UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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4) Date Filed:
LEHMAN BROTHERS
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
399 PARK AVENUE
NEW YORK, NEW YORK 10022
________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
________________________
Dear SHAREHOLDER:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders ("Annual
Meeting") of Lehman Brothers First Trust Income Opportunity Fund, a Delaware
statutory trust (the "Fund"), will be held on April 16, 2007, at 3:30 p.m.
Eastern time at the offices of Neuberger Berman, LLC, an affiliate of Neuberger
Berman Management Inc., the Fund's investment adviser, at 605 Third Avenue, 41st
Floor, New York, New York 10158-3698 for the following purposes:
(1) To elect five Class II trustees as outlined below:
(a) Four Class II trustees, C. Anne Harvey, George W. Morriss, Jack
L. Rivkin and Tom D. Seip, to be elected by the holders of common
shares (the "Common Shares") and Money Market Cumulative
Preferred Shares (the "MMP Shares"), voting together as a single
class, such trustees to serve until the annual meeting of
shareholders in 2010, or until their successors are elected and
qualified; and
(b) One Class II trustee, John Cannon, to be elected by the holders
of MMP Shares only, voting separately as a single class, such
trustee to serve until the annual meeting of shareholders in
2010, or until such trustee's successors are elected and
qualified; and
(2) To consider and act upon any other business that may properly come
before the Annual Meeting or any adjournments thereof.
You are entitled to vote at the Annual Meeting of your Fund and any
adjournments thereof if you owned Fund shares at the close of business on
February 21, 2007 (the "Record Date"). IF YOU ATTEND THE ANNUAL MEETING, YOU MAY
VOTE YOUR SHARES IN PERSON. IF YOU DO NOT EXPECT TO ATTEND THE ANNUAL MEETING,
PLEASE REVIEW THE ENCLOSED MATERIALS AND FOLLOW THE INSTRUCTIONS THAT APPEAR ON
THE ENCLOSED PROXY CARD(S). If you have any questions about the proposals or the
voting instructions, please call us at 877-461-1899. Any proposal submitted to a
vote at the Annual Meeting by anyone other than the officers or trustees of the
Fund may be voted only in person or by written proxy.
We will admit to the Annual Meeting (1) all shareholders of record of the
Fund as of the Record Date, (2) persons holding proof of beneficial ownership at
the Record Date such as a letter or account statement from a broker, (3) persons
who have been granted proxies, and (4) such other persons that we, in our sole
discretion, may elect to admit. ALL PERSONS WISHING TO BE ADMITTED TO THE ANNUAL
MEETING MUST PRESENT PHOTO IDENTIFICATION. IF YOU PLAN TO ATTEND THE ANNUAL
MEETING, PLEASE CONTACT US AT 877-461-1899.
Unless proxy cards submitted by corporations and partnerships are signed by
the appropriate persons as indicated in the voting instructions on the proxy
cards, they will not be voted.
By order of the Board of Trustees,
/s/ Claudia A. Brandon
Claudia A. Brandon
Secretary
Dated: March 12, 2007
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense to the Fund involved in validating your vote
if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration
on the proxy card.
3. Other Accounts: The capacity of the individual signing the proxy card
should be indicated unless it is reflected in the form of
registration. For example:
REGISTRATION VALID SIGNATURE
________________________________________________________________________________
Corporate Accounts
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78 Jane B. Doe
CUSTODIAN OR ESTATE ACCOUNTS
(1) John B. Smith,
Cust. f/b/o John B. Smith, Jr. UGMA John B. Smith
(2) John B. Smith John B. Smith, Jr., Executor
________________________________________________________________________________
________________________________________________________________________________
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY
SHARES OF THE FUND YOU OWN.
PLEASE RETURN YOUR PROXY CARD PROMPTLY
If you own both Common Shares and MMP Shares of the Fund, there will be
more than one proxy card enclosed. Please fill out and return each proxy card.
Shareholders are invited to attend the Annual Meeting in person. Any
shareholder who does not expect to attend the Annual Meeting is urged to review
the enclosed materials and follow the instructions that appear on the enclosed
proxy card(s).
To avoid additional expense to the Fund of further solicitation, we ask
your cooperation in voting your proxy promptly, no matter how large or small
your holdings may be.
________________________________________________________________________________
LEHMAN BROTHERS
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
605 THIRD AVENUE
NEW YORK, NEW YORK 10158-0180
_________________
PROXY STATEMENT
_________________
ANNUAL MEETING OF SHAREHOLDERS
APRIL 16, 2007
INTRODUCTION
This Proxy Statement is furnished to the shareholders of the Lehman
Brothers First Trust Income Opportunity Fund, a Delaware statutory trust (the
"Fund"), by the Board of Trustees (the "Board") of the Fund in connection with
the solicitation of shareholder votes by proxy to be voted at the Annual Meeting
of Shareholders or any adjournments thereof ("Annual Meeting"). The Annual
Meeting is expected to be held on April 16, 2007, at 3:30 p.m.Eastern time at
605 Third Avenue, 41st Floor, New York, New York 10158-3698, at the offices of
Neuberger Berman, LLC, an affiliate of Neuberger Berman Management Inc. ("NB
Management"), the Fund's investment adviser.
The matters to be acted upon at the Annual Meeting are set forth in the
accompanying Notice of Annual Meeting. It is expected that the Notice of Annual
Meeting, this Proxy Statement and form of proxy first will be mailed to
shareholders on or about March 12, 2007.
If the enclosed proxy card is executed properly and returned, shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions on the proxy card. A proxy may nevertheless be revoked at any time
prior to its use by written notification received by the Secretary of the Fund,
by the execution of a subsequently dated proxy card or by attending the Annual
Meeting and voting in person. However, if no instructions are specified on a
proxy card, shares will be voted "FOR" the election of each nominee for Trustee
and "FOR," "ABSTAIN" or "AGAINST" any other matters acted upon at the Annual
Meeting in the discretion of the persons named as proxies.
The close of business on February 21, 2007, has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the Annual Meeting ("Record Date"). On that date, the Fund had 12,252,971.652
common shares ("Common Shares") and 3,600 Money Market Cumulative Preferred
Shares (the "MMP Shares") outstanding and entitled to vote.
Each shareholder will have one vote for each dollar, and a proportionate
fraction of a vote for each fraction of a dollar, of the net asset value per
share of each share held on the Record Date. On the Record Date, the net asset
value of the Common Shares was $15.37 per share and the MMP Shares were
redeemable at $25,000 per share.
Holders of the Fund's outstanding shares will vote to elect a total of five
Trustees: Common Shares and MMP Shares will vote together as a single class to
elect four Class II Trustees, while holders of the Fund's outstanding MMP Shares
will vote as a single class to elect one Class II Trustee. As to any other
business that may properly come before the Annual Meeting or any adjournments
thereof, holders of the Common Shares and MMP Shares may vote together as a
single class or separately, depending on the requirements of the Investment
Company Act of 1940, as amended ("1940 Act"), applicable law governing Delaware
statutory business trusts, and the Fund's charter with respect to said item of
business.
Solicitation is made primarily by the mailing of this Proxy Statement and
the accompanying proxy card(s). Supplementary solicitations may be made by mail,
telephone, and electronic transmission or in person by regular employees of NB
Management, Lehman Brothers Asset Management LLC ("LBAM LLC"), the Fund's
sub-adviser, or affiliates of these entities. Such solicitations may also be
made by other authorized representatives of the Fund. All expenses in connection
with preparing this Proxy Statement and its enclosures, and additional
solicitation expenses including reimbursement of brokerage firms and others for
their expenses in forwarding proxy solicitation material to the beneficial
owners of shares, will be borne by the Fund.
QUORUM; ADJOURNMENT
A quorum of shareholders is necessary to take action at the Annual Meeting.
A quorum will exist for the election of the four Class II Trustees to be elected
by holders of Common Shares and MMP shares entitled to vote if 25% of all such
shares (Common Shares and MMP Shares) outstanding on the Record Date are present
in person or by proxy. A quorum will exist for the election of the single Class
II Trustee to be elected by holders of the MMP Shares entitled to vote if 25% of
all such MMP Shares outstanding on the Record Date are present in person or by
proxy. THE FAILURE OF A QUORUM TO BE PRESENT AT THE ANNUAL MEETING WILL
NECESSITATE ADJOURNMENT AND WILL SUBJECT THE FUND TO ADDITIONAL EXPENSE.
In the event that a quorum is not present at the Annual Meeting, or for any
other reason, the persons named as proxies may propose one or more adjournments
of the Annual Meeting to permit further solicitation of proxies. Under the
Fund's by-laws (the "By-Laws"), any meeting of shareholders may be adjourned
from time to time by: (a) the vote of the majority of the shares represented at
that meeting, either in person or by proxy, or (b) in his or her sole discretion
by the chair of the meeting. The persons named as proxies will vote those
proxies which they are entitled to vote "FOR" the election of any nominee in
favor of such an adjournment and will
2
vote those proxies required to "WITHHOLD" on all of the nominees against any
such adjournment. A shareholder vote may be taken on one or more of the
proposals prior to any adjournment if sufficient votes have been received for
approval and it is otherwise appropriate.
The Fund expects that broker-dealer firms holding shares of the Fund in
"street name" for the benefit of their customers and clients will request the
instructions of such customers and clients on how to vote their shares on each
proposal at the Annual Meeting. The Fund understands that, under the rules of
the New York Stock Exchange ("NYSE") and the American Stock Exchange ("AMEX"),
such broker-dealers may grant authority to the proxies designated by the Fund to
vote on the election of Trustees for the Fund if no instructions have been
received prior to the date specified in the broker-dealer firm's request for
voting instructions. Certain broker-dealer firms may exercise discretion over
shares held in their names for which no instructions are received by voting such
shares in the same proportion as they have voted shares for which they have
received instructions.
In tallying shareholder votes, abstentions and "broker non-votes" (i.e.,
shares held by brokers or nominees as to which instructions have not been
received from the beneficial owners or the persons entitled to vote and either
(i) the broker or nominee does not have discretionary voting power or (ii) the
broker or nominee returns the proxy but expressly declines to vote on a
particular matter) will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum. Accordingly,
abstentions and broker non-votes effectively will be a vote against any
adjournment and but will have no impact on the election of the Class II Trustee
Nominees because the required vote is the plurality of votes cast.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS ARE
THEREFORE URGED TO COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD(S) AS SOON AS
POSSIBLE IN THE MANNER DESCRIBED IN THE ENCLOSED PROXY CARD(S).
As of February 21, 2007, the Fund knows of no person who owns beneficially
more than 5% of its outstanding Common Shares or MMP Shares. In addition, the
Trustees and officers of the Fund, in the aggregate, owned less than 1% of the
Fund's outstanding shares as of February 21, 2007.
NB Management and LBAM LLC serve as the Fund's investment adviser and
sub-adviser, respectively. In addition, NB Management provides investment
management and advisory services to private accounts of institutional and
individual clients and to mutual funds, as well as the Neuberger Berman Family
of Funds. NB Management is located at 605 Third Avenue, New York, New York
10158-0180. As of December 31, 2006, Neuberger Berman affiliates had
approximately $126.9 billion in assets under management. NB Management and LBAM
LLC are wholly-owned subsidiaries of Lehman Brothers Holdings Inc. ("LBHI"), a
publicly held company. Investors Bank and Trust Company ("IBT") currently serves
as the Fund's administrator. IBT is located at 200 Clarendon Street, Boston,
Massachusetts 02116.
3
SHAREHOLDERS OF RECORD OR BENEFICIAL OWNERS AS OF THE RECORD DATE MAY
OBTAIN A FREE COPY OF THE ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31,
2006, WHICH INCLUDES AUDITED FINANCIAL STATEMENTS FOR THE FUND, BY WRITING NB
MANAGEMENT AT 605 THIRD AVENUE, 2ND FLOOR, NEW YORK, NEW YORK 10158-0180, OR BY
CALLING TOLL FREE 877-461-1899.
Shareholders may also send communications that they would like to direct to
the Fund's Board of Trustees to the attention of Chamaine Williams, Chief
Compliance Officer, Neuberger Berman Funds, 605 Third Avenue, 21st Floor, New
York, NY, 10158-0180. The Board has directed Ms. Williams to send such
communications to the chairperson of the Fund's Ethics and Compliance Committee.
Nominee recommendations and shareholder proposals should be directed to the
attention of Claudia A. Brandon, Secretary, Neuberger Berman Funds, 605 Third
Avenue, 21st Floor, New York, NY, 10158-0180 as described in this Proxy
Statement under "Information Regarding the Fund's Process for Nominating Trustee
Candidates" and "Shareholder Proposals."
ELECTION OF TRUSTEES
PROPOSAL
The Fund's Board is divided into three classes (Class I, Class II and Class
III). At a meeting held in February 2007, the Fund's Board of Trustees expanded
the size of the Board from thirteen (1) to fifteen and appointed Michael M.
Knetter as a Class I Trustee and George W. Morriss as a Class II Trustee to fill
the vacancies created by the expansion. The terms of office of Class I, Class II
and Class III Trustees will expire at the annual meeting of shareholders held in
2009, 2007 and 2008, respectively, and at each third annual meeting of
shareholders thereafter. Each Trustee shall hold office until his or her
successor is elected and qualified or until his or her earlier death,
resignation or removal. The classification of the Fund's Trustees helps to
promote the continuity and stability of the Fund's management and policies
because the majority of the Trustees at any given time will have prior
experience as Trustees of the Fund. At least two shareholder meetings, instead
of one, are required to effect a change in a majority of the Trustees, except in
the event of vacancies resulting from removal for cause or other reasons, in
which case the remaining Trustees may fill the vacancies so created, to the
extent permitted by the 1940 Act.
At the Annual Meeting, four Class II Trustees are to be voted upon by the
holders of Common Shares and MMP Shares, voting together as a single class, and
one Class II Trustee is to be voted upon by the holders of MMP Shares only,
voting separately as a single class. In accordance with the provisions of the
1940 Act and the Fund's By-Laws, under normal circumstances the holders of
outstanding MMP Shares are entitled, as a class, and to the exclusion of the
holders of Common Shares,
1[superscript] Following the death of Barry Hirsch, a Class II Trustee, the
Board determined to reduce the number of Trustees on the Board from 14 to
13 and to reclassify C. Anne Harvey, a Class I Trustee, as a Class II
Trustee. Ms. Harvey was reclassified as a Class II Trustee of the Board so
that each class of the Board would have as close to the same number of
Trustees as possible.
4
to elect two Trustees. The holders of outstanding Common Shares and MMP Shares,
voting together as a single class, elect the balance of the Trustees. The Class
I and III Trustees are not nominees to be considered at the Meeting.
The term of each current Class II Trustee expires in 2007, but each
expressed his or her willingness to serve another term as Trustee of the Fund if
nominated by the Board.
The following table indicates which shareholders are solicited with respect
to each of these Nominees:
NOMINEE COMMON SHARES MMP SHARES
________________________________________________________________________________
John Cannon X
C. Anne Harvey X X
George W. Morriss X X
Jack L. Rivkin X X
Tom D. Seip X X
________________________________________________________________________________
The Governance and Nominating Committee of the Fund reviewed the
qualifications, experience and background of each Trustee. Based upon this
review, the Committee determined that nominating the Nominees listed above would
be in the best interests of the Fund's shareholders. The Fund's Board believes
that the Nominees are well suited for service on the Board due to their
knowledge of the financial services sector, their substantial experience in
serving as directors or trustees, officers or advisers of public companies and
business organizations, including other investment companies, and due to their
familiarity with the Fund as a result of their prior service as Trustees.
At a meeting in December 2006, the Board received the recommendations of
the Governance and Nominating Committee. After discussion and consideration of,
among other things, the backgrounds of the incumbents, the Fund's Board voted to
nominate John Cannon, C. Anne Harvey, Jack L. Rivkin and Tom D. Seip for
election as Class II Trustees with a term expiring in 2010. Mr. Morriss was not
a Trustee in December 2006. Upon recommendation of other Board members, at a
February 2007 Board meeting, the Fund's Board voted to nominate Mr. Morriss for
election as a Class II Trustee with a term expiring in 2010. The Fund has a
policy that at least three-fourths of all Trustees be Independent Fund Trustees.
Independent Fund Trustees are those who are not associated with the Fund's
investment adviser or sub-adviser or their affiliates, or with any broker-dealer
used by the Fund, the investment adviser or the sub-adviser in the past six
months.
It is the intention of the persons named in the enclosed proxy card(s) to
vote in favor of the election of each Nominee named in this Proxy Statement.
Each Nominee has consented to be named in this Proxy Statement and to serve as
Trustee if elected. The Fund's Board has no reason to believe that any Nominee
will become unavailable for election as a Trustee, but if that should occur
before the Meeting, the proxies will be voted for such other nominees as the
Board may recommend.
5
None of the Trustees is related to any other. The following tables set
forth certain information regarding each Trustee. Unless otherwise noted, each
Trustee has engaged in the principal occupation listed in the following table
for five years or more. The business address of each listed person is 605 Third
Avenue, New York, New York 10158.
INFORMATION REGARDING NOMINEES
FOR ELECTION AT 2007 ANNUAL MEETING
__________________________________________________________________________________________________
NUMBER OF
NAME, AGE, POSITION, PORTFOLIOS IN
TERM OF OFFICE, AND FUND COMPLEX OTHER DIRECTORSHIPS HELD
LENGTH OF TIME OVERSEEN BY OUTSIDE FUND COMPLEX BY
SERVED (1) PRINCIPAL OCCUPATION(S) TRUSTEE (2) TRUSTEE
__________________________________________________________________________________________________
CLASS II
__________________________________________________________________________________________________
Independent Fund Trustees
__________________________________________________________________________________________________
John Cannon (77) Consultant. Formerly, 62 Independent Trustee
Trustee Chairman, CDC or Director of three
Since April 2006 Investment Advisers series of Oppenheimer
(registered investment Funds: Limited Term
adviser), 1993 to January New York Municipal
1999; formerly, President Fund, Rochester
and Chief Executive Fund Municipals,
Officer, AMA Investment and Oppenheimer
Advisors, an affiliate of Convertible Securities
the American Medical Fund, since 1992.
Association.
__________________________________________________________________________________________________
C. Anne Harvey (69) President, C.A. Harvey 62 Formerly, President,
Trustee Associates since October Board of Associates
Since April 2006 2001; formerly, Director, to The National
AARP, 1978 to December Rehabilitation
2001. Hospital's Board of
Directors, 2001 to 2002;
formerly, Member,
Individual Investors
Advisory Committee
to the New York Stock
Exchange Board of
Directors, 1998 to June
2002.
__________________________________________________________________________________________________
6
__________________________________________________________________________________________________
NUMBER OF
NAME, AGE, POSITION, PORTFOLIOS IN
TERM OF OFFICE, AND FUND COMPLEX OTHER DIRECTORSHIPS HELD
LENGTH OF TIME OVERSEEN BY OUTSIDE FUND COMPLEX BY
SERVED (1) PRINCIPAL OCCUPATION(S) TRUSTEE (2) TRUSTEE
__________________________________________________________________________________________________
George W. Morriss Formerly, Executive 62 Member, Board of
(59) Vice President and Chief Managers, Old Mutual
Trustee Financial Officer, People's Funds of Hedge Funds
Since February 2007 Bank (a financial services (registered hedge fund),
company), 1991 to 2001. since October 2006.
__________________________________________________________________________________________________
Tom D. Seip (57) General Partner, Seip 62 Director, H&R Block,
Trustee Investments LP (a private Inc. (financial services
Since April 2006; investment partnership); company) since May
Lead Independent formerly, President 2001; Chairman,
Trustee and CEO, Westaff, Inc. Compensation
Since April 2006 (temporary staffing), May Committee, H&R
2001 to January 2002; Block, Inc. since 2006;
formerly, Senior Executive Director, America
at the Charles Schwab One Foundation
Corporation, 1983 to 1998, since 1998; formerly,
including Chief Executive Chairman, Governance
Officer, Charles Schwab and Nominating
Investment Management, Committee, H&R
Inc. and Trustee, Schwab Block, Inc., 2004
Family of Funds and to 2006; formerly,
Schwab Investments, 1997 Director, Forward
to 1998, and Executive Management, Inc. (asset
Vice President-Retail management company),
Brokerage, Charles 1999 to 2006;
Schwab & Co., Inc., 1994 formerly Director,
to 1997. E-Bay Zoological
Society, 1999 to 2003;
formerly, Director,
General Magic (voice
recognition software),
2001 to 2002; formerly,
Director, E-Finance
Corporation (credit
decisioning services),
1999 to 2003; formerly,
Director, Save-Daily.
com (micro investing
services), 1999 to 2003.
__________________________________________________________________________________________________
7
__________________________________________________________________________________________________
NUMBER OF
NAME, AGE, POSITION, PORTFOLIOS IN
TERM OF OFFICE, AND FUND COMPLEX OTHER DIRECTORSHIPS HELD
LENGTH OF TIME OVERSEEN BY OUTSIDE FUND COMPLEX BY
SERVED (1) PRINCIPAL OCCUPATION(S) TRUSTEE (2) TRUSTEE
__________________________________________________________________________________________________
Trustee who is an "Interested Person" *
__________________________________________________________________________________________________
Jack L. Rivkin * (66) Executive Vice President 62 Director, Dale Carnegie
President Since June and Chief Investment and Associates, Inc.
2006; Trustee Officer, Neuberger (private company)
Since April 2006 Berman Inc. (holding since 1998; Director,
company) since 2002 Solbright, Inc. (private
and 2003, respectively; company) since 1998.
Managing Director and
Chief Investment Officer,
Neuberger Berman since
December 2005 and 2003,
respectively; formerly,
Executive Vice President,
Neuberger Berman,
December 2002 to 2005;
Director and Chairman,
NB Management since
December 2002; formerly,
Executive Vice President,
Citigroup Investments,
Inc., September 1995 to
February 2002; formerly,
Executive Vice President,
Citigroup Inc., September
1995 to February 2002.
__________________________________________________________________________________________________
8
INFORMATION REGARDING TRUSTEES
WHOSE CURRENT TERMS CONTINUE
__________________________________________________________________________________________________
NUMBER OF
NAME, AGE, POSITION, PORTFOLIOS IN
TERMS OF OFFICE, FUND COMPLEX OTHER DIRECTORSHIPS HELD
AND LENGTH OF TIME OVERSEEN BY OUTSIDE FUND COMPLEX BY
SERVED (1) PRINCIPAL OCCUPATION(S) TRUSTEE (2) TRUSTEE
__________________________________________________________________________________________________
CLASS I
__________________________________________________________________________________________________
Independent Fund Trustees
__________________________________________________________________________________________________
Faith Colish (71) Counsel, Carter 62 Formerly, Director
Trustee Ledyard & Milburn (1997 to 2003) and
Since April 2006 LLP (law firm) since Advisory Director
October 2002; formerly, (2003 to 2006), ABA
Attorney-at-Law and Retirement Funds
President, Faith Colish, A (formerly, American
Professional Corporation, Bar Retirement
1980 to 2002. Association) (not-for-
profit membership
corporation).
__________________________________________________________________________________________________
Michael M. Knetter Dean, School of Business, 62 Trustee, Northwestern
(46) University of Wisconsin Mutual Series Fund,
Trustee - Madison; formerly, Inc., since February
Since February 2007 Professor of International 2007; Director, Wausau
Economics and Associate Paper, since 2005;
Dean, Amos Tuck School Director, Great Wolf
of Business - Dartmouth Resorts, since 2004.
College, 1998 to 2002.
__________________________________________________________________________________________________
Cornelius T. Ryan Founding General 62 None.
(75) Partner, Oxford Partners
Trustee and Oxford Bioscience
Since April 2006 Partners (venture
capital investing) and
President, Oxford Venture
Corporation since 1981.
__________________________________________________________________________________________________
Peter P. Trapp (62) Regional Manager for 62 None.
Trustee Mid-Southern Region,
Since April 2006 Ford Motor Credit
Company since September
1997; formerly, President,
Ford Life Insurance
Company, April 1995 to
August 1997.
__________________________________________________________________________________________________
9
__________________________________________________________________________________________________
NUMBER OF
NAME, AGE, POSITION, PORTFOLIOS IN
TERMS OF OFFICE, FUND COMPLEX OTHER DIRECTORSHIPS HELD
AND LENGTH OF TIME OVERSEEN BY OUTSIDE FUND COMPLEX BY
SERVED (1) PRINCIPAL OCCUPATION(S) TRUSTEE (2) TRUSTEE
__________________________________________________________________________________________________
Trustee who is an "Interested Person" *
__________________________________________________________________________________________________
Peter E. Sundman * Executive Vice President, 62 Director and Vice
(47) Neuberger Berman President, Neuberger &
Chief Executive Inc. (holding company) Berman Agency, Inc.
Officer since June since 1999; Head of since 2000; formerly,
2006; Trustee and Neuberger Berman Director, Neuberger
Chairman of the Inc.'s Mutual Funds Berman Inc. (holding
Board Since April Business (since 1999) and company), October
2006 Institutional Business 1999 to March 2003;
(1999 to October 2005); Trustee, Frost Valley
responsible for Managed YMCA; Trustee,
Accounts Business and College of Wooster.
intermediary distribution
since October 1999;
President and Director,
NB Management since
1999; Managing Director,
Neuberger Berman
since 2005; formerly,
Executive Vice President,
Neuberger Berman,
1999 to December 2005;
formerly, Principal,
Neuberger Berman,
1997 to 1999; formerly,
Senior Vice President,
NB Management, 1996 to
1999.
__________________________________________________________________________________________________
10
__________________________________________________________________________________________________
NUMBER OF
NAME, AGE, POSITION, PORTFOLIOS IN
TERMS OF OFFICE, FUND COMPLEX OTHER DIRECTORSHIPS HELD
AND LENGTH OF TIME OVERSEEN BY OUTSIDE FUND COMPLEX BY
SERVED (1) PRINCIPAL OCCUPATION(S) TRUSTEE (2) TRUSTEE
__________________________________________________________________________________________________
CLASS III
__________________________________________________________________________________________________
Independent Fund Trustees
__________________________________________________________________________________________________
Robert A. Kavesh (79) Marcus Nadler Professor 62 Formerly, Director, The
Trustee Emeritus of Finance and Caring Community (not-
Since April 2006 Economics, New York for-profit) from 1997 to
University Stern School 2006; formerly, Director,
of Business; formerly, DEL Laboratories,
Executive Secretary- Inc. (cosmetics and
Treasurer, American pharmaceuticals), 1978
Finance Association, 1961 to 2004; formerly,
to 1979. Director, Apple Bank
for Savings, 1979
to 1990; formerly,
Director, Western Pacific
Industries, Inc., 1972 to
1986 (public company).
__________________________________________________________________________________________________
Howard A. Mileaf (70) Retired; formerly, Vice 62 Director, Webfinancial
Trustee President and General Corporation (holding
Since April 2006 Counsel, WHX Corporation company) since
(holding company), 1993 to December 2002;
2001. formerly, Director WHX
Corporation (holding
company), January 2002
to June 2005; formerly,
Director, State Theatre
of New Jersey (not-for-
profit theater), 2000 to
2005.
__________________________________________________________________________________________________
11
__________________________________________________________________________________________________
NUMBER OF
NAME, AGE, POSITION, PORTFOLIOS IN
TERMS OF OFFICE, FUND COMPLEX OTHER DIRECTORSHIPS HELD
AND LENGTH OF TIME OVERSEEN BY OUTSIDE FUND COMPLEX BY
SERVED (1) PRINCIPAL OCCUPATION(S) TRUSTEE (2) TRUSTEE
__________________________________________________________________________________________________
Edward I. O'Brien Formerly, Member, 62 Director, Legg Mason,
(78) Investment Policy Inc. (financial services
Trustee Committee, Edward Jones, holding company)
Since April 2006 1993 to 2001; President, since 1993; formerly,
Securities Industry Director, Boston
Association ("SIA") Financial Group (real
(securities industry's estate and tax shelters),
representative in 1993 to 1999.
government relations and
regulatory matters at the
federal and state levels),
1974 to 1992; Adviser to
SIA, November 1992 to
November 1993.
__________________________________________________________________________________________________
William E. Rulon Retired; formerly, 62 Formerly, Director, Pro-
(74) Senior Vice President, Kids Golf and Learning
Trustee Foodmaker, Inc. (operator Academy (teach golf
Since April 2006 and franchiser of and computer usage
restaurants) until January to "at risk" children),
1997 1998 to 2006; formerly,
Director, Prandium,
Inc. (restaurants),
March 2001 to July
2002.
__________________________________________________________________________________________________
12
__________________________________________________________________________________________________
NUMBER OF
NAME, AGE, POSITION, PORTFOLIOS IN
TERMS OF OFFICE, FUND COMPLEX OTHER DIRECTORSHIPS HELD
AND LENGTH OF TIME OVERSEEN BY OUTSIDE FUND COMPLEX BY
SERVED (1) PRINCIPAL OCCUPATION(S) TRUSTEE (2) TRUSTEE
__________________________________________________________________________________________________
Candace L. Straight Private investor and 62 Director, Montpelier Re
(59) consultant specializing in (reinsurance company)
Trustee the insurance industry; since 2006; Director,
Since April 2006 formerly, Advisory National Atlantic
Director, Securitas Capital Holdings Corporation
LLC (a global private (property and casualty
equity investment firm insurance company)
dedicated to making since 2004; Director,
investments in the The Proformance
insurance sector), 1998 to Insurance Company
December 2003. (property and casualty
insurance company)
since March 2004;
formerly, Director,
Providence Washington
Insurance Company
(property and casualty
insurance company),
December 1998 to
March 2006; formerly,
Director, Summit
Global Partners
(insurance brokerage
firm), 2000 to 2005.
__________________________________________________________________________________________________
(1) The majority of the current Board of the Fund was elected in April 2006 as part of a proposal
to streamline the governance structure of the Fund. Prior to April 2006, Michael M. Knetter
and George W. Morriss had served as Trustees of the Fund. In February 2007, Dr. Knetter and
Mr. Morriss became Board members again. The Board of Trustees shall at times be divided as
equally as possible into three classes of Trustees designated Class I, Class II, and Class
III. The terms of office of Class I, Class II, and Class III Trustees shall expire at the
annual meeting of shareholders held in 2009, 2007, and 2008, respectively, and at each third
annual meeting of shareholders thereafter.
(2) For funds organized in a master-feeder structure, we count the master fund and its associated
feeder funds as a single portfolio.
* Indicates a Trustee who is an "interested person" within the meaning of the 1940 Act. Mr.
Sundman and Mr. Rivkin are interested persons of the Fund by virtue of the fact that they are
officers and/or directors of NB Management.
13
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended
("1934 Act"), Section 30(h) of the 1940 Act and Securities and Exchange
Commission ("SEC") regulations thereunder, certain of the Fund's officers and
trustees, portfolio managers, persons owning more than 10% of the Fund's stock
and certain officers and directors/trustees of the Fund's investment adviser and
sub-adviser are required to report their transactions in the Fund's stock to the
SEC and the NYSE. Based solely on the review by the Fund of the copies of such
reports received by it, the Fund believes that, during its fiscal year ended
December 31, 2006, Cornelius T. Ryan filed an Initial Statement of Beneficial
Ownership of Securities on Form 3 after the required time period due to
difficulties associated with filing on EDGAR. The late filing did not relate to
any transactions in Fund shares but rather to Mr. Ryan's election as a Trustee
in 2006.
BOARD OF TRUSTEES AND COMMITTEE MEETINGS
The Fund's Board met six times during the fiscal year ended December 31,
2006. Each Trustee attended at least 75% of the total number of meetings of the
Board and of any committee of which he or she was a member during that year.
The Board has established several standing committees to oversee particular
aspects of the Fund's management. The standing committees of the Board are
described below. The Board does not have a standing compensation committee.
AUDIT COMMITTEE. The purposes of the Fund's Audit Committee are (a) to
oversee the accounting and financial reporting processes of the Fund and its
internal control over financial reporting and, as the Committee deems
appropriate, to inquire into the internal control over financial reporting of
certain third-party service providers; (b) to oversee the quality and integrity
of the Fund's financial statements and the independent audit thereof; (c) to
oversee, or, as appropriate, assist Board oversight of, the Fund's compliance
with legal and regulatory requirements that relate to the Fund's accounting and
financial reporting, internal control over financial reporting and independent
audits; (d) to approve prior to appointment the engagement of the Fund's
independent registered public accounting firm and, in connection therewith, to
review and evaluate the qualifications, independence and performance of the
Fund's independent registered public accounting firm; (e) to act as a liaison
between the Fund's independent registered public accounting firm and the full
Board; and (f) to prepare an audit committee report as required by Item 306 of
Regulation S-K to be included in proxy statements relating to the election of
trustees. The independent registered public accounting firm for the Fund shall
report directly to the Audit Committee. The Fund has adopted a written charter
for its Audit Committee. The charter of the Audit Committees was attached to the
Fund's proxy statement dated February 28, 2006 and is available on the Fund's
website at www.lbftincomeopportunity.com. The Audit Committee of the Fund has
delegated the authority to grant pre-approval of permissible non-audit services
and
14
all audit, review or attest engagements of the Fund's independent registered
public accounting firm to the Chairman of the Audit Committee, and, if the
Committee Chair is not available, to any other member of the Audit Committee.
The Audit Committee of the Fund, established in accordance with Section
3(a)(58)(A) of the 1934 Act, is composed entirely of Independent Fund Trustees
who are also considered independent under the listing standards applicable to
the Fund. Its members are John Cannon, Howard A. Mileaf, Cornelius T. Ryan
(Chairman), Tom D. Seip and Peter P. Trapp. Members of the Audit Committee
receive additional compensation for serving on this committee. The Report of the
Audit Committee relating to the audit of Fund financial statements for the
fiscal year ended December 31, 2006 is attached hereto as Appendix A. During the
fiscal year ended December 31, 2006, the Committee met six times.
CLOSED-END FUNDS COMMITTEE. The Fund's Closed-End Funds Committee is
responsible for consideration and evaluation of issues specific to the Fund. Its
members are Edward I. O'Brien (Chairman), Jack L. Rivkin, William E. Rulon, and
Tom D. Seip. All members other than Mr. Rivkin are Independent Fund Trustees.
During the fiscal year ended December 31, 2006, the Committee met once.
CONTRACT REVIEW COMMITTEE. The Contract Review Committee of the Fund is
responsible for overseeing and guiding the process by which the Independent Fund
Trustees annually consider whether to continue the Fund's principal contractual
arrangements. Its members are Faith Colish (Chairwoman), Robert A. Kavesh,
William E. Rulon and Candace L. Straight. All members are Independent Fund
Trustees. During the fiscal year ended December 31, 2006, the Committee met two
times.
ETHICS AND COMPLIANCE COMMITTEE. The Ethics and Compliance Committee of the
Fund oversees: (a) the Fund's program for compliance with Rule 38a-1 under the
1940 Act and the Fund's implementation and enforcement of its compliance
policies and procedures; (b) compliance with the Fund's Code of Ethics (which
restricts the personal securities transactions, including transactions in Fund
shares, of employees, officers, and Trustees), and (c) the activities of the
Fund's Chief Compliance Officer. The Committee shall not assume oversight duties
to the extent that such duties have been assigned by the Boards expressly to
another Committee of the Boards (such as oversight of internal controls over
financial reporting, which has been assigned to the Audit Committee.) The
Committee's primary function is oversight. Each investment adviser, sub-adviser,
administrator and transfer agent (collectively, "Service Providers") is
responsible for its own compliance with the federal securities laws and for
devising, implementing, maintaining and updating appropriate policies,
procedures and codes of ethics to ensure compliance with applicable laws and
regulations. The CCO is responsible for administering the Fund's Compliance
Program, including devising and implementing appropriate methods of testing
compliance by the Fund and its Service Providers. Its members are John Cannon
(Chairman), Faith Colish, C. Anne Harvey and Edward I. O'Brien. All members are
Independent Fund Trustees. The Board will receive at least annually
15
a report on the compliance programs of the Fund and Service Providers and the
required annual reports on the administration of the Code of Ethics and the
required annual certifications from the Fund, NB Management and LBAM LLC. During
the fiscal year ended December 31, 2006, the Committee met three times.
EXECUTIVE COMMITTEE. The Executive Committee of the Fund is responsible for
acting in an emergency when a quorum of the Board of Trustees is not available;
the Committee has all the powers of the Board of Trustees when the Board is not
in session to the extent permitted by Delaware law. Its members are John Cannon,
Howard A. Mileaf, Edward I. O'Brien, Tom D. Seip and Peter E. Sundman
(Chairman). All members except for Mr. Sundman are Independent Fund Trustees.
During the fiscal year ended December 31, 2006, the Committee did not meet.
GOVERNANCE AND NOMINATING COMMITTEE. The Governance and Nominating
Committee of the Fund is responsible for: (a) considering and evaluating the
structure, composition and operation of the Board of Trustees and each committee
thereof, including the operation of the annual self-evaluation by the Board; (b)
evaluating and nominating individuals to serve as Trustees, including as
Independent Fund Trustees, as members of committees, as Chair of the Board and
as officers of the Fund; and (c) considering and making recommendations relating
to the compensation of Independent Fund Trustees and of those officers as to
whom the Board is charged with approving compensation. The Committee met to
discuss matters relating to the nomination of Class II Trustees with respect to
the Fund. Its members are C. Anne Harvey (Chairwoman), Robert A. Kavesh, Howard
A. Mileaf and Tom D. Seip. All members are Independent Fund Trustees and are not
"interested parties" of the Fund as defined in section 2(a)(19) of the 1940 Act.
During the fiscal year ended December 31, 2006, the Committee met four times.
INVESTMENT PERFORMANCE COMMITTEE. The Investment Performance Committee of
the Fund is responsible for overseeing and guiding the process by which the
Board reviews Fund performance. Its members are Robert A. Kavesh, Edward I.
O'Brien, Jack L. Rivkin (Vice Chairman), Cornelius T. Ryan and Peter P. Trapp
(Chairman). All members except for Mr. Rivkin are Independent Fund Trustees.
During the fiscal year ended December 31, 2006, the Committee met two times.
PORTFOLIO TRANSACTIONS AND PRICING COMMITTEE. The Portfolio Transactions
and Pricing Committee of the Fund (a) monitors the operation of policies and
procedures reasonably designed to ensure that each portfolio holding is valued
in an appropriate and timely manner, reflecting information known to the manager
about current market conditions ("Pricing Procedures"); (b) considers and
evaluates, and recommends to the Board when the Committee deems it appropriate,
amendments to the Pricing Procedures proposed by management, counsel, the
independent registered public accounting firm and others; (c) from time to time,
as required or permitted by the Pricing Procedures, establishes or ratifies a
method of determining the fair value of portfolio securities for which market
prices are not readily available; (d) oversees the program by which the manager
seeks to monitor and improve
16
the quality of execution for portfolio transactions; and (e) oversees the
adequacy and fairness of the arrangements for securities lending; in each case
with special emphasis on any situations in which the Fund deals with the manager
or any affiliate of the manager as principal or agent.
The members of the Committee are Faith Colish, Jack L. Rivkin (Vice
Chairman), William E. Rulon, Cornelius T. Ryan and Candace L. Straight
(Chairwoman). All members except for Mr. Rivkin are Independent Fund Trustees.
During the fiscal year ended December 31, 2006, the Committee met three times.
INFORMATION REGARDING THE FUND'S PROCESS FOR NOMINATING TRUSTEE
CANDIDATES
GOVERNANCE AND NOMINATING COMMITTEE CHARTER. A copy of the Governance and
Nominating Committee Charter is available to shareholders on the Fund's website
at www.lbftincomeopportunity.com.
SHAREHOLDER COMMUNICATIONS. The Fund's Governance and Nominating Committee
will consider nominees recommended by shareholders; shareholders may send
resumes of recommended persons to the attention of Claudia A. Brandon,
Secretary, Neuberger Berman Funds, 605 Third Avenue, 21st Floor, New York, NY,
10158-0180. No nominee recommendation has been received from a shareholder
within the past 120 days.
NOMINEE QUALIFICATIONS. The Governance and Nominating Committee will
consider nominees recommended by shareholders on the basis of the same criteria
used to consider and evaluate candidates recommended by other sources. While
there is no formal list of qualifications, the Governance and Nominating
Committee considers, among other things, whether prospective nominees have
distinguished records in their primary careers, unimpeachable integrity, and
substantive knowledge in areas important to the Board's operations, such as
background or education in finance, auditing, securities law, the workings of
the securities markets, or investment advice. For candidates to serve as
independent trustees, independence from the Fund's investment adviser, its
affiliates and other principal service providers is critical, as is an
independent and questioning mindset. The Committee also considers whether the
prospective candidates' workloads would allow them to attend the vast majority
of Board meetings, be available for service on Board committees, and devote the
additional time and effort necessary to keep up with Board matters and the
rapidly changing regulatory environment in which the Fund operates. Different
substantive areas may assume greater or lesser significance at particular times,
in light of the Board's present composition and the Committee's (or the Board's)
perceptions about future issues and needs.
IDENTIFYING NOMINEES. The Governance and Nominating Committee considers
prospective candidates from any reasonable source. The Committee initially
evaluates prospective candidates on the basis of their resumes, considered in
light of the criteria discussed above. Those prospective candidates that appear
likely to be able to fill a significant need of the Board would be contacted by
a
17
Committee member by telephone to discuss the position; if there appeared to be
sufficient interest, an in-person meeting with one or more Committee members
would be arranged. If the Committee members, based on the results of these
contacts, believed they had identified a viable candidate, they would air the
matter with the full group of independent Board members for input. Any request
by management to meet with the prospective candidate would be given appropriate
consideration. The Fund has not paid a fee to third parties to assist in finding
nominees.
TRUSTEE ATTENDANCE AT ANNUAL MEETINGS
The Fund does not have a policy on Trustee attendance at the annual meeting
of shareholders. Two Board members attended the 2006 annual meeting of
shareholders.
18
OWNERSHIP OF SECURITIES
Set forth below is the dollar range of equity securities owned by each
Trustee.
AGGREGATE DOLLAR RANGE OF EQUITY
DOLLAR RANGE OF EQUITY SECURITIES IN ALL REGISTERED INVESTMENT
SECURITIES OWNED IN THE COMPANIES OVERSEEN BY TRUSTEE IN
NAME OF TRUSTEE FUND * FAMILY OF INVESTMENT COMPANIES *
_______________________________________________________________________________________
Independent Fund Trustees
_______________________________________________________________________________________
John Cannon None Over $100,000
Faith Colish None Over $100,000
C. Anne Harvey None $50,001-$100,000
Robert A. Kavesh None $10,001-$50,000
Michael M. Knetter None None
Howard A. Mileaf None Over $100,000
George W. Morriss $10,001-$50,000 ** $10,001-$50,000
Edward I. O'Brien None Over $100,000
William E. Rulon None Over $100,000
Cornelius T. Ryan None $10,001-$50,000
Tom D. Seip None Over $100,000
Candace L. Straight None Over $100,000
Peter P. Trapp None Over $100,000
_______________________________________________________________________________________
Trustees who are "Interested Persons"
_______________________________________________________________________________________
Jack L. Rivkin None $1-$10,000
Peter E. Sundman None Over $100,000
_______________________________________________________________________________________
* Valuation as of March 5, 2007.
** Mr. Morriss owns 1,363.1 shares of the Fund, constituting less than 1% of the
outstanding common shares.
INDEPENDENT FUND TRUSTEES' OWNERSHIP OF SECURITIES
As of January 31, 2006, no Independent Trustee (or his/her immediate family
members) owned securities of NB Management or securities in an entity
controlling, controlled by or under common control with NB Management (not
including registered investment companies).
19
OFFICERS OF THE FUND
The following table sets forth certain information regarding the officers
of the Fund. Except as otherwise noted, each individual has held the positions
shown in the table below since April, 2006. The business address of each listed
person is 605 Third Avenue, New York, New York 10158. Officers of the Fund are
appointed by the Board and serve at the pleasure of the Board.
____________________________________________________________________________________________
POSITION AND LENGTH OF
NAME AND AGE TIME SERVED (1) PRINCIPAL OCCUPATION(S)
____________________________________________________________________________________________
Andrew B. Allard (45) Anti-Money Laundering Senior Vice President,
Compliance Officer since April Neuberger Berman since 2006;
2006 Deputy General Counsel,
Neuberger Berman since 2004;
formerly, Vice President,
Neuberger Berman, 2000 to
2006; formerly, Associate
General Counsel, Neuberger
Berman, 1999 to 2004; Anti-
Money Laundering Compliance
Officer, sixteen registered
investment companies for
which NB Management acts
as investment manager and
administrator (seven since 2002,
three since 2003, four since
2004, one since 2005 and one
since 2006) and one registered
investment company for which
NB Management acts as
investment adviser (since 2006).
____________________________________________________________________________________________
Michael J. Bradler (37) Assistant Treasurer since April Vice President, Neuberger
2006 Berman since 2006; Employee,
NB Management since 1997;
Assistant Treasurer, sixteen
registered investment companies
for which NB Management
acts as investment manager and
administrator (fifteen since 2005
and one since 2006) and one
registered investment company
for which NB Management acts
as investment adviser (since
2006).
____________________________________________________________________________________________
20
____________________________________________________________________________________________
POSITION AND LENGTH OF
NAME AND AGE TIME SERVED (1) PRINCIPAL OCCUPATION(S)
____________________________________________________________________________________________
Claudia A. Brandon Secretary since April 2006 Senior Vice President,
(50) Neuberger Berman since
2007; Vice President-Mutual
Fund Board Relations,
NB Management since 2000
and Assistant Secretary since
2004; formerly, Vice President,
Neuberger Berman 2002 to
2006 and Employee since 1999;
Secretary, sixteen registered
investment companies for
which NB Management acts
as investment manager and
administrator (three since 1985,
four since 2002, three since
2003, four since 2004, one
since 2005 and one since 2006)
and one registered investment
company for which NB
Management acts as investment
adviser (since 2006).
____________________________________________________________________________________________
Robert Conti (50) Vice President since April 2006 Managing Director, Neuberger
Berman since 2007; formerly,
Senior Vice President,
Neuberger Berman, 2003 to
2006; formerly, Vice President,
Neuberger Berman, 1999 to
2003; Senior Vice President, NB
Management since 2000; Vice
President, sixteen registered
investment companies for
which NB Management acts
as investment manager and
administrator (three since 2000,
four since 2002, three since
2003, four since 2004, one
since 2005 and one since 2006)
and one registered investment
company for which NB
Management acts as investment
adviser (since 2006).
____________________________________________________________________________________________
21
____________________________________________________________________________________________
POSITION AND LENGTH OF
NAME AND AGE TIME SERVED (1) PRINCIPAL OCCUPATION(S)
____________________________________________________________________________________________
Brian J. Gaffney (53) Vice President since April 2006 Managing Director, Neuberger
Berman since 1999; Senior Vice
President, NB Management
since 2000; Vice President,
sixteen registered investment
companies for which NB
Management acts as investment
manager and administrator
(three since 2000, four since
2002, three since 2003, four
since 2004, one since 2005
and one since 2006) and one
registered investment company
for which NB Management acts
as investment adviser (since
2006).
____________________________________________________________________________________________
Maxine Gerson (56) Chief Legal Officer since Senior Vice President,
April 2006 (only for purposes Neuberger Berman since 2002;
of sections 307 and 406 of the Deputy General Counsel and
Sarbanes-Oxley Act of 2002) Assistant Secretary, Neuberger
Berman since 2001; formerly,
Vice President, Neuberger
Berman, 2001 to 2002; formerly,
Associate General Counsel,
Neuberger Berman, 2001;
formerly, Counsel, Neuberger
Berman, 2000; Secretary
and General Counsel, NB
Management since 2004; Chief
Legal Officer (only for purposes
of sections 307 and 406 of the
Sarbanes-Oxley Act of 2002),
sixteen registered investment
companies for which NB
Management acts as investment
manager and administrator
(fifteen since 2005 and one
since 2006) and one registered
investment company for which
NB Management acts as
investment adviser (since 2006).
____________________________________________________________________________________________
22
____________________________________________________________________________________________
POSITION AND LENGTH OF
NAME AND AGE TIME SERVED (1) PRINCIPAL OCCUPATION(S)
____________________________________________________________________________________________
Sheila R. James (41) Assistant Secretary since April Assistant Vice President,
2006 Neuberger Berman since 2007;
formerly, Employee since 1999;
Assistant Secretary, sixteen
registered investment companies
for which NB Management
acts as investment manager and
administrator (seven since 2002,
three since 2003, four since
2004, one since 2005 and one
since 2006) and one registered
investment company for which
NB Management acts as
investment adviser (since 2006).
____________________________________________________________________________________________
Kevin Lyons (51) Assistant Secretary since April Employee, Neuberger Berman
2006 since 1999; Assistant Secretary,
sixteen registered investment
companies for which NB
Management acts as investment
manager and administrator (ten
since 2003, four since 2004, one
since 2005 and one since 2006)
and one registered investment
company for which NB
Management acts as investment
adviser (since 2006).
____________________________________________________________________________________________
23
____________________________________________________________________________________________
POSITION AND LENGTH OF
NAME AND AGE TIME SERVED (1) PRINCIPAL OCCUPATION(S)
____________________________________________________________________________________________
John M. McGovern (37) Treasurer and Principal Senior Vice President,
Financial and Accounting Neuberger Berman since 2007;
Officer since June 2006 formerly, Vice President,
Neuberger Berman, 2004
to 2006; Employee, NB
Management since 1993;
Treasurer and Principal
Financial and Accounting
Officer, sixteen registered
investment companies for
which NB Management acts
as investment manager and
administrator (fifteen since 2005
and one since 2006) and one
registered investment company
for which NB Management acts
as investment adviser (since
2006); formerly, Assistant
Treasurer, fifteen registered
investment companies for
which NB Management acts
as investment manager and
administrator, 2002 to 2005.
____________________________________________________________________________________________
Frank Rosato (36) Assistant Treasurer since April Vice President, Neuberger
2006 Berman since 2006; Employee,
NB Management since 1995;
Assistant Treasurer, sixteen
registered investment companies
for which NB Management
acts as investment manager and
administrator (fifteen since 2005
and one since 2006) and one
registered investment company
for which NB Management acts
as investment adviser (since
2006).
____________________________________________________________________________________________
24
____________________________________________________________________________________________
POSITION AND LENGTH OF
NAME AND AGE TIME SERVED (1) PRINCIPAL OCCUPATION(S)
____________________________________________________________________________________________
Frederic B. Soule (60) Vice President since April 2006 Senior Vice President,
Neuberger Berman since 2003;
formerly, Vice President,
Neuberger Berman, 1999 to
2003; Vice President, sixteen
registered investment companies
for which NB Management
acts as investment manager
and administrator (three since
2000, four since 2002, three
since 2003, four since 2004, one
since 2005 and one since 2006)
and one registered investment
company for which NB
Management acts as investment
adviser (since 2006).
____________________________________________________________________________________________
Chamaine Williams Chief Compliance Officer since Senior Vice President, Lehman
(36) 2005 Brothers Inc. since 2007;
formerly, Vice President,
Lehman Brothers Inc. from
2003 to 2006; Chief Compliance
Officer, sixteen registered
investment companies for
which NB Management acts
as investment manager and
administrator (fifteen since 2005
and one since 2006) and one
registered investment company
for which NB Management
acts as investment adviser
(since 2005); Chief Compliance
Officer, Lehman Brothers
Asset Management Inc. since
2003; Chief Compliance
Officer, Lehman Brothers
Alternative Investment
Management LLC since 2003;
formerly, Vice President, UBS
Global Asset Management
(US) Inc. (formerly, Mitchell
Hutchins Asset Management,
a wholly-owned subsidiary of
PaineWebber Inc.), 1997 to 2003.
____________________________________________________________________________________________
25
(1) In April, 2006, the Fund's shareholders elected the current Board as part of
a proposal to streamline the governance structure of the Fund. Except for
Chamaine Williams, who served as the Chief Compliance Officer since 2005,
most officers have served since April 2006 and a few since June 2006.
COMPENSATION OF TRUSTEES AND OFFICERS
The following table sets forth information concerning the compensation of
the Fund's Trustees. The Fund does not have any retirement plan for its
Trustees. For the fiscal year ended December 31, 2006, the Trustees received the
amounts set forth in the following table from the Fund. For the calendar year
ended December 31, 2006, the Trustees received the compensation set forth in the
following table for serving as Trustees or Directors of investment companies in
the "Fund Complex." Each officer and Trustee who is a director, officer or
employee of NB Management, LBAM LLC, or any entity controlling, controlled by or
under common control with NB Management or LBAM LLC, serves as a Trustee and/or
officer without any compensation from the Fund.
TABLE OF COMPENSATION
TOTAL COMPENSATION FROM REGISTERED
COMPENSATION FROM INVESTMENT COMPANIES IN THE NEUBERGER
NAME AND POSITION THE FUND FOR FISCAL BERMAN FUND COMPLEX PAID TO TRUSTEES FOR
WITH THE FUND YEAR ENDED 12/31/06 CALENDAR YEAR ENDED 12/31/06
_____________________________________________________________________________________
Independent Fund Trustees
_____________________________________________________________________________________
John Cannon
Trustee $1,270 $109,719
Faith Colish
Trustee $1,190 $102,864
C. Anne Harvey
Trustee $1,190 $102,864
Robert A. Kavesh
Trustee $1,190 $102,864
Michael M. Knetter *
Trustee $6,077 $ 6,077
Howard A. Mileaf
Trustee $1,270 $109,719
George W. Morriss *
Trustee $6,375 $ 6,375
Edward I. O'Brien
Trustee $1,190 $102,864
William E. Rulon
Trustee $1,190 $102,864
Cornelius T. Ryan
Trustee $1,299 $113,645
_____________________________________________________________________________________
26
TOTAL COMPENSATION FROM REGISTERED
COMPENSATION FROM INVESTMENT COMPANIES IN THE NEUBERGER
NAME AND POSITION THE FUND FOR FISCAL BERMAN FUND COMPLEX PAID TO TRUSTEES FOR
WITH THE FUND YEAR ENDED 12/31/06 CALENDAR YEAR ENDED 12/31/06
_____________________________________________________________________________________
Tom D. Seip
Trustee $1,447 $128,341
Candace L. Straight
Trustee $1,190 $102,864
Peter P. Trapp
Trustee $1,118 $102,372
_____________________________________________________________________________________
Trustees who are "Interested Persons"
_____________________________________________________________________________________
Jack L. Rivkin
Trustee and President $0 $0
Peter E. Sundman
Trustee, Chairman
of the Board and
Chief Executive
Officer $0 $0
_____________________________________________________________________________________
* Dr. Knetter and Mr. Morriss were members of the Board from from the Fund's
inception through April 2006. They were appointed to the Fund's Board again in
February 2007.
VOTE REQUIRED
C. Anne Harvey, George W. Morriss, Jack Rivkin and Tom D. Seip each will be
elected by a plurality of the votes cast by the holders of the Fund's
outstanding Common Shares and Preferred Shares, voting together. John Cannon
will be elected by a plurality of the votes cast by the holders of the Preferred
Shares, voting separately from the holders of the Common Shares.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" EACH NOMINEE.
INFORMATION ON THE FUND'S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP ("Ernst & Young") audited the financial statements for
the fiscal year ended December 31, 2006 for the Fund. Ernst & Young, 200
Clarendon Street, Boston, MA 02116, serves as the independent registered public
accounting firm for the Fund and provides audit services, tax compliance
services and assistance and consultation in connection with the review of the
Fund's filings with the SEC. In the opinion of the Audit Committee, the services
provided by Ernst & Young are compatible with maintaining the independence of
the Fund's independent registered public accounting firm. The Board has selected
Ernst & Young as the independent registered public accounting firm for the Fund
for the fiscal year ending December 31, 2007. Ernst & Young has served as the
Fund's
27
independent registered public accounting firm since the Fund's inception. Ernst
& Young has informed the Fund that it has no material direct or indirect
financial interest in the Fund.
Representatives of Ernst & Young are not expected to be present at the
Meeting but have been given the opportunity to make a statement if they so
desire and will be available should any matter arise requiring their presence.
AUDIT FEES
The aggregate fees billed by Ernst & Young for the audit of the annual
financial statements of the Fund for the fiscal years ended December 31, 2005
and December 31, 2006 and for the review of the financial statements included in
the Fund's regulatory filings were as shown in the table below.
AUDIT FEES BILLED
_______________________________________
FISCAL YEAR ENDED FISCAL YEAR ENDED
FUND 12/31/05 12/31/06
_______________________________________________________________________________
Lehman Brothers
First Trust Income Opportunity Fund $34,500 $34,500
_______________________________________________________________________________
AUDIT-RELATED FEES
The aggregate audit-related fees billed by Ernst & Young for the fiscal
years ended December 31, 2005 and December 31, 2006, for performing agreed-upon
procedures for the MMP Shares of the Fund were as shown in the table below.
AUDIT-RELATED FEES BILLED
_______________________________________
FISCAL YEAR ENDED FISCAL YEAR ENDED
FUND 12/31/05 12/31/06
_______________________________________________________________________________
Lehman Brothers
First Trust Income Opportunity Fund $6,000 $6,250
_______________________________________________________________________________
TAX FEES
The aggregate fees billed by Ernst & Young for the fiscal years ended
December 31, 2005 and December 31, 2006, for tax compliance, tax advice, and tax
planning were as shown in the table below.
TAX FEES BILLED
_______________________________________
FISCAL YEAR ENDED FISCAL YEAR ENDED
FUND 12/31/05 12/31/06
_______________________________________________________________________________
Lehman Brothers
First Trust Income Opportunity Fund $8,700 $8,700
_______________________________________________________________________________
28
ALL OTHER FEES
Aggregate fees billed by Ernst & Young during the fiscal years ended
December 31, 2005 and December 31, 2006 for other services provided to the Fund
were as shown in the table below.
ALL OTHER FEES
_______________________________________
FISCAL YEAR ENDED FISCAL YEAR ENDED
FUND 12/31/05 12/31/06
_______________________________________________________________________________
Lehman Brothers
First Trust Income Opportunity Fund $0 $0
_______________________________________________________________________________
Aggregate fees billed by Ernst & Young during the fiscal years ended
December 31, 2005 and December 31, 2006 for non-audit services to the Fund,
Lehman Brothers Asset Management Inc. and LBAM LLC were as shown in the table
below.
AGGREGATE NON-AUDIT FEES
_______________________________________
FISCAL YEAR ENDED FISCAL YEAR ENDED
FUND 12/31/05 12/31/06
_______________________________________________________________________________
Lehman Brothers
First Trust Income Opportunity Fund $14,700 $14,950
_______________________________________________________________________________
The Audit Committee has considered these fees and the nature of the
services rendered, and has concluded that they are compatible with maintaining
the independence of Ernst & Young. The Audit Committee did not approve any of
the services described above pursuant to the "de minimis exceptions" set forth
in Rule 2-01(c)(7)(i)(C) and Rule 2-01(c)(7)(ii) of Regulation S-X. Ernst &
Young did not provide any audit-related services, tax services or other
non-audit services to NB Management or LBAM LLC that the Audit Committee was
required to approve pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X.
OTHER MATTERS
No business, other than as set forth above, is expected to come before the
Annual Meeting. Should any other matters requiring a vote of shareholders
properly come before the Annual Meeting, the persons named in the enclosed proxy
will vote thereon in accordance with their best judgment in the interests of the
Fund.
SHAREHOLDER PROPOSALS
The Fund's By-laws require shareholders wishing to nominate Trustees or make
proposals to be voted on at the Fund's annual meeting to provide notice of the
nominations or proposals in writing delivered to the Secretary of the Fund. The
Secretary must receive the nomination or proposal not less than 90 days and no
more than 120 days in advance of the anniversary of the date of the Fund's proxy
statement released to shareholders in connection with the previous year's annual
meeting. In order to be considered at the Fund's 2008 annual meeting,
shareholder
29
nominations and proposals must be received by the Fund no later than December
13, 2007 and no earlier than November 13, 2007 and must satisfy the other
requirements of the federal securities laws. Timely submission of a nomination
or proposal does not guarantee that such nomination or proposal will be
included. The chairperson of the Annual Meeting may refuse to acknowledge a
nomination or other proposal by a shareholder that is not made in the manner
described above.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING
TRUSTEES AND THEIR NOMINEES
Please advise the Fund, c/o its Secretary at 605 Third Avenue New York, New
York 10158, whether other persons are beneficial owners of shares for which
proxies are being solicited and, if so, the number of copies of the Proxy
Statement you wish to receive in order to supply copies to such beneficial
owners of shares.
By order of the Board of Trustees,
/s/ Claudia A. Brandon
Secretary
Dated: March 12, 2007
30
APPENDIX A
AUDIT COMMITTEE REPORT
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND (THE "FUND")
The Audit Committee of the Board of Trustees of the Fund operates pursuant
to a Charter, which sets forth the role of the Audit Committee in the Fund's
financial reporting process. Pursuant to the Charter, the role of the Audit
Committee is to oversee the Fund's accounting and financial reporting processes
and the quality and integrity of the Fund's financial statements and the
independent audit of those financial statements. The Committee is responsible
for, among other things, recommending the initial and ongoing engagement of the
auditors and reviewing the scope and results of the Fund's annual audit with the
Fund's independent auditors. Fund management is responsible for the preparation,
presentation and integrity of the Fund's financial statements and for the
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. The independent auditors for the Fund are
responsible for planning and carrying out proper audits and reviews.
The Audit Committee met on February 14, 2007 to review the Fund's audited
financial statements for the fiscal year ended December 31, 2006. In performing
this oversight function, the Audit Committee has reviewed and discussed the
audited financial statements with the Fund's management and their independent
auditors, Ernst & Young, LLP ("E&Y"). The Audit Committee has discussed with E&Y
the matters required to be discussed by Statement on Auditing Standards No. 61,
and has received the written disclosures and the letter from E&Y required by
Independence Standards Board Standard No. 1. The Audit Committee also has
discussed with E&Y its independence.
The members of the Audit Committee are not employed by the Fund as experts
in the fields of auditing or accounting and are not employed by the Fund for
accounting, financial management or internal control purposes. Members of the
Audit Committee rely without independent verification on the information
provided and the representations made to them by management and E&Y.
Based upon this review and related discussions, and subject to the
limitation on the role and responsibilities of the Audit Committee set forth
above and in the Charter, the Audit Committee recommended to the Board of
Trustees that the audited financial statements be included in the Fund's Annual
Report to Shareholders for the fiscal year ended December 31, 2006.
A-1
The members of the Audit Committee are listed below. Each has been
determined to be independent pursuant to New York Stock Exchange Rule 303.01.
John Cannon
Howard Mileaf
Cornelius T. Ryan (Chairman)
Tom D. Seip
Peter P. Trapp
February 14, 2007
A-2
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[NEUBERGER BERMAN LOGO]
NEUBERGER BERMAN MANAGEMENT INC.
605 Third Avenue 2nd Floor
New York, New York 10158-0180
www.nb.com
P41615
H0281 03/07
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
COMMON SHARES
The undersigned appoints as proxies Robert Conti, Frederic B. Soule and Claudia
A. Brandon, and each of them (with power of substitution), to vote all the
undersigned's common shares in Lehman Brothers First Trust Income Opportunity
Fund (the "Fund") at the Annual Meeting of Shareholders to be held on April 16,
2007, at 3:30 p.m. Eastern Time at the offices of Neuberger Berman LLC, 605
Third Avenue, 41st Floor, New York, New York 10158-3698, and any adjournments
thereof ("Annual Meeting"), with all the power the undersigned would have if
personally present. Receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement is acknowledged by your execution of this proxy. THIS PROXY IS
BEING SOLICITED ON BEHALF OF THE FUND'S BOARD OF TRUSTEES.
The common shares represented by this proxy will be voted as instructed. UNLESS
INDICATED TO THE CONTRARY, THIS PROXY SHALL BE DEEMED TO GRANT AUTHORITY TO VOTE
"FOR" THE PROPOSAL SPECIFIED ON THE REVERSE SIDE. THIS PROXY ALSO GRANTS
DISCRETIONARY POWER TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE ANNUAL MEETING.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. PLEASE SIGN AND DATE
THIS PROXY BELOW AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
Date:___________________, 2007
Signature (owner, trustee, custodian, etc.) (PLEASE SIGN IN THE BOX)
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Please sign exactly as name appears hereon. If shares are held in
the name of two or more persons, any may sign. If shares are held by
a corporation, partnership, trust, estate or similar account, the
name and capacity of the individual signing the proxy card should be
indicated unless it is reflected in the form of registration.
CLB-JH-CMN
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN.
PLEASE SIGN AND DATE THE REVERSE SIDE OF THIS PROXY CARD AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
PLEASE FILL IN BOX AS SHOWN USING BLACK OR BLUE INK OR NUMBER 2 PENCIL. PLEASE
DO NOT USE FINE POINT PENS. [X]
1. To elect four Class II Trustees to serve until the annual meeting of
shareholders in 2010, or until their successors are elected and qualified:
ALL FUNDS FOR WITHHOLD FOR ALL
ALL ALL EXCEPT*
(01) C. Anne Harvey (02) George Morriss [ ] [ ] [ ]
(03) Jack Rivkin (04) Tom D. Seip
*TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), MARK THE BOX "FOR ALL
EXCEPT" AND WRITE ON THE LINE BELOW THE NUMBER(S) OF THE NOMINEE(S) FOR WHOM
YOU DO NOT WANT TO VOTE.
________________________________________________________________________________
IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE CALL 1-877-461-1899
PLEASE SIGN ON THE REVERSE SIDE.
CLB-JH-CMN
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
MONEY MARKET CUMULATIVE PREFERRED SHARES
The undersigned appoints as proxies Robert Conti, Frederic B. Soule and Claudia
A. Brandon, and each of them (with power of substitution), to vote all the
undersigned's preferred shares in Lehman Brothers First Trust Income Opportunity
Fund (the "Fund") at the Annual Meeting of Shareholders to be held on April 16,
2007, at 3:30 p.m. Eastern Time at the offices of Neuberger Berman LLC, 605
Third Avenue, 41st Floor, New York, New York 10158-3698, and any adjournments
thereof ("Annual Meeting"), with all the power the undersigned would have if
personally present. Receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement is acknowledged by your execution of this proxy. THIS PROXY IS
BEING SOLICITED ON BEHALF OF THE FUND'S BOARD OF TRUSTEES.
The preferred shares represented by this proxy will be voted as instructed.
UNLESS INDICATED TO THE CONTRARY, THIS PROXY SHALL BE DEEMED TO GRANT AUTHORITY
TO VOTE "FOR" THE PROPOSAL SPECIFIED ON THE REVERSE SIDE. THIS PROXY ALSO GRANTS
DISCRETIONARY POWER TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE ANNUAL MEETING.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. PLEASE SIGN AND DATE
THIS PROXY BELOW AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
Date:___________________, 2007
Signature (owner, trustee, custodian, etc.) (PLEASE SIGN IN THE BOX)
--------------------------------------------------------------------
| |
| |
| |
| |
--------------------------------------------------------------------
Please sign exactly as name appears hereon. If shares are held in
the name of two or more persons, any may sign. If shares are held by
a corporation, partnership, trust, estate or similar account, the
name and capacity of the individual signing the proxy card should be
indicated unless it is reflected in the form of registration.
CLB-JH-PRE
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN.
PLEASE SIGN AND DATE THE REVERSE SIDE OF THIS PROXY CARD AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
PLEASE FILL IN BOX AS SHOWN USING BLACK OR BLUE INK OR NUMBER 2 PENCIL. PLEASE
DO NOT USE FINE POINT PENS. [X]
1. To elect five Class II Trustees to serve until the annual meeting of
shareholders in 2010, or until their successors are elected and qualified:
ALL FUNDS FOR WITHHOLD FOR ALL
ALL ALL EXCEPT*
(01) C. Anne Harvey (02) George Morriss (05) John Cannon [ ] [ ] [ ]
(03) Jack Rivkin (04) Tom Seip
*TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), MARK THE BOX "FOR ALL
EXCEPT" AND WRITE ON THE LINE BELOW THE NUMBER(S) OF THE NOMINEE(S) FOR WHOM
YOU DO NOT WANT TO VOTE.
________________________________________________________________________________
IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE CALL 1-877-461-1899
PLEASE SIGN ON THE REVERSE SIDE.
CLB-JH-PRE