Neuberger & Berman Income Trust
NEUBERGER & BERMAN LIMITED MATURITY BOND TRUST
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
800-877-9700
PROSPECTUS AND INFORMATION STATEMENT
DATED JANUARY 23, 1998
This Prospectus and Information Statement is being furnished to
shareholders of Neuberger & Berman Ultra Short Bond Trust ("Ultra Short Bond
Trust") in connection with a Plan of Reorganization and Termination ("Plan").
Pursuant to the Plan, shareholders of Ultra Short Bond Trust will receive, in
exchange for shares of that Fund, shares of Neuberger & Berman Limited Maturity
Bond Trust ("Limited Maturity Bond Trust") equal in total value to their
holdings in Ultra Short Bond Trust as of the closing date of the Reorganization,
which is expected to be February 27, 1998; when the Reorganization is complete,
Ultra Short Bond Trust will be dissolved.
This Prospectus and Information Statement sets forth concisely
information about Limited Maturity Bond Trust that investors should know before
the closing date. Additional information is contained in a Statement of
Additional Information ("SAI") dated January 23, 1998, relating to the Plan and
including financial statements, which has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated herein by reference (legally
forms a part of this prospectus). The SAI is available without charge upon
request by calling N&B Management at 800-877-9700. The Trust's current
prospectus ("Trust Prospectus") accompanies this Prospectus and Information
Statement, has been filed with the SEC and is incorporated herein by this
reference. The Trust's current Statement of Additional Information ("Trust SAI")
and the Neuberger & Berman Income Trust Annual Report to Shareholders, dated
October 31, 1997 ("Annual Report"), also have been filed with the SEC. You can
obtain a free copy of the Trust SAI or Annual Report by calling N&B Management
at the phone number shown above.
Investors are advised to read and retain this Prospectus and
Information Statement for future reference.
Ultra Short Bond Trust and Limited Maturity Bond Trust (each a "Fund")
are series of Neuberger & Berman Income Trust ("Trust"), a Delaware business
trust registered as an open-end, diversified management investment company
consisting of six separate series, which are feeder funds in a master/feeder
fund structure.
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WE ARE NOT ASKING YOU FOR A PROXY OR WRITTEN CONSENT AND YOU ARE REQUESTED NOT
TO SEND TO US A PROXY OR WRITTEN CONSENT.
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.
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Each Fund invests all of its net investable assets in a corresponding
portfolio ("Portfolio") of Income Managers Trust, a New York common law trust
registered as an open-end management investment company. Neuberger & Berman
Management Incorporated ("N&B Management") serves as the investment manager and
Neuberger & Berman, LLC ("Neuberger & Berman") serves as sub-adviser to each
Portfolio.
Each Portfolio invests in securities in accordance with an investment
objective, policies, and limitations identical to those of its corresponding
Fund. The investment objective of Limited Maturity Bond Trust and Portfolio is
to provide the highest current income consistent with low risk to principal and
liquidity; and secondarily, total return. Ultra Short Bond Trust and Portfolio
seek to provide current income consistent with minimal risk to principal and
liquidity.
The Board of Trustees of the Trust has determined to dissolve Ultra
Short Bond Trust because it has not achieved a sufficient size to be viable.
Shareholders of Ultra Short Bond Trust are not being asked to vote on the Plan
or approve the Reorganization. Ultra Short Bond Trust will cease selling its
shares to existing shareholders as of the close of regular trading on the New
York Stock Exchange on February 13, 1998.
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TABLE OF CONTENTS
Page
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SYNOPSIS.......................................................................1
The Reorganization.............................................................1
Investment Objectives and Policies.............................................2
Certain Differences Between Ultra Short Bond Trust and Limited Maturity
Bond Trust...............................................................3
Fees and Expenses..............................................................4
Purchases......................................................................5
Redemptions....................................................................6
Exchange Privileges............................................................7
Dividends and Other Distributions..............................................7
Federal Income Tax Consequences................................................7
COMPARISON OF PRINCIPAL RISK FACTORS...........................................8
THE REORGANIZATION............................................................11
Reorganization Plan...........................................................11
Reasons for the Reorganization................................................13
Description of the Securities to be Issued....................................14
Federal Income Tax Considerations.............................................14
Capitalization................................................................16
ADDITIONAL INFORMATION ABOUT LIMITED MATURITY BOND TRUST AND PORTFOLIO........17
Financial Highlights..........................................................17
Investment Objective and Policies.............................................17
Board of Trustees.............................................................17
Investment Manager, Subadviser, Portfolio Manager and Transfer Agent..........17
Calculation of Performance Data...............................................19
Management's Discussion of Fund Performance...................................17
Limited Maturity Bond Trust Shares............................................18
Net Asset Value...............................................................18
Taxes, Dividends and Other Distributions......................................18
ADDITIONAL INFORMATION ABOUT ULTRA SHORT BOND TRUST AND
PORTFOLIO.....................................................................18
Financial Highlights..........................................................18
Investment Objective and Policies.............................................18
Board of Trustees.............................................................19
Investment Manager, Subadviser, Portfolio Manager and Transfer Agent..........19
Management's Discussion of Fund Performance...................................19
Ultra Short Bond Trust Shares.................................................19
Net Asset Value...............................................................19
Taxes, Dividends and Other Distributions......................................19
INFORMATION REGARDING FIVE PERCENT SHARE OWNERSHIP AND INTERESTS OF
AFFILIATED PERSONS............................................................20
Five Percent Holders..........................................................20
Shares Held by Officers and Directors.........................................21
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Interests of Affiliated Persons and Necessary No-Action Relief................22
MISCELLANEOUS.................................................................22
Available Information.........................................................22
Legal Matters.................................................................22
Experts.......................................................................23
APPENDIX A: Plan of Reorganization and Termination..........................A-1
APPENDIX B: Financial Highlights ...........................................B-1
APPENDIX C: Management's Discussion of Fund Performance.....................C-1
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NEUBERGER & BERMAN INCOME TRUST
Neuberger & Berman Limited Maturity Bond Trust
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
PROSPECTUS AND INFORMATION STATEMENT
DATED JANUARY 23, 1998
SYNOPSIS
The following synopsis is a summary of certain information contained
elsewhere in this Prospectus and Information Statement and the Plan of
Reorganization and Termination ("Plan") and is qualified by reference to the
more complete information contained herein as well as the current prospectus of
Neuberger & Berman Income Trust ("Trust Prospectus"), which accompanies this
Prospectus and Information Statement. Shareholders should read this entire
Prospectus and Information Statement carefully.
The Plan is attached to this Prospectus and Information Statement as
Appendix A. The transactions contemplated by the Plan (collectively, the
"Reorganization") are described herein.
The Reorganization
At a meeting held on September 24, 1997, the Boards of Trustees of
Neuberger & Berman Income Trust ("Trust") and Income Managers Trust (including
all of those Trustees who are not "interested persons" of the participating
Funds, as that term is defined in Section 2(a)(19) of the Investment Company Act
of 1940 ("Independent Trustees")) unanimously approved the Plan, pursuant to
which Neuberger & Berman Ultra Short Bond Trust ("Ultra Short Bond Trust") will
transfer substantially all of its assets from Neuberger & Berman Ultra Short
Bond Portfolio ("Ultra Short Bond Portfolio") to Neuberger & Berman Limited
Maturity Bond Portfolio ("Limited Maturity Bond Portfolio"), and shareholders in
Neuberger & Berman Ultra Short Bond Trust ("Ultra Short Bond Trust") will
receive shares of Neuberger & Berman Limited Maturity Bond Trust ("Limited
Maturity Bond Trust"), in exchange for their shares of Ultra Short Bond Trust.
Each Ultra Short Bond Trust shareholder will receive the number of full and
fractional shares of Limited Maturity Bond Trust equal in value to that
shareholder's shares of Ultra Short Bond Trust as of the closing date of the
Reorganization, which is expected to be February 27, 1998 ("Closing Date").
According to the specific terms of the Plan, Ultra Short Bond Trust
will exercise its right to withdraw its interest in Ultra Short Bond Portfolio,
which will distribute assets in kind to satisfy this withdrawal. Ultra Short
Bond Trust will then transfer all of these assets to Limited Maturity Bond
Portfolio in exchange for an interest in that Portfolio. Ultra Short Bond Trust
will then transfer all of its assets (essentially composed of its interest in
Limited Maturity Bond Portfolio) to Limited Maturity Bond Trust in exchange for
shares of that Fund and that Fund's assumption of all liabilities of Ultra Short
Bond Trust. Ultra Short Bond Trust will then distribute to its shareholders the
shares of Limited Maturity Bond Trust in exchange for their shares of Ultra
Short Bond Trust; and Ultra Short Bond Trust and Portfolio will be dissolved.
<PAGE>
When the Reorganization is completed, each person who held shares in Ultra Short
Bond Trust will hold shares in Limited Maturity Bond Trust with exactly the same
total value.
For the reasons set forth below under "Reasons for the Reorganization,"
the Boards of Trustees of the Trust and Income Managers Trust, including the
Independent Trustees, determined that the Reorganization is in the best
interests of the Funds and Portfolios, and that neither the interests of the
Funds' shareholders nor the Portfolios' interest holders will be diluted as a
result of the transactions.
Another mutual fund that is a series of Neuberger & Berman Income
Funds, Neuberger & Berman Ultra Short Bond Fund, which invests all of its net
investable assets in Ultra Short Bond Portfolio, will undergo a similar
reorganization to that described above, also on February 27, 1998. After Ultra
Short Bond Fund and Ultra Short Bond Trust have both withdrawn their assets from
Ultra Short Bond Portfolio, that Portfolio will be terminated.
Investment Objectives and Policies
The investment objective of Ultra Short Bond Trust and Portfolio is to
provide current income with minimal risk to principal and liquidity. The
investment objective of Limited Maturity Bond Trust and Portfolio is to provide
the highest current income consistent with low risk to principal and liquidity;
and secondarily, total return.
Ultra Short Bond Portfolio and Limited Maturity Bond Portfolio each
invests in a diversified portfolio of fixed and variable rate debt securities
and seeks to increase income and preserve or enhance total return by actively
managing portfolio duration in light of market conditions and trends.
Ultra Short Bond Portfolio invests in a diversified portfolio of U.S.
Government and Agency Securities and investment grade debt securities issued by
financial institutions, corporations, and others. The Portfolio's
dollar-weighted average duration will not exceed two years, although the
Portfolio may invest in individual securities of any duration. Securities in
which the Portfolio may invest include mortgage-backed and asset-backed
securities, money market instruments, repurchase agreements with respect to U.S.
Government and Agency Securities, and U.S. dollar-denominated securities of
foreign issuers. The Portfolio may also enter into futures contracts and
purchase and sell options on futures contracts. The Portfolio may invest 25% or
more of its total assets in U.S. Government and Agency Securities or in
certificates of deposit or bankers' acceptances issued by domestic branches of
U.S. banks.
Similarly, Limited Maturity Bond Portfolio invests in a diversified
portfolio consisting primarily of U.S. Government and Agency Securities and
investment grade debt securities issued by financial institutions, corporations,
and others. The dollar-weighted average duration of the Portfolio will not
exceed four years, although the Portfolio may invest in individual securities of
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any duration. The Portfolio's dollar-weighted average maturity may range up to
five years. Securities in which the Portfolio may invest include mortgage-backed
and asset-backed securities, repurchase agreements with respect to U.S.
Government and Agency Securities, and foreign investments. The Portfolio may
invest up to 10% of its net assets in fixed income securities that are below
investment grade, including unrated securities deemed by N&B Management to be of
comparable quality. The Portfolio will not invest in such securities unless they
are rated at least B by Moody's Investors Service, Inc. ("Moody's") or Standard
& Poors ("S&P") or, if unrated by either of those entities, deemed by N&B
Management to be of comparable quality. 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 other investment policies of Ultra Short Bond Trust and Portfolio
are similar to the investment policies of Limited Maturity Bond Trust and
Portfolio, including their ability to invest in inflation-indexed securities,
variable and floating rate securities, restricted securities and Rule 144A
securities, zero coupon securities, and up to 15% in illiquid securities. Each
Portfolio may also enter into reverse repurchase agreements, dollar rolls,
securities loans, and when-issued transactions. As a non-fundamental policy,
neither of the Portfolios may purchase portfolio securities if its outstanding
borrowings, including reverse repurchase agreements, exceed 5% of its total
assets. For temporary defensive purposes, each Portfolio may invest up to 100%
of its total assets in cash or cash equivalents, commercial paper, U.S.
Government and Agency Securities and certain other money market instruments, as
well as repurchase agreements on U.S. Government and Agency Securities, and may
adopt shorter than normal weighted average maturities or durations.
Certain Differences Between Ultra Short Bond Trust and Limited Maturity Bond
Trust
While both Funds are similar in several respects, a number of
differences exist as well.
First, although the investment objectives of Ultra Short Bond Trust and
Portfolio and Limited Maturity Bond Trust and Portfolio are substantially
similar, Ultra Short seeks current income with minimal risk to principal and
liquidity, while Limited Maturity seeks a high current income consistent with
low risk to principal and liquidity. Limited Maturity has a secondary objective
of seeking total return.
Second, while Ultra Short Bond Portfolio and Limited Maturity Bond
Portfolio each invests primarily in debt securities, there are some differences
in the types of debt securities in which each Portfolio may invest. For example,
Limited Maturity may invest in foreign securities denominated in or indexed to
foreign currencies, while Ultra Short is restricted to U.S. dollar-denominated
securities of foreign issuers. Limited Maturity may also enter into forward
foreign currency contracts or futures contracts and related options to manage
currency risks and to facilitate transactions in foreign securities. In
addition, Limited Maturity may invest up to 10% of its net assets in fixed
income securities that are below investment grade. Also in contrast to Ultra
Short, Limited Maturity may purchase and sell covered call and put options and
invest in indexed securities. See "Principal Risk Factors " below for a
discussion of the risks of investing in such investments.
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Third, the maximum dollar-weighted average duration of Ultra Short Bond
Portfolio is two years, while Limited Maturity Bond Portfolio's dollar-weighted
average duration is four years. With its moderately conservative portfolio of
securities and shorter maximum duration, Ultra Short Bond Portfolio has lower
potential for fluctuation in principal value.
Fees and Expenses
As shown by this table, there are no transaction charges when you buy
or sell Fund shares, nor will there be any such charges following the
Reorganization. There will not be any fee payable in connection with the
Reorganization.
Sales Charge Imposed on Purchases NONE
Sales Charge Imposed on Reinvested Dividends NONE
Deferred Sales Charges NONE
Redemption Fees NONE
Exchange Fees NONE
Set forth below is a comparison of each Fund's operating expenses for
the fiscal year ended October 31, 1997. The ratios also are shown on a pro forma
(estimated) combined basis, giving effect to the Reorganization.
<TABLE>
<CAPTION>
Neuberger&Berman Management and 12b-1 Other Total Operating
Income Trust Administration Fees Fees Expenses Expenses
<S> <C> <C> <C> <C>
ULTRA SHORT 0.75% None 0.00%* 0.75%*
LIMITED MATURITY 0.75% None 0.05%* 0.80%*
PRO FORMA COMBINED 0.75% None 0.05%* 0.80%*
</TABLE>
*(Reflects N&B Management's expense reimbursement undertaking described below)
Total Operating Expenses for each Fund are based upon current
administration fees for the Fund and management fees for its corresponding
Portfolio and any current expense reimbursement undertakings. "Other Expenses"
are based on each Fund's and Portfolio's expenses for the past fiscal year. The
Trustees of the Trust believe that the aggregate per share expenses of each Fund
and its corresponding Portfolio will be approximately equal to the expenses the
Fund would incur if its assets were invested directly in the type of securities
held by its corresponding Portfolio. The Trustees of the Trust also believe that
investment in a Portfolio by investors in addition to a Fund may enable the
Portfolio to achieve economies of scale which could reduce expenses. The
expenses and, accordingly, the returns of other funds that may invest in the
Portfolios may differ from those of the Funds.
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The previous table reflects N&B Management's voluntary undertaking to
reimburse each Fund's Operating Expenses and that Fund's pro rata share of its
corresponding Portfolio's Operating Expenses which, in the aggregate, exceed
0.75% per annum of Ultra Short Bond Trust's average daily net assets and 0.80%
of Limited Maturity Bond Trust's average daily net assets (both before and after
the Reorganization). 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 have been 1.40%, 0.49%, and 0.49% and Total Operating
Expenses would have been 2.15%, 1.24%, and 1.24% per annum of the average daily
net assets of Ultra Short Bond Trust, Limited Maturity Bond Trust, and the
combined Fund, respectively, based upon the expenses of each Fund for the 1997
fiscal year.
Example
To illustrate the effect of Operating Expenses, assume that each Fund's
annual return is 5% and that it had Total Operating Expenses described in the
table above. For every $1,000 invested in each Fund, the following amounts of
total expenses would have been paid if an investor closed his or her account at
the end of each of the following time periods:
Neuberger&Berman 1 Year 3 Years 5 Years 10 Years
Income Trust
ULTRA SHORT $8 $24 $42 $93
LIMITED MATURITY 8 26 44 99
PRO FORMA COMBINED 8 26 44 99
The purpose of these tables is to assist an investor in understanding
the various types of costs and expenses that an investor in the combined Fund
will bear, whether directly or indirectly. 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.
Purchases
Procedures to purchase shares in the two Funds are identical.
Shareholders can buy and own Fund shares only through an account with an
Institution which provides accounting, recordkeeping, and other services to
investors and which has an administrative services agreement with N&B
Management. N&B Management and the Funds do not recommend, endorse, or receive
payments from any Institution. N&B Management compensates Institutions for
services they provide under an administrative services agreement. N&B Management
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does not provide investment advice to any Institution or its clients or make
decisions regarding their investments.
Each Institution will establish its own procedures for the purchase of
Fund shares, including minimum initial and additional investments for shares of
each Fund and the acceptable methods of payment for shares. Shares are purchased
at the next price calculated on a day the New York Stock Exchange ("NYSE") is
open, after a purchase order is received and accepted by an Institution. Prices
for Fund shares are usually calculated as of 4 p.m. Eastern time. An Institution
may be closed on days when the NYSE is open. As a result, prices for shares of
the Funds may be significantly affected on days when a shareholder has no access
to the Institution to buy shares.
Some institutions may charge their clients a fee in connection with
purchases of Fund shares.
See "Shareholder -- How to Buy Shares" in the Trust Prospectus enclosed
herewith and incorporated by reference herein for additional information on how
shares of each Fund may be purchased.
Redemptions
Rights and procedures to redeem shares in the two Funds are identical.
Shareholders can sell (redeem) all or some of each Fund's shares only through an
account with an Institution. Each Institution will establish its own procedures
for the sale of Fund shares. Shares are sold at the next price calculated on a
day the NYSE is open, after a sales order is received and accepted by an
Institution. Prices for Fund shares are usually calculated as of 4 p.m. Eastern
time. An Institution may be closed on days when the NYSE is open. As a result,
prices for shares of the Funds may be significantly affected on days when a
shareholder has no access to the Institution to sell shares.
Redemption proceeds will be paid to Institutions as agreed with
each Fund but in any case within three business days (under unusual
circumstances a Fund may take longer, as permitted by law).
Each Fund may suspend redemptions or postpone payments on days when
the NYSE is closed (besides weekends and holidays), when trading on the NYSE is
restricted, or as permitted by the SEC.
See "Shareholder Services -- How to Sell Shares" in the Trust
Prospectus enclosed herewith and incorporated by reference herein for additional
information on how to redeem shares held in each Fund.
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Exchange Privileges
Through an account with an Institution, a shareholder may be able to
exchange shares of a Fund for shares of another Neuberger & Berman Fund.(R) 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.
See "Shareholder Services -- Exchanging Shares" in the Trust Prospectus
enclosed herewith and incorporated by reference herein for additional
information on how to exchange Fund shares.
Dividends and Other Distributions
Each Fund distributes substantially all of its share of any net
investment income (net of the Fund's expenses) and any net realized capital
gains earned by its corresponding Portfolio. Income dividends are declared daily
for each Fund at the time its NAV is calculated and are paid monthly, and net
realized capital gains, if any, are normally distributed annually in December.
Investors who are considering the purchase of Fund shares in December should
take this into account because of the tax consequences of such distributions.
Income dividends for each Fund will accrue beginning on the day after an
investor's purchase order is converted to "federal funds."
All dividends and other distributions paid on shares of each Fund are
automatically reinvested in additional shares of that Fund. 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.
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. Limited Maturity Bond Trust will
continue to honor the current election of each Institution.
Federal Income Tax Consequences
Trust and Income Managers Trust have received an opinion of Kirkpatrick
& Lockhart LLP, their counsel, to the effect that Ultra Short Bond Trust's
transfer of its assets (essentially composed of the interest it will receive in
Limited Maturity Bond Portfolio) to Limited Maturity Bond Trust in exchange
solely for the latter's shares and its assumption of Ultra Short Bond Trust's
liabilities will constitute a tax-free reorganization within the meaning of
section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code").
Accordingly, no gain or loss will be recognized to either Fund or its
shareholders as a result of the transaction. In addition, the opinion states
that no gain or loss will be recognized on the distribution of property from
Ultra Short Bond Portfolio to Ultra Short Bond Trust or on the contribution of
property from Ultra Short Bond Trust to Limited Maturity Bond Portfolio in
exchange for an interest therein, pursuant to the Plan. See "The Reorganization
- -- Federal Income Tax Considerations" for more information on the federal income
tax consequences of the Reorganization.
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COMPARISON OF PRINCIPAL RISK FACTORS
Both Ultra Short Bond Portfolio and Limited Maturity Bond Portfolio
invest in fixed income securities, and thus an investment in either Ultra Short
Bond Trust or Limited Maturity Bond Trust entails the risks of fixed income
investing. Fixed income securities typically decline in value in times of rising
market interest rates and rise in value in times of falling interest rates.
Generally, the longer the remaining maturity on a security, the more pronounced
is the fluctuation in value. The risks of certain investments that are unique to
Limited Maturity Bond Trust and Portfolio are identified below. See "Investment
Programs" and "Description of Investments" in the Trust Prospectus, which is
enclosed herewith and incorporated by reference herein, for a more detailed
discussion of the investment risks of each Fund.
Lower Rated Debt Securities. Ultra Short Bond Portfolio may invest only in
investment grade securities. Limited Maturity Bond Portfolio may invest up to
10% of its net assets in securities that are below investment grade, including
unrated securities deemed by N&B Management to be of comparable quality. The
Portfolio will not invest in such securities unless they are rated at least B by
Moody's or S&P or, if unrated by those entities, deemed by N&B Management to be
of comparable quality. Securities rated below investment grade are described as
speculative by both Moody's and S&P. Securities rated B are judged to be
predominantly speculative with respect to their capacity to pay interest and
repay principal in accordance with the terms of the obligations.
Changes in economic conditions or developments regarding the individual
issuer are more likely to cause price volatility and weaken the capacity of the
issuer of such securities to make principal and interest payments than is the
case for higher grade debt securities. An economic downturn affecting the issuer
may result in an increased incidence of default. The market for lower-rated
securities may be thinner and less active than for higher-rated securities. N&B
Management seeks to reduce the risks associated with investing in such
securities by limiting the Portfolio's holdings in them and by extensively
analyzing the potential benefits of such an investment in relation to the
associated risks.
The following table shows the ratings of debt securities held by
Limited Maturity Bond Portfolio for the year ended October 31, 1997. The
percentages in each category represent the 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.
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Neuberger & Berman Limited Maturity Bond Portfolio's
Holdings of Debt Securities, by Rating for the Year Ended October 31, 1997
Moody's
Investors Service, Inc. Standard & Poor's
(as a % of investments) (as a % of investments)
Rating Average Rating Average
Investment Grade
Treasury/Agency* Y/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 --
99.87%*** 99.87%***
*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 Trust
SAI.
Foreign Securities. Each Portfolio may invest in foreign securities. Limited
Maturity Bond Portfolio, unlike Ultra Short Bond Portfolio, may invest in
foreign securities denominated in or indexed to foreign currencies. Such
securities may be affected by governmental regulation of foreign exchange
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transactions and the fluctuation of foreign currencies relative to the U.S.
dollar, which could result in losses irrespective of the performance of the
underlying investment. In addition, Limited Maturity Bond Portfolio may enter
into forward foreign currency contracts or futures contracts (agreements to
exchange one currency for another at a specified price at a future date) and
related options to manage currency risks and to facilitate transactions in
foreign securities. Although these contracts can protect the Portfolio from
adverse exchange rate changes, they involve a risk of loss if N&B Management
fails to predict foreign currency values correctly; see the discussion of
Hedging Instruments, below.
Put and Call Options, Futures Contracts, and Options on Futures Contracts. Each
Portfolio may try to reduce the risk of securities price changes (hedge) or
manage portfolio duration by (1) entering into interest-rate futures contracts
traded on futures exchanges and (2) purchasing and writing options on futures
contracts. Each Portfolio may engage in transactions in futures contracts and
related options only as permitted by regulations of the Commodity Futures
Trading Commission. These investment practices involve certain risks, including
price volatility and a high degree of leverage.
Limited Maturity Bond Portfolio also may write covered call options and
purchase put options on debt securities in its portfolio or on foreign
currencies for hedging purposes or for the purpose of producing income. Limited
Maturity Bond Portfolio will write a call option on a security or currency only
if it holds that security or currency or has the right to obtain the security or
currency at no additional cost.
The primary risks in using put and call options, futures contracts,
options on futures contracts, forward foreign currency contracts or options on
foreign currencies ("Hedging Instruments") are (1) imperfect correlation or no
correlation between changes in market value of the securities or currencies held
by a Portfolio and the prices of Hedging Instruments; (2) possible lack of a
liquid secondary market for Hedging Instruments and the resulting inability to
close out Hedging Instruments when desired; (3) the fact that use of Hedging
Instruments is a highly specialized activity that involves skills, techniques,
and risks (including price volatility and a high degree of leverage) different
from those needed to select a Portfolio's securities; and (4) the fact that,
although use of these instruments for hedging purposes can reduce the risk of
loss, they also can reduce the opportunity for gain, or even result in losses,
by offsetting favorable price movements in hedged investments. When a Portfolio
uses Hedging Instruments, the Portfolio will place cash or appropriate liquid
securities in a segregated account, or will "cover" its position, to the extent
required by SEC staff policy. Another risk of Hedging Instruments is the
possible inability of a Portfolio to purchase or sell a security at a time that
would otherwise be favorable for it to do so, or the possible need for a
Portfolio to sell a security at a disadvantageous time, due to its need to
maintain cover or to segregate securities in connection with its use of these
instruments. Futures, options, and forward contracts are considered
"derivatives." Losses that may arise from certain futures transactions are
potentially unlimited.
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<PAGE>
THE REORGANIZATION
Reorganization Plan
The terms and conditions under which the Reorganization will be
consummated are set forth in the Plan. Significant provisions of the Plan are
summarized below; however, this summary is qualified in its entirety by
reference to the Plan, which is attached as Appendix A to this Prospectus and
Information Statement.
The Plan contemplates (i) Limited Maturity Bond Trust's acquiring
substantially all of the assets of Ultra Short Bond Trust in exchange solely for
shares of Limited Maturity Bond Trust and the assumption by Limited Maturity
Bond Trust of all of Ultra Short Bond Trust's liabilities, if any, as of the
Closing Date and (ii) the constructive distribution on the Closing Date of such
shares to the shareholders of Ultra Short Bond Trust.
The assets of Ultra Short Bond Trust to be acquired by Limited Maturity
Bond Trust shall include all cash, cash equivalents, securities (including its
interest in Limited Maturity Bond Portfolio), receivables (including interest
and dividends receivable) and other property of any kind owned by Ultra Short
Bond Trust and any deferred or prepaid assets shown as assets on the books of
Ultra Short Bond Trust. Because the investment policies and limitations of the
two Portfolios are substantially similar, it will not be necessary for Limited
Maturity Bond Portfolio to dispose of any of the assets that were previously
held by Ultra Short Bond Portfolio in order for Limited Maturity Bond Portfolio
to continue operating within its investment policies and limitations. However,
sales of certain assets held by Limited Maturity Bond Portfolio may be necessary
or desirable based upon that Portfolio's investment strategy and the market as
it exists immediately prior to or following the Reorganization.
Limited Maturity Bond Trust will assume all liabilities of Ultra Short
Bond Trust, if any; provided, however, that Ultra Short Bond Trust will utilize
its best efforts, to the extent practicable, to discharge all of its known
liabilities prior to the Closing Date. Limited Maturity Bond Trust will deliver
to Ultra Short Bond Trust shares of Limited Maturity Bond Trust, which will be
distributed to Ultra Short Bond Trust shareholders.
The value of Ultra Short Bond Trust's assets to be acquired and the
amount of its liabilities to be assumed by Limited Maturity Bond Trust and the
net asset value of a share of Ultra Short Bond Trust will be determined as of
the close of regular trading on the NYSE on the Closing Date and will be
determined in accordance with the valuation procedures described in the
then-current Prospectus and Statement of Additional Information. Securities and
other assets for which market quotations are not readily available will be
valued by a method that the Trustees of Managers Trust believe accurately
reflects fair value. All computations described in this paragraph will be
performed by State Street Bank & Trust Company, which serves as custodian and
transfer agent for each Fund and Portfolio, using to the extent possible prices
provided by outside pricing services approved by the Board of Trustees of Income
Managers Trust.
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<PAGE>
As soon as practicable after the Closing Date, Ultra Short Bond Trust
will distribute pro rata to its shareholders of record the shares of Limited
Maturity Bond Trust it receives in the Reorganization, so that each shareholder
of Ultra Short Bond Trust will receive a number of full and fractional shares of
Limited Maturity Bond Trust equal in value to the shareholder's holdings in
Ultra Short Bond Trust. Ultra Short Bond Trust and Portfolio will be dissolved
as soon as practicable thereafter. Such distribution will be accomplished by
opening accounts on the books of Limited Maturity Bond Trust in the names of
Ultra Short Bond Trust shareholders and by transferring thereto the shares of
Limited Maturity Bond Trust previously credited to the account of Ultra Short
Bond Trust on those books. Each shareholder account shall be credited with the
pro rata number of Limited Maturity Bond Trust's shares due to that shareholder.
Fractional shares of Limited Maturity Bond Trust will be rounded to the third
decimal place.
Accordingly, immediately after the Reorganization, each former
shareholder of Ultra Short Bond Trust will own shares of Limited Maturity Bond
Trust that will be equal to the value of that shareholder's shares of Ultra
Short Bond Trust immediately prior to the Reorganization. Moreover, because
shares of Limited Maturity Bond Trust will be issued at net asset value in
exchange for net assets of Ultra Short Bond Trust that will equal the aggregate
value of those shares, the net asset value per share of Limited Maturity Bond
Trust will be unchanged. Thus, the Reorganization will not result in a dilution
of the value of any shareholder account. However, in general, the Reorganization
substantially will reduce the percentage of ownership of each Ultra Short Bond
Trust shareholder below such shareholder's current percentage of ownership in
Ultra Short Bond Trust because, while the shareholder will have the same dollar
amount invested initially in Limited Maturity Bond Trust that he or she had
invested in Ultra Short Bond Trust, his or her investment will represent a
smaller percentage of the combined net assets of the Funds.
Any transfer taxes payable upon issuance of shares of Limited Maturity
Bond Trust in a name other than that of the registered holder of the shares on
the books of Ultra Short Bond Trust as of the time of transfer shall be paid by
the person to whom such shares are to be issued as a condition of such transfer.
Any reporting responsibility of Ultra Short Bond Trust will continue to be its
responsibility up to and including the Closing Date and such later date on which
it is dissolved.
The consummation of the Reorganization is subject to a number of
conditions set forth in the Plan, including receipt of no-action assurance from
the SEC with respect to the Reorganization pursuant to Section 17(a) of the
Investment Company Act of 1940 ("1940 Act"). The Plan may be terminated and the
Reorganization abandoned at any time prior to the Closing Date by the Trust's
Board of Trustees if it determines that the Reorganziation would be inadvisable
for either Fund. At the Closing Date, and solely in order to facilitate the
closing, the non-fundamental investment objective and policies of Ultra Short
Bond Trust will be conformed to those of Limited Maturity Bond Trust. The
Trust's officers may change or postpone the Closing Date.
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<PAGE>
Reasons for the Reorganization
At a meeting held on September 24, 1997, the Boards of Trustees of the
Trust and Income Managers Trust, including a majority of the Independent
Trustees, determined that the Reorganization is in the best interests of Ultra
Short Bond Trust and Portfolio and Limited Maturity Bond Trust and Portfolio,
respectively, and that the interests of shareholders in Ultra Short Bond Trust
and Limited Maturity Bond Trust, respectively, will not be diluted as a result
of the Reorganization. In recommending the Reorganization, N&B Management
indicated that the Reorganization would eliminate the expense of maintaining
Ultra Short Bond Trust and Portfolio as separate series of the Trust and Income
Managers Trust (i.e., fund accounting, legal, audit, shareholder reporting,
custodial expenses, etc.), producing economies of scale in Limited Maturity Bond
Trust and making it more marketable, and eliminating the need for further
expense reimbursements with respect to Ultra Short Bond Trust. In unanimously
approving the Reorganization, the Boards of Trustees specifically noted Ultra
Short Bond Portfolio's small asset base and its inability to operate effectively
and efficiently due to its small asset base.
In considering the Reorganization, the Boards of Trustees of the Trust
and Income Managers Trust considered the following factors:
(1) the small asset base of Ultra Short Bond Portfolio and its
failure to attract new assets;
(2) the effect of the Reorganization will be to place Ultra
Short Bond Trust shareholders' assets in another Neuberger & Berman
Fund having the most nearly similar investment strategy with a minimum
of administrative burden to shareholders;
(3) the Reorganization will be tax-neutral to investors;
(4) the compatibility of the different investment objectives
and strategies of the Ultra Short Bond entities and the Limited
Maturity Bond entities, as a result of which the portfolio resulting
from the proposed transactions is not expected to require any
significant restructuring;
(5) the Funds' historical performance records and risk/reward
ratios, expense ratios, past growth in assets, and their future
prospects;
(6) alternatives to the proposed transactions, including
simple liquidation of the Ultra Short Bond entities and maintaining the
status quo;
(7) the effect of the Reorganization on the expense ratio of
Limited Maturity Bond Trust, namely, that the Reorganization will
permit the fixed costs of each of the Limited Maturity Bond entities to
be spread over a larger asset base, effectively bringing the assets of
that Fund closer to the point where expenses borne by each shareholder
will be reduced, based upon the Fund's current fee structure;
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<PAGE>
(8) N&B Management, as administrator of the Funds, has capped
the expenses of each participating Fund, and would thus bear much of
the cost of the Reorganization;
(9) the benefit to N&B Management due to the elimination of
the need to reimburse Ultra Short Bond Trust for expenses exceeding
0.75%; and
(10) the potential benefit to N&B Management due to the
possible decrease in the expenses of Limited Maturity Bond Trust.
Description of the Securities to be Issued
The Trust is registered with the SEC as an open-end management
investment company and its Trustees are authorized to issue an unlimited number
of shares of beneficial interest in each separate series (par value $0.001 per
share). Shares of each Fund represent equal proportionate interests in the
assets of that Fund only and have identical voting, dividend, redemption,
liquidation, and other rights. All shares issued are fully paid and
non-assessable, and shareholders have no preemptive or other rights to subscribe
to any additional shares.
At a meeting held on December 17, 1997, the Board of Trustees of the
Trust authorized the issuance of shares of beneficial interest in Limited
Maturity Bond Trust. These shares will be issued to Ultra Short Bond Trust
shareholders as of the Closing Date in exchange for their Ultra Short Bond Trust
shares.
The Board of Trustees of the Trust does not intend to hold annual
meetings of shareholders of the Funds. The Trustees will call special meetings
of shareholders of a Fund only if required under the 1940 Act or in their
discretion or upon the written request of holders of 10% or more of the
outstanding shares of that Fund entitled to vote.
Under Delaware law, the shareholders of a Fund will not be personally
liable for the obligations of any Fund; a shareholder is entitled to the same
limitation of personal liability extended to shareholders of a corporation. To
guard against the risk that Delaware law might not be applied in other states,
the Trust Instrument of the Trust requires that every written obligation of the
Trust or a Fund contain a statement that such obligation may be enforced only
against the assets of the Trust or a Fund and provides for indemnification out
of Trust or Fund property of any shareholder nevertheless held personally liable
for Trust or Fund obligations, respectively.
Federal Income Tax Considerations
The exchange of Ultra Short Bond Trust's assets for Limited Maturity
Bond Trust shares and the latter's assumption of Ultra Short Bond Trust's
liabilities is intended to qualify for federal income tax purposes as a tax-free
reorganization under section 368(a)(1)(C) of the Code. Trust and Income Managers
Trust have received an opinion of Kirkpatrick & Lockhart LLP, their counsel
("Opinion"), substantially to the effect that:
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<PAGE>
(1) Limited Maturity Bond Trust's acquisition of Ultra Short
Bond Trust's assets in exchange solely for Limited Maturity Bond Trust
shares and the latter's assumption of Ultra Short Bond Trust's
liabilities, followed by Ultra Short Bond Trust's distribution of those
shares to its shareholders constructively in exchange for their Ultra
Short Bond Trust shares, will constitute a "reorganization" within the
meaning of section 368(a)(1)(C) of the Code, and each Fund will be "a
party to a reorganization" within the meaning of section 368(b) of the
Code;
(2) No gain or loss will be recognized to Ultra Short Bond
Trust on the transfer to Limited Maturity Bond Trust of its assets in
exchange solely for Limited Maturity Bond Trust shares and the latter's
assumption of Ultra Short Bond Trust's liabilities or on the subsequent
distribution of those shares to Ultra Short Bond Trust's shareholders
in constructive exchange for their Ultra Short Bond Trust shares;
(3) No gain or loss will be recognized to Limited Maturity
Bond Trust on its receipt of the transferred assets in exchange solely
for Limited Maturity Bond Trust shares and its assumption of Ultra
Short Bond Trust's liabilities;
(4) Limited Maturity Bond Trust's basis for the transferred
assets will be the same as the basis thereof in Ultra Short Bond
Trust's hands immediately before the transaction, and Limited Maturity
Bond Trust's holding period for those assets will include Ultra Short
Bond Trust's holding period therefor;
(5) An Ultra Short Bond Trust shareholder will recognize no
gain or loss on the constructive exchange of all its Ultra Short Bond
Trust shares solely for Limited Maturity Bond Trust shares pursuant to
the Plan; and
(6) An Ultra Short Bond Trust shareholder's basis for the
Limited Maturity Bond Trust shares to be received in the transaction
will be the same as the basis for its Ultra Short Bond Trust shares to
be constructively surrendered in exchange for those Limited Maturity
Bond Trust shares, and its holding period for those Limited Maturity
Bond Trust shares will include its holding period for those Ultra Short
Bond Trust shares, provided they are held as capital assets by the
shareholder on the Closing Date.
The Opinion also states that:
(1) No gain or loss will be recognized on the distribution of
property from Ultra Short Bond Portfolio to Ultra Short Bond Trust
pursuant to the Plan;
(2) Ultra Short Bond Trust's basis for the distributed
property will be equal to the adjusted basis of its interest in Ultra
Short Bond Portfolio;
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<PAGE>
(3) No gain or loss will be recognized on the contribution of
property by Ultra Short Bond Trust to Limited Maturity Bond Portfolio
in exchange for an interest therein;
(4) Ultra Short Bond Trust's basis for its interest in Limited
Maturity Bond Portfolio will be the same as the basis it had in the
property it contributed thereto at the time of the contribution; and
(5) Limited Maturity Bond Portfolio's basis for the property
contributed thereto by Ultra Short Bond Trust will be same as the basis
thereof in Ultra Short Bond Portfolio's hands immediately before the
contribution.
The Opinion may state that no opinion is expressed as to the effect of
the transactions on the Funds or any shareholder with respect to any asset
(including certain options, futures and forward contracts) as to which any
unrealized gain or loss is required to be recognized for federal income tax
purposes at the end of a taxable year (or on the termination or transfer
thereof) under a mark-to-market system of accounting.
Utilization by Limited Maturity Bond Trust after the transactions of
previous capital losses realized by Ultra Short Bond Trust could be subject to
limitation in future years under the Code.
Shareholders of Ultra Short Bond Trust should consult their tax
advisers regarding the effect, if any, of the Reorganization in light of their
individual circumstances. Because the foregoing discussion only relates to the
federal income tax consequences of the Reorganization, those shareholders also
should consult their tax advisers as to state and local tax consequences, if
any, of the Reorganization.
Capitalization
The following table shows the capitalization of Ultra Short Bond Trust
and Limited Maturity Bond Trust as of October 31, 1997 and the pro forma
combined capitalization of both Funds as if the Reorganization had occurred on
that date.
Ultra Short Limited Pro Forma
Maturity Combined
Net Assets (000) $10,169 $37,396 $47,565
Net Asset Value per share $9.85 $9.57 $9.57
Shares Outstanding (000) 1,032 3,907 4,970
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<PAGE>
ADDITIONAL INFORMATION ABOUT LIMITED MATURITY BOND TRUST AND
PORTFOLIO
Financial Highlights
The financial highlights of Limited Maturity Bond Trust and Portfolio,
which are attached as Appendix B, have been audited by Ernst & Young LLP,
independent auditors, whose report thereon was unqualified. This information is
derived from and should be read in conjunction with the financial statements of
Limited Maturity Bond Trust and Portfolio and notes thereto, which are
incorporated by reference into the SAI, together with the report of the auditors
thereon.
Investment Objective and Policies
For a discussion of Limited Maturity Bond Trust and Portfolio's
investment objective and policies and the risk factors associated with an
investment in the Fund in addition to that included in this Prospectus and
Information Statement, see "Investment Programs" and "Description of
Investments" in the Trust Prospectus enclosed herewith and incorporated by
reference herein.
Board of Trustees
For a discussion of the responsibilities of the Trustees of the Trust,
see "Management and Administration -- Trustees and Officers" in the Trust
Prospectus enclosed herewith and incorporated by reference herein.
Investment Manager, Subadviser, Portfolio Manager and Transfer Agent
For a discussion of Limited Maturity Bond Portfolio's investment
manager, subadviser and portfolio manager, and Limited Maturity Bond Fund and
Portfolio's transfer agent, see "Management and Administration -- Investment
Manager, Administrator, Distributor and Sub-Adviser," "-- Expenses," and " --
Transfer Agent" in the Trust Prospectus enclosed herewith and incorporated by
reference herein.
Calculation of Performance Data
For a discussion of the methods used to calculate Limited Maturity Bond
Trust's performance data, see "Performance Information" in the Trust Prospectus
enclosed herewith and incorporated by reference herein.
Management's Discussion of Fund Performance
See Attachment C for management's discussion of the performance of
Limited Maturity Bond Trust and Portfolio and the material factors affecting
this performance.
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<PAGE>
Limited Maturity Bond Trust Shares
For a discussion of Limited Maturity Bond Trust's shares, including
voting rights and exchange rights, and how the shares may be purchased and
redeemed, in addition to that included in this Prospectus and Information
Statement, see "Information Regarding Organization, Capitalization and Other
Matters," and "Shareholder Services" in the Trust Prospectus enclosed herewith
and incorporated by reference herein.
Net Asset Value
For a discussion of how the offering price of Limited Maturity Bond
Trust is determined, see "Share Prices and Net Asset Value" in the Trust
Prospectus enclosed herewith and incorporated by reference herein.
Taxes, Dividends and Other Distributions
For a discussion of Limited Maturity Bond Trust's policy with respect
to dividends and other distributions and the tax consequences of an investment
in its shares, see "Dividends, Other Distributions, and Taxes" in the Trust
Prospectus enclosed herewith and incorporated by reference herein.
ADDITIONAL INFORMATION ABOUT ULTRA SHORT BOND TRUST AND
PORTFOLIO
Financial Highlights
The financial highlights of Ultra Short Bond Trust and Portfolio, which
are attached as Appendix B, have been audited by Ernst & Young LLP, independent
auditors, whose report thereon was unqualified. This information is derived from
and should be read in conjunction with the financial statements of Ultra Short
Bond Trust and Portfolio and notes thereto, which are incorporated by reference
into the SAI, together with the report of the auditors thereon.
Investment Objective and Policies
For a discussion of Ultra Short Bond Trust and Portfolio's investment
objective and policies and the risk factors associated with an investment in the
Fund in addition to that included in this Prospectus and Information Statement,
see "Investment Programs" and "Description of Investments" in the Trust
Prospectus enclosed herewith and incorporated by reference herein.
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<PAGE>
Board of Trustees
For a discussion of the responsibilities of the Trustees of the Trust,
see "Management and Administration -- Trustees and Officers" in the Trust
Prospectus enclosed herewith and incorporated by reference herein.
Investment Manager, Subadviser, Portfolio Manager and Transfer Agent
For a discussion of Ultra Short Bond Portfolio's investment manager,
subadviser and portfolio manager, and Ultra Short Bond Fund and Portfolio's
transfer agent, see "Management and Administration -- Investment Manager,
Administrator, Distributor and Sub-Adviser," "-- Expenses," and " -- Transfer
Agent" in the Trust Prospectus enclosed herewith and incorporated by reference
herein.
Calculation of Performance Data
For a discussion of the methods used to calculate Ultra Short Bond
Trust's performance data, see "Performance Information" in the Trust Prospectus
enclosed herewith and incorporated by reference herein.
Management's Discussion of Fund Performance
See Attachment C for management's discussion of the performance of
Ultra Short Bond Trust and Portfolio and the material factors affecting this
performance.
Ultra Short Bond Trust Shares
For a discussion of Ultra Short Bond Trust's shares, including voting
rights and exchange rights, and how the shares may be purchased and redeemed, in
addition to that included in this Prospectus and Information Statement, see
"Information Regarding Organization, Capitalization and Other Matters" and
"Shareholder Services" in the Trust Prospectus enclosed herewith and
incorporated by reference herein.
Net Asset Value
For a discussion of how the offering price of Ultra Short Bond Trust is
determined, see "Share Prices and Net Asset Value" in the Trust Prospectus
enclosed herewith and incorporated by reference herein.
Taxes, Dividends and Other Distributions
For a discussion of Ultra Short Bond Trust's policy with respect to
dividends and other distributions and the tax consequences of an investment in
its shares, see "Dividends, Other Distributions, and Taxes" in the Trust
Prospectus enclosed herewith and incorporated by reference herein.
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<PAGE>
INFORMATION REGARDING FIVE PERCENT SHARE OWNERSHIP AND
INTERESTS OF AFFILIATED PERSONS
Five Percent Holders
The following table sets forth the name, address, and percentage
ownership of each person who was known by each Fund to own beneficially or of
record 5% or more that Fund's outstanding shares at November 30, 1997:
Limited Maturity Bond Trust:
Name and Address: Percentage of Ownership:
- ---------------- -----------------------
Chase Manhattan Bank 29.31%
NA Directed
Ttee Met Life Defined
Contribution Plan
Group Attn Judith Trepanowski
770 Broadway 10th Floor
New York, NY 10003-9522
Nationwide Life Insurance 18.85%
QPVA
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029
D Leon Leonhardt PSP 15.04%
for Partners & Principals
of Price Waterhouse Dtd 6/28/85
3109 W. Dr. Martin Luther King Blvd.
Tampa, FLA 33607
D Leon Leonhardt Retirement 9.30%
Benefit Accumulation Plan for
Employees of Price Waterhouse LLP
3109 W. Dr. Martin Luther King Blvd.
Tampa, FLA 33607
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<PAGE>
Ultra Short Bond Trust:
Name and Address: Percentage of Ownership:
- ---------------- -----------------------
Gary N. Skoloff, Saul A. Wolfe 36.74%
Skoloff & Wolfe Target Benefit
Trust dtd 11/1/95
293 Eisenhower Pky.
Livingston, NJ 07039-1711
Aetna Life Insurance & Annuity Co. 18.61%
ACES - Separate Account F
Attn. Michael Weiner - RTAL
15 Farmington Ave.
Hartford, CT 06156
Northern Trust Ttee 16.01%
FBO Manufacturers Bk Svgs System
401K
P.O. Box 92956 22-88478
Chicago, IL 60675-2956
Chase Manhattan Bank Ttee 12.84%
Various Retirement Plans
Under PPI Retirement Programs
Professional Pensions Inc.
444 Foxon Rd.
East Haven, CT 06513-2019
National Financial Serv Corp 7.85%
For the Exclusive Benefit of
Our Customers
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Shares Held by Officers and Directors
At November 30, 1997, the trustees and officers of the Trust and Income
Managers Trust, as a group, owned beneficially or of record less than 1% of the
outstanding shares of each Fund.
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<PAGE>
Interests of Affiliated Persons and Necessary No-Action Relief
Certain persons involved in the Reorganization hold more than five
percent of the shares of both of the Funds involved in the Reorganization and
therefore may be deemed affiliated persons of each Fund. The implementation of
the Plan is thus conditional on receipt of assurance from the SEC staff that it
will not recommend action under Section 17(a) of the 1940 Act. The
Reorganization will NOT be effected unless and until the SEC staff has granted
this or similar relief. The SEC staff has informed the Trust that it intends to
provide the necessary relief.
N&B Management, the investment manager of the Portfolios and the Funds'
administrator and distributor, may be deemed to benefit from the Reorganization,
because the combination of the Funds and Portfolios will eliminate expenses,
such as fund accounting, legal, audit, shareholder reporting, and custodial
expenses, that are involved in maintaining Ultra Short Bond Trust and Portfolio
as separate series of the Trust and Income Managers Trust, respectively. N&B
Management anticipates that this will produce economies of scale in the
remaining Limited Maturity Bond Trust and Portfolio and make Limited Maturity
Bond Trust more marketable, as well as eliminate the need for further expense
reimbursements with respect to Ultra Short Bond Trust and Portfolio. The SEC has
concluded that such benefits are fully compatible with Rule 17a-8 under the 1940
Act, which is the principal exemptive rule for mutual fund combinations.
MISCELLANEOUS
Available Information
The Trust and each series thereof are subject to the informational
requirements of the Securities Exchange Act of 1934 and the 1940 Act and in
accordance therewith files reports, proxy material and other information with
the SEC. Such reports, proxy material and other information can be inspected and
copied at the Public Reference Facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices in New
York (7 World Trade Center, Suite 1300, New York, New York 10048). Copies of
such material also can be obtained at prescribed rates from the Public Reference
Branch, Office of Consumer Affairs and Information Services, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Legal Matters
Certain legal matters in connection with the issuance of Limited
Maturity Bond Trust shares as part of the Reorganization will be passed upon by
Kirkpatrick & Lockhart LLP, counsel to the Trust.
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Experts
The audited financial statements of Limited Maturity Bond Trust and
Portfolio and Ultra Short Bond Trust and Portfolio, incorporated by reference in
the Statement of Additional Information, have been audited by Ernst & Young LLP,
independent auditors, to the extent indicated in their reports thereon which are
included in the Annual Report to shareholders of Limited Maturity Bond Trust and
Ultra Short Bond Trust for the fiscal year ended October 31, 1997. The financial
statements of Limited Maturity Bond Trust and Portfolio and Ultra Short Bond
Trust and Portfolio audited by Ernst & Young LLP have been incorporated by
reference in the Statement of Additional Information in reliance on their
reports given on their authority as experts in auditing and accounting.
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APPENDIX
PLAN OF REORGANIZATION AND TERMINATION
A-1
<PAGE>
NEUBERGER & BERMAN INCOME TRUST
PLAN OF REORGANIZATION AND TERMINATION
--------------------------------------
This Plan of Reorganization and Termination ("Plan"), dated as of this
22nd day of December, 1997, is made by Neuberger & Berman Income Trust, a
Delaware business trust ("Trust"), on behalf of two segregated portfolios of
assets ("series") thereof, Neuberger & Berman Ultra Short Bond Trust ("Target")
and Neuberger & Berman Limited Maturity Bond Trust ("Acquiror"). (Target and
Acquiror are sometimes referred to herein individually as a "Fund" and
collectively as the "Funds.")
R E C I T A L S
---------------
A. Each Fund is a feeder fund in a "master/feeder fund structure,"
pursuant to which (a) Target invests substantially all of its net investable
assets in Neuberger & Berman Ultra Short Bond Portfolio ("USB Portfolio"), a
subtrust of Income Managers Trust, a New York common law trust registered as an
open-end management investment company under the Investment Company Act of 1940,
as amended ("1940 Act") ("Managers Trust"), and (b) Acquiror invests
substantially all of its net investable assets in Neuberger & Berman Limited
Maturity Bond Portfolio ("LMB Portfolio"), another subtrust of Managers Trust
(USB Portfolio and LMB Portfolio being sometimes referred to herein collectively
as the "Portfolios");
B. The boards of trustees of the Trust and Managers Trust -- in each
case, including all of the trustees who are not "interested persons" (as that
term is defined in section 2(a)(19) of the 1940 Act) thereof -- approved the
transactions described herein (collectively "Reorganization") at a joint meeting
thereof held on September 24, 1997 ("Meeting"), respectively finding, in
accordance with Rule 17a-8 under the 1940 Act, that the Reorganization is in the
best interests of Target, Acquiror, and the Portfolios and that the interests of
each such entity's existing shareholders/interestholders will not be diluted as
a result of the Reorganization; and
C. At the time of the Reorganization, Neuberger & Berman Ultra Short
Bond Fund ("Target's Sister Fund"), a series of Neuberger & Berman Income Funds
that (like Target) invests substantially all of its net investable assets in USB
Portfolio, and Neuberger & Berman Limited Maturity Bond Fund, another series of
that trust that (like Acquiror) invests substantially all of its net investable
assets in LMB Portfolio, will engage in transactions substantially identical to
the Reorganization.
P R O V I S I O N S
-------------------
I. Background.
A. The Trust is a Delaware business trust duly registered as an
open-end management investment company under the 1940 Act, and each Fund is a
duly established and designated series thereof.
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<PAGE>
B. This Plan is intended to be, and is adopted as, a plan of a
reorganization described in section 368(a)(1)(C) of the Internal Revenue Code of
1986, as amended ("Code"). As described in paragraph 3, at the Effective Time
(as defined in paragraph 5), Target will transfer its assets to Acquiror in
exchange solely for voting shares of beneficial interest in Acquiror ("Acquiror
Shares") and the assumption by Acquiror of Target's liabilities and then will
constructively distribute the Acquiror Shares to the holders of shares of
beneficial interest in Target ("Target Shares") in exchange therefor, all upon
the terms and conditions set forth herein.
II. Related Transactions.
A. As of the Effective Time, Target shall redeem (i.e., completely
withdraw) its interest in USB Portfolio, as permitted under Section 3.5 and
Article VII of Managers Trust's Declaration of Trust. In payment therefor,
Target shall receive a distribution in kind of its share of USB Portfolio's net
assets -- Managers Trust's board of trustees having determined at the Meeting
that, in the event of any such redemption, liquidation of USB Portfolio's
investments to pay for such a withdrawal would not be in its best interests --
which assets Target will contribute to LMB Portfolio in exchange for an interest
therein ("LMB Portfolio Interest"). (The foregoing transactions are referred to
herein collectively as the "Related Transactions.") Simultaneously, Target's
Sister Fund likewise shall redeem its interest in USB Portfolio in consideration
for a distribution in kind and shall exchange the assets it thus receives for an
LMB Portfolio Interest. Promptly upon consummation of the redemptions by Target
and Target's Sister Fund of their interests in USB Portfolio, the latter will
discharge its remaining liabilities and be terminated as a subtrust of Managers
Trust.
B. State Street Bank & Trust Company, the Funds' and Portfolios'
custodian and the Funds' transfer agent ("State Street"), shall record all such
asset transfers on its records and shall deliver at the Closing (as defined in
paragraph 5) (a) a certificate of an authorized officer stating that (1) USB
Portfolio's assets held by State Street immediately before, and distributed to
Target as part of, the Related Transactions are held by LMB Portfolio at the
Effective Time and (2) all necessary taxes in conjunction with the transfer of
those assets, including all applicable federal and state stock transfer stamps,
if any, have been paid or provision for payment has been made and (b) a schedule
of those assets as of the Effective Time, setting forth for all portfolio
securities included therein their adjusted tax basis and holding period by lot.
III. The Reorganization.
A. At the time of the Related Transactions, Target shall assign, sell,
convey, transfer, and deliver to Acquiror all of its assets described in
paragraph 3.2 ("Assets"). In exchange therefor, Acquiror shall
(a) issue and deliver to Target the number of full and
fractional Acquiror Shares determined by dividing the net asset value
("NAV") of Target (computed as set forth in paragraph 4.1) by the NAV
per Acquiror Share (computed as set forth in paragraph 4.2), and
A-3
<PAGE>
(b) assume all of Target's liabilities described in paragraph
3.3 ("Liabilities").
(Target's assets and liabilities shall be determined in accordance with the
Trust's Trust Instrument.) Such transactions shall take place at the Closing.
B. The Assets shall include, without limitation, all cash, cash
equivalents, securities (including Target's LMB Portfolio Interest), receivables
(including interest and dividends receivable), claims and rights of action,
rights to register shares under applicable securities laws, books and records,
deferred and prepaid expenses shown as assets on Target's books, and other
property owned by Target at the Effective Time.
C. The Liabilities shall include (except as otherwise provided herein)
all of Target's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Effective Time, and whether or not specifically referred to in this Plan,
including Target's share of the expenses described in paragraph 7.
Notwithstanding the foregoing, Target shall use its best efforts, to the extent
practicable, to discharge all of its known Liabilities prior to the Effective
Time.
D. At or immediately before the Effective Time, Target shall declare
and pay to its shareholders a dividend and/or other distribution in an amount
large enough so that it will have distributed substantially all (and in any
event not less than 90%) of its investment company taxable income (computed
without regard to any deduction for dividends paid) and substantially all of its
realized net capital gain, if any, for the current taxable year through the
Effective Time.
E. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall constructively distribute the Acquiror Shares
received by it pursuant to paragraph 3.1(a) to Target's shareholders of record,
determined as of the Effective Time (collectively "Shareholders" and
individually a "Shareholder"), in exchange for their Target Shares. Such
distribution shall be accomplished by State Street's opening accounts on
Acquiror's share transfer books in the Shareholders' names and transferring such
Acquiror Shares thereto. Each Shareholder's account shall be credited with the
respective pro rata number of full and fractional (rounded to the third decimal
place) Acquiror Shares due that Shareholder. All outstanding Target Shares,
including any represented by certificates, shall simultaneously be canceled on
Target's share transfer books. Acquiror shall issue certificates representing
the Acquiror Shares in connection with the Reorganization only to shareholders
whose Target shares were represented by certificates.
F. As soon as reasonably practicable after the distribution described
in the preceding paragraph, Target shall be terminated as a series of the Trust
and any further actions shall be taken in connection therewith as required by
applicable law and the Trust's Trust Instrument.
G. Any transfer taxes payable upon issuance of Acquiror Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiror Shares are to be issued, as a condition of such transfer.
A-4
<PAGE>
IV. Valuation.
A. For purposes of paragraph 3.1(a), Target's NAV shall be (a) the
value of the Assets computed as of the close of regular trading on the New York
Stock Exchange ("NYSE") (currently 4:00 p.m., Eastern time) on the date of the
Closing ("Valuation Time"), using the valuation procedures set forth in Target's
then-current prospectus and statement of additional information, less (b) the
amount of the Liabilities as of the Valuation Time.
B. For purposes of paragraph 3.1(a), the NAV per share of Acquiror
Shares shall be computed as of the Valuation Time, using the valuation
procedures set forth in Acquiror's then-current prospectus and statement of
additional information as filed in its registration statement on Form N-1A.
C. All computations pursuant to paragraphs 4.1 and 4.2 shall be made
by State Street, using (insofar as practicable) prices provided by outside
pricing services approved by Managers Trust's board of trustees.
V. Closing and Effective Time. The Reorganization, together with related acts
necessary to consummate it ("Closing"), shall occur at the Trust's principal
office on February 27, 1998, or at such other place and/or on such other date as
the Trust's officers may determine. All acts taking place at the Closing shall
be deemed to take place simultaneously at the Valuation Time or at such other
time as the Trust's officers may determine ("Effective Time"). If, immediately
before the Valuation Time, trading or the reporting of trading on the NYSE or
elsewhere is disrupted, so that accurate appraisal of Target's NAV and the NAV
per Acquiror Share is impracticable, the Effective Time shall be postponed until
the first business day after the day when such trading shall have been fully
resumed and such reporting shall have been restored.
VI. Conditions. Each Fund's obligations hereunder are subject to satisfaction
of each condition indicated in this paragraph as being applicable to it either
at the time stated therein or, if no time is so stated, at or before the
Effective Time:
A. Conditions to Each Fund's Obligations:
-------------------------------------
1. The Related Transactions shall have been consummated;
2. The fair market value of the Acquiror Shares, when
received by the Shareholders, will be approximately equal to the fair
market value of their Target Shares constructively surrendered in
exchange therefor;
3. The Trust's management (a) is unaware of any plan or
intention of Shareholders to redeem or otherwise dispose of any portion
of the Acquiror Shares to be received by them in the Reorganization and
(b) does not anticipate dispositions of those Acquiror Shares at the
time of or soon after the Reorganization to exceed the usual rate and
frequency of dispositions of shares of Target as a series of an
open-end investment company. Consequently, the Trust's management
expects that the percentage of Shareholder interests, if any, that will
be disposed of as a result of or at the time of the Reorganization will
be de minimis. Nor does the Trust's management anticipate that there
A-5
<PAGE>
will be extraordinary redemptions of Acquiror Shares immediately
following the Reorganization;
4. The Shareholders will pay their own expenses, if any,
incurred in connection with the Reorganization;
5. Immediately following consummation of the Reorganization,
Acquiror (directly or through LMB Portfolio) will hold substantially
the same assets and be subject to substantially the same liabilities
that Target (directly or through USB Portfolio) held or was subject to
immediately prior thereto, in addition to the assets and liabilities
Acquiror held immediately before the Reorganization, plus any
liabilities and expenses of the parties incurred in connection with
the Reorganization;
6. The fair market value on a going concern basis of the
Assets will equal or exceed the Liabilities to be assumed by Acquiror
and those to which the Assets are subject;
7. There is no inter-series indebtedness between the Funds
that was issued or acquired, or will be settled, at a discount;
8. Pursuant to the Reorganization, Target will transfer to
Acquiror, and Acquiror will acquire, at least 90% of the fair market
value of the net assets, and at least 70% of the fair market value of
the gross assets, held by Target immediately before the
Reorganization. For the purposes of this representation, any amounts
used by Target to pay its Reorganization expenses and redemptions and
distributions made by it immediately before the Reorganization (except
for (a) distributions made to conform to its policy of distributing
all or substantially all of its income and gains to avoid the
obligation to pay federal income tax and/or the excise tax under
section 4982 of the Code and (b) redemptions not made as part of the
Reorganization) will be included as assets thereof held immediately
before the Reorganization; 9. Immediately after the Reorganization,
the Shareholders will not own shares constituting "control" of
Acquiror within the meaning of section 304(c);
10. The Trust and Managers Trust shall have received an
opinion of Kirkpatrick & Lockhart LLP, their counsel ("Counsel"),
addressed to and in form and substance satisfactory to them, as to the
federal income tax consequences mentioned below ("Tax Opinion"). In
rendering the Tax Opinion, Counsel may assume satisfaction of all the
conditions set forth in this paragraph 6 (and may treat them as
representations by the Trust and Managers Trust to Counsel) and may
rely, as to any factual matters, exclusively and without independent
verification, on such representations and any other representations
made to Counsel by responsible officers of the Trust. The Tax Opinion
shall be substantially to the effect that, based on the facts and
assumptions stated therein, for federal income tax purposes:
a. Acquiror's acquisition of the Assets in exchange
solely for Acquiror Shares and Acquiror's assumption of the
Liabilities, followed by Target's distribution of those shares to
A-6
<PAGE>
the Shareholders constructively in exchange for their Target
Shares, will constitute a reorganization within the meaning of
section 368(a)(1)(C) of the Code, and each Fund will be "a party
to a reorganization" within the meaning of section 368(b) of the
Code;
b. No gain or loss will be recognized to Target on the
transfer to Acquiror of the Assets in exchange solely for Acquiror
Shares and Acquiror's assumption of the Liabilities or on the
subsequent distribution of those shares to the Shareholders in
constructive exchange for their Target Shares;
c. No gain or loss will be recognized to Acquiror on
its receipt of the Assets in exchange solely for Acquiror Shares
and its assumption of the Liabilities;
d. Acquiror's basis for the Assets will be the same
as the basis thereof in Target's hands immediately before the
Reorganization, and Acquiror's holding period for the Assets will
include Target's holding period therefor;
e. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiror
Shares pursuant to the Reorganization; and
f. A Shareholder's basis for the Acquiror Shares to be
received by it in the Reorganization will be the same as the basis
for its Target Shares to be constructively surrendered in exchange
for those Acquiror Shares, and its holding period for those
Acquiror Shares will include its holding period for those Target
Shares, provided they are held as capital assets by the
Shareholder at the Effective Time.
Notwithstanding subparagraphs 6.1.10.2 and 6.1.10.4, the Tax Opinion
may state that no opinion is expressed as to the effect of the
Reorganization on the Funds or any Shareholder with respect to any
asset as to which any unrealized gain or loss is required to be
recognized for federal income tax purposes at the end of a taxable year
(or on the termination or transfer thereof) under a mark-to-market
system of accounting;
11. The Trust and Managers Trust shall have received any
no-action assurance from the Securities and Exchange Commission ("SEC")
deemed necessary by counsel with respect to section 17(a) of the 1940
Act;
12. All necessary filings shall have been made with the SEC
and state securities authorities, and no order or directive shall have
been received that any other action is required to permit the parties
to carry out the transactions contemplated hereby. The registration
statement on Form N-14 relating to the Acquiror Shares issuable
hereunder shall have become effective under the Securities Act of 1933,
no stop orders suspending the effectiveness thereof shall have been
issued, and the SEC shall not have issued an unfavorable report with
respect to the Reorganization under section 25(b) of the 1940 Act nor
instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act;
and
A-7
<PAGE>
13. Each Fund shall have taken or caused to be taken all
actions, and shall have done or caused to be done all things,
reasonably necessary, proper, or advisable to consummate and effectuate
the transactions contemplated hereby.
B. Conditions to Acquiror's Obligations:
------------------------------------
1. At the Closing, Target will have good title to the Assets
and full right, power, and authority to sell, assign, transfer, and
deliver the Assets to Acquiror free of any liens or other encumbrances;
and upon delivery and payment for the Assets, Acquiror will acquire
good and marketable title thereto;
2. The Liabilities were incurred by Target in the ordinary
course of its business;
3. Target is a "fund" as defined in section 851(g)(2) of the
Code; it qualified for treatment as a regulated investment company
under Subchapter M of the Code ("RIC") for each past taxable year since
it commenced operations and will continue to meet all the requirements
for such qualification for its current taxable year; and it has no
earnings and profits accumulated in any taxable year in which the
provisions of Subchapter M did not apply to it;
4. Target is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case
within the meaning of section 368(a)(3)(A) of the Code;
5. Not more than 25% of the value of the total assets held by
Target, directly or through USB Portfolio (excluding cash, cash items,
and U.S. government securities), is invested in the stock and
securities of any one issuer, and not more than 50% of the value of
such assets is invested in the stock and securities of five or fewer
issuers; and
6. Target will be terminated as soon as reasonably
practicable after the Reorganization, but in all events within six
months after the Effective Time.
C. Conditions to Target's Obligations:
----------------------------------
1. No consideration other than Acquiror Shares (and
Acquiror's assumption of the Liabilities) will be issued in exchange
for the Assets in the Reorganization;
2. The Acquiror Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized and,
when issued and delivered as provided herein, will be duly and validly
issued and outstanding shares of Acquiror, fully paid and
non-assessable. Except as contemplated by this Plan, Acquiror does not
have outstanding any options, warrants, or other rights to subscribe
for or purchase any of its shares, nor is there outstanding any
security convertible into any of its shares;
3. Acquiror is a "fund" as defined in section 851(g)(2) of the
Code; it qualified for treatment as a RIC for each past taxable year
since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year;
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<PAGE>
Acquiror intends to continue to meet all such requirements for the next
taxable year; and it has no earnings and profits accumulated in any
taxable year in which the provisions of Subchapter M of the Code did
not apply to it;
4. Acquiror has no plan or intention to issue additional
Acquiror Shares following the Reorganization except for shares issued
in the ordinary course of its business as a series of an open-end
investment company; nor does Acquiror have any plan or intention to
redeem or otherwise reacquire any Acquiror Shares issued to the
Shareholders pursuant to the Reorganization, other than through
redemptions arising in the ordinary course of that business;
5. Acquiror (directly or through LMB Portfolio) (a) will
actively continue Target's business in substantially the same manner
that Target conducted that business (directly or through USB Portfolio)
immediately before the Reorganization, (b) has no plan or intention to
sell or otherwise dispose of any of the Assets, except for dispositions
made in the ordinary course of that business and dispositions necessary
to maintain its status as a RIC, and (c) expects to retain
substantially all the Assets in the same form as it receives them in
the Reorganization, unless and until subsequent investment
circumstances suggest the desirability of change or it becomes
necessary to make dispositions thereof to maintain such status;
6. There is no plan or intention for Acquiror to be dissolved
or merged into another corporation or business trust or any "fund"
thereof (within the meaning of section 851(g)(2) of the Code) following
the Reorganization;
7. Immediately after the Reorganization, (a) not more than 25%
of the value of the total assets held by Acquiror, directly or through
LMB Portfolio (excluding cash, cash items, and U.S. government
securities), will be invested in the stock and securities of any one
issuer and (b) not more than 50% of the value of such assets will be
invested in the stock and securities of five or fewer issuers; and
8. Acquiror does not directly or indirectly own, nor at the
Effective Time will it directly or indirectly own, nor has it at any
time during the past five years directly or indirectly owned, any
Target Shares.
VII. Expenses. Except as otherwise provided herein, all expenses incurred by
the Funds in connection with the transactions contemplated by this Plan (whether
or not they are consummated) will be borne by the Funds proportionately, as
follows: each such expense will be borne by the Funds in proportion to their
respective net assets as of the close of business on the last business day of
the month in which such expense was incurred. Such expenses include (a) expenses
incurred in connection with entering into and carrying out the provisions of
this Plan, (b) expenses associated with preparing and filing with the SEC a
registration statement on Form N-14 relating to the Acquiror Shares issuable
hereunder, and any supplement or amendment thereto, including therein a
prospectus/information statement ("Prospectus"), (c) registration or
qualification fees and expenses of preparing and filing such forms as are
necessary under applicable state securities laws to qualify such Acquiror Shares
in each state in which Target's shareholders are resident as of the date of the
mailing of the Prospectus to them, (d) expenses incurred in connection with
obtaining no-action assurance from the SEC referenced in subparagraph 6.1.11,
(e) printing and postage expenses, and (f) legal and accounting fees.
A-9
<PAGE>
VIII. Termination. The Trust's board of trustees may terminate this Plan and
abandon the Reorganization at any time prior to the Closing if circumstances
develop that, in the trustees' judgment, make proceeding with the Reorganization
inadvisable for either Fund.
IX. Governing Law. This Plan shall be construed in accordance with the internal
laws of the State of Delaware; provided that, in the case of any conflict
between such laws and the federal securities laws, the latter shall govern.
IN WITNESS WHEREOF, Neuberger & Berman Income Trust has caused this
Plan to be executed and delivered on behalf of each Fund by its duly authorized
officers as of the day and year first written above.
Attest: NEUBERGER & BERMAN INCOME TRUST
/s/ Claudia A. Brandon /s/ Theodore P. Giuliano
- --------------------------- -----------------------------
Secretary President
A-10
<PAGE>
APPENDIX B
FINANCIAL HIGHLIGHTS
Neuberger & Berman Limited Maturity Bond Trust and Portfolio
Neuberger & Berman Ultra Short Bond Fund and Portfolio
B-1
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Limited Maturity Bond Trust
- --------------------------------------------------------------------------------
The following table includes selected data for a share
outstanding throughout each year and other performance information
derived from the Financial Statements. The per share amounts and ratios
which are shown reflect income and expenses, including the Fund's
proportionate share of its corresponding Portfolio's income and
expenses. It should be read in conjunction with its corresponding
Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
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 .04 (.08) .18 (.54) (.03)
unrealized)
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)
See Notes to Financial Highlights.
</TABLE>
B-2
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Ultra Short Bond Trust
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding
throughout each year and other performance information derived from the
Financial Statements. The per share amounts and ratios which are shown reflect
income and expenses, including the Fund's proportionate share of its
corresponding Portfolio's income and expenses. It should be read in conjunction
with its corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
September 7,
Year Ended October 31, 1993(1)
1997 1996 1995 1994 to October 31,
1993
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $9.82 $9.85 $9.79 $9.97 $10.00
Income From Investment Operations
Net Investment Income .54 .53 .53 .37 .05
Net Gains or Losses on Securities (both realized and
unrealized) .03 (.03) .06 (.18) (.03)
Total From Investment Operations .57 .50 .59 .19 .02
Less Distributions
Dividends (from net investment income) (.54) (.53) (.53) (.37) (.05)
Net Asset Value, End of Year $9.85 $9.82 $9.85 $9.79 $9.97
Total Return(2) +5.97% +5.24% +6.15% +1.92% +0.17%(3)
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $10.2 $6.6 $1.7 $1.2 $0.2
Ratio of Gross Expenses to Average Net Assets(4) .76% .76% .72% -- --
Ratio of Net Expenses to Average Net Assets(5) .76% .76% .72% .65% .65%(6)
Ratio of Net Investment Income to Average Net Assets(5) 5.51% 5.43% 5.42% 3.86% 2.98%(6)
See Notes to Financial Highlights.
</TABLE>
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<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger&Berman
October 31, 1997
- --------------------------------------------------------------------------------
Income Trust
1) The date investment operations commenced.
2) Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of each Fund during each
fiscal period and assumes dividends and other distributions, if any, were
reinvested. Results represent past performance and do not guarantee future
results. Investment returns and principal may fluctuate and shares when
redeemed may be worth more or less than original cost. Total return 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, each 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 as described in Note B of
Notes to Financial Statements. 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:
Period from
September 7,
Year Ended October 31, 1993 to
ULTRA SHORT 1997 1996 1995 1994 1993 October 31
- ----------------------- --------- --------- ------------------------------------
Net Expenses 2.15% 2.50% 2.50% 2.50% 2.50%
Net Investment Income 4.12% 3.69% 3.64% 2.01% 1.13%
Period from
August 30,
Year Ended October 31, 1993 to
LIMITED MATURITY 1997 1996 1995 1994 1993 October 31
- ----------------------- --------- --------- ---------- -------------------------
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%
6) Annualized.
B-4
<PAGE>
7) Ultra Short and Limited Maturity each invests only in its corresponding
Portfolio, and that Portfolio, rather than the Fund, engages in
securities transactions. The portfolio turnover rates for each
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>
Ultra Short Bond Portfolio 101% 173% 148% 94% 46%
Limited Maturity Bond Portfolio 89% 169% 88% 102% 71%
</TABLE>
B-5
<PAGE>
APPENDIX C
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
(from Neuberger & Berman Income Trust
Annual Report to Shareholders dated October 31, 1997)
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<PAGE>
PRESIDENT'S LETTER
Dear Shareholder,
In a "state of the bond market" address presented in our fiscal April
30, 1997, Semi-Annual Report, I expressed our positive attitude toward the
fixed-income markets. I summarized our perspective by concluding that, ". . .
based on their own fundamental merits, we find that bonds currently provide an
appealing investment opportunity." Evidently, our opinion was shared by others,
most notably legendary value investor Warren Buffett, who was reported to have
purchased several billion dollars of bonds during the third quarter in a rare
foray into the fixed-income market. Equities investors' renewed enthusiasm for
bonds is also becoming more evident in the mutual fund arena. In September and
October 1997, an estimated $6.6 billion flowed into bond funds, nearly double
the total from a year ago. What is happening here? We believe investors are
recognizing bonds' fundamental attractiveness and showing greater appreciation
for the traditional role fixed income plays in diversified investment
portfolios.
EDGAR PRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
1-YEAR TREASURY BILLS 5-YEAR TREASURY NOTES 10-YEAR TREASURY BONDS
Nov 96 0.51% 1.49% 2.68%
Dec 96 0.85% 0.40% 0.54%
Jan 97 1.38% 0.74% 0.55%
Feb 97 1.72% 0.50% 0.32%
Mar 97 2.00% -0.45% -1.65%
Apr 97 2.62% 0.83% 0.25%
May 97 3.28% 1.59% 1.34%
Jun 97 3.87% 2.61% 3.06%
Jul 97 4.62% 5.22% 7.30%
Aug 97 4.99% 4.38% 5.08%
Sep 97 5.55% 5.84% 7.38%
Oct 97 6.15% 7.47% 10.18%
Source: Salomon Brothers
Let's discuss fundamentals first. There are several surprising bullish
developments that have allowed interest rates to decline by 53-86 basis points
(.53%-.86%) on bonds with maturities of one year or more over the last six
months (ended 10/31/97). All other things being equal, these developments may
help rates gradually fall further in the year ahead. First, the federal budget
deficit appears to be shrinking in a dramatic fashion, and there are forecasts
that the U.S. may in fact have a budget surplus within the next several years.
This would be the first budget surplus in over three decades. The decline in the
federal deficit, accompanied by reduced issuance of government bonds, have
convinced a growing number of investors that the United States' fiscal house may
finally be in order.
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<PAGE>
A second development is in the Treasury Department's funding policy.
Despite their rather tepid initial reception, the Treasury remains committed to
selling more floating rate debt (the new Treasury Inflation Protection
Securities or "TIPS") and fewer fixed-rate securities. We believe demand for the
traditional fixed-rate Treasuries will remain strong, and therefore, prices are
likely to be supported by investors chasing a shrinking supply.
Finally, the notion that a strong economy leads to a pick-up in
inflation is being called into question. With this historically unprecedented
economic expansion, many economists and market observers have predicted that a
rise in inflation was inevitable. This has not happened. Inflation statistics
are being reported below 3.0% and the Federal Reserve, which would have normally
tightened credit at this point in the business cycle, has refrained from raising
rates because of what appears to be dormant inflation.
These four factors -- declining federal deficits, a shrinking supply of
fixed-rate Treasury securities, low inflation, and a benign Federal Reserve --
have produced very positive results for fixed-income investors over the last six
months. While future events are inherently unpredictable, we expect these
factors will continue to buoy the bond market over the next year. Bonds may also
benefit from a tailwind provided by equities investors. In October, investors
got their first taste of stock market instability in several years. True to
form, during the stock market sell-off, bonds provided yield and relative safety
of principal, and in the process, clearly demonstrated why they deserve a place
in everyone's investment program.
ULTRA SHORT BOND TRUST With interest rates trending lower over the last
six months, we extended the portfolio's weighted average duration from 1.62
years to 1.80 years at the close of fiscal 1997. In the process, securities with
durations (measure of interest rate sensitivity) less than one year declined
from 39% of the portfolio at the end of first half fiscal 1997 to 15% at the
close of the fiscal year.
Our primary strategic shift during the last six months was to increase
our allocation in corporate notes and bonds from 16.4% at the close of first
half fiscal 1997 to 37.2% at the end of the fiscal year. This was done to take
advantage of the higher yields offered by corporates as a result of plentiful
supply and, in our opinion, unjustified jitters over corporate profitability.
Our allocation in Treasury securities declined from 31.6% at the close of first
half fiscal 1997 to 25.2% at the end of this reporting period. This reflects our
response to the higher prices and lower yields for Treasuries created by the
supply/demand imbalance in the marketplace. In view of corporate bonds' material
yield advantage over Treasuries, one might wonder why we have not reduced our
Treasury securities weighting even more. We believe the scarcity value of
Treasuries is likely to continue to contribute to price appreciation and
enhanced total return. We reduced our exposure to asset-backed securities from
19.1% to 12.3% over the last six months, taking profits on bonds that became
more fully valued.
We are always on the lookout for "special situations," bonds that are
attractively priced due to what we view as investor misperception. The bonds of
Countrywide Credit Industries, the U.S.'s second largest servicer and originator
of home mortgages, offers a current example. We think the bond is attractively
priced due to investors' concern that a potential wave of refinancing could
C-3
<PAGE>
reduce revenue and cash flow in Countrywide's mortgage servicing business.
However, the WAC (weighted average interest rate) of the mortgages Countrywide
services approximates the rates on no-point mortgages being offered today. So,
we believe rates would have to come down quite a bit before significant
refinancings would have a materially negative impact on the company's mortgage
servicing business. If they do, we think Countrywide is well positioned to take
up the slack in its mortgage servicing business by increasing revenue and cash
flow from originating new mortgages. At the close of second-half fiscal 1997,
the Countrywide Funding 7.31%s of 8/28/2000 were priced at $102.71 to yield
6.24%; in our view, an attractive yield for a piece of paper maturing in under
three years. Of course, we reserve the right to change our opinion on any bond
in our portfolios, but currently we like the prospects for this one.
LIMITED MATURITY BOND TRUST The fund's weighted average duration was
extended from 1.9 years at the beginning of second half fiscal 1997 to a peak of
2.3 years in October to take advantage of declining interest rates. In the last
week of October, believing the bond market had become temporarily overbought as
equities investors flocked to bonds in the midst of the stock market's
instability, we reduced duration to 2.0 years.
Our sector allocation has not changed significantly over the last six
months. As of October 31, 1997, 68.8% of assets were in corporate bonds, 20.5%
in asset-backed securities, 7.7% in mortgages, and the remaining 3.0% in
Government Agencies and cash equivalents. Once again, our high-yield investments
performed well. So well, in fact, that we took some profits in high-yield bonds
that had become fully priced, and in September had reduced our high-yield
positions from approximately 9.6% of the portfolio at the start of second half
fiscal 1997 to 6.0%. Since then, we took advantage of what we believe to be more
attractive pricing in the high-yield sector to build our positions back up to
8.8% of the fund's assets at the close of fiscal 1997.
One of our successful investment strategies over the last six months is
something that we didn't do--namely, invest in Southeast Asia. We can have up to
25% of the Fund's assets in non-dollar-denominated foreign bonds and as much as
we want in dollar-denominated bonds of foreign issuers. While the fund will take
advantage of foreign opportunities, we are very careful in our credit analysis.
In recent years, countries such as Thailand, Korea, Malaysia and Indonesia have
been major issuers of U.S. dollar-denominated debt in the U.S. bond market. All
of these countries had strong investment-grade ratings from the major rating
agencies and powerful sponsorship from the key Wall Street underwriters. We took
a hard look at these offerings and our analysis showed these bonds to have below
investment-grade risk characteristics with huge downside risk if the supply of
external capital dried up. Our concerns were confirmed when currency turmoil,
which began in July and accelerated through the Fall, overwhelmed these
countries and sent bonds plummeting.
In the corporate sector, we have been modestly increasing our exposure
to utility company bonds. Due to concerns about the deregulation of the
industry, utilities bonds have been out of favor with the credit rating agencies
and investors in recent years. Now, the dust is settling and we are seeing
evidence that financially strong and well-managed utilities companies can
survive and prosper in this new environment. In addition, regulators thus far
appear disposed to protecting bond holders during this transition period. We see
the potential for solid returns in utilities bonds such as Cleveland Electric
Illuminating Co. 7.19%s of 7/1/2000 and Central Maine Power 7.05%s of 3/l/2008,
two of our portfolio holdings. Of course, these bonds are examples of our
C-4
<PAGE>
current perspective on utilities bonds, and if fundamentally warranted, our
investment opinions can change.
In closing, we are gratified by our fixed-income funds' performance in
second half and full fiscal year 1997. Favorable economic and supply/demand
fundamentals for bonds remain intact. We also expect investors' renewed
enthusiasm for bonds will carry over into 1998.
Sincerely,
/s/ Theodore P. Giuliano
-------------------------------
President and Trustee
Neuberger&Berman Income Trust
C-5
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman October 31, 1997
- --------------------------------------------------------------------------------
EDGAR PRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Ultra Short 6-Month Salomon
Bond Trust Treasury Bill Index
1987 $10,000 $10,000
1988 $10,716 $10,673
1989 $11,686 $11,603
1990 $12,619 $12,555
1991 $13,583 $13,384
1992 $14,186 $13,961
1993 $14,699 $14,417
1994 $14,981 $14,990
1995 $15,903 $15,885
1996 $16,736 $16,746
1997 $17,735 $17,656
Average Annual Total Return(1)
Ultra Short 6-Month Salomon
Bond Trust Treasury Bill
1 Year +5.97% +5.43%
5 Year +4.57% +4.81%
10 Year +5.90% +5.85%
The performance information for Neuberger&Berman Ultra Short Bond
Trust(R) ("Ultra Short Bond Trust") is as of October 31, 1997. Ultra Short Bond
Trust started operating on September 7, 1993. It has identical investment
objectives and policies, and invests in the same Portfolio as Neuberger&Berman
Ultra Short Bond Fund(R) ("Sister Fund"), which is also managed by
Neuberger&Berman Management Inc.(R) The performance information shown in the
above chart for the period before September 7, 1993, is for the Sister Fund.
Neuberger&Berman Management Inc. has voluntarily undertaken to reimburse Ultra
Short Bond Trust for its operating expenses and its pro rata share of its
Portfolio's operating expenses which, in the aggregate, exceed .75% per annum of
Ultra Short Bond Trust's average daily net assets. This arrangement can be
terminated upon 60 days' prior written notice. Absent such arrangement, the
average annual total returns would have been less. The total returns for periods
prior to the Trust's commencement of operations would have been lower had they
reflected the higher expense ratios of the Trust as compared to those of the
Sister Fund.
1. "Total Return" includes reinvestment of all income dividends and capital
gain distributions. Results represent past performance and do not indicate
future results. The value of an investment in the Trust and the return on
the investment both will fluctuate, and redemption proceeds may be higher
or lower than an investor's original cost.
C-6
<PAGE>
2. The 6-Month Salomon Treasury Bill Index is an unmanaged index of the 6 most
recent 6-month Treasury bill securities. This index consists of a moving
6-month average yield (not total return) of the 6-month Treasury bills.
Please note that indices do not take into account any fees and expenses of
investing in the individual securities that they track, and that
individuals cannot invest directly in any index. Data about the performance
of this index are prepared or obtained by Neuberger&Berman Management Inc.
and include reinvestment of all dividends and capital gain distributions.
The Portfolio invests in many securities not included in the
above-described index.
C-7
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman October 31, 1997
- --------------------------------------------------------------------------------
EDGAR PRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Limited Maturity Merrill-Lynch 1-3 Year
Bond Trust Treasury Index
1987 $10,000 $10,000
1988 $10,825 $10,758
1989 $11,859 $11,771
1990 $12,791 $12,800
1991 $14,184 $14,244
1992 $15,300 $15,411
1993 $16,408 $16,308
1994 $16,406 $16,501
1995 $17,778 $17,978
1996 $18,719 $19,040
1997 $20,008 $20,275
Average Annual Total Return(1)
Limited Maturity Merrill-Lynch 1-3 Year
Bond Trust Treasury Index
1 Year +6.88% +6.49%
5 Year +5.51% +5.64%
10 Year +7.18% +7.32%
The performance information for Neuberger&Berman Limited Maturity Bond
Trust(R) ("Limited Maturity Bond Trust") is as of October 31, 1997. Limited
Maturity Bond Trust started operating on August 30, 1993. It has identical
investment objectives and policies, and invests in the same Portfolio as
Neuberger&Berman Limited Maturity Bond Fund(R) ("Sister Fund"), which is also
managed by Neuberger&Berman Management Inc.(R) The performance information shown
in the above chart for the period before August 30, 1993, is for the Sister
Fund. Neuberger&Berman Management Inc. has voluntarily undertaken to reimburse
Limited Maturity Bond Trust for its operating expenses and its pro rata share of
its Portfolio's operating expenses which, in the aggregate, exceed .80% per
annum of Limited Maturity Bond Trust's average daily net assets. This
arrangement can be terminated upon 60 days' prior written notice. Absent such
arrangement, the average annual total returns would have been less. The total
returns for periods prior to the Trust's commencement of operations would have
been lower had they reflected the higher expense ratios of the Trust as compared
to those of the Sister Fund.
1. "Total Return" includes reinvestment of all income dividends and capital
gain distributions. Results represent past performance and do not indicate
future results. The value of an investment in the Trust and the return on
the investment both will fluctuate, and redemption proceeds may be higher
or lower than an investor's original cost.
2. The Merrill Lynch 1-3 Treasury Index is an unmanaged total return market
value index consisting of all coupon-bearing U.S. Treasury publicly placed
C-8
<PAGE>
debt securities with maturities between 1 and 3 years. Please note that
indices do not take into account any fees and expenses of investing in the
individual securities that they track, and that individuals cannot invest
directly in any index. Data about the performance of this index are
prepared or obtained by Neuberger&Berman Management Inc. and include
reinvestment of all dividends and capital gain distributions. The Portfolio
invests in many securities not included in the above-described index.
C-9
<PAGE>
NEUBERGER & BERMAN INCOME TRUST
Neuberger & Berman Limited Maturity Bond Trust
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
STATEMENT OF ADDITIONAL INFORMATION
DATED JANUARY 23, 1998
This Statement of Additional Information ("SAI") relates specifically
to the reorganization of Neuberger & Berman Ultra Short Bond Trust ("Ultra Short
Bond Trust") into Neuberger & Berman Limited Maturity Bond Trust ("Limited
Maturity Bond Trust"), whereby Ultra Short Bond Trust will transfer
substantially all of its assets from Neuberger & Berman Ultra Short Bond
Portfolio ("Ultra Short Bond Portfolio") to Neuberger & Berman Limited Maturity
Bond Portfolio ("Limited Maturity Bond Portfolio"), and shareholders in Ultra
Short Bond Trust will receive shares of Neuberger & Berman Limited Maturity Bond
Trust ("Limited Maturity Bond Trust"), in exchange for their shares of Ultra
Short Bond Trust. This Statement of Additional Information consists of the
information set forth herein and the following described documents, each of
which is incorporated by reference herein (legally forms a part of the SAI):
(1) The audited financial statements of Neuberger & Berman Limited
Maturity Bond Trust and Neuberger & Berman Ultra Short Bond
Trust (series of Neuberger & Berman Income Trust) and the
audited financial statements of Neuberger & Berman Limited
Maturity Bond Portfolio and Neuberger & Berman Ultra Short Bond
Portfolio (series of Income Manager Trust) included in the
Annual Report to Shareholders of Neuberger & Berman Income Trust
for the fiscal year ended October 31, 1997, previously filed on
EDGAR, Accession Number 0000898432-97-00530.
(2) The Statement of Additional Information of Neuberger & Berman
Income Trust, dated February 3, 1997, as supplemented on June
26, 1997, previously filed on EDGAR, Accession Number
0000898432-97-00040 and 0000898432-97-000327, respectively,
except for the information contained herein, which has been
updated as of the fiscal year ended October 31, 1997.
This Statement of Additional Information is not a prospectus and should
be read only in conjunction with the Prospectus and Information Statement dated
January 23, 1998 relating to the above-referenced matter. A copy of the
Prospectus and Information Statement may be obtained by calling Neuberger &
Berman Management Incorporated at 800-877-9700.
<PAGE>
Trustees' and Officers' Compensation
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 10/31/97
<TABLE>
<CAPTION>
Name and Position with Aggregate Compensation Total Compensation from Trusts in
Neuberger & Berman from Neuberger & Berman the Neuberger & Berman Fund Complex
Income Trust Income Trust Paid to Trustees
- --------------------------- ------------------------ -----------------------------------
<S> <C> <C>
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
Chairman of the Board, Chief $ 0 (9 other investment companies)
Executive Officer, and
Trustee
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)
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)
</TABLE>
Fees Paid to Investment Manager
Limited Maturity Bond Trust accrued management and administration fees
of the following amounts (before any reimbursement of the Fund, described below)
for the fiscal years ended October 31, 1997, 1996, and 1995:
1997 1996 1995
---- ---- ----
$246,420 $114,471 $65,572
2
<PAGE>
Neuberger & Berman Management Incorporated ("N&B Management") has
voluntarily undertaken to reimburse Limited Maturity Bond Trust for its
Operating Expenses (including fees under the Administration Agreement) and the
Fund's pro rata share of the corresponding Portfolio's Operating Expenses
(including fees under the Management Agreement) that exceed, in the aggregate,
0.80% per annum of the Fund's average daily net assets. Operating Expenses
exclude interest, taxes, brokerage commissions, and extraordinary expenses. N&B
Management can terminate this undertaking by giving the Fund at least 60 days'
prior written notice. For the fiscal years ended October 31, 1997, 1996, and
1995, N&B Management reimbursed Limited Maturity Bond Trust the following
amounts of expenses: $144,510, $168,733, and $123,568, respectively.
Amount of Securities Held by "Regular Brokers or Dealers"
During the fiscal year ended October 31, 1997, Limited Maturity Bond
Portfolio acquired securities of the following of its "regular brokers or
dealers": Goldman Sachs & Co.; 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;
Merrill Lynch, Pierce, Fenner & Smith Inc., $5,269,344.
Yield Information
The annualized yield for Limited Maturity Bond Trust for the 30-day
period ended October 31, 1997, was 5.75%.
3
<PAGE>
NOTES TO PRO FORMA COMBINED
FINANCIAL STATEMENTS (UNAUDITED)
The accompanying unaudited Pro Forma Combined Schedule of Investments
and Statements of Assets and Liabilities as of October 31, 1997 and the
unaudited Pro Forma Combined Statements of Operations for the year ended October
31, 1997, are intended to present the financial condition and related results of
operations of Neuberger & Berman Limited Maturity Bond Trust ("Limited Maturity
Bond Trust") and Neuberger & Berman Limited Maturity Bond Portfolio ("Limited
Maturity Bond Portfolio") as if the reorganization with Neuberger & Berman Ultra
Short Bond Trust ("Ultra Short Bond Trust") and Neuberger & Berman Ultra Short
Bond Portfolio ("Ultra Short Bond Portfolio"), respectively, had been
consummated on that date. Certain expenses have been adjusted to reflect the
expected operations of the combined entities.
Certain expenses will be reduced due to the elimination of duplicate
services. It is estimated that costs of approximately $16,000 associated with
the Reorganization will be charged to the Funds in proportion to their
respective net assets. The pro forma combined financial statements reflect the
current expense cap of Limited Maturity Bond Trust, 0.80% of the average daily
net assets of the Fund, which will continue to be the expense cap for that Fund
following the Reorganization. (This expense cap is voluntary and may be
terminated by N&B Management at any time upon 60 days' notice to the Fund.)
The pro forma combined financial statements are presented for the
information of the reader and may not necessarily be representative of what the
actual combined financial statements would have been had the Reorganization
occurred at October 31, 1997. The pro forma combined financial statements should
be read in conjunction with the separate annual audited financial statements of
the constituent Funds and Portfolios incorporated by reference into this
Statement of Additional Information.
4
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
Neuberger&Berman For the Year Ended October 31, 1997 (Unaudited)
---------------------------------------------------------------------------------------------------------------------------------
Income Trust
ULTRA SHORT LIMITED MATURITY PRO FORMA
(000's omitted) BOND TRUST BOND TRUST ADJUSTMENTS1 COMBINED
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Investment income from corresponding Portfolio $568 $2,314 -- $2,882
------------------------------------------------------------------
Expenses:
Administration fee 45 164 -- 209
Amortization of deferred organization and initial 11 10 (11)2 10
offering expenses
Auditing fees 5 5 ( 5)3 5
Custodian fees 10 10 (10)3 10
Legal fees 13 14 (13)3 14
Registration and filing fees 29 41 (29)3 41
Shareholder reports 24 34 -- 58
Shareholder servicing agent fees 18 19 (17)3+4 20
Trustees' fees and expenses 1 2 -- 3
Miscellaneous 1 1 ( 1)3 1
Expenses from corresponding Portfolio 38 108 (10)5 136
------------------------------------------------------------------
Total expenses 195 408 (96) 507
Expenses reimbursed by administrator and/or reduced 6
by custodian fee expense offset arrangement (126) (145) 126 (145)
------------------------------------------------------------------
Total net expenses 69 263 30 362
------------------------------------------------------------------
Net investment income 499 2,051 (30) 2,520
------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
from Corresponding Portfolio
Net realized gain on investment securities 1 237 -- 238
Net realized loss on financial futures contracts -- (279) -- (279)
Net realized gain on foreign currency transactions -- 2 -- 2
Change in net unrealized appreciation of investment
securities, financial currencies, futures contracts,
translation of assets and liabilities in foreign
and foreign currency contracts 44 163 -- 207
------------------------------------------------------------------
Net gain on investments from corresponding 45 123 -- 168
Portfolio
------------------------------------------------------------------
Net increase in net assets resulting from $544 $2,174 (30) $2,688
operations
------------------------------------------------------------------
1 The adjustments assume that Limited Maturity Bond Trust has obtained all the shareholder accounts of Ultra Short Bond
Trust, and that Limited Maturity Bond Portfolio has obtained all the assets of Ultra Short Bond Portfolio.
2 Unamortized organization expenses of Ultra Short Bond Trust have been written off as a result of the Reorganization.
3 Certain expenses have been reduced due to the elimination of partially duplicative services.
4 Certain expenses, which are determined on a per series basis or on a sliding scale based upon net assets, have been
adjusted to reflect the combination of Limited Maturity Bond Trust and Ultra Short Bond Trust.
5 Reflects each Fund's pro rata share of the expenses of its corresponding Portfolio.
6 Reflects expenses of Ultra Short Bond Trust that were reimbursed by the administrator and/or reduced by the custodian fee
expense offset arrangement.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED STATEMENTS OF ASSETS AND LIABILITIES
Neuberger&Berman October 31, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Income Trust
ULTRA SHORT LIMITED MATURITY PRO FORMA
(000's omitted except per share amounts) BOND TRUST BOND TRUST ADJUSTMENTS1 COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investment in corresponding Portfolio, at value $10,186 $37,469 $47,655
Deferred organization costs 9 9 (9)2 9
Receivable for Trust shares sold 2 12 14
Receivable from administrator - net 5 -- 5
------------------------------------------------------------------
10,202 37,490 (9) 47,683
------------------------------------------------------------------
Liabilities
Payable for Trust shares redeemed 14 56 70
Payable to administrator--net -- 13 13
Accrued expenses 19 25 44
------------------------------------------------------------------
33 94 127
------------------------------------------------------------------
Net Assets at value $10,169 $37,396 $(9) $47,556
------------------------------------------------------------------
Net Assets consist of:
Par value $ 1 $ 4 $ 5
Paid-in capital in excess of par value 10,145 37,291 (9) 47,427
Accumulated net realized losses on investment (43) (111) (154)
Net unrealized appreciation in value of investment 66 212 278
------------------------------------------------------------------
Net Assets at value $10,169 $37,396 $(9) $47,556
------------------------------------------------------------------
Shares Outstanding 3
($.001 par value; unlimited shares authorized) 1,032 3,907 31 4,970
------------------------------------------------------------------
Net Asset Value, offering and redemption price per share $9.85 $9.57 $9.57
------------------------------------------------------------------
1 The adjustments assume that Limited Maturity Bond Trust has obtained all the shareholder accounts of Ultra Short Bond
Trust.
2 Unamortized organization expenses of Ultra Short Bond Trust have been written off as a result of the Reorganization.
3 Each shareholder of Ultra Short Bond Trust will receive the number of Limited Maturity Bond Trust shares equal in dollar
value to that shareholder's shares of Ultra Short Bond Trust.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Amount Rating ULTRA SHORT LIMITED MATURITY PRO FORMA
(000's omitted) Moody's S&P BOND PORTFOLIO BOND PORTFOLIO COMBINED VALUE
- -------------------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES (5.2%)
$ 40 U.S. Treasury Notes, 7.375%, due 11/15/97 TSY TSY $ 40 $ 40
540 U.S. Treasury Notes, 6.50%, due 4/30/99 TSY TSY 547 547
4,655 U.S. Treasury Notes, 6.875%, due 8/31/99 TSY TSY $ 4,751 4,751
1,785 U.S. Treasury Notes, 5.875%, due 2/15/00 TSY TSY 1,791 1,791
4,220 U.S. Treasury Notes, 6.75%, due 4/30/00 TSY TSY 4,320 4,320
340 U.S. Treasury Notes, 6.375%, due 5/15/00 TSY TSY 345 345
3,895 U.S. Treasury Notes, 6.00%, due 8/15/00 TSY TSY 3,926 3,926
2,629 U.S. Treasury Inflation-Indexed Notes, 3.375%, TSY TSY 2,591 2,591
due 1/15/07
----------------------------------------------------
Total U.S. Treasury Securities (Cost $14,949,
$3,219, and $18,168 respectively) 15,133 3,178 18,311
----------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES (5.6%)
19,080 Federal Home Loan Bank, Discount Notes, 5.50% & AGY AGY 3,283 15,788 19,071
5.54%, due 11/3/97
250 Federal Home Loan Bank, Variable Rate Notes, AGY AGY 249 249
4.704%, due 1/29/98
500 Federal Home Loan Bank, Variable Rate Notes, AGY AGY 498 498
4.729%, due 2/25/98
----------------------------------------------------
Total U.S. Government Agency Securities (Cost
$4,033, $15,790, and $19,823 respectively) 4,030 15,788 19,818
----------------------------------------------------
MORTGAGE-BACKED SECURITIES (10.3%)
Fannie Mae
118 Balloon Pass-Through Certificates, 9.00%, due AGY AGY 122 122
12/1/97-8/1/98
207 Balloon Pass-Through Certificates, 8.50%, due AGY AGY 214 214
3/1/98-11/1/98
2,156 Balloon Pass-Through Certificates, 7.00%, due AGY AGY 2,182 2,182
8/1/03
396 REMIC Floating Rate CMO, Ser. 1992-59F, 6.05625%, AGY AGY 397 397
due 8/25/06
7,652 Pass-Through Certificates, 7.00%, due 9/1/03 AGY AGY 7,801 7,801
& 6/1/11
7,541 Pass-Through Certificates, 7.50%, due 7/1/11 AGY AGY 2,195 5,535 7,730
& 9/1/11
Freddie Mac
18 Mortgage Participation Certificates, 11.50%,
due 5/1/00 AGY AGY 19 19
3,155 Gold Balloon Mortgage Participation Certificates, AGY AGY 3,173 3,173
6.50%, due 9/1/98-11/1/00
7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Amount Rating ULTRA SHORT LIMITED MATURITY PRO FORMA
(000's omitted) Moody's S&P BOND PORTFOLIO BOND PORTFOLIO COMBINED VALUE
- -------------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
172 Mortgage Participation Certificates, 10.50%, due 6/1/00 AGY AGY 61 120 181
& 12/1/00
416 Mortgage Participation Certificates, 8.50%, due 10/1/01 AGY AGY 428 428
1,484 Gold Balloon Mortgage Participation Certificates, AGY AGY 1,517 1,517
7.50%, due 11/1/01
357 ARM Certificates, 7.00%, due 1/1/17 & 2/1/17 AGY AGY 363 363
617 ARM Certificates, 7.125%, due 3/1/17 AGY AGY 628 628
General National Mortgage Association
2,211 Pass-Through Certificates, 7.50%, due 10/15/09-10/15/10 AGY AGY 2,274 2,274
8,960 Pass-Through Certificates, 7.00%, due 4/15/11 & 1/15/27 AGY AGY 2,208 6,825 9,033
151 Pass-Through Certificates, 12.00%, due 5/15/12-3/15/15 AGY AGY 172 172
---------------------------------------------
Total Mortgage-Backed Securities (Cost $13,489, $22,067,
and $35,556 respectively) 13,629 22,605 36,234
---------------------------------------------
ASSET-BACKED SECURITIES (19.1%)
767 Capita Equipment Receivables Trust, Ser. 1996-1, Class Aaa AAA 768 768
A-2, 5.95%, due 7/15/98
77 Daimler-Benz Auto Grantor Trust, Ser. 1993-A, Class A, Aaa AAA 77 77
3.90%, due 10/15/98
15 USAA Auto Loan Grantor Trust, Automobile Loan Aaa AAA 15 15
Pass-Through Certificates, Ser. 1993-1, 3.90%, due
3/15/99
6,300 Capita Equipment Receivables Trust, Ser. 1996-1, Class Aaa AAA 6,332 6,332
A-3, 6.11%, due 7/15/99
1,600 Chase Manhattan Grantor Trust, Automobile Loan Aaa AAA 1,601 1,601
Pass-Through Certificates, Ser. 1997-A, Class A-2,
5.95%, due 10/15/99
5,710 PNC Student Loan Trust I, Ser. 1997-2, Class A-2, Aaa AAA 5,734 5,734
6.138%, due 1/25/00
676 Premier Auto Trust, Ser. 1997-1, Class A-2, 5.90%, due Aaa AAA 677 677
4/6/00
696 Ford Credit Grantor Trust, Ser. 1995-A, Class A, 5.90%, Aaa AAA 695 695
due 5/15/00
3,820 Chase Manhattan Auto Owner Trust, Ser. 1996-C, Class Aaa AAA 3,826 3,826
A-3, 5.95%, due 11/15/00
6,927 Money Store Auto Grantor Trust, Ser. 1997-2, Class A-1, Aaa AAA 6,948 6,948
6.17%, due 3/20/01
8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Amount Rating ULTRA SHORT LIMITED MATURITY PRO FORMA
(000's omitted) Moody's S&P BOND PORTFOLIO BOND PORTFOLIO COMBINED VALUE
- -------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1,178 Chase Manhattan Grantor Trust, Automobile Loan Aaa AAA 1,177 1,177
Pass-Through Certificates, Ser. 1995-A, 6.00%, due
9/17/01
5,178 Banc One Auto Grantor Trust, Ser. 1996-B, Class A, Aaa AAA 1,936 3,282 5,218
6.55%, due 2/15/03
6,500 Ford Credit Auto Loan Master Trust, Auto Loan Aaa AAA 6,411 6,411
Certificates, Ser. 1996-1, 5.50%, due 2/15/03
448 Honda Auto Receivables Grantor Trust, Ser. 1997-A, Aaa AAA 448 448
Class A, 5.85%, due 2/15/03
5,600 Chase Credit Card Master Trust, Ser. 1997-2, Class A, Aaa AAA 5,649 5,649
6.30%, due 4/15/03
2,590 Navistar Financial Owner Trust, Ser. 1996-B, Class A-3, Aaa AAA 2,606 2,606
6.33%, due 4/21/03
5,330 World Omni Automobile Lease Securitization Trust, Ser. Aaa AAA 5,446 5,446
1997-A, Class A-3, 6.85%, due 6/25/03
3,839 Chevy Chase Auto Receivables Trust, Ser. 1996-2, Class Aaa AAA 3,827 3,827
A, 5.90%, due 7/15/03
5,000 Standard Credit Card Master Trust I, Credit Card Aaa AAA 5,397 5,397
Participation Certificates, Ser. 1994-4, Class A,
8.25%, due 11/7/03
4,680 IMC Excess Cashflow Trust, Ser. 1997-A, 7.41%, due BBB 4,686 4,686
11/27/28
----------------------------------------------------
Total Asset-Backed Securities (Cost $7,372, $60,025,
and $67,397 respectively) 7,394 60,144 67,538
----------------------------------------------------
BANKS & FINANCIAL INSTITUTIONS (24.7%)
3,500 Merrill Lynch & Co., Inc., Medium-Term Notes, Ser. B, Aa3 AA- 3,536 3,536
6.64%, due 4/9/99
2,000 AT&T Capital Corp., Medium-Term Notes, Ser. 1997-4, Baa3 BBB 2,025 2,025
6.92%, due 4/29/99
5,250 Household Finance Corp., Medium-Term Notes, 6.62%, due A2 A 5,295 5,295
5/28/99
5,240 Merrill Lynch & Co., Inc., Medium-Term Notes, Ser. B, Aa3 AA- 5,269 5,269
6.28%, due 6/25/99
4,850 Chase Manhattan Bank USA, Senior Global Bank Notes, Aa2 A+ 4,847 4,847
5.875%, due 8/4/99
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Amount Rating ULTRA SHORT LIMITED MATURITY PRO FORMA
(000's omitted) Moody's S&P BOND PORTFOLIO BOND PORTFOLIO COMBINED VALUE
- -------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3,500 Associates Corp. of North America, Senior Notes, Aa3 AA- 3,524 3,524
6.375%, due 8/15/99
5,180 CIT Group Holdings, Inc., Medium-Term Notes, 6.25%, due Aa3 A+ 5,204 5,204
10/25/99
3,940 First National Bank of Commerce, Senior Bank Notes, A2 A- 3,982 3,982
6.50%, due 1/14/00
3,980 HomeSide Lending, Inc., Notes, 6.875%, due 5/15/00 Baa2 BBB 4,033 4,033
5,000 Smith Barney Holdings Inc., Notes, 7.00%, due 5/15/00 A2 A 5,106 5,106
1,300 Lehman Brothers Holdings Inc., Medium-Term Notes, Ser. Baa1 A 1,325 1,325
E, 7.08%, due 5/22/00
1,800 International Lease Finance Corp., Notes, 6.625%, due A1 A+ 1,822 1,822
6/1/00
5,400 Comdisco, Inc., Notes, 6.50%, due 6/15/00 Baa1 BBB+ 5,438 5,438
3,150 Countrywide Funding Corp., Medium-Term Notes, Ser. A, A3 A 3,235 3,235
7.31%, due 8/28/00
7,090 Associates Pass-Through Asset Trust, Ser. 1997-1, Aa3 AA- 7,141 7,141
6.45%, due 9/15/00
5,000 Lehman Brothers Holdings Inc., Medium-Term Notes, Ser. Baa1 A 5,078 5,078
E, 6.89%, due 10/10/00
1,725 Lehman Brothers Holdings Inc., Medium-Term Notes, Ser. Baa1 A 1,739 1,739
E, 6.65%, due 11/8/00
3,000 Aristar, Inc., Senior Notes, 6.125%, due 12/1/00 A3 A- 2,983 2,983
6,600 Capital One Bank, Bank Notes, 5.95%, due 2/15/01 Baa3 BBB- 6,503 6,503
3,550 Riggs National Corp., Subordinated Notes, 8.50%, due Ba1 BB- 3,692 3,692
2/1/06
5,150 Goldman Sachs Group, L.P., Global Notes, 6.75%, due A1 A+ 5,211 5,211
2/15/06
--------------------------------------------
Total Banks & Financial Institutions (Cost $18,342, $68,137,
and $86,479 respectively) 18,450 68,538 86,988
--------------------------------------------
CORPORATE DEBT SECURITIES (38.7%)
2,780 Colonial Gas Co., Medium-Term Notes, Ser. A, 6.20%, due Baa1 A- 2,785 2,785
3/18/98
6,400 Alco Capital Resource, Inc., Medium-Term Notes, Ser. B, A3 A- 6,361 6,361
5.46%, due 2/22/99
1,900 American Standard Inc., Senior Notes, 10.875%, due Ba3 BB- 2,002 2,002
5/15/99
7,000 Lockheed Martin Corp., Notes, 6.55%, due 5/15/99 A3 BBB+ 7,066 7,066
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Amount Rating ULTRA SHORT LIMITED MATURITY PRO FORMA
(000's omitted) Moody's S&P BOND PORTFOLIO BOND PORTFOLIO COMBINED VALUE
- -------------------- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4,800 NWCG Holdings Corp., Notes, Zero-Coupon, Yielding Ba2 BBB- 4,320 4,320
7.05%, due 6/15/99
5,200 Williams Holdings of Delaware, Inc., Medium-Term Notes, Baa2 BBB- 5,225 5,225
Ser. A, 6.40%, due 6/17/99
4,070 Chrysler Financial Corp., Medium-Term Notes, Ser. Q, A3 A 4,098 4,098
6.37%, due 6/21/99
2,710 Arkla, Inc., Notes, 8.875%, due 7/15/99 Baa3 BBB 2,825 2,825
4,680 Time Warner Pass-Through Asset Trust, Ser. 1997-2, Ba1 BBB- 4,573 4,573
4.90%, due 7/29/99
1,000 General Motors Acceptance Corp., Medium-Term Notes, A3 A- 1,002 1,002
6.15%, due 9/20/99
4,800 Norfolk Southern Corp., Notes, 6.70%, due 5/1/00 Baa1 BBB+ 4,859 4,859
3,610 Cleveland Electric Illuminating Co., Secured Notes, Ba1 BB+ 3,655 3,655
Ser. A, 7.19%, due 7/1/00
4,550 Arvin Industries, Inc., Notes, 10.00%, due 8/1/00 Ba1 BBB- 4,936 4,936
2,000 Ford Motor Credit Co., Medium-Term Notes, 6.84%, due A1 A 2,038 2,038
8/16/00
6,370 MedPartners, Inc., Senior Subordinated Notes, 6.875%, Ba2 BBB- 6,380 6,380
due 9/1/00
2,000 American General Finance Corp., Senior Notes, 6.125%, A2 A+ 2,006 2,006
due 9/15/00
2,510 Chesapeake Corp., Notes, 10.375%, due 10/1/00 Baa3 BBB 2,775 2,775
1,730 BHP Finance (USA) Limited, Guaranteed Notes, 5.625%, A2 A 1,708 1,708
due 11/1/00
500 Congoleum Corp., Senior Notes, 9.00%, due 2/1/01 B1 BB- 507 507
5,200 General Motors Acceptance Corp., Medium-Term Notes, A3 A- 5,501 5,501
8.125%, due 3/1/01
3,470 Revlon Worldwide Corp., Senior Secured Notes, Ser. B, B3 B- 2,407 2,407
Zero-Coupon, Yielding 10.75% & 10.959%, due 3/15/01
2,290 Colonial Realty Limited Partnership, Senior Notes, Baa3 BBB- 2,372 2,372
7.50%, due 7/15/01
4,160 Tyco International Ltd., Notes, 6.50%, due 11/1/01 Baa2 A- 4,196 4,196
2,965 ICI Wilmington Inc., Guaranteed Notes, 7.50%, due Baa1 A- 3,111 3,111
1/15/02
2,835 Black & Decker Corp., Medium-Term Notes, Ser. A, 8.90%, Baa2 BBB- 3,095 3,095
due 1/21/02
11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Amount Rating ULTRA SHORT LIMITED MATURITY PRO FORMA
(000's omitted) Moody's S&P BOND PORTFOLIO BOND PORTFOLIO COMBINED VALUE
- -------------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
900 Ford Motor Credit Co., Global Bonds, 6.50%, due 2/28/02 A1 A+ 908 908
2,280 Fort James Corp., Senior Notes, 6.50%, due 9/15/02 Baa3 BBB- 2,294 2,294
1,000 Safeway Inc., Medium-Term Notes, 8.57%, due 4/1/03 Baa1 BBB 1,091 1,091
4,200 Stewart Enterprises, Inc., Notes, 6.70%, due 12/1/03 Baa3 BBB 4,218 4,218
620 Loomis Fargo & Co., Senior Subordinated Notes, 10.00%, B3 B- 618 618
due 1/15/04
175 Playtex Products, Inc., Senior Notes, Ser. B, 8.875%, B1 B+ 175 175
due 7/15/04
420 Iridium LLC, Senior Notes, Ser. C, 11.25%, due 7/15/05 B3 B- 385 385
190 ICN Pharmaceuticals, Inc., Senior Notes, 9.25%, due B1 BB 200 200
8/15/05
4,350 Bell Cablemedia plc, Senior Step Up Notes, Yielding Baa3 BBB+ 3,763 3,763
8.98%, due 9/15/05
4,200 Heritage Media Corp., Senior Subordinated Notes, 8.75%, B2 BBB- 4,463 4,463
due 2/15/06
4,040 Mark IV Industries, Inc., Senior Subordinated Notes, Ba2 BB+ 4,111 4,111
7.75%, due 4/1/06
400 Printpack, Inc., Senior Subordinated Notes, Ser. B, B3 B+ 425 425
10.625%, due 8/15/06
2,825 Time Warner Inc., Notes, 8.11%, due 8/15/06 Ba1 BBB- 3,051 3,051
400 Commonwealth Aluminum Corp., Senior Subordinated Notes, B2 B- 429 429
10.75%, due 10/1/06
415 Evenflo & Spalding Holdings Corp., Senior Subordinated B3 B- 354 354
Notes, Ser. B, 10.375%, due 10/1/06
4,950 MedPartners, Inc., Senior Notes, 7.375%, due 10/1/06 Baa3 BBB 4,837 4,837
500 Motors and Gears, Inc., Senior Notes, Ser. B, 10.75%, B3 B 526 526
due 11/15/06
680 Newport News Shipbuilding Inc., Senior Subordinated B1 B+ 707 707
Notes, 9.25%, due 12/1/06
857 AMTROL Inc., Senior Subordinated Notes, 10.625%, due B3 B- 870 870
12/31/06
1,275 Pen-Tab Industries, Inc., Senior Subordinated Notes, B3 B- 1,269 1,269
Ser. B, 10.875%, due 2/1/07
965 Fonda Group, Inc., Senior Subordinated Notes, Ser. B, B3 B- 924 924
9.50%, due 3/1/07
12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Amount Rating ULTRA SHORT LIMITED MATURITY PRO FORMA
(000's omitted) Moody's S&P BOND PORTFOLIO BOND PORTFOLIO COMBINED VALUE
- -------------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
120 Tekni-Plex, Inc., Senior Subordinated Notes, Ser. B, B3 B- 131 131
11.25%, due 4/1/07
300 French Fragrances, Inc., Senior Notes, Ser. B, 10.375%, B2 B+ 313 313
due 5/15/07
2,410 Owens-Illinois, Inc., Senior Debentures, 8.10%, due Ba1 BB+ 2,553 2,553
5/15/07
405 AmeriServe Food Distribution, Inc., Senior Subordinated B3 B- 422 422
Notes, 10.125%, due 7/15/07
190 Safety Components International, Inc., Senior B3 B- 197 197
Subordinated Notes, 10.125%, due 7/15/07
880 HydroChem Industrial Services, Inc., Senior B3 B- 913 913
Subordinated Notes, Ser. B, 10.375%, due 8/1/07
4,680 Interpool, Inc., Notes, 7.20%, due 8/1/07 Ba1 BBB 4,681 4,681
190 Insilco Corp., Senior Subordinated Notes, 10.25%, due B3 B+ 198 198
8/15/07
1,585 Central Maine Power & Co., General and Refunding Baa3 BB+ 1,568 1,568
Mortgage Bonds, Ser. Q, 7.05%, due 3/1/08
360 KinderCare Learning Centers, Inc., Senior Subordinated B3 B- 354 354
Notes, Ser. B, 9.50%, due 2/15/09
-----------------------------------------------
Total Corporate Debt Securities (Cost $3,893, $132,217,
and $136,110) 3,916 132,835 136,751
-----------------------------------------------
Total Investments (103.6%) (Cost $62,078, $301,455,
and $363,533 respectively) 62,552 303,088 365,640
Liabilities, less cash, receivables and other assets
[(3.6%)] (2,431) (10,122) (12,553)
-----------------------------------------------
Total Net Assets (100.0%) $60,121 $292,966 $353,087
-----------------------------------------------
13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
For the Year Ended October 31, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Income Managers Trust
ULTRA SHORT BOND LIMITED MATURITY PRO FORMA
(000's omitted) PORTFOLIO BOND PORTFOLIO ADJUSTMENTS1 COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Income
<S> <C> <C> <C> <C>
Interest income $4,986 $19,575 $24,561
$0
----------------------------------------------------------------
Expenses:
Investment management fee 200 697 -- 897
Accounting fees 10 10 (10)2 10
Amortization of deferred organization and
initial offering expenses 2 5 (2)2 5
Auditing fees 23 24 (23)2 24
Custodian fees 61 135 (30)2+4 166
Insurance expense 2 6 -- 8
Legal fees 22 19 (22)2 19
Trustees' fees and expenses 9 18 (1)4 26
----------------------------------------------------------------
Total expenses 329 914 (88) 1,155
Expenses reduced by custodian fee expense -- -- -- --
offset arrangement
----------------------------------------------------------------
Total net expenses 329 914 (88) 1,155
----------------------------------------------------------------
Net investment income 4,657 18,661 88 23,406
----------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain on investment securities sold 21 1,672 -- 1,693
Net realized loss on financial futures contracts -- (2,679) -- (2,679)
Net realized gain on foreign currency transactions -- 17 -- 17
Change in net unrealized appreciation (depreciation) of
investment securities, financial futures contracts,
translation of assets and liabilities in foreign 115 2,266 -- 2,381
currencies, and foreign currency contracts
--------------------------------------------------------
Net gain on investments 136 1,276 -- 1,412
--------------------------------------------------------
Net increase in net assets resulting from $4,793 $19,937 88 $24,818
operations
--------------------------------------------------------
1 The adjustments assume that Limited Maturity Bond Portfolio has obtained all the assets of Ultra Short Bond Portfolio.
2 Certain expenses have been reduced due to the elimination of partially duplicative services.
3 Organization expenses of Ultra Short Bond Portfolio cannot be carried forward for the combined Portfolio, because the
unamortized portion of these expenses must be written off as a result of the Reorganization.
4 Certain expenses, which are determined on a per series basis or on a sliding scale based upon net assets, have been
adjusted to reflect the combination of Limited Maturity Bond Portfolio and Ultra Short Bond Portfolio.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Income Managers Trust
ULTRA SHORT LIMITED MATURITY PRO FORMA
(000's omitted) BOND PORTFOLIO BOND PORTFOLIO ADJUSTMENTS1 COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments in securities, at market value*
-see Schedule of Investments $62,552 $303,088 $365,640
Cash 4 1 5
Deferred organization costs 1 4 (1)2 4
Interest receivable 676 4,067 4,743
Prepaid expenses and other assets 2 6 8
Receivable for securities sold 2 44 46
------------------------------------------------------------------
63,237 307,210 (1) 370,446
------------------------------------------------------------------
Liabilities
Payable for securities purchased 3,067 14,112 17,179
Payable for variation margin -- 18 18
Payable to investment manager 13 62 75
Accrued expenses 36 52 88
------------------------------------------------------------------
3,116 14,244 17,360
------------------------------------------------------------------
Net Assets Applicable to Investors' Beneficial Interests $60,121 $292,966 $(1) $353,086
------------------------------------------------------------------
Net Assets consist of:
Paid-in capital $59,647 $291,698 (1) $351,344
Net unrealized appreciation in value of investment
securities and financial futures contracts 474 1,268 1,742
------------------------------------------------------------------
Net Assets $60,121 $292,966 $(1) $353,086
------------------------------------------------------------------
*Cost of investments $62,078 $301,455 $363,533
1 The adjustments assume that Limited Maturity Bond Portfolio has obtained all the assets of Ultra Short Bond Portfolio.
2 Unamortized organization expenses of Ultra Short Bond Portfolio have been written off as a result of the Reorganization.
15
</TABLE>
