As filed with the Securities and Exchange Commission on December 24, 1997
Registration No. 2-85229
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM N-14
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. /__/ Post-Effective Amendment No. /__/
(Check appropriate box or boxes)
Neuberger & Berman Income Funds
(Exact name of registrant as specified in charter)
605 Third Avenue
NEW YORK, NEW YORK 10158-0180
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 476-8800
Theodore P. Giuliano, President
Neuberger & Berman Income Funds
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
(Names and Addresses of Agents for Service of Process)
It is proposed that this filing will become effective on January 23, 1998
pursuant to Rule 488 under the Securities Exchange Act of 1933, as amended.
For the new shares of Neuberger & Berman Limited Maturity Bond Fund, the
approximate date of the proposed public offering is February 27, 1998. The
public offering of shares of Registrant's series is on-going. The title of
securities being registered is shares of beneficial interest.
Neuberger & Berman Income Funds is a "master/feeder fund." This
Registration Statement includes signature pages for the master fund, Income
Managers Trust, and appropriate officers and trustees thereof.
NEUBERGER & BERMAN INCOME FUNDS
CONTENTS OF REGISTRATION STATEMENT ON FORM N-14
This Registration Statement consists of the following papers and
documents:
Cover Sheet
Contents of Registration Statement on Form N-14
Cross Reference Sheet
Neuberger & Berman Limited Maturity Bond Fund
Part A - Prospectus and Information Statement
Part B - Statement of Additional Information
Part C - Other Information
Signature Pages
Exhibits
CROSS REFERENCE SHEET
(as required by Rule 481(a) under the Securities Act of 1933)
N-14 ITEM NO. PROSPECTUS AND INFORMATION
AND CAPTION STATEMENT CAPTION
- ----------- --------------------------
PART A
Item 1. Beginning of Registration Statement and Outside
Front Cover Page of Prospectus.................. Cover Page
Item 2. Beginning and Outside Back Cover Page of Table of Contents
Prospectus......................................
Item 3. Fee Table, Synopsis Information and Risk Factors Synopsis; Comparison of Principal Risk
Factors
Item 4. Information about the Transaction............... Synopsis; The Reorganization
Item 5. Information about the Registrant................ Synopsis; Comparison of Principal Risk
Factors; Additional Information about
Limited Maturity Bond Fund;
Miscellaneous; See also the Prospectus
for Neuberger & Berman Income Funds,
dated February 3, 1997, as supplemented
on April 7, 1997 and October 22, 1997,
previously filed on EDGAR Accession
Number 0000898432-97-000039,
0000898432-97-000232 and
0000898432-97-0000449, respectively
Item 6. Information about the Company Being Acquired.... Synopsis; Comparison of Principal Risk
Factors; Additional Information about
Ultra Short Bond Fund; Miscellaneous
Item 7. Voting Information.............................. Cover Page; Information Regarding Five
Percent Share Ownership and Interests of
Affiliated Persons
Item 8. Interest of Certain Persons and Experts......... Information Regarding Five Percent Share
Ownership and Interests of Affiliated
Persons
Item 9. Additional Information Required for Reoffering
by Persons Deemed to be Underwriters............ Not Applicable
PART B STATEMENT OF ADDITIONAL
INFORMATION CAPTION
-------------------
Item 10. Cover Page...................................... Cover Page
Item 11. Table of Contents............................... Cover Page
Item 12. Additional Information about the Registrant..... Statement of Additional Information of
Neuberger & Berman Income Funds dated
February 3, 1997, as supplemented on
June 26, 1997, previously filed on
EDGAR, Accession Number
0000898432-97-000039 and
0000898432-97-0000328, respectively
Item 13. Additional Information about the Company Being
Acquired........................................ Not applicable
Item 14. Financial Statements............................ Annual Report to Shareholders of
Neuberger & Berman Income Funds for the
fiscal year ended October 31, 1997,
previously filed on EDGAR, Accession
Number 0000898432-97-000531
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
NEUBERGER & BERMAN INCOME FUNDS
NEUBERGER & BERMAN LIMITED MATURITY BOND FUND
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
800-877-9700
PROSPECTUS AND INFORMATION STATEMENT
This Prospectus and Information Statement is being furnished to
shareholders of Neuberger & Berman Ultra Short Bond Fund ("Ultra Short Bond
Fund") in connection with a Plan of Reorganization and Termination ("Plan").
Pursuant to the Plan, shareholders of Ultra Short Bond Fund will receive, in
exchange for shares of that Fund, shares of Neuberger & Berman Limited Maturity
Bond Fund ("Limited Maturity Bond Fund") equal in total value to their holdings
in Ultra Short Bond Fund as of the closing date of the Reorganization, which is
expected to be February 27, 1998; when the Reorganization is complete, Ultra
Short Bond Fund will be dissolved.
The Board of Trustees of Neuberger & Berman Income Funds ("Trust") has
determined to dissolve Ultra Short Bond Fund because it has not achieved a
sufficient size to be viable. Shareholders of Ultra Short Bond Fund are not
being asked to vote on the Plan or approve the Reorganization.
Ultra Short Bond Fund and Limited Maturity Bond Fund (each a "Fund") are
series of the Trust, a Delaware business trust registered as an open-end,
diversified management investment company consisting of six separate series,
which are feeder funds in a master/feeder fund structure. Each Fund invests all
of its net investable assets in a corresponding portfolio ("Portfolio") of
Income Managers Trust, a New York common law trust registered as an open-end
management investment company. Neuberger & Berman Management Incorporated ("N&B
Management") serves as the investment manager and Neuberger & Berman, LLC
("Neuberger & Berman") serves as sub-adviser to each Portfolio.
Each Portfolio invests in securities in accordance with an investment
objective, policies, and limitations identical to those of its corresponding
Fund. The investment objective of Limited Maturity Bond Fund and Portfolio is to
provide the highest current income consistent with low risk to principal and
liquidity; and secondarily, total return. Ultra Short Bond Fund and Portfolio
seek to provide current income consistent with minimal risk to principal and
liquidity.
This Prospectus and Information Statement sets forth concisely
information about Limited Maturity Bond Fund that investors should know before
the closing date. Additional information is contained in a Statement of
Additional Information ("SAI") dated January 23, 1998, relating to the Plan and
including financial statements, which has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated herein by reference (legally
forms a part of this prospectus). The SAI is available without charge upon
request by calling N&B Management at 800-877-9700. The Trust's current
prospectus ("Trust Prospectus") accompanies this Prospectus and Information
Statement, has been filed with the SEC and is incorporated herein by this
reference. The Trust's current Statement of Additional Information ("Trust SAI")
and the Neuberger & Berman Income Funds Annual Report to Shareholders, dated
October 31, 1997 ("Annual Report"), also have been filed with the SEC. You can
obtain a free copy of the Trust SAI or Annual Report by calling N&B Management
at the phone number shown above.
Investors are advised to read and retain this Prospectus and Information
Statement for future reference.
WE ARE NOT ASKING YOU FOR A PROXY OR WRITTEN CONSENT AND YOU ARE REQUESTED
NOT TO SEND TO US A PROXY OR WRITTEN CONSENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus and Information Statement is January
23, 1998.
2
SYNOPSIS.....................................................................................1
The Reorganization........................................................................1
Investment Objectives and Policies........................................................2
Certain Differences Between Ultra Short Bond Fund and Limited Maturity Bond Fund..........3
Fees and Expenses.........................................................................4
Purchases.................................................................................5
Redemptions...............................................................................6
Exchange Privileges.......................................................................7
Dividends and Other Distributions.........................................................7
Federal Income Tax Consequences...........................................................8
COMPARISON OF PRINCIPAL RISK FACTORS.........................................................8
THE REORGANIZATION..........................................................................11
Reorganization Plan......................................................................11
Reasons for the Reorganization...........................................................13
Description of the Securities to be Issued...............................................14
Federal Income Tax Considerations........................................................15
Capitalization...........................................................................16
ADDITIONAL INFORMATION ABOUT LIMITED MATURITY BOND FUND AND PORTFOLIO.......................17
Financial Highlights.....................................................................17
Investment Objective and Policies........................................................17
Board of Trustees........................................................................17
Investment Manager, Subadviser, Portfolio Manager and Transfer Agent.....................17
Calculation of Performance Data..........................................................18
Management's Discussion of Fund Performance..............................................18
Limited Maturity Bond Fund Shares........................................................18
Net Asset Value..........................................................................18
Taxes, Dividends and Other Distributions.................................................18
ADDITIONAL INFORMATION ABOUT ULTRA SHORT BOND FUND AND PORTFOLIO............................19
Financial Highlights.....................................................................19
Investment Objective and Policies........................................................19
Board of Trustees........................................................................19
Investment Manager, Subadviser, Portfolio Manager and Transfer Agent.....................19
Calculation of Performance Data..........................................................20
Management's Discussion of Fund Performance..............................................20
Ultra Short Bond Fund Shares.............................................................20
Net Asset Value..........................................................................20
Taxes, Dividends and Other Distributions.................................................20
INFORMATION REGARDING FIVE PERCENT SHARE OWNERSHIP AND INTERESTS OF AFFILIATED PERSONS......20
Five Percent Holders.....................................................................20
Shares Held by Officers and Directors....................................................21
Interests of Affiliated Persons and Necessary No-Action Relief...........................21
MISCELLANEOUS...............................................................................22
Available Information....................................................................22
Legal Matters............................................................................22
Experts..................................................................................22
APPENDIX A: Plan of Reorganization and Termination........................................A-1
APPENDIX B: Financial Highlights..........................................................B-1
APPENDIX C: Management's Discussion of Fund Performance...................................C-1
-i-
NEUBERGER & BERMAN INCOME FUNDS
NEUBERGER & BERMAN LIMITED MATURITY BOND FUND
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
PROSPECTUS AND INFORMATION STATEMENT
DATED JANUARY 23, 1998
SYNOPSIS
The following synopsis is a summary of certain information contained
elsewhere in this Prospectus and Information Statement and the Plan of
Reorganization and Termination ("Plan") and is qualified by reference to the
more complete information contained herein as well as the current prospectus of
Neuberger & Berman Income Funds ("Trust Prospectus"), which accompanies this
Prospectus and Information Statement. Shareholders should read this entire
Prospectus and Information Statement carefully.
The Plan is attached to this Prospectus and Information Statement as
Appendix A. The transactions contemplated by the Plan (collectively, the
"Reorganization") are described herein.
THE REORGANIZATION
At a meeting held on September 24, 1997, the Boards of Trustees of
Neuberger & Berman Income Funds ("Trust") and Income Managers Trust (including
all of those Trustees who are not "interested persons" of the participating
Funds, as that term is defined in Section 2(a)(19) of the Investment Company Act
of 1940 ("Independent Trustees")) unanimously approved the Plan, pursuant to
which Neuberger & Berman Ultra Short Bond Fund ("Ultra Short Bond Fund") will
transfer substantially all of its assets from Neuberger & Berman Ultra Short
Bond Portfolio ("Ultra Short Bond Portfolio") to Neuberger & Berman Limited
Maturity Bond Portfolio ("Limited Maturity Bond Portfolio"), and shareholders in
Ultra Short Bond Fund will receive shares of Neuberger & Berman Limited Maturity
Bond Fund ("Limited Maturity Bond Fund"), in exchange for their shares of Ultra
Short Bond Fund. EACH ULTRA SHORT BOND FUND SHAREHOLDER WILL RECEIVE THE NUMBER
OF FULL AND FRACTIONAL SHARES OF LIMITED MATURITY BOND FUND EQUAL IN VALUE TO
THAT SHAREHOLDER'S SHARES OF ULTRA SHORT BOND FUND AS OF THE CLOSING DATE OF THE
REORGANIZATION, WHICH IS EXPECTED TO BE FEBRUARY 27, 1998 ("CLOSING DATE").
According to the specific terms of the Plan, Ultra Short Bond Fund will
exercise its right to withdraw its interest in Ultra Short Bond Portfolio, which
will distribute assets in kind to satisfy this withdrawal. Ultra Short Bond Fund
will then transfer all of these assets to Limited Maturity Bond Portfolio in
exchange for an interest in that Portfolio. Ultra Short Bond Fund will then
transfer all of its assets (essentially composed of its interest in Limited
Maturity Bond Portfolio) to Limited Maturity Bond Fund in exchange for shares of
that Fund and that Fund's assumption of all liabilities of Ultra Short Bond
Fund. Ultra Short Bond Fund will then distribute to its shareholders the shares
of Limited Maturity Bond Fund in exchange for their shares of Ultra Short Bond
Fund; and Ultra Short Bond Fund and Portfolio will be dissolved. When the
Reorganization is completed, each person who held shares in Ultra Short Bond
Fund will hold shares in Limited Maturity Bond Fund with exactly the same total
value.
For the reasons set forth below under "Reasons for the Reorganization,"
the Boards of Trustees of the Trust and Income Managers Trust, including the
Independent Trustees, determined that the Reorganization is in the best
interests of the Funds and Portfolios, and that neither the interests of the
Funds' shareholders nor the Portfolios' interest holders will be diluted as a
result of the transactions.
Another mutual fund that is a series of Neuberger & Berman Income Trust,
Neuberger & Berman Ultra Short Bond Trust, which invests all of its net
investable assets in Ultra Short Bond Portfolio, will undergo a similar
reorganization to that described above also on February 27, 1998. After Ultra
Short Bond Fund and Ultra Short Bond Trust have both withdrawn their assets from
Ultra Short Bond Portfolio, that Portfolio will be terminated.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of Ultra Short Bond Fund and Portfolio is to
provide current income with minimal risk to principal and liquidity. The
investment objective of Limited Maturity Bond Fund and Portfolio is to provide
the highest current income consistent with low risk to principal and liquidity;
and secondarily, total return.
Ultra Short Bond Portfolio and Limited Maturity Bond Portfolio each
invests in a diversified portfolio of fixed and variable rate debt securities
and seeks to increase income and preserve or enhance total return by actively
managing portfolio duration in light of market conditions and trends.
Ultra Short Bond Portfolio invests in a diversified portfolio of U.S.
Government and Agency Securities and investment grade debt securities issued by
financial institutions, corporations, and others. The Portfolio's
dollar-weighted average duration will not exceed two years, although the
Portfolio may invest in individual securities of any duration. Securities in
which the Portfolio may invest include mortgage-backed and asset-backed
securities, money market instruments, repurchase agreements with respect to U.S.
Government and Agency Securities, and U.S. dollar-denominated securities of
foreign issuers. The Portfolio may also enter into futures contracts and
purchase and sell options on futures contracts. The Portfolio may invest 25% or
more of its total assets in U.S. Government and Agency Securities or in
certificates of deposit or bankers' acceptances issued by domestic branches of
U.S. banks.
Similarly, Limited Maturity Bond Portfolio invests in a diversified
portfolio consisting primarily of U.S. Government and Agency Securities and
investment grade debt securities issued by financial institutions, corporations,
and others. The dollar-weighted average duration of the Portfolio will not
exceed four years, although the Portfolio may invest in individual securities of
-2-
any duration. The Portfolio's dollar-weighted average maturity may range up to
five years. Securities in which the Portfolio may invest include mortgage-backed
and asset-backed securities, repurchase agreements with respect to U.S.
Government and Agency Securities, and foreign investments. The Portfolio may
invest up to 10% of its net assets in fixed income securities that are below
investment grade, including unrated securities deemed by N&B Management to be of
comparable quality. The Portfolio will not invest in such securities unless they
are rated at least B by Moody's Investors Service, Inc. ("Moody's") or Standard
& Poors ("S&P") or, if unrated by either of those entities, deemed by N&B
Management to be of comparable quality. The Portfolio may purchase and sell
covered call and put options, interest-rate futures contracts, and options on
those futures contracts and may lend portfolio securities.
The other investment policies of Ultra Short Bond Fund and Portfolio are
similar to the investment policies of Limited Maturity Bond Fund and Portfolio,
including their ability to invest in inflation-indexed securities, variable and
floating rate securities, restricted securities and Rule 144A securities, zero
coupon securities, and up to 15% in illiquid securities. Each Portfolio may also
enter into reverse repurchase agreements, dollar rolls, securities loans, and
when-issued transactions. As a non-fundamental policy, neither of the Portfolios
may purchase portfolio securities if its outstanding borrowings, including
reverse repurchase agreements, exceed 5% of its total assets. For temporary
defensive purposes, each Portfolio may invest up to 100% of its total assets in
cash or cash equivalents, commercial paper, U.S. Government and Agency
Securities and certain other money market instruments, as well as repurchase
agreements on U.S. Government and Agency Securities, and may adopt shorter than
normal weighted average maturities or durations.
CERTAIN DIFFERENCES BETWEEN ULTRA SHORT BOND FUND AND LIMITED MATURITY BOND FUND
While both Funds are similar in several respects, a number of
differences exist as well.
First, although the investment objectives of Ultra Short Bond Fund and
Portfolio and Limited Maturity Bond Fund and Portfolio are substantially
similar, Ultra Short seeks current income with minimal risk to principal and
liquidity, while Limited Maturity seeks a high current income consistent with
low risk to principal and liquidity. Limited Maturity has a secondary objective
of seeking total return.
Second, while Ultra Short Bond Portfolio and Limited Maturity Bond
Portfolio each invests primarily in debt securities, there are some differences
in the types of debt securities in which each Portfolio may invest. For example,
Limited Maturity may invest in foreign securities denominated in or indexed to
foreign currencies, while Ultra Short is restricted to U.S. dollar-denominated
securities of foreign issuers. Limited Maturity may also enter into forward
foreign currency contracts or futures contracts and related options to manage
currency risks and to facilitate transactions in foreign securities. In
addition, Limited Maturity may invest up to 10% of its net assets in fixed
income securities that are below investment grade. Also in contrast to Ultra
Short, Limited Maturity may purchase and sell covered call and put options and
invest in indexed securities. See "Principal Risk Factors " below for a
discussion of the risks of investing in such investments.
-3-
Third, the maximum dollar-weighted average duration of Ultra Short Bond
Portfolio is two years, while Limited Maturity Bond Portfolio's dollar-weighted
average duration is four years. With its moderately conservative portfolio of
securities and shorter maximum duration, Ultra Short Bond Portfolio has a lower
potential for fluctuation in principal value.
FEES AND EXPENSES
As shown by this table, there are no transaction charges when you buy or
sell Fund shares, nor will there be any such charges following the
Reorganization. THERE WILL NOT BE ANY FEE PAYABLE IN CONNECTION WITH THE
REORGANIZATION.
Sales Charge Imposed on Purchases NONE
Sales Charge Imposed on Reinvested Dividends NONE
Deferred Sales Charges NONE
Redemption Fees NONE
Exchange Fees NONE
If you want to redeem shares by wire transfer, the Funds' transfer agent
charges a fee (currently $8.00) for each wire redemption. Shareholders who have
one or more accounts in the Neuberger&Berman Funds(R) aggregating $200,000 or
more in value are not charged foR wire redemptions; the $8.00 fee is borne by
N&B Management.
Set forth below is a comparison of each Fund's operating expenses for
the fiscal year ended October 31, 1997. The ratios also are shown on a pro forma
(estimated) combined basis, giving effect to the Reorganization.
NEUBERGER&BERMAN MANAGEMENT AND 12B-1 OTHER TOTAL OPERATING
INCOME FUNDS ADMINISTRATION FEES FEES EXPENSES EXPENSES
ULTRA SHORT 0.28%* None 0.37% 0.65%*
LIMITED MATURITY 0.51%* None 0.19% 0.70%*
PRO FORMA COMBINED 0.51%* None 0.19% 0.70%*
*(REFLECTS N&B MANAGEMENT'S EXPENSE REIMBURSEMENT UNDERTAKING DESCRIBED BELOW)
Total Operating Expenses for each Fund are based upon current
administration fees for the Fund and management fees for its corresponding
Portfolio and any current expense reimbursement undertakings. "Other Expenses"
are based on each Fund's and Portfolio's expenses for the past fiscal year. The
-4-
Trustees of the Trust believe that the aggregate per share expenses of each Fund
and its corresponding Portfolio will be approximately equal to the expenses the
Fund would incur if its assets were invested directly in the type of securities
held by its corresponding Portfolio. The Trustees of the Trust also believe that
investment in a Portfolio by investors in addition to a Fund may enable the
Portfolio to achieve economies of scale which could reduce expenses. The
expenses and, accordingly, the returns of other funds that may invest in the
Portfolios may differ from those of the Funds.
The previous table reflects N&B Management's voluntary undertaking to
reimburse each Fund's Operating Expenses which, in the aggregate, exceed 0.65%
per annum of Ultra Short Bond Fund's average daily net assets and 0.70% of
Limited Maturity Bond Fund's average daily net assets (both before and after the
Reorganization). Each undertaking can be terminated by N&B Management by giving
a Fund at least 60 days' prior written notice. Absent the reimbursement,
Management and Administration Fees would have been 0.52%, 0.52%, and 0.52% and
Total Operating Expenses would have been 0.89%, 0.71%, and 0.71% per annum of
the average daily net assets of Ultra Short Bond Fund, Limited Maturity Bond
Fund, and the combined Fund, respectively, based upon the expenses of each Fund
for the 1997 fiscal year.
EXAMPLE
To illustrate the effect of Operating Expenses, assume that each Fund's
annual return is 5% and that it had Total Operating Expenses described in the
table above. For every $1,000 invested in each Fund, the following amounts of
total expenses would have been paid if an investor closed his or her account at
the end of each of the following time periods:
NEUBERGER&BERMAN 1 YEAR 3 YEARS 5 YEARS 10 YEARS
INCOME FUNDS
ULTRA SHORT $7 $21 $36 $81
LIMITED MATURITY 7 22 39 87
PRO FORMA COMBINED 7 22 39 87
The purpose of these tables is to assist an investor in understanding
the various types of costs and expenses that an investor in the combined Fund
will bear, whether directly or indirectly. The assumption in this example of a
5% annual return is required by regulations of the SEC applicable to all mutual
funds. THE INFORMATION IN THE PREVIOUS TABLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR
RETURNS MAY BE GREATER OR LESS THAN THOSE SHOWN, AND MAY CHANGE IF EXPENSE
REIMBURSEMENTS CHANGE.
PURCHASES
Procedures to purchase shares in the two Funds are identical.
Shareholders of each Fund can buy shares directly by mail, wire or telephone or
through an exchange of shares with another Neuberger & Berman Fund. Shares are
purchased at the next price calculated on a day the New York Stock Exchange
("NYSE") is open, after a purchase order is received and accepted. Prices for
-5-
shares of each Fund are usually calculated as of 4 p.m. Eastern time. For
shareholders purchasing shares of a Fund for the first time, a minimum
investment of $2,000 is required. Each additional purchase of a Fund must be at
least $100, unless the purchase is made by telephone or by exchange. If made by
telephone or by exchanging shares of another Neuberger & Berman Fund for shares
of a Fund, an additional purchase must be at least $1,000. An order made by
telephone may be canceled if payment is not received by the third business day
after the order is placed. N&B Management, in its discretion, may waive the
minimum investment requirements.
Shares of each Fund may also be purchased indirectly through certain
stockbrokers, banks, and other financial institutions having an arrangement with
the Fund, some of which may charge a fee.
See "How to Buy Shares" and "Additional Information on Telephone
Transactions" in the Trust Prospectus enclosed herewith for additional
information on how shares of each Fund may be purchased.
REDEMPTIONS
Rights and procedures to redeem shares in the two Funds are identical.
Shareholders of each Fund may sell all or some of their shares at any time by
mail, fax or telephone. If the shareholder holds a certificate for the shares,
shares can be redeemed only by sending the certificate by mail. Shares may also
be sold by exchanging them for shares of another Neuberger & Berman Fund.
Usually, redemption proceeds will be mailed on the next business day
following the receipt of a proper redemption request, but in any case within
three business days of such receipt (under unusual circumstances, the Funds may
take longer, as permitted by law). Each Fund may delay paying for any redemption
until it is reasonably satisfied that the check used to buy shares has cleared,
which may take up to 15 days after the purchase date. Redemption requests sent
by fax are limited to not more than $50,000. To redeem by telephone, the shares
must be worth at least $500. If a shareholder's account balance falls bellow
$2,000 because he or she sold shares, each Fund has the right to close the
account after giving the shareholder at least 60 days' written notice to
reestablish the minimum balance.
Shareholders wishing to sell shares held in a retirement account or by a
trust, estate, guardian, or business organization should call 800-877-9700 for
instructions. Shareholders purchasing shares indirectly through certain
stockbrokers, banks, or other financial institutions, may sell those shares only
through those organizations, some of which may charge a fee.
Shares are sold at the next price calculated on a day the NYSE is open,
after the sales order is received and accepted. Prices for shares of each Fund
are usually calculated as of 4 p.m. Eastern time.
-6-
See "How to Sell Shares" and "Additional Information on Telephone
Transactions" in the Trust Prospectus enclosed herewith for additional
information on how to redeem shares held in each Fund.
EXCHANGE PRIVILEGES
Shares of each Fund may be exchanged for shares in another
Neuberger & Berman Fund that is eligible for exchange as specified in the Trust
Prospectus under "Funds Eligible for Exchange." Exchanges may be affected by
telephone, by sending a letter or by fax. See "Shareholder Services -- Exchange
Privilege" in the Trust Prospectus for restrictions on making such transfers. An
exchange must be for at least $1,000 worth of shares, and if the exchange is a
shareholder's first purchase in another Neuberger & Berman Fund, it must be for
at least the minimum initial investment amount for that fund. Shares are
exchanged at the next price calculated on a day the NYSE is open, after the
exchange order is received and accepted.
See "Shareholder Services -- Exchange Privilege" and "Additional
Information on Telephone Transactions" in the Trust Prospectus enclosed herewith
and incorporated by reference herein for additional information on how to
exchange Fund shares.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund distributes substantially all of its share of any net
investment income (net of the Fund's expenses) and any net realized capital
gains earned by its corresponding Portfolio. Income dividends are declared daily
for each Fund at the time its NAV is calculated and are paid monthly, and net
realized capital gains, if any, are normally distributed annually in December.
Investors who are considering the purchase of Fund shares in December should
take this into account because of the tax consequences of such distributions.
Income dividends for each Fund will accrue beginning on the day after an
investor's purchase order is converted to "federal funds."
All dividends and other distributions paid on shares of each Fund are
automatically reinvested in additional shares of that Fund, unless a shareholder
elects to receive them in cash. Dividends are reinvested at the Fund's per share
NAV on the last business day of each month. Each other distribution is
reinvested at the Fund's per share NAV, usually as of the date the distribution
is payable. For RETIREMENT ACCOUNTS, all distributions are automatically
reinvested in shares; when an investor is at least 59-1/2 years old, he or she
can receive distributions in cash without incurring a premature distribution
penalty tax.
Shareholders may elect to receive dividends in cash, with other
distributions being reinvested in additional Fund shares, or they may elect to
receive all dividends and other distributions in cash, by checking the
appropriate election box on the Fund application.
Checks for cash dividends and other distributions usually will be mailed
no later than seven days after the payable date. However, if shares were
purchased with a check, distributions on those shares may not be paid in cash
-7-
until the Fund is reasonably satisfied that the check has cleared, which may
take up to 15 days after the purchase date. Cash dividends and other
distributions may be paid through an electronic transfer to a bank account
designated in the Fund application. A shareholder may call 800-877-9700 for more
information. Following the Reorganization, Limited Maturity Bond Fund will
continue to honor the current election of each shareholder of Ultra Short Bond
Fund. A shareholder can change any distribution election by writing to State
Street, the Funds' shareholder servicing agent.
FEDERAL INCOME TAX CONSEQUENCES
Trust and Income Managers Trust have received an opinion of Kirkpatrick
& Lockhart LLP, their counsel, to the effect that Ultra Short Bond Fund's
transfer its assets (essentially composed of the interest it will receive in
Limited Maturity Bond Portfolio) to Limited Maturity Bond Fund in exchange
solely for the latter's shares and its assumption of Ultra Short Bond Fund's
liabilities will constitute a tax-free reorganization within the meaning of
section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code").
Accordingly, no gain or loss will be recognized to either Fund or its
shareholders as a result of the transaction. In addition, the opinion states
that no gain or loss will be recognized on the distribution of property from
Ultra Short Bond Portfolio to Ultra Short Bond Fund, or on the contribution of
property from Ultra Short Bond Fund to Limited Maturity Bond Portfolio in
exchange for an interest therein, pursuant to the Plan. See "The Reorganization
- -- Federal Income Tax Considerations," page __.
COMPARISON OF PRINCIPAL RISK FACTORS
Both Ultra Short Bond Portfolio and Limited Maturity Bond Portfolio
invest in fixed income securities, and thus an investment in either Ultra Short
Bond Fund or Limited Maturity Bond Fund entails the risks of fixed income
investing. Fixed income securities typically decline in value in times of rising
market interest rates and rise in value in times of falling interest rates.
Generally, the longer the remaining maturity on a security, the more pronounced
is the fluctuation in value. The risks of certain investments that are unique to
Limited Maturity Bond Fund and Portfolio are identified below. See "Investment
Programs" and "Description of Investments" in the Trust Prospectus, which is
enclosed herewith and incorporated by reference herein, for a more detailed
discussion of the investment risks of each Fund.
LOWER RATED DEBT SECURITIES. Ultra Short Bond Portfolio may invest only in
investment grade securities. Limited Maturity Bond Portfolio may invest up to
10% of its net assets in securities that are below investment grade, including
unrated securities deemed by N&B Management to be of comparable quality. The
Portfolio will not invest in such securities unless they are rated at least B by
Moody's or S&P or, if unrated by those entities, deemed by N&B Management to be
of comparable quality. Securities rated below investment grade are described as
speculative by both Moody's and S&P. Securities rated B are judged to be
predominantly speculative with respect to their capacity to pay interest and
repay principal in accordance with the terms of the obligations.
-8-
Changes in economic conditions or developments regarding the individual
issuer are more likely to cause price volatility and weaken the capacity of the
issuer of such securities to make principal and interest payments than is the
case for higher grade debt securities. An economic downturn affecting the issuer
may result in an increased incidence of default. The market for lower-rated
securities may be thinner and less active than for higher-rated securities. N&B
Management seeks to reduce the risks associated with investing in such
securities by limiting the Portfolio's holdings in them and by extensively
analyzing the potential benefits of such an investment in relation to the
associated risks.
The following table shows the ratings of debt securities held by Limited
Maturity Bond Portfolio for the year ended October 31, 1997. The percentages in
each category represent the dollar-weighted month-end holdings during the
period. These percentages are historical only and are not necessarily
representative of the ratings of current and future holdings.
-9-
==============================================================================================
NEUBERGER & BERMAN LIMITED MATURITY BOND PORTFOLIO'S
HOLDINGS OF DEBT SECURITIES, BY RATING FOR THE YEAR ENDED OCTOBER 31, 1997
============================= ================================ ===============================
MOODY'S
INVESTORS SERVICE, INC. STANDARD & POOR'S
(AS A % OF INVESTMENTS) (AS A % OF INVESTMENTS)
- ----------------------------- ---------------- --------------- --------------- ===============
Rating Average Rating Average
============================= ---------------- --------------- --------------- ===============
INVESTMENT GRADE
============================= ---------------- --------------- --------------- ===============
Treasury/Agency* TSY/AGY 15.26% TSY/AGY 15.26%
============================= ---------------- --------------- --------------- ===============
Highest quality Aaa 17.91% AAA 17.91%
============================= ---------------- --------------- --------------- ===============
High quality Aa 4.38% AA 1.81%
============================= ---------------- --------------- --------------- ===============
Upper-medium grade A 19.99% A 24.05%
============================= ---------------- --------------- --------------- ===============
Medium grade Baa 25.58% BBB 29.07%
============================= ---------------- --------------- --------------- ===============
LOWER QUALITY**
============================= ---------------- --------------- --------------- ===============
Moderately speculative Ba 12.81% BB 6.92%
============================= ---------------- --------------- --------------- ===============
Speculative B 3.94% B 4.85%
============================= ---------------- --------------- --------------- ===============
Highly Speculative Caa -- CCC --
============================= ---------------- --------------- --------------- ===============
Poor Quality Ca -- CC --
============================= ---------------- --------------- --------------- ===============
Lowest quality, no interest C -- C --
============================= ---------------- --------------- --------------- ===============
In default, in arrears - -- D --
============================= ================ =============== =============== ===============
99.87%*** 99.87%***
============================= ================ =============== =============== ===============
-10-
Further information regarding the ratings assigned to securities
purchased by the Portfolio, and the meanings of those ratings, is included in
the Trust SAI.
FOREIGN SECURITIES. Each Portfolio may invest in foreign securities. However,
Limited Maturity Bond Portfolio, unlike Ultra Short Bond Portfolio, may invest
in foreign securities denominated in or indexed to foreign currencies. Such
securities may be affected by governmental regulation of foreign exchange
transactions and the fluctuation of foreign currencies relative to the U.S.
dollar, which could result in losses irrespective of the performance of the
underlying investment. In addition, Limited Maturity Bond Portfolio may enter
into forward foreign currency contracts or futures contracts (agreements to
exchange one currency for another at a specified price at a future date) and
related options to manage currency risks and to facilitate transactions in
foreign securities. Although these contracts can protect the Portfolio from
adverse exchange rate changes, they involve a risk of loss if N&B Management
fails to predict foreign currency values correctly; see the discussion of
Hedging Instruments, below.
PUT AND CALL OPTIONS, FUTURES CONTRACTS, AND OPTIONS ON FUTURES CONTRACTS. Each
Portfolio may try to reduce the risk of securities price changes (hedge) or
manage portfolio duration by (1) entering into interest-rate futures contracts
traded on futures exchanges and (2) purchasing and writing options on futures
contracts. Each Portfolio may engage in transactions in futures contracts and
related options only as permitted by regulations of the Commodity Futures
Trading Commission. These investment practices involve certain risks, including
price volatility and a high degree of leverage.
-11-
Limited Maturity Bond Portfolio also may write covered call options and
purchase put options on debt securities in its portfolio or on foreign
currencies for hedging purposes or for the purpose of producing income. Limited
Maturity Bond Portfolio will write a call option on a security or currency only
if it holds that security or currency or has the right to obtain the security or
currency at no additional cost.
The primary risks in using put and call options, futures contracts,
options on futures contracts, forward foreign currency contracts or options on
foreign currencies ("Hedging Instruments") are (1) imperfect correlation or no
correlation between changes in market value of the securities or currencies held
by a Portfolio and the prices of Hedging Instruments; (2) possible lack of a
liquid secondary market for Hedging Instruments and the resulting inability to
close out Hedging Instruments when desired; (3) the fact that use of Hedging
Instruments is a highly specialized activity that involves skills, techniques,
and risks (including price volatility and a high degree of leverage) different
from those needed to select a Portfolio's securities; and (4) the fact that,
although use of these instruments for hedging purposes can reduce the risk of
loss, they also can reduce the opportunity for gain, or even result in losses,
by offsetting favorable price movements in hedged investments. When a Portfolio
uses Hedging Instruments, the Portfolio will place cash or appropriate liquid
securities in a segregated account, or will "cover" its position, to the extent
required by SEC staff policy. Another risk of Hedging Instruments is the
possible inability of a Portfolio to purchase or sell a security at a time that
would otherwise be favorable for it to do so, or the possible need for a
Portfolio to sell a security at a disadvantageous time, due to its need to
maintain cover or to segregate securities in connection with its use of these
instruments. Futures, options, and forward contracts are considered
"derivatives." Losses that may arise from certain futures transactions are
potentially unlimited.
THE REORGANIZATION
REORGANIZATION PLAN
The terms and conditions under which the Reorganization will be
consummated are set forth in the Plan. Significant provisions of the Plan are
summarized below; however, this summary is qualified in its entirety by
reference to the Plan, which is attached as Appendix A to this Prospectus and
Information Statement.
The Plan contemplates (i) Limited Maturity Bond Fund's acquiring
substantially all of the assets of Ultra Short Bond Fund in exchange solely for
shares of Limited Maturity Bond Fund and the assumption by Limited Maturity Bond
Fund of all of Ultra Short Bond Fund's liabilities, if any, as of the Closing
Date and (ii) the constructive distribution on the Closing Date of such shares
to the shareholders of Ultra Short Bond Fund.
-12-
The assets of Ultra Short Bond Fund to be acquired by Limited Maturity
Bond Fund shall include all cash, cash equivalents, securities (including its
interest in Limited Maturity Bond Portfolio) and receivables (including interest
and dividends receivable) and other property of any kind owned by Ultra Short
Bond Fund and any deferred or prepaid assets shown as assets on the books of
Ultra Short Bond Fund. Limited Maturity Bond Fund will assume all liabilities of
Ultra Short Bond Fund, if any; provided, however, that Ultra Short Bond Fund
will utilize its best efforts, to the extent practicable, to discharge all of
its known liabilities prior to the Closing Date. Limited Maturity Bond Fund will
deliver to Ultra Short Bond Fund shares of Limited Maturity Bond Fund, which
will be distributed to Ultra Short Bond Fund shareholders.
The value of Ultra Short Bond Fund's assets to be acquired and the
amount of its liabilities to be assumed by Limited Maturity Bond Fund and the
net asset value of a share of Ultra Short Bond Fund will be determined as of the
close of regular trading on the NYSE on the Closing Date and will be determined
in accordance with the valuation procedures described in the then-current
Prospectus and Statement of Additional Information. Securities and other assets
for which market quotations are not readily available will be valued by a method
that the Trustees of Managers Trust believe accurately reflects fair value. All
computations described in this paragraph will be performed by State Street Bank
& Trust Company, which serves as custodian and transfer agent for each Fund and
Portfolio, using to the extent possible prices provided by outside pricing
services approved by the Board of Trustees of Income Managers Trust.
As soon as practicable after the Closing Date, Ultra Short Bond Fund
will distribute PRO RATA to its shareholders of record the shares of Limited
Maturity Bond Fund it receives in the Reorganization, so that each shareholder
of Ultra Short Bond Fund will receive a number of full and fractional shares of
Limited Maturity Bond Fund equal in value to the shareholder's holdings in Ultra
Short Bond Fund. Ultra Short Bond Fund and Portfolio will be dissolved as soon
as practicable thereafter. Such distribution will be accomplished by opening
accounts on the books of Limited Maturity Bond Fund in the names of Ultra Short
Bond Fund shareholders and by transferring thereto the shares of Limited
Maturity Bond Fund previously credited to the account of Ultra Short Bond Fund
on those books. Each shareholder account shall be credited with the PRO RATA
number of Limited Maturity Bond Fund's shares due to that shareholder.
Fractional shares of Limited Maturity Bond Fund will be rounded to the third
decimal place.
Accordingly, immediately after the Reorganization, each former
shareholder of Ultra Short Bond Fund will own shares of Limited Maturity Bond
Fund that, except for rounding, will be equal to the value of that shareholder's
shares of Ultra Short Bond Fund immediately prior to the Reorganization.
Moreover, because shares of Limited Maturity Bond Fund will be issued at net
asset value in exchange for net assets of Ultra Short Bond Fund that, except for
rounding, will equal the aggregate value of those shares, the net asset value
per share of Limited Maturity Bond Fund will be unchanged. Thus, the
Reorganization will not result in a dilution of the value of any shareholder
account. However, in general, the Reorganization substantially will reduce the
percentage of ownership of each Ultra Short Bond Fund shareholder below such
shareholder's current percentage of ownership in Ultra Short Bond Fund because,
while the shareholder will have the same dollar amount invested initially in
Limited Maturity Bond Fund that he or she had invested in Ultra Short Bond Fund,
his or her investment will represent a smaller percentage of the combined net
assets of the Funds.
Any transfer taxes payable upon issuance of shares of Limited Maturity
Bond Fund in a name other than that of the registered holder of the shares on
the books of Ultra Short Bond Fund as of the time of transfer shall be paid by
the person to whom such shares are to be issued as a condition of such transfer.
Any reporting responsibility of Ultra Short Bond Fund will continue to be its
-13-
responsibility up to and including the Closing Date and such later date on which
it is dissolved.
The consummation of the Reorganization is subject to a number of
conditions set forth in the Plan, including receipt of no-action assurance from
the SEC with respect to the Reorganization pursuant to Section 17(a) of the
Investment Company Act of 1940 ("1940 Act"). The Plan may be terminated and the
Reorganization abandoned at any time prior to the Closing Date by the Trust's
Board of Trustees if it determines that the Reorganziation would be inadvisable
for either Fund. At the Closing Date, and solely in order to facilitate the
closing, the non-fundamental investment objective and policies of Ultra Short
Bond Fund will be conformed to those of Limited Maturity Bond Fund. The Trust's
officers may change or postpone the Closing Date.
REASONS FOR THE REORGANIZATION
At a meeting held on September 24, 1997, the Boards of Trustees of the
Trust and Income Managers Trust, including a majority of the Independent
Trustees, determined that the Reorganization is in the best interests of Ultra
Short Bond Fund and Portfolio and Limited Maturity Bond Fund and Portfolio,
respectively, and that the interests of shareholders in Ultra Short Bond Fund
and Limited Maturity Bond Fund, respectively, will not be diluted as a result of
the Reorganization. In recommending the Reorganization, N&B Management indicated
that the Reorganization would eliminate the expense of maintaining Ultra Short
Bond Fund and Portfolio as separate series of the Trust and Income Managers
Trust (i.e., fund accounting, legal, audit, shareholder reporting, custodial
expenses, etc.), producing economies of scale in Limited Maturity Bond Fund and
making it more marketable, and eliminating the need for further expense
reimbursements with respect to Ultra Short Bond Fund. In unanimously approving
the Reorganization, the Boards of Trustees specifically noted Ultra Short Bond
Portfolio's small asset base and its inability to operate effectively and
efficiently due to its small asset base.
In considering the Reorganization, the Boards of Trustees of the Trust
and Income Managers Trust considered the following factors:
(1) the small asset base of Ultra Short Bond Portfolio and its
failure to attract new assets;
(2) the effect of the Reorganization will be to place Ultra Short
Bond Fund shareholders' assets in another Neuberger & Berman Fund having
the most nearly similar investment strategy with a minimum of
administrative burden to shareholders;
-14-
(3) the Reorganization will be tax-neutral to investors;
(4) the compatibility of the different investment objectives and
strategies of the Ultra Short Bond entities and the Limited Maturity
Bond entities, as a result of which the portfolio resulting from the
proposed transactions is not expected to require any significant
restructuring;
(5) the Funds' historical performance records and risk/reward
ratios, expense ratios, past growth in assets, and their future
prospects;
(6) alternatives to the proposed transactions, including simple
liquidation of the Ultra Short Bond entities and maintaining the status
quo;
(7) the effect of the Reorganization on the expense ratio of
Limited Maturity Bond Fund, namely, that the Reorganization will permit
the fixed costs of each of the Limited Maturity Bond entities to be
spread over a larger asset base, effectively reducing the expense ratio
borne by each shareholder;
(8) N&B Management, as administrator of the Funds, has capped the
expenses of each participating Fund, and would thus bear much of the
cost of the Reorganization;
(9) the benefit to N&B Management due to the elimination of the
need to reimburse Ultra Short Bond Fund for expenses exceeding 0.65%;
and
(10) the potential benefit to N&B Management due to the possible
decrease in the expenses of Limited Maturity Bond Fund.
DESCRIPTION OF THE SECURITIES TO BE ISSUED
The Trust is registered with the SEC as an open-end management
investment company and its Trustees are authorized to issue an unlimited number
of shares of beneficial interest in each separate series (par value $0.001 per
share). Shares of each Fund represent equal proportionate interests in the
assets of that Fund only and have identical voting, dividend, redemption,
liquidation, and other rights. All shares issued are fully paid and
non-assessable, and shareholders have no preemptive or other rights to subscribe
to any additional shares.
At a meeting held on December 17, 1997, the Board of Trustees of the
Trust authorized the issuance of shares of beneficial interest in Limited
Maturity Bond Fund. These shares will be issued to Ultra Short Bond Fund
shareholders as of the Closing Date in exchange for their Ultra Short Bond Fund
shares.
The Board of Trustees of the Trust does not intend to hold annual
meetings of shareholders of the Funds. The Trustees will call special meetings
of shareholders of a Fund only if required under the 1940 Act or in their
discretion or upon the written request of holders of 10% or more of the
outstanding shares of that Fund entitled to vote.
-15-
Under Delaware law, the shareholders of a Fund will not be personally
liable for the obligations of any Fund; a shareholder is entitled to the same
limitation of personal liability extended to shareholders of a corporation. To
guard against the risk that Delaware law might not be applied in other states,
the Trust Instrument of the Trust requires that every written obligation of the
Trust or a Fund contain a statement that such obligation may be enforced only
against the assets of the Trust or a Fund and provides for indemnification out
of Trust or Fund property of any shareholder nevertheless held personally liable
for Trust or Fund obligations, respectively.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Ultra Short Bond Fund's assets for Limited Maturity Bond
Fund shares and the latter's assumption of Ultra Short Bond Fund's liabilities
is intended to qualify for federal income tax purposes as a tax-free
reorganization under section 368(a)(1)(C) of the Code. Trust and Income Managers
Trust have received an opinion of Kirkpatrick & Lockhart LLP, their counsel
("Opinion"), substantially to the effect that:
(1) Limited Maturity Bond Fund's acquisition of Ultra Short Bond
Fund's assets in exchange solely for Limited Maturity Bond Fund shares
and the latter's assumption of Ultra Short Bond Fund's liabilities,
followed by Ultra Short Bond Fund's distribution of those shares to its
shareholders constructively in exchange for their Ultra Short Bond Fund
shares, will constitute a "reorganization" within the meaning of section
368(a)(1)(C) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
(2) No gain or loss will be recognized to Ultra Short Bond Fund
on the transfer to Limited Maturity Bond Fund of its assets in exchange
solely for Limited Maturity Bond Fund shares and the latter's assumption
of Ultra Short Bond Fund's liabilities or on the subsequent distribution
of those shares to Ultra Short Bond Fund's shareholders in constructive
exchange for their Ultra Short Bond Fund shares;
(3) No gain or loss will be recognized to Limited Maturity Bond
Fund on its receipt of the transferred assets in exchange solely for
Limited Maturity Bond Fund shares and its assumption of Ultra Short Bond
Fund's liabilities;
(4) Limited Maturity Bond Fund's basis for the transferred assets
will be the same as the basis thereof in Ultra Short Bond Fund's hands
immediately before the transaction, and Limited Maturity Bond Fund's
holding period for those assets will include Ultra Short Bond Fund's
holding period therefor;
(5) An Ultra Short Bond Fund shareholder will recognize no gain
or loss on the constructive exchange of all its Ultra Short Bond Fund
shares solely for Limited Maturity Bond Fund shares pursuant to the
Plan; and
-16-
(6) An Ultra Short Bond Fund shareholder's basis for the Limited
Maturity Bond Fund shares to be received by it in the transaction will
be the same as the basis for its Ultra Short Bond Fund shares to be
constructively surrendered in exchange for those Limited Maturity Bond
Fund shares, and its holding period for those Limited Maturity Bond Fund
shares will include its holding period for those Ultra Short Bond Fund
shares, provided they are held as capital assets by the shareholder on
the Closing Date.
The Opinion also states that:
(1) No gain or loss will be recognized on the distribution of
property from Ultra Short Bond Portfolio to Ultra Short Bond Fund
pursuant to the Plan;
(2) Ultra Short Bond Fund's basis for the distributed property
will be the same as the basis thereof in Ultra Short Bond Portfolio's
hands immediately before the distribution;
(3) No gain or loss will be recognized on the contribution of
property by Ultra Short Bond Fund to Limited Maturity Bond Portfolio in
exchange for an interest therein;
(4) Ultra Short Bond Fund's basis for its interest in Limited
Maturity Bond Portfolio will be the same as the basis it had in the
property it contributed thereto at the time of the contribution; and
(5) Limited Maturity Bond Portfolio's basis for the property
contributed thereto by Ultra Short Bond Fund will be same as the basis
thereof in Ultra Short Bond Portfolio's hands immediately before the
contribution.
The Opinion may state that no opinion is expressed as to the effect of
the transactions on the Funds or any shareholder with respect to any asset
(including certain options, futures and forward contracts) as to which any
unrealized gain or loss is required to be recognized for federal income tax
purposes at the end of a taxable year (or on the termination or transfer
thereof) under a mark-to-market system of accounting.
Utilization by Limited Maturity Bond Fund after the transactions of
previous capital losses realized by Ultra Short Bond Fund could be subject to
limitation in future years under the Code.
-17-
Shareholders of Ultra Short Bond Fund should consult their tax advisers
regarding the effect, if any, of the Reorganization in light of their individual
circumstances. Because the foregoing discussion only relates to the federal
income tax consequences of the Reorganization, those shareholders also should
consult their tax advisers as to state and local tax consequences, if any, of
the Reorganization.
CAPITALIZATION
The following table shows the capitalization of Ultra Short Bond Fund
and Limited Maturity Bond Fund as of October 31, 1997 and the pro forma combined
capitalization of both Funds as if the Reorganization had occurred on that date.
ULTRA SHORT LIMITED PRO FORMA
MATURITY COMBINED
Net Assets (000) $49,789 $255,406 $305,195
Net Asset Value per share $9.52 $10.03 $10.03
Shares Outstanding (000) 5,229 25,461 30,425
ADDITIONAL INFORMATION ABOUT LIMITED MATURITY BOND FUND AND PORTFOLIO
FINANCIAL HIGHLIGHTS
The financial highlights of Limited Maturity Bond Fund and Portfolio,
which are attached as Appendix B, have been audited by Ernst & Young LLP,
independent auditors, whose report thereon was unqualified. This information is
derived from and should be read in conjunction with the financial statements of
Limited Maturity Bond Fund and Portfolio and notes thereto, which are
incorporated by reference into the SAI together with the report of the auditors
thereon.
INVESTMENT OBJECTIVE AND POLICIES
For a discussion of Limited Maturity Bond Fund and Portfolio's
investment objective and policies and the risk factors associated with an
investment in the Fund in addition to that included in this Prospectus and
Information Statement, see "Investment Programs" and "Description of
Investments" in the Trust Prospectus enclosed herewith and incorporated by
reference herein.
-18-
BOARD OF TRUSTEES
For a discussion of the responsibilities of the Trustees of the Trust,
see "Management and Administration -- Trustees and Officers" in the Trust
Prospectus enclosed herewith and incorporated by reference herein.
INVESTMENT MANAGER, SUBADVISER, PORTFOLIO MANAGER AND TRANSFER AGENT
For a discussion of Limited Maturity Bond Portfolio's investment
manager, subadviser and portfolio manager, and Limited Maturity Bond Fund and
Portfolio's transfer agent, see "Management and Administration -- Investment
Manager, Administrator, Distributor and Sub-Adviser," "-- Expenses," and "--
Transfer Agent" in the Trust Prospectus enclosed
herewith and incorporated by reference herein.
CALCULATION OF PERFORMANCE DATA
For a discussion of the methods used to calculate Limited Maturity Bond
Fund's performance data, see "Performance Information" in the Trust Prospectus
enclosed herewith and incorporated by reference herein.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
See Attachment C for management's discussion of the performance of
Limited Maturity Bond Fund and Portfolio and the material factors affecting this
performance.
LIMITED MATURITY BOND FUND SHARES
For a discussion of Limited Maturity Bond Fund's shares, including
voting rights and exchange rights, and how the shares may be purchased and
redeemed, in addition to that included in this Prospectus and Information
Statement, see "Information Regarding Organization, Capitalization and Other
Matters," "How to Buy Shares," "How to Sell Shares," and "Shareholder Services"
in the Trust Prospectus enclosed herewith and incorporated by reference herein.
NET ASSET VALUE
For a discussion of how the offering price of Limited Maturity Bond Fund
is determined, see "Share Prices and Net Asset Value" in the Trust Prospectus
enclosed herewith and incorporated by reference herein.
-19-
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS
For a discussion of Limited Maturity Bond Fund's policy with respect to
dividends and other distributions and the tax consequences of an investment in
its shares, see "Dividends, Other Distributions, and Taxes" in the Trust
Prospectus enclosed herewith and incorporated by reference herein.
ADDITIONAL INFORMATION ABOUT ULTRA SHORT BOND FUND AND PORTFOLIO
FINANCIAL HIGHLIGHTS
The financial highlights of Ultra Short Bond Fund and Portfolio, which
are attached as Appendix B, have been audited by Ernst & Young LLP, independent
auditors, whose report thereon was unqualified. This information is derived from
and should be read in conjunction with the financial statements of Ultra Short
Bond Fund and Portfolio and notes thereto, which are incorporated by reference
into the SAI, together with the report of the auditors thereon.
INVESTMENT OBJECTIVE AND POLICIES
For a discussion of Ultra Short Bond Fund and Portfolio's investment
objective and policies and the risk factors associated with an investment in the
Fund in addition to that included in this Prospectus and Information Statement,
see "Investment Programs" and "Description of Investments" in the Trust
Prospectus enclosed herewith and incorporated by reference herein.
BOARD OF TRUSTEES
For a discussion of the responsibilities of the Trustees of the Trust,
see "Management and Administration -- Trustees and Officers" in the Trust
Prospectus enclosed herewith and incorporated by reference herein.
INVESTMENT MANAGER, SUBADVISER, PORTFOLIO MANAGER AND TRANSFER AGENT
For a discussion of Ultra Short Bond Portfolio's investment manager,
subadviser, and portfolio manager, and Ultra Short Bond Fund and Portfolio's
transfer agent, see "Management and Administration -- Investment Manager,
Administrator, Distributor and Sub-Adviser," "--Expenses," and "--Transfer
Agent" in the Trust Prospectus enclosed herewith and incorporated by reference
herein.
-20-
CALCULATION OF PERFORMANCE DATA
For a discussion of the methods used to calculate Ultra Short Bond
Fund's performance data, see "Performance Information" in the Trust Prospectus
enclosed herewith and incorporated by reference herein.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
See Attachment C for management's discussion of the performance of Ultra
Short Bond Fund and Portfolio and the material factors affecting this
performance.
ULTRA SHORT BOND FUND SHARES
For a discussion of Ultra Short Bond Fund's shares, including voting
rights and exchange rights, and how the shares may be purchased and redeemed,
Fund in addition to that included in this Prospectus and Information Statement,
see "Information Regarding Organization, Capitalization and Other Matters," "How
to Buy Shares," "How to Sell Shares," and "Shareholder Services" in the Trust
Prospectus enclosed herewith and incorporated by reference herein.
NET ASSET VALUE
For a discussion of how the offering price of Ultra Short Bond Fund is
determined, see "Share Prices and Net Asset Value" in the Trust Prospectus
enclosed herewith and incorporated by reference herein.
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS
For a discussion of Ultra Short Bond Fund's policy with respect to
dividends and other distributions and the tax consequences of an investment in
its shares, see "Dividends, Other Distributions, and Taxes" in the Trust
Prospectus enclosed herewith and incorporated by reference herein.
INFORMATION REGARDING FIVE PERCENT SHARE OWNERSHIP AND INTERESTS OF
AFFILIATED PERSONS
FIVE PERCENT HOLDERS
The following table sets forth the name, address, and percentage
ownership of each person who was known by each Fund to own beneficially or of
record 5% or more that Fund's outstanding shares at November 30, 1997:
-21-
LIMITED MATURITY BOND FUND:
NAME AND ADDRESS: PERCENTAGE OF OWNERSHIP:
---------------- -----------------------
Charles Schwab & Co., Inc.* 27.78%
Attn. Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
Nationwide Life Insurance Co. 9.67%
QPVA
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029
Neuberger & Berman Trust Co.* 5.06%
Neuberger & Berman Employees
Profit Sharing Plan UTD 05/20/71
Attn. Al Boccardo
605 Third Avenue, 36th Floor
New York, NY 10158-0180
ULTRA SHORT BOND FUND:
NAME AND ADDRESS: PERCENTAGE OF OWNERSHIP:
---------------- -----------------------
Charles Schwab & Co., Inc.* 33.09%
Attn. Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
*Charles Schwab & Co., Inc. and Neuberger & Berman Trust Company hold
these shares of record for certain of their clients and have informed the Funds
of their policies to maintain the confidentiality of holdings in their client
accounts unless disclosure is expressly required by law.
SHARES HELD BY OFFICERS AND DIRECTORS
At November 30, 1997, the trustees and officers of the Trust and Income
Managers Trust, as a group, owned beneficially or of record less than 1% of the
outstanding shares of each Fund.
INTERESTS OF AFFILIATED PERSONS AND NECESSARY NO-ACTION RELIEF
The implementation of the Plan is conditional on receipt of assurance
from the SEC staff that no enforcement action will be taken under Section 17(a)
-22-
of the 1940 Act. THE REORGANIZATION WILL NOT BE EFFECTED UNLESS AND UNTIL THE
SEC STAFF HAS GRANTED THIS OR SIMILAR RELIEF. The Trustees of the Trust are
advised that it is appropriate to obtain such relief before effecting the
Reorganization because certain persons involved in the Reorganization hold more
than five percent of the shares of both of the Funds involved in the
Reorganization and therefore may be deemed affiliated persons of each Fund, or
because Neuberger & Berman Trust Company (an affiliate of the Portfolios'
investment manager) owns of record more than five percent of the shares of
Limited Maturity Bond Fund.
N&B Management, the investment manager of the Portfolios and the Funds'
administrator and distributor, may be deemed to benefit from the Reorganization,
because the combination of the Funds and Portfolios will eliminate expenses,
such as fund accounting, legal, audit, shareholder reporting, and custodial
expenses, that are involved in maintaining Ultra Short Bond Fund and Portfolio
as separate series of the Trust and Income Managers Trust, respectively. N&B
Management anticipates that this will produce economies of scale in the
remaining Limited Maturity Bond Fund and Portfolio and make Limited Maturity
Bond Fund more marketable, as well as eliminate the need for further expense
reimbursements with respect to Ultra Short Bond Fund and Portfolio. The SEC has
concluded that such benefits are fully compatible with Rule 17a-8 under the 1940
Act, which is the principal exemptive rule for mutual fund combinations.
MISCELLANEOUS
AVAILABLE INFORMATION
The Trust and each series thereof are subject to the informational
requirements of the Securities Exchange Act of 1934 and the 1940 Act and in
accordance therewith files reports, proxy material and other information with
the SEC. Such reports, proxy material and other information can be inspected and
copied at the Public Reference Facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices in New
York (7 World Trade Center, Suite 1300, New York, New York 10048). Copies of
such material also can be obtained at prescribed rates from the Public Reference
Branch, Office of Consumer Affairs and Information Services, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
LEGAL MATTERS
Certain legal matters in connection with the issuance of Limited
Maturity Bond Fund shares as part of the Reorganization will be passed upon by
Kirkpatrick & Lockhart LLP, counsel to the Trust.
EXPERTS
The audited financial statements of Limited Maturity Bond Fund and
Portfolio and Ultra Short Bond Fund and Portfolio, incorporated by reference in
the Statement of Additional Information, have been audited by Ernst & Young LLP,
-23-
independent auditors, to the extent indicated in their reports thereon which are
included in the Annual Report to shareholders of Limited Maturity Bond Fund and
Ultra Short Bond Fund for the fiscal year ended October 31, 1997. The financial
statements of Limited Maturity Bond Fund and Portfolio and Ultra Short Bond Fund
and Portfolio audited by Ernst & Young LLP have been incorporated by reference
in the Statement of Additional Information in reliance on their reports given on
their authority as experts in auditing and accounting.
-24-
APPENDIX A
PLAN OF REORGANIZATION AND TERMINATION
A-1
NEUBERGER & BERMAN INCOME FUNDS
PLAN OF REORGANIZATION AND TERMINATION
--------------------------------------
This Plan of Reorganization and Termination ("Plan"), dated as of this
22nd day of December, 1997, is made by Neuberger & Berman Income Funds, a
Delaware business trust ("Trust"), on behalf of two segregated portfolios of
assets ("series") thereof, Neuberger & Berman Ultra Short Bond Fund ("Target")
and Neuberger & Berman Limited Maturity Bond Fund ("Acquiror"). (Target and
Acquiror are sometimes referred to herein individually as a "Fund" and
collectively as the "Funds.")
R E C I T A L S
---------------
A. Each Fund is a feeder fund in a "master/feeder fund structure,"
pursuant to which (a) Target invests substantially all of its net investable
assets in Neuberger & Berman Ultra Short Bond Portfolio ("USB Portfolio"), a
subtrust of Income Managers Trust, a New York common law trust registered as an
open-end management investment company under the Investment Company Act of 1940,
as amended ("1940 Act") ("Managers Trust"), and (b) Acquiror invests
substantially all of its net investable assets in Neuberger & Berman Limited
Maturity Bond Portfolio ("LMB Portfolio"), another subtrust of Managers Trust
(USB Portfolio and LMB Portfolio being sometimes referred to herein collectively
as the "Portfolios");
B. The boards of trustees of the Trust and Managers Trust -- in each
case, including all of the trustees who are not "interested persons" (as that
term is defined in section 2(a)(19) of the 1940 Act) thereof -- approved the
transactions described herein (collectively "Reorganization") at a joint meeting
thereof held on September 24, 1997 ("Meeting"), respectively finding, in
accordance with Rule 17a-8 under the 1940 Act, that the Reorganization is in the
best interests of Target, Acquiror, and the Portfolios and that the interests of
each such entity's existing shareholders/interestholders will not be diluted as
a result of the Reorganization; and
C. At the time of the Reorganization, Neuberger & Berman Ultra Short
Bond Trust ("Target's Sister Fund"), a series of Neuberger & Berman Income Trust
that (like Target) invests substantially all of its net investable assets in USB
Portfolio, and Neuberger & Berman Limited Maturity Bond Trust, another series of
that trust that (like Acquiror) invests substantially all of its net investable
assets in LMB Portfolio, will engage in transactions substantially identical to
the Reorganization.
P R O V I S I O N S
-------------------
1. BACKGROUND.
1.1. The Trust is a Delaware business trust duly registered as an
open-end management investment company under the 1940 Act, and each Fund is a
duly established and designated series thereof.
1.2. This Plan is intended to be, and is adopted as, a plan of a
reorganization described in section 368(a)(1)(C) of the Internal Revenue Code of
1986, as amended ("Code"). As described in paragraph 3, at the Effective Time
(as defined in paragraph 5), Target will transfer its assets to Acquiror in
exchange solely for voting shares of beneficial interest in Acquiror ("Acquiror
Shares") and the assumption by Acquiror of Target's liabilities and then will
constructively distribute the Acquiror Shares to the holders of shares of
beneficial interest in Target ("Target Shares") in exchange therefor, all upon
the terms and conditions set forth herein.
2. RELATED TRANSACTIONS.
2.1. As of the Effective Time, Target shall redeem (I.E., completely
withdraw) its interest in USB Portfolio, as permitted under Section 3.5 and
Article VII of Managers Trust's Declaration of Trust. In payment therefor,
Target shall receive a distribution in kind of its share of USB Portfolio's net
assets -- Managers Trust's board of trustees having determined at the Meeting
that, in the event of any such redemption, liquidation of USB Portfolio's
investments to pay for such a withdrawal would not be in its best interests --
which assets Target will contribute to LMB Portfolio in exchange for an interest
therein ("LMB Portfolio Interest"). (The foregoing transactions are referred to
herein collectively as the "Related Transactions.") Simultaneously, Target's
Sister Fund likewise shall redeem its interest in USB Portfolio in consideration
for a distribution in kind and shall exchange the assets it thus receives for an
LMB Portfolio Interest. Promptly upon consummation of the redemptions by Target
and Target's Sister Fund of their interests in USB Portfolio, the latter will
discharge its remaining liabilities and be terminated as a subtrust of Managers
Trust.
2.2. State Street Bank & Trust Company, the Funds' and Portfolios'
custodian and the Funds' transfer agent ("State Street"), shall record all such
asset transfers on its records and shall deliver at the Closing (as defined in
paragraph 5) (a) a certificate of an authorized officer stating that (1) USB
Portfolio's assets held by State Street immediately before, and distributed to
Target as part of, the Related Transactions are held by LMB Portfolio at the
Effective Time and (2) all necessary taxes in conjunction with the transfer of
those assets, including all applicable federal and state stock transfer stamps,
if any, have been paid or provision for payment has been made and (b) a schedule
of those assets as of the Effective Time, setting forth for all portfolio
securities included therein their adjusted tax basis and holding period by lot.
3. THE REORGANIZATION.
3.1. At the time of the Related Transactions, Target shall assign,
sell, convey, transfer, and deliver to Acquiror all of its assets described in
paragraph 3.2 ("Assets"). In exchange therefor, Acquiror shall
(a) issue and deliver to Target the number of full and
fractional Acquiror Shares determined by dividing the net asset value
("NAV") of Target (computed as set forth in paragraph 4.1) by the NAV
per Acquiror Share (computed as set forth in paragraph 4.2), and
(b) assume all of Target's liabilities described in paragraph
3.3 ("Liabilities").
(Target's assets and liabilities shall be determined in accordance with
the Trust's Trust Instrument.) Such transactions shall take place at the
Closing.
3.2. The Assets shall include, without limitation, all cash, cash
equivalents, securities (including Target's LMB Portfolio Interest), receivables
(including interest and dividends receivable), claims and rights of action,
2
rights to register shares under applicable securities laws, books and records,
deferred and prepaid expenses shown as assets on Target's books, and other
property owned by Target at the Effective Time.
3.3. The Liabilities shall include (except as otherwise provided
herein) all of Target's liabilities, debts, obligations, and duties of whatever
kind or nature, whether absolute, accrued, contingent, or otherwise, whether or
not arising in the ordinary course of business, whether or not determinable at
the Effective Time, and whether or not specifically referred to in this Plan,
including Target's share of the expenses described in paragraph 7.
Notwithstanding the foregoing, Target shall use its best efforts, to the extent
practicable, to discharge all of its known Liabilities prior to the Effective
Time.
3.4. At or immediately before the Effective Time, Target shall declare
and pay to its shareholders a dividend and/or other distribution in an amount
large enough so that it will have distributed substantially all (and in any
event not less than 90%) of its investment company taxable income (computed
without regard to any deduction for dividends paid) and substantially all of its
realized net capital gain, if any, for the current taxable year through the
Effective Time.
3.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall constructively distribute the Acquiror Shares
received by it pursuant to paragraph 3.1(a) to Target's shareholders of record,
determined as of the Effective Time (collectively "Shareholders" and
individually a "Shareholder"), in exchange for their Target Shares. Such
distribution shall be accomplished by State Street's opening accounts on
Acquiror's share transfer books in the Shareholders' names and transferring such
Acquiror Shares thereto. Each Shareholder's account shall be credited with the
respective PRO RATA number of full and fractional (rounded to the third decimal
place) Acquiror Shares due that Shareholder. All outstanding Target Shares,
including any represented by certificates, shall simultaneously be canceled on
Target's share transfer books. Acquiror shall issue certificates representing
the Acquiror Shares in connection with the Reorganization only to shareholders
whose Target shares were represented by certificates.
3.6. As soon as reasonably practicable after the distribution described
in the preceding paragraph, Target shall be terminated as a series of the Trust
and any further actions shall be taken in connection therewith as required by
applicable law and the Trust's Trust Instrument.
3.7. Any transfer taxes payable upon issuance of Acquiror Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiror Shares are to be issued, as a condition of such transfer.
4. VALUATION.
4.1. For purposes of paragraph 3.1(a), Target's NAV shall be (a) the
value of the Assets computed as of the close of regular trading on the New York
Stock Exchange ("NYSE") (currently 4:00 p.m., Eastern time) on the date of the
Closing ("Valuation Time"), using the valuation procedures set forth in Target's
then-current prospectus and statement of additional information, less (b) the
amount of the Liabilities as of the Valuation Time.
4.2. For purposes of paragraph 3.1(a), the NAV per share of Acquiror
Shares shall be computed as of the Valuation Time, using the valuation
procedures set forth in Acquiror's then-current prospectus and statement of
additional information as filed in its registration statement on Form N-1A.
3
4.3. All computations pursuant to paragraphs 4.1 and 4.2 shall be made
by State Street, using (insofar as practicable) prices provided by outside
pricing services approved by Managers Trust's board of trustees.
5. CLOSING AND EFFECTIVE TIME. The Reorganization, together with related acts
necessary to consummate it ("Closing"), shall occur at the Trust's principal
office on February 27, 1998, or at such other place and/or on such other date as
the Trust's officers may determine. All acts taking place at the Closing shall
be deemed to take place simultaneously at the Valuation Time or at such other
time as the Trust's officers may determine ("Effective Time"). If, immediately
before the Valuation Time, trading or the reporting of trading on the NYSE or
elsewhere is disrupted, so that accurate appraisal of Target's NAV and the NAV
per Acquiror Share is impracticable, the Effective Time shall be postponed until
the first business day after the day when such trading shall have been fully
resumed and such reporting shall have been restored.
6. CONDITIONS. Each Fund's obligations hereunder are subject to satisfaction of
each condition indicated in this paragraph as being applicable to it either at
the time stated therein or, if no time is so stated, at or before the Effective
Time:
6.1. Conditions to Each Fund's Obligations:
--------------------------------------
6.1.1. The Related Transactions shall have been consummated;
6.1.2. The fair market value of the Acquiror Shares, when
received by the Shareholders, will be approximately equal to the fair
market value of their Target Shares constructively surrendered in
exchange therefor;
6.1.3. The Trust's management (a) is unaware of any plan or
intention of Shareholders to redeem or otherwise dispose of any portion
of the Acquiror Shares to be received by them in the Reorganization and
(b) does not anticipate dispositions of those Acquiror Shares at the
time of or soon after the Reorganization to exceed the usual rate and
frequency of dispositions of shares of Target as a series of an open-end
investment company. Consequently, the Trust's management expects that
the percentage of Shareholder interests, if any, that will be disposed
of as a result of or at the time of the Reorganization will be DE
MINIMIS. Nor does the Trust's management anticipate that there will be
extraordinary redemptions of Acquiror Shares immediately following the
Reorganization;
6.1.4. The Shareholders will pay their own expenses, if any,
incurred in connection with the Reorganization;
6.1.5. Immediately following consummation of the Reorganization,
Acquiror (directly or through LMB Portfolio) will hold substantially the
same assets and be subject to substantially the same liabilities that
Target (directly or through USB Portfolio) held or was subject to
immediately prior thereto, in addition to the assets and liabilities
Acquiror held immediately before the Reorganization, plus any
liabilities and expenses of the parties incurred in connection with the
Reorganization;
4
6.1.6. The fair market value on a going concern basis of the
Assets will equal or exceed the Liabilities to be assumed by Acquiror
and those to which the Assets are subject;
6.1.7. There is no inter-series indebtedness between the Funds
that was issued or acquired, or will be settled, at a discount;
6.1.8. Pursuant to the Reorganization, Target will transfer to
Acquiror, and Acquiror will acquire, at least 90% of the fair market
value of the net assets, and at least 70% of the fair market value of
the gross assets, held by Target immediately before the Reorganization.
For the purposes of this representation, any amounts used by Target to
pay its Reorganization expenses and redemptions and distributions made
by it immediately before the Reorganization (except for (a)
distributions made to conform to its policy of distributing all or
substantially all of its income and gains to avoid the obligation to pay
federal income tax and/or the excise tax under section 4982 of the Code
and (b) redemptions not made as part of the Reorganization) will be
included as assets thereof held immediately before the Reorganization;
6.1.9. Immediately after the Reorganization, the Shareholders
will not own shares constituting "control" of Acquiror within the
meaning of section 304(c);
6.1.10. The Trust and Managers Trust shall have received an
opinion of Kirkpatrick & Lockhart LLP, their counsel ("Counsel"),
addressed to and in form and substance satisfactory to them, as to the
federal income tax consequences mentioned below ("Tax Opinion"). In
rendering the Tax Opinion, Counsel may assume satisfaction of all the
conditions set forth in this paragraph 6 (and may treat them as
representations by the Trust and Managers Trust to Counsel) and may
rely, as to any factual matters, exclusively and without independent
verification, on such representations and any other representations made
to Counsel by responsible officers of the Trust. The Tax Opinion shall
be substantially to the effect that, based on the facts and assumptions
stated therein, for federal income tax purposes:
6.1.10.1. Acquiror's acquisition of the Assets in exchange
solely for Acquiror Shares and Acquiror's assumption of the
Liabilities, followed by Target's distribution of those shares to the
Shareholders constructively in exchange for their Target Shares, will
constitute a reorganization within the meaning of section
368(a)(1)(C) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
6.1.10.2. No gain or loss will be recognized to Target on
the transfer to Acquiror of the Assets in exchange solely for
Acquiror Shares and Acquiror's assumption of the Liabilities or on
the subsequent distribution of those shares to the Shareholders in
constructive exchange for their Target Shares;
6.1.10.3. No gain or loss will be recognized to Acquiror
on its receipt of the Assets in exchange solely for Acquiror Shares
and its assumption of the Liabilities;
6.1.10.4. Acquiror's basis for the Assets will be the same
as the basis thereof in Target's hands immediately before the
Reorganization, and Acquiror's holding period for the Assets will
include Target's holding period therefor;
5
6.1.10.5. A Shareholder will recognize no gain or loss on
the constructive exchange of all its Target Shares solely for
Acquiror Shares pursuant to the Reorganization; and
6.1.10.6. A Shareholder's basis for the Acquiror Shares
to be received by it in the Reorganization will be the same as the
basis for its Target Shares to be constructively surrendered in
exchange for those Acquiror Shares, and its holding period for those
Acquiror Shares will include its holding period for those Target
Shares, provided they are held as capital assets by the Shareholder
at the Effective Time.
Notwithstanding subparagraphs 6.1.10.2 and 6.1.10.4, the Tax Opinion
may state that no opinion is expressed as to the effect of the
Reorganization on the Funds or any Shareholder with respect to any asset
as to which any unrealized gain or loss is required to be recognized for
federal income tax purposes at the end of a taxable year (or on the
termination or transfer thereof) under a mark-to-market system of
accounting;
6.1.11. The Trust and Managers Trust shall have received any
no-action assurance from the Securities and Exchange Commission ("SEC")
deemed necessary by counsel with respect to section 17(a) of the 1940
Act;
6.1.12. All necessary filings shall have been made with the SEC
and state securities authorities, and no order or directive shall have
been received that any other action is required to permit the parties to
carry out the transactions contemplated hereby. The registration
statement on Form N-14 relating to the Acquiror Shares issuable
hereunder shall have become effective under the Securities Act of 1933,
no stop orders suspending the effectiveness thereof shall have been
issued, and the SEC shall not have issued an unfavorable report with
respect to the Reorganization under section 25(b) of the 1940 Act nor
instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act;
and
6.1.13. Each Fund shall have taken or caused to be taken all
actions, and shall have done or caused to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the
transactions contemplated hereby.
6.2. Conditions to Acquiror's Obligations:
-------------------------------------
6.2.1. At the Closing, Target will have good title to the Assets
and full right, power, and authority to sell, assign, transfer, and
deliver the Assets to Acquiror free of any liens or other encumbrances;
and upon delivery and payment for the Assets, Acquiror will acquire good
and marketable title thereto;
6.2.2. The Liabilities were incurred by Target in the ordinary
course of its business;
6.2.3. Target is a "fund" as defined in section 851(g)(2) of the
Code; it qualified for treatment as a regulated investment company under
Subchapter M of the Code ("RIC") for each past taxable year since it
commenced operations and will continue to meet all the requirements for
such qualification for its current taxable year; and it has no earnings
and profits accumulated in any taxable year in which the provisions of
Subchapter M did not apply to it;
6
6.2.4. Target is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case
within the meaning of section 368(a)(3)(A) of the Code;
6.2.5. Not more than 25% of the value of the total assets held
by Target, directly or through USB Portfolio (excluding cash, cash
items, and U.S. government securities), is invested in the stock and
securities of any one issuer, and not more than 50% of the value of such
assets is invested in the stock and securities of five or fewer issuers;
and
6.2.6. Target will be terminated as soon as reasonably
practicable after the Reorganization, but in all events within six
months after the Effective Time.
6.3. Conditions to Target's Obligations:
-----------------------------------
6.3.1. No consideration other than Acquiror Shares (and
Acquiror's assumption of the Liabilities) will be issued in exchange for
the Assets in the Reorganization;
6.3.2. The Acquiror Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized and,
when issued and delivered as provided herein, will be duly and validly
issued and outstanding shares of Acquiror, fully paid and
non-assessable. Except as contemplated by this Plan, Acquiror does not
have outstanding any options, warrants, or other rights to subscribe for
or purchase any of its shares, nor is there outstanding any security
convertible into any of its shares;
6.3.3. Acquiror is a "fund" as defined in section 851(g)(2) of
the Code; it qualified for treatment as a RIC for each past taxable year
since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year;
Acquiror intends to continue to meet all such requirements for the next
taxable year; and it has no earnings and profits accumulated in any
taxable year in which the provisions of Subchapter M of the Code did not
apply to it;
6.3.4. Acquiror has no plan or intention to issue additional
Acquiror Shares following the Reorganization except for shares issued in
the ordinary course of its business as a series of an open-end
investment company; nor does Acquiror have any plan or intention to
redeem or otherwise reacquire any Acquiror Shares issued to the
Shareholders pursuant to the Reorganization, other than through
redemptions arising in the ordinary course of that business;
6.3.5. Acquiror (directly or through LMB Portfolio) (a) will
actively continue Target's business in substantially the same manner
that Target conducted that business (directly or through USB Portfolio)
immediately before the Reorganization, (b) has no plan or intention to
sell or otherwise dispose of any of the Assets, except for dispositions
made in the ordinary course of that business and dispositions necessary
to maintain its status as a RIC, and (c) expects to retain substantially
all the Assets in the same form as it receives them in the
Reorganization, unless and until subsequent investment circumstances
suggest the desirability of change or it becomes necessary to make
dispositions thereof to maintain such status;
6.3.6. There is no plan or intention for Acquiror to be dissolved
or merged into another corporation or business trust or any "fund"
thereof (within the meaning of section 851(g)(2) of the Code) following
the Reorganization;
7
6.3.7. Immediately after the Reorganization, (a) not more than
25% of the value of the total assets held by Acquiror, directly or
through LMB Portfolio (excluding cash, cash items, and U.S. government
securities), will be invested in the stock and securities of any one
issuer and (b) not more than 50% of the value of such assets will be
invested in the stock and securities of five or fewer issuers; and
6.3.8. Acquiror does not directly or indirectly own, nor at the
Effective Time will it directly or indirectly own, nor has it at any
time during the past five years directly or indirectly owned, any Target
Shares.
7. EXPENSES. Except as otherwise provided herein, all expenses incurred by the
Funds in connection with the transactions contemplated by this Plan (whether or
not they are consummated) will be borne by the Funds proportionately, as
follows: each such expense will be borne by the Funds in proportion to their
respective net assets as of the close of business on the last business day of
the month in which such expense was incurred. Such expenses include (a)
expenses incurred in connection with entering into and carrying out the
provisions of this Plan, (b) expenses associated with preparing and filing with
the SEC a registration statement on Form N-14 relating to the Acquiror Shares
issuable hereunder, and any supplement or amendment thereto, including therein a
prospectus/information statement ("Prospectus"), (c) registration or
qualification fees and expenses of preparing and filing such forms as are
necessary under applicable state securities laws to qualify such Acquiror Shares
in each state in which Target's shareholders are resident as of the date of the
mailing of the Prospectus to them, (d) expenses incurred in connection with
obtaining no-action assurance from the SEC referenced in subparagraph 6.1.11,
(e) printing and postage expenses, and (f) legal and accounting fees.
8. TERMINATION. The Trust's board of trustees may terminate this Plan and
abandon the Reorganization at any time prior to the Closing if circumstances
develop that, in the trustees' judgment, make proceeding with the Reorganization
inadvisable for either Fund.
9. GOVERNING LAW. This Plan shall be construed in accordance with the internal
laws of the State of Delaware; provided that, in the case of any conflict
between such laws and the federal securities laws, the latter shall govern.
IN WITNESS WHEREOF, Neuberger & Berman Income Funds has caused this Plan
to be executed and delivered on behalf of each Fund by its duly authorized
officers as of the day and year first written above.
Attest:
NEUBERGER & BERMAN INCOME FUNDS
/s/ Claudia A. Brandon By: /s/ Theodore P. Giuliano
- ------------------------- ---------------------------------
Claudia A. Brandon Title: President
APPENDIX B
FINANCIAL HIGHLIGHTS
NEUBERGER & BERMAN LIMITED MATURITY BOND FUND AND PORTFOLIO
NEUBERGER & BERMAN ULTRA SHORT BOND AND PORTFOLIO
B-1
Neuberger&Berman
LIMITED MATURITY BOND FUND
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding
throughout each year and other performance information derived from the
Financial Statements. It should be read in conjunction with its corresponding
Portfolio's Financial Statements and notes thereto.
Period from
Year Ended October 31, March 1, 1988
to October 31,
19971/ 19961/ 19951/ 19941/ 19931/ 1992 1991 1990 1989 1988
Net Asset Value, Beginning of Year $9.99 $10.06 $9.88 $10.49 $10.40 $10.24 $9.91 $9.96 $9.88 10.00
Income From Investment Operations
Net Investment Income .63 .60 .62 .56 .58 .63 .71 .80 .82 .48
Net Gains or Losses on Securities .04 (.07) .18 (.55) .14 .16 .33 (.05) .08 (.12)
(both realized and unrealized)
Total From Investment .67 .53 .80 .01 .72 .79 1.04 .75 .90 .36
Operations
Less Distributions
Dividends (from net investment (.63) (.60) (.62) (.56) (.58) (.63) (.71) (.80) (.82) (.48)
income)
Distributions (from net capital -- -- -- (.05) (.05) -- -- -- -- --
gains)
Distributions (in excess of net -- -- -- (.01) -- -- -- -- -- --
capital gains)
Tax return of capital -- -- -- -- -- -- -- -- -- --
Total Distributions (.63) (.60) (.62) (.62) (.63) (.63) (.71) (.80) (.82) (.48)
Net Asset Value, End of Year $10.03 $9.99 $10.06 $9.88 $10.49 $10.40 $10.24 $9.91 $9.96 $9.88
Total Return(2) +6.97% +5.44% +8.32% +0.13% +7.09% +7.87% +10.89% +7.85% +9.56% +3.76%(6)
Ratios/Supplemental Data
Net Assets, End of Year $255.4 $245.7 $307.4 $308.6 $357.3 $273.0 $163.2 $101.3 $107.7 $133.5
(in millions)
Ratio of Gross Expenses to Average .70% .71% .70% -- -- -- -- -- -- --
Net Assets(3)
Ratio of Net Expenses to Average .70% .70% .70% .69% .65% .65% .65% .65% .65% .63%(7)
Net Assets(4)
Ratio of Net Investment Income to 6.34% 6.10% 6.21% 5.53% 5.49% 6.02% 7.07% 8.09% 8.33% 7.34%(7)
Average Net Assets(4)
Portfolio Turnover Rate(8) -- -- -- -- 114% 113% 88% 88% 121% 68%
SEE NOTES TO FINANCIAL HIGHLIGHTS.
B-2
FINANCIAL HIGHLIGHTS
Neuberger&Berman
ULTRA SHORT BOND FUND
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding
throughout each year and other performance information derived from the
Financial Statements. It should be read in conjunction with its corresponding
Portfolio's Financial Statements and notes thereto.
Period from
March 1,
Year Ended October 31, 1988
to October 31,
19971/ 19961/ 19951/ 19941/ 19931/ 1992 1991 1990 1989 1988
- - - - -
- ------------------------------------------ ------- ------- ------- -------- --------- -------- -------- -------- ------ ----------
Net Asset Value, Beginning of Year $9.49 $9.53 $9.47 $9.64 $9.70 $9.83 $9.79 $9.83 $9.87 $9.93
Income From Investment Operations
Net Investment Income .53 .52 .52 .35 .40 .56 .68 .79 .89 .47
Net Gains or Losses on Securities .03 (.04) .06 (.17) (.06) (.13) .04 (.04) (.04) (.06)
(both realized and unrealized)
Total From Investment Operations .56 .48 .58 .18 .34 .43 .72 .75 .85 .41
Less Distributions
Dividends (from net investment income) (.53) (.52) (.52) (.35) (.40) (.56) (.68) (.79) (.89) (.47)
Net Asset Value, End of Year $9.52 $9.49 $9.53 $9.47 $9.64 $9.70 $9.83 $9.79 $9.83 $9.87
Total Return(2) +6.09% +5.23% +6.26% +1.96% +3.53% +4.44% +7.64% +7.98% +9.05% +4.20%6/
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $49.8 $89.0 $100.5 $101.1 $104.4 $103.3 $97.9 $85.8 $103.3 $101.0
Ratio of Gross Expenses to Average Net .66% .66% .65% -- -- -- -- -- -- --
Assets(3)
Ratio of Net Expenses to Average Net .65% .65% .65% .65% .65% .65% .65% .65% .65% .63%7/
-
Assets(4)
Ratio of Net Investment Income to 5.59% 5.53% 5.44% 3.72% 4.09% 5.70% 6.97% 8.14% 9.06% 7.01%7/
Average Net Assets(4)
Portfolio Turnover Rate(8) -- -- -- -- 115% 66% 89% 120% 85% 47%
SEE NOTES TO FINANCIAL HIGHLIGHTS.
B-3
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger&Berman October 31, 1997
- --------------------------------------------------------------------------------
INCOME FUNDS
1) The per share amounts and ratios which are shown reflect income and
expenses, including each Fund's proportionate share of its corresponding
Portfolio's income and expenses.
2) Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of each Fund during each
fiscal period and assumes dividends and other distributions, if any, were
reinvested. Results represent past performance and do not guarantee future
results. Investment returns and principal may fluctuate and shares when
redeemed may be worth more or less than original cost. For each Fund, total
return would have been lower if N&B Management had not reimbursed certain
expenses.
3) For fiscal periods ending after September 1, 1995, each Fund is required to
calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
4) After reimbursement of expenses by N&B Management as described in Note B of
Notes to Financial Statements. Had N&B Management not undertaken such action
the annualized ratios of net expenses and net investment income to average
daily net assets would have been:
B-4
Period
from
Year Ended October 31, March 1,
1988 to
Oct. 31,
ULTRA SHORT 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- --------------------- ---------- -------- ------- -------- -------- -------- -------- --------- ------- ------------
Net Expenses .89% .84% .87% .86% .95% .87% .87% .81% .92% .89%
Net Investment 5.35% 5.34% 5.22% 3.51% 3.79% 5.48% 6.75% 7.98% 8.79% 6.75%
Income
Period
from
Year Ended October 31, March
1, 1988
to Oct.
31,
LIMITED MATURITY 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- --------------------- ---------- -------- ------- -------- -------- -------- -------- --------- ------- ----------------------------
Net Expenses .71% .71% .71% .71% .73% .68% .72% .71% .77% .74%
Net Investment 6.33% 6.09% 6.20% 5.51% 5.42% 5.99% 7.00% 8.03% 8.21% 7.23%
Income
5) The date investment operations commenced.
6) Not annualized.
7) Annualized.
8) Ultra Short and Limited Maturity transferred all of their investment
securities into their respective portfolios on July 2, 1993. After that
date, each Fund invested only in its corresponding Portfolio, and that
Portfolio, rather than the Fund, engaged in securities transactions.
Therefore, after that date neither Fund had a portfolio turnover rate.
Portfolio turnover rates for periods ending after July 2, 1993 for each
Portfolio were as follows:
B-5
Period from July 2,
1993 (Commencement of
Operations)
Year Ended October 31, to October 31,
1997 1996 1995 1994 1993
- ------------------------------ ------------- ------------ ------------ ------------- ------------------------
ULTRA SHORT Bond Portfolio 101% 173% 148% 94% 46%
LIMITED MATURITY Bond Portfolio 89% 169% 88% 102% 71%
B-6
APPENDIX C
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
(FROM NEUBERGER & BERMAN INCOME FUNDS
ANNUAL REPORT TO SHAREHOLDERS DATED OCTOBER 31, 1997)
C-1
PRESIDENT'S LETTER
Dear Shareholder,
In a "state of the bond market" address presented in our fiscal April
30, 1997, Semi-Annual Report, I expressed our positive attitude toward the
fixed-income markets. I summarized our perspective by concluding that, ". . .
based on their own fundamental merits, we find that bonds currently provide an
appealing investment opportunity." Evidently, our opinion was shared by others,
most notably legendary value investor Warren Buffett, who was reported to have
purchased several billion dollars of bonds during the third quarter in a rare
foray into the fixed-income market. Equities investors' renewed enthusiasm for
bonds is also becoming more evident in the mutual fund arena. In September and
October 1997, an estimated $6.6 billion flowed into bond funds, nearly double
the total from a year ago. What is happening here? We believe investors are
recognizing bonds' fundamental attractiveness and showing greater appreciation
for the traditional role fixed income plays in diversified investment
portfolios.
EDGAR PRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
1-YEAR TREASURY BILLS 5-YEAR TREASURY NOTES 10-YEAR TREASURY BONDS
Nov 96 0.51% 1.49% 2.68%
Dec 96 0.85% 0.40% 0.54%
Jan 97 1.38% 0.74% 0.55%
Feb 97 1.72% 0.50% 0.32%
Mar 97 2.00% -0.45% -1.65%
Apr 97 2.62% 0.83% 0.25%
May 97 3.28% 1.59% 1.34%
Jun 97 3.87% 2.61% 3.06%
Jul 97 4.62% 5.22% 7.30%
Aug 97 4.99% 4.38% 5.08%
Sep 97 5.55% 5.84% 7.38%
Oct 97 6.15% 7.47% 10.18%
Source: Salomon Brothers
Let's discuss fundamentals first. There are several surprising bullish
developments that have allowed interest rates to decline by 53-86 basis points
(.53%-.86%) on bonds with maturities of one year or more over the last six
months (ended 10/31/97). All other things being equal, these developments may
help rates gradually fall further in the year ahead. First, the federal budget
deficit appears to be shrinking in a dramatic fashion, and there are forecasts
that the U.S. may in fact have a budget surplus within the next several years.
This would be the first budget surplus in over three decades. The decline in the
federal deficit, accompanied by reduced issuance of government bonds, have
convinced a growing number of investors that the United States' fiscal house may
finally be in order.
A second development is in the Treasury Department's funding policy.
Despite their rather tepid initial reception, the Treasury remains committed to
selling more floating rate debt (the new Treasury Inflation Protection
C-2
Securities or "TIPS") and fewer fixed-rate securities. We believe demand for the
traditional fixed-rate Treasuries will remain strong, and therefore, prices are
likely to be supported by investors chasing a shrinking supply.
Finally, the notion that a strong economy leads to a pick-up in
inflation is being called into question. With this historically unprecedented
economic expansion, many economists and market observers have predicted that a
rise in inflation was inevitable. This has not happened. Inflation statistics
are being reported below 3.0% and the Federal Reserve, which would have normally
tightened credit at this point in the business cycle, has refrained from raising
rates because of what appears to be dormant inflation.
These four factors -- declining federal deficits, a shrinking supply of
fixed-rate Treasury securities, low inflation, and a benign Federal Reserve --
have produced very positive results for fixed-income investors over the last six
months. While future events are inherently unpredictable, we expect these
factors will continue to buoy the bond market over the next year. Bonds may also
benefit from a tailwind provided by equities investors. In October, investors
got their first taste of stock market instability in several years. True to
form, during the stock market sell-off, bonds provided yield and relative safety
of principal, and in the process, clearly demonstrated why they deserve a place
in everyone's investment program.
ULTRA SHORT BOND FUND With interest rates trending lower over the last
six months, we extended the portfolio's weighted average duration from 1.62
years to 1.80 years at the close of fiscal 1997. In the process, securities with
durations (measure of interest rate sensitivity) less than one year declined
from 39% of the portfolio at the end of first half fiscal 1997 to 15% at the
close of the fiscal year.
Our primary strategic shift during the last six months was to increase
our allocation in corporate notes and bonds from 16.4% at the close of first
half fiscal 1997 to 37.2% at the end of the fiscal year. This was done to take
advantage of the higher yields offered by corporates as a result of plentiful
supply and, in our opinion, unjustified jitters over corporate profitability.
Our allocation in Treasury securities declined from 31.6% at the close of first
half fiscal 1997 to 25.2% at the end of this reporting period. This reflects our
response to the higher prices and lower yields for Treasuries created by the
supply/demand imbalance in the marketplace. In view of corporate bonds' material
yield advantage over Treasuries, one might wonder why we have not reduced our
Treasury securities weighting even more. We believe the scarcity value of
Treasuries is likely to continue to contribute to price appreciation and
enhanced total return. We reduced our exposure to asset-backed securities from
19.1% to 12.3% over the last six months, taking profits on bonds that became
more fully valued.
We are always on the lookout for "special situations," bonds that are
attractively priced due to what we view as investor misperception. The bonds of
Countrywide Credit Industries, the U.S.'s second largest servicer and originator
of home mortgages, offers a current example. We think the bond is attractively
priced due to investors' concern that a potential wave of refinancing could
reduce revenue and cash flow in Countrywide's mortgage servicing business.
However, the WAC (weighted average interest rate) of the mortgages Countrywide
services approximates the rates on no-point mortgages being offered today. So,
we believe rates would have to come down quite a bit before significant
refinancings would have a materially negative impact on the company's mortgage
servicing business. If they do, we think Countrywide is well positioned to take
up the slack in its mortgage servicing business by increasing revenue and cash
flow from originating new mortgages. At the close of second-half fiscal 1997,
C-3
the Countrywide Funding 7.31%s of 8/28/2000 were priced at $102.71 to yield
6.24%; in our view, an attractive yield for a piece of paper maturing in under
three years. Of course, we reserve the right to change our opinion on any bond
in our portfolios, but currently we like the prospects for this one.
LIMITED MATURITY BOND FUND The fund's weighted average duration was
extended from 1.9 years at the beginning of second half fiscal 1997 to a peak of
2.3 years in October to take advantage of declining interest rates. In the last
week of October, believing the bond market had become temporarily overbought as
equities investors flocked to bonds in the midst of the stock market's
instability, we reduced duration to 2.0 years.
Our sector allocation has not changed significantly over the last six
months. As of October 31, 1997, 68.8% of assets were in corporate bonds, 20.5%
in asset-backed securities, 7.7% in mortgages, and the remaining 3.0% in
Government Agencies and cash equivalents. Once again, our high-yield investments
performed well. So well, in fact, that we took some profits in high-yield bonds
that had become fully priced, and in September had reduced our high-yield
positions from approximately 9.6% of the portfolio at the start of second half
fiscal 1997 to 6.0%. Since then, we took advantage of what we believe to be more
attractive pricing in the high-yield sector to build our positions back up to
8.8% of the fund's assets at the close of fiscal 1997.
One of our successful investment strategies over the last six months is
something that we didn't do--namely, invest in Southeast Asia. We can have up to
25% of the Fund's assets in non-dollar-denominated foreign bonds and as much as
we want in dollar-denominated bonds of foreign issuers. While the fund will take
advantage of foreign opportunities, we are very careful in our credit analysis.
In recent years, countries such as Thailand, Korea, Malaysia and Indonesia have
been major issuers of U.S. dollar-denominated debt in the U.S. bond market. All
of these countries had strong investment-grade ratings from the major rating
agencies and powerful sponsorship from the key Wall Street underwriters. We took
a hard look at these offerings and our analysis showed these bonds to have below
investment-grade risk characteristics with huge downside risk if the supply of
external capital dried up. Our concerns were confirmed when currency turmoil,
which began in July and accelerated through the Fall, overwhelmed these
countries and sent bonds plummeting.
In the corporate sector, we have been modestly increasing our exposure
to utility company bonds. Due to concerns about the deregulation of the
industry, utilities bonds have been out of favor with the credit rating agencies
and investors in recent years. Now, the dust is settling and we are seeing
evidence that financially strong and well-managed utilities companies can
survive and prosper in this new environment. In addition, regulators thus far
appear disposed to protecting bond holders during this transition period. We see
the potential for solid returns in utilities bonds such as Cleveland Electric
Illuminating Co. 7.19%s of 7/1/2000 and Central Maine Power 7.05%s of 3/l/2008,
two of our portfolio holdings. Of course, these bonds are examples of our
current perspective on utilities bonds, and if fundamentally warranted, our
investment opinions can change.
C-4
In closing, we are gratified by our fixed-income funds' performance in
second half and full fiscal year 1997. Favorable economic and supply/demand
fundamentals for bonds remain intact. We also expect investors' renewed
enthusiasm for bonds will carry over into 1998.
Sincerely,
/s/ Theodore P. Giuliano
Theodore P. Giuliano
President and Trustee
Neuberger&Berman Income Funds
C-5
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman October 31, 1997
- ------------------------------------------------------------------------------
EDGAR PRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Ultra Short 6-Month Salomon
Bond Fund Treasury Bill Index
1987 $10,000 $10,000
1988 $10,716 $10,673
1989 $11,686 $11,603
1990 $12,619 $12,555
1991 $13,583 $13,384
1992 $14,186 $13,961
1993 $14,687 $14,417
1994 $14,975 $14,990
1995 $15,912 $15,885
1996 $16,744 $16,746
1997 $17,764 $17,656
Average Annual Total Return(1)
Ultra Short 6-Month Salomon
Bond Fund Treasury Bill
1 Year +6.09% +5.43%
5 Year +4.60% +4.81%
10 Year +5.91% +5.85%
Life of Fund +5.85% +5.87%
The inception date of Neuberger&Berman Ultra Short Bond Fund(R) is
11/7/86.
Neuberger&Berman Management Inc.(R) has voluntarily undertaken to
reimburse Ultra Short Bond Fund for its operating expenses and its pro rata
share of its Portfolio's operating expenses which, in the aggregate, exceed .65%
per annum of Ultra Short Bond Fund's average daily net assets. This arrangement
can be terminated upon 60 days' prior written notice. Absent such arrangement,
the average annual total returns would have been less.
1. "Total Return" includes reinvestment of all income dividends and capital
gain distributions. Results represent past performance and do not indicate
future results. The value of an investment in the Trust and the return on
the investment both will fluctuate, and redemption proceeds may be higher or
lower than an investor's original cost.
2. The 6-Month Salomon Treasury Bill Index is an unmanaged index of the 6 most
recent 6-month Treasury bill securities. This index consists of a moving
6-month average yield (not total return) of the 6-month Treasury bills.
Please note that indices do not take into account any fees and expenses of
investing in the individual securities that they track, and that individuals
cannot invest directly in any index. Data about the performance of this
index are prepared or obtained by Neuberger&Berman Management Inc. and
include reinvestment of all dividends and capital gain distributions. The
Portfolio invests in many securities not included in the above-described
index.
C-6
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman October 31, 1997
- -------------------------------------------------------------------------------
EDGAR PRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Limited Maturity Merrill-Lynch 1-3 Year
Bond Fund Treasury Index
1987 $10,000 $10,000
1988 $10,825 $10,758
1989 $11,859 $11,771
1990 $12,791 $12,800
1991 $14,184 $14,244
1992 $15,300 $15,411
1993 $16,384 $16,308
1994 $16,404 $16,501
1995 $17,770 $17,978
1996 $18,736 $19,040
1997 $20,041 $20,275
Average Annual Total Return(1)
Limited Maturity Merrill-Lynch 1-3 Year
Bond Fund Treasury Index
1 Year +6.97% +6.49%
5 Year +5.55% +5.64%
10 Year +7.20% +7.32%
Life of Fund +6.98% +7.34%
The inception date of Neuberger&Berman Limited Maturity Bond Fund(R) is
6/9/86.
Neuberger&Berman Management Inc.(R) has voluntarily undertaken to
reimburse Limited Maturity Bond Fund for its operating expenses and its pro rata
share of its Portfolio's operating expenses which, in the aggregate, exceed .70%
per annum of Limited Maturity Bond Fund's average daily net assets. This
arrangement can be terminated upon 60 days' prior written notice. Absent such
arrangement, the average annual total returns would have been less.
1. "Total Return" includes reinvestment of all income dividends and capital
gain distributions. Results represent past performance and do not indicate
future results. The value of an investment in the Trust and the return on
the investment both will fluctuate, and redemption proceeds may be higher or
lower than an investor's original cost.
2. The Merrill Lynch 1-3 Treasury Index is an unmanaged total return market
value index consisting of all coupon-bearing U.S. Treasury publicly placed
debt securities with maturities between 1 and 3 years. Please note that
indices do not take into account any fees and expenses of investing in the
individual securities that they track, and that individuals cannot invest
directly in any index. Data about the performance of this index are prepared
or obtained by Neuberger&Berman Management Inc. and include reinvestment of
all dividends and capital gain distributions. The Portfolio invests in many
securities not included in the above-described index.
C-7
NEUBERGER & BERMAN INCOME FUNDS
NEUBERGER & BERMAN LIMITED MATURITY BOND FUND
605 THIRD AVENUE, 2ND FLOOR
NEW YORK, NEW YORK 10158-0180
STATEMENT OF ADDITIONAL INFORMATION
DATED JANUARY 23, 1998
This Statement of Additional Information ("SAI") relates specifically to
the reorganization of Neuberger & Berman Ultra Short Bond Fund ("Ultra Short
Bond Fund") into Neuberger & Berman Limited Maturity Bond Fund ("Limited
Maturity Bond Fund"), whereby Ultra Short Bond Fund will transfer substantially
all of its assets from Neuberger & Berman Ultra Short Bond Portfolio ("Ultra
Short Bond Portfolio") to Neuberger & Berman Limited Maturity Bond Portfolio
("Limited Maturity Bond Portfolio"), and shareholders in Ultra Short Bond Fund
will receive shares of Neuberger & Berman Limited Maturity Bond Fund ("Limited
Maturity Bond Fund"), in exchange for their shares of Ultra Short Bond Fund.
This Statement of Additional Information consists of the information set forth
herein and the following described documents, each of which is incorporated by
reference herein (legally forms a part of the SAI):
(1) The audited financial statements of Neuberger & Berman Limited
Maturity Bond Fund and Neuberger & Berman Ultra Short Bond Fund
(series of Neuberger & Berman Income Funds) and the audited
financial statements of Neuberger & Berman Limited Maturity Bond
Portfolio and Neuberger & Berman Ultra Short Bond Portfolio (series
of Income Managers Trust) included in the Annual Report to
Shareholders of Neuberger & Berman Income Funds for the fiscal year
ended October 31, 1997, previously filed on EDGAR, Accession Number
0000898432-97-000531.
(2) The Statement of Additional Information of Neuberger & Berman
Income Funds, dated February 3, 1997, as supplemented on June 26,
1997, previously filed on EDGAR, Accession Number
0000898432-97-00039 and 0000898432-97-0000328, respectively, except
for the information contained herein, which has been updated as of
the fiscal year ended October 31, 1997.
This Statement of Additional Information is not a prospectus and should
be read only in conjunction with the Prospectus and Information Statement dated
January 23, 1998 relating to the above-referenced matter. A copy of the
Prospectus and Information Statement may be obtained by calling Neuberger &
Berman Management Incorporated at 800-877-9700.
TRUSTEES' AND OFFICERS' COMPENSATION
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 10/31/97
------------------------------
Aggregate Total Compensation from Trusts in
Name and Position Compensation the Neuberger & Berman Fund
with the Trust from the Trust Complex Paid to Trustees
- ----------------- -------------- ---------------------------------
John Cannon $16,504 $34,500
Trustee (2 other investment companies)
Charles DeCarlo $3,293 $8,000
Trustee (retired 12/96) (2 other investment companies)
Stanley Egener $ 0 $ 0
Chairman of the Board, Chief (9 other investment companies)
Executive Officer, and Trustee
Theodore P. Giuliano $ 0 $ 0
President and Trustee (2 other investment companies)
Barry Hirsch $14,809 $30,500
Trustee (2 other investment companies)
Robert A. Kavesh $16,504 $35,000
Trustee (2 other investment companies)
Harold R. Logan $3,293 $8,000
Trustee (retired 12/96) (2 other investment companies)
William E. Rulon $14,809 $30,500
Trustee (2 other investment companies)
Candace L. Straight $14,809 $31,500
Trustee (2 other investment companies)
FEES PAID TO INVESTMENT MANAGER
Limited Maturity Bond Fund accrued management and administration fees of
the following amounts (before any reimbursement of the Fund, described below)
for the fiscal years ended October 31, 1997, 1996, and 1995:
1997 1996 1995
---- ---- ----
$1,275,694 $1,480,085 $1,522,574
2
Neuberger & Berman Management Incorporated ("N&B Management") has
voluntarily undertaken to reimburse Limited Maturity Bond Fund for its Operating
Expenses (including fees under the Administration Agreement) and the Fund's pro
rata share of the corresponding Portfolio's Operating Expenses (including fees
under the Management Agreement) that exceed, in the aggregate, 0.70% per annum
of the Fund's average daily net assets. Operating Expenses exclude interest,
taxes, brokerage commissions, and extraordinary expenses. N&B Management can
terminate this undertaking by giving the Fund at least 60 days' prior written
notice. For the fiscal years ended October 31, 1997, 1996, and 1995, N&B
Management reimbursed Limited Maturity Bond Fund the following amounts of
expenses: $20,974, $16,575, and $32,042, respectively.
AMOUNT OF SECURITIES HELD BY "REGULAR BROKERS OR DEALERS"
During the fiscal year ended October 31, 1997, Limited Maturity Bond
Portfolio acquired securities of the following of its "regular brokers or
dealers": Goldman, Sachs & Co.; Merrill Lynch, Pierce, Fenner & Smith Inc. At
October 31, 1997, that Portfolio held the securities of its "regular brokers or
dealers" with an aggregate value as follows: Goldman, Sachs & Co., $5,211,285;
Merrill Lynch, Pierce, Fenner & Smith Inc., $5,269,344.
YIELD INFORMATION
The annualized yield for Limited Maturity Bond Fund for the 30-day
period ended October 31, 1997, was 5.85%.
3
NOTES TO PRO FORMA COMBINED
FINANCIAL STATEMENTS (UNAUDITED)
The accompanying unaudited Pro Forma Combined Schedule of Investments
and Statement of Assets and Liabilities as of October 31, 1997 and the unaudited
Statement of Operations for the year ended October 31, 1997, are intended to
present the financial condition and related results of operations of Neuberger &
Berman Limited Maturity Bond Fund ("Limited Maturity Bond Fund") and Neuberger &
Berman Limited Maturity Bond Portfolio ("Limited Maturity Bond Portfolio") as if
the reorganization with Neuberger & Berman Ultra Short Bond Fund ("Ultra Short
Bond Fund") and Neuberger & Berman Ultra Short Bond Portfolio ("Ultra Short Bond
Portfolio"), respectively, had been consummated on that date. Certain expenses
have been adjusted to reflect the expected operations of the combined entities.
Certain expenses will be reduced due to the elimination of duplicate
services. It is estimated that costs of approximately $102,500 associated with
the Reorganization will be charged to the Funds in proportion to their
respective net assets. The pro forma combined financial statements reflect the
current expense cap of Limited Maturity Bond Fund, 0.70% of the average daily
net assets of the Fund, which will continue to be the expense cap for that Fund
following the Reorganization. (This expense cap is voluntary and may be
terminated by N&B Management at any time upon 60 days' notice to the Fund.)
The pro forma combined financial statements are presented for the
information of the reader and may not necessarily be representative of what the
actual combined financial statements would have been had the Reorganization
occurred at October 31, 1997. The pro forma combined financial statements should
be read in conjunction with the separate annual audited financial statements of
the constituent Funds and Portfolios incorporated by reference into this
Statement of Additional Information.
4
STATEMENTS OF OPERATIONS
Neuberger&Berman For the Year Ended October 31, 1997
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Income Funds
ULTRA SHORT LIMITED MATURITY PRO FORMA
(000'S OMITTED) BOND FUND BOND FUND ADJUSTMENTS COMBINED
- ------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Investment income from corresponding Portfolio $4,419 $17,260 -- $21,679
-----------------------------------------------------------------
Expenses:
Administration fee 191 661 -- 852
Auditing fees 8 8 (8) 8
Custodian 10 10 (10) 10
fees
Legal fees 13 20 (13) 20
Registration and 24 28 (24) 28
filing fees
Shareholder reports 23 31 (9) 45
Shareholder servicing agent fees 62 163 (38) 187
Trustees' fees and 8 15 (1) 22
expenses
Miscellaneous 2 4 (2) 4
Expenses from corresponding Portfolio 291 806 (78) 1,019
-----------------------------------------------------------
Total expenses 632 1,746 (183) 2,195
Expenses reimbursed by administrator and reduced by
custodian fee and shareholder servicing (171) (30) 171 (30)
expense offset arrangement
-----------------------------------------------------------
Total net expenses 461 1,716 (12) 2,165
-----------------------------------------------------------
Net investment 3,958 15,544 12 19,514
income
-----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
FROM CORRESPONDING PORTFOLIO
Net realized gain on investment securities 20 1,435 -- 1,455
Net realized loss on financial futures contracts - (2,400) -- (2,400)
Net realized gain on foreign currency transactions - 15 -- 15
Change in net unrealized appreciation (depreciation)
of investment securities, financial futures contracts,
translation of assets and liailities in foreign
5
STATEMENTS OF OPERATIONS
Neuberger&Berman For the Year Ended October 31, 1997
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
Income Funds
ULTRA SHORT LIMITED MATURITY PRO FORMA
(000'S OMITTED) BOND FUND BOND FUND ADJUSTMENTS COMBINED
- --------------------------------------------------------------------------------------------------------------------------------
currencies, and foreign currency contracts 71 2,103 -- 2,174
-------------------------------------------------------------------
Net gain on investments from corresponding 91 1,153 -- 1,244
Portfolio
-------------------------------------------------------------------
Net increase in net assets resulting $4,049 $16,697 12 $20,758
from operations -------------------------------------------------------------------
6
STATEMENTS OF ASSETS AND LIABILITIES
Neuberger&Berman October 31, 1997 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------
Income Funds
ULTRA SHORT LIMITED MATURITY PRO FORMA
(000'S OMITTED EXCEPT PER SHARE AMOUNTS) BOND FUND BOND FUND COMBINED
- -----------------------------------------------------------------------------------------------------------------------------
ASSETS
Investment in corresponding Portfolio, at $49,935 $255,497 $305,432
value
Receivable for Trust shares sold 7 321 328
----------------------------------------------------------
49,942 255,818 305,760
----------------------------------------------------------
LIABILITIES
Dividends payable 39 196 235
Payable for Trust shares redeemed 81 91 172
Payable to 4 64 68
administrator--net
Accrued expenses 29 61 90
----------------------------------------------------------
153 412 565
----------------------------------------------------------
NET ASSETS at value $49,789 $255,406 $305,195
----------------------------------------------------------
NET ASSETS consist of:
Par value $ 5 $ 25 $ 30
Paid-in capital in excess of par 53,703 264,602 318,305
value
Accumulated net realized losses on investment (4,327) (10,277) (14,604)
Net unrealized appreciation in value of 408 1,056 1,464
investment
----------------------------------------------------------
NET ASSETS at value $49,789 $255,406 $305,195
----------------------------------------------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares 5,229 25,461 30,425
authorized)
----------------------------------------------------------
NET ASSET offering and redemption price per share $9.52 $10.03 $10.03
VALUE,
----------------------------------------------------------
7
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1997
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
LIMITED PRO
Principal MATURITY FORMA
Amount Rating ULTRA SHORT BOND COMBINED
(000's omitted) Moody's S&P BOND PORTFOLIO PORTFOLIO VALUE
- ----------------- -------------------------------------------------------------
U.S. TREASURY SECURITIES (5.2%)
$ 40 U.S. Treasury Notes, 7.375%, due 11/15/97 TSY TSY 40 $ 40
540 U.S. Treasury Notes, 6.50%, due 4/30/99 TSY TSY 547 547
4,655 U.S. Treasury Notes, 6.875%, due 8/31/99 TSY TSY 4,751
$ 4,751
1,785 U.S. Treasury Notes, 5.875%, due 2/15/00 TSY TSY 1,791 1,791
4,220 U.S. Treasury Notes, 6.75%, due 4/30/00 TSY TSY 4,320 4,320
340 U.S. Treasury Notes, 6.375%, due 5/15/00 TSY TSY 345 345
3,895 U.S. Treasury Notes, 6.00%, due 8/15/00 TSY TSY 3,926 3,926
2,629 U.S. Treasury Inflation-Indexed Notes, 3.375%, due 1/15/07 TSY TSY 2,591 2,591
----------------------------------------
TOTAL U.S. REASURY SECURITIES (COST $14,949, $3,219, AND $18,168 RESPECTIVELY) 15,133 3,178 18,311
----------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES (5.6%)
19,080 Federal Home Loan Bank, Discount Notes, 5.50% & 5.54%, AGY AGY 3,283 15,788 19,071
due 11/3/97
250 Federal Home Loan Bank, Variable Rate Notes, 4.704%, due AGY AGY 249 249
1/29/98
500 Federal Home Loan Bank, Variable Rate Notes, 4.729%, due AGY AGY 498 498
2/25/98
----------------------------------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES (COST $4,033, $15,790, AND $19,823 4,030 15,788 19,818
RESPECTIVELY)
----------------------------------------
MORTGAGE-BACKED SECURITIES (10.3%)
FANNIE MAE
118 Balloon Pass-Through Certificates, 9.00%, due AGY AGY 122 122
12/1/97-8/1/98
207 Balloon Pass-Through Certificates, 8.50%, due AGY AGY 214 214
3/1/98-11/1/98
8
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1997
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
LIMITED PRO
Principal MATURITY FORMA
Amount Rating ULTRA SHORT BOND COMBINED
(000's omitted) Moody's S&P BOND PORTFOLIO PORTFOLIO VALUE
- ----------------- -------------------------------------------------------------
2,156 Balloon Pass-Through Certificates, 7.00%, due 8/1/03 AGY AGY 2,182 2,182
396 REMIC Floating Rate CMO, Ser. 1992-59F, 6.05625%, due AGY AGY 397 397
8/25/06
7,652 Pass-Through Certificates, 7.00%, due 9/1/03 & 6/1/11 AGY AGY 7,801 7,801
7,541 Pass-Through Certificates, 7.50%, due 7/1/11 & 9/1/11 AGY AGY 2,195 5,535 7,730
FREDDIE MAC
18 Mortgage Participation Certificates, 11.50%, due 5/1/00 AGY AGY 19 19
3,155 Gold Balloon Mortgage Participation Certificates, 6.50%, AGY AGY 3,173 3,173
due 9/1/98-11/1/00
172 Mortgage Participation Certificates, 10.50%, due 6/1/00 & AGY AGY 61 120 181
12/1/00
416 Mortgage Participation Certificates, 8.50%, due 10/1/01 AGY AGY 428 428
1,484 Gold Balloon Mortgage Participation Certificates, 7.50%, AGY AGY 1,517 1,517
due 11/1/01
357 ARM Certificates, 7.00%, due 1/1/17 & 2/1/17 AGY AGY 363 363
617 ARM Certificates, 7.125%, due 3/1/17 AGY AGY 628 628
GENERAL NATIONAL MORTGAGE ASSOCIATION
2,211 Pass-Through Certificates, 7.50%, due 10/15/09-10/15/10 AGY AGY 2,274 2,274
8,960 Pass-Through Certificates, 7.00%, due 4/15/11 & 1/15/27 AGY AGY 2,208 6,825 9,033
151 Pass-Through Certificates, 12.00%, due 5/15/12-3/15/15 AGY AGY 172 172
----------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $13,489, $22,067, AND $35,556 13,629 22,605 36,234
RESPECTIVELY)
----------------------------------------
ASSET-BACKED SECURITIES (19.1%)
767 Capita Equipment Receivables Trust, Ser. 1996-1, Class Aaa AAA 768 768
A-2, 5.95%, due 7/15/98
77 Daimler-Benz Auto Grantor Trust, Ser. 1993-A, Class A, Aaa AAA 77 77
3.90%, due 10/15/98
9
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1997
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
LIMITED PRO
Principal MATURITY FORMA
Amount Rating ULTRA SHORT BOND COMBINED
(000's omitted) Moody's S&P BOND PORTFOLIO PORTFOLIO VALUE
- ----------------- -------------------------------------------------------------
15 USAA Auto Loan Grantor Trust, Automobile Loan Aaa AAA 15 15
Pass-Through Certificates, Ser. 1993-1, 3.90%, due 3/15/99
6,300 Capita Equipment Receivables Trust, Ser. 1996-1, Class Aaa AAA 6,332 6,332
A-3, 6.11%, due 7/15/99
1,600 Chase Manhattan Grantor Trust, Automobile Loan Aaa AAA 1,601 1,601
Pass-Through Certificates, Ser. 1997-A, Class A-2, 5.95%,
due 10/15/99
5,710 PNC Student Loan Trust I, Ser. 1997-2, Class A-2, 6.138%, Aaa AAA 5,734 5,734
due 1/25/00
676 Premier Auto Trust, Ser. 1997-1, Class A-2, 5.90%, due Aaa AAA 677 677
4/6/00
696 Ford Credit Grantor Trust, Ser. 1995-A, Class A, 5.90%, Aaa AAA 695 695
due 5/15/00
3,820 Chase Manhattan Auto Owner Trust, Ser. 1996-C, Class A-3, Aaa AAA 3,826 3,826
5.95%, due 11/15/00
6,927 Money Store Auto Grantor Trust, Ser. 1997-2, Class A-1, Aaa AAA 6,948 6,948
6.17%, due 3/20/01
1,178 Chase Manhattan Grantor Trust, Automobile Loan Aaa AAA 1,177 1,177
Pass-Through Certificates, Ser. 1995-A, 6.00%, due 9/17/01
5,178 Banc One Auto Grantor Trust, Ser. 1996-B, Class A, 6.55%, Aaa AAA 1,936 3,282 5,218
due 2/15/03
6,500 Ford Credit Auto Loan Master Trust, Auto Loan Aaa AAA 6,411 6,411
Certificates, Ser. 1996-1, 5.50%, due 2/15/03
448 Honda Auto Receivables Grantor Trust, Ser. 1997-A, Class Aaa AAA 448 448
A, 5.85%, due 2/15/03
5,600 Chase Credit Card Master Trust, Ser. 1997-2, Class A, Aaa AAA 5,649 5,649
6.30%, due 4/15/03
10
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1997
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
LIMITED PRO
Principal MATURITY FORMA
Amount Rating ULTRA SHORT BOND COMBINED
(000's omitted) Moody's S&P BOND PORTFOLIO PORTFOLIO VALUE
- ----------------- -------------------------------------------------------------
2,590 Navistar Financial Owner Trust, Ser. 1996-B, Class A-3, Aaa AAA 2,606 2,606
6.33%, due 4/21/03
5,330 World Omni Automobile Lease Securitization Trust, Ser. Aaa AAA 5,446 5,446
1997-A, Class A-3, 6.85%, due 6/25/03
3,839 Chevy Chase Auto Receivables Trust, Ser. 1996-2, Class A, Aaa AAA 3,827 3,827
5.90%, due 7/15/03
5,000 Standard Credit Card Master Trust I, Credit Card Aaa AAA 5,397 5,397
Participation Certificates, Ser. 1994-4, Class A, 8.25%,
due 11/7/03
4,680 IMC Excess Cashflow Trust, Ser. 1997-A, 7.41%, due BBB 4,686 4,686
11/27/28
----------------------------------------
TOTAL ASSET-BACKED SECURITIES (COST $7,372, $60,025, AND $67,397 RESPECTIVELY) 7,394 60,144 67,538
----------------------------------------
BANKS & FINANCIAL INSTITUTIONS (24.7%)
3,500 Merrill Lynch & Co., Inc., Medium-Term Notes, Ser. B, Aa3 AA- 3,536 3,536
6.64%, due 4/9/99
2,000 AT&T Capital Corp., Medium-Term Notes, Ser. 1997-4, Baa3 BBB 2,025 2,025
6.92%, due 4/29/99
5,250 Household Finance Corp., Medium-Term Notes, 6.62%, due A2 A 5,295 5,295
5/28/99
5,240 Merrill Lynch & Co., Inc., Medium-Term Notes, Ser. B, Aa3 AA- 5,269 5,269
6.28%, due 6/25/99
4,850 Chase Manhattan Bank USA, Senior Global Bank Notes, Aa2 A+ 4,847 4,847
5.875%, due 8/4/99
3,500 Associates Corp. of North America, Senior Notes, 6.375%, Aa3 AA- 3,524 3,524
due 8/15/99
5,180 CIT Group Holdings, Inc., Medium-Term Notes, 6.25%, due Aa3 A+ 5,204 5,204
10/25/99
11
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1997
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
LIMITED PRO
Principal MATURITY FORMA
Amount Rating ULTRA SHORT BOND COMBINED
(000's omitted) Moody's S&P BOND PORTFOLIO PORTFOLIO VALUE
- ----------------- -------------------------------------------------------------
3,940 First National Bank of Commerce, Senior Bank Notes, A2 A- 3,982 3,982
6.50%, due 1/14/00
3,980 HomeSide Lending, Inc., Notes, 6.875%, due 5/15/00 Baa2 BBB 4,033 4,033
5,000 Smith Barney Holdings Inc., Notes, 7.00%, due 5/15/00 A2 A 5,106 5,106
1,300 Lehman Brothers Holdings Inc., Medium-Term Notes, Ser. E, Baa1 A 1,325 1,325
7.08%, due 5/22/00
1,800 International Lease Finance Corp., Notes, 6.625%, due A1 A+ 1,822 1,822
6/1/00
5,400 Comdisco, Inc., Notes, 6.50%, due 6/15/00 Baa1 BBB+ 5,438 5,438
3,150 Countrywide Funding Corp., Medium-Term Notes, Ser. A, A3 A 3,235 3,235
7.31%, due 8/28/00
7,090 Associates Pass-Through Asset Trust, Ser. 1997-1, 6.45%, Aa3 AA- 7,141 7,141
due 9/15/00
5,000 Lehman Brothers Holdings Inc., Medium-Term Notes, Ser. E, Baa1 A 5,078 5,078
6.89%, due 10/10/00
1,725 Lehman Brothers Holdings Inc., Medium-Term Notes, Ser. E, Baa1 A 1,739 1,739
6.65%, due 11/8/00
3,000 Aristar, Inc., Senior Notes, 6.125%, due 12/1/00 A3 A- 2,983 2,983
6,600 Capital One Bank, Bank Notes, 5.95%, due 2/15/01 Baa3 BBB- 6,503 6,503
3,550 Riggs National Corp., Subordinated Notes, 8.50%, due Ba1 BB- 3,692 3,692
2/1/06
5,150 Goldman Sachs Group, L.P., Global Notes, 6.75%, due A1 A+ 5,211 5,211
2/15/06
----------------------------------------
TOTAL BANKS & FINANCIAL INSTITUTIONS (COST $18,342, $68,137, AND $86,479 18,450 68,538 86,988
RESPECTIVELY)
----------------------------------------
CORPORATE DEBT SECURITIES (38.7%)
2,780 Colonial Gas Co., Medium-Term Notes, Ser. A, 6.20%, due Baa1 A- 2,785 2,785
3/18/98
12
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1997
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
LIMITED PRO
Principal MATURITY FORMA
Amount Rating ULTRA SHORT BOND COMBINED
(000's omitted) Moody's S&P BOND PORTFOLIO PORTFOLIO VALUE
- ----------------- -------------------------------------------------------------
6,400 Alco Capital Resource, Inc., Medium-Term Notes, Ser. B, A3 A- 6,361 6,361
5.46%, due 2/22/99
1,900 American Standard Inc., Senior Notes, 10.875%, due 5/15/99 Ba3 BB- 2,002 2,002
7,000 Lockheed Martin Corp., Notes, 6.55%, due 5/15/99 A3 BBB+ 7,066 7,066
4,800 NWCG Holdings Corp., Notes, Zero-Coupon, Yielding 7.05%, Ba2 BBB- 4,320 4,320
due 6/15/99
5,200 Williams Holdings of Delaware, Inc., Medium-Term Notes, Baa2 BBB- 5,225 5,225
Ser. A, 6.40%, due 6/17/99
4,070 Chrysler Financial Corp., Medium-Term Notes, Ser. Q, A3 A 4,098 4,098
6.37%, due 6/21/99
2,710 Arkla, Inc., Notes, 8.875%, due 7/15/99 Baa3 BBB 2,825 2,825
4,680 Time Warner Pass-Through Asset Trust, Ser. 1997-2, 4.90%, Ba1 BBB- 4,573 4,573
due 7/29/99
1,000 General Motors Acceptance Corp., Medium-Term Notes, A3 A- 1,002 1,002
6.15%, due 9/20/99
4,800 Norfolk Southern Corp., Notes, 6.70%, due 5/1/00 Baa1 BBB+ 4,859 4,859
3,610 Cleveland Electric Illuminating Co., Secured Notes, Ser. Ba1 BB+ 3,655 3,655
A, 7.19%, due 7/1/00
4,550 Arvin Industries, Inc., Notes, 10.00%, due 8/1/00 Ba1 BBB- 4,936 4,936
2,000 Ford Motor Credit Co., Medium-Term Notes, 6.84%, due A1 A 2,038 2,038
8/16/00
6,370 MedPartners, Inc., Senior Subordinated Notes, 6.875%, due Ba2 BBB- 6,380 6,380
9/1/00
2,000 American General Finance Corp., Senior Notes, 6.125%, due A2 A+ 2,006 2,006
9/15/00
2,510 Chesapeake Corp., Notes, 10.375%, due 10/1/00 Baa3 BBB 2,775 2,775
1,730 BHP Finance (USA) Limited, Guaranteed Notes, 5.625%, due A2 A 1,708 1,708
11/1/00
13
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1997
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
LIMITED PRO
Principal MATURITY FORMA
Amount Rating ULTRA SHORT BOND COMBINED
(000's omitted) Moody's S&P BOND PORTFOLIO PORTFOLIO VALUE
- ----------------- -------------------------------------------------------------
500 Congoleum Corp., Senior Notes, 9.00%, due 2/1/01 B1 BB- 507 507
5,200 General Motors Acceptance Corp., Medium-Term Notes, A3 A- 5,501 5,501
8.125%, due 3/1/01
3,470 Revlon Worldwide Corp., Senior Secured Notes, Ser. B, B3 B- 2,407 2,407
Zero-Coupon, Yielding 10.75% & 10.959%, due 3/15/01
2,290 Colonial Realty Limited Partnership, Senior Notes, 7.50%, Baa3 BBB- 2,372 2,372
due 7/15/01
4,160 Tyco International Ltd., Notes, 6.50%, due 11/1/01 Baa2 A- 4,196 4,196
2,965 ICI Wilmington Inc., Guaranteed Notes, 7.50%, due 1/15/02 Baa1 A- 3,111 3,111
2,835 Black & Decker Corp., Medium-Term Notes, Ser. A, 8.90%, Baa2 BBB- 3,095 3,095
due 1/21/02
900 Ford Motor Credit Co., Global Bonds, 6.50%, due 2/28/02 A1 A+ 908 908
2,280 Fort James Corp., Senior Notes, 6.50%, due 9/15/02 Baa3 BBB- 2,294 2,294
1,000 Safeway Inc., Medium-Term Notes, 8.57%, due 4/1/03 Baa1 BBB 1,091 1,091
4,200 Stewart Enterprises, Inc., Notes, 6.70%, due 12/1/03 Baa3 BBB 4,218 4,218
620 Loomis Fargo & Co., Senior Subordinated Notes, 10.00%, B3 B- 618 618
due 1/15/04
175 Playtex Products, Inc., Senior Notes, Ser. B, 8.875%, due B1 B+ 175 175
7/15/04
420 Iridium LLC, Senior Notes, Ser. C, 11.25%, due 7/15/05 B3 B- 385 385
190 ICN Pharmaceuticals, Inc., Senior Notes, 9.25%, due B1 BB 200 200
8/15/05
4,350 Bell Cablemedia plc, Senior Step Up Notes, Yielding Baa3 BBB+ 3,763 3,763
8.98%, due 9/15/05
4,200 Heritage Media Corp., Senior Subordinated Notes, 8.75%, B2 BBB- 4,463 4,463
due 2/15/06
4,040 Mark IV Industries, Inc., Senior Subordinated Notes, Ba2 BB+ 4,111 4,111
7.75%, due 4/1/06
14
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1997
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
LIMITED PRO
Principal MATURITY FORMA
Amount Rating ULTRA SHORT BOND COMBINED
(000's omitted) Moody's S&P BOND PORTFOLIO PORTFOLIO VALUE
- ----------------- -------------------------------------------------------------
400 Printpack, Inc., Senior Subordinated Notes, Ser. B, B3 B+ 425 425
10.625%, due 8/15/06
2,825 Time Warner Inc., Notes, 8.11%, due 8/15/06 Ba1 BBB- 3,051 3,051
400 Commonwealth Aluminum Corp., Senior Subordinated Notes, B2 B- 429 429
10.75%, due 10/1/06
415 Evenflo & Spalding Holdings Corp., Senior Subordinated B3 B- 354 354
Notes, Ser. B, 10.375%, due 10/1/06
4,950 MedPartners, Inc., Senior Notes, 7.375%, due 10/1/06 Baa3 BBB 4,837 4,837
500 Motors and Gears, Inc., Senior Notes, Ser. B, 10.75%, due B3 B 526 526
11/15/06
680 Newport News Shipbuilding Inc., Senior Subordinated B1 B+ 707 707
Notes, 9.25%, due 12/1/06
857 AMTROL Inc., Senior Subordinated Notes, 10.625%, due B3 B- 870 870
12/31/06
1,275 Pen-Tab Industries, Inc., Senior Subordinated Notes, Ser. B3 B- 1,269 1,269
B, 10.875%, due 2/1/07
965 Fonda Group, Inc., Senior Subordinated Notes, Ser. B, B3 B- 924 924
9.50%, due 3/1/07
120 Tekni-Plex, Inc., Senior Subordinated Notes, Ser. B, B3 B- 131 131
11.25%, due 4/1/07
300 French Fragrances, Inc., Senior Notes, Ser. B, 10.375%, B2 B+ 313 313
due 5/15/07
2,410 Owens-Illinois, Inc., Senior Debentures, 8.10%, due Ba1 BB+ 2,553 2,553
5/15/07
405 AmeriServe Food Distribution, Inc., Senior Subordinated B3 B- 422 422
Notes, 10.125%, due 7/15/07
190 Safety Components International, Inc., Senior B3 B- 197 197
Subordinated Notes, 10.125%, due 7/15/07
15
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1997
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
LIMITED PRO
Principal MATURITY FORMA
Amount Rating ULTRA SHORT BOND COMBINED
(000's omitted) Moody's S&P BOND PORTFOLIO PORTFOLIO VALUE
- ----------------- -------------------------------------------------------------
880 HydroChem Industrial Services, Inc., Senior Subordinated B3 B- 913 913
Notes, Ser. B, 10.375%, due 8/1/07
4,680 Interpool, Inc., Notes, 7.20%, due 8/1/07 Ba1 BBB 4,681 4,681
190 Insilco Corp., Senior Subordinated Notes, 10.25%, due B3 B+ 198 198
8/15/07
1,585 Central Maine Power & Co., General and Refunding Mortgage Baa3 BB+ 1,568 1,568
Bonds, Ser. Q, 7.05%, due 3/1/08
360 KinderCare Learning Centers, Inc., Senior Subordinated B3 B- 354 354
Notes, Ser. B, 9.50%, due 2/15/09
----------------------------------------
TOTAL CORPORATE DEBT SECURITIES (COST $3,893, $132,217, AND 3,916 132,835 136,751
$136,110)
----------------------------------------
TOTAL INVESTMENTS (103.6%) (COST $62,078, $301,455, AND $363,533 RESPECTIVELY) 62,552 303,088 365,640
Liabilities, less cash, receivables and other assets
[(3.6%)] (2,431) (10,122) (12,553)
----------------------------------------
TOTAL NET ASSETS (100.0%) $60,121 $292,966 $353,087
----------------------------------------
16
STATEMENTS OF OPERATIONS
For the Year Ended October 31, 1997
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Income Managers Trust
ULTRA SHORT LIMITED MATURITY
BOND BOND PRO FORMA
(000'S OMITTED) PORTFOLIO PORTFOLIO ADJUSTMENTS COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income $4,986 $19,575 $0 $24,561
----------------------------------------------------------
Expenses:
Investment management fee 200 697 -- 897
Accounting fees 10 10 (10) 10
Amortization of deferred organization
and initial offering expenses 2 5 (2) 5
Auditing 23 24 (23) 24
fees
Custodian 61 135 (30) 166
fees
Insurance expense 2 6 -- 8
Legal fees 22 19 (22) 19
Trustees' fees and expenses 9 18 (1) 26
----------------------------------------------------------
Total expenses 329 914 (88) 1,155
Expenses reduced by custodian fee - - - -
expense offset arrangement
----------------------------------------------------------
Total net expenses 329 914 (88) 1,155
----------------------------------------------------------
Net investment 4,657 18,661 88 23,406
income
----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment securities sold 21 1,672 -- 1,693
Net realized loss on financial futures contracts -- (2,679) -- (2,679)
Net realized gain on foreign currency transactions -- 17 -- 17
Change in net unrealized appreciation (depreciation)
of investment securities,
financial futures contracts,
translation of assets and liabilities in
foreign currencies, and foreign currency contracts 115 2,266 -- 2,381
----------------------------------------------------------
Net gain on investments 136 1,276 -- 1,412
----------------------------------------------------------
----------------------------------------------------------
Net increase in net assets resulting from operations $4,793 $19,937 88 $24,818
----------------------------------------------------------
17
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1997
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
Income Managers Trust
ULTRA SHORT LIMITED MATURITY
BOND BOND PRO FORMA
(000'S OMITTED) PORTFOLIO PORTFOLIO COMBINED
- --------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market
value*
-see Schedule of Investments $62,552 $303,088 $365,640
Cash 4 1 5
Deferred organization costs 1 4 5
Interest receivable 676 4,067 4,743
Prepaid expenses and other 2 6 8
assets
Receivable for securities sold 2 44 46
--------------------------------------------------------------
63,237 307,210 370,447
--------------------------------------------------------------
LIABILITIES
Payable for securities purchased 3,067 14,112 17,179
Payable for variation margin -- 18 18
Payable to investment manager 13 62 75
Accrued expenses 36 52 88
--------------------------------------------------------------
3,116 14,244 17,360
--------------------------------------------------------------
NET ASSETS Applicable to Investors' Beneficial $60,121 $292,966 $353,087
Interests
--------------------------------------------------------------
NET ASSETS consist of:
Paid-in $59,647 $291,698 $351,345
capital
Net unrealized appreciation in value of
investment
securities and financial futures
contracts
474 1,268 1,742
--------------------------------------------------------------
NET ASSETS $60,121 $292,966 $353,087
--------------------------------------------------------------
*Cost of investments $62,078 $301,455 $363,533
18
NEUBERGER & BERMAN INCOME FUNDS
PART C
OTHER INFORMATION
Item 15. Indemnification.
- -------- ----------------
A Delaware business trust may provide in its governing instrument for
indemnification of its officers and trustees from and against any and all claims
and demands whatsoever. Article IX, Section 2 of the Trust Instrument provides
that the Registrant shall indemnify any present or former trustee, officer,
employee or agent of the Registrant ("Covered Person") to the fullest extent
permitted by law against liability and all expenses reasonably incurred or paid
by him or her in connection with any claim, action, suit or proceeding
("Action") in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been a Covered Person and against amounts paid or
incurred by him or her in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other body to be liable to the
Registrant or its shareholders by reason of "willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office" ("Disabling Conduct"), or not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of the
Registrant. In the event of a settlement, no indemnification may be provided
unless there has been a determination that the officer or trustee did not engage
in Disabling Conduct (i) by the court or other body approving the settlement;
(ii) by at least a majority of those trustees who are neither interested
persons, as that term is defined in the Investment Company Act of 1940 ("1940
Act"), of the Registrant ("Independent Trustees"), nor parties to the matter
based upon a review of readily available facts; or (iii) by written opinion of
independent legal counsel based upon a review of readily available facts.
Pursuant to Article IX, Section 3 of the Trust Instrument, if any
present or former shareholder of any series ("Series") of the Registrant shall
be held personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or for some other
reason, the present or former shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of any entity, its
general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Registrant, on behalf of the affected
Series, shall, upon request by such shareholder, assume the defense of any claim
made against such shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
Section 9 of the Management Agreement between Income Managers Trust
("Managers Trust") and Neuberger and Berman Management Incorporated ("N&B
Management") provides that neither N&B Management nor any director, officer or
employee of N&B Management performing services for any series of Managers Trust
(each a "Portfolio") at the direction or request of N&B Management in connection
with N&B Management's discharge of its obligations under the Agreement shall be
liable for any error of judgment or mistake of law or for any loss suffered by a
Portfolio in connection with any matter to which the Agreement relates;
provided, that nothing in the Agreement shall be construed (i) to protect N&B
Management against any liability to Managers Trust or a Portfolio or its
interestholders to which N&B Management would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of its
duties, or by reason of N&B Management's reckless disregard of its obligations
and duties under the Agreement, or (ii) to protect any director, officer or
employee of N&B Management who is or was a trustee or officer of Managers Trust
against any liability to Managers Trust or a Portfolio or its interestholders to
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such person's office with Managers Trust.
Section 1 of the Sub-Advisory Agreement between N&B Management and
Neuberger & Berman, L.P. ("Neuberger & Berman") with respect to Managers Trust
provides that, in the absence of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or of reckless disregard of its
duties and obligations under the Agreement, Neuberger & Berman will not be
subject to liability for any act or omission or any loss suffered by any
Portfolio or its interestholders in connection with the matters to which the
Agreement relates.
Section 12 of the Administration Agreement between the Registrant and
N&B Management provides that N&B Management will not be liable to the Registrant
for any action taken or omitted to be taken by N&B Management or its employees,
agents or contractors in carrying out the provisions of the Agreement if such
action was taken or omitted in good faith and without negligence or misconduct
on the part of N&B Management, or its employees, agents or contractors. Section
13 of the Administration Agreement provides that the Registrant shall indemnify
N&B Management and hold it harmless from and against any and all losses, damages
and expenses, including reasonable attorneys' fees and expenses, incurred by N&B
Management that result from: (i) any claim, action, suit or proceeding in
connection with N&B Management's entry into or performance of the Agreement; or
(ii) any action taken or omission to act committed by N&B Management in the
performance of its obligations under the Agreement; or (iii) any action of N&B
Management upon instructions believed in good faith by it to have been executed
by a duly authorized officer or representative of a Series; provided, that N&B
Management will not be entitled to such indemnification in respect of actions or
omissions constituting negligence or misconduct on the part of N&B Management,
or its employees, agents or contractors. Amounts payable by the Registrant under
this provision shall be payable solely out of assets belonging to that Series,
and not from assets belonging to any other Series of the Registrant. Section 14
of the Administration Agreement provides that N&B Management will indemnify the
Registrant and hold it harmless from and against any and all losses, damages and
expenses, including reasonable attorneys' fees and expenses, incurred by the
Registrant that result from: (i) N&B Management's failure to comply with the
terms of the Agreement; or (ii) N&B Management's lack of good faith in
performing its obligations under the Agreement; or (iii) the negligence or
misconduct of N&B Management, or its employees, agents or contractors in
connection with the Agreement. The Registrant shall not be entitled to such
indemnification in respect of actions or omissions constituting negligence or
misconduct on the part of the Registrant or its employees, agents or contractors
other than N&B Management, unless such negligence or misconduct results from or
is accompanied by negligence or misconduct on the part of N&B Management, any
affiliated person of N&B Management, or any affiliated person of an affiliated
person of N&B Management.
Section 11 of the Distribution Agreement between the Registrant and N&B
Management provides that N&B Management shall look only to the assets of a
Series for the Registrant's performance of the Agreement by the Registrant on
C-2
behalf of such Series, and neither the trustees nor any of the Registrant's
officers, employees or agents, whether past, present or future, shall be
personally liable therefor.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("1933 Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the 1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
Item 16. Exhibits.
- ------- --------
Exhibit
Number Description
------ -----------
(1) (a) Certificate of Trust. Incorporated by
Reference to Post-Effective Amendment No.
21 to Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-000117.
(b) Trust Instrument of Neuberger & Berman
Income Funds. Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-000117.
(c) Schedule A - Current Series of Neuberger &
Berman Income Funds. Incorporated by
Reference to Registrant's Registration
Statement, Post-Effective Amendment No. 24,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-97-000040.
(2) By-Laws of Neuberger & Berman Income Funds.
Incorporated by Reference to Post-Effective
Amendment No. 21 to Registrant's Registration
Statement, File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-000117.
(3) Voting Trust Agreement. None.
(4) Plan of Reorganization and Termination. Filed
Herewith.
C-3
(5) (a) Trust Instrument of Neuberger & Berman
Income Funds, Articles IV, V, and VI.
Incorporated by Reference to Post-Effective
Amendment No. 21 to Registrant's
Registration Statement, File Nos. 2-85229
and 811-3802, EDGAR Accession No.
0000898432-96-00017.
(b) By-Laws of Neuberger & Berman Income Funds,
Articles V, VI, and VIII. Incorporated by
Reference to Post-Effective Amendment No.
21 to Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(6) (a) (i) Management Agreement Between Income
Managers Trust and Neuberger &
Berman Management Incorporated.
Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802,
EDGAR Accession No.
0000898432-96-00017.
(ii) Form of Schedule A - Portfolios of
Income Managers Trust Currently
Subject to the Management Agreement.
Incorporated by Reference to
Registrant's Registration Statement,
Post-Effective Amendment No. 24,
File Nos. 2-85229 and 811-3802,
EDGAR Accession No.
0000898432-97-000040.
(iii) Form of Schedule B - Schedule of
Compensation under the Management
Agreement. Incorporated by Reference
to Registrant's Registration
Statement, Post-Effective Amendment
No. 24, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-97-000040.
(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
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802,
EDGAR Accession No.
0000898432-96-00017.
C-4
(ii) Form of Schedule A - Portfolios of
Income Managers Trust Currently
Subject to the Sub-Advisory
Agreement. Incorporated by Reference
to Registrant's Registration
Statement, Post-Effective Amendment
No. 24, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-97-000040.
(iii) Substitution Agreement Among
Neuberger & Berman Management
Incorporated, Income Managers Trust,
Neuberger & Berman, L.P., and
Neuberger & Berman, LLC.
Incorporated by Reference to
Post-Effective Amendment No. 23 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802;
EDGAR Accession No.
0000898432-96-000117.
(7) (a) Distribution Agreement between Neuberger &
Berman Income Funds and Neuberger & Berman
Management Incorporated. Incorporated by
Reference to Post-Effective Amendment No.
21 to Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(b) Form of Schedule A - Series of Neuberger &
Berman Income Funds Currently Subject to
the Distribution Agreement. Incorporated by
Reference to Registrant's Registration
Statement, Post-Effective Amendment No. 24,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-97-000040.
(8) Bonus, Profit Sharing or Pension Plans. None.
(9) (a) Custodian Contract Between Neuberger &
Berman Income Funds and State Street Bank
and Trust Company. Incorporated by
Reference to Post-Effective Amendment No.
21 to Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(b) Form of Agreement between Neuberger &
Berman Income Funds and State Street Bank
and Trust Company Adding Neuberger & Berman
High Yield Bond Fund as a Series Governed
by the Custodian Contract. Incorporated by
Reference to Registrant's Registration
Statement, Post-Effective Amendment No. 24,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-97-000040.
C-5
(c) Schedule A - Approved Foreign Banking
Institutions and Securities Depositories
Under the Custodian Contract. Incorporated
by Reference to Post-Effective Amendment
No. 21 to Registrant's Registration
Statement, File Nos. 2-85229 and 811-3802,
EDGAR Accession No. 0000898432-96-00017.
(d) Schedule of Compensation under the
Custodian Contract. Incorporated by
Reference to Post-Effective Amendment No.
23 to Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802; EDGAR
Accession No. 0000898432-96-000117.
(10) (a) Plan Pursuant to Rule 12b-1. None.
(b) Plan Pursuant to Rule 18f-3. None.
(11) Opinion and Consent of Kirkpatrick & Lockhart LLP
on Securities Matters. Filed Herewith.
(12) Opinion and Consent of Kirkpatrick & Lockhart LLP
Regarding Certain Tax Matters. To be filed by
Amendment.
(13) (a) (i) Transfer Agency Agreement Between
Neuberger & Berman Income Funds and
State Street Bank and Trust Company.
Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802,
EDGAR Accession No.
0000898432-96-00017.
(ii) Form of Agreement between Neuberger
& Berman Income Funds and State
Street Bank and Trust Company Adding
Neuberger & Berman High Yield Bond
Fund as a Series Governed by the
Transfer Agency Agreement.
Incorporated by Reference to
Registrant's Registration Statement,
Post-Effective Amendment No. 24,
File Nos. 2-85229 and 811-3802,
EDGAR Accession No.
0000898432-97-000040.
(iii) First Amendment to Transfer Agency
and Service Agreement between
Neuberger & Berman Income Funds and
State Street Bank and Trust Company.
Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802,
EDGAR Accession No.
0000898432-96-00017.
C-6
(iv) Schedule of Compensation under the
Transfer Agency Agreement.
Incorporated by Reference to Post
Effective Amendment No. 23 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802,
EDGAR Accession No.
0000898432-96-000117.
(b) (i) Administration Agreement Between
Neuberger & Berman Income Funds and
Neuberger & Berman Management
Incorporated. Incorporated by
Reference to Post-Effective
Amendment No. 21 to Registrant's
Registration Statement, File Nos.
2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(ii) Form of Schedule A - Series of
Neuberger & Berman Income Funds
Currently Subject to the
Administration Agreement.
Incorporated by Reference to
Registrant's Registration Statement,
Post-Effective Amendment No. 24,
File Nos. 2-85229 and 811-3802,
EDGAR Accession No.
0000898432-97-000040.
(iii) Schedule B - Schedule of
Compensation Under the
Administration Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802,
EDGAR Accession No.
0000898432-96-00017.
(14) Other Opinions, Appraisals, Rulings and Consents.
Consent of Ernst & Young, LLP, Independent
Auditors. Filed Herewith.
(15) Financial Statements Omitted from Part B. None.
(16) Powers of Attorney Pursuant to Which the Name of
Any Person Has Been Signed to the Registration
Statement. Filed Herewith.
(17) Additional Exhibits. None.
(27) Financial Data Schedules. Filed Herewith.
Item 17. Undertakings
- -------- ------------
(1) Registrant hereby agrees that prior to any public
reoffering of the securities registered through the use
of a prospectus which is a part of this registration
statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the
Securities Act of 1993, the reoffering prospectus will
contain the information called for by the applicable
registration form for reofferings by persons who may be
C-7
deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an
amendment to the registration statement and will not be
used until the amendment is effective, and that, in
determining any liability under the Securities Act of
1933, each post-effective amendment shall be deemed to be
a new registration statement for securities offered
therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of
them.
(3) Registrant hereby undertakes to file a post-effective
amendment to this registration statement on Form N-14,
containing an opinion of counsel supporting the tax
consequences of the Reorganization described herein
within a reasonable time after receipt of such opinion
and, in any event, prior to the consummation of the
Reorganization.
C-8
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, NEUBERGER &
BERMAN INCOME FUNDS has duly caused the Registration Statement on Form N-14 to
be signed on its behalf by the undersigned, thereto duly authorized, in the City
and State of New York on the 17th day of December, 1997.
NEUBERGER & BERMAN INCOME FUNDS
By: /s/ Theodore P. Giuliano
------------------------
Theodore P. Giuliano
President
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ John Cannon Trustee December 17, 1997
- ------------------------
John Cannon
/s/ Stanley Egener Chairman of the Board, December 17, 1997
- ------------------------ Chief Executive Officer
Stanley Egener and Trustee
/s/ Theodore P. Giuliano President and Trustee December 17, 1997
- ------------------------
Theodore P. Giuliano
/s/ Barry Hirsch Trustee December 17, 1997
- ------------------------
Barry Hirsch
/s/ Robert A. Kavesh Trustee December 17, 1997
- ------------------------
Robert A. Kavesh
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ William E. Rulon Trustee December 17, 1997
- ------------------------
William E. Rulon
/s/ Candace L. Straight Trustee December 17, 1997
- ------------------------
Candace L. Straight
/s/ Richard Russell Treasurer and December 17, 1997
- ------------------------ Principal Accounting
Richard Russell Officer
/s/ Michael J. Weiner Vice President and December 17, 1997
- ------------------------ Principal Financial
Michael J. Weiner Officer
2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, INCOME MANAGERS
TRUST has duly caused the Registration Statement of Neuberger & Berman Income
Funds on Form N-14 to be signed on its behalf by the undersigned, thereto duly
authorized, in the City and State of New York on the 22nd day of December, 1997.
INCOME MANAGERS TRUST
By: /s/ Theodore P. Giuliano*
---------------------------
Theodore P. Giuliano
President
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ John Cannon* Trustee December 22, 1997
- ------------------------
John Cannon
/s/ Stanley Egener* Chairman of the Board, December 22, 1997
- ------------------------ Chief Executive Officer
Stanley Egener and Trustee
/s/ Theodore P. Giuliano* President and Trustee December 22, 1997
- ------------------------
Theodore P. Giuliano
/s/ Barry Hirsch* Trustee December 22, 1997
- ------------------------
Barry Hirsch
/s/ Robert A. Kavesh* Trustee December 22, 1997
- ------------------------
Robert A. Kavesh
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ William E. Rulon* Trustee December 22, 1997
- ------------------------
William E. Rulon
/s/ Candace L. Straight* Trustee December 22, 1997
- ------------------------
Candace L. Straight
/s/ Richard Russell* Treasurer and December 22, 1997
- ------------------------ Parincipal Accounting
Richard Russell Officer
/s/ Michael J. Weiner* Vice President and December 22, 1997
- ------------------------ Principal Financial
Michael J. Weiner Officer
* (signed pursuant to a Power of Attorney dated September 24, 1997 by
/s/ Arthur C. Delibert )
- -----------------------
Arthur C. Delibert
2
NEUBERGER & BERMAN INCOME FUNDS
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description Page
------ -----------------------------------------------------------------------------
(1) (a) Certificate of Trust. Incorporated by Reference to N.A.
Post-Effective Amendment No. 21 to Registrant's
Registration Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No. 0000898432-96-00017.
(b) Trust Instrument of Neuberger & Berman Income N.A.
Funds. Incorporated by Reference to Post-Effective
Amendment No. 21 to Registrant's Registration
Statement, File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(c) Schedule A - Current Series of Neuberger & Berman N.A.
Income Funds. Incorporated by Reference to
Registrant's Registration Statement, Post-Effective
Amendment No. 24, File Nos. 2-85229 and 811-3802,
EDGAR Accession No. 0000898432-97-000040.
(2) By-Laws of Neuberger & Berman Income Funds. Incorporated N.A.
by Reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No. 0000898432-96-00017.
(3) Voting Trust Agreement. None. N.A.
(4) Plan of Reorganization and Termination. Filed Herewith. ____
(5) (a) Trust Instrument of Neuberger & Berman Income N.A.
Funds, Articles IV, V, and VI. Incorporated by
Reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement, File Nos.
2-85229 and 811-3802, EDGAR Accession No.
0000898432-96-00017.
(b) By-Laws of Neuberger & Berman Income Funds, N.A.
Articles V, VI, and VIII. Incorporated by
Reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement, File Nos.
2-85229 and 811-3802, EDGAR Accession No.
0000898432-96-00017.
Sequentially
Exhibit Numbered
Number Description Page
------ -----------------------------------------------------------------------------
(6) (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
Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.
(ii) Form of Schedule A - Portfolios of Income N.A.
Managers Trust Currently Subject to the
Management Agreement. Incorporated by
Reference to Registrant's Registration
Statement, Post-Effective Amendment No. 24,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-97-000040.
(iii) Form of Schedule B - Schedule of N.A.
Compensation Under the Management Agreement.
Incorporated by Reference to Registrant's
Registration Statement, Post-Effective
Amendment No. 24, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-97-000040.
(b) (i) Sub-Advisory Agreement Between Neuberger & N.A.
Berman Management Incorporated and Neuberger
& Berman, L.P. with Respect to Income
Managers Trust. Incorporated by Reference
to Post-Effective Amendment No. 21 to
Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.
(ii) Form of Schedule A - Portfolios of Income N.A.
Managers Trust Currently Subject to the
Sub-Advisory Agreement. Incorporated by
Reference to Registrant's Registration
Statement, Post-Effective Amendment No. 24,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-97-000040.
Sequentially
Exhibit Numbered
Number Description Page
------ -----------------------------------------------------------------------------
(iii) Substitution Agreement Among Neuberger & N.A.
Berman Management Incorporated, Income
Managers Trust, Neuberger & Berman, L.P.,
and Neuberger & Berman, LLC. Incorporated
by Reference to Post-Effective Amendment No.
23 to Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-000117.
(7) (a) Distribution Agreement Between Neuberger & Berman N.A.
Income Funds and Neuberger & Berman Management
Incorporated. Incorporated by Reference to
Post-Effective Amendment No. 21 to Registrant's
Registration Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No. 0000898432-96-00017.
(b) Form of Schedule A - Series of Neuberger & Berman N.A.
Income Funds Currently Subject to the Distribution
Agreement. Incorporated by Reference to
Registrant's Registration Statement, Post-Effective
Amendment No. 24, File Nos. 2-85229 and 811-3802,
EDGAR Accession No. 0000898432-97-000040.
(8) Bonus, Profit Sharing or Pension Plans. None. N.A.
(9) (a) Custodian Contract Between Neuberger & Berman N.A.
Income Funds and State Street Bank and Trust
Company. Incorporated by Reference to
Post-Effective Amendment No. 21 to Registrant's
Registration Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No. 0000898432-96-00017.
(b) Form of Agreement between Neuberger & Berman Income N.A.
Funds and State Street Bank and Trust Company
Adding Neuberger & Berman High Yield Bond Fund as a
Series Governed by the Custodian Contract.
Incorporated by Reference to Registrant's
Registration Statement, Post-Effective Amendment
No. 24, File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-97-000040.
(c) Schedule A - Approved Foreign Banking Institutions N.A.
and Securities Depositories Under the Custodian
Contract. Incorporated by Reference to
Post-Effective Amendment No. 21 to Registrant's
Registration Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No. 0000898432-96-00017.
Sequentially
Exhibit Numbered
Number Description Page
------ -----------------------------------------------------------------------------
(d) Schedule of Compensation under the Custodian N.A.
Contract. Incorporated by Reference to
Post-Effective Amendment No. 23 to Registrant's
Registration Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No. 0000898432-96-000117.
(10) (a) Plan Pursuant to Rule 12b-1. None. N.A.
(b) Plan Pursuant to Rule 18f-3. None.
(11) Opinion and Consent of Kirkpatrick & Lockhart LLP on ____
Securities Matters. Filed Herewith.
(12) Opinion and Consent of Kirkpatrick & Lockhart LLP Regarding N.A.
Certain Tax Matters. To be filed by Amendment.
(13) (a) (i) Transfer Agency Agreement Between Neuberger N.A.
& Berman Income Funds and State Street Bank
and Trust Company. Incorporated by
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.
(ii) Form of Agreement between Neuberger & Berman N.A.
Income Funds and State Street Bank and Trust
Company adding Neuberger & Berman High Yield
Bond Fund as a Series Governed by the
Transfer Agency Agreement. Incorporated by
Reference to Registrant's Registration
Statement, Post-Effective Amendment No. 24,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-97-000040.
(iii) First Amendment to Transfer Agency and N.A.
Service Agreement between Neuberger & Berman
Income Funds and State Street Bank and Trust
Company. Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.
(iv) Schedule of Compensation under the Transfer N.A.
Agency Agreement. Incorporated by Reference
to Post-Effective Amendment No. 23 to
Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-000117.
Sequentially
Exhibit Numbered
Number Description Page
------ -----------------------------------------------------------------------------
(b) (i) Administration Agreement Between Neuberger & N.A.
Berman Income Funds and Neuberger & Berman
Management Incorporated. Incorporated by
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.
(ii) Form of Schedule A - Series of Neuberger & N.A.
Berman Income Funds Currently Subject to the
Administration Agreement. Incorporated by
Reference to Registrant's Registration
Statement, Post-Effective Amendment No. 24,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-97-000040.
(iii) Schedule B - Schedule of Compensation Under N.A.
the Administration Agreement. Incorporated
by Reference to Post-Effective Amendment No.
21 to Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(14) Other Opinions, Appraisals, Rulings And Consents. Consent ____
of Ernst & Young, LLP, Independent Auditors. Filed
Herewith.
(15) Financial Statements Omitted from Part B. None. ____
(16) Powers of Attorney Pursuant to Which the Name of Any Person
Has Been Signed to the Registration Statement. Filed Herewith.
(17) Additional Exhibits. None. N.A.
(27) Financial Data Schedules. Filed Herewith. ____