of foreign securities and exchange rates for foreign
currencies. Local factors, including the strength of the local economy,
the demand for borrowing, the government's fiscal and monetary policies,
and the international balance of payments, often affect the interest rates
in other countries. 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.
In order to limit the risks inherent in investing in
foreign currency denominated securities, the Portfolio may not purchase
any such security if, after such purchase, more than 25% of its net assets
(taken at market value) would be invested in foreign currency denominated
securities. Within that limitation, however, the Portfolio is not
restricted in the amount it may invest in securities denominated in any
one foreign currency.
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Dollar Rolls (Both Portfolios). In a "dollar roll," a
Portfolio sells securities for delivery in the current month and
simultaneously agrees to repurchase substantially similar (i.e., same type
and coupon) securities on a specified future date from the same party. A
"covered roll" is a specific type of dollar roll in which the Portfolio
holds an offsetting cash position or a cash-equivalent securities position
that matures on or before the forward settlement date of the dollar roll
transaction. Dollar rolls are considered borrowings for purposes of the
Portfolios' investment policies and limitations concerning borrowings.
There is a risk that the contra-party will be unable or unwilling to
complete the transaction as scheduled, which may result in losses to the
Portfolio.
When-Issued Transactions (Both Portfolios). The
Portfolios may purchase securities (including mortgage-backed securities
such as GNMA, FNMA, and FHLMC certificates) on a when-issued basis. In
such a transaction, a Portfolio commits to purchase securities at a future
date (to secure what N&B Management believes to be an advantageous price
and yield at the time of the commitment) and pays for the securities when
they are delivered. For instance, in periods of falling interest rates
and rising prices, a Portfolio might purchase a security on a when-issued
basis and sell a similar security to settle such purchase, thereby
obtaining the benefit of currently higher yields. When-issued purchases
are negotiated directly with the other party, and such commitments are not
traded on an exchange.
The value of securities purchased on a when-issued basis
and any subsequent fluctuations in their value are reflected in the
computation of a Portfolio's net asset value ("NAV") starting on the date
of the agreement to purchase the securities. Because the Portfolio has
not yet paid for the securities, this produces an effect similar to
leverage. The Portfolio does not earn interest on securities it has
committed to purchase until the securities are paid for and delivered on
the settlement date. Settlement of when-issued purchase transactions
generally takes place within two months, although a Portfolio may agree to
a longer settlement period.
A Portfolio will purchase securities on a when-issued
basis only with the intention of completing the transaction and actually
purchasing the securities. If deemed advisable as a matter of investment
strategy, however, a Portfolio may dispose of or renegotiate a commitment
after it has been entered into. A Portfolio also may sell securities it
has committed to purchase before those securities are delivered to the
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<PAGE>
Portfolio on the settlement date. The Portfolio may realize capital gains
or losses in connection with these transactions.
When a Portfolio purchases securities on a when-issued
basis, it will maintain in a segregated account with its custodian, until
payment is made, cash or appropriate liquid securities having an aggregate
market value (determined daily) at least equal to the amount of the
Portfolio's purchase commitments. This procedure is designed to ensure
that the Portfolio maintains sufficient assets at all times to cover its
obligations under when-issued purchases.
Futures Contracts and Options Thereon (Both Portfolios).
The Portfolios may purchase and sell interest rate and bond index futures
contracts and options thereon and Neuberger & Berman LIMITED MATURITY Bond
Portfolio may purchase and sell foreign currency futures contracts (with
interest rate and bond index futures contracts, "Futures" or "Futures
Contracts") and options thereon. The Portfolios engage in interest rate
and bond index Futures and options transactions in an attempt to hedge
against changes in securities prices resulting from changes in prevailing
interest rates; Neuberger & Berman LIMITED MATURITY Bond Portfolio engages
in foreign currency Futures and options transactions in an attempt to
hedge against changes in prevailing currency exchange rates. Because the
futures markets may be more liquid than the cash markets, the use of
Futures permits a Portfolio to enhance portfolio liquidity and maintain a
defensive position without having to sell portfolio securities. The Port-
folios do not engage in transactions in Futures or options thereon for
speculation. The Portfolios view investment in (1) interest rate and bond
index Futures and options thereon as a maturity or duration management
device and/or a device to reduce risk and preserve total return in an
adverse interest rate environment for the hedged securities and
(2) foreign currency Futures and options thereon as a means of estab-
lishing more definitely the effective return on, or the purchase price of,
securities denominated in foreign currencies held or intended to be
acquired by them.
A "sale" of a Futures Contract (or a "short" Futures
position) entails the assumption of a contractual obligation to deliver
the securities or currency underlying the contract at a specified price at
a specified future time. A "purchase" of a Futures Contract (or a "long"
Futures position) entails the assumption of a contractual obligation to
acquire the securities or currency underlying the contract at a specified
price at a specified future time. Certain Futures, including bond index
Futures, are settled on a net cash payment basis rather than by the sale
and delivery of the securities underlying the Futures.
U.S. Futures (except certain currency Futures) are traded
on exchanges that have been designated as "contract markets" by the
Commodity Futures Trading Commission ("CFTC"); Futures transactions must
be executed through a futures commission merchant that is a member of the
relevant contract market. The exchange's affiliated clearing organization
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guarantees performance of the contracts between the clearing members of
the exchange.
Although Futures Contracts by their terms may require the
actual delivery or acquisition of the underlying securities or currency,
in most cases the contractual obligation is extinguished by being offset
before the expiration of the contract, without the parties having to make
or take delivery of the assets. A Futures position is offset by buying
(to offset an earlier sale) or selling (to offset an earlier purchase) an
identical Futures Contract calling for delivery in the same month.
"Margin" with respect to Futures is the amount of assets
that must be deposited by a Portfolio with, or for the benefit of, a
futures commission merchant in order to initiate and maintain the
Portfolio's Futures positions. The margin deposit made by a Portfolio
when it enters into a Futures Contract ("initial margin") is intended to
assure its performance of the contract. If the price of the Futures
Contract changes -- increases in the case of a short (sale) position or
decreases in the case of a long (purchase) position -- so that the
unrealized loss on the contract causes the margin deposit not to satisfy
margin requirements, the Portfolio will be required to make an additional
margin deposit ("variation margin"). However, if favorable price changes
in the Futures Contract cause the margin on deposit to exceed the required
margin, the excess will be paid to the Portfolio. In computing its daily
NAV, each Portfolio marks to market the value of its open Futures
positions. A Portfolio also must make margin deposits with respect to
options on Futures that it has written. If the futures commission
merchant holding the deposit goes bankrupt, the Portfolio could suffer a
delay in recovering its funds and could ultimately suffer a loss.
An option on a Futures Contract gives the purchaser the
right, in return for the premium paid, to assume a position in the
contract (a long position if the option is a call and a short position if
the option is a put) at a specified exercise price at any time during the
option exercise period. The writer of the option is required upon
exercise to assume a short Futures position (if the option is a call) or a
long Futures position (if the option is a put). Upon exercise of the
option, the assumption of offsetting Futures positions by the writer and
holder of the option is accompanied by delivery of the accumulated cash
balance in the writer's Futures margin account. That balance represents
the amount by which the market price of the Futures Contract at exercise
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option.
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Although each Portfolio believes that the use of Futures
Contracts will benefit it, if N&B Management's judgment about the general
direction of the markets is incorrect, a Portfolio's overall return would
be lower than if it had not entered into any such contracts. The prices
of Futures are volatile and are influenced by, among other things, actual
and anticipated changes in interest or currency exchange rates, which in
turn are affected by fiscal and monetary policies and by national and
international political and economic events. At best, the correlation
between changes in prices of Futures and of the securities and currencies
being hedged can be only approximate. Decisions regarding whether, when,
and how to hedge involve skill and judgment. Even a well-conceived hedge
may be unsuccessful to some degree because of unexpected market behavior
or interest rate or currency exchange rate trends, or lack of correlation
between the futures markets and the securities markets. Because of the
low margin deposits required, Futures trading involves an extremely high
degree of leverage; as a result, a relatively small price movement in a
Futures Contract may result in an immediate and substantial loss, or gain,
to the investor. Losses that may arise from certain Futures transactions
are potentially unlimited.
Most U.S. futures exchanges limit the amount of fluctua-
tion in the price of a Futures Contract or option thereon during a single
trading day; once the daily limit has been reached, no trades may be made
on that day at a price beyond that limit. The daily limit governs only
price movements during a particular trading day, however; it thus does not
limit potential losses. In fact, it may increase the risk of loss,
because prices can move to the daily limit for several consecutive trading
days with little or no trading, thereby preventing liquidation of
unfavorable Futures and options positions and subjecting investors to
substantial losses. If this were to happen with respect to a position
held by a Portfolio, it could (depending on the size of the position) have
an adverse impact on the NAV of the Portfolio.
Put and Call Options (Neuberger & Berman LIMITED MATURITY
Bond Portfolio). The Portfolio may write and purchase put and call
options on securities. Generally, the purpose of writing and purchasing
these options is to reduce the effect of price fluctuations of securities
held by the Portfolio on the Portfolio's and its corresponding Fund's
NAVs. The Portfolio may also write covered call options to earn premium
income. Portfolio securities on which call and put options may be written
and purchased by the Portfolio are purchased solely on the basis of
investment considerations consistent with the Portfolio's investment
objective.
The Portfolio will receive a premium for writing a put
option, which obligates the Portfolio to acquire a security at a certain
price at any time until a certain date if the purchaser of the option
decides to exercise the option. The Portfolio may be obligated to
purchase the underlying security at more than its current value.
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<PAGE>
When the Portfolio 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. The Portfolio would
purchase a put option in order to protect itself against a decline in the
market value of a security it owns.
When the Portfolio writes a call option, it is obligated
to sell a security to a purchaser at a specified price at any time until a
certain date if the purchaser decides to exercise the option. The
Portfolio receives a premium for writing the option. The Portfolio writes
only "covered" call options on securities it owns. So long as the
obligation of the call option continues, the Portfolio may be assigned an
exercise notice, requiring it to deliver the underlying security against
payment of the exercise price. The Portfolio may be obligated to deliver
securities underlying a call option at less than the market price, thereby
giving up any additional gain on the security.
When the Portfolio 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. The Portfolio would purchase a
call option in order to protect against an increase in the price of
securities it intends to purchase or to offset a previously written call
option.
The writing of covered call options is a conservative
investment technique that is believed to involve relatively little risk
(in contrast to the writing of "naked" or uncovered call options, which
the Portfolio will not do), but is capable of enhancing the Portfolio's
total return. When writing a covered call option, the Portfolio, 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, the Portfolio, in return for the
premium, takes the risk that it must purchase the underlying security at a
price which may be higher than the current market price of the security.
If a call or put option that the Portfolio has written expires
unexercised, the Portfolio 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 option is exercised, the Portfolio will realize a
gain or loss from the sale of the underlying security.
The exercise price of an option may be below, equal to,
or above the market value of the underlying security at the time the
option is written. Options normally have expiration dates between three
and nine months from the date written. 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
transaction" to purchase an option of the same series. If an option is
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<PAGE>
purchased by the Portfolio and is never exercised, the Portfolio will lose
the entire amount of the premium paid.
Options are traded both on national securities exchanges
and in the over-the-counter ("OTC") market. Exchange-traded options in
the U.S. are issued by a clearing organization affiliated with the
exchange on which the option is listed; the clearing organization in
effect guarantees completion of every exchange-traded option. In
contrast, OTC options are contracts between the Portfolio and a counter-
party, with no clearing organization guarantee. Thus, when the Portfolio
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
transaction" with the dealer to whom (or from whom) the Portfolio
originally sold (or purchased) the option. There can be no assurance that
the Portfolio would be able to liquidate an OTC option at any time prior
to expiration. Unless the Portfolio 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 until different cover is substituted. In the event of the
counter-party's insolvency, the Portfolio may be unable to liquidate its
options position and the associated cover. N&B Management monitors the
creditworthiness of dealers with which the Portfolio may engage in OTC
options transactions, and limits the Portfolio's counter-parties 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 for OTC options written by the
Portfolio will be considered illiquid unless the OTC options are sold to
qualified dealers who agree that the Portfolio 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 the Portfolio when it
writes (or purchases) an 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 interest rate environment. The premium received by the
Portfolio for writing an option is recorded as a liability on the
Portfolio's statement of assets and liabilities. This liability is
adjusted daily to the option's current market value, which is the last
sales price before the time the Portfolio's NAV is computed on the day the
option is being valued or, in the absence of any trades thereof on that
day, the mean between the bid and asked prices as of that time.
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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 the Portfolio to
write another call option on the underlying security with a different
exercise price or expiration date or both. If the Portfolio desires to
sell a security on which it has written a call option, it will seek to
effect a closing transaction prior to, or concurrently with, the sale of
the security. There is, of course, no assurance that the Portfolio will
be able to effect closing transactions at favorable prices. If the
Portfolio 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
at market risk on the security.
The Portfolio 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.
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 the
Portfolio; however, the Portfolio could be in a less advantageous position
than if it had not written the call option.
The Portfolio pays 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. From
time to time, the Portfolio 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.
Options on Foreign Currencies (Neuberger & Berman LIMITED
MATURITY Bond Portfolio). The Portfolio may write and purchase covered
call and put options on foreign currencies. The Portfolio would engage in
such transactions to protect against declines in the U.S. dollar value of
portfolio securities or increases in the U.S. dollar cost of securities to
be acquired, or to protect the dollar equivalent of dividends, interest,
or other payments on those securities. As with other types of options,
however, writing an option on foreign currency constitutes only a partial
hedge, up to the amount of the premium received, and the Portfolio could
be required to purchase or sell foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The risks of currency options
are similar to the risks of other options, discussed herein. 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.
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Forward Foreign Currency Contracts (Neuberger & Berman
LIMITED MATURITY Bond Portfolio). The Portfolio may enter into contracts
for the purchase or sale of a specific foreign currency at a future date
at a fixed price ("forward contracts"). The Portfolio enters into forward
contracts in an attempt to hedge against changes in prevailing currency
exchange rates. The Portfolio does not engage in transactions in forward
contracts for speculation; it views investments in forward contracts as a
means of establishing more definitely the effective return on, or the
purchase price of, securities denominated in foreign currencies that are
held or intended to be acquired by it. Forward contract transactions
include forward sales or purchases of foreign currencies for the purpose
of protecting the U.S. dollar value of securities held or to be acquired
by the Portfolio that are denominated in a foreign currency or protecting
the U.S. dollar equivalent of dividends, interest, or other payments on
those securities.
N&B Management believes that the use of foreign currency
hedging techniques, including "proxy-hedges," can help protect against
declines in the U.S. dollar value of income available for distribution and
declines in the Portfolio's NAV resulting from adverse changes in currency
exchange rates. For example, the return available from securities denomi-
nated in a particular foreign currency would diminish if the value of the
U.S. dollar increased against that currency. Such a decline could be
partially or completely offset by an increase in value of a hedge involv-
ing a forward contract to sell that foreign currency or a proxy-hedge
involving a forward contract to sell a different foreign currency whose
behavior is expected to resemble the currency in which the securities
being hedged are denominated and which is available on more advantageous
terms. N&B Management believes that hedges and proxy-hedges can,
therefore, provide significant protection of NAV in the event of a general
rise in the U.S. dollar against foreign currencies. However, a hedge or
proxy-hedge cannot protect against exchange rate risks perfectly, and, if
N&B Management is incorrect in its judgment of future exchange rate
relationships, the Portfolio could be in a less advantageous position than
if such a hedge or proxy-hedge had not been established. If the Portfolio
uses proxy-hedging, it may experience losses on both the currency in which
it has invested and the currency used for hedging if the two currencies do
not vary with the expected degree of correlation. Because forward
contracts are not traded on an exchange, the assets used to cover such
contracts may be illiquid.
Regulatory Limitations on Using Futures, Options on
Futures, Options on Securities and Foreign Currencies, and Forward
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Contracts (collectively, "Hedging Instruments"). To the extent a
Portfolio sells or purchases Futures Contracts and/or writes options
thereon or options on foreign currencies that are traded on an exchange
regulated by the CFTC other than for bona fide hedging purposes (as
defined by the CFTC), the aggregate initial margin and premiums on these
positions (excluding the amount by which options are "in-the-money") may
not exceed 5% of the Portfolio's net assets.
In addition, (1) the aggregate premiums paid by a
Portfolio on all options (both exchange-traded and OTC) held by it at any
time may not exceed 20% of its net assets and (2) the aggregate margin
deposits required on all exchange-traded Futures Contracts and related
options held at any time by a Portfolio may not exceed 5% of its total
assets. Neuberger & Berman LIMITED MATURITY Bond Portfolio does not
currently intend to purchase a put option if, as a result, more than 5% of
its total assets would be invested in put options.
General Risks of Hedging Instruments. The primary risks
in using Hedging Instruments are (1) imperfect correlation or no
correlation between changes in market value of the securities or currency
held or to be acquired by a Portfolio and changes in market value of
Hedging Instruments; (2) possible lack of a liquid secondary market for
Hedging Instruments and the resulting inability to close out Hedging
Instruments when desired; (3) the fact that the skills needed to use
Hedging Instruments are different from those needed to select a
Portfolio's securities; (4) the fact that, although use of these
instruments for hedging purposes can reduce the risk of loss, they also
can reduce the opportunity for gain, or even result in losses, by
offsetting favorable price movements in hedged investments; and (5) the
possible inability of a Portfolio to purchase or sell a portfolio security
at a time that would otherwise be favorable for it to do so, or the
possible need for a Portfolio to sell a portfolio security at a
disadvantageous time, due to its need to maintain "cover" or to segregate
securities in connection with its use of Hedging Instruments. N&B
Management intends to reduce the risk of imperfect correlation by
investing only in Hedging Instruments whose behavior is expected to
resemble or offset that of a Portfolio's underlying securities or
currency. N&B Management intends to reduce the risk that a Portfolio will
be unable to close out Hedging Instruments by entering into such transac-
tions only if N&B Management believes there will be an active and liquid
secondary market. Hedging Instruments used by the Portfolios are
generally considered "derivatives." There can be no assurance that a
Portfolio's use of Hedging Instruments will be successful.
The Portfolios' use of Hedging Instruments may be limited
by the provisions of the Internal Revenue Code of 1986, as amended
("Code"), with which each Portfolio must comply if its corresponding Fund
is to continue to qualify as a regulated investment company ("RIC"). See
"Additional Tax Information -- Taxation of Portfolios."
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Cover for Hedging Instruments. Each Portfolio will com-
ply with SEC guidelines regarding cover for Hedging Instruments and, if
the guidelines so require, set aside in a segregated account with its
custodian the prescribed amount of cash or appropriate liquid securities.
Securities held in a segregated account cannot be sold while the Futures,
option, or forward strategy covered by those securities is outstanding,
unless they are replaced with other suitable assets. As a result,
segregation of a large percentage of a Portfolio's assets could impede
portfolio management or the Portfolio's ability to meet current
obligations. A Portfolio may be unable promptly to dispose of assets
which cover, or are segregated with respect to, an illiquid Futures,
options, or forward position; this inability may result in a loss to the
Portfolio.
Indexed Securities (Neuberger & Berman LIMITED MATURITY
Bond Portfolio). The Portfolio may invest in securities whose value is
linked to interest rates, commodities, foreign currencies, indices, or
other financial indicators ("indexed securities"). Most indexed secu-
rities are short- to intermediate-term fixed income securities whose
values at maturity or interest rate rise or fall according to the change
in one or more specified underlying instruments. The value of indexed
securities may increase or decrease if the underlying instrument
appreciates, and they may have return characteristics similar to direct
investment in the underlying instrument or to one or more options thereon.
An indexed security may be more volatile than the underlying instrument
itself.
Zero Coupon Securities (Both Portfolios). Each Portfolio
may invest in zero coupon securities, which are debt obligations that do
not entitle the holder to any periodic payment of interest prior to
maturity or that specify a future date when the securities begin to pay
current interest. Zero coupon securities are issued and traded at a
discount from their face amount or par value. This 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 ratably by a Portfolio prior to the
receipt of any actual payments. Because each Fund must distribute
substantially all of its net income (including its pro rata share of its
corresponding Portfolio's original issue discount) to its shareholders
each year for income and excise tax purposes (see "Additional Tax Informa-
tion -- Taxation of the Funds"), a Portfolio may have to dispose of
portfolio securities under disadvantageous circumstances to generate cash,
or may be required to borrow, to satisfy its corresponding Fund's
distribution requirements.
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The market prices of zero coupon securities generally are
more volatile than the prices of securities that pay interest periodi-
cally. Zero coupon securities are likely to respond to changes in
interest rates to a greater degree than other types of debt securities
having similar maturities and credit quality.
Municipal Obligations (Neuberger & Berman LIMITED
MATURITY Bond Portfolio). This Portfolio may invest up to 5% of its net
assets in municipal obligations, which are securities 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. Municipal obligations
include "general obligation" 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" 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 (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 Portfolio's investments in
municipal obligations, whereas a decline in interest rates generally will
increase that value. Efforts are underway that may result in a
restructuring of the federal income tax system. Any of these factors
could affect the value of municipal securities.
Risks of Fixed Income Securities
--------------------------------
Fixed income securities are subject to the risk of an
issuer's inability to meet principal and interest payments on its
obligations ("credit risk") and are 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.
Changes in economic conditions or developments regarding the individual
issuer are more likely to cause price volatility and weaken the capacity
of the issuer of such securities to make principal and interest payments
- 25 -
<PAGE>
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.
Subsequent to its purchase by a Portfolio, an issue of
debt securities may cease to be rated or its rating may be reduced, so
that the securities would no longer be eligible for purchase by that
Portfolio. In such a case, N&B Management will engage in an orderly
disposition of the downgraded securities to the extent necessary to ensure
that the Portfolio's holdings of such securities will not exceed 5% of its
net assets.
PERFORMANCE INFORMATION
Each Fund's performance figures are based on historical
results and are not intended to indicate future performance. The yield
and total return of each Fund will vary. The share price of each Fund will
vary, and an investment in a Fund, when redeemed, may be worth more or
less than an investor's original cost.
Yield Calculations
------------------
Each Fund 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 an investment.
The annualized yields for LIMITED MATURITY and ULTRA
SHORT for the 30-day period ended October 31, 1996, were ____% and ____%,
respectively.
Total Return Computations
-------------------------
Each Fund 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:
n
P(1+T) = ERV
- 26 -
<PAGE>
Average annual total return smooths out year-to-year
variations in performance and, in that respect, differs from actual year-
to-year results.
Although LIMITED MATURITY and ULTRA SHORT did not
commence operations until August 30, 1993 and September 7, 1993,
respectively, each Fund's investment objective, limitations, and policies
are the same as those of another mutual fund administered by N&B
Management, which has a name similar to the Fund's and invests in the same
Portfolio ("Sister Fund"). Each Sister Fund had a predecessor. The
following total return data is for each Fund since its inception and, for
periods prior to each Fund's inception, its Sister Fund and that Sister
Fund's predecessor. The total returns for periods prior to the Funds'
inception would have been lower had they reflected the higher fees of the
Funds, as compared to those of the Sister Funds and their predecessors.
The average annual total returns for ULTRA SHORT, its
Sister Fund and that Sister Fund's predecessor for the one- and five-year
periods ended October 31, 1996, and for the period November 7, 1986
(commencement of operations of the Sister Fund's predecessor) through
October 31, 1996, were _____%, _____%, and _____%, respectively. If an
investor had invested $10,000 in that predecessor's shares on November 7,
1986 and had reinvested all capital gain distributions and income
dividends, the NAV of that investor's holdings would have been $______ on
October 31, 1996.
The average annual total returns for LIMITED MATURITY,
its Sister Fund and that Sister Fund's predecessor for the one-, five- and
ten-year periods ended October 31, 1996, were _____%, _____%, and _____%,
respectively. If an investor had invested $10,000 in that predecessor's
shares on June 9, 1986 and had reinvested all capital gain distributions
and income dividends, the NAV of that investor's holdings would have been
$______ on October 31, 1996.
N&B Management reimbursed the Funds, the Sister Funds and
their predecessors for certain expenses during the periods mentioned
above, which has the effect of increasing yield and total return. Of
course, past performance cannot guarantee future results.
Comparative Information
-----------------------
From time to time each Fund's 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
- 27 -
<PAGE>
periodicals) that monitor the performance of mutual
funds, such as Lipper Analytical Services, Inc., C.D.A.
Investment Technologies, Inc., Wiesenberger Investment
Companies Service, IBC/Donoghue's Money Market Fund
Report, Investment Company Data Inc., Morningstar, Inc.,
Micropal Incorporated, and quarterly mutual fund rankings
by Money, Fortune, Forbes, Business Week, Personal
Investor, and U.S. News & World Report magazines, The
Wall Street Journal, The New York Times, Kiplingers
Personal Finance, and Barron's Newspaper, or
(2) recognized bond, stock, and other indices such as the
Shearson Lehman Bond Index, the Standard & Poor's 500
Composite Stock Price Index ("S&P 500 Index"), Dow Jones
Industrial Average ("DJIA"), S&P/BARRA Index, Russell
Index, and various other domestic, international, and
global indices and changes in the U.S. Department of
Labor Consumer Price Index. The S&P 500 Index is a broad
index of common stock prices, while the DJIA represents a
narrower segment of industrial companies. Each assumes
reinvestment of distributions and is calculated without
regard to tax consequences or the costs of investing.
Each Portfolio may invest in different types of securi-
ties from those included in some of the above indices.
Each Fund's performance also may be compared from time to
time with the following specific indices and other measures of per-
formance:
ULTRA SHORT'S performance may be compared with the
Merrill Lynch 2-year Treasury Index and the Salomon
Brothers 6-month and 1-year Treasury Bill Indices, as
well as the performance of Treasury Securities and the
Lipper Short Investment Grade Debt Funds category.
LIMITED MATURITY'S performance may be compared with the
Merrill Lynch 1-3 year Treasury Index and the Lehman
Brothers Intermediate Government/Corporate Bond Index, as
well as the performance of Treasury Securities, corporate
bonds, and the Lipper Short Investment Grade Debt Funds
category.
In addition, each Fund's performance may be compared at
times with that of various bank instruments (including bank money market
accounts and CDs of varying maturities) as reported in publications such
as The Bank Rate Monitor. Any such comparisons may be useful to investors
who wish to compare a Fund's past performance with that of certain of its
competitors. Of course, past performance is not a guarantee of future
results. Unlike an investment in a Fund, bank CDs pay a fixed rate of
interest for a stated period of time and are insured up to $100,000.
- 28 -
<PAGE>
Evaluations of the Funds' performance, their yield/total
returns and comparisons may be used in advertisements and in information
furnished to current and prospective shareholders (collectively,
"Advertisements"). The Funds 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.
Other Performance Information
-----------------------------
From time to time, information about a Portfolio's
portfolio allocation and holdings as of a particular date may be included
in Advertisements for its corresponding Fund. This information, for
example, may include the Portfolio's portfolio diversification by asset
type. Information used in Advertisements may include statements or
illustrations relating to the appropriateness of types of securities
and/or mutual funds that may be employed to meet specific financial goals,
such as (1) funding retirement, (2) paying for children's education, and
(3) financially supporting aging parents.
Information (including charts and illustrations) showing
the effects of compounding interest may be included in Advertisements from
time to time. Compounding is the process of earning interest on principal
plus interest that was earned earlier. Interest can be compounded at
different intervals, such as annually, semi-annually, quarterly, monthly,
or daily. For example, $1,000 compounded annually at 9% will grow to
$1,090 at the end of the first year (an increase of $90) and $1,188 at the
end of the second year (an increase of $98). The extra $8 that was earned
on the $90 interest from the first year is the compound interest. One
thousand dollars compounded annually at 9% will grow to $2,367 at the end
of ten years and $5,604 at the end of twenty years. Other examples of
compounding are as follows: at 7% and 12% annually, $1,000 will grow to
$1,967 and $3,106, respectively, at the end of ten years and $3,870 and
$9,646, respectively, at the end of twenty years. All these examples are
for illustrative purposes only and are not indicative of any Fund's
performance.
Information relating to inflation and its effects on the
dollar also may be included in Advertisements. For example, after ten
years, the purchasing power of $25,000 would shrink to $16,621, $14,968,
$13,465, and $12,100, respectively, if the annual rates of inflation
during that period were 4%, 5%, 6%, and 7%, respectively. (To calculate
the purchasing power, the value at the end of each year is reduced by the
inflation rate for the ten-year period.)
Information (including charts and illustrations) showing
the total return performance for government funds, 6-month CDs and money
market funds may be included in Advertisements from time to time.
- 29 -
<PAGE>
Information regarding the effects of automatic investment
and systematic withdrawal plans, investing at market highs and/or lows,
and investing early versus late for retirement plans also may be included
in Advertisements, if appropriate.
From time to time the investment philosophy of N&B Man-
agement's founder, Roy R. Neuberger, may be included in the Funds'
Advertisements. This philosophy is described in further detail in "The
Art of Investing: A Conversation with Roy Neuberger," attached as
Appendix B to this SAI.
CERTAIN RISK CONSIDERATIONS
Although each Portfolio seeks to reduce risk by investing
in a diversified portfolio, diversification does not eliminate all risk.
There can, of course, be no assurance any Portfolio will achieve its
investment objective.
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 (where applicable) their corresponding portfolios, administered
or managed by N&B Management and Neuberger & Berman.
<TABLE>
<CAPTION>
Name, Address Positions Held
and Age(1) With the Trusts Principal Occupation(s)(2)
------------- --------------- --------------------------
<S> <C> <C>
John Cannon (66) Trustee of each Trust President, AMA Investment Advisers, Inc.
CDC Associates, Inc. (registered investment adviser) (1976 -
620 Sentry Parkway 1991); Senior Vice President AMA
Suite 220 Investment Advisers, Inc. (1991 - 1993);
Blue Bell, PA 19422 President of AMA Family of Funds
(investment companies) (1976 - 1991);
Chairman and Treasurer of CDC
Associates, Inc. (registered investment
adviser) (1993 - present)
Charles DeCarlo (75) Trustee of each Trust President Emeritus of Sarah Lawrence
33 West 67th Street College; Chief Executive Officer of
New York, NY 10023 Xicon Systems (animation company).
- 30 -
<PAGE>
Name, Address Positions Held
and Age(1) With the Trusts Principal Occupation(s)(2)
------------- --------------- --------------------------
Stanley Egener* (62) Chairman of the Board, Principal of Neuberger & Berman;
Chief Executive Officer, President and Director of N&B Manage-
and Trustee of each Trust ment; Chairman of the Board, Chief
Executive Officer, and Trustee of eight
other mutual funds for which N&B
Management acts as investment manager or
administrator.
Theodore P. Giuliano* (__) President and Trustee of Principal of Neuberger & Berman; Vice
each Trust President and Director of N&B Manage-
ment; President and Trustee of one other
mutual fund for which N&B Management
serves as administrator.
Barry Hirsch (63) Trustee of each Trust Senior Vice President, Secretary, and
Loews Corporation General Counsel of Loews Corporation
667 Madison Avenue (diversified financial corporation).
7th Floor
New York, NY 10021
Robert A. Kavesh (69) Trustee of each Trust Professor of Finance and Economics at
110 Blecker Street Stern School of Business, New York
Apt. 24B University; Director of Del
New York, NY 10012 Laboratories, Inc. and Greater New York
Mutual Insurance Co.
William E. Rulon (64) Trustee of each Trust Senior Vice President and Secretary of
Foodmaker, Inc. Foodmaker, Inc. (operator and franchisor
9330 Balboa Avenue of restaurants).
San Diego, CA 92123
Candace L. Straight (49) Trustee of each Trust Private investor and consultant
518 E. Passaic Avenue specializing in the insurance industry;
Bloomfield, NJ 07003 Principal of Head & Company, LLC
(limited liability company providing
investment banking and consulting
services to the insurance industry)
until March 1996; President of Integon
Corporation (marketer of life insurance,
annuities, and property and casualty
insurance), 1990-1992; Director of and
Drake Holdings (U.K. motor insurer)
until June 1996.
- 31 -
<PAGE>
Name, Address Positions Held
and Age(1) With the Trusts Principal Occupation(s)(2)
------------- --------------- --------------------------
Daniel J. Sullivan (57) Vice President of each Senior Vice President of N&B Management
Trust since 1992; prior thereto, Vice Presi-
dent of N&B Management; Vice President
of eight other mutual funds for which
N&B Management acts as investment
manager or administrator.
Michael J. Weiner (49) Vice President and Senior Vice President and Treasurer of
Principal Financial N&B Management since 1992; Treasurer of
Officer of each Trust N&B Management from 1992 to 1996; prior
thereto, Vice President and Treasurer of
N&B Management and Treasurer of certain
mutual funds for which N&B Management
acted as investment adviser; Vice
President and Principal Financial
Officer of eight other mutual funds for
which N&B Management acts as investment
manager or administrator.
Claudia A. Brandon (40) Secretary of each Trust Vice President of N&B Management;
Secretary of eight other mutual funds
for which N&B Management acts as
investment manager or administrator.
Richard Russell (50) Treasurer and Principal Vice President of N&B Management since
Accounting Officer of 1993; prior thereto, Assistant Vice
each Trust President of N&B Management; Treasurer
and Principal Accounting Officer of
eight other mutual funds for which N&B
Management acts as investment manager or
administrator.
Stacy Cooper-Shugrue (33) Assistant Secretary of Assistant Vice President of N&B
each Trust Management since 1993; prior thereto,
employee of N&B Management; Assistant
Secretary of eight other mutual funds
for which N&B Management acts as
investment manager or administrator.
C. Carl Randolph (59) Assistant Secretary of Principal of Neuberger & Berman since
each Trust 1992; prior thereto, employee of
Neuberger & Berman; Assistant Secretary
of eight other mutual funds for which
N&B Management acts as investment
manager or administrator.
- 32 -
<PAGE>
Name, Address Positions Held
and Age(1) With the Trusts Principal Occupation(s)(2)
------------- --------------- --------------------------
Barbara DiGiorgio (38) Assistant Treasurer of Assistant Vice President of N&B
each Trust Management since 1993; prior thereto,
employee of N&B Management; Assistant
Treasurer of eight other mutual funds
for which N&B Management acts as
investment manager or administrator.
Celeste Wischerth (35) Assistant Treasurer of Assistant Vice President of N&B
each Trust Management since 1994; prior thereto,
employee of N&B Management; Assistant
Treasurer of eight other mutual funds
for which N&B Management acts as
investment manager or administrator.
</TABLE>
____________________
(1) Unless otherwise indicated, the business address of each listed
person is 605 Third Avenue, New York, NY 10158.
(2) Except as otherwise indicated, each individual has held the positions
shown for at least the last five years.
* Indicates a trustee who is an "interested person" of each Trust
within the meaning of the 1940 Act. Mssrs. Egener and Giuliano are
interested persons by virtue of the fact that they are officers and
directors of N&B Management and principals of Neuberger & Berman.
The Trust's Trust Instrument and Managers Trust's
Declaration of Trust each provides that it will indemnify its trustees and
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 (a) engaged in
bad faith, willful misfeasance, gross negligence, or reckless disregard of
the duties involved in the conduct of their offices or (b) did not act in
good faith in the reasonable belief that their action was in the best
interest of the Trust. 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, 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 willful misfeasance, bad faith, gross
negligence, or reckless disregard of their duties.
- 33 -
<PAGE>
For the fiscal year ended October 31, 1996, each Fund and
Portfolio paid and accrued the following fees and expenses to Fund and
Portfolio Trustees who were not affiliated with N&B Management or
Neuberger & Berman: Neuberger & Berman ULTRA SHORT Bond Trust and
Portfolio - $___, and Neuberger & Berman LIMITED MATURITY Bond Trust and
Portfolio - $_____.
The following table sets forth information concerning the
compensation of the trustees and officers of the Trust. None of the
Neuberger & Berman Funds(REGISTERED TRADEMARK) has any retirement plan for
its trustees or officers.
<TABLE>
<CAPTION>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 10/31/96
-----------------------------
Total Compensation
from Trusts in the
Name and Position Aggregate Compensation Neuberger & Berman Fund
with the Trust from the Trust Complex Paid to Trustees
----------------- ---------------------- ------------------------
<S> <C> <C>
John Cannon $___ $_______
Trustee (2 other investment companies)
Charles DeCarlo $____ $_______
Trustee
Stanley Egener $ 0 $0
Chairman of the Board, Chief Executive (9 other investment companies)
Officer, and Trustee
Theodore Giuliano $ 0 $ 0
President and Trustee (2 other investment companies)
Barry Hirsch $____ $_______
Trustee (2 other investment companies)
Robert A. Kavesh $____ $_______
Trustee (2 other investment companies)
Harold R. Logan $____ $_______
Trustee (2 other investment companies)
William E. Rulon $____ $_______
Trustee (2 other investment companies)
- 34 -
<PAGE>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 10/31/96
-----------------------------
Total Compensation
from Trusts in the
Name and Position Aggregate Compensation Neuberger & Berman Fund
with the Trust from the Trust Complex Paid to Trustees
----------------- ---------------------- ------------------------
Candace L. Straight $____ $_______
Trustee (2 other investment companies)
</TABLE>
At ______________, the trustees and officers of the Trust
and Managers Trust, as a group, owned beneficially or of record less than
1% of the outstanding shares of each Fund.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
Investment Manager and Administrator
------------------------------------
Because all of the Funds' net investable assets are
invested in their corresponding Portfolios, the Funds do not need an
investment manager. N&B Management serves as the Portfolios' investment
manager pursuant to a management agreement with Managers Trust, on behalf
of the Portfolios, dated as of July 2, 1993 ("Management Agreement"). The
Management Agreement was approved by the holders of the interests in all
the Portfolios on July 2, 1993.
The Management Agreement provides, in substance, that N&B
Management will make and implement investment decisions for the Portfolios
in its discretion and will continuously develop an investment program for
the Portfolios' assets. The Management Agreement permits N&B Management
to effect securities transactions on behalf of each Portfolio through
associated persons of N&B Management. The Management Agreement also
specifically permits N&B Management to compensate, through higher
commissions, brokers and dealers who provide investment research and
analysis to the Portfolios, although N&B Management has no current plans
to do so.
N&B Management provides to each Portfolio, without
separate cost, office space, equipment, and facilities and the personnel
necessary to perform executive, administrative, and clerical functions.
N&B Management 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 and directors of N&B Management
(who also are principals of Neuberger & Berman), presently serve as
- 35 -
<PAGE>
trustees and officers of the Trusts. See "Trustees and Officers." Each
Portfolio pays N&B Management a management fee based on the Portfolio's
average daily net assets, as described in the Prospectus.
N&B Management provides similar facilities, services, and
personnel to each Fund pursuant to an administration agreement dated July
2, 1993 ("Administration Agreement"). For such administrative services,
each Fund pays N&B Management a fee based on the Fund's average daily net
assets, as described in the Prospectus. N&B Management enters into
administrative services agreements with Institutions, pursuant to which it
compensates such Institutions for accounting, recordkeeping and other
services that they provide to investors who purchase shares of the Funds.
During the fiscal years ended October 31, 1996, 1995, and
1994, each Fund accrued management and administration fees as follows:
LIMITED MATURITY - $______, $65,572, and $18,788, respectively; and ULTRA
SHORT - $______, $11,176, and $5,804, respectively.
As noted in the Prospectus under "Management and
Administration -- Expenses," N&B Management has voluntarily undertaken to
reimburse each Fund for its Operating Expenses (including fees under the
Administration Agreement) and the Fund's pro rata share of the corres-
ponding Portfolio's Operating Expenses (including fees under the
Management Agreement) that exceed, in the aggregate, 0.75% and 0.80% per
annum of the average daily net assets of ULTRA SHORT and LIMITED MATURITY,
respectively. N&B Management can terminate each undertaking by giving the
Fund at least 60 days' prior written notice. From March 1, 1994 to
February 28, 1995, N&B Management reimbursed each Fund for its Operating
Expenses (including fees under the Administration Agreement) and its pro
rata share of its corresponding Portfolio's Operating Expenses (including
fees under the Management Agreement) that exceeded, in the aggregate,
0.65% and 0.70% per annum of the average daily net assets of ULTRA SHORT
and LIMITED MATURITY, respectively; prior to that, the expense limitations
were 0.65% and 0.65%, respectively. "Operating Expenses" exclude
interest, taxes, brokerage costs and extraordinary expenses.
For the fiscal years ended October 31, 1996, 1995, and
1994, N&B Management reimbursed each Fund the following amounts of
expenses under the above arrangements: LIMITED MATURITY - $_______,
$123,568, and $90,718, respectively; and ULTRA SHORT - $_______, $104,135,
and $91,185, respectively.
The Management Agreement continues with respect to each
Portfolio for a period of two years after the date the Portfolio became
subject thereto. The Management Agreement is renewable thereafter from
year to year with respect to each 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 Managers
Trust ("Independent Portfolio Trustees"), cast in person at a meeting
- 36 -
<PAGE>
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 the Portfolio. The Administration Agreement
continues with respect to each Fund for a period of two years after the
date the Fund became subject thereto. The Administration Agreement is
renewable from year to year with respect to a Fund, so long as its
continuance is approved at least annually (1) by the vote of a majority of
the Fund Trustees who are not "interested persons" of N&B Management or
the Trust ("Independent Fund 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 Fund Trustees or by a 1940 Act majority vote of the
outstanding shares in the Fund.
The Management Agreement is terminable, without penalty,
with respect to a Portfolio on 60 days' written notice either by Managers
Trust or by N&B Management. The Administration Agreement is terminable,
without penalty, with respect to a Fund on 60 days' written notice either
by N&B Management or by the Trust. Each Agreement terminates
automatically if it is assigned.
Sub-Adviser
-----------
N&B Management retains Neuberger & Berman, 605 Third
Avenue, New York, NY 10158-3698, as sub-adviser with respect to each
Portfolio pursuant to a sub-advisory agreement dated July 2, 1993 ("Sub-
Advisory Agreement"). The Sub-Advisory Agreement was approved by the
holders of the interests in the Portfolios on July 2, 1993.
The Sub-Advisory Agreement provides in substance that
Neuberger & Berman will furnish to N&B Management, upon reasonable
request, the same type of investment recommendations and research that
Neuberger & Berman, from time to time, provides to its principals and
employees for use in managing client accounts. 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 staff consists of approximately fourteen
investment analysts, each of whom specializes in studying one or more
industries, under the supervision of the Director of Research, who is also
available for consultation with N&B Management. The Sub-Advisory
Agreement provides that N&B Management will pay for the services rendered
by Neuberger & Berman based on 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 managed by N&B
Management.
- 37 -
<PAGE>
The Sub-Advisory Agreement continues with respect to each
Portfolio for a period of two years after the date the Portfolio became
subject thereto, and is renewable thereafter from year to year, 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 Portfolio by the Portfolio Trustees or a
1940 Act majority vote of the outstanding interests in that Portfolio, 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 Portfolio if it is assigned or if the
Management Agreement terminates with respect to that Portfolio.
Most money managers that come to the Neuberger & Berman
organization have at least fifteen years experience. Neuberger & Berman
and N&B Management employ experienced professionals that work in a
competitive environment.
Investment Companies Managed
----------------------------
N&B Management currently serves as investment manager of
the following investment companies. As of September 30, 1996, these
companies, along with three other investment companies advised by
Neuberger & Berman, had aggregate net assets of approximately $13.9
billion, as shown in the following list:
Approximate
Net Assets at
Name September 30, 1996
---- -------------------
Neuberger & Berman Cash Reserves Portfolio . . . . . . . . $ 527,447,493
(investment portfolio for Neuberger & Berman Cash Reserves)
Neuberger & Berman Government Money Portfolio . . . . . . . $ 319,705,018
(investment portfolio for Neuberger & Berman Government Money Fund)
Neuberger & Berman Limited Maturity Bond Portfolio . . . . $ 268,892,148
(investment portfolio for Neuberger & Berman Limited Maturity Bond
Fund and Neuberger & Berman Limited Maturity Bond Trust)
Neuberger & Berman Ultra Short Bond Portfolio . . . . . . . $ 96,306,004
(investment portfolio for Neuberger & Berman Ultra Short Bond Fund
and Neuberger & Berman Ultra Short Bond Trust)
Neuberger & Berman Municipal Money Portfolio . . . . . . . $ 141,116,062
(investment portfolio for Neuberger & Berman Municipal Money Fund)
- 38 -
<PAGE>
Neuberger & Berman Municipal Securities Portfolio . . . . . $ 38,416,801
(investment portfolio for Neuberger & Berman Municipal Securities
Trust)
Neuberger & Berman New York Insured
Intermediate Portfolio . . . . . . . . . . . . . . . $ 9,575,489
(investment portfolio for Neuberger & Berman New York Insured
Intermediate Fund)
Neuberger & Berman Focus Portfolio . . . . . . . . . . . $ 1,174,138,341
(investment portfolio for Neuberger & Berman Focus Fund, Neuberger &
Berman Focus Trust, and Neuberger & Berman Focus Assets)
Neuberger & Berman Genesis Portfolio . . . . . . . . . . . $ 287,653,131
(investment portfolio for Neuberger & Berman Genesis Fund and
Neuberger & Berman Genesis Trust)
Neuberger & Berman Guardian Portfolio . . . . . . . . . $ 6,513,577,557
(investment portfolio for Neuberger & Berman Guardian Fund, Neuberger
& Berman Guardian Trust, and Neuberger & Berman Guardian Assets)
Neuberger & Berman International Portfolio . . . . . . . . $ 59,969,278
(investment portfolio for Neuberger & Berman International Fund)
Neuberger & Berman Manhattan Portfolio . . . . . . . . . $ 592,681,290
(investment portfolio for Neuberger & Berman Manhattan Fund,
Neuberger & Berman Manhattan Trust, and Neuberger & Berman Manhattan
Assets)
Neuberger & Berman Partners Portfolio . . . . . . . . . . $ 2,112,475,324
(investment portfolio for Neuberger & Berman Partners Fund, Neuberger
& Berman Partners Trust, and Neuberger & Berman Partners Assets)
Neuberger & Berman Socially Responsive Portfolio . . . . $ 167,005,429
(investment portfolio for Neuberger & Berman Socially Responsive Fund
and Neuberger & Berman NYCDC Socially Responsive Trust)
Advisers Managers Trust (six series) . . . . . . . . . $ 1,468,727,224
In addition, Neuberger & Berman serves as investment
adviser to three investment companies, Plan Investment Fund, Inc., AHA
Investment Fund, Inc., and AHA Full Maturity, with assets of $61,738,329,
$77,498,236, and $26,954,887, respectively, at September 30, 1996.
The investment decisions concerning the Portfolios and
the other funds and portfolios managed by N&B Management (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
- 39 -
<PAGE>
N&B Funds differ from the Portfolios. Even where the investment
objectives are similar, however, the methods used by the Other N&B Funds
and the Portfolios to achieve their objectives may differ. The investment
results achieved by all of the funds managed by N&B Management have varied
from one another in the past and are likely to vary in the future.
There may be occasions when a Portfolio and one or more
of the Other N&B Funds or other accounts managed by Neuberger & Berman are
contemporaneously engaged in purchasing or selling the same securities
from or to third parties. When this occurs, the transactions are averaged
as to price and allocated as to amounts in accordance with a formula con-
sidered to be equitable to the funds involved. Although in some cases
this arrangement may have a detrimental effect on the price or volume of
the securities as to a Portfolio, in other cases it is believed that a
Portfolio's ability to participate in volume transactions may produce
better executions for it. In any case, it is the judgment of the
Portfolio Trustees that the desirability of the Portfolios' having their
advisory arrangements with N&B Management outweighs any disadvantages that
may result from contemporaneous transactions.
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; Theodore P. Giuliano, Vice President and director; Michael M.
Kassen, Vice President and director; Irwin Lainoff, director; Lawrence
Zicklin, director; Daniel J. Sullivan, Senior Vice President; Peter E.
Sundman, Senior Vice President; Michael J. Weiner, Senior Vice President;
Claudia A. Brandon, Vice President; Patrick T. Byrne, Vice President;
Robert Conti, Treasurer; William Cunningham, Vice President; Clara Del
Villar, Vice President; Mark R. Goldstein, Vice President; Farha-Joyce
Haboucha, Vice President; Michael Lamberti, Vice President; Josephine P.
Mahaney, Vice President; Lawrence Marx III, Vice President; Ellen Metzger,
Vice President and Secretary; Janet W. Prindle, Vice President; Felix
Rovelli, Vice President; Richard Russell, Vice President; Kent C. Simons,
Vice President; Frederick B. Soule, Vice President; Judith M. Vale, Vice
President; Susan Walsh, Vice President; Thomas Wolfe, Vice President;
Andrea Trachtenberg, Vice President of Marketing; Stacy Cooper-Shugrue,
Assistant Vice President; Robert Cresci, Assistant Vice President; Barbara
DiGiorgio, Assistant Vice President; Roberta D'Orio, Assistant Vice
President; Joseph G. Galli, Assistant Vice President; Robert I. Gendelman,
Assistant Vice President; Leslie Holliday-Soto, Assistant Vice President;
Jody L. Irwin, Assistant Vice President; Carmen G. Martinez, Assistant
Vice President; Paul Metzger, Assistant Vice President; Joseph S. Quirk,
Assistant Vice President; Kevin L. Risen, Assistant Vice President; Susan
Switzer, Assistant Vice President; Celeste Wischerth, Assistant Vice
President; KimMarie Zamot, Assistant Vice President; and Loraine
Olavarria, Assistant Secretary. Messrs. Cantor, Egener, Giuliano,
- 40 -
<PAGE>
Lainoff, Zicklin, Goldstein, Kassen, Marx, and Simons and Mmes. Prindle
and Vale are principals of Neuberger & Berman.
Mr. Guiliano and Mr. Egener are trustees and officers,
and Messrs. Sullivan, Weiner, and Russell and Mmes. Brandon, Cooper-
Shugrue, DiGiorgio, and Wischerth are officers, of each Trust. C. Carl
Randolph, a principal 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 principals of Neuberger & Berman.
DISTRIBUTION ARRANGEMENTS
N&B Management serves as the distributor ("Distributor")
in connection with the offering of each Fund's shares on a no-load basis
to Institutions. In connection with the sale of its shares, each Fund 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 personally, through the mails,
or by electronic means. The Distributor is the Funds' "principal
underwriter" within the meaning of the 1940 Act and, as such, acts as
agent in arranging for the sale of each Fund's shares to Institutions
without sales commission or other compensation and bears all advertising
and promotion expenses incurred in the sale of the Funds' shares.
From time to time, N&B Management may enter into
arrangements pursuant to which it compensates a registered broker-dealer
or other third party for services in connection with the distribution of
Fund shares.
The Trust, on behalf of each Fund, and the Distributor
are parties to a Distribution Agreement that continues until July 2, 1997.
The Distribution Agreement may be renewed annually if specifically
approved by (1) the vote of a majority of the Fund Trustees or a 1940 Act
majority vote of the Fund's outstanding shares and (2) the vote of a
majority of the Independent Fund 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.
ADDITIONAL EXCHANGE INFORMATION
As more fully set forth in the section of the Prospectus
entitled "Shareholder Services -- Exchanging Shares," an Institution may
- 41 -
<PAGE>
exchange shares of either Fund for shares of the other Fund or the equity
funds that are briefly described below ("Equity Funds").
<TABLE>
<CAPTIION>
<S> <C>
Neuberger & Berman Seeks long-term capital appreciation through investments principally in
Focus Trust common stocks selected from 13 multi-industry economic sectors. The
corresponding portfolio uses a value-oriented approach to select
individual securities and then focuses its investments in the sectors in
which the undervalued stocks are clustered. Through this approach, 90%
or more of the portfolio's investments are normally made in not more
than six sectors.
Neuberger & Berman Seeks capital appreciation through investments primarily in common
Genesis Trust stocks of companies with small market capitalizations (i.e., up to $1.5
billion) at the time of the Portfolio's investment. The corresponding
portfolio uses a value-oriented approach to the selection of individual
securities.
Neuberger & Berman Seeks capital appreciation through investments primarily in common
Guardian Trust stocks of long-established, high-quality companies that N&B Management
believes are well-managed. The corresponding portfolio uses a value-
oriented approach to the selection of individual securities. Current
income is a secondary objective. The sister fund (and its predecessor)
have paid its shareholders an income dividend every quarter, and a
capital gain distribution every year, since its inception in 1950,
although there can be no assurance that it will be able to continue to
do so.
Neuberger & Berman Seeks capital appreciation, without regard to income, through
Manhattan Trust investments generally in securities of small-, medium- and large-
capitalization companies that N&B Management believes have the maximum
potential for increasing total NAV. The corresponding portfolio's
"growth at a reasonable price" investment approach involves greater
risks and share price volatility than programs that invest in securities
thought to be undervalued.
Neuberger & Berman Seeks capital growth through an investment approach that is designed to
Partners Trust increase capital with reasonable risk. Its investment program seeks
securities believed to be undervalued based on strong fundamentals such
as a low price-to-earnings ratio, consistent cash flow, and the
company's track record through all parts of the market cycle. The
corresponding portfolio uses the value-oriented investment approach to
the selection of individual securities.
</TABLE>
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<PAGE>
Either Fund described herein, and any of the Equity
Funds, may terminate or modify its exchange privilege in the future.
Fund shareholders who are considering exchanging shares
into any of the Equity Funds should note that each such fund (1) is a
series of a Delaware business trust (named "Neuberger & Berman Equity
Trust") that is registered with the SEC as an open-end management
investment company; and (2) invests all of its net investable assets in a
corresponding portfolio that has an investment objective, policies, and
limitations identical to those of the fund.
Before effecting an exchange, Fund shareholders must
obtain and should review a currently effective prospectus of the fund into
which the exchange is to be made. In this regard, it should be noted that
the Equity Funds share a prospectus. An exchange is treated as a sale for
federal income tax purposes and, depending on the circumstances, a short-
or long-term capital gain or loss may be realized.
ADDITIONAL REDEMPTION INFORMATION
Suspension of Redemptions
-------------------------
The right to redeem a Fund's shares may be suspended or
payment of the redemption price postponed (1) when the New York Stock
Exchange ("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 it is not reasonably practicable for the corresponding
Portfolio to dispose of securities it owns or 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 Fund's shareholders; provided that
applicable SEC rules and regulations shall govern 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 day the NYSE is open ("Business Day") after termination of the
suspension.
Redemptions in Kind
-------------------
Each Fund reserves the right, under certain conditions,
to honor any request for redemption, or a combination of requests from the
same shareholder in any 90-day period, totalling $250,000 or 1% of the net
assets of the Fund, whichever is less, by making payment in whole or in
part in securities valued as described under "Share Prices and Net Asset
Value" in the Prospectus. If payment is made in securities, a shareholder
generally will incur brokerage expenses or other transactions costs in
- 43 -
<PAGE>
converting those securities into cash and will be subject to fluctuation
in the market prices of those securities until they are sold. The Funds
do not redeem in kind under normal circumstances, but would do so when the
Fund Trustees determined that it was in the best interests of a Fund's
shareholders as a whole. Redemptions in kind will be made with readily
marketable securities to the extent possible.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund distributes to its shareholders amounts equal
to substantially all of its proportionate share of any net investment
income (after deducting expenses incurred directly by the Fund), any net
realized capital gains (both long-term and short-term), and any net
realized gains from foreign currency transactions earned or realized by
its corresponding Portfolio. Each Fund calculates its net investment
income and share price as of the close of regular trading on the NYSE on
each Business Day (usually 4:00 p.m. Eastern time). Shares of the Funds
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. Dividends
declared for each month are paid on the last Business Day of the month.
A Portfolio's net investment income consists of all
income accrued on portfolio assets less accrued expenses but does not
include realized capital and foreign currency gains and losses. Net
investment income and realized gains and losses are reflected in a
Portfolio's NAV (and, hence, its corresponding Fund's NAV) until they are
distributed. Distributions of net realized capital and foreign currency
gains, if any, normally are paid once annually, in December. Income
dividends are declared daily and paid monthly.
Dividends and other distributions, if any, are
automatically reinvested in additional shares of the distributing Fund,
unless the Institution elects to receive them in cash ("cash election").
To the extent dividends and other distributions are subject to federal,
state, or local income taxation, they are taxable to the shareholders
whether received in cash or reinvested in Fund shares. A cash election
with respect to any Fund remains in effect until the Institution notifies
the Fund in writing to discontinue the election.
ADDITIONAL TAX INFORMATION
Taxation of the Funds
---------------------
In order to continue to qualify for treatment as a RIC
under the Code, each Fund must distribute to its shareholders for each
taxable year at least 90% of the sum of its investment company taxable
income (consisting generally of net investment income, net short-term
- 44 -
<PAGE>
capital gain, and for LIMITED MATURITY, net gains from certain foreign
currency transactions) ("Distribution Requirement") and must meet several
additional requirements. With respect to each Fund, these requirements
include the following: (1) the Fund 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
Hedging Instruments) derived with respect to its business of investing in
securities or those currencies ("Income Requirement"); (2) the Fund 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 (i) Hedging Instruments (other than those
on foreign currencies), or (ii) foreign currencies or Hedging Instruments
thereon that are not directly related to the Fund'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
Fund'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,
securities of other RICs, and other securities limited, in respect of any
one issuer, to an amount that does not exceed 5% of the value of the
Fund'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, including the
Sister Funds, have received a ruling from the Internal Revenue Service
("Service") that each such fund, as an investor in a corresponding portfo-
lio of Managers Trust or Equity Managers Trust, will be deemed to own a
proportionate share of the portfolio's assets and income for purposes of
determining whether the fund satisfies all the requirements described
above to qualify as a RIC. Although that ruling may not be relied on as
precedent by the Funds, N&B Management believes that the reasoning thereof
and, hence, its conclusion apply to the Funds as well.
Each Fund will be subject to a nondeductible 4% excise
tax ("Excise Tax") to the extent it fails to distribute by the end of any
calendar year substantially all of its ordinary income for that year and
capital gain net income for the one-year period ending on October 31 of
that year, plus certain other amounts.
See the next section for a discussion of the tax conse-
quences to ULTRA SHORT and LIMITED MATURITY of hedging and certain other
transactions engaged in by their corresponding Portfolios.
Taxation of the Portfolios
--------------------------
The Portfolios have received a ruling from the Service to
the effect that, among other things, each Portfolio will be treated as a
separate partnership for federal income tax purposes and will not be a
"publicly traded partnership." As a result, neither Portfolio is subject
- 45 -
<PAGE>
to federal income tax; instead, each investor in a Portfolio, such as a
Fund, is required to take into account in determining its federal income
tax liability its share of the Portfolio's income, gains, losses,
deductions, and credits, without regard to whether it has received any
cash distributions from the Portfolio. Each Portfolio also is not subject
to Delaware or New York income or franchise tax.
Because each Fund is deemed to own a proportionate share
of its corresponding Portfolio's assets and income for purposes of
determining whether the Fund qualifies as a RIC, each Portfolio intends to
continue to conduct its operations so that its corresponding Fund will be
able to continue to satisfy all those requirements.
Distributions to a Fund from its corresponding Portfolio
(whether pursuant to a partial or complete withdrawal or otherwise) will
not result in the Fund'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 Fund's basis for its interest in
the Portfolio before the distribution, (2) income or gain will be
recognized if the distribution is in liquidation of the Fund's entire
interest in the Portfolio and includes a disproportionate share of any
unrealized receivables held by the Portfolio, (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 Fund's basis
for its interest in its corresponding Portfolio generally equals the
amount of cash the Fund invests in the Portfolio, increased by the Fund's
share of the Portfolio's net income and capital gains and decreased by
(1) the amount of cash and the basis of any property the Portfolio distri-
butes to the Fund and (2) the Fund's share of the Portfolio's losses.
Dividends and interest received by a Portfolio 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 many
foreign countries do not impose taxes on capital gains in respect of
investments by foreign investors.
The Portfolios' use of hedging strategies, such as writ-
ing (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 the Portfolios realize in connection therewith. Gains from the
disposition of foreign currencies (except certain gains therefrom that may
be excluded by future regulations), and gains from transactions in Hedging
Instruments derived by a Portfolio with respect to its business of
investing in securities or foreign currencies, will qualify as permissible
income for its corresponding Fund under the Income Requirement. However,
income from the disposition by a Portfolio of Hedging Instruments (other
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<PAGE>
than those on foreign currencies) will be subject to the Short-Short
Limitation for its corresponding Fund if they are held for less than three
months. Income from the disposition of foreign currencies, and Hedging
Instruments on foreign currencies, that are not directly related to a
Portfolio's 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 Fund if they are held for less than three
months.
If a Portfolio satisfies certain requirements, any in-
crease 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 Fund 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. Each
Portfolio will consider whether it should seek to qualify for this
treatment for its hedging transactions. To the extent a Portfolio 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 advan-
tageous to do so, in order for its corresponding Fund to continue to
qualify as a RIC.
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 Portfolio's 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.
Neuberger & Berman LIMITED MATURITY Bond Portfolio may
invest in municipal bonds that are purchased with market discount (that
is, at a price less than the bond's 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 bond's 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 Portfolio (other than a
bond with a fixed maturity date within one year from its issuance), gener-
ally is treated as ordinary (taxable) income, rather than capital gain, to
the extent of the bond's 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
Portfolio may elect to include market discount in its gross income cur-
rently, for each taxable year to which it is attributable.
- 47 -
<PAGE>
Each Portfolio may acquire zero coupon or other securi-
ties issued with OID. As a holder of those securities, each Portfolio
(and, through it, its corresponding Fund) must take into account the OID
that accrues on the securities during the taxable year, even if it
receives no corresponding payment on the securities during the year.
Because each Fund annually must distribute substantially all of its
investment company taxable income (plus its share of its corresponding
Portfolio's accrued OID) to satisfy the Distribution Requirement and to
avoid imposition of the Excise Tax, the Fund may be required in a
particular year to distribute as a dividend an amount that is greater than
its proportionate share of the total amount of cash its corresponding
Portfolio actually receives. Those distributions will be made from a
Fund's (or its proportionate share of its corresponding Portfolio's) cash
assets or, if necessary, from the proceeds of sales of that Portfolio's
securities. A Portfolio may realize capital gains or losses from those
sales, which would increase or decrease its corresponding Fund's
investment company taxable income and/or net capital gain (the excess of
net long-term capital gain over net short-term capital loss). 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 Portfolio's ability to sell other
securities, or certain Hedging Instruments, held for less than three
months that it might wish to sell in the ordinary course of its portfolio
management.
Taxation of the Funds' Shareholders
-----------------------------------
If Fund shares are sold at a loss after being held for
six months or less, the loss will be treated as long-term, instead of
short-term, capital loss to the extent of any capital gain distributions
received on those shares.
PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities generally are
transacted with issuers, underwriters, or dealers that serve as primary
market-makers, who act as principals for the securities on a net basis.
The Portfolios typically 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 the prices quoted by 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 Portfolio
seeks to obtain 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
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<PAGE>
transactions, N&B Management considers such factors as the price of the
security, the rate of commission, the size and difficulty of the order,
and the reliability, integrity, financial condition, and general execution
and operational capabilities of competing broker-dealers. N&B Management
also may consider the brokerage and research services that broker-dealers
provide to the Portfolio or N&B Management. Under certain conditions, a
Portfolio may pay higher brokerage commissions in return for brokerage and
research services, although neither Portfolio has a current arrangement to
do so. In any case, each Portfolio may effect principal transactions with
a dealer who furnishes research services, may designate any dealer to
receive selling concessions, discounts, or other allowances, or otherwise
may deal with any dealer in connection with the acquisition of securities
in underwritings.
During the fiscal year ended October 31, 1996, Neuberger
& Berman ULTRA SHORT Bond Portfolio acquired securities of the following
of its "regular brokers or dealers" (as defined in the 1940 Act):
_____________________________________________. At October 31, 1996, that
Portfolio held the securities of its "regular brokers or dealers" with an
aggregate value as follows: ________.
During the fiscal year ended October 31, 1996, Neuberger
& Berman LIMITED MATURITY Bond Portfolio acquired securities of the
following of its "regular brokers or dealers": _________________
_____________________________. At October 31, 1996, that Portfolio held
the securities of its "regular brokers or dealers" with an aggregate value
as follows: ___________.
No affiliate of any Portfolio receives give-ups or
reciprocal business in connection with its portfolio transactions. No
Portfolio effects transactions with or through broker-dealers in
accordance with any formula or for selling shares of any Fund. However,
broker-dealers who execute portfolio transactions may from time to time
effect purchases of Fund shares for their customers. The 1940 Act
generally prohibits Neuberger & Berman from acting as principal in the
purchase of portfolio securities from, or the sale of portfolio securities
to, a Portfolio unless an appropriate exemption is available.
Portfolio Turnover
------------------
A Portfolio's portfolio turnover rate is calculated by
dividing (1) the lesser of the cost of the securities purchased or the
value of the securities sold by the Portfolio during the fiscal year
(other than securities, including options, whose maturity or expiration
date at the time of acquisition was one year or less) by (2) the monthly
average of the value of such securities owned by the Portfolio during the
fiscal year.
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<PAGE>
REPORTS TO SHAREHOLDERS
Shareholders of each Fund receive unaudited semi-annual
financial statements, as well as year-end financial statements audited by
the independent auditors for the Fund and for its corresponding Portfolio.
Each Fund's statements show the investments owned by its corresponding
Portfolio and the market values thereof and provide other information
about the Fund and its operations, including the Fund's beneficial
interest in its corresponding Portfolio.
CUSTODIAN AND TRANSFER AGENT
Each Fund and Portfolio has selected State Street Bank
and Trust Company ("State Street"), 225 Franklin Street, Boston, MA 02110
as custodian for its securities and cash. All correspondence should be
mailed to Neuberger & Berman Funds, Institutional Services, 605 Third
Avenue, 2nd Floor, New York, NY 10158-0180. State Street also serves as
each Fund's transfer agent, administering purchases, redemptions, and
transfers of Fund shares with respect to Institutions and the payment of
dividends and other distributions to Institutions.
INDEPENDENT AUDITORS
Each Fund and Portfolio has selected Ernst & Young LLP,
200 Clarendon Street, Boston, MA 02116, as the independent auditors who
will audit its financial statements.
LEGAL COUNSEL
Each Fund and Portfolio has selected Kirkpatrick &
Lockhart LLP, 1800 Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C.
20036-1800, as its legal counsel.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the name, address, and
percentage of ownership of each person who was known by each Fund to own
beneficially or of record 5% or more of that Fund's outstanding shares at
__________________:
- 50 -
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Name and Address Ownership at
---------------- -------------
<S> <C> <C>
LIMITED MATURITY: D. Leon Leonhardt PSP _____%
---------------- for Partners & Principals
of Price Waterhouse dtd 6/28/85
1410 N. Westshore Blvd.
Tampa, FL 33607-4519
North American Trust Co. _____%
Omnibus Acct.
P.O. Box 84419
San Diego, CA 92138-4419
National Financial Serv. Corp. _____%
For the Exclusive Benefit of Our
Customers
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Chase Manhattan Bank TTEE ____%
Various Retirement Plans under PPI
Retirement Program
Professional Pensions Inc.
444 Foxon Road
East Haven, CT 06513-2019
ULTRA SHORT: Gary N. Skoloff, etc. _____%
----------- Skoloff & Wolfe Target Benefit Trust dtd
11/1/95
293 Eisenhower Pkwy.
Livingston, NJ 07039-1711
Aetna Life Insurance & Annuity Co. _____%
ACES - separate account F
Attn: Michael Weiner - RTAL
15 Farmington Avenue
Hartford, CT 06156-0001
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<PAGE>
Percentage of
Name and Address Ownership at
---------------- -------------
National Financial Serv. Corp. _____%
For the Exclusive Benefit of
Our Customers
P.O. Box 3906
Church Street Station
New York, NY 10008-3908
</TABLE>
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the infor-
mation included in the Trust's registration statement filed with the SEC
under the 1933 Act with respect to the securities offered by the
Prospectus. 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 any contract or other document filed as an exhibit to the registration
statement, each such statement being qualified in all respects by such
reference.
FINANCIAL STATEMENTS
The following financial statements and related documents
are incorporated herein by reference to the Funds' Annual Report to
shareholders for the fiscal year ended October 31, 1996:
[To be filed by amendment to the
Trust's registration statement.]
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<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 - Debt rated 'BB' is regarded, unbalanced, as
predominately 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. While such debt will likely
have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
BB - Debt rated 'BB' has less near-term vulnerability to
default then other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, or economic conditions
which could leave to an inadequate capacity to meet timely interest and
principal payments. The 'BB' rating category is also used for debt
subordinated to senior debt that is assigned an actual implied 'BBB-'
rating.
B - Debt rated 'B' has a greater vulnerability to default
but current has the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will
likely impair capacity or willingness to pay interest and repay principal.
The 'B' rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied 'BB' or 'BB-' rating.
- 53 -
<PAGE>
Plus (+) or Minus (-) - The ratings above may be modified by the
addition of a plus or minus sign to show relative standing within major
categories.
Moody's corporate bond ratings:
Aaa - Bonds rated Aaa are judged to be of the best qual-
ity. They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." 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, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
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 considered to be 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 which are 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 characterizes bonds in this class.
B - Bonds which are 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 of time may be small.
Modifiers - Moody's may apply numerical modifiers 1, 2,
and 3 in each generic rating classification described above. The modifier
1 indicates that the company 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 company ranks in the lower end of its generic rating
category.
- 54 -
<PAGE>
S&P commercial paper ratings:
A-1 - This highest category indicates that the degree of
safety regarding timely payment is strong. Those issuers determined to
possess extremely strong safety characteristics are denoted with a plus
sign (+).
A-2 - This designation denotes satisfactory capacity for
timely payment. However, the relative degree of safety is not as high as
for issues designated A-1.
Moody's commercial paper ratings:
Issuers rated Prime-1 (or related supporting institu-
tions), 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.
Issuers rated Prime-2 (or related supporting institu-
tions), also known as P-2, have a strong capacity for repayment of short-
term promissory obligations. This will normally be evidenced by many of
the characteristics cited above, but to a lesser degree. Earnings trends
and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
- 55 -
<PAGE>
Appendix B
THE ART OF INVESTMENT:
A CONVERSATION WITH ROY NEUBERGER
[To be filed by amendment to the Trust's registration statement.]
- 56 -
<PAGE>
NEUBERGER & BERMAN INCOME TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
------- ---------------------------------
(a) Financial Statements:
Audited financial statements for the fiscal year ended
October 31, 1996 for Neuberger & Berman Income Trust (with
respect to Neuberger & Berman Limited Maturity Bond Trust and
Neuberger & Berman Ultra Short Bond Trust) and Income Managers
Trust (with respect to Neuberger & Berman Limited Maturity Bond
Portfolio and Neuberger & Berman Ultra Short Bond Portfolio) will
be filed by amendment to Registrant's Registration Statement.
Included in Part A of this Post-Effective Amendment:
Form of FINANCIAL HIGHLIGHTS for the
periods indicated therein for Neuberger
& Berman Limited Maturity Bond Trust and
Neuberger & Berman Ultra Short Bond
Trust, to be filed by amendment to the
Registrant's Registration Statement, for
the periods indicated therein.
(b) Exhibits:
Exhibit
Number Description
------- -----------------
Exhibit
Number Description
--------- ------------------
(1) (a) Certificate of Trust. Incorporated by
Reference to Post-Effective Amendment No.
3 to Registrant's Registration Statement,
File Nos. 33-62872 and 811-7724, EDGAR
Accession No. 0000898432-96-00018.
(b) Trust Instrument of Neuberger & Berman
Income Trust. Incorporated by Reference
to Post-Effective Amendment No. 3 to
Registrant's Registration Statement, File
Nos. 33-62872 and 811-7724, EDGAR
Accession No. 0000898432-96-00018.
<PAGE>
(c) Schedule A - Current Series of Neuberger
& Berman Income Trust. Incorporated by
Reference to Post-Effective Amendment No.
3 to Registrant's Registration Statement,
File Nos. 33-62872 and 811-7724, EDGAR
Accession No. 0000898432-96-00018.
(2) By-laws of Neuberger & Berman Income Trust.
Incorporated by Reference to Post-Effective
Amendment No. 3 to Registrant's Registration
Statement, File Nos. 33-62872 and 811-7724,
EDGAR Accession No. 0000898432-96-00018.
(3) Voting Trust Agreement. None.
(4) Specimen Share Certificate. None.
(5) (a) (i) Management Agreement Between
Income Managers Trust and
Neuberger & Berman
Management Incorporated.
Incorporated by Reference to
Post-Effective Amendment No.
21 to Registration Statement
of Neuberger & Berman Income
Funds, File Nos. 2-85229 and
811-3802, EDGAR Accession
No. 0000898432-96-000117.
(ii) Schedule A - Portfolios of
Income Managers Trust
Currently Subject to the
Management Agreement.
Incorporated by Reference to
Post-Effective Amendment
No. 21 to Registration
Statement of Neuberger &
Berman Income Funds, File
Nos. 2-85229 and 811-3802,
EDGAR Accession No.
0000898432-96-00017.
- 2 -
<PAGE>
(iii) Schedule B - Schedule of
Compensation Under the
Management Agreement.
Incorporated by Reference to
Post-Effective Amendment
No. 21 to Registration
Statement of Neuberger &
Berman Income Funds, File
Nos. 2-85229 and 811-3802,
EDGAR Accession No.
0000898432-96-00017.
(i)(b) Sub-Advisory Agreement
Between Neuberger & Berman
Management Incorporated and
Neuberger & Berman, L.P.
with Respect to Income
Managers Trust.
Incorporated by Reference to
Post-Effective Amendment
No. 21 to Registration
Statement of Neuberger &
Berman Income Funds, File
Nos. 2-85229 and 811-3802,
EDGAR Accession No.
0000898432-96-00017.
(ii) Schedule A - Portfolios of
Income Managers Trust
Currently Subject to the
Sub-Advisory Agreement.
Incorporated by Reference to
Post-Effective Amendment
No. 21 to Registration
Statement of Neuberger &
Berman Income Funds, File
Nos. 2-85229 and 811-3802,
EDGAR Accession No.
0000898432-96-00017.
- 3 -
<PAGE>
(6) (a) Distribution Agreement Between Neuberger
& Berman Income Trust and Neuberger &
Berman Management Incorporated.
Incorporated by Reference to Post-
Effective Amendment No. 3 to Registrant's
Registration Statement, File Nos. 33-
62872 and 811-7724, EDGAR Accession No.
0000898432-96-00018.
(b) Schedule A - Series of Neuberger & Berman
Income Trust Currently Subject to the
Distribution Agreement. Incorporated by
Reference to Post-Effective Amendment No.
3 to Registrant's Registration Statement,
File Nos. 33-62872 and 811-7724, EDGAR
Accession No. 0000898432-96-00018.
(7) Bonus, Profit Sharing or Pension Plans. None.
(8) (a) Custodian Contract Between Neuberger &
Berman Income Trust and State Street Bank
and Trust Company. Incorporated by
Reference to Post-Effective Amendment No.
3 to Registrant's Registration Statement,
File Nos. 33-62872 and 811-7724, EDGAR
Accession No. 0000898432-96-00018.
(b) Schedule A - Approved Foreign Banking
Institutions and Securities Depositories
Under the Custodian Contract.
Incorporated by Reference to Post-
Effective Amendment No. 21 to
Registration Statement of Neuberger &
Berman Income Funds, File Nos. 2-85229
and 811-3802, EDGAR Accession No.
0000898432-96-00017.
- 4 -
<PAGE>
(9) (a) (i) Transfer Agency Agreement
Between Neuberger & Berman
Income Trust and State
Street Bank and Trust
Company. Incorporated by
Reference to Post-Effective
Amendment No. 3 to
Registrant's Registration
Statement, File Nos.
33-62872 and 811-7724, EDGAR
Accession No. 0000898432-96-
00018.
(ii) First Amendment to Transfer
Agency and Service Agreement
between Neuberger & Berman
Income Trust and State
Street Bank and Trust
Company. Incorporated by
Reference to Post-Effective
Amendment No. 3 to
Registrant's Registration
Statement, File Nos. 33-
62872 and 811-7724, EDGAR
Accession No. 0000898432-96-
00018.
(b) (i) Administration Agreement
Between Neuberger & Berman
Income Trust and Neuberger &
Berman Management
Incorporated. Incorporated
by Reference to Post-
Effective Amendment No. 3 to
Registrant's Registration
Statement, File Nos. 33-
62872 and 811-7724, EDGAR
Accession No. 0000898432-96-
00018.
- 5 -
<PAGE>
(ii) Schedule A - Series of
Neuberger & Berman Income
Trust Currently Subject to
the Administration
Agreement. Incorporated by
Reference to Post-Effective
Amendment No. 3 to
Registrant's Registration
Statement, File Nos. 33-
62872 and 811-7724, EDGAR
Accession No. 0000898432-96-
00018.
(iii) Schedule B - Schedule of
Compensation Under the
Administration Agreement.
Incorporated by Reference to
Post-Effective Amendment No.
3 to Registrant's
Registration Statement, File
Nos. 33-62872 and 811-7724,
EDGAR Accession No.
0000898432-96-00018.
(10) Opinion and Consent of Kirkpatrick & Lockhart on
Securities Matters. Incorporated by Reference
to Registrant's Registration Statement, File
Nos. 33-62872 and 811-7724.
(11) Other Opinions, Appraisals, Rulings and
Consents:
Consent of Ernst & Young LLP, Independent
Auditors. To be filed by Amendment.
(12) Financial Statements Omitted from Prospectus.
None.
(13) Letter of Investment Intent. None
(14) Prototype Retirement Plan. None
(15) Plan Pursuant to Rule 12b-1. NOne.
(16) Schedule of Computation of Performance
Quotations. Incorporated by Reference to Post-
Effective Amendment No. 1 to Registrant's
Registration Statement, File Nos. 33-62872 and
811-7724.
- 6 -
<PAGE>
(17) Financial Data Schedule. To be filed by
Amendment.
(18) Plan Pursuant to Rule 18f-3. None.
Item 25. Persons Controlled By or Under Common Control with Registrant.
-------------------------------------------------------------
No person is controlled by or under common control with the
Registrant.
Item 26. Number of Holders of Securities.
------- -------------------------------
The following information is given as of ________, 1996.
Number of
Title of Class Record Holders
-------------- --------------
Shares of beneficial
interest, $0.001 par value, of:
Neuberger & Berman Limited Maturity Bond Trust __
Neuberger & Berman Ultra Short Bond Trust __
Item 27. Indemnification.
-------- ---------------
A Delaware business trust may provide in its governing instrument
for indemnification of its officers and trustees from and against any and
all claims and demands whatsoever. Article IX, Section 2 of the Trust
Instrument provides that the Registrant shall indemnify any present or
former trustee, officer, employee or agent of the Registrant ("Covered
Person") to the fullest extent permitted by law against liability and all
expenses reasonably incurred or paid by him or her in connection with any
claim, action, suit or proceeding ("Action") in which he or she becomes
involved as a party or otherwise by virtue of his or her being or having
been a Covered Person and against amounts paid or incurred by him or her
in settlement thereof. Indemnification will not be provided to a person
adjudged by a court or other body to be liable to the Registrant or its
shareholders by reason of "willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office" ("Disabling Conduct"), or not to have acted in good faith in
the reasonable belief that his or her action was in the best interest of
the Registrant. In the event of a settlement, no indemnification may be
- 7 -
<PAGE>
provided unless there has been a determination that the officer or trustee
did not engage in Disabling Conduct (i) by the court or other body
approving the settlement; (ii) by at least a majority of those trustees
who are neither interested persons, as that term is defined in the
Investment Company Act of 1940 ("1940 Act"), of the Registrant
("Independent Trustees"), nor parties to the matter based upon a review of
readily available facts; or (iii) by written opinion of independent legal
counsel based upon a review of readily available facts.
Pursuant to Article IX, Section 3 of the Trust Instrument, if any
present or former shareholder of any series ("Series") of the Registrant
shall be held personally liable solely by reason of his or her being or
having been a shareholder and not because of his or her acts or omissions
or for some other reason, the present or former shareholder (or his or her
heirs, executors, administrators or other legal representatives or in the
case of any entity, its general successor) shall be entitled out of the
assets belonging to the applicable Series to be held harmless from and
indemnified against all loss and expense arising from such liability. The
Registrant, on behalf of the affected Series, shall, upon request by such
shareholder, assume the defense of any claim made against such shareholder
for any act or obligation of the Series and satisfy any judgment thereon
from the assets of the Series.
Section 9 of the Management Agreement between Income Managers
Trust ("Managers Trust") and Neuberger and Berman Management Incorporated
("N&B Management") provides that neither N&B Management nor any director,
officer or employee of N&B Management performing services for any series
of Managers Trust (each a "Portfolio") at the direction or request of N&B
Management in connection with N&B Management's discharge of its
obligations under the Agreement shall be liable for any error of judgment
or mistake of law or for any loss suffered by a Portfolio in connection
with any matter to which the Agreement relates; provided, that nothing in
the Agreement shall be construed (i) to protect N&B Management against any
liability to Managers Trust or a Portfolio or its interestholders to which
N&B Management would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its
duties, or by reason of N&B Management's reckless disregard of its
obligations and duties under the Agreement, or (ii) to protect any
director, officer or employee of N&B Management who is or was a trustee or
officer of Managers Trust against any liability to Managers Trust or a
Portfolio or its interestholders to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such person's
office with Managers Trust.
Section 1 of the Sub-Advisory Agreement between N&B Management
and Neuberger & Berman, L.P. ("Neuberger & Berman") with respect to
Managers Trust provides that in the absence of willful misfeasance, bad
faith or gross negligence in the performance of its duties, or of reckless
disregard of its duties and obligations under the Agreement, Neuberger &
- 8 -
<PAGE>
Berman will not be subject to liability for any act or omission or any
loss suffered by any Portfolio or its interestholders in connection with
the matters to which the Agreement relates.
Section 11 of the Agreement provides that N&B Management shall
look only to the assets of a Series for the Registrant's performance of
the Agreement by the Registrant on behalf of such Series, and neither the
trustees nor any of the Registrant's officers, employees or agents,
whether past, present or future, shall be personally liable therefor.
Section 12 of the Administration Agreement provides that each
Series shall indemnify N&B Management and hold it harmless from and
against any and all losses, damages and expenses, including reasonable
attorneys' fees and expenses, incurred by N&B Management that result from:
(i) any claim, action, suit or proceeding in connection with N&B
Management's entry into or performance of the Agreement with respect to
such Series; or (ii) any action taken or omission to act committed by N&B
Management in the performance of its obligations hereunder with respect to
such Series; or (iii) any action of N&B Management upon instructions
believed in good faith by it to have been executed by a duly authorized
officer or representative of the Trust with respect to such Series;
provided, that N&B Management shall not be entitled to such
indemnification in respect of actions or omissions constituting negligence
or misconduct on the part of N&B Management or its employees, agents or
contractors.
Section 13 of the Administration Agreement provides that N&B
Management shall indemnify each Series and hold it harmless from and
against any and all losses, damages and expenses, including reasonable
attorneys' fees and expenses, incurred by such Series which result from:
(i) N&B Management's failure to comply with the terms of this Agreement
with respect to such Series; or (ii) N&B Management's lack of good faith
in performing its obligations hereunder with respect to such Series; or
(iii) N&B Management's negligence or misconduct of its employees, agents
or contractors in connection herewith with respect to such Series. A
Series shall not be entitled to such indemnification in respect of actions
or omissions constituting negligence or misconduct on the part of that
Series or its employees, agents or contractors other than N&B Management
unless such negligence or misconduct results from or is accompanied by
negligence or misconduct on the part of N&B Management, any affiliated
person of N&B Management, or any affiliated person of an affiliated person
of N&B Management.
Section 11 of the Distribution Agreement between the Registrant
and N&B Management contains provisions similar to Section 11 of the
Administration Agreement, with respect to N&B Management.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("1933 Act") may be permitted to trustees, officers
and controlling persons of the Registrant pursuant to the foregoing
- 9 -
<PAGE>
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such trustee, officer or controlling person, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the 1933 Act and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Adviser and Sub-Adviser.
-------- ----------------------------------------------------------
There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each
director or officer of N&B Management and each partner of Neuberger &
Berman is, or at any time during the past two years has been, engaged for
his or her own account or in the capacity of director, officer, employee,
partner or trustee.
<TABLE>
<CAPTION>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
<S> <C>
Claudia A. Brandon Secretary, Neuberger & Berman Advisers Management
Vice President, Trust (Delaware business trust); Secretary,
N&B Management Advisers Managers Trust; Secretary, Neuberger &
Berman Advisers Management Trust (Massachusetts
business trust) (1); Secretary, Neuberger & Berman
Income Funds; Secretary, Neuberger & Berman Income
Trust; Secretary, Neuberger & Berman Equity Funds;
Secretary, Neuberger & Berman Equity Trust;
Secretary, Income Managers Trust; Secretary, Equity
Managers Trust; Secretary, Global Managers Trust;
Secretary, Neuberger & Berman Equity Assets.
- 10 -
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
Stacy Cooper-Shugrue Assistant Secretary, Neuberger & Berman Advisers
Assistant Vice President, Management Trust (Delaware business trust);
N&B Management Assistant Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger & Berman Advisers
Management Trust (Massachusetts business trust)
(1); Assistant Secretary, Neuberger & Berman Income
Funds; Assistant Secretary, Neuberger & Berman
Income Trust; Assistant Secretary, Neuberger &
Berman Equity Funds; Assistant Secretary,
Neuberger & Berman Equity Trust; Assistant
Secretary, Income Managers Trust; Assistant
Secretary, Equity Managers Trust; Assistant
Secretary, Global Managers Trust; Assistant
Secretary, Neuberger & Berman Equity Assets.
Robert Cresci Assistant Portfolio Manager, BNP-N&B Global Asset
Assistant Vice President, Management L.P. (joint venture of Neuberger &
N&B Management Berman and Banque Nationale de Paris) (2).
Barbara DiGiorgio, Assistant Treasurer, Neuberger & Berman Advisers
Assistant Vice President, Management Trust (Delaware business trust);
N&B Management Assistant Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger & Berman Income
Funds; Assistant Treasurer, Neuberger & Berman
Income Trust; Assistant Treasurer, Neuberger &
Berman Equity Funds; Assistant Treasurer,
Neuberger & Berman Equity Trust; Assistant
Treasurer, Income Managers Trust; Assistant
Treasurer, Equity Managers Trust; Assistant
Treasurer, Global Managers Trust; Assistant
Treasurer, Neuberger & Berman Equity Assets.
- 11 -
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
Stanley Egener Chairman of the Board and Trustee, Neuberger &
President and Director, Berman Advisers Management Trust (Delaware business
N&B Management; Principal, trust); Chairman of the Board and Trustee, Advisers
Neuberger & Berman Managers Trust; Chairman of the Board and Trustee,
Neuberger & Berman Advisers Management Trust
(Massachusetts business trust) (1); Chairman of the
Board and Trustee, Neuberger & Berman Income Funds;
Chairman of the Board and Trustee, Neuberger &
Berman Income Trust; Chairman of the Board and
Trustee, Neuberger & Berman Equity Funds; Chairman
of the Board and Trustee, Neuberger & Berman Equity
Trust; Chairman of the Board and Trustee, Income
Managers Trust; Chairman of the Board and Trustee,
Equity Managers Trust; Chairman of the Board and
Trustee, Global Managers Trust; Chairman of the
Board and Trustee, Neuberger & Berman Equity
Assets.
Theodore P. Giuliano President and Trustee, Neuberger & Berman Income
Vice President and Director, Funds; President and Trustee, Neuberger & Berman
N&B Management; Principal, Income Trust; President and Trustee, Income
Neuberger & Berman Managers Trust.
C. Carl Randolph Assistant Secretary, Neuberger & Berman Advisers
Principal, Neuberger & Management Trust (Delaware business trust);
Berman Assistant Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger & Berman Advisers
Management Trust (Massachusetts business trust)
(1); Assistant Secretary, Neuberger & Berman Income
Funds; Assistant Secretary, Neuberger & Berman
Income Trust; Assistant Secretary, Neuberger &
Berman Equity Funds; Assistant Secretary,
Neuberger & Berman Equity Trust; Assistant
Secretary, Income Managers Trust; Assistant
Secretary, Equity Managers Trust; Assistant
Secretary, Global Managers Trust; Assistant
Secretary, Neuberger & Berman Equity Assets.
Felix Rovelli Senior Vice President-Senior Equity Portfolio
Vice President, N&B Manager, BNP-N&B Global Asset Management L.P.
Management (joint venture of Neuberger & Berman and Banque
Nationale de Paris) (2).
- 12 -
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
Richard Russell Treasurer, Neuberger & Berman Advisers Management
Vice President, N&B Trust (Delaware business trust); Treasurer,
Management Advisers Managers Trust; Treasurer, Neuberger &
Berman Advisers Management Trust (Massachusetts
business trust) (1); Treasurer, Neuberger & Berman
Income Funds; Treasurer, Neuberger & Berman Income
Trust; Treasurer, Neuberger & Berman Equity Funds;
Treasurer, Neuberger & Berman Equity Trust;
Treasurer, Income Managers Trust; Treasurer, Equity
Managers Trust; Treasurer, Global Managers Trust;
Treasurer, Neuberger & Berman Equity Assets.
Daniel J. Sullivan Vice President, Neuberger & Berman Advisers
Senior Vice President, Management Trust (Delaware business trust); Vice
N&B Management President, Advisers Managers Trust; Vice President,
Neuberger & Berman Advisers Management Trust
(Massachusetts business trust) (1); Vice President,
Neuberger & Berman Income Funds; Vice President,
Neuberger & Berman Income Trust; Vice President,
Neuberger & Berman Equity Funds; Vice President,
Neuberger & Berman Equity Trust; Vice President,
Income Managers Trust; Vice President, Equity
Managers Trust; Vice President, Global Managers
Trust; Vice President, Neuberger & Berman Equity
Assets.
Susan Switzer Portfolio Manager, Mitchell Hutchins Asset
Assistant Vice President, Management Inc., 1285 Avenue of the Americas, New
N&B Management York, New York 10019 (3).
Michael J. Weiner Vice President, Neuberger & Berman Advisers
Senior Vice President, Management Trust (Delaware business trust); Vice
N&B Management President, Advisers Managers Trust; Vice President,
Neuberger & Berman Advisers Management Trust
(Massachusetts business trust) (1); Vice President,
Neuberger & Berman Income Funds; Vice President,
Neuberger & Berman Income Trust; Vice President,
Neuberger & Berman Equity Funds; Vice President,
Neuberger & Berman Equity Trust; Vice President,
Income Managers Trust; Vice President, Equity
Managers Trust; Vice President, Global Managers
Trust; Vice President, Neuberger & Berman Equity
Assets.
- 13 -
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
Celeste Wischerth, Assistant Treasurer, Neuberger & Berman Advisers
Assistant Vice President, Management Trust (Delaware business trust);
N&B Management Assistant Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger & Berman Income
Funds; Assistant Treasurer, Neuberger & Berman
Income Trust; Assistant Treasurer, Neuberger &
Berman Equity Funds; Assistant Treasurer,
Neuberger & Berman Equity Trust; Assistant
Treasurer, Income Managers Trust; Assistant
Treasurer, Equity Managers Trust; Assistant
Treasurer, Global Managers Trust; Assistant
Treasurer, Neuberger & Berman Equity Assets.
Lawrence Zicklin President and Trustee, Neuberger & Berman Advisers
Director, N&B Management; Management Trust (Delaware business trust);
Principal, Neuberger & President and Trustee, Advisers Managers Trust;
Berman President and Trustee, Neuberger & Berman Advisers
Management Trust (Massachusetts business trust)
(1); President and Trustee, Neuberger & Berman
Equity Funds; President and Trustee, Neuberger &
Berman Equity Trust; President and Trustee, Equity
Managers Trust; President, Global Managers Trust;
President and Trustee, Neuberger & Berman Equity
Assets
</TABLE>
The principal address of N&B Management, Neuberger & Berman, and
of each of the investment companies named above, is 605 Third Avenue, New
York, New York 10158.
____________________________________
(1) Until April 30, 1995.
(2) Until October 31, 1995.
(3) Until 1994.
Item 29. Principal Underwriters.
-------- -----------------------
(a) N&B Management, the principal underwriter distributing
securities of the Registrant, is also the principal underwriter and
distributor for each of the following investment companies and any series
thereof:
- 14 -
<PAGE>
Neuberger & Berman Advisers Management Trust
Neuberger & Berman Equity Assets
Neuberger & Berman Equity Funds
Neuberger & Berman Equity Trust
Neuberger & Berman Income Funds
N&B Management is also the investment manager to the
master funds in which the above-named investment companies invest.
(b) Set forth below is information concerning the directors
and officers of the Registrant's principal underwriter. The principal
business address of each of the persons listed is 605 Third Avenue, New
York, New York 10158-0180, which is also the address of the Registrant's
principal underwriter.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
---- --------------------- ----------------------
<S> <C> <C>
Claudia A. Brandon Vice President Secretary
Patrick T. Byrne Vice President None
Richard A. Cantor Chairman of the Board and None
Director
Robert Conti Treasurer None
Stacy Cooper-Shugrue Assistant Vice President Assistant Secretary
Robert Cresci Assistant Vice President None
William Cunningham Vice President None
Barbara DiGiorgio Assistant Vice President Assistant Treasurer
Roberta D'Orio Assistant Vice President None
Stanley Egener President and Director Chairman of the Board of
Trustees
(Chief Executive Officer)
Joseph G. Galli Assistant Vice President None
Robert I. Gendelman Assistant Vice President None
- 15 -
<PAGE>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
---- --------------------- ----------------------
Mark R. Goldstein Vice President None
Theodore P. Giuliano Vice President and Director None
Farha-Joyce Haboucha Vice President None
Leslie Holliday-Soto Assistant Vice President None
Jody L. Irwin Assistant Vice President None
Michael M. Kassen Vice President and Director None
Irwin Lainoff Director None
Michael Lamberti Vice President None
Josephine Mahaney Vice President None
Carmen G. Martinez Assistant Vice President None
Lawrence Marx III Vice President None
Ellen Metzger Vice President and Secretary None
Paul Metzger Assistant Vice President None
Lorraine Olavaria Assistant Secretary None
Janet W. Prindle Vice President None
Joseph S. Quirk Assistant Vice President None
Kevin L. Risen Assistant Vice President None
Felix Rovelli Vice President None
Richard Russell Vice President Treasurer (Principal
Accounting Officer)
Kent C. Simons Vice President None
Frederick B. Soule Vice President None
Daniel J. Sullivan Senior Vice President Vice President
- 16 -
<PAGE>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
---- --------------------- ----------------------
Peter E. Sundman Senior Vice President None
Susan Switzer Assistant Vice President None
Andrea Trachtenberg Vice President of Marketing None
Judith M. Vale Vice President None
Clara Del Villar Vice President None
Susan Walsh Vice President None
Michael J. Weiner Senior Vice President Vice President
(Principal Financial Officer)
Celeste Wischerth Assistant Vice President Assistant Treasurer
Thomas Wolfe Vice President None
KimMarie Zamot Assistant Vice President None
Lawrence Zicklin Director Trustee and President
</TABLE>
(c) No commissions or other compensation were received
directly or indirectly from the Registrant by any principal underwriter
who was not an affiliated person of the Registrant.
Item 30. Location of Accounts and Records.
------- --------------------------------
All accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act, as amended, and the rules
promulgated thereunder with respect to the Registrant are maintained at
the offices of State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110, except for the Registrant's Trust Instrument
and By-Laws, minutes of meetings of the Registrant's Trustees and
shareholders and the Registrant's policies and contracts, which are
maintained at the offices of the Registrant, 605 Third Avenue, New York,
New York 10158.
- 17 -
<PAGE>
Item 31. Management Services
------- -------------------
Other than as set forth in Parts A and B of this
Registration Statement, the Registrant is not a party to any management-
related service contract.
Item 32. Undertakings
------- ------------
Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
- 18 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, NEUBERGER & BERMAN INCOME TRUST has
duly caused the Post-Effective Amendment No. 4 to be signed on its behalf
by the undersigned, thereto duly authorized, in the City and State of New
York on the 14th day of November, 1996.
NEUBERGER & BERMAN INCOME TRUST
By: /s/ Theodore P. Giuliano
-----------------------------
Theodore P. Giuliano
President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. has been signed below by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John Cannon Trustee November 14, 1996
---------------------------
John Cannon
/s/ Charles DeCarlo Trustee November 14, 1996
---------------------------
Charles DeCarlo
/s/ Stanley Egener Chairman of the Board, November 14, 1996
--------------------------- Chief Executive Officer
Stanley Egener and Trustee
/s/ Theodore P. Giuliano President and Trustee November 14, 1996
---------------------------
Theodore P. Giuliano
/s/ Barry Hirsch Trustee November 14, 1996
---------------------------
Barry Hirsch
(signatures continued on next page)
<PAGE>
Signature Title Date
--------- ----- ----
/s/ Robert A. Kavesh Trustee November 14, 1996
---------------------------
Robert A. Kavesh
/s/ Harold R. Logan Trustee November 14, 1996
---------------------------
Harold R. Logan
/s/ William E. Rulon Trustee November 14, 1996
---------------------------
William E. Rulon
/s/ Richard Russell Treasurer and November 14, 1996
--------------------------- Principal Accounting Officer
Richard Russell
/s/ Candace L. Straight Trustee November 14, 1996
---------------------------
Candace L. Straight
/s/ Michael J. Weiner Vice President and November 14, 1996
--------------------------- Principal Financial Officer
Michael J. Weiner
</TABLE>
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, INCOME MANAGERS TRUST has duly caused
the Post-Effective Amendment No. 4 to be signed on its behalf by the
undersigned, thereto duly authorized, in the City and State of New York on
the 14th day of November, 1996.
INCOME MANAGERS TRUST
By: /s/ Theodore P. Giuliano
--------------------------
Theodore P. Giuliano
President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. 4 has been signed below by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John Cannon Trustee November 14, 1996
---------------------------
John Cannon
/s/ Charles DeCarlo Trustee November 14, 1996
---------------------------
Charles DeCarlo
/s/ Stanley Egener Chairman of the Board, November 14, 1996
--------------------------- Chief Executive Officer
Stanley Egener and Trustee
/s/ Theodore P. Giuliano President and Trustee November 14, 1996
---------------------------
Theodore P. Giuliano
/s/ Barry Hirsch Trustee November 14, 1996
---------------------------
Barry Hirsch
(signatures continued on next page)
<PAGE>
Signature Title Date
--------- ----- ----
/s/ Robert A. Kavesh Trustee November 14, 1996
---------------------------
Robert A. Kavesh
/s/ Harold R. Logan Trustee November 14, 1996
---------------------------
Harold R. Logan
/s/ William E. Rulon Trustee November 14, 1996
---------------------------
William E. Rulon
/s/ Richard Russell Treasurer and November 14, 1996
--------------------------- Principal Accounting Officer
Richard Russell
/s/ Candace L. Straight Trustee November 14, 1996
---------------------------
Candace L. Straight
/s/ Michael J. Weiner Vice President and November 14, 1996
--------------------------- Principal Financial Officer
Michael J. Weiner
</TABLE>
<PAGE>
NEUBERGER & BERMAN INCOME TRUST
POST-EFFECTIVE AMENDMENT NO. 4 ON FORM N-1A
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
<S> <C> <C>
(1) (a) Certificate of Trust. Incorporated by Reference N.A.
to Post-Effective Amendment No. 3 to Registrant's
Registration Statement, File Nos. 33-62872 and
811-7724, EDGAR Accession No. 0000898432-96-00018.
(b) Trust Instrument of Neuberger & Berman Income N.A.
Trust. Incorporated by Reference to Post-
Effective Amendment No. 3 to Registrant's
Registration Statement, File Nos. 33-62872 and
811-7724, EDGAR Accession No. 0000898432-96-00018.
(c) Schedule A - Current Series of Neuberger & Berman N.A.
Income Trust. Incorporated by Reference to Post-
Effective Amendment No. 3 to Registrant's
Registration Statement, File Nos. 33-62872 and
811-7724, EDGAR Accession No. 0000898432-96-00018.
(2) By-laws of Neuberger & Berman Income Trust. N.A.
Incorporated by Reference to Post-Effective Amendment No.
3 to Registrant's Registration Statement, File Nos. 33-
62872 and 811-7724, EDGAR Accession No. 0000898432-96-
00018.
(3) Voting Trust Agreement. None. N.A.
(4) Specimen Share Certificate. None. N.A.
(5) (a) (i) Management Agreement Between Income N.A.
Managers Trust and Neuberger & Berman
Management Incorporated. Incorporated by
Reference to Post-Effective Amendment No.
21 to Registration Statement of Neuberger
& Berman Income Funds, File Nos. 2-85229
and 811-3802, EDGAR Accession No.
0000898432-96-00017.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
(ii) Schedule A - Portfolios of Income N.A.
Managers Trust Currently Subject to the
Management Agreement. Incorporated by
Reference to Post-Effective Amendment No.
21 to Registration Statement of Neuberger
& Berman Income Funds, File Nos. 2-85229
and 811-3802, EDGAR Accession No.
0000898432-96-00017.
(iii) Schedule B - Schedule of Compensation N.A.
Under the Management Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 21 to
Registration Statement of Neuberger &
Berman Income Funds, File Nos. 2-85229
and 811-3802, EDGAR Accession No.
0000898432-96-00017.
(b) (i) Sub-Advisory Agreement Between Neuberger N.A.
& Berman Management Incorporated and
Neuberger & Berman, L.P. with Respect to
Income Managers Trust. Incorporated by
Reference to Post-Effective Amendment No.
21 to Registration Statement of Neuberger
& Berman Income Funds, File Nos. 2-85229
and 811-3802, EDGAR Accession No.
0000898432-96-00017.
(ii) Schedule A - Portfolios of Income N.A.
Managers Trust Currently Subject to the
Sub-Advisory Agreement. Incorporated by
Reference to Post-Effective Amendment No.
21 to Registration Statement of Neuberger
& Berman Income Funds, File Nos. 2-85229
and 811-3802, EDGAR Accession No.
0000898432-96-00017.
(6) (a) Distribution Agreement Between Neuberger & Berman N.A.
Income Trust and Neuberger & Berman Management
Incorporated. Incorporated by Reference to Post-
Effective Amendment No. 3 to Registrant's
Registration Statement, File Nos. 33-62872 and
811-7724, EDGAR Accession No. 0000898432-96-00018.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
(b) Schedule A - Series of Neuberger & Berman Income N.A.
Trust Currently Subject to the Distribution
Agreement. Incorporated by Reference to Post-
Effective Amendment No. 3 to Registrant's
Registration Statement, File Nos. 33-62872 and
811-7724, EDGAR Accession No. 0000898432-96-00018.
(7) Bonus, Profit Sharing or Pension Plans. None. N.A.
(8) (a) Custodian Contract Between Neuberger & Berman N.A.
Income Trust and State Street Bank and Trust
Company. Incorporated by Reference to Post-
Effective Amendment No. 3 to Registrant's
Registration Statement, File Nos. 33-62872 and
811-7724, EDGAR Accession No. 0000898432-96-00018.
(b) Schedule A - Approved Foreign Banking Institutions N.A.
and Securities Depositories Under the Custodian
Contract. Incorporated by Reference to Post-
Effective Amendment No. 21 to Registration
Statement of Neuberger & Berman Income Funds, File
Nos. 2-85229 and 811-3802, EDGAR Accession No.
0000898432-96-00017.
(9) (a) (i) Transfer Agency Agreement Between N.A.
Neuberger & Berman Income Trust and State
Street Bank and Trust Company.
Incorporated by Reference to Post-
Effective Amendment No. 3 to Registrant's
Registration Statement, File Nos. 33-
62872 and 811-7724, EDGAR Accession No.
0000898432-96-00018.
(ii) First Amendment to Transfer Agency and N.A.
Service Agreement between Neuberger &
Berman Income Trust and State Street Bank
and Trust Company. Incorporated by
Reference to Post-Effective Amendment No.
3 to Registrant's Registration Statement,
File Nos. 33-62872 and 811-7724, EDGAR
Accession No. 0000898432-96-00018.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
(b) (i) Administration Agreement Between N.A.
Neuberger & Berman Income Trust and
Neuberger & Berman Management
Incorporated. Incorporated by Reference
to Post-Effective Amendment No. 3 to
Registrant's Registration Statement, File
Nos. 33-62872 and 811-7724, EDGAR
Accession No. 0000898432-96-00018.
(ii) Schedule A - Series of Neuberger & Berman N.A.
Income Trust Currently Subject to the
Administration Agreement. Incorporated
by Reference to Post-Effective Amendment
No. 3 to Registrant's Registration
Statement, File Nos. 33-62872 and 811-
7724, EDGAR Accession No. 0000898432-96-
00018.
(iii) Schedule B - Schedule of Compensation N.A.
Under the Administration Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 3 to Registrant's
Registration Statement, File Nos. 33-
62872 and 811-7724, EDGAR Accession No.
0000898432-96-00018.
(10) Opinion and Consent of Kirkpatrick & Lockhart on N.A.
Securities Matters. Incorporated by Reference to
Registrant's Registration Statement, File Nos. 33-62872
and 811-7724.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
(11) Other Opinions, Appraisals, Rulings and Consents:
Consent of Ernst & Young LLP, Independent ____
Auditors. To be Filed by Amendment.
(12) Financial Statements Omitted from Prospectus. None. N.A.
(13) Letter of Investment Intent. None. N.A.
(14) Prototype Retirement Plan. None. N.A.
(15) Plan Pursuant to Rule 12b-1. None. N.A.
(16) Schedule of Computation of Performance N.A.
Quotations. Incorporated by Reference to Post-Effective
Amendment No. 1 to Registrant's Registration Statement,
File Nos. 33-62872 and 811-7724.
(17) Financial Data Schedule. To be Filed by Amendment. ____
(18) Plan Pursuant to Rule 18-3f. None. N.A.
</TABLE>
<PAGE>
