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As filed with the Securities and Exchange Commission on February 29, 1996
File No. 811-7824
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 4
INCOME MANAGERS TRUST
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(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
Theresa A. Havell, President
Income Managers 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, DC 20036-1800
(Names and Addresses of Agents for Service)
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EXPLANATORY NOTE
This Registration Statement is being filed by the Registrant
pursuant to Section 8(b) of the Investment Company Act of 1940, as amended
("1940 Act"). However, beneficial interests in the series of the Regis-
trant are not being registered under the Securities Act of 1933, as
amended, ("1933 Act") because such interests are issued solely in private
placement transactions that do not involve any "public offering" within
the meaning of Section 4(2) of the 1933 Act. Investments in the
Registrant's series may be made only by regulated investment companies,
segregated asset accounts, foreign investment companies, common trust
funds, group trusts, or other investment arrangements, whether organized
within or without the United States (excluding individuals,
S corporations, partnerships, and grantor trusts beneficially owned by any
individuals, S corporations, or partnerships). This Registration
Statement does not constitute an offer to sell, or the solicitation of an
offer to buy, any beneficial interests in any series of the Registrant.
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Part A
Responses to Items 1 through 3 and 5A have been omitted pursuant
to paragraph 4 of Instruction F of the General Instructions to Form N-1A.
Item 4. GENERAL DESCRIPTION OF REGISTRANT.
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Income Managers Trust ("Trust") is a diversified, no-load, open-
end management investment company that was organized as a trust under the
laws of the State of New York pursuant to a Declaration of Trust dated as
of December 1, 1992.
Beneficial interests in the Trust are divided into seven separate
subtrusts or "series," each having a distinct investment objective and
distinct investment policies and limitations: Neuberger&Berman GOVERNMENT
MONEY Portfolio, Neuberger&Berman CASH RESERVES Portfolio,
Neuberger&Berman ULTRA SHORT Bond Portfolio, Neuberger&Berman LIMITED
MATURITY Bond Portfolio, Neuberger&Berman MUNICIPAL MONEY Portfolio,
Neuberger&Berman MUNICIPAL SECURITIES Portfolio, and Neuberger&Berman NEW
YORK INSURED INTERMEDIATE Portfolio (each a "Portfolio"). Two series,
Neuberger&Berman PROFESSIONAL INVESTORS GROWTH Portfolio and
Neuberger&Berman PROFESSIONAL INVESTORS MONEY Portfolio, were dissolved in
1994; Neuberger&Berman GOVERNMENT INCOME Portfolio was dissolved in 1996.
The assets of each Portfolio belong only to that Portfolio, and the
liabilities of each Portfolio are borne solely by that Portfolio and no
other.
Beneficial interests in the Portfolios are issued solely in
private placement transactions that do not involve any "public offering"
within the meaning of Section 4(2) of the 1933 Act. Investments in the
Portfolios may be made only by regulated investment companies, segregated
asset accounts, foreign investment companies, common trust funds, group
trusts, or other investment arrangements, whether organized within or
without the United States (excluding individuals, S corporations,
partnerships, and grantor trusts beneficially owned by any individuals,
S corporations, or partnerships). This Registration Statement does not
constitute an offer to sell, or the solicitation of an offer to buy, any
"security" within the meaning of the 1933 Act.
Neuberger&Berman Management Incorporated ("N&B Management")
serves as the investment manager and Neuberger&Berman, L.P.
("Neuberger&Berman") serves as the sub-adviser of each Portfolio.
INVESTMENT OBJECTIVES
The investment objective of each Portfolio is not fundamental.
Although any investment objective thus may be changed by the trustees of
the Trust ("Trustees") without investor approval, each Portfolio intends
to notify its investors before implementing any material change in any
investment objective. There can be no assurance that any Portfolio will
achieve its investment objective.
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Neuberger&Berman GOVERNMENT MONEY Portfolio seeks maximum safety
and liquidity with the highest available current income. The Portfolio
seeks to achieve this investment objective through investments in U.S.
Treasury obligations and other money market instruments backed by the full
faith and credit of the United States. The dollar-weighted average
maturity of the Portfolio's investments shall not exceed 90 days.
Neuberger&Berman CASH RESERVES Portfolio seeks the highest
current income consistent with safety and liquidity. The Portfolio seeks
to achieve this investment objective through investment in high-quality
money market instruments of government and non-government issuers. The
dollar-weighted average maturity of the Portfolio's investments shall not
exceed 90 days.
Neuberger&Berman ULTRA SHORT Bond Portfolio seeks higher total
return than is available from money market funds, with minimal risk to
principal and liquidity. The Portfolio seeks to achieve this investment
objective through investments in high-quality money market instruments and
short-term debt securities of government and non-government issuers. The
dollar-weighted average duration of the Portfolio's investments shall not
exceed two years.
Neuberger&Berman LIMITED MATURITY Bond Portfolio seeks the
highest current income consistent with low risk to principal and
liquidity; and secondarily, total return. The Portfolio seeks to achieve
this investment objective through investments in short- to intermediate-
term debt securities, primarily investment grade. The Portfolio may
invest up to 10% of its net assets in fixed income securities that are
rated below Baa or BBB, but no lower than B. The dollar-weighted average
duration of the Portfolio's investments shall not exceed four years. The
Portfolio's dollar-weighted average maturity may range up to five years.
Neuberger&Berman MUNICIPAL MONEY Portfolio seeks maximum current
income exempt from federal income tax ("tax-exempt income") consistent
with safety and liquidity. The Portfolio seeks to achieve this investment
objective through investments in high- quality, short-term tax-exempt
municipal securities. The dollar-weighted average maturity of the
Portfolio's investments shall not exceed 90 days.
Neuberger&Berman MUNICIPAL SECURITIES Portfolio seeks high
current tax-exempt income with low risk to principal, limited price
fluctuation, and liquidity; and secondarily, total return. The Portfolio
seeks to achieve this investment objective through investments in
municipal securities rated A or better. The dollar-weighted average
duration of the Portfolio's investments shall not exceed 10 years.
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio seeks a
high level of current income exempt from federal income tax and New York
State and New York City personal income taxes, consistent with
preservation of capital. The Portfolio seeks to achieve this investment
objective by investing at least 65% of its total assets in New York
Municipal Securities (as defined below) having the highest ratings
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(Aaa/AAA) at the time of purchase, whose interest and principal payments
are guaranteed by private insurance companies. The remainder may be
invested in uninsured New York Municipal Securities of investment grade
and certain other instruments. The dollar-weighted average duration of
the Portfolio's investments shall not exceed 10 years.
INVESTMENT PROGRAMS
The Portfolios' investment policies and limitations are not
fundamental unless otherwise specified in this Registration Statement.
Although non-fundamental policies or limitations may be changed by the
Trustees without investor approval, each Portfolio intends to notify its
investors before implementing any material change to such policies or
limitations. Fundamental policies and limitations may not be changed
without approval of a "majority of the outstanding voting securities" (as
defined in the 1940 Act) of the Portfolio.
Additional investment techniques, features, and restrictions
concerning the Portfolios' investment programs are described in Part B.
The value of fixed income securities is likely to rise in times
of falling market interest rates and fall in times of rising interest
rates. Investments in shorter-term income securities normally are less
affected by interest rate changes than are investments in longer-term
securities. The value of income securities is also affected by changes in
the creditworthiness of the issuer.
Neuberger&Berman GOVERNMENT MONEY Portfolio and Neuberger&Berman
CASH RESERVES Portfolio each invests in a portfolio of debt instruments
with remaining maturities of 397 days or less and maintains a dollar-
weighted average portfolio maturity of not more than 90 days. Each Port-
folio uses the amortized cost method of valuation to enable investment
companies that invest in the Portfolios to maintain a stable $1.00 share
price. Of course, there is no guarantee that any such investment company
will be able to maintain a $1.00 share price.
Neuberger&Berman GOVERNMENT MONEY Portfolio, as a fundamental
policy, may invest only in U.S. Treasury obligations and other securities
backed by the full faith and credit of the United States. Currently, the
Portfolio invests only in U.S. Treasury obligations. As a fundamental
policy, the Portfolio may not invest in repurchase agreements.
Neuberger&Berman CASH RESERVES Portfolio invests in high- quality
U.S. dollar-denominated money market instruments of U.S. and foreign
issuers, including governments and their agencies and instrumentalities,
banks and other financial institutions, and corporations, and may invest
in repurchase agreements with respect to these instruments. The Portfolio
may invest 25% or more of its total assets in U.S. Government and Agency
Securities or in certificates of deposit or bankers' acceptances issued by
domestic branches of U.S. banks.
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Neuberger&Berman ULTRA SHORT Bond Portfolio and Neuberger&Berman
LIMITED MATURITY Bond Portfolio each invests in a diversified portfolio of
fixed and variable rate debt securities and seeks to increase income and
preserve or enhance total return by actively managing average portfolio
duration in light of market conditions and trends.
Neuberger&Berman ULTRA SHORT Bond Portfolio invests in a
diversified portfolio of U.S Government and Agency Securities and high-
quality debt securities issued by financial institutions, corporations,
and others. The Portfolio's dollar-weighted average duration will not
exceed two years. Securities in which the Portfolio may invest include
mortgage-backed and asset-backed securities, money market instruments,
repurchase agreements with respect to U.S. Government and Agency
Securities, and U.S. dollar-denominated securities of foreign issuers.
The Portfolio may also purchase and sell options, futures contracts and
options on futures contracts. The Portfolio may invest 25% or more of its
total assets in U.S. Government and Agency Securities or in certificates
of deposit or bankers' acceptances issued by domestic branches of U.S.
banks.
Neuberger&Berman LIMITED MATURITY Bond Portfolio invests in a
diversified portfolio consisting primarily of short- to intermediate-term
U.S. Government and Agency Securities and primarily investment grade debt
securities issued by financial institutions, corporations, and others.
The dollar-weighted average duration of the Portfolio will not exceed four
years. The Portfolio's dollar-weighted average maturity may range up to
five years. Securities in which the Portfolio may invest include
mortgage-backed and asset-backed securities, repurchase agreements with
respect to U.S. Government and Agency Securities, and foreign investments.
The Portfolio may invest up to 10% of its net assets in fixed income
securities that are rated below investment grade but rated B or higher by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's ("S&P")
(or, if unrated, determined by N&B Management to be of comparable
quality). For information on the risks associated with investments in
securities rated below investment grade, see "Ratings of Securities." The
Portfolio may purchase and sell covered call and put options, interest-
rate futures contracts, and options on those futures contracts and may
lend portfolio securities. The Portfolio may invest up to 5% of its net
assets in municipal securities when N&B Management believes such
securities may outperform other available issues.
Neuberger&Berman MUNICIPAL MONEY Portfolio and Neuberger&Berman
MUNICIPAL SECURITIES Portfolio each normally invests only in municipal
obligations with fixed and variable interest rates. Each Portfolio may
invest in municipal securities issued to finance private activities, the
interest on which is a tax-preference item for purposes of the federal
alternative minimum tax. In addition, when, in N&B Management's opinion,
market conditions warrant a defensive posture, each Portfolio may
temporarily invest part of its assets in short-term, high-quality taxable
securities.
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Neuberger&Berman MUNICIPAL MONEY Portfolio invests in high-
quality municipal obligations with remaining maturities of 397 days or
less and maintains a dollar-weighted average portfolio maturity of not
more than 90 days. The Portfolio uses the amortized cost method of
valuation to enable investment companies that invest in the Portfolio to
maintain a stable $1.00 share price. Of course, there is no guarantee
that any such investment company will be able to maintain a $1.00 share
price.
Neuberger&Berman MUNICIPAL SECURITIES Portfolio invests in
securities rated A or better by S&P or Moody's (or, if unrated by either
of these agencies, deemed by N&B Management to be of comparable quality).
As a fundamental policy, the Portfolio invests at least 80% of its total
assets in municipal obligations. The Portfolio's dollar-weighted average
duration will not exceed ten years. The Portfolio seeks to increase
income and preserve or enhance total return by actively managing the
average portfolio duration in light of market conditions and trends. The
Portfolio also may seek to hedge all or a part of its portfolio against
changes in securities prices resulting from changes in interest rates by
buying or selling interest-rate futures contracts and options on those
contracts.
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio invests
in municipal obligations issued by the State of New York, its authorities,
multi-state authorities, municipalities, counties, and any other political
subdivisions and in municipal obligations issued by territories or
possessions of the United States, such as the Virgin Islands, Guam, and
Puerto Rico, the interest income from which is exempt, in the opinion of
counsel for the issuer, from federal income tax and New York State and New
York City personal income taxes ("New York Municipal Securities"). At
least 65% of the Portfolio's total assets normally will be invested in the
highest-rated New York Municipal Securities which are insured as to the
timely payment of principal and interest by municipal bond insurance
("Municipal Bond Insurance"). Municipal Bond Insurance provides an
unconditional and irrevocable guarantee that the insured bond's principal
and interest will be paid when due. The insurance is purchased from a
private, non-governmental insurance company. The insurance does not
guarantee the market value of the municipal bonds or the value of the
interests in the Portfolio. The insured bonds purchased by the Portfolio
must at the time of purchase have the highest credit rating available from
a nationally recognized statistical rating organization ("NRSRO"). For
such insured bonds to receive the highest credit rating, at least one
NRSRO must rate the claims-paying ability or financial strength of the
insurance company in the highest category (within which there may be
gradations). There is, of course, no guarantee that the claims-paying
ability or financial strength of the insurers will continue to receive the
highest credit ratings, or that the insurers will be able to pay all
claims when due.
The insured municipal bonds purchased by Neuberger&Berman NEW
YORK INSURED INTERMEDIATE Portfolio will carry Municipal Bond Insurance
obtained to improve the bond's credit rating. Once purchased, Municipal
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Bond Insurance cannot be canceled by the insurer, and the protection it
affords continues as long as the bonds are outstanding and the insurer
remains solvent. The Municipal Bond Insurance covering the municipal
securities purchased by the Portfolio will be either new issue insurance
("New Issue Insurance") or secondary insurance ("Secondary Insurance").
New Issue Insurance is purchased by the respective issuers of the
municipal securities at the time of the original issuance of those
securities. Secondary Insurance may be purchased by the broker, another
investor or the Portfolio after the municipal security is originally
issued. Generally, the Portfolio expects that municipal securities it
purchases will carry insurance obtained by another party.
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio may
purchase bonds insured by AMBAC Indemnity Corporation, Municipal Bond
Investors Assurance Corporation or Financial Guaranty Insurance Company
(known as AMBAC, MBIA Corp. and FGIC, respectively), or any other
insurance company that has received the highest credit rating. The
Portfolio may invest more than 25% of its assets in bonds insured by the
same insurance company. Further information regarding Municipal Bond
Insurance and insurance companies is included in Part B.
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio's
remaining assets normally will be invested in New York Municipal
Securities that are not so insured and are rated investment grade or
better and in other investments described herein. The Portfolio may
invest up to 100% of its assets in New York Municipal Securities and
certain other municipal securities issued to finance private activities
whose interest is a tax-preference item for purposes of the federal
alternative minimum tax.
During seasonal variations or other shortages in the supply of
suitable New York Municipal Securities, Neuberger & Berman New York
Insured Intermediate Portfolio may purchase uninsured New York Municipal
Securities; municipal securities the interest income on which is exempt
from federal income tax, but not New York State and New York City personal
income taxes; or taxable U.S. Government and Agency Securities. However,
as a fundamental policy, the Portfolio normally invests at least 80% of
its total assets in municipal obligations.
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio's
dollar-weighted average duration will not exceed ten years. The Portfolio
seeks to increase income and preserve or enhance total return by actively
managing average portfolio duration in light of market conditions and
trends. The Portfolio also may seek to hedge all or a part of its
portfolio against changes in securities prices by buying or selling
interest-rate futures contracts and options. Although the Portfolio is
"non-diversified" for federal securities law purposes, it will limit its
investments to meet federal tax requirements so that, as of the last day
of each quarter of its taxable year, not more than 25% of its total assets
are invested in the securities of a single issuer and, with respect to at
least 50% of its total assets, not more than 5% of those assets are
invested in the securities of a single issuer (other than, in each case,
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U.S. Government and Agency Securities). The Portfolio may not invest 25%
or more of its total assets in revenue bonds related to a single industry
but may invest 25% or more of its total assets in securities that depend
on revenue from similar types of projects, e.g., transportation, electric
utilities, housing, or health care. Developments affecting a single
issuer or industry, or securities financing particular types of projects,
could thus have a significant effect on the Portfolio.
Because NEUBERGER&BERMAN NEW YORK INSURED INTERMEDIATE Portfolio
invests primarily in New York Municipal Securities, the yield and share
price of investment companies that invest in the Portfolio are sensitive
to political and economic developments within the State of New York
("State") and to the financial condition of the State, its public
authorities, and political subdivisions, particularly the City of New York
("City"). Both the State and the City have experienced significant
financial difficulties related to poor economic performance, and no
assurance can be given that the State or the City will not experience
future fiscal instabilities. Further information regarding the financial
condition of the State and the City may be found in Part B.
New York Municipal Securities include general obligations of
Puerto Rico and its political subdivisions and public corporations. The
economy of Puerto Rico is closely linked with that of the United States
and will depend on several factors, including the condition of the U.S.
economy, the exchange rate for U.S. dollars, the price stability of oil
imports, and interest rates.
Short-Term Trading; Portfolio Turnover
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Although none of the Portfolios purchases securities with the
intention of profiting from short-term trading, each Portfolio may sell
portfolio securities prior to maturity when N&B Management believes that
such action is advisable. The portfolio turnover rates for the year ended
October 31, 1995 of Neuberger&Berman ULTRA SHORT Bond, Neuberger&Berman
LIMITED MATURITY Bond, Neuberger&Berman MUNICIPAL SECURITIES and
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolios were 148%, 88%,
66% and 17%, respectively. Turnover rates in excess of 100% generally
result in higher transaction costs (which are borne directly by the
Portfolio) and a possible increase in short-term capital gains or losses.
Borrowings
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Each Portfolio has a fundamental policy that it may not borrow
money, except that it may (1) borrow money from banks for temporary or
emergency purposes and not for leveraging or investment and (2) except for
Neuberger&Berman GOVERNMENT MONEY Portfolio, enter into reverse repurchase
agreements for any purpose, so long as the aggregate amount of borrowings
and reverse repurchase agreements does not exceed one-third of the
Portfolio's total assets (including the amount borrowed) less liabilities
(other than borrowings). None of the Portfolios expects to borrow money.
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As a non-fundamental policy, none of the Portfolios may purchase portfolio
securities if its outstanding borrowings, including reverse repurchase
agreements, exceed 5% of its total assets. Dollar rolls are treated as
reverse repurchase agreements.
Other Investments
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For temporary defensive purposes, each Portfolio may invest up to
100% of its total assets in cash or cash equivalents, commercial paper
(except for Neuberger&Berman GOVERNMENT MONEY Portfolio), U.S. Government
and Agency Securities and certain other money market instruments, as well
as (except for Neuberger&Berman GOVERNMENT MONEY Portfolio) 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
weighted average maturities or durations than normal.
Ratings of Securities
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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 the case of commercial paper) or, if not rated by any NRSRO,
such as U.S. Government and Agency Securities, have been determined by
N&B Management to be of comparable quality. If two or more NRSROs have
rated a security, at least two of them must rate it as high quality if the
security is to be eligible for purchase by Neuberger&Berman GOVERNMENT
MONEY Portfolio, Neuberger&Berman CASH RESERVES Portfolio, or
Neuberger&Berman MUNICIPAL MONEY Portfolio.
INVESTMENT GRADE DEBT SECURITIES. Investment grade debt
securities are securities that have received a rating from at least one
NRSRO in one of the four highest rating categories or, if not rated by any
NRSRO, have been determined by N&B Management to be of comparable quality.
Moody's deems securities rated in its fourth highest category (Baa) to
have speculative characteristics; a change in economic factors could lead
to a weakened capacity of the issuer to repay.
LOWER-RATED DEBT SECURITIES. Neuberger&Berman LIMITED MATURITY
Bond Portfolio may invest up to 10% of its assets in fixed income
securities that are rated below investment grade, i.e., rated below Baa by
Moody's or BBB by S&P, but at least B (or, if unrated, determined by N&B
Management to be of comparable quality). Securities rated below
investment grade are described as "speculative" by both Moody's and S&P.
Securities rated B are judged to be predominantly speculative with respect
to their capacity to pay interest and repay principal in accordance with
the terms of the obligations. Changes in economic conditions or
developments regarding the individual issuer are more likely to cause
price volatility and weaken the capacity of the issuer of such securities
to make principal and interest payments than is the case for higher grade
debt securities. An economic downturn affecting the issuer may result in
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an increased incidence of default. The market for lower-rated securities
may be thinner and less active than for higher-rated securities. N&B
Management seeks to reduce the risks associated with investing in such
securities by limiting the Portfolio's holdings in them and by extensively
analyzing the potential benefits of such an investment in relation to the
associated risks.
If the quality of securities held by any Portfolio (other than
Neuberger&Berman GOVERNMENT MONEY Portfolio, Neuberger&Berman CASH
RESERVES Portfolio, Neuberger&Berman MUNICIPAL MONEY Portfolio, or
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio) deteriorates so
that the securities would no longer satisfy that Portfolio's standards,
the Portfolio will engage in an orderly disposition of the downgraded
securities to the extent necessary to ensure that the Portfolio's holdings
of such securities do not exceed 5% of its net assets. Neuberger&Berman
GOVERNMENT MONEY Portfolio, Neuberger&Berman CASH RESERVES Portfolio and
Neuberger&Berman MUNICIPAL MONEY Portfolio, in accordance with Rule 2a-7
under the 1940 Act, will consider disposing of the securities.
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio will seek to
dispose of the securities as soon as is reasonably practicable. Further
information regarding the ratings assigned to securities purchased by the
Portfolios and their meaning is included in Part B.
Duration
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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. For all Portfolios except Neuberger&Berman
Government Money Portfolio, Neuberger&Berman Cash Reserves Portfolio, and
Neuberger&Berman MUNICIPAL MONEY Portfolio, N&B Management utilizes
duration as a tool in portfolio selection instead of the more traditional
measure known as "term to maturity." "Term to maturity" measures only the
time until a debt security provides its final payment, taking no account
of the pattern of the security's payments prior to maturity. Duration
incorporates a bond's yield, coupon interest payments, final maturity and
call features into one measure. Duration therefore provides a more
accurate measurement of a bond's likely price change in response to a
given change in market interest rates. The longer the duration, the
greater the bond's price movement will be as interest rates change. For
any fixed income security with interest payments occurring prior to the
payment of principal, duration is always less than maturity.
Futures, options and options on futures have durations which are
generally related to the duration of the securities underlying them.
Holding long futures or call option positions will lengthen a Portfolio's
duration by approximately the same amount as would holding an equivalent
amount of the underlying securities. Short futures or put options have
durations roughly equal to the negative duration of the securities that
underlie these positions, and have the effect of reducing portfolio
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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 prepayment rates are
critical in determining the securities' interest rate exposure. In these
and other similar situations, N&B Management, where permitted, will use
more sophisticated analytical techniques that incorporate the economic
life of a security into the determination of its interest rate exposure.
Description of Investments
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In addition to the securities referred to in "Investment
Programs" herein, each Portfolio (except as noted) may make the following
investments, among others, individually or in combination, although it may
not necessarily buy all of the types of securities or use all of the
investment techniques that are described. For additional information on
the following investments or other types of investments which the
Portfolios may make, see Part B.
Certain investment techniques, such as futures and options,
securities loans, and repurchase agreements, may produce taxable income
and capital gains or losses if used by Neuberger&Berman MUNICIPAL MONEY
Portfolio, Neuberger&Berman MUNICIPAL SECURITIES Portfolio, or
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio.
U.S. GOVERNMENT AND AGENCY SECURITIES (ALL PORTFOLIOS). 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
instrumentalities; by other U.S. Government-sponsored enterprises, such as
the Government National Mortgage Association ("GNMA"), Federal National
Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation
("FHLMC"), Student Loan Marketing Association, and Tennessee Valley
Authority; and by various federally chartered or sponsored banks. Some
U.S. Government Agency Securities are supported by the full faith and
credit of the United States, while others may be supported by the issuer's
ability to borrow from the U.S. Treasury, subject to the Treasury's
discretion in certain cases, or only by the credit of the issuer. U.S.
Government Agency Securities include U.S. Government mortgage-backed
securities. The market prices of U.S. Government securities are not
guaranteed by the Government and generally fluctuate with changing
interest rates.
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VARIABLE AND FLOATING RATE SECURITIES (ALL PORTFOLIOS EXCEPT
NEUBERGER&BERMAN GOVERNMENT MONEY PORTFOLIO). Variable and floating rate
securities have interest rate adjustment formulas that may help to
stabilize their market value. Many of these instruments carry a demand
feature which permits a Portfolio to sell them during a determined time
period at par value plus accrued interest. The demand feature is often
backed by a credit instrument, such as a letter of credit, or by a
creditworthy insurer. A Portfolio may rely on the credit instrument or
the creditworthiness of the insurer in purchasing a variable or floating
rate security. For purposes of determining its dollar-weighted average
maturity, each Portfolio calculates the remaining maturity of variable and
floating rate instruments as provided in Rule 2a-7 under the 1940 Act.
REPURCHASE AGREEMENTS/SECURITIES LOANS (ALL PORTFOLIOS EXCEPT
NEUBERGER&BERMAN GOVERNMENT MONEY PORTFOLIO). In a repurchase agreement,
a Portfolio buys a security from a Federal Reserve member bank or a
securities dealer and simultaneously agrees to sell it back at a higher
price, at a specified date, usually less than a week later. The
underlying securities must fall within the Portfolio's investment policies
and limitations (but not limitations as to maturity or duration). The
Portfolios also may lend portfolio securities to banks, brokerage firms or
institutional investors to earn income. Costs, delays, or losses could
result if the selling party to a repurchase agreement or the borrower of
portfolio securities becomes bankrupt or otherwise defaults.
N&B Management monitors the creditworthiness of sellers and borrowers.
ILLIQUID SECURITIES (ALL PORTFOLIOS EXCEPT NEUBERGER&BERMAN
GOVERNMENT MONEY PORTFOLIO). Each Portfolio may invest up to 10% of its
net assets in illiquid securities, which are securities that cannot be
expected to be sold within seven days at approximately the price at which
they are valued. Due to the absence of an active trading market, a Port-
folio may experience difficulty in valuing or disposing of illiquid
securities. N&B Management determines the liquidity of the Portfolios'
securities, under general supervision of the Trustees. Securities that
are freely tradeable in their country of origin or in their principal
market are not considered illiquid even if they are not registered for
sale in the U.S.
RESTRICTED AND RULE 144A SECURITIES (ALL PORTFOLIOS EXCEPT
NEUBERGER&BERMAN GOVERNMENT MONEY PORTFOLIO). Each Portfolio may invest
in restricted securities and Rule 144A securities. Restricted securities
cannot be sold to the public without registration under the 1933 Act.
Unless registered for sale, these securities can be sold only in privately
negotiated transactions or pursuant to an exemption from registration.
Restricted securities are generally considered illiquid. Rule 144A
securities, although not registered, may be resold to qualified insti-
tutional buyers in accordance with Rule 144A under the 1933 Act.
Unregistered securities may also be sold abroad pursuant to Regulation S
under the 1933 Act. N&B Management, acting pursuant to guidelines
established by the Trustees, may determine that some restricted securities
are liquid.
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REVERSE REPURCHASE AGREEMENTS (ALL PORTFOLIOS EXCEPT NEUBER-
GER&BERMAN GOVERNMENT MONEY PORTFOLIO) AND DOLLAR ROLLS (NEUBERGER&BERMAN
ULTRA SHORT BOND AND NEUBERGER&BERMAN LIMITED MATURITY BOND PORTFOLIOS).
In a reverse repurchase agreement, a Portfolio sells securities to a bank
or securities dealer and simultaneously agrees to repurchase the same
securities at an agreed upon price on a specific date. During the period
before the repurchase, the Portfolio continues to receive principal and
interest payments on the securities. A Portfolio will maintain a
segregated account consisting of cash or high-grade, liquid debt
obligations to cover its obligations under reverse repurchase agreements.
Dollar rolls are similar to reverse repurchase agreements. In a dollar
roll, a Portfolio sells securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type
and coupon) securities on a specified future date from the same party.
During the period before the repurchase, the Portfolio forgoes principal
and interest payments on the securities. The Portfolio is compensated by
the difference between the current sales price and the forward price for
the future purchase (often referred to as the "drop"), as well as by the
interest earned on the cash proceeds of the initial sale. Reverse
repurchase agreements and dollar rolls may increase the fluctuation in the
market value of a Portfolio's assets and are a form of leverage.
N&B Management monitors the creditworthiness of parties to reverse
repurchase agreements and dollar rolls.
WHEN-ISSUED TRANSACTIONS (ALL PORTFOLIOS EXCEPT NEUBERGER&BERMAN
GOVERNMENT MONEY AND NEUBERGER&BERMAN CASH RESERVES PORTFOLIOS). In a
when-issued transaction, a Portfolio commits to purchase securities at a
future date (generally within three months) in order to secure an
advantageous price and yield at the time of the commitment and pays for
the securities when they are delivered. If the seller fails to complete
the sale, a Portfolio may lose the opportunity to obtain a favorable price
and yield. When-issued securities may decline or increase in value during
the period from the Portfolio's investment commitment to the settlement of
the purchase, which may magnify fluctuation in a Portfolio's net asset
value ("NAV"). Neuberger&Berman MUNICIPAL MONEY Portfolio
Neuberger&Berman MUNICIPAL SECURITIES Portfolio, and Neuberger&Berman NEW
YORK INSURED INTERMEDIATE Portfolio each may not invest more than 10% of
its total assets in when-issued securities.
MORTGAGE-BACKED SECURITIES (NEUBERGER&BERMAN CASH RESERVES,
NEUBERGER&BERMAN ULTRA SHORT BOND, AND NEUBERGER&BERMAN LIMITED MATURITY
BOND PORTFOLIOS). Mortgage-backed securities represent interests in, or
are secured by and payable from, pools of mortgage loans, including
collateralized mortgage obligations. These securities include U.S.
Government mortgage-backed securities, which are issued or guaranteed by a
U.S. Government agency or instrumentality (though not necessarily backed
by the full faith and credit of the United States), such as GNMA, FNMA,
and FHLMC certificates. Other mortgage-backed securities are issued by
private issuers, generally originators of and investors in mortgage loans.
These issuers include savings associations, mortgage bankers, commercial
banks, investment bankers, and special purpose entities. Private
mortgage-backed securities may be supported by U.S. Government mortgage-
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backed securities or some form of non-governmental credit enhancement.
Mortgage-backed securities may have either fixed or adjustable interest
rates. Tax or regulatory changes may adversely affect the mortgage
securities market. In addition, changes in the market's perception of the
issuer may affect the value of mortgage-backed securities. The rate of
return on mortgage-backed securities may be affected by prepayments of
principal on the underlying loans, which generally increase as market
interest rates decline; as a result, when interest rates decline, holders
of these securities normally do not benefit from appreciation in market
value to the same extent as holders of other non-callable debt securities.
N&B Management determines the effective life of mortgage-backed securities
based upon industry practice and current market conditions. If N&B
Management's determination is not borne out in practice, it could
positively or negatively affect the value of the Portfolio when market
interest rates change. Increasing market interest rates generally extend
the effective maturities of mortgage-backed securities.
ASSET-BACKED SECURITIES (NEUBERGER&BERMAN CASH RESERVES,
NEUBERGER&BERMAN ULTRA SHORT BOND, NEUBERGER&BERMAN LIMITED MATURITY BOND
AND NEUBERGER&BERMAN NEW YORK INSURED INTERMEDIATE PORTFOLIOS). Asset-
backed securities represent interests in, or are secured by and payable
from, pools of assets, such as consumer loans, CARS ("Certificates for
Automobile Receivables "), credit card receivables securities, and
installment loan contracts. Although these securities may be supported by
letters of credit or other credit enhancements, payment of interest and
principal ultimately depends upon individuals paying the underlying loans,
which may be affected adversely by general downturns in the economy. The
risk that recovery on repossessed collateral might be unavailable or
inadequate to support payments on asset-backed securities is greater than
in the case of mortgage-backed securities.
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio may
purchase units of beneficial interest in pools of purchase contracts,
financing leases, and sales agreements entered into by municipalities.
These municipal obligations may be created when a municipality enters into
an installment purchase contract or lease with a vendor and may be secured
by the assets purchased or leased by the municipality. However, except in
very limited circumstances, there will be no recourse against the vendor
if the municipality stops making payments. Pools may also hold other
types of investments. The market for tax-exempt asset-backed securities
is still relatively new. Certain of these obligations are likely to
involve unscheduled prepayments of principal. In purchasing such
securities, the Portfolio typically relies on an opinion from the issuer's
counsel that interest on the asset-backed securities is exempt from income
taxes.
FOREIGN INVESTMENTS (NEUBERGER&BERMAN CASH RESERVES,
NEUBERGER&BERMAN ULTRA SHORT BOND, AND NEUBERGER&BERMAN LIMITED MATURITY
BOND PORTFOLIOS). The Portfolios may invest in U.S. dollar-denominated
foreign securities. Foreign securities may be affected by political or
economic developments in foreign countries, the investment significance of
which may be difficult to discern. Foreign companies may not be subject
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to accounting standards or governmental supervision comparable to U.S.
companies, and there may be less public information about their
operations. In addition, foreign markets may be less liquid or more
volatile than U.S. markets and may offer less protection to investors. It
may be difficult to invoke legal process abroad. Neuberger&Berman LIMITED
MATURITY Bond Portfolio may also invest in foreign securities denominated
in or indexed to foreign currencies. Such securities may be affected by
special risks, such as governmental regulation of foreign exchange
transactions and the fluctuation of foreign currencies relative to the
U.S. dollar, which could result in losses irrespective of the performance
of the underlying investment. N&B Management considers these factors in
making investments for the Portfolios. Neuberger&Berman LIMITED MATURITY
Bond Portfolio may enter into forward foreign currency contracts or
futures contracts (agreements to exchange one currency for another at a
specified price at a future date) and related options to manage currency
risks and to facilitate transactions in foreign securities. Although
these contracts can protect the Portfolio from adverse exchange rate
changes, they involve a risk of loss if N&B Management fails to predict
foreign currency values correctly; see the discussion of Hedging
Instruments, below.
PUT AND CALL OPTIONS, FUTURES CONTRACTS, AND OPTIONS ON FUTURES
CONTRACTS (NEUBERGER&BERMAN ULTRA SHORT BOND, NEUBERGER&BERMAN LIMITED
MATURITY BOND, NEUBERGER&BERMAN MUNICIPAL SECURITIES, AND NEUBERGER&BERMAN
NEW YORK INSURED INTERMEDIATE PORTFOLIOS). Each Portfolio may try to
reduce the risk of securities price changes (hedge) or manage portfolio
duration by (1) entering into interest-rate futures contracts traded on
futures exchanges and (2) purchasing and writing options on futures con-
tracts. Neuberger&Berman LIMITED MATURITY Bond Portfolio also may write
covered call options and purchase put options on debt securities in its
portfolio or on foreign currencies for hedging purposes or for the purpose
of producing income. Neuberger&Berman NEW YORK INSURED INTERMEDIATE
Portfolio also may purchase and sell call options and put options on debt
securities in its portfolio for hedging purposes or for the purpose of
producing income. Neuberger&Berman LIMITED MATURITY Bond and
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolios each will write
a call option on a security or currency only if it holds that security or
currency or has the right to obtain the security or currency at no
additional cost. These investment practices involve certain risks,
including price volatility and a high degree of leverage. The Portfolios
may engage in transactions in futures contracts and related options only
as permitted by regulations of the Commodity Futures Trading Commission.
The primary risks in using put and call options, futures
contracts, options on futures contracts, forward foreign currency
contracts or options on foreign currencies ("Hedging Instruments") are (1)
imperfect correlation or no correlation between changes in market value of
the securities or currency held by a Portfolio and the prices of Hedging
Instruments; (2) possible lack of a liquid secondary market for Hedging
Instruments and the resulting inability to close out Hedging Instruments
when desired; (3) the fact that the skills needed to use Hedging
Instruments are different from those needed to select a Portfolio's
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securities; and (4) the fact that, although use of these instruments for
hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain, or even result in losses, by offsetting favorable
price movements in hedged investments. When a Portfolio uses Hedging
Instruments, the Portfolio will place cash or high-grade, liquid debt
securities in a segregated account to the extent required by SEC staff
policy. Another risk of Hedging Instruments is the possible inability of
a Portfolio to purchase or sell a security at a time that would otherwise
be favorable for it to do so, or the possible need for a Portfolio to sell
a security at a disadvantageous time, due to its need to maintain "cover"
or to segregate securities in connection with its use of these
instruments. Futures, options, and forward contracts are considered
"derivatives." Losses that may arise from certain futures transactions
are potentially unlimited.
MUNICIPAL OBLIGATIONS (NEUBERGER&BERMAN MUNICIPAL MONEY,
NEUBERGER&BERMAN MUNICIPAL SECURITIES, AND NEUBERGER&BERMAN NEW YORK
INSURED INTERMEDIATE, NEUBERGER&BERMAN CASH RESERVES AND NEUBERGER&BERMAN
LIMITED MATURITY BOND PORTFOLIOS). 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. Municipal obligations include "general
obligation" securities, which are backed by the full taxing power of a
municipality, and "revenue" securities, which are backed by the income
from a specific project, facility, or tax. Municipal obligations also
include industrial development and other private activity bonds -- the
interest on which may be a tax-preference item for purposes of the federal
alternative minimum tax -- which are issued by or on behalf of public
authorities and are not backed by the credit of any governmental or public
authority. "Anticipation notes" are issued by municipalities in
expectation of future proceeds from the issuance of bonds, or from taxes
or other revenues, and are payable from those bond proceeds, taxes, or
revenues. Municipal obligations also include tax-exempt commercial paper,
which is issued by municipalities to help finance short-term capital or
operating requirements. Current efforts to restructure the federal budget
and the relationship between the federal government and state and local
governments may adversely impact the financing of some issuers of
municipal securities. Some states and localities are experiencing
substantial deficits and may find it difficult for political or economic
reasons to increase taxes. Efforts are underway that may result in a
"flat tax" or other restructuring of the federal income tax system. These
developments could reduce the value of all municipal securities, or the
securities of particular issuers. Neuberger&Berman CASH RESERVES
Portfolio may invest in taxable municipal obligations that otherwise meet
its criteria for quality and maturity.
ZERO COUPON SECURITIES (ALL PORTFOLIOS). Zero coupon securities
do not pay interest currently; instead, they are sold at a deep discount
from their face value and are redeemed at face value when they mature.
Because zero coupon securities do not pay current income, their prices can
be very volatile when interest rates change. In calculating their daily
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income, the Portfolios accrue a portion of the difference between a zero
coupon security's purchase price and its face value.
SWAP AGREEMENTS (NEUBERGER&BERMAN NEW YORK INSURED INTERMEDIATE
AND NEUBERGER&BERMAN MUNICIPAL SECURITIES PORTFOLIOS). To help enhance the
value of their investments or manage their exposure to different types of
investments, the Portfolios may enter into interest rate, currency, and
mortgage swap agreements and may purchase and sell interest rate "caps,"
"floors," and "collars."
In a typical interest rate swap agreement, one party agrees to
make regular payments equal to a floating interest rate on a specified
amount ("notional principal amount") in return for payments equal to a
fixed interest rate on the same amount for a specified period. If a swap
agreement provides for payment in different currencies, the parties may
also agree to exchange the notional principal amount. Mortgage swap
agreements are similar to interest rate swap agreements, except the
notional principal amount is tied to a reference pool of mortgages.
In a cap or floor, one party agrees, usually in return for a fee,
to make payments under particular circumstances. For example, the
purchaser of an interest rate cap has the right to receive payments to the
extent a specified interest rate exceeds an agreed level; the purchaser of
an interest rate floor has the right to receive payments to the extent a
specified interest rate falls below an agreed level. A collar entitles
the purchaser to receive payments to the extent a specified interest rate
falls outside an agreed range.
Swap agreements, including caps and floors, may involve leverage
and may be highly volatile; depending on how they are used, they may have
a considerable impact on a Portfolio's performance. The risks of swap
agreements depend upon the other party's creditworthiness and ability to
perform, as well as a Portfolio's ability to terminate its swap agreements
or reduce its exposure through offsetting transactions. Swap agreements
may be illiquid. The swap market is relatively new and is largely
unregulated. Swap agreements are considered "derivatives."
RESIDUAL INTEREST BONDS (NEUBERGER&BERMAN MUNICIPAL SECURITIES
AND NEUBERGER&BERMAN NEW YORK INSURED INTERMEDIATE PORTFOLIOS). The
Portfolios may purchase one component of a municipal security that is
structured in two parts: a variable rate security and a residual interest
bond. The interest rate for the variable rate security is determined by
an index or an auction process held approximately every 35 days, while the
residual interest bond holder receives the balance of the income less an
auction fee. These instruments are also known as inverse floaters because
the income received on the residual interest bond is inversely related to
the market rates. The market prices of residual interest bonds are highly
sensitive to changes in market rates and may decrease significantly when
market rates increase.
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MUNICIPAL LEASE OBLIGATIONS (NEUBERGER&BERMAN MUNICIPAL
SECURITIES AND NEUBERGER&BERMAN NEW YORK INSURED INTERMEDIATE PORTFOLIOS).
These obligations are issued by a state or local government or authority
to acquire land and a wide variety of equipment and facilities. The
obligations typically are not fully backed by the municipality's credit.
If funds are not appropriated for the following year's lease payments, the
lease may terminate, with the possibility of default on the lease
obligations and significant loss to the Portfolio. The Portfolios may
also purchase certificates of participation in municipal lease obligations
or installment sales contracts, which entitle the holder to a
proportionate interest in lease-purchase payments made.
RESOURCE RECOVERY BONDS (NEUBERGER&BERMAN MUNICIPAL MONEY,
NEUBERGER&BERMAN MUNICIPAL SECURITIES AND NEUBERGER&BERMAN NEW YORK
INSURED INTERMEDIATE PORTFOLIOS). Resource recovery bonds are a type of
revenue bond issued to build facilities such as solid waste incinerators
or waste-to-energy plants. Typically, a private corporation will be
involved on a temporary basis during the construction of the facility, and
the revenue stream will be secured by fees or rents paid by municipalities
for use of the facilities. The credit and quality of resource recovery
bonds may be affected by the viability of the project itself, tax
incentives for the project, and changing environmental regulations or
interpretations thereof.
TENDER OPTION BONDS (NEUBERGER&BERMAN MUNICIPAL SECURITIES AND
NEUBERGER&BERMAN NEW YORK INSURED INTERMEDIATE PORTFOLIOS). Tender option
bonds are created by coupling an intermediate-term or long-term, fixed
rate tax-exempt bond with a tender agreement that gives the holder the
option to tender the bond at its face value. A sponsor, such as a bank,
broker-dealer or other financial institution, in return for providing the
tender option, receives periodic fees equal to the difference between the
bond's fixed coupon rate and the rate that would cause the bond, with the
tender option, to trade at par value. A sponsor may terminate the tender
option if, for example, the issuer of the bond defaults on interest
payments or the bond's rating falls below investment grade. The tax
treatment of tender option bonds is unclear, and the Portfolios will not
invest in any such bonds unless N&B Management has assurances that the
interest thereon will be tax-exempt.
Item 5. Management of the Fund.
-------------------------------
TRUSTEES AND OFFICERS. The Trustees have oversight responsi-
bility for the operations of each Portfolio. Part B contains general
background information about each Trustee and officer of the Trust. The
Trustees and officers of the Trust who are officers and/or directors of
N&B Management and/or partners of Neuberger&Berman serve without
compensation from the Portfolios. The Trustees, including a majority of
those Trustees who are not "interested persons" (as defined in the 1940
Act) of the Trust, have adopted written procedures reasonably appropriate
to deal with potential conflicts of interest between the Trust and any
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institution investing therein, including, if necessary, creating a
separate board of trustees of the Trust.
Investment Manager and Sub-Adviser
----------------------------------
N&B Management, 605 Third Avenue, 2nd Floor, New York, New York
10158-0180, serves as the investment manager of each Portfolio.
N&B Management and its predecessor firms have specialized in the
management of no-load mutual funds since 1950. In addition to serving the
seven Portfolios, N&B Management currently serves as investment manager of
other mutual funds. Neuberger&Berman, 605 Third Avenue, New York, New
York 10158-3698, which acts as sub-adviser for the Portfolios and other
mutual funds managed by N&B Management, also serves as investment adviser
of three other investment companies. The mutual funds managed by N&B
Management and Neuberger&Berman had aggregate net assets of approximately
$11.9 billion as of December 31, 1995.
As sub-adviser, Neuberger&Berman furnishes N&B Management with
investment recommendations and research without added cost to the
Portfolios. Neuberger&Berman is a member firm of the New York Stock
Exchange ("NYSE") and other principal exchanges and may act as the
Portfolios' principal broker to the extent that a broker is used in the
purchase and sale of portfolio securities and the sale of covered call
options. Neuberger&Berman and its affiliates, including N&B Management,
manage securities accounts that had approximately $38.7 billion of assets
as of December 31, 1995. All of the voting stock of N&B Management is
owned by individuals who are general partners of Neuberger&Berman.
Theresa A. Havell, the President and a Trustee of the Trust, is a
general partner of Neuberger&Berman and a director and Vice President of
N&B Management. Ms. Havell is the Manager of the Fixed Income Group of
Neuberger&Berman, which she established in 1984. The Fixed Income Group
manages fixed income accounts that had approximately $11.1 billion of
assets as of December 31, 1995. Ms. Havell has had overall responsibility
for the activities of the Fixed Income Group since 1984.
The following members of the Fixed Income Group are, along with
Theresa Havell, primarily responsible for the day-to-day management of the
listed Portfolios:
Neuberger&Berman GOVERNMENT MONEY, CASH RESERVES, and ULTRA SHORT
BOND Portfolios - Josephine P. Mahaney. Ms. Mahaney, who has been a
Senior Portfolio Manager in the Fixed Income Group since 1984 and a Vice
President of N&B Management since November 1994, has been primarily
responsible for Neuberger&Berman GOVERNMENT MONEY Portfolio and
Neuberger&Berman CASH RESERVES Portfolio since January 1993, and
Neuberger&Berman ULTRA SHORT Bond Portfolio since July 1993. She was an
Assistant Vice President of N&B Management from 1986 to 1994.
Neuberger&Berman LIMITED MATURITY Bond Portfolio - Thomas G.
Wolfe. Mr. Wolfe has been primarily responsible for Neuberger&Berman
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LIMITED MATURITY Bond Portfolio since October 1, 1995. Mr. Wolfe has been
a Senior Portfolio Manager in the Fixed Income Group since July 1993,
Director of Fixed Income Credit Research since July 1993 and a Vice
President of N&B Management since October 1995. From November 1987 to
June 1993, he was Vice President in the Corporate Finance Department of
Standard & Poor's.
Neuberger&Berman MUNICIPAL MONEY, Neuberger&Berman MUNICIPAL
SECURITIES, and Neuberger&Berman NEW YORK INSURED INTERMEDIATE
Portfolios - Clara Del Villar. Ms. Del Villar, who has been a Senior
Portfolio Manager in the Fixed Income Group since December 1991 and a Vice
President of N&B Management since November 1994, has been primarily
responsible for Neuberger&Berman MUNICIPAL MONEY Portfolio since August
1993, Neuberger&Berman MUNICIPAL SECURITIES Trust since December 1, 1991,
and Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio since October
1, 1994. From April 1991 to December 1991 she worked for a charitable
organization; from January 1990 to April 1991 she was a consultant for a
commodities trading adviser.
The partners and employees of Neuberger&Berman and officers and
employees of N&B Management, together with their families, have invested
over $100 million of their own money in Neuberger&Berman
Funds[SERVICEMARK].
To mitigate the possibility that a Portfolio will be adversely
affected by employees' personal trading, the Trust, N&B Management, and
Neuberger&Berman have adopted policies that restrict securities trading in
personal accounts of the portfolio managers and others who normally come
into possession of information on portfolio transactions.
Expenses
--------
N&B Management provides investment management services to each
Portfolio that include, among other things, making and implementing
investment decisions and providing facilities and personnel necessary to
operate the Portfolio. For investment management services, each Portfolio
pays N&B Management a fee at the annual rate of 0.25% of the first
$500 million of 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.
Each Portfolio bears all expenses of its operations other than
those borne by N&B Management as investment manager of the Portfolio.
These expenses include, but are not limited to, legal and accounting fees,
compensation for Trustees who are not affiliated with N&B Management, and
custodial fees for securities.
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Item 6. Capital Stock and Other Securities.
-------------------------------------------
The Trust was organized as a common law trust under the laws of
the State of New York. Under the Declaration of Trust, the Trustees are
authorized to issue beneficial interests in separate subtrusts or "series"
of the Trust. The Trust currently has seven operating series. The Trust
reserves the right to create and issue additional series.
Each investor in a Portfolio is entitled to participate equally
in the Portfolio's earnings and assets and to vote in proportion to the
amount of its investment in the Portfolio. Investments in a Portfolio may
not be transferred, but an investor may withdraw all or any portion of its
investment at any time at the NAV of such investment. Each investor in a
Portfolio is liable for all obligations of the Portfolio. However, the
risk of an investor in a Portfolio incurring financial loss on account of
such liability would be limited to circumstances in which the Portfolio
had inadequate insurance and was unable to meet its obligations (including
indemnification obligations) out of its assets. Upon liquidation of a
Portfolio, investors would be entitled to share pro rata in the net assets
of the Portfolio available for distribution to investors.
Investments in a Portfolio have no preemptive or conversion
rights and are fully paid and non-assessable. The Trust is not required
and has no current intention to hold annual meetings of investors, but the
Trust will hold special meetings of investors when, in the Trustees'
judgment, it is necessary or desirable to submit matters to an investor
vote. Changes in fundamental policies or limitations will be submitted to
investors for approval. Investors have the right to remove one or more
Trustees without a meeting by a declaration in writing signed by a
specified number of investors.
Each Portfolio's NAV is determined each day the NYSE is open for
trading (a "Business Day"). This determination is made once during each
Business Day for each Portfolio, as follows: (1) as of 12:00 noon, Eastern
time, in the case of Neuberger&Berman GOVERNMENT MONEY Portfolio,
Neuberger&Berman CASH RESERVES Portfolio, and Neuberger&Berman MUNICIPAL
MONEY Portfolio; and (2) as of the close of regular trading on the NYSE,
usually 4:00 p.m., Eastern time, in the case of each other Portfolio (each
a "Valuation Time").
Each investor in a Portfolio may add to or reduce its investment
in the Portfolio. At each Valuation Time on each Business Day, the value
of each investor's beneficial interest in a Portfolio will be determined
by multiplying the Portfolio's NAV by the percentage, effective for that
day, that represents that investor's share of the aggregate beneficial
interests in the Portfolio. Any additions to or withdrawals of those
interests which are to be effected on that day will then be effected.
Each investor's share of the aggregate beneficial interests in the
Portfolio then will be recomputed using the percentage equal to the
fraction (1) the numerator of which is the value of the investor's
investment in the Portfolio as of the Valuation Time on that day plus or
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minus, as the case may be, the amount of any additions to or withdrawals
from such investment effected on that day and (2) the denominator of which
is the Portfolio's aggregate NAV as of the Valuation Time on that day plus
or minus, as the case may be, the amount of the net additions to or
withdrawals from the aggregate investments in the Portfolio by all
investors. The percentages so determined then will be applied to
determine the value of each investor's respective interest in the
Portfolio as of the Valuation Time on the following Business Day.
A Portfolio's net income consists of (1) all accrued interest
(including earned discount, both original issue and market discount),
dividends, and other income, including any net realized gains or losses on
the Portfolio's assets, less (2) all actual and accrued expenses of the
Portfolio, and amortization of any premium, all as determined in
accordance with generally accepted accounting principles. All of a
Portfolio's net income is allocated pro rata among the investors in the
Portfolio. A Portfolio's net income generally is not distributed to the
investors in the Portfolio, except as determined by the Trustees from time
to time, but instead is included in the value of the investors' respective
beneficial interests in the Portfolio.
Under the current method of the Portfolios' operations, they are
not subject to any income tax. However, each investor in a Portfolio is
taxable on its share (as determined in accordance with the Trust's
governing instruments and the Internal Revenue Code of 1986, as amended
("Code"), and the regulations promulgated thereunder) of the Portfolio's
ordinary income and capital gain. It is intended that each Portfolio's
assets, income, and distributions will continue to be managed in such a
way that an investor in a Portfolio will be able to satisfy the
requirements of Subchapter M of the Code, assuming that the investor
invests all of its assets in the Portfolio. See Part B for a discussion
of the foregoing tax matters and certain other matters.
Neuberger&Berman Income Funds ("Income Funds") owns a majority
interest in the Trust and each Portfolio thereof. However, Income Funds
has undertaken that, with respect to most matters on which the Trust seeks
a vote of its interestholders, Income Funds will seek a vote of its
shareholders and will vote its interest in the Trust in accordance with
their instructions.
Inquiries by a holder of an interest in a Portfolio should be
directed to such Portfolio at the following address: 605 Third Avenue,
New York, New York, 10158-0180.
Item 7. Purchase of Securities.
-------------------------------
Beneficial interests in the Portfolios are issued solely in
private placement transactions that do not involve any "public offering"
within the meaning of Section 4(2) of the 1933 Act. See "General
Description of Registrant" above. All investments in the Portfolios are
made without a sales load, at the NAV next determined after an order is
A-21
<PAGE>
received by the Portfolio. The NAV of each Portfolio is determined on
each Business Day as of the Valuation Time.
Neuberger&Berman GOVERNMENT MONEY Portfolio, Neuberger&Berman
CASH RESERVES Portfolio, and Neuberger&Berman MUNICIPAL MONEY Portfolio
value their securities at their cost at the time of purchase and assume a
constant amortization to maturity of any discount or premium.
Neuberger&Berman ULTRA SHORT Bond Portfolio and Neuberger&Berman
LIMITED MATURITY Bond Portfolio value their 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 believe
accurately reflects fair value. The Portfolios periodically verify
valuations provided by the pricing services. Short-term securities with
remaining maturities of less than 60 days are valued at cost which, when
combined with interest earned, approximates market value.
Neuberger&Berman MUNICIPAL SECURITIES Portfolio and
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio use an
independent pricing service to determine the market value of their
portfolio securities and periodically verify the valuations.
There is no minimum initial or subsequent investment in any
Portfolio. However, because each Portfolio intends to be as fully
invested at all times as is reasonably practicable in order to enhance the
yield on its assets, investments in each Portfolio must be made in federal
funds (i.e., monies credited to the account of the Trust's custodian bank
by a Federal Reserve Bank). The Trust reserves the right to cease
accepting investments in a Portfolio at any time or to reject any
investment order.
The Trust's placement agent is N&B Management. Its principal
business address is 605 Third Avenue, New York, NY 10158-0180.
N&B Management receives no compensation for serving as the Trust's
placement agent.
Item 8. Redemption or Repurchase.
---------------------------------
An investor in any Portfolio may withdraw all or any portion of
its investment at the NAV next determined after a withdrawal request in
proper form is furnished by the investor to the Trust. The proceeds of a
withdrawal will be paid by the Portfolio in federal funds normally on the
Business Day the withdrawal is effected, but in any event within three
business days, except as extensions may be permitted by law.
Neuberger&Berman LIMITED MATURITY Bond Portfolio,
Neuberger&Berman MUNICIPAL MONEY Portfolio, Neuberger&Berman NEW YORK
INSURED INTERMEDIATE Portfolio, and Neuberger&Berman MUNICIPAL SECURITIES
Portfolio reserve the right to pay withdrawals in kind. Unless requested
by an investor, a Portfolio will not pay a withdrawal in kind to an
A-22
<PAGE>
investor, except in situations where that investor may pay redemptions in
kind. Investments in a Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended, or the payment of the withdrawal proceeds
postponed, during any period in which the NYSE is closed (other than
weekends or holidays) or trading on the NYSE is restricted or to the
extent otherwise permitted by the 1940 Act.
A-23
<PAGE>
Item 9. Pending Legal Proceedings.
----------------------------------
Not applicable.
xxx
A-24
<PAGE>
Part B
Item 10. Cover Page.
---------------------
Not applicable.
Item 11. Table of Contents. Page
--------------------------- ----
General Information and History . . . . . . . . . . . B-1
Investment Objectives and Policies. . . . . . . . . . B-1
Management of the Trust . . . . . . . . . . . . . . . B-52
Control Persons and Principal Holders
of Securities . . . . . . . . . . . . . . . . . . . B-59
Investment Advisory and Other Services. . . . . . . . B-59
Brokerage Allocation and Other Practices . . . . . . B-65
Capital Stock and Other Securities . . . . . . . . . B-67
Purchase, Redemption and Pricing of
Securities. . . . . . . . . . . . . . . . . . . . . B-68
Tax Status. . . . . . . . . . . . . . . . . . . . . . B-68
Underwriters. . . . . . . . . . . . . . . . . . . . . B-71
Calculations of Performance Data. . . . . . . . . . . B-72
Financial Statements. . . . . . . . . . . . . . . . . B-72
Item 12. General Information and History.
-----------------------------------------
Registrant added the words "Neuberger & Berman" to the names of
each series of Registrant on December 22, 1993.
Item 13. Investment Objectives and Policies.
--------------------------------------------
Part A contains information about the investment objectives and
policies of Neuberger & Berman Government Money Portfolio, Neuberger &
Berman Cash Reserves Portfolio, Neuberger & Berman Ultra Short Bond Por-
tfolio, Neuberger & Berman Limited Maturity Bond Portfolio, Neuberger &
Berman Municipal Money Portfolio, Neuberger & Berman Municipal Securities
Portfolio, and Neuberger & Berman New York Insured Intermediate Portfolio,
(each a "Portfolio" and collectively the "Portfolios"), the active series
of Income Managers Trust (the "Trust"). This Part B should be read only
in conjunction with Part A. This section contains supplemental
information concerning the investment policies and portfolio strategies
that the Portfolios may utilize, the types of securities and other instru-
ments in which the Portfolios may invest, and certain risks attendant to
those investments, policies, and strategies.
Investment Policies and Limitations
-----------------------------------
For purposes of the investment policies and limitations described
herein and in Part A, Neuberger & Berman Management Incorporated
("N&B Management") identifies the "issuer" of a municipal obligation that
is not a general obligation note or bond by the obligation's
characteristics. The most significant of these characteristics is the
<PAGE>
source of funds for the payment of principal and interest on the
obligation. If an obligation is backed by an irrevocable letter of credit
or other guarantee, without which the obligation would not qualify for
purchase under a Portfolio's quality restrictions, an issuer of the letter
of credit or the guarantee is considered an issuer of the obligation. If
an obligation meets a Portfolio's quality restrictions without credit
support, the Portfolio treats the commercial developer or the industrial
user, rather than the governmental entity or the guarantor, as the only
issuer of the obligation, even if the obligation is backed by a letter of
credit or other guarantee.
Except for the limitation on borrowing and the limitation on
ownership of portfolio securities by officers and trustees, any investment
policy or limitation that involves a maximum percentage of securities or
assets will not be considered to be violated unless the percentage
limitation is exceeded immediately after, and because of, a transaction by
a Portfolio. The policies and limitations described in this Part B are
non-fundamental unless otherwise stated.
The fundamental investment policies and limitations of
Neuberger & Berman Government Money Portfolio are as follows:
1. Borrowing. The Portfolio may not borrow money, except from
banks for temporary or emergency purposes and not for leveraging or
investment, in an amount not exceeding 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, it 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 and Real Estate. The Portfolio may not purchase
or sell commodities, commodity contracts, foreign exchange, or real
estate, including interests in real estate investment trusts and real
estate mortgage loans, except securities issued by the Government National
Mortgage Association.
3. Lending. The Portfolio may not make loans. The acquisition
of a portion of an issue of publicly distributed bonds, debentures, notes,
and other securities as permitted by the Trust's Declaration of Trust
shall not be deemed to be the making of loans.
4. Senior Securities. The Portfolio may not issue senior
securities, except as permitted under the Investment Company Act of 1940,
as amended (the "1940 Act").
5. 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 (the "1933 Act").
B-2
<PAGE>
6. Short Sales and Puts, Calls, Straddles, or Spreads. The
Portfolio may not effect short sales of securities or write or purchase
any puts, calls, straddles, spreads, or any combination thereof.
The non-fundamental investment policies and limitations of
Neuberger & Berman Government Money Portfolio are as follows:
1. Investments in Other Investment Companies. The Portfolio may
not purchase securities of other investment companies, except to the
extent permitted by the 1940 Act and in the open market at no more than
customary brokerage commission rates. This limitation does not apply to
securities received or acquired as dividends, through offers of exchange,
or as a result of a reorganization, consolidation, or merger.
2. Borrowing. The Portfolio may not purchase securities if
outstanding borrowings exceed 5% of its total assets.
3. 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.
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 (i) purchases of securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities ("U.S. Government and
Agency Securities") or (ii) investments in certificates of deposit ("CDs")
or banker's acceptances issued by domestic branches of U.S. banks.
The fundamental investment policies and limitations of
Neuberger & Berman Cash Reserves Portfolio, Neuberger & Berman Ultra Short
Bond Portfolio, and Neuberger & Berman Limited Maturity Bond Portfolio
(collectively, with Neuberger & Berman Government Money Portfolio, the
"Fixed Income Portfolios") are as follows:
1. Borrowing. No Portfolio may borrow money, except that a
Portfolio may (i) borrow money from banks for temporary or emergency
purposes and not for leveraging or investment and (ii) enter into reverse
repurchase agreements; provided that (i) and (ii) in combination do not
exceed 33-1/3% of the value of its total assets (including the amount
borrowed) less liabilities (other than borrowings). If at any time
borrowings exceed 33-1/3% of the value of a Portfolio's total assets, that
Portfolio will reduce its borrowings within three days (excluding Sundays
and holidays) to the extent necessary to comply with the 33-1/3%
limitation.
2. Commodities. Neuberger & Berman Ultra Short Bond and
Neuberger & Berman Limited Maturity Bond Portfolios 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
B-3
<PAGE>
prohibit a Portfolio from purchasing futures contracts or options
(including options on futures contracts, but excluding options or futures
contracts on physical commodities) or from investing in securities of any
kind. Neuberger & Berman Cash Reserves Portfolio may not purchase
commodities or contracts thereon, but this restriction shall not prohibit
the Portfolio from purchasing the securities of issuers that own interests
in any of the foregoing.
3. Diversification. No Portfolio may, with respect to 75% of
the value of its total assets, purchase the securities of any issuer
(other than 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. No Portfolio may purchase any
security if, as a result, 25% or more of its total assets (taken at
current value) would be invested in the securities of issuers having their
principal business activities in the same industry. This limitation does
not apply to (i) purchases of U.S. Government and Agency Securities, or
(ii) investments by Neuberger & Berman Cash Reserves Portfolio or
Neuberger & Berman Ultra Short Bond Portfolio in CDs or banker's
acceptances issued by domestic branches of U.S. banks. Mortgage-backed
and asset-backed securities are considered to be a single industry.
5. Lending. No Portfolio may lend any security or make any
other loan if, as a result, more than 33-1/3% of its total assets (taken
at current value) would be lent to other parties, except, in accordance
with its investment objective, policies, and limitations, (i) through the
purchase of a portion of an issue of debt securities or (ii) by engaging
in repurchase agreements.
6. Real Estate. No Portfolio may purchase real estate unless
acquired as a result of the ownership of securities or instruments, but
this restriction shall not prohibit a Portfolio from purchasing securities
issued by entities or investment vehicles that own or deal in real estate
or interests therein, or instruments secured by real estate or interests
therein.
7. Senior Securities. No Portfolio may issue senior securities,
except as permitted under the 1940 Act.
8. Underwriting. No Portfolio may underwrite securities of
other issuers, except to the extent that a Portfolio, in disposing of
portfolio securities, may be deemed to be an underwriter within the
meaning of the 1933 Act.
The non-fundamental investment policies and limitations of
Neuberger & Berman Cash Reserves Portfolio, Neuberger & Berman Ultra Short
Bond Portfolio, and Neuberger & Berman Limited Maturity Bond Portfolio are
as follows:
B-4
<PAGE>
1. Investments in Any One Issuer. Neuberger & Berman Cash
Reserves Portfolio and Neuberger & Berman Ultra Short Bond Portfolio may
not purchase the securities of any one issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 5% of the Portfolio's total
assets would be invested in the securities of that issuer.
2. Illiquid Securities. No Portfolio may purchase any security
if, as a result, more than 10% 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.
3. Unseasoned Issuers. No Portfolio may purchase the securities
of any issuer (other than securities issued or guaranteed by domestic or
foreign governments or political subdivisions thereof) if, as a result,
more than 5% of the Portfolio's total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
4. Ownership of Portfolio Securities by Officers and
Trustees. No Portfolio may purchase or retain the securities of any
issuer if, to the knowledge of N&B Management, those officers and trustees
of the Trust and officers and directors of N&B Management who each owns
individually more than 1/2 of 1% of the outstanding securities of such
issuer, together own more than 5% of such securities.
5. Investments in Other Investment Companies. No Portfolio may
purchase securities of other investment companies, except to the extent
permitted by the 1940 Act and in the open market at no more than customary
brokerage commission rates. This limitation does not apply to securities
received or acquired as dividends, through offers of exchange, or as a
result of a reorganization, consolidation, or merger.
6. Oil and Gas Programs. No Portfolio may invest in
participations or other direct interests in oil, gas, or other mineral
exploration or development programs or leases.
7. Borrowing. No Portfolio may purchase securities if out-
standing borrowings, including any reverse repurchase agreements, exceed
5% of its total assets.
8. Lending. Except for the purchase of debt securities and
engaging in repurchase agreements, no Portfolio may make any loans other
than securities loans.
9. Margin Transactions. No Portfolio may purchase securities on
margin from brokers or other lenders except that a Portfolio may obtain
such short-term credits as are necessary for the clearance of securities
transactions. For Neuberger & Berman Ultra Short Bond Portfolio and
Neuberger & Berman Limited Maturity Bond Portfolio, margin payments in
B-5
<PAGE>
connection with transactions in futures contracts and options on futures
contracts shall not constitute the purchase of securities on margin and
shall not be deemed to violate the foregoing limitation.
10. Short Sales. No Portfolio may sell securities short, unless
it owns, or has the right to obtain without payment of additional
consideration, securities equivalent in kind and amount to the securities
sold. For Neuberger & Berman Ultra Short Bond Portfolio and Neuberger &
Berman Limited Maturity Bond Portfolio, transactions in forward contracts,
futures contracts and options shall not constitute selling securities
short.
11. Puts, Calls, Straddles, or Spreads. No Portfolio may invest
in puts, calls, straddles, spreads, or any combination thereof, except
that each of the Portfolios may (i) purchase securities with rights to put
the securities to the seller in accordance with its investment program and
(ii) purchase call options and write (sell) put options to close out
options previously written by the Portfolio, and Neuberger & Berman
Limited Maturity Bond Portfolio may write covered call options and
purchase put options. The Portfolios do not construe the foregoing
limitation to preclude them from purchasing or selling options on futures
contracts or from purchasing securities with rights to put the security to
the issuer or a guarantor.
12. Real Estate Limited Partnerships. No Portfolio may invest
in real estate limited partnerships.
The fundamental investment policies and limitations of
Neuberger & Berman Municipal Money and Neuberger & Berman Municipal
Securities Portfolios are as follows:
1. Borrowing. Neither Portfolio may borrow money, except that a
Portfolio may (i) borrow money from banks for temporary or emergency
purposes and not for leveraging or investment and (ii) enter into reverse
repurchase transactions for any purpose; provided that (i) and (ii) in
combination do not exceed 33-1/3% of the value of its total assets
(including the amount borrowed) less liabilities (other than borrowings).
If at any time borrowings exceed 33-1/3% of the value of a Portfolio's
total assets, 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. Neuberger & Berman Municipal Money Portfolio
may not purchase commodities or contracts thereon, except that it may
purchase the securities of issuers that own interests in any of the
foregoing. Neuberger & Berman Municipal Securities 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 Neuberger & Berman Municipal Securities 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.
B-6
<PAGE>
3. Diversification. Neither Portfolio may, with respect to 75%
of the value of its total assets, purchase the securities of any issuer
(other than U.S. Government and Agency Securities) if, as a result,
(i) more than 5% of the value of the Portfolio's total assets would be
invested in the securities of that issuer or (ii) the Portfolio would hold
more than 10% of the outstanding voting securities of that issuer.
4. Industry Concentration. Neither Portfolio may invest 25% or
more of its total assets in the securities of issuers having their
principal business activities in the same industry, except that this
limitation does not apply to (i) U.S. Government and Agency Securities,
(ii) municipal securities, or (iii) CDs or bankers' acceptances issued by
domestic banks.
5. Lending. Neither Portfolio may lend any securities 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 and
(ii) by engaging in repurchase agreements.
6. Real Estate. Neither Portfolio may purchase real estate
unless acquired as a result of the ownership of securities or instruments,
but this restriction shall not prohibit a Portfolio from purchasing
securities issued by entities or investment vehicles that own or deal in
real estate or interests therein, or instruments secured by real estate or
interests therein.
7. Senior Securities. Neither Portfolio may issue senior
securities, except as permitted under the 1940 Act.
8. Underwriting. Neither Portfolio may underwrite securities of
other issuers, except to the extent that a Portfolio, in disposing of
portfolio securities, may be deemed to be an underwriter within the
meaning of the 1933 Act.
The non-fundamental investment policies and limitations of
Neuberger & Berman Municipal Money and Neuberger & Berman Municipal
Securities Portfolios are as follows:
1. Geographic Concentration. Neither Portfolio will invest 25%
or more of its total assets in securities issued by governmental units
located in any one state, territory, or possession of the United States
(but this limitation does not apply to project notes backed by the full
faith and credit of the United States).
2. Illiquid Securities. Neither Portfolio may purchase any
security if, as a result, more than 10% 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
B-7
<PAGE>
securities, such as repurchase agreements maturing in more than seven
days.
3. Unseasoned Issuers. Neither Portfolio currently intends to
purchase the securities of any issuer (other than securities issued or
guaranteed by domestic or foreign governments or political subdivisions
thereof) if, as a result, more than 5% of a Portfolio's total assets would
be invested in the securities of business enterprises that, including
predecessors, have a record of less than three years of continuous
operation. This restriction does not apply to asset-backed securities.
4. Ownership of Portfolio Securities by Officers and
Trustees. Neither Portfolio may purchase or retain the securities of any
issuer if, to the knowledge of N&B Management, those officers and trustees
of the Trust, and officers and directors of N&B Management who each owns
individually more than 1/2 of 1% of the outstanding securities of such
issuer, together own more than 5% of such securities.
5. Investments in Other Investment Companies. Neither Portfolio
may purchase securities of other investment companies, except to the
extent permitted by the 1940 Act and in the open market at no more than
customary brokerage commission rates. This limitation does not apply to
securities received or acquired as dividends, through offers of exchange,
or as a result of a reorganization, consolidation, or merger.
6. Oil and Gas Programs. Neither Portfolio may invest in
participations or other direct interests in oil, gas, or other mineral
exploration or development programs or leases.
7. Borrowing. Neither Portfolio may purchase securities if
outstanding borrowings, including any reverse repurchase agreements,
exceed 5% of its total assets.
8. Lending. Except for the purchase of debt securities and
engaging in repurchase agreements, neither Portfolio may make any loans
other than securities loans.
9. Margin Transactions. Neither Portfolio may purchase
securities on margin from brokers or other lenders, except that a
Portfolio may obtain such short-term credits as are necessary for the
clearance of securities transactions. For Neuberger & Berman Municipal
Securities Portfolio, margin payments in connection with transactions in
futures contracts and options on futures contracts shall not constitute
the purchase of securities on margin and shall not be deemed to violate
the foregoing limitation.
10. Short Sales. Neither Portfolio may sell securities short,
unless it owns, or has the right to obtain without payment of additional
consideration, securities equivalent in kind and amount to the securities
sold. For Neuberger & Berman Municipal Securities Portfolio, transactions
in futures contracts and options shall not constitute selling securities
short.
B-8
<PAGE>
11. Puts, Calls, Straddles, or Spreads. Neither Portfolio may
invest in puts, calls, straddles, spreads, or any combination thereof,
except that a Portfolio may purchase securities with rights to put the
securities to the seller in accordance with its investment program, and
Neuberger & Berman Municipal Securities Portfolio may purchase options on
interest-rate futures contracts. Neuberger & Berman Municipal Securities
Portfolio does not construe the foregoing limitation to preclude it from
purchasing or selling options on futures contracts, and neither Portfolio
construes the limitation to preclude it from purchasing securities with
rights to put the security to the issuer or a guarantor.
12. Real Estate Limited Partnerships. Neither Portfolio may
invest in real estate limited partnerships.
The fundamental investment policies and limitations of
Neuberger & Berman New York Insured Intermediate Portfolio 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 transactions for any purpose; 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. 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 U.S. Government and Agency Securities. State and local
governments, their agencies and instrumentalities, including multi-state
agencies, are not considered part of any "industry."
4. 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 debt securities and (ii) by engaging in repurchase
agreements.
B-9
<PAGE>
5. 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.
6. Senior Securities. The Portfolio may not issue senior
securities, except as permitted under the 1940 Act.
7. Underwriting. The Portfolio may not engage in the
business of underwriting 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 1933 Act.
The non-fundamental investment policies and limitations of
Neuberger & Berman New York Insured Intermediate Portfolio are as follows:
1. Diversification. At the close of each quarter of the
Portfolio's taxable year, (i) not more than 25% of its total assets may be
invested in the securities of a single issuer and (ii) with regard to at
least 50% of its total assets, not more than 5% of its total assets will
be invested in the securities of a single issuer. These limitations do
not apply to U.S. Government and Agency Securities.
2. Illiquid Securities. The Portfolio may not purchase any
security if, as a result, more than 10% 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.
3. Unseasoned Issuers. The Portfolio currently does not
intend to purchase the securities of any issuer (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof) if, as a result, more than 5% of the Portfolio's
total assets would be invested in the securities of business enterprises
that, including predecessors, have a record of less than three years of
continuous operation. This restriction does not apply to asset-backed
securities.
4. Ownership of Portfolio Securities by Officers and
Trustees. The Portfolio may not purchase or retain the securities of any
issuer if, to the knowledge of N&B Management, those officers and trustees
of the Trust, and officers and directors of N&B Management who each owns
individually more than 1/2 of 1% of the outstanding securities of such
issuer, together own more than 5% of such securities.
5. Investments in Other Investment Companies. The Portfolio
may not purchase securities of other investment companies, except to the
extent permitted by the 1940 Act and in the open market at no more than
B-10
<PAGE>
customary brokerage commission rates. This limitation does not apply to
securities received or acquired as dividends, through offers of exchange,
or as a result of a reorganization, consolidation, or merger.
6. Oil and Gas Programs. The Portfolio may not invest in
participations or other direct interests in oil, gas, or other mineral
exploration or development programs or leases.
7. Borrowing. The Portfolio may not purchase securities if
outstanding borrowings, including any reverse repurchase agreements,
exceed 5% of its total assets.
8. Lending. Except for the purchase of debt securities and
engaging in repurchase agreements, the Portfolio may not make any loans
other than securities loans.
9. 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.
10. Short Sales. The Portfolio may not sell securities
short, unless it owns, or has the right to obtain without payment of
additional consideration, securities equivalent in kind and amount to the
securities sold. Transactions in futures contacts and options shall not
constitute selling securities short.
11. Real Estate Limited Partnerships. The Portfolio may not
invest in real estate limited partnerships.
Rating Agencies; Ratings of Corporate Debt Securities and Commercial Paper
(All Fixed Income Portfolios)
-------------------------------------------------------------------------
As discussed in Part A, the Portfolios may purchase securities
rated by Standard & Poor's ("S&P"), Moody's Investors Service, Inc.
("Moody's"), or any other nationally recognized statistical rating
organization ("NRSRO"). The ratings of an NRSRO represent its opinion as
to the quality of securities it undertakes to rate. Ratings are not
absolute standards of quality; consequently, securities with the same
maturity, duration, coupon, and rating may have different yields. Among
the NRSROs, the Portfolios rely primarily on ratings assigned by S&P and
Moody's, which are described below.
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.
B-11
<PAGE>
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 in higher rated
categories.
BB, B - Bonds rated BB or B 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. While these bonds will likely
have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
BB - Bonds rated BB have less near-term vulnerability to default
than other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely interest
and principal payments. The BB rating category is used for debt
subordinated to senior debt that is assigned an actual or implied BBB-
rating.
B - Bonds rated B have a greater vulnerability to default but
currently have the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will
likely impair capacity or willingness to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BB or BB- rating.
Plus (+) or Minus (-) - The ratings above may be modified by the
addition of a plus or minus sign to show relative standing within major
categories.
Moody's corporate bond ratings:
------------------------------
Aaa - Bonds rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or
exceptionally stable margin, and principal is secure. Although the
various protective elements are likely to change, such changes that can be
visualized are most unlikely to impair the fundamentally strong position
of such issuer.
B-12
<PAGE>
Aa - Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as "high-grade bonds." They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa-rated
securities, fluctuation of protective elements may be of greater
amplitude, or there may be other elements present that make the long-term
risks appear somewhat larger than in Aaa-rated securities.
A - Bonds rated A possess many favorable investment attributes
and are considered to be upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present that suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. These bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Modifiers - Moody's may apply numerical modifiers 1, 2, and 3 in
each generic rating classification described above. The modifier 1
indicates that the company ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the company ranks in the lower end of its generic rating
category.
S&P commercial paper ratings:
----------------------------
A-1 - This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+).
A-2 - This designation denotes satisfactory capacity for timely
payment. However, the relative degree of safety is not as high as for
issues designated A-1.
B-13
<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.
Issuers rated Prime-2 (or related supporting institutions), also
known as P-2, have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Investment Programs of Both Neuberger & Berman Municipal Money Portfolio
and Neuberger & Berman Municipal Securities Portfolio.
-----------------------------------------------------------------------
Neuberger & Berman Municipal Money Portfolio and Neuberger &
Berman Municipal Securities Portfolio invest in municipal obligations
which are issued by or on behalf of states (as used herein, including the
District of Columbia), territories, and possessions of the United States
and their political subdivisions, agencies, and instrumentalities, and
which pay interest that is exempt from federal income tax.
Ordinarily, Neuberger & Berman Municipal Money Portfolio invests
only in high-quality municipal obligations with remaining maturities of
397 days or less. Neuberger & Berman Municipal Securities Portfolio, as a
fundamental policy, invests at least 80%, and intends to invest
substantially all, of its total assets in municipal obligations. Each
Portfolio, however, temporarily may invest any part of its total assets in
taxable securities to maintain a "defensive" posture when, in
N&B Management's opinion, market conditions warrant. See "Additional
Investment Information -- Investment in Taxable Securities."
B-14
<PAGE>
Investment Program of Neuberger & Berman Municipal Securities Portfolio.
-----------------------------------------------------------------------
Neuberger & Berman Municipal Securities Portfolio invests in
(1) municipal bonds, notes, and instruments receiving any of the three
highest ratings assigned by S&P, Moody's, or any other NRSRO, (2) unrated
municipal obligations that N&B Management determines are of comparable
quality to rated municipal obligations of the same type in which the
Portfolio may invest, and (3) municipal obligations backed by the full
faith and credit of the United States. During periods of rising or
falling interest rates, the Portfolio may seek to hedge all or part of its
portfolio against related changes in securities prices by buying or
selling interest-rate futures contracts (with bond index futures
contracts, "Futures" or "Futures Contracts") and options thereon. See
"Additional Investment Information -- Futures Contracts and Options
Thereon (Neuberger & Berman Municipal Securities Portfolio)."
The dollar-weighted average duration of the Portfolio's
investment portfolio will not exceed ten years. Futures, options and
options on futures have durations which are generally related to the
duration of the securities underlying them. There are some situations
where even the standard duration calculation does not properly reflect the
interest rate exposure of a security. For example, variable or floating
rate securities often have final maturities of ten or more years;
however, their interest rate exposure corresponds to the frequency of the
coupon reset. See "Additional Investment Information -- Variable or
Floating Rate Securities; Demand and Put Features." In this and other
similar situations, N&B Management, where permitted, will use more
sophisticated analytical techniques that incorporate the economic life of
a security into the determination of its interest rate exposure.
Investment Program of Neuberger & Berman New York Insured Intermediate
Portfolio
----------------------------------------------------------------------
Generally, Neuberger & Berman New York Insured Intermediate
Portfolio invests at least 65% of its total assets in (1) municipal
obligations issued by the State of New York, its authorities, multi-state
authorities, municipalities, counties, and any other political
subdivisions (including New York City), or (2) municipal obligations
issued by territories or possessions of the U.S., such as the Virgin
Islands, Guam, and Puerto Rico, that are exempt from federal income tax
and New York State and New York City personal income taxes (collectively,
"New York Municipal Securities") and that are insured as to the timely
payment of principal and interest by private insurance companies having
the highest rating available from S&P, Moody's or any other NRSRO at the
time of purchase ("Municipal Bond Insurance"). The Portfolio invests the
remainder, up to 35% of its total assets, in (1) uninsured New York
Municipal Securities that receive any of the four highest ratings assigned
by at least one NRSRO, (2) unrated municipal obligations that N&B
Management determines are of comparable quality to the rated municipal
obligations of the same type in which the Portfolio may invest and (3)
other instruments described in Part A. During seasonal variations or
other shortages in the supply of suitable New York Municipal Securities or
B-15
<PAGE>
when, in N&B Management's opinion, market conditions warrant, the
Portfolio may invest in municipal securities which are exempt from federal
income tax, but not New York State and New York City personal income
taxes, or may invest in high-quality taxable U.S. Government obligations.
See "Additional Investment Information-Investment in Taxable Securities."
However, as a fundamental policy, the Portfolio will, under normal
conditions, invest at least 80% of its total assets in municipal
obligations. The Portfolio may invest the remaining 20% in non-municipal
securities, including U.S. Government and Agency Securities, bank
obligations, repurchase agreements, securities loans, commercial paper
receiving the highest rating from S&P or Moody's, put and call options,
and futures and options on futures.
For temporary defensive purposes only, the Portfolio may invest
up to 100% of its total assets in cash that is not earning interest and in
U.S. Government and Agency Securities, the interest on which may be
subject to federal income tax, and New York State and New York City
personal income taxes. During periods of rising or falling interest
rates, the Portfolio also may seek to hedge all or part of its portfolio
against related changes in securities prices by buying or selling Futures
Contracts and options thereon. See "Additional Investment Information --
Futures Contracts and Options Thereon."
The dollar-weighted average duration of the Portfolio's
investment portfolio will not exceed ten years. Futures, options and
options on futures have durations which are generally related to the
duration of the securities underlying them. There are some situations
where even the standard duration calculation does not properly reflect the
interest rate exposure of a security. For example, variable or floating
rate securities often have final maturities of ten or more years;
however, their interest rate exposure corresponds to the frequency of the
coupon reset. See "Additional Investment Information -- Variable or
Floating Rate Securities; Demand and Put Features." In this and other
similar situations, N&B Management, where permitted, will use more
sophisticated analytical techniques that incorporate the economic life of
a security into the determination of its interest rate exposure.
Investment Approach of Neuberger & Berman Municipal Securities
Portfolio and Neuberger & Berman New York Insured Intermediate Portfolio.
Neuberger & Berman Municipal Securities Portfolio and New York Insured
Intermediate Portfolio are managed in accordance with an investment
approach developed by their sub-adviser, Neuberger & Berman, L.P.
("Neuberger & Berman"), and currently used by that firm in managing
taxable and tax-exempt fixed income portfolios with an aggregate value of
approximately $11.1 billion. In the tax-exempt area, the approach is
based, in part, on market studies that compared the yield and price
volatility of municipal obligations having maturities of five to ten years
with the yield and price volatility of long-term municipal bonds --
securities having maturities of thirty years. The studies show that
municipal obligations with maturities of five to ten years have generally
produced from 80% to 90% of the yield but have been subject to only one-
half to two-thirds of the price volatility of 30-year municipal bonds.
B-16
<PAGE>
The average duration of each Portfolio is actively managed and may not
exceed ten years.
Municipal Bond Insurance (Neuberger & Berman New York Insured
Intermediate Portfolio). Neuberger & Berman New York Insured Intermediate
Portfolio will purchase insured bonds only if, at the time of purchase,
they have the highest credit rating available from an NRSRO. For an
insured bond to receive the highest credit rating, an NRSRO must rate the
claims-paying ability or financial strength of the insurance company in
the highest category. There is, of course, no guarantee that the
insurance company will continue to receive the highest credit rating or
that it will be able to meet its obligation to the Portfolio. See
Appendix A for a summary of the highest ratings of Municipal Bond
Insurance companies by S&P and Moody's.
The Municipal Bond Insurance covering the New York Municipal
Securities purchased by the Portfolio may be either new issue insurance
("New Issue Insurance") or secondary insurance ("Secondary Insurance").
New Issue Insurance is purchased by the issuer of the municipal security
at the time of the original issuance of such security. Secondary
Insurance may be purchased by the selling broker, a prior investor or the
Portfolio after the municipal security is issued. Generally, the
Portfolio expects to purchase New York Municipal Securities that have been
insured by a prior party.
The Portfolio may purchase bonds insured by AMBAC Indemnity
Corporation ("AMBAC"), Municipal Bond Investors Assurance Corporation
("MBIA Corp."), Financial Guaranty Insurance Company ("FGIC"), or any
other insurance company that has received the highest credit rating from
at least one NRSRO. The Portfolio may invest more than 25% of its assets
in bonds insured by the same insurance company. AMBAC, FGIC and MBIA
Corp. collectively hold a market share in excess of 90% of the Municipal
Bond Insurance market.
AMBAC is a wholly-owned subsidiary of AMBAC Inc. and is licensed
to do insurance business in all 50 states, the District of Columbia, and
Puerto Rico. AMBAC is the successor to the business of the oldest
Municipal Bond Insurance company, which wrote the first Municipal Bond
Insurance policy in 1971. According to its shareholder or other reports,
AMBAC is a Wisconsin-domiciled stock insurance corporation with admitted
assets of approximately $2,060,000,000 (unaudited) and statutory capital
of approximately $1,178,000,000 (unaudited) as of June 30, 1994.
Statutory capital consists of AMBAC Indemnity's policyholders' surplus and
statutory contingency reserve. AMBAC primarily provides New Issue
Insurance.
MBIA Corp. is a wholly-owned subsidiary of MBIA Inc. and is
licensed to do insurance business in all 50 states, the District of
Columbia, Guam, the Northern Mariana Islands, the U.S. Virgin Islands, and
Puerto Rico. MBIA Corp. primarily provides New Issue Insurance and
Secondary Insurance. It also provides surety bonds for debt service
reserve funds. MBIA Corp. also insures other types of obligations, such
B-17
<PAGE>
as asset-backed securities, debt of investor-owned utilities and municipal
deposits in approved financial institutions. According to its shareholder
or other reports, as of September 30, 1995 MBIA Corp. had admitted assets
of $3.7 billion (unaudited), total liabilities of $2.5 billion
(unaudited), and total capital and surplus of 1.2 billion (unaudited)
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities. According to its
shareholder or other reports, as of December 31, 1994, MBIA Corp. had
admitted assets of $3.4 billion (audited), total liabilities of $2.3
billion (audited), and total capital and surplus of $1.1 billion (audited)
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities.
FGIC is a wholly-owned subsidiary of FGIC Corporation, which is a
wholly-owned subsidiary of General Electric Capital Corporation. FGIC
writes New Issue Insurance and Secondary Insurance on bonds held in unit
investment trusts and mutual funds. FGIC also guarantees certain
structured debt issues in the taxable market. According to its
shareholder or other reports, as of June 30, 1994, the total capital and
surplus of FGIC was approximately $850,000,000. Approximately 90% of the
business written to date by FGIC has been Municipal Bond Insurance.
Ratings of Municipal Obligations (Neuberger & Berman Municipal Securities,
Neuberger & Berman Municipal Money, and Neuberger & Berman New York
Insured Intermediate Portfolios)
-------------------------------------------------------------------------
S&P and Moody's commercial paper: See S&P and Moody's commercial
paper ratings above.
S&P and Moody's municipal bond ratings: See S&P and Moody's
corporate bond ratings above.
S&P municipal note ratings:
--------------------------
SP-1 - This designation denotes very strong or strong capacity to
pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given a plus (+) designation.
SP-2 - This designation denotes satisfactory capacity to pay
principal and interest.
SP-3 - This designation denotes speculative capacity to pay
principal and interest.
Moody's municipal note ratings:
------------------------------
MIG 1/VMIG 1 - This designation denotes best quality. There is
present strong protection by established cash flows, superior liquidity
support, or demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2 - This designation denotes high quality. Margins of
protection are ample, although not so large as in the preceding group.
B-18
<PAGE>
MIG 3/VMIG 3 - This designation denotes favorable quality. All
security elements are accounted for, but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may
be narrow, and market access for refinancing is likely to be less well
established.
MIG 4/VMIG 4 - This designation denotes adequate quality,
carrying specific risk but having protection and not distinctly or
predominantly speculative.
The designation VMIG indicates a variable rate demand note.
S&P commercial paper ratings:
----------------------------
A-1 - This highest category indicates that the degree of safety
regarding timely payment is strong. Those issuers determined to possess
extremely strong safety characteristics are denoted with a plus sign (+).
A-2 - This designation denotes satisfactory capacity for timely
payment. However, the relative degree of safety is not as high as for
issues designated A-1.
Moody's commercial paper ratings:
--------------------------------
Issuers rated Prime-1 (or related supporting institutions), also
known as P-1, have a superior capacity for repayment of short-term promis-
sory obligations. Prime-1 repayment capacity will normally be evidenced
by the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions), also
known as P-2, have a strong capacity for repayment of short-term promis-
sory obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
B-19
<PAGE>
S&P Claims-Paying Ability Ratings of Insurance Companies:
--------------------------------------------------------
AAA - Insurers rated AAA offer superior financial security on
both an absolute and relative basis. They possess the highest safety and
have an overwhelming capacity to meet policyholder obligations.
Moody's Financial Strength Ratings of Insurance Companies:
---------------------------------------------------------
Aaa - Insurers rated Aaa offer exceptional financial security.
While the financial strength of these companies is likely to change, such
changes as can be visualized are most unlikely to impair their
fundamentally strong position.
Risks of Fixed Income Securities (All Fixed Income Portfolios and
Neuberger & Berman New York Insured Intermediate Portfolio)
-----------------------------------------------------------------
Fixed income securities are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations
("credit risk") and are subject to price volatility due to such factors as
interest rate sensitivity, market perception of the creditworthiness of
the issuer, and general market liquidity ("market risk"). Lower-rated
securities are more likely to react to developments affecting market and
credit risk than are more highly rated securities, which react primarily
to movements in the general level of interest rates. Neuberger&Berman
Limited Maturity Bond Portfolio may invest up to 10% of its net assets in
fixed income securities that are rated below investment grade, i.e., rated
below Baa by Moody's or BBB by S&P, but rated at least B (or, if unrated,
determined by N&B Management to be of comparable quality). Securities
rated below investment grade are described as "speculative" by both
Moody's and S&P. Moody's also deems securities rated Baa to have
speculative characteristics. Securities rated B are judged to be
predominantly speculative with respect to their capacity to pay interest
and repay principal in accordance with the terms of the obligations.
Changes in economic conditions or developments regarding the
individual issuer are more likely to cause price volatility and weaken the
capacity of the issuer of such securities to make principal and interest
payments than is the case for higher-grade debt securities. An economic
downturn affecting the issuer may result in an increased incidence of
default. The market for lower-rated securities may be thinner and less
active than for higher-rated securities. Pricing of thinly traded
securities requires greater judgment than pricing of securities for which
market transactions are regularly reported.
Subsequent to its purchase by a Portfolio, an issue of debt
securities may cease to be rated or its rating may be reduced, so that the
securities would not be eligible for purchase by that Portfolio. In such
a case with respect to the non-money market Portfolios, N&B Management
will engage in an orderly disposition of the downgraded securities to the
extent necessary to ensure that the Portfolio's holdings of such
securities will not exceed 5% of its net assets. With respect to
Neuberger & Berman Government Money Portfolio, Neuberger & Berman Cash
B-20
<PAGE>
Reserves Portfolio, and Neuberger & Berman Municipal Money Portfolio, N&B
Management will consider the need to dispose of such securities in
accordance with Rule 2a-7 under the 1940 Act.
Additional Investment Information
(Fixed Income Portfolios and Neuberger
& Berman New York Insured Intermediate Portfolio)
Some or all of these Portfolios, as indicated below, may make the
following investments, among others, although they may not buy all of the
types of securities or use all of the investment techniques that are
described.
Repurchase Agreements (All Portfolios except Neuberger & Berman
Government Money Portfolio). Repurchase agreements are agreements under
which a Portfolio purchases securities from a bank that is a member of the
Federal Reserve System or from a securities dealer that agrees to
repurchase the securities from the Portfolio at a higher price on a
designated future date. Repurchase agreements generally are for a short
period of time, usually less than a week. No Portfolio may enter into a
repurchase agreement with a maturity of more than seven days if, as a
result, more than 10% of the value of its net assets would then be
invested in such repurchase agreements and other illiquid securities. A
Portfolio may enter into a repurchase agreement only if (1) the underlying
securities are of the type (excluding maturity 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 value of the
repurchase agreement, 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 (All Portfolios except Neuberger & Berman
Government Money Portfolio). In order to realize income, the Portfolios
may lend portfolio securities with a value not exceeding 33-1/3% of its
total assets to banks, brokerage firms, or institutional investors judged
creditworthy by N&B Management. Borrowers are required continuously to
secure their obligations to return securities on loan from the Portfolio
by depositing collateral in a form determined to be satisfactory by the
Trustees. The collateral, which must be marked to market daily, must be
equal to at least 100% of the market value of the loaned securities, which
will also be marked to market daily. N&B Management believes the risk of
loss on these transactions is slight because, if a borrower were to
default for any reason, the collateral should satisfy the obligation.
However, as with other extensions of secured credit, loans of portfolio
securities involve some risk of loss of rights in the collateral should
the borrower fail financially.
Restricted Securities and Rule 144A Securities (All Portfolios
except Neuberger & Berman Government Money Portfolio). The Portfolios may
invest in restricted securities, which are securities that may not be sold
B-21
<PAGE>
to the public without an effective registration statement under the
1933 Act or, if they are unregistered, 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 trad-
ing among institutional investors by permitting the sale of certain
unregistered securities to qualified institutional buyers. To the extent
privately placed securities held by a Portfolio qualify under Rule 144A,
and an institutional market develops for those securities, the Portfolio
likely will be able to dispose of the securities without registering them
under the 1933 Act. To the extent that institutional buyers become, for a
time, uninterested in purchasing these securities, investing in Rule 144A
securities could increase the level of a Portfolio's illiquidity. N&B -
Management, acting under guidelines established by the Trustees, may
determine that certain securities qualified for trading under Rule 144A
are liquid. Foreign securities that can be freely sold in the markets in
which they are principally traded are not considered to be restricted.
Regulation S under the 1933 Act permits the sale abroad of securities that
are not registered for sale in the United States.
Where registration is required, a Portfolio may be obligated to
pay all or part of the registration expenses, and a considerable period
may elapse between the decision to sell and the time the Portfolio may be
permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, the
Portfolio might obtain a less favorable price than prevailed when it
decided to sell. To the extent privately placed securities, including
Rule 144A securities, are illiquid, purchases thereof will be subject to
each Portfolio's 10% limit on investments in illiquid securities.
Restricted securities for which no market exists are priced at fair value
as determined in accordance with procedures approved and periodically
reviewed by the Trustees.
Commercial Paper. (All Portfolios except Neuberger & Berman
Government Money Portfolio). Commercial paper is a short-term debt
security issued by a corporation, bank, municipality or other issuer for
purposes such as financing current operations. Each Portfolio may invest
only in commercial paper receiving the highest rating from S&P (A-1) or
Moody's (P-1), or deemed by N&B Management to be of equivalent quality.
Each Portfolio may invest in commercial paper that cannot be
resold to the public without an effective registration statement under the
1933 Act. While restricted commercial paper normally is deemed illiquid,
N&B Management may in certain cases determine that such paper is liquid,
pursuant to guidelines established by the Trustees.
Reverse Repurchase Agreements (All Fixed Income Portfolios,
except Neuberger & Berman Government Money Portfolio). In a reverse
repurchase agreement, a Portfolio sells portfolio securities subject to
its agreement to repurchase the securities at a later date for a fixed
B-22
<PAGE>
price reflecting a market rate of interest; these agreements are
considered borrowings for purposes of the Portfolios' investment policies
and limitations concerning borrowings. While a reverse repurchase
agreement is outstanding, a Portfolio will maintain with its custodian in
a segregated account cash, U.S. Government or Agency Securities, or other
liquid, high-grade debt securities, marked to market daily, in an amount
at least equal to the Portfolio's obligations under the agreement. There
is a risk that the contra-party to a reverse repurchase agreement will be
unable or unwilling to complete the transaction as scheduled, which may
result in losses to the Portfolio.
Banking and Savings Institution Securities (All Fixed Income
Portfolios, except Neuberger & Berman Government Money Portfolio). The
Portfolios may invest in banking and savings institution obligations,
which include CDs, time deposits, bankers' acceptances, and other short-
term debt obligations issued by commercial banks and savings institutions.
CDs are receipts for funds deposited for a specified period of time at a
specified rate of return; time deposits generally are similar to CDs, but
are uncertificated. Bankers' acceptances are time drafts drawn on
commercial banks by borrowers, usually in connection with international
commercial transactions. The CDs, time deposits, and bankers' acceptances
in which the Portfolios invest typically are not covered by deposit
insurance.
The Portfolios may invest in securities issued by a commercial
bank or savings institution only if (1) the bank or institution has total
assets of at least $1,000,000,000, (2) the bank or institution is on
N&B Management's approved list, (3) in the case of a U.S. bank or
institution, its deposits are insured by the Federal Deposit Insurance
Corporation, and (4) in the case of a foreign bank or institution, the
securities are, in N&B Management's opinion, of an investment quality
comparable with other debt securities that may be purchased by the
Portfolio. These limitations do not prohibit investments in securities
issued by foreign branches of U.S. banks that meet the foregoing
requirements. These Portfolios do not currently intend to invest in any
security issued by a foreign savings institution.
Variable or Floating Rate Securities; Demand and Put Features
(All Fixed Income Portfolios except Neuberger & Berman Government Money
Portfolio). 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 index changes. The
interest rate on variable and floating rate securities (collectively,
"Variable Rate Securities") ordinarily is determined by reference to a
particular bank's prime rate, the 90-day U.S. Treasury Bill rate, the rate
of return on commercial paper or bank CDs, an index of short-term tax-
exempt rates, or some other objective measure.
The Variable Rate Securities in which the Portfolios invest
frequently permit the holder to demand payment of the obligations'
principal and accrued interest at any time or at specified intervals not
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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, the Variable Rate Securities might not meet the Portfolios'
quality standards Accordingly, in purchasing these securities, each
Portfolio relies primarily on the creditworthiness of the credit
instrument issuer or the insurer. A Portfolio may not invest more than 5%
of its total assets in securities backed by credit instruments from any
one issuer or by insurance from any one insurer (excluding securities that
do not rely on the credit instrument or insurance for their rating, i.e.,
stand on their own credit).
A Portfolio can also buy fixed rate securities accompanied by a
demand feature or by a put option, which permits the Portfolio to sell the
security to the issuer or third party at a specified price. A Portfolio
may rely on the creditworthiness of issuers of puts in purchasing these
securities.
In calculating its maturity or duration, each Portfolio is
permitted to treat certain Variable Rate Securities as maturing on a date
prior to the date on which the final repayment of principal is due to be
made. In applying such maturity shortening devices, N&B Management
considers whether the interest rate reset is expected to cause the
security to trade at approximately its par value.
Mortgage-Backed Securities (All Fixed Income Portfolios, except
Neuberger & Berman Government Money Portfolio). Mortgage-backed securi-
ties 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 (though not necessarily
backed by the full faith and credit of the United States), such as the
Government National Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA"), and the Federal Home Loan Mortgage Corpora-
tion ("FHLMC"), or may be issued by private issuers.
Mortgage-backed securities may be issued in the form of
collateralized mortgage obligations ("CMOs") or mortgage-backed bonds.
CMOs are obligations fully collateralized directly or indirectly by a pool
of mortgages; payments of principal and interest on the mortgages are
passed through to the holders of the CMOs, although not necessarily on a
pro rata basis, on the same schedule as they are received. Mortgage-
backed bonds are general obligations of the issuer 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
of a CMO but not that of a mortgage-backed bond (although, like many
bonds, mortgage-backed bonds may be callable by the issuer prior to
maturity).
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Governmental, government-related, and private entities may create
mortgage loan pools to back mortgage pass-through and mortgage-
collateralized investments. Commercial banks, savings institutions,
private mortgage insurance companies, mortgage bankers, and other
secondary market issuers, including securities broker-dealers and special
purpose entities (which generally are affiliates of the foregoing estab-
lished to issue such securities), also create pass-through pools of
residential mortgage loans. 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 government 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 the mortgage poolers
issue these forms of insurance and guarantees. Such insurance and
guarantees, as well as the creditworthiness of the issuers thereof, are
considered in determining whether a mortgage-backed security meets a
Portfolio's investment quality standards. There can be no assurance that
the private insurers or guarantors can meet their obligations under the
insurance policies or guarantee arrangements.
A Portfolio may buy mortgage-backed securities without insurance
or guarantees, if N&B Management determines that the securities meet the
Portfolio's quality standards. A Portfolio may not purchase mortgage-
backed securities or any other assets that, in N&B Management's opinion,
are illiquid if, as a result, more than 10% of the value of the
Portfolio's net assets would be illiquid. N&B Management will, consistent
with the Portfolios' investment objective, policies and limitations and
quality standards, consider making investments in new types of mortgage-
backed securities as such securities are developed and offered to
investors.
Because many mortgages are repaid early, the actual maturity and
duration of mortgage-backed securities are typically shorter than their
stated final maturity and their duration calculated solely on the basis of
the stated life and payment schedule. In calculating its maturity and
duration, a Portfolio may apply certain industry conventions regarding the
maturity and duration of mortgage-backed instruments.
Asset-Backed Securities (All Fixed Income Portfolios, except
Neuberger & Berman Government Money Portfolio). The Portfolios may
purchase asset-backed securities, including commercial paper. Asset-
backed securities represent direct or indirect participations in, or are
secured by and payable from, pools of assets such as motor vehicle
installment sales contracts, installment loan contracts, leases of various
types of real and personal property, and receivables from revolving credit
(credit card) agreements. These assets are securitized through the use of
trusts and special purpose corporations. Credit enhancements, such as
various forms of cash collateral accounts or letters of credit, may
support payments or distributions of principal and interest on asset-
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backed securities. Like mortgage-backed securities, asset-backed
securities are subject to the risk of prepayment. The risk that recovery
on repossessed collateral might be unavailable or inadequate to support
payments, however, is greater for asset-backed securities than for
mortgage-backed securities.
Certificates for Automobile Receivables ("CARS ") represent
undivided fractional interests in a trust whose assets consist of a pool
of motor vehicle retail installment sales contracts and security interests
in the vehicles securing those contracts. Payments of principal and
interest on the underlying contracts are "passed-through" monthly to
certificate holders and are guaranteed up to specified amounts by a letter
of credit issued by a financial institution unaffiliated with the trustee
or originator of the Trust. Underlying installment sales contracts are
subject to prepayment, which may reduce the overall return to certificate
holders. Certificate holders also may experience delays in payment or
losses on CARS if the Trust does not realize the full amounts due on
underlying installment sales contracts because of unanticipated legal or
administrative costs of enforcing the contracts; depreciation, damage, or
loss of the vehicles securing the contracts; or other factors.
Credit card receivable securities are backed by receivables from
revolving credit card agreements ("Accounts"). Credit balances on
Accounts are generally paid down more rapidly than are automobile
contracts. Most of the credit card receivable securities issued publicly
to date have been pass-through certificates. In order to lengthen their
maturity or duration, most such securities provide for a fixed period
during which only interest payments on the underlying Accounts are passed
through to the security holder; principal payments received on the
Accounts are used to fund the transfer of additional credit card charges
made on the Accounts to the pool of assets supporting the securities.
Usually, the initial fixed period may be shortened if specified events
occur signalling 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 nondeductibility 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 most other
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asset-backed securities, Accounts are unsecured obligations of the
cardholder.
When-Issued Transactions (Neuberger & Berman Ultra Short Bond
Portfolio, Neuberger & Berman Limited Maturity Bond Portfolio, and
Neuberger & Berman New York Insured Intermediate Portfolio). The
Portfolios may purchase securities (including mortgage-backed securities
such as GNMA, FNMA, and FHLMC certificates) on a when-issued basis, that
is, by committing to purchase securities (to secure an advantageous price
and yield at the time of the commitment) and complete the purchase by
making payment against delivery of the securities at a future date. When
a Portfolio purchases securities on a when-issued basis, it will maintain
in a segregated account with its custodian, until payment is made, cash,
U.S. Government and Agency Securities, or other liquid, high-grade debt
securities having an aggregate market value (determined daily) at least
equal to the amount of its purchase commitments.
U.S. Dollar-Denominated Foreign Debt Securities (All Fixed Income
Portfolios, except Neuberger & Berman Government Money Portfolio). The
Portfolios may invest in U.S. dollar-denominated debt securities issued by
foreign issuers (including banks, governments and quasi-governmental
organizations) and foreign branches of U.S. banks, including negotiable
CDs, bankers' acceptances and commercial paper. These investments are
subject to each Portfolio's quality, maturity, and duration standards.
While investments in foreign securities are intended to reduce risk by
providing further diversification, such investments involve sovereign and
other risks, in addition to the credit and market risks normally
associated with domestic securities. These additional risks include the
possibility of adverse political and economic developments (including
political instability) and the potentially adverse effects of
unavailability of public information regarding issuers, less governmental
supervision and regulation of financial markets, reduced liquidity of
certain financial markets, and the lack of uniform accounting, auditing,
and financial standards or the application of standards that are different
or less stringent than those applied in the United States.
Foreign Currency Denominated Foreign Securities (Neuberger &
Berman Limited Maturity Bond Portfolio). The Portfolio may invest in debt
or other income-producing securities (of issuers in countries whose
governments are considered stable by N&B Management) that are denominated
in or indexed to foreign currencies, including (1) CDs, commercial paper,
fixed time deposits, and bankers' acceptances issued by foreign banks,
(2) obligations of other corporations, and (3) obligations of foreign
governments or their subdivisions, agencies, and instrumentalities,
international agencies, and supranational entities. Investing in foreign
currency denominated securities includes the special risks associated with
investing in non-U.S. issuers described in the preceding section and the
additional risks of (1) adverse changes in foreign exchange rates, (2)
nationalization, expropriation, or confiscatory taxation, (3) adverse
changes in investment or exchange control regulations (which could prevent
cash from being brought back to the United States), and (4) expropriation
or nationalization of foreign portfolio companies. Additionally,
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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.
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.
Foreign markets also have different clearance and settlement
procedures, and, in certain markets, there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Such
delays in settlement could result in temporary periods when a portion of
the assets of a Portfolio are uninvested and no return is earned thereon.
The inability of a 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 a Portfolio due to
subsequent declines in value of the portfolio securities, or, if the
Portfolio has entered into a contract to sell the securities, could result
in possible liability to the purchaser.
In order to limit the risk inherent in investing in foreign
currency denominated securities, the Portfolio may not purchase any such
security if, after such purchase, more than 25% of its net assets (taken
at market value) would be invested in foreign currency denominated
securities. Within that limitation, however, the Portfolio is not
restricted in the amount it may invest in securities denominated in any
one foreign currency.
Dollar Rolls (Neuberger & Berman Ultra Short Bond Portfolio and
Neuberger & Berman Limited Maturity Bond Portfolio). In a "dollar roll,"
a Portfolio sells securities for delivery in the current month and simul-
taneously agrees to repurchase substantially similar (same type and
coupon) securities on a specified future date from the same party. A
"covered roll" is a specific type of dollar roll in which the Portfolio
holds an offsetting cash position or a cash equivalent security position
that matures on or before the forward settlement date of the dollar roll
transaction. Dollar rolls are considered borrowings for purposes of the
Portfolios' investment policies and limitations concerning borrowings.
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There is a risk that the contra-party will be unable or unwilling to
complete the transactions as scheduled, which may result in losses to the
Portfolio.
Futures Contracts and Options Thereon (Neuberger & Berman Ultra
Short Bond Portfolio, Neuberger & Berman Limited Maturity Bond Portfolio,
and Neuberger & Berman New York Insured Intermediate Portfolio). The
Portfolios may purchase and sell interest-rate and bond index futures
contracts and options thereon, and Neuberger & Berman Limited Maturity
Bond Portfolio may purchase and sell foreign currency futures contracts
(with interest-rate and bond index futures contracts, "Futures" or
"Futures Contracts") and options thereon. The Portfolios engage in inter-
est-rate Futures and options transactions in an attempt to hedge against
changes in securities prices resulting from expected changes in prevailing
interest rates; Neuberger & Berman Limited Maturity Bond Portfolio engages
in foreign currency Futures and options transactions in an attempt to
hedge against expected changes in prevailing currency exchange rates.
Because the futures markets may be more liquid than the cash markets, the
use of Futures permits a Portfolio to enhance portfolio liquidity and
maintain a defensive position without having to sell portfolio securities.
The Portfolios do not engage in transactions in Futures or options thereon
for speculation. The Portfolios view investment in (1) interest-rate
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 and (2) foreign currency Futures and options
thereon as a means of establishing more definitely the effective return on
securities denominated in foreign currencies held or intended to be
acquired by them.
A "sale" of a Futures Contract (or a "short" Futures position)
entails the assumption of a contractual obligation to deliver the
securities or currency underlying the contract at a specified price at a
specified future time. A "purchase" of a Futures Contract (or a "long"
Futures position) entails the assumption of a contractual obligation to
acquire the securities or currency underlying the contract at a specified
price at a specified future time. Certain Futures, including bond index
Futures, are settled on a net cash payment basis rather than by the sale
and delivery of the securities underlying the Futures.
"Margin" with respect to Futures is the amount of assets that
must be deposited by a Portfolio with, or for the benefit of, a futures
commission merchant in order to initiate and maintain the Portfolio's
Futures positions. The margin deposit made by a Portfolio when it enters
into a Futures Contract ("initial margin") is intended to assure its per-
formance 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 ("vari-
ation 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 net asset
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value ("NAV"), each Portfolio marks to market the current value of its
open Futures positions. A Portfolio also must make margin deposits with
respect to options on Futures that it has written. If the futures
commission merchant holding the margin deposit goes bankrupt, the
Portfolio could suffer a delay in recovering its funds and could
ultimately suffer a loss.
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"), an agency of the U.S. Government;
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.
Although each Portfolio believes that the use of Futures Con-
tracts will benefit it, if N&B Management's judgment about the general
direction of the markets is incorrect, a Portfolio's overall return would
be lower than if it had not entered into any such contracts. Moreover,
the spread between values in the cash and futures markets, is subject to
distortions, due to differences in the character of those markets.
Because of the possibility of distortion, even a correct forecast of
general market trends by N&B Management may not result in a successful
transaction.
An option on a Futures Contract gives the purchaser the right, in
return for the premium paid, to assume a position in the contract (a long
position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the option exercise
period. The writer of the option is required upon exercise to assume a
short Futures position (if the option is a call) or a long Futures
position (if the option is a put). Upon exercise of the option, the
assumption of offsetting Futures positions by the writer and holder of the
option is accompanied by delivery of the accumulated cash balance in the
writer's Futures margin account. That balance represents the amount by
which the market price of the Futures Contract at exercise exceeds, in the
case of a call, or is less than, in the case of a put, the exercise price
of the option.
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
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and currencies being hedged can be only approximate. Decisions regarding
whether, when, and how to hedge involve skill and judgment. Even a well-
conceived hedge may be unsuccessful to some degree because of unexpected
market behavior or interest rate or currency exchange rate trends, or lack
of correlation between the futures markets and the securities markets.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage; as a result, a relatively small price
movement in a Futures Contract may result in an immediate and substantial
loss, or gain, to the investor. Losses that 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 thereof may be made
on that day at a price beyond that limit. The daily limit governs only
price movements during a particular trading day, however; it thus does not
limit potential losses, because the limit may prevent the liquidation of
unfavorable positions. Prices can move to the daily limit for several
consecutive trading days with little or no trading, thereby preventing
liquidation of Futures and options positions and subjecting investors to
substantial losses. If this were to happen with respect to a position
held by a Portfolio, it could (depending on the size of the position) have
an adverse impact on the NAV of the Portfolio.
Covered Call and Put Options (Neuberger & Berman Limited Maturity
Bond Portfolio and Neuberger & Berman New York Insured Intermediate
Portfolio). The Portfolios may write or purchase put and call options on
securities. Generally, the purpose of writing and purchasing these
options is to reduce the effect of price fluctuations of securities held
by the Portfolio on the Portfolio's and its corresponding Fund's NAVs.
Each Portfolio may also write covered call options to earn premium income.
The obligation under any options 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 a Portfolio and is never
exercised, the Portfolio will lose the entire amount of the premium paid.
A Portfolio will receive a premium for writing a put option,
which obligates the Portfolio to acquire a certain security at a certain
price at any time until a certain date if the purchaser of the option
decides to sell such security. The Portfolio may be obligated to purchase
the underlying security at more than its current value.
When a 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. A Portfolio would purchase a put
option in order to protect itself against a decline in the market value of
a security it owns.
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When a Portfolio writes a call option, it is obligated to sell a
security to a purchaser at a specified price at any time the purchaser
requests until a certain date, and receives a premium for writing the
option. Each 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 an option at less than
the market price, thereby giving up any additional gain on the security.
When a 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. A Portfolio would purchase a call option in order
to protect against an increase in the price of securities it intends to
purchase or to offset a previously written call option.
Portfolio securities on which call and put options may be written
and purchased by the Portfolio are purchased solely on the basis of
investment considerations consistent with the Portfolio's investment
objective. The 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 Portfolios will not do), but is capable of enhancing a Portfolio's
total return. When writing a covered call option, a 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, a Portfolio, in return for the premium, takes the
risk that it must purchase the underlying security at the exercise price,
which may be higher than the current market price of the security. If a
call or put option that a 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.
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 a Portfolio and its counter-party with no clearing
organization guarantee. Thus, when a 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 a Portfolio would be able to
liquidate an OTC option at any time prior to expiration. Unless a Port-
folio is able to effect a closing purchase transaction in a covered OTC
call option it has written, it will not be able to liquidate securities
used as cover until the option expires or is exercised or until different
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cover is substituted. In the event of the counter-party's insolvency, a
Portfolio may be unable to liquidate its options position and the
associated cover. N&B Management monitors the creditworthiness of dealers
with which the Portfolios may engage in OTC options transactions, and
limits the Portfolio's counter-parties in such transactions to dealers
with a net worth of at least $20 million as reported in their latest
financial statements.
The assets used as cover for OTC options written by the Portfolio
will be considered illiquid unless the OTC options are sold to qualified
dealers who agree that the Portfolio may repurchase any OTC option it
writes at a maximum price to be calculated by a formula set forth in the
option agreement. The cover for an OTC call option written subject to
this procedure will be considered illiquid only to the extent that the
maximum repurchase price under the formula exceeds the intrinsic value of
the option.
The premium received (or paid) by a Portfolio when it writes (or
purchases) a call or put 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 general interest rate environment. The premium received
by a Portfolio for writing a covered call and put 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 sales price on the option's last reported trade on that day before the
time the Portfolio's NAV is computed or, in the absence of any trades
thereof on that day, the mean between the bid and ask prices as of that
time.
Closing transactions are effected in order to realize a profit on
an outstanding option, to prevent an underlying security from being
called, or to permit the sale or the put of the underlying security.
Furthermore, effecting a closing transaction permits a Portfolio to write
another call option on the underlying security with either a different
exercise price or expiration date or both. If a Portfolio desires to sell
a security on which it has written a call option, it will seek to effect a
closing transaction prior to, or concurrently with, the sale of the
security. There is, of course, no assurance that a Portfolio will be able
to effect closing transactions at favorable prices. If a 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.
A 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. However, because
increases in the market price of a call option generally reflect increases
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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 a Portfolio.
Each Portfolio pays the brokerage commissions in connection with
purchasing or writing options, including those used to close out existing
positions. These brokerage commissions normally are higher than those
applicable to purchases and sales of portfolio securities.
Options normally have expiration dates between three and nine
months from the date written. 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. From time to time, a Portfolio may
purchase an underlying security for delivery in accordance with an
exercise notice of a call option assigned to it, rather than delivering
the security from its portfolio. In those cases, additional brokerage
commissions are incurred.
Options on Foreign Currencies (Neuberger & Berman Limited
Maturity Bond Portfolio). The Portfolio may write and purchase covered
call and put options on foreign currencies. The Portfolio would engage in
such transaction to protect against declines in the U.S. dollar value of
portfolio securities or increases in the U.S. dollar cost of securities to
be acquired, or to protect the dollar equivalent of dividends, interest,
or other payments on those securities. As with other types of options,
however, writing an option on foreign currency constitutes only a partial
hedge, up to the amount of the premium received, and the Portfolio could
be required to purchase or sell foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The risks of currency options
are similar to the risks of other options, discussed herein. Certain
options on foreign currencies are traded on the OTC market and involve
liquidity and credit risks that may not be present in the case of
exchange-traded currency options.
Forward Foreign Currency Contracts (Neuberger & Berman Limited
Maturity Bond Portfolio). The Portfolio may enter into contracts for the
purchase or sale of a specific foreign currency at a future date at a
fixed price ("Forward Contracts"). The Portfolio enters into Forward
Contracts in an attempt to hedge against expected changes in prevailing
currency exchange rates. The Portfolio does not engage in transactions in
Forward Contracts for speculation; it views investments in Forward
Contracts as a means of establishing more definitely the effective return
on securities denominated in foreign currencies that are held or intended
to be acquired by it. Forward Contract transactions include forward sales
or purchases of foreign currencies for the purpose of protecting the U.S.
dollar value of securities held or to be acquired by the Portfolio that
are denominated in a foreign currency or protecting the U.S. dollar
equivalent of dividends, interest, or other payments on those securities.
N&B Management believes that the use of foreign currency hedging
techniques, including "cross-hedges," can help protect against declines in
the U.S. dollar value of income available for distribution and declines in
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<PAGE>
the Portfolio's NAV resulting from adverse changes in currency exchange
rates. 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 cross-hedge involving a
Forward Contract to sell a different foreign currency whose behavior is
expected to resemble the currency in which the securities being hedged are
denominated and which is available on more advantageous terms.
N&B Management believes that hedges and cross-hedges can, therefore,
provide significant protection of NAV in the event of a general rise in
the U.S. dollar against foreign currencies. However, a hedge or cross-
hedge cannot protect against exchange rate risks perfectly, and, if
N&B Management is incorrect in its judgment of future exchange rate
relationships, the Portfolio could be in a less advantageous position than
if such a hedge or cross-hedge had not been established. If the actual
behavior of the currency used in a cross hedge does not sufficiently
correlate to the behavior of hedged currency, the Portfolio may suffer
losses on both currencies. In addition, because forward contracts are not
traded on an exchange, the assets used to cover such contracts may be
illiquid.
General Considerations Involving Futures, Options on Futures,
Options on Securities and Foreign Currencies, and
Forward Contracts (collectively, "Hedging Instruments")
Futures Contracts and Options on Futures Contracts and Foreign
Currencies. To the extent a Portfolio sells or purchases Futures
Contracts and/or writes options thereon, or options on foreign currencies
that are traded on an exchange regulated by the CFTC other than for bona
fide hedging purposes (as defined by the CFTC), the aggregate initial
margin and premiums on these positions (excluding the amount by which
options are "in-the-money") may not exceed 5% of the Portfolio's net
assets.
In addition, pursuant to state securities laws, (1) the aggregate
premiums paid by a Portfolio on all options (both exchange-traded and OTC)
held by it at any time may not exceed 20% of its net assets and (2) the
aggregate margin deposits required on all exchange-traded Futures
Contracts and related options held at any time by a Portfolio may not
exceed 5% of its total assets. Pursuant to an undertaking to a state
securities law administrator, Neuberger & Berman Limited Maturity Bond
Portfolio may not purchase a put option if, as a result, more than 5% of
its total assets would be invested in put options.
Risks Involved in Using Hedging Instruments. The primary risks
in using Hedging Instruments are (1) imperfect correlation or no
correlation between changes in market value of the securities held or to
be acquired by a Portfolio and changes in market value of Hedging
Instruments; (2) possible lack of a liquid secondary market for Hedging
Instruments and the resulting inability to close out Hedging Instruments
when desired; (3) the fact that the skills needed to use Hedging
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<PAGE>
Instruments are different from those needed to select a Portfolio's
securities; (4) the fact that, although use of these instruments for
hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain, or even result in losses, by offsetting favorable
price movements in hedged investments; and (5) the possible inability of a
Portfolio to purchase or sell a portfolio security at a time that would
otherwise be favorable for it to do so, or the possible need for a
Portfolio to sell a portfolio security at a disadvantageous time, due to
its need to maintain "cover" or to segregate securities in connection with
its use of Hedging Instruments. N&B Management intends to reduce the risk
of imperfect correlation by investing only in Hedging Instruments whose
behavior is expected to resemble or offset that of a Portfolio's
underlying securities. N&B Management intends to reduce the risk that a
Portfolio will be unable to close out Hedging Instruments by entering into
such transactions only if N&B Management believes there will be an active
and liquid secondary market. Hedging Instruments used by the Portfolios
are generally considered "derivatives." There can be no assurance that a
Portfolio's use of Hedging Instruments will be successful.
The Portfolios' use of Hedging Instruments may be limited by the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with
which certain investors must comply to continue to qualify as a regulated
investment company ("RIC"). See "Tax Status" below.
Cover for Hedging Instruments. Each Portfolio will comply with
SEC guidelines regarding cover for Hedging Instruments and, if the guide-
lines so require, set aside in a segregated account with its custodian
cash, U.S. Government or Agency Securities, or other liquid, high-grade
debt securities in the prescribed amount. Securities held in a segregated
account cannot be sold while the Futures, option, or forward strategy
covered by those securities is outstanding, unless they are replaced with
other suitable assets. As a result, segregation of a large percentage of
a Portfolio's assets could impede portfolio management or the Portfolio's
ability to meet current obligations. A Portfolio may be unable promptly
to dispose of assets which cover, or are segregated with respect to, an
illiquid Futures, option, or forward position; this inability may result
in a loss to the Portfolio.
Indexed Securities (Neuberger & Berman Limited Maturity Bond
Portfolio). The Portfolio may invest in securities linked to foreign
currencies, interest rates, commodities, indices, or other financial
indicators ("indexed securities"). Most indexed securities are short- to
intermediate-term fixed income securities whose value at maturity or
interest rate rises or falls according to the change in one or more
specified underlying instruments. An indexed security may be positively
or negatively indexed (i.e., their value may increase or decrease if the
underlying instrument appreciates) and may have return characteristics
similar to direct investments in the underlying instrument or to one or
more options thereon. Indexed securities may be more volatile than the
underlying instrument itself.
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<PAGE>
Zero Coupon Securities (All Portfolios). Each Portfolio may
invest in zero coupon securities, which are debt obligations that do not
entitle the holder to any periodic payment of interest prior to maturity
or that specify a future date when the securities begin to pay current
interest. Zero coupon securities are issued and traded at a discount from
their face amount or par value. This discount varies depending on
prevailing interest rates, the time remaining until cash payments begin,
the liquidity of the security, and the perceived credit quality of the
issuer.
The discount on zero coupon securities ("original issue
discount") is taken into account ratably by each Portfolio prior to the
receipt of any actual payments. Because certain investors in the
Portfolios must distribute substantially all of their net income (includ-
ing their pro rata share of their corresponding Portfolios' original issue
discount) to their shareholders each year for income and excise tax
purposes (See "Tax Status" below), each Portfolio may have to dispose of
portfolio securities under disadvantageous circumstances to generate cash,
or may be required to borrow, to satisfy its investors' distribution
requirements.
The market prices of zero coupon securities generally are more
volatile than the prices of securities that pay interest periodically.
Zero coupon securities are likely to respond to changes in interest rates
to a greater degree than other types of debt securities having similar
maturities and credit quality.
Municipal Obligations (Neuberger & Berman Limited Maturity Bond
Portfolio). This Portfolio may invest up to 5% of its net assets in
municipal obligations which are issued by or on behalf of states (as used
herein, including the District of Columbia), territories, and possessions
of the United States and their political subdivisions, agencies, and
instrumentalities, and which pay interest that is exempt from federal
income tax. Municipal obligations include "general obligation"
securities, which are backed by the full taxing power of a municipality,
and "revenue" securities, which are backed only by the income from a
specific project, facility, or tax. Municipal obligations also include
industrial development and private activity bonds which are issued by or
on behalf of public authorities, but are not backed by the credit of any
governmental or public authority. "Anticipation notes" are issued by
municipalities in expectation of future proceeds from the issuance of
bonds or from taxes or other revenues, and are payable from those bond
proceeds, taxes, or revenues. Municipal obligations also include tax-
exempt commercial paper, which is issued by municipalities to help finance
short-term capital or operating requirements.
The value of municipal obligations is dependent on the continuing
payment of interest and principal when due by the issuers of the municipal
obligations (or, in the case of industrial development bonds, the revenues
generated by the facility financed by the bonds or, in certain other
instances, the provider of the credit facility backing the bonds). As
with other fixed income securities, an increase in interest rates
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<PAGE>
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 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 "flat tax" or
other restructuring of the federal income tax system. Any of these
factors could affect the value of municipal securities.
Interest Rate Protection Transactions (Neuberger & Berman New
York Insured Intermediate Portfolio). The Portfolio may enter into
interest rate swaps, caps, floors, and collars. An interest rate swap
involves an agreement between two parties to exchange payments that are
based, for example, on variable and fixed rates of interest and that are
calculated on the basis of a specified amount (the "notional principal
amount"). In an interest rate cap or floor transaction, one party agrees
to make payments to the other party when a specified market interest rate
goes above (in the case of a cap) or below (in the case of a floor) a
designated level on predetermined dates or during a specified time period.
An interest rate collar transaction involves both a cap and a floor (that
is, one party agrees to make payments to the other party when a specified
market interest rate goes outside a specified range).
The Portfolio enters into these transactions only with banks and
recognized securities dealers believed by N&B Management to present
minimal credit risks, for the purpose of (1) preserving a return or spread
on a particular investment or portion of its portfolio, (2) protecting
against an increase in the price of securities it anticipates purchasing
at a later date, or (3) effectively fixing the rate of interest it pays on
borrowings. The Portfolio uses interest rate protection transactions as
hedges and not as speculative investments; these transactions are subject
to risks comparable to those described herein with respect to other
hedging strategies. If the Portfolio enters into such a transaction and
N&B Management incorrectly forecasts interest rates, market values, or
other economic factors, the Portfolio would have been in a better position
had it not hedged at all. The Portfolio does not treat these transactions
as being subject to its borrowing restrictions.
The Portfolio will maintain appropriate liquid assets in a
segregated custodial account to cover its current obligations under swap
agreements. If the Portfolio enters into a swap agreement on a net basis,
it will segregate assets with a daily value at least equal to the excess,
if any, of its accrued obligations under the swap agreement over the
accrued amount it is entitled to receive under the agreement. If the
Portfolio enters into a swap agreement on other than a net basis, it will
segregate assets with a value equal to the full amount of its accrued
obligations under the agreement.
The swap market has grown substantially in recent years, with a
large number of the participants utilizing standardized swap
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<PAGE>
documentation. Swap agreements are treated as liquid if they can be
expected, in N&B Management's judgment, to be able to be sold within seven
days at approximately the price at which they are valued. Caps, floors,
and collars are more recent innovations for which documentation is less
standardized, and accordingly they are less liquid than swaps.
Additional Investment Information (Municipal Portfolios and
Neuberger & Berman New York Insured Intermediate Portfolio)
Types of Municipal Obligations. 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. Except
as otherwise provided in Part A and this Part B, Municipal Portfolios' and
Neuberger & Berman New York Insured Intermediate Portfolio's investment
portfolios may consist of any combination of the types of municipal
obligations described below, and others set forth in Part A or in this
Part B. The proportions in which each Portfolio invests in various types
of municipal obligations will vary from time to time.
General Obligation Bonds. A general obligation bond is backed by
the governmental issuer's pledge of its full faith and credit and power to
raise taxes for payment of principal and interest under the bond. The
taxes or special assessments that can be levied for the payment of debt
service may be limited or unlimited as to rate or amount. Many
jurisdictions face political and economic constraints on their ability to
raise taxes. These limitations and constraints may adversely affect the
ability of the governmental issuer to meet its obligations under the bonds
in a timely manner.
Revenue Bonds. Revenue bonds are issued to finance a wide
variety of public projects, including (1) housing, (2) electric, gas,
water, and sewer systems, (3) highways, bridges, and tunnels, (4) port and
airport facilities, (5) colleges and universities, and (6) hospitals. In
some cases, the repayment of these bonds depends upon annual legislative
appropriations; in other cases, if the issuer is unable to meet its legal
obligation to repay the bond, repayment becomes an unenforceable "moral
commitment" of a related governmental unit (subject, however, to
appropriations). Revenue bonds issued by housing finance authorities are
backed by a wider range of security, including partially or fully insured
mortgages, rent subsidized and/or collateralized mortgages, and net
revenues from housing projects.
Most industrial development bonds are revenue bonds, in that
principal and interest are payable only from the net revenues of the
facility financed by the bonds. These bonds generally do not constitute a
pledge of the general credit of the public or private operator or user of
the facility. In some cases, however, payment may be secured by a pledge
of real and personal property constituting the facility.
Municipal Lease Obligations (Neuberger & Berman Municipal
Securities Portfolio and Neuberger & Berman New York Insured Intermediate
Portfolio). These obligations, which may take the form of a lease, an
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<PAGE>
installment purchase, or a conditional sale contract, are issued by a
state or local government or authority to acquire land and a wide variety
of equipment and facilities. A Portfolio will usually invest in municipal
lease obligations through certificates of participation ("COPs"), which
give the Portfolio a specified, undivided interest in the obligation. For
example, a COP may be created when long-term revenue bonds are issued by a
governmental corporation to pay for the acquisition of property. The
payments made by the municipality under the lease are used to repay
interest and principal on the bonds. Once these lease payments are
completed, the municipality gains ownership of the property. These
obligations are distinguished from general obligation or revenue bonds in
that they typically are not backed fully by the municipality's credit, and
their interest may become taxable if the lease is assigned. The lease
subject to the transaction usually contains a "non-appropriation" clause.
A non-appropriation clause states that, while the municipality will use
its best efforts to make lease payments, the municipality may terminate
the lease without penalty if the municipality's appropriating body does
not allocate necessary funds. Such termination would result in a
significant loss to a Portfolio.
Municipal Notes. Municipal notes include the following:
---------------
1. Project notes are issued by local issuing agencies
created under the laws of a state, territory, or possession of the United
States to finance low-income housing, urban redevelopment, and similar
projects. These notes are backed by an agreement between the local
issuing agency and the Department of Housing and Urban Development
("HUD"). Although the notes are the primary obligations of the local
issuing agency, the HUD agreement provides the full faith and credit of
the U.S. as additional security.
2. Tax anticipation notes are issued to finance working
capital needs of municipalities. Generally, they are issued in anticipa-
tion of future seasonal tax revenues, such as from income, sales, use, and
business taxes, and are payable from these future revenues.
3. Revenue anticipation notes are issued in expectation of
receipt of other types of revenue, such as that available under federal
revenue-sharing programs. Because of proposed measures to reform the
federal budget and alter the relative obligations of federal, state, and
local governments, many revenue-sharing programs are in a state of
uncertainty.
4. Bond anticipation notes are issued to provide interim
financing until long-term bond financing can be arranged. In most cases,
the long-term bonds provide the funds for the repayment of the notes.
5. Construction loan notes are sold to provide construction
financing. After completion of construction, many projects receive
permanent financing from FNMA or GNMA.
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<PAGE>
6. Tax-exempt commercial paper is a short-term obligation
issued by state or local governments or their agencies to finance seasonal
working capital needs or as short-term financing in anticipation of
longer-term financing.
7. Pre-refunded and "escrowed" municipal bonds are bonds
with respect to which the issuer has deposited, in an escrow account, an
amount of securities and cash, if any, that will be sufficient to pay the
periodic interest on and principal amount of the bonds, either at their
stated maturity date or on the date the issuer may call the bonds for
payment. This arrangement gives the investment a quality equal to the
securities in the account, usually U.S. Government securities. The
Portfolios can also purchase bonds issued to refund earlier issues. The
proceeds of these refunding bonds are often used for escrow to support
refunding.
Zero Coupon Securities. See the discussion of these investments
under "Additional Investment Information (Fixed Income Portfolios and
Neuberger & Berman New York Insured Intermediate Portfolio)."
Tender Option Bonds (Neuberger & Berman Municipal Securities
Portfolio and Neuberger & Berman New York Insured Intermediate Portfolio).
Tender option bonds are created by coupling an intermediate or long-term
fixed rate tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, the Portfolio effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. N&B Management considers the creditworthiness of the issuer of the
underlying bond, the custodian, and the third party provider of the tender
option. In certain instances, a sponsor may terminate a tender option if,
for example, the issuer of the underlying bond defaults on interest
payments.
Yield and Price Characteristics of Municipal Obligations
--------------------------------------------------------
Municipal obligations generally have the same yield and price
characteristics as other debt securities. Yields depend on a variety of
factors, including general conditions in the money and bond markets and,
in the case of any particular securities issue, its amount, maturity, and
rating. Market prices of fixed income securities usually vary upward or
downward in inverse relationship to market interest rates.
Municipal obligations with longer maturities or durations tend to
produce higher yields. They are generally subject to potentially greater
price fluctuations, and thus greater appreciation or depreciation in
value, than obligations with shorter maturities or duration and lower
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<PAGE>
yields. An increase in interest rates generally will reduce the value of
a Portfolio's investments, whereas a decline in interest rates generally
will increase that value. The ability of each Portfolio to achieve its
investment objective also is dependent on the continuing ability of the
issuers of the municipal obligations in which the Portfolios invest (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) to pay interest and
principal when due.
Additional Techniques for Purchasing and Selling Municipal Obligations and
Taxable Securities
-------------------------------------------------------------------------
The Portfolios' investments in municipal obligations and taxable
securities may take the form of the following types of investments:
Variable or Floating Rate Securities; Demand and Put Features
-------------------------------------------------------------
The Portfolios may invest in Variable Rate Securities (described
under "Additional Investment Information (Fixed Income Portfolios"), the
interest rate on which ordinarily is determined by reference to the
measures described there or an index of short-term tax-exempt rates. The
Variable Rate Securities in which the Portfolios invest are municipal
obligations which 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 municipal bond insurance from a creditworthy
insurer. Without these credit enhancements, the Variable Rate Securities
might not meet the Portfolios' quality standards. Accordingly, in
purchasing these securities, each Portfolio relies primarily on the
creditworthiness of the credit instrument issuer or the insurer. Neither
Neuberger & Berman Municipal Money Portfolio nor Neuberger & Berman
Municipal Securities Portfolio may invest more than 5% of its total assets
in securities backed by credit instruments from any one issuer or by
insurance from any one insurer (excluding securities that do not rely on
the credit instrument or insurance for their rating, i.e., stand on their
own credit).
A Portfolio can also buy fixed rate securities accompanied by a
demand feature or by a put option, which permits the Portfolio to sell the
security to the issuer or third party at a specified price. A Portfolio
may rely on the creditworthiness of issuers of puts in purchasing these
securities.
In calculating its maturity or duration, each Portfolio is
permitted to treat certain Variable Rate Securities as maturing on a date
prior to the date on which principal is due to be paid. In applying such
maturity shortening devices, N&B Management considers whether the interest
rate reset is expected to cause the security to trade at approximately its
par value.
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Purchases with a Standby Commitment to Repurchase
-------------------------------------------------
When a Portfolio purchases municipal obligations, it also may
acquire a standby commitment obligating the seller to repurchase the
obligations at an agreed price on a specified date or within a specified
period. A standby commitment is the equivalent of a nontransferable "put"
option held by a Portfolio that terminates if the Portfolio sells the
obligations to a third party.
The Portfolios may enter into standby commitments only with banks
and (if permitted under the 1940 Act) securities dealers determined to be
creditworthy. A Portfolio's ability to exercise a standby commitment
depends on the ability of the bank or securities dealer to pay for the
obligations on exercise of the commitment. If a bank or securities dealer
defaults on its commitment to repurchase such obligations, a Portfolio may
be unable to recover all or even part of any loss it may sustain from
having to sell the obligations elsewhere.
Although none of the Portfolios currently intends to invest in
standby commitments, each reserves the right to do so. No Portfolio will
invest in standby commitments unless it receives an opinion of its counsel
or a ruling of the Internal Revenue Service ("Service") satisfactory to
the Trustees that interest earned by the Portfolio on municipal
obligations subject to standby commitments is exempt from federal income
tax. No Portfolio will acquire standby commitments with a view to
exercising them when the exercise price exceeds the current value of the
underlying obligations; a Portfolio will do so only to facilitate
portfolio liquidity. By enabling a Portfolio to dispose of municipal
obligations at a predetermined price prior to maturity, this investment
technique allows the Portfolio to be fully invested while preserving
flexibility to make commitments for when-issued securities, take advantage
of other buying opportunities, and meet redemptions.
Standby commitments are valued at zero in determining NAV. The
maturity or duration of municipal obligations purchased by a Portfolio is
not shortened by a standby commitment. Therefore, standby commitments do
not affect the average maturity of the Portfolio's investment portfolio.
Participation Interests
-----------------------
The Portfolios may purchase from banks participation interests in
all or part of specific holdings of short-term municipal obligations.
Each participation interest is backed by an irrevocable letter of credit
issued by a selling bank determined to be creditworthy. A Portfolio has
the right to sell the participation interest back to the bank, usually
after seven days' notice, for the full principal amount of its
participation, plus accrued interest, but only (1) to provide portfolio
liquidity, (2) to maintain portfolio quality, or (3) to avoid loss when
the underlying municipal obligations are in default. Although no
Portfolio currently intends to acquire participation interests, each
reserves the right to do so in the future. No Portfolio will purchase
participation interests unless it receives an opinion of its counsel or a
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<PAGE>
ruling of the Service satisfactory to the Trustees that interest earned by
the Portfolio on municipal obligations in which it holds participation
interests is exempt from federal income tax.
Restricted Securities and Rule 144A Securities
----------------------------------------------
See the discussion of these investments under "Additional
Investment Information (Fixed Income Portfolios and Neuberger & Berman New
York Insured Intermediate Portfolio)."
When-Issued Transactions
------------------------
See the discussion of these investments under "Additional
Investment Information (Fixed Income Portfolios and Neuberger & Berman New
York Insured Intermediate Portfolio)."
Futures Contracts and Options Thereon (Neuberger & Berman Municipal
Securities Portfolio and Neuberger & Berman New York Insured Intermediate
Portfolio).
------------------------------------------------------------------------
A Portfolio may purchase and sell Futures Contracts and options
thereon in an attempt to hedge against changes in the prices of municipal
obligations resulting from expected changes in prevailing interest rates.
Because the futures markets may be more liquid than the cash markets, the
use of Futures permits a Portfolio to enhance portfolio liquidity and
maintain a defensive position without having to sell portfolio securities.
The Portfolios do not engage in transactions in Futures or options thereon
for speculation. The Portfolios view investment in Futures and options
thereon as a maturity management device and/or a device to reduce risk and
preserve total return in an adverse interest rate environment. For
further information regarding these investments, see the discussion
thereof under "Additional Investment Information (Fixed Income Portfolios
and Neuberger & Berman New York Insured Intermediate Portfolio)."
Reverse Repurchase Agreements
-----------------------------
For further information regarding these investments, see the
discussion thereof under "Additional Investment Information (Fixed Income
Portfolios and Neuberger & Berman New York Insured Intermediate
Portfolio)."
Investment in Taxable Securities
--------------------------------
The types of taxable securities in which each Portfolio
temporarily may invest are limited to the following short-term (maturing
in one year or less from the time of purchase) fixed income securities:
U.S. Government and Agency Securities (Neuberger & Berman
Municipal Securities Portfolio and Neuberger & Berman New York Insured
Intermediate Portfolio). U.S. Government and Agency Securities are direct
obligations of the U.S. Government, its agencies and instrumentalities,
and obligations issued or guaranteed by U.S. Government-sponsored
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<PAGE>
enterprises and federal agencies. Many agency securities are not backed
by the full faith and credit of the United States.
Bank Obligations. Bank obligations include CDs, bankers'
acceptances, and other short-term debt obligations issued by U.S. banks
with total assets of $1 billion or more.
Repurchase Agreements. See the discussion of these investments
under "Additional Investment Information (Fixed Income Portfolios and
Neuberger & Berman New York Insured Intermediate Portfolio)." Neuberger &
Berman Municipal Money Portfolio may invest only in repurchase agreements
with respect to securities rated in the highest rating category by S&P,
Moody's, or any other NRSRO.
Securities Loans. See the discussion of these investments under
"Additional Investment Information (Fixed Income Portfolios)."
Commercial Paper. Each Portfolio may invest only in paper
receiving the highest rating from S&P (A-1) or Moody's (P-1) or deemed by
N&B Management to be of equivalent quality. See the discussion of these
investments under "Additional Investment Information (Fixed Income
Portfolios and Neuberger & Berman New York Insured Intermediate
Portfolio)."
Swap Agreements (Neuberger & Berman Municipal Securities
Trust and New York Insured Intermediate Portfolio). To help enhance the
value of its portfolio or manage its exposure to different types of
investments, the Portfolio may enter into interest rate and mortgage swap
agreements and may purchase and sell interest rate "caps," "floors," and
"collars." In accordance with SEC staff requirements, the Portfolio will
segregate cash or liquid high-grade debt securities in an amount equal to
its obligations under swap agreements; when an agreement provides for
netting of the payments by the two parties, the Portfolio will segregate
only the amount of its net obligation, if any.
Certain Risk Considerations
All Portfolios
--------------
Although each Portfolio seeks to reduce risk by investing in a
diversified portfolio, diversification does not eliminate all risk. There
can, of course, be no assurance any Portfolio will achieve its investment
objective, and an investment in a Portfolio involves certain risks that
are described in the sections entitled "Investment Programs" and
"Description of Investments" in Item 4 in Part A and in the "Risks of
Fixed Income Securities" and applicable "Additional Investment
Information" sections above. The ratings of S&P and Moody's represent
their opinions as to the quality of securities (including municipal
obligations) and companies they undertake to rate. Ratings are not
absolute standards of quality; consequently, securities with the same
maturity, duration, coupon, and rating may have different yields. See
B-45
<PAGE>
"Rating Agencies; Ratings of Corporate Debt Securities and Commercial
Paper (All Fixed Income Portfolios)" above for corporate bond and
commercial paper ratings of S&P and Moody's.
Each Portfolio's ability to achieve its investment objective is
dependent on the continuing ability of the issuers of municipal
obligations in which the Portfolio invests and, in certain circumstances,
of banks issuing letters of credit or insurers issuing insurance backing
those obligations) to pay interest and principal when due.
The ratings of New York Municipal Securities and other municipal
securities by S&P, Moody's, and other NRSROs, as well as their ratings of
municipal bond insurers, represent their opinions as to the quality of
municipal obligations and companies they undertake to rate. Ratings are
not absolute standards of quality; consequently, municipal obligations
with the same maturity, duration, coupon, and rating may have different
yields. There are variations in municipal obligations and bond insurers,
both within a particular classification and between classifications.
These variations result from numerous factors, each of which could affect
the obligation's or insurer's ratings. See "Ratings of Municipal Obliga-
tions (Municipal Portfolios)" above for municipal obligations and claims
paying ability or financial strength of municipal bond insurers.
Unlike other types of investments, municipal obligations have
traditionally not been subject to the registration requirements of the
federal securities laws, although there have been proposals to provide for
such registration in the future. This lack of SEC regulation has
adversely affected the quantity and quality of information available to
the bond markets about issuers and their financial condition. The SEC has
responded to the need for such information by recently amending Rule 15c2-
12 of the Securities Exchange Act of 1934, as amended (the "Rule"). The
Rule requires that underwriters must reasonably determine that an issuer
of municipal securities undertakes in a written agreement for the benefit
of the holders of such securities to file with a nationally recognized
municipal securities information repository certain information regarding
the financial condition of the issuer and material events relating to such
securities. The SEC's intent in adopting the Rule was to provide holders
and potential holders of municipal securities with more adequate financial
information concerning issuers of municipal securities. The Rule provides
exemptions for issuances with a principal amount of less than $1,000,000
and certain privately placed issuances.
The federal bankruptcy statutes provide that, in certain
circumstances, political subdivisions and authorities of states may initi-
ate bankruptcy proceedings without prior notice to or consent of their
creditors, which proceedings could result in material and adverse changes
in the rights of holders of their obligations. In addition, there have
been lawsuits challenging the issuance of pollution control revenue bonds
and certain general obligation bonds of New York City and the validity of
their issuance under state or federal law that could ultimately affect the
validity of such bonds or the tax-free nature of the interest thereon.
B-46
<PAGE>
The Tax Reform Act of 1986 eliminated the federal income tax
exemption for interest on certain municipal obligations and, as a result,
has affected the availability of municipal obligations for investment by
each Portfolio. There can be no assurance that similar legislation
affecting the tax-exempt status of other municipal obligations will not be
enacted in the future. In the event such legislation is enacted, each
Fund and its corresponding Portfolio will reevaluate its investment
objective, policies and limitations.
The following information as to certain New York City ("City"),
New York State ("State"), and Puerto Rico risk factors is given to
investors in view of the policy of Neuberger & Berman New York Insured
Intermediate Portfolio of concentrating its investments in New York
Municipal Securities. Such information constitutes only a brief
discussion, does not purport to be a complete description, and is based on
information from sources believed to be reliable, including official
statements relating to securities offerings of the State and municipal
issuers, and periodic publications by national ratings organizations.
Such information, however, has not been independently verified by
Neuberger & Berman New York Insured Intermediate Fund or Portfolio.
New York City
-------------
The City faces potential economic problems which could seriously
affect its ability to meet its financial obligations.
The national economic downturn which began in July 1990 adversely
affected the City's economy, which had been declining since late 1989.
The City's current four-year financial plan assumes that, after noticeable
improvements in the City's economy during calendar year 1994, economic
growth will slow in calendar years 1995 and 1996 with local employment
increasing modestly.
For each of the 1981 through 1995 fiscal years, the City achieved
balanced operating results as reported in accordance with then-applicable
generally accepted accounting principles ("GAAP"). The City was required
to close substantial budget gaps in recent years in order to maintain
balanced operating results. The City is currently trying to close a
substantial budget gap in fiscal year 1996 and projects substantial budget
gaps for each of the 1997 through 1999 fiscal years. There can be no
assurance that the City will continue to maintain a balanced budget, as
required by New York State law, without additional tax or other revenue
increases or reductions in City services or entitlement programs, which
could adversely affect the City's economic base.
Pursuant to the laws of the State, the City prepares a four-year
annual financial plan, which is reviewed and revised on a quarterly basis
and which includes the City's capital, revenue and expense projections and
outlines proposed gap-closing programs for years with projected budget
gaps. The City submitted to the New York State Financial Control Board
("Control Board") on July 11, 1995 a financial plan for the 1996 through
1999 fiscal years (the "Financial Plan") which was subsequently reissued
B-47
<PAGE>
on November 29, 1995 to reflect actual receipts and expenditures since the
release of the Financial Plan. A modification to the Financial Plan for
the City's 1996 through 1999 fiscal years and a preliminary budget for the
City's 1997 fiscal year are expected to be published in the beginning of
1996. The City's projections set forth in the Financial Plan are based on
various assumptions and contingencies which are uncertain and which may
not materialize. Changes in major assumptions could significantly affect
the City's ability to balance its budget as required by State law and meet
its annual cash flow and financing requirements.
From 1975 to 1986, the City's financial condition was subject to
oversight and review by the Control Board. As of 1986, the Control
Board's supervisory power was suspended due to the City's satisfaction of
certain statutory conditions required under the Financial Emergency Act
("Financial Emergency Act"). The City is still required to submit its
four-year financial plan to the Control Board for the Control Board's
limited review until the expiration of the Financial Emergency Act on July
1, 2008.
In 1975, S&P suspended its A rating of City bonds. This
suspension remained in effect until March 1981, at which time the City
received an investment grade rating of BBB from S&P. On July 2, 1985, S&P
revised its rating of City bonds upward to BBB+ and on November 19, 1987,
to A-. On January 17, 1995, S&P placed the City's general obligation
bonds on CreditWatch with negative implications. On July 10, 1995, S&P
revised downward its rating in City general obligation bonds from A- to
BBB+ and removed City bonds from CreditWatch. Moody's ratings of City
bonds were revised in November 1981 from B (in effect since 1977) to Ba1,
in November 1983 to Baa, in December 1985 to Baa1, in May 1988 to A and
again in February 1991, to Baa1. Since July 15, 1993, Fitch has rated
City bonds A-. On July 12, 1995, Fitch stated that the City's credit
trend remains "declining."
New York State
--------------
As of December 15, 1995, the State's general operating fund
("General Fund"), the major operating fund of the State, projects a
positive margin of $172 million. In addition, the State's economy, as
measured by employment, started to recover near the start of the 1993
calendar year, and the State completed its 1994 fiscal year with a cash-
basis balanced budget in the General Fund.
The State's 1995-1996 Financial Plan projects a balanced General
Fund. The State's second quarterly update which was released on October
27, 1995, projects continued balance in the State's 1995-1996 Financial
Plan. The State Division of the Budget, however, cautioned that these
projections were subject to various risks, including current tax
regulation under consideration by Congress and the President. It also has
been reported that the State could face a revenue shortfall for its 1995-
1996 fiscal year, and for fiscal year 1996-1997. The Governor has
proposed closing the 1996-1997 fiscal year imbalance primarily through
General Fund expenditure reductions. The State Division of Budget also
B-48
<PAGE>
predicts budget gaps for fiscal years 1997-1998 and 1998-1999 of $1.4
billion and $2.5 billion, respectively. As a result of such budget gaps,
the State would be required to take actions to increase receipts and/or
reduce disbursements from current projected levels. The Governor
submitted a proposed budget for the State's 1996-1997 fiscal year on
December 15, 1995. There can be no assurances that the Budget will be
enacted before April 1, 1996.
There can be no assurance that the State's economy will not
experience worse-than-predicted results in the 1995-1996 fiscal year, or
that the State will not face substantial budget gaps in the future. Such
incidents could cause material and adverse effects on the State's
projections of receipts and disbursements.
New York State's economy is expected to expand modestly during
1996, but slower than during 1995. On an average annual basis, the
State's employment growth will be about half the rate estimated for 1995.
State personal income and wages are expected to record moderate gains in
1996.
Certain State agencies and local governments require State
assistance to meet their financial obligations. The ability of the State
to meet its own obligations or to obtain additional financing could be
adversely affected if there is an increased need for assistance by State
agencies and local governments.
On June 6, 1990, Moody's changed its ratings on all of the
State's outstanding general obligation bonds from A1 to A. On March 26,
1990 and January 13, 1992, S&P changed its ratings on all of the State's
outstanding general obligation bonds from AA- to A and from A to A-,
respectively.
Puerto Rico
-----------
The economy of Puerto Rico is closely linked with that of the
U.S. and will depend on several factors, including the condition of the
U.S. economy, the exchange rate for the U.S. dollar, the price stability
of oil imports, and interest rates. Businesses may enjoy a federal tax
advantage from locating certain of their operations in Puerto Rico.
However, this program may be phased out over the next several years, with
uncertain effect on the Puerto Rican economy.
Item 14. Management of the Trust.
---------------------------------
Trustees and Officers
The following table sets forth information concerning the
Trustees and officers of the Trust, 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
B-49
<PAGE>
funds, and (where applicable) their corresponding portfolios, administered
or managed by N&B Management and Neuberger & Berman.
<TABLE>
<CAPTION>
Name, Address Positions Held
and Age(1) With the Trust Principal Occupation(s)(2)
----------- -------------- --------------------------
<S> <C> <C>
John Cannon (66) Trustee President, AMA Investment Advisers, Inc.
CDC Associates, Inc. (registered investment adviser) (1976 -
620 Sentry Parkway 1991); Senior Vice President AMA Investment
Suite 220 Advisers, Inc. (1991 - 1993); President of
Blue Bell, PA 19422 AMA Family Funds (investment companies)
(1976 - 1991); Chairman and Treasurer of
CDC Associates, Inc. (registered investment
adviser) (1993 - present)
Charles DeCarlo (74) Trustee President Emeritus of Sarah Lawrence
33 West 67th Street College; Chief Executive Officer of Xicon
New York, NY 10023 Systems (animation company).
Stanley Egener* (61) Chairman of the Board, Chief Partner of Neuberger & Berman; President
Executive Officer, and and Director of N&B Management; Chairman of
Trustee the Board, Chief Executive Officer and
Trustee of eight other mutual funds for
which N&B Management acts as investment
manager or administrator.
Theresa A. Havell* (49) President and Trustee Partner of Neuberger & Berman; Vice
President and Director of N&B Management;
President and Trustee of one other mutual
fund for which N&B Management acts as
administrator.
Barry Hirsch (62) Trustee 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 (68) Trustee Professor of Finance and Economics at Stern
110 Bleeker 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.
B-50
<PAGE>
Name, Address Positions Held
and Age(1) With the Trust Principal Occupation(s)(2)
----------- -------------- --------------------------
Harold R. Logan (74) Trustee Chairman of Comstock Resources, Inc.
19 Norfield Road (natural resources company); Vice Chairman,
Weston, CT 06883 Retired, of W.R. Grace & Co. (chemicals,
natural resources, and selected consumer
services).
William E. Rulon (63) Trustee Senior Vice President and Secretary of
Foodmaker, Inc. Foodmaker, Inc. (operator and franchisor of
9330 Balboa Avenue restaurants).
San Diego, CA 92123
Candace L. Straight (48) Trustee Managing Director of Head & Company, LLC
Head & Company, LLC (limited liability company providing in-
1330 Avenue of the Americas vestment banking and consulting services to
12th Floor the insurance industry); President of
New York, NY 10019 Integon Corporation, (marketer of life
insurance, annuities, and property and
casualty insurance), 1990-1992; Director of
Drake Holdings (U.K. motor insurer).
Daniel J. Sullivan (56) Vice President Senior Vice President of N&B Management
since 1992; prior thereto, Vice President
of N&B Management; Vice President of eight
other mutual funds for which N&B Management
acts as investment manager or
administrator.
Michael J. Weiner (49) Vice President and Principal Senior Vice President of N&B Management
Financial Officer since 1992; Treasurer of N&B Management
from 1992 to 1996; prior thereto, Vice
President and Treasurer of N&B Management
and Treasurer of certain mutual funds for
which N&B Management acted as investment
adviser; Vice President and Principal
Financial Officer of eight other mutual
funds for which N&B Management acts as
investment manager or administrator.
Claudia A. Brandon (39) Secretary Vice President of N&B Management; Secretary
of eight other mutual funds for which N&B
Management acts as investment manager or
administrator.
B-51
<PAGE>
Name, Address Positions Held
and Age(1) With the Trust Principal Occupation(s)(2)
----------- -------------- --------------------------
Richard Russell (49) Treasurer and Principal Ac- Vice President of N&B Management since
counting Officer 1993; prior thereto, Assistant Vice
President of N&B Management; Treasurer and
Principal Accounting Officer of eight other
mutual funds for which N&B Management acts
as investment manager or administrator.
Stacy Cooper-Shugrue (33) Assistant Secretary Assistant Vice President of N&B Management
since 1993; prior thereto, employee of N&B
Management; Assistant Secretary of eight
other mutual funds for which N&B Management
acts as investment manager or
administrator.
C. Carl Randolph (58) Assistant Secretary Partner of Neuberger & Berman since 1992;
prior thereto, employee of Neuberger &
Berman; Assistant Secretary of eight other
mutual funds for which N&B Management acts
as investment manager or administrator.
</TABLE>
____________________
(1) Unless otherwise indicated, the business address of each listed
person is 605 Third Avenue, 2nd Floor, New York, NY 10158-0180.
(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 the Trust
within the meaning of the 1940 Act. Mr. Egener and Ms. Havell are
interested persons by virtue of the fact that they are officers and
directors of N&B Management and partners of Neuberger & Berman.
The Trust's Declaration of Trust provides that it will indemnify
its Trustees and officers against liabilities and expenses reasonably
incurred in connection with litigation in which they may be involved
because of their offices with the Trust, unless it is adjudicated that
they engaged in bad faith, willful misfeasance, gross negligence, or
reckless disregard of the duties involved in the conduct of their offices.
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, or 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.
B-52
<PAGE>
The following table sets forth information concerning the
compensation of the Trustees and officers of the Trust. None of the
Neuberger & Berman Funds(SERVICEMARK) has any retirement plan for its
trustees or officers.
<TABLE>
<CAPTION>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 10/31/95
------------------------------
Total Compensation from
Aggregate Trusts in the Neuberger
Name and Position Compensation & Berman Fund Complex
with the Trust from the Trust Paid to Trustees
------------------ -------------- ------------------------
<S> <C> <C>
John Cannon $10,500 $20,500
Trustee (2 other investment companies)
Charles DeCarlo $16,750 $33,500
Trustee (2 other investment companies)
Stanley Egener $ 0 $ 0
Chairman of the Board, Chief Executive (9 other investment companies)
Officer, and Trustee
Theresa Havell $0 $ 0
President and Trustee (2 other investment companies)
Barry Hirsch $16,750 $33,500
Trustee (2 other investment companies)
Robert A. Kavesh $15,500 $30,500
Trustee (2 other investment companies)
Harold R. Logan $14,000 $28,000
Trustee (2 other investment companies)
William E. Rulon $15,250 $30,500
Trustee (2 other investment companies)
Candace L. Straight $16,250 $32,000
Trustee (2 other investment companies)
</TABLE>
B-53
<PAGE>
Item 15. Control Persons and Principal Holders of Securities.
--------------------------------------------------------------
As of February 28, 1996, each Portfolio could be deemed to be
under the control of a corresponding series of Neuberger & Berman Income
Funds ("Income Funds"). Specifically, as of that date, (1) Neuberger &
Berman Ultra Short Bond Fund owned 93.77% of the value of the outstanding
interests in Neuberger & Berman Ultra Short Bond Portfolio, (2)
Neuberger & Berman Limited Maturity Bond Fund owned 95.63% of the value of
the outstanding interests in Neuberger & Berman Limited Maturity Bond
Portfolio, (3) Neuberger & Berman Cash Reserves owned 100% of the value of
the outstanding interests in Neuberger & Berman Cash Reserves Portfolio,
(4) Neuberger & Berman Government Money Fund owned 100% of the value of
the outstanding interests in Neuberger & Berman Government Money
Portfolio, (5) Neuberger & Berman New York Insured Intermediate Fund owned
100% of the value of the outstanding interests in Neuberger & Berman New
York Insured Intermediate Portfolio, (6) Neuberger & Berman Municipal
Money Fund owned 100% of the value of the outstanding interests in
Neuberger & Berman Municipal Money Portfolio, and (7) Neuberger & Berman
Municipal Securities Trust owned 100% of the value of the outstanding
interests in Neuberger & Berman Municipal Securities Portfolio. For
Neuberger & Berman Ultra Short Bond Portfolio and Neuberger & Berman
Limited Maturity Bond Portfolio, the remaining interests are owned by a
series of Neuberger & Berman Income Trust ("Income Trust"). So long as a
series of Income Funds or Income Trust or any other investor owns more
than 50% of the value of the outstanding interests in a Portfolio, such
series or investor may take actions without the approval of any other
registered investment company that invests in the Portfolio.
Income Funds and Income Trust have informed the Trust that
whenever a series of either such investment company is requested to vote
on matters pertaining to its corresponding Portfolio, the series affected
will solicit proxies from its shareholders and will vote its interest in
the Portfolio in proportion to the votes cast by the series' shareholders.
It is anticipated that other registered investment companies investing in
any Portfolio will follow the same or a similar practice.
The address of each of the above-described control persons is 605
Third Avenue, 2nd Floor, New York, New York 10158-0180.
Item 16. Investment Advisory and Other Services.
------------------------------------------------
Investment Manager. N&B Management serves as the Portfolios'
investment manager pursuant to a management agreement with the Trust dated
as of July 2, 1993 ("Management Agreement"). The Management Agreement was
approved by the holders of the interests in each such Portfolio (except
Neuberger & Berman New York Insured Intermediate Portfolio) on July 2,
1993 and by the holders of the interests in Neuberger & Berman New York
Insured Intermediate Portfolio on February 1, 1994. That Portfolio was
authorized to become subject to the Management Agreement by vote of the
Trustees on September 30, 1993 and became subject to it on February 1,
1994.
B-54
<PAGE>
The Management Agreement provides, in substance, that N&B Man-
agement will make and implement investment decisions for the Portfolios in
its discretion and will continuously develop an investment program for the
Portfolios' assets. The Management Agreement permits N&B Management to
effect securities transactions on behalf of each Portfolio through
associated persons of N&B Management. The Management Agreement also
specifically permits N&B Management to compensate, through higher
commissions, brokers and dealers who provide investment research and
analysis to the Portfolios, although N&B Management has no current plans
to do so.
N&B Management provides to each Portfolio, without separate cost,
office space, equipment, and facilities and the personnel necessary to
perform executive, administrative, and clerical functions. N&B Management
pays all salaries, expenses, and fees of the officers, Trustees, and
employees of the Trust who are officers, directors, or employees of
N&B Management. Two officers and directors of N&B Management (who also
are partners of Neuberger & Berman) presently serve as Trustees and
officers of the Trust. See "Trustees and Officers" above. Each Portfolio
pays N&B Management a management fee based on the Portfolio's average
daily net assets as described in Part A.
The Management Agreement continues with respect to each Portfolio
for a period of two years after the date the Portfolio became subject
thereto. The Management Agreement is renewable thereafter from year to
year with respect to each Portfolio, so long as its continuance is
approved at least annually (1) by the vote of a majority of the Trustees
who are not "interested persons" of N&B Management or the Trust
("Independent 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 Trustees or by a 1940 Act majority vote of the outstanding interests
in the Portfolio. The Management Agreement is terminable with respect to
a Portfolio without penalty on 60 days' written notice either by the Trust
or by N&B Management. The Management Agreement terminates automatically
if it is assigned.
The total management fees paid by each operating Portfolio
(except Neuberger & Berman New York Insured Intermediate Portfolio) to N&B
Management under the Management Agreement during the fiscal years ended
October 31, 1995 and 1994 were:
<TABLE>
<CAPTION>
PORTFOLIO 1995 1994 1993*
--------- ---- ---- -----
<S> <C> <C> <C>
Neuberger & Berman Government Money Portfolio $745,052 $ 553,360 $ 237,155
Neuberger & Berman Cash Reserves Portfolio $852,207 $ 724,879 $ 215,671
Neuberger & Berman Ultra Short Bond Portfolio $229,072 $ 268,424 $ 85,012
B-55
<PAGE>
PORTFOLIO 1995 1994 1993*
--------- ---- ---- -----
Neuberger & Berman Limited Maturity Bond Portfolio $769,332 $ 835,161 $ 280,096
Neuberger & Berman Municipal Money Portfolio $379,000 $ 412,000 $ 149,367
Neuberger & Berman Municipal Securities Portfolio $110,000 $ 204,000 $ 69,232
* For the period July 2, 1993 (commencement of operations) through
October 31, 1993.
</TABLE>
Total management fees paid by Neuberger & Berman New York Insured
Intermediate Portfolio for the fiscal year ended October 31, 1995 and the
fiscal period February 1, 1994 (commencement of operations) to October 31,
1994 were $29,000 and $28,000, respectively.
Sub-Adviser. N&B Management retains Neuberger & Berman, 605
Third Avenue, New York, NY 10158-3698, as sub-adviser with respect to each
Portfolio pursuant to a sub-advisory agreement dated July 2, 1993 ("Sub-
Advisory Agreement"). The Sub-Advisory Agreement was approved by the
holders of interests of each such Portfolio (except Neuberger & Berman New
York Insured Intermediate Portfolio) on July 2, 1993 and by the holders of
the interests in Neuberger & Berman New York Insured Intermediate
Portfolio on February 1, 1994. That Portfolio was authorized to become
subject to the Sub-Advisory Agreement by vote of the Trustees on September
30, 1993 and became subject to it on February 1, 1994.
The Sub-Advisory Agreement provides in substance that Neuberger &
Berman will furnish to N&B Management, upon reasonable request, investment
recommendations and research that Neuberger & Berman, from time to time,
provides to its partners and employees for use in managing client
accounts. In this manner, N&B Management expects to have available to it,
in addition to research from other professional sources, the capability of
the research staff of Neuberger & Berman. This staff consists of
approximately fourteen investment analysts, each of whom specializes in
studying one or more industries, under the supervision of the Director of
Research, who is also available for consultation with N&B Management. The
Sub-Advisory Agreement provides that N&B Management will pay for the
services rendered by Neuberger & Berman based on the direct and indirect
costs to Neuberger & Berman in connection with those services.
Neuberger & Berman also serves as a sub-adviser for all of the other
mutual funds managed by N&B Management.
The Sub-Advisory Agreement continues with respect to each
Portfolio for a period of two years after the date the Portfolio became
subject thereto, and is renewable thereafter from year to year, subject to
approval of its continuance in the same manner as the Management
Agreement. The Sub-Advisory Agreement is subject to termination, without
penalty, with respect to each Portfolio by the Trustees, by a 1940 Act
majority vote of the outstanding interests in the Portfolio, by
N&B Management, or by Neuberger & Berman on not less than 30 nor more than
60 days' written notice. The Sub-Advisory Agreement also terminates
B-56
<PAGE>
automatically with respect to each Portfolio if it is assigned or if the
Management Agreement terminates with respect to that Portfolio.
Most money managers that come to the Neuberger & Berman
organization have at least fifteen years experience. Neuberger & Berman
and N&B Management employ experienced professionals that work in a
competitive environment.
Investment Companies Managed
----------------------------
N&B Management currently serves as investment manager of the
following investment companies. As of December 31, 1995, these companies,
along with three investment companies advised by Neuberger & Berman, had
aggregate net assets of approximately $11.9 billion, as shown in the
following list:
Approximate
Net Assets at
Name December 31, 1995
---- -----------------
Neuberger & Berman Cash Reserves Portfolio . . . . . . . . $ 433,504,363
(investment portfolio for Neuberger & Berman Cash Reserves)
Neuberger & Berman Government Money Portfolio . . . . . . . $ 275,569,350
(investment portfolio for Neuberger & Berman Government Money Fund)
Neuberger & Berman Limited Maturity Bond Portfolio . . . . $ 318,037,698
(investment portfolio for Neuberger & Berman Limited Maturity Bond
Fund and Neuberger & Berman Limited Maturity Bond Trust)
Neuberger & Berman Ultra Short Bond Portfolio . . . . . . . $102,724,936
(investment portfolio for Neuberger & Berman Ultra Short Bond Fund
and Neuberger & Berman Ultra Short Bond Trust)
Neuberger & Berman Municipal Money Portfolio . . . . . . . $ 152,876,653
(investment portfolio for Neuberger & Berman Municipal Money Fund)
Neuberger & Berman Municipal Securities Portfolio . . . . . $ 43,859,557
(investment portfolio for Neuberger & Berman Municipal Securities
Trust)
Neuberger & Berman New York Insured Intermediate
Portfolio . . . . . . . . . . . . . . . . . . . $ 11,742,945
(investment portfolio for Neuberger & Berman New York Insured
Intermediate Fund)
Neuberger & Berman Focus Portfolio . . . . . . . . . . . $ 1,057,224,027
(investment portfolio for Neuberger & Berman Focus Fund, Neuberger &
Berman Focus Trust, and Neuberger & Berman Focus Assets)
Neuberger & Berman Genesis Portfolio . . . . . . . . . . . $ 152,439,092
B-57
<PAGE>
(investment portfolio for Neuberger & Berman Genesis Fund and
Neuberger & Berman Genesis Trust)
Neuberger & Berman Guardian Portfolio . . . . . . . . . $ 5,321,221,497
(investment portfolio for Neuberger & Berman Guardian Fund, Neuberger
& Berman Guardian Trust, and Neuberger & Berman Guardian Assets)
Neuberger & Berman International Portfolio . . . . . . . $ 33,320,099
(investment portfolio for Neuberger & Berman International Fund)
Neuberger & Berman Manhattan Portfolio . . . . . . . . . $ 638,295,408
(investment portfolio for Neuberger & Berman Manhattan Fund,
Neuberger & Berman Manhattan Trust, and Neuberger & Berman Manhattan
Assets)
Neuberger & Berman Partners Portfolio . . . . . . . . . . $ 1,741,742,815
(investment portfolio for Neuberger & Berman Partners Fund, Neuberger
& Berman Partners Trust, and Neuberger & Berman Partners Assets)
Neuberger & Berman Socially Responsive
Portfolio . . . . . . . . . . . . . . . . . . . . $ 115,240,931
(investment portfolio for Neuberger & Berman Socially Responsive
Fund, Neuberger & Berman Socially Responsive Trust, and Neuberger &
Berman NYCDC Socially Responsive Trust)
Advisers Managers Trust (six series) . . . . . . . . . . $ 1,306,566,805
In addition, Neuberger & Berman serves as investment adviser to
three investment companies, Plan Investment Fund, Inc., AHA Investment
Fund, Inc., and AHA Full Maturity, with assets of $64,302,128, $99,396,468
and $26,077,793, respectively, at December 31, 1995.
The investment decisions concerning the Portfolios and the other
funds and portfolios managed by N&B Management (collectively, "Other N&B
Funds") have been and will continue to be made independently of one
another. In terms of their investment objectives, most of the Other N&B
Funds differ from the Portfolios. Even where the investment objectives
are similar, however, the methods used by the Other N&B Funds and the
Portfolios to achieve their objectives may differ.
There may be occasions when a Portfolio and one or more of the
Other N&B Funds or other accounts managed by Neuberger & Berman are
contemporaneously engaged in purchasing or selling the same securities
from or to third parties. When this occurs, the transactions are averaged
as to price and allocated as to amounts in accordance with a formula
considered to be equitable to the funds involved. Although in some cases
this arrangement may have a detrimental effect on the price or volume of
the securities as to a Portfolio, in other cases it is believed that a
Portfolio's ability to participate in volume transactions may produce
better executions for it. In any case, it is the judgment of the Trustees
that the desirability of the Portfolios' having their advisory
arrangements with N&B Management outweighs any disadvantages that may
B-58
<PAGE>
result from contemporaneous transactions. The investment results achieved
by all of the funds managed by N&B Management have varied from one another
in the past and are likely to vary in the future.
Management and Control of N&B Management
----------------------------------------
The directors and officers of N&B Management, all of whom have
offices at the same address as N&B Management, are Richard A. Cantor,
Chairman of the Board and director; Stanley Egener, President and
director; Theresa A. Havell, Vice President and director; Irwin Lainoff,
director; Marvin C. Schwartz, 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; Robert Conti, Treasurer; William Cunningham, Vice
President; Clara Del Villar, Vice President; Mark R. Goldstein, Vice
President; Farha-Joyce Haboucha, Vice President; Michael M. Kassen, Vice
President; Michael Lamberti, Vice President; Josephine P. Mahaney, Vice
President; Lawrence Marx III, Vice President; Ellen Metzger, Vice
President and Secretary; Janet W. Prindle, Vice President; Felix Rovelli,
Vice President; Richard Russell, Vice President; Kent C. Simons, Vice
President; Frederick B. Soule, Vice President; Judith M. Vale, Vice
President; Thomas Wolfe, Vice President; Andrea Trachtenberg, Vice
President of Marketing; Patrick T. Byrne, Assistant Vice President; Stacy
Cooper-Shugrue, Assistant Vice President; Robert Cresci, Assistant Vice
President; Barbara DiGiorgio, Assistant Vice President; Roberta D'Orio,
Assistant Vice President; Robert I. Gendelman, Assistant Vice President;
Joseph G. Galli, Assistant Vice President; Leslie Holliday-Soto, Assistant
Vice President; Jody L. Irwin, Assistant Vice President; Carmen G.
Martinez, Assistant Vice President; Paul Metzger, Assistant Vice
President; Susan Switzer, Assistant Vice President; Susan Walsh, Assistant
Vice President; and Celeste Wischerth, Assistant Vice President. Messrs.
Cantor, Egener, Lainoff, Schwartz, Zicklin, Goldstein, Kassen, Marx, and
Simons and Mmes. Havell and Prindle are general partners of Neuberger &
Berman.
Ms. Havell and Mr. Egener are Trustees and officers, and Messrs.
Sullivan, Weiner, and Russell and Mmes. Brandon and Cooper-Shugrue are
officers, of the Trust. C. Carl Randolph, a general partner of Neuberger
& Berman, also is an officer of the Trust.
All of the outstanding voting stock in N&B Management is owned by
persons who are also general partners of Neuberger & Berman.
Custodian. Each Portfolio has selected State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, as
custodian for its securities and cash.
Independent Auditors. Each Portfolio has selected Ernst & Young
LLP as the independent auditors who will audit its financial statements.
The principal business address of Ernst & Young LLP is 200 Clarendon
Street, Boston, Massachusetts 02116.
B-59
<PAGE>
Legal Counsel. Each Portfolio has selected Kirkpatrick &
Lockhart LLP, 1800 Massachusetts Avenue, N.W., Washington, D.C. 20036, as
its legal counsel.
Item 17. Brokerage Allocation and Other Practices.
--------------------------------------------------
Purchases and sales of portfolio securities generally are
transacted with issuers, underwriters, or dealers that serve as primary
market-makers, who act as principals for the securities on a net basis.
The Portfolios usually do not pay brokerage commissions for such purchases
and sales. Instead, the price paid for newly issued securities typically
includes a concession or discount paid by the issuer to the underwriter,
and the prices quoted by market-makers reflect a spread between the bid
and the asked prices from which the dealer derives a profit.
In purchasing and selling portfolio securities other than as
described above (for example, in the secondary market), each Portfolio
seeks to obtain best execution at the most favorable prices through
responsible broker-dealers and, in the case of agency transactions, at
competitive commission rates. In selecting broker-dealers to execute
transactions, N&B Management considers such factors as the price of the
security, the rate of commission, the size and difficulty of the order,
and the reliability, integrity, financial condition, and general execution
and operational capabilities of competing broker-dealers. N&B Management
also may consider the brokerage and research services that broker-dealers
provide to the Portfolio or N&B Management. Under certain conditions, a
Portfolio may pay higher brokerage commissions in return for brokerage and
research services, although no Portfolio has a current arrangement to do
so. In any case, each Portfolio may effect principal transactions with a
dealer who furnishes research services, designate any dealer to receive
selling concessions, discounts, or other allowances, or otherwise deal
with any dealer in connection with the acquisition of securities in
underwritings.
During the fiscal year ended October 31, 1995, Neuberger & Berman
Ultra Short Bond Portfolio acquired securities of the following "regular
brokers or dealers" (as defined in the 1940 Act): Canadian Imperial Bank
of Commerce, Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith
Inc., and Morgan Stanley & Co. Inc. At October 31, 1995, that Portfolio
held none of the securities of its "regular brokers or dealers."
During the fiscal year ended October 31, 1995, Neuberger & Berman
Limited Maturity Bond Portfolio acquired securities of the following
"regular brokers or dealers": Canadian Imperial Bank of Commerce. At
October 31, 1995, that Portfolio held none of the securities of its
"regular brokers or dealers."
During the fiscal year ended October 31, 1995, Neuberger & Berman
Cash Reserves Portfolio acquired securities of the following "regular
brokers or dealers": Canadian Imperial Bank of Commerce, Goldman, Sachs &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Morgan
Stanley & Co. Inc.; at October 31, 1995, that Portfolio held the
B-60
<PAGE>
securities of its "regular brokers or dealers" with an aggregate value as
follows: Goldman Sachs & Co.: $5,862,022 and Morgan Stanley & Co. Inc.:
$5,931,360.
During the fiscal year ended October 31, 1995, Neuberger & Berman
Government Money, Neuberger & Berman Municipal Money, Neuberger & Berman
Municipal Securities, and Neuberger & Berman New York Insured Intermediate
Portfolios acquired none of the securities of their "regular brokers or
dealers." At October 31, 1995, these Portfolios held none of the
securities of their "regular brokers or dealers."
No affiliate of any Portfolio receives give-ups or reciprocal
business in connection with its portfolio transactions. No Portfolio
effects transactions with or through broker-dealers in accordance with any
formula or for selling shares of any investment company that invests in
the Portfolio. However, broker-dealers who effect or execute portfolio
transactions may from time to time effect purchases of shares of
investment companies that invest in a Portfolio for their customers. The
1940 Act generally prohibits Neuberger & Berman from acting as principal
in the purchase or sale of securities for a Portfolio's account unless an
appropriate exemption is available.
Item 18. Capital Stock and Other Securities.
--------------------------------------------
Each investor in a Portfolio is entitled to a vote in proportion
to the amount of its investment therein. Investors in the Portfolios will
all vote together in certain circumstances (e.g., election of the Trustees
and ratification of the selection of auditors, as provided by the 1940 Act
and the rules thereunder). One or more Portfolios could control the
outcome of these votes. Investors do not have cumulative voting rights,
and investors holding more than 50% of the aggregate beneficial interests
in the Trust or in a Portfolio, as the case may be, may control the
outcome of votes. The Trust is not required and has no current intention
to hold annual meetings of investors, but the Trust will hold special
meetings of investors when (1) a majority of the Trustees determines to do
so or (2) investors holding at least 10% of the interests in the Trust (or
a Portfolio) request in writing a meeting of investors in the Trust (or
Portfolio).
The Trust, with respect to a Portfolio, may enter into a merger
or consolidation, or sell all or substantially all of its assets, if
approved by a 1940 Act majority vote. A Portfolio may be terminated
(1) upon liquidation and distribution of its assets, if approved by the
vote of at least two-thirds of its investors, or (2) by the Trustees on
written notice to the Portfolio's investors.
The Trust is organized as a trust under the laws of the State of
New York. Investors in a Portfolio will be held personally liable for its
obligations and liabilities, subject, however, to indemnification by the
Trust in the event that there is imposed upon an investor a greater
portion of the liabilities and obligations than its proportionate
B-61
<PAGE>
beneficial interest. The Declaration of Trust also provides that the
Trust shall maintain appropriate insurance (for example, fidelity bonding
and errors and omissions insurance) for the protection of the Portfolios,
investors, Trustees, officers, employees, and agents covering possible
tort and other liabilities. Thus, the risk of an investor incurring
financial loss on account of such liability is limited to circumstances in
which the Portfolio had inadequate insurance and was unable to meet its
obligations out of its assets.
The Declaration of Trust further provides that obligations of a
Portfolio are not binding upon the Trustees individually but only upon the
property of the Portfolio and that the Trustees will not be liable for any
action or failure to act; however, nothing in the Declaration of Trust
protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
Upon liquidation or dissolution of any Portfolio, the investors
therein would be entitled to share pro rata in its net assets available
for distribution to investors.
Item 19. Purchase, Redemption and Pricing of Securities.
--------------------------------------------------------
Beneficial interests in the Portfolios are issued solely in
private placement transactions that do not involve any "public offering"
within the meaning of Section 4(2) of the 1933 Act. See Items 4, 7, and 8
in Part A.
Each of Neuberger & Berman Government Money Portfolio,
Neuberger & Berman Cash Reserves Portfolio, and Neuberger & Berman
Municipal Money Portfolio relies on Rule 2a-7 under the 1940 Act to use
the amortized cost method of valuation to stabilize the purchase and
withdrawal price of investors' interests. This method involves valuing
portfolio securities at their cost at the time of purchase and thereafter
assuming a constant amortization (or accretion) to maturity of any premium
(or discount), regardless of the impact of interest rate fluctuations on
the market value of the securities. Although reliance on Rule 2a-7 should
enable investment companies that invest in these Portfolios to maintain a
stable $1.00 share price, there can be no assurance they will be able to
do so. An investment in such investment companies, as in any mutual fund,
is neither insured nor guaranteed by the U.S. Government.
Futures Contracts are marked to market daily, and options thereon
are valued at their latest sale price on the applicable exchange prior to
pricing. If, for any such option, there is no sale on that day prior to
pricing, it is valued at its bid price at that time; except that, if
N&B Management believes that bid price does not accurately reflect the
option's value at the time of pricing, it is valued at fair value, as
determined in accordance with procedures approved by the Trustees. All
other securities and assets, including illiquid securities, are valued in
good faith in a manner designed to reflect their fair value, in accordance
with procedures approved by the Trustees.
B-62
<PAGE>
Item 20. Tax Status.
--------------------
The Portfolios (except Neuberger & Berman New York Insured
Intermediate Portfolio) have received a ruling from the Internal Revenue
Service ("Service") to the effect that, among other things, each Portfolio
will be treated as a separate partnership for federal income tax purposes
and will not be a "publicly traded partnership." Although this ruling may
not be relied on as precedent by Neuberger & Berman New York Insured
Intermediate Portfolio, N&B Management believes the reasoning thereof and,
hence, this conclusion apply to that Portfolio as well. As a result, no
Portfolio is subject to federal income tax; instead, each investor in a
Portfolio is required to take into account in determining its federal
income tax liability its share of the Portfolio's income, gains, losses,
deductions, and credits, without regard to whether it has received any
cash distributions from the Portfolio. Each Portfolio also is not subject
to Delaware or New York income or franchise tax.
Because each investor in a Portfolio that intends to qualify as a
RIC for federal income tax purposes ("RIC investor") is deemed to own a
proportionate share of the Portfolio's assets and income for purposes of
determining whether the investor satisfies the requirements to so qualify,
each Portfolio intends to continue to conduct its operations so that its
RIC investors will continue to be able to satisfy such requirements.
Distributions to an investor from a Portfolio (whether pursuant
to a partial or complete withdrawal or otherwise) will not result in the
investor'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 investor'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 investor's entire interest in
the Portfolio and includes a disproportionate share of any unrealized
receivables held by the Portfolio, (3) loss will be recognized if a
liquidation distribution consists solely of cash and/or unrealized
receivables, and (4) gain or loss may be recognized on a distribution to
an investor that contributed property to a Portfolio. An investor's basis
for its interest in a Portfolio generally equals the amount of cash and
the basis of any property it invests in the Portfolio, increased by the
investor's share of the Portfolio's net income and gains and decreased by
(a) the amount of cash and the basis of any property the Portfolio
distributes to the investor and (b) the investor's share of the Port-
folio's losses.
Dividends and interest received by a Portfolio may be subject to
income, withholding, or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield on its securities. Tax treaties
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 use of hedging strategies, such as writing (selling) and
purchasing Futures Contracts and options and entering into Forward
B-63
<PAGE>
Contracts, by Neuberger & Berman Ultra Short Bond Portfolio, Neuberger &
Berman Limited Maturity Bond Portfolio, Neuberger & Berman Municipal
Securities Portfolio and Neuberger & Berman New York Insured Intermediate
Portfolio ("Hedging Portfolios") involves complex rules that will
determine for income tax purposes the character and timing of recognition
of the gains and losses the Hedging Portfolios realize in connection
therewith. For Neuberger & Berman Limited Maturity Bond Portfolio, income
from foreign currencies (except certain gains therefrom that may be
excluded by future regulations), and, for each Hedging Portfolio, income
from transactions in Hedging Instruments derived by the Portfolio with
respect to its business of investing in securities or (except for
Neuberger & Berman Municipal Securities and Neuberger & Berman New York
Insured Intermediate Portfolios) foreign currencies, will qualify as
permissible income for the Portfolio's RIC investors under a requirement
applicable to RICs regarding permissible sources of income. However, for
certain of the Portfolio's RIC investors, income from the disposition by a
Hedging Portfolio of Hedging Instruments (other than those on foreign
currencies) will be subject to a limit on income that may be derived by a
RIC from certain short-term investments ("Short-Short Limitation") if they
are held for less than three months. Income from the disposition of
foreign currencies, and Hedging Instruments on foreign currencies, that
are not directly related to a Portfolio's principal business of investing
in securities (or options and Futures with respect thereto) also will be
subject to the Short-Short Limitation if they are held for less than three
months.
If a Hedging Portfolio satisfies certain requirements, any
increase in value of a position that is part of a "designated hedge" will
be offset by any decrease in value (whether realized or not) of the
offsetting hedging position during the period of the hedge for purposes of
determining whether the Portfolio's RIC investors satisfy the Short-Short
Limitation. Thus, only the net gain (if any) from the designated hedge
will be included in gross income for purposes of that limitation. Each
Hedging Portfolio will consider whether it should seek to qualify for this
treatment for its hedging transactions. To the extent a Portfolio does
not so qualify, it may be forced to defer the closing out of certain
Hedging Instruments beyond the time when it otherwise would be
advantageous to do so, in order for its RIC investors to qualify or
continue to qualify as RICs.
Exchange-traded Futures Contracts and listed options thereon
constitute "Section 1256 contracts." Section 1256 contracts are required
to be marked to market (that is, treated as having been sold at market
value) at the end of a Portfolio's taxable year. Sixty percent of any
gain or loss recognized as a result of these "deemed sales," and 60% of
any net realized gain or loss from any actual sales, of Section 1256
contracts are treated as long-term capital gain or loss, and the remainder
is treated as short-term capital gain or loss.
Neuberger & Berman Limited Maturity Bond Portfolio, Neuberger &
Berman Municipal Securities Portfolio, Neuberger & Berman Municipal Money
Portfolio, and Neuberger & Berman New York Insured Intermediate Portfolio
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<PAGE>
each may invest in municipal bonds that are purchased with market discount
(that is, at a price less than the bond's principal amount or, in the case
of a bond that was issued with original issue discount ("OID"), a price
less than the amount of the issue price plus accrued OID) ("municipal
market discount bonds"). If a bond's market discount is less than the
product of (1) 0.25% of the redemption price at maturity times (2) the
number of complete years to maturity after the taxpayer acquired the bond,
then no market discount is considered to exist. Gain on the disposition
of a municipal market discount bond purchased by the Portfolio (other than
a bond with a fixed maturity date within one year from its issuance), gen-
erally is treated as ordinary (taxable) income, rather than capital gain,
to the extent of the bond's accrued market discount at the time of
disposition. Market discount on such a bond generally is accrued ratably,
on a daily basis, over the period from the acquisition date to the date of
maturity. In lieu of treating the disposition gain as above, each of
these Portfolios may elect to include market discount in its gross income
currently, for each taxable year to which it is attributable.
Each Portfolio may acquire zero coupon or other securities issued
with OID. As a holder of those securities, each Portfolio (and, through
it, its investors) must take into account the OID that accrues on the
securities during the taxable year, even if it receives no corresponding
payment on the securities during the year. Because each RIC investor in a
Portfolio annually must distribute substantially all of its income
(including its share of the Portfolio's accrued OID) to satisfy the
Distribution Requirement and to avoid imposition of the excise tax, a RIC
investor 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 RIC investor's (or its proportionate share of the Portfolio's)
cash assets or, if necessary, from the proceeds of sales of that
Portfolio's securities. A Portfolio may realize capital gains or losses
from those sales, which would increase or decrease a RIC investor's
investment company taxable income and/or net capital gain (the excess of
net long-term capital gain over net short-term capital loss). In
addition, any such gains may be realized on the disposition of securities
held for less than three months. Because of the Short-Short Limitation,
any such gains would reduce a Portfolio's ability to sell other
securities, or certain Hedging Instruments, held for less than three
months that it might wish to sell in the ordinary course of its portfolio
management.
Item 21. Underwriters.
---------------------
N&B Management, 605 Third Avenue, New York, NY 10158-0180, a New
York corporation that is the Portfolios' investment manager, serves as the
Trust's placement agent. N&B Management receives no compensation for such
placement agent services.
B-65
<PAGE>
Item 22. Calculations of Performance Data.
------------------------------------------
Not applicable.
Item 23. Financial Statements.
------------------------------
Audited financial statements for the Portfolios for the fiscal
year ended October 31, 1995, and the reports of Ernst & Young LLP,
independent auditors, with respect to such financial statements are
incorporated by reference to the Annual Reports to Shareholders of
Neuberger & Berman Income Funds for the period ended October 31, 1995.
B-66
<PAGE>
INCOME MANAGERS TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
-------------------------------------------
(a) Financial Statements
Audited financial statements of the following seven series of
Income Managers Trust, Neuberger & Berman Government Money
Portfolio, Neuberger & Berman Cash Reserves Portfolio,
Neuberger & Berman Ultra Short Bond Portfolio, Neuberger & Berman
Limited Maturity Bond Portfolio, Neuberger & Berman Municipal
Money Portfolio, Neuberger & Berman Municipal Securities
Portfolio, and Neuberger & Berman New York Insured Intermediate
Portfolio, are incorporated into Part B by reference to the
Annual Reports to Shareholders of Neuberger & Berman Income
Funds, File Nos. 2-85229 and 811-3802, Edgar Accession
Nos. 0000898432-95-000451 and 0000898432-95-000452.
(b) Exhibits:
Exhibit
Number Description
------- -----------
(1) (a) Declaration of Trust of Income
Managers Trust. Filed herewith.
(b) Schedule A - Current Series of
Income Managers Trust. Filed
herewith.
(2) By-Laws of Income Managers Trust. Filed
herewith.
(3) Voting Trust Agreement. None.
(4) Specimen Share Certificate. None.
(5) (a)(i) Management Agreement Between
Income Managers Trust and
Neuberger & Berman Management
Incorporated. Incorporated by
Reference to Post-Effective
Amendment No. 21 to Registration
Statement of Neuberger & Berman
Income Funds, File Nos. 2-85229
and 811-3802, Edgar Accession
No. 0000898432-96-000117.
C-1
<PAGE>
(ii) Schedule A - Series of Income
Managers Trust Currently Subject
to the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 21
to Registration Statement of
Neuberger & Berman Income Funds,
File Nos. 2-85229 and 811-3802,
Edgar Accession No. 0000898432-
96-000117.
(iii) Schedule B - Schedule
of Compensation Under
the Management
A g r e e m e n t .
Incorporated by
Reference to Post-
Effective Amendment No.
21 to Registration
Statement of Neuberger
& Berman Income Funds,
File Nos. 2-85229 and
811-3802, Edgar
Accession No.
0000898432-96-000117.
(b)(i) Sub-Advisory Agreement Between
Neuberger & Berman Management
Incorporated and Neuberger &
Berman, L.P. with Respect to
Income Managers Trust.
Incorporated by Reference to
Post-Effective Amendment No. 21
to Registration Statement of
Neuberger & Berman Income Funds,
File Nos. 2-85229 and 811-3802,
Edgar Accession No. 0000898432-
96-000117.
(ii) Schedule A - Series of Income
Managers Trust Currently Subject
to the Sub-Advisory Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 21
to Registration Statement of
Neuberger & Berman Income Funds,
File Nos. 2-85229 and 811-3802,
Edgar Accession No. 0000898432-
96-000117.
(6) Distribution Agreement. None.
C-2
<PAGE>
(7) Bonus, Profit Sharing or Pension Plans.
None.
(8) (a) Custodian Contract Between
Income Managers Trust and State
Street Bank and Trust Company.
Filed herewith.
(b) Schedule A - Approved Foreign
Banking Institutions and
Securities Depositories Under
the Custodian Contract.
Incorporated by Reference to
Post-Effective Amendment No. 21
to Registration Statement of
Neuberger & Berman Income Funds,
File Nos. 2-85229 and 811-3802,
Edgar Accession No. 0000898432-
96-000117.
(9) Form of Transfer Agency Agreement
Between Income Managers Trust and State
Street Bank and Trust Company. To be
Filed by Amendment.
(10) Opinion and Consent of Kirkpatrick & Lockhart on
Securities Matters. None.
(11) Opinions, Appraisals, Rulings and Consents:
Consent of Independent Auditors. None.
(12) Financial Statements Omitted from Prospectus.
None.
(13) Letter of Investment Intent. None.
(14) Prototype Retirement Plan. None.
(15) Plan pursuant to Rule 12b-1. None.
(16) Schedule of Computation of Performance
Quotations. None.
(17) Financial Data Schedule. Filed herewith.
(18) Plan pursuant to Rule 18f-3. None.
Item 25. Persons Controlled By or Under Common Control with Registrant
-----------------------------------------------------------------------
No person is controlled by or under common control with the
Registrant.
C-3
<PAGE>
Item 26. Number of Holders of Securities
-----------------------------------------
The following information is given as of February 28, 1996.
Number
of
Title of Class Record
Holders
-------------- ------
--------
Neuberger & Berman Government Money Portfolio 3
Neuberger & Berman Cash Reserves Portfolio 3
Neuberger & Berman Ultra Short Bond Portfolio 4
Neuberger & Berman Limited Maturity Bond Portfolio 4
Neuberger & Berman Municipal Money Portfolio 3
Neuberger & Berman Municipal Securities Portfolio 3
Neuberger & Berman New York Insured Intermediate Portfolio 3
Item 27. Indemnification
-------------------------
A New York trust may provide in its governing instrument for
indemnification of its officers and trustees from and against all claims
and demands whatsoever. Article V, Section 5.4 of the Declaration of
Trust provides that the Registrant shall indemnify, to the fullest extent
permitted by law (including the Investment Company Act of 1940, as amended
(the "1940 Act")), each trustee, officer, employee, agent or independent
contractor (except in the case of an agent or independent contractor to
the extent expressly provided by written contract) of the Registrant
(including any individual, corporation, partnership, trust, association,
joint venture or other entities, whether or not legal entities, and
governments and agencies and political subdivision thereof ("Person"), who
serves at the Registrant's request as a director, officer or trustee of
another organization in which the Registrant has any interest as a
shareholder, creditor or otherwise) against all liabilities and expenses
(including amounts paid in satisfaction of judgments, in compromise, as
fines and penalties, and as counsel fees) reasonably incurred by such
Person in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, in which such Person may
be involved or with which such Person may be threatened, while in office
or thereafter, by reason of such Person being or having been such a
trustee, officer, employee, agent or independent contractor, except with
respect to any matter as to which such Person shall have been adjudicated
to have acted in bad faith, willful misfeasance, gross negligence or
reckless disregard of such Person's duties, such liabilities and expenses
being liabilities only of the series out of which such claim for
indemnification arises; provided, however, that as to any matter disposed
of by a compromise payment by such Person, pursuant to a consent decree or
otherwise, no indemnification either for such payment or for any other
expenses shall be provided unless there has been a determination that such
Person did not engage in willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such
C-4
<PAGE>
Person's office: (i) by the court or other body approving the settlement
or other disposition; or (ii) based upon a review of readily available
facts (as opposed to a full trial-type inquiry), by written opinion from
independent legal counsel approved by the trustees; or (iii) by a majority
of the trustees who are neither "interested persons" (as defined in the
1940 Act) of the Registrant nor parties to the matter, based upon a review
of readily available facts (as opposed to a full trial-type inquiry). The
rights accruing to any Person under these provisions shall not exclude any
other right to which such Person may be lawfully entitled; provided that
no Person may satisfy any right of indemnity or reimbursement granted in
the Registrant's Declaration of Trust or to which such Person may be
otherwise entitled except out of the Trust Property (as defined in the
Declaration of Trust). The rights of indemnification provided herein may
be insured against by policies maintained by the Registrant. The trustees
may make advance payments in connection with this indemnification,
provided that the indemnified Person shall have given a written
undertaking to reimburse the Registrant in the event it is subsequently
determined that such Person is not entitled to such indemnification, and
provided further that either: (i) such Person shall have provided
appropriate security for such undertaking; or (ii) the Registrant is
insured against losses arising out of any such advance payments; or
(iii) either a majority of the trustees who are neither "interested
persons" (as defined in the 1940 Act) of the Registrant nor parties to the
matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed to
a trial-type inquiry or full investigation), that there is reason to
believe that such Person will not be disqualified from indemnification.
Pursuant to Article V Section 5.1 of the Registrant's Declaration
of Trust, each holder of an interest in a series of the Registrant shall
be jointly and severally liable with every other holder of an interest in
that series (with rights of contribution inter se in proportion to their
respective interests in the series) for the liabilities and obligations of
that series (and of no other series) in the event that the Registrant
fails to satisfy such liabilities and obligations from the assets of that
series; provided, however, that, to the extent assets of that series are
available, the Registrant shall indemnify and hold each holder harmless
from and against any claim or liability to which such holder may become
subject by reason of being or having been a holder of an interest in that
series to the extent that such claim or liability imposes on the Holder an
obligation or liability which, when compared to the obligations and
liabilities imposed on other holders of interests in that series, is
greater than such holder's interest (proportionate share), and shall
reimburse such holder for all legal and other expenses reasonably incurred
by such holder in connection with any such claim or liability. The rights
accruing to a holder under the Registrant's Declaration of Trust shall not
exclude any other right to which such holder may be lawfully entitled, nor
shall anything contained herein restrict the right of the Registrant to
indemnify or reimburse a holder in any appropriate situation even though
not specifically provided herein. Notwithstanding the indemnification
procedure described above, it is intended that each holder of an interest
in a series shall remain jointly and severally liable to the creditors of
C-5
<PAGE>
that series as a legal matter. The liabilities of a particular series and
the right to indemnification granted hereunder to holders of interests in
such series shall not be enforceable against any other series or holders
of interests in any other series.
Section 9 of the Management Agreement between the Registrant and
Neuberger & Berman Management Incorporated ("N&B Management") provides
that neither N&B Management nor any director, officer or employee of N&B
Management performing services for the series of the Registrant at the
direction or request of N&B Management in connection with N&B Management's
discharge of its obligations under the agreement shall be liable for any
error of judgment or mistake of law or for any loss suffered by a series
in connection with any matter to which the agreement relates; provided,
that nothing in the agreement shall be construed (i) to protect N&B
Management against any liability to the Registrant or any series thereof
or its holders to which N&B Management would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of N&B Management's duties, or by reason of N&B Management's
reckless disregard of its obligations and duties under the agreement, or
(ii) to protect any director, officer or employee of N&B Management who is
or was a trustee or officer of the Registrant against any liability to the
Registrant or any series thereof or its holders 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 the Registrant.
Section 1 of the Sub-Advisory Agreement between the Registrant
and Neuberger & Berman, L.P. ("Sub-Adviser") 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, the Sub-Adviser will not be subject to liability for
any act or omission or any loss suffered by any series of the Registrant
or its security holders in connection with the matters to which the
agreement relates.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "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.
C-6
<PAGE>
Item 28. Business and Other Connections of Investment Manager and
Sub-Adviser
There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each
director or officer of N&B Management and each partner of the Sub-Adviser
is, or at any time during the past two years has been, engaged for his or
her own account or in the capacity of director, officer, employee, partner
or trustee.
<TABLE>
<CAPTION>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
<S> <C>
Claudia A. Brandon Secretary, Neuberger & Berman Advisers Management Trust
Vice President, N&B (Delaware business trust); Secretary, Advisers Managers
Management Trust; Secretary, Neuberger & Berman Advisers Management
Trust (Massachusetts business trust) (1); Secretary,
Neuberger & Berman Income Funds; Secretary, Neuberger &
Berman Income Trust; Secretary, Neuberger & Berman
Equity Funds; Secretary, Neuberger & Berman Equity
Trust; Secretary, Income Managers Trust; Secretary,
Equity Managers Trust; Secretary, Global Managers Trust;
Secretary, Neuberger & Berman Equity Assets.
Stacy Cooper-Shugrue Assistant Secretary, Neuberger & Berman Advisers
Assistant Vice President, Management Trust (Delaware business trust); Assistant
N&B Management Secretary, Advisers Managers Trust; Assistant Secretary,
Neuberger & Berman Advisers Management Trust
(Massachusetts business trust) (1); Assistant Secretary,
Neuberger & Berman Income Funds; Assistant Secretary,
Neuberger & Berman Income Trust; Assistant Secretary,
Neuberger & Berman Equity Funds; Assistant Secretary,
Neuberger & Berman Equity Trust; Assistant Secretary,
Income Managers Trust; Assistant Secretary, Equity
Managers Trust; Assistant Secretary, Global Managers
Trust; Assistant Secretary, Neuberger & Berman Equity
Assets.
Robert Cresci Assistant Portfolio Manager, BNP-N&B Global Asset
Assistant Vice President, Management L.P. (joint venture of Neuberger & Berman and
N&B Management Banque Nationale de Paris) (2); Assistant Portfolio
Manager, Vontobel (Swiss bank) (3).
C-7
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
Stanley Egener Chairman of the Board and Trustee, Neuberger & Berman
President and Director, Advisers Management Trust (Delaware business trust);
N&B Management; General Partner, Chairman of the Board and Trustee, Advisers Managers
Neuberger & Berman Trust; Chairman of the Board and Trustee, Neuberger &
Berman Advisers Management Trust (Massachusetts business
trust) (1); Chairman of the Board and Trustee,
Neuberger & Berman Income Funds; Chairman of the Board
and Trustee, Neuberger & Berman Income Trust; Chairman
of the Board and Trustee, Neuberger & Berman Equity
Funds; Chairman of the Board and Trustee, Neuberger &
Berman Equity Trust; Chairman of the Board and Trustee,
Income Managers Trust; Chairman of the Board and
Trustee, Equity Managers Trust; Chairman of the Board
and Trustee, Global Managers Trust; Chairman of the
Board and Trustee, Neuberger & Berman Equity Assets.
Theodore P. Giuliano Executive Vice President and Trustee, Neuberger & Berman
Vice President, N&B Management (4); Income Funds (5); Executive Vice President and Trustee,
General Partner, Neuberger & Berman Neuberger & Berman Income Trust (5); Executive Vice
President and Trustee, Income Managers Trust (5).
Theresa A. Havell President and Trustee, Neuberger & Berman Income Funds;
Vice President and President and Trustee, Neuberger & Berman Income Trust;
Director, N&B Management; President and Trustee, Income Managers Trust.
General Partner, Neuberger & Berman
C. Carl Randolph Assistant Secretary, Neuberger & Berman Advisers
General Partner, Neuberger & Berman Management Trust (Delaware business trust); Assistant
Secretary, Advisers Managers Trust; Assistant Secretary,
Neuberger & Berman Advisers Management Trust
(Massachusetts business trust) (1); Assistant Secretary,
Neuberger & Berman Income Funds; Assistant Secretary,
Neuberger & Berman Income Trust; Assistant Secretary,
Neuberger & Berman Equity Funds; Assistant Secretary,
Neuberger & Berman Equity Trust; Assistant Secretary,
Income Managers Trust; Assistant Secretary, Equity
Managers Trust; Assistant Secretary, Global Managers
Trust; Assistant Secretary, Neuberger & Berman Equity
Assets.
Felix Rovelli Senior Vice President-Senior Equity Portfolio Manager,
Vice President, BNP-N&B Global Asset Management L.P. (joint venture of
N&B Management Neuberger & Berman and Banque Nationale de Paris) (2);
Portfolio Manager, Vontobel (Swiss bank) (6).
C-8
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
Richard Russell Treasurer, Neuberger & Berman Advisers Management Trust
Vice President, (Delaware business trust); Treasurer, Advisers Managers
N&B Management Trust; Treasurer, Neuberger & Berman Advisers Management
Trust (Massachusetts business trust) (1); Treasurer,
Neuberger & Berman Income Funds; Treasurer, Neuberger &
Berman Income Trust; Treasurer, Neuberger & Berman
Equity Funds; Treasurer, Neuberger & Berman Equity
Trust; Treasurer, Income Managers Trust; Treasurer,
Equity Managers Trust; Treasurer, Global Managers Trust;
Treasurer, Neuberger & Berman Equity Assets.
Susan Switzer Portfolio Manager, Mitchell Hutchins Asset Management
Assistant Vice President, Inc. (7).
N&B Management
Daniel J. Sullivan Vice President, Neuberger & Berman Advisers Management
Senior Vice President, N&B Management Trust (Delaware business trust); Vice President,
Advisers Managers Trust; Vice President, Neuberger &
Berman Advisers Management Trust (Massachusetts business
trust) (1); Vice President, Neuberger & Berman Income
Funds; Vice President, Neuberger & Berman Income Trust;
Vice President, Neuberger & Berman Equity Funds; Vice
President, Neuberger & Berman Equity Trust; Vice
President, Income Managers Trust; Vice President, Equity
Managers Trust; Vice President, Global Managers Trust;
Vice President, Neuberger & Berman Equity Assets.
Michael J. Weiner Vice President, Neuberger & Berman Advisers Management
Senior Vice President, N&B Management Trust (Delaware business trust); Vice President,
Advisers Managers Trust; Vice President, Neuberger &
Berman Advisers Management Trust (Massachusetts business
trust) (1); Vice President, Neuberger & Berman Income
Funds; Vice President, Neuberger & Berman Income Trust;
Vice President, Neuberger & Berman Equity Funds; Vice
President, Neuberger & Berman Equity Trust; Vice
President, Income Managers Trust; Vice President, Equity
Managers Trust; Vice President, Global Managers Trust;
Vice President, Neuberger & Berman Equity Assets.
Lawrence Zicklin President and Trustee, Neuberger & Berman Advisers
Director, N&B Management; Management Trust (Delaware business trust); President
General Partner, Neuberger & Berman and Trustee, Advisers Managers Trust; President and
Trustee, Neuberger & Berman Advisers Management Trust
(Massachusetts business trust) (1); President and
Trustee, Neuberger & Berman Equity Funds; President and
Trustee, Neuberger & Berman Equity Trust; President and
Trustee, Equity Managers Trust; President, Global
Managers Trust; President and Trustee, Neuberger &
Berman Equity Assets.
</TABLE>
C-9
<PAGE>
The principal address of N&B Management, Neuberger & Berman, BNP-
N&B Global Asset Management L.P. and of each of the investment companies
named above, is 605 Third Avenue, New York, New York 10158. Other
addresses to be provided by amendment.
__________________
(1) Until April 30, 1995.
(2) Until October 31, 1995.
(3) Until May 1994.
(4) Until November 4, 1994.
(5) Until June 22, 1994.
(6) Until April 1994.
(7) Until 1994.
Item 29. Principal Underwriters
--------------------------------
Not Applicable.
Item 30. Location of Accounts and Records
------------------------------------------
All accounts, books and other documents required to be maintained
by Section 31(a) of the 1940 Act 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 Declaration of Trust and By-laws, minutes of
meetings of the Registrant's Trustees and investors and the Registrant's
policies and contracts, which are maintained at the offices of the
Registrant, 605 Third Avenue, New York, New York 10158.
Item 31. Management Services
-----------------------------
Other than as set forth in Parts A and B of this Registration
Statement, the Registrant is not a party to any management-related service
contract.
Item 32. Undertakings
----------------------
None.
C-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of
1940, the Registrant has duly caused this Amendment No. 4 to its
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York and the
State of New York on the 28th day of February, 1996.
INCOME MANAGERS TRUST
By /s/ Theresa A. Havell
-------------------------
Theresa A. Havell
President
C-11
<PAGE>
<TABLE>
<CAPTION>
INCOME MANAGERS TRUST
REGISTRATION STATEMENT ON FORM N-1A
INDEX TO EXHIBITS
Exhibit Sequentially
Number Description Numbered Pages
------- ----------- --------------
<S> <C> <C>
(1) (a) Declaration of Trust of Income Managers Trust. Filed ____
herewith.
(b) Schedule A - Current Series of Income Managers Trust. ____
Filed herewith.
(2) By-Laws of Income Managers Trust. Filed herewith. ____
(3) Voting Trust Agreement. None. N.A.
(4) Specimen Share Certificate. None. N.A.
(5) (a) (i) Management Agreement Between Income Managers N.A.
Trust and Neuberger & Berman Management
Incorporated. Incorporated by Reference to Post-
Effective Amendment No. 21 to Registration
Statement of Neuberger & Berman Income Funds,
File Nos. 2-85229 and 811-3802, Edgar Accession
No. 0000898432-96-000117.
(ii) Schedule A - Series of Income Managers Trust N.A.
Currently Subject to the Management Agreement.
Incorporated by Reference to Post-Effective
Amendment No. 21 to Registration Statement of
Neuberger & Berman Income Funds, File Nos.
2-85229 and 811-3802, Edgar Accession No.
0000898432-96-000117.
(iii) Schedule B - Schedule of Compensation Under the N.A.
Management Agreement. Incorporated by Reference
to Post-Effective Amendment No. 21 to
Registration Statement of Neuberger & Berman
Income Funds, File Nos. 2-85229 and 811-3802,
Edgar Accession No. 0000898432-96-000117.
(b) (i) Sub-Advisory Agreement Between Neuberger & Berman N.A.
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.
0000898432-96-000117.
C-12
<PAGE>
Exhibit Sequentially
Number Description Numbered Pages
------- ----------- --------------
(ii) Schedule A - Series of Income Managers Trust N.A.
Currently Subject to the Sub-Advisory Agreement.
Incorporated by Reference to Post-Effective
Amendment No. 21 to Registration Statement of
Neuberger & Berman Income Funds, File Nos. 2-
85229 and 811-3802, Edgar Accession No.
0000898432-96-000117.
(6) Distribution Agreement. None. N.A.
(7) Bonus, Profit Sharing or Pension Plans. None. N.A.
(8) (a) Custodian Contract Between Income Managers Trust and ____
State Street Bank and Trust Company. Filed herewith.
(b) Schedule A - Approved Foreign Banking Institutions and
Securities Depositories Under the Custodian Contract. N.A.
Incorporated by Reference to Post-Effective Amendment No.
21 to Registration Statement of Neuberger & Berman Income
Funds, File Nos. 2-85229 and 811-3802, Edgar Accession
No. 0000898432-96-000117.
(9) Form of Transfer Agency Agreement Between Income Managers Trust N.A.
and State Street Bank and Trust Company. To be Filed by
Amendment.
(10) Opinion and Consent of Kirkpatrick & Lockhart on Securities N.A.
Matters. None.
(11) Opinions, Appraisals, Rulings and Consents: Consent of N.A.
Independent Auditors. None.
(12) Financial Statements Omitted from Prospectus. None. N.A.
(13) Letter of Investment Intent. None. N.A.
(14) Prototype Retirement Plan. None. N.A.
(15) Plan pursuant to Rule 12b-1. None. N.A.
(16) Schedule of Computation of Performance Quotations. None. N.A.
(17) Financial Data Schedule. Filed herewith. ____
(18) Plan pursuant to Rule 18f-3. None. N.A.
</TABLE>
C-13
<PAGE>
<PAGE>
INCOME MANAGERS TRUST
DECLARATION OF TRUST
Dated as of December 1, 1992
<PAGE>
DECLARATION OF TRUST
OF
INCOME MANAGERS TRUST
This DECLARATION OF TRUST of Income Managers Trust is
made as of the 1st day of December, 1992 by the parties signatory hereto,
as Trustees (as defined in Section 1.2 hereof).
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a master trust fund
under the law of the State of New York consisting of one or more subtrusts
or series for the investment and reinvestment of assets contributed
thereto; and
WHEREAS, it is proposed that the trust assets be composed
of money and other property contributed to the subtrusts of the trust fund
established hereby, such assets to be held and managed in trust for the
benefit of the holders of beneficial interests in such subtrusts;
NOW, THEREFORE, the Trustees hereby declare that they
will hold in trust all money and other property contributed to the master
trust fund established hereby and will manage and dispose of the same for
the benefit of such holders of beneficial interests and subject to the
provisions hereof, to wit:
ARTICLE I
The Trust
1.1. Name. The name of the master trust fund
established hereby (the "Trust") shall be Income Managers Trust and so far
as may be practicable the Trustees shall conduct the Trust's activities,
execute all documents and sue or be sued under that name, which name (and
the word "Trust" wherever hereinafter used) shall refer to the Trustees as
Trustees, and not individually, and shall not refer to the officers,
employees, agents or independent contractors of the Trust or its holders
of beneficial interests.
1.2. Definitions. As used in this Declaration, the
following terms shall have the following meanings:
"Administrator" shall mean any party furnishing services
to the Trust pursuant to any administration contract described in Section
4.1 hereof.
"Book Capital Account" shall mean, for any Holder (as
hereinafter defined) at any time, the Book Capital Account of the Holder
<PAGE>
at such time with respect to the Holder's beneficial interest in the Trust
Property (as hereinafter defined) of any Series (as hereinafter defined),
determined in accordance with the method established by the Trustees
pursuant to Section 8.1 hereof. Each Holder shall have a separate Book
Capital Account for each such Series.
"Code" shall mean the United States Internal Revenue Code
of 1986, as amended from time to time, as well as any non-superseded
provisions of the Internal Revenue Code of 1954, as amended (or any
corresponding provision or provisions of succeeding law).
"Commission" shall mean the United States Securities and
Exchange Commission.
"Declaration" shall mean this Declaration of Trust as
amended from time to time. References in this Declaration to
"Declaration", "hereof", "herein" and "hereunder" shall be deemed to refer
to this Declaration rather than the article or section in which any such
word appears.
"Fiscal Year" shall mean an annual period determined by
the Trustees which ends on December 31 of each year or on such other day
as is permitted or required by the Code.
"Holders" shall mean as of any particular time all
holders of record of beneficial interests in the Trust Property of any
Series.
"Institutional Investor(s)" shall mean any regulated
investment company, segregated asset account, foreign investment company,
common trust fund, group trust or other investment arrangement, whether
organized within or without the United States of America, other than an
individual, S corporation, partnership or grantor trust beneficially owned
by any individual, S corporation or partnership.
"Interested Person" shall have the meaning given it in
the 1940 Act (as hereinafter defined).
"Interest(s)" shall mean the beneficial interest of a
Holder in the Trust Property of any Series, including all rights, powers
and privileges accorded to Holders by this Declaration, which interest may
be expressed as a percentage, determined by calculating for a particular
Series, at such times and on such basis as the Trustees shall from time to
time determine, the ratio of each Holder's Book Capital Account balance to
the total of all Holders' Book Capital Account balances. Reference
herein to a specified percentage of, or fraction of, Interests, means
Holders whose combined Book Capital Account balances represent such
specified percentage or fraction of the combined Book Capital Account
balances of all, or a specified group of, Holders.
- 3 -
<PAGE>
"Investment Adviser" shall mean any party furnishing
services to one or more Series of the Trust pursuant to any investment
advisory contract described in Section 4.1 hereof.
"Majority Interests Vote" shall mean the vote, at a
meeting of Holders (or Holders of one or more Series as the context may
require), of (A) 67% or more of the Interests present or represented at
such meeting, if Holders of more than 50% of all Interests are present or
represented by proxy, or (B) more than 50% of all Interests, whichever is
less.
"1940 Act" shall mean the United States Investment
Company Act of 1940, as amended from time to time, and the rules and
regulations thereunder.
"Person" shall mean and include individuals,
corporations, partnerships, trusts, associations, joint ventures and other
entities, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"Redemption" shall mean the complete withdrawal of an
Interest of a Holder the result of which is to reduce the Book Capital
Account balance of that Holder to zero, and the term "redeem" shall mean
to effect a Redemption.
"Series" shall mean the subtrusts of the trust fund
established hereby as the same are established and designated pursuant to
Article VI hereof, each of which shall be a separate subtrust.
"Trust" shall mean the master trust fund established
hereby and shall include each Series hereof.
"Trust Property" shall mean as of any particular time any
and all assets or other property, real or personal, tangible or
intangible, which at such time is owned or held by or for the account of
the Trust or the Trustees, each component of which shall be allocated and
belong to a specific Series to the exclusion of all other Series.
"Trustees" shall mean each signatory to this Declaration,
so long as such signatory shall continue in office in accordance with the
terms hereof, and all other individuals who at the time in question have
been duly elected or appointed and have qualified as Trustees in
accordance with the provisions hereof and are then in office, and
reference in this Declaration to a Trustee or Trustees shall refer to such
individual or individuals in their capacity as Trustees hereunder.
- 4 -
<PAGE>
ARTICLE II
Trustees
2.1. Number and Qualification. The number of Trustees
shall be fixed from time to time by action of the Trustees taken as
provided in Section 2.5 hereof; provided, however, that the number of
Trustees so fixed shall in no event be less than two. Any vacancy created
by an increase in the number of Trustees may be filled by the appointment
of an individual having the qualifications described in this Section 2.1
made by action of the Trustees taken as provided in Section 2.5 hereof.
Any such appointment shall not become effective, however, until the
individual named in the written instrument of appointment shall have
accepted in writing such appointment and agreed in writing to be bound by
the terms of this Declaration. No reduction in the number of Trustees
shall have the effect of removing any Trustee from office. Whenever a
vacancy occurs, until such vacancy is filled as provided in Section 2.4
hereof, the Trustees continuing in office, regardless of their number,
shall have all the powers granted to the Trustees and shall discharge all
the duties imposed upon the Trustees by this Declaration. A Trustee shall
be an individual at least 21 years of age who is not under legal
disability.
2.2. Term and Election. Each Trustee named herein, or
elected or appointed prior to the first meeting of Holders, shall (except
in the event of resignations, retirements, removals or vacancies pursuant
to Section 2.3 or Section 2.4 hereof) hold office until a successor to
such Trustee has been elected at such meeting and has qualified to serve
as Trustee, as required under the 1940 Act. Subject to the provisions of
Section 16(a) of the 1940 Act and except as provided in Section 2.3
hereof, each Trustee shall hold office during the lifetime of the Trust
and until its termination as hereinafter provided.
2.3. Resignation. Removal and Retirement. Any Trustee
may resign his or her trust (without need for prior or subsequent
accounting) by an instrument in writing executed by such Trustee and
delivered or mailed to the Chairman, if any, the President or the
Secretary of the Trust and such resignation shall be effective upon such
delivery, or at a later date according to the terms of the instrument.
Any Trustee may be removed with or without cause by the affirmative vote
of Holders of two-thirds of the Interests or (provided the aggregate
number of Trustees, after such removal and after giving effect to any
appointment made to fill the vacancy created by such removal, shall not be
less than the number required by Section 2.1 hereof) by the action of
two-thirds of the remaining Trustees. Any Trustee who has attained a
mandatory retirement age, if any, established pursuant to any written
policy adopted from time to time by a majority of the Trustees shall,
automatically and without action by such Trustee or the remaining
Trustees, be deemed to have retired in accordance with the terms of such
policy, effective as of the date determined in accordance with such
policy. Any Trustee who has become incapacitated by illness or injury as
determined by a majority of the other Trustees, may be retired by written
- 5 -
<PAGE>
instrument executed by a majority of the other Trustees, specifying the
date of such Trustee's retirement. Upon the resignation, retirement or
removal of a Trustee, or a Trustee otherwise ceasing to be a Trustee, such
resigning, retired, removed or former Trustee shall execute and deliver
such documents as the remaining Trustees shall require for the purpose of
conveying to the Trust or the remaining Trustees any Trust Property held
in the name of such resigning, retired, removed or former Trustee. Upon
the death of any Trustee or upon removal, retirement or resignation due to
any Trustee's incapacity to serve as Trustee, the legal representative of
such deceased, removed, retired or resigning Trustee shall execute and
deliver on behalf of such deceased, removed, retired or resigning Trustee
such documents as the remaining Trustees shall require for the purpose set
forth in the preceding sentence.
2.4. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death,
resignation, retirement or removal of a Trustee. No such vacancy shall
operate to annul this Declaration or to revoke any existing agency created
pursuant to the terms of this Declaration. In the case of a vacancy,
Holders of at least a majority of the Interests entitled to vote, acting
at any meeting of Holders held in accordance with Section 9.2 hereof, or,
to the extent permitted by the 1940 Act, a majority vote of the Trustees
continuing in office acting by written instrument or instruments, may fill
such vacancy, and any Trustee so elected by the Trustees or the Holders
shall hold office as provided in this Declaration. The Trustees may
appoint a new Trustee as provided above in anticipation of a vacancy
expected to occur because of the retirement, resignation or removal of a
Trustee, or an increase in number of Trustees, provided that such
appointment shall become effective only when or after the expected vacancy
occurs. As soon as any Trustee has accepted his appointment in writing,
the Trust estate shall vest in the new Trustee, together with the
continuing Trustees, without any further act or conveyance, and he or she
shall be deemed a Trustee hereunder. The power of appointment is subject
to Section 16(a) of the 1940 Act.
2.5. Meetings. Meetings of the Trustees shall be held
from time to time upon the call of the Chairman, if any, the President,
the Secretary, an Assistant Secretary or any two Trustees. Regular
meetings of the Trustees may be held without call or notice at a time and
place fixed by the By-Laws or by resolution of the Trustees. Notice of
any other meeting shall be mailed or otherwise given not less than 24
hours before the meeting but may be waived in writing by any Trustee
either before or after such meeting. The attendance of a Trustee at a
meeting shall constitute a waiver of notice of such meeting except in the
situation in which a Trustee attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the
meeting was not lawfully called or convened. The Trustees may act with or
without a meeting. A quorum for all meetings of the Trustees shall be a
majority of the Trustees. Unless provided otherwise in this Declaration,
any action of the Trustees may be taken at a meeting by vote of a majority
of the Trustees present (a quorum being present) or without a meeting by
written consent of a majority of the Trustees.
- 6 -
<PAGE>
Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum for all
meetings of any such committee shall be a majority of the members thereof.
Unless provided otherwise in this Declaration, any action of any such
committee may be taken at a meeting by vote of a majority of the members
present (a quorum being present) or without a meeting by written consent
of a majority of the members.
Any notice, waiver or written consent hereunder may be
provided and delivered to the Trust or a Trustee by facsimile or other
similar electronic mechanism.
With respect to actions of the Trustees and any committee
of the Trustees, Trustees who are Interested Persons of the Trust or
otherwise interested in any action to be taken may be counted for quorum
purposes under this Section 2.5 and shall be entitled to vote to the
extent permitted by the 1940 Act.
All or any one or more Trustees may participate in a
meeting of the Trustees or any committee thereof by means of a conference
telephone or similar communications equipment by means of which all
individuals participating in the meeting can hear each other and
participation in a meeting by means of such communications equipment shall
constitute presence in person at such meeting.
Any Trustee may, by power of attorney, delegate his or
her powers as Trustee for a period not exceeding six months at any one
time to any other Trustee or Trustees.
2.6. Officers; Chairman of the Board. The Trustees
shall, from time to time, elect a President, a Secretary and a Treasurer.
The Trustees may elect or appoint, from time to time, a Chairman of the
Board who shall preside at all meetings of the Trustees and carry out such
other duties as the Trustees may designate. The Trustees may elect or
appoint or authorize the President to appoint such other officers, agents
or independent contractors with such powers as the Trustees may deem to be
advisable. The Chairman, if any, shall be and each other officer may, but
need not, be a Trustee.
2.7. By-Laws. The Trustees may adopt and, from time to
time, amend or repeal By-Laws for the conduct of the business of the
Trust.
ARTICLE III
Powers of Trustees
3.1. General. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the
Trust and each Series to the same extent as if the Trustees were the sole
owners of the Trust Property and such business in their own right, but
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with such powers of delegation as may be permitted by this Declaration.
The Trustees may perform such acts as in their sole discretion they deem
proper for conducting the business of the Trust and any Series. The
enumeration of or failure to mention any specific power herein shall not
be construed as limiting such exclusive and absolute control. The powers
of the Trustees may be exercised without order of or resort to any court.
3.2. Investments. The Trustees shall have the power
with respect to the Trust and each Series to:
(a) conduct, operate and carry on the business of
an investment company;
(b) subscribe for, invest in, reinvest in,
purchase or otherwise acquire, hold, pledge, sell, assign, transfer,
exchange, distribute or otherwise deal in or dispose of United States and
foreign currencies and related instruments including forward contracts,
and securities, including common and preferred stock, warrants, bonds,
debentures, time notes and all other evidences of indebtedness, negotiable
or non-negotiable instruments, obligations, certificates of deposit or
indebtedness, commercial paper, repurchase agreements, reverse repurchase
agreements, convertible securities, options, futures contracts, and other
securities, including, without limitation, those issued, guaranteed or
sponsored by any state, territory or possession of the United States and
the District of Columbia and their political subdivisions, agencies and
instrumentalities, or by the United States Government, any foreign
government, or any agency, instrumentality or political subdivision of the
United States Government or any foreign government, or any
international instrumentality, or by any bank, savings institution,
corporation or other business entity organized under the laws of the
United States or under any foreign laws; and to exercise any and all
rights, powers and privileges of ownership or interest in respect of any
and all such investments of any kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto,
with power to designate one or more Persons to exercise any of such
rights, powers and privileges in respect of any of such investments; and
the Trustees shall be deemed to have the foregoing powers with respect to
any additional instruments in which the Trustees may determine to invest.
The Trustees shall not be limited to investing in
obligations maturing before the possible termination of the Trust, nor
shall the Trustees be limited by any law limiting the investments which
may be made by fiduciaries.
3.3. Legal Title. Legal title to all Trust Property
shall be vested in the Trustees as joint tenants except that the Trustees
shall have the power to cause legal title to any Trust Property to be held
by or in the name of one or more of the Trustees, or in the name of the
Trust or any Series, or in the name or nominee name of any other Person on
behalf of the Trust or any Series, on such terms as the Trustees may
determine.
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The right, title and interest of the Trustees in the
Trust Property shall vest automatically in each individual who may
hereafter become a Trustee upon his due election and qualification. Upon
the resignation, removal or death of a Trustee, such resigning, removed or
deceased Trustee shall automatically cease to have any right, title or
interest in any Trust Property, and the right, title and interest of such
resigning, removed or deceased Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of
title shall be effective whether or not conveyancing documents have been
executed and delivered.
3.4. Sale and Increases of Interests. The Trustees, in
their discretion, may, from time to time, without a vote of the Holders,
permit any Institutional Investor to purchase an Interest in a Series, or
increase such Interest, for such type of consideration, including cash or
property, at such time or times (including, without limitation, each
business day), and on such terms as the Trustees may deem best, and may in
such manner acquire other assets (including the acquisition of assets
subject to, and in connection with the assumption of, liabilities) and
businesses. Individuals, S corporations, partnerships and grantor trusts
that are beneficially owned by any individual, S corporation or
partnership may not purchase Interests. The Trustees, in their
discretion, may refuse to sell an Interest in a Series to any person
without any cause or reason therefor. A Holder which has redeemed its
Interest in a Series may not be permitted to purchase an Interest in such
Series until the later of 60 calendar days after the date of such
Redemption or the first day of the Fiscal Year next succeeding the Fiscal
Year during which such Redemption occurred.
3.5. Decreases and Redemptions of Interests. Subject to
Article VII hereof, the Trustees, in their discretion, may, from time to
time, without a vote of the Holders, permit a Holder to redeem its
Interest in a Series, or decrease such Interest, for either cash or
property, at such time or times (including, without limitation, each
business day), and on such terms as the Trustees may deem best.
3.6. Borrow Money. The Trustees shall have power to
borrow money or otherwise obtain credit and to secure the same by
mortgaging, pledging or otherwise subjecting as security the Trust
Property, including the lending of portfolio securities, and to endorse,
guarantee, or undertake the performance of any obligation, contract or
engagement of any other Person.
3.7. Delegation; Committees. The Trustees shall have
power, consistent with their continuing exclusive and absolute control
over the Trust Property and over the business of the Trust or any Series,
to delegate from time to time to such of their number or to officers,
employees, agents or independent contractors of the Trust or any Series
the doing of such things and the execution of such instruments in either
the name of the Trust or any Series or the names of the Trustees or
otherwise as the Trustees may deem expedient.
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3.8. Collection and Payment. The Trustees shall have
power to collect all property due to the Trust or any Series; and to pay
all claims, including taxes, against the Trust Property; to prosecute,
defend, compromise or abandon any claims relating to the Trust or any
Series or the Trust Property; to foreclose any security interest securing
any obligation, by virtue of which any property is owed to the Trust or
any Series; and to enter into releases, agreements and other instruments.
3.9. Expenses. The Trustees shall have power to incur
and pay any expenses from the Trust Property or the assets belonging to a
particular Series which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of this Declaration, and to
pay reasonable compensation from the Trust Property or the assets
belonging to a particular Series to themselves as Trustees. Permitted
expenses of the Trust or a particular Series include, but are not limited
to, interest charges, taxes, brokerage fees and commissions; expenses of
sales, increases, decreases or redemptions of Interests; certain insurance
premiums; applicable fees, interest charges and expenses of third parties,
including the Trust's investment advisers, managers, administrators,
placement agents, custodians transfer agents and fund accountants; fees of
pricing, interest, dividend, credit and other reporting services; costs of
membership in trade associations; telecommunications expenses; costs of
forming the Trust and its Series and maintaining its existence; costs of
preparing and printing the registration statements and Holder reports of
the Trust and each Series and delivering them to Holders; expenses of
meetings of Holders; costs of maintaining books and accounts; costs of
reproduction, stationery and supplies; fees and expenses of the Trustees;
compensation of the Trust's officers and employees and costs of other
personnel performing services for the Trust or any Series; costs of
Trustee meetings; Commission registration fees and related expenses; state
or foreign securities laws registration fees and related expenses; and for
such non-recurring items as may arise, including litigation to which the
Trust or a Series (or a Trustee or officer of the Trust acting as such) is
a party, and for all losses and liabilities by them incurred in
administering the Trust. The Trustees shall have a lien on the assets
belonging to the appropriate Series, or in the case of an expense
allocable to more than one Series, on the assets of each such Series,
prior to any rights or interests of the Holders thereto, for the
reimbursement to them of such expenses, disbursements, losses and
liabilities. The Trustees shall fix the compensation of all officers,
employees and Trustees. The Trustees may pay themselves such compensation
for special services, including legal and brokerage services, as they in
good faith may deem reasonable, and reimbursement for expenses reasonably
incurred by themselves on behalf of the Trust or any Series.
3.10. Miscellaneous Powers. The Trustees shall have
power to: (a) employ or contract with such Persons as the Trustees may
deem appropriate for the transaction of the business of the Trust or any
Series and terminate such employees or contractual relationships as they
consider appropriate; (b) enter into joint ventures, partnerships and any
other combinations or associations; (c) purchase, and pay for out of Trust
Property, insurance policies insuring the Investment Adviser,
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Administrator, placement agent, Holders, Trustees, officers, employees,
agents or independent contractors of the Trust or any Series against all
claims arising by reason of holding any such position or by reason of any
action taken or omitted by any such Person in such capacity, whether or
not the Trust would have the power to indemnify such Person against such
liability; (d) establish pension, profit-sharing and other retirement,
incentive and benefit plans for the Trustees, officers, employees or
agents of the Trust or any Series; (e) prosecute, defend and settle
lawsuits in the name of the Trust or any Series and pay settlements and
judgments out of the Trust Property; (f) to the extent permitted by law,
indemnify any Person with whom the Trust or any Series has dealings,
including the Investment Adviser, Administrator, placement agent, Holders,
Trustees, officers, employees, agents or independent contractors of the
Trust or any Series, to such extent as the Trustees shall determine; (g)
guarantee indebtedness or contractual obligations of others; (h) determine
and change the Fiscal Year of the Trust or any Series and the method by
which its accounts shall be kept; and (i) adopt a seal for the Trust or
any Series, but the absence of such a seal shall not impair the validity
of any instrument executed on behalf of the Trust or such Series.
3.11. Further Powers. The Trustees shall have power to
conduct the business of the Trust or any Series and carry on its
operations in any and all of its branches and maintain offices, whether
within or without the State of New York, in any and all states of the
United States of America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies, possessions, agencies
or instrumentalities of the United States of America and of foreign
governments, and to do all such other things and execute all such
instruments as they deem necessary, proper, appropriate or desirable in
order to promote the interests of the Trust or any Series although such
things are not herein specifically mentioned. Any determination as to
what is in the interests of the Trust or any Series which is made by the
Trustees in good faith shall be conclusive. In construing the provisions
of this Declaration, the presumption shall be in favor of a grant of power
to the Trustees. The Trustees shall not be required to obtain any court
order in order to deal with Trust Property.
ARTICLE IV
Investment Advisory, Administration
and Placement Agent Arrangements; Custodian
4.1. Investment Advisory and Other Arrangements. The
Trustees may in their discretion, from time to time, enter into investment
advisory and administration contracts or placement agent agreements
whereby the other party to such contract or agreement shall undertake to
furnish with respect to one or more particular Series such investment
advisory, administration, placement agent and/or other services as the
Trustees shall, from time to time, consider appropriate or desirable and
all upon such terms and conditions as the Trustees may in their sole
discretion determine, provided that any investment advisory contract shall
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be subject to a Majority Interests Vote. Notwithstanding any provision of
this Declaration, the Trustees may authorize any Investment Adviser
(subject to such general or specific instructions as the Trustees may,
from time to time, adopt) to employ one or more subadvisers and to effect
purchases, sales, loans or exchanges of Trust Property on behalf of any
Series or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of any
such Investment Adviser (all without any further action by the Trustees).
Any such purchase, sale, loan or exchange shall be deemed to have been
authorized by the Trustees.
4.2. Parties to Contract. Any contract of the character
described in Section 4.1 or Section 4.3 hereof or in the By-Laws of the
Trust may be entered into with any corporation, firm, trust or
association, although one or more of the Trustees or officers of the Trust
may be an officer, director, Trustee, shareholder or member of such other
party to the contract, and no such contract shall be invalidated or
rendered voidable by reason of the existence of any such relationship, nor
shall any individual holding such relationship be liable merely by reason
of such relationship for any loss or expense to the Trust or any Series
under or by reason of any such contract or accountable for any profit
realized directly or indirectly therefrom, provided that the contract when
entered into was reasonable and fair and not inconsistent with the
provisions of this Article IV or the By-Laws. The same Person may be the
other party to one or more contracts entered into pursuant to Section 4.1
or Section 4.3 hereof or the By-Laws, and any individual may be
financially interested or otherwise affiliated with Persons who are
parties to any or all of the contracts mentioned in this Section 4.2 or in
the By-Laws.
4.3. Custodian. The Trustees shall at all times place
and maintain the securities and similar investments of the Trust and of
each Series in custody meeting the requirements of Section 17(f) of the
1940 Act and the rules thereunder. The Trustees, on behalf of the Trust
or any Series, may enter into an agreement with a custodian on terms and
conditions acceptable to the Trustees, providing for the custodian, among
other things, (a) to hold the securities owned by the Trust or any Series
and deliver the same upon written order or oral order confirmed in
writing, (b) to receive and receipt for any moneys due to the Trust or any
Series and deposit the same in its own banking department or elsewhere,
(c) to disburse such funds upon orders or vouchers, and (d) to employ one
or more subcustodians.
4.4. 1940 Act Governance. Any contract referred to in
Section 4.1 hereof shall be consistent with and subject to the applicable
requirements of Section 15 of the 1940 Act and the rules and orders
thereunder with respect to its continuance in effect, its termination, and
the method of authorization and approval of such contract or renewal. No
amendment to a contract referred to in Section 4.1 hereof shall be
effective unless assented to in a manner consistent with the requirements
of Section 15 of the 1940 Act, and the rules and orders thereunder.
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ARTICLE V
Liability of Holders; Limitations of
Liability of Trustees, Officers, etc.
5.1. Liability of Holders; Indemnification. Each
Holder of an Interest in a Series shall be jointly and severally liable
with every other Holder of an Interest in that Series (with rights of
contribution inter se in proportion to their respective Interests in the
Series) for the liabilities and obligations of that Series (and of no
other Series) in the event that the Trust fails to satisfy such
liabilities and obligations from the assets of that Series; provided,
however, that, to the extent assets of that Series are available in the
Trust, the Trust shall indemnify and hold each Holder harmless from and
against any claim or liability to which such Holder may become subject by
reason of being or having been a Holder of an Interest in that Series to
the extent that such claim or liability imposes on the Holder an
obligation or liability which, when compared to the obligations and
liabilities imposed on other Holders of Interests in that Series, is
greater than such Holder's Interest (proportionate share), and shall
reimburse such Holder for all legal and other expenses reasonably incurred
by such Holder in connection with any such claim or liability. The
rights accruing to a Holder under this Section 5.1 shall not exclude any
other right to which such Holder may be lawfully entitled, nor shall
anything contained herein restrict the right of the Trust to indemnify or
reimburse a Holder in any appropriate situation even though not
specifically provided herein. Notwithstanding the indemnification
procedure described above, it is intended that each Holder of an Interest
in a Series shall remain jointly and severally liable to the creditors of
that Series as a legal matter. The liabilities of a particular Series and
the right to indemnification granted hereunder to Holders of Interests in
such Series shall not be enforceable against any other Series or Holders
of Interests in any other Series.
5.2. Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors to Third Parties. No Trustee,
officer, employee, agent or independent contractor (except in the case of
an agent or independent contractor to the extent expressly provided by
written contract) of the Trust or any Series shall be subject to any
personal liability whatsoever to any Person, other than the Trust or the
Holders, in connection with Trust Property or the affairs of the Trust;
and all such Persons shall look solely to the Trust Property for
satisfaction of claims of any nature against a Trustee, officer, employee,
agent or independent contractor (except in the case of an agent or
independent contractor to the extent expressly provided by written
contract) of the Trust arising in connection with the affairs of the
Trust.
5.3. Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors to Trust, Holders, etc. No
Trustee, officer, employee, agent or independent contractor (except in the
case of an agent or independent contractor to the extent expressly
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provided by written contract) of the Trust shall be liable to the Trust or
the Holders for any action or failure to act (including, without
limitation, the failure to compel in any way any former or acting Trustee
to redress any breach of trust) except for such Person's own bad faith,
willful misfeasance, gross negligence or reckless disregard of such
Person's duties.
5.4. Mandatory Indemnification. The Trust shall
indemnify, to the fullest extent permitted by law (including the 1940
Act), each Trustee, officer, employee, agent or independent contractor
(except in the case of an agent or independent contractor to the extent
expressly provided by written contract) of the Trust (including any Person
who serves at the Trust's request as a director, officer or trustee of
another organization in which the Trust has any interest as a shareholder,
creditor or otherwise) against all liabilities and expenses (including
amounts paid in satisfaction of judgments, in compromise, as fines and
penalties, and as counsel fees) reasonably incurred by such Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which such Person may be
involved or with which such Person may be threatened, while in office or
thereafter, by reason of such Person being or having been such a Trustee,
officer, employee, agent or independent contractor, except with respect to
any matter as to which such Person shall have been adjudicated to have
acted in bad faith, willful misfeasance, gross negligence or reckless
disregard of such Person's duties, such liabilities and expenses being
liabilities only of the Series out of which such claim for indemnification
arises; provided, however, that as to any matter disposed of by a
compromise payment by such Person, pursuant to a consent decree or
otherwise, no indemnification either for such payment or for any other
expenses shall be provided unless there has been a determination that such
Person did not engage in willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such
Person's office (i) by the court or other body approving the settlement or
other disposition; or (ii) based upon a review of readily available facts
(as opposed to a full trial-type inquiry), by written opinion from
independent legal counsel approved by the Trustees; or (iii) by a majority
of the Trustees who are neither Interested Persons of the Trust nor
parties to the matter, based upon a review of readily available facts (as
opposed to a full trial-type inquiry). The rights accruing to any Person
under these provisions shall not exclude any other right to which such
Person may be lawfully entitled; provided that no Person may satisfy any
right of indemnity or reimbursement granted in this Section 5.4 or in
Section 5.2 hereof or to which such Person may be otherwise entitled
except out of the Trust Property. The rights of indemnification provided
herein may be insured against by policies maintained by the Trust. The
Trustees may make advance payments in connection with indemnification
under this Section 5.4, provided that the indemnified Person shall have
given a written undertaking to reimburse the Trust in the event it is
subsequently determined that such Person is not entitled to such
indemnification, and provided further that either (i) such Person shall
have provided appropriate security for such undertaking, or (ii) the Trust
is insured against losses arising out of any such advance payments, or
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(iii) either a majority of the Trustees who are neither Interested Persons
of the Trust nor parties to the matter, or independent legal counsel in a
written opinion, shall have determined, based upon a review of readily
available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Person will not
be disqualified from indemnification under this Section 5.4.
5.5. No Bond Required of Trustees. No Trustee shall, as
such, be obligated to give any bond or surety or other security for the
performance of any of such Trustee's duties hereunder.
5.6. No Duty of Investigation; Notice in Trust Instru-
ments, etc. No purchaser, lender or other Person dealing with any
Trustee, officer, employee, agent or independent contractor of the Trust
or any Series shall be bound to make any inquiry concerning the validity
of any transaction purporting to be made by such Trustee, officer,
employee, agent or independent contractor or be liable for the application
of money or property paid, loaned or delivered to or on the order of such
Trustee, officer, employee, agent or independent contractor. Every
obligation, contract, instrument, certificate or other interest or
undertaking of the Trust or any Series, and every other act or thing
whatsoever executed in connection with the Trust or any Series shall be
conclusively taken to have been executed or done by the executors thereof
only in their capacity as Trustees, officers, employees, agents or
independent contractors of the Trust or any Series. Every written
obligation, contract, instrument, certificate or other interest or
undertaking of the Trust or any Series made or sold by any Trustee,
officer, employee, agent or independent contractor of the Trust or any
Series, in such capacity, shall contain an appropriate recital to the
effect that the Trustee, officer, employee, agent or independent
contractor of the Trust or any Series shall not personally be bound by or
liable thereunder, nor shall resort be had to their private property for
the satisfaction of any obligation or claim thereunder, and appropriate
references shall be made therein to the Declaration, and may contain any
further recital which they may deem appropriate, but the omission of such
recital shall not operate to impose personal liability on any Trustee,
officer, employee, agent or independent contractor of the Trust or any
Series. Subject to the provisions of the 1940 Act, the Trust may
maintain insurance for the protection of the Trust Property, the Holders,
and the Trustees, officers, employees, agents and independent contractors
of the Trust and any Series in such amount as the Trustees shall deem
adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable.
5.7. Reliance on Experts, etc. Each Trustee, officer,
employee, agent or independent contractor of the Trust and any Series
shall, in the performance of such Person's duties, be fully and completely
justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other
records of the Trust or any Series (whether or not the Trust or any Series
would have the power to indemnify such Persons against such liability),
upon an opinion of counsel, or upon reports made to the Trust or any
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Series by any of its officers or employees or by any Investment Adviser or
Administrator, accountant, appraiser or other experts or consultants
selected with reasonable care by the Trustees, officers or employees of
the Trust or any Series, regardless of whether such counsel or expert may
also be a Trustee.
5.8. No Repeal or Modification. Any repeal or modifi-
cation of this Article V by the Holders, or adoption or modification of
any other provision of this Declaration or the By-Laws inconsistent with
this Article V, shall be prospective only, to the extent that such repeal
or modification would, if applied retrospectively, adversely affect any
limitation on the liability of any Person or indemnification available to
any indemnified Person with respect to any act or omission which occurred
prior to such repeal, modification or adoption.
ARTICLE VI
Interests
6.1. Interests. The beneficial interest in the Trust
Property shall consist of non-transferable Interests. Interests may be
sold only to Institutional Investors, as may be approved by the Trustees,
for cash or other consideration acceptable to the Trustees, subject to the
requirements of the 1940 Act. The Interests shall be personal property
giving only the rights in this Declaration specifically set forth. The
value of an Interest shall be equal to the Book Capital Account balance of
the Holder of the Interest.
The Trustees shall have authority, from time to time, to
establish Series, each of which shall be a separate subtrust and the
Interests in which shall be separate and distinct from the Interests in
any other Series. The Series shall include, without limitation, the
Series specifically established and designated pursuant to Section 6.2
hereof, and such other Series as the Trustees may deem necessary or
desirable. The Trustees shall have exclusive power without the
requirement of Holder approval to establish and designate such separate
and distinct Series, and, subject to the provisions of this Declaration
and the 1940 Act, to fix and determine the rights of Holders of Interests
in such Series, including with respect to the price, terms and manner of
purchase and redemption, dividends and other distributions, rights on
liquidation, sinking or purchase fund provisions, conversion rights and
conditions under which the Holders of the several Series shall have
separate voting rights or no voting rights.
6.2. Establishment and Designation of Series. The
establishment and designation of any Series shall be effective upon the
execution by the Secretary or an Assistant Secretary of the Trust,
pursuant to authorization by a majority of the Trustees, of an instrument
setting forth such establishment and designation and the relative rights
and preferences of the Interests in such Series, or as otherwise provided
in such instrument. At any time that there are no Interests outstanding
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of any particular Series previously established and designated, the
Trustees may by resolution adopted by a majority of their number, and
evidenced by an instrument executed by the Secretary or an Assistant
Secretary of the Trust, abolish that Series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall
have the status of an amendment to this Declaration of Trust.
Without limiting the authority of the Trustees set forth
above to establish and designate further Series, the Trustees hereby
establish and designate the subtrust or Series set forth on Schedule A
hereto. The Interests in this Series and any Interests in any further
Series that may from time to time be established and designated by the
Trustees shall (unless the Trustees otherwise determine with respect to
some further Series at the time of establishing and designating the same)
have the following relative rights and preferences:
(a) Assets Belonging to Series. All
consideration received by the Trust for the issue or sale of Interests in
a particular Series, together with all assets in which such consideration
is invested or reinvested, all income, earnings, profits, and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
held by the Trustees in a separate trust for the benefit of the Holders of
Interests in that Series and shall irrevocably belong to that Series for
all purposes, and shall be so recorded upon the books of account of the
Trust. Such consideration, assets, income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange
or liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may be, are
herein referred to as "assets belonging to" that Series. No Series shall
have any right to or interest in the assets belonging to any other Series,
and no Holder shall have any right or interest with respect to the assets
belonging to any Series in which it does not hold an Interest.
(b) Liabilities Belonging to Series. The assets
belonging to each particular Series shall be charged with the liabilities
in respect of that Series and all expenses, costs, charges and reserves
attributable to that Series. The liabilities, expenses, costs, charges
and reserves so charged to a Series are herein referred to as "liabilities
belonging to" that Series. No Series shall be liable for or charged with
the liabilities belonging to any other Series, and no Holder shall be
subject to any liabilities belonging to any Series in which it does not
hold an Interest.
(c) Voting. On each matter submitted to a vote
of the Holders, each Holder of an Interest in each Series shall be
entitled to a vote proportionate to its Interest in such Series as
recorded on the books of the Trust and all Holders of Interests in each
Series shall vote as a separate class except as to voting for Trustees and
as otherwise required by the 1940 Act. As to any matter which does not
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affect the interest of a particular Series, only the Holders of Interests
in the one or more affected Series shall be entitled to vote.
6.3. Non-Transferability. A Holder may not transfer its
Interest.
6.4. Register of Interests. A register shall be kept at
the Trust under the direction of the Trustees which shall contain the
name, address and Book Capital Account balance of each Holder in each
Series. Such register shall be conclusive as to the identity of the
Holders. No Holder shall be entitled to receive payment of any
distribution, nor to have notice given to it as herein provided, until it
has given its address to such officer or agent of the Trust as is keeping
such register for entry thereon.
ARTICLE VII
Increases, Decreases And Redemptions of Interests
Subject to applicable law, to the provisions of this
Declaration and to such restrictions as may from time to time be adopted
by the Trustees, each Holder may vary its Interest in any Series at any
time by increasing (through a capital contribution) or decreasing (through
a capital withdrawal) or by a Redemption of its Interest. An increase in
the Interest of a Holder in a Series shall be reflected as an increase in
the Book Capital Account balance of that Holder in that Series and a
decrease in the Interest of a Holder in a Series or the Redemption of the
Interest of that Holder shall be reflected as a decrease in the Book
Capital Account balance of that Holder in that Series. The Trust shall,
upon appropriate and adequate notice from any Holder, increase, decrease
or redeem such Holder's Interest for an amount determined by the
application of a formula adopted for such purpose by resolution of the
Trustees; provided that (a) the amount received by the Holder upon any
such decrease or Redemption shall not exceed the decrease in the Holder's
Book Capital Account balance effected by such decrease or Redemption of
its Interest, and (b) if so authorized by the Trustees, the Trust may, at
any time and from time to time, charge fees for effecting any such
decrease or Redemption, at such rates as the Trustees may establish, and
may, at any time and from time to time, suspend such right of decrease or
Redemption. The procedures for effecting decreases or Redemptions shall
be as determined by the Trustees from time to time.
ARTICLE VIII
Determination of Book Capital Account
Balances and Distributions
8.1. Book Capital Account Balances. The Book Capital
Account balance of Holders with respect to a particular Series shall be
determined on such days and at such time or times as the Trustees may
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determine. The Trustees shall adopt resolutions setting forth the method
of determining the Book Capital Account balance of each Holder. The power
and duty to make calculations pursuant to such resolutions may be
delegated by the Trustees to the Investment Adviser or Administrator,
custodian, or such other Person as the Trustees may determine. Upon the
Redemption of an Interest, the Holder of that Interest shall be entitled
to receive the balance of its Book Capital Account. A Holder may not
transfer its Book Capital Account balance.
8.2. Allocations and Distributions to Holders. The
Trustees shall, in compliance with the Code, the 1940 Act and generally
accepted accounting principles, establish the procedures by which the
Trust shall make with respect to each Series (i) the allocation of
unrealized gains and losses, taxable income and tax loss, and profit and
loss, or any item or items thereof, to each Holder, (ii) the payment of
distributions, if any, to Holders, and (iii) upon liquidation, the final
distribution of items of taxable income and expense. Such procedures
shall be set forth in writing and be furnished to the Trust's accountants.
The Trustees may amend the procedures adopted pursuant to this Section 8.2
from time to time. The Trustees may retain from the net profits of each
Series such amount as they may deem necessary to pay the liabilities and
expenses of that Series.
8.3. Power to Modify Foregoing Procedures. Notwith-
standing any of the foregoing provisions of this Article VIII, the
Trustees may prescribe, in their absolute discretion, such other bases and
times for determining the net income and net assets of the Trust and of
each Series, the allocation of income of the Trust and of each Series, the
Book Capital Account balance of each Holder, or the payment of
distributions to the Holders as they may deem necessary or desirable to
enable the Trust or a Series to comply with any provision of the 1940 Act
or any order of exemption issued by the Commission or with the Code.
ARTICLE IX
Holders
9.1. Rights of Holders. The ownership of the Trust
Property and the right to conduct any business described herein are vested
exclusively in the Trustees, and the Holders shall have no right or title
therein other than the beneficial interest conferred by their Interests
and they shall have no power or right to call for any partition or
division of any Trust Property. In addition, the Holders shall have power
to vote only with respect to (a) the election of Trustees as provided in
Article II, Section 2.4; (b) the removal of Trustees as provided in
Article II, Section 2.3; (c) any investment advisory contract as provided
in Article IV, Section 4.1; (d) dissolution of a Series, to the extent
provided in Article X, Section 10.2; (e) the amendment of this Declaration
to the extent and as provided in Article X, Section 10.4; (f) any merger,
consolidation or sale of assets as provided in Article X, Section 10.5;
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and (9) such additional matters relating to the Trust as may be required
or authorized by law, by this Declaration or the By-Laws or any
registration statement of the Trust filed with the Commission, or as the
Trustees may consider desirable.
9.2. Meetings of Holders. Meetings of Holders may be
called at any time by a majority of the Trustees and shall be called by
any Trustee upon written request of Holders holding, in the aggregate, not
less than 10% of the Interests in a Series (if the meeting relates solely
to that Series), or not less than 10% of the Interests in the Trust (if
the meeting relates to the Trust and not solely to a particular Series),
such request specifying the purpose or purposes for which such meeting is
to be called. Any such meeting shall be held within or without the State
of New York and within or without the United States of America on such day
and at such time as the Trustees shall designate. Holders of at least
one-third of the Interests in the Series (if the meeting relates solely to
that Series) or Holders of at least one-third of the Interests in the
Trust (if the meeting relates to the Trust and not solely to a particular
Series), present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as may otherwise be required by the
1940 Act, other applicable law, this Declaration or the By-Laws. If a
quorum is present at a meeting, an affirmative vote of the Holders
present, in person or by proxy, holding more than 50% of the total
Interests of the Holders present, either in person or by proxy, at such
meeting constitutes the action of the Holders, unless a greater number of
affirmative votes is required by the 1940 Act, other applicable law, this
Declaration or the By-Laws, and except that a plurality of the total
Interests of the Holders present shall elect a Trustee. All or any one or
more Holders may participate in a meeting of Holders by means of a
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other and
participation in a meeting by means of such communications equipment shall
constitute presence in person at such meeting.
9.3. Notice of Meetings. Notice of each meeting of
Holders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail to each Holder of the Series or the Trust,
as the case may be, at its registered address, mailed at least 10 days and
not more than 60 days before the meeting. Notice of any meeting may be
waived in writing by any Holder either before or after such meeting. The
attendance of a Holder at a meeting shall constitute a waiver of notice of
such meeting except in the situation in which a Holder attends a meeting
for the express purpose of objecting to the transaction of any business on
the ground that the meeting was not lawfully called or convened. At any
meeting, any business properly before the meeting may be considered
whether or not stated in the notice of the meeting. Any adjourned meeting
may be held as adjourned without further notice.
9.4. Record Date for Meetings, Distributions, etc. For
the purpose of determining the Holders who are entitled to notice of and
to vote at any meeting, or to participate in any distribution, or for the
purpose of any other action, the Trustees may from time to time fix a
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<PAGE>
date, not more than 90 days prior to the date of any meeting of Holders or
the payment of any distribution or the taking of any other action, as the
case may be, as a record date for the determination of the Persons to be
treated as Holders of the Series or the Trust, as the case may be, for
such purpose.
9.5. Proxies, etc. At any meeting of Holders, any
Holder entitled to vote thereat may vote by proxy, provided that no proxy
shall be voted at any meeting unless it shall have been placed on file
with the Secretary, or with such other officer or agent of the Trust as
the Secretary may direct, for verification prior to the time at which such
vote is to be taken. A proxy may be revoked by a Holder at any time
before it has been exercised by placing on file with the Secretary, or
with such other officer or agent of the Trust as the Secretary may direct,
a later dated proxy or written revocation. Pursuant to a resolution of a
majority of the Trustees, proxies may be solicited in the name of the
Trust or of one or more Trustees or of one or more officers of the Trust.
Only Holders on the record date shall be entitled to vote. Each such
Holder shall be entitled to a vote proportionate to its Interest in the
Series or the Trust, as the case may be. When an Interest is held jointly
by several Persons, any one of them may vote at any meeting in person or
by proxy in respect of such Interest, but if more than one of them is
present at such meeting in person or by proxy, and such joint owners or
their proxies so present disagree as to any vote to be cast, such vote
shall not be received in respect of such Interest. A proxy purporting to
be executed by or on behalf of a Holder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger.
9.6. Reports. The Trustees shall cause to be prepared
and furnished to each Holder, at least annually as of the end of each
Fiscal year, a report of operations containing a balance sheet and a
statement of income of each Series prepared in conformity with generally
accepted accounting principles and an opinion of an independent public
accountant on such financial statements. The Trustees shall, in addition,
with respect to each Series furnish to each Holder at least semi-annually
interim reports of operations containing an unaudited balance sheet as of
the end of such period and an unaudited statement of income for the period
from the beginning of the then-current Fiscal year to the end of such
period.
9.7. Inspection of Records. The records of the Trust
shall be open to inspection by Holders during normal business hours for
any purpose not harmful to the Trust.
9.8. Holder Action by Written Consent. Any action
which may be taken on behalf of the Trust or any Series by Holders may be
taken without a meeting if Holders holding more than 50% of all Interests
entitled to vote (or such larger proportion thereof as shall be required
by any express provision of this Declaration or of applicable law) consent
to the action in writing and the written consents are filed with the
records of the meetings of Holders. Such consents shall be treated for
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all purposes as a vote taken at a meeting of Holders. Each such written
consent shall be executed by or on behalf of the Holder delivering such
consent and shall bear the date of such execution. No such written
consent shall be effective to take the action referred to therein unless,
within one year of the earliest dated consent, written consents executed
by a sufficient number of Holders to take such action are filed with the
records of the meetings of Holders.
9.9. Notices. Any and all communications, including any
and all notices to which any Holder may be entitled, shall be deemed duly
served or given if mailed, postage prepaid, addressed to a Holder at its
last known address as recorded on the register of the Trust or if
delivered to a Holder by courier or by facsimile or other similar
electronic mechanism.
ARTICLE X
Duration; Termination; Dissolution;
Amendment; Mergers; Etc.
10.1. Duration. Subject to possible dissolution or
termination in accordance with the provisions of Section 10.2 and Section
10.3 hereof, respectively, the Trust created hereby shall continue until
the expiration of 20 years after the death of the last survivor of the
initial Trustees named herein and the following named persons:
Name Address Date of Birth
---- ------- -------------
Nelson Stewart Ruble 65 Duck Pond Road 04/10/91
Glen Cove, NY 11542
Shelby Sara Wyetzner 8 Oak Brook Lane 10/18/90
Amanda Jehan Sher 483 Pleasant Street, No. 08/16/89
Coolidge 9, Belmont, MA 02178
David Cornelius Johnson 752 West End Avenue, Apt. 04/10/91
10J, New York, NY 10025
Conner Leahy McCabe 100 Parkway Road, Apt. 3C, 02/22/89
Bronxville, NY 10708
Andrea Hellegers 530 East 84th Street, Apt. 12/22/88
5H, New York, NY 10028
Emilie Blair Ruble 65 Duck Pond Road Glen 02/24/89
Cove, NY 11542
Brian Patrick Lyons 152-48 Jewel Avenue 01/20/89
Flushing, NY 11367
Carolina Bolger Cima 11 Beechwood Lane 12/23/88
Scarsdale, NY 10583
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<PAGE>
or until such later date as may be permitted by the applicable law of the
State of New York.
lO.2. Dissolution. Any Series shall be dissolved (i)
by the affirmative vote of the Holders of not less than two-thirds of the
Interests in the Series at any meeting of the Holders or by an instrument
in writing, without a meeting, signed by a majority of the Trustees and
consented to by the Holders of not less than two-thirds of such Interests,
or (ii) by the Trustees by written notice of dissolution to the Holders of
the Interests in the Series. The Trust shall be dissolved upon the
dissolution of the last remaining Series.
10.3. Termination.
(a) Upon an event of dissolution of the Trust
or a Series, the Trust or Series shall be terminated
in accordance with the following provisions:
(i) the Trust or Series, as applicable, shall
carry on no business except for the purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind up
the affairs of the Trust or Series, as applicable, and all of the powers
of the Trustees under this Declaration shall continue until the affairs of
the Trust or Series have been wound up, including the power to fulfill or
discharge the contracts of the Trust or Series, collect the assets of the
Trust of Series, sell, convey, assign, exchange or otherwise dispose of
all or any part of the Trust Property affected to one or more Persons at
public or private sale for consideration which may consist in whole or in
part of cash, securities or other property of any kind, discharge or pay
the liabilities of the Trust or Series, and do all other acts appropriate
to liquidate the business of the Trust or Series; provided that any sale,
conveyance, assignment, exchange or other disposition of all or
substantially all the Trust Property or substantially all of the assets
belonging to a particular Series, other than for cash, shall require
approval of the principal terms of the transaction and the nature and
amount of the consideration by the vote of Holders holding more than 50%
of the total Interests in the Trust or Series, as applicable; and
(iii) after paying or adequately providing
for the payment of all liabilities of the Trust or of the Series being
terminated, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees shall
distribute the remaining Trust Property of the Trust or Series, as
applicable, in cash or in kind or partly each, among the Holders according
to their respective rights as set forth in the procedures established
pursuant to Section 8.2 hereof.
(b) Upon termination of the Trust or Series
and distribution to the Holders as herein provided, a majority of the
Trustees shall execute and file with the records of the Trust an
instrument in writing setting forth the fact of such termination and
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distribution. Upon termination of the Trust, the Trustees shall thereupon
be discharged from all further liabilities and duties hereunder, and the
rights and interests of all Holders shall thereupon cease.
10.4. Amendment Procedure.
(a) The Trustees may, without any vote of
Holders, amend or otherwise supplement this Declaration by an instrument
in writing executed by a majority of the Trustees, provided that Holders
shall have the right to vote on any amendment (a) which would affect the
voting rights of Holders granted in Article IX, Section 9.1, (b) to this
Section 10.4, (c) required to be approved by Holders by law or by the
Trust's registration statement filed with the Commission, or (d) submitted
to them by the Trustees. Any amendment submitted to Holders which the
Trustees determine would affect the Holders of any Series shall be
authorized by vote of the Holders of such Series and no vote shall be
required of Holders of a Series not affected. Notwithstanding anything
else herein, any amendment to Article V which would have the effect of
reducing the indemnification and other rights provided thereby and any
repeal or amendment of this sentence shall each require the affirmative
vote of the Holders of two-thirds of the Interests entitled to vote
thereon.
(b) No amendment may be made under Section
10.4(a) hereof which would change any rights with respect to any Interest
by reducing the amount payable thereon upon liquidation of the Trust or
any Series or by diminishing or eliminating any voting rights pertaining
thereto, except with the vote or consent of Holders of two-thirds of all
Interests which would be so affected by such amendment.
(c) A certification in recordable form
executed by a majority of the Trustees setting forth an amendment and
reciting that it was duly adopted by the Holders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, in recordable form,
and executed by a majority of the Trustees, shall be conclusive evidence
of such amendment when filed with the records of the Trust.
Notwithstanding any other provision hereof, until such
time as Interests are first sold, this Declaration may be terminated or
amended in any respect by the affirmative vote of a majority of the
Trustees at any meeting of Trustees or by an instrument executed by a
majority of the Trustees.
10.5. Merger, Consolidation and Sale of Assets. The
Trust or any Series may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange
all or substantially all of the Trust Property, or assets belonging to
such Series, as applicable, including good will, upon such terms and
conditions and for such consideration when and as authorized at any
meeting of Holders called for such purpose by Majority Interests Vote of
Interests in the Series affected by such action, or by an instrument in
writing without a meeting, consented to by Holders of not less than a
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<PAGE>
majority of the Interests in the Series affected by such action, and any
such merger, consolidation, sale, lease or exchange shall be deemed for
all purposes to have been accomplished under and pursuant to the law of
the State of New York.
ARTICLE XI
Miscellaneous
11.1. Certificate of Designation; Agent for Service
of Process. If required by New York law, the Trust shall file, with the
Department of State of the State of New York, a certificate, in the name
of the Trust and executed by an officer of the Trust, designating the
Secretary of State of the State of New York as an agent upon whom process
in any action or proceeding against the Trust or any Series may be served.
11.2. Governing Law. This Declaration is executed by
the Trustees and delivered in the State of New York and with reference to
the law thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
in accordance with the law of the State of New York and reference shall be
specifically made to the trust law of the State of New York as to the
construction of matters not specifically covered herein or as to which an
ambiguity exists.
11.3. Counterparts. This Declaration may be
simultaneously executed in several counterparts, each of which shall be
deemed to be an original, and such counterparts, together, shall
constitute one and the same instrument, which shall be sufficiently
evidenced by any one such original counterpart.
11.4. Reliance by Third Parties. Any certificate
executed by an individual who, according to the records of the Trust or of
any recording office in which this Declaration may be recorded, appears to
be a Trustee hereunder, certifying to: (a) the number or identity of
Trustees or Holders, (b) the due authorization of the execution of any
instrument or writing, (c) the form of any vote passed at a meeting of
Trustees or Holders, (d) the fact that the number of Trustees or Holders
present at any meeting or executing any written instrument satisfies the
requirements of this Declaration, (e) the form of any By-Laws adopted by
or the identity of any officer elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs
of the Trust, shall be conclusive evidence as to the matters so certified
in favor of any Person dealing with the Trustees.
11.5. Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration are
severable, and if the Trustees shall determine, with the advice of
counsel, that any of such provisions is in conflict with the 1940 Act, or
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<PAGE>
with other applicable law and regulations, the conflicting provision shall
be deemed never to have constituted a part of this Declaration; provided,
however, that such determination shall not affect any of the remaining
provisions of this Declaration or render invalid or improper any action
taken or omitted prior to such determination.
(b) If any provision of this Declaration
shall be held invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provision in any
other jurisdiction or any other provision of this Declaration in any
jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this Declaration
of Trust of Income Managers Trust as of the day and year first above
written.
/s/ Ellen Metzger
-------------------------------
Ellen Metzger
As Trustee and not individually
/s/ Daniel J. Sullivan
-------------------------------
Daniel J. Sullivan
As Trustee and not individually
/s/ Claudia A. Brandon
-------------------------------
Claudia A. Brandon
As Trustee and not individually
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<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I--The Trust . . . . . . . . . . . . . . . . . . . . 2
1.1. Name . . . . . . . . . . . . . . . . . . . . . 2
1.2. Definitions . . . . . . . . . . . . . . . . . 2
ARTICLE II--Trustees . . . . . . . . . . . . . . . . . . . . 5
2.1. Number and Qualification . . . . . . . . . . . 5
2.2. Term and Election . . . . . . . . . . . . . . 5
2.3. Resignation Removal and Retirement . . . . . . 5
2.4. Vacancies . . . . . . . . . . . . . . . . . . 6
2.5. Meetings . . . . . . . . . . . . . . . . . . . 6
2.6. Officers; Chairman of the Board . . . . . . . 7
2.7. By-Laws . . . . . . . . . . . . . . . . . . . 8
ARTICLE III--Powers of Trustees . . . . . . . . . . . . . . . 8
3.1. General . . . . . . . . . . . . . . . . . . . 8
3.2. Investments . . . . . . . . . . . . . . . . . 8
3.3. Legal Title . . . . . . . . . . . . . . . . . 9
3.4. Sale and Increases of Interests . . . . . . . 9
3.5. Decreases and Redemptions of Interests . . . . 10
3.6. Borrow Money . . . . . . . . . . . . . . . . . 10
3.7. Delegation; Committees . . . . . . . . . . . . 10
3.8. Collection and Payment . . . . . . . . . . . . 10
3.9. Expenses . . . . . . . . . . . . . . . . . . . 10
3.10. Miscellaneous Powers . . . . . . . . . . . . . 11
3.11. Further Powers . . . . . . . . . . . . . . . . 12
ARTICLE IV--Investment Advisory, Administration and
Placement Agent Arrangements; Custodian . . . . . 12
4.1. Investment Advisory and Other Arrangements . . 12
4.2. Parties to Contract . . . . . . . . . . . . . 13
4.3. Custodian . . . . . . . . . . . . . . . . . . 13
4.4. 1940 Act Governance . . . . . . . . . . . . . 13
ARTICLE V--Liability of Holders; Limitations of
Liability of Trustees, Officers, etc. . . . . . . 13
5.1. Liability of Holders; Indemnification . . . . 13
5.2. Limitations of Liability of Trustees,
Officers, Employees, Agents, Independent
Contractors to Third Parties . . . . . . . . . 14
5.3. Limitations of Liability of Trustees,
Officers, Employees, Agents, Independent
Contractors to Trust, Holders, etc. . . . . . 14
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<PAGE>
5.4. Mandatory Indemnification . . . . . . . . . . 15
5.5. No Bond Required of Trustees . . . . . . . . . 16
5.6. No Duty of Investigation; Notice in Trust
Instruments, etc. . . . . . . . . . . . . . . 16
5.7. Reliance on Experts, etc. . . . . . . . . . . 17
5.8. No Repeal or Modification . . . . . . . . . . 17
ARTICLE VI--Interests . . . . . . . . . . . . . . . . . . . . 17
6.1. Interests . . . . . . . . . . . . . . . . . . 17
6.2. Establishment and Designation of Series. . . . 18
6.3. Non-Transferability . . . . . . . . . . . . . 19
6.4. Register of Interests . . . . . . . . . . . . 19
ARTICLE VII-- Increases, Decreases And Redemptions of
Interests . . . . . . . . . . . . . . . . . . 19
ARTICLE VIII-- Determination of Book Capital Account
Balances and Distributions . . . . . . . . . . 20
8.1. Book Capital Account Balances . . . . . . . . 20
8.2. Allocations and Distributions to Holders . . . 20
8.3. Power to Modify Foregoing Procedures . . . . . 20
ARTICLE IX--Holders . . . . . . . . . . . . . . . . . . . . . 21
9.1. Rights of Holders . . . . . . . . . . . . . . 21
9.2. Meetings of Holders . . . . . . . . . . . . . 21
9.3. Notice of Meetings . . . . . . . . . . . . . . 22
9.4. Record Date for Meetings,
Distributions, etc. . . . . . . . . . . . . 22
9.5. Proxies, etc. . . . . . . . . . . . . . . . . 22
9.6. Reports . . . . . . . . . . . . . . . . . . . 23
9.7. Inspection of Records . . . . . . . . . . . . 23
9.8. Holder Action by Written Consent . . . . . . . 23
9.9. Notices . . . . . . . . . . . . . . . . . . . 23
ARTICLE X--Duration; Termination; Termination; Dissolution;
Amendment; Mergers; Etc. . . . . . . . . . . . . . . . . . . 24
10.1. Duration . . . . . . . . . . . . . . . . . . 24
lO.2. Dissolution . . . . . . . . . . . . . . . . . 24
10.3. Termination . . . . . . . . . . . . . . . . . 25
10.4. Amendment Procedure . . . . . . . . . . . . . 26
10.5. Merger, Consolidation and Sale of Assets . . 27
ARTICLE XI--Miscellaneous . . . . . . . . . . . . . . . . . . 27
11.1. Certificate of Designation; Agent for
Service of Process . . . . . . . . . . . . . . 27
11.2. Governing Law . . . . . . . . . . . . . . . . 27
11.3. Counterparts . . . . . . . . . . . . . . . . . 27
- ii -
<PAGE>
PAGE
11.4. Reliance by Third Parties . . . . . . . . . . 28
11.5. Provisions in Conflict with Law or
Regulations. . . . . . . . . . . . . . . . . . 28
- iii -
<PAGE>
<PAGE>
INCOME MANAGERS TRUST
SCHEDULE A
INITIAL SERIES
--------------
Neuberger & Berman Cash Reserves Portfolio
Neuberger & Berman Government Money Portfolio
Neuberger & Berman Limited Maturity Bond Portfolio
Neuberger & Berman Municipal Money Portfolio
Neuberger & Berman Municipal Securities Portfolio
Neuberger & Berman Ultra Short Bond Portfolio
ADDITIONAL SERIES
-----------------
Neuberger & Berman New York Insured Intermediate Portfolio
Dated: February 2, 1996
<PAGE>
<PAGE>
INCOME MANAGERS TRUST
BY-LAWS
January 13, 1993
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
PRINCIPAL OFFICE AND SEAL . . . . . . . . . . . . . . . . . 1
Section 1. Principal Office . . . . . . . . . . . . 1
Section 2. Seal . . . . . . . . . . . . . . . . . . 1
ARTICLE II
MEETINGS OF TRUSTEES . . . . . . . . . . . . . . . . . . . . 1
Section 1. Action by Trustees . . . . . . . . . . . 1
Section 2. Compensation of Trustees . . . . . . . . 1
ARTICLE III
COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Establishment . . . . . . . . . . . . . 1
Section 2. Proceedings; Quorum; Action . . . . . . 2
Section 3. Executive Committee . . . . . . . . . . 2
Section 4. Nominating Committee . . . . . . . . . . 2
Section 5. Audit Committee . . . . . . . . . . . . 2
Section 6. Compensation of Committee Members . . . 2
ARTICLE IV
OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1. General . . . . . . . . . . . . . . . . 2
Section 2. Election, Tenure and Qualifications
of Officers . . . . . . . . . . . . . . . 2
Section 3. Vacancies and Newly Created Offices . . 3
Section 4. Removal and Resignation . . . . . . . . 3
Section 5. Chairman . . . . . . . . . . . . . . . . 3
Section 6. President . . . . . . . . . . . . . . . 3
Section 7. Vice President(s) . . . . . . . . . . . 3
Section 8. Treasurer and Assistant Treasurer(s) . . 4
Section 9. Secretary and Assistant Secretaries . . 4
Section 10. Compensation of Officers . . . . . . . . 4
Section 11. Surety Bond . . . . . . . . . . . . . . 4
ARTICLE V
MEETINGS OF INTERESTHOLDERS . . . . . . . . . . . . . . . . 5
Section 1. No Annual Meetings . . . . . . . . . . . 5
Section 2. Special Meetings . . . . . . . . . . . . 5
Section 3. Notice of Meetings; Waiver . . . . . . . 5
Section 4. Adjourned Meetings . . . . . . . . . . . 6
Section 5. Validity of Proxies . . . . . . . . . . 6
Section 6. Record Date . . . . . . . . . . . . . . 7
Section 7. Action Without a Meeting . . . . . . . . 7
ARTICLE VI
INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1. No Interest Certificates . . . . . . . . 7
Section 2. Transfer of Interests . . . . . . . . . 7
- i -
<PAGE>
ARTICLE VII
FISCAL YEAR AND ACCOUNTANT . . . . . . . . . . . . . . . . . 7
Section 1. Fiscal Year . . . . . . . . . . . . . . 7
Section 2. Accountant . . . . . . . . . . . . . . . 7
ARTICLE VIII
AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1. General . . . . . . . . . . . . . . . . 8
Section 2. By Interestholders Only . . . . . . . . 8
ARTICLE IX
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE X
CONFLICT OF INTEREST PROCEDURES . . . . . . . . . . . . . . 9
Section 1. Monitoring and Reporting Conflicts . . . 9
Section 2. Annual Report . . . . . . . . . . . . . 9
Section 3. Resolution of Conflicts . . . . . . . . 9
Section 4. Annual Review . . . . . . . . . . . . . 9
- ii -
<PAGE>
BY-LAWS
OF
INCOME MANAGERS TRUST
These By-laws of Income Managers Trust (the "Trust"), a New York
common law trust, are subject to the Trust Instrument of the Trust dated
December 1, 1992, as from time to time amended, supplemented or restated
(the "Trust Instrument"). Capitalized terms used herein have the same
meanings as in the Trust Instrument.
ARTICLE I
---------
PRINCIPAL OFFICE AND SEAL
-------------------------
Section 1. Principal Office. The principal office of the Trust shall be
located in New York, New York, or such other location as the Trustees
determine. The Trust may establish and maintain other offices and places
of business as the Trustees determine.
Section 2. Seal. The Trustees may adopt a seal for the Trust in such
form and with such inscription as the Trustees determine. Any Trustee or
officer of the Trust shall have authority to affix the seal to any
document.
ARTICLE II
----------
MEETINGS OF TRUSTEES
--------------------
Section 1. Action by Trustees. Trustees may take actions at meetings
held at such places and times as the Trustees may determine, or without
meetings, all as provided in Article II, Section 7, of the Trust
Instrument.
Section 2. Compensation of Trustees. Each Trustee who is neither an
employee of an investment adviser of the Trust or any Series nor an
employee of an entity affiliated with the investment adviser may receive
such compensation from the Trust for services and reimbursement for
expenses as the Trustees may determine.
ARTICLE III
----------
COMMITTEES
----------
Section 1. Establishment. The Trustees may designate one or more
committees of the Trustees, which shall include an Executive Committee, a
Nominating Committee, and an Audit Committee (collectively, the
"Established Committees"). The Trustees shall determine the number of
members of each committee and its powers and shall appoint its members and
its chair. Each committee member shall serve at the pleasure of the
<PAGE>
Trustees. The Trustees may abolish any committee, other than the
Established Committees, at any time. Each committee shall maintain
records of its meetings and report its actions to the Trustees. The
Trustees may rescind any action of any committee, but such rescission
shall not have retroactive effect. The Trustees may delegate to any
committee any of its powers, subject to the limitations of applicable law.
Section 2. Proceedings; Quorum; Action. Each committee may adopt such
rules governing its proceedings, quorum and manner of acting as it shall
deem proper and desirable. In the absence of such rules, a majority of
any committee shall constitute a quorum, and a committee shall act by the
vote of a majority of a quorum.
Section 3. Executive Committee. The Executive Committee shall have all
the powers of the Trustees when the Trustees are not in session. The
Chairman shall be a member and the chair of the Executive Committee. A
majority of the members of the Executive Committee shall be trustees who
are not "interested persons" of the Trust, as defined in the 1940 Act
("Disinterested Trustees").
Section 4. Nominating Committee. The Nominating Committee shall nominate
individuals to serve as Trustees (including Disinterested Trustees), as
members of committees, and as officers of the Trust. The members of the
Committee shall be Disinterested Trustees.
Section 5. Audit Committee. The Audit Committee shall review and
evaluate the audit function, including recommending the selection of
independent certified public accountants for each Series. The members of
the Committee shall be Disinterested Trustees.
Section 6. Compensation of Committee Members. Each committee member who
is a Disinterested Trustee may receive such compensation from the Trust
for services and reimbursement for expenses as the Trustees may determine.
ARTICLE IV
----------
OFFICERS
--------
Section 1. General. The officers of the Trust shall be a Chairman, a
President, one or more Vice Presidents, a Treasurer, and a Secretary, and
may include one or more Assistant Treasurers or Assistant Secretaries and
such other officers ("Other Officers") as the Trustees may determine.
Section 2. Election, Tenure and Qualifications of Officers. The Trustees
shall elect the officers of the Trust, except those appointed as provided
in Section 9 of this Article. Each officer elected by the Trustees shall
hold office until his or her successor shall have been elected and
qualified or until his or her earlier death, inability to serve, or
resignation. Any person may hold one or more offices, except that the
Chairman and the Secretary may not be the same individual. A person who
holds more than one office in the Trust may not act in more than one
- 2 -
<PAGE>
capacity to execute, acknowledge, or verify an instrument required by law
to be executed, acknowledged, or verified by more than one officer. No
officer other than the Chairman need be a Trustee or Interestholder.
Section 3. Vacancies and Newly Created Offices. Whenever a vacancy shall
occur in any office or if any new office is created, the Trustees may fill
such vacancy or new office.
Section 4. Removal and Resignation. Officers serve at the pleasure of
the Trustees and may be removed at any time with or without cause. The
Trustees may delegate this power to the Chairman or President with respect
to any Other Officer. Such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Any officer may resign
from office at any time by delivering a written resignation to the
Trustees, Chairman, or the President. Unless otherwise specified therein,
such resignation shall take effect upon delivery.
Section 5. Chairman. The Chairman shall be the chief executive officer
of the Trust. Subject to the direction of the Trustees, the Chairman
shall have general charge, supervision and control over the Trust's
business affairs and shall be responsible for the management thereof and
the execution of policies established by the Trustees. The Chairman shall
preside at any Interestholders' meetings and at all meetings of the
Trustees and shall in general exercise the powers and perform the duties
of the Chairman of the Trustees. Except as the Trustees may otherwise
order, the Chairman shall have the power to grant, issue, execute or sign
such powers of attorney, proxies, agreements or other documents. The
Chairman also shall have the power to employ attorneys, accountants and
other advisers and agents for the Trust. The Chairman shall exercise such
other powers and perform such other duties as the Trustees may assign to
the Chairman.
Section 6. President. The President shall have such powers and perform
such duties as the Trustees or the Chairman may determine. At the request
or in the absence or disability of the Chairman, the President shall
perform all the duties of the President and, when so acting, shall have
all the powers of the President.
Section 7. Vice President(s). The Vice President(s) shall have such
powers and perform such duties as the Trustees or the Chairman may
determine. At the request or in the absence or disability of the
President, the Vice President (or, if there are two or more Vice
Presidents, then the senior of the Vice Presidents present and able to
act) shall perform all the duties of the President and, when so acting,
shall have all the powers of the President. The Trustees may designate a
Vice President as the principal financial officer of the Trust or to serve
one or more other functions. If a Vice President is designated as
principal financial officer of the Trust, he or she shall have general
charge of the finances and books of the Trust and shall report to the
Trustees annually regarding the financial condition of each Series as soon
as possible after the close of such Series's fiscal year. The Trustees
also may designate one of the Vice Presidents as Executive Vice President.
- 3 -
<PAGE>
Section 8. Treasurer and Assistant Treasurer(s). The Treasurer may be
designated as the principal financial officer or as the principal
accounting officer of the Trust. If designated as principal financial
officer, the Treasurer shall have general charge of the finances and books
of the Trust, and shall report to the Trustees annually regarding the
financial condition of each Series as soon as possible after the close of
such Series' fiscal year. The Treasurer shall be responsible for the
delivery of all funds and securities of the Trust to such company as the
Trustees shall retain as Custodian. The Treasurer shall furnish such
reports concerning the financial condition of the Trust as the Trustees
may request. The Treasurer shall perform all acts incidental to the
office of Treasurer, subject to the Trustees' supervision, and shall
perform such additional duties as the Trustees may designate.
Any Assistant Treasurer may perform such duties of the Treasurer
as the Trustees or the Treasurer may assign, and, in the absence of the
Treasurer, may perform all the duties of the Treasurer.
Section 9. Secretary and Assistant Secretaries. The Secretary shall
record all votes and proceedings of the meetings of Trustees and
Interestholders in books to be kept for that purpose. The Secretary shall
be responsible for giving and serving notices of the Trust. The Secretary
shall have custody of any seal of the Trust and shall be responsible for
the records of the Trust, including the Interest register and such other
books and documents as may be required by the Trustees or by law. The
Secretary shall perform all acts incidental to the office of Secretary,
subject to the supervision of the Trustees, and shall perform such
additional duties as the Trustees may designate.
Any Assistant Secretary may perform such duties of the Secretary
as the Trustees or the Secretary may assign, and, in the absence of the
Secretary, may perform all the duties of the Secretary.
Section 10. Compensation of Officers. Each officer may receive such
compensation from the Trust for services and reimbursement for expenses as
the Trustees may determine.
Section 11. Surety Bond. The Trustees may require any officer or agent
of the Trust to execute a bond (including, without limitation, any bond
required by the 1940 Act and the rules and regulations of the Securities
and Exchange Commission ("Commission")) to the Trust in such sum and with
such surety or sureties as the Trustees may determine, conditioned upon
the faithful performance of his or her duties to the Trust, including
responsibility for negligence and for the accounting of any of the Trust's
property, funds or securities that may come into his or her hands.
- 4 -
<PAGE>
ARTICLE V
---------
MEETINGS OF INTERESTHOLDERS
---------------------------
Section 1. No Annual Meetings. There shall be no annual Interestholders'
meetings, unless required by law.
Section 2. Special Meetings. The Secretary shall call a special meeting
of Interestholders of any Series or Class whenever ordered by the
Trustees.
The Secretary also shall call a special meeting of
Interestholders of any Series or Class upon the written request of
Interestholders owning at least ten percent of the Outstanding Interests
of such Series or Class entitled to vote at such meeting; provided, that
(1) such request shall state the purposes of such meeting and the matters
proposed to be acted on, and (2) the Interestholders requesting such
meeting shall have paid to the Trust the reasonably estimated cost of
preparing and mailing the notice thereof, which the Secretary shall
determine and specify to such Interestholders. If the Secretary fails for
more than thirty days to call a special meeting when required to do so,
the Trustees or the Interestholders requesting such a meeting may, in the
name of the Secretary, call the meeting by giving the required notice.
The Secretary shall not call a special meeting upon the request of
Interestholders of any Series or Class to consider any matter that is
substantially the same as a matter voted upon at any special meeting of
Interestholders of such Series or Class held during the preceding twelve
months, unless requested by the holders of a majority of the Outstanding
Interests of such Series or Class entitled to be voted at such meeting.
A special meeting of Interestholders of any Series or Class shall
be held at such time and place as is determined by the Trustees and stated
in the notice of that meeting.
Section 3. Notice of Meetings; Waiver. The Secretary shall call a
special meeting of Interestholders by giving written notice of the place,
date, time, and purposes of that meeting at least fifteen days before the
date of such meeting. The Secretary may deliver or mail, postage prepaid,
the written notice of any meeting to each Interestholder entitled to vote
at such meeting. If mailed, notice shall be deemed to be given when
deposited in the United States mail directed to the Interestholder at his
or her address as it appears on the records of the Trust.
Section 4. Adjourned Meetings. A Interestholders' meeting may be
adjourned one or more times for any reason, including the failure of a
quorum to attend the meeting. No notice of adjournment of a meeting to
another time or place need be given to Interestholders if such time and
place are announced at the meeting at which the adjournment is taken or
reasonable notice is given to persons present at the meeting, and if the
adjourned meeting is held within a reasonable time after the date set for
the original meeting. Any business that might have been transacted at the
- 5 -
<PAGE>
original meeting may be transacted at any adjourned meeting. If after the
adjournment a new record date is fixed for the adjourned meeting, the
Secretary shall give notice of the adjourned meeting to Interestholders of
record entitled to vote at such meeting. Any irregularities in the notice
of any meeting or the nonreceipt of any such notice by any of the
Interestholders shall not invalidate any action otherwise properly taken
at any such meeting.
Section 5. Validity of Proxies. Subject to the provisions of the Trust
Instrument, Interestholders entitled to vote may vote either in person or
by proxy; provided, that either (1) the Interestholder or his or her duly
authorized attorney has signed and dated a written instrument authorizing
such proxy to act, or (2) the Trustees adopt by resolution an electronic,
telephonic, computerized or other alternative to execution of a written
instrument authorizing the proxy to act, but if a proposal by anyone other
than the officers or Trustees is submitted to a vote of the
Interestholders of any Series or Class, or if there is a proxy contest or
proxy solicitation or proposal in opposition to any proposal by the
officers or Trustees, Interests may be voted only in person or by written
proxy. Unless the proxy provides otherwise, it shall not be valid for
more than eleven months before the date of the meeting. All proxies shall
be delivered to the Secretary or other person responsible for recording
the proceedings before being voted. A proxy with respect to Interests
held in the name of two or more persons shall be valid if executed by one
of them unless at or prior to exercise of such proxy the Trust receives a
specific written notice to the contrary from any one of them. Unless
otherwise specifically limited by their terms, proxies shall entitle the
Interestholder to vote at any adjournment of a Interestholders' meeting.
A proxy purporting to be executed by or on behalf of a Interestholder
shall be deemed valid unless challenged at or prior to its exercise, and
the burden of proving invalidity shall rest on the challenger. At every
meeting of Interestholders, unless the voting is conducted by inspectors,
the chairman of the meeting shall decide all questions concerning the
qualifications of voters, the validity of proxies, and the acceptance or
rejection of votes. Subject to the provisions of the Delaware Business
Trust Act, the Trust Instrument, or these By-laws, the General Corporation
Law of the State of Delaware relating to proxies, and judicial
interpretations thereunder shall govern all matters concerning the giving,
voting or validity of proxies, as if the Trust were a Delaware corporation
and the Interestholders were interestholders of a Delaware corporation.
Section 6. Record Date. The Trustees may fix in advance a date up to
ninety days before the date of any Interestholders' meeting as a record
date for the determination of the Interestholders entitled to notice of,
and to vote at, any such meeting. The Interestholders of record entitled
to vote at a Interestholders' meeting shall be deemed the Interestholders
of record at any meeting reconvened after one or more adjournments, unless
the Trustees have fixed a new record date. If the Interestholders'
meeting is adjourned for more than sixty days after the original date, the
Trustees shall establish a new record date.
- 6 -
<PAGE>
Section 7. Action Without a Meeting. Interestholders may take any action
without a meeting if a majority (or such greater amount as may be required
by law) of the Outstanding Interests entitled to vote on the matter
consent to the action in writing and such written consents are filed with
the records of Interestholders' meetings. Such written consent shall be
treated for all purposes as a vote at a meeting of the Interestholders.
ARTICLE VI
----------
INTERESTS
--------
Section 1. No Interest Certificates. Neither the Trust nor any Series or
Class shall issue certificates certifying the ownership of Interests,
unless the Trustees may otherwise specifically authorize such
certificates.
Section 2. Transfer of Interests. Interests shall be transferable only
by a transfer recorded on the books of the Trust by the Interestholder of
record in person or by his or her duly authorized attorney or legal
representative. Interests may be freely transferred and the Trustees may,
from time to time, adopt rules and regulations regarding the method of
transfer of such Interests.
ARTICLE VII
-----------
FISCAL YEAR AND ACCOUNTANT
--------------------------
Section 1. Fiscal Year. The fiscal year of the Trust shall end on
October 31.
Section 2. Accountant. The Trust shall employ independent certified
public accountants as its Accountant to examine the accounts of the Trust
and to sign and certify financial statements filed by the Trust. The
Accountant's certificates and reports shall be addressed both to the
Trustees and to the Interestholders. A majority of the Disinterested
Trustees shall select the Accountant at any meeting held within ninety
days before or after the beginning of the fiscal year of the Trust, acting
upon the recommendation of the Audit Committee. The Trust shall submit
the selection for ratification or rejection at the next succeeding
Interestholders' meeting, if such a meeting is to be held within the
Trust's fiscal year. If the selection is rejected at that meeting, the
Accountant shall be selected by majority vote of the Trust's outstanding
voting securities, either at the meeting at which the rejection occurred
or at a subsequent meeting of Interestholders called for the purpose of
selecting an Accountant. The employment of the Accountant shall be
conditioned upon the right of the Trust to terminate such employment
without any penalty by vote of a Majority Interestholder Vote at any
Interestholders' meeting called for that purpose.
- 7 -
<PAGE>
ARTICLE VIII
------------
AMENDMENTS
----------
Section 1. General. Except as provided in Section 2 of this Article,
these By-laws may be amended by the Trustees, or by the affirmative vote
of a majority of the Outstanding Interests entitled to vote at any
meeting.
Section 2. By Interestholders Only. After the issue of any Interests,
this Article may only be amended by the affirmative vote of the holders of
the lesser of (a) at least two-thirds of the Outstanding Interests present
and entitled to vote at any meeting, or (b) at least fifty percent of the
Outstanding Interests.
ARTICLE IX
----------
NET ASSET VALUE
--------------
The term "Net Asset Value" of any Series shall mean that amount
by which the assets belonging to that Series exceed its liabilities, all
as determined by or under the direction of the Trustees. Net Asset Value
per Interest shall be determined separately for each Series and shall be
determined on such days and at such times as the Trustees may determine.
The Trustees shall make such determination with respect to securities for
which market quotations are readily available, at the market value of such
securities, and with respect to other securities and assets, at the fair
value as determined in good faith by the Trustees; provided, however, that
the Trustees, without Interestholder approval, may alter the method of
appraising portfolio securities insofar as permitted under the 1940 Act
and the rules, regulations and interpretations thereof promulgated or
issued by the SEC or insofar as permitted by any order of the SEC
applicable to the Series. The Trustees may delegate any of their powers
and duties under this Article X with respect to appraisal of assets and
liabilities. At any time the Trustees may cause the Net Asset Value per
Interest last determined to be determined again in a similar manner and
may fix the time when such redetermined values shall become effective.
ARTICLE X
---------
CONFLICT OF INTEREST PROCEDURES
-------------------------------
Section 1. Monitoring and Reporting Conflicts. The trustees of Income
Managers Trust, Income Trust and Income Funds (collectively, the "Trusts")
and every other Interestholder are the same individuals. Set forth in
this Article are procedures established to address potential conflicts of
interest that may arise between the Trusts. On an ongoing basis, the
investment adviser ("Manager") of Income Managers Trust shall be
responsible for monitoring the Trusts for the existence of any material
conflicts of interest between the Trusts. The Manager shall be
- 8 -
<PAGE>
responsible for reporting any potential or existing conflicts to trustees
of the Trusts as they may develop.
Section 2. Annual Report. The Manager shall report to the trustees of
the Trusts annually regarding its monitoring of the Trusts for conflicts
of interest.
Section 3. Resolution of Conflicts. If a potential conflict of interest
arises, the Trustees shall take such action as is reasonably appropriate
to deal with the conflict, up to and including recommending a change in
the trustees and implementing such recommendation, consistent with
applicable law.
Section 4. Annual Review. The Trustees, including a majority of the
Disinterested Trustees, shall determine no less frequently than annually
that the operating structure is in the best interest of Interestholders.
The Trustees shall consider, among other things, whether the expenses
incurred by the Trust are approximately the same or less than the expenses
that the Trust would incur if it invested directly in the type of
securities being held by Income Managers Trust. The Trustees, including a
majority of the Disinterested Trustees, shall review no less frequently
than annually these procedures for their continuing appropriateness.
- 9 -
<PAGE>
<PAGE>
CUSTODIAN CONTRACT
Between
INCOME MANAGERS TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By It . . . . 1
2. Duties of the Custodian with Respect to Property of the
Fund Held by the Custodian in the United States . . . . . . . 2
2.1 Holding Securities . . . . . . . . . . . . . . . . . . 2
2.2 Delivery of Securities . . . . . . . . . . . . . . . . 2
2.3 Registration of Securities . . . . . . . . . . . . . . 5
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . 5
2.5 Availability of Federal Funds . . . . . . . . . . . . 5
2.6 Collection of Income . . . . . . . . . . . . . . . . . 6
2.7 Payment of Fund Monies . . . . . . . . . . . . . . . . 6
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased . . . . . . . . . . . . . . . . . 8
2.9 Appointment of Agents . . . . . . . . . . . . . . . . 8
2.10 Deposit of Fund Assets in Securities System . . . . . 8
2.11 Fund Assets Held in the Custodian's
Direct Paper System . . . . . . . . . . . . . . . . . 9
2.12 Segregated Account . . . . . . . . . . . . . . . . . . 10
2.13 Ownership Certificates for Tax Purposes . . . . . . . 11
2.14 Proxies . . . . . . . . . . . . . . . . . . . . . . . 11
2.15 Communications Relating to Portfolio
Securities . . . . . . . . . . . . . . . . . . . . . . 11
3. Duties of the Custodian with Respect to Property of the
Fund Held Outside of the United States . . . . . . . . . . . . 12
3.1 Appointment of Foreign Sub-Custodians . . . . . . . . 12
3.2 Assets to be Held . . . . . . . . . . . . . . . . . . 12
3.3 Foreign Securities Depositories . . . . . . . . . . . 12
3.4 Agreements with Foreign Banking Institutions . . . . . 12
3.5 Access of Independent Accountants of the Fund . . . . 13
3.6 Reports by Custodian . . . . . . . . . . . . . . . . . 13
3.7 Transactions in Foreign Custody Account . . . . . . . 13
3.8 Liability of Foreign Sub-Custodians . . . . . . . . . 14
3.9 Liability of Custodian . . . . . . . . . . . . . . . . 14
3.10 Reimbursement for Advances . . . . . . . . . . . . . . 15
3.11 Monitoring Responsibilities . . . . . . . . . . . . . 16
3.12 Branches of U.S. Banks . . . . . . . . . . . . . . . . 16
3.13 Foreign Exchange Transactions . . . . . . . . . . . . 17
3.14 Tax Law . . . . . . . . . . . . . . . . . . . . . . . 17
4. Payments for Sales or Repurchase or Redemptions of Shares
of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . 18
5. Proper Instructions . . . . . . . . . . . . . . . . . . . . . 19
6. Actions Permitted Without Express Authority . . . . . . . . . 19
- i -
<PAGE>
7. Evidence of Authority . . . . . . . . . . . . . . . . . . . . 20
8. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income . . . . . . 20
9. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10. Opinion of Fund's Independent Accountants . . . . . . . . . . 21
11. Reports to Fund by Independent Public Accountants . . . . . . 21
12. Compensation of Custodian . . . . . . . . . . . . . . . . . . 21
13. Responsibility of Custodian . . . . . . . . . . . . . . . . . 22
14. Effective Period, Termination and Amendment . . . . . . . . . 23
15. Successor Custodian . . . . . . . . . . . . . . . . . . . . . 24
16. Interpretive and Additional Provisions . . . . . . . . . . . . 24
17. Additional Funds . . . . . . . . . . . . . . . . . . . . . . . 25
18. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . 25
19. Limitation of Trustee, Officer and Shareholder Liability . . . 25
20. No Liability of Other Portfolios . . . . . . . . . . . . . . . 25
21. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 26
22. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 26
23. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 26
24. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . 26
25. Shareholder Communications Election . . . . . . . . . . . . . 26
- ii -
<PAGE>
CUSTODIAN CONTRACT
This Contract between Income Managers Trust, a common law trust
organized and existing under the laws of New York, having its principal
place of business at 605 Third Avenue, New York, New York 10158
hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate
series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in eight
series, Neuberger & Berman Cash Reserves Portfolio, Neuberger & Berman
Government Money Portfolio, Neuberger & Berman Limited Maturity Bond
Portfolio, Neuberger & Berman Government Income Portfolio, Neuberger &
Berman Ultra Short Bond Portfolio, Neuberger & Berman Municipal Money
Portfolio, and Neuberger & Berman Municipal Securities Portfolio (such
series together with all other series subsequently established by the Fund
and made subject to this Contract in accordance with paragraph 17, being
herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the
assets of each Portfolio, including securities which the Fund, on behalf
of the applicable Portfolio desires to be held in places within the United
States ("domestic securities") and securities it desires to be held
outside the United States ("foreign securities") pursuant to the
provisions of the Declaration of Trust. The Fund on behalf of each
Portfolio agrees to deliver to the Custodian all securities and cash of
the Portfolios, and all payments of income, payments of principal or
capital distributions received by it with respect to all securities owned
by the Portfolio(s) from time to time, and the cash consideration received
by it for such new or treasury shares of beneficial interest of the Fund
representing interests in the Portfolios, ("Shares") as may be issued or
sold from time to time. The Custodian shall not be responsible for any
property of a Portfolio held or received by the Portfolio and not
delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of
Article 5), the Custodian shall on behalf of the applicable Portfolio(s)
from time to time employ one or more sub-custodians, located in the United
States but only in accordance with an applicable vote by the Board of
<PAGE>
Trustees of the Fund on behalf of the applicable Portfolio(s), and
provided that the Custodian shall have no more or less responsibility or
liability to the Fund on account of any actions or omissions of any
sub-custodian so employed than any such sub-custodian has to the
Custodian. The Custodian may employ as sub-custodian for the Fund's
foreign securities on behalf of the applicable Portfolio(s) the foreign
banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD
BY THE CUSTODIAN IN THE UNITED STATES
2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash
property, to be held by it in the United States including all
domestic securities owned by such Portfolio, other than (a)
securities which are maintained pursuant to Section 2.10 in a
clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities System"
and (b) commercial paper of an issuer for which State Street Bank
and Trust Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the Direct Paper
System of the Custodian pursuant to Section 2.11.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or
in a Securities System account of the Custodian or in the
Custodian's Direct Paper book entry system account ("Direct Paper
System Account") only upon receipt of Proper Instructions from
the Fund on behalf of the applicable Portfolio, which may be
continuing instructions when deemed appropriate by the parties,
and only in the following cases:
1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered
into by the Portfolio;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section 2.10
hereof;
4) To the depository agent in connection with tender or
other similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities
are called, redeemed, retired or otherwise become
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payable; provided that, in any such case, the cash or
other consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into
the name of the Portfolio or into the name of any nominee
or nominees of the Custodian or into the name or nominee
name of any agent appointed pursuant to Section 2.9 or
into the name or nominee name of any sub-custodian
appointed pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of
units; PROVIDED that, in any such case, the new
securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery" custom; provided that in any such case, the
Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities
prior to receiving payment for such securities except as
may arise from the Custodian's own negligence or willful
misconduct;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization
or readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar securities,
the surrender thereof in the exercise of such warrants,
rights or similar securities or the surrender of interim
receipts or temporary securities for definitive
securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
10) For delivery in connection with any loans of securities
made by the Portfolio, BUT ONLY against receipt of
adequate collateral as agreed upon from time to time by
the Custodian and the Fund on behalf of the Portfolio,
which may be in the form of cash or obligations issued by
the United States government, its agencies or
instrumentalities, except that in connection with any
loans for which collateral is to be credited to the
Custodian's account in the book-entry system authorized
by the U.S. Department of the Treasury, the Custodian
will not be held liable or responsible for the delivery
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of securities owned by the Portfolio prior to the receipt
of such collateral;
11) For delivery as security in connection with any
borrowings by the Fund on behalf of the Portfolio
requiring a pledge of assets by the Fund on behalf of the
Portfolio, BUT ONLY against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and
a member of The National Association of Securities
Dealers, Inc. ("NASD"), relating to compliance with the
rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any
similar organization or organizations, regarding escrow
or other arrangements in connection with transactions by
the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits
in connection with transactions by the Portfolio of the
Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for a Portfolio, for delivery to such
Transfer Agent or to the holders of shares in connection
with distributions in kind, as may be described from time
to time in the currently effective prospectus and
statement of additional information of the Fund, related
to the Portfolio ("Prospectus"), in satisfaction of
requests by holders of Shares for repurchase or
redemption; and
15) For any other proper corporate purpose, BUT ONLY upon
receipt of, in addition to Proper Instructions from the
Fund on behalf of the applicable Portfolio, a certified
copy of a resolution of the Board of Trustees or of the
Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary,
specifying the securities of the Portfolio to be
delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be
made.
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2.3 REGISTRATION OF SECURITIES. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in
the name of the Portfolio or in the name of any nominee of the
Fund on behalf of the Portfolio or of any nominee of the
Custodian which nominee shall be assigned exclusively to the
Portfolio, UNLESS the Fund has authorized in writing the
appointment of a nominee to be used in common with other
registered investment companies having the same investment
adviser as the Portfolio, or in the name or nominee name of any
agent appointed pursuant to Section 2.9 or in the name or nominee
name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of the Portfolio
under the terms of this Contract shall be in "street name" or
other good delivery form. If, however, the Fund directs the
Custodian to maintain securities in "street name", the Custodian
shall utilize its best efforts only to timely collect income due
the Fund on such securities and to notify the Fund on a best
efforts basis only of relevant corporate actions including,
without limitation, pendency of calls, maturities, tender or
exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate
bank account or accounts in the United States in the name of each
Portfolio of the Fund which shall contain only property held by
the Custodian as custodian for that Portfolio, subject only to
draft or order by the Custodian acting pursuant to the terms of
this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or
for the account of the Portfolio, other than cash maintained by
the Portfolio in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of
1940. Funds held by the Custodian for a Portfolio may be
deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or
desirable; PROVIDED, however, that every such bank or trust
company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank or
trust company shall on behalf of each applicable Portfolio be
approved by vote of a majority of the Board of Trustees of the
Fund. Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian
only in that capacity.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the
Fund on behalf of each applicable Portfolio and the Custodian,
the Custodian shall, upon the receipt of Proper Instructions from
the Fund on behalf of a Portfolio, make federal funds available
to such Portfolio as of specified times agreed upon from time to
time by the Fund and the Custodian in the amount of checks
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received in payment for Shares of such Portfolio which are
deposited into the Portfolio's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3,
the Custodian shall collect on a timely basis all income and
other payments with respect to registered domestic securities
held hereunder to which each Portfolio shall be entitled either
by law or pursuant to custom in the securities business, and
shall collect on a timely basis all income and other payments
with respect to bearer domestic securities if, on the date of
payment by the issuer, such securities are held by the Custodian
or its agent and shall credit such income, as collected, to such
Portfolio's custodian account. Without limiting the generality
of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation
as and when they become due and shall collect interest when due
on securities held hereunder. Collection of income due each
Portfolio on securities loaned pursuant to the provisions of
Section 2.2 (10) shall be the responsibility of the Custodian so
long as the securities are registered and remain in the name of
the Fund, the Custodian, or its nominee, or in the Depository
Trust Company account of the Custodian, but otherwise shall be
the responsibility of the Fund and the Custodian will have no
duty or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be
necessary to assist the Fund in arranging for the timely delivery
to the Custodian of the income to which the Portfolio is properly
entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from
the Fund on behalf of the applicable Portfolio, which may be
continuing instructions when deemed appropriate by the parties,
the Custodian shall pay out monies of a Portfolio in the
following cases only:
1) Upon the purchase of domestic securities, options,
futures contracts or options on futures contracts for the
account of the Portfolio but only (a) against the
delivery of such securities or evidence of title to such
options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm or
trust company doing business in the United States or
abroad which is qualified under the Investment Company
Act of 1940, as amended, to act as a custodian and has
been designated by the Custodian as its agent for this
purpose) registered in the name of the Portfolio or in
the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer; (b) in
the case of a purchase effected through a Securities
System, in accordance with the conditions set forth in
Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
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<PAGE>
conditions set forth in Section 2.11; (d) in the case of
repurchase agreements entered into between the Fund on
behalf of the Portfolio and the Custodian, or another
bank, or a broker-dealer which is a member of NASD, (i)
against delivery of the securities either in certificate
form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities
or (ii) against delivery of the receipt evidencing
purchase by the Portfolio of securities owned by the
Custodian along with written evidence of the agreement by
the Custodian to repurchase such securities from the
Portfolio or (e) for transfer to a time deposit account
of the Fund in any bank, whether domestic or foreign;
such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank
pursuant to Proper Instructions from the Fund as defined
in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section
2.2 hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by
the Portfolio, including but not limited to the following
payments for the account of the Portfolio: interest,
taxes, management, accounting, transfer agent and legal
fees, and operating expenses of the Fund whether or not
such expenses are to be in whole or part capitalized or
treated as deferred expenses;
5) For the payment of any dividends on Shares of the
Portfolio declared pursuant to the governing documents of
the Fund;
6) For payment of the amount of dividends received in
respect of securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions from the Fund on
behalf of the Portfolio, a certified copy of a resolution
of the Board of Trustees or of the Executive Committee of
the Fund signed by an officer of the Fund and certified
by its Secretary or an Assistant Secretary, specifying
the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose
to be a proper purpose, and naming the person or persons
to whom such payment is to be made.
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<PAGE>
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES
PURCHASED. Except as specifically stated otherwise in this
Contract, in any and every case where payment for purchase of
domestic securities for the account of a Portfolio is made by the
Custodian in advance of receipt of the securities purchased in
the absence of specific written instructions from the Fund on
behalf of such Portfolio to so pay in advance, the Custodian
shall be absolutely liable to the Fund for such securities to the
same extent as if the securities had been received by the
Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other
bank or trust company which is itself qualified under the
Investment Company Act of 1940, as amended, and its rules or
regulations to act as a custodian, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from
time to time direct; PROVIDED, however, that the appointment of
any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
2.10 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a
clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of
1934, which acts as a securities depository, or in the book-entry
system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as
"Securities System" in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in
the Securities System which shall not include any assets
of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to securities
of the Portfolio which are maintained in a Securities
System shall identify by book-entry those securities
belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from
the Securities System that such securities have been
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
payment and transfer for the account of the Portfolio.
The Custodian shall transfer securities sold for the
account of the Portfolio upon (i) receipt of advice from
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the Securities System that payment for such securities
has been transferred to the Account, and (ii) the making
of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the
Portfolio. Copies of all advices from the Securities
System of transfers of securities for the account of the
Portfolio shall identify the Portfolio, be maintained for
the Portfolio by the Custodian and be provided to the
Fund at its request. Upon request, the Custodian shall
furnish the Fund on behalf of the Portfolio confirmation
of each transfer to or from the account of the Portfolio
in the form of a written advice or notice and shall
furnish to the Fund on behalf of the Portfolio copies of
daily transaction sheets reflecting each day's
transactions in the Securities System for the account of
the Portfolio;
4) The Custodian shall provide the Fund for the Portfolio
with any report obtained by the Custodian (or by any
agent appointed by the Custodian pursuant to Section 2.9)
on the Securities System's accounting system, internal
accounting control and procedures for safeguarding
securities deposited in the Securities System;
5) The Custodian shall have received from the Fund on behalf
of the Portfolio the certificate required by Article 14
hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the
Fund for the benefit of the Portfolio for any loss or
damage to the Portfolio resulting from use of the
Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its
agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall
be entitled to be subrogated to the rights of the
Custodian with respect to any claim against the
Securities System or any other person which the Custodian
may have as a consequence of any such loss or damage if
and to the extent that the Portfolio has not been made
whole for any such loss or damage.
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The
Custodian may deposit and/or maintain securities owned by a
Portfolio in the Direct Paper System of the Custodian subject to
the following provisions:
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1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper
Instructions from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are
represented in an account ("Account") of the Custodian in
the Direct Paper System which shall not include any
assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities
of the Portfolio which are maintained in the Direct Paper
System shall identify by book-entry those securities
belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on
the records of the Custodian to reflect such payment and
transfer of securities to the account of the Portfolio.
The Custodian shall transfer securities sold for the
account of the Portfolio upon the making of an entry on
the records of the Custodian to reflect such transfer and
receipt of payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the
account of the Portfolio, in the form of a written advice
or notice, of Direct Paper on the next business day
following such transfer and shall furnish to the Fund on
behalf of the Portfolio copies of daily transaction
sheets reflecting each day's transaction in the
Securities System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on the Custodian's system of
internal accounting control as the Fund may reasonably
request from time to time.
2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and
on behalf of each such Portfolio, into which account or accounts
may be transferred cash and/or securities, including securities
maintained in an account by the Custodian pursuant to Section
2.10 hereof, (i) in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Exchange Act
and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange (or the Commodity
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Futures Trading Commission or any registered contract market), or
of any similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written
by the Portfolio or commodity futures contracts or options
thereon purchased or sold by the Portfolio, (iii) for the
purposes of compliance by the Portfolio with the procedures
required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
corporate purposes, BUT ONLY, in the case of clause (iv), upon
receipt of, in addition to Proper Instructions from the Fund on
behalf of the applicable Portfolio, a certified copy of a
resolution of the Board of Trustees or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary
or an Assistant Secretary, setting forth the purpose or purposes
of such segregated account and declaring such purposes to be
proper corporate purposes.
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to domestic securities of
each Portfolio held by it and in connection with transfers of
securities.
2.14 PROXIES. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the
registered holder of such securities, if the securities are
registered otherwise than in the name of the Portfolio or a
nominee of the Portfolio, all proxies, without indication of the
manner in which such proxies are to be voted, and shall promptly
deliver to the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. The Custodian
shall transmit promptly to the Fund for each Portfolio all
written information (including, without limitation, pendency of
calls and maturities of domestic securities and expirations of
rights in connection therewith and notices of exercise of call
and put options written by the Fund on behalf of the Portfolio
and the maturity of futures contracts purchased or sold by the
Portfolio) received by the Custodian from issuers of the
securities being held for the Portfolio. With respect to tender
or exchange offers, the Custodian shall transmit promptly to the
Portfolio all written information received by the Custodian from
issuers of the securities whose tender or exchange is sought and
from the party (or his agents) making the tender or exchange
offer. If the Portfolio desires to take action with respect to
any tender offer, exchange offer or any other similar
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transaction, the Portfolio shall when reasonably possible notify
the Custodian at least three business days prior to the date on
which the Custodian is to take such action.
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD
OUTSIDE OF THE UNITED STATES
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby
authorizes and instructs the Custodian to employ as
sub-custodians for each Portfolio's securities and other assets
maintained outside the United States the foreign banking
institutions and foreign securities depositories designated on
Schedule A hereto ("foreign sub-custodians"). Upon receipt of
"Proper Instructions", as defined in Section 5 of this Contract,
together with a certified resolution of the Fund's Board of
Trustees, the Custodian and the Fund may agree to amend Schedule
A hereto from time to time to designate additional foreign
banking institutions and foreign securities depositories to act
as sub-custodian. Upon receipt of Proper Instructions, the Fund
may instruct the Custodian to cease the employment of any one or
more such sub-custodians for maintaining custody of a Portfolio's
assets.
3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and
other assets maintained in the custody of the foreign
sub-custodians to: (a) "foreign securities", as defined in
paragraph (c)(1) of Rule 17f-5 under the Investment Company Act
of 1940, and (b) cash and cash equivalents in such amounts as
the Custodian or the Fund may determine to be reasonably
necessary to effect a Portfolio's foreign securities
transactions. The Custodian shall identify on its books as
belonging to each Portfolio, the foreign securities of the
Portfolio held by each foreign sub-custodian.
3.3 FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be
agreed upon in writing by the Custodian and the Fund, assets of
each Portfolio shall be maintained in foreign securities
depositories only through arrangements implemented by the foreign
banking institutions serving as sub-custodians pursuant to the
terms hereof. Where possible, such arrangements shall include
entry into agreements containing the provisions set forth in
Section 3.4 hereof.
3.4 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement
with a foreign banking institution shall be substantially in the
form set forth in Exhibit 1 hereto and shall provide that: (a)
the assets of each Portfolio will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of
the foreign banking institution or its creditors or agent, except
a claim of payment for their safe custody or administration; (b)
beneficial ownership for the assets of each Portfolio will be
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freely transferable without the payment of money or value other
than for custody or administration; (c) adequate records will be
maintained identifying the assets as belonging to each applicable
Portfolio; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants
for the Fund, will be given access to the books and records of
the foreign banking institution relating to its actions under its
agreement with the Custodian; and (e) assets of each Portfolio
held by the foreign sub-custodian will be subject only to the
instructions of the Custodian or its agents.
3.5 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of
the Fund, the Custodian will use its best efforts to arrange for
the independent accountants of the Fund to be afforded access to
the books and records of any foreign banking institution employed
as a foreign sub-custodian insofar as such books and records
relate to the performance of such foreign banking institution
under its agreement with the Custodian.
3.6 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from
time to time, as mutually agreed upon, statements in respect of
the securities and other assets of each Portfolio held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of each Portfolio's securities and
other assets and advices or notifications of any transfers of
securities to or from each custodial account maintained by a
foreign banking institution for the Custodian on behalf of each
applicable Portfolio indicating, as to securities acquired for a
Portfolio, the identity of the entity having physical possession
of such securities.
3.7 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise
provided in paragraph (b) of this Section 3.7, the provision of
Sections 2.2 and 2.7 of this Contract shall apply, MUTATIS
MUTANDIS to the foreign securities of the Fund held outside the
United States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the
contrary, settlement and payment for securities received for the
account of each applicable Portfolio and delivery of securities
maintained for the account of each applicable Portfolio may be
effected in accordance with the customary established securities
trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the
purchaser thereof or to a dealer therefor (or an agent for such
purchaser or dealer) against a receipt with the expectation of
receiving later payment for such securities from such purchaser
or dealer.
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(c) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such entity's
nominee to the same extent as set forth in Section 2.3 of this
Contract, and the Fund agrees to hold any such nominee harmless
from any liability as a holder of record of such securities.
3.8 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to
which the Custodian employs a foreign banking institution as a
foreign sub-custodian shall require the institution to exercise
reasonable care in the performance of its duties and to
indemnify, and hold harmless, the Custodian and the Fund from and
against any loss, damage, cost, expense, liability or claim
arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it
shall be entitled to be subrogated to the rights of the Custodian
with respect to any claims against a foreign banking institution
as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not
been made whole for any such loss, damage, cost, expense,
liability or claim.
3.9 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the
acts or omissions of a foreign banking institution to the same
extent as set forth with respect to sub-custodians generally in
this Contract and, regardless of whether assets are maintained in
the custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank as contemplated
by paragraph 3.12 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting
from nationalization, expropriation, currency restrictions, or
acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the
foregoing provisions of this paragraph 3.9, in delegating custody
duties to State Street London Ltd., the Custodian shall not be
relieved of any responsibility to the Fund for any loss due to
such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife or armed hostilities) or (b) other
losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God,
nuclear incident or the like, in each case under circumstances
where the Custodian and State Street London Ltd. have exercised
reasonable care.
3.10 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian
to advance cash or securities for any purpose for the benefit of
a Portfolio including the purchase or sale of foreign exchange or
of contracts for foreign exchange ("Advance"), or in the event
that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as
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may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct ("Liability") then
in such event property equal in value to not more than 125% of
such Advance and accrued interest on the Advance or the
anticipated amount of such Liability, held at any time for the
account of the appropriate Portfolio by the Custodian or sub-
custodian may be held as security for such Liability or for such
Advance and accrued interest on the Advance. The Custodian shall
designate the security or securities constituting security for an
Advance or Liability (the "Designated Securities") by notice in
writing to the Fund (which may be sent by tested telefax or
telex). In the event the value of the Designated Securities shall
decline to less than 110% of the amount of such Advance and
accrued interest on the Advance or the anticipated amount of such
Liability, then the Custodian may designate in the same manner an
additional security for such obligation ("Additional
Securities"), but the aggregate value of the Designated
Securities and Additional Securities shall not be in excess of
125% of the amount of such Advance and the accrued interest on
the Advance or the anticipated amount of such Liability. At the
request of the Fund, on behalf of a Portfolio, the Custodian
shall agree to substitution of a security or securities which
have a value equal to the value of the Designated or Additional
Securities which the Fund desires be released from their status
as security, and such release from status as security shall be
effective upon the Custodian and the Fund agreeing in writing as
to the identity of the substituted security or securities, which
shall thereupon become Designated Securities.
Notwithstanding the above, the Custodian shall, at the request of
the Fund, on behalf of a Portfolio, immediately release from
their status as security any or all of the Designated Securities
or Additional Securities upon the Custodian's receipt from such
of Portfolio cash or cash equivalents in an amount equal to 100%
of the value of the Designated Securities or Additional
Securities that the Fund desires to be released from their status
as security pursuant to this Section. The applicable Portfolio
shall reimburse or indemnify the Custodian in respect of a
Liability and shall pay any Advances upon demand; provided,
however, that the Custodian first notified the Fund on behalf of
the Portfolio of such demand for repayment, reimbursement or
indemnification. If, upon notification, the Portfolio shall fail
to pay such Advance or interest when due or shall fail to
reimburse or indemnify the Custodian promptly in respect of a
Liability, the Custodian shall be entitled to dispose of the
Designated Securities and Additional Securities to the extent
necessary to obtain repayment, reimbursement or indemnification.
Interest, dividends and other distributions paid or received on
the Designated Securities and Additional Securities, other than
payments of principal or payments upon retirement, redemption or
repurchase, shall remain the property of the Portfolio, and shall
not be subject to this Section. To the extent that the
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disposition of the Portfolio's property, designated as security
for such Advance or Liability, results in an amount less than
necessary to obtain repayment, reimbursement or indemnification,
the Portfolio shall continue to be liable to the Custodian for
the differences between the proceeds of the disposition of the
Portfolio's property, designated as security for such Advance or
Liability, and the amount of the repayment, reimbursement or
indemnification due to the Custodian and the Custodian shall have
the right to designate in the same manner described above an
additional security for such obligation which shall constitute
Additional Securities hereunder.
3.11 MONITORING RESPONSIBILITIES. The Custodian shall furnish
annually to the Fund, during the month of June, information
concerning the foreign sub-custodians employed by the Custodian.
Such information shall be similar in kind and scope to that
furnished to the Fund in connection with the initial approval of
this Contract. In addition, the Custodian will promptly inform
the Fund in the event that the Custodian learns of a material
adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or
in the case of any foreign sub-custodian not the subject of an
exemptive order from the Securities and Exchange Commission is
notified by such foreign sub-custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline
below $200 million (U.S. dollars or the equivalent thereof) or
that its shareholders' equity has declined below $200 million (in
each case computed in accordance with generally accepted U.S.
accounting principles).
3.12 BRANCHES OF U.S. BANKS. (a) Except as otherwise set forth in
this Contract, the provisions hereof shall not apply where the
custody of a Portfolio's assets are maintained in a foreign
branch of a banking institution which is a "bank" as defined by
Section 2(a)(5) of the Investment Company Act of 1940 meeting the
qualification set forth in Section 26(a) of said Act. The
appointment of any such branch as a sub-custodian shall be
governed by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United
Kingdom shall be maintained in an interest bearing account
established for the Fund with the Custodian's London branch,
which account shall be subject to the direction of the Custodian,
State Street London Ltd. or both.
3.13 FOREIGN EXCHANGE TRANSACTIONS. (a) Upon receipt of Proper
Instructions, the Custodian shall settle foreign exchange
contracts or options to purchase and sell foreign currencies for
spot and future delivery on behalf of and for the account of a
Portfolio with such brokers, banks or trust companies other than
the Custodian ("Currency Brokers") as the Fund may determine and
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direct pursuant to Proper Instructions or as the Custodian may
select ("Transactions Other Than As Principal").
(b). The Custodian shall not be obligated to enter into foreign
exchange transactions as principal ("Transactions As Principal").
However, if the Custodian has made available to the Fund its
services as a principal in foreign exchange transactions and
subject to any separate agreement between the parties relating to
such transactions, the Custodian shall enter into foreign
exchange contracts or options to purchase and sell foreign
currencies for spot and future delivery on behalf of and for the
account of a Portfolio, with the Custodian as principal.
(c) If, in a Transaction Other Than As Principal, a Currency
Broker is selected by the Fund, on behalf of a Portfolio, the
Custodian shall have no duty with respect to the selection of the
Currency Broker, or, so long as the Custodian acts in accordance
with Proper Instructions, for the failure of such Currency Broker
to comply with the terms of any contract or option. If, in a
Transaction Other Than As Principal, the Currency Broker is
selected by the Custodian or if the Custodian enters into a
Transaction As Principal, the Custodian shall be responsible for
the selection of the Currency Broker and the failure of such
Currency Broker to comply with the terms of nay contract or
option.
(d) In Transactions Other Than As Principal and Transactions
As Principal, the Custodian shall be responsible for any transfer
of cash, the transmission of instructions to and from a Currency
Broker, if any, the safekeeping of all certificates and other
documents and agreements evidencing or relating to such foreign
exchange transactions and the maintenance of proper records as
set forth in Section 9 of this Contract.
3.14 TAX LAW. Except to the extent that imposition of any tax
liability arises from State Street's failure to perform in
accordance wiyh the terms of this Section 3.14 or from the
failure of any sub-custodian to perform in accordance with the
terms of the applicable subcustody agreement, State Street shall
have no responsibility or liability for any obligations now or
hereafter imposed on each Portfolio by the tax law of the
domicile of each Portfolio or of any jurisdiction in which each
Portfolio is invested or any political subdivision thereof. It
shall be the responsibility of State Street to use due care to
perform such steps as are required to collect any tax refund, to
ascertain the appropriate rate of tax withholding and to provide
such information and documents as may be required to enable each
Portfolio to receive appropriate tax treatment under applicable
tax laws and any applicable treaty provisions. Unless otherwise
informed by each Portfolio, State Street, in performance of its
duties under this Section, shall be entitled to apply categorical
treatment of each Portfolio according to the nationality of each
Portfolio, the particulars of its organization and other relevant
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details that shall be supplied by each Portfolio. State Street
shall be entitled to rely on any information supplied by each
Portfolio. State Street may engage reasonable professional
advisors disclosed to each Portfolio by State Street, which may
include attorneys, accountants or financial institutions in the
regular business of investment administration and may rely upon
advice received therefrom. It shall be the duty of each
Portfolio to inform State Street of any change in the
organization, domicile or other relevant fact concerning tax
treatment of each Portfolio and further to inform State Street if
each Portfolio is or becomes the beneficiary of any special
ruling or treatment not applicable to the general nationality and
category of entity of which each Portfolio is a part under
general laws and treaty provisions.
4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE
FUND
The Custodian shall receive from the distributor for the Shares
or from the Transfer Agent of the Fund and deposit into the account of the
appropriate Portfolio such payments as are received for Shares of that
Portfolio issued or sold from time to time by the Fund. The Custodian
will provide timely notification to the Fund on behalf of each such
Portfolio and the Transfer Agent of any receipt by it of payments for
Shares of such Portfolio.
From such funds as may be available for the purpose but subject
to the limitations of the Declaration of Trust and any applicable votes of
the Board of Trustees of the Fund pursuant thereto, the Custodian shall,
upon receipt of instructions from the Transfer Agent, make funds available
for payment to holders of Shares who have delivered to the Transfer Agent
a request for redemption or repurchase of their Shares. In connection
with the redemption or repurchase of Shares of a Portfolio, the Custodian
is authorized upon receipt of instructions from the Transfer Agent to wire
funds to or through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or repurchase of Shares
of the Fund, the Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by the Fund to the
holder of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
5. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Contract means a
writing signed or initialled by two or more person or persons as the Board
of Trustees shall have from time to time authorized. Each such writing
shall set forth the specific transaction or type of transaction involved,
including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper Instructions if
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the Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in
writing. Upon receipt of a certificate of the Secretary or an Assistant
Secretary as to the authorization by the Board of Trustees of the Fund
accompanied by a detailed description of procedures approved by the Board
of Trustees, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that
the Fund and the Custodian are satisfied that such procedures afford
adequate safeguards for the Portfolios' assets. For purposes of this
Section, Proper Instructions shall include instructions received by the
Custodian pursuant to any three-party agreement which requires a
segregated asset account in accordance with Section 2.12.
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority
from the Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to
its duties under this Contract, PROVIDED that all such
payments shall be accounted for to the Fund on behalf of
the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the securities
and property of the Portfolio except as otherwise
directed by the Board of Trustees of the Fund.
7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper
believed by it to be genuine and to have been properly executed by or on
behalf of the Fund. The Custodian may receive and accept a certified copy
of a vote of the Board of Trustees of the Fund as conclusive evidence (a)
of the authority of any person to act in accordance with such vote or (b)
of any determination or of any action by the Board of Trustees pursuant to
the Declaration of Trust as described in such vote, and such vote may be
considered as in full force and effect until receipt by the Custodian of
written notice to the contrary.
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8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
If, and to the extent requested by the Fund, the Custodian shall
cooperate with and supply necessary information to the entity or entities
appointed by the Board of Trustees of the Fund to keep the books of
account of each Portfolio and/or compute the net asset value per share of
the outstanding shares of each Portfolio or, if directed in writing to do
so by the Fund on behalf of the Portfolio, shall itself keep such books of
account and/or compute such net asset value per share. If so directed,
the Custodian shall also calculate daily the net income of the Portfolio
as described in the Fund's currently effective prospectus related to such
Portfolio and shall advise the Fund and the Transfer Agent daily of the
total amounts of such net income and, if instructed in writing by an
officer of the Fund to do so, shall advise the Transfer Agent periodically
of the division of such net income among its various components. The
calculations of the net asset value per share and the daily income of each
Portfolio shall be made at the time or times described from time to time
in the Fund's currently effective prospectus related to such Portfolio.
9. RECORDS
The Custodian shall with respect to each Portfolio create and
maintain all records relating to its activities and obligations under this
Contract in such manner as will meet the obligations of the Fund under the
Investment Company Act of 1940, with particular attention to Section 31
thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be
the property of the Fund and shall at all times during the regular
business hours of the Custodian be open for inspection by duly authorized
officers, employees or agents of the Fund and employees and agents of the
Securities and Exchange Commission. The Custodian shall, at the Fund's
request, supply the Fund with a tabulation of securities owned by each
Portfolio and held by the Custodian and shall, when requested to do so by
the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on
behalf of each applicable Portfolio may from time to time request, to
obtain from year to year favorable opinions from the Fund's independent
accountants with respect to its activities hereunder in connection with
the preparation of the Fund's Form N-1A, and Form N-SAR or other annual
reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
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<PAGE>
11. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each Portfolio
at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal
accounting control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including securities deposited
and/or maintained in a Securities System, relating to the services
provided by the Custodian under this Contract; such reports, shall be of
sufficient scope and in sufficient detail, as may reasonably be required
by the Fund to provide reasonable assurance that any material inadequacies
would be disclosed by such examination, and, if there are no such
inadequacies, the reports shall so state.
12. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for
its services and expenses as Custodian, as agreed upon from time to time
between the Fund on behalf of each applicable Portfolio and the Custodian.
13. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of
reasonable care, the Custodian shall not be responsible for the title,
validity or genuineness of any property or evidence of title thereto
received by it or delivered by it pursuant to this Contract and shall be
held harmless in acting upon any notice, request, consent, certificate or
other instrument reasonably believed by it to be genuine and to be signed
by the proper party or parties, including any futures commission merchant
acting pursuant to the terms of a three-party futures or options
agreement. The Custodian shall be held to the exercise of reasonable care
in carrying out the provisions of this Contract, but shall be kept
indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be
counsel for the Fund) on all matters, and shall be without liability for
any action reasonably taken or omitted pursuant to such advice.
As a condition to the indemnification provided for in this
Section 13, if in any case the indemnifying party is asked to indemnify
and hold the indemnified party harmless, the indemnified party shall fully
and promptly advise the indemnifying party of all pertinent facts
concerning the situation in question, and shall use all reasonable care to
identify, and promptly notify the indemnifying party of, any situation
which presents or appears likely to present the probability of such a
claim for indemnification against the indemnifying party. The
indemnifying party shall be entitled, at its own expense, to participate
in the investigation and to be consulted as to the defense of any such
claim, and in such event, the indemnified party shall keep the
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indemnifying party fully and currently informed of all developments
relating to such investigation or defense. At any time, the indemnifying
party shall be entitled at its own expense to conduct the defense of any
such claim, provided that the indemnifying party: (a) reasonably
demonstrates to the other party its ability to pay the full amount of
potential liability in connection with such claim and (b) first admits in
writing to the other party that such claim is one in respect of which the
indemnifying party is obligated to indemnify the other party hereunder.
Upon satisfaction of the foregoing conditions, the indemnifying party
shall take over complete defense of the claim, and the indemnified party
shall initiate no further legal or other expenses for which it shall seek
indemnification. The indemnified party shall in no case confess any claim
or make any compromise in any case in which the indemnifying party may be
asked to indemnify the indemnified party, except with the indemnifying
party's prior written consent.
If the Fund on behalf of a Portfolio requires the Custodian to
take any action with respect to securities, which action involves the
payment of money or which action may, in the opinion of the Custodian,
result in the Custodian or its nominee assigned to the Fund or the
Portfolio being liable for the payment of money or incurring liability of
some other form, the Fund on behalf of the Portfolio, as a prerequisite to
requiring the Custodian to take such action, shall provide indemnity to
the Custodian in an amount and form satisfactory to it.
14. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall
continue in full force and effect with respect to each Portfolio until
terminated as hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either party by
an instrument in writing delivered or mailed, postage prepaid to the other
party, such termination to take effect not sooner than thirty (30) days
after the date of such delivery or mailing; PROVIDED, however that the
Custodian shall not with respect to a Portfolio act under Section 2.10
hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Trustees of the
Fund has approved the use of a particular Securities System by such
Portfolio as required by Rule 17f-4 under the Investment Company Act of
1940, as amended and that the Custodian shall not with respect to a
Portfolio act under Section 2.11 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary that the
Board of Trustees has approved the initial use of the Direct Paper System
by such Portfolio and the receipt of an annual certificate of the
Secretary or an Assistant Secretary that the Board of Trustees has
reviewed the use by such Portfolio of the Direct Paper System; PROVIDED
FURTHER, however, that the Fund shall not amend or terminate this Contract
in contravention of any applicable federal or state regulations, or any
provision of the Declaration of Trust, and further provided, that the Fund
on behalf of one or more of the Portfolios may at any time by action of
its Board of Trustees (i) substitute another bank or trust company for the
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Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the
Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as may
be due as of the date of such termination and shall likewise reimburse the
Custodian for its costs, expenses and disbursements. Termination of the
Contract with respect to one Portfolio (but less than all of the
Portfolios) will not constitute termination of the Contract, and the terms
of the Contract continue to apply to the other Portfolios.
15. SUCCESSOR CUSTODIAN
If a successor custodian for the Fund, of one or more of the
Portfolios shall be appointed by the Board of Trustees of the Fund, the
Custodian shall, upon termination, deliver to such successor custodian at
the office of the Custodian, duly endorsed and in the form for transfer,
all securities of each applicable Portfolio then held by it hereunder and
shall transfer to an account of the successor custodian all of the
securities of each such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the
Board of Trustees of the Fund, deliver at the office of the Custodian and
transfer such securities, funds and other properties in accordance with
such vote.
In the event that no written order designating a successor
custodian or certified copy of a vote of the Board of Trustees shall have
been delivered to the Custodian on or before the date when such
termination shall become effective, then the Custodian shall have the
right to deliver to a bank or trust company, which is a "bank" as defined
in the Investment Company Act of 1940, doing business in Boston,
Massachusetts, of its own selection, having an aggregate capital, surplus,
and undivided profits, as shown by its last published report, of not less
than $25,000,000, all securities, funds and other properties held by the
Custodian on behalf of each applicable Portfolio and all instruments held
by the Custodian relative thereto and all other property held by it under
this Contract on behalf of each applicable Portfolio and to transfer to an
account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust
company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain
in the possession of the Custodian after the date of termination hereof
owing to failure of the Fund to procure the certified copy of the vote
referred to or of the Board of Trustees to appoint a successor custodian,
the Custodian shall be entitled to fair compensation for its services
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during such period as the Custodian retains possession of such securities,
funds and other properties and the provisions of this Contract relating to
the duties and obligations of the Custodian shall remain in full force and
effect.
16. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian
and the Fund on behalf of each of the Portfolios, may from time to time
agree on such provisions interpretive of or in addition to the provisions
of this Contract as may in their joint opinion be consistent with the
general tenor of this Contract. Any such interpretive or additional
provisions shall be in a writing signed by both parties and shall be
annexed hereto, PROVIDED that no such interpretive or additional
provisions shall contravene any applicable federal or state regulations or
any provision of the Declaration of Trust of the Fund. No interpretive or
additional provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Contract.
17. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of
Shares in addition to Neuberger & Berman Cash Reserves Portfolio,
Neuberger & Berman Government Money Portfolio, Neuberger & Berman Limited
Maturity Bond Portfolio, Neuberger & Berman Government Income Portfolio,
Neuberger & Berman Ultra Short Bond Portfolio, Neuberger & Berman
Municipal Money Portfolio, and Neuberger & Berman Municipal Securities
Portfolio with respect to which it desires to have the Custodian render
services as custodian under the terms hereof, it shall so notify the
Custodian in writing, and if the Custodian agrees in writing to provide
such services, such series of Shares shall become a Portfolio hereunder.
18. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
19. LIMITATION OF TRUSTEE, OFFICER AND SHAREHOLDER LIABILITY
It is expressly agreed that the obligations of the Fund and each
Portfolio hereunder shall not be binding upon any of the Trustees,
officers, agents or employees of the Fund or upon the shareholders of any
Portfolio personally, but shall only bind the assets and property of the
Fund, as provided in its Trust Instrument. The execution and delivery of
this Contract have been authorized by the Trustees of the Fund, and this
Contract has been executed and delivered by an authorized officer of the
Fund acting as such; neither such authorization by such Trustees nor such
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execution and delivery by such officer shall be deemed to have been made
by any of them individually or to impose any liability on any of them
personally, but shall bind only the assets and property of the Fund, as
provided in its Declaration of Trust.
20. NO LIABILITY OF OTHER PORTFOLIOS
Notwithstanding any other provision of this Contract, the parties
agree that the assets and liabilities of each Portfolio are separate and
distinct from the assets and liabilities of each other Portfolio and that
no Portfolio shall be liable or shall be charged for any debt, obligation
or liability of any other Portfolio, whether arising under this Contract
or otherwise.
21. CONFIDENTIALITY
The Custodian agrees that all books, records, information and
data pertaining to the business of the Fund which are exchanged or
received pursuant to the negotiation or carrying out of this Contract
shall remain confidential, shall not be voluntarily disclosed to any other
person, except as may be required by law, and shall not be used by the
Custodian for any purpose not directly related to the business of the
Fund, except with the Fund's written consent.
22. ASSIGNMENT
Neither the Fund nor the Custodian shall have the right to assign
any of its rights or obligations under this Contract without the prior
written consent of the other party.
23. SEVERABILITY
If any provision of this Contract is held to be unenforceable as
a matter of law, the other terms and provisions hereof shall not be
affected thereby and shall remain in full force and effect.
24. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof,
all prior contracts between the Fund on behalf of each of the Portfolios,
or any predecessor(s) thereto, and the Custodian relating to the custody
of the Fund's assets.
- 25 -
<PAGE>
25. SHAREHOLDER COMMUNICATIONS ELECTION
Securities and Exchange Commission Rule 14b-2 requires banks
which hold securities for the account of customers to respond to requests
by issuers of securities for the names, addresses and holdings of
beneficial owners of securities of that issuer held by the bank unless the
beneficial owner has expressly objected to disclosure of this information.
In order to comply with the rule, the Custodian needs the Fund to indicate
whether it authorizes the Custodian to provide the Fund's name, address,
and share position to requesting companies whose securities the Fund owns.
If the Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian
"yes" or does not check either "yes" or "no" below, the Custodian is
required by the rule to treat the Fund as consenting to disclosure of this
information for all securities owned by the Fund or any funds or accounts
established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and address for any
purpose other than corporate communications. Please indicate below
whether the Fund consents or objects by checking one of the alternatives
below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [X] The Custodian is not authorized to release the Fund's
name, address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly authorized
representative and its seal to be hereunder affixed as of the 2nd day of
July, 1993.
ATTEST INCOME MANAGERS TRUST
/s/ Claudia A. Brandon By /s/ Stanley Egener
----------------------- -------------------------
CEO
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ E. Solomon By /s/ Ronald E. Logue
------------------------ ----------------------------
Executive Vice President
- 26 -
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Government Money Portfolio Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<CIK> 0000908473
<NAME> INCOME MANAGERS TRUST
<SERIES>
<NUMBER> 01
<NAME> NEUBERGER&BERMAN GOVERNMENT MONEY PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 307,149
<INVESTMENTS-AT-VALUE> 307,149
<RECEIVABLES> 1,311
<ASSETS-OTHER> 31
<OTHER-ITEMS-ASSETS> 127
<TOTAL-ASSETS> 308,618
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 133
<TOTAL-LIABILITIES> 133
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 282,481
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 25,997
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 308,485
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16,783
<OTHER-INCOME> 0
<EXPENSES-NET> (926)
<NET-INVESTMENT-INCOME> 15,857
<REALIZED-GAINS-CURRENT> 4
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 15,861
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 56,928
<ACCUMULATED-NII-PRIOR> 10,139
<ACCUMULATED-GAINS-PRIOR> 3
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 745
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 926
<AVERAGE-NET-ASSETS> 298,021
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Cash Reserves Portfolio Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<CIK> 0000908473
<NAME> INCOME MANAGERS TRUST
<SERIES>
<NUMBER> 04
<NAME> NEUBERGER&BERMAN CASH RESERVES PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 407,651
<INVESTMENTS-AT-VALUE> 407,651
<RECEIVABLES> 1,310
<ASSETS-OTHER> 31
<OTHER-ITEMS-ASSETS> 387
<TOTAL-ASSETS> 409,379
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 148
<TOTAL-LIABILITIES> 148
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 377,064
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 32,171
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 409,231
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 20,225
<OTHER-INCOME> 0
<EXPENSES-NET> (1,065)
<NET-INVESTMENT-INCOME> 19,160
<REALIZED-GAINS-CURRENT> (3)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 19,157
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 97,270
<ACCUMULATED-NII-PRIOR> 13,011
<ACCUMULATED-GAINS-PRIOR> (1)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 852
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,065
<AVERAGE-NET-ASSETS> 340,883
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger& Berman Ultra Short Bond Portfolio Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<CIK> 0000908473
<NAME> INCOME MANAGERS TRUST
<SERIES>
<NUMBER> 05
<NAME> NEUBERGER&BERMAN ULTRA SHORT BOND PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 105,064
<INVESTMENTS-AT-VALUE> 105,251
<RECEIVABLES> 1,188
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 3
<TOTAL-ASSETS> 106,451
<PAYABLE-FOR-SECURITIES> 4,314
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 71
<TOTAL-LIABILITIES> 4,385
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 93,075
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 10,833
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,029)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 187
<NET-ASSETS> 102,066
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,566
<OTHER-INCOME> 0
<EXPENSES-NET> (366)
<NET-INVESTMENT-INCOME> 5,200
<REALIZED-GAINS-CURRENT> (331)
<APPREC-INCREASE-CURRENT> 842
<NET-CHANGE-FROM-OPS> 5,711
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 90
<ACCUMULATED-NII-PRIOR> 5,633
<ACCUMULATED-GAINS-PRIOR> (1,698)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 229
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 366
<AVERAGE-NET-ASSETS> 91,629
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
</FN>
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Limited Maturity Bond Portfolio Annual Report and is
qualified in its entirety by reference to such document.
</LEGEND>
<CIK> 0000908473
<NAME> INCOME MANAGERS TRUST
<SERIES>
<NUMBER> 06
<NAME> NEUBERGER&BERMAN LIMITED MATURITY BOND PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 315,538
<INVESTMENTS-AT-VALUE> 316,359
<RECEIVABLES> 3,483
<ASSETS-OTHER> 32
<OTHER-ITEMS-ASSETS> 4
<TOTAL-ASSETS> 319,878
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 232
<TOTAL-LIABILITIES> 232
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 280,754
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 46,022
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7,857)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 727
<NET-ASSETS> 319,646
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 21,191
<OTHER-INCOME> 0
<EXPENSES-NET> (1,027)
<NET-INVESTMENT-INCOME> 20,164
<REALIZED-GAINS-CURRENT> (3,626)
<APPREC-INCREASE-CURRENT> 9,092
<NET-CHANGE-FROM-OPS> 25,630
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,521
<ACCUMULATED-NII-PRIOR> 25,858
<ACCUMULATED-GAINS-PRIOR> (4,231)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 769
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,027
<AVERAGE-NET-ASSETS> 307,733
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
</FN>
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Municipal Money Portfolio Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<CIK> 0000908473
<NAME> INCOME MANAGERS TRUST
<SERIES>
<NUMBER> 08
<NAME> NEUBERGER&BERMAN MUNICIPAL MONEY PORTFOLI
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 163,319
<INVESTMENTS-AT-VALUE> 163,319
<RECEIVABLES> 2,045
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 36
<TOTAL-ASSETS> 165,413
<PAYABLE-FOR-SECURITIES> 4,226
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93
<TOTAL-LIABILITIES> 4,319
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 150,457
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 10,657
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (20)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 161,094
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,971
<OTHER-INCOME> 0
<EXPENSES-NET> (553)
<NET-INVESTMENT-INCOME> 5,418
<REALIZED-GAINS-CURRENT> (25)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 5,393
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,631
<ACCUMULATED-NII-PRIOR> 5,239
<ACCUMULATED-GAINS-PRIOR> 5
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 379
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 553
<AVERAGE-NET-ASSETS> 151,660
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Municipal Securities Portfolio Annual Report and is
qualified in its entirety by reference to such document.
</LEGEND>
<CIK> 0000908473
<NAME> INCOME MANAGERS TRUST
<SERIES>
<NUMBER> 09
<NAME> NEUBERGER&BERMAN MUNICIPAL SECURITIES PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 44,389
<INVESTMENTS-AT-VALUE> 45,247
<RECEIVABLES> 584
<ASSETS-OTHER> 5
<OTHER-ITEMS-ASSETS> 70
<TOTAL-ASSETS> 45,906
<PAYABLE-FOR-SECURITIES> 1,438
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48
<TOTAL-LIABILITIES> 1,486
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 37,185
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 6,859
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (482)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 858
<NET-ASSETS> 44,420
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,249
<OTHER-INCOME> 0
<EXPENSES-NET> (204)
<NET-INVESTMENT-INCOME> 2,045
<REALIZED-GAINS-CURRENT> (677)
<APPREC-INCREASE-CURRENT> 2,886
<NET-CHANGE-FROM-OPS> 4,254
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (6,942)
<ACCUMULATED-NII-PRIOR> 4,814
<ACCUMULATED-GAINS-PRIOR> 195
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 110
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 204
<AVERAGE-NET-ASSETS> 44,189
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .46
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman New York Insured Intermediate Portfolio Annual Report
and is qualified in its entirety by reference to such document.
</LEGEND>
<CIK> 0000908473
<NAME> INCOME MANAGERS TRUST
<SERIES>
<NUMBER> 10
<NAME> NEUBERGER&BERMAN NEW YORK INSURED INTERMEDIATE PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 11,349
<INVESTMENTS-AT-VALUE> 11,397
<RECEIVABLES> 130
<ASSETS-OTHER> 11
<OTHER-ITEMS-ASSETS> 12
<TOTAL-ASSETS> 11,550
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 33
<TOTAL-LIABILITIES> 33
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,907
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 908
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (346)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 48
<NET-ASSETS> 11,517
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 561
<OTHER-INCOME> 0
<EXPENSES-NET> 98
<NET-INVESTMENT-INCOME> 463
<REALIZED-GAINS-CURRENT> (95)
<APPREC-INCREASE-CURRENT> 938
<NET-CHANGE-FROM-OPS> 1,306
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (3,243)
<ACCUMULATED-NII-PRIOR> 445
<ACCUMULATED-GAINS-PRIOR> (251)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 29
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 98
<AVERAGE-NET-ASSETS> 11,446
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
</TABLE>
