<PAGE>
NEUBERGER&BERMAN INCOME FUNDS
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Fund
This information supplements the Prospectus dated March 1, 1995.
HOW TO BUY SHARES
You can invest as little as $50 each month under an automatic investing plan.
(See "Automatic Investing and Dollar Cost Averaging" on page 23.)
Due to a change in Securities and Exchange Commission rules regarding the
settlement period for securities transactions, your order may be cancelled if
your payment is not received by the third business day after your order is
placed. In that case, you could be liable for any resulting losses or fees the
Fund or its agents have incurred. To recover those losses or fees, a Fund has
the right to redeem shares from your account. To meet the new three day
deadline, you can wire payment, send a check through overnight mail, or call
800-877-9700 for information on how to make electronic transfers through your
bank.
HOW TO SELL SHARES
Usually, redemption proceeds will be mailed to you on the next business day
after receipt of your request, but in any case, within three business days.
(Under unusual circumstances, the Fund may take longer as permitted by law.) You
may also call 800-877-9700 for information on how to make and receive electronic
transfers through your bank.
In addition, if you have changed the record address by telephone or
facsimile, shares may not be redeemed by telephone or facsimile for 15 days
after receipt of the address change. Please call 800-877-9700 to confirm receipt
of your order submitted by facsimile.
(OVER PLEASE)
<PAGE>
If you purchased shares directly through certain stockbrokers, banks or other
financial institutions, you may sell those shares only through those
organizations.
The date of this Supplement is June 1, 1995.
[Recycled Logo] NBII00120695
NUB398SUP695
<PAGE>
PROSPECTUS
- ------------------------------------------------
March 1, 1995
Neuberger&Berman
INCOME FUNDS -SM-
Neuberger&Berman
NEW YORK
INSURED INTERMEDIATE FUND
No Sales Charges
No Redemption Fees
No 12b-1 Fees
<PAGE>
Neuberger&Berman
NEW YORK INSURED INTERMEDIATE FUND
A No-Load Municipal Fund
- ----------------------------------------------------------------------
Neuberger&Berman NEW YORK INSURED INTERMEDIATE FUND
MINIMUM INITIAL PURCHASE $2,000 -- CALL 800-877-9700
- ----------------------------------------------------------------------
NEUBERGER&BERMAN NEW YORK INSURED INTERMEDIATE FUND (THE "FUND") INVESTS ALL
OF ITS NET INVESTABLE ASSETS IN THE NEUBERGER&BERMAN NEW YORK INSURED
INTERMEDIATE PORTFOLIO (THE "PORTFOLIO"), A NON-DIVERSIFIED SERIES OF INCOME
MANAGERS TRUST ("MANAGERS TRUST"), AN OPEN-END MANAGEMENT INVESTMENT COMPANY
MANAGED BY NEUBERGER&BERMAN MANAGEMENT INCORPORATED ("N&B MANAGEMENT"). THE
PORTFOLIO INVESTS IN SECURITIES IN ACCORDANCE WITH AN INVESTMENT OBJECTIVE,
POLICIES, AND LIMITATIONS IDENTICAL TO THOSE OF THE FUND. THE INVESTMENT
PERFORMANCE OF THE FUND WILL DIRECTLY CORRESPOND WITH THE INVESTMENT PERFORMANCE
OF THE PORTFOLIO. THIS "MASTER/FEEDER FUND" STRUCTURE IS DIFFERENT FROM THAT OF
MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIOS OF SECURITIES. FOR MORE INFORMATION ON THIS UNIQUE STRUCTURE THAT YOU
SHOULD CONSIDER, SEE "SPECIAL INFORMATION REGARDING ORGANIZATION,
CAPITALIZATION, AND OTHER MATTERS" ON PAGE 15.
The Fund is a no-load mutual fund, so you pay no sales commissions or other
charges when you buy or redeem shares. The Fund does not pay "12b-1 fees" to
promote or distribute its shares. The Fund declares income dividends daily and
pays them monthly.
Please read this Prospectus before investing in the Fund and keep it for
future reference. It contains information about the Fund that a prospective
investor should know before investing. A Statement of Additional Information
("SAI") about the Fund and Portfolio, dated March 1, 1995, is on file with the
Securities and Exchange Commission. The SAI is incorporated herein by reference
(so it is legally considered a part of this Prospectus). You can obtain a free
copy of the SAI by calling N&B Management at 800-877-9700. PROSPECTUS DATED
MARCH 1, 1995
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY
BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY 3
The Fund and Portfolio 3
Risk Factors 3
Management 4
EXPENSE INFORMATION 5
Shareholder Transaction
Expenses 5
Annual Fund Operating
Expenses 5
Example 6
FINANCIAL HIGHLIGHTS 7
INVESTMENT PROGRAM 9
Special Considerations 10
Short-Term Trading;
Portfolio Turnover 11
Municipal Bond
Insurance; Ratings of
Securities 11
Borrowings 12
Other Investments 13
PERFORMANCE
INFORMATION 14
Yield 14
Total Return 14
Tax-Equivalent Yield 14
Yield and Total Return
Information 14
SPECIAL INFORMATION REGARDING
ORGANIZATION, CAPITALIZATION,
AND OTHER MATTERS 15
The Fund 15
The Portfolio 15
HOW TO BUY SHARES 18
By Mail 18
By Wire 18
By Telephone 18
By Exchanging Shares 19
Other Information 19
HOW TO SELL SHARES 20
By Mail or Facsimile
Transmission (Fax) 20
By Telephone 21
Other Information 21
ADDITIONAL
INFORMATION ON
TELEPHONE
TRANSACTIONS 22
SHAREHOLDER SERVICES 23
Automatic Investing and
Dollar Cost Averaging 23
Exchange Privilege 23
Systematic Withdrawal
Plan 24
SHARE PRICES AND NET
ASSET VALUE 25
DIVIDENDS, OTHER
DISTRIBUTIONS, AND
TAXES 26
Distribution Options 26
Taxes 26
MANAGEMENT AND
ADMINISTRATION 28
Trustees and Officers 28
Investment Manager,
Administrator,
Distributor, and
Sub-Adviser 28
Expenses 29
Shareholder Servicing
Arrangements 30
DESCRIPTION OF
INVESTMENTS 31
OTHER INFORMATION 36
Directory & Funds
Eligible for Exchange 36
</TABLE>
2
<PAGE>
SUMMARY
The Fund and Portfolio
- ----------------------------------------------------------------------
The Fund is a series of Neuberger&Berman Income Funds (the "Trust") and
invests in the Portfolio which, in turn, invests in securities in accordance
with an investment objective, policies, and limitations that are identical to
those of the Fund. The trustees of the Trust believe that this master/feeder
fund structure may benefit shareholders. For more information about the
organization of the Fund and the Portfolio, including certain features of the
master/feeder fund structure, see "Special Information Regarding Organization,
Capitalization, and Other Matters" on page 15.
Here is a summary of important features of the Fund and the Portfolio. You
may want to invest in a variety of Funds to fit your particular investment
needs. Of course, there can be no assurance that the Fund will meet its
investment objective.
INVESTMENT OBJECTIVE. High level of current income exempt from federal
income tax and New York State and New York City personal income taxes,
consistent with preservation of capital
PRINCIPAL PORTFOLIO INVESTMENTS. At least 65% of total assets normally in
New York Municipal Securities having the highest ratings (Aaa/AAA) at the time
of purchase, whose interest and principal payments are guaranteed by private
insurance companies; the remainder may be invested in uninsured New York
Municipal Securities of investment grade and certain other instruments
DOLLAR-WEIGHTED AVERAGE PORTFOLIO MATURITY. Up to 10 years
Risk Factors
- ----------------------------------------------------------------------
The value and yield of New York Municipal Securities in which the Portfolio
invests are subject to a variety of factors, including political and economic
conditions in New York State. Special risk factors also apply to investments,
which may be made by the Portfolio, in residual interest bonds, municipal
leases, options and futures contracts, zero coupon bonds, and swap agreements.
The Portfolio may at times have to rely on the private companies that insure the
municipal securities for payment of principal and interest on a particular
security. The Portfolio invests in fixed income securities, the value of which
is likely to decline in times of rising interest rates and rise in times of
falling interest rates. In general, the longer the maturity of a fixed income
security, the more pronounced is the effect of a change in interest rates on the
value of the security. For more details about the Portfolio, its investments,
and their risks, see "Investment Program" on page 9 and "Description of
Investments" on page 31.
3
<PAGE>
Management
- ----------------------------------------------------------------------
N&B Management, with the assistance of Neuberger&Berman, L.P. ("Neuberger&
Berman") as sub-adviser, selects investments for the Portfolio. N&B Management
also provides administrative services to the Portfolio and the Fund and acts as
distributor of Fund shares. See "Management and Administration" on page 28. If
you want to know how to buy and sell shares or exchange them for shares of other
Neuberger&Berman FundsSM, see "How to Buy Shares" on page 18, "How to Sell
Shares" on page 20, and "Shareholder Services -- Exchange Privilege" on page 23.
4
<PAGE>
EXPENSE INFORMATION
This section gives you certain information about the expenses of the Fund and
the Portfolio.
Shareholder Transaction Expenses
- ----------------------------------------------------------------------
As shown by this table, you pay no transaction charges when you buy or sell
Fund shares.
<TABLE>
<S> <C>
Sales Charge Imposed on Purchases NONE
Sales Charge Imposed on Reinvested Dividends NONE
Deferred Sales Charges NONE
Redemption Fees NONE
Exchange Fees NONE
</TABLE>
If you want to redeem shares by wire transfer, the Fund's transfer agent
charges a fee (currently $8.00) for each wire redemption. Shareholders who have
one or more accounts in the Neuberger&Berman FundsSM aggregating $250,000 or
more in value are not charged for wire redemptions; the $8.00 fee is borne by
N&B Management.
Annual Fund Operating Expenses
(as a percentage of average net assets)
- --------------------------------------------------------------------------------
The following table shows anticipated Annual Fund Operating Expenses, which
are paid out of the assets of the Fund and which include the Fund's pro rata
portion of the Operating Expenses of the Portfolio. These expenses are borne
indirectly by Fund shareholders. The Fund pays N&B Management an administration
fee and shareholder servicing fee, each based on the Fund's net asset value. The
Portfolio pays N&B Management a management fee based on the Portfolio's average
daily net assets; a pro rata portion of this fee is borne indirectly by the
Fund. Therefore, the table combines management and administration fees. The Fund
and Portfolio also incur other expenses for things such as accounting and legal
fees, maintaining shareholder records, and furnishing shareholder statements and
Fund reports. "Operating Expenses" exclude interest, taxes, brokerage
commissions, and extraordinary expenses. The Fund's expenses are factored into
its share prices and dividends and are not charged directly to Fund
shareholders. For more information, see "Management and Administration" and the
SAI.
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT AND 12B-1 OTHER OPERATING
ADMINISTRATION FEES FEES EXPENSES EXPENSES
- --------------------------------------------------------
<S> <C> <C> <C>
0.00%* NONE 0.65%* 0.65%*
</TABLE>
* ("OTHER EXPENSES" ESTIMATED; REFLECTS N&B MANAGEMENT'S EXPENSE REIMBURSEMENT
UNDERTAKING DESCRIBED BELOW)
5
<PAGE>
Anticipated Annual Fund Operating Expenses for the Fund are
annualized projections based upon current administration fees for the Fund
and management fees for the Portfolio, with "Other Expenses" estimated.
The trustees of the Trust believe that the aggregate per share expenses of
the Fund and the Portfolio will be approximately equal to the expenses the
Fund would incur if its assets were invested directly in the type of
securities being held by the Portfolio. The trustees of the Trust also
believe that investment in the Portfolio by investors in addition to the Fund
may enable the Portfolio to achieve economies of scale which could reduce
expenses. Other feeder funds may invest in the Portfolio, and such other
funds' expenses and, correspondingly, their returns, may differ from those of
the Fund.
The previous table reflects N&B Management's voluntary undertaking until
February 29, 1996, to reimburse the Fund for its Operating Expenses and its pro
rata portion of the Portfolio's Operating Expenses which, in the aggregate,
exceed 0.65% per annum of the Fund's average daily net assets. Absent the
reimbursement, total Management and Administration Fees would be 0.50% and total
anticipated aggregate Fund and Portfolio Operating Expenses would be 1.56% per
annum of the average daily net assets of the Fund.
Example
- ----------------------------------------------------------------------
To illustrate the effect of Operating Expenses, let's assume that the Fund's
annual return is 5% and that it had annual Operating Expenses described in the
table above. For every $1,000 you invested in the Fund, you would have paid the
following amounts of total expenses if you closed your account at the end of
each of the following time periods:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- ---------------------
<S> <C>
$7 $21
</TABLE>
The assumption in this example of a 5% annual return is required by
regulations of the Securities and Exchange Commission applicable to all mutual
funds. THE INFORMATION IN THE TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR RETURNS MAY BE
GREATER OR LESS THAN THOSE SHOWN, AND MAY CHANGE IF EXPENSE REIMBURSEMENTS
CHANGE.
6
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios
- --------------------------------------------------------------------------------
The financial information in the following table is for the Fund as of
October 31, 1994. This information has been audited by the Fund's independent
auditors. You may obtain further information about the performance of the Fund
at no cost in the Fund's annual report to shareholders by calling
800-877-9700. Also, see "Performance Information."
Neuberger&Berman
New York Insured Intermediate Fund
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding
throughout the period and other performance information derived from the
Financial Statements. The per share amounts and ratios which are shown reflect
income and expenses including the Fund's proportionate share of its
corresponding Portfolio's income and expenses. It should be read in
conjunction with its corresponding Portfolio's Financial Statements and notes
thereto.
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 1, 1994(1)
TO OCTOBER 31, 1994
- -------------------------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $10.00
-------------------
Income From Investment Operations
Net Investment Income .29
Net Gains or Losses on Securities (both realized and unrealized) (.75)
-------------------
Total From Investment Operations (.46)
-------------------
Less Distributions
Dividends (from net investment income) (.29)
-------------------
Net Asset Value, End of Period $ 9.25
-------------------
Total Return+ -4.63%(2)
-------------------
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $ 14.7
-------------------
Ratio of Expenses to Average Net Assets(3) .65%
-------------------
Ratio of Net Income to Average Net Assets(3) 4.10%
-------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS.
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
1) The date investment operations commenced.
2) Not annualized.
3) Annualized. After reduction of expenses of the Neuberger&Berman New York
Insured Intermediate Fund by the administrator. Had the administrator not
undertaken such action the annualized ratios of expenses and investment
income -- net to average daily net assets would have been 1.53% and 3.22%,
respectively, for the period ended October 31, 1994.
4) The portfolio turnover rate for the Neuberger&Berman New York Insured
Intermediate Portfolio from February 1, 1994 (commencement of operations) to
October 31, 1994 was 96%.
+ Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of the Fund during the period,
and assumes dividends and capital gain distributions, if any, were reinvested.
Results represent past performance and do not guarantee future results.
Investment returns and principal may fluctuate and shares when redeemed may be
worth more or less than original cost. Total return would be lower if N&B
Management had not absorbed certain expenses.
8
<PAGE>
INVESTMENT PROGRAM
The investment policies and limitations of the Fund and the Portfolio are
identical. The Fund invests only in the Portfolio. Therefore, the following
shows you the kinds of securities in which the Portfolio invests. For an
explanation of some types of investments, see "Description of Investments" on
page 31.
There can be no assurance that the Portfolio and the Fund will achieve their
objective. The Fund, by itself, does not represent a comprehensive investment
program. Investment policies and limitations of the Fund and the Portfolio are
not fundamental unless otherwise specified in this Prospectus or the SAI. While
a non-fundamental policy or limitation may be changed by the trustees of the
Trust or of Managers Trust without shareholder approval, the Fund intends to
notify shareholders before making any material change to such policies or
limitations. Fundamental policies may not be changed without shareholder
approval.
Additional investment techniques, features, and limitations concerning the
Portfolio's investment programs are described in the SAI.
The investment objective of the Fund and the Portfolio is to seek a high
level of current income exempt from federal income tax and New York State and
New York City personal income taxes, consistent with preservation of capital.
This investment objective is non-fundamental.
The Portfolio invests in municipal obligations issued by the State of New
York, its authorities, multi-state authorities, municipalities, counties, and
any other political subdivisions and municipal obligations issued by territories
or possessions of the United States, such as the Virgin Islands, Guam, and
Puerto Rico, the interest income from which is exempt, in the opinion of counsel
for the issuer, from federal income tax and New York State and New York City
personal income taxes ("New York Municipal Securities"). At least 65% of the
Portfolio's total assets normally will be invested in the highest rated New York
Municipal Securities which are insured as to the timely payment of principal and
interest by municipal bond insurance ("Municipal Bond Insurance"). The remaining
assets normally will be invested in New York Municipal Securities that are not
so insured and are rated investment grade or better and in other investments
described in this Prospectus.
The Portfolio may invest up to 100% of its assets in New York Municipal
Securities and certain other municipal securities issued to finance private
activities whose interest is a tax-preference item for purposes of the federal
alternative minimum tax. To the extent the Portfolio makes those investments and
you are subject to that tax, a portion of your dividends from the Fund may not
be exempt from federal income tax. See "Taxes."
During seasonal variations or other shortages in the supply of suitable New
York Municipal Securities, the Portfolio may purchase uninsured New York
municipal securities or municipal securities the interest income on which is
exempt from federal
9
<PAGE>
income tax, but not New York State and New York City personal income taxes, or
it may purchase taxable U.S. Government and Agency securities. However, as a
fundamental policy, the Portfolio normally invests at least 80% of its total
assets in municipal obligations.
The Portfolio's dollar-weighted average portfolio maturity will not exceed
ten years. The Portfolio seeks to increase income and preserve or enhance total
return by actively managing the average portfolio maturity in light of market
conditions and trends. The Portfolio also may seek to hedge all or a part of its
portfolio against changes in securities prices by buying or selling interest
rate futures contracts and options. Although the Portfolio is "non-diversified"
for federal securities law purposes, it will limit its investments to meet
federal tax requirements so that, as of the last day of each quarter of its
taxable year, not more than 25% of its total assets are invested in the
securities of a single issuer and, with respect to at least 50% of its total
assets, not more than 5% of those assets are invested in the securities of a
single issuer (other than, in each case, U.S. Government and Agency Securities).
The Portfolio may not invest 25% or more of its total assets in revenue bonds
related to a single industry but may invest 25% or more of its total assets in
securities that depend on revenue from similar types of projects, E.G.,
transportation, electric utilities, housing, or health care. Developments
affecting a single issuer or industry, or securities financing particular types
of projects, could thus have a significant effect on the Portfolio.
Special Considerations
- ----------------------------------------------------------------------
NEW YORK. Because the Portfolio invests primarily in New York Municipal
Securities, investors should consider that the Fund's yield and share price are
sensitive to political and economic developments within the State of New York
("State") and to the financial condition of the State, its public authorities,
and political subdivisions, particularly the City of New York ("City"). Both the
State and the City have experienced significant financial difficulties related
to poor economic performance, and no assurance can be given that the State or
the City will not incur future fiscal instabilities. Further information
regarding the financial condition of the State and the City may be found in the
SAI.
PUERTO RICO. New York Municipal Securities include general obligations of
Puerto Rico and its political subdivisions and public corporations. The economy
of Puerto Rico is closely linked with that of the United States and will depend
on several factors, including the condition of the U.S. economy, the exchange
rate for U.S. dollars, the price stability of oil imports, and interest rates.
The value of fixed income securities is likely to rise in times of falling
market interest rates and fall in times of rising interest rates. Investments in
shorter-term
10
<PAGE>
income securities normally are less affected by interest rate changes than are
investments in longer-term securities. The value of income securities is also
affected by the creditworthiness of the issuer.
Some securities purchased by the Portfolio may be called by the issuer when
interest rates decline, which could result in a lower yield and total return for
that security.
Short-Term Trading; Portfolio Turnover
- ----------------------------------------------------------------------
Although the Portfolio does not purchase securities with the intention of
profiting from short-term trading, the Portfolio may sell portfolio securities
prior to maturity when N&B Management believes that such action is advisable.
This practice may produce capital gains, which will not be exempt from federal
income tax and State and City personal income taxes. The portfolio turnover rate
of the Portfolio for the period ended October 31, 1994, is set forth in the
"Notes to Financial Highlights." It is anticipated that the Portfolio's turnover
rate generally will not exceed 100%.
Municipal Bond Insurance; Ratings of Securities
- ----------------------------------------------------------------------
Municipal Bond Insurance provides an unconditional and irrevocable guarantee
that the insured bond's principal and interest will be paid when due. The
insurance is purchased from a private, non-governmental insurance company. The
insurance does not guarantee the market value of the municipal bonds or the
value of the shares in the Portfolio. The insured bonds purchased by the
Portfolio must at the time of purchase have the highest credit rating available
from a nationally recognized statistical rating organization ("NRSRO"). For such
insured bonds to receive the highest credit rating, the claims-paying ability or
financial strength of the insurance company must be rated by at least one NRSRO
in the highest category (within which there may be gradations). There is, of
course, no guarantee that the claims-paying ability or financial strength of the
insurers will continue to receive the highest credit ratings, or that the
insurers will be able to pay all claims when due.
The insured municipal bonds purchased by the Portfolio will carry Municipal
Bond Insurance obtained to improve the bond's credit rating. Once purchased,
Municipal Bond Insurance cannot be cancelled, and the protection it affords
continues as long as the bonds are outstanding and the insurer remains solvent.
The Municipal Bond Insurance covering the municipal securities purchased by the
Portfolio will be either new issue insurance ("New Issue Insurance") or
secondary insurance ("Secondary Insurance"). New Issue Insurance is purchased by
the respective issuers of the municipal securities at the time of the original
issuance of those securities. Secondary
11
<PAGE>
Insurance may be purchased by the broker, another investor or the Portfolio
after the municipal security is originally issued. Generally, the Portfolio
expects that municipal securities it purchases will carry insurance obtained by
another party.
The Portfolio may purchase bonds insured by AMBAC Indemnity Corporation,
Municipal Bond Investors Assurance Corporation or Financial Guaranty Insurance
Company (known as AMBAC, MBIA Corp. and FGIC, respectively), or any other
insurance company that has received the highest credit rating. The Portfolio may
invest more than 25% of its assets in bonds insured by the same insurance
company.
As noted above, the Portfolio normally will invest primarily in insured New
York Municipal Securities. The Portfolio may invest up to 35% of its assets in
uninsured New York Municipal Securities that are determined to be "investment
grade" or better.
Investment grade municipal securities are securities that have received a
rating from at least one NRSRO in one of the four highest rating categories or,
if not rated by any NRSRO, have been determined by N&B Management to be of
comparable quality. Moody's Investors Service, Inc. ("Moody's") deems securities
rated in its fourth highest category (Baa) to have speculative characteristics;
a change in economic factors could lead to a weakened capacity of the issuer to
repay.
If the quality of securities held by the Portfolio deteriorates so that the
securities would no longer satisfy its standards, the Portfolio will seek to
dispose of the securities as soon as is reasonably practicable. Further
information regarding Municipal Bond Insurance, insurance companies, and the
ratings assigned to securities purchased by the Portfolio is included in the
SAI.
Borrowings
- ----------------------------------------------------------------------
The Portfolio has a fundamental policy that it may not borrow money, except
that it may (1) borrow money from banks for temporary or emergency purposes and
not for leveraging or investment and (2) enter into reverse repurchase
agreements for any purpose, so long as the aggregate amount of borrowings and
reverse repurchase agreements does not exceed one-third of the Portfolio's
respective total assets (including the amount borrowed) less liabilities (other
than borrowings). The Portfolio does not expect to borrow money. As a
non-fundamental policy, the Portfolio may not purchase portfolio securities if
its outstanding borrowings, including reverse repurchase agreements, exceed 5%
of its total assets.
12
<PAGE>
Other Investments
- ----------------------------------------------------------------------
For temporary defensive purposes, the Portfolio may invest up to 100% of its
total assets in cash or cash equivalents, or in commercial paper, U.S.
Government and Agency Securities and repurchase agreements on U.S. Government
and Agency Securities, the interest on which may be subject to federal income
tax and New York State and New York City personal income taxes, and may adopt
shorter weighted average maturities than normal.
13
<PAGE>
PERFORMANCE INFORMATION
The performance of the Fund can be measured as YIELD or as TOTAL RETURN.
Further information regarding the Fund's performance is presented in its annual
report to shareholders, which is available without charge by calling
800-877-9700.
Yield
- ----------------------------------------------------------------------
YIELD refers to the income generated by an investment over a particular
period of time, which is annualized (assumed to have been generated for one
year) and expressed as an annual percentage rate. EFFECTIVE YIELD is yield
assuming that all distributions are reinvested.
Total Return
- ----------------------------------------------------------------------
TOTAL RETURN is the change in value of an investment in a fund over a
particular period, assuming that all distributions have been reinvested. Thus,
total return reflects not only income earned, but also variations in share
prices from the beginning to the end of the period.
Tax-Equivalent Yield
- ----------------------------------------------------------------------
Substantially all income dividends paid by the Fund will be exempt from
federal income tax and State and City personal income taxes. The Fund may
measure its performance by a TAX-EQUIVALENT YIELD. This reflects the taxable
yield that an individual investor at the highest marginal federal income tax and
State and City personal income tax rates would have to receive to equal the
primarily tax-exempt yield from the Fund.
Before investing in the Fund, you may want to determine which investment --
tax-free or taxable -- will result in a higher after-tax yield. To do this,
divide the yield on the tax-free investment by the decimal determined by
subtracting from 1 the highest combination of federal income tax and State and
City personal income tax rates you pay. For example, if the tax-free yield is 4%
and your maximum combined tax bracket is 47.1%, the computation is:
4% Tax-Free Yield DIVIDED BY (1 - .471 Tax Rate)
= 4% DIVIDED BY .529 = 7.56% Tax-Equivalent Yield
In this example, your after-tax return would be higher from the 4% tax-free
investment if available taxable yields are below 7.56%. Conversely, the taxable
investment would provide a higher yield when taxable yields exceed 7.56%. This
example assumes that all of the income from the investment is exempt.
Yield and Total Return Information
- ----------------------------------------------------------------------
N&B Management has reimbursed the Fund for certain expenses, which has the
effect of increasing its yield and total return. You can obtain current
performance information about the Fund by calling N&B Management at
800-877-9700.
14
<PAGE>
SPECIAL INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND OTHER MATTERS
The Fund
- ----------------------------------------------------------------------
The Fund is a separate series of the Trust, a Delaware business trust
organized pursuant to a Trust Instrument dated December 23, 1992. The Trust is
registered under the Investment Company Act of 1940 (the "1940 Act") as a
diversified, open-end management investment company, commonly known as a mutual
fund. The Trust has eight separate operating series. The Fund invests all of its
net investable assets in the Portfolio, in each case receiving a beneficial
interest in the Portfolio. The trustees of the Trust may establish additional
series or classes of shares without the approval of shareholders. The assets of
each series belong only to that series, and the liabilities of each series are
borne solely by that series and no other.
DESCRIPTION OF SHARES. The Fund is authorized to issue an unlimited number
of shares of beneficial interest (par value $0.001 per share). Shares of the
Fund represent equal proportionate interests in the assets of the Fund only and
have identical voting, dividend, redemption, liquidation, and other rights. All
shares issued are fully paid and non-assessable, and shareholders have no
preemptive or other right to subscribe to any additional shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to hold annual
meetings of shareholders of the Fund. The trustees will call special meetings of
shareholders of the Fund only if required under the 1940 Act or in their
discretion or upon the written request of holders of 10% or more of the
outstanding shares of the Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the shareholders
of the Fund will not be personally liable for the obligations of the Fund; a
shareholder is entitled to the same limitation of personal liability extended to
shareholders of corporations. To guard against the risk that Delaware law might
not be applied in other states, the Trust Instrument requires that every written
obligation of the Trust or the Fund contain a statement that such obligation may
be enforced only against the assets of the Trust or Fund and provides for
indemnification out of Trust or Fund property of any shareholder nevertheless
held personally liable for Trust or Fund obligations, respectively.
The Portfolio
- ----------------------------------------------------------------------
The Portfolio is a separate series of Managers Trust, a New York common law
trust organized as of December 1, 1992. Managers Trust is registered under the
1940 Act as a diversified, open-end management investment company. Managers
Trust has
15
<PAGE>
eight separate operating portfolios. The assets of the Portfolio belong only to
the Portfolio, and the liabilities of the Portfolio are borne solely by the
Portfolio and no other.
THE FUND'S INVESTMENT IN THE PORTFOLIO. The Fund seeks to achieve its
investment objective by investing all of its net investable assets in the
Portfolio, which has the same investment objective, policies, and limitations as
the Fund. Accordingly, the Portfolio directly acquires securities and the Fund
acquires an indirect interest in those securities. Historically, N&B Management,
which is the investment manager of the Portfolio, has sponsored, with
Neuberger&Berman, traditionally structured funds since 1950. However, it has
operated 12 master funds and 20 feeder funds since August 1993 and now operates
15 master funds and 24 feeder funds.
The Fund's investment in the Portfolio is in the form of a non-transferable
beneficial interest. Members of the general public may not purchase a direct
interest in the Portfolio. As of the date of this Prospectus, the Fund is the
only institutional investor in the Portfolio. However, the Portfolio may permit
other investment companies and/or other institutional investors to invest in the
Portfolio. All investors will invest in the Portfolio on the same terms and
conditions as the Fund and will pay a proportionate share of the Portfolio's
expenses. Another investor in the Portfolio would not be required to sell its
shares at the same public offering price as the Fund, could have a different
administration fee and expenses than the Fund, and might charge a sales
commission. Therefore, Fund shareholders may have different returns than
shareholders in another investment company that invests exclusively in the
Portfolio. There is currently no such other investment company that offers its
shares directly to members of the general public. Information regarding any fund
that may invest in the Portfolio in the future will be available from N&B
Management by calling 800-877-9700.
The Fund's investment in the Portfolio may be affected by the actions of
other large investors in the Portfolio, if any. For example, if a large investor
in the Portfolio other than the Fund redeemed its interest in the Portfolio, the
Portfolio's remaining investors (including the Fund) might, as a result,
experience higher pro rata operating expenses, thereby producing lower returns.
The Fund may withdraw its entire investment from the Portfolio at any time,
if the trustees of the Trust determine that it is in the best interests of the
Fund and its shareholders to do so. The Fund might withdraw, for example, if
there were other investors in the Portfolio with power to, and who did by a vote
of all investors (including the Fund), change the investment objective,
policies, or limitations of the Portfolio in a manner not acceptable to the
trustees of the Trust. A withdrawal could result in a distribution in kind of
securities (as opposed to a cash distribution) by the Portfolio. That
distribution could result in a less diversified portfolio of investments
16
<PAGE>
for the Fund and could affect adversely the liquidity of the Fund's investment
portfolio. If the Fund decided to convert those securities to cash, it usually
would incur brokerage fees or other transaction costs. If the Fund withdrew its
investment from the Portfolio, the trustees would consider what action might be
taken, including the investment of all of the Fund's net investable assets in
another pooled investment entity having substantially the same investment
objective as the Fund or the retention by the Fund of its own investment manager
to manage its assets in accordance with its investment objective, policies, and
limitations. The inability of the Fund to find a suitable replacement could have
a significant impact on shareholders.
INVESTOR MEETINGS AND VOTING. The Portfolio normally will not hold meetings
of investors except as required by the 1940 Act. Each investor in the Portfolio
will be entitled to vote in proportion to its relative beneficial interest in
the Portfolio. On most issues subjected to a vote of investors, as required by
the 1940 Act and other applicable law, the Fund will solicit proxies from its
shareholders and will vote its interest in the Portfolio in proportion to the
votes cast by the Fund's shareholders. If there are other investors in the
Portfolio, there can be no assurance that any issue that receives a majority of
the votes cast by Fund shareholders will receive a majority of votes cast by all
Portfolio investors; indeed, if other investors hold a majority interest in the
Portfolio, they could have voting control of the Portfolio.
CERTAIN PROVISIONS. Each investor in the Portfolio, including the Fund, will
be liable for all obligations of the Portfolio. However, the risk of an investor
in the Portfolio incurring financial loss on account of such liability would be
limited to circumstances in which the Portfolio had inadequate insurance and was
unable to meet its obligations out of its assets. Upon liquidation of the
Portfolio, investors would be entitled to share pro rata in the net assets of
the Portfolio available for distribution to investors.
17
<PAGE>
HOW TO BUY SHARES
You can buy shares of the Fund directly by mail, wire, or telephone, or
through an exchange of shares of another Neuberger&Berman FundSM. (See "Funds
Eligible for Exchange") Shares are purchased at the next price calculated on a
day the New York Stock Exchange ("NYSE") is open, after your order is received
and accepted. Prices for shares of the Fund are usually calculated as of 4 p.m.
Eastern time.
N&B Management may, in its discretion, waive the minimum investment
requirement.
By Mail
- ----------------------------------------------------------------------
Send your check or money order payable to "Neuberger&Berman Funds" by mail
to:
Neuberger&Berman Funds
Boston Service Center
P.O. Box 8403
Boston, MA 02266-8403
or by overnight courier, U.S. Express Mail, or registered or certified mail to:
Neuberger&Berman Funds
c/o State Street Bank and Trust Company
2 Heritage Drive
North Quincy, MA 02171
Be sure to specify the name of the Fund. If this is your FIRST PURCHASE,
please send a minimum of $2,000 for shares of the Fund. For an ADDITIONAL
PURCHASE, please send at least $100 for shares of the Fund. Unless your check or
money order is made payable on its face to Neuberger&Berman FundsSM, it may not
be accepted.
By Wire
- ----------------------------------------------------------------------
Call 800-877-9700 before you wire money to buy shares. Your wire goes to
State Street Bank and Trust Company ("State Street") and must include your name,
the name of the Fund, and your account number. The minimum for a FIRST PURCHASE
of shares of the Fund is $2,000. For an ADDITIONAL PURCHASE, you should wire at
least $1,000.
By Telephone
- ----------------------------------------------------------------------
Call 800-877-9700 to buy shares of the Fund. The minimum for a FIRST PURCHASE
of shares of the Fund by telephone is $2,000. The minimum for an ADDITIONAL
PURCHASE is $1,000. Your order may be canceled if your payment is not received
by the fifth business day (third business day, effective June 1995) after your
order is placed;
18
<PAGE>
in that case you could be liable for any resulting losses or fees the Fund
or its agents have incurred. To recover those losses or fees, the Fund has
the right to redeem shares from your account. Please refer to "Additional
Information on Telephone Transactions."
By Exchanging Shares
- ----------------------------------------------------------------------
Call 800-877-9700 for instructions on how to invest by exchanging shares of
another Neuberger&Berman FundSM for shares of the Fund. To buy Fund shares by an
exchange, both fund accounts must be registered in the same name, address, and
taxpayer ID number. The minimum for a FIRST PURCHASE of shares of the Fund by an
exchange is $2,000 worth of shares of the other fund, and the minimum for an
ADDITIONAL PURCHASE is $1,000. For more details, see "Shareholder Services --
Exchange Privilege," "Directory & Funds Eligible for Exchange".
Other Information
- ----------------------------------------------------------------------
/ / You can also buy shares of the Fund indirectly through certain
stockbrokers, banks, and other financial institutions, some of which may
charge you a fee.
/ / The Fund will not issue a certificate for your shares unless you write to
State Street and request it. Most shareholders do not want certificates,
because you must present the certificate to sell or exchange the shares
it represents. This means that you would be able to sell or exchange
those shares only by mail, and not by telephone or facsimile
transmission. If you lose your certificate, you will have to pay the
expense of replacing it.
/ / You must pay for your shares in U.S. dollars by check or money order
(drawn on a U.S. bank), or by bank or federal funds wire transfer; cash
cannot be accepted.
/ / The Fund has the right to suspend the offering of its shares for a period
of time. The Fund also has the right to accept or reject a purchase order
in its sole discretion, including certain purchase orders using the
exchange privilege. See "Shareholder Services -- Exchange Privilege."
/ / If you paid by check and your check does not clear, or if you ordered
shares by telephone and fail to pay for them, your purchase will be
canceled and you could be liable for any resulting losses or fees the
Fund or its agents have incurred. To recover those losses or fees, the
Fund has the right to bill you or to redeem shares from your account.
/ / When you sign your application for a new Fund account, you will be
certifying that your Social Security or other taxpayer ID number is
correct and whether you are subject to backup withholding. If you violate
certain federal income tax provisions, the Internal Revenue Service can
require the Fund to withhold 31% of your taxable distributions and
redemptions.
19
<PAGE>
HOW TO SELL SHARES
You can sell (redeem) all or some of your shares at any time by mail,
telecopy, or telephone. HOWEVER, IF YOU HAVE A CERTIFICATE FOR YOUR SHARES, YOU
CAN REDEEM THOSE SHARES ONLY BY SENDING THE CERTIFICATE BY MAIL. You can also
sell shares by exchanging them for shares of other Neuberger&Berman FundsSM; see
"Shareholder Services -- Exchange Privilege" for details.
TO SELL SHARES HELD BY A TRUST, ESTATE, GUARDIAN, OR BUSINESS ORGANIZATION,
PLEASE CALL 800-225-1596 FOR INSTRUCTIONS.
Your shares are sold at the next price calculated on a day the NYSE is open,
after your sales order is received and accepted. Prices for shares of the Fund
are usually calculated as of 4 p.m. Eastern time.
Unless otherwise instructed, the Fund will mail a check for your sales
proceeds, payable to the owner(s) shown on your account ("record owner"), to the
address shown on your account ("record address"). You may designate in your Fund
application a bank account to which, at your request, State Street will wire
your sales proceeds of $1,000 or more. State Street currently charges a fee of
$8.00 for each wire. Shareholders who have one or more accounts in the
Neuberger&Berman FundsSM aggregating $250,000 or more in value are not charged
for wire redemptions; the $8.00 fee is borne by N&B Management.
If you purchased shares indirectly through certain stock brokers, banks, or
other financial institutions, you may sell those shares only through those
organizations.
By Mail or Facsimile Transmission (Fax)
- ----------------------------------------------------------------------
Write a redemption request letter with your name and account number, the
Fund's name, and the dollar amount or number of shares of the Fund you want to
sell, together with any other instructions, and send it by mail to:
Neuberger&Berman Funds
Boston Service Center
P.O. Box 8403
Boston, MA 02266-8403
OR by overnight courier, U.S. Express Mail, or registered or certified mail to:
Neuberger&Berman Funds
c/o State Street Bank and Trust Company
2 Heritage Drive
North Quincy, MA 02171
OR by facsimile, to redeem up to $50,000 worth of shares, to 212-476-8848. If
shares are issued in certificate form they are not eligible to be redeemed by
facsimile. Please call 800-877-9700 to confirm receipt and acceptance of your
order submitted by facsimile.
20
<PAGE>
Be sure to have all owners sign the request exactly as their names appear on
the account and include the certificate for your shares if you have one.
To protect you and the Fund against fraud, your signature on a redemption
request must have a SIGNATURE GUARANTEE if (1) you want to sell more than
$50,000 worth of shares, or (2) you want the redemption check to be made out to
someone other than the record owner, or (3) you want the check to be mailed
somewhere other than to the record address, or (4) you want the proceeds to be
wired to a bank account not named in your application or in your written
instruction with a signature guarantee. You can obtain a signature guarantee
from most banks, stockbrokers and dealers, credit unions, and financial
institutions, but not from a notary public.
For a redemption request sent by FACSIMILE, limited to not more than $50,000,
the redemption check may only be made out to the record owner and mailed to the
record address or the proceeds wired to a bank account named in your application
or in a written instruction from the record owner with a signature guarantee.
By Telephone
- ----------------------------------------------------------------------
To sell shares worth at least $500, call 800-877-9700, giving your name and
account number, the name of the Fund, and the dollar amount or number of shares
you want to sell.
You can sell shares by telephone unless (1) you have declined this service
either in your application or later by writing or by submitting an appropriate
form to State Street, or (2) you have a certificate for such shares.
Please refer to "Additional Information on Telephone Transactions."
Other Information
- ----------------------------------------------------------------------
/ / Usually redemption proceeds will be mailed to you on the next business
day, but in any case within seven calendar days.
/ / The Fund may delay paying for any redemption until it is reasonably
satisfied that the check used to buy shares has cleared, which may take
up to 15 days after the purchase date. So if you plan to sell shares
shortly after buying them, you may want to pay for the purchase with a
certified check or money order or by wire transfer.
/ / The Fund may suspend redemptions or postpone payments on days when the
NYSE is closed (besides weekends and holidays), when trading on the NYSE
is restricted, or as permitted by the Securities and Exchange Commission.
/ / If, because you sold shares, your account balance with the Fund falls
below $2,000, the Fund has the right to close your account after giving
you at least 60 days' written notice to reestablish the minimum balance.
If you do not do so, the Fund may redeem your remaining shares at their
per share NAV on the date of redemption and will send the redemption
proceeds to you.
21
<PAGE>
ADDITIONAL INFORMATION ON
TELEPHONE TRANSACTIONS
You can buy shares by telephone, but the Fund at any time can limit the
number of its shares that may be bought or can stop accepting telephone orders.
You can also sell or exchange shares by telephone, unless (1) you have declined
these services in your application or by written notice to N&B Management or
State Street, with your signature guaranteed, or (2) you have a certificate for
such shares. The Fund or its agent follows reasonable procedures -- requiring
you to provide a form of personal identification when you telephone, recording
your telephone call, and sending you a written confirmation of each telephone
transaction -- designed to confirm that telephone instructions are genuine.
However, neither the Fund nor its agent is responsible for the authenticity of
telephone instructions or for any losses caused by fraudulent or unauthorized
telephone instructions if the Fund or its agent reasonably believed that the
instructions were genuine.
If you are unable to reach N&B Management by telephone (which might be the
case, for example, during periods of unusual market activity), consider sending
your transaction instructions by facsimile, overnight courier, or U.S. Express
Mail.
22
<PAGE>
SHAREHOLDER SERVICES
Several other services are available to assist you in investing and managing
your investment in the Fund.
Automatic Investing and Dollar Cost Averaging
- ----------------------------------------------------------------------
If you want to invest regularly, you may participate in a plan that lets you
automatically buy shares each month in the Fund using dollar cost averaging.
Under this plan, you buy a fixed dollar amount of shares in the Fund at pre-set
intervals. You may pay for the shares by automatic transfers from your accounts
in a Neuberger& Berman money market fund or by pre-authorized drafts from your
bank account. You buy more shares when the Fund's share price is relatively low
and fewer shares when the Fund's share price is relatively high. Thus, under
this plan your average cost of shares over a period of time is generally lower
than if you did not use dollar cost averaging. To benefit from dollar cost
averaging, you should be financially prepared to continue your participation for
a long enough period to include times when Fund share prices are lower. Of
course, the plan does not guarantee a profit and will not protect you against
losses in a declining market. For further information, call 800-877-9700.
Exchange Privilege
- ----------------------------------------------------------------------
To exchange your shares in the Fund for shares in another Neuberger&Berman
FundSM, call 800-877-9700 between 8 a.m. and 4 p.m., Eastern time, on any Monday
through Friday (unless the NYSE is closed). See "Directory & Funds Eligible for
Exchange." You may also effect an exchange by sending a letter to Neuberger&
Berman Management Incorporated, 605 Third Avenue, 2nd Floor, New York, NY
10158-0006, Attention: [Name of Fund], or by sending the letter by facsimile to
212-476-8848, giving your name and account number, the name of the Fund, the
dollar amount or number of shares you want to sell, and the name of the fund
whose shares you want to buy. Please call 800-877-9700 to confirm receipt and
acceptance of your order by facsimile. You can use the telephone exchange
privilege unless (1) you have declined it in your application or by later
writing to N&B Management or State Street, or (2) you have a certificate for
such shares. An exchange must be for at least $1,000 worth of shares, and if the
exchange is your FIRST PURCHASE in another mutual fund, it must be for at least
the minimum initial investment amount for that fund. Shares are exchanged at
their next prices calculated on a day the NYSE is open, after your exchange
order is received and accepted.
Please note the following about the exchange privilege:
/ / You can exchange shares ONLY between accounts registered in the same
name, address, and taxpayer ID number.
23
<PAGE>
/ / A telephone exchange order cannot be modified or canceled.
/ / You can exchange only into a mutual fund whose shares are eligible for
sale in your state under applicable state securities laws.
/ / An exchange may have tax consequences for you.
/ / Because excessive trading (including short-term "market timing" trading)
can hurt the Fund's performance, the Fund may refuse any exchange orders
(1) if they appear to be market-timing transactions involving significant
portions of the Fund's assets or (2) from any shareholder account if the
shareholder has been advised that previous use of the exchange privilege
was considered excessive. Accounts under common ownership or control,
including those with the same taxpayer ID number, will be considered one
account for this purpose.
/ / The Fund may impose other restrictions on the exchange privilege, or
modify or terminate the privilege, but will try to give you advance
notice whenever it can reasonably do so.
Please refer to "Additional Information on Telephone Transactions."
Systematic Withdrawal Plan
- ----------------------------------------------------------------------
If you own shares of the Fund worth at least $5,000, you can open a
Systematic Withdrawal Plan. Under the Plan, you arrange to withdraw a specific
amount (at least $50) on a monthly, quarterly, semi-annual, or annual basis, or
you can have your account completely paid out over a specified period of time.
You can also arrange for periodic cash withdrawals from your Fund account to pay
fees to your financial planner or investment adviser. Because the price of
shares of the Fund fluctuates, you may incur capital gains or losses when you
redeem shares of the Fund through a Systematic Withdrawal Plan or by other
methods. Call 800-877-9700 for more information.
24
<PAGE>
SHARE PRICES AND NET ASSET VALUE
The Fund's shares are bought or sold at a price that is the Fund's net asset
value ("NAV") per share. The NAVs for the Fund and the Portfolio are calculated
by subtracting liabilities from total assets (in the case of the Portfolio, the
market value of the securities the Portfolio holds plus cash and other assets;
in the case of the Fund, its percentage interest in the Portfolio, multiplied by
the Portfolio's NAV, plus any other assets). The Fund's per share NAV is
calculated by dividing its NAV by the number of Fund shares outstanding and
rounding the result to the nearest full cent. The Fund and the Portfolio
calculate their NAVs at the same time and on the same days. The Portfolio uses
an independent pricing service to determine the market value of its portfolio
securities and periodically verifies the valuations.
25
<PAGE>
DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES
The Fund distributes substantially all of its share of the Portfolio's net
investment income (net of the Fund's expenses) and net realized capital gains.
Income dividends are declared daily for the Fund at the time its NAV is
calculated and are paid monthly, and net realized capital gains, if any, are
normally distributed in December. Investors who are considering the purchase of
Fund shares in December should take this into account because of the tax
consequences of such distributions. Dividends will accrue beginning on the day
after after an investor's purchase order is converted to "federal funds."
Distribution Options
- ----------------------------------------------------------------------
REINVESTMENT IN SHARES. All dividends and capital gain distributions, if
any, paid on shares of the Fund are automatically reinvested in additional
shares of the Fund, unless you elect to receive them in cash. Dividends are
reinvested at the Fund's per share NAV on the last business day of each month.
Each distribution of capital gains is reinvested at the Fund's per share NAV,
usually as of the date the distribution is payable.
DIVIDENDS IN CASH. You may elect to receive dividends in cash, with capital
gain distributions, if any, being reinvested in additional Fund shares, by
checking that election box on your application.
ALL DISTRIBUTIONS IN CASH. You may elect to receive dividends and capital
gain distributions in cash, by checking that election box on your application.
Checks for cash distributions will be mailed no later than seven days after
the last day of the month. However, if you purchased your shares with a check,
distributions on those shares may not be paid in cash until the Fund is
reasonably satisfied that your check has cleared, which may take up to 15 days
after the purchase date. You can change any distribution election by writing to
State Street, the Fund's shareholder servicing agent.
Taxes
- ----------------------------------------------------------------------
The Fund intends to continue to qualify for treatment as a regulated
investment company for federal income tax purposes so that it will be relieved
of federal income tax on the part of its taxable income and realized gains that
it distributes to its shareholders. Your investment has certain tax
consequences.
TAXES ON DISTRIBUTIONS. Substantially all dividends are expected to be
exempt from federal income tax and State and City personal income taxes, but may
be subject to other state and local income taxes; distributions of net realized
capital gains are fully taxable. Those distributions that are not tax-exempt are
taxable in the tax year in
26
<PAGE>
which they are paid, whether in cash or by reinvestment in additional Fund
shares, except that distributions declared in December to shareholders of record
on a date in that month and paid in the following January are taxable as if they
were paid on December 31 of the year in which the distribution was declared.
The Portfolio may invest up to 100% of its assets in municipal obligations
whose interest is an item of tax preference for purposes of the federal
alternative minimum tax.
Every January, the Fund will send you a statement showing the amounts of tax-
exempt and taxable distributions in the previous year, including the portion of
any dividends paid to individuals which constitutes an item of tax preference
for purposes of the alternative minimum tax.
TAXES ON REDEMPTIONS. Capital gains realized on your redemptions, including
exchanges to other Neuberger&Berman FundsSM, are subject to tax. A capital gain
(or loss) is the difference between the amount you paid for the shares
(including the value of any dividends or other distributions that were
reinvested) and the amount you receive when you sell them.
When you sell shares you will receive a confirmation statement showing the
number of shares you sold and the price. Every January you will also receive a
consolidated transaction statement for the previous year. Be sure to keep your
statements; they will be useful to you and your tax preparer in determining the
capital gains and losses from your redemptions.
The foregoing is only a summary of some of the important federal tax
considerations affecting the Fund and its shareholders. See the SAI for
additional tax information. There may be other federal, state, local, or foreign
tax considerations applicable to a particular investor. Therefore, you should
consult your tax advisers.
27
<PAGE>
MANAGEMENT AND ADMINISTRATION
Trustees and Officers
- ----------------------------------------------------------------------
The trustees of the Trust and the trustees of Managers Trust, who are
currently the same individuals, have overall responsibility for the operations
of the Fund and the Portfolio, respectively. The SAI contains general background
information about each trustee and officer of the Trust and of Managers Trust.
The officers of the Trust and of Managers Trust who are officers and/or
directors of N&B Management and/or partners of Neuberger&Berman serve without
compensation from the Fund or the Portfolio. The trustees of the Trust and of
Managers Trust, including a majority of those trustees who are not "interested
persons" (as defined in the 1940 Act) of the Fund, have adopted written
procedures reasonably appropriate to deal with potential conflicts of interest,
including, if necessary, creating a separate board of trustees of Managers
Trust.
Investment Manager, Administrator,
Distributor, and Sub-Adviser
- ----------------------------------------------------------------------
N&B Management serves as the investment manager of the Portfolio, as
administrator of the Fund, and as distributor of the shares of the Fund. N&B
Management and its predecessor firms have specialized in the management of
no-load mutual funds since 1950. In addition to serving the Portfolio, N&B
Management currently serves as investment manager or investment adviser of other
mutual funds. Neuberger& Berman, which acts as sub-adviser for the Portfolio and
other mutual funds managed by N&B Management, also serves as investment adviser
of two investment companies. These funds had aggregate net assets of
approximately $7.4 billion as of December 31, 1994.
As sub-adviser, Neuberger&Berman furnishes N&B Management with investment
recommendations and research information without added cost to the Portfolio.
Neuberger&Berman is a member firm of the NYSE and other principal exchanges and
acts as the Portfolio's principal broker to the extent that a broker is used in
the purchase and sale of its portfolio securities. Neuberger&Berman and its
affiliates, including N&B Management, manage securities accounts that had
approximately $29 billion of assets as of December 31, 1994. All of the voting
stock of N&B Management is owned by individuals who are general partners of
Neuberger& Berman.
Theresa A. Havell, the President and a Trustee of the Trust and of Managers
Trust, is a general partner of Neuberger&Berman and a director and Vice
President of N&B Management. Ms. Havell is the Manager of the Fixed Income Group
of Neuberger& Berman, which she established in 1984. The Fixed Income Group
manages fixed
28
<PAGE>
income accounts that had approximately $9.9 billion of assets as of December
31, 1994. Ms. Havell has overall responsibility for the activities of the
Fixed Income Group, providing guidance and reviewing portfolio strategy and
structure. Clara Del Villar, who has been a Senior Portfolio Manager in the
Fixed Income Group since December 1991 and a Vice President of N&B Management
since November 1994, is primarily responsible for the day-to-day management
of the Portfolio. From April 1991 to December 1991 she worked for a charitable
organization; from January 1990 to April 1991 she was a consultant for a
commodities trading adviser.
The partners and employees of Neuberger&Berman and officers and employees of
N&B Management, together with their families, have invested over $100 million of
their own money in Neuberger&Berman FundsSM.
To mitigate the possibility that the Portfolio will be adversely affected by
personal trading of employees, the Trust, Managers Trust, N&B Management, and
Neuberger&Berman have adopted policies that restrict securities trading in
personal accounts of the portfolio managers and others who normally come into
possession of information on portfolio transactions. These policies comply, in
all material respects, with the recommendations of the Investment Company
Institute.
Expenses
- ----------------------------------------------------------------------
N&B Management provides investment management services to the Portfolio that
include, among other things, making and implementing investment decisions and
providing facilities and personnel necessary to operate the Portfolio. N&B
Management provides administrative services to the Fund that include furnishing
similar facilities and personnel for the Fund. For such administrative services,
the Fund pays N&B Management a fee at the annual rate of 0.25% of the Fund's
average daily net assets. With the Fund's consent, N&B Management may
subcontract some of its responsibilities under the Administration Agreement to
third parties. For investment management services, the Portfolio pays N&B
Management a fee at the annual rate of 0.25% of the first $500 million of the
Portfolio's average daily net assets, 0.225% of the next $500 million, 0.20% of
the next $500 million, 0.175% of the next $500 million, and 0.15% of average
daily net assets in excess of $2 billion. From February 1, 1994 (commencement of
operations) until October 31, 1994, the Fund accrued management and
administration fees, as an annualized percentage of average daily net assets, of
0.50%.
The Fund bears all expenses of its operations other than those borne by N&B
Management as administrator of the Fund and as distributor of its shares. The
Portfolio bears all expenses of its operations other than those borne by N&B
Management as investment manager of the Portfolio. These expenses include, but
are not limited to, for the Fund and Portfolio, legal and accounting fees and
compensation for trustees who are not affiliated with N&B Management; for the
Fund, shareholder servicing fees
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and the cost of printing and sending reports and proxy materials to
shareholders; and for the Portfolio, custodial fees for securities. During
the Fund's 1994 fiscal year, the Fund bore Operating Expenses, as an
annualized percentage of its average daily net assets, of 0.65% (after
taking into consideration N&B Management's expense reimbursement).
N&B Management has voluntarily undertaken until February 29, 1996, to
reimburse the Fund for the Fund's Operating Expenses and the Fund's pro-rata
share of the Portfolio's Operating Expenses which exceed, in the aggregate,
0.65% per annum of the Fund's average daily net assets (the "Expense
Limitation"). The Fund has in turn agreed to repay N&B Management through
October 31, 1998, for the excess Operating Expenses N&B Management previously
reimbursed to the Fund, so long as the Fund's annual Operating Expenses during
that period do not exceed the Expense Limitation.
Shareholder Servicing Arrangements
- ----------------------------------------------------------------------
The Fund's shareholder servicing agent is State Street. State Street
administers purchases, redemptions, and transfers of Fund shares and the payment
of dividends and other distributions through its Boston Service Center, P.O. Box
8403, Boston, MA 02266-8403.
The Fund retains N&B Management under a Service Agreement to provide certain
shareholder, shareholder-related, and other services not furnished by State
Street. As compensation for such services, the Fund pays N&B Management a fee
calculated at an annual rate of 0.02% of the average daily net assets of the
Fund. With the Fund's consent, N&B Management may subcontract some or all of its
responsibilities under the Service Agreement to third parties.
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DESCRIPTION OF INVESTMENTS
In addition to the securities referred to in "Investment Program" herein, the
Portfolio may make the following investments, among others, individually or in
combination, although it may not necessarily buy all of the types of securities
or use all of the investment techniques that are described. For additional
information on the following investments or other types of investments in which
the Portfolio may invest, see the SAI.
Certain investment techniques such as futures and options, securities loans,
and repurchase agreements may produce income subject to federal income tax and
State and City personal income taxes and may produce capital gains (or losses)
subject to tax.
MUNICIPAL OBLIGATIONS. Municipal obligations are issued by or on behalf of
states, the District of Columbia, and U.S. territories and possessions and their
political subdivisions, agencies, and instrumentalities; the interest on
municipal obligations is exempt from federal income tax. New York Municipal
Securities are municipal obligations issued by the State, its authorities,
multi-state authorities, municipalities, counties, and any other political
subdivisions (including the City) and municipal obligations issued by
territories or possessions of the United States, such as the Virgin Islands,
Guam, and Puerto Rico, the interest income from which is exempt, in the opinion
of counsel for the issuer, from federal income tax and State and City personal
income taxes. Municipal obligations include "general obligation" securities,
which are backed by the full taxing power of a municipality, and "revenue"
securities, which are backed by the income from a specific project, facility, or
tax. Municipal obligations also include industrial development and private
activity bonds -- the interest on which may be a tax preference item for
purposes of the federal alternative minimum tax -- which are issued by or on
behalf of public authorities and are not backed by the credit of any
governmental or public authority. "Anticipation notes" are issued by
municipalities in expectation of future proceeds from the issuance of bonds, or
from taxes or other revenues, and are payable from those bond proceeds, taxes,
or revenues. Municipal obligations also include tax-exempt commercial paper,
which is issued by municipalities to help finance short-term capital or
operating requirements.
RESIDUAL INTEREST BONDS. The Portfolio may purchase one component of a
municipal security that is structured in two parts: a variable rate security and
a residual interest bond. The interest rate for the variable rate security is
determined by an index or an auction process held approximately every 35 days,
while the residual interest rate bond holder receives the balance of the income
less an auction fee. These instruments are also known as inverse floaters
because the income received on the residual interest bond is inversely related
to the market rates. The market prices of residual interest bonds are highly
sensitive to changes in market rates and may decrease significantly when market
rates increase.
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MUNICIPAL LEASE OBLIGATIONS. These obligations are issued by a state or
local government or authority to acquire land and a wide variety of equipment
and facilities. The obligations typically are not fully backed by the
municipality's credit. If funds are not appropriated for the following year's
lease payments, the lease may terminate, with the possibility of default on the
lease obligations and significant loss to the Portfolio. The Portfolio may also
purchase certificates of participation in municipal lease obligations or
installment sales contracts, which entitle the holder to a proportionate
interest in lease-purchase payments made.
ZERO COUPON SECURITIES. Zero coupon securities do not pay interest
currently. Instead, they are sold at a deep discount from their face value and
are redeemed at face value when they mature. Because zero coupon securities do
not pay current income, their prices can be very volatile when interest rates
change. In calculating its daily income, the Portfolio accrues a portion of the
difference between a zero coupon security's purchase price and its face value.
RESOURCE RECOVERY BONDS. Resource recovery bonds are a type of revenue bond
issued to build facilities such as solid waste incinerators or waste-to-energy
plants. Typically, a private corporation will be involved on a temporary basis
during the construction of the facility, and the revenue stream will be secured
by fees or rents paid by municipalities for use of the facilities. The credit
and quality of resource recovery bonds may be affected by the viability of the
project itself, tax incentives for the project, and changing environmental
regulations or interpretations thereof.
VARIABLE AND FLOATING RATE SECURITIES. Variable and floating rate
securities, which may include certain participation interests in municipal
obligations, have interest rate adjustment formulas that may help to stabilize
their market value. Many of these instruments carry a demand feature which
permits the Portfolio to sell them during a determined time period at par value
plus accrued interest. The demand feature is often backed by a credit
instrument, such as a letter of credit, or by a creditworthy insurer. The
Portfolio may rely on the credit instrument or the creditworthiness of the
insurer in purchasing a variable or floating rate security. For purposes of
determining its dollar-weighted average maturity, the Portfolio calculates the
remaining maturity of variable and floating rate instruments as provided in Rule
2a-7 under the 1940 Act.
TENDER OPTION BONDS. Tender option bonds are created by coupling an
intermediate-term or long-term, fixed rate tax-exempt bond with a tender
agreement that gives the holder the option to tender the bond at its face value.
A sponsor, such as a bank, broker-dealer or other financial institution, in
return for providing the tender option, receives periodic fees equal to the
difference between the bond's fixed coupon rate and the rate that would cause
the bond, with the tender option, to trade at par value. A sponsor may terminate
the tender option if, for example, the issuer of the bond defaults on interest
payments or the bond's rating falls below investment grade.
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The tax treatment of tender option bonds is unclear, and the Portfolio will not
invest in any such bonds unless N&B Management has assurances that the interest
thereon will be tax-exempt.
U.S. GOVERNMENT AND AGENCY SECURITIES. U.S. Government securities are
obligations of the U.S. Treasury backed by the full faith and credit of the
United States. U.S. Government Agency securities are issued or guaranteed by
U.S. Government agencies, instrumentalities, or other U.S. Government-sponsored
enterprises, such as the Government National Mortgage Association ("GNMA"),
Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage
Corporation ("FHLMC"), Student Loan Marketing Association, Tennessee Valley
Authority, and various federally chartered banks. Some of these securities are
supported by the full faith and credit of the United States, while others may be
supported by the issuer's ability to borrow from the U.S. Treasury, subject to
the Treasury's discretion in certain cases, or only by the credit of the issuer.
U.S. Government Agency securities include U.S. Government mortgage-backed
securities. The market prices of U.S. Government securities are not guaranteed
by the government and generally fluctuate with changing interest rates.
REPURCHASE AGREEMENTS/SECURITIES LOANS. In a repurchase agreement, the
Portfolio buys a security from a Federal Reserve member bank or a securities
dealer and simultaneously agrees to sell it back at a higher price, at a
specified date, usually less than a week later. The underlying securities must
fall within the Portfolio's investment policies and limitations (but not
restrictions as to maturity). The Portfolio also may lend portfolio securities
to banks, brokerage firms, or institutional investors to earn income. Costs,
delays, or losses could result if the selling party to a repurchase agreement or
the borrower of portfolio securities becomes bankrupt or otherwise defaults. N&B
Management monitors the creditworthiness of sellers and borrowers.
COMMERCIAL PAPER. Commercial paper refers to promissory notes issued by
corporations and municipalities in order to finance their short-term credit
needs.
ILLIQUID SECURITIES. The Portfolio may invest up to 10% of its net assets in
illiquid securities, which are securities that cannot be expected to be sold
within seven days at approximately the price at which they are valued. Due to
the absence of an active trading market, the Portfolio may experience difficulty
in valuing or disposing of illiquid securities. N&B Management determines the
liquidity of the Portfolio's securities, under supervision of the trustees of
Managers Trust.
RESTRICTED SECURITIES AND RULE 144A SECURITIES. The Portfolio may invest in
restricted securities and Rule 144A securities. Restricted securities cannot be
sold to the public without registration under the Securities Act of 1933 ("1933
Act"). Unless registered for sale, these securities can be sold only in
privately negotiated transactions or pursuant to an exemption from registration.
Restricted securities are generally considered illiquid. Rule 144A securities,
although not registered, may be resold to qualified institutional buyers in
accordance with Rule 144A under the 1933 Act.
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Unregistered securities may also be sold abroad pursuant to Regulation S under
the 1933 Act. N&B Management, acting pursuant to guidelines established by the
trustees of Managers Trust, may determine that some restricted securities are
liquid.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the
Portfolio sells securities and at the same time agrees to repurchase the same
securities at a later date at a fixed price. During the period before the
repurchase, the Portfolio continues to receive principal and interest payments
on the securities. Reverse repurchase agreements may increase the fluctuation in
the market value of the Portfolio's assets and are a form of leverage. N&B
Management monitors the creditworthiness of parties to reverse repurchase
agreements.
WHEN-ISSUED TRANSACTIONS. In a when-issued transaction, the Portfolio
commits to purchase securities in order to secure an advantageous price and
yield at the time of the commitment and pays for the securities when they are
delivered at a future date (generally within three months). If the seller fails
to complete the sale, the Portfolio may lose the opportunity to obtain a
favorable price and yield. When-issued securities may decline or increase in
value during the period from the Portfolio's investment commitment to the
settlement of the purchase, which may magnify fluctuations in the Fund's NAV.
The Portfolio may not invest more than 10% of its total assets in when-issued
securities.
ASSET-BACKED SECURITIES. The Portfolio may purchase units of beneficial
interest in pools of purchase contracts, financing leases, and sales agreements
entered into by municipalities. These municipal obligations may be created when
a municipality enters into an installment purchase contract or lease with a
vendor and may be secured by the assets purchased or leased by the municipality.
However, except in very limited circumstances, there will be no recourse against
the vendor if the municipality stops making payments. Pools may also hold other
types of investments. The market for tax-exempt asset-backed securities is still
relatively new. Certain of these obligations are likely to involve unscheduled
prepayments of principal. In purchasing such securities, the Portfolio typically
relies on an opinion from the issuer's counsel that interest on the asset-backed
securities is exempt from income taxes.
PUT AND CALL OPTIONS, FUTURES CONTRACTS, AND OPTIONS ON FUTURES CONTRACTS.
The Portfolio may try to reduce the risk of securities price changes (hedge) or
manage portfolio maturity by purchasing and selling (1) interest-rate futures
contracts traded on futures exchanges and (2) options on futures contracts. The
Portfolio also may purchase and sell call options and put options on debt
securities in its portfolio for hedging purposes or for the purpose of producing
income. The Portfolio will sell call options on a security only if it holds that
security or has the right to obtain it at no additional cost. These investment
practices involve certain risks, including price volatility and a high degree of
leverage. The Portfolio may engage in transactions in futures contracts and
related options only as permitted by regulations of the Commodity Futures
Trading Commission.
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The primary risks in using put and call options, futures contracts, and
options on futures contracts ("Hedging Instruments") are (1) imperfect
correlation or no correlation between changes in market value of the securities
held by the Portfolio and the prices of the Hedging Instruments; (2) possible
lack of a liquid secondary market for Hedging Instruments and the resulting
inability to close out a Hedging Instrument when desired; (3) the fact that the
skills needed to use Hedging Instruments are different from those needed to
select the Portfolio's securities; (4) the fact that, although use of these
instruments for hedging purposes can reduce the risk of loss, they also can
reduce the opportunity for gain, or even result in losses, by offsetting
favorable price movements in hedged investments; and (5) the possible inability
of the Portfolio to purchase or sell a security at a time that would otherwise
be favorable for it to do so, or the possible need for the Portfolio to sell a
security at a disadvantageous time, due to its need to maintain "cover" or to
segregate securities in connection with its use of these instruments. Futures,
options, and forward contracts are generally considered "derivatives." Losses
that may arise from certain futures contracts are potentially unlimited.
SWAP AGREEMENTS. To help enhance the value of its investment or manage its
exposure to different types of investments, the Portfolio may enter into
interest rate and mortgage swap agreements and may purchase and sell interest
rate "caps," "floors," and "collars."
In a typical interest rate swap agreement, one party agrees to make regular
payments equal to a floating interest rate on a specified amount (the "notional
principal amount") in return for payments equal to a fixed interest rate on the
same amount for a specified period. Mortgage swap agreements are similar to
interest rate swap agreements, except the notional principal amount is tied to a
reference pool of mortgages.
In a cap or floor, one party agrees, usually in return for a fee, to make
payments under particular circumstances. For example, the purchaser of an
interest rate cap has the right to receive payments to the extent a specified
interest rate exceeds an agreed level; the purchaser of an interest rate floor
has the right to receive payments to the extent a specified interest rate falls
below an agreed level. A collar entitles the purchaser to receive payments to
the extent a specified interest rate falls outside an agreed range.
Swap agreements, including caps and floors, may involve leverage and may be
highly volatile; depending on how they are used, they may have a considerable
impact on the Portfolio's performance. Swap agreements involve risks depending
upon the other party's creditworthiness and ability to perform, as well as the
Portfolio's ability to terminate its swap agreements or reduce its exposure
through offsetting transactions. Swap agreements may be illiquid. The swap
market is relatively new and is largely unregulated. Swap agreements are
generally considered "derivatives."
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<PAGE>
OTHER INFORMATION
DIRECTORY FUNDS ELIGIBLE FOR EXCHANGE
INVESTMENT MANAGER, ADMINISTRATOR, EQUITY FUNDS
AND DISTRIBUTOR
Neuberger&Berman Focus Fund
Neuberger&Berman Management Incorporated Neuberger&Berman Genesis Fund
605 Third Avenue, 2nd Floor Neuberger&Berman
New York, NY 10158-0006 Guardian Fund
800-877-9700 Neuberger&Berman
Institutional Services 800-366-6264 International Fund
Neuberger&Berman
SUB-ADVISER Manhattan Fund
Neuberger&Berman, L.P. Neuberger&Berman Partners Fund
605 Third Avenue Neuberger&Berman Socially
New York, NY 10158-3698 Responsive Fund
CUSTODIAN AND SHAREHOLDER MONEY MARKET FUNDS
SERVICING AGENT
State Street Bank and Trust Company Neuberger&Berman
225 Franklin Street Government Money Fund
Boston, MA 02110 Neuberger&Berman Cash Reserves
BOND FUNDS
Address correspondence to: Neuberger&Berman
Neuberger&Berman Funds Ultra Short Bond Fund
Boston Service Center Neuberger&Berman
P.O. Box 8403 Limited Maturity Bond Fund
Boston, MA 02266-8403 Neuberger&Berman
800-225-1596 Government Income Fund
LEGAL COUNSEL MUNICIPAL FUNDS
Kirkpatrick & Lockhart Neuberger&Berman
1800 M Street, NW Municipal Money Fund
Washington, DC 20036-5891 Neuberger&Berman
Municipal Securities Trust
Neuberger&Berman New York
Insured Intermediate Fund
(available to residents of NY
and FL only)
Neuberger&Berman, Neuberger&Berman Management Inc., and the above-named Funds
are service marks of Neuberger&Berman Management Inc.
- -C- 1995 Neuberger&Berman Management Inc.
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<PAGE>
Neuberger&Berman Management Inc.
605 THIRD AVENUE 2ND FLOOR
NEW YORK, NY 10158-0006
SHAREHOLDER SERVICES
800-877-9700
This wrapper is not part of the prospectus.
(recycle logo) PRINTED ON RECYCLED PAPER
WITH SOY BASED INKS NBIP00030395
<PAGE>
