[Federal Register Volume 65, Number 229 (Tuesday, November 28, 2000)]
[Notices]
[Pages 70849-70850]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-30245]



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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24745 812-12250]


Neuberger Berman Equity Funds, et al., Notice of Application

November 21, 2000.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION:  Notice of an application under section 17(b) of the Investment 
Company Act of 1940 (the ``Act'' for an exemption from section 17(a) of 
the Act.

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    Summary of Application: Applicants request an order to permit the 
series of certain registered open-end management investment companies 
to acquire all of the assets and stated liabilities of the series of 
certain other registered open-end management investment companies. 
Because of certain affiliations, applicants may not rely on rule 17a-8 
under the Act.
    Applicants: Neuberger Berman Equity Funds, on behalf of its 
underlying series: Neuberger Berman Century, Focus, Genesis, Guardian, 
International, Manhattan, Millennium, Partners, Regency, Socially 
Responsive, and Technology Funds; and Neuberger Berman Income Funds, on 
behalf of its underlying series: Neuberger Berman Government Money, 
Municipal Money, High Yield Bond, and Limited Maturity Bond Funds, as 
well as Neuberger Berman Cash Reserves and Neuberger Berman Municipal 
Securities Trust (each series individually an ``Acquiring Fund'' and 
collectively, the ``Acquiring Funds''); Neuberger Berman Equity Trust, 
on behalf of its underlying series: Neuberger Berman Century, Focus, 
Genesis, Guardian, International, Manhattan, Millennium, Partners, 
Regency, Socially Responsive and Technology Trusts; Neuberger Berman 
Equity Assets, on behalf of its underlying series: Neuberger Berman 
Focus, Genesis, Guardian, Manhattan, Millennium, Partners and Socially 
Responsive Assets; Neuberger Berman Equity Series, on behalf of its 
underlying series: Neuberger Berman Genesis Institutional; and 
Neuberger Berman Income Trust, on behalf of its underlying series: 
Neuberger Berman Limited Maturity Bond and Institutional Cash Trusts 
(each series individually an ``Acquired Fund'' and collectively, the 
``Acquired Funds'') (the Acquired Funds and the Acquiring Funds 
collectively, the ``Funds''); Neuberger Berman Management Inc. 
(``NBMI''), and Neuberger Berman, LLC (``Neuberger Berman'') (NBMI and 
Neuberger Berman are referred to collectively as the ``Advisers'').
    Filing Dates: The application was filed on September 13, 2000. 
Applicants have agreed to file an amendment during the notice period, 
the substance of which is reflected in this notice.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on December 14, 2000, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609; Applicants, 605 Third Avenue, 21st Floor, New York, NY 
10158-3698.

FOR FURTHER INFORMATION CONTACT: Lidian Pereira, Senior Counsel, at 
(202) 942-0524 or Christine Y. Greenlees, Branch Chief, at (202) 952-
0564 (Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (telephone (202) 942-8090).

Applicant's Representations

    1. The Funds are registered under the Act as open-end management 
investment companies. Each of the Funds is a feeder fund in a master-
feeder structure. Each Acquired Fund and its corresponding Acquiring 
Fund invest in the same master fund (the ``Master Fund''). Each Master 
Fund is registered under the Act as an open-end management investment 
company.
    2. Both NBMI and Neuberger Berman are registered as investment 
advisers under the Investment Advisers Act of 1940. NBMI serves as the 
investment adviser for each Master Fund and as the administrator for 
each Fund. Neuberger Berman serves as sub-adviser to each master Fund. 
NBMI and Neuberger Berman are wholly-owned subsidiaries of Neuberger 
Berman, Inc., a publicly owned holding company owned primarily by the 
employees of Neuberger Berman. One of the Advisers or individuals or 
entities that are affiliated with the Advisers hold beneficially or of 
record more than 5% and in some cases more than 25%, of the outstanding 
shares of several of the Funds. In addition, certain third parties each 
owns more than 5% of two of the Funds. Further, certain Funds each owns 
5% or more of the corresponding Master Fund.
    3. On June 6, 2000, the boards of trustees of the Acquiring Funds 
and the Acquired Funds (the ``Boards''), respectively, including all of 
the trustees who are not ``interested persons'' of the Funds, as 
defined in section 2(a)(19) of the Act (``Independent Trustees''), 
approved an Agreement and Plan of Reorganization (``the Agreement''). 
Under the Agreement, each Acquiring Fund will acquire all of the assets 
and assume the stated liabilities of its corresponding Acquired Fund in 
exchange for shares of the Trust Class, Advisor Class or Institutional 
Class of the Acquiring Fund (the ``Reorganization''). Pursuant to the 
Agreement, each shareholder of an Acquired Fund will receive shares of 
the Trust Class, Advisor Class or Institutional Class of the 
corresponding Acquiring Fund having an aggregate net asset value 
(``NAV'') equal to the aggregate NAV of the Acquired Fund's shares held 
by that shareholder, determined as of the close of regular trading on 
New York Stock Exchange on the closing date (the ``Closing Date''). The 
valuation will be made in accordance with the procedures set forth in 
the then-current prospectus and statement of additional information for 
the Funds. On or as soon as practicable after the Closing Date, the 
classes of shares of the Acquiring Fund received by the Acquired Fund 
will be distributed pro rata to the shareholders of the Acquired Fund 
and the Acquired Fund will be dissolved. The Reorganization is designed 
to convert the master-feeder structure of the Funds into a multiple 
class structure.
    4. Each of the Acquired Funds has investment objectives, policies, 
and restrictions that are identical to those of its corresponding 
Acquiring Fund and to those of its Master Fund. The Acquired Funds and 
the Acquiring Funds are sold without a front-end or contingent deferred 
sales charge. The Acquired Funds and the Acquiring Funds impose 
distribution and service fees that will remain the same after the 
Reorganization. No sales charge, redemption fee or exchange fee will be

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imposed in connection with the Reorganization.
    5. The Boards, including a majority of the Independent Trustees, 
determined that participation in the Reorganization is in the best 
interests of each Fund, and that the interests of existing shareholders 
of each Fund will not be diluted as a result of the Reorganization. In 
assessing the Reorganization, the Boards considered a number of 
factors, including: (a) The terms and conditions of the Reorganization; 
(b) the potential administrative benefits and savings that may be 
achieved from the simplified structure; (c) the tax-free nature of the 
reorganization; (d) the compatibility of the investment objectives, 
policies and restrictions among the Funds; and (e) the greater 
likelihood of asset growth that potentially may result from a more 
familiar structure and the greater economies of scale that can be 
achieved from such asset growth, including without limitation lower 
management fees that take effect at certain asset level breakpoints. 
The Funds will bear the expenses associated with the Reorganization, as 
determined by the Board of each Fund.
    6. The consummation of the Reorganization is subject to various 
conditions, including: (a) The approval of the Reorganization by the 
shareholders of each Acquired Fund; (b) completion of all filings with, 
and receipt of all necessary approvals from, the Commission; and (c) 
delivery of legal opinions regarding the federal tax consequences of 
the Reorganization. The Reorganization Plan for an Acquired Fund may be 
terminated at any time prior to the Closing Date if the Board of either 
that Acquired Fund or the Acquiring Fund determines in good faith that 
the Reorganization is not in the best interests of the shareholders. 
Applicants agree not to make any changes to the Reorganization Plan 
that materially affect the application without prior approval of the 
Commission staff.
    7. A prospectus/proxy statement was filed with the Commission on 
June 26, 2000, and was mailed to the Acquired Fund shareholders 
beginning the week of August 28, 2000. The shareholders of the Acquired 
Funds considered and approved the Reorganization on October 31, 
2000.\1\
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    \1\ Three of the Acquired Funds did not obtain sufficient votes 
to approve their respective Reorganization. On November 13, 2000, 
the Boards of these three Acquired Funds voted to approve the 
Reorganizations, pursuant to authority granted in the Funds' 
Declarations of Trust.
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Applicants' Legal Analysis

    1. Section 17(a) of the Act generally prohibits an affiliated 
person of a registered investment company, or an affiliated person of 
such a person, acting as principal, from selling any security to, or 
purchasing any security from, the company. Section 2(a)(3) of the Act 
defines an ``affiliated person'' of another person to include: (a) Any 
person directly or indirectly owning, controlling, or holding with 
power to vote 5% or more of the outstanding voting securities of the 
other person; (b) any person 5% or more of whose securities are 
directly or indirectly owned, controlled, or held with power to vote by 
the other person; (c) any person directly or indirectly controlling, 
controlled by or under common control with the other person, and (d) if 
the other person is an investment company, any investment adviser of 
that company. Applicants state that the Funds may be deemed affiliated 
persons and, thus, the Reorganization may be prohibited by section 
17(a).
    2. Rule 17a-8 under the Act exempts from the prohibitions of 
section 17(a) mergers, consolidations, or purchases or sales of 
substantially all of the assets of registered investment companies that 
are affiliated persons, or affiliated persons of an affiliated person, 
solely by reason of having a common investment adviser, common 
directors, and/or common officers, provided that certain conditions set 
forth in the rule are satisfied. Applicants state that they may not 
rely on rule 17a-8 because the Funds may be deemed to be affiliated for 
reasons other than those set forth in the rule. Applicants state that 
more than 5% of the outstanding shares of certain Funds is held 
beneficially or of record by either NBMI, Neuberger Berman, or 
individual Neuberger Berman officers and/or directors of affiliated 
entities of such individuals. Applicants also state that certain third 
parties are the record owners of 5% or more of each of two Funds. Under 
section 2(a)(3)(A) of the Act, NBMI, Neuberger Berman and these 
individuals/entities could be deemed ``affiliated persons'' of the 
Funds whose shares they own. Applicants further state that certain 
Funds may be deemed affiliated persons of affiliated persons of one 
another because each owns 5% or more of the outstanding voting 
securities of the same Master Fund. Thus, each of the Acquired Funds 
might be deemed to be an affiliated person of an affiliated person of 
an Acquiring Fund for reasons other than those set forth in rule 17a-8.
    3. Section 17(b) of the Act provides, in relevant part, that the 
Commission may exempt a transaction from the provisions of section 
17(a) if the evidence establishes that the terms of the proposed 
transaction, including the consideration to be paid or received, are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned, and that the proposed transaction is consistent with 
the policy of each registered investment company concerned and with the 
general purposes of the Act.
    4. Applicants request an order under section 17(b) of the Act 
exempting them from section 17(a) of the Act to the extent necessary to 
permit applicants to complete the proposed Reorganization. Applicants 
submit that the Reorganization satisfies the standards of section 17(b) 
of the Act. Applicants state that the terms of the proposed 
Reorganization are fair and reasonable and do not involve overreaching. 
Applicants also state that the Boards, including all of the Independent 
Trustees, found that participation in the Reorganization is in the best 
interests of each Fund and that interests of the existing shareholders 
will not be diluted as a result of the Reorganization. Applicants 
further state that the Reorganization will be based on the Funds' 
relative NAVs.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-30245 Filed 11-27-00; 8:45 am]
BILLING CODE 8010-01-M