As filed with the Securities and Exchange Commission on January 31, 1997
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. [__5__] [__X__]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [__X__]
Amendment No. [__5__] [__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)
_X__ on February 3, 1997 pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)(1)
____ on ________________ pursuant to paragraph (a)(1)
____ 75 days after filing pursuant to paragraph (a)(2)
____ on __________ pursuant to paragraph (a)(2)
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 was filed on December 27, 1996.
Neuberger & Berman Income Trust is a "master/feeder fund." This
Post-Effective Amendment No. 5 includes a signature page for the master fund,
Income Managers Trust, and appropriate officers and trustees thereof.
Page _____ of _____
Exhibit Index
Begins on Page _____
<PAGE>
NEUBERGER & BERMAN INCOME TRUST
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 5 ON FORM N-1A
This Post-Effective Amendment consists of the following papers and
documents:
Cover Sheet
Contents of Post-Effective Amendment No. 5 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
<PAGE>
NEUBERGER & BERMAN INCOME TRUST
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 5 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
Form N-1A Item No. Caption in Part A Prospectus
------------------ ----------------------------
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
<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 Control Persons And Principal
Principal Holders of Holders of Securities
Securities
Item 16. Investment Advisory and Investment Management and
Other 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 Additional Exchange Information;
Being Offered Additional Redemption
Information
Item 20. Tax Status Dividends and Other Distribu
tions; Additional Tax
Information
Item 21. Underwriters Investment Management and
Administration Services;
Distribution Arrangements
Item 22. Calculation of Performance Information
Performance Data
Item 23. Financial Statements Financial Statements
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. 5.
<PAGE>
PROSPECTUS
February 3, 1997
Neuberger&Berman
INCOME TRUST
Neuberger&Berman
ULTRA SHORT BOND TRUST
Neuberger&Berman
LIMITED MATURITY BOND TRUST
No Sales Charges
No Redemption Fees
No 12b-1 Fees
<PAGE>
<PAGE>
Neuberger&Berman
INCOME TRUST
No-Load Bond Funds
- -------------------------------------------------------------------------------
Neuberger&Berman ULTRA SHORT BOND TRUST(R)
Neuberger&Berman LIMITED MATURITY BOND TRUST(R)
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") THAT PROVIDES ACCOUNTING, RECORDKEEPING AND OTHER SERVICES TO
INVESTORS AND THAT 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 its 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 structure that you should
consider, see "Summary" on page 3 and "Information Regarding Organization,
Capitalization, and Other Matters" on page 26.
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 Fund 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 3
The Funds and Portfolios 3
Risk Factors 4
Management 4
EXPENSE INFORMATION 5
Shareholder Transaction
Expenses for Each Fund 5
Annual Fund Operating Expenses 5
Example 6
FINANCIAL HIGHLIGHTS 7
Selected Per Share Data and
Ratios 7
Ultra Short Bond Trust 8
Limited Maturity Bond Trust 9
INVESTMENT PROGRAMS 11
Short-Term Trading; Portfolio
Turnover 12
Ratings of Securities 12
Borrowings 14
Other Investments 14
Duration 14
PERFORMANCE INFORMATION 16
Yield 16
Total Return 16
Yield and Total Return
Information 16
SHAREHOLDER SERVICES 17
How to Buy Shares 17
How to Sell Shares 17
Exchanging Shares 18
SHARE PRICES AND NET ASSET
VALUE 19
DIVIDENDS, OTHER
DISTRIBUTIONS, AND TAXES 20
Distribution Options 20
Taxes 20
MANAGEMENT AND
ADMINISTRATION 22
Trustees and Officers 22
Investment Manager,
Administrator, Distributor,
and Sub-Adviser 22
Expenses 23
Transfer Agent 25
INFORMATION REGARDING
ORGANIZATION,
CAPITALIZATION, AND OTHER
MATTERS 26
The Funds 26
The Portfolios 26
DESCRIPTION OF INVESTMENTS 29
USE OF JOINT PROSPECTUS AND
STATEMENT OF ADDITIONAL
INFORMATION 35
OTHER INFORMATION 36
Directory 36
Funds Eligible For Exchange 36
<PAGE>
SUMMARY
The Funds and Portfolios
- --------------------------------------------------------------------------------
Each Fund is a series of Neuberger&Berman Income Trust (the "Trust") and
invests in its corresponding Portfolio which, 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
[arrow] BUY SHARES IN
FUNDS
[arrow] INVEST IN
PORTFOLIOS
[arrow] 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 "Information Regarding Organization, Capitalization, and Other Matters"
on page 26.
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. Please see "Investment
Programs" on page 11. Of course, there can be no assurance that a Fund will
meet its investment objective.
3
<PAGE>
<TABLE>
<CAPTION>
NEUBERGER&BERMAN INVESTMENT PRINCIPAL PORTFOLIO COMPARATIVE
INCOME TRUST OBJECTIVE INVESTMENTS INFORMATION
- ---------------------- ----------------------------- --------------------------- --------------------------
<S> <C> <C> <C>
ULTRA SHORT Current income with minimal Money market instruments Lower expected price
risk to principal and and investment grade debt fluctuation; maximum
liquidity securities of government dollar-weighted average
and non-government issuers duration of two years
LIMITED MATURITY Highest current income Debt securities, primarily More potential price
consistent with low risk to investment grade; maximum fluctuation; maximum
principal and liquidity; and 10% below investment grade, dollar-weighted average
secondarily, total return but no lower than B* duration of four years
</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 12.
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 debt securities rated below
investment grade, foreign securities, options and futures contracts and zero
coupon bonds. For more details about each Portfolio, its investments and
their risks, see "Investment Programs" on page 11 and "Description of
Investments" on page 29.
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(R) made
available through an Institution, see "Shareholder Services--How to Buy
Shares" on page 17, "Shareholder Services--How to Sell Shares" on page 17,
"Shareholder Services--Exchanging Shares" on page 18, and the policies of the
Institution through which you are purchasing shares.
4
<PAGE>
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.
Shareholder Transaction Expenses for Each Fund
- --------------------------------------------------------------------------------
As shown by this table, the Funds impose 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 the Fund's
pro rata portion of the Total Operating Expenses of its corresponding
Portfolio. 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. "Total 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.
NEUBERGER&BERMAN MANAGEMENT AND 12B-1 OTHER TOTAL OPERATING
INCOME TRUST ADMINISTRATION FEES* FEES EXPENSES* EXPENSES*
- ----------------- -------------------- ------- ----------- ---------------
ULTRA SHORT 0.25% None 0.50% 0.75%
LIMITED MATURITY 0.25% None 0.55% 0.80%
* REFLECTS N&B MANAGEMENT'S EXPENSE REIMBURSEMENT UNDERTAKING DESCRIBED BELOW
Total Operating Expenses for each Fund are based upon administration fees
incurred by the Fund and management fees incurred by its corresponding
Portfolio during the past fiscal year and any current expense reimbursement
undertaking. "Other Expenses" are 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 Portfolio
will be approximately equal to the expenses the
5
<PAGE>
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 Total Operating Expenses and pro rata share of
its corresponding Portfolio's Total 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 0.75% and 0.75%, Other Expenses would be 2.34%
and 1.16%, and Total Operating Expenses would be 3.09% and 1.91% 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 Total 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
INCOME TRUST 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------- ------- -------- -------- ----------
ULTRA SHORT $8 $24 $42 $93
LIMITED MATURITY $8 $26 $44 $99
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.
6
<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."
7
<PAGE>
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 the corresponding Portfolio's Financial Statements and notes
thereto.(6)
<TABLE>
<CAPTION>
Period from
September 7,
1993(1) to
Year Ended October 31, October 31,
1996 1995 1994 1993
- ------------------------------------------ -------- -------- -------- ---------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $9.85 $9.79 $9.97 $10.00
-------- -------- -------- ---------------
Income From Investment Operations
Net Investment Income .53 .53 .37 .05
Net Gains or Losses on Securities
(both realized and unrealized) (.03) .06 (.18) (.03)
-------- -------- -------- ---------------
Total from Investment Operations .50 .59 .19 .02
-------- -------- -------- ---------------
Less Distributions
Dividends (from net investment income) (.53) (.53) (.37) (.05)
-------- -------- -------- ---------------
Net Asset Value, End of Year $9.82 $9.85 $9.79 $ 9.97
-------- -------- -------- ---------------
Total Return(2) +5.24% +6.15% +1.92% + 0.17%(3)
-------- -------- -------- ---------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 6.6 $ 1.7 $ 1.2 $ 0.2
-------- -------- -------- ---------------
Ratio of Expenses to Average Net
Assets(4) .76% .72% .65% .65%(5)
-------- -------- -------- ---------------
Ratio of Net Investment Income to
Average Net Assets(4) 5.43% 5.42% 3.86% 2.98%(5)
-------- -------- -------- ---------------
</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 the corresponding Portfolio's Financial Statements and notes
thereto.(6)
<TABLE>
<CAPTION>
Period from
August 30,
1993(1) to
Year Ended October 31, October 31,
1996 1995 1994 1993
- ------------------------------------------ -------- -------- -------- --------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $9.61 $9.43 $9.97 $10.00
-------- -------- -------- --------------
Income From Investment Operations
Net Investment Income .57 .58 .54 .08
Net Gains or Losses on Securities
(both realized and unrealized) (.08) .18 (.54) (.03)
-------- -------- -------- --------------
Total From Investment Operations .49 .76 -- .05
-------- -------- -------- --------------
Less Distributions
Dividends (from net investment income) (.57) (.58) (.54) (.08)
-------- -------- -------- --------------
Net Asset Value, End of Year $9.53 $9.61 $9.43 $ 9.97
-------- -------- -------- --------------
Total Return(2) +5.29% +8.36% -0.01% + 0.55%(3)
-------- -------- -------- --------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $21.2 $11.9 $ 6.7 $ 0.1
-------- -------- -------- --------------
Ratio of Expenses to Average Net
Assets(4) .80% .77% .70% .65%(5)
-------- -------- -------- --------------
Ratio of Net Investment Income to
Average Net Assets(4) 6.06% 6.16% 5.72% 4.99%(5)
-------- -------- -------- --------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
9
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
1) The date investment operations commenced.
2) 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
fiscal period and assumes dividends and other distributions, if any, were
reinvested. 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.
3) Not annualized.
4) 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:
PERIOD FROM
SEPTEMBER 7, 1993
NEUBERGER&BERMAN YEAR ENDED OCTOBER 31, TO OCTOBER 31,
ULTRA SHORT BOND TRUST 1996 1995 1994 1993
- ------------------------ ------- ------- ------- ------------------
Expenses 2.50% 2.50% 2.50% 2.50%
------- ------- ------- ------------------
Net Investment Income 3.69% 3.64% 2.01% 1.13%
------- ------- ------- ------------------
PERIOD FROM
AUGUST 30, 1993
NEUBERGER&BERMAN YEAR ENDED OCTOBER 31, TO OCTOBER 31,
LIMITED MATURITY BOND TRUST 1996 1995 1994 1993
----------------------------- ------- ------- ------- ----------------
Expenses 1.91% 2.18% 2.50% 2.50%
------- ------- ------- ----------------
Net Investment Income 4.95% 4.75% 3.92% 3.14%
------- ------- ------- ----------------
5) Annualized.
6) Because each Fund invests only in its corresponding Portfolio and that
Portfolio (rather than the Fund) engages in securities transactions,
neither Fund calculates a portfolio turnover rate. The portfolio turnover
rates for each Portfolio were as follows:
<TABLE>
<CAPTION>
PERIOD FROM JULY 2,
1993 (COMMENCEMENT
OF OPERATIONS) TO
YEAR ENDED OCTOBER 31, OCTOBER 31,
1996 1995 1994 1993
- --------------------------------------- -------- -------- -------- --------------------
<S> <C> <C> <C> <C>
Neuberger&Berman
ULTRA SHORT Bond Portfolio 173% 148% 94% 46%
Neuberger&Berman
LIMITED MATURITY Bond Portfolio 169% 88% 102% 71%
</TABLE>
10
<PAGE>
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 28.
Investment policies and limitations of the Funds and the Portfolios are
not fundamental unless otherwise specified in this Prospectus or the SAI.
Fundamental policies may not be changed without shareholder approval. A
non-fundamental policy or limitation may be changed by the trustees of the
Trust or of Managers Trust 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 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.
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. The Portfolio may also invest in
municipal obligations.
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.
11
<PAGE>
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 the Portfolios for 1996 and
earlier years are set forth under "Notes to Financial Highlights." Turnover
rates in excess of 100% generally result in higher transaction costs (which
are borne directly by the Portfolio) and a possible increase in realized
short-term capital gains or losses. See "Dividends, Other Distributions, and
Taxes" on page 20 and the SAI.
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 S&P, Moody's, Fitch
Investors Service L.P. or Duff & Phelps Credit Rating Co., 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. Securities rated by
Moody's in its fourth highest category (Baa) may have speculative
characteristics; a change in economic factors could lead to a weakened
capacity of the issuer to repay.
12
<PAGE>
LOWER-RATED DEBT SECURITIES (Neuberger&Berman LIMITED MATURITY Bond
Portfolio). Securities rated below investment grade may be considered
speculative. 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 Neuberger&Berman LIMITED MATURITY
Bond 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 during the period March 1,
1996*, to October 31, 1996. The percentages in each category represent the
average of dollar-weighted month-end holdings during the period. These
percentages are historical only and are not necessarily representative of the
ratings of current and future holdings. During this period, the Portfolio did
not invest in any unrated corporate securities.
<TABLE>
<CAPTION>
MOODY'S (AS A % OF S&P (AS A % OF
INVESTMENTS) INVESTMENTS)
INVESTMENT GRADE RATING AVERAGE RATING AVERAGE
- --------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Treasury/Agency** TSY/AGY 24.95% TSY/AGY 24.95%
Highest quality Aaa 14.83% AAA 14.83%
High quality Aa 4.03% AA 0.81%
Upper-medium grade A 21.65% A 21.45%
Medium grade Baa 18.20% BBB 25.61%
LOWER QUALITY***
Moderately speculative Ba 13.57% BB 10.45%
Speculative B 1.34% B 1.90%
Highly Speculative Caa -- CCC --
Poor Quality Ca -- CC --
Lowest quality, no interest C -- C --
In default, in arrears -- -- D --
TOTAL 98.57%+ 100%
</TABLE>
*AS OF MARCH 1, 1996, THE PORTFOLIO WAS AUTHORIZED TO INVEST UP TO 10% OF ITS
NET ASSETS IN DEBT SECURITIES THAT ARE BELOW INVESTMENT GRADE.
**U.S. GOVERNMENT AND AGENCY SECURITIES ARE NOT RATED BY MOODY'S OR S&P.
***INCLUDES SECURITIES RATED INVESTMENT GRADE BY OTHER NRSROS.
+MOODY'S DID NOT RATE EVERY SECURITY PURCHASED DURING THIS PERIOD.
13
<PAGE>
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). 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 for purposes of this limitation.
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.
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
accruing 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
14
<PAGE>
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 expected economic life of a
security into the determination of its interest rate exposure.
15
<PAGE>
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 securities. For this reason,
longer-term bond funds usually have higher yields and carry more
interest-rate risk than shorter-term bond funds. The creditworthiness of
issuers of income securities also affects risk; for example, U.S. Government
and Agency Securities are generally considered to have less credit risk than
investment grade bonds.
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.
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
- --------------------------------------------------------------------------------
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.
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.
16
<PAGE>
SHAREHOLDER SERVICES
How to Buy Shares
- --------------------------------------------------------------------------------
YOU CAN BUY AND OWN FUND SHARES ONLY THROUGH AN ACCOUNT WITH AN
INSTITUTION THAT PROVIDES ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO
INVESTORS AND THAT 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 shares of both Funds 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:
(bullet) An Institution must pay for shares it purchases in U.S. dollars.
(bullet) 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."
(bullet) The Funds will not issue a certificate for your shares.
(bullet) Some Institutions may charge their clients a fee in connection
with purchases of Fund 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 shares of both Funds 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.
17
<PAGE>
Other Information:
(bullet) Redemption proceeds will be paid to Institutions as agreed with
N&B Management, but in any case within three business days (under
unusual circumstances a Fund may take longer, as permitted by
law).
(bullet) 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.
(bullet) Some Institutions may charge their clients a fee in connection
with redemptions of Fund shares.
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. 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.
(bullet) Shares can be exchanged only between accounts registered in the
same name, address, and taxpayer ID number of the Institution.
(bullet) An exchange can be made only into a mutual fund whose shares are
eligible for sale in the state where the Institution is located.
(bullet) An exchange may have tax consequences.
(bullet) 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.
(bullet) 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.
18
<PAGE>
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 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 may be valued at cost which, when combined
with interest earned, approximates market value.
19
<PAGE>
DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES
Each Fund distributes substantially all of its share of any net investment
income (net of the Fund's expenses), any net capital gains from investment
transactions and, for Neuberger&Berman LIMITED MATURITY Bond Trust, any net
gains from foreign currency transactions earned or realized by the Fund's
corresponding Portfolio. Income dividends are declared daily for each Fund at
the time its NAV is calculated and are paid monthly, and net realized 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, if any,
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. FOR AN ACCOUNT UNDER A QUALIFIED RETIREMENT
PLAN OR AN INDIVIDUAL RETIREMENT ACCOUNT, TAXES ARE DEFERRED.
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.
20
<PAGE>
For federal income tax purposes, income dividends and distributions of net
short-term capital gain and net gains from certain foreign currency
transactions 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 the shares have been held. Distributions of net capital gain
may include gains from the sale of portfolio securities that appreciated in
value before the shares were purchased. Each Portfolio may invest in
municipal securities. Any distributions of income derived from these
securities, however, are not tax-exempt, because neither Portfolio invests
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 (or deemed paid)
in the previous year. Information accompanying that statement will show the
portion, if any, of those distributions that generally are not subject to
state and local income taxes.
TAXES ON REDEMPTIONS. Capital gains realized on redemption of Fund shares,
including redemptions in connection with exchanges to other Neuberger&Berman
Funds, 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 is required annually to 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 income tax
considerations affecting each Fund and its shareholders. See the SAI for
additional tax information. There may be other federal, state, local, or
foreign tax considerations applicable to a particular investor. Therefore,
investors should consult their tax advisers.
21
<PAGE>
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 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 one other investment company. The mutual funds managed by N&B
Management and Neuberger&Berman had aggregate net assets of approximately
$15.2 billion as of December 31, 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 $44.7 billion of assets as
of December 31, 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
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
22
<PAGE>
manages fixed income accounts that had approximately $10.5 billion of assets
as of December 31, 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 October 1992. 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. Mr. Wolfe 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.
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. 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.
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 such administrative
services, each 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 Institutions some of its responsibilities to that Fund
under the administration agreement and may com-
23
<PAGE>
pensate each Institution that provides such services at an annual rate of up
to 0.25% of the value of Fund shares held through that Institution. During
its 1996 fiscal year, each Fund accrued administration fees and a pro rata
portion of the corresponding Portfolio's management fees (prior to any
expense reimbursement) of 0.75% 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
Total Operating Expenses, which include its pro rata share of its
corresponding Portfolio's Total Operating Expenses, which 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%
N&B Management may terminate this undertaking to either Fund by giving at
least 60 days' prior written notice to the Fund. The effect of reimbursement
by N&B Management is to reduce a Fund's expenses and thereby increase its
total return.
During its 1996 fiscal year, each Fund bore aggregate 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:
- --------------------------------------------------------------------------------
Neuberger&Berman ULTRA SHORT Bond Trust 0.76%
Neuberger&Berman LIMITED MATURITY Bond Trust 0.80%
24
<PAGE>
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 Management Inc., Institutional Services, 605 Third Avenue,
2nd Floor, New York, NY 10158-0180.
25
<PAGE>
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
either 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 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 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.
26
<PAGE>
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; the Fund thus acquires an
indirect interest in those securities.
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 two corresponding Portfolios of
Managers Trust. 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 invests in a Portfolio is
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.
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 actions might
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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, 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.
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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 and on
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"), Fannie Mae
(formerly, Federal National Mortgage Association), Federal Home Loan Mortgage
Corporation ("FHLMC"), Student Loan Marketing Association ("SLMA") 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
Agency mortgage-backed securities. The market prices of U.S. Government
Agency Securities are not guaranteed by the Government and generally
fluctuate inversely with changing interest rates.
INFLATION-INDEXED SECURITIES. Each Portfolio may invest in U.S. Treasury
securities whose principal value is adjusted daily in accordance with changes
to the Consumer Price Index. Interest is calculated on the basis of the
current adjusted principal value. The principal value of inflation-indexed
securities declines in periods of deflation, but holders at maturity receive
no less than par. If inflation is lower than expected during the period a
Portfolio holds the security, the Portfolio may earn less on it than on a
conventional bond. Any increase in principal value is taxable in the year the
increase occurs, even though holders do not receive cash representing the
increase until the security matures. Changes in market interest rates from
causes other than inflation will likely affect the market prices of
inflation-indexed securities in the same manner as conventional bonds.
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 maturity, each Portfolio calculates
the remaining maturity of variable and floating rate instruments as provided
in Rule 2a-7 under the 1940 Act.
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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
borrowers and repurchase agreement sellers.
ILLIQUID SECURITIES. Each Portfolio may invest up to 15% 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, as amended ("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 of the 1933 Act. Foreign securities that are freely tradeable
in their principal market are not considered restricted securities even if
they are not 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 securities 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 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
30
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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 fluctuations 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 that will be issued 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
fluctuation in a Fund's NAV.
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
Agency 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, Fannie Mae, 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 Agency 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 changes.
ASSET-BACKED SECURITIES. Asset-backed securities represent interests in,
or are secured by and payable from, pools of assets, such as consumer loans,
CARSSM ("Certificates for Automobile Receivables"), credit card receivables,
and installment loan contracts. Although these securities may be supported by
letters of credit or other
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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.
Each Portfolio may invest in trust preferred securities, which are a type
of asset-backed security. Trust preferred securities represent interests in a
trust formed by a parent company to finance its operations. The trust sells
preferred shares and invests the proceeds in debt securities of the parent.
This debt may be subordinated and unsecured. Dividend payments on the trust
preferred securities match the interest payments on the debt securities; if
no interest is paid on the debt securities, the trust will not make current
payments on its preferred securities. Unlike typical asset-backed securities,
which have many underlying payors and are usually overcollateralized, trust
preferred securities have only one underlying payor and are not
overcollateralized. Issuers of trust preferred securities and their parents
currently enjoy favorable tax treatment. If the tax characterization of trust
preferred securities were to change, they could be redeemed by the issuers,
which could result in a loss to the Portfolio.
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 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.
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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.
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 the 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 associated with selection of 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. Losses that may arise from certain futures transactions are
potentially unlimited.
MUNICIPAL OBLIGATIONS. 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. 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 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
33
<PAGE>
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
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.
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<PAGE>
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.
35
<PAGE>
OTHER INFORMATION
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR,
AND 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, LLC, Neuberger&Berman Management Inc., and the above-named
Funds are service marks or registered trademarks of Neuberger&Berman
Management Inc.
(c)1997 Neuberger&Berman Management Inc.
36
<PAGE>
[IBC]
<PAGE>
[back cover]
Neuberger&Berman Management Inc.(R)
605 THIRD AVENUE 2ND FLOOR
NEW YORK, NY 10158-0180
SHAREHOLDER SERVICES
800.877.9700
This wrapper is not part of the Prospectus.
[recycle logo] PRINTED ON RECYCLED PAPER NBIP00020197
<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 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 PENSION PLAN ADMINISTRATOR, BROKER-DEALER, 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 of Contents
INVESTMENT INFORMATION.......................................................1
Investment Policies and Limitations.................................1
Rating Agencies.....................................................4
Overview of Each Fund...............................................4
Additional Investment Information...................................6
Risks of Fixed Income Securities...................................24
PERFORMANCE INFORMATION.....................................................25
Yield Calculations.................................................25
Total Return Computations..........................................25
Comparative Information............................................26
Other Performance Information......................................27
CERTAIN RISK CONSIDERATIONS.................................................28
TRUSTEES AND OFFICERS.......................................................29
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...........................41
DISTRIBUTION ARRANGEMENTS...................................................41
ADDITIONAL EXCHANGE INFORMATION.............................................42
ADDITIONAL REDEMPTION INFORMATION...........................................44
Suspension of Redemptions..........................................44
Redemptions in Kind................................................44
DIVIDENDS AND OTHER DISTRIBUTIONS...........................................44
ADDITIONAL TAX INFORMATION..................................................45
Taxation of the Funds..............................................45
Taxation of the Portfolios.........................................46
Taxation of the Funds' Shareholders................................49
<PAGE>
PORTFOLIO TRANSACTIONS......................................................49
Portfolio Turnover.................................................50
REPORTS TO SHAREHOLDERS.....................................................50
CUSTODIAN AND TRANSFER AGENT................................................51
INDEPENDENT AUDITORS........................................................51
LEGAL COUNSEL...............................................................51
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................51
REGISTRATION STATEMENT......................................................53
FINANCIAL STATEMENTS........................................................53
Appendix A -- RATINGS OF SECURITIES........................................A-1
Appendix B -- THE ART OF INVESTMENT:.A CONVERSATION WITH ROY NEUBERGER.....B-1
- ii -
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INVESTMENT INFORMATION
Each Fund is a separate 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. 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. 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 substantially 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 repayment of principal and payment of 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. Also, for purposes of the investment limitation on
concentration in a particular industry, both mortgage-backed and asset-backed
securities are grouped together as a single industry.
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.
-2-
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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.
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 under- writer 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 15% of its net assets would be
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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. Borrowing. Neither Portfolio may purchase securities if outstanding
borrowings, including any reverse repurchase agree- ments, exceed 5% of its
total assets.
4. Lending. Except for the purchase of debt securities and engaging in
repurchase agreements, neither Portfolio may make any loans other than
securities loans.
5. 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.
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 Portfolios mainly refer to ratings assigned by S&P and Moody's, which are
described in Appendix A to this SAI.
Overview of Each Fund
Neuberger & Berman Management offers a group of taxable mutual funds
designed with varying degrees of risk and return based on the duration of each
Portfolio. Duration measures a bond's exposure to interest rate risk. Duration
incorporates a bond's exposure to interest rate risk. Duration incorporates a
bond's yield, coupon interest payments, final maturity and call features into
one measure. In general, the longer you extend a bond's duration, the greater
its potential return and exposure to interest rate fluctuations.
For example, Ultra Short can invest in a portfolio of bonds with a
maximum average duration of two years. Rounding out the group is Limited
Maturity which seeks a higher income but can experience more price fluctuation.
Its Portfolio of bonds has a maximum average duration of four years. A more
detailed discussion of each Fund follows. In all cases, these Funds pursue
attractive current income with low risk to principal and vary according to their
investment guidelines. These guidelines include duration, type of bonds, and the
credit quality of these bonds.
The Funds are managed on the basis of a strategy of investment in fixed
income sectors we believe are attractively priced, and the selection of the most
attractively priced issues in those sectors based on their perceived risk and
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returns. We also manage the duration of the portfolios. Sector investments
include corporate bonds, mortgage-backed securities, asset backed securities,
CMOs (Collateralized Mortgages Obligations), Treasuries and Government agencies.
Neuberger & Berman Ultra Short Bond Trust
Ultra Short is oriented to investors who seek attractive current income
with minimal risk to principal and liquidity.
Through its Portfolio, the Fund invests in a broad array of investment
grade fixed income sectors in order to increase the yield of the Portfolio.
Within each bond sector we seek out securities that offer superior yield to
alternative investments while not compromising our credit quality standards.
This is a total return fund so that the investor's return will include earned
income on the underlying bonds, plus or minus changes in their principal values.
Therefore, the duration of the Fund is also actively managed in response to the
trend of interest rates. The Portfolio is limited to a maximum duration of two
years, which, combined with its moderately conservative portfolio of securities,
is intended to result in only limited fluctuation in principal value.
Neuberger & Berman Limited Maturity Bond Trust
Limited Maturity is appropriate for investors who seek to participate
in the returns of the bond market, but wish to avoid significant fluctuations in
principal value. In order to achieve its investment goal through its Portfolio,
this Fund has the flexibility to invest across the full range of bond sectors
(corporate, mortgage-backed securities, etc.) and may invest a limited portion
of its assets in foreign securities denominated in foreign currencies as well as
lower-rated "high yield" issues.
The investment strategy of this Fund is based upon the demonstrated
ability of short and intermediate duration portfolios to deliver virtually all
of the income of riskier long-term maturity portfolios. Thus, this Fund limits
its maximum average duration to four years. However, in order to improve total
return, it invests across a broad range of fixed income sectors and within each
sector seeks out securities that have a higher yield than counterpart issues
that we believe have a similar credit risk. It may opportunistically invest in
foreign issues when they offer higher yield than U.S. issues. In addition, it
may invest up to 10% of its net assets in "high yield" issues when these issues
offer the prospect of higher total return to the Portfolio. It is the manager's
belief that the combination of broad sector diversification, active security
selection and flexible maturity
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and duration management can offer investors the prospect of total returns that
will approximate the bond market as a whole, with only moderate fluctuation in
principal value.
Additional Investment Information
One or both 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.
U.S. GOVERNMENT AND AGENCY SECURITIES (BOTH PORTFOLIOS). U.S.
Government and Agency Securities are direct obligations of the U.S. Government
or its agencies and instrumentalities, such as the Government National Mortgage
Association ("GNMA"), Fannie Mae, Federal Home Loan Mortgage Corporation
("FHLMC") Student Loan Marketing Association ("SLMA"), and Tennessee Valley
Authority. Many agency securities are not backed by the full faith and credit of
the United States.
INFLATION-INDEXED SECURITIES (BOTH PORTFOLIOS). The Portfolios may
invest in U.S. Treasury securities whose principal value is adjusted daily in
accordance with changes to the Consumer Price Index. Any increase in principal
value is taxable in the year the increase occurs, even though holders do not
receive cash representing the increase until the security matures. Because each
Fund must pay substantially all of its income to investors to avoid payment of
an excise tax, a Portfolio may have to dispose of other investments to obtain
the cash necessary to distribute the gain on inflation-indexed securities.
REPURCHASE AGREEMENTS (BOTH PORTFOLIOS). In a repurchase agreement, 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 15% 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 a 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.
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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 other institutional investors
judged creditworthy by N&B Management. Borrowers are required continuously to
secure their obligations to return securities on loan from a 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 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 tradable in their
principal markets 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
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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 15% 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 each Portfolio's investment policies and limitations concerning
borrowings. While a reverse repurchase agreement is outstanding, a Portfolio
will deposit in a segregated account with its custodian cash or appropriate
liquid securities, marked to market daily, in an amount at least equal to each
Portfolio's obligations under the agreement. There is a risk that the
counter-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. Neither Portfolio currently expects to enter into reverse repurchase
agreements or to borrow money.
Banking and Savings Institution Securities (Both Portfolios). 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 commercial bank or
savings institution only if (1) the bank or institution has total assets of at
least $1,000,000,000, (2) the bank or institution is on N&B Management's
approved list, (3) in the case of a U.S. bank or institution, its deposits are
insured by the Federal Deposit Insurance Corporation, and (4) in the case of a
foreign bank or institution, the securities are, in N&B Manage-
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ment's opinion, of an investment quality comparable with other debt securities
that may be purchased by the Portfolio. These limitations do not prohibit
investments in securities issued by foreign branches of U.S. banks that meet the
foregoing requirements.
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 credit-
worthy 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 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 dollar-weighted average 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 GNMA, Fannie Mae, and FHLMC),
though not necessarily
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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 dollar-weighted average 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
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 securities) 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.
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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 15% 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.
ASSET-BACKED SECURITIES (BOTH PORTFOLIOS). The Portfolios may purchase
asset-backed securities, including commercial paper. Asset-backed securities
represent direct or indirect participations in, or are secured by and payable
from, pools of assets such as motor vehicle installment sales contracts,
installment loan contracts, leases of various types of real and personal
property, and receivables from revolving credit (credit card) agreements. These
assets are securitized 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 ReceivablesSM ("CARSSM") 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 CARSSM 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.
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Credit card receivable securities are backed by receivables from
revolving credit card agreements ("Accounts"). Credit balances on Accounts are
generally paid down more rapidly than are automobile contracts. Most of the
credit card receivable securities issued publicly to date have been pass-through
certificates. In order to lengthen 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 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
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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, of their subdivisions,
agencies, and instrumentalities, international agencies, and supranational
entities. Investing in foreign currency denominated securities involves the
special risks associated with investing in non-U.S. issuers, as described in the
preceding section, and the additional risks of (1) adverse changes in foreign
exchange rates, (2) nationalization, expropriation, or confiscatory taxation,
and (3) adverse changes in investment or exchange control regulations (which
could prevent cash from being brought back to the 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. 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. 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 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
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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, as
a result, 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.
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, Fannie Mae, and
FHLMC certificates) on a when-issued basis. These transactions involve a
commitment by a Portfolio to purchase securities that will be issued at a future
date (ordinarily within two months, although the Portfolio may agree to a longer
settlement period). The price of the underlying securities (usually expressed in
terms of yield) and the date when the securities will be delivered and paid for
(the settlement date) are fixed at the time the transaction is negotiated.
When-issued purchases are negotiated directly with the other party, and such
commitments are not traded on exchanges.
When-issued transactions enable a Portfolio to "lock in" what N&B
Management believes to be an attractive price or yield on a particular security
for a period of time, regardless of future changes in interest rates. 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
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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.
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 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
deposit in a segregated account with its custodian, until payment is made,
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 Portfolios 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 establishing more definitely the effective return
on, or the purchase price of, securities denominated in foreign currencies held
or intended to be acquired by the Portfolios.
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
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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 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 accumulated cash balance in the
writer's Futures margin account is delivered to the holder of the option. That
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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.
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 fluctuation 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.
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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.
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 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
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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 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
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is adjusted daily to the option's current market value, which is the last
reported 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.
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.
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
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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 provide significant protection of NAV
in the event of a general rise in the U.S. dollar against foreign currencies.
For example, the return available from securities denominated 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 involving 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. 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.
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. 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, as 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.
Regulatory Limitations on Using Futures, Options on Futures, Options on
Securities and Foreign Currencies, and Forward Contracts (collectively, "Hedging
Instruments") (Both Portfolios). To the extent a Portfolio sells or purchases
Futures Contracts and/or writes options thereon or options on foreign currencies
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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. 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.
COVER FOR HEDGING INSTRUMENTS (BOTH PORTFOLIOS). Each Portfolio will
comply 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.
General Risks of Hedging Instruments (Both Portfolios). The primary
risks in using Hedging Instruments are (1) imperfect correlation or no
correlation between changes in market value of the securities or currencies held
or to be acquired by a Portfolio and changes in 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 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 Hedging 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
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unable to close out Hedging Instruments by entering into such transactions only
if N&B Management believes there will be an active and liquid secondary market.
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
it must comply if its corresponding Fund is to continue to qualify as a
regulated investment company ("RIC"). See "Additional Tax Information --
Taxation of Portfolios."
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 securities are short- to
intermediate-term fixed income securities whose values at maturity or interest
rates 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") must
be taken into income ratably by each such Portfolio prior to the receipt of any
actual payments. Because its corresponding Fund must distribute substantially
all of its net income (including its share of the Portfolio's accrued original
issue discount) to its shareholders each year for income and excise tax
purposes, each such 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. See "Additional Tax
Information."
The market prices of zero coupon securities generally are more volatile
than the prices of securities that pay interest periodically. 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 (BOTH PORTFOLIOS). Neuberger & Berman Limited
Maturity Bond 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
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herein, including the District of Columbia), territories, and possessions of the
United States and their political subdivisions, agencies, and instrumentalities.
Neuberger & Berman Ultra Short Bond Portfolio may also invest in municipal
obligations. 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 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 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.
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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 securities that
are below investment grade will not exceed 5% of the net assets of Neuberger &
Berman Ultra Short Bond Portfolio or 10% of the net assets of Neuberger & Berman
Limited Maturity Bond Portfolio.
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 6.16% and 5.36%, 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:
P(1+T)n = ERV
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
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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 +5.24%, +4.26%, and
+5.82%, 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 $17,602 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 +5.29%, +5.71%, and +6.81%, 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 $20,155 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
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, Kiplinger's
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"
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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 securities 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 performance:
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.
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
-27-
<PAGE>
corresponding Fund. This information 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.
Information regarding the effects of automatic investing 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 Management'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.
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<PAGE>
CERTAIN RISK CONSIDERATIONS
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.
Although each Portfolio seeks to reduce risk by investing in a
diversified portfolio of securities, 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 their
corresponding portfolios, administered or managed by N&B Management and
Neuberger & Berman.
<TABLE>
<CAPTION>
Name, Address Positions Held Principal Occupation(s)(2)
and Age(1) With the Trusts
<S> <C> <C>
John Cannon (67) Trustee of each Trust President, AMA Investment
CDC Associates, Inc. Advisers, Inc. (registered
620 Sentry Parkway investment adviser) (1976 -
Suite 220 1991); Senior Vice President AMA
Blue Bell, PA 19422 Investment Advisers, Inc. (1991 -
1993); President of AMA Family of
Funds (investment companies)
(1976 - 1991); Chairman and Chief
Investment Officer of CDC
Associates, Inc. (registered
investment adviser) (1993 -
present).
Stanley Egener* (62) Chairman of the Board, Principal of Neuberger & Berman;
Chief Executive President and Director of N&B
Officer, and Trustee of Management; Chairman of the
of each Trust 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* (44) President and Trustee Principal of Neuberger & Berman;
of each Trust Vice President and Director of
N&B Management; 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,
Loews Corporation and General Counsel of Loews
667 Madison Avenue Corporation (diversified finan-
7th Floor cial corporation).
New York, NY 10021
Robert A. Kavesh (69) Trustee of each Trust Professor of Finance and
110 Bleecker Street Economics at Stern School of
Apt. 24B Business, New York University;
New York, NY 10012 Director of Del Laboratories,
Inc. and Greater New York Mutual
Insurance Co.
William E. Rulon (64) Trustee of each Trust Retired Senior Vice President of
1761 Hotel Circle South Foodmaker, Inc. (operator and
San Diego, CA 92108 franchiser of restau-rants) until
January 1997; Secretary of
Foodmaker, Inc. until July 1996.
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<PAGE>
Candace L. Straight (49) Trustee of each Trust Private investor and consultant
518 E. Passaic Avenue specializing in the insurance
Bloomfield, NJ 07003 industry; 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, annui-ties, and
property and casualty insurance),
1990-1992; Director of and Drake
Holdings (U.K. motor insurer)
until June 1996.
Daniel J. Sullivan (57) Vice President of Senior Vice President of N&B
each Trust Management since 1992; prior
thereto, Vice President of N&B
Management; Vice Presi-dent 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
Principal Financial Treasurer of N&B Management since
Officer of each Trust 1992; Treasurer of 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 invest-
ment 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 Vice President of N&B Management;
Trust Secretary of eight other mutual
funds for which N&B Management
acts as investment manager or
administrator.
Richard Russell (50) Treasurer and Vice President of N&B Management
Principal Accounting since 1993; prior thereto,
Officer of each Trust Assistant Vice 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
each Trust since 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.
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 (36) 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.
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<PAGE>
(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. Messrs. 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
provide that each such Trust 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.
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 - $1,543, and Neuberger & Berman
Limited Maturity Bond Trust and Portfolio - $2,727.
The following table sets forth information concerning the compensation
of the trustees and officers of the Trust. None of the Neuberger & Berman
Funds(R) has any retirement plan for its trustees or officers.
-31-
<PAGE>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 10/31/96
------------------------------
Total Compensation
from Trusts in the
Aggregate Neuberger & Berman
Name and Position Compensation from Fund Complex Paid to
with the Trust the Trust Trustees
- ------------------ ----------------- --------------------
John Cannon $242 $31,000
Trustee (2 other investment
companies)
Charles DeCarlo $278 $35,000
Trustee (retired
12/96)
Stanley Egener $ 0 $0
Chairman of the (9 other investment
Board, Chief companies)
Executive Officer,
and Trustee
Theodore P. Giuliano $ 0 $ 0
President and Trustee (2 other investment
companies)
Barry Hirsch $282 $35,500
Trustee (2 other investment
companies)
Robert A. Kavesh $242 $31,000
Trustee (2 other investment
companies)
Harold R. Logan $245 $30,500
Trustee (retired (2 other investment
12/96) companies)
William E. Rulon $245 $30,500
Trustee (2 other investment
companies)
Candace L. Straight $242 $30,500
Trustee (2 other investment
companies)
At January 14, 1997, 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.
-32-
<PAGE>
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 pay a material amount of such compensation.
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 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 with the Trust 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 in connection
with investments in the Funds.
-33-
<PAGE>
During the fiscal years ended October 31, 1996, 1995, and 1994, each
Fund accrued management and administration fees as follows: Limited Maturity -
$114,471, $65,572, and $18,788, respectively; and Ultra Short - $46,490,
$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 corresponding 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 - $168,733, $123,568, and $90,718,
respectively; and Ultra Short - $143,959, $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 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 interests 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
-34-
<PAGE>
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 that 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.
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
-35-
<PAGE>
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 December 31, 1996, these companies, along with one
other investment company advised by Neuberger & Berman, had aggregate net assets
of approximately $15.2 billion, as shown in the following list:
Approximate
Net Assets at
Name December 31, 1996
- ---- -----------------
Neuberger & Berman Cash Reserves Portfolio.................... ....$499,989,187
(investment portfolio for Neuberger & Berman Cash Reserves)
Neuberger & Berman Government Money Portfolio.......................$402,843,399
(investment portfolio for Neuberger & Berman Government Money
Fund)
Neuberger & Berman Limited Maturity Bond Portfolio..................$272,342,178
(investment portfolio for Neuberger & Berman Limited Maturity
Bond Fund and Neuberger & Berman Limited Maturity Bond Trust)
Neuberger & Berman Ultra Short Bond Portfolio.................. .....$89,819,435
(investment portfolio for Neuberger & Berman Ultra Short Bond
Fund and Neuberger & Berman Ultra Short Bond Trust)
-36-
<PAGE>
Approximate
Net Assets at
Name December 31, 1996
- ---- -----------------
Neuberger & Berman Municipal Money Portfolio........................$135,494,410
(investment portfolio for Neuberger & Berman Municipal Money
Fund)
Neuberger & Berman Municipal Securities Portfolio....................$38,634,808
(investment portfolio for Neuberger & Berman Municipal
Securities Trust)
Neuberger & Berman New York Insured
Intermediate Portfolio............................................$9,877,137
(investment portfolio for Neuberger & Berman New York Insured
Intermediate Fund)
Neuberger & Berman Focus Portfolio................................$1,260,252,029
(investment portfolio for Neuberger & Berman Focus Fund,
Neuberger & Berman Focus Trust, and Neuberger & Berman Focus
Assets)
Neuberger & Berman Genesis Portfolio................................$398,343,946
(investment portfolio for Neuberger & Berman Genesis Fund,
Neuberger & Berman Genesis Trust, and Neuberger & Berman Genesis
Assets)
Neuberger & Berman Guardian Portfolio........................... $7,071,702,448
(investment portfolio for Neuberger & Berman Guardian Fund,
Neuberger & Berman Guardian Trust, and Neuberger & Berman
Guardian Assets)
Neuberger & Berman International Portfolio........................ ..$73,377,704
(investment portfolio for Neuberger & Berman International Fund)
Neuberger & Berman Manhattan Portfolio..............................$574,606,109
(investment portfolio for Neuberger & Berman Manhattan Fund,
Neuberger & Berman Manhattan Trust, and Neuberger & Berman
Manhattan Assets)
-37-
<PAGE>
Approximate
Net Assets at
Name December 31, 1996
- ---- -----------------
Neuberger & Berman Partners Portfolio.............................$2,405,865,742
(investment portfolio for Neuberger & Berman Partners Fund,
Neuberger & Berman Partners Trust, and Neuberger & Berman
Partners Assets)
Neuberger & Berman Socially Responsive Portfolio....................$188,366,394
(investment portfolio for Neuberger & Berman Socially Responsive
Fund and Neuberger & Berman NYCDC Socially Responsive Trust)
Advisers Managers Trust (six series)..............................$1,695,378,078
In addition, Neuberger & Berman serves as investment adviser to one
investment company, Plan Investment Fund with assets of $70,276,858 December 31,
1996.
The investment decisions concerning the Portfolios and the other mutual
funds 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 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, in
terms of amount, in accordance with a formula considered 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.
-38-
<PAGE>
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, Presi- dent 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; William Cunningham, Vice President; Clara Del
Villar, Vice President; Mark R. Goldstein, Vice President; Michael Lamberti,
Vice President; Josephine P. Mahaney, Vice President; Ellen Metzger, Vice
President and Secretary; Paul Metzger, Vice President; 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; Robert Conti, Treasurer; Stacy
Cooper- Shugrue, 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; 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, Gendelman, Giuliano, Lainoff, Zicklin,
Goldstein, Kassen, Risen, Simons and Sundman 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.
-39-
<PAGE>
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
terminate automatically 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 exchange shares
of either Fund for shares of the other Fund or the equity funds that are briefly
described below ("Equity Trusts").
-40-
<PAGE>
Neuberger & Berman Seeks long-term capital appreciation
Focus Trust through investments principally in 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
Genesis Trust investments primarily in common 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
Guardian Trust investments primarily in common 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
Manhattan Trust regard to income, through 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.
-41-
<PAGE>
Neuberger & Berman Seeks capital growth through an
Partners Trust investment approach that is designed to
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.
Either Fund described herein, and any of the Equity Trusts, may
terminate or modify its exchange privilege in the future.
Fund shareholders who are considering exchanging shares into any of the
Equity Trusts 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. The Equity Trusts 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.
-42-
<PAGE>
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 its 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 the Fund's
shareholders. 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) exceeding $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 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.
-43-
<PAGE>
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund distributes to its shareholders amounts equal to
substantially all of its 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. A Portfolio's
net investment income consists of all income accrued on portfolio assets less
accrued expenses but does not include net realized or unrealized capital and
foreign currency gains and losses. Net investment income and net gains and
losses are reflected in a Portfolio's NAV (and, hence, its corresponding Fund's
NAV) until they are distributed. 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).
Income dividends are declared daily; dividends declared for each month
are paid on the last Business Day of the month. 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. Distributions of net realized
capital and foreign currency gains, if any, normally are paid once annually, in
December.
Dividends and other distributions 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 its investment company taxable income (consisting generally of net investment
-44-
<PAGE>
income, net short-term 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 or securities of other RICs) of any one issuer.
Certain funds that invest in portfolios 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
portfolio 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 consequences to the
Funds of hedging and certain other transactions engaged in by their
corresponding Portfolios.
-45-
<PAGE>
Taxation of the Portfolios
- --------------------------
The Portfolios have received rulings 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 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 Port-
folio's income, gains, losses, deductions, credits, and tax preference items,
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 (a) the amount of cash
and the basis of any property the Portfolio distributes to the Fund and (b) the
Fund's share of the Portfolio's losses.
-46-
<PAGE>
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 writing (selling)
and purchasing Futures Contracts and options and entering into forward
contracts, involves complex rules that will determine for income tax purposes
the character and timing of recognition of the gains and losses the Portfolios
realize in connection therewith. Gains from the disposition of foreign
currencies (except certain gains 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 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 increase in value of
a position that is part of a "designated hedge" will be offset by any decrease
in value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether its corresponding 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 satisfy those
requirements to enable its corresponding Fund to qualify for this treatment for
hedging transactions. To the extent a Portfolio does not so qualify, it may be
forced to defer the closing out of certain Hedging Instruments or foreign
currency positions beyond the time when it otherwise would be advantageous 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
-47-
<PAGE>
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.
Each 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), generally 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 currently,
for each taxable year to which it is attributable.
Each Portfolio may acquire zero coupon or other securities issued with
OID. As a holder of those securities, each Portfolio (and, through it, its
corresponding Fund) must take into income 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 (including 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 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 or foreign currency positions held for less than three
months that it might wish to sell in the ordinary course of its portfolio
management.
-48-
<PAGE>
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 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.
-49-
<PAGE>
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): Goldman, Sachs & Co.; Merrill
Lynch, Pierce, Fenner & Smith Inc.; and Morgan (J.P.) Securities Inc. At October
31, 1996, that Portfolio held the securities of its "regular brokers or dealers"
with an aggregate value as follows: Morgan (J.P.) Securities Inc., $3,003,150.
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": Goldman, Sachs & Co. At October 31, 1996, that
Portfolio held the securities of its "regular brokers or dealers" with an
aggregate value as follows: Goldman, Sachs & Co., $5,045,352.
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 proceeds from 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 month-end 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. 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. All correspondence should be mailed to Neuberger & Berman Funds,
Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180.
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.
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<PAGE>
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 January 14, 1997:
Percentage of
Ownership at
Name and Address January 14, 1997
---------------- ----------------
Limited Maturity: Chase Manhattan Bank TTEE 34.05%
- ---------------- Met Life Defined
Contribution
Group Attn Judity
Trepanowski
770 Broadway 10th Floor
New York, NY 10003
D. Leon Leonhardt PSP 18.51%
For Partners & Principals
of Price Waterhouse Ltd.
DTD 6/28/85
3109 W DR Martin Luther King Blvd
Tampa, FL 33607
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<PAGE>
Nationwide Life Insurance 14.68%
QPVA
C/O IPO Portfolio Accounting
PO Box 182029
Columbus, OH 43218
D Leon Retirement 5.10%
Benefit Accumulation Plan
for Employees of Price
Waterhouse LLP
3109 W DR Martin Luther King
Blvd
Tampa, FL 33607
Chase Manhattan Bank TTEE 5.00%
Various Retirement Plans
Under PPI Retirement
Programs
Professional Pensions Inc
444 Foxon RD
East Haven, CT 06513
Ultra Short: Gary N. Skoloff, Saul A Wolfe 49.92%
- ----------- Skoloff & Wolfe Target
Benefit Trust dtd 11/1/95
293 Eisenhower Pkwy.
Livingston, NJ 07039-1711
Aetna Life Insurance & 20.67%
Annuity Co.
ACES - separate account F
Attn: Michael Weiner - RTAL
15 Farmington Avenue
Hartford, CT 06156-0001
National Financial Serv. 9.37%
Corp.
For the Exclusive Benefit of
Our Customers
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Chase Manhattan Bank TTEE 6.91%
Various Retirement Plans
under PPI Retirement Program
Professional Pensions Inc.
444 Foxon Road
East Haven, CT 06513-2019
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<PAGE>
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included
in the Trust's registration statement filed with the SEC under the 1933 Act with
respect to the securities offered by the Prospectus. 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 from the Funds' Annual Report to shareholders
for the fiscal year ended October 31, 1996:
The Statements of Assets and Liabilities of the Funds and
Portfolios, including the Schedule of Investments of the
Portfolios, as of October 31, 1996, and the related
Statements of Operations for the year then ended, the
Statements of Changes in Net Assets for each of the two years
in the period then ended, the Financial Highlights for each
of the periods indicated therein, and the notes to each of
the foregoing for the fiscal year ended October 31, 1996, and
the reports of Ernst & Young LLP, independent auditors, with
respect to such audited financial statements of, Neuberger &
Berman Ultra Short Bond Trust and Portfolio, and Neuberger &
Berman Limited Maturity Bond Trust and Portfolio.
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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.
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.
A-1
<PAGE>
Moody's corporate bond ratings:
-------------------------------
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
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.
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
<PAGE>
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 institutions), also known
as P-1, have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions), 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.
A-3
<PAGE>
Appendix B
The Art of Investing:
A Conversation with Roy Neuberger
"I firmly believe that if you want to manage your own
money, you must be a student of the market. If you
are unwilling or unable to do that, find someone else
to manage your money for you."
NEUBERGER & BERMAN
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[THIS PAGE IS BLANK - IT IS AN INSIDE PAGE OF THIS BROCHURE]
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[PICTURE OF ROY NEUBERGER]
During my more than sixty-five years of buying and selling
securities, I've been asked many questions about my approach to
investing. On the pages that follow are a variety of my thoughts,
ideas and investment principles which have served me well over the
years. If you gain useful knowledge in the pursuit of profit as well
as enjoyment from these comments, I shall be more than content.
\s\ Roy R. Neuberger
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YOU'VE BEEN ABLE TO CONDENSE SOME OF THE
CHARACTERISTICS OF SUCCESSFUL INVESTING INTO
FIVE "RULES." WHAT ARE THEY?
Rule #1: Be flexible. My philosophy has
necessarily changed from time to time because
of events and because of mistakes. My views
change as economic, political, and
technological changes occur both on and
sometimes off our planet. It is imperative
that you be willing to change your thoughts
to meet new conditions.
Rule #2: Take your temperament into account.
Recognize whether you are by nature very
speculative or just the opposite -- fearful,
timid of taking risks. But in any event --
Diversify your investments, Rule #3: Be broad-gauged. Diversify your make sure
that some of your investments, make sure that some of your principal is kept
safe, and principal is kept safe, and try to increase try to increase your
income your income as well as your capital. as well as your capital.
[PICTURE OF ROY NEUBERGER]
Rule #4: Always remember there are many ways
to skin a cat! Ben Graham and David Dodd did
it by understanding basic values. Warren
Buffet invested his portfolio in a handful of
long-term holdings, while staying involved
with the companies' managements. Peter Lynch
chose to understand, first-hand, the products
of many hundreds of the companies he invested
in. George Soros showed his genius as a hedge
fund investor who could decipher world
currency trends. Each has been successful in
his own way. But to be successful, remember
to-
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Rule #5: Be skeptical. To repeat a few well-
worn useful phrases:
A. Dig for yourself.
B. Be from Missouri.
C. If it sounds too good to be true, it
probably is.
IN YOUR 65 YEARS OF INVESTING ARE THERE ANY
GENERAL PATTERNS YOU'VE OBSERVED AS TO HOW
THE MARKET BEHAVES?
Every decade that I've been involved with
Wall Street has a nuance of its own, an
economic and social climate that influences
investors. But generally, bull markets tend
to be longer than bear markets, and stock
prices tend to go up more slowly and
erratically than they go down. Bear markets
tend to be shorter and of greater intensity.
The market rarely rises or declines
concurrently with business cycles longer than
six months.
AS A LEGENDARY "VALUE INVESTOR," HOW DO YOU
DEFINE VALUE INVESTING?
Value investing means finding the best values
- - either absolute or relative. Absolute
means a stock has a low market price relative
to its own fundamentals. Relative value means
the price is attractive relative to the
market as a whole.
COULD YOU DESCRIBE A STOCK WITH "GOOD VALUE"?
A classic example is a company that has a low
price to earnings ratio, a low price to book
ratio, free cash flow, a strong balance
sheet, undervalued corporate assets,
unrecognized earnings turnaround and is
selling at a discount to private market
value.
These characteristics usually lead to
companies that are under-researched and have
a high degree of inside ownership and
entrepreneurial management.
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One of my colleagues at Neuberger & Berman
says he finds his value stocks either "under
a cloud" or "under a rock." "Under a cloud"
stocks are those Wall Street in general
doesn't like, because an entire industry is
out of favor and even the good stocks are
being dropped. "Under a rock" stocks are
those Wall Street is ignoring, so you have to
uncover them on your own.
ARE THERE OTHER KEY CRITERIA YOU USE TO JUDGE
STOCKS?
I'm more interested in longer-term trends in
earnings than short-term trends. Earnings
gains should be the product of long-term
strategies, superior management, taking
advantage of business opportunities and so
on. If these factors are in their proper
place, short-term earnings should not be of
major concern. Dividends are an important
extra because, if they're stable, they help
support the price of the stock.
WHAT ABOUT SELLING STOCKS?
Most individual investors should invest for
the long term but not mindlessly. A sell
discipline, often neglected by investors, is
vitally important.
"One should fall in love One should fall in love with ideas, with
with ideas, with people or people, or with idealism. But in my book, the
with idealism. But in my last thing to fall in love with is a
book, the last thing to particular security. It is after all just a
fall in love with is a sheet of paper indicating a part ownership in
particular security." a corporation and its use is purely
mercenary. If you must love a security, stay
in love with it until it gets overvalued;
then let somebody else fall in love.
[PICTURE OF ROY NEUBERGER]
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ANY OTHER ADVICE FOR INVESTORS?
I firmly believe that if you want to manage
your own money, you must be a student of the
market. If you're unwilling or unable to do
that, find someone else to manage your money
for you. Two options are a well-managed
no-load mutual fund or, if you have enough
assets for separate account management, a
money manager you trust with a good record.
HOW WOULD YOU DESCRIBE YOUR PERSONAL
INVESTING STYLE?
Every stock I buy is bought to be sold. The
market is a daily event, and I continually
review my holdings looking for selling
opportunities. I take a profit occasionally
on something that has gone up in price over
what was expected and simultaneously take
losses whenever misjudgment seems evident.
This creates a reservoir of buying power that
can be used to make fresh judgments on what
are the best values in the market at that
time. My active investing style has worked
well for me over the years, but for most
investors I recommend a longer-term approach.
I tend not to worry very must about the day
to day swings of the market, which are very
hard to comprehend. Instead, I try to be
rather clever in diagnosing values and trying
to win 70 to 80 percent of the time.
YOU BEGAN INVESTING IN 1929. WHAT WAS YOUR
EXPERIENCE WITH THE "GREAT CRASH"?
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The only money I managed in the Panic of 1929
was my own. My portfolio was down about 12
percent, and I had an uneasy feeling about
the market and conditions in general. Those
were the days of 10 percent margin. I studied
the lists carefully for a stock that was
overvalued in my opinion and which I could
sell short as a hedge. I came across RCA at
about $100 per share. It had recently split 5
for 1 and appeared overvalued. There were no
dividends, little income, a low net worth and
a weak financial position. I sold RCA short
in the amount equal to the dollar value of my
long portfolio. It proved to be a timely and
profitable move.
HOW DID THE CRASH OF 1929 AFFECT YOUR
INVESTING STYLE?
I am prematurely bearish when the market goes
up for a long time and everybody is happy
because they are richer. I am very bullish
when the market has gone down perceptibly and
I feel it has discounted any troubles we are
going to have.
HOW IMPORTANT ARE PSYCHOLOGICAL FACTORS TO
MARKET BEHAVIOR?
There are many factors in addition to
economic statistics or security analysis in a
buy or sell decision. I believe psychology
plays an important role in the Market. Some
people follow the crowd in hopes they'll be
swept along in the right direction, but if
the crowd is late in acting, this can be a
bad move.
I like to be contrary. When things look bad,
I become optimistic. When everything looks
rosy, and the crowd is optimistic, I like to
be a seller. Sometimes I'm too early, but I
generally profit.
AS A RENOWNED ART COLLECTOR, DO YOU FIND
SIMILARITIES BETWEEN SELECTING STOCKS AND
SELECTING WORKS OF ART?
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Both are an art, although picking stocks is a
minor art compared with painting, sculpture
"When things look bad, I or literature. I started buying art in the
become optimistic. When 30s, and in the 40s it was a daily, almost
everything looks rosy, and hourly occurrence. My inclination to buy the
the crowd is optimistic, I works of living artists comes from Van Gogh,
like to be a seller." who sold only one painting during his
lifetime. He died in poverty, only then to
become a legend and have his work sold for
millions of dollars.
[PICTURE OF ROY NEUBERGER]
There are more variables to consider now in
both buying art and picking stocks. In the
modern stock markets, the heavy use of
futures and options has changed the nature of
the investment world. In past times, the
stock market was much less complicated, as
was the art world.
Artists rose and fell on their own merits
without a lot of publicity and attention. As
more and more dealers are involved with
artists, the price of their work becomes
inflated. So I almost always buy works of
unknown, relatively undiscovered artists,
which, I suppose is similar to value
investing.
But the big difference in my view of art and
stocks is that I buy a stock to sell it and
make money. I never bought paintings or
sculptures for investment in my life. The
objective is to enjoy their beauty.
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WHAT DO YOU CONSIDER THE BUSINESS MILESTONES
IN YOUR LIFE?
Being a founder of Neuberger & Berman and
creating one of the first no-load mutual
funds. I started on Wall Street in 1929, and
during the depression I managed my own money
and that of my clientele. We all prospered,
but I wanted to have my own firm. In 1939 I
became a founder of Neuberger & Berman, and
for about 10 years we managed money for
individuals with substantial financial
assets. But I also wanted to offer the
smaller investor the benefits of professional
money management, so in 1950 I created the
Guardian Mutual Fund (now known as the
Neuberger & Berman Guardian Fund). The Fund
was kind of an innovation in its time because
it didn't charge a sales commission. I
thought the public was being overcharged for
mutual funds, so I wanted to create a fund
that would be offered directly to the public
without a sales charge. Now of course the
"no-load" fund business is a huge industry. I
managed the Fund myself for over 28 years.
[PICTURE OF ROY NEUBERGER]
YOU'RE IN YOUR NINETIES AND STILL YOU GO INTO
THE OFFICE EVERY DAY TO MANAGE YOUR
INVESTMENTS. WHY?
I like the fun of being nimble in the stock
market, and I'm addicted to the market's
fascinations.
WHAT CLOSING WORDS OF ADVICE DO YOU HAVE
ABOUT INVESTING?
Realize that there are opportunities at all
times for the adventuresome investor. And
stay in good physical condition. It's a
strange thing. You do not dissipate your
energies by using them. Exercise your body
and your brain every day, and you'll do
better in investments and in life.
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ROY NEUBERGER: A BRIEF BIOGRAPHY
Roy Neuberger is a founder of the investment
management firm Neuberger & Berman, and a
renowned value investor. He is also a
recognized collector of contemporary American
art, much of which he has given away to
museums and colleges across the country.
During the 1920s, Roy studied art in
Paris. When he realized he didn't possess the
talent to become an artist, he decided to
collect art, and to support this passion, Roy
turned to investing -- a pursuit for which
his talents have proven more than adequate.
A TALENT FOR INVESTING
Roy began his investment career by
joining a brokerage firm in 1929, seven
months before the "Great Crash." Just weeks
before "Black Monday," he shorted the stock
of RCA, thinking it was overvalued. He
profited from the falling market and gained a
reputation for market prescience and stock
selection that has lasted his entire career.
NEUBERGER & BERMAN'S FOUNDING
Roy's investing acumen attracted many
people who wished to have him manage their
money. In 1939, at the age of 36, after
purchasing a seat on the New York Stock
Exchange, Roy founded Neuberger & Berman to
provide money management services to people
who lacked the time, interest or expertise to
manage their own assets.
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NEUBERGER & BERMAN -- OVER FIVE DECADES OF
GROWTH
Neuberger & Berman has grown through
the years and now manages approximately $30
billion of equity and fixed income assets,
both domestic and international, for
individuals, institutions, and its family of
no-load mutual funds. Today, as when the firm
was founded, Neuberger & Berman follows a
value approach to investing, designed to
enable clients to advance in good markets and
minimize losses when conditions are less
favorable.
For more complete information about the
Neuberger & Berman Guardian Fund,
including fees and expenses, call
Neuberger & Berman Management at
800-877- 9700 for a free prospectus.
Please read it carefully, before you
invest or send money.
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Neuberger & Berman Management
Inc.[SERVICE MARK]
605 Third Avenue, 2nd Floor
New York, NY 10158-0006
Shareholder Services
(800) 877-9700
[COPYRIGHT SYMBOL]1995
Neuberger & Berman
PRINTED ON RECYCLED PAPER
WITH SOY BASED INKS
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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) and the reports of the independent auditors are incorporated
into the Statement of Additional Information for such series by
reference.
Included in Part A of this Post-Effective Amendment:
FINANCIAL HIGHLIGHTS for the periods indicated therein for
Neuberger & Berman Limited Maturity Bond Trust and Neuberger
& Berman Ultra Short Bond Trust.
(b) Exhibits:
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.
(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.
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(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) (a) Trust Instrument of Neuberger & Berman Income
Trust, Articles IV, V, and VI. 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) By-laws of Neuberger & Berman Income Trust
Articles V, VI, and VIII. 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) (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.
(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.
(b) (i) Sub-Advisory Agreement Between
Neuberger & Berman Management
Incorporated and Neuberger & Berman,
L.P. with Respect to
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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.
(iii) Substitution Agreement Among Neuberger
& Berman Management Incorporated,
Income Managers Trust, Neuberger &
Berman, L.P., and Neuberger & Berman,
LLC. Filed Herewith.
(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.
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(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.
(c) Schedule of Compensation under the Custodian
Contract. Filed Herewith.
(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.
(iii) Schedule of Compensation Under the
Transfer Agency Agreement. Filed
Herewith.
(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.
(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.
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(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. Filed Herewith.
(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.
(17) Financial Data Schedules. Filed Herewith.
(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 January 9, 1997.
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Number of
Title of Class Record Holders
- -------------- --------------
Shares of beneficial
interest, $0.001 par value, of:
Neuberger & Berman Limited Maturity Bond Trust 53
Neuberger & Berman Ultra Short Bond Trust 28
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 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.
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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 & 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.
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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 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.
C-8
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Claudia A. Brandon Secretary, Neuberger & Berman Advisers
Vice President, Management Trust (Delaware business
N&B Management trust); Secretary, 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.
Stacy Cooper-Shugrue Assistant Secretary, Neuberger & Berman
Assistant Vice President, Advisers Management Trust (Delaware
N&B Management business trust); 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.
C-9
<PAGE>
Barbara DiGiorgio, Assistant Treasurer, Neuberger & Berman
Assistant Vice President, Advisers Management Trust (Delaware
N&B Management business trust); 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.
Stanley Egener Chairman of the Board and Trustee,
President and Director, Neuberger & Berman Advisers Management
N&B Management; Principal, Trust (Delaware business trust);
Neuberger & Berman Chairman of the Board and Trustee,
Advisers 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 &
Vice President and Director, N&B Berman Income Funds; President and
Management; Principal, Neuberger & Trustee, Neuberger & Berman Income
Berman Trust; President and Trustee, Income
Managers Trust.
C-10
<PAGE>
C. Carl Randolph Assistant Secretary, Neuberger & Berman
Principal, Neuberger & Berman Advisers Management Trust (Delaware
business trust); 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
Vice President, N&B Management Portfolio Manager, BNP-N&B Global Asset
Management L.P. (joint venture of
Neuberger & Berman and Banque Nationale
de Paris) (2).
Richard Russell Treasurer, Neuberger & Berman Advisers
Vice President, N&B Management Management Trust (Delaware business
trust); Treasurer, 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.
C-11
<PAGE>
Daniel J. Sullivan Vice President, Neuberger & Berman
Senior Vice President, Advisers Management Trust (Delaware
N&B Management business trust); Vice 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
Assistant Vice President, Asset Management Inc., 1285 Avenue of
N&B Management the Americas, New York, New York 10019
(3).
Michael J. Weiner Vice President, Neuberger & Berman
Senior Vice President, Advisers Management Trust (Delaware
N&B Management business trust); Vice 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.
C-12
<PAGE>
Celeste Wischerth, Assistant Treasurer, Neuberger & Berman
Assistant Vice President, Advisers Management Trust (Delaware
N&B Management business trust); 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 &
Director, N&B Management; Berman Advisers Management Trust
Principal, Neuberger & (Delaware business trust); President and
Berman Trustee, Advisers Managers Trust;
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.
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 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:
Neuberger & Berman Advisers Management Trust
Neuberger & Berman Equity Assets
Neuberger & Berman Equity Funds
Neuberger & Berman Equity Trust
Neuberger & Berman Income Funds
C-13
<PAGE>
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.
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- --------------------- ---------------------
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
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
Mark R. Goldstein Vice President None
Theodore P. Giuliano Vice President and None
Director
Leslie Holliday-Soto Assistant Vice President None
Jody L. Irwin Assistant Vice President None
Michael M. Kassen Vice President and None
Director
Irwin Lainoff Director None
C-14
<PAGE>
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 None
Secretary
Paul Metzger 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
Peter E. Sundman Senior Vice President None
Susan Switzer Assistant Vice President None
Andrea Trachtenberg Vice President of None
Marketing
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
C-15
<PAGE>
Lawrence Zicklin Director Trustee and President
(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.
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.
C-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, NEUBERGER & BERMAN INCOME TRUST certifies that
it meets all of the requirements for effectiveness of the Post-Effective
Amendment No. 5 to the Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City and State of New York on the 30th day of
January, 1997.
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. 5 has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ John Cannon Trustee January 30, 1997
John Cannon
/s/ Stanley Egener Chairman of the Board, January 30, 1997
- ------------------
Stanley Egener Chief Executive Officer
and Trustee
/s/ Theodore P. Giuliano President and Trustee January 30, 1997
- ------------------------
Theodore P. Giuliano
/s/ Barry Hirsch Trustee January 30, 1997
Barry Hirsch
/s/ Robert A. Kavesh Trustee January 30, 1997
- --------------------
Robert A. Kavesh
(signatures continued on next page)
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ William E. Rulon Trustee January 30, 1997
- --------------------
William E. Rulon
/s/ Richard Russell Treasurer and January 30, 1997
- -------------------
Richard Russell Principal Accounting Officer
/s/ Candace L. Straight Trustee January 30, 1997
- -----------------------
Candace L. Straight
/s/ Michael J. Weiner Vice President and January 30, 1997
- ---------------------
Michael J. Weiner Principal Financial Officer
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, INCOME MANAGERS TRUST certifies that it meets
all of the requirements for effectiveness of the Post-Effective Amendment No. 5
to the Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City and State of New York on the 30th day of January, 1997.
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. 5 has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ John Cannon Trustee January 30, 1997
John Cannon
/s/ Stanley Egener Chairman of the Board, January 30, 1997
- ------------------
Stanley Egener Chief Executive Officer
and Trustee
/s/ Theodore P. Giuliano President and Trustee January 30, 1997
- ------------------------
Theodore P. Giuliano
/s/ Barry Hirsch Trustee January 30, 1997
Barry Hirsch
/s/ Robert A. Kavesh Trustee January 30, 1997
- --------------------
Robert A. Kavesh
(signatures continued on next page)
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ William E. Rulon Trustee January 30, 1997
- --------------------
William E. Rulon
/s/ Richard Russell Treasurer and January 30, 1997
- -------------------
Richard Russell Principal Accounting Officer
/s/ Candace L. Straight Trustee January 30, 1997
- -----------------------
Candace L. Straight
/s/ Michael J. Weiner Vice President and January 30, 1997
- ---------------------
Michael J. Weiner Principal Financial Officer
<PAGE>
NEUBERGER & BERMAN INCOME TRUST
POST-EFFECTIVE AMENDMENT NO. 5 ON FORM N-1A
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description Page
- ------- ------------------------------------------------------ ------------
(1) (a) Certificate of Trust. Incorporated by N.A.
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 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.
(c) Schedule A - Current Series of Neuberger & N.A.
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. 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) (a) Trust Instrument of Neuberger & Berman N.A.
Income Trust, Articles IV, V, and VI.
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) By-laws of Neuberger & Berman Income Trust N.A.
Articles V, VI, and VIII. 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>
(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.
(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 N.A.
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.
<PAGE>
(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.
(iii) Substitution Agreement Among _____
Neuberger & Berman Management
Incorporated, Income Managers Trust,
Neuberger & Berman, L.P., and
Neuberger & Berman, LLC.
Incorporated. Filed Herewith.
(6) (a) Distribution Agreement Between Neuberger & N.A.
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 N.A.
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. N.A.
(8) (a) Custodian Contract Between Neuberger & N.A.
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>
(b) Schedule A - Approved Foreign Banking N.A.
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.
(c) Schedule of Compensation under the Custodian ____
Contract. Filed Herewith.
(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 N.A.
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.
(iii) Schedule of Compensation Under the ____
Transfer Agency Agreement. Filed
Herewith.
(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.
<PAGE>
(ii) Schedule A - Series of Neuberger & N.A.
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 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.
(11) Other Opinions, Appraisals, Rulings and Consents:
Consent of Ernst & Young LLP, Independent ____
Auditors. Filed Herewith.
(12) Financial Statements Omitted from Prospectus. N.A.
None.
(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 Schedules. Filed Herewith. ____
(18) Plan Pursuant to Rule 18-3f. None. N.A.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Limited Maturity Bond Trust Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 02
<NAME> NEUBERGER&BERMAN LIMITED MATURITY BOND TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 21,253
<RECEIVABLES> 37
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,309
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 81
<TOTAL-LIABILITIES> 81
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,226
<SHARES-COMMON-STOCK> 2,227
<SHARES-COMMON-PRIOR> 1,240
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (47)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 49
<NET-ASSETS> 21,228
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,046
<OTHER-INCOME> 0
<EXPENSES-NET> (123)
<NET-INVESTMENT-INCOME> 923
<REALIZED-GAINS-CURRENT> (10)
<APPREC-INCREASE-CURRENT> (58)
<NET-CHANGE-FROM-OPS> 855
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (922)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,629
<NUMBER-OF-SHARES-REDEEMED> (737)
<SHARES-REINVESTED> 95
<NET-CHANGE-IN-ASSETS> 9,313
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (33)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 292
<AVERAGE-NET-ASSETS> 15,229
<PER-SHARE-NAV-BEGIN> 9.61
<PER-SHARE-NII> .57
<PER-SHARE-GAIN-APPREC> (.08)
<PER-SHARE-DIVIDEND> (.57)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.53
<EXPENSE-RATIO> .80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Ultra Short Bond Trust Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> NEUBERGER&BERMAN ULTRA SHORT BOND TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 6,637
<RECEIVABLES> 10
<ASSETS-OTHER> 20
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,667
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34
<TOTAL-LIABILITIES> 34
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,659
<SHARES-COMMON-STOCK> 676
<SHARES-COMMON-PRIOR> 177
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (48)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22
<NET-ASSETS> 6,633
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 383
<OTHER-INCOME> 0
<EXPENSES-NET> (47)
<NET-INVESTMENT-INCOME> 336
<REALIZED-GAINS-CURRENT> (42)
<APPREC-INCREASE-CURRENT> 19
<NET-CHANGE-FROM-OPS> 313
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (336)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 849
<NUMBER-OF-SHARES-REDEEMED> (384)
<SHARES-REINVESTED> 34
<NET-CHANGE-IN-ASSETS> 4,893
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (8)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 191
<AVERAGE-NET-ASSETS> 6,187
<PER-SHARE-NAV-BEGIN> 9.85
<PER-SHARE-NII> .53
<PER-SHARE-GAIN-APPREC> (.03)
<PER-SHARE-DIVIDEND> (.53)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.82
<EXPENSE-RATIO> .76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Limited Maturity Bond Portfolio Annual Report and is
qualified in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 06
<NAME> NEUBERGER&BERMAN LIMITED MATURITY BOND PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 274,509
<INVESTMENTS-AT-VALUE> 274,317
<RECEIVABLES> 3,771
<ASSETS-OTHER> 25
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 278,113
<PAYABLE-FOR-SECURITIES> 10,637
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 167
<TOTAL-LIABILITIES> 10,804
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 211,748
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 65,408
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,849)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (998)
<NET-ASSETS> 267,309
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 20,377
<OTHER-INCOME> 0
<EXPENSES-NET> (991)
<NET-INVESTMENT-INCOME> 19,386
<REALIZED-GAINS-CURRENT> (992)
<APPREC-INCREASE-CURRENT> (1,726)
<NET-CHANGE-FROM-OPS> 16,668
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (52,337)
<ACCUMULATED-NII-PRIOR> 46,022
<ACCUMULATED-GAINS-PRIOR> (7,857)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 751
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 991
<AVERAGE-NET-ASSETS> 300,392
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Ultra Short Bond Portfolio Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 05
<NAME> NEUBERGER&BERMAN ULTRA SHORT BOND PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 94,783
<INVESTMENTS-AT-VALUE> 95,142
<RECEIVABLES> 970
<ASSETS-OTHER> 7
<OTHER-ITEMS-ASSETS> 3
<TOTAL-ASSETS> 96,122
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 59
<TOTAL-LIABILITIES> 59
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 81,675
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 16,650
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,621)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 359
<NET-ASSETS> 96,063
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,215
<OTHER-INCOME> 0
<EXPENSES-NET> (398)
<NET-INVESTMENT-INCOME> 5,817
<REALIZED-GAINS-CURRENT> (592)
<APPREC-INCREASE-CURRENT> 172
<NET-CHANGE-FROM-OPS> 5,397
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (6,003)
<ACCUMULATED-NII-PRIOR> 10,833
<ACCUMULATED-GAINS-PRIOR> (2,029)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 252
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 398
<AVERAGE-NET-ASSETS> 100,852
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
SUBSTITUTION AGREEMENT
AGREEMENT, made this lst day of November, 1996, by and among
Neuberger&Berman Management Incorporated ("NBMI"), a New York corporation;
Neuberger&Berman, L.P. ("N&B L.P."), a New York limited partnership;
Neuberger&Berman, LLC, ("N&B LLC"), a Delaware limited liability company; and
Income Managers Trust, a New York common law trust (the "trust").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended ("Act"), and the Trust issues shares in several
different classes, each of which is known as a "Series": and
WHEREAS, NBMI serves as Investment Manager to the Trust pursuant to a
Management Agreement between the Trust and NBMI dated July 2, 1993; and
WHEREAS, NBMI entered into a Sub-Advisory Agreement with N&B L.P., dated
July 2, 1993 (the "Sub-Advisory Agreement"), under which N&B L.P. serves as the
Sub-Adviser for the Series of the Trust; and
WHEREAS, N&B LLC was organized on September 10, 1996, to succeed to the
investment advisory business of N&B L.P.; and
WHEREAS, N&B L.P. wishes to substitute N&B LLC in place of N&B L.P., as
a party to the Sub-Advisory Agreement; and
WHEREAS, N&B L.P. has represented to NBMI that N&B LLC is under the same
management and control as N&B L.P., that the individuals responsible for the
day-to-day operations are identical for N&B LLC and for N&B L.P., that the
investment process and procedures are identical for N&B LLC and for N&B L.P.,
and that in the event of substitution as requested by N&B L.P. the persons
rendering portfolio management services for the Series would remain the same;
and
WHEREAS, N&B LLC has entered into a written agreement with N&B L.P.
whereby N&B LLC agrees to assume all liabilities of N&B L.P.; and
WHEREAS, under these circumstances, NBMI and the Trust agree to the
substitution of N&B LLC as a party to the Sub-Advisory Agreement in place of N&B
L.P.
NOW, THEREFORE, it is agreed as follows:
1. SUBSTITUTION OF PARTY. Effective as of the date first written above,
N&B LLC hereby assumes all of the interest, rights and responsibilities of N&B
L.P. under the Sub-Advisory Agreement.
<PAGE>
2. PERFORMANCE OF DUTIES. N&B LLC hereby assumes and agrees to perform
all of N&B L.P.'s duties and obligations under the Sub-Advisory Agreement and be
subject to all of the terms and conditions of said Agreement as if they applied
to N&B LLC. Nothing in this Substitution Agreement shall make N&B LLC
responsible for any claim or demand arising under the Sub-Advisory Agreement
from services rendered prior to the effective date of this Substitution
Agreement unless otherwise agreed by N&B LLC; and nothing in this Substitution
Agreement shall make N&B L.P. responsible for any claim or demand arising under
the Sub-Advisory Agreement from services rendered after the effective date of
this Substitution Agreement unless otherwise agreed by N&B L.P.
3. REPRESENTATION OF N&B LLC. N&B LLC represents and warrants that it is
registered as an investment adviser under the Investment Advisers Act of 1940
("Advisers Act"). N&B L.P. and N&B LLC each represent and warrant that they are
under the same control and management, and that substitution of N&B LLC as a
party to the Sub-Advisory Agreement in place of N&B L.P. shall not result in an
"assignment" of the Sub-Advisory Agreement as that term is defined in the Act or
the Advisers Act.
4. CONSENTS. NBMI and the Trust hereby consent to this assumption by N&B
LLC of the interest, rights and responsibilities of N&B L.P. under the
Sub-Advisory Agreement and agree, subject to the terms and conditions of said
Agreement, to look solely to N&B LLC for the performance of the Sub-Adviser's
duties and obligations under said Agreement after the effective date described
above.
IN WITNESS WHEREOF, the parties hereto have caused this Substitution
Agreement to be executed by their duly authorized officers hereunto daily
attested as of the date and year first written above.
Neuberger&Berman Management Incorporated
By: /s/ Stanley Egener
--------------------
President
Title
Income Managers Trust
By: /s/ Michael J. Weiner
----------------------
Vice President
Title
Neuberger&Berman, L.P.
By: /S/ C. Carl Randolph
----------------------
General Partner
Title
Neuberger&Berman, LLC
By: /S/ Lawrence Zicklin
-----------------------
Managing Principal
Title
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
NEUBERGER AND BERMAN FUND COMPLEX
EQUITY MANAGERS TRUST:
. NEUBERGER AND BERMAN FOCUS PORTFOLIO
. NEUBERGER AND BERMAN GENESIS PORTFOLIO
. NEUBERGER AND BERMAN GUARDIAN PORTFOLIO
. NEUBERGER AND BERMAN MANHATTAN PORTFOLIO
. NEUBERGER AND BERMAN PARTNERS PORTFOLIO
. NEUBERGER AND BERMAN SOCIALLY RESPONSIVE PORTFOLIO
INCOME MANAGERS TRUST:
. NEUBERGER AND BERMAN CASH RESERVES PORTFOLIO NEUBERGER AND BERMAN
. GOVERNMENT MONEY PORTFOLIO NEUBERGER AND BERMAN LIMITED MATURITY BOND
. PORTFOLIO NEUBERGER AND BERMAN MUNICIPAL MONEY PORTFOLIO NEUBERGER AND
. BERMAN MUNICIPAL SECURITIES PORTFOLIO NEUBERGER AND BERMAN NEW YORK
. INSURED INTERMEDIATE PORTFOLIO NEUBERGER AND BERMAN ULTRA SHORT BOND
ADVISERS MANAGERS TRUST:
. AMT BALANCED INVESTMENTS
. AMT GOVERNMENT INCOME INVESTMENTS
. AMT GROWTH INVESTMENTS
. AMT INTERNATIONAL INVESTMENTS
. AMT LIMITED MATURITY BOND INVESTMENTS
. AMT LIQUID ASSET INVESTMENTS
. AMT PARTNERS INVESTMENTS
- --------------------------------------------------------------------------------
I. ADMINISTRATION
- --------------------------------------------------------------------------------
CUSTODY, PORTFOLIO AND FUND ACCOUNTING SERVICE: Maintain custody of
fund assets. Settle portfolio purchase and sales. Report buy and sell
fails. Determine and collect portfolio income. Make cash disbursements
and report cash transactions. Maintain investment ledgers, provide
selected portfolio transactions, position and income reports. Maintain
general ledger and capital stock accounts. Prepare daily trial balance.
Calculate net asset value daily. Provide selected general ledger
reports. Securities yield or market value quotations will be provided
to State Street by sources authorized by the funds.
The administration fee shown below is an annual charge, billed and
payable monthly, based on average monthly net assets.
ANNUAL FEES PER PORTFOLIO
-------------------------
Custody, Portfolio
Fund Net Assets and Fund Accounting
--------------- -------------------
$0 - $20 million .075%
$20 - $100 million .037%
$100 - $200 million .028%
$200 - $500 million .014%
Over $500 million .013%
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page: 2
- --------------------------------------------------------------------------------
II. GLOBAL CUSTODY
- --------------------------------------------------------------------------------
These fees are divided into two categories: Transaction Charges and
Holdings Charges which are calculated based on the following country
groups:
<TABLE>
<CAPTION>
A. COUNTRY GROUPING
GROUP A GROUP B GROUP C GROUP D GROUP E GROUP F
----------- ------------ ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
USA Austria Australia Denmark Indonesia Argentina
Canada Belgium Finland Malaysia Bangladesh
Euroclear Hong Kong France Philippines Brazil
Germany Netherlands Ireland Portugal Chile
Japan New Zealand Italy So. Korea China
Singapore Luxembourg Spain Columbia
Switzerland Mexico Sri Lanka Czech Republic
Norway Sweden Cyprus
Thailand Taiwan Greece
U.K. Hungary
India
Israel
Morocco
Pakistan
Peru
Poland
So. Africa
Turkey
Uruguay
Venezuela
</TABLE>
<TABLE>
<CAPTION>
B. TRANSACTIONS CHARGES
GROUP A GROUP B GROUP C GROUP D GROUP E GROUP F
------------------------- ------------ -------------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
State Street Bank $25 $50 $60 $70 $150
Repos or Euros - $7.00
DTC or Fed Book
Entry - $12.00
All Other - $25.00
</TABLE>
<TABLE>
<CAPTION>
C. HOLDINGS CHARGES
GROUP A GROUP B GROUP C GROUP D GROUP E GROUP F
--------------------- ------------ -------------- ----------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
1.5 5.0 6.0 10.0 25.0 40.0
</TABLE>
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page: 3
- --------------------------------------------------------------------------------
III. PORTFOLIO TRADES - FOR EACH LINE ITEM PROCESSED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
State Street Bank Repos $ 7.00
DTC of Fed Book Entry $12.00
New York Physical Settlements $25.00
Maturity Collection (NY Physical Items Only) $ 8.00
All Other Trades $16.00
- --------------------------------------------------------------------------------
IV. OPTIONS
- --------------------------------------------------------------------------------
Option charge for each option written or closing contract,
per issue, per broker $25.00
Option expiration charge, per issue, per broker $15.00
Option exercised charge, per issue, per broker $15.00
- --------------------------------------------------------------------------------
V. LENDING OF SECURITIES
- --------------------------------------------------------------------------------
Deliver loaned securities versus cash collateral $20.00
Deliver loaned securities versus securities collateral $30.00
Receive/deliver additional cash collateral $ 6.00
Substitutions of securities collateral $30.00
Deliver cash collateral versus receipt of loaned securities $15.00
Deliver securities collateral versus receipt of loaned securities $25.00
Loan administration - mark-to-market per day, per loan $ 3.00
- --------------------------------------------------------------------------------
VI. INTEREST RATE FUTURES
- --------------------------------------------------------------------------------
Transactions - no security movement $ 8.00
- --------------------------------------------------------------------------------
VII. PRICING SERVICE
- --------------------------------------------------------------------------------
Monthly Quote Charge (based on average number of positions in $ 6.00
portfolio)
- --------------------------------------------------------------------------------
VIII. HOLDINGS CHARGE
- --------------------------------------------------------------------------------
For each issue maintained - monthly charge $ 5.00
- --------------------------------------------------------------------------------
IX. PRINCIPAL REDUCTION PAYMENTS
- --------------------------------------------------------------------------------
Per Paydown $10.00
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page: 4
- --------------------------------------------------------------------------------
X. DIVIDEND/INTEREST COLLECTION CHARGES
- --------------------------------------------------------------------------------
For items held at the request of traders over record date in $50.00
street form
</TABLE>
- --------------------------------------------------------------------------------
XI. SPOKE CONFIGURATION
- --------------------------------------------------------------------------------
Annual fee of $10,000 per each series in each Spoke Entity
Spoke Entities:
---------------
Neuberger and Berman Equity Funds (except N & B International Fund)
Neuberger and Berman Equity Trust Neuberger and Berman Income Funds
Neuberger and Berman Income Trust Neuberger and Berman Advisers
Management Trust Neuberger and Berman Equity Assets
- --------------------------------------------------------------------------------
XII. SPECIAL SERVICES
- --------------------------------------------------------------------------------
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, extraordinary security shipments and
the preparation of special reports will be subject to negotiation.
Yield calculation and other special items will be negotiated
separately.
- --------------------------------------------------------------------------------
XIII. OUT-OF-POCKET EXPENSES
- --------------------------------------------------------------------------------
A billing for the recovery of applicable out-of-pocket expenses will be
made as of the end of each month. Out-of-pocket expenses include, but
are not limited to the following:
. Wire charges relative to custodian functions ($5.25 per wire
in and $5.00 out)
. Postage and Insurance
. Courier Service
. Duplicating
. Legal fees in jointly agreed upon situations
. Supplies related to fund records
. Rush transfer -- $8.00 each
. Transfer fees
. Sub-custodian charges
. Price Waterhouse audit letter
. Federal Reserve fee for return check items over $2,500-$4.25
. GNMA Transfer - $15 each
- --------------------------------------------------------------------------------
XIV. PAYMENT AND EARNINGS CREDIT
- --------------------------------------------------------------------------------
The above fees will be charged against the fund's custodian checking
account five (5) days after the invoice is mailed to the fund's
offices, contingent on fund approval.
An earnings credit of 75% of the 90 Day T-Bill rate will be applied for
fund balances.
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page: 5
NEUBERGER & BERMAN FUND COMPLEX STATE STREET BANK AND TRUST CO.
By: /s/ Michael J. Weiner By: /s/ K. Griffin
------------------------------------ -------------------------
Title: Vice President Income Managers Trust Title: Vice President
By: 7-31-96 Date: July 31, 1996
----------------------------------- -------------------------
FEE SCHEDULE
FOR
TRANSFER AGENCY AGREEMENT
BETWEEN
STATE STREET BANK AND TRUST COMPANY
AND
NEUBERGER & BERMAN INCOME TRUST
The Portfolios within the Neuberger & Berman Income Trust will be charged an
annual Fund minimum of $16,500 for the first three years, and following that
period an annual fee of $12.50 per account:
Limited Maturity Bond Trust
Ultra Short Bond Trust
There will be an Account Charge of $1.00 per closed account or zero balance, and
out of pocket expenses which will be billed on a monthly basis as incurred, and
determined by product and related expense. The Fund minimum will be waived for
the first nine months after seed money has been received by the Bank. This
minimum will be guaranteed for three years.
NEUBERGER & BERMAN STATE STREET BANK AND
INCOME TRUST TRUST COMPANY
Name: /s/ Michael J. Weiner Name: /s/ Ronald E. Logue
------------------------- --------------------------
Title: Vice President Title: Executive Vice President
Date: 9-10-96 Date: 9-16-96
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Reports to Shareholders," "Independent
Auditors" and "Financial Statements" in the Statement of Additional Information
in Post-Effective Amendment Number 5 to the Registration Statement (Form N-1A
No. 33-62872) of Neuberger&Berman Income Trust, and to the incorporation by
reference of our reports dated December 2, 1996 on the Neuberger&Berman Limited
Maturity Bond Trust and Neuberger&Berman Ultra Short Bond Trust, and on
Neuberger&Berman Limited Maturity Bond Portfolio and Neuberger&Berman Ultra
Short Bond Portfolio, included in the 1996 Annual Report to Shareholders of
Neuberger&Berman Income Trust.
/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
Boston, Massachusetts
January 28, 1997
