As filed with the Securities and Exchange Commission on December 29, 1998
1933 Act Registration No. 33-62872
1940 Act Registration No. 811-7724
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
-----
Pre-Effective Amendment No. [ ] [ ]
Post-Effective Amendment No. [ 7 ] [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. [ 7 ] [ X ]
----- -----
(Check Appropriate Box or Boxes)
NEUBERGER BERMAN INCOME TRUST
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue
New York, New York 10158-0180
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (212) 476-8800
Theodore P. Giuliano, President
Neuberger Berman Income Trust
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., 2nd Floor
Washington, D.C. 20036-1800
(Names and Addresses of Agents for Service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b)
___ on ________________ pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
_X_ on March 1, 1999 pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on __________ pursuant to paragraph (a)(2)
The public offering of Registrant's series is on-going. The title of
securities being registered is shares of beneficial interest.
Neuberger Berman Income Trust is a "master/feeder fund." This
Post-Effective Amendment No. 7 includes a signature page for the master fund,
Income Managers Trust, and appropriate officers and trustees thereof.
<PAGE>
NEUBERGER BERMAN INCOME TRUST
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 7 ON FORM N-1A
This Post-Effective Amendment consists of the following papers and
documents:
Cover Sheet
Contents of Post-Effective Amendment No. 7 on Form N-1A
Cross Reference Sheet
NEUBERGER BERMAN LIMITED MATURITY BOND TRUST
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Pages
<PAGE>
NEUBERGER BERMAN INCOME TRUST
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 7 ON FORM N-1A
CROSS REFERENCE SHEET
This cross reference sheet relates to the Prospectus
and Statement of Additional Information for:
NEUBERGER BERMAN LIMITED MATURITY BOND TRUST
Form N-1A Item No. Caption in Part a Prospectus
------------------ ----------------------------
Item 1. Front and Back Cover Pages Front and Back Cover Pages
Item 2. Risk/Return Summary; Investor Expenses; Performance;
Investments, Risks, and Main Risks
Performance
Item 3. Risk/Return Summary; Fee Table Performance; Investor Expenses
Item 4. Investment Objectives, Goal & Strategy; Main Risks
Principal Investment
Strategies, and Related Risks
Item 5. Management's Discussion of Fund Not Applicable
Performance
Item 6. Management, Organization, and Front Cover Page; Management
Capital Structure Sidebar
Item 7. Shareholder Information Your Investment; Buying Shares;
Maintaining Your Account;
Privileges and Services; Share
Prices
Item 8. Distribution Arrangements Fund Structure Sidebar (under
Maintaining Your Account)
Item 9. Financial Highlights Information Financial Highlights
<PAGE>
Form N-1A Item No. Caption in Part B
------------------
Statement of Additional Information
-----------------------------------
Item 10. Cover Page and Table of Cover Page and Table of Contents
Contents
Item 11. Fund History Information Regarding Organization,
Capitalization and Other Matters
Item 12. Description of the Fund Investment Information; Certain Risk
and Its Investments and Considerations
Risks
Item 13. Management of the Fund Trustees and Officers
Item 14. Control Persons and Not Applicable
Principal Holders of
Securities
Item 15. Investment Advisory and Investment Management and
Other Services Administration Services; Trustees And
Officers; Distribution Arrangements;
Reports To Shareholders; Custodian And
Transfer Agent; Independent
Auditors/Accountants
Item 16. Brokerage Allocation and Portfolio Transactions
Other Practices
Item 17. Capital Stock and Other Investment Information; Additional
Securities Redemption Information; Dividends and
Other Distributions
Item 18. Purchase, Redemption and Additional Purchase Information;
Pricing of Shares Additional Exchange Information;
Additional Redemption Information;
Distribution Arrangements
Item 19. Taxation of the Fund Dividends and Other Distributions;
Additional Tax Information
Item 20. Underwriters Investment Management and
Administration Services; Distribution
Arrangements
Item 21. Calculation of Performance Information
Performance Data
Item 22. Financial Statements Financial Statements
Part C
------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Post-Effective Amendment No. 7.
<PAGE>
<PAGE>
[PHOTO OF CHESS PIECES] NEUBERGER BERMAN
NEUBERGER BERMAN
INCOME TRUST
- --------------------------------------------------------------------------------
PROSPECTUS , 1999
The Securities and Exchange Commission does not say
whether any mutual fund is a good or bad investment or
whether the information in any prospectus is accurate or
complete. It is unlawful for anyone to indicate
otherwise.
Limited Maturity Bond Trust
<PAGE>
CONTENTS
<TABLE>
<C> <S>
NEUBERGER BERMAN INCOME TRUST
PAGE 2 ...... Limited Maturity Bond Trust
YOUR INVESTMENT
8 ...... Maintaining Your Account
10 ...... Share Prices
11 ...... Distributions and Taxes
13 ...... Fund Structure
</TABLE>
The "Neuberger Berman" name and logo are service
marks of Neuberger Berman, LLC. "Neuberger Berman
Management Inc." and the individual fund name in
this prospectus are either service marks or
registered trademarks of Neuberger Berman
Management Inc. -C-1998 Neuberger Berman Management
Inc.
<PAGE>
- ------------------------------------------------------------
FUND MANAGEMENT
The fund is managed by Neuberger Berman Management Inc., in conjunction with
Neuberger Berman, LLC, as sub-adviser. Together, the firms manage more than $49
billion in total assets (as of XX/98) and continue an asset management history
that began in 1939.
RISK INFORMATION
This prospectus discusses principal risks of investment in fund shares. These
and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
THIS FUND:
- - IS DESIGNED FOR INVESTORS SEEKING CURRENT INCOME
- - OFFERS YOU THE OPPORTUNITY TO PARTICIPATE IN FINANCIAL MARKETS THROUGH A
PROFESSIONALLY MANAGED STOCK PORTFOLIO
- - USES A MASTER/FEEDER STRUCTURE IN ITS PORTFOLIO; SEE PAGE 13 FOR INFORMATION
ON HOW IT WORKS.
- - CARRIES CERTAIN RISKS, INCLUDING THE RISK THAT YOU COULD LOSE MONEY IF FUND
SHARES ARE WORTH LESS THAN WHAT YOU PAID
- - IS A MUTUAL FUND, NOT A BANK DEPOSIT, AND IS NOT GUARANTEED OR INSURED
1
<PAGE>
[PHOTO]
NEUBERGER BERMAN
LIMITED MATURITY BOND TRUST
- --------------------------------------------------------------------------------
Ticker Symbol: XXXXX ABOVE: PORTFOLIO MANAGERS THEODORE P.
GIULIANO AND CATHERINE WATERWORTH
"HISTORICALLY LIMITED MATURITY PORTFOLIOS HAVE BEEN ABLE TO DELIVER MUCH OF THE
YIELD AVAILABLE IN THE INVESTMENT-GRADE BOND MARKET WHILE OFFERING REDUCED SHARE
PRICE FLUCTUATION. WITH THIS IN MIND, WE STRIVE TO MANAGE THE FUND WITH AN
EMPHASIS ON YIELD AND RISK MANAGEMENT."
2
<PAGE>
GOAL & STRATEGY
- ------------------------------------------------------------
DURATION
Duration is a measurement of a bond investment's sensitivity to changes in
interest rates.
Typically, with a 1% rise in interest rates, an investment's value may be
expected to fall approximately 1% for each year of its duration.
BOND RATINGS
Most large issuers obtain ratings for their bonds from one or more independent
rating agencies, although many bonds of all quality levels remain unrated.
Bonds in the top four categories of credit quality are considered investment
grade. Bonds in the fifth or sixth category (BB/Ba or B) are called lower-rated,
or non-investment grade. Many of these "junk bonds" are actually issued by
reputable companies, and offer attractive yields.
[ARROW]
THE FUND SEEKS THE HIGHEST AVAILABLE CURRENT INCOME CONSISTENT WITH
LIQUIDITY AND LOW RISK TO PRINCIPAL; TOTAL RETURN IS A SECONDARY
GOAL.
To pursue these goals, the fund invests mainly in investment-grade bonds and
other debt securities from U.S. government and corporate issuers. These may
include mortgage- and asset-backed securities. To enhance yield and add
diversification, the fund may invest up to 10% of net assets in securities that,
at the time of purchase, are rated as low as B by Moody's or Standard and Poor's
or, if unrated by either of these, are believed by the manager to be of
comparable quality.
The fund seeks to reduce credit risk by diversifying among many issuers and
different types of securities. Although it may invest in securities of any
maturity, under normal circumstances it maintains an average portfolio duration
of four years or less.
The managers monitor national trends in the corporate and government securities
markets, including a range of economic and financial factors. The managers look
for securities that appear underpriced compared to securities of similar
structure and credit quality, and securities that appear likely to have their
credit ratings raised. In choosing lower-rated securities, the managers look for
bonds from issuers whose financial health appears comparatively strong but that
are smaller or less well known to investors.
The fund is authorized to change its goal without shareholder approval, although
it does not currently intend to do so.
Limited Maturity Bond Trust 3
<PAGE>
MAIN RISKS
- ------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
The use of certain derivatives to hedge interest rate risk or produce income
could affect fund performance if the derivatives do not perform as expected.
Foreign securities could add to the ups and downs in the fund's share price,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
securities. This could help the fund avoid losses but may mean lost
opportunities.
[DOLLAR SIGNS]
Most of the fund's performance depends
on what happens in the investment grade bond market. The value of your
investment will rise and fall, and you could lose money.
The fund's yield and total return will change with interest rate movements. When
interest rates rise, the fund's share price will typically fall. The fund's
sensitivity to this risk will increase with any increase in the funds duration.
A downgrade or default affecting any of the fund's securities would affect the
fund's performance. Performance could also be affected if unexpected interest
rate trends cause the fund's mortgage- or asset-backed securities to be paid off
substantially earlier or later than expected.
Over time, the fund may produce a lower return than stock investments and less
conservative bond investments. Although historically the fund's performance has
outpaced inflation, it may not always do so.
Through active trading, the fund may have a high portfolio turnover rate, which
can mean higher taxable distributions and increased transaction costs.
4 Neuberger Berman
<PAGE>
PERFORMANCE
- ------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
To obtain the fund's current yield call 800-877-9700. The current yield is the
fund's net income over a recent 30-day period expressed as an annual rate of
return.
[ARROW] The bar chart below shows how the
fund's performance has varied from one year to another. The table
below the chart shows what the return would equal if you averaged out
actual performance over various lengths of time. This information is based on
past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of XX/XX each year*
[LOGO]
<TABLE>
<CAPTION>
1988 `89 `90 `91 `92 `93 `94 `95 `96 `97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
</TABLE>
BEST QUARTER: WORST QUARTER:
Year-to-date performance as of xx/xx/98:
AVERAGE ANNUAL TOTAL % RETURNS as of XX/XX/XX*
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
- -------------------------------------------------------------------
LIMITED MATURITY BOND TRUST 00.00 00.00 00.00
Merrill Lynch 1-3 Year
Treasury Index
</TABLE>
The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index of U.S.
Treasuries with maturities between 1 and 3 years.
* The fund began operating in August 1993. Performance results from March 1988
to August 1993 are actually those of another Neuberger Berman fund that began
operations in 1988, and invests in the same portfolio of securities. Because
the older fund had moderately lower expenses, its performance was slightly
better than Limited Maturity Bond Trust would have had. That older fund is not
offered in this prospectus.
Limited Maturity Bond Trust 5
<PAGE>
INVESTOR EXPENSES
- ------------------------------------------------------------
MANAGEMENT
THEODORE P. GIULIANO, a Vice President and Director of Neuberger Berman
Management and a principal of Neuberger Berman, LLC, is the manager of the Fixed
Income Group of Neuberger Berman, which he helped establish in 1984. He has
co-managed the fund's assets since 19 .
CATHERINE WATERWORTH has co-managed the fund's assets since December 1998.
Previously she was a managing director of major investment firms from 1995-98
and a senior officer at another firm prior to 1995.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 10/31/98, the
management/administration fees paid to Neuberger Berman Management were 0.00% of
average net
assets.
[DOLLAR SIGNS]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees
PLUS: Distribution (12b-1) fees None
Other expenses
....
EQUALS: Total annual operating expenses
</TABLE>
NEUBERGER BERMAN MANAGEMENT REIMBURSES CERTAIN EXPENSES OF THE FUND SO THAT THE
TOTAL ANNUAL OPERATING EXPENSES OF THE FUND ARE LIMITED TO .80% OF AVERAGE NET
ASSETS. THIS ARRANGEMENT MAY BE TERMINATED UPON 60 DAYS' NOTICE TO THE FUND. IN
ADDITION, THIS ARRANGEMENT DOES NOT COVER INTEREST, TAXES, BROKERAGE
COMMISSIONS, AND EXTRAORDINARY EXPENSES. THE TABLE INCLUDES COSTS PAID BY THE
FUND AND ITS SHARE OF MASTER PORTFOLIO COSTS. FOR MORE INFORMATION ON
MASTER/FEEDER FUNDS, SEE "FUND STRUCTURE" ON PAGE 13.
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses** $ $ $ $
</TABLE>
** UNDER THE REIMBURSEMENT ARRANGEMENT DESCRIBED IN THE FOOTNOTE ABOVE, YOUR
COSTS FOR THE ONE-, THREE-, FIVE-, AND TEN-YEAR PERIODS WOULD BE $ ,
$ , $ , AND $ , RESPECTIVELY.
6 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended October 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what
it distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year
PLUS: Income from investment operations
Net investment income
Net gains/losses -- realized and unrealized
Subtotal: income from investment operations
MINUS: Distributions to shareholders
Income dividends
Capital gain distributions
Distributions in excess of net capital gains
Subtotal: distributions to shareholders
...........................................
EQUALS: Share price (NAV) at end of year
- --------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income -- as they actually are as well as how they
would have been if certain expense offset arrangements had not been in effect.
Net expenses -- actual
Gross expenses(1)
Expenses(2)
Net investment income -- actual
- --------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%)(3)
Net assets at end of year (in millions of dollars)
Portfolio turnover rate (%)
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENT.
(2) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER
9/1/95.
(3) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT REIMBURSED
CERTAIN EXPENSES.
Limited Maturity Bond Trust 7
<PAGE>
YOUR INVESTMENT
MAINTAINING YOUR
ACCOUNT
- ------------------------------------------------------------
YOUR INVESTMENT PROVIDER
The fund shares described in this prospectus are available through investment
providers such as banks, brokerage firms, workplace retirement programs, and
financial advisers.
The fees and policies outlined in this prospectus are set by the funds and by
Neuberger Berman Management. However, most of the information you'll need for
managing your investment will come from your investment provider. This includes
information on how to buy and sell shares, investor services, and additional
policies.
In exchange for the services it offers, your investment provider may charge
fees, which are generally in addition to those described in this prospectus.
To buy or sell shares of the fund described in this prospectus, contact your
investment provider. All investments must be made in U.S. dollars, and
investment checks must be drawn on a U.S. bank. The fund does not issue
certificates for shares.
Most investment providers allow you to take advantage of the Neuberger Berman
fund exchange program, which is designed for moving money from one Neuberger
Berman fund to another through an exchange of shares. However, this privilege
can be withdrawn from any investor that we believe is trying to "time the
market" or is otherwise making exchanges that we judge to be excessive. Frequent
exchanges can interfere with fund management and affect costs and performance
for other shareholders.
8 Neuberger Berman
<PAGE>
- ------------------------------------------------------------
BUYING SHARES BEFORE
A DISTRIBUTION
The money a fund earns, either as income or as capital gains, is reflected in
its share price until the fund makes a distribution. At that time, the amount of
the distribution is deducted from the share price. The amount of the
distribution is either reinvested in additional fund shares or paid to
shareholders in cash.
Because of this, if you buy shares just before a fund makes a distribution,
you'll end up getting some of your investment back as a taxable distribution.
You can avoid this situation by waiting to invest until after the distribution
has been made.
If you're investing in a tax-advantaged account, you don't need to worry;
generally there are no tax consequences to you in this case.
Under certain circumstances, the funds reserve the right to:
- - suspend the offering of shares
- - reject any exchange or investment order
- - change, suspend, or revoke the exchange privilege
- - satisfy an order to sell fund shares with securities rather than cash, for
certain very large orders
- - suspend or postpone the redemption of shares on days when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the SEC
The proceeds from the shares you sold are generally sent out the next business
day after your order is executed, and nearly always within three business days.
There are two cases in which proceeds may be delayed beyond this time:
- - in unusual circumstances where the law allows additional time if needed
- - if a check you wrote to buy shares hasn't cleared by the time you sell those
shares
If you think you may need to sell shares soon after buying them, you can avoid
the check clearing time (which may be up to 15 days) by investing by wire or
certified check.
Your Investment 9
<PAGE>
SHARE PRICES
- ------------------------------------------------------------
SHARE PRICE CALCULATIONS
A fund's share price is the total value of its assets minus its liabilities,
divided by the total number of shares. Because the value of a fund's securities
changes every business day, the share price usually changes as well.
When valuing portfolio securities, the funds use market prices. However, in rare
cases, events that occur after certain markets have closed may render these
prices unreliable.
When the fund believes a market price does not reflect a security's true value,
the fund may substitute for the market price a fair-value estimate derived
through methods approved by its trustees. A fund may also use these methods to
value certain types of illiquid securities.
Because the fund does not have sales charges, the price you pay for each share
of the fund is the fund's net asset value per share. Similarly, because the fund
does not charge any fee for selling shares, the fund pays you the full share
price when you sell shares. Remember that your investment provider may charge
fees for its services.
The fund is open for business every day the New York Stock Exchange is open. In
general, every buy or sell order you place will go through at the next share
price to be calculated after your order has been accepted; check with your
investment provider to find out by what time your order must be received in
order to be processed the same day. The fund calculates its share price as of
the end of regular trading on the Exchange on business days, usually 4:00 p.m.
eastern time. Depending on when your investment provider accepts orders, it's
possible that the fund's share price could change on days when you are unable to
buy or sell shares.
Also, because foreign markets may be open on days when U.S. markets are closed,
the value of foreign securities owned by the fund could change on days when you
can't buy or sell fund shares. The fund's share price, however, will not change
until the next time it is calculated.
10 Neuberger Berman
<PAGE>
DISTRIBUTIONS
AND TAXES
- ------------------------------------------------------------
TAXES AND YOU
The taxes you actually owe on distributions and transactions can vary with many
factors, such as your tax bracket, how long you held your shares, and whether
you owe alternative minimum tax.
How can you figure out your tax liability on fund distributions and
transactions? One helpful tool is the tax statement that your investment
provider sends you every January. It details the distributions you received
during the past year and shows their tax status. A separate statement covers
your transactions.
Most importantly, consult your tax professional. Everyone's tax situation is
different, and your professional should be able to help you answer any questions
you may have.
DISTRIBUTIONS -- The fund pays out to shareholders any net income and net
capital gains. The fund declares income dividends daily and pays them monthly.
Ordinarily, the funds make any distributions once a year (in December). Gains
from foreign currency transactions, if any, are normally distributed in
December.
Consult your investment provider about whether your income and capital gains
distributions from a fund will be reinvested in that fund or paid to you in
cash.
HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement accounts,
all fund distributions you receive are generally taxable to you, regardless of
whether you take them in cash or reinvest them. Fund distributions to Roth IRAs,
other individual retirement accounts and qualified retirement plans generally
are tax free. Eventual withdrawals from a Roth IRA of these amounts also may be
tax free, while withdrawals from other retirement accounts and plans generally
are subject to tax.
Distributions are taxable in the year you receive them. In some cases,
distributions you receive in January are taxable as if they had been paid the
previous year. Your tax statement (see sidebar) will help clarify this for you.
Distributions of taxable income and short-term capital gains distributions are
generally taxed as ordinary income. Distributions of other capital gains are
generally taxed as long-term capital gains. The tax treatment of capital gain
distributions depends on how long the fund held the securities it sold, not when
you bought your shares of the fund or whether you reinvested your distributions.
Your Investment 11
<PAGE>
DISTRIBUTIONS
AND TAXES CONTINUED
- -------------------------------------------------------------------
EURO AND YEAR 2000
ISSUES
Like other mutual funds, the fund could be affected by problems relating to the
conversion of European currencies into the Euro beginning 1/1/99, and the
ability of computer systems to recognize the year 2000.
At Neuberger Berman, we are taking steps to ensure that our own computer systems
are compliant with Euro and Year 2000 issues and to determine that the systems
used by our major service providers are also compliant. We are also making
efforts to determine whether companies in the funds' portfolios will be affected
by either issue.
At the same time, it is impossible to know whether these problems, which could
disrupt fund operations and investments if uncorrected, have been adequately
addressed until the dates in question arrive.
HOW TRANSACTIONS ARE TAXED -- When you sell fund shares, you generally realize a
gain or loss. These transactions, which include exchanges between funds, usually
have tax consequences. The exception, once again, is tax-advantaged retirement
accounts.
UNCASHED CHECKS -- When you receive a check, you may want to deposit or cash it
right away, as you will not receive interest on uncashed checks.
12 Neuberger Berman
<PAGE>
FUND STRUCTURE
- ------------------------------------------------------------
The fund uses a "master-feeder" structure.
Rather than investing directly in securities, the fund is a "feeder fund,"
meaning that it invests in a corresponding "master portfolio." The master
portfolio in turn invests in securities, using the strategies described in this
prospectus. One potential benefit of this structure is lower costs, since the
expenses of the master portfolio can be shared with any other feeder funds. In
this prospectus we have used the word "fund" to mean a feeder fund and its
master portfolio.
In this prospectus we have used the word "fund" to mean a feeder fund and its
master portfolio. Costs for a feeder fund include its own costs and its share of
master portfolio costs.
For reasons relating to costs or a change in investment goal, among others, the
feeder fund could switch to another master portfolio or decide to manage its
assets itself. No fund in this prospectus is currently contemplating such a
move.
Your Investment 13
<PAGE>
- ------------------------------------------------------------
[SOLID BAR]
OBTAINING INFORMATION
You can obtain a share-
holder report, SAI, and other information from your investment provider, or
from:
NEUBERGER BERMAN
MANAGEMENT INC.
605 Third Avenue 2nd floor
New York, NY 10158-0180
800-877-9700
212-476-8800
Broker/Dealer and
Institutional Services:
800-366-6264
Web site:
www.nbfunds.com
Email:
[email protected]
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549-6009
800-SEC-0330 (Public
Reference Section)
Web site:
www.sec.gov
You can request copies of documents from the SEC for the cost of a duplicating
fee, or view documents at the SEC's Public Reference Room in Washington.
NEUBERGER BERMAN LIMITED MATURITY BOND TRUST
- - NO LOAD
- - NO SALES CHARGES
- - NO 12b-1 FEES
If you'd like further details on any of these funds, you can request a free copy
of the following documents:
SHAREHOLDER REPORTS -- Published twice a year, the shareholder reports offer
information about the fund's recent performance, including:
- - a discussion by the portfolio manager(s) about strategies and market
conditions
- - fund performance data and financial statements
- - complete portfolio holdings
STATEMENT OF ADDITIONAL INFORMATION -- The SAI contains more comprehensive
information on this fund, including:
- - various types of securities and practices, and their risks
- - investment limitations and additional policies
- - information about each fund's management and business structure
The SAI is incorporated by reference into this prospectus, making it legally
part of the prospectus.
Investment manager:
NEUBERGER BERMAN MANAGEMENT INC.
Sub-adviser:
NEUBERGER BERMAN, LLC
[LOGO]
NEUBERGER BERMAN MANAGEMENT INC.
605 Third Avenue
New York, NY 10158-0180
[RECYCLE LOGO] NMLRR1040299 SEC file number: 811-7724
<PAGE>
NEUBERGER BERMAN INCOME TRUST AND PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED MARCH __, 1999
Neuberger Berman
Limited Maturity Bond Trust
(and Neuberger Berman
Limited Maturity Bond
Portfolio)
No-Load Mutual Fund
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
Neuberger Berman LIMITED MATURITY Bond Trust ("Fund") is a
no-load mutual fund that offer shares pursuant to a Prospectus dated March
__, 1999. The Fund invests all of its net investable assets in Neuberger Berman
Limited Maturity Bond Portfolio ("Portfolio").
AN INVESTOR CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT
WITH AN ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION THAT PROVIDES
ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND THAT HAS AN
ADMINISTRATIVE SERVICES AGREEMENT WITH NEUBERGER BERMAN MANAGEMENT INCORPORATED
(EACH AN "INSTITUTION").
The Fund's Prospectus provides basic information that an
investor should know before investing. A copy of the Prospectus may be obtained,
without charge, from Neuberger Berman Management Incorporated ("NB Management"),
Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180 or
by calling 800-877-9700.
This Statement of Additional Information ("SAI") is not a
prospectus and should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to
make any representations not contained in the Prospectus or in this SAI in
connection with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by the Fund or its distributor in any jurisdiction in which such
offering may not lawfully be made.
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Table of Contents
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Page
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INVESTMENT INFORMATION.........................................................1
Investment Policies and Limitations...................................1
Temporary Defensive Position..........................................3
Overview of the Fund..................................................4
Additional Investment Information.....................................4
Risks of Fixed Income Securities.....................................23
CERTAIN RISK CONSIDERATIONS...................................................25
PERFORMANCE INFORMATION.......................................................25
Yield Calculations...................................................25
Total Return Computations............................................26
Comparative Information..............................................26
Other Performance Information........................................27
TRUSTEES AND OFFICERS.........................................................28
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES.............................33
Investment Manager and Administrator.................................33
Management and Administration Fees...................................34
Expense Reimbursements...............................................35
Sub-Adviser..........................................................35
Management and Control of NB Management..............................38
DISTRIBUTION ARRANGEMENTS.....................................................38
ADDITIONAL PURCHASE INFORMATION...............................................39
Share Prices and Net Asset Value.....................................39
ADDITIONAL EXCHANGE INFORMATION...............................................39
ADDITIONAL REDEMPTION INFORMATION.............................................41
Suspension of Redemptions............................................41
Redemptions in Kind..................................................41
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DIVIDENDS AND OTHER DISTRIBUTIONS.............................................42
ADDITIONAL TAX INFORMATION....................................................42
Taxation of the Fund.................................................42
Taxation of the Portfolio............................................43
Taxation of the Fund's Shareholders..................................46
PORTFOLIO TRANSACTIONS........................................................46
Portfolio Turnover...................................................47
REPORTS TO SHAREHOLDERS.......................................................47
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS................................47
The Fund.............................................................47
The Portfolio........................................................48
CUSTODIAN AND TRANSFER AGENT..................................................49
INDEPENDENT AUDITORS..........................................................49
LEGAL COUNSEL.................................................................50
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...........................50
REGISTRATION STATEMENT........................................................51
FINANCIAL STATEMENTS..........................................................51
Appendix A.....................................................................1
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INVESTMENT INFORMATION
The Fund is a separate series of Neuberger Berman Income Trust
("Trust"), a Delaware business trust that is registered with the Securities and
Exchange Commission ("SEC") as an open-end management investment company. The
Fund seeks its investment objective by investing all of its net investable
assets in a Portfolio of Income Managers Trust ("Managers Trust") that has an
investment objective identical to, and a name similar to, that of the Fund. The
Portfolio, in turn, invests in securities in accordance with an investment
objective, policies, and limitations identical to those of the Fund. (The Trust
and Managers Trust, which is an open-end management investment company managed
by NB Management, are together referred to below as the "Trusts.")
The following information supplements the discussion in the
Prospectus of the investment objective, policies, and limitations of the Fund
and Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of the Fund and Portfolio are not
fundamental. Any investment objective, policy or limitation that is not
fundamental may be changed by the trustees of the Trust ("Fund Trustees") or of
Managers Trust ("Portfolio Trustees") without shareholder approval. The
fundamental investment policies and limitations of the Fund or the Portfolio may
not be changed without the approval of the lesser of (1) 67% of the total units
of beneficial interest ("shares") of the Fund or Portfolio represented at a
meeting at which more than 50% of the outstanding Fund or Portfolio shares are
represented or (2) a majority of the outstanding shares of the Fund or
Portfolio. These percentages are required by the Investment Company Act of 1940
("1940 Act") and are referred to in this SAI as a "1940 Act majority vote."
Whenever the Fund is called upon to vote on a change in a fundamental investment
policy or limitation of the Portfolio, the Fund casts its votes thereon in
proportion to the votes of its shareholders at a meeting thereof called for that
purpose.
Investment Policies and Limitations
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The Fund has the following fundamental investment policy, to
enable it to invest in the Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its investable assets (cash, securities, and receivables
relating to securities) in an open-end management investment company
having substantially the same investment objective, policies, and
limitations as the Fund.
All other fundamental investment policies and limitations and
the non-fundamental investment policies and limitations of the Fund are
identical to those of the Portfolio. Therefore, although the following discusses
the investment policies and limitations of the Portfolio, it applies equally to
the Fund.
For purposes of the investment limitation on concentration in
a particular industry, the Portfolio determines the "issuer" of a municipal
obligation that is not a general obligation note or bond based on the
obligation's characteristics. The most significant of these characteristics is
the source of funds for the repayment of principal and payment of interest on
the obligation. If an obligation is backed by an irrevocable letter of credit or
other guarantee, without which the obligation would not qualify for purchase
under the Portfolio's quality restrictions, the issuer of the letter of credit
or the guarantee is considered an issuer of the obligation. If an obligation
meets the Portfolio's quality restrictions without credit support, the Portfolio
treats the commercial developer or the industrial user, rather than the
governmental entity or the guarantor, as the only issuer of the obligation, even
if the obligation is backed by a letter of credit or other guarantee. Also, for
purposes of the investment limitation on concentration in a particular industry,
both mortgage-backed and asset-backed securities are grouped together as a
single industry. For purposes of the limitation on commodities, the Portfolio
does not consider foreign currencies or forward contracts to be physical
commodities.
Except for the limitation on borrowing and the limitation on
illiquid securities, any maximum percentage of securities or assets, contained
in any investment policy or limitation will not be considered to be exceeded
unless the percentage limitation is exceeded immediately after, and because of,
a transaction by the Portfolio. If events subsequent to a transaction result in
the Portfolio exceeding the percentage limitation on borrowing or illiquid
securities, NB Management will take appropriate steps to reduce the percentage
of borrowings or the percentage held in illiquid securities, as may be required
by law, within a reasonable amount of time.
The Portfolio's fundamental investment policies and
limitations are as follows:
1. BORROWING. The Portfolio may not borrow money, except that
the Portfolio may (i) borrow money from banks for temporary or emergency
purposes and not for leveraging or investment and (ii) enter into reverse
repurchase agreements; provided that (i) and (ii) in combination do not exceed
33-1/3% of the value of its total assets (including the amount borrowed) less
liabilities (other than borrowings). If at any time borrowings exceed 33-1/3% of
the value of the Portfolio's total assets, the Portfolio will reduce its
borrowings within three days (excluding Sundays and holidays) to the extent
necessary to comply with the 33-1/3% limitation.
2. COMMODITIES. The Portfolio may not purchase physical
commodities or contracts thereon, unless acquired as a result of the ownership
of securities or instruments, but this restriction shall not prohibit the
Portfolio from purchasing futures contracts or options (including options on
futures contracts, but excluding options or futures contracts on physical
commodities) or from investing in securities of any kind.
3. DIVERSIFICATION. The Portfolio may not, with respect to 75%
of the value of its total assets, purchase the securities of any issuer (other
than securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities ("U.S. Government and Agency Securities")) if, as
a result, (i) more than 5% of the value of the Portfolio's total assets would be
invested in the securities of that issuer or (ii) the Portfolio would hold more
than 10% of the outstanding voting securities of that issuer.
4. INDUSTRY CONCENTRATION. The Portfolio may not purchase any
security if, as a result, 25% or more of its total assets (taken at current
value) would be invested in the securities of issuers having their principal
business activities in the same industry. This limitation does not apply to
purchases of U.S. Government and Agency Securities.
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5. LENDING. The Portfolio may not lend any security or make
any other loan if, as a result, more than 33-1/3% of its total assets (taken at
current value) would be lent to other parties, except, in accordance with its
investment objective, policies, and limitations, (i) through the purchase of a
portion of an issue of debt securities or (ii) by engaging in repurchase
agreements.
6. REAL ESTATE. The Portfolio may not purchase real estate
unless acquired as a result of the ownership of securities or instruments, but
this restriction shall not prohibit the Portfolio from purchasing securities
issued by entities or investment vehicles that own or deal in real estate or
interests therein or instruments secured by real estate or interests therein.
7. SENIOR SECURITIES. The Portfolio may not issue senior
securities, except as permitted under the 1940 Act.
8. UNDERWRITING. The Portfolio may not underwrite securities
of other issuers, except to the extent that the Portfolio, in disposing of
portfolio securities, may be deemed to be an underwriter within the meaning of
the Securities Act of 1933 ("1933 Act").
The Portfolio's non-fundamental investment policies and
limitations are as follows:
1. ILLIQUID SECURITIES. The Portfolio may not purchase any
security if, as a result, more than 15% of its net assets would be invested in
illiquid securities. Illiquid securities include securities that cannot be sold
within seven days in the ordinary course of business for approximately the
amount at which the Portfolio has valued the securities, such as repurchase
agreements maturing in more than seven days.
2. BORROWING. The Portfolio may not purchase securities if
outstanding borrowings, including any reverse repurchase agreements, exceed 5%
of its total assets.
3. Lending. Except for the purchase of debt securities and
engaging in repurchase agreements, the Portfolio may not make any loans other
than securities loans.
4. MARGIN TRANSACTIONS. The Portfolio may not purchase
securities on margin from brokers or other lenders, except that the Portfolio
may obtain such short-term credits as are necessary for the clearance of
securities transactions. Margin payments in connection with transactions in
futures contracts and options on futures contracts shall not constitute the
purchase of securities on margin and shall not be deemed to violate the
foregoing limitation.
Temporary Defensive Position
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For temporary defensive purposes, the Portfolio may invest up to 100%
of its total assets in cash or cash equivalents, U.S. Government and Agency
Securities, commercial paper and certain other money market instruments, as well
as repurchase agreements on U.S. Government and Agency Securities, the interest
on which may be subject to federal and state income taxes, and may adopt shorter
than normal weighted average maturities or durations. Yields on these securities
are generally lower than yields available on the debt securities in which the
Portfolio normally invests.
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Overview of the Fund
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The Fund pursues attractive current income with low risk to
principal. The Fund is managed on the basis of a strategy of investment in fixed
income sectors we believe are attractively priced, and the selection of the most
attractively priced issues in those sectors based on their perceived risk and
returns. Sector investments include corporate bonds, mortgage-backed securities,
asset backed securities, CMOs (Collateralized Mortgages Obligations), Treasuries
and Government agencies.
We also manage the duration of the portfolio. LIMITED
MATURITY'S portfolio of bonds has a maximum average duration of four years.
Duration measures a bond's exposure to interest rate risk. Duration incorporates
a bond's yield, coupon interest payments, final maturity and call features into
one measure. In general, the longer you extend a bond's duration, the greater
its potential return and exposure to interest rate fluctuations.
LIMITED MATURITY is appropriate for investors who seek to
participate in the returns of the bond market, but wish to avoid significant
fluctuations in principal value. In order to achieve its investment goal through
the Portfolio, the Fund has the flexibility to invest across the full range of
bond sectors (corporate, mortgage-backed securities, etc.) and may invest a
limited portion of its assets in foreign securities denominated in foreign
currencies as well as lower-rated "high yield" issues.
The investment strategy of this Fund is based upon the
demonstrated ability of short and intermediate duration portfolios to deliver
virtually all of the income of riskier long-term maturity portfolios. Thus, this
Fund limits its maximum average duration to four years. However, in order to
improve total return, it invests across a broad range of fixed income sectors
and within each sector seeks out securities that have a higher yield than
counterpart issues that we believe have a similar credit risk. It may
opportunistically invest in foreign issues when they offer higher yield than
U.S. issues. In addition, it may invest up to 10% of its net assets in "high
yield" issues when these issues offer the prospect of higher total return to the
Portfolio. It is the manager's belief that the combination of broad sector
diversification, active security selection and flexible maturity and duration
management can offer investors the prospect of total returns that will
approximate the bond market as a whole, with only moderate fluctuation in
principal value.
Additional Investment Information
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The Portfolio may make the following investments, among
others, although it may not buy all of the types of securities or use all of the
investment techniques that are described.
U.S. GOVERNMENT AND AGENCY SECURITIES. U.S. Government
Securities are obligations of the U.S. Treasury backed by the full faith and
credit of the United States. U.S. Government Agency Securities are issued or
guaranteed by U.S. Government agencies, or by instrumentalities of the U.S.
Government, such as the Government National Mortgage Association ("GNMA"),
Fannie Mae (also known as Federal National Mortgage Association), Freddie Mac
(also known as the Federal Home Loan Mortgage Corporation), Student Loan
Marketing Association (commonly known as "Sallie Mae"), and Tennessee Valley
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Authority. Some U.S. Government Agency Securities are supported by the full
faith and credit of the United States, while others may be supported by the
issuer's ability to borrow from the U.S. Treasury, subject to the Treasury's
discretion in certain cases, or only by the credit of the issuer. U.S.
Government Agency Securities include U.S. Government Agency mortgage-backed
securities. (See "Mortgage-Backed Securities," below.) The market prices of U.S.
Government Agency Securities are not guaranteed by the Government and generally
fluctuate inversely with changing interest rates.
INFLATION-INDEXED SECURITIES. The Portfolio may invest in U.S.
Treasury securities whose principal value is adjusted daily in accordance with
changes to the Consumer Price Index. Such securities are backed by the full
faith and credit of the U.S. Government. Interest is calculated on the basis of
the current adjusted principal value. The principal value of inflation-indexed
securities declines in periods of deflation, but holders at maturity receive no
less than par. If inflation is lower than expected during the period the
Portfolio holds the security, the Portfolio may earn less on it than on a
conventional bond.
Because the coupon rate on inflation-indexed securities is
lower than fixed-rate U.S. Treasury securities, the Consumer Price Index would
have to rise at least to the amount of the difference between the coupon rate of
the fixed rate U.S. Treasury issues and the coupon rate of the inflation-indexed
securities, assuming all other factors are equal, in order for such securities
to match the performance of the fixed-rate Treasury securities.
Inflation-indexed securities are expected to react primarily to changes in the
"real" interest rate (i.e., the nominal (or stated) rate less the rate of
inflation), while a typical bond reacts to changes in the nominal interest rate.
Accordingly, inflation-indexed securities have characteristics of fixed-rate
Treasuries having a shorter duration. Changes in market interest rates from
causes other than inflation will likely affect the market prices of
inflation-indexed securities in the same manner as conventional bonds.
Any increase in principal value is taxable in the year the
increase occurs, even though holders do not receive cash representing the
increase until the security matures. Because the Fund must distribute
substantially all of its income to its shareholders to avoid payment of federal
income and excise taxes, the Portfolio may have to dispose of other investments
to obtain the cash necessary to distribute the accrued taxable income on
inflation-indexed securities.
ILLIQUID SECURITIES. Illiquid securities are securities that
cannot be expected to be sold within seven days at approximately the price at
which they are valued. These may include unregistered or other restricted
securities and repurchase agreements maturing in greater than seven days.
Illiquid securities may also include commercial paper under section 4(2) of the
Securities Act of 1933, as amended, and Rule 144A securities (restricted
securities that may be traded freely among qualified institutional buyers
pursuant to an exemption from the registration requirements of the securities
laws); these securities are considered illiquid unless NB Management, acting
pursuant to guidelines established by the trustees of Managers Trust, determines
they are liquid. Generally, foreign securities freely tradable in their
principal market are not considered restricted or illiquid, even if they are not
registered in the U.S. Illiquid securities may be difficult for the Portfolio to
value or dispose of due to the absence of an active trading market. The sale of
some illiquid securities by the Portfolio may be subject to legal restrictions
which could be costly to the Portfolio.
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POLICIES AND LIMITATIONS. The Portfolio may invest up to 15%
of its net assets in illiquid securities.
REPURCHASE AGREEMENTS. In a repurchase agreement, the
Portfolio purchases securities from a bank that is a member of the Federal
Reserve System or from a securities dealer that agrees to repurchase the
securities from the Portfolio at a higher price on a designated future date.
Repurchase agreements generally are for a short period of time, usually less
than a week. Costs, delays, or losses could result if the selling party to a
repurchase agreement becomes bankrupt or otherwise defaults. NB Management
monitors the creditworthiness of sellers.
POLICIES AND LIMITATIONS. Repurchase agreements with a
maturity of more than seven days are considered to be illiquid securities. The
Portfolio may not enter into a repurchase agreement with a maturity of more than
seven days if, as a result, more than 15% of the value of its net assets would
then be invested in such repurchase agreements and other illiquid securities.
The Portfolio may enter into a repurchase agreement only if (1) the underlying
securities are of a type (excluding maturity and duration limitations) that the
Portfolio's investment policies and limitations would allow it to purchase
directly, (2) the market value of the underlying securities, including accrued
interest, at all times equals or exceeds the repurchase price, and (3) payment
for the underlying securities is made only upon satisfactory evidence that the
securities are being held for the Portfolio's account by its custodian or a bank
acting as the Portfolio's agent.
SECURITIES LOANS. The Portfolio may lend portfolio securities
to banks, brokerage firms, and other institutional investors judged creditworthy
by NB Management. NB Management, provided that cash or equivalent collateral,
equal to at least 100% of the market value of the loaned securities, is
continuously maintained by the borrower with the Portfolio. The Portfolio may
invest the cash collateral and earn income, or it may receive an agreed upon
amount of interest income from a borrower who has delivered equivalent
collateral. During the time securities are on loan, the borrower will pay the
Portfolio an amount equivalent to any dividends or interest paid on such
securities. These loans are subject to termination at the option of the
Portfolio or the borrower. The Portfolio may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Portfolio does not have the right to vote securities on loan, but
would terminate the loan and regain the right to vote if that were considered
important with respect to the investment. NB Management believes the risk of
loss on these transactions is slight because, if a borrower were to default for
any reason, the collateral should satisfy the obligation. However, as with other
extensions of secured credit, loans of portfolio securities involve some risk of
loss of rights in the collateral should the borrower fail financially.
POLICIES AND LIMITATIONS. Borrowers are required continuously
to secure their obligations to return securities on loan from the Portfolio by
depositing collateral in a form determined to be satisfactory by the Portfolio
Trustees. The collateral, which must be marked to market daily, must be equal to
at least 100% of the market value of the loaned securities, which will also be
marked to market daily.
RESTRICTED SECURITIES AND RULE 144A SECURITIES. The Portfolio
may invest in restricted securities, which are securities that may not be sold
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to the public without an effective registration statement under the 1933 Act.
Before they are registered, such securities may be sold only in a privately
negotiated transaction or pursuant to an exemption from registration. In
recognition of the increased size and liquidity of the institutional market for
unregistered securities and the importance of institutional investors in the
formation of capital, the SEC has adopted Rule 144A under the 1933 Act. Rule
144A is designed further to facilitate efficient trading among institutional
investors by permitting the sale of certain unregistered securities to qualified
institutional buyers. To the extent privately placed securities held by the
Portfolio qualify under Rule 144A and an institutional market develops for those
securities, the Portfolio likely will be able to dispose of the securities
without registering them under the 1933 Act. To the extent that institutional
buyers become, for a time, uninterested in purchasing these securities,
investing in Rule 144A securities could increase the level of the Portfolio's
illiquidity. NB Management, acting under guidelines established by the Portfolio
Trustees, may determine that certain securities qualified for trading under Rule
144A are liquid. Regulation S under the 1933 Act permits the sale abroad of
securities that are not registered for sale in the United States.
Where registration is required, the Portfolio may be obligated
to pay all or part of the registration expenses, and a considerable period may
elapse between the decision to sell and the time the Portfolio may be permitted
to sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Portfolio might obtain a
less favorable price than prevailed when it decided to sell. Restricted
securities for which no market exists are priced by a method that the Portfolio
Trustees believe accurately reflects fair value.
POLICIES AND LIMITATIONS. To the extent restricted securities,
including Rule 144A securities, are illiquid, purchases thereof will be subject
to the Portfolio's 15% limit on investments in illiquid securities.
COMMERCIAL PAPER. Commercial paper is a short-term debt
security issued by a corporation, bank, municipality, or other issuer, usually
for purposes such as financing current operations. The Portfolio may invest in
commercial paper that cannot be resold to the public without an effective
registration statement under the 1933 Act. While restricted commercial paper
normally is deemed illiquid, NB Management may in certain cases determine that
such paper is liquid, pursuant to guidelines established by the Portfolio
Trustees.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase
agreement, the Portfolio sells portfolio securities subject to its agreement to
repurchase the securities at a later date for a fixed price reflecting a market
rate of interest. Reverse repurchase agreements may increase fluctuations in the
Portfolio's and the Fund's NAVs and may be viewed as a form of leverage. There
is a risk that the counter-party to a reverse repurchase agreement will be
unable or unwilling to complete the transaction as scheduled, which may result
in losses to the Portfolio. NB Management monitors the creditworthiness of
counterparties to reverse repurchase agreements.
POLICIES AND LIMITATIONS. Reverse repurchase agreements are
considered borrowings for purposes of the Portfolio's investment policies and
limitations concerning borrowings. While a reverse repurchase agreement is
outstanding, the Portfolio will deposit in a segregated account with its
custodian cash or appropriate liquid securities, marked to market daily, in an
amount at least equal to the Portfolio's obligations under the agreement.
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BANKING AND SAVINGS INSTITUTION SECURITIES. The Portfolio may
invest in banking and savings institution obligations, which include CDs, time
deposits, bankers' acceptances, and other short-term and long-term debt
obligations issued by commercial banks and savings institutions. CDs are
receipts for funds deposited for a specified period of time at a specified rate
of return; time deposits generally are similar to CDs, but are uncertificated.
Bankers' acceptances are time drafts drawn on commercial banks by borrowers,
usually in connection with international commercial transactions. The CDs, time
deposits, and bankers' acceptances in which the Portfolio invests, typically are
not covered by deposit insurance.
VARIABLE OR FLOATING RATE SECURITIES; DEMAND AND PUT FEATURES.
Variable rate securities provide for automatic adjustment of the interest rate
at fixed intervals (e.g., daily, monthly, or semi-annually); floating rate
securities provide for automatic adjustment of the interest rate whenever a
specified interest rate or index changes. The interest rate on variable and
floating rate securities (collectively, "Adjustable Rate Securities") ordinarily
is determined by reference to a particular bank's prime rate, the 90-day U.S.
Treasury Bill rate, the rate of return on commercial paper or bank CDs, an index
of short-term tax-exempt rates, or some other objective measure.
Adjustable Rate Securities in which the Portfolio invests
frequently permit the holder to demand payment of the obligations' principal and
accrued interest at any time or at specified intervals not exceeding one year.
The demand feature usually is backed by a credit instrument (e.g., a bank letter
of credit) from a creditworthy issuer and sometimes by insurance from a
creditworthy insurer. Without these credit enhancements, some Adjustable Rate
Securities might not meet the Portfolio's quality standards. Accordingly, in
purchasing these securities, the Portfolio relies primarily on the
creditworthiness of the credit instrument issuer or the insurer. The Portfolio
may not invest more than 5% of its total assets in securities backed by credit
instruments from any one issuer or by insurance from any one insurer (excluding
securities that do not rely on the credit instrument or insurance for their
ratings, i.e., stand on their own credit).
The Portfolio can also buy fixed rate securities accompanied
by a demand feature or by a put option, which permits the Portfolio to sell the
security to the issuer or third party at a specified price. The Portfolio may
rely on the creditworthiness of issuers of the credit enhancements in purchasing
these securities.
POLICIES AND LIMITATIONS. The Portfolio may not invest more
than 5% of its total assets in securities backed by credit instruments from any
one issuer or by insurance from any one insurer. For purposes of this
limitation, the Portfolio, excludes securities that do not rely on the credit
instrument or insurance for their ratings, i.e., stand on their own credit.
For purposes of determining its dollar-weighted average
maturity, the Portfolio calculates the remaining maturity of variable and
floating rate instruments as provided in Rule 2a-7 under the 1940 Act. In
calculating its dollar-weighted average maturity and duration, the Portfolio is
permitted to treat certain Adjustable Rate Securities as maturing on a date
prior to the date on which the final repayment of principal must unconditionally
be made. In applying such maturity shortening devices, NB Management considers
whether the interest rate reset is expected to cause the security to trade at
approximately its par value.
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MORTGAGE-BACKED SECURITIES. Mortgage-backed securities
represent direct or indirect participations in, or are secured by and payable
from, pools of mortgage loans. They may be issued or guaranteed by a U.S.
Government agency or instrumentality (such as GNMA, Fannie Mae, and Freddie
Mac), though not necessarily backed by the full faith and credit of the United
States, or may be issued by private issuers. Private issuers are generally
originators of and investors in mortgage loans and include savings associations,
mortgage bankers, commercial banks, investment bankers, and special purpose
entities. Private mortgage-backed securities may be supported by U.S. Government
Agency mortgage-backed securities or some form of non-governmental credit
enhancement.
Mortgage-backed securities may have either fixed or adjustable
interest rates. Tax or regulatory changes may adversely affect the mortgage
securities market. In addition, changes in the market's perception of the issuer
may affect the value of mortgage-backed securities. The rate of return on
mortgage-backed securities may be affected by prepayments of principal on the
underlying loans, which generally increase as market interest rates decline; as
a result, when interest rates decline, holders of these securities normally do
not benefit from appreciation in market value to the same extent as holders of
other non-callable debt securities.
Because many mortgages are repaid early, the actual maturity
and duration of mortgage-backed securities are typically shorter than their
stated final maturity and their duration calculated solely on the basis of the
stated life and payment schedule. In calculating its dollar-weighted average
maturity and duration, the Portfolio may apply certain industry conventions
regarding the maturity and duration of mortgage-backed instruments. Different
analysts use different models and assumptions in making these determinations.
The Portfolio uses an approach that NB Management believes is reasonable in
light of all relevant circumstances. If this determination is not borne out in
practice, it could positively or negatively affect the value of the Portfolio
when market interest rates change. Increasing market interest rates generally
extend the effective maturities of mortgage-backed securities, increasing their
sensitivity to interest rate changes.
Mortgage-backed securities may be issued in the form of CMOs
or collateralized mortgage-backed bonds ("CBOs"). CMOs are obligations that are
fully collateralized, directly or indirectly, by a pool of mortgages; payments
of principal and interest on the mortgages are passed through to the holders of
the CMOs, although not necessarily on a pro rata basis, on the same schedule as
they are received. CBOs are general obligations of the issuer that are fully
collateralized, directly or indirectly, by a pool of mortgages. The mortgages
serve as collateral for the issuer's payment obligations on the bonds, but
interest and principal payments on the mortgages are not passed through either
directly (as with mortgage-backed "pass-through" securities issued or guaranteed
by U.S. Government agencies or instrumentalities) or on a modified basis (as
with CMOs). Accordingly, a change in the rate of prepayments on the pool of
mortgages could change the effective maturity or the duration of a CMO but not
that of a CBO (although, like many bonds, CBOs may be callable by the issuer
prior to maturity). To the extent that rising interest rates cause prepayments
to occur at a slower than expected rate, a CMO could be converted into a
longer-term security that is subject to greater risk of price volatility.
Governmental, government-related, and private entities (such
as commercial banks, savings institutions, private mortgage insurance companies,
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mortgage bankers, and other secondary market issuers, including securities
broker-dealers and special purpose entities that generally are affiliates of the
foregoing established to issue such securities) may create mortgage loan pools
to back CMOs and CBOs. Such issuers may be the originators and/or servicers of
the underlying mortgage loans, as well as the guarantors of the mortgage-backed
securities. Pools created by non-governmental issuers generally offer a higher
rate of interest than governmental and government-related pools because of the
absence of direct or indirect government or agency guarantees. Various forms of
insurance or guarantees, including individual loan, title, pool, and hazard
insurance and letters of credit, may support timely payment of interest and
principal of non-governmental pools. Governmental entities, private insurers,
and mortgage poolers issue these forms of insurance and guarantees. NB
Management considers such insurance and guarantees, as well as the
creditworthiness of the issuers thereof, in determining whether a
mortgage-backed security meets the Portfolio's investment quality standards.
There can be no assurance that private insurers or guarantors can meet their
obligations under insurance policies or guarantee arrangements.
The Portfolio may buy mortgage-backed securities without
insurance or guarantees, if NB Management determines that the securities meet
the Portfolio's quality standards. NB Management will, consistent with the
Portfolio's investment objective, policies and limitations and quality
standards, consider making investments in new types of mortgage-backed
securities as such securities are developed and offered to investors.
POLICIES AND LIMITATIONS. The Portfolio may not purchase
mortgage-backed securities that, in NB Management's opinion, are illiquid if, as
a result, more than 15% of the Portfolio's net assets would be invested in
illiquid securities.
ASSET-BACKED SECURITIES. Asset-backed securities represent
direct or indirect participations in, or are secured by and payable from, pools
of assets such as motor vehicle installment sales contracts, installment loan
contracts, leases of various types of real and personal property, and
receivables from revolving credit (credit card) agreements. These assets are
securitized through the use of trusts and special purpose corporations. Credit
enhancements, such as various forms of cash collateral accounts or letters of
credit, may support payments of principal and interest on asset-backed
securities. Although these securities may be supported by letters of credit or
other credit enhancements, payment of interest and principal ultimately depends
upon individuals paying the underlying loans, which may be affected adversely by
general downturns in the economy. Asset-backed securities are subject to the
same risk of prepayment described with respect to mortgage-backed securities.
The risk that recovery on repossessed collateral might be unavailable or
inadequate to support payments, however, is greater for asset-backed securities
than for mortgage-backed securities.
Certificates for Automobile ReceivablesSM ("CARSSM") represent
undivided fractional interests in a trust whose assets consist of a pool of
motor vehicle retail installment sales contracts and security interests in the
vehicles securing those contracts. Payments of principal and interest on the
underlying contracts are passed-through monthly to certificate holders and are
guaranteed up to specified amounts by a letter of credit issued by a financial
institution unaffiliated with the trustee or originator of the trust. Underlying
installment sales contracts are subject to prepayment, which may reduce the
overall return to certificate holders. Certificate holders also may experience
delays in payment or losses on CARSSM if the trust does not realize the full
amounts due on underlying installment sales contracts because of unanticipated
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legal or administrative costs of enforcing the contracts; depreciation, damage,
or loss of the vehicles securing the contracts; or other factors.
Credit card receivable securities are backed by receivables
from revolving credit card agreements ("Accounts"). Credit balances on Accounts
are generally paid down more rapidly than are automobile contracts. Most of the
credit card receivable securities issued publicly to date have been pass-through
certificates. In order to lengthen their maturity or duration, most such
securities provide for a fixed period during which only interest payments on the
underlying Accounts are passed through to the security holder; principal
payments received on the Accounts are used to fund the transfer of additional
credit card charges made on the Accounts to the pool of assets supporting the
securities. Usually, the initial fixed period may be shortened if specified
events occur which signal a potential deterioration in the quality of the assets
backing the security, such as the imposition of a cap on interest rates. An
issuer's ability to extend the life of an issue of credit card receivable
securities thus depends on the continued generation of principal amounts in the
underlying Accounts and the non-occurrence of the specified events. The
non-deductibility of consumer interest, as well as competitive and general
economic factors, could adversely affect the rate at which new receivables are
created in an Account and conveyed to an issuer, thereby shortening the expected
weighted average life of the related security and reducing its yield. An
acceleration in cardholders' payment rates or any other event that shortens the
period during which additional credit card charges on an Account may be
transferred to the pool of assets supporting the related security could have a
similar effect on its weighted average life and yield.
Credit cardholders are entitled to the protection of state and
federal consumer credit laws. Many of those laws give a holder the right to set
off certain amounts against balances owed on the credit card, thereby reducing
amounts paid on Accounts. In addition, unlike the collateral for most other
asset-backed securities, Accounts are unsecured obligations of the cardholder.
The Portfolio may invest in trust preferred securities, which
are a type of asset-backed securities. Trust preferred securities represent
interests in a trust formed by a parent company to finance its operations. The
trust sells preferred shares and invests the proceeds in debt securities of the
parent. This debt may be subordinated and unsecured. Dividend payments on the
trust preferred securities match the interest payments on the debt securities;
if no interest is paid on the debt securities, the trust will not make current
payments on its preferred securities. Unlike typical asset-backed securities,
which have many underlying payors and are usually overcollateralized, trust
preferred securities have only one underlying payor and are not
overcollateralized. Issuers of trust preferred securities and their parents
currently enjoy favorable tax treatment. If the tax characterization of trust
preferred securities were to change, they could be redeemed by the issuers,
which could result in a loss to the Portfolio.
U.S. DOLLAR-DENOMINATED FOREIGN DEBT SECURITIES. These are
securities of foreign issuers (including banks, governments and
quasi-governmental organizations) and foreign branches of U.S. banks, including
negotiable CDs, bankers' acceptances, and commercial paper. While investments in
foreign securities are intended to reduce risk by providing further
diversification, such investments involve sovereign and other risks, in addition
to the credit and market risks normally associated with domestic securities.
These additional risks include the possibility of adverse local political,
social, diplomatic and economic developments (including political instability)
and the potentially adverse effects of unavailability of public information
regarding issuers, less governmental supervision and regulation of financial
markets, reduced liquidity of certain financial markets, and the lack of uniform
accounting, auditing, and financial reporting standards or the application of
standards that are different or less stringent than those applied in the United
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States. It may be difficult to invoke legal process or to enforce contractual
obligations abroad.
POLICIES AND LIMITATIONS. These investments are subject to the
Portfolio's quality, maturity, and duration standards.
FOREIGN CURRENCY DENOMINATED FOREIGN SECURITIES. Foreign
currency denominated foreign securities are denominated in or indexed to foreign
currencies, including (1) CDs, commercial paper, fixed time deposits, and
bankers' acceptances issued by foreign banks, (2) obligations of other
corporations, and (3) obligations of foreign governments, of their subdivisions,
agencies, and instrumentalities, international agencies, and supranational
entities. Investing in foreign currency denominated securities involves the
special risks associated with investing in non-U.S. issuers, as described in the
preceding section, and the additional risks of (1) adverse changes in foreign
exchange rates, (2) nationalization, expropriation, or confiscatory taxation,
and (3) adverse changes in investment or exchange control regulations (which
could prevent cash from being brought back to the United States). Additionally,
dividends and interest payable on foreign securities may be subject to foreign
taxes, including taxes withheld from those payments.
Foreign securities often trade with less frequency and in less
volume than domestic securities and therefore may exhibit greater price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than apply to domestic custody arrangements,
and transaction costs of foreign currency conversions.
Foreign markets also have different clearance and settlement
procedures. In certain markets, there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Portfolio are uninvested
and no return is earned thereon. The inability of the Portfolio to make intended
security purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to the Portfolio
due to subsequent declines in value of the securities or, if the Portfolio has
entered into a contract to sell the securities, could result in possible
liability to the purchaser.
Interest rates prevailing in other countries may affect the
prices of foreign securities and exchange rates for foreign currencies. Local
factors, including the strength of the local economy, the demand for borrowing,
the government's fiscal and monetary policies, and the international balance of
payments, often affect the interest rates in other countries. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
POLICIES AND LIMITATIONS. The Portfolio may invest up to 25%
of its net assets in foreign securities denominated in or indexed to foreign
currencies. Within that limitation, however, the Portfolio is not restricted in
the amount it may invest in securities denominated in any one foreign currency.
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The Portfolio invests in foreign currency denominated foreign securities of
issuers in countries whose governments are considered stable by NB Management.
DOLLAR ROLLS. In a "dollar roll," the Portfolio sells
securities for delivery in the current month and simultaneously agrees to
repurchase substantially similar (i.e., same type and coupon) securities on a
specified future date from the same party. During the period before the
repurchase, the Portfolio forgoes principal and interest payments on the
securities. The Portfolio is compensated by the difference between the current
sales price and the forward price for the future purchase (often referred to as
the "drop"), as well as by the interest earned on the cash proceeds of the
initial sale. Dollar rolls may increase fluctuations in the Portfolio's and the
Fund's NAVs and may be viewed as a form of leverage. A "covered roll" is a
specific type of dollar roll in which the Portfolio holds an offsetting cash
position or a cash-equivalent securities position that matures on or before the
forward settlement date of the dollar roll transaction. There is a risk that the
contra-party will be unable or unwilling to complete the transaction as
scheduled, which may result in losses to the Portfolio. NB Management monitors
creditworthiness of counterparties to dollar rolls.
POLICIES AND LIMITATIONS. Dollar rolls are considered
borrowings for purposes of the Portfolio's investment policies and limitations
concerning borrowings.
WHEN-ISSUED TRANSACTIONS. These transactions may involve
mortgage-backed securities such as GNMA, Fannie Mae, and Freddie Mac
certificates. These transactions involve a commitment by the Portfolio to
purchase securities that will be issued at a future date (ordinarily within two
months, although the Portfolio may agree to a longer settlement period). The
price of the underlying securities (usually expressed in terms of yield) and the
date when the securities will be delivered and paid for (the settlement date)
are fixed at the time the transaction is negotiated. When-issued purchases are
negotiated directly with the other party, and such commitments are not traded on
exchanges.
When-issued transactions enable the Portfolio to "lock in"
what NB Management believes to be an attractive price or yield on a particular
security for a period of time, regardless of future changes in interest rates.
In periods of falling interest rates and rising prices, the Portfolio might
purchase a security on a when-issued basis and sell a similar security to settle
such purchase, thereby obtaining the benefit of currently higher yields.
When-issued purchases are negotiated directly with the other party, and such
commitments are not traded on an exchange. If the seller fails to complete the
sale, the Portfolio may lose the opportunity to obtain a favorable price.
The value of securities purchased on a when-issued basis and
any subsequent fluctuations in their value are reflected in the computation of
the Portfolio's net asset value ("NAV") starting on the date of the agreement to
purchase the securities. Because the Portfolio has not yet paid for the
securities, this produces an effect similar to leverage. The Portfolio does not
earn interest on securities it has committed to purchase until the securities
are paid for and delivered on the settlement date.
POLICIES AND LIMITATIONS. The Portfolio will purchase
securities on a when-issued basis only with the intention of completing the
transaction and actually purchasing the securities. If deemed advisable as a
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matter of investment strategy, however, the Portfolio may dispose of or
renegotiate a commitment after it has been entered into. The Portfolio also may
sell securities it has committed to purchase before those securities are
delivered to the Portfolio on the settlement date. The Portfolio may realize
capital gains or losses in connection with these transactions.
When the Portfolio purchases securities on a when-issued
basis, it will deposit in a segregated account with its custodian, until payment
is made, appropriate liquid securities having an aggregate market value
(determined daily) at least equal to the amount of the Portfolio's purchase
commitments. This procedure is designed to ensure that the Portfolio maintains
sufficient assets at all times to cover its obligations under when-issued
purchases.
FUTURES CONTRACTS AND OPTIONS THEREON. The Portfolio may
purchase and sell interest rate and bond index futures contracts and options
thereon and may purchase and sell foreign currency futures contracts (with
interest rate and bond index futures contracts, "Futures" or "Futures
Contracts") and options thereon the prices of securities or, in the case of
foreign currency futures and options thereon, to hedge against changes in
prevailing currency exchange rates. Because the futures markets may be more
liquid than the cash markets, the use of Futures permits the Portfolio to
enhance portfolio liquidity and maintain a defensive position without having to
sell portfolio securities. The Portfolio views investment in (1) interest rate
and bond index Futures and options thereon as a maturity or duration management
device and/or a device to reduce risk and preserve total return in an adverse
interest rate environment for the hedged securities and (2) foreign currency
Futures and options thereon as a means of establishing more definitely the
effective return on, or the purchase price of, securities denominated in foreign
currencies held or intended to be acquired by the Portfolio.
A "sale" of a Futures Contract (or a "short" Futures position)
entails the assumption of a contractual obligation to deliver the securities or
currency underlying the contract at a specified price at a specified future
time. A "purchase" of a Futures Contract (or a "long" Futures position) entails
the assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
Futures, including bond index Futures, are settled on a net cash payment basis
rather than by the sale and delivery of the securities underlying the Futures.
U.S. Futures (except certain currency Futures) are traded on
exchanges that have been designated as "contract markets" by the Commodity
Futures Trading Commission ("CFTC"); Futures transactions must be executed
through a futures commission merchant that is a member of the relevant contract
market. The exchange's affiliated clearing organization guarantees performance
of the contracts between the clearing members of the exchange.
Although Futures Contracts by their terms may require the
actual delivery or acquisition of the underlying securities or currency, in most
cases the contractual obligation is extinguished by being offset before the
expiration of the contract, without the parties having to make or take delivery
of the assets. A Futures position is offset by buying (to offset an earlier
sale) or selling (to offset an earlier purchase) an identical Futures Contract
calling for delivery in the same month. This may result in a profit or loss.
While futures contracts entered into by the Portfolio will usually be liquidated
in this manner, the Portfolio may instead make or take delivery of underlying
securities whenever it appears economically advantageous for it to do so.
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"Margin" with respect to Futures is the amount of assets that
must be deposited by the Portfolio with, or for the benefit of, a futures
commission merchant in order to initiate and maintain the Portfolio's Futures
positions. The margin deposit made by the Portfolio when it enters into a
Futures Contract ("initial margin") is intended to assure its performance of the
contract. If the price of the Futures Contract changes -- increases in the case
of a short (sale) position or decreases in the case of a long (purchase)
position -- so that the unrealized loss on the contract causes the margin
deposit not to satisfy margin requirements, the Portfolio will be required to
make an additional margin deposit ("variation margin"). However, if favorable
price changes in the Futures Contract cause the margin on deposit to exceed the
required margin, the excess will be paid to the Portfolio. In computing its
daily NAV, the Portfolio marks to market the value of its open Futures
positions. The Portfolio also must make margin deposits with respect to options
on Futures that it has written (but not with respect to options on futures that
it has purchased). If the futures commission merchant holding the deposit goes
bankrupt, the Portfolio could suffer a delay in recovering its funds and could
ultimately suffer a loss.
An option on a Futures Contract gives the purchaser the right,
in return for the premium paid, to assume a position in the contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume a short Futures
position (if the option is a call) or a long Futures position (if the option is
a put). Upon exercise of the option, the accumulated cash balance in the
writer's Futures margin account is delivered to the holder of the option. That
balance represents the amount by which the market price of the Futures Contract
at exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option. Options on futures have characteristics
and risks similar to those of securities options, as discussed herein.
Although the Portfolio believes that the use of Futures
Contracts will benefit it, if NB Management's judgment about the general
direction of the markets or about interest rate or currency exchange rate trends
is incorrect, the Portfolio's overall return would be lower than if it had not
entered into any such contracts. The prices of Futures are volatile and are
influenced by, among other things, actual and anticipated changes in interest or
currency exchange rates, which in turn are affected by fiscal and monetary
policies and by national and international political and economic events. At
best, the correlation between changes in prices of Futures and of the securities
and currencies being hedged can be only approximate due to differences between
the futures and securities markets or differences between the securities or
currencies underlying the Portfolio's futures position and the securities held
by or to be purchased for the Portfolio. The currency futures market may be
dominated by short-term traders seeking to profit from changes in exchange
rates. This would reduce the value of such contracts used for hedging purposes
over a short-term period. Such distortions are generally minor and would
diminish as the contract approaches maturity.
Because of the low margin deposits required, Futures trading
involves an extremely high degree of leverage; as a result, a relatively small
price movement in a Futures Contract may result in an immediate and substantial
loss, or gain, to the investor. Losses that may arise from certain Futures
transactions are potentially unlimited.
Most U.S. futures exchanges limit the amount of fluctuation in
the price of a Futures Contract or option thereon during a single trading day;
once the daily limit has been reached, no trades may be made on that day at a
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price beyond that limit. The daily limit governs only price movements during a
particular trading day, however; it thus does not limit potential losses. In
fact, it may increase the risk of loss, because prices can move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing liquidation of unfavorable Futures and options positions and
subjecting investors to substantial losses. If this were to happen with respect
to a position held by the Portfolio, it could (depending on the size of the
position) have an adverse impact on the NAV of the Portfolio.
POLICIES AND LIMITATIONS. The Portfolio may purchase and sell
interest rate and bond index Futures and may purchase and sell options thereon
in an attempt to hedge against changes in securities prices resulting from
changes in prevailing interest rates. The Portfolio engages in foreign currency
Futures and options transactions in an attempt to hedge against changes in
prevailing currency exchange rates. The Portfolio does not engage in
transactions in Futures or options thereon for speculation.
CALL OPTIONS ON SECURITIES. The Portfolio may write covered
call options and may purchase call options. The purpose of writing covered call
options is to hedge (i.e., to reduce, at least in part, the effect of price
fluctuations of securities held by the Portfolio on the Portfolio's and its
corresponding Fund's NAVs or to earn premium income. Portfolio securities on
which call and put options may be written and purchased by the Portfolio are
purchased solely on the basis of investment considerations consistent with the
Portfolio's investment objective.
When the Portfolio writes a call option, it is obligated to
sell a security to a purchaser at a specified price at any time until a certain
date if the purchaser decides to exercise the option. The Portfolio receives a
premium for writing the option. When writing call options, the Portfolio writes
only "covered" call options on securities it owns. So long as the obligation of
the call option continues, the Portfolio may be assigned an exercise notice,
requiring it to deliver the underlying security against payment of the exercise
price. The Portfolio may be obligated to deliver securities underlying a call
option at less than the market price.
When the Portfolio purchases a call option, it pays a premium
for the right to purchase a security from the writer at a specified price until
a specified date. The Portfolio would purchase a call option to protect against
an increase in the price of securities it intends to purchase or to offset a
previously written call option.
The writing of covered call options is a conservative
investment technique that is believed to involve relatively little risk (in
contrast to the writing of "naked" or uncovered call options, which the
Portfolio will not do), but is capable of enhancing the Portfolio's total
return. When writing a covered call option, the Portfolio, in return for the
premium, gives up the opportunity for profit from a price increase in the
underlying security above the exercise price, but conversely retains the risk of
loss should the price of the security decline. When writing a put option, the
Portfolio, in return for the premium, takes the risk that it must purchase the
underlying security at a price which may be higher than the current market price
of the security. If a call or put option that the Portfolio has written expires
unexercised, the Portfolio will realize a gain in the amount of the premium;
however, in the case of a call option, that gain may be offset by a decline in
the market value of the underlying security during the option period. If the
call option is exercised, the Portfolio will realize a gain or loss from the
sale of the underlying security.
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POLICIES AND LIMITATIONS. The Portfolio may write covered call
options and may purchase call options on debt securities in its portfolio or on
foreign currencies in its portfolio for hedging purposes. The Portfolio may
write covered call options for the purpose of producing income. The Portfolio
will write a call option on a security only if it holds that security or
currency or has the right to obtain the security or currency at no additional
cost.
PUT OPTIONS ON SECURITIES. The Portfolio may write and
purchase put options on securities. The Portfolio will receive a premium for
writing a put option, which obligates the Portfolio to acquire a security at a
certain price at any time until a certain date if the purchaser of the option
decides to exercise the option. The Portfolio may be obligated to purchase the
underlying security at more than its current value.
When the Portfolio purchases a put option, it pays a premium
to the writer for the right to sell a security to the writer for a specified
amount at any time until a certain date. The Portfolio might purchase a put
option in order to protect itself against a decline in the market value of a
security it owns.
Portfolio securities on which put options may be written and
purchased by the Portfolio are purchased solely on the basis of investment
considerations consistent with the Portfolio's investment objective. When
writing a put option, the Portfolio, in return for the premium, takes the risk
that it must purchase the underlying security at a price that may be higher than
the current market price of the security. If a put option that the Portfolio has
written expires unexercised, the Portfolio will realize a gain in the amount of
the premium.
POLICIES AND LIMITATIONS. The Portfolio generally writes and
purchases put options on securities or on foreign currencies for hedging
purposes (i.e., to reduce, at least in part, the effect of price fluctuations of
securities held by the Portfolio on the Portfolio's and the Fund's NAVs).
GENERAL INFORMATION ABOUT SECURITIES OPTIONS. The exercise
price of an option may be below, equal to, or above the market value of the
underlying security at the time the option is written. Options normally have
expiration dates between three and nine months from the date written. The
obligation under any option written by the Portfolio terminates upon expiration
of the option or, at an earlier time, when the writer offsets the option by
entering into a "closing purchase transaction" to purchase an option of the same
series. If an option is purchased by the Portfolio and is never exercised or
closed out, the Portfolio will lose the entire amount of the premium paid.
Options are traded both on national securities exchanges and
in the over-the-counter ("OTC") market. Exchange-traded options in the U.S. are
issued by a clearing organization affiliated with the exchange on which the
option is listed; the clearing organization in effect guarantees completion of
every exchange-traded option. In contrast, OTC options are contracts between the
Portfolio and a counterparty, with no clearing organization guarantee. Thus,
when the Portfolio sells (or purchases) an OTC option, it generally will be able
to "close out" the option prior to its expiration only by entering into a
"closing transaction" with the dealer to whom (or from whom) the Portfolio
originally sold (or purchased) the option. There can be no assurance that the
Portfolio would be able to liquidate an OTC option at any time prior to
expiration. Unless the Portfolio is able to effect a closing purchase
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transaction in a covered OTC call option it has written, it will not be able to
liquidate securities used as cover until the option expires or is exercised or
until different cover is substituted. In the event of the counterparty's
insolvency, the Portfolio may be unable to liquidate its options position and
the associated cover. NB Management monitors the creditworthiness of dealers
with which the Portfolio may engage in OTC options transactions.
The premium received (or paid) by the Portfolio when it writes
(or purchases) an option is the amount at which the option is currently traded
on the applicable exchange, less or (plus) a commission. The premium may
reflect, among other things, the current market price of the underlying
security, the relationship of the exercise price to the market price, the
historical price volatility of the underlying security, the length of the option
period, the general supply of and demand for credit, and the interest rate
environment. The premium received by the Portfolio for writing an option is
recorded as a liability on the Portfolio's statement of assets and liabilities.
This liability is adjusted daily to the option's current market value, which is
the last reported sales price before the time the Portfolio's NAV is computed on
the day the option is being valued or, in the absence of any trades thereof on
that day, the mean between the bid and asked prices as of that time.
Closing transactions are effected in order to realize a profit
(or minimize a loss) on an outstanding option, to prevent an underlying security
from being called, or to permit the sale or the put of the underlying security.
Furthermore, effecting a closing transaction permits the Portfolio to write
another call option on the underlying security with a different exercise price
or expiration date or both. There is, of course, no assurance that the Portfolio
will be able to effect closing transactions at favorable prices. If the
Portfolio cannot enter into such a transaction, it may be required to hold a
security that it might otherwise have sold (or purchase a security that it would
not have otherwise bought), in which case it would continue to be at market risk
on the security.
The Portfolio will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more than the
premium received from writing the call or put option. Because increases in the
market price of a call option generally reflect increases in the market price of
the underlying security, any loss resulting from the repurchase of a call option
is likely to be offset, in whole or in part, by appreciation of the underlying
security owned by the Portfolio; however, the Portfolio could be in a less
advantageous position than if it had not written the call option.
The Portfolio pays brokerage commissions or spreads in
connection with purchasing or writing options, including those used to close out
existing positions. These brokerage commissions normally are higher than those
applicable to purchases and sales of portfolio securities. From time to time,
the Portfolio may purchase an underlying security for delivery in accordance
with an exercise notice of a call option assigned to it, rather than delivering
the security from its portfolio. In those cases, additional brokerage
commissions are incurred.
POLICIES AND LIMITATIONS. The assets used as cover (or held in
a segregated account) for OTC options written by the Portfolio will be
considered illiquid unless the OTC options are sold to qualified dealers who
agree that the Portfolio may repurchase any OTC option it writes at a maximum
price to be calculated by a formula set forth in the option agreement. The cover
for an OTC call option written subject to this procedure will be considered
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illiquid only to the extent that the maximum repurchase price under the formula
exceeds the intrinsic value of the option.
FORWARD FOREIGN CURRENCY CONTRACTS. The Portfolio may enter
into contracts for the purchase or sale of a specific foreign currency at a
future date at a fixed price ("Forward Contracts"). The Portfolio enters into
Forward Contracts in an attempt to hedge against changes in prevailing currency
exchange rates. Forward Contract transactions include forward sales or purchases
of foreign currencies for the purpose of protecting the U.S. dollar value of
securities held or to be acquired by the Portfolio that are denominated in a
foreign currency or protecting the U.S. dollar equivalent of dividends,
interest, or other payments on those securities.
NB Management believes that the use of foreign currency
hedging techniques, including "proxy-hedges," can provide significant protection
of NAV in the event of a general rise in the U.S. dollar against foreign
currencies. For example, the return available from securities denominated in a
particular foreign currency would diminish if the value of the U.S. dollar
increased against that currency. Such a decline could be partially or completely
offset by an increase in value of a hedge involving a Forward Contract to sell
that foreign currency or a proxy-hedge involving a Forward Contract to sell a
different foreign currency whose behavior is expected to resemble the currency
in which the securities being hedged are denominated but which is available on
more advantageous terms.
However, a hedge or proxy-hedge cannot protect against
exchange rate risks perfectly, and, if NB Management is incorrect in its
judgment of future exchange rate relationships, the Portfolio could be in a less
advantageous position than if such a hedge or proxy-hedge had not been
established. If the Portfolio uses proxy-hedging, it may experience losses on
both the currency in which it has invested and the currency used for hedging if
the two currencies do not vary with the expected degree of correlation. Using
Forward Contracts to protect the value of the Portfolio's securities against a
decline in the value of a currency does not eliminate fluctuations in the prices
of the underlying securities. Because Forward Contracts are not traded on an
exchange, the assets used to cover such contracts may be illiquid. The Portfolio
may experience delays in the settlement of its foreign currency transactions.
POLICIES AND LIMITATIONS. The Portfolio does not engage in
transactions in Forward Contracts for speculation; it views investments in
Forward Contracts as a means of establishing more definitely the effective
return on, or the purchase price of, securities denominated in foreign
currencies that are held or intended to be acquired by it.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio may write and
purchase covered call and put options on foreign currencies. Currency options
have characteristics and risks similar to those of securities options, as
discussed herein. Certain options on foreign currencies are traded on the OTC
market and involve liquidity and credit risks that may not be present in the
case of exchange-traded currency options.
POLICIES AND LIMITATIONS. The Portfolio would use options on
foreign currencies to protect against declines in the U.S. dollar value of
portfolio securities or increases in the U.S. dollar cost of securities to be
acquired, or to protect the dollar equivalent of dividends, interest, or other
19
<PAGE>
payments on those securities. To the extent the Portfolio sells or purchases
Futures Contracts and/or writes options thereon or options on foreign currencies
that are traded on an exchange regulated by the CFTC other than for bona fide
hedging purposes (as defined by the CFTC), the aggregate initial margin and
premiums on these positions excluding the amount by which options are
"in-the-money") may not exceed 5% of the Portfolio's net assets.
COVER FOR FUTURES, OPTIONS ON FUTURES, OPTIONS ON SECURITIES
AND FOREIGN CURRENCIES, AND FORWARD CONTRACTS (COLLECTIVELY, "HEDGING
INSTRUMENTS"). The Portfolio will comply with SEC guidelines regarding "cover"
for Hedging Instruments and, if the guidelines so require, set aside in a
segregated account with its custodian the prescribed amount of cash or
appropriate liquid securities. Securities held in a segregated account cannot be
sold while the Futures, option, or forward strategy covered by those securities
is outstanding, unless they are replaced with other suitable assets. As a
result, segregation of a large percentage of the Portfolio's assets could impede
portfolio management or the Portfolio's ability to meet current obligations. The
Portfolio may be unable promptly to dispose of assets which cover, or are
segregated with respect to, an illiquid Futures, options, or forward position;
this inability may result in a loss to the Portfolio.
POLICIES AND LIMITATIONS. The Portfolio will comply with SEC
guidelines regarding "cover" for Hedging Instruments and, if the guidelines so
require, set aside in a segregated account with its custodian the prescribed
amount of cash or appropriate liquid securities.
GENERAL RISKS OF HEDGING INSTRUMENTS. The primary risks in
using Hedging Instruments are (1) imperfect correlation or no correlation
between changes in the market value of the securities or currencies held or to
be acquired by the Portfolio and changes in the market value of Hedging
Instruments; (2) possible lack of a liquid secondary market for Hedging
Instruments and the resulting inability to close out Hedging Instruments when
desired; (3) the fact that the skills needed to use Hedging Instruments are
different from those needed to select the Portfolio's securities; (4) the fact
that, although use of Hedging Instruments for hedging purposes can reduce the
risk of loss, they also can reduce the opportunity for gain, or even result in
losses, by offsetting favorable price movements in hedged investments; and (5)
the possible inability of the Portfolio to purchase or sell a portfolio security
at a time that would otherwise be favorable for it to do so, or the possible
need for the Portfolio to sell a portfolio security at a disadvantageous time,
due to its need to maintain cover or to segregate securities in connection with
its use of Hedging Instruments. NB Management intends to reduce the risk of
imperfect correlation by investing only in Hedging Instruments whose behavior is
expected to resemble or offset that of the Portfolio's underlying securities or
currency. There can be no assurance that the Portfolio's use of Hedging
Instruments will be successful.
The Portfolio's use of Hedging Instruments may be limited by
certain provisions of the Internal Revenue Code of 1986, as amended ("Code"),
with which it must comply if the Fund is to continue to qualify as a regulated
investment company ("RIC"). See "Additional Tax Information -- Taxation of the
Portfolio."
POLICIES AND LIMITATIONS. NB Management intends to reduce the
risk of imperfect correlation by investing only in Hedging Instruments whose
behavior is expected to resemble or offset that of the Portfolio's underlying
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<PAGE>
securities or currency. NB Management intends to reduce the risk that the
Portfolio will be unable to close out Hedging Instruments by entering into such
transactions only if NB Management believes there will be an active and liquid
secondary market.
INDEXED SECURITIES. The Portfolio may invest in securities
whose value is linked to interest rates, commodities, foreign currencies,
indices, or other financial indicators ("indexed securities"). Most indexed
securities are short- to intermediate-term fixed income securities whose values
at maturity or interest rates rise or fall according to the change in one or
more specified underlying instruments. The value of indexed securities may
increase or decrease if the underlying instrument appreciates, and they may have
return characteristics similar to direct investment in the underlying instrument
or to one or more options thereon. An indexed security may be more volatile than
the underlying instrument itself.
ZERO COUPON AND STEP COUPON SECURITIES. The Portfolio may
invest in zero coupon and step coupon securities, which are debt obligations
that do not entitle the holder to any periodic payment of interest prior to
maturity or that specify a future date when the securities begin to pay current
interest. Zero coupon and step coupon securities are issued and traded at a
discount from their face amount or par value. This discount varies depending on
prevailing interest rates, the time remaining until cash payments begin, the
liquidity of the security, and the perceived credit quality of the issuer. Zero
coupon and step coupon securities are redeemed at face value when they mature.
The discount on zero coupon and step coupon securities ("original issue
discount" or "OID") must be taken into income ratably by the Portfolio prior to
the receipt of any actual payments.
Because the Fund must distribute substantially all of its net
income (including its share of the Portfolio's accrued OID attributable to zero
coupon and step coupon securities) to its shareholders each year for income and
excise tax purposes, the Portfolio may have to dispose of portfolio securities
under disadvantageous circumstances to generate cash, or may be required to
borrow, to satisfy the Fund's distribution requirements. See "Additional Tax
Information."
The market prices of zero coupon and step coupon securities
generally are more volatile than the prices of securities that pay interest
periodically. Zero coupon securities are likely to respond to changes in
interest rates to a greater degree than other types of debt securities having
similar maturities and credit quality.
MUNICIPAL OBLIGATIONS. Municipal obligations are issued by or
on behalf of states, the District of Columbia, and U.S. territories, and
possessions and their political subdivisions, agencies, and instrumentalities.
The interest on municipal obligations is generally exempt from
federal income tax. The tax-exempt status of any issue of municipal obligations
is determined on the basis of an opinion of the issuer's bond counsel at the
time the obligations are issued. Municipal obligations include "general
obligation" securities, which are backed by the full taxing power of a
municipality, and "revenue" securities, which are backed only by the income from
a specific project, facility, or tax. Municipal obligations also include
industrial development and private activity bonds which are issued by or on
behalf of public authorities, but are not backed by the credit of any
governmental or public authority. "Anticipation notes" are issued by
municipalities in expectation of future proceeds from the issuance of bonds or
21
<PAGE>
from taxes or other revenues, and are payable from those bond proceeds, taxes,
or revenues. Municipal obligations also include tax-exempt commercial paper,
which is issued by municipalities to help finance short-term capital or
operating requirements.
The value of municipal obligations is dependent on the
continuing payment of interest and principal when due by the issuers of the
municipal obligations (or, in the case of industrial development bonds, the
revenues generated by the facility financed by the bonds or, in certain other
instances, the provider of the credit facility backing the bonds). As with other
fixed income securities, an increase in interest rates generally will reduce the
value of the Portfolio's investments in municipal obligations, whereas a decline
in interest rates generally will increase that value.
Current efforts to restructure the federal budget and the
relationship between the federal government and state and local governments may
adversely impact the financing of some issuers of municipal securities. Some
states and localities are experiencing substantial deficits and may find it
difficult for political or economic reasons to increase taxes. Efforts are under
way that may result in a restructuring of the federal income tax system. These
developments could reduce the value of all municipal securities, or the
securities of particular issuers.
POLICIES AND LIMITATIONS. The Portfolio may invest up to 5% of
its net assets in municipal obligations.
LOWER-RATED DEBT SECURITIES. Lower-rated debt securities or
"junk bonds" are those rated below the fourth highest category by all NRSROs
that have rated them (including those securities rated as low as D by S&P) or
unrated securities of comparable quality. Securities rated below investment
grade may be considered speculative. These securities are deemed to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal. Lower rated debt securities generally offer a higher
current yield than that available for investment grade issues with similar
maturities, but they may involve significant risk under adverse conditions. In
particular, adverse changes in general economic conditions and in the industries
in which the issuers are engaged and changes in the financial condition of the
issuers are more likely to cause price volatility and weaken the capacity of the
issuer to make principal and interest payments than is the case for higher-grade
debt securities. In addition, if the Portfolio invests in lower-quality
securities, it may incur additional expenses to the extent recovery is sought on
defaulted securities. Because of the many risks involved in investing in
high-yield securities, the success of such investments is dependent on the
credit analysis of NB Management.
During periods of economic downturn or rising interest rates,
highly leveraged issuers may experience financial stress which could adversely
affect their ability to make payments of interest and principal and increase the
possibility of default. In addition, such issuers may not have more traditional
methods of financing available to them and may be unable to repay debt at
maturity by refinancing. The risk of loss due to default by such issuers is
significantly greater because such securities frequently are unsecured and
subordinated to the prior payment of senior indebtedness.
The market for lower rated debt securities has expanded
rapidly in recent years, and its growth generally paralleled a long economic
expansion. In the past, the prices of many lower rated debt securities declined
22
<PAGE>
substantially, reflecting an expectation that many issuers of such securities
might experience financial difficulties. As a result, the yields on lower rated
debt securities rose dramatically. However, such higher yields did not reflect
the value of the income stream that holders of such securities expected, but
rather the risk that holders of such securities could lose a substantial portion
of their value as a result of the issuers' financial restructuring or defaults.
There can be no assurance that such declines will not recur.
The market for lower rated debt issues generally is thinner or
less active than that for higher quality securities, which may limit a Fund's
ability to sell such securities at fair value in response to changes in the
economy or financial markets. Judgment may play a greater role in pricing such
securities than it does for more liquid securities. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may also
decrease the values and liquidity of lower rated debt securities, especially in
a thinly traded market.
See Appendix A for further information about the ratings of
debt securities assigned by S&P and Moody's.
POLICIES AND LIMITATIONS. The Portfolio may invest up to 10%
of its net assets in lower-rated debt securities; the Portfolio will not invest
in such securities unless, at the time of purchase, they are rated at least B by
Moody's or S&P or, if unrated by either of those entities, deemed by NB
Management to be of comparable quality.
Risks of Fixed Income Securities
- --------------------------------
Fixed income securities are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
risk") and are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). Lower-rated securities are more likely to react to
developments affecting market and credit risk than are more highly rated
securities, which react primarily to movements in the general level of interest
rates.
RATINGS OF FIXED INCOME SECURITIES
As discussed in the Prospectus, the Portfolio may purchase
securities rated by Standard & Poor's ("S&P"), Moody's Investors Service, Inc.
("Moody's"), or any other nationally recognized statistical rating organization
("NRSRO"). The ratings of an NRSRO represent its opinion as to the quality of
securities it undertakes to rate. Ratings are not absolute standards of quality;
consequently, securities with the same maturity, duration, coupon, and rating
may have different yields. Although the Portfolio may rely on the ratings of any
NRSRO, the Portfolio mainly refers to ratings assigned by S&P and Moody's, which
are described in Appendix A. The Portfolio may also invest in unrated securities
that are deemed comparable in quality by NB Management to the rated securities
in which the Portfolio may permissibly invest.
HIGH-QUALITY DEBT SECURITIES. High-quality debt securities are
securities that have received a rating from at least one NRSRO, such as S&P or
Moody's, in one of the two highest rating categories (the highest category in
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<PAGE>
the case of commercial paper) or, if not rated by any NRSRO, such as U.S.
Government and Agency Securities, have been determined by NB Management to be of
comparable quality.
INVESTMENT GRADE DEBT SECURITIES. Investment grade debt
securities are securities that have received a rating from at least one NRSRO in
one of the four highest rating categories or, if not rated by any NRSRO, have
been determined by NB Management to be of comparable quality. Moody's deems
securities rated in its fourth highest category (Baa) to have speculative
characteristics; a change in economic factors could lead to a weakened capacity
of the issuer to repay.
LOWER-RATED DEBT SECURITIES. Lower-rated debt securities or
"junk bonds" are those rated below the fourth highest category by all NRSROs
that have rated them (including those securities rated as low as D by S&P) or
unrated securities of comparable quality. Securities rated below investment
grade may be considered speculative. Securities rated B are judged to be
predominantly speculative with respect to their capacity to pay interest and
repay principal in accordance with the terms of the obligations. Although these
securities generally offer higher yields than investment grade debt securities
with similar maturities, lower-quality securities involve greater risks,
including the possibility of default or bankruptcy by the issuer or the
securities may already be in default. See the additional risks described above
for lower-rated securities.
Subsequent to its purchase by the Portfolio, an issue of debt
securities may cease to be rated or its rating may be reduced, so that the
securities would no longer be eligible for purchase by that Portfolio. In such a
case, NB Management will engage in an orderly disposition of the downgraded or
other securities to the extent necessary to ensure that the Portfolio's holdings
of securities that are considered by the Portfolio to be below investment grade
will not exceed 10% of its net assets. The Portfolio may hold up to 5% of its
net assets in securities that are downgraded after purchase to a rating below
that permissible by the Portfolio's investment policies.
DURATION AND MATURITY
Duration is a measure of the sensitivity of debt securities to
changes in market interest rates, based on the entire cash flow associated with
the securities, including payments occurring before the final repayment of
principal. NB Management utilizes duration as a tool in portfolio selection
instead of the more traditional measure known as "term to maturity." "Term to
maturity" measures only the time until a debt security provides its final
payment, taking no account of the pattern of the security's payments prior to
maturity. Duration incorporates a bond's yield, coupon interest payments, final
maturity and call features into one measure. Duration therefore provides a more
accurate measurement of a bond's likely price change in response to a given
change in market interest rates. The longer the duration, the greater the bond's
price movement will be as interest rates change. For any fixed income security
with interest payments occurring prior to the payment of principal, duration is
always less than maturity.
Futures, options and options on futures have durations which
are generally related to the duration of the securities underlying them. Holding
long futures or call option positions will lengthen the Portfolio's duration by
24
<PAGE>
approximately the same amount as would holding an equivalent amount of the
underlying securities. Short futures or put options have durations roughly equal
to the negative of the duration of the securities that underlie these positions,
and have the effect of reducing portfolio duration by approximately the same
amount as would selling an equivalent amount of the underlying securities.
There are some situations where even the standard duration
calculation does not properly reflect the interest rate exposure of a security.
For example, floating and variable rate securities often have final maturities
of ten or more years; however, their interest rate exposure corresponds to the
frequency of the coupon reset. Another example where the interest rate exposure
is not properly captured by duration is the case of mortgage-backed securities.
The stated final maturity of such securities is generally 30 years, but current
and expected prepayment rates are critical in determining the securities'
interest rate exposure. In these and other similar situations, NB Management,
where permitted, will use more sophisticated analytical techniques that
incorporate the economic life of a security into the determination of its
interest rate exposure.
The Portfolio's dollar-weighted average duration will not
exceed four years, although the Portfolio may invest in individual securities of
any duration; the Portfolio's dollar-weighted average maturity may range up to
five years.
CERTAIN RISK CONSIDERATIONS
The Fund's investment in the Portfolio may be affected by the
actions of other large investors in the Portfolio, if any. For example, if a
large investor in the Portfolio (other than the Fund) redeemed its interest in
the Portfolio, the Portfolio's remaining investors (including the Fund) might,
as a result, experience higher pro rata operating expenses, thereby producing
lower returns.
Although the Portfolio seeks to reduce risk by investing in a
diversified portfolio of securities, diversification does not eliminate all
risk. There can, of course, be no assurance the Portfolio will achieve its
investment objective.
PERFORMANCE INFORMATION
The Fund's performance figures are based on historical results
and are not intended to indicate future performance. The yield and total return
of the Fund will vary. The share price of the Fund will vary, and an investment
in the Fund, when redeemed, may be worth more or less than an investor's
original cost.
Yield Calculations
- ------------------
The Fund may advertise its "yield" based on a 30-day (or one
month) period. This yield is computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period. The result then is annualized and shown as an annual
percentage of an investment.
The annualized yield for the Fund for the 30-day period ended
October 31, 1998 was 5.26%.
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Total Return Computations
- -------------------------
The Fund may advertise certain total return information. An
average annual compounded rate of return ("T") may be computed by using the
redeemable value at the end of a specified period ("ERV") of a hypothetical
initial investment of $1,000 ("P") over a period of time ("n") according to the
formula:
P(1+T)n = ERV
Average annual total return smooths out year-to-year variations in performance
and, in that respect, differs from actual year-to-year results.
Although the Fund did not commence operations until August 30,
1993, the Fund's investment objective, limitations, and policies are the same as
those of another mutual fund administered by NB Management, which has a name
similar to the Fund's and invests in the same Portfolio ("Sister Fund"). The
Sister Fund had a predecessor. The following total return data is for the Fund
since its inception and, for periods prior to the Fund's inception, its Sister
Fund and which, as used herein, includes data for the Sister Fund's predecessor.
The total returns for periods prior to the Fund's inception would have been
lower had they reflected the higher fees of the Fund, as compared to those of
the Sister Fund and its predecessor.
The average annual total returns for the Fund, its Sister Fund
and that Sister Fund's predecessor for the one-, five- and ten-year periods
ended October 31, 1998, were +4.79%, +5.03%, and +6.83%, respectively. If an
investor had invested $10,000 in that predecessor's shares on June 9, 1986 and
had reinvested all capital gain distributions and income dividends, the value of
that investor's holdings would have been $22,575 on October 31, 1998.
NB Management may from time to time reimburse the Fund or
Portfolio for a portion of its expenses. Such action has the effect of
increasing yield and total return. Actual reimbursements are described in the
Prospectus and in "Investment Management and Administration Services" below.
Comparative Information
- -----------------------
From time to time the Fund's performance may be compared with:
(1) data (that may be expressed as rankings or ratings) published
by independent services or publications (including newspapers,
newsletters, and financial periodicals) that monitor the
performance of mutual funds, such as Lipper Analytical
Services, Inc., C.D.A. Investment Technologies, Inc.,
Wiesenberger Investment Companies Service, IBC/Donoghue's
Money Market Fund Report, Investment Company Data Inc.,
Morningstar, Inc., Micropal Incorporated, and quarterly mutual
fund rankings by Money, Fortune, Forbes, Business Week,
Personal Investor, and U.S. News & World Report magazines, The
Wall Street Journal, The New York Times, Kiplinger's Personal
Finance, and Barron's Newspaper, or
26
<PAGE>
(2) recognized bond, stock, and other indices such as the Shearson
Lehman Bond Index, the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500 Index"), Dow Jones Industrial Average
("DJIA"), S&P/BARRA Index, Russell Index, and various other
domestic, international, and global indices and changes in the
U.S. Department of Labor Consumer Price Index. The S&P 500
Index is a broad index of common stock prices, while the DJIA
represents a narrower segment of industrial companies. Each
assumes reinvestment of distributions and is calculated
without regard to tax consequences or the costs of investing.
Each Portfolio may invest in different types of securities
from those included in some of the above indices.
The Fund's performance also may be compared from time to time
with the following specific indices and other measures of performance: the
Merrill Lynch 1-3 year Treasury Index and the Lehman Brothers Intermediate
Government/Corporate Bond Index, as well as the performance of Treasury
Securities, corporate bonds, and the Lipper Short Investment Grade Debt Funds
category.
The Fund may invest some of its assets in different types of
securities than those included in the index used as a comparison with the Fund's
historical performance. The Fund may also compare certain indices, which
represent different segments of the securities markets, for the purpose of
comparing the historical returns and the volatility in those particular market
segments. Measures of volatility show the range of historical price
fluctuations. Standard deviation may be used as a measure of volatility. There
are other measures of volatility, which may yield different results.
In addition, the Fund's performance may be compared at times
with that of various bank instruments (including bank money market accounts and
CDs of varying maturities) as reported in publications such as The Bank Rate
Monitor. Any such comparisons may be useful to investors who wish to compare the
Fund's past performance with that of certain of its competitors. Of course, past
performance is not a guarantee of future results. Unlike an investment in the
Fund, bank CDs pay a fixed rate of interest for a stated period of time and are
insured up to $100,000.
The Fund may also be compared to individual asset classes such
as common stocks, small-cap stocks, or Treasury bonds, based on information
supplied by Ibbotson and Sinquefield. Evaluations of the Fund's performance, its
yield/total returns and comparisons may be used in advertisements and in
information furnished to current and prospective shareholders (collectively,
"Advertisements").
Other Performance Information
- -----------------------------
From time to time, information about the Portfolio's portfolio
allocation and holdings as of a particular date may be included in
Advertisements for the Fund. This information may include the Portfolio's
portfolio diversification by asset type. Information used in Advertisements may
include statements or illustrations relating to the appropriateness of types of
securities and/or mutual funds that may be employed to meet specific financial
goals, such as (1) funding retirement, (2) paying for children's education, and
(3) financially supporting aging parents.
Information (including charts and illustrations) showing the
effects of compounding interest may be included in Advertisements from time to
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<PAGE>
time. Compounding is the process of earning interest on principal plus interest
that was earned earlier. Interest can be compounded at different intervals, such
as annually, semi-annually, quarterly, monthly, or daily. For example, $1,000
compounded annually at 9% will grow to $1,090 at the end of the first year (an
increase of $90) and $1,188 at the end of the second year (an increase of $98).
The extra $8 that was earned on the $90 interest from the first year is the
compound interest. One thousand dollars compounded annually at 9% will grow to
$2,367 at the end of ten years and $5,604 at the end of twenty years. Other
examples of compounding are as follows: at 7% and 12% annually, $1,000 will grow
to $1,967 and $3,106, respectively, at the end of ten years and $3,870 and
$9,646, respectively, at the end of twenty years. All these examples are for
illustrative purposes only and are not indicative of the Fund's performance.
Information relating to inflation and its effects on the
dollar also may be included in Advertisements. For example, after ten years, the
purchasing power of $25,000 would shrink to $16,621, $14,968, $13,465, and
$12,100, respectively, if the annual rates of inflation during that period were
4%, 5%, 6%, and 7%, respectively. (To calculate the purchasing power, the value
at the end of each year is reduced by the inflation rate for the ten-year
period.)
Information (including charts and illustrations) showing the
total return performance for government funds, 6-month CDs and money market
funds may be included in Advertisements from time to time.
Information regarding the effects of automatic investing and
systematic withdrawal plans, investing at market highs and/or lows, and
investing early versus late for retirement plans also may be included in
Advertisements, if appropriate.
TRUSTEES AND OFFICERS
The following table sets forth information concerning the
trustees and officers of the Trusts, including their addresses and principal
business experience during the past five years. Some persons named as trustees
and officers also serve in similar capacities for other funds and their
corresponding portfolios, administered or managed by NB Management and Neuberger
Berman.
<TABLE>
<CAPTION>
Name, Address Positions Held
and Age(1) With the Trusts Principal Occupation(s)(2)
------------- --------------- --------------------------
<S> <C> <C>
John Cannon (68) Trustee of each Trust Senior Vice President AMA Investment
CDC Associates, Inc. Advisers, Inc. (1991-1993); Chairman and
620 Sentry Parkway Chief Investment Officer of CDC Associates,
Suite 220 Inc. (registered investment adviser)
P.O. Box 1111 (1993-present).
Blue Bell, PA 19422
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<PAGE>
Name, Address Positions Held
and Age(1) With the Trusts Principal Occupation(s)(2)
------------- --------------- --------------------------
Stanley Egener* (64) Chairman of the Board, Principal of Neuberger Berman; President
Chief Executive Officer, and Director of NB Management; Chairman of
and Trustee of each Trust the Board, Chief Executive Officer, and
Trustee of nine other mutual funds for which
NB Management acts as investment manager
or administrator.
Theodore P. Giuliano* (45) President and Trustee of Principal of Neuberger & Berman; Vice
each Trust President and Director of NB Management;
President and Trustee of one other
mutual fund for which NB Management
serves as administrator.
Barry Hirsch (64) Trustee of each Trust Senior Vice President, Secretary, and
Loews Corporation General Counsel of Loews Corporation
667 Madison Avenue (diversified financial corporation).
7th Floor
New York, NY 10021
Robert A. Kavesh (70) Trustee of each Trust Professor of Finance and Economics at Stern
110 Bleecker Street School of Business, New York University;
Apt. 24B Director of Del Laboratories, Inc. and
New York, NY 10012 Greater New York Mutual Insurance Co.
William E. Rulon (65) Trustee of each Trust Retired. Senior Vice President of
1761 Hotel Circle South Foodmaker, Inc. (operator and franchiser of
San Diego, CA 92108 restaurants) until January 1997; Secretary
of Foodmaker, Inc. until July 1996.
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<PAGE>
Name, Address Positions Held
and Age(1) With the Trusts Principal Occupation(s)(2)
------------- --------------- --------------------------
Candace L. Straight (50) Trustee of each Trust Private investor and consultant
518 E. Passaic Avenue specializing in the insurance industry;
Bloomfield, NJ 07003 Principal of Head & Company, LLC (limited
liability company providing investment
banking and consulting services to the
insurance industry) until March 1996;
Director of Drake Holdings (U.K. motor
insurer) until June 1996.
Daniel J. Sullivan (59) Vice President of each Trust Senior Vice President of NB Management
since 1992; prior thereto, Vice President
of NB Management; Vice President of nine
other mutual funds for which NB Management
acts as investment manager or administrator.
Michael J. Weiner (51) Vice President and Senior Vice President and Treasurer of NB
Principal Financial Officer Management since 1992; Treasurer of NB
of each Trust Management from 1992 to 1996; prior
thereto, Vice President and Treasurer of
NB Management and Treasurer of certain
mutual funds for which NB Management
acted as investment adviser; Vice
President and Principal Financial
Officer of nine other mutual funds for
which NB Management acts as investment
manager or administrator.
Claudia A. Brandon (42) Secretary of each Trust Vice President of NB Management; Secretary
of nine other mutual funds for which NB
Management acts as investment manager or
administrator.
30
<PAGE>
Name, Address Positions Held
and Age(1) With the Trusts Principal Occupation(s)(2)
------------- --------------- --------------------------
Richard Russell (51) Treasurer and Principal Vice President of NB Management since 1993;
Accounting Officer of each prior thereto, Assistant Vice President of
Trust NB Management; Treasurer and Principal
Accounting Officer of nine other mutual
funds for which NB Management acts as
investment manager or administrator.
Stacy Cooper-Shugrue (35) Assistant Secretary of each Assistant Vice President of NB Management
Trust since 1993; prior thereto, employee of NB
Management; Assistant Secretary of nine
other mutual funds for which NB
Management acts as investment manager
or administrator.
C. Carl Randolph (61) Assistant Secretary of each Principal of Neuberger Berman since 1992;
Trust prior thereto, employee of Neuberger
Berman; Assistant Secretary of nine
other mutual funds for which NB
Management acts as investment manager
or administrator.
Barbara DiGiorgio (39) Assistant Treasurer of each Assistant Vice President of NB Management
Trust since 1993; prior thereto, employee of NB
Management; Assistant Treasurer of nine
other mutual funds for which NB
Management acts as investment manager
or administrator.
Celeste Wischerth (37) Assistant Treasurer of each Assistant Vice President of NB Management
Trust since 1994; prior thereto, employee of NB
Management; Assistant Treasurer of nine
other mutual funds for which NB
Management acts as investment manager
or administrator.
- --------------------
</TABLE>
31
<PAGE>
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, NY 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" of each
Trust within the meaning of the 1940 Act. Messrs. Egener and Giuliano are
interested persons by virtue of the fact that they are officers and directors of
NB Management and principals of Neuberger Berman.
The Trust's Trust Instrument and Managers Trust's Declaration
of Trust provide that each such Trust will indemnify its trustees and officers
against liabilities and expenses reasonably incurred in connection with
litigation in which they may be involved because of their offices with the
Trust, unless it is adjudicated that they (a) engaged in bad faith, willful
misfeasance, gross negligence, or reckless disregard of the duties involved in
the conduct of their offices or (b) did not act in good faith in the reasonable
belief that their action was in the best interest of the Trust. In the case of
settlement, such indemnification will not be provided unless it has been
determined (by a court or other body approving the settlement or other
disposition, by a majority of disinterested trustees based upon a review of
readily available facts, or in a written opinion of independent counsel) that
such officers or trustees have not engaged in willful misfeasance, bad faith,
gross negligence, or reckless disregard of their duties.
The following table sets forth information concerning the
compensation of the trustees and officers of the Trust. None of the Neuberger
Berman Funds(R) has any retirement plan for its trustees or officers.
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 10/31/97
------------------------------
<TABLE>
<CAPTION>
Total Compensation from Trusts in
Name and Position Aggregate Compensation the Neuberger Berman Fund Complex
with the Trust from the Trust Paid to Trustees
----------------- ---------------------- ---------------------------------
<S> <C> <C>
John Cannon $ $
Trustee
Stanley Egener $0 $0
Chairman of the Board, Chief Executive (10 other investment companies)
Officer, and Trustee
Theodore P. Giuliano $0 $0
President and Trustee (2 other investment companies)
32
<PAGE>
Barry Hirsch $ $
Trustee (2 other investment companies)
Robert A. Kavesh $ $
Trustee (2 other investment companies)
Harold R. Logan $ $
Trustee (retired 12/96) (2 other investment companies)
William E. Rulon $ $
Trustee (2 other investment companies)
Candace L. Straight $ $
Trustee (2 other investment companies)
</TABLE>
At January __, 1999, the trustees and officers of the Trust
and Managers Trust, as a group, owned beneficially or of record less than 1% of
the outstanding shares of the Fund.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
Investment Manager and Administrator
- ------------------------------------
Because all of the Fund's net investable assets are invested
in the Portfolio, the Fund does not need an investment manager. NB Management
serves as the Portfolio's investment manager pursuant to a management agreement
with Managers Trust, on behalf of the Portfolio, dated as of July 2, 1993
("Management Agreement"). The Management Agreement was approved by the holders
of the interests in the Portfolio on July 2, 1993.
The Management Agreement provides, in substance, that NB
Management will make and implement investment decisions for the Portfolio in its
discretion and will continuously develop an investment program for the
Portfolio's assets. The Management Agreement permits NB Management to effect
securities transactions on behalf of the Portfolio through associated persons of
NB Management. The Management Agreement also specifically permits NB Management
to compensate, through higher commissions, brokers and dealers who provide
investment research and analysis to the Portfolio, although NB Management has no
current plans to pay a material amount of such compensation.
NB Management provides to the Portfolio, without separate
cost, office space, equipment, and facilities and the personnel necessary to
perform executive, administrative, and clerical functions. NB Management pays
all salaries, expenses, and fees of the officers, trustees, and employees of
33
<PAGE>
Managers Trust who are officers, directors, or employees of NB Management. Two
officers and directors of NB Management (who also are principals of Neuberger
Berman), presently serve as trustees and officers of the Trusts. See "Trustees
and Officers." The Portfolio pays NB Management a management fee based on the
Portfolio's average daily net assets, as described in the Prospectus.
NB Management provides similar facilities, services, and
personnel to the Fund pursuant to an administration agreement with the Trust
dated July 2, 1993 ("Administration Agreement"). For such administrative
services, the Fund pays NB Management a fee based on the Fund's average daily
net assets, as described in the Prospectus. NB Management enters into
administrative services agreements with Institutions, pursuant to which it
compensates such Institutions for accounting, recordkeeping and other services
that they provide in connection with investments in the Funds.
Management and Administration Fees
- ----------------------------------
For investment management services, the Portfolio pays NB
Management a fee at the annual rate of 0.25% of the first $500 million of that
Portfolio's average daily net assets, 0.225% of the next $500 million, 0.20% of
the next $500 million, 0.175% of the next $500 million, and 0.15% of average
daily net assets in excess of $2 billion.
For administrative services, the Fund pays NB Management at
the annual rate of 0.50% of the Fund's average daily net assets. With the Fund's
consent, NB Management may subcontract to third parties some of its
responsibilities to the Fund under the administration agreement. In addition,
the Fund may compensate such third parties for accounting and other services.
The Fund accrued management and administration fees of the
following amounts (before any reimbursement of the Fund, described below) for
the fiscal years ended October 31, 1998, 1997, and 1996:
Fund 1998 1997 1996
- ---- ---- ---- ----
LIMITED MATURITY $372,713 $246,420 $114,471
Expense Reimbursements
- ----------------------
NB Management has voluntarily undertaken to reimburse the Fund
for its Operating Expenses (including fees under the Administration Agreement)
and the Fund's pro rata share of the Portfolio's Operating Expenses (including
fees under the Management Agreement) that exceed, in the aggregate, 0.80% per
annum of the average daily net assets of the Fund. Operating Expenses exclude
interest, taxes, brokerage commissions, and extraordinary expenses. NB
Management can terminate each undertaking by giving the Fund at least 60 days'
prior written notice.
For the fiscal years ended October 31, 1998, 1997 and 1996, NB
Management reimbursed the Fund the following amounts of expenses under the above
arrangements:
34
<PAGE>
Fund 1998 1997 1996
- ---- ---- ---- ----
Limited Maturity $206,630 $144,510 $168,733
The Management Agreement continues with respect to the
Portfolio for a period of two years after the date the Portfolio became subject
thereto. The Management Agreement is renewable thereafter from year to year with
respect to the Portfolio, so long as its continuance is approved at least
annually (1) by the vote of a majority of the Portfolio Trustees who are not
"interested persons" of NB Management or Managers Trust ("Independent Portfolio
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval, and (2) by the vote of a majority of the Portfolio Trustees or by a
1940 Act majority vote of the outstanding interests in the Portfolio. The
Administration Agreement continues with respect to the Fund for a period of two
years after the date the Fund became subject thereto. The Administration
Agreement is renewable from year to year with respect to the Fund, so long as
its continuance is approved at least annually (1) by the vote of a majority of
the Fund Trustees who are not "interested persons" of NB Management or the Trust
("Independent Fund Trustees"), cast in person at a meeting called for the
purpose of voting on such approval, and (2) by the vote of a majority of the
Fund Trustees or by a 1940 Act majority vote of the outstanding shares in the
Fund.
The Management Agreement is terminable, without penalty, with
respect to the Portfolio on 60 days' written notice either by Managers Trust or
by NB Management. The Administration Agreement is terminable, without penalty,
with respect to the Fund on 60 days' written notice either by NB Management or
by the Trust. Each Agreement terminates automatically if it is assigned.
Sub-Adviser
- -----------
NB Management retains Neuberger Berman, 605 Third Avenue, New
York, NY 10158-3698, as sub-adviser with respect to the Portfolio pursuant to a
sub-advisory agreement dated July 2, 1993 ("Sub-Advisory Agreement"). The
Sub-Advisory Agreement was approved by the holders of the interests in the
Portfolio on July 2, 1993.
The Sub-Advisory Agreement provides in substance that
Neuberger Berman will furnish to NB Management, upon reasonable request, the
same type of investment recommendations and research that Neuberger Berman, from
time to time, provides to its principals and employees for use in managing
client accounts. In this manner, NB Management expects to have available to it,
in addition to research from other professional sources, the capability of the
research staff of Neuberger Berman. This staff consists of numerous investment
analysts, each of whom specializes in studying one or more industries, under the
supervision of the Director of Research, who is also available for consultation
with NB Management. The Sub-Advisory Agreement provides that NB Management will
pay for the services rendered by Neuberger Berman based on the direct and
indirect costs to Neuberger Berman in connection with those services. Neuberger
Berman also serves as a sub-adviser for all of the other mutual funds managed by
NB Management.
35
<PAGE>
The Sub-Advisory Agreement continues with respect to the
Portfolio for a period of two years after the date the Portfolio became subject
thereto, and is renewable thereafter from year to year, subject to approval of
its continuance in the same manner as the Management Agreement. The Sub-Advisory
Agreement is subject to termination, without penalty, with respect to the
Portfolio by the Portfolio Trustees or a 1940 Act majority vote of the
outstanding interests in the Portfolio, by NB Management, or by Neuberger Berman
on not less than 30 nor more than 60 days' written notice to the Fund. The
Sub-Advisory Agreement also terminates automatically with respect to the
Portfolio if it is assigned or if the Management Agreement terminates with
respect to the Portfolio.
Most money managers that come to the Neuberger Berman
organization have at least fifteen years experience. Neuberger Berman and NB
Management employ experienced professionals that work in a competitive
environment.
Investment Companies Managed
- ----------------------------
As of December 31, 1997, the investment companies managed by
NB Management had aggregate net assets of approximately $20.7 billion. NB
Management currently serves as investment manager of the following investment
companies:
<TABLE>
<CAPTION>
Name December 31, 1998
---- -----------------
<S> <C>
Neuberger Berman Cash Reserves Portfolio............................................................$ _____________
(investment portfolio for Neuberger Berman Cash Reserves)
Neuberger Berman Government Money Portfolio.........................................................$ _____________
(investment portfolio for Neuberger Berman Government Money Fund)
Neuberger Berman High Yield Bond Portfolio..........................................................$ _____________
(investment portfolio for Neuberger Berman High Yield Bond Fund)
Neuberger Berman Limited Maturity Bond Portfolio....................................................$ _____________
(investment portfolio for Neuberger Berman Limited Maturity Bond Fund and Neuberger Berman Limited Maturity
Bond Trust)
Neuberger Berman Municipal Money Portfolio..........................................................$ _____________
(investment portfolio for Neuberger Berman Municipal Money Fund)
Neuberger Berman Municipal Securities Portfolio.....................................................$ _____________
(investment portfolio for Neuberger Berman Municipal Securities Trust)
Neuberger Berman Focus Portfolio....................................................................$ _____________
(investment portfolio for Neuberger Berman Focus Fund, Neuberger Berman Focus Trust, and Neuberger Berman
Focus Assets)
Neuberger Berman Genesis Portfolio..................................................................$ _____________
(investment portfolio for Neuberger Berman Genesis Fund, Neuberger Berman Genesis Trust, and Neuberger
Berman Genesis Assets)
36
<PAGE>
Neuberger Berman Guardian Portfolio............................................................... $ _____________
(investment portfolio for Neuberger Berman Guardian Fund, Neuberger Berman Guardian Trust, and Neuberger
Berman Guardian Assets)
Neuberger Berman International Portfolio............................................................$ _____________
(investment portfolio for Neuberger Berman International Fund and Neuberger Berman International Trust)
Neuberger Berman Manhattan Portfolio................................................................$ _____________
(investment portfolio for Neuberger Berman Manhattan Fund, Neuberger Berman Manhattan Trust, and Neuberger
Berman Manhattan Assets)
Neuberger Berman Millennium Portfolio.............................................................. $ _____________
(investment portfolio for Neuberger Berman Millennium Fund and Neuberger Berman Millennium Trust)
Neuberger Berman Partners Portfolio.................................................................$ _____________
(investment portfolio for Neuberger Berman Partners Fund, Neuberger Berman Partners Trust, and Neuberger
Berman Partners Assets)
Neuberger Berman Socially Responsive Portfolio......................................................$ _____________
(investment portfolio for Neuberger Berman Socially Responsive Fund, Neuberger Berman Socially Responsive
Trust and Neuberger Berman NYCDC Socially Responsive Trust)
Advisers Managers Trust (seven series)..............................................................$ _____________
</TABLE>
The investment decisions concerning the Portfolio and the
other mutual funds managed by NB Management (collectively, "Other NB Funds")
have been and will continue to be made independently of one another. In terms of
their investment objectives, most of the Other NB Funds differ from the
Portfolio. Even where the investment objectives are similar, however, the
methods used by the Other NB Funds and the Portfolio to achieve their objectives
may differ. The investment results achieved by all of the funds managed by NB
Management have varied from one another in the past and are likely to vary in
the future.
There may be occasions when the Portfolio and one or more of
the Other NB Funds or other accounts managed by Neuberger Berman are
contemporaneously engaged in purchasing or selling the same securities from or
to third parties. When this occurs, the transactions are averaged as to price
and allocated, in terms of amount, in accordance with a formula considered to be
equitable to the funds involved. Although in some cases this arrangement may
have a detrimental effect on the price or volume of the securities as to the
Portfolio, in other cases it is believed that the Portfolio's ability to
participate in volume transactions may produce better executions for it. In any
case, it is the judgment of the Portfolio Trustees that the desirability of the
Portfolio's having their advisory arrangements with NB Management outweighs any
disadvantages that may result from contemporaneous transactions.
37
<PAGE>
Management and Control of NB Management
- ---------------------------------------
The directors and officers of NB Management, all of whom have
offices at the same address as NB Management, are Richard A. Cantor, Chairman of
the Board and director; Stanley Egener, President and director; Theodore P.
Giuliano, Vice President and director; Michael M. Kassen, Vice President and
director; Irwin Lainoff, director; Lawrence Zicklin, director; Daniel J.
Sullivan, Senior Vice President; Peter E. Sundman, Senior Vice President;
Michael J. Weiner, Senior Vice President; Claudia A. Brandon, Vice President;
Patrick T. Byrne, Vice President; Brooke A. Cobb, Vice President; Robert W.
D'Alelio, Vice President; Clara Del Villar, Vice President; Brian J. Gaffney,
Vice President; Joseph Galli, Vice President; Robert I. Gendelman, Vice
President; Josephine P. Mahaney, Vice President; Michael F. Malouf, Vice
President; Ellen Metzger, Vice President and Secretary; Paul Metzger, Vice
President; S. Basu Mullick, Vice President; Janet W. Prindle, Vice President;
Kevin L. Risen, Vice President; Richard Russell, Vice President; Jennifer K.
Silver, Vice President; Kent C. Simons, Vice President; Frederic B. Soule, Vice
President; Judith M. Vale, Vice President; Susan Walsh, Vice President;
Catherine Waterworth, Vice President; Allan R. White, III, Vice President;
Andrea Trachtenberg, Vice President of Marketing; Robert Conti, Treasurer;
Ramesh Babu, Assistant Vice President; Valerie Chang, Assistant Vice President;
Stacy Cooper-Shugrue, Assistant Vice President; Barbara DiGiorgio, Assistant
Vice President; Michael J. Hanratty, Assistant Vice President; Robert L. Ladd,
Assistant Vice President; Carmen G. Martinez, Assistant Vice President; Joseph
S. Quirk, Assistant Vice President; Ingrid Saukaitis, Assistant Vice President;
Josephine Velez, Assistant Vice President; Celeste Wischerth, Assistant Vice
President; and Loraine Olavarria, Assistant Secretary. Messrs. Cantor, Egener,
Gendelman, Giuliano, Kassen, Lainoff, Zicklin, Risen, Simons, Sundman and White
and Mmes. Prindle, Silver and Vale are principals of Neuberger Berman.
Mr. Giuliano and Mr. Egener are trustees and officers, and
Messrs. Sullivan, Weiner, and Russell and Mmes. Brandon, Cooper-Shugrue,
DiGiorgio, and Wischerth are officers, of each Trust. C. Carl Randolph, a
principal of Neuberger Berman, also is an officer of each Trust.
All of the outstanding voting stock in NB Management is owned
by persons who are also principals of Neuberger Berman.
DISTRIBUTION ARRANGEMENTS
NB Management serves as the distributor ("Distributor") in
connection with the offering of the Fund's shares on a no-load basis to
Institutions. In connection with the sale of its shares, the Fund has authorized
the Distributor to give only the information, and to make only the statements
and representations, contained in the Prospectus and this SAI or that properly
may be included in sales literature and advertisements in accordance with the
1933 Act, the 1940 Act, and applicable rules of self-regulatory organizations.
Sales may be made only by the Prospectus, which may be delivered personally,
through the mails, or by electronic means. The Distributor is the Fund's
"principal underwriter" within the meaning of the 1940 Act and, as such, acts as
agent in arranging for the sale of the Fund's shares to Institutions without
sales commission or other compensation and bears all advertising and promotion
expenses incurred in the sale of the Fund's shares.
38
<PAGE>
From time to time, NB Management may enter into arrangements
pursuant to which it compensates a registered broker-dealer or other third party
for services in connection with the distribution of Fund shares.
The Trust, on behalf of the Fund, and the Distributor are
parties to a Distribution Agreement that continues until July 2, 1999. The
Distribution Agreement may be renewed annually if specifically approved by (1)
the vote of a majority of the Fund Trustees or a 1940 Act majority vote of the
Fund's outstanding shares and (2) the vote of a majority of the Independent Fund
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement may be terminated by either party and will
terminate automatically on its assignment, in the same manner as the Management
Agreement.
ADDITIONAL PURCHASE INFORMATION
Share Prices and Net Asset Value
- --------------------------------
The Fund's shares are bought or sold at a price that is the
Fund's NAV per share. The NAVs for the Fund and the Portfolio are calculated by
subtracting liabilities from total assets (in the case of the Portfolio, the
market value of the securities the Portfolio holds plus cash and other assets;
in the case of the Fund, its percentage interest in the Portfolio, multiplied by
the Portfolio's NAV, plus any other assets). The Fund's per share NAV is
calculated by dividing its NAV by the number of Fund shares outstanding and
rounding the result to the nearest full cent.
The Portfolio values its securities on the basis of bid
quotations from independent pricing services or principal market makers, or, if
quotations are not available, by a method that the trustees of Managers Trust
believe accurately reflects fair value. The Portfolio periodically verifies
valuations provided by the pricing services. Short-term securities with
remaining maturities of less than 60 days may be valued at cost which, when
combined with interest earned, approximates market value. The Portfolio and the
Fund calculate their NAVs as of the close of regular trading on the NYSE,
usually 4 p.m. Eastern time, on each day the NYSE is open.
If NB Management believes that the price of a security
obtained under the Portfolio's valuation procedures (as described above) does
not represent the amount that the Portfolio reasonably expects to receive on a
current sale of the security, the Portfolio will value the security based on a
method that the trustees of Managers Trust believe accurately reflects fair
value.
ADDITIONAL EXCHANGE INFORMATION
As more fully set forth in the section of the Prospectus
entitled "Shareholder Services -- Exchanging Shares," an Institution may
exchange shares of the Fund for shares of the equity funds that are briefly
described below, if made available through that Institution.
Fund shareholders who are considering exchanging shares into
any of the funds described below should note that each such fund (1) is a series
of a Delaware business trust (named "Neuberger Berman Equity Trust") that is
39
<PAGE>
registered with the SEC as an open-end management investment company; and (2)
invests all of its net investable assets in a corresponding portfolio that has
an investment objective, policies, and limitations identical to those of the
fund.
Neuberger Berman Seeks long-term growth of capital through
Focus Trust investments principally in common stocks
selected from 13 multi-industry economic
sectors. The corresponding portfolio uses
a value-oriented approach to select
individual securities and then focuses its
investments in the sectors in which the
undervalued stocks are clustered. Through
this approach, 90% or more of the
portfolio's investments are normally made
in not more than six sectors.
Neuberger Berman Seeks growth of capital through
Genesis Trust investments primarily in common stocks of
companies with small market
capitalizations (i.e., up to $1.5 billion)
at the time of the Portfolio's investment.
The corresponding portfolio uses a
value-oriented approach to the selection
of individual securities.
Neuberger Berman Seeks long-term growth of capital through
Guardian Trust investments primarily in common stocks of
long-established, high-quality companies
that NB Management believes are well-
managed. The corresponding portfolio
uses a value-oriented approach to the
selection of individual securities.
Current income is a secondary objective.
The sister fund (and its predecessor)
have paid its shareholders an income
dividend every quarter, and a capital gain
distribution every year, since its
inception in 1950, although there can be
no assurance that it will be able to
continue to do so.
Neuberger Berman Seeks long-term growth of capital by
International Trust investing primarily in common stocks of
foreign companies. Assets will be
allocated among economically mature
countries and emerging industrialized
countries.
Neuberger Berman Seeks growth of capital without regard to
Manhattan Trust income, through investments in securities
of small-, medium- and large-
capitalization companies (with a current
focus on medium-capitalization
companies) believed to have the maximum
potential for long-term capital
appreciation. The corresponding
portfolio's investment program involves
greater risks and share price volatility
than programs that invest in more
undervalued securities.
Neuberger Berman Seeks growth of capital by investing
Millennium Trust primarily in common stocks of small-
capitalization companies (those with a
market value of no more than $1.5 billion
at the time the fund first invests in
them). The corresponding portfolio uses
a growth-oriented investment approach to
the selection of individual securities.
40
<PAGE>
Neuberger Berman Seeks capital growth through an investment
Partners Trust approach that is designed to increase
capital with reasonable risk. Its
investment program seeks securities
believed to be undervalued based on
strong fundamentals such as a low
price-to-earnings ratio, consistent cash
flow, and the company's track record
through all parts of the market cycle. The
corresponding portfolio uses the
value-oriented investment approach to the
selection of individual securities.
Neuberger Berman Socially Seeks long-term growth of capital through
Responsive Trust investments primarily in securities of
companies that meet both financial
and social criteria.
The Fund described herein, and any of the funds described
above, may terminate or modify their exchange privileges in the future.
Before effecting an exchange, Fund shareholders must obtain
and should review a currently effective prospectus of the fund into which the
exchange is to be made. The Equity Trusts share a prospectus. An exchange is
treated as a sale for federal income tax purposes and, depending on the
circumstances, a short- or long-term capital gain or loss may be realized.
ADDITIONAL REDEMPTION INFORMATION
Suspension of Redemptions
- -------------------------
The right to redeem the Fund's shares may be suspended or
payment of the redemption price postponed (1) when the New York Stock Exchange
("NYSE") is closed, (2) when trading on the NYSE is restricted, (3) when an
emergency exists as a result of which it is not reasonably practicable for the
Portfolio to dispose of securities it owns or fairly to determine the value of
its net assets, or (4) for such other period as the SEC may by order permit for
the protection of the Fund's shareholders. Applicable SEC rules and regulations
shall govern whether the conditions prescribed in (2) or (3) exist. If the right
of redemption is suspended, shareholders may withdraw their offers of
redemption, or they will receive payment at the NAV per share in effect at the
close of business on the first day the NYSE is open ("Business Day") after
termination of the suspension.
Redemptions in Kind
- -------------------
The Fund reserves the right, under certain conditions, to
honor any request for redemption (or a combination of requests from the same
shareholder in any 90-day period) exceeding $250,000 or 1% of the net assets of
the Fund, whichever is less, by making payment in whole or in part in securities
valued as described under "Share Prices and Net Asset Value" above. If payment
is made in securities, an Institution generally will incur brokerage expenses or
other transactions costs in converting those securities into cash and will be
subject to fluctuation in the market prices of those securities until they are
sold. The Fund does not redeem in kind under normal circumstances, but would do
so when the Fund Trustees determined that it was in the best interests of the
Fund's shareholders as a whole.
41
<PAGE>
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund distributes to its shareholders substantially all of
its share of any net investment income (after deducting expenses incurred
directly by the Fund), any net realized capital gains (both long-term and
short-term), and any net realized gains from foreign currency transactions
earned or realized by the Portfolio. The Portfolio's net investment income
consists of all income accrued on portfolio assets less accrued expenses but
does not include capital and foreign currency gains and losses. Net investment
income and net gains and losses are reflected in the Portfolio's NAV (and,
hence, the Fund's NAV) until they are distributed. The Fund calculates its net
investment income and share price as of the close of regular trading on the NYSE
on each Business Day (usually 4:00 p.m. Eastern time).
Income dividends are declared daily; dividends declared for
each month are paid on the last Business Day of the month. Shares of the Fund
begin earning income dividends on the Business Day after the proceeds of the
purchase order have been converted to "federal funds" and continue to earn
dividends through the Business Day they are redeemed. Distributions of net
realized capital and foreign currency gains, if any, normally are paid once
annually, in December.
Dividends and other distributions are automatically reinvested
in additional shares of the Fund, unless the Institution elects to receive them
in cash ("cash election"). To the extent dividends and other distributions are
subject to federal, state, or local income taxation, they are taxable to the
shareholders whether received in cash or reinvested in Fund shares. A cash
election remains in effect until the Institution notifies the Fund in writing to
discontinue the election.
ADDITIONAL TAX INFORMATION
Taxation of the Fund
- --------------------
In order to continue to qualify for treatment as a RIC under
the Code, the Fund must distribute to its shareholders for each taxable year at
least 90% of its investment company taxable income (consisting generally of
taxable net investment income, net short-term capital gain, and net gains from
certain foreign currency transactions) ("Distribution Requirement") and must
meet several additional requirements. These requirements include the following:
(1) the Fund must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of securities or foreign currencies, or other
income (including gains from Hedging Instruments) derived with respect to its
business of investing in securities or those currencies ("Income Requirement");
and (2) at the close of each quarter of the Fund's taxable year, (i) at least
50% of the value of its total assets must be represented by cash and cash items,
U.S. Government securities, securities of other RICs, and other securities
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of the Fund's total assets and does not represent more than 10% of the
issuer's outstanding voting securities, and (ii) not more than 25% of the value
of its total assets may be invested in securities (other than U.S. Government
securities or securities of other RICs) of any one issuer.
If the Fund failed to qualify for treatment as a RIC for any
taxable year, (1) it would be taxed on the full amount of its taxable income for
42
<PAGE>
that year without being able to deduct the distributions it makes to its
shareholders and (2) the shareholders would treat all those distributions,
including distributions of net capital gain (the excess of net long-term capital
gain over net short-term capital loss) and distributions that otherwise would
qualify as "exempt-interest dividends" described in the following paragraph, as
dividends (that is, ordinary income) to the extent of the Fund's earnings and
profits. In addition, the Fund could be required to recognize unrealized gains,
pay substantial taxes and interest, and make substantial distributions before
requalifying for RIC treatment.
Certain funds that invest in portfolios managed by NB
Management, including the Sister Fund, have received a ruling from the Internal
Revenue Service ("Service") that each such fund, as an investor in a
corresponding portfolio of Managers Trust or Equity Managers Trust, will be
deemed to own a proportionate share of the portfolio's assets and income for
purposes of determining whether the fund satisfies all the requirements
described above to qualify as a RIC. Although that ruling may not be relied on
as precedent by the Fund, NB Management believes that the reasoning thereof and,
hence, its conclusion apply to the Fund as well.
The Fund will be subject to a nondeductible 4% excise tax
("Excise Tax") to the extent it fails to distribute by the end of any calendar
year substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.
See the next section for a discussion of the tax consequences
to the Fund of distributions to it from the Portfolio, investments by the
Portfolio in certain securities, and hedging and certain other transactions
engaged in by the Portfolio.
Taxation of the Portfolio
- -------------------------
The Portfolio has received a ruling from the Service to the
effect that, among other things, the Portfolio will be treated as a separate
partnership for federal income tax purposes and will not be a "publicly traded
partnership." As a result, the Portfolio is not subject to federal income tax;
instead, each investor in the Portfolio, such as the Fund, is required to take
into account in determining its federal income tax liability its share of the
Portfolio's income, gains, losses, deductions, credits, and tax preference
items, without regard to whether it has received any cash distributions from the
Portfolio. The Portfolio also is not subject to Delaware or New York income or
franchise tax.
Because the Fund is deemed to own a proportionate share of the
Portfolio's assets and income for purposes of determining whether the Fund
qualifies as a RIC, the Portfolio intends to continue to conduct its operations
so that the Fund will be able to continue to satisfy all those requirements.
Distributions to the Fund from the Portfolio (whether pursuant
to a partial or complete withdrawal or otherwise) will not result in the Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds the
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of the
43
<PAGE>
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, (3) loss may be recognized if
a liquidation distribution consists solely of cash and/or unrealized
receivables, and (4) gain (and, in certain situations, loss) may be recognized
on an in-kind distribution by the Portfolio. The Fund's basis for its interest
in the Portfolio generally equals the amount of cash the Fund invests in the
Portfolio, increased by the Fund's share of the Portfolio's net income and
capital gains and decreased by (a) the amount of cash and the basis of any
property the Portfolio distributes to the Fund and (b) the Fund's share of the
Portfolio's losses.
Dividends and interest received by the Portfolio and gains
realized by the Portfolio may be subject to income, withholding, or other taxes
imposed by foreign countries and U.S. possessions that would reduce the yield
and/or total returns on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
The Portfolio's use of hedging strategies, such as writing
(selling) and purchasing Futures Contracts and options and entering into Forward
Contracts, involves complex rules that will determine for income tax purposes
the amount, character, and timing of recognition of the gains and losses the
Portfolio realizes in connection therewith. Gains from the disposition of
foreign currencies (except certain gains that may be excluded by future
regulations), and gains from transactions in Hedging Instruments derived by the
Portfolio with respect to its business of investing in securities or foreign
currencies, will qualify as permissible income for the Fund under the Income
Requirement.
Exchange-traded Futures Contracts and listed options thereon
and certain Forward Contracts ("Section 1256 contracts") are required to be
marked to market (that is, treated as having been sold at market value) for
federal income tax purposes at the end of the Portfolio's taxable year. Sixty
percent of any net gain or loss recognized as a result of these "deemed sales,"
and 60% of any net realized gain or loss from any actual sales, of Section 1256
contracts are treated as long-term capital gain or loss, and the remainder is
treated as short-term capital gain or loss.
Section 1256 contracts also may be marked-to-market for
purposes of the Excise Tax. These rules may operate to increase the amount that
the Fund must distribute to satisfy the Distribution Requirement, which will be
taxable to the shareholders as ordinary income, and to increase the net capital
gain recognized by the Fund, without in either case increasing the cash
available to the Fund. The Fund may elect to exclude certain transactions from
the operation of these rules, although doing so may have the effect of
increasing the relative proportion of net short-term capital gain (taxable as
ordinary income) and/or increasing the amount of dividends that must be
distributed to meet the Distribution Requirement and avoid imposition of the
Excise Tax.
Section 988 of the Code also may apply to Forward Contracts
and options on foreign currencies. Under section 988 each foreign currency gain
or loss generally is computed separately and treated as ordinary income or loss.
In the case of overlap between sections 1256 and 988, special provisions
determine the character and timing of any income, gain or loss.
When a covered call option written (sold) by the Portfolio
expires, it realizes a short-term capital gain equal to the amount of the
premium it received for writing the option. When the Portfolio terminates its
44
<PAGE>
obligations under such an option by entering into a closing transaction, it
realizes a short-term capital gain (or loss), depending on whether the cost of
the closing transaction is less (or more) than the premium it received when it
wrote the option. When a covered call option written by the Portfolio is
exercised, the Portfolio is treated as having sold the underlying security,
producing long-term or short-term capital gain or loss, depending on the holding
period of the underlying security and whether the sum of the option price
received on the exercise plus the premium received when it wrote the option is
more or less than the basis of the underlying security.
If the Portfolio has an "appreciated financial position" --
generally, an interest (including an interest through an option, Futures or
Forward Contract, or short sale) with respect to any stock, debt instrument
(other than "straight debt"), or partnership interest the fair market value of
which exceeds its adjusted basis -- and enters into a "constructive sale" of the
same or substantially similar property, the Portfolio will be treated as having
made an actual sale thereof, with the result that it will recognize a gain at
that time. A constructive sale generally consists of a short sale, an offsetting
notional principal contract, or a Futures or Forward Contract entered into by
the Portfolio or a related person with respect to the same or substantially
similar property. In addition, if the appreciated financial position is itself a
short sale or such a contract, acquisition of the underlying property or
substantially similar property will be deemed a constructive sale. The foregoing
will not apply, however, to any transaction during any taxable year that
otherwise would be treated as a constructive sale if the transaction is closed
within 30 days after the end of that year and the Portfolio holds the
appreciated financial position unhedged for 60 days after that closing (i.e., at
no time during that 60-day period is the Portfolio's risk of loss regarding that
position reduced by reason of certain specified transactions with respect to
substantially similar or related property, such as having an option to sell,
being contractually obligated to sell, making a short sale, or granting an
option to buy substantially identical stock or securities).
The Portfolio may invest in municipal bonds that are purchased
with market discount (that is, at a price less than the bond's principal amount
or, in the case of a bond that was issued with OID, a price less than the amount
of the issue price plus accrued OID) ("municipal market discount bonds"). If a
bond's market discount is less than the product of (1) 0.25% of the redemption
price at maturity times (2) the number of complete years to maturity after the
taxpayer acquired the bond, then no market discount is considered to exist. Gain
on the disposition of a municipal market discount bond purchased by the
Portfolio (other than a bond with a fixed maturity date within one year from its
issuance), generally is treated as ordinary (taxable) income, rather than
capital gain, to the extent of the bond's accrued market discount at the time of
disposition. Market discount on such a bond generally is accrued ratably, on a
daily basis, over the period from the acquisition date to the date of maturity.
In lieu of treating the disposition gain as described above, the Portfolio may
elect to include market discount in its gross income currently, for each taxable
year to which it is attributable.
The Portfolio may acquire zero coupon or other securities
issued with OID. As a holder of those securities, the Portfolio (and, through
it, the Fund) must take into income the OID that accrues on the securities
during the taxable year, even if it receives no corresponding payment on the
securities during the year. Because the Fund annually must distribute
substantially all of its investment company taxable income (including its share
of the Portfolio's accrued OID) to satisfy the Distribution Requirement and
45
<PAGE>
avoid imposition of the Excise Tax, the Fund may be required in a particular
year to distribute as a dividend an amount that is greater than its
proportionate share of the total amount of cash the Portfolio actually receives.
Those distributions will be made from the Fund's (or its share of the
Portfolio's) cash assets or, if necessary, from the proceeds of sales of the
Portfolio's securities. The Portfolio may realize capital gains or losses from
those sales, which would increase or decrease the Fund's investment company
taxable income and/or net capital gain.
Taxation of the Fund's Shareholders
- -----------------------------------
If Fund shares are sold at a loss after being held for six
months or less, the loss will be treated as long-term, instead of short-term,
capital loss to the extent of any capital gain distributions received on those
shares.
PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities generally are
transacted with issuers, underwriters, or dealers that serve as primary
market-makers, who act as principals for the securities on a net basis. The
Portfolio typically does not pay brokerage commissions for such purchases and
sales. Instead, the price paid for newly issued securities usually includes a
concession or discount paid by the issuer to the underwriter, and the prices
quoted by market-makers reflect a spread between the bid and the asked prices
from which the dealer derives a profit.
In purchasing and selling portfolio securities other than as
described above (for example, in the secondary market), the Portfolio seeks to
obtain best execution at the most favorable prices through responsible
broker-dealers and, in the case of agency transactions, at competitive
commission rates. In selecting broker-dealers to execute transactions, NB
Management considers such factors as the price of the security, the rate of
commission, the size and difficulty of the order, and the reliability,
integrity, financial condition, and general execution and operational
capabilities of competing broker-dealers. NB Management also may consider the
brokerage and research services that broker-dealers provide to the Portfolio or
NB Management. Under certain conditions, the Portfolio may pay higher brokerage
commissions in return for brokerage and research services, although the
Portfolio does not have a current arrangement to do so. In any case, the
Portfolio may effect principal transactions with a dealer who furnishes research
services, may designate any dealer to receive selling concessions, discounts, or
other allowances, or otherwise may deal with any dealer in connection with the
acquisition of securities in underwritings.
During the fiscal year ended October 31, 1998, the Portfolio
acquired securities of the following of its "regular brokers or dealers":
Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Inc. At October
31, 1998, that Portfolio held the securities of its "regular brokers or dealers"
with an aggregate value as follows: Goldman, Sachs & Co., $_______; and Merrill
Lynch, Pierce, Fenner & Smith Inc., $-------.
No affiliate of the Portfolio receives give-ups or reciprocal
business in connection with its portfolio transactions. The Portfolio does not
effect transactions with or through broker-dealers in accordance with any
formula or for selling shares of the Fund. However, broker-dealers who execute
portfolio transactions may from time to time effect purchases of Fund shares for
46
<PAGE>
their customers. The 1940 Act generally prohibits Neuberger Berman from acting
as principal in the purchase of portfolio securities from, or the sale of
portfolio securities to, the Portfolio unless an appropriate exemption is
available.
Portfolio Turnover
- ------------------
The Portfolio's portfolio turnover rate is calculated by
dividing (1) the lesser of the cost of the securities purchased or the proceeds
from the securities sold by the Portfolio during the fiscal year (other than
securities, including options, whose maturity or expiration date at the time of
acquisition was one year or less) by (2) the month-end average of the value of
such securities owned by the Portfolio during the fiscal year.
REPORTS TO SHAREHOLDERS
Shareholders of the Fund receive unaudited semi-annual
financial statements, as well as year-end financial statements audited by the
independent auditors for the Fund and for the Portfolio. The Fund's statements
show the investments owned by the Portfolio and the market values thereof and
provide other information about the Fund and its operations, including the
Fund's beneficial interest in the Portfolio.
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS
The Fund
- --------
The Fund is a separate series of the Trust, a Delaware
business trust organized pursuant to a Trust Instrument dated as of May 6, 1993.
The Trust is registered under the 1940 Act as a diversified, open-end management
investment company, commonly known as a mutual fund. The Trust has one operating
series. The Fund invests all of its net investable assets in the Portfolio,
receiving a beneficial interest in the Portfolio. The trustees of the Trust may
establish additional series or classes of shares without the approval of
shareholders. The assets of the series belong only to that series, and the
liabilities of the series are borne solely by the series and no other.
DESCRIPTION OF SHARES. The Fund is authorized to issue an
unlimited number of shares of beneficial interest (par value $0.001 per share).
Shares of the Fund represent equal proportionate interests in the assets of the
Fund only and have identical voting, dividend, redemption, liquidation, and
other rights. All shares issued are fully paid and non-assessable, and
shareholders have no preemptive or other rights to subscribe to any additional
shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend
to hold annual meetings of shareholders of the Fund. 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 the Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law,
the shareholders of the Fund will not be personally liable for the obligations
of the Fund; a shareholder is entitled to the same limitation of personal
liability extended to shareholders of a corporation. To guard against the risk
47
<PAGE>
that Delaware law might not be applied in other states, the Trust Instrument
requires that every written obligation of the Trust or the Fund contain a
statement that such obligation may be enforced only against the assets of the
Trust or Fund and provides for indemnification out of Trust or Fund property of
any shareholder nevertheless held personally liable for Trust or Fund
obligations, respectively.
The Portfolio
- -------------
The Portfolio is a separate operating series of Managers
Trust, a New York common law trust organized as of December 1, 1992. Managers
Trust is registered under the 1940 Act as a diversified, open-end management
investment company. Managers Trust has six separate Portfolios. The assets of
the Portfolio belong only to the Portfolio, and the liabilities of the Portfolio
are borne solely by the Portfolio and no other.
FUND'S INVESTMENTS IN THE PORTFOLIO. The Fund is a "feeder
fund" that seeks to achieve its investment objective by investing all of its net
investable assets in the Portfolio, which is a "master fund." The Portfolio,
which has the same investment objective, policies, and limitations as the Fund,
in turn invests in securities; the Fund thus acquires an indirect interest in
those securities.
The Fund's investment in the Portfolio is in the form of a
non-transferable beneficial interest. Members of the general public may not
purchase a direct interest in the Portfolio. Neuberger Berman LIMITED MATURITY
Bond Fund, a series of Neuberger Berman Income Funds ("Income Funds"), invests
all of its net assets in the Portfolio. The shares of each series of Income
Funds are available for purchase by members of the general public. The Trust
does not sell its shares directly to members of the general public.
The Portfolio may also permit other investment companies
and/or other institutional investors to invest in the Portfolio. All investors
will invest in the Portfolio on the same terms and conditions as the Fund and
will pay a proportionate share of the Portfolio's expenses. Other investors in
the Portfolio (including the other series of Income Funds) are not required to
sell their shares at the same public offering price as the Fund, could have a
different administration fee and expenses than the Fund, and (except Income
Funds) might charge a sales commission. Therefore, Fund shareholders may have
different returns than shareholders in another investment company that invests
exclusively in the Portfolio. Information regarding any Fund that invests in the
Portfolio is available from NB Management by calling 800-877-9700.
The trustees of the Trust believe that investment in the
Portfolio by a series of Income Funds or by other potential investors in
addition to the Fund may enable the Portfolio to realize economies of scale that
could reduce its operating expenses, thereby producing higher returns and
benefitting all shareholders. However, the Fund's investment in the Portfolio
may be affected by the actions of other large investors in the Portfolio, if
any. For example, if a large investor in the Portfolio (other than the Fund)
redeemed its interest in the Portfolio, the Portfolio's remaining investors
(including the Fund) might, as a result, experience higher pro rata operating
expenses, thereby producing lower returns.
The Fund may withdraw its entire investment from the Portfolio
at any time, if the trustees of the Trust determine that it is in the best
48
<PAGE>
interests of the Fund and its shareholders to do so. The Fund might withdraw,
for example, if there were other investors in the Portfolio with power to, and
who did by a vote of all investors (including the Fund), change the investment
objective, policies, or limitations of the Portfolio in a manner not acceptable
to the trustees of the Trust. A withdrawal could result in a distribution in
kind of portfolio securities (as opposed to a cash distribution) by the
Portfolio to the Fund. That distribution could result in a less diversified
portfolio of investments for the Fund and could affect adversely the liquidity
of the Fund's investment portfolio. If the Fund decided to convert those
securities to cash, it usually would incur brokerage fees or other transaction
costs. If the Fund withdrew its investment from the Portfolio, the trustees of
the Trust would consider what actions might be taken, including the investment
of all of the Fund's net investable assets in another pooled investment entity
having substantially the same investment objective as the Fund or the retention
by the Fund of its own investment manager to manage its assets in accordance
with its investment objective, policies, and limitations. The inability of the
Fund to find a suitable replacement could have a significant impact on
shareholders.
INVESTOR MEETINGS AND VOTING. The Portfolio normally will not
hold meetings of investors except as required by the 1940 Act. Each investor in
the Portfolio will be entitled to vote in proportion to its relative beneficial
interest in the Portfolio. On most issues subjected to a vote of investors, the
Fund will solicit proxies from its shareholders and will vote its interest in
the Portfolio in proportion to the votes cast by the Fund's shareholders. If
there are other investors in the Portfolio, there can be no assurance that any
issue that receives a majority of the votes cast by Fund shareholders will
receive a majority of votes cast by all Portfolio investors; indeed, if other
investors hold a majority interest in the Portfolio, they could have voting
control of the Portfolio.
CERTAIN PROVISIONS. Each investor in the Portfolio, including
the Fund, will be liable for all obligations of the Portfolio. However, the risk
of an investor in the Portfolio incurring financial loss beyond the amount of
its investment on account of such liability would be limited to circumstances in
which the Portfolio had inadequate insurance and was unable to meet its
obligations out of its assets. Upon liquidation of the Portfolio, investors
would be entitled to share pro rata in the net assets of the Portfolio available
for distribution to investors.
CUSTODIAN AND TRANSFER AGENT
The Fund and Portfolio have selected State Street Bank and
Trust Company ("State Street"), 225 Franklin Street, Boston, MA 02110 as
custodian for its securities and cash. State Street also serves as the Fund's
transfer agent, administering purchases, redemptions, and transfers of Fund
shares with respect to Institutions and the payment of dividends and other
distributions to Institutions. All correspondence should be mailed to Neuberger
Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY
10158-0180.
INDEPENDENT AUDITORS
The Fund and Portfolio have selected Ernst & Young LLP, 200
Clarendon Street, Boston, MA 02116, as the independent auditors who will audit
their financial statements.
49
<PAGE>
LEGAL COUNSEL
The Fund and Portfolio have selected Kirkpatrick & Lockhart
LLP, 1800 Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as
their legal counsel.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the name, address, and
percentage of ownership of each person who was known by the Fund to own
beneficially or of record 5% or more of the Fund's outstanding shares at January
__, 1999:
<TABLE>
<CAPTION>
Percentage of
Ownership at
Name and Address January __, 1999
---------------- ----------------
<S> <C> <C>
Limited Maturity: Chase Manhattan Bank TTEE Met Life Defined _____%
Contribution Group
Attn David Otti
770 Broadway 10th Floor
New York, NY 10003
Nationwide Life Insurance _____%
QPVA
C/O IPO Portfolio Accounting
PO Box 182029
Columbus, OH 43218
D. Leon Leonhardt PSP _____%
For Partners & Principals
of Price Waterhouse Ltd.
DTD 6/28/85
3109 W DR Martin Luther King Blvd.
Tampa, FL 33607
D Leon Leonhardt Retirement _____%
Benefit Accumulation Plan for Employees of Price
Waterhouse LLP
3109 W DR Martin Luther King Blvd.
Tampa, FL 33607
National Financial Serv Corp. ____%
For the Exclusive Benefit of
our Customers
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
</TABLE>
50
<PAGE>
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information
included in the Trust's registration statement filed with the SEC under the 1933
Act with respect to the securities offered by the Prospectus. The registration
statement, including the exhibits filed therewith, may be examined at the SEC's
offices in Washington, D.C.
Statements contained in this SAI and in the Prospectus as to
the contents of any contract or other document referred to are not necessarily
complete, and in each instance reference is made to the copy of any contract or
other document filed as an exhibit to the registration statement, each such
statement being qualified in all respects by such reference.
FINANCIAL STATEMENTS
[To be filed.]
51
<PAGE>
Appendix A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
S&P CORPORATE BOND RATINGS:
AAA - Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the higher rated issues only in
small degree.
A - Bonds rated A have a strong capacity to pay interest and
repay principal, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in higher
rated categories.
BBB - Bonds rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in higher rated categories.
BB, B, CCC, CC, C - Bonds rated BB, B, CCC, CC, and C are
regarded, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
CI - The rating CI is reserved for income bonds on which no
interest is being paid.
D - Bonds rated D are in default, and payment of interest
and/or repayment of principal is in - arrears.
Plus (+) or Minus (-) - The ratings above may be modified by
the addition of a plus or minus sign to show relative standing within the major
categories.
MOODY'S CORPORATE BOND RATINGS:
Aaa - Bonds rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or an exceptionally
stable margin, and principal is secure. Although the various protective elements
are likely to change, the changes that can be visualized are most unlikely to
impair the fundamentally strong position of the issuer.
Aa - Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as "high grade bonds." They are rated lower than the best bonds because margins
A-1
<PAGE>
of protection may not be as large as in Aaa-rated securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat larger than in Aaa-rated
securities.
A - Bonds rated A possess many favorable investment attributes
and are considered to be upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
that suggest a susceptibility to impairment sometime in the future.
- Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa - Bonds rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca - Bonds rated Ca represent obligations that are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
MODIFIERS - Moody's may apply numerical modifiers 1, 2, and 3
in each generic rating classification described above. The modifier 1 indicates
that the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issuer ranks in the lower end of its generic rating category.
S&P COMMERCIAL PAPER RATINGS:
A-1 - This highest category indicates that the degree of
safety regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+).
A-2
<PAGE>
MOODY'S COMMERCIAL PAPER RATINGS
Issuers rated PRIME-1 (or related supporting institutions),
also known as P-1, have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be evidenced by
the following characteristics:
- Leading market positions in well-established
industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial
markets and assured sources of alternate liquidity.
A-3
<PAGE>
NEUBERGER BERMAN INCOME TRUST
PART C
OTHER INFORMATION
Item 23 Financial Statements and Exhibits
- ------- ---------------------------------
(a) Financial Statements: None.
(b) Exhibits:
Exhibit
Number Description
------- -----------
(a) (1) Certificate of Trust. Incorporated by Reference to
Post-Effective Amendment No. 3 to Registrant's
Registration Statement, File Nos. 33-62872 and
811-7724, EDGAR Accession No. 0000898432-96-00018.
(2) Restated Certificate of Trust. Filed Herewith.
(3) Trust Instrument of Neuberger Berman Income Trust.
Incorporated by Reference to Post-Effective
Amendment No. 3 to Registrant's Registration
Statement, File Nos. 33-62872 and 811-7724, EDGAR
Accession No. 0000898432-96-00018.
(4) Schedule A - Current Series of Neuberger Berman
Income Trust. Incorporated by Reference to
Post-Effective Amendment No. 6 to Registrant's
Registration Statement, File Nos. 33-62872 and
811-7724, EDGAR Accession No.
0000898432-98-000251.
(b) By-laws of Neuberger Berman Income Trust. Incorporated
by Reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement, File Nos. 33-62872
and 811-7724, EDGAR Accession No. 0000898432-96-00018.
(c) (1) Trust Instrument of Neuberger Berman Income
Trust, Articles IV, V, and VI. Incorporated by
Reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement, File Nos.
33-62872 and 811-7724, EDGAR Accession No.
0000898432-96-00018.
(2) By-laws of Neuberger Berman Income Trust Articles
V, VI, and VIII. Incorporated by Reference to
Post-Effective Amendment No. 3 to Registrant's
Registration Statement File Nos. 33-62872 and
811-7724, EDGAR Accession No. 0000898432-96-00018.
(d) (1) (i) Management Agreement Between Income
Managers Trust and Neuberger Berman
Management Incorporated. Incorporated by
Reference to Post-Effective Amendment No.
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<PAGE>
21 to Registration Statement of Neuberger
Berman Income Funds, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-96-000117.
(ii) Schedule A - Portfolios of Income Managers
Trust Currently Subject to the Management
Agreement. Incorporated by Reference to
Post-Effective Amendment No. 25 to
Registration Statement of Neuberger Berman
Income Funds, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-98-000246.
(iii) Schedule B - Schedule of Compensation Under
the Management Agreement. Incorporated by
Reference to Post-Effective Amendment No.
25 to Registration Statement of Neuberger
Berman Income Funds, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-98-000246.
(2) (i) Sub-Advisory Agreement Between Neuberger
Berman Management Incorporated and
Neuberger Berman, L.P. with Respect to
Income Managers Trust. Incorporated by
Reference to Post-Effective Amendment No.
21 to Registration Statement of Neuberger
Berman Income Funds, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-96-00017.
(ii) Schedule A - Portfolios of Income Managers
Trust Currently Subject to the Sub-Advisory
Agreement. Incorporated by Reference to
Post-Effective Amendment No. 25 to
Registration Statement of Neuberger Berman
Income Funds, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-98-000246.
(iii) Substitution Agreement Among Neuberger
Berman Management Incorporated, Income
Managers Trust, Neuberger Berman, L.P., and
Neuberger Berman, LLC. Incorporated by
reference to Post-Effective Amendment No. 5
to Registrant's Registration Statement,
File Nos. 33-62872 and 811-7724, EDGAR
Accession No. 0000898432-97-000040.
(e) (1) Distribution Agreement Between Neuberger
Berman Income Trust and Neuberger Berman
Management Incorporated. Incorporated by Reference
to Post-Effective Amendment No. 3 to Registrant's
Registration Statement, File Nos. 33-62872 and
811-7724, EDGAR Accession No. 0000898432-96-00018.
(2) Schedule A - Series of Neuberger Berman Income
Trust Currently Subject to the Distribution
Agreement. Incorporated by Reference to
Post-Effective Amendment No. 6 to Registrant's
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<PAGE>
Registration Statement, File Nos. 33-62872 and
811-7724, EDGAR Accession No. 000898432-98-000251.
(f) Bonus, Profit Sharing or Pension Plans. None.
(g) (1) Custodian Contract Between Neuberger Berman
Income Trust and State Street Bank and Trust
Company. Incorporated by Reference to
Post-Effective Amendment No. 3 to Registrant's
Registration Statement, File Nos. 33-62872 and
811-7724, EDGAR Accession No. 0000898432-96-00018.
(2) Schedule of Compensation under the Custodian
Contract. Incorporated by Reference to
Post-Effective Amendment No. 5 to Registrant's
Registration Statement, File Nos. 33-62872 and
811-7724, EDGAR Accession No.
0000898432-97-000040.
(3) Agreement between Neuberger Berman Income Trust
and State Street Bank and Trust Company relating
to the merger of Neuberger Berman Ultra Short Bond
Trust and Neuberger Berman Limited Maturity Bond
Trust. Incorporated by Reference to Post-Effective
Amendment No. 6 to Registrant's Registration
Statement, File Nos. 33-62872 and 811-7724, EDGAR
Accession No. 0000898432-98-000251.
(h) (1) (i) Transfer Agency and Service Agreement
Between Neuberger Berman Income Trust and
State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective
Amendment No. 3 to Registrant's
Registration Statement, File Nos. 33-62872
and 811-7724, EDGAR Accession No.
0000898432-96-00018.
(ii) First Amendment to Transfer Agency and
Service Agreement between Neuberger Berman
Income Trust and State Street Bank and
Trust Company. Incorporated by Reference
to Post-Effective Amendment No. 3 to
Registrant's Registration Statement, File
Nos.33-62872 and 811-7724, EDGAR Accession
No. 0000898432-96-00018.
(iii) Schedule of Compensation under the Transfer
Agency and Service Agreement. Incorporated
by Reference to Post-Effective Amendment
No. 5 to Registrant's Registration
Statement, File Nos. 33-62872 and 811-7724,
EDGAR Accession No. 0000898432-97-000040.
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<PAGE>
(2) (i) Administration Agreement Between Neuberger
Berman Income Trust and Neuberger Berman
Management Incorporated. Incorporated by
Reference to Post-Effective Amendment No.
3 to Registrant's Registration Statement,
File Nos. 33-62872 and 811-7724, EDGAR
Accession No. 0000898432-96-00018.
(ii) Schedule A - Series of Neuberger Berman
Income Trust Currently Subject to the
Administration Agreement. Incorporated by
Reference to Post-Effective Amendment No.
6 to Registrant's Registration Statement,
File Nos. 33-62872 and 811-7724, EDGAR
Accession No. 0000898432-98-000251.
(iii) Schedule B - Schedule of Compensation Under
the Administration Agreement. Incorporated
by Reference to Post-Effective Amendment
No. 5 to Registrant's Registration
Statement, File Nos. 33-62872 and 811-7724,
EDGAR Accession No. 0000898432-97-000040.
(i) Opinion and Consent of Kirkpatrick & Lockhart on
Securities Matters. Incorporated by Reference to
Post-Effective Amendment No. 6 to Registrant's
Registration Statement, File Nos. 33-62872 and 811-7724,
EDGAR Accession No. 0000898432-98-000251.
(j) Other Opinions, Appraisals, Rulings and Consents: To Be
Filed by Amendment.
(k) Financial Statements Omitted from Prospectus. None.
(l) Letter of Investment Intent. None.
(m) Plan Pursuant to Rule 12b-1. None.
(n) Financial Data Schedules. To Be Filed by Amendment.
(o) Plan Pursuant to Rule 18f-3. None.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
No person is controlled by or under common control with the Registrant.
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ITEM 25. INDEMNIFICATION.
A Delaware business trust may provide in its governing instrument for
indemnification of its officers and trustees from and against any and all claims
and demands whatsoever. Article IX, Section 2 of the Trust Instrument provides
that the Registrant shall indemnify any present or former trustee, officer,
employee or agent of the Registrant ("Covered Person") to the fullest extent
permitted by law against liability and all expenses reasonably incurred or paid
by him or her in connection with any claim, action, suit or proceeding
("Action") in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been a Covered Person and against amounts paid or
incurred by him or her in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other body to be liable to the
Registrant or its shareholders by reason of "willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office" ("Disabling Conduct"), or not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of the
Registrant. In the event of a settlement, no indemnification may be provided
unless there has been a determination that the officer or trustee did not engage
in Disabling Conduct (i) by the court or other body approving the settlement;
(ii) by at least a majority of those trustees who are neither interested
persons, as that term is defined in the Investment Company Act of 1940 ("1940
Act"), of the Registrant ("Independent Trustees"), nor parties to the matter
based upon a review of readily available facts; or (iii) by written opinion of
independent legal counsel based upon a review of readily available facts.
Pursuant to Article IX, Section 3 of the Trust Instrument, if any present
or former shareholder of any series ("Series") of the Registrant shall be held
personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or for some other
reason, the present or former shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of any entity, its
general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Registrant, on behalf of the affected
Series, shall, upon request by such shareholder, assume the defense of any claim
made against such shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
Section 9 of the Management Agreement between Income Managers Trust
("Managers Trust") and Neuberger and Berman Management Incorporated ("NB
Management") provides that neither NB Management nor any director, officer or
employee of NB Management performing services for any series of Managers Trust
(each a "Portfolio") at the direction or request of NB Management in connection
with NB Management's discharge of its obligations under the Agreement shall be
liable for any error of judgment or mistake of law or for any loss suffered by a
Portfolio in connection with any matter to which the Agreement relates;
provided, that nothing in the Agreement shall be construed (i) to protect NB
Management against any liability to Managers Trust or a Portfolio or its
interestholders to which NB Management would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of its
duties, or by reason of NB Management's reckless disregard of its obligations
and duties under the Agreement, or (ii) to protect any director, officer or
employee of NB Management who is or was a trustee or officer of Managers Trust
against any liability to Managers Trust or a Portfolio or its interestholders to
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such person's office with Managers Trust.
Section 1 of the Sub-Advisory Agreement between NB Management and
Neuberger Berman, L.P. ("Neuberger Berman") with respect to Managers Trust
provides that in the absence of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or of reckless disregard of its
duties and obligations under the Agreement, Neuberger Berman will not be subject
to liability for any act or omission or any loss suffered by any Portfolio or
its interestholders in connection with the matters to which the Agreement
relates.
Section 11 of the Agreement provides that NB Management shall look only to
the assets of a Series for the Registrant's performance of the Agreement by the
Registrant on behalf of such Series, and neither the trustees nor any of the
C-9
<PAGE>
Registrant's officers, employees or agents, whether past, present or future,
shall be personally liable therefor.
Section 12 of the Administration Agreement provides that each Series shall
indemnify NB Management and hold it harmless from and against any and all
losses, damages and expenses, including reasonable attorneys' fees and expenses,
incurred by NB Management that result from: (i) any claim, action, suit or
proceeding in connection with NB Management's entry into or performance of the
Agreement with respect to such Series; or (ii) any action taken or omission to
act committed by NB Management in the performance of its obligations hereunder
with respect to such Series; or (iii) any action of NB Management upon
instructions believed in good faith by it to have been executed by a duly
authorized officer or representative of the Trust with respect to such Series;
provided, that NB Management shall not be entitled to such indemnification in
respect of actions or omissions constituting negligence or misconduct on the
part of NB Management or its employees, agents or contractors.
Section 13 of the Administration Agreement provides that NB Management
shall indemnify each Series and hold it harmless from and against any and all
losses, damages and expenses, including reasonable attorneys' fees and expenses,
incurred by such Series which result from: (i) NB Management's failure to comply
with the terms of this Agreement with respect to such Series; or (ii) NB
Management's lack of good faith in performing its obligations hereunder with
respect to such Series; or (iii) NB Management's negligence or misconduct of its
employees, agents or contractors in connection herewith with respect to such
Series. A Series shall not be entitled to such indemnification in respect of
actions or omissions constituting negligence or misconduct on the part of that
Series or its employees, agents or contractors other than NB Management unless
such negligence or misconduct results from or is accompanied by negligence or
misconduct on the part of NB Management, any affiliated person of NB Management,
or any affiliated person of an affiliated person of NB Management.
Section 11 of the Distribution Agreement between the Registrant and NB
Management contains provisions similar to Section 11 of the Administration
Agreement, with respect to NB Management.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("1933 Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the 1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF ADVISER AND SUB-ADVISER.
There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each
director or officer of NB Management and each principal of Neuberger Berman is,
or at any time during the past two years has been, engaged for his or her own
account or in the capacity of director, officer, employee, partner or trustee.
C-10
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Claudia A. Brandon Secretary, Neuberger Berman Advisers
Vice President, NB Management Trust; Secretary, Advisers
Management Managers Trust; Secretary, Neuberger
Berman Income Funds; Secretary, Neuberger
Berman Income Trust; Secretary, Neuberger
Berman Equity Funds; Secretary, Neuberger
Berman Equity Trust; Secretary, Income
Managers Trust; Secretary, Equity Managers
Trust; Secretary, Global Managers Trust;
Secretary, Neuberger Berman Equity Assets;
Secretary, Neuberger Berman Equity Series.
Valerie Chang
Assistant Vice President, Senior Securities Analyst, TIAA/CREF.1
NB Management
Brooke A. Cobb Chief Investment Officer, Bainco
Vice President, International Investors. Senior Vice
NB Management President and Senior Portfolio Manager,
Putnam Investments.2
Stacy Cooper-Shugrue Assistant Secretary, Neuberger Berman
Assistant Vice President, Advisers Management Trust; Assistant
NB Management Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger Berman
Income Funds; Assistant Secretary,
Neuberger Berman Income Trust; Assistant
Secretary, Neuberger Berman Equity Funds;
Assistant Secretary, Neuberger Berman
Equity Trust; Assistant Secretary, Income
Managers Trust; Assistant Secretary,
Equity Managers Trust; Assistant
Secretary, Global Managers Trust;
Assistant Secretary, Neuberger Berman
Equity Assets; Assistant Secretary,
Neuberger Berman Equity Series.
Robert W. D'Alelio Senior Portfolio Manager, Putnam
Vice President, NB Investments.3
Management; Principal,
Neuberger Berman
Barbara DiGiorgio, Assistant Treasurer, Neuberger Berman
Assistant Vice President, Advisers Management Trust; Assistant
NB Management Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger Berman
Income Funds; Assistant Treasurer,
Neuberger Berman Income Trust; Assistant
- ---------------
1 Until 1996.
2 Until 1997.
3 Until 1996.
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<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Treasurer, Neuberger Berman Equity Funds;
Assistant Treasurer, Neuberger Berman
Equity Trust; Assistant Treasurer, Income
Managers Trust; Assistant Treasurer,
Equity Managers Trust; Assistant
Treasurer, Global Managers Trust;
Assistant Treasurer, Neuberger Berman
Equity Assets; Assistant Treasurer,
Neuberger Berman Equity Series.
Stanley Egener Chairman of the Board and Trustee,
President and Director, Neuberger Berman Advisers Management
NB Management; Principal, Trust; Chairman of the Board and Trustee,
Neuberger Berman Advisers Managers Trust; Chairman of the
Board and Trustee, Neuberger Berman Income
Funds; Chairman of the Board and Trustee,
Neuberger Berman Income Trust; Chairman of
the Board and Trustee, Neuberger Berman
Equity Funds; Chairman of the Board and
Trustee, Neuberger Berman Equity Trust;
Chairman of the Board and Trustee, Income
Managers Trust; Chairman of the Board and
Trustee, Equity Managers Trust; Chairman
of the Board and Trustee, Global Managers
Trust; Chairman of the Board and Trustee,
Neuberger Berman Equity Assets; Chairman
of the Board and Trustee, Neuberger Berman
Equity Series.
Theodore P. Giuliano President and Trustee, Neuberger Berman
Vice President and Income Funds; President and Trustee,
Director, NB Management; Neuberger Berman Income Trust; President
Principal, Neuberger Berman and Trustee, Income Managers Trust.
Michael F. Malouf Portfolio Manager, Dresdner RCM Global
Vice President, NB Management Investors.4
S. Basu Mullick Portfolio Manager, Ark Asset Management.5
Vice President NB Management
C. Carl Randolph Assistant Secretary, Neuberger Berman
Principal, Neuberger Berman Advisers Management Trust; Assistant
Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger Berman
- ---------------
4 Until 1998.
5 Until 1998.
C-12
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Income Funds; Assistant Secretary,
Neuberger Berman Income Trust; Assistant
Secretary, Neuberger Berman Equity Funds;
Assistant Secretary, Neuberger Berman
Equity Trust; Assistant Secretary, Income
Managers Trust; Assistant Secretary,
Equity Managers Trust; Assistant
Secretary, Global Managers Trust;
Assistant Secretary, Neuberger Berman
Equity Assets; Assistant Secretary,
Neuberger Berman Equity Series.
Ingrid Saukaitis Project Director, Council on Economic
Assistant Vice President, NB Priorities.6
Management
Richard Russell Treasurer, Neuberger Berman Advisers
Vice President, Management Trust; Treasurer, Advisers
NB Management Managers Trust; Treasurer, Neuberger
Berman Income Funds; Treasurer, Neuberger
Berman Income Trust; Treasurer, Neuberger
Berman Equity Funds; Treasurer, Neuberger
Berman Equity Trust; Treasurer, Income
Managers Trust; Treasurer, Equity Managers
Trust; Treasurer, Global Managers Trust;
Treasurer, Neuberger Berman Equity Assets;
Treasurer, Neuberger Berman Equity Series.
Jennifer K. Silver Portfolio Manager and Director, Putnum
Vice President, NB Management; Investments.7
Principal, Neuberger Berman
Daniel J. Sullivan Vice President, Neuberger Berman Advisers
Senior Vice President, NB Management Management Trust; Vice President, Advisers
Managers Trust; Vice President, Neuberger
Berman Income Funds; Vice President,
Neuberger Berman Income Trust; Vice
President, Neuberger Berman Equity Funds;
Vice President, Neuberger Berman Equity
Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers
Trust; Vice President, Global Managers
Trust; Vice President, Neuberger Berman
Equity Assets; Vice President, Neuberger
Berman Equity Series.
Catherine Waterworth Managing Director, TCW Group Inc.8
Vice President, NB Management
- ---------------
6 Until 1997.
7 Until 1997.
8 Until 1998.
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<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Michael J. Weiner Vice President, Neuberger Berman Advisers
Senior Vice President, Management Trust; Vice President, Advisers
NB Management; Managers Trust; Vice President, Neuberger
Principal, Neuberger Berman Income Funds; Vice President,
Berman Neuberger Berman Income Trust; Vice
President, Neuberger Berman Equity Funds;
Vice President, Neuberger Berman Equity
Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers
Trust; Vice President, Global Managers
Trust; Vice President, Neuberger Berman
Equity Assets; Vice President, Neuberger
Berman Equity Series.
Allan R. White Portfolio Manager, Salomon Asset
Vice President, NB Management; Management.9
Principal, Neuberger Berman
Celeste Wischerth, Assistant Treasurer, Neuberger Berman
Assistant Vice President, Advisers Management Trust; Assistant
NB Management Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger Berman
Income Funds; Assistant Treasurer,
Neuberger Berman Income Trust; Assistant
Treasurer, Neuberger Berman Equity Funds;
Assistant Treasurer, Neuberger Berman
Equity Trust; Assistant Treasurer, Income
Managers Trust; Assistant Treasurer,
Equity Managers Trust; Assistant
Treasurer, Global Managers Trust;
Assistant Treasurer, Neuberger Berman
Equity Assets; Assistant Treasurer,
Neuberger Berman Equity Series.
Lawrence Zicklin President and Trustee, Neuberger Berman
Director, NB Management; Advisers Management Trust; President and
Principal, Neuberger Berman Trustee, Advisers Managers Trust;
President and Trustee, Neuberger Berman
Equity Funds; President and Trustee,
Neuberger Berman Equity Trust; President
and Trustee, Equity Managers Trust;
President, Global Managers Trust;
President and Trustee, Neuberger Berman
Equity Assets; President and Trustee,
Neuberger Berman Equity Series.
- ---------------
9 Until 1998.
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<PAGE>
The principal address of NB Management, Neuberger Berman, and of each of
the investment companies named above, is 605 Third Avenue, New York, New York
10158.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) NB Management, the principal underwriter distributing securities of
the Registrant, is also the principal underwriter and distributor for each of
the following investment companies and any series thereof:
Neuberger Berman Advisers Management Trust
Neuberger Berman Equity Assets
Neuberger Berman Equity Funds
Neuberger Berman Equity Series
Neuberger Berman Equity Trust
Neuberger Berman Income Funds
NB Management is also the investment manager to the master funds in
which the above-named investment companies invest.
(b) Set forth below is information concerning the directors and officers
of the Registrant's principal underwriter. The principal business
address of each of the persons listed is 605 Third Avenue, New York,
New York 10158-0180, which is also the address of the Registrant's
principal underwriter.
The principal address of NB Management, Neuberger Berman, and of each of
the investment companies named above, is 605 Third Avenue, New York, New York
10158.
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------
Ramesh Babu Assistant Vice President None
Claudia A. Brandon Vice President Secretary
Patrick T. Byrne Vice President None
Richard A. Cantor Chairman of the Board and None
Director
Valerie Chang Assistant Vice President None
Brooke A. Cobb Vice President None
Robert Conti Treasurer None
Stacy Cooper-Shugrue Assistant Vice President Assistant Secretary
Robert W. D'Alelio Vice President None
Clara Del Villar Vice President None
Barbara DiGiorgio Assistant Vice President Assistant Treasurer
C-15
<PAGE>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------
Stanley Egener President and Director Chairman of the
Board, Chief
Executive Officer,
and Trustee
Brian Gaffney Vice President None
Joseph G. Galli Assistant Vice President None
Robert I. Gendelman Vice President None
Theodore P. Giuliano Vice President and Director None
Michael J. Hanratty Assistant Vice President None
Michael M. Kassen Vice President and Director None
Robert L. Ladd Assistant Vice President None
Irwin Lainoff Director None
Josephine Mahaney Vice President None
Michael F. Malouf Vice President None
Carmen G. Martinez Assistant Vice President None
Ellen Metzger Vice President and Secretary None
Paul Metzger Vice President None
S. Basu Mullick Vice President None
Loraine Olavarria Assistant Secretary None
Janet W. Prindle Vice President None
Joseph S. Quirk Assistant Vice President None
Kevin L. Risen Vice President None
Richard Russell Vice President Treasurer and
Principal Accounting
Officer
Ingrid Saukaitis Assistant Vice President None
Jennifer K. Silver Vice President None
Kent C. Simons Vice President None
Frederick B. Soule Vice President None
Daniel J. Sullivan Senior Vice President Vice President
Peter E. Sundman Senior Vice President None
Andrea Trachtenberg Vice President of Marketing None
C-16
<PAGE>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------
Judith M. Vale Vice President None
Josephine Velez Assistant Vice President None
Susan Walsh Vice President None
Catherine Waterworth Vice President None
Michael J. Weiner Senior Vice President Vice President and
Principal Financial
Officer
Allan R. White, III Vice President None
Celeste Wischerth Assistant Vice President Assistant Treasurer
Lawrence Zicklin Director Trustee and President
(c) No commissions or other compensation were received directly or
indirectly from the Registrant by any principal underwriter who was not an
affiliated person of the Registrant.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to the Registrant are maintained at the offices of State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, except
for the Registrant's Trust Instrument and By-Laws, minutes of meetings of the
Registrant's Trustees and shareholders and the Registrant's policies and
contracts, which are maintained at the offices of the Registrant, 605 Third
Avenue, New York, New York 10158.
ITEM 29. MANAGEMENT SERVICES
Other than as set forth in Parts A and B of this Registration
Statement, the Registrant is not a party to any management-related service
contract.
ITEM 30. UNDERTAKINGS
None.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, INCOME MANAGERS TRUST certifies that it meets
all of the requirements for effectiveness of this Post-Effective Amendment No. 7
to the Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City and State of New York on the 14th day of
December, 1998.
INCOME MANAGERS TRUST
By: /s/ Theodore P. Giulano
-----------------------
Theodore P. Giulano
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 7 has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ John Cannon Trustee December 14, 1998
- ---------------
John Cannon
/s/ Stanley Egener Chairman of the Board, December 14, 1998
- ------------------ Chief Executive Officer
Stanley Egener and Trustee
/s/ Theodore P. Giuliano President and Trustee December 14, 1998
- ------------------------
Theodore P. Giuliano
/s/ Barry Hirsch Trustee December 14, 1998
- ----------------
Barry Hirsch
/s/ Robert A. Kavesh Trustee December 14, 1998
- --------------------
Robert A. Kavesh
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ William E. Rulon Trustee December 14, 1998
- --------------------
William E. Rulon
/s/ Candace L. Straight Trustee December 14, 1998
- -----------------------
Candace L. Straight
/s/ Richard Russell Treasurer and December 14, 1998
- ------------------- Principal Accounting Officer
Richard Russell
/s/ Michael J. Weiner Vice President and December 14, 1998
- --------------------- Principal Financial Officer
Michael J. Weiner
- 2 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, NEUBERGER BERMAN INCOME TRUST has duly caused
this Post-Effective Amendment No. 7 to the Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized, in the City and State
of New York on the 14th day of December, 1998.
NEUBERGER BERMAN INCOME TRUST
By: /s/ Theodore P. Giuliano
------------------------
Theodore P. Giuliano
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 7 has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ John Cannon Trustee December 14, 1998
- ---------------
John Cannon
/s/ Stanley Egener Chairman of the Board, December 14, 1998
- ------------------ Chief Executive Officer
Stanley Egener and Trustee
/s/ Theodore P. Giuliano President and Trustee December 14, 1998
- ------------------------
Theodore P. Giuliano
/s/ Barry Hirsch Trustee December 14, 1998
- ----------------
Barry Hirsch
/s/ Robert A. Kavesh Trustee December 14, 1998
- --------------------
Robert A. Kavesh
<PAGE>
Signature Title Date
/s/ William E. Rulon Trustee December 14, 1998
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William E. Rulon
/s/ Candace L. Straight Trustee December 14, 1998
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Candace L. Straight
/s/ Richard Russell Treasurer and December 14, 1998
- ------------------- Principal Accounting
Richard Russell Officer
/s/ Michael J. Weiner Vice President and December 14, 1998
- --------------------- Principal Financial
Michael J. Weiner Officer
<PAGE>
NEUBERGER BERMAN INCOME TRUST
POST-EFFECTIVE AMENDMENT NO. 7 ON FORM N-1A
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
NUMBER DESCRIPTION PAGE
(a) (1) Certificate of Trust. Incorporated by N.A.
Reference to Post-Effective Amendment No. 3
to Registrant's Registration Statement, File
Nos. 33-62872 and 811-7724, EDGAR Accession
No. 0000898432-96-00018.
(2) Restated Certificate of Trust. Filed
Herewith.
(3) Trust Instrument of Neuberger Berman Income N.A.
Trust. Incorporated by Reference to
Post-Effective Amendment No. 3 to
Registrant's Registration Statement, File
Nos. 33-62872 and 811-7724, EDGAR Accession
No. 0000898432-96-00018.
(4) Schedule A - Current Series of Neuberger N.A.
Berman Income Trust. Incorporated by
Reference to Post-Effective Amendment No. 6
to Registrant's Registration Statement, File
Nos. 33-62872 and 811-7724, EDGAR Accession
No. 0000898432-98-000251.
(b) By-laws of Neuberger Berman Income Trust. N.A.
Incorporated by Reference to Post-Effective
Amendment No. 3 to Registrant's Registration
Statement, File Nos. 33-62872 and 811-7724, EDGAR
Accession No. 0000898432-96-00018.
(c) (1) Trust Instrument of Neuberger Berman Income N.A.
Trust, Articles IV, V, and VI. Incorporated
by Reference to Post-Effective Amendment No.
3 to Registrant's Registration Statement,
File Nos. 33-62872 and 811-7724, EDGAR
Accession No. 0000898432-96-00018.
(2) By-laws of Neuberger Berman Income Trust N.A.
Articles V, VI, and VIII. Incorporated by
Reference to Post-Effective Amendment No. 3
to Registrant's Registration Statement File
Nos. 33-62872 and 811-7724, EDGAR Accession
No. 0000898432-96-00018.
(d) (1) (i) Management Agreement Between Income N.A.
Managers Trust and Neuberger Berman
Management Incorporated.
Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registration Statement of Neuberger
Berman Income Funds, File Nos.
2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.
(ii) Schedule A - Portfolios of Income N.A.
Managers Trust Currently Subject to
the Management Agreement.
<PAGE>
Incorporated by Reference to
Post-Effective Amendment No. 25 to
Registration Statement of Neuberger
Berman Income Funds, File Nos.
2-85229 and 811-3802, EDGAR Accession
No. 0000898432-90-000246.
(iii) Schedule B - Schedule of Compensation N.A.
Under the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 25 to
Registration Statement of Neuberger
Berman Income Funds, File Nos.
2-85229 and 811-3802, EDGAR Accession
No. 0000898432-98-000246.
(2) (i) Sub-Advisory Agreement Between N.A.
Neuberger Berman Management
Incorporated and Neuberger Berman,
L.P. with Respect to Income Managers
Trust. Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registration Statement of Neuberger
Berman Income Funds, File Nos.
2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.
(ii) Schedule A - Portfolios of Income N.A.
Managers Trust Currently Subject to
the Sub-Advisory Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 25 to
Registration Statement of Neuberger
Berman Income Funds, File Nos.
2-85229 and 811-3802, EDGAR Accession
No. 0000898432-98-000246.
(iii) Substitution Agreement Among N.A.
Neuberger Berman Management
Incorporated, Income Managers Trust,
Neuberger Berman, L.P., and Neuberger
Berman, LLC. Incorporated by
reference to Post-Effective Amendment
No. 5 to Registrant's Registration
Statement, File Nos. 33-62872 and
811-7724, EDGAR Accession No.
0000898432-97-00040.
(e) (1) Distribution Agreement Between Neuberger N.A.
Berman Income Trust and Neuberger Berman
Management Incorporated. Incorporated by
Reference to Post-Effective Amendment No. 3
to Registrant's Registration Statement, File
Nos. 33-62872 and 811-7724, EDGAR Accession
No. 0000898432-96-00018.
(2) Schedule A - Series of Neuberger Berman N.A.
Income Trust Currently Subject to the
Distribution Agreement. Incorporated by
Reference to Post-Effective Amendment No. 6
to Registrant's Registration Statement, File
Nos. 33-62872 and 811-7724, EDGAR Accession
No. 0000898432-98-000251.
<PAGE>
(f) Bonus, Profit Sharing or Pension Plans. None. N.A.
(g) (1) Custodian Contract Between Neuberger Berman N.A.
Income Trust and State Street Bank and Trust
Company. Incorporated by Reference to
Post-Effective Amendment No. 3 to
Registrant's Registration Statement, File
Nos. 33-62872 and 811-7724, EDGAR Accession
No. 0000898432-96-00018.
(2) Schedule of Compensation under the Custodian N.A.
Contract. Incorporated by Reference to
Post-Effective Amendment No. 5 to
Registrant's Registration Statement, File
Nos. 33-62872 and 811-7724, EDGAR Accession
No. 0000898432-97-000040.
(3) Agreement between Neuberger Berman Income N.A.
Trust and State Street Bank and Trust Company
relating to the merger of Neuberger Berman
Ultra Short Bond Trust and Neuberger Berman
Limited Maturity Bond Trust. Incorporated by
Reference to Post-Effective Amendment No. 6
to Registrant's Registration Statement, File
Nos. 33-62872 and 811-7724, EDGAR Accession
No. 0000898432-98-000251.
(h) (1) (i) Transfer Agency and Service Agreement N.A.
Between Neuberger Berman Income Trust
and State Street Bank and Trust
Company. Incorporated by Reference
to Post-Effective Amendment No. 3 to
Registrant's Registration Statement,
File Nos. 33-62872 and 811-7724,
EDGAR Accession No.
0000898432-96-00018.
(ii) First Amendment to Transfer Agency N.A.
and Service Agreement between
Neuberger Berman Income Trust and
State Street Bank and Trust Company.
Incorporated by Reference to
Post-Effective Amendment No. 3 to
Registrant's Registration Statement,
File Nos. 33-62872 and 811-7724,
EDGAR Accession No.
0000898432-96-00018.
(iii) Schedule of Compensation under the N.A.
Transfer Agency and Service
Agreement. Incorporated by Reference
to Post-Effective Amendment No. 5 to
Registrant's Registration Statement,
File Nos. 33-62872 and 811-7724,
EDGAR Accession No.
0000898432-97-000040.
(2) (i) Administration Agreement Between N.A.
Neuberger Berman Income Trust and
Neuberger Berman Management
Incorporated. Incorporated by
Reference to Post-Effective Amendment
No. 3 to Registrant's Registration
Statement, File Nos. 33-62872 and
811-7724, EDGAR Accession No.
0000898432-96-00018.
<PAGE>
(ii) Schedule A - Series of Neuberger N.A.
Berman Income Trust Currently Subject
to the Administration Agreement.
Filed Herewith.
(iii) Schedule B - Schedule of Compensation N.A.
Under the Administration Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 3 to
Registrant's Registration Statement,
File Nos. 33-62872 and 811-7724,
EDGAR Accession No.
0000898432-96-00018.
(i) Opinion and Consent of Kirkpatrick & Lockhart on N.A.
Securities Matters. Incorporated by Reference to
Post-Effective Amendment No. 6 to Registrant's
Registration Statement, File Nos. 33-62872 and
811-7724, EDGAR Accession No. 0000898432-98-000251.
(j) Other Opinions, Appraisals, Rulings and Consents: N.A.
To be Filed by Amendment.
(k) Financial Statements Omitted from Prospectus. N.A.
None.
(l) Letter of Investment Intent. None. N.A.
(m) Plan Pursuant to Rule 12b-1. None. N.A.
(n) Financial Data Schedules. To Be Filed by N.A.
Amendment.
(o) Plan Pursuant to Rule 18-3f. None. N.A.
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 11/09/1998
981429986 - 2336362
RESTATED CERTIFICATE OF TRUST
FOR
NEUBERGER BERMAN INCOME TRUST
(FORMERLY NEUBERGER & BERMAN INCOME TRUST)
This Restated Certificate of Trust is filed in accordance with the provisions of
the Delaware Business Trust Act (12 Del. Code Ann. Tit. 12 Section 3801 et seq.)
and sets forth the following:
1. The name of the trust: NEUBERGER BERMAN INCOME TRUST
2. The name under which the trust was originally formed: Neuberger & Berman
Income Trust
3. The date of filing of the original certificate of trust: May 11, 1993
4. The business address of the registered office of the Trust and of the
registered agent of the Trust is:
Corporation Service Company
1013 Centre Road
Wilmington, Delaware 19805
New Castle County
5. This Restated Certificate of Trust is effective upon filing.
6. The Trust is a Delaware business trust registered under the Investment
Company Act of 1940. Notice is hereby given that the Trust shall consist
of one or more series. The debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a
particular series of the Trust shall be enforceable against the assets of
such series only, and not against the assets of the Trust generally or any
other series.
IN WITNESS WHEREOF, the undersigned, being a Trustee, has executed this Restated
Certificate of Trust of Neuberger Berman Income Trust this 6th day of Nov.,
1998.
/s/ Stanley Egener
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Stanley Egener, as Trustee and not individually
Address: 605 Third Avenue
New York, NY 10158
STATE OF NEW YORK
CITY OF NEW YORK
Before me this 6 day of Nov., 1998, personally appeared the above-named
Stanley Egener, known to me to be the person who executed the foregoing
instrument and who acknowledged that he executed the same.
/s/ Loraine Olavarria
-------------------------------------
Notary Public
LORAINE OLAVARRIA
Notary Public, State of New York
No. 03-4979299
Qualified in Nassau County
Commission Expires 4-15-99
My commission expires 4-15-99
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<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE PAGE 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"NEUBERGER & BERMAN INCOME TRUST", CHANGING ITS NAME FROM "NEUBERGER & BERMAN
INCOME TRUST" TO "NEUBERGER BERMAN INCOME TRUST", FILED IN THIS OFFICE ON THE
NINTH DAY OF NOVEMBER, A.D. 1998, AT 9 O'CLOCK A.M.
[SEAL]
[SEAL] /s/ Edward J. Freel
-----------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
2336362 8100 AUTHENTICATION: 9395599
98142986 DATE: 11-09-98
