As filed with the Securities and Exchange Commission on February 27, 1998
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. [ 6 ] [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. [ 6 ] [ 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 March 2, 1998 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)
The public offering of Registrant's series is on-going. The title of
securities being registered is shares of beneficial interest.
Neuberger & Berman Income Trust is a "master/feeder fund." This
Post-Effective Amendment No. 6 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. 6 ON FORM N-1A
This Post-Effective Amendment consists of the following papers and
documents:
Cover Sheet
Contents of Post-Effective Amendment No. 6 on Form N-1A
Cross Reference Sheet
NEUBERGER & BERMAN LIMITED MATURITY 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. 6 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
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>
Form N-1A Item No. Caption in Part B Statement of
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 Risk
Policies Considerations
Item 14. Management of the Fund Trustees And Officers
Item 15. Control Persons and Control Persons And Principal Holders
Principal Holders of 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; Additional
Securities Redemption Information; Dividends and
Other Distributions
Item 19. Purchase, Redemption and Distribution Arrangements; Additional
Pricing of Securities Exchange Information; Additional
Being Offered Redemption Information
Item 20. Tax Status Dividends and Other Distributions;
Additional Tax Information
Item 21. Underwriters Investment Management and
Administration Services; Distribution
Arrangements
Item 22. Calculation of Performance 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. 6.
<PAGE>
<PAGE> 1
Neuberger&Berman
LIMITED MATURITY BOND TRUST
- --------------------------------
A No-Load Bond Fund
- --------------------------------------------------------------------------------
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").
- --------------------------------------------------------------------------------
The above-named fund ("Fund"), which is a series of Neuberger&Berman Income
Trust ("Income Trust"), invests all of its net investable assets in a portfolio
(the "Portfolio") of Income Managers Trust ("Managers Trust"), an open-end
management investment company managed by N&B Management. The Portfolio invests
in securities in accordance with an investment objective, policies, and
limitations identical to those of the Fund. The investment performance of the
Fund directly corresponds with the investment performance of the 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 23.
The Fund is a no-load mutual fund, so there are no sales commissions or
other charges when buying or redeeming shares. The Fund does not pay "12b-1
fees" to promote or distribute its shares. The Fund declares income dividends
daily and pays them monthly.
Please read this Prospectus before investing in the Fund and keep it for
future reference. It contains information about the Fund that a prospective
investor should know before investing. A Statement of Additional Information
("SAI") about the Fund and Portfolio, dated March 2, 1998, 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 MARCH 2, 1998
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, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY 3
The Fund and Portfolio 3
Risk Factors 4
Management 4
EXPENSE INFORMATION 5
Shareholder Transaction
Expenses 5
Annual Fund Operating
Expenses 5
Example 6
FINANCIAL HIGHLIGHTS 7
Selected Per Share Data and
Ratios 7
Limited Maturity Bond Trust 8
INVESTMENT PROGRAM 10
Short-Term Trading;
Portfolio Turnover 11
Ratings of Debt Securities 11
Borrowings 12
Other Investments 13
Duration 13
PERFORMANCE INFORMATION 14
Yield 14
Total Return 14
Yield and Total Return
Information 14
SHAREHOLDER SERVICES 15
How to Buy Shares 15
How to Sell Shares 15
Exchanging Shares 16
SHARE PRICES AND NET
ASSET VALUE 17
DIVIDENDS, OTHER
DISTRIBUTIONS, AND
TAXES 18
Distribution Options 18
Taxes 18
MANAGEMENT AND
ADMINISTRATION 20
Trustees and Officers 20
Investment Manager,
Administrator, Distributor,
and Sub-Adviser 20
Expenses 21
Transfer Agent 22
INFORMATION REGARDING
ORGANIZATION,
CAPITALIZATION, AND
OTHER MATTERS 23
The Fund 23
The Portfolio 24
DESCRIPTION OF
INVESTMENTS 26
OTHER INFORMATION 32
Directory 32
Funds Eligible For Exchange 32
</TABLE>
<PAGE> 3
SUMMARY
- -----------------------------------
The Fund and Portfolio
- --------------------------------------------------------------------------------
The Fund is a series of the Trust and invests in the 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 the Fund "feeds"
shareholders' investments into the Portfolio, a "master" fund. The structure
looks like this:
SHAREHOLDERS
BUY SHARES IN
-
.
FUND
INVESTS IN
-
.
PORTFOLIO
INVESTS IN
-
.
DEBT SECURITIES &
OTHER SECURITIES
The trustees who oversee the Fund believe that this structure may benefit
shareholders; investment in the Portfolio by investors in addition to the Fund
may enable the Portfolio to achieve economies of scale that could reduce
expenses. For more information about the organization of the Fund and the
Portfolio, including certain features of the master/feeder fund structure, see
"Information Regarding Organization, Capitalization, and Other Matters" on page
23.
The following table is a summary highlighting features of the Fund and the
Portfolio. Please see "Investment Program" on page 10. Of course, there can be
no assurance that the Fund will meet its investment objective.
3
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
NEUBERGER&BERMAN INVESTMENT PRINCIPAL OTHER
INCOME TRUST OBJECTIVE PORTFOLIO INFORMATION
INVESTMENTS
- ------------------------------------------------------------------------------
LIMITED Highest current Debt securities, Potential price
MATURITY income consistent primarily fluctuation;
with low risk to investment grade; maximum dollar-
principal and maximum 10% below weighted average
liquidity; and investment grade, duration of four
secondarily, total but no lower than years.
return. B*.
- - -
</TABLE>
*Securities that are below investment grade will be purchased only if, at the
time of purchase, they are 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 11.
- -------------------
Risk Factors
- --------------------------------------------------------------------------------
An investment in the Fund involves certain risks, depending upon the types
of investments made by the Portfolio. The Portfolio invests 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. The
value of debt securities is also affected by the creditworthiness of the issuer.
Special risk factors apply to investments in debt securities rated below
investment grade, foreign securities, options and futures contracts and zero
coupon bonds. For more details about the Portfolio, its investments and their
risks, see "Investment Program" on page 10 and "Description of Investments" on
page 26.
- -------------------
Management
- --------------------------------------------------------------------------------
N&B Management, with the assistance of Neuberger&Berman, LLC
("Neuberger&Berman") as sub-adviser, selects investments for the Portfolio. N&B
Management also provides administrative services to the Fund and Portfolio and
acts as distributor of Fund shares. See "Management and Administration" on page
20. If you want to know how to buy and sell shares of the Fund 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 15,
"Shareholder Services -- How to Sell Shares" on page 15, "Shareholder
Services -- Exchanging Shares" on page 16, and the policies of the Institution
through which you are purchasing shares.
4
<PAGE> 5
EXPENSE INFORMATION
This section gives you certain information about the expenses of the Fund
and the Portfolio. See "Performance Information" for important facts about the
investment performance of the Fund, after taking expenses into account.
- ------------------------------------------------
Shareholder Transaction Expenses
- --------------------------------------------------------------------------------
As shown by this table, the Fund imposes no transaction charges when you buy
or sell Fund shares.
<TABLE>
<S> <C>
Sales Charge Imposed on Purchases NONE
Sales Charge Imposed on Reinvested Dividends NONE
Deferred Sales Charges NONE
Redemption Fees NONE
Exchange Fees NONE
</TABLE>
- ----------------------------------------------------------
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
- --------------------------------------------------------------------------------
The following table shows annual operating expenses for the Fund which are
paid out of the assets of the Fund and which include the Fund's pro rata portion
of the operating expenses of the Portfolio ("Total Operating Expenses"). "Total
Operating Expenses" exclude interest, taxes, brokerage commissions, and
extraordinary expenses.
The Fund pays N&B Management an administration fee based on the Fund's
average daily net assets. The 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 Fund. "Management and Administration Fees" in the
following table are based upon administration fees incurred by the Fund and
management fees incurred by the Portfolio during the past fiscal year. For more
information, see "Management and Administration" and the SAI.
The Fund and Portfolio incur other expenses for things such as accounting
and legal fees, transfer agency fees, custodial fees, printing and furnishing
shareholder statements and Fund reports and compensating trustees who are not
affiliated with N&B Management ("Other Expenses"). Other Expenses in the
following table are based on the Fund's and Portfolio's expenses for the past
fiscal year. All expenses are factored into the Fund's share prices and
dividends and are not charged directly to Fund shareholders.
5
<PAGE> 6
<TABLE>
<CAPTION>
NEUBERGER&BERMAN MANAGEMENT AND 12b-1 OTHER TOTAL OPERATING
INCOME TRUST ADMINISTRATION FEES FEES EXPENSES* EXPENSES*
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIMITED MATURITY 0.75% None 0.05% 0.80%
</TABLE>
*Reflects N&B Management's expense reimbursement undertaking described below.
The previous table reflects N&B Management's voluntary undertaking to
reimburse the Fund for its Total Operating Expenses and pro rata share of its
corresponding Portfolio's Total Operating Expenses which, in the aggregate,
exceed 0.80% per annum of the Fund's average daily net assets. Each undertaking
can be terminated by N&B Management by giving a Fund at least 60 days' prior
written notice. Absent the reimbursement, Other Expenses would be 0.49%, and
Total Operating Expenses would be 1.24% per annum of the average daily net
assets of the Fund based upon the Fund's expenses for its 1997 fiscal year.
For more information, see "Expenses" on page 21.
- --------------------
Example
- --------------------------------------------------------------------------------
To illustrate the effect of Total Operating Expenses, let's assume that the
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 the 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:
<TABLE>
<CAPTION>
NEUBERGER&BERMAN
INCOME TRUST 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIMITED MATURITY $ 8 $ 26 $ 44 $99
</TABLE>
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> 7
FINANCIAL HIGHLIGHTS
- --------------------------------------------------
Selected Per Share Data and Ratios
- --------------------------------------------------------------------------------
The financial information in the following tables is for the Fund as of
October 31, 1997, and the prior periods. This information has been audited by
the Fund's independent auditors. You may obtain, at no cost, further information
about the performance of the Fund in its 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> 8
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- ----------------------------------------
Limited Maturity Bond Trust
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding
throughout each year and other performance information derived from the
Financial Statements. The per share amounts and ratios which are shown reflect
income and expenses, including the Fund's proportionate share of its
corresponding Portfolio's income and expenses. It should be read in conjunction
with its corresponding Portfolio's Financial Statements and notes thereto.(7)
<TABLE>
<CAPTION>
Period from
August 30,
1993(1)
Year Ended October 31, to October 31,
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $9.53 $9.61 $9.43 $9.97 $10.00
------------------------------------------------------------
Income From Investment Operations
Net Investment Income .60 .57 .58 .54 .08
Net Gains or Losses on Securities (both realized and
unrealized) .04 (.08) .18 (.54) (.03)
------------------------------------------------------------
Total From Investment Operations .64 .49 .76 -- .05
------------------------------------------------------------
Less Distributions
Dividends (from net investment income) (.60) (.57) (.58) (.54) (.08)
------------------------------------------------------------
Net Asset Value, End of Year $9.57 $9.53 $9.61 $9.43 $ 9.97
------------------------------------------------------------
Total Return(2) +6.88% +5.29% +8.36% -0.01% +0.55%(3)
------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $37.4 $21.2 $11.9 $ 6.7 $ 0.1
------------------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(4) .80% .81% .77% -- --
------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets(5) .80% .80% .77% .70% .65%(6)
------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets(5) 6.25% 6.06% 6.16% 5.72% 4.99%(6)
------------------------------------------------------------
</TABLE>
See Notes to Financial Highlights
8
<PAGE> 9
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 the 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)For fiscal periods ending after September 1, 1995, the Fund is required to
calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements. These ratios reflect the
reimbursement of certain expenses.
5)After reimbursement of expenses by N&B Management. Had N&B Management not
undertaken such action the annualized ratios of net expenses and net
investment income to average daily net assets would have been:
<TABLE>
<CAPTION>
Period from
August 30, 1993
NEUBERGER&BERMAN Year Ended October 31, to October 31,
LIMITED MATURITY BOND TRUST 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Expenses 1.24% 1.91% 2.18% 2.50% 2.50%
----------------------------
Net Investment Income 5.81% 4.95% 4.75% 3.92% 3.14%
----------------------------
</TABLE>
6)Annualized.
7)Because the Fund invests only in the Portfolio and that Portfolio (rather than
the Fund) engages in securities transactions, the Fund does not calculate a
portfolio turnover rate. The portfolio turnover rates for the Portfolio were
as follows:
<TABLE>
<CAPTION>
Period from
July 2, 1993
(Commencement
of Operations)
Year Ended October 31, to October 31,
1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Neuberger&Berman
LIMITED MATURITY Bond Portfolio 89% 169% 88% 102% 71%
</TABLE>
9
<PAGE> 10
INVESTMENT PROGRAM
The investment policies and limitations of the Fund are identical to those
of the Portfolio. The Fund invests only in the Portfolio. Therefore, the
following shows you the kinds of securities in which the Portfolio invests. For
an explanation of some types of investments, see "Description of Investments" on
page 26.
Investment policies and limitations of the Fund and the Portfolio 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 objective of the Fund and Portfolio is not fundamental. There
can be no assurance that the Fund or Portfolio will achieve its objective. The
Fund, by itself, does not represent a comprehensive investment program.
Additional investment techniques, features, and limitations concerning the
Portfolio's 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 the Fund and Portfolio is to provide the highest
current income consistent with low risk to principal and liquidity; and
secondarily, total return.
Neuberger&Berman LIMITED MATURITY Bond Portfolio seeks to increase income
and preserve or enhance total return by actively managing average portfolio
duration in light of market conditions and trends. The Portfolio invests in a
diversified portfolio consisting primarily of U.S. Government and Agency
Securities and investment grade debt securities issued by financial
institutions, corporations, and others. The dollar-weighted average duration of
the Portfolio will not exceed four years, although the Portfolio may invest in
individual securities of any duration. The Portfolio's dollar-weighted average
portfolio maturity may range up to five years. Securities, in which the
Portfolio may invest, include mortgage-backed and asset-backed securities,
repurchase agreements with respect to U.S. Government and Agency Securities, and
foreign investments. The Portfolio may invest up to 10% of its net assets in
fixed income securities that are below investment grade, including unrated
securities deemed by N&B Management to be of comparable quality. The Portfolio
will not invest in such securities unless, at the time of purchase, 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
10
<PAGE> 11
of Debt 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 the Portfolio does not purchase securities with the intention of
profiting from short-term trading, it may sell portfolio securities prior to
maturity when N&B Management believes that such action is advisable. See "Notes
to Financial Highlights" for more information about the portfolio turnover rates
of the Portfolio. Turnover rates in excess of 100% generally result in higher
transaction costs (which are borne directly by the Portfolio and indirectly by
the corresponding Fund) and a possible increase in realized short-term capital
gains or losses. See "Dividends, Other Distributions, and Taxes" on page 18 and
the SAI.
- ----------------------------------------
Ratings of Debt Securities
- --------------------------------------------------------------------------------
INVESTMENT GRADE DEBT SECURITIES. Investment grade debt securities are
securities that have received a rating from at least one nationally recognized
statistical rating organization ("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.
LOWER-RATED DEBT SECURITIES. Lower-rated debt securities or "junk bonds"
are those rated below the fourth highest category by all NRSROs that have rated
them or unrated securities of comparable quality. 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 the
Portfolio's holdings in them and by extensively analyzing the potential benefits
of such an investment in relation to the associated risks.
11
<PAGE> 12
The following table shows the ratings of debt securities held by the
Portfolio during the fiscal year ended October 31, 1997. 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 S&P
(AS A % OF (AS A % OF
INVESTMENTS) INVESTMENTS)
INVESTMENT GRADE RATING AVERAGE RATING AVERAGE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Treasury/Agency* TSY/AGY 15.26% TSY/AGY 15.26%
Highest quality Aaa 17.91% AAA 17.91%
High quality Aa 4.38% AA 1.81%
Upper-medium grade A 19.99% A 24.05%
Medium grade Baa 25.58% BBB 29.07%
LOWER QUALITY**
Moderately speculative Ba 12.81% BB 6.92%
Speculative B 3.94% B 4.85%
Highly speculative Caa -- CCC --
Poor quality Ca -- CC --
Lowest quality, no interest C -- C --
In default, in arrears -- -- D --
TOTAL 99.87%+ 99.87%+
</TABLE>
* 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 and S&P did not rate every security purchased during this period.
Further information regarding the ratings assigned to securities purchased
by the Portfolio, and the meanings of those ratings, is included in the SAI and
the Fund's annual report.
- -----------------
Borrowings
- --------------------------------------------------------------------------------
The 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 nonfundamental policy, the Portfolio may not 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.
12
<PAGE> 13
- --------------------------
Other Investments
- --------------------------------------------------------------------------------
For temporary defensive purposes, the 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 the Portfolio's duration by approximately
the same amount as would holding an equivalent amount of the underlying
securities. Short futures or put options have durations roughly equal to the
negative duration of the securities that underlie these positions, and have the
effect of reducing portfolio duration by approximately the same amount as would
selling an equivalent amount of the underlying securities.
There are some situations where even the standard duration calculation does
not properly reflect the interest rate exposure of a security. For example,
floating and variable rate securities often have final maturities of ten or more
years; however, their interest rate exposure corresponds to the frequency of the
coupon reset. Another example where the interest rate exposure is not properly
captured by duration is the case of mortgage-backed securities. The stated final
maturity of such securities is generally 30 years, but current and expected
prepayment rates are critical in determining the securities' interest rate
exposure. In these and other similar situations, N&B Management, where
permitted, will use more sophisticated analytical techniques that incorporate
the expected economic life of a security into the determination of its interest
rate exposure.
13
<PAGE> 14
PERFORMANCE INFORMATION
The Fund's performance can be measured as YIELD or as TOTAL RETURN. The
Portfolio invests in various kinds of fixed income securities, so its
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 Fund and Portfolio" shows the investment
objective and principal types of investments for the Fund and Portfolio. For
more detailed information, see "Investment Program" and "Description of
Investments." Further information regarding the 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 evens out year-to-year variations in
actual performance.
- -----------------------------------------------
Yield and Total Return Information
- --------------------------------------------------------------------------------
You can obtain current performance information about the Fund by calling N&B
Management at 800-877-9700. N&B Management may from time to time reimburse the
Fund for certain expenses, which has the effect of increasing its yields and
total returns.
14
<PAGE> 15
SHAREHOLDER SERVICES
- ---------------------------
How to Buy Shares
- --------------------------------------------------------------------------------
YOU CAN BUY AND OWN FUND SHARES ONLY THROUGH AN ACCOUNT WITH AN INSTITUTION.
N&B Management and the Fund 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 the
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. Investors
should consult their Institution to determine the time by which it must receive
an order so that Fund shares can be purchased at that day's price. Prices for
Fund shares are usually calculated as of the close of regular trading on the
NYSE, usually 4 p.m. Eastern time. An Institution may be closed on days when the
NYSE is open. As a result, prices for Fund shares may be significantly affected
on days when an investor has no access to that Institution to buy shares.
Other Information:
----- An Institution must pay for shares it purchases on its clients' behalf
in U.S. dollars.
----- The Fund has the right to suspend the offering of its shares for a
period of time. The 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."
----- The Fund does not issue certificates for shares.
----- 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 and the payment of redemption proceeds. 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. Investors should consult their
Institution to determine the time by which it must receive an order so that Fund
shares can be sold at that day's price. Prices for shares of the Fund are
usually calculated as of the close of regular trading on the NYSE, usually 4
p.m. Eastern time. An Institution may be
15
<PAGE> 16
closed on days when the NYSE is open. As a result, prices for shares of the Fund
may be significantly affected on days when an investor has no access to that
Institution to sell shares.
Other Information:
----- Redemption proceeds will be paid to Institutions as agreed with N&B
Management, but in any case within three business days (under unusual
circumstances the Fund may take longer, as permitted by law). An
Institution may not follow the same procedures for payment of
redemption proceeds to its clients.
----- The Fund may suspend redemptions or postpone payments on days when the
NYSE is closed, when trading on the NYSE is restricted, or as
permitted by the SEC.
----- 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 the 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.
----- Shares can be exchanged ONLY between accounts registered in the same
name, address, and taxpayer ID number of the Institution.
----- An exchange can be made only into a mutual fund whose shares are
eligible for sale in the state where the Institution is located.
----- An exchange may have tax consequences.
----- The 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.
----- The 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.
16
<PAGE> 17
SHARE PRICES AND NET ASSET VALUE
The Fund's shares are bought or sold at a price that is the Fund's net asset
value ("NAV") per share. The NAVs for the Fund and Portfolio are calculated by
subtracting liabilities from total assets (in the case of the Portfolio, the
market value of the securities the Portfolio holds plus cash and other assets;
in the case of the Fund, its percentage interest in the Portfolio, multiplied by
the Portfolio's NAV, plus any other assets). The 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. The Fund and 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.
The 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 Portfolio periodically verifies 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.
If N&B Management believes that the price of a security obtained under the
Portfolio's valuation procedures (as described above) does not represent the
amount that the Portfolio reasonably expects to receive on a current sale of the
security, the Portfolio will value the security based on a method that the
trustees of Managers Trust believe accurately reflects fair value.
17
<PAGE> 18
DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES
The 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 any net gains from foreign currency transactions earned or
realized by the Portfolio. Income dividends are declared daily for the Fund at
the time its NAV is calculated and are paid monthly, and net capital and foreign
currency 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 the Fund are automatically reinvested in additional shares of the
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
- --------------------------------------------------------------------------------
An investment has certain tax consequences, depending on the type of account
through which the investment is made. 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
generally also are 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.
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 an
investor has owned Fund shares. Distributions of net capital gain may include
gains from the sale of portfolio securities that appreciated in value before an
investor bought Fund shares.
18
<PAGE> 19
Under the Taxpayer Relief Act of 1997, different maximum tax rates apply to
the Fund's distributions of net capital gain depending on the Portfolio's
holding periods for the securities it sold that generated the gain. The
Portfolio may invest in municipal securities. Any distributions of income
derived from these securities, however, are not tax-exempt, because the
Portfolio does not invest the percentage of its assets in municipal securities
required under federal tax law in order for the Fund to be eligible to
distribute tax-free income.
Every January, the Fund will send each Institution that is a shareholder
therein a statement showing the amount of distributions paid in cash or
reinvested in Fund shares for the previous year. Each Institution will also
receive information showing (1) the portion, if any, of those distributions that
generally is not subject to state and local income taxes in certain states and
(2) capital gain distributions broken down in a manner that will enable
investors or their tax advisers to determine the appropriate rate of capital
gains tax on such distributions.
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 generally 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. Capital gain on shares held for more than one year will be long-term
capital gain, in which event it will be subject to federal income tax at the
capital gains rate applicable to an investor's holding period and tax bracket
(for non-corporate taxpayers).
When an Institution sells Fund shares, it will receive a confirmation
statement showing the number of shares sold and the price.
OTHER. Every January, Institutions will 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 Fund intends to continue to qualify for treatment as a regulated
investment company for federal income tax purposes so that it will not have to
pay federal income tax on that part of its taxable income and realized gains
that it distributes to its shareholders.
The foregoing is only a summary of some of the important income tax
considerations affecting the 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.
19
<PAGE> 20
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 the Fund and the 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 Fund or the Portfolio.
- -------------------------------------------------
Investment Manager, Administrator,
Distributor, and Sub-Adviser
- --------------------------------------------------------------------------------
N&B Management serves as the investment manager of the Portfolio, as
administrator of the Fund, and as distributor of the shares of the 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 Portfolio, N&B
Management currently serves as investment manager of other mutual funds.
Neuberger&Berman acts as sub-adviser for the Portfolio and other mutual funds
managed by N&B Management. The mutual funds managed by N&B Management and
Neuberger&Berman had aggregate net assets of approximately $20.7 billion as of
December 31, 1997.
As sub-adviser, Neuberger&Berman furnishes N&B Management with investment
recommendations and research without added cost to the Portfolio. N&B Management
compensates Neuberger&Berman for its costs in connection with those services.
Neuberger&Berman is a member firm of the NYSE and other principal exchanges and
may act as the Portfolio's 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 $52.9 billion of assets as of
December 31, 1997. All of the voting stock of N&B Management is owned by
individuals who are principals of Neuberger&Berman.
Theodore P. Giuliano and Thomas G. Wolfe are primarily responsible for day-
to-day management as co-managers of the Portfolio.
Mr. 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
manages fixed income accounts that had approximately $9.3 billion of assets as
of December 31, 1997.
20
<PAGE> 21
Mr. Wolfe has been a co-manager of the 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 the 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.
YEAR 2000. Like other financial and business organizations, the Fund and
Portfolio could be adversely affected if computer systems they rely on do not
properly process date-related information and data involving the years 2000 and
after. N&B Management and Neuberger&Berman are taking steps that they believe
are reasonable to address this problem in their own computer systems and to
obtain assurances that comparable steps are being taken by the Fund's and
Portfolio's other major service providers. N&B Management also attempts to
evaluate the potential impact of this problem on the issuers of investment
securities that the Portfolio purchases. However, there can be no assurance that
these steps will be sufficient to avoid any adverse impact on the Fund and
Portfolio.
- ---------------
Expenses
- --------------------------------------------------------------------------------
N&B Management provides investment management services to the 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, the 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 the Fund that include
furnishing facilities and personnel for the Fund and performing accounting,
recordkeeping, and other services. For such administrative services, the Fund
pays N&B Management a fee at the annual rate of 0.50% of the Fund's average
daily net assets. With the Fund's consent, N&B Management may subcontract to
Institutions some of its responsibilities to the Fund under the administration
agreement and may compensate each Institution that provides such services at an
annual rate of up to 0.25% of the average net asset value of Fund shares held
through that Institution.
21
<PAGE> 22
The 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. The
Portfolio bears all expenses of its operations other than those borne by N&B
Management as investment manager of the Portfolio. These expenses include the
"Other Expenses" described on page 5.
See "Expense Information -- Annual Fund Operating Expenses" for information
about how these fees and expenses may affect the value of your investment.
During its 1997 fiscal year, the Fund accrued administration fees and a pro
rata portion of the Portfolio's management fees (prior to any expense
reimbursement) of 0.75% of the Fund's average daily net assets.
N&B Management has voluntarily undertaken to reimburse the Fund for its
Total Operating Expenses, which exceed, in the aggregate, 0.80% per annum of the
Fund's average daily net assets. N&B Management may terminate this undertaking
to the Fund by giving at least 60 days' prior written notice to the Fund. The
effect of reimbursement by N&B Management is to reduce the Fund's expenses and
thereby increase its total return.
During its 1997 fiscal year, the Fund bore aggregate operating expenses
(after taking into consideration N&B Management's expense reimbursement) of
0.80% of the Fund's average daily net assets.
- ---------------------
Transfer Agent
- --------------------------------------------------------------------------------
The Fund's 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.
22
<PAGE> 23
INFORMATION REGARDING
ORGANIZATION, CAPITALIZATION, AND
OTHER MATTERS
- ---------------------
The Fund
- --------------------------------------------------------------------------------
The Fund is the only 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 Fund invests all of its net investable assets in the Portfolio,
receiving a beneficial interest in the Portfolio. The trustees of the Trust may
establish additional series or classes of shares without the approval of
shareholders. If additional series are established, the assets of each series
would belong only to that series, and the liabilities of each series would be
borne solely by that series and no other.
DESCRIPTION OF SHARES. The Fund is authorized to issue an unlimited number
of shares of beneficial interest (par value $0.001 per share). Shares of the
Fund represent equal proportionate interests in the assets of the Fund and have
identical voting, dividend, redemption, liquidation, and other rights. All
shares issued are fully paid and nonassessable, 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 Fund shareholders. The trustees will call special meetings of
Fund shareholders 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
the Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the
shareholders of the Fund will not be personally liable for the obligations of
the 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 the 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.
OTHER. Because Fund shares can be bought, owned and sold only through an
account with an Institution, a client of an Institution may be unable to
purchase additional shares and/or may be required to redeem shares (and possibly
incur a tax liability) if the client no longer has a relationship with the
Institution or if the Institution no longer has a contract with N&B Management
to perform services. Depending on the policies of the Institutions involved, an
investor may be able to transfer an account from one Institution to another.
23
<PAGE> 24
- --------------------------
The Portfolio
- --------------------------------------------------------------------------------
The 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 six 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.
FUND'S INVESTMENT IN THE PORTFOLIO. The Fund is a "feeder fund" that seeks
to achieve its investment objective by investing all of its net investable
assets in the 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.
The Fund's investment in the Portfolio is in the form of a non-transferable
beneficial interest. Members of the general public may not purchase a direct
interest in the Portfolio. Neuberger&Berman LIMITED MATURITY Bond Fund, a series
of Neuberger&Berman Income Funds ("N&B Income Funds"), invests all of its net
investable assets in the Portfolio. The shares of each series of N&B Income
Funds are available for purchase by members of the general public. The Trust
does not sell its shares directly to members of the general public.
The Portfolio may also permit other investment companies and/or other
institutional investors to invest in the Portfolio. All investors will invest in
the Portfolio on the same terms and conditions as the Fund and will pay a
proportionate share of the Portfolio's expenses. Other investors in the
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 the Fund, could have a different administration fee and
expenses than the 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 the 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 the Fund may
enable the Portfolio to realize economies of scale that could reduce its
operating expenses, thereby producing higher returns and benefitting all
shareholders.
The Fund may withdraw its entire investment from the 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. The Fund might withdraw, for example, if
there were other investors in the 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 distribu-
24
<PAGE> 25
tion) 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 the Fund withdrew its investment from the Portfolio, the
trustees of the Trust would consider what actions might be taken, including the
investment of all of the Fund's net investable assets in another pooled
investment entity having substantially the same investment objective as the Fund
or the retention by the Fund of its own investment manager to manage its assets
in accordance with its investment objective, policies, and limitations. The
inability of the Fund to find a suitable replacement could have a significant
impact on shareholders.
INVESTOR MEETINGS AND VOTING. The Portfolio normally will not hold meetings
of investors except as required by the 1940 Act. Each investor in the 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, the 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 the 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 the Portfolio, they could have voting control of the
Portfolio.
CERTAIN PROVISIONS. Each investor in the Portfolio, including the Fund,
will be liable for all obligations of the Portfolio. However, the risk of an
investor in the 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 the Portfolio, investors
would be entitled to share pro rata in the net assets of the Portfolio available
for distribution to investors.
25
<PAGE> 26
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), Freddie Mac (also known as the Federal
Home Loan Mortgage Corporation), Student Loan Marketing Association (commonly
known as "Sallie Mae") 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. The 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 the 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 the 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. The
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, the Portfolio calcu-
26
<PAGE> 27
lates the remaining maturity of variable and floating rate instruments as
provided in Rule 2a-7 under the 1940 Act.
REPURCHASE AGREEMENTS/SECURITIES LOANS. In a repurchase agreement, the
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 Portfolio also may lend portfolio
securities to banks, brokerage firms or institutional investors to earn income.
Costs, delays, or losses could result if the selling party to a repurchase
agreement or the borrower of portfolio securities becomes bankrupt or otherwise
defaults. N&B Management monitors the creditworthiness of sellers and borrowers.
ILLIQUID, RESTRICTED AND RULE 144A SECURITIES. The 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. These may include unregistered or other restricted
securities and repurchase agreements maturing in greater than seven days.
Illiquid securities may also include commercial paper issued under section 4(2)
of the Securities Act of 1933, as amended, and Rule 144A securities (restricted
securities that may be traded freely among qualified institutional buyers
pursuant to an exemption from the registration requirements of the securities
laws); these securities are considered illiquid unless N&B Management, acting
pursuant to guidelines established by the trustees of Managers Trust, determines
they are liquid. Generally, foreign securities freely tradable in their
principal market are not considered restricted or illiquid. Illiquid securities
may be difficult for the Portfolio to value or dispose of due to the absence of
an active trading market. The sale of some illiquid securities by the Portfolio
may be subject to legal restrictions which could be costly to the Portfolio.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. In a reverse repurchase
agreement, the 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. The Portfolio will
place cash or appropriate liquid securities in a segregated account to cover its
obligations under reverse repurchase agreements. Dollar rolls are similar to
reverse repurchase agreements. In a dollar roll, the 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 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 the Portfolio's
27
<PAGE> 28
and its corresponding Fund's NAV and may be viewed as a form of leverage. N&B
Management monitors the creditworthiness of counterparties 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, the 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 Freddie
Mac 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 noncallable 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,
CARS(SM) ("Certificates for Automobile Receivables"), credit card receivables,
and installment loan contracts. Although these securities may be supported by
letters of credit or other credit enhancements, payment of interest and
principal ultimately depends upon individuals paying the underlying loans, which
may be affected adversely by
28
<PAGE> 29
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.
The 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 Portfolio 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. The 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, the 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. The 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. The Portfolio also may write covered call options and
purchase put options on debt securities in its portfolio or on foreign
currencies for hedging
29
<PAGE> 30
purposes or for the purpose of producing income. The 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. When the
Portfolio writes a covered call option against a security, the Portfolio is
obligated to sell that security to the purchaser of the option at a fixed price
at any time during a specified period if the purchaser decides to exercise the
option. These investment practices involve certain risks, including price
volatility and a high degree of leverage. The Portfolio 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 the 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 the 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 the
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 the 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 the
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.
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
commercial paper, which is issued by municipal-
30
<PAGE> 31
ities 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 AND STEP COUPON SECURITIES. Zero coupon and step 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;
in calculating its daily income, the Portfolio accrues a portion of the
difference between a zero coupon or step coupon security's purchase price and
its face value. Because these securities do not pay current income, their prices
can be very volatile when interest rates change. In addition, because the Fund
is required by the federal tax law to distribute to its shareholders at least
annually substantially all of its income, including the non-cash income
attributable to zero coupon and step coupon securities, the Portfolio may have
to dispose of securities to obtain cash for such distributions.
CALLABLE BONDS. Many bonds give the issuer the right to repay them early.
If the issuer of a callable bond exercises this right during a period of falling
interest rates, the Portfolio may not be able to invest the proceeds at a
comparably high rate of return.
31
<PAGE> 32
OTHER INFORMATION
<TABLE>
<CAPTION>
DIRECTORY FUNDS ELIGIBLE FOR EXCHANGE
<S> <C>
INVESTMENT MANAGER, EQUITY TRUSTS
ADMINISTRATOR, Neuberger&Berman Focus Trust
AND DISTRIBUTOR Neuberger&Berman Genesis Trust
Neuberger&Berman Management Neuberger&Berman Guardian Trust
Incorporated Neuberger&Berman Manhattan Trust
605 Third Avenue 2nd Floor Neuberger&Berman Partners Trust
New York, NY 10158-0180 Neuberger&Berman Socially
Responsive Trust
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
</TABLE>
Neuberger&Berman, LLC, Neuberger&Berman Management Inc., and the above-named
Funds are service marks or registered trademarks of Neuberger&Berman Management
Inc.
(C) 1998 Neuberger&Berman Management Inc.
32
<PAGE>
- --------------------------------------------------------------------------------
NEUBERGER & BERMAN INCOME TRUST AND PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED MARCH 2, 1998
Neuberger & Berman
Limited Maturity Bond Trust
(and Neuberger & Berman
Limited Maturity Bond
Portfolio)
No-Load Mutual Fund
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
- --------------------------------------------------------------------------------
Neuberger & Berman LIMITED MATURITY Bond Trust ("Fund") is a no-load
mutual fund that offer shares pursuant to a Prospectus dated March 2, 1998. The
Fund invests all of its net investable assets in Neuberger & Berman LIMITED
MATURITY Bond Portfolio ("Portfolio").
AN INVESTOR CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT
WITH AN ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION THAT PROVIDES
ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND THAT HAS AN
ADMINISTRATIVE SERVICES AGREEMENT WITH NEUBERGER & BERMAN MANAGEMENT
INCORPORATED (EACH AN "INSTITUTION").
The Fund's Prospectus provides basic information that an investor
should know before investing. A copy of the Prospectus may be obtained, without
charge, from Neuberger & Berman Management Incorporated ("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 the Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by the Fund or its distributor in any jurisdiction in which such
offering may not lawfully be made.
<PAGE>
TABLE OF CONTENTS
PAGE
INVESTMENT INFORMATION.......................................................1
Investment Policies and Limitations....................................1
Rating Agencies........................................................4
Overview of the Fund...................................................5
Additional Investment Information......................................6
Risks of Fixed Income Securities......................................25
CERTAIN RISK CONSIDERATIONS.................................................25
PERFORMANCE INFORMATION.....................................................26
Yield Calculations....................................................26
Total Return Computations.............................................26
Comparative Information...............................................27
Other Performance Information.........................................28
TRUSTEES AND OFFICERS.......................................................29
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................35
Investment Manager and Administrator..................................35
Sub-Adviser...........................................................37
Investment Companies Managed .........................................38
Management and Control of N&B Management..............................40
DISTRIBUTION ARRANGEMENTS...................................................41
ADDITIONAL EXCHANGE INFORMATION.............................................41
ADDITIONAL REDEMPTION INFORMATION...........................................43
Suspension of Redemptions.............................................43
Redemptions in Kind...................................................44
DIVIDENDS AND OTHER DISTRIBUTIONS...........................................44
ADDITIONAL TAX INFORMATION..................................................45
Taxation of the Funds.................................................45
Taxation of the Portfolio.............................................46
Taxation of the Fund's Shareholders...................................48
i
<PAGE>
PORTFOLIO TRANSACTIONS......................................................48
Portfolio Turnover....................................................49
REPORTS TO SHAREHOLDERS.....................................................49
CUSTODIAN AND TRANSFER AGENT................................................50
INDEPENDENT AUDITORS........................................................50
LEGAL COUNSEL...............................................................50
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................50
REGISTRATION STATEMENT......................................................51
FINANCIAL STATEMENTS........................................................52
Appendix A...................................................................1
RATINGS OF SECURITIES..................................................1
ii
<PAGE>
INVESTMENT INFORMATION
The 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. The
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. The
Portfolio, in turn, invests in securities in accordance with an investment
objective, policies, and limitations identical to those of the 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 the Fund and
Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of the Fund and Portfolio are not
fundamental. Any investment objective, 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 the Fund or the 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 the Fund is called upon to vote on a change in a fundamental investment
policy or limitation of the 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
The Fund has the following fundamental investment policy, to enable it
to invest in the 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 the Fund are identical to
those of the Portfolio. Therefore, although the following discusses the
investment policies and limitations of the Portfolio, it applies equally to the
Fund.
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 the 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. For purposes of the limitation on commodities, the Portfolio
does not consider foreign currencies or forward contracts to be physical
commodities.
Except for the limitation on borrowing and the limitation on illiquid
securities, any maximum percentage of securities or assets, contained in any
investment policy or limitation will not be considered to be exceeded unless the
percentage limitation is exceeded immediately after, and because of, a
transaction by the Portfolio. If events subsequent to a transaction result in
the Portfolio exceeding the percentage limitation on borrowing or illiquid
securities, N&B Management will take appropriate steps to reduce the percentage
of borrowings or the percentage held in illiquid securities, as may be required
by law, within a reasonable amount of time.
The Portfolio's fundamental investment policies and limitations are as
follows:
1. BORROWING. The Portfolio may not borrow money, except that the
Portfolio may (i) borrow money from banks for temporary or emergency purposes
and not for leveraging or investment and (ii) enter into reverse repurchase
2
<PAGE>
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 the Portfolio's total assets, the 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. The Portfolio may not purchase physical commodities or
contracts thereon, unless acquired as a result of the ownership of securities or
instruments, but this restriction shall not prohibit the 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.
3. DIVERSIFICATION. The Portfolio may not, with respect to 75% of the
value of its total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities ("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. The Portfolio may not purchase any security
if, as a result, 25% or more of its total assets (taken at current value) would
be invested in the securities of issuers having their principal business
activities in the same industry. This limitation does not apply to purchases of
U.S. Government and Agency Securities.
5. LENDING. The Portfolio may not lend any security or make any other
loan if, as a result, more than 33-1/3% of its total assets (taken at current
value) would be lent to other parties, except, in accordance with its investment
objective, policies, and limitations, (i) through the purchase of a portion of
an issue of debt securities or (ii) by engaging in repurchase agreements.
6. REAL ESTATE. The Portfolio may not purchase real estate unless
acquired as a result of the ownership of securities or instruments, but this
restriction shall not prohibit the 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.
3
<PAGE>
7. SENIOR SECURITIES. The Portfolio may not issue senior securities,
except as permitted under the 1940 Act.
8. UNDERWRITING. The Portfolio may not underwrite securities of other
issuers, except to the extent that the Portfolio, in disposing of portfolio
securities, may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 ("1933 Act").
The Portfolio's non-fundamental investment policies and limitations
are as follows:
1. ILLIQUID SECURITIES. The Portfolio may not purchase any security
if, as a result, more than 15% of its net assets would be invested in illiquid
securities. Illiquid securities include securities that cannot be sold within
seven days in the ordinary course of business for approximately the amount at
which the Portfolio has valued the securities, such as repurchase agreements
maturing in more than seven days.
2. BORROWING. The Portfolio may not purchase securities if outstanding
borrowings, including any reverse repurchase agreements, exceed 5% of its total
assets.
3. LENDING. Except for the purchase of debt securities and engaging in
repurchase agreements, the Portfolio may not make any loans other than
securities loans.
4. MARGIN TRANSACTIONS. The Portfolio may not purchase securities on
margin from brokers or other lenders, except that the 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 Portfolio 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 Portfolio may rely on the ratings of any NRSRO,
the Portfolio mainly refers to ratings assigned by S&P and Moody's, which are
4
<PAGE>
described in Appendix A to this SAI. The Portfolio may also invest in unrated
securities that are deemed comparable in quality by N&B Management to the rated
securities in which the Portfolio may permissibly invest.
OVERVIEW OF THE FUND
The Fund pursues attractive current income with low risk to principal.
The Fund is 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
returns. Sector investments include corporate bonds, mortgage-backed securities,
asset backed securities, CMOs (Collateralized Mortgages Obligations), Treasuries
and Government agencies.
We also manage the duration of the portfolio. LIMITED MATURITY'S
portfolio of bonds has a maximum average duration of four years. Duration
measures 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. 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 the Portfolio, the 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 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.
5
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
The Portfolio may make the following investments, among others,
although it 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. 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 (also known as the Federal National Mortgage Association),
Freddie Mac (also known as the Federal Home Loan Mortgage Corporation), 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. The Portfolio may invest in U.S.
Treasury securities whose principal value is adjusted daily in accordance with
changes to the Consumer Price Index. Such securities are backed by the full
faith and credit of the U.S. Government. Because the coupon rate on
inflation-indexed securities is lower than fixed-rate U.S. Treasury securities,
the Consumer Price Index would have to rise at least to the amount of the
difference between the coupon rate of the fixed rate U.S. Treasury issues and
the coupon rate of the inflation-indexed securities, assuming all other factors
are equal, in order for such securities to match the performance of the
fixed-rate Treasury securities. Inflation-indexed securities are expected to
react primarily to changes in the "real" interest rate (I.E., the nominal (or
stated) rate less the rate of inflation), while a typical bond reacts to changes
in the nominal interest rate. Accordingly, inflation-indexed securities have
characteristics of fixed-rate Treasuries having a shorter duration.
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 the Fund must distribute substantially all of its
income to its shareholders to avoid payment of federal income and excise taxes,
the Portfolio may have to dispose of other investments to obtain the cash
necessary to distribute the accrued taxable income on inflation-indexed
securities.
REPURCHASE AGREEMENTS. In a repurchase agreement, the 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
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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. The Portfolio may not enter into a repurchase agreement with a
maturity of more than seven days 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. The 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.
SECURITIES LOANS. In order to realize income, the 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. The 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 the
Portfolio qualify under Rule 144A and an institutional market develops for those
securities, the Portfolio likely will be able to dispose of the securities
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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 the 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, the Portfolio may be obligated to pay
all or part of the registration expenses, and a considerable period may elapse
between the decision to sell and the time the Portfolio may be permitted to sell
a security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to sell. To the extent restricted
securities, including Rule 144A securities, are illiquid, purchases thereof will
be subject to the 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. 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. The 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. In a reverse repurchase agreement, the
Portfolio sells portfolio securities subject to its agreement to repurchase the
securities at a later date for a fixed price reflecting a market rate of
interest; these agreements are considered borrowings for purposes of the
Portfolio's investment policies and limitations concerning borrowings. While a
reverse repurchase agreement is outstanding, the 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 the Portfolio's
obligations under the agreement. There is a risk that the counterparty to a
reverse repurchase agreement will be unable or unwilling to complete the
transaction as scheduled, which may result in losses to the Portfolio.
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BANKING AND SAVINGS INSTITUTION SECURITIES. The Portfolio may invest
in banking and savings institution obligations, which include CDs, time
deposits, bankers' acceptances, and other short-term and long-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 Portfolio invests typically are
not covered by deposit insurance.
VARIABLE OR FLOATING RATE SECURITIES; DEMAND AND PUT FEATURES.
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.
Adjustable Rate Securities in which the Portfolio invests frequently
permit the holder to demand payment of the obligations' principal and accrued
interest at any time or at specified intervals not exceeding one year. The
demand feature usually is backed by a credit instrument (e.g., a bank letter of
credit) from a creditworthy issuer and sometimes by insurance from a
creditworthy insurer. Without these credit enhancements, some Adjustable Rate
Securities might not meet the Portfolio's quality standards. Accordingly, in
purchasing these securities, the Portfolio relies primarily on the
creditworthiness of the credit instrument issuer or the insurer. The 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
ratings, i.e., stand on their own credit).
The 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. The Portfolio may
rely on the creditworthiness of issuers of the credit enhancements in purchasing
these securities.
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In calculating its dollar-weighted average maturity and duration, the
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. 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 Freddie Mac), though not
necessarily backed by the full faith and credit of the United States, or may be
issued by private issuers.
Because many mortgages are repaid early, the actual maturity and
duration of mortgage-backed securities are typically shorter than their stated
final maturity and their duration calculated solely on the basis of the stated
life and payment schedule. In calculating its dollar-weighted average maturity
and duration, the 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 Portfolio
uses 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 CMOs or
collateralized mortgage-backed bonds ("CBOs"). 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. CBOs 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 CBO (although, like many bonds, CBOs 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.
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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 CMOs and CBOs. Such issuers may be the originators and/or servicers of
the underlying mortgage loans, as well as the guarantors of the mortgage-backed
securities. Pools created by non-governmental issuers generally offer a higher
rate of interest than governmental and government-related pools because of the
absence of direct or indirect government or agency guarantees. Various forms of
insurance or guarantees, including individual loan, title, pool, and hazard
insurance and letters of credit, may support timely payment of interest and
principal of non-governmental pools. Governmental entities, private insurers,
and mortgage poolers issue these forms of insurance and guarantees. N&B
Management considers such insurance and guarantees, as well as the
creditworthiness of the issuers thereof, in determining whether a
mortgage-backed security meets the 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.
The Portfolio may buy mortgage-backed securities without insurance or
guarantees, if N&B Management determines that the securities meet the
Portfolio's quality standards. The 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 Portfolio's 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. 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
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mortgage-backed securities. The risk that recovery on repossessed collateral
might be unavailable or inadequate to support payments, however, is greater for
asset-backed securities than for mortgage-backed securities.
Certificates for Automobile Receivables(SERVICEMARK)
("CARS(SERVICEMARK)") represent undivided fractional interests in a trust whose
assets consist of a pool of motor vehicle retail installment sales contracts and
security interests in the vehicles securing those contracts. Payments of
principal and interest on the underlying contracts are passed-through monthly to
certificate holders and are guaranteed up to specified amounts by a letter of
credit issued by a financial institution unaffiliated with the trustee or
originator of the trust. Underlying installment sales contracts are subject to
prepayment, which may reduce the overall return to certificate holders.
Certificate holders also may experience delays in payment or losses on
CARS(SERVICEMARK) if the trust does not realize the full amounts due on
underlying installment sales contracts because of unanticipated legal or
administrative costs of enforcing the contracts; depreciation, damage, or loss
of the vehicles securing the contracts; or other factors.
Credit card receivable securities are backed by 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.
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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. These are securities
of foreign issuers (including banks, governments and quasi-governmental
organizations) and foreign branches of U.S. banks, including negotiable CDs,
bankers' acceptances, and commercial paper. These investments are subject to
each Portfolio's quality, maturity, and duration standards. While investments in
foreign securities are intended to reduce risk by providing further
diversification, such investments involve sovereign and other risks, in addition
to the credit and market risks normally associated with domestic securities.
These additional risks include the possibility of adverse political and economic
developments (including political instability) and the potentially adverse
effects of unavailability of public information regarding issuers, less
governmental supervision and regulation of financial markets, reduced liquidity
of certain financial markets, and the lack of uniform accounting, auditing, and
financial reporting standards or the application of standards that are different
or less stringent than those applied in the United States.
FOREIGN CURRENCY DENOMINATED FOREIGN SECURITIES. 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.
The Portfolio invests in foreign currency denominated foreign securities of
issuers in countries whose governments are considered stable by N&B Management.
Foreign currency denominated foreign securities 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
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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
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
DOLLAR ROLLS. In a "dollar roll," the 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 Portfolio's 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.
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WHEN-ISSUED TRANSACTIONS. These transactions may involve
mortgage-backed securities such as GNMA, Fannie Mae, and Freddie Mac
certificates. These transactions involve a commitment by the 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 the 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, the 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 the
Portfolio's net asset value ("NAV") starting on the date of the agreement to
purchase the securities. Because the Portfolio has not yet paid for the
securities, this produces an effect similar to leverage. The Portfolio does not
earn interest on securities it has committed to purchase until the securities
are paid for and delivered on the settlement date.
The 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, the
Portfolio may dispose of or renegotiate a commitment after it has been entered
into. The 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 the 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.
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FUTURES CONTRACTS AND OPTIONS THEREON. The Portfolio may purchase and
sell interest rate and bond index futures contracts and options thereon and may
purchase and sell foreign currency futures contracts (with interest rate and
bond index futures contracts, "Futures" or "Futures Contracts") and options
thereon. The Portfolio engages 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; the 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 the Portfolio
to enhance portfolio liquidity and maintain a defensive position without having
to sell portfolio securities. The Portfolio does not engage in transactions in
Futures or options thereon for speculation. The Portfolio views 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
Portfolio.
A "sale" of a Futures Contract (or a "short" Futures position) entails
the assumption of a contractual obligation to deliver the securities or currency
underlying the contract at a specified price at a specified future time. A
"purchase" of a Futures Contract (or a "long" Futures position) entails the
assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
Futures, including bond index Futures, are settled on a net cash payment basis
rather than by the sale and delivery of the securities underlying the Futures.
U.S. Futures (except certain currency Futures) are traded on exchanges
that have been designated as "contract markets" by the Commodity Futures Trading
Commission ("CFTC"); Futures transactions must be executed through a futures
commission merchant that is a member of the relevant contract market. The
exchange's affiliated clearing organization 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. This may result in a profit or loss.
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"Margin" with respect to Futures is the amount of assets that must be
deposited by the 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 the 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, the Portfolio marks
to market the value of its open Futures positions. The Portfolio also must make
margin deposits with respect to options on Futures that it has written (but not
with respect to options on futures that it has purchased). 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
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. Options on futures have characteristics
and risks similar to those of securities options, as discussed herein.
Although the Portfolio believes that the use of Futures Contracts will
benefit it, if N&B Management's judgment about the general direction of the
markets or about interest rate or currency exchange rate trends is incorrect,
the 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
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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 due to differences between the
futures and securities markets or differences between the securities or
currencies underlying the Portfolio's futures position and the securities held
by or to be purchased for the Portfolio. The currency futures market may be
dominated by short-term traders seeking to profit from changes in exchange
rates. This would reduce the value of such contracts used for hedging purposes
over a short-term period. Such distortions are generally minor and would
diminish as the contract approaches maturity.
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 the Portfolio, it could (depending on the size of the
position) have an adverse impact on the NAV of the Portfolio.
PUT AND CALL OPTIONS. The Portfolio may write and purchase put and
covered call options on securities to reduce the effect of price fluctuations of
securities held by the Portfolio on the Portfolio's and its corresponding Fund's
NAVs. The Portfolio may also write covered call options to earn premium income.
Portfolio securities on which call and put options may be written and purchased
by the Portfolio are purchased solely on the basis of investment considerations
consistent with the Portfolio's investment objective.
The Portfolio will receive a premium for writing a put option, which
obligates the Portfolio to acquire a security at a certain price at any time
until a certain date if the purchaser of the option decides to exercise the
option. The Portfolio may be obligated to purchase the underlying security at
more than its current value.
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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. When writing call options, 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.
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 written by the Portfolio
19
<PAGE>
terminates upon expiration of the option or, at an earlier time, when the writer
offsets the option by entering into a "closing purchase transaction" to purchase
an option of the same series. If an option is purchased by the Portfolio and is
never exercised or closed out, 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 counterparty, 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 counterparty'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.
The assets used as cover (or held in a segregated account) 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
20
<PAGE>
premium received by the Portfolio for writing an option is recorded as a
liability on the Portfolio's statement of assets and liabilities. This liability
is adjusted daily to the option's current market value, which is the last
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 (or
minimize a loss) 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. 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 or spreads 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. 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
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<PAGE>
establishing more definitely the effective return on, or the purchase price of,
securities denominated in foreign currencies that are held or intended to be
acquired by it. Forward Contract transactions include forward sales or purchases
of foreign currencies for the purpose of protecting the U.S. dollar value of
securities held or to be acquired by the Portfolio that are denominated in a
foreign currency or protecting the U.S. dollar equivalent of dividends,
interest, or other payments on those securities.
N&B Management believes that the use of foreign currency hedging
techniques, including "proxy-hedges," can 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 but 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. Using Forward Contracts to
protect the value of the Portfolio's securities against a decline in the value
of a currency does not eliminate fluctuations in the prices of the underlying
securities. Because Forward Contracts are not traded on an exchange, the assets
used to cover such contracts may be illiquid. The Portfolio may experience
delays in the settlement of its foreign currency transactions.
OPTIONS ON FOREIGN CURRENCIES. 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. Currency options have characteristics and risks
similar to those of securities 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.
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<PAGE>
REGULATORY LIMITATIONS ON USING FUTURES, OPTIONS ON FUTURES, OPTIONS
ON SECURITIES AND FOREIGN CURRENCIES, AND FORWARD CONTRACTS (COLLECTIVELY,
"HEDGING INSTRUMENTS"). To the extent the Portfolio sells or purchases Futures
Contracts and/or writes options thereon or options on foreign currencies that
are traded on an exchange regulated by the CFTC other than for BONA FIDE hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums on
these positions (excluding the amount by which options are "in-the-money") may
not exceed 5% of the Portfolio's net assets.
COVER FOR HEDGING INSTRUMENTS. The 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 the Portfolio's assets
could impede portfolio management or the Portfolio's ability to meet current
obligations. The 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. The primary risks in using
Hedging Instruments are (1) imperfect correlation or no correlation between
changes in the market value of the securities or currencies held or to be
acquired by the Portfolio and changes in the market value of Hedging
Instruments; (2) possible lack of a liquid secondary market for Hedging
Instruments and the resulting inability to close out Hedging Instruments when
desired; (3) the fact that the skills needed to use Hedging Instruments are
different from those needed to select the 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 the 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 the 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
23
<PAGE>
imperfect correlation by investing only in Hedging Instruments whose behavior is
expected to resemble or offset that of the Portfolio's underlying securities or
currency. N&B Management intends to reduce the risk that the Portfolio will be
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 the Portfolio's use of Hedging Instruments will
be successful.
The Portfolio's use of Hedging Instruments may be limited by certain
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with which
it must comply if the Fund is to continue to qualify as a regulated investment
company ("RIC"). See "Additional Tax Information -- Taxation of the Portfolio."
INDEXED SECURITIES. 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 AND STEP COUPON SECURITIES. The Portfolio may invest in
zero coupon and step 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 and step 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 and step coupon securities ("original
issue discount" or "OID") must be taken into income ratably by the Portfolio
prior to the receipt of any actual payments. Because the Fund must distribute
substantially all of its net income (including its share of the Portfolio's
accrued OID) to its shareholders each year for income and excise tax purposes,
the Portfolio may have to dispose of portfolio securities under disadvantageous
circumstances to generate cash, or may be required to borrow, to satisfy the
Fund's distribution requirements. See "Additional Tax Information."
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<PAGE>
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. The Portfolio may invest up to 5% of its net
assets in municipal obligations, which are securities issued by or on behalf of
states (as used herein, including the District of Columbia), territories, and
possessions of the United States and their political subdivisions, agencies, and
instrumentalities. Municipal obligations include "general obligation"
securities, which are backed by the full taxing power of a municipality, and
"revenue" securities, which are backed only by the income from a specific
project, facility, or tax. Municipal obligations also include industrial
development and private activity bonds which are issued by or on behalf of
public authorities, but are not backed by the credit of any governmental or
public authority. "Anticipation notes" are issued by municipalities in
expectation of future proceeds from the issuance of bonds or from taxes or other
revenues, and are payable from those bond proceeds, taxes, or revenues.
Municipal obligations also include tax-exempt commercial paper, which is issued
by municipalities to help finance short-term capital or operating requirements.
The value of municipal obligations is dependent on the continuing
payment of interest and principal when due by the issuers of the municipal
obligations (or, in the case of industrial development bonds, the revenues
generated by the facility financed by the bonds or, in certain other instances,
the provider of the credit facility backing the bonds). As with other fixed
income securities, an increase in interest rates generally will reduce the value
of the Portfolio's investments in municipal obligations, whereas a decline in
interest rates generally will increase that value. Efforts are underway that may
result in a restructuring of the federal income tax system. Any of these factors
could affect the value of municipal securities.
RISKS OF FIXED INCOME SECURITIES
Fixed income securities are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
risk") and are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and 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
25
<PAGE>
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.
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 or other
securities to the extent necessary to ensure that the Portfolio's holdings of
securities that are considered by the Portfolio to be below investment grade
(but rated no lower than B by Moody's or S&P) will not exceed 10% of the net
assets. The Portfolio may hold up to 5% of its net assets in securities that are
downgraded after purchase to a rating below that permissible by the Portfolio's
investment policies.
CERTAIN RISK CONSIDERATIONS
The Fund's investment in the Portfolio may be affected by the actions
of other large investors in the Portfolio, if any. For example, if a large
investor in the Portfolio (other than the 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 the 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 the Portfolio will achieve its
investment objective.
PERFORMANCE INFORMATION
The Fund's performance figures are based on historical results and are
not intended to indicate future performance. The yield and total return of the
Fund will vary. The share price of the Fund will vary, and an investment in the
Fund, when redeemed, may be worth more or less than an investor's original cost.
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<PAGE>
YIELD CALCULATIONS
The 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 yield for the Fund for the 30-day period ended October
31, 1997 was 5.75%.
TOTAL RETURN COMPUTATIONS
The 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 the Fund did not commence operations until August 30, 1993,
the Fund's investment objective, limitations, and policies are the same as those
of another mutual fund administered by N&B Management, which has a name similar
to the Fund's and invests in the same Portfolio ("Sister Fund"). The Sister Fund
had a predecessor. The following total return data is for the Fund since its
inception and, for periods prior to the Fund's inception, its Sister Fund and
which, as used herein, includes data for the Sister Fund's predecessor. The
total returns for periods prior to the Fund's inception would have been lower
had they reflected the higher fees of the Fund, as compared to those of the
Sister Fund and its predecessor.
The average annual total returns for the Fund, its Sister Fund and
that Sister Fund's predecessor for the one-, five- and ten-year periods ended
October 31, 1997, were +6.88%, +5.51%, and +7.18%, 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 value of
that investor's holdings would have been $21,542 on October 31, 1997.
N&B Management may from time to time reimburse the Fund or Portfolio
for a portion of its expenses. Such action has the effect of increasing yield
and total return. Actual reimbursements are described in the Prospectus and in
"Investment Management and Administration Services" below.
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<PAGE>
COMPARATIVE INFORMATION
From time to time the 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" 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.
The Fund's performance also may be compared from time to time with the
following specific indices and other measures of performance:
THE FUND'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.
28
<PAGE>
The Fund may invest some of its assets in different types of
securities than those included in the index used as a comparison with the Fund's
historical performance. The Fund may also compare certain indices, which
represent different segments of the securities markets, for the purpose of
comparing the historical returns and the volatility in those particular market
segments. Measures of volatility show the range of historical price
fluctuations. Standard deviation may be used as a measure of volatility. There
are other measures of volatility, which may yield different results.
In addition, the 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 the 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 the
Fund, bank CDs pay a fixed rate of interest for a stated period of time and are
insured up to $100,000.
The Fund 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. Evaluations of the Fund's performance, its
yield/total returns and comparisons may be used in advertisements and in
information furnished to current and prospective shareholders (collectively,
"Advertisements").
OTHER PERFORMANCE INFORMATION
From time to time, information about the Portfolio's portfolio
allocation and holdings as of a particular date may be included in
Advertisements for the 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).
29
<PAGE>
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 the 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.
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.
Name, Address Positions Held Principal
and Age(1) With the Trusts Occupation(s)(2)
- ---------- --------------- ---------------------------
John Cannon (68) Trustee of each Senior Vice President
CDC Associates, Inc. Trust AMA Investment Advisers,
620 Sentry Parkway Inc. (1991 -
Suite 220
P.O. Box 1111
Blue Bell, PA 19422
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<PAGE>
Name, Address Positions Held Principal
and Age(1) With the Trusts Occupation(s)(2)
- ---------- --------------- ---------------------------
1993); Chairman and Chief
Investment Officer of CDC
Associates, Inc.
(registered investment
adviser) (1993 present).
Stanley Egener* (63) Chairman of the Principal of Neuberger &
Board, Chief Berman; President and
Executive Officer, Director of N&B Management;
and Trustee of Chief Executive Chairman of
each Trust the Board, Chief Executive
Officer, and Trustee of
eight other mutual funds
for which N&B Management
acts as investment manager
or administrator.
Theodore P. Giuliano* (45) President and Principal of Neuberger &
Trustee of each Berman; Vice President and
Trust Director of N&B Management;
President and Trustee of
one other mutual fund for
which N&B Management serves
as administrator.
Barry Hirsch (64) Trustee of each Senior Vice President,
Loews Corporation Trust Secretary, and General
667 Madison Avenue Counsel of Loews
7th Floor Corporation (diversified
New York, NY 10021 financial corporation).
Robert A. Kavesh (70) Trustee of each Professor of Finance and
110 Bleecker Street Trust Economics at Stern School
Apt. 24B of Business, New York
New York, NY 10012 University; Director of Del
Laboratories, Inc. and
Greater New York Mutual
Insurance Co.
William E. Rulon (65) Trustee of each Retired. Senior Vice
Foodmaker, Inc. Trust President of Foodmaker,
1761 Hotel Circle South Inc. (operator and
San Diego, CA 92108 franchiser of restaurants)
until January 1997;
Secretary of Foodmaker,
Inc. until July 1996.
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<PAGE>
Name, Address Positions Held Principal
and Age(1) With the Trusts Occupation(s)(2)
- ---------- --------------- ---------------------------
Candace L. Straight (50) Trustee of each Private investor and
518 E. Passaic Avenue Trust consultant specializing in
Bloomfield, NJ 07003 the insurance industry;
Principal of Head &
Company, LLC (limited
liability company providing
investment banking and
consulting services to the
insurance industry) until
March 1996; Director of
Drake Holdings (U.K. motor
insurer) until June 1996.
Daniel J. Sullivan (58) Vice President of Senior Vice President of
each Trust N&B Management since 1992;
prior thereto, Vice
President of N&B
Management; Vice President
of eight other mutual funds
for which N&B Management
acts as investment manager
or administrator.
Michael J. Weiner (51) Vice President and Senior Vice President and
Principal Treasurer of N&B Management
Financial Officer since 1992; Treasurer of
of each Trust N&B Management from 1992 to
1996; prior thereto, Vice
President and Treasurer of
N&B Management and
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<PAGE>
Name, Address Positions Held Principal
and Age(1) With the Trusts Occupation(s)(2)
- ---------- --------------- ---------------------------
Treasurer of certain mutual
funds for which N&B
Management acted as
investment adviser; Vice
President and Principal
Financial Officer of eight
other mutual funds for
which N&B Management acts
as investment manager or
administrator.
Claudia A. Brandon (41) Secretary of each Vice President of N&B
Trust Management; Secretary of
eight other mutual funds
for which N&B Management
acts as investment manager
or administrator.
Richard Russell (51) Treasurer and Vice President of N&B
Principal Management since 1993;
Accounting Officer prior thereto, Assistant
of each Trust Vice President of N&B
Management; Treasurer and
Principal Accounting
Off-icer of eight other
mutual funds for which N&B
Management acts as
investment manager or
administrator.
Stacy Cooper-Shugrue (35) Assistant Assistant Vice President of
Secretary of each N&B Management since 1993;
Trust 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 (60) Assistant Principal of Neuberger &
Secretary of each Berman since 1992; prior
Trust thereto, employee of
Neuberger & Berman;
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Name, Address Positions Held Principal
and Age(1) With the Trusts Occupation(s)(2)
- ---------- --------------- ---------------------------
Assistant Secretary of
eight other mutual funds
for which N&B Management
acts as investment manager
or administrator.
Barbara DiGiorgio (39) Assistant Assistant Vice President of
Treasurer of each N&B Management since 1993;
Trust 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 (37) Assistant Assistant Vice President of
Treasurer of each N&B Management since 1994;
Trust 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.
- --------------------
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, NY 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" of each Trust
within the meaning of the 1940 Act. 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
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<PAGE>
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.
The following table sets forth information concerning the compensation
of the trustees and officers of the Trust. None of the Neuberger & Berman
Funds(REGISTERED) has any retirement plan for its trustees or officers.
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 10/31/97
Total Compensation from
Aggregate Trusts in the Neuberger
Name and Position Compensation & Berman Fund Complex
with the Trust from the Trust Paid to Trustees
- -------------- -------------- ----------------
John Cannon $496 $34,500
Trustee (2 other investment
companies)
Charles DeCarlo $77 $8,000
Trustee (retired 12/96) (2 other investment
companies)
Stanley Egener $0 $0
Chairman of the Board, Chief (9 other investment
Executive Officer, and Trustee companies)
Theodore P. Giuliano $0 $0
President and Trustee (2 other investment
companies)
Barry Hirsch $441 $30,500
Trustee (2 other investment
companies)
Robert A. Kavesh $496 $35,000
Trustee (2 other investment
companies)
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Total Compensation from
Aggregate Trusts in the Neuberger
Name and Position Compensation & Berman Fund Complex
with the Trust from the Trust Paid to Trustees
- -------------- -------------- ----------------
Harold R. Logan $77 $8,000
Trustee (retired 12/96) (2 other investment
companies)
William E. Rulon $441 $30,500
Trustee (2 other investment
companies)
Candace L. Straight $441 $31,500
Trustee (2 other investment
companies)
At January 30, 1998, 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 the Fund.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
INVESTMENT MANAGER AND ADMINISTRATOR
Because all of the Fund's net investable assets are invested in the
Portfolio, the Fund does not need an investment manager. N&B Management serves
as the Portfolio's investment manager pursuant to a management agreement with
Managers Trust, on behalf of the Portfolio, dated as of July 2, 1993
("Management Agreement"). The Management Agreement was approved by the holders
of the interests in the Portfolio on July 2, 1993.
The Management Agreement provides, in substance, that N&B Management
will make and implement investment decisions for the Portfolio in its discretion
and will continuously develop an investment program for the Portfolio's assets.
The Management Agreement permits N&B Management to effect securities
transactions on behalf of the 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 Portfolio, although N&B Management has
no current plans to pay a material amount of such compensation.
N&B Management provides to the 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 &
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<PAGE>
Berman), presently serve as trustees and officers of the Trusts. See "Trustees
and Officers." The 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
the Fund pursuant to an administration agreement with the Trust dated July 2,
1993 ("Administration Agreement"). For such administrative services, the 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.
During the fiscal years ended October 31, 1997, 1996, and 1995, the
Fund accrued management and administration fees of $246,420, $114,471 and
$65,572, respectively.
As noted in the Prospectus under "Management and Administration --
Expenses," N&B Management has voluntarily undertaken to reimburse the Fund for
its Operating Expenses (including fees under the Administration Agreement) and
the Fund's pro rata share of the Portfolio's Operating Expenses (including fees
under the Management Agreement) that exceed, in the aggregate, 0.80% per annum
of the average daily net assets of the Fund. 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 the Fund for its
Operating Expenses (including fees under the Administration Agreement) and its
pro rata share of the Portfolio's Operating Expenses (including fees under the
Management Agreement) that exceeded, in the aggregate, 0.70% per annum of the
average daily net assets of the Fund. "Operating Expenses" exclude interest,
taxes, brokerage costs and extraordinary expenses.
For the fiscal years ended October 31, 1997, 1996, and 1995, N&B
Management reimbursed the Fund the following amounts of expenses under the above
arrangements: $144,510, $168,733, and $123,568, respectively.
The Management Agreement continues with respect to the 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
the 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,
37
<PAGE>
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 the 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 the Fund, so long as its continuance is
approved at least annually (1) by the vote of a majority of the Fund Trustees
who are not "interested persons" of N&B Management or the Trust ("Independent
Fund Trustees"), cast in person at a meeting called for the purpose of voting on
such approval, and (2) by the vote of a majority of the Fund Trustees or by a
1940 Act majority vote of the outstanding shares in the Fund.
The Management Agreement is terminable, without penalty, with respect
to the 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 the 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 the 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
Portfolio 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 numerous 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 the 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
38
<PAGE>
continuance in the same manner as the Management Agreement. The Sub-Advisory
Agreement is subject to termination, without penalty, with respect to the
Portfolio by the Portfolio Trustees or a 1940 Act majority vote of the
outstanding interests in the Portfolio, by N&B Management, or by Neuberger &
Berman on not less than 30 nor more than 60 days' written notice to the Fund.
The Sub-Advisory Agreement also terminates automatically with respect to the
Portfolio if it is assigned or if the Management Agreement terminates with
respect to the 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
As of December 31, 1997, the investment companies managed by N&B
Management had aggregate net assets of approximately $20.7 billion. N&B
Management currently serves as investment manager of the following investment
companies:
NAME DECEMBER 31, 1997
Neuberger & Berman Cash Reserves Portfolio.......................$ 662,861,352
(investment portfolio for Neuberger & Berman Cash Reserves)
Neuberger & Berman Government Money Portfolio....................$ 297,594,922
(investment portfolio for Neuberger & Berman Government Money Fund)
Neuberger & Berman Limited Maturity Bond Portfolio...............$ 294,956,156
(investment portfolio for Neuberger & Berman Limited Maturity Bond Fund
and Neuberger & Berman Limited Maturity Bond Trust)
Neuberger & Berman Municipal Money Portfolio.....................$ 166,832,901
(investment portfolio for Neuberger & Berman Municipal Money Fund)
Neuberger & Berman Municipal Securities Portfolio.................$ 32,970,458
(investment portfolio for Neuberger & Berman Municipal Securities Trust)
Neuberger & Berman Focus Portfolio.............................$ 1,530,971,078
(investment portfolio for Neuberger & Berman Focus Fund, Neuberger &
Berman Focus Trust, and Neuberger & Berman Focus Assets)
39
<PAGE>
Neuberger & Berman Genesis Portfolio...........................$ 1,841,928,659
(investment portfolio for Neuberger & Berman Genesis Fund, Neuberger &
Berman Genesis Trust, and Neuberger & Berman Genesis Assets)
Neuberger & Berman Guardian Portfolio........................ $ 8,328,032,611
(investment portfolio for Neuberger & Berman Guardian Fund, Neuberger &
Berman Guardian Trust, and Neuberger & Berman Guardian Assets)
Neuberger & Berman International Portfolio.......................$ 111,718,206
(investment portfolio for Neuberger & Berman International Fund and
Neuberger & Berman International Trust)
Neuberger & Berman Manhattan Portfolio...........................$ 626,632,234
(investment portfolio for Neuberger & Berman Manhattan Fund, Neuberger &
Berman Manhattan Trust, and Neuberger & Berman Manhattan Assets)
Neuberger & Berman Partners Portfolio..........................$ 3,830,066,838
(investment portfolio for Neuberger & Berman Partners Fund, Neuberger &
Berman Partners Trust, and Neuberger & Berman Partners Assets)
Neuberger & Berman Socially Responsive Portfolio.................$ 287,169,564
(investment portfolio for Neuberger & Berman Socially Responsive Fund,
Neuberger & Berman Socially Responsive Trust and Neuberger & Berman NYCDC
Socially Responsive Trust)
Advisers Managers Trust (eight series).........................$ 2,644,430,313
The investment decisions concerning the Portfolio 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 Portfolio.
Even where the investment objectives are similar, however, the methods used by
the Other N&B Funds and the Portfolio 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 the 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
40
<PAGE>
effect on the price or volume of the securities as to the Portfolio, in other
cases it is believed that the 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 Portfolio's
having their advisory arrangements with N&B Management outweighs any
disadvantages that may result from contemporaneous transactions.
MANAGEMENT AND CONTROL OF N&B MANAGEMENT
The directors and officers of N&B Management, all of whom have offices
at the same address as N&B Management, are Richard A. Cantor, Chairman of the
Board and director; Stanley Egener, President and director; Theodore P.
Giuliano, Vice President and director; Michael M. Kassen, Vice President and
director; Irwin Lainoff, director; Lawrence Zicklin, director; Daniel J.
Sullivan, Senior Vice President; Peter E. Sundman, Senior Vice President;
Michael J. Weiner, Senior Vice President; Claudia A. Brandon, Vice President;
Patrick T. Byrne, Vice President; Brooke A. Cobb, Vice President; Robert W.
D'Alelio, Vice President; Roberta D'Orio, Vice President; Clara Del Villar, Vice
President; Brian J. Gaffney, Vice President; Joseph Galli, Vice President;
Robert I. Gendelman, Vice President; Josephine P. Mahaney, Vice President; Ellen
Metzger, Vice President and Secretary; Paul Metzger, Vice President; Janet W.
Prindle, Vice President; Kevin L. Risen, Vice President; Richard Russell, Vice
President; Jennifer K. Silver, Vice President; Kent C. Simons, Vice President;
Frederic 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; Ramesh Babu, Assistant Vice
President; Valerie Chang, Assistant Vice President; Stacy Cooper-Shugrue,
Assistant Vice President; Barbara DiGiorgio, Assistant Vice President; Michael
J. Hanratty, Assistant Vice President; Leslie Holliday-Soto, Assistant Vice
President; Jody L. Irwin, Assistant Vice President; Robert L. Ladd, Assistant
Vice President; Carmen G. Martinez, Assistant Vice President; Joseph S. Quirk,
Assistant Vice President; Ingrid Saukaitis, Assistant Vice President; Josephine
Velez, Assistant Vice President; Celeste Wischerth, Assistant Vice President;
and Loraine Olavarria, Assistant Secretary. Messrs. Cantor, Egener, Gendelman,
Giuliano, Kassen, Lainoff, Zicklin, Risen, Simons and Sundman and Mmes. Prindle,
Silver 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.
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<PAGE>
All of the outstanding voting stock in N&B Management is owned by
persons who are also principals of Neuberger & Berman.
DISTRIBUTION ARRANGEMENTS
N&B Management serves as the distributor ("Distributor") in connection
with the offering of the Fund's shares on a no-load basis to Institutions. In
connection with the sale of its shares, the 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 Fund's "principal
underwriter" within the meaning of the 1940 Act and, as such, acts as agent in
arranging for the sale of the Fund's shares to Institutions without sales
commission or other compensation and bears all advertising and promotion
expenses incurred in the sale of the Fund's 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 the Fund, and the Distributor are parties to a
Distribution Agreement that continues until July 2, 1998. 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 the Fund for shares of the equity funds that are briefly described below, if
made available through that Institution.
Fund shareholders who are considering exchanging shares into any of
the funds described below should note that each such fund (1) is a series of a
Delaware business trust (named "Neuberger & Berman Equity Trust") that is
42
<PAGE>
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.
Neuberger & Berman Seeks long-term capital appreciation through
Focus Trust 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 investments
Genesis Trust 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 investments
Guardian Trust 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 long-term capital appreciation through
International Trust investments primarily in a diversified portfolio of
equity securities of foreign issuers. Assets will be
allocated among economically mature countries and
emerging industrialized countries.
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<PAGE>
Neuberger & Berman Seeks capital appreciation, without regard to
Manhattan Trust income, through investments in securities of
small-, medium- and large-capitalization companies
(with a current focus on medium-capitalization
companies) believed to have the maximum potential for
long-term capital appreciation. The corresponding
portfolio's investment program involves greater risks
and share price volatility than programs that invest
in more undervalued securities.
Neuberger & Berman Seeks capital growth through an investment approach
Partners Trust 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.
Neuberger & Berman Seeks long-term capital appreciation through
Socially Responsive investments primarily in securities of companies
Trust that meet both financial and social criteria.
The Fund described herein, and any of the funds described above, may
terminate or modify their exchange privileges in the future.
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.
ADDITIONAL REDEMPTION INFORMATION
SUSPENSION OF REDEMPTIONS
The right to redeem the Fund's shares may be suspended or payment of
the redemption price postponed (1) when the New York Stock Exchange ("NYSE") is
closed, (2) when trading on the NYSE is restricted, (3) when an emergency exists
as a result of which it is not reasonably practicable for the Portfolio to
dispose of securities it owns or fairly to determine the value of its net
44
<PAGE>
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
The 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, an Institution 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 Fund does not redeem in kind under normal circumstances, but would do
so when the Fund Trustees determined that it was in the best interests of the
Fund's shareholders as a whole.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund distributes to its shareholders 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 the Portfolio. The Portfolio's net investment income consists of all income
accrued on portfolio assets less accrued expenses but does not include capital
and foreign currency gains and losses. Net investment income and net gains and
losses are reflected in the Portfolio's NAV (and, hence, the Fund's NAV) until
they are distributed. The 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 Fund 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.
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<PAGE>
Dividends and other distributions are automatically reinvested in
additional shares of the 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 remains in effect until the Institution notifies the Fund in writing to
discontinue the election.
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUND
In order to continue to qualify for treatment as a RIC under the Code,
the Fund must distribute to its shareholders for each taxable year at least 90%
of its investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. 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") and (2) 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 Fund, 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
Fund, N&B Management believes that the reasoning thereof and, hence, its
conclusion apply to the Fund as well.
The 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
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<PAGE>
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
Fund of distributions to it from the Portfolio, investments by the Portfolio in
certain securities, and hedging and certain other transactions engaged in by the
Portfolio.
TAXATION OF THE PORTFOLIO
The Portfolio has received a ruling from the Service to the effect
that, among other things, the Portfolio will be treated as a separate
partnership for federal income tax purposes and will not be a "publicly traded
partnership." As a result, the Portfolio is not subject to federal income tax;
instead, each investor in the Portfolio, such as the Fund, is required to take
into account in determining its federal income tax liability its share of the
Portfolio's income, gains, losses, deductions, credits, and tax preference
items, without regard to whether it has received any cash distributions from the
Portfolio. The Portfolio also is not subject to Delaware or New York income or
franchise tax.
Because the Fund is deemed to own a proportionate share of the
Portfolio's assets and income for purposes of determining whether the Fund
qualifies as a RIC, the Portfolio intends to continue to conduct its operations
so that the Fund will be able to continue to satisfy all those requirements.
Distributions to the Fund from the 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 Portfolio. The Fund's basis for its interest
in the 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.
47
<PAGE>
Dividends and interest received by the Portfolio and gains realized by
the Portfolio may be subject to income, withholding, or other taxes imposed by
foreign countries and U.S. possessions that would reduce the yield and/or total
returns 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 Portfolio's 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 amount, character and timing of recognition of the gains and losses the
Portfolio realizes 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 the
Portfolio with respect to its business of investing in securities or foreign
currencies, will qualify as permissible income for the Fund under the Income
Requirement.
Exchange-traded Futures Contracts and listed options thereon and
certain Forward Contracts ("Section 1256 contracts") are required to be marked
to market (that is, treated as having been sold at market value) for federal
income tax purposes at the end of the Portfolio's taxable year. Sixty percent of
any net gain or loss recognized as a result of these "deemed sales," and 60% of
any net realized gain or loss from any actual sales, of Section 1256 contracts
are treated as long-term capital gain or loss, and the remainder is treated as
short-term capital gain or loss. As of the date of this SAI, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
noncorporate taxpayers' net capital gain (the excess of net long-term capital
gain over net short-term capital loss) enacted by the Taxpayer Relief Act of
1997 -- 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months -- instead of the 28%
rate in effect before that legislation, which now applies to gain recognized on
capital assets held for more than one year but not more than 18 months. However,
technical corrections legislation passed by the House of Representatives late in
1997 would clarify that the 20% rate applies.
The 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 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
48
<PAGE>
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.
The Portfolio may acquire zero coupon or other securities issued with
OID. As a holder of those securities, the Portfolio (and, through it, the 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 the Fund annually must distribute substantially all of its
investment company taxable income (including its share of the 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 the Portfolio actually receives. Those distributions will be made
from the Fund's (or its share of the Portfolio's) cash assets or, if necessary,
from the proceeds of sales of the Portfolio's securities. The Portfolio may
realize capital gains or losses from those sales, which would increase or
decrease the Fund's investment company taxable income and/or net capital gain.
TAXATION OF THE FUND'S 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 Portfolio typically
does 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.
49
<PAGE>
In purchasing and selling portfolio securities other than as described
above (for example, in the secondary market), the 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 the Portfolio does not have a current
arrangement to do so. In any case, the Portfolio may effect principal
transactions with a dealer who furnishes research services, may designate any
dealer to receive selling concessions, discounts, or other allowances, or
otherwise may deal with any dealer in connection with the acquisition of
securities in underwritings.
During the fiscal year ended October 31, 1997, the Portfolio acquired
securities of the following of its "regular brokers or dealers": Goldman, Sachs
& Co. and Merrill Lynch, Pierce, Fenner & Smith Inc. At October 31, 1997, that
Portfolio held the securities of its "regular brokers or dealers" with an
aggregate value as follows: Goldman, Sachs & Co., $5,211,285; and Merrill Lynch,
Pierce, Fenner & Smith Inc., $5,269,344.
No affiliate of the Portfolio receives give-ups or reciprocal business
in connection with its portfolio transactions. The Portfolio does not effect
transactions with or through broker-dealers in accordance with any formula or
for selling shares of the 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, the Portfolio unless an appropriate exemption is available.
PORTFOLIO TURNOVER
The 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.
50
<PAGE>
REPORTS TO SHAREHOLDERS
Shareholders of the Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
auditors for the Fund and for the Portfolio. The Fund's statements show the
investments owned by the Portfolio and the market values thereof and provide
other information about the Fund and its operations, including the Fund's
beneficial interest in the Portfolio.
CUSTODIAN AND TRANSFER AGENT
The Fund and Portfolio have 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 the 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
The Fund and Portfolio have selected Ernst & Young LLP, 200 Clarendon
Street, Boston, MA 02116, as the independent auditors who will audit their
financial statements.
LEGAL COUNSEL
The Fund and Portfolio have selected Kirkpatrick & Lockhart LLP, 1800
Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as their
legal counsel.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the name, address, and percentage of
ownership of each person who was known by the Fund to own beneficially or of
record 5% or more of the Fund's outstanding shares at January 30, 1998:
51
<PAGE>
Percentage of
Ownership at
Name and Address January 30, 1998
---------------- ----------------
LIMITED MATURITY: Chase Manhattan Bank TTEE Met 28.05%
---------------- Life Defined Contribution Group
Attn David Otti
770 Broadway 10th Floor
New York, NY 10003
Nationwide Life Insurance 18.91%
QPVA
C/O IPO Portfolio Accounting
PO Box 182029
Columbus, OH 43218
D. Leon Leonhardt PSP 14.85%
For Partners & Principals
of Price Waterhouse Ltd.
DTD 6/28/85
3109 W DR Martin Luther King Blvd
Tampa, FL 33607
D Leon Leonhardt Retirement 8.90%
Benefit Accumulation Plan for
Employees of Price Waterhouse LLP
3109 W DR Martin Luther King Blvd
Tampa, FL 33607
National Financial Serv Corp 5.11%
For the Exclusive Benefit of
our Customers
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
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.
52
<PAGE>
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 Fund's Annual Report to shareholders
for the fiscal year ended October 31, 1997:
The Statements of Assets and Liabilities of Neuberger & Berman
Limited Maturity Bond Trust and Portfolio, as of October 31, 1997,
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, the notes to each of the foregoing for
the fiscal year ended October 31, 1997, and the reports of Ernst &
Young LLP, independent auditors, with respect to such audited
financial statements of Neuberger & Berman Limited Maturity Bond
Trust and Portfolio.
53
<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, on balance, 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 lead 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.
A-1
<PAGE>
Plus (+) or Minus (-) - The ratings above may be modified by the addition
of a plus or minus sign to show relative standing within major categories.
Moody's Corporate Bond Ratings:
Aaa - Bonds rated Aaa are judged to be of the best 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.
A-2
<PAGE>
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 - 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
A-3
<PAGE>
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-4
<PAGE>
NEUBERGER & BERMAN INCOME TRUST
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Audited financial statements for the fiscal year ended October 31, 1997
for Neuberger & Berman Income Trust (with respect to Neuberger & Berman
Limited Maturity Bond Trust) and Income Managers Trust (with respect to
Neuberger & Berman Limited Maturity Bond Portfolio) and the reports of the
independent auditors are incorporated into the Statement of Additional
Information for such series by reference to the Annual Report to
Shareholders of Neuberger & Berman Income Trust, File Nos. 33-62872 and
811-7724, Edgar Accession No. 0000898432-97-000530.
Included in Part A of this Post-Effective Amendment:
FINANCIAL HIGHLIGHTS for the periods indicated
therein for Neuberger & Berman Limited Maturity 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. Filed Herewith.
(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
C-5
<PAGE>
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. 25 to Registration Statement of
Neuberger & Berman Income Funds, File
Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-98-000246.
(iii) Schedule B - Schedule of Compensation
Under the Management Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 25 to
Registration Statement of Neuberger
& Berman Income Funds, File Nos.
2-85229 and 811-3802, EDGAR
Accession No. 0000898432-98-000246.
(b) (i) Sub-Advisory Agreement Between Neuberger
& Berman Management Incorporated and
Neuberger & Berman, L.P. with Respect to
Income Managers Trust. Incorporated by
Reference to Post-Effective Amendment
No. 21 to Registration Statement of
Neuberger & Berman Income Funds, File
Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(ii) Schedule A - Portfolios of Income
Managers Trust Currently Subject to the
Sub-Advisory Agreement. Incor-
porated by Reference to Post-
Effective Amendment No. 25 to
Registration Statement of Neuberger
& Berman Income Funds, File Nos.
2-85229 and 811-3802, EDGAR
Accession No. 0000898432-98-000246.
(iii) Substitution Agreement Among Neuberger &
Berman Management Incorporated, Income
Managers Trust, Neuberger & Berman,
L.P., and Neuberger & Berman, LLC.
Incorporated by reference to
Post-Effective Amendment No. 5 to
Registrant's Registration Statement,
File Nos. 33-62872 and 811-7724, EDGAR
Accession No. 0000898432-97-000040.
(6) (a) Distribution Agreement Between Neuberger &
Berman Income Trust and Neuberger & Berman
Management Incorporated. Incorporated by
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<PAGE>
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. Filed Herewith.
(7) Bonus, Profit Sharing or Pension Plans. None.
(8) (a) Custodian Contract Between Neuberger & Berman
Income Trust and State Street Bank and Trust
Company. Incorporated by Reference to
Post-Effective Amendment No. 3 to Registrant's
Registration Statement, File Nos. 33-62872 and
811-7724, EDGAR Accession No.
0000898432-96-00018.
(b) Schedule of Compensation under the Custodian
Contract. Incorporated by Reference to Post-
Effective Amendment No. 5 to Registrant's
Registration Statement, File Nos. 33-62872 and
81-7724, EDGAR Accession No. 0000898432-97-000040.
(c) Agreement between Neuberger & Berman Income
Trust and State Street Bank and Trust Company
relating to the merger of Neuberger & Berman
Ultra Short Bond Trust and Neuberger & Berman
Limited Maturity Bond Trust. Filed Herewith.
(9) (a) (i) 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.
(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 and Service Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 5 to
Registrant's Registration Statement, File
Nos. 33-62872 and 81-7724, EDGAR Accession
No. 0000898432-97-000040.
C-7
<PAGE>
(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. Filed
Herewith.
(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. Filed Herewith.
(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.
C-8
<PAGE>
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 February 3, 1998.
TITLE OF CLASS Number of
RECORD HOLDERS
Shares of beneficial interest, $0.001 par value, of:
Neuberger & Berman Limited Maturity Bond Trust 83
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
C-9
<PAGE>
expense arising from such liability. The Registrant, on behalf of the affected
Series, shall, upon request by such shareholder, assume the defense of any claim
made against such shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
Section 9 of the Management Agreement between Income Managers Trust
("Managers Trust") and Neuberger and Berman Management Incorporated ("N&B
Management") provides that neither N&B Management nor any director, officer or
employee of N&B Management performing services for any series of Managers Trust
(each a "Portfolio") at the direction or request of N&B Management in connection
with N&B Management's discharge of its obligations under the Agreement shall be
liable for any error of judgment or mistake of law or for any loss suffered by a
Portfolio in connection with any matter to which the Agreement relates;
provided, that nothing in the Agreement shall be construed (i) to protect N&B
Management against any liability to Managers Trust or a Portfolio or its
interestholders to which N&B Management would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of its
duties, or by reason of N&B Management's reckless disregard of its obligations
and duties under the Agreement, or (ii) to protect any director, officer or
employee of N&B Management who is or was a trustee or officer of Managers Trust
against any liability to Managers Trust or a Portfolio or its interestholders to
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such person's office with Managers Trust.
Section 1 of the Sub-Advisory Agreement between N&B Management and
Neuberger & Berman, L.P. ("Neuberger & Berman") with respect to Managers Trust
provides that in the absence of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or of reckless disregard of its
duties and obligations under the Agreement, Neuberger & 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.
C-10
<PAGE>
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 principal 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-11
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
Claudia A. Brandon Secretary, Neuberger & Berman Advisers
Vice President, N&B Management Trust; Secretary, Advisers
Management Managers Trust; 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.
Brooke A. Cobb Chief Investment Officer, Baineo
Vice President, N&B International Investors.1 Senior Vice
Management President and Senior Portfolio Manager,
Putnam Investments.2
Stacy Cooper-Surge Assistant Secretary, Neuberger & Berman
Assistant Vice President, Advisers Management Trust; Assistant
N&B Management Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger & Berman
Income Funds; Assistant Secretary, Neuberger
& Berman Income Trust; Assistant Secretary,
Neuberger & Berman Equity Funds; Assistant
Secretary, Neuberger & Berman Equity Trust;
Assistant Secretary, Income Managers Trust;
Assistant Secretary, Equity Managers Trust;
Assistant Secretary, Global Managers Trust;
Assistant Secretary, Neuberger & Berman
Equity Assets.
Robert W. D'Alelio Senior Portfolio Manager, Putnam
Vice President, N&B Investments.3
Management
Barbara DiGiorgio, Assistant Treasurer, Neuberger & Berman
Assistant Vice President, Advisers Management Trust; Assistant
N&B Management 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.
1/ Until 1997.
2/ Until 1995.
3/ Until 1996.
C-12
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
Stanley Egener Chairman of the Board and Trustee,
President and Director, Neuberger & Berman Advisers Management
N&B Management; Principal, Trust; Chairman of the Board and Trustee,
Neuberger & Berman Advisers Managers Trust; Chairman of the
Board and Trustee, Neuberger & Berman Income
Funds; Chairman of the Board and Trustee,
Neuberger & Berman Income Trust; Chairman of
the Board and Trustee, Neuberger & Berman
Equity Funds; Chairman of the Board and
Trustee, Neuberger & Berman Equity Trust;
Chairman of the Board and Trustee, Income
Managers Trust; Chairman of the Board and
Trustee, Equity Managers Trust; Chairman of
the Board and Trustee, Global Managers
Trust; Chairman of the Board and Trustee,
Neuberger & Berman Equity Assets.
Theodore P. Giuliano President and Trustee, Neuberger & Berman
Vice President and Income Funds; President and Trustee,
Director, N&B Management; Neuberger & Berman Income Trust; President
Principal, Neuberger & Berman and Trustee, Income Managers Trust.
C. Carl Randolph Assistant Secretary, Neuberger & Berman
Principal, Neuberger & Berman Advisers Management Trust; Assistant
Secretary, Advisers Managers Trust;
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.
Richard Russell Treasurer, Neuberger & Berman Advisers
Vice President, Management Trust; Treasurer, Advisers
N&B Management Managers Trust; 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-13
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
Ingrid Saukaitis Project Director, Council on Economic
Assistant Vice President, Priorities.4
N&B Management
Jennifer K. Silver Portfolio Manager and Director, Putnam
Vice President, N&B Investments.5
Management; Principal,
Neuberger & Berman
Daniel J. Sullivan Vice President, Neuberger & Berman Advisers
Senior Vice President, Management Trust; Vice President, Advisers
N&B Management Managers Trust; 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.
Michael J. Weiner Vice President, Neuberger & Berman Advisers
Senior Vice President, Management Trust; Vice President, Advisers
N&B Management Managers Trust; 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.
Celeste Wischerth, Assistant Treasurer, Neuberger & Berman
Assistant Vice President, Advisers Management Trust; Assistant
N&B Management 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.
4/ Until 1997.
5/ Until 1997.
C-14
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
Lawrence Zicklin President and Trustee, Neuberger & Berman
Director, N&B Management; Advisers Management Trust; President and
Principal, Neuberger & Berman Trustee, Advisers Managers Trust; 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.
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
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.
NAME BUSINESS AND OTHER CONNECTIONS
Claudia A. Brandon Secretary, Neuberger & Berman Advisers
Vice President, N&B Management Trust; Secretary, Advisers
Management Managers Trust; 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.
C-15
<PAGE>
Brooke A. Cobb Chief Investment Officer, Bainco
Vice President, N&B International Investors.6 Senior Vice
Management President and Senior Portfolio Manager,
Putnam Investments.7
Stacy Cooper-Surge Assistant Secretary, Neuberger & Berman
Assistant Vice President, Advisers Management Trust; Assistant
N&B Management Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger & Berman
Income Funds; Assistant Secretary, Neuberger
& Berman Income Trust; Assistant Secretary,
Neuberger & Berman Equity Funds; Assistant
Secretary, Neuberger & Berman Equity Trust;
Assistant Secretary, Income Managers Trust;
Assistant Secretary, Equity Managers Trust;
Assistant Secretary, Global Managers Trust;
Assistant Secretary, Neuberger & Berman
Equity Assets.
Robert W. D'Alelio Senior Portfolio Manager, Putnam
Vice President, N&B Investments.8
Management
Barbara DiGiorgio, Assistant Treasurer, Neuberger & Berman
Assistant Vice President, Advisers Management Trust; Assistant
N&B Management 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; Chairman of the Board and Trustee,
Neuberger & Berman Advisers Managers Trust; 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.
6/ Until 1997.
7/ Until 1995.
8/ Until 1996.
C-16
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
Theodore P. Giuliano President and Trustee, Neuberger & Berman
Vice President and Income Funds; President and Trustee,
Director, N&B Management; Neuberger & Berman Income Trust; President
Principal, Neuberger & Berman and Trustee, Income Managers Trust.
C. Carl Randolph Assistant Secretary, Neuberger & Berman
Principal, Neuberger & Berman Advisers Management Trust; Assistant
Secretary, Advisers Managers Trust;
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.
Richard Russell Treasurer, Neuberger & Berman Advisers
Vice President, Management Trust; Treasurer, Advisers
N&B Management Managers Trust; 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.
Ingrid Saukaitis Project Director, Council on Economic
Assistant Vice President, Priorities.9
N&B Management
Jennifer K. Silver Portfolio Manager and Director, Putnam
Vice President, N&B Investments.10
Management; Principal,
Neuberger & Berman
Daniel J. Sullivan Vice President, Neuberger & Berman Advisers
Senior Vice President, Management Trust; Vice President, Advisers
N&B Management Managers Trust; 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.
9/ Until 1997.
10/ Until 1997.
C-17
<PAGE>
Michael J. Weiner Vice President, Neuberger & Berman Advisers
Senior Vice President, Management Trust; Vice President, Advisers
N&B Management Managers Trust; 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.
Celeste Wischerth, Assistant Treasurer, Neuberger & Berman
Assistant Vice President, Advisers Management Trust; Assistant
N&B Management Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger & Berman
Income Funds; Assistant Treasurer, Neuberger
& Berman Income Trust; Assistant Treasurer,
Neuberger & Berman Equity Funds; Assistant
Treasurer, Neuberger & Berman Equity Trust;
Assistant Treasurer, Income Managers Trust;
Assistant Treasurer, Equity Managers Trust;
Assistant Treasurer, Global Managers Trust;
Assistant Treasurer, Neuberger & Berman
Equity Assets.
Lawrence Zicklin President and Trustee, Neuberger & Berman
Director, N&B Management; Advisers Management Trust; President and
Principal, Neuberger & Berman Trustee, Advisers Managers Trust; 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.
C-18
<PAGE>
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:
Neuberger & Berman Advisers Management Trust
Neuberger & Berman Equity Funds
Neuberger & Berman Equity Trust
Neuberger & Berman Income Funds
N&B Management is also the investment manager to the master funds in
which the above-named investment companies invest.
(b) Set forth below is information concerning the directors and
officers of the Registrant's principal underwriter. The principal business
address of each of the persons listed is 605 Third Avenue, New York, New York
10158-0180, which is also the address of the Registrant's principal underwriter.
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 None
Valerie Chang Assistant Vice President None
Brooke A. Cobb Vice President None
Robert Conti Treasurer None
Stacy Cooper-Shugrue Assistant Vice President Assistant Secretary
Robert W. D'Alelio Vice President None
Clara Del Villar 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, Chief
Executive Officer,
and Trustee
Brian Gaffney Vice President None
Joseph G. Galli Assistant Vice President None
Robert I. Gendelman Vice President None
Theodore P. Giuliano Vice President and Director None
Michael J. Hanratty Assistant Vice President None
C-19
<PAGE>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------
Leslie Holliday-Soto Assistant Vice President None
Jody L. Irwin Assistant Vice President None
Michael M. Kassen Vice President and Director None
Robert L. Ladd Assistant Vice President None
Irwin Lainoff Director None
Josephine Mahaney Vice President None
Carmen G. Martinez Assistant Vice President None
Ellen Metzger Vice President and Secretary None
Paul Metzger Vice President None
Loraine Olavarria Assistant Secretary None
Janet W. Prindle Vice President None
Joseph S. Quirk Assistant Vice President None
Kevin L. Risen Vice President None
Richard Russell Vice President Treasurer and
Principal Accounting
Officer
Ingrid Saukaitis Assistant Vice President None
Jennifer K. Silver Vice President None
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
Andrea Trachtenberg Vice President of Marketing None
Judith M. Vale Vice President None
Josephine Velez Assistant Vice President None
Susan Walsh Vice President None
Michael J. Weiner Senior Vice President Vice President and
Principal Financial
Officer
Celeste Wischerth Assistant Vice President Assistant Treasurer
Thomas Wolfe Vice President None
Lawrence Zicklin Director Trustee and President
C-20
<PAGE>
(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-21
<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. 6 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 27th day of February,
1998.
NEUBERGER & BERMAN INCOME TRUST
By: /s/Theodore P. Giulano
--------------------------
Theodore P. Giulano
President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. 6has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ John Cannon Trustee February 27, 1998
- -------------------------
John Cannon
/s/ Stanley Egener Chairman of the Board, February 27, 1998
- ------------------------- Chief Executive Officer
Stanley Egener and Trustee
/s/ Theodore P. Giuliano President and Trustee February 27, 1998
- -------------------------
Theodore P. Giuliano
/s/ Barry Hirsch Trustee February 27, 1998
- -------------------------
Barry Hirsch
/s/ Robert A. Kavesh Trustee February 27, 1998
- -------------------------
Robert A. Kavesh
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ William E. Rulon Trustee February 27, 1998
- -------------------------
William E. Rulon
/s/ Richard Russell Treasurer and February 27, 1998
- ------------------------- Principal Accounting Officer
Richard Russell
/s/ Candace L. Straight Trustee February 27, 1998
- -------------------------
Candace L. Straight
/s/ Michael J. Weiner Vice President and February 27, 1998
- ------------------------- Principal Financial Officer
Michael J. Weiner
2
<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. 25
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 27th day of February, 1998.
INCOME MANAGERS TRUST
By:/s/Theodore P. Giulano
----------------------
Theodore P. Giulano
President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. 25 has been signed below by the following persons
in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ John Cannon Trustee February 27, 1998
- ---------------
John Cannon
/s/Stanley Egener Chairman of the Board, February 27, 1998
- ----------------- Chief Executive Officer
Stanley Egener and Trustee
/s/Theodore P. Giuliano President and Trustee February 27, 1998
- -----------------------
Theodore P. Giuliano
/s/Barry Hirsch Trustee February 27, 1998
- ---------------
Barry Hirsch
/s/Robert A. Kavesh Trustee February 27, 1998
- -------------------
Robert A. Kavesh
(Signatures continued on next page)
<PAGE>
Signature Title Date
- --------- ----- ----
/s/William E. Rulon Trustee February 27, 1998
- -------------------
William E. Rulon
/s/Richard Russell Treasurer and February 27, 1998
- ------------------ Principal Accounting Officer
Richard Russell
/s/Candace L. Straight Trustee February 27, 1998
- ----------------------
Candace L. Straight
/s/Michael J. Weiner Vice President and February 27, 1998
- -------------------- Principal Financial Officer
Michael J. Weiner
- 2 -
<PAGE>
NEUBERGER & BERMAN INCOME TRUST
POST-EFFECTIVE AMENDMENT NO. 6 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 & ____
Berman Income Trust. Filed Herewith.
(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.
(5) (a) (i) Management Agreement Between Income N.A.
Managers Trust and Neuberger & Berman
Management Incorporated.
Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registration Statement of Neuberger &
Berman Income Funds, File Nos.
2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.
<PAGE>
Sequentially
Exhibit Numbered
NUMBER DESCRIPTION PAGE
(ii) Schedule A - Portfolios of Income N.A
Managers Trust Currently Subject to
the Management Agreement. Incor-
porated by Reference to Post-
Effective Amendment No. 25 to
Registration Statement of Neuberger
& Berman Income Funds, File Nos.
2-85229 and 811-3802, EDGAR
Accession No. 0000898432-98-000246.
(iii) Schedule B - Schedule of Compensation N.A.
Under the Management Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 25 to
Registration Statement of Neuberger
& Berman Income Funds, File Nos.
2-85229 and 811-3802, EDGAR
Accession No. 0000898432-98-000246.
(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.
(ii) Schedule A - Portfolios of Income N.A.
Managers Trust Currently Subject to
the Sub-Advisory Agreement. Incor-
porated by Reference to Post-
Effective Amendment No. 25 to
Registration Statement of Neuberger
& Berman Income Funds, File Nos.
2-85229 and 811-3802, EDGAR
Accession No. 0000898432-98-000246.
(iii) Substitution Agreement Among N.A.
Neuberger & Berman Management
Incorporated, Income Managers Trust,
Neuberger & Berman, L.P., and
Neuberger & Berman, LLC.
Incorporated by reference to
Post-Effective Amendment No. 5 to
Registrant's Registration Statement,
File Nos. 33-62872 and 811-7724,
EDGAR Accession No.
0000898432-97-00040.
(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 ____
Income Trust Currently Subject to the
Distribution Agreement. Filed Herewith.
(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>
Sequentially
Exhibit Numbered
NUMBER DESCRIPTION PAGE
(b) Schedule of Compensation under the Custodian N.A.
Contract. Incorporated by Reference to Post-
Effective Amendment No. 5 to Registrant's
Registration Statement, File Nos. 33-62872
and 811-7724, EDGAR Accession No.
0000898432-97-000040.
(c) Agreement between Neuberger & Berman Income ____
Trust and State Street Bank and Trust
Company relating to the merger of Neuberger
& Berman Ultra Short Bond Trust and
Neuberger & Berman Limited Maturity Bond
Trust. Filed Herewith.
(9) (a) (i) Transfer Agency and Service Agreement N.A.
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 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 N.A.
Transfer Agency and Service
Agreement. Incorporated by Reference
to Post-Effective Amendment No. 5
to Registrant's Registration Statement,
File Nos. 33-62872 and 811-7724, EDGAR
Accession No. 0000898432-97-000040.
(b) (i) Administration Agreement Between N.A.
Neuberger & Berman Income Trust and
Neuberger & Berman Management
Incorporated. Incorporated by
Reference to Post-Effective Amendment
No. 3 to Registrant's Registration
Statement, File Nos. 33-62872 and
811-7724, EDGAR Accession No.
0000898432-96-00018.
(ii) Schedule A - Series of Neuberger & ____
Berman Income Trust Currently Subject
to the Administration Agreement.
Filed Herewith.
(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.
<PAGE>
Sequentially
Exhibit Numbered
NUMBER DESCRIPTION PAGE
(10) Opinion and Consent of Kirkpatrick & Lockhart on ____
Securities Matters. Filed Herewith.
(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.
Ex. 1(c)
NEUBERGER & BERMAN INCOME TRUST
SCHEDULE A
INITIAL SERIES
--------------
Neuberger & Berman Limited Maturity Bond Trust
Dated: March 2, 1998
Ex. 6(b)
NEUBERGER & BERMAN INCOME TRUST
DISTRIBUTION AGREEMENT
SCHEDULE A
The Series of Neuberger & Berman Income Trust currently subject to this
Agreement is as follows:
Neuberger & Berman Limited Maturity Bond Trust
DATED: March 2, 1998
EX. 8(c)
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
RE: NEUBERGER & BERMAN INCOME TRUST (THE "FUND")
Gentlemen:
This is to advise you that Neuberger & Berman Ultra Short Bond Trust will be
merged into Neuberger & Berman Limited Maturity Bond Trust as of the close of
business on February 27, 1998. Also, as you know Neuberger & Berman Government
Income Trust has been dissolved. In accordance with Section 14 of the Custodian
Contract dated 7/2/93 and Section 11 of the Transfer Agency and Services
Agreement dated 7/1/93 between the Fund and State Street Bank and Trust Company,
the Fund hereby requests that the respective contracts be amended to reflect the
deletion of these two series and that all series subject to these agreements be
set forth in a Schedule A to both contracts.
New Schedule As are attached hereto.
Please indicate your acceptance of the foregoing by executing two copies of this
Letter Agreement, returning one to the Fund and retaining one copy of your
records.
By: /s/ Michael J. Weiner
_________________________________
Michael J. Weiner
Vice President
Neuberger & Berman Income Trust
Agreed to as of this 2nd day of March, 1998.
State Street Bank and Trust Company
By: /s/ Ronald E. Logue
_________________________________
Title: Executive Vice President
Ex. 9(b)(ii)
NEUBERGER & BERMAN INCOME TRUST
ADMINISTRATION AGREEMENT
SCHEDULE A
The Series of Neuberger & Berman Income Trust currently subject to this
Agreement is as follows:
Neuberger & Berman Limited Maturity Bond Trust
DATED: March 2, 1998
KIRKPATRICK & LOCKHART
1800 M Street, N.W.
Washington, D.C. 20036
May 17, 1993
Neuberger & Berman Income Trust
605 Third Avenue
New York, New York 10158
Dear Sir or Madam:
You have requested our opinion regarding certain matters in connection
with the issuance of shares of beneficial interest ("Shares") of Neuberger &
Berman Income Trust ("Trust") in the following designated Series: Neuberger &
Berman Government Income Trust; Neuberger & Berman Limited Maturity Bond Trust;
and Neuberger & Berman Ultra Short Bond Trust (each, a "Series").
We have, as counsel, participated in the preparation of the Trust's
organizational documents and in various other matters concerning the Trust. We
have examined copies, either certified or otherwise proved to be genuine, of the
Trust Instrument dated as of May 6, 1993 ("Trust Instrument") and By-Laws of the
Trust, the minutes of meetings of the trustees, and other documents relating to
the organization and operation of the Trust and the Series, and we generally are
familiar with its business. Based on the foregoing, it is our opinion that the
unlimited number of unissued Shares of each Series, which are currently being
registered, may be legally and validly issued from time to time in accordance
with the Trust Instrument and By-Laws of the Trust and subject to compliance
with the Securities Act of 1933, the Investment Company Act of 1940, and
applicable state laws regulating the offer and sale of securities; and when so
issued, such Shares will be legally issued, fully paid, and nonassessable by the
Trust or any Series.
The Trust is a business trust established pursuant to the Delaware
Business Trust Act ("Delaware Act"). The Delaware Act provides that a
shareholder of the Trust is entitled to the same limitation of personal
liability extended to shareholders of for-profit corporations. To the extent
that the Trust or any of its shareholders become subject to the jurisdiction of
courts in states which do not have statutory or other authority limiting the
<PAGE>
Neuberger & Berman Income Funds
May 17, 1993
Page 2
liability of business trust shareholders, such courts might not apply the
Delaware Act and could subject Trust shareholders to liability.
To guard against this risk, the Trust Instrument: (i) requires that every
written obligation of the Trust contain a statement that such obligation may
only be enforced against the assets of the Trust; however, the omission of such
a disclaimer will not operate to create personal liability for any shareholder;
and (ii) provides for indemnification out of Trust property of any shareholder
held personally liable for the obligations of the Trust. Thus, the risk of a
Trust shareholder incurring financial loss beyond his or her investment because
of shareholder liability is limited to circumstances in which: (i) a court
refuses to apply Delaware law; (ii) no contractual limitation of liability was
in effect; and (iii) the Trust itself would be unable to meet its obligations.
We hereby consent to the filing of this opinion in connection with the
Trust's Registration Statement on Form N-1A to be filed with the Securities and
Exchange Commission and to the reference to our firm under the caption "Legal
Counsel" in the Statements of Additional Information incorporated by reference
into the Series' Prospectuses.
Sincerely yours,
KIRKPATRICK & LOCKHART
By: /s/ Alan Roy Dynner
--------------------------------
Alan Roy Dynner
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 No. 6 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 5, 1997 on Neuberger&Berman Limited
Maturity Bond Trust, one of the series comprising Neuberger&Berman Income Trust,
and on Neuberger&Berman Limited Maturity Bond Portfolio, one of the series
comprising Income Managers Trust, included in the 1997 Annual Report to
Shareholders of Neuberger&Berman Income Trust.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
February 25, 1998
<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-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 37,469
<RECEIVABLES> 15
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 37,493
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 97
<TOTAL-LIABILITIES> 97
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 37,295
<SHARES-COMMON-STOCK> 3,907
<SHARES-COMMON-PRIOR> 2,227
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (111)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 212
<NET-ASSETS> 37,396
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,314
<OTHER-INCOME> 0
<EXPENSES-NET> (263)
<NET-INVESTMENT-INCOME> 2,051
<REALIZED-GAINS-CURRENT> (40)
<APPREC-INCREASE-CURRENT> 163
<NET-CHANGE-FROM-OPS> 2,174
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,053)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,052
<NUMBER-OF-SHARES-REDEEMED> (1,587)
<SHARES-REINVESTED> 215
<NET-CHANGE-IN-ASSETS> 16,168
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (47)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 408
<AVERAGE-NET-ASSETS> 32,802
<PER-SHARE-NAV-BEGIN> 9.53
<PER-SHARE-NII> .60
<PER-SHARE-GAIN-APPREC> .04
<PER-SHARE-DIVIDEND> (.60)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.57
<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 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-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 301,455
<INVESTMENTS-AT-VALUE> 303,088
<RECEIVABLES> 4,111
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 307,210
<PAYABLE-FOR-SECURITIES> 14,112
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 132
<TOTAL-LIABILITIES> 14,244
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 217,469
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 84,068
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (9,839)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,268
<NET-ASSETS> 292,966
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,575
<OTHER-INCOME> 0
<EXPENSES-NET> (914)
<NET-INVESTMENT-INCOME> 18,661
<REALIZED-GAINS-CURRENT> (990)
<APPREC-INCREASE-CURRENT> 2,266
<NET-CHANGE-FROM-OPS> 19,937
<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> 25,657
<ACCUMULATED-NII-PRIOR> 65,407
<ACCUMULATED-GAINS-PRIOR> (8,849)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 697
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 914
<AVERAGE-NET-ASSETS> 278,661
<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>
